1. In compliance with the Corporate Debt Restructuring (‘CDR’) Scheme approved on March 10, 2004, the company has issued equity shares of Rs 6,337.31 Lacs at par to Industrial Development Bank of India (‘IDBI’) and for Rs 1,969.70 Lacs at a premium of Rs 98.48 Lacs to Banks and unsecured Optionally Fully Convertible Debentures (‘OFCDs’) of Rs 1,667.76 Lacs to Banks/Financial Institutions. Further the Company has issued secured OFCDs of Rs 7,551.18 Lacs fully paid-up to Financial Institutions and Banks.

During the year ended March 31, 2005, the Company has incurred a loss of Rs 9,360.26 Lacs (accumulated loss of Rs 54,320.41 Lacs), resulting into erosion of 88 per cent of networth. However, the Company is in the process of implementing an overall restructuring of the liabilities as approved by the CDR Scheme and accordingly, these financial results are prepared on a going concern basis.

On October 16, 2004, the Company issued 7,551,178 Zero percent Optionally Fully Convertible Debentures (‘OFCDs’) of Rs 100 each in lieu of interest accrued on term loans from financial institutions and banks from January 1, 2004 to March 31, 2005. In addition to the securities created for the term loans, the OFCDs are yet to be secured by way of assignment of the License from the DoT for provision of basic telephony services in the Punjab Circle, extension of the pari-passu charge on all the assets of the Company, Corporate Guarantee of the Holding Company, extension of pledge of 163,000,000 equity shares and personal guarantee of the promoter directors.

On May 23, 2005, the Company has submitted a proposal to the lenders for providing services in the States of Haryana, Himachal Pradesh and Jammu & Kashmir and expansion of Mobile network & launch of Cable Access services in Punjab. Consequent to the proposed expansion plan, the revised peak funding requirement would increase to Rs 154,700 lacs upto March 31, 2007. The funding for the same shall be arranged on the completion of the appraisal.

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During the year ended March 31, 2005, the Company entered into a contract with equipment supplier for expansion of capacity and roll-out of CDMA based wireless networks to most parts of the Punjab telecom circle. Further, effective April 1, 2004, the management has revised the economic useful life of the equipment purchased from the original equipment supplier and believes that the same would be utilised upto the year ended March 31, 2008. As a result of the revision in the economic useful life, the depereciation charge and the losses reflected in the Statement of Profit and Loss are higher by Rs. 686 lacs.

During the year the Company has revised the economic useful life of furniture & fixtures, office equipment and vehicles. As a result of the revision in the economic useful life, the depreciation charge and the losses reflected in the Statement of Profit and Loss are higher by Rs 114 lacs.

As at March 31, 2005, the Company has accumulated losses of Rs 54,320 lacs, resulting into a tax loss carry forward situation. The Company has not recognised the net deferred tax asset resulting from the tax loss carry forward as there is currently no convincing evidence of virtual certainty that the Company would reverse the tax loss carry forwards during the tax holiday period under Section 80IA. Further, no deferred tax liabilities on account of temporary timing differences have been recognized since they are expected to be reversed during the tax holiday period.

On July 2, 2004, the Company incorporated a wholly owned subsidiary named ‘Connect Broadband Services Limited (‘CBSL’), which has yet to start commercial operations. As on March 31, 2005, the Company holds 46.67 per cent equity shares of The Investment Trust of India Limited (‘ITI’). The company has prepared consolidated financial statements as per reporting requirements of Accounting Standard 21 ‘Consolidated Financial Statements’ and Accounting Standard 23 ‘Accounting for Investments in Associates in Consolidated Financial Statements’ issued by the Institute of Chartered Accountants of India

The primary reporting of the Company has been performed on the basis of business segments. The Company has only one business segment i.e. the provision of unified telephony services. Accordingly, the amounts appearing in these financial statements relate to this primary business segment. Further, the Company provides services only in the state of Punjab and, accordingly, no disclosures are required under secondary segment reporting.

IInformation on investors’ complaints for the quarter is as following: Opening balance: Nil, New: 6, Disposal: 6, Closing Balance: Nil.

Previous period/years figures have been reclassified, where necessary, to confirm with current year's presentation.

Above results were reviewed by the Audit Committee and approved by the Board in their meeting held on June 13, 2005.