UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


                                   FORM 20-F


                                  (Mark One)
      [ ] Registration statement pursuant to Section 12(b) or (g) of the
                        Securities Exchange Act of 1934

      [X] Annual report pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                   For the fiscal year ended March 31, 2004
      [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
                             Exchange Act of 1934

         For the transition period from _____________ to _____________


                       Commission File Number 000-30735


                           REDIFF.COM INDIA LIMITED
            (Exact name of Registrant as specified in its charter)


                                Not Applicable
                (Translation of Registrant's name into English)


                               Republic of India
                (Jurisdiction of incorporation or organization)


                         Mahalaxmi Engineering Estate
                       1st Floor, L. J. First Cross Road
                                 Mahim (West)
                            Mumbai - 400016, India
                               +91-22-2444-9144
                   (Address of principal executive offices)


Securities registered or to be registered pursuant to Section 12(b) of the Act:

     Title of Each Class              Name of Each Exchange on Which Registered
            None                                    Not Applicable


          Securities registered pursuant to Section 12(g) of the Act:

                          American Depositary Shares,
  each represented by one-half of one equity share, par value Rs 5 per share.
                               (Title of Class)

       Securities for which there is a reporting obligation pursuant to
                           Section 15(d) of the Act:
                                Not Applicable
                               (Title of Class)


<PAGE>


         Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by
the annual report: 12,827,425 equity shares.

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

         Yes [X]           No [  ]

         Indicate by check mark which financial statement item the registrant
has elected to follow.

         Item 17 [  ]      Item 18 [X]



<PAGE>

                               TABLE OF CONTENTS

                                                                          Page


Cross Reference Sheet ...................................................... 1
Currency of Presentation and Certain Defined Terms ......................... 3
Forward-Looking Statements ................................................. 3
Exchange Rates ............................................................. 5
Selected Consolidated Financial Data ....................................... 6
Risk Factors ............................................................... 7
Business ...................................................................
      Overview .............................................................24
      Our Markets ..........................................................25
      Our Opportunity.......................................................25
      Strategy .............................................................26
      Our Product and Service Offerings ....................................27
      Infrastructure........................................................32
      Competition...........................................................35
      Intellectual Property.................................................35
      Facilities............................................................36
      Legal Proceedings ....................................................37
      Government Regulation.................................................39
      Ownership of Foreign Securities.......................................41
Management's Discussion and Analysis of Financial Condition
  and Results of Operations ................................................42
Management .................................................................56
Related Party Transactions..................................................63
Exchange Controls ..........................................................64
Trading Market .............................................................66
Restriction on Foreign Ownership of Indian Securities ......................67
Principal Shareholders .....................................................70
Taxation ...................................................................73
Use of Proceeds ............................................................79
Controls and Procedures ....................................................80
Principal Accountant fees and services......................................80
Presentation of Financial Information ......................................81
Additional Information .....................................................81
Exhibit Index ............................................................ E-1
Index to U.S. GAAP Financial Statements ...................................F-1


<PAGE>

                             CROSS REFERENCE SHEET

                                    PART I

Item 1.  Identity of Directors, Senior Management and Advisers

         Not applicable.

Item 2.  Offer Statistics and Expected Timetable

         Not applicable.

Item 3.  Key Information

         See "Exchange Rates", "Risk Factors" and "Selected Consolidated
         Financial Data".

Item 4.  Information on the Company

         See "Business", "Management's Discussion and Analysis of Financial
         Condition and Results of Operations" and "Additional Information".

Item 5.  Operating and Financial Review and Prospects

         See "Risk Factors" and "Management's Discussion and Analysis of
         Financial Condition and Results of Operations".

Item 6.  Directors, Senior Management and Employees

         See "Management".

Item 7.  Major Shareholders and Related Party Transactions.

         See "Principal Shareholders" and "Related Party Transactions".

Item 8.  Financial Information

         See the Report of Independent Registered Public Accounting firm, U.S.
         GAAP Consolidated financial statements and the notes thereto for
         Rediff.com India Limited for the fiscal year ended March 31, 2004 and
         Report of Independent Registered Public Accounting firm for Rediff
         Holdings Inc for the fiscal year ended March 31, 2003. Also see
         "Business--Legal Proceedings" and "Management's Discussion and
         Analysis of Financial Condition and Results of Operations".

Item 9.  The Offer and Listing

         See "Trading Market".

Item 10. Additional Information

         See "Management's Discussion and Analysis of Financial Condition and
         Results of Operations--Exchange Controls", "Restriction on Foreign
         Ownership of Indian Securities", "Taxation" and "Additional
         Information".

Item 11. Quantitative and Qualitative Disclosures About Market Risk

         See "Management's Discussion and Analysis of Financial Condition and
         Results of Operations--Market Risks".

Item 12. Description of Securities Other than Equity Securities

         Not applicable.


                                    PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

         Not applicable.

Item 14. Material Modifications to the Rights of Security Holders and Use
         of Proceeds

         See "Use of Proceeds".

Item 15. Controls and Procedures

         See "Controls and Procedures".

Item 16.

         A. Independent Audit Committee Financial expert - See "Management"

         B. Code of Ethics - See "Management"

         C. Principal Accountant Fees and Services - See "Principal Accountant
            Fees and Services"

         D. Exemptions from the Listing Standards for Audit Committees

            Not applicable

         E. Purchases of Equity Securities by the Issuer and Affiliated
            Purchasers

            Not applicable


                                   PART III

Item 17. Financial Statements

         Not applicable.

Item 18. Financial Statements

         See the Report of Independent Registered Public Accounting firm, U.S.
         GAAP Consolidated financial statements and the notes thereto for
         Rediff.com India Limited for the fiscal year ended March 31, 2004 and
         Report of Independent Registered Public Accounting firm for Rediff
         Holdings Inc for the fiscal year ended March 31, 2003.

Item 19. Exhibits

         See the Exhibit Index and the attached exhibits.



<PAGE>


              CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS

         In this annual report all references to "we", "our", "us", "Rediff",
"rediff.com" and the "Company", unless otherwise relevant to the context, are
to Rediff.com India Limited, a limited liability company organized under the
laws of the Republic of India, and its consolidated subsidiaries. References
to "U.S." or the "United States" are to the United States of America, its
territories and its possessions. References to "India" are to the Republic of
India.

         In this annual report, references to "$" or "US$" or "dollars" or
"U.S. dollars" are to the legal currency of the United States and references
to "Rs." or "Rupees" or "Indian Rupees" are to the legal currency of India.
Our financial statements are prepared in Indian Rupees and presented in U.S.
dollars except in case of our U.S. subsidiaries which are prepared in U.S.
dollars. Our financial statements are prepared in accordance with United
States Generally Accepted Accounting Principles ("U.S. GAAP"). References to a
particular "fiscal" or "financial" year are to Rediff's fiscal year ended
March 31 of such year.

         Although we have presented Indian Rupee amounts in this annual report
in U.S. dollars, this does not mean that the Indian Rupee amounts referred to
have been, or could be, converted into dollars at any particular rate, the
rates stated below in the section of this annual report entitled "Exchange
Rates", or at all. Except as otherwise stated in this annual report and for
information derived from our financial statements included in this annual
report, all translations from Indian Rupees to U.S. dollars contained in this
annual report are based on the noon buying rate, in the City of New York, on
March 31, 2004, for cable transfers in Indian Rupees as certified for customs
purposes by the Federal Reserve Bank of New York, which was Rs.43.40 per
US$1.00.

                          FORWARD-LOOKING STATEMENTS

         We have included statements in this annual report which contain words
or phrases such as "may", "will", "aim", "will likely result", "believe",
"expect", "will continue", "anticipate", "estimate", "intend", "plan",
"contemplate", "seek to", "future", "objective", "goal", "project", "should",
"will pursue" and similar expressions or variations of such expressions, that
are "forward-looking statements", within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and reflect our current expectations. We have made
forward-looking statements with respect to the following, among others:

     o    our goals and strategies;

     o    our recently acquired businesses and other acquisitions, investments
          and divestments;

     o    the importance and expected growth of Internet technology;

     o    the pace of change in the Internet market;

     o    the demand for Internet services; and

     o    advertising demand and revenues.

         Actual results may differ materially from those suggested by the
forward-looking statements due to certain risks or uncertainties associated
with our expectations with respect to, but not limited to, our ability to
successfully implement our strategy, our ability to successfully integrate the
businesses we have acquired with our business, demand for e-commerce and
changes in the Internet marketplace, technological changes, investment income,
cash flow projections and our exposure to market risks. By their nature,
certain of the market risk disclosures are only estimates and could be
materially different from what actually occur in the future. As a result,
actual future gains, losses or impact on net interest income could materially
differ from those that have been estimated.

         In addition, other factors that could cause actual results to differ
materially from those estimated by the forward-looking statements contained in
this document include, but are not limited to, general economic and political
conditions in India and the United States, changes in the value of the Rupee,
foreign exchange rates, equity prices or other rates or prices and level of
Internet penetration in India and globally, changes in domestic and foreign
laws, regulations and taxes, changes in competition, and other factors beyond
our control. For further discussion on the factors that could cause actual
results to differ, see the discussion under "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in this annual report. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. In addition, readers should review the
other information contained in this annual report and in our periodic reports
filed with the U.S. Securities and Exchange Commission (the "SEC"), from time
to time. We undertake no obligation to update forward-looking statements to
reflect events or circumstances after the date hereof.



<PAGE>



                                EXCHANGE RATES

         Fluctuations in the exchange rate between the Indian Rupee and the
U.S. dollar may affect the market price of our American Depositary Shares (the
"ADSs") which, beginning on June 24, 2002, have been traded on the NASDAQ
Small Cap Market. Such fluctuations will also affect the U.S. dollar
conversion by our depositary for the ADSs, Citibank, N.A., (the "Depositary"),
of any cash dividends paid in Indian Rupees on our equity shares represented
by the ADSs.

         The following table sets forth, for the periods indicated, certain
information concerning the exchange rates between Indian Rupees and U.S.
dollars based on the noon buying rate in the City of New York for cable
transfers in Rupees as certified for customs purposes by the Federal Reserve
Bank of New York:

<TABLE>
<CAPTION>

Fiscal Year Ended March 31,          Period End (1)     Average (1)(2)          High             Low
                                     --------------     --------------        -------        -----------

<S>                                         <C>                <C>             <C>                <C>

2000                                      Rs.43.65           Rs.43.46        Rs.43.75        Rs.  42.50
2001                                         46.85              45.88           47.47             43.68
2002                                         48.83              47.80           48.91             46.58
2003                                         47.53              48.36           49.07             47.53
2004                                         43.40              45.78           47.46             43.40

</TABLE>

         The following table sets forth the high and low exchange rates for
the previous six months and are based on the average of the noon buying rate
in the City of New York on the last business day of each month during the
period for cable transfers in Indian rupees as certified for customs purposes
by the Federal Reserve Bank of New York:

                 Month                         High              Low
                                               ----             ------

                 March 2004                    45.32            43.40
                 April 2004                    44.14            43.40
                 May 2004                      45.57            44.55
                 June 2004                     46.21            44.94
                 July 2004                     46.45            45.66
                 August 2004                   46.40            46.21

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

(1)  The noon buying rate at each period end and the average rate for each
     period differed from the exchange rates used in the preparation of our
     financial statements.

(2)  Represents the average of the noon buying rate on the last day of each
     month during the period.

On September 23, 2004, the noon buying rate in the city of New York was
Rs. 45.87.


<PAGE>


                     SELECTED CONSOLIDATED FINANCIAL DATA

         Our consolidated financial statements are presented in U.S. dollars
and prepared in accordance with U.S. GAAP. The selected balance sheet data set
forth below as of March 31, 2003 and 2004 and the selected statement of
operations data for the fiscal years ended March 31, 2002, 2003 and 2004 has
been derived from our audited financial statements presented elsewhere in this
annual report and which have been audited by Deloitte Haskins & Sells,
independent auditors. The selected balance sheet data set forth below as of
March 31, 2000, 2001 and 2002 and the selected statement of operations data
for the fiscal years ended March 31, 2000 and 2001 are derived from U.S. GAAP
financial statements which are not included in this annual report.*

<TABLE>
<CAPTION>

                                                                  Fiscal Years Ended March 31,
                                           -------------------------------------------------------------------------------
                                              2000            2001             2002            2003               2004
                                           ----------     -------------   ------------     ------------        -----------
                                                             (In thousands, except per share data)

<S>                                            <C>              <C>              <C>              <C>              <C>

Statement of Operations data:
Revenues..........................           US$1,906         US$5,233         US$7,859         US$8,572         US$9,446
Cost of goods sold................                392              147                -                -                -
Cost of revenues..................                561            2,155            5,098            5,560            4,738
Gross profit......................                954            2,931            2,761            3,012            4,708
Operating expenses................              7,869           14,837           20,938           14,903            7,927
Loss from continuing operations...             (6,915)          (6,360)         (16,101)         (12,177)          (3,349)
Profit/(Loss) from discontinuing
operations........................                  -               (5)           1,336           (6,804)          (2,371)
Net loss..........................          US$(6,666)       US$(6,365)      US$(14,765)      US$(18,981)       US$(5,720)
Loss per equity share (from
continuing operations) - basic and
diluted...........................          US$(0.79)        US$(0.51)        US$(1.25)        US$(0.95)        US$(0.26)
Loss per equity share - basic and
diluted...........................          US$(0.76)        US$(0.52)        US$(1.15)        US$(1.48)        US$(0.45)
Weighted average number of equity
shares - basic and diluted........             8,765           12,253           12,795           12,795           12,800


                                                                       As of March 31,
                                           --------------------------------------------------------------------------------
                                               2000            2001             2002             2003             2004
                                           -----------     -----------     -------------      -----------      ------------
                                                                         (In thousands)
Balance Sheet Data:
Cash and cash equivalents.........          US$11,576        US$47,654        US$26,520        US$14,384        US$11,639
Working capital...................             10,522           43,507           22,412           13,238           11,468
Total assets......................             16,062           67,497           52,250           30,332           24,868
Total shareholders' equity........             12,722           60,249           44,004           25,541           21,027


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

*    The selected financial data set forth below should be read in conjunction
     with Item 5. "Operating and Financial Review and Prospects" and the
     financial statements and the notes to those statements included elsewhere
     in this annual report.

</TABLE>

<PAGE>


                                 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

Pending and potential litigation against us could have a material adverse
effect on our business and operating results and lower the market price of our
ADSs.

         On April 16, 2001, four of our officers and directors, including Ajit
Balakrishnan, its Chairman and Managing Director, a group of investment banks
that acted as underwriters in our June 2000 initial public offering (the
"IPO") and listing of ADSs and we were named as defendants in Khanna v.
Rediff.com India Ltd. et al., (the "Khanna Action"), a class action lawsuit
filed in the U.S. District Court for the Southern District of New York. The
plaintiffs allege that our registration statement filed with the SEC contained
misleading statements and omissions in violation of the U.S. Securities Act of
1933, as amended (the "Securities Act"), the U.S. Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 10b-5 of the Exchange Act. The
plaintiff class in this lawsuit has been defined as all persons who purchased
ADSs from the time of the IPO through April 14, 2001 and seeks unspecified
damages. Subsequent to the filing of the Khanna Action, several other actions
have been filed against us and the other defendants setting forth
substantially the same allegations. All the cases have been consolidated
before a single judge in the United States District Court for the Southern
District of New York. On May 11, 2001, we received from our underwriters in
our IPO a demand for indemnification of the underwriters' legal fees and
liabilities. Our board of directors resolved to indemnify our officers and
directors named as defendants against their legal fees and liabilities, to the
extent permitted under Indian law. At the time of the IPO, we purchased
Directors & Officers liability insurance (the "D&O Policy"), providing
coverage against federal securities law claims. The D&O Policy includes
coverage for our cost of defending the class action lawsuits, our
indemnification liabilities to our officers and directors, and our
indemnification liabilities to our underwriters. The coverage of the D&O
Policy is denominated in Indian Rupees, but the policy proceeds are payable in
U.S. dollars. Based on the noon buying rate at March 31, 2004, the face amount
of the D&O Policy is approximately US$20.6 million. The proceeds of the D&O
Policy available to satisfy any judgment against us, or any judgment against
persons whom we are obligated to indemnify, will be reduced by the amount of
the legal fees and associated expenses incurred in the course of our defense
and the defense of the individual defendants and the underwriters which are
paid from the D&O Policy. The D&O Policy includes a deductible of
approximately US$259,000 (based on the noon buying rate at March 31, 2004),
which must be paid by us before the D&O Policy proceeds would be available.
The D&O Policy contains various exclusions, which, if met, may result in the
denial of insurance coverage. We have been advised by the insurance carriers
who wrote the D&O Policy that they are not aware of any facts or circumstances
that would cause any of the exclusions to apply, but that the carriers have
reserved their rights to claim that the exclusions do apply if any such facts
or circumstances come to their attention. On June 5, 2001, twenty-four
companies, including us, who had issued securities to the public in their
initial public offerings, together with the investment banks who acted as
underwriters in these initial public offerings, were named as defendants in
the action of Shives et al. v. Bank of America Securities, LLC et al., (the
"Shives Action"), a class action lawsuit filed in the U.S. District Court for
the Southern District of New York. Also named as defendants in this lawsuit
were four of our officers and directors, including Ajit Balakrishnan. The
plaintiffs in this lawsuit allege that the underwriter defendants combined and
conspired to inflate the underwriting compensation they received in connection
with the initial public offerings of the defendant companies, to manipulate
and inflate the prices paid by plaintiffs for securities issued in the initial
public offerings and to restrain and suppress competitive pricing for
underwriting compensation. The plaintiffs allege claims pursuant to the U.S.
Sherman Antitrust Act, 1890, as amended, the U.S. Clayton Antitrust Act, 1914,
as amended, and the Securities Act against the underwriter defendants. The
plaintiffs further allege that the defendants, including us and certain of our
officers and directors, made material misstatements and omissions in violation
of the Securities Act and the Exchange Act by concealing or failing to
disclose the compensation earned by the underwriters in the initial public
offerings. As against us and our officers and directors, the Complaint defines
a "Rediff.com Sub-Class" consisting of all persons who purchased securities of
Rediff.com India Limited from the time of the IPO through April 4, 2001 and
seeks unspecified damages. This case has been consolidated with several
hundred other similar cases filed against other issuers who had IPOs in 2000
and 2001.

         On November 24, 2003, plaintiffs' counsel in the Khanna action and
Shives action filed a Consolidated Amended Securities Class Action Complaint
("Consolidated Complaint") which incorporates the material allegations from
Khanna action and Shives action. On January 30, 2004, we and our officers and
directors filed a motion to dismiss the Consolidated Complaint. The
underwriter defendants filed a separate motion to dismiss. The motions are
currently being briefed by the parties.

         On June 21, 2000, we and our directors and others (Ajit Balakrishnan,
Arun Nanda, Abhay Havaldar, Sunil Phatarphekar, Charles Robert Kaye and Tony
Janz) were named as accused in a criminal complaint (RCC Complaint Number 76
of 2000, the "Complaint"), filed by Mr. Abinav Bhatt, a 22 year old student,
before the Judicial Magistrate, First Class, Pune, India, alleging commission
of an offense under Section 292 of the Indian Penal Code, 1860, as amended, or
IPC, for distributing, publicly exhibiting and putting into circulation
obscene, pornographic and objectionable material. The Complaint alleged that
we, through our website "www.rediff.com", provided a search facility that
enabled Internet users to view pornographic, objectionable and obscene
material. On November 27, 2000, the Judicial Magistrate passed an order in the
Complaint holding that a prima facie case under Section 292 of the IPC had
been made out against us and directed commencement of criminal proceedings
against all the defendants. A criminal writ petition, or Writ Petition, was
filed in the High Court of Mumbai (Criminal Writ Petition Number 1754 of 2000)
seeking, among other things, relief setting aside of the order of the Judicial
Magistrate. The High Court of Mumbai in its order dated December 20, 2000,
while granting ad-interim relief to the petitioners in the Writ Petition,
stayed the order of the Judicial Magistrate pending final disposal of the Writ
Petition. The Writ Petition has been admitted by the High Court of Mumbai.
While we believe that the lawsuit is without merit, and that we and our
directors have a valid defense to the Complaint, in the event that we are
unsuccessful in our defense, we and our directors may face both criminal
penalties and monetary fines.

         A complaint was filed by the Indian Music Industry ("IMI"), a society
representing various music companies in Magistrate's Court India against three
of our directors. The complaint alleges that by providing links to MP3 sites
through its directory we have been guilty of violating Section 51 of the
Copyright Act 1957. The complaint alleges that the MP3 sites to which links
were provided permitted downloading of music, which had not been authorized to
be so downloaded by copyright owners who are members of IMI. Our directors are
named as parties to the lawsuit because, according to the complaint, the
directors are in charge of our affairs and are hence deemed to be guilty of
committing the offense. Our directors have presently been exempted from
personal appearance. Our directors have filed an application for discharge of
the complaint before the Magistrate. Although our directors believe they have
valid defenses to the action, if they are unsuccessful after exhausting all
legal remedies, our directors could face both criminal penalties and monetary
fines.

         All of the foregoing actions require management time and cost. In
addition, we can give no assurances that we will be successful in our defense
of such actions. If any of our directors are subject to criminal penalties, we
may be deprived of their services as a director.

         We are also subject to other legal proceedings and claims, which have
arisen in the ordinary course of its business. Those actions, when ultimately
concluded and determined, will not, in the opinion of management, have a
material effect on our results of operations or financial position.

         For additional information regarding pending litigation filed against
us, please see the section of this annual report entitled "Business--Legal
Proceedings".

A slowdown in the Indian and the U.S. economies and in certain sectors could
adversely affect our business, operating results and financial condition.

         We are dependent on the health of the Indian and the U.S. economies.
A slowdown in the United States and Indian economies or sectors in which our
clients are based, including the Internet and technology-based sectors, or an
overall reduction in consumer and business spending, could have a materially
adverse impact on our business and our prospects. A significant portion of our
revenues are derived from retail customers and from companies that operate in
various sectors, including the Internet and technology-based sectors as well
as insurance, financial services, banking and consumer goods sectors. Many of
these sectors could experience slowdown in growth. As a result, advertisers
may reduce advertising expenditures or may not spend as much money on online
and offline advertising as anticipated. A prolonged or material decline in
Internet advertising expenditure will have a material adverse effect on our
operating results. Further, a slowdown in the Indian and U.S. economies may
make it difficult for us to raise money in the equity and debt markets on
terms favorable to us or at all, which may have an adverse effect on our
financial condition and operating results.

We may not benefit from our acquisitions and investments and our acquired
businesses could increase our net losses.

         We have made several strategic acquisitions and investments in order
to penetrate new markets, generate additional revenue streams and provide
value-added services to our users. We may, if an opportunity arises, acquire
or invest in products, technologies or companies in the future. However, there
can be no assurance that our acquisition and investment strategy will be
successful or that we will realize the anticipated benefits from such
acquisitions or investments. Such transactions are accompanied by a number of
risks, including:

          o    the failure to identify operating weaknesses of the acquired
               business during the course of due diligence and negotiations of
               these transactions;

          o    the difficulty of assimilating the operations, third-party
               relationships and personnel of the acquired companies with our
               operations;

          o    the potential disruption of our ongoing business and
               distraction of management during the acquisition;

          o    the difficulty of incorporating acquired technology, software
               or content into our products, and unanticipated expenses
               related to such integration;

          o    the impairment of relationships with employees and customers as
               a result of any integration of new management personnel;

          o    the potential unknown liabilities associated with acquired
               businesses; and

          o    unfavorable changes in accounting rules and guidelines relating
               to our acquisitions.

         Any or all of our future acquisitions may face similar risks and we
may not be successful in addressing these risks or any other problems
encountered in connection with such acquisitions.

We have a history of losses. We expect to continue to incur losses and we may
not achieve or maintain profitability.

         We have incurred significant net losses and negative cash flows from
operations since our inception in January 1996, including a net loss of
approximately US$5.7 million for the fiscal year ended March 31, 2004. As of
March 31, 2004, we had an accumulated deficit of approximately US$54.4
million. We expect to continue to have net losses and negative operating cash
flows for the foreseeable future. We expect to increase our spending as we
continue to expand our services, advertise and promote our brand, and invest
in the expansion of our infrastructure and sales and marketing staff. We have
incurred and in the future will incur expenses in connection with acquisitions
and investments. Accordingly, we will need to generate significant additional
revenues, while controlling our expenses, to achieve profitability. We may not
be able to do so. Our business model is not yet proven in India or the United
States, and we cannot assure you that we will ever achieve or sustain
profitability or that our history of operating losses will not continue in the
future. If we are unable to achieve or maintain profitability, we will be
unable to build a sustainable business. In this event, the price of our ADSs
and the value of your investment would likely decline.

Intense competition in our businesses could prevent us from achieving or
sustaining profitability.

         Our businesses compete in various sectors including Indian and
foreign online content and services providers, and traditional print and
television media companies. Many of our competitors have a longer operating
history, greater name recognition and customer base, and greater management,
financial, technical, marketing, sales, brand, and other resources than we do.
They can use their superior experience and resources in a variety of
competitive ways, including by investing more aggressively in research and
development, creating superior content, making acquisitions, and competing
more aggressively for advertisers. There has also been a trend toward industry
consolidation so our smaller competitors today may become larger in the
future. If our competitors are more successful than we are at generating
visitors and website traffic due to superior content and other service
offerings, our revenues may decline.

         In addition to Internet companies, we face competition from other
companies that offer traditional media advertising opportunities, including
print and television companies. Most large advertisers have set advertising
budgets, a small portion of which is allocated to Internet advertising. For
the near future, we expect that large advertisers will continue to focus their
advertising efforts on traditional media. If we fail to convince these
companies to spend a larger portion of their advertising budgets with us, or
if our existing advertisers reduce the amount they spend on Internet
advertising, our operating results may decline.

         Competition for visitors, customers, subscribers, advertisers and
e-commerce partners is intense and is expected to increase significantly in
the future because there are no substantial barriers to entry in our market.
Furthermore, it is difficult to predict which online advertising pricing
model, if any, will emerge as the industry standard. This makes it difficult
to predict our future advertising rates and revenues.

         Our revenues could be adversely affected if we are unable to adapt to
new forms of pricing for the services and products we offer. Increased
competition may result in:

          o    loss of visitors and website traffic;

          o    loss of advertisers;

          o    reduced operating margins;

          o    loss of market share; and

          o    diminished value in our services.

         Any one of these factors could materially and adversely affect our
business, financial condition and operating results.

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.

         Our quarterly results may fluctuate significantly in the future based
on a variety of factors. These factors could affect our long-term performance.
Some of these factors include:

          o    increased competition;

          o    changes in pricing policies or our product and service
               offerings;

          o    increase in personnel, marketing and other operating expenses
               to support our anticipated growth;

          o    our ability to attract new users and retain existing users at
               reasonable costs;

          o    our ability to adequately maintain, upgrade and develop our
               portal, our computer network and the systems that we use to
               process customer orders and payments;

          o    the timing of our expansion plans in India and other geographic
               markets;

          o    seasonality in retail sales;

          o    technical difficulties, system or website downtime or Internet
               service disruptions ; and

          o    entry into new businesses requiring substantial investments.

         Our operating results could be volatile and difficult to predict. As
a result, quarter-to-quarter comparisons of our operating results may not be
good indicators of our future performance. In addition, it is possible that
our operating results in any future quarter could be below the expectations of
investors generally and any published reports or analyses of our Company. In
that event, the market price of our ADSs may decline, perhaps substantially.

The loss of one or more significant advertisers could adversely affect our
revenues.

         We derive a considerable portion of our revenues from certain key
advertisers. Our top ten advertisers accounted for 58% of our India Online
advertising revenues. Any failure to meet advertiser expectations could result
in cancellation or non-renewal of contracts. The loss of, or a significant
reduction in the volume of business from, one or more of our large advertisers
could have a material adverse effect on our operating results and financial
condition.

Our operations could be disrupted by unexpected network interruptions caused
by system failures, natural disasters or unauthorized tampering of our
systems.

         Our online businesses rely heavily on the Internet and, accordingly,
depend upon the continuous, reliable and secure operation of Internet servers,
related hardware and software and network infrastructure, such as telephone
lines leased from service providers. The continual accessibility of our
websites and the performance and reliability of our network infrastructure are
critical to our reputation, and our ability to attract and retain users,
advertisers and merchants. Any system failure or performance inadequacy that
causes interruptions in the availability of our services or increases the
response time of our services could reduce our appeal to advertisers and
consumers. Factors that could significantly disrupt our operations include:

          o    system failures and outages caused by fire, floods,
               earthquakes, power loss, telecommunications failures and
               similar events;

          o    software errors; computer viruses, break-ins and similar
               disruptions from unauthorized tampering with our computer
               systems;

          o    security breaches related to the storage and transmission of
               proprietary information, such as credit card numbers or other
               personal information; and

          o    terrorist acts.

         We have limited backup systems and redundancy. The failure of these
backup systems could lead to the disruption of our services and the loss of
important data. We have suffered temporary service outages in the past from
time to time that have resulted in a disruption of our services. Future
disruptions or the occurrence of any of the foregoing factors may result in
users being temporarily unable to access our content, community and e-commerce
offerings. Any sustained disruption will reduce the number of visitors to our
website and have a material adverse impact on the revenues from e-commerce
transactions handled through our website. Such disruptions could also reduce
the number of advertisers on our site and materially affect our operating
results, which may lead to a decline in the market price of our ADSs.

         We seek to protect our computer systems and network infrastructure
from physical break-ins, as well as security breaches and other disruptive
problems. We employ security systems, including firewalls and password
encryption, designed to minimize the risk of security breaches. There can be
no assurance that these security measures will be successful. If someone
penetrates our network security or otherwise misappropriates sensitive data
about our users, we could be subject to liability. These liabilities could
include fraud claims and other claims for misuses of personal information,
such as unauthorized marketing purposes. These claims could result in
litigation and could have a material adverse effect on our business, results
of operations and financial condition.

         We do not carry material business interruption insurance to protect
us in the event of a catastrophe, even though such an event could lead to a
significant negative impact on our business. Any sustained disruption in
Internet access provided by third parties could also adversely affect our
business.

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 certain key members of our management team. In
particular, our success depends upon the continued efforts of our Chairman and
Managing Director, Ajit Balakrishnan. We do not carry any key employee
insurance. All of our employees are located in India and the United States,
and each may voluntarily terminate his or her employment with us. Our planned
activities will require additional expertise in sales and marketing,
technology and other areas. The labor market for skilled employees is
extremely competitive, and the process of hiring employees with the necessary
skills is time consuming and requires the diversion of significant resources.
While we have not experienced difficulty in employee retention or integration
to date, we may not be able to continue to retain existing personnel or
identify, hire and successfully integrate additional qualified personnel in
the future. The loss of the services of key personnel, especially the
unexpected death or disability of such personnel, or the inability to attract
additional or replacement qualified personnel, could impair the growth of our
business.

We are highly dependent on our agreements with cellular service providers for
service delivery and fee collection.

         Our mobile services, including wireless short messaging services,
depend mainly on the cooperation of a large number of private and government
mobile phone operators who have the necessary licenses to provide cellular
services to consumers across various states/cities in India. We rely on all of
these mobile phone operators to provide network and gateway for our wireless
short messaging services. We also utilize their billing systems to collect
service fees from customers. If any or all of these cellular service providers
encounter technical problems, or if they refuse to cooperate with us, our
ability to provide mobile services may cease or be severely disrupted, which
may have a significant and adverse impact on our future operating results.

We rely on increased sales of, and high renewal rates for, our subscription
and fee based products and services.

         A substantial part of our online revenue growth for the fiscal year
ended March 31, 2004 was from our fee-based Internet services consisting
primarily of paid e-mail service, subscription service and wireless short
messaging service in India. We are deriving an increased portion of our
revenues from these services. If not enough users adopt and use our fee-based
Internet services, our growth may be adversely affected.

Potential liability for information we publish may require us to defend
against legal claims, which may cause significant operational expenditures.

         We may be subject to claims for defamation, libel, copyright or
trademark infringement or other legal actions relating to the information we
publish. These types of claims have been brought, sometimes successfully,
against news and opinion publishing businesses in the past. We could also be
subject to claims based upon the content that is accessible from our website
through links to other websites. Our insurance coverage may not adequately
protect us against these claims. Liability claims could require us to spend
significant time and money in litigation and to pay significant damages. As a
result, liability claims, whether or not successful, could seriously damage
our reputation and business.

Privacy concerns may prevent us from selling demographically targeted
advertising in the future and make us less attractive to advertisers.

         We collect personal data from our user base in order to understand
better our users and their needs and to help our advertisers target specific
demographic groups. If privacy concerns or regulatory restrictions prevent us
from selling demographically targeted advertising, we may become less
attractive to advertisers. For example, as part of our future advertisement
delivery system, we may integrate user information such as advertisement
response rate, name, address, age or e-mail address, with third-party
databases to generate comprehensive demographic profiles for individual users.
However, if we are unable to construct demographic profiles for Internet users
because users refuse to give consent, we will be less attractive to
advertisers and our business may suffer.

We may not be able to grow our business if online advertising in our markets
does not expand.

         Our business strategy depends on the anticipated growth of online
advertising in our markets and the growth of our revenues depends on increased
revenues generated by advertising. We anticipate that a high portion of our
future revenues will be derived from hosting advertising space on our website.
Online advertising is an unproven business and our ability to generate and
maintain significant advertising revenues will depend on:

          o    our ability to attract advertisers at profitable rates in light
               of intense competition;

          o    our ability to generate and continue to grow a large community
               of users with demographics attractive to advertisers;

          o    advertisers' acceptance of the Internet as an effective and
               sustainable medium;

          o    our ability to contract with a diverse group of advertisers
               that will generate attractive traffic patterns and user
               demographics;

          o    the effectiveness of our advertising delivery, tracking and
               reporting systems; and

          o    our ability to adapt to new forms of Internet advertising.

         Different pricing models are used to sell online advertising, and it
is difficult to predict which, if any, of the models will emerge as the
industry standard. This makes it difficult to project our future advertising
rates and revenues. A reduction in traffic on our website may cause new
advertisers not to enter into contracts with us and could cause existing
advertisers not to renew their contractual arrangements with us, each of
which, in turn, would reduce our potential advertising revenues. Additionally,
any development of Internet software that blocks advertisements before they
appear on a user's screen may hinder the growth of online advertising and
could materially and adversely affect our ability to grow our online
advertising and our business. Also, a slowdown in economic growth, and in
particular a slowdown in the growth of companies that advertise on the
Internet, may result in a reduction in our advertising revenues.

         Our contracts with advertising customers do not commit them to
continue to provide us with a specific volume of business and can typically be
terminated by them with or without cause, with little or no advance notice and
without penalty. Additionally, our contracts with advertising customers often
are limited to a specific project and not any future work. There are also a
number of factors other than our performance, and not within our control, that
could cause the loss of advertising customers. Early termination of material
contracts or non-renewal of an expired material contract could have a material
adverse effect on our business and on our future financial performance.

We may not be able to manage our operations effectively if we grow, which
could harm our business.

         We anticipate expansion of our business in India as we address growth
in our customer base and market opportunities. In order to manage the expected
growth of our operations and personnel, we will be required to improve
existing and implement new operational and financial systems, procedures and
controls, and to expand, train and manage our employee base. Further, our
management will be required to maintain and expand our relationships with
various other partners, mobile phone operators, Internet and other online
service providers and other third parties necessary to our business. We cannot
assure you that our current and planned personnel, systems, procedures and
controls will be adequate to support our future operations.

Currency exchange rate fluctuations may adversely impact our operating results
and financial condition.

         The exchange rate between the Indian Rupee and the U.S. dollar has
changed substantially in recent years and may fluctuate substantially in the
future. During the period from the fiscal year ended March 31, 1997 to the
fiscal year ended March 31, 2004, the value of the Indian Rupee against the
U.S. dollar declined by approximately 21% from Rs.35.9 to Rs.43.4 per U.S.
dollar. Because a substantial portion of our cash and cash equivalents is
currently held in Indian Rupees, devaluation or further depreciation of the
value of the Indian Rupee will adversely affect the value of our cash reserves
in foreign currency terms. In addition, our market valuation could be
materially adversely affected by the devaluation of the Indian Rupee if U.S.
investors analyze our value based on the U.S. dollar equivalent of our
financial condition and operating results. We expect that a substantial
portion of our revenues will continue to be generated in U.S. dollars from our
U.S.-based operations for the foreseeable future and that a significant
portion of our expenses, including personnel costs, will continue to be
denominated in Indian Rupees. Consequently, the results of our operations may
be adversely affected by currency fluctuations.

If we are unable to adapt to the rapid technological changes, our business
could suffer.

         Our success will depend, in part, on our ability to respond to
technological advances and practices on a cost-effective and timely basis. The
development and implementation of such technology entails significant
technical and business risks. There can be no assurance that we will
successfully implement new technologies effectively. If we are unable, for
technical, legal, financial or other reasons, to adapt in a timely manner to
changing market conditions or customer requirements, our business and our
future financial performance could be materially adversely affected.

If we are unable to successfully seize upon new business opportunities, our
growth may be adversely affected.

         New technologies are giving rise to new business opportunities, such
as in gaming and paid search. We believe that much of our future growth will
depend on our ability to seize upon these opportunities and successfully
launch new products and services. If we are unable to do so, our future growth
and financial performance could be adversely affected.

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.

         As of March 31, 2004, our seven largest shareholders beneficially
owned an aggregate of approximately 76.6% of our equity shares. As a result,
such shareholders acting collectively are able to exercise control over most
matters requiring approval by our shareholders, including the election of
directors and approval of significant corporate transactions. Under Indian
law, a simple majority is sufficient to control all shareholder action except
for those items which require approval by a special resolution. In case of a
special resolution, approval of three-fourths of the shareholders present and
voting is required. Examples of actions that require a special resolution
include:

          o    amending our Articles of Association;

          o    issuing additional shares of capital stock, except for pro rata
               issuance to existing shareholders;

          o    commencing any new line of business; and

          o    commencing a liquidation.

         The interests of this group may differ from our other shareholders or
owners of our ADSs and could result in a delay or prevention of a change in
control of our Company even if a transaction of that sort would be beneficial
to our other shareholders, including the owners of our ADSs, or in the best
interest of our Company. For additional information regarding our principal
shareholders, please see the section of this annual report entitled "Principal
Shareholders".

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.

         Our intellectual property rights are important to our business. We
rely on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our
intellectual property.

         Our efforts to protect our intellectual property may not be adequate.
Our competitors may independently develop similar technology or duplicate our
products or services. Unauthorized parties may infringe upon or misappropriate
our products, services or proprietary information. In addition, the laws of
India do not protect proprietary rights to the same extent as the laws of the
United States, and the global nature of the Internet makes it difficult to
control the ultimate destination of our products and services. The
misappropriation or duplication of our intellectual property could disrupt our
ongoing business, distract our management and employees, reduce our revenues
and increase our expenses. We may need to litigate to enforce our intellectual
property rights or to determine the validity and scope of the proprietary
rights of others. Any such litigation could be time-consuming and costly and
may not ultimately prove successful.

         We could be subject to intellectual property infringement claims as
the number of our competitors grows and the content and functionality of our
website or other product or service offerings overlap with competitive
offerings. Defending against these claims, even if not meritorious, could be
expensive and divert our attention and resources from operating our company.
If we become liable to third parties for infringing their intellectual
property rights, we could be required to pay a substantial damage award and
forced to develop non-infringing technology, obtain a license or cease selling
the applications that contain the infringing technology. We may be unable to
develop non-infringing technology or obtain a license on commercially
reasonable terms, or at all. For additional information regarding our
intellectual property rights, please see the section in this annual report
entitled "Business--Intellectual Property".

We do not plan to pay dividends in the foreseeable future.

         We do not anticipate paying cash dividends to the owners of our
equity shares or ADSs in the foreseeable future. Accordingly, investors must
rely on sales of their equity shares or ADSs, which may increase or decrease
in value, as the only way to realize cash from their investment. Investors
seeking cash dividends should not purchase our ADSs.

We may be a passive foreign investment company for U.S. federal income tax
purposes, which could increase the U.S. tax costs to U.S. holders of ADSs.

         It is uncertain whether or not we will be a passive foreign
investment company, or PFIC, for U.S. federal income tax purposes for the
current or future taxable years. PFIC status is a factual determination that
is based on the composition of our income and the value of our assets during
each year. Valuation of our assets, including goodwill, is based on the market
price of the ADSs, which is subject to change from time to time. If we are a
PFIC, U.S. holders of ADSs may incur significantly increased U.S. income tax
costs on the sale or disposition of ADSs and on the receipt of distributions
on ADSs to the extent such distributions are treated as "excess distributions"
under the U.S. income tax rules. Please also see the section in this annual
report entitled "Taxation--United States Federal Tax--Passive Foreign
Investment Company Rules".

The high cost of accessing the Internet in India limits our pool of potential
customers and the growth of our business.

         Our growth is limited by the high cost of obtaining hardware,
software and communications links necessary to connect to the Internet in
India. If the costs required to access the Internet do not significantly
decrease, much of India's population will not be able to afford to use our
services. The failure of a significant number of additional Indians to obtain
affordable access to the Internet would make it difficult to execute our
business strategy.

The limited installed personal computer base in India limits our pool of
potential customers and restricts the growth of our business.

         The market penetration of, or access to, personal computers, or PCs,
and the Internet in India is far lower than in the United States. According to
Internet Service Providers' Association of India, in March 2004 India had
approximately 4.5 million Internet connections compared to a total population
in India of more than 1 billion. Alternate methods of obtaining access to the
Internet, such as through cable television modems or set-top boxes for
televisions, although available, are available in a limited manner in India.
We cannot assure you that the market penetration of personal computers in
India will increase rapidly or at all, or that alternate means of accessing
the Internet will develop and become widely available in India. If these
events do not occur we will not be able to expand our customer base, which
will make it difficult for us to execute our business strategy.

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 high bandwidth cost, and other technical obstacles in India.

         The growth of our India Online business is highly dependent on the
growth in the number of PCs in use, and the penetration rates of broadband and
Internet use and mobile phones.

         The growth of the telecom and cellular industry in India will be a
significant factor in facilitating our growth. As with many developing
nations, the fixed line telecommunications infrastructure in India is not
fully developed. Although this industry has been opened for private sector
participation, service levels remains inferior to service levels in most
developed countries. Further, telephone penetration rates, measured by the
number of telephone lines per one thousand persons in India, is low when
compared to most developed countries. Bandwidth, the measurement of the volume
of data capable of being transported in a communications system in a given
amount of time, remains very expensive in India, especially when compared to
bandwidth costs in the United States. Prices for bandwidth capacity have
remained high, as compared to the United States, due to, among other things,
capacity constraints. Further, limitations in network architecture in India
sometimes limit Internet connection speeds to 28 Kbps or less, which are less
than the 56 Kbps connection speeds on conventional dial-up telephone lines,
and significantly less than the up to 1.5 Mbps connection speed on direct
satellite link, digital subscriber lines and cable modems in the United
States. These speed and cost constraints may severely limit the quality and
desirability of using the Internet in India, which consequently may limit our
ability to expand our pool of customers and reduce our desirability to online
advertisers.

         In other developing Asian markets such as South Korea and Malaysia,
an increase in broadband penetration rates led to rapid growth in the number
of online subscribers. Currently, the broadband penetration rates in India is
very low compared to other developed countries. As per the Telecom Regulatory
Authority of India (TRAI) Report, India currently has 0.4 internet connections
and 0.02 broadband connections per 100 persons, while South Korea and the
People's Republic of China have 26 and 2.5 internet connections, and 25 and
1.4 broadband connections per 100 persons, respectively. If the broadband and
telecom industry in India fails to register significant growth as has been
experienced by other developed countries, our growth may also be affected.

The success of our e-commerce business depends on its acceptance and growth
in India, which is uncertain.

         Many of our existing and proposed products and services are designed
to facilitate e-commerce in India, although there is very little e-commerce
currently being conducted in India. Demand and market acceptance for these
products and services by consumers is highly uncertain. Critical issues
concerning the commercial use of the Internet, such as legal recognition of
electronic records, validity of contracts entered into through the Internet
and the validity of digital signatures, are governed in India by the
Information Technology Act, 2000 (the "IT Act"). In addition, many Indian
businesses have deferred deploying e-commerce initiatives for a number of
reasons, including the existence or perception of, among other things:

          o    inconsistent quality of service;

          o    lack of legal infrastructure relating to e-commerce in India;

          o    lack of security of commercial data such as credit card
               numbers; and

          o    low number of Internet users in India.

         If usage of the Internet and e-commerce in India does not
substantially increase and the legal infrastructure and network infrastructure
in India are not further developed, we are not likely to achieve significant
growth of our e-commerce products and services. Also, a slowdown in economic
growth in India may result in an overall reduction in consumer and business
spending, which will adversely affect our e-commerce services revenues.

We may be liable to third parties for information retrieved from our website.

         We could be exposed to liability for the selection of listings that
may be accessible through our portal or through content and materials that we
develop or that our users may post in message boards, chat rooms, or other
interactive services. For example, we are a party to a criminal writ petition
filed in the High Court of Mumbai, India, which alleged that we, through our
website "www.rediff.com", provided a search facility that enabled Internet
users to view pornographic, objectionable and obscene material. Please see the
section in this annual report on "Business - Legal Proceedings" for more
information on this litigation. We may also be subject to claims for
defamation, negligence, copyright or trademark infringement, personal injury
or other legal theories relating to the information we post on our website. We
could also become liable if confidential information is disclosed
inappropriately on or through our website. It is also possible that if any
information provided through our services contains errors, third parties could
make claims against us for losses incurred in reliance on the information. We
offer Internet-based e-mail services, which expose us to potential liabilities
or claims resulting from:

          o    unsolicited e-mail;

          o    lost or misdirected e-mail;

          o    illegal or fraudulent use of e-mail; and

          o    interruptions or delays in e-mail service.

         The laws in India and the United States relating to the liability of
companies which provide online services, like ours, for activities of their
users are currently unsettled. Investigating and defending these claims is
expensive, even if they do not result in liability. We do not carry insurance
to protect us against these types of claims, and there is no precedent on such
liabilities under Indian law. Further, our business is based on establishing
the rediff.com portal as a trustworthy and dependable provider of content and
services. Allegations of impropriety, even if unfounded, could damage our
reputation, disrupt our ongoing business, distract our management and
employees, reduce our revenues and increase our expenses.

We may be liable to third parties for the products they purchase online.

         Consumers may sue us if any of the products or services that are
offered on our website's marketplace are defective, fail to perform properly
or injure the user. Although our agreements with manufacturers and
distributors whose products are displayed on our website's marketplace
typically contain provisions intended to limit our exposure to such liability
claims, these provisions may not be sufficient to limit all of our liability
from such claims. Product warranties are the responsibility of those who sell
products on our website's marketplace, although our reputation can be
adversely affected if a user is not satisfied with a purchase. Liability
claims could require us to spend a considerable amount of resources, time and
money in litigation and to pay significant damages. Allegations of
impropriety, even if unfounded, or poor service provided by manufacturers and
distributors on our website's marketplace, could damage our reputation,
disrupt our ongoing business, distract our management and employees, reduce
our revenues and increase our expenses.

         In addition, the laws relating to the online sale of goods is not
fully developed. The various laws and regulations that cover online sales of
products and their interpretation involve a significant degree of uncertainty.
For example, we may have to register our business under various laws relating
to the sale of goods. Our business, financial condition and operating results
may be materially affected if we were required to obtain such registrations.

               Risks Related to Investments in Indian Companies

         We are incorporated in India, and a large part of our assets,
business operations and employees are located in India. Consequently, our
financial performance and the market price of our ADSs will be affected by
social and economic developments in India and the policies of the Government
of India, including taxation and foreign investment policies, as well as
changes in exchange rates, interest rates and controls.

Regional conflicts in South Asia could adversely affect the Indian economy
and cause our business to suffer.

         South Asia has from time to time experienced instances of civil
unrest and hostilities among neighboring countries, including between India
and Pakistan. In recent years there have been military confrontations between
India and Pakistan that have occurred in the region of Kashmir. Events of this
nature in the future could influence the Indian economy and could have a
material adverse effect on the market for securities of Indian companies,
including our ADSs, and on the market for our services.

Political instability related to the current multi-party coalition government
could halt or delay the liberalization of the Indian economy and adversely
affect economic conditions in India generally and our business in particular.

         Since 1991, successive Indian governments have pursued policies of
economic liberalization, including significantly relaxing restrictions on the
private sector. We cannot assure you that these liberalization policies will
continue in the future. The recently elected Government of India may announce
certain policies and take initiatives that may slow the economic
liberalization policies that have been pursued by previous governments. The
rate of economic liberalization could change, and specific laws and policies
affecting technology companies, foreign investment, currency exchange rates
and other matters affecting investment in our securities could change as well.
A significant change in India's economic liberalization and deregulation
policies could adversely affect business and economic conditions in India
generally, including our business.

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.

         Indian law constrains our ability to raise capital through the
issuance of equity or convertible debt securities. Foreign investment in an
Indian company may require approval from relevant government authorities in
India including the Reserve Bank of India. The Government of India has
classified existing businesses into various categories for automatic approval
of foreign direct investment up to certain prescribed percentages. Under the
current guidelines, the Government of India provides for approval under the
automatic route for foreign direct investment proposals relating to the
information technology sector.

         We cannot assure you that equity or other forms of financing will be
available on terms favorable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our ability to fund our
operations, take advantage of unanticipated opportunities, develop or enhance
our infrastructure and services, or otherwise respond to competitive pressures
would be significantly limited. Our business, operating results and financial
condition could be materially adversely affected by any such limitation.

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 ADSs.

         Currently there is no public trading market for our equity shares in
India or elsewhere, nor can we assure you that we will take steps to develop
one or that we will be able to meet applicable listing guidelines or
regulations to list our equity shares on a stock exchange in India or
elsewhere. Our equity shares are only traded on the Nasdaq Small Cap Market,
or Nasdaq, in the form of ADSs. Under current Indian laws and regulations,
outstanding equity shares not listed in India may not be deposited into our
depositary facility. Thus, if you elect to surrender your ADSs and receive
equity shares, you will not be able to trade those equity shares on any
securities market. Further, you will be prohibited from re-depositing such
unlisted outstanding equity shares with our Depositary.

         Under proposed regulations in India, our Depositary may be allowed to
accept deposits of outstanding equity shares and issue American Depositary
Receipts, or ADRs, evidencing ADSs representing such equity shares only to the
extent, and limited to the number, of ADSs converted into underlying equity
shares, if such equity shares are listed in recognized Indian stock exchanges.
In the present case, since our outstanding equity shares are unlisted, you
would be unable to deposit outstanding equity shares with our Depositary and
receive ADRs.

         Under current Indian regulations and practice, the approval of the
Reserve Bank of India, or RBI, is required for the sale of equity shares
underlying ADSs by a non-resident of India to a resident of India as well as
for a renunciation of rights in favor of a resident of India unless the sale
of the outstanding equity shares is made through a recognized stock exchange.
Since our outstanding equity shares are unlisted, any such transfer would
require the approval of the RBI. Under currency exchange controls that are in
effect in India, any such approval granted by the Reserve Bank of India will
specify the price at which the equity shares may be transferred based on a
specified formula, and a higher price per share may not be permitted.
Additionally, shareholders who seek to convert the Rupee proceeds from a sale
of equity shares in India into foreign currency and repatriate that foreign
currency from India will have to obtain Reserve Bank of India approval for
each transaction. We cannot assure you that any required approval from the
Reserve Bank of India or any other government agency can be obtained on any
particular terms or at all.

         If in the future a market for our equity shares is established in
India, our equity shares may trade at a discount or premium to the ADSs, in
part because of such restrictions.

Our ability to acquire companies organized outside India may depend on the
approval of the Government of India. Our failure to obtain approval from the
Government of India for acquisitions of companies organized outside India may
restrict our growth, which could negatively affect our revenues.

         As part of our business strategy, we may plan to acquire
complementary businesses, including businesses based outside of India. For the
acquisition of a business based outside India we may be required to obtain
approval of the Reserve Bank of India and/or the Government of India. The
Government of India has recently issued guidelines permitting acquisitions
without approval of companies organized outside India with a transaction
value:

          o    in cash, up to 100% of the proceeds from an ADS offering or
               balances in the Exchange Earners Foreign Currency ("EEFC")
               Account;

          o    if in cash (not through balances in an EEFC account or
               utilization of ADR issues) subject to a cap of 100% of the
               Indian party's net worth; and

          o    if in stock in the form of listed ADRs, the greater of $100
               million or 10 times the acquiring company's export earnings in
               the previous fiscal year and such issue of ADRs is backed by a
               new issuance of equity shares.

         We cannot assure you that we will be able to obtain any required
approval from the Reserve Bank of India and/or the Government of India. Our
failure to obtain approval from the Government of India for acquisitions of
companies organized outside India may restrict our growth, which could
negatively impact our revenues.

It may be difficult for you to enforce any judgment obtained in the United
States against us or our affiliates.

         We are incorporated under the laws of the Republic of India and many
of our directors and executive officers reside outside of the United States.
In addition, a large part of our assets and the assets of many of these
persons are located outside of the United States. As a result, you may be
unable to:

          o    effect service of process upon us outside India or these
               persons outside the jurisdiction of their residence; or

          o    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 solely upon the
               federal securities laws of the United States.

         We have been advised by our Indian counsel that the United States and
India do not currently have a treaty providing for reciprocal recognition and
enforcement of judgments of courts in the United States in civil and
commercial matters. Therefore, a final judgment for the payment of money
rendered by any federal or state court in the United States on civil
liability, whether or not predicated solely upon the federal securities laws
of the United States, would not be enforceable in India. However, the party in
whose favor such final judgment is rendered may bring a new suit in a
competent court in India based on a final judgment which has been obtained in
the United States. A judgment of the courts in the United States shall be
conclusive as to any matter directly adjudicated between the parties to the
suit except if Indian courts were of the opinion that such judgment:

          o    was not rendered by a court of competent jurisdiction;

          o    was not rendered on the merits of the case;

          o    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;

          o    was obtained in proceedings which are opposed to "natural
               justice"; or

          o    sustains a claim founded on a breach of any law in force in
               India.


               Risks Related to the ADSs and Our Trading Market

An active or liquid market for our ADSs is not assured.

         Active, liquid trading markets generally result in lower price
volatility and more efficient execution of buy and sell orders for investors.
Liquidity of a securities market is often a function of the volume of the
shares that are publicly held by unrelated parties. Although holders of our
ADSs are entitled to withdraw the equity shares underlying the ADSs from our
depositary facility at any time, subject to certain legal restrictions, there
is no public market for our equity shares in India or elsewhere. Under current
Indian law, equity shares may be deposited into our depositary facility in
exchange for ADS, under certain circumstances. Current Indian regulations
allow our Depositary to accept deposits of outstanding equity shares and issue
ADRs, evidencing ADSs representing such equity shares only to the extent, and
limited to the number, of ADSs converted into underlying equity shares and so
long as such equity shares were purchased through SEBI registered stock
brokers which would require our shares be listed in a recognized Indian stock
exchange. Therefore, if you elect to surrender your ADSs and receive equity
shares, you would be unable to deposit outstanding equity shares with our
Depositary and receive ADRs because the number of ADRs that can be issued
cannot, at any time, exceed the number of ADRs converted into underlying
equity shares. Therefore, unless the law is changed, the number of outstanding
ADSs and trading volumes will decrease to the extent that equity shares are
withdrawn from our depositary facility and not deposited for the re-issuance
of ADSs, which may adversely affect the market price and the liquidity of the
market for the ADSs.

Our management has broad discretion in using the proceeds from our equity
offerings and therefore investors will be relying on the judgment of our
management to invest those funds effectively.

         Our management has broad discretion with respect to the expenditure
of the net proceeds from our equity offerings. As of March 31, 2004,
approximately US$11.6 million of the net proceeds from our ADS offering
completed in June 2000 remain as cash and cash equivalents and short term
deposits with banks on which we are earning interest. We intend to use these
proceeds primarily to develop content for our Internet portal, to advertise
and promote our brand and for general corporate purposes, including capital
expenditures and strategic investments, partnerships and acquisitions.
However, there is a possibility that we may be unable to make potential
strategic investments, partnerships or acquisitions in the near future and a
risk that our management may use the net proceeds from our equity offerings in
an inefficient or ineffective manner.

Our ADS market price may be highly volatile and could drop unexpectedly in
the future.

         The stock markets in the United States have from time to time
experienced significant price and volume fluctuations that have affected the
market prices for the securities of technology companies, particularly
Internet companies. Volatility in the price of our ADSs may be caused by
factors outside of our control and may be unrelated or disproportionate to our
operating results. In the past, following periods of volatility in the market
price of a public company's securities, securities class action litigation has
often been instituted against that company. The securities class action
litigation has been instituted against us in the United States. Such
litigation brought against us, even if unsuccessful, could damage our
reputation and result in substantial costs and a diversion of our management's
attention and resources.

Owners of our ADSs may be restricted in their ability to exercise preemptive
rights and thereby may suffer future dilution of their ownership position.

         Under the Indian Companies Act, 1956, as amended (the "Companies
Act"), a company incorporated in India must offer its holders of equity shares
preemptive rights to subscribe and pay for a proportionate number of shares to
maintain their existing ownership percentages prior to the issuance of any new
equity shares, unless the preemptive rights have been waived by adopting a
special resolution by holders of three-fourths of the company's equity shares
which are voted on the resolution. U.S. owners of ADSs may not be able to
exercise preemptive rights for equity shares underlying ADSs unless a
registration statement under the Securities Act is effective with respect to
the rights or an exemption from the registration requirements of the
Securities Act is available. Our decision to file a registration statement
will depend on the costs and potential liabilities associated with any given
registration statement as well as the perceived benefits of enabling the
owners of our ADSs to exercise their preemptive rights and any other factors
that we deem appropriate to consider at the time the decision must be made. We
may elect not to file a registration statement related to preemptive rights
otherwise available by law to our shareholders. In the case of such future
issuance, the new securities may be issued to our Depositary, which may sell
the securities for the benefit of the owners of our ADSs. The value, if any,
our Depositary would receive upon the sale of such securities cannot be
predicted. To the extent that owners of ADSs are unable to exercise preemptive
rights granted in respect of the equity shares represented by their ADSs,
their proportional interests in our company would be reduced.

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.

         Holders of ADSs may exercise voting rights only through a depositary,
unlike an owner of equity shares, who can exercise voting rights directly. An
owner of ADSs generally will have the right under the deposit agreement to
instruct our Depositary to exercise the voting rights for the equity shares
represented by the ADSs. Owners of ADSs have no rights pursuant to the
Companies Act, under which we are incorporated, and are limited to those
rights granted to them pursuant to the deposit agreement.

         If our Depositary timely receives voting instructions from an owner
of ADSs, it will endeavor to vote the securities represented by those ADSs in
accordance with such voting instructions. In the event that voting takes place
by a show of hands, our Depositary will cause the custodian to vote all
deposited securities in accordance with the instructions received from owners
of a majority of the ADSs for which our Depositary receives voting
instructions. However, the ability of our Depositary to carry out voting
instructions may be limited by practical and legal limitations and the terms
of the securities on deposit. We cannot assure that holders of ADSs will
receive voting materials in time to enable them to return voting instructions
to our Depositary in a timely manner.

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 securities.

         The market price of our ADSs could decline as a result of sales of a
large number of equity securities on a U.S. stock exchange or elsewhere, or
the perception that such sales could occur. Such sales also might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate. As of March 31, 2004, we had an aggregate of
12,827,425 equity shares outstanding. Of the outstanding equity shares,
5,354,450 ADSs, representing 2,677,225 equity shares, are freely tradable. The
remaining equity shares may be sold in the United States only pursuant to a
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act.


<PAGE>

                                   BUSINESS


Overview

         Our legal name is Rediff.com India Limited. We were incorporated on
January 9, 1996 as Rediff Communication Private Limited under the Indian
Companies Act. We converted to a public company on May 29, 1998. On February
15, 2000 we changed our name to Rediff.com India Limited. Our principal office
is located at Mahalaxmi Engineering Estate, 1 st Floor, L.J. First Cross Road,
Mahim (West), Mumbai 400 016, India, and our telephone number is
+91-22-2444-9144. Our Internet address is www.rediff.com.

         We are a leading Internet destination in India, focusing on India and
the global Indian community. Our websites in India and the U.S. consist of
communication services, such as e-mail and instant messaging, news and
information channels, community features, sophisticated search engines, and
mobile and online marketplace services.

         We also publish two weekly newspapers aimed at the Indian-American
community based in the United States and Canada: "India Abroad" and "India in
New York".

         During the fiscal year ended March 31, 2003, our management
reclassified our business segments and reviewed our performance on a new
basis. Revenues during the fiscal year were segmented under India Online
business (formerly "media services and merchandising services"), U.S.
Publishing business, which include `Rediff U.S.A.' and `India Abroad'
(formerly "media services"), and phone card business (formerly known as
"communication services"). In April of 2004, we sold our phone card business
and in accordance with SFAS 144, Accounting for the impairment or disposal of
long-lived assets, the operations of this business have been classified under
discontinued operations. Currently we operate in two business segments, the
India Online business and the U.S. Publishing business.

         On June 14, 2000, we issued 4.6 million ADSs, representing 2.3
million equity shares at a price of US$12.00 per ADS, raising net proceeds of
US$49.8 million, after underwriting discounts and expenses, and we listed our
ADSs on the Nasdaq National Market. On June 20, 2000, the underwriters of our
offering exercised their over-allotment option and we issued an additional
690,000 ADSs, representing 345,000 equity shares at a price of US$12.00 per
ADS for net proceeds of US$7.5 million. The net proceeds of the ADS offering
have been used by us, and in future, are intended to be used by us, to develop
content for our Internet portal, to advertise and promote our brand, and for
general corporate purposes, including capital expenditures, strategic
investments, partnerships and acquisitions.

         During the years 2001 and 2002, while we waited for the Indian
Internet user base to grow, we made a number of acquisitions in the United
States to strengthen our offerings to people of Indian origin living in North
America. First, we acquired "thinkindia.com", an Internet portal servicing
people of Indian origin in the United States, for $3.4 million. Next, in March
2001, we acquired ValuCom, a provider of online phone cards, for US$3.7
million plus deferred consideration payable over a period of 2 years.
Subsequently, in July 2002, we concluded the acquisition of ValuCom by paying
the deferred consideration of approximately US$3.1 million. In April 2001, we
acquired India Abroad and India in New York, two weekly community newspapers
based in New York, for approximately US$10.7 million.

         We periodically evaluate the fair value of goodwill arising from
these acquisitions by applying the guidelines of SFAS No. 142, "Goodwill and
Other Intangible Assets", and wrote off US$3.3 million, US$8.3 million and
US$1.7 million for the fiscal years ended March 31, 2002, 2003 and 2004,
respectively. In accordance with SFAS 144, Accounting for the impairment or
disposal of long-lived assets, the goodwill write-off relating to our Valucom
acquisition has been disclosed as results from discontinued operations. The
residual value of goodwill at March 31, 2004 relates to our India Abroad
business and amounts to US$7.3 million.

         During the fiscal year ended March 31, 2002, we reviewed the values
of our investments in Apnaloan.com, Traveljini.com and Billjunction.com, three
Indian Internet businesses in which we had purchased minority stakes during
2001, and concluded that these investments had suffered permanent impairment
due to the downturn in valuations of dot.com companies, together with the
generally adverse conditions affecting the technology industry. Accordingly,
we wrote down the value of our investments in these companies and recorded the
appropriate impairment expense.

         During the fiscal year ended March 31, 2004, we evaluated the
prospects of the Valucom business and decided that, because of a number of
factors, including the downward trend of telecom rates for US-India telephone
calls, the emergence of low cost- low quality competitors and our lack of
sufficient scale, it was more prudent to exit the Valucom business. In April
2004, we exited this business.

Our Markets

         We believe that the growth of our revenues and profits from the India
Online business is dependent on the growth of the Indian Internet and mobile
phone user bases, the evolution of adequate payment mechanisms and our ability
to capture a sizeable share of the increase in revenues resulting from such
growth.

         The growth of the user bases for internet and mobile phones, in turn,
is dependant on government policies which facilitate a competitive and
financially healthy telecom industry. During the last few years, the
Government of India has taken a number of steps in this direction- opening
most sectors of the telecom industry to private sector and foreign capital,
establishing independent regulatory authorities and reducing taxes on personal
computers and mobile phones. We believe these steps are starting to show
results:

          -    According to the Indian Internet and Online Association, the
               number of Internet users in India was 24 million as of March
               31, 2004,a growth of 41% compared to March 31, 2003. The number
               of mobile users in India was 38 million as of March 31, 2004, a
               growth of nearly 90% as compared to March 31, 2003. The number
               of personal computers as a percentage of number of households,
               or personal computer penetration rate, in India as of March 31,
               2004 was 7% as compared to 6% as of March 31, 2003.

         The growth of our US businesses is dependant on our ability to launch
new services that appeal to the approximately 2 million affluent Asian Indians
living in the United States.

Our Opportunity

         Internet and mobile phone usage is at an early stage in India and
after a period of slow growth in the 2000-2003 period, is currently starting
to accelerate. We believe our opportunities are driven by the following five
factors:

         1. Early mover in the Indian market; brand is recognized and valued
by Indian Internet users

         Our free e-mail service, RediffMail, is used by large numbers of
Indians living in over 3,000 towns in India. Our news service has acquired a
reputation for reliable, dispassionate and fast reporting of breaking news.
Our online shopping services pioneered e-commerce in India.

         2. Few Portals in India

         We are one of the few Internet companies in India offering complete
portal services, such as e-mail, search, chat, instant messaging, blogs, news
and online shopping.

         3. Early stage of online shopping in India

         The low credit and debit card penetration rates in India means that
many potential e-commence customers are not able to make payments online.
Moreover, distribution and fulfillment facilities are not integrated
nationally. Anticipated improvement in infrastructure, an increase in credit
and debit card penetration rates, and the development of alternative payment
mechanisms for online purchases, such as cash on delivery (C.O.D.), is
expected to fuel the growth of e-commerce in India.

         4. Early stage of online advertising in India

         The percentage of online advertising expenditure to total advertising
expenditure is less than 1% in India, compared to 3-5% in countries such as
the People's Republic of China and South Korea. As penetration and usage of
the Internet grows in India, we believe advertisers will increasingly use this
medium as an additional advertising channel. We believe that advertisers will
see the benefits of Internet advertising in that the Internet allows
advertisers to target desired demographic groups or consumers in specific
geographic locations and allows them to interact more effectively with
consumers and capture valuable information about buying patterns, preferences
and demands. We believe that as Internet advertising grows in popularity in
India, we are well positioned, as the leading portal, to benefit from the
growth.

         5. Early stage of mobile value-added revenues

         Portals worldwide have demonstrated in varying degrees their ability
to capture sizeable portions of mobile value-added services revenue because
the very active users of mobile value added services are often also intensive
users of Internet services. Portals such as Rediff.com stand at the
intersection of both of these industries. In India, mobile value-added
services in the form of ringtones, games and chat services, are just getting
under way as mobile phone operators complete installation of infrastructure
for these services. We believe that as a portal with large numbers of users,
we are well positioned to benefit from the revenues generated from these
services.

Our Strategy

         We believe our success is due to our focus on providing a full range
of culturally relevant portal solutions to Indians living in India and other
parts of the world, such as:

          -    Communication services, including e-mail, chat and instant
               messaging, which were all developed using in-house technology.
               E-mail services are provided in a variety of Indian languages.

          -    News and information services, including breaking news with
               message boards for users to post their opinions, a facility for
               users to personalize news to those that suit their interests
               and periodic newsletters they can receive in their e-mail
               boxes. Our news and information channels cover politics,
               business and entertainment news.

          -    Consumer services, including matchmaking and astrology. Some of
               our consumer services are offered on a subscription basis.

          -    Search services, including facilities to locate highly local
               information on people and businesses.

          -    Online shopping services, including a sophisticated platform
               for merchants in India to create online shops, package tracking
               facilities, and a facility for consumers to rate merchants. Our
               arrangements with delivery service providers ensure that
               customers living in various cities can use our online shopping
               services. Our online shopping service also allows Indians
               living worldwide to send gift products to their friends and
               relatives living in India. We offer a wide range of payment
               options to our consumers, including dollar and Rupee
               denominated credit cards, charge cards, debit cards, local
               checks, demand drafts, direct debit to savings accounts and
               C.O.D.

          -    Mobile services, including facilities for downloading
               ringtones, mobile games and wallpapers and chat. We provide
               these services for both 2G and 2.5G mobile services.

          -    Online advertising services, including facilities for
               advertisers to target customers demographically and a
               pay-for-performance system which makes it easier for smaller
               advertisers to benefit from online advertising. We also provide
               tools that allow media planners and other advertising agency
               staff to monitor and plan online advertising campaigns.

         In the United States, our media properties, India Abroad, India in
New York and the Rediff USA Website, offer a variety of advertising options
for advertisers interested in reaching the affluent Indian-American community.

         Our quarterly page views in India have grown from approximately 3.2
billion for the quarter ended March 31, 2003 to approximately 3.5 billion for
the quarter ended March 31, 2004.

Our Product and Service Offerings

India Online Business

         Our Rediff.com India website consists of information, communication
and content services, free and paid community features and products, including
e-commerce and mobile services. With 30.4 million online registered users
worldwide as at March 31, 2004, we believe Rediff.com is one of the most
recognized online brands in India and among the Indian community worldwide.

         For the fiscal year ended March 31, 2004, the India Online business
segment generated US$3.6 million of revenues, accounting for 38.5% of our
total revenues from continuing operations.

         Information and Content

         We deliver information and content to our users in an easy to use
interface. The information and content channels currently available to our
users include news, business, movies, cricket/sports, auto, health, food,
books, gaming, astrology, contests, lifestyle, home decor, women and several
other topics of interest. We currently offer this information and content
without charge to our users.

         Because a significant percentage of our online users are between 18
and 34 years old, we place emphasis on reaching younger users through more
focused information and content relevant to this audience.

         Our primary information and content channels are broadly classified
into news content and interest specific subjects. News content includes:

          o    Current affairs and breaking news. Our in-house editorial staff
               and contract journalists provide our users with up-to-date news
               focused on events of interest to Indians, including feature
               news stories, interviews and online chats with leading Indian
               personalities. We provide breaking news and in-depth coverage
               of significant news and other events, such as the recent Indian
               elections. We also aggregate news and photos from various news
               providers and websites, thereby giving our users access to news
               and information relevant to them from multiple sources and
               points of view.

          o    Business. Our business channel offers business news from India
               and coverage of Indian stock markets. This channel also
               provides regular columns and feature stories, as well as
               personal finance information. We also offer Rediff.com
               Portfolio Tracker, which allows registered users to monitor
               stock quotes from the Bombay Stock Exchange and personalize a
               portfolio tracker to monitor performance of investments.

          o    Movies. Our movie channel offers coverage of movie news from
               Bollywood and Hollywood with box office information, regular
               columns, feature stories, interviews with movie personalities,
               movie reviews and slide shows.

          o    Cricket/Sports. Our cricket/sports channel provides coverage of
               Indian and global sporting news. We provide in-depth coverage
               of cricket news from India and around the globe, including
               statistics, scores and schedules, regular columns, feature
               stories and interviews. We also provide special coverage of
               major sporting events of specific interest to Indians, such as
               our recent coverage of the India-Pakistan Cricket Series.

         Interest specific channels include topic of interest such as Auto,
Health, Home Decor, Personal Finance and Jobs.

         Content for these channels is managed through a combination of in
house editorial staff, content syndication from newswires, such as Reuters,
PTI and UNI, content aggregation from other publications and news providers,
and by partnering with specialized content providers. We also provide analysis
of our in-house and aggregated news content and an opportunity for users to
participate in discussions and debates on a variety of subjects online in our
discussion forums.

         Our registered users have the opportunity to receive updated news and
information via e-mail by subscribing to a choice of daily newsletters such as
our daily News flash and Money flash. Additionally, our website offers users
the Rediff Personal Edition, enabling the creation of personalized home pages
with specific topics of interest to individual users. Rediff Personal Edition
is powered by our in-house developed content management system using XML
technology, making it one of the first personalized websites in India. XML
technology allows us to analyze user surfing patterns on the website and
thereby understand that user's online preferences. Based on these surfing
trends, the technology recommends news stories of specific interest to that
user.

         We have launched the RSS (Really Simple Syndication/Rich site
summary) feature. This is an XML-based format for distributing and aggregating
Web content (such as breaking news, cricket scores, information updates).
RSS/XML feeds can gather information related to a user's area of interest such
as (breaking) news, elections (seats tally), cricket (scores), and update
these headlines onto a downloadable desktop software on the user's computer.
Our website also allows users to search the Rediff.com archives, which contain
over seven years of news and information, using our own search technology. We
also allow users to search the World Wide Web, with technology licensed from
an OEM partner.

         Community Features and Products

         Through a single login facility, we provide a combination of free and
paid community features and products to consumers and businesses. Our
offerings include e-mail, instant messaging, chat, e-cards, Matchmaker,
astrology services, blogs, message board and mobile services. Some of these
features and products are offered without charge, while others are offered on
a subscription or fee basis.

                  E-mail, Instant Messaging, Chat and E-cards

         We offer our users a variety of e-mail solutions tailored to their
needs. All of our e-mail services offer advanced Spam control and support
eleven Indian languages. Rediffmail, our flagship e-mail service, is provided
free of charge to our users. Our free e-mail service has limited features but
additional features, such as additional storage, may be individually purchased
as add-on supplements. Additionally, we have created branded e-mail products,
such as Rediffmail Plus, Rediffmail Mobile, Rediffmail Pro and Rediffmail Pro
Enterprise by packaging various groups of features together to match the
preferences of specific users. We have priced each of these branded products
competitively. Our e-mail offerings are described below.

          o    Rediffmail is a free service that provides users with a full
               featured e-mail service with a powerful Spam shield and 1GB of
               free storage space. We operate one of the largest free e-mail
               systems in India. As of March 31, 2004, we had approximately 30
               million registered Rediffmail users.

          o    Rediffmail Plus is a subscription service that offers a variety
               of premium features. Rediffmail Plus subscribers receive 2GB of
               storage space, the ability to send large attachments and
               accounts which do not automatically expire when not used.
               Subscribers can also send up to 100 SMS messages and access
               their e-mail accounts with other client applications, free of
               charge. Rediffmail Plus comes with a 30 MB Briefcase. A one
               year subscription to Rediffmail Plus is currently priced at
               Rs.449 (or approximately US $10).

          o    Rediffmail Mobile is a subscription service with a variety of
               premium features similar to Rediffmail Plus but with the added
               functionality of receiving e-mail alerts on the user's selected
               mobile phone. This service is currently priced at Rs.399 (or
               approximately US $9) for a one year subscription.

          o    Rediffmail Pro is a subscription service targeted at business
               users. Rediffmail Pro offers small businesses, as well as large
               corporations, the ability to select, subject to availability,
               their own domain name for e-mail addresses. Subscribers are
               given five e-mail addresses and 1GB of storage space, which can
               be allocated among employees and increased without limitation
               at an additional charge. Rediffmail Pro also offers enhanced
               address book features and virus protection. Users may also
               access their other e-mail accounts at other POP accounts
               through their Rediffmail Pro accounts. A one year subscription
               to Rediffmail Pro is currently priced at Rs.1,499 (or
               approximately US $33).

          o    Rediffmail Enterprise Pro is a web based e-mail service for
               corporates having a large field force of agents/sales
               associates/dealers.

         Rediff Bol instant messenger is a free service that enables instant
communication across the Internet with other Rediff Bol users. With Rediff
Bol, registered users can identify the users that they are chatting with and
can also find out instantly if someone on their contact list is online.
Additionally, users can chat in any one of eleven Indian languages and can use
the people search feature to make new friends by searching for other users who
meet age, gender and location criteria.

         We offer our registered users the ability to communicate with others
who share their interests through various chat rooms organized by areas of
interest and geographic locations in India and around the world. Our chat
services are available free of charge.

         Rediff E-cards is a free service that allows registered users to send
personalized electronic greeting cards to anyone on the Internet. We provide
e-cards for a wide variety of occasions, including those of importance to
Indians.

                  Matchmaker

         Rediff Matchmaker is a matrimonial service targeted at the global
Indian community. This service offers users the ability to post profiles of
themselves or others for free on the Rediff Matchmaker member database. Users
may also search the Rediff Matchmaker member database for free and those with
profiles can initiate contact with and be contacted by other users. With a
subscription to the Rediff Matchmaker service, users can also send e-mails to
and chat with potential matches. A three month subscription to Rediff
Matchmaker is currently priced at Rs.1,000 (or US$20 for payments made in U.S.
dollars). Matchmaker was established in the fiscal year ended March 31, 2003.

                  Astrology

         Our astrology channel provides various astrology services, including
daily zodiac predictions free of charge. Depending on the service selected,
users can also purchase enhanced personalized astrological predictions about
their life, career, finances, business and relationships. Users can also ask
specific questions which are answered by a panel of astrologers.

         Our personalized astrology predictions are currently priced between
Rs.599 and Rs.2,399 each (or US$12.50 to US$50 each for payments made in U.S.
dollars). The Ask a Question product is currently priced at Rs.299 (or US$6
for payments made in U.S. dollars)

         Payment for any of the above fee-based services can be made by credit
cards and within India by cheque/demand draft or through direct debit of the
user's Internet banking account.

                  Blogs

         RediffBlogs is a free online interactive community where users can
set up their own blog, or personal online diary, publish their thoughts and
ideas directly and instantly to the Web and visit other blogs and comment on
them. Users can also post pictures and create multiple blogs under a single
username and password. We believe that we are the first Indian website to
allow its users to create and post blogs.

                  Mobile Services

         Rediff Mobile offers mobile phone users a variety of value added
services. Users order our value added services from their mobile phones by
sending a requesting SMS to 7333 (seven triple-three), which is our designated
number for such services, or by browsing our content on general packet radio
service (GPRS) or wireless application protocol (WAP) enabled mobile phones.
For certain value added services, users can also place orders through our
website, including downloads, contests, services, and news and information.
Our mobile offerings are described below:

          o    Downloads. Users can download ringtones, polyphonic ringtones,
               logos, picture messages, wallpapers and games from our website.
               We have introduced search of ring tones on mobile phones.
               Downloads include popular Indian content, such as Indi-pop
               ringtones, Indian cricket team logos and wallpapers featuring
               Bollywood movie stars. Our ringtones, logos, picture messages
               and wallpapers are currently priced between Rs.3 and Rs.10 each
               (including the cost of the outgoing SMS which requests the
               download), and our games are currently priced between Rs.20 and
               Rs.50 each.

          o    Contests. Users can participate in contests in which they can
               win prizes by correctly answering questions sent to them by SMS
               (Short Messaging Service, or text messaging). Some of our
               recent contests include Rediff 11,Filmi 10, a Bollywood quiz
               contest. Users are charged only for the cost of each outgoing
               SMS message which responds to a question.

          o    Services. We offer users a variety of mobile phone related
               services by SMS, such as the ability to search, seek and flirt
               with other users, play interactive games, and receive jokes and
               astrological predictions. Users are charged only for the cost
               of each outgoing SMS message which requests the service.

          o    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 only for the cost of each outgoing
               SMS message which requests the news and information.

          o    E-mail and Instant Messaging. Rediffmail and Rediff Bol
               subscribers can receive, read and reply to e-mails and instant
               messages by SMS. Users are charged only for the cost of each
               outgoing SMS which contains the e-mail or instant message.

         Rediff Mobile was established in the fiscal year ended March 31,
2003.

         E-Commerce

         Rediff Shopping is an online marketplace which allows users to
purchase products and services from various merchants. We offer products and
services in more than 50 categories, the most popular of which currently
include apparel, personal accessories, footwear, electronics, flowers and
jewelry. Approximately half of the purchases are from users located in Mumbai,
New Delhi, Bangalore, Kolkata, Chennai, and Pune.

         Revenue Sources

         India Online business primarily includes revenues from Online
advertising and fee based services. Online advertising includes advertisement
and sponsorships and designing and managing customers' websites. Fee based
services include e-commerce, subscription services and wireless short
messaging services.

                  Online Advertising

         Online advertising on our site includes sponsorships of editorial
events. Sponsorships are sought for event led features like the 2003 Cricket
World Cup, the 2004 Indo-Pakistan Friendship Cricket Series, Budget 2003 and
Election 2004. Other forms of advertising include banner, e-mail and text link
campaigns. Our advertisers enter into agreements pursuant to which they either
pay a fixed fee for a given time-period, usually ranging from one month to one
year, or a combination of fixed and variable fees depending upon the leads
provided to them through our website.

         Some of our advertisers also enter into agreements pursuant to which
they pay a fixed fee for a guaranteed number of impressions on our site. Our
standard rate per thousand impressions, commonly referred to as CPMs, for
banner advertisements varies, depending on location of the advertisements on
our site, the targeted country and the extent to which the advertisements are
targeted to a particular audience. Discounts from standard CPM rates may be
provided for higher volume and longer-term advertising contracts. We have
introduced new formats for advertisers to broaden the appeal of the
advertisements to our users, such as text ads and dynamic hypertext markup
language

         We had over 146 advertisers on our Rediff.com India website during
the fiscal year ended March 31, 2004. Our top five advertisers accounted for
approximately 42% of our India advertising revenues for the fiscal year ended
March 31, 2004. Advertisements by interest specific online verticals,
financial institutions and consumer goods accounted for 93.5% of our India
advertising revenues for the fiscal year ended March 31, 2004. A partial list
of our advertising clients includes Apnaloan, Citibank, Coca-Cola, Colgate,
Google, Hewlett Packard, Hero Honda Motors, the ICICI Group, Johnson &
Johnson, Levers, Makemytrip, Monster India and Pepsi.

                  Fee based services

         Revenues from fee based services primarily include income from
various paid e-mail and other service products, such as e-commerce marketplace
and mobile services.

         Subscription service revenues primarily include income from various
paid e-mail service products that cater to a cross section of our registered
user base and revenues from subscriptions to Matchmaker. The revenue for
subscription based service products is recognized ratably over the period of
subscription.

         Subscription revenues are also derived from providing value added
short messaging services such as e-mail and other related products to mobile
phone users. We have contracts with third-party mobile phone operators for
sharing revenues from these services. SMS based revenues are recognized when
the service is performed.

         E-commerce revenue primarily consists of commission earned on sale of
books, music, apparel, confectionery, gifts and other items to customers who
shop at our online store. Revenues from E-commerce services also include fees
charged to vendors for creating, designing and hosting the vendors' product
information on our website. Such fees are amortized over the hosting contract
period.

         Infrastructure

                  Online Advertising

         Our sales and marketing professionals are responsible for seeking
additional advertisers and e-commerce merchants, creating advertisements, as
well as obtaining and analyzing customer feedback. Sales team members are
based in Mumbai, New Delhi, New York, Chicago and Toronto. The sales team
coordinates regularly regarding advertising across all of our businesses. Our
sales team includes designers, copywriters, programmers, campaign managers and
technology personnel. As of March 31, 2004, our sales team consisted of 65
sales and marketing professionals.

         During the year, many of the leading advertising agencies expanded
their operations with the establishment of an interactive division. These
divisions now promote the Internet as an advertising medium among leading
marketers in the country. We closely interact and support these advertising
agencies in garnering larger online advertising budgets from their clients.

         Our sales teams are based in Mumbai and New Delhi and sell
advertising space on our websites. They focus their sales efforts on the top
200 advertisers in India and on key consumer categories. Our sales team
consults regularly with advertisers on design and placement of their web-based
advertising, provides advertisers with advertising measurement analysis and
focuses on providing a high level of customer service satisfaction.

                  E-commerce

         Our shopping platform has a host of user-friendly features such as
product search and detailed product category listing. The "tracking order",
"view account" and "shopping bag details" features make online shopping more
convenient for users. Users can pay for purchases by credit card, local check,
C.O.D. or direct debit to an Internet banking account if they have an account
with designated Indian banks. Our customer service officers address customer
inquiries mainly through e-mail as well as over voice, including through a
toll-free number, and solicit feedback from users to continuously improve our
offerings. Once a user places an order on our website, we process and collect
payment (except where the method of payment is C.O.D.) and notify the merchant
who then packages the product and arranges for delivery through one of our
designated couriers. We make payment to the merchant once we receive proof
that the merchant has dispatched the product. Most products purchased through
our website are delivered within 10 business days. In the event of failure of
delivery or payment or in the event of a return, we return the product to the
merchant and receive a full refund, although we bear the cost of the
additional courier charges incurred. Product warranties are the responsibility
of those who sell products on our website's marketplace, although our
reputation can be adversely affected if a user is not satisfied with a
purchase.

         Pursuant to the terms of our agreements with merchants, we receive a
small one-time entry fee and a separate commission on the sale of each product
posted on our website. Our commissions range from 5% to 50% of the sale price
depending on the type and quantity of products sold. During the fiscal year
ended March 31, 2004, we processed approximately 225,000 online purchases.
Rediff Shopping currently has over 700,000 registered users.

         Our sales force targets manufacturers and vendors of the leading
products in India for them to offer their products through the Rediff Shopping
platform. We also target manufacturers and vendors that supply products in
categories that are fast moving over the Internet.

         Electronic Payments

         We were among the first Internet companies in India to accept credit
cards for online payments. Users can use all leading U.S. dollar and Rupee
credit cards, debit cards, Paypal and online money transfers for online
payments. All online transactions are secured by Secure Socket Layer (SSL)
technology.

         We have entered into agreements with Citibank, N.A. and ICICI Bank
Limited to automate Visa and MasterCard credit card payments through our
website.

         We also have arrangements with a number of major banks in India to
facilitate online money transfers.

         Mobile services

         We have entered into agreements with major Indian mobile phone
operators permitting their mobile phone users to access our offerings. Our
agreements with these operators currently allow us to reach all Global Systems
for Mobile Communications (GSM)-based cellular providers, covering 90% of the
cellular footprint in India. Mobile phone users that subscribe for service
from mobile phone operators which have not entered into agreements with us
cannot access our value added services. Pursuant to the terms of our
agreements with Indian mobile phone operators, we receive a portion of the
amounts charged to mobile phone users (including the amounts mobile phone
users are charged for an outgoing SMS which requests the service), which
mobile phone operators bill and collect.

         We aggregate and purchase the ringtones, polyphonic ringtones, logos,
picture messages, wallpapers and games available on our website from a third
party provider. Pursuant to the terms of our agreement, we pay them an agreed
amount per downloaded ringtone and share with them a percentage of the
revenues we receive from mobile phone operators in respect of the content
obtained from such provider which we provide to mobile phone users.

United States Publishing Business

         Our United States publishing business primarily consists of our India
Abroad newspaper, India in New York newspaper and Rediff.com U.S.A. website.
For the fiscal year ended March 31, 2004, the United States publishing
business generated US$5.8 million of revenues, accounting for 61.5% of our
total revenues.

         India Abroad

         India Abroad, which we acquired in April 2001, was established over
34 years ago and is one of the oldest weekly newspapers focused on the Indian
community in the United States. The newspaper has five North America editions
- New York, Tristate, Chicago/Dallas, Los Angeles and Canadian.

         The paper is divided into five sections: News, Community, Business
and Sports, Classifieds, and a magazine. India Abroad's content is targeted at
Indians living in North America. In determining content, India Abroad places
emphasis on reaching Indians in North America who are not likely to be regular
visitors to our websites.

         During the past three years, we have consolidated most of the
editorial and production functions of India Abroad in Mumbai, India to achieve
cost savings and greater efficiencies. Once the paper is produced by the
editorial staff in Mumbai, it is transmitted electronically to printers in New
York and Toronto for publishing every Friday.

         The paper is available for home delivery primarily in the United
States and Canada. The annual subscription rate is US$32 in the United States,
US$26 in Canada, US$90 in other countries and Rs.850 in India. Subscriptions
for six months, two years and life-time are also available. India Abroad is
also available at leading newsstands and Indian grocery stores across North
America, generally at US$1 per copy. Subscriptions comprise approximately 80%
of our circulation.

         India Abroad offers classified advertising, which includes
advertisements listed together in sequence by the nature of the advertisement,
such as matrimonial, business/finance, employment, medical and real estate.
The paper also has a Bulletin Board on the back cover which offers enhanced
classified advertising. Prices for our standard classified advertisement
packages range from US$20 for 10 words in regular liner with no border to
US$240 for 100 words (1colX4") with large text and a border. There is a 50%
surcharge for running advertisements in all of the editions. India Abroad also
has an associated website, www.indiaabroad.com, which allows users to start
and renew subscriptions, make payments and change their delivery addresses.
Users can also order classified advertisements through this website.

         India in New York

         India in New York, a guide to events and entertainment from India
Abroad, was started in 1997 as a sister publication of India Abroad. India in
New York features news, events, sports and entertainment and a wide array of
classifieds. The India in New York newspaper is distributed free in the
Tristate area of New York, New Jersey and Connecticut. India in New York is
available at restaurants, temples, Indian associations, community events and
Indian grocery stores in the Tristate area.

         Rediff.com U.S.A.

         Rediff.com U.S.A. is our website targeted at the Indian-American
community in North America. Rediff.com U.S.A. includes information and content
which are the same as, or similar to, that on our Rediff.com India website,
along with certain additional offerings including those described below.

          o    Rediff SMS2India. Rediff SMS2India allows subscribers to send
               text messages (SMS) from a personal computer to a mobile phone
               in India or the U.S. The mobile user can reply by SMS back to
               the subscriber's personal computer. A three month subscription
               that permits a maximum of 400 messages is currently priced at
               US$9.99. Rediff SMS2India was established in the fiscal year
               ended March 31, 2003.

          o    Rediff Radio. This service allows subscribers access to two
               channels of radio with Indian music (sorted by categories such
               as artist, composer, decades, lyricist and mood), Bollywood and
               other entertainment news, interviews with Indian personalities
               and programs such as Bollywood Rewind, Dance Bar and Chart
               Masala, which are hosted by Indian radio jockeys. A one month
               subscription to Rediff Radio is currently priced at US$4.95 per
               month, and a three month subscription is currently priced at
               US$11.95.

         Revenue sources

         Our U.S. Publishing business, primarily includes revenues from
subscription and advertising services from the publication of India Abroad,
India in New York and Rediff.com U.S.A.

                  Offline Advertising

         Through India Abroad, we offer an attractive platform to advertisers
seeking an online-offline solution as well as a means for advertisers to tap
the Indian community in the United States. India Abroad sells retail, brand,
services, event and other advertising. Generally, there are different rates
for advertisements depending on the size, placement and category of
advertisement as well as the number of issues in respect of which advertising
is purchased. Customers have a choice to run the advertisement in different
and/or combined editions.

         Infrastructure

         Our sales team members based in the USA and Canada focus their sales
efforts on advertisers in the United States that are seeking to advertise in
India Abroad and on our Rediff.com U.S.A. website. All of our sales team
members undertake to leverage newspaper and website advertising sales
opportunities.

Competition

         Online

         There are a number of companies that provide websites focusing on
India and the global Indian community. These companies compete with our
websites for visitors, online advertising, e-commerce and subscription
revenues. Competition for visitors and e-commerce is intense and is expected
to increase in the future as there are no substantial barriers to entry in our
market.

         Our ability to compete successfully depends on many factors
including:

          o    the quality of our content;
          o    the user friendliness of our services;
          o    our sales and marketing efforts;
          o    the performance of our technology; and
          o    ability to fund our operations.

         We compete with providers of Indian content over the Internet,
including web directories, search engines, content sites, portals, horizontal
sites and Internet service providers. Our current and anticipated competitors
include:

          o    IndiaTimes.com (Bennett, Coleman & Co. Ltd.);
          o    MSNBC.co.in and MSN.com (Microsoft Corporation);
          o    Yahoo.co.in and Yahoo.com (Yahoo Inc.);
          o    Google; and
          o    Sify (Sify Ltd.).

         We also compete with other forms of media, such as print media, radio
and television, for advertisers and advertising revenue.

         Many of our competitors have a longer operating history, greater name
recognition and customer base, and greater management, financial, technical,
marketing, sales, brand, and other resources than we do. They can use their
superior experience and resources in a variety of competitive ways, including
by investing more aggressively in research and development, creating superior
content, making acquisitions, and competing more aggressively for advertisers.
There has also been a trend toward industry consolidation so our smaller
competitors today may become larger in the future. If our competitors are more
successful than we are at generating visitors and website traffic due to
superior content and other service offerings, our revenues may decline.

         Offline

         There are a limited number of companies that provide newspapers
focusing on India and the global Indian community. These newspapers compete
with India Abroad for advertising revenues. Our current competitors include:

          o    India West;
          o    Indian Express; and
          o    News India Times.

Intellectual Property

         Intellectual property rights are important to our business. We rely
on a combination of copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect our
intellectual property. We require employees, independent contractors and, when
practicable, vendors to enter into confidentiality agreements upon the
commencement of their relationships with us. These agreements generally
provide that confidential information developed or made known during the
course of a relationship with us must be kept confidential.

         Our efforts to protect our intellectual property may not be adequate.
Our competitors may independently develop similar technology or duplicate our
products or services. Unauthorized parties may infringe upon or misappropriate
our products, services or proprietary information, including our domain name.
For example, there are some parties who have registered domain names similar
to or slightly different from our domain name, Rediff.com, and we have filed
lawsuits in India to protect our rights in respect of our domain name. We do
not believe that the outcome of these lawsuits will have a material adverse
effect on our business. However, the laws of India do not protect proprietary
rights to the same extent as the laws of the United States. Further, the
global nature of the Internet makes it difficult to control the ultimate
destination of our products and services. In the future, further litigation
may be necessary to enforce our intellectual property rights or to determine
the validity and scope of the proprietary rights of others. Any such
litigation could be time-consuming and costly.

         We could be subject to intellectual property infringement claims as
the number of our competitors grows and the content and functionality of our
website or other product or service offerings overlap with competitive
offerings. Defending against these claims, even if not meritorious, could be
expensive and divert our attention from our operations. If we become liable to
third parties for infringing their intellectual property rights, we could be
required to pay a substantial damage award and be forced to try to obtain or
develop non-infringing technology, obtain a license or cease selling the
applications that contain the infringing technology. If this were to occur, we
may be unable to develop non-infringing technology or obtain a license on
commercially reasonable terms, or at all.

         We also rely on a variety of technologies that are licensed from
third parties. The software developed by these third parties is used in our
website to perform key functions. These and other third-party licenses may not
be available to us on commercially reasonable terms in the future. The loss or
inability to obtain or retain any of these licenses could delay the
introduction of software enhancements, interactive tools and other features
until equivalent technology could be licensed or developed. Any such delays
could materially adversely affect our business, operating results and
financial condition.

         We have filed trademark applications for "www.rediff.com" and "Rediff
On The Net" in India and for "Rediff" and "Rediff.com" in the United States,
which are pending. Certificate of Registration of "Rediff On The Net" and
Design (Square) bearing no. 2511409 for the mark being registered on November
27, 2001 under International classes 35, 36, 38, 41 and 42, has been received
by us from the United States Patent and Trademark Office.

Facilities

         India

         Our corporate headquarters are located in Mumbai, India, where we
lease approximately 14,000 square feet, located in two buildings. In one
facility we lease approximately 11,000 square feet and in the other, we lease
approximately 3,000 square feet. The lease for the 11,000 square feet facility
expires on April 25, 2005. The lease for the 3000 square feet facility expired
on January 31, 2004 and we are in the process of entering into the agreement
for renewal of the facility. We also lease approximately 2,500 square feet of
office space in New Delhi, India, which serves as a branch office. This lease
expires on December 31, 2006.

         United States

         Our India Abroad subsidiary leases approximately 6,250 square feet of
office space in New York, the lease for which expires on October 31, 2007.
India Abroad leases an additional 3,100 square feet of office space in the
same building, the lease for which expires on November 30, 2004.

         Additionally India Abroad leases approximately 1,500 square feet for
office space in Chicago, Illinois, the lease for which expires on March 31,
2008.

Legal Proceedings

         Securities Actions

         Khanna v. Rediff.com India Limited, et al., United States District
Court of the Southern District of New York, Case No. SDNY 01CV 3814. On April
16, 2001, Rediff, four of its officers and directors, including Ajit
Balakrishnan, and a group of investment banks that had acted as underwriters
in our June 2000 initial public offering, or IPO, were named as defendants in
a class action lawsuit. The lawsuit alleges that our registration statement
filed with the SEC contained misleading statements and omissions in violation
of the Securities Act, the Exchange Act and Rule 10b-5 thereof. The plaintiff
class in this lawsuit has been defined as all persons who purchased ADSs from
the time of the IPO through April 14, 2001 and seeks unspecified damages.

          -    Several other class action lawsuits have been filed against us
               and other defendants stating substantially the same allegations
               as set forth in the Khanna Action. As of the date of this
               annual report, we are aware of the following related lawsuits
               pending in the U.S. courts:

               o    David & Chaile Steinberg v. Rediff.com India Limited, et
                    al., United States District Court of the Southern District
                    of New York, Case No. SDNY 01CV 3471;

               o    Thomas Karakunnel and Roger Steward v. Rediff.com India
                    Limited, et al., United States District Court of the
                    Southern District of New York, Case No. SDNY 01CV 3814;
                    and

               o    Anup Kumar Bhasin v. Rediff.com India Limited, et al.,
                    United States District Court of the Southern District of
                    New York, Case No. SDNY 01CV 3593.

         All the cases have been consolidated before a single judge in the
United States District Court for the Southern District of New York.

         On May 11, 2001, we received from our underwriters in our IPO a
demand for indemnification of the underwriters' legal fees and liabilities.
Our board of directors resolved to indemnify our officers and directors named
as defendants against their legal fees and liabilities, to the extent
permitted under Indian law. At the time of the IPO, we purchased Directors and
Officers Liability insurance (the "D&O Policy"), providing coverage against
federal securities law claims. The D&O Policy includes coverage for our cost
of defending the class action lawsuits, our indemnification liabilities to our
officers and directors, and our indemnification liabilities to our
underwriters. The coverage of the D&O Policy is denominated in Indian Rupees,
but the policy proceeds are payable in U.S. dollars. Based on the noon buying
rate on March 31, 2004, the face amount of the D&O Policy is approximately
US$20.6 million. The proceeds of the D&O Policy available to satisfy any
judgment against us, or any judgment against persons whom we are is obligated
to indemnify, will be reduced by the amount of the legal fees and associated
expenses incurred in the course of our defense and the defense of the
individual defendants and the underwriters which are paid from the D&O Policy.
The D&O Policy includes a deductible of approximately US$259,000 (based on the
noon buying rate at March 31, 2004), which must be paid by us before the D&O
Policy proceeds would be available. The D&O Policy contains various
exclusions, which, if met, may result in the denial of insurance coverage. We
have been advised by the insurance carriers who wrote the D&O Policy that they
are not aware of any facts or circumstances that would cause any of the
exclusions to apply, but that the carriers have reserved their rights to claim
that the exclusions do apply if any such facts or circumstances come to their
attention. On June 5, 2001, twenty-four companies, including Rediff, who had
issued securities to the public, together with the investment banks who acted
as underwriters in these initial public offerings, were named as defendants in
the action of Shives et al. v. Bank of America Securities, LLC et al., a class
action lawsuit filed in the United States District Court for the Southern
District of New York. Also named as defendants in this lawsuit were four of
our officers and directors, including Ajit Balakrishnan. Plaintiffs in this
lawsuit allege that the underwriter defendants combined and conspired to
inflate the underwriting compensation they received in connection with the
initial public offerings of the defendant companies, to manipulate and inflate
the prices paid by plaintiffs for securities issued in the initial public
offerings and to restrain and suppress competitive pricing for underwriting
compensation. Plaintiffs alleged claims pursuant to the U.S. Sherman Antitrust
Act, 1890, as amended, the U.S. Clayton Antitrust Act, 1914, as amended and
the Securities Act against the underwriter defendants. The plaintiffs further
allege that the defendants, including Rediff and certain of its officers and
directors, made material misstatements and omissions in violation of the
Securities Act and the Exchange Act by concealing or failing to disclose the
compensation earned by the underwriters in the initial public offerings. As
against us and our officers and directors, the Complaint defines a "Rediff.com
Sub-Class" consisting of all persons who purchased securities of Rediff.com
India Limited from the time of the IPO through April 4, 2001 and seeks
unspecified damages. This case has been consolidated with several hundred
other class action complaints filed against other issuers who had IPOs in 2000
and 2001.

         On November 24, 2003, plaintiffs' counsel in the Khanna action and
Shives action filed a Consolidated Amended Securities Class Action Complaint
("Consolidated Complaint") which incorporates the material allegations from
Khanna action and Shives action. On January 30, 2004, we and our officers and
directors filed a motion to dismiss the Consolidated Complaint. The
Underwriter Defendants filed a separate motion to dismiss. The motions are
currently being briefed by the parties.

         Action Relating to Access to Pornographic Material

         Sunil N. Phatarphekar & Ors. v. Abhinav Bhatt and Ors., Mumbai High
Court, Criminal Writ Petition No. 1754 of 2000. On June 21, 2000, Rediff, its
directors and others (Ajit Balakrishnan, Arun Nanda, Abhay Havaldar, Sunil
Phatarphekar, Charles Robert Kaye and Tony Janz) were named as accused in a
criminal complaint (RCC Complaint Number 76 of 2000) filed by Mr. Abinav
Bhatt, a 22 year old student, before the Judicial Magistrate, First Class,
Pune, India, alleging commission of an offence, under Section 292 of the
Indian Penal Code ("IPC") for distributing, publicly exhibiting and putting
into circulation obscene, pornographic and objectionable material. The
Complaint alleged that we, through our website "www.rediff.com", provided a
search facility that enabled Internet users to view pornographic,
objectionable and obscene material. On November 27, 2000, the Judicial
Magistrate passed an order in the Complaint holding that a prima facie case
under Section 292 of the IPC had been made out against us and directed
commencement of criminal proceedings against all the defendants. A criminal
writ petition was filed in the High Court of Mumbai (Criminal Writ Petition
Number 1754 of 2000), seeking among other relief the setting aside of the
order of the Judicial Magistrate. The High Court of Mumbai in its order dated
December 20, 2000, while granting ad-interim relief to the petitioners in the
Writ Petition, stayed the order of Judicial Magistrate pending final disposal
of the Writ Petition. The Writ Petition has been admitted by the High Court of
Mumbai. While we believe that the lawsuit is without merit, and that we and
our directors have a valid defense to the Complaint, in the event that we are
unsuccessful in our defense, we and our directors may face both criminal
penalties and monetary fines.

         Current Indian laws provide that if any person publishes or transmits
or causes to be published in the electronic form, any material which is
lascivious or appeals to the prurient interest or if its effect is such as to
tend to deprave and corrupt persons who are likely, having regard to all
relevant circumstances, to read, see or hear the matter contained or embodied
in it, shall be punished (i) for the first conviction, with imprisonment of up
to five years and with a fine of up to Rs.100,000 approximately (US$2,000);
and (ii) in the event of a second conviction, with imprisonment of up to ten
years and with a fine of up to Rs.200,000 approximately (US$4,000).

         Action Relating to Copyright Violation

         A complaint was filed by the IMI, a society representing various
music companies in Magistrate's Court India against three of our directors.
The complaint alleges that by providing links to MP3 sites through its
directory we have been guilty of violating Section 51 of the Copyright Act
1957. The complaint alleges that the MP3 sites to which links were provided
permitted downloading of music which had not been authorized to be so
downloaded by copyright owners who are members of IMI. Our directors are named
as parties to the lawsuit because, according to the complaint, the directors
are in charge of our affairs and are hence deemed to be guilty of committing
the offense. Our directors have presently been exempted from personal
appearance. Our directors have filed an application for discharge of the
complaint before the Magistrate. Although our directors believe they have
valid defenses to the action, if they are unsuccessful after exhausting all
legal remedies, our directors could face both criminal penalties and monetary
fines.

         We are also subject to other legal proceedings and claims, which have
arisen in the ordinary course of its business. Those actions, when ultimately
concluded and determined, will not, in the opinion of management, have a
material effect on our results of operations or financial position.

Subsidiaries

         Rediff Holdings, Inc., or Rediff Holdings, is our wholly owned
subsidiary and is incorporated in the State of Delaware. Rediff Holdings holds
all of the outstanding and voting shares of Rediff.com Inc. (formerly,
thinkindia.com) and substantially all of the outstanding and voting shares of
India Abroad. We also own a total of 19.9% of the outstanding and voting
shares of Apnaloan.com, 10% of the outstanding and voting shares of
Traveljini.com and 5% of the outstanding and voting shares of Bill Junction.

         Rediff.com Inc., which runs our U.S.-based Internet portal, is
incorporated in Delaware. India Abroad is a New York corporation, which
publishes a weekly newspaper targeted primarily at the Indian community in
North America. Value Communication Corporation (or Valucom), an Illinois
corporation incorporated in 1996, is another subsidiary of Rediff.com India
Limited. In April 2004, we sold Valucom's business to Worldquest Networks Inc.

         Apnaloan.com is a private company registered under the Indian
Companies Act. It is a web-enabled loan marketplace and offers a wide spectrum
of personal financial products, including credit cards, car loans, personal
loans and housing loans.

         Bill Junction and Traveljini.com are companies registered under the
Indian Companies Act and are indirect subsidiaries of ICICI Limited. Bill
Junction provides easy online bill payment solutions and Traveljini.com
provides travel related information.

Government Regulation

         General

         Our online business is primarily subject to regulation by the
Ministry of Information Technology, which was formed in October 1999 and is a
part of the Government of India. We may also be subject to regulation by the
Ministry of Communications of the Government of India and the TRAI.

         On June 9, 2000, the Indian IT Act was enacted and was made effective
as of October 17, 2000. The IT Act has been enacted to:

               o    give legal validity to online contracts;
               o    give legal validity to digital signatures;
               o    make electronic records admissible in court in evidentiary
                    proceedings;
               o    set default rules for time and place of dispatch and
                    receipt of electronic records;
               o    allow for filing of documents with the Government of India
                    in electronic form;
               o    allow for retention of documents, information or records
                    in electronic form;
               o    set up certifying authorities to issue and supervise
                    digital signatures;
               o    set up a controller of certifying authorities to monitor
                    and supervise the certifying authorities;
               o    set up Cyber Regulations Appellate Tribunals to act as
                    quasi-judicial bodies with respect to disputes relating to
                    online transactions; and
               o    penalize computer crimes.

         Although the IT Act has been enacted, clarity on various issues
including legal recognition of electronic records, validity of contracts
entered into through the Internet, validity of digital signatures needs to be
established.

         New Telecom Policy, 1999

         The New Telecom Policy, 1999, or the New Telecom Policy, deals with
restructuring of the Indian telecommunications sector. The New Telecom Policy
states that Internet Service Providers, or ISPs, who wish to provide
applications such as tele-banking, tele-medicine, tele-education, tele-trading
and e-commerce, will be allowed to operate using infrastructure provided by
various Internet access providers. The New Telecom Policy also provides that
no license fees will be charged for providing the specific services, but
registration with the Government of India will be required. The New Telecom
Policy prohibits such service providers to provide switched telephony.

         If the New Telecom Policy is enforced in its current form, we may
have to register our services with the Government of India and we may also be
governed by the regulations issued by the TRAI.

         The TRAI was established in January 1997 by the Government of India
under the provisions of the Telecom Regulatory Authority of India Act, 1997,
as an autonomous body to regulate the telecommunications industry. On January
24, 2000, the President of India passed an ordinance to recast the TRAI. The
ordinance set up a Telecom Disputes Settlement and Appellate Tribunal to
adjudicate any dispute between a licensor and licensee, between service
providers, appeals of telecom service providers and between service providers
and groups of consumers. This ordinance has been replaced by the Telecom
Regulatory Authority of India (Amendment) Act, 2000. The TRAI under the
amended Act has powers to decide on new licenses and their terms and
conditions, the levy of fees and charges on services, interconnectivity
between the telecom service providers and perform administrative and financial
functions entrusted to it by the Government of India. The new TRAI has no
adjudicatory powers, as these powers now vest in a Telecom Disputes Settlement
and Appellate Authority. Telecom service providers can approach this appellate
authority and the orders of this authority can be challenged only in the
Supreme Court of India.

         Privacy

         At present India does not have any specific legislation to prevent
invasion of privacy by private parties. The Constitution of India protects the
privacy of private parties against any invasion by the state or government,
but it may not be possible to invoke this protection against violation by
private parties. There is no pending or proposed legislation that seeks to
penalize or regulate violation of privacy by private parties.

         Encryption

         Telecommunications in India are governed by the Indian Telegraph Act,
1885, as amended (the "Telegraph Act"), and the Indian Wireless Telegraphy
Act, 1933, as amended (the "Wireless Act"). Pursuant to the Telegraph Act, the
provision of any telecommunications services in India requires a license from
the Government of India obtained through the Department of Telecommunications.
While the Telegraph Act sets the legal framework for regulation of the
telecommunications industry, the Wireless Act regulates the possession of
wireless telegraphy equipment. Encryption hardware may be considered as an
instrument capable of being used for the transmission and reception of
telecommunications signals. Any person intending to use encryption hardware
may be required to obtain prior permission from the Department of
Telecommunications of the Government of India.

         The guidelines for ISPs permit the use of encryption equipment for
providing secrecy in transmission up to a level of encryption specified by the
Government of India. However, if the encryption equipment of levels higher
than specified is to be deployed, ISPs have to obtain the clearance of the
Government of India and should deposit one set of keys with the Department of
Telecommunications.

         These guidelines are applicable to ISPs and it is uncertain whether
they will apply to us. For using encryption hardware, we may have to obtain
prior approval from the Department of Telecommunications. However, it is
uncertain whether we are required to obtain any approval from the Department
of Telecommunications or any other department for using encryption software.
Furthermore, there may be certain restrictions in relation to the import of
encrypted software into India.

         Imports

         We may be required to import into India computer hardware and
Internet related software purchased from foreign manufacturers for our
business. These imports will be subject to the Export and Import Policy issued
by the Ministry of Commerce of the Government of India. At the time of import,
we may be required to pay a customs duty pursuant to the Customs Tariff Act,
1975, as amended. We will also be subject to the Foreign Exchange Management
Act, 1999, and the rules thereunder, ("FEMA"), in connection with payments in
foreign currency to the manufacturers of these products. We may require the
approval of the Reserve Bank of India if the payment in respect of such import
is made beyond a period of 6 months from the date of shipment.

Ownership of Foreign Securities

         We may wish to invest in the securities of foreign companies. The
FEMA may require that we obtain permission from the Reserve Bank of India
prior to making any such investment.



<PAGE>


                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The following discussion of our financial condition and operating
results should be read in conjunction with the financial statements and the
related notes included elsewhere in this annual report. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and
elsewhere in this annual report particularly in the "Risk Factors" section of
this annual report.

Overview

         We are a leading Internet destination in India focusing on India and
the global Indian community. Our websites in India and the United States
include information and content channels relevant to Indians, such as news,
business, movies and cricket/sports, community features, such as e-mail, chat,
messenger, e-commerce, Matchmaker, astrology, blogs and mobile services. Many
of these services are provided free of charge, while others are subscription
based. We also provide wireless short messaging services from PCs to cellular
phone subscribers. With 30.4 million online registered users worldwide as at
March 31, 2004, we believe Rediff.com is the most recognized online brand in
India and among the Indian community worldwide.

         Additionally, we publish a weekly newspaper, India Abroad, in the
United States and Canada. In February 1996, we initiated our online content
offerings with rediff.co.in and rediffindia.com. We later combined the sites
into rediff.com, our online portal in India. With the acquisition of
thinkindia.com Inc. (later renamed Rediff.com Inc.) in February 2001, we
launched Rediff U.S.A., an online portal providing content, community and
e-commerce for our users in the United States.

         During the fiscal year ended March 31, 2004, our reportable business
segments were India Online business, U.S. Publishing business and phone card
business. On April 8, 2004, we sold our phone card business to Worldquest
Networks, Inc. In accordance with SFAS 144, Accounting for the impairment or
disposal of long-lived assets, the results of the operations of the phone card
business, are disclosed as discontinued operations in our consolidated
statement of operations. Accordingly, the segmented results of operations for
the phone card business for the fiscal year ended March 31, 2004 and for prior
fiscal years have not been presented and the reportable business segments
presented herein are:

               (i)  India Online business, which primarily includes revenues
                    from online advertising and fee based services. Online
                    advertising includes advertisements and sponsorships and
                    designing and managing customers' websites. Fee based
                    services include e-commerce, subscription services and
                    wireless short messaging services.

               (ii) U.S. Publishing business, which primarily includes
                    revenues from subscription and advertising services from
                    the publication of India Abroad, India in New York and
                    Rediff.com U.S.A.

         In earlier years, our reportable business segments were:

               (i)  for the fiscal year ended March 31, 2003, India Online
                    business, U.S.Publishing business and phone card business.

               (ii) for the fiscal year ended March 31, 2002, Media services,
                    Merchandizing services and Communication services.

         Revenues from our reportable business segments were as follows:

<TABLE>
<CAPTION>

                                                                For the Fiscal Years Ended March 31,
                                                     --------------------------------------------------------
                                                         2002(1)               2003                 2004
                                                     -----------------   -----------------   ----------------

<S>                                                     <C>                  <C>                 <C>

 India Online business...........                     US$2,575,918         US$2,767,244        US$3,636,183

 U.S. Publishing business........                        5,283,037            5,804,598           5,810,420
                                                      ------------         ------------        ------------
      Total revenues.............                     US$7,858,955         US$8,571,842        US$9,446,603
                                                      ============         ============        ============

-------------------------------
(1)    Revenues for the year ended March 31, 2002 have been reclassified to conform to the above classification.

</TABLE>


         During the year ended March 31, 2004, we discontinued our earlier
practice of allocating our operating expenses to our business segments, as our
management focuses primarily on the segment's gross profits to measure the
performance of each operating segment.

         We have incurred significant net losses and negative cash flows from
operations since our inception in January 1996, including a net loss of
approximately US$5.7 million for the fiscal year ended March 31, 2004. As of
March 31, 2004, we had an accumulated deficit of approximately US$54.4
million. We will need to generate additional revenues, while controlling our
expenses, to achieve profitability.

         During June 2000, we issued a total of 5.3 million ADSs, representing
2.6 million equity shares, in an underwritten initial public offering at a
price of US$12.00 per ADS, for aggregate net proceeds of US$57.3 million. The
net proceeds of the ADS offering have been used by us, and in the future are
intended to be used by us, to develop content for our Internet portals, to
advertise and promote our brand and for general corporate purposes, including
strategic investments, partnerships and acquisitions.

Significant Accounting Policies

         Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with U.S. GAAP. The preparation of these financial
statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and the
related disclosures of contingent assets and liabilities. On an on-going
basis, we evaluate our estimates, including but not limited to allowances for
doubtful accounts, the valuation of investments, income taxes, restructuring
costs, contingencies, goodwill impairment and litigation. We base our
estimates on historical experience and on other assumptions that we believe
are reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.

         The following are the significant accounting policies used in the
preparation of our financial statements.

Revenue Recognition

India Online business

         India Online business includes revenues from online advertising and
fee based services. Online advertising includes advertisement and sponsorships
and designing and managing customers' websites. Fee based services include
e-commerce, subscription services and wireless short messaging services.
E-commerce revenue primarily consists of commission earned on sale of items to
customers who shop on our online marketplace, while subscription services
consist of subscriptions received for using our paid e-mail services,
Matchmaker, astrology and other services. Wireless short messaging services
include revenues derived from mobile phone operators based on ringtones,
picture messages, logos, wallpapers and value added text messages received and
sent by mobile subscribers over the mobile phone.

         Advertisement and sponsorship income is derived from customers who
advertise on our website or to whom direct links from our website to their own
websites are provided and income earned from designing and managing customers'
websites.

         Revenues from advertisement and sponsorships are recognized ratably
over the contractual period of the advertisement, commencing from the time the
advertisement is placed on the website. Revenues are also derived from sponsor
buttons placed in specific areas of our website, which generally provide users
with direct links to sponsor websites. Such revenues are recognized ratably
over the period in which the advertisement is displayed, provided that no
significant obligations remain and collection of the resulting receivable is
probable. Our obligations typically include guarantee of a minimum number of
impressions or number of times that an advertisement appears in pages viewed
by users of our portal. To the extent that minimum guaranteed impressions are
not met, we defer recognition of corresponding revenues until the guaranteed
impression levels are achieved.

         We also earn revenues on sponsorship contracts, which include fees
relating to the design, coordination and integration of the customers'
content, which are recognized ratably over the term of the contract.

         Website development services principally consist of services relating
to the designing of graphics, layout, artwork and content of the customers'
website. Revenue from such services on large contracts that relatively take
longer periods of time to complete are recognized upon completion of
milestones specified in the contract. At each such milestone, the services are
either billed or billable, and as they relate to completed work, are earned.
Revenue from such services on contracts that take relatively shorter periods
of time is recognized on completion of the entire contract. During fiscal
2002, 2003 and 2004, short-term contracts constituted substantially all of
these services.

         Fee based services include e-commerce, subscription services and
wireless short messaging services. E-commerce marketplace revenues primarily
consist of commission from the sale of books, music, apparel, confectionery,
gifts and other items to retail customers who shop online at our website.
Customers directly place orders with vendors through our website. When an
order is placed, we inform the vendor through an intranet and also confirm
whether payment has already been collected by us through credit card/debit
card or checks, or whether the payment is to be made by the customer on a
C.O.D. basis. The vendor then dispatches the products to the customers. The
vendor sends a monthly summary of transactions executed during the month for
which we collected payments on its behalf. We make payment to the vendor after
deduction of our share of commission and costs. We recognize as revenues
commissions earned on these transactions. Revenues from e-commerce services
also include fees charged to vendors for creating, designing and hosting the
vendors' product information on our website. Such fees are amortized over the
hosting contract period.

         Subscription revenues primarily include income from various
subscription based products, such as paid e-mail, match maker, SMS based
services, astrology and other services that cater to a cross section of our
registered user base. Revenues for subscription based service products are
recognized ratably over the period of subscription.

         We also derive revenues from providing value added short messaging
services such as ringtones, picture messages, logos, wallpapers, e-mail and
other related products to mobile phone users. Our contracts are with
third-party mobile phone operators for sharing revenues from these services.
SMS based revenues are recognized when the service is performed.

U.S. Publishing business

         U.S. Publishing business primarily includes revenues from
subscription and advertising services from the publication of India Abroad,
India in New York and Rediff.com U.S.A.

         We recognize advertising revenues at the time of publication of the
related advertisement. Subscription income is deferred and recognized pro rata
over the term of the subscription. Revenues from banners and sponsorships on
our Rediff.com U.S.A. portal are recognized over the contractual period of the
advertisement, commencing from the date the advertisement is placed on the
website, provided that no significant obligations remain and collection of the
resulting receivable is probable. Obligations may include guarantee of a
minimum number of impressions, or times that an advertisement appears in pages
viewed by users of our portal. To the extent that minimum guaranteed
impressions are not met, we defer recognition of the corresponding revenues
until the guaranteed impression levels are achieved.

Allowances for doubtful accounts receivable and other recoverables

         We maintain allowances for doubtful accounts receivable and for other
recoverables for estimated losses resulting from the inability of our
customers to make contractually agreed payments. All receivables which are
outstanding for 180 days or more are provided for. We also make allowances for
a specific account receivable or other recoverable if the facts and
circumstances indicate that such account receivable or other recoverable is
unlikely to be collected. For example, if the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required.

Depreciation and amortization

         We depreciate our tangible assets on a straight-line basis over the
useful life of the assets, which range from three to ten years. Costs incurred
for website development are accounted for in accordance with EITF 00-02 -
Accounting for Website Development Costs. Eligible costs are capitalized and
amortized over the estimated useful life of three years. Maintenance expenses
or costs that do not result in new features or functions are expensed as
product development costs.

Goodwill and intangible assets

         We capitalize the cost of purchased goodwill and other intangibles.

         Until March 31, 2001, we amortized the cost of such goodwill and
intangibles using the straight line method over their estimated useful lives,
ranging from three to seven years for goodwill and generally not exceeding
three years for intangibles.

         With effect from April 1, 2001, we adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets",
and ceased to amortize the remaining cost at March 31, 2001 of goodwill and
intangibles that do not have a finite life. Instead, in accordance with the
two-step methodology required by SFAS No. 142, we test unamortized balances of
goodwill and intangible assets that do not have a finite life for impairment
annually, or earlier upon the occurrence of a triggering event.

Acquisitions and Divestments

Value Communications Corporation

         On March 23, 2001, we acquired the entire outstanding common stock of
Value Communications Corporation, a company engaged in selling prepaid
long-distance calling cards primarily to the Indian community in the United
States and Canada. The purchase consideration consisted of US$3.0 million,
which was paid by us on March 23, 2001, plus a deferred consideration (called
earn-out payments) payable over a period of two years which was contingent
upon Value Communications achieving specified earnings levels in those years.

         The transaction was accounted for by the purchase method in
accordance with APB Opinion No. 16, which resulted in creation of an initial
goodwill of US$3.7 million at March 23, 2001. Such goodwill increased to
US$6.82 million at March 31, 2002 as a result of provisions for earn-out
payments to ValuCom's former shareholders and cash-out of ValuCom options.
Such goodwill further increased to US$7.13 million at March 31, 2003 as a
result of final earn-out payments made to ValuCom's option holders.

         On April 8, 2004, we sold our phone card business, consisting
primarily of the "Valucom" brand, trademarks, websites, internally built
software, customer lists and certain hardware for US$500,000 to Worldquest
Networks Inc ("WQN"). WQN paid US$200,000 of the total consideration at
closing with the remaining US$300,000 to be paid in twelve monthly
installments of US$25,000 commencing May 2004. In addition, we also sold its
inventory of prepaid identification numbers ("PINS") to WQN at its carrying
value on April 8, 2004, resulting in additional consideration of US$102,424.
Separately, in April 2004, WQN entered into an advertising agreement with
Rediff.com, Inc. entitling WQN to exclusive rights to prominent online
advertising space on the Rediff.com U.S.A website. Under the terms of the
advertising agreement, WQN will pay Rediff US$50,000 for twelve consecutive
months commencing in May 2004 for the advertising services. WQN provided both
Valucom and Rediff irrevocable letters of credit to secure WQN's remaining
obligations under these agreements.

         In accordance with SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, the disposal of the phone card business
qualifies as discontinued operations at March 31, 2004.

India Abroad Publications Inc.

         On April 27, 2001, we acquired substantially all the outstanding
voting shares of India Abroad Publications Inc., a New York corporation
primarily engaged in the publication of a weekly newspaper, India Abroad.

         Pursuant to a stock purchase agreement, at the closing of the
acquisition, we paid approximately US$11.4 million to the selling shareholders
of India Abroad. Simultaneously with this acquisition, the former principal
shareholder repurchased certain assets for approximately US$1.1 million
resulting in an estimated gain of approximately US$314,000, which has been
recorded as reduction of goodwill. Of the amount to be paid to the former
principal shareholder, we had placed US$2.0 million in an escrow account. At
March 31, 2004, US$1 million remained in the escrow account.

         We accounted for this acquisition by the purchase method, in
accordance with APB Opinion No. 16, which resulted in the initial creation of
goodwill of approximately US$10.5 million.

Goodwill Impairment

Fiscal year ended March 31, 2004

         During the fiscal year ended March 31, 2004, we recorded a further
impairment charge of US$1.7 million for the Valucom goodwill. In April 2004,
we sold our phone card business for a consideration of US$500,000. The
impairment charge was computed based on the sale value of the phone card
business. The remainder of the Valucom goodwill of US$371,588 has been
classified as "Assets held for sale" in the balance sheet at March 31, 2004.

         Our annual assessment of goodwill of India Abroad for impairment
during the fiscal year ended March 31, 2004, with the assistance of an
independent valuation specialist, concluded that there was no impairment of
goodwill during the fiscal year ended March 31, 2004.

Fiscal year ended March 31, 2003

         During the fiscal year ended March 31 2003, we identified the
following three triggering events to warrant testing of goodwill on the
ValuCom acquisition for impairment:

1.       On July 30, 2002, we entered into a settlement agreement with
         ValuCom's former founder shareholders, who were managing ValuCom
         subsequent to our acquisition, to finally settle in full all of our
         obligations, including payment of earn-out amounts, and to discharge
         them of their duties to the Company, which resulted in the loss of
         key management personnel.

2.       Deregulation of the Indian long distance telecommunications market
         and commencement of VOIP (Voice over Internet Protocol) having
         resulted in increased competition, with a significant drop in
         international long distance rates, shifting of calls originating from
         the U.S. to calls originating in India and pricing pressures due to
         significantly lower rates offered by providers of Internet telephony.
         We believed that it was unlikely that these trends would reverse in
         the near future.

3.       A significant drop in the number of Indian software professionals in
         the U.S., as a result of the events of September 11, 2001 and the
         subsequent downturn in the technology market. As a result, a key
         target customer group had shrunk and sales volumes were adversely
         affected. We believed that this trend was also unlikely to reverse in
         the near future.

         Following these triggering events, we re-evaluated goodwill that
arose on ValuCom's acquisition.

         During the fiscal year ended March 31, 2003, we assessed the goodwill
that arose on India Abroad's acquisition. Based on the application of SFAS No.
142, we concluded that goodwill relating to India Abroad was impaired.

         We determined the fair value of ValuCom and India Abroad with the
assistance of an independent valuation specialist and recorded an impairment
charge of US$5.1 million and US$3.2 million for ValuCom and India Abroad,
respectively, during the year. Consequently, goodwill of ValuCom and India
Abroad as on March 31, 2003 were US$2.0 million and US$7.3 million,
respectively.

Fiscal year ended March 31, 2002

         Following the acquisition of India Abroad on April 27, 2001, we
initiated a process of integrating the operations of Rediff.com Inc. (formerly
thinkindia.com, Inc.) with those of India Abroad, including relocating the
operations of Rediff.com Inc. from California to New York. Based upon this
restructuring, we re-evaluated the goodwill that arose on the Rediff.com Inc.
acquisition for impairment. After applying SFAS No. 142, we concluded that
goodwill relating to Rediff.com Inc. was impaired and, accordingly, wrote off
the unamortized balance of US$3.3 million as an expense in the fiscal year
ended March 31, 2002.

Investment Impairment

         The market environment, including general conditions affecting the
technology industry together with the downturn in valuations of dot.com
companies caused us to re-examine whether the values of our Internet
investments were appropriate. After reviewing key financial indicators for
such investments, which were unlisted and illiquid, we concluded that such
investments had suffered permanent impairment. Accordingly, during the fiscal
year ended March 31, 2002, we wrote off the value of these investments and
recorded an impairment expense of US$3.3 million.

         We may continue to invest in various companies for business and
strategic purposes. While we will seek to preserve capital while maximizing
yields, we will remain exposed to market risk to the extent the value of these
investments is adversely affected. Market volatility may materially and
adversely affect the value of any investments that we may make and thus have a
material and adverse impact on our operating results.

Current Trading and Business Outlook

         We believe that the India Online market will be entering a phase of
accelerated growth as revealed by macro indicators such as the rapid increase
in mobile subscribers, higher PC sales and the impending penetration of
broadband as recognized by TRAI. During the fiscal year ended March 2004, we
maintained our market leadership in the Indian Online space as demonstrated by
the growth of our registered user base and paid subscribers. We believe that
there continues to be an opportunity and a challenge to significantly grow our
fee-paying subscribers which currently account for less than 1% of our
registered user base. We believe the online advertising industry is in a
promising stage of development with more marketers experimenting with the
medium with significantly larger budgets. Growth in this business segment is
largely dependent on the advertising industry collaborating with online
providers like us to cohesively promote the medium to leading marketers across
the country.

         Our U.S. Publishing business, comprised of India Abroad, India in New
York and Rediff.com U.S.A., maintained its leadership position within the
Indian-American community during the fiscal year ended March 31, 2004. Our
U.S. Publishing business segment is mainly dependent on our ability to attract
advertisers in a growing market, especially in the New York area, while
effectively managing costs through greater operational efficiencies across our
businesses.

         The outlook for our India Online business during the fiscal year
ending March 31, 2005 will be dependent on whether Indian mobile and Internet
users, who are largely in the early stage of use, quickly adopt the advanced
services we provide such as ring tone downloads, e-commerce, online
matchmaking and paid e-mail services.

         Actual results may differ materially from those suggested by our
forward-looking statements due to certain risks or uncertainties associated
with our expectations with respect to, but not limited to the impact on our
business of a continued economic slowdown or a downturn in the sectors in
which our clients operate, our ability to successfully implement our strategy,
our ability to successfully integrate the business we have acquired with our
business, demand for our online and offline service offerings, changes in the
Internet marketplace, technological changes, investment income, cash flow
projections and our exposure to market risks. By their nature, certain of the
market risk disclosures are only estimates and could be materially different
from what actually occur in the future. As a result, actual future gains,
losses or impact on net interest income could materially differ from those
that have been estimated. For further discussion on forward-looking
statements, see the discussion under the "Forward-Looking Statements" section
of this annual report.

Operating Results

         We sold our phone card business in April 2004. In accordance with
SFAS 144, Accounting for the impairment or disposal of long-lived assets, the
disposal of our phone card business qualifies as discontinued operations at
March 31, 2004. The results of operations of the phone card business are
disclosed as discontinued operations in our consolidated statements of
operations.

         The comparative analysis presented below relates to our continuing
operations.

Fiscal Year Ended March 31, 2004 Compared to Fiscal Year Ended March 31, 2003

         Revenues. Total revenues for the fiscal year ended March 31, 2004
increased 10.2% to US$9.5 million from US$8.6 million for the fiscal year
ended March 31, 2003. This increase was principally attributable to the
increase in revenues from our India Online business.

         India Online business. We recognized US$3.6 million as revenues for
the India Online business for the fiscal year ended March 31, 2004 as compared
to US$2.8 million for the fiscal year ended March 31, 2003, representing an
increase of US$0.9 million, or 31.4%, over the previous fiscal year. The
increase in revenue was mainly due to increases in:

               o    advertising revenues by US$0.3 million, primarily as a
                    result of an increase in Internet advertising in India.

               o    fee based services by US$0.6 million due to an increase in
                    revenues from our subscription services, mobile SMS
                    services and our e-commerce marketplace. This resulted
                    from a greater number of users and greater usage of these
                    services.

         U.S. Publishing business. We recognized US$5.8 million in revenues
for the U.S. Publishing business for the fiscal year ended March 31, 2004. The
revenues during the year were largely flat as compared to the previous year.

         Cost of revenues. Cost of revenues primarily includes cost of content
for the Rediff websites, editorial costs, printing and circulation costs for
the India Abroad newspaper, e-commerce marketplace related costs and related
salaries. For the fiscal year ended March 31, 2004, cost of revenues was
US$4.7 million or 50.2% of total revenues compared to US$5.6 million or 64.9%
of revenues for the previous fiscal year. This represents a decrease of US$0.8
million, or 14.8%, over the previous fiscal year due to the decrease in the
cost of revenue for our U.S. publishing business by US$0.9 million, which was
partially offset by an increase in cost of revenues of our India Online
business by US$52,000.

         The decline in cost of revenues for the U.S. Publishing business
resulted from benefits arising from tighter integration between our US and
Indian operations, including shifting of some high cost U.S. operations to
India, favorable negotiations with key vendors and other cost control
initiatives.

         We anticipate that our cost of revenues in absolute dollar terms for
our India Online business will increase during the fiscal year ended March 31,
2005 as compared to the fiscal year ended March 31, 2004, as we expect to
incur additional costs to develop new products and services, and enhance the
content that we currently offer on Rediff.com.

         Sales and marketing expenses. Sales and marketing expenses primarily
include employee compensation for sales and marketing personnel, advertising
and promotion expenses and market research costs. For the fiscal year ended
March 31, 2004, sales and marketing expenses were US$1.0 million compared to
US$2.6 million for the fiscal year ended March 31, 2003, representing a
decrease of US$1.6 million, or 63.3%, over the previous fiscal year. This
decrease was primarily due to a decrease in advertising expenditures by
approximately US$0.7 million, writeback of allowances no longer required,
amounting to approximately US$0.7 million and reduction of personnel expenses
by approximately US$79,000.

         We expect our sales and marketing expenses in absolute dollar terms
will increase for the fiscal year ended March 31, 2005, as compared to the
fiscal year ended March 31, 2004, as we launch more products and services and
expand the range of offerings on our websites.

         Product development expenses. Product development costs primarily
include internet communication costs, software usage fees, software
development expenses and compensation to product development personnel. For
the fiscal year ended March 31, 2004, product development expenses were US$1.6
million compared to US$1.8 million for the fiscal year ended March 31, 2003,
representing a decrease of US$0.2 million, or 12.2%. The decrease was
primarily due to lower software development expenses, internet communication
costs and personnel costs.

         We expect to continue to invest in product development to maintain
our position as a leading Internet destination for the global Indian
community. Therefore, we expect our product development expenses in absolute
dollar terms to increase in the future.

         General and administrative expenses. General and administrative costs
primarily consist of compensation for administrative personnel, fees for legal
and professional services, allowances for doubtful accounts, insurance premia,
depreciation and sundry administrative costs. For the fiscal year ended March
31, 2004, general and administrative expenses were US$5.4 million compared to
US$7.3 million for the fiscal year ended March 31, 2003, representing a
decrease of US$1.9 million, or 26.2%. This decrease was primarily due to a
decrease of US$0.7 million in deprecation expense primarily as a result of
certain assets being fully depreciated, decrease in personnel expenses of
US$0.6 million, a decrease of US$0.4 million in legal and professional
services expense and a write back of allowances no longer required, amounting
to US$0.1 million. We expect that as we continue to grow, our general and
administrative expenses will increase in the future.

         Other income (loss), net. Other income (loss), net primarily consists
of interest income and foreign exchange gain or loss. During the fiscal year
ended March 31, 2004, other expense (net) was US$0.1 million compared to an
income (net) of US$18,000 for the fiscal year ended March 31, 2003,
representing a decrease of US$0.1 million, or 791.7%. Interest income for the
fiscal year ended March 31, 2004 was US$0.3 million compared to US$0.4 million
for the fiscal year ended March 31, 2003, representing a decline of US$0.1
million, or 16.0%. The decrease in interest income was due to lower applicable
interest rates and lower average balance of cash and cash equivalents during
the fiscal year ended March 31, 2004 as compared to the fiscal year ended
March 31, 2003. Foreign exchange loss for the fiscal year ended March 31, 2004
was US$0.5 million as compared to a loss of US$0.4 million for the previous
fiscal year. The net foreign exchange loss was as a result of appreciation of
the Indian Rupee by 8.6% to Rs.43.4 per U.S. dollar as of March 31, 2004 from
Rs.47.50 per U.S. dollar as of March 31, 2003, which lowered the value in
Rupee terms of our U.S. dollar denominated revenues.

         Net loss. Our net loss was US$5.7 million for the fiscal year ended
March 31, 2004 compared to a net loss of US$19.0 million for the fiscal year
ended March 31, 2003.

Fiscal Year Ended March 31, 2003 Compared to Fiscal Year Ended March 31, 2002

         Revenues. Total revenues for the fiscal year ended March 31, 2003 was
US$8.6 million as compared to US$7.9 million for the fiscal year ended March
31, 2002. This represents an increase of US$0.7 million or 9.1% over previous
year. Of the increase in revenue, US$0.2 million arose in the India Online
business and US$0.5 million in the U.S. Publishing business.

         India Online business. We recognized US$2.8 million as revenues for
the India Online business for the fiscal year ended March 31, 2003 as compared
to US$2.6 million for the fiscal year ended March 31, 2002, representing an
increase of US$0.2 million, or 7.4%, over the previous fiscal year. The
increase in fee based revenue included an increase of US$0.3 million in fee
based revenues as a result of higher sales of our various services such as
Rediffmail mobile, Rediffmail Pro, a paid e-mail service, SMS based value
added services such as games, contest, dating services and e-commerce
services. This increase was partially offset by a decline of US$0.3 million in
advertising revenue.

         U.S. Publishing business. We recognized US$5.8 million in revenues
for the U.S. publishing business for the fiscal year ended March 31, 2003 as
compared to US$5.3 million for the fiscal year ended March 31, 2002,
representing an increase of US$0.5 million or 9.9% over the previous fiscal
year. The increase in revenue primarily resulted from an increase in
advertising revenue. During the fiscal year ended March 31, 2003, we launched
a number of special interest supplements in the India Abroad newspaper which
were well received by advertisers in the United States and India.

         Cost of revenues. Cost of revenues primarily include the cost of
content for the Rediff websites, editorial cost, printing and circulation cost
for the India Abroad newspaper, e-commerce marketplace related cost and
related salaries. For the fiscal year ended March 31, 2003, cost of revenues
was US$5.6 million or 64.9% of revenues compared to US$5.1 million or 64.9% of
revenues for the fiscal year ended March 31, 2002. This represents an increase
of US$0.5 million, or 9.1%, over the previous fiscal year. The increase was
principally attributable to an increase of US$0.5 million in U.S. publishing
editorial costs, an increase of US$0.2 million in U.S. publishing circulation
costs and an increase of US$0.2 million in India online e-commerce costs. The
above increase was partially offset by a decrease of US$0.4 million in India
online cost of revenues.

         Sales and marketing expenses. Sales and marketing expenses primarily
include employee compensation for sales and marketing personnel, advertising,
promotion and market research costs. Sales and marketing expenses were flat at
US$2.6 million for the years ended March 31, 2003 and 2002.

         Product development expenses. Product development costs primarily
include internet communication costs, software usage fees, software
development expenses and compensation to product development personnel. For
the fiscal year ended March 31, 2003 product development expenses were US$1.8
million compared to US$3.1 million for the fiscal year ended March 31, 2002,
representing a decrease of US$1.3 million, or 41.1%, over the previous fiscal
year. The decrease in product development expenses included US$0.7 million
decrease in internet communication costs and US$0.3 million decrease on
account of lower amortization expenses as a result of certain website
development costs being fully amortized.

         General and administrative expenses. General and administrative costs
primarily consist of compensation for administrative personnel, fees for legal
and professional services, allowances for doubtful accounts, insurance premia,
depreciation and sundry administrative costs. For the fiscal year ended March
31, 2003, general and administrative expenses were US$7.3 million compared to
US$7.9 million for the fiscal year ended March 31, 2002, representing a
decrease of US$0.6 million, or 7.1%, over the previous fiscal year. This
decrease was largely on account of lower legal and professional fees and a
lower allowance for doubtful accounts receivable.

         Restructuring costs and legal fees. During the fiscal year ended
March 31, 2003, restructuring costs and legal fees were nil as compared to
US$0.8 million for the fiscal year ended March 31, 2002. Restructuring costs
and legal fees for the fiscal year ended March 31, 2002 of US$0.8 million
include US$0.6 million for restructuring expenses in accordance with SAB 100
and EITF 94-3 primarily consisting of lease termination costs, expenses for
relocation of equipment and staff and severance payments. These costs related
to restructuring and relocating Rediff.com Inc's operations from California to
New York and its integration with India Abroad. The balance of US$0.2 million
represented our retention under our directors and officers liability insurance
for legal fees relating to the class action suit described under
"Business--Legal Proceedings".

         Other income, net. Other income, net primarily consists of interest
income and foreign exchange gain or loss. During the fiscal year ended March
31, 2003, other income (net) was US$18,090 compared to US$2.0 million for the
fiscal year ended March 31, 2002. Interest income for the fiscal year was
US$0.4 million compared to US$0.9 million for the fiscal year ended March 31,
2002. The decrease in interest income was due to lower interest rates and
lower average balance of cash and cash equivalents. Foreign exchange loss for
the fiscal year was US$0.4 million as compared to a gain of US$1.1 million for
the fiscal year ended March 31, 2002. The net foreign exchange loss was as a
result of appreciation of the Indian Rupee against the U.S. dollar during the
year, which lowered the value in Rupee terms of our U.S. dollar denominated
revenues.

         Net loss. Our net loss was US$19.0 million for the fiscal year ended
March 31, 2003 compared to a net loss of US$14.8 million for the fiscal year
ended March 31, 2002.

         Seasonality

         Given the early stage of the development of the Internet in India,
the rapidly evolving nature of our business and our limited operating history,
we cannot accurately predict to what extent, if at all, our operations will
prove to be seasonal. However, we do experience peaks in our business because
of the festival seasons in the Indian winter months of November through
February and because of extended vacation in the Indian summer months of April
through June. India Abroad experiences its peak season during the Christmas
holiday season in the United States.

Liquidity and Capital Expenditures

         Our primary liquidity needs have been to finance our losses from
operations, acquisition of India Abroad and loss from the acquisition and sale
of Value Communications and capital expenditures. We have funded these costs
primarily from the private sales of equity securities, sale of ADSs and from
cash received from our operations.

         For the fiscal years ended March 31, 2002, 2003 and 2004, we incurred
net losses of US$14.8 million, US$19.0 million and US$5.7 million,
respectively. Although our net losses have decreased as a result of, among
other reasons, realized cost efficiencies and increased revenues, we expect to
continue to incur net losses and negative cash flows from operations, which
will require us to continue to use the proceeds from the sale of our equity
securities and ADSs.

         As of March 31, 2004, our accounts receivable balance was US$1.9
million compared to US$1.4 million as of March 31, 2003, net of allowances of
US$1.2 million and US$1.0 million as of March 31, 2004 and 2003, respectively.
This increase was principally due to the increase in our revenues. During the
years ended March 31, 2002, 2003 and 2004, we had write-offs or provided
allowances of US$0.4 million, US$0.2 million and US$0.2 million for delinquent
trade receivables, respectively. These write-offs and allowances constituted
5.1%, 2.3% and 2.2% of total revenues, respectively in those years.

Cash Flows

<TABLE>
<CAPTION>

                                                        For the Fiscal Year Ended March 31,
                                           --------------------------------------------------------------
                                                2002                   2003                   2004
                                           -----------------      -----------------      ----------------

<S>                                           <C>                     <C>                   <C>

 Net cash used in (provided  by)
 operating activities..............

 - from continuing operations               US$(7,916,592)          US$(6,720,388)        US$(2,886,563)
 -from discontinued operations                 US$721,075           US$(2,128,786)          US$(373,744)
                                            --------------          --------------        --------------
 Total.............................         US$(7,195,517)          US$(8,849,174)        US$(3,260,307)
                                            ==============          ==============        ==============
 Net cash used in investing
 activities........................        US$(11,620,422)          US$(3,753,778)          US$(561,783)
                                           ---------------          --------------          ------------
 Net cash provided by (used  in)
 financing activities..............           US$(861,929)                      -             US$73,473
                                              ------------          --------------            ---------
 Effect of exchange rate changes
 on cash............................        US$(1,456,041)             US$466,891          US$1,004,004
                                           ===============         ==============         =============
 Net decrease in cash and cash
 equivalents.......................        US$(21,133,909)         US$(12,136,061)        US$(2,744,613)
                                           ===============         ===============        ==============

</TABLE>

         Fiscal Year Ended March 31, 2004

         Net cash from continuing operations used in operating activities of
US$2.9 million during the fiscal year ended March 31, 2004 was primarily
attributable to a net loss of US$5.7 million which included non-cash items of
depreciation and amortization of US$1.3 million. Other cash flows included
decreases in accounts payable and accrued liabilities of US$0.9 million and
increase in accounts receivable of US$0.5 million. This was offset by a
reduction in prepaid and other current assets of US$0.2 million, an increase
in unearned revenues of US$0.1 million due principally to higher collections
during the year and a decrease in recoverable income taxes of US$0.2 million
due principally to refund of taxes from Indian Tax authorities.

         Net cash used in investing activities during the fiscal year ended
March 31, 2004 was US$0.6 million, comprising principally purchases of
computers and other capital equipment in connection with the expansion of our
network.

         Net cash provided by financing activities during the fiscal year
ended March 31, 2004 was US$73,000 representing cash received for employee
stock options exercised during the year.

         As of March 31, 2004, we had aggregate commitments for capital
expenditures of approximately US$4,896.

         Fiscal Year Ended March 31, 2003

         Net cash from continuing operations used in operating activities of
US$6.7 million during the fiscal year ended March 31, 2003 was primarily
attributable to a net loss of US$19.0 million which included non-cash items of
depreciation and amortization of US$2.0 million and goodwill impairment of
US$3.2 million. Other cash outflows included an increase in accounts
receivable of US$0.4 million and decreases in accounts payable and accrued
liabilities of US$64,000. This was offset by a reduction in prepaid expenses
of US$0.4 million, an increase in unearned revenue of US$0.1 million and a
decrease in recoverable income taxes of US$0.2 million.

         Net cash used in investing activities during the fiscal year ended
March 31, 2003 was US$3.8 million, principally for the full and final
settlement with Valucom's former shareholders for US$3.4 million and purchases
of computers and other capital equipment in connection with the expansion of
our network and our offices aggregating US$0.4 million.

         No cash was used or provided by financing activities during the
fiscal year ended March 31, 2003.

         Fiscal Year Ended March 31, 2002

         Net cash from continuing operations used in operating activities of
US$7.9 million during the fiscal year ended March 31, 2002 was primarily
attributable to a net loss of US$14.8 million which included non-cash items of
depreciation and amortization of US$2.9 million, goodwill impairment of US$3.3
million and other than temporary diminution in the value of investments of
US$3.3 million. Other cash outflows include decreases in accounts payable and
accrued liabilities of US$1.2 million, an increase in recoverable income taxes
of US$0.3 million and an increase in other current assets and prepaid expenses
of US$0.7 million. This was offset by a reduction in accounts receivable of
US$0.2 million and a decrease in other assets of US$0.7 million.

         Net cash used in investing activities during the fiscal year ended
March 31, 2002 was US$11.6 million, principally for the acquisition of India
Abroad for US$10.9 million and purchases of computers and other capital
equipment in connection with the expansion of our network and our offices
aggregating US$1.5 million.

         Net cash used by financing activities during the fiscal year ended
March 31, 2002 was US$0.9 million due to repayment of long-term debt of India
Abroad in connection with its acquisition.

         Contractual Obligations

            Our contractual obligations relates to operating leases, payments
            for which are to be made as per the table below:
            Years ended March 31,
            ---------------------

            2005................................................... US$485,767
            2006...................................................    171,203
            2007...................................................     75,677
            2008...................................................     23,400
            2009 and thereafter....................................          -
                                                                    -----------
            Total payments........................................  US$756,047
                                                                    -----------

         Capital Expenditures

         Our principal capital expenditures are for purchases of computer
equipment, such as servers for our websites and leasehold improvements. In
fiscal 2004, 2003 and 2002, we had capital expenditures of US$0.6 million,
US$0.4 million and US$1.5 million, respectively.

         Dividends

         We have not declared or paid any cash dividends on our equity shares
since our inception and do not expect to pay any cash dividends for the
foreseeable future. We currently intend to retain future earnings, if any, to
finance the expansion of our business. For additional information, please see
the sections of this annual report entitled "Risk Factors--Risks Related to
our Business" and "Taxation".

         We believe our cash balances and liquid assets, cash generated from
future operations and our existing credit facilities will be adequate to
satisfy anticipated working capital requirements, capital expenditures and
investment commitments for the next twelve months. As business and market
conditions permit, we may from time to time, invest in or acquire
complementary businesses, products or technologies. These activities may
require us to seek additional equity or debt to fund financing such
activities, which could result in ownership dilution to existing shareholders,
including holders of our ADSs.

Income Tax Matters

         As of March 31, 2004, we had net operating loss carry forwards for
our Indian operations aggregating approximately US$19.2 million, which expire
between April 1, 2004 and March 31, 2012. If we do not have sufficient taxable
business income or if the applicable period expires, we will lose the
potential tax benefit of the relevant losses carried forward.

         As of March 31, 2004, Rediff Holdings Inc., our U.S. subsidiary and
the holding company of our Rediff.com Inc. and India Abroad investments, had
net operating loss carryforward of approximately US$7.4 million for federal
income tax purposes. These net operating loss carryforwards expire in years
2020 through 2024. Whether Rediff Holdings is able to realize the future tax
benefits related to its deferred income tax asset is dependent on many
factors, including its ability to generate taxable income within the net
operating loss carry forward period. Management considered these factors and
believed that a full valuation allowance of the deferred tax asset was
required for the period presented. For the years ended March 31, 2003 and
2004, the provision for current income taxes was US$304,000 and US$5,000,
respectively.

         As of March 31, 2004, Value Communications Corporation had a net
operating loss carryforward of approximately US$2.8 million. In April 2004,
Valucom sold its business to Worldquest Networks Inc. This sale has resulted
in a capital gain of approximately US$395,000 accruing to Value Communications
Corporation. This capital gain will be offset against the available net
operating losses of US$2.8 million, which will consequently be reduced to
approximately US$2.4 million. For U.S. federal income tax purposes, this loss
will expire in years 2021 through 2024. Following the sale of its business,
Valucom currently does not engage in any business activity. Unless Valucom is
able to generate taxable income within the aforesaid net operating loss carry
forward period, it will not be able to realize any future tax benefit.
Management considered these factors and believed that a full valuation
allowance of the deferred tax asset was required for the period presented.

Market Risks

Foreign Currency Exchange Rate Risk

         The functional currency for our Indian operations is the Indian
Rupee.We are exposed to foreign exchange rate fluctuations, principally
relating to the fluctuation of the U.S. dollar to Indian Rupee exchange rate.
We face foreign exchange risk with respect to funds held in foreign currencies
and in particular will have foreign exchange losses with respect to these
funds if there is an appreciation in the value of the Indian Rupee compared to
such foreign currency. We also face foreign exchange risk from accounts
payable to overseas vendors, which we partially mitigate with receipts in
foreign currency from overseas customers and balances in foreign currency with
overseas banks.

         Prior to October 2003, we held most of the proceeds from our ADS
offering in U.S. dollar denominated accounts. We now hold most of our cash and
cash equivalents in Indian Rupee denominated bank accounts in response to the
appreciation in the value of the Indian Rupee compared to the U.S. dollar. The
following table sets forth information about our net foreign exchange (US
dollars) exposure as of March 31, 2004:

                                                          As of March 31, 2004
                                                             (in thousands)

             Accounts payable in U.S. dollars........                    137
             Accounts receivable in U.S. dollars, net
             of allowance............................                     90
             Cash balances held in U.S. dollars......                  1,069
                                                          --------------------
             Net foreign exchange exposure...........                  1,022
                                                          --------------------


         We do not currently try to reduce our exposure to exchange rate
fluctuations by using hedging transactions. However, we may choose to do so in
the future. We may not be able to do this successfully. Accordingly, we may
experience economic losses and negative impacts on earnings and equity as a
result of foreign exchange rate fluctuations. If the Indian Rupee appreciates
against the US dollars by one Rupee, the net foreign exchange loss as of March
31, 2004 would be approximately US$24,000.

Interest Rate Risk

         We hold interest-bearing accounts in India as well as outside India
and fluctuations in interest rates impacted our interest earnings for the
fiscal year ended March 31, 2004. These interest rates are linked to the
interest rates prevailing in India and the United States which declined during
the fiscal year ended March 31, 2004. We expect that our interest earnings
will continue to be affected in the future by fluctuations in interest rates.


<PAGE>

                                  MANAGEMENT

         The following table sets forth, as of September 1, 2004, the name,
age and position of each of our directors and executive officers.

<TABLE>
<CAPTION>

                               Name                   Age              Position

<S>                     <C>                           <C>    <C>

       Ajit Balakrishnan(1)(2)....................    56     Chairman and Managing Director
       Joy Basu * ................................    43     Chief Financial Officer
       Diwan Arun Nanda(1)(2).....................    60     Director
       Sunil N. Phatarphekar(1)(2)(3).............    40     Director
       Abhay Havaldar(1)(3).......................    42     Director
       Pulak Prasad(1)(3).........................    36     Director
       Ashok Narasimhan(1)(3).....................    57     Director

       (1)  Member of the Board of Directors
       (2)  Member of the Compensation Committee
       (3)  Member of the audit committee
       Note: Effective July 31, 2003, Nitin Gupta, formerly our President
       and Chief Operating Officer resigned. Effective September 5, 2003,
       Rick Filippelli, formerly our Chief Financial Officer resigned.

       * Employed only for part of the fiscal year ended March 31, 2004

</TABLE>

         Ajit Balakrishnan is founder, Chairman and Managing Director of the
Company. Mr. Balakrishnan is also Managing Director of Rediffusion-Dentsu,
Young & Rubicam Private Limited, where he has served since March 1993, and a
director of Rediffusion Holdings Private Limited (earlier called Rediffusion
Advertising Private Limited), Klaas Equipment Private Limited, India Abroad
Publications Inc., India In New York Inc., Rediff.Com Inc., Rediff Holdings
Inc, Value Communications Corporation, AB Technologies LLC. U.S.A, Ajit
Balakrishnan Estates & Securities Private Limited and Quintrol Technologies
Private Limited. Mr. Balakrishnan holds a Bachelors degree in Physics from
Kerala University and a Post Graduate Diploma in Management from the Indian
Institute of Management, Kolkata. Mr. Balakrishnan's initial term of
appointment as Managing Director of the Company expired on August 24, 2003.
The shareholders have re-appointed Mr. Balakrishnan for an additional five
years term as Managing Director with effect from August 24, 2003, at the
Annual General Meeting held on September 29, 2003.

         Joy Basu has been our Chief Financial Officer since September 6,
2003. From April 16, 2003 to September 5, 2003, he served as our Vice
President-Finance. From October 2002 to April 2003, he served as Chief
Financial Officer of Sahara India Media Communication Limited. From April 2000
to September 2002, he served with the Sterlite Group of Companies, as Chief
Financial Officer of Sterlite Optical Technologies-Limited from April 2000 to
April 2002 and as Vice President, Corporate Finance from April 2002 to
September 2002. From 1993 to 2000 he served with the RPG Group of companies,
where the last position he held was General Manager - Strategic Planning. From
1986 to 1993 he served with the Tata Group in various capacities. Mr. Basu
hold a Bachelors degree in Commerce from St Xaviers College, Calcutta
University. He is also a member of the Institute of Chartered Accountants of
India and has completed the Senior Executive Course at the Manchester Business
School, U.K.

         Diwan Arun Nanda has been a director of Rediff.com India Limited
since its inception in December 1995. Mr. Nanda is also - Director of
Rediffusion-Dentsu, Young & Rubicam Pvt. Ltd. Klaas Equipment Private Limited,
Wunderman India Private Limited, Arion Horse Co. Pvt. Ltd., Rediffusion
Holdings Private Limited (earlier called Rediffusion Advertising Private
Limited), Dentsu, Young & Rubicam Tokyo, Japan, Royal Western India Turf Club,
Ltd. Everest Integrated Communications Pvt. Ltd., Showdiff Worldwide Pvt.
Ltd., , Dentsu, Young & Rubicam Sdn. Bhd, Malaysia and Clariant (India)
Limited. Mr. Nanda holds a Bachelors degree in commerce from Loyola College,
Chennai University, and a Post Graduate Diploma in Management from the Indian
Institute of Management, Ahmedabad.

         Sunil N. Phatarphekar has been a director of the Company since
February 1998. Mr. Phatarphekar is a director of Rediffusion-Dentsu Young, &
Rubicam Private Limited. He is also a partner of Doijode, Phatarphekar &
Associates, a Mumbai law firm. After obtaining his Bachelors degree in
Commerce from Jai Hind College, Bombay University, and a Bachelors degree in
Law from Government Law College, Bombay University he joined Crawford Bayley &
Company, a Mumbai law firm. Thereafter he was a partner at two Mumbai law
firms, Mahimtura & Co. and Shah Desai Doijode & Phatarphekar.

         Abhay Havaldar has been a director of the Company since August 1998.
Mr. Havaldar has also been a Principal with General Atlantic Partners, LLC., a
worldwide private equity firm, since 2002. Prior to joining General Atlantic
in 2002, Mr. Havaldar has been involved in the private equity industry in
India as a partner with ConnectCapital and Draper International for over 7
years. Prior to Draper, Mr. Havaldar spent twelve years in operations
management in the Indian IT industry at Tata Infotech and HCL-Hewlett Packard.
Mr. Havaldar holds a Bachelors degree in electrical engineering from the
University of Bombay and a masters in management degree from the Sloan Fellow
program of the London Business School.

         Pulak Prasad has been director of the Company since 1999. Since 2000,
he is also a Managing Director of Warburg, Pincus & Co. Mr. Prasad holds a
Bachelor's degree in Technology from the Indian Institute of Technology, Delhi
and an Post Graduate Diploma in Management from the Indian Institute of
Management, Ahmedabad.

         Ashok Narasimhan has been a director of the Company since June 25,
2002. He is currently Chairman, CEO and Co-Founder of July Systems Inc. He is
also limited partner, advisor, and board member for a number of U.S. venture
capital funds. He was earlier founder of Prio, Inc., where he served as
Chairman and CEO from early 1996 until its merger with InfoSpace. He
subsequently served on the board of Infospace. Prior to this, he served as
Head of Worldwide Marketing and Business Development of VeriFone, a leader in
automated electronic payment transactions. He holds a Bachelors Degree in
Physics from Madras University and a Post Graduate Diploma in Management from
the Indian Institute of Management, Kolkata.

Board Composition

         On March 16, 2000, we amended our Articles of Association. Our
Amended Articles of Association set the minimum number of directors at three
and the maximum number of directors at seven. We currently have six directors.
Our Articles of Association provide as follows:

               o    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
                    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.

               o    The remaining directors on the Board of Directors are
                    non-permanent directors, and one-third of these
                    non-permanent directors are liable to retire by rotation
                    each year, the members of the Board having served the
                    longest retiring first. These directors may be reappointed
                    at the annual general meeting of the shareholders. Mr.
                    Abhay Havaldar and Mr. Ashok Narasimhan retired by
                    rotation and were re-elected by the shareholders for a
                    further three year term at the annual general meeting of
                    the Company held on August 9, 2004.

Code of Ethics

         Effective February 15, 2004, we have adopted a code of ethics for all
of our employees and for all of our directors. We will provide a copy of our
code of ethics to any person without charge, upon request.

Board Committees

         The audit committee of the Board of Directors reviews, acts on and
reports to the Board of Directors with respect to various auditing and
accounting matters, including the recommendation of our independent auditors,
the scope of the annual audits, fees to be paid to the independent auditors,
the performance of our independent auditors and our accounting practices. The
members of the audit committee are Abhay Havaldar, Sunil N. Phatarphekar,
Pulak Prasad and Ashok Narasimhan.

         The Compensation Committee of the Board of Directors determines the
salaries, benefits and stock option grants for our employees, consultants,
directors and other individuals compensated by us. The Compensation Committee
also administers our compensation plans. The members of the Compensation
Committee are Ajit Balakrishnan, Diwan Arun Nanda and Sunil N. Phatarphekar.

Audit Committee Financial Expert

         As of March 31, 2004, no member of our audit committee met the
requirements to be an independent audit committee financial expert under the
SEC's definition. We intend to appoint to our board a director who will act as
the independent audit committee financial expert prior to July 2005.

Employees

         As of March 31, 2004, we had 222 employees and full-time consultants.
Of such employees, 29 are administrative, 65 are in our sales and marketing
teams, 87 are creative and editorial, 11 are dedicated to production and
circulation, 12 are dedicated to e-commerce and 18 are dedicated to product
development. We believe that our relationship with our employees is good. The
table sets forth the distribution of our employees by geographic location of
our facilities and by department:

Department                      Mumbai        Delhi        New York       Total

Creative                         22              5              -           27
Editorial                        42              5             13           60
Production                        -              -              6            6
Circulation                       -              -              5            5
Sales and Marketing              30             10             25           65
Product Development              17              -              1           18
E-Commerce                       12              -              -           12
Administration                   19              -             10           29
                             ------- -------------- -------------- ------------
         Total                  142             20             60          222
                             ------- -------------- -------------- ------------

Compensation

         Our Articles of Association provide that each of our directors may
receive an attendance fee for every Board and Committee meeting, provided that
no director shall be entitled to an attendance fee in excess of Rs.2,000 per
meeting. In fiscal year 2003, we did not pay any fees to our non-employee
directors. Mr. Ajit Balakrishnan, who is our Managing Director, does not
receive any additional compensation for his service on our Board of Directors.
Directors are reimbursed for travel and out-of-pocket expenses in connection
with their attendance at Board and Committee meetings.

         The total remuneration received by our executive officers and
directors for their services to us for the fiscal year ended March 31, 2004
was approximately US$362,666.

         The following table sets forth details regarding:

               (i)  compensation paid to executive officers and directors of
                    the Company during the fiscal year ended March 31, 2004;
                    and

               (ii) equity shares arising out of warrants granted to such
                    officers and directors under the Employee Stock Option
                    Plan, or ESOP, since inception of such plan.

         The dollar amounts in the following table are based on the weighted
average of the exchange rate used in our financial statements for such period.

<TABLE>
<CAPTION>

Name                    Salary             Equity Shares arising out of     Grant    Expiration date
                        and other          warrants granted during the      price
                        compensation       year under the 1999 ESOP, 1999   (US$)
                                           ASOP and the 2002 ADR ESOP

<S>                         <C>                              <C>            <C>        <C>

Ajit Balakrishnan       US$120,192                               -            -                  -

Joy Basu *                  50,710                           7,500          7.52          April 23, 2013
                                                             2,500         10.36      September 11, 2013

Sunil Phatarphekar               -                               -            -                  -

Abhay Havaldar                   -                               -            -                  -

Ashok Narasimhan                 -                               -            -                  -

Rick J. Filippelli *       110,808                               -            -                  -

Nitin Gupta *               80,956                               -            -                  -


*     Employed only for part of the fiscal year ended March 31, 2004

</TABLE>

Employee Benefit Plans

Employee Stock Option Plan 1999

         Our 1999 Employee Stock Option Plan (the "1999 ESOP"), allows for the
grant to our employees of warrants to purchase our equity shares. Each warrant
granted gives the employee the right to purchase a specified number of our
equity shares under the 1999 ESOP. The 1999 ESOP was approved by our Board of
Directors in August 1998 and by our shareholders in February 1999. A total of
280,000 equity shares, after giving effect to our 2 for 5 reverse share split
effective as of May 3, 2000, were reserved for issuance under the 1999 ESOP.
As of March 31, 2000, we had granted, under the 1999 ESOP, warrants,
equivalent to the right to purchase 222,300 equity shares, after giving effect
to our 2 for 5 reverse share split effective as of May 3, 2000, at a weighted
average exercise price of US$6.73 (Rs.293) per share. From April 1, 2001 to
March 31, 2002, we had granted additional warrants equivalent to the right to
purchase 19,000 equity shares at a weighted average exercise price of US$2.25
(Rs.108) per share under the 1999 ESOP. During the same period, there was a
forfeiture of warrants, equivalent to 13,450 equity shares from the employees
who had left the Company. During the fiscal year ended March 31, 2003,
warrants equivalent to 12,900 equity shares were forfeited due to the
resignation of employees. During the fiscal year ended March 31, 2004, we
granted additional warrants equivalent to the right to purchase 7,500 equity
shares and during the same period, warrants equivalent to 22,975 equity shares
were forfeited due to resignation of employees.

         Unless otherwise determined by the Board of Directors, the warrants
granted under the 1999 ESOP vest at a rate of 25% on each successive
anniversary of the grant date, until fully vested. Equity shares acquired
pursuant to the 1999 ESOP are subject to a 4-year lock-up period from the date
of grant of the respective warrants. In the case of termination of the
employee, the employee shall have the right to exercise only the warrants
vested up to the time of termination, and the unvested warrants shall lapse.
In the case of death, incapacitation, or retirement at the normal retirement
age of an employee, all warrants granted to him or her shall vest in full
either on the employee or his or her legal heirs, as appropriate. The period
during which vested warrants may be exercised expires 5 years after the date
of grant.

Associate Stock Option Plan 1999

         We have an Associate Stock Option Plan 1999 (the "1999 ASOP"), which
allows for the grant to our associates, such as key vendors, software
developers, retainers, consultants, and all other persons or legal entities
not eligible to participate in the 1999 ESOP, of warrants to purchase our
equity shares. Each warrant granted gives the associate the right to purchase
a specified number of our equity shares under the 1999 ASOP. The 1999 ASOP was
approved by our Board of Directors in April 1999 and by our shareholders in
February 1999. A total of 198,000 equity shares, after giving effect to our 2
for 5 reverse share split effective as of May 3, 2000, were reserved for
issuance under the 1999 ASOP. As of March 31, 2000, we had granted warrants
under the 1999 ASOP, equivalent to the right to purchase 73,600 equity shares,
after giving effect to our 2 for 5 reverse share split effective as of May 3,
2000, at a weighted average exercise price of US$11.73 (Rs.511) per share.
From April 1, 2001 to March 31, 2002 there was a fresh issuance of warrants
equivalent to 1000 equity shares to Associates at the rate of US$2.25 (Rs.108)
under the 1999 ASOP. During the same period, there was a forfeiture of
warrants, equivalent to 5,750 equity shares from the associates who had
terminated their association with Rediff. Warrants equivalent to 28,000 equity
shares were issued on January 1, 2003 at an exercise price of US$2.28 (Rs.109)
to three Directors of the Company.

         The warrants granted under the 1999 ASOP vest at rates set forth on
each warrant. Equity shares acquired pursuant to the 1999 ASOP are subject to
a 4-year lock-up period from the date of grant of the respective warrants. In
the case of termination of the relationship, the associate shall have the
right to exercise only the warrants vested up to the time of termination, and
the unvested warrants shall lapse. In the case of death of the associate, all
warrants granted to him or her shall vest in full on his or her legal heirs,
as appropriate. The period during which vested warrants may be exercised
expires 5 years after the date of grant.

ValuCom Stock Option Plans

         On April 1, 2000, ValuCom adopted the Value Communications
Corporation 2000 Stock Incentive Compensation Plan as a means of encouraging
stock ownership by its employees, officers, directors and advisors. Under
terms of this plan, non-qualified options to purchase up to 300,000 shares of
common stock of ValuCom were reserved for issuance, were generally granted at
not less than fair market value, became exercisable as established by ValuCom
(generally over four years) and generally expire seven years from the date of
grant.

         On the date of ValuCom's acquisition, we contractually agreed to
replace the existing employee stock options of ValuCom employees with our
options once we obtained approvals necessary to establish a stock option plan
in the U.S.

         As of March 31, 2002, under the terms of an agreement with the
ValuCom employees holding options to purchase shares of ValuCom, we agreed to
pay such employees the cash value of their vested options as of that date. The
value of the options was calculated pursuant to a formula included in the
stock purchase agreement. An amount of US$133,000 was recorded as of that date
and included in goodwill. During the fiscal year ended March 31, 2003, an
aggregate of US$176,299 was paid to employees and US$43,299 was recorded as a
compensation expense. We no longer have any obligations under the ValuCom
option plan.

2002 Stock Option plan

         In January 2002 our board of directors approved the 2002 Stock Option
Plan ("2002 plan") which provides for the grant of stock options to our
employees. All options under this plan are exercisable for our ADSs. Necessary
approvals from the regulators in India have been obtained. During the fiscal
year ended March 31, 2004, we made appropriate filings with the SEC prior to
the first exercise date of the options granted under the 2002 plan. Unless
terminated sooner, this plan will terminate automatically in January 2012. A
total of 280,000 of our equity shares were reserved for issuance under the 2002
plan. As of March 31, 2003, we had granted under the 2002 stock option plan,
warrants equivalent to the right to purchase 220,500 equity shares at an
exercise price of Rs.109. During the fiscal year ended March 31, 2004, we
granted warrants equivalent to the right to purchase 116,000 equity shares at a
weighted average exercise price of US$7.75. During the same period, warrants
equivalent to 32,225 equity shares were exercised and warrants equivalent to
69,250 equity shares were forfeited. The options granted under the 2002 ADR
plan vest at the rates set forth in every award.

Retirement Plans

         Gratuity. We provide for gratuity, an unfunded defined benefit
retirement plan covering its eligible employees in India based on third-party
actuarial valuations. This plan provides for a lump-sum payment to be made to
vested employees at retirement or termination of employment in an amount
equivalent to 15 days' salary, payable for each completed year of service.
These gratuity benefits vest upon an employee's completion of five years of
service.

         Net periodic pension cost for the years ended March 31, 2004 and the
unfunded benefit liability as of March 31, 2004 are as follows:

<TABLE>
<CAPTION>

                                                                           Years ended March 31,
                                                                           ---------------------
                                                             2002                2003                 2004
                                                          ------------      --------------         -----------
Change in benefit obligation

<S>                                                         <C>                  <C>                  <C>

Benefit obligation at the beginning of the year ..........US$35,650            US$53,729           US $66,439
Actuarial (gain) loss ....................................      520               (8,631)              (3,042)
Service cost .............................................   15,651               14,328               14,875
Interest cost ............................................    3,758                5,316                5,350
Benefits paid ............................................      -                    -                 (2,724)
Effect of exchange rate changes ..........................   (1,850)               1,697                7,123
                                                          ------------        ----------           -----------
Benefit obligation at the end of the year ............... US$53,729            US$66,439            US$88,021
Unrecognized net actuarial (loss) gain ..................    (9,885)                (773)               2,229
                                                          ------------        ----------           ----------
Accrued liability ....................................... US$43,844           US$ 65,666           US$ 90,250
                                                          ------------        ----------           ----------

</TABLE>

         The assumptions used in accounting for gratuity in the fiscal year
ended March 31, 2004 were as follows:

                                                            Fiscal Year Ended
                                                              March 31, 2004

        Rupee discount rate...................................        7%
        Rate of increase in Rupee compensation................        8%



         Provident Fund. Employees based in India and we each contribute at
the rate of 12% of salaries to a provident fund maintained by the Government
of India for the benefit of such employees. The provident fund is a defined
contribution plan. Accordingly, we expense such contributions to operations as
incurred. The amount contributed by us to the provident fund, in the
aggregate, was US$77,677 for the fiscal year ended March 31, 2004.



<PAGE>


                          RELATED PARTY TRANSACTIONS

Lease Agreement

         In October 1998, we entered into an agreement with
Rediffusion-Dentsu, Young & Rubicam Limited, a company in which Mr. Ajit
Balakrishnan and Diwan Arun Nanda are shareholders and directors, whereby we
occupied the offices in New Delhi formerly occupied by Rediffusion-Dentsu,
Young & Rubicam Limited, and reimburse Rediffusion-Dentsu, Young & Rubicam
Limited for the respective lease payments. This lease was terminated in
December 2001. Total lease payments made during the years ended March 31, 2002
were US$7,000. There were no payments made during the fiscal years ended March
31, 2003 and March 31, 2004.

Advertising Services Cost Agreement

         On December 28, 1998, we entered into an agreement with
Rediffusion-Dentsu, Young & Rubicam Private Limited, a company in which Mr.
Ajit Balakrishnan and Diwan Arun Nanda are shareholders and directors, for
advertising services. Under the terms of the engagement letter,
Rediffusion-Dentsu, Young & Rubicam Limited provide advertising services to us
and we pay them ten percent commission on the amounts charged by third parties
for the execution of such advertising. Aggregate commission payments made to
Rediffusion-Dentsu, Young & Rubicam Limited for the fiscal ended March 31,
2002 were approximately US$113,808. There were no payments made during the
fiscal years ended March 31, 2003 and March 31, 2004.

Advertising Revenues

         During the fiscal years ended March 31, 2004 and 2003, we received
US$11,537 and US$1,345 as advertising revenues from Rediffusion-Dentsu, Young
& Rubicam Limited, a company in which Mr. Ajit Balakrishnan and Diwan Arun
Nanda are shareholders and directors. We did not receive any such amounts
during the fiscal year ended March 31, 2002.

<PAGE>

                               EXCHANGE CONTROLS

Restrictions on Conversion of Rupees

         There are restrictions on the conversion of Indian Rupees into U.S.
dollars. Before February 29, 1992, the Reserve Bank of India determined the
official value of the Rupee in relation to a weighted basket of currencies of
India's major trading partners. In the February 1992 budget, a new dual
exchange rate mechanism was introduced by allowing conversion of 60% of the
foreign exchange received on trade or current account at a market-determined
rate and the remaining 40% at the official rate. All importers were, however,
required to buy foreign exchange at the market rate except for certain
specified priority imports. In March 1993, the exchange rate was unified and
allowed to float. In February 1994 and again in August 1994, the Reserve Bank
of India announced relaxation in payment restrictions in the case of a number
of transactions. Since August 1994, the Government of India has substantially
complied with its obligations owed to the IMF, under which India is committed
to refrain from using exchange restrictions on current international
transactions as an instrument in managing the balance of payments. Effective
July 1995, the process of current account convertibility was advanced by
relaxing restrictions on foreign exchange for various purposes, such as
foreign travel and medical treatment.

         In December 1999, the Indian Parliament passed the Foreign Exchange
Management Act, which became effective on June 1, 2000 ("FEMA"), replacing the
earlier Foreign Exchange Regulation Act, 1973 ("FERA"). This new legislation
indicates a major shift in the policy of the government with regard to foreign
exchange management in India. While FERA was aimed at the conservation of
foreign exchange and its utilization for the economic development of the
country, the objective of FEMA is to facilitate external trade and promote the
orderly development and maintenance of the foreign exchange market in India.

         FEMA permits most transactions involving foreign exchange except
those prohibited or restricted by the Reserve Bank of India. FEMA has eased
restrictions on current account transactions. However the Reserve Bank of
India continues to exercise control over capital account transactions (i.e.,
those which alter the assets or liabilities, including contingent liabilities,
of persons). The Reserve Bank of India has issued regulations under FEMA to
regulate the various kinds of capital account transactions, including certain
aspects of the purchase and issuance of shares of Indian companies.

Restrictions on Sale of the Equity Shares Underlying the ADSs and for
Repatriation of Sale Proceeds

         ADSs issued by Indian companies to non-residents have free
transferability outside India. However, under Indian regulations and practice,
the approval of the Reserve Bank of India is required for the sale of equity
shares underlying the ADSs (other than a sale on a stock exchange) by a
non-resident of India to a resident of India as well as for renunciation of
rights to a resident of India. Further, under current Indian law the
Depository cannot accept deposits of outstanding equity shares and issue ADRs
evidencing ADSs representing such equity shares. Our depository will be
allowed to accept deposits of outstanding equity shares and issue ADRs,
evidencing ADSs representing such equity shares only to the extent, and
limited to the number, of ADSs converted into underlying equity shares and
sold in the domestic market and provided such outstanding equity shares which
are to be deposited are purchased on a recognized stock exchange through SEBI
registered stock brokers. Investors who seek to sell in India to resident
Indians any equity shares (other than a sale on a stock exchange) withdrawn
from the depository facility and to convert the Rupee proceeds from such sale
into foreign currency and repatriate such foreign currency from India will,
subject to the foregoing, have to obtain Reserve Bank of India approval for
each such transaction. Since our equity shares are not listed on a recognized
stock exchange, the prior approval of the RBI would be required for such sale
of our equity shares to resident Indians.

An Active or Liquid Market for Our ADSs Is Not Assured

         Active, liquid trading markets generally result in lower price
volatility and more efficient execution of buy and sell orders for investors.
Liquidity of a securities market is often a function of the volume of the
shares that are publicly held by unrelated parties. Although ADS owners are
entitled to withdraw the equity shares underlying the ADSs from the depository
facility at any time, subject to certain legal restrictions, there is no
public market for our equity shares in India or elsewhere. Under current
Indian law, equity shares not listed in India may not be deposited into our
depository facility in exchange for ADSs. Our depository will be allowed to
accept deposits of outstanding equity shares and issue ADRs, evidencing ADSs
representing such equity shares only to the extent, and limited to the number,
of ADSs converted into underlying equity shares and sold in the domestic
market. If you elect to surrender your ADSs and receive equity shares, you may
still be unable to deposit outstanding equity shares with our depository and
receive ADRs because the number of ADRs that can be issued cannot, at any
time, exceed the number of ADRs converted into underlying equity shares and
sold in the domestic market. Since our equity shares are unlisted, any such
re-deposit of our equity shares would not be allowed on an automatic basis
under existing laws.

Sponsored ADR Schemes

         From November 2002, the RBI has permitted existing shareholders of
Indian companies to sell their shares through the issuance of ADR's against
the block of existing shares of the Indian company, subject to the following
conditions:

               o    The facility to sell the shares would be available pari
                    passu to all categories of shareholders.

               o    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.

               o    The proposal for divestment of the shares would have to be
                    approved by a special resolution of the Indian company.

               o    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 and by a
                    recent notification this facility has been extended
                    indefinitely till further notice.

               o    The issue related expenses in relation to public issue of
                    ADRs under this scheme would be subject to a ceiling of 4%
                    in the case of GDRs and 7% in the case of ADRs of the
                    issue size in the case of public issues and 2% of the
                    issue size in case of private placements. The issue
                    related expenses would include underwriting commissions,
                    lead manager charges, legal expenses and reimbursable
                    expenses. The issue expenses shall be passed onto the
                    shareholders participating in the sponsored issue on a pro
                    rata basis.




<PAGE>


                                TRADING MARKET

General

         There is no public market for our equity shares in India, the United
States or any other market. Our ADSs evidenced by ADRs have been traded in the
United States on the Nasdaq National Market under the ticker symbol "REDF"
since June 14, 2000, when they were issued by our depositary, Citibank, N.A.,
pursuant to a Deposit Agreement. On June 24, 2002, our ADSs began trading on
the NASDAQ Small Cap Market under the same ticker symbol. Each ADS represents
one-half of one equity share.

         The number of outstanding equity shares as of March 31, 2004, was
12,827,425. We have been informed by our depository that as of March 31, 2004,
there were approximately 30 record holders of ADRs evidencing 5,354,450 ADSs
(representing 2677,225 equity shares) in the United States.

         The tables below set forth high and low trading prices for our ADSs
on the NASDAQ National Market until June 24, 2002, and thereafter on the
NASDAQ Small Cap Market:

Annual and Quarterly high-low price history:

<TABLE>
<CAPTION>

                                                                          Price Per American
                                                                            Depositary Share
                                                                           (in U.S. dollars)
                                                                            High         Low
                                                                            ----         ---

<S>                                                                       <C>           <C>

Fiscal  year ended March 31, 2002.....................................    4.95          0.45
Fiscal  year ended March 31, 2003.....................................    4.78          0.21
First Quarter (April 2002 to June 2002)...............................    1.28          0.35
Second Quarter (July 2002 to September 2002)..........................    0.48          0.32
Third Quarter (October 2002 to December 2002).........................    1.15          0.21
Fourth Quarter (January 2003 to March 2003)...........................    4.78          1.06
First Quarter (April 2003 to June 2003)...............................    7.92          2.76
Second Quarter (July 2003 to September 2003)..........................   10.55          4.11
Third Quarter (October 2003 to December 2003).........................    7.25          4.65
Fourth Quarter (January 2004 to March 2004)...........................   13.87          5.27
First Quarter (April 2004 to June 2004)...............................   15.47          6.35

Monthly high-low price history for previous six months:
------------------------------------------------------

                                                                        Price per American
                                                                          Depositary Share
                                                                         (in U.S. dollars)
Previous six months                                                       High         Low
-------------------                                                       ----         ---
March 2004...........................................................  13.87          7.24
April 2004...........................................................  15.47          8.62
May 2004.............................................................   9.49          6.35
June 2004............................................................   9.60          7.55
July 2004............................................................   8.40          5.25
August 2004..........................................................   7.71          5.30
September 2004 (through September 23, 2004)..........................   8.43          7.1

</TABLE>



<PAGE>


             RESTRICTION ON FOREIGN OWNERSHIP OF INDIAN SECURITIES

         Prior to June 1, 2000, foreign investment in Indian securities,
including the acquisition, sale and transfer of securities in Indian
companies, was regulated by the FERA. As of June 1, 2000, foreign investment
in and divestment from Indian securities have been regulated by the provisions
of FEMA, the notifications and regulations issued by the Reserve Bank of India
thereunder, and the rules made by the Ministry of Finance of the Government of
India. A summary of the regulatory environment for foreign investment in India
is provided below.

ADR Guidelines

         Subject to the fulfillment of certain conditions, Indian companies
issuing ADSs are no longer required to obtain approval of the Ministry of
Finance or the Reserve Bank of India under the Issue of Foreign Currency
Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism)
Scheme, 1993, as amended from time to time, or the 1993 Scheme. Although we
will not require approval of either the Ministry of Finance or the Reserve
Bank of India, we are required to furnish a quarterly return to the Reserve
Bank of India and the Ministry of Finance within 15 days of the close of each
calendar quarter.

         The 1993 Scheme is distinct from other policies described below
relating to investments in Indian companies by foreign investors. The issuance
of ADSs pursuant to the 1993 Scheme also affords to holders of ADSs the
benefits of Sections 115AC and 115ACA of the Income-tax Act, 1961 for purposes
of the application of Indian tax law.

Foreign Direct Investment

         Currently, subject to certain exceptions, foreign direct investment
and investment by individuals of Indian nationality or origin residing outside
India, or non-resident Indians, does not require the prior approval of the
Government of India, or the Reserve Bank of India. We applied for and obtained
the approval of the Government of India for our ADS offering. The Government
of India has indicated that in all cases the Reserve Bank of India would
continue to be the primary agency for the purposes of monitoring and
regulating foreign investment. In cases where Government of India approval is
obtained, no prior approval of the Reserve Bank of India is required, although
a declaration in the prescribed form, detailing the foreign investment must be
filed with the Reserve Bank of India once the foreign investment is made in
the Indian company. The foregoing description applies only to an issuance of
shares by, and not to a transfer of shares of, Indian companies. Any transfer
of shares of an Indian company by a non-resident Indian requires the prior
approval of the Government of India and the Reserve Bank of India.

Portfolio Investment by Non-Resident Indians

         A variety of methods for investing in shares of Indian companies are
available to non-resident Indians. Subject to certain terms and conditions,
these methods allow non-resident Indians to make portfolio investments in
shares and other securities of Indian companies on a basis not generally
available to other foreign investors. In addition to portfolio investments in
Indian companies, non-resident Indians may also make foreign direct
investments in Indian companies pursuant to the foreign direct investment
route discussed above.

Portfolio Investment by Foreign Institutional Investors

         In September 1992, the Government of India issued guidelines which
enable foreign institutional investors, including institutions such as pension
funds, investment trusts, asset management companies, nominee companies and
incorporated/institutional portfolio managers, to make portfolio investments
in all securities of listed and unlisted companies in India. Under the
guidelines, foreign institutional investors must be registered with SEBI and
obtain a general permission from the Reserve Bank of India to engage in
transactions regulated under FEMA.

         Foreign institutional investors are required to comply with the
provisions of the Securities and Exchange Board of India (Foreign
Institutional Investors) Regulations, 1995, or Foreign Institutional Investor
Regulations. A registered foreign institutional investor may buy, subject to
the ownership restrictions discussed below, and sell freely securities issued
by any Indian company, realize capital gains on investments made through the
initial amount invested in India, subscribe to or renounce rights offerings
for shares, appoint a domestic custodian for custody of investments made and
repatriate the capital, capital gains, dividends, income received by way of
interest and any compensation received towards sale or renunciation of rights
offerings of shares. Investment by foreign institutional investors in unlisted
Indian companies would require the prior approval of the RBI.

         In addition to making portfolio investments in Indian companies,
foreign institutional investors may make foreign direct investments in Indian
companies pursuant to the foreign direct investment route discussed above.

Ownership Restrictions

         SEBI and the Reserve Bank of India regulations restrict portfolio
investments in Indian companies by foreign institutional investors and
non-resident Indians, all of which we refer to as foreign portfolio investors.

         Foreign Institution Investors - Under current Indian law, foreign
institutional investors in the aggregate may hold no more than 24% of the
equity shares of an Indian company, and non-resident Indians in aggregate may
hold no more than 10% of the shares of an Indian company through portfolio
investments. The 24% limit referred to above may be increased up to the
sectoral cap/statutory ceiling, as applicable if the shareholders of the
company pass a special resolution to that effect. The 10% limit referred to
above may be increased to 24% if the shareholders of the company pass a
special resolution to that effect. No single foreign institutional investor
may hold more than 10% of the shares of an Indian company if investing through
proprietary funds, or 5% if investing through funds of a individual or
corporate sub-account of the shares of an Indian Company and no single
non-resident Indian may hold more than 5% of the shares of an Indian company.

         There is uncertainty under Indian law as to the tax regime applicable
to foreign institutional investors that hold and trade ADSs. Foreign
institutional investors are urged to consult with their Indian legal and tax
advisors.

         More detailed provisions relating to investment by foreign
institutional investors have been introduced by SEBI with the introduction of
the Foreign Institutional Investors Regulations. These provisions relate to
the registration of foreign institutional investors, their general obligations
and responsibilities, and certain investment conditions and restrictions. One
such restriction is that the total investment in equity and equity-related
instruments should not be less than 70% of the aggregate of all investments of
a foreign institutional investor in India. SEBI has also permitted private
placements of shares by listed companies with foreign institutional investors,
subject to the prior approval of the Reserve Bank of India under FEMA.

Takeover Regulations

         Under the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997, as amended, or
Takeover Code, upon the acquisition of more than 5% of the outstanding shares
or voting rights of a listed public Indian company, a purchaser is required to
notify the company, and the company and the purchaser are required to notify
all the stock exchanges on which the shares of such company are listed. Upon
the acquisition of 15% or more of such shares or voting rights or a change in
control of the company, the purchaser is required to make an open offer to the
other shareholders offering to purchase at least 20% of all the outstanding
shares of the company at a minimum offer price as determined pursuant to the
Takeover Code. Upon conversion of ADSs into equity shares, an ADS holder will
be subject to the Takeover Code; provided the Indian company is listed in
India. Similarly, appropriate disclosures would have to be made under the SEBI
(Prohibition of Insider Trading), Regulations, 1992, or Insider Trading
Regulations, if the equity shares of the Indian Company are listed on a
recognized stock exchange in India. Please note that since our equity shares
are unlisted in India, the provisions of the Takeover Code and the Insider
Trading Regulations will not be applicable.

Restrictions on Conversion of Rupees

         There are restrictions on the conversion of Rupees into dollars.
Before February 29, 1992, the Reserve Bank of India determined the official
value of the Rupee in relation to a weighted basket of currencies of India's
major trading partners. In the February 1992 budget, a new dual exchange rate
mechanism was introduced by allowing conversion of 60% of the foreign exchange
received on trade or current account at a market-determined rate and the
remaining 40% at the official rate. All importers were, however, required to
buy foreign exchange at the market rate except for certain specified priority
imports. In March 1993, the exchange rate was unified and allowed to float. In
February 1994 and again in August 1994, the Reserve Bank of India announced
relaxation in payment restrictions in the case of a number of transactions.
Since August 1994, the Government of India has substantially complied with its
obligations owed to the IMF, under which India is committed to refrain from
using exchange restrictions on current international transactions as an
instrument in managing the balance of payments. Effective July 1995, the
process of current account convertibility was advanced by relaxing
restrictions on foreign exchange for various purposes, such as foreign travel
and medical treatment.

         In December 1999, the Indian parliament passed the Foreign Exchange
Management Act, which became effective on June 1, 2000, replacing the earlier
Foreign Exchange Regulation Act, 1973, or FERA. This new legislation indicates
a major shift in the policy of the government with regard to foreign exchange
management in India. While FERA was aimed at the conservation of foreign
exchange and its utilization for the economic development of the country, the
objective of FEMA is to facilitate external trade and promote the orderly
development and maintenance of the foreign exchange market in India.

         FEMA permits most transactions involving foreign exchange except
those prohibited or restricted by the Reserve Bank of India. FEMA has eased
restrictions on current account transactions. However the Reserve Bank of
India continues to exercise control over capital account transactions (i.e.,
those which alter the assets or liabilities, including contingent liabilities,
of persons). The Reserve Bank of India has issued regulations under FEMA to
regulate the various kinds of capital account transactions, including certain
aspects of the purchase and issuance of shares of Indian companies.


<PAGE>


                            PRINCIPAL SHAREHOLDERS

         The following table provides information relating to the beneficial
ownership of our equity shares for:

     o    each of the executive officers named in the summary compensation
          table and each of our directors;
     o    all of our directors and executive officers as a group; and
     o    each person or group of affiliated persons who is known by us to
          beneficially own 5.0% or more of our equity shares

<TABLE>
<CAPTION>

                              Shares Beneficially Owned    Shares Beneficially Owned As   Shares Beneficially Owned As
                                  As of May 6, 2004              of June 30, 2003               of March 31, 2002
                              ---------------------------  ----------------------------   -----------------------------
                                            Percent of                     Percent of                     Percent of
                               Number of   total equity    Number of      total equity     Number of     total equity
    Name and Address of         equity        shares         equity          shares          equity         shares
      Beneficial Owner        shares held   outstanding   shares held     outstanding     shares held     outstanding
 -----------------------      -----------  -------------  ------------   -------------   -------------   ---------------

<S>                             <C>                  <C>     <C>                  <C>        <C>                  <C>

Officers and Directors
Ajit Balakrishnan (1)(1A)
(1B) (IC)                       3,463,982            27%     3,463,982            27.07%     3,300,192            25.8%

Diwan Arun Nanda (1)            3,444,742            27%     3,444,742            26.92%     3,300,202            25.8%

Sunil N. Phatarphekar *                 -             -              -                -              -               -
Abhay Havaldar (2) *            2,200,000            17%     2,200,000             17.2%     2,200,000            17.2%

Pulak Prasad (3) c/o
Warburg, Pincus & Co.466
Lexington Avenue, New York,
NY 10017                        2,008,000            16%     2,132,804             16.7%     2,445,499            19.1%

All Directors and Officers
as a Group (5 persons)          8,916,722            70%     9,041,526            70.66%     9,045,891           70.70%

5% Shareholders

Rediffusion Holdings
Private Limited(1)Ready
Money Terrace, 167, Dr.
Annie Besant RoadWorli,
Mumbai, 400 018, India          2,200,002            17%     2,200,002             17.2%     2,200,002            17.2%

Draper-India International
c/o Multiconsult Ltd. Les
Jamalacs, Vieux Conseil
Street, Port Louis,
Mauritius                       2,200,000            17%     2,200,000             17.2%     2,200,000            17.2%

Queenswood Investments Ltd
C/O Multiconsult Limited,
Les Jamalacs, Vieux Conseil
StreetPort Louis, Mauritius     2,008,000            16%     2,132,804             16.7%     2,445,499            19.1%


(1)      Includes 2,200,002 equity shares held by Rediffusion Holdings Private
         Limited earlier 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.

(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.

(2)      Includes 2,200,000 equity shares held by Draper-India International
         Limited. Mr. Havaldar is a limited partner of Draper India Management
         L.P., which is the general partner of Draper India L.P., which holds
         99.0% of the outstanding equity of Draper-India International
         Limited. Mr. Havaldar is a director of Rediff.com India Limited and
         disclaims beneficial ownership of shares held by Draper-India
         International Limited, except to the extent of his proportional
         interest arising from his partnership interest in Draper-India
         International Limited.

(3)      Includes 2,008,000 equity shares held by Queenswood Investments
         Limited. Pulak Prasad is a Managing Director and member of Warburg
         Pincus LLC. Fifty percent (50%) of the outstanding equity of
         Queenswood Investments Limited is held by Warburg, Pincus Equity
         Partners, L.P. (including three affiliated partnerships) ("WPEP") and
         fifty percent (50%) of the outstanding equity of Queenswood
         Investments Limited is held by Warburg, Pincus Ventures
         International, L.P. ("WPVI"). Warburg Pincus & Co. ("WP") is the sole
         general partner of WPEP and WPVI. WPEP and WPVI are managed by
         Warburg Pincus LLC ("WP LLC"). All shares indicated as held by Mr.
         Prasad are included because of his affiliation with the Warburg
         Pincus entities. Mr. Prasad disclaims beneficial ownership of all
         shares held by the Warburg Pincus entities.
         Our ADSs are listed on the Nasdaq and each ADS is represented by
         one-half of one equity share of par value of Rs.5 per share. Our ADSs
         are registered pursuant to Section 12(g) of the Securities Act. We
         have been informed by our depository that as of March 31, 2004
         5,354,450 ADSs were held by approximately 32 record holders of ADRs
         in the United States.

    *    In addition to the above, the following directors have also been
         granted stock options under the ASOP Plan 1999:

         Abhay Havaldar - 16,000 equity shares granted on January 1, 2003 at
         an exercise price of Rs.109.42 per share

         Sunil N. Phatarphekar - 6,000 equity shares granted on January 1,
         2003 at an exercise price of Rs.109.42 per share

         Ashok Narasimhan - 6,000 equity shares granted on January 1, 2003 at
         an exercise price of Rs.109.42 per share

         None of the directors have exercised their options till date. The
         period during which these options may be exercised expires 5 years
         after the date of grant.
</TABLE>

<PAGE>


                                   TAXATION

Indian Tax

         The following discussion of Indian tax consequences for investors in
ADSs and equity shares received upon redemption of ADSs who are not resident
in India, whether of Indian origin or not, is based on the current provisions
of the Indian Income Tax Act, 1961, including the special tax regime for ADSs
contained in Section 115AC, as amended, and certain regulations implementing
the Section 115AC regime. The Indian Income Tax Act is amended every year by
the Finance Act of the relevant year. Some or all of the tax consequences of
the Section 115AC and other relevant provisions may be amended or modified by
future amendments to the Indian Income Tax Act. Furthermore, please note that
the tax rates described herein are only those set forth in the Indian Income
Tax Act read together with the Finance Act, 2004 to the extent such provisions
are effective. In the event there is any double taxation avoidance agreement
between two states and an investor is a resident of either of the states, then
to the extent the provisions of the double taxation avoidance agreement are
more favorable to the investor, under the Indian Income Tax Act, the
provisions of the double taxation avoidance agreement would prevail.

The summary is not intended to constitute a complete analysis of the tax
consequences under Indian law of the acquisition, ownership and sale of ADSs
and 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 115 AC regime.

Residence

         For the purpose of the Income Tax Act, an individual is a resident of
India during any fiscal year, if he (i) is in India in that year for 182 days
or more or (ii) having within the four years preceding that year been in India
for a period or periods amounting in all to 365 days or more, is in India for
period or periods amounting in all to 60 days or more in that year. The period
of 60 days is substituted by 182 days in case of Indian citizen or person of
Indian origin who being resident outside India comes on a visit to India
during the financial year or an Indian citizen who leaves India for the
purposes of his employment during the financial year. A company is resident in
India in any fiscal year if it is incorporated in India or the control and
management of its affairs is situated wholly in India in that year. A firm or
other association of persons is resident in India except where the control and
the management of its affairs are situated wholly outside India.

Taxation of Distributions

         Dividend distributed by a domestic company to shareholders will not
be subject to tax in the hands of the shareholders. Consequently, withholding
tax on dividends paid to shareholders does not apply. However, if dividends
are declared, the Company is required to pay as tax 13.07%, including
applicable surcharge and Education Cess, of the total dividend declared.

Taxation on Sale of ADSs

         Any transfer of ADSs outside India by a non-resident investor to
another non-resident investor does not give rise to Indian capital gains tax.

Taxation on Redemption of ADSs

         Though there is no specific provision exempting the redemption of
ADSs, it can be inferred from the provisions of section 47(viia) of the Indian
Income Tax Act that the acquisition of underlying equity shares upon a
redemption of ADSs by a non-resident investor should not give rise to a
taxable event for Indian tax purposes.

         In terms of Article 8(3) of the Issue of Foreign Currency Convertible
Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993,
(Scheme) issued by the Central Government, conversion of FCCBs (including ADS)
into shares will not give rise to any capital gains liable to tax in India.

         Since the exemption is provided under the Scheme and not under the
Income Tax Act, 1961, it cannot be guaranteed that the tax authorities would
grant such exemption. Moreover Article 7(3) of the Scheme clarifies that the
cost of acquisition of the underlying shares acquired through the redemption
of ADRs/GDRs, shall be reckoned as the price of ordinary shares of the issuing
company prevailing on the Stock Exchange on the date of the advice or
redemption. Therefore the tax authorities may argue that since the Scheme does
not provide the methodology for calculating the capital gains on sale of
underlying shares in the case of unlisted companies, the benefit under the
Scheme would not be available to companies not listed in India. In such a case
there may be a risk of taxability of gains on acquisition of underlying equity
shares upon redemption of ADSs.

Taxation on Sale of Equity Shares

         Subject to any relief under any relevant double taxation treaty, a
gain arising on the sale of an equity share by a non-resident investor will
generally give rise to a liability for Indian capital gains tax and tax is
required to be withheld at source. Capital gains on sale of equity shares,
which have been held for more than 12 months (measured from the date of advice
of redemption of the ADS by our Depositary in the case of non resident
sellers) are considered as long-term capital gains and generally taxable at
the rate of 20%. Surcharge on this tax would be applicable at the rate of 2.5%
in the case of corporations whereas for individuals and association of
persons, the rate of surcharge would be 10% if their Indian taxable income
exceeds Rs.850,000. In all the above cases the amount of tax and surcharge
would be increased by an Education Cess of 2%. Though section 115AC provides
for lower rate of tax (i.e. 10% plus surcharge where applicable and Education
Cess of 2%) on long term capital gains arising from transfer of ADS (other
than between two non-residents), it is unclear whether the lower rate of tax
would also extend to such gains arising from transfer of shares converted from
ADS under the amended provisions of Section 115AC. However, it may be noted
that certain other provisions of the Indian Income Tax Act also provide for
lower rate of tax (i.e. 10% plus surcharge where applicable and Education Cess
of 2%) for specific class of taxpayers e.g. Foreign Institutional Investors
registered with the Securities and Exchange Board of India.

         If section 115AC and the Issue of Foreign Currency Convertible Bonds
and Ordinary Shares Scheme are not applicable to a non-resident holder,
long-term capital gains realized on the sale of such equity shares which are
listed in India will still be subject to tax at the rate of 10% plus surcharge
wherever applicable (as mentioned above) and Education Cess. In the case of
non-residents, the option of taxation of capital gains on sale of listed
securities at 10% may be litigative since the tax department may contend that
the option is available only to residents. The non-resident holders will also
be able to avail of the benefits of exchange rate fluctuations for the
computation of capital gains tax, which are not available to a non-resident
holder under section 115AC and the Issue of Foreign Currency Convertible Bonds
and Ordinary Shares Scheme.

         Where the equity shares have been held for 12 months or less, the
rate of tax varies and will be subject to tax at normal rates of income-tax
applicable to non-residents under the provisions of the Indian Income Tax Act,
subject to a maximum of 40% (plus applicable surcharge and Education Cess as
mentioned above.) The actual rate of tax on short-term gains depends on a
number of factors, including the legal status of the non-resident holder and
the type of income chargeable in India. During the period the underlying
equity shares are held by non-resident investors on a transfer from our
Depositary upon redemption of ADSs, the provisions of the Avoidance of Double
Taxation Agreement entered into by the Government of India with the country of
residence of the non-resident investors will be applicable in the matter of
taxation of any capital gain arising on a transfer of the equity shares. The
double taxation treaty between the United States and India does not provide
U.S. residents with any relief from Indian tax on capital gains.

         Under the regulations, the purchase price of equity shares received
in exchange for ADSs will be the price of the underlying shares on the date
that the depositary gives notice to the custodian of the delivery of the
equity shares in exchange for the corresponding ADSs. In the case of companies
listed in India, the purchase price of the equity shares would be the price of
the equity shares prevailing on the BSE or the NSE on the date the depositary
gives notice to the custodian of the delivery of the equity shares in exchange
for the corresponding ADSs. This deemed method of determining the purchase
price of the equity shares is not provided for under the Income Tax Act. In
the event that the tax department denies this benefit, the original purchase
price of ADSs would be considered the purchase price for computing the capital
gains tax.

         However, the regulations and Section 115AC do not provide a basis for
determining the cost of acquisition for the purposes of computing capital
gains tax where the shares of the Indian company are not listed on the BSE or
the NSE. Therefore, in the case of our company, which is not listed on either
the BSE or the NSE, the determination of the purchase price of equity shares
is unclear.

Rights

         Distribution to non-resident holders of additional ADSs or equity
shares or rights to subscribe for equity shares made with respect to ADSs or
equity shares are not subject to tax in the hands of the non-resident holder.

         It is unclear as to whether capital gain derived from the sale of
rights by a non-resident holder, not entitled to exemption under a tax treaty,
to another non-resident holder outside India will be subject to Indian capital
gains tax. If rights are deemed by the Indian tax authorities to be situated
within India, as our situs is in India, the gains realized on the sale of
rights will be subject to Indian taxation. Such rights would generally be in
the nature of short-term capital assets.

Stamp Duty

         Upon the issuance of the equity shares underlying the ADSs, we are
required to pay a stamp duty of 0.1% per share of the issue price. A transfer
of ADSs is not subject to Indian stamp duty. Normally, upon the acquisition of
equity shares from the depositary in exchange for ADSs representing such
equity shares in physical form, an investor would be liable for Indian stamp
duty at the rate of 0.25% of the market value of the equity shares at the date
of registration. Similarly, a sale of equity shares by an investor would also
be subject to Indian stamp duty at the rate of 0.25% of the market value of
the equity shares on the trade date, although customarily such tax is borne by
the transferee, that is, the purchaser. In case the equity shares of the
company are held in a dematerialized form, no stamp duty would be payable on
the acquisition or transfer of such equity shares.

Other Taxes

         At present, there are no Indian taxes on wealth, gifts and
inheritance, which may apply to the ADSs and underlying equity shares.

Service Tax

         Brokerage or commissions paid to stockbrokers in connection with the
sale or purchase of shares traded in India is subject to a service tax of 10%
The stockbroker is responsible for collecting the service tax and paying it to
the relevant authority. Payments received in India in convertible foreign
exchange are currently exempted from the levy of service tax.

General

         Our business is primarily subject to regulation by the Ministry of
Information Technology, which was formed in October 1999 and is a part of the
Government of India. We may also be subject to regulation by the Ministry of
Communications of the Government of India and the Telecom Regulatory Authority
of India, or the TRAI.

         On June 9, 2000, the Information Technology, Act was enacted and was
made effective as of October 17, 2000.

         The IT Act has been enacted to:

o    give legal validity to online contracts;
o    give legal validity to digital signatures;
o    make electronic records admissible in court in evidentiary proceedings;
o    set default rules for time and place of dispatch and receipt of
     electronic records;
o    allow for filing of documents with the Government of India in electronic
     form;
o    allow for retention of documents, information or records in electronic
     form;
o    set up certifying authorities to issue and supervise digital signatures;
o    set up a controller of certifying authorities to monitor and supervise
     the certifying authorities;
o    set up Cyber Regulations Appellate Tribunals to act as quasi-judicial
     bodies with respect to disputes relating to online transactions; and
o    Penalize computer crimes.

         Since the IT Act is a recently enacted legislation, it is uncertain
how issues such as legal recognition of electronic records, validity of
contracts entered into through the Internet and validity of digital signatures
will be resolved under this legislation.

United States Federal Tax

         The following discussion describes certain U.S. federal income tax
consequences of the acquisition, ownership and sale of ADSs that are generally
applicable to U.S. investors. For these purposes, you are a U.S. investor if
you are:

o    a citizen or resident of the United States under U.S. federal income tax
     laws;
o    a corporation organized under the laws of the United States or of any
     political subdivision of the United States; or
o    an estate or trust the income of which is subject to U.S. federal income
     tax regardless of its source.

         This discussion only applies to ADSs that you own as capital assets.

         Please note that this discussion does not discuss all of the tax
consequences that may be relevant in light of your particular circumstances.
In particular, it does not address investors subject to special tax rules,
including:

o    insurance companies;
o    tax-exempt entities;
o    dealers in securities;
o    financial institutions;
o    persons who own the ADSs as part of an integrated investment (including a
     straddle, hedging or conversion transaction) consisted of the ADS and one
     or more other positions for tax purposes;
o    persons whose functional currency is not the U.S. dollar; or
o    persons who own, actually or constructively, 10% or more of our voting
     stock.

         This discussion is based on the tax laws of the United States
currently in effect (including the Internal Revenue Code of 1986, as amended,
referred to as "the Code"), Treasury Regulations, Revenue Rulings and judicial
decisions. These laws may change, possibly with retroactive effect.

         For U.S. federal income tax purposes, if you own an ADS, you will
generally be treated as the owner of the equity shares underlying the ADS.

         Please consult your own tax advisor with regard to the application of
the U.S. federal income tax laws to the ADSs in your particular circumstances,
including the passive foreign investment company rules described below, as
well as any tax consequences arising under the laws of any state, local or
other taxing jurisdiction.

Taxation of Dividends

         Subject to the passive foreign investment company rules described
below, dividends you receive on the ADSs, other than certain pro rata
distributions of common shares or rights to acquire common shares or ADSs,
will generally constitute taxable dividend income (as determined for U.S.
federal income tax purposes) and foreign source "passive income" or "financial
services income" for U.S. foreign tax credit purposes. The amount of the
dividend you will be required to include in income will equal the U.S. dollar
value of the Rupees constituting such taxable dividend, calculated by
reference to the spot exchange rate in effect on the date the payment is
received by the depositary, regardless of whether the payment is converted
into U.S. dollars. If you realize gain or loss on a sale or other disposition
of Rupees, it will generally be U.S. source ordinary income or loss.

Taxation of Capital Gains

         You will generally recognize gain or loss on the sale or exchange of
ADSs equal to the difference between the amount realized on such sale or
exchange and your U.S. tax basis in the ADSs. Subject to the passive foreign
investment company rules described below, such gain or loss will be capital
gain or loss, and will generally be long-term capital gain or loss if the ADSs
were held for more than one year. Gain or loss, if any, recognized by a U.S.
investor generally will be treated as U.S. source gain or loss for U.S.
foreign tax credit purposes. The deductibility of capital losses may be
subject to limitation.

Estate Taxes

         An individual shareholder who is a citizen or resident of the United
States as determined for U.S. federal estate tax purposes will have the value
of the equity shares or ADSs owned by such holder included in his or her gross
estate for U.S. federal estate tax purposes. An individual holder who actually
pays Indian estate tax with respect to the equity shares will, however, be
entitled to credit the amount of such tax against his or her U.S. federal
estate tax liability, subject to certain conditions and limitations.

Passive Foreign Investment Company Rules

         A foreign corporation is a PFIC for any taxable year in which (i)
75.0% or more of its gross income consists of passive income (such as
dividends, interest, rents and royalties) or (ii) 50.0% or more of the average
quarterly value of its assets consists of assets that produce, or are held for
the production of, passive income (including cash).

         If a foreign corporation owns at least 25% by value of the stock of
another corporation, the foreign corporation is treated for purposes of the
PFIC tests as owning its proportionate share of the assets of the other
corporation and as receiving directly its proportionate share of the other
corporation's income.

         It is uncertain whether or not we will be a PFIC for U.S. federal
income tax purposes for the current or future taxable years. PFIC status is a
factual determination that is based on the composition of our income and the
value of our assets during each year. Valuation of our assets, including
goodwill, is based on the market price of the ADSs, which is subject to change
from time to time. As described below, if we are treated as a PFIC, U.S.
investors in ADSs may incur significantly increased U.S. federal income tax
costs on the sale or disposition of ADSs and on the receipt of distributions
on ADSs to the extent such distributions are treated as "excess distributions"
under the U.S. federal income tax rules.

         If we are treated as a PFIC, and you are a U.S. investor in ADSs that
did not make a mark-to-market election, as described below, you will be
subject to special rules with respect to:

o    any gain you realize on the sale or other disposition of your shares; and
o    any excess distribution that we make to you (generally, any distributions
     to you during a single taxable year that are greater than 125% of the
     average annual distributions received by you in respect of the shares
     during the three preceding taxable years or, if shorter, your holding
     period for the shares).

         Under these rules:

o    the gain or excess distribution will be allocated ratably over your
     holding period for the shares,
o    the amount allocated to the taxable year in which you realized the gain
     or excess distribution will be taxed as ordinary income,
o    the amount allocated to each prior year, with certain exceptions, will be
     taxed at the highest tax rate in effect for that year, and
o    the interest charge generally applicable to underpayments of tax will be
     imposed in respect of the tax attributable to each such year.

         Special rules apply for calculating the amount of the foreign tax
credit with respect to excess distributions by a PFIC.

         If you own shares in a PFIC that are treated as marketable stock, you
may make a mark-to-market election. So long as our ADSs are traded on the
NASDAQ Small Cap Market, our shares should be treated as marketable stock for
this purpose. If you make this election, you will not be subject to the PFIC
rules described above. Instead, in general, you will include as ordinary
income each year the excess, if any, of the fair market value of your shares
at the end of the taxable year over your adjusted basis in your shares. You
will also be allowed to take an ordinary loss in respect of the excess, if
any, of the adjusted basis of your shares over their fair market value at the
end of the taxable year (but only to the extent of the net amount of
previously included income as a result of the mark-to-market election). Your
basis in the shares will be adjusted to reflect any such income or loss
amounts.

         Upon request, we will furnish you with the information that you would
need in order to make a qualifying electing fund election to include your
share of income on current basis."

         If you own shares during any year that we are a PFIC, you must file
Internal Revenue Service Form 8621 that describes the distributions received
on the shares and the gain realized on the disposition of the shares.

         Please consult your own tax advisor about the possibility that we
will be a PFIC and the rules that would apply to you if we were.

Backup Withholding and Information Reporting.

         If you are a non-corporate U.S. investor, information reporting
requirements, on Internal Revenue Service Form 1099, generally will apply to:

     o    dividend payments or other taxable distributions made to you within
          the United States; and
     o    the payment of proceeds to you from the sale of shares effected at a
          United States office of a broker.

         Additionally, backup withholding may apply to such payments if you
are a non-corporate U.S. investor that:

     o    fails to provide an accurate taxpayer identification number,
     o    is notified by the Internal Revenue Service that you have failed to
          report all interest and dividends required to be shown on your
          federal income tax returns; or
     o    in certain circumstances, fails to comply with applicable
          certification requirements.

         Payment of the proceeds from the sale of shares effected at a foreign
office of a broker generally will not be subject to information reporting or
backup withholding. However, a sale of shares that is effected at a foreign
office of a broker will be subject to information reporting and backup
withholding if:

     o    the proceeds are transferred to an account maintained by you in the
          United States,
     o    the payment of proceeds or the confirmation of the sale is mailed to
          you at a United States address; or
     o    the sale has some other specified connection with the United States
          as provided in U.S. Treasury regulations,

         unless the broker does not have actual knowledge or reason to know
that you are a United States person and the documentation requirements
described above are met or you otherwise establish an exemption.

         In addition, a sale of shares effected at a foreign office of a
broker will be subject to information reporting if the broker is:

     o    a United States person,
     o    a controlled foreign corporation for United States tax purposes,
     o    a foreign person 50% or more of whose gross income is effectively
          connected with the conduct of a United States trade or business for
          a specified three-year period, or
     o    a foreign partnership, if at any time during its tax year:
     o    one or more of its partners are "U.S. persons", as defined in U.S.
          Treasury regulations, who in the aggregate hold more than 50% of the
          income or capital interest in the partnership, or
     o    such foreign partnership is engaged in the conduct of a United
          States trade or business,

         unless the broker does not have actual knowledge or reason to know
that you are a United States person and the documentation requirements
described above are met or you otherwise establish an exemption. Backup
withholding will apply if the sale is subject to information reporting and the
broker has actual knowledge that you are a United States person.

         You generally may obtain a refund of any amounts withheld under the
backup withholding rules that exceed your income tax liability by filing a
refund claim with the United States Internal Revenue Service.


                                USE OF PROCEEDS

         In our initial offering of our ADSs, completed in June 2000, we sold
a total of 5,290,000 ADSs, representing 2,645,000 equity shares, to an
underwriting syndicate (including the underwriters' over-allotment option of
690,000 ADSs representing 345,000 equity shares) at an initial offering price
of US$12.00 per ADS. The managing underwriters were Goldman, Sachs & Co.,
Credit Suisse First Boston, and Robert Fleming Inc. We received US$57.3
million in net proceeds from the offering.

         The gross proceeds from our ADS offering were US$63.48 million, out
of which US$4.4 million was paid as underwriting and management consulting
fees and US$1.7 million was paid for other expenses.

         As of March 31, 2004, the net proceeds of our ADS offering, together
with our existing cash balances as of the date of the ADS offering, were
utilized as follows:

o    approximately US$24.4 million for strategic acquisitions and investments,
     including costs of acquisitions (US$Nil was used during the fiscal 2004);

o    approximately US$16.5 million to enhance our content and service
     offerings and promote our brands (approximately US$1 million was utilized
     during the fiscal 2004); and

o    approximately US$6.05 million in capital expenditures. (approximately
     US$0.6 million was used during the fiscal 2004)

         As of March 31, 2004, US$11.6 million of the net proceeds of our ADS
offering remain as cash and cash equivalents and short term deposits with
banks. We are able to withdraw these deposits on demand. The Reserve Bank of
India has the authority to compel us to bring the proceeds to India and have
them invested in Indian Rupee denominated bank accounts in India. None of the
net proceeds from the IPO were paid, directly or indirectly, to any of our
directors, officers or general partners or any of their associates, or to any
persons owning ten per cent or more of any class of our equity securities, or
any affiliates.


                            CONTROLS AND PROCEDURES

         Our Chairman, who serves as our principal executive officer and our
Chief Financial Officer, after evaluating the effectiveness of our "disclosure
controls and procedures" (as defined in the Exchange Act Rules 13a-15(e) and
15d-15(e)) as of the end of the period covered by this annual report, has
concluded that our disclosure controls and procedures were adequate and
designed to ensure that material information relating to us and our
consolidated subsidiaries would be made known to them by others within those
entities.

         There were no significant changes in our internal controls over
financial reporting that occurred during our last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

         Our disclosure controls and procedures, no matter how well designed
and operated, can provide only reasonable, not absolute, assurance of
achieving the objectives of the control system. As such, disclosure controls
and procedures or internal control systems may not prevent all error and all
fraud. In addition, the design of a control system must reflect the fact that
there are resource constraints and the benefits of controls must be considered
relative to their costs and our management necessarily was required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, at our Company have been detected.


                    PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The following table summarizes the fees billed to us by our principal
accountant, Deloitte Haskins and Sells, Mumbai, India and its affiliates
(collectively "Deloitte") for various services rendered to us during the
fiscal years ended March 31, 2003 and 2004.



                                                       Fiscal year ended
                                                           March 31,
                                                    2003               2004
                                                    ----               ----

         Audit Fees.........................        US$ 98,783     US$ 126,262

         Audit-Related Fees.............                 2,793           7,401

         Tax Fees..........................             17,694         12,483

         All other Fees....................             87,989             -


         Audit fees represents the aggregate fees billed by Deloitte in
connection with the audits of our annual consolidated financial statements,
the reviews of our quarterly financial statements and statutory audits. We
appointed Deloitte as auditors of our subsidiary, Rediff Holdings, Inc, for
the first time for the fiscal year ended March 31, 2004.

         Audit related fees represents payments for statutory certification
work for the fiscal years ended March 31, 2003 and 2004 and for obtaining
auditors' consent on our Form S-8 filing during the fiscal year ended March
31, 2004. Tax fees primarily comprise fees for tax audit, tax returns, tax
processing, tax filing and advisory services. Tax fees also include other
corporate tax services such as assistance with foreign income tax and service
tax.

         All other fees comprise of payments made to a Deloitte affiliated
entity for providing certain financial information software implementation
services. In accordance with the Sarbanes-Oxley Act of 2002 and the Securities
and Exchange Commission's Rule relating to "Strengthening the Commission's
requirements regarding auditor independence" which prohibits such services
subsequent to the effective date of May 6, 2003, all contracted software
maintenance for periods after that date was terminated.

         Our audit committee charter requires us to obtain the prior approval
of our audit committee on every occasion we engage our principal accountants
or their associated entities to provide us any audit or non-audit services. We
disclose to our Audit Committee the nature of services that are provided. All
of the services provided by our principal accountants or their associated
entities in the previous two fiscal years (since the emergence of the
pre-approval rules), have been pre-approved by our Audit Committee.


                     PRESENTATION OF FINANCIAL INFORMATION

         The financial information in this annual report has been prepared in
accordance with U.S. GAAP, unless indicated otherwise. Our fiscal year ends on
March 31 of each year so all references to a particular fiscal year are to the
year ended March 31 of that year. The financial statements, including the
notes to these financial statements, audited by Deloitte Haskins and Sells,
independent accountants, are set forth at the end of this annual report.

         Although we have translated in this annual report certain Indian
Rupee amounts into U.S. dollars, this does not mean that the Indian Rupee
amounts referred to could have been, or could be, converted into U.S. dollars
at any particular rate, the rates stated earlier in this annual report, or at
all. The Federal Reserve Bank of New York certifies the exchange rate for
customs purposes on each date the rate is given. The noon buying rate on March
31, 2004 was Rs.43.40 per US$1.00.


                            ADDITIONAL INFORMATION

Memorandum and Articles of Association

Objects and Purposes

         The main object as stated in our Memorandum of Association is to
carry on and undertake the business of providing online information services
in various languages via electronic and other forms of communications for
local and other subscribers in India and abroad and to deal in all the
materials connected therewith. For purposes of carrying out this main object,
we are also authorized under our Memorandum of Association to carry on and
undertake the business of publishers of dailies, weeklies, fortnightly,
newspapers, periodicals, journals, magazines, directories, souvenirs,
year-books and other literary works in the electronic and other forms in any
language and on any subject and marketing including export markets,
sell/distribute such published items to subscribers in India and abroad.

Description of Equity Shares

         The following description of equity shares does not purport to be
complete and is subject to and qualified in its entirety by our Articles of
Association and Memorandum of Association, as amended, the provisions of the
Companies Act, as currently in effect, and other applicable provisions of
Indian law.

Share Capital

         Our authorized share capital is 20,000,000 equity shares, par value
Rs.5 per share (after giving effect to our 2 for 5 reverse share split
effective May 3, 2000). As of March 31, 2004, 12,827,425 equity shares were
issued and outstanding.

         The equity shares are our only class of share capital. However, our
Amended and Restated Articles of Association and the Companies Act permit us
to issue classes of securities in addition to the equity shares. For the
purposes of this annual report, "shareholder" means a shareholder who is
registered as a member in the register of members of our company.

Prior Shareholder Rights Agreements

         In connection with our sales of equity shares to our investors from
April 1998 through December 1999, we entered into nine separate shareholders
rights agreements with our shareholders which provide for, among other things,
certain preemptive, registration, co-sale and information rights, as well as
the right of some shareholders to appoint members or observers of our Board of
Directors. Some of the agreements also provide the shareholders with
protective provisions that require us to obtain our shareholders' consent to
take certain actions that would otherwise only require our Board's approval.

Amended and Restated Shareholders' Rights Agreement

         On February 24, 2000 we entered into an Amended and Restated
Shareholders' Rights Agreement with all of our shareholders to amend, restate,
supersede and replace all nine previous shareholder agreements we entered into
with our shareholders. The Amended and Restated Shareholders' Rights
Agreement, which became effective on the completion of our ADR offering,
provides for the following shareholder rights:

1.       Registration Rights

         Holders of at least 30% of our equity shares can require us, subject
to limitations, to effect a registration or qualification of the securities
either with the NASDAQ National Market, the National Stock Exchange of India
or The Stock Exchange, Mumbai. We are not required to effect:

o    more than two such registrations or qualifications pursuant to such
     demand registration rights;
o    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
o    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.

         At any time after we become eligible to file a registration statement
on Form F-3, holders of our equity shares may require us to file registration
statements on Form F-3 with respect to their equity shares. We are not
required to effect this registration:

o    more than once in a twelve month period;
o    unless the registration relates to securities that are valued in excess
     of US$1,000,000; or
o    if our Board of Directors has made a good faith determination that such
     registration would be detrimental to us or our shareholders.

         Each of the foregoing registration rights is subject to conditions
and limitations, including the right of the underwriters in any underwritten
offering to limit the number of equity shares to be included in such
registration. We are required to bear all the expenses of all such
registrations, except underwriting discounts and commissions. The registration
rights with respect to any holder thereof terminate upon the earlier of when
the holder may sell the equity shares within a three month period pursuant to
Rule 144 of the Securities Act, or the time when the holder is able to convert
the registrable securities into ADSs which, beginning on June 24, 2002, are
traded on the NASDAQ Small Cap Market.

2.       Other Rights

         The Amended and Restated Shareholders' Rights Agreement also provides
certain preemptive, information and co-sale rights to our shareholders.

Dividends

         Under the Companies Act, unless our Board of Directors recommends the
payment of a dividend, we may not declare a dividend. Similarly, under our
Amended and Restated Articles of Association, although the shareholders may,
at the annual general meeting, approve a dividend in an amount less than that
recommended by the Board of Directors, they cannot increase the amount of the
dividend. In India, dividends generally are declared as a percentage of the
par value of a company's equity shares. Any dividend recommended by the Board
of Directors subject to the limitations described above, will be distributed
and paid to shareholders in proportion to the paid up value of their shares
within 30 days of the approval by the shareholders at the annual general
meeting. The Board of Directors may also declare interim dividend and the
amount of dividend, including interim dividend, is required to be deposited in
a separate bank account within five days from the date of declaration of such
dividend. If such dividend, including interim dividend, has not been paid or
claimed within 30 days of declaration of such dividend, we are required to
transfer the total amount of dividend which remains unpaid or unclaimed within
7 days of the expiry of the 30 day period, to a special bank account. Under
the Companies Act if a dividend has been declared by a company but has not
been paid within 30 days from the date of declaration to any shareholder
entitled to the payment of the dividend, each director of the company, if he
is knowingly a party to the default, will be punishable with imprisonment and
also liable to a fine. Pursuant to our Amended and Restated Articles of
Association, our Board of Directors has discretion to declare and pay interim
dividends without shareholders' approval. With respect to equity shares issued
during a particular fiscal year (including any equity shares underlying ADSs
issued to our Depositary in connection with the offering or in the future),
cash dividends declared and paid for such fiscal year generally will be
prorated from the date of issuance to the end of such fiscal year. Under the
Companies Act, dividends can only be paid in cash to the registered
shareholder at a record date fixed on or prior to the annual general meeting
or to his order or his banker's order.

         Under the Companies Act, dividends and interim dividends may be paid
out of profits of a company in the year in which the dividend is declared or
out of the undistributed profits of previous fiscal years. Before declaring a
dividend the Companies Act requires that we provide for depreciation in
accordance with the Companies Act and also transfer to its reserves a minimum
percentage of its profits for that year, ranging between 2.5% to 10.0%
depending upon the dividend percentage to be declared in such year. The
Companies Act further provides that, in the event of an inadequacy or absence
of profits in any year, a dividend may be declared for such year out of the
company's accumulated profits, subject to the following conditions:

     o    the rate of dividend to be declared may not exceed 10.0% of its paid
          up capital or the average of the rate at which dividends were
          declared by the company in the prior five years, whichever is less;
     o    the total amount to be drawn from the accumulated profits earned in
          the previous years and transferred to the reserves may not exceed an
          amount equivalent to 10.0% of its 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
     o    the balance of reserves after withdrawals shall not fall below 15.0%
          of its paid up capital.

Bonus Shares

         In addition to permitting dividends to be paid out of current or
retained earnings as described above, the Companies Act permits us to
distribute an amount transferred from the general reserve or surplus in our
profit and loss account to our shareholders in the form of bonus shares, which
are similar to a stock dividend. The Companies Act also permits the issuance
of bonus shares from a securities premium account. These bonus shares must be
distributed to shareholders in proportion to the number of equity shares owned
by them. Bonus shares are distributed to shareholders in the proportion
recommended by the Board of Directors. Shareholders of record on a fixed
record date are entitled to receive such bonus shares.

Preemptive Rights and Issue of Additional Shares

         The Companies Act gives shareholders the right to subscribe for new
shares in proportion to their respective existing shareholdings unless
otherwise determined by a special resolution passed by a general meeting of
the shareholders. For approval, this special resolution must be approved by a
number of votes which is not less than three times the number of votes against
the special resolution. If the special resolution is not approved, the new
shares must first be offered to the existing shareholders as of a fixed record
date. The offer must include: (1) the right, exercisable by the shareholders
of record, to renounce the shares offered in favor of any other person; and
(2) the number of shares offered and the period of the offer, which may not be
less than 15 days from the date of offer. If the offer is not accepted it is
deemed to have been declined. Our Board of Directors is authorized under the
Companies Act to distribute any new shares not purchased by the preemptive
rights holders in the manner that it deems most beneficial to the Company.

Annual General Meetings of Shareholders

         We must convene an annual general meeting of shareholders within 15
months of the previous annual general meeting or within six months after the
end of each fiscal year and may convene an extraordinary general meeting of
shareholders when necessary or at the request of a shareholder or shareholders
holding at least 10.0% of our paid up capital carrying voting rights. The
annual general meeting of the shareholders is generally convened by our
Secretary pursuant to a resolution of the Board. Written notice setting out
the agenda of the meeting must be given at least 21 days (excluding the days
of mailing and receipt) prior to the date of the general meeting to the
shareholders of record. Shareholders who are registered as shareholders on the
date of the general meeting are entitled to attend or vote at such meeting.

         The annual general meeting of shareholders must be held at our
registered office or at such other place within the city in which the
registered office is located; meetings other than the annual general meeting
may be held at any other place if so determined by the Board of Directors. Our
registered office is located at 1st floor, Mahalaxmi Engineering Estate, L. J.
Road No.1, Mahim (West), Mumbai 400 016.

         Our Articles of Association provide that a quorum for a general
meeting is the presence of at least five shareholders in person.

Voting Rights

         At any general meeting, voting is by show of hands unless a poll is
demanded by a shareholder or shareholders present in person or by proxy
holding at least 10.0% of the total shares entitled to vote on the resolution
or by those holding shares with an aggregate paid up capital of at least
Rs.50,000. Upon a show of hands, every shareholder entitled to vote and
present in person has one vote and, on a poll, every shareholder entitled to
vote and present in person or by proxy has voting rights in proportion to the
paid up capital held by such shareholders.

         Any shareholder may appoint a proxy. The instrument appointing a
proxy must be delivered to us at least 48 hours prior to the meeting. A proxy
may not vote except on a poll. A corporate shareholder may appoint an
authorized representative who can vote on behalf of the shareholder, both upon
a show of hands and upon a poll.

         Ordinary resolutions may be passed by simple majority of those
present and voting at any general meeting for which the required period of
notice has been given. However, specified resolutions such as amendments to
our Amended and Restated Articles of Association and the Memorandum of
Association, commencement of a new line of business, the waiver of preemptive
rights for the issuance of any new shares and a reduction of share capital,
require that votes cast in favor of the resolution (whether by show of hands
or poll) are not less than three times the number of votes, if any, cast
against the resolution.

         Pursuant to the Companies (Issue of Share Capital with Differential
Voting Rights) Rules, 2001, issued on March 9, 2001, by the Department of
Company Affairs, Government of India, a company limited by shares is
authorized to issue shares with differential voting rights if the articles of
association of the company so authorizes. Our Amended and Restated Articles of
Association do not authorize issue of shares with differential voting rights.

         Pursuant to Section 192A of the Companies Act, a listed public
company has an option to pass any resolution relating to such businesses as
notified by the Central Government through a postal ballot. Since as of the
date of this annual report, the Company is not a "listed public company", the
provisions of Section 192A of the Companies Act do not currently apply to us.

         Holders of our ADSs may exercise voting rights only through a
depositary, unlike an owner of equity shares, who can exercise voting rights
directly. An owner of ADSs generally will have the right under the deposit
agreement to instruct our Depositary to exercise the voting rights for the
equity shares represented by the ADSs. Owners of ADSs have no rights pursuant
to the Companies Act, under which we were incorporated, and are limited to
those rights granted to them pursuant to the Deposit Agreement.

         It is our expectation that our Depositary will mail to the owners of
ADSs any notice of shareholders' meeting timely received from us together with
information explaining how to instruct our Depositary to exercise the voting
rights of the equity shares represented by ADSs. If our Depositary timely
receives voting instructions from an owner of ADSs, it will endeavor to vote
the securities represented by those ADSs in accordance with such voting
instructions. In the event that voting takes place by a show of hands, our
Depositary will cause the custodian to vote all deposited securities in
accordance with the instructions received from owners of a majority of the
ADSs for which our Depositary receives voting instructions. However, the
ability of our Depositary to carry out voting instructions may be limited by
practical and legal limitations and the terms of the securities on deposit. We
cannot assure that holders of ADSs will receive voting materials in time to
enable them to return voting instructions to our Depositary in a timely
manner.

Register of Shareholders; Record Dates; Transfer of Shares

         We maintain a register of shareholders. For the purpose of
determining the shares entitled to annual dividends, the register is closed
for a specified period prior to the annual general meeting. The date on which
this period begins is the record date.

         To determine which shareholders are entitled to specified shareholder
rights, we may close the register of shareholders. The Companies Act requires
us to give at least seven days' prior notice to the public before such
closure. We may not close the register of shareholders for more than thirty
consecutive days, and in no event for more than forty-five days in a year.

         Following the introduction of the Depositories Act, 1996, as amended,
and the repeal of Section 22A of the Securities Contracts (Regulation) Act,
1956, as amended, which enabled companies to refuse to register transfers of
shares in some circumstances, the equity shares of a public company are freely
transferable, subject only to the provisions of Section 111A of the Companies
Act. Since we are a public limited company, the provisions of Section 111A
will apply to us. Our Articles currently contain provisions, which give our
directors discretion to refuse to register a transfer of shares in some
circumstances. Furthermore, in accordance with the provisions of Section
111A(2) of the Companies Act, our directors may refuse to register a transfer
of shares if they have sufficient cause to do so. If our directors refuse to
register a transfer of shares, the shareholder wishing to transfer his, her or
its shares may file a civil suit or an appeal with the Company Law Board
constituted under Section 10E of the Companies Act. Pursuant to Section
111A(3) of the Companies Act, if a transfer of shares contravenes any of the
provisions of the Indian Securities and Exchange Board of India Act, 1992 or
the regulations issued there under or the Indian Sick Industrial Companies
(Special Provisions) Act, 1985 or any other Indian laws, the Company Law Board
may, on application made by the company, a depository incorporated in India,
an investor, the Securities and Exchange Board of India or other parties,
direct the rectification of the register of records. The Company Law Board
may, in its discretion, issue an interim order suspending the voting rights
attached to the relevant shares before making or completing its investigation
into the alleged contravention. Notwithstanding such investigation, the rights
of a shareholder to transfer the shares will not be restricted.

         Under the Companies Act, unless the shares of a company are held in a
dematerialized form, a transfer of shares is effected by an instrument of
transfer in the form prescribed by the Companies Act and the rules thereunder
together with delivery of the share certificates.

Disclosure of Ownership Interest

         Section 187C of the Companies Act requires beneficial owners of
shares of Indian companies who are not holders of record to declare to us
details of the holder of record and the holder of record to declare details of
the beneficial owner. Any person who fails to make the required declaration
within 30 days may be liable for a fine of up to Rs.1,000 for each day the
declaration is not made. Any lien, promissory note or other collateral
agreement created, executed or entered into with respect to any equity share
by its registered owner, or any hypothecation by the registered owner of any
equity share, shall not be enforceable by the beneficial owner or any person
claiming through the beneficial owner if such declaration is not made. Failure
to comply with Section 187C will not affect our obligation to register a
transfer of shares or to pay any dividends to the registered holder of any
shares pursuant to which the declaration has not been made. While it is
unclear under Indian law whether Section 187C applies to holders of ADSs,
investors who exchange ADSs for the underlying equity shares will be subject
to the restrictions of Section 187C. The provisions of Section 187C of the
Companies Act do not, however, apply to a trustee holding shares of a company
for the benefit of the beneficiaries of a trust.

Audit and Annual Report

         At least 21 days before the annual general meeting of shareholders
excluding the days of mailing and receipt, we must distribute to our
shareholders a detailed version of our audited balance sheet and profit and
loss account and the related reports of the Board and the auditors, together
with a notice convening the annual general meeting. Under the Companies Act,
we must file the balance sheet and annual profit and loss account presented to
the shareholders within 30 days of the conclusion of the annual general
meeting with the Registrar of Companies in Mumbai, which is in the State of
Maharashtra, India. Our registered office is located in Mumbai. We must also
file an annual return containing a list of our shareholders and other
information, within 60 days of the conclusion of the meeting.

Company Acquisition of Equity Shares

         Under the Companies Act, approval of at least 75.0% of a company's
shareholders voting on the matter and approval of the High Court of the State
in which the registered office of the company is situated is required to
reduce a company's share capital. A company may, under some circumstances,
acquire its own equity shares without seeking the approval of the High Court.
However, a company would have to extinguish the shares it has so acquired
within the prescribed time period. A company is not permitted to acquire its
own shares for treasury operations. An acquisition by a company of its own
shares (without having to obtain the approval of the High Court) must comply
with prescribed rules, regulations and conditions as laid down in the
Companies Act. In addition, private and unlisted public companies. such as
ours, would have to comply with the Private Limited Company and Unlisted
Public Limited Company (Buy-back of Securities) Rules, 1999, notified by the
Ministry of Law, Justice and Company Affairs of the Government of India on
July 6, 1999 and public companies which are listed on a recognized stock
exchange in India would have to comply with the provisions of the Securities
and Exchange Board of India (Buy-back of Securities) Regulations, 1998, or
Buy-back Regulations. Since we are not listed on any recognized stock exchange
in India, we would have to comply with the relevant provisions of the
Companies Act and the Private Limited Company and Unlisted Public Limited
Company (Buy-back of Securities) Rules, 1999.

Liquidation Rights

         Subject to the rights of creditors, workmen and the holders of any
shares entitled by their terms to preferential repayment over the equity
shares, if any, in the event of our winding-up the holders of the equity
shares are entitled to be repaid the amounts of paid up capital or credited as
paid upon those equity shares. Further, in the event of a winding up, the
shareholders of the Company would be liable for an amount not exceeding the
aggregate unpaid amount of the face value of shares of the Company held by
such shareholders. All surplus assets after payments to the holders of any
preference shares and other creditors shall be paid to holders of equity
shares in proportion to their shareholdings at the commencement of the
winding-up.

Documents on Display

         This annual report and other information filed or to be filed by the
Company can be inspected and copied at the public reference facilities
maintained by the SEC at:

         Judiciary Plaza
         450 Fifth Street, N.W.
         Room 1024
         Washington, D.C. 20529

         Copies of these materials can also be obtained from the Public
Reference Section of the SEC, 450th Street, N.W., Washington, D.C. 20549, at
prescribed rates.

         The SEC maintains a website at www.sec.gov that contains reports and
other information regarding registrants that make electronic filings with the
SEC using its EDGAR system. With effect from November 4, 2002, the SEC has
issued a Rule mandating use of EDGAR system of filing for all international
filers. The Company has accordingly been following the Rule.

         Additionally, documents referred to in this Form 20-F may be
inspected at our Registered office, which are located at Mahalaxmi Engineering
Estate, 1st Floor, L.J. First Cross Road, Mahim (West), Mumbai 400 016, India.


<PAGE>

                                 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          Form of Indemnification Agreement.
    *4.5          Sublease dated July 5, 1999 between Shreenathji Balaji
                  Computech Private Limited and Rediff.com.
    *4.6          Letter Agreement dated December 28, 1998 between
                  Rediffusion-Dentsu, Young & Rubicam Limited and Rediff.com.
    *4.7          Promoters Agreement dated January 9, 1996 between Ajit
                  Balakrishnan and Diwan Arun Nanda
    **4.8         Stock Purchase Agreement among Rediff.com, ValuCom and
                  shareholders of ValuCom dated March 21, 2001.
    **4.9         Stock Purchase Agreement among Rediff.com, India Abroad and
                  shareholders of India Abroad dated March 21, 2001, as
                  amended on April 27, 2001.
    **4.10        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.
    4.11          Agreement for sale of assets of Value Communications
                  Corporation dated April 8, 2004.
    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

------------------
*   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.

<PAGE>


                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                Page

<S>                                                                               <C>

Report of Independent Registered Public Accounting Firm on
the Consolidated Financial Statements...........................................F-2

Report of Independent Registered Public Accounting Firm
on the financial statements of Rediff Holdings, Inc, a subsidiary Company. .....F-3

Consolidated Balance Sheets at March 31, 2003 and 2004..........................F-4

Consolidated Statements of Operations for the years ended
March 31, 2002, 2003 and 2004...................................................F-5

Statements of Shareholders' Equity for the years ended
March 31, 2002, 2003 and 2004...................................................F-6

Consolidated Statements of Cash Flows for the years ended
March 31, 2002, 2003 and 2004...................................................F-7

Notes to Consolidated Financial Statements......................................F-8

Report of Independent Registered Public Accounting Firm
 on Financial Statement Schedule of Valuation and
Qualifying Accounts.............................................................F-30

Schedule of Valuation and Qualifying Accounts...................................F-31

</TABLE>

<PAGE>


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
Rediff.com India Limited



         We have audited the accompanying consolidated balance sheets of
Rediff.com India Limited and subsidiaries ("the Company") as of March 31, 2003
and 2004, and the related consolidated statements of operations, cash flows
and shareholders' equity for each of the years in the three year period ended
March 31, 2004. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the financial
statements of a consolidated subsidiary of the Company, (Rediff Holdings Inc.
and its subsidiaries, Rediff.com Inc. and India Abroad Publications Inc.) for
the years ended March 31, 2002 and March 31, 2003, which statements reflect
total assets constituting 31% of the related consolidated total assets at
March 31, 2003 and total revenues constituting 21% and 34%, respectively, of
the related consolidated total revenues for the years ended March 31, 2002 and
2003. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts
included for the Company for the years ended March 31, 2002 and March 31, 2003
is based solely on the report of such other auditors.

         We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

         In our opinion, based on our audits and the report of the other
auditors, such consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
March 31, 2003 and 2004 and the results of its operations and its cash flows
for each of the years in the three year period ended March 31, 2004 in
conformity with accounting principles generally accepted in the United States
of America.

         As described in Note 2(b), these consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America, which differ in certain material respects
from accounting principles generally accepted in India, which form the basis
of the Company's general purpose financial statements.

         As discussed in Note 2(i) to the consolidated financial statements,
on April 1, 2001, the Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible assets."




Deloitte Haskins & Sells
Mumbai, India
Dated: April 29, 2004.


<PAGE>

               Report of Independent Registered Accounting Firm

The Board of Directors
Rediff Holdings, Inc.

We have audited the accompanying consolidated balance sheet of Rediff
Holdings, Inc. and Subsidiaries (the "Company") as of March 31, 2003, and the
related consolidated statements of operations, changes in shareholders'
equity, and cash flows for the years ended March 31, 2003 and 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Rediff Holdings,
Inc. and Subsidiaries at March 31, 2003, and the consolidated results of their
operations and their cash flows for the years ended March 31, 2003 and 2002 in
conformity with U.S. generally accepted accounting principles.


                               Ernst & Young LLP

New York, New York, April 21, 2003

<PAGE>



                           REDIFF.COM INDIA LIMITED

                          CONSOLIDATED BALANCE SHEETS
                         As of March 31, 2003 and 2004

<TABLE>
<CAPTION>

                                                                                                    March 31,
                                                                                        ---------------------------------
                                                                                             2003              2004
                                                                                        ---------------------------------

<S>                                                                                        <C>              <C>

Assets
Current Assets
Cash and cash equivalents .......................................................    US$14,383,786        US$11,639,173
Trade accounts receivable,
  (net of allowances of US$1,034,360 and US$1,229,677
  at March 31, 2003 and 2004, respectively) .....................................        1,476,773            1,884,193
Inventories .....................................................................          275,321                  -
Prepaid expenses and other current assets .......................................        1,338,047            1,111,784
Assets held for sale (See Note 5) ...............................................              -                523,322
Recoverable income taxes ........................................................          540,856              134,633
                                                                                      ------------         ------------
Total current assets ............................................................       18,014,783           15,293,105
Property, plant and equipment - net .............................................        2,257,016            1,491,240
Goodwill - net ..................................................................        9,347,278            7,314,468
Other assets ....................................................................          712,549              768,962
                                                                                     -------------        -------------
Total assets ....................................................................    US$30,331,626        US$24,867,775
                                                                                     =============        =============
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities ........................................     US$ 4,155,545        US$ 3,127,894
Customer deposits ...............................................................          221,600              208,391
Unearned revenues ...............................................................          356,410              488,743
Bank balance overdrawn ..........................................................           43,208                 --
                                                                                      ------------         ------------
Total current liabilities .......................................................        4,776,763            3,825,028
Other liabilities ...............................................................           13,941               15,384
                                                                                      ------------         ------------
Total liabilities ...............................................................        4,790,704            3,840,412
                                                                                      ------------         ------------
Commitments and contingencies (See note 20) .....................................             --                   --
                                                                                      ------------         ------------

Shareholders' equity
  Equity shares: par value -- Rs.5, Authorized: 20,000,000 shares;
  Issued and outstanding: 12,795,200 shares and 12,827,425 shares at March
  31, 2003 and 2004, respectively (See note 12) .................................        1,534,308            1,537,865
Additional paid in capital ......................................................       76,903,671           76,973,587
Other comprehensive loss ........................................................       (4,221,694)          (3,089,310)
Deferred compensation expense (See note 18) .....................................           (1,136)                (710)
Accumulated deficit .............................................................      (48,674,227)         (54,394,069)
                                                                                      ------------        -------------
Total shareholders' equity ......................................................       25,540,922           21,027,363
                                                                                     -------------        -------------
Total liabilities and shareholders' equity ......................................    US$30,331,626        US$24,867,775
                                                                                     =============        ==============
          See accompanying notes to consolidated financial statements

</TABLE>



<PAGE>


<TABLE>
<CAPTION>

                                                REDIFF.COM INDIA LIMITED

                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                For each of the years ended March 31, 2002, 2003 and 2004

                                                                                    Years ended March 31,
                                                             --------------------------------------------------------------------
                                                                       2002                    2003                   2004
                                                             ---------------------    -------------------    --------------------

<S>                                                                    <C>                    <C>                     <C>

Operating revenues
  India Online..........................................             US$ 2,575,918          US$ 2,767,244           US$ 3,636,183
  U.S. Publishing.......................................                 5,283,037              5,804,598               5,810,420
                                                             ---------------------    -------------------    --------------------
Total revenues..........................................                 7,858,955              8,571,842               9,446,603
                                                             ---------------------    -------------------    --------------------
Cost of revenues
  India Online..........................................                 1,337,183              1,078,472               1,130,373
  U.S. Publishing.......................................                 3,760,841              4,481,618               3,608,029
                                                             ---------------------    -------------------    --------------------
Total cost of revenues..................................                 5,098,024              5,560,090               4,738,402
                                                             ---------------------    -------------------    --------------------
Gross profit............................................                 2,760,931              3,011,752               4,708,201
                                                             ---------------------    -------------------    --------------------
Operating expenses
  Sales and marketing...................................                 2,568,461              2,591,017                 950,268
  Product development...................................                 3,092,183              1,820,372               1,598,199
  General and administrative............................                 7,851,628              7,291,276               5,378,600
Restructuring costs (See note 8) and legal fees.........                   848,398                    --                      --
Goodwill written off (See note 9).......................                 3,316,508              3,200,700                     --
Investments written off (See note 3)....................                 3,261,248                    --                      --
                                                             ---------------------    -------------------    --------------------
Total operating expenses................................                20,938,426             14,903,365               7,927,067
                                                             ---------------------    -------------------    --------------------
Operating loss .........................................              (18,177,495)           (11,891,613)             (3,218,866)
                                                             ---------------------    -------------------    --------------------
  Other income (expense), net:
  Interest income.......................................                   902,095                395,003                 331,806
  Foreign exchange gain (loss), net.....................                 1,079,260              (400,387)               (459,075)
  Miscellaneous income..................................                    17,337                 23,474                   2,137
                                                             ---------------------    -------------------    --------------------
                                                                         1,998,692                 18,090               (125,132)
                                                             ---------------------    -------------------    --------------------
Loss from continuing operations before income taxes.....              (16,178,803)           (11,873,523)             (3,343,998)
Income tax benefit (expense) ...........................                   77,809               (303,932)                 (4,862)
                                                             ---------------------    -------------------    --------------------
Loss from continuing operations.........................           US$(16,100,994)        US$(12,177,455)          US$(3,348,860)
Income (loss) from discontinued operations (See Note 5).             US$1,335,988          US$(6,803,695)          US$(2,370,982)
                                                             ---------------------    -------------------    --------------------
Net loss................................................           US$(14,765,006)        US$(18,981,150)          US$(5,719,842)
                                                             =====================    ===================    ====================
Weighted average number of equity
    shares -- basic and diluted..........................              12,795,200             12,795,200              12,799,997
                                                             =====================    ===================    ====================
Loss per share -- basic and diluted:
    continuing operations...............................                US$ (1.25)             US$ (0.95)              US$ (0.26)
    discontinued operations.............................                     0.10                  (0.53)                  (0.19)
                                                             ---------------------    -------------------    --------------------
Loss per share - basic and diluted......................                 US$(1.15)              US$(1.48)               US$(0.45)
                                                             =====================    ===================    ====================
Loss per ADS -- (where 2 ADSs are equal
to 1 equity share) -- basic and diluted:
     continuing operations..............................                 US$(0.63)              US$(0.48)               US$(0.13)
     discontinued operations............................                     0.05                  (0.26)                  (0.09)
                                                             ---------------------    -------------------    --------------------
Loss per ADS -- (where 2 ADSs are equal to 1 equity share)
     -- basic and diluted...............................                US$ (0.58)             US$ (0.74)              US$ (0.22)
                                                             =====================    ===================    ====================

          See accompanying notes to consolidated financial statements

</TABLE>


<PAGE>


                           REDIFF.COM INDIA LIMITED

                      STATEMENTS OF SHAREHOLDERS' EQUITY
           For each of the years ended March 31, 2002, 2003 and 2004

<TABLE>
<CAPTION>

                                    Equity Shares
                          ----------------------------
                                  (See note 12)      Additional      Other          Deferred
                           Number                     Paid in     Comprehensive   Compensation   Accumulated
                         of Shares      Amount        Capital     Income (Loss)     Expense         Deficit       Total
                         -----------------------------------------------------------------------------------------------------

<S>     <C>              <C>            <C>            <C>            <C>              <C>       <C>              <C>

Balance, as of
  April 1, 2001........  12,795,200   US$1,534,308   US$76,902,065  US$(3,259,356)   US$--     US$(14,928,071)  US$60,248,946
Compensation related
  to stock
  option grants........         --                           1,606            --     (1,606)              --              --
Amortization of
  compensation
  related to stock
  option grants.........        --            --               --             --         67               --               67
Net loss................        --            --               --             --         --       (14,765,006)    (14,765,006)
Other comprehensive
  income translation
  adjustment... ........        --            --               --      (1,479,709)       --               --      ( 1,479,709)
                         -----------     ----------    ------------   ------------  ----------   -------------   -------------
Balance, as of
  March 31, 2002........ 12,795,200      1,534,308      76,903,671     (4,739,065)   (1,539)      (29,693,077)     44,004,298
Amortization of
  compensation
  related to stock
  option grants.........        --            --               --             --        403               --              403
Net loss................        --            --               --             --         --       (18,981,150)    (18,981,150)
Other comprehensive
  income-translation
  adjustment............        --            --               --         517,371        --                --         517,371
                         -----------     ----------    ------------   ------------  ----------   -------------   -------------
Balance, as of
  March 31, 2003........ 12,795,200     1,534,308      76,903,671      (4,221,694)   (1,136)      (48,674,227)     25,540,922

Amortization of
  compensation
  related to stock
  option grants........                                                                 426                               426
Stock options
  exercised............      32,225         3,557          69,916                                                      73,473
Net loss...............                                                                            (5,719,842)     (5,719,842)
Other comprehensive
  income-translation
  adjustment...........                                                 1,132,384                                   1,132,384
                         ----------- -------------- -------------  --------------- ---------   ---------------  --------------
Balance, as of
  March 31, 2004.......  12,827,425  US$1,537,865   US$76,973,587  US$ (3,089,310)  US$(710)   US$(54,394,069)  US$21,027,363
                         ----------- -------------- -------------  ---------------  --------   ---------------- -------------


          See accompanying notes to consolidated financial statements
</TABLE>



<PAGE>


<TABLE>
<CAPTION>

                                                REDIFF.COM INDIA LIMITED

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                For each of the years ended March 31, 2002, 2003 and 2004


                                                                               Years ended March 31,
                                                             ------------------------------------------------------------
                                                                    2002               2003                 2004
                                                             ------------------------------------------------------------

<S>                                                             <C>                 <C>                    <C>

Cash flows from operating activities
Net loss ...................................................  US$(14,765,006)     US$(18,981,150)        US$(5,719,842)
(Profit) loss from discontinued operations ..................     (1,335,988)          6,803,695             2,370,982
Adjustments  relating to continuing  operations to
reconcile net loss to net cash used in continuing operations:
Depreciation and amortization ...............................      2,860,755           1,959,768             1,306,518
Amortization of intangibles .................................         35,848              40,132                   --
Allowance for impairment of goodwill ........................      3,316,508           3,200,700                   --
Other than temporary diminution in the value of investments .      3,261,248                --                     --
Loss on sale of property, plant and equipment ...............         44,306               7,975                29,509
Stock based compensation expense ............................             67                 403                   426
Changes in assets and liabilities:
  Trade accounts receivable .................................        245,153            (360,305)             (451,212)
  Prepaid expenses and other current assets .................       (737,149)            407,612               187,655
  Accounts payable and accrued liabilities ..................     (1,230,772)            (63,771)             (896,592)
  Unearned revenues .........................................       (278,917)            102,919               144,359
  Customer deposits .........................................        (28,160)              7,257               (13,209)
  Recoverable income taxes ..................................       (313,124)            237,466               205,223
  Unexpired subscription revenues ...........................        119,750              (3,760)              (12,026)
  Deferred income taxes .....................................        174,000                --                     --
  Other assets ..............................................        714,889             (79,329)              (38,354)
                                                                --------------    ----------------        ---------------
Net cash used in continuing operations ......................     (7,916,592)         (6,720,388)           (2,886,563)
                                                                --------------    ----------------        ---------------
Net cash provided by (used in) discontinued operations ......        721,075          (2,128,786)             (373,744)
                                                                --------------    ----------------        ---------------
Net cash used in operating activities .......................     (7,195,517)         (8,849,174)           (3,260,307)
                                                                --------------    ----------------        ---------------

Cash flows from investing activities
  Payments to acquire property, plant and equipment .........     (1,535,885)           (377,629)             (596,763)
  Purchase consideration for acquisitions ...................    (10,953,875)         (3,411,720)                  --
  Refund from stockholder ...................................        741,248                --                     --
  Cash acquired on acquisitions .............................        116,048                --                     --
  Purchases of investments ..................................           --                  --                     --
  Short term bank deposits
  Sale of investments .......................................           --                  --                     --
  Proceeds from sales of property, plant and equipment ......         12,042              35,571                34,980
                                                                --------------    ----------------        ---------------
    Net cash used in investing activities ...................    (11,620,422)         (3,753,778)             (561,783)
                                                                --------------    ----------------        ---------------

Cash flows from financing activities
  Repayment of long term debt ...............................       (861,929)               --                     --
  Net proceeds from issue of equity shares ..................           --                  --                  73,473
                                                                --------------    ----------------        ---------------
    Net cash (used in) provided by financing activities .....       (861,929)               --                  73,473
                                                                --------------    ----------------        ---------------
Effect of exchange rate changes on cash .....................     (1,456,041)            466,891             1,004,004
Net decrease in cash and cash equivalents ...................    (21,133,909)        (12,136,061)           (2,744,613)
Cash and cash equivalents at the beginning of the year ......     47,653,756          26,519,847            14,383,786
                                                                --------------    ----------------        ---------------
Cash and cash equivalents at the end of the year ............ US$ 26,519,847      US$ 14,383,786        US$ 11,639,173
                                                                --------------    ----------------        ---------------
  Supplemental disclosure of cash flow information:
    U.S. Federal income taxes paid ..........................      US$12,208           US$   --                US$ --
    Bank interest paid ......................................      US$19,773           US$ 4,105               US$ 942


          See accompanying notes to consolidated financial statements

</TABLE>

<PAGE>




                           REDIFF.COM INDIA LIMITED
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Organization and Business

         Rediff.com India Limited (the "Company") was incorporated in India on
January 9, 1996 under the Indian Companies Act, 1956. It was converted to a
public limited Company on May 29, 1998. On June 14, 2000, the Company listed
its ADSs on the NASDAQ National Market through an initial public offering. On
June 24, 2002, the Company's ADSs ceased to be listed on the NASDAQ National
Market and were listed instead on the NASDAQ Small Cap Market.

         In February 2001, the Company established Rediff Holdings, Inc
("RHI"), a Delaware Corporation, as a wholly-owned subsidiary to be a holding
company for certain of its investments in the United States of America. On
February 27, 2001, RHI acquired thinkindia.com Inc ("thinkindia"), later
renamed Rediff.com Inc. On April 27, 2001, RHI acquired India Abroad
Publications, Inc ("India Abroad"), an offline and online news company. For
further information, see note 4.

         In March 2001, the Company acquired Value Communications Corporation
("ValuCom"), an Illinois Corporation that provides internet-based marketing of
prepaid long distance service in the United States. On April 8, 2004, the
Company sold its phone card business to Worldquest Networks Inc. (See Note 5).

         The Company is one of the leading Internet destinations, or portals,
focusing on India and the global Indian community. Its websites consists of
interest specific channels relevant to Indian interests such as cricket,
astrology, Matchmaker and movies, content on various matters like news and
finance, search facilities, a range of community features such as e-mail,
chat, messenger, e-commerce, broadband wireless content and wireless short
messaging services to cellular phone subscribers in India. Additionally, the
Company publishes a weekly newspaper, India Abroad, in the United States and
Canada.

2.       Significant accounting policies

         (a)      Principles of consolidation

         The consolidated financial statements include the accounts of the
Company and its directly and indirectly held subsidiaries RHI, India Abroad,
Rediff.com Inc and ValuCom, which have been consolidated from their respective
dates of acquisition. All material inter-company accounts and transactions are
eliminated on consolidation.

         (b)      Basis of preparation of financial statements

         The accompanying consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States ("U.S. GAAP"). All amounts have been stated in U.S. dollars. U.S. GAAP
differs in certain material respects from accounting principles generally
accepted in India, which form the basis of the Company's general-purpose
financial statements. Principal differences insofar as they relate to the
Company include consolidation of subsidiaries, accounting for business
combinations, valuation of investments, accounting for deferred income taxes,
stock based compensation and website development costs, and the presentation
and format of the financial statements and related notes.

         (c)      Use of estimates

         The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities on the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. On an ongoing basis, the Company
evaluates its estimates, including those related to uncollectible receivables
and goodwill. Actual results could differ from those estimates.

(d)      Revenue recognition

India Online business

         India Online business includes revenues from online advertising and
fee based services. Online advertising includes advertisement and sponsorships
and designing and managing customers' websites. Fee based services include
e-commerce, subscription services and wireless short messaging services.
E-commerce revenues primarily consist of commission earned on sale of items to
customers who shop online while subscription services consist of subscriptions
received for using e-mail, Matchmaker, astrology and other subscriber
services. Wireless short messaging services include revenues derived from
mobile phone operators based on value added text messages received and sent by
mobile subscribers over their mobile phones.

         Advertisement and sponsorship income is derived from customers who
advertise on the Company's website or to whom direct links from the Company's
website to their own websites are provided and, income earned from designing
and managing customers' websites.

         Revenue from advertisement and sponsorships is recognized ratably
over the contractual period of the advertisement, commencing when the
advertisement is placed on the website. Revenues are also derived from sponsor
buttons placed in specific areas of the Company's website, which generally
provide users with direct links to sponsor websites. These revenues are
recognized ratably over the period in which the advertisement is displayed,
provided that no significant Company obligations remain and collection of the
resulting receivable is probable. Company obligations may include guarantees
of a minimum number of impressions, or times, that an advertisement appears in
pages viewed by users of the Company's portal. To the extent that minimum
guaranteed impressions are not met, the Company defers recognition of the
corresponding revenues until the guaranteed impression levels are achieved.

         The Company also earns revenues on sponsorship contracts for fees
relating to the design, coordination, and integration of the customers'
content. Sponsorship contract revenues are recognized ratably over the term of
the contract.

         Website development services principally consist of services relating
to the designing of graphics, layout, artwork and content of the client's
website. Revenue from such services on large contracts that take relatively
longer periods of time to complete are recognized upon completion of
milestones specified in the contract. At each such milestone, the services are
either billed or billable, and as they relate to completed work, are earned.
Revenue from such services on contracts that take relatively shorter periods
of time are recognized on completion of the entire contract. During fiscal
years 2002, 2003 and 2004, such short-term contracts constituted substantially
all of these services.

         E-commerce revenue primarily consists of commission from the sale of
books, music, apparel, confectionery, gifts and other items to retail
customers who shop at the Company's online store.

         Customers directly place orders with vendors through the Company's
website. When an order is placed, the Company informs the vendor through an
intranet and also confirms whether payment has already been collected by the
Company through credit card/debit card or checks, or whether the payment is to
be made by the customer on C.O.D. basis. The vendor then dispatches the
products to the customers. The vendor sends a monthly summary of the
transactions executed during the month for which the Company has collected
payments on its behalf. The Company makes payment to the vendor after
deduction of its share of margin and costs. The Company recognizes as revenues
the commission earned on these transactions.

         Revenues from E-commerce services also include fees charged to
vendors for creating, designing and hosting the vendors' product information
on the Company's website. Such fees are amortized over the hosting contract
period.

         Subscription service revenues primarily include income from various
paid e-mail and other service products that cater to a cross section of the
Company's registered user base. The revenue for subscription based services is
recognized ratably over the period of subscription.

         Subscription revenues are also derived from providing value added
short messaging services such as e-mail and other related products to mobile
phone users. The Company contracts with third-party mobile phone operators for
sharing revenues from these services. SMS based revenues are recognized when
the service is performed.

         U.S. Publishing business

         U.S. Publishing business primarily includes advertising and
sponsorship revenues and consumer subscription revenues earned from the
publication of India Abroad, a weekly newspaper distributed primarily in the
United States and Canada. It also includes the advertising revenues of
Rediff.com Inc, the website catering to the Indian community in the U.S.

         Advertising revenues are recognized at the time of publication of the
related advertisement. Subscription income is deferred and recognized pro rata
as fulfilled over the terms of such subscription. Revenues from lifetime
subscriptions are recognized over an estimated period of ten years.

         Revenues from banners and sponsorships are recognized over the
contractual period of the advertisement, commencing when the advertisement is
placed on the website, provided that no significant obligations remain and
collection of the resulting receivable is probable. Obligations may include
guarantee of a minimum number of impressions, or times that an advertisement
appears in pages viewed by users of the Company's portal. To the extent that
minimum guaranteed impressions are not met, the Company defers recognition of
the corresponding revenues until the guaranteed impression levels are
achieved.

         (e)      Costs and expenses

         Costs and expenses have been classified according to their primary
functions within the enterprise in the following categories:

         Cost of revenues

         These costs primarily include employee compensation of staff that are
directly involved or related to the production of services, fees paid to
third-party content providers, outward freight on e-commerce sales and direct
cost associated with subscription services which are spread over the period of
subscription.

         During the fiscal year ended March 31, 2004, the Company wrote back
certain old accruals, which are no longer payable and which were earlier
charged to costs of revenues amounting to US$41,000.

         Sales and marketing

         These costs primarily include employee compensation to sales and
marketing personnel, advertising, business promotion expenses and market
research costs.

         During the fiscal year ended March 31, 2004, the Company wrote back
certain old accounts payable and accruals amounting to U.S. $ 663,000, which
are no longer payable and which were earlier charged to sales and marketing
expenses.

         Product development

         These costs primarily include employee compensation, Internet
communications costs, and amortization of website development costs incurred
to enhance the features and functionality of the Company's website (See note
2(h)). Product development expenses include bandwidth costs of US$1,368,281,
US$730,607 and US$660,166 for the years ended March 31, 2002, 2003 and 2004
respectively.

         General and administrative

         These costs primarily include employee compensation of
administrative, operations and supervisory staff whose time is mainly devoted
to strategic and managerial functions, depreciation, rent, insurance premiums,
electricity, telecommunication costs, legal and professional fees, valuation
allowances and other general expenses.

         During the fiscal year ended March 31, 2004, the Company wrote back
certain old accruals amounting to US$234,000, which are no longer payable and
which were earlier charged to general and administrative costs.

         (f)      Cash and cash equivalents

         The Company considers all highly liquid investments with a remaining
maturity at the date of purchase of three months or less to be cash
equivalents. Cash and cash equivalents consist of cash on hand and cash on
deposit with banks.

         Cash and cash equivalents include short term bank deposits at March
31, 2004, of US$8,433,180, which have a remaining maturity of less than one
year, but which are redeemable without penalty on demand.

         (g)      Property, plant and equipment

         Property, plant and equipment are stated at cost. The Company
computes depreciation for all property, plant and equipment using the
straight-line method over the estimated useful lives of assets. The estimated
useful lives of assets are as follows:

                  Furniture and fixtures.....................   5 to 10 years
                  Computer equipment and software............   3 to 5 years
                  Office equipment...........................   5 to 10 years
                  Vehicles...................................         8 years
                  Leasehold improvements.....................         6 years
                  Website development costs..................         3 years

         (h)      Website development costs

         Costs incurred in the operations stage that provides additional
functions or features to the Company's website are capitalized and amortized
over their estimated useful life of three years. Maintenance expenses or costs
that do not result in new features or functions are expensed as product
development costs as incurred.

         (i)      Goodwill and intangible assets

         The Company capitalizes the cost of purchased goodwill and other
intangibles.

         Until March 31, 2001, the Company amortized the cost of such goodwill
and intangibles using the straight line method over their estimated useful
lives, ranging from three to seven years for goodwill and generally not
exceeding three years for intangibles.

         Effective April 1, 2001, the Company adopted SFAS No. 142, "Goodwill
and Other Intangible Assets", and ceased to amortize the remaining cost at
March 31, 2001 of goodwill and intangibles that do not have a finite life.
Instead, in accordance with the two-step methodology required by SFAS No. 142,
the Company tests unamortized balances for goodwill and intangible assets that
do not have a finite life for impairment annually or earlier upon the
occurrence of a triggering event.

         (j)      Foreign currency translation

         The accompanying financial statements are reported in U.S. dollars.
The functional currency of the parent is the Indian Rupee ("Rs." or "Rupee")
while that of its subsidiaries is the U.S. Dollar. For the purposes of
presenting the consolidated financial statements, Rupees have been converted
into U.S. dollars for balance sheet accounts using the exchange rate in effect
at the balance sheet date, and for revenue and expense accounts using a
weighted-average exchange rate for the respective periods. The gains or losses
resulting from such translation are reported as other comprehensive income or
loss, which is a separate component of shareholders' equity. Such translation
should not be construed as representation that the Rupee amounts have been or
could be translated into U.S. dollars at any particular rate, or at all.

         Transactions in foreign currency are recorded at the original rates
of exchange in force at the time the transactions are effected. Monetary items
denominated in a foreign currency are restated using the exchange rates
prevailing at the date of the balance sheet. Exchange differences arising on
settlement of transactions and restatement of assets and liabilities at the
balance sheet date are recognized in operations.

         (k)      Loss per share

         The Company reports basic and diluted loss per share in accordance
with SFAS No. 128, Earnings Per Share. Basic loss per share for loss from
continuing operations and net loss has been computed by dividing the loss from
continuing operations and net loss, respectively for the year by the weighted
average number of equity shares outstanding during the period, including
equity share equivalents for ADSs issued. Diluted loss per share is computed
using the weighted average number of equity shares including equity share
equivalents for ADSs issued and dilutive potential equity shares outstanding
during the period, using the treasury stock method for options and warrants,
except where the results would be anti-dilutive. The determination as to
whether a potential equity share is anti-dilutive is based on the loss per
share from continuing operations. The Company also reports loss per ADS, where
two ADSs are equal to one equity share.

         (l)      Income taxes

         Income taxes consist of current income taxes and the change in the
deferred tax balances during the year. Deferred income taxes are accounted for
using the liability method. Deferred tax assets and liabilities are recognized
for each entity and taxing jurisdiction for future tax consequences
attributable to temporary differences between the carrying amounts of assets
and liabilities and their respective tax bases and operating loss
carry-forwards, measured using the enacted tax rates expected to apply in the
years in which such temporary differences are expected to be recovered or
settled. The effect of changes in tax rates is recognized in income in the
period that includes the enactment date. The measurement of deferred tax
assets is reduced, if necessary, by a valuation allowance for any tax benefits
for which future realization is uncertain.

         (m)      Fair value of financial instruments

         The carrying amounts for cash, cash equivalents, short term bank
deposits, accounts receivable, accounts payable and bank overdrafts
approximate their fair values due to the short maturity of these instruments.

         (n)      Investments

         The Company classifies investments into held to maturity, trading or
available for sale based on management's intent at the time of purchase.
Available for sale equity securities with readily determinable market values
and all debt securities are carried at fair value. Available for sale equity
securities for which there are no readily determinable market values are
carried at cost, less an allowance for impairments that are other than
temporary. Unrealized gains or losses on available for sale securities are
treated as other comprehensive income or loss, a separate component of
shareholders' equity.

         (o)      Impairment or disposal of long-lived assets

         Effective April 1, 2002, the Company adopted SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment and disposal of long-lived assets.
While SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of
long-lived Assets and for Long-Lived Assets to be disposed of, it retains the
fundamental provisions of SFAS No. 121.

         Whenever events or changes in circumstances indicate that the
carrying amount of tangible long lived assets may not be recoverable, the
Company subjects such long lived assets to a test of recoverability, based on
the undiscounted cash flows expected from use or disposition of such assets.
Such events or circumstances would include changes in the market,
technological obsolescence, adverse changes in profitability or regulation. If
the asset is impaired, the Company recognizes an impairment loss based on the
estimated fair values using discounted cash flows and the carrying value of
the asset. Assets to be disposed of are reported at the lower of the carrying
value or the fair value less the cost to sell.

         (p)      Stock based compensation

         The Company uses the intrinsic value method specified under APB
Opinion No. 25 to account for the compensation cost of stock options and
awards granted to officers, employees and retainers in full time service of
the Company and non-employee directors for their services as directors and the
fair value method specified in SFAS 123 to account for the compensation cost
of stock options and awards granted to associates of the Company. The Company
also applies FASB Interpretation No. 44 "Accounting for Certain Transactions
involving Stock Compensation - an interpretation of APB Opinion No. 25" to
account for its stock option plans. Pro forma disclosures, as applicable,
required under SFAS No. 123 and SFAS No. 148 have been provided in note 18.

         (q)      Classification

         Certain prior years' balances have been reclassified to conform to
the current year's presentation. These have no effect on previously reported
results of operations or shareholders' equity.

3.       Write-off of Investments

         The market environment and general conditions affecting the
technology industry together with the downturn in valuations of dotcom
companies, during the fiscal year ended March 31, 2002, caused the Company to
re-examine whether the values of its Internet investments were appropriate.
After reviewing key financial indicators for such investments, which were
unlisted and illiquid, the Company concluded that such investments had
suffered permanent impairment. Accordingly, during the fiscal year ended March
31, 2002, the Company wrote off the value of these investments and recorded an
impairment expense of US$3,261,248.

4.       Business Combinations and Acquisitions

India Abroad Publications Inc ("India Abroad")

         On April 27, 2001, the Company acquired substantially all of the
outstanding voting shares of India Abroad Publications Inc, a New York
corporation, for an aggregate net consideration of approximately US$10
million.

         Pursuant to the stock purchase agreement (as amended) entered into
between the Company and certain of India Abroad's shareholders, at the closing
of the acquisition, the Company paid approximately US$11.4 million to the
selling shareholders of India Abroad. Simultaneously with the acquisition, the
former principal shareholder repurchased certain assets for approximately
US$1.1 million resulting in an estimated gain of approximately US$314,000,
which has been recorded as reduction of goodwill. Of the amount to be paid to
the former principal shareholder, the Company had placed US$2 million in an
escrow account. At March 31, 2004, US$1 million remains in the escrow account.

         The Company has accounted for this acquisition by the purchase
method, in accordance with APB Opinion No. 16, which resulted in the creation
of goodwill of approximately US$10.5 million.

         The fair value of assets acquired and liabilities assumed on the
India Abroad acquisition were as follows:

<TABLE>
<CAPTION>

<S>                                                                    <C>

 Cash and cash equivalents........................................   US$     116,048
 Accounts receivable..............................................           435,512
 Due from former shareholder......................................           741,248
 Prepaid expenses and other current assets........................            66,273
 Prepaid taxes....................................................            24,782
 Net assets held for sale.........................................         1,040,914
 Deferred income taxes - current..................................            36,000
 Property, plant and equipment, net...............................           267,811
 Deferred income taxes - non current..............................           138,000
 Other assets.....................................................            42,516
 Goodwill, net (See below)........................................        10,515,168
 Borrowings.......................................................         (861,929)
 Accounts payable and accrued liabilities.........................         (530,535)
 Customer deposits................................................         (242,503)
 Unexpired subscription revenues..................................         (354,447)
                                                                    -----------------
Total purchase consideration, including direct costs of acquisition    US$11,434,858
                                                                    =================

</TABLE>

         On June 29, 2001 the Company repaid the borrowing amounting to
US$861,929 assumed in the India Abroad acquisition.

         Goodwill related to this acquisition at March 31, 2003 and 2004 is as
follows:

                                                  2003                 2004
                                                  ----                 ----
Goodwill..............................       US$10,515,168        US$7,314,468
Goodwill impairment...................          (3,200,700)                 -
                                            ---------------       ------------
                                            US$  7,314,468        US$7,314,468
                                            ---------------       ------------

         The operating results of India Abroad have been consolidated from
April 27, 2001, the date of its acquisition.

5.       Discontinued Operations and assets held for sale

         On April 8, 2004, Valucom sold its phone-card business, consisting
primarily of the "Valucom" brand, trademarks, websites, internally built
software, customer lists and certain hardware for US$500,000 to Worldquest
Networks Inc ("WQN"). WQN paid U.S. $ 200,000 of the total consideration at
closing with the remaining U.S. $ 300,000 to be paid in twelve monthly
installments of US$25,000 commencing May 2004. In addition, the Company also
sold its inventory of prepaid identification numbers ("PINS") to WQN at its
carrying value on April 8, 2004, for an additional consideration of
US$102,424. Separately, in April 2004, WQN entered into an advertising
agreement with Rediff.com, Inc. entitling WQN to exclusive rights to prominent
online advertising space on Rediff.com U.S. website. Under the terms of the
advertising agreement, WQN will pay Rediff US$50,000 for twelve consecutive
months commencing in May 2004 for the advertising services. WQN provided both
Valucom and Rediff irrevocable letters of credit for WQN's remaining
obligation under the agreements.

         In accordance with SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, the disposal of the phone-card business
qualifies as discontinued operations at March 31, 2004. Hence, the results of
operations of the phone card business, as detailed below, are disclosed as
discontinued operations in the Company's Consolidated Statements of
Operations.

<TABLE>
<CAPTION>

                                                                                Years ended March 31,
                                                    ---------------------------------------------------------------------
                                                            2002                      2003                    2004
                                                    ----------------------     --------------------     -----------------

<S>                                                       <C>                       <C>                    <C>

Operating revenues..................................    US$16,902,610             US$8,680,031           US$4,487,598
                                                    ----------------------     --------------------     -----------------
Income (loss) from operations before taxes
(after eliminating inter-company transactions)
(Including loss on disposal of US$1,866,380 for
the fiscal year ended March 31, 2004).............          1,386,461               (6,915,776)            (2,370,982)
                                                    ----------------------     --------------------     -----------------
Income tax benefit (provision)....................             66,000                  (66,000)                   --
                                                    ----------------------     --------------------     -----------------
Income (loss) from discontinued operations.......        US$1,335,988            US$(6,803,695)         US$(2,370,982)
                                                    ----------------------     --------------------     -----------------

</TABLE>

         Upon approval of the plan of disposal in March 31, 2004, the related
long-lived assets of the phone card business which have been subsequently
disposed of are reported as held-for-sale and measured at their fair value
less cost to sell. The loss of US$1,866,380 resulting from the write-down of
goodwill and other assets have been reported as a loss on disposal.

         Assets held for sale at March 31, 2004, relating to the phone card
business comprised of the following assets written down to their net
realizable values:

Inventory............................................  US$  86,686
Plant and equipment..................................       65,048
Goodwill.............................................      371,588
                                                      --------------
Assets held for sale................................  US$  523,322
                                                      ==============

         Inventory comprising prepaid long distance service PINs and acquired
by Worldquest at an additional consideration are reported at the lower of
average cost and market at March 31, 2004.

         Impairment loss on plant and equipment and goodwill has been computed
by reducing the direct costs of sale from the sale consideration.

6.       Prepaid Expenses and Other Current Assets

         Prepaid expenses and other current assets consist of:

<TABLE>
<CAPTION>

                                                                    As of March 31,
                                                                    ---------------
                                                                2003               2004
                                                                ----               ----

<S>                                                          <C>                <C>

Prepaid expenses and deferred costs.....................   US$   585,034      US$  467,072
Other deposits and advances.............................         153,812            183,398
Rent deposits...........................................         534,168            221,164
Loans to employees......................................          49,834             38,736
Accrued interest........................................          15,199            201,414
                                                            -------------     --------------
                                                            US$1,338,047      US$ 1,111,784
                                                            =============     ==============

</TABLE>

7.       Property, Plant and Equipment

         Property, plant and equipment consist of:

<TABLE>
<CAPTION>

                                                                  As of March 31,
                                                                  ---------------
                                                                2003               2004
                                                                ----               ----

<S>                                                           <C>                  <C>

Furniture and fixtures.................................     US$  429,881         US$456,926
Computer equipment and software........................        6,263,075          6,919,479
Office equipment.......................................          308,796            312,095
Vehicles...............................................          298,101            286,166
Leasehold improvements.................................          305,095            322,053
Deferred website development costs.....................          526,582            628,633
Capital work in progress...............................                -             35,945
                                                           --------------      -------------
Property, plant and equipment, cost....................        8,131,530          8,961,297
Accumulated depreciation and amortization..............       (5,874,514)        (7,470,057)
                                                           --------------      -------------
Property, plant and equipment, net.....................    US$ 2,257,016       US$1,491,240
                                                           ==============      =============

</TABLE>


8.       Restructuring

         Following the acquisition of India Abroad on April 27, 2001, the
Company integrated the operations of Rediff.com Inc., with those of India
Abroad, including relocating Rediff.com Inc.'s operations from California to
New York. During the fiscal year ended March 31, 2002, the Company provided
US$598,398 for restructuring expenses in accordance with Staff Accounting
Bulletin ("SAB") 100 and EITF 94-3, primarily consisting of lease termination
costs, expenses for relocation of equipment and staff, and severance payments.

9.       Goodwill

Rediff.com Inc (formerly "thinkindia.com Inc")

         Following the triggering event of the restructuring during the fiscal
year ended March 31, 2002, as described in Note No. 8 above, the Company
re-evaluated the goodwill that arose on Rediff.com Inc's acquisition for
impairment. Based on the application of SFAS No. 142, during the fiscal year
ended March 31, 2002, management concluded goodwill relating to Rediff.com Inc
was impaired and accordingly wrote off the unamortized balance of US$3,316,508
as an expense.

Value Communications Corporation (Valucom)

         During the year ended March 31 2003, management identified the
following three triggering events to warrant testing of goodwill on the
Valucom acquisition for impairment:

1.       On July 30, 2002, the Company entered into a settlement agreement
         with ValuCom's former founder shareholders for full and final
         settlement of all obligations and earn-out payments and terminated
         their service, resulting in the loss of key management personnel.

2.       Deregulation of the Indian long distance telecom market and
         commencement of VOIP (Voice over Internet Protocol) has resulted in
         increased competition with a significant drop in international long
         distance rates, shifting of calls originating from the U.S. to calls
         originating in India and pricing pressures due to significantly lower
         rates offered by providers of internet telephony. It is unlikely that
         these trends will reverse in near future.

3.       A significant drop in the number of Indian software professionals in
         the U.S. as a result of 9/11 and the subsequent downturn in the
         technology market. As a result, a key target customer group has
         shrunk and volumes are adversely affected. This trend is also
         unlikely to reverse in the near future.

         Following the triggering events, the Company re-evaluated goodwill
that arose on ValuCom's acquisition. Based on the application of SFAS No. 142,
management concluded that the goodwill relating to Valucom was impaired and
recorded an impairment charge of US$5,100,000 in the fiscal year ended March
31, 2003.

         During the fiscal year ended March 31, 2004, the Company recorded a
further impairment charge of US$1,661,222 for the Valucom goodwill. As
described in note 5 above, the Company sold the phone card business for a
consideration of US$500,000. The impairment charge was computed based on the
sale value of the phone card business. In accordance with SFAS 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, the impairment charge for
Valucom goodwill for the fiscal year ended March 31, 2004 and for prior years
has been included in "Profit (Loss) from discontinued operations". The
remainder of the Valucom goodwill of US$371,588 has been classified as "Assets
held for sale" in the balance sheet at March 31, 2004.

India Abroad

         During the fiscal year ended March 31, 2003, the Company annually
assessed the goodwill that arose on India Abroad's acquisition. Based on the
application of SFAS No. 142, management concluded that goodwill relating to
India Abroad was impaired. Management determined the fair value of the India
Abroad business with the assistance of an independent valuation specialist and
recorded an impairment charge of US$3,200,700 for the fiscal year ended March
31, 2003.

         During the fiscal year ended March 31, 2004, the Company performed
its annual assessment of goodwill on India Abroad. The Company carried out a
fair valuation of the India Abroad business with the assistance of an
independent valuer and concluded that there was no further impairment to be
recorded during the fiscal year ended March 31, 2004.

         Goodwill at March 31, 2003 and 2004 are as follows:

<TABLE>
<CAPTION>

                                                                           As of March 31,
                                                                          ----------------
                                                                        2003                2004
                                                                  ---------------           ----

<S>                                                                 <C>                  <C>
Goodwill, on acquisition (including adjustments
to purchase price)........................................        US$ 21,070,842       US$21,070,842
Accumulated amortization..................................              (106,356)           (106,356)
Accumulated impairment....................................           (11,617,208)        (13,278,430)
Valucom goodwill reclassified as "Assets held for
sale".....................................................                    --             (371,588)
                                                                  ---------------     ----------------
Goodwill, net.............................................        US$  9,347,278       US$  7,314,468
                                                                  ===============     ================
</TABLE>


10.      Other Assets

         Other assets mainly consist of rental deposits which at the balance
sheet date are due after more than one year and the non current portion of
loans to employees. Other assets also include an amount of US$67,955
representing a recoverable from the insurance carrier of the Company's D&O
policy (See Note 20).

11.      Related Party Transactions

         The Company's principal related parties are its founder shareholders
and companies that the founder shareholders control. The Company enters into
transactions with such related parties in the normal course of business.

         Included in the determination of net loss are the following
significant transactions with related parties:

<TABLE>
<CAPTION>

                                                                  Years ended March 31,
                                                                  ---------------------
                                                             2002             2003        2004
                                                             ----             ----        ----

<S>                                                         <C>              <C>         <C>

    Operating lease rent expense.......................   US$    7,010     US$ --      US$     --
    Advertising expense................................   US$  113,808     US$ --      US$     --
    Advertising revenues...............................   US$   13,369     US$1345     US$  11,537

</TABLE>

         Balances with related parties include:

                                                          As of March 31,
                                                          ---------------
                                                        2003           2004
                                                        ----           ----

    Receivable for advertising income............... US$--         US$   8,756
    Loans to officers............................... US$84,941     US$  33,741

         The Company grants unsecured loans to employees for acquiring assets
such as housing property and vehicles and also for other personal purposes.
These are recovered from the employee's salaries. The rates at which the loans
are made to employees vary between 0% to 2%.

         The required repayments of loans by employees are as follows:

     Years ended March 31,

    2005..................................................       US$ 41,736
    2006..................................................           10,565
    2007..................................................            8,055
    2008..................................................            8,048
    2009 and thereafter...................................           15,870
                                                          ------------------
    Total payments........................................        US$84,274
                                                          ==================

12.      Shareholders' Equity

         During the fiscal year ended March 31, 2004, the Company issued
64,450 ADSs, representing 32,225 equity shares on account of the exercise of
stock options pertaining to the 2002 Stock Option Plan at the grant price of
US$1.14 per ADS for aggregate proceeds of US$ 73,473.

13.      Retirement Benefits

         Gratuity

         The Company provides for gratuity, an unfunded defined benefit
retirement plan covering eligible employees in India based on third-party
actuarial valuations. This plan provides for a lump-sum payment to be made to
vested employees at retirement, death or termination of employment in an
amount equivalent to 15 days salary, payable for each completed year of
service. These gratuity benefits vest upon an employee's completion of five
years of service.

         The following tables set out the funded status of the gratuity plans
and the amounts recognized in the Company's financial statements in for the
fiscal year ended March 31, 2002, 2003 and 2004. The measurement date used is
March 31 of the relevant fiscal year.

<TABLE>
<CAPTION>

                                                                        Years ended March 31,
                                                                        ---------------------
                                                                2002              2003             2004
                                                              ----------      ------------      ---------

<S>                                                             <C>               <C>               <C>

Change in benefit obligation
Benefit obligation at the beginning of the year ...........   US$35,650         US$53,729        US $66,439
Actuarial (gain) loss .....................................         520            (8,631)           (3,042)
Service cost ..............................................      15,651            14,328            14,875
Interest cost .............................................       3,758             5,316             5,350
Benefits paid .............................................        --                --              (2,724)
Effect of exchange rate changes ...........................      (1,850)            1,697             7,123
                                                               --------          --------          --------
Benefit obligation at the end of the year .................   US$53,729         US$66,439         US$88,021
Unrecognized net actuarial (loss) gain ....................      (9,885)             (773)            2,229
                                                              ---------        ----------        ----------
Accrued liability .........................................   US$43,844        US$ 65,666        US$ 90,250
                                                              ---------        ----------        ----------
</TABLE>

         Net gratuity cost for the years ended March 31, 2002, 2003 and 2004
comprise of the following:

<TABLE>
<CAPTION>

                                                                          Years ended March 31,
                                                                          ---------------------
                                                                   2002               2003               2004
                                                             --------------   -----------------    --------------

<S>                                                                <C>               <C>                 <C>

Service cost...........................................          US$15,651         US$14,328           US$14,875
Interest cost..........................................              3,758             5,316               5,351
Recognized net actuarial loss..........................                 --               381                 --
                                                             --------------   -----------------    --------------
Net gratuity cost......................................          US$19,409         US$20,025           US$20,226
                                                             --------------   -----------------    --------------

</TABLE>


         The assumptions used in accounting for gratuity in the years ended
March 31, 2002, 2003 and 2004 were as follows:

                                                      Years ended March 31,
                                                      ---------------------
                                                     2002      2003     2004
                                                     ----      ----     ----
Rupee discount rate..............................    10%        8%       7%
Rate of increase in Rupee compensation...........    12%        8%       8%


         The company assesses these assumptions with its projected long-term
plans of growth and prevalent industry standards. Unrecognized actuarial loss
is amortized over the average remaining service period of the active employees
expected to receive benefits under the Plan.

         The following benefit payments, which reflect expected future
service, as appropriate, are expected to be paid.

               Years ending March 31,
               2005.....................................           US$8,894
               2006.....................................             10,046
               2007.....................................             10,944
               2008.....................................             11,659
               2009.....................................             13,134
               2010-14.................................              67,211

         The expected benefits are based on the same assumptions used to
measure the Company's benefit obligations as of March 31, 2004.

         Provident Fund

         Employees based in India and the Company each contribute at the rate
of 12% of salaries to a provident fund maintained by the Government of India
for the benefit of such employees. The provident fund is a defined
contribution plan. Accordingly, the Company expenses such contributions as
incurred. Amounts contributed by the Company to the provident fund, in the
aggregate, were US$84,487, US$76,727 and US$77,677 for the years ended March
31, 2002, 2003 and 2004 respectively.

14.      Operating Leases

         The Company leases office space, computer equipment, high-speed
telephone lines and residential apartments for employees under various
operating leases. Operating lease expense that has been included in the
determination of the net loss is as follows:

<TABLE>
<CAPTION>

                                                             Years ended March 31,
                                                             ---------------------
                                                     2002                2003               2004
                                                     ----                ----               ----

<S>                                                 <C>               <C>               <C>

Office space                                      US$  358,329      US$   423,658     US$  452,077
Computers                                                  --              36,287           29,214
Telecom leased lines                                   886,829            576,211          504,450
Residential apartments for employees                   176,656            121,008          113,549
                                                 -------------     --------------    --------------
Total operating lease expense                    US$ 1,421,814     US$  1,157,164    US$ 1,099,290
                                                 ==============    ==============    ==============

</TABLE>

         The minimum annual rental commitments under non-cancelable operating
leases that have initial or remaining terms in excess of one year are as
follows:

             Years ended March 31,

            2005........................................... US$485,767
            2006...........................................    171,203
            2007...........................................     75,677
            2008...........................................     23,400
            2009 and thereafter............................          -
                                                            ----------
            Total payments................................. US$756,047
                                                            ----------

15.      Income Taxes

         The income tax expense (benefit) consists of:

<TABLE>
<CAPTION>

                                                                      Years ended March 31,
                                                                      ---------------------
                                                               2002               2003               2004
                                                               ----               ----               ----

<S>                                                         <C>                 <C>                 <C>

     Current taxes -- all foreign......................   US$   (185,809)     US$   237,932       US$4,862
     Deferred taxes, net of allowance.................           174,000                 --           --
                                                         -----------------   ----------------    -----------
     Net income tax expense (benefit).................    US$    (11,809)     US$   237,932       US$4,862
                                                         =================   ================    ===========

</TABLE>

         The tax effects of significant temporary differences that resulted in
deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>

                                                                  As of March 31,
                                                          -------------------------------------
                                                                  2003                2004
                                                                  ----                ----

<S>                                                         <C>                   <C>

Depreciation .......................................      US$  1,994,831        US$ 2,746,660
Bad debt allowance .................................             381,297              447,605
Net operating loss carry forwards ..................          10,428,326           11,465,320
Retirement benefits -- Gratuity ....................              58,784               51,131
Website development costs ..........................              (8,573)              (1,955)
Other ..............................................             186,993               37,578
                                                           --------------       --------------
                                                              13,041,658           14,746,339
Less: Valuation allowance ..........................         (13,041,658)         (14,746,339)
                                                           --------------       --------------
Net deferred tax asset .............................       US$       --         US$      --
                                                           ==============       ==============

</TABLE>


         The Company increased the valuation allowance by US$1,247,892,
US$4,677,381 and US$1,704,681 for the years ended March 31, 2002, 2003 and
2004 respectively.

         The Company has not generated any taxable income in India to date,
and therefore has not had to pay any Indian income tax since its inception.
The Company has provided a full valuation allowance against the deferred tax
asset since it is more likely than not that the asset will not be recovered.
The Company's net operating loss carry forwards for its Indian operations
aggregating approximately US$19.2 million will expire between April 1, 2004
and March 31, 2012.

         Recoverable income taxes mainly consist of tax deducted at source on
income from advertising services and interest income, which the Company will
claim as refund.

         As of March 31, 2004, ValuCom has net operating loss carryforwards
available to offset future federal taxable income of US$2,805,000, which
expire in years 2021 through 2024.

         As of March 31, 2004, Rediff Holdings, Inc., has net operating loss
carryforwards of approximately US$7,350,000, for federal income tax purposes,
which expire in years 2020 through 2024.

         Realization of the future tax benefits related to the deferred income
asset is dependent on many factors, including the Company's ability to
generate taxable income within the net operating loss carryforward period.
Management has considered these factors and believes that a full valuation
allowance is required for each of the periods presented.

16.      Segments

         During the fiscal year ended March 31, 2002, the Company's reportable
segments were Media services, Merchandizing services and Communication
services. Included in media services, were the results of operations of India
abroad, which was acquired during the year. The Communication services segment
related to the operations of Valucom which was acquired during the fiscal year
ended March 31, 2001.

         During the fiscal year ended March 31, 2003, the Chairman and
Managing Director of the Company, who is its chief operating decision maker,
reclassified the Company's business segments and assessed the Company's
performance on a new basis. The reportable segments for the fiscal year ended
March 31, 2003 were:

         (i)      India Online business, which primarily includes revenues
                  from online advertising and fee based services. Online
                  advertising includes advertisements and sponsorships and
                  designing and managing customers' websites. Fee based
                  services include e-commerce, subscription services and
                  wireless short messaging services.

         (ii)     U.S. Publishing business, which primarily includes
                  subscription and advertising revenues from the publication
                  of India Abroad, a weekly newspaper published in the United
                  States and Canada. It also includes the advertising revenues
                  of Rediff.com Inc., the website catering to the Indian
                  community in the U.S.A.

         (iii)    Phone card business, which primarily includes internet based
                  marketing of prepaid long distance call services.

         As discussed in Note 5, on April 8, 2004, the Company sold the phone
card business and has reported the results of the phone card business as
discontinued operations. Accordingly, segmental information for the phone card
business is no longer presented as the Company currently operates in two
business segments viz. India Online business and U.S.Publishing business.

         During the year ended March 31, 2004, the Company has discontinued
its earlier practice of allocating the operating expenses to its segments as
management does not use this information to measure the performance of these
operating segments. The Company believes that allocating these expenses is no
longer meaningful in evaluating segment performances since the Chief Operating
Decision Maker's measure for segment results is the gross profit of the
segment.

         Following are the segment results and segment assets for the years
ended March 31, 2002, 2003 and 2004.

<TABLE>
<CAPTION>

                                                            Years ended March 31,
                                                            ----------------------
                             2002                                  2003                                  2004
                              U.S.                                  U.S.                    India       U.S.
             India Online  Publishing               India Online   Publishing                Online    Publishing
              Business     Business    Total         Business      Business     Total       Business    Business      Total
             ---------------------------------------------------------------------------------------------------------------

<S>        <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>

Revenues from
external
customers:

Advert-
ising    US$2,239,386 US$4,395,590 US$6,634,976 US$1,905,516 US$4,940,803 US$6,846,319 US$2,184,411 US$5,129,229 US$7,313,640

Fee based
services      336,532      887,447    1,223,979      861,728      863,795    1,725,523    1,451,772      681,191    2,132,963
        ----------------------------------------------------------------------------------------------------------------------
            2,575,918    5,283,037    7,858,955    2,767,244     5,804,598    8,571,842   3,636,183    5,810,420    9,446,603
        ----------------------------------------------------------------------------------------------------------------------
Inter
segment
revenues:
Advertising 1,265,037    1,407,553    2,672,590       87,930       286,184      374,114      31,611       34,000       65,611
        ----------------------------------------------------------------------------------------------------------------------
Total
revenues    3,840,955    6,690,590   10,531,545    2,855,174     6,090,782    8,945,956   3,667,794    5,844,420    9,512,214
        ----------------------------------------------------------------------------------------------------------------------
Cost of
revenues
-Third-
  party     1,337,183    3,760,841    5,098,024    1,078,472     4,481,618    5,560,090   1,130,373    3,608,029    4,738,402
-Inter
 segment      123,937           --      123,937       13,554          --         13,554         --          --           --
        ----------------------------------------------------------------------------------------------------------------------
Total
cost of
revenues    1,461,120    3,760,841    5,221,961    1,092,026     4,481,618    5,573,644   1,130,373    3,608,029    4,738,402
        ----------------------------------------------------------------------------------------------------------------------
Segment
Gross
Profit   US$2,379,835 US$2,929,749 US$5,309,584 US$1,763,148  US$1,609,164 US$3,372,312 US$2,537,421 US$2,236,391 US$4,773,812
       =======================================================================================================================

Segment
Assets US$30,419,528 US$12,890,171 US$43,309,699 US$18,055,607 US$9,334,043 US$27,389,650 US$13,935,845US$10,220,059US$24,155,904
       ==========================================================================================================================

</TABLE>

         The following is a reconciliation of the segment gross profits to the
loss from continuing operations before income taxes of the Company for the
years ended March 31, 2002, 2003 and 2004.

<TABLE>
<CAPTION>

                                                              Years ended March 31,
                                                              ----------------------
                                                 2002                   2003                   2004
                                                 ----                   ----                   ----

<S>                                            <C>                 <C>                     <C>

        Segment Gross Profit............     US$   5,309,584     US$   3,372,312         US$ 4,773,812
        Inter segment expenses..........           2,548,653             360,560                65,611
        Operating expenses..............          20,938,426          14,903,365             7,927,067
        Other income (loss) ............           1,998,692              18,090              (125,132)
                                            -----------------    ---------------         ---------------
        Loss from continuing operations
        before income taxes.............    US$  (16,178,803)    US$ (11,873,523)        US$ (3,343,998)
                                            -----------------    ----------------        ---------------
</TABLE>


         Revenues are derived from customers based as follows:

<TABLE>
<CAPTION>

                                                               Years ended March 31,
                                                               ---------------------
                                                 2002                   2003                   2004
                                                 ----                   ----                   ----
<S>                                              <C>                    <C>                     <C>

        United States.....................     US$  5,370,367         US$    5,573,161        US$5,377,198
        India.............................          2,472,460                2,757,482           3,665,317
        Rest of the world.................             16,128                  241,199             404,088
                                              ----------------        -----------------      ---------------
        Total revenues.........................US$  7,858,955         US$    8,571,842        US$9,446,603
                                              ----------------        -----------------      ---------------
</TABLE>


         Net property, plant and equipment by location is as follows:

<TABLE>
<CAPTION>

                                                                As of March 31,
                                                                ---------------
                                                          2003                   2004
                                                          ----                   ----
<S>                                                      <C>                  <C>

        United States...............................   US$    512,729       US$  244,116
        India.......................................        1,744,287          1,247,124
                                                      ----------------      ------------
        Total.......................................   US$  2,257,016       US$1,491,240
                                                      ----------------      -------------

</TABLE>

17.      Concentrations of credit risk

         Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, cash equivalents
and accounts receivable. The Company maintains the majority of its cash and
cash equivalents in Indian Rupees with reputed banks in India.

         The Company's advertising revenues from the India Online business are
primarily derived from large corporate clients in India. Advertising revenues
from the U.S. Publishing business are primarily derived from corporate clients
and retail customers in the United States and Canada. The Company's fee based
revenues from the India Online business and U.S. Publishing business are
primarily derived from retail customers in India, the United States and
Canada. These do not expose the Company to any material concentrations of
credit risk.

Significant clients

         No single client accounted for more than 10% of the total revenues
for the years ended March 31, 2002, 2003 and 2004.

18.      Stock Based Compensation

         1999 Stock Option Plans

         On February 22, 1999, the Company approved the Employee Stock Option
Plan 1999 ("1999 ESOP") and the Associate Stock Option Plan 1999 ("1999 ASOP")
(collectively "Option Plans") which cover present and future employees,
retainers in full time service of the Company and certain associates of the
Company. The 1999 ESOP and 1999 ASOP have similar terms. Under the terms of
the 1999 ESOP, a committee of the board may award stock options to eligible
employees in the form of warrants. Such options vest at the rate of 25% on
each successive anniversary of the grant date, until fully vested. Under the
terms of the 1999 ASOP, a committee of the board may award stock options to
eligible associates in the form of warrants. Such warrants vest at the rates
set forth in each warrant.

         Each allotted warrant carries with it the right to purchase a
specified number of the Company's equity shares at the exercise price during
the exercise period, which expires five years from the date of grant.

         The exercise price is determined by the awarding committee, and is
intended to be at least the fair value of the Company's equity shares on the
date of the grant.

         Under the Option Plans, the Company reserved 280,000 equity shares
for the 1999 ESOP and 198,000 equity shares for the 1999 ASOP, respectively.
The Option Plans also permit the board of directors to reserve additional
warrants under either plan to be issued to eligible parties on such terms and
conditions as may then be decided by the board at its absolute discretion.

         The Company has elected to use the intrinsic value method of APB
Opinion No. 25 to account for its stock-based compensation plans regarding
options awarded to officers, employees, retainers in full time service of the
Company and non-employee directors for their services as directors, and the
fair value method specified in SFAS No. 123 in respect of the options awarded
to associates of the Company.

         For the years ended March 31, 2002, 2003 and 2004, the Company
recognized a compensation cost of US$67, US$403 and US$426, in respect of
stock options granted to associates of the Company in accordance with SFAS
123.

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

<TABLE>
<CAPTION>

                                                               Shares available to be granted as options
                                                                         Years ended March 31,

Employee Stock Option Plan 1999:                                      2002           2003             2004
                                                                      ----           ----             ----

<S>                                                                 <C>             <C>             <C>

Warrants available to be granted, beginning of year....             10,900          5,350           18,250
Forfeited..............................................             13,450         12,900           22,975
Options granted........................................            (19,000)            --           (7,500)
                                                                -----------      ----------        ---------
Warrants available to be granted, end of year..........              5,350         18,250           33,725
                                                                ===========      ==========        ==========

</TABLE>

Activity in the warrants of the 1999 ESOP for the years ended March 31, 2002,
2003 and 2004 is as follows:

<TABLE>
<CAPTION>

                                                               Years ended March 31,
                    ---------------------------------------------------------------------------------------------------------
                                 2002                             2003                                2004
                       Shares                           Shares                            Shares
                    arising out    Weighted average   arising out   Weighted average    arising out      Weighted average
                    of options      exercise price    of options     exercise price     of options        exercise price
                    -----------    -----------------  -----------   ----------------   -----------       ----------------

<S>                 <C>              <C>        <C>     <C>           <C>          <C>    <C>             <C>             <C>

Outstanding at
the  beginning
of the year.....    269,100        US$ 7.17  Rs 336     274,650     US$  6.52  Rs  318    261,750       US$    6.49   Rs  308
Granted.........     19,000        US$ 2.25  Rs 108         --             --      --       7,500       US$   10.32   Rs  474
Forfeited.......    (13,450)       US$ 7.75  Rs 371     (12,900)    US$ 10.84  Rs  524    (22,975)      US$    9.67   Rs  444
                   ---------       --------  -------   --------     ---------  --------   --------      -----------   -------
Outstanding at
the end of the
year..........      274,650        US$ 6.52  Rs 318    261,750      US$  6.49  Rs  308    246,275       US$    6.92   Rs  300
                   ---------       --------  -------   --------     ---------  --------   --------      -----------   -------

</TABLE>

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

<TABLE>
<CAPTION>

                                                                  Shares available to be granted as options
                                                              --------------------------------------------------
                                                                            Years ended March 31,
                                                              --------------------------------------------------
    Associate Stock Option Plan 1999:                                    2002            2003              2004
                                                                         ----            ----              ----

<S>                                                                   <C>             <C>               <C>

    Warrants available to be granted, beginning of year..             132,900         137,650           109,650
    Forfeited............................................               5,750             --                 --
    Options granted......................................              (1,000)        (28,000)               --
                                                                     ----------     ----------         ---------
    Warrants available to be granted, end of year........             137,650         109,650           109,650
                                                                     ==========     ==========         =========

</TABLE>


         Activity in the warrants of the 1999 ASOP for the years ended March
31, 2002, 2003 and 2004 is as follows:

<TABLE>
<CAPTION>

                                                               Years ended March 31,
                    ------------------------------------------------------------------------------------------------------
                                 2002                             2003                                2004
                       Shares                           Shares                            Shares
                    arising out    Weighted average   arising out   Weighted average    arising out     Weighted average
                    of options      exercise price    of options     exercise price     of options       exercise price
                    -----------    -----------------  -----------   ----------------   -----------      ----------------

<S>                 <C>          <C>        <C>        <C>           <C>     <C>        <C>             <C>       <C>

Outstanding at
the beginning
of the year......   65,100       US$  12.12   Rs  568    60,350     US$12.32  Rs  601     88,350       US$9.38     Rs  446
Granted.........     1,000       US$   2.25   Rs. 108    28,000     US$ 2.26  Rs  109        --             --         --
Forfeited.......    (5,750)      US$   2.78   Rs. 133       --           --      --          --             --         --
                   ----------    -----------  --------   -------    --------- --------    --------     ---------   --------
Outstanding
at the end
of the
year............    60,350       US$  12.32   Rs. 601    88,350     US$ 9.38  Rs  446     88,350       US$ 10.27   Rs  446
                   ----------    -----------  --------   -------    --------- --------    --------     ---------   --------

</TABLE>

2002 Stock Option Plan

         In January 2002 the Company's board of directors approved the 2002
Stock Option Plan ("2002 plan"), which provide for the grant of stock options
to the Company's employees. All options under this plan are exercisable for the
ADSs of the Company. The Company has elected to account for the 2002 plan using
the intrinsic value method of APB Opinion No. 25. Unless terminated sooner,
this plan will terminate automatically in January 2012. A total of 280,000 of
the Company's equity shares are currently reserved for issuance pursuant to
2002 plan.

         Under the terms of the 2002 plan, the board or a committee or a
sub-committee of the board will determine and authorize the grant of options
to eligible employees. Such options vest at the rates set forth in each award.
Each option grant carries with it the right to purchase a specified number of
the Company's ADS's at the exercise price during the exercise period, which
expires ten years from the date of grant. The exercise price is determined by
the board (or a committee or a sub-committee of the board) and shall be no
more than 110% of the fair market value and no less than 50% of the fair
market value on the date of the grant.

         For the 2002 plan, the Company had, during the fiscal year ended
March 31, 2003, obtained necessary approvals from regulators in India. During
the fiscal year ended March 31, 2004, the Company made appropriate filings
with the SEC prior to the first exercise date of the options granted under the
2002 plan.

         Activity in the warrants available to be granted under the 2002 plan
is as follows:

<TABLE>
<CAPTION>

                                                                  Shares available to be
                                                                    granted as options
                                                                   Years ended March 31,
                                                                   ---------------------

ADS linked Employee Stock Option Plan 2002:                           2003           2004
                                                                      ----           ----

<S>                                                                <C>             <C>

Warrants available to be granted, beginning of year......          280,000         59,500
Forfeited................................................               --         69,250
Options granted..........................................         (220,500)      (116,000)
                                                                 ----------      ---------
Warrants available to be granted, end of year............           59,500         12,750
                                                                 ==========      =========

</TABLE>


         Activity in the warrants of the 2002 plan for the fiscal year ended
March 31, 2003 and 2004 is as follows:

<TABLE>
<CAPTION>

                                                           Year ended March 31, 2003         Year ended March 31, 2004
                                                           Shares                            Shares
                                                         arising out  Weighted average    arising out  Weighted average
                                                         of options   exercise price      of options   exercise price
                                                         ----------   ----------------    -----------  -----------------

<S>                                                         <C>           <C>               <C>              <C>

Outstanding at the beginning of the year...........             --            --            220,500        US$ 2.26
Granted............................................         220,500     US$ 2.26            116,000        US$ 7.75
Forfeited..........................................             --            --            (69,250)       US$ 2.28
Exercised..........................................             --            --            (32,225)       US$ 2.28
                                                         -----------  ----------           ----------      ---------
Outstanding at the end of the year.................         220,500     US$ 2.26            235,025        US$ 4.64
                                                         -----------  ----------           ----------      ---------

</TABLE>

         The Company has adopted the pro forma disclosure provisions of SFAS
No. 123 and SFAS No. 148 for the aforementioned plans. Had compensation cost
for the Company's stock-based compensation plans been determined in a manner
consistent with the fair value approach described in SFAS No. 123, the
Company's net loss and basic loss per share as reported would have been
reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>

                                                              Years ended March 31,
                                         -----------------------------------------------------------------
                                                 2002                  2003                  2004
                                                 ----                  ----                  ----

<S>                                          <C>                   <C>                    <C>

    Net Loss As reported...............    US$(14,765,006)       US$(18,981,150)        US$(5,719,842)
    Less: Total stock-based employee
          compensation expense
          determined under fair value
          based method for all
          awards.....................            (224,745)             (257,166)             (647,364)
                                         --------------------- --------------------- ---------------------
    Adjusted pro forma...............      US$(14,989,751)       US$(19,238,316)        US$(6,367,206)
                                         --------------------- --------------------- ---------------------
    Loss per share - basic and
    diluted
        As reported..................          US$  (1.15)            US$ (1.48)            US$ (0.45)
                                               ===========            ==========            ==========
        Adjusted pro forma............         US$  (1.17)            US$ (1.50)            US$ (0.50)
                                               ===========            ==========            ==========

</TABLE>


         The fair value of each warrant is estimated on the date of grant
using the Black-Scholes model with the following assumptions:

<TABLE>
<CAPTION>

                                                                       Years ended March 31,
                                                                       ---------------------
                                                                    2002         2003        2004
                                                                    ----         ----        ----

<S>                                                                  <C>          <C>         <C>

        Dividend yield........................................       0%           0%          0%
        Expected life.........................................   4 years      4 Years     4 Years
        Risk free interest rates..............................       8%        5.75%          5%
        Volatility............................................   99.32%      118.59%      112.6%

</TABLE>


         The following table summarizes information about stock options
outstanding as at March 31, 2004:

<TABLE>
<CAPTION>

                                                                   Options Outstanding
                                           ---------------------------------------------------------------------
             Range of Exercise Price           Number of             Weighted
                                                shares               average
                                              arising out           remaining               Weighted average
                                              of options         contractual life            Exercise price
                                              -----------        ----------------           ----------------

<S>               <C>       <C>                 <C>                 <C>                <C>            <C>

                US$  1.73 - 2.62                284,775             2.78 years         US$    2.20    Rs    96
                US$  6.05 - 9.38                106,500             8.59 years         US$    7.62    Rs.  331
                US$ 9.86 - 13.65                118,875             2.55 years         US$   11.02    Rs.  478
                US$15.53 - 20.53                 56,500             0.86 years         US$   18.27    Rs.  793
                US$23.46 - 25.05                  3,000             1.10 years         US$   23.77    Rs.1,032


</TABLE>

19.      Loss per share

         A reconciliation of the numerators and denominators used in the
computation of the basic and diluted per equity share has not been provided,
since 61,114, 29,145 and 319,542 stock options outstanding as on March 31,
2002, 2003 and 2004 respectively, which can potentially dilute basic EPS in
the future were anti dilutive in those years.

20.      Commitments and contingencies

         Litigation

         On April 16, 2001, the Company, four of its officers and directors,
and a group of investment banks that acted as underwriters (the "Underwriter
defendants") in the Company's June 2000 initial public offering (the "IPO")
and listing of ADSs were named as defendants in the legal action of Khanna v.
Rediff.com India Ltd. et al., a class action lawsuit filed in the United
States District Court for the Southern District of New York. Plaintiffs in
Khanna allege that the Company's registration statement filed with the SEC
contained misleading statements and omissions in violation of the U.S.
Securities Act of 1933, as amended ("Securities Act"), the U.S. Securities
Exchange Act of 1934, as amended ("Exchange Act") and SEC Rule 10b-5. The
plaintiff class in this lawsuit has been defined as all persons who purchased
ADSs from the time of the IPO through April 14, 2001 and seeks unspecified
damages. Subsequent to the filing of the Khanna Action, several other actions
have been filed against the Company and the other defendants propounding
substantially the same allegations. All the cases have been consolidated
before a single judge in the United States District Court for the Southern
District of New York.

         On May 11, 2001, the Company received from the Underwriter defendants
a demand for indemnification of the underwriters' legal fees and liabilities.
The Company's board of directors also has resolved to indemnify its officers
and directors named as defendants against their legal fees and liabilities, to
the extent permitted under Indian law. At the time of the IPO, the Company
purchased Directors & Officers Liability Insurance, ("the D&O Policy"),
providing coverage against federal securities law claims. The D&O Policy
includes coverages for the Company's cost of defending the class action
lawsuit, indemnification liabilities to its officers and directors, and
indemnification liabilities to the Underwriter defendants. The coverage of the
D&O Policy is denominated in Indian Rupees, but the policy proceeds are
payable in United States dollars. Based on the noon buying rate at March 31,
2004, the face amount of the D&O Policy is approximately US$20.6 million. The
proceeds of the D&O Policy are available to satisfy any judgment against the
Company, or any judgment against persons whom the Company is obligated to
indemnify, will be reduced by the amount of the legal fees and associated
expenses in the defense of the Company, the individual defendants and the
underwriters which are paid from the D&O Policy. The coverage of the D&O
Policy for the payment of legal fees, cost of defense and judgment, if any, is
subject to a retention of approximately US$259,000 (based on the noon buying
rate at March 31, 2004), which must be satisfied by the Company before the D&O
Policy proceeds would be available to the Company.

         During the fiscal year ended March 31, 2002, the Company recorded a
recoverable from the Insurance carrier of US$67,955 paid by the Company
towards legal fees in excess of the self-insured retention for this case. The
insurance carriers have informed the Company that this amount would be paid on
the settlement of the cases. The D&O Policy contains various exclusions,
which, if met, may result in the denial of insurance coverage. The Company has
been advised by the insurance carriers who wrote the D&O Policy that they are
not currently aware of any facts or circumstances that would cause any of the
exclusions to apply, but that the carriers have reserved their rights to claim
that the exclusions do apply if any such facts or circumstances come to their
attention.

         On June 5, 2001, twenty-four companies, including the Company, who
had issued securities to the public in their initial public offerings,
together with the investment banks who acted as underwriters in these initial
public offerings, were named as defendants in the lawsuit of Shives et al v.
Bank of America Securities, LLC et al., a class action lawsuit filed in the
United States District Court for the Southern District of New York. Also named
as defendants in this lawsuit were four of the Company's officers and
directors. The plaintiffs in Shives allege that the underwriter defendants
combined and conspired to inflate the underwriting compensation they received
in connection with the initial public offerings of the defendant companies, to
manipulate and inflate the prices paid by plaintiffs for securities issued in
the initial public offerings and to restrain and suppress competitive pricing
for underwriting compensation. Plaintiffs allege claims pursuant to Section 1
of the U.S. Sherman Antitrust Act of 1890, as amended, Section 4 of the
Clayton Antitrust Act of 1914, as amended, and Section 10(b) of the Securities
Exchange Act of 1934 (and Rule 10(b)-5 promulgated thereunder) against the
underwriter defendants. The plaintiffs further allege that the issuer
defendants, including the Company and certain of its officers and directors,
made material misstatements and omissions in violation of the Securities Act
and the Exchange Act and Rule 10(b)-5 by concealing or failing to disclose the
compensation earned by the underwriter defendants in the initial public
offerings. As against the Company and its oficers and directors, the Complaint
defines a "Rediff.com Sub-class" consisting of all persons who purchased
common stock of Rediff.com India Limited from the time of the IPO through
April 4, 2001 and seeks unspecified damages. This case has been consolidated
with several hundred other similar cases filed against other issuers who had
IPOs in 2000 and 2001.

         On November 24, 2003, plaintiffs' counsel in the Shives and Khanna
cases filed a single Consolidated Amended Securities Class Action Complaint
("Consolidated Complaint") which incorporates the material allegations from
the Shives and Khanna cases. On January 30, 2004, the Company and its officers
and directors filed a motion to dismiss the Consolidated Complaint. The
Underwriter Defendants filed a separate motion to dismiss. The motions are
currently being briefed by the parties.

         The Company believes that the allegations in the Khanna Action and
its related cases, and in the Shives Action are without merit and intends to
defend the lawsuits vigorously. The Company is not able at this point to
predict the course or the outcome of the litigation. In the event the class
action law suits result in substantial judgments against the Company and the
Company's Directors and Officers Liability insurance coverage proves
inadequate, the said judgments could have a severe material effect on the
Company's financial position and its results of operations.

         In connection with the Company's acquisition of India Abroad in April
2001, the Company has been advised by a holdout shareholder that he believes
his shares in India Abroad are worth approximately US$1.2 million. The Company
disputes this assertion and has offered the claimant approximately US$50,000
for his shares. The Company does not know if this offer will be acceptable to
the shareholder or if the shareholder will file a legal action against the
Company if the matter is not resolved. The Company believes that the outcome
will have no impact on the Company's financial position, results of operations
or cash flows.

         Indian Music Industry ("IMI"), an association claiming to represent
50 Indian companies, which purportedly owns copyrights to sound recordings,
filed a complaint with the Mumbai Police Department in February, 2000,
alleging that the Company was aiding and abetting violations of the Indian
Copyright Act of 1957, as amended, because the Company, through its website,
provided links to websites containing downloadable music files copyrighted by
IMI members. In July 2001, the Mumbai Metropolitan Magistrate issued bailable
warrants concerning the complaint against three of the Company's directors.
The warrants as against two of the Company's directors were promptly cancelled
and the warrant against one director was stayed. The Company is continuing to
investigate the underlying facts of the complaint. The directors have
presently been exempted from personal appearance and have filed an application
for discharge of the complaint before the Magistrate.

         The Income Tax authorities in India have disallowed certain expenses
claimed by the Company for certain years and have also levied penalties on
some of those disallowances. The amounts of the penalties are not quantifiable
at present and the Company has lodged appropriate appeal proceedings with the
relevant income tax authorities. The Company expects to prevail in the
appellate proceedings.

         The Company is also subject to other legal proceedings and claims,
which have arisen in the ordinary course of its business. Those actions, when
ultimately concluded and determined, will not, in the opinion of management,
have a material effect on the results of operations, cash flows or the
financial position of the Company.



<PAGE>





          REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
      FINANCIAL STATEMENT SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS




To the Board of Directors
Rediff.com India Limited

         We have audited the consolidated financial statements of Rediff.com
India Limited as of March 31, 2003 and 2004 and for each of the years in the
three year period ended March 31, 2004 and have issued our report thereon
dated April 29, 2004 (included elsewhere in the Annual report on Form 20-F),
which report expresses an unqualified opinion. Our audits also included the
accompanying Schedule of Valuation and Qualifying Accounts. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.





Deloitte Haskins & Sells
Mumbai, India
Dated:  April 29, 2004




<PAGE>




<TABLE>
<CAPTION>


                                     Schedule of Valuation and Qualifying Accounts

Allowance for trade accounts receivables

  Description        Balance at                                                Effect of           Balance
                    Beginning of       Charged to cost                       exchange rate         at end
                      Period            and expenses         Write offs         changes           of period
----------------- ----------------- ---------------------- --------------- ---------------- ---------------------

<S>      <C>        <C>                    <C>               <C>                <C>           <C>

  Fiscal 2004     US$1,034,360           US$186,090        US$(90,000)        US$99,227     US$1,229,677
----------------- ----------------- ---------------------- --------------- ---------------- ---------------------
  Fiscal 2003     US$841,160             US$189,385        US$(20,388)        US$24,203     US$1,034,360


</TABLE>




<PAGE>


                                   SIGNATURE


         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.


                                     REDIFF.COM INDIA LIMITED


                                     By:      /s/ Ajit Balakrishnan
                                              --------------------------
                                     Name:    Ajit Balakrishnan
                                     Title:   Chairman and Managing Director
Place: Mumbai
Date: September 29, 2004.



<PAGE>




                                   SIGNATURE

         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.


                                           REDIFF.COM INDIA LIMITED

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


Place:  Mumbai
Date: September 29, 2004



<PAGE>




                                CERTIFICATIONS

I, Ajit Balakrishnan, certify that:

1.   I have reviewed this annual report on Form 20-F of Rediff.com India
     Limited;

2.   Based on my knowledge, this report does not contain any untrue statement
     of a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered
     by this report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the company as of, and for, the periods presented in this report;

4.   The company's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company
     and we have:

     (a) Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         company, including its consolidated subsidiaries, is made known to us
         by others within those entities, particularly during the period in
         which this report is being prepared;

     (b) Evaluated the effectiveness of the company's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the
         end of the period covered by this report based on such evaluation,
         and;

     (c) Disclosed in this report any change in the company's internal control
         over financial reporting that occurred during the period covered by
         the annual report that has materially affected, or is reasonably
         likely to materially affect, the company's internal control over
         financial reporting; and

5.   The company's other certifying officer and I have disclosed, based on our
     most recent evaluation of internal control over financial reporting, to
     the company's auditors and the audit committee of the company's board of
     directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the company's ability to
         record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the company's internal
         control over financial reporting.

Date: September 29, 2004

                                                /s/ Ajit Balakrishnan
                                                ------------------------------
                                                Ajit Balakrishnan
                                                Chairman and Managing Director
                                                (Principal Executive Officer)



<PAGE>


                                CERTIFICATIONS

I, Joy Basu, certify that:

1.   I have reviewed this annual report on Form 20-F;

2.   Based on my knowledge, this report does not contain any untrue statement
     of a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered
     by this report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the company as of, and for, the periods presented in this report;

4.   The company's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company
     and we have:

     (a) Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         company, including its consolidated subsidiaries, is made known to us
         by others within those entities, particularly during the period in
         which this report is being prepared;

     (b) Evaluated the effectiveness of the company's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the
         end of the period covered by this report based on such evaluation,
         and;

     (c) Disclosed in this report any change in the company's internal control
         over financial reporting that occurred during the period covered by
         the annual report that has materially affected, or is reasonably
         likely to materially affect, the company's internal control over
         financial reporting; and

5.   The company's other certifying officer and I have disclosed, based on our
     most recent evaluation of internal control over financial reporting, to
     the company's auditors and the audit committee of the company's board of
     directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the company's ability to
         record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the company's internal
         control over financial reporting.

Date: September 29, 2004

                                               /s/ Joy Basu
                                               ----------------------------
                                               Joy Basu
                                               Chief Financial Officer
                                               (Principal Financial Officer)



<PAGE>




                 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
                      PURSUANT TO 18 U.S.C. SECTION 1350

         In connection with the accompanying Annual Report on Form 20-F of
Rediff.com India Limited for the fiscal year ended March 31, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Ajit Balakrishnan, the principal executive officer of Rediff.com India
Limited, hereby certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to
ss.906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

         (1)      the Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      the information contained in the Report fairly represents,
                  in all material respects, the financial condition and
                  results of operations of Rediff.com India Limited.



Date: September 29, 2004                          /s/ Ajit Balakrishnan
                                                  ---------------------
                                                Ajit Balakrishnan
                                                Chairman and Managing Director


         A signed original of this written statement required by ss. 906 has
been provided to the Company and will be retained by the Company and furnished
to the Securities and Exchange Commission or its staff upon request.



<PAGE>




                 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
                      PURSUANT TO 18 U.S.C. SECTION 1350

         In connection with the accompanying Annual Report on Form 20-F of
Rediff.com India Limited for the fiscal year ended March 31, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Joy Basu, Chief Financial Officer of Rediff.com India Limited, hereby
certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, that:

         (1)      the Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      the information contained in the Report fairly represents,
                  in all material respects, the financial condition and
                  results of operations of Rediff.com India Limited.



Date     September 29, 2004                            /s/ Joy Basu
                                                       ------------
                                                       Joy Basu
                                                       Chief Financial Officer


         A signed original of this written statement required by ss. 906 has
been provided to the Company and will be retained by the Company and furnished
to the Securities and Exchange Commission or its staff upon request.