cairn india

Cairn Ind

ia Limited

Annual Report and Financial Statem

ents 2008–09

Cairn India Limited3rd & 4th Floors, Vipul Plaza, Sun CitySector 54, Gurgaon 122 002, India

www.cairnindia.com

Des

igne

d by

ww

w.i

cdin

dia

.com

& P

rinte

d at

Tho

mso

n Pr

ess

Company Information

board of directors Sir William B.B. Gammell (Chairman)

Malcolm Shaw Thoms (Deputy Chairman)

Jann Brown

Naresh Chandra

Dr Omkar Goswami

Aman Mehta

Edward T. Story

Rahul Dhir (Managing Director & Chief Executive Offi cer)

Indrajit Banerjee (Executive Director & Chief Financial Offi cer)

Rick Bott (Executive Director & Chief Operating Offi cer)

board committees

Audit CommitteeAman Mehta (Chairman)

Naresh Chandra

Dr Omkar Goswami

Edward T. Story

Jann Brown

Remuneration CommitteeNaresh Chandra (Chairman)

Sir William B.B. Gammell

Malcolm Shaw Thoms

Aman Mehta

Dr Omkar Goswami

Nomination CommitteeSir William B.B. Gammell (Chairman)

Rahul Dhir

Jann Brown

Malcolm Shaw thoms

Edward T. Story

Shareholders’ / Investors’ Grievance CommitteeDr Omkar Goswami (Chairman)

Naresh Chandra

Rahul Dhir

company secretaryNeerja Sharma

statutory auditorsS.R. Batliboi & Associates

Golf View Corporate Tower B

Sector 42, Sector Road

Gurgaon 122 002, India

bankersCitibank | State Bank of India | ABN AMRO

stock exchanges listed onBombay Stock Exchange Limited

National Stock Exchange of India Limited

registered office 101, West View

Veer Savarkar Marg

Prabhadevi

Mumbai 400 025, India

corporate office3rd & 4th Floors, Vipul Plaza

Sun City, Sector 54


registrar & share transfer agentLink Intime India Private Limited

(formerly Intime Spectrum Registry Limited)

C-13, Pannalal Silk Mills Compound

L.B.S.Marg , Bhandup (West)


Contents Highlights

Total acreage of theRajasthan fi elds

3,111 km2

Nearly the same as the combined area of National Capital Region of Delhi and Greater London

Area of the Mangala Processing Terminal (MPT) 1.6 km2

or approximately 400 acresEquivalent to 200 football grounds, or 27 times the size of the Eden Garden cricket ground at Kolkata, or three times the area of the Red Fort Complex in Delhi

Mangala, Bhagyam and Aishwariya plan to produce 175,000bopd(barrels of oil per day)

At peak production which is estimated to account for more than 20% of India’s crude oil production

Total capacity of the four trains of the MPT

205,000bopd

The MPT will have four crude oil processing trains, together designed to handle a total capacity of 205,000 bopd.

These are:TRAIN 1 Capacity of 30,000 bopd from the Mangala fi eld which is ready to start production. Initial evacuation by trucking

TRAIN 2 Capacity of 50,000 bopd, also from the Mangala fi eld is targeted for completion by Q4 2009, along with the heated pipeline.

TRAIN 3 Capacity of 50,000 bopd — targeted for completion in H1 of 2010. Will access the plateau production of the Mangala fi eld

TRAIN 4 Capacity of 75,000 bopd, designed to accommodate production from Bhagyam and Aishwariya and further expansion. Will be commissioned by 2011

2 Board of Directors

4 Letter from the CEO

6 Management Discussion and Analysis

32 Cairn Milestones

34 Corporate Social Responsibility

40 Report on Corporate Governance

58 Directors’ Report

65 Auditors’ Report

68 Balance Sheet

69 Profit and Loss Account

70 Statement of Cash Flows

71 Schedules to the Financial Statements

92 Balance Sheet Abstract and Company’s General Business Profile

93 Auditors’ Report on Consolidated Financial Statements

94 Consolidated Balance Sheet

95 Consolidated Profit and Loss Account

96 Consolidated Statement of Cash Flows

97 Schedules to Consolidated Financial Statements

123 Glossary

Cairn is ready to produce fi rst oil from Rajasthan, which can go up to

30,000 bopd

Given the progress at the MPT, we are targeting producing oil from Train 2 — up to an additional 50,000 bopd — by Q4 2009

EOR resource base of incremental recoverable oil

> 300mmbbls(million barrels)

The current assessment of the enhanced oil recovery (EOR) resource base is greater than 300 mmbbls of incremental recoverable oil from Mangala, Bhagyam and Aishwariya fi elds

Building facilities to handle

80,000 bopdby Q4 2009

Cairn is targeting completion of the pipeline in time to evacuate crude oil by the time Train 2 is operational. The Company is building facilities that will have the capacity to handle 80,000 bopd by Q4 2009

Operational expense at Ravva and Cambay

US$ 2.4 per barrel

The fi eld direct operational expense for the current producing blocks, Ravva and Cambay is one of the lowest in the world

Estimated Rajasthan Upstream operating expenses

aroundUS$ 3.50 per barrel during fi eld life

If one were to add to that the cost of pipeline operating expenses, the total opex of Rajasthan crude is targeted at around US$ 5 per barrel during fi eld life

Vehicle accident frequency rate

1.33 per million km travelled

During 2008, contractor vehicles travelled for more than 15 million km without any fatalities or serious accidents. The motor vehicle accident frequency rate was 1.33 per million km travelled — which is well below international benchmark in this industry

The 24” heated & insulated pipeline runs for approximately

700 km

It runs from the MPT at Barmer to a marine terminal on the Gujarat Coast. Of the 700 km of pipeline, 154 km is located in Rajasthan and the rest is in Gujarat

Headcount in 2008increased by

50%

While many businesses faced reducing employee numbers or revisited their recruitment plans, Cairn has been hiring throughout 2008, and will continue to do so in 2009

1 HIGHLIGHTS

Board of Directors

Sir Bill Gammell, 56, holds a BA in Economics and Accountancy from Stirling University and was awarded a knighthood in 2006 for services to industry in Scotland. He has over 25 years’ experience in the international oil and gas industry. He founded Cairn Energy PLC and was ap-pointed Chief Executive on its initial listing in 1988. He is the non-executive Chair-man of Cairn India Limited and is a member of the Asia Task Force and the UK India Business Council. Sir Bill, who is an ex–Scotland rugby internationalist, is also Chairman of Winning Scotland Foundation and a director of sport Scotland and Glasgow 2014 Limited

sir bill gammellChairman and Non-Executive Director

Ms Jann Brown, 54, holds an MA degree from Edinburgh University and joined Cairn Energy PLC in 1998 after a career in the accountancy profession, mainly with KPMG. She was appointed Finance Director of Cairn Energy PLC in 2006. Prior to her appointment as Finance Director, she served on the Group Management Board for seven years. She is a member of the Institute of Chartered Accountants of Scotland and the Chartered Institute of Taxation

jann brownNon-Executive Director

Mr Aman Mehta, 62, is an economics graduate from Delhi University. He was earlier the Chief Executive Offi cer of HSBC Asia Pacifi c until 2003. Mr Mehta is currently an independent non-executive director of several public companies in India as well as overseas. Besides this he is also a member of the Advisory Council of INSEAD, France and International Advisory Boards of Prudential Inc., USA and CapitaLand Ltd. of Singapore

aman mehtaNon-Executive and Independent Director

Dr Omkar Goswami, 52, holds a Master of Econom-ics Degree from the Delhi School of Economics. He is a D. Phil. in Economics from Oxford University. He has authored various books and research papers on economic history, industrial economics, public sector, bankruptcy laws and proce-dures, economic policy, cor-porate fi nance, corporate governance, public fi nance, tax enforcement and legal reforms

dr omkar goswamiNon-Executive and Independent Director

Mr Indrajit Banerjee, 53, graduated from the Univer-sity of Calcutta with a Bach-elor’s degree in Commerce. An associate member of the Institute of Chartered Accountants of India, Mr Banerjee started his career at Price Waterhouse Coopers in Calcutta in 1979 and has held several senior positions throughout his career, including 17 years at the Indian Aluminium Company which was part of the Alcan Group, and two years in Lucent Technolo-gies (India). Before joining the Company, he was President-Finance and Plan-ning at Lupin Limited

indrajit banerjeeExecutive Director and CFO

2 CAIRN INDIA LIMITED ANNUAL REPORT 2008-2009

Mr Malcolm Thoms, 53, holds a BSc Hons degree in Physics from Edinburgh University and is an MBA from Heriot-Watt Univer-sity. He started his career in the oil industry as a fi eld en-gineer with Schlumberger and subsequently became manager of their businesses in Qatar and Brunei. He joined Cairn Energy PLC in 1989 where he held a number of senior manage-ment positions prior to his appointment as an Execu-tive Director in 2000. He is currently Chief Operating Offi cer of Cairn Energy PLC. Mr Thoms is also a trustee of the University of Edinburgh Development Trust. He has been a regular visitor to South Asia since 1994 and was instrumental in developing Cairn’s busi-ness interests in the region

malcolm shaw thomsNon-Executive Director

Mr Rahul Dhir, 43, joined Cairn India in May 2006 and was appointed Chief Executive Offi cer on 22 August 2006. He was educated at the Indian In-stitute of Technology, Delhi (Bachelor of Technology), the University of Texas at Austin (M.Sc) and at the Wharton Business School in Pennsylvania (MBA). Mr Dhir started his career as an oil and gas reservoir en-gineer before moving into investment banking. He has worked at SBC Warburg, Morgan Stanley and Merrill Lynch, where he managed a team advising several major oil companies and a number of independent E&P companies on mergers and acquisitions and capital market related issues. Before joining Cairn India, he was Managing Director and Co-Head of Energy and Power Investment Banking at Merrill Lynch

rahul dhirManaging Director and CEO

Mr Naresh Chandra, 74, is a post graduate (MSc. in Mathematics) from Allahabad University and a retired IAS offi cer. Previously, Mr Chandra was Chairman of the Committee on Corporate Governance, India’s Ambassador to the US, Advisor to the Prime Minister, Governor of Raj-asthan, Cabinet Secretary to the Government of India, and Chief Secretary of Rajasthan. A reputed administrator and diplomat, Mr Chandra serves as an independent director on the boards of a number of companies

naresh chandraNon-Executive and Independent Director

Mr Rick Bott, 49, was appointed as Additional Director on 29 April 2008 and assumed offi ce of Ex-ecutive Director and Chief Operating Offi cer with ef-fect from 15 June 2008. Mr Bott holds a B.S in Marine Sciences and Masters in Geology from Texas A & M. He joined Cairn India from Devon Energy’s Interna-tional division where he was Vice President responsible for developing and imple-menting business growth and exploration strategy for assets in 12 countries outside of North America, focusing on the deepwater, West Africa, South America and the Middle East /Asia. Previously he served as President of Ocean Egypt Companies and as President of Ocean Yemen Corpora-tion. He also served in a number of international management and technical positions with British Gas and Tenneco and has exten-sive global exploration and production experience with more than 21 years in the industry leading integrated organisations, developing new business and focusing on cross-cultural leadership development

rick bottExecutive Director and COO

Mr Edward T Story, 65, is a science graduate from Trinity University, San Antonio, Texas and holds a Masters degree in Business Administration from the University of Texas. He has also been conferred an hon-orary Doctorate degree by the Institute of Finance and Economics of Mongolia and is Chairman of the North America Mongolia Business Council.Mr Story has more than 40 years experience in the international oil and gas industry and is the founder, President and Chief Executive Offi cer of SOCO International PLC, an international explora-tion and production (E&P) company listed on the London Stock Exchange. SOCO International has E&P interests in South East Asia and Africa

edward t. storyNon-Executive and Independent Director

3 BOARD OF DIRECTORS

Letter from the CEO

Dear Shareholder,

If I were to describe the progress of your Company from the previous annual report to this one, the most apt phrase would be: “From Concept to Reality”. Let me explain what this means

first oilConcept In April 2008, in my previous letter to you, I had written of “the commitment of Cairn India to deliver fi rst oil from Rajasthan by the second half of 2009”.Reality Your Company and its joint venture partner ONGC, is ready to deliver fi rst oil from Rajasthan. Cairn will be able to produce up to 30,000 barrels of oil per day (bopd) from the Train 1 of the Mangala Processing Terminal (MPT).The initial production is targeted to be evacuated by trucking to refi neries in different parts of India.

Spread over 400 acres, the size of the MPT is equivalent to 200 football grounds or three times the area of the Red Fort complex in Delhi. The infrastructure to and from the MPT involves some 500 kilometres (km) of intra- and inter-fi eld pipelines (more than the distance from Delhi to Lucknow), and 80 km of inter-fi eld roads.

At peak production, Mangala, Bhagyam and Aishwariya (MBA) together will produce 175,000 barrels of oil per day (bopd) — which will account for more than 20% of India’s crude oil production. The MPT will have the capacity to process not only this 175,000 bopd, but also any additional crude oil produced through enhanced oil recovery and from other fi elds.

the pipelineConcept We had promised to complete the insulated heated pipeline from the MPT to Guja-rat before the end of 2009. When we made this pledge last year, there were still several hurdles to overcome regarding acquiring the rights of use and the laying of the pipeline in Rajasthan. Reality Thanks to cooperation from the Gov-ernment of India (GoI) and the State Govern-ments of Rajasthan and Gujarat, your Company is targeting completion of the pipeline from the MPT to the Gujarat coast by Q4 2009.

This is one of the longest continously heated

and insulated pipelines in the world— approxi-mately 700 kilometres (km) in length. The insu-lated pipeline has an outer diameter of 24” with an 8” pipeline running along it that will carry gas from the Raageshwari fi eld for heating the main pipeline to ensure that the crude remains at a constant temperature of 65°C. Along the pipe-line, there will be more than 35 heating stations. In addition, there is an intermediate terminal at Viramgam for storage and further pumping to the coast. There are also two pigging stations to clean the pipe and scour it of wax.

fundingConcept In December 2007, there was an increase in the Rajasthan project cost conse-quent to an increase in the scale and scope with a greater engineering need and higher input prices. At that time, neither was the capital requirement for the Rajasthan upstream project precisely defi ned, nor the funding for the pipe-line fi rmly established. Reality In April 2008, Cairn India obtained US$ 625 million through a private placement of its shares — the largest such placement in the Indian equity market during 2008–09. This included 63.3 million shares at Rs. 224.30 per share to our existing shareholder, Petronas.

In addition, despite the global fi nancial crisis, your Company was able to fully draw down its earlier debt facility of US$ 850 million. This, together with the US$ 625 million private place-ment, has eliminated funding uncertainties for the core upstream and pipeline development in Rajasthan.

In addition the Company has an ongoing dia-logue with various international and domestic institutions to review its fi nancing options — to create fi nancial fl exibility by securing competi-tively priced long term debt

We are, thus, fi nancially well placed to imple-ment our business plans.


optimising costsConcept By the end of 2007, there was signifi -cant infl ation in the oil industry, driven by rising levels of activity, increases in steel prices and an acute shortage of skilled professionals. The planned capital expenditure on the Rajasthan project for 2008 and 2009 rose to US$ 1.8 billion on net basis (i.e. net to Cairn, the 70% partner of the Cairn–ONGC joint venture). We had to trim project costs — and yet ensure that the target for production of fi rst oil was maintained.Reality The project cost was reduced by US$ 400 million to US$ 1.4 billion through a tight control on expenses and the phased develop-ment of the MPT and the pipeline. The fi eld direct operating expense at Ravva and CB/OS-2 in 2008 was US$ 2.4 per barrel — one of the lowest in the world. We plan to apply these skill sets in Rajasthan and continue as a low cost operator. The Rajasthan upstream operating expenses are estimated at US$ 3.5 per barrel and the pipeline opex is estimated at US$ 1.5 per barrel during the life of fi eld.

Thanks to cost optimisation, your Company will be well placed to create shareholder value under any reasonable price scenario for crude oil.

reserves and enhanced oil recoveryThe stock tank oil initially in place (STOIIP) for the MBA fi elds is now estimated at 2,054 million barrels of oil equivalent (mmboe).

We continue to improve our understanding of these fi elds through the application of in-novative techniques. At Mangala, these efforts have resulted in a 20% increase in our estimated oil in place; and a 30% increase in reserves and resources, resulting in a 25% rise in the potential plateau rate to 125,000 bopd.

Similarly, the STOIIP at Aishwariya has increased by over 37% — from 213 million barrels (mmbbls) in the originally approved fi eld development plan to 293 mmbbls. This has

doubled the fi eld’s production potential from 10,000 bopd to 20,000 bopd.

We continue to explore for additional hy-drocarbons in the Barmer basin. In December 2008, our efforts resulted in Cairn’s 25th oil and gas discovery adjacent to Raageshwari fi eld. Tests indicate an oil fl ow of around 500 bopd, plus 0.4 mmscfd gas. In addition, the Barmer Hill formation has an estimated STOIIP of ap-proximately 400 mmbbls.

We are also focusing on the early application of enhanced oil recovery (EOR) techniques in the MBA fi elds. Our laboratory and computer studies indicate that an additional 308 mmbbls of oil can be recovered through the use of EOR from these fi elds.

Cairn will make use of all the viable Rajasthan fi elds to optimise both the life of the different hydrocarbon resources and the associated revenue streams.

ravva and cambay (cb/os-2)Cairn’s gross production from these two op-erating assets in India during 2008 was 66,146 boepd. It’s net working interest was 17,264 boepd.

These assets highlight our ability to maximise recovery and manage costs. In Ravva, we have now produced over 200 million barrels, and ex-pect to recover over 60% of the STOIIP. Around US$ 4 billion has been contributed to the GoI from the share of profi ts following the oil and gas sales at Ravva.

In Cambay, we have applied new seismic interpretations to identify further hydrocarbons and with minimal investment, we managed to convert the processing facilities to handle oil pro-duction as well. In addition to gas, we are now producing over 10,000 bopd from these fi elds.

Cambay is a case where discovery to delivery took place in only 28 months and during 2008 it generated its highest revenues since the start of production.

explorationIn September 2008, the Sri Lanka Board of In-vestment and your Company signed a commit-ment for the Mannar Basin which lies offshore north-west Sri Lanka and covers approximately 3,000 km2 in water depths of 200 metres to 1,800 metres. The work programme includes the acquisition of seismic data and the drilling of three wells in the fi rst three years of the explora-tion period.

health and safetyDuring 2008, occupational health and safety management systems at Ravva and Suvali were certifi ed to best-in-class international standards, namely OHSAS 18001 and ISO 14001. For the year, our contractor vehicles travelled over 15 million km without any fatalities or serious accidents.

These are a few examples of what I began the letter with — the determined journey of Cairn from concept to reality.

This journey would not have been possible without the efforts of all your Company’s em-ployees — many of whom have been working day and night in Rajasthan and along the pipe-line in testing weather conditions, where day temperatures can soar to more than 48°C.

It is a journey that fulfi ls your Company’s pledge — to be a major supplier of crude oil to India and to generate long term shareholder value.

Thank you for your support. You have had faith in us. The results will now be for you to see.

Rahul DhirManaging Director and CEO

5 LETTER FROM THE CEO

R A H U L D H I R

Management Discussion & Analysis

Much has happened at Cairn India Limited (‘Cairn’ or ‘the Company’) between what was reported in last year’s Management Discussion and Analysis and this one — changes that can be described in a single phrase: “From Concept to Reality”


To understand the importance of this phrase, it is best to begin this Management Discussion and Analysis by describing what the Company has accomplished in the course of one year in Rajasthan — in terms of developing the up-stream facility at the Mangala Processing Termi-nal (MPT) at Barmer as well as the progress in constructing the approximately 700 kilometres (km) insulated heated pipeline that will fl ow the crude oil from MPT to the coast of Gujarat.

the rajasthan projectBroadly speaking, the Company’s immedi-ate project in Rajasthan involves three sets of activities:

Production of crude oil from the three main fi elds: fi rst Mangala, then Bhagyam, followed by Aishwariya, as well as the develop-ment and operations of the MPT.

Laying and completing the insulated heat-ed pipeline from the MPT to the Gujarat coast, including more than 35 heating stations and an intermediate terminal at Viramgam (Gujarat).

Enhancing Rajasthan resources — through reservoir development, enhanced oil recovery (EOR), the phased development of the other 22 fi elds and potential for further discoveries in Rajasthan.

rajasthan upstream The discovery of the Mangala oil fi eld among others in Rajasthan, spurred the fl otation and the creation of a separate Indian business. It has provided the Company with the right platform to translate the exploration success into real and tangible operational excellence. The fl ow of oil from the fi elds in Rajasthan at a planned peak of 175,000 barrels of oil per day (bopd) will help meet more than one fi fth of the country’s domestic production and is a signifi cant contribution to aid the nation’s energy security.

Cairn fi rst came into Rajasthan in the late 1990s, when it acquired an interest in the block RJ-ON-90/1. The Company fi rmly believed that the area was not only rich in hydrocarbons but also had all the key ingredients for successful commercial production. By 2003, Cairn had acquired 100% of the exploration interest and assumed the role of operator of this acreage. In 2004, a major discovery of crude oil was made in the Mangala fi eld which has been the largest onshore discovery in India over the last 25 years. This was followed by key discoveries at Bhagyam and Aishwariya which, along with Mangala, comprise the MBA fi elds. In all, 25 discoveries have now been made in Rajasthan.

Today, Cairn is the operator of the Rajasthan block, with a 70% development and production interest. The balance 30% is held by India’s public sector oil and gas major, the Oil and

7 MANAGEMENT DISCUSSION AND ANALYSIS

Natural Gas Corporation Limited (ONGC) fol-lowing their exercise of an option provided for in the PSC.

Chart A gives the location of the Rajasthan resources.

The development areas in Rajasthan consist of three contiguous areas: (i) Mangala, Aish-wariya, Raageshwari and Saraswati (MARS) fi elds; (ii) Bhagyam; and (iii) Kaameshwari West. The total acreage of the development areas in Rajasthan accounts for 3,111 square kilometers (km2). This is nearly the same as the combined area of national capital region of Delhi and Greater London. More than 350 wells and over 40 well pads are currently planned throughout the Rajasthan fi elds.

Peak production from the MBA fi elds is planned at a rate of 175,000 bopd — which is estimated to account for more than 20% of India’s crude oil production.

mangala processing terminalIn order to produce the oil and separate associ-ated gas and water, the Company has set up the Mangala Processing Terminal (MPT). The capacity to produce 30,000 bopd will be devel-oped at the MPT by Q3 2009, to be evacuated by road tankers. As stated in last year’s annual report, the next phase is targeting a capac-ity to handle 80,000 bopd before the end of 2009 — all of which is planned to be evacuated ultimately by the insulated heated pipeline.

The MPT will have four crude oil processing trains, designed to handle a total capacity of 205,000 bopd with scope for expansion:

train 1 Capacity of 30,000 bopd from the Mangala fi eld which is ready to start production. Initial evacuation will be by trucking.

train 2 Capacity of 50,000 bopd, also from the Mangala fi eld is targeted for completion by Q4 2009, along with the heated pipeline.

train 3 Capacity of 50,000 bopd — targeted for completion in H1 of 2010 — will access the plateau production of the Mangala fi eld.

train 4 Capacity of 75,000 bopd, designed to accommodate production from Bhagyam and Aishwariya and further expansion. Will be com-missioned by 2011.

After Train 4 is commissioned, the MPT will have the capacity to process not only the pla-teau production of the MBA fi elds of 175,000 bopd, but will also have additional capacity to support further potential production from EOR and the 22 other fi elds.

Spread over an area of 1.6 square km, or approximately 400 acres, the size of the MPT is equivalent to 200 football grounds, or 27 times the size of the Eden Garden cricket ground at Kolkata, or three times the area of the Red Fort complex in Delhi.

The processing of crude oil from four trains requires the MPT to have an extensive water heating, circulating and recycling system; gas recovery systems; heat and power systems; and built-in fi re and safety systems. The infrastruc-ture to and from the MPT involves some 500 km of intra- and inter-fi eld pipelines (more than the distance from Delhi to Lucknow), and 80 km of inter-fi eld roads.

Steam will be the main source of heat to help produce the Rajasthan crude, with the use of fi ve 115 metric ton / hour boilers. The advan-tage of steam is that it is an effi cient, pollution-free and renewable resource. All power require-ments of the MPT will be met by captive power plants, comprising four 12 megawatt (MW) steam turbine generators, plus three 2 MW emergency diesel generators. There will be 20 water and oil storage tanks, 16 buildings hous-ing various equipment, including the power sta-tions and different control systems, and several kilometres of pipe racks to carry all the pipes and cables across the facility. When completed, the MPT will have used up more than 98,000 cubic metres of concrete and 23,600 metric tons of steel — excluding the steel used for the insulated heated pipeline.

Chart B gives a geographical snapshot of the Rajasthan Field and the MPT. The water to cre-ate steam and for fl ooding the oil reservoirs to

Peak production from Mangala, Bhagyam and Aishwariya is planned at a rate of 175,000 barrels of oil per day (bopd) — which is estimated to account for more than 20% of India’s crude oil production


Barrel of Oil The standard oil barrel of 42 US gallons (159 litres) is used in the United States as a measure of crude oil.

The measurement originated in the Pennsylvania oil fi elds in the 1860s, when there was no standard container for oil. To remove distrust, the oil producers decided to use the 40 gallon whisky barrel, and add a couple more gallons to ensure buyers’ confi dence — like the baker’s dozen. Of course, nobody uses barrels any more

BHAGYAM DEVELOPMENT AREA

MANGALA PROCESSING TERMINAL (MPT)

KAAMESHWARI WEST DEVELOPMENT AREA

MANGALA, AISHWARIYA, RAAGESHWARI& SARASWATI DEVELOPMENT AREA

I N D I A

A Cairn’s Rajasthan Block


Oil Processing System

MAKE UP GAS FROM RAAGESHWARI

TO EXPORT PIPELINE

ASSOCIATED GAS

TO INJECTION AND POWER

WATER SYSTEMS

48 MW Power for Plant Utilities Steam Turbine

GeneratorsInjection Heaters

Process Heaters

Tank Heaters

Thumbli Well

Boilers

MAKE UP WATER FROM THUMBLI SALINE WELLSRECOVERED WATER

C The Steam and Power System at the MPTSCHEMATIC DIAGRAM


help extract the crude comes from the Thumbli saline water aquifer discovered by Cairn in 2004. The Thumbli reservoir is 22 km away from the MPT (see (B) in Chart B). Cairn has drilled fi ve water wells, each with a capacity of 63,000 barrels per day. The saline water is transported to the MPT by a pipeline 20” in diameter. The water is desalinated and then fed to the fi ve boilers at the MPT to generate steam.

The gas needed to fi re the boilers and, more importantly, to generate the power to heat the waxy crude at an average of 65°C along the pipeline, comes from the Raageshwari gas fi eld, located some 90 km away from the MPT (see (C) in Chart B). The Raageshwari Gas Terminal (RGT), with four gas well pads and 35 wells, is designed to produce dry gas of over 30 million standard cubic feet per day (mmscfd). The gas will be transported via a 12” gas pipeline to the MPT and the gas liquids, or condensate, by a 4” pipeline. This will involve 180 km of pipeline.

All the power requirements will be met by three 1250 KVA steam turbine generators. The gas from Raageshwari will be used to supple-ment the produced gas at MPT as fuel for the boilers. Steam from the boilers will be used to produce power and also for heating of fl uids at the MPT.

Chart C explains the closed-loop steam and power system of the MPT. Water from the Thumbli aquifer is desalinated and fed to the boilers, along with gas from Raageshwari. Steam generated from the fi ve boilers is used for four purposes:

First, to drive the four steam turbines to create 48 MW of power for the MPT.

Second, to heat water to inject into the oil wells for extracting the crude oil.

Third, to heat the crude oil process heaters to maintain the minimum heat needed for ensuring that the waxy crude fl ows freely to the oil tanks.

Fourth, to continuously heat the oil tanks that hold the crude at the MPT — again to ensure

Barrels of oil equivalent is a unit based on the approximate energy released by burning one barrel (42 US gallons) of crude oil.

1 boe = 5.8 x 10 6 BTU (British Thermal Unit) = 6.1178632 x 10 9 J (joule), or approximately 6.1 GJ (giga joule).

A boe is roughly 6,000 cubic feet (170 cubic metres) of typical natural gas. The boe or mmboe is used by oil and gas companies as a way of combining oil and natural gas reserves and production into a single measure.

BHAGYAMMANGALAMPT & WELL PADSAISHWARIYATHUMBLI WATERSYSTEM

RAARAAGESGESGESSSHWAHWAHWAHWHWHHH RI RI RI GASS TETE TEETETEERMIRMIRMIRMINALNALNALLLLNA ANDANDNDNDAND WE WE WEWEW LL LL LL PADPADPADPADP SS

OILOILOILOILOILO EX EXEX EX EXPORPORPORPP T T T T TPIPPIPPIPP ELIELILIINE NE NE & & &&&&HEAHEAHEAHEAHEAH TINTINTINTING GG GGHHHSTASTASTASTASTAATIOTIOTITIOTIOT NSNSN

B Rajasthan Block & Mangala Processing Unit

The water to create steam and for fl ooding the oil reservoirs for extraction of crude comes from the Thumbli saline water aquifer discovered by Cairn in 2004. The Thumbli reservoir is 22 km away from the MPT

B O E


FLUIDS FROM OIL WELLS

ASSOCIATED GAS RECOVERYMAKEUP GAS FROM RAAGESHWARI

PRODUCED WATER TREATMENTMAKEUP WATER FROM THUMBLI SALINE WELLS

Heater SeparatorSlug Catcher Settling Tank Dehydrator Export Oil Storage Tank

Oil Pump

TO EXPORT PIPELINE

TO FUEL GAS DISTRIBUTION SYSTEM

INJECTED BACK INTO OIL WELLS

FIRST STAGE PREPARATION SECOND STAGE PREPARATION STORAGE & EXPORT

that the oil is maintained at the required tem-perature.

The water recovered from well injection is then stripped of its oil, desalinated, re-heated and re-used for further injection in the wells or for generating steam at the boilers.

The scheme of the processing system at the MPT is depicted in Chart D. The crude goes through various stages of separation to yield oil, associated gas and water. The associated gas is recovered for use as fuel for steam generation. The water is separated out and re-injected into the wells following treatment. The separated oil goes through a dehydrator, where any remain-ing water is removed. Finally the oil is sent to the oil storage tanks from where it is pumped to the heated pipeline.

The process system is designed in such a way that there is no fl aring of gas during the normal course of operation and also all the water produced is re-used in the crude extraction process. This ensures minimal impact to the environment.

Desalinated water from the Thumbli saline water system is injected into the wells to extract crude oil. The crude goes through a fi rst stage separation of oil, associated gas and water. The associated gas is recovered to fi re the steam tur-bines; and the separated water is treated. The crude then goes through a heater for the sec-ond stage of separation, with the same results. Thereafter, it goes to a settling tank, where the fi nal associated residual gas is taken off from the top, as is the water that settles at the bottom. Thereafter, it is processed through a dehydrator to take out the last remnants of water. Finally it goes to the oil storage tanks, from where it is pumped to the heated pipeline. All separated water is recycled.

At the time of writing this Management Discussion and Analysis:

There are more than 450 engineers from �

the Indian construction major, Larsen and Toubro (L&T), 100 engineers from Cairn and more than 6,000 workmen at the MPT site, all focused on the goal of producing oil from Train 1 by Q3 2009, from Train 2 by Q4 2009 and from Train 3 by H1 2010. Work is on schedule for the completion of �

the 20 tanks at the MPT along with the facili-ties at the Raageshwari Gas Terminal. At the MPT the boilers have been erected and the steam turbine generators are being erected according to schedule.

In addition to all these activities, Cairn has built a wide channel and a Gabion Wall running across the MPT as a fl ood mitigation measure. Barmer was fl ooded by unseasonal and unprec-edented heavy rains in August 2006. Despite the statistically improbable nature of the heavy rains at Barmer, the Company decided to create a fl oodwater outfl ow channel and protect the MPT by a Gabion Wall through an innovative engineering solution that reduced the cost from an initial estimate of US$ 57 to US$ 30 million.

A full schematic presentation of the entire crude oil extraction process at the MPT is given in Chart E.

Cairn is ready to produce fi rst oil from Rajast-han via the fi rst train, which can be scaled up to 30,000 bopd. The completion of Train 2 — with an additional capacity of 50,000 bopd — is targeted for Q4 2009.

D Overview of the Processing System at the MPTSCHEMATIC DIAGRAM


A

A

B

B

C

C

Gas Recovery System

Vertical Well

Horizontal Well

Water Injector

Heater

Separator + Heat

Export Oil Storage Tank

TO FUEL GAS DISTRIBUTION

SYSTEM

THUMBLI SALINE AQUIFIER

BARMER HILL

FATEHGARH

WATER TABLE

FRESH WATER

OIL

TO EXPORT PIPELINE

Saline Water Abstraction

E The Oil Recovery SystemSCHEMATIC DIAGRAM


the rajasthan–gujarat pipelineOn 30 April 2008, the Government of India (GoI) approved the shifting of the crude oil de-livery point as defi ned under the PSC from the MPT at Barmer to the Gujarat coast. Thereafter, ‘in principle’ approval of RoU (Right of Use) was granted to lay the pipeline up to the marine terminal on the Gujarat coast.

The GoI had granted the Right of Use (RoU) to Cairn on 22 August 2007 and had directed the state governments of Rajasthan and Gujarat to nominate competent authorities to process the RoU. The Gujarat authorities granted their RoUs to enable an early start on that section of the pipeline. The Rajasthan RoUs followed in February 2009, and the company took the nec-essary steps to source the construction teams to commence work with the aim of meeting the initial target for completion of Q4 2009.

The 24” heated and insulated pipeline is approximately 700 km long from the MPT at Barmer to a marine terminal on the Gujarat Coast. Some 154 km of the pipeline is located in Rajasthan and the rest is in Gujarat.

The heated and insulated pipeline has an outer diameter of 24” with an 8” pipeline run-ning along it that will carry Raageshwari gas, that will be used for power generation. The heating of the pipeline is based on an electric heat induction technology named Skin Effect Heat Management System (SEHMS). Along the length of the pipeline, there will be more than 35 SEHMS heating stations or Above Ground Installations (AGIs). Gas will be supplied at each station to generate the power required to heat the pipeline for approximately 10 km on either side — to ensure that the crude remains constantly heated above 65°C. In addition, there is an intermediate terminal at Viramgam for storage and further pumping to the coast. There are also two pigging stations at Sanchore and Wankaner to insert ‘pigs’ (basically metal cylinders) that are used to clean the pipe and scour it of wax.

As on 31 March 2009, the status of the heat-ed and insulated pipeline — India’s fi rst, and one of the world’s longest — was as follows:

Nine spreads (which are teams of trenchers, �

welders and layers) are in operation — fi ve in Gujarat and four in RajasthanSignifi cant length of pipeline has been �

lowered.In addition to the main pipeline, there will be a 22 km spur line at Radhanpur (Gujarat), culminating in an export terminal having two pre-heated tanks, each with a capacity of 9,000 barrels.

A comprehensive SEHMS test was carried out on a suitable length of pipeline. The test performed as per design — confi rming that the system should be capable of meeting the heat-ing needs for the pipeline.

Cairn is targeting completion of the pipeline in time to evacuate crude oil by the time Train 2 is operational. The Company is building facilities that will have the capacity to handle 80,000 bopd through the pipeline by Q4 2009.

hydrocarbon resources in rajasthan To date, estimates of the hydrocarbon reserves and resources in the MBA fi elds calculated by Cairn are consistent with those of the indepen-dent specialists, DeGolyer and McNaughton.

Stock Tank Oil Initially in Place (STOIIP), or �

the estimate of the size of the accumulations in MBA: 2,054 million barrels of oil (mmbbls).Of this, the proved plus probable (2P) �

reserves and resources that can be produced from MBA under water fl ooding techniques are estimated to be 685 mmbbls. 2P implies that there is at least a 50% probability of equalling or exceeding the estimate.In addition to this, the 2P estimate of oil �

resource that can be produced by EOR tech-niques is 308 mmbbls. The total 2P estimate of MBA reserves and resources therefore stands at 993 mmbbls. Since Cairn holds a 70% participating interest �

in the approved development areas under the PSC — the other 30% partner being ONGC — the net 2P estimate of reserves and resources in MBA is 695 mmbbls, or 70% of the gross 2P estimate of 993 mmbbls.

Pigging is the practice of using pipeline inspection gauges or ‘pigs’ to perform

various operations on a pipeline without stopping the fl ow of oil. They make a squealing sound while traveling through a pipeline not unlike the sound a pig makes. Cleaning and inspection of the pipeline is done by inserting the pig into a ‘pig launcher’ — a funnel shaped Y section in the pipeline. The launcher is then closed and the pressure of the product in the pipeline is used to push it along down the pipe until it reaches the receiving trap — the ‘pig catcher’

F Map of the ~700 km Rajasthan–Gujarat Pipeline

T H A NT H A NR A J A S TA S TR A J A T

ManM gala ManM gala TerrminminalTerrminminal

Viramgam Viramgam TerminalTerminal

WWankanka erWWankankaner

Terrminminal on oerrminminal on oGujujaraarat Ct Coasoa tararat Ct Coasoa tt

SSanSanSa chochohoreeSSanSanSa chochohoree

ThaThaTharararaThaThaTharararaRadhananpurRadhananpur

G U JU A R AA R ATG U JU A R AAT


Cairn is targeting completion of the pipeline in time to evacuate crude oil by the time Train 2 is operational. The Company is building facilities that will have the capacity to handle 80,000 bopd through the pipeline by Q4 2009

G The Rajasthan–Gujarat PipelineSCHEMATIC DIAGRAM

COASTAL TERMINAL STORAGE AND EXPORT

Distribution to buyer

MANGALA PROCESSING TERMINAL

SHEMS

RAAGESHWARI GAS SUPPLY

Distribution to Refiners

Sanchore Pigging Station

Wankaner Pigging Station

VIRAMGAM INTERMEDIATE TERMINAL

Storage, Pumping and Export

GAS PIPELINE

HEATED CRUDE OIL PIPELINE


SHAKTI NE

SHAKTINC WEST OIL & GAS

N-I

MANGALA

AISHWARIYA

VIJAYA & VANDANA

N-R

GS-V

SARASWATIKAAMESHWARI

RAAGESHWARI OILRAAGESHWARI GASRAAGESHWARI EAST

GUDA

OIL GAS

N-I-NORTHBHAGYAMBHAGYAM

SOUTH

N-EN-P

KAAMESHWARIWEST 6

KAAMESHWARIWEST 3

KAAMESHWARIWEST 2

0 5

Kilometers

10 20

Chart H gives the details.

Application of technologies such as hi-density 3D seismic, detailed core studies, detailed data gathering and analysis among others at Mangala has resulted in:

20% increase in STOIIP over the original FDP;• 30% increase in reserves and resources; and• 25% increase in the plateau rate of the fi eld.•

The FDP for the Bhagyam fi eld has been ap-proved by the GoI, and is based on a plateau off-take rate of 40,000 bopd. Front end engineering design has been completed for Bhagyam.

The STOIIP at Aishwariya has increased by over 37% — from 213 million barrels (mmbbls) in the originally approved FDP to 293 mmbbls. This rise in STOIIP provides a commensurate increase in 2P reserves and resources from Aishwariya to 62 mmbbls. It also doubles the fi eld’s plateau production potential from 10,000 bopd to 20,000 bopd, subject to regulatory approvals.

Additional hydrocarbon resources have been discovered in the Barmer Hill formation over the Mangala and Aishwariya fi elds, estimated at around 400 mmbbls of STOIIP in tighter reser-voir rocks with lower permeability. This Barmer Hill reservoir has tested oil at fl ow rates of up to 250 bopd (from a single well) after stimula-tion. Fields of similar structures elsewhere in the world have been developed with recoveries ranging 7%–10% of the STOIIP under primary recovery, and around 20% as secondary recov-ery. Cairn is planning to conduct pilot activities to evaluate this additional resource potential and the associated development options.

There are also a series of smaller fi elds in Rajasthan (see Chart I). The Kaameshwari West Development Area has been awarded by the GoI and an FDP is under preparation. The Shakti FDP has been submitted to the Operat-ing Committee; and the Guda FDP is under preparation. Cairn proposes to develop these resources at low cost by optimising technologi-cal applications such as low cost drilling and modular facilities, and by leveraging the main infrastructure. When developed, these fi elds

Stock Tank Oil Initially in Place is the total hydrocarbon content of an oil reservoir, referring to the oil in place before the commencement of production. STOIIP must not be confused with oil reserves — which refer to the technically and economically recoverable portion of oil volume in the reservoir. Current recovery factors for oil fi elds around the world range between 10% and 60%, with a few at over 80%. This wide variance is due to the diversity of fl uid and reservoir characteristics for different deposits

STOIIP MANGALA, BHAGYAM, AISHWARIYA

2P GROSS EOR + WATERLOG

2P NET TO CAIRN INDIA

2,054

993

695

308+ 685

216+ 479

I The Rajasthan FieldsRAJASTHAN BLOCK RJ-ON-90/1

H Hydrocarbon Estimates at the MBA FieldsIN MMBOE

Proved volume is equivalent to P90 volumes of hydrocarbon, i.e. defi ned as the

point on an expectation curve at which reserves have a 90% probability of exceeding the quoted value

Proved plus Probable volume is equivalent to P50, the median point on an

expectation curve — with at least a 50% probability of equaling or exceeding the estimate

Proved plus Probable plus Possible volumes is equivalent to P10, the point

on the expectation curve where there is a 10% chance of exceeding the estimate

S T O I I P 1 P

2 P

3 P


will tie in to the MPT.An example of the potential for future growth

was highlighted at the end of 2008. In addition to the existing Raageshwari gas fi eld, Cairn test-ed a new play in the southern part of the Barmer Basin and made another oil and gas discovery in an adjacent fi eld in December 2008 named as the Shaheed Tukaram Ombale ASI (Tukaram) fi eld. This is located approximately 1.5 km east of the Raageshwari 1 well in the southern part of the MARS development area. Early tests indicate a potential oil fl ow of around 500 bopd, plus 0.4 mmscfd gas. Other such fi nds could easily tie into the infrastructure that is being built.

Cairn intends to make use of all the viable Rajasthan fi elds — so as to optimise both the life of the different hydrocarbon resources and the associated revenue streams.

enhanced oil recovery EOR techniques are exactly what they mean — methods of increasing recovery from oil fi elds. Historically, EOR has been considered as a tertiary recovery method — to be applied at the late stage of fi eld life after the primary and secondary recovery schemes.

Cairn recognised the opportunity to imple-ment EOR techniques in MBA very early in the fi eld life, and is planning to conduct a fi eld pilot to demonstrate its applicability in the Mangala fi eld. The reservoir quality, oil properties and temperature make these fi elds ideal for chemical fl ooding EOR methods such as polymer or Alkali Surfactant Polymer (ASP) fl ooding. The potential benefi ts of such applications are: an increase in reserves, extended oil plateau production period, reduced water production thereby ac-celerating oil production. Chart J illustrates the advantages of EOR application in MBA fi elds.

Given the wax content of the oil in MBA, under a conventional water–fl ood scenario, the injected water will ‘fi nger’ through the oil and reach the producer wells early — leaving behind un-drained crude. Adding polymer to the injection water brings the viscosity of the injected water closer to the oil viscosity, and thus improves the sweep of oil. In addition, the

use of alkali and surfactant makes the injected water act like soap, further helping to wash more oil off the reservoir rock. Both these EOR processes will aim to increase the overall recov-ery from the MBA fi elds.

Studies conducted by two independent labo-ratories show favourable results of 30%–40% incremental recovery from the application of EOR. However, fi eld recoveries are expected to be lower. Detailed fi eld scale modelling and simulation studies carried out incorporating the fi ndings of the laboratory evaluation indicate incremental recoveries of some 15% from the MBA fi elds.

If the pilot is successful, the intention is to implement chemical fl ooding on a fi eld scale in Mangala, followed by Bhagyam and Aishwariya. The current assessment of the EOR resource base is greater than 300 mmbbls of incremental recoverable oil from the MBA fi elds.

funding rajasthan and the pipeline: securing finance and optimising costs

Innovations in Securing FinanceAs covered in last year’s Management Discus-sion and Analysis, April 2008 saw Cairn obtain US$ 625 million through a private placement of its shares — the largest private placement in the Indian equity market during 2008–09.

Enhanced Oil Recovery is a term for special techniques to increase the amount of crude oil that can be extracted from a fi eld, over and above conventional methods which typically recover 20% to 40% of the STOIIP. Using EOR methods, an additional 10% to 20% of STOIIP can be extracted. For example, polymers can be used to increase the viscosity of injected water, forcing it to move into regions of the reservoir that would not be contacted by water, resulting in a more effi cient fl ood and sweeping of more oil.Small amounts of detergent-like surfactants can also be injected with the water and polymer; these “soaps” help “scrub” more oil out of the rock, further enhancing oil recovery

J Effect of Enhanced Oil RecoverySCHEMATIC REPRESENTATION

E O R

Q3 2009 2011 2013 2015 2017 2019

CURRENT FDP

175,000 bopd

OIL RATE

EORPotential to extend & enhance plateau

WATER FLOODMangala, Bhagyam & Aishwariya


As a response to the global fi nancial crisis Cairn has tailored its spending plans to the available liquidity — demonstrating its commitment to preserving fi nancial and operational fl exibility. The Company remains focused on maintaining strict capital discipline and is continually evaluating opportunities to reduce costs even further


This included 63.3 million shares at Rs. 224.30 per share to our existing shareholder, Petronas. This proactive move enabled Cairn to work on building the pipeline and to keep the Rajasthan development plan on track and ensure timely production of fi rst oil from the Mangala fi eld.

In addition, Cairn had a debt fi nancing facil-ity for US$ 850 million to fund the upstream development. Since the Rajasthan project has grown in scale and scope — especially with the inclusion of the pipeline — there was a need for additional fi nancing. This has been met by the private placement of shares.

The Company is well placed fi nancially with signifi cant cash on its balance sheet, and a full drawdown of the US$ 850 million credit facility that was provided by our bankers.

In addition, the Company has an ongoing dia-logue with various international and domestic institutions to review its fi nancing options — to create fi nancial fl exibility by securing competi-tively priced long term debt.

In this, the guiding principle is always to secure terms that will enhance long term share-holder value.

Innovations in Optimising Project CostsSimultaneously, Cairn has been focusing on various ways of optimising costs in Rajasthan. The introduction of a more economical smaller Train 1 with a capacity of 30,000 bopd, phasing Bhagyam and Aishwariya to 2010–11, limiting the number of wells during the initial period, and ensuring greater fl exibility in delivery points have reduced costs and optimised the develop-ment of the Rajasthan project.

As a response to the global fi nancial crisis Cairn has tailored its spending plans to the avail-able liquidity — demonstrating its commitment to preserving fi nancial and operational fl exibility. The Company remains focused on maintaining a strict capital discipline and is continually evalu-ating opportunities to reduce costs even further.

The earlier planned capital expenditure for 2008 and 2009 was US$ 1.8 billion on net basis (i.e. net to Cairn, the 70% partner of the Cairn–ONGC joint venture). This has been reduced to

US$ 1.4 billion through tight control on expens-es and innovative project design and planning for the MPT and the pipeline. Examples of these include — proactive placement and ordering of equipment and material prior to global price rise in steel; the ordering of customised rapid drill rigs that work at a faster rate thereby reduc-ing movement time between wells; optimising well designs and pads; and the incorporation of closed loop systems to ensure proper and complete energy utilisation while achieving zero fl aring during normal operations.

Cairn has spent approximately US$ 610 mil-lion in fi nding the oil in Rajasthan — the largest onshore discovery in India since 1985. Post exploration, the Company is planning to spend between US$ 3.8 billion to US$ 4.1 billion on a gross basis (US$ 2.7 billion to US$ 2.9 billion on net basis) up to 2011 on the development of the MBA fi elds the largest discoveries in Rajasthan.

Cairn aims to run low cost operations in Raj-asthan. Given that its fi eld direct opex at Ravva and CB/OS-2 in 2008 was US$ 2.4 per barrel, the Company has one of the lowest operating expenses in the world. We plan to apply these skill sets in Rajasthan and continue as a low cost operator.

The Rajasthan upstream operating expenses are estimated at US$ 3.5 per barrel and the pipeline opex is estimated at US$ 1.5 per barrel during the life of the fi eld.


K Weekly West Texas Intermediate Spot PriceUS$ PER BARREL

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 200


rajasthan: the ‘what ifs’

What if global crude oil prices crash once again, as occurred in the second half of 2008?It is indeed true that oil prices have been ex-tremely volatile in recent times, especially since the beginning of 2007. The price of West Texas Intermediate (WTI), a leading benchmark crude, rose from US$ 54 per barrel in January 2007 and hit an intra-day peak of over US$ 145 per barrel in July 2008. Thereafter, it fell to a low of US$ 40 per barrel in December 2008, before rising again. At the time of writing this Manage-ment Discussion and Analysis, the crude oil price is above US$ 60 per barrel. Chart K plots the average weekly FOB spot price of WTI since January 1986.

What Chart K shows is that, despite volatility, crude oil prices have been above US$ 40 per barrel since May 2004. The average long term analysts’ expectation for the oil price is in the range of US$ 75 to US$ 100 per barrel.

We remain focussed on leveraging our low cost operations to drive the competitive advan-tage. With opex of the existing operations at Ravva and CB/OS-2 of US$ 2.4 per barrel and the estimated Rajasthan opex costs of US$ 5 per barrel, we are well placed to create greater shareholder value even at lower oil prices.

What if MPT doesn’t produce oil according to schedule?Train 1 is completed and is ready to start pro-duction in Q3 2009 with a capacity of 30,000 bopd via trucking to the Gujarat coast. We are targeting completion of Train 2 by Q4 2009, with a capacity of up to 80,000 bopd by the end of 2009.

What if the pipeline is delayed?The pipeline is targeting completion by Q4 2009, in line with the additional oil to be pro-duced through Train 2. As of now, we remain committed to this date. However, in spite of the hard work put in by the teams, some risk remains — particularly on account of the monsoons. Trucking shall continue to be an interim measure.

What if Cairn ran out of funds for the Rajasthan project?The prompt action to raise funds through private placement of equity, re-phasing of Bhag-yam and Aishwariya and the targeting of cost savings through innovative project design and planning has placed Cairn in a strong fi nancial position. With most of the contracts entered into — providing a level of certainty over the cost base — the Company believes it has taken the necessary steps to prevent a funding short-fall. Table 1 gives the estimated costs for 2008 to 2011, versus the funding already in place.

Moreover, Cairn will have additional sources of funds. These are:

Continuous cash fl ows from existing opera-• tions from Ravva and CB/OS-2Start of cash generation from the Rajasthan • operationsThus we believe that there is adequate

funding for Rajasthan. Equally, we continue to explore possibilities for additional fi nancing — if necessary and available at terms that can enhance long term corporate value.

150

120

90

60

30

0

04 2005 2006 2007 2008 2009

1 Cost vs Funds Available for the Rajasthan ProjectIN US$ BILLION

Estimated Costs Financed by

2008 & 2009

Gross (Upstream 1.2, Pipeline 0.8) 2.0 Opening cash on 1 January 2008 0.4

Net to Cairn 1.4 Cash fl ow from operations * 0.2

2010 & 2011 Preferential allotment of equity (2008) 0.6

Gross 1.5–1.8 Existing debt facility 0.9

Net to Cairn ~1.1-1.3 Total 2.1

* from Ravva and CB, for January 2008 – March 2009


Krishna–Godavari (KG) Basin Offshore, Eastern IndiaRAVVA (Cairn is the operator with 22.5% participating interest)

Average gross from the Ravva fi eld for 2008 was 52,539 boepd — comprising average oil production of 41,227 bopd and average gas production of 68 mmscfd.

Ravva has been producing for more than 14 years. Well optimisation measures and surface de-bottlenecking in the last quarter of 2008 helped extend the plateau and arrest the ex-pected production decline. The RD-9 and RB-4 LM sands are producing under extended well test at an average rate of 1,600 bopd. Reservoir pressure was maintained by optimal water injec-tion. 4D time-lapse seismic surveys have been initiated to locate potential bypassed oil, and preparations are underway for the execution of critical development projects to maintain production rates.

Ravva fi eld milestones are: increased produc-tion from 3,700 bopd to 50,000 bopd; plateau extended to nine years and reserves doubled; produced over 200 mmbbls; 2.4 million hours worked with no LTI; ISO14001 and OH-SAS18001 certifi ed; around US$ 4 billion profi t on petroleum paid to GoI.

Cairn intends to maintain and consolidate its position as a low cost operator. The fi eld direct operational expenses for the current producing blocks, Ravva and Cambay, were US$ 2.4 per barrel in 2008 — one of the lowest in the world.

cairn’s operating assets: ravva and cambayAt present, Cairn has two signifi cant producing assets: at CB/OS-2 in the Cambay Basin, off the Gujarat coast in western India, and Ravva, located in the Krishna–Godavari basin off the Andhra Pradesh coastline in Eastern India.

Cairn’s gross operated production from these two assets in India during 2008 was 66,146 boepd (net working interest: 17,264 boepd).

Cambay Basin Offshore, Western IndiaBLOCK CB/OS-2 (Cairn is the operator with 40% participating interest)

In CB/OS-2 block, the Lakshmi and Gauri off-shore fi elds are currently producing oil and gas, while the onshore fi eld, CB-X, is producing only gas. The average gross production from the CB/OS-2 block for 2008 was 13,607 boepd — comprising average oil production 7,376 bopd and average gas production of 37.4 mmscfd.

The drilling and work-over campaign carried out during 2007–08 has not only transformed the CB/OS-2 block from a predominately gas to an oil producing asset, but has also extended its economic life. Two development wells were drilled successfully. The onshore facilities were fully upgraded to handle and process 10,000 bopd, and the fi eld is currently producing around 8,500 bopd.

Cambay has some notable fi eld milestones; Discovery to delivery took just 28 months; health, safety and environment (HSE) — 1.4 million hours of work with no lost time injury (LTI); the facility is both ISO14001 and OHSAS18001 certifi ed. Cambay generated its historically highest revenues during 2008 aided by greater oil production from the new wells and higher oil prices.

Cairn intends to maintain and consolidate its position as a low cost operator. The fi eld direct operational expenses for the current producing blocks, Ravva and Cambay, wereUS$ 2.4 per barrel in 2008 — one of the lowest in the world


mannar basin

saurashtra and cambay basin

I N D I Ags-osn-2003/1cairn india 49%, ongc operator ambe

lakshmi

gauri

cb/os-2lakshmi, gauri, cb-x, ambecairn india 40%, operator

kk-dwn-2004/1cairn india 40%, ongc operator

ravvacairn india 22.5%, operator

pr-osn-2004/1cairn india 35%, operator

vn-onn-2003/1cairn india 49%, operator

gv-onn-2002/1cairn india 50%, operator

gv-onn-2003/1cairn india 24%, operator

kg-dwn-98/2cairn india 10%, ongc operator

kg-onn-2003/1cairn india 49%, operator

rj-onn-2003/1cairn india 30%, eni operator

rj-on-90/1cairn india 70%, operator, ongc 30%

rajasthan ganga valley basin

krishna - godavari basin

non-operated blocks

operated blocks

A R A B I A N S E A

B A N G L A D E S H

B AY O F B E N G A L

B H U TA N

cb-x

sl2007-01-001cairn india 100%, operator

L Cairn’s Exploration Assets


explorationCairn is a major long term player in oil and gas exploration. It has an experienced team, a large proprietary database, and a record of successful exploration over 10 years by its parent company Cairn Energy — with a success ratio that is close to 40%. The exploration strategy is based on building a portfolio of high reward prospects across the risk spectrum in a diversity of basins, plays and operating environments. The key tools of the Company’s exploration methodol-ogy are:

Acquisition and processing of best-in-class �

seismic dataIntegrated petroleum systems evaluation and �

predictive basin modelling Reprocessed and enhanced regional gravity �

and magnetic data for basin delineation Application of appropriate leading-edge �

technology.Chart L shows the map with Cairn’s exploration assets.

Last year’s Management Discussion and Analysis presented a detailed overview of Cairn’s exploration assets. This time, the focus is on key developments that have occurred since then.

discoveries in rajasthanIn December 2008, Cairn made a separate oil and gas discovery adjacent to the existing Raageshwari gas fi eld in Rajasthan. Early tests indicate a waxy oil of 40° API gravity with a potential fl ow of around 500 bopd, plus 0.4 mmscfd gas.

Also in Rajasthan, a third development area was awarded to Cairn by the GoI. This is the Kaameshwari West Development Area measur-ing 822 km2, where there have been three dis-coveries: Kaameshwari West 2, 3 and 6 — with Kaameshwari West 2 and 3 lying in a new play in the Upper Barmer Hill / Lower Dharvi Dungar sandstones.

sri lankaIn September 2008, the Sri Lanka Board of Investment (BoI) and Cairn India signed a com-mitment to explore the Mannar Basin, a frontier

petroleum province. Block SL 2007-01-001 lies offshore north–west Sri Lanka and covers approximately 3,000 km2 in water depths of 200 metres to 1,800 metres. The work programme includes the commitment to acquire signifi cant quantities of seismic data and drill three wells in the initial three of the eight years exploration period. Cairn will explore the block by applying the best in class technologies and industry practices. The plan is to acquire 2D and 3D seismic in late 2009 and 2010 and, depending on results, start exploration drilling in 2011.

building the future and transformational growthTo summarise, therefore, Cairn’s strategy going forward is based on four building blocks as given below.

1 Maximize recovery from production baseSuccessful drilling at Ravva and CB/OS-2• Maintain low operating cost base• Time lapse (4D) seismic in Ravva•

2 Execute Rajasthan developmentFirst production Mangala Q3 2009• Major regulatory clearances obtained• Delivery point shifted• Major contracts awarded• Mangala FDP revision submitted•

3 Maximize potential in RajasthanOver 3,000 km• 2 under long term contractGrowing resource base• Increased Mangala recovery• EOR • Monetise Barmer Hill and other fi elds•

4 Identify new growth opportunitiesUnrisked potential of 1.4 billion bbls• New leads in existing portfolio• Seismic programmes completed• Acreage in Sri Lanka• If each of these work according to plan,

Cairn will witness transformational growth — with production rising from roughly 63,000 bopd (gross) in Q4 of calendar 2008 to around 200,000 bopd (gross) in 2011.

Cairn will witness transformational growth — with production rising from roughly 63,000 bopd (gross) in Q4 of calendar 2008 to around 200,000 bopd (gross) in 2011


health, safety and environment (hse)The Company’s policies on HSE are clear: no harm to the people, and no adverse impact on the environment and the communities in which we operate. Hence, the priorities were excel-lence in construction safety, minimising the environmental impact of all activities including those carried out by contractors, and continuing to improve HSE across all assets and operations.

health and safetyCairn has successfully developed and rolled out a Corporate Responsibility Management System (CRMS) in line with international best practices. The CRMS has fi ve key sub-systems — health, safety, environment, security and corporate social responsibility (details on CSR are given in a separate chapter).

During 2008, Ravva and Suvali were re-certifi ed to the ISO 14001 standard and also to OHSAS 18001 for their occupational health and safety management systems.

Road SafetyIn 2008, road safety training was upgraded with the help of the Institute of Road Traffi c Educa-tion (IRTE), with all drivers given additional training.

Journey management plans are key to road travel safety, and all Cairn vehicles are being fi tted with an ‘in-vehicle monitoring system’ (IVMS). A heavy vehicle safety programme has been initiated to ensure that trailers and other heavy vehicles have appropriate safeguards and are regularly inspected.

During 2008, contractor vehicles travelled for more than 15 million km without any fatalities or serious accidents. The motor vehicle accident frequency rate was 1.33 per million km travelled — which is well below the international bench-mark in this industry.

Operational & Construction Safety With over 10,000 contract workers of varying skill levels at multiple project sites across the country, it was a challenge to ensure all–round

safety at the work place. A comprehensive Safety Management System was implemented across all sites. All workers have been trained in site rules and safe work practices.

In Rajasthan Mine Safety Week 2008, Cairn’s rig site judged as the best entry in overall opera-tional and HSE performance.

2008 saw an excellent health and safety re-cord. There were no fatalities or serious injuries involving permanent disability. The Lost Time Injury Frequency Rate (LTIFR) was 0.27 which is below the International Association of Oil & Gas Producers average of 0.66. There were 10 further recordable incidents involving minor in-juries with a Total Recordable Injury Frequency Rate (TRIFR) of 0.49.

Process SafetyOperating assets continue to focus on the pro-cess safety management programmes to ensure asset integrity and emergency preparedness. Emergency exercises involving employees, con-tractors and the surrounding communities have been conducted at various Company sites.

Health During 2008, a study was conducted on workplace ergonomics and feedback given to employees. A clinic with a doctor and / or para-medics and an ambulance were deployed at all construction sites. Workforce pre-employment medical assessments were also carried out.

environmentCairn recognises its responsibility to minimise environmental impacts from its activities. Work-ing closely with our contractors, we are manag-ing the environmental issues during construc-tion of our projects to achieve our goals.

Performance Highlights

Environmental impacts were assessed for our new exploration activities.

Environmental and social management plans developed for Rajasthan project.

Air emissions in 2008 have been maintained at similar rates to 2007 despite a quantum rise in energy demand.

Several initiatives were taken at Ravva towards reducing energy consumption. It is estimated that these initiatives have led to a saving of 1,659 giga joule (GJ) in 2008. Power supply for offshore platforms at Ravva is now being met by solar arrays and back up wind turbine generators.

Treated waste water marine discharge has gone down drastically at Ravva with produced water now being re-injected into the reservoir.

Loss time Injury Frequency Rate

Discharges to WaterMG OF OIL PER L ITRE OF WATER LOST

0.6

0.3

9

0.2

7

2006 2007 2008

8.9

1

7.5

6

6.6

4

2006 2007 2008

2008 saw an excellent health and safety record. There were no fatalities or serious injuries involving permanent disability. The Lost Time Injury Frequency Rate (LTIFR) was 0.27 which is below the International Association of Oil & Gas Producers average of 0.66


human resourcesCairn’s human resource strategy and direction has been aligned with the ongoing business pri-orities. The focus during 2008 was on hiring and creating robust people management practices in four key areas:

Improving the effi ciency of acquiring new �

staffFocusing on staff development �

Overall retention of staff, especially those �

with high potentialLeveraging SAP to improve the operational �

effectiveness of HR processes.The introduction of SAP Employee Self Service (ESS) in 2008 marked the beginning of a journey to make all HR processes seamless and available at all times to employees. The new system resulted in process and time sav-ing effi ciencies. The goal is to introduce new modules and functions — thereby leveraging a world class Enterprise Resource Planning (ERP) system in support of integrated human resource management.

While many businesses reduced their em-ployee count or put on hold their recruitment plans, Cairn has been hiring throughout 2008, and will continue to do so in 2009. During the fi nancial year under review, the head count increased by 50%.

As part of a Company-wide focus on improv-ing talent management initiatives, the technical competency framework was introduced during 2008 and is intended to ultimately form the core of many people processes. As a fi rst step, the framework was introduced for all roles in the geo-technical functions. It has provided a struc-tured basis for the development of staff, with each employee given a personal development plan that clearly articulates the areas of strength and areas for redevelopment.

The leadership development initiative was targeted to help provide a supply of leaders, to aid succession planning. Cairn has a partner-ship with the Indian Institute of Management (Ahmedabad) to provide classroom training on leadership skills. The two-phase leadership development programme is interspersed with a cross-functional project assignments focusing on the business challenges.

Retention levels improved with focus on development of staff. During 2008, 94% of staff and 98% of key personnel retained.

As on 31 March 2009, Cairn had 902 full time employees.


internal control systems and their adequacyIn 2008, Cairn implemented the SAP enterprise resource planning system, which signifi cantly enhanced the Company’s internal control en-vironment. SAP implementation was widened with the launch of the Maintenance Manage-ment and Employee Self Service modules. The Programme Offi ce was certifi ed as ISO 27001 compliant for information systems. A review of management processes was carried out by an external consultant, which has resulted in improved programmes being developed for implementation in the areas of contracts and procurement, project management and human resources.

The Cairn Business Risk Management System has been implemented for all activities.

Operational policies and procedures have been documented and disseminated to appro-priate departments / functions. However, the process is still ongoing in Rajasthan — which will be put in place before fi rst oil. Cairn’s operational activities have been subjected to audits and peer reviews — and the recom-mendations and actions arising from such audit reports are regularly and formally monitored by senior management.

Financial management policies, standards and delegations of authority have been dissemi-nated to appropriate levels of management. Cairn’s fi nancial activities are subjected to inde-pendent audits — both internal and statutory — and these reports are placed before the senior management and the Audit Committee of the Board of Directors.

An updated Code of Business Ethics has been prepared which, after approval by senior management and the Board of Directors, will be disseminated throughout the Company.

Emergency response plans are in place for key operations and the IT disaster recovery plan and business continuity plans have been developed.

As part of improvement in the system of internal controls, the following are the major programmes planned in 2009:

Implementation of a robust mechanism for �

identifi cation, updating and tracking of regu-latory requirements. Implementation of improved processes in the �

areas of contracts and procurement, project management and human resources.

abridged financial resultsThe year ending for Cairn India was changed from 31 December to 31 March to align the Company’s fi nancial year with India’s tax year. Consequently, the results for the current ac-counting period covers 15 months, while for the previous it was 12 months. Thus, one cannot readily compare the results over the two suc-cessive periods. Table 2 gives the consolidated and audited results.

outlookAt the time of writing this Management Discus-sion and Analysis, Cairn is targeting delivering transformational growth — beginning Q3 2009.

We will soon start delivering fi rst oil from Rajasthan — with the capacity to produce up to 30,000 bopd through Train 1.

We aim to complete the pipeline by Q4 2009.

We are targeting completion of Train 2 at the MPT by Q4 2009 — and thus should have the capacity to produce up to 80,000 bopd of oil.

By 2011, with Bhagyam and Aishwariya coming on stream, Rajasthan will have the ability to pro-duce up to 175,000 bopd of oil — all of which will be processed at the MPT.

Thus, by 2011, we will have a targeted increase in overall operated production from approxi-mately 63,000 bopd (gross) in Q4 of calender 2008 to around 200,000 bopd (gross) in 2011.

We are, therefore, confi dent of being a signifi -cant provider of India’s energy needs in the near future.

The Cairn Business Risk Management System has been implemented for all activities. Emergency response plans are in place for key operations and the IT disaster recovery plan and business continuity plans have been developed


2 Abridged Consolidated Audited Financials for Cairn IndiaRS. MILLION EXCEPT FOR EPS, WHICH IS IN RS.

For 12 months ended 31 Dec 07

For 15 months ended 31 Mar 09

incomeIncome from Operations 10,123 14,327

Other Income 1,324 5,072

Total Income 11,447 19,398

expenditure(Increase)/Decrease in Stock-in-trade -112 222

Operating Expenses 1,946 2,130

Employees Cost 1,257 1,145

Depreciation, Depletion, Amortisation & Site Restoration 2,077 2,698

Other Administration Cost 360 1,732

Exploration Costs 2,512 1,684

Foreign Exchange Fluctuation 2,120

Total Expenditure 10,161 9,611

Interest and Finance Cost 27 64

Exceptional Items 156

Profi t/(Loss) before taxation 1,259 9,879

provision for taxationa) Current Tax 388 1,111

b) Deferred Tax 764 623

c) Fringe Benefi t Tax 353 110

Net Profi t/(Loss) for the period -245 8,035

Paid up Equity Share Capital (face value of Rs.10 each) 17,784 18,967

Reserves excluding Revaluation Reserves 275,627 308,668

earnings/(loss) per share (not annualised)a) Basic -0.14 4.31

b) Diluted -0.14 4.28

public shareholdinga) Number of Shares 551,555,629 669,824,025

b) Percentage of Shareholding 31.01% 35.32%

cautionary statementStatements in this Management Discussion and Analysis describing the Company’s objectives, projections, estimates and expectations may be ‘forward looking statements’ within the mean-ing of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Company’s operations include a downtrend in the sector, signifi cant changes in political and economic environment in India, exchange rate fl uctua-tions, tax laws, litigation, labour relations and interest costs.


J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M AO N D M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1

RJ BLOCK MILESTONESRAJASTHAN BASIN

CB/OS-2 MILESTONESCAMBAY BASIN

MAY 95 Production Sharing Contract signed

DEC 1999 Cairn farmed in for an additional 22.5%

1998 Cairn farmed in for 27.5%

NOV 2001 Saraswati discovery

1999 Guda (discovered by Shell)

JAN 2001 Gauri oil & gas fi eld discovery

JUN 1998 Production Sharing Contract signed

JAN 2001 Ambe oil & gas fi eld discovery

MAY 2000 Lakshmi oil & gas fi eld discovery

Fastest progress in India

Discovery to production in only 28 months

$9.8 PER BARREL

OCT 1994 Production Sharing Contract signed

DATE Description of milestone for Rajasthan Field

DATE Description of milestone for Ravva Field

DATE Description of milestone for CBOS2 Field

DISCOVERY DATE Well discovered in the Rajasthan Field

DISCOVERY DATE Well discovered in the CBOS2 Field

Oil produced in bopd

100 million barrels of oil produced

100 million barrels of oil produced

JAN 1995 Command Petroleum took-over as JV Operator

DEC 1996 Phase-II of development commissioned

OCT 1997 Cairn took over from Command Petroleum

1998 Ravva fi eld

doubled its oil reserves

1999 Ramped up production to

50,000 bopd

NOV 2000 Water injection up gradation

2001 Additional subsea lines for Ravva satellite gas project

SEPT 2001 Ravva Satellite Gas

Development Project

JUN 2001 Third associate gas

recovery compressor

JULY 2001 Zero fl aring

WHEN THE BRENT CRUDE OIL PRICES WERE…US$ PER BARREL

RAVVA MILESTONESKRISHNA GODAVARI BASIN

32

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A MJ F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9

MARCH 2008 Completion of Infi ll drilling programme in 17 months

JUNE 2003 Lakshmi fi elds ramped up gas production to

130 mmscfd

JUNE 2003

Cairn acquired 100% interest

JAN 2004 Mangala discovery

OCT 2003 Kaameshwari discovery

JAN 2007 IPO of Cairn India

MAY 2005 Vandana discovery

JUNE 2005 N-I discovered

MAR 2004 Aishwariya discovery

SEPT 2004 Vijaya discovery

AUG 2004 Bhagyam discovery

APR 2004 Shakti discovery

NOV 2005 GSV & N-C-West discovered

DEC 2005 Bhagyam South

JAN 2006 Raag Deep gasN-E discovered

APR 2006 N-P & Mangala Barmer Hill discoveries

NOV 2006 Shakti-NE-1 discovery

DEC 2006 K-W-2 discovery

FEB 2007 N-I-North discovery

MAY 2007 K-W-3 & Saraswati- Crest - 1 discoveries

AUG 2007 K-W-6 discoveryFEB 2003

Raageshwari discovery

NOV 2003 G-R-F-1 discovery(now part of Guda)

DEC 2008 Raageshwari-

East-1z discovery

NOV 2005 Gauri Oil Development

First oil from Gauri

JAN 2006 Oil production up to

3,000 bopd

FEB 2008 Oil production up to

6,000 bopd

APR 2004 Gauri fi eld developed and

Gas production commenced

JUL 2002

Safety case developed for the fi rst time in India JUN 2006

Reverse Osmosis plant installed at Suvali village

MAY 2009 Upgraded oil processing capacity to

10,000 bopd

CB/OS-2 onshore & offshore facilities certifi ed for OHSAS

18001:2007 standards

DEC 2004

Hydrocarbon Dew Point project

completed to meet sales gas specifi cations

APR 2005 CB/OS-2 onshore & offshore facilities certifi ed for ISO 14001:2004 standards

APR 2006 Ambe fi eld

Commerciality declared

MAR 2005 Lakshmi fi eld Phase-II development –

5 new wells drilled OCT 2002 Lakshmi gas fi eld developed and

Gas production commenced

FEB 2004 CB-X onshore discovery

JUNE 2007 CB-X fi eld development completed and

Gas sales commenced

VALUED AT $133.9

DEC 2005 Innovative technology application of drag reducing additive for incremental oil production30

mmscfd70 mmscfd

2002Ramped up gas Sales

JUN 2002 Additional crude oil storage tank installed

JAN 2003

100 mn barrelsof oil production by JV

Micro vendor development- programme initiated to encourage the local village contractors at site- for which Casurina plantation in an area of 110 acres at Ravva onshore (along the beach)

JAN 2005 & SEPT 2008 ISO 14001 & OSHAS 18001 certifi cation Installation of additional compressors APR 2008

200 mn barrels of oil production by JV

JAN 2008 First of its kind in India

Multiphase pumpsfor incremental oil production

MAY 2008

Commissioned Produced Water Re- Injection project

making Ravva Eco-Friendly

2008 – 2009 additional subsea lines planned for Ravva

2004 TERI Awards conferred for the Micro vendor development Programme

»

33

Corporate Social Responsibility

Our vision is ‘sustainable development’, which we interpret as growing our business in a socially and environmentally responsible way, while simultaneously meeting the legitimate interests of our stakeholders


overviewOur activities are of importance to the social and economic environment of the communities in which we operate. Helping to bring positive benefi ts to such communities not only improves their state of well-being but also facilitates the smooth running of our operations. As an exam-ple, helping people have access to clean water has been a common issue for the communities we have worked with in India. Our fi rst projects to bring fresh water supplies to local communi-ties started around our Ravva plant in Andhra Pradesh. This initiative continues in Rajasthan.

stakeholder engagementAt Cairn, we believe that building strong, open and lasting relationships with our stakeholders is as much a social responsibility, as it is vital to achieve our business goals. Our activities are typically large in scale and often involve the neighbouring communities. Therefore, it is important for us to continuously cooperate with governments and local communities to ensure ‘win-win’ outcomes for all — the people in com-munities around us and our businesses.

In Rajasthan, for instance, the scale of our development project requires extensive consultation. This continues to be guided by a Public Consultation and Disclosure Plan that completed 54 consultation meetings in 2008: 34 grievances were received for the project in 2008, all of which were successfully resolved.

community developmentCairn recognises that its activities can affect the social and economic environment of the com-munities in which we operate. This is particu-larly true where its presence dominates local industrial or commercial activity — as is the case in the remote and arid part of Rajasthan. In 2008, we have continued our partnership with the International Finance Corporation (IFC) a part of the World Bank group, to establish an Enterprise Centre at Barmer for promoting local economic development, a rural dairy develop-ment project and a child and maternal health awareness initiative.

human rightsCairn recognises the importance of human rights. In Rajasthan, we continue to apply a ‘Rights Aware’ approach to safeguard the local community’s right to water in an area with limited water resources while accessing the water required to support our operations. Similarly, land acquisition which is critical for the Rajasthan project, has been carried out after extensive consultations with local communities and immediate stakeholders.

policyCairn is committed to maintaining the highest standards of corporate social responsibility in its business activities. To meet this commit-

ment, we seek to respect the rule of law, adopt appropriate international standards, implement management systems, and strive to maintain the highest standard of ethics with regard to our employees, investors, shareholders, local com-munities and suppliers.

visionOur vision is ‘sustainable development’, which we interpret as growing our business in a socially and environmentally responsible way, while simultaneously meeting the legitimate interests of our stakeholders. Executing this vision involves community involvement, which means taking an active role and responsibility in empowering local communities to achieve their ambitions.

Cairn’s vision of CSR is further encapsulated in 3Rs: Respect, Relationships and Responsibility.

Respect Respect for the people, who are Cairn’s key asset. This is not only respect for Cairn’s employees, but also for everyone who works in our facilities and lives in the communi-ties with which we interact.

Relationships Cairn’s success would not be possible without the consistent support that we have enjoyed. Relationships are all-important, whether with people living next to a drill site in Rajasthan, people from nearby villages or of-fi cials and politicians making decisions.

Responsibility We have a responsibility to manage the expectations of the people who are affected by Cairn’s operations. Working in any country is only possible when values are shared. We believe that our core values of integrity, social and environmental responsibility, team-work and nurturing of individuals, creativity, risk management and alliances with key partners are all ingredients that are central to our success.

Cairn operates in areas that are economi-cally, socially and environmentally sensitive and therefore needs to take due recognition of these challenges when developing its plans.

objectivesAt Cairn, we seek to:

Proactively manage stakeholder expectations �

to attain and maintain the ‘social licence’ to operatePartner with communities for sustainable �

developmentCreate and sustain a positive perception of �

Cairn in its areas of operationShow leadership in corporate citizenship. �

csr initiativesCairn aims to promote inclusive and sustainable development. Hence, it focuses on:

Development of social capital through health �

and education initiativesEconomic development of the disadvantaged �

35 CORPORATE SOCIAL RESPONSIBIL ITY

— in enhancing their well-being and wealth by increasing their opportunities and access to servicesInfrastructure development to facilitate the �

process of economic regenerationEffective protection of the environment and �

prudent use of natural resources.

In 2008, Cairn achieved a number of milestones in CSR across all its operations.

We won the prestigious TERI (The Energy Research Institute) CSR Award, 2008, for our micro-vendor programme at Ravva.

At a corporate level, the framework for our Pubic Consultation and Disclosure Plan (PCDP) and the Land Acquisition and Compensation Plan (LACP) has been defi ned; and this has been aligned with the requirements of the IFC’s Policies and Performance Standards on Social and Environmental Sustainability. This framework has been embedded within the systems and operations of Cairn throughout the project life cycle. During 2008, IFC carried out independent audits of Cairn, which showed that the Company is progressing well towards full compliance with the IFC standards.

In Rajasthan, the IFC–Cairn Linkage Programme launched in 2007 led to skills development of

more than 5,000 local people — enabling them to be associated with construction-related job opportunities. Efforts were made to strengthen relationships with the local community, espe-cially those who had contributed land to Cairn for the Rajasthan project, so as to enhance their economic possibilities and outreach.

In Bihar, the major CSR objective was to address the socio-economic needs of the communities around our project areas and build an environ-ment of trust and cooperation. More than 5,500 farmers were given training in organic farming techniques and organised into farmers’ clubs for sustainability. Cairn supported more than 20,000 fl ood affected families by providing shel-ters in relief camps and by making provisions for medical aid, water and sanitation.

CSR initiatives were also launched in the exploration blocks of Uttar Pradesh (UP). The major focus in UP is on improving reproduc-tive and child health care practices through a project called ‘Janani Pariyojna’ in four districts of eastern UP, namely Gorakhpur, Maharajganj, Deoria, and Kushinagar.

The CSR programmes at Ravva and Suvali focus on promoting health, education, sustainable livelihoods and improving local infrastructure together with the local administration.

A self-employment programme focusing on making handicrafts and establishing linkages with locally-based exporters has brought economic benefi ts to more than 200 women

In Bihar, more than 5,500 farmers were given training in organic farming techniques and organised into farmers’ clubs for sustainability. Cairn supported more than 20,000 fl ood affected families by providing shelters in relief camps and by making provisions for medical aid, water and sanitation


infrastructure developmentSeveral initiatives have been undertaken that recognise the importance of infrastructure de-velopment in growth and poverty reduction:

Working for the last fi ve years to create water security in the district of Barmer by constructing over 1,300 water harvesting structures. This year, a water vending outlet was constructed at Naya Nagar, Barmer — which is an important location for the community on the highway.

Supporting the construction of 200 houses for the poor at Ravva, under the Indira Awaas Yojana.

Supporting schools around its operational area by constructing classrooms, providing drinking water facilities, building boundary walls and establishing computer learning centres.

Constructing panchayat offi ces, community halls and internal roads in Ravva, benefi ting over 35,000 villagers.

Constructing an emergency ward in the Com-munity Health Centre, Baitu (Barmer) which will cater to the needs of more than 25,000 people and handle several emergency cases, especially road accidents.

educationEducation is a key area of focus for Cairn. Several initiatives are underway across the operational areas:

Supporting an interactive mode of learning for children in 27 government schools in rural Barmer called ‘Theatre in Education’. This pro-gramme has been instrumental in breaking the monotony of classroom teaching and making education more lively and interesting.

Supporting infrastructure improvements for rural schools in our operational areas which has aided enrolment and reduced the numbers dropping out of schools.

Partnering with All India Radio to broadcast two community awareness programmes ‘Gaon Ki Dhani’ and ‘Hello Doctor’. ‘Gaon Ki Dhani’ provides expert advice on agriculture, livestock rearing; while ‘Hello Doctor’ advises on health related issues. The programmes have been very effective and have reached out to more than 10,000 villagers.

Supporting a computer literacy programme in various government schools in Bihar since 2007. The objective is to give students of Classes IX and X exposure to computers to improve their academic options and career opportunities.

Starting adult education centres. Contract work-men at the Ravva terminal have been attending these centres, and some have qualifi ed for the graduation courses entrance examination conducted by the Andhra University. Cairn also supports the education of girl students to continue their studies — especially those who dropped out after matriculation.

economic developmentCairn is working on a two-fold strategy:

Developing capabilities of SMEs /general �

suppliers /contractors /micro-entrepreneurs to act as vendors to large industries and supply them with goods and services.

Developing the skills of locals to match the �

market requirements for employment.

Cairn received the TERI Corporate Award for Social Responsibility, 2008, in recognition of its efforts for the Micro-Vendor Programme at Ravva. The programme was initiated in 2005. It registers local people as potential suppliers and provides training in quality, safety and en-vironmental skills. The training helped create a pool of vendors that can supply goods and ser-vices to Cairn and other business enterprises. Contracts worth over US$ 1 million have been awarded to about 80 micro-vendors at Ravva.


More than 780 economically marginal households have become members of 13 milk collection societies which are supplying milk to the Barmer district cooperative society (SARAS). Over 400,000 litres of milk was collected in 2008, compared with 200,000 litres in 2007 — and generated total revenue of over Rs.4.8 million


Under the IFC–Cairn Linkage Programme, an enterprise centre (EC) has been set up at the Industrial Training Institute (ITI) Barmer. TheEC aims to develop the skills of local youth — enabling them to be employed with Cairn or other industries in the area. The EC also acts as a catalyst for micro, small and medium enter-prise growth and development in Barmer.

By the end of 2008, the Barmer EC had trained more than 5,000 individuals in construc-tion related skills (reinforced concrete construc-tion, masonry, bar bending, electrical, plumbing carpentry, scaffolding and fabrication); in handicrafts (garments and key chain making); in auto repairs; mobile and electrical appliances repairing; and in teaching spoken English. Ap-proximately 70% of the trainees have secured employment following such training.

A self-employment programme focusing on making handicrafts and establishing linkages with locally-based exporters has brought eco-nomic benefi ts to more than 200 women.

Another component of the IFC-Cairn Linkage Programme is the community-based rural dairy development project at Barmer.

More than 780 economically marginal households have become members of 13 milk collection societies which are supplying milk to the Barmer district cooperative society (SARAS). Over 400,000 litres of milk was col-lected in 2008, compared with 200,000 litres in 2007 — and generated total revenue of over Rs. 4.8 million.

healthCairn’s community based health initiatives work at three levels:

Supporting GoI initiatives with health care �

through infrastructure support and capacity building of health service providers

Helping improve health literacy so that �

people can make informed choices

Creating partnerships with stakeholders to �

build capacity for leadership development at

the grassroot level, supported by health promo-tional practices.

Cairn’s health initiatives have been:

Child and Maternal Health (CMH) Awareness: This is a component of IFC–Cairn Linkage programme and is being implemented in part-nership with the Centre for Development and Population Activities (CEDPA), an international NGO. The project aims to increase awareness regarding HIV/AIDS prevention, reproductive, child and other major health concerns by em-powering Government of Rajasthan health prac-titioners and elected panchayat representatives. Under the project, both in- and out-of- school adolescents are empowered through life skill education programmes. The other component is awareness generation on HIV/AIDS for more than 4,000 truckers in the area, who are consid-ered to be in the high risk group.

Cairn has been addressing the issue of commu-nity health in Ravva by running a village clinic for the community in Surasaniyanam. This has helped improve the health status of more than 6,000 people in and around the village.

A 12 bed hospital has been constructed by Cairn in Surasaniyanam — as well as a veteri-nary clinic at the mandal headquarters.

Health camps are organised periodically for specifi c health issues and health education.

Reproductive and Child Health (RCH): Cairn is implementing a project on RCH in four districts of Uttar Pradesh. The aim is to increase commu-nity action that directly and indirectly improves reproductive and child health care practices.


company»s philosophy on corporate governanceTransparency, integrity, professionalism and accountability are the cornerstones of our value system. These guide the Company’s manage-ment in all aspects of business conduct, and in its relationship with all its stakeholders — including shareholders, customers, employees and the communities in which it operates.

In India, corporate governance standards for listed companies are regulated by the Securities and Exchange Board of India (SEBI) through Clause 49 of the Listing Agreement of the Stock Exchanges. This chapter, along with those on Management Discussion and Analysis, reports Cairn India’s compliance with Clause 49.

board of directors composition of the boardThe Company believes that good corporate governance begins with setting the tone at the top. Its Board of Directors, therefore, com-prises not only eminent experts from various fi elds, but also people who are committed to all the key underlying principles and values that constitute the best standards of corporate governance.

For most of 2008-09, the Company had an appropriate mix of independent and executive / promoter Directors, as specifi ed by Clause 49 of the Listing Agreement. However, subsequent to the SEBI clarifi cation issued on 23 October 2008, the Company was required to increase the number of independent Directors to at least half the strength of the Board. To this end, the Company has inducted Mr Edward T. Story — an international expert in oil exploration and production — as an independent Director. It is actively in the process of inducting two more independent Directors with requisite expertise. By the end of 2009-10, Cairn India intends to have half of the Board comprising independent Directors.

As on 31 March 2009, the Company’s Board comprised ten Directors, including seven non-executive Directors, four of whom are also independent. The Chairman of the Board is a non-executive promoter Director. All non-executive Directors are professionals who have rich experience in a wide spectrum of functions including management, fi nance, economics, oil and gas exploration and general administration.

The executive Directors have been ap-pointed for a term of fi ve years barring Mr Rick Bott, who has a three-year contract.

As mandated by the Clause 49, the indepen-dent Directors on the Company’s Board:

Apart from receiving Director’s remuneration, do not have any material pecuniary relationships or transactions with the Company, its promot-ers, its Directors, its senior management or its holding company, its subsidiaries and associates which may affect their independence.

Are not related to promoters or persons occu-pying management positions at the Board level or at one level below the Board.

Have not been executives of the Company in the immediately preceding three fi nancial years.

Are not partners or executives, or were not partners or executives, during the preceding three years of the:

Statutory audit fi rm or the internal audit fi rm • that is associated with the Company.Legal fi rm(s) and consulting fi rm(s) that have • a material association with the Company.

Are not material suppliers, service providers or customers or lessors or lessees of the Company which may affect their independence.

Are not substantial shareholders of the

Company i.e. do not own two percent or more of a block of voting Shares.

Are not less than 21 years of age.

information supplied to the board The Board has complete access to all informa-tion with the Company. The quantum and qual-ity of information supplied by the management to the Board goes well beyond the minimum requirement stipulated in Clause 49. All infor-mation, except critical price sensitive informa-tion (which is considered immediately by the Board), is given to the Directors well in advance of the Board and Committee meetings.

The Board periodically reviews compliance reports of all applicable laws as well as steps taken by the Company to rectify instances of non-compliances, if any. Signifi cant transactions and arrangements entered into by the unlisted subsidiary companies are also discussed and deliberated in advance by the Board.

board procedureThe Company follows a structured process of decision-making by the Board and its Committees. The meeting dates are usually fi nalised at the beginning of the year. Meetings are generally convened by fi xing dates a year in advance. The meetings are usually held at the Company’s corporate offi ce in Gurgaon. Detailed agenda, management reports and other explana-tory statements are circulated at least seven days ahead of the meeting for facilitating meaningful, informed and focused discussions and decision-making. To address specifi c urgent needs, meet-ings are also called at shorter notice — but never less than a minimum of seven days. In some instances, resolutions are passed by circulation.

Directors have complete access to all information of the Company. The Board is also free to recommend inclusion of any matter in

Report on Corporate Governance

The philosophy of Cairn India Limited (‘Cairn India’ or ‘the Company’) is to assist the management in conducting its business in a fair, ethical, effi cient and transparent manner to ensure higher long term stakeholder and shareholder value


the agenda for discussion. Senior management offi cials are called to provide additional inputs on the matters being discussed by the Board/Committee, as and when necessary.

During the course of the fi nancial year ended 31 March 2009, the following changes were made in the composition of the Board:

Mr Lawrence W. Smyth � resigned from the Board with effect from 21 January 2008.

Mr Rick Bott � was appointed as an additional Director with effect from 29 April 2008 and as

an executive Director and chief operating of-fi cer with effect from 15 June 2008.

Ms Jann Brown � was appointed as an alter-nate Director to Mr Norman L. Murray with ef-fect from 25 November 2008, and ceased to be an alternate Director from 10 December 2008. Thereafter, she was appointed as additional Director with effect from 19 December 2008.

Mr Norman L. Murray � resigned from the Board with effect from 18 December 2008, and was appointed as an alternate Director to Ms Jann Brown on 19 December 2008.

Thereafter, he ceased to be an alternate Director effective 10 February 2009.

Mr Edward T. Story � was appointed as an additional Director with effect from 18 March 2009.

Mr Philip Tracy � was appointed as an alternate Director to Sir William B. B. Gammell on 18 March 2009. He ceased to be an alternate Director effective 26 May 2009.

The composition of the Board as on 31 March 2009 is given in Table 1. As mandated by Clause 49 of the Listing Agreement, none

1 Composition of the BoardAS ON 31 MARCH 2009

S.No. Name of Director Executive/Non-Executive

No. of other Directorships Memberships/ Chairmanships of Board-level Committees**

Indian Foreign * Member Chairman

1 Sir William B.B. Gammell Chairman, Non-Executive Director - 29 - -

2 Ms Jann Brown1 Non-Executive Director - 42 1 -

3 Mr Aman Mehta Non-Executive & Independent Director 6 3 7 3

4 Mr Naresh Chandra Non-Executive & Independent Director 15 2 10 1

5 Dr Omkar Goswami Non-Executive & Independent Director 9 - 9 2

6 Mr Malcolm Shaw Thoms Non-Executive Director - 30 - -

7 Mr Rahul Dhir Managing Director & CEO - 5 1 -

8 Mr Indrajit Banerjee Executive Director & CFO - 29 - -

9 Mr Rick Bott 2 Executive Director & COO - - - -

10 Mr Edward T. Story 3 Non-Executive & Independent Director - 1 1 -

11 Mr Philip Tracy 4 Non-Executive Director - 1 - -

* Includes Foundations** Only the Audit Committee and the Shareholders’ / Investors’ Grievance Committee of Indian public limited companies have been considered1 Appointed as an additional Director with effect from 19 December 20082 Appointed as an additional Director with effect from 29 April 20083 Appointed as an additional Director with effect from 18 March 20094 Appointed as an alternate Director to Sir William B.B. Gammell with effect from 18 March 2009 and ceased to be alternate Director with effect from 26 May 2009

41 CORPORATE GOVERNANCE

Report on Corporate Governance Continued

of the Directors is a member of more than ten Board-level committees of public limited Indian companies; nor are they chairmen of more than fi ve committees in which they are mem-bers. Moreover, none of the Directors of the Company is related to the other, or to any other employee of the Company.

number of board meetingsDuring the fi nancial year ended 31 March 2009, the Board of Directors met 10 times. The dates were: 21 January 2008, 17 March 2008, 27 March 2008, 31 March 2008, 29 April 2008, 25 June 2008, 29 July 2008, 29 October 2008, 10 December 2008 and 18 March 2009. The maximum gap between any two meetings was less than four months.

directors’ attendance record Table 2 gives the Directors’ attendance at Board Meetings and the Annual General Meeting (AGM) during the fi nancial year ended 31 March 2009.

directors‘ remunerationTable 3 lists the remuneration paid or payable to the Directors. The non-executive Directors do not have any material pecuniary relationship or transactions with the Company, other than sitting fees paid to them. The non-executive Directors are also eligible for commission up to 1% of net profi ts as permitted by the Companies Act, 1956 and as approved by sharehold-ers in the annual general meeting held on 20 September 2007.

During the year under review, 69,630 options were granted to Mr Indrajit Banerjee under the Cairn India Performance Option Plan, 2006 (CIPOP). These options have been granted based on performance in contributing to busi-ness results, organisational strength and market position of the Company and criticality of the role assigned. The vesting period is minimum three years, subject to the fulfi llment of performance conditions in the Plan. The exercise period is three months from the date of vesting of options. Table 4 details the options exercised by the executive Directors during the year.

2 Directors’ Attendance RecordFOR THE F INANCIAL YEAR ENDED 31 MARCH 2009

Name of the Director No. of meetings held during the period the Director was on Board

No. of Meetings attended Presence at the last AGM

Sir William B. B. Gammell 10 5 * Yes

Ms Jann Brown 1 1 1 NA

Mr Norman L. Murray 2 9 7 Yes

Mr Rahul Dhir 10 8 Yes

Mr Malcolm Shaw Thoms 10 7 Yes

Mr Aman Mehta 10 9 No

Mr Naresh Chandra 10 10 Yes

Dr Omkar Goswami 10 8 Yes

Mr Indrajit Banerjee 10 10 Yes

Mr Rick Bott 3 5 5 Yes

Mr Edward T. Story 4 - - NA

Mr Philip Tracy 5 1 1 NA

Mr Lawrence W. Smyth 6 - - NA

* Sir William B. B. Gammell also participated in the proceedings of 3 Board Meetings through audio conference1 Appointed as an additional Director with effect from 19 December 20082 Resigned from an the Board with effect from 18 December 20083 Appointed as additional Director with effect from 29 April 20084 Appointed as an additional Director with effect from 18 March 20095 Appointed as an alternate Director to Sir William B.B. Gammell with effect from 18 March 2009 and ceased to be alternate Director with effect from 26 May 20096 Resigned from the Board with effect from 21 January 2008



3 Details of Directors’ RemunerationFOR THE F INANCIAL YEAR ENDED 31 MARCH 2009, IN RS.

Name of the Director Salary Bonus and Performance

incentives

Retirement Benefi ts

Commission Sitting Fee Total

Sir William B. B. Gammell - - - - - -

Ms Jann Brown 1 - - - - - -

Mr Norman L. Murray 2 - - - - - -

Mr Rahul Dhir * 56,334,353 13,423,473 1,701,442 - - 71,459,268

Mr Malcom Shaw Thoms - - - - - -

Mr Aman Mehta - - - - 440,000 440,000

Mr Naresh Chandra - - - - 480,000 480,000

Dr Omkar Goswami - - - - 400,000 400,000

Mr Indrajit Banerjee ** 16,274,192 8,099,000 1,749,600 - - 26,122,792

Mr Rick Bott 3 *** 26,783,554 86,598,000 1,169,703 - - 114,551,257

Mr Edward T. Story 4 - - - - - -

Mr Lawrence W. Smyth 5 **** 11,373,143 14,141,503 - - - 25,514,646

1 Appointed as an additional Director with effect from 19 December 20082 Resigned from the Board with effect from 18 December 20083 Appointed as an additional Director with effect from 29 April 2008 4 Appointed as an additional Director with effect from 18 March 20095 Resigned from the Board with effect from 21 January 2008* Rs. 71,459,268 includes Rs. 3,000,000 paid by Cairn India Limited as salary and retiral benefi ts. Further benefi ts and perquisites valued at Rs. 54,000,436 were provided by Cairn Energy India Pty Limited (CEIPL, incorporated in Australia). ** Salary of Rs. 2,008,929 and retirement benefi ts / perquisites of Rs. 241,071 was paid by Cairn India Limited and balance by CEIPL. *** Rs. 114,551,257 includes Rs. 950,000 paid by Cairn India Limited as salary and retiral benefi ts. Further benefi ts and perquisites valued at Rs. 67,936,605 were provided by CEIPL. **** Lawrence W. Smyth, who resigned from the Board on 21 January 2008, was paid salary of Rs.11,373,143 and perquisites of Rs. 14,141,503 by CEIPL. Further benefi ts and perquisites valued at Rs. 13,821,800 were provided by CEIPL.Mr Philip Tracy, alternate Director was paid retirement benefi ts / perquisites of Rs. 1,353,642 by CEIPL for the period for which he was alternate Director.

4 Employee Stock OptionsUNDER THE CAIRN INDIA SENIOR MANAGEMENT PLAN, 2006 (CISMP)

Name of the Director No. of Options granted

No. of Options vested

No. of Options exercised

No. of Options cancelled

No. of Options outstanding

Exercise Price (in Rs.)

Mr Rahul Dhir 6,714,233 4,476,156 4,476,156 - 2,238,077 * 33.70

Mr Lawrence W. Smyth 1 1,584,480 792,240 792,240 792,240 - 33.70

1 Resigned from the Board with effect from 21 January 2008* The outstanding options of Mr Rahul Dhir will vest on Company’s achieving 30 days’ consecutive production of over 150,000 bopd from the Rajasthan Block and can be exercised within a period of eighteen months from the date of vesting



shareholding of non-executive directors Sir William B. B. Gammell, Ms Jann Brown and Mr Malcolm Shaw Thoms, who are non-executive Directors of the Company hold one equity share each in the Company as nominees of Cairn UK Holdings Limited, the holding company. Apart from this, none of the non-executive Directors holds any equity shares or convertible instruments of the Company.

code of conduct The Company’s Board of Directors has laid down a ‘Code of Conduct for the Board of Directors and Senior Management’ of the Company. For details, see www.cairnindia.com. All Directors and senior management have affi rmed compliance with the Code for the fi nancial year ended 31 March 2009.

committees of the board(a) audit committeeThe Audit Committee of the Company plays a key role in ensuring maintenance of high level of governance standards in the organisation. It oversees, monitors, and advises the Company’s management and auditors in conducting audits and preparing fi nancial statements, subject to the ultimate authority of the Board of Directors. It ensures accountability on the part of man-agement and internal and external auditors; makes certain that all groups involved in the fi nancial reporting and internal controls process understand their roles; gains input from the auditors and external experts when needed and safeguards the overall objectivity of the fi nancial reporting and internal controls process.

The Company has an adequately qualifi ed and independent Audit Committee. As on 31 March 2009, the Committee comprised fi ve non-executive Directors: Mr Aman Mehta (Chairman), Mr Naresh Chandra, Ms Jann Brown, Dr Omkar Goswami and Mr Edward T. Story. Four of the fi ve members are indepen-dent. All members have the fi nancial knowledge and expertise mandated by Clause 49 of the Listing Agreement.

Mr Indrajit Banerjee, Executive Director and CFO, Mr Raj Agarwal, Partner S. R. Batliboi and Associates and Mr Raman Sobti, Director KPMG are invitees to the meetings of the Audit Committee. Ms Neerja Sharma, Company Secretary is the Secretary to the Committee.

The current Charter of the Audit Committee is in line with international best practices as well as the regulatory requirements mandated by SEBI and Clause 49 of the Listing Agreement

with the Stock Exchanges on which the Company is listed. The brief terms of reference of the Company’s Audit Committee are listed below.

Terms of Reference

Overseeing the Company’s fi nancial reporting process and the disclosure of its fi nancial infor-mation to ensure correct, suffi cient and credible fi nancial information

Recommending to the Board the appointment, re-appointment or replacement of statutory auditors and the setting up of audit fees

Approval of payment to statutory auditors for any other services rendered by the statutory auditors

Reviewing, with management, the annual fi nan-cial information before submission to the Board for approval, with particular reference to:

matters required to be included in the • Directors’ Responsibility Statement in the Board’s Report pursuant to subsection (2AA) of Section 217 of the Companies Act, 1956changes, if any, in accounting policies and • practices and reasons for such changes;major accounting entries involving estimates • based on the exercise of judgement by the Company’s managementany signifi cant adjustments made in the fi nan-• cial information arising out of audit fi ndings;compliance with listing and other legal or • regulatory requirements relating to fi nancial informationdisclosure of any ‘related party transactions’• any qualifi cations in the draft Audit Report•

Reviewing, with management, the quarterly fi nancial information before submission to the Board for approval

Reviewing, with the management, the state-ment of uses / application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue, and making appropriate recommendations to the Board to take up steps in this matter

Reviewing, with management, the performance



of statutory and internal auditors, and the adequacy of the internal control systems of the Company

Approving the appointment, removal and terms of remuneration of the chief internal auditor

Reviewing the adequacy of the internal audit function, if any, including the structure of the internal audit department, staffi ng and seniority of the offi cial heading the department, reporting structure coverage and frequency of internal audit

Discussing with internal auditors any signifi cant fi ndings and following up on any such signifi -cant fi ndings

Reviewing the fi ndings of any internal investiga-tion by internal auditors into matters relating to irregularities, fraud, or a failure in internal control systems of a material nature, and report-ing such matters to the Board

Having pre-audit discussions with the statutory auditors as to the nature and scope of the audit, and post-audit discussions to ascertain any areas of concern

Looking into the reasons for any substantial defaults in payments to debenture holders, shareholders (in case of the non-payment of declared Dividends) and creditors

Reviewing the Company’s fi nancial and risk management policies

Monitoring the utilisation of funds to be raised pursuant to a public issue

Carrying out any other function as the Board may from time to time refer to the Audit Committee

The Audit Committee also reviews the following information:

Management discussion and analysis of fi nan-cial condition and results of operations

Statement of signifi cant related party transac-tions (as defi ned by the Audit Committee), submitted by management

Management letters / letters of internal control weaknesses issued by the statutory auditors

Internal audit reports relating to internal control weaknesses

During the fi nancial year ended 31 March 2009, the Audit Committee met six times: on 21 January 2008, 27 March 2008, 29 April 2008, 29 July 2008, 29 October 2008 and 29 January 2009. The attendance record of the Audit Committee is given in Table 5.

As Mr Aman Mehta, Chairman of the Audit Committee was out of the country on the date

of annual general meeting held on 25 June 2008, Mr Naresh Chandra attended the meet-ing as an Interim Audit Committee Chairman to answer queries from the shareholders.

(b) shareholders’/ investors’ grievance committeeThe Company has constituted a Shareholders’/ Investors’ Grievance Committee primarily with the objective of redressal of shareholders’ and investors’ complaints such as relating to transfer of shares, non-receipt of Balance Sheet and non-receipt of declared Dividends.

During the year, the terms of reference of the Shareholders’ / Investors’ Grievance Committee was amended with the addition of following powers and duties:

To approve / refuse / reject registration of trans-fer / transmission / transposition of shares

To authorise issue of duplicate share certifi cates and issue of share certifi cates after split / con-solidation / rematerialisation of shareholding

To authorise printing of share certifi cates

To authorise affi xation of common seal of the Company on share certifi cates of the Company

To authorise directors / managers / offi cers / signatories for signing / endorsing share certifi cates

5 Attendance Record of Audit Committee FOR THE F INANCIAL YEAR ENDED 31 MARCH 2009

Name of the Member Position Status No. of Meetings held during the period the

Director was a Member of the Committee

No. of Meetings attended

Mr Aman Mehta Independent Director Chairman 6 6

Mr Naresh Chandra Independent Director Member 6 6

Dr Omkar Goswami Independent Director Member 6 5

Mr Norman L. Murray 1 Non-executive Director Member 5 5

Ms Jann Brown 2 Non-executive Director Member 1 -

Mr Edward T. Story 3 Non-executive Director Member - -

1 Resigned from the Board with effect from 18 December 20082 Appointed as an additional Director and co-opted on the Audit Committee with effect from 19 December 20083 Appointed as an additional Director and co-opted on the Audit Committee with effect from 18 March 2009



Procedure laid down for Shareholders’ / Investors’ Grievance CommitteeThe Company has appointed Link Intime India Private Limited (formerly Intime Spectrum Registry Limited) as the Registrar and Transfer Agent to handle the investor grievances in co-ordination with the Compliance Offi cer. All grievances can be addressed to the Registrar and Share Transfer Agent. The Company moni-tors the work of the Registrar to ensure that the investor grievances are settled expeditiously and satisfactorily. The Shareholders’/ Investors’ Grievance Committee oversees redressal of shareholders’ grievances.

As on 31 March 2009, the Committee comprised three Directors: Dr Omkar Goswami (Chairman), Mr Naresh Chandra and Mr Rahul Dhir. Two of these members, including the Chairman, are independent. Ms Neerja Sharma, Company Secretary, is the Compliance Offi cer of the Company and the Secretary of the Committee. The Committee met twice during the fi nancial year: on 29 April 2008 and 10 December 2008. Table 6 details the atten-dance record of the Committee.

The status of complaints received during the 15-month period ended 31 March 2009 by the

Company and the Registrar and Share Transfer Agent is given in Table 7.

(c) remuneration committeeThe Board has a Remuneration Committee to make recommendations to the Board as to the Company’s framework or broad policy for the remuneration of the Chairman, the executive Directors of the Board, and senior executives one level below the Board.

The objective of the Company’s remunera-tion policy is to ensure the Company’s execu-tive Directors and senior executives receive suf-fi cient incentive for enhanced performance and are fairly rewarded for their contribution to the Company’s overall performance. In determining this policy, the Committee takes into account all factors it deems relevant and give due regard to the interests of the shareholders and to the fi -nancial and commercial health of the Company. The Committee ensures that levels of remunera-tion are suffi cient to attract and retain executive directors and senior executives of the quality required to run the Company successfully.

Within the terms of the agreed policy, the Committee determines the entire individual remuneration packages for the Chairman and

the executive Directors. The Committee en-sures that a signifi cant proportion of executive Directors’ remuneration is structured so as to link rewards to corporate and individual perfor-mance. In determining packages of remunera-tion, the Committee consults with the Chairman as appropriate.

The Committee is responsible for overseeing the Company’s share option schemes and long term incentive plans, including determining eligibility for benefi ts and approving total annual payments. The Committee also recommends and monitors the level and structure of remu-neration for the fi rst layer of management below Board level.

As on 31 March 2009, the Remuneration Committee comprised fi ve non-executive Directors: Mr Naresh Chandra (Chairman), Sir William B.B. Gammell, Mr Malcolm Shaw Thoms, Mr Aman Mehta and Dr Omkar Goswami. Three of these members are independent. Ms Neerja Sharma, Company Secretary, is the Secretary to the Committee.

During the fi nancial year ended 31 March 2009, six meetings of the Remuneration Committee were held: on 21 January 2008, 27 March 2008, 29 April 2008, 29 July 2008,

7 Nature of Complaints received and attended DURING THE F INANCIAL YEAR ENDED 31 MARCH 2009

Nature of Complaint No. of Complaints

Received Attended Pending

Non-receipt of refund orders / revalidation 26 26 Nil

Referred by SEBI 58 58 Nil

Referred by Stock Exchanges 19 19 Nil

Received from Investors 188 188 Nil

Non receipt of Annual Report 7 7 Nil

Total 298 298 Nil

6 Attendance record of Shareholders’/ Investors’ Grievance CommitteeFOR THE F INANCIAL YEAR ENDED 31 MARCH 2009

Name of the Member Position Status No. of Meetings held No. of Meetings attended

Dr Omkar Goswami Independent Director Chairman 2 2

Mr Naresh Chandra Independent Director Member 2 2

Mr Rahul Dhir Managing Director and CEO Member 2 2



10 December 2008 and 18 March 2009. The attendance record of the Remuneration Committee is given in Table 8.

(d) nomination committeeAs on 31 March 2009, the Nomination Committee comprised fi ve Directors: Sir William B.B. Gammell (Chairman), Mr Rahul Dhir, Ms Jann Brown, Mr Malcolm Shaw Thoms and Mr Edward T. Story. Ms Jann Brown and Mr Edward T. Story were inducted on the Committee on 19 December 2008 and 18 March 2009 respectively.

The functions of the Nomination Committee are:

Reviewing the structure, size and composition of the Board, with a view to ensuring continued ability of the Company to compete effectively in the market place, and make recommendations to the Board with regard to any changes

Identifying and nominating, for the approval of the Board, appropriate individuals to fi ll Board vacancies as and when they arise

Evaluating the balance of skills, knowledge and experience of the Board and, in the light of this evaluation, preparing a description of the role and capabilities required for particular appoint-ments; and then identifying suitable candidates for the Board

Reviewing time required from each non-exec-utive Director and assessing whether s(he) has given suffi cient commitment to the role

Considering succession planning in the course of its work, taking into account the challenges and opportunities facing the Company, and what skills and expertise are needed from mem-

bers of the Board in the future

Ensuring that on appointment to the Board, the non-executive Directors receive a formal letter of appointment setting out clearly what is expected of them in terms of time commitment, committee service and involvement outside Board meetings

The Nomination Committee met once during the fi nancial year on 10 January 2009.

managementmanagement discussion and analysisThis Annual Report has a detailed chapter on Management Discussion and Analysis.

disclosures The Company follows the accounting standards and guidelines laid down by the Institute of Chartered Accountants of India (ICAI) in preparation of its fi nancial statements. No mate-rial fi nancial and commercial transactions were reported by the management to the Board, in which the management had any personal inter-est that either had or could have had a confl ict with the interest of the Company at large.

There were no transactions with the Directors or Management, their associates or their relatives etc. that either had or could have had a confl ict with the interest of the Company at large.

any non-compliance by the companyThere were no penalties or strictures imposed on the Company by Stock Exchange or SEBI or any statutory authority, on any matter related to capital markets, during the last three years.

code for prevention of insider trading practices In compliance with the SEBI regulation on prevention of insider trading, the Company has instituted a comprehensive Code of Conduct for its management and staff. The Code lays down guidelines which advise management and staff on procedures to be followed and disclosures to be made while dealing with shares of the Company, and cautions them of the consequences of violations.

risk management Cairn India follows well-established and detailed risk assessment and minimisation procedures, which are periodically reviewed by the Board.

ceo / cfo certificationThe CEO and CFO certifi cation of the fi nancial statements for the fi nancial year under review is enclosed at the end of the report.

subsidiary companiesAll subsidiaries of the Company are unlisted wholly owned subsidiary companies and are foreign subsidiaries. These subsidiaries have their own Board of Directors having the rights and obligations to manage such companies in best interest of the Company. The Company has its representatives on the Boards of subsidiary companies and monitors the performance of such companies regularly.

8 Attendance record of Remuneration CommitteeFOR THE F INANCIAL YEAR ENDED 31 MARCH 2009

Name of the Member Position Status No. of Meetings held No. of Meetings attended

Mr Naresh Chandra Independent Director Chairman 6 6

Sir William B.B. Gammell Non-Executive Director Member 6 2

Dr Omkar Goswami Independent Director Member 6 5

Mr Aman Mehta Independent Director Member 6 6

Mr Malcolm Shaw Thoms Non-Executive Director Member 6 5



shareholdersdisclosure regarding appointment or re-appointment of directorsBrief profi les of the persons to be appointed /re-appointed as Director at the annual general meeting of the Company are given below.

Mr Edward T. Story, 65, was appointed as an additional Director with effect from 18 March 2009. He is a science graduate from Trinity University, San Antonio, Texas and holds a Masters degree in Business Administration from the University of Texas. He has also been conferred an honorary Doctorate degree by the Institute of Finance and Economics of Mongolia and is Chairman of the North America Mongolia Business Council.

Mr Story has more than 40 years experience in the international oil and gas industry and is the Founder, President and Chief Executive Offi cer of SOCO International PLC, an inter-national exploration and production (E&P) company listed on the London Stock Exchange.

Soco International has E&P interests in South East Asia and Africa.

Ms Jann Brown, 54, was appointed as an ad-ditional Director with effect from 19 December 2008. She holds an MA degree from Edinburgh University and joined Cairn Energy PLC in 1998 after a career in the accountancy profession, mainly with KPMG. She was appointed Finance Director of Cairn Energy PLC in 2006. Prior to her appointment as Finance Director, she served on the Group Management Board for seven years. She is a member of the Institute of Chartered Accountants of Scotland and the Chartered Institute of Taxation.

Mr Aman Mehta, 62, is an Economics gradu-ate from Delhi University. He was earlier the Chief Executive Offi cer of HSBC Asia Pacifi c until 2003. Mr Mehta is currently an indepen-dent non-executive Director of several public companies in India as well as overseas. Besides this he is also a member of the Advisory Council of INSEAD, France and International Advisory

Boards of Prudential Inc, USA and CapitaLand Ltd of Singapore.

Dr Omkar Goswami, 52, holds a Master of Economics Degree from the Delhi School of Economics and a D. Phil. in Economics from Oxford University. He has authored various books and research papers on economic history, industrial economics, public sector, bank-ruptcy laws and procedures, economic policy, corporate fi nance, corporate governance, public fi nance, tax enforcement and legal reforms.

Dr Goswami was Chief Economist for the Confederation of Indian Industry and the Editor of Business India. He is founder and chairman of CERG Advisory Private Limited which advises companies on corporate governance, investor relations, business restructuring and economic research. Dr Goswami is currently a non-exec-utive Director on a number of Boards of other companies.

The directorships and committee positions held by these Directors as at 31 March 2009 is detailed in Table 9 below.

9 Details of Directorship & Committee Positions held in other Companies

Name of Director Name of the Company in which Directorship held Committee Chairmanship# Committee Membership#

Mr Edward T. Story SOCO International PLC - -

Ms Jann Brown Cairn Energy PLC - -

Hansen Transmissions International N.V. - Audit Committee

Cairn India Holdings Limited - -

Cairn Energy Birganj Limited - -

Cairn Energy Dhangari Limited - -

Cairn Energy Exploration & Production Company Limited - -

Cairn Energy Karnali Limited - -

Cairn Energy Lumbini Limited - -

Cairn Energy Malangawa Limited - -

Cairn Energy Nepal Holdings Limited - -

Cairn Energy Search Limited - -

Cairn Exploration (No. 1) Limited - -

Cairn Resources Management Limited - -

Capricorn Energy Limited - -

Cairn Resources (2002) PLC - -

Medoil PLC - -

Cairn UK Holdings Limited - -

Capricorn Oil Limited - -

Capricorn Exploration Limited - -



Name of Director Name of the Company in which Directorship held Committee Chairmanship# Committee Membership#

Ms Jann Brown Capricorn Greenland Exploration 1 Limited - -

Capricorn Greenland Exploration 2 Limited - -







Capricorn Petroleum Limited - -

Capricorn Oil and Gas Limited - -

Plectrum Oil and Gas Limited - -

Plectrum Oil Limited - -

Plectrum Petroleum Limited - -

Banchory Exploration Limited - -

Medoil Resources Limited - -

Capricorn Albania Limited - -

Capricorn Atammik Limited - -

Capricorn Lady Franklin Limited - -




Capricorn Bangladesh Limited - -

Capricorn Spain Limited - -

Mr Aman Mehta PCCW Ltd, Hongkong Audit Committee -

Tata Consultancy Services Limited Audit Committee -

Vedanta Resources PLC, UK Audit Committee -

Godrej Consumer Products Limited - Audit Committee

Emaar MGF Land Limited - Audit Committee

ING Group N.V.Netherlands - -

Max India Limited - -

Jet Airways Limited Audit Committee -

Wockhardt Pharmaceuticals Limited - Audit Committee, Shareholders/ Investor Grievance Committee

Dr Omkar Goswami Dr Reddy’s Laboratories Limited Audit Committee -

Infosys Technologies Limited - Audit Committee, Shareholders Committee

DSP BlackRock Investment Managers Limited - -

IDFC Limited - Audit Committee,Shareholders Committee

Crompton Greaves Limited - Audit Committee

Ambuja Cements Limited - -

Godrej Consumer Products Limited - Audit Committee

Max New York Life Insurance Company Limited - -

CERG Advisory Private Limited - -

# Only Audit and Shareholders’/Investors’ Grievance Committees included. 49 CORPORATE GOVERNANCE


means of communication financial resultsThe Company intimates un-audited as well as audited fi nancial results to the Stock Exchanges, immediately after the Board / Committee meet-ings at which they are approved. The results of the Company are also published in at least one prominent national and one regional newspaper having wide circulation. The fi nancial results are also displayed on the Company’s website www.cairnindia.com and posted on Corporate Filing and Dissemination System at www.corpfi ling.co.in.

news release, analyst presentation etc.The offi cial news releases, detailed presenta-tions made to media, institutional investors, fi nancial analysts etc. are displayed on the Company’s website www.cairnindia.com.

WebsiteThe Company’s website www.cairnindia.com contains a separate dedicated section ‘Investor Relations’ where shareholders information is available. The full Annual Report, shareholding pattern and Corporate Governance Report is also available on the website in a user-friendly manner.

general body meetingsThe Company in its brief history has had two Annual General Meetings (AGM) and four Extraordinary General Meetings (EGM). The third AGM is scheduled to take place on 18 August 2009. The desired details in respect of General Meetings are given in Table 10 above.

special resolutions passed in the last three years

Annual General MeetingsIn the previous AGMs held on 20 September 2007 and 25 June 2008, the following special resolutions were passed:

20 September 2007Keeping register of members and other • related documentsConsent of shareholders for issue of further • securitiesPayment of commission to non-executive • Directors

25 June 2008Keeping register of members and other • related documents

Extraordinary General MeetingsAt the EGMs held on 8 September 2006, 21 September 2006, 17 November 2006 and 16 April 2008, the following special resolutions were passed:

8 September 2006Investment in shares of Cairn India Holdings • Limited

21 September 2006Amendment in the memorandum of associa-• tion of the Company Amendment in the articles of association of • the Company Appointment of non- retiring Directors•

10 Location and Time of General Meetings LAST THREE YEARS (2006-2008)

Financial Year

Location of the meeting Date Time

AGMs

2006 Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 20 Sept 2007 11:00 AM

2007 Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 25 June 2008 11:00 AM

EGMs

2006 50 Lothian Road, Edinburgh, EH3, 9BY 8 Sept 2006 3:00 PM

2006 50 Lothian Road, Edinburgh, EH3, 9BY 21 Sept 2006 2:00 PM

2006 50 Lothian Road, Edinburgh, EH3, 9BY 17 Nov 2006 2:15 PM

2008 Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 16 April 2008 2:30 PM



Issue of equity shares of the Company on a • private placement basisIssue of equity shares of the Company by an • initial public offeringIncrease in the limit of foreign institutional • investment in the CompanyInvestment in the shares of Cairn India • Holdings Limited

17 November 2006Appointment of Chief Executive Offi cer of • the CompanyEmployee stock option plans• Amendment in the articles of association of • the Company Remuneration of non-executive Directors•

16 April 2008Allotment of the equity shares of the • Company on preferential basis

resolution passed through postal ballot last yearThe Company passed a special resolution through a postal ballot, where the sharehold-ers approved change in fi nancial year of the Company beginning 1 January 2008, by extending it by a period of three months, so as to end on 31 March 2009 and subsequent fi nancial year(s) from the fi rst day of April in each calendar year to the last day of March in the subsequent calendar year.

The Company followed a transparent postal ballot process, where all members on the books as of 12 December 2008 were sent a postal bal-lot form along with postage pre-paid business reply envelope. All replies received up to close of working hours on 21 January 2009 were con-sidered. All postal ballot forms were kept in the control of the scrutiniser, Mr Sunil K. Grover, a practicing Company Secretary. The postal ballots were opened on 21 January 2009 under the scrutiny of Mr Grover. Table 11 shows the

details of the voting pattern.

compliance with clause 49Mandatory Requirements The Company is fully compliant with the ap-plicable mandatory requirements of the revised Clause 49 except with respect to composition of the Board as stated in this report, which it intends to comply with fully in the course of 2009-10.

Adoption of Non-Mandatory Requirements

Remuneration Committee The Board has constituted a Remuneration Committee, details of which have been given earlier.

Shareholder Rights A half-yearly declaration of fi nancial performance including summary of the signifi cant events in last six-months, is sent to the shareholders.

Audit qualifi cations The Company’s fi nancial statements are free from any qualifi cations by the Auditors.

Training of Board Members The Board of Directors is periodically updated on the busi-ness model, company profi le, and the risk pro-fi le of the business parameters of the Company.

Whistle Blower Policy Though there is no formal Whistle Blower Policy, the Company takes cognizance of the complaints made and suggestions given by employees and others. Complaints are looked into and whenever necessary, suitable corrective steps are taken. No employee of the Company has been denied access to the Audit Committee of the Board of Directors of the Company. Further, the Company is in the process of fi nalising a formal Whistle Blower Policy to provide a mechanism to enable employees and others to raise con-cerns in a responsible and effective manner.

11 Voting Result of Special Resolution passed through Postal Ballot

Number of valid postal ballot forms received 1,751

Votes in favour of the resolution 1,467,378,264

Votes against the resolution 1,823

Resolution passed by % of valid votes received 99.99


Additional Shareholder Information

annual general meetingDate 18 August 2009Time 11:00 AMVenue Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 400 020.

financial calendarFor the year ended 31 March 2009, results were announced on:

29 April 2008 � : First quarter29 July 2008 � : Half yearly29 October 2008 � : Third quarter29 January 2009 � : Fourth quarter27 May 2009 � : Fifth (last) quarter and the 15-month fi nancial year’s results

For the year ending 31 March 2010, results will be announced by

Last week of July 2009 � : First quarterLast week of October 2009 � : Half yearlyLast week of January 2010 � : Third quarterLast week of June 2010 � : Fourth quarter and full fi nancial year’s results.

book closure The dates of book closure are from Tuesday, 11 August 2009 to Tuesday, 18 August 2009, inclusive of both days.

listingThe equity shares of the Company are listed on Bombay Stock Exchange Limited (BSE) and the National Stock Exchange of India Limited (NSE). The annual listing fee for the fi nancial year 2009-10 has been paid to BSE and NSE.

stock codesTable 1 gives the details.

market price dataTable 2 and Chart A and B give the details.

Distribution of ShareholdingTables 3 and 4 list the distribution of the Shareholding and Shareholding pattern of the Company by size and by ownership class as on

1 Stock Exchange Codes

Name of the Stock Exchange Code

National Stock Exchange of India Limited CAIRN

Bombay Stock Exchange Limited 532792

2 High, low and volume of Company’s Shares traded at BSE and NSEFINANCIAL YEAR ENDED 31 MARCH 2009

Month BSE NSE

High (in Rs.) Low (in Rs.) No. of Shares traded High (in Rs.) Low (in Rs.) No. of Shares traded

January 2008 268.50 136.00 22,875,865 268.90 125.00 94,497,993

February 2008 232.15 180.25 20,054,261 231.00 180.15 67,078,925

March 2008 255.90 187.50 35,871,458 255.85 187.60 118,341,281

April 2008 270.00 219.10 25,973,973 269.90 219.50 88,965,150

May 2008 342.50 242.10 102,080,820 342.70 242.00 262,823,438

June 2008 304.90 251.00 53,467,345 304.90 250.95 152,074,023

July 2008 277.00 205.00 47,488,361 278.00 206.50 170,252,458

August 2008 254.50 226.50 17,092,651 254.55 229.85 70,131,190

September 2008 251.80 189.90 15,417,795 251.80 190.00 63,555,709

October 2008 218.70 88.15 21,467,558 219.20 88.20 91,523,174

November 2008 162.80 122.05 21,044,237 163.20 122.15 76,067,146

December 2008 176.80 129.25 23,676,299 176.90 129.10 90,987,024

January 2009 184.70 142.50 14,766,974 184.00 140.00 65,556,537

February 2009 170.75 148.20 12,425,863 170.75 147.10 51,998,380

March 2009 199.00 150.00 15,162,536 199.00 152.25 79,457,245


Additional Shareholder Information Continued

3 Distribution of ShareholdingAS ON 31 MARCH 2009

No. of Shares No. of Shareholders % of Shareholders Total Shares % of Shares

Up to 5,000 245,780 99.61 41,785,436 2.20

5,001-10,000 282 0.11 2,076,139 0.11

10,001-20,000 173 0.07 2,493,051 0.13

20,001-30,000 66 0.03 1,649,854 0.09

30,001-40,000 47 0.02 1,675,699 0.09

40,001-50,000 30 0.01 1,375,077 0.07

50,001-100,000 72 0.03 5,179,409 0.27

100,001 & above 283 0.12 1,840,433,151 97.04

Total 246,733 100.00 1,896,667,816 100.00

B Share Performance on NSE versus Nifty FINANCIAL YEAR ENDED 31 MARCH 2009

Share prices, BSE Sensex and Nifty indexed to 100 as on the fi rst working day of the fi nancial year 2008–09 i.e.1 January 2008

A Share Performance on BSE versus BSE Sensex FINANCIAL YEAR ENDED 31 MARCH 2009

SENSEX

CAIRN

150

125

100

75

50

25

JAN 2008

FEB2008

MAR2008

APR2008

MAY2008

JUN2008

JUL2008

AUG2008

SEPT2008

OCT2008

NOV2008

DEC2008

JAN2009

FEB2009

MAR2009

NIFTY

CAIRN

150

125

100

75

50

25

JAN 2008

FEB2008

MAR2008

APR2008

MAY2008

JUN2008

JUL2008

AUG2008

SEPT2008

OCT2008

NOV2008

DEC2008

JAN2009

FEB2009

MAR2009



4 Shareholding Pattern by OwnershipAS ON 31 MARCH 2009

No. of Equity Shares (Face Value Rs. 10 each)

Shares Held (%)

promoters holdingIndian Promoters - -

Foreign Promoters 1,226,843,791 64.68

Persons acting in concert - -

non-promoters holding(a) Banks, Financial Institutions, Insurance Companies

(Central / State Govt. / Non-Government Institutions) 75,162,817 3.96

(b) Foreign Institutional Investors 166,620,923 8.78

(c) Foreign Company 49,700,000 2.62

(d) Public 50,560,707 2.67

(e) Mutual Funds 31,842,774 1.68

(f) NRI (Repatriable) 1,067,598 0.06

(g) NRI (Non-Repatriable) 381,195 0.02

(h) Bodies Corporate 43,588,865 2.30

(i) Foreign Bodies Corporate 246,882,573 13.02

(j) Clearing Member 3,973,515 0.21

(k) Trusts 43,058 -

Grand Total 1,896,667,816 100.00

31 March 2009. Further details of top twenty shareholders are given in Table 5.

dematerialisation of shares As on 31 March 2009, over 99.99% shares of the Company were held in dematerialised form. The shares of the Company are permitted to be traded only in dematerialised form under ISIN INE910H01017.

outstanding gdrs / adrs /warrants or any convertible instruments, conversion date and likely impact on equityThere are no outstanding GDRs / ADRs / war-rants or any convertible instruments issued by the Company. However, the Company has out-standing employee stock options, the details of which as on 31 March 2009 are as per Table 6.

The last date of exercise in case of CIPOP is considered on the assumption that the options shall vest after three years of their grant.

If all the outstanding Stock Options granted get vested and exercised, the number of equity shares will increase by 16,352,417.

details of funding obtained in the last three years The Company’s Initial Public Offering (IPO) of 328,799,675 equity shares, which closed on 15 December 2006, was fully subscribed aggre-gating Rs. 52,608 million at the issue price of Rs. 160. The Company also placed Rs. 33,547 million through a pre-IPO placement and exercised its Green Shoe Option for 13,085,041 shares. The total proceeds aggregated Rs. 88,249 million.

The Company made a preferential issue of 113,000,000 equity shares to Petronas International Corporation Ltd and Orient Global Tamarind Fund Pte Ltd. amounting to Rs. 25,345.9 million on 22 April 2008. The shares were issued at a premium of Rs. 214.30 per share.

share suspense accountIn pursuance of Clause 5A of the Listing Agreement, the status of the Equity Shares lying in the Suspense Account is given in Table 7.



5 Top Twenty ShareholdersAS ON 31 MARCH 2009

S.No. Name No. of Equity Shares

Shares Held (%)

1 Cairn UK Holdings Limited 1,226,843,791 64.68

2 Petronas International Corporation Limited 239,831,438 12.64

3 Orient Global Tamarind Fund Pte Ltd 49,700,000 2.62

4 Life Insurance Corporation of India 38,852,092 2.05

5 Merrill Lynch International Investment Funds 13,245,952 0.70

6 LIC of India - Market Plus 12,872,266 0.68

7 Europacifi c Growth Fund 12,812,190 0.68

8 State Bank of India (Equity) 12,423,119 0.65

9 ICICI Prudential Life Insurance Company Ltd 10,404,456 0.55

10 FID Funds (Mauritius) Limited 7,061,281 0.37

11 International Finance Corporation 7,050,035 0.37

12 New World Fund Inc 6,587,000 0.35

13 Reliance Capital Trustee Co Ltd - Reliance Natural Resources Fund

6,536,219 0.34

14 Bajaj Allianz Life Insurance Company Ltd. 6,422,984 0.34

15 PRU India Equity Open Limited 6,260,658 0.33

16 Government of Singapore 4,956,608 0.26

17 Emerging Markets Management, L.L.C. A/C EMSAF - Mauritius

4,955,677 0.26

18 Rahul Dhir 4,476,156 0.24

19 DWS Invest - DWS Invest Bric Plus 4,000,025 0.21

20 Fortis Banque Luxembourg Sa A/C Fortis L Fund 3,963,504 0.21

6 Outstanding Employee Stock OptionsAS ON 31 MARCH 2009

ESOP Scheme

No. of options outstanding

Last date for exercise Exercise Price (Rs.)

CIESOP 2,468,615 31 December 2016 160.00

4,757,911 19 September 2017 166.95

3,651,678 28 July 2018 227.00

36,040 9 December 2018 143.00

CIPOP * 759,809 31 March 2010 10.00

1,673,335 19 December 2010 10.00

766,952 28 October 2011 10.00

CISMP 2,238,077 18 months after the vesting date which will occur on the Company achieving 30 days’ consecutive production

of over 150,000 bopd from the Rajasthan Block

33.70

Total 16,352,417

* The vesting period is minimum three years, subject to the fulfi llment of performance conditions as defi ned in the Plan. The exercise period is three months from the date of vesting of options.



share transfer systemThe Company has appointed Link Intime India Private Limited as its Registrar and Transfer Agent with effect from 1 January 2008. All share transfers and related operations are conducted by Link Intime India Private Limited, which is registered with the SEBI. The Company has a Shareholders’/Investors’ Grievance Committee for redressing the complaints/queries of share-holders and investors.

Investor correspondence should be addressed to either:Registrar and Transfer AgentLink Intime India Private Limited (formerly Intime Spectrum Registry Limited)(Unit: Cairn India Limited)C-13, Pannalal Silk Mills CompoundL.B.S Marg, Bhandup (West)Mumbai 400 078, IndiaE-Mail [email protected] +91 22 25946970 Fax +91 22 25946969

or

Company SecretaryCairn India Limited4th Floor, Vipul Plaza, Sun City, Sector 54Gurgaon 122 002, IndiaE-Mail [email protected] +91 124 2703000 Fax +91 124 2889320Investors can e-mail their queries/complaints to [email protected]. The weblink to this E-Mail ID is also available on Company’s website www.cairnindia.com under Investor Relations section.

investor relations The Company has a dedicated Shares Investor Relations Department which helps investors, including FIIs and institutional investors, in mak-ing informed decisions. This team also maintains close liaison with investors and shares informa-tion through periodic meetings including tele-conferencing in India and abroad, regular press meeting with investment bankers, research analysts, the media, institutional investors etc.The ‘Investor Relations’ section on the Company’s website www.cairnindia.com updates information sought by investors and analysts. It provides the latest information on fi nancial statements, investor-related events and presentations, annual reports and sharehold-ing pattern along with media releases and the current Company overview. The section helps existing and potential investors to interact with the Company.

operational locationsThe Company’s oil and gas fi elds are located at:

Ravva � (Andhra Pradesh)Cambay Basin � (Gujarat)Barmer � (Rajasthan)

registered office addressCairn India Limited101, West ViewVeer Savarkar MargPrabhadeviMumbai 400 025, India

7 Status of Equity Shares lying in the Suspense Account DURING THE 15 MONTH PERIOD ENDED 31 MARCH 2009

Particulars Number of Shareholders

Number of Shares

Aggregate number of Shareholders and the outstanding Shares in the suspense account lying as on 1 January 2008

112 19,950

Shares transferred to suspense account - Recovery against incorrect credit 1 525

No. of Shareholders who approached for transfer of shares from suspense account 40 7,980

No. of Shareholders to whom Shares were transferred from suspense account 40 7,980

Aggregate number of Shareholders and the outstanding shares in the suspense account as on 31 March 2009

73 12,495


Certifi cations Under Clause 49 of Listing Agreement

certification by the chief executive officer and chief financial officer of the company

We, Rahul Dhir, Chief Executive Offi cer, and Indrajit Banerjee, Chief Financial Offi cer, of Cairn India Limited hereby certify to the Board that:

a. We have reviewed fi nancial statements and the cash fl ow statement for the fi nancial year ended 31 March 2009 and that to the best of our 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 en-tered into by Cairn India Limited during the year which are fraudulent, illegal or violative of the Company’s Code of Ethical Conduct.

c. We are responsible for establishing and maintaining internal controls for fi nancial reporting in Cairn India Limited, and we have evaluated the effectiveness of the internal control systems of the Company per-taining to fi nancial reporting. We have disclosed to the auditors and the Audit Committee, defi ciencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these defi ciencies.

d. We have indicated to the auditors and the Audit Committee i. Signifi cant changes in internal control over fi nancial reporting dur-

ing the year; ii. Signifi cant changes in accounting policies during the year and the

same have been disclosed in the notes to the fi nancial statements; and

iii. Instances of signifi cant fraud of which we have become aware and the involvement therein, if any, of the management or an employee having a signifi cant role in the Company’s internal control system over fi nancial reporting.

e. We affi rm that we have not denied any personnel access to the Audit Committee of the Company (in respect of matters involving alleged misconduct).

f. We further declare that all Board members and senior management have affi rmed compliance with the Company’s Code of Conduct for the fi nancial year ended 31 March 2009.

Rahul DhirManaging Director & CEO

Indrajit BanerjeeExecutive Director & CFO

Place Gurgaon Date 27 May 2009

auditors» certificate

To The Members of Cairn India Limited

We have examined the compliance of conditions of corporate gover-nance by Cairn India Limited (‘the Company’), for the fi fteen months period ended on 31 March 2009, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchanges.

The compliance of conditions of corporate governance is the responsi-bility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the com-pliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the fi nancial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, subject to the fact that the proportion of the independent directors to the total strength of the Board being 40% is less than the minimum prescribed limit of 50%, the Chairman of the Board being related to the promoter of the Company in terms of clarifi cation dated 23 October 2008 issued by the Securities and Exchange Board of India, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the effi ciency or effectiveness with which the management has conducted the affairs of the Company.

For S. R. Batliboi & AssociatesChartered Accountants

per Raj Agrawal Partner Membership No. 82028 Place GurgaonDate 27 May 2009


The consolidated statements provide the results of Cairn India Limited together with those of its subsidiaries for the fi nancial year ended 31 March 2009.

dividendThis being just the third year since inception of the Company and in the absence of enough distributable income, your Directors do not recommend any dividend.

change in financial year The current fi nancial year of the Company beginning 1 January 2008 has been changed, by extending it by a period of three months, so as to end on 31 March 2009 and subsequent fi nan-cial year(s) have been changed to start from the fi rst day of April in each calendar year to the last day of March in the subsequent calendar year. Accordingly, previous year’s numbers are not comparable with numbers of the current year. Further, with the change, the Company is now compliant with the IFRS provisions which would be applicable effective 1 April 2011.

operations A detailed review of operations has been included in the Management Discussion and Analysis Report, which forms a part of this Annual Report.

changes in capital structureDuring the fi nancial year under review, your Company made a successful Preferential is-sue of 113,000,000 equity shares to Petronas International Corporation Ltd and Orient Global Tamarind Fund Pte Ltd. amounting to Rs. 25,345.9 million. The Shares were issued at a premium of Rs. 214.30 per share.

Further, 5,268,396 equity shares of Rs. 10/- each were allotted on exercise of Employee Stock Options by executive Directors. Accordingly the issued and paid up capital of the Company has increased to Rs. 18,966,678,160 divided into 1,896,667,816 equity shares of Rs. 10/- each.

utilization of ipo proceedsIn December 2006, the Company raised Rs. 88,249 million from its maiden offer to the

Your Directors have pleasure in presenting the third Annual Report, together with the Audited Accounts of your Company for the Financial Year ended 31 March 2009

Directors’ Report

Financial ResultsIN RUPEES THOUSANDS

Standalone Consolidated

For the fi nancial year ended For the fi nancial year ended

31 March 2009(Fifteen months)

31 December 2007(Twelve months)

31 March 2009(Fifteen months)

31 December 2007(Twelve months)

Total income 2,980,403 339,623 20,271,368 11,446,716

Total expenditure 1,859,687 807,300 10,392,502 10,187,488

Profi t / (Loss) before tax 1,120,716 (467,677) 9,878,866 1,259,228

Taxes 578,309 320,489 1,844,360 1,504,669

Profi t / (Loss) after tax 542,407 (788,166) 8,034,506 (245,441)


public for the stated objects in the Prospectus dated 22 December 2006. The amounts ear-marked for each object category, as mentioned in the prospectus, were based on the plans and requirements of the business at the time of is-suance of the prospectus in December 2006. In view of the dynamic environment, the business plans and requirements have changed since the public offer and necessitate rescheduling of the capital expenditure programme and increase /decrease of the amount needed to meet each object category.

Three object categories namely (a) consid-eration to Cairn UK Holdings Limited (CUHL),

(b) contingencies and (c) issue expenses, have some unutilized balances as on 31 March 2009. The end purpose of these object categories has been achieved and no further expenditure is envisaged to be incurred under these catego-ries. It is proposed to transfer the unutilized balance of Rs. 5,449 million inter-se from above mentioned three categories to the object category of “Development” after obtaining the approval of the Shareholders of the Company in the forthcoming Annual General Meeting. The proposed revised utilization schedule is given in the table below.

Proposed Revised Utilization ScheduleIN RS. MILLION

S.No. Particulars Total funding requirement

as per the prospectus

Funding envisaged from IPO

proceeds as per prospectus

Amount actually

utilised till 31 March

2009

Balance unutilised

amount

Revised utilization schedule

1 Acquisition of shares of Cairn India Holdings Limited 62,250 62,250 59,581 2,669 59,581

2 Contingencies 2,530 2,530 Nil 2,530 Nil

3 Issue expenses 1,850 1,850 1,600 250 1,600

4 Development in the Rajasthan Block and additional drilling activities in Ravva and Cambay

55,250 16,120 21,153 1,877 26,838 *

5 Exploration and appraisal activities including funding minimum work program for capital commitments and any additional appraisal expenditure that may arise as a result of exploration success in existing blocks and blocks that may be awarded in NELP VI round 6,910 6,910

Included in 4 above

Included in 4 above -

6 General corporate purposes 230 230 230 - 230

7 Less: Shortfall in Issue Proceeds 1,641

Total 129,020 89,890 82,563 5,686 88,249*

* After adjusting shortfall in issue proceeds of Rs. 1641 million

59 DIRECTORS’ REPORT

Directors’ ReportContinued

employee stock option schemeThe Company has established share incentive schemes viz., Cairn India Senior Management Plan (CISMP), Cairn India Performance Option Plan (CIPOP) and Cairn India Employee Stock Option Plan (CIESOP) pursuant to which op-tions to acquire shares have been granted to select employees and Directors of the Company and its subsidiaries. The Company also has cash awards option plan (phantom stock options) for expatriate employees of the Company and its subsidiaries.

During the year, stock options have been granted to the executive Directors and employ-ees of the Company. On exercise of the options so granted, the paid-up equity share capital of the Company will increase in terms of the Stock Option Plans mentioned above. The details of stock options granted by the Company are disclosed in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and set out in Annexure I to this Report.

subsidiary companiesDuring the fi nancial year under review, CIG Mauritius Holding Pvt. Limited, CIG Mauritius Pvt. Limited, Cairn Lanka Pvt. Limited and Cairn Energy Developments Pte. Limited became subsidiaries of the Company. As on 31 March 2009 the Company had 31 subsidiaries includ-ing indirect subsidiaries.

Pursuant to the provisions of Section 212(8) of the Companies Act, 1956, the Company has obtained exemption from the Ministry of Corporate Affairs, Government of India from attaching the accounts of its subsidiaries to the Company’s Annual Accounts for the fi nancial year ended 31 March 2009. The accounts of the subsidiaries are available for inspection by members on any working day at the Registered Offi ce of the Company between 10 a.m. and 12 noon. A statement in respect of subsidiary companies is attached to the accounts.

consolidated financial statementsYour Company is also presenting the audited consolidated fi nancial statements prepared in accordance with the Accounting Standard 21 is-sued by the Institute of Chartered Accountants of India. Information in aggregate for each subsidiary in respect of capital reserves, total assets, liabilities, investments, turnover, etc. is disclosed separately and forms part of the annual report.

directors

Mr Rick Bott was appointed as additional Director on the Board with effect from 29 April 2008, and as Executive Director and Chief Operating Offi cer with effect from 15 June 2008.

During the fi nancial year under review, Ms Jann Brown, was appointed as an alternate Director to Mr Norman L. Murray with effect from 25 November 2008 and later ceased to be an alternate Director from 10 December 2008. Thereafter, she was appointed as additional Director effective 19 December 2008. Pursuant to the provisions of Section 260 of the Companies Act, 1956, she holds offi ce up to the ensuing annual general meeting. The Company has received a notice from a member of the Company sponsoring her candidature as Director of the Company. Ms Jann Brown is proposed to be appointed as a non-rotational Director.

Mr Edward T. Story was appointed as ad-ditional Director on 18 March 2009. Pursuant to the provisions of Section 260 of the Companies Act, 1956, he holds offi ce up to the ensuing annual general meeting. The Company has re-ceived a notice from a member of the Company sponsoring his candidature as Director of the Company.

Mr Lawrence Smyth resigned as Executive Director and COO with effect from 21 January 2008. Mr Norman L. Murray resigned from the Board with effect from 18 December 2008, and was appointed as alternate Director to Ms Jann Brown on 19 December 2008. Later he ceased to be an alternate Director effective 10 February 2009. Your Directors wish to place on record their sincere appreciation of the valu-able contribution made by Mr Lawrence Smyth and Mr Norman Murray during their tenure on the Board of the Company.

Mr Philip Tracy was appointed as alternate Director to Sir Bill Gammell on 18 March 2009 and later ceased to be alternate Director with effect from 26 May 2009.

Mr Aman Mehta and Dr Omkar Goswami retire by rotation at the ensuing annual general meeting and being eligible, offer themselves for re-appointment.


Directors’ ReportContinued

corporate governanceThe Corporate Governance and Management Discussion and Analysis Reports form an integral part of this report and are set out as separate sections to this annual report. The Certifi cate of S. R. Batliboi & Associates, chartered accountants, the statutory auditors of the Company certifying compliance with the conditions of corporate governance as stipu-lated in Clause 49 of the listing agreement with stock exchanges is annexed with the report on corporate governance.

auditorsM/s. S. R. Batliboi & Associates, chartered accountants, auditors of the Company, retire at the conclusion of the ensuing annual general meeting and being eligible, offer themselves for re-appointment. The audit committee in its meeting held on 27 May 2009 has recom-mended the re-appointment of M/s. S. R. Batliboi & Associates, as statutory auditors of the Company.

fixed depositsThe Company has not invited any deposits from the public under Section 58A of the Companies Act, 1956.

human resourcesCompany’s industrial relations continued to be harmonious during the period under review.

particulars of employees Particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956 (‘the Act’) form part of this report. However, as per the provisions of Section 219(1)(b)(iv) of the Act, the report and accounts are being sent to the sharehold-ers of the Company excluding the particulars of employees under Section 217(2A) of the Act. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Offi ce of the Company.

conservation of energy, technology absorption and foreign exchange earnings and outgoInformation on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in Annexure II to this report.

directors’ responsibility statementPursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confi rm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explana-tion relating to material departures

(ii) appropriate accounting policies have been selected and applied consistently and have 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 31 March 2009 and of the profi t of the Company for the year ended 31 March 2009

(iii) proper and suffi cient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguard-ing the assets of the Company and for preventing and detecting fraud and other irregularities

(iv) the annual accounts have been prepared on a going concern basis

appreciationYour Directors wish to place on record their gratitude for the valuable assistance and co-operation extended to the Company by the Central Government, State Governments, Banks, Institutions, Investors and Customers.

For and on behalf of the Board of Directors

Sir William B.B. GammellChairman



Annexures to theDirectors’ Report

annexure i Disclosure pursuant to the provisions of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

S.No. Particulars Cairn India Senior Management Plan

Cairn India Performance

Option Plan (2006)

Cairn India Employee Stock

Option Plan (2006)

1 Options granted during January 2008 - March 2009 Nil 789,567 3,809,896

2 The Pricing Formula Rs. 33.70 per Share Rs. 10 per Share Price determined by the Remuneration

Committee but not less than the fair

market value of a share on the date of grant

3 Options Vested during January 2008 - March 2009 2,238,078 NIL NIL

4 Options Exercised during January 2008 - March 2009 5,268,396 NIL NIL

5 Total number of Shares arising as a result of exercise of options during January 2008 - March 2009

5,268,396 NIL NIL

6 Options lapsed during January 2008 - March 2009 792,240 2,344,715 1,441,362

7 Variation of terms of options None None None

8 Money realized by exercise of options during January 2008 - March 2009 Rs. 177,544,945 NIL NIL

9 Total number of options in force as on 31 March 2009 2,238,077 3,200,096 10,914,244

10 Employee wise details of options granted during the year to:

(i) Senior Managerial Person None Indrajit BanerjeeSantosh Chandra

Elango P.Senthil Kumar P.

S. V. NairAnanthakrishnan B.

: 69,630: 48,676: 78,269: 32,605: 89,195: 48,024

None

(ii) Any other employee who receives a grant in any one year of option amounting to 5% or more of options granted during the year

None Venkateshan T. K.Narayanan P. S.

Ajay Gupta

: 45,978: 49,204: 75,191

None

(iii) Identifi ed employees who were granted options during any 1 year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants & conversions) of the Company at the time of grant

None None None

11 Diluted Earnings Per Share (EPS) pursuant to issue of Shares on exercise of options calculated in accordance with Accounting Standard 20

Rs. 0.29 NA NA

12 (i) Method of calculation of employee compensation cost Intrinsic Value Method

(ii) Difference between the employee compensation cost so computed at 12(i) above and the employee compensation cost that shall have been recognised if it had used the fair value of the options (Rs. in thousands)

485,151

(iii) The impact of this difference on profi ts and on EPS of the Company

Profi t after Tax (PAT) (Rs. in thousands) 542,407

Less: Additional employee Compensation cost based on fair value (Rs. in thousands) 485,151

Adjusted PAT (Rs. in thousands) 57,256

Adjusted EPS Basic (Rs.) 0.03

Adjusted EPS Diluted (Rs.) 0.03

13 Weighted-average exercise prices of options granted during January 2008 - March 2009

NA 10.00 226.21

Weighted-average fair value of each option outstanding as on 31 March 2009

131.50 165.46 101.47


annexure iiconservation of energy, technology absorption, foreign exchange earnings and outgoconservation of energyEnergy conservation measures takenWe have continued our efforts in conserving energy from our operating assets. In line with our climate change strategy, we have been monitoring and setting targets for both methane and other Green House Gas (GHG) emissions since 2000. We have implemented several initiatives to reduce these emissions including the installation of high effi ciency fl ares, third stage compression, gas ejector systems and improving plant operations to minimise volumes of gas fl ared during plant upsets.

At Ravva , energy audits were carried out and certain energy conservation measures were recommended. Some of the recommendations that were implemented include:

1 Installation of additional solar arrays at offshore platformsThe power supply requirement for offshore platforms is met by using solar arrays. With the increase in load, additional solar arrays were installed to minimize the usage of the DG set. With this addition, the total solar energy utiliza-tion is 5.87 MWH per annum.

2 Installation of wind turbine generators at offshore platformsThe back up power supply requirement for offshore platforms during the rainy season is met by installing the wind turbine generators at platforms to minimize usage of the DG set. The estimated energy usage is 7.2 MWH per annum.

3 Variable frequency drives Variable frequency drives were introduced in

Multi Phase Pump (MPP) and Produced Water Reinjection (PWRI) projects as an energy con-servation measure.

Energy conservation initiatives were adopted at the Gurgaon corporate offi ce through better operational practices. An estimated 156 MWH energy saving was achieved.

Additional investments and proposals being implemented for conservation of energyWe have implemented major design modifi ca-tions at the MPT in Rajasthan to reduce overall energy consumption. As per the earlier plan crude / natural gas based thermal power plant was considered with additional heaters for meeting the heating requirements for main-taining the pour point of the crude. This was replaced with natural gas fi red steam turbines and elimination of heaters. This initiative will not only ensure much lower gaseous emissions but also effi cient use of energy.

Impact of the above measures for reduction of energy consumption and consequent impact on the cost of productionThe design modifi cations at the MPT will sub-stantially reduce emissions and will ensure effi -cient use of energy. This design change will not affect production of hydrocarbons. The installa-tion of renewable energy sources at the Ravva plant will reduce dependence on conventional energy and the aim is to carry out all operations at the platforms using renewable energy.

technology absorptionResearch and Development (R&D)Specifi c areas in which R&D was carried out by the CompanyCairn has been actively pursuing the applica-tion of EOR (Enhanced Oil Recovery) technol-

Annexures to theDirectors’ Report Continued

S.No. Particulars Cairn India Senior Management Plan

Cairn India Performance

Option Plan (2006)

Cairn India Employee Stock

Option Plan (2006)

14 A description of the method and signifi cant assumptions used during the year to estimate the fair values of options, including the following weighted-average information:

(i) risk-free interest rate 7.05% 7.77% 8.13%

(ii) expected life (in years) 2.45 3.12 6.50

(iii) expected volatility 44.08% 37.90% 40.14%

(iv) expected dividends NA NA NA

(v) price of the underlying Share in market at the time of option grant 160.00 180.06 185.93


ogy in the Mangala, Bhagyam and Aishwariya Fields. Corefl ood studies have been carried out in 2 independent laboratories in order to determine the effi ciency of the chemical fl ood processes and also to determine the optimum chemical formulations. In house simulation work has also been carried out to determine the ef-fi ciency at fi eld level. The laboratory studies are ongoing to optimise the chemical formulations.

Re-injection of produced water separated at the Ravva terminal, back into the reservoir helps reduce discharge of waste water to sea and abstraction of ground water for injection purposes. PWRI has been designed and imple-mented to treat and handle a maximum capacity of 90,000 BWPD. The PWRI was successfully commissioned in Q2 2008 and is presently re-injecting 90% of the produced water.

Benefi ts derived as a result of this R&DCairn ’s research in EOR applications for the MBA fi elds has the potential to unlock addi-tional oil reserves within these fi elds and a long term strategy for EOR is being developed with this end in mind.

Cairn ’s study with the National Geophysical Research Centre (NGRI) on salinity changes of ground water sets an example of ‘good industry practice’. We are reassured that our operation in Ravva does not have an adverse impact on ground water and the environment.

Expenditure on R&DDetails outlined in the Table above.

foreign exchange earnings and outgo Activities relating to exports; initiatives taken to increase exports ; development of new export markets for products and services ; and export plans India imports approximately 75% of its oil & gas requirement and in this situation; the export of crude oil & natural gas which are the main products of Cairn are not relevant in this sector. However, by discovering new oil & gas fi nds and bringing them into production, Cairn is working towards enhancing energy security and increasing the self suffi ciency of the nation which is in line with policy of the Indian Government. At peak production rate, Rajasthan block is expected to contribute upto 20% of domestic crude oil production.

Foreign exchange used and earned. During the period ended 31 March 2009, the Company earned Rs. 37.58 million and incurred expenditure of Rs. 1036.31 million in foreign exchange.


Sir William B.B. GammellChairman


Annexures to theDirectors’ Report Continued

Expenditure on R&DIN RS.

Particulars Amount

(i) Capital 3,704,225 *

(ii) Recurring -

(iii) Total 3,704,225

(iv) Total R&D expenditures as a % of total turnover 0.02%

* These are consolidated numbers for the fi fteen months period ended 31 March 2009


65

Auditors' Report

TO

THE MEMBERS OF CAIRN INDIA LIMITED

1. We have audited the attached balance sheet of Cairn India Limited ('the Company') as at March 31, 2009 and also the profit and loss account and

the cash flow statement for the fifteen months period ended on that date annexed thereto, which include the Company's share of net liabilities,

expenses and cash outflows aggregating to Rs. 44,467 thousand, Rs. 213,225 thousand and Rs. 20,344 thousand, respectively in the

unincorporated joint ventures ('JVs') not operated by the Company or its subsidiaries, the accounts of which have been audited by the auditors of

the respective JVs and further include the Company's share of net assets, expenses and cash flows aggregating to Rs. 1,871 thousand,

Rs. 137,193 thousand and Rs. Nil, respectively in certain JVs, the accounts of which have been certified by the operators of the respective JVs

(for which, as informed to us, the audits are in progress) and relied upon by us. These financial statements are the responsibility of the Company's

management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a

test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles

used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit

provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) ('the Order') issued by the Central Government of India in terms of

sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4

and 5 of the said Order. In respect of clauses (ix)(a), (ix)(b), (ix)(c) and (xxi), our comments are restricted to the operations of the Company and

the JV's where the Company is the operator and does not cover the JV's where any third party is the operator.

4. Further to our comments in the Annexure referred to above, we report that:

i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of

our audit;

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those

books;

iii. The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

iv. In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting

standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v. On the basis of the written representations received from the directors, as on March 31, 2009, and taken on record by the Board of Directors,

we report that none of the directors is disqualified as on March 31, 2009 from being appointed as a director in terms of clause (g) of sub-

section (1) of section 274 of the Companies Act, 1956;

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information

required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles

generally accepted in India;

a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2009;

b) in the case of the profit and loss account, of the profit for the fifteen months period ended on that date; and

c) in the case of cash flow statement, of the cash flows for the fifteen months period ended on that date.

For S. R. Batliboi & Associates

Chartered Accountants

per Raj Agrawal

Partner

Membership No.: 82028

Place : Gurgaon

Date : 27th May, 2009


Annexure referred to in paragraph 3 of our report of even date

Re: Cairn India Limited (‘the Company’)

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

(b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such

verification.

(c) There was no substantial disposal of fixed assets during the year.

(ii) The Company has not started commercial production in any of its oil and gas blocks and has not purchased any inventories.

Therefore the provisions of clause 4(ii) of the Order are not applicable to the Company.

(iii) (a-d) As informed, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the

register maintained under section 301 of the Companies Act, 1956. Therefore the provisions of clause 4(iii) (b), (c) and (d) of the

Order are not applicable to the Company.

(e-g) As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the

register maintained under section 301 of the Companies Act, 1956. Therefore the provisions of clause 4(iii) (f) and (g) of the Order

are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system

commensurate with the size of the Company and the nature of its business, for the purchase of fixed assets and for the sale services.

During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. Since

the Company has not started commercial production in any of its oil and gas blocks, it has neither purchased any inventories nor sold

any goods.

(v) (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts

or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into the register maintained under

section 301 have been so entered.

(b) In respect of transactions made in pursuance of such contracts or arrangements exceeding the value of Rupees five lakhs entered

into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable

prices, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.

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

(viii) The Company has not commenced commercial production in any of its oil and gas blocks. Accordingly, the provisions of clause 4(viii)

of the Order are not applicable to the Company.

(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, income-tax, service tax, cess have

generally been regularly deposited with the appropriate authorities. The provisions relating to employees' state insurance, sales tax,

wealth tax, customs duty and excise duty are not applicable to the Company.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor

education and protection fund, income-tax, service tax, cess and other undisputed statutory dues were outstanding, at the year end,

for a period of more than six months from the date they became payable. The provisions relating to employees' state insurance, sales

tax, wealth tax, customs duty and excise duty are not applicable to the Company.

(c) According to the information and explanation given to us, there are no dues of income tax and cess which have not been deposited

on account of any dispute. The provisions relating to sales tax, wealth tax, customs duty and excise duty are not applicable to the

Company.

(x) The Company has been registered for a period of less than five years and hence we are not required to comment on whether or not

the accumulated losses at the end of the financial year is fifty per cent or more of its net worth and whether it has incurred cash

losses in such financial year and in the immediately preceding financial year.

(xi) The Company has no outstanding dues in respect of a financial institution, bank or debenture holders.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company

has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of

the Order are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the

provisions of clause 4(xiv) of the Order are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from

bank or financial institutions.

(xvi) The Company did not have any term loans outstanding during the period.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we

report that no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under

section 301 of the Companies Act, 1956.

Auditors' Report

67

(xix) The Company did not have any outstanding debentures during the year.

(xx) We have verified that the end use of money raised by public issue is as disclosed in the note no. 5 of schedule 18 to the financial

statements.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per

the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or

reported during the course of our audit.



per Raj Agrawal

Partner


Place : Gurgaon


Auditors' Report


SOURCES OF FUNDS

Shareholders’ funds

Share capital 1 18,966,678 17,783,994

Stock options outstanding 2 388,978 947,084

Reserves and surplus 3 301,090,274 276,084,115

320,445,930 294,815,193

APPLICATION OF FUNDS

Fixed assets 4

Gross cost 974 –

Less: Accumulated amortisation 365 –

Net book value 609 –

Exploratory work in progress 5 540,299 –

Investments 6 292,253,966 294,137,285

Current assets, loans and advances

Sundry debtors 7 17,942 12,708

Cash and bank balances 8 27,632,762 7,757

Other current assets 9 633,645 –

Loans and advances 10 220,814 35,950

28,505,163 56,415

Less: Current liabilities and provisions

Current liabilities 11 1,076,734 138,410

Provisions 12 315,373 320,504

1,392,107 458,914

Net current assets 27,113,056 (402,499)

Profit and loss account 538,000 1,080,407

320,445,930 294,815,193

Notes to accounts 18

Balance SheetAS AT MARCH 31, 2009

The schedules referred to above and the notes to accounts form an integral part of the balance sheet.

As per our report of even date

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

Chartered Accountants Rahul Dhir Managing Director and Chief Executive Officer

per Raj Agrawal Aman Mehta Director

Partner Indrajit Banerjee Executive Director and Chief Financial Officer

Membership No.: 82028 Neerja Sharma Company Secretary

Place : Gurgaon


Schedules As at As at

March 31, 2009 December 31, 2007

(All amounts are in thousand Indian Rupees, unless otherwise stated)

69

Profit and Loss AccountFOR THE PERIOD ENDED MARCH 31, 2009

INCOME

Revenue from operating activities 37,331 12,708

Other income 13 2,943,072 326,915

2,980,403 339,623

EXPENDITURE

Staff costs 14 212,519 623,374

Data acquisition and pre exploration cost 36,235 –

Administrative expenses 15 793,554 174,838

Unsuccessful exploration costs 5 813,568 8,879

Amortisation 4 365 –

Finance costs 16 3,446 209

1,859,687 807,300

Profit/(Loss) before taxation 1,120,716 (467,677)

Current tax 543,800 –

Fringe Benefit Tax 34,509 320,489

Profit/(Loss) for the period / year 542,407 (788,166)

Add: Accumulated losses at the beginning of (1,080,407) (292,241)

the period / year

Deficit carried forward to balance sheet (538,000) (1,080,407)

Earnings/(Loss) per share in INR 17

Basic 0.29 (0.44)

Diluted (previous year considered anti-dilutive) 0.29 (0.44)

[Nominal value of shares Rs. 10]


Schedules Fifteen months ended Twelve months endedMarch 31, 2009 December 31, 2007

The schedules referred to above and the notes to accounts form an integral part of the profit and loss account.







Place : Gurgaon




Cash flow from operating activities

Profit / (loss) before taxation for the period / year 1,120,716 (467,677)Adjustments for:– Employee compensation expense (stock options) - net of exceptional gains (33,325) 602,025– Interest income (1,341,376) (96,166)– Dividend from unquoted current investments (200,225) (203,117)– Depreciation, depletion and site restoration costs 365 –– Profit on sale of unquoted current investments (net) (1,245,686) (27,632)– Share issue expenses 208,410 –– Unrealised exchange loss / (gain) on restatement of assets and liabilities (net) 183,896 –– Unsuccessful exploration cost 813,568 –– Interest expense 388 209Operating (loss) before working capital changes (493,269) (192,358)Movements in working capital:(Increase)/decrease in debtors (5,234) (12,708)(Increase)/decrease in loans and advances and other current assets (212,729) (16,395)Increase/(decrease) in current liabilities and provisions 909,781 125,944Cash generated from / (used in) operations 198,549 (95,517)Direct taxes paid including fringe benefit tax (553,060) (24,488)Net cash (used in) operating activities (A) (354,511) (120,005)

Cash flow from investing activities

Payment made for exploration and development activities (1,371,119) –Long term investments made in subsidiaries during the period (1,562,784) (55,028,070)Payment for purchase of fixed assets (974) –Fixed deposits made (37,573,811) –Proceeds from matured fixed deposits 10,005,000 –Current, unquoted investments made during the period (43,293,242) (13,297,748)Interest received 707,732 107,819Dividend received from unquoted current investments 200,225 203,117Proceeds from sale of unquoted current investments 47,985,031 8,271,805Net cash (used in) investing activities (B) (24,903,942) (59,743,077)

Cash flow from financing activities

Proceeds from issue of equity shares (including securities premium) 25,523,445 2,093,607Payment for share issue expenses (208,410) (1,422,257)Unsecured loans repaid – (204,708)Security deposit recovered from / (paid) to a stock exchange – 30,000Interest paid (388) (209)Net cash from financing activities (C) 25,314,647 496,433

Net increase in cash and cash equivalents (A+B+C) 56,194 (59,366,649)Cash and cash equivalents at the beginning of the period / year 7,757 59,374,406Cash and cash equivalents at the end of the period / year 63,951 7,757

Components of cash and cash equivalents as at March 31, 2009 December 31, 2007

Cash in hand 15 –Balances with scheduled banks– on current accounts 13,936 7,757– on deposit accounts 27,618,811 –

Less: Deposits having maturity of over 90 days (27,568,811) –63,951 7,757

Notes:1) The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in Accounting Standard-3 on “Cash flow statements”.2) Amounts in bracket indicate a cash outflow or reduction.3) Bank balance in deposit accounts includes INR 1,530,000 thousand, previous year Nil, pledged with the banks.

Statement of Cash FlowsFOR THE PERIOD ENDED MARCH 31, 2009

Particulars Fifteen months ended Twelve months ended



For S. R. Batliboi & Associates For and on behalf of the Board of DirectorsChartered Accountants Rahul Dhir Managing Director and Chief Executive Officerper Raj Agrawal Aman Mehta DirectorPartner Indrajit Banerjee Executive Director and Chief Financial OfficerMembership No.: 82028 Neerja Sharma Company Secretary

Place : GurgaonDate : 27th May, 2009


71

Schedules to the Financial Statements

As at As at


SCHEDULE - 1

Share capital

Authorised:

2,250,000,000 (previous year 2,250,000,000) equity shares of INR 10 each 22,500,000 22,500,000

Issued, subscribed and fully paid up:


18,966,678 17,783,994

Note:

1) Issued, subscribed and fully paid up share capital includes 1,226,843,791 equity shares (previous year - 1,226,843,791 equity shares) of INR 10

each held by Cairn UK Holdings Limited, the holding company together with its nominees.

2) Shares held by the holding company includes 861,764,893 equity shares (previous year - 861,764,893 equity shares) of INR 10 each, allotted as

fully paid up pursuant to contracts for consideration other than cash.

3) For stock options outstanding refer note no. 6 in schedule 18.

SCHEDULE - 2

Stock options outstanding

Employee stock options outstanding 782,548 2,496,095

Less: Deferred employee compensation outstanding 393,570 1,549,011

388,978 947,084

SCHEDULE - 3

Reserves and surplus

Securities premium account

Opening balance 276,084,115 275,017,837

Add: Additions during the period / year 25,006,159 1,962,756

Less: Adjustment against share issue expenses – 896,478

Closing Balance 301,090,274 276,084,115

SCHEDULE - 4

Fixed assets

Intangible Assets - Computer Software

Gross Block

Additions during the period / year 974 –

Closing balance 974 –

Accumulated amortisation

For the period / year 365 –

Closing balance 365 –

Net Block 609 –



Schedules to the Financial Statements Continued

SCHEDULE - 5

Exploratory work in progress

Additions during the period / year 1,353,867 8,879

Less: Unsuccessful exploration costs for the period / year 813,568 8,879

540,299 –

SCHEDULE - 6

Investments

Long term investments in Subsidiary Companies (at cost)

Unquoted, trade and fully paid-up

292,929,752 equity shares (previous year: 272,389,192 equity shares) of 290,524,514 289,083,710

GBP 1 each in Cairn India Holdings Limited, U.K.

2,509,960 equity shares (previous year: Nil) of USD 1 each in CIG Mauritius 121,980 –

Holding Pvt Limited

Current Investments (at lower of cost and market value)

Unquoted and non trade

Mutual Funds (Refer note no. 21 in Schedule 18 for details) * 1,607,472 5,053,575

292,253,966 294,137,285

Aggregate amount of unquoted investments 292,253,966 294,137,285

Repurchase price of mutual fund units, represented by Net Asset Value 1,607,472 5,114,006

* Includes unutilized monies of the public issue. (Refer note no. 5 in Schedule 18)

SCHEDULE - 7

Sundry Debtors

Debts outstanding for a period exceeding six months

– Unsecured, considered good 7,609 8,587

Other debts

– Unsecured, considered good 10,333 4,121

17,942 12,708

SCHEDULE - 8

Cash and bank balances

Cash in hand 15 –

Balances with scheduled banks *

– on current accounts 13,936 7,757

– on deposit accounts ** 27,618,811 –

27,632,762 7,757

* Includes unutilized monies of the public issue (refer note no.5 in Schedule 18)

** Includes INR 1,530,000 thousand, previous year Nil, pledged with the banks


As at As at


73


SCHEDULE - 9

Other current assets

Interest accrued on bank deposits 633,645 –

633,645 –

SCHEDULE - 10

Loans and advances

Unsecured considered good:

Advances recoverable in cash or in kind or for value to be received 12,855 417

Advances recoverable from subsidiary companies 192,795 663

Deposits 15,164 –

Advance income tax / tax deducted at source (Net of provisions Nil, previous year Nil) – 34,870

220,814 35,950

SCHEDULE - 11

Current liabilities

Sundry Creditors

– Total outstanding dues to Micro and Small Enterprises (refer note no. 20 in schedule 18) 6 –

– Total outstanding dues to other than Micro and Small Enterprises 97,773 111,964

Amounts payable to Cairn Energy Plc., the ultimate holding company 24,109 25,000

Amounts payable to subsidiary companies 753,778 –

Other liabilities 201,068 1,446

1,076,734 138,410

SCHEDULE - 12

Provisions

Provision for taxation (net of advance tax -INR 338,382 thousand, previous year Nil) 205,118 –

Provision for fringe benefit tax (net of advance tax payments INR 266,883 thousand, 105,235 320,231

previous year - INR 258 thousand)

Provision for gratuity 3,994 233

Provision for leave encashment 1,026 40

315,373 320,504


As at As atMarch 31, 2009 December 31, 2007


SCHEDULE - 13

Other income

Interest on bank deposits (Gross, tax deducted at source INR 304,879 thousand, 1,341,377 96,166

previous year INR 23,103 thousand)

Dividend from non-trade current investments 200,225 203,117

Profit on sale of non-trade current investments (net) 1,245,686 27,632

Miscellaneous income 61 –

Exceptional gain (refer note no. 8 in schedule 18) 155,723 –

2,943,072 326,915

SCHEDULE - 14

Staff costs

Salary, wages and bonus 74,089 19,904

Contribution to provident fund 3,314 349

Contribution to superannuation fund 1,716 904

Gratuity expenses 3,720 192

Leave encashment expenses 1,103 –

Staff welfare expenses 6,179 –

Employee compensation expense (stock options) 122,398 602,025

212,519 623,374

Fifteen months ended Twelve months endedMarch 31, 2009 December 31, 2007



75

Fifteen months ended Twelve months endedMarch 31, 2009 December 31, 2007


SCHEDULE - 15

Administrative expenses

Legal and professional expenses 254,050 109,461

Contract employee charges 4,517 –

Rent 1,377 –

Auditor’s remuneration

As Auditors

– Fees for statutory audit and consolidated financial statements 5,314 2,921

– Fees for tax audit 828 563

– Fees for limited review 7,595 1,014

– Fees for certification 506 –

– Fees for statutory reporting for parent companies consolidated 10,566 13,847

financial statements

– Other services 2,997 10,637

– Out of pocket expenses 443 28,249 552 29,534

Directors’ sitting fees 1,320 700

Advertisement and publicity 14,385 14,321

Public relation expenses 42,959 14,329

Sponsorship 15,666 –

Repairs and maintenance (others) 303 140

Travel expenses 30,954 1,308

Insurance expenses 197 –

Communication expenses 5,983 4,777

Share issue expenses (refer note no. 13 in schedule 18) 208,410 –

Exchange differences (net) 180,632 –

Miscellaneous expenses 4,552 268

793,554 174,838

SCHEDULE - 16

Finance costs

Interest on bank overdraft – 200

Other interest 388 –

Bank charges 3,058 9

3,446 209

SCHEDULE - 17

Earnings / (Loss) per share

Profit/(Loss) for the period / year as per profit and loss account 542,407 (788,166)

Weighted average number of equity shares in 1,866,146,993 1,777,001,292

calculating basic earning / (loss) per share

Add: Number of equity shares arising on grant of stock options 10,052,076 11,017,256

Weighted average number of equity shares in 1,876,199,069 1,788,018,548

calculating diluted earning / (loss) per share

Earning/(Loss) per share in INR

Basic 0.29 (0.44)

Diluted (previous year considered as anti-dilutive) 0.29 (0.44)



1. NATURE OF OPERATIONS

Cairn India Limited (‘the Company’) was incorporated in India on August 21, 2006 and is a subsidiary of Cairn UK Holdings Limited, which in turn

is a wholly owned subsidiary of Cairn Energy Plc., UK which is listed on London Stock Exchange.

The Company is primarily engaged in the business of surveying, prospecting, drilling, exploring, acquiring, developing, producing, maintaining,

refining, storing, trading, supplying, transporting, marketing, distributing, importing, exporting and generally dealing in minerals, oils, petroleum,

gas and related by-products and other activities incidental to the above. As part of its business activities, the Company also holds interests in its

subsidiary companies which have been granted rights to explore and develop oil exploration blocks in the Indian sub-continent.

The Company is participant in various Oil and Gas blocks/fields granted by the Government of India through Production Sharing Contracts (‘PSC’)

entered into between the Company and Government of India and other venture partners. The Company has interest in the following Oil and Gas

blocks/fields-

Oil and Gas blocks/fields Area Participating Interest

Operated block (through subsidiaries)

1 VN-ONN-2003/1* Vindhyan Onshore 25%

2 PR-OSN-2004 Palar Basin Offshore 25%

3 KG-ONN-2003/1* Krishna Godavari Onshore 25%

Non – operated block

4 RJ-ONN-2003/1* Rajasthan Onshore 30%

5 GS-OSN-2003/1* Gujarat Saurashtra Onshore 49%

6 KK-DWN-2004 Kerala Konkan Basin Offshore 40%

7 CB-ONN-2002/1* Cambay Onshore 30%

(proposed to be relinquished)

*Acquired during current period through assignment of interest from subsidiary companies

2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial statements have been prepared to comply in all material respects with the mandatory Accounting Standards notified under the

Companies (Accounting Standard) Rules, 2006 under the historical cost convention and on an accrual basis. The accounting policies, in all material

respects, have been consistently applied by the Company and are consistent with those used in the previous period, except to the extent stated in

note no. 8 below.

(b) Oil and gas assets

The Company follows a successful efforts method for accounting for oil and gas assets as set out by the Guidance Note issued by the Institute of

Chartered Accountants of India (ICAI) on “Accounting for Oil and Gas Producing Activities”.

Expenditure incurred on the acquisition of a license interest is initially capitalised on a license by license basis. Costs are held, undepleted, within

exploratory and development wells in progress until the exploration phase relating to the license area is complete or commercial oil and gas

reserves have been discovered.

Exploration expenditure incurred in the process of determining exploration targets which cannot be directly related to individual exploration

wells, is expensed in the period in which it is incurred. Exploration/appraisal drilling costs are initially capitalised within exploratory and

development work in progress on a well by well basis until the success or otherwise of the well has been established. The success or failure of each

exploration/appraisal effort is judged on a well by well basis. Drilling costs are written off on completion of a well unless the results indicate that oil

and gas reserves exist and there is a reasonable prospect that these reserves are commercial.

Where results of exploration drilling indicate the presence of oil and gas reserves which are ultimately not considered commercially viable, all

related costs are written off to the profit and loss account. Following appraisal of successful exploration wells, when a well is ready for

commencement of commercial production, the related exploratory and development wells in progress are transferred into a single field cost centre

within producing properties, after testing for impairment.

Where costs are incurred after technical feasibility and commercial viability of producing oil and gas is demonstrated and it has been

determined that the wells are ready for commencement of commercial production, they are capitalised within producing properties for each cost

centre. Subsequent expenditure is capitalised when it enhances the economic benefits of the producing properties or replaces part of the existing

producing properties. Any costs remaining associated with such part replaced are expensed in the financial statements.

Net proceeds from any disposal of an exploration asset within exploratory and development work in progress is initially credited against the

previously capitalised costs and any surplus proceeds are credited to the profit and loss account. Net proceeds from any disposal of producing

properties are credited against the previously capitalised cost and any gain or loss on disposal of producing properties is recognised in the profit

and loss account, to the extent that the net proceeds exceed or are less than the appropriate portion of the net capitalised costs of the asset.

Schedules to the Financial Statements ContinuedSCHEDULE 18 - NOTES TO ACCOUNTS


77

(c) Depletion

The expenditure on producing properties is depleted within each cost centre.

Depletion is charged on a unit of production basis, based on proved reserves for acquisition costs and proved and developed reserves for

other costs.

(d) Site restoration costs

At the end of the producing life of a field, costs are incurred in restoring the site of production facilities. The Company recognizes the full cost of

site restoration as a liability when the obligation to rectify environmental damage arises. The site restoration expense forms part of the cost of

producing properties of the related asset. The amortization of the asset, calculated on a unit of production basis based on proved and developed

reserves, is included in the “depletion and site restoration costs” in the profit and loss account.

(e) Impairment

i. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external

factors. An impairment loss is recognized where the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is

the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their

present value at the weighted average cost of capital.

ii. After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining

useful life.

(f) Other tangible fixed assets, depreciation and amortization

Tangible assets, other than oil and gas assets, are stated at cost, less accumulated depreciation and impairment losses, if any. Cost comprises the

purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition

of fixed assets which take a substantial period of time to get ready for its intended use are also included to the extent they relate to the period till

such assets are ready to be put to use. Depreciation is provided using the Straight Line Method as per the useful lives of the assets estimated by

the management, or at the rates prescribed under Schedule XIV of the Companies Act 1956, whichever is higher. The expected useful economic

lives are as follows:

Vehicles 2 to 5 years

Freehold buildings 10 years

Computers 2 to 5 years

Furniture and fixtures 2 to 5 years

Office equipments 2 to 5 years

Plant and Equipment 2 to 5 years

Leasehold improvements are amortized over the remaining period of the primary lease or expected useful economic lives, whichever is shorter.

(g) Intangible fixed assets and amortization

Intangible assets, other than oil and gas assets, have finite useful lives and are measured at cost and amortized over their expected useful

economic lives as follows:

Computer software 2 to 4 years

Goodwill arising on acquisition is capitalized and is subject to review for impairment.

(h) Leases

Finance leases, which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the

lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease

payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are

charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.

If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalised leased assets are

depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating

leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

(i) Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. Current investments

are measured at cost or market value, whichever is lower, determined on an individual investment basis. All other investments are classified as

long-term investments. Long term investments are measured at cost. However, provision for diminution in value is made to recognise a decline

other than temporary in the value of the investments.

(j) Joint Ventures

The Company participates in several Joint Ventures which involve the joint control of assets used in the oil and gas exploration, development and

producing activities. It accounts for its share of the assets and liabilities of Joint Ventures along with attributable income and expenses in such Joint

Ventures, in which it holds a participating interest. Joint venture cash and cash equivalent balances are considered by the Company to be the

amounts contributed in excess of the Company’s obligations to the joint ventures and are, therefore, disclosed within loans and advances.

(k) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably

measured.




Revenue from operating activities

The Company recognizes operators fees as revenue from joint ventures (in which its foreign subsidiaries are participants) based on the provisions

of respective PSCs.

Interest income

Interest income is recognised on a time proportion basis.

(l) Borrowing costs

Borrowing costs include interest and commitment charges on borrowings, amortisation of costs incurred in connection with the arrangement of

borrowings, exchange differences to the extent they are considered a substitute to the interest cost and finance charges under leases. Costs

incurred on borrowings directly attributable to development projects, which take a substantial period of time to complete, are capitalised within

the development/producing asset for each cost centre.

All other borrowing costs are recognised in the profit and loss account in the period in which they are incurred.

(m) Foreign currency transactions and translations

The Company translates foreign currency transactions into Indian Rupees at the rate of exchange prevailing at the transaction date. Monetary

assets and liabilities denominated in foreign currency are translated into Indian Rupees at the rate of exchange prevailing at the balance sheet

date. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at

the date of the transaction.

Exchange differences arising on the settlement of monetary items or on reporting the Company’s monetary items at rates different from those

at which they were initially recorded during the period, or reported in previous financial statements, are recognised as income or as expenses in

the period in which they arise except those arising from investments in non-integral operations.

All transactions of integral foreign operations are translated as if the transactions of those foreign operations were the transactions of the

Company itself. In translating the financial statements of a non-integral foreign operation for incorporating in the Company’s financial statements,

the Company translates the assets and liabilities at the rate of exchange prevailing at the balance sheet date. Income and expenses of non-integral

operations are translated using rates at the date of transactions. Resulting exchange differences are disclosed under the foreign currency

translation reserve until the disposal of the net investment in non-integral operations.

(n) Income taxes

Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax are measured at the amount

expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Fringe benefit tax also includes the proportionate

amount of tax likely to be paid by the Company, on the exercise of share options of the Company. Deferred income tax reflects the impact of

current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier

periods.

Deferred tax assets and liabilities are measured, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available

against which such deferred tax assets can be realised. If the Company has carry forward of unabsorbed depreciation and tax losses, deferred tax

assets are recognised only if there is virtual certainty, supported by convincing evidence, that such deferred tax assets can be realised against

future taxable profits. Unrecognised deferred tax assets of earlier periods are re-assessed and recognised to the extent that it has become

reasonably certain that future taxable income will be available against which such deferred tax assets can be realised.

(o) Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average

number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted

for events of bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares).

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the

weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.

(p) Provisions

A provision is recognised when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will

be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are

determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and

adjusted to reflect the current best estimates.

(q) Cash and Cash equivalents

Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short-term investments, with an original maturity of

90 days or less.

(r) Employee Benefits

Retirement and Gratuity benefits

Retirement benefits in the form of provident fund and superannuation scheme are defined contribution schemes and the contributions are

charged to the profit and loss account of the period when the contributions to the respective funds are due. There are no obligations other than

the contribution payable to the respective funds.

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made

at the end of each financial year. The scheme is maintained and administered by an insurer for the entire Cairn India Group to which the trustees

make periodic contributions.



79

Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based actuarial

valuation made at the end of each financial year. The actuarial valuation is done as per projected unit credit method.

Actuarial gains / losses are immediately taken to profit and loss account and are not deferred.

Employee Stock Compensation Cost

Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and

Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the

Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock options using the intrinsic

value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.

(s) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements

and the results of operations during the reporting period end. Although these estimates are based upon management’s best knowledge of current

events and actions, actual results could differ from these estimates.

(t) Segment Reporting Policies

Identification of segments: The Company’s operating businesses are organized and managed separately according to the nature of products and

services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The

analysis of geographical segments is based on the areas in which major operating divisions of the Company operate.

3. SEGMENTAL REPORTING

Business segments

The primary reporting of the Company has been prepared on the basis of business segments. The Company has only one business segment,

which is the exploration, development and production of oil and gas and operates in a single business segment based on the nature of the

products, the risks and returns, the organisation structure and the internal financial reporting systems. Accordingly, the figures appearing in these

financial statements relate to the Company’s single business segment.

Geographical segments

Secondary segmental reporting is prepared on the basis of the geographical location of customers. The operating interests of the Company are

confined to India in terms of oil and gas blocks and customers. Accordingly, the figures appearing in these financial statements relate to the

Company’s single geographical segment being operations in India.

4. RELATED PARTY TRANSACTIONS

(a) Names of related parties:

Companies having control

• Cairn UK Holdings Limited, UK • Cairn Energy Plc., UK

Holding Company Ultimate holding company

Subsidiary companies

• Cairn Energy Australia Pty Limited • Cairn Energy India Pty Limited

• CEH Australia Pty Limited • Cairn Energy Asia Pty Limited

• Sydney Oil Company Pty Limited • Cairn Energy Investments Australia Pty Limited

• Wessington Investments Pty Limited • CEH Australia Limited

• Cairn India Holdings Limited (‘CIHL’) • CIG Mauritius Holding Private Limited (‘CMHPL’) –

• CIG Mauritius Private Limited – with effect from 1st July 2008 with effect from 1st July 2008

• Cairn Energy Holdings Limited • Cairn Energy Discovery Limited

• Cairn Exploration (No. 2) Limited • Cairn Exploration (No. 6) Limited

• Cairn Energy Hydrocarbons Limited • Cairn Petroleum India Limited

• Cairn Energy Gujarat Block 1 Limited • Cairn Exploration (No. 4) Limited

• Cairn Exploration (No. 7) Limited • Cairn Energy Development Pte Limited –

• Cairn Lanka Private Limited – with effect from 3rd July 2008 with effect from 16th July 2008

• Cairn Energy Group Holdings BV • Cairn Energy India West BV

• Cairn Energy India West Holding BV • Cairn Energy Gujarat Holding BV

• Cairn Energy India Holdings BV • Cairn Energy Netherlands Holdings BV

• Cairn Energy Gujarat BV • Cairn Energy Cambay BV

• Cairn Energy Cambay Holding BV

Key Managerial Personnel

• Rahul Dhir • Winston Frederick Bott Jr. Executive Director

Managing Director and Chief Executive Officer and Chief Operating Officer (Appointed on 29th April 2008)

• Indrajit Banerjee • Lawrence Smyth

Executive Director and Chief Financial Officer Executive Director and Chief Operating Officer (Appointed on

(Appointed on 1st March 2007) 1st March 2007 and resigned on 21st January 2008)




(b) Transactions during the period/year:

Nature of the Transactions Related Party Current period Previous year

Expenses incurred by related party on Cairn Energy India Pty Limited 93,757 858

behalf of the Company

Expenses incurred by the Company Cairn Energy India Pty Limited 256,499 1,100

on behalf of related party

Cairn Energy Plc. 854 Nil

CIG Mauritius Holding Private Limited 491 Nil

CIG Mauritius Private Limited 264 Nil

Cairn Energy Gujarat Block 1 Limited 10,648 Nil

Cairn Exploration (No. 4) Limited 100 Nil

Cairn Exploration (No. 7) Limited 13,668 Nil

Cairn Lanka Private Limited 881 Nil

Cairn Energy Hydrocarbons Limited 30,597 Nil

Total 314,002 1,100

Equity contributions made during the period Cairn India Holdings Limited 1,440,804 22,265,000

CIG Mauritius Holding Private Limited 121,980 Nil

Total 1,562,784 22,265,000

Assignment of interest in oil & gas blocks from Cairn Energy Gujarat Block 1 Limited 89,513 Nil





Total 627,390 Nil

Recovery of share option charge Cairn Energy India Pty Limited 140,617 Nil

Shares issued including premium and Cairn UK Holding Ltd Nil 2,093,607

stock option charge

Rahul Dhir 716,185 Nil

Lawrence Smyth 126,758 Nil

Total 842,943 2,093,607

Remuneration Rahul Dhir 3,000 2,400

Winston Frederick Bott Jr. 950 Nil

Indrajit Banerjee 2,250 1,500

Lawrence Smyth Nil 1,800

Total 6,200 5,700

(c) Balances outstanding as at the end of the period/year:

Nature of the Balance Related Party 31st March 2009 31st December 2007

Accounts receivable Cairn Energy India Pty Limited 160,563 663

CIG Mauritius Holding Private Limited 491 Nil

CIG Mauritius Private Limited 264 Nil

Cairn Lanka Private Limited 881 Nil

Cairn Energy Hydrocarbons Limited 30,596 Nil

Total 192,795 663

Accounts payable Cairn Energy Plc. 24,109 25,000

Cairn Energy Gujarat Block 1 Limited 102,552 Nil





Total 777,887 25,000



81

Remuneration payable Rahul Dhir Nil 3,261

Winston Frederick Bott Jr. Nil Nil

Indrajit Banerjee Nil 1,500


Total Nil 6,561

Note: The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave encashment benefits, as they

are determined on an actuarial basis for the Company as a whole.

5. As at 31st March 2009, the Company and its subsidiaries together have utilized INR 82,563,170 thousand (previous year – 71,682,135 thousand)

for the purposes listed in the prospectus issued for the Initial Public Offer. The details of utilization of funds is as follows-

Particulars Upto 31st March 2009 Upto 31st December 2007

Acquisition of shares of Cairn India Holdings Limited from Cairn UK Holdings Limited 59,580,837 59,580,837

Exploration and development expenses 21,152,714 10,411,239

General corporate purposes 230,000 90,440

Issue expenses 1,599,619 1,599,619

Total 82,563,170 71,682,135

The details of the unutilized monies out of the public issue proceeds is as follows-

Particulars 31st March 2009 31st December 2007

Mutual funds 718,277 7,337,856

Balances with banks 4,967,454 9,228,910

Total 5,685,731 16,566,766

6. EMPLOYEES STOCK OPTION PLANS

The Company has provided various share-based payment schemes to its employees. During the period ended 31st March 2009, the following

schemes were in operation-

Particulars CISMP CIPOP CIESOP

Date of Board Approval 17th Nov 2006 17th Nov 2006 17th Nov 2006

Date of Shareholder’s approval 17th Nov 2006 17th Nov 2006 17th Nov 2006

Number of options granted till March 2009 8,298,713 5,732,956 12,792,651

Method of Settlement Equity Equity Equity

Vesting Period Refer vesting conditions below 3 years from grant date 3 years from grant date

Exercise Period 18 months from vesting 3 months from vesting date 7 years from vesting date

Number of options granted till March 2009

24th Nov 2006 8,298,713 – –

1st Jan 2007 – 1,708,195 3,467,702

20th Sept 2007 – 3,235,194 5,515,053

29th July 2008 – 789,567 3,773,856

10th Dec 2008 – – 36,040

Total 8,298,713 5,732,956 12,792,651

The vesting conditions of the above plans are as under-

CISMP plan

(a) 6,714,233 options are to be vested in the following manner-

– 1/3rd of the options will vest on the day following the date on which the equity shares have been admitted to listing on the Stock

Exchanges (‘admission date’). Listing date was 9th Jan 2007.

– 1/3rd of the options will vest 18 months after the admission date.

– 1/3rd of the options will vest on achieving 30 days’ consecutive production of over 150,000 bopd from the Rajasthan Block.

(b) 1,584,480 options are to be vested in the following manner-

– 1/2 of the options will vest on the day following the date on which the equity shares have been admitted to listing on the Stock

Exchanges.

– 1/4th of the options will vest on the date on which all major equipment for the start-up of the Mangala field is delivered to site.

– 1/4th of the options will vest on achieving 100,000 boepd from the Mangala Field.







CIPOP plan

Options will vest (i.e become exercisable) at the end of a “performance period” which will be set by the remuneration committee at the time of

grant (although such period will not be less than three years). However, the percentage of an option which vests on this date will be determined

by the extent to which pre-determined performance conditions have been satisfied.

CIESOP plan

There are no specific vesting conditions under CIESOP plan.

Details of activities under Employees Stock Option Plans

CISMP Plan Current period Previous year

Number Weighted average Number Weighted averageof options exercise of options exercise

Price in INR Price in INR

Outstanding at the beginning of the year 8,298,713 33.70 8,298,713 33.70

Granted during the year Nil NA Nil NA

Forfeited during the year Nil NA Nil NA

Exercised during the year 5,268,396 33.70 Nil NA

Expired during the year 792,240 33.70 Nil NA

Outstanding at the end of the year 2,238,077 33.70 8,298,713 33.70

Exercisable at the end of the year Nil NA Nil NA

Weighted average fair value of options granted 131.50 NA 131.50 NA

on the date of grant (INR)

The weighted average share price on the dates of exercise of stock options was INR 220.09

CIPOP Plan Current period Previous year

Number Weighted average Number Weighted averageof options exercise of options exercise


Outstanding at the beginning of the year 4,755,244 10.00 Nil NA

Granted during the year 789,567 10.00 4,943,389 10.00


Exercised during the year Nil NA Nil NA

Expired during the year 2,344,715 10.00 188,145 10.00





CIESOP Plan Current period Previous yearNumber Weighted average Number Weighted average

of options exercise of options exercise



Granted during the year 3,809,896 226.21 8,982,755 164.27








83

The details of exercise price for stock options outstanding as at March 31, 2009 are:

Scheme Range of No. of Weighted average Weighted

exercise options remaining contractual average

price (INR) outstanding life of options exercise

(in years) price (INR)

CISMP Plan 33.70 2,238,077 2.08 33.70

CIPOP Plan 10.00 3,200,096 1.51 10.00

CIESOP Plan 143-227 10,914,244 1.60 185.39

The details of exercise price for stock options outstanding as at December 31, 2007 are:

CISMP Plan 33.70 8,298,713 1.04 33.70

CIPOP Plan 10.00 4,755,244 2.49 10.00

CIESOP Plan 160-166.95 8,545,710 2.47 164.49

Inputs for Fair valuation of Employees Stock Option Plans

The Share Options have been fair valued using an Option Pricing Model (Black Scholes Model). The main inputs to the model and the Fair Value

of the options, based on an independent valuation, are as under:

Variables - CISMP A B

Grant date 24th Nov 2006 24th Nov 2006

Stock Price/fair value of the equity shares on the date of grant (INR) 160.00 160.00

Vesting date Refer vesting Refer vesting

conditions conditions

Vesting % Refer vesting Refer vesting


Volatility (Weighted average) 44.08% 46.59%

Risk free rate (Weighted average) 7.05% 6.94%

Time to maturity in years (Weighted average) 2.45 2.00

Exercise price – INR 33.70 33.70

Fair Value of the options (Weighted average) - INR 131.69 130.69

Variables – CIESOP

Grant date 1st Jan 2007 20th Sept 2007 29th July 2008 10th Dec 2008

Stock Price/fair value of the equity shares on 160.00 166.95 228.55 150.10

the date of grant (INR)

Vesting date 1st Jan 2010 20th Sept 2010 29th July 2011 10th Dec 2011

Vesting % 100% 100% 100% 100%

Volatility 41.04% 40.24% 39.43% 38.19%

Risk free rate 7.50% 7.65% 9.20% 6.94%

Time to maturity (years) 6.50 6.50 6.50 6.50

Exercise price (INR) 160.00 166.95 227.00 143.00

Fair Value of the options (INR) 87.30 90.72 130.42 79.80

Variables – CIPOP

Grant date 1st Jan 2007 20th Sept 2007 29th July 2008

Stock Price/fair value of the equity shares on 160.00 166.95 228.55

the date of grant (INR)

Vesting date 1st Jan 2010 20th Sept 2010 29th July 2011

Vesting % Refer vesting Refer vesting Refer vesting

conditions conditions conditions

Volatility 41.61% 36.40% 37.49%

Risk free rate 7.33% 7.23% 9.37%

Time to maturity (years) 3.12 3.12 3.12

Exercise price (INR) 10.00 10.00 10.00

Fair Value of the options (INR) 152.05 158.97 221.09




Volatility is the measure of the amount by which the price has fluctuated or is expected to fluctuate during the period. The measure of volatility

used in Black-Scholes option-pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over

a period of time. Time to maturity /expected life of options is the period for which the Company expects the options to be live. The time to

maturity has been calculated as an average of the minimum and maximum life of the options.

Effect of Employees Stock Option Plans on Financial Position

Effect of the employee share-based payment plans on the profit and loss account and on its financial position:

Particulars Current Period Previous Year

Total Employee Compensation Cost pertaining to equity settled share-based (33,325) 602,025

payment plans (including exceptional gain of INR 155,723 thousand in the

current period-refer note no. 8 below)

Liability for employee stock options outstanding as at period / year end 388,978 947,084

Deferred Compensation Cost 393,570 1,549,011

Impact of Fair Valuation Method on net profits and EPS

In March 2005, the Institute of Chartered Accountants of India has issued a guidance note on "Accounting for Employees Share Based Payments"

applicable to employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said guidance note requires the

Proforma disclosures of the impact of the fair value method of accounting of employee stock compensation accounting in the financial statements.

Applying the fair value based method defined in the said guidance note, the impact on the reported net profit and earnings per share would be as

follows:

Particulars Current Period

Profit as reported 542,407

Add: Employee stock compensation under intrinsic value method (33,325)

(net of exceptional gain of INR 155,723 thousand-refer note no. 8 below)

Less: Employee stock compensation under fair value method 451,826

Proforma profit 57,256

Earnings Per Share in INR

Basic

– As reported 0.29

– Proforma 0.03

Diluted


– Proforma 0.03

7. The Company has offered certain share options to some of the employees of one of its subsidiary companies and it was bearing the charge in its

profit and loss account till 31st March 2008. With effect from 1st April 2008, the management decided that this charge would be borne by the

immediate employer company of those employees. Accordingly, the stock option charge for the current period is lower and the profit after tax is

higher by INR 140,617 thousand.

8. During the current period, the Company decided to retrospectively account for stock options using the Intrinsic Value Method as against the Fair

Value Method (Black Scholes) followed till the financial year ended 31st December 2007. Accordingly, the excess stock option provision up to

31st December 2007 was reversed during the current period ended 31st March 2009, resulting in an exceptional gain of INR 155,723 thousand.

Further, the stock option charge for the current period is lower and the profit after tax is higher by INR 485,151 thousand (including exceptional

gain of INR 155,723 thousand) due to this change.

9. LEASE OBLIGATIONS DISCLOSURES

Operating Lease

The Joint Ventures, in which the Company has participating interest, have entered into operating lease for equipments. All such leases are

cancellable in nature. There are neither escalation clauses nor any restrictions in the lease agreements. There are no subleases.


Lease rentals recognized during the period 7,255 Nil



85

10. DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN CURRENCY EXPOSURE

The Company did not take any derivative instruments during the current period / previous year. Particulars of unhedged foreign currency

exposures are as follows-


Sundry debtors 17,942 12,708

Current assets 16,925 Nil

Current liabilities 785,562 25,000

11. The Company has a gratuity plan, wherein every employee who has completed five years or more of service gets a gratuity on departure at 15

days salary (last drawn salary) for each completed year of service. The gratuity plan of the Company is an unfunded scheme. However, one of the

subsidiary companies has taken an insurance policy with the Life Insurance Corporation of India to cover the gratuity liability of the entire group.

The following tables summarize the components of net benefit expense recognised in the profit and loss account and the amounts recognised in

the balance sheet for the gratuity plans.

Profit and Loss account

Net employee benefit expense (recognised in Employee Cost)

Particulars 31st March 2009

Current service cost 1,011

Interest cost on benefit obligation 200

Net actuarial (gain) / loss recognised in the year 2,509

Past service cost Nil

Net benefit expense 3,720

Balance sheet

Details of Provision for Gratuity


Defined benefit obligation 3,994

Less: Unrecognized past service cost Nil

Plan asset / (liability) (3,994)

Changes in the present value of the defined benefit obligation are as follows:


Opening defined benefit obligation 274

Current service cost 1,011

Interest cost 200

Benefits paid Nil

Actuarial (gains) / losses on obligation 2,509

Closing defined benefit obligation 3,994

The principal assumptions used in determining gratuity liability for the Group's plans are shown below:


Discount rate 7.00 %

Future salary increase 10.00 %

Employee turnover 13.13 %

Mortality Rate LIC (1994-96) Ultimate Table

Note: The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant

factors, such as supply and demand in the employment market.

Gratuity liabilities for the current period are as follows:


Defined benefit obligation 3,994

Surplus / (deficit) (3,994)

Experience adjustments on plan liabilities (loss) / gain (45)

Note - The Company has adopted AS-15 (Revised 2005) Employee Benefits for the first time during the current period, as the liability as at

31st December 2007 was not material. Disclosures required by paragraph 120 (n) of AS-15 (Revised 2005) are required to be furnished

prospectively from the date of transition and hence have been furnished for the current period only.




12. DETAILS OF MOVEMENT IN SHARE CAPITAL IS AS UNDER

Date Number Description Issue price Share capital Securities

of equity shares in INR premium

of INR 10 each

31st December 2006 1,765,314,379 Closing balance 17,653,144 275,017,837

8th February 2007 13,085,041 Issued under Green Shoe Option 160.00 130,850 1,962,756

Less: Share issue expenses

adjusted against premium (896,478)

31st December 2007 1,778,399,420 17,783,994 276,084,115

7th March 2008 792,240 Exercise of stock options 33.70 7,922 18,776

22nd April 2008 113,000,000 Preferential allotment of

shares to non promoter investors 224.30 1,130,000 24,215,900

7th May 2008 525,000 Exercise of share options 33.70 5,250 12,443

27th May 2008 1,713,078 Exercise of share options 33.70 17,131 40,600

8th December 2008 1,600,000 Exercise of share options 33.70 16,000 37,920

19th December 2008 638,078 Exercise of share options 33.70 6,381 15,122

Add : Share options liability transferred

to securities premium upon exercise of

the options 665,398

31st March 2009 1,896,667,816 18,966,678 301,090,274

13. Share issue expenses of INR 208,410 thousand incurred on the preferential allotment of 113,000,000 equity shares have been charged to the

profit and loss account and not adjusted from the securities premium account on conservative basis.

14. In accordance with the provisions of Accounting Standard 22 'Accounting for taxes on income', the Company would have had deferred tax assets

of approximately INR 511,000 thousand, primarily comprising of accumulated tax losses and unamortized issue expenses. However, as the

management is not virtually certain of subsequent realization of the asset, no deferred tax asset has been computed or recognized in these

financial statements.

15. MANAGERIAL REMUNERATION

Remuneration paid or payable to the Directors Current period Previous year

Salary and other benefits 6,200 5,700

Sitting fees 1,320 700

Total 7,520 6,400

Note - As the future liability for gratuity and leave encashment is provided on actuarial basis for the Company, the amount pertaining to the

directors is not ascertainable and therefore, not included above.

16. EARNINGS IN FOREIGN CURRENCY (ACCRUAL BASIS)

Particulars Current period Previous year

Parent company overhead 37,331 12,708

Interest 249 Nil

Total 37,580 12,708

17. EXPENDITURE IN FOREIGN CURRENCY (ACCRUAL BASIS)

Particulars Current period Previous year

Professional fees 128,251 26,776

Exploration cost 279,599 Nil

Assignment of interest in oil and gas blocks 627,390 Nil

Other expenses 1,072 Nil

Total 1,036,312 26,776



87

18. The Company has neither imported any goods nor consumed any stores and spares during the current period/previous year. Further, none of the

joint ventures where the Company has participating interest has commenced commercial production. Accordingly, no additional disclosures, other

than those furnished, are required in terms of paragraphs 3, 4C and 4D of Part-II of Schedule-VI to the Companies Act, 1956.

19. CAPITAL COMMITMENTS (NET OF ADVANCES)


Company's share of Joint Ventures' Exploration and Development activities 3,517,376 Nil

20. DETAILS OF DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES AS PER MSMED ACT, 2006

31st March 2009 31st December 2007

The principal amount (interest-nil) remaining unpaid to any supplier as at the end of each accounting year 6 Nil

The amount of interest paid by the buyer in terms of section 16, of the Micro Small and Medium Nil Nil

Enterprise Development Act, 2006 along with the amounts of the payment made to the supplier

beyond the appointed day during each accounting year

The amount of interest due and payable for the period of delay in making payment (which have Nil Nil

been paid but beyond the appointed day during the year) but without adding the interest specified

under Micro Small and Medium Enterprise Development Act, 2006.

The amount of interest accrued and remaining unpaid at the end of each accounting year; and Nil Nil

The amount of further interest remaining due and payable even in the succeeding years, Nil Nil

until such date when the interest dues as above are actually paid to the small enterprise for the

purpose of disallowance as a deductible expenditure under section 23 of the Micro Small and

Medium Enterprise Development Act, 2006

21. CURRENT INVESTMENTS - UNQUOTED AND NON TRADE:

The details of investments in mutual fund units are as tabulated under:

31st March 2009

1 63,626,783.898 units, face value of Rs.10 each, of Birla Cash Plus - Institutional Premium- 637,509

Daily Dividend Reinvestment plan

2 21,126,234.606 units, face value of Rs.10 each, of HDFC Liquid Fund - Premium Plan- 259,003

Daily Dividend Reinvestment plan

3 26,081,125.863 units, face value of Rs.10 each, of ICICI Prudential Institutional Liquid Plan - 260,824

Super Iinst- Daily Dividend Reinvestment plan

4 15,494,677.273 units, face value of Rs.10 each, of Reliance Liquid Fund - Treasury Plan- 236,870

Institutional Option- Daily Dividend Reinvestment plan

5 191,352.168 units, face value of Rs.1000 each, of Tata Liquid Fund - SHIP- Daily Dividend 213,266

Reinvestment plan

Total 1,607,472

31st December 2007

1 20,594,145.28 units, face value Rs 10 each, of ABN AMRO Mutual Fund of ABN AMRO 238,367

Money Plus Fund-Institutional Plan-Growth Option

2 51,971,029.11 units, face value Rs 10 each, of Birla Sun Life Mutual Fund under Birla Sun Life 763,907

Liquid Plus-Institutional Plan - Growth Option

3 225,723.55 units, face value Rs 1,000 each, of DSP Merrill Lynch Mutual Fund under DSP 250,000

Merrill Lynch Liquid Plus Fund - Institutional Plan - Growth Option

4 28,699,826.62 units, face value Rs 10 each, of HDFC Mutual Fund under HDFC Floating 380,692

Rate Income Fund-Short Term Plan - Wholesale Option - Growth

5 17,009,296.46 units, face value Rs 10 each, of HDFC Mutual Fund under HDFC Cash 290,000

Management Savings Plus - Wholesale Plan Growth Option

6 23,353,354.94 units, face value Rs 10 each, of HDFC Mutual Fund under HDFC 250,000

Quarterly Interval Fund-Plan A Wholesale Growth




7 43,733,776.21 units, face value Rs 10 each, of ICICI Prudential Mutual Fund under 502,628

ICICI Prudential Floating Plan D - Growth

8 19,998,847.30 units, face value Rs 10 each, of ICICI Prudential Mutual Fund under 290,047

ICICI Prudential Flexible Income Plan - Growth

9 47,430,680.06 units, face value Rs 10 each, of ING Mutual Fund under ING Liquid 500,000

Plus Fund - Institutional Growth Option

10 242,823.20 units, face value Rs 10 each, of Reliance Mutual Fund under Reliance 255,450

Liquid Plus Fund - Institutional Option - Growth Plan

11 23,960,359.98 units, face value Rs 10 each, of Reliance Mutual Fund under Reliance

Quarterly Interval Fund-Series III -Institutional Growth Plan 250,000

12 20,000,000.00 units, face value Rs 10 each, of SBI Mutual Fund under SBI Debt Fund 200,000

Series - 90 Days - November 2007 - Growth

13 55,482,327.99 units, face value Rs 10 each, of Tata Mutual Fund under 639,784

Tata Floater Fund - Growth

14 20,898,812.55 units, face value Rs 10 each, of Franklin Templeton Mutual Fund under 242,700

Templeton Floating Rate Income Fund Short Term Plan Institutional Option - Growth

TOTAL 5,053,575

The following mutual fund units were purchased and sold during the current period :-

1 288,767,315.348 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium - Daily Dividend Reinvestment

2 396,375,092.433 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium - Growth

3 22,951,572.183 units of Birla Sunlife mutual fund under Birla Sunlife Interval Income - Institutional - Quarterly - Series 2 - Growth

4 76,578,714.912 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional - Daily Dividend Reinvestment

5 185,222,322.210 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional - Growth

6 15,000,000.000 units of Canara Robeco mutual fund under Canara Robeco FMP - Series 3 - 90 Days - IP - Growth

7 48,919,527.434 units of Canara Robeco mutual fund under Canara Robeco Liquid Plus Super Institutional - Daily Dividend Reinvestment

8 31,366,504.158 units of Fidelity mutual fund under Fidelity Cash - SIP - Growth

9 62,263,785.752 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Daily Dividend Reinvestment

10 57,042,071.083 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Growth

11 128,735,016.559 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plan - Daily Dividend Reinvestment

12 193,231,349.459 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale - Daily Dividend Reinvestment

13 174,864,026.065 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale - Growth

14 166,891,417.599 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale - Daily Dividend Reinvestment

15 193,913,572.172 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale - Growth

16 24,000,000.000 units of HDFC mutual fund under HDFC FMP 90D (VIII)(3) - Wholesale - Growth

17 62,847,681.039 units of HDFC mutual fund under HDFC Liquid - Premium Plan - Daily Dividend Reinvestment

18 303,956,967.062 units of HDFC mutual fund under HDFC Liquid - Premium Plan - Growth

19 41,003,275.892 units of HDFC mutual fund under HDFC Liquid - Premium Plus Plan - Weekly Dividend Reinvestment

20 23,586,685.788 units of HDFC mutual fund under HDFC Quarterly Interval -Plan B Wholesale Growth - Growth

21 106,509,667.336 units of HSBC mutual fund under HSBC Cash - Inst Plus - Daily Dividend Reinvestment

22 155,825,133.036 units of HSBC mutual fund under HSBC Cash - Inst Plus - Growth

23 146,239,354.262 units of HSBC mutual fund under HSBC Liquid Plus - IP - Daily Dividend Reinvestment


31st December 2007


89

24 229,632,812.180 units of HSBC mutual fund under HSBC Liquid Plus - IP - Growth

25 150,719,932.352 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan - Daily Dividend Reinvestment

26 208,534,658.087 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan - Growth

27 32,963,478.576 units of ICICI Prudential mutual fund under ICICI Prudential FRF - Plan D - Growth

28 475,076,846.158 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst - Daily Dividend Reinvestment

29 446,678,299.784 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst - Growth

30 24,485,318.603 units of ICICI prudential mutual fund under ICICI Prudential Interval II Quarterly Interval Plan B - Retail Cumulative - Growth

31 49,165,295.525 units of IDFC mutual fund under IDFC Cash - Super Institutional Plan C - Daily Dividend Reinvestment

32 81,765,529.637 units of IDFC mutual fund under IDFC Floating Rate -LT-Inst Plan B - Growth

33 24,000,000.000 units of IDFC mutual fund under IDFC FMP Qtr Series 31 - Growth

34 64,428,611.450 units of IDFC mutual fund under IDFC Liquid Plus - Investment Plan - Inst Plan B - Daily Dividend Reinvestment

35 15,341,933.611 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst - Daily Dividend Reinvestment

36 15,984,796.682 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst - Growth

37 18,000,000.000 units of ING mutual fund under ING Interval - Quarterly-C-Institutional - Growth

38 115,482,013.676 units of ING mutual fund under ING Liquid Super Institutional - Growth

39 128,337,221.108 units of ING mutual fund under ING Liquid Plus - Institutional - Growth

40 23,518,230.356 units of ING mutual fund under ING Vysya Liquid Plus - IP - Growth

41 66,088,564.716 units of JP Morgan mutual fund under JP Morgan India Liquid Plus - Growth

42 20,913,376.793 units of Kotak Mahindra mutual fund under Kotak Liquid - Institutional Premium - Growth

43 3,165,848.830 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Plan - Growth

44 50,350,377.553 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Premium Plan - Daily Dividend Reinvestment

45 150,114,424.840 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional - Daily Dividend Reinvestment

46 197,490,161.056 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional - Growth

47 20,583,956.929 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option - Daily Dividend Reinvestment

48 82,564,434.800 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option - Growth

49 2,052,210.472 units of Reliance mutual fund under Reliance Liquid Plus - Institutional - Daily Dividend Reinvestment

50 2,380,813.521 units of Reliance mutual fund under Reliance Liquid Plus - Institutional - Growth

51 23,091,764.916 units of Reliance mutual fund under Reliance Liquidity - Daily Dividend Reinvestment

52 36,180,904.523 units of Reliance mutual fund under Reliance Liquidity - Growth

53 158,916,208.254 units of Reliance mutual fund under Reliance Medium Term - Daily Dividend Reinvestment

54 21,680,412.651 units of Reliance mutual fund under Reliance Monthly Interval - Series I Institutional - Growth

55 23,407,582.184 units of Reliance mutual fund under Reliance Quarterly Interval - Series II Institutional - Growth

56 29,168,603.376 units of SBI mutual fund under SBI Magnum Insta Cash - Daily Dividend Reinvestment

57 20,444,600.000 units of SBI mutual fund under SBI SDFS - 90 Days - Growth

58 98,778,981.505 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Daily Dividend Reinvestment

59 233,026,708.605 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Growth

60 859,254.684 units of Standard Chartered mutual fund under Standard Chartered Liquidity Manager Plus - Growth

61 259,059,637.734 units of Tata mutual fund under Tata Floater - Daily Dividend Reinvestment

62 206,755,712.884 units of Tata mutual fund under Tata Floater - Growth

63 38,774,117.501 units of Tata mutual fund under Tata Floating Rate - STP - Institutional Plan - Growth

64 2,457,011.120 units of Tata mutual fund under Tata Liquid - SHIP - Daily Dividend Reinvestment

65 329,826.757 units of Tata mutual fund under Tata Liquid - SHIP - Growth




The following mutual fund units were purchased and sold during the previous year:-

1 18,535,141.015 units of ABN AMRO Mutual Fund under ABN AMRO Cash Fund - Institutional Plus Plan - Daily Dividend Reinvestment

Option

2 50,701,760.398 units of ABN AMRO Mutual Fund under ABN AMRO Money Plus Fund-Institutional Plan- Daily Dividend Option

3 22,604,265.015 units of ABN AMRO Mutual Fund under ABN AMRO Money Plus Fund-Institutional Plan-Growth Option

4 51,286,477.010 units of Birla Sun Life Mutual Fund under Birla Cash Plus-Institutional Premium Plan - Daily Dividend

5 51,393,934.559 units of Birla Sun Life Mutual Fund under Birla Floating Rate Fund-Long Term Plan-Weekly Dividend

6 1,175,375.415 units of Birla Sun Life Mutual Fund under Birla Cash Plus-Institutional (Growth)

7 62,395,963.596 units of Birla Sun Life Mutual Fund under Birla Sunlife Liquid Plus Fund - Institutional - Daily Dividend

8 1,055,356.222 units of Birla Sun Life Mutual Fund under Birla Sunlife Liquid Plus Fund - Institutional - Growth

9 799,966.925 units of DSP Merrill Lynch Mutual Fund under DSP Merrill Lynch Liquid Fund - Institutional Plan - Daily Dividend

Reinvestment Option

10 810,376.138 units of DSP Merrill Lynch Mutual Fund under DSP Merrill Lynch Liquid Plus Fund - Institutional Plan - Daily Dividend

Reinvestment Option

11 30,429,402.715 units of Standard Chartered Mutual Fund under Grindlays Floating Rate Fund - Long Term - Institutional Plan B - Daily

Dividend Reinvestment Option

12 25,141,266.651 units of Standard Chartered Mutual Fund under Grindlays Floating Rate Fund - Long Term - Institutional Plan B - Growth

13 74,125,061.345 units of HDFC Mutual Fund under HDFC Cash Management Fund - Savings Plan - Daily Dividend Reinvestment Option

14 79,686,483.778 units of HDFC Mutual Fund under HDFC Cash Management Fund - Savings Plus Plan - Wholesale - Daily Dividend

Reinvestment Option

15 32,404,919.325 units of HDFC Mutual Fund under HDFC Floating Rate Income Fund - Short Term Plan - Retail Option Dividend

Reinvestment - Daily

16 24,820,364.948 units of HDFC Mutual Fund under HDFC Floating Rate Income Fund - Short Term Plan - Retail Option - Growth

17 18,698,998.482 units of HDFC Mutual Fund under HDFC Floating Rate Income Fund - Short Term Plan - Wholesale - Growth

18 59,976,612.345 units of HSBC Mutual Fund under HSBC Cash Fund - Institutional Plus - Daily Dividend Reinvestment Option

19 62,786,020.733 units of HSBC Mutual Fund under HSBC Liquid Plus Fund - Institutional Plus - Daily Dividend Reinvestment Option

20 57,943,951.333 units of HSBC Mutual Fund under HSBC Liquid Plus Fund - Institutional Plus - Growth

21 686,242.889 units of ICICI Prudential Mutual Fund under ICICI Prudential Flexible Income Plan - Growth

22 100,777,456.602 units of ICICI Prudential Mutual Fund under ICICI Prudential Floating Rate Plan D - Daily Dividend - Reinvest Dividend

23 131,634,015.968 units of ICICI Prudential Mutual Fund under ICICI Prudential Liquid Plan - Super Institutional Dividend Daily

24 61,166,842.849 units of ING Mutual Fund under ING Liquid Plus Fund - Institutional Daily Dividend Option

25 58,606,580.178 units of ING Mutual Fund under ING Liquid Plus Fund - Institutional Growth Option

26 32,523,815.818 units of Kotak Mahindra Mutual Fund under Kotak Flexi Debt Fund - Daily Dividend

27 40,671,100.686 units of PRINCIPAL Mutual Fund under Principal Cash Management-Liquid Option-Institutional Premium - Daily Dividend

28 40,602,212.009 units of PRINCIPAL Mutual Fund under Principal Floating Rate Fund - SMP - Institutional - Growth

29 502,053.962 units of Reliance Mutual Fund under Reliance Liquid Plus Fund - Institutional Option - Daily Dividend Plan

30 234,933.967 units of Reliance Mutual Fund under Reliance Liquid Plus Fund - Institutional Option - Growth Plan

31 406,648.782 units of Standard Chartered Mutual Fund under Standard Chartered Liquidity Manager Plus-A-Dividend Daily

32 60,938,518.404 units of Sundaram BNP Paribas Mutual Fund under Sundaram BNP Paribas Liquid Plus Super Institutional Daily Dividend

33 58,603,615.153 units of Sundaram BNP Paribas Mutual Fund under Sundaram BNP Paribas Liquid Plus Super Institutional Growth

34 64,847,479.846 units of Tata Mutual Fund under Tata Floater Fund Growth

35 594,550.430 units of Tata Mutual Fund under Tata Liquid Super High Investment Plan - Daily

36 808,048.384 units of Franklin Templeton Mutual Fund under Templeton India Treasury Management Account-Super Institutional

Plan - Daily Dividend



91






Membership No. 82028 Neerja Sharma Company Secretary

Place : Gurgaon


22. Details of outstanding advances given to subsidiary companies in which directors are interested are same as disclosed in note 4 (c) above. The

balance outstanding as at the period/year end is also the maximum amount outstanding during the period/year.

23. Change in financial year and prior year comparatives

The shareholders of the Company have approved the change of financial year end from 31st December to 31st March. Therefore, the current

financial year consists of fifteen month period from 1st January 2008 to 31st March 2009. Subsequent financial years would be for twelve months

period ending 31st March every year. Accordingly, previous year figures in the profit and loss account and cash flow statement are not

comparable with current extended financial year.

Previous year's figures have been regrouped where necessary to confirm to this year's classification.




i) Registration Details

Registration No. L11101MH2006PLC163934

State Code 11

Balance Sheet Date 31/03/2009

ii) Capital raised during the year* (Amount in INR Thousands)

Public Issue –

Rights Issue –

Bonus Issue –

Private Placement (Includes stock options exercised) 1,182,684

*Does not include securities premium

iii) Position of Mobilisation and Deployment of Funds (Amount in INR Thousands)

Total Liabilities 321,300,037

Total Assets 321,300,037

Source of Funds

Paid up Capital 18,966,678

Reserves & Surplus (Includes stock options outstanding) 301,479,252

Secured Loans Nil

Unsecured Loans Nil

Application of Funds

Net Fixed Assets (Includes exploratory work-in-progress) 540,908

Investments 292,253,966

Net Current Assets 27,113,056

Miscellaneous Expenditure Nil

Accumulated losses 538,000

iv) Performance of the Company (Amount in INR Thousands)

Turnover (Total Income) 2,980,403

Total Expenditure 1,859,687

Profit/(Loss) before tax 1,120,716

Profit/(Loss) after tax 542,407

Profit per Share in Rs. (Basic & Diluted) 0.29

Dividend rate % Nil

v) Generic Names of Principal Products/Services of Company (as per monetary terms)

Item Code No. (ITC Code) 27090000

Product Description Crude Oil

Item Code No. (ITC Code) 27112100

Product Description Natural Gas

Balance Sheet Abstract and Company’s General Business Profile


Rahul Dhir Managing Director and Chief Executive Officer

Aman Mehta Director

Indrajit Banerjee Executive Director and Chief Financial Officer

Neerja Sharma Company Secretary

Place : Gurgaon


93

Auditors' Report on Consolidated Financial Statements

TO

THE BOARD OF DIRECTORS OF CAIRN INDIA LIMITED

1. We have audited the attached consolidated balance sheet of Cairn India Limited (the Company) and its subsidiaries (collectively called 'the Cairn

India Group') as at March 31, 2009 and also the consolidated profit and loss account and the consolidated cash flow statement for the fifteen

months period ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our

responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a

test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles

used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit

provides a reasonable basis for our opinion.

3. We report that the consolidated financial statements have been prepared by the Company's management in accordance with the requirements of

Accounting Standard (AS) 21, Consolidated Financial Statements notified under the Companies (Accounting Standard) Rules, 2006.

4. In our opinion and to the best of our information and according to the explanations given to us, the consolidated financial statements give a true

and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the consolidated balance sheet, of the state of affairs of the Cairn India Group as at March 31, 2009;

(b) in the case of the consolidated profit and loss account, of the profit of the Cairn India Group for the fifteen months period ended on that date;

and

(c) in the case of the consolidated cash flow statement, of the cash flows of the Cairn India Group for the fifteen months period ended on that

date.



per Raj Agrawal

Partner


Place : Gurgaon



SOURCES OF FUNDS

Shareholders’ funds

Share capital 1 18,966,678 17,783,994

Stock options outstanding 2 388,978 947,084

Reserves and surplus 3 308,667,596 276,084,115

328,023,252 294,815,193

Loan funds

Secured loans (Finance lease liabilities) 222,402 169,361

Unsecured loans 4 43,341,500 2,955,000

43,563,902 3,124,361

Deferred tax liabilities (net) 5 5,623,782 4,916,494

377,210,936 302,856,048

APPLICATION OF FUNDS

Fixed assets 6

Gross cost 1,434,686 1,092,632

Less: Accumulated depreciation / amortisation 801,843 606,126

Net book value 632,843 486,506

Exploration, Development and Site-restoration costs 7

Cost of producing facilities (net) 3,013,742 4,389,517

Exploratory and development work in progress 62,027,323 24,670,264

Net book value 65,041,065 29,059,781

Goodwill 253,192,675 253,192,675

Investments 8 1,712,806 7,128,909

Deferred tax assets (net) 5 83,935 –

Current assets, loans and advances

Inventories 9 1,682,808 1,216,048

Sundry debtors 10 1,516,418 1,348,578

Cash and bank balances 11 65,270,674 13,317,907

Other current assets 12 704,244 134,533

Loans and advances 13 3,505,102 4,867,071

72,679,246 20,884,137

Less: Current liabilities and provisions

Current liabilities 14 11,794,353 4,691,797

Provisions 15 4,337,281 3,661,347

16,131,634 8,353,144

Net current assets 56,547,612 12,530,993

Profit & Loss account – 457,184

377,210,936 302,856,048


Consolidated Balance SheetAS AT MARCH 31, 2009

Schedules As at As at


The schedules referred to above are an integral part of the consolidated balance sheet.As per our report of even date

For S. R. Batliboi & Associates For and on behalf of the Board of DirectorsChartered Accountants Rahul Dhir Managing Director and Chief Executive Officerper Raj Agrawal Aman Mehta DirectorPartner Indrajit Banerjee Executive Director and Chief Financial OfficerMembership No. 82028 Neerja Sharma Company Secretary



95

Consolidated Profit and Loss AccountFOR THE PERIOD ENDED MARCH 31, 2009

INCOME

Income from operations 16 14,326,716 10,122,627

Other income 17 5,944,652 1,324,089

20,271,368 11,446,716

EXPENDITURE

Operating expenses 18 2,129,743 1,945,812

Depletion and site restoration costs 7 2,635,431 1,906,379

Unsuccessful exploration costs 7 1,683,851 2,512,282

Administrative expenses 19 3,311,407 3,884,855

(Increase)/decrease in inventories 20 222,342 (111,715)

Prior period exchange difference 283,045 –

Depreciation and amortisation 6 62,593 33,701

Finance costs 21 64,090 16,174

10,392,502 10,187,488

Profit before taxation 9,878,866 1,259,228

Current tax (net of INR 225,490 thousand, previous 1,110,792 387,756

year Nil of MAT credit availed during the period)

Deferred tax 623,354 764,194

Fringe Benefit Tax 110,214 352,719

1,844,360 1,504,669

Profit/(Loss) for the period / year 8,034,506 (245,441)

Surplus / (Deficit) brought forward from the previous year (457,184) (211,743)

Surplus / (Deficit) carried to Balance sheet 7,577,322 (457,184)

Earnings / (Loss) per share in INR 22

Basic 4.31 (0.14)


(Nominal value of shares INR 10)


Schedules Fifteen months ended Twelve months ended


The schedules referred to above are an integral part of the consolidated profit and loss account.






Membership No. 82028 Neerja Sharma Company Secretary

Place : Gurgaon




Cash flow from operating activities

Profit / (Loss) before taxation for the period / year 9,878,866 1,259,228

Adjustments for

– Employee compensation expense (equity settled stock options) - net of exceptional gains 107,292 780,365

– Depreciation, depletion and site restoration costs 2,949,665 2,077,055

– Loss on sale / discard of fixed assets (net) 1,835 10,055

– Unsuccessful exploration costs 1,683,851 2,512,281

– Share issue expenses 208,410 –

– Unrealised exchange loss / (gain) on restatement of assets and liabilities (net) (1,710,406) 1,844,459

– Interest expense 819,258 8,256

– Profit on sale of non trade current investments (net) (1,245,686) (595,663)

– Interest income (1,920,273) (727,431)

– Dividend from investments (221,876) –

– Unrealised loss on option contracts 112,973 63,010

– Provisions written-back (60,351) –

Operating profit before working capital changes 10,603,558 7,231,615

Movements in working capital:

(Increase)/decrease in inventories (466,761) 35,062

(Increase)/decrease in debtors (108,344) 406,420

(Increase)/decrease in loans and advances and other current assets 186,699 (1,998,426)

Increase/(decrease) in current liabilities and provisions 1,601,491 649,255

Cash generated from operations 11,816,643 6,323,926

Current tax/FBT paid (net of refunds) (1,457,679) (819,797)

Net cash from operating activities (A) 10,358,964 5,504,129

Cash flow from investing activities

Payments made for acquisition of subsidiaries – (32,763,069)

Payments made for exploration and development activities (31,150,183) (11,566,913)

Payments made for purchase of fixed assets (462,608) (176,058)

Mutual funds purchased (43,293,242) (15,295,380)

Fixed deposits made (43,410,755) (14,076,538)

Proceeds from matured fixed deposits 11,686,817 –

Proceeds from sale of mutual funds 49,955,033 8,271,805

Proceeds from sale of fixed assets 202 4,270

Interest received 1,293,614 710,969

Dividend from investments received 224,849 587,403

Net cash used in investing activities (B) (55,156,273) (64,303,511)

Cash flow from financing activities

Proceeds from issue of equity shares 25,523,445 2,093,607

Payments made for share issue expenses (208,410) (1,422,257)

Finance lease taken 175,645 (204,708)

Repayment of finance lease (124,838) –

Proceeds from long term borrowings 37,620,170 31,217

Repayment of long term borrowings – (1,517,999)

Interest paid (724,779) (24,503)

Net cash from/(used in) financing activities (C) 62,261,233 (1,044,643)

Net increase/(decrease) in cash and cash equivalents (A+B+C) 17,463,924 (59,844,025)

Cash and cash equivalents at the beginning of the period / year 1,503,807 61,347,832

Cash and cash equivalents at the end of the period / year 18,967,731 1,503,807

Unrealised exchange differences on closing cash and cash equivalents 2,764,904 –

Cash and cash equivalents as per financial statements 21,732,635 1,503,807

Components of cash and cash equivalents as at March 31, 2009 December 31, 2007

Cash in hand 626 108

Balances with banks


– on deposit accounts 65,042,024 12,708,703

Less: Deposits having maturity of over 90 days (43,538,039) (11,814,100)

21,732,635 1,503,807

Notes:1) The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in Accounting Standard-3 on “Cash flow statements”.2) Amounts in bracket indicate a cash outflow or reduction.3) Bank balance in deposit accounts includes INR 3,312,342 thousand, previous year INR 1,717,840 thousand, pledged with the banks.

Consolidated Statement of Cash FlowsFOR THE PERIOD ENDED MARCH 31, 2009

Fifteen months ended Twelve months ended



For S. R. Batliboi & Associates For and on behalf of the Board of DirectorsChartered Accountants Rahul Dhir Managing Director and Chief Executive Officerper Raj Agrawal Aman Mehta DirectorPartner Indrajit Banerjee Executive Director and Chief Financial OfficerMembership No. 82028 Neerja Sharma Company Secretary



97

Schedules to the Consolidated Financial Statements

AS at As at


SCHEDULE - 1

Share capital

Authorised:


Issued, subscribed and paid up:


18,966,678 17,783,994

Note:

1) Issued, subscribed and fully paid up share capital includes 1,226,843,791 equity shares (previous year - 1,226,843,791 equity shares) of INR 10

each held by Cairn UK Holdings Limited, the holding company together with its nominees.

2) Shares held by the holding company includes 861,764,893 equity shares (previous year - 861,764,893 equity shares) of INR 10 each, allotted as

fully paid up pursuant to contracts for consideration other than cash.

3) For stock options outstanding refer note no. 7 in schedule 23.

SCHEDULE - 2

Stock Options Outstanding

Employee stock options outstanding 782,548 2,496,095

Less: Deferred employee compensation outstanding (393,570) (1,549,011)

Closing Balance 388,978 947,084

SCHEDULE - 3

Reserves and Surplus

Securities premium account

Opening Balance 276,084,115 275,017,837

Add:- Additions during the period / year 25,006,159 1,962,756

Less:- Adjustment against preliminary expenses / share issue expenses – (896,478)

Closing Balance 301,090,274 276,084,115

Profit and Loss Account 7,577,322 –

308,667,596 276,084,115

SCHEDULE - 4

Unsecured Loans

Long term loans

– from International Finance Corporation 7,648,500 521,471

– from banks 35,693,000 2,433,529

43,341,500 2,955,000



Schedules to the Consolidated Financial Statements Continued

SCHEDULE - 6

Fixed Assets

Description Gross Block Accumulated Depreciation / Amortisation Net Block

As on Additions Deletions/ As on As on For the Deletions/ As on As on As on01.01.2008 Adjustments 31.03.2009 01.01.2008 period Adjustments 31.03.2009 31.03.2009 31.12.2007

A) Tangible Assets

Freehold land 43,583 – – 43,583 – – – – 43,583 43,583

Buildings 5,247 – – 5,247 1,109 1,224 – 2,333 2,914 4,138

Office equipments 364,752 182,623 (35,353) 512,022 233,766 145,535 (34,862) 344,439 167,583 130,986

Furniture and fittings 200,962 116,416 (17,508) 299,870 76,094 66,627 (15,961) 126,760 173,110 124,868

Vehicles 945 10,038 – 10,983 915 1,745 – 2,660 8,323 30

B) Intangible Assets

Computer software 477,143 153,531 (67,693) 562,981 294,242 99,102 (67,693) 325,651 237,330 182,901

Grand Total 1,092,632 462,608 (120,554) 1,434,686 606,126 314,233 (118,516) 801,843 632,843 486,506

Previous period 1,326,837 176,058 (410,263) 1,092,632 831,387 170,677 (395,938) 606,126 486,506 495,450

Notes:1. Furniture and fittings includes Leasehold improvements of INR 278,895 thousand (previous year INR 165,013 thousand), accumulated depreciation thereon INR 110,482

thousand (previous year INR 49,882 thousand).2. Leasehold improvements and Office equipments of INR 278,271 thousand (previous year INR 164,389 thousand) and INR 210,192 thousand (previous year INR 135,539

thousand) respectively have been acquired under finance lease. The depreciation charge for the period on these assets is INR 60,569 thousand (previous year INR 25,096thousand) and INR 61,040 thousand (previous year INR 24,181 thousand) respectively and the accumulated depreciation thereon is INR 110,355 thousand (previous year INR49,786 thousand) and INR 139,781 thousand (previous year INR 78,741 thousand) respectively.

3. Depreciation charge for the period includes INR 251,640 thousand (previous year INR 136,976 thousand) allocated to joint ventures.4. Fixed assets include INR 176,798 thousand (previous year INR 120,805 thousand) jointly owned with the joint venture partners. Accumulated depreciation on these assets is

INR 82,643 thousand (previous year INR 60,932 thousand) and net book value is INR 94,155 thousand (previous year INR 59,873 thousand).


SCHEDULE - 5

Deferred tax asset / liabilities (net)

Effect of differences in block of fixed assets as per tax books and financial books 6,178,716 5,208,962

Gross deferred tax liabilities 6,178,716 5,208,962

Effect of lease accounting 8,972 8,972

Expenditure debited to profit and loss but allowed for tax purposes in following years 629,897 283,496

Gross deferred tax assets 638,869 292,468

Net Deferred tax liabilities * 5,539,847 4,916,494

* After setting off net deferred tax assets aggregating to INR 83,935 thousand, previous year Nil in respect of certain group companies

As at As at


99


As at As at


SCHEDULE - 7

Exploration, Development and Site restoration costs

Opening balance of producing properties 4,389,517 2,976,132

Additions / Deletions / Transfer for the period / year 1,259,656 3,319,764

5,649,173 6,295,896

Less: Depletion and site restoration costs 2,635,431 1,906,379

Net producing properties 3,013,742 4,389,517

Opening balance of exploratory & development work in progress 24,670,264 17,122,353

Additions / Deletions / Transfer for the period / year 39,040,910 10,060,193

Less: Unsuccessful exploration costs for the period / year 1,683,851 2,512,282

Exploration and Development work in progress 62,027,323 24,670,264

Net book value 65,041,065 29,059,781

Note: Additions for the period includes borrowing costs (net of income on temporary investments INR 241,350 thousand, previous year Nil)

aggregating to INR 1,620,043 thousand (previous year INR 573,983 thousand)

SCHEDULE - 8

Investments

Long term investments (at cost)

Quoted and non-trade

755,275 (previous year 755,275) equity shares of INR 10 each 105,334 105,334

fully paid up in Videocon Industries Limited

Current Investments (at lower of cost and market value)

Unquoted and non trade

Mutual Funds 1,607,472 7,023,575

1,712,806 7,128,909

SCHEDULE - 9

Inventories

Stores and spares 1,595,774 906,672

Finished goods 87,034 309,376

1,682,808 1,216,048

SCHEDULE - 10

Sundry Debtors

Debts - Unsecured and outstanding for a period exceeding six months :

– Considered Good 94,261 8,587

– Considered doubtful – 62,025

Other unsecured debts :

– Considered Good 1,422,157 1,339,991

1,516,418 1,410,603

Less: Provision for doubtful debts – (62,025)

1,516,418 1,348,578



As at As at



SCHEDULE - 11

Cash and bank balances

Cash in hand 626 108

Balances with banks:


– on deposit accounts (including deposits more than 3 months)* 65,042,024 12,708,703

65,270,674 13,317,907

* includes INR 3,312,342 thousand, previous year INR 1,717,840 thousand, pledged with the banks

SCHEDULE - 12

Other Current Assets

Interest accrued on bank deposits 660,639 28,614

Dividend receivable – 8,260

Outstanding option contracts 43,605 97,659

704,244 134,533

SCHEDULE - 13

Loans and advances

Unsecured and considered good, unless otherwise stated:

Advances recoverable in cash or kind or for value to be received* 5,789,515 5,921,540

Deposits 169,469 25,169

Advance tax and tax deducted at source (net of tax provisions 599,367 565,441

INR 1,921,505 thousand, (previous year INR 3,011,025 thousand)

Fringe benefit tax paid (net of provisions INR 266, 883 thousand, 13,290 1,920

previous year INR 6,000 thousand)

6,571,641 6,514,070

Less: Provision for doubtful advances (3,066,539) (1,646,999)

3,505,102 4,867,071

*Includes doubtful balances INR 3,066,539 thousand (previous year INR 1,646,999 thousand)

SCHEDULE - 14

Current liabilities

Amount payable to Cairn Energy Plc., the ultimate holding company 1,296,164 1,033,919

Sundry creditors 8,647,926 3,587,844

Lease equalisation liability 9,279 –

Interest accrued but not due 94,471 21,383

Other liabilities 1,746,513 48,651

11,794,353 4,691,797


101

As at As at



SCHEDULE - 15

Provisions

Provision for taxation (net of advance tax - INR 356,794 thousand, previous year Nil) 250,643 222,901

Provision for fringe benefit tax (net of advance tax payments, INR 127,956 thousand, 105,235 320,231

previous year - INR 258 thousand)

Site restoration provision * 3,886,882 2,714,913

Provision for Government share of profit petroleum ** 11,444 362,382

Provision for leave encashment 16,305 3,941

Provision for gratuity 39,571 36,979

Provision for employee stock options (cash settled) *** 27,201 –

4,337,281 3,661,347

* Site restoration provision

Opening balance 2,714,913 2,232,264

Additions for the period / year 1,388,000 482,649

Reversed during the period / year (216,031) –

Closing balance 3,886,882 2,714,913

** Provision for Government share of profit petroleum

Opening balance 362,382 306,211

Additions for the period / year 26,453 56,171

Payments during the period / year (377,391) –

Closing balance 11,444 362,382

*** Provision for employee stock options (cash settled)

Opening balance – –

Additions for the period / year 27,201 –

Payments during the period / year – –

Closing balance 27,201 –




SCHEDULE - 16

Income from operations

Revenue from sale of oil, gas and condensate 24,476,702 16,287,379

Less: Government share of Profit Petroleum (10,829,219) (6,438,550)

13,647,483 9,848,829

Tolling income 50,391 31,995

Income received as operator from joint venture 628,842 241,803

14,326,716 10,122,627


SCHEDULE - 17

Other income

Interest on bank deposits 1,858,924 727,431

Profit on sale of non trade current investments (net) 1,245,686 27,632

Dividend income from non trade current investments 216,589 568,031

Dividend income from non trade long term investments 5,287 –

Exchange fluctuation (net) 2,319,158 –

Miscellaneous income 143,285 995

Exceptional gain (refer note no. 8 in schedule 23) 155,723 –

5,944,652 1,324,089

SCHEDULE - 18

Operating expenses

Production expenses 952,510 943,863

Data acquisition and analysis 66,266 32,884

Insurance 56,677 39,630

Royalty 393,787 342,907

Cess 546,365 487,569

Production bonus 114,138 98,959

2,129,743 1,945,812

SCHEDULE - 19

Administrative expenses

Salaries, wages and bonus 3,408,323 2,325,513

Employee compensation expense (stock options) 454,546 780,365

Contribution to Provident fund 97,356 35,490

Contribution to Superannuation fund 53,226 30,865

Leave encashment expenses 29,916 1,041

Gratuity expenses 40,888 33,137

Staff welfare expenses 280,312 32,519

Contract employee charges 1,295,828 1,534,541

Legal and professional expenses 1,488,580 464,776

Share issue expenses (refer note no. 15 in schedule 23) 208,410 –

Repair and maintenance 260,933 206,779

Rent 455,648 212,806

Travelling and conveyance expenses 511,320 192,505

Communication expenses 150,906 56,944

Exchange Fluctuation (net) – 2,057,001

Insurance 3,127 6,464

Directors' sitting fees 1,320 700

Loss on sale / discard of fixed assets (net) 1,835 10,055

Loss on derivative contracts 434,328 63,010

Miscellaneous expenses 357,706 246,298

9,534,508 8,290,809

Less: Cost allocated to joint ventures (6,223,101) (4,405,954)

3,311,407 3,884,855





103

SCHEDULE - 20

(Increase) / Decrease in inventories

Inventories at the beginning of the period / year


Inventories at the end of the period / year


222,342 (111,715)

SCHEDULE - 21

Finance costs

Interest on bank overdraft – 199

Other interest 38,581 –

Finance lease charges 40,855 7,524

Bank charges 20,734 19,326

100,170 27,049

Less: Cost allocated to joint ventures (36,080) (10,875)

64,090 16,174

SCHEDULE - 22

Earnings / (Loss) Per Share

Profit / (Loss) for the period / year as per profit and loss account 8,034,506 (245,441)

Weighted average number of equity shares in calculating basic 1,866,146,993 1,777,001,292

earnings / (loss) per share

Add: Number of equity shares arising on grant of stock options 10,052,076 11,017,255

Weighted average number of equity shares in calculating diluted 1,876,199,069 1,788,018,547

earnings / (loss) per share

Earnings / (Loss) per share in INR

Basic 4.31 (0.14)







1. NATURE OF OPERATIONS

Cairn India Limited ('the Company') was incorporated in India on August 21, 2006 and is a subsidiary of Cairn UK Holdings Limited, which in turn

is a wholly owned subsidiary of Cairn Energy Plc., UK which is listed on London Stock Exchange.

The Company is primarily engaged in the business of surveying, prospecting, drilling, exploring, acquiring, developing, producing,

maintaining, refining, storing, trading, supplying, transporting, marketing, distributing, importing, exporting and generally dealing in minerals,

oils, petroleum, gas and related by-products and other activities incidental to the above. As part of its business activities, the Company also holds

interests in its subsidiary companies which have been granted rights to explore and develop oil exploration blocks in the Indian sub-continent.

The Company along with its subsidiaries are herein referred to as 'Cairn India Group'. The entities under the Cairn India Group are participants in

various Oil and Gas blocks/fields granted by the Government of India/Sri Lanka through Production Sharing Contract ('PSC')/Production

Resources Agreement ('PRA') entered into between these entities and Government of India/Sri Lanka and other venture partners.

2. COMPONENTS OF THE CAIRN INDIA GROUP

The Consolidated Financial Statements represent consolidation of accounts of the Company and its subsidiaries as detailed below:

S. No. Name of the Subsidiaries Country of Incorporation

i Cairn Energy Australia Pty Limited Australia

ii Cairn Energy India Pty Limited Australia

iii CEH Australia Pty Limited Australia

iv Cairn Energy Asia Pty Limited Australia

v Sydney Oil Company Pty Limited Australia

vi Cairn Energy Investments Australia Pty Limited Australia

vii Wessington Investments Pty Limited Australia

viii CEH Australia Limited British Virgin Islands

ix Cairn India Holdings Limited ('CIHL') Jersey

x CIG Mauritius Holding Private Limited ('CMHPL') - with effect from 1st July 2008 Mauritius

xi CIG Mauritius Private Limited - with effect from 1st July 2008 Mauritius

xii Cairn Energy Holdings Limited Scotland

xiii Cairn Energy Discovery Limited Scotland

xiv Cairn Exploration (No. 2) Limited Scotland

xv Cairn Exploration (No. 6) Limited Scotland

xvi Cairn Energy Hydrocarbons Limited Scotland

xvii Cairn Petroleum India Limited Scotland

xviii Cairn Energy Gujarat Block 1 Limited Scotland

xix Cairn Exploration (No. 4) Limited Scotland

xx Cairn Exploration (No. 7) Limited Scotland

xxi Cairn Energy Development Pte Limited - with effect from 16th July 2008 Singapore

xxii Cairn Lanka Private Limited - with effect from 3rd July 2008 Sri Lanka

xxiii Cairn Energy Group Holdings BV Netherlands

xxiv Cairn Energy India West BV Netherlands

xxv Cairn Energy India West Holding BV Netherlands

xxvi Cairn Energy Gujarat Holding BV Netherlands

xxvii Cairn Energy India Holdings BV Netherlands

xxviii Cairn Energy Netherlands Holdings BV Netherlands

xxix Cairn Energy Gujarat BV Netherlands

xxx Cairn Energy Cambay BV Netherlands

xxxi Cairn Energy Cambay Holding BV Netherlands

CIHL and CMHPL are wholly owned subsidiaries of the Company. All other above mentioned companies are direct or indirect wholly owned

subsidiaries of either CIHL or CMHPL.


SCHEDULE 23 - NOTES TO ACCOUNTS


105

Cairn India Group has interest in the following Oil and Gas blocks/fields-

S. No. Oil and Gas blocks/fields Area Participating Interest

Operated block

i Ravva Krishna Godavari 22.50%

ii CB-OS/2 - Exploration area Cambay Offshore 60%

CB-OS/2 - Development area Cambay Offshore 40%

iii RJ-ON-90/1 - Exploration area Rajasthan Onshore 100%

RJ-ON-90/1 - Development area Rajasthan Onshore 70%

iv GV-ONN-2003/1 Ganga Valley Onshore 24%

v VN-ONN-2003/1 Vindhyan Onshore 49%

vi PR-OSN-2004 Palar Basin Offshore 35%

vii SL 2007-01-001 North West Sri Lanka Offshore 100%

viii KG-ONN-2003/1 Krishna Godavari Onshore 49%

ix GV-ONN-2002/1 Ganga Valley Onshore 50%

Non - operated block

x KG-DWN-98/2 Krishna Godavari Deep water 10%

xi RJ-ONN-2003/1 Rajasthan Onshore 30%

xii GS-OSN-2003/1 Gujarat Saurashtra Onshore 49%

xiii KK-DWN-2004 Kerala Konkan Basin Offshore 40%

xiv CB-ONN-2002/1 Cambay Onshore 30%

(proposed to be relinquished)

xv GV-ONN-97/1 Ganga Valley Onshore 15%

(relinquished in 2008)

xvi CB-ONN-2001/1 Cambay Onshore 30%

(relinquished in 2007)

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial statements have been prepared to comply in all material respects with the mandatory Accounting Standards notified under the

Companies (Accounting Standard) Rules, 2006 under the historical cost convention and on an accrual basis. The accounting policies, in all

material respects, have been consistently applied by Cairn India Group and are consistent with those used in the previous period, except to the

extent stated in note no. 8 below.

Principles of consolidation:

The consolidated financial statements relate to the Cairn India Group. In the preparation of these consolidated financial statements, investments in

subsidiaries have been accounted for in accordance with the provisions of AS 21 (Accounting for Consolidated Financial Statements). The

financial statements of the subsidiaries have been drawn up to the same reporting date as of Cairn India Limited. The consolidated financial

statements are prepared on the following basis:

i. The financial statements of the Company and its subsidiary companies are consolidated on a line-by-line basis by adding together the book

values of the like items of assets, liabilities, income and expenses after eliminating all significant intra-group balances and intra-group

transactions and also unrealised profits or losses in accordance with Accounting Standard (AS) 21 "Consolidated Financial Statements".

ii. The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar

circumstances and are presented, to the extent possible, in the same manner as the Company's separate financial statements. The financial

statements of the subsidiaries are adjusted for the accounting principles and policies followed by the Company.

iii. The difference between the cost to the Company of its investment in subsidiaries and its proportionate share in the equity of the investee

company at the time of acquisition of shares in the subsidiaries is recognized in the financial statements as Goodwill or Capital Reserve, as the

case may be. Goodwill is tested for impairment by the management on each reporting date.

(b) Oil and gas assets

Cairn India Group follows a successful efforts method for accounting for oil and gas assets as set out by the Guidance Note issued by the Institute

of Chartered Accountants of India (ICAI) on "Accounting for Oil and Gas Producing Activities".

Expenditure incurred on the acquisition of a license interest is initially capitalised on a license by license basis. Costs are held, undepleted,

within exploratory and development work in progress until the exploration phase relating to the license area is complete or commercial oil and gas

reserves have been discovered.

Exploration expenditure incurred in the process of determining exploration targets which cannot be directly related to individual exploration





wells is expensed in the period in which it is incurred.

Exploration/appraisal drilling costs are initially capitalised within exploratory and development work in progress on a well by well basis until

the success or otherwise of the well has been established. The success or failure of each exploration/appraisal effort is judged on a well by well

basis. Drilling costs are written off on completion of a well unless the results indicate that oil and gas reserves exist and there is a reasonable

prospect that these reserves are commercial.

Where results of exploration drilling indicate the presence of oil and gas reserves which are ultimately not considered commercially viable, all

related costs are written off to the profit and loss account. Following appraisal of successful exploration wells, when a well is ready for

commencement of commercial production, the related exploratory and development wells in progress are transferred into a single field cost centre

within producing properties, after testing for impairment.

Where costs are incurred after technical feasibility and commercial viability of producing oil and gas is demonstrated and it has been

determined that the wells are ready for commencement of commercial production, they are capitalised within producing properties for each cost

centre. Subsequent expenditure is capitalised when it enhances the economic benefits of the producing properties or replaces part of the existing

producing properties. Any costs remaining associated with such part replaced are expensed in the financial statements.

Net proceeds from any disposal of an exploration asset within exploratory and development work in progress are initially credited against the

previously capitalised costs and any surplus proceeds are credited to the profit and loss account. Net proceeds from any disposal of producing

properties are credited against the previously capitalised cost and any gain or loss on disposal of producing properties is recognised in the profit and

loss account, to the extent that the net proceeds exceed or are less than the appropriate portion of the net capitalised costs of the asset.

(c) Depletion

The expenditure on producing properties is depleted within each cost centre.

Depletion is charged on a unit of production basis, based on proved reserves for acquisition costs and proved and developed reserves for

other costs.

(d) Site restoration costs

At the end of the producing life of a field, costs are incurred in restoring the site of production facilities. Cairn India Group recognizes the full cost

of site restoration as a liability when the obligation to rectify environmental damage arises. The site restoration expense forms part of the cost of

producing properties of the related asset. The amortization of the asset, calculated on a unit of production basis based on proved and developed

reserves, is included in the "depletion and site restoration costs" in the profit and loss account.

(e) Impairment

i. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/

external factors. An impairment loss is recognized where the carrying amount of an asset exceeds its recoverable amount. The

recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the estimated future cash

flows are discounted to their present value at the weighted average cost of capital.

ii. After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its

remaining useful life.

(f) Tangible Fixed Assets, depreciation and amortization

Tangible assets, other than oil and gas assets, are stated at cost, less accumulated depreciation and impairment losses, if any. Cost comprises the

purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition

of fixed assets which take a substantial period of time to get ready for its intended use are also included to the extent they relate to the period till

such assets are ready to be put to use.

Depreciation is provided using the Straight Line Method as per the useful lives of the assets estimated by the management, or at the rates

prescribed under Schedule XIV of the Companies Act 1956, whichever is higher. The expected useful economic lives are as follows:

Vehicles 2 to 5 years

Freehold buildings 10 years

Computers 2 to 5 years

Furniture and fixtures 2 to 5 years

Office equipments 2 to 5 years

Plant and Equipment 2 to 5 years

Leasehold improvements are amortized over the remaining period of the primary lease or expected useful lives, whichever is shorter.

(g) Intangible fixed assets and amortization

Intangible assets, other than oil and gas assets, have finite useful lives and are measured at cost and amortized over their expected useful

economic lives as follows:

Computer software 2 to 4 years

Goodwill arising on acquisition is capitalized and is subject to review for impairment.

(h) Leases

Finance leases, which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the

lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease




107

payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are

charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.

If there is no reasonable certainty that Cairn India Group will obtain the ownership by the end of the lease term, capitalised leased assets are

depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating

leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

(i) Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. Current investments

are measured at cost or market value, whichever is lower, determined on an individual investment basis. All other investments are classified as

long-term investments. Long term investments are measured at cost. However, provision for diminution in value is made to recognise a decline

other than temporary in the value of the investments.

(j) Inventory

Inventories of oil and condensate held at the balance sheet date are valued at net realizable value based on the estimated selling price. Inventory

of stores and spares related to exploration, development and production activities are stated at cost, determined on First in First out (FIFO) basis.

(k) Joint Ventures

Cairn India Group participates in several Joint Ventures which involve the joint control of assets used in the oil and gas exploration, development

and producing activities. It accounts for its share of the assets and liabilities of Joint Ventures along with attributable income and expenses in such

Joint Ventures, in which it holds a participating interest. Joint venture cash and cash equivalent balances are considered by the Cairn India Group

to be the amounts contributed in excess of the Cairn India Group's obligations to the joint ventures and are, therefore, disclosed within Loans and

Advances.

(l) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Cairn India Group and the revenue can be

reliably measured.

Revenue from operating activities

From sale of oil, gas and condensate

Revenue represents the Cairn India Group's share of oil, gas and condensate production, recognised on a direct entitlement basis, when

significant risks and rewards of ownership are transferred to the buyers.

As operator from the joint venture

Cairn India Group recognizes operators fees as revenue from joint ventures based on the provisions of respective PSCs.

Tolling income

Tolling income represents Cairn India Group's share of revenues from Pilotage and Oil Transfer Services from the respective joint ventures, which

is recognized based on the rates agreed with the customers, as and when the services are rendered.

Interest income

Interest income is recognised on a time proportion basis.

Dividend income

Revenue is recognized when the shareholders' right to receive payment is established by the balance sheet date. Dividend from subsidiaries is

recognized even if same are declared after the balance sheet date but pertains to period on or before the date of balance sheet as per the

requirement of schedule VI of the Companies Act, 1956.

(m) Borrowing costs

Borrowing costs include interest and commitment charges on borrowings, amortisation of costs incurred in connection with the arrangement of

borrowings, exchange differences to the extent they are considered a substitute to the interest cost and finance charges under leases. Costs

incurred on borrowings directly attributable to development projects, which take a substantial period of time to complete, are capitalised within

the development/producing asset for each cost centre.

All other borrowing costs are recognised in the profit and loss account in the period in which they are incurred.

(n) Foreign currency transactions and translations

Cairn India Group translates foreign currency transactions into Indian Rupees at the rate of exchange prevailing at the transaction date. Monetary

assets and liabilities denominated in foreign currency are translated into Indian Rupees at the rate of exchange prevailing at the Balance Sheet

date. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at

the date of the transaction.

Exchange differences arising on the settlement of monetary items or on reporting the Cairn India Group's monetary items at rates different

from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as

expenses in the year in which they arise except those arising from investments in non-integral operations.

All transactions of integral foreign operations are translated as if the transactions of those foreign operations were the transactions of the

group itself. In translating the financial statements of a non-integral foreign operation for incorporating in the group's financial statements, the

Cairn India Group translates the assets and liabilities at the rate of exchange prevailing at the balance sheet date. Income and expenses of non-





integral operations are translated using rates at the date of transactions. Resulting exchange differences are disclosed under the foreign currency

translation reserve until the disposal of the net investment in non-integral operations.

(o) Income taxes

Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax are measured at the amount

expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Fringe benefit tax also includes the proportionate

amount of tax likely to be paid by Cairn India Group, on the exercise of share options of the Company. Deferred income tax reflects the impact of

current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier

period.

Deferred tax assets and liabilities are measured, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Deferred tax assets and deferred tax liabilities across various subsidiaries or countries of operation are not set off against each other as Cairn India

Group does not have a legal right to do so. Current and deferred tax assets and liabilities are only offset where they arise within the same entity

and tax jurisdiction.

Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available

against which such deferred tax assets can be realised. If Cairn India Group has carry forward of unabsorbed depreciation and tax losses, deferred

tax assets are recognised only if there is virtual certainty, supported by convincing evidence, that such deferred tax assets can be realised against

future taxable profits. Unrecognised deferred tax assets of earlier periods are re-assessed and recognised to the extent that it has become

reasonably certain that future taxable income will be available against which such deferred tax assets can be realised.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a

deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income

will be available against which deferred tax asset can be realised. Any such write-down is reversed to the extent that it becomes reasonably

certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company

will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset in

accordance with the recommendations contained in guidance note issued by the Institute of Chartered Accountants of India, the said asset is

created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance

sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that

Company will pay normal Income Tax during the specified period.

(p) Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average

number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted

for events of bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares).

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the

weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.

(q) Provisions

A provision is recognised when Cairn India Group has a present obligation as a result of past event and it is probable that an outflow of resources

will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and

are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date

and adjusted to reflect the current best estimates.

(r) Cash and Cash equivalents

Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short-term investments, with an original maturity of

90 days or less.

(s) Employee Benefits

Retirement and Gratuity benefits

Retirement benefits in the form of provident fund and superannuation scheme are defined contribution schemes and the contributions are

charged to the profit and loss account of the period when the contributions to the respective funds are due. There are no obligations other than

the contribution payable to the respective funds.

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made

at the end of each financial year. The scheme is maintained and administered by an insurer to which the trustees make periodic contributions.

Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on

actuarial valuation made at the end of each financial year. The actuarial valuation is done as per projected unit credit method.

Actuarial gains / losses are immediately taken to profit and loss account and are not deferred.

Employee Stock Compensation Cost

Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and

Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the

Institute of Chartered Accountants of India. Cairn India Group measures compensation cost relating to employee stock options using the intrinsic




109

value method. Compensation expense is amortized over the vesting period of the option on a straight line basis. The cost of awards to employees

under the Company's ultimate parent entity's Long Term Incentive Plans ("the LTIP") is recognised based on the amount cross charged by the

parent entity.

(t) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements

and the results of operations during the reporting period end. Although these estimates are based upon management's best knowledge of current

events and actions, actual results could differ from these estimates.

(u) Segment Reporting Policies

Identification of segments:

The Company's operating businesses are organized and managed separately according to the nature of products and services provided, with each

segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments

is based on the areas in which major operating divisions of the Company operate.

(v) Derivative Instruments

As per the ICAI Announcement, accounting for derivative contracts, other than those covered under AS-11, is done on marked to market on a

portfolio basis, and the net loss is charged to the income statement. Net gains are ignored.

4. SEGMENTAL REPORTING

Business segments

The primary reporting of Cairn India Group has been prepared on the basis of business segments. Cairn India Group has only one business

segment, which is the exploration, development and production of oil and gas and operates in a single business segment based on the nature of

the products, the risks and returns, the organisation structure and the internal financial reporting systems. Accordingly, the figures appearing in

these financial statements relate to the Cairn India Group's single business segment.

Geographical segments

Secondary segmental reporting is prepared on the basis of the geographical location of customers. The operating interests of the Cairn India

Group are confined to the Indian sub-continent in terms of oil and gas blocks and customers. Accordingly, the figures appearing in these financial

statements relate to Cairn India Group's single geographical segment being operations in the Indian sub-continent.

5. RELATED PARTY TRANSACTIONS

(a) Names of related parties:

Companies having control

• Cairn UK Holdings Limited, UK • Cairn Energy Plc., UK

Holding Company Ultimate holding company

Key Managerial Personnel

• Rahul Dhir • Winston Frederick Bott Jr.

Managing Director and Chief Executive Officer Executive Director and Chief Operating Officer

(Appointed on 29th April 2008)

• Indrajit Banerjee • Philip Tracy

Executive Director and Chief Financial Officer Alternate Director

(Appointed on 1st March 2007) (Appointed on 18th March 2009)

• Lawrence Smyth

Executive Director and Chief Operating Officer

(Appointed on 1st March 2007 and resigned on 21st January 2008)

(b) Transactions during the period/year:

Nature of the Transactions Related Party Current period Previous year

Reimbursement of expenses Cairn Energy Plc. 279,725 197,600

Shares issued including premium and stock option charge Rahul Dhir 716,185 Nil

Lawrence Smyth 126,758 Nil

Total 842,943 Nil

Remuneration (including bonus on cash basis) Rahul Dhir 125,460 165,579

Winston Frederick Bott Jr. 182,488 Nil

Indrajit Banerjee 26,123 15,593

Philip Tracy 1,354 Nil

Lawrence Smyth 39,336 113,677

Total 374,761 294,849





(c) Balances outstanding as at the end of the period/year:


Accounts payable Cairn Energy Plc. 1,296,164 1,033,919

Remuneration payable Rahul Dhir Nil 3,261

Indrajit Banerjee Nil 1,500


Total Nil 6,561

Note: The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave encashment benefits, as

they are determined on an actuarial basis for the Cairn India Group as a whole.

6. As at 31st March 2009, the Company and its subsidiaries together have utilized INR 82,563,170 thousand for the purposes listed in the

prospectus issued for the Initial Public Offer. The details of utilization of funds is as follows-

Particulars Upto Upto

31st March 2009 31st December 2007

Acquisition of shares of Cairn India Holdings Limited from Cairn UK Holdings Limited 59,580,837 59,580,837

Exploration and Development expenses 21,152,714 10,411,239

General corporate purposes 230,000 90,440

Issue expenses 1,599,619 1,599,619

Total 82,563,170 71,682,135

The details of the unutilized monies out of the public issue proceeds is as follows-


Mutual funds 718,277 7,337,856

Balances with banks 4,967,454 9,228,910

Total 5,685,731 16,566,766

7. EMPLOYEES STOCK OPTION PLANS

The Company has provided various share-based payment schemes to its employees. During the period ended 31st March 2009, the following

schemes were in operation:

Particulars CISMP CIPOP CIESOP CIPOP CIESOP

Phantom Phantom

Date of Board Approval 17th Nov 2006 17th Nov 2006 17th Nov 2006 Not applicable Not applicable

Date of Shareholder's approval 17th Nov 2006 17th Nov 2006 17th Nov 2006 Not applicable Not applicable

Number of options granted till March 2009 8,298,713 5,732,956 12,792,651 822,867 362,556

Method of Settlement Equity Equity Equity Cash Cash

Vesting Period Refer vesting 3 years from 3 years from 3 years from 3 years from

conditions below grant date grant date grant date grant date

Exercise Period 18 months 3 months from 7 years from Immediately Immediately

from vesting vesting date vesting date upon vesting upon vesting

Number of options granted till March 2009

24th Nov 2006 8,298,713 – – – –

1st Jan 2007 – 1,708,195 3,467,702 – –

20th Sept 2007 – 3,235,194 5,515,053 – –

29th July 2008 – 789,567 3,773,856 822,867 324,548

10th Dec 2008 – – 36,040 – 38,008

Total 8,298,713 5,732,956 12,792,651 822,867 362,556

The vesting conditions of the above plans are as under-

CISMP plan

(a) 6,714,233 options are to be vested in the following manner-

– 1/3rd of the options will vest on the day following the date on which the equity shares have been admitted to listing on the Stock Exchanges

('admission date'). Listing date was 9th Jan 2007.

– 1/3rd of the options will vest 18 months after the admission date.

– 1/3rd of the options will vest on achieving 30 days' consecutive production of over 150,000 bopd from the Rajasthan Block.




111

(b) 1,584,480 options are to be vested in the following manner-

– 1/2 of the options will vest on the day following the date on which the equity shares have been admitted to listing on the Stock Exchanges.

– 1/4th of the options will vest on the date on which all major equipment for the start-up of the Mangala field is delivered to site.

– 1/4th of the options will vest on achieving 100,000 boepd from the Mangala Field.

CIPOP plan (including phantom options)

Options will vest (i.e become exercisable) at the end of a "performance period" which will be set by the remuneration committee at the time of

grant (although such period will not be less than three years). However, the percentage of an option which vests on this date will be determined

by the extent to which pre-determined performance conditions have been satisfied.

CIESOP plan (including phantom options)

There are no specific vesting conditions under CIESOP plan.

Details of Activities under Employees Stock Option Plans

CISMP Plan Current period Previous year

Number of Weighted Number of Weightedoptions average exercise options average exercise


Outstanding at the beginning of the year 8,298,713 33.70 8,298,713 33.70

Granted during the year Nil NA Nil NA


Exercised during the year 5,268,396 33.70 Nil NA




Weighted average fair value of options 131.50 NA 131.50 NA

granted on the date of grant (INR)

The weighted average share price on the dates of exercise of stock options was INR 220.09

CIPOP Plan Current period Previous year




Granted during the year 789,567 10.00 4,943,389 10.00








CIESOP Plan Current period Previous year




Granted during the year 3,809,896 226.21 8,982,755 164.27












CIPOP Plan - Phantom options Current period Previous year



Outstanding at the beginning of the year Nil NA Nil NA

Granted during the year 822,867 10.00 Nil NA




Outstanding at the end of the year 784,859 10.00 Nil NA


Weighted average fair value of options 175.40 NA Nil NA

granted on reporting date (INR)

CIESOP Plan - Phantom options Current period Previous year



Outstanding at the beginning of the year Nil NA Nil NA

Granted during the year 362,556 218.19 Nil NA



Expired during the year Nil NA Nil NA

Outstanding at the end of the year 362,556 218.19 Nil NA


Weighted average fair value of options 48.13 NA Nil NA

granted on reporting date (INR)

The details of exercise price for stock options outstanding as at March 31, 2009 are:

Scheme Range of No. of Weighted Weighted

exercise options average averageprice (INR) outstanding remaining exercise

contractual price (INR) life of options

(in years)

CISMP Plan 33.70 2,238,077 2.08 33.70

CIPOP Plan 10.00 3,200,096 1.51 10.00

CIESOP Plan 143-227 10,914,244 1.60 185.39

CIPOP Plan - Phantom options* 10.00 784,859 2.33 10.00

CIESOP Plan - Phantom options* 143-227 362,556 2.37 218.19

The details of exercise price for stock options outstanding as at December 31, 2007 are:

CISMP Plan 33.70 8,298,713 1.04 33.70

CIPOP Plan 10.00 4,755,244 2.49 10.00

CIESOP Plan 160-166.95 8,545,710 2.47 164.49

*Introduced during the current period




113

Effect of Employees Stock Option Plans on Financial Position

Effect of the employee share-based payment plans on the profit and loss account and on its financial position:

Particulars Current Period Previous Year

Total Employee Compensation Cost pertaining to share-based payment plans 134,493 602,025

(including exceptional gain of INR 155,723 thousand in the current period-refer note no. 8 below)

Compensation Cost pertaining to equity-settled employee share-based payment plan included above 107,292 602,025

Compensation Cost pertaining to cash-settled employee share-based payment plan included above 27,201 Nil

Liability for equity-settled employee stock options outstanding as at period / year end 388,978 947,084

Liability for cash-settled employee stock options outstanding as at period / year end 27,201 Nil

Deferred compensation cost of equity-settled options 393,570 1,549,011

Deferred compensation cost of cash-settled options 94,719 Nil

Inputs for Fair valuation of Employees Stock Option Plans

The Share Options have been fair valued using an Option Pricing Model (Black Scholes Model). The main inputs to the model and the Fair Value of

the options, based on an independent valuation, are as under:

Variables - CISMP A B

Grant date 24th Nov 2006 24th Nov 2006

Stock Price / fair value of the equity shares on the date of grant (INR) 160.00 160.00

Vesting date Refer vesting Refer vesting


Vesting % Refer vesting Refer vesting


Volatility (Weighted average) 44.08% 46.59%

Risk free rate (Weighted average) 7.05% 6.94%

Time to maturity in years (Weighted average) 2.45 2.00

Exercise price - INR 33.70 33.70

Fair Value of the options (Weighted average) - INR 131.69 130.69

Variables - CIESOP

Grant date 1st Jan 2007 20th Sept 2007 29th July 2008 10th Dec 2008

Stock Price/fair value of the equity shares 160.00 166.95 228.55 150.10


Vesting date 1st Jan 2010 20th Sept 2010 29th July 2011 10th Dec 2011

Vesting % 100% 100% 100% 100%

Volatility 41.04% 40.24% 39.43% 38.19%

Risk free rate 7.50% 7.65% 9.20% 6.94%

Time to maturity (years) 6.50 6.50 6.50 6.50

Exercise price (INR) 160.00 166.95 227.00 143.00

Fair Value of the options (INR) 87.30 90.72 130.42 79.80

Variables - CIPOP

Grant date 1st Jan 2007 20th Sept 2007 29th July 2008

Stock Price/fair value of the equity shares on the date of grant (INR) 160.00 166.95 228.55

Vesting date 1st Jan 2010 20th Sept 2010 29th July 2011

Vesting % Refer vesting Refer vesting Refer vesting

conditions conditions conditions

Volatility 41.61% 36.40% 37.49%

Risk free rate 7.33% 7.23% 9.37%

Time to maturity (years) 3.12 3.12 3.12

Exercise price (INR) 10.00 10.00 10.00

Fair Value of the options (INR) 152.05 158.97 221.09





Variables - CIPOP Phantom

Grant date 29th July 2008

Stock Price of the equity shares on the reporting date (INR) 184.10

Vesting date 29th July 2011

Vesting % Refer vesting conditions

Volatility 44.64%

Risk free rate 5.97%

Time to maturity (years) 2.33

Exercise price (INR) 10.00

Fair Value of the options (INR) 175.40

Variables - CIESOP Phantom

Grant date 29th July 2008 10th Dec 2008

Stock Price of the equity shares on the reporting date (INR) 184.10 184.10

Vesting date 29th July 2011 10th Dec 2011

Vesting % 100% 100%

Volatility 44.64% 42.35%

Risk free rate 5.97% 6.18%

Time to maturity (years) 2.33 2.70

Exercise price (INR) 227.00 143.00

Fair Value of the options (INR) 44.41 79.91

Volatility is the measure of the amount by which the price has fluctuated or is expected to fluctuate during the period. The measure of volatility

used in Black-Scholes option-pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over

a period of time. Time to maturity /expected life of options is the period for which the Company expects the options to be live. The time to

maturity has been calculated as an average of the minimum and maximum life of the options.

Impact of Fair Valuation Method on net profits and EPS

In March 2005 the ICAI has issued a guidance note on "Accounting for Employees Share Based Payments" applicable to employee based share

plan the grant date in respect of which falls on or after April 1, 2005. The said guidance note requires the Proforma disclosures of the impact of

the fair value method of accounting of employee stock compensation accounting in the financial statements. Applying the fair value based method

defined in the said guidance note, the impact on the reported net profit and earnings per share would be as follows:

Particulars Current Period

Profit as reported 8,034,506

Add: Employee stock compensation under intrinsic value method

(including exceptional gain of INR 155,723 thousand-refer note no. 8 below) 134,493

Less: Employee stock compensation under fair value method 622,866

Proforma profit 7,546,133

Earnings Per Share

Basic


– Proforma 4.04

Diluted


– Proforma 4.02

8. During the current period, Cairn India Group decided to retrospectively account for stock options using the Intrinsic Value Method as against the

Fair Value Method (Black Scholes) followed till the financial year ended 31st December 2007. Accordingly, the excess stock option provision up to

31st December 2007 was reversed during the current period ended 31st March 2009, resulting in an exceptional gain of INR 155,723 thousand.

Further, the stock option charge for the current period is lower and the profit after tax is higher by INR 488,373 thousand (including exceptional

gain of INR 155,723 thousand) due to this change.




115

9. LEASE OBLIGATIONS DISCLOSURES

Finance Lease:

Fixed assets include office equipments and leasehold improvements obtained under finance lease. The lease is secured by way of hypothecation of

the respective assets acquired under them. The lease term is for 3 to 6 years and renewable for further period/years at the option of the Cairn India

Group. There is no escalation clause in the lease agreements. There are no restrictions imposed by lease arrangements and there are no subleases.

Current Period Minimum lease Principal Interest due

payments amount due

Within one year of the balance sheet date 97,740 80,366 17,374

Due in a period between one year and five years 160,059 142,037 18,022

Due after five years Nil Nil Nil

Total 257,799 222,403 35,396

Previous Year Minimum lease Principal Interest due

payments amount due

Within one year of the balance sheet date 86,166 74,764 11,402

Due in a period between one year and five years 104,096 94,597 9,499

Due after five years Nil Nil Nil

Total 190,262 169,361 20,901

Note: The interest rate on finance lease ranges from 3.77% to 14.64%

Operating Lease:

Cairn India Group has entered into operating leases for office premises and office equipments. The leases have a life of 3 to 6 years. There is an

escalation clause in the lease agreement for the primary lease period. There are no restrictions imposed by lease arrangements and there are no

subleases. There are no contingent rents.


Lease payments made during the period 120,173 40,199

Minimum lease payments in case of non-cancellable operating leases

Within one year of the balance sheet date 124,628 117,470

Due in a period between one year and five years 150,536 264,797

Due after five years Nil Nil

10. CONTINGENT LIABILITIES

Ravva Joint Venture Arbitration proceedings : ONGC Carry

Ravva is an unincorporated Joint Venture (JV) in which Cairn India Group has an interest. The calculation of the Government of India's (GoI) share

of petroleum produced from the Ravva oil field has been a matter of disagreement for some years.

An arbitration panel opined in October 2004 and Cairn has been willing to be bound by the award, although it was not as favourable as had been

hoped. The GoI, however, had lodged an appeal in the Malaysian courts in respect of one element of the award which was in Cairn's favour,

namely the "ONGC Carry" issue. The "ONGC Carry" issue relates to whether Contractor Parties under Ravva PSC are entitled to include in their

accounts for the purposes of calculating the PTRR certain costs paid by Contractor Parties in consideration for ONGC having paid 100% of costs

prior to the signing of the Ravva PSC in 1994.

Cairn India Group challenged both the GoI's right to appeal and the grounds of that appeal.

A judgement was delivered by the Malaysian High Court on 12th January 2009, ruling in favour of the GoI and setting the arbitration award aside.

This has the effect of negating the original award in favour of Cairn India Group. This judgement is subject to appeal to the Malaysian Court of

Appeal and, potentially, the Malaysian Federal Court. Cairn has appealed to the Malaysian Court of Appeal.

Should Cairn finally lose the argument through the Malaysian courts, given the terms of the High Court's award itself, this will require the matter

to be arbitrated afresh under the terms of the PSC for dispute resolution.

Cairn India Group has received advice from their Malaysian legal counsel to the effect that there are strong grounds for appeal through the

Malaysian courts but, even if this proved unsuccessful, given there was one arbitration award in Cairn India Group's favour on this issue and a

similar award was made in favour of one of Cairn India Group's joint venture partners on the same issue in a separate arbitration with GoI, Cairn

India Group believes it has a good chance of any new arbitration panel coming to the same conclusion.

The GoI has challenged Cairn's understanding of the effect of a set-aside claiming that this would not entitle Cairn to a fresh arbitration should we

ultimately lose in Malaysia. This dispute is currently before the courts in India although Cairn has received clear and consistent advice from

Malaysian lawyers that a set-aside under Malaysian law does not constitute a judgement in favour of GoI.

In addition, consistent with GoI's view that the set-aside meant they now have a binding judgement in their favour, GoI has demanded and





commenced recovery from Cairn's buyers, of revenues from sale proceeds to set-off against the sums they claim are now due as a result of the

Malaysian judgement being in their favour. This recovery action is currently being contested by Cairn in the Indian courts.

In the event that the GoI's appeal ultimately succeeded in a manner which resulted in a ruling which Cairn India Group accepted as binding, then

Cairn India Group would be required to pay an additional USD 64 million (approximately INR 3,265,000 thousand). Cairn India Group would also

be potentially liable for interest on this sum currently estimated at approximately USD 30 million (INR 1,536,000 thousand) though the calculation

of interest would require further agreement.

Ravva Joint Venture Arbitration proceedings : Base Development Cost

In a separate and unrelated dispute related to the profit petroleum calculations under the Ravva PSC, the Ravva joint venture received a claim from

the Director General of Hydrocarbons (DGH) for the period from 2000-2005 for USD 166.4 million for an alleged underpayment of profit

petroleum to the Indian Government, out of which Cairn India Group's share will be USD 37.4 million (approximately INR 1,909,000 thousand)

plus potential interest at applicable rate (LIBOR plus 2% as per PSC).

This claim relates to the Indian Government's allegation that the Ravva JV has recovered costs in excess of the Base Development Costs ("BDC")

cap imposed in the PSC and that the Ravva JV has also allowed these excess costs in the calculation of the Post Tax Rate of Return (PTRR). Cairn

believes that such a claim is unsustainable under the terms of the PSC because, amongst other reasons, the BDC cap only applies to the initial

development of the Ravva field and not to subsequent development activities under the PSC. Additionally the Ravva JV has also contested the

basis of the calculation in the above claim from the DGH. Even if upheld, Cairn believes that the DGH has miscalculated the sums that would be

due to the Indian Government in such circumstances. Companies have initiated the arbitration proceedings with appointment of an arbitrator.

Government of India has also appointed its arbitrator. Presiding arbitrator is yet to be appointed.

Service tax

One of the subsidiary companies of the Cairn India Group has received three show cause notices from the tax authorities in India for non payment

of service tax as a recipient of services from foreign suppliers. These notices cover periods from 16th August 2002 to 31st March 2008. A writ

petition(s) challenging the liability to pay service tax as recipient of services in respect of first show cause notice (16th August 2002 to 31st March

2006) and challenging the scope of some services in respect of second show cause notice (1st April 2006 to 31st March 2007), has been filed

with the Chennai High Court. The reply for second and third show cause notice has also been filed before the authorities. Should the adjudication

go against Cairn India Group, it will be liable to pay the service tax of approximately INR 978,000 thousand plus potential interest of

approximately INR 395,000 thousand, although this could be recovered in part where it relates to services provided to Joint Venture of which

Cairn India is operator.

Tax holiday on gas production

Section 80-IB(9) of the Income Tax Act, 1961 allows the deduction of 100% of profits from the commercial production or refining of mineral oil.

The term 'mineral oil' is not defined but has always been understood to refer to both oil and gas, either separately and collectively.

The 2008 Finance Bill appeared to remove this deduction by stating [without amending section 80-IB(9)] that "for the purpose of section 80-IB(9),

the term 'mineral oil' does not include petroleum and natural gas, unlike in other sections of the Act". Subsequent announcements by the Finance

Minister and the Ministry of Petroleum and Natural Gas have confirmed that tax holiday would be available on production of crude oil but have

continued to exclude gas.

Cairn India Group filed a writ petition to the Gujarat High Court in December 2008 challenging the restriction of section 80-IB to the production of

oil. In the event this challenge is unsuccessful, the potential liability for tax and related interest on tax holiday claimed on gas production for all

periods to 31st March 2009 is approximately INR 2,370,000 thousand.

Based on the legal opinions received, the management is of the view that the liability in these cases is not probable and accordingly no provision

has been made in the financial statements.

11. CAPITAL COMMITMENTS (NET OF ADVANCES)

a. In respect of Cairn India Group's share of Joint Ventures' Exploration activities - INR 11,324,140 thousand (previous year - INR 23,442,498

thousand).

b. In respect of the Cairn India Group's share of Joint Ventures' Development activities - INR 34,536,062 thousand (previous year - INR

3,351,442 thousand).

12. DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN CURRENCY EXPOSURE

Cairn India Group has taken USD put/INR call options to hedge the risk of foreign currency exposure. The aggregate amount of outstanding

options as at 31st March 2009 aggregated to USD 214,000 thousand (previous year USD 210,000 thousand)

Particulars of Unhedged Foreign Currency Exposure at the Balance Sheet date


Unsecured Loans 43,341,500 2,955,000

Sundry Debtors 1,516,418 1,335,754

Cash and Bank 31,366,364 11,304,311

Current Assets 2,266,955 4,843,437

Current Liabilities 5,623,077 4,168,594




117

13. Cairn India Group has a defined contribution gratuity plan. Every employee who has completed five years or more of service gets a gratuity on

departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a

qualifying insurance policy.

The following tables summarize the components of net benefit expense recognised in the profit and loss account and the funded status and amounts

recognised in the balance sheet for the gratuity plans.

Profit and Loss account

Net employee benefit expense (recognised in Employee Cost)


Current service cost 23,529 10,846

Interest cost on benefit obligation 6,051 2,863

Expected return on plan assets (3,666) (1,798)

Net actuarial (gain) / loss recognised in the year 14,974 21,226

Past service cost Nil Nil

Net benefit expense 40,888 33,137

Actual return on plan assets 6,700 2,975

Balance sheet

Details of Provision for Gratuity


Defined benefit obligation 108,425 66,142

Fair value of plan assets 68,854 29,163

Less: Unrecognized past service cost Nil Nil

Plan asset / (liability) (39,571) (36,979)

Changes in the present value of the defined benefit obligation are as follows:


Opening defined benefit obligation 66,142 41,207

Current service cost 23,529 10,846

Interest cost 6,051 2,515

Benefits paid (5,306) (10,829)

Actuarial (gains) / losses on obligation 18,009 22,403

Closing defined benefit obligation 108,425 66,142

Changes in the fair value of plan assets are as follows:


Opening fair value of plan assets 29,163 25,693

Expected return 3,666 1,798

Contributions by employer 38,296 11,324

Benefits paid (5,306) (10,829)

Actuarial gains / (losses) 3,035 1,177

Closing fair value of plan assets 68,854 29,163

Note: The Group's expected contribution to the fund in the next year is INR 34,725 thousand.

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:


Investments with insurer 100% 100%

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which

the obligation is to be settled.





The principal assumptions used in determining gratuity liability for the Group's plans are shown below:


Discount rate 7% 8%

Future salary increase 10% 10%

Expected rate of return on assets 9.35% 9.1%

Employee turnover 13.13% 13.13%

Mortality Rate LIC (1994-96) LIC (1994-96)

Ultimate Table Ultimate Table

Note: The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant

factors, such as supply and demand in the employment market.

Gratuity liabilities for the current and previous period are as follows:


Defined benefit obligation 108,425 66,142

Plan assets 68,854 29,163

Surplus / (deficit) (39,571) (36,979)

Experience adjustments on plan assets (loss)/gain 3,132 2,970

Experience adjustments on plan liabilities (loss)/gain (11,964) (6,960)

Notes:

a) The Group has adopted AS 15 (Revised 2005) Employee Benefits for the first time during the previous year. Disclosures required by

paragraph 120 (n) of AS-15 (Revised 2005) are required to be furnished prospectively from the date of transition and hence have been

furnished for the current and the previous year only.

b) The Group is maintaining a fund with the Life Insurance Corporation of India (LIC) to meet its gratuity liability. The present value of the plan

assets represents the balance available with the LIC as at the end of the period. The total value of plan assets amounts to INR 68,854

thousand as certified by the LIC.

14. DETAILS OF MOVEMENT IN SHARE CAPITAL IS AS UNDER

Date Number of equity Description Issue price Share capital Securities

shares of INR 10 each in INR premium

31st December 2006 1,765,314,379 Closing balance 17,653,144 275,017,837

8th February 2007 13,085,041 Issued under Green Shoe Option 160.00 130,850 1,962,756

Less: Share issue expenses (896,478)

adjusted against premium

31st December 2007 1,778,399,420 17,783,994 276,084,115

7th March 2008 792,240 Exercise of stock options 33.70 7,922 18,776

22nd April 2008 113,000,000 Preferential allotment of shares 224.30 1,130,000 24,215,900

to non promoter investors

7th May 2008 525,000 Exercise of share options 33.70 5,250 12,443

27th May 2008 1,713,078 Exercise of share options 33.70 17,131 40,600

8th December 2008 1,600,000 Exercise of share options 33.70 16,000 37,920

19th December 2008 638,078 Exercise of share options 33.70 6,381 15,122

Add : Share options liability 665,398

transferred to securities premium

upon exercise of the options

31st March 2009 1,896,667,816 18,966,678 301,090,274

15. The share issue expenses of INR 208,410 thousand incurred on the preferential allotment of 113,000,000 equity shares have been charged to the

profit and loss account and not adjusted from the securities premium account on conservative basis.

16. Cairn India Group supplies gas from its Ravva and Cambay blocks to various customers. The price contracts with two customers are due for

revision with effect from December 2008 and currently the same are under negotiation. Pending finalization of the price contracts, revenue has

been recognised based on the last agreed prices on a conservative basis, as the management is expecting an upward price revision.




119

17. The goodwill of Cairn India Group amounting to INR 253,192,675 thousand has arisen on consolidation of financial statements of the Company

with its subsidiaries and represents the difference between the cost to the Company of its investment in Cairn India Holdings Limited (which

largely represent Cairn India Group's operations in India through its subsidiaries) and its proportionate share in the net book value of Cairn India

Holdings Limited on consolidated basis at the time of acquisition of shares in Cairn India Holdings Limited. The management has carried out the

tests for impairment of goodwill at the year-end as per requirements of AS 28 (Impairment of Assets) by computing the value in use of the assets

and comparing the same with the carrying amount of the net assets. Value in use is based on the discounted future net cash flows of the oil and

gas assets held by the Cairn India Group. For all blocks in the exploration stage, valuation has been carried out using risked NPV / boe. The result

of the impairment tests indicate that the value in use is higher than the carrying amounts and no impairment provision is required to be created at

the reporting date.

18. The management committee for the Rajasthan block has recently approved the declaration of commerciality and has granted an area of 822 square

kilometers for future development. This includes an additional area of 238 square kilometers where the approval of the Ministry of Petroleum and

Natural Gas is awaited.

19. Long term investment represents shares of Videocon Industries Limited held by Cairn Energy India Pty Limited (CEIPL) by virtue of its holdings in

erstwhile Videocon Petroleum Limited, which subsequently merged with Videocon Industries Limited. CEIPL is yet to receive the share certificates

of the merged entity and the matter is being pursued with the company.

20. The current tax and deferred tax provisions have been computed on the basis of the standalone financial statements of the Company's

subsidiaries, i.e. not based on the consolidated financial statements of Cairn India Limited and its subsidiaries. There was a reversal of deferred tax

liability amounting to INR 237,884 thousand during the current period due to changes in assumptions for computing the timing differences in

relation to certain assets of Rajasthan project during the tax holiday period.

21. Cairn India Holdings Limited (CIHL), a wholly owned subsidiary of the Company along with some of its subsidiaries has entered into a loan facility

agreement for USD 850 million with a consortium of banks. For the purposes of securing this facility, CIHL along with some of its subsidiaries has

created a negative pledge on its assets and those of its subsidiaries, whereby it has undertaken not to dispose any of the said assets or create any

charge on the same without the prior consent of the lenders. Further, the entire shares of Cairn Energy Hydrocarbons Limited a wholly owned

subsidiary of CIHL, has been pledged with the lenders.

22. Cairn India Group's estimate of hydrocarbon reserves and resources at the period/year end is as follows-

Particulars Gross proved and probable Gross proved and probable Net proved and probable

hydrocarbons initially in place reserves and resources reserves and resources

(mmboe) (mmboe) (mmboe)

Current Year Previous Year Current Year Previous Year Current Year Previous Year

Rajasthan MBA Fields 2,054 2,054 685 685 479 479

Rajasthan MBA EOR – – 308 308 216 216

Rajasthan Block Other Fields 1,708 1,697 86 84 61 60

Ravva Fields 625 584 72 82 16 18

CBOS/2 Fields 156 116 20 25 8 10

KG-DWN-98/2 650 650 353 353 35 35

Total 5,193 5,101 1,524 1,537 815 818

Cairn India Group's net working interest in proved and probable reserves is as follows-

Particulars Proved and Proved and probable

probable Reserves reserves (developed)

Oil (mmstb) Gas (bscf) Oil (mmstb) Gas (bscf)

Reserves as at 1st January 2007* 207.15 53.19 18.10 53.19

Additions / revision during the year 44.47 4.21 3.63 4.21

Production during the year 4.59 13.40 4.59 13.40

Reserves as at 31st December 2007** 247.03 44.00 17.14 44.00

Additions / revision during the fifteen months period 98.35 (1.66) 2.64 (1.66)

Production during the fifteen months period 5.58 13.74 5.58 13.74

Reserves as at 31st March 2009*** 339.80 28.60 14.20 28.60











Place : Gurgaon





* Includes probable oil reserves of 35.81 mmstb (of which 3.24 mmstb is developed) and probable gas reserves of 16.73 bscf (of which 16.73

bscf is developed)

** Includes probable oil reserves of 41.78 mmstb (of which 4.17 mmstb is developed) and probable gas reserves of 16.57 bscf (of which 16.57

bscf is developed)

*** Includes probable oil reserves of 57.70 mmstb (of which 5.7 mmstb is developed) and probable gas reserves of 12.80 bscf (of which 12.80 bscf

is developed)

mmboe = million barrels of oil equivalent

mmstb = million stock tank barrels

bscf = billion standard cubic feet

1 million metric tonnes = 7.4 mmstb

1 standard cubic meter = 35.315 standard cubic feet

MBA = Mangala, Bhagyam & Aishwarya

EOR = Enhanced Oil Recovery

23. CHANGE IN FINANCIAL YEAR AND PRIOR YEAR COMPARATIVES

Shareholders of the Company have approved the change of financial year end from 31st December to 31st March. Therefore, the current financial

year consists of fifteen month period from 1st January 2008 to 31st March 2009. Subsequent financial years would be for twelve months period

ending 31st March every year. Accordingly, previous year figures in the profit and loss account and cash flow statement are not comparable with

current extended financial year.

Previous year's figures have been regrouped where necessary to confirm to current period's classification.

121

Sta

tem

en

t P

urs

uan

t to

Secti

on

21

2 (

8)

of

the C

om

pan

ies

Act,

19

56

(All

am

ou

nts

are

in

th

ou

san

d I

nd

ian

Ru

pe

es,

un

less

oth

erw

ise

sta

ted

)

Pu

rsu

ant

to s

ecti

on

21

2 (

8)o

f th

e C

om

pan

ies

Act

, 1

95

6,

the

com

pan

y h

as o

bta

ined

exe

mp

tio

n f

rom

th

e M

inis

try

of

Co

mp

any

Aff

airs

, N

ew D

elh

i, vi

de

its

lett

er N

o.4

7/1

08

/20

09

-CL-

III d

ated

30

/03

/20

09

to

atta

ch a

cco

un

ts o

f su

bsi

dia

ries

. T

he

acco

un

ts o

f su

bsi

dia

ries

are

ava

ilab

le f

or

insp

ecti

on

of

mem

ber

s o

n a

ny

wo

rkin

g d

ay a

t th

e r

egis

tere

d o

ffic

e o

f th

e co

mp

any

bet

wee

n 1

0 a

m a

nd

12

no

on

. A

sta

tem

ent

pu

rsu

ant

to a

bo

ve o

rder

giv

ing

det

ails

of

sub

sid

iari

es is

giv

en b

elo

w:

S.

Nam

e o

f th

e S

ub

sid

iary

Co

mp

an

yC

ap

ital

Re

serv

es

Tota

lTo

tal

Inv

est

me

nts

*D

eta

ils

of

Turn

ov

er

Pro

fit

/P

rov

isio

n f

or

Pro

fit

/P

rop

ose

dN

o.

Ass

ets

Lia

bil

itie

sIn

ve

stm

en

t(L

oss

)ta

xa

tio

n(L

oss

)d

ivid

en

db

efo

reaft

er

tax

ati

on

tax

ati

on

1C

airn

In

dia

Ho

ldin

gs

Lim

ite

d 2

5,6

41

,91

6 2

,92

6,0

43

1,9

69

,92

0 2

6,5

98

,03

9 –

– –

6,4

56

,89

0 –

6,4

56

,89

0 N

IL

2C

airn

En

erg

y G

uja

rat

Blo

ck 1

Lim

ite

d 4

6 6

2,9

53

27

5 6

2,7

24

– –

– 1

04

,33

6 9

,70

3 9

4,6

33

NIL

3C

airn

Exp

lora

tio

n (

No

.7)

Lim

ite

d –

(1

3,7

66

) 1

10

(1

3,8

76

) –

– –

14

2,1

21

12

,35

4 1

29

,76

6 N

IL

4C

airn

Exp

lora

tio

n (

No

.6)

Lim

ite

d –

(4

27

) (

15

3)

(2

74

) –

– –

7,9

13

44

3 7

,46

9 N

IL

5C

airn

Exp

lora

tio

n (

No

.4)

Lim

ite

d –

(1

,19

0)

13

0 (

1,3

21

) –

– –

6,6

03

84

6,5

19

NIL

6C

airn

Exp

lora

tio

n (

No

.2)

Lim

ite

d –

(4

1,0

14

) 9

4 (

41

,10

8)

– –

– 2

41

,84

4 1

9,8

67

22

1,9

77

NIL

7C

airn

En

erg

y D

isco

very

Lim

ite

d 1

,95

6 (

71

,45

0)

(5

,03

8)

(6

4,4

55

) –

– –

(1

6,6

79

) 1

3 (

16

,69

2)

NIL

8C

airn

En

erg

y H

ydro

carb

on

s Li

mit

ed

2,7

55

,86

0 (

2,5

76

,88

8)

46

,19

8,6

49

(4

6,0

19

,67

7)

– –

42

8 4

,08

6,8

22

25

,38

9 4

,06

1,4

33

NIL

9C

airn

Pe

tro

leu

m I

nd

ia L

imit

ed

– –

– –

– –

– –

– –

NIL

10

Cai

rn E

ne

rgy

Ho

ldin

gs

Lim

ite

d 4

,05

3,7

26

(3

,21

9,8

53

) 8

35

,27

7 (

1,4

04

) –

– 5

91

,51

1 6

07

,97

2 (

14

5,0

42

) 7

53

,01

4 N

IL

11

Cai

rn E

ne

rgy

Ne

the

rlan

ds

Ho

ldin

gs

B.V

. 7

60

(1

5,8

28

) 8

79

(1

5,9

47

) –

– –

(4

,98

7,5

04

) (

30

,25

3)

(4

,95

7,2

52

) N

IL

12

Cai

rn E

ne

rgy

Gro

up

Ho

ldin

gs

B.V

. 4

,27

6 (

97

1,4

29

) 3

,33

4 (

97

0,4

86

) –

– –

(1

,44

0,2

44

) (

12

,48

0)

(1

,42

7,7

64

) N

IL

13

Cai

rn E

ne

rgy

Ind

ia H

old

ing

s B

.V.

79

0 (

66

8)

91

31

– –

– (

87

8)

– (

87

8)

NIL

14

Cai

rn E

ne

rgy

Gu

jara

t H

old

ing

B.V

. 7

90

(8

16

) –

(2

6)

– –

– (

26

) –

(2

6)

NIL

15

Cai

rn E

ne

rgy

Gu

jara

t B

.V.

79

0 1

,72

1,0

36

2,1

31

,44

0 (

40

9,6

14

) –

– 1

,27

6,9

23

49

8,6

67

31

,28

2 4

67

,38

4 N

IL

16

Cai

rn E

ne

rgy

Ind

ia W

est

Ho

ldin

g B

.V.

79

1 (

81

6)

– (

26

) –

– –

(2

6)

– (

26

) N

IL

17

Cai

rn E

ne

rgy

Ind

ia W

est

B.V

. 7

90

2,2

74

,97

8 2

,12

5,0

42

15

0,7

27

– –

1,6

87

,02

9 5

81

,04

1 1

18

,20

7 4

62

,83

4 N

IL

18

Cai

rn E

ne

rgy

Cam

bay

Ho

ldin

g B

.V.

78

9 (

81

5)

– (

26

) –

– –

(2

6)

– (

26

) N

IL

19

Cai

rn E

ne

rgy

Cam

bay

B.V

. 7

90

1,7

62

,65

6 2

,21

2,8

58

(4

49

,41

1)

– –

1,2

89

,65

0 3

73

,41

4 (

26

,84

6)

40

0,2

60

NIL

20

Cai

rn E

ne

rgy

Au

stra

lia P

ty L

imit

ed

3,3

97

,09

1 (

3,4

58

,25

6)

6,5

37

(6

7,7

02

) –

– –

(1

6,7

32

) (

23

,26

7)

6,5

35

NIL

21

CE

H A

ust

ralia

Lim

ite

d –

– –

– –

– –

– –

– N

IL

22

CE

H A

ust

ralia

Pty

Lim

ite

d –

– –

– –

– –

– –

– N

IL

23

Cai

rn E

ne

rgy

Asi

a P

ty L

imit

ed

85

,73

4 9

23

,34

1 4

,54

4 1

,00

4,5

32

– –

– 2

33

,00

2 –

23

3,0

02

NIL

24

We

ssin

gto

n I

nve

stm

en

ts P

ty L

imit

ed

19

4,5

43

(1

94

,54

3)

– –

– –

– –

– –

NIL

25

Cai

rn E

ne

rgy

Inve

stm

en

ts A

ust

ralia

1,5

90

,60

5 (

1,5

90

,60

5)

– –

– –

– –

– –

NIL

Pty

Lim

ite

d

26

Syd

ne

y O

il C

om

pan

y P

ty L

imit

ed

16

3,6

17

(1

63

,61

7)

– –

– –

– –

– –

NIL

27

Cai

rn E

ne

rgy

Ind

ia P

ty L

imit

ed

1,1

16

,83

7 9

,61

8,9

95

62

,67

9,0

34

(5

2,0

48

,53

5)

10

5,3

34

Lon

g t

erm

in

vest

me

nts

9,4

43

,84

4 2

,40

8,7

16

1,2

82

,32

0 1

,12

6,3

97

NIL

(at

cost

)–u

nq

uo

ted

an

dtr

ade

: 7

55

,27

5 e

qu

ity

shar

es

of

Rs.

10

eac

hfu

lly p

aid

up

in V

ide

con

Ind

ust

rie

s Li

mit

ed

28

Cai

rn L

anka

Pri

vate

Lim

ite

d 1

21

,53

8 (

68

,15

6)

64

,69

3 (

11

,31

1)

– –

– (

68

,15

6)

– (

68

,15

6)

NIL

29

CIG

Mau

riti

us

Ho

ldin

g P

riva

te L

imit

ed

12

1,9

80

(1

23

,10

3)

33

3 (

1,4

57

) –

– –

(3

,51

8)

– (

3,5

18

) N

IL

30

CIG

Mau

riti

us

Pri

vate

Lim

ite

d 1

19

,58

5 (

12

0,8

73

) 7

(1

,29

6)

– –

– 6

64

– 6

64

NIL

* O

the

r th

an I

nve

stm

en

t in

su

bsi

dia

rie

sF

or

an

d o

n b

eh

alf

of

the

Bo

ard

of

Dir

ect

ors

Rah

ul

Dh

ir M

anag

ing

Dir

ect

or

and

Ch

ief

Exe

cuti

ve O

ffic

er

Am

an

Me

hta

Dir

ect

or

Pla

ce

:G

urg

aon

Ind

raji

t B

an

erj

ee

Exe

cuti

ve D

ire

cto

r an

d C

hie

f Fi

nan

cial

Off

ice

rD

ate

:2

7th

May

, 2

00

9N

ee

rja S

harm

a C

om

pan

y S

ecr

eta

ry


Sta

tem

en

t P

urs

uan

t to

Secti

on

21

2 o

f th

e C

om

pan

ies

Act,

19

56

(All

amo

un

ts a

re in

th

ou

san

d I

nd

ian

Ru

pe

es,

un

less

oth

erw

ise

sta

ted

)P

rofi

ts/(

Lo

sse

s) s

o f

ar

itP

rofi

ts/(

Lo

sse

s) s

o f

ar

itco

nce

rns

the

me

mb

ers

of

co

nce

rns

the

me

mb

ers

the

Ho

ldin

g C

om

pan

yo

f th

e H

old

ing

Co

mp

an

yan

d n

ot

de

alt

wit

h i

n t

he

an

d d

ealt

wit

h i

n t

he

bo

ok

s o

f A

cco

un

t o

f th

eb

oo

ks

of

Acco

un

t o

f th

eH

old

ing

Co

mp

an

y

H

old

ing

Co

mp

an

yS

.N

am

e o

f th

e S

ub

sid

iary

Co

mp

an

yN

am

e o

f th

e H

old

ing

Co

mp

an

yN

um

be

r o

f e

qu

ity

sh

are

s h

eld

Ex

ten

t o

fF

inan

cia

lF

or

the

Fo

r th

eF

or

the

Fo

r th

eN

o.

Ho

ldin

gy

ear

of

the

Fin

an

cia

lP

rev

iou

sF

ina

ncia

lP

rev

iou

ssu

bsi

dia

ryY

ea

r o

f th

eF

ina

ncia

lY

ea

r o

f th

eF

ina

ncia

le

nd

ed

on

S

ub

sid

iary

Ye

ar(

s)S

ub

sid

iary

Ye

ar(

s)si

nce

it

sin

ce

it

be

cam

e a

be

cam

e a

Su

bsi

dia

ry

Su

bsi

dia

ry1

Cai

rn I

nd

ia H

old

ing

s Li

mit

edC

airn

In

dia

Lim

ited

29

2,9

29

,75

2 s

har

es o

f £

1 e

ach

10

0%

12

/31

/20

08

6,4

56

,89

0 (

1,5

92

,11

1)

– –

2C

airn

En

erg

y G

uja

rat

Blo

ck 1

Lim

ited

Cai

rn I

nd

ia H

old

ing

s Li

mit

ed5

51

ord

inar

y sh

ares

of

£ 1

eac

h1

00

%1

2/3

1/2

00

8 9

4,6

33

(8

,45

8)

– –

3C

airn

Exp

lora

tio

n (

No

.7)

Lim

ited

Cai

rn I

nd

ia H

old

ing

s Li

mit

ed1

ord

inar

y sh

are

of

£ 1

eac

h1

00

%1

2/3

1/2

00

8 1

29

,76

6 (

13

6,0

16

) –

–

4C

airn

Exp

lora

tio

n (

No

.6)

Lim

ited

Cai

rn I

nd

ia H

old

ing

s Li

mit

ed1

ord

inar

y sh

are

of

£ 1

eac

h1

00

%1

2/3

1/2

00

8 7

,46

9 (

6,2

76

) –

–

5C

airn

Exp

lora

tio

n (

No

.4)

Lim

ited

Cai

rn I

nd

ia H

old

ing

s Li

mit

ed1

ord

inar

y sh

are

of

£ 1

eac

h1

00

%1

2/3

1/2

00

8 6

,51

9 (

7,7

10

) –

–

6C

airn

Exp

lora

tio

n (

No

.2)

Lim

ited

Cai

rn I

nd

ia H

old

ing

s Li

mit

ed1

ord

inar

y sh

are

of

£ 1

eac

h1

00

%1

2/3

1/2

00

8 2

21

,97

7 (

21

6,4

79

) –

–

7C

airn

En

erg

y D

isco

very

Lim

ited

Cai

rn I

nd

ia H

old

ing

s Li

mit

ed2

3,2

16

ord

inar

y sh

ares

of

£ 1

eac

h1

00

%1

2/3

1/2

00

8 (

16

,69

2)

(1

1,6

66

) –

–

8C

airn

En

erg

y H

ydro

carb

on

s Li

mit

edC

airn

In

dia

Ho

ldin

gs

Lim

ited

31

,34

1,7

12

ord

inar

y sh

ares

of

£ 1

eac

h1

00

%1

2/3

1/2

00

8 4

,06

1,4

33

(3

92

,62

5)

– –

9C

airn

Pet

role

um

In

dia

Lim

ited

Cai

rn I

nd

ia H

old

ing

s Li

mit

ed1

ord

inar

y sh

are

of

£ 1

eac

h1

00

%1

2/3

1/2

00

8 –

– –

–

10

Cai

rn E

ner

gy

Ho

ldin

gs

Lim

ited

Cai

rn I

nd

ia H

old

ing

s Li

mit

ed6

7,4

18

,40

5 o

rdin

ary

shar

es o

f £

1 e

ach

10

0%

12

/31

/20

08

75

3,0

14

24

0,8

63

– –

11

Cai

rn E

ner

gy

Net

her

lan

ds

Ho

ldin

gs

B.V

.C

airn

En

erg

y H

old

ing

s Li

mit

ed1

8 e

qu

ity

shar

es o

f E

UR

1,0

00

eac

h1

00

%1

2/3

1/2

00

8 (

4,9

57

,25

2)

(3

23

,99

8)

– –

12

Cai

rn E

ner

gy

Gro

up

Ho

ldin

gs

B.V

.C

airn

En

erg

y N

eth

erla

nd

s H

old

ing

s B

.V.

21

5 e

qu

ity

shar

es o

f N

LG 1

,00

0 e

ach

(in

acc

ord

ance

wit

h a

rtic

le 2

:17

8c

of

the

Du

tch

Civ

il C

od

e, t

his

su

m c

on

vert

s to

EU

R 4

53

.78

)1

00

%1

2/3

1/2

00

8 (

1,4

27

,76

4)

(1

4,1

24

) –

–

13

Cai

rn E

ner

gy

Ind

ia H

old

ing

s B

.V.

Cai

rn E

ner

gy

Gro

up

Ho

ldin

gs

B.V

.4

0 e

qu

ity

shar

es o

f N

LG 1

,00

0 e

ach

(in

acc

ord

ance

wit

h a

rtic

le 2

:17

8c

of

the

Du

tch

Civ

il C

od

e, t

his

su

m c

on

vert

s to

EU

R 4

53

.78

)1

00

%1

2/3

1/2

00

8 (

87

8)

(1

44

) –

–

14

Cai

rn E

ner

gy

Gu

jara

t H

old

ing

B.V

.C

airn

En

erg

y In

dia

Ho

ldin

gs

B.V

.4

1 s

har

es o

f E

UR

45

4 e

ach

10

0%

12

/31

/20

08

(2

6)

– –

–

15

Cai

rn E

ner

gy

Gu

jara

t B

.V.

Cai

rn E

ner

gy

Gu

jara

t H

old

ing

B.V

.4

0 e

qu

ity

shar

es o

f N

LG 1

,00

0 e

ach

(in

acc

ord

ance

wit

h a

rtic

le 2

:17

8c

of

the

Du

tch

Civ

il C

od

e, t

his

su

m c

on

vert

s to

EU

R 4

53

.78

)1

00

%1

2/3

1/2

00

8 4

67

,38

4 3

12

,80

5 –

–

16

Cai

rn E

ner

gy

Ind

ia W

est

Ho

ldin

g B

.V.

Cai

rn E

ner

gy

Ind

ia H

old

ing

s B

.V.

41

sh

ares

of

EU

R 4

54

eac

h1

00

%1

2/3

1/2

00

8 (

26

) –

– –

17

Cai

rn E

ner

gy

Ind

ia W

est

B.V

.C

airn

En

erg

y In

dia

Wes

t H

old

ing

B.V

.4

0 e

qu

ity

shar

es o

f N

LG 1

,00

0 e

ach

(in

acc

ord

ance

wit

h a

rtic

le 2

:17

8c

of

the

Du

tch

Civ

il C

od

e, t

his

su

m c

on

vert

s to

EU

R 4

53

.78

)1

00

%1

2/3

1/2

00

8 4

62

,83

4 4

56

,30

7 –

–

18

Cai

rn E

ner

gy

Cam

bay

Ho

ldin

g B

.V.

Cai

rn E

ner

gy

Ind

ia H

old

ing

s B

.V.

18

eq

uit

y sh

ares

of

EU

R 1

,00

0 e

ach

10

0%

12

/31

/20

08

(2

6)

– –

–

19

Cai

rn E

ner

gy

Cam

bay

B.V

.C

airn

En

erg

y C

amb

ay H

old

ing

B.V

.4

0 e

qu

ity

shar

es o

f N

LG 1

,00

0 e

ach

(in

acc

ord

ance

wit

h a

rtic

le 2

:17

8c

of

the

Du

tch

Civ

il C

od

e, t

his

su

m c

on

vert

s to

EU

R 4

53

.78

)1

00

%1

2/3

1/2

00

8 4

00

,26

0 2

96

,20

4 –

–

20

Cai

rn E

ner

gy

Au

stra

lia P

ty L

imit

edC

airn

En

erg

y G

rou

p H

old

ing

s B

.V.

11

6,7

89

,07

9 o

rdin

ary

shar

es o

f A

US

$ 1

eac

h1

00

%1

2/3

1/2

00

8 6

,53

5 (

6,6

53

) –

–

21

CE

H A

ust

ralia

Lim

ited

Cai

rn E

ner

gy

Au

stra

lia P

ty L

imit

ed1

00

sh

ares

of

US

$ 1

eac

h1

00

%1

2/3

1/2

00

8 –

– –

–

22

CE

H A

ust

ralia

Pty

Lim

ited

CE

H A

ust

ralia

Lim

ited

2 o

rdin

ary

shar

es o

f A

US

$ 1

eac

h1

00

%1

2/3

1/2

00

8 –

– –

–

23

Cai

rn E

ner

gy

Asi

a P

ty L

imit

edC

airn

En

erg

y A

ust

ralia

Pty

Lim

ited

33

0,5

22

,61

7 o

rdin

ary

shar

es o

f A

US

$ 1

eac

h1

00

%1

2/3

1/2

00

8 2

33

,00

2 (

56

,68

3)

– –

24

Wes

sin

gto

n I

nve

stm

ents

Pty

Lim

ited

Cai

rn E

ner

gy

Asi

a P

ty L

imit

ed3

0,0

00

,00

0 o

rdin

ary

shar

es o

f A

US

$ 0

.25

eac

h1

00

%1

2/3

1/2

00

8 –

– –

–

25

Cai

rn E

ner

gy

Inve

stm

ents

Au

stra

liaC

airn

En

erg

y A

sia

Pty

Lim

ited

14

4,1

01

,30

2 o

rdin

ary

shar

es o

f A

US

$ 1

eac

h1

00

%1

2/3

1/2

00

8 –

– –

–P

ty L

imit

ed

26

Syd

ney

Oil

Co

mp

any

Pty

Lim

ited

Cai

rn E

ner

gy

Inve

stm

ents

Au

stra

lia2

7,0

24

,28

8 o

rdin

ary

shar

es o

f A

US

$ 0

.25

eac

h1

00

%1

2/3

1/2

00

8 –

– –

–P

ty L

imit

ed

27

Cai

rn E

ner

gy

Ind

ia P

ty L

imit

edS

ydn

ey O

il C

om

pan

y P

ty L

imit

ed2

ord

inar

y sh

ares

of

AU

S$

1 e

ach

an

d

1

,00

01

00

%1

2/3

1/2

00

8 1

,12

6,3

97

2,0

09

,48

6 –

–o

rdin

ary

shar

es o

f A

US

$ 4

5,7

92

.67

eac

h

28

Cai

rn L

anka

Pri

vate

Lim

ited

CIG

Mau

riti

us

Pri

vate

Lim

ited

27

,93

7,4

67

ord

inar

y sh

ares

of

LKR

10

eac

h1

00

%1

2/3

1/2

00

8 (

68

,15

6)

– –

–

29

CIG

Mau

riti

us

Ho

ldin

g P

riva

te L

imit

edC

airn

In

dia

Lim

ited

2,5

09

,96

0 o

rdin

ay s

har

es o

f U

SD

1 e

ach

10

0%

12

/31

/20

08

(3

,51

8)

– –

–

30

CIG

Mau

riti

us

Pri

vate

Lim

ited

CIG

Mau

riti

us

Ho

ldin

g P

riva

te L

imit

ed2

,50

1,0

00

ord

inay

sh

ares

of

US

D 1

eac

h1

00

%1

2/3

1/2

00

8 6

64

– –

–

Fo

r an

d o

n b

eh

alf

of

the

Bo

ard

of

Dir

ect

ors

Rah

ul

Dh

ir M

anag

ing

Dir

ecto

r an

d C

hie

f E

xecu

tive

Off

icer

Am

an

Me

hta

Dir

ecto

rIn

dra

jit

Ban

erj

ee

Exe

cuti

ve D

irec

tor

and

Ch

ief

Fin

anci

al O

ffic

erN

ee

rja S

harm

a C

om

pan

y S

ecre

tary

Pla

ce

:G

urg

aon

Date

:2

7th

May

, 2

00

9

123

GlossaryABBREVIATIONS AND FULL FORMS FOR MAIN TERMS USED IN THIS ANNOUNCEMENT

CORPORATE

AGM Annual General Meeting

Board The Board of Directors of Cairn India Limited

BSE Bombay Stock Exchange Ltd

Cairn Cairn India Limited and its subsidiaries

CEIL or CEIPL Cairn Energy India Pty Limited

CIG Cairn India Group

CIHL Cairn India Holdings Limited

Company Cairn India Limited

DGH Director General of Hydrocarbons

EGM Extraordinary General Meeting

FDP Field Development Plan

GoI Government of India

IP Institutional Plan

IPO Initial Public Offering

ISIN International Securities Identifying Number

ITC Item code No.

KPI Key Performance Indicator

LACP Land Acquisition and Compensation Plan

LTIP Long Term Incentive Plans

MoPNG Ministry of Petroleum and Natural Gas

MPT Mangala Processing Terminal

NELP New Exploration Licensing Policy

NRI Non Resident Indian

NSE National Stock Exchange of India Limited

ONGC Oil and Natural Gas Corporation Limited

PRA Production Resources Agreement

PCDP Public Consultation and Disclosure Plan

PSC Production Sharing Contract

RoU Right of Use

SEBI Securities and Exchange Board of India

SME Small & Medium Enterprise

TECHNICAL

1P Proven

2P Proven plus Probable

3D 3 Dimensional

3P Proven plus Probable and Possible

AGI Above Ground Installation

API American Petroleum Institute

ASP Alkali Surfactant Polymer

boepd barrels of oil equivalent per day

bopd barrels of oil per day

bscf billion standard cubic feet

BTU British Thermal Unit

°C Celcius

CO2

Carbon Dioxide

DG Diesel Generator

E & P Exploration and Production

EC Enterprise Centre

EOR Enhanced Oil Recovery

GHG Green House Gas

GJ Giga Joule

Kbopd Thousand barrels of oil per day

Km Kilo Meter

Km2 Square Kilo Meter

MARS Mangala, Aishwariya, Raageshwari and Saraswati

MBA Mangala, Bhagyam and Aishwariya

mmbbls million barrels

mmboe million barrels of oil equivalent

mmscfd million standard cubic feet of gas per day

mmstb million stock tank barrels

MW Mega Watt

MWH Mega Watt per Hour

pigs pipeline inspection gauges

SEHMS Skin Effect Heat Management System

STOIIP Stock Tank Oil Initially in Place

ACCOUNTING

$ US Dollar

ADR American Depository Receipt

AS Accounting Standard

AUS $ Australian Dollar

BDC Base Development Costs

CAGR Compounded Annual Growth Rate

CIESOP Cairn India Employee Stock Option Plan

CIPOP Cairn India Performance Option Plan

CISMP Cairn India Senior Management Plan

EPS Earnings per share

ESOP Employee Stock Option Plan

EUR Euro - currency

FBT Fringe Benefit Tax

GDR Global Depository Receipt

H1 First Half

ICAI Institute of Chartered Accounts of India

IFC International Finance Corporation

IFRS International Financial Reporting Standards

INR Indian Rupees

LIBOR London Inter Bank Offered Rate

MAT Minimum Alternate Tax

NLG Dutch Guilder - currency

NPV Net Present Value

PTRR Post Tax Rate of Return

CORPORATE RESPONSIBILITY

AIR All India Radio

CAB Corporate Advisory Board

CEDPA Centre for Development and Population Activities

CSR Corporate Social Responsibility

IAY Indira Awas Yojna

ISO International Organisation for Standardization

ITI Industrial Training Institute

NGO Non Government Organisation

NGRI National Geophysical Research Centre

PCDP Public Consultation and Disclosure Plan

PWRI Produced Water Re Injection

RGT Reproductive and Child Health

TERI The Energy Resources Institute


Notes

Company Information

board of directors Sir William B.B. Gammell (Chairman)

Malcolm Shaw Thoms (Deputy Chairman)

Jann Brown

Naresh Chandra

Dr Omkar Goswami

Aman Mehta

Edward T. Story

Rahul Dhir (Managing Director & Chief Executive Offi cer)

Indrajit Banerjee (Executive Director & Chief Financial Offi cer)

Rick Bott (Executive Director & Chief Operating Offi cer)

board committees

Audit CommitteeAman Mehta (Chairman)

Naresh Chandra

Dr Omkar Goswami

Edward T. Story

Jann Brown

Remuneration CommitteeNaresh Chandra (Chairman)

Sir William B.B. Gammell

Malcolm Shaw Thoms

Aman Mehta

Dr Omkar Goswami

Nomination CommitteeSir William B.B. Gammell (Chairman)

Rahul Dhir

Jann Brown

Malcolm Shaw thoms

Edward T. Story

Shareholders’ / Investors’ Grievance CommitteeDr Omkar Goswami (Chairman)

Naresh Chandra

Rahul Dhir

company secretaryNeerja Sharma

statutory auditorsS.R. Batliboi & Associates

Golf View Corporate Tower B

Sector 42, Sector Road


bankersCitibank | State Bank of India | ABN AMRO

stock exchanges listed onBombay Stock Exchange Limited

National Stock Exchange of India Limited

registered office 101, West View

Veer Savarkar Marg

Prabhadevi


corporate office3rd & 4th Floors, Vipul Plaza

Sun City, Sector 54


registrar & share transfer agentLink Intime India Private Limited

(formerly Intime Spectrum Registry Limited)

C-13, Pannalal Silk Mills Compound

L.B.S.Marg , Bhandup (West)


Contents Highlights

Total acreage of theRajasthan fi elds

3,111 km2

Nearly the same as the combined area of National Capital Region of Delhi and Greater London

Area of the Mangala Processing Terminal (MPT) 1.6 km2

or approximately 400 acresEquivalent to 200 football grounds, or 27 times the size of the Eden Garden cricket ground at Kolkata, or three times the area of the Red Fort Complex in Delhi

Mangala, Bhagyam and Aishwariya plan to produce 175,000bopd(barrels of oil per day)

At peak production which is estimated to account for more than 20% of India’s crude oil production

Total capacity of the four trains of the MPT

205,000bopd

The MPT will have four crude oil processing trains, together designed to handle a total capacity of 205,000 bopd.

These are:TRAIN 1 Capacity of 30,000 bopd from the Mangala fi eld which is ready to start production. Initial evacuation by trucking

TRAIN 2 Capacity of 50,000 bopd, also from the Mangala fi eld is targeted for completion by Q4 2009, along with the heated pipeline.

TRAIN 3 Capacity of 50,000 bopd — targeted for completion in H1 of 2010. Will access the plateau production of the Mangala fi eld

TRAIN 4 Capacity of 75,000 bopd, designed to accommodate production from Bhagyam and Aishwariya and further expansion. Will be commissioned by 2011

2 Board of Directors

4 Letter from the CEO

6 Management Discussion and Analysis

32 Cairn Milestones

34 Corporate Social Responsibility

40 Report on Corporate Governance

58 Directors’ Report

65 Auditors’ Report

68 Balance Sheet

69 Profit and Loss Account

70 Statement of Cash Flows

71 Schedules to the Financial Statements

92 Balance Sheet Abstract and Company’s General Business Profile

93 Auditors’ Report on Consolidated Financial Statements

94 Consolidated Balance Sheet

95 Consolidated Profit and Loss Account

96 Consolidated Statement of Cash Flows

97 Schedules to Consolidated Financial Statements

123 Glossary

Cairn Ind

ia Limited

Annual Report and Financial Statem

ents 2008–09

Cairn India Limited3rd & 4th Floors, Vipul Plaza, Sun CitySector 54, Gurgaon 122 002, India

www.cairnindia.com

Des

igne

d by

ww

w.i

cdin

dia

.com

& P

rinte

d at

Tho

mso

n Pr

ess

cairn india

Documents

Transcript of cairn india