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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
ACT OF 1934
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the fiscal year ended March 31, 2011
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 Date of event requiring this shell company report
 For the transition period from  to
 Commission File Number 000-30735
 REDIFF.COM INDIA LIMITED
  
 
 
 
  Title of each Class
    
    Name of each exchange on which registeredAmerican Depositary Shares,
    
    NASDAQ Global Marketeach represented by one-half of one 
equity share, par value Rs.5 per share
 
 
   o þ
  o þ
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
  U.S. GAAP
þ
    
    International Financial Reporting Standards as issued
by the International Accounting Standards Board o
    
    Other
o
  o o
  o þ




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TABLE OF CONTENTS
 PageCROSS REFERENCE TO FORM 20-F ITEM HEADINGS
    
    
    1CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS
    
    
    4FORWARD-LOOKING STATEMENTS
    
    
    5EXCHANGE RATES
    
    
    6SELECTED FINANCIAL DATA
    
    
    7RISK FACTORS
    
    
    8BUSINESS
    
    
    30MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    46MANAGEMENT
    
    
    63RELATED PARTY TRANSACTIONS
    
    
    74EXCHANGE CONTROLS
    
    
    75TRADING MARKET
    
    
    79RESTRICTION ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
    
    
    80PRINCIPAL SHAREHOLDERS
    
    
    87TAXATION
    
    
    89CONTROLS AND PROCEDURES
    
    
    96PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    98PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASER
    
    
    99PRESENTATION OF FINANCIAL INFORMATION
    
    
    100ADDITIONAL INFORMATION
    
    
    101EXHIBIT INDEX
    
    
    109INDEX TO FINANCIAL STATEMENTS
    
    
    F-1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1




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CROSS REFERENCE TO FORM 20-F ITEM HEADINGS
 PART I
                        1




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PART II
                      2




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PART III
        3




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CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS
     4




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FORWARD-LOOKING STATEMENTS
  
    
    our goals and strategies;
 
    
    our recently acquired businesses and other acquisitions, investments and divestments;
 
    
    the impact of regulations and court orders on our business;
 
    
    our future investments, costs and working capital;
 
    
    the importance and expected growth of Internet technology,
including sales of personal computers and mobile phones, and the
development of broadband Internet and 3G networks in India;
 
    
    the pace of change in the Internet market;
 
    
    the demand for Internet services;
 
    
    advertising demand and revenues; and
 
    
    new product and services.
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EXCHANGE RATES
   Fiscal Year Ended March 31,
    
    Period End
    
    

Average (1)(2)
    
    
    High
    
    
    Low(Rs.)2007
    
    
    43.59
    
    
    
    45.22
    
    
    
    46.95
    
    
    
    43.142008
    
    
    39.97
    
    
    
    40.13
    
    
    
    43.15
    
    
    
    39.272009
    
    
    50.95
    
    
    
    46.46
    
    
    
    52.06
    
    
    
    39.892010
    
    
    45.14
    
    
    
    47.36
    
    
    
    50.53
    
    
    
    44.942011
    
    
    44.65
    
    
    
    45.57
    
    
    
    47.57
    
    
    
    44.03
 
 Notes:(1)
    
    The average rate for each period differed from the exchange rates used
in the preparation of our financial statements.(2)
    
    The column titled Average represents the average of the closing rate
as at the last day of each month during the period.  Month
    
    High
    
    
    Low(Rs.)March 2011
    
    
    45.27
    
    
    
    44.65April 2011
    
    
    44.68
    
    
    
    44.04May 2011
    
    
    45.38
    
    
    
    44.30June 2011
    
    
    45.10
    
    
    
    44.61July 2011
    
    
    44.69
    
    
    
    43.95August 2011
    
    
    46.13
    
    
    
    44.05
   6




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SELECTED CONSOLIDATED FINANCIAL DATA
  Fiscal Years Ended March 31,2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011(in US$ thousands, except per share data)Statement of Operations data:Revenues
    
    
    28,676
    
    
    
    32,249
    
    
    
    25,429
    
    
    
    18,843
    
    
    
    21,795Cost of revenues
    
    
    7,462
    
    
    
    9,699
    
    
    
    10,376
    
    
    
    10,115
    
    
    
    10,796Operating expenses
    
    
    18,015
    
    
    
    24,669
    
    
    
    30,589
    
    
    
    20,302
    
    
    
    19,696Net income (loss)
    
    
    6,963
    
    
    
    4,908
    
    
    
    (11,258
    )
    
    
    (8,028
    )
    
    
    (6,572
    )Earnings (loss) per Equity Share  basic
    
    US$
    0.48
    
    
    US$
    0.336
    
    
    US$
    (0.770
    )
    
    US$
    (0.552
    )
    
    US$
    (0.477
    )Earnings (loss) per Equity Share  diluted
    
    US$
    0.47
    
    
    US$
    0.332
    
    
    US$
    (0.770
    )
    
    US$
    (0.552
    )
    
    US$
    (0.477
    )Weighted average number of equity shares- Basic
    
    
    14,543
    
    
    
    14,607
    
    
    
    14,615
    
    
    
    14,563
    
    
    
    13,783- Diluted
    
    
    14,924
    
    
    
    14,772
    
    
    
    14,615
    
    
    
    14,563
    
    
    
    13,783
 As of March 31,2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011(in US$ thousands)Balance Sheet Data:Current assets
    
    
    65,851
    
    
    
    74,208
    
    
    
    54,345
    
    
    
    52,244
    
    
    
    45,804Current liabilities
    
    
    8,899
    
    
    
    10,570
    
    
    
    6,927
    
    
    
    8,161
    
    
    
    8,773Total assets
    
    
    86,459
    
    
    
    101,422
    
    
    
    71,612
    
    
    
    69,541
    
    
    
    63,940Total shareholders equity
    
    
    77,223
    
    
    
    90,150
    
    
    
    64,007
    
    
    
    60,606
    
    
    
    54,102
 Note:The selected financial data set forth above should be read in conjunction with
the section entitled Managements Discussion and Analysis of Financial
Condition and Results of Operations and the financial statements and the notes
to those statements included elsewhere in this annual report.  7




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RISK FACTORS
 RISK FACTORS
 An investment in our ADSs involves a high degree of risk. You should carefully consider the
following information about risks, together with the other information contained in this annual
report on Form 20-F , including our consolidated financial statements and related notes, before you
decide to buy our ADSs. If any of the circumstances or events described below actually arises or
occurs, our business, results of operations and financial condition would likely suffer. In any
such case, the market price of our ADSs could decline, and you may lose all or part of your
investment. This annual report also contains forward-looking information that involves risks and
uncertainties. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of many factors, including the risks faced by us described
below and elsewhere in this annual report.
 Risks Related to our Business
 We face significant competition for users, advertisers, publishers and distributors,
principally from Google, Yahoo, Facebook and MSN but also from other smaller competitors
        8




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Our future results and growth prospects may be materially and adversely affected if our
expansions into new business are not successful
  Our business could be disrupted if our investment in new products, services, technologies and
new business strategy is not successful, our current plans for growth depend in part on the
development broadband Internet and 3G networks in India
  The success of technological infrastructure and consumer base for our products and services
depends on the acceptance of the Internet in India, which may be slowed by cost and affordability
issues, technical obstacles and unfavorable Government policies
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If we are unable to develop new services or enhance existing services in anticipation of our
users needs, our users level of engagement with our services may decline and our business could
suffer as a result.
   Our Strategy of acquiring business which complements our existing business may fail
    10




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More individuals are utilizing non-PC devices to access the Internet, and versions of our
services developed for these devices might not gain widespread adoption by the devices users,
manufacturers, or distributors or might fail to function as intended on some devices.
   If we fail to detect click fraud or other invalid clicks, we could lose the confidence of our
advertisers, which would cause our business to suffer.
  New technologies could block our ads, which would harm our business.
  The ongoing global slowdown, especially in India and the United States, could continue to
negatively impact revenues from some of our key customer categories
     11




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Our publication business in the United States and Canada faces competition and industry wide
declines
   We may be required to record a significant charge to earnings if our goodwill, long lived
assets, or investments in equity interests become impaired
  We have a history of losses. We may incur losses in the future and we may not achieve or
maintain profitability
   12




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Our revenues could be adversely affected if we are unable to successfully adapt to new forms
of pricing for the services and products we offer
  
    
    loss of visitors and decreased website traffic;
    
    loss of paid subscribers;
    
    loss of advertisers;
    
    reduced operating margins;
    
    loss of market share; and
    
    diminished value in our services.
  Increasing consumer resistance to online advertising may result in loss of revenues
  Our quarterly operating results may fluctuate significantly and may fail to meet the
expectations of securities analysts and investors, which may cause the price of our ADSs to decline
  
    
    increased competition;
    
    slowdown in the Indian and global economies
  13




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
    
    lower than expected revenues from one or more of our customers;
    
    changes in prices for our product and service offerings;
    
    increases in personnel, marketing and other operating expenses;
    
    our ability to attract new users and to retain existing users at reasonable costs;
    
    our ability to adequately maintain, upgrade and develop our website,
our computer network and the systems that we use to process customer
orders and payments;
    
    the timing of our expansion plans in India and other geographic markets;
    
    seasonality in retail sales;
    
    technical difficulties, system or website downtime or Internet service disruptions; and
    
    entry into new businesses or development of new products or services requiring
substantial investments.
  We may not be able to grow our business if online advertising in our markets does not expand
  
    
    our ability to attract and retain advertisers at profitable rates in light of intense competition;
    
    our ability to generate and continue to grow a large community of
users with demographics attractive to advertisers;
    
    advertisers acceptance of the Internet as an effective and sustainable medium;
    
    the effectiveness of our advertising delivery, tracking and reporting systems; and
    
    our ability to adapt, including technologically, to new forms of Internet advertising.
   14




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The loss of one or more significant advertisers could adversely affect our revenues
  Our operations could be disrupted by unexpected network interruptions caused by system
failures, natural disasters or unauthorized tampering of our systems
  
    
    system failures and outages caused by fire, floods, earthquakes,
tsunamis, power loss, telecommunications failures and similar events;
    
    software errors; computer viruses, break-ins and similar disruptions
from unauthorized tampering with our computer systems;
    
    security breaches related to the storage and transmission of
proprietary information, such as credit card numbers or other personal
information; and
    
    terrorist acts
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We may lose a significant portion of our assets if banks in India collapse.
  We may not benefit from our acquisitions and investments and our acquired businesses could
increase our net losses
  
    
    the failure to identify operating weaknesses of the acquired business
during the course of due diligence and negotiations of these
transactions;
    
    the difficulty of assimilating the operations, third-party
relationships and personnel of the acquired companies with our
operations;
    
    Diversion of management time and focus from operating our business to
acquisition integration process;
    
    the difficulty of incorporating acquired technology, software or
content into our products, and unanticipated expenses related to such
integration;
    
    the impairment of relationships with employees and customers as a
result of any integration of new management personnel;
    
    The potential unknown liabilities associated with acquired businesses;
    
    The failure to develop successfully new products or technologies;
    
    The failure to popularize such products or technologies and/or derive
expected revenues therefrom;
    
    unfavorable changes in business environment and government regulations;
    
    unfavorable changes in accounting rules and guidelines relating to our acquisitions; and
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
    
    the failure of companies in
which we invest to raise sufficient capital to maintain their business.
    
    Cultural challenges
associated with integrating employees from the acquired company into our organization
    
    Retention of employees from the businesses we acquire.
    
    Litigation or other claims in connection with the acquisition or
investment, including claims from terminated employees, customers,
former stockholders, or other third parties.
  Our business and growth will be impaired if we are unable to retain our existing key personnel
and hire additional skilled employees
  We are dependent on our agreements with mobile service providers for service delivery and fee
collection
  We rely on increased sales of, and high renewal rates for, our subscription and fee based
products and services
   17




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We depend on mobile operators to reach out to their customers
  Potential liability for information we publish may require us to defend against legal claims,
which may cause significant operational expenditures
   We may be liable to third parties for information uploaded on or retrieved from our website
     
    
    unsolicited e-mail;
    
    lost or misdirected e-mail;
    
    illegal or fraudulent use of e-mail;
    
    interruptions or delays in e-mail service; and
    
    loss or deletion of data stored in mailboxes.
  18




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If we are unable to provide innovative search experiences and other services that generate
significant traffic to our Websites, our business could be harmed, causing our revenues to decline.
  We may be liable to third parties for the products they purchase online
     19




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Privacy concerns may prevent us from selling demographically targeted advertising in the
future and make us less attractive to advertisers
    Indian and/or overseas regulators and other telecommunications operators may challenge our
ability to offer a PC-to-PC voice facility as one of the features of our Rediff BOL instant
messenger service
  We may not be able to manage our operations effectively if we grow, which could harm our
business
  Currency exchange rate fluctuations may adversely impact our operating results and financial
condition
   20




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A small group of our existing shareholders control our Company and may have interests which
conflict with those of our other shareholders or owners of our ADSs
   
    
    amending our Articles of Association;
    
    issuing additional shares of capital stock, except for pro rata issuance to existing shareholders;
    
    commencing any new line of business; and
    
    commencing liquidation.
    The laws of India do not protect intellectual property rights to the same extent as those of
the United States, and we may be unsuccessful in protecting our intellectual property rights, which
could lead to a reduction in our revenues and an increase in our expenses
   21




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The limited installed personal computer base in India limits our pool of potential customers
and restricts the growth of our business
  The success of our e-commerce platform depends on its acceptance and growth in India, which is
uncertain
  
    
    inconsistent quality of service;
    
    lack of legal infrastructure relating to e-commerce in India;
    
    lack of security of commercial data such as credit card numbers;
    
    low number of Internet users in India; and
    
    low levels of credit card penetration in India.
   22




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Compliance with corporate governance and public disclosure requirements may increase our costs
of compliance
    Risks Related to Investments in Indian Companies
  Terrorist attacks and other acts of violence or war involving India, the United States, and
other countries could adversely affect the financial markets, result in a loss of business
confidence and adversely affect our business, results of operations and financial condition
  If communal disturbances or riots erupt in India, or if regional hostilities increase, this
would adversely affect the Indian economy, the health of which our business depends upon
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Future political instability in India could halt or delay the liberalization of the Indian
economy and adversely affect economic conditions in India generally and our business in particular
   Indian law limits our ability to raise capital and the ability of others to acquire us, which
could prevent us from operating our business or entering into a transaction that is in the best
interests of our shareholders
    24




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Our ability to acquire companies organized outside of India may depend on the approval of the
Government of India and the Reserve Bank of India. Our failure to obtain approval for acquisitions
of companies organized outside India may restrict our growth, which could negatively affect our
revenues
   Statistical and third-party data in this document and documents incorporated by reference
herein may be incomplete or unreliable
  It may be difficult for you to enforce any judgment obtained in the United States against us
or our affiliates
  
    
    effect service of process upon us outside India or these persons
outside the jurisdiction of their residence; or
    
    enforce against us in courts outside of India or these persons outside
the jurisdiction of their residence, judgments obtained in U.S.
courts, including judgments predicated upon the federal securities
laws of the United States.
  
    
    was not rendered by a court of competent jurisdiction;
    
    was not rendered on the merits of the case;
    
    appears on the face of the proceedings to be founded on an incorrect
view of international law or a refusal to recognize the law of India
in cases in which such law is applicable;
    
    was obtained in proceedings which are opposed to natural justice; or
    
    sustains a claim founded on a breach of any law in force in India.
  25




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Risks Related to the ADSs and Our Trading Market
 An active or liquid market for our ADSs is not assured
   Currently there is no public trading market for our Equity Shares in India or elsewhere which,
together with existing Indian laws that restrict the conversion of outstanding equity shares into
ADSs, reduce your ability to sell our Equity Shares represented by ADSs
   Our management has broad discretion in using the proceeds from our securities offerings and
cash from operations and therefore investors will be relying on the judgment of our management to
invest those funds effectively
    26




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Our ADS market price is highly volatile and could drop unexpectedly in the future. Should our
ADS market price drop below $1.00, our ADSs may be delisted from the NASDAQ Global Market
   Owners of our ADSs may be restricted in their ability to exercise preemptive rights and
thereby may suffer future dilution of their ownership position
  Owners of our ADSs may be restricted in their ability to exercise voting rights because of the
practical and legal limitations associated with instructing our Depositary to vote on your behalf
    27




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We do not plan to pay dividends in the foreseeable future
  We may be classified as a passive foreign investment company for United States federal income
tax purposes, which could subject United States investors in the ADSs or Equity Shares to adverse
tax consequences
  Sales of substantial amounts of securities in the public market could depress the price of our
ADSs and could impair our ability to raise capital through the sale of additional Equity Shares
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We may be required to list our Equity Shares on an Indian stock exchange. If we were to list
our Equity Shares on an Indian stock exchange, conditions in the Indian securities market may
affect the price or liquidity of our Equity Shares
      29




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BUSINESS
 Overview
         30




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Our Markets
      Our Opportunity
  
    
    We are an early entrant in the Indian internet market and our
brand is recognized and trusted by Indian Internet users;
 
    
    We offer services based on contemporary technology, thus making
them easy to use and accessible through both PCs and mobile
phones.
 
    
    We are one of the few Internet companies in India offering
complete website services, such as e-mail, search, community,
instant messaging, blogs, news, daily deals and online shopping;
 
    
    Anticipated improvement in broadband access, online payment
infrastructure, distribution and fulfillment facilities, and an
increase in credit and debit card penetration rates and the
development of alternative payment mechanisms for online
purchases, such as cash on deliveries is expected to fuel the
growth of e-commerce in India; and
 
    
    Expected growth over time in internet access through PCs, mobile
phones and other mobile device, further fueled by the recent
issuance of 3G licenses in India.
  31




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Our Strategy
  
    
    Online advertising services on our Rediff.com website, revenues
from which currently account for a significant portion of our
India Online business. These include banner advertising,
performance based advertising, e-mail and text link campaigns
sponsorship of online events and rich media ad formats. Our target
client base for advertising and sponsorships include global
companies doing business in India, domestic corporations and small
and medium enterprises.
 
    
    Our Rediff Deal Ho Jaye! service, an advertising service for
small and local advertisers was recently introduced in 40 Indian
cities. Merchants now have the ability to take advantage of
Rediff.coms reach to generate business through new customers by
offering special discounts and promotions on Rediff DealHoJaye!.
The Deal Ho Jaye! offering enables consumers to discover new
services and experiences in their city, such as restaurants, spas,
hotels, healthcare, tattoos, hobby classes, adventure sports and
other local attractions across 70 categories and at 30-60%
discounts, helping them make the most of their quality time with
their family and friends. Apart from the traditional online
payment options, Rediff also enables users to pay by cash on
delivery of coupons to their doorstep, through logistics partners.
The primary objective of introducing this mode of payment is to
make it easy for a large number of users without credit cards or
net banking facilities to buy offers from Rediff Deal Ho Jaye!.
 
    
    Community and social networking platforms which connect people
through an online network. Our social networking initiatives are
centered around MyPage for each user of our service. Other
community products and platforms includeGet Ahead Q&A and Rediff
Blogs. We believe our video, audio/music and photo-sharing
platform, iShare, is a leader in its category. We are also a
leading provider of free e-mail communication services which are
provided in many Indian languages.
 
    
    News and information services, including breaking news, our money
channel Moneywiz as well as message boards for users to post their
opinions, a facility for users to personalize news to suit their
interests and periodic newsletters they can receive in their
e-mail boxes. Our news and information channels cover politics,
business, entertainment and sports.
 
    
    Mobile value added services, include facilities for downloading
ringtones, mobile games, wallpapers, chat and e-mail. We provide
these services for 2G, 2.5G and 3G mobile services.
  32




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
    
    In addition to services for small and medium businesses such as
webhosting, domain name registration on a subscription basis,
Rediff has also launched the next generation Rediffmail NG on
mobile service. With Rediffmail NG, Indias 840 million mobile
phone users (source: TRAI report  May 2011) now have the
advantage of being able to send and receive unlimited email, look
up contacts and assign tasks to the calendar, and set reminders
with the same ease from mobile devices as from their PC  and all
at a low price of Rs. 50 per month. Rediffmail NG works across
almost all mobile phone platforms including Symbian, Java, and
Android, as well as on almost all mobile phones in the market
(close to 200 models from over two dozen manufacturers), including
all entry level phones which cost as little as Rs. 2000. Users of
Rediffmail NG can maintain service upon switching phones which has
become increasingly important with the introduction of new phone
models on a continuous basis. Additionally, Rediffmail NG offers
seamless service across a users phone and PC, providing instant
and secure synchronization, and full-service features including
multi-taking capabilities, administrative control, SMS and
always-on e-mail service. The service offers small-sized business
owners a cost-effective way to equip their employees with mobile
communications and increase productivity.
 
    
    Search services, including web search facilities as well as
services to locate local information on domestic airfares, train
fares, job listings, images and products.
 
    
    Online shopping services, includes a platform for merchants in
India to create online shops, for consumers to explore the wide
product range on our site, conveniently place orders track their
packages, and rate the merchants. We believe that not only do we
offer the widest range of payment options to our consumers. We
also have one of the largest delivery coverage of any online
shopping sites in India. We have recently introduced the concept
of social shopping that allows merchants to have their own
MyPage to display products and interact with their customers. We
are positioning ourselves to be a continued leader in the
e-commerce and online shopping network in India.
 
    
    New service in the United States, including our publications
India Abroad and India in New York, as well as providing
online services to the Asian Indian community.
 India Online Business
   Information and Content
    33




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urrent affairs, Business and Finance, Movies,
Sports.
 Community Features and Products
   E-mail
  
    
    Rediffmail, our flagship e-mail service, is provided free of
charge to our users. In fiscal 2009 we enabled integration of
feeds from social networking sites Orkut, Facebook and Linkedin
into the Rediffmail inbox, facilitating users to get updates of
their friends activities through Rediffmail. We have now made our
interface more user friendly by providing easy navigation tools to
quickly perform actions like reading unread mails, composing a new
mail, deleting mails, accessing the calendar and contacts. The
service is also accessible on mobile device and works seamlessly
on most mobile phones.
 
    
    Rediffmail Pro is a subscription e-mail service targeted at
business users. Rediffmail Pro offers small businesses the ability
to select and configure, subject to availability, e-mail
addresses. Subscribers are given five e-mail addresses and 1GB of
storage space, which can be allocated among different users and
increased without limitation at a small additional charge.
Rediffmail Pro also offers enhanced address book features and
superior virus and spam protection. Users may also access their
e-mail accounts using POP access through their Rediffmail Pro
accounts. Rediffmail Enterprise Pro is a web based e-mail service
primarily for companies with a significant number of agents/sales
associates/dealers.
  34




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##### Table of Contents




    
    Rediff Business Solution is aimed at the small and medium
enterprise (SME) segment in India. Through this product, we
offer SMEs a range of web management services such as domain name
registration, web hosting and business e-mail. Features offered
include 100MB web hosting service, a choice of Windows or Linux
platforms, POP3 business e-mail service and the ability to
register domain names for up to ten years.
 
    
    For the small and medium enterprises, we have introduced
Rediffmail NG. It enables small and medium enterprises to have
complete administrative control over the subscribed email service
and offer the same to their employees. The service is offered at
significantly lower price compared to other competing services and
works across almost all mobile phone platforms including Symbian,
Java, and Android, as well as on almost all mobile phones in the
market.
 Local TV Advertising
  Blogs
  Social Networking
      35




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##### Table of Contents



Finance Channel
  Search Services
  
    
    Fare Search, which allows users to search for and compare
transportation fares. Features of Fare Search include the Lowest
Fare Finder search tool, which charts out the lowest price points
for up to 90 days. Fare search offerings include searching for
schedules, seat availability, fares for trains in the India
Railway System.
 
    
    Job Search, which allows users to search for jobs across multiple
job sites as well as private company and government job openings.
Job Search also includes a tool that allows human resource
consultants and recruiters to upload job vacancies, at no cost,
directly to the Job Search website. We also offer a free e-mail
alert feature that allows users to stay updated on the latest job
openings in their desired categories.
 
    
    Product Search, which allows users to search for and compare
product features and prices across major Indian cities. Product
Search features a Price history feature that enables users to
track prices of different products on a month-on-month basis.
 
    
    Video Search, we offer video search as part of our vertical search
offerings and this helps users to search and find videos from a
database of over two million online videos.
 
    
    Other search services, which include Image Search, Map Search,
Stock Search, Book Search and Ringtone Search. We also enhanced
our language search crawling technology to identify and reach more
Indian language websites. Our web search now also returns relevant
results from our News, Images, Maps, Shopping, Q&A and other
services.
 Mobile Value Added Services
  
    
    Downloads. Users can download ringtones, polyphonic ringtones,
logos, picture messages, wallpapers and games from our website.
Downloads include popular Indian content, such as Indi-pop
ringtones, Indian cricket team logos and wallpapers featuring
Bollywood movie stars. In addition, users have the ability to
customize and download images of their choice.
 
    
    Contests. Users can participate in contests in which they can win
prizes by correctly answering questions sent to them by SMS. Users
are charged for the cost of each outgoing SMS message that
responds to a question.
  36




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##### Table of Contents




    
    Services. We offer users a variety of mobile phone related
services by SMS, such as the ability to search, seek and interact
with other users, play interactive games, and receive jokes and
astrological predictions. Users are charged for the cost of each
outgoing SMS message requesting the service. We also provide
enterprise solutions through access to short code services on
keywords using 57333.
 
    
    News and Information. Users can stay updated on current events by
receiving cricket scores, news and stock quotes by an SMS message.
Users are charged for the cost of each outgoing SMS message
requesting the news and information. Information search of utility
services such as railways, air fares and travel visa application
and status of many countries is also made available on mobile
phones.
 
    
    Subscription. Subscription based services have been introduced
where customers can choose to subscribe for a monthly/weekly/daily
and on demand service for receiving SMS based information, jokes,
or astrology related services as well as proprietary rediff
services such as email alerts, job alerts and stock alerts for a
fixed fee.
 
    
    E-mail. Rediffmail subscribers can receive, read and reply to
e-mails by SMS. Users are charged a fee for each outgoing SMS
which contains the e-mail.
 
    
    SMS Keywords:We have recently launched a new service through which advertisers can
purchase a specific keyword for a period of time. This keyword can be advertised in their
marketing campaigns and promotions. This allows advertisers, both large and small, to reach
out to and interact with the vast majority of the Indian consumers that have access to a
mobile phone at a very low cost,
  Online Shopping
     37




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Local deals services
  Our Revenue Sources
  Advertising
    Fee-based services
      38




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Our Infrastructure
 Technology
     Advertising
     39




---



##### Table of Contents



Online Shopping
     Electronic Payments
    United States Publishing Business
  Rediff India Abroad website
   40




---



##### Table of Contents



India Abroad
    India in New York
  Competition
 Online
      41




---



##### Table of Contents



Print
  Intellectual Property
       42




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Facilities
 India
   United States
  Seasonality
  Legal Proceedings
 Action Relating to Access to Pornographic Material
 Sunil
N. Phatarphekar & Ors. v. Abhinav Bhatt and Ors.
   43




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Actions Relating to Trademark Infringement
   Actions Relating to Patent Infringement
   44




---



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Other proceedings
  Subsidiaries
     45




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
      Our reportable business segments are:
 
    
    India Online business, which primarily includes revenues from
advertising and fee-based services. Advertising includes revenues
largely from display and performance based advertising and to a lesser
extent from sponsorships. Fee-based services include revenues from
online shopping, subscription services and mobile value-added
services.
    
    US Publishing business, which primarily includes revenues from the
Rediff India Abroad website and revenues from the print newspapers
India Abroad and India in New York.
  46




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Critical accounting policies and the use of estimates
   Revenue Recognition
 India Online business
      47




---



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US Publishing business
   Allowances for doubtful accounts receivable and other recoverables
  Depreciation and amortization
  Goodwill
   48




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Current Trends and Business Outlook
        49




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Acquisition of Vubites India Private Limited
    
    
    web-based tools that small merchants can use to create low cost TV ads in mpeg
2 format, which, play on television directly,
 
    
    an online media planning tool where the advertisers can create their media plan
without any assistance and
 
    
    a technology to insert TV ads at the city level.
   Operating Results
 Results of our reportable business segments were as follows (amount in US$ million):
 2009
    
    
    2010
    
    
    2011India
    
    
    US
    
    
    
    
    
    
    India
    
    
    US
    
    
    
    
    
    
    India
    
    
    USOnline
    
    
    Publishing
    
    
    
    
    
    
    Online
    
    
    Publishing
    
    
    
    
    
    
    Online
    
    
    PublishingBusiness
    
    
    Business
    
    
    Total
    
    
    Business
    
    
    Business
    
    
    Total
    
    
    Business
    
    
    Business
    
    
    TotalRevenues from
external customers:Advertising
    
    
    14.0
    
    
    
    5.3
    
    
    
    19.3
    
    
    
    10.6
    
    
    
    3.8
    
    
    
    14.4
    
    
    
    13.8
    
    
    
    3.6
    
    
    
    17.4Fee based services
    
    
    5.7
    
    
    
    0.4
    
    
    
    6.1
    
    
    
    4.1
    
    
    
    0.3
    
    
    
    4.4
    
    
    
    4.1
    
    
    
    0.3
    
    
    
    4.4Total revenues
    
    
    19.7
    
    
    
    5.7
    
    
    
    25.4
    
    
    
    14.7
    
    
    
    4.1
    
    
    
    18.8
    
    
    
    17.9
    
    
    
    3.9
    
    
    
    21.8Cost of revenues
    
    
    7.5
    
    
    
    2.9
    
    
    
    10.4
    
    
    
    7.6
    
    
    
    2.5
    
    
    
    10.1
    
    
    
    8.3
    
    
    
    2.5
    
    
    
    10.8Segment Results
    
    
    12.2
    
    
    
    2.8
    
    
    
    15.0
    
    
    
    7.1
    
    
    
    1.6
    
    
    
    8.7
    
    
    
    9.6
    
    
    
    1.4
    
    
    
    11.0
  50




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Fiscal Year Ended March 31, 2011 compared to Fiscal Year Ended March 31, 2010
 Revenues
  India O nline business
  U.S. Publishing business
   Cost of revenues
  India online business
    US Publishing business
   51




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Segment results
  India Online business
  U.S. Publishing business
  Sales and marketing expenses
   Product development expenses
    52




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Depreciation and amortization expenses
 
 General and administrative expenses
  Long-lived assets impairment
  Foreign exchange gain or (loss)
 
 Other income (expenses), net
  Interest income
  Investment impairment
  Equity in net earnings of affiliate
 
  53




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Net income
 
 Fiscal Year Ended March 31, 2010 compared to Fiscal Year Ended March 31, 2009
 Revenues
  India O nline business
  US Publishing business
   Cost of revenues
  India online business
    54




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US Publishing business
   Segment results
  India Online business
  US Publishing business
  Sales and marketing expenses
  Product development expenses
  Depreciation and amortization expenses
 
  55




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General and administrative expenses
  Goodwill impairment
  Long-lived assets impairment
  Foreign exchange gain or (loss)
 
 Other income (expenses), net
  Interest income
  Equity in net earnings of affiliate
  Net income
   56




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Liquidity and Capital Expenditures
     Cash Flows
 For the Fiscal Year Ended March 31,2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Net cash generated from operating activities
    
    
    4,940,766
    
    
    
    982,659
    
    
    
    495,637Net cash used in investing activities
    
    
    (6,899,815
    )
    
    
    (3,883,854
    )
    
    
    (7,278,620
    )Net cash used in financing activities
    
    
    
    
    
    
    (3,106,447
    )
    
    
    (1,320,158
    )Effect of exchange rate changes on cash
    
    
    (11,552,468
    )
    
    
    5,176,783
    
    
    
    334,952Net decrease in cash and cash equivalents
    
    
    (1,959,049
    )
    
    
    (6,007,642
    )
    
    
    (8,103,141
    )
 Fiscal Year Ended March 31, 2011
    57




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Fiscal Year Ended March 31, 2010
     Fiscal Year Ended March 31, 2009
     58




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Contractual Obligations
  CapitalYear ended March 31,
    
    Operating leases
    
    
    commitmentsUS$
    
    
    US$2012
    
    
    626,117
    
    
    
    109,0172013
    
    
    346,649
    
    
    
    2014
    
    
    211,450
    
    
    
    2015
    
    
    217,794
    
    
    
    2016
    
    
    224,328
    
    
    
    and there after
    
    
    509,800
    
    
    
    Total payments
    
    
    2,136,138
    
    
    
    109,017
 Capital Expenditures
   Dividends
    59




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Income Tax Matters
  2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Loss before income taxes and equity in net earnings
of affiliates
    
    
    (11,084,921
    )
    
    
    (7,575,383
    )
    
    
    (5,769,028
    )Indian statutory income tax rate
    
    
    33.99
    %
    
    
    33.99
    %
    
    
    33.218
    %Expected income tax expense (benefit)
    
    
    (3,767,765
    )
    
    
    (2,574,873
    )
    
    
    (1,916,356
    )Tax effect of:-Adjustments to reconcile expected income tax
expense to reported income tax expense:Employee stock-based compensation
    
    
    395,857
    
    
    
    283,210
    
    
    
    185,741Goodwill impairment
    
    
    1,806,229
    
    
    
    
    
    
    
    Change in valuation allowance
    
    
    1,545,471
    
    
    
    2,401,938
    
    
    
    1,544,729Tax in foreign jurisdictions
    
    
    1,010
    
    
    
    (149,127
    )
    
    
    (26,208
    )Others
    
    
    59,198
    
    
    
    68,852
    
    
    
    229,373Income tax expense
    
    
    40,000
    
    
    
    30,000
    
    
    
    17,279
    Market Risks
 Foreign Currency Exchange Rate Risk
   As of March 31, 2011(in US$ thousands)Accounts payable in U.S. dollars
    
    
    1,623Accounts receivable in U.S. dollars, net of allowance
    
    
    709Cash balances held in U.S. dollars
    
    
    295Net foreign currency exchange exposure
    
    
    619
  60




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Interest Rate Risk
  Off-balance Sheet Arrangements
  New Accounting Pronouncements
 Comprehensive Income
 Fair Value Measurements and Disclosures
 IntangiblesGoodwill and
Other
   61




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Fair Value Measurements and Disclosures
    62




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MANAGEMENT
  Name
    
    Age
    
    PositionAjit Balakrishnan(1)(2)
    
    
    63
    
    
    Chairman and Managing DirectorJayesh Sanghrajka
    
    
    37
    
    
    Vice President FinanceDiwan Arun Nanda(1)(2)
    
    
    68
    
    
    DirectorSunil N. Phatarphekar(1)(2)(3)
    
    
    47
    
    
    DirectorAshok Narasimhan(1)
    
    
    63
    
    
    DirectorSridar Iyengar(1)(3)
    
    
    64
    
    
    DirectorRashesh C. Shah(1) (3)
    
    
    47
    
    
    Director
 (1)
    
    Member of the Board of Directors(2)
    
    Member of the Compensation Committee(3)
    
    Member of the Audit Committee Ajit Balakrishnan
 Jayesh Sanghrajka
 Diwan Arun Nanda .
 Sunil N. Phatarphekar
 Ashok Narasimhan
  63




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Sridar A. Iyengar
 Rashesh Shah
 Board Composition
  
    
    Ajit Balakrishnan, Diwan Arun Nanda and Rediffusion Holdings
Private Limited (earlier called Rediffusion Advertising Private
Limited), are entitled to appoint and have appointed Mr.
Balakrishnan as Director on the Board and Chairman of Rediff.com
India Ltd. so long as they hold, singly or jointly, not less than
10.0% of the issued, subscribed and paid up capital of Rediff.com
India Ltd. Mr. Balakrishnan serves an indefinite term and is not
required to retire by rotation.
 
    
    The remaining directors on the Board of Directors are
non-permanent directors who are appointed by shareholders and
retire by rotation. Diwan Arun Nanda and Sunil Phatarphekar
retired by rotation and were re-elected by the shareholders at our
last annual general meeting held on September 14, 2010. Sridar
Iyengar and Ashok Narasimhan will retire by rotation at our next
Annual General Meeting of shareholders, which is scheduled to be
held on or before September 30, 2011.
  64




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Code of Ethics
   Audit Committee
   Audit Committee Financial Expert
  Compensation Committee
  NASDAQ Corporate Governance Requirements
    65




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(i) Rule 5250(d)(2) and Rule 5250 (d)(3)  Distribution of quarterly and interim reports
  (ii) Rule 5605(b)(1)  Independent Directors
  (iii) Rule 5605(b)(2)  Executive sessions of Independent Directors
  (iv) Rule 5605(d)  Compensation of Officers
     66




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(v) Rule 5605(e)  Nomination of Directors
  (vi) Rule 5620(c)  Quorum
  (vii) Rule 5620(b)  Solicitation of Proxies
   Employees
  As at March 31,Department
    
    2009
    
    
    2010
    
    
    2011Technology and Product Development
    
    
    112
    
    
    
    106
    
    
    
    119Sales and Marketing
    
    
    92
    
    
    
    88
    
    
    
    79Editorial
    
    
    64
    
    
    
    67
    
    
    
    80General & Administration
    
    
    30
    
    
    
    32
    
    
    
    33Creative
    
    
    18
    
    
    
    16
    
    
    
    17Production & Circulation
    
    
    7
    
    
    
    7
    
    
    
    7Total
    
    
    323
    
    
    
    316
    
    
    
    335
 Compensation
   67




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Name
    
    Salary and other compensation (US$)Ajit Balakrishnan
    
    
    200,000
    (1)Jayesh Sanghrajka
    
    
    101,380
    (2)Sridar A. Iyengar
    
    
    25,000
    (1)Sunil Phatarphekar
    
    
    20,000
    (1)
 (1)
    
    Each of Mr. Balakrishnan, Mr. Iyengar and Mr. Phatarphekar receive a
salary and/or other compensation from Rediff Holdings, Inc., our
wholly-owned U.S.-incorporated subsidiary, in their capacity as
directors of Rediff Holdings, Inc. None of them receive any salary
from Rediff.com India Limited.(2)
    
    Jayesh Sanghrajka has been granted 10,000 options (equivalent to 5,000
equity shares) under ADR linked Employee Stock option Plan 2006 at
exercise price of $2.95. The Plan will expire in September 2019. Employee Benefit Plans
 Employee Stock Option Plan 1999
   68




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Associate Stock Option Plan 1999
    2002 Stock Option Plan
   69




---



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2004 Stock Option Plan
     70




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2006 Employee Stock Option Plan
   2006 ADR Linked Employee Stock Option Plan
    71




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Retirement Plans
 Gratuity
   2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Change in benefit obligationBenefit obligation at the beginning of the year
    
    
    286,524
    
    
    
    288,136
    
    
    
    349,624Acquisition
    
    
    
    
    
    
    
    
    
    
    7,874Actuarial loss (gain)
    
    
    9,659
    
    
    
    (19,112
    )
    
    
    (16,687
    )Service cost
    
    
    60,933
    
    
    
    63,183
    
    
    
    74,660Interest cost
    
    
    28,214
    
    
    
    32,683
    
    
    
    36,731Benefits paid
    
    
    (27,888
    )
    
    
    (53,452
    )
    
    
    (22,851
    )Effect of exchange rate changes
    
    
    (69,306
    )
    
    
    38,186
    
    
    
    5,243Benefit obligation at the end of the year
    
    
    288,136
    
    
    
    349,624
    
    
    
    434,594
   2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Service cost
    
    
    60,933
    
    
    
    63,183
    
    
    
    74,660Interest cost
    
    
    28,214
    
    
    
    32,683
    
    
    
    36,731Recognized net actuarial loss (gain)
    
    
    9,659
    
    
    
    (19,112
    )
    
    
    (16,687
    )Net gratuity cost
    
    
    98,806
    
    
    
    76,754
    
    
    
    94,704
  2009
    
    
    2010
    
    
    2011Discount rate
    
    9.00%
    
    
    9.10%
    
    
    9.00%Rate of increase in compensation
    
    10% for first 3
years and 7%
thereafter
    
    
    10% for first 2
years and 7%
thereafter
    
    
    10% for first year
and 7% thereafter
  72




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Year ending March 31,
    
    US$2012
    
    
    35,2522013
    
    
    41,2322014
    
    
    56,6632015
    
    
    56,0582016
    
    
    71,8032017-2021
    
    
    523,830
  Provident Fund
  Compensated Absences
   73




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RELATED PARTY TRANSACTIONS
  Repurchase of equity shares for treasury
  Advertising Revenues
  Product Development Expenses
   Purchase of Convertible Promissory Note
   As of March 31,2010
    
    
    2011US$
    
    
    US$Account receivable for advertising revenues
    
    
    154,852
    
    
    
    341,230Accounts payable for product development expense
    
    
    
    
    
    
    7,226Convertible promissory notes and accrued interest thereon
    
    
    1,316,919
    
    
    
    
 Acquisition
of business
   74




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EXCHANGE CONTROLS
 Restrictions on Conversion of Rupees
    Restrictions on Sale of the Equity Shares Underlying the ADSs and for Repatriation of Sale Proceeds
   75




---



##### Table of Contents



Restriction on Foreign Ownership and
Indian Securities
  An Active or Liquid Market for Our ADSs is Not Assured
  Restriction on Debt Issues
   
    
    All-in cost ceiling does not exceed 300 basis points over the
six-month LIBOR for the respective currency of borrowing, in the
case of ECBs with a minimum average maturity of three to five
years, and 500 basis points over the six-month LIBOR for the
respective currency of borrowing, in the case of ECBs with a
minimum average maturity of more than five years. Borrowers
proposing to avail of ECBs beyond the permissible all-in-cost
ceilings must seek prior RBI approval.
 
    
    Proceeds from ECBs may only be raised for permitted purposes, such
as capital investments, overseas direct investment in a joint
venture or a wholly-owned foreign subsidiary. ECB proceeds cannot
be used for on-lending, for investing in capital markets and real
estate, for working capital and general corporate purposes or for
refinancing existing domestic loans.
  76




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##### Table of Contents




    
    ECBs may be secured by assets of the borrower subject to
compliance with the relevant regulations issued by the Reserve
Bank of India.
 
    
    Pre-payment or redemption of ECBs prior to maturity in amounts up
to US$500 million is permitted without prior Reserve Bank of India
approval, provided that any such prepayment and redemption can
only be undertaken if the same complies with the stipulated
average maturity period of three years, in the case an ECB of up
to US$20 million, and five years, in the case of an ECB of up to
US$500 million.
 
    
    Preference shares and convertible debentures that are not
mandatorily and fully convertible into equity shares would be
treated as ECBs for all purposes under the law.
    Fungibility of ADSs
  
    
    the shares of the Indian company are purchased on a recognized stock exchange in India;
    
    the shares of the Indian company are purchased on a recognized stock exchange with the
permission of the domestic custodian for the ADSs and such shares are deposited with the
custodian after purchase;
    
    the Indian company has authorized the custodian to accept shares from non-resident
investors for
re-issuance of ADSs;
    
    the number of shares of the Indian company so purchased does not exceed the ADSs
converted
into underlying shares; and
    
    compliance with the provisions of the ADR Scheme and the guidelines issued thereunder.
  77




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Sponsored ADR Schemes
  
    
    The facility to sell the shares would be available pari passu to all categories of shareholders.
 
    
    The sponsoring company whose shareholders propose to divest
existing shares in the overseas market through issue of ADRs will
give an option to all its shareholders indicating the number of
 shares to be divested and mechanism how the price will be
determined under the ADR norms. If the shares offered for
divestment are more than the pre-specified number to be divested,
 shares would be accepted from the existing shareholders in
proportion to their existing shareholdings.
 
    
    The proposal for divestment of the shares would have to be
approved by a special resolution of the Indian company.
 
    
    The proceeds of the ADR issue raised abroad shall be repatriated
into India within a period of one month from the closure of the
issue. However, the proceeds of the ADR issue can also be retained
abroad to meet the future foreign exchange requirements of the
company.
  78




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TRADING MARKET
 General
    Annual and Quarterly high-low price history:
 Price Per ADS(in U.S. dollars)High
    
    
    LowFiscal year ended March 31, 2007
    
    
    25.00
    
    
    
    11.16Fiscal year ending March 31, 2008
    
    
    27.50
    
    
    
    6.46Fiscal year ending March 31, 2009
    
    
    9.77
    
    
    
    1.40Fiscal year ending March 31, 2010First Quarter (April 2009 to June 2009)
    
    
    4.50
    
    
    
    1.75Second Quarter (July 2009 to September 2009)
    
    
    3.99
    
    
    
    2.16Third Quarter (October 2009 to December 2009)
    
    
    3.84
    
    
    
    2.50Fourth Quarter (January 2010 to March 2010)
    
    
    2.98
    
    
    
    2.25Fiscal year ending March 31, 2011First Quarter (April 2010 to June 30, 2010)
    
    
    3.42
    
    
    
    1.97Second Quarter (July 2010 to September 30, 2010
    
    
    6.25
    
    
    
    1.69Third Quarter (October 2010 to December 2010)
    
    
    5.64
    
    
    
    2.90Fourth Quarter (January 2011 to March 2011)
    
    
    9.90
    
    
    
    4.95Fiscal year ending March 31, 2012First Quarter (April 2011 to June 30, 2011)
    
    
    17.98
    
    
    
    7.13Second Quarter (July 2011 to August 31, 2011)
    
    
    14.48
    
    
    
    6.75
 Monthly high-low price history for previous six months:
 Price Per ADS(in U.S. dollars)Previous six months
    
    High
    
    
    LowMarch 2011
    
    
    8.26
    
    
    
    5.29April 2011
    
    
    17.98
    
    
    
    7.13May 2011
    
    
    16.25
    
    
    
    9.68June 2011
    
    
    12.09
    
    
    
    7.35July 2011
    
    
    14.48
    
    
    
    9.11August 2011
    
    
    11.09
    
    
    
    6.75
  79




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RESTRICTION ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
    ADR Guidelines
   Foreign Direct Investment
      80




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##### Table of Contents



Transfer of Shares of an Indian company by a Person Resident outside India
      The following investments require the prior permission of the FIPB:(i)
    
    investments in excess of specified sectoral caps or in sectors in which foreign direct
investment is not permitted or in sectors which specifically require approval of the FIPB;(ii)
    
    The activity of the issuer company does not require an industrial license under the
provisions of the Industries (Development & Regulation) Act, 1951 or under the location policy
notified by Government of India under the Industrial Policy of 1991, as amended from time to
time.(iii)
    
    All proposals relating to the acquisition of existing shares of an Indian company by a
foreign investor (including a non-resident Indian) beyond specified sectoral caps or in
sectors in which FDI is not permitted or in case such proposals do not comply with certain
RBI pricing guidelines.
   81




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##### Table of Contents



(i)
    
    business of chit fund;(ii)
    
    nidhi company;(iii)
    
    agricultural or plantation activities;(iv)
    
    real estate business or construction of farm houses; or(v)
    
    trading in Transferable Development Rights (TDRs).
   a)
    
    retail trading (except single brand product retailing);b)
    
    atomic energy;c)
    
    lottery business including Government/private lottery, online lotteries, etc;d)
    
    gambling and betting including casions etc;e)
    
    Activities/sectors not opened to private sector investment;f)
    
    Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or
of tobacco substitutes; andg)
    
    agriculture (excluding floriculture, horticulture, development of seeds,
animal husbandry, pisiculture and cultivation of vegetables, mushrooms etc. under
controlled conditions and services related to agro and allied sectors) and plantations
(other than tea plantations).
   Pricing
   82




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Portfolio Investment by Non-Resident Indians
  which were formerly classified as Overseas Corporate Bodies
 Portfolio Investment by Foreign Institutional Investors
   83




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##### Table of Contents




    
    a public offer, where the price of the shares to be issued is not
less than the price at which the shares are issued to the
residents; or
 
    
    by way of a private placement, where the price is not less than
the price arrived at in terms of SEBI guidelines or guidelines
issued by the erstwhile Controller of Capital Issues, as
applicable.
  (a)
    
    any entity that is regulated, authorized or supervised by a central bank or
any other similar body in any country, state or authority, provided that the entity
must not only be authorized but also be regulated by the aforesaid;(b)
    
    any entity that is regulated, authorized or supervised by a securities or
futures commission in any country, state or territory; and(c)
    
    any entity which is a broad based fund or portfolio, incorporated or
established outside India or is a proprietary fund of a registered foreign
institutional investor or university fund, endowment, foundation, charitable trust or
charitable society whose investments are managed by a person covered by (a) or (b)
above.
   84




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Takeover and Insider Trading Regulations
  Qualified Institutional Placement under the SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009
  
    
    Issuers. A company whose equity shares are listed on an Indian
stock exchange with nationwide trading terminals and which is in
compliance with the prescribed requirements of minimum public
shareholding in its listing agreement will be eligible to raise
funds in the domestic market by placing securities with Qualified
Institutional Buyers, or QIBs.
  
    
    Public financial institution as defined in Section 4A of the Companies Act;
    
    Scheduled commercial banks;
    
    Mutual funds;
    
    FIIs and sub-account (other than a sub-account which is a foreign corporate or
foreign individual) registered with SEBI;
    
    Multilateral and bilateral development financial institutions;
    
    Venture capital funds registered with SEBI;
    
    Foreign venture capital investors registered with SEBI;
  85




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##### Table of Contents




    
    State industrial development corporations;
    
    Insurance companies registered with the Insurance Regulatory and Development
Authority;
    
    Provident funds with minimum corpus of Rs.250 million;
    
    Pension funds with minimum corpus of Rs.250 million; or National Investment Fund
set up by the Government of India
    
    National Investment Funds; and
    
    Insurance funds set up and managed by Army, Navy or Air Force of the Union of India.
 
    
    Securities: Securities which can be issued through the QIP program
are equity shares, non-convertible debt instruments along with
warrants and convertible securities other than warrants
(hereinafter referred to as eligible securities). A security
which is convertible into or exchangeable with equity shares at a
later date, may be converted or exchanged into equity shares at
any time after allotment of security but not later than sixty
months from the date of allotment. The eligible securities must be
fully paid up at the time of allotment.
 
    
    Investors/Allottees: The specified securities can be issued only
to QIBs, as defined above. Such QIBs must not be promoters or
related to promoters of the issuer, either directly or indirectly.
Each placement of the eligible securities issued through the QIP
program shall be on a private placement basis, in compliance with
the requirements of the Companies Act and the SEBI (Issue of
Capital and Disclosure Requirements) Regulations, 2009. A minimum
of 10% of the securities in each placement must be allotted to
mutual funds. If no mutual fund agrees to take up the minimum
portion or any part thereof, such minimum portion or part thereof
may be allotted to other QIBs.
 
    
    Issue Size: The aggregate funds that can be raised through the QIP
program in one financial year shall not exceed five times of the
net worth of the issuer as of the end of its previous financial
year.
 
    
    Placement Document: The issuer shall prepare a placement document
containing all the relevant and material disclosures. There will
be no pre-issue filing of the placement document with SEBI. The
placement document will be placed on the websites of the relevant
Indian stock exchanges and of the issuer, with appropriate
disclaimer to the effect that the placement is meant only for QIBs
on a private placement basis and is not an offer to the public.
 
    
    Pricing: The price of the shares issued under the QIP program must
not be less than the average of the weekly high and low of the
closing prices of the shares quoted on the stock exchange during
the two weeks preceding the relevant date. Relevant date has
been defined to mean the date of the meeting in which the Board of
the company or the Committee of Directors duly authorized by the
Board of the company decides to open the proposed issue. The issue
price is subject to adjustment in case of corporate actions such
as stock splits, rights issues and bonus issues.
   86




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PRINCIPAL SHAREHOLDERS
  
    
    each of the executive officers named in the summary compensation
table and each of our directors;
 
    
    all of our directors and executive officers as a group; and
 
    
    each person or group of affiliated persons who is known by us to
beneficially own 5.0% or more of our Equity Shares.
 Shares Beneficially
    
    
    Shares Beneficially
    
    
    Shares BeneficiallyOwned
    
    
    Owned
    
    
    Owned As of May 29,As of June 30, 2011
    
    
    As of June 30, 2010
    
    
    2009Percent of
    
    
    
    
    
    Percent of
    
    
    
    
    
    Percent ofNumber of
    
    
    total Equity
    
    
    Number of
    
    
    total Equity
    
    
    Number of
    
    
    total EquityEquity
    
    
    Shares
    
    
    Equity
    
    
    Shares
    
    
    Equity
    
    
    SharesName of Beneficial Owner
    
    Shares held
    
    
    outstanding
    
    
    Shares held
    
    
    outstanding
    
    
    Shares held
    
    
    outstandingOfficers and DirectorsAjit Balakrishnan (1)(1A) (1B) (1C) (1D)
    
    
    3,463,982
    
    
    
    23.42
    %
    
    
    3,463,982
    
    
    
    23.70
    %
    
    
    3,463,982
    
    
    
    23.70
    %Diwan Arun Nanda(1)
    
    
    3,444,742
    
    
    
    23.29
    %
    
    
    3,444,742
    
    
    
    23.57
    %
    
    
    3,444,742
    
    
    
    23.57
    %All Directors and Officers as a Group
(2 persons)
    
    
    4,720,722
    
    
    
    31.92
    %
    
    
    4,720,722
    
    
    
    32.08
    %
    
    
    4,720,722
    
    
    
    32.08
    %Other Shareholders holding more than 5%
shareholdingRediffusion Holdings Private Limited(1)
    
    
    2,200,002
    
    
    
    15
    %
    
    
    2,200,002
    
    
    
    15
    %
    
    
    2,200,002
    
    
    
    15
    %Draper-India International
    
    
    2,200,000
    
    
    
    15
    %
    
    
    2,200,000
    
    
    
    15
    %
    
    
    2,200,000
    
    
    
    15
    %Queenswood Investments Ltd
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,008,000
    
    
    
    14
    %Edwlweiss Finance and Investment Limited
    
    
    1,523,000
    
    
    
    10.30
    %
    
    
    1,258,000
    
    
    
    9
    %
    
    
    
    
    
    
    Rediff.com India limited Employee Trust (1D)
    
    
    1,015,000
    
    
    
    6.86
    %
    
    
    750,000
    
    
    
    5
    %
    
    
    
    
    
    
    
 Notes:(1)
    
    Includes 2,200,002 Equity Shares held by Rediffusion Holdings Private
Limited, previously called Rediffusion Advertising Private Limited, of
which Ajit Balakrishnan is a 50.0% shareholder and Director and Diwan
Arun Nanda is a 50.0% shareholder and Director.(1A)
    
    Includes 144,540 Equity Shares held by Quintrol Technologies Private
Limited, of which Ajit Balakrishnan is a director as well as a 99.9%
stockholder.(1B)
    
    Includes 5,300 ADSs of the Company held by Mr. Ajit Balakrishnan.  87




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##### Table of Contents



(1C)
    
    Includes 33,200 ADSs of the Company held by A B Technologies, LLC a
New York limited liability company, with respect to which Mr.
Balakrishnan holds a position as the Managing Member as well as 99.9%
stockholder.(1D)
    
    The trustees of the trust consist of 3 executive officers of Rediff.
Mr. Balakrishnan in his capacity as the Chairman of Rediff has the
power to remove and appoint the trustees of the trust, and therefore
may be deemed to be the beneficial owner of the shares owned by the
trust. Mr. Balakrishnan disclaims beneficial ownership of the shares
owned by the trust.      88




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TAXATION
 Indian Tax
  The following summary is not intended to constitute a complete analysis of the tax
consequences under Indian law of the acquisition, ownership and sale of our ADSs and our Equity
Shares by non-resident investors. Potential investors should, therefore, consult their own tax
advisers on the tax consequences of such acquisition, ownership and sale, including specifically
the tax consequences under Indian law, the law of the jurisdiction of their residence, any tax
treaty between India and their country of residence, and in particular the application of the
regulations implementing the Section 115AC regime.
 Residence
  Taxation of Distributions
  Taxation on Sale of ADSs
   89




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Taxation on Redemption of ADSs
    Taxation on Sale of Equity Shares
      90




---



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Rights
   Stamp Duty
   91




---



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Other Taxes
  Service Tax
  United States Federal Income Tax Considerations
      92




---



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General
     Distributions
   93




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##### Table of Contents



Sale or Other Disposition of ADSs or Equity Shares
  Passive Foreign Investment Company
   
    
    the gain or excess distribution would be allocated ratably over your
holding period for ADSs or Equity Shares;
    
    the amount allocated to the taxable year in which the gain or excess
distribution was realized, and any taxable year prior to the first
taxable year that you held our ADSs or our Equity Shares in which we
are classified as a PFIC (a pre-PFIC year), would be taxable as
ordinary income; and
    
    the amount allocated to each prior year, other than the current year
and any pre-PFIC year, would be subject to (i) tax at the highest tax
rate in effect for that year and (ii) an interest charge generally
applicable to underpayments of tax based on the amount of the tax
deferred during the time in which you owned ADSs or Equity Shares.
  94




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95




---



##### Table of Contents



CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Managements Annual Report on Internal Control over Financial Reporting
     96




---



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Changes in Internal Controls over Financial Reporting
   97




---



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PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Fiscal year ended March 31,2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Audit Fee
    
    
    160,448
    
    
    
    156,544
    
    
    
    204,051Audit-Related
Fees (in respect of certain review services)
    
    
    
    
    
    
    29,617
    
    
    
    Tax Fees
    
    
    16,476
    
    
    
    20,097
    
    
    
    26,391Total
    
    
    176,924
    
    
    
    206,258
    
    
    
    230,442
     98




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PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASER
 MaximumTotal
    
    
    number (ornumber of
    
    
    approximateshares
    
    
    dollar value) ofpurchased as
    
    
    shares thatpart of
    
    
    may yet beTotal
    
    
    
    
    
    
    publicly
    
    
    purchasednumber of
    
    
    Average
    
    
    announced
    
    
    under theShares
    
    
    price paid
    
    
    plan or
    
    
    plans orPeriod
    

purchased (1)
    
    
    per share
    
    
    programs
    
    
    programsUS$
    
    
    
    
    
    
    US$Month # 12 (March 2010)
    
    
    750,000
    
    
    
    4.08
    
    
    
    
    
    
    
    5,538,325Month # 09 (December 2010)
    
    
    265,000
    
    
    
    5.16
    
    
    
    
    
    
    
    Total
    
    
    1,015,000
 (1)
    
    Our ordinary share to ADS ratio is one ordinary share for two ADS.(2)
    
    Our board of directors authorized US$8,861,320 under the share repurchase program on February
23, 2010.(3)
    
    Considering the current market price of the ADR, our Board of Director in their meeting held on
July 21, 2011 abandoned the said share repurchase program.  99




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PRESENTATION OF FINANCIAL INFORMATION
    100




---



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ADDITIONAL INFORMATION
 Memorandum and Articles of Association
 Objectives and Purposes
  Description of Share Capital
  Share Capital
   Shareholder Rights Agreements
   101




---



##### Table of Contents



Amended and Restated Shareholders Rights Agreement
  Registration Rights
  
    
    More than two such registrations or qualifications pursuant to
such demand registration rights;
 
    
    a registration or qualification prior to the earlier of December
31, 2002, or six months after the effective date of any Indian
law, regulation or other governmental order which allows our
Equity Shares to be offered to the public on an Indian stock
exchange; or
 
    
    a registration for a period not to exceed 120 days, if our Board
of Directors has made a good faith determination that such
registration would be detrimental to us or our shareholders.
  
    
    More than once in a twelve month period;
 
    
    unless the registration relates to securities that are valued in excess of US$1,000,000; or
 
    
    if our Board of Directors has made a good faith determination that
such registration would be detrimental to us or our shareholders.
  Other Rights
  Dividends
   102




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
    
    the rate of the dividend to be declared shall not exceed 10.0% of
the companys paid up capital or the average of the rate at which
dividends were declared by the company in the previous five years,
whichever is less;
 
    
    the total amount to be drawn from the accumulated profits earned
in the previous years and transferred to the reserves shall not
exceed an amount equivalent to 10.0% of the companys paid up
capital and free reserves, and the amount so drawn is to be used
first to set off the losses incurred in the fiscal year before any
dividends in respect of preference or equity shares are declared;
and
 
    
    the balance of reserves after withdrawals shall not fall below
15.0% of the companys paid up capital.
 Bonus Shares
  Preemptive Rights and Issue of Additional Shares
   103




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Annual General Meetings of Shareholders
    Voting Rights
       104




---



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Register of Shareholders; Record Dates; Transfer of Shares
      105




---



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Disclosure of Ownership Interest
  Audit and Annual Report
   Company Acquisition of Equity Shares
   106




---



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Liquidation Rights
  Material Contracts
   107




---



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DOCUMENTS ON DISPLAY
  
      108




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EXHIBIT INDEX
 Exhibit No.
    
    Description of Document*1.1
    
    Articles of Association, as amended.*1.2
    
    Memorandum of Association, as amended.*1.3
    
    Certificate of Incorporation, as amended.*2.1
    
    Form of Deposit Agreement among Rediff.com, Citibank, N.A.,
and holders from time to time of American Depository Receipts
issued thereunder (including as an exhibit, the form of
American Depository Receipt).*2.2
    
    Rediff.coms specimen certificate for equity shares.*2.3
    
    Amended and Restated Shareholder Rights Agreement dated
February 24, 2000 between Rediff.com and the shareholders of
Rediff.com.*4.1
    
    1999 Employee Stock Option Plan.*4.2
    
    1999 Associate Stock Option Plan.***4.3
    
    2002 Stock Option Plan.****4.4
    
    2004 Stock Option Plan.*******4.5
    
    2006 Employee Stock Option Plan.********4.6
    
    2006 ADR Linked Employee Stock Option Plan.*4.7
    
    Form of Indemnification Agreement.*******4.8
    
    Indemnification Agreement dated November 8, 2005 between
Rediff.com and Sridar A. Iyengar.*******4.9
    
    Indemnification Agreement dated November 8, 2005 between
Rediff.com and Ashok Narasimhan.*******4.10
    
    Indemnification Agreement dated November 8, 2005 between
Rediff.com and Pulak Chandan Prasad.*******4.11
    
    Indemnification Agreement dated November 8, 2005 between
Rediff.com and Joy Basu.*4.12
    
    Sublease dated July 5, 1999 between Shreenathji Balaji
Computech Private Limited and Rediff.com.*4.13
    
    Letter Agreement dated December 28, 1998 between
Rediffusion-Dentsu, Young & Rubicam Limited and Rediff.com.*4.14
    
    Promoters Agreement dated January 9, 1996 between Ajit
Balakrishnan and Diwan Arun Nanda.**4.15
    
    Stock Purchase Agreement among Rediff.com, ValuCom and
shareholders of ValuCom dated March 21, 2001.**4.16
    
    Stock Purchase Agreement among Rediff.com, India Abroad and
shareholders of India Abroad dated March 21, 2001, as amended
on April 27, 2001.**4.17
    
    Amended and Restated Agreement and Plan of Reorganization
among Rediff.com, Thinkindia.com, Inc., Rediff Holdings, Inc.,
the principal stock holders of Think India and certain other
parties thereto dated February 27, 2001.*****4.18
    
    Agreement for sale of assets of Value Communications
Corporation dated April 8, 2004.******4.19
    
    Underwriting Agreement dated November 9, 2005 between
Rediff.com and Deutsche Bank Securities Inc.12.1
    
    Certification of Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.12.2
    
    Certification of Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.13.1
    
    Certification of Principal Executive Officer pursuant to 18.
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.13.2
    
    Certification of Principal Financial Officer pursuant to 18.
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.15.1
    
    Consent of Independent Registered Public Accounting Firm
  109




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*
    
    Incorporated by reference to exhibits filed with the Registrants
Registration Statement on Form F-1 (File No. 333-37376).*
    
    Incorporated by reference to exhibits filed with the Registrants
Form 20-F for the fiscal year ended March 31, 2001.***
    
    Incorporated by reference to exhibits filed with the Registrants
Form 20-F for the fiscal year ended March 31, 2003.****
    
    Incorporated by reference to exhibits filed with the Registrants
Form S-8 filed on December 30, 2004.*****
    
    Incorporated by reference to exhibits filed with the Registrants
Form 20-F for the fiscal year ended March 31, 2004.******
    
    Incorporated by reference to exhibits filed with the Registrants
Form 6-K filed on November 9, 2005.*******
    
    Incorporated by reference to exhibits filed with the Registrants
Form 20-F for the fiscal year ended March 31, 2006.********
    
    Incorporated by reference to exhibits filed with the Registrants
Form 20-F for the fiscal year ended March 31, 2007.
    
    Filed herewith.  110




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INDEX TO FINANCIAL STATEMENTS
 Page(s)Reports of Independent Registered Public Accounting Firm
    
    F-2 - F-3Consolidated Balance Sheets as of March 31, 2010 and 2011
    
    F-4Consolidated Statements of Operations for the years ended March
31, 2009, 2010 and 2011
    
    F-5Consolidated Statements of Changes in Shareholders Equity for
the years ended March 31, 2009, 2010 and 2011
    
    F-6Consolidated Statements of Cash Flows for the years ended March
31, 2009, 2010 and 2011
    
    F-7Notes to Consolidated Financial Statements
    
    F-8 - F-33
  F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
  F-2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
  F-3




---



##### Table of Contents



REDIFF.COM INDIA LIMITED
 
 CONSOLIDATED BALANCE SHEETS
 as of March 31, 2010 and 2011
 2010
    
    
    2011US$
    
    
    US$AssetsCurrent AssetsCash and cash equivalents
    
    
    44,690,314
    
    
    
    36,922,125Trade accounts receivable (net of allowances of
US$4,128,829 and US$4,022,664 as of March 31, 2010
and 2011, respectively)
    
    
    5,807,994
    
    
    
    7,178,848Prepaid expenses and other current assets (See Note 4)
    
    
    1,745,564
    
    
    
    1,702,963Total current assets
    
    
    52,243,872
    
    
    
    45,803,936Property, plant and equipment  net (See Note 5)
    
    
    5,489,761
    
    
    
    5,972,595Goodwill (See Note 8)
    
    
    2,000,000
    
    
    
    2,000,000Intangible assets, net (See Note 9)
    
    
    
    
    
    
    3,271,089Investments, at cost
    
    
    
    
    
    
    1,300,000Investments in equity method investees (See Note 7)
    
    
    1,873,672
    
    
    
    540,902Recoverable taxes
    
    
    5,115,727
    
    
    
    3,326,024Other non-current assets (See Note 10)
    
    
    2,817,855
    
    
    
    1,725,624Total non-current assets
    
    
    17,297,015
    
    
    
    18,136,234Total assets
    
    
    69,540,887
    
    
    
    63,940,170Liabilities and Shareholders EquityLiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities (See Note 11)
    
    
    6,794,991
    
    
    
    7,189,236Customer advances and unearned revenues
    
    
    1,366,336
    
    
    
    1,583,692Total current liabilities
    
    
    8,161,327
    
    
    
    8,772,928Deferred tax liability (See Note 17)
    
    
    
    
    
    
    205,159Other non- current liabilities (See Note 12)
    
    
    773,561
    
    
    
    859,892Total liabilities
    
    
    8,934,888
    
    
    
    9,837,979Commitments and contingencies (See Note 25)Shareholders EquityEquity shares: par value  Rs.5, Authorized:24,000,000 equity shares as of March 31, 2010 and 2011 ;Issued and outstanding 13,865,800 and 13,600,800 equity
shares as of March 31, 2010 and 2011, respectively
    
    
    1,735,105
    
    
    
    1,735,105Additional paid- in- capital
    
    
    127,847,598
    
    
    
    128,827,344Accumulated other comprehensive loss
    
    
    (3,845,603
    )
    
    
    (3,436,985
    )Accumulated deficit
    
    
    (62,024,654
    )
    
    
    (68,596,668
    )Treasury shares, at cost (See Note 13)(750,000 and 1,015,000 equity shares as of March 31, 2010
and 2011, respectively )
    
    
    (3,106,447
    )
    
    
    (4,426,605
    )Total shareholders equity
    
    
    60,605,999
    
    
    
    54,102,191Total liabilities and shareholders equity
    
    
    69,540,887
    
    
    
    63,940,170
 See accompanying notes to the consolidated financial statements
  F-4




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##### Table of Contents



REDIFF.COM INDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For each of the years ended March 31, 2009, 2010 and 2011
 2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$RevenuesIndia Online
    
    
    19,707,381
    
    
    
    14,694,576
    
    
    
    17,942,609U.S. Publishing
    
    
    5,722,571
    
    
    
    4,148,685
    
    
    
    3,852,854Total revenues
    
    
    25,429,952
    
    
    
    18,843,261
    
    
    
    21,795,463Cost of revenues (excluding
depreciation and amortization
separately disclosed below)India Online
    
    
    7,511,179
    
    
    
    7,654,344
    
    
    
    8,299,834U.S. Publishing
    
    
    2,864,552
    
    
    
    2,460,959
    
    
    
    2,496,145Total cost of revenues
    
    
    10,375,731
    
    
    
    10,115,303
    
    
    
    10,795,979Operating expensesSales and marketing
    
    
    5,876,851
    
    
    
    7,143,440
    
    
    
    5,373,345Product development
    
    
    2,686,066
    
    
    
    2,663,319
    
    
    
    3,826,350Depreciation and amortization
    
    
    6,248,129
    
    
    
    5,004,262
    
    
    
    3,786,398General and administrative
    
    
    8,027,980
    
    
    
    5,549,891
    
    
    
    6,582,091Goodwill impairment (See Note 8)
    
    
    5,314,468
    
    
    
    
    
    
    
    Long-lived assets impairment (See
Note 5)
    
    
    2,528,261
    
    
    
    136,878
    
    
    
    109,658Foreign exchange (gain) loss, net
    
    
    (92,393
    )
    
    
    (195,865
    )
    
    
    17,783Total operating expenses
    
    
    30,589,362
    
    
    
    20,301,925
    
    
    
    19,695,625Operating loss
    
    
    (15,535,141
    )
    
    
    (11,573,967
    )
    
    
    (8,696,141
    )Other income (expense), netInterest income
    
    
    4,515,997
    
    
    
    4,017,824
    
    
    
    3,372,109Investment impairment
    
    
    (109,842
    )
    
    
    (65,556
    )
    
    
    (543,220
    )Miscellaneous income
    
    
    44,065
    
    
    
    46,316
    
    
    
    98,224Total other income, net
    
    
    4,450,220
    
    
    
    3,998,584
    
    
    
    2,927,113Income (loss) before income taxes
and equity in net earnings of equity
method investees
    
    
    (11,084,921
    )
    
    
    (7,575,383
    )
    
    
    (5,769,028
    )Income tax expense
    
    
    (40,000
    )
    
    
    (30,000
    )
    
    
    (17,279
    )Equity in net loss of equity method
investees
    
    
    (133,209
    )
    
    
    (423,099
    )
    
    
    (785,707
    )Net loss
    
    
    (11,258,130
    )
    
    
    (8,028,482
    )
    
    
    (6,572,014
    )Weighted average number of equity
shares  basic
    
    
    14,615,800
    
    
    
    14,563,197
    
    
    
    13,783,033Weighted average number of equity
shares  diluted
    
    
    14,615,800
    
    
    
    14,563,197
    
    
    
    13,783,033(Loss) earnings per share  basic
    
    
    (0.770
    )
    
    
    (0.552
    )
    
    
    (0.477
    )(Loss) earnings per share  diluted
    
    
    (0.770
    )
    
    
    (0.552
    )
    
    
    (0.477
    )(Loss) earnings per ADS  (where 2
ADSs represent 1 equity share) 
basic
    
    
    (0.385
    )
    
    
    (0.276
    )
    
    
    (0.238
    )(Loss) earnings per ADS  (where 2
ADSs represent 1 equity share) 
diluted
    
    
    (0.385
    )
    
    
    (0.276
    )
    
    
    (0.238
    )
 See accompanying notes to the consolidated financial statements
  F-5




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##### Table of Contents



REDIFF.COM INDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 For each of the years ended March 31, 2009, 2010 and 2011
 Equity shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury sharesEquity
    
    
    
    
    
    
    Accumulated other
    
    
    
    
    
    
    (Equity shares held by
    
    
    Totalshare
    
    
    Additional paid- in-
    
    
    comprehensive
    
    
    Accumulated
    
    
    controlled trust)
    
    
    shareholders
    
    
    ComprehensiveNumber of
    
    
    capital
    
    
    capital
    
    
    income (loss)
    
    
    deficit
    
    
    No of
    
    
    
    
    
    
    equity
    
    
    income (loss)shares
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    shares
    
    
    US$
    
    
    US$
    
    
    US$Balance as of March 31, 2008
    
    
    14,615,800
    
    
    
    1,735,105
    
    
    
    125,849,756
    
    
    
    5,303,652
    
    
    
    (42,738,042
    )
    
    
    
    
    
    
    
    
    
    
    90,150,471Stock- based compensation
    
    
    
    
    
    
    
    
    
    
    1,164,628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,164,628Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,258,130
    )
    
    
    
    
    
    
    
    
    
    
    (11,258,130
    )
    
    
    (11,258,130
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,049,970
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,049,970
    )
    
    
    (16,049,970
    )(27,308,100
    )Balance as of March 31, 2009
    
    
    14,615,800
    
    
    
    1,735,105
    
    
    
    127,014,384
    
    
    
    (10,746,318
    )
    
    
    (53,996,172
    )
    
    
    
    
    
    
    
    
    
    
    64,006,999Stock- based compensation
    
    
    
    
    
    
    
    
    
    
    833,214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    833,214Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,028,482
    )
    
    
    
    
    
    
    
    
    
    
    (8,028,482
    )
    
    
    (8,028,482
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,900,715
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,900,715
    
    
    
    6,900,715Repurchase of equity shares for treasury (See Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (750,000
    )
    
    
    (3,106,447
    )
    
    
    (3,106,447
    )(1,127,767
    )Balance as of March 31, 2010
    
    
    14,615,800
    
    
    
    1,735,105
    
    
    
    127,847,598
    
    
    
    (3,845,603
    )
    
    
    (62,024,654
    )
    
    
    (750,000
    )
    
    
    (3,106,447
    )
    
    
    60,605,999Stock- based compensation
    
    
    
    
    
    
    
    
    
    
    559,157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    559,157Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,572,014
    )
    
    
    
    
    
    
    
    
    
    
    (6,572,014
    )
    
    
    (6,572,014
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    408,618
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    408,618
    
    
    
    408,618Contribution from principal shareholder (See Note 6)
    
    
    
    
    
    
    
    
    
    
    420,589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420,589Repurchase of equity shares for treasury (See Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (265,000
    )
    
    
    (1,320,158
    )
    
    
    (1,320,158
    )(6,163,396
    )Balance as of March 31, 2011
    
    
    14,615,800
    
    
    
    1,735,105
    
    
    
    128,827,344
    
    
    
    (3,436,985
    )
    
    
    (68,596,668
    )
    
    
    (1,015,000
    )
    
    
    (4,426,605
    )
    
    
    54,102,191
 See accompanying notes to the consolidated financial statements
  F-6




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##### Table of Contents



REDIFF.COM INDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For each of the years ended March 31,
 2009
    
    
    2010
    
    
    2011US $
    
    
    US $
    
    
    US $Cash flows from operating activitiesNet loss
    
    
    (11,258,130
    )
    
    
    (8,028,482
    )
    
    
    (6,572,014
    )Adjustments to reconcile net loss to net cash generated
from operating activities:Goodwill impairment
    
    
    5,314,468
    
    
    
    
    
    
    
    Long-lived assets impairment
    
    
    2,528,261
    
    
    
    136,878
    
    
    
    109,658Investment impairment
    
    
    109,842
    
    
    
    65,556
    
    
    
    543,220Equity in net earnings of equity method investees
    
    
    133,209
    
    
    
    423,099
    
    
    
    785,707Depreciation and amortization
    
    
    6,248,129
    
    
    
    5,004,262
    
    
    
    3,786,398Allowances for doubtful trade accounts receivables
    
    
    1,238,400
    
    
    
    (261,825
    )
    
    
    (144,263
    )Loss (profit) on sale of property, plant and equipment
    
    
    40,460
    
    
    
    7,314
    
    
    
    (51
    )Stock- based compensation expense
    
    
    1,164,628
    
    
    
    833,214
    
    
    
    559,157Unrealized exchange loss (gain)
    
    
    97,482
    
    
    
    43,764
    
    
    
    (257
    )Changes in assets and liabilities:Trade accounts receivable
    
    
    2,503,586
    
    
    
    1,489,504
    
    
    
    (1,146,531
    )Prepaid expenses and other current assets
    
    
    135,986
    
    
    
    919,765
    
    
    
    24,969Accounts payable, accrued liabilities and other liabilities
    
    
    (800,326
    )
    
    
    352,412
    
    
    
    428,114Customer advances and unearned revenues
    
    
    (356,881
    )
    
    
    (35,878
    )
    
    
    201,184Recoverable taxes
    
    
    (1,874,723
    )
    
    
    (157,291
    )
    
    
    1,812,649Other non-current assets
    
    
    (283,625
    )
    
    
    190,367
    
    
    
    107,697Net cash generated from operating activities
    
    
    4,940,766
    
    
    
    982,659
    
    
    
    495,637Cash flows from investing activitiesPayments to acquire property, plant and equipment
    
    
    (5,313,138
    )
    
    
    (1,762,906
    )
    
    
    (4,010,461
    )Purchase of investment in equity method investee
    
    
    (1,516,696
    )
    
    
    (407,018
    )
    
    
    Purchase of investments
    
    
    (109,842
    )
    
    
    
    
    
    
    Acquisition, net of cash acquired*
    
    
    
    
    
    
    
    
    
    
    (3,028,660
    )Purchase of promissory notes
    
    
    
    
    
    
    (1,750,000
    )
    
    
    (250,000
    )Proceeds from sale of property, plant and equipment
    
    
    39,861
    
    
    
    36,070
    
    
    
    10,501Net cash used in investing activities
    
    
    (6,899,815
    )
    
    
    (3,883,854
    )
    
    
    (7,278,620
    )Cash flows from financing activitiesRepurchase of equity shares
    
    
    
    
    
    
    (3,106,447
    )
    
    
    (1,320,158
    )Net cash used in financing activities
    
    
    
    
    
    
    (3,106,447
    )
    
    
    (1,320,158
    )Net decrease in cash and cash equivalents
    
    
    (1,959,049
    )
    
    
    (6,007,642
    )
    
    
    (8,103,141
    )Cash and cash equivalents at the beginning of the year
    
    
    59,032,690
    
    
    
    45,521,173
    
    
    
    44,690,314Effect of exchange rate changes on cash
    
    
    (11,552,468
    )
    
    
    5,176,783
    
    
    
    334,952Cash and cash equivalents at the end of the year
    
    
    45,521,173
    
    
    
    44,690,314
    
    
    
    36,922,125Supplementary cash flow information:Income taxes paid
    
    
    1,318,052
    
    
    
    1,051,768
    
    
    
    482,414Supplementary disclosure of non cash investing activity:Payables for purchase of property, plant and equipment
    
    
    545
    
    
    
    133,568
    
    
    
    35,595Conversion of Runa Inc promissory notes into investment in
equity shares
    
    
    
    
    
    
    
    
    
    
    1,300,000
 *
    
    Payment for acquisition of Vubites includes an amount of US$2,711,622 for
settlement of Vubites shareholder loan assumed and settled in accordance with the terms of the
acquisition, (See Note 6). See accompanying notes to the consolidated financial statements
  F-7




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##### Table of Contents



REDIFF.COM INDIA LIMITED
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization and business
     2. Significant accounting policies
 (a) Basis of preparation
  (b) Basis of consolidation
  (c) Investments in equity method investees
   F-8




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##### Table of Contents



(d) Use of estimates
  (e) Revenue recognition
 India Online business
       F-9




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##### Table of Contents



US Publishing business
    (f) Costs and expenses
  Cost of revenues
  Sales and marketing
  Product development
  General and administrative
   F-10




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##### Table of Contents



(g) Cash and cash equivalents
   (h) Property, plant and equipment
  Furniture and fixtures
    
    10 yearsComputer equipment and software
    
    
    1 to 3 yearsOffice equipment
    
    
    3 to 10 yearsVehicles
    
    8 yearsLeasehold improvements
    
    6 yearsWebsite development costs
    
    3 years
  (i) Website development costs
  (j) Investments, at cost
  (k) Business Combination
    F-11




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##### Table of Contents



(l) Goodwill
     (m) Foreign currency
   (n) Earnings per share
   F-12




---



##### Table of Contents



(o) Income taxes
    (p) Impairment or disposal of long-lived assets (excluding goodwill)
  (q) Intangible assets
  (r) Stock-based compensation
  (s) Allowances for doubtful trade accounts receivable
  (t) Compensated absences
   F-13




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##### Table of Contents



3. New Accounting Pronouncements
 Comprehensive Income
 Fair Value Measurements and Disclosures
 IntangiblesGoodwill and
Other
  Fair Value Measurements and Disclosures
    F-14




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##### Table of Contents



4. Prepaid Expenses and Other Current Assets
  As of March 31,2010
    
    
    2011US$
    
    
    US$Prepaid expenses
    
    
    990,169
    
    
    
    843,525Supplier advances
    
    
    62,205
    
    
    
    63,227Rent deposits
    
    
    539,532
    
    
    
    695,979Other advances and deposits
    
    
    91,650
    
    
    
    25,304Loans to employees
    
    
    61,670
    
    
    
    72,882Others
    
    
    338
    
    
    
    2,046Total
    
    
    1,745,564
    
    
    
    1,702,963
 5. Property, Plant and Equipment
  As of March 31,2010
    
    
    2011US$
    
    
    US$Furniture and fixtures
    
    
    495,834
    
    
    
    507,737Computer equipment and software
    
    
    27,167,102
    
    
    
    30,461,459Office equipment
    
    
    396,262
    
    
    
    411,334Vehicles
    
    
    251,549
    
    
    
    333,958Leasehold improvements
    
    
    442,370
    
    
    
    478,156Website development costs
    
    
    2,399,218
    
    
    
    1,856,794Property, plant and equipment  at cost
    
    
    31,152,335
    
    
    
    34,049,438Less: Accumulated depreciation and amortization
    
    
    (26,401,257
    )
    
    
    (29,159,054
    )4,751,078
    
    
    
    4,890,384Capital work- in- progress (net of impairment)
    
    
    738,683
    
    
    
    1,082,211Property, plant and equipment  net
    
    
    5,489,761
    
    
    
    5,972,595
      F-15




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##### Table of Contents



6. Acquisition of Vubites India Private Limited
    Net asset acquired at fair values
 US $Cash acquired
    
    
    23,155Property, plant & equipment
    
    
    202,856Other assets
    
    
    63,947Amortizable intangible assets:Customer contracts
    
    
    16,270Intellectual property
    
    
    3,423,682Total assets
    
    
    3,729,910Liabilities assumed:Loan from Principal shareholder and the CMD of Rediff
    
    
    2,711,622Other liabilities
    
    
    68,449Deferred tax liability, net
    
    
    205,159Total Liabilities
    
    
    2,985,230Net assets acquired
    
    
    744,680Purchase price
    
    
    324,091Contribution from a principal shareholder
    
    
    420,589
    F-16




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##### Table of Contents



7. Investments in equity method investees
 Investments in equity interest
  Percent of ownershipof equity sharesTachyon Technology Private Limited
    
    
    26
    %Eterno Infotech Private Limited
    
    
    43
    %Imere Technology Private Limited
    
    
    44
    %Bigslick Infotech Private Limited*
    
    
    37
    %
  As at March 31,2010
    
    
    2011US$
    
    
    US$Current assets
    
    
    1,160,252
    
    
    
    592,454Non-current assets
    
    
    208,225
    
    
    
    133,431Current liabilities
    
    
    352,667
    
    
    
    322,298Non-current liabilities
    
    
    
    
    
    
    206,111
 For years ended March 31,2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Revenues
    
    
    454,455
    
    
    
    241,903
    
    
    
    480,045Total costs
    
    
    1,027,499
    
    
    
    1,278,772
    
    
    
    1,307,874Loss from operations
    
    
    573,044
    
    
    
    1,036,871
    
    
    
    827,829Loss attributable to Rediff*
    
    
    133,209
    
    
    
    423,099
    
    
    
    785,707
 *
    
    Companys share of loss of the equity method investee has been determined after giving effect to
the subsequent amortization on account of fair value adjustments made for the identifiable
intangible assets of the equity method investees as at the date of acquisition.  US$Carrying value of equity method investments
    
    
    540,902Proportionate share of net assets of equity method investments
    
    
    66,317Excess of carrying value of investment over proportionate share of net assets
    
    
    474,585
    F-17




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##### Table of Contents



8. Goodwill
   For the year ended March 31,2010
    
    
    2011Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    
    impairment
    
    
    Net
    
    
    Gross
    
    
    impairment
    
    
    NetUS$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$As at beginning of
the year
    
    
    10,515,168
    
    
    
    8,515,168
    
    
    
    2,000,000
    
    
    
    10,515,168
    
    
    
    8,515,168
    
    
    
    2,000,000As at end of the
year
    
    
    10,515,168
    
    
    
    8,515,168
    
    
    
    2,000,000
    
    
    
    10,515,168
    
    
    
    8,515,168
    
    
    
    2,000,000
   9. Intangible assets, net
  As of March 31, 2011Fair value atthe date of
    
    
    Accumulated
    
    
    Net carryingacquisition
    
    
    amortization
    
    
    amountUS$
    
    
    US$
    
    
    US$Customer contracts
    
    
    16,270
    
    
    
    1,851
    
    
    
    14,419Intellectual property
(consists of software
and related process
know-how)
    
    
    3,423,682
    
    
    
    167,012
    
    
    
    3,256,670Total
    
    
    3,439,952
    
    
    
    168,863
    
    
    
    3,271,089
  F-18




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##### Table of Contents



Year ending March 31,
    
    US$2012
    
    
    493,9082013
    
    
    493,9082014
    
    
    492,1062015
    
    
    488,5012016
    
    
    488,501
 10. Other non-current assets
 Other non-current assets comprise :
 As of March 31,2010
    
    
    2011US$
    
    
    US$Promissory notes (including accrued interest)
    
    
    2,166,919
    
    
    
    1,100,000Prepaid expenses
    
    
    189,717
    
    
    
    173,639Rent deposits
    
    
    280,990
    
    
    
    324,164Loans to employees
    
    
    34,513
    
    
    
    59,492Other advances and deposits
    
    
    145,716
    
    
    
    68,329Total
    
    
    2,817,855
    
    
    
    1,725,624
   11. Accounts payable and accrued liabilities
  As of March 31,2010
    
    
    2011US$
    
    
    US$Accounts payable
    
    
    1,040,123
    
    
    
    1,464,353Accrued expenses
    
    
    3,285,436
    
    
    
    3,188,813Taxes payable
    
    
    916,286
    
    
    
    911,103Employee incentive payable
    
    
    885,860
    
    
    
    771,350Other employee payables
    
    
    584,918
    
    
    
    729,985Other current liabilities
    
    
    82,368
    
    
    
    123,632Total
    
    
    6,794,991
    
    
    
    7,189,236
  F-19




---



##### Table of Contents



12. Other non-current liabilities
  As of March 31,2010
    
    
    2011US$
    
    
    US$Unearned revenues
    
    
    325,676
    
    
    
    274,342Retirement benefits
    
    
    323,550
    
    
    
    399,341Other liabilities
    
    
    124,335
    
    
    
    186,209Total
    
    
    773,561
    
    
    
    859,892
 13. Shareholders equity
 Treasury shares
  14. Sales and marketing
  15. Related party transactions
  Repurchase of equity shares for treasury
  Advertising Revenues
  Product Development Expenses
    F-20




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##### Table of Contents



Purchase of Convertible Promissory Note
   As of March 31,2010
    
    
    2011US$
    
    
    US$Trade account receivable for advertising revenues
    
    
    154,852
    
    
    
    341,230Accounts payable for product development expense
    
    
    
    
    
    
    7,226Convertible promissory notes and accrued interest thereon
    
    
    1,316,919
    
    
    
    
 16. Retirement Benefits
 Gratuity
   2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Change in benefit obligationBenefit obligation at the beginning of the year
    
    
    286,524
    
    
    
    288,136
    
    
    
    349,624Acquisition
    
    
    
    
    
    
    
    
    
    
    7,874Actuarial loss (gain)
    
    
    9,659
    
    
    
    (19,112
    )
    
    
    (16,687
    )Service cost
    
    
    60,933
    
    
    
    63,183
    
    
    
    74,660Interest cost
    
    
    28,214
    
    
    
    32,683
    
    
    
    36,731Benefits paid
    
    
    (27,888
    )
    
    
    (53,452
    )
    
    
    (22,851
    )Effect of exchange rate changes
    
    
    (69,306
    )
    
    
    38,186
    
    
    
    5,243Benefit obligation at the end of the year
    
    
    288,136
    
    
    
    349,624
    
    
    
    434,594
   2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Service cost
    
    
    60,933
    
    
    
    63,183
    
    
    
    74,660Interest cost
    
    
    28,214
    
    
    
    32,683
    
    
    
    36,731Recognized net actuarial loss (gain)
    
    
    9,659
    
    
    
    (19,112
    )
    
    
    (16,687
    )Net gratuity cost
    
    
    98,806
    
    
    
    76,754
    
    
    
    94,704
  F-21




---



##### Table of Contents



2009
    
    
    2010
    
    
    2011Discount rate
    
    
    9.00
    %
    
    
    9.10
    %
    
    
    9.00
    %Rate of increase in compensation
    
    10% for first 3
years 
and 7%
thereafter
    
    
    10% for first 2
years 
and 7%
thereafter
    
    
    10% for first year

and 7% thereafter
  Year ending March 31,
    
    US$2012
    
    
    35,2522013
    
    
    41,2322014
    
    
    56,6632015
    
    
    56,0582016
    
    
    71,8032017-2021
    
    
    523,830
  Provident Fund
  17. Income Taxes
  2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$- Domestic
    
    
    (5,885,632
    )
    
    
    (6,622,537
    )
    
    
    (4,870,380
    )- Foreign
    
    
    (5,199,289
    )
    
    
    (952,846
    )
    
    
    (898,648
    )Income (loss) before income
taxes and equity in net
earnings of affiliates
    
    
    (11,084,921
    )
    
    
    (7,575,383
    )
    
    
    (5,769,028
    )Current income tax expense
- Foreign
    
    
    40,000
    
    
    
    30,000
    
    
    
    17,279
  F-22




---



##### Table of Contents



2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Income (loss) before income taxes and equity in net earnings
of affiliates
    
    
    (11,084,921
    )
    
    
    (7,575,383
    
    
    
    (5,769,028
    )Indian statutory income tax rate
    
    
    33.99
    %
    
    
    33.99
    %
    
    
    33.218
    %Expected income tax expense (benefit)
    
    
    (3,767,765
    )
    
    
    (2,574,873
    )
    
    
    (1,916,356
    )Tax effect of:-Adjustments to reconcile expected income tax expense to
reported income tax expense:Employee stock-based compensation
    
    
    395,857
    
    
    
    283,210
    
    
    
    185,741Goodwill impairment
    
    
    1,806,229
    
    
    
    
    
    
    
    Change in valuation allowance
    
    
    1,545,471
    
    
    
    2,401,938
    
    
    
    1,544,729Tax in foreign jurisdictions
    
    
    1,010
    
    
    
    (149,127
    )
    
    
    (26,208
    )Others
    
    
    59,198
    
    
    
    68,852
    
    
    
    229,373Income tax expense
    
    
    40,000
    
    
    
    30,000
    
    
    
    17,279
  As of March 31,2010
    
    
    2011US$
    
    
    US$Deferred tax assets:Net operating loss carry forwards
    
    
    4,949,739
    
    
    
    3,959,315Depreciation and amortization
    
    
    2,620,616
    
    
    
    3,764,795Allowances for doubtful accounts receivables
    
    
    1,442,226
    
    
    
    1,358,753Retirement benefits
    
    
    246,003
    
    
    
    277,960Minimum alternate tax credit
    
    
    379,265
    
    
    
    383,427Others
    
    
    250,829
    
    
    
    298,108Gross deferred tax assets
    
    
    9,888,678
    
    
    
    10,042,358Valuation allowance
    
    
    (9,888,678
    )
    
    
    (9,908,141
    )Deferred tax assets
    
    
    
    
    
    
    134,217Deferred tax liability:Intangible assets
    
    
    
    
    
    
    339,376Net Deferred tax liability
    
    
    
    
    
    
    205,159
  As of March 31,2010
    
    
    2011US$
    
    
    US$Balance as at beginning of the year
    
    
    10,159,291
    
    
    
    9,888,678Change during the year
    
    
    2,401,938
    
    
    
    1,544,729Expired net operating carry forward losses
    
    
    (1,912,578
    )
    
    
    (1,280,512
    )Utilized net operating carry forward losses
and unabsorbed depreciation
    
    
    (1,605,864
    )
    
    
    Effect of change in tax rate
    
    
    
    
    
    
    (313,110
    )Reduction on account of unrecognized tax
benefit
    
    
    28,443
    
    
    
    5,502Effect of currency translation
    
    
    817,448
    
    
    
    62,854Balance as at end of the year
    
    
    9,888,678
    
    
    
    9,908,141
  F-23




---



##### Table of Contents



2010
    
    
    2011US$
    
    
    US$Unrecognized tax benefits balance at beginning of the year
    
    
    43,960
    
    
    
    21,175Gross increase for tax positions of prior years
    
    
    
    
    
    
    16,357Gross decrease for tax positions of prior years
    
    
    (28,443
    )
    
    
    (5,502
    )Effect of currency translation
    
    
    5,658
    
    
    
    412Unrecognized tax benefits balance at end of the year
    
    
    21,175
    
    
    
    32,442
  18. Segments
   (i)
    
    India Online business primarily includes revenues from advertising and
fee-based services. Advertising includes revenues mainly from display
and performance based advertising and to a lesser extent from
sponsorships. Fee-based services include revenues from online
shopping, subscription services and mobile value-added services.(ii)
    
    US Publishing business primarily includes revenues from the Rediff
India Abroad website and revenues from the print newspapers, India
Abroad and India in New York.
  F-24




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##### Table of Contents



2009
    
    
    2010
    
    
    2011India
    
    
    US
    
    
    
    
    
    
    
    
    
    
    US
    
    
    
    
    
    
    India
    
    
    USOnline
    
    
    Publishing
    
    
    
    
    
    
    India
    
    
    Publishing
    
    
    
    
    
    
    Online
    
    
    PublishingBusiness
    
    
    Business
    
    
    Total
    
    
    Online Business
    
    
    Business
    
    
    Total
    
    
    Business
    
    
    Business
    
    
    TotalUS$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$Revenues from external customers:Advertising
    
    
    14,053,368
    
    
    
    5,277,561
    
    
    
    19,330,929
    
    
    
    10,624,932
    
    
    
    3,751,818
    
    
    
    14,376,750
    
    
    
    13,817,053
    
    
    
    3,548,083
    
    
    
    17,365,136Fee based services
    
    
    5,654,013
    
    
    
    445,010
    
    
    
    6,099,023
    
    
    
    4,069,644
    
    
    
    396,867
    
    
    
    4,466,511
    
    
    
    4,125,556
    
    
    
    304,771
    
    
    
    4,430,327Total revenues
    
    
    19,707,381
    
    
    
    5,722,571
    
    
    
    25,429,952
    
    
    
    14,694,576
    
    
    
    4,148,685
    
    
    
    18,843,261
    
    
    
    17,942,609
    
    
    
    3,852,854
    
    
    
    21,795,463Cost of revenues(excluding depreciation and amortization)
    
    
    7,511,179
    
    
    
    2,864,552
    
    
    
    10,375,731
    
    
    
    7,654,344
    
    
    
    2,460,959
    
    
    
    10,115,303
    
    
    
    8,299,834
    
    
    
    2,496,145
    
    
    
    10,795,979Segment Results
    
    
    12,196,202
    
    
    
    2,858,019
    
    
    
    15,054,221
    
    
    
    7,040,232
    
    
    
    1,687,726
    
    
    
    8,727,958
    
    
    
    9,642,775
    
    
    
    1,356,709
    
    
    
    10,999,484Segment Assets
    
    
    62,340,933
    
    
    
    7,449,390
    
    
    
    69,790,323
    
    
    
    61,574,823
    
    
    
    5,986,629
    
    
    
    67,561,452
    
    
    
    57,334,942
    
    
    
    4,702,523
    
    
    
    62,037,465Capital expenditures
    
    
    5,313,138
    
    
    
    
    
    
    
    5,313,138
    
    
    
    1,755,917
    
    
    
    6,989
    
    
    
    1,762,906
    
    
    
    3,999,158
    
    
    
    11,303
    
    
    
    4,010,461
  2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Segment result
    
    
    15,054,221
    
    
    
    8,727,958
    
    
    
    10,999,484Operating expenses
(including depreciation
and amortization)
    
    
    (25,274,894
    )
    
    
    (20,301,925
    )
    
    
    (19,695,625
    )Goodwill impairment
    
    
    (5,314,468
    )
    
    
    
    
    
    
    Other income , net
    
    
    4,450,220
    
    
    
    3,998,584
    
    
    
    2,927,113Net income (loss) before
income taxes and equity
in net earnings of equity
method investees
    
    
    (11,084,921
    )
    
    
    (7,575,383
    )
    
    
    (5,769,028
    )
  F-25




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##### Table of Contents



As at March 31,2010
    
    
    2011US$
    
    
    US$India Online business
    
    
    61,574,823
    
    
    
    57,334,942US Publishing business
    
    
    5,986,629
    
    
    
    4,702,523Total segment assets
    
    
    67,561,452
    
    
    
    62,037,465Investments in equity method investees
    
    
    1,873,673
    
    
    
    540,902Investment, at cost
    
    
    
    
    
    
    1,300,000Rediff.com India Employee trust
    
    
    24,920
    
    
    
    49,288Phone card business
    
    
    80,842
    
    
    
    12,515Total assets
    
    
    69,540,887
    
    
    
    63,940,170
   Years ended March 31,2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$United States and Canada
    
    
    5,292,299
    
    
    
    3,964,579
    
    
    
    3,628,056India
    
    
    19,664,404
    
    
    
    14,584,991
    
    
    
    17,615,686Rest of the world
    
    
    473,249
    
    
    
    293,691
    
    
    
    551,721Total revenues
    
    
    25,429,952
    
    
    
    18,843,261
    
    
    
    21,795,463
   As of March 31,2010
    
    
    2011US$
    
    
    US$United States and Canada
    
    
    2,028,856
    
    
    
    2,030,407India
    
    
    5,460,905
    
    
    
    5,942,188Total
    
    
    7,489,761
    
    
    
    7,972,595
 19. Concentration of credit risk
   F-26




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##### Table of Contents



20. Stock-based compensation
 2002 Stock Option Plan
    WeightedWeighted
    
    
    averageaverage
    
    
    remaining
    
    
    AggregateNumber of Options
    
    
    exercise
    
    
    contractual
    
    
    intrinsicOptions
    
    (in terms of shares)
    
    
    price
    
    
    term (year)
    
    
    valueUS$
    
    
    
    
    
    US$Outstanding as at April 1, 2010
    
    
    62,375
    
    
    
    4.91Forfeited
    
    
    
    
    
    
    Outstanding as at March 31, 2011
    
    
    62,375
    
    
    
    4.91
    
    
    
    2.1
    
    
    
    629,203Exercisable as at March 31, 2011
    
    
    62,375
    
    
    
    4.91
    
    
    
    2.1
    
    
    
    629,203
   2004 Stock Option Plan
   F-27




---



##### Table of Contents



WeightedWeighted
    
    
    averageNumber of
    
    
    average
    
    
    remaining
    
    
    Aggregateoptions (in terms
    
    
    exercise
    
    
    contractual
    
    
    intrinsicOptions
    
    of shares)
    
    
    price
    
    
    term (year)
    
    
    valueUS$
    
    
    
    
    
    US$Outstanding as at April 1, 2010
    
    
    247,990
    
    
    
    10.20Forfeited
    
    
    (7,250
    )
    
    
    6.07Outstanding as at March 31, 2011
    
    
    240,740
    
    
    
    10.33
    
    
    
    5.3
    
    
    
    1,346,420Exercisable as at March 31, 2011
    
    
    178,490
    
    
    
    12.13
    
    
    
    4.3
    
    
    
    733,880
    2006 Stock Option Plan
    F-28




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##### Table of Contents



WeightedWeighted
    
    
    averageNumber of
    
    
    average
    
    
    remainingoptions (in
    
    
    exercise
    
    
    contractual
    
    
    AggregateOptions
    
    terms of shares)
    
    
    price
    
    
    term (year)
    
    
    intrinsic valueUS$
    
    
    
    
    
    US$Outstanding as at April 1, 2010
    
    
    393,563
    
    
    
    10.21Granted
    
    
    162,500
    
    
    
    2.04Forfeited
    
    
    (23,875
    )
    
    
    9.31Outstanding as at March 31, 2011
    
    
    532,188
    
    
    
    7.76
    
    
    
    7.8
    
    
    
    5,071,026Exercisable as at March 31, 2011
    
    
    223,963
    
    
    
    13.33
    
    
    
    6.2
    
    
    
    1,556,332
     Years ended March 31,2009
    
    
    2010
    
    
    2011Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected term
    
    4 years
    
    
    7 - 9 years
    
    
    5.5 - 7 yearsRisk free interest rates
    
    
    2.43
    %
    
    
    2.83% - 3.81
    %
    
    
    2.04% - 2.77
    %Expected volatility
    
    
    57.95
    %
    
    
    70.87% - 75.5
    %
    
    
    75.88% - 77.61
    %
   Year ended March 31,2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Cost of revenues
    
    
    127,731
    
    
    
    102,635
    
    
    
    78,559Sales and marketing
    
    
    573,068
    
    
    
    327,758
    
    
    
    161,506Product development
    
    
    215,073
    
    
    
    213,337
    
    
    
    187,378General and administrative
    
    
    248,756
    
    
    
    189,484
    
    
    
    131,714
  F-29




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##### Table of Contents



21. Earnings (loss) per share and ADS
  Year ended March 31,2009
    
    
    2010
    
    
    2011Net loss
    
    US$
    (11,258,130
    )
    
    US$
    (8,028,482
    )
    
    US$
    (6,572,014
    )Weighted average equity shares for basic
and diluted earnings (loss) per share
    
    
    14,615,800
    
    
    
    14,563,197
    
    
    
    13,783,033Earnings / (loss) per share basic
    
    
    (0.770
    )
    
    
    (0.552
    )
    
    
    (0.477
    ) diluted
    
    
    (0.770
    )
    
    
    (0.552
    )
    
    
    (0.477
    )Earnings / (loss) per ADS basic
    
    
    (0.385
    )
    
    
    (0.276
    )
    
    
    (0.238
    ) diluted
    
    
    (0.385
    )
    
    
    (0.276
    )
    
    
    (0.238
    )
  22. Dividends
  23. Allowance for doubtful trade accounts receivables
 Balance at
    
    
    
    
    
    
    Effect of
    
    
    Balance atBeginning of
    
    
    Expense /
    
    
    exchange rate
    
    
    endDescription
    
    Period
    
    
    Reversal
    
    
    changes
    
    
    of periodUS$
    
    
    US$
    
    
    US$
    
    
    US$Fiscal 2011
    
    
    4,128,829
    
    
    
    (144,263
    )
    
    
    38,098
    
    
    
    4,022,664Fiscal 2010
    
    
    3,935,812
    
    
    
    (261,825
    )
    
    
    454,842
    
    
    
    4,128,829Fiscal 2009
    
    
    3,540,173
    
    
    
    1,238,400
    
    
    
    (842,761
    )
    
    
    3,935,812
 24. Fair value of financial instruments
    F-30




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##### Table of Contents



25. Commitments and contingencies
    Years ended March 31,2009
    
    
    2010
    
    
    2011US$
    
    
    US$
    
    
    US$Office premises
    
    
    1,030,766
    
    
    
    594,523
    
    
    
    707,772Residential apartments for employees
    
    
    222,955
    
    
    
    118,717
    
    
    
    128,956Total operating lease expense
    
    
    1,253,721
    
    
    
    713,240
    
    
    
    836,728
  For the yearendingMarch 31,
    
    US$2012
    
    
    626,1172013
    
    
    346,6492014
    
    
    211,4502015
    
    
    217,7942016
    
    
    224,328And there after
    
    
    509,800
 Litigation and Other Legal Matters
 Action Relating to Access to Pornographic Material
 Sunil N.
Phatarphekar & Ors. v. Abhinav Bhatt and Ors.
  F-31




---



##### Table of Contents



Actions Relating to Trademark Infringement
    F-32




---



##### Table of Contents



Actions Relating to Patent Infringement
     F-33




---



##### Table of Contents



SIGNATURE
  REDIFF.COM INDIA LIMITEDBy:
    /s/ Ajit BalakrishnanName:
    Ajit BalakrishnanTitle:
    Chairman and Managing Director
(Principal Executive Officer)




---



##### Table of Contents



SIGNATURE
  REDIFF.COM INDIA LIMITEDBy:
    /s/ Jayesh SanghrajkaName:
    Jayesh SanghrajkaTitle:
    Vice President Finance
(Principal Financial Officer)