HFCL Infotel - Limited Review for the quarter ended Sep 30, 2007

HFCL Infotel Ltd has informed that in the limited review report of the Company for the quarter ended September 30, 2007, the Auditors of the Company have made the following observations:

Without qualifying their opinion, the Auditors draw attention to Note 2 of the statement, the Company has incurred a loss of Rs 3,721.97 lacs and Rs 6,732.66 lacs during the three months ended and six months period September 30, 2007 (accumulated loss of Rs 83,989.30 lacs) resulting into erosion of its net-worth, and has a net current liability of Rs 15,198.16 Lacs (after considering provision for interest amounting to Rs 8,623.98 lacs being the difference in the amount paid in comparison to the amount accrued on yield basis as per the CDR scheme) as of September 30, 2007. The Company has achieved profitability at the Earnings before interest and depreciation / amortisation level, and is also able to generate cash from operations. The ability of the Company to continue as a going concern is significantly dependent on its ability to successfully arrange the balance funding in terms of the CDR scheme and achieve financial closure to fund its operating and capital funding requirements and to substantially increase its subscriber base. The management in view of its business plans is confident of generating cash flows and to fund the operating and capital requirements of the Company in the event of any delay in the arrangement of the balance funding. Accordingly, these statements have been prepared on a going concern basis.

Attention is invited to Note 3 of the statement regarding Companys investment Rs 7,176.71 lacs (Rs 180 lacs as equity and Rs 6,996.71 Lacs as unsecured convertible OFCD) in an associate company. The Investment Trust of India Ltd (ITI), ITI has incurred a net loss of Rs 925.15 lacs and has a negative net worth of Rs 132.20 lacs as on March 31, 2007.