-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E8h+zMa9eW5bKWOmWJ1b4nLLFAMgH6OY+N4TF4G5QOq2XZPj/GMECtlaGNJzobRa YCLzR0G0CMIyZR5Z4sde3A== 0001341004-06-002591.txt : 20060922 0001341004-06-002591.hdr.sgml : 20060922 20060922102041 ACCESSION NUMBER: 0001341004-06-002591 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060908 FILED AS OF DATE: 20060922 DATE AS OF CHANGE: 20060922 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REDIFF COM INDIA LTD CENTRAL INDEX KEY: 0001103783 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 000000000 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-30735 FILM NUMBER: 061103481 BUSINESS ADDRESS: STREET 1: MAHALAXMI ENGINEERING ESTATE, 1ST FLOOR STREET 2: BEHIND KHILANI COLLEGE CITY: MUMBAI STATE: K7 ZIP: 00000 BUSINESS PHONE: 0119122444 MAIL ADDRESS: STREET 1: MAHALAXMI ENGINEERING ESTATE, 1ST FLOOR CITY: BEHIND KHILANI COLLE STATE: K7 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: REDIFF COMMUNICATION LTD DATE OF NAME CHANGE: 20000119 6-K 1 rediff6k09-20.htm FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of September 2006

Commission File Number: 000-30735

Rediff.com India Limited

(Translation of registrant's name into English)

1^st Floor, Mahalaxmi Engineering Estate, L.J. First Cross Road

Mahim (West), Mumbai 400 016

(Address of principal executive office)

____________________

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F x Form 40-F o

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes o No x

(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b) : 82- .)

Rediff.com India Limited has scheduled the Annual General Meeting of its shareholders for 10:00 a.m. (Indian Standard Time) on September 29, 2006, at its registered office at Mahalaxmi Engineering Estate, L.J. First Cross Road, Mahim (W), Mumbai 400 016, Maharashtra, India. A copy of its Annual Report for the year 2005-06 prepared in accordance with the requirements of the Companies Act, 1956, is attached hereto as Exhibit 13.1. A copy of the notice, attendance slip and proxy form issued by Rediff.com India Limited and sent to its members (including Citibank, N.A., in its capacity as depositary under the Deposit Agreement dated as of June 13, 2000) is attached hereto as Exhibit 99.1.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: September 22, 2006

Rediff.com India Limited

(Registrant)

	By: /s/ Joy Basu
	Name: Joy Basu
	Title: Chief Financial Officer

EXHIBIT NO.	DESCRIPTION

13.1	Annual Report for the year 2005-06 prepared in accordance with the requirements of the Companies Act, 1956.

99.1	Notice of Annual General Meeting of the Members of Rediff.com India Limited, attendance slip and proxy form.

EX-13 2 rediff1_ex13-1.txt COVER SHEET - 11TH ANNUAL REPORT 2005-2006 REDIFF.COM INDIA LIMITED 11TH ANNUAL REPORT 2005-2006 (UNDER COMPANIES ACT, 1956) (INDIAN LAWS) Rediff.com India Ltd. Board of Directors Mr. Ajit Balakrishnan (Chairman & Managing Director) Diwan Arun Nanda Mr. Sunil Phatarphekar Mr. Pulak Prasad Mr. Ashok Narasimhan Mr. Sridar Iyengar Mr. Rashesh Shah (appointed w.e.f. 26th April, 2006) Statutory Auditors M/s. Deloitte Haskins & Sells Chartered Accountants 12, Dr. Annie Besant Road Opp. Shiv Sagar Estate Worli Mumbai 400 018 Registered Office First Floor, Mahalaxmi Engineering Estate L. J. First Cross Road Mahim (West) Mumbai 400 016

NOTICE Notice is hereby given that the Eleventh Annual General Meeting of the Members of Rediff.com India Limited will be held on Friday, 29th September, 2006, at 10 a.m. (IST) at the Registered Office of the Company situated at First Floor, Mahalaxmi Engineering Estate, L. J. First Cross Road, Mahim (West), Mumbai 400016, to transact the following business: ORDINARY BUSINESS 1. To receive, consider and adopt the Audited Balance Sheet as at March 31, 2006 and Profit & Loss Account for the year ended as on that date and the reports of the Auditors and Directors' thereon. 2. To appoint a Director in place of Mr. Pulak Prasad, Director retiring by rotation and being eligible, offers himself for reappointment. 3. To appoint a Director in place of Mr. Ashok Narasimhan, Director retiring by rotation and being eligible, offers himself for reappointment. 4. To appoint Auditors and fix their remuneration by passing the following resolution as an Ordinary Resolution with or without modification(s); "RESOLVED that M/s Deloitte Haskins & Sells, Chartered Accountants, Mumbai be and are hereby re-appointed as Statutory Auditors of Rediff.com India Limited and to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting at a remuneration to be decided by the Board of Directors/Audit Committee of the Directors of the Company." SPECIAL BUSINESS 5. To consider and if thought fit, to pass with or without modification, the following resolution as SPECIAL resolutions: "RESOLVED THAT Mr. Rashesh Shah, who was appointed as an Additional Director on April 26, 2006, in terms of the Articles of Association of the Company and who by virtue of the provisions of section 260 of the Companies Act, 1956, holds office upto the date of the Annual General Meeting, being eligible, offers himself for appointment and in respect of whom the Company has received a notice in writing under section 257 of the Companies Act, 1956 proposing his candidature for the office of Director, be and is hereby appointed as Director of the Company." By Order of the Board For Rediff.com India Limited sd/- PLACE: MUMBAI Jyoti Dialani DATE: 5th September, 2006 Company Secretary & Manager Legal NOTES: 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF/HERSELF AND SUCH A PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES TO BE EFFECTIVE MUST BE RECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE COMMENCEMENT OF THE ANNUAL GENERAL MEETING. 2. The relative Explanatory Statement pursuant to the provisions of Section 173 of the Companies Act, 1956 for item Nos. 5 is enclosed and forms part of this Notice. REDIFF.COM INDIA LIMITED EXPLANATORY STATEMENT PURSUANT TO THE PROVISIONS OF SECTION 173(2) OF THE COMPANIES ACT, 1956. Pursuant to the provisions of Section 173(2) of the Companies Act, 1956, the following Explanatory Statement sets out the material facts relating to the item of Special Business mentioned in the accompanying Notice dated 5th September, 2006 and shall be form part of the Notice Item No.5 Mr. Rashesh Chandrakant Shah was appointed as an Additional Director, in terms of the provisions of the Companies Act, 1956 and the Articles of Association of the Company on April 26, 2006. He holds office upto the date of the Annual General Meeting by virtue of section 260 of the Companies Act, 1956. Notices in writing under section 257 of the Companies Act, 1956, have been received from members signifying their intention to propose Mr. Rahesh Shah as a candidate for the office of Director. Mr. Shah is currently CEO of Edelweiss Capital Limited. Edelweiss Capital is a leading financial services company based in Mumbai, India, whose businesses include investment banking, securities broking and investment management. He also serves on the Boards of various companies. He has more than 18 years of experience in capital markets. Mr. Shah is an MBA graduate from the Indian Institute of Management, Ahmedabad, and holds a Bachelor's degree in Science from the University of Bombay. He is also a Diploma holder in International Trade from the Indian Institute of Foreign Trade, New Delhi. Prior to his joining Edelweiss Mr. Shah worked as Head of Investment and Research with Prime Securities Limited. The Directors, therefore, recommend the passing of the Resolution under Item no.5 of the accompanying Notice. No Director other than Mr. Rashesh Shah, may be considered to be concerned or interested in the passing of this Resolution. By Order of the Board For Rediff.com India Limited sd/- PLACE: MUMBAI Jyoti Dialani DATE: 5th September, 2006 Company Secretary & Manager Legal REDIFF.COM INDIA LIMITED DIRECTORS' REPORT ----------------- To, The Members, Rediff.com India Limited Your Directors have pleasure in presenting to you the Eleventh Annual Report together with the Audited Annual Accounts for the year ended March 31, 2006. 1. FINANCIAL PERFORMANCE FOR THE YEAR APRIL 1, 2005 - MARCH 31, 2006 Our Consolidated operating revenues including that of all our subsidiaries were Rs.829 million (previous year Rs. 565 million). Consolidated Gross Profits for the year before depreciation, amortisation and impairment expenses stood at a profit of Rs. 606 million (previous year loss of Rs. 46 million). After accounting for interest income and depreciation, our consolidated net profit stood at Rs.54 million (previous year net loss of Rs.64 million). 2. CAPITAL RAISED DURING THE YEAR During the fiscal year 2005-06, the Company raised Equity Capital of Rs.2,198.4million by issue of 3,026,480 American Depositary Receipts underlying 1,513,240 equity shares of par value of Rs. 5/- each. 3. REDIFF.COM INDIA LTD.'S FINANCIAL HIGHLIGHTS (a) Total Income:- Rs. 594 million (previous year Rs. 317 million). ------------ (b) Operating expenses:- Rs. 537 million (previous year Rs. 374 million). ------------------ (c) Operating Profits before depreciation, amortisation, impairment of ------------------------------------------------------------------ Investments and taxes:- Rs.124 million (previous year loss of Rs. --------------------- 11 million). (d) Net Profit/ Loss:- After providing for depreciation and amortisation of ---------------- Rs.66 million and taxes of Rs. 3 million net profits for the year were Rs. 55 million (previous year net loss Rs. 57million). 4. DIVIDEND In view of carried forward losses the Board does not recommend any dividend. 5. CORPORATE GOVERNANCE The various committees constituted by the Company including the Audit Committee and Compensation Committee have been functioning satisfactorily during the year. The present Board comprises of eminent professionals from various fields, in addition to Chairman and Managing Director who looks after the day to day affairs of the Company. The composition of the Audit Committee of the Board is as follows:- Name Designation in the Committee Mr. Sridar Iyengar Chairman Mr. Sunil Phatarphekar Member Mr. Ashok Narasimhan Member Mr. Rashesh Shah Member (appointed with effect from 26th April, 2006) The composition of the Compensation Committee of the Board is as follows:- Name Designation in the Committee Mr. Ajit Balakrishnan Chairman Diwan Arun Nanda Member Mr. Sunil N Phatarphekar Member 6. EMPLOYEE STOCK OPTION PLAN/ ASSOCIATE STOCK OPTIONS PLAN At the Extraordinary General Meeting held on 31st March, 2006 shareholders granted powers to the Board of Directors to create and administer one or more stock option plans within the following overall limits: (a) For all new Employee Stock Option Plans in the aggregate - ordinary stock options convertible into equity shares of Rs. 5/- each not exceeding 335,000 equity shares. (b) For all new ADR linked stock options Plans in the aggregate - ADR linked stock options convertible into equity Shares of Rs. 5/- each not exceeding 335,000 equity shares (c) For all new Associate Stock Option Plans in the aggregate - ordinary stock options convertible into equity shares of Rs. 5/- each not exceeding 50,000 equity shares. 7. FIXED DEPOSITS During the year under review, our Company had not accepted any Fixed Deposit from the Public. 8. DIRECTORS Mr. Rashesh Shah was appointed as an Additional Director of the Company with effect from 26th April, 2006. The approval of the members for appointing him as a Director is sought vide requisite resolution in the accompanying Notice dated 5th September, 2006, convening the Annual General Meeting. The Directors recommend the resolution for the approval by the members. In accordance with the provisions of the Companies Act, 1956, Mr. Pulak Prasad and Mr. Ashok Narasimhan, Directors retire by rotation at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. 9. PARTICULARS OF EMPLOYEES The Company had employees who were in receipt of remuneration of not less than Rs. 24 lakhs during the year ended 31st March, 2006 or not less than Rs. 2 lakhs per month during any part of the said year. However, as per the provisions of section 219(1)(b)(iv) of the Companies Act, 1956, the Directors Report being sent to the shareholders does not include this Annexure. Any shareholder interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered office of the Company. 10. AUDITORS M/s. Deloitte Haskins & Sells, Chartered Accountants, the Statutory Auditors of Company and who hold the office till the conclusion of ensuing Annual General Meeting are eligible to be re-appointed as the Statutory Auditors of the Company till the conclusion of next Annual General Meeting. The Company has received from the Auditors undertaking their eligibility to accept the office, if reappointed. The members are requested to consider their re-appointment as set out in the Notice convening the Annual General Meeting. The observations made by the Auditors' in their report and notes to accounts are self- explanatory and do not call for any further comments. 11. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that: a) In the preparation of the annual accounts, the applicable accounting standards had been followed along-with proper explanation relating to material departures. b) The Directors had selected such accounting policies and applied them consistently and 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 at the end of the financial year on March 31, 2006 and of the profit of the company for that period. c) The Directors have taken proper and sufficient care for the 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 the frauds and other irregularities. d) The directors had prepared the annual accounts on a going concern basis. 12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The information required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is as under: 1. Conservation of Energy:- The operation of your Company is not energy intensive. Adequate measures have however been taken to reduce energy consumption by using energy efficient computer equipments incorporating latest technologies. 2. Technologies Absorption Since technology related to internet portal business is constantly evolving, continuous investments and improvements are being made to the content, community and commerce offerings made to the customers. The investments are classified as deferred revenue expenditure and amortized. 3. Foreign Exchange Earnings and outgo Foreign exchange earned by the Company in the fiscal year ended March 31, 2006 was Rs.44 million and the foreign exchange outgo in the same period was Rs. 40 million. 13. ACKNOWLEDGEMENTS The Directors place on record their appreciation for the dedicated services rendered by the employees of our Company and acknowledge the cooperation extended by our Company's bankers. On behalf of Board of Directors Place : Mumbai sd/- Date : 5th September, 2006 Ajit Balakrishnan Chairman and Managing Director (U.S.$1= Rs.44.34 for the year 2005-2006 and Rs.44.74 for year 2004-2005) AUDITORS' REPORT TO THE MEMBERS OF REDIFF.COM INDIA LIMITED 1. We have audited the attached Balance Sheet of REDIFF.COM INDIA LIMITED as at March 31, 2006, and also the Profit and Loss 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. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor's Report) Order, 2003, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; c) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account; d) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; e) on the basis of written representations received from the directors of the Company dated subsequent to March 31, 2006, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2006 from being appointed as a director in terms Section 274(1)(g) of the Companies Act, 1956; f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the accounting policies and notes thereon give the information required by the Companies Act, 1956, in the manner so required, and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in the case of the Balance sheet, of the state of affairs of the Company as at March 31, 2006; (ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. For Deloitte Haskins & Sells Chartered Accountants P. B. Pardiwalla Partner Membership Number: 40005 Mumbai, India September 5, 2006 ANNEXURE TO THE AUDITORS' REPORT (Referred to in paragraph 1 of our report of even date) 1. The nature of the Company's business / activities for the year ended March 31, 2006, are such that the requirements of clauses (ii), (vi), (viii), (xi), (xii), (xiii), (xiv), (xv), (xvi), (xviii) and (xix) of paragraph 4 of the Order are not applicable to the Company. 2. Fixed assets: (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets. (b) The management has drawn up a plan to physically verify its fixed assets over a period of three years. Management has accordingly physically verified some of its fixed assets during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification. 3. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. 4. Pursuant to an internal program to comply with the internal control provisions of the Sarbanes-Oxley Act of 2002, the Company is presently engaged in a project to document the design of controls and test the operating effectiveness of key controls. This exercise could result in the Company identifying control deficiencies either in the design or operating effectiveness which would require strengthening of the controls to be commensurate with the size of the Company and the nature of its business. 5. In respect of contracts and arrangements entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us: (a) The particulars of contracts or arrangements that needed to be entered into the register have been so entered. (b) In respect of services obtained by the Company from a party entered in the said register and where the total value of services exceeds Rs. 5 lacs during the year , these have been made at prices which are prima facie reasonable having regard to prevailing market prices. 6. In our opinion, the internal audit function carried out during the year, by a firm of Chartered Accountants appointed by the management, is commensurate with the size of the Company and the nature of its business. 7. Statutory dues: a. According to the information and explanations given to us, and on the basis of our examination of the books of account, undisputed statutory dues including provident fund, employees' state insurance, income tax, service tax, wealth tax, cess and any other material statutory dues have been generally regularly deposited with the appropriate authorities during the year except in the case of service tax of Rs. 3,369,849 which was outstanding for more than six months from the date it became payable. An amount of Rs. 1,892,746 (including interest and after adjusting the input tax credit available) has subsequently been deposited in April 2006. b. According to the information and explanations given to us, there are no dues in respect of service tax, income tax, wealth tax and cess that have not been deposited with the appropriate authorities on account of any dispute. 8. The Company's accumulated losses at March 31, 2006 are not in excess of fifty per cent of its net worth. The Company has not incurred cash losses during the financial year covered by our audit. However, the Company had incurred cash losses in the immediately preceding financial year. 9. According to the information and explanations given to us, the Company has not raised any funds on short-term basis. 10. According to the information and explanations given to us, the Company has not raised any money by way of public issue during the year. Therefore, the provisions of clause (xx) of the Order are not applicable to the Company. 11. According to the information and explanations given to us, no material fraud on or by the Company was noticed or reported during the year. For Deloitte Haskins & Sells Chartered Accountants P. B. Pardiwalla Partner Membership #: 40005 Mumbai, India September 5, 2006

CAPITAL WORK IN PROGRESS - ----------------------------------------------------------- As at As at March 31, March 31, 2006 2005 - ----------------------------------------------------------- Capital Work in Progress 12,079,037 2,763,857 - -----------------------------------------------------------

2. Due from subsidiary companies comprise of the following : (a) Rs. 46,921,556 (Previous year Rs. 16,449,974) due from India Abroad Publications, Inc. (b) Rs. 1,631,075 (Previous year Rs. 1,594,878) due from Value Communications Corporation. (c) Rs. 80,476 (Previous year Rs. 78,690 ) due from Rediff Holdings, Inc. (d) Rs.1,453,394 (Previous year Rs.1,146,334 ) due from Rediff.Com, Inc.

REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS A. SIGNIFICANT ACCOUNTING POLICIES 1. Basis of preparation of financial statements The accompanying financial statements have been prepared under the historical cost convention in accordance with accounting principles generally accepted in India ("Indian GAAP") and the provisions of the Companies Act, 1956. 2. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Differences between actual results and estimates are recognized in the periods in which the results materialize or are known. 3. Revenue recognition Revenues comprise of revenues from online advertising and fee based services. Online advertising includes advertisement and sponsorships and designing and managing customers' websites. Fee based services include e-commerce, subscription services and wireless short messaging services. E-commerce revenues primarily comprise of commission earned on sale of items to customers who shop online while subscription services comprise of subscriptions received for using e-mail, matchmaker and other subscriber services. Wireless short messaging services include revenues derived from mobile operators based on value added text messages received and sent by mobile subscribers over their mobile phones. Online advertising Advertisement and sponsorship income is derived from customers who advertise on the Company's website or to whom direct links from the Company's website to their own websites are provided, and, income earned from designing and managing customers' websites. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS Revenue from advertisement and sponsorships is recognized ratably over the contractual period of the advertisement, commencing when the advertisement is placed on the website. Revenues are also derived from sponsor buttons placed in specific areas of the Company's website, which generally provide users with direct links to sponsor websites. These revenues are recognized ratably over the period in which the advertisement is displayed, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Company obligations may include guarantees of a minimum number of impressions, or times, that an advertisement appears in pages viewed by users of the Company's website. To the extent that minimum guaranteed impressions are not met, the Company defers recognition of the corresponding revenues until the guaranteed impression levels are achieved. The Company also earns revenues on sponsorship contracts for fees relating to the design, coordination, and integration of the customers' content, which is recognized ratably over the term of the contract. Website development services principally comprise services relating to the designing of graphics, layout, artwork and content of the client's website. Revenue from such services on large contracts that take relatively longer periods of time to complete are recognized upon completion of milestones specified in the contract. At each such milestone, the services are either billed or billable, and as they relate to completed work, are earned. Revenue from such services on contracts that take relatively shorter periods of time is recognized on completion of the entire contract. During fiscal 2006 such short-term contracts constituted substantially all of these services. Fee based services E-commerce revenue primarily consists of commission from the sale of books, music, apparel, confectionery, gifts and other items to retail customers who shop at the Company's online store. Customers directly place orders with vendors through the Company's website. When an order is placed, the Company informs the vendor through an intranet and also confirms whether payment has already been collected by the Company through credit card/ debit card or cheques, or whether the payment is to be made by the customer on C.O.D basis. The vendor then dispatches the products to the customers. The vendor sends a monthly summary of the transactions executed during the month for which the Company has collected payments on its behalf. The Company makes payment to the vendor after deduction of its share of margin and costs. The Company recognizes as revenues the commission earned on these transactions and shipping costs recovered from customers. Revenues from E-commerce services also include fees charged to vendors for creating, designing and hosting the vendors' product information on the Company's website. Such fees are amortized over the hosting contract period. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS Subscription service revenues primarily include income from various paid email service products that cater to a cross section of the Company's registered user base. The revenue for subscription based service products is recognized ratably over the period of subscription. Subscription revenues are also derived from providing value added short messaging services such as e-mail and other related products to mobile phone users. The Company contracts with third party mobile operators for sharing revenues from these services. SMS based revenues are recognized when the service is performed. 4. Fixed assets, intangibles, depreciation and amortization Fixed Assets Fixed assets are stated at historical cost. The Company depreciates fixed assets using the straight-line method, over the estimated useful lives of assets. The estimated useful lives of assets are as follows: Furniture and Fixtures..................... 10 years Computer Equipment......................... 3 to 5 years Office equipment........................... 10 years Vehicles................................... 8 years Leasehold improvements..................... 6 years Individual assets costing less than Rs.5,000 are depreciated in full in the year of acquisition. Intangibles Costs incurred in the operations stage that provide additional functions or features to the Company's website are amortized over their estimated useful life of two years. Maintenance expenses or costs that do not result in new features or functions are expensed as product development costs, when incurred. Expenses incurred in connection with the Company's implementation of new accounting software are amortized over its estimated economic useful life of five years. 5. Investments Investments classified as long-term investments are stated at cost. Provision is made to recognize a decline, other than temporary, in the value of such investments. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS Cost of trade investments representing equity shares comprises of purchase cost and duties related to the purchase. Cost of investments in wholly owned subsidiaries comprise of purchase cost as increased by legal fees, due diligence fees and other direct expenses connected with such acquisition. Additional consideration for the acquisition of equity shares payable in subsequent years on the resolution of certain contingencies is debited to the cost of the investments in the year in which the contingent payments crystallize. 6. Employee retirement benefits Gratuity The Company provides for gratuity, an unfunded defined benefit retirement plan tcovering all its employees, based on third-party actuarial valuations. This plan provides for a lump-sum payment to be made to vested employees at retirement or termination of employment in an amount equivalent to 15 days salary, payable for each completed year of service. These gratuity benefits vest upon an employee's completion of five years of service. The gratuity valuation is made at each year-end and the incremental liability over the previous year is provided for in the accounts. Provident Fund Employees and the Company each contribute at the rate of 12% of basic salary to a provident fund maintained by the Government of India for the benefit of employees. The provident fund is a defined contribution plan. Accordingly, the Company expenses such contributions to operations as incurred. Leave Encashment Provision for leave encashment is computed on the basis of last drawn salary for the unavailed leave balance to the credit of the employees at the year-end and is charged to the Profit and Loss Account. 7. Foreign currency transactions Transactions in foreign currency are recorded at the original rates of exchange in force at the time transactions are effected. Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets from a country outside India are adjusted in the carrying amount of the respective fixed asset. The carrying amount of fixed assets acquired from a country outside India is also adjusted at the end of each financial year for any change in the liability arising out of expressing the related outstanding foreign currency liabilities at the closing rates of exchange prevailing at the date of the Balance Sheet. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS Monetary items (other than those related to acquisition of fixed assets from a country outside India) denominated in a foreign currency are restated using the exchange rates prevailing at the date of Balance Sheet. Gains / losses arising on restatement and on settlement of such items are recognized in the Profit and Loss Account. Non-monetary items such as investments denominated in a foreign currency are reported using the exchange rate at the date of the transaction. 8. Stock based compensation The compensation cost of stock options and awards granted to officers, employees and retainers in full time service of the Company is measured by the difference between the estimated fair value of the Company's shares on the date of grant or award and the exercise price to be paid by the option holders. The compensation cost of stock options and awards granted is measured using the Black-Scholes model. The compensation expense is amortized uniformly over the vesting period of the options. 9. Earnings per share The Company reports basic and diluted earnings per share in accordance with Accounting Standard 20 on Earnings Per Share. Basic earnings per share is computed by dividing the net profit/loss for the year by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the net profit/loss for the year by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares, except where the results are anti-dilutive. For the purpose of Earnings Per Share calculations, ADRs are converted to equity shares (Refer Schedule 1) 10. Income taxes Income taxes are accounted for in accordance with Accounting Standard - 22, Accounting for Taxes on Income. Income taxes comprise both current and deferred tax. Current tax is measured at the amount expected to be paid to / recovered from the revenue authorities, using applicable tax rates and laws. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. Deferred tax assets and liabilities are recognized for future tax consequences attributable to timing differences. They are measured using the substantively enacted tax rates and tax regulations. The carrying amount of deferred tax assets at each balance sheet date is reduced to the extent that it is no longer reasonably certain that sufficient future taxable income will be available against which the deferred tax asset can be realized. 11. Cash Flow Statement Cash flows are reported using the indirect method set out in Accounting Standard 3 on Cash Flow Statements and presents the cash flows by operating, investing and financing activities of the company. Cash and cash equivalents presented in the Cash Flow Statement consist of cash on hand and demand deposits with banks. The Company considers short term bank deposits with a remaining maturity of less than 1 year, which are redeemable without penalty on demand. 12. Leases Operating Lease rentals are expensed with reference to lease terms and conditions. 13. Securities / Share issue expenses Securities / Share issue expenses are written off to securities premium account. 14. Contingent Liabilities Contingent liabilities as defined in Accounting Standard 29 on Provisions, Contingent liabilities and contingent assets are disclosed by way of notes to accounts. Provision is made if it becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as a contingent liability. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS B. NOTES TO ACCOUNTS 1. Organization and Business Rediff.com India Limited ("the Company") was incorporated in India on January 9, 1996, under the Indian Companies Act, 1956. It was converted to a public limited Company on May 29, 1998. On June 14, 2000, the Company listed its ADSs on the NASDAQ through an initial public offering. On June 24, 2002, the Company's ADSs ceased to be listed on the NASDAQ National market and were listed instead on the NASDAQ Small Cap market. The Company is one of the leading internet destinations or websites, focusing on India and the global Indian community. Its websites consist of interest specific channels relevant to Indian interests such as cricket, astrology, matchmaker and movies, content on various matters like news and finance, search facilities, a range of community features such as e-mail, chat, messenger, e-commerce, broadband wireless content and wireless short messaging services to mobile phone subscribers in India. During the year the Company raised capital aggregating to US $ 47,999,973 by issue of ADRs listed on the NASDAQ. - ---------------------------------------------- ---------------- ---------------- As at March 31, As at March 31, 2006 2005 Rs. Rs. - ---------------------------------------------- ---------------- ---------------- 2. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)........................ 5,031,900 19,635,300 - ---------------------------------------------- ---------------- ---------------- 3. Earnings in foreign currency (on accrual basis): ------ ---------------------------------- ---------------- --------------- 2005-06 2004-05 Rs. Rs. ------ ---------------------------------- ---------------- --------------- ------ ---------------------------------- ---------------- --------------- (i) E-commerce services (net)........ 5,282,836 5,404,364 ------ ---------------------------------- ---------------- --------------- (ii) Media and Mobile services ....... 2,866,022 2,038,120 ------ ---------------------------------- ---------------- --------------- (iii) Interest received on deposits 36,163,842 671,199 with banks....................... ------ ---------------------------------- ---------------- --------------- 44,312,700 81,13,683 ------ ---------------------------------- ---------------- --------------- REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 4. Expenditure in foreign currency (on accrual basis): -------- ------------------------------- -------------- ---------------- 2005-06 2004-05 Rs. Rs. -------- ------------------------------- -------------- ---------------- -------- ------------------------------- -------------- ---------------- (i) Professional charges......... 8,439,315 10,623,717 -------- ------------------------------- -------------- ---------------- (ii) Other matters................ 31,373,143 23,550,868 -------- ------------------------------- -------------- ---------------- 39,812,458 34,174,585 -------- ------------------------------- -------------- ---------------- 5. Payment to auditors (net of service tax): --------- ------------------------------- --------------- ------------- 2005-06 2004-05 Rs. Rs. --------- ------------------------------- --------------- ------------- (i) Statutory audit fees........... 400,000 400,000 --------- ------------------------------- --------------- ------------- (ii) As adviser, or in any other capacity in respect of: (a) Tax audit fees............ 100,000 100,000 (b) Taxation maters........... 400,000 350,000 (c) In any other manner....... 9,147,818 2,515,000 (US GAAP audit) --------- ------------------------------- --------------- ------------- 9,647,818 2,965,000 --------- ------------------------------- --------------- ------------- (iii) As expenses 17,455 16,776 --------- ------------------------------- --------------- ------------- 10,065,623 3,381,776 --------- ------------------------------- --------------- ------------- 6. Stock Option Plans 1. During the year ended 31st March, 2006 the Company used intrinsic value method for disclosing the details with respect to employee shared based payment plan. If fair value method would have been used, the net profit for the year would have been lower by Rs. 43,415,715/- and basic and diluted EPS would have been lower by Rs. 3.22 and Rs. 3.15 respectively. 2 Employee Stock Option and Associate Stock Option Plans (1999) On February 22, 1999, the Company approved the Employee Stock Option Plan 1999 ("1999 ESOP") and the Associate Stock Option Plan 1999 ("1999 ASOP") (collectively "Option Plans") which cover present and future employees, retainers in full time service of the Company and certain associates of the Company. The 1999 ESOP and 1999 ASOP have similar terms. Under the terms of the 1999 ESOP, a committee of the board may award stock options to eligible employees in the form of warrants. Such options vest at the rate of 25% on each successive anniversary of the grant date, until fully vested. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS Under the terms of the 1999 ASOP, a committee of the board may award stock options to eligible associates in the form of warrants. Such warrants vest at the rates set forth in each warrant. Each allotted warrant carries with it the right to purchase a specified number of the Company's equity shares at the exercise price during the exercise period, which expires five years from the date of grant. The exercise price is determined by the awarding committee, and is intended to be at least the fair value of the Company's equity shares on the date of the grant. Under the Option Plans, the Company reserved 280,000 equity shares for the 1999 ESOP and 198,000 equity shares for the 1999 ASOP, respectively. The Option Plans also permit the Board of Directors to reserve additional warrants under either plan to be issued to eligible parties on such terms and conditions as may then be decided by the board at its absolute discretion. The Company has during the year recognized a cost of Rs.16,250 as compensation cost for options granted to associates. Activity in the warrants available to be granted under the 1999 ESOP is as follows: ----------------------------------------------------- ---------------------- Shares available to be granted as options ----------------------------------------------------- ---------------------- Years ended March 31, ----------------------------------------------------- ---------------------- Employee Stock Option Plan 1999: 2006 2005 ---- ---- Warrants available to be granted, beginning of year.. 11,475 33,725 Options granted...................................... - (30,000) Forfeited............................................ - 7,750 -------- --------- Warrants available to be granted, end of year........ 11,475 11,475 -------- --------- REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS Activity in the warrants of the 1999 ESOP for the years ended March 31, 2006 and 2005 is as follows:

Activity in the warrants available to be granted under the 1999 ASOP is as follows:

REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS Activity in the warrants of the 1999 ASOP for the years ended March 31, 2006 and 2005 is as follows:

2002 Stock Option Plan In January 2002, the Company's board of directors approved the 2002 Stock Option Plan ("2002 Plan") which provide for the grant of incentive stock options and non-statutory stock options to the Company's employees. All options under these plans are exercisable for the ADSs of the Company. Unless terminated sooner, these plans will terminate automatically in January 2012. A total of 280,000 of the Company's equity shares are currently reserved for issuance pursuant to 2002 plan. Under the terms of the 2002 plan, the board or a committee or a sub-committee of the board will determine and authorize the grant of options to eligible employees. Such options vest at the rates set forth in each award. Each option grant carries with it the right to purchase a specified number of the Company's ADSs at the exercise price during the exercise period, which expires ten years from the date of grant. The exercise price is determined by the board (or a committee or a sub-committee of the board) and shall be no more than 110% of the fair market value and no less than 50% of the fair market value on the date of the grant. For the 2002 plan, the Company had, during the year ended March 31, 2003, obtained necessary approvals from regulators in India. During the year ended March 31, 2004, the Company made appropriate filings with the United States Securities and Exchange Commission prior to the first exercise date of the options granted under the 2002 plan. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS Activity in the warrants available to be granted under the 2002 plan is as follows:

Activity in the warrants of the 2002 plan for the years ended March 31, 2006 and 2005 are as under:

2004 Stock Option Plan For the 2004 plan, the Company had, during the year ended March 31, 2005, obtained necessary approvals from regulators in India. During the year ended March 31, 2005, the Company made appropriate filings with the United States Securities and Exchange Commission prior to the first exercise date of the options granted under the 2004 plan. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS Activity in the warrants available to be granted under the 2004 plans is as follows:

Activity in the warrants of the 2004 plan for the years ended March 31, 2006 and 2005 is as under:

The following table summarizes information about stock options outstanding as at March 31, 2006:

The weighted average share price for the stock options exercised during the current year is Rs. 2,035/-. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS During the year ended 31st March, 2006 the Company granted stock options to its employees under the ADR linked Employee Stock Option Plan 2004 and the details of such issue are as follows : Date of grant - July 6, 2005 No. of ADS granted - 5,100 Vesting condition - 1 year of service The estimated fair value of each stock option granted was Rs. 464. This was calculated by applying Black Scholes pricing model. The model inputs were share price at grant date Rs. 639.31, exercise price of Rs. 639.31, volatility of 104 %, Risk free rate of interest at 4.23%. The expected volatility was entirely based on the historical volatility which was calculated from the first date on which the ADRs of the Company were listed i.e. June 15, 2000 to June 30, 2005. 7. Operating leases The Company leases office space and residential apartments for employees under various operating leases. Operating lease expense that has been included in the determination of the net profit/loss is as follows: -------------------------------- ------------------- ------------------- 2005-06 2004-05 Particulars Rs. Rs. -------------------------------- ------------------- ------------------- -------------------------------- ------------------- ------------------- Office Premises.............. 13,481,166/- 11,672,240/- -------------------------------- ------------------- ------------------- Residential flats for accommodation of employees.................... 4,703,539/- 4,960,080/- -------------------------------- ------------------- ------------------- 18,184,705/- 16,632,320/- -------------------------------- ------------------- ------------------- These lease agreements are executed for a period ranging between 3 - 60 months with a renewable clause except for office premises. These lease agreements also provide for termination at will by either party by giving a prior notice period between 1 - 3 months except in the case of agreement for office premises which can be terminated only by the Company. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS The minimum annual rental commitments under operating leases that have initial or remaining terms in excess of one year are as follows: ------------------------------------------ ---------------- --------------- Amount in Rs. Amount in Rs. ------------------------------------------ ---------------- --------------- ------------------------------------------ ---------------- -------------- Not later than one year................ 17,457,027 7,185,155 ------------------------------------------ ---------------- -------------- Later than one year and not later than five years ................ 10,691,596 2,588,309 ------------------------------------------ ---------------- -------------- Total payments......................... 28,148,623 9,773,464 ------------------------------------------ ---------------- -------------- 8. Segment Reporting The Company operates in a single business and geographical segment and hence disclosure of segment information as per Accounting Standard 17 on Segment Reporting has not been presented. 9. Related Parties Disclosures I. Names and relationships of related parties a. Subsidiary Companies: Rediff Holdings, Inc. Value Communications Corporation ("Valucom") Rediff.com, Inc. India Abroad, Inc. b. Associate Companies: Rediffussion Holdings Private Limited RDY&R Private Limited ("RDY&R") c. Key Management Personnel: Mr. Ajit Balakrishnan Chairman and Managing Director REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS

REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS ------- ------------------------------------- -------------- ------------- RDY&R Advertising revenue through RDY&R Rs. 1,919,882 Rs. 2,415,566 Receivable as at March 31, 2006 Rs. 1,115,411 Rs. 1,097,325 ------- ------------------------------------- -------------- ------------- 10. Investment in subsidiary The Company had in earlier years provided for diminution in the value of long term investments in respect of one of its subsidiary companies on account of continuing losses from operations. Whilst, the subsidiary has since commenced reporting profits, the Company believes it is too early to merit a reversal of the provision for diminution at this stage and accordingly the investments are carried at the same value as at March 31, 2005. 11. Deferred tax The items that could have resulted in deferred tax assets mainly include the net operating loss and unabsorbed depreciation carry-forward, depreciation, retirement benefits and provisions for bad and doubtful debts. Such deferred tax assets have not been recognized since there is no certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. The Company's net tax loss carry forwards aggregating approximately Rs. 1,299 million will expire between April 1, 2006 and March 31, 2014. 12. Earnings/(Loss) per Share (EPS)

REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 13. Derivative transactions The Company has not entered in to any derivative transaction during the year ended March 31, 2006. Foreign exchange currency exposures not hedged by derivative instruments as at March 31, 2006: - --------------- ------------------------------- ------------- ---------------- Amount Amount Sl. No. (US dollars) (Rupees) - --------------- ------------------------------- ------------- ---------------- 1 Amount receivable on account of 1,268,597 56,592,108 sale of services - --------------- ------------------------------- ------------- ---------------- 2 Creditors payable on account of 1,824,714 81,400,484 foreign currency expenditure - --------------- ------------------------------- ------------- ---------------- 3 Foreign currency bank balances 25,593,507 1,141,726,326 - --------------- ------------------------------- ------------- ---------------- The above disclosures have been made consequent to an announcement by the Institute of Chartered Accountants of India in December 2005, which is applicable to the financial periods ending on or after 31st March, 2006. Therefore, figures for the previous year have not been disclosed. 14. Contingencies Litigation a) On April 16, 2001, the Company, four of its officers and directors, and a group of investment banks that acted as underwriters (the "Underwriter defendants") in the Company's June 2000 initial public offering (the "IPO") and listing of ADSs were named as defendants in the legal action of Khanna v. Rediff.com India Ltd. et al., ("Khanna Action") a class action lawsuit filed in the United States District Court for the Southern District of New York. Plaintiffs in Khanna Action allege that the Company's registration statement filed with the SEC contained misleading statements and omissions in violation of the U.S. Securities Act of 1933, as amended ("Securities Act"), the U.S. Securities Exchange Act of 1934, as amended ("Exchange Act") and Rule 10b-5 under the Exchange Act. The plaintiff class in this lawsuit has been defined as all persons who purchased ADSs from the time of the IPO through April 14, 2001 and seeks unspecified damages. Subsequent to the filing of the Khanna Action, several other actions have been filed against the Company and the other defendants propounding substantially the same allegations. All the cases have been consolidated before a single judge in the United States District Court for the Southern District of New York. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS On May 11, 2001, the Company received from the Underwriter defendants a demand for indemnification of the underwriters' legal fees and liabilities. The Company's board of directors also has resolved to indemnify its officers and directors named as defendants against their legal fees and liabilities, to the extent permitted under Indian law. At the time of the IPO, the Company purchased Directors & Officers Liability Insurance, ("the D&O Policy"), providing coverage against federal securities law claims. The D&O Policy includes coverages for the Company's cost of defending the class action lawsuit, indemnification liabilities to its officers and directors, and indemnification liabilities to the Underwriter defendants. The coverage of the D&O Policy is denominated in Indian Rupees, but the policy proceeds are payable in United States dollars. The face amount of the D&O Policy is approximately Rs. 894,150,000. The proceeds of the D&O Policy available to satisfy any judgment against the Company, or any judgment against persons whom the Company is obligated to indemnify, will be reduced by the amount of the legal fees and associated expenses in the defense of the Company, the individual defendants and the underwriters which are paid from the D&O Policy. The coverage of the D&O Policy for the payment of legal fees, cost of defense and judgment, if any, is subject to retention of approximately Rs. 11,244,000, which must be satisfied by the Company before the D&O Policy proceeds would be available to the Company. During the year ended March 31, 2002, the Company recorded a recoverable from the Insurance carrier of U.S.$ 67,955 paid by the Company towards legal fees in excess of the self-insured retention for this case. The insurance carriers have informed the Company that this amount would be paid on the settlement of the cases. The D&O Policy contains various exclusions, which, if met, may result in the denial of insurance coverage. The Company has been advised by the insurance carriers who wrote the D&O Policy that they are not currently aware of any facts or circumstances that would cause any of the exclusions to apply, but that the carriers have reserved their rights to claim that the exclusions do apply if any such facts or circumstances come to their attention. On June 5, 2001, twenty-four companies, including the Company, who had issued securities to the public in their initial public offerings, together with the investment banks who acted as underwriters in these initial public offerings, were named as defendants in the lawsuit of Shives et al v. Bank of America Securities, LLC et al., a class action lawsuit filed in the United States District Court for the Southern District of New York. Also named, as defendants in this lawsuit were four of the Company's officers and directors. The plaintiffs in Shives allege that the underwriter defendants combined and conspired to inflate the underwriting compensation they received in connection with the initial public offerings of the defendant companies, to manipulate and inflate the prices paid by plaintiffs for securities issued in the initial public offerings and to restrain and suppress competitive pricing for underwriting compensation. Plaintiffs allege claims pursuant to Section 1 of the U.S. Sherman Antitrust Act of 1890, as amended, Section 4 of the Clayton Antitrust Act of 1914, as amended, and Section 10(b) of the Securities Exchange Act of 1934 (and Rule 10(b)-5 promulgated there under) against the underwriter defendants. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS The plaintiffs further allege that the issuer defendants, including the Company and certain of its officers and directors, made material misstatements and omissions in violation of the Securities Act of 1933 and Securities Exchange Act of 1934 and Rule 10(b)-5 promulgated there under, by concealing or failing to disclose the compensation earned by the underwriter defendants in the initial public offerings. As against the Company and its officers and directors, the Complaint defines a "Rediff.com Sub-class" consisting of all persons who purchased common stock of Rediff.com India Limited from the time of the IPO through April 4, 2001 and seeks unspecified damages. This case has been consolidated with several hundred other similar cases filed against other issuers who had IPOs in 2000 and 2001. On November 24, 2003, plaintiffs' counsel in the Shives and Khanna cases filed a single Consolidated Amended Securities Class Action Complaint ("Consolidated Complaint") which incorporates the material allegations from the Shives and Khanna cases. On January 30, 2004, the Company and its officers and directors filed a motion to dismiss the Consolidated Complaint. The Underwriter Defendants filed a separate motion to dismiss. The motions are currently being briefed by the parties. The Company believes that the allegations in the Khanna Action and its related cases, and in the Shives Action are without merit and intends to defend the lawsuits vigorously. The Company is not able at this point to predict the course or the outcome of the litigation. In the event the class action law suits result in substantial judgments against the Company and the Company's Directors and Officers Liability insurance coverage proves inadequate, the said judgments could have a severe material effect on the Company's financial position and its results of operations. b) Indian Music Industry ("IMI"), an association claiming to represent 50 Indian companies, which purportedly own copyrights to sound recordings, filed a complaint with the Mumbai Police Department in February, 2000, alleging that the Company was aiding and abetting violations of the Indian Copyright Act of 1957, as amended, because the Company, through its website, provided links to websites containing downloadable music files copyrighted by IMI members. In July 2001, the Mumbai Metropolitan Magistrate issued bailable warrants concerning the complaint against three of the Company's directors. The warrants as against two of the Company's directors were promptly cancelled and the warrant against one director was stayed. The Company is continuing to investigate the underlying facts of the complaint. The directors have presently been exempted from personal appearance. The directors are filing an application for discharge of the complaint before the Magistrate. Other contingencies The Income Tax authorities in India have returned disallowances of certain expenses claimed by the Company for certain years and have also levied penalties on some of those disallowances. The amounts of the penalties are not quantifiable at present and the Company has lodged appropriate appeal proceedings with the relevant income tax authorities. The Company expects to prevail in the appellate proceedings. REDIFF.COM INDIA LIMITED SCHEDULE 15: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS The Company is also subject to other legal proceedings and claims, which have arisen in the ordinary course of its business. Those actions, when ultimately concluded and determined, will not, in the opinion of management, have a material effect on the results of operations or the financial position of the Company. 15. Comparatives Comparative financial information (i.e., the amounts and disclosures for the preceding year) presented above, is included as an integral part of the current year's financial statements, and is to be read in relation to the amounts and disclosures relating to the current year. Figures of the previous year are regrouped and reclassified wherever necessary to correspond to figures of the current year. As per our attached report of even date. For Deloitte Haskins & Sells For and on behalf of the board Chartered Accountants P. B. Pardiwalla Ajit Balakrishnan Sunil Phatarphekar Jyoti Dialani Partner Chairman & MD Director Company Secretary Mumbai, India Mumbai, India Dated: September 5, 06 Dated: September 5, 06 REDIFF.COM INDIA LIMITED ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI. Balance Sheet Abstract and Company's General Business Profile (I) Registration Details ------------------- ------------- Registration No. | 96077 | State Code | 11 | ------------------- ------------- ------------------- Balance Sheet Date | 31/03/2006 | ------------------- (dd/mm/yy) (II) Capital raised during the year (Amount in Rs. Thousands) Public Issue Rights Issue - -------------------------------------------------------------------------------- 2,198,399 Nil - -------------------------------------------------------------------------------- Bonus Issue Private Placement - -------------------------------------------------------------------------------- Nil Nil - -------------------------------------------------------------------------------- (III) Position of Mobilization and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities Total Assets - -------------------------------------------------------------------------------- 5,546,329 5,546,329 - -------------------------------------------------------------------------------- Sources of Funds Paid - up Capital Reserves & Surplus - -------------------------------------------------------------------------------- 72,698 5,473,553 - -------------------------------------------------------------------------------- Secured Loans Unsecured Loans - -------------------------------------------------------------------------------- Nil Nil - -------------------------------------------------------------------------------- Application of Funds Net Fixed Assets Investments - -------------------------------------------------------------------------------- 237,579 824,299 - -------------------------------------------------------------------------------- Net Current Assets Misc. Expenditure - -------------------------------------------------------------------------------- 2,354,580 NIL - -------------------------------------------------------------------------------- Accumulated Losses - ---------------------------------- 2,129,870 - ---------------------------------- REDIFF.COM INDIA LIMITED ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI (IV) Performance of Company (Amount in Rs. Thousands) for the year ended March 31, 2006. Turnover Total Expenditure -------------------------------------------------------------------- | 594,479 536,577 | -------------------------------------------------------------------- Profit/Loss Before Tax Profit/Loss After Tax ------------------- -------------------- + - | 57,903 | + - | 55,047 | -----------------|-------------------|-------------------|--------------------- | [_] | | [_] | ----------------- -------------------- Earnings (Loss) per share Dividend @ % ------------------------------------|-------------------------------- | Rs 4.08 | Nil | ------------------------------------|-------------------------------- (V) Generic Names of Three Principal Products / Services of Company (as per monetary terms) --------------------------------------------- Item Code No. ( ITC ) | N/A | --------------------------------------------- Product Description | Online Advertising & Fee based services | --------------------------------------------- For and on behalf of the board Ajit Balakrishnan Sunil Phatarphekar Jyoti Dialani Chairman & Managing Director Director Company Secretary Mumbai, India Dated: September 5, 06 Statement pursuant to Section 212 of the Companies Act 1956 relating to the Subsidiary Companies

Rediff Holdings Inc BOARD OF DIRECTORS Mr. Ajit Balakrishnan Mr. Sridar Iyengar Mr. Sunil Phatarphekar SECRETARY Mr. Joy Basu AUDITORS Patkar & Pendse India Directors' Report The Board of Directors presents Rediff Holdings Inc audited financial statements for the year ended 31st March 2006. PRINCIPAL ACTIVITIES Rediff Holdings Inc is a cost center taking care of all corporate related expenditure for the Rediff Group in the USA, and does not generate any revenue. REVIEW OF BUSINESS Gross Loss (before depreciation, amortisation, impairment write down and taxes) is US $ 794,572/-. After giving effect to other adjustments, the net loss of US $ 5,739,899/- was carried to Balance Sheet. DIVIDENDS Your Directors do not recommend any dividend. DIRECTORS During the year Mr. Sunil Phatarphekar was appointed as a director of the Company. For and on behalf of the Board of Directors Director Date: 5th September, 2006 REPORT OF THE AUDITORS ---------------------- The Board of Directors, Rediff Holdings Inc. We have audited the attached Balance Sheet of REDIFF HOLDINGS INC., a Company incorporated as a Delaware Corporation in February, 2001 in the United States, as at March 31, 2006 and also the Profit & Loss Account of the Company 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 and report that : We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Further, we report that: (a) We have obtained all the information & explanations, which to the best of our knowledge & belief were necessary for the purposes of our audit. (b) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the books of account. (c) In our opinion, the Balance sheet and Profit and Loss Account comply with Accounting Standards referred to in Schedule 9 to the Accounts. (d) In our opinion and to the best of our information and according to the explanations given to us the said accounts read with the notes thereon, give a true and fair view in conformity with the accounting principles generally accepted in India: i. in the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2006; and ii. in the case of Profit and Loss Account, of the loss of the Company for the year ended on that date; For Patkar & Pendse Chartered Accountants B.M. Pendse Partner. M.No. 32625 Place : Mumbai Date : September 5, 2006

REDIFF HOLDINGS, INC SCHEDULE 9: ACCOUNTING POLICIES AND NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT A. ACCOUNTING POLICIES 1. Basis of preparation of financial statements The accompanying financial statements have been prepared under the historical cost convention, in accordance with the accounting principles generally accepted in India ("Indian GAAP"), the Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. 2. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Revenue recognition Rediff Holdings Inc is a cost center taking care of all corporate related expenditure for the Rediff Group in US, and does not generate any revenue. 4. Fixed assets and depreciation Fixed assets are stated at historical cost. The Company depreciates fixed assets using the straight-line method, over the estimated useful lives of assets. The estimated useful lives of assets are as follows: Computer equipment and software.......... 3 years Office equipment......................... 5 years 5. Investments Cost of investments in wholly owned subsidiaries comprise of purchase cost as increased by legal fees, due diligence fees and other direct expenses connected with such acquisition. Additional consideration for the acquisition of equity shares payable in subsequent years on the resolution of certain contingencies is debited to the cost of the investments in the year in which the contingent payments crystallize. Provision is made to recognize a decline, other than temporary in the value of such investments. REDIFF HOLDINGS, INC (Contd.....2) (2) 6. Employee retirement benefits The company has employee retirement benefit plan in which employer merely facilitates the plan administration. Employer does not contribute to the plan. Leave Encashment The company's policies do not allow leave encashment and the employees are encouraged to avail the eligible leave. Unavailed leave lapses at the end of the period and hence no provision has been made in the books. 7. Foreign currency transactions Transactions in foreign currency are recorded at the original rates of exchange in force at the time transactions are effected. Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets are adjusted in the carrying amount of the respective fixed asset. The carrying amount of fixed assets is also adjusted at the end of each financial year for any change in the liability arising out of expressing the related outstanding foreign currency liabilities at the closing rates of exchange prevailing at the date of the Balance Sheet or at the rates specified in the related forward contract. Monetary items (other than those related to acquisition of fixed assets) denominated in a foreign currency are restated using the exchange rates prevailing at the date of Balance Sheet or rates specified in the related forward contract. Gains / losses arising on restatement and on settlement of such items are recognized in the Profit and Loss Account. Non-monetary items such as investments denominated in a foreign currency are reported using the exchange rate at the date of the transaction. 8. Leases Operating Lease rentals are expensed with reference to lease terms and conditions. 9. Contingent Liabilities These are disclosed by way of notes on the balance sheet. Provision is made in the accounts in respect of those liabilities, which are likely to materialize after the year-end, till the finalization of accounts and having a material effect on the position stated in the balance sheet. REDIFF HOLDINGS, INC (Contd.....3) (3) 10. Deferred Income Taxes As of March 31, 2006 and 2005, the components of the Company's net deferred tax assets are as follows: As of March 31,2005, the Company has net operating loss carry forwards of approx $ 7,622,000 for federal income tax purposes, which expire in the years 2020 to 2025. Realization of the future tax benefits related to the deferred tax income tax asset is dependent on many factors, including the Company's ability to generate taxable income within the net operating loss carry forward period. Management has considered these factors and believes that no asset to be created in the books of accounts. B. NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT 1. Organization and Business Rediff Holdings Inc ("the Company") was incorporated as a Delaware Corporation in February 2001 by Rediff.Com India Limited to act as the holding company for some of the Parent's investments in United States. 2. Additional information pursuant to the provisions of paragraph 4C and 4D of Schedule VI of the Companies Act., 1956 to the extent not applicable are not given. 3. Litigation There are no pending litigations against the company. 4. Other contingencies In connection with the Company's acquisition of India Abroad in April 2001, the Company has been advised by a hold-out shareholder that he believes his shares in India Abroad are worth approximately US$1.2 million. The Company disputes this assertion and has offered the claimant approximately US$50,000 for his shares. The Company does not know if this offer will be acceptable to the shareholder or if the shareholder will file a legal action against the Company if the matter is not resolved. 5. During the year, the Company has made a provision of US$ 4,917,208 for diminuition in the value of investment in its subsidiary, India Abroad Publications, Inc. This has been done to give effect to the permanent reduction in value, which the Company's parent company, Rediff.com India Limited has already accounted for, in earlier years. REDIFF HOLDINGS, INC (Contd.....4) (4) 6. Balance Sheet Abstract and Company's General Business Profile (I) Registration Details ------------- ----------- Registration No.-TAX ID No N.A. State Code N.A. ------------- ----------- ------------ Balance Sheet Date 31/03/2006 (dd/mm/yy) ------------ (II) Capital raised during the year (Amount in Rs. Thousands) Public Issue Rights Issue --------------------------------------------------------------------- Nil | Nil --------------------------------------------------------------------- Bonus Issue Private Placement --------------------------------------------------------------------- Nil | Nil --------------------------------------------------------------------- (III) Position of Mobilisation and Deployment of Funds (Amount in US$) Total Liabilities $ Total Assets $ -------------------------------------------------------------------- 24,000,000 | 24,000,000 -------------------------------------------------------------------- Sources of Funds Paid - up Capital $ Reserves & Surplus -------------------------------------------------------------------- 1,107 | 23,998,893 -------------------------------------------------------------------- Secured Loans Unsecured Loans -------------------------------------------------------------------- Nil | Nil -------------------------------------------------------------------- Application of Funds Net Fixed Assets $ Investments $ -------------------------------------------------------------------- Nil | 10,705,004 -------------------------------------------------------------------- Net Current Assets $ Misc. Expenditure -------------------------------------------------------------------- 3,739,060 | Nil -------------------------------------------------------------------- Accumulated Losses $ --------------------------------- 9,555,936 | --------------------------------- REDIFF HOLDINGS, INC (Contd.....5) (5) (IV) Performance of Company (Amount in US$) for the year ended March 31, 2006. Turnover $ Total Expenditure $ --------------------------------------------------------------------- Nil | 5,723,456 --------------------------------------------------------------------- Profit / Loss Before Tax $ Profit / Loss After Tax $ --------------- ------------------- + - | (5,723,456) | + - | (5,739,899) --------------------------------------------------------------------- _ | | _ | [_] | | [_] | --------------------- ---------------- (Please tick Appropriate box + for Profit - for Loss) Earning per Share Dividend @ % --------------------------------------------------------------------- (0.52) | Nil --------------------------------------------------------------------- (V) Generic Names of Three Principal Products / Services of Company ( as per monetary terms ) ----------------------------------- Item Code No. (ITC) | N/A Product Description ----------------------------------- | ----------------------------------- 7. Previous years figures have been regrouped and reclassified wherever necessary to conform to current years classifications. For and on behalf of the board Ajit Balakrishnan Director Mumbai, India Dated: September 5, 2006 India Abroad Publications Inc. BOARD OF DIRECTORS Mr. Ajit Balakrishnan SECRETARY Mr. Joy Basu AUDITORS Patkar & Pendse India Directors' Report The Board of Directors present India Abroad Publications Inc.'s audited financial statements for the year ended 31st March 2006. PRINCIPAL ACTIVITIES India Abroad Publications Inc., a weekly newspaper-publishing unit is a subsidiary of Rediff Holdings Inc., ('Rediff Holdings') which in turn is a wholly owned subsidiary of Rediff.com India Limited. ('Rediff.com'). India Abroad's revenue primarily includes advertising and sponsorship and consumer subscription revenues earned from the publication of its weekly newspaper distributed primarily in the USA & Canada. India Abroad was acquired by Rediff Holdings on April 28, 2001 by acquiring substantially all of the outstanding voting shares of India Abroad Publications, Inc. Together with this acquisition of India Abroad Publications Inc., Rediff Holdings also acquired two wholly-owned subsidiaries of India Abroad Publications - India in New York, Inc. and India Abroad Publications (Canada), Inc. REVIEW OF BUSINESS The Profit & Loss account is set out along with this report and shows that during the year, the Company earned gross revenue of US $ 4,745,212/-.Gross Profit (before depreciation, amortisation, impairment write down and taxes) is US $ 166,132 /-. After giving effect to other adjustments, the net profit of US $ 102,655/- was carried to Balance Sheet. DIVIDENDS Your Directors do not recommend any dividend. For and on behalf of the Board of Directors Director Date: 5th September, 2006 REPORT OF THE AUDITORS ---------------------- The Board of Directors, India Abroad Publications Inc. We have audited the attached Balance Sheet of INDIA ABROAD PUBLICATIONS INC., a wholly owned subsidiary of Rediff Holdings Inc. and incorporated in the United States, as at March 31, 2006 and also the Profit & Loss Account of the Company 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 and report that : We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Further, we report that: (a) We have obtained all the information & explanations, which to the best of our knowledge & belief were necessary for the purposes of our audit. (b) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the books of account. (c) In our opinion, the Balance sheet and Profit and Loss Account comply with Accounting Standards referred to in Schedule 13 to the Accounts. (d) In our opinion and to the best of our information and according to the explanations given to us the said accounts read with the notes thereon, give a true and fair view in conformity with the accounting principles generally accepted in India: i. in the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2006; and ii. in the case of Profit and Loss Account, of the profit of the Company for the year ended on that date; For Patkar & Pendse Chartered Accountants B.M. Pendse Partner. M.No. 32625 Place : Mumbai Date : September 5, 2006

INDIA ABROAD PUBLICATIONS INC. SCHEDULE 13: ACCOUNTING POLICIES AND NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT A. ACCOUNTING POLICIES 1. Basis of preparation of financial statements The accompanying financial statements have been prepared under the historical cost convention, in accordance with the accounting principles generally accepted in India ("Indian GAAP"), the Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. 2. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Revenue recognition Revenues comprise of subscriptions to the India Abroad weekly newspaper publication and income from advertisements. Revenue from advertisements are recognized upon publishing of the advertisements in the newspaper. Subscription revenues are derived from the revenues received from newspaper subscribers and is recognized ratably over the period of subscription. Subscriptions received towards lifetime subscribers are shown as deferred revenue and recognized ratably over a 10 years period. 4. Fixed assets and depreciation Fixed assets are stated at historical cost. The Company depreciates fixed assets using the straight-line method, over the estimated useful lives of assets. The estimated useful lives of assets are as follows: Furniture and fixtures..................... 7 years Computer equipment and software............ 3 years Office equipment........................... 5 years INDIA ABROAD PUBLICATIONS INC. (Contd.....2) (2) 5. Investments Cost of investments in wholly owned subsidiaries comprise of purchase cost as increased by legal fees, due diligence fees and other direct expenses connected with such acquisition. Additional consideration for the acquisition of equity shares payable in subsequent years on the resolution of certain contingencies is debited to the cost of the investments in the year in which the contingent payments crystallize. 6. Employee retirement benefits The company has employee retirement benefit plan in which employer merely facilitate the plan administration. Employer does not contribute to the plan. Leave Encashment The company's policies does not allow leave encashment and the employees are encouraged to avail the eligible leave. Unavailed leave lapses at the end of the period and hence no provision has been made in the books. 7. Foreign currency transactions Transactions in foreign currency are recorded at the original rates of exchange in force at the time transactions are effected. Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets are adjusted in the carrying amount of the respective fixed asset. The carrying amount of fixed assets is also adjusted at the end of each financial year for any change in the liability arising out of expressing the related outstanding foreign currency liabilities at the closing rates of exchange prevailing at the date of the Balance Sheet or at the rates specified in the related forward contract. Monetary items (other than those related to acquisition of fixed assets) denominated in a foreign currency are restated using the exchange rates prevailing at the date of Balance Sheet or rates specified in the related forward contract. Gains / losses arising on restatement and on settlement of such items are recognized in the Profit and Loss Account. Non-monetary items such as investments denominated in a foreign currency are reported using the exchange rate at the date of the transaction. 8. Income taxes Income taxes are accounted for in accordance with US tax laws on Income accrued. Current tax is measured at the amount expected to be paid to / recovered from the revenue authorities, using applicable tax rates and laws in US. Tax liabilities and provision is accounted for by the Holding company. INDIA ABROAD PUBLICATIONS INC. (Contd.....3) (3) 9. Leases Operating Lease rentals are expensed with reference to lease terms and conditions. 10. Contingent Liabilities These are disclosed by way of notes on the balance sheet. Provision is made in the accounts in respect of those liabilities, which are likely to materialize after the year-end, till the finalization of accounts and having a material effect on the position stated in the balance sheet. B. NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT 1. Organization and Business India Abroad Publications Inc ("the Company") was incorporated as a New York Corporation on June 26th, 1970. On April 26, 2001, the Company was acquired by Rediff Holdings Inc, a wholly owned subsidiary of Rediff.Com India Limited. The Company is one of the leading news publications catering to the Asian-American community focusing on India and the global Indian community. 2. Additional information pursuant to the provisions of paragraph 4C and 4D of Schedule VI of the Companies Act., 1956 to the extent not applicable are not given. 3. The Company recognizes as revenues based on advertisements published and subscriptions ratably over the period of subscription. Hence requirements as to quantitative information are not applicable. 4. Earnings in foreign exchange: ----------------------------------------------------------------- US $ US$ 2006 2005 ----------------------------------------------------------------- Advertising Revenue 824,912 811,583 ----------------------------------------------------------------- INDIA ABROAD PUBLICATIONS INC. (Contd.....4) (4) 5. Operating leases The Company leases office space under various operating leases. Operating lease expense that has been included in the determination of the net loss are as follows: --------------------------------------------------------------------- US$ Particulars 2006 2005 --------------------------------------------------------------------- Office Premises 153,345 175,932 --------------------------------------------------------------------- 6. Litigation An action was brought against India Abroad by DoubleClick, Inc., based upon alleged breach of contract for the principal sum of $28,750 with interest, attorneys' fees and expenses in the Supreme Court of New York, New York County, Double Click, Inc. V. India Abroad Publications, Inc., Index No. 02 119928. India Abroad has filed an Answer denying liability and asserted Counterclaims based upon fraud in the inducement. India Abroad intends to contest this action vigorously. The action has been transferred to the Lower Court, Doubleclick, Inc. v. India Abroad Publications, New York City Civil Court, New York County, No. 291TS-2003. India Abroad is reasonably optimistic of prevailing on this action. Another litigation against India Abroad is the litigation in the United States District Court, Southern District of New York (Lok Prakashan Ltd d/b/a Gujarat Samachar v. India Abroad Publications, Inc., 00 Civ 5852 (LAP). The action was brought by the publishers of "Gujarat Samachar" (GS) in August 2000, asserting that India Abroad allegedly breached the parties' agreements concerning the marketing and sale of Gujarat Samachar's International Weekly in North America. India Abroad vigorously disputed these allegations, and asserted various Counterclaims based upon Gujarat Samachar's breach of contract. The action was tried before a jury (Hon. Preska, J., presiding), in a one-week trial commencing December 3, 2001. After about six hours of deliberation on December 7, 2001, the jury returned a verdict in favor of India Abroad for the sum of $560,000, as reported with substantial accuracy in India Abroad. See IA, December 28, 2001, at 10 col. 1. After deducting $279,000 -- being the sums which had been withheld from Gujarat Samachar by India Abroad and which India Abroad had conceded -- Judge Preska entered judgment in favor of India Abroad in the sum of $281,000 ("Judgment"). GS had also filed an Appeal against that Judgment, and India Abroad filed a Cross-Appeal on an issue of law, with the United States Court of Appeals for the Second Circuit. By order entered October 29, 2002, that Court dismissed GS's appeal. INDIA ABROAD PUBLICATIONS INC. (Contd.....5) (5) GS had also filed a motion to vacate that Judgment before Judge Preska. India Abroad filed a cross-motion for sanctions. By an Order dated 31, 2003, Judge Preska denied the motion and although she found "has certainly toed the line between appropriate and inappropriate litigation practice," she did not find that its actions were "so frivolous and vexatious as to warrant sanctions." Accordingly, she denied the cross-motion. Gujarat Samachar appealed that decision. That appeal and India Abroad's cross-appeal were heard by the Second Circuit on April 7, 2004. By a Summary Order of April 13, 2004, that Court affirmed the judgment in all respects, finding Gujarat Samachar's appeal to "border on the frivolous". We do not anticipate any further legal proceedings on this. Gujarat Samachar has also deposited the entire amount due under the December 26, 2001 judgment with the Court Clerk, whereupon India Abroad agreed to stay enforcement thereof. Presently the process is on for getting this deposit paid to India Abroad. 7. Other contingencies In connection with the Company's acquisition of India Abroad in April 2001, the Company has been advised by a hold-out shareholder that he believes his shares in India Abroad are worth approximately US$1.2 million. The Company disputes this assertion and has offered the claimant approximately US$50,000 for his shares. The Company does not know if this offer will be acceptable to the shareholder or if the shareholder will file a legal action against the Company if the matter is not resolved. 8. The prior year figures have been regrouped and reclassified to conform those of the current year. 9. Balance Sheet Abstract and Company's General Business Profile (I) Registration Details -------------- ---------- Registration No.-TAX | N.A | State Code | N.A | ID No -------------- ---------- ------------- Balance Sheet Date | 31/03/2006 | (dd/mm/yy) ------------- INDIA ABROAD PUBLICATIONS INC. (Contd.....6) (6) (II) Capital raised during the year (Amount in US$) Public Issue Rights Issue ---------------------------------------------------------------- Nil | Nil ---------------------------------------------------------------- Bonus Issue Private Placement ---------------------------------------------------------------- Nil | Nil ---------------------------------------------------------------- (III) Position of Mobilisation and Deployment of Funds (Amount in US$) Total Liabilities $ Total Assets $ --------------------------------------------------------------- 254,427 | 254,427 --------------------------------------------------------------- Sources of Funds Paid - up Capital $ Reserves & Surplus --------------------------------------------------------------- 41,981 | 212,446 --------------------------------------------------------------- Secured Loans Unsecured Loans --------------------------------------------------------------- Nil | Nil --------------------------------------------------------------- Application of Funds Net Fixed Assets $ Investments $ --------------------------------------------------------------- 295,123 | 129,793 --------------------------------------------------------------- Net Current Assets $ Misc. Expenditure --------------------------------------------------------------- (1,459,389) | 47,962 --------------------------------------------------------------- Accumulated Losses $ ------------------------------- 1,240,938 | ------------------------------- (IV) Performance of Company (Amount in US$) for the year ended March 31, 2006. Turnover $ Total Expenditure $ ---------------------------------------------------------------- 4,745,212 | 4,641,397 ---------------------------------------------------------------- Profit / Loss Before Tax $ Profit / Loss After Tax $ -------------- ------------- + - | 103,815 | + - | 102,655 | ---------------------------------------------------------------- 0 | | 0 | -------------------- -------------------- (Please tick Appropriate box + for Profit - for Loss) Earning per Share Dividend @ % ---------------------------------------------------------------- 0.03 | Nil ---------------------------------------------------------------- INDIA ABROAD PUBLICATIONS INC. (Contd.....7) (7) (V) Generic Names of Three Principal Products / Services of Company (as per monetary terms ) -------------------------------- Item Code No. (ITC) | N/A | Product Description | | ------------------------------- | News Paper | -------------------------------- For and on behalf of the board Ajit Balakrishnan Director Mumbai, India Dated: September 5, 2006 India in New York Inc. BOARD OF DIRECTORS Mr. Ajit Balakrishnan SECRETARY Mr. Joy Basu AUDITORS PATKAR & PENDSE INDIA Directors' Report The Board of Directors presents India in New York Inc. audited financial statements for the year ended 31st March 2006. PRINCIPAL ACTIVITIES India in New York Inc. is a weekly newspaper-publishing unit, which is a wholly owned subsidiary of India Abroad Publications Inc. The Company publishes is a free newspaper, distributed in the New York Metropolitan area. REVIEW OF BUSINESS The Profit & Loss account is set out along with this report and shows that during the year the Company earned gross revenue of US $ 317,983/-. Gross Profit (before depreciation, amortisation, impairment write down and taxes) is US $ 203,676/-. After giving effect to other adjustments, the net profit of US $ 203,676/- was carried to Balance Sheet. DIVIDENDS Your Directors do not recommend any dividend. For and on behalf of the Board of Directors Director Date: 5th September, 2006 REPORT OF THE AUDITORS The Board of Directors, India In New York Inc. We have audited the attached Balance Sheet of INDIA IN NEW YORK INC., a wholly owned subsidiary of India Abroad Publications Inc. incorporated in the United States, as at March 31, 2006 and also the Profit & Loss Account of the Company 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 and report that : We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Further we report that: (a) We have obtained all the information & explanations, which to the best of our knowledge & belief were necessary for the purposes of our audit. (b) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the books of account. (c) In our opinion, the Balance sheet and Profit and Loss Account comply with Accounting Standards referred to in Schedule 9 to the Accounts. (d) In our opinion and to the best of our information and according to the explanations given to us the said accounts read with the notes thereon, give a true and fair view in conformity with the accounting principles generally accepted in India: i. in the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2006; and ii. in the case of Profit and Loss Account, of the profit of the Company for the year ended on that date; For Patkar & Perdse Chartered Accountants B.M. Pendse Partner. M.No. 32625 Place : Mumbai Date : September 5, 2006

India In New York Inc. Schedules 1 to 9 forming part of the Balance Sheet and Profit & Loss Account for the year ended 31st March, 2006 - --------------------------------------------------------------------------------------------------------------

INDIA IN NEW YORK, INC SCHEDULE 9: ACCOUNTING POLICIES AND NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT A. ACCOUNTING POLICIES 1. Basis of preparation of financial statements The accompanying financial statements have been prepared under the historical cost convention, in accordance with the accounting principles generally accepted in India ("Indian GAAP"), the Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. 2. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Revenue recognition Revenues comprise of revenues from advertisements. Revenue from advertisements are recognized upon publishing of the advertisements in the newspaper. 4. Foreign currency transactions Transactions in foreign currency are recorded at the original rates of exchange in force at the time transactions are effected. Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets are adjusted in the carrying amount of the respective fixed asset. The carrying amount of fixed assets is also adjusted at the end of each financial year for any change in the liability arising out of expressing the related outstanding foreign currency liabilities at the closing rates of exchange prevailing at the date of the Balance Sheet or at the rates specified in the related forward contract. Monetary items (other than those related to acquisition of fixed assets) denominated in a foreign currency are restated using the exchange rates prevailing at the date of Balance Sheet or rates specified in the related forward contract. Gains / losses arising on restatement and on settlement of such items are recognized in the Profit and Loss Account. (Contd.....2) INDIA IN NEW YORK, INC (2) 5. Income taxes Income taxes are accounted for in accordance with US tax laws on Income accrued. Current tax is measured at the amount expected to be paid to / recovered from the revenue authorities, using applicable tax rates and laws in US. Tax liabilities and provision is accounted for by the Holding company. B. NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT 1. Organization and Business India In New York Inc ("the Company") was incorporated as a New York Corporation on May 1st 1997. In February 2001, the Company was acquired by Rediff Holdings Inc, a wholly owned subsidiary of Rediff.Com India Limited. The Company is one of the leading free news publication catering to the Asian-American community focusing on India and the global Indian community. 2. Additional information pursuant to the provisions of paragraph 4C and 4D of Schedule VI of the Companies Act., 1956 to the extent not applicable are not given. 3. Litigation: There are no pending litigations against the company. 4. The prior year figures have been regrouped and reclassified to conform with those of current year. 5. Balance Sheet Abstract and Company's General Business Profile (I) Registration Details ------------ ------------- Registration No.-TAX ID No | N.A. | State Code | N.A. | ------------ ------------- ----------------------- Balance Sheet Date | 31/03/2006 | ----------------------- (dd/mm/yy) (Contd.....3) INDIA IN NEW YORK, INC (3) (II) Capital raised during the year (Amount in US $) Public Issue Rights Issue --------------------------------- -------------------------------- | Nil | | Nil | --------------------------------- -------------------------------- Bonus Issue Private Placement --------------------------------- -------------------------------- | Nil | | Nil | --------------------------------- -------------------------------- (III) Position of Mobilisation and Deployment of Funds (Amount in US$) Total Liabilities $ Total Assets $ --------------------------------- -------------------------------- | 792,648 | | 792,648 | --------------------------------- -------------------------------- Sources of Funds Paid - up Capital $ Reserves & Surplus --------------------------------- -------------------------------- | - | | 792,648 | --------------------------------- -------------------------------- Secured Loans Unsecured Loans --------------------------------- -------------------------------- | Nil | | Nil | --------------------------------- -------------------------------- Application of Funds Net Fixed Assets $ Investments $ --------------------------------- -------------------------------- | - | | - | --------------------------------- -------------------------------- Net Current Assets $ Misc. Expenditure --------------------------------- -------------------------------- | 792,648 | | - | --------------------------------- -------------------------------- Accumulated Losses $ --------------------------------- | - | --------------------------------- (IV) Performance of Company (Amount in US$) for the year ended March 31, 2006. Turnover $ Total Expenditure $ --------------------------------- -------------------------------- | 317,983 | | 114,308 | --------------------------------- -------------------------------- Profit / Loss Before Tax $ Profit / Loss After Tax $ ----------------- ----------------- + - | 203,676 | + - | 203,676 | -------------------------------------------------------------------- | [ ] | | [ ] | --------------- --------------- (Please tick Appropriate box + for Profit - for Loss) Earning per Share Dividend @ % --------------------------------- -------------------------------- | - | | Nil | --------------------------------- -------------------------------- (Contd.....4) (4) (V) Generic Names of Three Principal Products / Services of Company ( as per monetary terms ) -------------------------------- Item Code No. ( ITC ) | N/A -------------------------------- Product Description | News Paper | -------------------------------- For and on behalf of the board Ajit Balakrishnan Director Mumbai, India Dated: September 5, 2006 India Abroad Publications (Canada), Inc. BOARD OF DIRECTORS Mr. Ajit Balakrishnan SECRETARY Mr. Joy Basu AUDITORS PATKAR & PENDSE INDIA Directors' Report The Board of Directors presents India Abroad Publications (Canada), Inc. audited financial statements for the year ended 31st March 2006. PRINCIPAL ACTIVITIES India Abroad Publications (Canada), Inc. ("IA Canada), is a weekly newspaper-publishing unit, which is a wholly owned subsidiary of India Abroad Publications Inc. IA Canada sells advertising space and subscriptions for the India Abroad newspaper in the Canadian Market. REVIEW OF BUSINESS The Profit & Loss account is set out along with this report and shows that during the year the Company earned gross revenue of C$ 292,474/-. Gross Loss (before depreciation, amortisation, impairment write down and taxes) is C$ 37,217/-. After giving effect to other adjustments, the net loss of C$38,578/- was carried to Balance Sheet. DIVIDENDS Your Directors do not recommend any dividend. For and on behalf of the Board of Directors Director Date: 5th September, 2006 REPORT OF THE AUDITORS The Board of Directors, India Abroad Publications (Canada) Inc. We have audited the attached Balance Sheet of INDIA ABROAD PUBLICATIONS (CANADA) INC., a Company incorporated in the United States, as at March 31, 2006 and also the Profit & Loss Account of the Company 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 and report that : We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Further, we report that: (a) We have obtained all the information & explanations, which to the best of our knowledge & belief were necessary for the purposes of our audit. (b) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the books of account. (c) In our opinion, the Balance sheet and Profit and Loss Account comply with Accounting Standards referred to in Schedule 10 to the Accounts. (d) In our opinion and to the best of our information and according to the explanations given to us the said accounts read with the notes thereon, give a true and fair view in conformity with the accounting principles generally accepted in India: i. in the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2006; and ii. in the case of Profit and Loss Account, of the loss of the Company for the year ended on that date; For Patkar & Pendse Chartered Accountants B.M. Pendse Partner. M.No. 32625 Place : Mumbai Date : September 5, 2006 India Abroad Publications (Canada) Inc Balance Sheet as at March 31, 2006

India Abroad Publications (Canada) Inc Profit & Loss Account for the year ended March 31, 2006

India Abroad Publications (Canada) Inc Schedules 1 to 10 forming part of the Balance Sheet and Profit & Loss Account for the year ended 31st March, 2006 - -------------------------------------------------------------------------------- As at As at 31.03.2006 31.03.2005 C $ C $ - -------------------------------------------------------------------------------- SCHEDULE 1 : CAPITAL Issued and subscribed : 162974 equity shares fully paid 142,974 142,974 --------------- --------------- TOTAL 142,974 142,974 =============== =============== India Abroad Publications (Canada) Inc Schedules 1 to 10 forming part of the Balance Sheet and Profit & Loss Account ----------------------------------------------------------------------------- for the year ended 31st March, 2006 -----------------------------------

India Abroad Publications (Canada) Inc Schedules 1 to 10 forming part of the Balance Sheet and Profit & Loss Account for the year ended 31st March, 2006

INDIA ABROAD PUBLICATIONS (Canada) INC. SCHEDULE 10: ACCOUNTING POLICIES AND NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT A. ACCOUNTING POLICIES 1. Basis of preparation of financial statements The accompanying financial statements have been prepared under the historical cost convention, in accordance with the accounting principles generally accepted in India ("Indian GAAP"), the Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. 2. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Revenue recognition Revenues comprise from subscription to the India Abroad weekly news paper and income from advertisements. Revenue from advertisements are recognized upon publishing of the advertisements in the newspaper. Subscription revenues are derived from the revenues received from the news paper subscribers and is recognized ratably over the period of subscription. Subscriptions received towards lifetime subscribers are shown as deferred revenue and recognized ratably over a 10 year period. 4. Fixed assets and depreciation Fixed assets are stated at historical cost. The Company depreciates fixed assets using the straight-line method, over the estimated useful lives of assets. The estimated useful lives of assets are as follows: Furniture and fixtures....................... 7 years Office equipment............................. 5 years 5. Employee retirement benefits The company does not have any employee retirement benefit plan. Leave Encashment The company's policies does not allow leave encashment and the employees are encouraged to avail the eligible leave. Unavailed leave lapses at the end of the period and hence no provision has been made in the books. INDIA ABROAD PUBLICATIONS (Canada) INC. (Contd.....2) (2) 6. Foreign currency transactions Transactions in foreign currency are recorded at the original rates of exchange in force at the time transactions are effected. Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets are adjusted in the carrying amount of the respective fixed asset. The carrying amount of fixed assets is also adjusted at the end of each financial year for any change in the liability arising out of expressing the related outstanding foreign currency liabilities at the closing rates of exchange prevailing at the date of the Balance Sheet or at the rates specified in the related forward contract. Monetary items (other than those related to acquisition of fixed assets) denominated in a foreign currency are restated using the exchange rates prevailing at the date of Balance Sheet or rates specified in the related forward contract. Gains / losses arising on restatement and on settlement of such items are recognized in the Profit and Loss Account. 7. Income taxes Income taxes are accounted for in accordance with Canadian tax laws on Income accrued and form part of the Holding Company tax liabilities. Current tax is measured at the amount expected to be paid to / recovered from the revenue authorities, using applicable tax rates and laws in Canada. Tax liabilities and provision is accounted for by the Holding company. B. NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT 1. Organization and Business India Abroad Publications(Canada) Inc ("the Company") was incorporated in Canada on December 20th, 1983. In February 2001, the Company was acquired by Rediff Holdings Inc, a wholly owned subsidiary of Rediff.Com India Limited. The Company is one of the leading news publications, catering to the Asian-American community focusing on India and the global Indian community. 2. Additional information pursuant to the provisions of paragraph 4C and 4D of Schedule VI of the Companies Act., 1956 to the extent not applicable are not given. 3. The Company recognizes as revenues based on advertisements published and subscriptions ratably over the period of subscription. Hence requirements as to quantitative information are not applicable. INDIA ABROAD PUBLICATIONS (Canada) INC. (Contd.....3) (3) 4. Litigation: There are no pending litigations against the company. 5. The prior year figures have been regrouped and reclassified to confirm with those of the current year. 6. Balance Sheet Abstract and Company's General Business Profile. (I) Registration Details ----------------- --------- Registration No.- | N.A. | State Code | N.A. | Business No | | --------- ----------------- ----------------- Balance Sheet Date | 31/03/2006 | (dd/mm/yy) ----------------- (II) Capital raised during the year (Amount in C$) Public Issue Rights Issue -------------------------------------------------------------------- | Nil | Nil | -------------------------------------------------------------------- Bonus Issue Private Placement -------------------------------------------------------------------- | Nil | Nil | -------------------------------------------------------------------- (III) Position of Mobilisation and Deployment of Funds (Amount in C$) Total Liabilities C$ Total Assets C $ -------------------------------------------------------------------- | 142,974 | 142,974 | -------------------------------------------------------------------- Sources of Funds Paid - up Capital C$ Reserves & Surplus -------------------------------------------------------------------- | 142,974 | Nil | -------------------------------------------------------------------- Secured Loans Unsecured Loans -------------------------------------------------------------------- | Nil | Nil | -------------------------------------------------------------------- INDIA ABROAD PUBLICATIONS (Canada) INC. (Contd.....4) (4) Application of Funds Net Fixed Assets C $ Investments $ ------------------------------------------------------------------- | 13,758 | Nil | ------------------------------------------------------------------- Net Current Assets C $ Misc. Expenditure ------------------------------------------------------------------- | 26,425 | Nil | ------------------------------------------------------------------- Accumulated Losses C$ -------------------------------- | 102,791 | -------------------------------- (IV) Performance of Company (Amount in C$) for the year ended March 31, 2006. Turnover C $ Total Expenditure C$ -------------------------------------------------------------------- | 292,474 | 331,052 | -------------------------------------------------------------------- Profit / Loss Before Tax C$ Profit / Loss After Tax C$ ------------------- --------------------- + - | (38,578) | + - | (38,578) | -------------------------------------------------------------------- | 0 | | 0 | -------------- -------------- (Please tick Appropriate box + for Profit - for Loss) Earning per Share Dividend @ % ----------------------------------------------------------- | (0.24) | Nil | ----------------------------------------------------------- (V) Generic Names of Three Principal Products / Services of Company (as per monetary terms) ------------------------------ Item Code No. (ITC) | N/A | ------------------------------ Product Description | News Paper | ------------------------------ 7. Previous years figures have been regrouped and reclassified wherever necessary to conform to current years classifications. For and on behalf of the board Ajit Balakrishnan Director Mumbai, India Dated: September 5, 2006 Rediff.com Inc. BOARD OF DIRECTORS Mr. Ajit Balakrishnan SECRETARY Mr. Joy Basu AUDITORS PATKAR & PENDSE INDIA Directors' Report The Board of Directors present Rediff.com Inc.'s audited financial statements of the year ended 31st March 2006. PRINCIPAL ACTIVITIES Rediff.com Inc., is a wholly owned subsidiary of Rediff Holdings Inc. Rediff.com Inc. derives revenue from a website targeted at the Indian American community. REVIEW OF BUSINESS The Profit & Loss account is set out along with this report and shows that the Company earned gross revenue of US $ 1,239,361/-. Gross Profit (before depreciation, amortisation, impairment write down and taxes) is US $ 468,004 /-. After giving effect to other adjustments, the net profit of US $ 468,004/- was carried to Balance Sheet. DIVIDENDS Your Directors do not recommend any dividend. For and on behalf of the Board of Directors Director Date: 5th September, 2006 REPORT OF THE AUDITORS ---------------------- The Board of Directors, Rediff.Com Inc. We have audited the attached Balance Sheet of REDIFF.com INC., a wholly owned subsidiary of Rediff Holdings Inc. incorporated in the United States, as at March 31, 2006 and also the Profit & Loss Account of the Company 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 and report that : We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Further, we report that : (a) We have obtained all the information & explanations, which to the best of our knowledge & belief were necessary for the purposes of our audit. (b) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the books of account. (c) In our opinion, the Balance sheet and Profit and Loss Account comply with Accounting Standards referred to in Schedule 9 to the Accounts. (d) In our opinion and to the best of our information and according to the explanations given to us the said accounts read with the notes thereon, give a true and fair view in conformity with the accounting principles generally accepted in India: i. in the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2006; and ii. in the case of Profit and Loss Account, of the profit of the Company for the year ended on that date; For Patkar & Pendse Chartered Accountants B.M. Pendse Partner. M.No. 32625 Place : Mumbai Date : September 5, 2006

As per our attached report of even date For Patkar & Pendse For and on behalf of the board Chartered Accountants B.M.Pendse A.Balakrishnan Partner Director M.No. 32625 Mumbai, India Mumbai, India Dated: September 5, 2006 Dated: September 5, 2006 Rediff.com Inc. Schedules 1 to 9 forming part of the Balance Sheet and Profit & Loss Account for the year ended 31st March, 2006 - -------------------------------------------------------------------------------- As at As at 31.03.2006 31.03.2005 US $ US $ - -------------------------------------------------------------------------------- SCHEDULE 1 : CAPITAL Authorized : 10000 shares @ $0.001 per share 10 10 =============== ============== Issued and subscribed : 5000 shares @ $0.001 per share; par value 5 5 --------------- -------------- TOTAL 5 5 =============== ============== Rediff.com Inc. Schedules 1 to 9 forming part of the Balance Sheet and Profit & Loss Account for the year ended 31st March, 2006 Schedule 2: Fixed Assets

Rediff.com Inc. SCHEDULE 9: ACCOUNTING POLICIES AND NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT A. ACCOUNTING POLICIES 1. Basis of preparation of financial statements The accompanying financial statements have been prepared under the historical cost convention, in accordance with the accounting principles generally accepted in India ("Indian GAAP"), the Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. 2. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Revenue recognition Revenues comprise of revenues from online advertising. Online advertising includes advertisement and sponsorships. Online advertising Advertisement and sponsorship income is derived from customers who advertise on the Company's website or to whom direct links from the Company's website to their own websites are provided . Revenue from advertisement and sponsorships is recognized ratably over the contractual period of the advertisement, commencing when the advertisement is placed on the website. Revenues are also derived from sponsor buttons placed in specific areas of the Company's website, which generally provide users with direct links to sponsor websites. These revenues are recognized ratably over the period in which the advertisement is displayed, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Company obligations may include guarantees of a minimum number of impressions, or times, that an advertisement appears in pages viewed by users of the Company's portal. To the extent that minimum guaranteed impressions are not met, the Company defers recognition of the corresponding revenues until the guaranteed impression levels are achieved. Rediff.com Inc. (Contd.....2) (2) 4. Fixed assets and depreciation Fixed assets are stated at historical cost. The Company depreciates fixed assets using the straight-line method, over the estimated useful lives of assets. The estimated useful lives of assets are as follows: Furniture and fixtures................ 7 years Computer equipment.................... 3 to 5 years 5. Income taxes Income taxes are accounted for in accordance with US tax laws on Income accrued and form part of the Parent company Income tax liability. Current tax is measured at the amount expected to be paid to / recovered from the revenue authorities, using applicable tax rates and laws in US. Tax liabilities and provision is accounted for by the Holding Company. B. NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT 1. Organization and Business Rediff.com Inc ("the Company") was incorporated on July 30, 1999. On February 27, 2001, Rediff Holdings Inc. acquired thinkindia.com Inc ("thinkindia") which was renamed as Rediff.Com Inc. Rediff.Com provides the Rediff Group with technology, marketing and content support in the United States. The Company is one of the leading Internet destinations, or portals, focusing on India and the global Indian community. Its websites consists of interest specific channels relevant to Indian interests such as cricket, astrology, matchmaker and movies, content on various matters like news and finance, search facilities, a range of community features such as e-mail, chat, messenger and e-commerce. 2. The Company recognizes as revenues from advertisements and online marketing and hence requirements as to quantitative information are not applicable. 3. Additional information pursuant to the provisions of paragraph 4C and 4D of Schedule VI of the Companies Act., 1956 to the extent not applicable are not given. 4. Litigation: There are no pending litigations against the company. Rediff.com Inc. (Contd.....3) (3) 5. Prior year figures have been regrouped and reclassified to conform those of the current year. 6. Balance Sheet Abstract and Company's General Business Profile. (I) Registration Details -------------- -------------- Registration No./Tax | N.A. | State Code | N.A. | ID No -------------- -------------- ------------- Balance Sheet Date | 31/03/2006 | (dd/mm/yy) ------------- (II) Capital raised during the year (Amount in US$) Public Issue Rights Issue ---------------------------------------------------------------- | Nil | Nil | ---------------------------------------------------------------- Bonus Issue Private Placement ---------------------------------------------------------------- | Nil | Nil | ---------------------------------------------------------------- (III) Position of Mobilisation and Deployment of Funds (Amount in US$) Total Liabilities US $ Total Assets US $ --------------------------------------------------------------- | 3,332,150 | 3,332,150 | --------------------------------------------------------------- Sources of Funds Paid - up Capital $ Reserves & Surplus --------------------------------------------------------------- | 5 | 3,332,145 | --------------------------------------------------------------- Secured Loans Unsecured Loans --------------------------------------------------------------- | Nil | Nil | --------------------------------------------------------------- Application of Funds Net Fixed Assets Investments --------------------------------------------------------------- | 0 | 0 | --------------------------------------------------------------- Net Current Assets $ Misc. Expenditure --------------------------------------------------------------- | 434,871 | 0 | --------------------------------------------------------------- Accumulated Losses ------------------------------- | 2,897,279 | ------------------------------- Rediff.com Inc. (Contd.....4) (4) (IV) Performance of Company (Amount in US $) for the year ended March 31, 2006 Turnover $ Total Expenditure $ ---------------------------------------------------------------- 1,239,361 | 771,357 | ---------------------------------------------------------------- Profit / Loss Before Tax Profit / Loss After Tax ------------- -------------- + - | 468,004 | + - | 468,004 | ---------------------------------------------------------------- 0 | | 0 | -------------------- ------------------ (Please tick Appropriate box + for Profit - for Loss) Earning per Share Dividend @ % ---------------------------------------------------------------- | $93.60 | Nil | ---------------------------------------------------------------- (V) Generic Names of Three Principal Products / Services of Company (as per monetary terms) -------------------------------- Item Code No. (ITC) | N/A | Product Description -------------------------------- | Online Advertising | -------------------------------- For and on behalf of the board Ajit Balakrishnan Director Mumbai, India Dated: September 5, 2006 Value Communications Corporation BOARD OF DIRECTORS Mr. Ajit Balakrishnan SECRETARY Mr. Joy Basu AUDITORS Patkar & Pendse India Directors' Report The Board presents the audited financial statements for the year ended on 31st March 2006. REVIEW OF BUSINESS Following the sale of its long distance phone card business in April 2004, the Company is currently not engaged in any business. DIVIDENDS Your Directors do not recommend any dividend. For and on behalf of the Board of Directors Director Date: 5th September, 2006 REPORT OF THE AUDITORS ---------------------- The Board of Directors, Value Communications Corporation We have audited the attached Balance Sheet of VALUE COMMUNICATIONS CORPORATION, a wholly owned subsidiary of Rediff.com India Limited incorporated in the United States, as at March 31, 2006 and also the Profit & Loss Account of the Company 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 and report that : We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Further, we report that : (a) We have obtained all the information & explanations, which to the best of our knowledge & belief were necessary for the purposes of our audit. (b) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the books of account. (c) In our opinion, the Balance sheet and Profit and Loss Account comply with Accounting Standards referred to in Schedule 8 to the Accounts. (d) Although the business of the Company was sold along with certain assets on 8th April, 2004; (refer note no.2 to the accounts) these financial statements for the year have been prepared by the Management as if the Company continues to be a `going concern'. (e) In our opinion and to the best of our information and according to the explanations given to us the said accounts read with the notes thereon, give a true and fair view in conformity with the accounting principles generally accepted in India: i. in the case of the Balance Sheet of the state of affairs of the Company as at 31st March, 2006; and ii. in the case of Profit and Loss Account, of the loss of the Company for the year ended on that date; For Patkar & Pendse Chartered Accountants Place : Mumbai B.M. Pendse Date : September 5, 2006 Partner M.No. 32625

Value Communications Corporation SCHEDULE 8: ACCOUNTING POLICIES AND NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT A. ACCOUNTING POLICIES 1. Basis of preparation of financial statements The accompanying financial statements have been prepared under the historical cost convention, in accordance with the accounting principles generally accepted in India ("Indian GAAP"), the Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. 2. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Revenue recognition The Company recognizes revenue as PINs and prepaid calling cards are delivered to customers. 4. Fixed assets and depreciation Pursuant to the sale of business on 8th april 2004, the company does not hold any fixed assets. 5. Employee retirement benefits The company has employee retirement benefit plan in which employer merely facilitate the plan administration. Employer does not contribute to the plan. Leave Encashment Provision for leave encashment is computed on the basis of last drawn salary for the unavailed leave balance to the credit of the employees at the year end and is charged to the Profit and Loss Account. 6. Foreign currency transactions Transactions in foreign currency are recorded at the original rates of exchange in force at the time transactions are effected. (Contd.....2) Value Communications Corporation (2) Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets are adjusted in the carrying amount of the respective fixed asset. The carrying amount of fixed assets is also adjusted at the end of each financial year for any change in the liability arising out of expressing the related outstanding foreign currency liabilities at the closing rates of exchange prevailing at the date of the Balance Sheet or at the rates specified in the related forward contract. Monetary items (other than those related to acquisition of fixed assets) denominated in a foreign currency are restated using the exchange rates prevailing at the date of Balance Sheet or rates specified in the related forward contract. Gains / losses arising on restatement and on settlement of such items are recognized in the Profit and Loss Account. Non-monetary items such as investments denominated in a foreign currency are reported using the exchange rate at the date of the transaction. 7. Income taxes Income taxes are accounted for in accordance with the US tax laws. Current tax is measured at the amount expected to be paid to / recovered from the revenue authorities, using applicable tax rates and laws. 8. Deferred Income Taxes As of March 31, 2006 and 2005, the components of the Company's net deferred tax assets are as follows: As of March 31,2006, the Company has net operating loss carry forwards of approx US.$ 2,915,000 for federal income tax purposes, which expire in the years 2021 to 2025. Realization of the future tax benefits related to the deferred tax income tax asset is dependent on many factors, including the Company's ability to generate taxable income within the net operating loss carry forward period. Management has considered these factors and believes that no asset to be created in the books of accounts. 9. Leases Operating Lease rentals are expensed with reference to lease terms and conditions. (Contd.....3) Value Communications Corporation (3) B. NOTES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT 1. Organization and Business Value Communications Corporation ("ValuCom" or the "Company") is a wholly-owned subsidiary of Rediff.com India, Ltd ("Rediff"). ValuCom provides internet-based marketing of prepaid long-distance service to over 200 countries worldwide. The Company markets its services to consumers and small businesses by packaging long-distance service from large telecommunication companies into Prepaid Identification Numbers ("PINs") and prepaid calling cards for sale on its Internet site or at its call-in center. 2. An event having significant impact on the Company, occurred on 8th April, 2004, where the Company's entire business was sold to World Quest Networks, Inc. 3. Additional information pursuant to the provisions of paragraph 4C and 4D of Schedule VI of the Companies Act., 1956 to the extent not applicable are not given. 4. Quantitative Details Pins and Prepaid Calling cards 31.03.2006 31.03.2005 (Nos.) (Nos.) ------------------------------ Opening Stock - 2,518 Purchases - - Sales / Consumption - 2,518 Closing Stock - - 5. Litigation: There are no pending litigations against the company. 6. The prior year figures have been regrouped and reclassified to conform with those of the current year. 7. Balance Sheet Abstract and Company's General Business Profile (I) Registration Details ------------ ---------- Registration No. N.A. State Code N.A. ------------ ---------- --------------- Balance Sheet Date 31/03/2006 --------------- (dd/mm/yy) (Contd.....4) Value Communications Corporation (4) (II) Capital raised during the year (Amount in US$) Public Issue Rights Issue ------------------------------- --------------------------------- Nil Nil ------------------------------- --------------------------------- Bonus Issue Private Placement ------------------------------- --------------------------------- Nil Nil ------------------------------- --------------------------------- (III) Position of Mobilisation and Deployment of Funds (Amount in US$ ) Total Liabilities Total Assets ---------------------------------- ------------------------------ 7,146,432 7,146,432 ---------------------------------- ------------------------------ Sources of Funds Paid - up Capital Reserves & Surplus --------------------------------- ------------------------------- 7,146,432 NIL --------------------------------- ------------------------------- Secured Loans Unsecured Loans --------------------------------- ------------------------------- Nil Nil --------------------------------- ------------------------------- Application of Funds Net Fixed Assets Investments --------------------------------- ------------------------------- Nil Nil --------------------------------- ------------------------------- Net Current Assets Accumulated Losses --------------------------------- ------------------------------- (2,850,702) 9,997,134 --------------------------------- ------------------------------- (IV) Performance of Company (Amount in US$) for the year ended March 31, 2006. Turnover $ Total Expenditure $ --------------------------------- ------------------------------- - - --------------------------------- ------------------------------- Profit / Loss Before Tax Profit / Loss After Tax -------------- ------------- + - | | + - | - | -----------------|--------------|--------------|-------------- | [ ] | | [ ] | ------------------ -------------- (Please tick Appropriate box + for Profit - for Loss) Earning per Share Dividend @ % --------------------------------- ------------------------------- Nil --------------------------------- ------------------------------- (Contd.....5) Value Communications Corporation (5) (V) Generic Names of Three Principal Products / Services of Company (as per monetary terms) ----------------------------- Item Code No. (ITC) | N/A | |-----------------------------| Product Description | Prepaid calling cards | ----------------------------- For and on behalf of the board Ajit Balakrishnan Director Mumbai, India Dated: September 5, 2006 REDIFF.COM INDIA LTD Regd. Office: 1st Floor, Mahalaxmi Engineering Estate, L. J. First Cross Road, Mahim (West), Mumbai 400 016 ATTENDANCE SLIP ------------------------ Folio No. ------------------------ No. of Shares held ------------------------ I hereby record my presence at the Tenth Annual General Meeting of the Company being held at Registered Office at Mahalaxmi Regd. Office: 1st Floor, Mahalaxmi Engineering Estate, L. J. First Cross Road, Mahim (West), Mumbai 400 016 at 10.00 a.m. (IST) on Friday, 29th September, 2006. - -------------------------- Signature of attending Member/Proxy Name: ----------------- Note: A member/proxy holder attending the meeting must bring the Attendance Slip to the meeting and hand it over at the entrance duly signed. - ------------------------------------------------------------------------------- REDIFF.COM INDIA LTD Regd. Office: 1st Floor, Mahalaxmi Engineering Estate, L. J. First Cross Road, Mahim (West), Mumbai 400 016 PROXY I/We, _________________________________________, of _______________________ in the district of ___________________________ being a member/members of the above Company hereby appoint ________________________________________ of _______________________ in the district of _________________________________ or failing him ____________________ of _________________________________ in the district of ___________________________ as my/our Proxy to attend and vote for me/us and on my/our behalf at the Eleventh Annual General Meeting of the Company to be held on Friday, 29th September, 2006 at 10.00a.m.(IST) and at any adjournment thereof. Signed this _______________________ day of _________________ 2006 ------------------------------ Folio No. ------------------------------ No. of Shares held ------------------------------ Signature ___________ Affix ___________ Re. 0.15 Revenue Stamp This form is to be used in favour of* / against* the resolution. Unless otherwise instructed, the proxy will act as he thinks fit. * Strike out whichever is not applicable. Note: 1. The Proxy must be returned so as to reach the registered office of the Company not less than 48 hours before the time for holding of the aforesaid meeting. 2. A proxy need not be a member. EX-99 3 rediffex99.htm EXHIBIT 99.1

NOTICE

Notice is hereby given that the Eleventh Annual General Meeting of the Members of Rediff.com India Limited will be held on Friday, 29^th September, 2006, at 10 a.m. (IST) at the Registered Office of the Company situated at First Floor, Mahalaxmi Engineering Estate, L. J. First Cross Road, Mahim (West), Mumbai 400016, to transact the following business:

ORDINARY BUSINESS

To receive, consider and adopt the Audited Balance Sheet as at March 31, 2006 and Profit & Loss Account for the year ended as on that date and the reports of the Auditors and Directors’ thereon.

To appoint a Director in place of Mr. Pulak Prasad, Director retiring by rotation and being eligible, offers himself for reappointment.

To appoint a Director in place of Mr. Ashok Narasimhan, Director retiring by rotation and being eligible, offers himself for reappointment.

To appoint Auditors and fix their remuneration by passing the following resolution as an Ordinary Resolution with or without modification(s);

“RESOLVED that M/s Deloitte Haskins & Sells, Chartered Accountants, Mumbai be and are hereby re-appointed as Statutory Auditors of Rediff.com India Limited and to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting at a remuneration to be decided by the Board of Directors/Audit Committee of the Directors of the Company.”

SPECIAL BUSINESS

5.	To consider and if thought fit, to pass with or without modification, the following resolution as SPECIAL resolutions:

“RESOLVED THAT Mr. Rashesh Shah, who was appointed as an Additional Director on April 26, 2006, in terms of the Articles of Association of the Company and who by virtue of the provisions of section 260 of the Companies Act, 1956, holds office upto the date of the Annual General Meeting, being

eligible, offers himself for appointment and in respect of whom the Company has received a notice in writing under section 257 of the Companies Act, 1956 proposing his candidature for the office of Director, be and is hereby appointed as Director of the Company.”

By Order of the Board

For Rediff.com India Limited

		sd/-
PLACE: MUMBAI		Jyoti Dialani
DATE: 5^th September, 2006	Company Secretary & Manager Legal

NOTES:

A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF/HERSELF AND SUCH A PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES TO BE EFFECTIVE MUST BE RECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE COMMENCEMENT OF THE ANNUAL GENERAL MEETING.

2.	The relative Explanatory Statement pursuant to the provisions of Section 173 of the Companies Act, 1956 for item Nos. 5 is enclosed and forms part of this Notice.

REDIFF.COM INDIA LIMITED

EXPLANATORY STATEMENT PURSUANT TO THE PROVISIONS OF SECTION 173(2) OF THE COMPANIES ACT, 1956.

Pursuant to the provisions of Section 173(2) of the Companies Act, 1956, the following Explanatory Statement sets out the material facts relating to the item of Special Business mentioned in the accompanying Notice dated 5^th September, 2006 and shall be form part of the Notice

Item No.5

Mr. Rashesh Chandrakant Shah was appointed as an Additional Director, in terms of the provisions of the Companies Act, 1956 and the Articles of Association of the Company on April 26, 2006. He holds office upto the date of the Annual General Meeting by virtue of section 260 of the Companies Act, 1956. Notices in writing under section 257 of the Companies Act, 1956, have been received from members signifying their intention to propose Mr. Rahesh Shah as a candidate for the office of Director.

Mr. Shah is currently CEO of Edelweiss Capital Limited. Edelweiss Capital is a leading financial services company based in Mumbai, India, whose businesses include investment banking, securities broking and investment management. He also serves on the Boards of various companies. He has more than 18 years of experience in capital markets.

Mr. Shah is an MBA graduate from the Indian Institute of Management, Ahmedabad, and holds a Bachelor's degree in Science from the University of Bombay. He is also a Diploma holder in International Trade from the Indian Institute of Foreign Trade, New Delhi. Prior to his joining Edelweiss Mr. Shah worked as Head of Investment and Research with Prime Securities Limited.

The Directors, therefore, recommend the passing of the Resolution under Item no.5 of the accompanying Notice.

No Director other than Mr. Rashesh Shah, may be considered to be concerned or interested in the passing of this Resolution.

By Order of the Board

For Rediff.com India Limited

		sd/-
PLACE: MUMBAI		Jyoti Dialani
DATE: 5^th September, 2006	Company Secretary & Manager Legal

REDIFF.COM INDIA LTD

Regd. Office: 1^st Floor, Mahalaxmi Engineering Estate, L. J. First Cross Road, Mahim (West), Mumbai 400 016

ATTENDANCE SLIP

Folio No.

No. of Shares held

I hereby record my presence at the Tenth Annual General Meeting of the Company being held at Registered Office at Mahalaxmi Regd. Office: 1^st Floor, Mahalaxmi Engineering Estate, L. J. First Cross Road, Mahim (West), Mumbai 400 016 at 10.00 a.m. (IST) on Friday, 29^th September, 2006.

__________________________

Signature of attending Member/Proxy

Name: _____________________

Note: A member/proxy holder attending the meeting must bring the Attendance Slip to the meeting and hand it over at the entrance duly signed.

---------------------------------------------------------------------------------------------------------------------------------

REDIFF.COM INDIA LTD

Regd. Office: 1^st Floor, Mahalaxmi Engineering Estate, L. J. First Cross Road, Mahim (West), Mumbai 400 016

PROXY

I/We, ___________________________________________________, of _______________________ in the district of ___________________________ being a member/members of the above Company hereby appoint ___________________________________________________ of _______________________ in the district of __________________________________________ or failing him ____________________ of __________________________________________ in the district of ___________________________ as my/our Proxy to attend and vote for me/us and on my/our behalf at the Eleventh Annual General Meeting of the Company to be held on Friday, 29^th September, 2006 at 10.00a.m.(IST) and at any adjournment thereof.

Signed this _______________________ day of _________________ 2006

			Folio No.
			No. of Shares held
Signature_____________	Affix Re. 0.15 Revenue Stamp	_______________

This form is to be used in favour of* / against* the resolution. Unless otherwise instructed, the proxy will act as he thinks fit.

* Strike out whichever is not applicable.

Note: 1.	The Proxy must be returned so as to reach the registered office of the Company not less than 48 hours before the time for holding of the aforesaid meeting.
2.	A proxy need not be a member.

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