Description
The report for the financial year 2009 - 2010 of cairn india.
Energy for India
ANNUAL REPORT & FINANCIAL STATEMENTS
Securing Energy
Fuelling Growth
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Cairn India Limited
3rd & 4th Floors, Vipul Plaza, Sun City
Sector 54, Gurgaon 122 002, India
+91 124 270 3000
www.cairnindia.com
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COMPANY I NFORMATI ON
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 Of?cer)
Indrajit Banerjee (Executive Director & Chief Financial Of?cer)
Rick Bott (Executive Director & Chief Operating Of?cer)
BOARD COMMITTEES
Audit Committee
Aman Mehta (Chairman)
Naresh Chandra
Dr Omkar Goswami
Edward T. Story
Jann Brown
Remuneration Committee
Naresh Chandra (Chairman)
Sir William B.B. Gammell
Malcolm Shaw Thoms
Aman Mehta
Dr Omkar Goswami
Nomination Committee
Sir William B.B. Gammell (Chairman)
Rahul Dhir
Jann Brown
Malcolm Shaw Thoms
Edward T. Story
Shareholders’ / Investors’ Grievance Committee
Dr Omkar Goswami (Chairman)
Edward T. Story
Rahul Dhir
COMPANY SECRETARY
Neerja Sharma
STATUTORY AUDITORS
S.R. Batliboi & Associates
Golf View Corporate Tower B
Sector 42, Sector Road
Gurgaon 122 002, India
BANKERS
State Bank of India | Standard Chartered Bank |
Deutsche Bank | Citibank
STOCK EXCHANGES LISTED ON
Bombay Stock Exchange Limited
Phiroze Jeejeebhoy Towers,
Dalal Street, Mumbai – 400 001
Tel +91 22 22721233/4
Fax +91 22 22721919
National Stock Exchange of India Limited
Exchange Plaza,
Plot No, C/1, G Block,
Bandra-Kurla Complex,
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Mumbai – 400 051
Tel +91 22 26598100-8114
Fax +91 22 26598120
REGISTERED OFFICE
101, West View
Veer Savarkar Marg
Prabhadevi
Mumbai 400 025, India
Tel +91 22 24338306
Fax +91 22 24311160
CORPORATE OFFICE
3rd & 4th Floors, Vipul Plaza
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Tel +91 124 2703000
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REGISTRAR & SHARE TRANSFER AGENT
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Contents
Board of Directors
Chairman's letter
Managing Director and CEO's letter
Management Discussion and Analysis
Securing Energy, Fuelling Growth
Delivering to the Nation
Corporate Social Responsibility
Report on Corporate Governance
Additional Shareholder Information
Directors’ Report
Auditors’ Report
Balance Sheet
Pro?t and Loss Account
Statement of Cash Flows
Schedules to the Financial Statements
Balance Sheet Abstract and
Company’s General Business Pro?le
Auditors’ Report on
Consolidated Financial Statements
Consolidated Balance Sheet
Consolidated Pro?t and Loss Account
Consolidated Statement of Cash Flows
Schedules to Consolidated
Financial Statements
Glossary
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128
The operational activity was largely focused on the development of
the Mangala Processing Terminal (MPT) at Barmer, Rajasthan and
the crude oil pipeline. The MPT is designed to process crude from
the Mangala, Bhagyam and Aishwariya (MBA) ?elds and will have a
capacity to handle 205,000 barrels of oil per day (bopd) of crude with
scope for further expansion.
The MPT consists of four processing trains
Train One, with a capacity of 30,000 bopd, was commissioned on 29 August, 2009, with
crude oil being trucked to the Kandla port for shipping to both Public Sector Undertaking
(PSU) and private re?ners.
Train Two, with a capacity of 50,000 bopd, commenced production in May 2010.
Train Three, with a capacity of 50,000 bopd, will be completed by June 2010.
Train Four, with a capacity of 75,000 bopd, is expected to come on stream in CY 2011.
The ~590 km heated and insulated crude oil pipeline from Barmer in Rajasthan to Salaya
in Gujarat is complete. Crude oil was introduced into the pipeline in May 2010. By June
2010, it will supply crude to private re?ners and to Indian Oil Corporation Limited in
early July, 2010.
Sales arrangements are in place for 143,000 bopd of Rajasthan crude.
81 wells including six horizontals have been drilled. Horizontal wells tested at an average
rate of more than 11,500 bopd, the highest ever production rate for an onshore well in India.
The potential resource base for the Rajasthan block is now estimated to be 6.5 billion
barrels of oil equivalent (boe) in place. The discovered resource base has increased
from 3.7 billion boe to 4 billion boe in place. As a result of the exploration potential, the
prospective resource base is now estimated at 2.5 billion boe in place.
The Rajasthan resources provide a basis for a vision to produce 240,000 bopd, subject to
Government of India (GoI) approval and additional investment.
The Rajasthan project is now well funded, with Cairn India having completed the ?nancing
arrangements for USD 1.6 billion at competitive pricing — comprising international
borrowing of USD 750 million and domestic borrowing of INR 4,000 crore (USD 850 million).
Gross operated production was 69,059 barrels of oil equivalent per day (boepd) and net
working interest was 24,957 boepd. This takes into account the Rajasthan production from
29 August, 2009.
THE HEADLI NES FOR FI NANCI AL YEAR 2009- 10
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2.5 billion BOE
PROSPECTIVE
4 billion BOE
DISCOVERED
USD 750 million
INTERNATIONAL
BORROWING
USD 850 million
DOMESTIC
BORROWING
2 CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10
SI R BI LL GAMMELL
Chairman and Non-Executive Director
Sir Bill Gammell, 57, holds a BA in
Economics and Accountancy from Stirling
University and was awarded a knighthood in
2006 for services to the industry in Scotland.
He has over 25 years of experience in the in-
ternational oil and gas industry. He founded
Cairn Energy PLC and was appointed Chief
Executive on its initial listing in 1988. He is
the Chairman and Non-Executive Director of
Cairn India Limited and is a member of the
Asia Task Force and the UK India Business
Council. Sir Gammell, who is an ex-Scotland
rugby internationalist, is also Chairman of
Winning Scotland Foundation and a Director
of Sport Scotland and Glasgow 2014 Limited
and a member of the British Olympic
Advisory Board.
MR RAHUL DHI R
Managing Director and CEO
Mr Rahul Dhir, 44, joined Cairn India in
May 2006 as the Chief Executive Of?cer
and was appointed the Managing Director
on 22 August, 2006. He completed his
degree in Bachelor of Technology from the
Indian Institute of Technology, Delhi. He
went on to complete his M.Sc from the
University of Texas at Austin and MBA
from the Wharton Business School in
Pennsylvania. Mr Dhir started his career
as an oil and gas reservoir engineer before
moving into investment banking. He has
worked at SBC Warburg, Morgan Stanley
and Merrill Lynch. Before joining Cairn
India, he was the Managing Director and
Co-Head of Energy and Power Investment
Banking at Merrill Lynch.
MR RI CK BOT T
Executive Director and COO
Mr Rick Bott, 50, was appointed as
Additional Director on 29 April, 2008 and
assumed of?ce of Executive Director and
Chief Operating Of?cer with effect from 15
June, 2008. Mr Bott holds a B.S in Marine
Sciences and Masters in Geology from
Texas A&M. Mr Bott has global exploration
and production experience of more than
21 years and has served in several senior
positions in Ocean Egypt Companies,
Ocean Yemen Corporation, British Gas,
and Tenneco. Before joining Cairn India,
he was Vice President of Devon Energy’s
International Division, responsible for
developing and implementing business
growth and exploration strategy for assets in
12 countries outside of North America.
MR I NDRAJ I T BANERJ EE
Executive Director and CFO
Mr Indrajit Banerjee, 54,was appointed as
an Additional Director on 26 February,
2007 and as the Executive Director and
Chief Financial Of?cer on 1 March,
2007. He graduated from the University
of Calcutta with a Bachelor’s Degree in
Commerce. An associate member of the
Institute of Chartered Accountants of
India, Mr Banerjee started his career at
PriceWaterhouse Coopers in Calcutta in
1979. He has held several senior posi-
tions throughout his career, including 17
years at the Indian Aluminium Company,
formerly part of the Alcan Group and at
Lucent Technologies (India). Before joining
Cairn India, he was President-Finance and
Planning at Lupin Limited.
Board of Directors
3 BOARD OF DI RECTORS
MR AMAN MEHTA
Non-Executive and
Independent Director
Mr Aman Mehta, 63, is an economics
graduate from Delhi University. He was
earlier the Chief Executive Of?cer of
HSBC Asia Paci?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.
MR NARESH CHANDRA
Non-Executive and
Independent Director
Mr Naresh Chandra, 75, holds an MSc. in
Mathematics from Allahabad University
and is a retired IAS of?cer.Previously,
Mr Chandra was the Chairman of the
Committee on Corporate Governance,
India’s Ambassador to the USA, Advisor
to the Prime Minister, Governor of
Rajasthan, Cabinet Secretary to the
Government of India, and Chief Secretary
to the Government of Rajasthan. A reputed
administrator and diplomat, Mr Chandra
serves as an independent director on the
boards of a number of companies.
DR OMKAR GOSWAMI
Non-Executive and
Independent Director
Dr Omkar Goswami, 53, holds a Master
of Economics 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 procedures, economic policy,
corporate ?nance, corporate governance,
public ?nance, tax enforcement and legal
reforms.
MR EDWARD T STORY
Non-Executive and
Independent Director
Mr Edward T Story, 66, is a science
graduate from Trinity University, San
Antonio, Texas and holds a Masters degree
in Business Administration from the
University of Texas and has been con-
ferred an honorary Doctorate degree by
the Institute of Finance and Economics
of Mongolia. He is the Chairman of
the North America Mongolia Business
Council. Mr Story has more than 40 years
of experience in the international oil and
gas industry and is the founder, President
and Chief Executive Of?cer of the LSE
listed SOCO International PLC.
MS J ANN BROWN
Non-Executive Director
Ms Jann Brown, 55, was appointed Finance
Director of Cairn Energy PLC in 2006
and is also a Non-Executive Director of
Cairn India Limited. 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. Prior to her appoint-
ment 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. She is the
Senior Independent Director of Hansen
Transmissions International NV, a Belgian
engineering company, which is listed on
the London Stock exchange.
MR MALCOLM SHAW THOMS
Non-Executive Director
Mr Malcolm Shaw Thoms, 54, holds a BSc
Hons degree in Physics from Edinburgh
University. He is an MBA from Heriot-
Watt University and is currently trustee of
the University of Edinburgh Development
Trust. He started his career in the oil
industry with Schlumberger and became
the manager of their businesses in Qatar
and Brunei. He joined Cairn Energy PLC
in 1989 and held a number of senior
management positions prior to his ap-
pointment as Executive Director in 2000.
Currently, the Chief Operating Of?cer of
Cairn Energy PLC, Mr Thoms is a Non-
Executive Director of Cairn India Limited
and has recently been appointed as a Non-
Executive Director of Agora Oil & Gas AS.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 4
NIGHT VIEW OF TRAIN ONE FACILITIES AT
THE MANGALA PROCESSING TERMINAL
5
First oil from Rajasthan in August 2009 and the
subsequent ?ow of crude through the world’s lon-
gest continuously heated and insulated oil pipe-
line has been the culmination of a journey of part-
nership and co-operation between your Company
and the Government of India, the Government
of Rajasthan, the Government of Gujarat, the Oil
and Natural Gas Corporation (ONGC) and other
stakeholders.
It was a great honour to have the Honourable
Prime Minister of India, Dr Manmohan Singh,
inaugurate the Mangala Processing Terminal on
29 August, 2009. It was a proud day for everybody
involved in the growth of Cairn India.
Six years on from the major discovery of
Mangala in January 2004, the development in
Rajasthan is starting to deliver for the government
and the people of India. It has been a huge achieve-
ment to develop this project in the middle of a des-
ert, and to construct the pipeline from Rajasthan
to the coast of Gujarat, which will eventually allow
access to 75 per cent of India’s re?ning capacity.
At the peak of construction, more than 16,000
people were involved in building the Mangala
Processing Terminal, the pipeline and related
infrastructure — making it one of the biggest
oil and gas production developments in India in
recent years.
When the Rajasthan ?elds are on production
at the current approved peak production plateau
rate of 175,000 bopd, Cairn India, along with
its joint venture partner ONGC, will account
for more than 20 per cent of India’s overall oil
output. Your Company has a belief and vision that,
subject to further investment and approval from
the Government of India, the Barmer Basin can
produce 240,000 bopd.
The Mangala ?eld is one of the 25 discoveries
that have been made in the Barmer Basin, and I
look forward to many long years of production as
additional ?elds are appraised, developed and tied
in to this world-class infrastructure.
Working effectively with government agencies
and partners is fundamental wherever we operate.
But the Rajasthan development has meant even
more intense and continuous co-operation. The
support of the Government of India, the state
governments, ONGC, local communities and key
contractors has been vital in helping complete this
national asset. I would personally like to thank all
who have played their part in developing this key
project for the country.
With a strong and sustainable cash ?ow, Cairn
India is well positioned for future growth. It is
focused on maximising value from the phased
development of the Rajasthan resource base in the
coming years.
May your Company thrive—and with it, India.
Sir Bill Gammell
Chairman
CHAI RMAN' S LETTER
Chairman’s Letter
Dear Shareholder,
Your company is helping to play a part in meeting the energy security needs of
India with oil and gas production from its operations across the country.
While consumption of oil across the globe in the last year has dipped, it continues
to rise in India. The International Energy Agency, a policy and research group
based in Paris, has forecast in November 2009 that India’s energy demand would
more than double by 2030. With GDP in India predicted to continue at its current
rate the country will need energy to help meet its economic growth. Your company
ultimately has the potential to produce more than 20 percent of India’s crude
output that will go towards meeting the country’s energy needs. The development
in Rajasthan has a key role to play in the energy security plans of the country.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 6
By the time you read this, your Company will
be in a position to produce 130,000 bopd from
Barmer. By next year, Cairn India’s production
from Rajasthan will be at 175,000 bopd — or over
a ?fth of India’s crude oil output.
It has been an incredible journey. As I look
back over the last two years, it has been the story
of a team of committed and dedicated people
overcoming one challenge after another.
Think about it: More than 16,000 people work-
ing in deserts of Rajasthan and northern Gujarat
where the day temperature soars to between 46°C
and 51°C. Ensuring each of the many thousand
processes and parts were up and ready in time,
despite huge infrastructure constraints, was a
huge achievement. Consider some of the big ele-
ments of the project:
Setting up various wells at Mangala, using the
latest technology to get not only the maximum
throughput but also the maximum life out of each well
Securing the gas supply which is 90 km away
from the Mangala Processing Terminal to ?re the
boilers to drive the steam turbines at the process-
ing terminal and to heat the pipeline
Piping saline water from a sub-surface reservoir
to be used to pump out the crude and to be desali-
nated, creating steam and drinking water
Constructing a state-of-the-art processing
terminal at Mangala with thousands of different
elements and equipment — a terminal that can
process up to 205,000 bopd, with ?exibility for
further expansion
Creating a massive closed loop system to con-
serve and re-use environmental resources in the
most energy ef?cient manner
Building a ~590 km continuously heated and
insulated 24” pipeline from Barmer in Rajasthan
to Salaya in Gujarat with a terminal at Viramgam
and 36 heating stations approximately 18 km
apart along the route. The next segment to the
coast at Bhogat will follow soon.
That’s not all. Consider the kind of cutting edge
technologies that your Company has put to use:
the drilling of horizontal wells, pad-based drilling,
rapid rigs and world-class well designs, enhanced
oil recovery, skin effect heat management system
using electric heat induction technology to heat
the length of the pipeline at a constant tempera-
ture above 65°C, hydro-fracturing of less perme-
able reservoirs, and many others. All these have
been tested, modi?ed, optimised and implement-
ed in your Company’s Rajasthan project.
These activities — both in the upstream and
midstream — cost a great deal of money. The
challenge, therefore, was to secure funds at
globally competitive rates. At a time when the
world was reeling under the ?nancial crisis, your
Managing Director
and CEO’s Letter
Dear Shareholder,
I write this letter with a sense of ful?lment. The management of Cairn India
Limited, with the support of our joint venture partner, ONGC, has delivered its
promise of supplying crude oil to our nation.
On 29 August, 2009, Dr Manmohan Singh, the Honourable Prime Minister of
India, inaugurated the Company’s ?rst oil from the Mangala Processing Terminal
at Barmer, and dedicated the ?eld to the nation. Initially, the oil from Train One
of up to 30,000 bopd was being trucked to different re?neries. In May 2010, Train
Two with a capacity of 50,000 bopd was commissioned. In June 2010, the ~590
km heated pipeline from Barmer to Salaya in Gujarat was made operational. As
I write, oil is ?owing through this pipeline to Indian Oil Corporation and private
re?ners. And Train Three, with a capacity of another 50,000 bopd, has become
operational.
7 MANAGI NG DI RECTOR AND CEO' S LETTER
Company’s management succeeded in raising
USD 1.6 billion at internationally competitive
rates — International borrowing facility of USD
750 million and domestic borrowing facility of
INR 4,000 crore (USD 850 million). This has
been used to repay the existing debt of USD
850 million and fund the ongoing projects in
Rajasthan. It was a great honour that this ?nanc-
ing arrangement was awarded the Oil & Gas Deal
of the Year (in Asia).
It is one thing to pump and ?ow the oil, and
to ?nance it; it is yet another to ?nd the buyers.
Here too, your Company has performed very
well. It has secured approval of multiple delivery
points, got the green light for selling to private
sector re?neries, locked in multiple buyers,
achieved a pricing benchmarked to low sulphur
international crude at a 10% to 15% discount to
Dated Brent, and has already got commitments
for 143,000 bopd as of 31 March, 2010.
Thanks to an outstanding job executed by your
Company’s upstream and midstream teams,
the operating expense of Rajasthan — includ-
ing the pipeline — is estimated at ~USD 5
per barrel. Even after adding the interest and
overhead charges, the cost of Rajasthan oil will
be in the neighbourhood of USD 10 per barrel.
Therefore, under any realistic pricing scenario,
your Company should generate returns for all its
stakeholders.
Today, it is not enough to be operationally
successful and therefore pro?table. Companies
like ours must consciously strive to meet societal
goals. I am proud to say that Cairn India has
played a leading role in this front — from the per-
spective of both the environment and corporate
social responsibility. The chapter on Management
Discussion and Analysis, a part of this Annual
Report gives a summary of your Company’s
achievements in occupational health, safety and
environment (HSE). And a separate chapter on
corporate social responsibility (CSR) lists the vari-
ous initiatives that Cairn India carries out in this
regard. I am as satis?ed with your Company’s
HSE and CSR activities as I am with its opera-
tions in Rajasthan, Ravva and Cambay.
You will read about all these and more in the
chapters that follow. It is now required of me to
thank six sets of stakeholders.
First, the Government of India, the Government
of Rajasthan and the Government of Gujarat, who
have been exemplary in their support
Second, the people, local communities, non-
governmental organisations and district authori-
ties in Rajasthan and Gujarat, who have co-oper-
ated and worked with us throughout the period
Third, ONGC,our partner in the Rajasthan proj-
ect, without whose steady and supporting hand
little could have been achieved
Fourth, the various suppliers, contractors and
contracting companies that helped set up the
Mangala Processing Terminal and the pipeline
Fifth, the team leaders and each and every em-
ployee of Cairn India, who together ensured that
we will overcome all odds and forge ahead
And ?nally, to you, for your faith in Cairn
India’s ability to deliver long term value.
It has been a great journey. And it will be even
better in the years to come. Stay with us!
Thank you for your support.
Rahul Dhir
Managing Director and CEO
It has been the
story of a team
of committed and
dedicated people
overcoming one
challenge after
another
8 CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 8
Delivering to
the Nation
MANAGEMENT
DISCUSSION AND ANALYSIS
MANAGEMENT DI SCUSSI ON AND ANALYSI S 9
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 10
The Mangala ?eld is not the beginning of the
involvement with the Indian hydrocarbon sector for
Cairn India Limited (‘Cairn India’, ‘CIL’, ‘Cairn’ or
‘the Company’). We started in India some 15 years
ago with the operating rights of the Ravva block in
the Krishna-Godavari basin of Andhra Pradesh.
From then on it has been an eventful journey: one
of India’s fastest discovery to production stories
was witnessed in the CB/OS-2 block (in Cambay,
off the coast of Gujarat); a doubling of reserves and
sustenance of plateau rates in the Ravva block for
more than nine years; 25 discoveries in Rajasthan
including the landmark Mangala discovery, whose
oil now ?ows to various re?neries in the country.
Nor is Mangala the end. In Rajasthan alone, the
Company has discovered other ?elds viz. Bhagyam
and Aishwariya, which will be on stream in the
near future, and is actively exploring the potential
of future developments in the further 22 discover-
ies, incluing the Barmer Hill tight reservoirs. Cairn
is also conducting systematic exploratory work in
several other onshore and offshore areas in India
and off the coast of Sri Lanka where the Company
believes there is signi?cant hydrocarbon potential.
As an Indian listed company, Cairn India is com-
mitted to securing energy for the nation — thus
fuelling its growth.
In this chapter on Management Discussion and
Analysis, we begin with Rajasthan — the MPT,
the heated and insulated pipeline, Rajasthan crude
sales, enhanced oil recovery and hydrocarbon
resources in the area. We then move on to the
Company’s other operating assets. Thereafter,
we discuss exploration. This is followed by the
Company’s human resources and health, safety
and environment. The chapter concludes with
internal controls and their adequacy, ?nancial re-
sults, business risks and the business outlook. The
Company’s focus on CSR is outlined in the chapter
that follows.
As an Indian listed
company, Cairn India
is committed to
securing energy for
the nation
29
was a red-letter day in the history of Cairn India Limited.
Dr Manmohan Singh, the Honourable Prime Minister of India,
dedicated the Mangala ?eld to the nation and inaugurated the Company’s ?rst oil
production from the Mangala Processing Terminal at Barmer, Rajasthan in the
presence of Shri Ashok Gehlot, the Honourable Chief Minister of Rajasthan and
Shri Murli Deora, the Honourable Union Minister for Petroleum & Natural Gas.
Crude oil has started ?owing through the world’s longest continuously heated and
insulated pipeline from MPT, in Barmer to Salaya in Gujarat, in preparation of
sales to some of the major re?neries in India. Soon, Cairn India’s production from
Rajasthan, at the currently approved rate of 175,000 bopd, will account for more than
20% of India’s domestic crude oil production.
AUG
2009
MANAGEMENT DI SCUSSI ON AND ANALYSI S 11
The
Rajasthan
Project
In essence, the Rajasthan project is about com-
mercialising the world class discoveries, getting
the oil and gas production to market and nurtur-
ing and enhancing the resource base in the region
— thus providing additional supply of energy that
is vital for India’s growth needs. It involves four
sets of activities:
Producing crude oil from the three main fields
?rst Mangala, then Bhagyam and Aishwariya,
followed by other ?elds through the
development and operations of the MPT.
Flowing crude through the continuously heated
and insulated pipeline from the MPT at Barmer
to Bhogat on the coast of Gujarat via Viramgam
and Salaya.
Enhancing Rajasthan’s resources through tech-
nology applications in reservoir development,
management, enhanced oil recovery (EOR),
focused development efforts in low permeabil-
ity reservoirs such as the Barmer Hill and the
phased development of other ?elds.
Further exploration in other parts of the
Rajasthan block, which is spread over 3,111 km
2
,
where the Company believes there are signi?-
cant prospects.
Cairn came into Rajasthan in the late 1990s,
when it acquired an interest in the block RJ-ON-
90/1. It soon realised that the area was rich in
The Rajasthan Fields
BHAGYAM
N-I -NORTH
SHAKTI
SHAKTI NE
N-I
NC WEST OI L & GAS
BHAGYAM SOUTH
MANGALA
MANGALA BARMER HI LL
AI SHWARIYA
N-E
VANDANA
VIJAYA
GS-V
SARASWATI CREST
SARASWATI
KAAMESHWARI
RAAGESHWARI OI L
SHAHEED TUKARAM OMBALE
RAAGESHWARI DEEP GAS
GUDA
OI L FI ELD
GAS FI ELD
OI L DI SCOVERY
GAS DI SCOVERY
OI L SHOWS
OI L DI SCOVERY & GAS SHOWS
CURRENT OPERATIONS
DEVELOPMENT AREA 2
Awarded November 2008
N-P
DEVELOPMENT AREA 3
Awarded December 2008
KAAMESHWARI WEST-6 GAS
KAAMESHWARI WEST-3 GAS
KAAMESHWARI WEST-2 OI L
DEVELOPMENT AREA 1
Awarded October 2004
0 5
KI LOMETRES
10 20
I NDI A
HONOURABLE PRIME MINISTER OF INDIA,
DR MANMOHAN SINGH, INAUGURATING FIRST
OIL PRODUCTION FROM THE MANGALA FIELD
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 12
MPT’s Four Oil Processing Trains
Train One Capacity of 30,000 bopd from
the Mangala ?eld which was inaugurated
by our Prime Minister on 29 August, 2009,
and is on stream.
Train Two Capacity of 50,000 bopd, also
from the Mangala ?eld, which commenced
production in May 2010.
Train Three Capacity of 50,000 bopd is
targeted for completion in June 2010 — to
access the plateau production from the
Mangala ?eld.
Train Four Capacity of 75,000 bopd,
designed to accommodate production
from Bhagyam and Aishwariya and further
expansion, will be commissioned in 2011.
hydrocarbons and possessed 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, the Mangala Field was discovered
which is considered to be the largest onshore
discovery in India in the last 25 years. This was
followed by the key discoveries at Bhagyam and
Aishwariya, which along with Mangala, comprise
the MBA ?elds. To date, 25 discoveries have been
made in the Rajasthan block.
Cairn India is the operator of the Rajasthan
block with a 70% participating interest and its joint
venture (JV) partner, ONGC has a 30% participat-
ing interest.
The Rajasthan block consists of three
contiguous development areas
Mangala, Aishwariya, Raageshwari and Saraswati 1
(MARS) fields
Bhagyam and Shakti fields 2
Kaameshwari West fields 3
The commercialisation and development phases
have resulted in successive de-risking of the value
of these assets by removing the binary risks that
were present at the end of the Exploration Phase.
Rajasthan is considered a relatively low risk onshore
project versus working in the offshore environ-
ment with its inherently high costs and operational
challenges. The wells are relatively shallow; and
the team has a good understanding of the reser-
voirs through extensive appraisal and development
work. The Rajasthan crude can be extracted using
industry best practices in oil?eld technology; and
recovery is expected to be further enhanced through
proven tertiary methods, such as EOR.
More than 350 wells and over 40 well pads are
currently planned across the Rajasthan ?elds. At
the current approved peak production rate from
the MBA ?elds of 175,000 bopd, Cairn India will
contribute more than 20% of India’s crude oil
production by 2011. Subject to GoI approval and
additional investments, the Rajasthan resource
base now provides a basis for a vision to produce
240,000 bopd — or 37% more than the currently
approved peak production, which could ultimately
translate to about 35% of India’s domestic crude oil
production.
In the ?rst month of operation Train 2 operated
at 97% ef?ciency and con?rmed nameplate capac-
ity. To date, both Trains One and Two have together
processed over 4 million barrels of crude oil.
The Mangala Processing Terminal
(MPT) has been designed as a
centralised hub facility to handle
crude oil production from the MBA
?elds as well the smaller ?elds
that have been discovered by the
Company. It will be able to process
205,000 bopd of crude; and has
been designed with suf?cient
?exibility to be later expanded to
process more crude, depending
upon the resource potential of
the block. The resource base
established in the block provides
a vision to produce 240,000
bopd, subject to further regulatory
approvals and aditional investments.
THE MANGALA PROCESSI NG TERMI NAL
At the currently
approved peak
production rate of
175,000 bopd from the
MBA ?elds, Cairn India
will contribute more
than 20% of India’s
crude oil production by
2011
Subject to GoI
approval and
additional investment,
the Rajasthan resource
base now provides the
basis for a vision to
produce 240,000 bopd
— or 37% more than
the currently approved
peak production rate,
which could ultimately
translate to about 35%
of India’s domestic
crude oil production
MANAGEMENT DI SCUSSI ON AND ANALYSI S 13
The MPT uses boilers to produce steam, which drives the
turbines to generate power. A closed loop system of steam
condensate recovery helps to meet the feed water requirement
of boilers and the heating requirement of various process units
and also the power ?uid for injection into the oil wells. This
closed loop system has resulted in ef?cient power management
and in turn, has resulted in lower emissions.
Sub-surface saline water is transported to the MPT by a 20”
pipeline from the Thumbli reservoir, which is 22 km from the
terminal.
Some of this water is desalinated to:
feed the ?ve boilers at the MPT to generate steam for heating,
drive the turbines to generate electricity as well as to aid water-
?ooding of the oil reservoirs, and
supply drinking and bathing water at the terminal.
The remaining saline water, with some steam, is injected into the
oil reservoirs for the extraction of crude. Any excess water in this
?ooding is trapped and re-used.
Gas is needed to ?re the boilers to generate steam, which in
turn generates the power to heat the waxy crude at an average
of 65°C along the pipeline. It comes from the Raageshwari gas
?eld, located some 90 km away from the MPT. 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). It is transported via a 12” gas pipeline to
the MPT and the gas liquids, or condensate, by a separate 4”
pipeline.
OIL RECOVERY SYSTEM
THE CLOSED LOOP SYSTEM
PANORAMIC VIEW OF THE
MANGALA PROCESSING TERMINAL
14 CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10
ENVI RONMENT MANAGEMENT AT THE MPT
The MPT facility has been designed to conserve and
minimise the impact on the surrounding environment.
There is almost zero surface disposal of any solid or
liquid waste. The facility meets its water demand from
the abundant supply of sub-surface saline water, without
any need to draw on scarce freshwater resources of
the area. Its energy demands are met by utilising the
associated gas produced from the separation of well
?uid, backed up by gas from the Raageshwari gas ?eld.
Power generation is achieved by using steam as the
means to transfer energy in a closed loop cycle — with
the medium and low pressure steam being utilised for
heating. A closed drainage system routes all hydrocarbon
liquid discharges to tanks, from where these circulate
back for reprocessing. All vapour emissions from vessels
and tanks are directed to the vapour recovery system
where these are pressure-conditioned and compressed
— to be fed back into the fuel gas system. At the MPT,
gas ?aring is only done in the case of an emergency.
There is also no cold venting of gas at the MPT.
All waste-water, reject water and wash water are routed
to the injection water system for re-injection into the oil
reservoir. In case of any operational issue — where a
speci?c type of waste water discharge cannot be mingled
with the injection stream— there is a provision for solar
evaporation ponds and deep dump wells, which can help
in the disposal without causing any environmental harm.
In addition, there is a dedicated secure land?ll facility
complying with the national standards on land?ll design
for the storage and disposal of non-recyclable wastes.
14 CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10
MANAGEMENT DI SCUSSI ON AND ANALYSI S 15
Saline water sourcing
The MPT facility utilises sub-surface
saline water to meet its operational
and potable water needs. The Thumbli ?eld,
22 km south-east of the MPT, is a massive
saline water underground reservoir. The
fresh water lens rides over the saline water
— and is located 12 km north-west of the
saline water abstraction zone. The country’s
regulatory body has accorded its approval
for saline water abstraction after carefully
reviewing the results of the detailed
modelling study. An extensive and ongoing
groundwater monitoring programme is
in place to monitor the behaviour of the
various aquifer systems in response to
the saline water abstraction. The systems
are designed to give early warning of
any potential issue so that they can be
corrected before problems arise.
Freshwater
The freshwater requirements of
the MPT are met by desalination
of about 4,000 cubic metres of water per
day. The reject water from the desalination
process is co-mingled with the well
injection water — for injecting it back
into the oil reservoir. There is no surface
discharge of the reject water.
Closed Drain System
A closed drain system routes
wastewater and ?uids from the
various vessels, process units and tanks to
a collection tank. Thereafter, this is pumped
into an off-spec oil tank for re-circulating
to the inlet manifold for processing. All
equipment handling hydrocarbon liquids
and water containing hydrocarbons are
connected to the closed drain system.
Open Drain System
An open drain system collects drain
?uids from equipment that is not
under pressure and routes it into collection
tanks. These ?uids are then put back into
the process through either the off-spec
oil tank or the produced water treatment
system.
Vent Gas Recovery Units
Hydrocarbon vapour from the
various process units, vessels and
tanks, including the crude oil storage
tanks, is recovered and fed into a two-
stage vapour recovery unit — and fed
into the fuel gas system. There will be no
venting of hydrocarbons during normal
routine operations.
Greenbelt Development
In accordance with our bio-diversity
commitments, the development of
a greenbelt within the MPT, the pipeline
corridors and the well pads is being done
keeping in mind that no alien invasive
species is introduced. The expertise of a
local specialist organisation, The School
of Desert Sciences, is being taken for
selection of appropriate species and for
training of local community for maintaining
the greenbelt.
Solid Waste
Management System
A common captive land?ll
disposal site, including a high
temperature incinerator facility, is being
established within the MPT. The land?ll
will serve as a disposal facility for all
non-recyclable wastes generated from
the MPT operation and the associated
well drilling programmes. The land?ll is
segregated into a hazardous waste and a
non-hazardous waste section. It is being
developed in a phased manner, and
will have the capacity to handle waste
generated over a 20-year period. It is
designed in compliance with international
best practices and in line with national
laws and guidelines.
Produced Water
Treatment and Disposal
Produced water generated from
the well ?uid phase separation is
treated in the Produced Water Treatment
Plant to separate any of the carried over
sediments and oil traces. This is achieved
using an induced gas ?oatation process.
The treated produced water is then re-
injected into the oil reservoir. There is no
surface discharge of produced water.
Flaring System
The ?aring system is provided to
safely route the emergency release
of hydrocarbons to the Flare Knock-Out
drums and then to the ?are tips. The ?are
system will only be required in emergency
conditions. The ?are tip is located in
the High Pressure (HP) Flare Stack at a
height of 30 metres to ensure that safe
radiation and burnt gas dispersion levels
are maintained beyond the exclusion zone.
Rainwater Harvesting
The storm water from the paved
areas (i.e. the non-hazardous areas)
and rooftops will be routed to a rain water
collection tank. In?ltration wells (approxi-
mately 20 metres deep) have been built
within the tank area so that the water
collected in the tank over a certain level
will over?ow into the in?ltration well for
recharging the groundwater.
Sewage Treatment Facility
Sewage from the plant and the
living quarters are treated in
a sewage treatment plant complying
with the regulatory standards for land
discharge, and then used for greenbelt
maintenance. This consists of physical
and biological treatment, followed by
disinfection. The entire treated sewage
is used within the facility, with no surface
discharge outside the MPT premises.
Power Generation
Steam is used for power generation
and for heating and pumping. It
is generated by heating the desalinated
water in fuel gas powered boilers. High
pressure (HP) steam is used to drive the
Steam Turbine Generators (STG) and the
steam turbine pumps. Exhaust from the
STG is cooled in air cooled condensers
at medium pressure (MP) levels. The MP
system provides heat for various process
heat exchanges, tanks and vessels.
The MP condensate passes to the low
pressure (LP) steam system. LP steam
is used in the de-aerators for the boiler
feed water and various utility stations. The
waste stream cycle is condensed and fed
in to the boiler feed water tank.
MANAGEMENT DI SCUSSI ON AND ANALYSI S 15
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 16
RAJASTHAN
TECHNICAL DEVELOPMENTS
Development drilling and the well completion
activities are under way, with three drilling rigs
and one completion rig operating in the Mangala
development area.
To date, 65 Mangala development wells have
been drilled, of which 51 have been completed
for initial production. In addition, three EOR
pilot wells, 10 Raageshwari Deep Gas wells and
three Thumbli water supply wells have also been
drilled.
Given the success of its ?rst horizontal well at
Mangala — which was tested at an oil production
rate of more than 11,500 bopd, the highest ever
for an onshore well in India — Cairn India has
successfully drilled and completed ?ve more hori-
zontal wells in Mangala. Twenty four Mangala
wells are currently producing and other wells will
be brought on stream in a staged manner during
the ramp-up period.
The results from all the wells drilled to date
con?rm excellent reservoir quality and the high
deliverability potential of the Fatehgarh formation
reservoir.
A hydro-fracturing campaign in three
Raageshwari Deep gas wells was carried out
across 10 gas zones. Following hydro frac
treatment, the ?rst Raageshwari deep gas well
tested at a gas rate of 15.7 million stand cubic feet
per day (mmscfd); and the second well showed
a gas rate of 20.9 mmscfd, the highest ever in
the ?eld, signi?cantly more than expected. These
test results indicate the potential for improved
frac designs, which could be applied to the low
permeability reservoir zones of the Barmer Hill
formation in the near future.
Following are some of the signi?cant technologi-
cal applications used to develop the Rajasthan
resources:
Drilling Engineering,
Completions and Operations
Cairn India is committed to technological excel-
lence with precise execution and top quartile drill-
ing performance. Given below are some of the
technological advances and processes that have
been implemented leading to increased ef?ciency
in the drilling operations.
Well Type Design
Six different well types have been designed for
oil and gas production wells, water source wells
and water injection wells. To date, all these well
design concepts have been tested and proven to
be performing to or above expectations.
The successful test
results of the hydro-
fracturing campaign
in three Raageshwari
Deep gas wells
indicate the potential
for improved frac
designs, which could
be applied to the
low permeability
reservoir zones
of the Barmer Hill
formation in the
near future
MANAGEMENT DI SCUSSI ON AND ANALYSI S 17
RAPID MOBILE SKID MOUNTED "SUPER SINGLES" RIG
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 18
Custom Made Rapid Rig Design
Highly mobile skid mounted ‘Super singles’ of
1000 HP with smaller footprint and self deploy-
ing design were custom built for Cairn India.
This design allows rigs to move between wells on
a pad in a period of ?ve to 10 hours. In fact, the
Company achieved a very fast slot-to-slot rig move
time of 4.5 hrs on four occasions. By drastically
cutting the time of rig movement, the Company
should save a minimum of 300-rig days for the
planned 350 wells over the life of the asset. It has
also helped reduce well construction time: wells
of 1,200-1,500 metre depths are being drilled in
seven to nine days.
Compact Well Head Design
This was custom designed for Cairn India to facil-
itate optimal extraction from the ?eld. The design
includes the provision for the termination of the
heater string, control lines and electrical submers-
ible pump cables. The system has resulted in rig
time savings of anywhere between 16 hours and
36 hours per well, depending on the well design.
Custom Mud Design
Cairn India succeeded in using customised
synthetic oil based mud system for the Rajasthan
drilling applications at almost the same cost as con-
ventional water based mud systems. Installation
of a thermo-mechanical Cuttings Cleaner unit
in Rajasthan will be a ?rst in India — another
example of Cairn India’s standing as an innovative
and environmentally responsible company.
Turbine and Bit Selection
Conventional usage of Tungsten Carbide Insert
(TCI) bits with positive displacement motors has
been replaced with the more advanced assembly of
impregnated (IMPREG) bits with turbines to drill
the Raageshwari fractured basement formations.
This has lead to a saving of around USD 360,000
per well. Cairn had earlier pioneered the intro-
duction of the high performance Polycrystalline
Diamond Compact (PDC) bits in India.
ICD completion for horizontal wells
Drain hole in horizontal wells have been com-
pleted with the latest technology of In?ow Control
Devices and Swell Packers in order to slow down
water cut, reduce ?eld operating expenses and
maximise recoverable reserves. Wells have tested
to production rates in excess of 11,500 bopd on
self ?ow and set the record of being highest rate
onshore production wells in India.
COMPACT WELL HEAD DESIGN
MANAGEMENT DI SCUSSI ON AND ANALYSI S 19
Coiled tubing heater string
The unique concept of coiled tubing inclusion as
heater string in conjunction with the production
tubing has been adopted in the production well
completions. Heater string is used to circulate
heated water in the annulus that addresses the ap-
prehensions on downhole ?ow assurance posed by
the waxy and viscous crude of Rajasthan oil?elds.
Pumps and Electrical
Submersible Pumps (ESP)
Jet Pumps using hot water as power ?uid are
planned for arti?cial lift deviated wells as the
water cut rises with time; high rate ESPs are
installed in the horizontal wells for arti?cial lift in
the future. Both technologies are set to open up
new frontiers in arti?cial lift technology in India
and would be the largest ?eld scale application of
the jet pump technology worldwide.
Enhanced Oil Recovery
Enhanced Oil Recovery (EOR) techniques are
methods of increasing recovery from oil ?elds.
Historically, EOR has been considered as a ter-
tiary recovery method — to be applied at the later
stage of ?eld life after primary and secondary
recovery from the reservoirs.
Cairn recognised the potential for EOR at an
early stage of development in its MBA ?elds. The
reservoir quality, oil properties and ambient tem-
perature make these ?elds ideal for the application
of chemical ?ooding EOR methods such as poly-
mer or Alkali Surfactant Polymer (ASP) ?ooding.
With the viscosity of oil being higher than that
of water, the injected water is not able to displace
the oil very ef?ciently, resulting in some bypassed
oil under a conventional water ?ooding scheme.
By adding chemicals such as polymers, the in-
jected water attains a viscosity close to that of the
oil, which improves the displacement and overall
sweep. In addition, the use of alkali and surfac-
tants along with polymer further increase recov-
ery, as these chemicals act like soap and wash off
more oil from the reservoir pore spaces.
Studies conducted by two independent labo-
ratories show favourable trial results of 30% to
40% incremental recovery from the application
of EOR in the reservoir core-?oods. Detailed
?eld scale modelling and simulation studies car-
ried out incorporating the ?ndings of the labora-
tory evaluation indicate incremental recoveries
of 15% from the MBA ?elds by the application of
ASP ?ooding.
The Company is conducting a ?eld pilot to
demonstrate the applicability of EOR in the
Mangala ?eld. A 10 well drilling programme is
planned and the drilling of the pilot wells has
started. Pilot trails will begin this year, initially
with water injection and subsequently with poly-
mer and ASP injection. Conditional upon success
of the pilot, Cairn India intends to implement
chemical ?ooding on a ?eld scale in Mangala,
followed by Bhagyam and Aishwariya. The cur-
rent assessment of the EOR resource base is more
than 300 million barrels (mmbbls) of incremental
recoverable oil from the MBA ?elds.
Cairn India is an active member of a Joint
Industry Project (JIP) on chemical EOR. This JIP
is supported by approximately 30 Exploration
and Production and service companies across the
world, which sponsors research in chemical EOR.
This initiative shall provide access to the results of
the latest technology and research carried out by
the industry
Studies conducted
by two independent
laboratories show
favourable trial
results of 30% to 40%
incremental recovery
from the application
of EOR in the reservoir
core-?oods
The current
assessment of the
EOR resource base
is 15% of STOIIP
which amounts to
more than 300 million
barrels of incremental
recoverable oil from
the MBA ?elds
EOR Opportunity in Rajasthan
Schematic Representation
Chemical EOR processes
Schematic Representation
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 20
Securing Energy,
Fuelling Growth
Demand supply gap is met by imports
In spite of India’s current oil production of around 0.7 million bopd, the country still remains grossly energy de?cient. This makes the
country a net importer of most forms of energy, including more than 70% of oil and gas.
Energy security is perhaps the most critical
challenge for any country, central to its
economic development and rapid growth.
For India, Cairn’s Rajasthan ?elds will thus
play a key role: the combined production
from Mangala, Bhagyam and Aishwariya
?elds are set to contribute more than 20%
of India’s domestic crude production from
CY 2011.
FY 2009-10 has been a historic year for
Cairn India, marking the commencement of
production from Mangala. With growth in this
stage of the business— a ?ve-fold increase in
net production— Cairn’s journey of discovery
and production in a supply de?cient market
has begun its transition to becoming a key
player in the energy security of the country.
…of which
HYDROELECTRIC
NUCLEAR ENERGY
COAL
NATURAL GAS
OIL
5%
1%
52%
10%
32%
In 2009, India consumed
4.2% of the world’s energy…
Source: BP Statistical Review of World Energy June 2010
Source: BP Statistical Review of World Energy June 2010
Figures in million barrels per annum
21 SECURI NG ENERGY, FUELLI NG GROWTH
An increase of
USD 1 per
barrel of oil…
…results in an
increase of USD
1 billion in India’s
import bill
In 2009, India produced 1% (275 mmbbls)
of crude oil but consumed 4.2%
(1,160 mmbbls) of the world’s total
produce (21,981 mmbbls)
ETHANE
DIESEL FUEL
FUEL OILS
GASOLINE/PETROL
JET FUEL
KEROSENE
LPG
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 22
RAJASTHAN
HYDROCARBON RESOURCES
Mangala, Bhagyam and Aishwariya
The MBA ?elds’ Stock Tank Oil Initially In Place
(STOIIP) is over 2.1 billion barrels with approved
Field Development Plans (FDPs) for all three
?elds. Cairn India believes that production
potential from these ?elds exceeds 210,000
bopd (MBA approved rate of 175,000 bopd,
additionally 25,000 bopd from Mangala and
10,000 bopd from Aishwariya) against an ap-
proved rate of 175,000 bopd (Mangala 125,000
bopd, Bhagyam 40,000 bopd and Aishwariya
10,000 bopd). The increase in production is
subject to regulatory approval.
The Mangala ?eld contains nearly 1,300 mmb-
bls of STOIIP in the Fatehgarh formation, with
nearly 500 mmbbls recoverable through water
?ood. Development drilling on the ?eld com-
menced in January 2009, and 65 wells from eight
pads have been drilled, with a combination of
horizontal wells with screens, deviated producers
and monobore water injectors. This represents
approximately a third of the wells planned for
the ?eld-wide development. Results from these
wells have con?rmed the geological and reser-
voir understanding of the ?eld and the STOIIP
estimates.
Performance of the horizontal wells has been
better than expected, with tested rates greater
than 11,500 bopd. Production performance from
the more conventional wells has been according
to expectations.
Given these encouraging well results, Cairn
India believes that the Mangala ?eld has a
potential to produce 150,000 bopd. Moreover,
the increased off-take rate from Mangala would
have no impact on the ultimate technical recovery
from the ?eld. This requires further regulatory
approvals.
Raageshwari Deep Gas Field
The Raageshwari Deep gas ?eld is designed to
supply gas to meet the energy requirements at the
MPT and the pipeline. Ten new wells were drilled
and completed in addition to the existing three gas
producers. Hydraulic fracturing operations have
been completed in two wells so far with four to
?ve zones fracced in each well. These fracturing
operations have been highly successful with wells
having ?owed at rates up to 20 mmscfd — which
is ?ve times the rates previously achieved from
this reservoir.
Saraswati and Raageshwari Fields
The FDPs for both the ?elds have been
approved and both the ?elds are currently under
development.
Barmer Hill and Other Fields
In addition to the MBA, Raageshwari and
Saraswati ?elds, Cairn India has discovered 20
other ?elds. Including the MBA ?elds, these
contain a gross discovered resource of approxi-
mately 4 billion boe of oil and gas in place.
From the development drilling results and
further evaluation of the Barmer Hill formation
overlying the Mangala and Aishwariya Fatehgarh
Formation reservoirs, the Company has identi-
?ed signi?cantly increased potential in the basin.
Fields in other parts of the world with characteris-
tics similar to the Barmer Hill are being devel-
oped — and have demonstrated recovery factors
of 7%–20%.
As a result of this evaluation, the estimated
Barmer Hill (from Mangala and Aishwariya) and
other ?elds gross recoverable resources have
more than doubled to 140 mmbbls.
Since the Barmer Hill reservoir is less perme-
able than the main Fatehgarh formation reservoir,
fracturing of horizontal wells is being planned to
optimise the well count and deliver high online
production rates. A declaration of commerciality
for the Barmer Hill has been submitted to the
GoI and an FDP is under preparation for submis-
sion later this year.
An FDP covering ?elds in the Kaameshwari
West development area has also been submitted
to the GoI.
Cairn India believes
that the Mangala ?eld
has a potential to
produce up to 150,000
bopd. Moreover, the
increased off-take rate
from Mangala would
have no impact on
the ultimate technical
recovery from the ?eld
MANAGEMENT DI SCUSSI ON AND ANALYSI S 23
Further Potential: Exploration Upside
There remains a signi?cant and as yet untested
prospective resource potential to pursue in the
Barmer Basin of the Rajasthan block.
Over the last two years, a full re-evaluation of the
Barmer Basin has been undertaken. All 170 explo-
ration and appraisal wells were re-examined, new
studies were started and 2,733 km
2
of 3D seismic
data was re-processed and re-interpreted. Cairn
India has also acquired over 2.2 km of cores to
help gain a better understanding of the geographi-
cal and reservoir models. As a result of these stud-
ies, the Rajasthan prospect portfolio has increased
substantially to 250 mmboe recoverable risked
mean prospective resources with an upside poten-
tial, equivalent to a most likely in place resource of
2,500 mmboe. Discovering and developing these
resources will be an important step in realising the
full production potential of Rajasthan.
Cairn India drilled two exploration wells in
Q4 FY 2010. Both wells found hydrocarbons in
the Thumbli reservoir, extending the Shaheed
Tukaram Ombale (Raageshwari East-1z) discovery
made in 2008. Tukaram-2 found 6m of oil pay
and 6m of gas pay whilst Tukaram SE-1 found
11m of oil pay. In addition, 2.5m of oil pay was
found in a Dharvi Dungar reservoir, and the
deeper well Tukaram-2 also found 15m of gas
pay in the Fatehgarh, extending the Raageshwari
deep gas resource base.
Technical evaluation work continues to assess
existing and new plays in the basin to generate
further prospects in Rajasthan.
There remains a
signi?cant and as yet
untested prospective
resource potential to
pursue in the Barmer
Basin of the Rajasthan
block
Technical evaluation
work continues to
assess existing and
new plays in the basin
to generate further
prospects in Rajasthan
OFF SPEC OIL STORAGE TANKS AT MANGALA PROCESSING TERMINAL
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 24
The 24” heated and
insulated pipeline is
approximately 670
km long, from the
MPT to the terminal
at Bhogat on the
Gujarat coast. It is
the world’s longest
continuously heated
and insulated crude
oil pipeline and will
have access to more
than 75 % of India’s
re?ning capacity
when the Bhogat
terminal is completed
in 2011
THE PI PELI NE AND EXPORT SYSTEM
Mangala crude is sweet (low sulphur) and waxy in
nature with an API gravity of around 28 degrees
and a pour point just over 40°C. In the BP crude
assay database, there are around 94 types of crude
oil that are heavier than the Mangala crude and
31 that are more viscous. So, while challenging,
the properties of the Rajasthan crude are not
something that will have any adverse impact on
subsequent processing. Though the crude has a
high pour point and viscosity due to its waxy nature,
its highly paraf?nic content makes it an excellent
secondary processing feedstock for re?ners.
The 24” heated and insulated pipeline is
approximately 670 km long, from the MPT to the
proposed marine terminal at Bhogat on the cost
of Gujarat. It is the world’s longest continuously
heated and insulated crude oil pipeline and will
have access to more than 75% of India’s re?ning
capacity when the Bhogat terminal is completed
in 2011. About 154 km of the pipeline is in
Rajasthan and the rest in Gujarat.
The crude pipeline has an outer diameter of 24”
with an 8” pipeline running along it that carries
Raageshwari gas, which 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 are 36
SEHMS heating stations or Above Ground
Installations (AGIs). Gas is supplied at each
station to generate the power required to heat the
pipeline for approximately 9 km on either side of
the heating station — to ensure that crude remains
constantly heated above 65°C.
In addition, there is an intermediate terminal at
Viramgam for storage and further pumping to the
coast, including a pigging facility. There are two
other pigging stations at Sanchore and Wankaner
to insert ‘pigs’ (pipeline cleaning devices) that are
used to clean and inspect the pipeline.
PIPELINE SECTION GETTING READY TO BE BURIED
MANAGEMENT DI SCUSSI ON AND ANALYSI S 25
R AJ AST HAN Mangala
Processing
Terminal
6IRAMGAM
7ANKANER
3ALAYA
Bhogat
3ANCHORE
2ADHANPUR
G UJ AR AT
Phase I From MPT to Salaya, in Gujarat, via a
storage and pumping terminal at Viramgam (in
the district of Ahmedabad). It includes spur lines
to connect to private re?ners and another spur
line at Radhanpur to connect with the Indian Oil
Corporation Limited’s (IOCL’s) Mundra to Panipat
crude pipeline.
As on 31 March, 2010, the status of the pipe-
line was as follows:
The entire section from MPT to Salaya
(~590 km) had been laid below the ground
and commissioned.
The Radhanpur (Gujarat) terminal, including a
22 km long 10” spur line was completed. It was
ready for start-up to supply crude to IOCL’s
Mundra-Panipat crude oil line.
The Viramgam terminal was completed and is
expected to be commissioned by June 2010.
Since then, oil was introduced in the pipeline on
13 May, 2010 in anticipation of sales to re?ners.
Phase II From Salaya to the Bhogat terminal on
the Arabian Sea coast, and a pipeline connecting
the terminal to the marine facilities. This Salaya
to Bhogat pipeline extension project consists of
three main components:
Extension of the pipeline with associated heat- 1.
ing stations from Salaya to the Bhogat terminal.
Coastal crude oil storage terminal at Bhogat. 2.
Marine export facilities, consisting of twin 24” 3.
sub-sea pipeline connecting the Bhogat ter-
minal to the SPM (Single Point Mooring). The
SPM is located ~ 6 km off shore in the Arabian
Sea and is equipped to load the AFRAMAX
type tankers.
All approvals for the Salaya to Bhogat section
have been obtained, and the necessary land
purchase completed to allow construction
to start. A number of major contracts for
construction and long lead equipment and
materials have been placed.
Pipeline length
Approximately 670 km
24” insulated heated
oil pipeline
from Barmer to Bhogat in
Gujarat, via Viramgam
Pipeline material
and diameter
Crude oil 24” API 5L X-65
insulated pipeline 90 mm
thick polyurethane foam
(PUF) insulation and 5 mm
thick high density
polyethylene (HDPE) wrap
Natural gas 8” API 5L
polyethylene (PE) coated
pipeline
Crude Oil Storage and
handling capacity
Viramgam 10,000 m
3
(~60,000 barrels)
Bhogat 393,512 m
3
(~2.5 million barrels)
Heating stations
36 at a distance of
approximately 18 km
apart along the pipeline
Standards
Heated oil pipeline with
PUF insulation and
HDPE wrap. OISD 118,
141, ASME B31.4, API 5L,
API 1102, API1104
Key Technical Details
of the Pipeline
670
KMS
THE PROJ ECT I S DI VI DED I NTO T WO PHASES
Pipeline Route Map
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 26
RAJASTHAN CRUDE:
SALE CONTRACTS
With Trains One, Two and Three being able to
process 130,000 bopd of crude oil at MPT, it is
important to understand the sales contracts or
arrangements that have been put in place with
re?neries.
The ?rst step of the sales process was the
approval of additional delivery points by the GoI.
The approvals were initially for the public sector
units — which allowed Cairn India to tie up sales
contracts at Viramgam for IOCL’s Koyali re?nery,
and at Radhanpur for delivery to IOCL’s Panipat
re?nery.
In addition, the GoI had, as an interim ar-
rangement, approved an additional Delivery Point
at the Kandla port for delivery of crude to the
Mangalore Re?nery and Petrochemicals Limited
(MRPL) and other coastal re?neries. During FY
2009-10, six parcels were delivered to MRPL.
When the Bhogat terminal along with the marine
export facilities is operational, it will be an ad-
ditional delivery point.
The second step was securing GoI approval to
sell the crude to private sector re?ners. Here, too,
the GoI agreed to allow domestic private re?ners
to qualify as additional buyers of the Rajasthan
crude. Cairn India has been successful in reach-
ing an agreement to supply Mangala crude to pri-
vate re?neries in Gujarat. In FY 2009-10, seven
parcels were delivered to the private re?ners.
As of 31 March, 2010, sales arrangements for
143,000 bopd were in place (two PSU buyers and
two private sector buyers). This has helped set a
clear roadmap for aligning sales volume with the
production ramp-up. Contracts for additional vol-
umes are expected to be ?nalised as the produc-
tion ramps up, subject to GoI approval.
The commercial terms and pricing negotiations
for the Rajasthan crude have been concluded with
the GoI nominees and domestic private re?ner-
ies. In accordance with the PSC, this pricing is
based on Bonny Light, comparable low sulphur
crude that is frequently traded in the region, with
appropriate adjustments for crude quality. The
implied price realisation represents an average
10% to 15% discount to Dated Brent on the basis
of prices prevailing for the year.
Once the Bhogat marine terminal becomes
operational, sales to other coastal re?neries will
be possible, subject to GoI approval.
FUNDING THE
RAJASTHAN PROJECT
The Rajasthan project is now well funded, with
Cairn India having completed ?nancing
arrangements for USD 1.6 billion at competitive
pricing. The facility is of a long term nature with
tenure of over six years from the time they were
contracted in October 2009. Proceeds from this
facility have been used to repay the then existing
debt of USD 850 million and to fund the ongoing
projects in Rajasthan. The ?nancing was arranged
through a combination of US Dollars and Indian
Rupee borrowing by accessing both domestic and
international markets.
International borrowing facility of USD 750
million was provided by a consortium of overseas
commercial banks led by Standard Chartered
Bank and the International Finance Corporation,
a member of the World Bank Group. Domestic
borrowing facility of INR 4,000 crore (USD 850
million) was underwritten by the State Bank of
India, which later syndicated to other banks and
?nancial institutions, including Canara Bank,
Bank of India, Oriental Bank of Commerce,
As of 31 March 2010,
sales arrangements
with PSU and private
re?ners for 143,000
bopd were in place
2004 2005 2006 2007 2008 2009 2010
Crude Price Movement since the discovery of Mangala Field
in USD per barrel
Bonny Light
Brent
Mangala Crude
30
60
90
120
150
MANAGEMENT DI SCUSSI ON AND ANALYSI S 27
Bank of Baroda, HDFC Bank and Infrastructure
Development and Finance Corporation.With
these ?nancing arrangements, Cairn India is well
funded to execute the Rajasthan project.
This financing is innovative in that:
It uniquely accesses two separate lending mar-
kets on different terms for the same project
It is one of the largest fully underwritten deals
of this size in the oil and gas sector after the
2008 ?nancial crisis
It is one of the largest ‘Reserve Base Lending’
deals completed in India to date
This ?nancing deal was awarded the ‘Oil & Gas
Deal of the Year’ for Asia Paci?c region by Project
Finance International (part of the Thomson
Reuters group).
The completion of the ?nancing underscores
the robustness of the Rajasthan project and the
lenders’ con?dence in Cairn India’s ability to
deliver.
In March, 2010, Cairn India was awarded the
‘AAA’ rating by the Credit Analysis and Research
Limited (CARE) for its INR 4,000 crore domestic
borrowing facility. The ‘AAA’ rating reinforces
the credit worthiness of the project.
As always, the Company has an ongoing
dialogue with various international and domestic
institutions to review its ?nancing options, so
as to create even greater ?nancial ?exibility by
securing competitively priced long term debt.
In this, the guiding principle is to secure terms
that enhance long term shareholder value. Table
1 gives the ?nancial details: capital expenditure
versus ?nancing.
During the year, PETRONAS International
Corporation Ltd (PICL), the overseas arm of
Petroliam Nasional Berhad (PETRONAS),
acquired from Cairn Energy PLC 43.6 mil-
lion shares in Cairn India, representing a 2.3%
stake and taking the total holding of PICL in the
Company to 14.94%.
A Scheme of Arrangement between the
Company and some of its wholly owned subsid-
iaries, to be effective from 1 January 2010, had
been approved earlier by our shareholders. The
Scheme of Arrangement has been approved by
the Hon’ble High Court of Madras but is pending
approval from the Hon’ble High Court of Bombay
and other regulatory authorities. Pending receipt
of such approvals, no accounting impact of the
scheme has been given in the ?nancial state-
ments. After the implementation of the scheme,
the Company will directly own the Indian busi-
nesses, which are currently owned by some of its
wholly owned subsidiaries.
The Rajasthan
project is now
well funded, with
Cairn India having
completed ?nancing
arrangements for
USD 1.6 billion at
competitive pricing
This ?nancing deal
was awarded the ‘Oil
& Gas Deal of the
Year’ for Asia Paci?c
region by Project
Finance International
1
Capital Expenditure towards Rajasthan Project
in USD billion
Capital Expenditure Gross Net to Cairn
Exploration (upto 2006) 0.61 0.57
Development
CY 2007 0.31 0.22
CY 2008 and 2009 1.76 1.23
CY 2010 and 2011 (estimated) ~2.00 ~1.40
Financed by
Net Cash (Net Debt) 31December, 2009 (0.1)
Existing Debt Facility 1.60
Total 1.50
Note: Cash ?ow from producing assets is an additional source of funds
Shareholding Structure
As on 31 March, 2010
22.69%
14.94% 62.37%
Cairn Energy PLC
Petronas
Public including
Institutions
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 28
Other
Producing
Assets
PKGM-1 BLOCK (RAVVA FIELD)
Krishna Godavari Basin, Andhra Pradesh
Cairn India ownership 22.5% and the operator
The Ravva oil and gas ?eld in the Krishna-
Godavari Basin was developed in partnership with
ONGC, Videocon and Ravva Oil, working under a
PSC that runs until 2019.
Currently, eight unmanned offshore platforms
are being operated. A 225-acre onshore process-
ing facility at Surasaniyanam processes natural
gas and crude oil from the Ravva ?eld. The Ravva
onshore terminal operates at an internationally
recognised environmental standard (ISO 14001),
and has the capacity to handle 70,000 bopd oil,
95 mmscfd of natural gas and 110,000 barrels per
day of injection water. The terminal also has the
capacity to store one million barrels of crude oil
onshore.
Ravva completed 15 years of continuous op-
erations on 28 October, 2009. The ?eld direct
operating expense for the Ravva block is amongst
the lowest in the world. The low-cost operating
base has been achieved by focusing on life-cycle
planning, continuous monitoring, control of
operational costs and the innovative application of
operating technologies.
The average gross production from the Ravva
?eld for FY 2009-10 was 40,718 boepd —
comprising an average oil production of 32,786
bopd and average gas production of 48 mmscfd.
Originally estimated to produce 101 million bar-
rels of crude oil, Ravva has now produced more
than 225 million barrels. Cairn India is con?dent
of the ?eld’s considerable remaining reserve po-
tential and of producing more oil from this block.
The Company and its joint venture partners have
completed a 4D seismic acquisition campaign to
identify bypassed oil zones within the ?eld and
the scope of further reserve addition through
future in?ll drilling.
The Ravva block’s
direct operating cost
per barrel is amongst
the lowest in the world
Originally estimated
to produce 101 million
barrels of crude
oil, Ravva has now
produced more than
225 million barrels of
crude oil
Ravva Offshore Facilities
Schematic Representation
MANAGEMENT DI SCUSSI ON AND ANALYSI S 29
CB/OS-2 BLOCK
Cambay Basin, Western India
Cairn India ownership 40% and the operator
Cairn is the operator for this block and the PSC
signed in 1998 with ONGC and Tata Petrodyne
Limited as partners, runs until 2023.
In 2002, gas production commenced from the
Lakshmi gas ?eld in the CB/OS-2 Block in the
Cambay offshore basin in the Gulf of Khambat
on the west coast of India. The Gauri offshore gas
?eld was discovered in 2001 and came on stream
in 2004. CB-X, a marginal gas ?eld in the transi-
tion zone of the block was in production between
June 2007 and August 2009. The Lakshmi and
Gauri ?elds commenced production of oil in addi-
tion to gas in 2005.
The 82-acre onshore processing facility at Suvali
is certi?ed to ISO 14001 and OSHAS 18001 stan-
dards. It has the capacity to process 150 mmscfd of
natural gas and 10,000 bopd of crude oil.
The application of advanced geophysical tools
has helped map thin oil sands which are beyond
normal seismic resolution capability. These
techniques have transformed the CB/OS-2 block
from a predominantly gas ?eld to an oil ?eld
through the discovery of an oil leg. Tubing sand
screens were used for the ?rst time in the Cambay
Basin as a sand control measure. The Cambay
asset has witnessed the use of several cutting-edge
technologies which have increased throughput at a
lower unit cost.
Cairn India signed a Term Sheet agreement
to produce Gauri share of GBA (Gas Balancing
Agreement – for sharing of gas from the shared
reservoir formation) gas through the Hazira facili-
ties in December 2009. The gas production and
sales also commenced in the same month. This
is a ?rst of its kind arrangement in the country
which showcases the Company’s commitment to
produce gas in the most economical manner and
contribute to the nation’s energy security.
The average gross production from the
CB/OS-2 block for FY 2009-10 was 13,480 boepd
consisting of an average oil / condensate produc-
tion of 9,060 bopd and an average gas production
of 26 mmscfd.
JUN 1998
Production sharing
contract signed
MAY 2000
Lakshmi oil and gas field
discovery
JAN 2001
Gauri oil and gas field
discovery
Ambe oil and gas field
discovery
OCT 2002
Lakshmi gas field
developed and
gas production
commmenced;
discovery to production
in only 28 months
FEB 2004
CB-X onshore discovery
APR 2004
Gauri development
and gas production
commenced
APR 2005
Onshore and offshore
facilities certified for ISO
14001; 2004 standards
NOV 2005
Gauri field development
First oil from Gauri
JAN 2006
Oil production up to
3,000 bopd
JUN 2007
CB-X field development
completed and gas sales
commenced
FEB 2008
Oil production up to
6,000 bopd
MAY 2009
Upgraded oil processing
capacity to 10,000 bopd
CB/OS-2 onshore
and offshore facilities
certified for OHSAS
18001:2007 standards
DEC 2009
GBA agreement signed
and sales commenced
CB/OS-2 Milestones
Exploring
to Discover
In addition to ongoing exploration activities in the three
producing blocks — Rajasthan, Ravva and CB/OS-2
— Cairn India has exploration interests in ?ve blocks in
India and one in Sri Lanka, ?ve of which are operated
by the Company.
These blocks are located in the Krishna-Godavari
basin, the Palar-Pennar basin, the Kerala-Konkan
basin, the Cambay basin, the Gujarat-Saurashtra
basin, the Barmer basin, the Jaisalmer basin and
the Mannar basin, off the shore of Sri Lanka. The
Company made two successful bids in the NELP
VIII licensing round, and was provisionally awarded
the KG-OSN-2009/3 and MB-DWN-2009/1 blocks,
subject to GoI approval.
East coast of India
Krishna Godavari Basin
Cairn holds a strong position in the
Krishna Godavari basin with both existing
production from Ravva and prospective
onshore and offshore acreages. Cairn
India’s commitment to this basin was further
consolidated with the award of the sought-
after KG-OSN-2009/3 block in the NELP
VIII bid round, subject to GoI approval.
Krishna Godavari Basin—
PKGM-1 (RAVVA FIELD)
Cairn India Ownership 22.5%
Operator Cairn
A major review of the block-wide additional
potential is being undertaken. A review of
contingent resources was completed in
early 2009, resulting in small but signi?cant
additions to the resource base, although
further drilling will be required to monetise
these. A second study to assess the
additional undiscovered potential within the
?eld, both in untested deeper horizons and
in adjacent structures, is ongoing and is
expected to add new exploration prospects.
Further evaluation of the commerciality of
these prospects is required.
Other Indian Acreage
Kerala-Konkan Basin
KK-DWN-2004/1
Cairn India Ownership 40%
Operator ONGC
A 3,840 line km 2D seismic programme
was completed in 2009 and following
interpretation of the data, 300 km
2
of 3D
acquisition is being planned.
Krishna Godavari Basin—
KG-ONN-2003/1
Cairn India Ownership 49%
Operator Cairn
The Company has ?nalised ?ve prospects
and the drilling of the ?rst of these wells
(Nagaram-1) commenced in February
2010 and was plugged and abandoned in
March 2010. The second well (Daliparu-1)
commenced drilling in the same month.
Drilling of the remaining wells is expected
to be completed by early Q3 CY 2010.
Krishna Godavari Basin—
KG-DWN-98/2
Cairn India Ownership 10%
Operator ONGC
The northern area of this PSC is now in
an appraisal phase, following completion
of the exploration period. The ?rst of three
wells commenced drilling in December
2009 and encountered low saturation
gas. Two further wells are expected to be
drilled by end Q2 CY 2010, as part of the
future plan for commercial development
of this discovered oil and gas resource.
The southern area appraisal period was
completed in December 2009, with the
declaration of commerciality submitted to
the DGH.
Gujarat-Saurashtra basin
Block GS-OSN-2003/1
Cairn India Ownership 49%
Operator ONGC
The offshore well GSA-1 was plugged and
abandoned in Q1 CY 2010.
Cairn India also completed its work
programme commitments in the Ganga
Valley exploration blocks
(GV-ONN-2002/1 and GV-ONN-2003/1) and
Vindhyan basin block (VN-ONN-2003/1).
The Company has since relinquished its
interests in these blocks.
Palar-Pennar Basin—
PR-OSN-2004/1
Cairn India Ownership 35%
Operator Cairn
This block, covering 9,400 km
2
, is located
contiguous to discoveries in Krishna-
Godavari and Cauvery basins. Following
interpretations of 3,100 line km of offshore
2D seismic data, an 800 km
2
of 3D seismic
data was acquired in Q1 CY 2010 in
preparation for a drilling campaign planned
for the Q1 CY 2011.
Rajasthan
Jaisalmer Basin—RJ-ONN-2003/1
Cairn India Ownership 30%
Operator ENI
The operator completed the ?rst exploration
well in mid-2009, which encountered
a sequence of low reservoir quality
Mesozoic and older rocks of limited
hydrocarbon potential. The operator held
discussions with the Directorate General
of Hydrocarbons (DGH) regarding
the remaining work of its programme
commitments. The block has now been
relinquished by Cairn.
Moving Beyond India
Sri Lanka, Mannar Basin—
SL 2007-01-001
Cairn Lanka 100%
A wholly owned subsidiary of Cairn India
Cairn Lanka (Private) Limited, a wholly
owned subsidiary of Cairn India, acquired
1,750 km
2
3D seismic data in the Mannar
Basin in Sri Lanka between December
2009 and January 2010. The programme
ful?ls the commitment of 1,450 km
2
of 3D
seismic data acquisition. The Mannar basin
is an under-explored frontier basin, with
both structural and strati-graphic plays.
The 3D seismic data is currently being
processed. A detailed Metocean study has
recently commenced in preparation for the
exploration drilling of three wells planned to
commence in Q2 CY 2011.
MANAGEMENT DI SCUSSI ON AND ANALYSI S 31
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 32
Cairn provides an
environment that
encourages initiative,
innovation and
rewards performance
to foster "High
Performance"
Our multicultural
workforce is
encouraged to
imbibe the best
practices from
different sectors,
enabling a vibrant
delivery and
execution oriented
work culture
Human
Resources
To build a sound and growing business
in a dif?cult and complex industry,
Cairn India needs people with world-
class capabilities.
The Company’s talent base has
steadily increased, witnessing almost a
three-fold growth in manpower over the
last three years. The Company is now
1,068 people strong with an average
age of 36 years and an average work
experience of 13 years. It is, thus, a
young yet experienced company.
Various initiatives to nurture talent were
launched during the year, the key amongst
them being:
Creation of multiple platforms for learning
Encouraging lateral placements and cross func-
tional expertise
Leadership development
Continuation of competency management
framework buildup
During the year, special emphasis was given to
leadership development, targeting the Company’s
senior management through its ‘Star Trek’
programme.
Cairn’s aggressive growth in FY 2009-10, and
heightened activity for delivery of the Mangala
project, scaled up the human resource needs for
the organisation. This was managed by reducing
cycle time to hire while giving greater emphasis
on the quality of potential employees. A total of
360 people were hired during the year, including
16 graduate engineer trainees from colleges in
Rajasthan.
One of the landmark achievements was man-
aging a workforce of more than 16,000 at the
Rajasthan and Gujarat sites during the peak of
construction activity. The work was conducted
adhering to strict safety standards and the people
were trained on HSE practices to ensure that
Cairn India’s safety policies were strictly complied
with. Attention to details such as induction and
training of the contractor’s workers, innova-
tive safety compliance reward programmes and
proper shelter and water were a part of the initia-
tives employed by the Company. There is more on
this in the next section.
MANAGEMENT DI SCUSSI ON AND ANALYSI S 33
COLLABORATION AND SAFE WORKING PRACTICES ARE A PART OF THE CAIRN CULTURE
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 34
HEALTH AND SAFETY
The safe execution and commissioning of
projects in the upstream and midstream projects
were signi?cant challenges for Cairn India
during the year. It employed a number of
contractors at various work sites to execute the
projects. Around 16,000 workers contributed
approximately 63 million man-hours, which en-
abled Cairn India to achieve signi?cant progress
in the project schedule.
The Company has achieved global industry
top quartile performance in Lost Time Injury
Frequency Rate (LTIFR) and Total Recordable
Incident Frequency Rate (TRIFR) during the year.
It has registered 42 million man-hours continu-
ously without any lost-time injury, which is a
world class performance by any standard.
HSE Training
More than 50,000 contract workers were
trained on HSE induction; more than 10,000
went through the HSE road shows at MPT; and
over 6,000 workers were covered under HSE
training in the midstream project.
Efforts to increase road safety awareness for
employees and contractors continued through
in-house and external training resources.
Around 700 Cairn staff attended road safety
and defensive driving training programmes at
the Gurgaon of?ces, while another 300 did so
at the Company’s assets and project sites.
Cairn Incident Management System
The Cairn Incident Management System was
launched in September 2009 for better reporting
and investigation of incidents and near-misses. It
is based on a user-friendly integrated process for
reporting, investigation and tracking preventative
actions until satisfactory closure and sharing of
the lessons learned. The software tool was devel-
oped in-house. It handles all incidents, accidents
and near-misses that require either a summary
or detailed analysis.
Crude Oil Transportation
Adhering to road safety guidelines and ensur-
ing HSE compliance by contractors engaged
in crude transportation by road tankers were
major challenges. A safety management system
including road risk survey, tanker speci?cations,
driver competency, inspection and an emergency
response plan were set up, and all relevant per-
sonnel were trained on the effective implementa-
tion of the system.
Vehicles operating for Cairn India travelled
some 32 million km during the year, which
amounts to circumnavigating the earth around
800 times. Cairn India has achieved a remark-
able performance in road safety, measured as
MVAFR (Motor Vehicle Accident Frequency
Rate). This was at 1.16 per million km driven,
which is well below the international and na-
tional benchmarks for the industry.
Contractors HSE
Performance Improvements
Although signi?cant efforts were put in place to
maintain safe working at the project sites, our
contractors suffered three fatalities and four lost-
time injuries during the year.
In order to improve contractor performance,
Cairn India has taken the following corrective
actions:
A performance-oriented manual on contractor
HSE requirements has been released
There is more rigorous screening of contractors
before engaging them
Setting up and communicating expectations
and risk based targets for contractors
Creating ownership and oversight of HSE
compliance by Cairn India’s line managers and
supervisors
Having ?nancial incentives/penalties for HSE
performance of suppliers/contractors
Process Safety
To ensure safety of existing assets, Cairn India
has established an internal integrated audit
assurance programme. It includes a review
of health, safety, environment and quality of
individual assets, and their compliance to the
Company’s own standards as well as various ap-
plicable statutory regulations. A multi-disciplin-
ary internal team was involved in the process of
review and assurance and sharing best practices
Health, Safety
and Environment
The Company’s policies on Health, Safety and Environment (HSE) are clear: no
harm to people and no adverse impact on the environment and the communities
in which it operates. Hence, the priorities were excellence in construction safety,
minimising the environmental impact of activities, including those carried out by
contractors, and continuing to improve HSE across all our assets.
NOx Emissions
in Tonnes
0
200
400
600
800
1000
1200
1
0
6
1
7
6
5 8
1
2
1
1
4
1
2009 2008 2007 2006
Lost Time Injury Frequency
Rate (LTIFR)
2009 2008 2007 2006
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0
.
6
0
0
.
3
9
0
.
2
7
0
.
2
6
MANAGEMENT DI SCUSSI ON AND ANALYSI S 35
across assets. A total of six integrated audits were
conducted, apart from walk-through inspections
and ISO-14001 and OHSAS-18001 surveillance
audits.
Ensuring safety of personnel, assets and envi-
ronment during the commissioning of various
projects was one of the major achievements dur-
ing the year. Cairn India has established a gated
process, including compliance veri?cation of
new facilities in the Rajasthan project including
the upstream, MPT and the pipeline facilities.
A Compliance and Assurance Team (CAT) was
constituted. It visits the new facilities and veri-
?es process safety compliance and readiness for
start-up besides ensuring availability of updated
standard operating procedures. Emergency
response procedures were upgraded and tested
for their effectiveness in the course of periodic
emergency drills at all operating and project sites
throughout the year.
Occupational Health
During the year, a number of initiatives were
taken by the occupational health team. A H1N1
prevention campaign was launched throughout
the Company and its contractors to prevent the
spread of the virus. Travellers were screened
medically before permitting them inside the
facilities or of?ces. Alerts were issued on alternate
days throughout the outbreak. In addition, a ma-
jor campaign was launched to prevent heat stress
at all the Company’s sites and assets. Various
precautionary measures were taken to avoid
heat stress related illnesses. Bottled water was
distributed to the contractor workers at sites; and
shades were provided for their rest during hot day
periods.
Periodic occupational and exposure surveys
were conducted at all operating sites in confor-
mance with regulatory requirements. Medical
coverage was provided across all the Company’s
assets and project work sites.
Total Recordable Incident
Frequency Rate (TRIFR)
2009 2008 2007 2006
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2
.
7
5
1
.
6
4
0
.
7
3
0
.
6
4
ENVIRONMENT FRIENDLY MODES OF TRANSPORT
ARE ENCOURAGED IN THE PROCESSING FACILITIES
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 36
ENVIRONMENT
Cairn India recognises the responsibility to
minimise the environmental impact from its
activities. It has worked closely with the project
development contractors in reducing construction
related environmental impacts. The challenges
of proactively managing the situation during the
construction phase of the MPT and the pipeline
project was accomplished through active support
and in partnership with the contractors.
Procedures were developed by Cairn India
highlighting the environmental issues to be
tackled along with the environment manage-
ment plan. The contractors then developed
bridging documents to align their operational
process controls for effective implementation
at site. Training on environmental awareness
as well as job speci?c training was provided to
all workers at site. Cairn India subscribes to the
International Finance Corporation (IFC) perfor-
mance standards.
Independent third party audits were conducted
on a quarterly basis to verify effectiveness of
compliance to the IFC standards. Gaps identi?ed
during the audits were addressed and closed.
In Sri Lanka, an environmental impact assess-
ment study was conducted for the planned seis-
mic surveys. The report was approved by the Sri
Lankan authorities. Ecological surveys were con-
ducted at the river crossings along the Barmer-
Salaya pipeline route, and an environmental
management plan developed and implemented to
avoid any adverse impact on aquatic ecology.
Energy Conservation Initiatives
Several initiatives were taken for conservation of
energy, some of which are listed below:
At Ravva
Solar street lighting poles were installed
resulting in reduction in usage of 615 units of
conventional energy.
Volatile Organic Compounds
in Tonnes
2009 2008 2007 2006
0
50
100
150
1
4
3
8
3
7
1
1
5
6
SO
2
Emissions
in Tonnes
0
1
2
3
4
5
2009 2008 2007 2006
4
.
9
5
0
.
9
5
0
.
7
3
0
.
7
3
MANAGEMENT DI SCUSSI ON AND ANALYSI S 37
PERFORMANCE HI GHLI GHTS
Environmental management plans
developed during various assessments of
the Rajasthan development project have
been consolidated into a comprehensive
Environmental and Social Management
Plan document.
At Ravva, a de-bottlenecking project
was undertaken to achieve the targeted
produced water re-injection. This has
enabled signi?cant reduction in ground
water consumption, and reduced ef?uent
discharge to the sea.
The Company regularly monitored air
emission sources and the ambient air
quality, and was able to maintain emission
levels within regulatory standards. During
construction activities in Rajasthan, dust
suppression was carried out through
sprinkling of treated sewage.
Green House Gas (GHG) emissions were
within targets set at the beginning of the
year notwithstanding a rise in energy
use. GHG emissions intensity was 47.32
tonnes of CO
2
per 1,000 tonnes of
hydrocarbon produced, which was slightly
higher than previous year (40.8) due to
decline in crude production from the Ravva
?eld.
Organic waste convertors were installed
and operated at the Rajasthan construction
site for composting all food waste into
manure, which is being used for greenbelt
development.
In the midstream project, a management
plan was developed and implemented for
protection of the top soil. The top soil after
excavation was stored in a manner to avoid
erosion with runoff. After lowering of the
pipeline sections top soil was re?lled in the
trenches.
All conventional water heaters were replaced
with solar water heaters, thus reducing energy
consumption by 40,000 units per annum.
18 conventional HPSV street light lamps were
replaced with LED lamps in plant street lighting
systems.
At the Gurgaon of?ce
Several energy conservation initiatives have
resulted in saving of 350,342 units of electricity,
thus reducing the of?ce’s carbon footprint. These
included:
Ensuring that all except the emergency lights
are turned off after working hours and on
holidays
Air handling units are started at 7 am and
turned off when the employees have left of?ce
Lights in empty cubicles are turned off after
6 pm
On working days, lights are turned on only by
the employees when they arrive on duty
Direct GHG Emissions
Tonnes CO
2
0
50000
100000
150000
200000
2006
2
0
4
6
0
7
2007
1
3
2
4
7
7
2008
1
2
9
4
7
4
2009
1
6
5
6
5
6
Direct GHG Intensity
Tonnes CO
2
/ 1000 tonnes of
Hydrocarbon produced
2009 2008 2007 2006
0
10
20
30
40
50
4
8
.
4
3
7
.
7
4
0
.
8
4
7
.
3
MAPPING AND SAFEGUARDING THE
FRAGILE BIO-DIVERSITY IN THE
REGION THROUGH ENVIRONMENT
IMPACT ASSESSMENT STUDIES
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 38
BUSINESS RISK
MANAGEMENT PROCESS
The Cairn India Business Risk Management
System, which aims to systematically identify and
document business risks, their signi?cance and
the appropriate controls to mitigate them, has
been implemented for all activities.
OPERATING POLICIES
AND PROCEDURES
Policies have been disseminated to appropriate
departments / functions, as considered essential
by senior management. Procedures have been re-
vised and put in place in many areas. The process
is still ongoing and will be completed and put in
place by the end of CY2010. Cairn India’s opera-
tional activities have been subjected to audits and
peer reviews. Implementation of the recommen-
dations arising from all audit reports is regularly
monitored by senior management.
LEGAL AND COMMERCIAL
PROCEDURES
These have been actively disseminated through-
out the Company. A process is ongoing to ensure
that policies and procedures are in place for all
key activities. A Legal Compliance Management
System has been developed to track regula-
tory compliance requirements. Internal audit
procedures for the Legal Department are being
developed, and will be completed in CY 2010.
CODE OF
BUSINESS ETHICS
The Cairn India Code of Business Ethics has
been distributed throughout the Company in FY
2009-10. The staff has accepted the provisions of
the Code.
FINANCIAL AND
MANAGEMENT REPORTING
Financial policies, standards and delegations of
authority have been disseminated to appropriate
senior management for further dissemination
to staff within their departments. Procedures to
ensure conformance with the policies, standards
and delegations of authority have been put in
place covering all activities. Periodic assessment
of the accuracy and reliability of the budget and
forecast model with respect to actual results have
been implemented. Cairn India’s processes and
?nancial activities are subjected to independent
audits — by internal as well as statutory auditors.
The implementation of the recommendations
arising from all audit reports is regularly moni-
tored by the senior management. Internal and
statutory audit reports and ?ndings, including
comments by management, are regularly placed
before the Audit Committee of the Board of
Directors.
PERFORMANCE SETTING
AND MEASUREMENT
Objectives and Key Performance Indicators have
been drawn up to meet the business plans and
work programme. A system is in place to moni-
tor and report on the progress to the Executive
Committee and the Board of Directors.
BUSINESS CONTINUITY
Emergency response and management plans
are in place for all operations. The IT Disaster
Recovery Plan was implemented in FY 2009-10.
The Gurgaon Of?ce Business Continuity Plan is
well developed. Final release will be by April 2011.
Business Continuity Plans for all other assets and
locations will be in place by end of CY 2010.
Internal Controls
and their Adequacy
During FY 2009-10, Cairn India further developed the use of the SAP system,
which enhanced the Company’s internal control environment. The intranet portal
use was extended and enhancements were made to the business risk management
system in line with best practices.
The review of management processes by third party consultants started in 2008
and continued in 2009. This has resulted in further improvements to business
systems and processes.
ACHI EVEMENTS DURI NG FY 2009- 10
Cairn India’s
processes and
?nancial activities
are subjected to
independent audits;
by internal as well
as statutory auditors.
The implementation
of the recommenda-
tions arising from
all audit reports is
regularly monitored
by the senior
management
MANAGEMENT DI SCUSSI ON AND ANALYSI S 39
0
5,000
15,000
10,000
FY 2010 2007
1
6
,
2
3
0
1
0
,1
2
3
1
1
,1
6
8
Income from Operations
INR million
FY 2009*
EPS
INR
0
4
2
3
1
5
FY 2010 2007
-
0
.1
FY 2009*
3
.
6
5
.
5
Net Profit/Loss
INR million
0
8,000
4,000
6,000
2,000
10,000
FY 2010 2007
-
2
4
5
6
,
8
7
0
1
0
,
5
1
1
FY 2009*
Abridged Financials
FI NANCI AL HI GHLI GHTS
For the Financial Year 2009–2010
Pro?t After Tax at INR 10,511 million
(USD 222 million)
Operating revenues at INR 16,230
million (USD 342 million)
The average oil price realisation was
USD 68.2 per bbl, the average gas
price realisation was USD 4.2 per
mscf; average price realisation per
boe was USD 60.9
Cash available as on 31 March, 2010
was INR 26,313 million (USD 583
million); loan drawn down to 31
March, 2010 against the loan facility
of USD 1.6 billion was INR 33,867
million (USD 751 million)
Gross cumulative Rajasthan
development capex spend USD
2,292 million, of which USD 934
million was spent during FY 2009-10
Completed ?nancing of USD 1.6
billion facility in October 2009
through a unique combination of USD
750 million international borrowing
and a domestic borrowing of INR
4,000 crore (USD 850 million)
The USD 1.6 billion ?nancing deal
was awarded the “Oil & Gas Deal
of the Year” for Asia Paci?c region
by Project Finance International.
The Company’s domestic borrowing
programme was given “AAA” by
CARE for an aggregate amount of
INR 4,000 crore (USD 850 million)
Company and some of its wholly
owned subsidiaries are undertaking
a Scheme of Arrangement. After the
approval and implementation of the
scheme, the Company will directly
own the Indian businesses, which are
currently owned by some of its wholly
owned subsidiaries.
Following the alignment of the Company’s ?nancial year with India’s
tax year the results of the current accounting period cover 12 months
as opposed to the 15 months period last year. One cannot thus readily
compare the results over the two successive periods. Table 2 provides
the consolidated audited results.
2
Consolidated Profit and Loss Account for the Year ended March 31, 2010
All amounts are in INR Million, unless otherwise stated
Year ended
March 31, 2010
For 15 months ended
March 31, 2009
Income from operations 16,230 14,327
Total Income 20,307 19,837
Total Expenditure 8,511 7,197
Earnings before Depreciation
Interest and Tax (EBIDTA)
11,796 12,640
Finance Cost 148 63
DD&A 1,485 2,698
Profit before taxation 10,163 9,879
Profit for the year / period 10,511 8,035
Paid up Equity Share Capital
(face value of Rs.10 each)
18,970 18,967
Reserves excluding Revaluation Reserves 319,250 308,668
Earnings Per Share (in INR)
Basic 5.54 4.31
Diluted 5.52 4.28
Public shareholding
Number of Shares 713,730,341 669,824,025
Percentage of Public Shareholding 37.62% 35.32%
* Figures normalised for 12 months
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 40
What if global crude oil prices crash to below 1.
USD 40 per barrel?
The past year saw crude oil prices stabilise in
the USD 70 per barrel range with some upward
movement. Energy researchers believe that the
demand for energy will continue to increase in
FY 2011. The Secretariat of the Organisation of
Petroleum Exporting Countries (OPEC) states
that, in all likelihood, crude prices of USD 70 per
barrel is longer term equilibrium—and a level
that ought to encourage exploration and produc-
tion of crude oil.
However, a lowering in crude prices can
never be ruled out. The only way to deal with
it is through operational cost advantages for
which Cairn India is well placed. The operational
expense for existing operations at Ravva and CB/
OS-2 is USD 2.10 per barrel; and the Rajasthan
operational expense including the pipeline is es-
timated at approximately USD 5 per barrel. Thus,
the Company should generate shareholder value
even at lower crude oil prices.
What if Train Four at the MPT is delayed? 2.
Train One at MPT was commissioned on 29
August, 2009 followed by Train Two in May
2010. This will be followed by the commission-
ing of Train Three with a capacity of 50,000 by
end June 2010. At the moment, Train Four is
the focus of Cairn India’s project activities at the
MPT, and all efforts are towards adhering to time-
lines. As of today, the Company plans to complete
Train Four in CY 2011 to support the ramp up of
production to the FDP approved rate of 175,000
bopd.
What if crude oil sales are not aligned to the 3.
capacity created at MPT?
As of now, the MPT has the capacity to process
130,000 bopd of crude, which can support
the Mangala approved peak production rate of
125,000 bopd. The Company targets to achieve
this rate during H2 CY 2010. Hence, it sees no
misallocation between sales arrangements and
production capacity at present.
Cairn India is in discussion with existing buy-
ers to enhance volumes, and with other re?ners
in the country to place orders for the Rajasthan
crude. In securing new buyers, the Company has
received consistent support from the GoI. It,
therefore, expects to ?nalise more allocations in
line with Train Four coming into operation in
CY 2011 — when the MPT could produce up to
205,000 bopd, subject to GoI approval.
What if Cairn ran out of funds for the 4.
Rajasthan project?
The capability to secure the USD 1.6 billion facil-
ity in dif?cult times demonstrates the capacity of
Cairn India to ?nancially secure the Rajasthan
development. The strong promoter support,
low ?nancial gearing and increasing cash ?ows
should only improve the ?nancial health of the
organisation. Moreover, lower operating costs of
the pipeline in comparison with trucking will re-
duce transport costs signi?cantly. The Company
continues to explore possibilities for additional
?nancing — if necessary and available at terms
that can enhance long term corporate value.
OUTLOOK
MBA targeted to reach its current approved peak
production level of 175,000 bopd in CY 2011.
The gross operated production of the Company
is expected to increase from 69,059 bopd in
FY 2009–10 to more than 200,000 bopd in FY
2011–12 with more than 400% increase in the
working interest.
CAUTIONARY STATEMENT
Statements in this Management Discussion and
Analysis describing the Company’s objectives,
projections, estimates and expectations may be
‘forward looking statements’ within the meaning
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, signi?cant
changes in political and economic environment in
India, exchange rate ?uctuations, tax laws,
Business
Risks
Given the nature of oil and gas exploration and production, managing risks is
an essential component of our business at Cairn India. The senior employees
and the Board of Directors are aware of the risks faced by the Company; and the
management takes steps when needed to mitigate such risks to the best possible
extent, for example:
Cairn India is well
placed to deal with
low crude oil prices
through operational
cost advantages. The
operational expense
for existing operations
at Ravva and
CB/OS-2 is USD 2.10
per barrel; and the
Rajasthan operational
expense including the
pipeline is estimated
at approximately USD
5 per barrel. Thus,
the Company should
generate shareholder
value even at lower
crude oil prices
The strong promoter
support, low ?nancial
gearing and increasing
cash ?ows should only
improve the ?nancial
health of the
organisation
MANAGEMENT DI SCUSSI ON AND ANALYSI S 41
INSIDE THE EXPORT OIL STORAGE TANK
DURING THE CONSTRUCTION PHASE AT
MANGALA PROCESSING TERMINAL
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 42
Delivering To
The Nation
MAY
PSC
signed
between
SIPD and
GoI
DEC
Cairn
farmed in
for 27.5%
NOV
Saraswati
discovery
F E B
Raagesh-
wari
discovery
J UN
Cairn
acquired
100%
J AN
Mangala
discovery
MAR
Aishwariya
discovery
AUG
Bhagyam
discovery
Mangala Processing Terminal
The World’s Longest Continuously Heated and Insulated Pipeline
1995 1999 2001 2003 2004
THE SITE IN 2004
THE CONCEPT TAKING SHAPE STATE–OF–THE–ART MOBILE RIGS
Cairn and ONGC JV (India) 670 km
LUKOIL Oil Company (Russia) 160 km
Pertamina (Indonesia) 115 km
LUKOIL Oil Company (Russia) 39 km
Aktua Oil (Kazakhstan) 20 km
43 DELI VERI NG TO THE NATI ON
OCT
Cairn submits
development plans to
GoI for its oil ?elds
Cairn’s ?nal concept
of pipeline with a
single 24” crude oil
line and a parallel gas
pipeline to feed gas
to heating stations
every ~18 km
J AN
Raageshwari Deep
gas and NE ?eld
discovery
AP R
First letter of approval
from GoI to shift
delivery point on the
pipeline to the coast
J UN
Work on the pipeline
formally commenced
DEC
Raageshwari East 1z
discovery
ONGC agrees to
share cost of USD
900 million pipeline
to Gujarat
Substantial RoU for
pipeline obtained in
Gujarat
F E B
RoU for pipeline
also obtained for
Rajasthan
AUG
Hon'ble Prime
Minister of India
dedicated Mangala
?eld to the nation.
Production
commences from
Mangala
MAY
Crude oil introduced
into the pipeline
2005 2006 2007 2008 2009 2010
TRAIN ONE AT MPT
CONSTRUCTION OF THE STORAGE TANKS
CURRENT NIGHT VIEW OF THE MPT
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 44
Respect
People are Cairn India’s key asset and the at-
titude of the Cairn team is critical to its business
culture. Cairn’s entrepreneurial spirit is under-
pinned by a depth of knowledge and a strong set
of cultural core values, including integrity, social
and environmental responsibility, teamwork, nur-
turing of individual creativity, risk management
and developing alliances with key partners.
Relationships
These are the key to developing any business and
Cairn India’s success in the region for more than
a decade would not have been possible without
the consistent support of all stakeholders, from
governments, regulators and JV partners to the
people living near our sites. The level of support
and understanding on the ground is something
we have worked hard to bring about in our busi-
ness development activities and we are proud of
what we have achieved — and continue to achieve
— wherever we operate.
Responsibility
Cairn India is operating in many areas that face
economic, social and environmental challenges.
It has the responsibility to understand these
CSR challenges, identify the potential impact
of its activities and, through engaging with
stakeholders, look for opportunities for mutual
bene?t.
OBJECTIVES
Strategic
Designed to establish best practices in the ?eld of
CSR and chartering a new path for others to follow.
Corporate
Social
Responsibility
OVERVIEW
Global organisations are expected not only to make a difference to the economic
development and stability in their countries of operation but also play a key role in
the social and environmental development of the region.
Cairn India has taken a lead in this direction by developing linkages,
relationships and interfaces between “business” and “society”. CSR is an integral
part of the business process and strategy at Cairn from exploration to development
and production. We aim to make a difference where we operate through our
ideology of “Respect, Relationships and Responsibility”.
MANAGEMENT DI SCUSSI ON AND ANALYSI S 45
External
Aimed towards a positive engagement with the
external stakeholders to enlist support for CSR ini-
tiatives and derive a vision striking a balance with
the expectation and needs of external stakeholders.
Internal
Directed towards seeking active participation of
internal stakeholders, namely employees, investors
and supply chain members.
FOCUS AREAS
Cairn India is committed to the Millennium
Development Goals (MDG). As we become an
increasingly signi?cant player in the energy sec-
tor, we will continue to leverage our CSR activities
and bring the bene?ts of energy development to
the communities.
We focus on inclusive growth by fostering
social capital through our health and education
initiatives and creating access to opportunities
and resources through our economic develop-
ment and infrastructure support initiatives.
Infrastructure
We recognise the role of infrastructure in the
macro development perspective and work closely
with local administration and communities
surrounding our areas of operations be it in
Ravva, Rajasthan or Suvali to aid and improve
existing infrastructure facilities From building
roads to improve access to the project site and
water harvesting structures in Rajasthan,
providing health infrastructure and sanitation
facilities in Ravva, Andhra Pradesh, we have tried
to seamlessly merge our social responsibility
initiatives with different stages of our business
development.
Economic Development
In a bid to create a conducive environment for
improved income generating opportunities, more
than 1000 trainees were provided with employ-
ment training for the year under review with 70%
being linked to various employment opportuni-
ties at the conclusion of the programme. These
programmes also include training for semi skilled
persons wherein 80% of the 115 trainees started
their own enterprise. Close to 400 women have
been trained in handicrafts making, majority
from project affected families with market linkage
of local exporters and contractors provided to
approximately 70% for the year under review.
Our dairy initiatives which have positively
impacted the lives of more than 800 families
continued its success through the year gone by.
Approximately 0.5 million litres of milk collection
was generated with revenue of INR 6.9 million
(USD 0.1 million) for the year under review.
Cairn India has tied up with Thomson Reuters
to provide agricultural market intelligence to
10,000 farmers along the pipeline route.
CSR HI GHLI GHTS
IFC linkage programme–
1,065 trainees trained in
employment programmes
Self-employment
programme 361 women
from project affected areas
trained in handicraft and key
chain making
Lives of more than 12,000
villagers touched through
Mobile Health Van project
More than 10,000 farmers
connected through SMS
service of Reuters Market
Light
Dairy Project collected
more than 0.5 million litres
of milk and generated more
than INR 6.9 million as
revenue (USD 0.1 million)
COMMUNITY ENGAGEMENT PROGRAMMES IN PROGRESS
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 46
The information is collated from around 1000
different markets on 250 different types of crops
and weather forecast from 2500 locations. Agri
kiosks as a single-window service for all pre-
harvest and post-harvest requirements of farmers
along with farming inputs from 10 corporate
houses are being set up in association with Multi
Commodity Exchange of India Limited (MCX)
and the Department of Post. For the year under
review, three such centres catering to 70 villages
and 2500 households have been set up.
Education
Initial activity during the exploration phase was
centred around providing educational aids to set-
ting up educational infrastructure like buildings,
computer rooms, text books and so on. Now a
long term approach is being adopted. The focus
is to improve the quality of education imparted
through innovation like “Theatre in Education”
and “English Relay” sessions aimed at enrich-
ing classroom experience. As part of the same
initiative, to inculcate a culture of learning and
reading, the Company set up 40 libraries in
Rajasthan and 20 in Gujarat under the “Room to
Read” initiative.
Health
Our health initiatives have touched more than
12,000 lives for the year under review, directly
and indirectly. While mobile health vans help
augment and support healthcare facilities, health
awareness camps and activities help improve the
health seeking behaviour of the villagers. Almost
100 villages have availed of the mobile health van
facilities in Rajasthan and Gujarat. More than 10
awareness camps attended by nearly 3000 villag-
ers were organised during the year.
Corporate Social Responsibility
Creating values for stakeholders
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° Competitive pay
° Challenging, high quality work
° Opportunity for development
° Continuing professional
development for all employees
° Consultation on organisational
initiatives
° Adherence to
global standards
° Direct interaction for feedback
and performance reporting
° Commercial relationship
° Responsible investment
° Legal compliance
° Fair returns
° Meetings with investment analysts
° IFC audit and annual monitoring
report to IFC
° Participation in surveys for
investment analysts
° Regular reporting
° To be treated fairly and honestly
° Long term relationships
° Opportunities for growth
° Commercial realtionships
° Meetings
° Training and capacity building
° Good neighbours
° Employment opportunities
° Community development
and welfare
° Public consultations
° Grievance mitigation
° Community investment
° Effective communication of
strategy and performance
° Good corporate governance and
risk/opportunity management
° Climate change strategy
° Award of exploration permits
° Granting Operational Permits
° Compliance monitoring
° Clear policies and principles
° Partnerships for progress
° Partnerships for conservation
of the environment
° Community development projects
STAKEHOLDERS
°
Key interest and expectations
°
Engagement
MANAGEMENT DI SCUSSI ON AND ANALYSI S 47
PARTNERING FOR SUCCESS
We build different levels of partnership looking at
the local needs and deliver highend programme
towards improving lives. Here are some of our
key partnerships and programmes:
International Finance Corporation (IFC)
IFC is a part of the World Bank group that provides
investment and advisory services to the private sec-
tor in developing countries. The Cairn-IFC Linkage
Programme with the support of the Government
of Rajasthan aims at maximising the development
impacts of Cairn’s investments in Barmer.
Thomson Reuters
This partnership offers localised, customised and
personalised information on agriculture to farmers
on their mobile phones. The model is one of the
six initiatives supported and recognised by United
Nations Development Programme (UNDP) as part
of its Millennium Development Goals.
Helpage India
The Helpage alliance with Cairn is based on
providing preventive and curative healthcare to
communities in Gujarat and Rajasthan.
MCX and Dept of Post, GoI
MCX is the fourth largest derivatives exchange in
Asia and sixth largest commodity exchange in the
world. The postal department of Government of
India has the largest postal network in the world.
The partnership aims to reach out to the 40,000
farmers along the pipeline route.
Room to Read India Trust
A global network which has bene?tted four
million children in nine countries with their inno-
vative model of infotainment through libraries.
Society to Uplift Rural Economy
One of the oldest and most renowned non-pro?t
organisation working in the Barmer region with
the local community for more than six decades.
WE ENCOURAGE THE USE OF
INNOVATIVE METHODS TO IMPART
EDUCATION
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 48 48
Board of
Directors
COMPOSITION, BOARD
PROCEDURE AND INFORMATION
SUPPLIED TO THE BOARD
As on 31 March, 2010, the Board comprised
10 Directors, including seven non-executive
Directors, four of whom are also independent. In
terms of the Securities and Exchange Board
of India’s (SEBI’s) revised Clause 49 of the
Listing Agreement, the Company is required to
increase the number of independent Directors to
at least half the strength of the Board. It is actively
engaged in the process of inducting two more
independent Directors with requisite expertise. It
intends to have half of the Board comprising inde-
pendent Directors before the end CY 2010.
The Chairman of the Board is a non-executive
Promoter Director. All non-executive Directors are
renowned professionals, having diversi?ed experi-
ence and expertise in ?nance, economics, oil and
gas exploration and general administration.
The Board has three executive Directors, namely
Messrs. Rahul Dhir, Indrajit Banerjee and Rick
Bott. The executive Directors have been appointed
for a term of ?ve years, except Mr Rick Bott, who
has a three-year contract.
The composition of the Board as on 31 March,
2010 is given in Table 1. None of the Directors is
a member of more than 10 Board-level commit-
tees of Indian public limited companies; nor are
they chairmen of more than ?ve committees in
which they are members. Moreover, none of the
Directors is related to the other, or to any other
employee of the Company.
During the period under review, Mr Philip
Tracy ceased to be an alternate Director to Sir
William B. B. Gammell effective 26 May, 2009,
The corporate governance philosophy of Cairn India Limited (‘Cairn India’ or ‘the
Company’) is structured to institutionalise policies and procedures that enhance
the ef?cacy of the Board and inculcate a culture of accountability, transparency
and integrity across the Cairn India group as a whole.
1
Composition of the Board
As on 31 March, 2010
S. No. Name of the Director Executive/ Non-Executive
No. of other
Directorships
Memberships/Chairmanships
of Board-level Committees**
Indian Others* Member Chairman
1 Sir William B.B. Gammell Chairman, Non-Executive Director - 29 - -
2 Ms Jann Brown Non-Executive Director - 41 1 -
3 Mr Malcolm Shaw Thoms Non-Executive Director - 26 - -
4 Mr Aman Mehta Non-Executive Independent Director 6 4 3 3
5 Mr Naresh Chandra Non-Executive Independent Director 16 3 9 1
6 Dr Omkar Goswami Non-Executive Independent Director 11 1 7 2
7 Mr Edward T. Story Jr Non-Executive Independent Director - 1 2 -
8 Mr Rahul Dhir Managing Director and CEO - 5 1 -
9 Mr Indrajit Banerjee Executive Director and CFO - 29 - -
10 Mr Rick Bott Executive Director and COO - - - -
Notes
* Directorships in companies registered in other jurisdictions (listed, unlisted and private limited companies).
** Only the Audit Committee and the Shareholders’ / Investors’ Grievance Committee of Indian public limited companies have been considered
Report on
Corporate Governance
49 REPORT ON CORPORATE GOVERNANCE
and was re-appointed in the same post effective 27
May, 2010.
The Company follows a structured pro-
cess of decision-making by the Board and its
Committees. The meeting dates are usually
?nalised well before the beginning of the year.
Detailed agenda, management reports and other
explanatory statements are circulated at least
seven days ahead of the meeting. To address
speci?c urgent needs, meetings are also called
at shorter notice but never less than a minimum
of seven days. In some instances, resolutions are
passed by circulation. The Board is also free to
recommend inclusion of any matter in the agenda
for discussion. Senior management of?cials are
called to provide additional inputs on the matters
being discussed by the Board/ Committee.
The Board has complete access to all relevant
information of the Company. The quantum
and quality of information supplied by the
management to the Board goes well beyond the
minimum requirement stipulated in Clause 49.
All information, except critical price sensitive
information (which is handed out at the meet-
ings), is given to the Directors well in advance of
the Board and Committee meetings.
NUMBER OF BOARD MEETINGS
AND THE ATTENDANCE OF DIRECTORS
During the year ended 31 March, 2010, the Board
of Directors met eight times on: 27 May, 2009,
29 July, 2009, 18 August, 2009, 22 October,
2009, 29 October, 2009, 9 December, 2009, 28
January, 2010 and 25 March, 2010. The maxi-
mum gap between any two meetings was less
than three months.
Table 2 gives the Directors’ attendance at
Board Meetings and the Annual General Meeting
(AGM) during the year ended 31 March, 2010.
DIRECTORS’ REMUNERATION
Table 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 / Directors’ remuneration paid / payable to
them. The non-executive Directors are eligible for
commission up to 1% of net pro?ts as permitted
by the Companies Act, 1956 and as approved by
shareholders in the annual general meeting held
on 20 September, 2007.
During the year under review, 65,845 options
were granted to Mr Indrajit Banerjee under the
Cairn India Performance Option Plan, 2006
(CIPOP). These were granted on the basis of his
2
Directors' Attendance Record for year ended 31 March, 2010
Name
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 * 8 7 Yes
Ms Jann Brown* 8 7 Yes
Mr Rahul Dhir 8 8 Yes
Mr Malcolm Shaw Thoms* 8 7 Yes
Mr Aman Mehta 8 8 Yes
Mr Naresh Chandra 8 8 Yes
Dr Omkar Goswami 8 7 Yes
Mr Indrajit Banerjee 8 8 Yes
Mr Rick Bott 8 8 Yes
Mr Edward T. Story Jr* 8 4 No
Note * Also participated in the proceedings of one Board Meeting through audio conference.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 50
performance in contributing to business results,
organisational strength and market position of
the Company and criticality of the role assigned.
The vesting period is minimum three years, sub-
ject to the ful?lment of performance conditions
in the Plan. The exercise period is three months
from the date of vesting of options.
In addition, 155,341 cash options were granted
to Mr Rick Bott under the Phantom Performance
Option Plan.
No options were exercised by the executive
Directors during the year under review.
SHAREHOLDING OF NON-EXECUTIVE
OR INDEPENDENT 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. Apart from this, none of the non-
executive or independent Directors holds any equity
shares or convertible instruments of the Company.
CODE OF CONDUCT
The Board of Directors has laid down a ‘Code of
Business Ethics’ which is applicable to everyone
in the Cairn India Group including employees,
contractors and Directors. Details of the Code are
available at www.cairnindia.com. All Directors and
senior management have af?rmed compliance
with the Code for the year ended 31 March, 2010.
COMMITTEES OF THE BOARD
Audit committee
The Company has an adequately quali?ed
Audit Committee. As on 31 March, 2010, the
Committee comprised ?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
?ve members are independent. All members have
the ?nancial knowledge and expertise mandated
by Clause 49 of the Listing Agreement. 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.
Mr Indrajit Banerjee, Executive Director and
CFO, Mr Raj Agarwal, Partner, S. R. Batliboi and
Co., 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. During the year
ended 31 March, 2010, the Audit Committee
met ?ve times: on 27 May, 2009, 29 July, 2009,
29 October, 2009, 28 January, 2010 and 25
March, 2010. The attendance record of the Audit
Committee is given in Table 4. Mr Aman Mehta,
Chairman of the Audit Committee, was present
at the Company’s last AGM held on 18 August,
2009.
Shareholders’ / Investors’
Grievance Committee
As on 31 March, 2010, the Committee comprised
three Directors: Dr Omkar Goswami (Chairman),
Mr Edward T. Story and Mr Rahul Dhir. Mr Story
was co-opted to the Committee as a member in
place of Mr Naresh Chandra with effect from 29
October, 2009.
The Chairman of the committee is an inde-
pendent Director. Ms Neerja Sharma, Company
3
Directors’ Remuneration
For the year ended 31 March, 2010 (in INR)
Name Salary Perquisites Bonus & Performance
incentives
Retirement
Bene?ts
Commission Sitting
Fee
Total
Sir William B. B. Gammell - - - - - - -
Ms Jann Brown - - - - - - -
Mr Rahul Dhir
1
34,995,023 67,616,900 28,812,876 4,201,892 - - 135,626,691
Mr Indrajit Banerjee
2
13,207,800 - 12,644,829 1,425,612 - - 27,278,241
Mr Rick Bott
3
23,969,235 68,736,308 6,497,197 2,887,725 - - 102,090,465
Mr Malcolm Shaw Thoms - - - - - - -
Mr Aman Mehta
4
- - - - - 340,000 340,000
Mr Naresh Chandra
4
- - - - - 340,000 340,000
Dr Omkar Goswami
4
- - - - - 320,000 320,000
Mr Edward T. Story Jr - - - - - 160,000 160,000
Notes
1
Mr Rahul Dhir’s salary as stated above includes salary from Cairn Energy India Pty Limited of INR 133,226,691
2
Mr Indrajit Banerjee’s salary as stated above includes salary from Cairn Energy India Pty Limited of INR 25,478,241. He was also paid an ex-gratia amount of
INR 25,478,362.
3
Mr Rick Bott’s salary as stated above includes salary from Cairn Energy India Pty Limited of INR 100,890,465. He was also paid a milestone linked bonus of
INR 62,653,500.
4
Mr Aman Mehta, Dr Omkar Goswami and Mr Naresh Chandra were paid a remuneration of INR 586,375 each from Cairn Energy Holdings Limited,
Cairn Energy Hydrocarbons Limited & Cairn Energy Asia Pty Limited, respectively, in their capacity as directors in these subsidiary companies.
51
Secretary, is the Compliance Of?cer of the
Company and the Secretary of the Committee.
The Committee met once during the ?nancial
year on 25 March, 2010. Dr Omkar Goswami and
Mr Rahul Dhir attended the said meeting. The
Company has appointed Link Intime India Private
Limited as the Registrar and Transfer Agent to
handle investor grievances in coordination with
the Compliance Of?cer. All grievances can be
addressed to the Registrar and Share Transfer
Agent. The Company monitors the work of the
Registrar to ensure that the investor grievances are
settled expeditiously and satisfactorily. The status
of complaints received during the 12-month period
ended 31 March, 2010 by the Registrar and Share
Transfer Agent is given in Table 5.
Remuneration Committee
The 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 executive Directors and
senior executives one level below the Board. As
on 31 March, 2010, the Remuneration Committee
comprised ?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 were independent Directors. Ms Neerja
Sharma, Company Secretary, is the Secretary to
the Committee.
The objective of the Company’s remuneration
policy is to ensure that Cairn India’s executive
Directors and senior executives are suf?ciently
incentivised for enhanced performance. In
determining this policy, the Committee takes into
account factors it deems relevant and gives due
regard to the interests of shareholders and to the
?nancial and commercial health of the Company.
It ensures that levels of remuneration are suf?-
cient to attract and retain senior executives of the
quality required to run the Company successfully.
Within the terms of the agreed policy, the
Committee determines the entire individual re-
muneration packages for the executive Directors.
The Committee is also responsible for overseeing
the Company’s share option schemes and long
term incentive plans, including determining the
eligibility for bene?ts and approving total annual
payments.
During the year ended 31 March, 2010, four meet-
ings of the Remuneration Committee were held:
on 27 May, 2009, 29 July, 2009, 29 October, 2009
and 25 March, 2010. The attendance record of the
Remuneration Committee is given in Table 6.
Nomination Committee
As on 31 March, 2010, the Nomination Committee
comprised ?ve Directors: Sir William B.B.
Gammell (Chairman), Mr Rahul Dhir, Ms Jann
Brown, Mr Malcolm Shaw Thoms and Mr Edward
T. Story.
The functions of the Nomination Committee are:
Reviewing the structure, size and composition
of the Board, and make recommendations to the
Board with regard to changes, if any.
Evaluating the balance of skills, knowledge
and experience of the Board and, in light of this
4
Attendance Record of Audit Committee
For the year ended 31 March, 2010
Name 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 5 5
Mr Naresh Chandra Independent Director Member 5 5
Dr Omkar Goswami Independent Director Member 5 4
Ms Jann Brown Non-executive Director Member 5 5
Mr Edward T Story Independent Director Member 5 4
5
Complaints Received and Attended
During the year ended 31 March, 2010
Nature of Complaint No. of Complaints
Received Attended Pending
Non-receipt of refund orders /
revalidation / demat credit
23 23 NIL
Referred by SEBI 10 10 NIL
Referred by Stock Exchanges - - NIL
Received from investors 44 44 NIL
Non-receipt of the Annual Report 11 11 NIL
Total 88 88 NIL
REPORT ON CORPORATE GOVERNANCE
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 52
evaluation, preparing a description of the role and
capabilities required for particular appointments.
Identifying and nominating, for the approval
of the Board, appropriate individuals to ?ll Board
vacancies as and when they arise.
Reviewing time required from each non-exec-
utive Director, and assessing whether s(he) has
given suf?cient commitment to the role.
Considering succession planning taking into
account the challenges and opportunities facing
the Company, and what skills and expertise are
needed from members 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
6
Attendance Record of Remuneration Committee
For the year ended 31 March, 2010
Name Position Status
No. of meetings
held
No. of meetings
attended
Mr Naresh Chandra Independent Director Chairman 4 4
Sir William B.B. Gammell Non-Executive Director Member 4 4
Dr Omkar Goswami Independent Director Member 4 4
Mr Aman Mehta Independent Director Member 4 4
Mr Malcolm Shaw Thoms Non-Executive Director Member 4 4
7
Details of Directorship and Committee Positions held in other Companies
S. No. Name of Director Name of the Company in which Directorship held Committee Chairmanship* Committee Membership*
1 Mr Rahul Dhir Cairn India Holdings Limited
CIG Mauritius Holding Pvt. Ltd.
CIG Mauritius Pvt. Ltd.
Cairn Lanka (Pvt.) Ltd.
Sunborne Energy Holdings LLC
2 Mr Indrajit Banerjee Cairn Energy Holdings Limited
Cairn Energy Hydrocarbons Limited
Cairn Exploration (No. 2) Limited
Cairn Exploration (No. 4) Limited
Cairn Exploration (No. 6) Limited
Cairn Exploration (No. 7) Limited
Cairn Energy Gujarat Block 1 Limited
Cairn Energy Discovery Limited
Cairn Petroleum India Limited
Cairn Energy Cambay B.V.
Cairn Energy India West B.V.
Cairn Energy Gujarat B.V.
Cairn Energy India Holdings B.V.
Cairn Energy Group Holdings B.V.
Cairn Energy Netherlands Holdings B.V.
Cairn Energy Gujarat Holding B.V.
Cairn Energy India West Holding B.V.
Cairn Energy Cambay Holding B.V.
Cairn Energy Australia Pty Limited
CEH Australia Limited
Cairn Energy Asia Pty Limited
Cairn Energy Investments Australia Pty Limited
Wessington Investments Pty Limited
Sydney Oil Company Pty Limited
Cairn Energy India Pty Limited
CEH Australia Pty Limited
CIG Mauritius Holding Pvt. Ltd.
CIG Mauritius Private Limited
Cairn Lanka (Pvt.) Limited
Note * Only Audit and Shareholders’/Investors’ Grievance Committees included
53
service and involvement outside Board meetings.
Management
MANAGEMENT DISCUSSION
AND ANALYSIS
This 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 prepara-
tion of its ?nancial statements. No material ?nan-
cial and commercial transactions were reported
by the management to the Board, in which the
management had any personal interest that either
had or could have had a con?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 con?ict with the interest of the Company at
large.
There were no penalties or strictures imposed
on the Company by the stock exchange, the 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 regulations on
prevention of insider trading, the Company has
instituted a comprehensive Code of Conduct for its
management and staff. The Code lays down guide-
lines which advise management and staff on proce-
dures to be followed and disclosures to be made
while dealing with shares of the Company, and
cautions them on 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 CERTIFICATION
The CEO’s and CFO’s certi?cation of the
?nancial statements and a declaration that all
Board members and senior management have
af?rmed compliance with the Company’s Code
of Business Ethics for the year ended 31 March,
2010 is enclosed at the end of this chapter.
SUBSIDIARY COMPANIES
All subsidiaries of the Company are unlisted
wholly owned foreign companies. These subsid-
iaries have their own Board of Directors hav-
ing 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 regularly
monitors the performance of such companies.
Shareholders
DISCLOSURES REGARDING
APPOINTMENT OR RE-APPOINTMENT
OF DIRECTORS
Brief pro?les of the persons sought to be
appointed / re-appointed as Directors at the
ensuing AGM of the Company are given below.
Mr Rahul Dhir
Mr Rahul Dhir, 44, joined Cairn India in May
2006 as the Chief Executive Of?cer and was
appointed the Managing Director on 22 August,
2006. He completed his degree in Bachelor
of Technology from the Indian Institute of
Technology, Delhi. He went on to complete his
M.Sc from the University of Texas at Austin
and MBA from the Wharton Business School
in Pennsylvania. Mr Dhir started his career as
an oil and gas reservoir engineer before moving
into investment banking. He has worked at SBC
Warburg, Morgan Stanley and Merrill Lynch.
Before joining Cairn India, he was the Managing
Director and Co-Head of Energy and Power
Investment Banking at Merrill Lynch.
Mr Indrajit Banerjee
Mr Indrajit Banerjee, 54,was appointed as an
Additional Director on 26 February, 2007 and
as the Executive Director and Chief Financial
Of?cer on 1 March, 2007. He graduated from the
University of Calcutta with a Bachelor’s Degree
in Commerce. An associate member of the
Institute of Chartered Accountants of India, Mr
Banerjee started his career at PriceWaterhouse
Coopers in Calcutta in 1979. He has held several
senior positions throughout his career, includ-
ing 17 years at the Indian Aluminium Company,
formerly part of the Alcan Group and at Lucent
Technologies (India). Before joining Cairn India,
he was President-Finance and Planning at
Lupin Limited.
The directorships and committee positions held
by these two Directors as on 31 March, 2010 are
detailed in Table 7.
REPORT ON CORPORATE GOVERNANCE
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 54
MEANS OF COMMUNICATION
Financial Results
The Company intimates un-audited as well as au-
dited ?nancial results to the Stock Exchanges, im-
mediately after the Board meetings 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 ?nancial results are also displayed on the
Company’s website: www.cairnindia.com and
posted on the corporate ?ling and dissemination
system at www.corp?ling.co.in.
News Releases,
Analyst Presentation, etc.
Of?cial news releases, detailed presentations
made to media, institutional investors, ?nancial
analysts etc. are displayed on the Company’s
website: www.cairnindia.com.
Website
The 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.
GENERAL BODY MEETINGS
The Company in its brief history has had three
AGMs and four Extraordinary General Meetings
(EGMs). The forthcoming AGM is scheduled to
take place on 15 September, 2010. The desired
details in respect of general meetings are given in
Table 8.
SPECIAL RESOLUTIONS PASSED
IN THE LAST THREE YEARS
At AGMs
At the AGMs held on 20 September, 2007 and
25 June, 2008, the following special resolutions
were passed:
20 September, 2007
Keeping register of members and other related
documents
Consent of shareholders for issue of further
securities
Payment of commission to non-executive
Directors
25 June, 2008
Keeping register of members and other related
documents
At EGMs
At 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, 2006
Investment in shares of Cairn India Holdings
Limited
21 September, 2006
Amendment in the memorandum of associa-
tion of the Company
Amendment in the articles of association of the
Company
Appointment of non-retiring Directors
Issue of equity shares of the Company on a
private placement basis
Issue of equity shares of the Company by an
initial public offering
Increase in the limit of foreign institutional
investment in the Company
Investment in the shares of Cairn India
Holdings Limited
17 November, 2006
Appointment of Chief Executive Of?cer of the
Company
Employee stock option plans
Amendment in the articles of association of the
Company
Remuneration of non-executive Directors
8
Location and time of general meetings
Financial Year Location of the meeting Date Time
AGMs
2006 Birla Matushri Sabhagar, 19 New Marine Lines, Mumbai 20 September, 2007 11:00 AM
2007 Birla Matushri Sabhagar, 19 New Marine Lines, Mumbai 25 June, 2008 11:00 AM
2008-09 Birla Matushri Sabhagar, 19 New Marine Lines, Mumbai 18 August, 2009 11:00 AM
EGMs
2006 50 Lothian Road, Edinburgh 08 September, 2006 03.00 PM
2006 50 Lothian Road, Edinburgh 21 September, 2006 02.00 PM
2006 50 Lothian Road, Edinburgh 17 November, 2006 02.15 PM
2008 Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 16 April, 2008 02.30 PM
55
16 April, 2008
Allotment of the equity shares of the Company
on preferential basis
RESOLUTIONS PASSED THROUGH
POSTAL BALLOT LAST YEAR
During the year under review, the Company
passed two resolutions through postal ballot,
as per the details provided below:
1. Special resolution for shifting of
registered of?ce from the State of
Maharashtra to the State of Rajasthan
All members on the books as of 29 May, 2009
were sent a postal ballot form along with post-
age pre-paid business reply envelope. All replies
received up to close of working hours on 11 July,
2009 were considered. 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 12 July, 2009
under the scrutiny of Mr Grover, and the result of
postal ballot was declared by the Chairman of the
proceedings on 17 July, 2009 at registered of?ce
of the Company. Table 9.1 shows the details of
the voting pattern.
2. Special resolution for utilisation of the
share premium account, not exceeding
INR 15,000 crore, of the Company to
adjust the goodwill arising pursuant to
the Scheme of Arrangement between
Cairn India Limited, Cairn Energy India
Pty Limited, Cairn Energy India West
B.V., Cairn Energy Cambay B.V. and Cairn
Energy Gujarat B.V. and their respective
shareholders & creditors.
All members on the books as of 8 January,
2010 were sent a postal ballot form along with
postage pre-paid business reply envelope. All
replies received up to close of working hours
on 24 February, 2010 were considered. All
postal ballot forms were kept in the control of
the scrutiniser, Mr Nesar Ahmad, a practising
Company Secretary. The postal ballots were
opened on 25 February, 2010 under the scrutiny
of Mr Ahmad, and the result of postal ballot was
declared by the Chairman of the proceedings
on 2 March, 2010 at the registered of?ce of the
Company. Table 9.2 shows the details of the vot-
ing pattern.
COMPLIANCE WITH CLAUSE 49
Mandatory Requirements
The Company is fully compliant with the applica-
ble mandatory requirements of the revised Clause
49 except with respect to composition of the Board
as stated earlier in this chapter, which it intends to
comply with fully in the course of CY 2010.
Non-Mandatory Requirements
Remuneration Committee — The Board has
constituted a Remuneration Committee, details of
which have been given earlier.
Audit quali?cations — The Company’s ?nancial
statements are free from any quali?cations by the
Auditors.
Training of Board Members — The Board of
Directors is periodically updated on the business
model, company pro?le, and the risk pro?le of
the business parameters of the Company.
Whistleblower Policy — During the year under
review, the Company formulated and adopted
a Whistleblower Policy, to support the Code of
Business Ethics. The policy is designed to enable
employees, directors, consultants and contrac-
tors to raise concerns internally at a signi?cantly
senior level and to disclose information which
the individual believes, shows malpractice or
wrongdoing which could affect the business or
reputation of the Company. Any allegations that
fall within the scope of the concerns identi?ed are
investigated and dealt with appropriately.
9.1
Voting Result of Special Resolution passed through Postal Ballot
Number of valid postal ballot forms received 8,432
Votes in favour of the resolution 1,468,110,709
Votes against the resolution 68,855
Resolution passed by % of valid votes received 99.99
9.2
Voting Result of Special Resolution passed through Postal Ballot
Number of valid postal ballot forms received 6,218
Votes in favour of the resolution 577,867,631
Votes against the resolution 40,909
Resolution passed by % of valid votes received 99.70
REPORT ON CORPORATE GOVERNANCE
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 56
ANNUAL GENERAL MEETING
Date 15 September, 2010
Time 11:00 AM
Venue:Rangsharda Auditorium,
K C Marg, Bandra Reclamation,
Bandra West, Mumbai-400050
FINANCIAL CALENDAR
For the year ended 31 March, 2010,
results were announced on
29 July, 2009: First quarter
29 October, 2009: Second quarter
28 January,2010 : Third quarter
27 May, 2010 :Fourth (last) quarter and the
?nancial year’s results
For the year ending 31 March, 2011,
results will be announced by
Last week of July 2010: First quarter
Last week of October 2010: Half yearly
Last week of January 2011: Third quarter
Last week of May 2011: Fourth quarter and full
?nancial year’s results.
BOOK CLOSURE
The dates of book closure are from Wednesday,
8 September, 2010 to Wednesday, 15 September,
2010, inclusive of both days.
LISTING
The 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 ?nancial year 2010-
11 has been paid to BSE and NSE. The stock codes
are given in Table 1 below.
MARKET PRICE DATA
Table 2 and Chart A give the details.
DISTRIBUTION OF SHAREHOLDING
Tables 3 and 4 list the distribution of the
Shareholding and Shareholding pattern of the
Company by size and by ownership class as on 31
March, 2010. Further details of top twenty share-
holders are given in Table 5.
Additional
Shareholder
Information
57 ADDI TI ONAL SHAREHOLDER I NFORMATI ON
1
Stock Exchange codes
Name of the Stock Exchange Stock Code
The National Stock Exchange of India CAIRN
Bombay Stock Exchange Limited 532792
2
High, Low and Volume of Company’s Shares traded
During the year ended 31 March, 2010 at the BSE and the NSE
Months BSE NSE
High Low No. of Shares traded High Low No. of Shares traded
April 2009 214.0 178.5 13,869,825 211.6 178.5 71,683,250
May 2009 239.9 192.0 49,252,984 240.5 190.5 164,417,628
June 2009 273.7 220.0 31,626,399 274.0 220.1 144,248,354
July 2009 252.0 201.0 17,376,062 252.0 200.6 79,285,187
August 2009 272.5 230.0 17,168,054 272.5 232.1 64,997,559
September 2009 275.25 253.5 11,576,332 275.5 253.2 55,393,930
October 2009 301.45 253.25 12,239,989 301.0 252.6 55,763,961
November 2009 288.0 254.0 7,365,798 288.9 254.2 37,112,191
December 2009 294.9 265.7 7,828,273 300.1 266.1 39,358,739
January 2010 310.0 258.3 10,288,360 310.0 258.0 59,917,270
February 2010 273.4 248.0 7,718,586 274.0 248.1 46,265,139
March 2010 307.8 261.9 9,884,708 307.6 261.4 62,073,392
#HARTô!ôôôôô3HAREô0ERFORMANCEôVSô.IFTYôANDô3ENSEX
0
50
100
150
200
Calrn
Nlfty
Sensex
Apr 2009 May 2009 1un 2009 1u| 2009 Aug 2009 Sep 2009 Oct 2009 Nov 2009 Dec 2009 1an 2010 Feb 2010 Mar 2010
Note Share prices, Nifty and Sensex indexed to 100 as on the ?rst working day of the ?nancial year 2009-10, i.e.1 April, 2009
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 58
DEMATERIALISATION OF SHARES
As on 31 March, 2010, 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 DATES
AND LIKELY IMPACT ON EQUITY
There are no outstanding GDRs / ADRs / war-
rants or any convertible instruments issued by the
Company. However, the Company has outstand-
ing employee stock options, the details of which
as on 31 March, 2010 are given in Table 6.
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 aggregat-
ing INR 52,608 million at the issue price of INR
160. The Company also placed INR 33,547 million
through a pre-IPO placement and exercised its
Green Shoe Option for 13,085,041 shares. The
total proceeds aggregated INR 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 INR
25,345.9 million on 22 April, 2008. The shares
were issued at a premium of INR 214.30 per share.
During the year under review, the Company
has received INR 20,363,110 as subscription
amount, pursuant to exercise of stock options
granted to employees.
During the ?nancial year ended 31 March,
2010, the Company borrowed USD 750 million
from a consortium of overseas commercial banks
led by Standard Chartered and International
Finance Corporation. Further, a domestic
3
Distribution of Shareholding
As on 31 March, 2010
Number of Shares No of Shareholders % of Shareholders Total Shares % of Shares
Up to 5,000 243,914 99.55 41,283,100 2.18
5,001-10,000 360 0.15 2,608,352 0.14
10,001-20,000 173 0.07 2,423,262 0.13
20,001-30,000 87 0.03 2,181,380 0.11
30,001-40,000 52 0.02 1,804,181 0.09
40,001-50,000 37 0.01 1,688,050 0.09
50,001-100,000 90 0.04 6,500,488 0.34
100,001 and above 309 0.13 1,838,485,319 96.92
Total 245,022 100 1,896,974,132 100
4
Shareholding Pattern by Ownership
As on 31 March, 2010
No. of Equity Shares
Face Value INR 10/- Each
Shares Held
(%)
A. PROMOTER HOLDING
Indian Promoters - -
Foreign Promoters 1,183,243,791 62.38
Persons acting in concert - -
B. NON-PROMOTER HOLDING
A Banks, Financial Institutions, Insurance Companies
(Central /State Govt. Institutions / Non-Government Institutions)
90,434,695 4.77
B Foreign Institutional Investors 194,051,172 10.23
C Public 43,757,767 2.31
D Mutual Funds 53,758,180 2.83
E NRI (Repatriable) 1,069,150 0.05
F NRI (Non-Repatriable) 380,995 0.02
G Bodies Corporate 35,457,071 1.87
H Foreign Bodies Corporate 290,481,473 15.31
I Clearing Member 1,536,702 0.08
J Directors/relatives 2,776,156 0.15
K Trusts 26,980 -
Grand Total 1,896,974,132 100.00
59 ADDI TI ONAL SHAREHOLDER I NFORMATI ON
7
Status of Equity Shares lying in the Suspense Account
S. No. Particulars
No. of
Shareholders
No. of
Shares
1
Aggregate number of shareholders and the outstanding shares in the
suspense account lying as on 1 April, 2009
72 12,495
3
No. of shareholders who approached for transfer of shares from sus-
pense account during the 12 months period ended 31 March, 2010
15 2,135
4
No. of shareholders to whom shares were transferred from suspense ac-
count during the 12 months period ended 31 March, 2010
15 2,135
5
Aggregate number of shareholders and the outstanding shares in the
suspense account as on 31 March, 2010
57 10,360
5
Top Twenty Shareholders
As on 31 March, 2010
S.No. Name No. of Equity Shares Shares Held (%)
1 Cairn UK Holdings Limited 1,183,243,785 62.38
2 Petronas International Corporation Limited 283,431,438 14.94
3 Life Insurance Corporation of India 46,672,794 2.46
4 LIC of India - Market Plus 14,271,145 0.75
5 Europaci?c Growth Fund 12,812,190 0.68
6 LIC of India Market Plus – 1 12,154,468 0.64
7 Merrill Lynch International Investment Fund 11,745,952 0.62
8 ICICI Prudential Life Insurance Company Ltd 10,359,774 0.55
9 International Finance Corporation 7,050,035 0.37
10 Schroder International Selection Fund Emerging Asia 6,751,530 0.36
11 New World Fund Inc 6,587,000 0.35
12 Barclays Capital Mauritius Limited 5,702,763 0.30
13 PRU India Equity Open Limited 5,663,234 0.30
14 Norges Bank A/C Government Petroleum Fund 5,556,960 0.30
15 State Bank of India (Equity) 5,222,170 0.28
16 LIC of India Money Plus 5,211,809 0.27
17 Franklin Templeton Investment Funds 4,554,429 0.24
18 Metlife India Insurance Company Limited 4,377,029 0.23
19 Societe Generale 4,144,345 0.22
20 SBI Life Insurance Co. Limited 4,126,623 0.22
6
Outstanding ESOPs
ESOP Scheme No. of outstanding options Last date for exercise Exercise Price (INR)
CIESOP 1,981,770 31 December, 2016 160.00
3,915,607 19 September, 2017 166.95
3,502,555 28 July, 2018 227.00
18,388 9 December, 2018 143.00
5,227,889 28 July, 2019 240.05
CIPOP* 168,382 31 March, 2010 10.00
777,496 19 December, 2010 10.00
714,237 28 October, 2011 10.00
966,715 28 October, 2012 10.00
CISMP 2,238,077 18 months after the vesting date, which
will occur on Company achieving 30 days’
consecutive production of over 150,000
bopd from the Rajasthan Block
33.70
Total 19,511,116
Note * The vesting period is a minimum of three years, subject to the ful?lment of performance conditions as de?ned
in the Plan. The exercise period is three months from the date of vesting of options. 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 19,511,116.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 60
borrowing of INR 4,000 crore was also under-
written by SBI, who had syndicated the facility to
other banks and ?nancial institutions.
SHARE SUSPENSE ACCOUNT
Following Clause 5A of the Listing Agreement,
the status of the equity shares lying in the
Suspense Account is given in Table 7.
SHARE TRANSFER SYSTEM
Link Intime India Private Limited is the Registrar
and Transfer Agent of the Company. All share
transfers and related operations are conducted by
Link Intime, which is registered with the SEBI.
The Company has a Shareholders’/Investors’
Grievance Committee for redressing the com-
plaints/queries of shareholders and investors.
ADDRESS FOR INVESTOR
CORRESPONDENCE
Either
Link Intime India Private Limited
(Unit: Cairn India Limited)
C-13, Pannalal Silk Mills Compound
L.B.S Marg, Bhandup (West)
Mumbai 400 078, India.
E-Mail [email protected]
Tel +91 22 25946970
Fax +91 22 25946969
Or
The Company Secretary
Cairn India Limited
4th Floor, Vipul Plaza, Sun City, Sector 54
Gurgaon 122 002, India.
E-Mail [email protected]
Tel +91 124 2703000
Fax +91 124 2889320
Investors 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
the ‘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 ana-
lysts, the media, institutional investors etc. The
‘Investor Relations’ section on the Company’s
website (www.cairnindia.com) updates informa-
tion sought by investors and analysts. It provides
the latest information on ?nancial statements,
investor-related events and presentations, annual
reports and shareholding pattern along with me-
dia releases and the current Company overview,
and thus helps existing and potential investors to
interact with the Company.
OPERATIONAL LOCATIONS
The Company’s oil and gas ?elds are located at:
Ravva (Andhra Pradesh)
Cambay Basin (Gujarat)
Barmer (Rajasthan)
REGISTERED OFFICE ADDRESS
Cairn India Limited
101, West View,
Veer Savarkar Marg,
Prabhadevi, Mumbai- 400 025
Tel +91 22 24338306
Fax +91 22 24311160
61 ADDI TI ONAL SHAREHOLDER I NFORMATI ON
CERTI FI CATE OF THE CEO & CFO
THE BOARD OF DIRECTORS
Cairn India Limited
101, West View,
Veer Savarkar Marg,
Prabhadevi, Mumbai- 400 025
Dear Sirs,
We, Rahul Dhir, Chief Executive Of?cer, and Indrajit Banerjee,
Chief Financial Of?cer, of Cairn India Limited hereby certify to the
Board that:
a. We have reviewed ?nancial statements and the cash ?ow state-
ment for the ?nancial year ended 31 March, 2010 and that to the
best of our knowledge and belief:
i. These statements do not contain any materially untrue state-
ment 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 account-
ing standards, applicable laws and regulations.
b. There are, to the best of our knowledge and belief, no transac-
tions entered into by Cairn India Limited during the year which
are fraudulent, illegal or violative of the Company’s Code of
Business Ethics.
c. We are responsible for establishing and maintaining internal
controls for ?nancial reporting in Cairn India Limited, and we
have evaluated the effectiveness of the internal control systems
of the Company pertaining to ?nancial reporting. We have dis-
closed to the auditors and the Audit Committee, de?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 de?ciencies.
d. We have indicated to the auditors and the Audit Committee
i.Signi?cant changes in internal control over ?nancial reporting
during the year;
ii.Signi?cant changes in accounting policies during the year and
the same have been disclosed in the notes to the ?nancial state-
ments; and
iii.Instances of signi?cant fraud of which we have become aware
and the involvement therein, if any, of the management or an
employee having a signi?cant role in the Company’s internal
control system over ?nancial reporting.
e. We af?rm that we have not denied any personnel access to the
Audit Committee of the Company (in respect of matters involv-
ing alleged misconduct).
We further declare that all Board members and senior manage-
ment have af?rmed compliance with the Company’s Code of
Business Ethics for the ?nancial year ended 31 March, 2010.
Rahul Dhir Indrajit Banerjee
Managing Director & CEO Executive Director & CFO
Date 27 May, 2010
Place Gurgaon
AUDI TORS’ CERTI FI CATE
TO THE MEMBERS OF CAIRN INDIA LIMITED
We have examined the compliance of conditions of corporate
governance by Cairn India Limited (‘the Company’), for the year
ended on 31 March, 2010, 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
responsibility of the management. Our examination was limited to
procedures and implementation thereof, adopted by the Company
for ensuring the compliance of the conditions of the Corporate
Governance. It is neither an audit nor an expression of opinion on
the ?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 propor-
tion 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 clari?cation dated 23 October, 2008
issued by the Securities 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 ef?ciency or effective-
ness with which the management has conducted the affairs of the
Company.
For S.R. BATLIBOI & ASSOCIATES
Firm registration number: 101049W
Chartered Accountants
per Sanjay Vij, Partner
Membership No.: 95169
Place Gurgaon
Date 27 May, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 62 62
Dear Members,
Your Directors have pleasure in presenting the Fourth Annual Report on the
business and operations of the Company and the Audited Financial accounts for
the year ended 31 March, 2010.
FINANCIAL HIGHLIGHTS
In INR million
The consolidated statements provide the results of
Cairn India Limited together with those of its subs-
idiaries for the ?nancial year ended 31 March, 2010.
DIVIDEND
In view of the inadequacy of pro?ts in Cairn India
Limited, your Directors regret their inability to
recommend any dividend.
CHANGES IN CAPITAL STRUCTURE
During the ?nancial year under review, 306,316
equity shares of INR 10/- each were allotted
on exercise of Employee Stock Options by the
employees of the Company or of its subsidiaries.
Accordingly, the issued and paid up capital of the
Company has increased to INR 18,969,741,320
divided into 1,896,974,132 equity shares of INR
10/- each.
Subsequent to the close of the ?nancial year,
the Company allotted 239,288 equity shares of
INR. 10/- each on exercise of Stock Options by
the employees. Accordingly, the issued and paid
up capital of the Company has increased to INR
18,972,134,200 divided into 1,897,213,420 equity
shares of INR 10/- each
CONSOLIDATED FINANCIAL
STATEMENTS
Your Company is also presenting the audited con-
solidated ?nancial statements prepared in accor-
dance with the Accounting Standard 21 issued 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.
OPERATIONS
A detailed review of operations has been included
in the Management Discussion and Analysis
Report, which forms a part of this Annual Report.
UTILISATION OF IPO PROCEEDS
The Company has fully utilised INR 88,249 mil-
lion raised from its maiden offer to the public.
EMPLOYEE STOCK OPTION SCHEMES
Your Company has established share incentive
schemes viz., Cairn India Senior Management
Plan (CISMP), Cairn India Performance Option
Plan (CIPOP) and Cairn India Employee Stock
Directors’
Report
Standalone Consolidated
For the ?nancial year ended For the ?nancial year ended
31 March, 2010
(Twelve months)
31 March, 2009
(Fifteen months)
31 March, 2010
(Twelve months)
31 March, 2009
(Fifteen months)
Total Income 1,634 2,980 20,307 19,837
Total Expenditure 2,367 1,860 10,143 9,958
Pro?t/(loss) before tax (734) 1,121 10,163 9,879
Taxes (44) 578 (348) 1,844
Pro?t/(loss) after tax (689) 542 10,511 8,034
63 DI RECTORS' REPORT
Option Plan (CIESOP) pursuant to which options
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/cash options have been
granted to the executive Directors and employees
of the Company or of its subsidiaries. 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.
During the period under review, 306,316 equity
shares of INR 10/- each were allotted pursuant to
the exercise of the stock options.
SUBSIDIARY COMPANIES
As on 31 March, 2010, the Company had 31 sub-
sidiaries including indirect subsidiaries. All these
companies are bene?cially owned 100% by Cairn
India Limited.
These subsidiaries have their own Boards of
Directors having the rights and obligations to man-
age such companies in the best interest of such
Companies. The Company has its representatives
on the Board of subsidiary companies and moni-
tors the performance of such companies regularly.
Pursuant to the provisions of Section 212(8) of
the Companies Act, 1956, the Company has ob-
tained 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 ?nancial year ended 31
March, 2010. The accounts of the subsidiaries are
available for inspection by members on any work-
ing day at the Registered Of?ce of the Company
between 10 am and 12 noon. Members interested
in obtaining copies are entitled to receive them
on speci?c request. A statement pursuant to the
approval under Section 212(8) of the Companies
Act,1956, in respect of subsidiary companies
forms part of the annual report.
SCHEME OF ARRANGEMENT
In order to simplify and consolidate the multi
layered structure comprising foreign susidiar-
ies, your Company had proposed a scheme of
arrangement between Cairn India Limited,
Cairn Energy India Pty Limited, Cairn Energy
India West B.V., Cairn Energy Cambay B.V.,
Cairn Energy Gujarat B.V. and their respective
shareholders and creditors (the 'Scheme'). The
members of the Company had approved the
Scheme with overwhelming majority in the Court
convened meeting held on 18 February, 2010.
The Scheme has since been approved by the
Hon'ble High Court of Judicature at Madras on
1 April, 2010. The matter is currently pending
for ?nal hearing before the Hon'ble High Court
of Bombay.
DIRECTORS
Mr Philip Tracy ceased to be an alternate director
with effect from 26 May, 2009. He was again
appointed as an alternate Director to Sir William
B. B. Gammell effective 27 May, 2010. Mr Rahul
Dhir and Mr Indrajit Banerjee, directors of the
Company, retire by rotation at the ensuing an-
nual general meeting and being eligible, offer
themselves for re-appointment. A brief pro?le
of the above-named directors forms part of the
Corporate Governance report.
CORPORATE GOVERNANCE
Your Directors reaf?rm their continued commit-
ment to good corporate governance practices. A
detailed report on the Corporate Governance and
Management Discussion and Analysis Report,
together with a certi?cate from Statutory Auditors
forms an integral part of this report and are set
out as separate sections in this annual report.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 64
AUDITORS
M/s S. R. Batliboi & Associates, Chartered
Accountants, auditors of the Company, retire
at the conclusion of the ensuing annual gen-eral
meeting but do not offer themselves for re-ap-
pointment. The Company has recieved a requisi-
tion to appoint M/s S.R Baltiboi & Co., Chartered
Accountants, as the Statutory Auditor of the
Company. Consequently a consent letter and
certi?cate from M/s S.R Baltiboi & Co., Chartered
Accountants stating that their appointment,
if made, will be in accordance with the limits
speci?ed in Section 224(1B) of the Companies
Act, 1956 has also been received. The Audit
Committee in its meeting held on 27 May, 2010
has also recommended the appointment of
M/s S. R. Batliboi & Co., as Statutory Auditors
of the Company. Your directors also recommend
their appointment.
FIXED DEPOSITS
The Company has not invited any deposits from
the public under Section 58A of the Companies
Act, 1956.
HUMAN RESOURCES
Company’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 shareholders of the Company excluding the
particulars of employees under Section 217(2A)
of the Act. Any shareholder interested in obtain-
ing a copy of the said statement may write to the
Company Secretary at the Registered Of?ce of the
Company.
CONSERVATION OF ENERGY,
TECHNOLOGY ABSORPTION
AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
Information on Conservation of Energy,
Technology Absorption and Foreign Exchange
Earnings and Outgo is given in Annexure II to
this report.
DIRECTORS’
RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies
Act, 1956, the Directors con?rm that:
In the preparation of the annual accounts, the 1
applicable accounting standards have been fol-
lowed along with proper explanation relating to
material departures
Appropriate accounting policies have been se- 2
lected 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, 2010 and of the profit of the Company
for the year ended 31 March, 2010
Proper and sufficient care has been taken for 3
maintenance of adequate accounting records
in accordance with the provisions of the
Companies Act, 1956 for safeguarding the
assets of the Company and for preventing and
detecting fraud and other irregularities
The annual accounts have been prepared on a 4
going concern basis
CORPORATE
SOCIAL RESPONSIBILITY
Your Company is a responsible corporate citizen,
and strives to give back to the community it oper-
ates in. A detailed report on CSR efforts of the
Company forms part of this annual report.
LISTING
The Company has paid the annual listing fee for
the year 2010-2011 to Bombay Stock Exchange
Limited and National Stock Exchange of India
Limited.
APPRECIATION
Your Directors wish to place on record their
sincere appreciation of the concerted efforts and
dedicated service of all employees, which contrib-
uted to the continous growth and performance
of the Company. Your 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, Joint
Venture Partners, Banks, Institutions, Investors
and Customers.
For and on behalf of the Board of Directors
Sir William B.B. Gammell
Chairman
Place Gurgaon
Date 27 May, 2010
65
Annexures To The Directors’ 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
DI RECTORS' REPORT
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 April 2009 - March 2010 Nil 994,768 5,405,144
2. The Pricing Formula Rs. 33.70 per Share Rs. 10 per Share Price determined by the Remu-
neration Committee but not
less than the fair market value
of a share on the date of grant
3. Options Vested during April 2009 - March 2010 NIL 359,369 2,142,525
4. Options Exercised during April 2009 - March 2010 NIL 190,983 115,333
5. Total number of Shares arising as a result of exercise of
options during April 2009 - March 2010
NIL 190,983 115,333
6. Options lapsed during April 2009 - March 2010 NIL 1,377,051 1,557,846
7. Variation of terms of options None None None
8. Money realized by exercise of options during April 2009 –
March 2010
NIL 1,909,830 18,453,280
9. Total number of options in force as on 31 March 2010 2,238,077 2,626,830 14,646,209
10. Employee wise details of options granted during the year to:
(i) Senior Managerial Person None Indrajit Banerjee 65,845
Manu Kapoor 77,130
S V Nair 68,953
P Elango 53,290
Santosh Chandra 52,474
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 Narayanan P S 67,747
Venkatesan T K 57,394
Ajay Gupta 51,099
None
(iii) Identi?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
(0.36) (0.36) (0.36)
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 compensa-
tion cost that shall have been recognised if it had used the
fair value of the options (Rs. in thousands)
390,521
(iii) The impact of this difference on pro?ts and on EPS of
the Company
Pro?t after Tax (PAT) (Rs. in thousands) (689,534)
Less: Additional employee Compensation cost based on
fair value (Rs. in thousands)
390,521
Adjusted PAT (Rs. in thousands) (1,080,055)
Adjusted EPS Basic (Rs.) (0.57)
Adjusted EPS Diluted (Rs.) (0.57)
13
Weighted-average exercise prices of options granted
during April 2009 - March 2010
NA 10 240.05
Weighted-average fair value of each option outstanding as
on 31 March 2010
135.50 200.23 110.99
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 66
Conservation of Energy,
Technology Absorption,
Foreign Exchange
Earnings and Outgo
CONSERVATION OF ENERGY
Energy conservation measures taken
As a responsible Corporate Citizen and in adher-
ence to our climate change strategy, we are con-
tinuously taking effective steps to conserve energy
and to reduce methane and other Green House
Gas (GHG) emissions, wherever feasible. GHG
emissions in 2009 were within targets set at the
beginning of the year notwithstanding a rise in
energy use.
Cairn India recognises the responsibility to
minimise environmental impact from its activi-
ties. The challenges of proactively managing en-
vironmental issues during the construction phase
of the MPT and the pipeline project have been
successfully achieved through active support and
in partnership with the contractors.
The Company regularly monitored air emis-
sion sources and the ambient air quality, and was
able to maintain emission levels within regulatory
standards in 2009.
Measures taken for reduction of energy
consumption & consequent impact
During the period under review, several energy
conservation initiatives were adopted and were
taken, some of which are listed below:
At Ravva
Solar street lighting poles were installed, which
resulted in the reduction in usage of 615 units
of conventional energy.
All conventional water heaters were replaced
with solar water heaters as a result of which
energy consumption was reduced by 40,000
units per annum.
18 conventional high pressure sodium street
light lamps were replaced with LED lamps in
plant street lighting systems.
At the Gurgaon of?ce
Several energy conservation initiatives at Cairn
India’s Gurgaon of?ce have resulted in saving of
around 350,000 units of electricity, thus reducing
the of?ce’s carbon footprint. These include:
Ensuring that all except the emergency lights
are switched off after working hours and on
holidays.
Ef?cient and judicious use of energy ef?cient
lights and air handling units.
Additional investments and proposals
being implemented for conservation of
energy
Additional funds were allocated during the year
for energy conservation measures. New tech-
nologies were absorbed & adapted to reduce the
carbon foot print of the Company like installation
of wind mills and solar arrays on platforms, solar
water heaters and LED street lights, wherever
feasible.
TECHNOLOGY ABSORPTION,
ADAPTION & INNOVATION
Research & Development (R&D)
Specific areas in which R & D was carried out by
the Company
Cairn has been actively pursuing the application
of EOR (Enhanced Oil Recovery) technology in
the Mangala, Bhagyam and Aishwariya Fields.
Core ?ood studies have been carried out in 2
independent laboratories in order to deter-
mine the ef?ciency of the various chemical
?ood processes like polymer injection and
alkali-surfactant-polymer (ASP) ?ooding.
Studies are ongoing in research institutes
with a view to optimise the chemical formula-
tions that could increase oil recovery in these
?elds using minimum of chemical quality. In-
ANNEXURE I I
14. A description of the method and signi?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
160 183.04 199.73
67 DI RECTORS' REPORT
house simulation & modelling work has also been
carried out to determine the ef?ciency at ?eld
level. A ?eld scale EOR pilot implementation is al-
ready underway to take the application of this tech-
nology from lab to a restricted area in the ?eld.
Re-injection of produced water separated at
the Ravva terminal, back into the reservoir helps
reduce discharge of waste water to sea and ab-
straction of ground water for injection purposes.
Produced Water Re-Injection (PWRI) has been
designed and implemented to treat and handle a
maximum capacity of 45,000 barrels of water per
day. The PWRI was successfully commissioned in
Q2 2008 and is presently re-injecting 50% of the
produced water.
Various other technology absorption, adaption
and innovation initiatives/methods like Rapid
Rig for drilling wells, customised well designs,
multi well pad approach, Rotary steerable/Logging
While Drilling technology, customised compact
well head equipment, usage of high cost synthetic
oil based mud system on onshore drilling applica-
tions, horizontal well technology, sand control
technology integral
with sleeve devices, hydraulic fracturing technol-
ogy, Sand Jet Perforating, Micro seismic for frac
modelling, multiphase metering technology were
taken/used for the development & drilling of the
oil ?elds in Rajasthan.
Bene?ts derived
as a result of this R&D
All these initiatives are helping the Company in
improving the overall ef?ciency, lowering the
land impact & environmental concerns, cost ef-
fectiveness & project economics. Cairn’s research
in EOR applications for the MBA ?elds has the
potential to unlock additional oil reserves within
these ?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&D
Details outlined in the Table below.
in INR
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 and
gas requirement and in this situation, the export
of crude oil and natural gas, which are the main
products of Cairn are not relevant in this sector.
However, by discovering new oil & gas ?nds
and bringing them into production, Cairn is
working towards enhancing energy security and
increasing the self suf?ciency of the nation which
is in line with policy of the Indian Government.
At peak production rate, Rajasthan block is ex-
pected to contribute more than 20% of domestic
crude oil production.
Foreign exchange used and earned
During the period ended 31 March, 2010, the
Company earned INR 32.04 million and incurred
expenditure of INR 188.82 million in foreign
exchange.
For and on behalf of the Board of Directors
Sir William B.B. Gammell
Chairman
Place Gurgaon
Date 27 May, 2010
No. Particulars Amount
1 Capital 962,452
2 Recurring -
3 Total 962,452
4
Total R&D expenditure
as a % of total turnover
0.05%
Note These are consolidated numbers for the
Twelve months period ended 31 March, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 68
TO THE MEMBERS OF CAIRN INDIA LIMITED
We have audited the attached Balance Sheet of Cairn India Limited (‘the Company’) as at 31 March, 2010 and also the Profit and Loss 1
Account and the Cash Flow Statement for the year 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.
We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan 2
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.
The attached financial statements include Company’s share of net assets, expenses and cash flows aggregating to INR 4,031 thousand, 3
INR 529,058 thousand and INR Nil thousand respectively in the unincorporated joint ventures not operated by the Company or its sub-
sidiaries, the accounts of which have been audited by the auditors of the respective unincorporated joint ventures and relied upon by us.
As required by the Companies (Auditor’s Report) Order, 2003 (as amended) (‘the Order’) issued by the Central Government of India in 4
terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters speci-
fied in paragraphs 4 and 5 of the said Order. In respect of clauses (ii), (ix)(a), (ix)(b), (ix)(c) and (xxi), our comments are restricted to the
operations of the Company and does not cover the unincorporated joint ventures where any third party is the operator.
Further to our comments in the Annexure referred to above, we report that: 5
We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the pur- i
poses of our audit;
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 ii
those books;
The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of iii
account;
In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the account- iv
ing standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;
On the basis of the written representations received from the directors, as on 31 March, 2010, and taken on record by the Board of v
Directors, we report that none of the directors is disqualified as on 31 March, 2010 from being appointed as a director in terms of
clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.
In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the informa- vi
tion 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;
in the case of the balance sheet, of the state of affairs of the Company as at 31 March, 2010; a
in the case of the profit and loss account, of the loss for the year ended on that date; and b
in the case of cash flow statement, of the cash flows for the year ended on that date. c
Auditors’
Report
For S.R. BATLIBOI & ASSOCIATES
Firm registration number: 101049W
Chartered Accountants
per Sanjay Vij, Partner
Membership No.: 95169
Place Gurgaon Date 27 May, 2010
69
Annexure referred to in paragraph 4 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 ?xed assets.
(b) Fixed assets have been physically veri?ed by the management during the year and no material discrepancies were identi?ed on such
veri?cation.
(c) There was no substantial disposal of ?xed assets during the year.
(ii) (a) The management has conducted physical veri?cation of inventory at reasonable intervals during the year.
(b) The procedures of physical veri?cation of inventory followed by the management are reasonable and adequate in relation to the size of the
Company and the nature of its business.
(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical veri?cation carried out at the
end of the year.
(iii) (a-d) As informed, the Company has not granted any loans, secured or unsecured to companies, ?rms 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, ?rms 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 inventory, ?xed assets and for the sale of services.
During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. During the
course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company.
Since the Company has not started commercial production in any of its oil and gas blocks, it has not 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 ?ve lakhs entered into
during the ?nancial 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) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor
education and protection fund, income-tax, wealth-tax, service tax, cess and other material statutory dues applicable to it. Further, since
the Central Governent has till date not prescribed the amount of cess payable under section 441 A of the Companies Act, 1956, we are
not in a position to comment upon the regularity or otherwise of the Company in depositing the same. The provisions relating to
employees’ state insurance, sales 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, wealth-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, customs duty and excise duty are not applicable to the Company.
(c) According to the information and explanations given to us, there are no dues of income tax, wealth tax, service tax, and cess which have not been
deposited on account of any dispute. The provisions relating to sales tax, customs duty and excise duty are not applicable to the Company.
Auditors’ Report
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 70
Auditors’ Report
(x) The Company has been registered for a period of less than ?ve years and hence we are not required to comment on whether or not the
accumulated losses at the end of the ?nancial year is ?fty per cent or more of its net worth and whether it has incurred cash losses in such
?nancial year and in the immediately preceding ?nancial year.
(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company
has not defaulted in repayment of dues to a ?nancial institution or bank. The Company has not issued any debentures.
(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 bene?t 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
?nancial institutions.
(xvi) Based on the information and explanations given to us by the management, term loans were applied for the purpose for which the loans were
obtained.
(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.
(xix) The Company did not have any outstanding debentures during the year.
(xx) We have veri?ed that the end use of money raised by public issues is as disclosed in the notes to the ?nancial statements.
(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the ?nancial statements and as per the informa-
tion 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.
For S.R. Batliboi & Associates
Firm registration number: 101049W
Chartered Accountants
per Sanjay Vij
Partner
Membership No.:95169
Place Gurgaon Date 27 May, 2010
71
Financial
Accounts
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 72
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Balance Sheet
AS AT MARCH 31, 2010
Schedules As at March 31, 2010 As at March 31, 2009
Sources of Funds
Shareholders’ funds
Share capital 1 18,969,741 18,966,678
Stock options outstanding 2 463,978 388,978
Reserves and surplus 3 301,161,222 301,090,274
Loan funds
Secured loans 4 13,450,000 -
334,044,941 320,445,930
Application of Funds
Fixed assets 5
Gross cost 1,055 974
Less: Accumulated depreciation /
amortisation
869 365
Net book value 186 609
Exploratory work in progress 6 242,074 540,299
Investments 7 331,290,939 292,253,966
Current assets, loans and advances
Inventories 8 9,831 -
Sundry debtors 9 15,728 17,942
Cash and bank balances 10 1,927,862 27,632,762
Other current assets 11 12,360 633,645
Loans and advances 12 829,151 220,814
2,794,932 28,505,163
Less: Current liabilities and provisions
Current liabilities 13 1,480,662 1,076,734
Provisions 14 30,062 315,373
1,510,724 1,392,107
Net current assets 1,284,208 27,113,056
Pro?t and loss account 1,227,534 538,000
334,044,941 320,445,930
Notes to accounts 20
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
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
73
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
Income
Revenue from operating activities 32,040 37,331
Other income 15 1,601,580 2,943,072
1,633,620 2,980,403
Expenditure
Staff costs 16 175,929 212,519
Data acquisition and pre exploration cost 33,860 36,235
Administrative expenses 17 302,959 793,554
Unsuccessful exploration costs 6 1,191,194 813,568
Depreciation/Amortisation 5 504 365
Finance costs 18 662,806 3,446
2,367,252 1,859,687
Pro?t/(Loss) before taxation (733,632) 1,120,716
Current tax 44,000 543,800
Fringe bene?t tax (refer note no. 14 in schedule 20) (88,098) 34,509
Pro?t/(Loss) for the year/period (689,534) 542,407
Add: Accumulated losses at the beginning of
the year / period
(538,000) (1,080,407)
De?cit carried forward to balance sheet (1,227,534) (538,000)
Earnings/(Loss) per share in INR 19
Basic (0.36) 0.29
Diluted (current year considered anti-dilutive) (0.36) 0.29
[Nominal value of shares INR 10]
Notes to accounts 20
Pro?t and Loss Account
FOR THE YEAR ENDED MARCH 31, 2010
The schedules referred to above and the notes to accounts form an integral part of the pro?t and loss account.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 74
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
Cash ?ow from operating activities
Pro?t/ (loss) for the year/period (733,632) 1,120,716
Adjustments for:
- Employee compensation expense (stock options) - net of
exceptional gains
39,385 (33,325)
- Interest income (1,266,573) (1,341,376)
- Dividend from unquoted current investments (220,839) (200,225)
- Depreciation/Amortisation 504 365
- Pro?t on sale of unquoted current investments (net) (2,385) (1,245,686)
- Share issue expenses - 208,410
- Unrealised exchange loss / (gain) on restatement of assets
and liabilities (net)
(110,526) 183,896
- Unsuccessful exploration costs 1,191,194 813,568
- Loan facility and management fees 59,574 -
- Balances written back (40,653) -
- Interest expense 599,810 388
Operating (loss) before working capital changes (484,141) (493,269)
Movements in working capital:
(Increase)/decrease in inventories (9,831) -
(Increase)/decrease in debtors 2,214 (5,234)
(Increase)/decrease in loans and advances 32,383 (212,729)
Increase/(decrease) in current liabilities and provisions (84,301) 909,781
Cash generated from / (used in) operations (543,676) 198,549
Direct taxes paid including fringe bene?t tax (248,254) (553,060)
Net cash (used in) operating activities (A) (791,930) (354,511)
Cash ?ow from investing activities
Payments made for exploration, development activities and
purchase of ?xed assets
(368,982) (1,372,093)
Long term investments made in subsidiaries (23,827,569) (1,562,784)
Fixed deposits made (6,083,612) (37,573,811)
Proceeds from matured ?xed deposits 31,728,811 10,005,000
Short term investments in mutual funds (net) (15,207,018) 4,691,789
Interest received 1,887,858 707,732
Dividend received from unquoted current investments 220,839 200,225
Net cash (used in) investing activities (B) (11,649,673) (24,903,942)
Cash ?ow from ?nancing activities
Proceeds from issue of equity shares
(including securities premium)
20,363 25,523,445
Payment for share issue expenses - (208,410)
Proceeds from long term borrowings 13,450,000 -
Loan facility and management fees paid (488,651) -
Interest paid (599,810) (388)
Net cash from ?nancing activities (C) 12,381,902 25,314,647
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Statement of Cash Flows
FOR THE YEAR ENDED MARCH 31, 2010
75
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Statement of Cash Flows Continued
Net increase in cash and cash equivalents (A+B+C) (59,701) 56,194
Cash and cash equivalents at the beginning of the year/ period 63,951 7,757
Cash and cash equivalents at the end of the year/ period 4,250 63,951
Components of cash and cash equivalents as at March 31, 2010 March 31, 2009
Cash in hand 42 15
Balances with scheduled banks
- on current accounts 4,208 13,936
- on deposit accounts 1,923,612 27,618,811
Less: Deposits having maturity of over 90 days (1,923,612) (27,568,811)
4,250 63,951
Notes
i) The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in Accounting Standard-3 on “Cash ?ow statements”.
ii) Amounts in bracket indicate a cash out?ow or reduction.
iii) Bank balance in deposit accounts includes INR 1,790,000 thousand, previous period INR 1,530,000 thousand, pledged with the banks.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 76
Notes
i) Issued, subscribed and fully paid up share capital includes 1,183,243,791 equity shares (previous period - 1,226,843,791 equity shares) of INR 10 each held
by Cairn UK Holdings Limited, the holding company, together with its nominees.
ii) Shares held by the holding company includes 861,764,893 equity shares (previous period - 861,764,893 equity shares) of INR 10 each, allotted as fully paid
up pursuant to contracts for consideration other than cash.
iii) For stock options outstanding, refer note no. 6 in schedule 20.
Schedules to the Financial Statements
As at
March 31, 2010
As at
March 31, 2009
Schedule 1
Share capital
Authorised:
2,250,000,000 (previous period 2,250,000,000) equity shares of
INR 10 each
22,500,000 22,500,000
Issued, Subscribed and fully Paid up:
1,896,974,132 (previous period 1,896,667,816) equity shares of INR 10 each 18,969,741 18,966,678
18,969,741 18,966,678
Schedule 2
Stock options outstanding
Employee stock options outstanding 768,120 782,548
Less: Deferred employee compensation outstanding 304,142 393,570
Closing Balance 463,978 388,978
Schedule 3
Reserves and surplus
Securities premium account
Opening balance 301,090,274 276,084,115
Add: Additions during the year/ period (refer note no. 10 of schedule 20) 70,948 25,006,159
Closing Balance 301,161,222 301,090,274
Schedule 4
Secured loans
Long term loans
- from ?nancial institutions 1,008,750 -
- from banks 12,441,250 -
13,450,000 -
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Notes
i) There is no amount repayable within one year.
ii) Refer note no. 12 in schedule 20.
77
Schedule 5
Fixed Assets
As at
March 31, 2010
As at
March 31, 2009
Schedule 6
Exploratory work in progress
Opening Balance 540,299 -
Additions during the year/period 892,969 1,353,867
Less: Unsuccessful exploration costs for the year/period 1,191,194 813,568
242,074 540,299
Schedule 7
Investments
Long term investments in Subsidiary Companies (at cost)
Unquoted, trade and fully paid-up
420,810,062 equity shares (previous period: 292,929,752 equity shares) of
GBP 1 each in Cairn India Holdings Limited, U.K.
300,424,799 290,524,514
175,560 redeemable preferential shares (previous period: Nil) of GBP 1,000
each in Cairn India Holdings Limited, U.K.
13,437,637 -
13,159,960 equity shares (previous period: 2,509,960) of USD 1 each in CIG
Mauritius Holding Private Limited
611,627 121,980
Current Investments (at lower of cost and market value)
Unquoted and non trade
Mutual Funds (refer note no. 22 in schedule 20 for details)* 16,816,876 1,607,472
331,290,939 292,253,966
Aggregate amount of unquoted investments 331,290,939 292,253,966
Repurchase price of mutual fund units, represented by Net Asset Value 16,816,876 1,607,472
* includes unutilized monies of the public issue. (refer note no. 5 in schedule 20)
Schedule 8
Inventories
Stores and spares 9,831 -
9,831 -
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Description Gross Block Accumulated Depreciation / Amortisation Net Block
As on
01.04.2009
Additions
Deletions/
Adjustment
As on
31.03.2010
As on
01.04.2009
For the
year/ period
Deletions/
Adjustment
As on
31.03.2010
As on
31.03.2010
As on
31.03.2009
A) Tangible Assets
Of?ce equipments - 32 - 32 - 9 - 9 23 -
B) Intangible Assets
Computer software 974 49 - 1,023 365 495 - 860 163 609
Grand Total 974 81 - 1,055 365 504 - 869 186 609
Previous period - 974 - 974 - 365 - 365 609 -
Schedules to the Financial Statements Continued
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 78
Schedule 9
Sundry Debtors
Debts outstanding for a period exceeding six months
- Unsecured, considered good 4,039 7,609
Other debts
- Unsecured, considered good 11,689 10,333
15,728 17,942
Schedule 10
Cash and bank balances
Cash in hand 42 15
Balances with scheduled banks *
- on current accounts 4,208 13,936
- on deposit accounts ** 1,923,612 27,618,811
1,927,862 27,632,762
* includes unutilized monies of the public issue (refer note no. 5 in schedule 20)
** Includes INR 1,790,000 thousand, previous period INR 1,530,000 thousand, pledged with the banks
Schedule 11
Other current assets
Interest accrued on bank deposits 12,360 633,645
12,360 633,645
Schedule 12
Loans and advances
Unsecured considered good:
Advances recoverable in cash or in kind or for value to be received* 582,159 12,855
Advances recoverable from subsidiary companies 242,247 192,795
Deposits 512 15,164
Fringe bene?t tax paid (Net of provisions INR 266,901 thousand, previous
period INR Nil)
4,233 -
829,151 220,814
* includes capital advances INR 1,465 thousand (previous period INR Nil)
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules to the Financial Statements Continued
79
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedule 13
Current liabilities
Sundry Creditors
- Total outstanding dues to Micro and Small Enterprises
(refer note no. 21 in schedule 20)
- 6
- Total outstanding dues to other than Micro and Small Enterprises 201,178 97,773
Amounts payable to Cairn Energy Plc., the ultimate holding company - 24,109
Amounts payable to subsidiary companies 672,931 753,778
Other liabilities 606,553 201,068
1,480,662 1,076,734
Schedule 14
Provisions
Provision for taxation (net of advance tax -INR 565,566 thousand, previous
period INR 338,382 thousand)
22,234 205,118
Provision for fringe bene?t tax (net of advance tax payments INR Nil, previous
period INR 266,883 thousand)
- 105,235
Provision for gratuity 6,647 3,994
Provision for leave encashment 1,181 1,026
30,062 315,373
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
Schedule 15
Other income
Interest on bank deposits (Gross, tax deducted at source
INR 188,872 thousand, previous period INR 304,879 thousand)
1,266,573 1,341,377
Dividend from non-trade current investments 220,839 200,225
Pro?t on sale of non-trade current investments (net) 2,385 1,245,686
Miscellaneous income - 61
Exchange differences (net) 71,130 -
Balances written back 40,653 -
Exceptional gain (refer note no. 25 in schedule 20) - 155,723
1,601,580 2,943,072
Schedule 16
Staff costs
Salary, wages and bonus 120,301 74,089
Contribution to provident fund 5,384 3,314
Contribution to superannuation fund 3,374 1,716
Gratuity expenses 2,653 3,720
Compensated absences 285 1,103
Staff welfare expenses 4,547 6,179
Employee compensation expense (stock options) 39,385 122,398
175,929 212,519
Schedules to the Financial Statements Continued
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 80
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedule 17
Administrative expenses
Legal and professional expenses 197,777 254,050
Contract employee charges 4,370 4,517
Rent 1,642 1,377
Auditor's remuneration
As Auditors
- Fees for statutory audit and consolidated ?nancial
statements
4,440 5,314
- Fees for tax audit - 828
- Fees for limited review 5,460 7,595
- Fees for statutory reporting for parent companies
consolidated ?nancial statements
2,041 10,566
- Other services 2,160 3,503
- Out of pocket expenses 394 14,495 443 28,249
Directors' sitting fees 1,160 1,320
Advertisement and publicity 9,538 14,385
Public relation expenses 18,248 42,959
Sponsorship 11,500 15,666
Printing & stationery 3,489 3,157
Security Expenses 361 129
Repairs and maintenance (others) 2,639 303
Travelling and conveyance 19,358 30,954
Insurance expenses 199 197
Communication expenses 16,104 5,983
Share issue expenses - 208,410
Exchange differences (net) - 180,632
Sundry balances written off 824 -
Miscellaneous expenses 1,255 1,266
302,959 793,554
Schedule 18
Finance costs
Interest
-on term loan 599,684 -
-others 126 388
Loan facility and management fees 59,574 -
Bank charges 3,422 3,058
662,806 3,446
Schedules to the Financial Statements Continued
81
Schedule 19
Earnings / (Loss) per share
Pro?t/(Loss) for the year/ period as per pro?t and
loss account
(689,534) 542,407
Weighted average number of equity shares in
calculating basic earnings / (loss) per share
1,896,696,475 1,866,146,993
Add: Number of equity shares arising on grant of stock
options
8,321,392 10,052,076
Weighted average number of equity shares in
calculating diluted earnings / (loss) per share
1,905,017,867 1,876,199,069
Earnings/(Loss) per share in INR
Basic (0.36) 0.29
Diluted (current year considered anti dilutive) (0.36) 0.29
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules to the Financial Statements Continued
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 82
NATURE OF OPERATIONS 1.
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,
re?ning, 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/?elds (which are in the nature of jointly controlled assets), 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 & Gas blocks / ?elds, which are presently under exploration phase:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES 2.
Basis of preparation (A)
The ?nancial statements have been prepared to comply in all material respects with the mandatory Accounting Standards noti?ed 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.
Oil and gas assets (B)
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 & 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 pro?t and loss account. Following appraisal of successful exploration wells, when a well is ready for com-
mencement of commercial production, the related exploratory and development work-in-progress are transferred into a single ?eld 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 deter-
mined 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 bene?ts of the producing properties or replaces part of the existing producing
properties. Any costs remaining associated with such part replaced are expensed in the ?nancial 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 pro?t 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 pro?t 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.
Oil & Gas blocks/?elds Area
Participating Interest
Operated block (through subsidiaries)
PR-OSN-2004 Palar Basin offshore 25%
KG-ONN-2003/1 Krishna Godavari Onshore 25%
Following block has been relinquished
VN-ONN-2003/1 in Aug 2009 Vindhyan Onshore 25%
Non – operated block
GS-OSN-2003/1 Gujarat Saurashtra Onshore 49%
KK-DWN-2004 Kerala Konkan Basin offshore 40%
Following blocks have been relinquished
CB-ONN-2002/1 in Jan 2009 Cambay Onshore 30%
RJ-ONN-2003/1 in Jan 2010 Rajasthan Onshore 30%
(All amounts are in INR thousand unless, otherwise stated)
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
83
Depletion (C)
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.
Site restoration costs (D)
At the end of the producing life of a ?eld, 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 expenses form part of the exploration &
development work in progress or cost of producing properties, as the case may be, 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 cost in the pro?t and loss account.
Impairment (E)
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external 1
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 ?ows are discounted to
their present value at the weighted average cost of capital.
After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining 2
useful life.
Tangible ?xed assets, depreciation and amortization (F)
Tangible 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 ?xed 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 ?xtures 2 to 5 years
Of?ce equipments 2 to 5 years
Plant and Equipment 2 to 10 years
Leasehold land Lease period
Leasehold improvements are amortized over the remaining period of the primary lease or expected useful economic lives, whichever is shorter.
Intangible ?xed assets and amortization (G)
Intangible assets, other than oil and gas assets, have ?nite useful lives and are measured at cost and amortized over their expected useful economic
lives as follows:
Computer software 2 to 4 years
Leases (H)
Finance leases, which effectively transfer substantially all the risks and bene?ts 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 ?nance 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 bene?ts of ownership of the leased item, are classi?ed as operating
leases. Operating lease payments are recognised as an expense in the pro?t and loss account on a straight-line basis over the lease term.
Investments (I)
Investments that are readily realisable and intended to be held for not more than a year are classi?ed as current investments. All other investments
are classi?ed as long-term investments. Current investments are measured at cost or market value, whichever is lower, determined on an individual
investment basis. 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.
Joint Ventures (J)
The Company participates in several Joint Ventures involving joint control of assets for carrying out oil and gas exploration, development and
producing activities. The Company 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.
Revenue recognition (K)
Revenue is recognized to the extent that it is probable that the economic bene?ts will ?ow to the Company and the revenue can be reliably measured.
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 84
Revenue from operating activities
The Company recognizes parent company overhead 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.
Borrowing costs (L)
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 ?nance 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 pro?t and loss account in the period in which they are incurred.
Foreign currency transactions and translations (M)
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 ?nancial statements, are recognised as income or as expenses in the
period in which they arise.
Income taxes (N)
Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act. Deferred income tax re?ects 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 suf?cient 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 pro?ts. Unrecognised deferred tax assets of earlier periods are re-assessed and recognised to the extent that it has become reasonably
certain or virtually certain as the case may be, that future taxable income will be available against which such deferred tax assets can be realised.
Earnings Per Share (O)
Basic earnings per share are calculated by dividing the net pro?t 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 pro?t 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.
Provisions (P)
A provision is recognised when the Company has a present obligation as a result of past event and it is probable that an out?ow 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 re?ect the current best estimates.
Cash and Cash equivalents (Q)
Cash and cash equivalents in the cash ?ow statement comprise cash at bank and in hand and short-term investments, with an original maturity of 90
days or less.
Employee Bene?ts (R)
Retirement and Gratuity bene?ts
Retirement bene?ts in the form of provident fund and superannuation scheme are de?ned contribution schemes and the contributions are charged to
the pro?t 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 de?ned bene?t obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made
at the end of each ?nancial year. The scheme is maintained and administered by an insurer for the entire Cairn India Group to which the trustees
make periodic contributions.
Short term compensated absences are provided for on based on estimates. Long term compensated absences are provided for based on
actuarial valuation made at the end of each ?nancial year. The actuarial valuation is done as per projected unit credit method.
Actuarial gains / losses are immediately taken to pro?t 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
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
85
Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by ICAI.
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.
Use of estimates (S)
The preparation of ?nancial statements in conformity with generally accepted accounting principles requires management to make estimates and as-
sumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the ?nancial 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.
Segment Reporting Policies (T)
Identi?cation 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.
Inventory (U)
Inventories of stores and spares related to exploration, development and production activities are stated at cost, determined on ?rst in ?rst out (FIFO)
basis. However, inventories of stores and spares, which are not likely to be consumed, are written down to their net realizable value.
SEGMENTAL REPORTING 3.
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 ?nancial reporting systems. Accordingly, the ?gures appearing in these ?nancial
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
con?ned to India in terms of oil and gas blocks and customers. Accordingly, the ?gures appearing in these ?nancial statements relate to the
Company’s single geographical segment, being operations in India.
RELATED PARTY TRANSACTIONS 4.
Names of related parties: (A)
Companies having control
? Cairn UK Holdings Limited, UK
Holding Company
? Cairn Energy Plc., UK
Ultimate holding company
Subsidiary companies
Cairn Energy Australia Pty Limited 1
Cairn Energy India Pty Limited 2
CEH Australia Pty Limited 3
Cairn Energy Asia Pty Limited 4
Sydney Oil Company Pty Limited 5
Cairn Energy Investments Australia Pty Limited 6
Wessington Investments Pty Limited 7
CEH Australia Limited 8
Cairn India Holdings Limited 9
CIG Mauritius Holding Private Limited 10
CIG Mauritius Private Limited 11
Cairn Energy Holdings Limited 12
Cairn Energy Discovery Limited 13
Cairn Exploration (No. 2) Limited 14
Cairn Exploration (No. 6) Limited 15
Cairn Energy Hydrocarbons Limited 16
Cairn Petroleum India Limited 17
Cairn Energy Gujarat Block 1 Limited 18
Cairn Exploration (No. 4) Limited 19
Cairn Exploration (No. 7) Limited 20
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 86
Cairn Energy Development Pte Limited 21
Cairn Lanka (Pvt) Limited 22
Cairn Energy Group Holdings BV 23
Cairn Energy India West BV 24
Cairn Energy India West Holding BV 25
Cairn Energy Gujarat Holding BV 26
Cairn Energy India Holdings BV 27
Cairn Energy Netherlands Holdings BV 28
Cairn Energy Gujarat BV 29
Cairn Energy Cambay BV 30
Cairn Energy Cambay Holding BV 31
Key Management Personnel
• Rahul Dhir, Managing Director and Chief Executive Of?cer
• Winston Frederick Bott Jr., Executive Director and Chief Operating Of?cer
(appointed on 29
th
April, 2008)
• Indrajit Banerjee, Executive Director and Chief Financial Of?cer
• Lawrence Smyth, Executive Director and Chief Operating Of?cer
(resigned on 21
st
January, 2008)
Transactions during the year/period: (B)
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Nature of the Transactions Related Party
Current year Previous period
Waiver of outstanding balance by the
parent company
Cairn Energy Plc. 24,176 Nil
Expenses incurred by related party on
behalf of the Company
Cairn Energy India Pty Limited 15,938 93,757
Cairn Energy Plc. 8,120 Nil
Total 24,058 93,757
Expenses incurred by the Company on
behalf of related party
Cairn Energy India Pty Limited 190 256,499
Cairn Energy Plc Nil 854
CIG Mauritius Holdings Private Limited Nil 491
CIG Mauritius Private Limited Nil 264
Cairn Energy Gujarat Block 1 Limited Nil 10,648
Cairn Exploration (No. 4) Limited Nil 100
Cairn Exploration (No. 7) Limited Nil 13,668
Cairn Lanka Private Limited Nil 881
Cairn Energy Hydrocarbons Limited 836 30,597
Cairn Energy Development Pte Limited 694 Nil
Total 1,720 314,002
Equity contributions made during
the year/period
Cairn India Holdings Limited 23,337,922 1,440,804
CIG Mauritius Holding Private Limited 489,647 121,980
23,827,569 1,562,784
Assignment of interest in oil & gas
blocks from
Cairn Energy Gujarat Block 1 Limited Nil 89,513
Cairn Exploration (No. 2) Limited Nil 302,085
Cairn Exploration (No. 4) Limited Nil 68,462
Cairn Exploration (No. 6) Limited Nil 7,164
Cairn Exploration (No. 7) Limited Nil 160,166
Total Nil 627,390
Guarantees given Cairn Lanka Private Limited Nil 1,432,436
Recovery of share option charge Cairn Energy India Pty Limited 64,264 140,617
Shares issued including premium and
stock option charge
Rahul Dhir Nil 716,185
Lawrence Smyth Nil 126,758
Total Nil 842,943
Remuneration
Rahul Dhir 2,400 3,000
Winston Frederick Bott Jr. 1,200 950
Indrajit Banerjee 1,800 2,250
Total 5,400 6,200
Note The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave bene?ts, as they are determined on an
actuarial basis for the Company as a whole.
87
Balances outstanding as at the end of the year/period: (C)
5. The shareholders of the Company in their meeting dated August 18, 2009 had revised the allocation of Initial Public Offer (IPO) proceeds within the
existing heads under the prospectus. As at 31
st
March 2010, the Company and its subsidiaries together have utilized the entire IPO proceeds
aggregating to INR 88,248,901 thousand in accordance with the revised approval received from the shareholders. The details of the revised approval
and utilization of funds is as follows:
6. EMPLOYEES STOCK OPTION PLANS
The Company has provided various share-based payment schemes to its employees. During the year ended 31
st
March 2010, the following schemes
were in operation:
Particulars
Upto 31
st
March 2010 Upto 31
st
March 2009
Acquisition of shares of Cairn India Holdings Limited
from Cairn UK Holdings Limited
59,580,837 59,580,837
Exploration and development expenses 26,838,445 21,152,714
General corporate purposes 230,000 230,000
Issue expenses 1,599,619 1,599,619
Total 88,248,901 82,563,170
The details of the unutilized monies out of the public issue proceeds is as follows:
Particulars
31
st
March 2010 31
st
March 2009
Mutual funds Nil 718,277
Balances with banks Nil 4,967,454
Total Nil 5,685,731
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Nature of the Balance Related Party
31
st
March 2010 31
st
March 2009
Guarantees given Cairn Lanka Private Limited 1,267,674 1,432,436
Accounts receivable Cairn Energy India Pty Limited 208,512 160,563
CIG Mauritius Holdings Private Limited 491 491
CIG Mauritius Private Limited 264 264
Cairn Lanka Private Limited 881 881
Cairn Energy Hydrocarbons Limited 31,432 30,596
Cairn Energy Development Pte Limited 667 Nil
Total 242,247 192,795
Accounts payable Cairn Energy Plc Nil 24,109
Cairn Energy Gujarat Block 1 Limited 89,531 102,552
Cairn Exploration (No. 2) Limited 332,327 367,147
Cairn Exploration (No. 4) Limited 77,497 86,635
Cairn Exploration (No. 6) Limited 8,423 9,558
Cairn Exploration (No. 7) Limited 165,153 187,886
Total 672,931 777,887
Particulars
CISMP CIPOP CIESOP
Date of Board Approval 17
th
Nov 2006 17
th
Nov 2006 17
th
Nov 2006
Date of Shareholder’s approval 17
th
Nov 2006 17
th
Nov 2006 17
th
Nov 2006
Number of options granted till March 2010 8,298,713 6,727,724 18,197,795
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 date 3 months from vesting date 7 years from vesting date
Number of options granted till March 2010
24
th
Nov 2006 8,298,713 - -
1
st
Jan 2007 - 1,708,195 3,467,702
20
th
Sept 2007 - 3,235,194 5,515,053
29
th
July 2008 - 789,567 3,773,856
10
th
Dec 2008 - - 36,040
29
th
July 2009 - 994,768 5,405,144
Total 8,298,713 6,727,724 18,197,795
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 88
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:
• 1/3
rd
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 9
th
Jan 2007.
• 1/3
rd
of the options will vest 18 months after the admission date.
• 1/3
rd
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.
• 1/4
th
of the options will vest on the date on which all major equipment for the start-up of the Mangala ?eld is delivered to site.
• 1/4
th
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 satis?ed.
CIESOP plan
There are no speci?c vesting conditions under CIESOP plan.
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Details of Activities under Employees Stock Option Plans
CISMP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 2,238,077 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 Nil NA 5,268,396 33.70
Expired during the year Nil NA 792,240 33.70
Outstanding at the end of the year 2,238,077 33.70 2,238,077 33.70
Exercisable at the end of the year Nil NA Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
131.50 NA 131.50 NA
CIPOP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 3,200,096 10.00 4,755,244 10.00
Granted during the year 994,768 10.00 789,567 10.00
Forfeited during the year Nil NA Nil NA
Exercised during the year 190,983 10.00 Nil NA
Expired during the year 1,377,051 10.00 2,344,715 10.00
Outstanding at the end of the year 2,626,830 10.00 3,200,096 10.00
Exercisable at the end of the year 168,382 10.00 Nil NA
CIESOP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 10,914,244 185.39 8,545,710 164.49
Granted during the year 5,405,144 240.05 3,809,896 226.21
Forfeited during the year Nil NA Nil NA
Exercised during the year 115,333 160.00 Nil NA
Expired during the year 1,557,846 179.09 1,441,362 169.33
Outstanding at the end of the year 14,646,209 206.43 10,914,244 185.39
Exercisable at the end of the year 1,981,770 160.00 Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
107.64 NA 101.47 NA
89
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 24
th
Nov 2006 24
th
Nov 2006
Stock Price/fair value of the equity shares on the date of
grant (INR)
160.00 160.00
Vesting date Refer vesting conditions Refer vesting conditions
Vesting % Refer vesting conditions Refer vesting conditions
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
A B C D E
Grant date 1
st
Jan’07 20
th
Sept’07 29
th
July’08 10
th
Dec’08 29
th
July’09
Stock Price/fair value of the equity
shares on the date of grant (INR)
160.00 166.95 228.55 150.10 234.75
Vesting date 1
st
Jan’10 20
th
Sept’10 29
th
Jul’11 10
th
Dec’11 29
th
July’ 12
Vesting % 100% 100% 100% 100% 100%
Volatility 41.04% 40.24% 39.43% 38.19% 39.97%
Risk free rate 7.50% 7.65% 9.20% 6.94% 6.91%
Time to maturity (years) 6.50 6.50 6.50 6.50 6.50
Exercise price (INR) 160.00 166.95 227.00 143.00 240.05
Fair Value of the options (INR) 87.30 90.72 130.42 79.80 122.24
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
Variables – CIPOP
A B C D
Grant date 1
st
Jan’07 20
th
Sept’07 29
th
Jul’08 29
th
Jul’09
Stock Price/fair value of the equity shares
on the date of grant (INR)
160.00 166.95 228.55 234.75
Vesting date 1
st
Jan’10 20
th
Sept’10 29
th
Jul’11 29
th
July’ 12
Vesting % Refer vesting conditions Refer vesting conditions Refer vesting conditions Refer vesting conditions
Volatility 41.61% 36.40% 37.49% 43.72%
Risk free rate 7.33% 7.23% 9.37% 5.78%
Time to maturity (years) 3.12 3.12 3.12 3.13
Exercise price (INR) 10.00 10.00 10.00 10.00
Fair Value of the options (INR) 152.05 158.97 221.09 226.40
The details of exercise price for stock options outstanding as at March 31, 2010 are:
(All amounts are in INR thousand unless, otherwise stated)
Scheme
Range of exercise
price (INR)
No. of options
outstanding
Weighted average
remaining contractual
life of options
(in years)
Weighted average
exercise price (INR)
CISMP Plan 33.70 2,238,077 1.08 33.70
CIPOP Plan 10.00 2,626,830 1.36 10.00
CIESOP Plan 143-240 14,646,209 1.28 206.43
The details of exercise price for stock options outstanding as at March 31, 2009 are:
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
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 90
Volatility is the measure of the amount by which the price has ?uctuated or is expected to ?uctuate 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 pro?t and loss account and on its ?nancial position:
Impact of Fair Valuation Method on net pro?ts 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 ?nancial statements.
Applying the fair value based method de?ned in the said guidance note, the impact on the reported net pro?t and earnings per share would be
as follows:
7. LEASE OBLIGATIONS DISCLOSURES
Operating Lease
The Joint Ventures, in which the Company has participating interest, have entered into operating lease for equipments and buildings. All such leases
are cancelable in nature. There are neither escalation clauses nor any restrictions in the lease agreements. There are no subleases.
8. DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN CURRENCY EXPOSURE
The Company did not take any derivative instruments during the current year / previous period. Particulars of unhedged foreign currency exposures are as follows:
Particulars
Current year Previous period
Total Employee Compensation Cost pertaining to equity settled share-
based payment plans (net of exceptional gain of INR 155,723 thousand
in the previous period)
39,385 (33,325)
Liability for employee stock options outstanding as at year/ period end 463,978 388,978
Deferred Compensation Cost 304,142 393,570
Particulars
Current year Previous period
Pro?t/(loss) as reported (689,534) 542,407
Add: Employee stock compensation under intrinsic value method 39,385 (33,325)
Less: Employee stock compensation under fair value method 427,537 451,826
Proforma pro?t/(loss) (1,077,686) 57,256
Earnings Per Share in INR
Basic
- As reported (0.36) 0.29
- Proforma (0.57) 0.03
Diluted (current year is anti-dilutive)
- As reported (0.36) 0.29
- Proforma (0.57) 0.03
Particulars
31
st
March 2010 31
st
March 2009
Lease rentals recognized during the year/period 2,002 7,255
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
Particulars
31
st
March 2010 31
st
March 2009
Sundry debtors 15,728 17,942
Other current assets 49,984 16,925
Current liabilities 711,263 785,562
(All amounts are in INR thousand unless, otherwise stated)
91
9. The Company has a gratuity plan, wherein every employee who has completed ?ve 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.
The following tables summarize the components of net bene?t expense recognised in the pro?t and loss account and the amounts recognised
in the balance sheet for the gratuity plans.
Pro?t and Loss account
Net employee bene?t expense (recognised in staff cost)
Balance sheet
Details of Provision for Gratuity
Note The estimates of future salary increases, considered in actuarial valuation, take account of in?ation, seniority, promotion and other relevant factors, such as
supply and demand in the employment market.
Gratuity liabilities are as follows:
Note The Company has adopted AS-15 (Revised 2005) Employee Bene?ts for the ?rst time during the previous period. Disclosures required by paragraph 120
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 previous period only.
Particulars
31
st
March 2010 31
st
March 2009
De?ned bene?t obligation 6,647 3,994
Surplus / (de?cit) (6,647) (3,994)
Experience adjustments on plan liabilities (loss) / gain (583) (45)
Particulars
31
st
March 2010 31
st
March 2009
Current service cost 1,605 1,011
Interest cost on bene?t obligation 319 200
Net actuarial (gain) / loss recognised in the year/period 729 2,509
Past service cost Nil Nil
Net bene?t expense 2,653 3,720
Particulars
31
st
March 2010 31
st
March 2009
De?ned bene?t obligation 6,647 3,994
Less: Unrecognized past service cost Nil Nil
Plan asset / (liability) (6,647) (3,994)
Changes in the present value of the de?ned bene?t obligation are as follows:
Opening de?ned bene?t obligation 3,994 274
Current service cost 1,605 1,011
Interest cost 319 200
Bene?ts paid Nil Nil
Actuarial (gains) / losses on obligation 729 2,509
Closing de?ned bene?t obligation 6,647 3,994
The principal assumptions used in determining gratuity liability for the Group’s plans are shown below:
Discount rate 8.00% 7.00%
Future salary increase 10.00% 10.00%
Employee turnover 5.00% 13.13%
Mortality Rate LIC (1994-96) Ultimate Table LIC (1994-96) Ultimate Table
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 92
10. DETAILS OF MOVEMENT IN SHARE CAPITAL AND SECURITIES PREMIUM IS AS UNDER
11. 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 361,000 thousand (previous period 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 ?nancial statements.
12. The Company and its wholly owned subsidiary Cairn Energy Hydrocarbons Limited (“CEHyL”) have entered into a loan facility for INR 40,000 million
(available to the Company) and USD 750 million (available to CEHyL) with a consortium of banks. The purpose of the loan facility is to ?nance the
RJ-ON-90/1 block expenditure and also the repayment of the earlier loan facility of USD 850 million. The main security for the INR loan facility is the
hypothecation of the 35% participating interest in RJ-ON-90/1 block held by Cairn Energy India Pty Limited, a wholly owned subsidiary of the
Company whereas for the USD loan facility, the entire shares of CEHyL has been provided as the main security.
13. The shareholders of the Company have approved a Scheme of Arrangement between the Company and some of its wholly owned subsidiaries, to
be effective from 1
st
January 2010. The Scheme of Arrangement has been approved by the Hon’ble High Court of Madras. However, it is pending for
approval from the Hon’ble High Court of Bombay and other regulatory authorities. Pending receipt of such approvals, no accounting impact of the
scheme has been given in these ?nancial statements. After the implementation of the scheme, the Company will directly own the Indian businesses,
which are currently owned by some of its wholly owned subsidiaries and as contemplated in the scheme, any goodwill arising in the Company
pursuant to the scheme, shall be adjusted against the securities premium account.
14. The reversal in fringe bene?t tax (FBT) is on account of the abolishment of FBT with effect from 1
st
April 2009, as the Company was accounting for
FBT liability on stock options on a pro-rata basis over the vesting period.
15. MANAGERIAL REMUNERATION
Note As the future liability for gratuity and leave bene?ts is provided on actuarial basis for the Company as a whole, the amount pertaining to the directors is not
included above.
Description
No. of equity shares Issue price in INR Share capital Securities premium
Balance as on 1
st
January 2008 1,778,399,420 17,783,994 276,084,115
Exercise of stock options-CISMP 792,240 33.70 7,922 18,776
Preferential allotment of shares to non
promoter investors on 22
nd
April 2008
113,000,000 224.30 1,130,000 24,215,900
Exercise of share options -CISMP 525,000 33.70 5,250 12,443
Exercise of share options-CISMP 1,713,078 33.70 17,131 40,600
Exercise of share options-CISMP 1,600,000 33.70 16,000 37,920
Exercise of share options-CISMP 638,078 33.70 6,381 15,122
Share options liability transferred to securities
premium upon exercise of the options
665,398
Balance as on 31
st
March 2009 1,896,667,816 18,966,678 301,090,274
Exercise of share options-CIPOP 190,983 10.00 1,910 Nil
Exercise of share options-CIESOP 115,333 160.00 1,153 17,300
Share options liability transferred to securities
premium upon exercise of the options
28,648
Waiver of parent company outstanding
balance, pertaining to share issue expenses
paid by parent company, which had earlier
been adjusted from securities premium
25,000
Balance as on 31
st
March 2010 1,896,974,132 18,969,741 301,161,222
Remuneration paid or payable to the Directors
Current year Previous period
Salary 4,632 5,798
Contribution to provident fund 768 402
Total 5,400 6,200
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
93
16. EARNINGS IN FOREIGN CURRENCY (ACCRUAL BASIS)
17. EXPENDITURE IN FOREIGN CURRENCY (ACCRUAL BASIS)
18. IMPORTED AND INDIGENOUS SPARE AND PARTS CONSUMED IN OIL & GAS EXPLORATION ACTIVITIES
19. VALUE OF IMPORTS CALCULATED ON CIF BASIS
20. CAPITAL COMMITMENTS (NET OF ADVANCES)
21. DETAILS OF DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES AS PER MSMED ACT, 2006
Particulars
Current year Previous period
Parent company overhead 32,040 37,331
Interest 8 249
Total 32,048 37,580
Particulars
Current year Previous period
Stores and spares 12,213 Nil
Particulars
Current year Previous period
Company’s share of Joint Ventures’ exploration activities 1,296,011 3,517,376
Details of dues to Micro, Small and Medium Enterprises as per MSMED
Act, 2006
Current year Previous period
The principal amount (interest-nil) remaining unpaid to any supplier as at the end of each
accounting year
Nil 6
The amount of interest paid by the buyer in terms of section 16, of the Micro Small and Medium
Enterprise Development Act, 2006 along with the amounts of the payment made to the supplier
beyond the appointed day during each accounting year
Nil Nil
The amount of interest due and payable for the period of delay in making payment (which have been
paid but beyond the appointed day during the year) but without adding the interest speci?ed under
Micro Small and Medium Enterprise Development Act, 2006.
Nil Nil
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, 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
Nil Nil
Particulars
Current year Previous period
Professional fees 27,409 128,251
Exploration cost 154,991 279,599
Assignment of interest in oil & gas blocks Nil 627,390
Other expenses 6,428 1,072
Total 188,828 1,036,312
Particulars
Percentage of total consumption Amount
Current year Previous period Current year Previous period
Imported 29.10 Nil 11,529 Nil
Indigenous 70.90 Nil 28,083 Nil
Total 100.00 Nil 39,612 Nil
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 94
22. CURRENT INVESTMENTS - UNQUOTED AND NON TRADE (REFER SCHEDULE-7 OF THE FINANCIAL STATEMENTS):
The details of investments in mutual fund units are as tabulated under:
31
st
March 2010
1
24,000,000 units of Birla Sunlife mutual fund under Birla Sun Life Interval Income Fund - Quarterly
Plan - Series II - Daily Dividend Reinvestment plan
241,596
2 117,443,151 units of Birla Sunlife mutual fund under Birla Sun Life Saving Funds - Daily Dividend Reinvestment plan 1,175,230
3 75,161,631 units of Birla Sunlife mutual fund under BSL Floating Rate Fund - Long Term - Daily Dividend Reinvestment plan 753,961
4 16,155,533 units of Canara Robeco mutual fund under Canara Robeco Treasury Advantage - Daily Dividend Reinvestment plan 200,443
5 1,074,176 units of DSP Blackrock mutual fund under DSP Blackrock Floating Rate - Daily Dividend Reinvestment plan 1,074,762
6
219,994,508 units of HDFC mutual fund under HDFC Cash Management Fund - Treasury Advantage - Daily Dividend
Reinvestment plan
2,206,875
7
22,933,236 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan
Premium - Daily Dividend Reinvestment plan
2,424,846
8 20,000,000 units of ICICI Prudential mutual fund under ICICI Prudential Interval Fund II - Daily Dividend Reinvestment plan 200,048
9
115,624,830 units of IDFC mutual fund under IDFC Money Manager TP Super Institutional - Plan C - Daily Dividend
Reinvestment plan
1,156,422
10 135,776,717 units of Kotak Mahindra mutual fund under Kotak Floater Long Term Fund - Daily Dividend Reinvestment plan 1,368,602
11 24,000,000 units of Kotak Mahindra mutual fund under Kotak Quarterly Interval Plan Series 8 - Daily Dividend Reinvestment plan 240,710
12
22,430,929 units of Reliance mutual fund under Reliance Liquid Fund - Treasury Plan-Institutional
Option - Daily Dividend Reinvestment plan
342,908
13 41,040,682 units of Reliance mutual fund under Reliance Medium Term Fund - Daily Dividend Reinvestment plan 701,627
14 128,910,540 units of SBI mutual fund under SBI SHF-Ultra Short Term Fund - Daily Dividend Reinvestment plan 1,289,879
15 130,570,088 units of Tata mutual fund under Tata Floater Fund - Daily Dividend Reinvestment plan 1,310,349
16 2,128,161 units of UTI mutual fund under UTI Treasury Advantage Fund - Daily Dividend Reinvestment plan 2,128,618
Total 16,816,876
31
st
March 2009
1
63,626,784 units, face value of Rs. 10 each, of Birla Cash Plus - Institutional Premium- Daily Dividend
Reinvestment plan
637,509
2 21,126,235 units, face value of Rs. 10 each, of HDFC Liquid Fund - Premium Plan- Daily Dividend Reinvestment plan 259,003
3
26,081,126 units, face value of Rs. 10 each, of ICICI Prudential Institutional Liquid Plan - Super Iinst- Daily Dividend
Reinvestment plan
260,824
4
15,494,677 units, face value of Rs. 10 each, of Reliance Liquid Fund - Treasury Plan-Institutional Option - Daily Dividend
Reinvestment plan
236,870
5 191,352 units, face value of Rs. 1000 each, of Tata Liquid Fund - SHIP- Daily Dividend Reinvestment plan 213,266
Total 1,607,472
The following mutual fund units were purchased and sold during the current year:-
1 335,214,545 units of Birla Sunlife mutual fund under Birla Cash Plus - Institutional Premium - Daily Dividend Reinvestment
2 19,920,035 units of Canara Robeco mutual fund under Canara Robeco Liquid Collection - Daily Dividend Reinvestment
3 1,073,385 units of DSP Blackrock mutual fund under DSP Blackrock Liquidity Fund - Daily Dividend Reinvestment
4 332,343,248 units of HDFC mutual fund under HDFC Liquid Fund - Premium Plan - Daily Dividend Reinvestment
5 49,198,541 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan Premium - Daily Dividend Reinvestment
6 368,973,177 units of ICICI Prudential mutual fund under ICICI Prudential Institutional Liquid Plan - Super Inst - Daily Dividend Reinvestment
7 115,181,352 units of IDFC mutual fund under IDFC Cash Fund Super Institutional - Plan C - Daily Dividend Reinvestment
8 8,927,386 units of Kotak Mahindra mutual fund under Kotak Floater Long Term Fund - Daily Dividend Reinvestment
9 173,076,949 units of Kotak Mahindra mutual fund under Kotak Liquid Fund - Institutional Premium - Daily Dividend Reinvestment
10 148,837,398 units of Reliance mutual fund under Reliance Liquid Fund - Treasury Plan - Institutional Option - Daily Dividend Reinvestment
11 76,780,784 units of SBI mutual fund under SBI Magnum Insta Cash Fund - Daily Dividend Reinvestment
12 39,908,068 units of Tata mutual fund under Tata Floater Fund - Daily Dividend Reinvestment
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
95
13 2,089,903 units of Tata mutual fund under Tata Liquid Fund - SHIP - Daily Dividend Reinvestment
14 4,152,801 units of UTI mutual fund under UTI Liquid Cash Plan - Inst - Daily Dividend Reinvestment
15 504,918 units of UTI mutual fund under UTI Treasury Advantage Fund - Daily Dividend Reinvestment
The following mutual fund units were purchased and sold during the previous period :-
1 288,767,315 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium - Daily Dividend Reinvestment
2 396,375,092 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium – Growth
3 22,951,572 units of Birla Sunlife mutual fund under Birla Sunlife Interval Income - Institutional - Quarterly - Series 2 – Growth
4 76,578,715 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional - Daily Dividend Reinvestment
5 185,222,322 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional – Growth
6 15,000,000 units of Canara Robeco mutual fund under Canara Robeco FMP - Series 3 - 90 Days - IP – Growth
7 48,919,527 units of Canara Robeco mutual fund under Canara Robeco Liquid Plus Super Institutional - Daily Dividend Reinvestment
8 31,366,504 units of Fidelity mutual fund under Fidelity Cash - SIP – Growth
9 62,263,786 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Daily Dividend Reinvestment
10 57,042,071 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Growth
11 128,735,017 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plan - Daily Dividend Reinvestment
12 193,231,349 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale - Daily Dividend Reinvestment
13 174,864,026 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale – Growth
14 166,891,418 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale - Daily Dividend Reinvestment
15 193,913,572 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale – Growth
16 24,000,000 units of HDFC mutual fund under HDFC FMP 90D (VIII)(3) - Wholesale - Growth
17 62,847,681 units of HDFC mutual fund under HDFC Liquid - Premium Plan - Daily Dividend Reinvestment
18 303,956,967 units of HDFC mutual fund under HDFC Liquid - Premium Plan – Growth
19 41,003,276 units of HDFC mutual fund under HDFC Liquid - Premium Plus Plan - Weekly Dividend Reinvestment
20 23,586,686 units of HDFC mutual fund under HDFC Quarterly Interval -Plan B Wholesale Growth – Growth
21 106,509,667 units of HSBC mutual fund under HSBC Cash - Inst Plus - Daily Dividend Reinvestment
22 155,825,133 units of HSBC mutual fund under HSBC Cash - Inst Plus - Growth
23 146,239,354 units of HSBC mutual fund under HSBC Liquid Plus - IP - Daily Dividend Reinvestment
24 229,632,812 units of HSBC mutual fund under HSBC Liquid Plus - IP - Growth
25 150,719,932 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan - Daily Dividend Reinvestment
26 208,534,658 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan – Growth
27 32,963,479 units of ICICI Prudential mutual fund under ICICI Prudential FRF - Plan D – Growth
28 475,076,846 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst - Daily Dividend Reinvestment
29 446,678,300 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst – Growth
30 24,485,319 units of ICICI prudential mutual fund under ICICI Prudential Interval II Quarterly Interval Plan B - Retail Cumulative – Growth
31 49,165,296 units of IDFC mutual fund under IDFC Cash - Super Institutional Plan C - Daily Dividend Reinvestment
32 81,765,530 units of IDFC mutual fund under IDFC Floating Rate -LT-Inst Plan B – Growth
33 24,000,000 units of IDFC mutual fund under IDFC FMP Qtr Series 31 - Growth
34 64,428,611 units of IDFC mutual fund under IDFC Liquid Plus - Investment Plan - Inst Plan B - Daily Dividend Reinvestment
35 15,341,934 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst - Daily Dividend Reinvestment
36 15,984,797 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst – Growth
37 18,000,000 units of ING mutual fund under ING Interval - Quarterly-C-Institutional – Growth
38 115,482,014 units of ING mutual fund under ING Liquid Super Institutional – Growth
39 128,337,221 units of ING mutual fund under ING Liquid Plus - Institutional – Growth
40 23,518,230 units of ING mutual fund under ING Vysya Liquid Plus - IP - Growth
41 66,088,565 units of JP Morgan mutual fund under JP Morgan India Liquid Plus – Growth
42 20,913,377 units of Kotak Mahindra mutual fund under Kotak Liquid - Institutional Premium – Growth
43 3,165,849 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Plan – Growth
44 50,350,378 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Premium Plan - Daily Dividend Reinvestment
45 150,114,425 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional - Daily Dividend Reinvestment
46 197,490,161 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional – Growth
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 96
47 20,583,957 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option - Daily Dividend Reinvestment
48 82,564,435 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option – Growth
49 2,052,210 units of Reliance mutual fund under Reliance Liquid Plus - Institutional - Daily Dividend Reinvestment
50 2,380,814 units of Reliance mutual fund under Reliance Liquid Plus - Institutional – Growth
51 23,091,765 units of Reliance mutual fund under Reliance Liquidity - Daily Dividend Reinvestment
52 36,180,905 units of Reliance mutual fund under Reliance Liquidity - Growth
53 158,916,208 units of Reliance mutual fund under Reliance Medium Term - Daily Dividend Reinvestment
54 21,680,417 units of Reliance mutual fund under Reliance Monthly Interval - Series I Institutional – Growth
55 23,407,582 units of Reliance mutual fund under Reliance Quarterly Interval - Series II Institutional – Growth
56 29,168,603 units of SBI mutual fund under SBI Magnum Insta Cash - Daily Dividend Reinvestment
57 20,444,600 units of SBI mutual fund under SBI SDFS - 90 Days - Growth
58 98,778,982 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Daily Dividend Reinvestment
59 233,026,709 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Growth
60 859,255 units of Standard Chartered mutual fund under Standard Chartered Liquidity Manager Plus – Growth
61 259,059,638 units of Tata mutual fund under Tata Floater - Daily Dividend Reinvestment
62 206,755,713 units of Tata mutual fund under Tata Floater – Growth
63 38,774,118 units of Tata mutual fund under Tata Floating Rate – STP - Institutional Plan – Growth
64 2,457,011 units of Tata mutual fund under Tata Liquid - SHIP - Daily Dividend Reinvestment
65 329,827 units of Tata mutual fund under Tata Liquid – SHIP - Growth
23. Balances written back are on account of reconciliation of certain working capital balances pertaining to joint ventures, in which the Company has
participating interest.
24. The Company has made equity investments in CIG Mauritius Holding Private Limited (‘CMHPL’) mainly for funding the expenditure pertaining to block
SL 2007-0-001 held by Cairn Lanka (Private) Limited (a wholly owned subsidiary of CMHPL). The said investment is carried at cost, as the block is
presently under exploration phase.
25. During the previous period, the Company had decided to retrospectively account for stock options using the Intrinsic Value Method as against the
Fair Value Method (Black Scholes) followed till the ?nancial year ended 31
st
December 2007. Accordingly, the excess stock option provision up to
31
st
December 2007 was reversed during the previous period, resulting in an exceptional gain of INR 155,723 thousand.
26. Details of amounts recoverable from subsidiary companies in which directors are interested are same as disclosed in note 4 (c) above. The balance
outstanding as at the year / period end is also the maximum amount outstanding during the year/period. No loans have been given to the
subsidiaries, associates, ?rms and companies, in which directors are interested.
27. CHANGE IN FINANCIAL YEAR AND PREVIOUS PERIOD COMPARATIVES
The previous ?nancial period consisted of ?fteen months from 1
st
January 2008 to 31
st
March 2009, while the current ?nancial year is for a twelve
months period. Accordingly, previous period ?gures in the pro?t and loss account and cash ?ow statement are not comparable with current
?nancial year. Previous period’s ?gures have been regrouped where necessary to con?rm to current year’s classi?cation.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
97
Balance Sheet Abstract and Company’s General Business Pro?le
For and on behalf of the Board of Directors
Rahul Dhir Managing Director and Chief Executive Of?cer
Indrajit Banerjee Executive Director and Chief Financial Of?cer
Omkar Goswami Director
Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
I) Registration Details
Registration No. L11101MH2006PLC163934
State Code 11
Balance Sheet Date 31/03/10
II) Capital raised during the year* (Amount in Rs. Thousands)
Public Issue -
Rights Issue -
Bonus Issue -
Private Placement (Includes stock options exercised) 3,063
*Does not include securities premium
III) Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)
Total Liabilities 334,328,131
Total Assets 334,328,131
Source of Funds
Paid up Capital 18,969,741
Reserves & Surplus (Includes stock options outstanding) 301,625,200
Secured Loans 13,450,000
Unsecured Loans Nil
Application of Funds
Net Fixed Assets (Includes exploratory work-in-progress) 242,260
Investments 331,290,939
Net Current Assets 1,284,208
Miscellaneous Expenditure Nil
Accumulated losses 1,227,534
IV) Performance of the Company (Amount in Rs. Thousands)
Turnover (Total Income) 1,633,620
Total Expenditure 2,367,252
Pro?t/(Loss) before tax (733,632)
Pro?t/(Loss) after tax (689,534)
Pro?t per Share in Rs. (Basic & Diluted) (0.36)
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
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 98
Auditor’s 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 Group, as at 31 March, 2010, and also the Consolidated Pro?t and
Loss Account and the Consolidated Cash Flow Statement for the year ended on that date annexed thereto. These ?nancial statements are
the responsibility of the Cairn India Limited’s management. Our responsibility is to express an opinion on these ?nancial statements based
on our audit.
2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the ?nancial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the ?nancial statements. An audit also includes assessing the
accounting principles used and signi?cant estimates made by management, as well as evaluating the overall ?nancial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
3. The attached ?nancial statements include Cairn India Group’s share of net assets, expenses and cash ?ows aggregating to Rs. 799,846
thousand, Rs. 692,124 thousand and Rs. 9 thousand respectively in the unincorporated joint ventures not operated by the Company or its
subsidiaries, the accounts of which have been audited by the auditors of the respective unincorporated joint ventures and relied upon by us.
4. We report that the consolidated ?nancial statements have been prepared by the Cairn India Limited’s management in accordance with the
requirements of Accounting Standards (AS) 21, Consolidated ?nancial statements, noti?ed pursuant to the Companies (Accounting Standards)
Rules, 2006, (as amended).
5. In our opinion and to the best of our information and according to the explanations given to us, the consolidated ?nancial 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 31 March, 2010;
(b) in the case of the consolidated pro?t and loss account, of the pro?t for the year ended on that date; and
(c) in the case of the consolidated cash ?ow statement, of the cash ?ows for the year ended on that date.
For S.R. Batliboi & Associates
Firm registration number: 101049W
Chartered Accountants
per Sanjay Vij
Partner
Membership No.:95169
Place Gurgaon Date 27 May, 2010
99
Consolidated Balance Sheet
AS AT MARCH 31, 2010
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules As at March 31, 2010 As at March 31, 2009
Sources of Funds
Shareholders’ Funds
Share capital 1 18,969,741 18,966,678
Stock options outstanding 2 463,978 388,978
Reserves and surplus 3 319,249,603 308,667,596
338,683,322 328,023,252
Loan funds
Secured loans 4 34,007,131 222,402
Unsecured loans 5 - 43,341,500
34,007,131 43,563,902
Deferred tax liabilities (net) 6 4,619,418 5,623,782
377,309,871 377,210,936
Application of Funds
Fixed assets 7
Gross cost 2,227,578 1,434,686
Less: Accumulated depreciation / amortisation 958,067 801,843
Net book value 1,269,511 632,843
Exploration, Development and
Site-restoration costs
8
Cost of producing facilities (net) 4,994,770 3,013,742
Exploratory & development work in progress 91,634,579 62,027,323
Net book value 96,629,349 65,041,065
Goodwill 253,192,675 253,192,675
Investments 9 17,124,133 1,712,806
Deferred tax assets (net) 6 166,215 83,935
Current assets, loans and advances
Inventories 10 2,909,438 1,682,808
Sundry debtors 11 3,067,474 1,516,418
Cash and bank balances 12 9,294,240 65,270,674
Other current assets 13 144,586 704,244
Loans and advances 14 8,317,866 3,505,102
23,733,604 72,679,246
Less: Current liabilities and provisions
Current liabilities 15 9,868,645 11,794,353
Provisions 16 4,936,971 4,337,281
14,805,616 16,131,634
Net Current assets 8,927,988 56,547,612
377,309,871 377,210,936
Notes to accounts 25
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 Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 100
The schedules referred to above are an integral part of the consolidated pro?t and loss account.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Consolidated Pro?t and Loss Account
FOR THE YEAR ENDED MARCH 31, 2010
Schedules
Year ended
March 31, 2010
Fifteen months
ended March 31, 2009
Income
Income from operations 17 16,230,261 14,326,716
Other income 18 4,076,616 5,510,324
20,306,877 19,837,040
Expenditure
Operating expenses 19 4,248,252 2,129,743
Depletion 8 1,376,477 2,635,431
Unsuccessful exploration costs 8 2,085,346 1,683,851
Staff Costs 20 1,101,635 1,150,010
Administrative expenses 21 1,372,497 1,727,069
(Increase) / decrease in inventories 22 (366,021) 222,342
Prior period items
(Refer note no. 22 in schedule 25)
68,716 283,045
Depreciation and amortisation 7 108,588 62,593
Finance costs 23 148,031 64,090
10,143,521 9,958,174
Pro?t before taxation 10,163,356 9,878,866
Current tax 2,216,325 1,336,282
MAT credit entitlement (1,372,228) (225,490)
Deferred tax (credit)/ charge (1,086,649) 623,354
Fringe Bene?t Tax
(refer note no. 23 in schedule 25)
(105,218) 110,214
Wealth tax 67 -
(347,703) 1,844,360
Pro?t for the year / period 10,511,059 8,034,506
Surplus / (De?cit) brought forward from the
previous period
7,577,322 (457,184)
Surplus carried to Balance sheet 18,088,381 7,577,322
Earnings per share in INR 24
Basic 5.54 4.31
Diluted 5.52 4.28
(Nominal value of shares INR 10)
Notes to accounts 25
101
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
Cash ?ow from operating activities
Pro?t before taxation for the year / period 10,163,356 9,878,866
Adjustments for
- Employee compensation expense (equity settled stock
options) - net of exceptional gains
89,175 107,292
- Depreciation and depletion 1,780,276 2,949,665
- Loss / (Pro?t) on sale / discard of ?xed assets (net) (313) 1,835
- Unsuccessful exploration costs 2,085,346 1,683,851
- Share issue expenses - 208,410
- Unrealised exchange loss / (gain) on restatement of assets
and liabilities (net)
(2,604,018) (1,710,402)
- Interest expense 59,518 79,436
- Pro?t on sale of non trade current investments (net) (2,385) (1,245,686)
- Interest income (1,375,578) (1,858,924)
- Dividend from investments (224,461) (221,876)
- Loan facility and management fees 103,834 -
- Unrealised loss on option contracts - 112,973
- Balances written back (net) (143,360) (143,285)
Operating pro?t before working capital changes 9,931,390 9,842,155
Movements in working capital:
(Increase)/decrease in inventories (1,226,630) (466,761)
(Increase)/decrease in debtors (1,598,096) (108,344)
(Increase)/decrease in loans and advances and other
current assets
(3,050,580) 186,699
Increase/(decrease) in current liabilities and provisions (1,206,652) 1,684,424
Cash generated from operations 2,849,432 11,138,173
Current tax/FBT paid (net of refunds) (1,752,558) (1,457,679)
Net cash from operating activities (A) 1,096,874 9,680,494
Cash ?ow from investing activities
Payments made for exploration, development activities and
purchase of ?xed assets
(33,662,150) (30,133,147)
Short term investments in mutual funds (net) (15,416,641) 6,661,791
Fixed deposits made (16,716,524) (43,410,755)
Proceeds from matured ?xed deposits 57,327,022 11,686,817
Proceeds from sale of ?xed assets 313 202
Interest received 2,138,135 1,240,524
Dividend from short term investments received 222,195 -
Dividend from long term investments received - 216,589
Net cash used in investing activities (B) (6,107,650) (53,737,979)
Cash ?ow from ?nancing activities
Proceeds from issue of equity shares (including securities
premium)
20,363 25,523,445
Payments made for share issue expenses - (208,410)
Finance lease taken 9,406 175,645
Repayment of ?nance lease (91,483) (124,838)
Proceeds from long term borrowings 34,604,616 37,620,170
Repayment of long term borrowings (41,409,564) -
Loan facility and management fees paid (1,908,255) -
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED MARCH 31, 2010
(All amounts are in thousand Indian Rupees, unless otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 102
Interest paid (1,678,228) (1,464,603)
Net cash from/(used in) ?nancing activities (C) (10,453,145) 61,521,409
Net increase/(decrease) in cash and cash
equivalents (A+B+C)
(15,463,921) 17,463,924
Cash and cash equivalents at the beginning of the year/ period 21,732,635 1,503,807
Cash and cash equivalents at the end of the year/ period 6,268,714 18,967,731
Unrealised exchange differences on closing cash and
cash equivalents
97,984 2,764,904
Cash and cash equivalents as per cash ?ow statement 6,366,698 21,732,635
Components of cash and cash equivalents as at March 31, 2010 March 31, 2009
Cash in hand 452 626
Balances with banks
on current accounts 390,057 228,024
on site restoration fund 143,703 -
on deposit accounts 8,760,028 65,042,024
Less: Deposits having maturity of over 90 days (2,927,542) (43,538,039)
6,366,698 21,732,635
Notes
i) The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in Accounting Standard-3 on “Cash ?ow statements”.
ii) Amounts in bracket indicate a cash out?ow or reduction.
iii) Bank balance in deposit accounts includes INR 1,955,866 thousand, previous period INR 3,312,342 thousand, pledged with the banks.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
Consolidated Statement of Cash Flows Continued
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
103
Notes
i) Issued, subscribed and fully paid up share capital includes 1,183,243,791 equity shares (previous period - 1,226,843,791 equity shares) of INR 10 each
held by Cairn UK Holdings Limited, the holding company, together with its nominees.
ii) Shares held by the holding company include 861,764,893 equity shares (previous period - 861,764,893 equity shares) of INR 10 each, allotted as fully
paid up pursuant to contracts for consideration other than cash.
iii) For stock options outstanding, refer note no. 7 in schedule 25.
Schedules to the Consolidated Financial Statements
As at
March 31, 2010
As at
March 31, 2009
Schedule 1
Share capital
Authorised:
2,250,000,000 (previous period 2,250,000,000) equity shares of
INR 10 each
22,500,000 22,500,000
Issued, Subscribed and Paid up:
1,896,974,132 (previous period 1,896,667,816) equity shares of INR 10 each 18,969,741 18,966,678
18,969,741 18,966,678
Schedule 2
Stock options outstanding
Employee stock options outstanding 768,120 782,548
Less: Deferred employee compensation outstanding (304,142) (393,570)
Closing Balance 463,978 388,978
Schedule 3
Reserves and surplus
Securities premium account
Opening Balance 301,090,274 276,084,115
Add: Additions during the year/ period (refer note no. 14 in schedule 25) 70,948 25,006,159
Closing Balance 301,161,222 301,090,274
Pro?t and Loss Account 18,088,381 7,577,322
319,249,603 308,667,596
Schedule 4
Secured loans
Finance lease liabilities (refer note no. 8 in schedule 25) 140,325 222,402
Long term loans (refer note no. 18 in schedule 25)
- from ?nancial institutions 5,092,111 -
- from banks 28,774,695 -
34,007,131 222,402
Schedule 5
Unsecured loans
Long term loans
- from ?nancial institutions - 7,648,500
- from banks - 35,693,000
- 43,341,500
(All amounts are in thousand Indian Rupees, unless otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 104
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules to the Consolidated Financial Statements Continued
Schedule 6
Deferred tax asset / liabilities (net)
Effect of differences in block of ?xed assets/exploration and development
assets as per tax books and ?nancial books
5,005,074 6,178,716
Gross deferred tax liabilities 5,005,074 6,178,716
Effect of lease accounting 7,877 8,972
Expenditure debited to pro?t and loss account but allowed for tax purposes in following years 543,994 629,897
Gross deferred tax assets 551,871 638,869
Net deferred tax liabilities * 4,453,203 5,539,847
* After setting off net deferred tax assets aggregating to INR 166,215 thousand, previous period INR 83,935
thousand in respect of certain group companies
Notes
i) Furniture and ?ttings includes Leasehold improvements of INR 282,259 thousand (previous period INR 278,895 thousand), accumulated depreciation
thereon INR 168,063 thousand (previous period INR 110,482 thousand).
ii) Furniture and ?ttings and Of?ce equipments of INR 281,634 thousand (previous period INR 278,271 thousand) and INR 100,733 thousand (previous period
INR 210,192 thousand) respectively have been acquired under ?nance lease. The depreciation charge for the year/ period on these assets is INR 57,556
thousand (previous period INR 60,569 thousand) and INR 27,197 thousand (previous period INR 61,040 thousand) respectively and the accumulated depre-
ciation thereon is INR 167,910 thousand (previous period INR 110,355 thousand) and INR 43,514 thousand (previous period INR 139,781 thousand) respectively.
iii) Depreciation charge for the year/period includes INR 295,211 thousand (previous period INR 251,640 thousand) allocated to joint ventures.
iv) Fixed assets include INR 996,883 thousand (previous period INR 169,471 thousand) jointly owned with the joint venture partners. Accumulated depreciation on
these assets is INR 131,109 thousand (previous period INR 78,560 thousand) and net book value is INR 865,773 thousand (previous period INR 90,911 thousand).
Schedule 7
Fixed Assets
Description Gross Block Accumulated Depreciation / Amortisation Net Block
As on
01.04.2009
Additions Deletions
As on
31.03.2010
As on
01.04.2009
For the
year/period
Deletions
As on
31.03.2010
As on
31.03.2010
As on
31.03.2009
A) Tangible Assets
Freehold land 43,583 - - 43,583 - - - - 43,583 43,583
Buildings 5,247 5,042 - 10,289 2,333 782 - 3,115 7,174 2,914
Plant and machinery - 777,549 - 777,549 - 21,845 - 21,845 755,704 -
Of?ce equipments 512,022 122,898 (165,296) 469,624 344,439 112,124 (165,165) 291,398 178,226 167,583
Furniture and ?ttings 299,870 13,080 (1,454) 311,496 126,760 61,319 (1,454) 186,625 124,871 173,110
Vehicles 10,983 582 - 11,565 2,660 2,608 - 5,268 6,297 8,323
B) Intangible Assets
Computer software 562,981 121,447 (80,956) 603,472 325,651 205,121 (80,956) 449,816 153,656 237,330
Grand Total 1,434,686 1,040,598 (247,706) 2,227,578 801,843 403,799 (247,575) 958,067 1,269,511 632,843
Previous period 1,092,632 462,608 (120,554) 1,434,686 606,126 314,233 (118,516) 801,843 632,843 486,506
105
Schedule 9
Investments
Long term investments (at cost)
Quoted and non-trade
Nil (previous period 755,275) equity shares of INR 10/- each fully paid up
in Videocon Industries Limited
- 105,334
Current Investments (at lower of cost and market value)
Quoted and non-trade
755,275 (previous period Nil) equity shares of INR 10/- each fully paid up
in Videocon Industries Limited
105,334 -
Unquoted and non trade
Mutual Funds 17,018,799 1,607,472
17,124,133 1,712,806
Schedule 10
Inventories
Stores and spares 2,456,383 1,595,774
Finished goods 453,055 87,034
2,909,438 1,682,808
Schedule 11
Sundry Debtors
Debts - Unsecured and outstanding for a period exceeding six months :
- Considered good 78,687 94,261
Other unsecured debts :
- Considered good 2,988,787 1,422,157
3,067,474 1,516,418
Schedules to the Consolidated Financial Statements Continued
Schedule 8
Exploration, Development and Site restoration costs
Opening balance of producing properties 3,013,742 4,389,517
Additions / deletions / transfer for the year / period 3,357,505 1,259,656
6,371,247 5,649,173
Less: Depletion 1,376,477 2,635,431
Net producing properties 4,994,770 3,013,742
Opening balance of exploratory & development work in progress 62,027,323 24,670,264
Additions / deletions / transfer for the year / period 31,692,602 39,040,910
Less: Unsuccessful exploration costs for the year/ period 2,085,346 1,683,851
Exploration and Development work in progress 91,634,579 62,027,323
Net book value 96,629,349 65,041,065
Note Additions for the year includes borrowing costs (net of income on temporary investments INR 125,203 thousand, previous period INR 241,350 thousand)
aggregating to INR 2,442,547 thousand (previous period INR 1,620,043 thousand).
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 106
Schedule 12
Cash and bank balances
Cash in hand 452 626
Balances with banks:
- on current accounts 390,057 228,024
- on deposit accounts (including deposits with maturity of more than 3 months)* 8,760,028 65,042,024
- on site restoration fund 143,703 -
9,294,240 65,270,674
* includes INR 1,955,866 thousand, previous period INR 3,312,342 thousand, pledged with the banks
Schedule 13
Other Current Assets
Interest accrued on bank deposits 23,285 660,639
Dividend receivable 7,553 -
Outstanding option contracts 113,748 43,605
144,586 704,244
Schedule 14
Loans and advances
Unsecured and considered good, unless otherwise stated:
Advances recoverable in cash or in kind or for value to be received* 10,463,960 5,789,515
Deposits 197,740 169,469
Advance tax and tax deducted at source, net of tax provisions INR 3,697,411 thousand
(previous period INR 1,921,505 thousand)
365,392 599,367
MAT credit entitlement 950,733 -
Fringe bene?t tax paid (net of provisions INR 394,040 thousand, previous period INR
266,883 thousand)
4,329 13,290
11,982,154 6,571,641
Less: Provision for doubtful advances (3,664,288) (3,066,539)
8,317,866 3,505,102
*includes doubtful balances INR 3,664,288 thousand (previous period INR 3,066,539 thousand) and also capital advances INR 549,799 thousand
(previous period INR 835,486 thousand)
Schedule 15
Current liabilities
Amount payable to Cairn Energy Plc., the ultimate holding company 1,773 1,296,164
Sundry creditors 8,652,475 8,647,926
Lease equalisation liability 12,250 9,279
Interest accrued but not due 7,838 94,471
Other liabilities 1,194,309 1,746,513
9,868,645 11,794,353
Schedules to the Consolidated Financial Statements Continued
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
107
Schedule 16
Provisions
Provision for taxation (net of advance tax - INR 576,716 thousand, previous period INR 356,794
thousand)
52,031 250,643
Provision for fringe bene?t tax (net of advance tax payments INR Nil, previous
period - INR 127,956 thousand)
- 105,235
Site restoration provision * 4,466,429 3,886,882
Provision for Government share of pro?t petroleum ** - 11,444
Provision for leave encashment 22,840 16,305
Provision for gratuity 64,879 39,571
Provision for employee stock options (cash settled) *** 330,792 27,201
4,936,971 4,337,281
* Site restoration provision
Opening balance 3,886,882 2,714,913
Additions for the year /period 579,547 1,388,000
Reversed during the year /period - (216,031)
Closing balance 4,466,429 3,886,882
** Provision for Government share of pro?t petroleum
Opening Balance 11,444 362,382
Additions for the year /period - 26,453
Written back during the year /period (11,444) -
Payments during the year /period - (377,391)
Closing Balance - 11,444
*** Provision for employee stock options (cash settled)
Opening Balance 27,201 -
Additions for the year /period 451,596 27,201
Payments during the year /period (144,762) -
Reversed during the year /period (3,243) -
Closing Balance 330,792 27,201
Schedule 17
Year Ended
March 31, 2010
Fifteen Months
ended March 31, 2009
Income from operations
Revenue from sale of oil, gas and condensate 22,018,998 24,476,702
Less: Government share of Pro?t Petroleum (6,396,752) (10,829,219)
15,622,246 13,647,483
Tolling income 41,406 50,391
Income received as operator from joint venture 566,609 628,842
16,230,261 14,326,716
Schedule 18
Other income
Interest on bank deposits 1,375,578 1,858,924
Pro?t on sale of non trade current investments (net) 2,385 1,245,686
Dividend income from non trade current investments 222,195 216,589
Schedules to the Consolidated Financial Statements Continued
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 108
Dividend income from non trade long term investments 2,266 5,287
Exchange ?uctuation (net)* 2,325,709 1,884,830
Miscellaneous income 4,810 -
Pro?t on sale of ?xed assets (net) 313 -
Balances written back (net) 143,360 143,285
Exceptional gain (refer note no. 24 in schedule 25) - 155,723
4,076,616 5,510,324
* Includes net gain on derivative contracts INR 450,547 thousand (previous period after setting off loss of INR 434,328 thousand).
Schedule 19
Operating expenses
Production expenses 1,130,815 821,016
Arbitration costs 71,431 7,582
Transportation expenses 1,198,660 123,912
Data acquisition and analysis 328,887 66,266
Insurance 52,164 56,677
Royalty 241,351 393,787
Cess 1,148,496 546,365
Production bonus 76,448 114,138
4,248,252 2,129,743
Schedule 20
Staff costs
Salaries, wages and bonus 3,763,973 3,359,347
Employee compensation expense (stock options) 537,529 454,546
Contribution to provident fund 177,970 97,356
Contribution to superannuation fund 68,753 53,226
Compensated absences 7,895 29,916
Gratuity expenses 53,570 40,888
Staff welfare expenses 325,567 329,288
4,935,257 4,364,567
Less: Cost allocated to joint ventures (3,833,622) (3,214,557)
1,101,635 1,150,010
Schedule 21
Administrative expenses
Contract employee charges 439,319 1,295,828
Legal and professional expenses 1,345,401 1,489,900
Share issue expenses - 208,410
Repairs and maintenance 275,984 260,933
Rent 305,214 455,648
Travelling and conveyance expenses 357,480 511,320
Communication expenses 158,900 150,906
Insurance 860 3,127
Inauguration expenses 93,149 -
Loss on sale / discard of ?xed assets (net) - 1,835
Miscellaneous expenses 334,943 357,706
3,311,250 4,735,613
Less: Cost allocated to joint ventures (1,938,753) (3,008,544)
1,372,497 1,727,069
Schedules to the Consolidated Financial Statements Continued
Year Ended
March 31, 2010
Fifteen Months
ended March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
109
Schedule 22
(Increase) / Decrease in inventories
Inventories at the beginning of the year/ period
Finished goods 87,034 309,376
Inventories at the end of the year/period
Finished goods 453,055 87,034
(366,021) 222,342
Schedule 23
Finance costs
Interest
-on term loan 17,807 -
-others 11,681 38,581
-?nance lease charges 30,030 40,855
Loan facility and management fees 103,834 -
Bank charges 12,153 20,734
175,505 100,170
Less: Cost allocated to joint ventures (27,474) (36,080)
148,031 64,090
Schedule 24
Earnings Per Share
Pro?t for the year/period as per pro?t and loss account 10,511,059 8,034,506
Weighted average number of equity shares in calculating basic earnings per share 1,896,696,475 1,866,146,993
Add: Number of equity shares arising on grant of stock options 8,321,392 10,052,076
Weighted average number of equity shares in calculating diluted earnings per share 1,905,017,867 1,876,199,069
Earnings per share in INR
Basic 5.54 4.31
Diluted 5.52 4.28
Year Ended
March 31, 2010
Fifteen Months
ended March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules to the Consolidated Financial Statements Continued
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 110
(All amounts are in INR thousand unless, otherwise stated)
NATURE OF OPERATIONS 1.
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,
re?ning, 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 is hereinafter collectively referred to as ‘Cairn India Group’. The entities under the Cairn India Group
are participants in various Oil and Gas blocks/?elds (which are in the nature of jointly controlled assets), 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.
COMPONENTS OF THE CAIRN INDIA GROUP 2.
The Consolidated Financial Statements represent consolidation of accounts of the Company and its subsidiaries as detailed below:
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
S. No. Name of the Subsidiaries Country of Incorporation
1 Cairn Energy Australia Pty Limited Australia
2 Cairn Energy India Pty Limited Australia
3 CEH Australia Pty Limited Australia
4 Cairn Energy Asia Pty Limited Australia
5 Sydney Oil Company Pty Limited Australia
6 Cairn Energy Investments Australia Pty Limited Australia
7 Wessington Investments Pty Limited Australia
8 CEH Australia Limited British Virgin Islands
9 Cairn India Holdings Limited (‘CIHL’) Jersey
10 CIG Mauritius Holding Private Limited (‘CMHPL’) Mauritius
11 CIG Mauritius Private Limited Mauritius
12 Cairn Energy Holdings Limited United Kingdom
13 Cairn Energy Discovery Limited United Kingdom
14 Cairn Exploration (No. 2) Limited United Kingdom
15 Cairn Exploration (No. 6) Limited United Kingdom
16 Cairn Energy Hydrocarbons Limited United Kingdom
17 Cairn Petroleum India Limited United Kingdom
18 Cairn Energy Gujarat Block 1 Limited United Kingdom
19 Cairn Exploration (No. 4) Limited United Kingdom
20 Cairn Exploration (No. 7) Limited United Kingdom
21 Cairn Energy Development Pte Limited Singapore
22 Cairn Lanka (Pvt) Limited Sri Lanka
23 Cairn Energy Group Holdings BV Netherlands
24 Cairn Energy India West BV Netherlands
25 Cairn Energy India West Holding BV Netherlands
26 Cairn Energy Gujarat Holding BV Netherlands
27 Cairn Energy India Holdings BV Netherlands
28 Cairn Energy Netherlands Holdings BV Netherlands
29 Cairn Energy Gujarat BV Netherlands
30 Cairn Energy Cambay BV Netherlands
31 Cairn Energy Cambay Holding BV Netherlands
111
CIHL and CMHPL are wholly owned subsidiaries of the Company. All other abovementioned companies are direct or indirect wholly owned
subsidiaries of either CIHL or CMHPL.
Cairn India Group has interest in the following Oil & Gas blocks/?elds:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES 3.
Basis of preparation (A)
The ?nancial statements have been prepared to comply in all material respects with the mandatory Accounting Standards noti?ed 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.
Principles of consolidation:
The consolidated ?nancial statements relate to the Cairn India Group. In the preparation of these consolidated ?nancial statements, investments
in subsidiaries have been accounted for in accordance with the provisions of Accounting Standard-21 (Consolidated Financial Statements). The
?nancial 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:
The ?nancial statements of the Company and its subsidiary companies are consolidated on a line-by-line basis by adding together the 1
book values of the like items of assets, liabilities, income and expenses after eliminating all signi?cant intra-group balances and intra-group
transactions and also unrealised pro?ts or losses in accordance with Accounting Standard-21 (Consolidated Financial Statements).
The Consolidated Financial Statements are prepared using uniform accounting policies for like transactions and other events in similar 2
circumstances and are presented, to the extent possible, in the same manner as the Company’s separate ?nancial statements. The ?nancial
statements of the subsidiaries are adjusted for the accounting principles and policies followed by the Company.
The difference between the cost to the Company of its investment in subsidiaries and its proportionate share in the equity of the investee 3
company at the time of acquisition of shares in the subsidiaries is recognized in the ?nancial statements as Goodwill or Capital Reserve, as
the case may be. Goodwill is tested for impairment by the management on each reporting date.
Oil and gas assets (B)
Cairn India Group follows the successful efforts method of 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 & 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.
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
Oil & Gas blocks/?elds Area
Participating Interest
Operated block
Ravva block Krishna Godavari 22.50%
CB-OS/2 – Exploration Cambay Offshore 60%
CB-OS/2 - Development & production Cambay Offshore 40%
RJ-ON-90/1 – Exploration Rajasthan Onshore 100%
RJ-ON-90/1 – Development & production Rajasthan Onshore 70%
PR-OSN-2004 Palar Basin offshore 35%
SL 2007-01-001 North West Sri Lanka offshore 100%
KG-ONN-2003/1 Krishna Godavari Onshore 49%
Following blocks have been relinquished
GV-ONN-2002/1 in July 2009 Ganga Valley Onshore 50%
VN-ONN-2003/1 in Aug 2009 Vindhyan Onshore 49%
GV-ONN-2003/1 in Feb 2010 Ganga Valley Onshore 24%
Non – operated block
KG-DWN-98/2 Krishna Godavari Deep water 10%
GS-OSN-2003/1 Gujarat Saurashtra Onshore 49%
KK-DWN-2004 Kerala Konkan Basin offshore 40%
Following blocks have been relinquished
GV-ONN-97/1 in 2008 Ganga Valley Onshore 15%
CB-ONN-2002/1 in Jan 2009 Cambay Onshore 30%
RJ-ONN-2003/1 in Jan 2010 Rajasthan Onshore 30%
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 112
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
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 pro?t and loss account. Following appraisal of successful exploration wells, when a well is ready for
commencement of commercial production, the related exploratory and development work in progress are transferred into a single ?eld 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 bene?ts of the producing properties or replaces part of the existing
producing properties. Any costs remaining associated with such part replaced are expensed in the ?nancial 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 pro?t 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 pro?t 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.
Depletion (C)
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.
Site restoration costs (D)
At the end of the producing life of a ?eld, 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 expenses form part of the exploration &
development work in progress or cost of producing properties, as the case may be, 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 cost in the pro?t and loss account.
Impairment (E)
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external 1
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 ?ows are discounted to
their present value at the weighted average cost of capital.
After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining 2
useful life.
Tangible ?xed assets, depreciation and amortization (F)
Tangible 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 ?xed 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 ?xtures 2 to 5 years
Of?ce equipments 2 to 5 years
Plant and Equipment 2 to 10 years
Leasehold land Lease period
Leasehold improvements are amortized over the remaining period of the primary lease or expected useful economic lives, whichever is shorter.
Intangible ?xed assets and amortization (G)
Intangible assets, other than oil and gas assets, have ?nite 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 tested for impairment.
Leases (H)
Finance leases, which effectively transfer substantially all the risks and bene?ts 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
113
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
are apportioned between the ?nance 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 bene?ts of ownership of the leased item, are classi?ed as operating
leases. Operating lease payments are recognised as an expense in the pro?t and loss account on a straight-line basis over the lease term.
Investments (I)
Investments that are readily realisable and intended to be held for not more than a year are classi?ed as current investments. All other investments
are classi?ed as long-term investments. Current investments are measured at cost or market value, whichever is lower, determined on an individual
investment basis. 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.
Inventory (J)
Inventories of oil and condensate held at the balance sheet date are valued at net realizable value based on the estimated selling price. Inventories
of stores and spares related to exploration, development and production activities are stated at cost, determined on ?rst in ?rst out (FIFO) basis.
However, inventories of stores and spares, which are not likely to be consumed, are written down to their net realizable value.
Joint Ventures (K)
Cairn India Group participates in several Joint Ventures involving joint control of assets for carrying out oil and gas exploration, development and
producing activities. Cairn India Group 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.
Revenue recognition (L)
Revenue is recognized to the extent that it is probable that the economic bene?ts will ?ow 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 signi?cant
risks and rewards of ownership are transferred to the buyers.
As operator from the joint venture
Cairn India Group recognizes parent company overhead 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 the period on or before the date of balance sheet as per the
requirement of schedule VI of the Companies Act, 1956.
Borrowing costs (M)
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 ?nance 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 pro?t and loss account in the period in which they are incurred.
Foreign currency transactions and translations (N)
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 Cairn India Group’s monetary items at rates different from
those at which they were initially recorded during the year, or reported in previous ?nancial 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
group itself. In translating the ?nancial statements of a non-integral foreign operation for incorporating in the consolidated ?nancial statements, Cairn
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 114
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
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.
Income taxes (O)
Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in
accordance with the income tax laws. Deferred income tax re?ects 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 suf?cient 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 pro?ts. Unrecognised deferred tax assets of earlier periods are re-assessed and recognised to the extent that it has become
reasonably certain or virtually certain, as the case may be, 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 suf?cient 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 suf?cient 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 income tax under the normal provisions during the speci?ed period, resulting in utilization of MAT credit. 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 pro?t and loss account and shown as MAT Credit Entitlement.
Cairn India Group 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 the individual company will utilize MAT credit during the speci?ed period.
Earnings Per Share (P)
Basic earnings per share are calculated by dividing the net pro?t 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 pro?t 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.
Provisions (Q)
A provision is recognised when Cairn India Group has a present obligation as a result of past event and it is probable that an out?ow 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 re?ect the current best estimates.
Cash and Cash equivalents (R)
Cash and cash equivalents in the cash ?ow statement comprise cash at bank and in hand and short-term investments, with an original maturity of 90
days or less.
Employee Bene?ts (S)
Retirement and Gratuity bene?ts
Retirement bene?ts in the form of provident fund and superannuation scheme are de?ned contribution schemes and the contributions are charged to
the pro?t 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 de?ned bene?t obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made
at the end of each ?nancial 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 ?nancial year. The actuarial valuation is done as per projected unit credit method.
Actuarial gains / losses are immediately taken to pro?t 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
ICAI. Cairn India Group 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. The cost of awards to employees under the Company’s ultimate parent entity’s
115
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Long Term Incentive Plans (“the LTIP”) is recognised based on the amount cross charged by the parent entity.
Use of estimates (T)
The preparation of ?nancial 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 ?nancial statements
and the results of operations during the reporting period. Although these estimates are based upon management’s best knowledge of current events
and actions, actual results could differ from these estimates.
Segment Reporting Policies (U)
Identi?cation of segments:
Cairn India Group’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 Cairn India Group operate.
Derivative Instruments (V)
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.
SEGMENTAL REPORTING 4.
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 ?nancial reporting systems. Accordingly, the ?gures appearing in these
?nancial 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 con?ned to the Indian sub-continent in terms of oil and gas blocks and customers. Accordingly, the ?gures appearing in these ?nancial
statements relate to Cairn India Group’s single geographical segment, being operations in the Indian sub-continent.
RELATED PARTY TRANSACTIONS 5.
Names of related parties: (A)
Companies having control
• Cairn UK Holdings Limited, UK
Holding Company
• Cairn Energy Plc., UK
Ultimate holding company
Key Management Personnel
• Rahul Dhir
Managing Director and Chief Executive Of?cer
• Winston Frederick Bott Jr.
Executive Director and Chief Operating Of?cer
(appointed on 29
th
April, 2008)
• Indrajit Banerjee
Executive Director and Chief Finacial Of?cer
• Philip Tracy
Alternate Director (from 18
th
March, 2009 till 26
th
May, 2009)
• Lawrence Smyth
Executive Director and Chief Operating Of?cer (resigned on 21
st
January, 2008)
Transactions during the year / period (B)
Nature of the Transactions Related Party
Current year Previous period
Reimbursement of expenses to parent company Cairn Energy Plc. 39,919 279,725
Waiver of outstanding balance by the
parent company
Cairn Energy Plc. 1,083,654 Nil
Shares issued including premium and stock
option charge
Rahul Dhir Nil 716,185
Lawrence Smyth Nil 126,758
Total Nil 842,943
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 116
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
In addition to the above remuneration, incentives and bonus of INR 28,813 thousand (previous period INR 13,424 thousand), INR 69,151 thousand
(previous period INR 86,598 thousand), INR 38,123 thousand (previous period INR 8,099 thousand) and INR Nil (previous period INR 14,141
thousand) were paid to Rahul Dhir, Winston Frederick Bott Jr., Indrajit Banerjee and Lawrence Smyth respectively. Further, the remuneration does not
include provisions made for gratuity and leave bene?ts, as they are determined on an actuarial basis for the Cairn India Group as a whole.
Balances outstanding as at the end of the year / period: (C)
6. The shareholders of the Company in their meeting dated August 18, 2009 had revised the allocation of Initial Public Offer (IPO) proceeds within
the existing heads under the prospectus. As at 31
st
March 2010, the Company and its subsidiaries together have utilized the entire IPO proceeds
aggregating to INR 88,248,901 thousand in accordance with the revised approval received from the shareholders. The details of the revised
approval and utilization of funds is as follows:
The details of the unutilized monies out of the public issue proceeds is as follows:
7. EMPLOYEES STOCK OPTION PLANS
Cairn India Group has provided various share based payment schemes to its employees. During the period ended 31
st
March 2010, the following
schemes were in operation:
Nature of the Balance Related Party
31
st
March 2010 31
st
March 2009
Accounts payable Cairn Energy Plc. 1,773 1,296,164
Particulars
Upto, 31
st
March 2010 Upto, 31
st
March 2009
Acquisition of shares of Cairn India Holdings Limited from Cairn
UK Holdings Limited
59,580,837 59,580,837
Exploration and Development expenses 26,838,445 21,152,714
General corporate purposes 230,000 230,000
Issue expenses 1,599,619 1,599,619
Total 88,248,901 82,563,170
Particulars
31
st
March 2010 31
st
March 2009
Mutual funds Nil 718,277
Balances with banks Nil 4,967,454
Total Nil 5,685,731
Particulars
CISMP CIPOP CIESOP CIPOP Phantom CIESOP Phantom
Date of Board Approval 17
th
Nov 2006 17
th
Nov 2006 17
th
Nov 2006 Not applicable Not applicable
Date of Shareholder’s approval 17
th
Nov 2006 17
th
Nov 2006 17
th
Nov 2006 Not applicable Not applicable
Number of options granted till
March 2010
8,298,713 6,727,724 18,197,795 1,883,339 573,918
Method of Settlement Equity Equity Equity Cash Cash
Vesting Period
Refer vesting
conditions below
3 years from
grant date
3 years from
grant date
3 years from
grant date
3 years from
grant date
Exercise Period
18 months from
vesting date
3 months from
vesting date
7 years from
vesting date
Immediately
upon vesting
Immediately
upon vesting
Number of options granted till 31
st
March 2010
24
th
Nov 2006 8,298,713 - - - -
1
st
Jan 2007 - 1,708,195 3,467,702 - -
20
th
Sept 2007 - 3,235,194 5,515,053 - -
29
th
July 2008 - 789,567 3,773,856 822,867 324,548
Remuneration Rahul Dhir 106,814 112,036
Winston Frederick Bott Jr. 95,593 95,890
Indrajit Banerjee 14,633 18,024
Lawrence Smyth Nil 25,195
Philip Tracy 3,865 1,354
Total 220,905 252,499
Nature of the Transactions Related Party
Current year Previous period
117
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
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-
• 1/3
rd
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 9
th
Jan 2007.
• 1/3
rd
of the options will vest 18 months after the admission date.
• 1/3
rd
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.
• 1/4
th
of the options will vest on the date on which all major equipment for the start-up of the Mangala ?eld is delivered to site.
• 1/4
th
of the options will vest on achieving 100,000 bopd 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 satis?ed. Phantom options are exercisable proportionate to the period of service
rendered by the employee subject to completion of one year.
CIESOP plan (including phantom options)
There are no speci?c vesting conditions under CIESOP plan. Phantom options are exercisable proportionate to the period of service rendered by the
employee subject to completion of one year.
Details of activities under employees stock option plans
CISMP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 2,238,077 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 Nil NA 5,268,396 33.70
Expired during the year Nil NA 792,240 33.70
Outstanding at the end of the year 2,238,077 33.70 2,238,077 33.70
Exercisable at the end of the year Nil NA Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
131.50 NA 131.50 NA
CIPOP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 3,200,096 10.00 4,755,244 10.00
Granted during the year 994,768 10.00 789,567 10.00
Forfeited during the year Nil NA Nil NA
Exercised during the year 190,983 10.00 Nil NA
Expired during the year 1,377,051 10.00 2,344,715 10.00
Outstanding at the end of the year 2,626,830 10.00 3,200,096 10.00
Exercisable at the end of the year 168,382 10.00 Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
174.47 NA 165.46 NA
Particulars
CISMP CIPOP CIESOP CIPOP Phantom CIESOP Phantom
10
th
Dec 2008 - - 36,040 - 38,008
29
th
July 2009 - 994,768 5,405,144 1,060,472 211,362
Total 8,298,713 6,727,724 18,197,795 1,883,339 573,918
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 118
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CIPOP Plan – Phantom options
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 784,859 10.00 Nil NA
Granted during the year 1,977,426 10.00 822,867 10.00
Forfeited during the year Nil NA Nil NA
Exercised during the year 795,230 10.00 Nil NA
Expired during the year 238,414 10.00 38,008 10.00
Outstanding at the end of the year 1,728,641 10.00 784,859 10.00
Exercisable at the end of the year, subject to
vesting conditions
812,543 10.00 Nil NA
Weighted average fair value of options granted
on reporting date (INR)
296.39 NA 175.40 NA
CIESOP Plan – Phantom options
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 362,556 218.19 Nil NA
Granted during the year 936,862 181.98 362,556 218.19
Forfeited during the year Nil NA Nil NA
Exercised during the year 392,977 178.22 Nil NA
Expired during the year 61,753 240.05 Nil NA
Outstanding at the end of the year 844,688 195.03 362,556 218.19
Exercisable at the end of the year, subject
to vesting conditions
695,079 185.34 Nil NA
Weighted average fair value of options
granted on reporting date (INR)
136.51 NA 48.13 NA
The details of exercise price for stock options outstanding as at March 31, 2010 are:
Scheme
Range of exercise
price (INR)
No. of options
outstanding
Weighted average
remaining contractual
life of options (in years)
Weighted average
exercise Price in INR
CISMP Plan 33.70 2,238,077 1.08 33.70
CIPOP Plan 10.00 2,626,830 1.36 10.00
CIESOP Plan 143-240 14,646,209 1.28 206.43
CIPOP Plan – Phantom options 10.00 1,728,641 1.71 10.00
CIESOP Plan – Phantom options 143-240 844,688 1.09 195.03
CIESOP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 10,914,244 185.39 8,545,710 164.49
Granted during the year 5,405,144 240.05 3,809,896 226.21
Forfeited during the year Nil NA Nil NA
Exercised during the year 115,333 160.00 Nil NA
Expired during the year 1,557,846 179.09 1,441,362 169.33
Outstanding at the end of the year 14,646,209 206.43 10,914,244 185.39
Exercisable at the end of the year 1,981,770 160.00 Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
107.64 NA 101.47 NA
119
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Effect of Employees Stock Option Plans on Financial Position
Effect of the employee share-based payment plans on the pro?t and loss account and on its ?nancial position:
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:
Particulars
Current year Previous period
Total Employee Compensation Cost pertaining to share-based payment plans
(including exceptional gain of INR 155,723 thousand in the previous period)
552,002 134,493
Compensation Cost pertaining to equity-settled employee share-based
payment plan included above
103,649 107,292
Compensation Cost pertaining to cash-settled employee share-based
payment plan included above
448,353 27,201
Liability for equity settled employee stock options outstanding as at year /
period end
463,978 388,978
Liability for cash settled employee stock options outstanding as at year /
period end (current year amount excludes INR 46,381 thousand payable
towards options vested but not exercised)
284,411 27,201
Deferred compensation cost of equity settled options 304,142 393,570
Deferred compensation cost of cash settled options 315,490 94,719
Variables - CISMP
A B
Grant date 24
th
Nov 2006 24
th
Nov 2006
Stock Price/fair value of the equity shares on the date of grant (INR) 160.00 160.00
Vesting date Refer vesting conditions Refer vesting conditions
Vesting % Refer vesting conditions Refer vesting conditions
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
1
st
Jan 2007 20
th
Sept 2007 29
th
July 2008 10
th
Dec 2008 29
th
July 2009
Stock Price/fair value of the
equity shares on the date of
grant (INR)
160.00 166.95 228.55 150.10 234.75
Vesting date 1
st
Jan 2010 20
th
Sept 2010 29
th
July 2011 10
th
Dec 2011 29
th
July 2012
Vesting % 100% 100% 100% 100% 100%
Volatility 41.04% 40.24% 39.43% 38.19% 39.97%
Risk free rate 7.50% 7.65% 9.20% 6.94% 6.91%
Time to maturity (years) 6.50 6.50 6.50 6.50 6.50
Exercise price (INR) 160.00 166.95 227.00 143.00 240.05
Fair Value of the options (INR) 87.30 90.72 130.42 79.80 122.24
The details of exercise price for stock options outstanding as at March 31, 2009 are:
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
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 120
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Volatility is the measure of the amount by which the price has ?uctuated or is expected to ?uctuate 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 Cairn India Group expects the options to be live. 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 pro?ts 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 April1, 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 ?nancial statements.
Applying the fair value based method de?ned in the said guidance note, the impact on the reported net pro?t and earnings per share would
be as follows:
Variables – CIPOP Phantom
Grant date
20
th
Sept 2007
(effective grant date)
29
th
July 2008 29
th
July 2009
Stock Price of the equity shares on the reporting
date (INR)
305.65 305.65 305.65
Vesting date 20
th
Sept 2010 29
th
July 2011 29
th
July 2012
Vesting % Refer vesting conditions
Refer vesting
conditions
Refer vesting
conditions
Volatility 28.90% 45.06% 58.06%
Risk free rate 3.76% 5.10% 6.12%
Time to maturity (years) 0.47 1.33 2.33
Exercise price (INR) 10.00 10.00 10.00
Fair Value of the options (INR) 295.83 296.31 296.98
Variables – CIESOP Phantom
Grant date
20
th
Sept 2007
(effective grant date)
29
th
July 2008 10
th
Dec 2008 29
th
July 2009
Stock Price of the equity shares on the reporting
date (INR)
305.65 305.65 305.65 305.65
Vesting date 20
th
Sept 2010 29
th
July 2011 10
th
Dec 2011 29
th
July 2012
Vesting %
Refer vesting
conditions
Refer vesting
conditions
Refer vesting
conditions
Refer vesting
conditions
Volatility 28.90% 45.06% 57.16% 58.06%
Risk free rate 3.76% 5.10% 5.53% 6.12%
Time to maturity (years) 0.47 1.33 1.70 2.33
Exercise price (INR) 166.95 227.00 143.00 240.05
Fair Value of the options (INR) 141.66 111.96 184.32 144.23
Variables – CIPOP
Grant date
1
st
Jan 2007 20
th
Sept 2007 29
th
July 2008 29
th
July 2009
Stock Price/fair value of the equity shares
on the date of grant (INR)
160.00 166.95 228.55 234.75
Vesting date 1
st
Jan 2010 20
th
Sept 2010 29
th
July 2011 29
th
July 2012
Vesting % Refer vesting conditions Refer vesting conditions Refer vesting conditions Refer vesting conditions
Volatility 41.61% 36.40% 37.49% 43.72%
Risk free rate 7.33% 7.23% 9.37% 5.78%
Time to maturity (years) 3.12 3.12 3.12 3.13
Exercise price (INR) 10.00 10.00 10.00 10.00
Fair Value of the options (INR) 152.05 158.97 221.09 226.40
121
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
8. LEASE OBLIGATIONS DISCLOSURES
Finance Lease:
Fixed assets include of?ce equipments and leaseholds improvements obtained under ?nance lease. The lease is secured by way of hypothecation of
the respective assets acquired under lease. 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.
Note The interest rate on ?nance lease ranges from 3.77 % to 14.61%
Operating Lease:
Cairn India Group has entered into operating leases for of?ce premises and of?ce equipments, some of which are cancellable and some are non-
cancellable. The leases have a life of 3 to 6 years. There is an escalation clause in the lease agreement during the primary lease period. There are no
restrictions imposed by lease arrangements and there are no subleases. There are no contingent rents.
9. CONTINGENT LIABILITIES
(A) 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 ?eld 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
Current Year
Minimum lease payments Principal amount due Interest due
Within one year of the balance sheet date 72,047 60,928 11,119
Due in a period between one year and ?ve years 85,391 79,397 5,994
Due after ?ve years Nil Nil Nil
Total 157,438 140,325 17,113
Previous Period
Minimum lease payments Principal amount due Interest due
Within one year of the balance sheet date 97,740 80,366 17,374
Due in a period between one year and ?ve years 160,058 142,036 18,022
Due after ?ve years Nil Nil Nil
Total 257,798 222,402 35,396
Particulars
31
st
March 2010 31
st
March 2009
Lease payments made during the period 132,390 120,173
Within one year of the balance sheet date 140,321 124,628
Due in a period between one year and ?ve years 34,536 150,536
Due after ?ve years Nil Nil
Current year Previous period
Pro?t as reported 10,511,060 8,034,506
Add: Employee stock compensation under intrinsic
value method (net of exceptional gain of INR 155,723
thousand in the previous period)
552,002 134,493
Less: Employee stock compensation under fair value
method
948,058 622,866
Proforma pro?t 10,115,004 7,546,133
Earnings Per Share (in INR)
Basic
- As reported 5.54 4.31
- As reported 5.33 4.04
Diluted
- As reported 5.52 4.28
- Proforma 5.31 4.02
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 122
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
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 judgment was delivered by the Malaysian High Court on 12
th
January 2009, ruling in favour of the GoI and setting the arbitration award
aside. This had the effect of negating the original award in favour of Cairn India Group.
Cairn India Group appealed against above judgment to the Malaysian Court of Appeal. A judgment was delivered by the Malaysian Court of
Appeal on 15
th
September 2009, which reversed the ruling of the High Court in Malaysia of 12
th
January 2009 and had the effect of reinstating the
original award in favour of Cairn India Group. The Government of India has applied for leave to appeal this judgment to the Federal Court of Malaysia
(the apex court).
In addition, consistent with GoI’s view that the set-aside meant they have a binding judgment 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 due as a result of the Malaysian
judgment being in their favour. This recovery action was contested by Cairn in the Indian courts, pursuant to which, the Government has given an
undertaking to stop recoveries post January 2010. The amounts recovered by the Government aggregate to approximately INR 7,230,000 thousand
(USD 160 million). The net effective deduction as on 31
st
March 2010, after adjusting the current year’s pro?t petroleum, amounts to approximately
INR 2,291,000 thousand (USD 51 million).
In the event that the GoI’s appeal is successful, then Cairn India Group would be required to pay approximately INR 2,888,000 thousand
(USD 64 million) and potential interest of INR 1,398,000 thousand (USD 31 million). The same dispute existed at the end of the previous period.
(B) Ravva Joint Venture Arbitration Proceedings : Base Development Cost
Ravva joint venture had 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 pro?t petroleum to the Indian Government, out of which, Cairn India Group’s share will be USD 37.4 million
(approximately INR 1,688,000 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 ?eld 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, the arbitration panel has been fully
constituted and one hearing has taken place. A further hearing has been scheduled for oral closing arguments. The same dispute existed at the end
of the previous period.
(C) Service Tax
One of the subsidiary companies of the Cairn India Group has received four show cause notices from the tax authorities in India for nonpayment of
service tax as a recipient of services from foreign suppliers.
These notices cover periods from 16th August 2002 to 31
st
March 2009. A writ petition(s) has been ?led with Chennai High Court
challenging the liability to pay service tax as recipient of services in respect of ?rst show cause notice (16
th
August 2002 to 31
st
March 2006) and
challenging the scope of some services in respect of second show cause notice (1
st
April 2006 to 31
st
March 2007). The reply for second and third
show cause notice has also been ?led before the authorities.
Should the adjudication go against Cairn India Group, it will be liable to pay the service tax of approximately INR 1,679,000 thousand
(previous period INR 978,000 thousand) plus potential interest of approximately INR 634,000 thousand (previous period 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 (D)
Section 80-IB (9) of the Income Tax Act, 1961 allows the deduction of 100% of pro?ts from the commercial production or re?ning of mineral oil. The
term ‘mineral oil’ is not de?ned but has always been understood to refer to both oil and gas, either separately or collectively.
The 2008 Indian 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 con?rmed that tax holiday would be available on production of crude oil
but have continued to exclude gas.
Cairn India Group ?led a writ petition to the Gujarat High Court in December 2008 challenging the restriction of section 80-IB to the
production of oil. Gujarat High Court did not admit the writ petition on the ground that the matter needs to be ?rst decided by lower tax authorities.
A Special Leave Petition has been ?led before Supreme Court against the decision of Gujarat High court.
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 31
st
March 2010 is approximately INR 2,321,000 thousand (previous period INR 2,370,000 thousand).
Based on the legal opinions received, the management is of the view that the liability in the cases mentioned in (A) to (D) above are not probable and
accordingly no provision has been considered necessary there against.
10. Balances written back are net of INR 450,217 thousand, being the adjustment arising on account of reconciliation of certain working capital balances
pertaining to joint ventures, in which Cairn India Group has participating interest.
123
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
11. CAPITAL COMMITMENTS (NET OF ADVANCES)
In respect of Cairn India Group’s share of Joint Ventures’ Exploration activities – INR 11,688,763 thousand (previous period – INR 1
11,324,140 thousand).
In respect of the Cairn India Group’s share of Joint Ventures’ Development activities – INR 28,096,949 thousand (previous year – INR 2
34,536,062 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 amount of outstanding options as at 31
st
March 2010 aggregated to USD 233,000 thousand (previous period USD 214,000 thousand)
Particulars of Unhedged Foreign Currency Exposure at the Balance Sheet date
13. Cairn India Group has a de?ned bene?t gratuity plan. Every employee who has completed ?ve 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 bene?t expense recognised in the pro?t and loss account, the funded status and
amounts recognised in the balance sheet for the gratuity plans.
Pro?t and Loss account
Net employee bene?t expense (recognised in staff cost)
Balance sheet
Details of Provision for Gratuity
Particulars
31
st
March 2010 31
st
March 2009
De?ned bene?t obligation 161,887 108,425
Fair value of plan assets 97,008 68,854
Less: Unrecognized past service cost Nil Nil
Plan asset / (liability) (64,879) (39,571)
Changes in the present value of the de?ned bene?t obligation are as follows:
Particulars
31
st
March 2010 31
st
March 2009
Opening de?ned bene?t obligation 108,425 66,142
Current service cost 31,030 23,529
Interest cost 8,674 6,051
Bene?ts paid (4,038) (5,306)
Actuarial (gains) / losses on obligation 17,796 18,009
Closing de?ned bene?t obligation 161,887 108,425
Particulars
31
st
March 2010 31
st
March 2009
Loan 20,416,806 43,341,500
Sundry Debtors 3,067,474 1,516,418
Investments 201,923 Nil
Cash and Bank 3,894,233 31,366,364
Other current Assets 13,543,767 2,266,955
Current Liabilities 4,545,666 5,623,077
Particulars
31
st
March 2010 31
st
March 2009
Current service cost 31,030 23,529
Interest cost on bene?t obligation 8,674 6,051
Expected return on plan assets (3,598) (3,666)
Net actuarial (gain) / loss recognised in the year 17,464 14,974
Past service cost Nil Nil
Net bene?t expense 53,570 40,888
Actual return on plan assets 6,604 6,700
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 124
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Note The Group’s expected contribution to the fund in the next year is INR 40,582 thousand (previous period INR 34,725 thousand).
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
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:
Note The estimates of future salary increases, considered in actuarial valuation, take account of in?ation, 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:
Notes
i) The Group has adopted AS 15 (Revised 2005) Employee Bene?ts for the ?rst time during the year ended December 31, 2007. Disclosures
required by paragraph 120 of AS-15 (Revised 2005) are required to be furnished prospectively from the date of transition and hence
have been furnished for year/period ended December 31, 2007 onwards.
ii) 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 year. The total value of plan assets amounts to INR 97,008 thou-
sand (Previous period INR 68,854 thousand) is as certi?ed by the LIC.
Particulars
31
st
March 2010 31
st
March 2009
Discount rate 8.00% 7.00%
Future salary increase 10.00% 10.00%
Expected rate of return on assets 9.40% 9.35%
Employee turnover 5.00% 13.13%
Mortality Rate LIC (1994-96) LIC (1994-96)
Ultimate Table Ultimate Table
Particulars
31
st
March 2010 31
st
March 2009
Changes in the fair value of plan assets are as follows:
Particulars
31
st
March 2010 31
st
March 2009
Opening fair value of plan assets 68,854 29,163
Expected return 3,598 3,666
Contributions by employer 28,262 38,296
Bene?ts paid (4,038) (5,306)
Actuarial gains / (losses) 332 3,035
Closing fair value of plan assets 97,008 68,854
Particulars
31
st
March 2010 31
st
March 2009 31
st
December 2007
De?ned bene?t obligation 161,887 108,425 66,142
Plan assets 97,008 68,854 29,163
Surplus / (de?cit) (64,879) (39,571) (36,979)
Experience adjustments on plan assets (loss)/gain 365 3,132 2,970
Experience adjustments on plan liabilities (loss)/gain (13,839) (11,964) (6,960)
125
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
14. DETAILS OF MOVEMENT IN SHARE CAPITAL AND SECURITIES PREMIUM IS AS UNDER
15. The price contract for sale of gas with one customer is due for revision with effect from December 2008 and currently the same is under negotiation.
Pending ?nalization of the price contract, revenue has been recognised based on the last agreed prices on a conservative basis, as the management
is expecting an upward price revision.
16. The goodwill of Cairn India Group amounting to INR 253,192,675 thousand has arisen on consolidation of ?nancial statements of the Company
with its subsidiaries and represents the difference between the cost of its investment in Cairn India Holdings Limited (which largely represent
Cairn India Group’s operations in India through its subsidiaries) and consolidated net book value of assets in Cairn India Holdings Limited, 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 ?ows 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 net present value per barrel of oil equivalent. 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.
17. The current tax and deferred tax provisions have been computed on the basis of the standalone ?nancial statements of the Company’s subsidiaries,
i.e. not based on the consolidated ?nancial statements of Cairn India Limited and its subsidiaries. For computing deferred tax liability in relation to
the Rajasthan ?eld, Cairn India Group has considered ?eld life as stipulated in the Production Sharing Contract instead of the economic useful life of
the ?eld considered in earlier years. This change has resulted in reversal of opening deferred tax liability by INR 1,760,519 thousand.
18. The Company and its wholly owned subsidiary Cairn Energy Hydrocarbons Limited (“CEHyL”) have entered into a loan facility for INR 40,000
million (available to the Company) and USD 750 million (available to CEHyL) with a consortium of banks. The purpose of the loan facility is to ?nance
the RJ-ON-90/1 block expenditure and also the repayment of the earlier loan facility of USD 850 million. The main security for the INR loan facility is
the hypothecation of the 35% participating interest in RJ-ON-90/1 block held by Cairn Energy India Pty Limited, a wholly owned subsidiary of the
Company whereas for the USD loan facility, the entire shares of CEHyL has been provided as the main security.
19. The shareholders of the Company have approved a Scheme of Arrangement between the Company and some of its wholly owned subsidiaries, to
be effective from 1
st
January 2010. The Scheme of Arrangement has been approved by the Hon’ble High Court of Madras. However, it is pending for
approval from the Hon’ble High Court of Bombay and other regulatory authorities. Pending receipt of such approvals, no accounting impact of the
scheme has been given in these ?nancial statements. After the implementation of the scheme, the Company will directly own the Indian businesses,
which are currently owned by some of its wholly owned subsidiaries and as contemplated in the scheme, any goodwill arising in the Company
pur suant to the scheme, shall be adjusted against the securities premium account.
Description
No. of equity
shares
Issue price
in INR
Share capital
Securities
premium
Balance as on 1
st
January 2008 1,778,399,420 17,783,994 276,084,115
Exercise of stock options-CISMP 792,240 33.70 7,922 18,776
Preferential allotment of shares to non promoter inves-
tors on 22
nd
April 2008
113,000,000 224.30 1,130,000 24,215,900
Exercise of share options -CISMP 525,000 33.70 5,250 12,443
Exercise of share options-CISMP 1,713,078 33.70 17,131 40,600
Exercise of share options-CISMP 1,600,000 33.70 16,000 37,920
Exercise of share options-CISMP 638,078 33.70 6,381 15,122
Share options liability transferred to securities premium
upon exercise of the options
665,398
Balance as on 31
st
March 2009 1,896,667,816 18,966,678 301,090,274
Exercise of share options-CIPOP 190,983 10.00 1,910 Nil
Exercise of share options-CIESOP 115,333 160.00 1,153 17,300
Share options liability transferred to securities premium
upon exercise of the options
28,648
Waiver of parent company outstanding balance, pertaining
to share issue expenses paid by parent company, which
had earlier been adjusted from securities premium
25,000
Balance as on 31
st
March 2010 1,896,974,132 18,969,741 301,161,222
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 126
Particulars
Gross proved and probable
hydrocarbons initially in
place (mmboe)
Gross proved and probable
reserves and resources
(mmboe)
Net proved and probable
reserves and resources
(mmboe)
Current Year Previous Period Current Year Previous Period Current Year Previous Period
Rajasthan MBA Fields 2,054 2,054 694 685 486 479
Rajasthan MBA EOR - - 308 308 216 216
Rajasthan Block Other Fields 1,976 1,708 152 86 107 61
Ravva Fields 708 625 100 72 23 16
CBOS/2 Fields 175 156 16 20 7 8
KG-DWN-98/2 650 650 353 353 35 35
Total 5,563 5,193 1,623 1,524 874 815
(All amounts are in INR thousand unless, otherwise stated)
20. Operating expenses include cess on crude oil produced from Rajasthan block. The Group has initiated arbitration proceedings against the
Government of India and its joint venture partner for recovery of the same.
21. Cairn India Group’s estimate of hydrocarbon reserves and resources at the year/period end is as follows:
22. Prior period items represent miscellaneous expenses in the current year and exchange difference in the previous period.
23. The reversal in fringe bene?t tax (FBT) is on account of the abolishment of FBT with effect from 1
st
April 2009, as Cairn India Group was accounting
for FBT liability on stock options on a pro-rata basis over the vesting period.
24. During the previous period, Cairn India Group had decided to retrospectively account for stock options using the Intrinsic Value Method as against
the Fair Value Method (Black Scholes) followed till the ?nancial year ended 31
st
December 2007. Accordingly, the excess stock option provision up
to 31
st
December 2007 was reversed during the previous period, resulting in an exceptional gain of INR 155,723 thousand.
25. Change in ?nancial year and previous period comparatives
The previous ?nancial period consisted of ?fteen months from 1
st
January 2008 to 31
st
March 2009, while the current ?nancial year is for a twelve
months period. Accordingly, previous period ?gures in the pro?t and loss account and cash ?ow statement are not comparable with current ?nancial
year. Previous period’s ?gures have been regrouped where necessary to con?rm to current year’s classi?cation.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
Cairn India Group’s net working interest in proved and probable reserves is as follows:
Particulars Proved and probable reserves Proved and probable reserves (developed)
Oil Gas Oil Gas
(mmstb) (bscf) (mmstb) (bscf)
Reserves as at 1
st
January 2008* 247.03 44.00 17.14 44.00
Additions / revision during the period 98.35 (1.66) 2.64 (1.66)
Production during the period 5.58 13.74 5.58 13.74
Reserves as at 31
st
March 2009** 339.80 28.60 14.20 28.60
Additions / revision during the year 2.37 5.93 54.12 5.93
Production during the year 6.26 7.85 6.26 7.85
Reserves as at 31
st
March 2010*** 335.91 26.68 62.06 26.68
* 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)
*** Includes probable oil reserves of 57.61 mmstb (of which 14.75 mmstb is developed) and probable gas reserves of 11.13 bscf (of which 11.13 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
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
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1
0
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 128
GLOSSARY
abbreviations and full forms for main terms used in this report
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
GDP Gross Domestic Product
GoI Government of India
IP Institutional Plan
IPO Initial Public Offering
ISIN International Securities Identifying Number
ITC Item code No.
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
OPEC Organisation of Petroleum Exporting Countries
PICL PETRONAS International Corporation Ltd
PRA Production Resources Agreement
PSC Production Sharing Contract
PSU Public Sector Undertaking
RoU Right of Use
SEBI Securities and Exchange Board of India
SIPD Shell India Production Development B.V.
TECHNICAL
1P Proved
2P Proved plus Probable
3D 3 Dimensional
3P Proved 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
°C Celcius
CO
2
Carbon Dioxide
E & P Exploration and Production
EOR Enhanced Oil Recovery
GBA Gas Balancing Agreement
GHG Green House Gas
GIIP Gross Intial In Place
HDPE High Density Polyethylene
HPSV High Power Sodium Vapour
HSE Health, Safety and Environment
ISO International Organisation for Standardization
JIP Joint Industry Project
Km Kilometre
Km
2
Square Kilometre
LTIFR Lost Time Injury Frequency Rate
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
pigs pipeline inspection gauges
PDC Polycrystalline Diamond Compact
PE Polyethylene
PUF Polyurethane Foam
PWRI Produced Water Re Injection
OHSAS Occupational Health & Safety Advisory Services
SEHMS Skin Effect Heat Management System
STOIIP Stock Tank Oil Initially in Place
TRIFR Total Recordable Incident Frequency Rate
ACCOUNTING
ADR American Depository Receipt
AS Accounting Standard
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
CY Calendar Year
EPS Earnings per share
ESOP Employee Stock Option Plan
FBT Fringe Bene?t Tax
FY Financial Year
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
MAT Minimum Alternate Tax
PTRR Post Tax Rate of Return
Q3 Third Quarter
USD United States Dollar
CORPORATE RESPONSIBILITY
CEDPA Centre for Development and Population Activities
CSR Corporate Social Responsibility
EC Enterprise Centre
MCX Multi Commodity Exchange of India Limited
MDG Millennium Development Goals
NGO Non Government Organisation
NGRI National Geophysical Research Centre
UNDP United Nations Development Programme
NOTES
NOTES
NOTES
COMPANY I NFORMATI ON
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 Of?cer)
Indrajit Banerjee (Executive Director & Chief Financial Of?cer)
Rick Bott (Executive Director & Chief Operating Of?cer)
BOARD COMMITTEES
Audit Committee
Aman Mehta (Chairman)
Naresh Chandra
Dr Omkar Goswami
Edward T. Story
Jann Brown
Remuneration Committee
Naresh Chandra (Chairman)
Sir William B.B. Gammell
Malcolm Shaw Thoms
Aman Mehta
Dr Omkar Goswami
Nomination Committee
Sir William B.B. Gammell (Chairman)
Rahul Dhir
Jann Brown
Malcolm Shaw Thoms
Edward T. Story
Shareholders’ / Investors’ Grievance Committee
Dr Omkar Goswami (Chairman)
Edward T. Story
Rahul Dhir
COMPANY SECRETARY
Neerja Sharma
STATUTORY AUDITORS
S.R. Batliboi & Associates
Golf View Corporate Tower B
Sector 42, Sector Road
Gurgaon 122 002, India
BANKERS
State Bank of India | Standard Chartered Bank |
Deutsche Bank | Citibank
STOCK EXCHANGES LISTED ON
Bombay Stock Exchange Limited
Phiroze Jeejeebhoy Towers,
Dalal Street, Mumbai – 400 001
Tel +91 22 22721233/4
Fax +91 22 22721919
National Stock Exchange of India Limited
Exchange Plaza,
Plot No, C/1, G Block,
Bandra-Kurla Complex,
Bandra (E),
Mumbai – 400 051
Tel +91 22 26598100-8114
Fax +91 22 26598120
REGISTERED OFFICE
101, West View
Veer Savarkar Marg
Prabhadevi
Mumbai 400 025, India
Tel +91 22 24338306
Fax +91 22 24311160
CORPORATE OFFICE
3rd & 4th Floors, Vipul Plaza
Sun City, Sector 54
Gurgaon 122 002, India
Tel +91 124 2703000
Fax +91 124 2889320
REGISTRAR & SHARE TRANSFER AGENT
Link Intime India Private Limited
C-13, Pannalal Silk Mills Compound
L.B.S. Marg, Bhandup (West)
Mumbai 400 078, India
Contents
Board of Directors
Chairman's letter
Managing Director and CEO's letter
Management Discussion and Analysis
Securing Energy, Fuelling Growth
Delivering to the Nation
Corporate Social Responsibility
Report on Corporate Governance
Additional Shareholder Information
Directors’ Report
Auditors’ Report
Balance Sheet
Pro?t and Loss Account
Statement of Cash Flows
Schedules to the Financial Statements
Balance Sheet Abstract and
Company’s General Business Pro?le
Auditors’ Report on
Consolidated Financial Statements
Consolidated Balance Sheet
Consolidated Pro?t and Loss Account
Consolidated Statement of Cash Flows
Schedules to Consolidated
Financial Statements
Glossary
2
5
6
8
20
42
44
48
56
62
68
72
73
74
76
97
98
99
100
101
103
128
Energy for India
ANNUAL REPORT & FINANCIAL STATEMENTS
Securing Energy
Fuelling Growth
D
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s
i
g
n
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d
b
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Cairn India Limited
3rd & 4th Floors, Vipul Plaza, Sun City
Sector 54, Gurgaon 122 002, India
+91 124 270 3000
www.cairnindia.com
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doc_400412950.pdf
The report for the financial year 2009 - 2010 of cairn india.
Energy for India
ANNUAL REPORT & FINANCIAL STATEMENTS
Securing Energy
Fuelling Growth
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.
Cairn India Limited
3rd & 4th Floors, Vipul Plaza, Sun City
Sector 54, Gurgaon 122 002, India
+91 124 270 3000
www.cairnindia.com
C
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n
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COMPANY I NFORMATI ON
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 Of?cer)
Indrajit Banerjee (Executive Director & Chief Financial Of?cer)
Rick Bott (Executive Director & Chief Operating Of?cer)
BOARD COMMITTEES
Audit Committee
Aman Mehta (Chairman)
Naresh Chandra
Dr Omkar Goswami
Edward T. Story
Jann Brown
Remuneration Committee
Naresh Chandra (Chairman)
Sir William B.B. Gammell
Malcolm Shaw Thoms
Aman Mehta
Dr Omkar Goswami
Nomination Committee
Sir William B.B. Gammell (Chairman)
Rahul Dhir
Jann Brown
Malcolm Shaw Thoms
Edward T. Story
Shareholders’ / Investors’ Grievance Committee
Dr Omkar Goswami (Chairman)
Edward T. Story
Rahul Dhir
COMPANY SECRETARY
Neerja Sharma
STATUTORY AUDITORS
S.R. Batliboi & Associates
Golf View Corporate Tower B
Sector 42, Sector Road
Gurgaon 122 002, India
BANKERS
State Bank of India | Standard Chartered Bank |
Deutsche Bank | Citibank
STOCK EXCHANGES LISTED ON
Bombay Stock Exchange Limited
Phiroze Jeejeebhoy Towers,
Dalal Street, Mumbai – 400 001
Tel +91 22 22721233/4
Fax +91 22 22721919
National Stock Exchange of India Limited
Exchange Plaza,
Plot No, C/1, G Block,
Bandra-Kurla Complex,
Bandra (E),
Mumbai – 400 051
Tel +91 22 26598100-8114
Fax +91 22 26598120
REGISTERED OFFICE
101, West View
Veer Savarkar Marg
Prabhadevi
Mumbai 400 025, India
Tel +91 22 24338306
Fax +91 22 24311160
CORPORATE OFFICE
3rd & 4th Floors, Vipul Plaza
Sun City, Sector 54
Gurgaon 122 002, India
Tel +91 124 2703000
Fax +91 124 2889320
REGISTRAR & SHARE TRANSFER AGENT
Link Intime India Private Limited
C-13, Pannalal Silk Mills Compound
L.B.S. Marg, Bhandup (West)
Mumbai 400 078, India
Contents
Board of Directors
Chairman's letter
Managing Director and CEO's letter
Management Discussion and Analysis
Securing Energy, Fuelling Growth
Delivering to the Nation
Corporate Social Responsibility
Report on Corporate Governance
Additional Shareholder Information
Directors’ Report
Auditors’ Report
Balance Sheet
Pro?t and Loss Account
Statement of Cash Flows
Schedules to the Financial Statements
Balance Sheet Abstract and
Company’s General Business Pro?le
Auditors’ Report on
Consolidated Financial Statements
Consolidated Balance Sheet
Consolidated Pro?t and Loss Account
Consolidated Statement of Cash Flows
Schedules to Consolidated
Financial Statements
Glossary
2
5
6
8
20
42
44
48
56
62
68
72
73
74
76
97
98
99
100
101
103
128
The operational activity was largely focused on the development of
the Mangala Processing Terminal (MPT) at Barmer, Rajasthan and
the crude oil pipeline. The MPT is designed to process crude from
the Mangala, Bhagyam and Aishwariya (MBA) ?elds and will have a
capacity to handle 205,000 barrels of oil per day (bopd) of crude with
scope for further expansion.
The MPT consists of four processing trains
Train One, with a capacity of 30,000 bopd, was commissioned on 29 August, 2009, with
crude oil being trucked to the Kandla port for shipping to both Public Sector Undertaking
(PSU) and private re?ners.
Train Two, with a capacity of 50,000 bopd, commenced production in May 2010.
Train Three, with a capacity of 50,000 bopd, will be completed by June 2010.
Train Four, with a capacity of 75,000 bopd, is expected to come on stream in CY 2011.
The ~590 km heated and insulated crude oil pipeline from Barmer in Rajasthan to Salaya
in Gujarat is complete. Crude oil was introduced into the pipeline in May 2010. By June
2010, it will supply crude to private re?ners and to Indian Oil Corporation Limited in
early July, 2010.
Sales arrangements are in place for 143,000 bopd of Rajasthan crude.
81 wells including six horizontals have been drilled. Horizontal wells tested at an average
rate of more than 11,500 bopd, the highest ever production rate for an onshore well in India.
The potential resource base for the Rajasthan block is now estimated to be 6.5 billion
barrels of oil equivalent (boe) in place. The discovered resource base has increased
from 3.7 billion boe to 4 billion boe in place. As a result of the exploration potential, the
prospective resource base is now estimated at 2.5 billion boe in place.
The Rajasthan resources provide a basis for a vision to produce 240,000 bopd, subject to
Government of India (GoI) approval and additional investment.
The Rajasthan project is now well funded, with Cairn India having completed the ?nancing
arrangements for USD 1.6 billion at competitive pricing — comprising international
borrowing of USD 750 million and domestic borrowing of INR 4,000 crore (USD 850 million).
Gross operated production was 69,059 barrels of oil equivalent per day (boepd) and net
working interest was 24,957 boepd. This takes into account the Rajasthan production from
29 August, 2009.
THE HEADLI NES FOR FI NANCI AL YEAR 2009- 10
3
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2.5 billion BOE
PROSPECTIVE
4 billion BOE
DISCOVERED
USD 750 million
INTERNATIONAL
BORROWING
USD 850 million
DOMESTIC
BORROWING
2 CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10
SI R BI LL GAMMELL
Chairman and Non-Executive Director
Sir Bill Gammell, 57, holds a BA in
Economics and Accountancy from Stirling
University and was awarded a knighthood in
2006 for services to the industry in Scotland.
He has over 25 years of experience in the in-
ternational oil and gas industry. He founded
Cairn Energy PLC and was appointed Chief
Executive on its initial listing in 1988. He is
the Chairman and Non-Executive Director of
Cairn India Limited and is a member of the
Asia Task Force and the UK India Business
Council. Sir Gammell, who is an ex-Scotland
rugby internationalist, is also Chairman of
Winning Scotland Foundation and a Director
of Sport Scotland and Glasgow 2014 Limited
and a member of the British Olympic
Advisory Board.
MR RAHUL DHI R
Managing Director and CEO
Mr Rahul Dhir, 44, joined Cairn India in
May 2006 as the Chief Executive Of?cer
and was appointed the Managing Director
on 22 August, 2006. He completed his
degree in Bachelor of Technology from the
Indian Institute of Technology, Delhi. He
went on to complete his M.Sc from the
University of Texas at Austin and MBA
from the Wharton Business School in
Pennsylvania. Mr Dhir started his career
as an oil and gas reservoir engineer before
moving into investment banking. He has
worked at SBC Warburg, Morgan Stanley
and Merrill Lynch. Before joining Cairn
India, he was the Managing Director and
Co-Head of Energy and Power Investment
Banking at Merrill Lynch.
MR RI CK BOT T
Executive Director and COO
Mr Rick Bott, 50, was appointed as
Additional Director on 29 April, 2008 and
assumed of?ce of Executive Director and
Chief Operating Of?cer with effect from 15
June, 2008. Mr Bott holds a B.S in Marine
Sciences and Masters in Geology from
Texas A&M. Mr Bott has global exploration
and production experience of more than
21 years and has served in several senior
positions in Ocean Egypt Companies,
Ocean Yemen Corporation, British Gas,
and Tenneco. Before joining Cairn India,
he was Vice President of Devon Energy’s
International Division, responsible for
developing and implementing business
growth and exploration strategy for assets in
12 countries outside of North America.
MR I NDRAJ I T BANERJ EE
Executive Director and CFO
Mr Indrajit Banerjee, 54,was appointed as
an Additional Director on 26 February,
2007 and as the Executive Director and
Chief Financial Of?cer on 1 March,
2007. He graduated from the University
of Calcutta with a Bachelor’s Degree in
Commerce. An associate member of the
Institute of Chartered Accountants of
India, Mr Banerjee started his career at
PriceWaterhouse Coopers in Calcutta in
1979. He has held several senior posi-
tions throughout his career, including 17
years at the Indian Aluminium Company,
formerly part of the Alcan Group and at
Lucent Technologies (India). Before joining
Cairn India, he was President-Finance and
Planning at Lupin Limited.
Board of Directors
3 BOARD OF DI RECTORS
MR AMAN MEHTA
Non-Executive and
Independent Director
Mr Aman Mehta, 63, is an economics
graduate from Delhi University. He was
earlier the Chief Executive Of?cer of
HSBC Asia Paci?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.
MR NARESH CHANDRA
Non-Executive and
Independent Director
Mr Naresh Chandra, 75, holds an MSc. in
Mathematics from Allahabad University
and is a retired IAS of?cer.Previously,
Mr Chandra was the Chairman of the
Committee on Corporate Governance,
India’s Ambassador to the USA, Advisor
to the Prime Minister, Governor of
Rajasthan, Cabinet Secretary to the
Government of India, and Chief Secretary
to the Government of Rajasthan. A reputed
administrator and diplomat, Mr Chandra
serves as an independent director on the
boards of a number of companies.
DR OMKAR GOSWAMI
Non-Executive and
Independent Director
Dr Omkar Goswami, 53, holds a Master
of Economics 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 procedures, economic policy,
corporate ?nance, corporate governance,
public ?nance, tax enforcement and legal
reforms.
MR EDWARD T STORY
Non-Executive and
Independent Director
Mr Edward T Story, 66, is a science
graduate from Trinity University, San
Antonio, Texas and holds a Masters degree
in Business Administration from the
University of Texas and has been con-
ferred an honorary Doctorate degree by
the Institute of Finance and Economics
of Mongolia. He is the Chairman of
the North America Mongolia Business
Council. Mr Story has more than 40 years
of experience in the international oil and
gas industry and is the founder, President
and Chief Executive Of?cer of the LSE
listed SOCO International PLC.
MS J ANN BROWN
Non-Executive Director
Ms Jann Brown, 55, was appointed Finance
Director of Cairn Energy PLC in 2006
and is also a Non-Executive Director of
Cairn India Limited. 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. Prior to her appoint-
ment 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. She is the
Senior Independent Director of Hansen
Transmissions International NV, a Belgian
engineering company, which is listed on
the London Stock exchange.
MR MALCOLM SHAW THOMS
Non-Executive Director
Mr Malcolm Shaw Thoms, 54, holds a BSc
Hons degree in Physics from Edinburgh
University. He is an MBA from Heriot-
Watt University and is currently trustee of
the University of Edinburgh Development
Trust. He started his career in the oil
industry with Schlumberger and became
the manager of their businesses in Qatar
and Brunei. He joined Cairn Energy PLC
in 1989 and held a number of senior
management positions prior to his ap-
pointment as Executive Director in 2000.
Currently, the Chief Operating Of?cer of
Cairn Energy PLC, Mr Thoms is a Non-
Executive Director of Cairn India Limited
and has recently been appointed as a Non-
Executive Director of Agora Oil & Gas AS.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 4
NIGHT VIEW OF TRAIN ONE FACILITIES AT
THE MANGALA PROCESSING TERMINAL
5
First oil from Rajasthan in August 2009 and the
subsequent ?ow of crude through the world’s lon-
gest continuously heated and insulated oil pipe-
line has been the culmination of a journey of part-
nership and co-operation between your Company
and the Government of India, the Government
of Rajasthan, the Government of Gujarat, the Oil
and Natural Gas Corporation (ONGC) and other
stakeholders.
It was a great honour to have the Honourable
Prime Minister of India, Dr Manmohan Singh,
inaugurate the Mangala Processing Terminal on
29 August, 2009. It was a proud day for everybody
involved in the growth of Cairn India.
Six years on from the major discovery of
Mangala in January 2004, the development in
Rajasthan is starting to deliver for the government
and the people of India. It has been a huge achieve-
ment to develop this project in the middle of a des-
ert, and to construct the pipeline from Rajasthan
to the coast of Gujarat, which will eventually allow
access to 75 per cent of India’s re?ning capacity.
At the peak of construction, more than 16,000
people were involved in building the Mangala
Processing Terminal, the pipeline and related
infrastructure — making it one of the biggest
oil and gas production developments in India in
recent years.
When the Rajasthan ?elds are on production
at the current approved peak production plateau
rate of 175,000 bopd, Cairn India, along with
its joint venture partner ONGC, will account
for more than 20 per cent of India’s overall oil
output. Your Company has a belief and vision that,
subject to further investment and approval from
the Government of India, the Barmer Basin can
produce 240,000 bopd.
The Mangala ?eld is one of the 25 discoveries
that have been made in the Barmer Basin, and I
look forward to many long years of production as
additional ?elds are appraised, developed and tied
in to this world-class infrastructure.
Working effectively with government agencies
and partners is fundamental wherever we operate.
But the Rajasthan development has meant even
more intense and continuous co-operation. The
support of the Government of India, the state
governments, ONGC, local communities and key
contractors has been vital in helping complete this
national asset. I would personally like to thank all
who have played their part in developing this key
project for the country.
With a strong and sustainable cash ?ow, Cairn
India is well positioned for future growth. It is
focused on maximising value from the phased
development of the Rajasthan resource base in the
coming years.
May your Company thrive—and with it, India.
Sir Bill Gammell
Chairman
CHAI RMAN' S LETTER
Chairman’s Letter
Dear Shareholder,
Your company is helping to play a part in meeting the energy security needs of
India with oil and gas production from its operations across the country.
While consumption of oil across the globe in the last year has dipped, it continues
to rise in India. The International Energy Agency, a policy and research group
based in Paris, has forecast in November 2009 that India’s energy demand would
more than double by 2030. With GDP in India predicted to continue at its current
rate the country will need energy to help meet its economic growth. Your company
ultimately has the potential to produce more than 20 percent of India’s crude
output that will go towards meeting the country’s energy needs. The development
in Rajasthan has a key role to play in the energy security plans of the country.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 6
By the time you read this, your Company will
be in a position to produce 130,000 bopd from
Barmer. By next year, Cairn India’s production
from Rajasthan will be at 175,000 bopd — or over
a ?fth of India’s crude oil output.
It has been an incredible journey. As I look
back over the last two years, it has been the story
of a team of committed and dedicated people
overcoming one challenge after another.
Think about it: More than 16,000 people work-
ing in deserts of Rajasthan and northern Gujarat
where the day temperature soars to between 46°C
and 51°C. Ensuring each of the many thousand
processes and parts were up and ready in time,
despite huge infrastructure constraints, was a
huge achievement. Consider some of the big ele-
ments of the project:
Setting up various wells at Mangala, using the
latest technology to get not only the maximum
throughput but also the maximum life out of each well
Securing the gas supply which is 90 km away
from the Mangala Processing Terminal to ?re the
boilers to drive the steam turbines at the process-
ing terminal and to heat the pipeline
Piping saline water from a sub-surface reservoir
to be used to pump out the crude and to be desali-
nated, creating steam and drinking water
Constructing a state-of-the-art processing
terminal at Mangala with thousands of different
elements and equipment — a terminal that can
process up to 205,000 bopd, with ?exibility for
further expansion
Creating a massive closed loop system to con-
serve and re-use environmental resources in the
most energy ef?cient manner
Building a ~590 km continuously heated and
insulated 24” pipeline from Barmer in Rajasthan
to Salaya in Gujarat with a terminal at Viramgam
and 36 heating stations approximately 18 km
apart along the route. The next segment to the
coast at Bhogat will follow soon.
That’s not all. Consider the kind of cutting edge
technologies that your Company has put to use:
the drilling of horizontal wells, pad-based drilling,
rapid rigs and world-class well designs, enhanced
oil recovery, skin effect heat management system
using electric heat induction technology to heat
the length of the pipeline at a constant tempera-
ture above 65°C, hydro-fracturing of less perme-
able reservoirs, and many others. All these have
been tested, modi?ed, optimised and implement-
ed in your Company’s Rajasthan project.
These activities — both in the upstream and
midstream — cost a great deal of money. The
challenge, therefore, was to secure funds at
globally competitive rates. At a time when the
world was reeling under the ?nancial crisis, your
Managing Director
and CEO’s Letter
Dear Shareholder,
I write this letter with a sense of ful?lment. The management of Cairn India
Limited, with the support of our joint venture partner, ONGC, has delivered its
promise of supplying crude oil to our nation.
On 29 August, 2009, Dr Manmohan Singh, the Honourable Prime Minister of
India, inaugurated the Company’s ?rst oil from the Mangala Processing Terminal
at Barmer, and dedicated the ?eld to the nation. Initially, the oil from Train One
of up to 30,000 bopd was being trucked to different re?neries. In May 2010, Train
Two with a capacity of 50,000 bopd was commissioned. In June 2010, the ~590
km heated pipeline from Barmer to Salaya in Gujarat was made operational. As
I write, oil is ?owing through this pipeline to Indian Oil Corporation and private
re?ners. And Train Three, with a capacity of another 50,000 bopd, has become
operational.
7 MANAGI NG DI RECTOR AND CEO' S LETTER
Company’s management succeeded in raising
USD 1.6 billion at internationally competitive
rates — International borrowing facility of USD
750 million and domestic borrowing facility of
INR 4,000 crore (USD 850 million). This has
been used to repay the existing debt of USD
850 million and fund the ongoing projects in
Rajasthan. It was a great honour that this ?nanc-
ing arrangement was awarded the Oil & Gas Deal
of the Year (in Asia).
It is one thing to pump and ?ow the oil, and
to ?nance it; it is yet another to ?nd the buyers.
Here too, your Company has performed very
well. It has secured approval of multiple delivery
points, got the green light for selling to private
sector re?neries, locked in multiple buyers,
achieved a pricing benchmarked to low sulphur
international crude at a 10% to 15% discount to
Dated Brent, and has already got commitments
for 143,000 bopd as of 31 March, 2010.
Thanks to an outstanding job executed by your
Company’s upstream and midstream teams,
the operating expense of Rajasthan — includ-
ing the pipeline — is estimated at ~USD 5
per barrel. Even after adding the interest and
overhead charges, the cost of Rajasthan oil will
be in the neighbourhood of USD 10 per barrel.
Therefore, under any realistic pricing scenario,
your Company should generate returns for all its
stakeholders.
Today, it is not enough to be operationally
successful and therefore pro?table. Companies
like ours must consciously strive to meet societal
goals. I am proud to say that Cairn India has
played a leading role in this front — from the per-
spective of both the environment and corporate
social responsibility. The chapter on Management
Discussion and Analysis, a part of this Annual
Report gives a summary of your Company’s
achievements in occupational health, safety and
environment (HSE). And a separate chapter on
corporate social responsibility (CSR) lists the vari-
ous initiatives that Cairn India carries out in this
regard. I am as satis?ed with your Company’s
HSE and CSR activities as I am with its opera-
tions in Rajasthan, Ravva and Cambay.
You will read about all these and more in the
chapters that follow. It is now required of me to
thank six sets of stakeholders.
First, the Government of India, the Government
of Rajasthan and the Government of Gujarat, who
have been exemplary in their support
Second, the people, local communities, non-
governmental organisations and district authori-
ties in Rajasthan and Gujarat, who have co-oper-
ated and worked with us throughout the period
Third, ONGC,our partner in the Rajasthan proj-
ect, without whose steady and supporting hand
little could have been achieved
Fourth, the various suppliers, contractors and
contracting companies that helped set up the
Mangala Processing Terminal and the pipeline
Fifth, the team leaders and each and every em-
ployee of Cairn India, who together ensured that
we will overcome all odds and forge ahead
And ?nally, to you, for your faith in Cairn
India’s ability to deliver long term value.
It has been a great journey. And it will be even
better in the years to come. Stay with us!
Thank you for your support.
Rahul Dhir
Managing Director and CEO
It has been the
story of a team
of committed and
dedicated people
overcoming one
challenge after
another
8 CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 8
Delivering to
the Nation
MANAGEMENT
DISCUSSION AND ANALYSIS
MANAGEMENT DI SCUSSI ON AND ANALYSI S 9
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 10
The Mangala ?eld is not the beginning of the
involvement with the Indian hydrocarbon sector for
Cairn India Limited (‘Cairn India’, ‘CIL’, ‘Cairn’ or
‘the Company’). We started in India some 15 years
ago with the operating rights of the Ravva block in
the Krishna-Godavari basin of Andhra Pradesh.
From then on it has been an eventful journey: one
of India’s fastest discovery to production stories
was witnessed in the CB/OS-2 block (in Cambay,
off the coast of Gujarat); a doubling of reserves and
sustenance of plateau rates in the Ravva block for
more than nine years; 25 discoveries in Rajasthan
including the landmark Mangala discovery, whose
oil now ?ows to various re?neries in the country.
Nor is Mangala the end. In Rajasthan alone, the
Company has discovered other ?elds viz. Bhagyam
and Aishwariya, which will be on stream in the
near future, and is actively exploring the potential
of future developments in the further 22 discover-
ies, incluing the Barmer Hill tight reservoirs. Cairn
is also conducting systematic exploratory work in
several other onshore and offshore areas in India
and off the coast of Sri Lanka where the Company
believes there is signi?cant hydrocarbon potential.
As an Indian listed company, Cairn India is com-
mitted to securing energy for the nation — thus
fuelling its growth.
In this chapter on Management Discussion and
Analysis, we begin with Rajasthan — the MPT,
the heated and insulated pipeline, Rajasthan crude
sales, enhanced oil recovery and hydrocarbon
resources in the area. We then move on to the
Company’s other operating assets. Thereafter,
we discuss exploration. This is followed by the
Company’s human resources and health, safety
and environment. The chapter concludes with
internal controls and their adequacy, ?nancial re-
sults, business risks and the business outlook. The
Company’s focus on CSR is outlined in the chapter
that follows.
As an Indian listed
company, Cairn India
is committed to
securing energy for
the nation
29
was a red-letter day in the history of Cairn India Limited.
Dr Manmohan Singh, the Honourable Prime Minister of India,
dedicated the Mangala ?eld to the nation and inaugurated the Company’s ?rst oil
production from the Mangala Processing Terminal at Barmer, Rajasthan in the
presence of Shri Ashok Gehlot, the Honourable Chief Minister of Rajasthan and
Shri Murli Deora, the Honourable Union Minister for Petroleum & Natural Gas.
Crude oil has started ?owing through the world’s longest continuously heated and
insulated pipeline from MPT, in Barmer to Salaya in Gujarat, in preparation of
sales to some of the major re?neries in India. Soon, Cairn India’s production from
Rajasthan, at the currently approved rate of 175,000 bopd, will account for more than
20% of India’s domestic crude oil production.
AUG
2009
MANAGEMENT DI SCUSSI ON AND ANALYSI S 11
The
Rajasthan
Project
In essence, the Rajasthan project is about com-
mercialising the world class discoveries, getting
the oil and gas production to market and nurtur-
ing and enhancing the resource base in the region
— thus providing additional supply of energy that
is vital for India’s growth needs. It involves four
sets of activities:
Producing crude oil from the three main fields
?rst Mangala, then Bhagyam and Aishwariya,
followed by other ?elds through the
development and operations of the MPT.
Flowing crude through the continuously heated
and insulated pipeline from the MPT at Barmer
to Bhogat on the coast of Gujarat via Viramgam
and Salaya.
Enhancing Rajasthan’s resources through tech-
nology applications in reservoir development,
management, enhanced oil recovery (EOR),
focused development efforts in low permeabil-
ity reservoirs such as the Barmer Hill and the
phased development of other ?elds.
Further exploration in other parts of the
Rajasthan block, which is spread over 3,111 km
2
,
where the Company believes there are signi?-
cant prospects.
Cairn came into Rajasthan in the late 1990s,
when it acquired an interest in the block RJ-ON-
90/1. It soon realised that the area was rich in
The Rajasthan Fields
BHAGYAM
N-I -NORTH
SHAKTI
SHAKTI NE
N-I
NC WEST OI L & GAS
BHAGYAM SOUTH
MANGALA
MANGALA BARMER HI LL
AI SHWARIYA
N-E
VANDANA
VIJAYA
GS-V
SARASWATI CREST
SARASWATI
KAAMESHWARI
RAAGESHWARI OI L
SHAHEED TUKARAM OMBALE
RAAGESHWARI DEEP GAS
GUDA
OI L FI ELD
GAS FI ELD
OI L DI SCOVERY
GAS DI SCOVERY
OI L SHOWS
OI L DI SCOVERY & GAS SHOWS
CURRENT OPERATIONS
DEVELOPMENT AREA 2
Awarded November 2008
N-P
DEVELOPMENT AREA 3
Awarded December 2008
KAAMESHWARI WEST-6 GAS
KAAMESHWARI WEST-3 GAS
KAAMESHWARI WEST-2 OI L
DEVELOPMENT AREA 1
Awarded October 2004
0 5
KI LOMETRES
10 20
I NDI A
HONOURABLE PRIME MINISTER OF INDIA,
DR MANMOHAN SINGH, INAUGURATING FIRST
OIL PRODUCTION FROM THE MANGALA FIELD
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 12
MPT’s Four Oil Processing Trains
Train One Capacity of 30,000 bopd from
the Mangala ?eld which was inaugurated
by our Prime Minister on 29 August, 2009,
and is on stream.
Train Two Capacity of 50,000 bopd, also
from the Mangala ?eld, which commenced
production in May 2010.
Train Three Capacity of 50,000 bopd is
targeted for completion in June 2010 — to
access the plateau production from the
Mangala ?eld.
Train Four Capacity of 75,000 bopd,
designed to accommodate production
from Bhagyam and Aishwariya and further
expansion, will be commissioned in 2011.
hydrocarbons and possessed 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, the Mangala Field was discovered
which is considered to be the largest onshore
discovery in India in the last 25 years. This was
followed by the key discoveries at Bhagyam and
Aishwariya, which along with Mangala, comprise
the MBA ?elds. To date, 25 discoveries have been
made in the Rajasthan block.
Cairn India is the operator of the Rajasthan
block with a 70% participating interest and its joint
venture (JV) partner, ONGC has a 30% participat-
ing interest.
The Rajasthan block consists of three
contiguous development areas
Mangala, Aishwariya, Raageshwari and Saraswati 1
(MARS) fields
Bhagyam and Shakti fields 2
Kaameshwari West fields 3
The commercialisation and development phases
have resulted in successive de-risking of the value
of these assets by removing the binary risks that
were present at the end of the Exploration Phase.
Rajasthan is considered a relatively low risk onshore
project versus working in the offshore environ-
ment with its inherently high costs and operational
challenges. The wells are relatively shallow; and
the team has a good understanding of the reser-
voirs through extensive appraisal and development
work. The Rajasthan crude can be extracted using
industry best practices in oil?eld technology; and
recovery is expected to be further enhanced through
proven tertiary methods, such as EOR.
More than 350 wells and over 40 well pads are
currently planned across the Rajasthan ?elds. At
the current approved peak production rate from
the MBA ?elds of 175,000 bopd, Cairn India will
contribute more than 20% of India’s crude oil
production by 2011. Subject to GoI approval and
additional investments, the Rajasthan resource
base now provides a basis for a vision to produce
240,000 bopd — or 37% more than the currently
approved peak production, which could ultimately
translate to about 35% of India’s domestic crude oil
production.
In the ?rst month of operation Train 2 operated
at 97% ef?ciency and con?rmed nameplate capac-
ity. To date, both Trains One and Two have together
processed over 4 million barrels of crude oil.
The Mangala Processing Terminal
(MPT) has been designed as a
centralised hub facility to handle
crude oil production from the MBA
?elds as well the smaller ?elds
that have been discovered by the
Company. It will be able to process
205,000 bopd of crude; and has
been designed with suf?cient
?exibility to be later expanded to
process more crude, depending
upon the resource potential of
the block. The resource base
established in the block provides
a vision to produce 240,000
bopd, subject to further regulatory
approvals and aditional investments.
THE MANGALA PROCESSI NG TERMI NAL
At the currently
approved peak
production rate of
175,000 bopd from the
MBA ?elds, Cairn India
will contribute more
than 20% of India’s
crude oil production by
2011
Subject to GoI
approval and
additional investment,
the Rajasthan resource
base now provides the
basis for a vision to
produce 240,000 bopd
— or 37% more than
the currently approved
peak production rate,
which could ultimately
translate to about 35%
of India’s domestic
crude oil production
MANAGEMENT DI SCUSSI ON AND ANALYSI S 13
The MPT uses boilers to produce steam, which drives the
turbines to generate power. A closed loop system of steam
condensate recovery helps to meet the feed water requirement
of boilers and the heating requirement of various process units
and also the power ?uid for injection into the oil wells. This
closed loop system has resulted in ef?cient power management
and in turn, has resulted in lower emissions.
Sub-surface saline water is transported to the MPT by a 20”
pipeline from the Thumbli reservoir, which is 22 km from the
terminal.
Some of this water is desalinated to:
feed the ?ve boilers at the MPT to generate steam for heating,
drive the turbines to generate electricity as well as to aid water-
?ooding of the oil reservoirs, and
supply drinking and bathing water at the terminal.
The remaining saline water, with some steam, is injected into the
oil reservoirs for the extraction of crude. Any excess water in this
?ooding is trapped and re-used.
Gas is needed to ?re the boilers to generate steam, which in
turn generates the power to heat the waxy crude at an average
of 65°C along the pipeline. It comes from the Raageshwari gas
?eld, located some 90 km away from the MPT. 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). It is transported via a 12” gas pipeline to
the MPT and the gas liquids, or condensate, by a separate 4”
pipeline.
OIL RECOVERY SYSTEM
THE CLOSED LOOP SYSTEM
PANORAMIC VIEW OF THE
MANGALA PROCESSING TERMINAL
14 CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10
ENVI RONMENT MANAGEMENT AT THE MPT
The MPT facility has been designed to conserve and
minimise the impact on the surrounding environment.
There is almost zero surface disposal of any solid or
liquid waste. The facility meets its water demand from
the abundant supply of sub-surface saline water, without
any need to draw on scarce freshwater resources of
the area. Its energy demands are met by utilising the
associated gas produced from the separation of well
?uid, backed up by gas from the Raageshwari gas ?eld.
Power generation is achieved by using steam as the
means to transfer energy in a closed loop cycle — with
the medium and low pressure steam being utilised for
heating. A closed drainage system routes all hydrocarbon
liquid discharges to tanks, from where these circulate
back for reprocessing. All vapour emissions from vessels
and tanks are directed to the vapour recovery system
where these are pressure-conditioned and compressed
— to be fed back into the fuel gas system. At the MPT,
gas ?aring is only done in the case of an emergency.
There is also no cold venting of gas at the MPT.
All waste-water, reject water and wash water are routed
to the injection water system for re-injection into the oil
reservoir. In case of any operational issue — where a
speci?c type of waste water discharge cannot be mingled
with the injection stream— there is a provision for solar
evaporation ponds and deep dump wells, which can help
in the disposal without causing any environmental harm.
In addition, there is a dedicated secure land?ll facility
complying with the national standards on land?ll design
for the storage and disposal of non-recyclable wastes.
14 CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10
MANAGEMENT DI SCUSSI ON AND ANALYSI S 15
Saline water sourcing
The MPT facility utilises sub-surface
saline water to meet its operational
and potable water needs. The Thumbli ?eld,
22 km south-east of the MPT, is a massive
saline water underground reservoir. The
fresh water lens rides over the saline water
— and is located 12 km north-west of the
saline water abstraction zone. The country’s
regulatory body has accorded its approval
for saline water abstraction after carefully
reviewing the results of the detailed
modelling study. An extensive and ongoing
groundwater monitoring programme is
in place to monitor the behaviour of the
various aquifer systems in response to
the saline water abstraction. The systems
are designed to give early warning of
any potential issue so that they can be
corrected before problems arise.
Freshwater
The freshwater requirements of
the MPT are met by desalination
of about 4,000 cubic metres of water per
day. The reject water from the desalination
process is co-mingled with the well
injection water — for injecting it back
into the oil reservoir. There is no surface
discharge of the reject water.
Closed Drain System
A closed drain system routes
wastewater and ?uids from the
various vessels, process units and tanks to
a collection tank. Thereafter, this is pumped
into an off-spec oil tank for re-circulating
to the inlet manifold for processing. All
equipment handling hydrocarbon liquids
and water containing hydrocarbons are
connected to the closed drain system.
Open Drain System
An open drain system collects drain
?uids from equipment that is not
under pressure and routes it into collection
tanks. These ?uids are then put back into
the process through either the off-spec
oil tank or the produced water treatment
system.
Vent Gas Recovery Units
Hydrocarbon vapour from the
various process units, vessels and
tanks, including the crude oil storage
tanks, is recovered and fed into a two-
stage vapour recovery unit — and fed
into the fuel gas system. There will be no
venting of hydrocarbons during normal
routine operations.
Greenbelt Development
In accordance with our bio-diversity
commitments, the development of
a greenbelt within the MPT, the pipeline
corridors and the well pads is being done
keeping in mind that no alien invasive
species is introduced. The expertise of a
local specialist organisation, The School
of Desert Sciences, is being taken for
selection of appropriate species and for
training of local community for maintaining
the greenbelt.
Solid Waste
Management System
A common captive land?ll
disposal site, including a high
temperature incinerator facility, is being
established within the MPT. The land?ll
will serve as a disposal facility for all
non-recyclable wastes generated from
the MPT operation and the associated
well drilling programmes. The land?ll is
segregated into a hazardous waste and a
non-hazardous waste section. It is being
developed in a phased manner, and
will have the capacity to handle waste
generated over a 20-year period. It is
designed in compliance with international
best practices and in line with national
laws and guidelines.
Produced Water
Treatment and Disposal
Produced water generated from
the well ?uid phase separation is
treated in the Produced Water Treatment
Plant to separate any of the carried over
sediments and oil traces. This is achieved
using an induced gas ?oatation process.
The treated produced water is then re-
injected into the oil reservoir. There is no
surface discharge of produced water.
Flaring System
The ?aring system is provided to
safely route the emergency release
of hydrocarbons to the Flare Knock-Out
drums and then to the ?are tips. The ?are
system will only be required in emergency
conditions. The ?are tip is located in
the High Pressure (HP) Flare Stack at a
height of 30 metres to ensure that safe
radiation and burnt gas dispersion levels
are maintained beyond the exclusion zone.
Rainwater Harvesting
The storm water from the paved
areas (i.e. the non-hazardous areas)
and rooftops will be routed to a rain water
collection tank. In?ltration wells (approxi-
mately 20 metres deep) have been built
within the tank area so that the water
collected in the tank over a certain level
will over?ow into the in?ltration well for
recharging the groundwater.
Sewage Treatment Facility
Sewage from the plant and the
living quarters are treated in
a sewage treatment plant complying
with the regulatory standards for land
discharge, and then used for greenbelt
maintenance. This consists of physical
and biological treatment, followed by
disinfection. The entire treated sewage
is used within the facility, with no surface
discharge outside the MPT premises.
Power Generation
Steam is used for power generation
and for heating and pumping. It
is generated by heating the desalinated
water in fuel gas powered boilers. High
pressure (HP) steam is used to drive the
Steam Turbine Generators (STG) and the
steam turbine pumps. Exhaust from the
STG is cooled in air cooled condensers
at medium pressure (MP) levels. The MP
system provides heat for various process
heat exchanges, tanks and vessels.
The MP condensate passes to the low
pressure (LP) steam system. LP steam
is used in the de-aerators for the boiler
feed water and various utility stations. The
waste stream cycle is condensed and fed
in to the boiler feed water tank.
MANAGEMENT DI SCUSSI ON AND ANALYSI S 15
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 16
RAJASTHAN
TECHNICAL DEVELOPMENTS
Development drilling and the well completion
activities are under way, with three drilling rigs
and one completion rig operating in the Mangala
development area.
To date, 65 Mangala development wells have
been drilled, of which 51 have been completed
for initial production. In addition, three EOR
pilot wells, 10 Raageshwari Deep Gas wells and
three Thumbli water supply wells have also been
drilled.
Given the success of its ?rst horizontal well at
Mangala — which was tested at an oil production
rate of more than 11,500 bopd, the highest ever
for an onshore well in India — Cairn India has
successfully drilled and completed ?ve more hori-
zontal wells in Mangala. Twenty four Mangala
wells are currently producing and other wells will
be brought on stream in a staged manner during
the ramp-up period.
The results from all the wells drilled to date
con?rm excellent reservoir quality and the high
deliverability potential of the Fatehgarh formation
reservoir.
A hydro-fracturing campaign in three
Raageshwari Deep gas wells was carried out
across 10 gas zones. Following hydro frac
treatment, the ?rst Raageshwari deep gas well
tested at a gas rate of 15.7 million stand cubic feet
per day (mmscfd); and the second well showed
a gas rate of 20.9 mmscfd, the highest ever in
the ?eld, signi?cantly more than expected. These
test results indicate the potential for improved
frac designs, which could be applied to the low
permeability reservoir zones of the Barmer Hill
formation in the near future.
Following are some of the signi?cant technologi-
cal applications used to develop the Rajasthan
resources:
Drilling Engineering,
Completions and Operations
Cairn India is committed to technological excel-
lence with precise execution and top quartile drill-
ing performance. Given below are some of the
technological advances and processes that have
been implemented leading to increased ef?ciency
in the drilling operations.
Well Type Design
Six different well types have been designed for
oil and gas production wells, water source wells
and water injection wells. To date, all these well
design concepts have been tested and proven to
be performing to or above expectations.
The successful test
results of the hydro-
fracturing campaign
in three Raageshwari
Deep gas wells
indicate the potential
for improved frac
designs, which could
be applied to the
low permeability
reservoir zones
of the Barmer Hill
formation in the
near future
MANAGEMENT DI SCUSSI ON AND ANALYSI S 17
RAPID MOBILE SKID MOUNTED "SUPER SINGLES" RIG
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 18
Custom Made Rapid Rig Design
Highly mobile skid mounted ‘Super singles’ of
1000 HP with smaller footprint and self deploy-
ing design were custom built for Cairn India.
This design allows rigs to move between wells on
a pad in a period of ?ve to 10 hours. In fact, the
Company achieved a very fast slot-to-slot rig move
time of 4.5 hrs on four occasions. By drastically
cutting the time of rig movement, the Company
should save a minimum of 300-rig days for the
planned 350 wells over the life of the asset. It has
also helped reduce well construction time: wells
of 1,200-1,500 metre depths are being drilled in
seven to nine days.
Compact Well Head Design
This was custom designed for Cairn India to facil-
itate optimal extraction from the ?eld. The design
includes the provision for the termination of the
heater string, control lines and electrical submers-
ible pump cables. The system has resulted in rig
time savings of anywhere between 16 hours and
36 hours per well, depending on the well design.
Custom Mud Design
Cairn India succeeded in using customised
synthetic oil based mud system for the Rajasthan
drilling applications at almost the same cost as con-
ventional water based mud systems. Installation
of a thermo-mechanical Cuttings Cleaner unit
in Rajasthan will be a ?rst in India — another
example of Cairn India’s standing as an innovative
and environmentally responsible company.
Turbine and Bit Selection
Conventional usage of Tungsten Carbide Insert
(TCI) bits with positive displacement motors has
been replaced with the more advanced assembly of
impregnated (IMPREG) bits with turbines to drill
the Raageshwari fractured basement formations.
This has lead to a saving of around USD 360,000
per well. Cairn had earlier pioneered the intro-
duction of the high performance Polycrystalline
Diamond Compact (PDC) bits in India.
ICD completion for horizontal wells
Drain hole in horizontal wells have been com-
pleted with the latest technology of In?ow Control
Devices and Swell Packers in order to slow down
water cut, reduce ?eld operating expenses and
maximise recoverable reserves. Wells have tested
to production rates in excess of 11,500 bopd on
self ?ow and set the record of being highest rate
onshore production wells in India.
COMPACT WELL HEAD DESIGN
MANAGEMENT DI SCUSSI ON AND ANALYSI S 19
Coiled tubing heater string
The unique concept of coiled tubing inclusion as
heater string in conjunction with the production
tubing has been adopted in the production well
completions. Heater string is used to circulate
heated water in the annulus that addresses the ap-
prehensions on downhole ?ow assurance posed by
the waxy and viscous crude of Rajasthan oil?elds.
Pumps and Electrical
Submersible Pumps (ESP)
Jet Pumps using hot water as power ?uid are
planned for arti?cial lift deviated wells as the
water cut rises with time; high rate ESPs are
installed in the horizontal wells for arti?cial lift in
the future. Both technologies are set to open up
new frontiers in arti?cial lift technology in India
and would be the largest ?eld scale application of
the jet pump technology worldwide.
Enhanced Oil Recovery
Enhanced Oil Recovery (EOR) techniques are
methods of increasing recovery from oil ?elds.
Historically, EOR has been considered as a ter-
tiary recovery method — to be applied at the later
stage of ?eld life after primary and secondary
recovery from the reservoirs.
Cairn recognised the potential for EOR at an
early stage of development in its MBA ?elds. The
reservoir quality, oil properties and ambient tem-
perature make these ?elds ideal for the application
of chemical ?ooding EOR methods such as poly-
mer or Alkali Surfactant Polymer (ASP) ?ooding.
With the viscosity of oil being higher than that
of water, the injected water is not able to displace
the oil very ef?ciently, resulting in some bypassed
oil under a conventional water ?ooding scheme.
By adding chemicals such as polymers, the in-
jected water attains a viscosity close to that of the
oil, which improves the displacement and overall
sweep. In addition, the use of alkali and surfac-
tants along with polymer further increase recov-
ery, as these chemicals act like soap and wash off
more oil from the reservoir pore spaces.
Studies conducted by two independent labo-
ratories show favourable trial results of 30% to
40% incremental recovery from the application
of EOR in the reservoir core-?oods. Detailed
?eld scale modelling and simulation studies car-
ried out incorporating the ?ndings of the labora-
tory evaluation indicate incremental recoveries
of 15% from the MBA ?elds by the application of
ASP ?ooding.
The Company is conducting a ?eld pilot to
demonstrate the applicability of EOR in the
Mangala ?eld. A 10 well drilling programme is
planned and the drilling of the pilot wells has
started. Pilot trails will begin this year, initially
with water injection and subsequently with poly-
mer and ASP injection. Conditional upon success
of the pilot, Cairn India intends to implement
chemical ?ooding on a ?eld scale in Mangala,
followed by Bhagyam and Aishwariya. The cur-
rent assessment of the EOR resource base is more
than 300 million barrels (mmbbls) of incremental
recoverable oil from the MBA ?elds.
Cairn India is an active member of a Joint
Industry Project (JIP) on chemical EOR. This JIP
is supported by approximately 30 Exploration
and Production and service companies across the
world, which sponsors research in chemical EOR.
This initiative shall provide access to the results of
the latest technology and research carried out by
the industry
Studies conducted
by two independent
laboratories show
favourable trial
results of 30% to 40%
incremental recovery
from the application
of EOR in the reservoir
core-?oods
The current
assessment of the
EOR resource base
is 15% of STOIIP
which amounts to
more than 300 million
barrels of incremental
recoverable oil from
the MBA ?elds
EOR Opportunity in Rajasthan
Schematic Representation
Chemical EOR processes
Schematic Representation
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 20
Securing Energy,
Fuelling Growth
Demand supply gap is met by imports
In spite of India’s current oil production of around 0.7 million bopd, the country still remains grossly energy de?cient. This makes the
country a net importer of most forms of energy, including more than 70% of oil and gas.
Energy security is perhaps the most critical
challenge for any country, central to its
economic development and rapid growth.
For India, Cairn’s Rajasthan ?elds will thus
play a key role: the combined production
from Mangala, Bhagyam and Aishwariya
?elds are set to contribute more than 20%
of India’s domestic crude production from
CY 2011.
FY 2009-10 has been a historic year for
Cairn India, marking the commencement of
production from Mangala. With growth in this
stage of the business— a ?ve-fold increase in
net production— Cairn’s journey of discovery
and production in a supply de?cient market
has begun its transition to becoming a key
player in the energy security of the country.
…of which
HYDROELECTRIC
NUCLEAR ENERGY
COAL
NATURAL GAS
OIL
5%
1%
52%
10%
32%
In 2009, India consumed
4.2% of the world’s energy…
Source: BP Statistical Review of World Energy June 2010
Source: BP Statistical Review of World Energy June 2010
Figures in million barrels per annum
21 SECURI NG ENERGY, FUELLI NG GROWTH
An increase of
USD 1 per
barrel of oil…
…results in an
increase of USD
1 billion in India’s
import bill
In 2009, India produced 1% (275 mmbbls)
of crude oil but consumed 4.2%
(1,160 mmbbls) of the world’s total
produce (21,981 mmbbls)
ETHANE
DIESEL FUEL
FUEL OILS
GASOLINE/PETROL
JET FUEL
KEROSENE
LPG
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 22
RAJASTHAN
HYDROCARBON RESOURCES
Mangala, Bhagyam and Aishwariya
The MBA ?elds’ Stock Tank Oil Initially In Place
(STOIIP) is over 2.1 billion barrels with approved
Field Development Plans (FDPs) for all three
?elds. Cairn India believes that production
potential from these ?elds exceeds 210,000
bopd (MBA approved rate of 175,000 bopd,
additionally 25,000 bopd from Mangala and
10,000 bopd from Aishwariya) against an ap-
proved rate of 175,000 bopd (Mangala 125,000
bopd, Bhagyam 40,000 bopd and Aishwariya
10,000 bopd). The increase in production is
subject to regulatory approval.
The Mangala ?eld contains nearly 1,300 mmb-
bls of STOIIP in the Fatehgarh formation, with
nearly 500 mmbbls recoverable through water
?ood. Development drilling on the ?eld com-
menced in January 2009, and 65 wells from eight
pads have been drilled, with a combination of
horizontal wells with screens, deviated producers
and monobore water injectors. This represents
approximately a third of the wells planned for
the ?eld-wide development. Results from these
wells have con?rmed the geological and reser-
voir understanding of the ?eld and the STOIIP
estimates.
Performance of the horizontal wells has been
better than expected, with tested rates greater
than 11,500 bopd. Production performance from
the more conventional wells has been according
to expectations.
Given these encouraging well results, Cairn
India believes that the Mangala ?eld has a
potential to produce 150,000 bopd. Moreover,
the increased off-take rate from Mangala would
have no impact on the ultimate technical recovery
from the ?eld. This requires further regulatory
approvals.
Raageshwari Deep Gas Field
The Raageshwari Deep gas ?eld is designed to
supply gas to meet the energy requirements at the
MPT and the pipeline. Ten new wells were drilled
and completed in addition to the existing three gas
producers. Hydraulic fracturing operations have
been completed in two wells so far with four to
?ve zones fracced in each well. These fracturing
operations have been highly successful with wells
having ?owed at rates up to 20 mmscfd — which
is ?ve times the rates previously achieved from
this reservoir.
Saraswati and Raageshwari Fields
The FDPs for both the ?elds have been
approved and both the ?elds are currently under
development.
Barmer Hill and Other Fields
In addition to the MBA, Raageshwari and
Saraswati ?elds, Cairn India has discovered 20
other ?elds. Including the MBA ?elds, these
contain a gross discovered resource of approxi-
mately 4 billion boe of oil and gas in place.
From the development drilling results and
further evaluation of the Barmer Hill formation
overlying the Mangala and Aishwariya Fatehgarh
Formation reservoirs, the Company has identi-
?ed signi?cantly increased potential in the basin.
Fields in other parts of the world with characteris-
tics similar to the Barmer Hill are being devel-
oped — and have demonstrated recovery factors
of 7%–20%.
As a result of this evaluation, the estimated
Barmer Hill (from Mangala and Aishwariya) and
other ?elds gross recoverable resources have
more than doubled to 140 mmbbls.
Since the Barmer Hill reservoir is less perme-
able than the main Fatehgarh formation reservoir,
fracturing of horizontal wells is being planned to
optimise the well count and deliver high online
production rates. A declaration of commerciality
for the Barmer Hill has been submitted to the
GoI and an FDP is under preparation for submis-
sion later this year.
An FDP covering ?elds in the Kaameshwari
West development area has also been submitted
to the GoI.
Cairn India believes
that the Mangala ?eld
has a potential to
produce up to 150,000
bopd. Moreover, the
increased off-take rate
from Mangala would
have no impact on
the ultimate technical
recovery from the ?eld
MANAGEMENT DI SCUSSI ON AND ANALYSI S 23
Further Potential: Exploration Upside
There remains a signi?cant and as yet untested
prospective resource potential to pursue in the
Barmer Basin of the Rajasthan block.
Over the last two years, a full re-evaluation of the
Barmer Basin has been undertaken. All 170 explo-
ration and appraisal wells were re-examined, new
studies were started and 2,733 km
2
of 3D seismic
data was re-processed and re-interpreted. Cairn
India has also acquired over 2.2 km of cores to
help gain a better understanding of the geographi-
cal and reservoir models. As a result of these stud-
ies, the Rajasthan prospect portfolio has increased
substantially to 250 mmboe recoverable risked
mean prospective resources with an upside poten-
tial, equivalent to a most likely in place resource of
2,500 mmboe. Discovering and developing these
resources will be an important step in realising the
full production potential of Rajasthan.
Cairn India drilled two exploration wells in
Q4 FY 2010. Both wells found hydrocarbons in
the Thumbli reservoir, extending the Shaheed
Tukaram Ombale (Raageshwari East-1z) discovery
made in 2008. Tukaram-2 found 6m of oil pay
and 6m of gas pay whilst Tukaram SE-1 found
11m of oil pay. In addition, 2.5m of oil pay was
found in a Dharvi Dungar reservoir, and the
deeper well Tukaram-2 also found 15m of gas
pay in the Fatehgarh, extending the Raageshwari
deep gas resource base.
Technical evaluation work continues to assess
existing and new plays in the basin to generate
further prospects in Rajasthan.
There remains a
signi?cant and as yet
untested prospective
resource potential to
pursue in the Barmer
Basin of the Rajasthan
block
Technical evaluation
work continues to
assess existing and
new plays in the basin
to generate further
prospects in Rajasthan
OFF SPEC OIL STORAGE TANKS AT MANGALA PROCESSING TERMINAL
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 24
The 24” heated and
insulated pipeline is
approximately 670
km long, from the
MPT to the terminal
at Bhogat on the
Gujarat coast. It is
the world’s longest
continuously heated
and insulated crude
oil pipeline and will
have access to more
than 75 % of India’s
re?ning capacity
when the Bhogat
terminal is completed
in 2011
THE PI PELI NE AND EXPORT SYSTEM
Mangala crude is sweet (low sulphur) and waxy in
nature with an API gravity of around 28 degrees
and a pour point just over 40°C. In the BP crude
assay database, there are around 94 types of crude
oil that are heavier than the Mangala crude and
31 that are more viscous. So, while challenging,
the properties of the Rajasthan crude are not
something that will have any adverse impact on
subsequent processing. Though the crude has a
high pour point and viscosity due to its waxy nature,
its highly paraf?nic content makes it an excellent
secondary processing feedstock for re?ners.
The 24” heated and insulated pipeline is
approximately 670 km long, from the MPT to the
proposed marine terminal at Bhogat on the cost
of Gujarat. It is the world’s longest continuously
heated and insulated crude oil pipeline and will
have access to more than 75% of India’s re?ning
capacity when the Bhogat terminal is completed
in 2011. About 154 km of the pipeline is in
Rajasthan and the rest in Gujarat.
The crude pipeline has an outer diameter of 24”
with an 8” pipeline running along it that carries
Raageshwari gas, which 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 are 36
SEHMS heating stations or Above Ground
Installations (AGIs). Gas is supplied at each
station to generate the power required to heat the
pipeline for approximately 9 km on either side of
the heating station — to ensure that crude remains
constantly heated above 65°C.
In addition, there is an intermediate terminal at
Viramgam for storage and further pumping to the
coast, including a pigging facility. There are two
other pigging stations at Sanchore and Wankaner
to insert ‘pigs’ (pipeline cleaning devices) that are
used to clean and inspect the pipeline.
PIPELINE SECTION GETTING READY TO BE BURIED
MANAGEMENT DI SCUSSI ON AND ANALYSI S 25
R AJ AST HAN Mangala
Processing
Terminal
6IRAMGAM
7ANKANER
3ALAYA
Bhogat
3ANCHORE
2ADHANPUR
G UJ AR AT
Phase I From MPT to Salaya, in Gujarat, via a
storage and pumping terminal at Viramgam (in
the district of Ahmedabad). It includes spur lines
to connect to private re?ners and another spur
line at Radhanpur to connect with the Indian Oil
Corporation Limited’s (IOCL’s) Mundra to Panipat
crude pipeline.
As on 31 March, 2010, the status of the pipe-
line was as follows:
The entire section from MPT to Salaya
(~590 km) had been laid below the ground
and commissioned.
The Radhanpur (Gujarat) terminal, including a
22 km long 10” spur line was completed. It was
ready for start-up to supply crude to IOCL’s
Mundra-Panipat crude oil line.
The Viramgam terminal was completed and is
expected to be commissioned by June 2010.
Since then, oil was introduced in the pipeline on
13 May, 2010 in anticipation of sales to re?ners.
Phase II From Salaya to the Bhogat terminal on
the Arabian Sea coast, and a pipeline connecting
the terminal to the marine facilities. This Salaya
to Bhogat pipeline extension project consists of
three main components:
Extension of the pipeline with associated heat- 1.
ing stations from Salaya to the Bhogat terminal.
Coastal crude oil storage terminal at Bhogat. 2.
Marine export facilities, consisting of twin 24” 3.
sub-sea pipeline connecting the Bhogat ter-
minal to the SPM (Single Point Mooring). The
SPM is located ~ 6 km off shore in the Arabian
Sea and is equipped to load the AFRAMAX
type tankers.
All approvals for the Salaya to Bhogat section
have been obtained, and the necessary land
purchase completed to allow construction
to start. A number of major contracts for
construction and long lead equipment and
materials have been placed.
Pipeline length
Approximately 670 km
24” insulated heated
oil pipeline
from Barmer to Bhogat in
Gujarat, via Viramgam
Pipeline material
and diameter
Crude oil 24” API 5L X-65
insulated pipeline 90 mm
thick polyurethane foam
(PUF) insulation and 5 mm
thick high density
polyethylene (HDPE) wrap
Natural gas 8” API 5L
polyethylene (PE) coated
pipeline
Crude Oil Storage and
handling capacity
Viramgam 10,000 m
3
(~60,000 barrels)
Bhogat 393,512 m
3
(~2.5 million barrels)
Heating stations
36 at a distance of
approximately 18 km
apart along the pipeline
Standards
Heated oil pipeline with
PUF insulation and
HDPE wrap. OISD 118,
141, ASME B31.4, API 5L,
API 1102, API1104
Key Technical Details
of the Pipeline
670
KMS
THE PROJ ECT I S DI VI DED I NTO T WO PHASES
Pipeline Route Map
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 26
RAJASTHAN CRUDE:
SALE CONTRACTS
With Trains One, Two and Three being able to
process 130,000 bopd of crude oil at MPT, it is
important to understand the sales contracts or
arrangements that have been put in place with
re?neries.
The ?rst step of the sales process was the
approval of additional delivery points by the GoI.
The approvals were initially for the public sector
units — which allowed Cairn India to tie up sales
contracts at Viramgam for IOCL’s Koyali re?nery,
and at Radhanpur for delivery to IOCL’s Panipat
re?nery.
In addition, the GoI had, as an interim ar-
rangement, approved an additional Delivery Point
at the Kandla port for delivery of crude to the
Mangalore Re?nery and Petrochemicals Limited
(MRPL) and other coastal re?neries. During FY
2009-10, six parcels were delivered to MRPL.
When the Bhogat terminal along with the marine
export facilities is operational, it will be an ad-
ditional delivery point.
The second step was securing GoI approval to
sell the crude to private sector re?ners. Here, too,
the GoI agreed to allow domestic private re?ners
to qualify as additional buyers of the Rajasthan
crude. Cairn India has been successful in reach-
ing an agreement to supply Mangala crude to pri-
vate re?neries in Gujarat. In FY 2009-10, seven
parcels were delivered to the private re?ners.
As of 31 March, 2010, sales arrangements for
143,000 bopd were in place (two PSU buyers and
two private sector buyers). This has helped set a
clear roadmap for aligning sales volume with the
production ramp-up. Contracts for additional vol-
umes are expected to be ?nalised as the produc-
tion ramps up, subject to GoI approval.
The commercial terms and pricing negotiations
for the Rajasthan crude have been concluded with
the GoI nominees and domestic private re?ner-
ies. In accordance with the PSC, this pricing is
based on Bonny Light, comparable low sulphur
crude that is frequently traded in the region, with
appropriate adjustments for crude quality. The
implied price realisation represents an average
10% to 15% discount to Dated Brent on the basis
of prices prevailing for the year.
Once the Bhogat marine terminal becomes
operational, sales to other coastal re?neries will
be possible, subject to GoI approval.
FUNDING THE
RAJASTHAN PROJECT
The Rajasthan project is now well funded, with
Cairn India having completed ?nancing
arrangements for USD 1.6 billion at competitive
pricing. The facility is of a long term nature with
tenure of over six years from the time they were
contracted in October 2009. Proceeds from this
facility have been used to repay the then existing
debt of USD 850 million and to fund the ongoing
projects in Rajasthan. The ?nancing was arranged
through a combination of US Dollars and Indian
Rupee borrowing by accessing both domestic and
international markets.
International borrowing facility of USD 750
million was provided by a consortium of overseas
commercial banks led by Standard Chartered
Bank and the International Finance Corporation,
a member of the World Bank Group. Domestic
borrowing facility of INR 4,000 crore (USD 850
million) was underwritten by the State Bank of
India, which later syndicated to other banks and
?nancial institutions, including Canara Bank,
Bank of India, Oriental Bank of Commerce,
As of 31 March 2010,
sales arrangements
with PSU and private
re?ners for 143,000
bopd were in place
2004 2005 2006 2007 2008 2009 2010
Crude Price Movement since the discovery of Mangala Field
in USD per barrel
Bonny Light
Brent
Mangala Crude
30
60
90
120
150
MANAGEMENT DI SCUSSI ON AND ANALYSI S 27
Bank of Baroda, HDFC Bank and Infrastructure
Development and Finance Corporation.With
these ?nancing arrangements, Cairn India is well
funded to execute the Rajasthan project.
This financing is innovative in that:
It uniquely accesses two separate lending mar-
kets on different terms for the same project
It is one of the largest fully underwritten deals
of this size in the oil and gas sector after the
2008 ?nancial crisis
It is one of the largest ‘Reserve Base Lending’
deals completed in India to date
This ?nancing deal was awarded the ‘Oil & Gas
Deal of the Year’ for Asia Paci?c region by Project
Finance International (part of the Thomson
Reuters group).
The completion of the ?nancing underscores
the robustness of the Rajasthan project and the
lenders’ con?dence in Cairn India’s ability to
deliver.
In March, 2010, Cairn India was awarded the
‘AAA’ rating by the Credit Analysis and Research
Limited (CARE) for its INR 4,000 crore domestic
borrowing facility. The ‘AAA’ rating reinforces
the credit worthiness of the project.
As always, the Company has an ongoing
dialogue with various international and domestic
institutions to review its ?nancing options, so
as to create even greater ?nancial ?exibility by
securing competitively priced long term debt.
In this, the guiding principle is to secure terms
that enhance long term shareholder value. Table
1 gives the ?nancial details: capital expenditure
versus ?nancing.
During the year, PETRONAS International
Corporation Ltd (PICL), the overseas arm of
Petroliam Nasional Berhad (PETRONAS),
acquired from Cairn Energy PLC 43.6 mil-
lion shares in Cairn India, representing a 2.3%
stake and taking the total holding of PICL in the
Company to 14.94%.
A Scheme of Arrangement between the
Company and some of its wholly owned subsid-
iaries, to be effective from 1 January 2010, had
been approved earlier by our shareholders. The
Scheme of Arrangement has been approved by
the Hon’ble High Court of Madras but is pending
approval from the Hon’ble High Court of Bombay
and other regulatory authorities. Pending receipt
of such approvals, no accounting impact of the
scheme has been given in the ?nancial state-
ments. After the implementation of the scheme,
the Company will directly own the Indian busi-
nesses, which are currently owned by some of its
wholly owned subsidiaries.
The Rajasthan
project is now
well funded, with
Cairn India having
completed ?nancing
arrangements for
USD 1.6 billion at
competitive pricing
This ?nancing deal
was awarded the ‘Oil
& Gas Deal of the
Year’ for Asia Paci?c
region by Project
Finance International
1
Capital Expenditure towards Rajasthan Project
in USD billion
Capital Expenditure Gross Net to Cairn
Exploration (upto 2006) 0.61 0.57
Development
CY 2007 0.31 0.22
CY 2008 and 2009 1.76 1.23
CY 2010 and 2011 (estimated) ~2.00 ~1.40
Financed by
Net Cash (Net Debt) 31December, 2009 (0.1)
Existing Debt Facility 1.60
Total 1.50
Note: Cash ?ow from producing assets is an additional source of funds
Shareholding Structure
As on 31 March, 2010
22.69%
14.94% 62.37%
Cairn Energy PLC
Petronas
Public including
Institutions
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 28
Other
Producing
Assets
PKGM-1 BLOCK (RAVVA FIELD)
Krishna Godavari Basin, Andhra Pradesh
Cairn India ownership 22.5% and the operator
The Ravva oil and gas ?eld in the Krishna-
Godavari Basin was developed in partnership with
ONGC, Videocon and Ravva Oil, working under a
PSC that runs until 2019.
Currently, eight unmanned offshore platforms
are being operated. A 225-acre onshore process-
ing facility at Surasaniyanam processes natural
gas and crude oil from the Ravva ?eld. The Ravva
onshore terminal operates at an internationally
recognised environmental standard (ISO 14001),
and has the capacity to handle 70,000 bopd oil,
95 mmscfd of natural gas and 110,000 barrels per
day of injection water. The terminal also has the
capacity to store one million barrels of crude oil
onshore.
Ravva completed 15 years of continuous op-
erations on 28 October, 2009. The ?eld direct
operating expense for the Ravva block is amongst
the lowest in the world. The low-cost operating
base has been achieved by focusing on life-cycle
planning, continuous monitoring, control of
operational costs and the innovative application of
operating technologies.
The average gross production from the Ravva
?eld for FY 2009-10 was 40,718 boepd —
comprising an average oil production of 32,786
bopd and average gas production of 48 mmscfd.
Originally estimated to produce 101 million bar-
rels of crude oil, Ravva has now produced more
than 225 million barrels. Cairn India is con?dent
of the ?eld’s considerable remaining reserve po-
tential and of producing more oil from this block.
The Company and its joint venture partners have
completed a 4D seismic acquisition campaign to
identify bypassed oil zones within the ?eld and
the scope of further reserve addition through
future in?ll drilling.
The Ravva block’s
direct operating cost
per barrel is amongst
the lowest in the world
Originally estimated
to produce 101 million
barrels of crude
oil, Ravva has now
produced more than
225 million barrels of
crude oil
Ravva Offshore Facilities
Schematic Representation
MANAGEMENT DI SCUSSI ON AND ANALYSI S 29
CB/OS-2 BLOCK
Cambay Basin, Western India
Cairn India ownership 40% and the operator
Cairn is the operator for this block and the PSC
signed in 1998 with ONGC and Tata Petrodyne
Limited as partners, runs until 2023.
In 2002, gas production commenced from the
Lakshmi gas ?eld in the CB/OS-2 Block in the
Cambay offshore basin in the Gulf of Khambat
on the west coast of India. The Gauri offshore gas
?eld was discovered in 2001 and came on stream
in 2004. CB-X, a marginal gas ?eld in the transi-
tion zone of the block was in production between
June 2007 and August 2009. The Lakshmi and
Gauri ?elds commenced production of oil in addi-
tion to gas in 2005.
The 82-acre onshore processing facility at Suvali
is certi?ed to ISO 14001 and OSHAS 18001 stan-
dards. It has the capacity to process 150 mmscfd of
natural gas and 10,000 bopd of crude oil.
The application of advanced geophysical tools
has helped map thin oil sands which are beyond
normal seismic resolution capability. These
techniques have transformed the CB/OS-2 block
from a predominantly gas ?eld to an oil ?eld
through the discovery of an oil leg. Tubing sand
screens were used for the ?rst time in the Cambay
Basin as a sand control measure. The Cambay
asset has witnessed the use of several cutting-edge
technologies which have increased throughput at a
lower unit cost.
Cairn India signed a Term Sheet agreement
to produce Gauri share of GBA (Gas Balancing
Agreement – for sharing of gas from the shared
reservoir formation) gas through the Hazira facili-
ties in December 2009. The gas production and
sales also commenced in the same month. This
is a ?rst of its kind arrangement in the country
which showcases the Company’s commitment to
produce gas in the most economical manner and
contribute to the nation’s energy security.
The average gross production from the
CB/OS-2 block for FY 2009-10 was 13,480 boepd
consisting of an average oil / condensate produc-
tion of 9,060 bopd and an average gas production
of 26 mmscfd.
JUN 1998
Production sharing
contract signed
MAY 2000
Lakshmi oil and gas field
discovery
JAN 2001
Gauri oil and gas field
discovery
Ambe oil and gas field
discovery
OCT 2002
Lakshmi gas field
developed and
gas production
commmenced;
discovery to production
in only 28 months
FEB 2004
CB-X onshore discovery
APR 2004
Gauri development
and gas production
commenced
APR 2005
Onshore and offshore
facilities certified for ISO
14001; 2004 standards
NOV 2005
Gauri field development
First oil from Gauri
JAN 2006
Oil production up to
3,000 bopd
JUN 2007
CB-X field development
completed and gas sales
commenced
FEB 2008
Oil production up to
6,000 bopd
MAY 2009
Upgraded oil processing
capacity to 10,000 bopd
CB/OS-2 onshore
and offshore facilities
certified for OHSAS
18001:2007 standards
DEC 2009
GBA agreement signed
and sales commenced
CB/OS-2 Milestones
Exploring
to Discover
In addition to ongoing exploration activities in the three
producing blocks — Rajasthan, Ravva and CB/OS-2
— Cairn India has exploration interests in ?ve blocks in
India and one in Sri Lanka, ?ve of which are operated
by the Company.
These blocks are located in the Krishna-Godavari
basin, the Palar-Pennar basin, the Kerala-Konkan
basin, the Cambay basin, the Gujarat-Saurashtra
basin, the Barmer basin, the Jaisalmer basin and
the Mannar basin, off the shore of Sri Lanka. The
Company made two successful bids in the NELP
VIII licensing round, and was provisionally awarded
the KG-OSN-2009/3 and MB-DWN-2009/1 blocks,
subject to GoI approval.
East coast of India
Krishna Godavari Basin
Cairn holds a strong position in the
Krishna Godavari basin with both existing
production from Ravva and prospective
onshore and offshore acreages. Cairn
India’s commitment to this basin was further
consolidated with the award of the sought-
after KG-OSN-2009/3 block in the NELP
VIII bid round, subject to GoI approval.
Krishna Godavari Basin—
PKGM-1 (RAVVA FIELD)
Cairn India Ownership 22.5%
Operator Cairn
A major review of the block-wide additional
potential is being undertaken. A review of
contingent resources was completed in
early 2009, resulting in small but signi?cant
additions to the resource base, although
further drilling will be required to monetise
these. A second study to assess the
additional undiscovered potential within the
?eld, both in untested deeper horizons and
in adjacent structures, is ongoing and is
expected to add new exploration prospects.
Further evaluation of the commerciality of
these prospects is required.
Other Indian Acreage
Kerala-Konkan Basin
KK-DWN-2004/1
Cairn India Ownership 40%
Operator ONGC
A 3,840 line km 2D seismic programme
was completed in 2009 and following
interpretation of the data, 300 km
2
of 3D
acquisition is being planned.
Krishna Godavari Basin—
KG-ONN-2003/1
Cairn India Ownership 49%
Operator Cairn
The Company has ?nalised ?ve prospects
and the drilling of the ?rst of these wells
(Nagaram-1) commenced in February
2010 and was plugged and abandoned in
March 2010. The second well (Daliparu-1)
commenced drilling in the same month.
Drilling of the remaining wells is expected
to be completed by early Q3 CY 2010.
Krishna Godavari Basin—
KG-DWN-98/2
Cairn India Ownership 10%
Operator ONGC
The northern area of this PSC is now in
an appraisal phase, following completion
of the exploration period. The ?rst of three
wells commenced drilling in December
2009 and encountered low saturation
gas. Two further wells are expected to be
drilled by end Q2 CY 2010, as part of the
future plan for commercial development
of this discovered oil and gas resource.
The southern area appraisal period was
completed in December 2009, with the
declaration of commerciality submitted to
the DGH.
Gujarat-Saurashtra basin
Block GS-OSN-2003/1
Cairn India Ownership 49%
Operator ONGC
The offshore well GSA-1 was plugged and
abandoned in Q1 CY 2010.
Cairn India also completed its work
programme commitments in the Ganga
Valley exploration blocks
(GV-ONN-2002/1 and GV-ONN-2003/1) and
Vindhyan basin block (VN-ONN-2003/1).
The Company has since relinquished its
interests in these blocks.
Palar-Pennar Basin—
PR-OSN-2004/1
Cairn India Ownership 35%
Operator Cairn
This block, covering 9,400 km
2
, is located
contiguous to discoveries in Krishna-
Godavari and Cauvery basins. Following
interpretations of 3,100 line km of offshore
2D seismic data, an 800 km
2
of 3D seismic
data was acquired in Q1 CY 2010 in
preparation for a drilling campaign planned
for the Q1 CY 2011.
Rajasthan
Jaisalmer Basin—RJ-ONN-2003/1
Cairn India Ownership 30%
Operator ENI
The operator completed the ?rst exploration
well in mid-2009, which encountered
a sequence of low reservoir quality
Mesozoic and older rocks of limited
hydrocarbon potential. The operator held
discussions with the Directorate General
of Hydrocarbons (DGH) regarding
the remaining work of its programme
commitments. The block has now been
relinquished by Cairn.
Moving Beyond India
Sri Lanka, Mannar Basin—
SL 2007-01-001
Cairn Lanka 100%
A wholly owned subsidiary of Cairn India
Cairn Lanka (Private) Limited, a wholly
owned subsidiary of Cairn India, acquired
1,750 km
2
3D seismic data in the Mannar
Basin in Sri Lanka between December
2009 and January 2010. The programme
ful?ls the commitment of 1,450 km
2
of 3D
seismic data acquisition. The Mannar basin
is an under-explored frontier basin, with
both structural and strati-graphic plays.
The 3D seismic data is currently being
processed. A detailed Metocean study has
recently commenced in preparation for the
exploration drilling of three wells planned to
commence in Q2 CY 2011.
MANAGEMENT DI SCUSSI ON AND ANALYSI S 31
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 32
Cairn provides an
environment that
encourages initiative,
innovation and
rewards performance
to foster "High
Performance"
Our multicultural
workforce is
encouraged to
imbibe the best
practices from
different sectors,
enabling a vibrant
delivery and
execution oriented
work culture
Human
Resources
To build a sound and growing business
in a dif?cult and complex industry,
Cairn India needs people with world-
class capabilities.
The Company’s talent base has
steadily increased, witnessing almost a
three-fold growth in manpower over the
last three years. The Company is now
1,068 people strong with an average
age of 36 years and an average work
experience of 13 years. It is, thus, a
young yet experienced company.
Various initiatives to nurture talent were
launched during the year, the key amongst
them being:
Creation of multiple platforms for learning
Encouraging lateral placements and cross func-
tional expertise
Leadership development
Continuation of competency management
framework buildup
During the year, special emphasis was given to
leadership development, targeting the Company’s
senior management through its ‘Star Trek’
programme.
Cairn’s aggressive growth in FY 2009-10, and
heightened activity for delivery of the Mangala
project, scaled up the human resource needs for
the organisation. This was managed by reducing
cycle time to hire while giving greater emphasis
on the quality of potential employees. A total of
360 people were hired during the year, including
16 graduate engineer trainees from colleges in
Rajasthan.
One of the landmark achievements was man-
aging a workforce of more than 16,000 at the
Rajasthan and Gujarat sites during the peak of
construction activity. The work was conducted
adhering to strict safety standards and the people
were trained on HSE practices to ensure that
Cairn India’s safety policies were strictly complied
with. Attention to details such as induction and
training of the contractor’s workers, innova-
tive safety compliance reward programmes and
proper shelter and water were a part of the initia-
tives employed by the Company. There is more on
this in the next section.
MANAGEMENT DI SCUSSI ON AND ANALYSI S 33
COLLABORATION AND SAFE WORKING PRACTICES ARE A PART OF THE CAIRN CULTURE
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 34
HEALTH AND SAFETY
The safe execution and commissioning of
projects in the upstream and midstream projects
were signi?cant challenges for Cairn India
during the year. It employed a number of
contractors at various work sites to execute the
projects. Around 16,000 workers contributed
approximately 63 million man-hours, which en-
abled Cairn India to achieve signi?cant progress
in the project schedule.
The Company has achieved global industry
top quartile performance in Lost Time Injury
Frequency Rate (LTIFR) and Total Recordable
Incident Frequency Rate (TRIFR) during the year.
It has registered 42 million man-hours continu-
ously without any lost-time injury, which is a
world class performance by any standard.
HSE Training
More than 50,000 contract workers were
trained on HSE induction; more than 10,000
went through the HSE road shows at MPT; and
over 6,000 workers were covered under HSE
training in the midstream project.
Efforts to increase road safety awareness for
employees and contractors continued through
in-house and external training resources.
Around 700 Cairn staff attended road safety
and defensive driving training programmes at
the Gurgaon of?ces, while another 300 did so
at the Company’s assets and project sites.
Cairn Incident Management System
The Cairn Incident Management System was
launched in September 2009 for better reporting
and investigation of incidents and near-misses. It
is based on a user-friendly integrated process for
reporting, investigation and tracking preventative
actions until satisfactory closure and sharing of
the lessons learned. The software tool was devel-
oped in-house. It handles all incidents, accidents
and near-misses that require either a summary
or detailed analysis.
Crude Oil Transportation
Adhering to road safety guidelines and ensur-
ing HSE compliance by contractors engaged
in crude transportation by road tankers were
major challenges. A safety management system
including road risk survey, tanker speci?cations,
driver competency, inspection and an emergency
response plan were set up, and all relevant per-
sonnel were trained on the effective implementa-
tion of the system.
Vehicles operating for Cairn India travelled
some 32 million km during the year, which
amounts to circumnavigating the earth around
800 times. Cairn India has achieved a remark-
able performance in road safety, measured as
MVAFR (Motor Vehicle Accident Frequency
Rate). This was at 1.16 per million km driven,
which is well below the international and na-
tional benchmarks for the industry.
Contractors HSE
Performance Improvements
Although signi?cant efforts were put in place to
maintain safe working at the project sites, our
contractors suffered three fatalities and four lost-
time injuries during the year.
In order to improve contractor performance,
Cairn India has taken the following corrective
actions:
A performance-oriented manual on contractor
HSE requirements has been released
There is more rigorous screening of contractors
before engaging them
Setting up and communicating expectations
and risk based targets for contractors
Creating ownership and oversight of HSE
compliance by Cairn India’s line managers and
supervisors
Having ?nancial incentives/penalties for HSE
performance of suppliers/contractors
Process Safety
To ensure safety of existing assets, Cairn India
has established an internal integrated audit
assurance programme. It includes a review
of health, safety, environment and quality of
individual assets, and their compliance to the
Company’s own standards as well as various ap-
plicable statutory regulations. A multi-disciplin-
ary internal team was involved in the process of
review and assurance and sharing best practices
Health, Safety
and Environment
The Company’s policies on Health, Safety and Environment (HSE) are clear: no
harm to people and no adverse impact on the environment and the communities
in which it operates. Hence, the priorities were excellence in construction safety,
minimising the environmental impact of activities, including those carried out by
contractors, and continuing to improve HSE across all our assets.
NOx Emissions
in Tonnes
0
200
400
600
800
1000
1200
1
0
6
1
7
6
5 8
1
2
1
1
4
1
2009 2008 2007 2006
Lost Time Injury Frequency
Rate (LTIFR)
2009 2008 2007 2006
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0
.
6
0
0
.
3
9
0
.
2
7
0
.
2
6
MANAGEMENT DI SCUSSI ON AND ANALYSI S 35
across assets. A total of six integrated audits were
conducted, apart from walk-through inspections
and ISO-14001 and OHSAS-18001 surveillance
audits.
Ensuring safety of personnel, assets and envi-
ronment during the commissioning of various
projects was one of the major achievements dur-
ing the year. Cairn India has established a gated
process, including compliance veri?cation of
new facilities in the Rajasthan project including
the upstream, MPT and the pipeline facilities.
A Compliance and Assurance Team (CAT) was
constituted. It visits the new facilities and veri-
?es process safety compliance and readiness for
start-up besides ensuring availability of updated
standard operating procedures. Emergency
response procedures were upgraded and tested
for their effectiveness in the course of periodic
emergency drills at all operating and project sites
throughout the year.
Occupational Health
During the year, a number of initiatives were
taken by the occupational health team. A H1N1
prevention campaign was launched throughout
the Company and its contractors to prevent the
spread of the virus. Travellers were screened
medically before permitting them inside the
facilities or of?ces. Alerts were issued on alternate
days throughout the outbreak. In addition, a ma-
jor campaign was launched to prevent heat stress
at all the Company’s sites and assets. Various
precautionary measures were taken to avoid
heat stress related illnesses. Bottled water was
distributed to the contractor workers at sites; and
shades were provided for their rest during hot day
periods.
Periodic occupational and exposure surveys
were conducted at all operating sites in confor-
mance with regulatory requirements. Medical
coverage was provided across all the Company’s
assets and project work sites.
Total Recordable Incident
Frequency Rate (TRIFR)
2009 2008 2007 2006
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2
.
7
5
1
.
6
4
0
.
7
3
0
.
6
4
ENVIRONMENT FRIENDLY MODES OF TRANSPORT
ARE ENCOURAGED IN THE PROCESSING FACILITIES
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 36
ENVIRONMENT
Cairn India recognises the responsibility to
minimise the environmental impact from its
activities. It has worked closely with the project
development contractors in reducing construction
related environmental impacts. The challenges
of proactively managing the situation during the
construction phase of the MPT and the pipeline
project was accomplished through active support
and in partnership with the contractors.
Procedures were developed by Cairn India
highlighting the environmental issues to be
tackled along with the environment manage-
ment plan. The contractors then developed
bridging documents to align their operational
process controls for effective implementation
at site. Training on environmental awareness
as well as job speci?c training was provided to
all workers at site. Cairn India subscribes to the
International Finance Corporation (IFC) perfor-
mance standards.
Independent third party audits were conducted
on a quarterly basis to verify effectiveness of
compliance to the IFC standards. Gaps identi?ed
during the audits were addressed and closed.
In Sri Lanka, an environmental impact assess-
ment study was conducted for the planned seis-
mic surveys. The report was approved by the Sri
Lankan authorities. Ecological surveys were con-
ducted at the river crossings along the Barmer-
Salaya pipeline route, and an environmental
management plan developed and implemented to
avoid any adverse impact on aquatic ecology.
Energy Conservation Initiatives
Several initiatives were taken for conservation of
energy, some of which are listed below:
At Ravva
Solar street lighting poles were installed
resulting in reduction in usage of 615 units of
conventional energy.
Volatile Organic Compounds
in Tonnes
2009 2008 2007 2006
0
50
100
150
1
4
3
8
3
7
1
1
5
6
SO
2
Emissions
in Tonnes
0
1
2
3
4
5
2009 2008 2007 2006
4
.
9
5
0
.
9
5
0
.
7
3
0
.
7
3
MANAGEMENT DI SCUSSI ON AND ANALYSI S 37
PERFORMANCE HI GHLI GHTS
Environmental management plans
developed during various assessments of
the Rajasthan development project have
been consolidated into a comprehensive
Environmental and Social Management
Plan document.
At Ravva, a de-bottlenecking project
was undertaken to achieve the targeted
produced water re-injection. This has
enabled signi?cant reduction in ground
water consumption, and reduced ef?uent
discharge to the sea.
The Company regularly monitored air
emission sources and the ambient air
quality, and was able to maintain emission
levels within regulatory standards. During
construction activities in Rajasthan, dust
suppression was carried out through
sprinkling of treated sewage.
Green House Gas (GHG) emissions were
within targets set at the beginning of the
year notwithstanding a rise in energy
use. GHG emissions intensity was 47.32
tonnes of CO
2
per 1,000 tonnes of
hydrocarbon produced, which was slightly
higher than previous year (40.8) due to
decline in crude production from the Ravva
?eld.
Organic waste convertors were installed
and operated at the Rajasthan construction
site for composting all food waste into
manure, which is being used for greenbelt
development.
In the midstream project, a management
plan was developed and implemented for
protection of the top soil. The top soil after
excavation was stored in a manner to avoid
erosion with runoff. After lowering of the
pipeline sections top soil was re?lled in the
trenches.
All conventional water heaters were replaced
with solar water heaters, thus reducing energy
consumption by 40,000 units per annum.
18 conventional HPSV street light lamps were
replaced with LED lamps in plant street lighting
systems.
At the Gurgaon of?ce
Several energy conservation initiatives have
resulted in saving of 350,342 units of electricity,
thus reducing the of?ce’s carbon footprint. These
included:
Ensuring that all except the emergency lights
are turned off after working hours and on
holidays
Air handling units are started at 7 am and
turned off when the employees have left of?ce
Lights in empty cubicles are turned off after
6 pm
On working days, lights are turned on only by
the employees when they arrive on duty
Direct GHG Emissions
Tonnes CO
2
0
50000
100000
150000
200000
2006
2
0
4
6
0
7
2007
1
3
2
4
7
7
2008
1
2
9
4
7
4
2009
1
6
5
6
5
6
Direct GHG Intensity
Tonnes CO
2
/ 1000 tonnes of
Hydrocarbon produced
2009 2008 2007 2006
0
10
20
30
40
50
4
8
.
4
3
7
.
7
4
0
.
8
4
7
.
3
MAPPING AND SAFEGUARDING THE
FRAGILE BIO-DIVERSITY IN THE
REGION THROUGH ENVIRONMENT
IMPACT ASSESSMENT STUDIES
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 38
BUSINESS RISK
MANAGEMENT PROCESS
The Cairn India Business Risk Management
System, which aims to systematically identify and
document business risks, their signi?cance and
the appropriate controls to mitigate them, has
been implemented for all activities.
OPERATING POLICIES
AND PROCEDURES
Policies have been disseminated to appropriate
departments / functions, as considered essential
by senior management. Procedures have been re-
vised and put in place in many areas. The process
is still ongoing and will be completed and put in
place by the end of CY2010. Cairn India’s opera-
tional activities have been subjected to audits and
peer reviews. Implementation of the recommen-
dations arising from all audit reports is regularly
monitored by senior management.
LEGAL AND COMMERCIAL
PROCEDURES
These have been actively disseminated through-
out the Company. A process is ongoing to ensure
that policies and procedures are in place for all
key activities. A Legal Compliance Management
System has been developed to track regula-
tory compliance requirements. Internal audit
procedures for the Legal Department are being
developed, and will be completed in CY 2010.
CODE OF
BUSINESS ETHICS
The Cairn India Code of Business Ethics has
been distributed throughout the Company in FY
2009-10. The staff has accepted the provisions of
the Code.
FINANCIAL AND
MANAGEMENT REPORTING
Financial policies, standards and delegations of
authority have been disseminated to appropriate
senior management for further dissemination
to staff within their departments. Procedures to
ensure conformance with the policies, standards
and delegations of authority have been put in
place covering all activities. Periodic assessment
of the accuracy and reliability of the budget and
forecast model with respect to actual results have
been implemented. Cairn India’s processes and
?nancial activities are subjected to independent
audits — by internal as well as statutory auditors.
The implementation of the recommendations
arising from all audit reports is regularly moni-
tored by the senior management. Internal and
statutory audit reports and ?ndings, including
comments by management, are regularly placed
before the Audit Committee of the Board of
Directors.
PERFORMANCE SETTING
AND MEASUREMENT
Objectives and Key Performance Indicators have
been drawn up to meet the business plans and
work programme. A system is in place to moni-
tor and report on the progress to the Executive
Committee and the Board of Directors.
BUSINESS CONTINUITY
Emergency response and management plans
are in place for all operations. The IT Disaster
Recovery Plan was implemented in FY 2009-10.
The Gurgaon Of?ce Business Continuity Plan is
well developed. Final release will be by April 2011.
Business Continuity Plans for all other assets and
locations will be in place by end of CY 2010.
Internal Controls
and their Adequacy
During FY 2009-10, Cairn India further developed the use of the SAP system,
which enhanced the Company’s internal control environment. The intranet portal
use was extended and enhancements were made to the business risk management
system in line with best practices.
The review of management processes by third party consultants started in 2008
and continued in 2009. This has resulted in further improvements to business
systems and processes.
ACHI EVEMENTS DURI NG FY 2009- 10
Cairn India’s
processes and
?nancial activities
are subjected to
independent audits;
by internal as well
as statutory auditors.
The implementation
of the recommenda-
tions arising from
all audit reports is
regularly monitored
by the senior
management
MANAGEMENT DI SCUSSI ON AND ANALYSI S 39
0
5,000
15,000
10,000
FY 2010 2007
1
6
,
2
3
0
1
0
,1
2
3
1
1
,1
6
8
Income from Operations
INR million
FY 2009*
EPS
INR
0
4
2
3
1
5
FY 2010 2007
-
0
.1
FY 2009*
3
.
6
5
.
5
Net Profit/Loss
INR million
0
8,000
4,000
6,000
2,000
10,000
FY 2010 2007
-
2
4
5
6
,
8
7
0
1
0
,
5
1
1
FY 2009*
Abridged Financials
FI NANCI AL HI GHLI GHTS
For the Financial Year 2009–2010
Pro?t After Tax at INR 10,511 million
(USD 222 million)
Operating revenues at INR 16,230
million (USD 342 million)
The average oil price realisation was
USD 68.2 per bbl, the average gas
price realisation was USD 4.2 per
mscf; average price realisation per
boe was USD 60.9
Cash available as on 31 March, 2010
was INR 26,313 million (USD 583
million); loan drawn down to 31
March, 2010 against the loan facility
of USD 1.6 billion was INR 33,867
million (USD 751 million)
Gross cumulative Rajasthan
development capex spend USD
2,292 million, of which USD 934
million was spent during FY 2009-10
Completed ?nancing of USD 1.6
billion facility in October 2009
through a unique combination of USD
750 million international borrowing
and a domestic borrowing of INR
4,000 crore (USD 850 million)
The USD 1.6 billion ?nancing deal
was awarded the “Oil & Gas Deal
of the Year” for Asia Paci?c region
by Project Finance International.
The Company’s domestic borrowing
programme was given “AAA” by
CARE for an aggregate amount of
INR 4,000 crore (USD 850 million)
Company and some of its wholly
owned subsidiaries are undertaking
a Scheme of Arrangement. After the
approval and implementation of the
scheme, the Company will directly
own the Indian businesses, which are
currently owned by some of its wholly
owned subsidiaries.
Following the alignment of the Company’s ?nancial year with India’s
tax year the results of the current accounting period cover 12 months
as opposed to the 15 months period last year. One cannot thus readily
compare the results over the two successive periods. Table 2 provides
the consolidated audited results.
2
Consolidated Profit and Loss Account for the Year ended March 31, 2010
All amounts are in INR Million, unless otherwise stated
Year ended
March 31, 2010
For 15 months ended
March 31, 2009
Income from operations 16,230 14,327
Total Income 20,307 19,837
Total Expenditure 8,511 7,197
Earnings before Depreciation
Interest and Tax (EBIDTA)
11,796 12,640
Finance Cost 148 63
DD&A 1,485 2,698
Profit before taxation 10,163 9,879
Profit for the year / period 10,511 8,035
Paid up Equity Share Capital
(face value of Rs.10 each)
18,970 18,967
Reserves excluding Revaluation Reserves 319,250 308,668
Earnings Per Share (in INR)
Basic 5.54 4.31
Diluted 5.52 4.28
Public shareholding
Number of Shares 713,730,341 669,824,025
Percentage of Public Shareholding 37.62% 35.32%
* Figures normalised for 12 months
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 40
What if global crude oil prices crash to below 1.
USD 40 per barrel?
The past year saw crude oil prices stabilise in
the USD 70 per barrel range with some upward
movement. Energy researchers believe that the
demand for energy will continue to increase in
FY 2011. The Secretariat of the Organisation of
Petroleum Exporting Countries (OPEC) states
that, in all likelihood, crude prices of USD 70 per
barrel is longer term equilibrium—and a level
that ought to encourage exploration and produc-
tion of crude oil.
However, a lowering in crude prices can
never be ruled out. The only way to deal with
it is through operational cost advantages for
which Cairn India is well placed. The operational
expense for existing operations at Ravva and CB/
OS-2 is USD 2.10 per barrel; and the Rajasthan
operational expense including the pipeline is es-
timated at approximately USD 5 per barrel. Thus,
the Company should generate shareholder value
even at lower crude oil prices.
What if Train Four at the MPT is delayed? 2.
Train One at MPT was commissioned on 29
August, 2009 followed by Train Two in May
2010. This will be followed by the commission-
ing of Train Three with a capacity of 50,000 by
end June 2010. At the moment, Train Four is
the focus of Cairn India’s project activities at the
MPT, and all efforts are towards adhering to time-
lines. As of today, the Company plans to complete
Train Four in CY 2011 to support the ramp up of
production to the FDP approved rate of 175,000
bopd.
What if crude oil sales are not aligned to the 3.
capacity created at MPT?
As of now, the MPT has the capacity to process
130,000 bopd of crude, which can support
the Mangala approved peak production rate of
125,000 bopd. The Company targets to achieve
this rate during H2 CY 2010. Hence, it sees no
misallocation between sales arrangements and
production capacity at present.
Cairn India is in discussion with existing buy-
ers to enhance volumes, and with other re?ners
in the country to place orders for the Rajasthan
crude. In securing new buyers, the Company has
received consistent support from the GoI. It,
therefore, expects to ?nalise more allocations in
line with Train Four coming into operation in
CY 2011 — when the MPT could produce up to
205,000 bopd, subject to GoI approval.
What if Cairn ran out of funds for the 4.
Rajasthan project?
The capability to secure the USD 1.6 billion facil-
ity in dif?cult times demonstrates the capacity of
Cairn India to ?nancially secure the Rajasthan
development. The strong promoter support,
low ?nancial gearing and increasing cash ?ows
should only improve the ?nancial health of the
organisation. Moreover, lower operating costs of
the pipeline in comparison with trucking will re-
duce transport costs signi?cantly. The Company
continues to explore possibilities for additional
?nancing — if necessary and available at terms
that can enhance long term corporate value.
OUTLOOK
MBA targeted to reach its current approved peak
production level of 175,000 bopd in CY 2011.
The gross operated production of the Company
is expected to increase from 69,059 bopd in
FY 2009–10 to more than 200,000 bopd in FY
2011–12 with more than 400% increase in the
working interest.
CAUTIONARY STATEMENT
Statements in this Management Discussion and
Analysis describing the Company’s objectives,
projections, estimates and expectations may be
‘forward looking statements’ within the meaning
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, signi?cant
changes in political and economic environment in
India, exchange rate ?uctuations, tax laws,
Business
Risks
Given the nature of oil and gas exploration and production, managing risks is
an essential component of our business at Cairn India. The senior employees
and the Board of Directors are aware of the risks faced by the Company; and the
management takes steps when needed to mitigate such risks to the best possible
extent, for example:
Cairn India is well
placed to deal with
low crude oil prices
through operational
cost advantages. The
operational expense
for existing operations
at Ravva and
CB/OS-2 is USD 2.10
per barrel; and the
Rajasthan operational
expense including the
pipeline is estimated
at approximately USD
5 per barrel. Thus,
the Company should
generate shareholder
value even at lower
crude oil prices
The strong promoter
support, low ?nancial
gearing and increasing
cash ?ows should only
improve the ?nancial
health of the
organisation
MANAGEMENT DI SCUSSI ON AND ANALYSI S 41
INSIDE THE EXPORT OIL STORAGE TANK
DURING THE CONSTRUCTION PHASE AT
MANGALA PROCESSING TERMINAL
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 42
Delivering To
The Nation
MAY
PSC
signed
between
SIPD and
GoI
DEC
Cairn
farmed in
for 27.5%
NOV
Saraswati
discovery
F E B
Raagesh-
wari
discovery
J UN
Cairn
acquired
100%
J AN
Mangala
discovery
MAR
Aishwariya
discovery
AUG
Bhagyam
discovery
Mangala Processing Terminal
The World’s Longest Continuously Heated and Insulated Pipeline
1995 1999 2001 2003 2004
THE SITE IN 2004
THE CONCEPT TAKING SHAPE STATE–OF–THE–ART MOBILE RIGS
Cairn and ONGC JV (India) 670 km
LUKOIL Oil Company (Russia) 160 km
Pertamina (Indonesia) 115 km
LUKOIL Oil Company (Russia) 39 km
Aktua Oil (Kazakhstan) 20 km
43 DELI VERI NG TO THE NATI ON
OCT
Cairn submits
development plans to
GoI for its oil ?elds
Cairn’s ?nal concept
of pipeline with a
single 24” crude oil
line and a parallel gas
pipeline to feed gas
to heating stations
every ~18 km
J AN
Raageshwari Deep
gas and NE ?eld
discovery
AP R
First letter of approval
from GoI to shift
delivery point on the
pipeline to the coast
J UN
Work on the pipeline
formally commenced
DEC
Raageshwari East 1z
discovery
ONGC agrees to
share cost of USD
900 million pipeline
to Gujarat
Substantial RoU for
pipeline obtained in
Gujarat
F E B
RoU for pipeline
also obtained for
Rajasthan
AUG
Hon'ble Prime
Minister of India
dedicated Mangala
?eld to the nation.
Production
commences from
Mangala
MAY
Crude oil introduced
into the pipeline
2005 2006 2007 2008 2009 2010
TRAIN ONE AT MPT
CONSTRUCTION OF THE STORAGE TANKS
CURRENT NIGHT VIEW OF THE MPT
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 44
Respect
People are Cairn India’s key asset and the at-
titude of the Cairn team is critical to its business
culture. Cairn’s entrepreneurial spirit is under-
pinned by a depth of knowledge and a strong set
of cultural core values, including integrity, social
and environmental responsibility, teamwork, nur-
turing of individual creativity, risk management
and developing alliances with key partners.
Relationships
These are the key to developing any business and
Cairn India’s success in the region for more than
a decade would not have been possible without
the consistent support of all stakeholders, from
governments, regulators and JV partners to the
people living near our sites. The level of support
and understanding on the ground is something
we have worked hard to bring about in our busi-
ness development activities and we are proud of
what we have achieved — and continue to achieve
— wherever we operate.
Responsibility
Cairn India is operating in many areas that face
economic, social and environmental challenges.
It has the responsibility to understand these
CSR challenges, identify the potential impact
of its activities and, through engaging with
stakeholders, look for opportunities for mutual
bene?t.
OBJECTIVES
Strategic
Designed to establish best practices in the ?eld of
CSR and chartering a new path for others to follow.
Corporate
Social
Responsibility
OVERVIEW
Global organisations are expected not only to make a difference to the economic
development and stability in their countries of operation but also play a key role in
the social and environmental development of the region.
Cairn India has taken a lead in this direction by developing linkages,
relationships and interfaces between “business” and “society”. CSR is an integral
part of the business process and strategy at Cairn from exploration to development
and production. We aim to make a difference where we operate through our
ideology of “Respect, Relationships and Responsibility”.
MANAGEMENT DI SCUSSI ON AND ANALYSI S 45
External
Aimed towards a positive engagement with the
external stakeholders to enlist support for CSR ini-
tiatives and derive a vision striking a balance with
the expectation and needs of external stakeholders.
Internal
Directed towards seeking active participation of
internal stakeholders, namely employees, investors
and supply chain members.
FOCUS AREAS
Cairn India is committed to the Millennium
Development Goals (MDG). As we become an
increasingly signi?cant player in the energy sec-
tor, we will continue to leverage our CSR activities
and bring the bene?ts of energy development to
the communities.
We focus on inclusive growth by fostering
social capital through our health and education
initiatives and creating access to opportunities
and resources through our economic develop-
ment and infrastructure support initiatives.
Infrastructure
We recognise the role of infrastructure in the
macro development perspective and work closely
with local administration and communities
surrounding our areas of operations be it in
Ravva, Rajasthan or Suvali to aid and improve
existing infrastructure facilities From building
roads to improve access to the project site and
water harvesting structures in Rajasthan,
providing health infrastructure and sanitation
facilities in Ravva, Andhra Pradesh, we have tried
to seamlessly merge our social responsibility
initiatives with different stages of our business
development.
Economic Development
In a bid to create a conducive environment for
improved income generating opportunities, more
than 1000 trainees were provided with employ-
ment training for the year under review with 70%
being linked to various employment opportuni-
ties at the conclusion of the programme. These
programmes also include training for semi skilled
persons wherein 80% of the 115 trainees started
their own enterprise. Close to 400 women have
been trained in handicrafts making, majority
from project affected families with market linkage
of local exporters and contractors provided to
approximately 70% for the year under review.
Our dairy initiatives which have positively
impacted the lives of more than 800 families
continued its success through the year gone by.
Approximately 0.5 million litres of milk collection
was generated with revenue of INR 6.9 million
(USD 0.1 million) for the year under review.
Cairn India has tied up with Thomson Reuters
to provide agricultural market intelligence to
10,000 farmers along the pipeline route.
CSR HI GHLI GHTS
IFC linkage programme–
1,065 trainees trained in
employment programmes
Self-employment
programme 361 women
from project affected areas
trained in handicraft and key
chain making
Lives of more than 12,000
villagers touched through
Mobile Health Van project
More than 10,000 farmers
connected through SMS
service of Reuters Market
Light
Dairy Project collected
more than 0.5 million litres
of milk and generated more
than INR 6.9 million as
revenue (USD 0.1 million)
COMMUNITY ENGAGEMENT PROGRAMMES IN PROGRESS
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 46
The information is collated from around 1000
different markets on 250 different types of crops
and weather forecast from 2500 locations. Agri
kiosks as a single-window service for all pre-
harvest and post-harvest requirements of farmers
along with farming inputs from 10 corporate
houses are being set up in association with Multi
Commodity Exchange of India Limited (MCX)
and the Department of Post. For the year under
review, three such centres catering to 70 villages
and 2500 households have been set up.
Education
Initial activity during the exploration phase was
centred around providing educational aids to set-
ting up educational infrastructure like buildings,
computer rooms, text books and so on. Now a
long term approach is being adopted. The focus
is to improve the quality of education imparted
through innovation like “Theatre in Education”
and “English Relay” sessions aimed at enrich-
ing classroom experience. As part of the same
initiative, to inculcate a culture of learning and
reading, the Company set up 40 libraries in
Rajasthan and 20 in Gujarat under the “Room to
Read” initiative.
Health
Our health initiatives have touched more than
12,000 lives for the year under review, directly
and indirectly. While mobile health vans help
augment and support healthcare facilities, health
awareness camps and activities help improve the
health seeking behaviour of the villagers. Almost
100 villages have availed of the mobile health van
facilities in Rajasthan and Gujarat. More than 10
awareness camps attended by nearly 3000 villag-
ers were organised during the year.
Corporate Social Responsibility
Creating values for stakeholders
C
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LATORS
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INVESTORS
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D
° Competitive pay
° Challenging, high quality work
° Opportunity for development
° Continuing professional
development for all employees
° Consultation on organisational
initiatives
° Adherence to
global standards
° Direct interaction for feedback
and performance reporting
° Commercial relationship
° Responsible investment
° Legal compliance
° Fair returns
° Meetings with investment analysts
° IFC audit and annual monitoring
report to IFC
° Participation in surveys for
investment analysts
° Regular reporting
° To be treated fairly and honestly
° Long term relationships
° Opportunities for growth
° Commercial realtionships
° Meetings
° Training and capacity building
° Good neighbours
° Employment opportunities
° Community development
and welfare
° Public consultations
° Grievance mitigation
° Community investment
° Effective communication of
strategy and performance
° Good corporate governance and
risk/opportunity management
° Climate change strategy
° Award of exploration permits
° Granting Operational Permits
° Compliance monitoring
° Clear policies and principles
° Partnerships for progress
° Partnerships for conservation
of the environment
° Community development projects
STAKEHOLDERS
°
Key interest and expectations
°
Engagement
MANAGEMENT DI SCUSSI ON AND ANALYSI S 47
PARTNERING FOR SUCCESS
We build different levels of partnership looking at
the local needs and deliver highend programme
towards improving lives. Here are some of our
key partnerships and programmes:
International Finance Corporation (IFC)
IFC is a part of the World Bank group that provides
investment and advisory services to the private sec-
tor in developing countries. The Cairn-IFC Linkage
Programme with the support of the Government
of Rajasthan aims at maximising the development
impacts of Cairn’s investments in Barmer.
Thomson Reuters
This partnership offers localised, customised and
personalised information on agriculture to farmers
on their mobile phones. The model is one of the
six initiatives supported and recognised by United
Nations Development Programme (UNDP) as part
of its Millennium Development Goals.
Helpage India
The Helpage alliance with Cairn is based on
providing preventive and curative healthcare to
communities in Gujarat and Rajasthan.
MCX and Dept of Post, GoI
MCX is the fourth largest derivatives exchange in
Asia and sixth largest commodity exchange in the
world. The postal department of Government of
India has the largest postal network in the world.
The partnership aims to reach out to the 40,000
farmers along the pipeline route.
Room to Read India Trust
A global network which has bene?tted four
million children in nine countries with their inno-
vative model of infotainment through libraries.
Society to Uplift Rural Economy
One of the oldest and most renowned non-pro?t
organisation working in the Barmer region with
the local community for more than six decades.
WE ENCOURAGE THE USE OF
INNOVATIVE METHODS TO IMPART
EDUCATION
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 48 48
Board of
Directors
COMPOSITION, BOARD
PROCEDURE AND INFORMATION
SUPPLIED TO THE BOARD
As on 31 March, 2010, the Board comprised
10 Directors, including seven non-executive
Directors, four of whom are also independent. In
terms of the Securities and Exchange Board
of India’s (SEBI’s) revised Clause 49 of the
Listing Agreement, the Company is required to
increase the number of independent Directors to
at least half the strength of the Board. It is actively
engaged in the process of inducting two more
independent Directors with requisite expertise. It
intends to have half of the Board comprising inde-
pendent Directors before the end CY 2010.
The Chairman of the Board is a non-executive
Promoter Director. All non-executive Directors are
renowned professionals, having diversi?ed experi-
ence and expertise in ?nance, economics, oil and
gas exploration and general administration.
The Board has three executive Directors, namely
Messrs. Rahul Dhir, Indrajit Banerjee and Rick
Bott. The executive Directors have been appointed
for a term of ?ve years, except Mr Rick Bott, who
has a three-year contract.
The composition of the Board as on 31 March,
2010 is given in Table 1. None of the Directors is
a member of more than 10 Board-level commit-
tees of Indian public limited companies; nor are
they chairmen of more than ?ve committees in
which they are members. Moreover, none of the
Directors is related to the other, or to any other
employee of the Company.
During the period under review, Mr Philip
Tracy ceased to be an alternate Director to Sir
William B. B. Gammell effective 26 May, 2009,
The corporate governance philosophy of Cairn India Limited (‘Cairn India’ or ‘the
Company’) is structured to institutionalise policies and procedures that enhance
the ef?cacy of the Board and inculcate a culture of accountability, transparency
and integrity across the Cairn India group as a whole.
1
Composition of the Board
As on 31 March, 2010
S. No. Name of the Director Executive/ Non-Executive
No. of other
Directorships
Memberships/Chairmanships
of Board-level Committees**
Indian Others* Member Chairman
1 Sir William B.B. Gammell Chairman, Non-Executive Director - 29 - -
2 Ms Jann Brown Non-Executive Director - 41 1 -
3 Mr Malcolm Shaw Thoms Non-Executive Director - 26 - -
4 Mr Aman Mehta Non-Executive Independent Director 6 4 3 3
5 Mr Naresh Chandra Non-Executive Independent Director 16 3 9 1
6 Dr Omkar Goswami Non-Executive Independent Director 11 1 7 2
7 Mr Edward T. Story Jr Non-Executive Independent Director - 1 2 -
8 Mr Rahul Dhir Managing Director and CEO - 5 1 -
9 Mr Indrajit Banerjee Executive Director and CFO - 29 - -
10 Mr Rick Bott Executive Director and COO - - - -
Notes
* Directorships in companies registered in other jurisdictions (listed, unlisted and private limited companies).
** Only the Audit Committee and the Shareholders’ / Investors’ Grievance Committee of Indian public limited companies have been considered
Report on
Corporate Governance
49 REPORT ON CORPORATE GOVERNANCE
and was re-appointed in the same post effective 27
May, 2010.
The Company follows a structured pro-
cess of decision-making by the Board and its
Committees. The meeting dates are usually
?nalised well before the beginning of the year.
Detailed agenda, management reports and other
explanatory statements are circulated at least
seven days ahead of the meeting. To address
speci?c urgent needs, meetings are also called
at shorter notice but never less than a minimum
of seven days. In some instances, resolutions are
passed by circulation. The Board is also free to
recommend inclusion of any matter in the agenda
for discussion. Senior management of?cials are
called to provide additional inputs on the matters
being discussed by the Board/ Committee.
The Board has complete access to all relevant
information of the Company. The quantum
and quality of information supplied by the
management to the Board goes well beyond the
minimum requirement stipulated in Clause 49.
All information, except critical price sensitive
information (which is handed out at the meet-
ings), is given to the Directors well in advance of
the Board and Committee meetings.
NUMBER OF BOARD MEETINGS
AND THE ATTENDANCE OF DIRECTORS
During the year ended 31 March, 2010, the Board
of Directors met eight times on: 27 May, 2009,
29 July, 2009, 18 August, 2009, 22 October,
2009, 29 October, 2009, 9 December, 2009, 28
January, 2010 and 25 March, 2010. The maxi-
mum gap between any two meetings was less
than three months.
Table 2 gives the Directors’ attendance at
Board Meetings and the Annual General Meeting
(AGM) during the year ended 31 March, 2010.
DIRECTORS’ REMUNERATION
Table 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 / Directors’ remuneration paid / payable to
them. The non-executive Directors are eligible for
commission up to 1% of net pro?ts as permitted
by the Companies Act, 1956 and as approved by
shareholders in the annual general meeting held
on 20 September, 2007.
During the year under review, 65,845 options
were granted to Mr Indrajit Banerjee under the
Cairn India Performance Option Plan, 2006
(CIPOP). These were granted on the basis of his
2
Directors' Attendance Record for year ended 31 March, 2010
Name
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 * 8 7 Yes
Ms Jann Brown* 8 7 Yes
Mr Rahul Dhir 8 8 Yes
Mr Malcolm Shaw Thoms* 8 7 Yes
Mr Aman Mehta 8 8 Yes
Mr Naresh Chandra 8 8 Yes
Dr Omkar Goswami 8 7 Yes
Mr Indrajit Banerjee 8 8 Yes
Mr Rick Bott 8 8 Yes
Mr Edward T. Story Jr* 8 4 No
Note * Also participated in the proceedings of one Board Meeting through audio conference.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 50
performance in contributing to business results,
organisational strength and market position of
the Company and criticality of the role assigned.
The vesting period is minimum three years, sub-
ject to the ful?lment of performance conditions
in the Plan. The exercise period is three months
from the date of vesting of options.
In addition, 155,341 cash options were granted
to Mr Rick Bott under the Phantom Performance
Option Plan.
No options were exercised by the executive
Directors during the year under review.
SHAREHOLDING OF NON-EXECUTIVE
OR INDEPENDENT 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. Apart from this, none of the non-
executive or independent Directors holds any equity
shares or convertible instruments of the Company.
CODE OF CONDUCT
The Board of Directors has laid down a ‘Code of
Business Ethics’ which is applicable to everyone
in the Cairn India Group including employees,
contractors and Directors. Details of the Code are
available at www.cairnindia.com. All Directors and
senior management have af?rmed compliance
with the Code for the year ended 31 March, 2010.
COMMITTEES OF THE BOARD
Audit committee
The Company has an adequately quali?ed
Audit Committee. As on 31 March, 2010, the
Committee comprised ?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
?ve members are independent. All members have
the ?nancial knowledge and expertise mandated
by Clause 49 of the Listing Agreement. 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.
Mr Indrajit Banerjee, Executive Director and
CFO, Mr Raj Agarwal, Partner, S. R. Batliboi and
Co., 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. During the year
ended 31 March, 2010, the Audit Committee
met ?ve times: on 27 May, 2009, 29 July, 2009,
29 October, 2009, 28 January, 2010 and 25
March, 2010. The attendance record of the Audit
Committee is given in Table 4. Mr Aman Mehta,
Chairman of the Audit Committee, was present
at the Company’s last AGM held on 18 August,
2009.
Shareholders’ / Investors’
Grievance Committee
As on 31 March, 2010, the Committee comprised
three Directors: Dr Omkar Goswami (Chairman),
Mr Edward T. Story and Mr Rahul Dhir. Mr Story
was co-opted to the Committee as a member in
place of Mr Naresh Chandra with effect from 29
October, 2009.
The Chairman of the committee is an inde-
pendent Director. Ms Neerja Sharma, Company
3
Directors’ Remuneration
For the year ended 31 March, 2010 (in INR)
Name Salary Perquisites Bonus & Performance
incentives
Retirement
Bene?ts
Commission Sitting
Fee
Total
Sir William B. B. Gammell - - - - - - -
Ms Jann Brown - - - - - - -
Mr Rahul Dhir
1
34,995,023 67,616,900 28,812,876 4,201,892 - - 135,626,691
Mr Indrajit Banerjee
2
13,207,800 - 12,644,829 1,425,612 - - 27,278,241
Mr Rick Bott
3
23,969,235 68,736,308 6,497,197 2,887,725 - - 102,090,465
Mr Malcolm Shaw Thoms - - - - - - -
Mr Aman Mehta
4
- - - - - 340,000 340,000
Mr Naresh Chandra
4
- - - - - 340,000 340,000
Dr Omkar Goswami
4
- - - - - 320,000 320,000
Mr Edward T. Story Jr - - - - - 160,000 160,000
Notes
1
Mr Rahul Dhir’s salary as stated above includes salary from Cairn Energy India Pty Limited of INR 133,226,691
2
Mr Indrajit Banerjee’s salary as stated above includes salary from Cairn Energy India Pty Limited of INR 25,478,241. He was also paid an ex-gratia amount of
INR 25,478,362.
3
Mr Rick Bott’s salary as stated above includes salary from Cairn Energy India Pty Limited of INR 100,890,465. He was also paid a milestone linked bonus of
INR 62,653,500.
4
Mr Aman Mehta, Dr Omkar Goswami and Mr Naresh Chandra were paid a remuneration of INR 586,375 each from Cairn Energy Holdings Limited,
Cairn Energy Hydrocarbons Limited & Cairn Energy Asia Pty Limited, respectively, in their capacity as directors in these subsidiary companies.
51
Secretary, is the Compliance Of?cer of the
Company and the Secretary of the Committee.
The Committee met once during the ?nancial
year on 25 March, 2010. Dr Omkar Goswami and
Mr Rahul Dhir attended the said meeting. The
Company has appointed Link Intime India Private
Limited as the Registrar and Transfer Agent to
handle investor grievances in coordination with
the Compliance Of?cer. All grievances can be
addressed to the Registrar and Share Transfer
Agent. The Company monitors the work of the
Registrar to ensure that the investor grievances are
settled expeditiously and satisfactorily. The status
of complaints received during the 12-month period
ended 31 March, 2010 by the Registrar and Share
Transfer Agent is given in Table 5.
Remuneration Committee
The 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 executive Directors and
senior executives one level below the Board. As
on 31 March, 2010, the Remuneration Committee
comprised ?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 were independent Directors. Ms Neerja
Sharma, Company Secretary, is the Secretary to
the Committee.
The objective of the Company’s remuneration
policy is to ensure that Cairn India’s executive
Directors and senior executives are suf?ciently
incentivised for enhanced performance. In
determining this policy, the Committee takes into
account factors it deems relevant and gives due
regard to the interests of shareholders and to the
?nancial and commercial health of the Company.
It ensures that levels of remuneration are suf?-
cient to attract and retain senior executives of the
quality required to run the Company successfully.
Within the terms of the agreed policy, the
Committee determines the entire individual re-
muneration packages for the executive Directors.
The Committee is also responsible for overseeing
the Company’s share option schemes and long
term incentive plans, including determining the
eligibility for bene?ts and approving total annual
payments.
During the year ended 31 March, 2010, four meet-
ings of the Remuneration Committee were held:
on 27 May, 2009, 29 July, 2009, 29 October, 2009
and 25 March, 2010. The attendance record of the
Remuneration Committee is given in Table 6.
Nomination Committee
As on 31 March, 2010, the Nomination Committee
comprised ?ve Directors: Sir William B.B.
Gammell (Chairman), Mr Rahul Dhir, Ms Jann
Brown, Mr Malcolm Shaw Thoms and Mr Edward
T. Story.
The functions of the Nomination Committee are:
Reviewing the structure, size and composition
of the Board, and make recommendations to the
Board with regard to changes, if any.
Evaluating the balance of skills, knowledge
and experience of the Board and, in light of this
4
Attendance Record of Audit Committee
For the year ended 31 March, 2010
Name 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 5 5
Mr Naresh Chandra Independent Director Member 5 5
Dr Omkar Goswami Independent Director Member 5 4
Ms Jann Brown Non-executive Director Member 5 5
Mr Edward T Story Independent Director Member 5 4
5
Complaints Received and Attended
During the year ended 31 March, 2010
Nature of Complaint No. of Complaints
Received Attended Pending
Non-receipt of refund orders /
revalidation / demat credit
23 23 NIL
Referred by SEBI 10 10 NIL
Referred by Stock Exchanges - - NIL
Received from investors 44 44 NIL
Non-receipt of the Annual Report 11 11 NIL
Total 88 88 NIL
REPORT ON CORPORATE GOVERNANCE
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 52
evaluation, preparing a description of the role and
capabilities required for particular appointments.
Identifying and nominating, for the approval
of the Board, appropriate individuals to ?ll Board
vacancies as and when they arise.
Reviewing time required from each non-exec-
utive Director, and assessing whether s(he) has
given suf?cient commitment to the role.
Considering succession planning taking into
account the challenges and opportunities facing
the Company, and what skills and expertise are
needed from members 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
6
Attendance Record of Remuneration Committee
For the year ended 31 March, 2010
Name Position Status
No. of meetings
held
No. of meetings
attended
Mr Naresh Chandra Independent Director Chairman 4 4
Sir William B.B. Gammell Non-Executive Director Member 4 4
Dr Omkar Goswami Independent Director Member 4 4
Mr Aman Mehta Independent Director Member 4 4
Mr Malcolm Shaw Thoms Non-Executive Director Member 4 4
7
Details of Directorship and Committee Positions held in other Companies
S. No. Name of Director Name of the Company in which Directorship held Committee Chairmanship* Committee Membership*
1 Mr Rahul Dhir Cairn India Holdings Limited
CIG Mauritius Holding Pvt. Ltd.
CIG Mauritius Pvt. Ltd.
Cairn Lanka (Pvt.) Ltd.
Sunborne Energy Holdings LLC
2 Mr Indrajit Banerjee Cairn Energy Holdings Limited
Cairn Energy Hydrocarbons Limited
Cairn Exploration (No. 2) Limited
Cairn Exploration (No. 4) Limited
Cairn Exploration (No. 6) Limited
Cairn Exploration (No. 7) Limited
Cairn Energy Gujarat Block 1 Limited
Cairn Energy Discovery Limited
Cairn Petroleum India Limited
Cairn Energy Cambay B.V.
Cairn Energy India West B.V.
Cairn Energy Gujarat B.V.
Cairn Energy India Holdings B.V.
Cairn Energy Group Holdings B.V.
Cairn Energy Netherlands Holdings B.V.
Cairn Energy Gujarat Holding B.V.
Cairn Energy India West Holding B.V.
Cairn Energy Cambay Holding B.V.
Cairn Energy Australia Pty Limited
CEH Australia Limited
Cairn Energy Asia Pty Limited
Cairn Energy Investments Australia Pty Limited
Wessington Investments Pty Limited
Sydney Oil Company Pty Limited
Cairn Energy India Pty Limited
CEH Australia Pty Limited
CIG Mauritius Holding Pvt. Ltd.
CIG Mauritius Private Limited
Cairn Lanka (Pvt.) Limited
Note * Only Audit and Shareholders’/Investors’ Grievance Committees included
53
service and involvement outside Board meetings.
Management
MANAGEMENT DISCUSSION
AND ANALYSIS
This 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 prepara-
tion of its ?nancial statements. No material ?nan-
cial and commercial transactions were reported
by the management to the Board, in which the
management had any personal interest that either
had or could have had a con?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 con?ict with the interest of the Company at
large.
There were no penalties or strictures imposed
on the Company by the stock exchange, the 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 regulations on
prevention of insider trading, the Company has
instituted a comprehensive Code of Conduct for its
management and staff. The Code lays down guide-
lines which advise management and staff on proce-
dures to be followed and disclosures to be made
while dealing with shares of the Company, and
cautions them on 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 CERTIFICATION
The CEO’s and CFO’s certi?cation of the
?nancial statements and a declaration that all
Board members and senior management have
af?rmed compliance with the Company’s Code
of Business Ethics for the year ended 31 March,
2010 is enclosed at the end of this chapter.
SUBSIDIARY COMPANIES
All subsidiaries of the Company are unlisted
wholly owned foreign companies. These subsid-
iaries have their own Board of Directors hav-
ing 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 regularly
monitors the performance of such companies.
Shareholders
DISCLOSURES REGARDING
APPOINTMENT OR RE-APPOINTMENT
OF DIRECTORS
Brief pro?les of the persons sought to be
appointed / re-appointed as Directors at the
ensuing AGM of the Company are given below.
Mr Rahul Dhir
Mr Rahul Dhir, 44, joined Cairn India in May
2006 as the Chief Executive Of?cer and was
appointed the Managing Director on 22 August,
2006. He completed his degree in Bachelor
of Technology from the Indian Institute of
Technology, Delhi. He went on to complete his
M.Sc from the University of Texas at Austin
and MBA from the Wharton Business School
in Pennsylvania. Mr Dhir started his career as
an oil and gas reservoir engineer before moving
into investment banking. He has worked at SBC
Warburg, Morgan Stanley and Merrill Lynch.
Before joining Cairn India, he was the Managing
Director and Co-Head of Energy and Power
Investment Banking at Merrill Lynch.
Mr Indrajit Banerjee
Mr Indrajit Banerjee, 54,was appointed as an
Additional Director on 26 February, 2007 and
as the Executive Director and Chief Financial
Of?cer on 1 March, 2007. He graduated from the
University of Calcutta with a Bachelor’s Degree
in Commerce. An associate member of the
Institute of Chartered Accountants of India, Mr
Banerjee started his career at PriceWaterhouse
Coopers in Calcutta in 1979. He has held several
senior positions throughout his career, includ-
ing 17 years at the Indian Aluminium Company,
formerly part of the Alcan Group and at Lucent
Technologies (India). Before joining Cairn India,
he was President-Finance and Planning at
Lupin Limited.
The directorships and committee positions held
by these two Directors as on 31 March, 2010 are
detailed in Table 7.
REPORT ON CORPORATE GOVERNANCE
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 54
MEANS OF COMMUNICATION
Financial Results
The Company intimates un-audited as well as au-
dited ?nancial results to the Stock Exchanges, im-
mediately after the Board meetings 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 ?nancial results are also displayed on the
Company’s website: www.cairnindia.com and
posted on the corporate ?ling and dissemination
system at www.corp?ling.co.in.
News Releases,
Analyst Presentation, etc.
Of?cial news releases, detailed presentations
made to media, institutional investors, ?nancial
analysts etc. are displayed on the Company’s
website: www.cairnindia.com.
Website
The 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.
GENERAL BODY MEETINGS
The Company in its brief history has had three
AGMs and four Extraordinary General Meetings
(EGMs). The forthcoming AGM is scheduled to
take place on 15 September, 2010. The desired
details in respect of general meetings are given in
Table 8.
SPECIAL RESOLUTIONS PASSED
IN THE LAST THREE YEARS
At AGMs
At the AGMs held on 20 September, 2007 and
25 June, 2008, the following special resolutions
were passed:
20 September, 2007
Keeping register of members and other related
documents
Consent of shareholders for issue of further
securities
Payment of commission to non-executive
Directors
25 June, 2008
Keeping register of members and other related
documents
At EGMs
At 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, 2006
Investment in shares of Cairn India Holdings
Limited
21 September, 2006
Amendment in the memorandum of associa-
tion of the Company
Amendment in the articles of association of the
Company
Appointment of non-retiring Directors
Issue of equity shares of the Company on a
private placement basis
Issue of equity shares of the Company by an
initial public offering
Increase in the limit of foreign institutional
investment in the Company
Investment in the shares of Cairn India
Holdings Limited
17 November, 2006
Appointment of Chief Executive Of?cer of the
Company
Employee stock option plans
Amendment in the articles of association of the
Company
Remuneration of non-executive Directors
8
Location and time of general meetings
Financial Year Location of the meeting Date Time
AGMs
2006 Birla Matushri Sabhagar, 19 New Marine Lines, Mumbai 20 September, 2007 11:00 AM
2007 Birla Matushri Sabhagar, 19 New Marine Lines, Mumbai 25 June, 2008 11:00 AM
2008-09 Birla Matushri Sabhagar, 19 New Marine Lines, Mumbai 18 August, 2009 11:00 AM
EGMs
2006 50 Lothian Road, Edinburgh 08 September, 2006 03.00 PM
2006 50 Lothian Road, Edinburgh 21 September, 2006 02.00 PM
2006 50 Lothian Road, Edinburgh 17 November, 2006 02.15 PM
2008 Birla Matushri Sabhagar, 19, New Marine Lines, Mumbai 16 April, 2008 02.30 PM
55
16 April, 2008
Allotment of the equity shares of the Company
on preferential basis
RESOLUTIONS PASSED THROUGH
POSTAL BALLOT LAST YEAR
During the year under review, the Company
passed two resolutions through postal ballot,
as per the details provided below:
1. Special resolution for shifting of
registered of?ce from the State of
Maharashtra to the State of Rajasthan
All members on the books as of 29 May, 2009
were sent a postal ballot form along with post-
age pre-paid business reply envelope. All replies
received up to close of working hours on 11 July,
2009 were considered. 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 12 July, 2009
under the scrutiny of Mr Grover, and the result of
postal ballot was declared by the Chairman of the
proceedings on 17 July, 2009 at registered of?ce
of the Company. Table 9.1 shows the details of
the voting pattern.
2. Special resolution for utilisation of the
share premium account, not exceeding
INR 15,000 crore, of the Company to
adjust the goodwill arising pursuant to
the Scheme of Arrangement between
Cairn India Limited, Cairn Energy India
Pty Limited, Cairn Energy India West
B.V., Cairn Energy Cambay B.V. and Cairn
Energy Gujarat B.V. and their respective
shareholders & creditors.
All members on the books as of 8 January,
2010 were sent a postal ballot form along with
postage pre-paid business reply envelope. All
replies received up to close of working hours
on 24 February, 2010 were considered. All
postal ballot forms were kept in the control of
the scrutiniser, Mr Nesar Ahmad, a practising
Company Secretary. The postal ballots were
opened on 25 February, 2010 under the scrutiny
of Mr Ahmad, and the result of postal ballot was
declared by the Chairman of the proceedings
on 2 March, 2010 at the registered of?ce of the
Company. Table 9.2 shows the details of the vot-
ing pattern.
COMPLIANCE WITH CLAUSE 49
Mandatory Requirements
The Company is fully compliant with the applica-
ble mandatory requirements of the revised Clause
49 except with respect to composition of the Board
as stated earlier in this chapter, which it intends to
comply with fully in the course of CY 2010.
Non-Mandatory Requirements
Remuneration Committee — The Board has
constituted a Remuneration Committee, details of
which have been given earlier.
Audit quali?cations — The Company’s ?nancial
statements are free from any quali?cations by the
Auditors.
Training of Board Members — The Board of
Directors is periodically updated on the business
model, company pro?le, and the risk pro?le of
the business parameters of the Company.
Whistleblower Policy — During the year under
review, the Company formulated and adopted
a Whistleblower Policy, to support the Code of
Business Ethics. The policy is designed to enable
employees, directors, consultants and contrac-
tors to raise concerns internally at a signi?cantly
senior level and to disclose information which
the individual believes, shows malpractice or
wrongdoing which could affect the business or
reputation of the Company. Any allegations that
fall within the scope of the concerns identi?ed are
investigated and dealt with appropriately.
9.1
Voting Result of Special Resolution passed through Postal Ballot
Number of valid postal ballot forms received 8,432
Votes in favour of the resolution 1,468,110,709
Votes against the resolution 68,855
Resolution passed by % of valid votes received 99.99
9.2
Voting Result of Special Resolution passed through Postal Ballot
Number of valid postal ballot forms received 6,218
Votes in favour of the resolution 577,867,631
Votes against the resolution 40,909
Resolution passed by % of valid votes received 99.70
REPORT ON CORPORATE GOVERNANCE
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 56
ANNUAL GENERAL MEETING
Date 15 September, 2010
Time 11:00 AM
Venue:Rangsharda Auditorium,
K C Marg, Bandra Reclamation,
Bandra West, Mumbai-400050
FINANCIAL CALENDAR
For the year ended 31 March, 2010,
results were announced on
29 July, 2009: First quarter
29 October, 2009: Second quarter
28 January,2010 : Third quarter
27 May, 2010 :Fourth (last) quarter and the
?nancial year’s results
For the year ending 31 March, 2011,
results will be announced by
Last week of July 2010: First quarter
Last week of October 2010: Half yearly
Last week of January 2011: Third quarter
Last week of May 2011: Fourth quarter and full
?nancial year’s results.
BOOK CLOSURE
The dates of book closure are from Wednesday,
8 September, 2010 to Wednesday, 15 September,
2010, inclusive of both days.
LISTING
The 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 ?nancial year 2010-
11 has been paid to BSE and NSE. The stock codes
are given in Table 1 below.
MARKET PRICE DATA
Table 2 and Chart A give the details.
DISTRIBUTION OF SHAREHOLDING
Tables 3 and 4 list the distribution of the
Shareholding and Shareholding pattern of the
Company by size and by ownership class as on 31
March, 2010. Further details of top twenty share-
holders are given in Table 5.
Additional
Shareholder
Information
57 ADDI TI ONAL SHAREHOLDER I NFORMATI ON
1
Stock Exchange codes
Name of the Stock Exchange Stock Code
The National Stock Exchange of India CAIRN
Bombay Stock Exchange Limited 532792
2
High, Low and Volume of Company’s Shares traded
During the year ended 31 March, 2010 at the BSE and the NSE
Months BSE NSE
High Low No. of Shares traded High Low No. of Shares traded
April 2009 214.0 178.5 13,869,825 211.6 178.5 71,683,250
May 2009 239.9 192.0 49,252,984 240.5 190.5 164,417,628
June 2009 273.7 220.0 31,626,399 274.0 220.1 144,248,354
July 2009 252.0 201.0 17,376,062 252.0 200.6 79,285,187
August 2009 272.5 230.0 17,168,054 272.5 232.1 64,997,559
September 2009 275.25 253.5 11,576,332 275.5 253.2 55,393,930
October 2009 301.45 253.25 12,239,989 301.0 252.6 55,763,961
November 2009 288.0 254.0 7,365,798 288.9 254.2 37,112,191
December 2009 294.9 265.7 7,828,273 300.1 266.1 39,358,739
January 2010 310.0 258.3 10,288,360 310.0 258.0 59,917,270
February 2010 273.4 248.0 7,718,586 274.0 248.1 46,265,139
March 2010 307.8 261.9 9,884,708 307.6 261.4 62,073,392
#HARTô!ôôôôô3HAREô0ERFORMANCEôVSô.IFTYôANDô3ENSEX
0
50
100
150
200
Calrn
Nlfty
Sensex
Apr 2009 May 2009 1un 2009 1u| 2009 Aug 2009 Sep 2009 Oct 2009 Nov 2009 Dec 2009 1an 2010 Feb 2010 Mar 2010
Note Share prices, Nifty and Sensex indexed to 100 as on the ?rst working day of the ?nancial year 2009-10, i.e.1 April, 2009
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 58
DEMATERIALISATION OF SHARES
As on 31 March, 2010, 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 DATES
AND LIKELY IMPACT ON EQUITY
There are no outstanding GDRs / ADRs / war-
rants or any convertible instruments issued by the
Company. However, the Company has outstand-
ing employee stock options, the details of which
as on 31 March, 2010 are given in Table 6.
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 aggregat-
ing INR 52,608 million at the issue price of INR
160. The Company also placed INR 33,547 million
through a pre-IPO placement and exercised its
Green Shoe Option for 13,085,041 shares. The
total proceeds aggregated INR 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 INR
25,345.9 million on 22 April, 2008. The shares
were issued at a premium of INR 214.30 per share.
During the year under review, the Company
has received INR 20,363,110 as subscription
amount, pursuant to exercise of stock options
granted to employees.
During the ?nancial year ended 31 March,
2010, the Company borrowed USD 750 million
from a consortium of overseas commercial banks
led by Standard Chartered and International
Finance Corporation. Further, a domestic
3
Distribution of Shareholding
As on 31 March, 2010
Number of Shares No of Shareholders % of Shareholders Total Shares % of Shares
Up to 5,000 243,914 99.55 41,283,100 2.18
5,001-10,000 360 0.15 2,608,352 0.14
10,001-20,000 173 0.07 2,423,262 0.13
20,001-30,000 87 0.03 2,181,380 0.11
30,001-40,000 52 0.02 1,804,181 0.09
40,001-50,000 37 0.01 1,688,050 0.09
50,001-100,000 90 0.04 6,500,488 0.34
100,001 and above 309 0.13 1,838,485,319 96.92
Total 245,022 100 1,896,974,132 100
4
Shareholding Pattern by Ownership
As on 31 March, 2010
No. of Equity Shares
Face Value INR 10/- Each
Shares Held
(%)
A. PROMOTER HOLDING
Indian Promoters - -
Foreign Promoters 1,183,243,791 62.38
Persons acting in concert - -
B. NON-PROMOTER HOLDING
A Banks, Financial Institutions, Insurance Companies
(Central /State Govt. Institutions / Non-Government Institutions)
90,434,695 4.77
B Foreign Institutional Investors 194,051,172 10.23
C Public 43,757,767 2.31
D Mutual Funds 53,758,180 2.83
E NRI (Repatriable) 1,069,150 0.05
F NRI (Non-Repatriable) 380,995 0.02
G Bodies Corporate 35,457,071 1.87
H Foreign Bodies Corporate 290,481,473 15.31
I Clearing Member 1,536,702 0.08
J Directors/relatives 2,776,156 0.15
K Trusts 26,980 -
Grand Total 1,896,974,132 100.00
59 ADDI TI ONAL SHAREHOLDER I NFORMATI ON
7
Status of Equity Shares lying in the Suspense Account
S. No. Particulars
No. of
Shareholders
No. of
Shares
1
Aggregate number of shareholders and the outstanding shares in the
suspense account lying as on 1 April, 2009
72 12,495
3
No. of shareholders who approached for transfer of shares from sus-
pense account during the 12 months period ended 31 March, 2010
15 2,135
4
No. of shareholders to whom shares were transferred from suspense ac-
count during the 12 months period ended 31 March, 2010
15 2,135
5
Aggregate number of shareholders and the outstanding shares in the
suspense account as on 31 March, 2010
57 10,360
5
Top Twenty Shareholders
As on 31 March, 2010
S.No. Name No. of Equity Shares Shares Held (%)
1 Cairn UK Holdings Limited 1,183,243,785 62.38
2 Petronas International Corporation Limited 283,431,438 14.94
3 Life Insurance Corporation of India 46,672,794 2.46
4 LIC of India - Market Plus 14,271,145 0.75
5 Europaci?c Growth Fund 12,812,190 0.68
6 LIC of India Market Plus – 1 12,154,468 0.64
7 Merrill Lynch International Investment Fund 11,745,952 0.62
8 ICICI Prudential Life Insurance Company Ltd 10,359,774 0.55
9 International Finance Corporation 7,050,035 0.37
10 Schroder International Selection Fund Emerging Asia 6,751,530 0.36
11 New World Fund Inc 6,587,000 0.35
12 Barclays Capital Mauritius Limited 5,702,763 0.30
13 PRU India Equity Open Limited 5,663,234 0.30
14 Norges Bank A/C Government Petroleum Fund 5,556,960 0.30
15 State Bank of India (Equity) 5,222,170 0.28
16 LIC of India Money Plus 5,211,809 0.27
17 Franklin Templeton Investment Funds 4,554,429 0.24
18 Metlife India Insurance Company Limited 4,377,029 0.23
19 Societe Generale 4,144,345 0.22
20 SBI Life Insurance Co. Limited 4,126,623 0.22
6
Outstanding ESOPs
ESOP Scheme No. of outstanding options Last date for exercise Exercise Price (INR)
CIESOP 1,981,770 31 December, 2016 160.00
3,915,607 19 September, 2017 166.95
3,502,555 28 July, 2018 227.00
18,388 9 December, 2018 143.00
5,227,889 28 July, 2019 240.05
CIPOP* 168,382 31 March, 2010 10.00
777,496 19 December, 2010 10.00
714,237 28 October, 2011 10.00
966,715 28 October, 2012 10.00
CISMP 2,238,077 18 months after the vesting date, which
will occur on Company achieving 30 days’
consecutive production of over 150,000
bopd from the Rajasthan Block
33.70
Total 19,511,116
Note * The vesting period is a minimum of three years, subject to the ful?lment of performance conditions as de?ned
in the Plan. The exercise period is three months from the date of vesting of options. 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 19,511,116.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 60
borrowing of INR 4,000 crore was also under-
written by SBI, who had syndicated the facility to
other banks and ?nancial institutions.
SHARE SUSPENSE ACCOUNT
Following Clause 5A of the Listing Agreement,
the status of the equity shares lying in the
Suspense Account is given in Table 7.
SHARE TRANSFER SYSTEM
Link Intime India Private Limited is the Registrar
and Transfer Agent of the Company. All share
transfers and related operations are conducted by
Link Intime, which is registered with the SEBI.
The Company has a Shareholders’/Investors’
Grievance Committee for redressing the com-
plaints/queries of shareholders and investors.
ADDRESS FOR INVESTOR
CORRESPONDENCE
Either
Link Intime India Private Limited
(Unit: Cairn India Limited)
C-13, Pannalal Silk Mills Compound
L.B.S Marg, Bhandup (West)
Mumbai 400 078, India.
E-Mail [email protected]
Tel +91 22 25946970
Fax +91 22 25946969
Or
The Company Secretary
Cairn India Limited
4th Floor, Vipul Plaza, Sun City, Sector 54
Gurgaon 122 002, India.
E-Mail [email protected]
Tel +91 124 2703000
Fax +91 124 2889320
Investors 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
the ‘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 ana-
lysts, the media, institutional investors etc. The
‘Investor Relations’ section on the Company’s
website (www.cairnindia.com) updates informa-
tion sought by investors and analysts. It provides
the latest information on ?nancial statements,
investor-related events and presentations, annual
reports and shareholding pattern along with me-
dia releases and the current Company overview,
and thus helps existing and potential investors to
interact with the Company.
OPERATIONAL LOCATIONS
The Company’s oil and gas ?elds are located at:
Ravva (Andhra Pradesh)
Cambay Basin (Gujarat)
Barmer (Rajasthan)
REGISTERED OFFICE ADDRESS
Cairn India Limited
101, West View,
Veer Savarkar Marg,
Prabhadevi, Mumbai- 400 025
Tel +91 22 24338306
Fax +91 22 24311160
61 ADDI TI ONAL SHAREHOLDER I NFORMATI ON
CERTI FI CATE OF THE CEO & CFO
THE BOARD OF DIRECTORS
Cairn India Limited
101, West View,
Veer Savarkar Marg,
Prabhadevi, Mumbai- 400 025
Dear Sirs,
We, Rahul Dhir, Chief Executive Of?cer, and Indrajit Banerjee,
Chief Financial Of?cer, of Cairn India Limited hereby certify to the
Board that:
a. We have reviewed ?nancial statements and the cash ?ow state-
ment for the ?nancial year ended 31 March, 2010 and that to the
best of our knowledge and belief:
i. These statements do not contain any materially untrue state-
ment 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 account-
ing standards, applicable laws and regulations.
b. There are, to the best of our knowledge and belief, no transac-
tions entered into by Cairn India Limited during the year which
are fraudulent, illegal or violative of the Company’s Code of
Business Ethics.
c. We are responsible for establishing and maintaining internal
controls for ?nancial reporting in Cairn India Limited, and we
have evaluated the effectiveness of the internal control systems
of the Company pertaining to ?nancial reporting. We have dis-
closed to the auditors and the Audit Committee, de?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 de?ciencies.
d. We have indicated to the auditors and the Audit Committee
i.Signi?cant changes in internal control over ?nancial reporting
during the year;
ii.Signi?cant changes in accounting policies during the year and
the same have been disclosed in the notes to the ?nancial state-
ments; and
iii.Instances of signi?cant fraud of which we have become aware
and the involvement therein, if any, of the management or an
employee having a signi?cant role in the Company’s internal
control system over ?nancial reporting.
e. We af?rm that we have not denied any personnel access to the
Audit Committee of the Company (in respect of matters involv-
ing alleged misconduct).
We further declare that all Board members and senior manage-
ment have af?rmed compliance with the Company’s Code of
Business Ethics for the ?nancial year ended 31 March, 2010.
Rahul Dhir Indrajit Banerjee
Managing Director & CEO Executive Director & CFO
Date 27 May, 2010
Place Gurgaon
AUDI TORS’ CERTI FI CATE
TO THE MEMBERS OF CAIRN INDIA LIMITED
We have examined the compliance of conditions of corporate
governance by Cairn India Limited (‘the Company’), for the year
ended on 31 March, 2010, 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
responsibility of the management. Our examination was limited to
procedures and implementation thereof, adopted by the Company
for ensuring the compliance of the conditions of the Corporate
Governance. It is neither an audit nor an expression of opinion on
the ?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 propor-
tion 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 clari?cation dated 23 October, 2008
issued by the Securities 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 ef?ciency or effective-
ness with which the management has conducted the affairs of the
Company.
For S.R. BATLIBOI & ASSOCIATES
Firm registration number: 101049W
Chartered Accountants
per Sanjay Vij, Partner
Membership No.: 95169
Place Gurgaon
Date 27 May, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 62 62
Dear Members,
Your Directors have pleasure in presenting the Fourth Annual Report on the
business and operations of the Company and the Audited Financial accounts for
the year ended 31 March, 2010.
FINANCIAL HIGHLIGHTS
In INR million
The consolidated statements provide the results of
Cairn India Limited together with those of its subs-
idiaries for the ?nancial year ended 31 March, 2010.
DIVIDEND
In view of the inadequacy of pro?ts in Cairn India
Limited, your Directors regret their inability to
recommend any dividend.
CHANGES IN CAPITAL STRUCTURE
During the ?nancial year under review, 306,316
equity shares of INR 10/- each were allotted
on exercise of Employee Stock Options by the
employees of the Company or of its subsidiaries.
Accordingly, the issued and paid up capital of the
Company has increased to INR 18,969,741,320
divided into 1,896,974,132 equity shares of INR
10/- each.
Subsequent to the close of the ?nancial year,
the Company allotted 239,288 equity shares of
INR. 10/- each on exercise of Stock Options by
the employees. Accordingly, the issued and paid
up capital of the Company has increased to INR
18,972,134,200 divided into 1,897,213,420 equity
shares of INR 10/- each
CONSOLIDATED FINANCIAL
STATEMENTS
Your Company is also presenting the audited con-
solidated ?nancial statements prepared in accor-
dance with the Accounting Standard 21 issued 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.
OPERATIONS
A detailed review of operations has been included
in the Management Discussion and Analysis
Report, which forms a part of this Annual Report.
UTILISATION OF IPO PROCEEDS
The Company has fully utilised INR 88,249 mil-
lion raised from its maiden offer to the public.
EMPLOYEE STOCK OPTION SCHEMES
Your Company has established share incentive
schemes viz., Cairn India Senior Management
Plan (CISMP), Cairn India Performance Option
Plan (CIPOP) and Cairn India Employee Stock
Directors’
Report
Standalone Consolidated
For the ?nancial year ended For the ?nancial year ended
31 March, 2010
(Twelve months)
31 March, 2009
(Fifteen months)
31 March, 2010
(Twelve months)
31 March, 2009
(Fifteen months)
Total Income 1,634 2,980 20,307 19,837
Total Expenditure 2,367 1,860 10,143 9,958
Pro?t/(loss) before tax (734) 1,121 10,163 9,879
Taxes (44) 578 (348) 1,844
Pro?t/(loss) after tax (689) 542 10,511 8,034
63 DI RECTORS' REPORT
Option Plan (CIESOP) pursuant to which options
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/cash options have been
granted to the executive Directors and employees
of the Company or of its subsidiaries. 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.
During the period under review, 306,316 equity
shares of INR 10/- each were allotted pursuant to
the exercise of the stock options.
SUBSIDIARY COMPANIES
As on 31 March, 2010, the Company had 31 sub-
sidiaries including indirect subsidiaries. All these
companies are bene?cially owned 100% by Cairn
India Limited.
These subsidiaries have their own Boards of
Directors having the rights and obligations to man-
age such companies in the best interest of such
Companies. The Company has its representatives
on the Board of subsidiary companies and moni-
tors the performance of such companies regularly.
Pursuant to the provisions of Section 212(8) of
the Companies Act, 1956, the Company has ob-
tained 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 ?nancial year ended 31
March, 2010. The accounts of the subsidiaries are
available for inspection by members on any work-
ing day at the Registered Of?ce of the Company
between 10 am and 12 noon. Members interested
in obtaining copies are entitled to receive them
on speci?c request. A statement pursuant to the
approval under Section 212(8) of the Companies
Act,1956, in respect of subsidiary companies
forms part of the annual report.
SCHEME OF ARRANGEMENT
In order to simplify and consolidate the multi
layered structure comprising foreign susidiar-
ies, your Company had proposed a scheme of
arrangement between Cairn India Limited,
Cairn Energy India Pty Limited, Cairn Energy
India West B.V., Cairn Energy Cambay B.V.,
Cairn Energy Gujarat B.V. and their respective
shareholders and creditors (the 'Scheme'). The
members of the Company had approved the
Scheme with overwhelming majority in the Court
convened meeting held on 18 February, 2010.
The Scheme has since been approved by the
Hon'ble High Court of Judicature at Madras on
1 April, 2010. The matter is currently pending
for ?nal hearing before the Hon'ble High Court
of Bombay.
DIRECTORS
Mr Philip Tracy ceased to be an alternate director
with effect from 26 May, 2009. He was again
appointed as an alternate Director to Sir William
B. B. Gammell effective 27 May, 2010. Mr Rahul
Dhir and Mr Indrajit Banerjee, directors of the
Company, retire by rotation at the ensuing an-
nual general meeting and being eligible, offer
themselves for re-appointment. A brief pro?le
of the above-named directors forms part of the
Corporate Governance report.
CORPORATE GOVERNANCE
Your Directors reaf?rm their continued commit-
ment to good corporate governance practices. A
detailed report on the Corporate Governance and
Management Discussion and Analysis Report,
together with a certi?cate from Statutory Auditors
forms an integral part of this report and are set
out as separate sections in this annual report.
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 64
AUDITORS
M/s S. R. Batliboi & Associates, Chartered
Accountants, auditors of the Company, retire
at the conclusion of the ensuing annual gen-eral
meeting but do not offer themselves for re-ap-
pointment. The Company has recieved a requisi-
tion to appoint M/s S.R Baltiboi & Co., Chartered
Accountants, as the Statutory Auditor of the
Company. Consequently a consent letter and
certi?cate from M/s S.R Baltiboi & Co., Chartered
Accountants stating that their appointment,
if made, will be in accordance with the limits
speci?ed in Section 224(1B) of the Companies
Act, 1956 has also been received. The Audit
Committee in its meeting held on 27 May, 2010
has also recommended the appointment of
M/s S. R. Batliboi & Co., as Statutory Auditors
of the Company. Your directors also recommend
their appointment.
FIXED DEPOSITS
The Company has not invited any deposits from
the public under Section 58A of the Companies
Act, 1956.
HUMAN RESOURCES
Company’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 shareholders of the Company excluding the
particulars of employees under Section 217(2A)
of the Act. Any shareholder interested in obtain-
ing a copy of the said statement may write to the
Company Secretary at the Registered Of?ce of the
Company.
CONSERVATION OF ENERGY,
TECHNOLOGY ABSORPTION
AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
Information on Conservation of Energy,
Technology Absorption and Foreign Exchange
Earnings and Outgo is given in Annexure II to
this report.
DIRECTORS’
RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies
Act, 1956, the Directors con?rm that:
In the preparation of the annual accounts, the 1
applicable accounting standards have been fol-
lowed along with proper explanation relating to
material departures
Appropriate accounting policies have been se- 2
lected 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, 2010 and of the profit of the Company
for the year ended 31 March, 2010
Proper and sufficient care has been taken for 3
maintenance of adequate accounting records
in accordance with the provisions of the
Companies Act, 1956 for safeguarding the
assets of the Company and for preventing and
detecting fraud and other irregularities
The annual accounts have been prepared on a 4
going concern basis
CORPORATE
SOCIAL RESPONSIBILITY
Your Company is a responsible corporate citizen,
and strives to give back to the community it oper-
ates in. A detailed report on CSR efforts of the
Company forms part of this annual report.
LISTING
The Company has paid the annual listing fee for
the year 2010-2011 to Bombay Stock Exchange
Limited and National Stock Exchange of India
Limited.
APPRECIATION
Your Directors wish to place on record their
sincere appreciation of the concerted efforts and
dedicated service of all employees, which contrib-
uted to the continous growth and performance
of the Company. Your 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, Joint
Venture Partners, Banks, Institutions, Investors
and Customers.
For and on behalf of the Board of Directors
Sir William B.B. Gammell
Chairman
Place Gurgaon
Date 27 May, 2010
65
Annexures To The Directors’ 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
DI RECTORS' REPORT
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 April 2009 - March 2010 Nil 994,768 5,405,144
2. The Pricing Formula Rs. 33.70 per Share Rs. 10 per Share Price determined by the Remu-
neration Committee but not
less than the fair market value
of a share on the date of grant
3. Options Vested during April 2009 - March 2010 NIL 359,369 2,142,525
4. Options Exercised during April 2009 - March 2010 NIL 190,983 115,333
5. Total number of Shares arising as a result of exercise of
options during April 2009 - March 2010
NIL 190,983 115,333
6. Options lapsed during April 2009 - March 2010 NIL 1,377,051 1,557,846
7. Variation of terms of options None None None
8. Money realized by exercise of options during April 2009 –
March 2010
NIL 1,909,830 18,453,280
9. Total number of options in force as on 31 March 2010 2,238,077 2,626,830 14,646,209
10. Employee wise details of options granted during the year to:
(i) Senior Managerial Person None Indrajit Banerjee 65,845
Manu Kapoor 77,130
S V Nair 68,953
P Elango 53,290
Santosh Chandra 52,474
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 Narayanan P S 67,747
Venkatesan T K 57,394
Ajay Gupta 51,099
None
(iii) Identi?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
(0.36) (0.36) (0.36)
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 compensa-
tion cost that shall have been recognised if it had used the
fair value of the options (Rs. in thousands)
390,521
(iii) The impact of this difference on pro?ts and on EPS of
the Company
Pro?t after Tax (PAT) (Rs. in thousands) (689,534)
Less: Additional employee Compensation cost based on
fair value (Rs. in thousands)
390,521
Adjusted PAT (Rs. in thousands) (1,080,055)
Adjusted EPS Basic (Rs.) (0.57)
Adjusted EPS Diluted (Rs.) (0.57)
13
Weighted-average exercise prices of options granted
during April 2009 - March 2010
NA 10 240.05
Weighted-average fair value of each option outstanding as
on 31 March 2010
135.50 200.23 110.99
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 66
Conservation of Energy,
Technology Absorption,
Foreign Exchange
Earnings and Outgo
CONSERVATION OF ENERGY
Energy conservation measures taken
As a responsible Corporate Citizen and in adher-
ence to our climate change strategy, we are con-
tinuously taking effective steps to conserve energy
and to reduce methane and other Green House
Gas (GHG) emissions, wherever feasible. GHG
emissions in 2009 were within targets set at the
beginning of the year notwithstanding a rise in
energy use.
Cairn India recognises the responsibility to
minimise environmental impact from its activi-
ties. The challenges of proactively managing en-
vironmental issues during the construction phase
of the MPT and the pipeline project have been
successfully achieved through active support and
in partnership with the contractors.
The Company regularly monitored air emis-
sion sources and the ambient air quality, and was
able to maintain emission levels within regulatory
standards in 2009.
Measures taken for reduction of energy
consumption & consequent impact
During the period under review, several energy
conservation initiatives were adopted and were
taken, some of which are listed below:
At Ravva
Solar street lighting poles were installed, which
resulted in the reduction in usage of 615 units
of conventional energy.
All conventional water heaters were replaced
with solar water heaters as a result of which
energy consumption was reduced by 40,000
units per annum.
18 conventional high pressure sodium street
light lamps were replaced with LED lamps in
plant street lighting systems.
At the Gurgaon of?ce
Several energy conservation initiatives at Cairn
India’s Gurgaon of?ce have resulted in saving of
around 350,000 units of electricity, thus reducing
the of?ce’s carbon footprint. These include:
Ensuring that all except the emergency lights
are switched off after working hours and on
holidays.
Ef?cient and judicious use of energy ef?cient
lights and air handling units.
Additional investments and proposals
being implemented for conservation of
energy
Additional funds were allocated during the year
for energy conservation measures. New tech-
nologies were absorbed & adapted to reduce the
carbon foot print of the Company like installation
of wind mills and solar arrays on platforms, solar
water heaters and LED street lights, wherever
feasible.
TECHNOLOGY ABSORPTION,
ADAPTION & INNOVATION
Research & Development (R&D)
Specific areas in which R & D was carried out by
the Company
Cairn has been actively pursuing the application
of EOR (Enhanced Oil Recovery) technology in
the Mangala, Bhagyam and Aishwariya Fields.
Core ?ood studies have been carried out in 2
independent laboratories in order to deter-
mine the ef?ciency of the various chemical
?ood processes like polymer injection and
alkali-surfactant-polymer (ASP) ?ooding.
Studies are ongoing in research institutes
with a view to optimise the chemical formula-
tions that could increase oil recovery in these
?elds using minimum of chemical quality. In-
ANNEXURE I I
14. A description of the method and signi?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
160 183.04 199.73
67 DI RECTORS' REPORT
house simulation & modelling work has also been
carried out to determine the ef?ciency at ?eld
level. A ?eld scale EOR pilot implementation is al-
ready underway to take the application of this tech-
nology from lab to a restricted area in the ?eld.
Re-injection of produced water separated at
the Ravva terminal, back into the reservoir helps
reduce discharge of waste water to sea and ab-
straction of ground water for injection purposes.
Produced Water Re-Injection (PWRI) has been
designed and implemented to treat and handle a
maximum capacity of 45,000 barrels of water per
day. The PWRI was successfully commissioned in
Q2 2008 and is presently re-injecting 50% of the
produced water.
Various other technology absorption, adaption
and innovation initiatives/methods like Rapid
Rig for drilling wells, customised well designs,
multi well pad approach, Rotary steerable/Logging
While Drilling technology, customised compact
well head equipment, usage of high cost synthetic
oil based mud system on onshore drilling applica-
tions, horizontal well technology, sand control
technology integral
with sleeve devices, hydraulic fracturing technol-
ogy, Sand Jet Perforating, Micro seismic for frac
modelling, multiphase metering technology were
taken/used for the development & drilling of the
oil ?elds in Rajasthan.
Bene?ts derived
as a result of this R&D
All these initiatives are helping the Company in
improving the overall ef?ciency, lowering the
land impact & environmental concerns, cost ef-
fectiveness & project economics. Cairn’s research
in EOR applications for the MBA ?elds has the
potential to unlock additional oil reserves within
these ?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&D
Details outlined in the Table below.
in INR
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 and
gas requirement and in this situation, the export
of crude oil and natural gas, which are the main
products of Cairn are not relevant in this sector.
However, by discovering new oil & gas ?nds
and bringing them into production, Cairn is
working towards enhancing energy security and
increasing the self suf?ciency of the nation which
is in line with policy of the Indian Government.
At peak production rate, Rajasthan block is ex-
pected to contribute more than 20% of domestic
crude oil production.
Foreign exchange used and earned
During the period ended 31 March, 2010, the
Company earned INR 32.04 million and incurred
expenditure of INR 188.82 million in foreign
exchange.
For and on behalf of the Board of Directors
Sir William B.B. Gammell
Chairman
Place Gurgaon
Date 27 May, 2010
No. Particulars Amount
1 Capital 962,452
2 Recurring -
3 Total 962,452
4
Total R&D expenditure
as a % of total turnover
0.05%
Note These are consolidated numbers for the
Twelve months period ended 31 March, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 68
TO THE MEMBERS OF CAIRN INDIA LIMITED
We have audited the attached Balance Sheet of Cairn India Limited (‘the Company’) as at 31 March, 2010 and also the Profit and Loss 1
Account and the Cash Flow Statement for the year 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.
We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan 2
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.
The attached financial statements include Company’s share of net assets, expenses and cash flows aggregating to INR 4,031 thousand, 3
INR 529,058 thousand and INR Nil thousand respectively in the unincorporated joint ventures not operated by the Company or its sub-
sidiaries, the accounts of which have been audited by the auditors of the respective unincorporated joint ventures and relied upon by us.
As required by the Companies (Auditor’s Report) Order, 2003 (as amended) (‘the Order’) issued by the Central Government of India in 4
terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters speci-
fied in paragraphs 4 and 5 of the said Order. In respect of clauses (ii), (ix)(a), (ix)(b), (ix)(c) and (xxi), our comments are restricted to the
operations of the Company and does not cover the unincorporated joint ventures where any third party is the operator.
Further to our comments in the Annexure referred to above, we report that: 5
We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the pur- i
poses of our audit;
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 ii
those books;
The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of iii
account;
In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the account- iv
ing standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;
On the basis of the written representations received from the directors, as on 31 March, 2010, and taken on record by the Board of v
Directors, we report that none of the directors is disqualified as on 31 March, 2010 from being appointed as a director in terms of
clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.
In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the informa- vi
tion 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;
in the case of the balance sheet, of the state of affairs of the Company as at 31 March, 2010; a
in the case of the profit and loss account, of the loss for the year ended on that date; and b
in the case of cash flow statement, of the cash flows for the year ended on that date. c
Auditors’
Report
For S.R. BATLIBOI & ASSOCIATES
Firm registration number: 101049W
Chartered Accountants
per Sanjay Vij, Partner
Membership No.: 95169
Place Gurgaon Date 27 May, 2010
69
Annexure referred to in paragraph 4 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 ?xed assets.
(b) Fixed assets have been physically veri?ed by the management during the year and no material discrepancies were identi?ed on such
veri?cation.
(c) There was no substantial disposal of ?xed assets during the year.
(ii) (a) The management has conducted physical veri?cation of inventory at reasonable intervals during the year.
(b) The procedures of physical veri?cation of inventory followed by the management are reasonable and adequate in relation to the size of the
Company and the nature of its business.
(c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical veri?cation carried out at the
end of the year.
(iii) (a-d) As informed, the Company has not granted any loans, secured or unsecured to companies, ?rms 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, ?rms 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 inventory, ?xed assets and for the sale of services.
During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. During the
course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company.
Since the Company has not started commercial production in any of its oil and gas blocks, it has not 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 ?ve lakhs entered into
during the ?nancial 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) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor
education and protection fund, income-tax, wealth-tax, service tax, cess and other material statutory dues applicable to it. Further, since
the Central Governent has till date not prescribed the amount of cess payable under section 441 A of the Companies Act, 1956, we are
not in a position to comment upon the regularity or otherwise of the Company in depositing the same. The provisions relating to
employees’ state insurance, sales 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, wealth-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, customs duty and excise duty are not applicable to the Company.
(c) According to the information and explanations given to us, there are no dues of income tax, wealth tax, service tax, and cess which have not been
deposited on account of any dispute. The provisions relating to sales tax, customs duty and excise duty are not applicable to the Company.
Auditors’ Report
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 70
Auditors’ Report
(x) The Company has been registered for a period of less than ?ve years and hence we are not required to comment on whether or not the
accumulated losses at the end of the ?nancial year is ?fty per cent or more of its net worth and whether it has incurred cash losses in such
?nancial year and in the immediately preceding ?nancial year.
(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company
has not defaulted in repayment of dues to a ?nancial institution or bank. The Company has not issued any debentures.
(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 bene?t 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
?nancial institutions.
(xvi) Based on the information and explanations given to us by the management, term loans were applied for the purpose for which the loans were
obtained.
(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.
(xix) The Company did not have any outstanding debentures during the year.
(xx) We have veri?ed that the end use of money raised by public issues is as disclosed in the notes to the ?nancial statements.
(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the ?nancial statements and as per the informa-
tion 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.
For S.R. Batliboi & Associates
Firm registration number: 101049W
Chartered Accountants
per Sanjay Vij
Partner
Membership No.:95169
Place Gurgaon Date 27 May, 2010
71
Financial
Accounts
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 72
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Balance Sheet
AS AT MARCH 31, 2010
Schedules As at March 31, 2010 As at March 31, 2009
Sources of Funds
Shareholders’ funds
Share capital 1 18,969,741 18,966,678
Stock options outstanding 2 463,978 388,978
Reserves and surplus 3 301,161,222 301,090,274
Loan funds
Secured loans 4 13,450,000 -
334,044,941 320,445,930
Application of Funds
Fixed assets 5
Gross cost 1,055 974
Less: Accumulated depreciation /
amortisation
869 365
Net book value 186 609
Exploratory work in progress 6 242,074 540,299
Investments 7 331,290,939 292,253,966
Current assets, loans and advances
Inventories 8 9,831 -
Sundry debtors 9 15,728 17,942
Cash and bank balances 10 1,927,862 27,632,762
Other current assets 11 12,360 633,645
Loans and advances 12 829,151 220,814
2,794,932 28,505,163
Less: Current liabilities and provisions
Current liabilities 13 1,480,662 1,076,734
Provisions 14 30,062 315,373
1,510,724 1,392,107
Net current assets 1,284,208 27,113,056
Pro?t and loss account 1,227,534 538,000
334,044,941 320,445,930
Notes to accounts 20
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
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
73
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
Income
Revenue from operating activities 32,040 37,331
Other income 15 1,601,580 2,943,072
1,633,620 2,980,403
Expenditure
Staff costs 16 175,929 212,519
Data acquisition and pre exploration cost 33,860 36,235
Administrative expenses 17 302,959 793,554
Unsuccessful exploration costs 6 1,191,194 813,568
Depreciation/Amortisation 5 504 365
Finance costs 18 662,806 3,446
2,367,252 1,859,687
Pro?t/(Loss) before taxation (733,632) 1,120,716
Current tax 44,000 543,800
Fringe bene?t tax (refer note no. 14 in schedule 20) (88,098) 34,509
Pro?t/(Loss) for the year/period (689,534) 542,407
Add: Accumulated losses at the beginning of
the year / period
(538,000) (1,080,407)
De?cit carried forward to balance sheet (1,227,534) (538,000)
Earnings/(Loss) per share in INR 19
Basic (0.36) 0.29
Diluted (current year considered anti-dilutive) (0.36) 0.29
[Nominal value of shares INR 10]
Notes to accounts 20
Pro?t and Loss Account
FOR THE YEAR ENDED MARCH 31, 2010
The schedules referred to above and the notes to accounts form an integral part of the pro?t and loss account.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 74
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
Cash ?ow from operating activities
Pro?t/ (loss) for the year/period (733,632) 1,120,716
Adjustments for:
- Employee compensation expense (stock options) - net of
exceptional gains
39,385 (33,325)
- Interest income (1,266,573) (1,341,376)
- Dividend from unquoted current investments (220,839) (200,225)
- Depreciation/Amortisation 504 365
- Pro?t on sale of unquoted current investments (net) (2,385) (1,245,686)
- Share issue expenses - 208,410
- Unrealised exchange loss / (gain) on restatement of assets
and liabilities (net)
(110,526) 183,896
- Unsuccessful exploration costs 1,191,194 813,568
- Loan facility and management fees 59,574 -
- Balances written back (40,653) -
- Interest expense 599,810 388
Operating (loss) before working capital changes (484,141) (493,269)
Movements in working capital:
(Increase)/decrease in inventories (9,831) -
(Increase)/decrease in debtors 2,214 (5,234)
(Increase)/decrease in loans and advances 32,383 (212,729)
Increase/(decrease) in current liabilities and provisions (84,301) 909,781
Cash generated from / (used in) operations (543,676) 198,549
Direct taxes paid including fringe bene?t tax (248,254) (553,060)
Net cash (used in) operating activities (A) (791,930) (354,511)
Cash ?ow from investing activities
Payments made for exploration, development activities and
purchase of ?xed assets
(368,982) (1,372,093)
Long term investments made in subsidiaries (23,827,569) (1,562,784)
Fixed deposits made (6,083,612) (37,573,811)
Proceeds from matured ?xed deposits 31,728,811 10,005,000
Short term investments in mutual funds (net) (15,207,018) 4,691,789
Interest received 1,887,858 707,732
Dividend received from unquoted current investments 220,839 200,225
Net cash (used in) investing activities (B) (11,649,673) (24,903,942)
Cash ?ow from ?nancing activities
Proceeds from issue of equity shares
(including securities premium)
20,363 25,523,445
Payment for share issue expenses - (208,410)
Proceeds from long term borrowings 13,450,000 -
Loan facility and management fees paid (488,651) -
Interest paid (599,810) (388)
Net cash from ?nancing activities (C) 12,381,902 25,314,647
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Statement of Cash Flows
FOR THE YEAR ENDED MARCH 31, 2010
75
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Statement of Cash Flows Continued
Net increase in cash and cash equivalents (A+B+C) (59,701) 56,194
Cash and cash equivalents at the beginning of the year/ period 63,951 7,757
Cash and cash equivalents at the end of the year/ period 4,250 63,951
Components of cash and cash equivalents as at March 31, 2010 March 31, 2009
Cash in hand 42 15
Balances with scheduled banks
- on current accounts 4,208 13,936
- on deposit accounts 1,923,612 27,618,811
Less: Deposits having maturity of over 90 days (1,923,612) (27,568,811)
4,250 63,951
Notes
i) The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in Accounting Standard-3 on “Cash ?ow statements”.
ii) Amounts in bracket indicate a cash out?ow or reduction.
iii) Bank balance in deposit accounts includes INR 1,790,000 thousand, previous period INR 1,530,000 thousand, pledged with the banks.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 76
Notes
i) Issued, subscribed and fully paid up share capital includes 1,183,243,791 equity shares (previous period - 1,226,843,791 equity shares) of INR 10 each held
by Cairn UK Holdings Limited, the holding company, together with its nominees.
ii) Shares held by the holding company includes 861,764,893 equity shares (previous period - 861,764,893 equity shares) of INR 10 each, allotted as fully paid
up pursuant to contracts for consideration other than cash.
iii) For stock options outstanding, refer note no. 6 in schedule 20.
Schedules to the Financial Statements
As at
March 31, 2010
As at
March 31, 2009
Schedule 1
Share capital
Authorised:
2,250,000,000 (previous period 2,250,000,000) equity shares of
INR 10 each
22,500,000 22,500,000
Issued, Subscribed and fully Paid up:
1,896,974,132 (previous period 1,896,667,816) equity shares of INR 10 each 18,969,741 18,966,678
18,969,741 18,966,678
Schedule 2
Stock options outstanding
Employee stock options outstanding 768,120 782,548
Less: Deferred employee compensation outstanding 304,142 393,570
Closing Balance 463,978 388,978
Schedule 3
Reserves and surplus
Securities premium account
Opening balance 301,090,274 276,084,115
Add: Additions during the year/ period (refer note no. 10 of schedule 20) 70,948 25,006,159
Closing Balance 301,161,222 301,090,274
Schedule 4
Secured loans
Long term loans
- from ?nancial institutions 1,008,750 -
- from banks 12,441,250 -
13,450,000 -
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Notes
i) There is no amount repayable within one year.
ii) Refer note no. 12 in schedule 20.
77
Schedule 5
Fixed Assets
As at
March 31, 2010
As at
March 31, 2009
Schedule 6
Exploratory work in progress
Opening Balance 540,299 -
Additions during the year/period 892,969 1,353,867
Less: Unsuccessful exploration costs for the year/period 1,191,194 813,568
242,074 540,299
Schedule 7
Investments
Long term investments in Subsidiary Companies (at cost)
Unquoted, trade and fully paid-up
420,810,062 equity shares (previous period: 292,929,752 equity shares) of
GBP 1 each in Cairn India Holdings Limited, U.K.
300,424,799 290,524,514
175,560 redeemable preferential shares (previous period: Nil) of GBP 1,000
each in Cairn India Holdings Limited, U.K.
13,437,637 -
13,159,960 equity shares (previous period: 2,509,960) of USD 1 each in CIG
Mauritius Holding Private Limited
611,627 121,980
Current Investments (at lower of cost and market value)
Unquoted and non trade
Mutual Funds (refer note no. 22 in schedule 20 for details)* 16,816,876 1,607,472
331,290,939 292,253,966
Aggregate amount of unquoted investments 331,290,939 292,253,966
Repurchase price of mutual fund units, represented by Net Asset Value 16,816,876 1,607,472
* includes unutilized monies of the public issue. (refer note no. 5 in schedule 20)
Schedule 8
Inventories
Stores and spares 9,831 -
9,831 -
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Description Gross Block Accumulated Depreciation / Amortisation Net Block
As on
01.04.2009
Additions
Deletions/
Adjustment
As on
31.03.2010
As on
01.04.2009
For the
year/ period
Deletions/
Adjustment
As on
31.03.2010
As on
31.03.2010
As on
31.03.2009
A) Tangible Assets
Of?ce equipments - 32 - 32 - 9 - 9 23 -
B) Intangible Assets
Computer software 974 49 - 1,023 365 495 - 860 163 609
Grand Total 974 81 - 1,055 365 504 - 869 186 609
Previous period - 974 - 974 - 365 - 365 609 -
Schedules to the Financial Statements Continued
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 78
Schedule 9
Sundry Debtors
Debts outstanding for a period exceeding six months
- Unsecured, considered good 4,039 7,609
Other debts
- Unsecured, considered good 11,689 10,333
15,728 17,942
Schedule 10
Cash and bank balances
Cash in hand 42 15
Balances with scheduled banks *
- on current accounts 4,208 13,936
- on deposit accounts ** 1,923,612 27,618,811
1,927,862 27,632,762
* includes unutilized monies of the public issue (refer note no. 5 in schedule 20)
** Includes INR 1,790,000 thousand, previous period INR 1,530,000 thousand, pledged with the banks
Schedule 11
Other current assets
Interest accrued on bank deposits 12,360 633,645
12,360 633,645
Schedule 12
Loans and advances
Unsecured considered good:
Advances recoverable in cash or in kind or for value to be received* 582,159 12,855
Advances recoverable from subsidiary companies 242,247 192,795
Deposits 512 15,164
Fringe bene?t tax paid (Net of provisions INR 266,901 thousand, previous
period INR Nil)
4,233 -
829,151 220,814
* includes capital advances INR 1,465 thousand (previous period INR Nil)
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules to the Financial Statements Continued
79
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedule 13
Current liabilities
Sundry Creditors
- Total outstanding dues to Micro and Small Enterprises
(refer note no. 21 in schedule 20)
- 6
- Total outstanding dues to other than Micro and Small Enterprises 201,178 97,773
Amounts payable to Cairn Energy Plc., the ultimate holding company - 24,109
Amounts payable to subsidiary companies 672,931 753,778
Other liabilities 606,553 201,068
1,480,662 1,076,734
Schedule 14
Provisions
Provision for taxation (net of advance tax -INR 565,566 thousand, previous
period INR 338,382 thousand)
22,234 205,118
Provision for fringe bene?t tax (net of advance tax payments INR Nil, previous
period INR 266,883 thousand)
- 105,235
Provision for gratuity 6,647 3,994
Provision for leave encashment 1,181 1,026
30,062 315,373
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
Schedule 15
Other income
Interest on bank deposits (Gross, tax deducted at source
INR 188,872 thousand, previous period INR 304,879 thousand)
1,266,573 1,341,377
Dividend from non-trade current investments 220,839 200,225
Pro?t on sale of non-trade current investments (net) 2,385 1,245,686
Miscellaneous income - 61
Exchange differences (net) 71,130 -
Balances written back 40,653 -
Exceptional gain (refer note no. 25 in schedule 20) - 155,723
1,601,580 2,943,072
Schedule 16
Staff costs
Salary, wages and bonus 120,301 74,089
Contribution to provident fund 5,384 3,314
Contribution to superannuation fund 3,374 1,716
Gratuity expenses 2,653 3,720
Compensated absences 285 1,103
Staff welfare expenses 4,547 6,179
Employee compensation expense (stock options) 39,385 122,398
175,929 212,519
Schedules to the Financial Statements Continued
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 80
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedule 17
Administrative expenses
Legal and professional expenses 197,777 254,050
Contract employee charges 4,370 4,517
Rent 1,642 1,377
Auditor's remuneration
As Auditors
- Fees for statutory audit and consolidated ?nancial
statements
4,440 5,314
- Fees for tax audit - 828
- Fees for limited review 5,460 7,595
- Fees for statutory reporting for parent companies
consolidated ?nancial statements
2,041 10,566
- Other services 2,160 3,503
- Out of pocket expenses 394 14,495 443 28,249
Directors' sitting fees 1,160 1,320
Advertisement and publicity 9,538 14,385
Public relation expenses 18,248 42,959
Sponsorship 11,500 15,666
Printing & stationery 3,489 3,157
Security Expenses 361 129
Repairs and maintenance (others) 2,639 303
Travelling and conveyance 19,358 30,954
Insurance expenses 199 197
Communication expenses 16,104 5,983
Share issue expenses - 208,410
Exchange differences (net) - 180,632
Sundry balances written off 824 -
Miscellaneous expenses 1,255 1,266
302,959 793,554
Schedule 18
Finance costs
Interest
-on term loan 599,684 -
-others 126 388
Loan facility and management fees 59,574 -
Bank charges 3,422 3,058
662,806 3,446
Schedules to the Financial Statements Continued
81
Schedule 19
Earnings / (Loss) per share
Pro?t/(Loss) for the year/ period as per pro?t and
loss account
(689,534) 542,407
Weighted average number of equity shares in
calculating basic earnings / (loss) per share
1,896,696,475 1,866,146,993
Add: Number of equity shares arising on grant of stock
options
8,321,392 10,052,076
Weighted average number of equity shares in
calculating diluted earnings / (loss) per share
1,905,017,867 1,876,199,069
Earnings/(Loss) per share in INR
Basic (0.36) 0.29
Diluted (current year considered anti dilutive) (0.36) 0.29
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules to the Financial Statements Continued
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 82
NATURE OF OPERATIONS 1.
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,
re?ning, 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/?elds (which are in the nature of jointly controlled assets), 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 & Gas blocks / ?elds, which are presently under exploration phase:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES 2.
Basis of preparation (A)
The ?nancial statements have been prepared to comply in all material respects with the mandatory Accounting Standards noti?ed 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.
Oil and gas assets (B)
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 & 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 pro?t and loss account. Following appraisal of successful exploration wells, when a well is ready for com-
mencement of commercial production, the related exploratory and development work-in-progress are transferred into a single ?eld 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 deter-
mined 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 bene?ts of the producing properties or replaces part of the existing producing
properties. Any costs remaining associated with such part replaced are expensed in the ?nancial 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 pro?t 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 pro?t 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.
Oil & Gas blocks/?elds Area
Participating Interest
Operated block (through subsidiaries)
PR-OSN-2004 Palar Basin offshore 25%
KG-ONN-2003/1 Krishna Godavari Onshore 25%
Following block has been relinquished
VN-ONN-2003/1 in Aug 2009 Vindhyan Onshore 25%
Non – operated block
GS-OSN-2003/1 Gujarat Saurashtra Onshore 49%
KK-DWN-2004 Kerala Konkan Basin offshore 40%
Following blocks have been relinquished
CB-ONN-2002/1 in Jan 2009 Cambay Onshore 30%
RJ-ONN-2003/1 in Jan 2010 Rajasthan Onshore 30%
(All amounts are in INR thousand unless, otherwise stated)
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
83
Depletion (C)
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.
Site restoration costs (D)
At the end of the producing life of a ?eld, 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 expenses form part of the exploration &
development work in progress or cost of producing properties, as the case may be, 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 cost in the pro?t and loss account.
Impairment (E)
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external 1
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 ?ows are discounted to
their present value at the weighted average cost of capital.
After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining 2
useful life.
Tangible ?xed assets, depreciation and amortization (F)
Tangible 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 ?xed 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 ?xtures 2 to 5 years
Of?ce equipments 2 to 5 years
Plant and Equipment 2 to 10 years
Leasehold land Lease period
Leasehold improvements are amortized over the remaining period of the primary lease or expected useful economic lives, whichever is shorter.
Intangible ?xed assets and amortization (G)
Intangible assets, other than oil and gas assets, have ?nite useful lives and are measured at cost and amortized over their expected useful economic
lives as follows:
Computer software 2 to 4 years
Leases (H)
Finance leases, which effectively transfer substantially all the risks and bene?ts 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 ?nance 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 bene?ts of ownership of the leased item, are classi?ed as operating
leases. Operating lease payments are recognised as an expense in the pro?t and loss account on a straight-line basis over the lease term.
Investments (I)
Investments that are readily realisable and intended to be held for not more than a year are classi?ed as current investments. All other investments
are classi?ed as long-term investments. Current investments are measured at cost or market value, whichever is lower, determined on an individual
investment basis. 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.
Joint Ventures (J)
The Company participates in several Joint Ventures involving joint control of assets for carrying out oil and gas exploration, development and
producing activities. The Company 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.
Revenue recognition (K)
Revenue is recognized to the extent that it is probable that the economic bene?ts will ?ow to the Company and the revenue can be reliably measured.
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 84
Revenue from operating activities
The Company recognizes parent company overhead 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.
Borrowing costs (L)
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 ?nance 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 pro?t and loss account in the period in which they are incurred.
Foreign currency transactions and translations (M)
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 ?nancial statements, are recognised as income or as expenses in the
period in which they arise.
Income taxes (N)
Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act. Deferred income tax re?ects 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 suf?cient 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 pro?ts. Unrecognised deferred tax assets of earlier periods are re-assessed and recognised to the extent that it has become reasonably
certain or virtually certain as the case may be, that future taxable income will be available against which such deferred tax assets can be realised.
Earnings Per Share (O)
Basic earnings per share are calculated by dividing the net pro?t 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 pro?t 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.
Provisions (P)
A provision is recognised when the Company has a present obligation as a result of past event and it is probable that an out?ow 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 re?ect the current best estimates.
Cash and Cash equivalents (Q)
Cash and cash equivalents in the cash ?ow statement comprise cash at bank and in hand and short-term investments, with an original maturity of 90
days or less.
Employee Bene?ts (R)
Retirement and Gratuity bene?ts
Retirement bene?ts in the form of provident fund and superannuation scheme are de?ned contribution schemes and the contributions are charged to
the pro?t 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 de?ned bene?t obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made
at the end of each ?nancial year. The scheme is maintained and administered by an insurer for the entire Cairn India Group to which the trustees
make periodic contributions.
Short term compensated absences are provided for on based on estimates. Long term compensated absences are provided for based on
actuarial valuation made at the end of each ?nancial year. The actuarial valuation is done as per projected unit credit method.
Actuarial gains / losses are immediately taken to pro?t 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
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
85
Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by ICAI.
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.
Use of estimates (S)
The preparation of ?nancial statements in conformity with generally accepted accounting principles requires management to make estimates and as-
sumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the ?nancial 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.
Segment Reporting Policies (T)
Identi?cation 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.
Inventory (U)
Inventories of stores and spares related to exploration, development and production activities are stated at cost, determined on ?rst in ?rst out (FIFO)
basis. However, inventories of stores and spares, which are not likely to be consumed, are written down to their net realizable value.
SEGMENTAL REPORTING 3.
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 ?nancial reporting systems. Accordingly, the ?gures appearing in these ?nancial
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
con?ned to India in terms of oil and gas blocks and customers. Accordingly, the ?gures appearing in these ?nancial statements relate to the
Company’s single geographical segment, being operations in India.
RELATED PARTY TRANSACTIONS 4.
Names of related parties: (A)
Companies having control
? Cairn UK Holdings Limited, UK
Holding Company
? Cairn Energy Plc., UK
Ultimate holding company
Subsidiary companies
Cairn Energy Australia Pty Limited 1
Cairn Energy India Pty Limited 2
CEH Australia Pty Limited 3
Cairn Energy Asia Pty Limited 4
Sydney Oil Company Pty Limited 5
Cairn Energy Investments Australia Pty Limited 6
Wessington Investments Pty Limited 7
CEH Australia Limited 8
Cairn India Holdings Limited 9
CIG Mauritius Holding Private Limited 10
CIG Mauritius Private Limited 11
Cairn Energy Holdings Limited 12
Cairn Energy Discovery Limited 13
Cairn Exploration (No. 2) Limited 14
Cairn Exploration (No. 6) Limited 15
Cairn Energy Hydrocarbons Limited 16
Cairn Petroleum India Limited 17
Cairn Energy Gujarat Block 1 Limited 18
Cairn Exploration (No. 4) Limited 19
Cairn Exploration (No. 7) Limited 20
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 86
Cairn Energy Development Pte Limited 21
Cairn Lanka (Pvt) Limited 22
Cairn Energy Group Holdings BV 23
Cairn Energy India West BV 24
Cairn Energy India West Holding BV 25
Cairn Energy Gujarat Holding BV 26
Cairn Energy India Holdings BV 27
Cairn Energy Netherlands Holdings BV 28
Cairn Energy Gujarat BV 29
Cairn Energy Cambay BV 30
Cairn Energy Cambay Holding BV 31
Key Management Personnel
• Rahul Dhir, Managing Director and Chief Executive Of?cer
• Winston Frederick Bott Jr., Executive Director and Chief Operating Of?cer
(appointed on 29
th
April, 2008)
• Indrajit Banerjee, Executive Director and Chief Financial Of?cer
• Lawrence Smyth, Executive Director and Chief Operating Of?cer
(resigned on 21
st
January, 2008)
Transactions during the year/period: (B)
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Nature of the Transactions Related Party
Current year Previous period
Waiver of outstanding balance by the
parent company
Cairn Energy Plc. 24,176 Nil
Expenses incurred by related party on
behalf of the Company
Cairn Energy India Pty Limited 15,938 93,757
Cairn Energy Plc. 8,120 Nil
Total 24,058 93,757
Expenses incurred by the Company on
behalf of related party
Cairn Energy India Pty Limited 190 256,499
Cairn Energy Plc Nil 854
CIG Mauritius Holdings Private Limited Nil 491
CIG Mauritius Private Limited Nil 264
Cairn Energy Gujarat Block 1 Limited Nil 10,648
Cairn Exploration (No. 4) Limited Nil 100
Cairn Exploration (No. 7) Limited Nil 13,668
Cairn Lanka Private Limited Nil 881
Cairn Energy Hydrocarbons Limited 836 30,597
Cairn Energy Development Pte Limited 694 Nil
Total 1,720 314,002
Equity contributions made during
the year/period
Cairn India Holdings Limited 23,337,922 1,440,804
CIG Mauritius Holding Private Limited 489,647 121,980
23,827,569 1,562,784
Assignment of interest in oil & gas
blocks from
Cairn Energy Gujarat Block 1 Limited Nil 89,513
Cairn Exploration (No. 2) Limited Nil 302,085
Cairn Exploration (No. 4) Limited Nil 68,462
Cairn Exploration (No. 6) Limited Nil 7,164
Cairn Exploration (No. 7) Limited Nil 160,166
Total Nil 627,390
Guarantees given Cairn Lanka Private Limited Nil 1,432,436
Recovery of share option charge Cairn Energy India Pty Limited 64,264 140,617
Shares issued including premium and
stock option charge
Rahul Dhir Nil 716,185
Lawrence Smyth Nil 126,758
Total Nil 842,943
Remuneration
Rahul Dhir 2,400 3,000
Winston Frederick Bott Jr. 1,200 950
Indrajit Banerjee 1,800 2,250
Total 5,400 6,200
Note The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave bene?ts, as they are determined on an
actuarial basis for the Company as a whole.
87
Balances outstanding as at the end of the year/period: (C)
5. The shareholders of the Company in their meeting dated August 18, 2009 had revised the allocation of Initial Public Offer (IPO) proceeds within the
existing heads under the prospectus. As at 31
st
March 2010, the Company and its subsidiaries together have utilized the entire IPO proceeds
aggregating to INR 88,248,901 thousand in accordance with the revised approval received from the shareholders. The details of the revised approval
and utilization of funds is as follows:
6. EMPLOYEES STOCK OPTION PLANS
The Company has provided various share-based payment schemes to its employees. During the year ended 31
st
March 2010, the following schemes
were in operation:
Particulars
Upto 31
st
March 2010 Upto 31
st
March 2009
Acquisition of shares of Cairn India Holdings Limited
from Cairn UK Holdings Limited
59,580,837 59,580,837
Exploration and development expenses 26,838,445 21,152,714
General corporate purposes 230,000 230,000
Issue expenses 1,599,619 1,599,619
Total 88,248,901 82,563,170
The details of the unutilized monies out of the public issue proceeds is as follows:
Particulars
31
st
March 2010 31
st
March 2009
Mutual funds Nil 718,277
Balances with banks Nil 4,967,454
Total Nil 5,685,731
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Nature of the Balance Related Party
31
st
March 2010 31
st
March 2009
Guarantees given Cairn Lanka Private Limited 1,267,674 1,432,436
Accounts receivable Cairn Energy India Pty Limited 208,512 160,563
CIG Mauritius Holdings Private Limited 491 491
CIG Mauritius Private Limited 264 264
Cairn Lanka Private Limited 881 881
Cairn Energy Hydrocarbons Limited 31,432 30,596
Cairn Energy Development Pte Limited 667 Nil
Total 242,247 192,795
Accounts payable Cairn Energy Plc Nil 24,109
Cairn Energy Gujarat Block 1 Limited 89,531 102,552
Cairn Exploration (No. 2) Limited 332,327 367,147
Cairn Exploration (No. 4) Limited 77,497 86,635
Cairn Exploration (No. 6) Limited 8,423 9,558
Cairn Exploration (No. 7) Limited 165,153 187,886
Total 672,931 777,887
Particulars
CISMP CIPOP CIESOP
Date of Board Approval 17
th
Nov 2006 17
th
Nov 2006 17
th
Nov 2006
Date of Shareholder’s approval 17
th
Nov 2006 17
th
Nov 2006 17
th
Nov 2006
Number of options granted till March 2010 8,298,713 6,727,724 18,197,795
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 date 3 months from vesting date 7 years from vesting date
Number of options granted till March 2010
24
th
Nov 2006 8,298,713 - -
1
st
Jan 2007 - 1,708,195 3,467,702
20
th
Sept 2007 - 3,235,194 5,515,053
29
th
July 2008 - 789,567 3,773,856
10
th
Dec 2008 - - 36,040
29
th
July 2009 - 994,768 5,405,144
Total 8,298,713 6,727,724 18,197,795
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 88
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:
• 1/3
rd
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 9
th
Jan 2007.
• 1/3
rd
of the options will vest 18 months after the admission date.
• 1/3
rd
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.
• 1/4
th
of the options will vest on the date on which all major equipment for the start-up of the Mangala ?eld is delivered to site.
• 1/4
th
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 satis?ed.
CIESOP plan
There are no speci?c vesting conditions under CIESOP plan.
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Details of Activities under Employees Stock Option Plans
CISMP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 2,238,077 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 Nil NA 5,268,396 33.70
Expired during the year Nil NA 792,240 33.70
Outstanding at the end of the year 2,238,077 33.70 2,238,077 33.70
Exercisable at the end of the year Nil NA Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
131.50 NA 131.50 NA
CIPOP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 3,200,096 10.00 4,755,244 10.00
Granted during the year 994,768 10.00 789,567 10.00
Forfeited during the year Nil NA Nil NA
Exercised during the year 190,983 10.00 Nil NA
Expired during the year 1,377,051 10.00 2,344,715 10.00
Outstanding at the end of the year 2,626,830 10.00 3,200,096 10.00
Exercisable at the end of the year 168,382 10.00 Nil NA
CIESOP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 10,914,244 185.39 8,545,710 164.49
Granted during the year 5,405,144 240.05 3,809,896 226.21
Forfeited during the year Nil NA Nil NA
Exercised during the year 115,333 160.00 Nil NA
Expired during the year 1,557,846 179.09 1,441,362 169.33
Outstanding at the end of the year 14,646,209 206.43 10,914,244 185.39
Exercisable at the end of the year 1,981,770 160.00 Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
107.64 NA 101.47 NA
89
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 24
th
Nov 2006 24
th
Nov 2006
Stock Price/fair value of the equity shares on the date of
grant (INR)
160.00 160.00
Vesting date Refer vesting conditions Refer vesting conditions
Vesting % Refer vesting conditions Refer vesting conditions
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
A B C D E
Grant date 1
st
Jan’07 20
th
Sept’07 29
th
July’08 10
th
Dec’08 29
th
July’09
Stock Price/fair value of the equity
shares on the date of grant (INR)
160.00 166.95 228.55 150.10 234.75
Vesting date 1
st
Jan’10 20
th
Sept’10 29
th
Jul’11 10
th
Dec’11 29
th
July’ 12
Vesting % 100% 100% 100% 100% 100%
Volatility 41.04% 40.24% 39.43% 38.19% 39.97%
Risk free rate 7.50% 7.65% 9.20% 6.94% 6.91%
Time to maturity (years) 6.50 6.50 6.50 6.50 6.50
Exercise price (INR) 160.00 166.95 227.00 143.00 240.05
Fair Value of the options (INR) 87.30 90.72 130.42 79.80 122.24
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
Variables – CIPOP
A B C D
Grant date 1
st
Jan’07 20
th
Sept’07 29
th
Jul’08 29
th
Jul’09
Stock Price/fair value of the equity shares
on the date of grant (INR)
160.00 166.95 228.55 234.75
Vesting date 1
st
Jan’10 20
th
Sept’10 29
th
Jul’11 29
th
July’ 12
Vesting % Refer vesting conditions Refer vesting conditions Refer vesting conditions Refer vesting conditions
Volatility 41.61% 36.40% 37.49% 43.72%
Risk free rate 7.33% 7.23% 9.37% 5.78%
Time to maturity (years) 3.12 3.12 3.12 3.13
Exercise price (INR) 10.00 10.00 10.00 10.00
Fair Value of the options (INR) 152.05 158.97 221.09 226.40
The details of exercise price for stock options outstanding as at March 31, 2010 are:
(All amounts are in INR thousand unless, otherwise stated)
Scheme
Range of exercise
price (INR)
No. of options
outstanding
Weighted average
remaining contractual
life of options
(in years)
Weighted average
exercise price (INR)
CISMP Plan 33.70 2,238,077 1.08 33.70
CIPOP Plan 10.00 2,626,830 1.36 10.00
CIESOP Plan 143-240 14,646,209 1.28 206.43
The details of exercise price for stock options outstanding as at March 31, 2009 are:
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
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 90
Volatility is the measure of the amount by which the price has ?uctuated or is expected to ?uctuate 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 pro?t and loss account and on its ?nancial position:
Impact of Fair Valuation Method on net pro?ts 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 ?nancial statements.
Applying the fair value based method de?ned in the said guidance note, the impact on the reported net pro?t and earnings per share would be
as follows:
7. LEASE OBLIGATIONS DISCLOSURES
Operating Lease
The Joint Ventures, in which the Company has participating interest, have entered into operating lease for equipments and buildings. All such leases
are cancelable in nature. There are neither escalation clauses nor any restrictions in the lease agreements. There are no subleases.
8. DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN CURRENCY EXPOSURE
The Company did not take any derivative instruments during the current year / previous period. Particulars of unhedged foreign currency exposures are as follows:
Particulars
Current year Previous period
Total Employee Compensation Cost pertaining to equity settled share-
based payment plans (net of exceptional gain of INR 155,723 thousand
in the previous period)
39,385 (33,325)
Liability for employee stock options outstanding as at year/ period end 463,978 388,978
Deferred Compensation Cost 304,142 393,570
Particulars
Current year Previous period
Pro?t/(loss) as reported (689,534) 542,407
Add: Employee stock compensation under intrinsic value method 39,385 (33,325)
Less: Employee stock compensation under fair value method 427,537 451,826
Proforma pro?t/(loss) (1,077,686) 57,256
Earnings Per Share in INR
Basic
- As reported (0.36) 0.29
- Proforma (0.57) 0.03
Diluted (current year is anti-dilutive)
- As reported (0.36) 0.29
- Proforma (0.57) 0.03
Particulars
31
st
March 2010 31
st
March 2009
Lease rentals recognized during the year/period 2,002 7,255
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
Particulars
31
st
March 2010 31
st
March 2009
Sundry debtors 15,728 17,942
Other current assets 49,984 16,925
Current liabilities 711,263 785,562
(All amounts are in INR thousand unless, otherwise stated)
91
9. The Company has a gratuity plan, wherein every employee who has completed ?ve 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.
The following tables summarize the components of net bene?t expense recognised in the pro?t and loss account and the amounts recognised
in the balance sheet for the gratuity plans.
Pro?t and Loss account
Net employee bene?t expense (recognised in staff cost)
Balance sheet
Details of Provision for Gratuity
Note The estimates of future salary increases, considered in actuarial valuation, take account of in?ation, seniority, promotion and other relevant factors, such as
supply and demand in the employment market.
Gratuity liabilities are as follows:
Note The Company has adopted AS-15 (Revised 2005) Employee Bene?ts for the ?rst time during the previous period. Disclosures required by paragraph 120
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 previous period only.
Particulars
31
st
March 2010 31
st
March 2009
De?ned bene?t obligation 6,647 3,994
Surplus / (de?cit) (6,647) (3,994)
Experience adjustments on plan liabilities (loss) / gain (583) (45)
Particulars
31
st
March 2010 31
st
March 2009
Current service cost 1,605 1,011
Interest cost on bene?t obligation 319 200
Net actuarial (gain) / loss recognised in the year/period 729 2,509
Past service cost Nil Nil
Net bene?t expense 2,653 3,720
Particulars
31
st
March 2010 31
st
March 2009
De?ned bene?t obligation 6,647 3,994
Less: Unrecognized past service cost Nil Nil
Plan asset / (liability) (6,647) (3,994)
Changes in the present value of the de?ned bene?t obligation are as follows:
Opening de?ned bene?t obligation 3,994 274
Current service cost 1,605 1,011
Interest cost 319 200
Bene?ts paid Nil Nil
Actuarial (gains) / losses on obligation 729 2,509
Closing de?ned bene?t obligation 6,647 3,994
The principal assumptions used in determining gratuity liability for the Group’s plans are shown below:
Discount rate 8.00% 7.00%
Future salary increase 10.00% 10.00%
Employee turnover 5.00% 13.13%
Mortality Rate LIC (1994-96) Ultimate Table LIC (1994-96) Ultimate Table
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 92
10. DETAILS OF MOVEMENT IN SHARE CAPITAL AND SECURITIES PREMIUM IS AS UNDER
11. 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 361,000 thousand (previous period 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 ?nancial statements.
12. The Company and its wholly owned subsidiary Cairn Energy Hydrocarbons Limited (“CEHyL”) have entered into a loan facility for INR 40,000 million
(available to the Company) and USD 750 million (available to CEHyL) with a consortium of banks. The purpose of the loan facility is to ?nance the
RJ-ON-90/1 block expenditure and also the repayment of the earlier loan facility of USD 850 million. The main security for the INR loan facility is the
hypothecation of the 35% participating interest in RJ-ON-90/1 block held by Cairn Energy India Pty Limited, a wholly owned subsidiary of the
Company whereas for the USD loan facility, the entire shares of CEHyL has been provided as the main security.
13. The shareholders of the Company have approved a Scheme of Arrangement between the Company and some of its wholly owned subsidiaries, to
be effective from 1
st
January 2010. The Scheme of Arrangement has been approved by the Hon’ble High Court of Madras. However, it is pending for
approval from the Hon’ble High Court of Bombay and other regulatory authorities. Pending receipt of such approvals, no accounting impact of the
scheme has been given in these ?nancial statements. After the implementation of the scheme, the Company will directly own the Indian businesses,
which are currently owned by some of its wholly owned subsidiaries and as contemplated in the scheme, any goodwill arising in the Company
pursuant to the scheme, shall be adjusted against the securities premium account.
14. The reversal in fringe bene?t tax (FBT) is on account of the abolishment of FBT with effect from 1
st
April 2009, as the Company was accounting for
FBT liability on stock options on a pro-rata basis over the vesting period.
15. MANAGERIAL REMUNERATION
Note As the future liability for gratuity and leave bene?ts is provided on actuarial basis for the Company as a whole, the amount pertaining to the directors is not
included above.
Description
No. of equity shares Issue price in INR Share capital Securities premium
Balance as on 1
st
January 2008 1,778,399,420 17,783,994 276,084,115
Exercise of stock options-CISMP 792,240 33.70 7,922 18,776
Preferential allotment of shares to non
promoter investors on 22
nd
April 2008
113,000,000 224.30 1,130,000 24,215,900
Exercise of share options -CISMP 525,000 33.70 5,250 12,443
Exercise of share options-CISMP 1,713,078 33.70 17,131 40,600
Exercise of share options-CISMP 1,600,000 33.70 16,000 37,920
Exercise of share options-CISMP 638,078 33.70 6,381 15,122
Share options liability transferred to securities
premium upon exercise of the options
665,398
Balance as on 31
st
March 2009 1,896,667,816 18,966,678 301,090,274
Exercise of share options-CIPOP 190,983 10.00 1,910 Nil
Exercise of share options-CIESOP 115,333 160.00 1,153 17,300
Share options liability transferred to securities
premium upon exercise of the options
28,648
Waiver of parent company outstanding
balance, pertaining to share issue expenses
paid by parent company, which had earlier
been adjusted from securities premium
25,000
Balance as on 31
st
March 2010 1,896,974,132 18,969,741 301,161,222
Remuneration paid or payable to the Directors
Current year Previous period
Salary 4,632 5,798
Contribution to provident fund 768 402
Total 5,400 6,200
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
93
16. EARNINGS IN FOREIGN CURRENCY (ACCRUAL BASIS)
17. EXPENDITURE IN FOREIGN CURRENCY (ACCRUAL BASIS)
18. IMPORTED AND INDIGENOUS SPARE AND PARTS CONSUMED IN OIL & GAS EXPLORATION ACTIVITIES
19. VALUE OF IMPORTS CALCULATED ON CIF BASIS
20. CAPITAL COMMITMENTS (NET OF ADVANCES)
21. DETAILS OF DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES AS PER MSMED ACT, 2006
Particulars
Current year Previous period
Parent company overhead 32,040 37,331
Interest 8 249
Total 32,048 37,580
Particulars
Current year Previous period
Stores and spares 12,213 Nil
Particulars
Current year Previous period
Company’s share of Joint Ventures’ exploration activities 1,296,011 3,517,376
Details of dues to Micro, Small and Medium Enterprises as per MSMED
Act, 2006
Current year Previous period
The principal amount (interest-nil) remaining unpaid to any supplier as at the end of each
accounting year
Nil 6
The amount of interest paid by the buyer in terms of section 16, of the Micro Small and Medium
Enterprise Development Act, 2006 along with the amounts of the payment made to the supplier
beyond the appointed day during each accounting year
Nil Nil
The amount of interest due and payable for the period of delay in making payment (which have been
paid but beyond the appointed day during the year) but without adding the interest speci?ed under
Micro Small and Medium Enterprise Development Act, 2006.
Nil Nil
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, 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
Nil Nil
Particulars
Current year Previous period
Professional fees 27,409 128,251
Exploration cost 154,991 279,599
Assignment of interest in oil & gas blocks Nil 627,390
Other expenses 6,428 1,072
Total 188,828 1,036,312
Particulars
Percentage of total consumption Amount
Current year Previous period Current year Previous period
Imported 29.10 Nil 11,529 Nil
Indigenous 70.90 Nil 28,083 Nil
Total 100.00 Nil 39,612 Nil
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 94
22. CURRENT INVESTMENTS - UNQUOTED AND NON TRADE (REFER SCHEDULE-7 OF THE FINANCIAL STATEMENTS):
The details of investments in mutual fund units are as tabulated under:
31
st
March 2010
1
24,000,000 units of Birla Sunlife mutual fund under Birla Sun Life Interval Income Fund - Quarterly
Plan - Series II - Daily Dividend Reinvestment plan
241,596
2 117,443,151 units of Birla Sunlife mutual fund under Birla Sun Life Saving Funds - Daily Dividend Reinvestment plan 1,175,230
3 75,161,631 units of Birla Sunlife mutual fund under BSL Floating Rate Fund - Long Term - Daily Dividend Reinvestment plan 753,961
4 16,155,533 units of Canara Robeco mutual fund under Canara Robeco Treasury Advantage - Daily Dividend Reinvestment plan 200,443
5 1,074,176 units of DSP Blackrock mutual fund under DSP Blackrock Floating Rate - Daily Dividend Reinvestment plan 1,074,762
6
219,994,508 units of HDFC mutual fund under HDFC Cash Management Fund - Treasury Advantage - Daily Dividend
Reinvestment plan
2,206,875
7
22,933,236 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan
Premium - Daily Dividend Reinvestment plan
2,424,846
8 20,000,000 units of ICICI Prudential mutual fund under ICICI Prudential Interval Fund II - Daily Dividend Reinvestment plan 200,048
9
115,624,830 units of IDFC mutual fund under IDFC Money Manager TP Super Institutional - Plan C - Daily Dividend
Reinvestment plan
1,156,422
10 135,776,717 units of Kotak Mahindra mutual fund under Kotak Floater Long Term Fund - Daily Dividend Reinvestment plan 1,368,602
11 24,000,000 units of Kotak Mahindra mutual fund under Kotak Quarterly Interval Plan Series 8 - Daily Dividend Reinvestment plan 240,710
12
22,430,929 units of Reliance mutual fund under Reliance Liquid Fund - Treasury Plan-Institutional
Option - Daily Dividend Reinvestment plan
342,908
13 41,040,682 units of Reliance mutual fund under Reliance Medium Term Fund - Daily Dividend Reinvestment plan 701,627
14 128,910,540 units of SBI mutual fund under SBI SHF-Ultra Short Term Fund - Daily Dividend Reinvestment plan 1,289,879
15 130,570,088 units of Tata mutual fund under Tata Floater Fund - Daily Dividend Reinvestment plan 1,310,349
16 2,128,161 units of UTI mutual fund under UTI Treasury Advantage Fund - Daily Dividend Reinvestment plan 2,128,618
Total 16,816,876
31
st
March 2009
1
63,626,784 units, face value of Rs. 10 each, of Birla Cash Plus - Institutional Premium- Daily Dividend
Reinvestment plan
637,509
2 21,126,235 units, face value of Rs. 10 each, of HDFC Liquid Fund - Premium Plan- Daily Dividend Reinvestment plan 259,003
3
26,081,126 units, face value of Rs. 10 each, of ICICI Prudential Institutional Liquid Plan - Super Iinst- Daily Dividend
Reinvestment plan
260,824
4
15,494,677 units, face value of Rs. 10 each, of Reliance Liquid Fund - Treasury Plan-Institutional Option - Daily Dividend
Reinvestment plan
236,870
5 191,352 units, face value of Rs. 1000 each, of Tata Liquid Fund - SHIP- Daily Dividend Reinvestment plan 213,266
Total 1,607,472
The following mutual fund units were purchased and sold during the current year:-
1 335,214,545 units of Birla Sunlife mutual fund under Birla Cash Plus - Institutional Premium - Daily Dividend Reinvestment
2 19,920,035 units of Canara Robeco mutual fund under Canara Robeco Liquid Collection - Daily Dividend Reinvestment
3 1,073,385 units of DSP Blackrock mutual fund under DSP Blackrock Liquidity Fund - Daily Dividend Reinvestment
4 332,343,248 units of HDFC mutual fund under HDFC Liquid Fund - Premium Plan - Daily Dividend Reinvestment
5 49,198,541 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan Premium - Daily Dividend Reinvestment
6 368,973,177 units of ICICI Prudential mutual fund under ICICI Prudential Institutional Liquid Plan - Super Inst - Daily Dividend Reinvestment
7 115,181,352 units of IDFC mutual fund under IDFC Cash Fund Super Institutional - Plan C - Daily Dividend Reinvestment
8 8,927,386 units of Kotak Mahindra mutual fund under Kotak Floater Long Term Fund - Daily Dividend Reinvestment
9 173,076,949 units of Kotak Mahindra mutual fund under Kotak Liquid Fund - Institutional Premium - Daily Dividend Reinvestment
10 148,837,398 units of Reliance mutual fund under Reliance Liquid Fund - Treasury Plan - Institutional Option - Daily Dividend Reinvestment
11 76,780,784 units of SBI mutual fund under SBI Magnum Insta Cash Fund - Daily Dividend Reinvestment
12 39,908,068 units of Tata mutual fund under Tata Floater Fund - Daily Dividend Reinvestment
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
95
13 2,089,903 units of Tata mutual fund under Tata Liquid Fund - SHIP - Daily Dividend Reinvestment
14 4,152,801 units of UTI mutual fund under UTI Liquid Cash Plan - Inst - Daily Dividend Reinvestment
15 504,918 units of UTI mutual fund under UTI Treasury Advantage Fund - Daily Dividend Reinvestment
The following mutual fund units were purchased and sold during the previous period :-
1 288,767,315 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium - Daily Dividend Reinvestment
2 396,375,092 units of Birla Sunlife mutual fund under Birla Sunlife Cash Plus - Institutional Premium – Growth
3 22,951,572 units of Birla Sunlife mutual fund under Birla Sunlife Interval Income - Institutional - Quarterly - Series 2 – Growth
4 76,578,715 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional - Daily Dividend Reinvestment
5 185,222,322 units of Birla Sunlife mutual fund under Birla Sunlife Liquid Plus - Institutional – Growth
6 15,000,000 units of Canara Robeco mutual fund under Canara Robeco FMP - Series 3 - 90 Days - IP – Growth
7 48,919,527 units of Canara Robeco mutual fund under Canara Robeco Liquid Plus Super Institutional - Daily Dividend Reinvestment
8 31,366,504 units of Fidelity mutual fund under Fidelity Cash - SIP – Growth
9 62,263,786 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Daily Dividend Reinvestment
10 57,042,071 units of Fidelity mutual fund under Fidelity Liquid Plus - SIP - Growth
11 128,735,017 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plan - Daily Dividend Reinvestment
12 193,231,349 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale - Daily Dividend Reinvestment
13 174,864,026 units of HDFC mutual fund under HDFC Cash Mgmt - Savings Plus Plan - Wholesale – Growth
14 166,891,418 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale - Daily Dividend Reinvestment
15 193,913,572 units of HDFC mutual fund under HDFC Floating Rate Income - Short Term Plan - Wholesale – Growth
16 24,000,000 units of HDFC mutual fund under HDFC FMP 90D (VIII)(3) - Wholesale - Growth
17 62,847,681 units of HDFC mutual fund under HDFC Liquid - Premium Plan - Daily Dividend Reinvestment
18 303,956,967 units of HDFC mutual fund under HDFC Liquid - Premium Plan – Growth
19 41,003,276 units of HDFC mutual fund under HDFC Liquid - Premium Plus Plan - Weekly Dividend Reinvestment
20 23,586,686 units of HDFC mutual fund under HDFC Quarterly Interval -Plan B Wholesale Growth – Growth
21 106,509,667 units of HSBC mutual fund under HSBC Cash - Inst Plus - Daily Dividend Reinvestment
22 155,825,133 units of HSBC mutual fund under HSBC Cash - Inst Plus - Growth
23 146,239,354 units of HSBC mutual fund under HSBC Liquid Plus - IP - Daily Dividend Reinvestment
24 229,632,812 units of HSBC mutual fund under HSBC Liquid Plus - IP - Growth
25 150,719,932 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan - Daily Dividend Reinvestment
26 208,534,658 units of ICICI Prudential mutual fund under ICICI Prudential Flexible Income Plan – Growth
27 32,963,479 units of ICICI Prudential mutual fund under ICICI Prudential FRF - Plan D – Growth
28 475,076,846 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst - Daily Dividend Reinvestment
29 446,678,300 units of ICICI Prudential mutual fund under ICICI Prudential Inst Liquid Plan - Super Iinst – Growth
30 24,485,319 units of ICICI prudential mutual fund under ICICI Prudential Interval II Quarterly Interval Plan B - Retail Cumulative – Growth
31 49,165,296 units of IDFC mutual fund under IDFC Cash - Super Institutional Plan C - Daily Dividend Reinvestment
32 81,765,530 units of IDFC mutual fund under IDFC Floating Rate -LT-Inst Plan B – Growth
33 24,000,000 units of IDFC mutual fund under IDFC FMP Qtr Series 31 - Growth
34 64,428,611 units of IDFC mutual fund under IDFC Liquid Plus - Investment Plan - Inst Plan B - Daily Dividend Reinvestment
35 15,341,934 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst - Daily Dividend Reinvestment
36 15,984,797 units of IDFC mutual fund under IDFC Quarterly Interval - Plan A - Inst – Growth
37 18,000,000 units of ING mutual fund under ING Interval - Quarterly-C-Institutional – Growth
38 115,482,014 units of ING mutual fund under ING Liquid Super Institutional – Growth
39 128,337,221 units of ING mutual fund under ING Liquid Plus - Institutional – Growth
40 23,518,230 units of ING mutual fund under ING Vysya Liquid Plus - IP - Growth
41 66,088,565 units of JP Morgan mutual fund under JP Morgan India Liquid Plus – Growth
42 20,913,377 units of Kotak Mahindra mutual fund under Kotak Liquid - Institutional Premium – Growth
43 3,165,849 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Plan – Growth
44 50,350,378 units of Principal mutual fund under Principal Cash Mgmt LO- Institutional Premium Plan - Daily Dividend Reinvestment
45 150,114,425 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional - Daily Dividend Reinvestment
46 197,490,161 units of Principal mutual fund under Principal Floating Rate - FMP - Institutional – Growth
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 96
47 20,583,957 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option - Daily Dividend Reinvestment
48 82,564,435 units of Reliance mutual fund under Reliance Liquid - Treasury Plan-Institutional Option – Growth
49 2,052,210 units of Reliance mutual fund under Reliance Liquid Plus - Institutional - Daily Dividend Reinvestment
50 2,380,814 units of Reliance mutual fund under Reliance Liquid Plus - Institutional – Growth
51 23,091,765 units of Reliance mutual fund under Reliance Liquidity - Daily Dividend Reinvestment
52 36,180,905 units of Reliance mutual fund under Reliance Liquidity - Growth
53 158,916,208 units of Reliance mutual fund under Reliance Medium Term - Daily Dividend Reinvestment
54 21,680,417 units of Reliance mutual fund under Reliance Monthly Interval - Series I Institutional – Growth
55 23,407,582 units of Reliance mutual fund under Reliance Quarterly Interval - Series II Institutional – Growth
56 29,168,603 units of SBI mutual fund under SBI Magnum Insta Cash - Daily Dividend Reinvestment
57 20,444,600 units of SBI mutual fund under SBI SDFS - 90 Days - Growth
58 98,778,982 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Daily Dividend Reinvestment
59 233,026,709 units of SBI mutual fund under SBI SHF - Liquid Plus - IP - Growth
60 859,255 units of Standard Chartered mutual fund under Standard Chartered Liquidity Manager Plus – Growth
61 259,059,638 units of Tata mutual fund under Tata Floater - Daily Dividend Reinvestment
62 206,755,713 units of Tata mutual fund under Tata Floater – Growth
63 38,774,118 units of Tata mutual fund under Tata Floating Rate – STP - Institutional Plan – Growth
64 2,457,011 units of Tata mutual fund under Tata Liquid - SHIP - Daily Dividend Reinvestment
65 329,827 units of Tata mutual fund under Tata Liquid – SHIP - Growth
23. Balances written back are on account of reconciliation of certain working capital balances pertaining to joint ventures, in which the Company has
participating interest.
24. The Company has made equity investments in CIG Mauritius Holding Private Limited (‘CMHPL’) mainly for funding the expenditure pertaining to block
SL 2007-0-001 held by Cairn Lanka (Private) Limited (a wholly owned subsidiary of CMHPL). The said investment is carried at cost, as the block is
presently under exploration phase.
25. During the previous period, the Company had decided to retrospectively account for stock options using the Intrinsic Value Method as against the
Fair Value Method (Black Scholes) followed till the ?nancial year ended 31
st
December 2007. Accordingly, the excess stock option provision up to
31
st
December 2007 was reversed during the previous period, resulting in an exceptional gain of INR 155,723 thousand.
26. Details of amounts recoverable from subsidiary companies in which directors are interested are same as disclosed in note 4 (c) above. The balance
outstanding as at the year / period end is also the maximum amount outstanding during the year/period. No loans have been given to the
subsidiaries, associates, ?rms and companies, in which directors are interested.
27. CHANGE IN FINANCIAL YEAR AND PREVIOUS PERIOD COMPARATIVES
The previous ?nancial period consisted of ?fteen months from 1
st
January 2008 to 31
st
March 2009, while the current ?nancial year is for a twelve
months period. Accordingly, previous period ?gures in the pro?t and loss account and cash ?ow statement are not comparable with current
?nancial year. Previous period’s ?gures have been regrouped where necessary to con?rm to current year’s classi?cation.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
Schedules to the Financial Statements Continued
SCHEDULE 20–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
97
Balance Sheet Abstract and Company’s General Business Pro?le
For and on behalf of the Board of Directors
Rahul Dhir Managing Director and Chief Executive Of?cer
Indrajit Banerjee Executive Director and Chief Financial Of?cer
Omkar Goswami Director
Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
I) Registration Details
Registration No. L11101MH2006PLC163934
State Code 11
Balance Sheet Date 31/03/10
II) Capital raised during the year* (Amount in Rs. Thousands)
Public Issue -
Rights Issue -
Bonus Issue -
Private Placement (Includes stock options exercised) 3,063
*Does not include securities premium
III) Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)
Total Liabilities 334,328,131
Total Assets 334,328,131
Source of Funds
Paid up Capital 18,969,741
Reserves & Surplus (Includes stock options outstanding) 301,625,200
Secured Loans 13,450,000
Unsecured Loans Nil
Application of Funds
Net Fixed Assets (Includes exploratory work-in-progress) 242,260
Investments 331,290,939
Net Current Assets 1,284,208
Miscellaneous Expenditure Nil
Accumulated losses 1,227,534
IV) Performance of the Company (Amount in Rs. Thousands)
Turnover (Total Income) 1,633,620
Total Expenditure 2,367,252
Pro?t/(Loss) before tax (733,632)
Pro?t/(Loss) after tax (689,534)
Pro?t per Share in Rs. (Basic & Diluted) (0.36)
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
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 98
Auditor’s 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 Group, as at 31 March, 2010, and also the Consolidated Pro?t and
Loss Account and the Consolidated Cash Flow Statement for the year ended on that date annexed thereto. These ?nancial statements are
the responsibility of the Cairn India Limited’s management. Our responsibility is to express an opinion on these ?nancial statements based
on our audit.
2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the ?nancial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the ?nancial statements. An audit also includes assessing the
accounting principles used and signi?cant estimates made by management, as well as evaluating the overall ?nancial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
3. The attached ?nancial statements include Cairn India Group’s share of net assets, expenses and cash ?ows aggregating to Rs. 799,846
thousand, Rs. 692,124 thousand and Rs. 9 thousand respectively in the unincorporated joint ventures not operated by the Company or its
subsidiaries, the accounts of which have been audited by the auditors of the respective unincorporated joint ventures and relied upon by us.
4. We report that the consolidated ?nancial statements have been prepared by the Cairn India Limited’s management in accordance with the
requirements of Accounting Standards (AS) 21, Consolidated ?nancial statements, noti?ed pursuant to the Companies (Accounting Standards)
Rules, 2006, (as amended).
5. In our opinion and to the best of our information and according to the explanations given to us, the consolidated ?nancial 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 31 March, 2010;
(b) in the case of the consolidated pro?t and loss account, of the pro?t for the year ended on that date; and
(c) in the case of the consolidated cash ?ow statement, of the cash ?ows for the year ended on that date.
For S.R. Batliboi & Associates
Firm registration number: 101049W
Chartered Accountants
per Sanjay Vij
Partner
Membership No.:95169
Place Gurgaon Date 27 May, 2010
99
Consolidated Balance Sheet
AS AT MARCH 31, 2010
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules As at March 31, 2010 As at March 31, 2009
Sources of Funds
Shareholders’ Funds
Share capital 1 18,969,741 18,966,678
Stock options outstanding 2 463,978 388,978
Reserves and surplus 3 319,249,603 308,667,596
338,683,322 328,023,252
Loan funds
Secured loans 4 34,007,131 222,402
Unsecured loans 5 - 43,341,500
34,007,131 43,563,902
Deferred tax liabilities (net) 6 4,619,418 5,623,782
377,309,871 377,210,936
Application of Funds
Fixed assets 7
Gross cost 2,227,578 1,434,686
Less: Accumulated depreciation / amortisation 958,067 801,843
Net book value 1,269,511 632,843
Exploration, Development and
Site-restoration costs
8
Cost of producing facilities (net) 4,994,770 3,013,742
Exploratory & development work in progress 91,634,579 62,027,323
Net book value 96,629,349 65,041,065
Goodwill 253,192,675 253,192,675
Investments 9 17,124,133 1,712,806
Deferred tax assets (net) 6 166,215 83,935
Current assets, loans and advances
Inventories 10 2,909,438 1,682,808
Sundry debtors 11 3,067,474 1,516,418
Cash and bank balances 12 9,294,240 65,270,674
Other current assets 13 144,586 704,244
Loans and advances 14 8,317,866 3,505,102
23,733,604 72,679,246
Less: Current liabilities and provisions
Current liabilities 15 9,868,645 11,794,353
Provisions 16 4,936,971 4,337,281
14,805,616 16,131,634
Net Current assets 8,927,988 56,547,612
377,309,871 377,210,936
Notes to accounts 25
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 Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 100
The schedules referred to above are an integral part of the consolidated pro?t and loss account.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Consolidated Pro?t and Loss Account
FOR THE YEAR ENDED MARCH 31, 2010
Schedules
Year ended
March 31, 2010
Fifteen months
ended March 31, 2009
Income
Income from operations 17 16,230,261 14,326,716
Other income 18 4,076,616 5,510,324
20,306,877 19,837,040
Expenditure
Operating expenses 19 4,248,252 2,129,743
Depletion 8 1,376,477 2,635,431
Unsuccessful exploration costs 8 2,085,346 1,683,851
Staff Costs 20 1,101,635 1,150,010
Administrative expenses 21 1,372,497 1,727,069
(Increase) / decrease in inventories 22 (366,021) 222,342
Prior period items
(Refer note no. 22 in schedule 25)
68,716 283,045
Depreciation and amortisation 7 108,588 62,593
Finance costs 23 148,031 64,090
10,143,521 9,958,174
Pro?t before taxation 10,163,356 9,878,866
Current tax 2,216,325 1,336,282
MAT credit entitlement (1,372,228) (225,490)
Deferred tax (credit)/ charge (1,086,649) 623,354
Fringe Bene?t Tax
(refer note no. 23 in schedule 25)
(105,218) 110,214
Wealth tax 67 -
(347,703) 1,844,360
Pro?t for the year / period 10,511,059 8,034,506
Surplus / (De?cit) brought forward from the
previous period
7,577,322 (457,184)
Surplus carried to Balance sheet 18,088,381 7,577,322
Earnings per share in INR 24
Basic 5.54 4.31
Diluted 5.52 4.28
(Nominal value of shares INR 10)
Notes to accounts 25
101
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
Cash ?ow from operating activities
Pro?t before taxation for the year / period 10,163,356 9,878,866
Adjustments for
- Employee compensation expense (equity settled stock
options) - net of exceptional gains
89,175 107,292
- Depreciation and depletion 1,780,276 2,949,665
- Loss / (Pro?t) on sale / discard of ?xed assets (net) (313) 1,835
- Unsuccessful exploration costs 2,085,346 1,683,851
- Share issue expenses - 208,410
- Unrealised exchange loss / (gain) on restatement of assets
and liabilities (net)
(2,604,018) (1,710,402)
- Interest expense 59,518 79,436
- Pro?t on sale of non trade current investments (net) (2,385) (1,245,686)
- Interest income (1,375,578) (1,858,924)
- Dividend from investments (224,461) (221,876)
- Loan facility and management fees 103,834 -
- Unrealised loss on option contracts - 112,973
- Balances written back (net) (143,360) (143,285)
Operating pro?t before working capital changes 9,931,390 9,842,155
Movements in working capital:
(Increase)/decrease in inventories (1,226,630) (466,761)
(Increase)/decrease in debtors (1,598,096) (108,344)
(Increase)/decrease in loans and advances and other
current assets
(3,050,580) 186,699
Increase/(decrease) in current liabilities and provisions (1,206,652) 1,684,424
Cash generated from operations 2,849,432 11,138,173
Current tax/FBT paid (net of refunds) (1,752,558) (1,457,679)
Net cash from operating activities (A) 1,096,874 9,680,494
Cash ?ow from investing activities
Payments made for exploration, development activities and
purchase of ?xed assets
(33,662,150) (30,133,147)
Short term investments in mutual funds (net) (15,416,641) 6,661,791
Fixed deposits made (16,716,524) (43,410,755)
Proceeds from matured ?xed deposits 57,327,022 11,686,817
Proceeds from sale of ?xed assets 313 202
Interest received 2,138,135 1,240,524
Dividend from short term investments received 222,195 -
Dividend from long term investments received - 216,589
Net cash used in investing activities (B) (6,107,650) (53,737,979)
Cash ?ow from ?nancing activities
Proceeds from issue of equity shares (including securities
premium)
20,363 25,523,445
Payments made for share issue expenses - (208,410)
Finance lease taken 9,406 175,645
Repayment of ?nance lease (91,483) (124,838)
Proceeds from long term borrowings 34,604,616 37,620,170
Repayment of long term borrowings (41,409,564) -
Loan facility and management fees paid (1,908,255) -
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED MARCH 31, 2010
(All amounts are in thousand Indian Rupees, unless otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 102
Interest paid (1,678,228) (1,464,603)
Net cash from/(used in) ?nancing activities (C) (10,453,145) 61,521,409
Net increase/(decrease) in cash and cash
equivalents (A+B+C)
(15,463,921) 17,463,924
Cash and cash equivalents at the beginning of the year/ period 21,732,635 1,503,807
Cash and cash equivalents at the end of the year/ period 6,268,714 18,967,731
Unrealised exchange differences on closing cash and
cash equivalents
97,984 2,764,904
Cash and cash equivalents as per cash ?ow statement 6,366,698 21,732,635
Components of cash and cash equivalents as at March 31, 2010 March 31, 2009
Cash in hand 452 626
Balances with banks
on current accounts 390,057 228,024
on site restoration fund 143,703 -
on deposit accounts 8,760,028 65,042,024
Less: Deposits having maturity of over 90 days (2,927,542) (43,538,039)
6,366,698 21,732,635
Notes
i) The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in Accounting Standard-3 on “Cash ?ow statements”.
ii) Amounts in bracket indicate a cash out?ow or reduction.
iii) Bank balance in deposit accounts includes INR 1,955,866 thousand, previous period INR 3,312,342 thousand, pledged with the banks.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
Consolidated Statement of Cash Flows Continued
Year ended
March 31, 2010
Fifteen months ended
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
103
Notes
i) Issued, subscribed and fully paid up share capital includes 1,183,243,791 equity shares (previous period - 1,226,843,791 equity shares) of INR 10 each
held by Cairn UK Holdings Limited, the holding company, together with its nominees.
ii) Shares held by the holding company include 861,764,893 equity shares (previous period - 861,764,893 equity shares) of INR 10 each, allotted as fully
paid up pursuant to contracts for consideration other than cash.
iii) For stock options outstanding, refer note no. 7 in schedule 25.
Schedules to the Consolidated Financial Statements
As at
March 31, 2010
As at
March 31, 2009
Schedule 1
Share capital
Authorised:
2,250,000,000 (previous period 2,250,000,000) equity shares of
INR 10 each
22,500,000 22,500,000
Issued, Subscribed and Paid up:
1,896,974,132 (previous period 1,896,667,816) equity shares of INR 10 each 18,969,741 18,966,678
18,969,741 18,966,678
Schedule 2
Stock options outstanding
Employee stock options outstanding 768,120 782,548
Less: Deferred employee compensation outstanding (304,142) (393,570)
Closing Balance 463,978 388,978
Schedule 3
Reserves and surplus
Securities premium account
Opening Balance 301,090,274 276,084,115
Add: Additions during the year/ period (refer note no. 14 in schedule 25) 70,948 25,006,159
Closing Balance 301,161,222 301,090,274
Pro?t and Loss Account 18,088,381 7,577,322
319,249,603 308,667,596
Schedule 4
Secured loans
Finance lease liabilities (refer note no. 8 in schedule 25) 140,325 222,402
Long term loans (refer note no. 18 in schedule 25)
- from ?nancial institutions 5,092,111 -
- from banks 28,774,695 -
34,007,131 222,402
Schedule 5
Unsecured loans
Long term loans
- from ?nancial institutions - 7,648,500
- from banks - 35,693,000
- 43,341,500
(All amounts are in thousand Indian Rupees, unless otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 104
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules to the Consolidated Financial Statements Continued
Schedule 6
Deferred tax asset / liabilities (net)
Effect of differences in block of ?xed assets/exploration and development
assets as per tax books and ?nancial books
5,005,074 6,178,716
Gross deferred tax liabilities 5,005,074 6,178,716
Effect of lease accounting 7,877 8,972
Expenditure debited to pro?t and loss account but allowed for tax purposes in following years 543,994 629,897
Gross deferred tax assets 551,871 638,869
Net deferred tax liabilities * 4,453,203 5,539,847
* After setting off net deferred tax assets aggregating to INR 166,215 thousand, previous period INR 83,935
thousand in respect of certain group companies
Notes
i) Furniture and ?ttings includes Leasehold improvements of INR 282,259 thousand (previous period INR 278,895 thousand), accumulated depreciation
thereon INR 168,063 thousand (previous period INR 110,482 thousand).
ii) Furniture and ?ttings and Of?ce equipments of INR 281,634 thousand (previous period INR 278,271 thousand) and INR 100,733 thousand (previous period
INR 210,192 thousand) respectively have been acquired under ?nance lease. The depreciation charge for the year/ period on these assets is INR 57,556
thousand (previous period INR 60,569 thousand) and INR 27,197 thousand (previous period INR 61,040 thousand) respectively and the accumulated depre-
ciation thereon is INR 167,910 thousand (previous period INR 110,355 thousand) and INR 43,514 thousand (previous period INR 139,781 thousand) respectively.
iii) Depreciation charge for the year/period includes INR 295,211 thousand (previous period INR 251,640 thousand) allocated to joint ventures.
iv) Fixed assets include INR 996,883 thousand (previous period INR 169,471 thousand) jointly owned with the joint venture partners. Accumulated depreciation on
these assets is INR 131,109 thousand (previous period INR 78,560 thousand) and net book value is INR 865,773 thousand (previous period INR 90,911 thousand).
Schedule 7
Fixed Assets
Description Gross Block Accumulated Depreciation / Amortisation Net Block
As on
01.04.2009
Additions Deletions
As on
31.03.2010
As on
01.04.2009
For the
year/period
Deletions
As on
31.03.2010
As on
31.03.2010
As on
31.03.2009
A) Tangible Assets
Freehold land 43,583 - - 43,583 - - - - 43,583 43,583
Buildings 5,247 5,042 - 10,289 2,333 782 - 3,115 7,174 2,914
Plant and machinery - 777,549 - 777,549 - 21,845 - 21,845 755,704 -
Of?ce equipments 512,022 122,898 (165,296) 469,624 344,439 112,124 (165,165) 291,398 178,226 167,583
Furniture and ?ttings 299,870 13,080 (1,454) 311,496 126,760 61,319 (1,454) 186,625 124,871 173,110
Vehicles 10,983 582 - 11,565 2,660 2,608 - 5,268 6,297 8,323
B) Intangible Assets
Computer software 562,981 121,447 (80,956) 603,472 325,651 205,121 (80,956) 449,816 153,656 237,330
Grand Total 1,434,686 1,040,598 (247,706) 2,227,578 801,843 403,799 (247,575) 958,067 1,269,511 632,843
Previous period 1,092,632 462,608 (120,554) 1,434,686 606,126 314,233 (118,516) 801,843 632,843 486,506
105
Schedule 9
Investments
Long term investments (at cost)
Quoted and non-trade
Nil (previous period 755,275) equity shares of INR 10/- each fully paid up
in Videocon Industries Limited
- 105,334
Current Investments (at lower of cost and market value)
Quoted and non-trade
755,275 (previous period Nil) equity shares of INR 10/- each fully paid up
in Videocon Industries Limited
105,334 -
Unquoted and non trade
Mutual Funds 17,018,799 1,607,472
17,124,133 1,712,806
Schedule 10
Inventories
Stores and spares 2,456,383 1,595,774
Finished goods 453,055 87,034
2,909,438 1,682,808
Schedule 11
Sundry Debtors
Debts - Unsecured and outstanding for a period exceeding six months :
- Considered good 78,687 94,261
Other unsecured debts :
- Considered good 2,988,787 1,422,157
3,067,474 1,516,418
Schedules to the Consolidated Financial Statements Continued
Schedule 8
Exploration, Development and Site restoration costs
Opening balance of producing properties 3,013,742 4,389,517
Additions / deletions / transfer for the year / period 3,357,505 1,259,656
6,371,247 5,649,173
Less: Depletion 1,376,477 2,635,431
Net producing properties 4,994,770 3,013,742
Opening balance of exploratory & development work in progress 62,027,323 24,670,264
Additions / deletions / transfer for the year / period 31,692,602 39,040,910
Less: Unsuccessful exploration costs for the year/ period 2,085,346 1,683,851
Exploration and Development work in progress 91,634,579 62,027,323
Net book value 96,629,349 65,041,065
Note Additions for the year includes borrowing costs (net of income on temporary investments INR 125,203 thousand, previous period INR 241,350 thousand)
aggregating to INR 2,442,547 thousand (previous period INR 1,620,043 thousand).
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 106
Schedule 12
Cash and bank balances
Cash in hand 452 626
Balances with banks:
- on current accounts 390,057 228,024
- on deposit accounts (including deposits with maturity of more than 3 months)* 8,760,028 65,042,024
- on site restoration fund 143,703 -
9,294,240 65,270,674
* includes INR 1,955,866 thousand, previous period INR 3,312,342 thousand, pledged with the banks
Schedule 13
Other Current Assets
Interest accrued on bank deposits 23,285 660,639
Dividend receivable 7,553 -
Outstanding option contracts 113,748 43,605
144,586 704,244
Schedule 14
Loans and advances
Unsecured and considered good, unless otherwise stated:
Advances recoverable in cash or in kind or for value to be received* 10,463,960 5,789,515
Deposits 197,740 169,469
Advance tax and tax deducted at source, net of tax provisions INR 3,697,411 thousand
(previous period INR 1,921,505 thousand)
365,392 599,367
MAT credit entitlement 950,733 -
Fringe bene?t tax paid (net of provisions INR 394,040 thousand, previous period INR
266,883 thousand)
4,329 13,290
11,982,154 6,571,641
Less: Provision for doubtful advances (3,664,288) (3,066,539)
8,317,866 3,505,102
*includes doubtful balances INR 3,664,288 thousand (previous period INR 3,066,539 thousand) and also capital advances INR 549,799 thousand
(previous period INR 835,486 thousand)
Schedule 15
Current liabilities
Amount payable to Cairn Energy Plc., the ultimate holding company 1,773 1,296,164
Sundry creditors 8,652,475 8,647,926
Lease equalisation liability 12,250 9,279
Interest accrued but not due 7,838 94,471
Other liabilities 1,194,309 1,746,513
9,868,645 11,794,353
Schedules to the Consolidated Financial Statements Continued
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
107
Schedule 16
Provisions
Provision for taxation (net of advance tax - INR 576,716 thousand, previous period INR 356,794
thousand)
52,031 250,643
Provision for fringe bene?t tax (net of advance tax payments INR Nil, previous
period - INR 127,956 thousand)
- 105,235
Site restoration provision * 4,466,429 3,886,882
Provision for Government share of pro?t petroleum ** - 11,444
Provision for leave encashment 22,840 16,305
Provision for gratuity 64,879 39,571
Provision for employee stock options (cash settled) *** 330,792 27,201
4,936,971 4,337,281
* Site restoration provision
Opening balance 3,886,882 2,714,913
Additions for the year /period 579,547 1,388,000
Reversed during the year /period - (216,031)
Closing balance 4,466,429 3,886,882
** Provision for Government share of pro?t petroleum
Opening Balance 11,444 362,382
Additions for the year /period - 26,453
Written back during the year /period (11,444) -
Payments during the year /period - (377,391)
Closing Balance - 11,444
*** Provision for employee stock options (cash settled)
Opening Balance 27,201 -
Additions for the year /period 451,596 27,201
Payments during the year /period (144,762) -
Reversed during the year /period (3,243) -
Closing Balance 330,792 27,201
Schedule 17
Year Ended
March 31, 2010
Fifteen Months
ended March 31, 2009
Income from operations
Revenue from sale of oil, gas and condensate 22,018,998 24,476,702
Less: Government share of Pro?t Petroleum (6,396,752) (10,829,219)
15,622,246 13,647,483
Tolling income 41,406 50,391
Income received as operator from joint venture 566,609 628,842
16,230,261 14,326,716
Schedule 18
Other income
Interest on bank deposits 1,375,578 1,858,924
Pro?t on sale of non trade current investments (net) 2,385 1,245,686
Dividend income from non trade current investments 222,195 216,589
Schedules to the Consolidated Financial Statements Continued
As at
March 31, 2010
As at
March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 108
Dividend income from non trade long term investments 2,266 5,287
Exchange ?uctuation (net)* 2,325,709 1,884,830
Miscellaneous income 4,810 -
Pro?t on sale of ?xed assets (net) 313 -
Balances written back (net) 143,360 143,285
Exceptional gain (refer note no. 24 in schedule 25) - 155,723
4,076,616 5,510,324
* Includes net gain on derivative contracts INR 450,547 thousand (previous period after setting off loss of INR 434,328 thousand).
Schedule 19
Operating expenses
Production expenses 1,130,815 821,016
Arbitration costs 71,431 7,582
Transportation expenses 1,198,660 123,912
Data acquisition and analysis 328,887 66,266
Insurance 52,164 56,677
Royalty 241,351 393,787
Cess 1,148,496 546,365
Production bonus 76,448 114,138
4,248,252 2,129,743
Schedule 20
Staff costs
Salaries, wages and bonus 3,763,973 3,359,347
Employee compensation expense (stock options) 537,529 454,546
Contribution to provident fund 177,970 97,356
Contribution to superannuation fund 68,753 53,226
Compensated absences 7,895 29,916
Gratuity expenses 53,570 40,888
Staff welfare expenses 325,567 329,288
4,935,257 4,364,567
Less: Cost allocated to joint ventures (3,833,622) (3,214,557)
1,101,635 1,150,010
Schedule 21
Administrative expenses
Contract employee charges 439,319 1,295,828
Legal and professional expenses 1,345,401 1,489,900
Share issue expenses - 208,410
Repairs and maintenance 275,984 260,933
Rent 305,214 455,648
Travelling and conveyance expenses 357,480 511,320
Communication expenses 158,900 150,906
Insurance 860 3,127
Inauguration expenses 93,149 -
Loss on sale / discard of ?xed assets (net) - 1,835
Miscellaneous expenses 334,943 357,706
3,311,250 4,735,613
Less: Cost allocated to joint ventures (1,938,753) (3,008,544)
1,372,497 1,727,069
Schedules to the Consolidated Financial Statements Continued
Year Ended
March 31, 2010
Fifteen Months
ended March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
109
Schedule 22
(Increase) / Decrease in inventories
Inventories at the beginning of the year/ period
Finished goods 87,034 309,376
Inventories at the end of the year/period
Finished goods 453,055 87,034
(366,021) 222,342
Schedule 23
Finance costs
Interest
-on term loan 17,807 -
-others 11,681 38,581
-?nance lease charges 30,030 40,855
Loan facility and management fees 103,834 -
Bank charges 12,153 20,734
175,505 100,170
Less: Cost allocated to joint ventures (27,474) (36,080)
148,031 64,090
Schedule 24
Earnings Per Share
Pro?t for the year/period as per pro?t and loss account 10,511,059 8,034,506
Weighted average number of equity shares in calculating basic earnings per share 1,896,696,475 1,866,146,993
Add: Number of equity shares arising on grant of stock options 8,321,392 10,052,076
Weighted average number of equity shares in calculating diluted earnings per share 1,905,017,867 1,876,199,069
Earnings per share in INR
Basic 5.54 4.31
Diluted 5.52 4.28
Year Ended
March 31, 2010
Fifteen Months
ended March 31, 2009
(All amounts are in thousand Indian Rupees, unless otherwise stated)
Schedules to the Consolidated Financial Statements Continued
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 110
(All amounts are in INR thousand unless, otherwise stated)
NATURE OF OPERATIONS 1.
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,
re?ning, 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 is hereinafter collectively referred to as ‘Cairn India Group’. The entities under the Cairn India Group
are participants in various Oil and Gas blocks/?elds (which are in the nature of jointly controlled assets), 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.
COMPONENTS OF THE CAIRN INDIA GROUP 2.
The Consolidated Financial Statements represent consolidation of accounts of the Company and its subsidiaries as detailed below:
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
S. No. Name of the Subsidiaries Country of Incorporation
1 Cairn Energy Australia Pty Limited Australia
2 Cairn Energy India Pty Limited Australia
3 CEH Australia Pty Limited Australia
4 Cairn Energy Asia Pty Limited Australia
5 Sydney Oil Company Pty Limited Australia
6 Cairn Energy Investments Australia Pty Limited Australia
7 Wessington Investments Pty Limited Australia
8 CEH Australia Limited British Virgin Islands
9 Cairn India Holdings Limited (‘CIHL’) Jersey
10 CIG Mauritius Holding Private Limited (‘CMHPL’) Mauritius
11 CIG Mauritius Private Limited Mauritius
12 Cairn Energy Holdings Limited United Kingdom
13 Cairn Energy Discovery Limited United Kingdom
14 Cairn Exploration (No. 2) Limited United Kingdom
15 Cairn Exploration (No. 6) Limited United Kingdom
16 Cairn Energy Hydrocarbons Limited United Kingdom
17 Cairn Petroleum India Limited United Kingdom
18 Cairn Energy Gujarat Block 1 Limited United Kingdom
19 Cairn Exploration (No. 4) Limited United Kingdom
20 Cairn Exploration (No. 7) Limited United Kingdom
21 Cairn Energy Development Pte Limited Singapore
22 Cairn Lanka (Pvt) Limited Sri Lanka
23 Cairn Energy Group Holdings BV Netherlands
24 Cairn Energy India West BV Netherlands
25 Cairn Energy India West Holding BV Netherlands
26 Cairn Energy Gujarat Holding BV Netherlands
27 Cairn Energy India Holdings BV Netherlands
28 Cairn Energy Netherlands Holdings BV Netherlands
29 Cairn Energy Gujarat BV Netherlands
30 Cairn Energy Cambay BV Netherlands
31 Cairn Energy Cambay Holding BV Netherlands
111
CIHL and CMHPL are wholly owned subsidiaries of the Company. All other abovementioned companies are direct or indirect wholly owned
subsidiaries of either CIHL or CMHPL.
Cairn India Group has interest in the following Oil & Gas blocks/?elds:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES 3.
Basis of preparation (A)
The ?nancial statements have been prepared to comply in all material respects with the mandatory Accounting Standards noti?ed 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.
Principles of consolidation:
The consolidated ?nancial statements relate to the Cairn India Group. In the preparation of these consolidated ?nancial statements, investments
in subsidiaries have been accounted for in accordance with the provisions of Accounting Standard-21 (Consolidated Financial Statements). The
?nancial 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:
The ?nancial statements of the Company and its subsidiary companies are consolidated on a line-by-line basis by adding together the 1
book values of the like items of assets, liabilities, income and expenses after eliminating all signi?cant intra-group balances and intra-group
transactions and also unrealised pro?ts or losses in accordance with Accounting Standard-21 (Consolidated Financial Statements).
The Consolidated Financial Statements are prepared using uniform accounting policies for like transactions and other events in similar 2
circumstances and are presented, to the extent possible, in the same manner as the Company’s separate ?nancial statements. The ?nancial
statements of the subsidiaries are adjusted for the accounting principles and policies followed by the Company.
The difference between the cost to the Company of its investment in subsidiaries and its proportionate share in the equity of the investee 3
company at the time of acquisition of shares in the subsidiaries is recognized in the ?nancial statements as Goodwill or Capital Reserve, as
the case may be. Goodwill is tested for impairment by the management on each reporting date.
Oil and gas assets (B)
Cairn India Group follows the successful efforts method of 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 & 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.
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
Oil & Gas blocks/?elds Area
Participating Interest
Operated block
Ravva block Krishna Godavari 22.50%
CB-OS/2 – Exploration Cambay Offshore 60%
CB-OS/2 - Development & production Cambay Offshore 40%
RJ-ON-90/1 – Exploration Rajasthan Onshore 100%
RJ-ON-90/1 – Development & production Rajasthan Onshore 70%
PR-OSN-2004 Palar Basin offshore 35%
SL 2007-01-001 North West Sri Lanka offshore 100%
KG-ONN-2003/1 Krishna Godavari Onshore 49%
Following blocks have been relinquished
GV-ONN-2002/1 in July 2009 Ganga Valley Onshore 50%
VN-ONN-2003/1 in Aug 2009 Vindhyan Onshore 49%
GV-ONN-2003/1 in Feb 2010 Ganga Valley Onshore 24%
Non – operated block
KG-DWN-98/2 Krishna Godavari Deep water 10%
GS-OSN-2003/1 Gujarat Saurashtra Onshore 49%
KK-DWN-2004 Kerala Konkan Basin offshore 40%
Following blocks have been relinquished
GV-ONN-97/1 in 2008 Ganga Valley Onshore 15%
CB-ONN-2002/1 in Jan 2009 Cambay Onshore 30%
RJ-ONN-2003/1 in Jan 2010 Rajasthan Onshore 30%
(All amounts are in INR thousand unless, otherwise stated)
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 112
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
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 pro?t and loss account. Following appraisal of successful exploration wells, when a well is ready for
commencement of commercial production, the related exploratory and development work in progress are transferred into a single ?eld 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 bene?ts of the producing properties or replaces part of the existing
producing properties. Any costs remaining associated with such part replaced are expensed in the ?nancial 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 pro?t 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 pro?t 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.
Depletion (C)
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.
Site restoration costs (D)
At the end of the producing life of a ?eld, 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 expenses form part of the exploration &
development work in progress or cost of producing properties, as the case may be, 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 cost in the pro?t and loss account.
Impairment (E)
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external 1
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 ?ows are discounted to
their present value at the weighted average cost of capital.
After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining 2
useful life.
Tangible ?xed assets, depreciation and amortization (F)
Tangible 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 ?xed 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 ?xtures 2 to 5 years
Of?ce equipments 2 to 5 years
Plant and Equipment 2 to 10 years
Leasehold land Lease period
Leasehold improvements are amortized over the remaining period of the primary lease or expected useful economic lives, whichever is shorter.
Intangible ?xed assets and amortization (G)
Intangible assets, other than oil and gas assets, have ?nite 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 tested for impairment.
Leases (H)
Finance leases, which effectively transfer substantially all the risks and bene?ts 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
113
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
are apportioned between the ?nance 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 bene?ts of ownership of the leased item, are classi?ed as operating
leases. Operating lease payments are recognised as an expense in the pro?t and loss account on a straight-line basis over the lease term.
Investments (I)
Investments that are readily realisable and intended to be held for not more than a year are classi?ed as current investments. All other investments
are classi?ed as long-term investments. Current investments are measured at cost or market value, whichever is lower, determined on an individual
investment basis. 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.
Inventory (J)
Inventories of oil and condensate held at the balance sheet date are valued at net realizable value based on the estimated selling price. Inventories
of stores and spares related to exploration, development and production activities are stated at cost, determined on ?rst in ?rst out (FIFO) basis.
However, inventories of stores and spares, which are not likely to be consumed, are written down to their net realizable value.
Joint Ventures (K)
Cairn India Group participates in several Joint Ventures involving joint control of assets for carrying out oil and gas exploration, development and
producing activities. Cairn India Group 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.
Revenue recognition (L)
Revenue is recognized to the extent that it is probable that the economic bene?ts will ?ow 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 signi?cant
risks and rewards of ownership are transferred to the buyers.
As operator from the joint venture
Cairn India Group recognizes parent company overhead 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 the period on or before the date of balance sheet as per the
requirement of schedule VI of the Companies Act, 1956.
Borrowing costs (M)
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 ?nance 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 pro?t and loss account in the period in which they are incurred.
Foreign currency transactions and translations (N)
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 Cairn India Group’s monetary items at rates different from
those at which they were initially recorded during the year, or reported in previous ?nancial 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
group itself. In translating the ?nancial statements of a non-integral foreign operation for incorporating in the consolidated ?nancial statements, Cairn
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 114
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
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.
Income taxes (O)
Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in
accordance with the income tax laws. Deferred income tax re?ects 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 suf?cient 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 pro?ts. Unrecognised deferred tax assets of earlier periods are re-assessed and recognised to the extent that it has become
reasonably certain or virtually certain, as the case may be, 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 suf?cient 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 suf?cient 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 income tax under the normal provisions during the speci?ed period, resulting in utilization of MAT credit. 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 pro?t and loss account and shown as MAT Credit Entitlement.
Cairn India Group 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 the individual company will utilize MAT credit during the speci?ed period.
Earnings Per Share (P)
Basic earnings per share are calculated by dividing the net pro?t 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 pro?t 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.
Provisions (Q)
A provision is recognised when Cairn India Group has a present obligation as a result of past event and it is probable that an out?ow 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 re?ect the current best estimates.
Cash and Cash equivalents (R)
Cash and cash equivalents in the cash ?ow statement comprise cash at bank and in hand and short-term investments, with an original maturity of 90
days or less.
Employee Bene?ts (S)
Retirement and Gratuity bene?ts
Retirement bene?ts in the form of provident fund and superannuation scheme are de?ned contribution schemes and the contributions are charged to
the pro?t 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 de?ned bene?t obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made
at the end of each ?nancial 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 ?nancial year. The actuarial valuation is done as per projected unit credit method.
Actuarial gains / losses are immediately taken to pro?t 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
ICAI. Cairn India Group 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. The cost of awards to employees under the Company’s ultimate parent entity’s
115
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Long Term Incentive Plans (“the LTIP”) is recognised based on the amount cross charged by the parent entity.
Use of estimates (T)
The preparation of ?nancial 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 ?nancial statements
and the results of operations during the reporting period. Although these estimates are based upon management’s best knowledge of current events
and actions, actual results could differ from these estimates.
Segment Reporting Policies (U)
Identi?cation of segments:
Cairn India Group’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 Cairn India Group operate.
Derivative Instruments (V)
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.
SEGMENTAL REPORTING 4.
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 ?nancial reporting systems. Accordingly, the ?gures appearing in these
?nancial 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 con?ned to the Indian sub-continent in terms of oil and gas blocks and customers. Accordingly, the ?gures appearing in these ?nancial
statements relate to Cairn India Group’s single geographical segment, being operations in the Indian sub-continent.
RELATED PARTY TRANSACTIONS 5.
Names of related parties: (A)
Companies having control
• Cairn UK Holdings Limited, UK
Holding Company
• Cairn Energy Plc., UK
Ultimate holding company
Key Management Personnel
• Rahul Dhir
Managing Director and Chief Executive Of?cer
• Winston Frederick Bott Jr.
Executive Director and Chief Operating Of?cer
(appointed on 29
th
April, 2008)
• Indrajit Banerjee
Executive Director and Chief Finacial Of?cer
• Philip Tracy
Alternate Director (from 18
th
March, 2009 till 26
th
May, 2009)
• Lawrence Smyth
Executive Director and Chief Operating Of?cer (resigned on 21
st
January, 2008)
Transactions during the year / period (B)
Nature of the Transactions Related Party
Current year Previous period
Reimbursement of expenses to parent company Cairn Energy Plc. 39,919 279,725
Waiver of outstanding balance by the
parent company
Cairn Energy Plc. 1,083,654 Nil
Shares issued including premium and stock
option charge
Rahul Dhir Nil 716,185
Lawrence Smyth Nil 126,758
Total Nil 842,943
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 116
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
In addition to the above remuneration, incentives and bonus of INR 28,813 thousand (previous period INR 13,424 thousand), INR 69,151 thousand
(previous period INR 86,598 thousand), INR 38,123 thousand (previous period INR 8,099 thousand) and INR Nil (previous period INR 14,141
thousand) were paid to Rahul Dhir, Winston Frederick Bott Jr., Indrajit Banerjee and Lawrence Smyth respectively. Further, the remuneration does not
include provisions made for gratuity and leave bene?ts, as they are determined on an actuarial basis for the Cairn India Group as a whole.
Balances outstanding as at the end of the year / period: (C)
6. The shareholders of the Company in their meeting dated August 18, 2009 had revised the allocation of Initial Public Offer (IPO) proceeds within
the existing heads under the prospectus. As at 31
st
March 2010, the Company and its subsidiaries together have utilized the entire IPO proceeds
aggregating to INR 88,248,901 thousand in accordance with the revised approval received from the shareholders. The details of the revised
approval and utilization of funds is as follows:
The details of the unutilized monies out of the public issue proceeds is as follows:
7. EMPLOYEES STOCK OPTION PLANS
Cairn India Group has provided various share based payment schemes to its employees. During the period ended 31
st
March 2010, the following
schemes were in operation:
Nature of the Balance Related Party
31
st
March 2010 31
st
March 2009
Accounts payable Cairn Energy Plc. 1,773 1,296,164
Particulars
Upto, 31
st
March 2010 Upto, 31
st
March 2009
Acquisition of shares of Cairn India Holdings Limited from Cairn
UK Holdings Limited
59,580,837 59,580,837
Exploration and Development expenses 26,838,445 21,152,714
General corporate purposes 230,000 230,000
Issue expenses 1,599,619 1,599,619
Total 88,248,901 82,563,170
Particulars
31
st
March 2010 31
st
March 2009
Mutual funds Nil 718,277
Balances with banks Nil 4,967,454
Total Nil 5,685,731
Particulars
CISMP CIPOP CIESOP CIPOP Phantom CIESOP Phantom
Date of Board Approval 17
th
Nov 2006 17
th
Nov 2006 17
th
Nov 2006 Not applicable Not applicable
Date of Shareholder’s approval 17
th
Nov 2006 17
th
Nov 2006 17
th
Nov 2006 Not applicable Not applicable
Number of options granted till
March 2010
8,298,713 6,727,724 18,197,795 1,883,339 573,918
Method of Settlement Equity Equity Equity Cash Cash
Vesting Period
Refer vesting
conditions below
3 years from
grant date
3 years from
grant date
3 years from
grant date
3 years from
grant date
Exercise Period
18 months from
vesting date
3 months from
vesting date
7 years from
vesting date
Immediately
upon vesting
Immediately
upon vesting
Number of options granted till 31
st
March 2010
24
th
Nov 2006 8,298,713 - - - -
1
st
Jan 2007 - 1,708,195 3,467,702 - -
20
th
Sept 2007 - 3,235,194 5,515,053 - -
29
th
July 2008 - 789,567 3,773,856 822,867 324,548
Remuneration Rahul Dhir 106,814 112,036
Winston Frederick Bott Jr. 95,593 95,890
Indrajit Banerjee 14,633 18,024
Lawrence Smyth Nil 25,195
Philip Tracy 3,865 1,354
Total 220,905 252,499
Nature of the Transactions Related Party
Current year Previous period
117
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
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-
• 1/3
rd
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 9
th
Jan 2007.
• 1/3
rd
of the options will vest 18 months after the admission date.
• 1/3
rd
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.
• 1/4
th
of the options will vest on the date on which all major equipment for the start-up of the Mangala ?eld is delivered to site.
• 1/4
th
of the options will vest on achieving 100,000 bopd 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 satis?ed. Phantom options are exercisable proportionate to the period of service
rendered by the employee subject to completion of one year.
CIESOP plan (including phantom options)
There are no speci?c vesting conditions under CIESOP plan. Phantom options are exercisable proportionate to the period of service rendered by the
employee subject to completion of one year.
Details of activities under employees stock option plans
CISMP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 2,238,077 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 Nil NA 5,268,396 33.70
Expired during the year Nil NA 792,240 33.70
Outstanding at the end of the year 2,238,077 33.70 2,238,077 33.70
Exercisable at the end of the year Nil NA Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
131.50 NA 131.50 NA
CIPOP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 3,200,096 10.00 4,755,244 10.00
Granted during the year 994,768 10.00 789,567 10.00
Forfeited during the year Nil NA Nil NA
Exercised during the year 190,983 10.00 Nil NA
Expired during the year 1,377,051 10.00 2,344,715 10.00
Outstanding at the end of the year 2,626,830 10.00 3,200,096 10.00
Exercisable at the end of the year 168,382 10.00 Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
174.47 NA 165.46 NA
Particulars
CISMP CIPOP CIESOP CIPOP Phantom CIESOP Phantom
10
th
Dec 2008 - - 36,040 - 38,008
29
th
July 2009 - 994,768 5,405,144 1,060,472 211,362
Total 8,298,713 6,727,724 18,197,795 1,883,339 573,918
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 118
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
CIPOP Plan – Phantom options
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 784,859 10.00 Nil NA
Granted during the year 1,977,426 10.00 822,867 10.00
Forfeited during the year Nil NA Nil NA
Exercised during the year 795,230 10.00 Nil NA
Expired during the year 238,414 10.00 38,008 10.00
Outstanding at the end of the year 1,728,641 10.00 784,859 10.00
Exercisable at the end of the year, subject to
vesting conditions
812,543 10.00 Nil NA
Weighted average fair value of options granted
on reporting date (INR)
296.39 NA 175.40 NA
CIESOP Plan – Phantom options
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 362,556 218.19 Nil NA
Granted during the year 936,862 181.98 362,556 218.19
Forfeited during the year Nil NA Nil NA
Exercised during the year 392,977 178.22 Nil NA
Expired during the year 61,753 240.05 Nil NA
Outstanding at the end of the year 844,688 195.03 362,556 218.19
Exercisable at the end of the year, subject
to vesting conditions
695,079 185.34 Nil NA
Weighted average fair value of options
granted on reporting date (INR)
136.51 NA 48.13 NA
The details of exercise price for stock options outstanding as at March 31, 2010 are:
Scheme
Range of exercise
price (INR)
No. of options
outstanding
Weighted average
remaining contractual
life of options (in years)
Weighted average
exercise Price in INR
CISMP Plan 33.70 2,238,077 1.08 33.70
CIPOP Plan 10.00 2,626,830 1.36 10.00
CIESOP Plan 143-240 14,646,209 1.28 206.43
CIPOP Plan – Phantom options 10.00 1,728,641 1.71 10.00
CIESOP Plan – Phantom options 143-240 844,688 1.09 195.03
CIESOP Plan
Current year Previous period
Number of
options
Weighted average
exercise Price in INR
Number of
options
Weighted average
exercise Price in INR
Outstanding at the beginning of the year 10,914,244 185.39 8,545,710 164.49
Granted during the year 5,405,144 240.05 3,809,896 226.21
Forfeited during the year Nil NA Nil NA
Exercised during the year 115,333 160.00 Nil NA
Expired during the year 1,557,846 179.09 1,441,362 169.33
Outstanding at the end of the year 14,646,209 206.43 10,914,244 185.39
Exercisable at the end of the year 1,981,770 160.00 Nil NA
Weighted average fair value of options granted
on the date of grant (INR)
107.64 NA 101.47 NA
119
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Effect of Employees Stock Option Plans on Financial Position
Effect of the employee share-based payment plans on the pro?t and loss account and on its ?nancial position:
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:
Particulars
Current year Previous period
Total Employee Compensation Cost pertaining to share-based payment plans
(including exceptional gain of INR 155,723 thousand in the previous period)
552,002 134,493
Compensation Cost pertaining to equity-settled employee share-based
payment plan included above
103,649 107,292
Compensation Cost pertaining to cash-settled employee share-based
payment plan included above
448,353 27,201
Liability for equity settled employee stock options outstanding as at year /
period end
463,978 388,978
Liability for cash settled employee stock options outstanding as at year /
period end (current year amount excludes INR 46,381 thousand payable
towards options vested but not exercised)
284,411 27,201
Deferred compensation cost of equity settled options 304,142 393,570
Deferred compensation cost of cash settled options 315,490 94,719
Variables - CISMP
A B
Grant date 24
th
Nov 2006 24
th
Nov 2006
Stock Price/fair value of the equity shares on the date of grant (INR) 160.00 160.00
Vesting date Refer vesting conditions Refer vesting conditions
Vesting % Refer vesting conditions Refer vesting conditions
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
1
st
Jan 2007 20
th
Sept 2007 29
th
July 2008 10
th
Dec 2008 29
th
July 2009
Stock Price/fair value of the
equity shares on the date of
grant (INR)
160.00 166.95 228.55 150.10 234.75
Vesting date 1
st
Jan 2010 20
th
Sept 2010 29
th
July 2011 10
th
Dec 2011 29
th
July 2012
Vesting % 100% 100% 100% 100% 100%
Volatility 41.04% 40.24% 39.43% 38.19% 39.97%
Risk free rate 7.50% 7.65% 9.20% 6.94% 6.91%
Time to maturity (years) 6.50 6.50 6.50 6.50 6.50
Exercise price (INR) 160.00 166.95 227.00 143.00 240.05
Fair Value of the options (INR) 87.30 90.72 130.42 79.80 122.24
The details of exercise price for stock options outstanding as at March 31, 2009 are:
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
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 120
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Volatility is the measure of the amount by which the price has ?uctuated or is expected to ?uctuate 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 Cairn India Group expects the options to be live. 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 pro?ts 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 April1, 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 ?nancial statements.
Applying the fair value based method de?ned in the said guidance note, the impact on the reported net pro?t and earnings per share would
be as follows:
Variables – CIPOP Phantom
Grant date
20
th
Sept 2007
(effective grant date)
29
th
July 2008 29
th
July 2009
Stock Price of the equity shares on the reporting
date (INR)
305.65 305.65 305.65
Vesting date 20
th
Sept 2010 29
th
July 2011 29
th
July 2012
Vesting % Refer vesting conditions
Refer vesting
conditions
Refer vesting
conditions
Volatility 28.90% 45.06% 58.06%
Risk free rate 3.76% 5.10% 6.12%
Time to maturity (years) 0.47 1.33 2.33
Exercise price (INR) 10.00 10.00 10.00
Fair Value of the options (INR) 295.83 296.31 296.98
Variables – CIESOP Phantom
Grant date
20
th
Sept 2007
(effective grant date)
29
th
July 2008 10
th
Dec 2008 29
th
July 2009
Stock Price of the equity shares on the reporting
date (INR)
305.65 305.65 305.65 305.65
Vesting date 20
th
Sept 2010 29
th
July 2011 10
th
Dec 2011 29
th
July 2012
Vesting %
Refer vesting
conditions
Refer vesting
conditions
Refer vesting
conditions
Refer vesting
conditions
Volatility 28.90% 45.06% 57.16% 58.06%
Risk free rate 3.76% 5.10% 5.53% 6.12%
Time to maturity (years) 0.47 1.33 1.70 2.33
Exercise price (INR) 166.95 227.00 143.00 240.05
Fair Value of the options (INR) 141.66 111.96 184.32 144.23
Variables – CIPOP
Grant date
1
st
Jan 2007 20
th
Sept 2007 29
th
July 2008 29
th
July 2009
Stock Price/fair value of the equity shares
on the date of grant (INR)
160.00 166.95 228.55 234.75
Vesting date 1
st
Jan 2010 20
th
Sept 2010 29
th
July 2011 29
th
July 2012
Vesting % Refer vesting conditions Refer vesting conditions Refer vesting conditions Refer vesting conditions
Volatility 41.61% 36.40% 37.49% 43.72%
Risk free rate 7.33% 7.23% 9.37% 5.78%
Time to maturity (years) 3.12 3.12 3.12 3.13
Exercise price (INR) 10.00 10.00 10.00 10.00
Fair Value of the options (INR) 152.05 158.97 221.09 226.40
121
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
8. LEASE OBLIGATIONS DISCLOSURES
Finance Lease:
Fixed assets include of?ce equipments and leaseholds improvements obtained under ?nance lease. The lease is secured by way of hypothecation of
the respective assets acquired under lease. 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.
Note The interest rate on ?nance lease ranges from 3.77 % to 14.61%
Operating Lease:
Cairn India Group has entered into operating leases for of?ce premises and of?ce equipments, some of which are cancellable and some are non-
cancellable. The leases have a life of 3 to 6 years. There is an escalation clause in the lease agreement during the primary lease period. There are no
restrictions imposed by lease arrangements and there are no subleases. There are no contingent rents.
9. CONTINGENT LIABILITIES
(A) 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 ?eld 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
Current Year
Minimum lease payments Principal amount due Interest due
Within one year of the balance sheet date 72,047 60,928 11,119
Due in a period between one year and ?ve years 85,391 79,397 5,994
Due after ?ve years Nil Nil Nil
Total 157,438 140,325 17,113
Previous Period
Minimum lease payments Principal amount due Interest due
Within one year of the balance sheet date 97,740 80,366 17,374
Due in a period between one year and ?ve years 160,058 142,036 18,022
Due after ?ve years Nil Nil Nil
Total 257,798 222,402 35,396
Particulars
31
st
March 2010 31
st
March 2009
Lease payments made during the period 132,390 120,173
Within one year of the balance sheet date 140,321 124,628
Due in a period between one year and ?ve years 34,536 150,536
Due after ?ve years Nil Nil
Current year Previous period
Pro?t as reported 10,511,060 8,034,506
Add: Employee stock compensation under intrinsic
value method (net of exceptional gain of INR 155,723
thousand in the previous period)
552,002 134,493
Less: Employee stock compensation under fair value
method
948,058 622,866
Proforma pro?t 10,115,004 7,546,133
Earnings Per Share (in INR)
Basic
- As reported 5.54 4.31
- As reported 5.33 4.04
Diluted
- As reported 5.52 4.28
- Proforma 5.31 4.02
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 122
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
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 judgment was delivered by the Malaysian High Court on 12
th
January 2009, ruling in favour of the GoI and setting the arbitration award
aside. This had the effect of negating the original award in favour of Cairn India Group.
Cairn India Group appealed against above judgment to the Malaysian Court of Appeal. A judgment was delivered by the Malaysian Court of
Appeal on 15
th
September 2009, which reversed the ruling of the High Court in Malaysia of 12
th
January 2009 and had the effect of reinstating the
original award in favour of Cairn India Group. The Government of India has applied for leave to appeal this judgment to the Federal Court of Malaysia
(the apex court).
In addition, consistent with GoI’s view that the set-aside meant they have a binding judgment 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 due as a result of the Malaysian
judgment being in their favour. This recovery action was contested by Cairn in the Indian courts, pursuant to which, the Government has given an
undertaking to stop recoveries post January 2010. The amounts recovered by the Government aggregate to approximately INR 7,230,000 thousand
(USD 160 million). The net effective deduction as on 31
st
March 2010, after adjusting the current year’s pro?t petroleum, amounts to approximately
INR 2,291,000 thousand (USD 51 million).
In the event that the GoI’s appeal is successful, then Cairn India Group would be required to pay approximately INR 2,888,000 thousand
(USD 64 million) and potential interest of INR 1,398,000 thousand (USD 31 million). The same dispute existed at the end of the previous period.
(B) Ravva Joint Venture Arbitration Proceedings : Base Development Cost
Ravva joint venture had 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 pro?t petroleum to the Indian Government, out of which, Cairn India Group’s share will be USD 37.4 million
(approximately INR 1,688,000 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 ?eld 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, the arbitration panel has been fully
constituted and one hearing has taken place. A further hearing has been scheduled for oral closing arguments. The same dispute existed at the end
of the previous period.
(C) Service Tax
One of the subsidiary companies of the Cairn India Group has received four show cause notices from the tax authorities in India for nonpayment of
service tax as a recipient of services from foreign suppliers.
These notices cover periods from 16th August 2002 to 31
st
March 2009. A writ petition(s) has been ?led with Chennai High Court
challenging the liability to pay service tax as recipient of services in respect of ?rst show cause notice (16
th
August 2002 to 31
st
March 2006) and
challenging the scope of some services in respect of second show cause notice (1
st
April 2006 to 31
st
March 2007). The reply for second and third
show cause notice has also been ?led before the authorities.
Should the adjudication go against Cairn India Group, it will be liable to pay the service tax of approximately INR 1,679,000 thousand
(previous period INR 978,000 thousand) plus potential interest of approximately INR 634,000 thousand (previous period 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 (D)
Section 80-IB (9) of the Income Tax Act, 1961 allows the deduction of 100% of pro?ts from the commercial production or re?ning of mineral oil. The
term ‘mineral oil’ is not de?ned but has always been understood to refer to both oil and gas, either separately or collectively.
The 2008 Indian 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 con?rmed that tax holiday would be available on production of crude oil
but have continued to exclude gas.
Cairn India Group ?led a writ petition to the Gujarat High Court in December 2008 challenging the restriction of section 80-IB to the
production of oil. Gujarat High Court did not admit the writ petition on the ground that the matter needs to be ?rst decided by lower tax authorities.
A Special Leave Petition has been ?led before Supreme Court against the decision of Gujarat High court.
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 31
st
March 2010 is approximately INR 2,321,000 thousand (previous period INR 2,370,000 thousand).
Based on the legal opinions received, the management is of the view that the liability in the cases mentioned in (A) to (D) above are not probable and
accordingly no provision has been considered necessary there against.
10. Balances written back are net of INR 450,217 thousand, being the adjustment arising on account of reconciliation of certain working capital balances
pertaining to joint ventures, in which Cairn India Group has participating interest.
123
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
11. CAPITAL COMMITMENTS (NET OF ADVANCES)
In respect of Cairn India Group’s share of Joint Ventures’ Exploration activities – INR 11,688,763 thousand (previous period – INR 1
11,324,140 thousand).
In respect of the Cairn India Group’s share of Joint Ventures’ Development activities – INR 28,096,949 thousand (previous year – INR 2
34,536,062 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 amount of outstanding options as at 31
st
March 2010 aggregated to USD 233,000 thousand (previous period USD 214,000 thousand)
Particulars of Unhedged Foreign Currency Exposure at the Balance Sheet date
13. Cairn India Group has a de?ned bene?t gratuity plan. Every employee who has completed ?ve 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 bene?t expense recognised in the pro?t and loss account, the funded status and
amounts recognised in the balance sheet for the gratuity plans.
Pro?t and Loss account
Net employee bene?t expense (recognised in staff cost)
Balance sheet
Details of Provision for Gratuity
Particulars
31
st
March 2010 31
st
March 2009
De?ned bene?t obligation 161,887 108,425
Fair value of plan assets 97,008 68,854
Less: Unrecognized past service cost Nil Nil
Plan asset / (liability) (64,879) (39,571)
Changes in the present value of the de?ned bene?t obligation are as follows:
Particulars
31
st
March 2010 31
st
March 2009
Opening de?ned bene?t obligation 108,425 66,142
Current service cost 31,030 23,529
Interest cost 8,674 6,051
Bene?ts paid (4,038) (5,306)
Actuarial (gains) / losses on obligation 17,796 18,009
Closing de?ned bene?t obligation 161,887 108,425
Particulars
31
st
March 2010 31
st
March 2009
Loan 20,416,806 43,341,500
Sundry Debtors 3,067,474 1,516,418
Investments 201,923 Nil
Cash and Bank 3,894,233 31,366,364
Other current Assets 13,543,767 2,266,955
Current Liabilities 4,545,666 5,623,077
Particulars
31
st
March 2010 31
st
March 2009
Current service cost 31,030 23,529
Interest cost on bene?t obligation 8,674 6,051
Expected return on plan assets (3,598) (3,666)
Net actuarial (gain) / loss recognised in the year 17,464 14,974
Past service cost Nil Nil
Net bene?t expense 53,570 40,888
Actual return on plan assets 6,604 6,700
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 124
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
Note The Group’s expected contribution to the fund in the next year is INR 40,582 thousand (previous period INR 34,725 thousand).
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
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:
Note The estimates of future salary increases, considered in actuarial valuation, take account of in?ation, 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:
Notes
i) The Group has adopted AS 15 (Revised 2005) Employee Bene?ts for the ?rst time during the year ended December 31, 2007. Disclosures
required by paragraph 120
of AS-15 (Revised 2005) are required to be furnished prospectively from the date of transition and hence have been furnished for year/period ended December 31, 2007 onwards.
ii) 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 year. The total value of plan assets amounts to INR 97,008 thou-
sand (Previous period INR 68,854 thousand) is as certi?ed by the LIC.
Particulars
31
st
March 2010 31
st
March 2009
Discount rate 8.00% 7.00%
Future salary increase 10.00% 10.00%
Expected rate of return on assets 9.40% 9.35%
Employee turnover 5.00% 13.13%
Mortality Rate LIC (1994-96) LIC (1994-96)
Ultimate Table Ultimate Table
Particulars
31
st
March 2010 31
st
March 2009
Changes in the fair value of plan assets are as follows:
Particulars
31
st
March 2010 31
st
March 2009
Opening fair value of plan assets 68,854 29,163
Expected return 3,598 3,666
Contributions by employer 28,262 38,296
Bene?ts paid (4,038) (5,306)
Actuarial gains / (losses) 332 3,035
Closing fair value of plan assets 97,008 68,854
Particulars
31
st
March 2010 31
st
March 2009 31
st
December 2007
De?ned bene?t obligation 161,887 108,425 66,142
Plan assets 97,008 68,854 29,163
Surplus / (de?cit) (64,879) (39,571) (36,979)
Experience adjustments on plan assets (loss)/gain 365 3,132 2,970
Experience adjustments on plan liabilities (loss)/gain (13,839) (11,964) (6,960)
125
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
(All amounts are in INR thousand unless, otherwise stated)
14. DETAILS OF MOVEMENT IN SHARE CAPITAL AND SECURITIES PREMIUM IS AS UNDER
15. The price contract for sale of gas with one customer is due for revision with effect from December 2008 and currently the same is under negotiation.
Pending ?nalization of the price contract, revenue has been recognised based on the last agreed prices on a conservative basis, as the management
is expecting an upward price revision.
16. The goodwill of Cairn India Group amounting to INR 253,192,675 thousand has arisen on consolidation of ?nancial statements of the Company
with its subsidiaries and represents the difference between the cost of its investment in Cairn India Holdings Limited (which largely represent
Cairn India Group’s operations in India through its subsidiaries) and consolidated net book value of assets in Cairn India Holdings Limited, 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 ?ows 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 net present value per barrel of oil equivalent. 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.
17. The current tax and deferred tax provisions have been computed on the basis of the standalone ?nancial statements of the Company’s subsidiaries,
i.e. not based on the consolidated ?nancial statements of Cairn India Limited and its subsidiaries. For computing deferred tax liability in relation to
the Rajasthan ?eld, Cairn India Group has considered ?eld life as stipulated in the Production Sharing Contract instead of the economic useful life of
the ?eld considered in earlier years. This change has resulted in reversal of opening deferred tax liability by INR 1,760,519 thousand.
18. The Company and its wholly owned subsidiary Cairn Energy Hydrocarbons Limited (“CEHyL”) have entered into a loan facility for INR 40,000
million (available to the Company) and USD 750 million (available to CEHyL) with a consortium of banks. The purpose of the loan facility is to ?nance
the RJ-ON-90/1 block expenditure and also the repayment of the earlier loan facility of USD 850 million. The main security for the INR loan facility is
the hypothecation of the 35% participating interest in RJ-ON-90/1 block held by Cairn Energy India Pty Limited, a wholly owned subsidiary of the
Company whereas for the USD loan facility, the entire shares of CEHyL has been provided as the main security.
19. The shareholders of the Company have approved a Scheme of Arrangement between the Company and some of its wholly owned subsidiaries, to
be effective from 1
st
January 2010. The Scheme of Arrangement has been approved by the Hon’ble High Court of Madras. However, it is pending for
approval from the Hon’ble High Court of Bombay and other regulatory authorities. Pending receipt of such approvals, no accounting impact of the
scheme has been given in these ?nancial statements. After the implementation of the scheme, the Company will directly own the Indian businesses,
which are currently owned by some of its wholly owned subsidiaries and as contemplated in the scheme, any goodwill arising in the Company
pur suant to the scheme, shall be adjusted against the securities premium account.
Description
No. of equity
shares
Issue price
in INR
Share capital
Securities
premium
Balance as on 1
st
January 2008 1,778,399,420 17,783,994 276,084,115
Exercise of stock options-CISMP 792,240 33.70 7,922 18,776
Preferential allotment of shares to non promoter inves-
tors on 22
nd
April 2008
113,000,000 224.30 1,130,000 24,215,900
Exercise of share options -CISMP 525,000 33.70 5,250 12,443
Exercise of share options-CISMP 1,713,078 33.70 17,131 40,600
Exercise of share options-CISMP 1,600,000 33.70 16,000 37,920
Exercise of share options-CISMP 638,078 33.70 6,381 15,122
Share options liability transferred to securities premium
upon exercise of the options
665,398
Balance as on 31
st
March 2009 1,896,667,816 18,966,678 301,090,274
Exercise of share options-CIPOP 190,983 10.00 1,910 Nil
Exercise of share options-CIESOP 115,333 160.00 1,153 17,300
Share options liability transferred to securities premium
upon exercise of the options
28,648
Waiver of parent company outstanding balance, pertaining
to share issue expenses paid by parent company, which
had earlier been adjusted from securities premium
25,000
Balance as on 31
st
March 2010 1,896,974,132 18,969,741 301,161,222
CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 126
Particulars
Gross proved and probable
hydrocarbons initially in
place (mmboe)
Gross proved and probable
reserves and resources
(mmboe)
Net proved and probable
reserves and resources
(mmboe)
Current Year Previous Period Current Year Previous Period Current Year Previous Period
Rajasthan MBA Fields 2,054 2,054 694 685 486 479
Rajasthan MBA EOR - - 308 308 216 216
Rajasthan Block Other Fields 1,976 1,708 152 86 107 61
Ravva Fields 708 625 100 72 23 16
CBOS/2 Fields 175 156 16 20 7 8
KG-DWN-98/2 650 650 353 353 35 35
Total 5,563 5,193 1,623 1,524 874 815
(All amounts are in INR thousand unless, otherwise stated)
20. Operating expenses include cess on crude oil produced from Rajasthan block. The Group has initiated arbitration proceedings against the
Government of India and its joint venture partner for recovery of the same.
21. Cairn India Group’s estimate of hydrocarbon reserves and resources at the year/period end is as follows:
22. Prior period items represent miscellaneous expenses in the current year and exchange difference in the previous period.
23. The reversal in fringe bene?t tax (FBT) is on account of the abolishment of FBT with effect from 1
st
April 2009, as Cairn India Group was accounting
for FBT liability on stock options on a pro-rata basis over the vesting period.
24. During the previous period, Cairn India Group had decided to retrospectively account for stock options using the Intrinsic Value Method as against
the Fair Value Method (Black Scholes) followed till the ?nancial year ended 31
st
December 2007. Accordingly, the excess stock option provision up
to 31
st
December 2007 was reversed during the previous period, resulting in an exceptional gain of INR 155,723 thousand.
25. Change in ?nancial year and previous period comparatives
The previous ?nancial period consisted of ?fteen months from 1
st
January 2008 to 31
st
March 2009, while the current ?nancial year is for a twelve
months period. Accordingly, previous period ?gures in the pro?t and loss account and cash ?ow statement are not comparable with current ?nancial
year. Previous period’s ?gures have been regrouped where necessary to con?rm to current year’s classi?cation.
As per our report of even date
For S. R. Batliboi & Associates For and on behalf of the Board of Directors
Firm Registration No.:101049W
Chartered Accountants Rahul Dhir Managing Director and Chief Executive Of?cer
per Sanjay Vij Indrajit Banerjee Executive Director and Chief Financial Of?cer
Partner Omkar Goswami Director
Membership No. 95169 Neerja Sharma Company Secretary
Place Gurgaon Date 27 May, 2010
Cairn India Group’s net working interest in proved and probable reserves is as follows:
Particulars Proved and probable reserves Proved and probable reserves (developed)
Oil Gas Oil Gas
(mmstb) (bscf) (mmstb) (bscf)
Reserves as at 1
st
January 2008* 247.03 44.00 17.14 44.00
Additions / revision during the period 98.35 (1.66) 2.64 (1.66)
Production during the period 5.58 13.74 5.58 13.74
Reserves as at 31
st
March 2009** 339.80 28.60 14.20 28.60
Additions / revision during the year 2.37 5.93 54.12 5.93
Production during the year 6.26 7.85 6.26 7.85
Reserves as at 31
st
March 2010*** 335.91 26.68 62.06 26.68
* 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)
*** Includes probable oil reserves of 57.61 mmstb (of which 14.75 mmstb is developed) and probable gas reserves of 11.13 bscf (of which 11.13 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
Schedules to the Consolidated Financial Statements Continued
SCHEDULE 25–NOTES TO ACCOUNTS
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CAI RN I NDI A LI MI TED ANNUAL REPORT 2009- 10 128
GLOSSARY
abbreviations and full forms for main terms used in this report
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
GDP Gross Domestic Product
GoI Government of India
IP Institutional Plan
IPO Initial Public Offering
ISIN International Securities Identifying Number
ITC Item code No.
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
OPEC Organisation of Petroleum Exporting Countries
PICL PETRONAS International Corporation Ltd
PRA Production Resources Agreement
PSC Production Sharing Contract
PSU Public Sector Undertaking
RoU Right of Use
SEBI Securities and Exchange Board of India
SIPD Shell India Production Development B.V.
TECHNICAL
1P Proved
2P Proved plus Probable
3D 3 Dimensional
3P Proved 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
°C Celcius
CO
2
Carbon Dioxide
E & P Exploration and Production
EOR Enhanced Oil Recovery
GBA Gas Balancing Agreement
GHG Green House Gas
GIIP Gross Intial In Place
HDPE High Density Polyethylene
HPSV High Power Sodium Vapour
HSE Health, Safety and Environment
ISO International Organisation for Standardization
JIP Joint Industry Project
Km Kilometre
Km
2
Square Kilometre
LTIFR Lost Time Injury Frequency Rate
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
pigs pipeline inspection gauges
PDC Polycrystalline Diamond Compact
PE Polyethylene
PUF Polyurethane Foam
PWRI Produced Water Re Injection
OHSAS Occupational Health & Safety Advisory Services
SEHMS Skin Effect Heat Management System
STOIIP Stock Tank Oil Initially in Place
TRIFR Total Recordable Incident Frequency Rate
ACCOUNTING
ADR American Depository Receipt
AS Accounting Standard
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
CY Calendar Year
EPS Earnings per share
ESOP Employee Stock Option Plan
FBT Fringe Bene?t Tax
FY Financial Year
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
MAT Minimum Alternate Tax
PTRR Post Tax Rate of Return
Q3 Third Quarter
USD United States Dollar
CORPORATE RESPONSIBILITY
CEDPA Centre for Development and Population Activities
CSR Corporate Social Responsibility
EC Enterprise Centre
MCX Multi Commodity Exchange of India Limited
MDG Millennium Development Goals
NGO Non Government Organisation
NGRI National Geophysical Research Centre
UNDP United Nations Development Programme
NOTES
NOTES
NOTES
COMPANY I NFORMATI ON
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 Of?cer)
Indrajit Banerjee (Executive Director & Chief Financial Of?cer)
Rick Bott (Executive Director & Chief Operating Of?cer)
BOARD COMMITTEES
Audit Committee
Aman Mehta (Chairman)
Naresh Chandra
Dr Omkar Goswami
Edward T. Story
Jann Brown
Remuneration Committee
Naresh Chandra (Chairman)
Sir William B.B. Gammell
Malcolm Shaw Thoms
Aman Mehta
Dr Omkar Goswami
Nomination Committee
Sir William B.B. Gammell (Chairman)
Rahul Dhir
Jann Brown
Malcolm Shaw Thoms
Edward T. Story
Shareholders’ / Investors’ Grievance Committee
Dr Omkar Goswami (Chairman)
Edward T. Story
Rahul Dhir
COMPANY SECRETARY
Neerja Sharma
STATUTORY AUDITORS
S.R. Batliboi & Associates
Golf View Corporate Tower B
Sector 42, Sector Road
Gurgaon 122 002, India
BANKERS
State Bank of India | Standard Chartered Bank |
Deutsche Bank | Citibank
STOCK EXCHANGES LISTED ON
Bombay Stock Exchange Limited
Phiroze Jeejeebhoy Towers,
Dalal Street, Mumbai – 400 001
Tel +91 22 22721233/4
Fax +91 22 22721919
National Stock Exchange of India Limited
Exchange Plaza,
Plot No, C/1, G Block,
Bandra-Kurla Complex,
Bandra (E),
Mumbai – 400 051
Tel +91 22 26598100-8114
Fax +91 22 26598120
REGISTERED OFFICE
101, West View
Veer Savarkar Marg
Prabhadevi
Mumbai 400 025, India
Tel +91 22 24338306
Fax +91 22 24311160
CORPORATE OFFICE
3rd & 4th Floors, Vipul Plaza
Sun City, Sector 54
Gurgaon 122 002, India
Tel +91 124 2703000
Fax +91 124 2889320
REGISTRAR & SHARE TRANSFER AGENT
Link Intime India Private Limited
C-13, Pannalal Silk Mills Compound
L.B.S. Marg, Bhandup (West)
Mumbai 400 078, India
Contents
Board of Directors
Chairman's letter
Managing Director and CEO's letter
Management Discussion and Analysis
Securing Energy, Fuelling Growth
Delivering to the Nation
Corporate Social Responsibility
Report on Corporate Governance
Additional Shareholder Information
Directors’ Report
Auditors’ Report
Balance Sheet
Pro?t and Loss Account
Statement of Cash Flows
Schedules to the Financial Statements
Balance Sheet Abstract and
Company’s General Business Pro?le
Auditors’ Report on
Consolidated Financial Statements
Consolidated Balance Sheet
Consolidated Pro?t and Loss Account
Consolidated Statement of Cash Flows
Schedules to Consolidated
Financial Statements
Glossary
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128
Energy for India
ANNUAL REPORT & FINANCIAL STATEMENTS
Securing Energy
Fuelling Growth
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Cairn India Limited
3rd & 4th Floors, Vipul Plaza, Sun City
Sector 54, Gurgaon 122 002, India
+91 124 270 3000
www.cairnindia.com
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