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, 2005

   [ ]  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: 12,880,050 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>


         This annual report on Form 20-F shall be deemed to be incorporated by
reference in the prospectus included in the Registration Statement on Form F-3
(File No. 333-122536) filed with the Securities and Exchange Commission and to
be a part thereof from the date on which this report is filed, to the extent
not superseded by documents or reports subsequently filed or furnished.


<PAGE>

<TABLE>
<CAPTION>

                                       TABLE OF CONTENTS

                                                                                                Page
                                                                                                ----

<S>                                                                                               <C>

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..........................................................................................24

   Overview.......................................................................................24
   Our Markets....................................................................................25
   Our Opportunity................................................................................25
   Our Strategy...................................................................................26
   Our Product and Service Offerings..............................................................27
   Infrastructure.................................................................................35
   Competition....................................................................................35
   Intellectual Property..........................................................................36
   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........................................................................................55

RELATED PARTY TRANSACTIONS........................................................................64

EXCHANGE CONTROLS.................................................................................65

TRADING MARKET....................................................................................68

RESTRICTION ON FOREIGN OWNERSHIP OF INDIAN SECURITIES.............................................69

PRINCIPAL SHAREHOLDERS............................................................................72

TAXATION..........................................................................................74

USE OF PROCEEDS...................................................................................81

CONTROLS AND PROCEDURES...........................................................................82

PRESENTATION OF FINANCIAL INFORMATION.............................................................84

ADDITIONAL INFORMATION............................................................................85

EXHIBIT INDEX ...................................................................................E-1

INDEX TO FINANCIAL STATEMENTS ...................................................................F-1
</TABLE>

<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 years ended March 31, 2004
         and 2005 and the related three-year period ended March 31, 2005 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--Acquisitions and Divestments--Value
         Communications Corporation", "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 years ended March 31, 2004
         and 2005 and the related three year period ended March 31, 2005 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 accounting
principles generally accepted in the United States of America ("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, 2005, for cable transfers in Indian Rupees as certified for customs
purposes by the Federal Reserve Bank of New York, which was Rs. 43.62 per
US$1.00.

<PAGE>


                          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 currency 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>
2001                                 Rs.46.85            Rs.45.88            Rs.47.47            Rs.43.63
2002                                    48.83               47.81               48.91               46.58
2003                                    47.53               48.36               49.07               47.53
2004                                    43.40               45.78               47.46               43.40
2005                                    43.62               44.87               46.45               43.27

</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
                                               ------------        ----------
December 2004                                     44.52               43.27
January 2005                                      43.82               43.35
February 2005                                     43.73               43.28
March 2005                                        43.70               43.44
April 2005                                        43.72               43.48
May 2005                                          43.62               43.21
June 2005 (up to June 27, 2005)                   43.71               43.44

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

(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 June 27, 2005, the noon buying rate in the city of New York was
Rs. 43.44.

<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, 2004 and 2005 and the selected statement of
operations data for the fiscal years ended March 31, 2003, 2004 and 2005 has
been derived from our audited financial statements presented elsewhere in this
annual report and which have been audited by Deloitte Haskins & Sells, an
independent registered public accounting firm. The selected balance sheet data
set forth below as of March 31, 2001, 2002 and 2003 and the selected statement
of operations data for the fiscal years ended March 31, 2001 and 2002 are
derived from U.S. GAAP financial statements which are not included in this
annual report.*

<TABLE>
<CAPTION>

                                                                 Fiscal Years Ended March 31,
                                           ---------------------------------------------------------------------------
                                              2001             2002            2003            2004            2005
                                           ---------        ----------      ----------      ----------     -----------
                                                          (in US$ thousands, except per share data)

<S>                                           <C>             <C>             <C>             <C>            <C>
   Statement of Operations data:
   Revenues......................             US$5,233        US$7,859        US$8,572        US$9,446       US$12,627
   Cost of goods sold............                  147              --              --              --              --
   Cost of revenues..............                2,155           5,098           5,560           4,738           5,113
   Gross profit..................                2,931           2,761           3,012           4,708           7,514
   Operating expenses............               14,837          20,938          14,903           7,927           9,227
   Loss from continuing
      operations.................               (6,360)        (16,101)        (12,177)         (3,349)         (1,220)
   Profit/(Loss) from
      discontinuing operations...                   (5)          1,336          (6,804)         (2,371)           (208)
   Net loss......................            US$(6,365)     US$(14,765)     US$(18,981)      US$(5,720)      US$(1,428)
   Loss per Equity Share
      (from continuing
      operations) - basic and
      diluted....................             US$(0.51)       US$(1.25)       US$(0.95)       US$(0.26)       US$(0.10)
      (from discontinued
      operations) - basic and
      diluted....................             US$(0.01)        US$0.10        US$(0.53)       US$(0.19)       US$(0.01)
   Loss per Equity Share - basic
      and diluted................             US$(0.52)       US$(1.15)       US$(1.48)       US$(0.45)       US$(0.11)
   Weighted average number of
      Equity Shares - basic and
      diluted....................               12,253          12,795          12,795          12,800          12,850


                                                                      As of March 31,
                                            ----------------------------------------------------------------------------
                                               2001            2002            2003            2004            2005
                                            ----------       ---------      ----------       --------         ----------
                                                                      (in US$ thousands)
   Balance Sheet Data:
   Cash and cash equivalents.....            US$47,654       US$26,520       US$14,384       US$11,639       US$10,069
   Current assets................               50,755          30,538          18,015          15,293          15,323
   Current liabilities...........                7,248           8,126           4,777           3,825           5,878
   Total assets..................               67,497          52,250          30,332          24,868          25,690
   Total shareholders' equity....               60,249          44,004          25,541          21,027          19,797

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

*    The selected financial data set forth above 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.

         Khanna Action

         On April 16, 2001, four of our officers and directors, including Ajit
Balakrishnan, our 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 Securities Act, the
U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
Rule 10b-5 under the Exchange Act. The plaintiff class in this lawsuit has
been defined as all persons who purchased ADSs from the time of the IPO
through April 14, 2001 and seeks unspecified damages. Subsequent to the filing
of the Khanna Action, several other actions have been filed against 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.

         Shives Action

         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. On October 15, 2004
the District Court judge granted in part and denied in part the motions to
dismiss and set a pre-trial discovery schedule. At a status conference held on
January 26, 2005, the District Court judge set a deadline for pre-trial fact
discovery and referred the parties to a magistrate judge for settlement
discussions. 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, 2005, the face amount of the D&O Policy is approximately
US$20.5 million. The proceeds of the D&O Policy available to satisfy any
judgment against us, or any judgment against persons whom we are obligated to
indemnify, will be reduced by the amount of the legal fees and associated
expenses incurred in the course of our defense and the defense of the
individual defendants and the underwriters which are paid from the D&O Policy.
The D&O Policy includes a deductible of approximately US$ 257,694 (based on
the noon buying rate at March 31, 2005), 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.

         RCC Complaint

         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 "RCC 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 RCC 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. In the event that we are unsuccessful in our defense, we and
our directors may face both criminal penalties and monetary fines.

         IMI Compliant

         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
Indian 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 filed an application for
discharge of the complaint before the Magistrate. However, a recent judgment
of the Supreme Court of India has held that applications for discharge cannot
be heard by the Magistrate who will be conducting the trial in relation to a
pending complaint. As such, the application for discharge of the complaint
before the Magistrate now needs to be withdrawn and a fresh application for
quashing the complaint will have to be filed in the High Court. Such
application is under preparation and will be filed shortly. 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 directors.

         Other matters

         From time to time, we hire employees from our competitors and our
competitors also hire our employees. In some circumstances, employees who we
hire are subject to employment terms that restrict them from working for
competitors of their former employer for a period of time. In one such recent
case, we hired a manager from a competitor who was subject to such a
restriction. The manager's former employer has given public notice in several
newspapers that any person dealing with the senior manager does so at their
own risk and cost. Such former employer is also seeking a permanent injunction
against our manager and us to prevent the disclosure of confidential
information, trade secrets and copyrighted information and to restrain our
senior manager from breaching the terms of his former employment contract. The
former employer has also claimed damages in the sum of Rs. 10.0 million
(approximately US$ 230,000). While Indian courts have often determined not to
enforce restrictions such as those sought against our senior manager on the
grounds that employees cannot be prevented from earning a living, there can be
no assurance that the court will refrain from issuing an injunction or holding
us liable for damages due to this or other hires that we have made or may make
in the future from any competitor. Any such claim, whether or not having
merit, would involve us in incurring expense, including for legal fees, and
management time, and there can be no assurance that we would be successful in
defending any such claim. If we are unsuccessful in our defenses against such
claims and Times Internet Limited proves that it has suffered damages, we
could be required to terminate the employment of our manager and pay monetary
damages.

         We are also subject to other legal proceedings and claims, which have
arisen in the ordinary course of our 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 "Business- Legal Proceedings" in this annual report.

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

         We have incurred significant net losses and negative cash flows since
our inception in January 1996, including a net loss of approximately US$ 1.43
million for the fiscal year ended March 31, 2005. As of March 31, 2005, we had
an accumulated deficit of approximately US$ 55.82 million. We may 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 may 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 on
sustaining profitability.

         Our businesses compete in various sectors including with 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 part of larger
competitors in the future. If our competitors in our online business are more
successful than we are at generating visitors and website traffic due to
superior content and other service offerings or our competitors in our
publication business are more successful at growing their circulation and
advertising share, our revenues may decline.

         In addition to Internet companies, our online business faces
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 publication business in the United States and Canada faces
competition from not only Internet-based publications but also from other
publications targeted at Indian-Americans and from television channels
featuring Indian news and programming. In addition, competition for paying
subscribers for our India Abroad newspaper, which is subscription-based, is
intense due to the presence of other paid newspapers such as New India Times,
Indian Express and India West. Further, our publications also face competition
from free newspapers and from electronic media, such as television and online
publications and services.

         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 or the actions of our existing competitors may result in:

     o   loss of visitors and website traffic;
     o   loss of paid subscribers;
     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. For additional
information regarding our competition, please see "Business - Competition" in
this annual report 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 for 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 to retain existing users at
         reasonable costs;
     o   our ability to adequately maintain, upgrade and develop our website,
         our computer network and the systems that we use to process customer
         orders and payments;
     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 are volatile and can be 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 on us. In that
event, the market price of our ADSs may decline.

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

         Online Advertising

         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 continue to 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 (among others)
depend on:

     o   our ability to attract and retain 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   the effectiveness of our advertising delivery, tracking and reporting
         systems; and
     o   our ability to adapt, including technologically, 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 revenues 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 are
usually limited to a specific project and/or for a specific time period 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.

         Newspaper Advertising

         Our business strategy in the United States and Canada for our India
Abroad business depends primarily on growth in advertising in our
publications. Competition to provide news and information regarding India or
of interest to Indian-Americans in these markets is intense, with competitors
including publications with general circulation or that are offered for free
and electronic media, such as websites and television channels dedicated to
Indian news and programming. Our ability to secure advertising contracts and
maintain our advertising rates depends principally on the number of
subscribers we have on our circulation. If we are unable to compete with these
alternatives or experience a reduction in paid subscribers, we may experience
a reduction in advertising revenues. A slowdown in economic growth, in
particular a slowdown in the growth of companies that advertise products or
services targeted at Indian-Americans, may also reduce advertising revenues
for our publications. Further, as is the case with our contracts with online
advertisers, our contracts with advertising customers for our India Abroad
business usually 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. Any of these
factors could have a material adverse effect on our business and our future
financial performance.

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. For the fiscal year ended March 31, 2005 our top ten advertisers
in India accounted for approximately 31% of our India Online revenues. For the
same period, for our U.S. publishing business, our top ten advertisers
contributed approximately 24% of total U.S. publishing revenues. Any failure
to meet advertiser expectations could result in cancellation or non-renewal of
contracts, which typically can be terminated by advertisers with or without
cause, with little or no advance notice and without penalty. 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,
         tsunamis, 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 could have a material adverse impact on the 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 effective.

         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.

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 opportunities arise, acquire or
invest in developing 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 to our ongoing business and distraction of
         management during the acquisition and integration process;
     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;
     o   failure to develop successfully new products or technologies;
     o   failure to popularize such products or technologies and/or derive
         expected revenues therefrom;
     o   unfavorable changes in business environment and government
         regulations; 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.

 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.
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 mobile 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 mobile
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. Certain of these mobile phone operators also
provide services to their customers (such as the downloading of ringtones),
which compete with the mobile services we offer. This may make them less eager
to cooperate with us. If any or all of these mobile service providers
encounter technical problems, or if they refuse to cooperate with us or reduce
fees payable to 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 part of our India Online revenue growth for the fiscal year ended
March 31, 2005 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. 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.

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 website or through content and materials that we
develop or that our users may post in message boards, chat rooms, blogs 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 on "Business - Legal Proceedings" in this annual report
for more information on this litigation. Further, in December 2004, a senior
executive of eBay's Indian affiliate, Baazee.com, was arrested and held in
custody in India in connection with the alleged sale of a pornographic video
CD on Baazee.com's online auction website. 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 could 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 all types of claims, and there is no precedent on such
liabilities under Indian law. Further, our business is based on establishing
the Rediff.com website 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 and
services 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. Further, the application of tax
law as it relates to online transactions for goods and services is likewise
uncertain. Our business, financial condition and operating results may be
materially affected if we were required to obtain such registrations or comply
with various additional laws and regulations or pay additional taxes.

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.

Indian and/or overseas regulators and other telecommunications operators may
challenge our ability to offer a Voice Over Internet Protocol, or VOIP,
service as one of the features of our Rediff BOL instant messenger service.

         In January 2005, we launched a new version of our Rediff BOL instant
messenger service. Among the new features we introduced was a PC-to-PC voice
chat facility that allows Rediff BOL users to chat, using VOIP technology,
with each other. Calls made are routed through the Internet. While Rediff BOL
users may not use the voice chat facility to communicate through a switched
telephone network, it is possible that Indian and/ or overseas
telecommunications regulators, operators or trade associations may in the
future seek to impose restrictions on our ability to offer this voice chat
facility. If any such restrictions are imposed, we may be required to
discontinue this feature of Rediff BOL. Further, we may be required to devote
time and management attention, and incur expenses, addressing any such
restrictions or responding to claims from third parties regarding Rediff BOL.

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 or that such
relationships will be maintained or developed.

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

         The exchange rate between the Rupee and the U.S. dollar has changed
substantially in the last two decades and could fluctuate substantially in the
future. On an annual average basis, the Rupee declined against the U.S. dollar
from 1980 to 2002. In May 2002, however, the Rupee began appreciating relative
to the U.S. dollar, such that as per the cable transfer buying Rupee/U.S.
dollar exchange rate quoted by the Federal Reserve Bank of New York, the Rupee
gained approximately 11.4% of its value relative to the U.S. dollar from a
rate of Rs.49.08 = U.S.$1.00 in May 2002 to a rate of Rs. 43.62 = U.S.$1.00 as
of March 31, 2005. As of June 27, 2005, the cable transfer buying Rupee/U.S.
dollar exchange rate quoted by the Federal Reserve Bank of New York was Rs.
43.44 = U.S.$1.00, a 0.4% appreciation against the rate as of March 31, 2005
stated above.

         Because a substantial portion of our cash and cash equivalents is
currently held in Indian Rupees, devaluation or 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 and performance 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 a significant portion of
our expenses, including personnel costs, will continue to be denominated in
Indian Rupees. As such, any appreciation of the Rupee against the U.S. dollar
will reduce the cost advantage derived from our Rupee-denominated expenses and
is likely to adversely affect our financial condition and results of
operations.

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. 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, 2005, our six largest shareholders and their
affiliates beneficially owned an aggregate of approximately 77% 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.

         Further, Ajit Balakrishnan, Diwan Arun Nanda and Rediffusion Holdings
Private Limited (formerly Rediffusion Advertising Private Limited), are
entitled to appoint and have appointed Mr. Balakrishnan as a Director on Board
and as our Chairman so long as they hold not less than 10.0% of our issued,
subscribed and paid-up capital. Mr. Balakrishnan currently serves an
indefinite term and is not required to retire by rotation.

         The interests of our controlling shareholders 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 "Principal Shareholders" in this annual report.

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 business.
If we become liable to third parties for infringing their intellectual
property rights, we could be required to pay substantial damages awards 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 "Business - Intellectual Property" in this annual report.

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, consequently, the Internet in India is far lower than in the United
States. According to the MAIT, personal computer sales for the nine months
ending December 31, 2004 were estimated at 2.5 million units. 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 mobile industry in India will be a
significant factor in determining whether we can grow our business. 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,
are 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.

         Further, 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.

         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. According to the report of the
Telecom Regulatory Authority of India, or TRAI, dated October 7, 2004, as of
December 31, 2003 India had 0.4 internet connections and 0.02 broadband
connections per 100 persons, while South Korea and the People's Republic of
China had 26 and 2.5 internet connections, and 25 and 1.4 broadband
connections per 100 persons, respectively, as of December 31, 2003. 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 platform 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;
     o   low number of Internet users in India; and
     o   low levels of credit card penetration in India.

         If usage of the Internet, credit cards 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
platform revenues.

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.

Terrorist attacks and other acts of violence or war involving India, the
United States, and other countries could adversely affect the financial
markets, result in a loss of business confidence and adversely affect our
business, results of operations and financial condition.

         Terrorist attacks, such as the ones that occurred in New York and
Washington, D.C., on September 11, 2001, New Delhi on December 13, 2001, the
bomb blasts in Mumbai on August 25, 2003, and the October 2004 bomb blasts in
Northeast India, as well as other acts of violence or war, including those
involving India, the United States or other countries, may adversely affect
Indian and worldwide financial markets. These acts may also result in a loss
of business confidence and have other consequences that could adversely affect
our business, results of operations and financial condition. Travel
restrictions as a result of such attacks may have an adverse impact on our
ability to operate effectively. Increased volatility in the financial markets
can have an adverse impact on the economies of India and other countries,
including economic recession.

If communal disturbances or riots erupt in India, or if regional hostilities
increase, this would adversely affect the Indian economy, the health of which
our business depends upon.

         Some parts of India have experienced communal disturbances, terrorist
attacks and riots during recent years. If such events recur, the market for
our services may be adversely affected, resulting in a decline in our income.

         The Asian region has from time to time experienced instances of civil
unrest and hostilities among neighboring countries, including those between
India and Pakistan. Since May 1999, military confrontations between India and
Pakistan have occurred in Kashmir. The hostilities between India and Pakistan
are particularly threatening because both India and Pakistan are nuclear
powers. Hostilities and tensions may occur in the future and on a wider scale.
Also, since 2003, there have been military hostilities and continuing civil
unrest and instability in Iraq and Afghanistan. Events of this nature in the
future, as well as social and civil unrest within other countries in Asia,
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.

         The Government has traditionally exercised and continues to exercise
significant influence over many aspects of the economy. Our business, and
the market price and liquidity of our ADSs, may be affected by interest rates,
changes in Government policy, taxation, social and civil unrest and other
political, economic or other developments in or affecting India.

         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 concluded general elections in India
resulted in the election of a multi-party coalition government that relies on
the support of political parties that have traditionally been opposed to 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 anticipated or 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.

Our ability to acquire companies organized outside of 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, under certain
circumstances, 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 subject to a cap of 100% of the Indian
party's net worth. If the acquisition is undertaken through the issuance by
the Indian company of stock in the form of listed ADRs in exchange for the
stock of the non-Indian company, the cap on the transaction's value is the
greater of 100% of the Indian company's net worth and 10 times the Indian
company's export earnings in the previous fiscal year.

         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 Reserve Bank of India and/or the
Government of India for acquisitions of companies organized outside India may
restrict our growth, which could negatively impact our revenues.

Statistical and third-party data in this document and documents incorporated
by reference herein may be incomplete or unreliable.

         We have not independently verified data from industry publications
and other third-party sources and therefore cannot assure you that they are
complete or reliable. Such data may also be produced on different bases from
those used in Western countries. Therefore, discussions of matters relating to
India, its economy or our industry are subject to the caveat that the
statistical and other data upon which such discussions are based may be
incomplete or unreliable.

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 only be deposited into
our depositary facility in exchange for ADSs and, under certain circumstances,
the number of ADSs that can be outstanding at any time is limited as follows:
after any offering of ADSs, Equity Shares can be deposited for issuance of
ADSs only to the extent that (a) holders have surrendered ADSs and withdrawn
Equity Shares from the ADS facility and (b) such holders sold such Equity
Shares through stockbrokers registered with the Securities and Exchange Board
of India ("SEBI") in a domestic Indian stock market. As our Equity Shares are
not listed on any Indian stock exchange, if you elect to surrender your ADSs
and receive Equity Shares, you would be unable to redeposit outstanding Equity
Shares with our Depositary and receive ADSs. Therefore, unless the law is
changed, the number of outstanding ADSs and the trading volumes for all ADSs
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.

Currently there is no public trading market for our Equity Shares in India or
elsewhere which, together with existing Indian laws that restrict the
conversion of outstanding equity shares into ADSs, reduce your ability to sell
our Equity Shares represented by ADSs.

         Currently there is no public trading market for our Equity Shares in
India or elsewhere, and we cannot 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 except in certain limited circumstances or with certain
regulatory approvals. 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 current Indian regulations and practice, approval of the
Reserve Bank of India is not required for the sale of equity shares underlying
ADSs by a non-resident of India to a resident of India or for a renunciation
in favor of a resident of India of rights to subscribe to equity shares
pursuant to a rights offering, unless the sale breaches the pricing guidelines
laid down for this purpose by the RBI, which specify that where the equity
shares of an Indian company are not listed on a stock exchange:

     o   if the consideration payable for the transfer does not exceed Rs. 2.0
         million, at a price mutually agreed to between the seller and the
         buyer, based on any recognized equity share valuation methodology, on
         submission of a certificate from the statutory auditors of the Indian
         company whose equity shares are proposed to be transferred, regarding
         the valuation of such equity shares; and

     o   if the consideration payable for the transfer exceeds Rs. 2.0
         million, at a price which is lower of the two independent valuations
         of the equity shares being transferred prepared by the statutory
         auditors of the company and by a Chartered Accountant or a Merchant
         Banker registered with Securities and Exchange Board of India.

Our management has broad discretion in using the proceeds from our securities
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 securities offerings. As of March 31, 2005,
approximately US$ 10.0 million of the net proceeds from our ADS offering
completed in June 2000 remained as cash and cash equivalents and short term
deposits with banks on which we are earning interest. We intend to use the
proceed from sales of our securities primarily to develop additional platforms
for the growth of our online business, product development, and general
corporate purposes, including capital expenditures and strategic investments,
partnerships and acquisitions. However, there is a possibility that we may be
unable to make successful strategic investments, partnerships or acquisitions
in the near future. Further, there could be a risk that our management may use
the net proceeds from our equity offerings in an inefficient or ineffective
manner.

Our ADS market price is 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. See "Risk
Factors - 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". 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, if there
is a trading market for such new securities which may not be the case, 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.

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 in part 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 Income
Tax--Passive Foreign Investment Company Rules".

Sales of substantial amounts of securities in the public market could depress
the price of our ADSs and could impair our ability to raise capital through
the sale of additional Equity Shares.

         The market price of our ADSs could decline as a result of sales of a
large number of Equity Shares represented by ADSs 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 Shares in the future at a
time and at a price that we deem appropriate. As of March 31, 2005, we had an
aggregate of 12,880,050 Equity Shares outstanding. Of the outstanding Equity
Shares, 5,459,700 ADSs, representing 2,729,850 Equity Shares, are freely
tradable. Our remaining Equity Shares may be sold in the United States
pursuant to a registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act. We have filed a
registration statement on Form F-3 for the sale of Equity Shares in the form
of ADSs up to an aggregate maximum offering price of US$40,000,000. Further,
certain holders of at least 30% of our Equity Shares can require us, subject
to limitations, to effect a registration of such Equity Shares and/or to list
the Equity Shares either with the NASDAQ National Market, the National Stock
Exchange of India or The Stock Exchange, Mumbai.

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 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.

<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 website, 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 website 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 as of March 31, 2004 and as of March 31, 2005
relates to our India Abroad business and amounts to US$7.3 million.

         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 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 our 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:

     o   Personal computer sales for the nine months ending December 31, 2004
         were estimated at 2.5 million units, according to the Indian
         Manufacturers Association of Internet Technology ("MAIT"); and

     o   The number of Indian mobile phone subscribers reached approximately
         55.4 million as of May 31, 2005, according to the TRAI.

         The growth of our U.S. businesses is dependent on our ability to
launch new services that appeal to the approximately 2 million Asian Indians
living in the United States as well as increase in advertising revenues from
our weekly newspapers, India Abroad and India in New York, and from our Rediff
US Website.

Our Opportunity

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

     o   We believe that we were an early mover in the Indian market; our
         brand is recognized and valued by Indian Internet users;

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

     o   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 is expected to fuel the growth of e-commerce in India;

     o   As of December 31, 2003, the percentage of online advertising
         expenditure to total advertising expenditure is less than 1% in
         India, compared to 3% to 5% in countries such as the People's
         Republic of China and South Korea, according to the TRAI. 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 as Internet advertising grows in
         popularity in India, we are well positioned, as one of India's
         leading websites, to benefit from this growth; and

     o   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 website with a large number 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 website solutions to Indians living in India and other
parts of the world. We intend to continue to focus on providing the following
services:

     o   News and information services, including breaking news as well as
         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.

     o   Communication services, including e-mail, chat and instant messaging.
         E-mail services are provided in a variety of Indian languages.

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

     o   Consumer and business services, including webhosting, domain name
         registration, matchmaking and astrology. Some of our consumer
         services are offered on a subscription basis.

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

     o   Online shopping services, including a platform for merchants in India
         to create online shops, package tracking facilities, and a facility
         for consumers to rate merchants. Our online shopping service also
         allows Indians living in India and worldwide to send gift products to
         their friends and relatives living in India. We offer a wide range of
         payment options to our consumers.

     o   Online advertising services on our Rediff.com website, revenues from
         which currently account for a significant portion of our India Online
         business. These include banners, email and text link campaigns and
         sponsorship of editorial events. Our target client base for
         advertising and sponsorships include global companies doing business
         in India as well as domestic corporations.

     o   Our recently launched "Pay4Clicks" platform, which is an automated
         platform targeted at small- to medium-scale Indian businesses that
         have little or no online presence or have limited advertising
         budgets. "Pay4Clicks" allows merchants to advertise on the Rediff.com
         website, with a fee being charged to the merchant each time a user
         clicks on its advertisement. This model has shown vibrant growth in
         some parts of the world.

     o   In the United States, publication of "India Abroad" and "India in New
         York", as well as providing online services to the Asian Indian
         community.

         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. As a result, according to the TRAI, the Indian
subscriber base grew by 25% during fiscal 2005 to approximately 5.65 million
as of March 31, 2005, compared to approximately 4.55 million as of March 31,
2004. According to statistics compiled by the TRAI, the number of mobile phone
subscribers in India was approximately 52.2 million as of March 31, 2005,
compared to approximately 33.6 million as of March 31, 2004, and had grown to
55.4 million as of May 31, 2005.

         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 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 36 million online registered users
worldwide as at March 31, 2005, 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, 2005, the India Online business
segment generated US$ 6.6 million of revenues, accounting for 51.9% 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.

         We believe that a significant percentage of our online users are
between 18 and 34 years old. As such, 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. 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.

     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.

         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, 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. During
fiscal 2005, we completed development of our content crawling, aggregation and
publishing platform, allowing us to aggregate and publish, at a relatively low
cost, a variety of channels without actually incurring the expense of creating
content. These channels can be viewed in the "Rediff Radar" section of our
website.

         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.

         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 original equipment manufacturer ("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, social networking 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 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 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 Spam shield and 1GB of free storage space. We
         operate one of the largest free e-mail systems in India. As of March
         31, 2005, we had approximately 36 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. 1,695
         (or approximately US $ 38). Rediffmail Enterprise Pro is a web based
         e-mail service for corporates having a large field force of
         agents/sales associates/dealers.

     o   We recently launched "Rediff Business Solution", which is aimed at
         the small and medium enterprise ("SME") segment in India. Through
         this product, we offer SMEs a range of web management services such
         as domain name registration, web hosting and business email. Features
         offered include 100 MB web hosting storage space, a choice of Windows
         or Linux platforms, 1 GB of webmail storage space and the ability to
         register domain names for up to 10 years.

                  Instant Messenger

         Rediff Bol instant messenger is a free service that enables instant
communication across the Internet with other Rediff Bol users. During the
third quarter of fiscal 2005, we re-launched Rediff Bol and included a voice
chat facility based on peer-to-peer technology that allows Rediff Bol users to
chat with other online users anywhere in the world. Users can also use Rediff
Bol to send text messages via Short Messaging Service ("SMS") to any Indian
mobile phone and can also create an online persona using Rediff Bol's
"Avatars" feature. The voice chat facility is currently undergoing beta
testing.

         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.

                  Connexions

         Connexions is our free online social networking product. Users become
part of a network by creating and uploading profiles that include details
about their profession, education and interests. Thereafter, users can invite
friends to join their network and can become linked to a larger network. One
of Connexions' applications is as a platform to search for people who provide
specific services or products either from within a user's network or from
other users across the service.

                  Search Services

         We are currently in the process of launching local search services,
such as an airfare search service which will be designed as a tool to help
users compare domestic air fares. Users will enter the destination and date of
travel desired and the search application will provide fares from different
airlines.

                  Mobile Services

         Rediff Mobile offers mobile phone users a number of value added
services. Users order our value added services from their mobile phones by
sending a request via 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.1 and Rs.20 each (including the cost of the
         outgoing SMS which requests the download), and our games are
         currently priced between Rs.49 and Rs.99 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. During fiscal 2005, we entered into an exclusive partnership with BSNL,
the leading government-owned mobile operator in India on the Sim Tool Kit
("STK") menu for BSNL subscribers across the southern and eastern markets of
India. The partnership allows BSNL subscribers in these markets to access all
our paid premium and regular services directly from their cell phones. Fiscal
2005 also saw us entering into agreements with Reliance and Tata Indicom - the
two leading CDMA operators in the country - allowing subscribers across these
networks to access the value added services on our 7333 platform. This is in
addition to our earlier partnerships with the leading GSM operators in the
country. Our value-added mobile services are also integrated across four
leading GPRS networks in India that allow subscribers across these networks to
browse the Rediff.com website on their mobile phones and download paid
services. With these partnerships, we believe that we have established an
extensive footprint in the country for value-added mobile services.

         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 various categories, the most popular of which currently include
apparel, personal accessories, electronics, flowers and jewelry.

         During fiscal 2005, we introduced a vendor rating system to enable
online shoppers on our e-commerce platform to rate their shopping experience
with different online vendors. Customers are invited to provide feedback when
items are delivered, rating their experience with the vendor as satisfactory,
unsatisfactory or undecided. Vendors are rated based on the amount and type of
feedback provided, after applying internal logic calculations.

         Auctions
         --------

         We recently launched Rediff Auctions, a new platform that allows
customers to use an online multi-price marketplace and bid for items
listed for sale by vendors. We provide vendors with the software tools that
they can use to upload and manage their online inventory. Vendor inventories
are posted on the auction site and bids are accepted for a specific period of
time, after which the customer with the highest bid wins the auction.

         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 225 advertisers on our Rediff.com India website during
the fiscal year ended March 31, 2005. Our top five advertisers accounted for
approximately 34% of our India advertising revenues for the fiscal year ended
March 31, 2005. A partial list of our advertising clients includes Citibank,
Coca-Cola, Samsung, Colgate, Google, Hewlett Packard, Hero Honda Motors, the
ICICI Group, Johnson & Johnson, Levers, Makemytrip, LG Electronics, Monster
India and Pepsi.

         During fiscal 2005, we launched a new platform, "Pay4Clicks", which
is an automated platform that allows merchants to advertise on the Rediff.com
website, with a fee being charged to the merchant each time a user clicks on
its advertisement. Users who click on an advertisement are directed to the
merchant's website or e-mail address or to the merchant's mobile phone via
SMS. Our Pay4Clicks platform is aimed at attracting Indian SMEs that have
little or no online presence or have limited advertising budgets, thereby
allowing them to reach a wider market for their products or services. We have
also added a re-seller module to allow partners to sell advertisements on the
rediff.com website. We are also in the early stages of developing a
classifieds section to allow the display of such ads in accordance with
defined categories. The initial response from consumers to this service has
been encouraging.

                  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.

         During fiscal 2005, we expanded our fee-based services to include
offering domain name registrations and website hosting services. This is aimed
at attracting small- to medium-scale Indian businesses to register their
domain names through us and to allow us to host their websites using our
Windows and Linux platforms.

         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, 2005, our sales team consisted of 78
sales and marketing professionals.

         Many of the leading advertising agencies have expanded their
operations with the establishment of interactive divisions. These divisions
promote the Internet as an advertising medium among leading marketers in
India. 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 through e-mail and solicit feedback from users to continuously
improve our offerings. Customers are invited to provide feedback when items
are delivered using the vendor rating system that we launched during fiscal
2005, rating their experience with a vendor as satisfactory, unsatisfactory or
undecided. Vendors are rated based on the amount and type of feedback
provided, after applying internal logic calculations.

         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 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 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 Global Systems for
Mobile Communications ("GSM")-based and CDMA-based cellular providers,
covering almost the entire mobile footprint in India. Pursuant to the terms of
our agreements with Indian mobile phone operators, we receive a portion of the
amounts charged by these operators to their mobile phone users for using our
SMS- based offerings.

         Our offerings include ringtones, polyphonic ringtones, logos, picture
messages, wallpapers and games from third-party providers that are made
available on our website. Pursuant to the terms of our agreements with these
third-party providers, we pay these providers an agreed amount per downloaded
offering 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, 2005, the United States publishing
business generated US$ 6.1 million of revenues, accounting for 48.1% of our
total revenues.

         India Abroad
         ------------

         India Abroad, which we acquired in April 2001, was established over
35 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 Canada.

         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. 1,500 in India
(equivalent to approximately US$ 32). 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, such as:

          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, websites, horizontal
sites and Internet service providers. Our current and anticipated competitors
include:

          o    IndiaTimes.com (Times Internet 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
expired on April 25, 2005 and we are in the process of entering in to an
agreement for renewal of the facility. The lease for the 3,000 square feet
facility expires on November 1, 2006. 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 on the
second floor of the same building, the lease for which expired on November 30,
2004 and the premises surrendered in November 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, four of our officers and directors, including Ajit Balakrishnan, our
Chairman and Managing Director, a group of investment banks that acted as
underwriters in our June 2000 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 Securities Act, the Exchange Act and Rule 10b-5 under the Exchange Act.
The plaintiff class in this lawsuit has been defined as all persons who
purchased ADSs from the time of the IPO through April 14, 2001 and seeks
unspecified damages.

          -    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.

         Shives et al. v. Bank of America Securities, LLC et al., United
States District Court of the Southern District of New York, Case No. 01 CV
3814. 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 (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. On October 15, 2004
the District Court judge granted in part and denied in part the motions to
dismiss and set a pre-trial discovery schedule. At a status conference held on
January 26, 2005, the District Court judge set a deadline for pre-trial fact
discovery and referred the parties to a magistrate judge for settlement
discussions. 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, 2005, the face amount of the D&O Policy is approximately US$
20.5 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$ 257,694 (based on
the noon buying rate at March 31, 2005), 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.

         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 initially filed an application for discharge of the
complaint before the Magistrate. However, a judgment of the Supreme Court of
India held that applications for discharge cannot be heard by the Magistrate
who will be conducting the trial in relation to a pending complaint. As such,
the application for discharge of the complaint before the Magistrate will be
withdrawn and a fresh application for quashing the complaint will have to be
filed in the High Court. Such application is being prepared and will be filed
shortly. 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.

         Action for Injunction and Damages
         ---------------------------------

         Proceedings have been commenced by Times Internet Limited against one
of our senior managers and us seeking a permanent injunction restraining the
said manager, a former employee of Times Internet Limited and currently one of
our senior managers, from disclosing confidential information, trade secrets,
copyrighted information and to restrain him from acting in breach of his
employment contract with Times Internet Limited dated February 12, 2000. Times
Internet Limited claims that the manager's employment with us is in breach of
his employment contract. Times Internet Limited also claims damages in the sum
of Rs. 10 million (approximately US$230,000). Since the commencement of these
proceedings, Times Internet Limited has not made any application for interim
relief and no orders have been issued by the Court that adversely affect
either our manager or us. Although we believe that we have valid defenses
against the claims of Times Internet Limited, if we are unsuccessful in our
defenses against such claims and Times Internet Limited proves that it has
suffered damages, we could be required to terminate the employment of our
manager and pay monetary damages.

         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.

         Rediff.com, Inc., which runs our U.S.-based Internet website, 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.

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 consolidated 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 mobile
phone subscribers. With 36 million online registered users worldwide as at
March 31, 2005, we believe Rediff.com is one of the most recognized
online brands both 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 website 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 website providing content, community and
e-commerce for our users in the United States.

         During the fiscal years ended March 31, 2004 and March 31, 2005, our
reportable business segments were India Online business and U.S. Publishing
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 in 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, 2005 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, 2004, India Online business
               and U.S. Publishing business.

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

         Revenues from our reportable business segments were as follows:

<TABLE>
<CAPTION>

                                                   For the Fiscal Years Ended March 31,
                                           -----------------------------------------------------
                                              2003(1)              2004               2005
                                           ---------------      ------------     ---------------
<S>                                           <C>                 <C>                <C>
 India Online business..............        US$2,767,244        US$3,636,183       US$6,556,320
 U.S. Publishing business...........           5,804,598           5,810,420          6,070,344
      Total revenues................        US$8,571,842        US$9,446,603      US$12,626,664

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

(1)  Revenues for the year ended March 31, 2003 have been reclassified to conform to the current
     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 since
our inception in January 1996, including a net loss of approximately US$ 1.43
million for the fiscal year ended March 31, 2005. As of March 31, 2005, we had
an accumulated deficit of approximately US$ 55.82 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 websites, 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 consolidated 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 website. 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
2003, 2004 and 2005, 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 and shipping costs recovered from
customers. Revenues from e-commerce services also include fees charged to
vendors for creating, designing and hosting the vendors' product information
on 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. website 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 website. 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 intangible assets and goodwill resulting from business
combinations.

         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, or Valucom, 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 Valucom's 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 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
paid Rediff US$50,000 for twelve consecutive months commencing in May 2004 for
the advertising services. 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., or India Abroad, 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$2.0 million in an escrow account. As
of March 31, 2005, US$ 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

         Our goodwill amounts arise from the acquisitions of Thinkindia, India
Abroad and Valucom. Each of these businesses represents a reporting unit. Our
business in India has been treated as a single reporting unit, and since none
of the components in India benefited from the synergies from acquisitions in
the United States, no goodwill was allocated to this reporting unit. The
realignment of our business segments did not effect the determination of our
reporting units or the allocation of goodwill.

         We have tested each reporting unit for impairment of goodwill
annually, or earlier upon the occurrence of a triggering event. Impairment
charges recorded are as follows:

                                             Fiscal year ended March 31,
                                                   (in US$ millions)
                                       ---------------------------------------
                                         2003          2004            2005
                                       ---------    ---------        ---------
India Abroad                           US$3.2         US$--           US$--
Valucom                                   5.1          1.66              --
Rediff.com, Inc. (Thinkindia)              --            --              --
Total                                  US$8.3       US$1.66           US$--


India Abroad

         In the fourth quarter of fiscal years 2003, 2004 and 2005, we
performed the annual impairment test for goodwill of India Abroad. Our
management determined the fair value of the business using the discounted cash
flow method in all years.

         In the fiscal year ended March 31, 2003 management determined the
fair value of the business was lower than its carrying value. The comparison
of the carrying amount of goodwill to its implied fair value resulted in an
impairment charge of US$ 3,200,700. In the fiscal years ended March 31, 2004
and March 31, 2005, the fair value of the reporting unit exceeded its carrying
value indicating that goodwill was not further impaired.

Valucom

         Value Communications Corporation's, or Valucom's, annual impairment
testing date was January 1. In the fiscal year ended March 31, 2003 the
management identified the following triggering events that required testing of
goodwill for impairment at a date earlier than the annual date:

         a.    A settlement was reached with Valucom's former founder
               shareholders.

         b.    Deregulation of the Indian long distance telecom market,
               privatization of telecom providers in India and the
               commencement of Voice over Internet Protocol had caused
               irreversible and significant reductions in the pricing of long
               distance calls between India and the United States.

         c.    The number of Indian software professionals in the U.S. (a core
               customer group) had fallen significantly as a result of the
               events of September 11, 2001 and the subsequent downturn in the
               technology market.

         Accordingly, we re-evaluated goodwill that arose on Valucom's
acquisition and 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. Our management used the discounted cash flow method to
determine such values.

         On April 8, 2004 we sold the phone card business for a consideration
of US$ 500,000. During the fiscal year ended March 31, 2004, we recorded a
further impairment charge of US$ 1,661,222 for the Valucom goodwill (included
in the loss from discontinued operations), based on the sale value of the
phone card business.

Rediff.com, Inc. (formerly Thinkindia)

         During fiscal 2002 due to the unfavourable market environment,
including general conditions affecting the technology industry together with
the downturn in the valuation of dot.com companies, we re-evaluated the
goodwill that arose on Rediff.com, Inc's acquisition for impairment. Since the
projected cash flows of the Thinkindia business were negative, we closed down
Thinkindia's facilities in California, terminated substantially all staff,
relocated the remaining operation to New York, and wrote off the unamortized
goodwill balance of US$ 3,316,508.

Current Trading and Business Outlook

         We believe that the India Online market will be entering a phase of
accelerated growth as revealed by indicators such as the rapid increase in the
number of mobile subscribers, higher PC sales and the increased penetration of
broadband connections as recognized and encouraged by the TRAI. During the
fiscal year ended March 31, 2005, 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, 2005. 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, 2006 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 for the fiscal years ended March 31, 2004 and March 31, 2005.

         The comparative analysis presented below relates to our continuing
operations.

Fiscal year Ended March 31, 2005 compared to Fiscal Year Ended March 31, 2004

         Revenues. Total revenues for the fiscal year ended March 31, 2005
increased by 33.7% to US$ 12.6 million from US$ 9.5 million for the fiscal
year ended March 31, 2004. This increase was principally attributable to an
increase in revenues from our India Online business and to a lesser degree,
the increase in revenues from our US Publishing business.

         India Online business. We recognized US$ 6.6 million in revenues from
our India Online business for the fiscal year ended March 31, 2005 as compared
to US$ 3.6 million for the fiscal year ended March 31, 2004, representing an
increase of US$ 2.9 million, or 80.3%, over the previous fiscal year. The
increase in revenue was mainly due to increases in:

     o    advertising revenues by US$ 2.0 million, primarily as a result of an
          increase in Internet advertising in India; and

     o    fee-based services by US$ 1.0 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$ 6.1 million in revenues
for the U.S. Publishing business for the fiscal year ended March 31, 2005, as
compared to US$ 5.8 million for the fiscal year ended March 31, 2004,
representing an increase of US$ 0.3 million, or 4.5%, over the previous fiscal
year. The increase in revenues was primarily due to increase in advertising
revenues from our Rediff.com USA website.

         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, 2005, cost of revenues was US$
5.1 million, or 40.5% of total revenues, compared to US$ 4.7 million, or 50.2%
of total revenues during the previous fiscal year. This represents an increase
of US$ 0.4 million, or 7.9%, over the previous fiscal year due to an increase
in the cost of revenues for our India Online business by US$0.5 million, which
was partially offset by a decrease in the cost of revenues for our US
Publishing business by US$88,000.

         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,
2006 as compared to the fiscal year ended March 31, 2005, 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, 2005, sales and marketing expenses were US$ 2.3 million, compared to
US$ 1.0 million for the fiscal year ended March 31, 2004, representing an
increase of US$ 1.3 million, or 140%, over the previous fiscal year. The
increase was attributable to an increase in advertising and publicity costs as
we continued to invest in promoting our brand and services, as well as an
increase in Indian payroll costs as higher advertising revenues led to higher
commissions paid to our sales employees. In addition, during fiscal 2004, we
wrote back allowances no longer required totaling US $0.7 million, which
reduced total sales and marketing expenses by a corresponding amount during
fiscal 2004.

         We expect our sales and marketing expenses in absolute dollar terms
will increase for the fiscal year ended March 31, 2006, as compared to the
fiscal year ended March 31, 2005, 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, 2005, product development expenses were US$
1.8 million compared to US$ 1.6 million for the fiscal year ended March 31,
2004, representing an increase of US$ 0.2 million, or 14.7%. The increase was
primarily due to an increase in bandwidth charges by US$ 0.2 million.

         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, 2005, general and administrative expenses were US$ 5.1 million compared to
US$ 5.4 million for the fiscal year ended March 31, 2004, representing a
decrease of US$ 0.3 million, or 4.9%. This decrease was primarily due to a
decrease of US$ 0.6 million in depreciation expense, primarily as a result of
certain assets being fully depreciated. 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, 2005, other income (net) was US$ 0.5 million compared to a
loss (net) of US$ 0.1 million for the fiscal year ended March 31, 2004,
representing an increase of US$ 0.6 million. Interest income for the fiscal
year ended March 31, 2005 was US$ 0.5 million, compared to US$0.3 million for
the fiscal year ended March 31, 2004, representing an increase of US$ 0.2
million, or 56.4%. The increase in interest income was due to higher
applicable interest rates for our Rupee-denominated deposits during the fiscal
year ended March 31, 2005 as compared to the fiscal year ended March 31, 2004.
Foreign exchange gain for the fiscal year ended March 31, 2005 was US$5,000 as
compared to a loss of US$ 0.5 million for the previous fiscal year.

         Net loss. As a result of the foregoing, our net loss was US$ 1.4
million for the fiscal year ended March 31, 2005, compared to a net loss of
US$ 5.7 million for the fiscal year ended March 31, 2004. Of the net loss for
the fiscal year ended March 31, 2005, US$ 1.2 million was attributable to
losses from continuing operations, while US$ 0.2 million was from our
discontinued 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 in 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; and

          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.

         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.

         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.

         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.

         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.

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, acquisitions and capital expenditures. These have been funded
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, 2003, 2004 and 2005, we incurred
net losses of US$ 19.0 million, US$ 5.7 million and US$ 1.4 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, 2005, our accounts receivable balance was US$ 3.1
million compared to US$ 1.9 million as of March 31, 2004, net of allowances of
US$ 1.4 million and US$ 1.2 million as of March 31, 2005 and 2004,
respectively. This increase was principally due to the increase in our
revenues. During the years ended March 31, 2003, 2004 and 2005, we had
write-offs or provided allowances of US$ 0.2 million, US$ 0.2 million and US$
0.2 million for delinquent trade receivables, respectively. These write-offs
and allowances constituted 2.3%, 2.2% and 1.7% of total revenues, respectively
in those years.

Cash Flows

<TABLE>
<CAPTION>

                                                              For the Fiscal Year Ended March 31,
                                                    ----------------------------------------------------------
                                                          2003                2004                 2005
                                                    ----------------    ---------------      -----------------
<S>                                                    <C>                 <C>                  <C>

 Net cash (used in)/provided by operating
      activities
 - from continuing operations...................     US$ (6,720,388)     US$ (2,886,563)      US$   144,073
 - from discontinued operations.................         (2,128,786)           (373,744)           (509,568)
 Total..........................................         (8,849,174)         (3,260,307)           (365,495)
 Net cash used in investing activities..........         (3,753,778)           (561,783)         (1,424,091)
 Net cash provided by financing activities......                 --              73,473             302,925
 Effect of exchange rate changes on cash........            466,891           1,004,004             (83,156)
 Net decrease in cash and cash equivalents......     US$(12,136,061)      US$(2,744,613)      US$(1,569,817)

</TABLE>

         Fiscal Year Ended March 31, 2005
         --------------------------------

         Net cash generated from continuing operations of US$ 144,000 during
the year ended March 31, 2005 was principally attributable to the reduction of
our net loss from continuing operations to US$1.4 million, which included
non-cash items of depreciation and amortization of US$ 0.7 million. This was
achieved through a combination of improvement in our revenues, control over
our expenditures and better working capital management. Other significant
contributors included an increase in accounts payable and accrued liabilities
of US$ 2.1 million, an increase in unearned revenues of US$ 0.3 million, and
decrease in other assets of US$ 0.3 million. These were partially offset by an
increase in accounts receivable of US$ 1.2 million increase in prepaid
expenses and other current assets of US$ 0.7 million and increase in
recoverable income taxes of US$ 0.1 million.

         Net cash used in investing activities during the fiscal year ended
March 31, 2005 was US$ 1.4 million, consisting principally of purchases of
computers and other capital equipment in connection with the expansion of our
network which was partially offset by cash inflows from the sale of Valucom
phone card business.

         Net cash provided by financing activities during the fiscal year
ended March 31, 2005 was US$ 303,000, which represented cash received for
employee stock options exercised during the year.

         As of March 31, 2005, we had aggregate commitments for capital
expenditures of approximately US$ 450,144.

         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.

Contractual Obligations

         Our contractual obligations relate to operating leases and capital
commitment, payments for which are to be made as per the table below:

<TABLE>
<CAPTION>

            Years ended March 31,                                         Operating            Capital
            ---------------------                                           Leases           Commitments

<S>        <C>                                                              <C>                <C>
           2006......................................................     US$ 249,386        US$ 450,144
           2007......................................................         145,552                 --
           2008......................................................          61,833                 --
           2009......................................................              --                 --
           2010 and thereafter.......................................              --                 --
                                                                         ------------      -------------
           Total payments............................................     US$ 456,771        US$ 450,144
                                                                         ============      =============
</TABLE>

Capital Expenditures

         Our principal capital expenditures are for purchases of computer
equipment, such as servers for our websites and leasehold improvements. In
fiscal 2005, 2004 and 2003, we had capital expenditures of US$ 1.8 million,
US$ 0.6 million and US$ 0.4 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, 2005, we had net operating loss carry forwards for
our Indian operations aggregating approximately US$ 23 million, which expire
between April 1, 2005 and March 31, 2013. 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, 2005, 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$ 7.6 million for federal
income tax purposes. These net operating loss carryforwards expire in years
2020 through 2025. Whether Rediff Holdings, Inc. 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, 2004 and
2005, the provision for current income taxes was US$ 5,000 and US$ 38,000,
respectively.

         As of March 31, 2005, Valucom had a net operating loss carryforward
of approximately US$ 2.9 million. This loss will expire in years 2021 through
2025. Following the sale of its phone-card business to WQN in April 2004,
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 currency exchange rate fluctuations,
principally relating to the fluctuation of the U.S. dollar to Indian Rupee
exchange rate. We face foreign currency 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 currency
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 currency exchange
(U.S. dollars) exposure as of March 31, 2005:

<TABLE>
<CAPTION>

                                                                     As of March 31, 2005
                                                                   -----------------------
                                                                        (in thousands)
<S>                                                                              <C>
Accounts payable in U.S. dollars...................................              151
Accounts receivable in U.S. dollars, net of allowance..............               18
Cash balances held in U.S. dollars.................................            1,056
                                                                   -----------------------
Net foreign currency exchange exposure.............................              923
                                                                   =======================

</TABLE>

         We do not currently try to reduce our exposure to foreign currency
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 currency exchange rate
fluctuations. If the Indian Rupee appreciates against the US dollars by one
Rupee, the net foreign currency exchange loss as of March 31, 2005 would be
approximately US$ 22,000.

Interest Rate Risk

         We hold interest-bearing accounts in India as well as outside India
and fluctuations in interest rates affected our interest earnings for the
fiscal year ended March 31, 2005. These interest rates are linked to the
interest rates prevailing in India and the United States. We expect that our
interest earnings will continue to be affected in the future by fluctuations
in interest rates. A hypothetical 10% increase or decrease in the interest
rates applicable to cash deposits during such period would have affected our
interest income by approximately US$ 50,000.

Off-balance sheet arrangements

         As of the date of this annual report, we are not a party to any
off-balance sheet obligations or arrangements.

New Accounting pronouncement

         In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004),
"Share-Based Payments", or SFAS 123R. This statement eliminates the option to
apply the intrinsic value measurement provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" to stock
compensation awards issued to employees. Rather, SFAS 123R requires companies
to measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award. That cost
will be recognized over the period during which an employee is required to
provide services in exchange for the award - the requisite service period
(usually the vesting period). We are required to apply SFAS 123R, effective
from the first fiscal year beginning after June 15, 2005. We have not yet
quantified the effect that the adoption of SFAS 123R will have on our
financial condition and results of operations going forward.

<PAGE>

                                  MANAGEMENT

         The following table sets forth, as of June 27, 2005, the name, age
and position of each of our directors and executive officers.

<TABLE>
<CAPTION>

                          Name                      Age             Position
<S>                                                 <C>     <C>
       Ajit Balakrishnan(1)(2)................       57     Chairman and Managing Director
       Joy Basu  .............................       43     Chief Financial Officer
       Diwan Arun Nanda(1)(2).................       61     Director
       Sunil N. Phatarphekar(1)(2)(3).........       41     Director
       Pulak Prasad(1)*.......................       37     Director
       Ashok Narasimhan(1)(3).................       58     Director
       Sridar Iyengar(1)(3)**.................       58     Director

       (1)      Member of the Board of Directors
       (2)      Member of the Compensation Committee
       (3)      Member of the Audit Committee
       Note: Effective January 25, 2005, Abhay Havaldar, formerly a member of our Board
       of Directors and Audit Committee, resigned.
       *  Resigned as a member of the Audit Committee effective June 20, 2005
       ** Appointed to Board of Directors and Audit Committee on September 28, 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., 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. At our Annual General Meeting held
on September 29, 2003, our shareholders re-appointed Mr. Balakrishnan for an
additional five-year term as Managing Director with effect from August 24,
2003.

         Joy Basu has been our Chief Financial Officer since September 2003,
having joined us in April 2003. 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 attended the Senior Executive Course at the Manchester Business
School, U.K on a British Chevening Scholarship.

         Diwan Arun Nanda has been a director of the Company since its
incorporation in December 1995. Mr. Nanda is also a 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), Rediffusion
Dentsu, Young & Rubicam Srilanka, Everest Integrated Communications
Pvt. Ltd., Showdiff Worldwide Pvt. Ltd., Clariant (India) Limited and Eveready
Industries India Ltd. Mr. Nanda is also a Member of the Managing Committee of
the Maharishi Dayanand Education Society and a Trustee of the Harikrishna
Mandir Trust, Pune. Mr. Nanda holds a Bachelor's 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 the proprietor of SNP Legal (Advocates), a
Mumbai law firm. Mr. Phatarphekar earlier was a partner of Doijode,
Phatarphekar & Associates, a Mumbai law firm. After obtaining his Bachelor's
Degree in Commerce from Jai Hind College, Bombay University, and a Bachelor's
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.
Mr. Phatarphekar is also a Director in Axon Promotions Pvt. Ltd., Quintrol
Technologies Private Ltd., Rediffusion Dentsu, Young & Rubicam Pvt. Ltd.,
Premium Energy Transmission Ltd., Chennai Power Generation Ltd., Rediff
Holdings, Inc. and Ajit Balakrishnan Estates & Securities Private Limited. Mr.
Phatarphekar is also a partner in Sun Plants, a partnership that specializes
in plant nurseries.

         Pulak Prasad has been director of the Company since 1999. He is also
a Managing Director of Warburg, Pincus LLC, a position he has held since 2000.
He is a Director of Bharti Televentures Ltd., Venture Infoteck Global Pvt.
Ltd., Radhakrishna Merchandise Pvt. Ltd., Arksoft Enterprise Pvt. Ltd.,
Radhakrishna Foodland Carriers Pvt. Ltd., Radhakrishna Foodland Pvt.Ltd., WNS
(Holdings) Ltd., Sintex Industries Ltd. and Foodbex Pte. Ltd., Singapore. Mr.
Prasad holds a Bachelor's Degree in Engineering from the Indian Institute of
Technology, New Delhi and a 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 is also a director on the board of Tarang Software
Technologies Pvt Limited, Genie Technologies India Pvt. Limited, Avendus
Advisors Private Limited, Atma Investments and Resources Pvt. Limited. 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.

         Sridar A. Iyengar has been a director of the Company since September
2004. Mr. Iyengar is currently the President of TiE (The Indus Entrepreneurs)
Inc. He also serves on the Board of Infosys Technologies Limited, a
Nasdaq-listed company, as an Independent Director and serves on its Audit
Committee. He is on the Board of Progeon Limited, Rediff Holdings, Inc. and
ICICI Bank, which is an NYSE-listed company, and also advises many early-stage
technology companies in the United States and India. From 1968 until his
retirement in March 2002, he was employed by KPMG, retiring as the
Partner-in-Charge of KPMG's Emerging Business Practice. He worked as a partner
in all three of KPMG's regions - Europe, America and Asia Pacific - as well as
in all four of KPMG's functional disciplines - assurance, tax, consulting and
financial advisory services. He was Chairman and CEO of KPMG's India
operations between 1997 and 2000 and during that period was a member of the
Executive Board of KPMG's Asia Pacific practice. Prior to that, he headed up
the International Services practice in the West Coast of USA. On his return
from India in 2000 he was asked to lead a major effort of KPMG focused on
delivering audit and advisory services to early stage companies. He also
served as a member of the Audit Strategy group of KPMG LLP. He is a Fellow of
the Institute of Chartered Accountants in England and Wales, holds a Bachelor
Degree in Commerce (Honors) from the University of Calcutta and has attended
the Executive Education course at Stanford University.

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 we have a system
               of cumulative voting for the remaining directors, the
               appointments being made once in three year. 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 at
               our annual general meeting held on August 9,
               2004. Mr. Havaldar subsequently resigned from the Board of
               Directors effective January 25, 2005. Mr. Nanda and Mr. Sunil
               Phatarphekar will retire by rotation at our next Annual General
               Meeting of shareholders, which will be held on or before
               September 30, 2005.

         As of the date of this annual report, our board has determined that
three of its six members qualify as independent directors: Sunil N.
Phatarphekar; Ashok Narasimhan; and Sridar A. Iyengar.

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 and senior officers in
accordance with the provisions of the Sarbanes-Oxley Act of 2002. We will
provide a copy of our code of ethics to any person without charge, upon a
written request sent to our headquarters.

Audit Committee

         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.

         As of the date of this annual report, our audit committee is
comprised of three members, all of whom are independent directors, Sridar A.
Iyengar, Sunil N. Phatarphekar and Ashok Narasimhan.

Audit Committee Financial Expert

         Mr. Sridar A. Iyengar has been designated the independent audit
committee financial expert. Prior to his appointment as a member of our Board
of Directors, Mr. Iyengar was a partner at KPMG, retiring in March 2002 as
Partner-in-Charge of KPMG's Emerging Business Practice.

Compensation Committee

         The Compensation Committee of the Board of Directors administers our
stock option plans. The members of the Compensation Committee are Ajit
Balakrishnan, Diwan Arun Nanda and Sunil N. Phatarphekar.

Nasdaq Corporate Governance Requirements

         In general, corporate governance principles for Indian companies
whose shares are not traded on any Indian stock exchange are set forth in the
Companies Act. Corporate governance principles under provisions of Indian law
may differ in significant ways from corporate governance standards for U.S.
Nasdaq-listed companies. Under the latest amendment to the NASD Marketplace
Rule 4350(a)(1), foreign private issuers such as ourselves are permitted to
follow certain home country corporate governance practices in lieu of certain
of the requirements of Rule 4350. Under the amendment, foreign private issuers
must disclose alternative home country practices they follow.

         The following are the requirements of Rule 4350 we do not follow and
the home country practices we follow in lieu of these Rule 4350 requirements.
Our independent Indian counsel has also submitted to the Nasdaq a letter,
dated June 27, 2005, certifying that our corporate governance practices as
described below are not prohibited by and are consistent with Indian law.

          (i)  Rule 4350(b)(2) and Rule 4350 (b)(3) - Distribution of
               quarterly and interim reports

         In lieu of the requirements of Rule 4350(b)(2) and Rule 4350(b)(3),
we follow Indian law, under which companies whose shares are not traded on any
Indian stock exchange are not required to prepare and/or distribute quarterly
and interim reports to shareholders. However, we have in the past regularly
released copies of press releases and conference call transcripts relating to
our quarterly results of operations by posting them on our website. Further,
we furnish press releases relating to our quarterly results of operations with
the SEC on Form 6-K and we currently intend to continue to do so. We also
currently intend to periodically update the financial information in our
registration statement on Form F-3 by filing our interim results of operations
with the SEC on a Form 6-K and incorporating these by reference into our Form
F-3 to ensure that, following its effectiveness, such registration statement
remains current.

          (ii) Rule 4350(c)(1) - Independent Directors

         In lieu of the requirements of Rule 4350(c)(1), we follow the
Companies Act, which does not require that a majority of the Board of
Directors of Indian companies be comprised of independent directors. As of the
date of this annual report, our board has determined that three out of the six
members of the board are independent.

          (iii) Rule 4350(c)(2) - Executive sessions of Independent Directors

         In lieu of the requirements of Rule 4350(c)(2), we follow the
Companies Act, which does not require independent directors to hold regularly
scheduled meetings at which only such independent directors are present (i.e.,
executive sessions). Under the Companies Act, our Board of Directors as a
whole is responsible for monitoring our business, although it is permitted to
delegate specific responsibilities to designated directors or to non-director
executive officers.

          (iv) Rule 4350(c)(3) - Compensation of Officers

         In lieu of the requirements of Rule 4350(c)(3), we follow Indian law,
which requires companies to form a Compensation Committee in case of
remuneration payable to specified managerial personnel by companies having no
profits or inadequate profits. In such a case, a "Remuneration Committee" is
required to be constituted for approving the payment of remuneration to
certain specified "managerial personnel" as defined in the Companies Act. Such
Remuneration Committee, if constituted for this purpose, should consist of at
least three non-executive independent directors including nominee directors,
if any. For purposes of the Companies Act "managerial personnel" include the
company's managing director, whole time director and manager, each as defined
under the Companies Act.

         We do not pay and currently do not intend to pay any remuneration to
any of our managerial personnel as defined in the Companies Act. As such, we
are not required to constitute a Remuneration Committee under the Companies
Act. However our Board of Directors has formed a compensation committee,
which currently comprises of three directors including one independent
director, for the sole purpose of administering our stock option plans and
other compensation plans as may be approved by our shareholders from time to
time.

         Two of our directors, Mr. Ajit Balakrishnan and Mr. Sridar Iyengar,
receive remuneration from our wholly-owned U.S. subsidiary Rediff Holdings,
Inc., in their capacity as directors of that subsidiary. There is no
restriction under Indian law on paying remuneration to directors of an Indian
company having no profits or inadequate profits who are, at the same time,
also directors of a non-Indian subsidiary.

          (v)  Rule 4350(c)(4) - Nomination of Directors

         In lieu of the requirements of Rule 4350(c)(4), we follow the
requirements of the Companies Act pursuant to which directors are required to
be appointed by shareholders at their general meeting . In addition, under the
Companies Act, our board can make appointments, subject to any regulations in
a company's articles of association, to fill any casual vacancies caused if
the office of a director is vacated before his term of office has expired. Any
person so appointed shall hold office only up to the date up to which the
director in whose place he is appointed would have held office. Our board also
has the power to appoint additional directors who shall hold office only up to
the date of our next annual general meeting of the company. The Companies Act
also allows our board to appoint an alternate director to act for a director
during his absence for a period of not less than three months from the state
in which the board meetings are ordinarily held. Finally, our articles of
association states that 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.

          (vi) Rule 4350(f) - Quorum

         In lieu of the requirements of Rule 4350(f), we follow the Companies
Act, under which a quorum for purposes of a meeting of the holders of our
common stock is considered present as long as five of our members are present in
person.

          (vii) Rule 4350(g) - Solicitation of Proxies

         As a foreign private issuer, we are not subject to Regulations 14A
and 14C under the Securities and Exchange Act of 1934, as amended. As such, in
lieu of the requirements of Rule 4350(g), we follow the requirements of the
Companies Act. Section 176 of the Companies Act prohibits a company
incorporated thereunder, such as us, from soliciting proxies. Because we are
prohibited from soliciting proxies under Indian law, we will not meet the
proxy solicitation requirement of Rule 4350(g). However, in accordance with
Indian law, we give written notices of all our shareholder meetings
(containing a statement that a shareholder is entitled to appoint a proxy, or,
where that is allowed, one or more proxies, to attend and vote instead of
himself, and that a proxy need not be a member) to all our shareholders and we
also furnish such notices with the SEC under Form 6-K.

         Other than as noted above, we intend to comply with all other
applicable Nasdaq corporate governance standards.

Employees

         As of March 31, 2005, we had 252 employees and full-time consultants.
Of such employees, 29 are administrative, 78 are in our sales and marketing
teams, 88 are creative and editorial, 11 are dedicated to production and
circulation, 15 are dedicated to e-commerce and 31 are dedicated to technology
and 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                                  11       6          -       17
                                        ------   -----    --------   -----
Editorial                                 54       4         13       71
                                        ------   -----    --------   -----
Production                                -        -          6        6
                                        ------   -----    --------   -----
Circulation                               -        -          5        5
                                        ------   -----    --------   -----
Sales and Marketing                       53      13         12       78
                                        ------   -----    --------   -----
Technology and Product Development        30       -          1       31
                                        ------   -----    --------   -----
E-Commerce                                15       -          -       15
                                        ------   -----    --------   -----
Administration and others                 21       -          8       29
                                        ------   -----    --------   -----
         Total                           184      23         45       252
                                        ======   =====    ========   =====

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 2005, 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. Directors of our U.S.
subsidiaries receive compensation for their service on the boards of these
subsidiaries.

         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, 2005; and

(ii) equity shares arising out of warrants granted to such officers and
     directors under the Employee Stock Option Plan, or ESOP during the fiscal
     year ended March 31, 2005.

<TABLE>
<CAPTION>

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

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

Ajit Balakrishnan       US$ 100,000(1)                           -              -                    -

Joy Basu                     54,494                         25,000          10.78     12th August, 2014

Sridar A. Iyengar*           12,500(1)                       6,000          15.11    20th September, 2009


         * Remuneration for only part of the fiscal year ended March 31, 2005.

         (1) Each of Mr. Balakrishnan and Mr. Iyengar receive a salary from Rediff Holdings, Inc.,
             our wholly-owned U.S.- incorporated subsidiary, in their capacity as directors of Rediff
             Holdings, Inc. Neither Mr. Balakrishnan nor Mr. Iyengar receive any salary from Rediff.com
             India Limited.

</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. During the fiscal year ended
March 31, 2005, we granted additional warrants equivalent to the right to
purchase 30,000 Equity Shares and during the same period, warrants equivalent
to 7,750 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 four-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 five 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 four-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 five 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 incentive stock options and
non-statutory stock options to our employees. All options under these plans
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. During the fiscal year ended March 31, 2005, we granted warrants
equivalent to the right to purchase 6,000 Equity Shares at a weighted average
exercise price of US$ 15.11. During the same period, warrants equivalent to
52,625 Equity Shares were exercised and warrants equivalent to 4,875 Equity
Shares were forfeited.

         Unless otherwise determined by the Board of Directors, the warrants
granted under the 2002 plan vest at a rate of 25% on each successive
anniversary of the grant date, until fully vested. The options granted under
the 2002 ADR plan vest at the rates set forth in every award.

2004 Stock Option plan

         In June 2004, our Board of Directors approved the 2004 Stock Option
Plan ("2004 plan"), which provides for the grant of stock options to our
employees. All options under the 2004 plan are exercisable for our ADSs. We
have elected to account for the 2004 plan using the intrinsic value method as
set forth in APB Opinion No. 25. Unless terminated sooner, the 2004 plan will
terminate automatically in January 2014. A total of 358,000 Equity Shares are
currently reserved for issuance pursuant to the 2004 plan.

         Under the terms of the 2004 plan, our Board of Directors or a
committee or a sub-committee of the board will determine and authorize the
grant of options to eligible employees. These options will vest at the rates
set forth in each award. Each option grant carries with it the right to
purchase a specified number of our ADSs at the exercise price during the
exercise period, which expires ten years from the date of grant. The exercise
price is determined by our Board of Directors (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 of our ADSs on the date of
the grant.

         We have obtained the approvals for the implementation of the 2004
plan. We also made the necessary filings with the SEC prior to the first
exercise date of the options granted under the 2004 plan.

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, 2003, 2004
and 2005 and the unfunded benefit liability as of March 31, 2005 are as
follows:

<TABLE>
<CAPTION>

                                                                         Years ended March 31,
                                                         -----------------------------------------------------
                                                             2003               2004                  2005
                                                         -----------        ------------          ------------

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

Change in benefit obligation
Benefit obligation at the beginning of the year.....      US$ 53,729          US$ 66,439           US$ 88,021
Actuarial (gain) loss...............................          (8,631)             (3,042)              (6,229)
Service cost........................................          14,328              14,875               16,923
Interest cost.......................................           5,316               5,350                5,675
Benefits paid.......................................              --              (2,724)              (7,647)
Effect of exchange rate changes.....................           1,697               7,123                 (219)
Benefit obligation at the end of the year...........      US$ 66,439          US$ 88,021           US$ 96,524
Unrecognized net actuarial (loss) gain..............            (773)              2,229                8,517
Accrued pension liability...........................      US$ 65,666          US$ 90,250          US$ 105,041

</TABLE>

         The assumptions used in accounting for gratuity in the fiscal years
ended March 31, 2003, March 31, 2004 and March 31, 2005 were as follows:

<TABLE>
<CAPTION>

                                                                              Years ended March 31,
                                                                              ---------------------
                                                                       2003            2004           2005
                                                                       ----            ----           ----
<S>                                                                     <C>             <C>            <C>
Discount rate.................................................          8%              7%             8%

Rate of increase in compensation..............................    8% for first 3   8% for first   8% for first
                                                                   years and 5%     2 years and    year and 6%
                                                                    thereafter     5% thereafter   thereafter

</TABLE>

         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$ 87,710 for the fiscal year ended March 31, 2005.

<PAGE>

                          RELATED PARTY TRANSACTIONS

         Six of our largest shareholders beneficially hold an aggregate of
approximately 77% of our Equity Share capital. As a result, such shareholders,
if they were to act collectively, could exercise control or significantly
influence most matters requiring shareholder approval, including significant
corporate transactions.

Advertising Revenues

         During the fiscal years ended March 31, 2005, 2004 and 2003, we
received US$ 53,991, US$ 11,537 and US$ 1,345 as advertising revenues from
Rediffusion-Dentsu, Young & Rubicam Limited, a company in which Mr. Ajit
Balakrishnan and Mr. Diwan Arun Nanda are shareholders and directors.

<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 International Monetary Fund, 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 Reserve Bank of India must be notified of the sale of equity shares
underlying ADSs by a non-resident of India to a resident of India, as well as
of any renunciation by a non-resident in favor of a resident of India of the
right to subscribe to such equity shares granted pursuant to a rights
offering, provided the price for sale of such equity shares is in accordance
with Reserve Bank of India pricing guidelines. If not, prior approval of the
Reserve Bank of India is required for any such transfer. Under current Indian
law, Equity Shares may only be deposited into our depositary facility in
exchange for ADSs, under certain circumstances and the number of ADSs that
can be outstanding at any time is limited as follows: after any offering of
ADSs, Equity Shares can be deposited for issuance of ADSs only to the extent
that (a) holders have surrendered ADSs and withdrawn Equity Shares from the
ADS facility and (b) such holders sold such Equity Shares through SEBI
registered stock brokers in a domestic Indian stock market. As our Equity
Shares are not listed on any Indian stock exchange, if you elect to surrender
your ADSs and receive Equity Shares, you would be unable to redeposit
outstanding Equity Shares with our Depositary and receive ADSs.

         Investors who seek to sell in India to resident Indians any Equity
Shares withdrawn from the depositary facility and to convert the Rupee proceeds
from such sale into foreign currency and repatriate such foreign currency from
India will be subject to pricing guidelines specified by the Reserve Bank of
India for such sales. Prior approval of the Reserve Bank of India will be
required in the event the price for any such sale does not comply with such
pricing guidelines.

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 may only be deposited into our depositary facility in exchange
for ADSs, under certain circumstances and the number of ADSs that can be
outstanding at any time is limited as follows: after any offering of ADSs,
Equity Shares can be deposited for issuance of ADSs only to the extent that (a)
holders have surrendered ADSs and withdrawn Equity Shares from the ADS facility
and (b) such holders sold such Equity Shares through SEBI registered stock
brokers in a domestic Indian stock market. Since our Equity Shares are
unlisted, if you elect to surrender your ADSs and receive Equity Shares, you
may be unable to re-deposit of our Equity Shares on an automatic basis under
existing laws.

Restriction on Debt Issues

         Indian corporates are permitted to raise debt in various forms
(commonly referred to as "External Commercial Borrowing" or "ECB") from
internationally recognized sources such as international banks, international
capital markets, multilateral financial institutions, export credit agents,
suppliers of equipment, foreign, collaborators and foreign equity holders,
subject to the regulations laid down by the Reserve Bank of India in this
regard. These regulations govern all the important aspects of ECBs including
amount and maturity, all-in cost ceilings (including rate of interest and fees
and expenses payable in foreign currency) end-use, security and
prepayment/redemption.

         Indian borrowers are allowed to raise up to US$ 20 million, in the
event the minimum average maturity of the ECB is three years, and up to US$ 500
million, in the event the minimum average maturity is five years, without
Reserve Bank of India approval (the "automatic route") so long as, inter alia,
the following conditions are met.

     o   "All-in cost" ceiling does not exceed 200 basis points over the
         six-month LIBOR for the respective currency of borrowing, in the case
         of ECBs with a minimum average maturity of 3 to 5 years, and 350 basis
         points over the six-month LIBOR for the respective currency of
         borrowing, in the case of ECBs with a minimum average maturity being
         more than five years.

     o   Proceeds from ECBs can be only raised for permitted purposes, such as
         capital investments, overseas direct investment in a joint venture or
         a wholly-owned foreign subsidiary. ECB proceeds cannot be used for
         on-lending, for investing in capital markets and real estate, for
         working capital and general corporate purposes or for refinancing
         existing domestic loans.

     o   ECBs may be secured by assets of the borrower subject to compliance
         with the relevant regulations issued by the Reserve Bank of India.

     o   Pre-payment or redemption of ECBs prior to maturity in amounts up to
         US$ 100 million is permitted without prior Reserve Bank of India
         approval, provided that any such prepayment and redemption can only be
         undertaken if the same complies with the stipulated average maturity
         period of three years, in the case an ECB of up to US$ 20 million, and
         five years, in the case of an ECB of up to US$ 500 million.

         All proposals for the issuance of ECBs that do not fall into the
parameters set out above will need the approval of the Reserve Bank of India.

         The maximum amount of ECB that may be raised by an eligible borrower
under the automatic route is US$ 500 million, or its equivalent, during a
single financial year. The primary responsibility to ensure that ECB
raised/utilized are in conformity with the RBI instructions is that of the
concerned borrower and any contravention of the RBI guidelines will be viewed
seriously and may invite penal action.

         The Ministry of Finance, through the Issue of Foreign Currency
Convertible Bonds and Ordinary Shares (through Depositary Receipt Mechanism)
Scheme 1993 (the "Scheme"), has allowed Indian corporates to issue Foreign
Currency Convertible Bonds ("FCCBs"). Unless otherwise expressly provided in
the Scheme, the issuance and terms of FCCBs are subject to the same conditions
and restrictions set forth above for ECBs. All proposals for the issuance of
FCCBs that do not fall under the automatic approval route set out in the Scheme
and that do not meet the conditions and restrictions set forth for ECBs will
need the approval of the Reserve Bank of India.

Sponsored ADR Schemes

         From November 23, 2002, the Reserve Bank of India has permitted
existing shareholders of Indian companies to sell their shares through the
issuance of ADRs 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 7% 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.


                                 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, 2005, was
12,880,050. We have been informed by our depository that as of March 31, 2005,
there were approximately 25 record holders of ADRs evidencing 5,459,700 ADSs
(representing 2,729,850 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:

<TABLE>
Annual and Quarterly high-low price history:
<CAPTION>
                                                                        Price Per ADS
                                                                        -------------
                                                                      (in U.S. dollars)
                                                                    High             Low
                                                                    ----             ---
<S>                                                                    <C>             <C>
Fiscal year ended March 31, 2003...............................        4.78            0.21
Fiscal year ended March 31, 2004 ..............................       13.87            2.76
Fiscal year ended March 31, 2005 ..............................       15.47            5.25
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
Second Quarter (July 2004 to September 2004)...................        8.43            5.25
Third Quarter (October 2004 to December 2004)..................       10.77            7.28
Fourth Quarter (January 2005 to March 2005)....................        8.90            5.52
First Quarter (April 2005 to June 26, 2005)....................        8.80            6.07

Monthly high-low price history for previous six months:
-------------------------------------------------------
                                                                        Price per ADS
                                                                        -------------
                                                                      (in U.S. dollars)
Previous six months                                                 High             Low
-------------------                                                 ----             ---
December 2004..................................................       10.77            7.85
January 2005...................................................        8.90            6.37
February 2005..................................................        7.49            5.52
March 2005.....................................................        7.80            6.60
April 2005.....................................................        7.15            6.42
May 2005.......................................................        7.49            6.07
June 2005 (through June 26, 2005)..............................        8.80            7.20

</TABLE>


             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 the
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.

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, including investment in the ADSs, does not
require the prior approval of the Government of India, or the Reserve Bank of
India, 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 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. The
foregoing description applies only to an issuance of shares by, and not to a
transfer of shares of, Indian companies. Transfer of shares of an Indian
company by a non-resident Indian can be undertaken without having to obtain
prior approval from the Reserve Bank of India by making an application with an
authorized foreign exchange dealer, provided conditions specified in the FEMA
are fulfilled. Otherwise, such transfers would require prior approval from
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 that
enable foreign institutional investors, including institutions such as pension
funds, investment trusts, asset management companies, nominee companies and
incorporated/institutional portfolio managers referred to as Foreign
Institutional Investors, or FIIs, to make portfolio investments in all
securities of listed and unlisted companies in India. Investments by registered
Foreign Institutional Investors or Non-Resident Indians made through a stock
exchange are known as Portfolio Investments. Foreign investors wishing to
invest and trade in Indian securities in India under these guidelines are
required to register with the SEBI. Foreign investors are not necessarily
required to register with the SEBI as Foreign Institutional Investors and may
invest in securities of Indian companies pursuant to the Foreign Direct
Investment route discussed above.

         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 FII 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 FII
in unlisted Indian companies would require the prior approval of the RBI.
Further, an FII may not hold more than 10% of the total issued capital of a
company in its own name, a corporate/individual sub-account of the FII may not
hold more than 5% of the total issued capital of a company and a broad based
sub-account of the FII may not hold more than 10% of the total issued capital
of a company. The total holding of all FIIs in a company is subject to a cap of
24% of the total paid-up capital of a company, which can be increased to the
relevant statutory cap/ceiling in respect of the said company with the passing
of a special resolution by the shareholders of the company in a general
meeting.

         Registered FIIs are generally subject to tax under Section 115AD of
the Income Tax Act of 1961. There is uncertainty under Indian law as to the tax
regime applicable to foreign institutional investors that hold and trade ADSs.
As such, FIIs are urged to consult with their Indian legal and tax advisors
before making an investment in ADSs issued by an Indian company.

         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.

Takeover and Insider Trading 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.


                             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 June 9, 2005              of May 6, 2004                of June 30, 2003
                             --------------------------   -----------------------------   ----------------------------
                                            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) (1C)                       3,463,982         27%        3,463,982         27%           3,463,982           27%

Diwan Arun Nanda (1)            3,444,742         27%        3,444,742         27%           3,444,742           27%

Pulak Prasad (2)

c/o Warburg, Pincus &
Co.466 Lexington Avenue,
New York, NY 10017              2,008,000         16%        2,008,000         16%           2,132,804           17%


All Directors and Officers
as a Group

(3 persons)                     6,716,722         52%        8,916,722         70%           9,041,526           71%

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%           2,200,002           17%

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

Queenswood Investments Ltd
C/O Multiconsult Limited,
Les Jamalacs, Vieux Conseil
StreetPort Louis, Mauritius     2,008,000         16%        2,008,000         16%           2,132,804           17%

</TABLE>

(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 2,008,000 equity shares held by Queenswood Investments
         Limited. Fifty percent (50%) of the outstanding equity of Queenswood
         Investments Limited is held by Warburg, Pincus Equity Partners, L.P.
         (including two affiliated limited 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 Partners LLC ("WPP LLC"), a subsidiary of
         Warburg Pincus & Co. ("WP"), is the general partner of WPEP and WPVI.
         WPEP and WPVI are managed by Warburg Pincus LLC ("WP LLC"). Pulak
         Prasad is a Managing Director and Member of 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, 2005
         5,459,700 ADSs were held by approximately 25 record holders of ADRs in
         the United States.

     *   In addition to the above, the following directors and former directors
         have also been granted stock options as follows:

         (A)    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

         Sridar Iyengar - 6,000 Equity Shares granted on September 28, 2004 at
         an exercise price of Rs. 658.92 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.


                                    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, 2005 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 following 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 as a member of the
crew of an Indian ship for the purposes of his employment during the financial
year. A company is resident in India in any fiscal year if it is an Indian
company 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 14.025%, 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(x) 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 is not certain whether Indian 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 contend 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%, except in the case of sale of equity shares entered into on a recognized
stock exchange in India. Surcharge on this tax would be applicable at the rate
of 2.5% in the case of non-resident corporations whereas for individuals and
association of persons, the rate of surcharge would be 10% if their Indian
taxable income exceeds Rs. 1,000,000. In all the above cases the amount of tax
and surcharge would be increased by an Education Cess of 2%. Article 9(5) of
the Scheme indicates that the long term capital gains on sale of redeemed
underlying shares held by non-resident investors in the domestic market would
be charged to tax at 10% in accordance with the provisions of section 115AC.
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 one between two non-residents made outside
India), 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.

         Long-term capital gains realized on the sale of equity shares which
are listed in India will be exempt from tax provided the transaction of such
sale is entered into on a recognized stock exchange in India and the contract
for the sale of such equity shares is settled by the actual delivery or
transfer of such shares.

         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), except in the case of sale of equity shares entered into in a
recognized stock exchange in India. 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.

         Short-term capital gains realized on the sale of equity shares which
are listed in India will be chargeable to tax at 10% plus a surcharge of 2.5%
(or 10% if the gain exceeds Rs. 1,000,000) and a further cess of 2% provided
the transaction of such sale is entered into in a recognized stock exchange in
India and the contract for the sale of such shares is settled by the actual
delivery or transfer of such shares.

         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 Income 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; or

     o   A trust (A) the administration of which is subject to the primary
         supervision of a U.S. court and which has one or more U.S. persons
         who have the authority to control all substantial decisions of the
         trust or (B) that was in existence on August 20, 1996, was treated as
         a United States person under the Code on the previous day, and
         elected to continue to be so treated.

         If a partnership (including any entity treated as a partnership for
U.S. federal income tax purposes) holds shares, the tax treatment of a partner
in such partnership will depend upon the status of the partner and the
activities of the partnership. Partners in a partnership holding our shares
are urged to consult their tax advisors as to the particular U.S. federal
income tax consequences applicable to them. 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) consisting
         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 income for U.S. foreign tax
credit purposes. A non-corporate recipient of dividend income will generally
be subject to tax on dividend income from a "qualified foreign corporation" at
a maximum U.S. federal income tax rate of 15% rather than the marginal tax
rate generally applicable to ordinary income so long as certain holding period
requirements are met. A non-U.S. corporation (other than a passive foreign
investment company ) generally will be considered to be a qualified foreign
corporation (i) if it is eligible for the benefits of a comprehensive income
tax treaty with the United States which the Secretary of Treasury of the
United States determines is satisfactory for purposes of this provision and
which includes an exchange of information program, or (ii) with respect to any
dividend it pays on stock which is readily tradable on an established
securities market in the United States. There is currently a tax treaty in
effect between the United States and India which the Secretary of Treasury has
determined is satisfactory for these purposes. Dividends received on the
shares will not be eligible for the dividends received deduction allowed to
corporations. 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 Gain

         You will generally recognize gain or loss on the sale or exchange of
ADSs equal to the difference between the amount realized on such disposition
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. Such gain or loss, 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.

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 we will be classified as a PFIC for U.S.
federal income tax purposes for the current or any future taxable years. PFIC
status is a factual determination that is based in part on the composition of
our income and the value of our assets during each year. As described below,
if we are classified 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 classified as a PFIC, and you are a U.S. investor in ADSs
that did not make a mark-to-market or "qualifying electing fund" 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 received by 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 subject to tax 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 claim 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
pro rata share of our earnings for any particular taxable year, as determined
for United States federal income tax purposes, currently in your gross income
despite the fact that we may not have made any actual dividend distributions
to you for such taxable year.

         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.


                                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, 2005, 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 2005);

     o   approximately US$ 18.8 million to enhance our content and service
         offerings and promote our brands (approximately US$ 2.3 million was
         utilized during the fiscal 2005); and

     o   approximately US$ 7.9 million in capital expenditures. (approximately
         US$ 1.8 million was used during the fiscal 2005)

         As of March 31, 2005, approximately US$ 10.0 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

Disclosure Controls and Procedures

         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.

         Our management, with the participation of our Chairman, who serves as
our principal executive officer, and our Chief Financial Officer, has evaluated
the effectiveness of our disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end
of the period covered by this annual report. Based on such evaluation, our
Chairman and Chief Financial Officer have concluded that, as of the end of such
period, our disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required
to be disclosed by us in the reports that we file or submit under the Exchange
Act and are effective in ensuring that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to our management, including our Chairman and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.

Internal Control Over Financial Reporting

         There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal year to which this report relates that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

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, 2004 and 2005.

                                             Fiscal year ended March 31,
                                    --------------------------------------------
                                     2003             2004             2005
                                    ---------       ----------      ------------
Audit Fees.......................   US$98,783       US$126,262      US$ 131,959
Audit-Related Fees...............       2,793            7,401            2,570
Tax Fees.........................      17,694           12,483           10,058
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, 2004 and 2005 and for obtaining
auditors' consent on our Form S-8 filing during the fiscal year ended March 31,
2004 and on our Form F-3 Registration Statement filed during the fiscal year
ended March 31, 2005. 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 consolidated financial statements in this annual report have been
prepared in accordance with U.S. GAAP. 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 consolidated financial statements, including the notes to
these financial statements, audited by Deloitte Haskins and Sells, independent
registered public accounting firm, 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, 2005
was Rs. 43.62 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 Share Capital

         The following description of our share capital does not purport to be
complete and is subject to and qualified in its entirety by the Company's
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 24,000,000 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, 2005, 12,880,050 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 prospectus, "shareholder" means a shareholder who is registered as a
member in the register of members of our company.

         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 certain 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 initial ADR
offering, provides for the following shareholder rights:

         Registration Rights
         -------------------

         Certain 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, certain 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.

         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
shareholder approval. With respect to Equity Shares issued during a particular
fiscal year (including any Equity Shares underlying ADSs issued to the
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 shall 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 shall 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
is similar to paying 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 company
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.
First Cross Road, 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
prospectus, 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 the 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 the Depositary to exercise the voting
rights of the Equity Shares represented by ADSs. If the 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, the
depositary bank 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 the depositary bank receives voting instructions. However, the
ability of the 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 the depositary bank 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:

         Office of Investor Education and Assistance
         100 F Street, NE
         Washington, DC 20549
         (202) 551-6551
         e-mail: help@sec.gov

         Copies of these materials can also be obtained from the Public
Reference Section of the SEC, 100 F Street, NE, 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                    2004 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

    23.1                   Consent of Deloitte, Haskins & Sells

    23.2                   Consent of Ernst & Young LLP
_____________________

*      Incorporated by reference to exhibits filed with the Registrant's
       Registration Statement on Form F-1 (File No. 333-37376)

**     Incorporated by reference to exhibits filed with the Registrant's Form
       20-F for the fiscal year ended March 31, 2001.

***    Incorporated by reference to exhibits filed with the Registrant's Form
       20-F for the fiscal year ended March 31, 2003.

****   Incorporated by reference to exhibits filed with the Registrant's Form
       S-8 filed on December 30, 2004.

*****  Incorporated by reference to exhibits filed with the Registrant's Form
       20-F for the fiscal year ended March 31, 2004.

<PAGE>


                         INDEX TO FINANCIAL STATEMENTS

                                                                           Page

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, 2004 and 2005......................F-4

Consolidated Statements of Operations for the years ended
March 31, 2003, 2004 and 2005...............................................F-5

Consolidated Statements of Shareholders' Equity for the years ended
March 31, 2003, 2004 and 2005...............................................F-6

Consolidated Statements of Cash Flows for the years ended
March 31, 2003, 2004 and 2005...............................................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-33

Schedule of Valuation and Qualifying Accounts..............................F-34

<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Shareholders and Board of Directors of
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, 2004
and 2005, 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, 2005. 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 year ended March 31, 2003, which statements reflect total revenues
constituting 68% of the related consolidated total operating revenues for the
year ended March 31, 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 year ended 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. The
company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly we express no such
opinion. An audit also 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 consolidated financial position of the
Company as of March 31, 2004 and 2005 and the consolidated results of its
operations and its cash flows for each of the years in the three year period
ended March 31, 2005 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.


Deloitte Haskins & Sells
Mumbai, India
Dated:  June 29, 2005

<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC 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>

<TABLE>

                                                  REDIFF.COM INDIA LIMITED


                                                CONSOLIDATED BALANCE SHEETS
                                               as of March 31, 2004 and 2005

<CAPTION>
                                                                                                      March 31,
                                                                                         -----------------------------------
                                                                                               2004               2005
                                                                                         ----------------   ----------------
<S>                                                                                           <C>                <C>
Assets
Current Assets
  Cash and cash equivalents.............................................................    US$11,639,173      US$10,069,356
  Trade accounts receivable, (net of allowances of  US$1,229,677 and
    US$1,434,910 at March 31,2004 and 2005, respectively)...............................        1,884,193          3,093,372
  Prepaid expenses and other current assets (See Note 4)................................        1,111,784          1,881,875
  Assets held for sale (See Note 3) ....................................................          523,322                  -
   Recoverable income taxes.............................................................          134,633            278,028
                                                                                         ----------------   ----------------
Total current assets....................................................................       15,293,105         15,322,631
Property, plant and equipment - net (See Note 5)........................................        1,491,240          2,557,753
Goodwill (See Note 6)...................................................................        7,314,468          7,314,468
Other assets (See Note 7) ..............................................................          768,962            495,560
                                                                                         ----------------   ----------------
Total assets............................................................................    US$24,867,775      US$25,690,412
                                                                                         ================   ================
Liabilities and Shareholders' equity
Current liabilities
   Accounts payable and accrued liabilities.............................................    US$ 3,127,894      US$ 4,863,631
   Customer advances and unearned revenues..............................................          697,134          1,014,419
                                                                                         ----------------   ----------------
Total current liabilities...............................................................        3,825,028          5,878,050
Other liabilities.......................................................................           15,384             15,859
                                                                                         ----------------   ----------------
Total liabilities.......................................................................        3,840,412          5,893,909
                                                                                         ----------------   ----------------

Commitments and contingencies (See note 18).............................................               --                 --
                                                                                         ----------------   ----------------

Shareholders' equity
  Equity shares:  par value -- Rs.5,  Authorized: 20,000,000 shares and
    24,000,000 shares at March 31, 2004 and 2005 respectively;
  Issued and outstanding: 12,827,425 shares and 12,880,050 shares at March
    31, 2004 and 2005, respectively (See note 9)........................................        1,537,865          1,543,938
Additional paid in capital..............................................................       76,973,587         77,270,439
Accumulated other comprehensive loss....................................................       (3,089,310)        (3,195,953)
Deferred compensation expense...........................................................             (710)              (262)
Accumulated deficit.....................................................................      (54,394,069)       (55,821,659)
                                                                                         ----------------   ----------------
Total shareholders' equity..............................................................       21,027,363         19,796,503
                                                                                         ----------------   ----------------
Total liabilities and shareholders' equity..............................................    US$24,867,775      US$25,690,412
                                                                                         ================   ================


                               See accompanying notes to consolidated financial statements
</TABLE>

<PAGE>

<TABLE>
                                                REDIFF.COM INDIA LIMITED

                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                For each of the years ended March 31, 2003, 2004 and 2005

<CAPTION>
                                                                                  Years ended March 31,
                                                           ------------------------------------------------------------------
                                                                  2003                    2004                    2005
                                                           --------------------    -------------------    -------------------
<S>                                                                 <C>                    <C>                    <C>
Operating revenues
  India Online..........................................          US$ 2,767,244          US$ 3,636,183          US$ 6,556,320
  U.S. Publishing.......................................              5,804,598              5,810,420              6,070,344
                                                           --------------------    -------------------    -------------------
Total revenues..........................................              8,571,842              9,446,603             12,626,664
                                                           --------------------    -------------------    -------------------
Cost of revenues
  India Online..........................................              1,078,472              1,130,373              1,593,218
  U.S. Publishing.......................................              4,481,618              3,608,029              3,519,906
                                                           --------------------    -------------------    -------------------
Total cost of revenues..................................              5,560,090              4,738,402              5,113,124
                                                           --------------------    -------------------    -------------------
Gross profit............................................              3,011,752              4,708,201              7,513,540
                                                           --------------------    -------------------    -------------------
Operating expenses
  Sales and marketing...................................              2,591,017                950,268              2,278,297
  Product development...................................              1,820,372              1,598,199              1,832,394
  General and administrative............................              7,291,276              5,378,600              5,116,020
  Goodwill impairment (See note 6)......................              3,200,700                     --                      --
                                                           --------------------    -------------------    -------------------
Total operating expenses................................             14,903,365              7,927,067              9,226,711
                                                           --------------------    -------------------    -------------------
Operating loss .........................................            (11,891,613)            (3,218,866)            (1,713,171)
                                                           --------------------    -------------------    -------------------
  Other income (expense), net:
  Interest income.......................................                395,003                331,806                518,958
  Foreign exchange gain (loss), net.....................               (400,387)              (459,075)                 5,055
  Miscellaneous income..................................                 23,474                  2,137                  7,272
                                                           --------------------    -------------------    -------------------
                                                                         18,090               (125,132)               531,285
                                                           --------------------    -------------------    -------------------
Loss from continuing operations before income taxes.....            (11,873,523)            (3,343,998)            (1,181,886)
Income tax expense .....................................               (303,932)                (4,862)               (37,994)
                                                           --------------------    -------------------    -------------------
Loss from continuing operations ........................         US$(12,177,455)         US$(3,348,860)         US$(1,219,880)
Loss from discontinued operations (See Note 3)..........          US$(6,803,695)         US$(2,370,982)           US$(207,710)
                                                           --------------------    -------------------    -------------------
Net loss................................................         US$(18,981,150)         US$(5,719,842)         US$(1,427,590)
                                                           ====================    ===================    ===================
Weighted average number of equity
  shares -- basic and diluted...........................             12,795,200             12,799,997             12,850,424
                                                           ====================    ===================    ===================
Loss per share -- basic and diluted:
  continuing operations ................................              US$ (0.95)             US$ (0.26)             US$ (0.10)
  discontinued operations ..............................                  (0.53)                 (0.19)                 (0.01)
                                                           --------------------    -------------------    -------------------
Loss per share - basic and diluted .....................               US$(1.48)              US$(0.45)              US$(0.11)
                                                           ====================    ===================    ===================
Loss per ADS -- (where 2 ADSs are equal to 1 equity
  share) -- basic and diluted:
  continuing operations ................................               US$(0.48)              US$(0.13)              US$(0.05)
  discontinued operations ..............................                  (0.26)                 (0.09)                 (0.00)
                                                           --------------------    -------------------    -------------------
Loss per ADS -- (where 2 ADSs are equal to 1 equity
  share) -- basic and diluted...........................              US$ (0.74)             US$ (0.22)             US$ (0.06)
                                                           ====================    ===================    ===================


                               See accompanying notes to consolidated financial statements
</TABLE>

<PAGE>

<TABLE>
                                                REDIFF.COM INDIA LIMITED

                                        CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
                            EQUITY For each of the years ended March 31, 2003, 2004 and 2005
<CAPTION>

                                      Equity Shares
                                 -----------------------
                                      (See note 9)                      Accumulated    Deferred
                                 -----------------------   Additional      other       Compen-
                                  Number                    Paid in    Comprehensive   sation     Accumulated
                                 of Shares     Amount       Capital         Loss       Expense      Deficit        Total
                                 ---------- ------------ ------------- ------------- ---------- ---------------  -------------

<S>                              <C>              <C>           <C>          <C>           <C>      <C>              <C>
Balance, as of April 1, 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

Amortization of compensation
 related to stock option grants.         --           --            --            --        448              --            448
Stock options exercised.........     52,625        6,073       296,852            --         --              --        302,925
Net loss........................         --           --            --            --         --      (1,427,590)    (1,427,590)
Other comprehensive income-
 translation adjustment.........         --           --            --     (106,643)         --              --       (106,643)
                                 ---------- ------------ ------------- ------------- ---------- --------------- --------------
Balance, as of March 31, 2005... 12,880,050 US$1,543,938 US$77,270,439 US$(3,195,953)  US$ (262) US$(55,821,659) US$19,796,503
                                 ---------- ------------ ------------- ------------- ---------- --------------- --------------


                               See accompanying notes to consolidated financial statements
</TABLE>

<PAGE>

<TABLE>
                                                REDIFF.COM INDIA LIMITED

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                For each of the years ended March 31, 2003, 2004 and 2005

                                                                                          Years ended March 31,
                                                                           ---------------------------------------------------
                                                                                2003              2004              2005
                                                                           ---------------    --------------    --------------
<S>                                                                          <C>                <C>               <C>
Cash flows from operating activities
Net loss.................................................................  US$(18,981,150)    US$(5,719,842)    US$(1,427,590)
Loss from discontinued operations .......................................       6,803,695         2,370,982           207,710
Adjustments  relating to continuing  operations to reconcile
 net loss to net cash used in continuing operations:
Depreciation and amortization............................................       1,959,768         1,306,518           735,232
Amortization of intangibles..............................................          40,132                --                --
Impairment of goodwill...................................................       3,200,700                --                --
Loss on sale of property, plant and equipment............................           7,975            29,509             5,859
Stock based compensation expense.........................................             403               426               448
Changes in assets and liabilities:
  Trade accounts receivable..............................................        (360,305)         (451,212)       (1,213,581)
  Prepaid expenses and other current assets..............................         407,612           187,655          (745,091)
  Accounts payable and accrued liabilities...............................         (63,771)         (896,592)        2,065,466
  Customer advances and unearned revenues................................         106,416           119,124           317,285
  Recoverable income taxes...............................................         237,466           205,223          (143,395)
  Other assets...........................................................         (79,329)          (38,354)          341,730
                                                                           ---------------    --------------    --------------
Net cash generated from / (used in) continuing operations................      (6,720,388)       (2,886,563)          144,073
                                                                           ---------------    --------------    --------------
Net cash used in discontinued operations ................................      (2,128,786)         (373,744)         (509,568)
                                                                           ---------------    --------------    --------------
Net cash used in operating activities ...................................      (8,849,174)       (3,260,307)         (365,495)
                                                                           ---------------    --------------    --------------


Cash flows from investing activities
  Payments to acquire property, plant and equipment......................        (377,629)         (596,763)       (1,855,901)
  Purchase consideration for acquisitions................................      (3,411,720)               --                --
  Cash received from discontinued operations.............................              --                --           407,000
  Proceeds from sales of property, plant and equipment...................          35,571            34,980            24,810
                                                                           ---------------    --------------    --------------
    Net cash used in investing activities................................     (3,753,778)         (561,783)        (1,424,091)
                                                                           ---------------    --------------    --------------

Cash flows from financing activities
  Net proceeds from issue of equity shares...............................              --            73,473           302,925
                                                                           ---------------    --------------    --------------
    Net cash provided by financing activities............................              --            73,473           302,925
                                                                           ---------------    --------------    --------------
Effect of exchange rate changes on cash..................................         466,891         1,004,004           (83,156)
Net decrease in cash and cash equivalents................................     (12,136,061)       (2,744,613)       (1,569,817)
Cash and cash equivalents at the beginning of the year...................      26,519,847        14,383,786        11,639,173
                                                                           ---------------    --------------    --------------
Cash and cash equivalents at the end of the year.........................  US$ 14,383,786     US$11,639,173    US$ 10,069,356
                                                                           ---------------    --------------    --------------
  Supplemental disclosure of cash flow information:
    Income taxes paid....................................................      US$     --         US$    --       US$  27,981
    Interest paid........................................................      US$  4,105         US$   942       US$     189


                              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.

         In March 2001, the Company acquired Value Communications Corporation
("ValuCom"), an Illinois Corporation that provided internet-based prepaid long
distance services in the United States. On April 8, 2004, the Company sold its
phone card business to Worldquest Networks, Inc. (See Note 3).

         The Company is one of the leading Internet destinations, or websites,
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 mobile 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, 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 receivable,
goodwill, deferred tax assets and retirement benefits. 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 website. To the extent that minimum guaranteed
impressions are not met, the Company defers recognition of the corresponding
revenues until the guaranteed impression levels are achieved.

         The Company also earns revenues on sponsorship contracts for fees
relating to the design, coordination, and integration of the customers'
content. 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 2003,
2004 and 2005, 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 and shipping costs recovered from
customers.

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

         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 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 website. To the extent that
minimum guaranteed impressions are not met, the Company defers recognition of
the corresponding revenues until the guaranteed impression levels are achieved.

         (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

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

         Sales and marketing

         Sales and marketing expenses primarily include employee compensation
for sales and marketing personnel, advertising and 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 were no longer payable and which were earlier charged to sales
and marketing expenses.

         Product development

         Product development costs primarily include internet communication
costs, software usage fees, software development expenses and compensation to
product development personnel. (See note 2(h)). Product development expenses
include bandwidth costs of US$730,607,US$660,166 and US$896,478 for the years
ended March 31, 2003, 2004 and 2005 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 were 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 and 2005, of US$9,461,567 and US$8,777,756 respecitvely, 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. Costs incurred for website development are
accounted for in accordance with EITF 00-02 - "Accounting for Website
development cost"

         (i)      Goodwill and intangible assets

         The Company capitalizes intangible assets and goodwill resulting from
business combinations.

         In accordance with the two-step methodology required by SFAS No. 142
"Goodwill and other Intangible Assets", the Company tests the carrying 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.

         Where the Management concludes that the carrying amounts are impaired,
the impairment loss is recognized in operations.

         (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)      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.

         (n)      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. The Company has adopted the pro forma
disclosure provisions of SFAS 123 and SFA 148 for its various plans. Had
Compensation cost for the Company's stock based compensation plan been
determined in a manner consistent with the fair value approach described in
SFAS 123 the Company's net loss and basic loss per share as reported would
have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                   Years ended March 31,
                                              -----------------------------------------------------------------
                                                      2003                  2004                  2005
                                                      ----                  ----                  ----
<S>                                               <C>                    <C>                   <C>
         Net Loss As reported..............     US$(18,981,150)        US$(5,719,842)        US$(1,427,590)
         Less: Stock compensation expenses
               included in reported net
               income......................
                                                           403                   426                   448
                                              --------------------- --------------------- ---------------------
         Add:  Total stock-based employee
               compensation expense
               determined under fair value
               based method for all
               awards......................           (257,569)             (647,790)           (1,259,234)
                                              --------------------- --------------------- ---------------------
         Adjusted pro forma................     US$(19,238,316)        US$(6,367,206)        US$(2,686,376)
                                              --------------------- --------------------- ---------------------
         Loss per share - basic and
         diluted
             As reported...................          US$.(1.48)            US$.(0.45)            US$ (0.11)
                                                  ===============       ===============       ===============
             Adjusted pro forma............          US$.(1.50)            US$.(0.50)            US$ (0.21)
                                                  ===============       ===============       ===============
</TABLE>

         The fair value of each warrant is estimated on the date of grant using
the Black-Scholes model with the following assumptions:

                                                      Years ended March 31,
                                                  -----------------------------
                                                  2003         2004        2005
                                                  ----         ----        ----
         Dividend yield.....................        0%           0%          0%
         Expected life......................   4 Years      4 Years     4 Years
         Risk free interest rates...........     5.75%           5%       4.23%
         Volatility.........................   118.59%       112.6%     111.17%

         See Note 15 - "Stock based compensation" for other proforma
disclosures.

         See "Recent Accounting Pronouncements" below regarding the
applicability of the statement of financial accounting standards SFAS 123 R
("SFAS- 123R").

         (o)      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.

         (p)      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.       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 US$200,000 of the total consideration at
closing with the remaining US$300,000 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 paid Rediff US$50,000 for twelve consecutive months
commencing in May 2004 for the advertising services.

         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 and 2005. 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,
                                                   --------------------------------------------------------------
                                                         2003                    2004                 2005
                                                   ------------------     -----------------     -----------------
<S>                                                     <C>                    <C>                     <C>
Operating revenues ............................       US$8,680,031           US$4,487,598            US$98,922
                                                   ------------------     -----------------     -----------------
Income (loss) from operations before taxes
(after eliminating inter-company
transactions) (Including impairment charges
of US$ 5,100,000 and US$ 1,866,380
for the fiscal year ended March
31, 2003 and 2004) ............................         (6,915,776)            (2,370,982)            (207,710)
                                                   ------------------     -----------------     -----------------

Income tax benefit (provision) ................             66,000                      -                    -
                                                   ------------------     -----------------     -----------------
Income (loss) from discontinued operations ....      US$(6,803,695)         US$(2,370,982)         US$(207,710)
                                                   ------------------     -----------------     -----------------
</TABLE>

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

         Assets held for sale at March 31, 2004 and 2005, relating to the phone
card business comprised of the following assets written down to their net
realizable values:

                                                   2004           2005
                                                   ----           ----

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

         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.

         Plant and equipment and inventory that were not transferred were
completely written off. The Company evaluated its phone card business reporting
unit for goodwill impairment. Since the fair value of the reporting unit, as
indicated by the sales price was lower than the carrying value, the Company
compared the book value of its goodwill to the implied fair value of the
goodwill and recorded a charge for the difference.

         The implied fair value of the goodwill was calculated as the fair
value of the reporting unit (sales price) less the fair value of the assets and
liabilities included in the reporting unit.

4.       Prepaid Expenses and Other Current Assets

         Prepaid expenses and other current assets comprise of:

                                                       As of March 31,
                                                       ---------------
                                                  2004                2005
                                                  ----                ----
Prepaid expenses .......................... US$   467,072       US$   345,197
Cost relating to shelf registration .......             -             626,061
Vendor advances ...........................             -             254,946
Rent deposits..............................       221,164             437,418
Other advances and deposits................       183,398             141,731
Loans to employees.........................        38,736              36,706
Accrued interest...........................       201,414              39,816
                                            -------------       -------------
                                            US$ 1,111,784       US$ 1,881,875
                                            =============       =============

5.       Property, Plant and Equipment

         Property, plant and equipment comprise of:

                                                       As of March 31,
                                                       ---------------
                                                  2004                2005
                                                  ----                ----
Furniture and fixtures....................... US$  456,926       US$  595,556
Computer equipment and software..............    6,919,479          8,467,908
Office equipment.............................      312,095            322,472
Vehicles.....................................      286,166            368,415
Leasehold improvements.......................      322,053            197,493
Deferred website development costs...........      628,633            281,636
Capital work in progress.....................       35,945             63,363
                                              ------------       ------------
Property, plant and equipment, cost..........    8,961,297         10,296,843
Accumulated depreciation and amortization....   (7,470,057)        (7,739,090)
                                              ------------       ------------
Property, plant and equipment, net........... US$1,491,240       US$2,557,753
                                              ============       ============

6.       Goodwill

         The Company's goodwill amounts arise from its acquisitions of
Thinkindia, India Abroad and Valucom. Each of these businesses represents a
reporting unit. The Company's business in India has been treated as a single
reporting unit, and since none of the components in India benefited from the
synergies from acquisitions in the United States, no goodwill was allocated to
this reporting unit. The segment realignment did not effect the determination
of reporting units or the allocation of goodwill.

         The Company has tested each reporting unit for impairment of goodwill
annually, or earlier upon the occurrence of a triggering event. Impairment
charges recorded are as follows:

         ----------------------------------------------------------
                                   2003         2004          2005
         ----------------------------------------------------------
                                          (in US$ millions)
         -----------------------------------------------------------
         India Abroad            US$3.2          US$-          US$-
         -----------------------------------------------------------
         Valucom                    5.1          1.66             -
         -----------------------------------------------------------
         Rediff.com, Inc.             -             -             -
         (Thinkindia)
         -----------------------------------------------------------
         Total                   US$8.3       US$1.66          US$-
         -----------------------------------------------------------

         India Abroad

         In the fourth quarter of fiscal years 2003, 2004 and 2005 the Company
performed its annual impairment test for goodwill of India Abroad. Management
determined the fair value of the business using the discounted cash flow method
in all years.

         In the fiscal year ended March 31, 2003 management determined the fair
value of the business was lower than its carrying value. The comparison of the
carrying amount of goodwill to its implied fair value resulted in an impairment
charge of US$ 3,200,700. In the fiscal years ended March 31, 2004 and 2005, the
fair value of the reporting unit exceeded its carrying value indicating that
goodwill was not further impaired.

         Valucom

         Valucom's annual impairment testing date was January 1. In the fiscal
year ended March 31, 2003 the management identified the following triggering
events that required testing of goodwill for impairment at a date earlier than
the annual date:

                  a. A settlement was reached with Valucom's former founder
shareholders .

                  b. Deregulation of the Indian long distance telecom market,
privatization of telecom providers in India and the commencement of Voice over
Internet Protocol ("VOIP") had caused irreversible and significant reductions
in the pricing of long distance calls between India and the United States.

                  c. The number of Indian software professionals in the U.S. (a
core customer group) had fallen significantly as a result of the events of
September 11, 2001 and the subsequent downturn in the technology market.

         Accordingly, the Company re-evaluated goodwill that arose on Valucom's
acquisition and 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. Management used the discounted cash flow method to determine
such values.

         On April 8, 2004 the Company sold the phone card business for a
consideration of US$ 500,000. During the fiscal year ended March 31, 2004, the
Company recorded a further impairment charge of US$ 1,661,222 for the Valucom
goodwill (included in the loss from discontinued operations), based on the sale
value of the phone card business.

         Rediff.com, Inc. (formerly Thinkindia)

         During fiscal 2002 due to the unfavourable market environment,
including general conditions affecting the technology industry together with
the downturn in the valuation of dot.com companies, the Company re-evaluated
the goodwill that arose on Rediff.com, Inc's acquisition for impairment. Since
the projected cash flows of the Thinkindia business were negative, the Company
closed down its facilities in California, terminated substantially all staff,
relocated the remaining operation to New York, and wrote off the unamortized
goodwill balance of US$ 3,316,508.

7.       Other Assets

         Other assets comprise 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
18).

8.       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.

         Six of the Company's largest shareholders beneficially hold 77% of the
Company's equity share capital in aggregate. As a result, such shareholders, if
they were to act collectively, could exercise control or significantly
influence most matters requiring shareholder approval, including significant
corporate transactions.

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

                                            Years ended March 31,
                                            ---------------------
                                       2003           2004             2005
                                       ----           ----             ----
    Advertising revenues ..........  US$ 1,345     US$  11,537      US$  53,991

         Balances with related parties include:

                                                         As of March 31,
                                                         ---------------
                                                      2004             2005
                                                      ----             ----

    Receivable for advertising income............. US$   8,756      US$  25,156
    Loans to officers............................. US$  33,741      US$  28,918



         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,
     ---------------------

    2006...................................................           32,106
    2007...................................................           27,370
    2008...................................................           17,826
    2009 ..................................................            9,263
    2010 and thereafter....................................            5,840
                                                             ----------------
    Total payments.........................................        US$92,405
                                                             ================

9.       Shareholders' Equity

         On August 9, 2004, the authorized share capital of the Company was
increased from 20,000,000 equity shares to 24,000,000 equity shares.

         During the fiscal year ended March 31, 2005, the Company issued
105,250 ADSs, representing 52,625 equity shares on account of the exercise of
stock options pertaining to the 2002 Stock Option Plan at various grant prices,
the aggregate proceeds of which were US$ 302,925.

10.      Retirement Benefits

         Gratuity

         The Company provides for gratuity, an unfunded defined benefit
retirement plan covering eligible employees in India. 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 status of the gratuity plans and the
amounts recognized in the Company's financial statements in for the fiscal years
ended March 31, 2003, 2004 and 2005. The measurement date used is March 31 of
the relevant fiscal year.

<TABLE>
<CAPTION>
                                                                          Years ended March 31,
                                                                          ---------------------
                                                              2003                2004               2005
                                                        -----------------   -----------------   ----------------
<S>                                                              <C>                 <C>                <C>
Change in benefit obligation
Benefit obligation at the beginning of the year......          US$53,729          US$66,439          US$88,021
Actuarial (gain) loss................................             (8,631)             (3,042)            (6,229)
Service cost.........................................             14,328              14,875             16,923
Interest cost........................................              5,316               5,350              5,675
Benefits paid........................................                  -              (2,724)            (7,647)
Effect of exchange rate changes......................              1,697               7,123               (219)
                                                        -----------------   -----------------   ----------------
Benefit obligation at the end of the year............          US$66,439           US$88,021          US$96,524
Unrecognized net actuarial (loss) gain...............               (773)              2,229              8,517
                                                        -----------------   -----------------   ----------------
Accrued liability....................................          US$65,666           US$90,250         US$105,041
                                                        -----------------   -----------------   ----------------
</TABLE>

         Net gratuity cost for the years ended March 31, 2003, 2004 and 2005
comprise of the following:

<TABLE>
<CAPTION>
                                                                            Years ended March 31,
                                                                          ---------------------
                                                             2003                2004               2005
                                                        -----------------   -----------------   ----------------
<S>                                                              <C>                 <C>                <C>
Service cost.........................................          US$14,328           US$14,875          US$16,923
Interest cost........................................              5,316               5,351              5,675
Recognized net actuarial loss........................                381                   -                  -
                                                        -----------------   -----------------   ----------------
Net gratuity cost....................................          US$20,025           US$20,226          US$22,598
                                                        -----------------   -----------------   ----------------
</TABLE>


<TABLE>
         The assumptions used in accounting for gratuity in the years ended
March 31, 2003, 2004 and 2005 were as follows:
<CAPTION>
                                                                         Years ended March 31,
                                                                         ---------------------
                                                                  2003            2004           2005
                                                                  ----            ----           ----

<S>                                                                <C>             <C>            <C>
Discount rate............................................          8%              7%             8%

Rate of increase in compensation.........................    8% for first 3   8% for first   8% for first
                                                              years and 5 %    2 years and    year and 6%
                                                               thereafter     5% thereafter   thereafter
</TABLE>

         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,
                  ----------------------

                  2006 ...............................    9,835
                  2007 ...............................    9,904
                  2008 ...............................   10,431
                  2009 ...............................   12,242
                  2010 ...............................   18,478
                  2011-14 ............................   95,025

         The expected benefits are based on the same assumptions used to
measure the Company's benefit obligations as of March 31, 2005.

         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$76,727, US$77,677 and US$ 87,710 for the years ended March 31, 2003, 2004
and 2005 respectively.

11.      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,
                                                                   ---------------------
                                                      2003                  2004                  2005
                                               -------------------   -------------------   -------------------
<S>                                                       <C>                   <C>                   <C>
Office space ...............................        US$   423,658         US$   452,077        US$   436,798
Computers and equipments ...................               36,287                29,214               18,378
Telecom leased lines .......................              576,211               504,450                     -
Residential apartments for employees .......              121,008               113,549              110,865
                                               -------------------   -------------------   -------------------
Total operating lease expense ..............       US$  1,157,164        US$  1,099,290          US$  566,041
                                               ===================   ===================   ===================
</TABLE>

         The minimum annual rental commitments under the above operating leases
that have initial or remaining terms in excess of one year are as follows:

             Years ended March 31,
             ---------------------

            2006.................................       249,386
            2007.................................       145,552
            2008.................................        61,833
            2009 ................................             -
            2010 and thereafter..................             -
                                                     ----------
            Total payments.......................    US$456,771
                                                     ----------

12.      Income Taxes

<TABLE>
         The income tax expense (benefit) consists of:
<CAPTION>
                                                                         Years ended March 31,
                                                                         ---------------------
                                                             2003                2004                2005
                                                         ---------------    ----------------    ----------------
<S>                                                              <C>                <C>                 <C>
     Current taxes -- all foreign (State tax).........     US$   237,932       US$    4,862        US$  37,994
     Deferred taxes, net of allowance.................                --                 --                 --
                                                         ---------------    ----------------    ----------------
     Net income tax expense (benefit).................     US$   237,932       US$    4,862        US$  37,994
                                                         ===============    ================    ================
</TABLE>


         The tax effects of significant temporary differences that resulted in
deferred tax assets and liabilities are as follows:

                                                        As of March 31,
                                           -------------------------------------
                                                   2004                2005
                                                   ----                ----
<
    Depreciation.........................   US$   2,746,660      US$  2,668,719
    Bad debt allowance...................           447,605             494,864
    Net operating loss carry forwards....        11,465,320          10,538,594
    Retirement benefits -- Gratuity......            51,131              70,011
    Website development costs............            (1,955)              4,431
    Other................................            37,578               7,250
                                            ---------------     ---------------
                                                 14,746,339          13,803,870
    Less: Valuation allowance............       (14,746,339)        (13,803,870)
                                            ---------------     ---------------
    Net deferred tax asset...............   US$          --     US$          --
                                            ===============     ===============

         The Company increased the valuation allowance by US$4,677,381 and
US$1,704,681 for the years ended March 31, 2003 and 2004 respectively. The
Company decreased the valuation allowance by US$942,469 for the year ended
March 31, 2005 mainly on account of disallowance of expenses by the Income tax
department of India.

         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$23 million will expire between April 1, 2005 and
March 31, 2013.

         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, 2005, ValuCom has net operating loss carryforwards
available to offset future federal taxable income of US$2,915,000, which expire
in years 2021 through 2025.

         As of March 31, 2005, Rediff Holdings, Inc., has net operating loss
carryforwards of approximately US$7,622,000, for federal income tax purposes,
which expire in years 2020 through 2025.

         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.

   13.   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 3, 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, 2003, 2004 and 2005.

<TABLE>
<CAPTION>
                                                         Years ended March 31,
                                                         ---------------------
                                            2003                                              2004

                       India Online      U.S. Publishing                      India Online    U.S. Publishing
                         Business           Business            Total           Business         Business          Total
                         --------           --------            -----           --------         --------          -----
<S>                       <C>              <C>               <C>              <C>              <C>            <C>

Revenues from external
 customers:
Advertising             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            861,728          863,795         1,725,523        1,451,772          681,191      2,132,963
                    ------------------------------------------------------------------------------------------------------
                            2,767,244        5,804,598         8,571,842        3,636,183        5,810,420      9,446,603
                    ------------------------------------------------------------------------------------------------------
Inter segment
revenues:

Advertising                    87,930          286,184           374,114           31,611           34,000         65,611
                    ------------------------------------------------------------------------------------------------------
Total revenues              2,855,174        6,090,782         8,945,956        3,667,794        5,844,420      9,512,214
                    ------------------------------------------------------------------------------------------------------
Cost of revenues
-Third-party                1,078,472        4,481,618         5,560,090        1,130,373        3,608,029      4,738,402

-Inter segment                 13,554               --            13,554               --               --             --
                    ------------------------------------------------------------------------------------------------------
Total cost of               1,092,026        4,481,618         5,573,644        1,130,373        3,608,029      4,738,402
revenues
                    ------------------------------------------------------------------------------------------------------

                    ------------------------------------------------------------------------------------------------------
Segment Gross           US$ 1,763,148    US$ 1,609,164     US$ 3,372,312    US$ 2,537,421    US$ 2,236,391  US$ 4,773,812
                        =============    =============     =============    =============    =============  =============
Profits

Segment Assets         US$ 18,055,607    US$ 9,334,043    US$ 27,389,650   US$ 13,935,845   US$ 10,220,059 US$ 24,155,904


[table continued]
<CAPTION>

                                   Years ended March 31,
                                   ---------------------

                                           2005

                              India            U.S.
                              Online       Publishing
                              Business       Business          Total
                              --------       --------          -----
<S>                            <C>            <C>              <C>

Revenues from external
 customers:
Advertising                  US$ 4,135,225  US$ 5,567,102    US$ 9,702,327
Fee based services               2,421,095        503,242        2,924,337
                          ------------------------------------------------
                                 6,556,320      6,070,344       12,626,664
                          ------------------------------------------------
Inter segment revenues:

Advertising                          6,353              -            6,353
                          ------------------------------------------------
Total revenues                   6,562,673      6,070,344       12,633,017
                          ------------------------------------------------
Cost of revenues
-Third-party                     1,593,218      3,519,906        5,113,124

-Inter segment                          --             --               --
                          ------------------------------------------------
Total cost of revenues           1,593,218      3,519,906        5,113,124
                          ------------------------------------------------

Segment Gross Profits        US$ 4,963,102  US$ 2,550,438    US$ 7,519,893
                             =============  =============    =============

Segment Assets               US$16,270,665  US$ 9,195,006   US$ 25,465,671

</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, 2003, 2004 and 2005.

                                       Years ended March 31,
                                       ---------------------

                                   2003              2004                2005
                                   ----              ----                ----
    Segment Gross Profit ...  US$ 3,372,312      US$ 4,773,812    US$ 7,519,893
    Inter segment expenses..        360,560             65,611            6,353
    Operating expenses......     14,903,365          7,927,067        9,226,711
    Other income (loss).....         18,090           (125,132)         531,285
                             ---------------   ----------------  ---------------
    Loss from continuing
    operations before
    income taxes........... US$ (11,873,523)    US$ (3,343,998)  US$ (1,181,886)
                            ----------------   ----------------  ---------------

    Revenues are derived from customers based as follows:

                                 Years ended March 31,
                                 ---------------------
                                2003                2004                 2005
                                ----                ----                 ----
    United States......   US$  5,573,161        US$5,377,198        US$5,352,176
    India ..............       2,757,482           3,665,317           6,898,291
    Rest of the world...         241,199             404,088             376,197
                          --------------        ------------       -------------
    Total revenues .....  US$  8,571,842        US$9,446,603       US$12,626,664
                          --------------        ------------       -------------


    Net property, plant and equipment by location is as follows:

                                              As of March 31,
                                              ---------------
                                          2004                    2005
                                          ----                    ----
    United States and Canada...        US$244,116             US$207,310
    India .....................         1,247,124              2,350,443
                                    -------------           ------------
    Total......................     US$ 1,491,240           US$2,557,753
                                    -------------           ------------



     14. Concentration 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, 2003, 2004 and 2005.

   15.   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 as under:

         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, 2003, 2004 and 2005, the Company
recognized a compensation cost of US$403, US$426 and US$448, 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:                               2003        2004        2005
--------------------------------                               ----        ----        ----
<S>                                                           <C>        <C>          <C>
Warrants available to be granted, beginning of year....       5,350      18,250       33,725
Forfeited..............................................      12,900      22,975       7,750
Options granted........................................          --      (7,500)     (30,000)
                                                             ------      ------      ------
Warrants available to be granted, end of year..........      18,250      33,725      11,475
                                                             ======      ======      ======
</TABLE>


         Activity in the warrants of the 1999 ESOP for the years ended March
31, 2003, 2004 and 2005 is as follows:

<TABLE>
<CAPTION>
                                                       Years ended March 31,
                    -------------------------------------------------------------------------------------------------------------
                                    2003                               2004                                   2005
                    ----------------------------------  -------------------------------      ------------------------------------
                       Shares                              Shares                               Shares
                    arising out          Weighted        arising out       Weighted           arising out         Weighted
                     of options       average price      of options      average price        of options        average price
                    -----------   --------------------   ----------  ------------------      ------------   ---------------------
<S>                    <C>            <C>          <C>    <C>          <C>          <C>      <C>               <C>          <C>
Outstanding at
the beginning of
the year........       274,650      US$ 6.52   Rs  318    261,750    US$ 6.49    Rs 308      246,275         US$6.92    Rs. 300
Granted.........            --            --        --      7,500    US$10.32    Rs 474       30,000        US$10.78    Rs. 500
Lapsed .........            --            --        --         --          --        --     (176,375)        US$6.13    Rs. 267
                       -------      --------   -------    -------    --------    ------     --------         -------    -------
Forfeited.......       (12,900)     US$10.84   Rs  524    (22,975)   US$ 9.67    Rs 444       (7,750)        US$8.29    Rs. 362
                       -------      --------   -------    -------    --------    ------     --------         -------    -------
Outstanding at
the end of the
year............       261,750      US$ 6.49   Rs  308    246,275    US$ 6.92    Rs 300       92,150         US$6.45    Rs. 281
                       -------      --------   -------    -------    --------    ------     --------         -------    -------

</TABLE>


<TABLE>
         Activity in the warrants available to be granted under the 1999 ASOP is as follows:
<CAPTION>

                                                                    Shares available to be granted as options
                                                                 ---------------------------------------------
                                                                             Years ended March 31,
                                                                 ---------------------------------------------
    Associate Stock Option Plan 1999:                                2003             2004             2005
                                                                 -----------      -----------        ---------
<S>                                                                 <C>              <C>              <C>
    Warrants available to be granted, beginning of year..           137,650          109,650          109,650
    Forfeited............................................                --               --               --
    Options granted......................................           (28,000)              --          (6,000)
                                                                    -------          -------          -------
    Warrants available to be granted, end of year........           109,650          109,650          103,650
                                                                    =======          =======          =======
</TABLE>



<TABLE>
         Activity in the warrants of the 1999 ASOP for the years ended March 31, 2003, 2004 and 2005 is
as follows:
<CAPTION>

                                                       Years ended March 31,
                    -------------------------------------------------------------------------------------------------------------
                                    2003                               2004                                   2005
                    ----------------------------------  -------------------------------      ------------------------------------
                       Shares                             Shares                               Shares
                    arising out         Weighted        arising out       Weighted           arising out         Weighted
                     of options      average price      of options      average price        of options        average price
                    -----------   -------------------   ----------  ------------------      ------------   ---------------------
<S>                     <C>          <C>          <C>     <C>         <C>          <C>         <C>              <C>           <C>
Outstanding at the
beginning of
the year ..........     60,350     US$12.32    Rs 601     88,350     US$9.38    Rs 446         88,350        US$10.27      Rs 446
Granted ...........     28,000     US$ 2.26    Rs 109         --          --        --          6,000        US$15.11      Rs 659
Lapsed ............         --           --        --         --          --        --        (59,350)       US$13.81      Rs 610
Forfeited .........         --           --        --         --          --        --             --              --          --
                       -------     --------    ------     ------    --------    ------         ------        --------      ------
Outstanding at the
end of the year ...     88,350     US$ 9.38    Rs 446     88,350    US$10.27    Rs 446         35,000         US$4.67      Rs 204
                       -------     --------    ------     ------    --------    ------         ------        --------      ------
</TABLE>


    2002 Stock Option Plan

         In January 2002 the Company's Board of Directors approved the 2002
Stock Option Plan ("2002 plan"), which provides 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.

<TABLE>
         Activity in the warrants available to be granted under the 2002 plan
is as follows:
<CAPTION>

                                                                Shares available to be
                                                                  granted as options
                                                                Years ended March 31,
                                                                ---------------------

   ADS linked Employee Stock Option Plan 2002:                      2004          2005
                                                                    ----          ----
<S>                                                                <C>           <C>
   Warrants available to be granted, beginning of year......       59,500        12,750
   Forfeited ...............................................       69,250         4,875
   Options granted..........................................     (116,000)      (10,500)
                                                                 --------       -------
   Warrants available to be granted, end of year ...........       12,750         7,125
                                                                 ========       =======
</TABLE>

<TABLE>
         Activity in the warrants of the 2002 plan for the fiscal year ended
March 31,  2005 is as follows:
<CAPTION>

                                                   Year ended March 31, 2004           Year ended March 31, 2005
                                                   -------------------------           -------------------------
                                                       Shares       Weighted             Shares       Weighted
                                                     arising out    average            arising out    average
                                                     of options      price             of options      price
                                                     ----------      -----             ----------      -----
 <S>                                                   <C>             <C>                <C>            <C>
Outstanding at the beginning of the year.......       220,500       US$2.26              235,025      US$4.64

Granted........................................       116,000       US$7.75               10,500     US$10.98

Forfeited .....................................       (69,250)      US$2.28               (4,875)     US$2.26

Exercised .....................................       (32,225)      US$2.28              (52,625)     US$5.53
                                                      -------       -------              -------      -------

Outstanding at the end of the year ............       235,025       US$4.64              188,025      US$5.22
                                                      -------       -------              -------      -------
</TABLE>


         2004 Stock Option Plan

                  In June 2004, the Company's Board of Directors approved the
2004 Stock Option Plan ("2004 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 2004
plan using the intrinsic value method of APB Opinion No. 25. Unless terminated
sooner, this plan will terminate automatically in January 2014. A total of
358,000 of the Company's equity shares are currently reserved for issuance
pursuant to 2004 plan.

         Under the terms of the 2004 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 2004 plan, the Company has obtained necessary approvals.
During the fiscal year ended March 31, 2005, the Company made appropriate
filings with the SEC prior to the first exercise date of the options granted
under the 2004 plan.

         Activity in the warrants available to be granted under the 2004 plan
is as follows:

                                                          Shares available to be
                                                             granted as options
                                                           Years ended March 31,
                                                           ---------------------

      ADS linked Employee Stock Option Plan 2004:                        2005
                                                                         ----
      Warrants available to be granted, beginning of year...           358,000
      Forfeited.............................................                 -
      Options granted.......................................          (284,500)
                                                                     ---------
      Warrants available to be granted, end of year.........            73,500
                                                                     =========


         Activity in the warrants of the 2004 plan for the fiscal year ended
March 31, 2005 is as follows:

                                                       Year ended March 31, 2005
                                                       -------------------------
                                                         Shares
                                                         arising       Weighted
                                                         out of        average
                                                         options        price
                                                         -------        -----

      Outstanding at the beginning of the year........         -             -

      Granted.........................................   284,500      US$10.84

      Forfeited.......................................         -             -

      Exercised.......................................         -             -
                                                         -------       -------
      Outstanding at the end of the year..............   284,500     US$ 10.84
                                                         -------       -------

         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,
                                               ----------------------------------------------------------------------
                                                        2003                     2004                      2005
                                                        ----                     ----                      ----

<S>                                                 <C>                       <C>                       <C>
    Net Loss As reported                          US$(18,981,150)           US$(5,719,842)            US$(1,427,590)

    Less:   Stock compensation expenses
          included in reported net income..                  403                      426                       448

    Add:    Total stock-based  employee
          compensation expense determined
          under fair value based method
          for all awards ..................             (257,569)                (647,790)               (1,258,234)
                                               ----------------------------------------------------------------------
    Adjusted pro forma ....................       US$(19,238,316)           US$(6,367,206)            US$(2,686,376)
                                               ----------------------------------------------------------------------
    Loss per share - basic and diluted                 US$ (1.48)               US$ (0.45)                US$ (0.11)
        As reported .......................

    Adjusted pro forma ....................            US$ (1.50)               US$ (0.50)                US$ (0.21)
                                                       =========                =========                 =========
</TABLE>



         The fair value of each warrant is estimated on the date of grant using
the Black-Scholes model with the following assumptions:

                                                     Years ended March 31,
                                                     ---------------------
                                                  2003         2004        2005
                                                  ----         ----        ----

        Dividend yield........................      0%           0%          0%


        Expected life......................... 4 Years      4 Years     4 Years

        Risk free interest rates..............   5.75%           5%       4.23%

        Volatility............................ 118.59%       112.6%     111.17%

<TABLE>
         The following table summarizes information about stock options
outstanding as at March 31, 2005:
<CAPTION>

                                                          Options Outstanding
                                 ---------------------------------------------------------------------
   Range of Exercise Price           Number of             Weighted
                                      shares               average
                                    arising out           remaining                Weighted average
                                    of options         contractual life                 price
                                    ----------         ----------------      -------------------------
<S>                                   <C>                 <C>                  <C>             <C>
      US$  1.72 - 2.60                151,650             1.36 years         US$   2.51   Rs.  109.3
      US$  6.44 - 9.29                106,250             1.59 years         US$   7.58   Rs.  330.5
      US$ 9.81 - 13.58                 57,500             1.00 years         US$  10.38   Rs.  452.8
      US$14.92 - 20.43                  7,400             2.15 years         US$  15.38   Rs.  670.9
      US$23.34 - 24.92                  3,000                 -              US$  23.65   Rs.1,031.8
</TABLE>


     16. 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.

     17. 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 29,145, 319,542 and 304,957 stock options outstanding as on March 31,
2003, 2004 and 2005 respectively, can potentially dilute basic EPS in the future
were anti dilutive in those years.

     18. 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, 2005, the
face amount of the D&O Policy is approximately US$20.5 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$257,694 (based on the noon buying rate at March 31, 2005),
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.

         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 "RCC 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
RCC 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.

         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.

         Action for Injunction and Damages

         Proceedings have been commenced by Times Internet Limited against one
of our managers and us seeking a permanent injunction restraining the said
manager, a former employee of Times Internet Limited and currently one of our
senior managers, from disclosing confidential information, trade secrets
copyrighted information and to restrain him from acting in breach of his
employment contract with Times Internet Limited dated February 12, 2000. Times
Internet Limited claims that the manager's employment with us is in breach of
his employment contract. Times Internet Limited also claims damages in the sum
of Rs. 10 million (approximately US$230,000). Since the commencement of these
proceedings, Times Internet Limited has not made any application for interim
relief and no orders have been issued by the Court that adversely affect either
our manager or us. Although we believe that we have valid defenses against the
claims of Times Internet Limited, if we are unsuccessful in our defenses
against such claims and Times Internet Limited proves that it has suffered
damages, the Company could be required to terminate the employment of the
manager and pay monetary damages.

         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.

     19. New Accounting pronouncement

         In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004),
"Share-Based Payments", or SFAS 123R. This statement eliminates the option to
apply the intrinsic value measurement provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" to stock
compensation awards issued to employees. Rather, SFAS 123R requires companies
to measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award. That cost
will be recognized over the period during which an employee is required to
provide services in exchange for the award - the requisite service period
(usually the vesting period). We are required to apply SFAS 123R, effective
from the first fiscal year beginning after June 15, 2005. We have not yet
quantified the effect of the future adoption of SFAS 123R on a going forward
basis.

<PAGE>



      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL
            STATEMENT SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS




To the Shareholders and Board of Directors
Rediff.com India Limited

         We have audited the consolidated financial statements of Rediff.com
India Limited as of March 31, 2004 and 2005 and for each of the years in the
three year period ended March 31, 2005 and have issued our report thereon dated
June 29, 2005 (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:  June 29, 2005

<PAGE>

<TABLE>
<CAPTION>


                                   Schedule of Valuation and Qualifying Accounts
                                     Allowance for trade accounts receivables


  Description        Balance at      Charged to cost and     Write offs       Effect of          Balance at
                    Beginning of          expenses                          exchange rate           end
                      Period                                                   changes           of period
-----------------------------------------------------------------------------------------------------------------
<S>                 <C>                    <C>               <C>                <C>               <C>
  Fiscal 2005     US$1,229,677           US$205,840               -           US$(607)         US$1,434,910

-----------------------------------------------------------------------------------------------------------------
  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:  June 30, 2005

<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:   June 30, 2005

<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:  June 30, 2005

                                             /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:   June 30, 2005

                                                  /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, 2005 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:  June 30, 2005                            /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, 2005 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, 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     June 30, 2005                                 /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.