UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549










FORM 20-F










| |  ̈ | 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, 2015



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------



| |  ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | -------------------------------------------------------------------------------------------



Date of event requiring this shell company
report



For the transition period from 
to



Commission File Number 000-30735










REDIFF.COM INDIA LIMITED

(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

+91-22-6182-0000

(Address of principal executive offices)



Swasti Bhowmick

Tel No - +91-22-6182-0000 ext 390 Facsimile
- +91-22- 2445-5346

(Name, telephone, e-mail and/or facsimile
number of company contact person)



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
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------
|American
        Depositary Shares,
        each
        represented by one-half of one
        equity
        share, par value ₹5 per share |  | NASDAQ Global Market                         



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

None

(Title of Class)



Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act:

Not Applicable

(Title of Class)










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: 13,795,178
Equity Shares.



Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.    Yes   ̈    No  x



If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.    Yes   ̈    No  
x



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 whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).    Yes  x    No   ̈



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer   ̈            Accelerated
filer   ̈            Non-accelerated
filer  x



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:

|             |                                                                                                          |         
|------------ | -------------------------------------------------------------------------------------------------------- | --------
|U.S. GAAP  x | International Financial Reporting Standards as issued by the International Accounting Standards Board   ̈ | Other   ̈





If “Other” has been checked in
response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17   ̈    Item 18   ̈



If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x


















TABLE OF CONTENTS

|                                                                                      | Page
|------------------------------------------------------------------------------------- | ----
|                                                                                      |     
|CROSS REFERENCE TO FORM 20-F ITEM HEADINGS                                            | 1   
|CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS                                    | 3   
|FORWARD-LOOKING STATEMENTS                                                            | 4   
|EXCHANGE RATES                                                                        | 5   
|SELECTED CONSOLIDATED FINANCIAL DATA                                                  | 6   
|RISK FACTORS                                                                          | 7   
|BUSINESS                                                                              | 26  
|MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 35  
|MANAGEMENT                                                                            | 50  
|RELATED PARTY TRANSACTIONS                                                            | 57  
|EXCHANGE CONTROLS                                                                     | 58  
|TRADING MARKET                                                                        | 59  
|RESTRICTION ON FOREIGN OWNERSHIP OF INDIAN SECURITIES                                 | 61  
|PRINCIPAL SHAREHOLDERS                                                                | 65  
|TAXATION                                                                              | 66  
|CONTROLS AND PROCEDURES                                                               | 72  
|PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                | 73  
|PRESENTATION OF FINANCIAL INFORMATION                                                 | 73  
|ADDITIONAL INFORMATION                                                                | 74  
|EXHIBIT INDEX                                                                         | 82  
|INDEX TO FINANCIAL STATEMENTS                                                         | F-1 











CROSS REFERENCE TO FORM 20-F ITEM HEADINGS



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”, “Selected Consolidated
Financial Data” and “Risk Factors”.



| | Item 4. | Information on the Company
| | ------- | --------------------------

See “Business”, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and “Additional Information”.



| | Item 4A. | Unresolved Staff Comments
| | -------- | -------------------------

Not applicable.



| | 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” and “Principal Shareholders”.



| | Item 7. | Major Shareholders and Related Party Transactions
| | ------- | -------------------------------------------------

See “Principal Shareholders,” “Related
Party Transactions” and “Additional Information”.



| | Item 8. | Financial Information
| | ------- | ---------------------

See the Report of Independent Registered Public Accounting
Firm and the U.S. GAAP consolidated financial statements and notes thereto for Rediff.com India Limited for the fiscal years ended
March 31, 2013, 2014 and 2015 and the related three-year period ended March 31, 2015. See also “Business”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.



| | Item 9. | The Offer and Listing
| | ------- | ---------------------

See “Trading Market”.



| | Item 10. | Additional Information
| | -------- | ----------------------

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



| | Item 11. | Quantitative and Qualitative Disclosures About Market
Risk
| | -------- | ----------------------------------------------------------

See “Management’s Discussion and Analysis
of Financial Condition and Results of Operations – Market Risks”.



| | Item 12. | Description of Securities Other than Equity Securities
| | -------- | ------------------------------------------------------

See “Trading Market”.



1







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 “Additional Information – Memorandum
and Articles of Association”.



| | Item 15. | Controls and Procedures
| | -------- | -----------------------

See “Controls and Procedures”.



| | Item 16A. | Audit Committee Financial Expert
| | --------- | --------------------------------

See “Management”.



| | Item 16B. | Code of Ethics
| | --------- | --------------

See “Management”.



| | Item 16C. | Principal Accountant Fees and Services
| | --------- | --------------------------------------

See “Principal Accountant Fees and Services”.



| | Item 16D. | Exemptions from the Listing Standards for Audit Committees
| | --------- | ----------------------------------------------------------

Not applicable.



| | Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
| | --------- | ----------------------------------------------------------------------

Not applicable.



| | Item 16F. | Change in Registrant’s Certifying Accountant
| | --------- | --------------------------------------------

Not applicable.



| | Item 16G. | Corporate Governance
| | --------- | --------------------

See “Management – NASDAQ Corporate Governance
Requirements”.



| | Item 16H. | Mine Safety Disclosure
| | --------- | ----------------------

Not applicable.



PART III



| | Item 17. | Financial Statements
| | -------- | --------------------

Not applicable.



| | Item 18. | Financial Statements
| | -------- | --------------------

See the Report of Independent Registered Public Accounting
Firm and the U.S. GAAP consolidated financial statements and notes thereto for Rediff.com India Limited and its consolidated subsidiaries
for the fiscal years ended March 31, 2013, 2014 and 2015 and the related three-year period ended March 31, 2015.



| | Item 19. | Exhibits
| | -------- | --------

See the Exhibit Index and the attached exhibits.



2







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 “₹”
or “Rs” or “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 for the financial statements of our
U.S. subsidiaries which are prepared and presented 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 except for
the 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 exchange rates published by The Reserve Bank of India, as at the close
of March 31, 2015 which was ₹62.59 to US$1.00. The translation
from Indian Rupees to U.S. dollars of the information derived from our financial statements included in this annual report are
based on daily rates published by the Reserve Bank of India.



3







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, all of which 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:



| | • | our goals and strategies;
| | - | -------------------------



| | • | our recently acquired businesses and other acquisitions, investments and divestments;
| | - | -------------------------------------------------------------------------------------



| | • | the impact of regulations and court orders on our business;
| | - | -----------------------------------------------------------



| | • | our future investments, costs and working capital;
| | - | --------------------------------------------------



| | • | the importance and expected growth of Internet technology, including sales of personal computers and smart phones, and the
development of broadband Internet, 3G and 4G networks in India;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the pace of change in the Internet market;
| | - | ------------------------------------------



| | • | the demand for Internet services;
| | - | ---------------------------------



| | • | advertising demand and revenues; and
| | - | ------------------------------------



| | • | new product and services.
| | - | -------------------------



These statements involve
a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by
the forward-looking statements. These include, but are not limited to, risks or uncertainties associated with 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 our 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 impacts 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, the slowdown in Indian economy and in the sectors in which our
clients are based, general economic and political conditions in India and the United States, acceptance of new products and
services, the development of broadband Internet and 3G and 4G networks in India, changes in the value of the Rupee, foreign
currency exchange rates, equity prices or other rates or prices, the 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 of factors that could cause actual results to differ, see the discussions 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 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 from time to time with the U.S. Securities and Exchange
Commission (the “SEC”). We undertake no obligation to update or revise this annual report in order to amend its
forward-looking statements to reflect events or circumstances after the date hereof, whether as a result of new information,
future events or otherwise.



4







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 trade on the NASDAQ Global Market. Such fluctuations may also affect U.S. dollar conversions made 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 rates published by the Reserve Bank of India:



|Fiscal Year Ended March 31, |  | Period End |       |  | Average (1)(2) |  |       | High |  |  | Low   | 
|--------------------------- |  | ---------- | ----- |  | -------------- |  | ----- | ---- |  |  | ----- | 
|                            |  | ₹          |       |  | ₹              |  |       | ₹    |  |  | ₹     | 
|                            |  |            |       |  |                |  |       |      |  |  |       | 
|2011                        |  |            | 44.65 |  |                |  | 45.57 |      |  |  | 47.57 | 
|2012                        |  |            | 51.16 |  |                |  | 48.11 |      |  |  | 54.23 | 
|2013                        |  |            | 54.39 |  |                |  | 54.53 |      |  |  | 57.22 | 
|2014                        |  |            | 60.10 |  |                |  | 60.94 |      |  |  | 68.36 | 
|2015                        |  |            | 62.59 |  |                |  | 61.22 |      |  |  | 63.75 | 










Notes:

| | (1) | The average rate for each period differed from the exchange rates used in the preparation of our financial statements.
| | --- | ----------------------------------------------------------------------------------------------------------------------

| | (2) | The column titled “Average” represents the average of the closing rate as at the last day of each month during
the period.
| | --- | --------------------------------------------------------------------------------------------------------------------------



The following table sets
forth the high and low exchange rates for the previous six months and are based on daily closing rates published by the Reserve
Bank of India:



|Month         |  | High |       |  | Low | 
|------------- |  | ---- | ----- |  | --- | 
|              |  | ₹    |       |  | ₹   | 
|January 2015  |  |      | 63.45 |  |     | 
|February 2015 |  |      | 62.43 |  |     | 
|March 2015    |  |      | 62.82 |  |     | 
|April 2015    |  |      | 63.61 |  |     | 
|May 2015      |  |      | 64.20 |  |     | 
|June 2015     |  |      | 64.18 |  |     | 
|July 2015     |  |      | 64.03 |  |     | 



On July 30, 2015, the closing
exchange rate in India was ₹64.01 to US$1.00



5







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, 2014 and 2015, and the selected statement of comprehensive loss data for the fiscal years ended March 31
2013, 2014 and 2015, have been derived from our audited consolidated financial statements presented elsewhere in this annual report.
The selected balance sheet data set forth below as of March 31, 2011, 2012 and 2013 and the selected statement of comprehensive
loss data for the fiscal years ended March 31, 2011 and 2012 are derived from U.S. GAAP financial statements which are not
included in this annual report. (See note 1 below)



|                                               |  | Fiscal
    Years Ended March 31,              |           
|---------------------------------------------- |  | --------------------------------------------- | ----------
|                                               |  | 2011                                          |           
|                                               |  | (in
    US$ thousands, except per share data) |           
|Statement
    of Comprehensive Loss:           |  |                                               |           
|Revenues                                       |  |                                               | 21,795    
|Cost of revenues                               |  |                                               | 10,796    
|Operating
    expenses                         |  |                                               | 19,696    
|Net
    loss                                   |  |                                               | (6,572    
|Earnings
    (loss) per Equity Share – basic   |  | US$                                           | (0.477	)  
|Earnings
    (loss) per Equity Share – diluted |  | US$                                           | (0.477	)  
|Weighted average
    number of equity shares   |  |                                               |           
|- Basic                                        |  |                                               | 13,783,033
|- Diluted                                      |  |                                               | 13,783,033



|                           |  | As of March 31,    |       
|-------------------------- |  | ------------------ | ------
|                           |  | 2011               |       
|                           |  | (in US$ thousands) |       
|Balance Sheet Data:        |  |                    |       
|Current assets             |  |                    | 45,804
|Current liabilities        |  |                    | 8,773 
|Total assets               |  |                    | 63,940
|Total liabilities          |  |                    | 9,838 
|Total shareholders’ equity |  |                    | 54,102



Notes:

| | 1. | The selected consolidated financial data set forth above should be read in conjunction with the
section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
the financial statements and the notes to those statements included elsewhere in this annual report.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | The company has established an ESOP trust for the benefit of employees, which has acquired 1,015,000
shares. These shares are treated as treasury stock and therefore are excluded from the EPS calculations.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6







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 and Company



We have a history
of losses. We may incur losses in the future and we may not achieve or maintain profitability, which may impact our balance sheet
and thus, the successful implementation of our growth plan.



We have incurred significant
net losses and negative cash flows since our inception in January 1996. As of March 31, 2015, we had an accumulated deficit
of approximately US$109 million. We incurred a net loss of US$13.8 million for the fiscal year ended March 31, 2015. We may
in the future incur additional net losses and negative operating cash flows which could have a material adverse impact on our balance
sheet and lead to the need for additional capital to implement our growth strategy.



As display advertising
is facing challenging time which is part of a longer term industry trend. In order to grow our online user base and attract new
user base through mobile applications, we are investing in making all of our services mobile friendly product and service offerings.
Our ability to grow such revenues is dependent on the deployment of 3G and 4G data services by Indian mobile phone operators which
we do not control. At present, we believe we have enough resources to continue to invest in our product and service offerings.
If we make such investments or if such deployment does not occur, and if we are not yet generating free cash flow, we may need
additional capital to implement this facet of our growth plans.



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 in order to become profitable and may not be able to do so. If we are not yet profitable or generating free
cash flow, we may need to raise additional capital. Our business model is not yet proven in India or the United States, and we
cannot assure you that we will achieve profitability or that we will not incur operating losses in the future. If we are unable
to achieve profitability, we will be unable to build a sustainable business. In this event, the price of our ADSs and the value
of investments in our company would likely decline.



We cannot ensure
that our existing cash balances will be sufficient to meet our future operating and capital requirements.



As of March 31, 2015
our cash balances was approximately US$8.3 million, and while we believe that based on the current cash use rate this cash balance
will be sufficient to meet our operating and capital requirements for the next five to seven quarters, there can be no assurance
that will be the case. The adequacy of our available funds to meet our operating and capital requirements will depend on many factors,
such as our ability to control our expenses, the growth in e-commerce marketplace, display advertising, optimization of cost of
revenues relating to fee based services and cost saving initiatives in operating and other expenses.  If we are unable to
control our costs or do not generate sufficient revenue, we may need to seek alternative financing sources to fund our operations.
There can be no assurance that such financing sources will be available when needed, whether they would be available on commercially
reasonable terms or at all, or that our actual cash requirements will not be greater than anticipated. If we are unable to obtain
future financing through the alternative financing sources or through other means, we may be unable to continue operations, which
would have a material adverse effect on our business and financial condition.



We face significant
competition in the India market for users, advertisers, publishers and distributors, principally from Google, Yahoo, Facebook,
Microsoft and AOL and also from other traditional media companies and a host of other smaller competitors.



We face significant competition
from Google, Yahoo, Facebook, Microsoft and AOL among other companies, each offering an integrated variety of Internet products,
advertising services, technologies, online services and content in a manner similar to us.



These large competitors
offer products and services that directly compete with our offerings, including consumer e-mail, search, instant messaging, photos,
maps, video and photo sharing, content channels, mobile applications, and shopping services, among other offerings.



7







We also compete with
traditional media companies to attract advertising revenues, both domestically and internationally. Currently, many advertisers
allocate a portion of their advertising budgets to Internet advertising. In response, traditional media companies are increasingly
expanding their content offerings on the Web and are competing for both offline and online revenues. We also compete with a variety
of other providers of online services, including social media and networking sites like Facebook and Orkut for users, advertisers
and developers. Social networking sites in particular are attracting a substantial and increasing share of users and user’s
online time, which could enable them to attract an increasing share of online advertising.



Some of our existing
competitors and possible market entrants may have greater brand recognition for certain products and services, more expertise in
a particular segment of the market, and/or greater operational, strategic, technological, financial, personnel, or other related
resources than we do. In addition, Google, Yahoo, Facebook and Microsoft, among other companies, have access to considerable financial
and technical resources with which to compete aggressively, including funding future growth and expansion by investing in acquisitions
and/or in research and development. Further, emerging start-ups may be able to innovate and provide products and services faster
than we can and in a manner more appealing to our target users. In addition, competitors may consolidate with each other or collaborate,
and new competitors may enter the market.



We are also subject to
competition from companies known as “aggregators”, which aggregate advertising space in third-party websites and resell
such space to our customers or potential customers. There has also been a trend toward industry consolidation so our smaller competitors
today may become part of larger competitors in the future.



We may also face competition
from companies engaged in providing mailing services to mobile users. Some of our existing competitors and possible additional
entrants may have greater brand recognition for certain products and services and greater operational, strategic, technological,
financial, personnel, or other resources than we do. In addition our e-commerce services face competition from the existing leading
e-commerce companies who have significantly greater financial resources, longer operating histories and more experience in attracting
and retaining users and managing customers than we do.



We may also face competition
from companies engaged in procuring advertisement from advertisers who want to reach out to a niche customer segment by choosing
to advertise in a particular city or specific area within a city and cannot afford to advertise on television channels. Some of
our existing competitors (like Amagi Media Labs Pvt. Ltd.) and possible additional entrants may have greater brand recognition
for certain products and services and greater operational, strategic, technological, financial, personnel, or other resources than
we do.



If our competitors are
more successful than we are in developing compelling products or services or attracting and retaining users, advertisers, publishers,
developers, or distributors, our revenues and potential growth rates could decline. In addition, new competitors may enter the
market which may adversely impact our financial performance.



8







Competition for visitors,
customers, subscribers, advertisers and shopping partners is intense and is expected to increase significantly in the future as
there are no substantial barriers to entry into 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.
Intense competition in our businesses could have a material adverse effect on our results of operation, including our ability to
achieve and sustain profitability. For additional information regarding our competition, please see “Business – Competition”
in this annual report.



We face strong
competition in our marketplace e-commerce business.



We have significant competition
in the India market for e-commerce business from Snapdeal, Flipkart, Amazon and Ebay. Some of our current and potential competitors
have greater resources, longer histories, more customers, and/or greater brand recognition. They may secure better terms from vendors,
adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfilment, and marketing.



Competition may intensify
as our competitors enter into business combinations or alliances and established companies in other market segments expand to become
competitive with our marketplace e-commerce business. In addition, new and enhanced technologies, including search, web and infrastructure
computing services, digital content and electronic devices, may increase our competition. The Internet facilitates competitive
entry and comparison shopping, and increased competition may reduce our sales and profits.



Gross margin from marketplace
e-commerce is lower than advertising business.



Currently we are focused
on growing our ability to monetize the e-commerce marketplace and share of e-commerce marketplace has gone up from 19% in the fiscal
2013-14 to 27% in the fiscal year 2014-15. The cost of revenue relating to ecommerce marketplace is significantly variable and
directly linked to revenue. Presently, e-commerce marketplace revenue has a lower gross margin than advertising revenues, which
has resulted in a decline in average gross margin for the India Online business segment. The lower gross margin on account of higher
variable cost of revenue for the e-commerce marketplace is because this business is in its early stages of market adoption, as our
e-commerce marketplace grows relative to the rest of our business, it could negatively affect our ability to become profitable.



We could be liable
for fraudulent or unlawful activities of sellers in our marketplace e-commerce business.



Under our seller programs,
we may be unable to prevent sellers from collecting payments, fraudulently or otherwise, if buyers do not receive the products
they ordered or if the products received are materially different from the sellers’ descriptions. Under our Rediff
Assurance, we reimburse buyers for payments in these situations, and as our marketplace seller sales grow, the cost of
this program will increase and could negatively affect our operating results. We also may be unable to prevent sellers on our sites
or through other seller sites from selling unlawful goods, selling goods in an unlawful manner, or violating the proprietary rights
of others, and could face civil or criminal liability for unlawful activities by such sellers.



We are subject
to payments-related risks.



We accept payments using
a variety of methods, including credit card, debit card, credit accounts (including promotional financing), gift cards, direct
debit from a customer’s bank account, consumer invoicing, physical bank check, and payment upon delivery. For existing and
future payment options we offer to our customers, we may become subject to additional regulations, compliance requirements, and
fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over
time and raise our operating costs and lower profitability. We rely on third parties to provide payment processing services, including
the processing of credit cards, debit cards, electronic checks, and promotional financing, and it could disrupt our business if
these companies become unwilling or unable to provide these services to us. We are also subject to payment card association operating
rules, including data security rules, certification requirements, and rules governing electronic funds transfers, which could change
or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements,
or if our data security systems are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines
and higher transaction fees, and lose our ability to accept credit and debit card payments from our customers, process electronic
funds transfers, or facilitate other types of online payments, and our business and operating results could be adversely affected.
We also offer co-branded credit card programs, which could adversely affect our operating results if terminated.



9







Our marketplace
supplier relationships subject us to risks.



We have large number
of marketplace suppliers that are important to our ongoing servicing of merchandise. We do not have long-term arrangements with
most of our suppliers to guarantee availability of merchandise, components, or services, particular payment terms, or the extension
of credit limits. If our current suppliers were to stop selling merchandise, components, or services to us on acceptable terms,
or delay delivery, including as a result of one or more supplier bankruptcies due to poor economic conditions, as a result of natural
disasters, or for other reasons, we may be unable to procure alternatives from other suppliers in a timely and efficient manner
and on acceptable terms, or at all.



If we fail to optimize
revenues through effective splicing in our local TV advertising business, we will continue to have negative gross margin.



The success of our local
TV advertizing business is dependent on effective splicing of advertising between national broadcasting and local (city specific)
advertising. Effective splicing is the key factor to generate more revenues to recover broadcaster’s cost and other direct
costs. If we fail to effectively splice between national and local broadcasting, then our gross margins from these business will
continue to be negative and result in higher operating losses.



Our future results
and growth prospects may be materially and adversely affected if our expansion into new business segments and verticals is not
successful.



We, as part of our growth
strategy, have, from time to time, entered into new Internet business segments by leveraging our large Internet user base to generate
additional revenue streams. For each new internet business or segment we enter into, we may face competition from existing leading
players in that business. Further the operating and marketing challenges of the new Internet business segment(s) may be different
from those that we currently face. If we cannot successfully compete and meet the challenges in the new Internet business segment(s),
we may not be able to recover costs incurred for developing and marketing new businesses and accordingly our future results and
growth prospects may be materially and adversely affected.



Our business could
be disrupted if our investment in new products, services, technologies and new business strategy is not successful. Our current
plans for growth depend in significant part on the further development of broadband internet and 3G and 4G networks in India.



We have invested significantly
in the development of new products, services, technologies and new business strategies and will continue to so invest in the future.
Such investment may involve significant risks and uncertainties including but not limited to inadequate returns on capital on our
investments, and distractions of management from current and future operations. On account of the inherent risk involved in such
investments, we offer no assurance that such investments will be successful and will not adversely affect our reputation, financial
condition and operating results. Additionally, delay in rollout of 3G and 4G network in India will affect internet penetration
and therefore, our revenue growth.



The success of
our products and services depends on the acceptance of the internet in India, which may be slowed by cost and affordability issues,
technical obstacles and unfavorable Government policies.



The growth of our India
Online business is highly dependent on the growth in India of the number of PCs in use, the growth of Internet and broadband use
and the growth of use of smart phones and other mobile devices such as tablets.



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 remain 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. In addition, limitations in network architecture in India sometimes limit Internet connection speeds. Network speed
and cost constraint 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 could
be limited by the cost of obtaining hardware, software and communications links necessary to connect to the Internet in India.
If much of India’s population is not able to afford access to the Internet, it may be difficult for us 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, broadband penetration rates in India are very low compared to other developing countries. Several industry
and government agencies believe that India could be a hotbed for broadband growth in future years based on the population and country
demographics. However, if the broadband and telecom industry in India fails to register significant growth, our potential growth
may also be affected.



10







If we are unable
to develop new services or enhance existing services in anticipation of our users’ needs, our users’ level of engagement
with our services may decline and our business could suffer as a result.



Our success is dependent,
in part, on our ability to anticipate customers’ needs in advance and develop new services or enhance the existing services
to fulfill those needs, on a cost-effective and timely basis. For example, Customer Delight Centre, Data Journalism and Recommendation
framework etc. The development and implementation of such services and any new services including the enhancement of existing service(s),
entails significant technical and business risks. There can be no assurance that we will successfully implement new services or
that any of our new products or services will be accepted by our users.



New technologies are
giving rise to new business opportunities, such as in local search and social networking. 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, and our ability
to retain or improve the level of user engagement with our services. 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.



Our strategy of
acquiring businesses to complement our existing market offering may fail.



As part of our growth
strategy, we have made selective strategic and opportunistic acquisitions of businesses that complement our existing market offering.
Such acquisitions may involve uncertainties and risks, including but not limited to, government regulations, diversion of resources
and management attention, costs and difficulties of integrating acquired businesses and managing a larger business, unforeseen
liabilities and ongoing financial obligations.



If we fail to address
such risks successfully, it may have a material adverse effect on our financial condition and growth prospects. Further, such acquisition(s)
could require a significant amount of capital investment, which could decrease the amount of cash available to us for working capital
or capital expenditures. In addition, if we fund the acquisition(s) through the use of our equity securities, we may dilute the
value of our ADSs and the underlying ordinary shares.



More individuals
are utilizing non-PC devices to access the Internet, and versions of our services developed for these devices might not gain widespread
adoption by the devices’ users, manufacturers, or distributors or might fail to function as intended on some devices.



The number of individuals,
who access the Internet through devices other than a PC, such as mobile telephones and related “smartphones” or “tablet-based”
devices, has substantially increased, and the trend is likely to continue. While we have dedicated significant resources over the
past few years to develop offerings for mobile devices, our services were originally designed for rich, graphical environments
such as those available on the desktop and PC. The different hardware and software, memory, operating systems, resolution, and
other functionality associated with alternative devices may make our services unusable or difficult to use on such devices, and
the versions of our services developed for these devices may not be compelling to users, manufacturers, or distributors of alternative
devices. Similarly, the licenses we have negotiated to present third-party content to desktop and PC users may not extend to users
of alternative devices. In those cases, we may need to enter into new or amended agreements with content providers in order to
present a similar user-experience on the new devices. The content providers may not be willing to enter into such new or amended
agreements on reasonable terms or at all.



Further, new devices,
operating systems, networks, and platforms are continually being released. It is difficult to predict the problems we may encounter
in developing versions of our services for use on these alternative devices and platforms. We may also need to devote significant
resources to the creation, support and maintenance of such versions.



If we fail to detect
click fraud or other invalid clicks, we could lose the confidence of our advertisers, which would cause our business to suffer.



We are exposed to the
risk of fraudulent clicks and other invalid clicks on our ads from a variety of potential sources. Invalid clicks are clicks that
we have determined are not intended by the user to link to the underlying content, such as inadvertent clicks on the same ad twice
and clicks resulting from click fraud. Click fraud occurs when a user intentionally clicks on an ad displayed on a website for
a reason other than to view the underlying content. An increase in click fraud or invalid clicks could cause our advertisers to
lose confidence in the effectiveness of our services, which could negatively damage our brand and impact our performance.



11







New technologies
could block our ads, which would harm our business.



Technologies have been
developed that can block the display of industry ads, including our own. Most of our revenues are derived from fees paid to us
by advertisers in connection with the display of ads on web pages. As a result, ad-blocking technology could adversely affect our
operating results.



The ongoing economic
slowdown in India, could continue to negatively impact revenues from some of our key customers and thus, negatively impact our
business.



We are dependent on the
health of the Indian and U.S. economies. A continued slowdown in Indian economy, an overall reduction in consumer and business
spending, or future difficulties experienced in either country could have a material adverse impact on our business and our prospects.



Advertisement expenditures
tend to be cyclical, reflecting overall economic conditions and the nature of industry, budgeting and buying patterns. Since a
significant portion of our revenue is derived from advertisements, the adverse economic conditions have caused, and a continuation
of adverse economic conditions could cause, additional decreases in or delays in advertising spending and internet user base is
shifting from PC to Mobile and Non PC , a reduction in our revenues and a negative impact on our short-term ability to grow our
revenues.



A significant
portion of our Indian advertising revenues include revenues from the Banking Financial Services and Insurance (BFSI) segments
and from other Internet companies, including those engaged in the business of jobs, travel, matrimonial, real estate and
online shopping. Some of these companies are startups without proven long-term business models and are dependent on external
funding for future growth. These companies have been adversely affected by the global economic slowdown, resulting in lower
online advertising revenues than in the past. While general economic conditions have recently improved compared to the heart
of the global economic recession, the robustness and pace of the global economic recovery remains uncertain and there is no
assurance that these and other segments will recover from the impact of the recession, succeed in raising financial resources
and increase online advertising spends.



Further, a future slowdown
in the Indian economy may make it difficult for us to raise money in the equity and debt markets on terms favorable to us or at
all, if we choose to conduct capital raises in accordance with our business plan and future growth opportunities, which may have
an adverse effect on our financial condition and operating results.



Our publication
business in the United States faces competition and industry-wide declines.



Our publication business
in the United States 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 to provide news and information regarding
India or content that is of interest to Indian-Americans in these markets for paying subscribers for our India Abroad newspaper,
which is subscription-based, is intense due to the presence of other paid newspapers such as News India Times, Indian Express and
India West, among others. Further, our publications also face competition from free newspapers and from electronic media, such
as television channels dedicated to Indian news and programming and online publications and services. If our U.S. publishing businesses
are unable to successfully compete, our results of operation could be adversely affected.



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 U.S. 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 an adverse effect on our business and our future financial performance.



Our revenues could
be adversely affected if we are unable to successfully adapt to new forms of pricing for the services and products we offer.



Increased competition
or the actions of our existing competitors may result in:



| | • | loss of visitors and decreased website traffic;
| | - | -----------------------------------------------

| | • | loss of paid subscribers;
| | - | -------------------------

| | • | loss of advertisers;
| | - | --------------------

| | • | reduced operating margins;
| | - | --------------------------

| | • | loss of market share; and
| | - | -------------------------



12







| | • | 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.



Increasing consumer
resistance to online advertising may result in loss of revenues



There is a growing consumer
resistance to intrusive advertising online. In our desire to improve the user experience on our site, we have reduced the number
of advertisements on our site and in particular, eliminated all advertising from our home page. As a consequence of this, we experienced
a decline in our advertising revenues and this may continue to decline based on market conditions. Although we are hopeful that
a better user experience will lead to a higher number of users over time, we can however give no assurances that this will happen.
If we are unable to compensate for the loss of advertising revenues from such restriction with incremental revenues from e-commerce
marketplace and display advertising due to increased user traffic, our results of operations could be materially adversely impacted.



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
have fluctuated significantly in the past and may continue to fluctuate significantly in the future based on a variety of factors.
These factors could affect both our near and long-term performance. Some of these factors include but are not limited to:



| | • | increased competition;
| | - | ----------------------

| | • | slowdown in the Indian and global economies;
| | - | --------------------------------------------

| | • | lower than expected revenues from one or more of our customers;
| | - | ---------------------------------------------------------------

| | • | changes in prices for our product and service offerings;
| | - | --------------------------------------------------------

| | • | increases in personnel, marketing and other operating expenses;
| | - | ---------------------------------------------------------------

| | • | our ability to attract new users and to retain existing users at reasonable costs;
| | - | ----------------------------------------------------------------------------------

| | • | our ability to adequately maintain, upgrade and develop our website, our computer network and the
systems that we use to process customer orders and payments;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | the timing of our expansion plans in India and other geographic markets;
| | - | ------------------------------------------------------------------------

| | • | seasonality in retail sales;
| | - | ----------------------------

| | • | technical difficulties, system or website downtime or Internet service disruptions; and
| | - | ---------------------------------------------------------------------------------------

| | • | entry into new businesses or development of new products or services requiring substantial investments.
| | - | -------------------------------------------------------------------------------------------------------



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 online advertising in our markets does not expand.



Our business strategy
depends heavily on the anticipated growth of e-commerce marketplace and online advertising in our markets and the growth of our
revenues depends on increased revenues generated by e-commerce marketplace and online advertising. We anticipate that a high portion
of our future revenues will continue to be derived from e-commerce marketplace and online advertising on our website. Online advertising
is an evolving business and our ability to generate and maintain significant advertising revenues will (among other factors) depend
on:



| | • | our ability to attract and retain advertisers at profitable rates in light of intense competition;
| | - | --------------------------------------------------------------------------------------------------

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

| | • | advertisers’ acceptance of the Internet as an effective and sustainable medium;
| | - | -------------------------------------------------------------------------------

| | • | the effectiveness of our advertising delivery, tracking and reporting systems; and
| | - | ----------------------------------------------------------------------------------

| | • | our ability to adapt, including technologically, to new forms of Internet advertising.
| | - | --------------------------------------------------------------------------------------



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
or standards. 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, whether in India or the United States, and in particular a slowdown in the growth of companies that advertise
on the Internet, may result in a reduction in our advertising revenues.



13







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, which are 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 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, 2015, our top ten advertisers in
India accounted for approximately 17% of our India Online advertising revenues and approximately 7% of our India Online receivables.
For the same period, for our U.S. publishing business, our top ten advertisers contributed approximately 31% of total U.S. publishing
revenues. Any failure to meet advertiser expectations could result in the 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 but are not limited to:



| | • | system failures and outages caused by fire, floods, earthquakes, tsunamis, power loss, telecommunications
failures and similar events;
| | - | --------------------------------------------------------------------------------------------------------------------------------------

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

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

| | • | terrorist acts or other acts of violence.
| | - | -----------------------------------------



While we have taken steps
to improve security and network reliability, 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 services. 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 and online shopping 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 breaches 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.



14







We may lose a significant
portion of our assets if banks in India collapse.



A significant portion
of our assets is held in the form of cash and cash equivalents. We maintain a majority of such cash and cash equivalents in Indian
Rupees with banks in India. In case one or more of these banks collapses due to financial crisis, or any futures ones, we may lose
a substantial portion of our cash and cash equivalents. This could have a material adverse effect on our business, results of operations
and financial condition.



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



We have made several
strategic and opportunistic 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. Lack of success in our acquisition and
investment strategy could result in significant write-offs relating to such acquisitions and investments and thus, adversely impact
our financial performance. Such transactions are accompanied by a number of risks, including:



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

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

| | • | diversion of management time and focus from operating our business to acquisition integration process;
| | - | ------------------------------------------------------------------------------------------------------

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

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

| | • | the potential unknown liabilities associated with acquired businesses;
| | - | ----------------------------------------------------------------------

| | • | the failure to develop successfully new products or technologies;
| | - | -----------------------------------------------------------------

| | • | the failure to popularize such products or technologies and/or derive expected revenues therefrom;
| | - | --------------------------------------------------------------------------------------------------

| | • | unfavorable changes in business environment and government regulations;
| | - | -----------------------------------------------------------------------

| | • | unfavorable changes in accounting rules and guidelines relating to our acquisitions;
| | - | ------------------------------------------------------------------------------------

| | • | cultural challenges associated with integrating employees from the acquired company into our organization;
| | - | ----------------------------------------------------------------------------------------------------------

| | • | retention of employees from the businesses we acquire; and
| | - | ----------------------------------------------------------

| | • | litigation or other claims in connection with the acquisition or investment, including claims from
terminated employees, customers, former stockholders, or other third parties.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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. 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 may lead to the diversion of 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 dependent
on our agreements with mobile service providers for service delivery and fee collection.



Our mobile value added
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 gateways for our mobile value added 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.



15







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



Growth in our India Online
revenues will depend on the increase in users of our fee-based Internet services, including paid e-mail services, other subscription
services and mobile value added service in India. If not enough users adopt and use our fee-based Internet services, our India
Online revenue may not increase.



We depend on mobile
operators to reach out to their customers.



We have arrangements
with most Indian mobile operators which allow the customers of such mobile operators to download ringtones, wallpapers and other
products from our servers. These customers can also access information relating to news, business and other information from us
by using short messaging services. Some operators permit us to selectively send SMS messages, advertising our mobile products to
a section of their customer base. The Telecom Regulatory Authority of India (“TRAI”) framed rules to prevent unsolicited
commercial communications to mobile phone users who sign up for a “Do Not Disturb” registry. TRAI has directed operators
to get written consent from users for activating value-added services (VAS) such as call ring back tone and hello tunes on their
mobile phones. These and any other regulatory actions may have a material adverse impact on our future mobile VAS revenues.



Potential liability
for information we publish may require us to defend against legal claims, which may cause significant operational expenditures
and have an adverse impact on our financial results.



We may be subject to
claims for defamation, libel, copyright or trademark infringement or other legal actions relating to the information we publish.
For example, recently our Managing Director, Editor-in-chief and an Assistant Editor have been named as defendants in a complaint
made at the Sessions Court in Chennai which has alleged that an article published on our website on the health status  of
the Chief Minister of Tamilnadu amounts to a defamation of her reputation. 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.



For information regarding
pending litigation filed against us, please see “Business — Litigation and other legal matters” in this annual
report.



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



We could be exposed to
liability for content that may be accessible through our website or content and materials that we develop or that our users may
upload or post in our social networking sites, message boards, chat rooms, blogs or via our 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.



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 or products sold by third parties on our website. For example, we had been named as a defendant in proceedings
filed by The Board of Control of Cricket in India (“BCCI”) in the High Court of Madras, where BCCI sought to obtain
a permanent injunction against a vendor who depicted the image of “IPL”. 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. Please see the section entitled “Business – Litigation and other legal matters”
in this annual report for more information on the litigation described above.



We also offer Internet-based
e-mail services, which could expose us to potential liabilities or claims resulting from:



| | • | unsolicited e-mail;
| | - | -------------------

| | • | lost or misdirected e-mail;
| | - | ---------------------------



| | • | illegal or fraudulent use of e-mail;
| | - | ------------------------------------

| | • | interruptions or delays in e-mail service; and
| | - | ----------------------------------------------

| | • | loss or deletion of data stored in mailboxes.
| | - | ---------------------------------------------



16







Our video sharing platform,
called iShare, allows members to upload and share music, videos and photos. Under our terms of use, our members are responsible
for their accounts and must agree and undertake not to post or upload any material that violates or infringes any copyright or
other privacy laws and acknowledge that Rediff.com assumes no responsibility for the content accessed or uploaded through this
service. Nonetheless, we could be subject to litigation within or outside of India which could include civil or criminal prosecution
and civil liability. Defending such litigation could involve substantial management time and cost and we can give no assurance
that we would succeed in defending any such litigation.



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 still relatively unclear. Investigating and defending these claims is an expensive process, 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 governing 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.



For information regarding
pending litigation filed against us, please see “Business — Litigation and other legal matters” in this annual
report.



If we are unable
to provide innovative search experiences and other services that generate significant traffic to our website(s), our business could
be harmed, causing our revenues to decline.



Internet search is characterized
by rapidly changing technology, significant competition, evolving industry standards, and frequent product and service enhancements.
We must continually invest in improving our users’ search experience—including improving the relevance of our search
results, as well as presenting users with a search experience that is responsive to their needs and preferences in order to continue
to attract, retain, and expand our user base. We currently deploy our own technology to provide search results on our network and
failure to keep pace with industry and/or develop new innovative search offering could adversely impact our operating results.



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



Consumers may sue us
if any of the products or services offered on our website’s marketplace are defective, fail to perform properly and/or injures
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.



For information regarding
pending litigation filed against us, please see “Business — Litigation and other legal matters” in this annual
report.



In addition, the laws
relating to the online sale of goods and services are not fully developed. The various laws and regulations covering online sale
of products and their interpretation involve a significant degree of uncertainty. 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 better understand 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.



Regulatory authorities
around the world are considering a number of legislative proposals concerning data protection. Complying with these various laws
could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.



17







Further, failure or perceived
failure by us to comply with our policies, applicable legal and other requirements, related to the collection, use, sharing or
security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user confidence
in us, damage to our brands, resulting in a loss of users, advertising partners, or affiliates, which could adversely affect our
business.



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, including but not limited to, mobile phone operators, Internet and other online
service providers and other third parties necessary to operate and grow 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 Indian Rupee and the U.S. dollar has fluctuated substantially both historically and in recent years, and could continue to
fluctuate substantially in the future. Our Indian revenues are translated into U.S. Dollars for reporting purposes at average annual
U.S. Dollar/Indian Rupee exchange rates, which are computed by us based on daily closing rates published by the Reserve Bank of
India. If the Indian Rupee depreciates further, such depreciation may adversely affect our reported revenues and operating results
in U.S. Dollars.



Additionally, 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.



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,
2015 our six largest shareholders beneficially owned an aggregate of approximately 63% of our Equity Shares.



As a result, such shareholders
could act collectively to exercise control over most matters requiring approval by our shareholders, including the election of
directors and approval of significant corporate transactions among other matters. 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:



| | • | amending our Articles of Association;
| | - | -------------------------------------

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

| | • | commencing any new line of business; and
| | - | ----------------------------------------

| | • | commencing liquidation.
| | - | -----------------------



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 and as our Chairman so long as they hold, singly or jointly, not less than
10% of our issued, subscribed and paid-up capital. Mr. Balakrishnan currently serves an indefinite term as a Director 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.



18







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
which could have an adverse effect on our financial results.



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.
Alternate methods of obtaining access to the Internet, such as through smart phones, 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 may not be able to expand our customer base, which will make
it difficult for us to execute our business strategy.



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, and 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:



| | • | inconsistent quality of service;
| | - | --------------------------------

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

| | • | lack of security of commercial data such as credit card numbers;
| | - | ----------------------------------------------------------------

| | • | low number of Internet users in India; and
| | - | ------------------------------------------

| | • | low levels of credit card penetration in India.
| | - | -----------------------------------------------



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 which
could adversely impact our operating result.



Management’s use of estimates
may affect our income and financial position.



To comply with GAAP,
management is required to make various estimates, judgments and assumptions. The facts and circumstances on which management bases
these estimates, judgments, assumptions, and management’s judgment of the facts and circumstances, may change from time to
time and this may result in significant changes in the estimates, with an impact on our assets or income. Current and future accounting
pronouncements and other financial reporting standards may adversely affect the financial information we present. We regularly
monitor our compliance with all of the financial reporting standards that are applicable to us and any new pronouncements that
are relevant to us. Findings of our monitoring activity or new financial reporting standards may require us to change our internal
accounting policies and to alter our operational policy so that it reflects new or amended financial reporting standards. We cannot
exclude the possibility that this may have a material impact on our assets, income, or cash flows.



19







If we fail to or
are unable to implement and maintain effective internal controls over financial reporting, the accuracy and timeliness of our financial
reporting may be adversely affected.



We are subject to reporting
obligations under U.S. securities laws. The SEC, as required under Section 404 of the Sarbanes-Oxley Act of 2002, has adopted
rules requiring every public company to include a report of management on the effectiveness of such company’s internal control
over financial reporting in its annual report. In addition, an independent registered public accounting firm must issue an attestation
report on the effectiveness of the company’s internal control over financial reporting.



We recognize that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives,
and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
If we fail to maintain effective internal control over financial reporting in the future, we and our independent registered public
accounting firm may not be able to conclude that we have effective internal control over financial reporting at a reasonable assurance
level. This could in turn result in the loss of investor confidence in the reliability of our financial statements. Furthermore,
we have incurred and anticipate that we will continue to incur considerable costs and use significant management time and other
resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. If we are not able to
continue to meet the requirements of Section 404 in a timely manner or with adequate compliance, we might be subject to sanctions
or investigation by the SEC or other regulatory authorities. Any such action could adversely affect the accuracy and timeliness
of our financial reporting.



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,
among other matters.



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
Mumbai train bombings on July 11, 2006, the terror attacks in Mumbai on November 26, 2008 and July 13, 2011 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, Afghanistan, Egypt, Libya, Syria and other part of Middle East. 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.



Future political
instability in India could halt or delay the liberalization of the Indian economy and adversely affect economic conditions in India
generally and our business in particular.



The Government of India
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. Any significant change in India’s
economic liberalization and deregulation policies could adversely affect business and economic conditions in India generally, including
our business.



20







In the event that
the Government of India changes its tax policies in a manner that is adverse to us, our tax expense may materially increase.



In the Finance Act, 2012,
the Government of India introduced a new service tax based on a negative list of services. Consequently, all services have become
taxable, except specifically exempted services. The Finance Act, 2015 has increased the rate from the 12% plus 0.36% surcharge
to a combined rate of 14% effective from 1st June 2015.Further the Act also introduced Swachh Bharat Cess (clean
India campaign) on all or certain taxable services at a rate of 2% on the value of such taxable services, which is not yet in effect.
This would increase the cost of input services.



The Union Budget, 2015
has proposed to implement Goods and Service Tax (GST) starting April 1, 2016. It is proposed to combine other indirect taxes such
as Central Excise duty, Service tax, Octroi, VAT and Sales tax, entry tax, etc., into GST, thus avoiding multiple layers of taxation
that currently exist in India. The proposed levying of GST on the supply of Goods and Services will harmonize the Indirect Tax
structure in the country.



The Finance Act,
2012 has also made certain retrospective amendments effective June 1, 1976, such as broadening the term “royalty”.
Any retrospective tax amendments may adversely affect our financial condition and results of operations.



The Finance Act, 2013
has increased the tax withholding rate from 10% to 25% in respect of the payment to be made to non-residents towards "Royalty"
and / or "Fees for Technical Services". However, the Finance Act, 2015 has amended the rate of tax withholding on payment
made to non-residents to 10% from 25% at present, subject to furnishing of Indian PAN by such non-residents. The new rates are
effective from April 1, 2015. In case Double Taxation Avoidance Agreements prescribing lower withholding tax rate than
the above, such rate would be applicable subject to fulfillment of prescribed conditions and documentation including furnishing
of Indian PAN. As we procure various software licenses and technical services from non-residents in course of delivering our products
and services, the cost of withholding tax on such procurements may increase and adversely affect our results of operations.



We operate in jurisdictions
that impose transfer pricing and other tax-related regulations on us, and any failure to comply could materially and adversely
affect our profitability.



We
are required to comply with various transfer pricing regulations in India. Failure to comply with such regulations may impact our
effective tax rates and consequently affect our net margins.



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 adversely affected by any such limitation.



21







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



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. Under guidelines issued by the Reserve Bank of India, the acquisition of companies organized outside
India is permitted under certain circumstances without prior approval if such acquisition does not exceed 400% of the net worth
of the acquiring company as of the date of the last audited balance sheet or unless the acquisition is funded with cash from acquiring
company’s existing foreign currency accounts or with cash proceeds from the issuance of ADRs/ADSs. This ceiling includes
contribution to the capital of companies organized outside India, loans granted by the Indian party to such companies organized
outside India and all of the guarantees issued by the Indian party to or on behalf of such companies organized outside India.



If we move forward with
such an acquisition outside of India, 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 business
and prospects and the market value of our ADSs.



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.



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:



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

| | • | enforce against us in courts outside of India or these persons outside the jurisdiction of their
residence, judgments obtained in U.S. courts, including judgments predicated upon the federal securities laws of the United States.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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:



| | • | was not rendered by a court of competent jurisdiction;
| | - | ------------------------------------------------------

| | • | was not rendered on the merits of the case;
| | - | -------------------------------------------

| | • | appears on the face of the proceedings to be founded on an incorrect view of international law
or a refusal to recognize the law of India in cases in which such law is applicable;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | was obtained in proceedings which are opposed to “natural justice”; or
| | - | ----------------------------------------------------------------------

| | • | sustains a claim founded on a breach of any law in force in India.
| | - | ------------------------------------------------------------------



Risks Related to the ADSs and Our Trading
Market



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



Trading volume in our
ADSs is inconsistent and we cannot assure you that an active, liquid trading market in our ADSs will be established. 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.



22







In addition, 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. Therefore, unless the law is changed, the number of outstanding
ADSs and the trading volumes for all ADSs may significantly decrease at any time 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 our 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, reduces 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 currently only traded on the NASDAQ Global Market 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 a renunciation in favor of a resident of India
of rights to subscribe to equity shares pursuant to a rights offering or for the sale of equity shares underlying ADSs by a non-resident
of India to a resident of India, 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 in India, the transfer of shares shall be
at a price not less than the fair value to be determined by a SEBI registered Category-I Merchant Banker or a Chartered Accountant
as per the discounted free cash flow method. The price per share arrived at should be certified by a SEBI registered Category-I
Merchant Banker/Chartered Accountant.



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



Our management has broad
discretion with respect to the use of the net proceeds from our securities offerings and cash from our operations. As of March 31,
2015, we held approximately US$8.3 million as cash and cash equivalents and short term deposits with banks on which we are earning
interest.



We intend to use these
funds 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 these funds in an inefficient or ineffective manner.



Our ADS market
price is highly volatile and could drop unexpectedly in the future. Should our ADS market price drop below $1.00, our ADSs may
be delisted from the NASDAQ Global Market.



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 event that the bid
price of our ADSs falls below $1.00 and remains below $1.00 for more than 30 consecutive days, our ADSs may be delisted from the
NASDAQ Global Market. The delisting of our ADSs from the NASDAQ Global Market could negatively affect the market price of our ADSs
and impair your ability to sell such ADSs.



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. Securities class action litigation had been instituted against us in the United States in
the past. Such litigation, if brought against us in the future, even if unsuccessful, could damage our reputation and result in
substantial costs and a diversion of our management’s attention and resources.



23







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, 2013, 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 depository 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.



In June 2009 The Ministry
of Company Affairs (MCA) of the Government of India has clarified that a depositary receipt holder cannot be considered to be a
shareholder of the Company until such time as the holder elects to transfer / redeem depositary receipts for underlying equity
shares. It has been further clarified that the depositary bank cannot be considered a nominee of the holder under the Indian Companies
Act.



We do not pay dividends
and currently have no plan to pay dividends in the foreseeable future.



We currently do not pay
cash dividends and 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 classified
as a passive foreign investment company for United States federal income tax purposes, which could subject United States investors
in the ADSs or Equity Shares to adverse tax consequences.



We do not expect to be
classified as a passive foreign investment company (“PFIC”) for United States federal income tax purposes for the most
recent taxable year ended March 31, 2015. However, there is no guarantee that the Internal Revenue Service will agree with
our determination. Moreover, it is uncertain whether we will be classified as a PFIC for any future taxable year. PFIC status is
a factual determination made annually on the basis of the composition of our income and the value of our active versus passive
assets. We currently maintain a significant amount of passive assets, including cash, which contributes significantly to the risk
that we may be or become classified as a PFIC. If we do not spend substantial amounts of our liquid assets for business development
purposes or if our market capitalization does not substantially increase, we may also be classified as a PFIC for one or more future
taxable years. If we are or become classified as a PFIC, United States investors holding our ADSs or our Equity Shares may be subject
to penalizing tax and interest charge rules on gain recognized on the sale or other disposition of our ADSs or our Equity Shares
and on the receipt of distributions on our ADSs or Equity Shares to the extent such distributions are treated as an “excess
distribution” under the United States federal income tax rules. Please see the section in this annual report entitled “Taxation
– United States Federal Income Tax Considerations – Passive Foreign Investment Company Rules”.



24







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, 2015, we had an aggregate of 13,795,178 Equity Shares
outstanding. Of the outstanding Equity Shares, 9,295,956 ADSs, representing 4,647,978 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. 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 on the NASDAQ
Global Market (formerly the NASDAQ National Market), the National Stock Exchange of India or the Bombay Stock Exchange Limited
(formerly The Stock Exchange, Mumbai).



We may be required
to list our Equity Shares on an Indian stock exchange. If we were to list our Equity Shares on an Indian stock exchange, conditions
in the Indian securities market may require compliance with new and changing regulations framed by Securities Exchange Board of
India(SEBI), listing requirements of stock exchange, corporate governance, accounting and public disclosure requirements which
might add uncertainty to our compliance policies and increases our costs of compliance. Further, If we were to list our Equity
Shares on an Indian stock exchange, conditions in the Indian securities market may affect the price or liquidity of our Equity
Shares and indirectly of our ADSs.



On June 28, 2006,
the Ministry of Finance (MoF) of the Republic of India issued amendments to the “Issue Of Foreign Currency Convertible Bonds
And Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993” (the “Scheme”). The amendments included
a statement that Indian companies that have issued depositary receipts and/or foreign currency convertible bonds prior to August 31,
2005 will be permitted to comply with listing conditions on the Indian stock exchanges within three years of starting to make profits.
However, by virtue of notification issued by the MoF on October 21, 2014, the issuance of depository receipts has been taken
out of the 1993 Scheme and is now regulated by the Depository Receipts Scheme, 2014. The 2014 Scheme allows Indian companies, whether
listed or unlisted, to access the international capital markets using depository receipts. Such issuances can either be through
a public offering of depository receipts or through a preferential allotment or qualified institutional placement. They can also
either be sponsored by the issuer company or unsponsored such as when an existing shareholder sells its holding through the issue
of depository receipts. These issuances are subject to the usual foreign investment regime, including in relation to sectoral
caps as well as pricing.  Moreover, such issuances are permitted only to investors in certain specific jurisdictions
as listed in the 2014 Scheme, which currently consists of a list of 34 countries. The earlier condition of mandatory listing in
India is dispensed with.



We may be required by
the Government of India at some point in time to list on a local Indian stock exchange. We may not be able to comply with any timeline
for listing and other standards imposed on us, and we are uncertain as to the consequences to us of any non-compliance. If we were
to list our equity shares on an Indian stock exchange, we will have to comply with changing laws, regulations and standards relating
to accounting, corporate governance and public disclosure, including the SEBI rules and regulations and stock exchange listing
requirements which may create uncertainty for companies like ours. These new or changed laws, regulations and standards may lack
specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided
by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of
compliance as a result of ongoing revisions to such governance standards.



The Indian securities
markets are smaller than securities markets in more developed economies and are more volatile than the securities markets in other
countries. Indian stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities.



Indian stock exchanges
have also experienced problems that have affected the market price and liquidity of the securities of Indian companies. These problems
have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. In addition, the governing
bodies of the Indian stock exchanges have from time to time restricted securities from trading, limited price movements and restricted
margin requirements. Further, from time to time, disputes have occurred between listed companies and the Indian stock exchanges
and other regulatory bodies that, in some cases, have had a negative effect on market sentiment. If we were to list our Equity
Shares on an Indian Stock Exchange and similar problems occur in the future, they could harm the market price and liquidity of
the Equity Shares and this could have an adverse effect on the price and liquidity of our ADSs.



25







BUSINESS



Overview

Our legal name is Rediff.com
India Limited and our commercial name is Rediff.com. We were incorporated in India 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, 1st Floor, L.
J. First Cross Road No-1, Mahim (West), Mumbai 400 016, India, and our telephone number is +91-22-6182-0000. Our Internet address
is www.rediff.com. Other information included in the website is not incorporated by reference into this document.



We are a leading internet
platform that enables content sharing and e-commerce for consumers and enterprises through our website and mobile application in
India and elsewhere in the world.



Through Vubites, we also
provide a platform for TV advertising targeting for small, medium and large corporate enterprises. In the United States, our news
and information platform comprises of a weekly print newspaper named “India Abroad” and an internet website under the
name “Rediff India Abroad”.



In June 2000, we issued
5.3 million ADSs, representing 2.65 million Equity Shares, at a price of US$12.00 per ADS, raising net proceeds of US$57.3
million, after underwriting discounts and other expenses, and we listed our ADSs on the NASDAQ Global Market (formerly the NASDAQ
National Market). In November 2005, we issued an additional 3.0 million ADSs, representing 1.5 million Equity Shares,
at a price of US$15.86 per ADS, raising net proceeds of US$44.1 million, after underwriting discounts and other expenses, and these
ADSs were also listed on the NASDAQ Global Market. Our ADSs are listed and traded on the NASDAQ Global Market under the ticker
symbol REDF. The net proceeds of our ADS offerings 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, to improve the technological capabilities of our company,
and for general corporate purposes, including capital expenditures, strategic investments, partnerships and acquisitions.



On November 26,
2010, we acquired Vubites India Private Limited (“Vubites”) for approximately US$0.30 million in cash and the assumption
of a $2.7 million loan. Vubites helps small and local businesses advertise on national TV channels within their cities to reach
their target audiences.



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 market accessed from
PCs and smartphones, which in turn is dependent on public and private investment for broadband infrastructure, the evolution of
adequate online payment mechanisms and e-commerce logistic in India, as well as the adoption of online advertising by advertisers,
and our ability to execute on our plans.



Our market share of
internet users in India accessing the internet from home and the office using PCs as measured by ComScore is presently 20%, and
our future growth and profitability is directly dependent on our maintaining this market share as India’s internet user
growth increases with the planned launch by mobile phone operators of 3G and 4G mobile data services.



The growth of our international
business, particularly our US operations, is dependent on our ability to deliver PC and mobile based services that appeal to the
Indian American population that we presently serve with our weekly print newspaper India Abroad and our website Rediff India Abroad.



Our overall growth is
also dependent on general economic conditions in all our markets, particularly India and the adoption of internet advertising by
consumer companies in the finance, consumer durable and consumer electronics and auto industries and increase in monetization of
our user base for e-commerce marketplace.



Our Opportunities



We believe our opportunities
are driven by the following factors, among others:



| | • | We were an early entrant in the Indian Internet market and our brand continues to be recognized
and trusted by Indian Internet users. We were the first company in India to introduce an e-commerce platform and related services
and through the expansion of our service offering, have retained a loyal user base following, with opportunities for expansion;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | We offer services based on contemporary technology, thus making them easy to use and accessible
through PCs, smart phones and tablet-based devices that have Internet capabilities. We have invested over the years in our news
media and e-commerce platforms to ensure our services are readily available and easy to use across virtually all operating systems,
mobile devices and communications platforms;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



26







| | • | We expect the growth of e-commerce in India to be fueled by anticipated improvements in broadband
access, online payment infrastructure and distribution and fulfillment facilities, an increase in credit and debit card penetration
rates, and the development of alternative payment mechanisms for online purchases, such as cash on delivery; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | We expect the growth in Internet access in India through PCs, smart phones and other mobile devices
such as tablets to be further fueled by the recent issuance of 3G licenses in India and the expected roll out of both 3G and 4G
services.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe that, as an
operator of an internet platform with a large number of users, we are well positioned to benefit from the anticipated growth of
revenues generated from these services, as well as new services we may offer in the future.



Our Strategy



We are focused on providing
an internet platform that makes it easy for consumers and online shoppers to discover content and products that is to their liking.
We make continuous efforts to improve the usability of our platform, add new features and improve the security and robustness of
transactions on our platform.



We also make continuous
efforts to make it easy for merchants and content creators to list their products and services on our platform and we provide them
with analytics to help them improve their business on our platform.



Our news and information
services are made up of both original content that we create, as well as content that we crawl and index from the world-wide web,
as well as content that is licensed from third party providers. Such content is in the form of text, audio and video.



Our free and reliable email
service, rediffmail, is a key draw for users to come to our site repeatedly. This email service is continuously improved by reducing
spam and improving usability. A paid version of this service is in use with highly discerning customers, including many insurance
and pharmaceutical companies. We have created mobile apps to use this mail service across many popular platforms, including Android
and Apple iPhone.



Our e-commerce marketplace
platform has continuously improved services to help merchants list their products and we continuously expand the number of logistics
services available to these merchants and also widen the number and type of payment mechanisms available to shoppers. In the past
few months we have fundamentally upgraded the analytics support we provide to merchants and we are presently testing with them
a new mobile app to help merchants manage their business with us with less effort.



Presently, we are able
to get a fraction of our user base to shop on our website. With the deployment of mobile applications we expect our user base to
grow significantly. With the help of mobile technology we are helping our merchants to list their products and services at a faster
pace. We also intend to increase the current merchant base, which will help to increase product listings / SKUs. We continue to
invest in creating and deploying algorithms that help match users with the content and product listings on our platform. We believe
that all this will help us to increase the monetization of e-commerce marketplace.



27







Our India
Online Business



Our Rediff.com India
website consists of information, communication and content services, free community products and platforms, e-commerce and mobile
services. With 17 million monthly active users in India, as reported by ComScore Media Metrix (March 2015 report) we believe
Rediff.com is one of the most recognized online brands in India and among the Indian community worldwide.



Information and Content



We deliver information
and content to our users in an easy-to-use interface for both PC and mobile phones. The information and content channels currently
available to our users include news, business, movies, cricket/sports and several other topics of interest. We currently offer
this information and content without charge to our users.



We believe, based on
the data provided by the ComScore, that a significant percentage of our online users are in the 18- to 34-year old age group. As
such, we place emphasis on reaching younger users through focused information and content relevant to this audience, and target
our marketing efforts to reach this demographic, as well as others, both in metro and small towns in India. Our specific offerings
include:



E-mail



We offer our users a
variety of e-mail solutions tailored to their needs.



| | • | Rediffmail, our flagship e-mail service, is provided free of charge to our users. We have now made
our interface more user friendly by providing easy navigation tools to quickly perform actions like reading unread mails, composing
a new mail, deleting mails and accessing the calendar and contacts. The service is also accessible on mobile devices and is designed
to work seamlessly on most mobile phones.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Rediffmail PRO is aimed at the small and medium sized enterprise (“SME”) segment in
India. Rediffmail ePro services are designed for use by large enterprises.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



Local TV Advertising



Vubites enables local
businesses to advertise on national TV channels within their city. Vubites works with TV broadcasters and cable multi-system operators
(MSOs) in the principal cities of India, enhancing local advertiser’s revenues by helping to make advertising on TV more
affordable. Vubites offers web-based tools that small merchants can use to create low cost TV ads in mpeg2 format, which play on
television directly, an online media planning tool with which advertisers can create their media plan without any assistance, and
a technology to insert TV ads at the city level.



Content Sharing Platform



Our content sharing platform
has several components. Rediff Blogs enables users to set up their own blogs and publish their thoughts and ideas directly
and instantly on the web as well as the ability to visit other blogs and comment on them. Users can also post pictures and create
multiple blogs under a single username and password.



On our video
sharing platform, Rediff iShare, videos are now available for viewing on iPhones and other operating systems (OS).
Video files are now available in both MP4 and flash video formats.



Rediff MyPage
is our free online social networking product which allows users to 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.



Get
Ahead, our editorial content channel, also supports a forum for questions and answers. This social media platform allows users
to post questions and answers on various issues, and vote for the most relevant answers within a community environment.ZaraBolallows users to share messages.



MONEYWIZ provides
stock market quotes, company information and a personal portfolio tracker, business news, feature articles, expert columns and
interviews. 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. Our free, real-time stock market indices and stock
quotes tool, which enables users to benchmark returns on their investments has been well received by users.



e-commerce Marketplace



Rediff Shopping is an
online marketplace which allows users to purchase products and services listed on our platform by various merchants. We offer products
and services from merchants in various categories which currently include apparel and accessories, mobile phones and accessories,
electronics, automobiles, home décor and related furnishings, toys, games, flowers, jewelry and a host of other products.



28







Customers can pay for
their purchases using a variety of payment options, including credit cards, debit cards, online banking services, cash on delivery,
gift vouchers and checks/demand drafts. We have entered into agreements with leading Indian banks to facilitate payment processes.
In our effort to provide more users with the convenience of online shopping, we partnered with India Post as a logistics partner.
This allows us to service more than 26,000 pin codes (similar to zip codes in the United States) across the country. We also continue
to work with our vendors to improve delivery cycles to better serve our customers and believe our logistics network enables us
to reach virtually all regions of India, a key competitive differentiator.



Rediff Shopping also
features a vendor rating system to enable online shoppers on our e-commerce platform to rate their shopping experience with different
online merchants. 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 feedback provided.



Our Revenue Sources



Our India online business
primarily includes revenues from both advertising and fee-based services. Online advertising includes revenues from advertisements
and sponsorships of events on web. Fee-based services include revenues from online shopping, subscription services.



Advertising



Advertising includes
revenues from banner advertising, performance-based advertising, e-mail and text link campaigns and sponsorships of events on web.
Our advertisers enter into agreements pursuant to which they either pay a fixed fee per thousand banner impressions for a given
time-period, usually ranging from a few weeks to months, or a variable fee depending upon the number of clicks or 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 rate
per thousand impressions, commonly referred to as CPMs, for banner advertisements varies depending on banner size, location of
the advertisements on our site, the targeted geographical areas 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
other formats for advertisers to broaden the appeal of the advertisements to our users, such as text links, image ads, video ads
and any combinations of these options.



We had over 379 advertisers on our Rediff.com
India website during the fiscal year ended March 31, 2015. Our top ten advertisers accounted for approximately 17% of our
India advertising revenues for the fiscal year ended March 31, 2015.



Fee-based services



Revenues from fee-based
services primarily includes income from various paid subscription service products, and from our online shopping marketplace.



Subscription service
revenues primarily include income from our various paid e-mail service products and domain name registration and web hosting services.
The revenue for subscription based products is recognized over the period of the subscription.



Online shopping revenues
primarily consist of commissions earned on the sale of electronics, books, music, apparel, confectionery, gifts and other items
to customers who shop from vendors on our online store. Revenues from online shopping services also include fees charged to vendors
for creating, designing and hosting the vendors’ product information on our website.





Our Infrastructure



Technology



Our operating infrastructure
is scalable and has been designed with a view to deliver many millions of page views per day and allow users to access our products
and services quickly and efficiently from different locations and devices worldwide. Our web pages are generated, served and cached
by servers all over India.



29







We use a wide range of
web application servers on Linux and Windows platforms. Servers are maintained mainly at telecom companies data centers in India
and abroad. In addition we use the cloud infrastructure offered by Amazon Web Services and Akamai to extend our reach. We have
the capability to deliver content using our own content delivery network and also use a third party content delivery network when
needed. We have architected our service in such a way as to protect our systems from the effects power outages, break-ins and other
service interruptions. We continuously monitor our system for accessibility, load, system resources, network intrusion and latency.
We have built a scalable column store data warehouse to cater to surges in demand for storage and for faster retrieval of data.



Our services are accessible
over PCs and mobile devices, such as smart phones and tablets. We have the ability to detect the browser capabilities and geographic
location of the user to serve pages with appropriate layouts and supported features. We log user activity while at the same time
protecting their privacy.



Advertising



Our sales and marketing
professionals are responsible for securing advertisers and shopping merchants, planning and creating advertising campaigns and
obtaining and analyzing customer feedback. Sales team members are based in Mumbai, New Delhi, Bangalore, Chennai, Hyderabad and
New York. The sales team coordinates regularly regarding advertising across all of our businesses. Our sales team includes designers,
copywriters, programmers and campaign managers.



In India, our sales team
focuses its sales efforts on major advertisers as well as smaller corporations and advertising agencies and provides them with
consultation on the design and placement of their web-based advertising and advertising measurement analysis. In the past few years,
a number of advertising agencies have been established in India to promote the Internet as an advertising medium among Indian advertisers.
In addition, several full-service advertising agencies in India have expanded their operations by creating and growing their Internet
/ interactive advertising divisions. These agencies manage the advertisement purchases of their customers (third party advertisers)
across media (TV, Print, Radio, Internet etc.) and are referred as digital agencies. We present the merits of our internet user
base visiting our website www. Rediff.com to these digital agencies and attempt to be included in the internet display advertisement
budget of their customers. These digital agencies place purchase orders for specific campaigns on behalf of their customers with
credit terms ranging from 60 to 90 days and for period ranging up to four weeks.Our advertising business from digital agencies
were accounted for approximately 60% of our advertisement revenues during fiscal year ended March 31, 2015.



Online Shopping



Our shopping platform
has a host of user-friendly features such as product search and detailed product category listings. The “tracking order”,
“view account”, “shopping bag details” and “order status update by automated e-mail” features
make online shopping convenient for users. Users can place orders from anywhere in the world for delivery in India. They can pay
for purchases by credit card, local check, cash-on-delivery or direct debit to an Internet banking account with designated Indian
banks. Our customer service officers address customer inquiries and solicit feedback from users to seek to continuously improve
our offerings. Customers are invited to provide feedback when items are delivered using our vendor rating system, rating their
experience with three options — satisfied, unsatisfied or undecided.



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 or the user’s designated courier.
We make payment to the merchant once we receive proof that the merchant has delivered the product. Most products purchased through
our website are delivered within ten business days. 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. Therefore,
we monitor complaints and merchant’s rating and remove merchant with bad satisfaction record.



Pursuant to the terms
of our agreements with merchants, we may receive a 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 leading international and Indian credit cards
and online money transfer methods for online payments. All online transactions are secured by VeriSign Secure Socket Layer (SSL)
technology.



30







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



United States Publishing Business



Our United States publishing
business consists of the India Abroad weekly print news paper and the Rediff India Abroad website, which is targeted at the Indian-American
community in North America.



India Abroad, which we
acquired in April 2001, was established over 40 years ago and is one of the oldest weekly newspapers focused on the Indian community
residing in North America and Canada. The newspaper is published in the United States.



The paper is divided
into five sections: News, Community, Business and Sports, Classifieds and Magazine. 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.
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 place classified advertisements through this website. Subscribers can have
copies of e-edition e-mailed to them for their convenience. The Rediff India Abroad website offers information and content that
is similar to the information and content on our Rediff.com India website, along with additional offerings relevant to North American
users.



Competition



There are a large number
of companies, both in India and internationally and based both in India and in other countries that provide websites and mobile
application focusing on users in India who compete with us for website visitors, online advertising and online shopping, and subscription
revenues. Our current and anticipated competitors include Google, Yahoo, Facebook, Microsoft, AOL, eBay, Amazon, Snapdeal, Flipkart
as well as a host of other international and Indian companies.



Competition is intense
and is expected to increase in the future, as there are no barriers to entry into the markets that we serve. Our competitive ability
is determined by how quickly we anticipate user needs and respond with new features on our various service offerings, our execution
skills and our financial management skills.



We also need to continue
to make investments in our marketing efforts.



We also compete for advertising
revenue with other forms of media, such as print media, radio and television, as well as companies known as “aggregators”,
which aggregate advertising space in third party websites and resell such space to, among others, our customers and potential customers.



In our e-commerce marketplace
we face competition not only from other e-commerce players but also from physical-world retailers, publishers and their vendors,
distributors and manufacturers.



Many of our competitors
have a longer operating history, greater name recognition, larger customer base and greater management, financial, technical, marketing,
sales, brand and other resources than we do. They may secure better terms from suppliers, adopt more aggressive pricing, and devote
more resources to technology, infrastructure, fulfillment, and marketing. Further, 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 also may enter into business combinations or alliances that
strengthen their competitive positions. In addition, emerging start-ups may be able to innovate and provide products and services
faster than we can. There has also been a trend toward industry consolidation, as a result of which 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,
our revenues may decline.



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 taken legal action in India and overseas to protect our rights in respect of our domain names.
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, and there can be no assurance we would prevail in it.



31







We could be subject to
intellectual property infringement claims as the number of our competitors grows and the content and functionality of our websites
or other product or service offerings overlap with competitive offerings. Defending against these claims, even if they are 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 substantial damage awards and be forced to try to obtain or develop
non-infringing assets, obtain a license or cease selling the applications that contain the infringing matter. If this were to occur,
we may be unable to develop non-infringing assets or obtain a license on commercially reasonable terms, or at all.



We 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 can be licensed or developed. Any such delays could materially adversely affect
our business, operating results and financial condition.



We have registered our
trademarks for “Rediff”, “Rediff on the Net and Design (Square)” and “Rediff.com” under various
classes with the United States Patent and Trademark Office. We have received registration for our trademarks “Rediff”,
“Rediff.com”, “Rediffmail”, “Rediffmail Mobile”, “Rediff Mobile”, “Rediff
Bol”, “Rediffmail NG Mobile”, “Rediff iShare”, “Sociali” and “Rediff Shopping”,
and have applied for registration for “RediffDeal Ho Jaye” and “Rediff ZaraBol”, in India. We have also
received copyright registration for our artworks entitled “How Hot Is This Stock”, “origami dog” and “sociali”
and for 40 “profile photo illustrations” in India.



Facilities



India



Our corporate headquarters
are located in Mumbai, India, where we lease approximately 22,700 square feet in two buildings. In one facility we lease approximately
10,800 square feet and in the other we lease a total of approximately 11,900 square feet under three separate lease agreements.
The lease for our 10,800 square-foot facility will expire on January 20, 2017. In regard to our 11,900 square-foot facility,
one lease, for 3,000 square feet, expires on October 31, 2015, a second lease, for 3,000 square feet of adjoining offices,
expired on September 30, 2014 and was renewed for another three years to until September 30, 2017. The third lease, for 5,900
square feet will expire on April 30, 2017. Further, we lease offices in Delhi and Bangalore.



United States



Our U.S. subsidiary leases
approximately 6,300 square feet of office space in New York, the lease for which expires on May 31, 2018.



We do not anticipate
having material difficulties renewing any of our current leases or, alternatively, entering into different space arrangements if
necessary.



Seasonality



Seasonal fluctuations
in Internet advertising have affected, and are likely to continue to affect, our business. Internet advertising in India is generally
slow during the first half of the fiscal year for most Indian companies. Such seasonal trends have in the past caused, and will
likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.



32







Litigation and Other Legal Matters



Action Relating to
Access to Pornographic Material



On June 21, 2000, the Company, certain
of our present and then directors and others (Ajit Balakrishnan, Arun Nanda, Abhay Havaldar, Sunil Phatarphekar, Charles Robert
Kaye and Tony Janz) were named as defendants in a criminal complaint (RCC Complaint Number 76 of 2000) filed by Mr. Abinav
Bhatt, who was then 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 RCC Complaint alleged that we, through our website www.rediff.com, provided
a search facility that enabled Internet users to view obscene, pornographic and objectionable material. On November 27, 2000,
the Judicial Magistrate passed an order on 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 (Sunil N. Phatarphekar & Ors. v. Abhinav Bhatt and Ors., Mumbai High Court,
Criminal Writ Petition No. 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 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 and currently hearings have commenced. While we believe that the lawsuit is without merit, and that
we and our directors have a valid defense to the charges, in the event that we are unsuccessful in our defense, we and our directors
may face both criminal penalties and monetary fines or damages. Under Indian law, any person who publishes or transmits or causes
to be published in electronic form any material which is lascivious or appeals to the prurient interest, or whose 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$1,700); 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$3,400).



Actions Relating to
Trademark Infringement



In May, 2008, a complaint
was filed by The Board of Control of Cricket in India (“BCCI”) against Sandeep Goyal and us, alleging that the depiction
of images in the online game known as Indian Fantasy League, started by Sandeep Goyal and hosted on the Web through our hosting
services, infringed the Indian Premier League (“IPL”) trademark. BCCI is seeking (a) a permanent injunction restraining
defendants from the use of logo “Indian Fantasy League.com”; (b) shutdown of the website Indianfantasyleague.com;
and (c) a rendering of the accounts of all profits earned by the website and damages of Rs.1.0 million (approximately US$17,000).
We have filed our response to the BCCI complaint, and among the defenses we have raised are: (a) it is Sandeep Goyal who has
infringed the trademark of IPL and not Rediff.com; (b) Rediff.com only provides the domain hosting and web based e-mail solution
services which enables the subscriber to set up and manage their website as per the terms and conditions of Rediff business solutions;
and (c) subscribers such as Sandeep Goyal are required to abide by and comply with the terms and conditions we impose on our
subscribers, which provide that the subscriber shall be solely responsible for producing, electronically uploading and maintaining
such subscriber’s website, and such subscriber shall ensure that all uploaded material shall be owned and/or properly licensed
by the subscriber and shall not adversely affect any rights of any third party. Although we and our legal counsel believe that
we have valid defenses to the charges and we do not ascertain any monetary claims against us. But if we are unsuccessful in our
defense, we could be subject to monetary fines or damages.



In February, 2006, a
complaint was filed by Marksman Pvt. Ltd. against various telecom operators and internet service providers and Rediff.com, alleging
infringement of Marksman’s copyright by way of the dissemination of information relating to scores, alerts, updates and other
events, via Short Message Service (SMS) technology on wireless and mobile telephones, in respect of One Day International Cricket
Matches (“ODIs”) during India’s tour of Pakistan scheduled in February, 2006. We have filed our response, and
among the defenses we have raised are: (a) Rediff.com, along with other telecom operators and service providers, has not infringed
Marksman copyrights; and (b) the information relating to scores, alerts, updates and other events were sourced from the public
domain and as such no exclusivity can be claimed. The one-judge panel, while dismissing a request for an interim order, has directed
the defendants to maintain the accounts of the SMSs received during the ODIs. Marksman would have to first amend the suit to seek
damages before any claim could stand against Rediff.com. In 2006, Marksman sought to amend the suit to include damages. Although
we believe we have valid defenses to the charges, if we are unsuccessful in our defense, we could be subject to monetary fines
or damages.



We cannot predict the
outcome of these lawsuits, nor can we predict the amount of time and expense that may be required to resolve these lawsuits. If
these lawsuits become time-consuming and expensive, or if there are unfavorable outcomes against us in these cases, there could
be a material adverse effect on our business, financial condition and results of operations. We may be subject to additional lawsuits
filed in the future.



We currently hold insurance
policies for the benefit of our directors and officers (the “D&O Policy”), which provide coverage against certain
claims. However, the amount of coverage may not be sufficient for our needs, or the various exclusions in the D&O Policy could
result in denial of coverage. In any such case, we would have to self-fund all or a substantial portion of our indemnification
obligations.



Other proceedings



We are also subject to
other legal proceedings and claims, which have arisen in the ordinary course of our business and which include some claims from
the Indian tax authorities. These proceedings and claims, when ultimately concluded and determined, will likely not, in the opinion
of management, have a material effect on our results of operations or financial statements.



We have not recognized
any loss accrual for the litigation disputes as the Company believes that it is probable that it would be successful on resolution
of the litigation. The maximum total loss relating to these disputes would be approximately US$20,400 excluding any interest and
penalties, which amounts cannot be reasonably estimated at this point of time.



33







Subsidiaries



Rediff Holdings, Inc.
(“Rediff Holdings”) is a wholly owned subsidiary of ours and is incorporated in the State of Delaware. Rediff Holdings
holds all of the outstanding voting shares of Rediff.com, Inc. (formerly thinkindia.com) and all of the outstanding voting shares
of India Abroad Publications Inc.



Rediff.com, Inc. runs
our North America - based Internet website operations, is incorporated in Delaware. India Abroad Publications Inc., which publishes
India Abroad, is a New York corporation,. Value Communication Corporation, an Illinois corporation incorporated in 1996, is another
subsidiary of ours. In April 2004, we sold its business to Worldquest Networks, Inc. (“WQN”).



Vubites India Private
Limited. Vubites is a wholly owned subsidiary of ours and an Indian-incorporated entity that offers affordable local TV advertising
in India.



34







MANAGEMENT’S
DISCUSSION AND ANALYSIS OFFINANCIAL 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
platform for content sharing and e-commerce in India. Our websites and Mobile apps offer a variety of internet-based consumer and
enterprise services.



Through our subsidiary
company Vubites, we provide a platform for targeting TV advertising. According to ComScore, in March 2015, India had 80 million
unique individuals accessing the internet using PCs from home and the office, of which 17.5 million, or 20%, visited Rediff.com.



In
addition to our Indian business we operate a subsidiary in the United States, “India Abroad”, which operates both a
weekly print newspaper as well as an online website providing news and information services to users in the United States.



We have
incurred significant net losses and negative cash flows in the process of creating and establishing a variety of
internet-based services and achieving a critical mass since our inception in January 1996. We incurred a net loss of
US$13.8 million for the fiscal year ended March 31, 2015, taking into account an impairment charge of US$3.2, and
as of the same date we had an accumulated deficit of US$109 million, compare to a net loss of US$7.5 million and an
accumulated deficit of US$95.2 million for the fiscal year ended March 31, 2014. As of March 31, 2015, our cash balance
was approximately US$8.3 million, and we believe that based on the current cash use rate this cash balance will be sufficient
to meet our operating and capital requirements for next five to seven quarters. On July 29, 2015, as described in Note 26, we
have entered into an arrangement with an investor in accordance with which the Company, at its option, has the right to
obtain financing in exchange for issuance of ADS, subject to certain conditions as described in Note 26. We are focused on
expanding the reach of our services and on generating additional revenues, while controlling our expenses, and to achieve
profitability in the near future.



Our reportable business segments are:



| | • | India Online business, comprised of revenues from online advertising (which includes display, performance
and sponsorship formats) and fee-based services (which includes e-commerce marketplace fees and revenues from subscription-based
email services and mobile value added services).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | US Publishing business, comprised of revenues from advertising and subscription for India Abroad
print and online properties and online advertising revenue from the Rediff India Abroad website.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Critical
accounting policies and the use of estimates



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 liabilities. On an
on-going basis, we evaluate our estimates, including but not limited to allowances for doubtful trade accounts receivables, impairment
of goodwill, property, plant and equipment, intangible and investments, useful lives of property, plant and equipment and intangible
assets, valuation of deferred tax assets, stock based compensation and employee benefits. We base our estimates on historical experience
and on 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
critical accounting policies used in the preparation of our consolidated financial statements. Refer to Note 2 to the Consolidated
Financial Statements for a more complete discussion of all of the Company’s significant accounting policies.



Revenue Recognition



India Online business



India Online business
includes revenues from advertising, sponsorship and fee based services. Advertisement and sponsorship income is derived from customers
who advertise on our website or from targeted mailers to Rediffmail subscribers. Fee based services include fee we earn
from our e-commerce marketplace, subscription fees for our email services and our share of revenues from mobile value added services.



35







Revenue from display
advertisement is recognized as impressions of or clicks on display advertisements are delivered or broadcast. Impressions are delivered
when a sold advertisement appears in pages viewed by users. Clicks are delivered when a user clicks on the advertisement. Revenues
are also derived from sponsor links placed in specific areas of the Company’s website, which generally provide users with
direct links to sponsor websites. Revenue from sponsor links is 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 from the sending
of mail shots to its users on behalf of advertisers and such revenues are recognized on delivery. We report our online advertisement
revenues on a gross basis principally because we are the primary obligor to our advertisers.



e-commerce marketplace
fee, which is comprised of the commissions and shipping revenue is recognized after receipt of confirmation that the online
customer has accepted delivery of the goods. The cost of incentives provided to online customers like coupons and promo codes are
reduced from revenue and where such incentives exceed the revenue amount, the excess is recognized as cost of revenue.



Subscription service
revenue, which is comprised of subscription fees for email and related services provided to small and large enterprises is deferred
and recognized pro rata over the terms of such subscription.



Mobile value-added services
revenues are derived from providing value added short messaging services (“SMS”), ring tones, picture messages, logos,
wallpapers and other related services to mobile phone users. The company contracts with third-party mobile phone operators for
sharing revenues from this service. Mobile value- added services revenue is recognized when this service is rendered.



US Publishing business



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



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.



Allowances for doubtful accounts receivable
and other recoverable



We maintain allowances
for doubtful accounts receivable and other recoverable for estimated losses resulting from the inability of our customers to make
contractually agreed payments. We establish an allowance for doubtful accounts on trade accounts receivable after considering the
financial condition of the customer, ageing of the accounts receivable, historical experience and the current economic environment.
Trade account receivable balances are written off against allowances only after all means of collections have been exhausted and
potential of recovery is considered remote.



Depreciation and amortization



We depreciate/amortize
our assets on a straight-line basis over the useful life of the assets, which range from one to ten years.



36







Goodwill



Goodwill is tested for
potential impairment on an annual basis, which is performed on January 1 or in interim periods if events and circumstances
indicate a potential impairment. As reporting units are determined after an acquisition or evolve with changes in business strategy,
goodwill is assigned and it may no longer retain its association with a particular transaction. All revenue streams and related
activities of a reporting unit, whether acquired or organic, are available to support the carrying amount of goodwill. The reporting
units for impairment assessment have been identified as the US Publishing business. Under the applicable accounting standard, goodwill
impairment analysis is a two-step test. The first step of the goodwill impairment test compares the fair value of the reporting
unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill
of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value,
the second step is performed. The second step involves calculating an implied fair value of goodwill for each reporting unit for
which the first step indicated possible impairment. The implied fair value of goodwill is determined in the same manner as the
amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit, as determined
in the first step, over the aggregate fair values of the individual assets, liabilities and identifiable intangibles as if the
reporting unit was being acquired in a business combination. The adjustments to measure the assets, liabilities and intangibles
at fair value are only for the purpose of measuring the implied fair value of goodwill and these adjustments are not reflected
in the consolidated balance sheet. If the implied fair value of goodwill exceeds the goodwill assigned to the reporting unit, there
is no impairment. If the goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge
is recorded for the excess. An impairment loss recognized cannot exceed the amount of goodwill assigned to a reporting unit, and
the loss establishes a new basis in the goodwill. Subsequent reversals of goodwill impairment losses are not permitted.



Estimating the fair value
of reporting units is a subjective process that requires significant estimates and assumptions, particularly related to cash flows
and the appropriate discount rates. The fair values of the reporting units were determined using a valuation technique consistent
with the income approach. For the purposes of the income approach, internal forecasts were used to estimate the future cash flows
(including a terminal value approach to estimate cash flows beyond the final year of the forecast) after considering current economic
conditions and trends, estimated future operating results and growth rates. Due to the inherent uncertainty involved in making
those estimates, actual results could differ from the estimates. The Company evaluates the merits of each significant assumption,
both individually and in aggregate, used to determine the fair value of the reporting unit, as well as the fair values of the corresponding
assets and liabilities within the reporting unit, for reasonableness. Cash flows are discounted based on a discount rate which
the Company believes adequately reflects the inherent risk in the businesses of the reporting unit, uncertainty in the economic
environment and risks associated with the internally developed forecasts.



During the fiscal year
2013, we tested the goodwill of the US Publishing business, which arose from the acquisition of the print newspaper India Abroad
in 2001, for impairment. As a result of the goodwill impairment test, we concluded that goodwill was impaired and accordingly we
recorded a goodwill impairment charge of US$2.0 million. The impairment was on account of the weakness in the publishing industry
which resulted in reduction of the US publishing business projected operating results and estimated future cash flows.



Impairment or disposal of long-lived assets
(excluding goodwill)



We evaluate long-lived
assets, such as property, plant and equipment and purchased or internally developed intangible assets with finite lives, for impairment
whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. When such events occur,
we assess the recoverability of the assets group based on the undiscounted future cash flow the assets group is expected to generate
and recognize an impairment loss when estimated undiscounted future cash flow expected to result from the use of the assets group
plus net proceeds expected from disposition of the assets group, if any, is less than the carrying value of the assets group. If
we identify an impairment, we reduce the carrying amount of the assets group to its estimated fair value based on a discounted
cash flow approach or, when available and appropriate, to comparable market values. We use estimates and judgments in our impairment
tests and if different estimates or judgments had been utilized, the timing or the amount of any impairment charges could be different.



During the fiscal year
ended March 31, 2015, we recognized an impairment loss of US$ 3,200,089 on its Property, plant and equipment relating to its India Online business. India Online business includes revenue from advertising and fee based services. The impairment
was on account of decline in advertisement revenue as there has been a continued reduction in spends by customers
which is consistent with industry trends. As a consequence, we have been experiencing a decline in our display advertisement revenue,
and incurring net operating cash losses. The fair value of the India Online business asset group is insignificant.



Intangible Assets



Intangible assets consist of customer contracts
and intellectual property carried at cost and amortized over their estimated useful lives, generally on a straight-line basis over
three and seven years, respectively, that best reflects the economic benefits of the intangible assets.



37







Impairment of Intangible Assets



Intangible assets, such
as purchased technology, are generally recorded in connection with a business acquisition. The value assigned to intangible assets
is usually based on estimates and judgments regarding expectations for the success and life cycle of the acquired technology. We
monitor acquired intangible assets for impairment on a periodic basis by reviewing indicators of impairment. If an indicator exists
we compare the fair value to the unamortized cost of the intangible asset. The recoverability of the intangible assets is primarily
dependent upon our ability to commercialize the acquired technology, secure new customers and retain existing customers, increase
and maintain awareness of the acquired technology and the related service. The fair value of the acquired intangible assets is
based on the estimated undiscounted future cash flows derived from such intangible asset. Our assumptions about future revenues
and expenses require significant judgment associated with forecast of the performance of the acquired technology and the related
service, ability to secure customers and maintain our market position. Actual revenues and costs could vary significantly from
these forecasted amounts.



Current Trends and Business Outlook



Our overall revenue for
fiscal 2015 was US$15.3 million, a decline of 5% as compared to the previous year. Our revenue from India Online was US$ 13.1 million,
a decline of 2% and our revenue from our US Publishing business was US$2.2 million, a decline of 19% as compared to the previous
fiscal year.



Within the India Online
business, the fee-based business grew strongly at 25% year-over-year led by our e-commerce marketplace fees that grew 35%. This
was not enough to overcome a decline of 19% in online advertising revenue. We continue to invest our marketplace technology platform,
invest in algorithms to improve customer service and expand the number of merchants on our platform.



The challenges we faced
in our India online advertising segment is partly a reflection of the challenge that display advertising is facing worldwide, and
in part also a reflection of difficult business conditions in India for advertisers in the consumer finance and consumer durable
industries.



There are three different
factors that have an influence on advertising revenues in our India Online segment. First, online display advertising (this is
advertising where banner ads are shown to users who visit Rediff’s website and where Rediff gets paid for the number of times
these banners are displayed to these users), like all forms of advertising is very sensitive to the economic environment particularly
as it affects consumer products and services and consumer durables industries. Second, size and growth of online advertising as
a category is dependent on the size and growth of the internet user base in India. Finally, the prices that Rediff gets for our
display advertising inventory is dependent on Rediff’s pricing power, which in turn is dependent on our share of the internet
users in India.



Taking the first factor,
economic environment, the Indian government, through its Central Statistical Organization, has recently released figures for 2014
which says that while India’s GDP (at factor cost) grew 4.9% on a year-on- year basis in the first half of 2014 and 4.6%
in the second half of 2014, the Manufacturing sector (which contains the consumer industries critical for advertising) grew a mere
0.1% in the first half of 2014 and actually declined 1.5% in the second half. The index of industrial production, also recently
released, shows the consumer goods industries declined 18.6% in November 2014, the most recent month of 2014 for which figures
are available, on a year-on-year basis.



The second driver of
online advertising revenue is the size and growth of the internet user base, and a good proxy for this is the internet penetration
rate. India’s internet penetration rate in 2013-14 was estimated to be in the low double digits 11%, compared to 43% for
China and 23% for Indonesia according to Mary Meeker of Kleiner Perkins. This low penetration is inhibiting the shift from other
media to internet as has been seen in other countries.



The third driver for
the Company’s online advertising growth is Company’s share of India’s internet user base. According to ComScore,
Rediff’s monthly unique users for the month March 2015 was 17 million compared to 80 million for India which represents a
20% share, a relatively large share, which gives us a reasonable pricing power.



The decline in advertising
revenue for India Abroad, a print newspaper, and an iconic voice for the Indian American community is because in the United States
the print newspaper industry has been continuously declining since fiscal 2007. Revenue from the US Publishing business has been
declining coincident with the overall decline in publishing industry. However, our target audience for the newspaper is niche and
the Indian diaspora and hence we believe that with our efforts it is possible to arrest this decline in revenues from the publishing
business and make it remain flat in the near future.



38







Revenue from fee-based
business accounted 32%, 39% and 50% respectively, of India Online business revenues for the fiscal years ended March 31, 2013,
2014, and 2015 respectively. This increasing share is due to both a year over year increase in absolute fee-based revenues, as
well as an absolute decline in advertising revenue. Cost of revenue relating to advertising is largely fixed in nature. Whereas
cost of revenue relating to fee-based services are significantly variable and directly linked to fee-based revenue. Presently fee-based
revenues have a lower gross margin than advertising revenues, which has resulted in a decline in average gross margin for the India
Online business segment from 40% in March 31, 2013, to 38% in March 31, 2014, and to 32% in March 31, 2015. The lower gross margin
on account of higher variable cost of revenue for the fee-based businesses is because the fee based business are in their early
stages of market adoption, and are likely to reach their optimum scale in the next two to three years.



Our subscription based
email services for enterprise scored many wins from high quality and discerning customers. This service won the CIO award in its
category for the second year in succession.



Vubites, our TV ad targeting
platform gained wider acceptance during the year from advertisers, TV networks and Cable Operators.



In order to grow our
online user base and attract new advertisers, we expect to continue to invest in new products and product enhancements, expand
the content and services on our network and procure more bandwidth and network equipment.



We believe that the growth
of our revenues and profits from our India Online business is dependent on the growth of the Indian Internet market and mobile
phone user base, the evolution of adequate online payment mechanisms, a consequent increase in advertising and fee-based revenues
and our ability to capture a sizeable share of any increases in revenues from such developments. In this context we look forward
to the proposed aggressive deployment of 3G and 4G data services by Indian mobile phone operators which is expected in late 2015.
We are preparing for this new mobile era by investing in making all our services mobile friendly.



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, acceptance of new products and services, the development
of broadband Internet and 3G and 4G networks in India, our ability to successfully integrate the businesses we have acquired, competition,
demand for our online and offline service offerings, changes in the Internet marketplace, technological changes, investment income,
cash flow and our exposure to market risks. By their nature, certain of our disclosures are only estimates and could be materially
different from what actually occurs in the future. As a result, actual future gains, losses or impacts could materially differ
from those that have been estimated. For further discussion of forward-looking statements, see the discussion under the “Forward-Looking
Statements” section of this annual report.



Operating Results



Results of our reportable business segments were as follows (amount
in US$ million):



|                                  |  | 2013                  |      |  | 2014                   |  |     | 2015  | 
|--------------------------------- |  | --------------------- | ---- |  | ---------------------- |  | --- | ----- | 
|                                  |  | India Online Business |      |  | US Publishing Business |  |     | Total | 
|Revenues from external customers: |  |                       |      |  |                        |  |     |       | 
|Advertising                       |  |                       | 8.5  |  |                        |  | 2.9 |       | 
|Fee based services                |  |                       | 4.0  |  |                        |  | 0.3 |       | 
|Total revenues                    |  |                       | 12.5 |  |                        |  | 3.2 |       | 
|                                  |  |                       |      |  |                        |  |     |       | 
|Cost of revenues                  |  |                       | 7.5  |  |                        |  | 2.5 |       | 
|Segment Results                   |  |                       | 5.0  |  |                        |  | 0.7 |       | 



The comparative analysis presented below relates to our operations.



39







Fiscal Year Ended March 31, 2015 compared to Fiscal Year
Ended March 31, 2014



Revenues



Our overall revenues
for the fiscal year ended March 31, 2015 declined by 5% to US$15.3 as compared to US$16.1 million for the previous fiscal year.



India Online business



We recognized US$13.1
million in revenues from our India Online business for the fiscal year ended March 31, 2015, as compared to US$13.4 million
for the fiscal year ended March 31, 2014, a decrease of 2%, over the previous fiscal year. This decrease is primarily due
to a decline of 19% in India online advertising revenue. Our India Online business is comprised of advertising business and fee-based
business. Our advertising revenue is declining because display advertising is facing challenges worldwide and in India advertisers
in the consumer finance and consumer durable industries are facing difficult business conditions. Within the India Online business
segment the fee-based business grew by 25% year-on-year led by our e-commerce marketplace fees that grew by 35% as compared to
previous fiscal year.



During the fiscal year
ended March 31, 2015, the Indian rupee depreciated against the US dollar by approximately 1% and hence did not have any significant
impact on revenue due to currency translation.



U.S. Publishing business



We recognized US$2.2
million revenues for the U.S. Publishing business for the fiscal year ended March 31, 2015, as compared to US$2.7 million
for the fiscal year ended March 31, 2014, representing a decrease of approximately US$0.5 million, or 19%, over the previous
fiscal year. In the United States the newspaper industry has been continuously declining since fiscal 2007. Revenue from US Publishing
business has been declining coincident with the overall decline in publishing industry. However, our target audience for the newspaper
is niche and Indian Diaspora and hence we expect that our revenues from publishing business will continue to remain flat in near
future.



Cost of revenues



In the fiscal year ended
March 31, 2015 cost of revenues were US$10.8 million as compared to US$10.4 million in the previous fiscal year, an increase
of US$0.4 million or by 4%. During the fiscal year ended March 31, 2015, cost of revenue was 71% of the total revenues as compared
to 65% of total revenues for the fiscal year ended March 31, 2014.



India Online business



Cost of revenues for
the India online business includes Internet communication, data storage and software usage costs, the cost of content for the Rediff
websites, the cost of editorial functions (including payroll costs and travel costs of staff in the editorial department), stock-based
compensation costs, the direct costs of providing fee-based services such as courier charges, content cost for mobile value-added
services, cost of domain registrations and the cost relates to broadcaster.



In the fiscal year ended
March 31, 2015 cost of revenues for the India Online business was US $8.9 million (68% of revenue) as compared to US $8.3
million (62% of revenue) for the fiscal year ended March 31, 2014. This represents an increase of US$0.6 million, or 6% over
the previous fiscal year. This increase was primarily related to increase in direct costs of providing fee- based services.



Cost of revenue relating
to advertising business consists of mostly fixed in nature. Whereas cost of revenue relating to fee-based services are variable
in nature and directly linked to fee-based revenue. An increase in fee-based revenue increases the corresponding cost of revenue.
As fee-based revenues presently have a lower gross margin than advertising revenues, this has resulted in a decline in average
gross margin for the India Online business segment from 38% in March 31, 2014 to 32% in March 31, 2015.



During the fiscal year
ended March 31, 2015, the Indian rupee depreciated against the US dollar by approximately 1% and hence did not have any significant
impact on cost of revenue due to currency translation.



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,
2016, as compared to the fiscal year ended March 31, 2015, as we expect to incur additional costs to continue to grow our
business.



40







U.S. Publishing business



Cost of revenues for
the U.S. Publishing business includes printing and circulation costs (including payroll costs) for our weekly news paper “India
Abroad”.



In the fiscal year ended
March 31, 2015 cost of revenues for the U.S. Publishing business was US $1.9 million (88% of revenue) as compared to US $2.1
million (76% of revenue) for the fiscal year ended March 31, 2014. This represents a decrease of US$0.2 million over the previous
fiscal year.



Segment results



Analysis of the results
presented below is based on the segment results as assessed by the Company’s chief operating decision maker and has been
determined as revenues less cost of revenues before operating expenses.



India Online business



Segment profit of the
India Online business was US$4.2 million and US$5.1 million for the fiscal year ended March 31, 2015 and 2014. However, fee
based revenues grew significantly but this growth was offset by increased cost of revenues and decrease in revenues from online
advertising which has higher gross margin.



U.S. Publishing business



Segment profit of the
U.S. publishing business was US$0.3 million and US$0.6 million for the fiscal year ended March 31, 2015 and 2014.



Operating expenses



Operating expenses include sales and marketing
expenses, product development expenses, depreciation and amortization, general and administrative expenses, long-lived impairment
and foreign exchange loss (gain) net.



In the fiscal year ended March 31, 2015,
operating expenses were US $19.5 million as compared to US $18.1 million for the fiscal year ended March 31, 2014. This represents
an increase of US$1.4 million, or 8% over the previous fiscal year.



During the fiscal year
ended March 31, 2015, the Indian rupee depreciated against the US dollar by approximately 1% and hence did not have any significant
impact on operating expenses due to currency translation.



Sales and marketing expenses



Sales and marketing expenses
primarily include employee compensation for sales and marketing personnel, stock-based compensation cost, advertising and promotion
expenses, sales support cost, distribution cost and market research costs. For the fiscal year ended March 31, 2015, sales
and marketing expenses were US$5.5 million, compared to US$3.9 million for the fiscal year ended March 31, 2014, representing
an increase of US $1.6 million over the previous fiscal year. This increase was mainly on account of marketing spends incurred
for the brand building of the Company.



We expect that our sales
and marketing expenses in absolute dollar terms will not increase substantially for the fiscal year ended March 31, 2016.



Product development expenses



Product development expenses
primarily include software development expenses and compensation for product development personnel including stock-based compensation
costs. Third-party technology and development expense, and other related operating costs are also included in product development
expenses. For the fiscal year ended March 31, 2014 and 2015, product development expenses were US$2.3 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.



Depreciation and amortization expenses



For the fiscal year ended
March 31, 2015, depreciation and amortization expense was US$1.7 million compared to US$3.1million for the fiscal year
ended March 31, 2014, representing a decrease of US$1.4 million, or 44%. This decrease was due to a lower base of depreciable
assets.



41







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 and promissory notes, insurance premiums, stock-based compensation costs and general administrative costs. For
the fiscal year ended March 31, 2015 and 2014, general and administrative expenses were US$6.7 and US$7.2 million, respectively,
a decrease of US$0.5 million or 8%, as compared to previous fiscal year 2014.



Long-lived assets impairment



During the fiscal year
ended March 31, 2015, we recognized an impairment loss of US$ 3,200,089 on its Property, plant and equipment relating to its India Online business. India Online business includes revenue from advertising and fee based services. The impairment
was on account of decline in advertisement revenue as there has been a continued reduction in spends by customers
which is consistent with industry trends. As a consequence, we have been experiencing a decline in our display advertisement revenue,
and incurring net operating cash losses. The fair value of the India Online business asset group is insignificant.



Other income
(expenses), net



Other income (expenses),
net, primarily comprised of interest income, interest income on income tax refunds, gain on sale of investments and miscellaneous
income. During the fiscal year ended March 31, 2015 and 2014, net other income were US$1.2 million and US$4.7 million,
respectively.



Interest income



Interest income for the
fiscal year ended March 31, 2015 was US$0.9 million, compared to US$1.3 million for the fiscal year ended March 31,
2014, representing a decrease of US$0.4 million, or 31%. The decrease in interest income was primarily due to utilization
of bank deposits held under cash and cash equivalents.



Interest income on Income tax refunds



During the fiscal year
ended March 31, 2015 and 2014, we received income tax refunds for prior income tax assessment years along with the interest of
US$0.1 million and US$0.6 million, respectively.



Miscellaneous income



During the fiscal year
ended March 31, 2015, we received our share of depository service fees (DSF) of US$0.19 million for the fiscal years 2012, 2013
and 2014.



Net income (loss)



As a result of the foregoing,
our net loss for the fiscal year ended March 31, 2015 was US$13.8 million, taking into account the long lived assets
impairment loss of US$3.2million, as compared to a net loss of US$7.5 million for the fiscal year ended March 31, 2014.



Fiscal Year Ended March 31, 2014 compared to Fiscal Year
Ended March 31, 2013



Revenues



Total revenues for the
fiscal year ended March 31, 2014 increased by 3% to US$16.1 million from US$15.7 million for the fiscal year ended March 31,
2013.



India Online business



We recognized US$13.4
million in revenues from our India Online business for the fiscal year ended March 31, 2014, as compared to US$12.5 million
for the fiscal year ended March 31, 2013,an increase of US$0.9 million, or 7%, over the previous fiscal year. This increase
resulted primarily from the growth in our online marketplace business. Our India Online business comprises of advertising business
and fee-based business. Fee-based business revenues accounted for approximately 39% of total India Online business revenues. During
the fiscal year ended March 31, 2014, fee-based revenue grew by 30% whereas advertising revenue declined by 4%. The advertising
business is declining because of slow growth in Indian economic environment, Indian internet user base and our share in Indian
internet user base.



42







In addition, our reported
revenues in fiscal year 2014 were adversely affected by currency translation of Indian Rupee to US dollar. During the fiscal year
ended March 31, 2014, the Indian rupee depreciated against the US dollar by approximately 12%. Had the exchange rate between
Indian rupees and US dollars remained constant, our India Online revenues in constant currency terms for fiscal 2014 would have
been approximately US$14.9 million, rather than our reported revenues of US$13.4 million, or an increase of 19% rather than our
reported increase of 7%.



U.S. Publishing business



We recognized US$2.7
million in revenues for the U.S. Publishing business for the fiscal year ended March 31, 2014, as compared to US$3.2 million
for the fiscal year ended March 31, 2013, representing a decrease of approximately US$0.5 million, or 12%, over the previous
fiscal year. The decrease in revenues was primarily due to a decrease in print revenues from our weekly newspapers “India
Abroad” and “India in New York”. In the United States, the newspaper industry has been continuously declining
since fiscal 2007. Our US Publishing business is also declining at a similar pace as the overall decline in publishing industry
in the United States.



Cost of revenues



In the fiscal year ended
March 31, 2014 and 2013, cost of revenues were US$10.4 million, or 65% of the total revenues for the fiscal year ended March
31, 2014 as compared to 64% of total revenues for the fiscal year ended March 31, 2013.



India Online business



Cost of revenues for
the India online business includes Internet communication, data storage and software usage costs, the cost of content for the Rediff
websites, the cost of editorial functions (including payroll costs and travel costs of staff in the editorial department), stock-based
compensation costs, the direct costs of providing fee-based services such as courier charges, content cost for mobile value-added
services, cost of domain registrations and the cost relates to broadcaster..



In the fiscal year ended
March 31, 2014 cost of revenues for the India Online business was US $8.3 million (62% of revenue) as compared to US $7.5
million (60% of revenue) for the fiscal year ended March 31, 2013. This represents increase of US$0.8 million, or 12% over
the previous fiscal year. This increase was primarily related to increase in direct costs of providing fee- based services and
higher costs of buying spots from broadcaster.



Cost of revenue relating
to advertising consists of mostly fixed costs in nature. Whereas cost of revenue relating to fee-based services are variable in
nature and directly linked to fee-based revenue. An increase in fee-based revenue increases the corresponding cost of revenue.
As fee-based revenues presently have a lower gross margin than advertising revenues, this has resulted in a decline in average
gross margin for the India Online business segment from 40% in March 31, 2013 to 38% in March 31, 2014.



During the fiscal year
ended March 31, 2014, the Indian rupee depreciated against the US dollar by approximately 12%. Had the exchange rate between
Indian rupees and US dollars remained constant, our India Online cost of revenues in constant currency terms for fiscal 2014 would
have been approximately US$9.2 million, rather than our reported cost of revenue of US$8.3 million, or an increase of 23% rather
than our reported increase of 11%.



U.S. Publishing business



Cost of revenues for
the U.S. Publishing business includes printing and circulation costs (including payroll costs) for the “India Abroad”
and “India in New York” newspapers.



In the fiscal year ended
March 31, 2014 cost of revenues for the U.S. Publishing business was US $2.1 million (76% of revenue) as compared to US $2.5
million (78% of revenue) for the fiscal year ended March 31, 2013. This represents a decrease of US$0.4 million, or 16% over
the previous fiscal year. U.S. Publishing cost of revenue is largely fixed in nature and this small reduction was on account of
saving in paper printing and mailing costs.



Segment results



Analysis of the results
presented below is based on the segment results as assessed by the Company’s chief operating decision maker and has been
determined as revenues less cost of revenues before operating expenses.



India Online business



Segment profit of the
India Online business was US$5.1 million and US$5.0 million for the fiscal year ended March 31, 2014 and 2013. There was increase
in the revenues on account of excellent growth in the fee based revenues but this growth was offset by increased cost of revenues.



43







U.S. Publishing business



Segment profit of the
U.S. publishing business was US$0.6 million and US$0.7 million for the fiscal year ended March 31, 2014 and 2013.



Operating expenses



Operating expenses include
sales and marketing expenses, product development expenses, depreciation and amortization, general and administrative expenses,
long-lived impairment and foreign exchange loss (gain) net.



In the fiscal year ended
March 31, 2014, operating expenses were US $18.1 million as compared to US $19.6 million for the fiscal year ended March 31,
2013. This represents decrease of US$1.5 million, or 8% over the previous fiscal year.



During the fiscal year
ended March 31, 2014, the Indian rupee depreciated against the US dollar by approximately 12%. Had the exchange rate between
the Indian rupee and the US dollar remained constant, our India Online cost of revenues in constant currency terms for fiscal 2014
would have been approximately US$20.1 million, rather than our reported operating expenses of US$19.6 million, or an increase of
3% rather than our reported decrease of 8%.



Sales and marketing expenses



Sales and marketing expenses
primarily include employee compensation for sales and marketing personnel, stock-based compensation cost, advertising and promotion
expenses, sales support cost, distribution cost and market research costs. For the fiscal year ended March 31, 2014, sales
and marketing expenses were US$3.9 million, compared to US$3.3 million for the fiscal year ended March 31, 2013, representing
an increase of US $0.6 million, or 19%, over the previous fiscal year. This increase was mainly on account of marketing spends
and higher sales support and distribution costs for online marketplace business.



Product development expenses



Product development expenses
primarily include software development expenses and compensation for product development personnel including stock-based compensation
costs. Third-party technology and development expense, and other related operating costs are also included in product development.
For the fiscal year ended March 31, 2014, product development expenses were US$2.3 million, compared to US$2.9 million
for the fiscal year ended March 31, 2013, representing a decrease of US $0.6 million, or 22%, over the previous fiscal
year. This decreased was mainly on account of optimizing the technical support cost.



Depreciation and amortization expenses



For the fiscal year ended
March 31, 2014, depreciation and amortization expense was US$3.1 million compared to US$3.7 million for the fiscal
year ended March 31, 2013, representing a decrease of US$0.6 million, or 16%. This decrease was due to lower capital
expenditures in previous reporting years which resulted in a lower base of depreciable assets.



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 and promissory notes, insurance premium, stock-based compensation cost and general administrative costs. For
the fiscal year ended March 31, 2014 and 2013, general and administrative expenses were US$7.2 and US$7.6 million, respectively.
There was decrease in expenses by US$0.4 million or 5% as compared to previous fiscal year 2013. During the fiscal year 2014, we
saved costs in various expenses like insurance, repairs and maintenance and admin /office related expenses.



Long-lived assets impairment



In fiscal year 2014,
we recognized impairment loss of US$1,550,991comprising mainly of intellectual property and computer equipment relating to the
Company’s subsidiary Vubites, which enables businesses to advertise locally (targeted advertising in local and specific cities
in India) on national television channels. Vubites offers web based tools for small businesses to create low cost advertisement
for television broadcast. This business is dependent on effective splicing and sale to local businesses in different cities of
broadcasting spots purchased from national television channels. The impairment resulted from similar targeted advertising services
now being offered directly by the television channels and on account of aggressive sales and marketing strategy launched by competitors
which have provided them with deeper market access. Additionally, in fiscal 2014, the Company abandoned an application related
project included in ‘Capital work-in-progress’ and as a result impaired an amount of US$39,380.



44







Other income (expenses), net



Other income (expenses),
net, primarily comprised of interest income, interest income on income tax refunds, gain on sale of investment /equity method investee,
promissory note impairment and miscellaneous income. During the fiscal year ended March 31, 2014 and 2013, net other income
were US$4.7 million and US$2.3 million, respectively.



Interest income



Interest income for the
fiscal year ended March 31, 2014 was US$1.3 million, compared to US$2.0 million for the fiscal year ended March 31,
2013, representing a decrease of US$0.7 million, or 35%. The decrease in interest income was primarily due to utilization
of bank deposits held under cash and cash equivalents.



Interest income on Income tax refunds



During the fiscal year
ended March 31, 2014 and 2013, we received income tax refunds for the earlier income tax assessment years along with the interest
of US$0.6 million and US$0.04 million, respectively.



Gain on sale of investment



During the fiscal year
ended March 31, 2014, the Company sold its investment in Runa Inc. for a total consideration of US$4,145,927 and recognized a gain
of US$2,740,940. An amount of US$613,992 of the total consideration has been held in escrow for certain representations and warranties
contained in the sale agreement. These representations and warranties have been assessed as accurate and the fair value of any
obligation resulting from these representations and warranties is insignificant. Of the total amount held in escrow US$152,457
and US$461,545 was recovered in October, 2014 and recoverable in April, 2015 respectively.

Net loss



As a result of the foregoing,
our net loss for the fiscal year ended March 31, 2014 was US$7.5 million, taking into account a one-time gain on a sale
of investment of US$2.74 million and long lived assets impairment loss of US$ 1.59 million, as compared to a net loss of US$11.4 million
for the fiscal year ended March 31, 2013, a decrease of 35%. The prime reason for this decline was increase in our overall
revenues, saving in our overall costs, interest income on income tax refunds and the one-time gain on sale of investment.



Cash Flows



|                                                     |  | For the Fiscal Year Ended March 31, |           
|---------------------------------------------------- |  | ----------------------------------- | ----------
|                                                     |  | 2013                                |           
|                                                     |  | US$                                 |           
|Net cash used in from operating activities           |  |                                     | (2,540,551
|Net cash generated by (used in) investing activities |  |                                     | (547,678  
|                                                     |  |                                     |           
|Net cash provided by financing activities            |  |                                     | —         
|Net decrease in cash and cash equivalents            |  |                                     | (3,088,229
|Effect of exchange rate changes on cash              |  |                                     | (1,433,127

45







Fiscal Year Ended March 31, 2015



Net cash used in operations
was US$7.3 million, after adjusting our net loss of US$13.8 million to account for non-cash items and changes in working capital.
Non-cash items, comprising depreciation, amortization, allowances for doubtful debts, impairment and stock-based compensation costs,
totaled US$5.5 million. Despite the net cash used in operations, our working capital only decreased by US$1.0 million due to efficient
management of working capital.



Net cash used in investing
activities was US$1.1 million, consisting of purchases of servers and other capital equipment. As of March 31, 2014, we had
cash and cash equivalents of US$8.3 million. We believe that based on the current cash use rate this cash balance will be sufficient
to meet our operating and capital requirements for the next five to seven quarters. However, we will require additional financing
in the future to fund our operations and capital requirements.





On July 29, 2015,
the Company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC, an Illinois limited liability company (“Investor”).
The Purchase Agreement provides that the Company has the right to sell to the Investor, and the Investor has the obligation to
purchase from the Company, up to an aggregate of US$15 Million of the Company’s American Depositary Shares (“ADSs”)
over the 36-month term of the Agreement in amount as described in the Purchase Agreement. Upon shareholder approval and upon effectiveness
of registration statement covering the resale of ADSs, the Company can elect its discretion to sell ADSs to the investor pursuant
to either regular purchase amounts or accelerated purchase amounts. The amounts of ADSs which may be sold to the Investor pursuant
to any regular purchase range from 40,000 ADSs to 100,000 ADSs, depending on the then current trading price of the Company’s
ADSs on Nasdaq (but not to exceed US$500,000 on any single purchase date). In addition, the Company has the right, but not
the obligation, to sell accelerated purchase amounts. The purchase price for any ADSs sold pursuant a regular purchase , will be
98% of the lower of (a) the lowest sale price of the ADSs on Nasdaq on the regular purchase date or (b) the average of the three
lowest closing sale prices over the preceding 10 trading-day period. The purchase price for any ADSs sold pursuant to an accelerated
purchase, will be 98% of the lower of (a) the closing sale price of the ADSs on Nasdaq on the accelerated purchase date or (b)
94% of a volume weighted average purchase price on the accelerated purchase date. The Company will file an application with
the Nasdaq to list the ADSs to be sold to the Investor pursuant to the Purchase Agreement. The Company is required to file
a  registration statement covering the resale of the ADSs, so that such ADSs may be sold by the Investor from time to time
pursuant to a Registration Rights Agreement entered into between the Company and Investor. Under the Purchase Agreement, the Investor
and its affiliates have a beneficial ownership limitation of 4.99% of the then issued and outstanding equity securities of the
Company. The issuance of the shares underlying the ADSs must be approved by the Company’s shareholders prior to any
purchases under the Purchase Agreement. The Purchase Agreement and Registration Rights Agreement also contain customary representations,
warranties, conditions and indemnification provisions. A copy of the Purchase Agreement has been filed with this 20F as Exhibit
4.15.





46







Fiscal Year Ended March 31, 2014



Net cash used in operations
was US$2.8 million, after adjusting our net loss of US$7.5 million to account for non-cash items and changes in working capital.
Non-cash items, comprising the sale of investment, depreciation, amortization, allowances for doubtful debts, impairment and stock-based
compensation costs, totaled US$2.7 million. Our working capital decreased by US$2.0 million. The decrease was a result of better
cash management process in receivables and payables and recoverable taxes.



Net cash generated by
investing activities was US$2.1 million, consisting of purchases of servers and other capital equipment aggregating US$1.4 million
in connection with the expansion of our network and data storage facility, fully offset by the sale of investment that generated
cash of US$3.5 million.



As of March 31,
2014, we had cash and cash equivalents of US$17.2 million.



Fiscal Year Ended March 31, 2013



Net cash used in operations
was US$2.5 million, after adjusting our net loss of US$11.4 million to account for non-cash items and changes in working capital.
Non-cash items, comprising the sale of equity investments, depreciation, amortization, allowances for doubtful debts, goodwill
and promissory note impairment and stock-based compensation costs, totaled US$6.1 million. Our working capital decreased by
US$2.8 million. The decrease was a result of better cash management process in receivables and payables.



Net cash used in investing
activities was US$0.5 million, consisting of purchases of servers and other capital equipment aggregating US$1.9 million in connection
with the expansion of our network and data storage facility, partially offset by the sale of an equity investment that generated
cash of US$1.4 million.



As of March 31,
2013, we had cash and cash equivalents of US$20.0 million.



Contractual Obligations



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



|                     |  |                  |           |  | Capital     | 
|-------------------- |  | ---------------- | --------- |  | ----------- | 
|                     |  | Operating leases |           |  | commitments | 
|Year ended March 31, |  | US$              |           |  | US$         | 
|                     |  |                  |           |  |             | 
|2016                 |  |                  | 492,935   |  |             | 
|2017                 |  |                  | 293,624   |  |             | 
|2018                 |  |                  | 237,989   |  |             | 
|2019                 |  |                  | 40,753    |  |             | 
|                     |  |                  |           |  |             | 
|Total                |  |                  | 1,065,301 |  |             | 



Capital Expenditures



Our principal capital
expenditures are for purchase of computer equipment, such as servers for our websites. In the fiscal years ended 2015, 2014 and
2013, we had capital expenditures of US$1.4 million, US$1.5 million and US$2.1 million, respectively.



Internal and external
costs incurred to develop internal use software during an application development stage is capitalized when the Company’s
managing director has authorized and committed to funding the development, and it is probable that the software development will
be complete and the software will perform the function intended. Upgrades and enhancements are capitalized only when these relate
to additional features or result in additional functionality that the existing software is incapable of performing. All costs incurred
during the preliminary project, post-implementation and operation stages are expensed as incurred.



Dividends



We have not declared
or paid any cash dividends on our equity shares since our inception and we do not expect to pay any cash dividends in 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 and cash generated from future operations 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 financing to fund such activities, which could result in ownership dilution to existing shareholders,
including holders of our ADSs. We believe that our working capital is sufficient for our present requirements.



47







Income Tax Matters



The reconciliation of
estimated income tax expense at Indian statutory income tax rate to income tax expense reported in our statement of comprehensive
loss is as follows:



|                                                                                     |  | 2013 |             |   | 2014 |  |            | 2015 | 
|------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- |  | ---------- | ---- | 
|                                                                                     |  | US$  |             |   | US$  |  |            | US$  | 
|Loss before income taxes and equity in net loss (earning) of equity method investee  |  |      | (11,549,781 | ) |      |  | (7,624,180 | )    | 
|                                                                                     |  |      |             |   |      |  |            |      | 
|Indian statutory income tax rate                                                     |  |      | 32.445      | % |      |  | 33.990     | %    | 
|                                                                                     |  |      |             |   |      |  |            |      | 
|Expected income tax expense (benefit)                                                |  |      | (3,747,327  | ) |      |  | (2.591,459 | )    | 
|                                                                                     |  |      |             |   |      |  |            |      | 
|Tax effect of:–                                                                      |  |      |             |   |      |  |            |      | 
|Adjustments to reconcile expected income tax expense to reported income tax expense: |  |      |             |   |      |  |            |      | 
|                                                                                     |  |      |             |   |      |  |            |      | 
|Employee stock-based compensation                                                    |  |      | 245,313     |   |      |  | 163,683    |      | 
|Valuation allowance recognized during the year                                       |  |      | 3,060,830   |   |      |  | 1,998,669  |      | 
|Goodwill impairment                                                                  |  |      | 648,900     |   |      |  | —          |      | 
|Tax in foreign jurisdictions                                                         |  |      | (142,710    | ) |      |  | 262,459    |      | 
|Earnings (loss) of equity method investees                                           |  |      | 27,354      |   |      |  | —          |      | 
|Others                                                                               |  |      | (125,608    | ) |      |  | 13,874     |      | 
|Income tax expense (benefit)                                                         |  |      | (33,248     | ) |      |  | (152,774   | )    | 



The reconciliation of
income tax expenses are as follows:



Income tax expense/(benefit)
for the year ended March 31, 2015 of US $ 14,791. The reasons for major reconciliation items are i) Change in Valuation allowance
recognized during fiscal year ended March 31, 2015 amounting to $ 4,875,019 on account of recurring loss. ii) Effect of different
overseas tax rate of US $ 247,558 for the year ended March 31, 2015. iii) Effect of Non-deductible expense of Employee stock option
of US $ 147,674 for the fiscal year ended March 31, 2015.



Rediff
India’s (including Vubites) net operating loss carry forwards aggregating approximately US$16,942,394 as of
March 31, 2015 will expire between April 2015 and March 2021.



As of March 31,
2015, ValuCom has net operating loss carry forwards available to offset future federal taxable income of US$3,033,000, which expire
in years 2020 through 2035.



As of March 31,
2015, Rediff Holdings, Inc. has net operating loss carry forwards of approximately US$6,229,000 for federal income tax purposes,
which expire in years 2020 through 2035.



Rediff’s unabsorbed
depreciation of US$18,642,739 can be indefinitely carried forward.



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 the fluctuations
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 receivables in foreign currency from overseas customers and balances in foreign
currency with overseas banks.



48







The following table sets
forth information about our net foreign currency exchange (U.S. dollars) exposure as of March 31, 2015:



|                                                                                                      |  | As of March 31, 2015 (in US$ thousands) |       
|----------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ------
|Accounts payable in U.S. dollars (include intercompany payable of US$950,661)                         |  |                                         | (1,183
|Accounts receivable in U.S. dollars, net of allowance (include intercompany receivable of US$123,286) |  |                                         | 501   
|Cash balances held in U.S. dollars                                                                    |  |                                         | 24    
|Net foreign currency exchange exposure                                                                |  |                                         | (658  



We are not currently
trying 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 U.S. dollar by one Rupee, the net foreign currency exchange loss as of March 31, 2016 would be approximately US$11,000.



Interest Rate Risk



We hold interest-bearing
accounts in India and fluctuations in interest rates affected our interest earnings for the fiscal year ended March 31, 2015.
These interest rates are linked to the interest rates prevailing in India. We expect that our interest earnings will continue to
be affected in the future by fluctuations in interest rates. A hypothetical 1% increase or decrease in the prevailing interest
rates applicable to cash deposits during such period would have affected our interest income by approximately US$84,000.



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 Pronouncements



In May 2014, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from
Contracts with Customers,” which supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”
and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The
amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods
within that reporting period, with early application not permitted. We are currently evaluating the effects, if any, that the adoption
of this guidance will have on the Company’s financial position, results of operations and cash flows."



In August 2014,
the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern. The amendments in this ASU
provides guidance about managements responsibility to evaluate whether there is substantial doubt about an entity’s
ability to continue as going concern and to provide related disclosures. In accordance with this guidance, in connection with
preparing financial statements, and entity’s management should evaluate whether there are conditions or events
considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern
within one year after the date the financial statements are issued.



In February 2015,
the FASB issued ASU 2015-02, “Consolidation (Topic 810) - Amendments to the Consolidation Analysis”, which provides
guidance for reporting entities that are required to evaluate whether they should consolidate certain legal entities. In accordance
with ASU 2015-02, all legal entities are subject to reevaluation under the revised consolidation model. ASU 2015-02 is effective
for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15,
2015. Early adoption is permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2015-02 on our
consolidated financial statements.



49







MANAGEMENT



The following table sets
forth, as of June 30, 2015, the name, age and position of each of our directors and executive officers.



|Name                           |  | Age |  | Position                      
|------------------------------ |  | --- |  | ------------------------------
|Ajit Balakrishnan(1)(2)        |  | 67  |  | Chairman and Managing Director
|Swasti Bhowmick                |  | 49  |  | Chief Financial Officer       
|Diwan Arun Nanda(1)(2)         |  | 71  |  | Director                      
|Sunil N. Phatarphekar(1)(2)(3) |  | 51  |  | Director                      
|Ashok Narasimhan(1)            |  | 67  |  | Director                      
|Sridar Iyengar(1)(3)           |  | 68  |  | Director                      
|M. Madhavan Nambiar(1) (3)     |  | 64  |  | Director                      



| | (1) | Member of the Board of Directors
| | --- | --------------------------------

| | (2) | Member of the Compensation Committee
| | --- | ------------------------------------

| | (3) | Member of the Audit Committee
| | --- | -----------------------------



Ajit Balakrishnanis the founder, Chairman and Managing Director of the Company. He is a director of Rediffusion Holdings Private Limited, Rediffusion
Dentsu Young & Rubicam Private Limited, Quintrol Technologies Private Limited, Rediff Holdings Inc USA, India Abroad Publications,
Inc., India In New York, Inc., India Abroad Publications (Canada) Inc., Rediff.com Inc USA and Value Communications Corporation.
Mr. Balakrishnan is also Chairman of the Board of Governors of The Indian Institute of Management Calcutta and Chairman of
the Working Group of Internet Governance set up by the Government of India. Mr. Balakrishnan holds a Bachelor’s Degree
in Physics from Kerala University and a Post Graduate Diploma in Management from the Indian Institute of Management, Calcutta.
At our annual general meeting held on September 30, 2013, our shareholders re-appointed Mr. Balakrishnan for a five-year
term as Managing Director with effect from August 22, 2013.



Swasti Bhowmickjoined
us in February 2012 as our Chief Financial Officer. He joined us from Tata TeleServices Ltd., where he helped create the Finance
Transformation Roadmap. He has over 20 years of experience in Sales Accounting, Cost Management, MIS, Budgeting, Credit Control
and Operations Finance in IT/Telecom, including managing startups and established FMCG brands. Swasti is a member of The Institute
of Chartered Accountants of India and a member of The Institute of Cost Accountants of India. He also holds an Executive MBA from
the Indian Institute of Management, Calcutta.



Diwan  Arun Nandahas
been a director of the Company since its incorporation in 1996. Mr. Nanda is also a director of Rediffusion Holdings Private
Limited, Arion Horse Company Private Limited, Rediffusion Dentsu, Young & Rubicam Private Ltd., Wunderman India Private
Limited, Rediffusion Dentsu, Young & Rubicam Pvt. Ltd. Sri Lanka, Everest Brand Solutions Pvt. Ltd., Clariant Chemicals
(India) Limited, Yes Bank. and Oriental Hotels Ltd. 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
is an Attorney and has been a director of the Company since 1998. Mr. Phatarphekar is also a director of several other Indian
companies. Mr. Phatarphekar is proprietor of SNP Legal (Advocates), a Mumbai law firm. Prior to that, he was a partner of
Doijode, Phatarphekar & Associates. 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. Thereafter, he was a partner at two Mumbai law firms, Mahimtura & Co. and Shah Desai Doijode & Phatarphekar.



Ashok Narasimhan
has been a director of the Company since 2002. He is a limited partner and advisor for a number of U.S. and Indian venture capital
funds. He is also a director on the board of Tarang Software Technologies Pvt. Limited, Genie Technologies India Pvt. Limited,
Atma Investments and Resources Pvt. Limited. Earlier, he was Chairman and Co-Founder of July Systems Inc and prior to that, he
was 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 that, he served as Head of Worldwide Marketing and Business Development of VeriFone,
a leader in automated electronic payment transactions. Earlier, he was the founding President of Wipro’s IT organizations.
He holds a Bachelor’s Degree in Physics from Madras University and a Post-Graduate Diploma in Management from the Indian
Institute of Management, Calcutta.



50







Sridar A. Iyengar
has been a director of the Company since September 2004. He is co-founder of ‘The Sounding Board’ and serves on the
Board of various companies, and other companies. He advises many early-stage 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 on the west coast of the United States.
On his return from India in 2000 he was asked to lead a major effort of KPMG’s 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, and holds a Bachelor’s Degree in Commerce (Honors) from the University of Calcutta.



M. Madhavan Nambiarhas spent over 36 years in the Indian Administrative Service with many years focused on Information Technology. Mr. Nambiar
most recently served as Secretary to the Government of India, first in the Ministry of Information Technology and then in the Ministry
of Civil Aviation. Mr. Nambiar is a Fellow at the Judge Business School, University of Cambridge. He serves on the Board of
various companies such as Hotel Leelaaventure Ltd., Loyal Textile Mills Ltd, Catholic Syrian Bank Ltd etc. He holds a Bachelor
of Arts Degree from Loyola College, Madras University and a Master of Business Administration Degree from the Faculty of Management
Studies, Delhi University. He has been recently appointed as Chairman, Indian Institute of Technology and Management, Trivandrum.



Board Composition



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



| | • | Ajit Balakrishnan, Diwan Arun Nanda and Rediffusion Holdings Private Limited (earlier called Rediffusion
Advertising Private Limited), are entitled to appoint and have appointed Mr. Balakrishnan as Director on the Board and Chairman
of Rediff.com India Ltd. so long as they hold, singly or jointly, not less than 10% of the issued, subscribed and paid up capital
of Rediff.com India Ltd. Mr. Balakrishnan serves an indefinite term and is not required to retire by rotation.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | • | The remaining directors on the Board of Directors are non-permanent directors who are appointed
by shareholders and retire by rotation. Ashok Narasimhan and Rashesh Shah retired by rotation and were re-elected by the shareholders
at our last annual general meeting held on September 29, 2014. Diwan Arun Nanda and Madhavan Nambiar will retire by rotation
at our next Annual General Meeting of shareholders, which is scheduled to be held on or before September 30, 2015.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of the date of this
annual report, our Board has determined that the following members qualify as independent directors: Sunil N. Phatarphekar; Sridar
A. Iyengar; Ashok Narsimhan and M. Madhavan Nambiar.



No directors have service
contracts with us providing for benefits upon termination of their service as a director.



Code of Ethics



Effective February 15,
2004, we 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. On July 19, 2005, we adopted amendments to the code of ethics for our officers.
On August 19, 2005, we adopted amendments to the code of ethics for our directors.



We will provide a copy
of the codes of ethics for our directors, officers and employees to any person without charge, upon a written request sent to our
principal executive office.



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 the following members, all of whom are independent directors, as determined
by the NASDAQ listing standards applicable to us: Sridar A. Iyengar, Sunil N. Phatarphekar and M. Madhavan Nambiar.



Audit Committee Financial Expert



Mr. Sridar A.
Iyengar has been designated the independent audit committee financial expert as defined under the applicable rules of the SEC issued
pursuant to Section 407 of the Sarbanes Oxley Act of 2002. 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.



51







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 India’s
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. The corporate governance standards for U.S. NASDAQ-listed companies are included in
the “5000” series of the NASDAQ Stock Market Rules, known as the NASDAQ Listing Rules and referred to herein as the
“Rules”. Under Rule 5615(a)(3), foreign private issuers such as ourselves are permitted to follow certain home country
corporate governance practices in lieu of certain of the requirements of the Rules. Under the Rules, foreign private issuers must
disclose any alternative home country practices that they follow.



The following are the
requirements of the Rules we do not follow and the home country practices we follow in lieu of these Rule requirements. Our independent
Indian counsel has 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 5250(d)(2) and Rule 5250 (d)(3) - Distribution of quarterly and interim reports
| | --- | ------------------------------------------------------------------------------------



In lieu of the requirements
of Rule 5250(d)(2) and Rule 5250(d)(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.



| | (ii) | Rule 5605(b)(1) - Independent Directors
| | ---- | ---------------------------------------



In lieu of the requirements
of Rule 5605(b)(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. Nevertheless, as of the date of this annual report, our Board has determined that four out
of its seven members are independent.



| | (iii) | Rule5605(b)(2) - Executive sessions of Independent Directors
| | ----- | ------------------------------------------------------------



In lieu of the requirements
of Rule 5605(b)(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 5605(d) - Compensation of Officers
| | ---- | ---------------------------------------



In lieu of the requirements
of Rule 5605(d), 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.



Four of our directors,
Mr. Ajit Balakrishnan, Mr. Sridar Iyengar, Mr. Sunil Phatarphekar and M. Madhavan Nambiar, receive remuneration
from our wholly-owned US 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.



52







| | (v) | Rule 5605(e) - Nomination of Directors
| | --- | --------------------------------------



In lieu of the requirements
of Rule 5605(e), 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, singly or jointly, not less than 10% 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 5620(c) - Quorum
| | ---- | ---------------------



In lieu of the requirements
of Rule 5620(c), 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 5620(b) - 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 5620(b), we follow the requirements of the Companies Act. Section 105 of the Companies Act, 2013
prohibits a company incorporated there-under, 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 5620(b). 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,
2015, we had 338 employees and full-time consultants. Of such employees, 129 are in our shopping, sales and marketing teams, 78
are creative and editorial, 98 are dedicated to technology and product development, 3 are dedicated to production and circulation
and 30 are administrative. We believe that our relationship with our employees is good. The table sets forth the distribution of
our employees by main category of activity:



|                                   |  | As at March 31, |    
|---------------------------------- |  | --------------- | ---
|Department                         |  | 2013            |    
|Technology and Product Development |  |                 | 122
|Sales and Marketing                |  |                 | 144
|Editorial                          |  |                 | 79 
|General & Administration           |  |                 | 32 
|Creative                           |  |                 | 13 
|Production & Circulation           |  |                 | 7  
|Total                              |  |                 | 397



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. During the fiscal year ended March 31, 2015, we did
not pay any attendance fees to our directors. Mr. Ajit Balakrishnan, who is our Managing Director, does not receive any additional
compensation for his service on our Board of Directors. Directors of our US subsidiaries receive compensation for their service
on the boards of these subsidiaries.



The following table sets
forth details regarding compensation paid to executive officers and directors of the Company during the fiscal year ended March 31,
2015.



53







|Name                |  | Salary and other compensation (US$) |        
|------------------- |  | ----------------------------------- | -------
|                    |  |                                     |        
|Ajit Balakrishnan   |  |                                     | 200,000
|                    |  |                                     |        
|Swasti Bhowmick     |  |                                     | 136,209
|                    |  |                                     |        
|Sridar A. Iyengar   |  |                                     | 25,000 
|                    |  |                                     |        
|Sunil Phatarphekar  |  |                                     | 20,000 
|                    |  |                                     |        
|M. Madhavan Nambiar |  |                                     | 20,000 



| | (1) | Each of Mr. Balakrishnan, Mr. Iyengar Mr. Phatarphekar and Mr Nambiar receive a
salary and/or other compensation from Rediff Holdings, Inc., our wholly-owned U.S.-incorporated subsidiary, in their capacity as
directors of Rediff Holdings, Inc. None of them receive any salary from Rediff.com India Limited. During the fiscal year ended
March 31, 2012, Sridar Iyengar was granted 9,000 options (equivalent to 9,000 shares) under Employee Stock option Plan 2006
at exercise price of US$21.25.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Swasti Bhowmick was granted 10,000 options (equivalent to 5,000 equity shares) under ADR linked
Employee Stock option Plan 2006 at exercise price of $6.34 in the fiscal year ended March 31, 2012. The Plan will expire in February
2022.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Employee Benefit Plans



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 of which 12,000 equity shares were reserved under 2015 Stock Option Plan.



During the fiscal year
ended March 31, 2015, 7,000 options equivalent to 3,500 equity shares lapsed at a weighted average price of $11.37 per share.



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. 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 of which 91,000 equity shares were reserved under 2015 Stock Option Plan.



During the fiscal year
ended March 31, 2015, 45,500 options equivalent to 22,750 equity shares were granted at the price of US$3.74 per share. During
the same fiscal year, 110,224 and 3,000 options equivalent to 55,112 and 1,500 equity shares at a weighted average exercise price
of US$10.97 and US$3.74 per share lapsed and forfeited due to resignation of the employees.



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.



54







2006 Employee Stock Option Plan



Our 2006 Employee Stock
Option Plan (the “ESOP 2006”) allows for the grant to our employees of options to purchase our Equity Shares. Each
option granted gives the employee the right to purchase a specified number of our Equity Shares under the ESOP 2006. The ESOP 2006
was adopted and approved by our Compensation Committee on June 20, 2006 in accordance with the approval granted by our shareholders
on March 31, 2006. A total of 150,000 Equity Shares were approved for issuance under the ESOP 2006.



During the fiscal year
ended March 31, 2015, 1,250 options equivalent to 1,250 equity shares at a weighted average exercise price of US$0.16 per
share were forfeited due to resignation of the employees.



Equity Shares acquired
upon the exercise of options granted pursuant to the terms of the ESOP 2006 are not subject to any lock-ups. In the case of termination
or resignation of the employee, the employee shall have the right to exercise only the options vested up to the time of termination
or resignation, and the unvested warrants options shall lapse. In the case of the death of an employee, all options granted to
him or her shall vest in full on his or her legal heirs. The period during which vested options may be exercised expires ten years
after the date of grant.



2006 ADR Linked Employee Stock Option
Plan



Our 2006 ADR Linked Employee
Stock Option Plan (the “ADR Linked ESOP 2006”) allows for the grant to our employees of options to purchase our ADRs
representing Equity Shares of the Company. Each option granted gives the employee the right to purchase a specified number of our
ADRs under the ADR Linked ESOP 2006. The ADR Linked ESOP 2006 was adopted and approved by our Compensation Committee on October 3,
2006 in accordance with the approval granted by our shareholders on March 31, 2006. A total of 520,000 Equity Shares (equivalent
to 1,040,000 ADRs) were approved for issuance under the ADR Linked ESOP 2006.



ADRs acquired upon the
exercise of options granted pursuant to the terms of the ADR Linked ESOP 2006 are not subject to any lock-ups. In the case of
termination or resignation of the employee, the employee shall have the right to exercise only the options vested up to the time
of termination or resignation, and the unvested options shall lapse. In the case of the death of an employee, all options granted
to him or her shall vest in full on his or her legal heirs. The period during which vested options may be exercised expires ten
years after the date of grant.



2015 Stock Option Plan



The compensation committee
authorized the 2015 stock option plan in their meeting held on January 27, 2015. Under the plan 103,000 equity shares (comprising
of 12,000 equity shares from 2002 Stock Option Plan and 91,000 equity shares from 2004 Stock Option Plan) were reserved. Unless
terminated sooner, any grant under this plan will terminate automatically after expiry of 10 years from the date of grant.



During the year ended
March 31, 2015, 73,600 options equivalent to 36,800 equity shares were granted at the exercise price of US$3.74.



Under the terms of the
2015 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 rate of 25% on each successive anniversary of the grant date, until fully vested. Each option
grant carries with it the right to purchase one ADS at the exercise price during the exercise period, which expires ten years from
the date of grant.



Retirement Plans



Gratuity

The Company provides
for gratuity on an actuarial valuation. The Company has 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
of an amount equivalent to 15 days basic 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 amounts recognized in the Company’s consolidated financial statements for the fiscal years ended March 31,
2013, 2014 and 2015. The measurement date used is March 31 of the relevant fiscal year.



55







|                                                |  |      |         |   |      |  |         |      | 
|----------------------------------------------- |  | ---- | ------- | - | ---- |  | ------- | ---- | 
|                                                |  | 2013 |         |   | 2014 |  |         | 2015 | 
|                                                |  | US$  |         |   | US$  |  |         | US$  | 
|Change in benefit obligation                    |  |      |         |   |      |  |         |      | 
|Benefit obligation at the beginning of the year |  |      | 446,146 |   |      |  | 527,512 |      | 
|Actuarial (gain) loss                           |  |      | 14,941  |   |      |  | (60,402 | )    | 
|Service cost                                    |  |      | 75,039  |   |      |  | 75,405  |      | 
|Interest cost                                   |  |      | 44,025  |   |      |  | 46,086  |      | 
|Benefits paid                                   |  |      | (26,382 | ) |      |  | (27,314 | )    | 
|Effect of exchange rate changes                 |  |      | (26,257 | ) |      |  | (49,781 | )    | 
|Benefit obligation at the end of the year       |  |      | 527,512 |   |      |  | 511,506 |      | 



Accumulated benefit obligation was US$292,701
and US$319,026 as of March 31, 2014 and 2015 respectively.



Net gratuity cost for the years ended March 31,
2013, 2014 and 2015 comprise of the following:



|                                     |  | 2013 |         |  | 2014 |  |         | 2015 | 
|------------------------------------ |  | ---- | ------- |  | ---- |  | ------- | ---- | 
|                                     |  | US$  |         |  | US$  |  |         | US$  | 
|Service cost                         |  |      | 75,039  |  |      |  | 75,405  |      | 
|Interest cost                        |  |      | 44,025  |  |      |  | 46,086  |      | 
|Recognized net actuarial (gain) loss |  |      | 14,941  |  |      |  | (60,402 | )    | 
|Net gratuity cost                    |  |      | 134,005 |  |      |  | 61,089  |      | 



The assumptions used in accounting for gratuity
in the years ended March 31, 2013, 2014 and 2015 were as follows:



|                                 |  | 2013 |      |   | 2014 |  |      | 2015 | 
|-------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- | 
|Discount rate                    |  |      | 8.75 | % |      |  | 9.60 | %    | 
|                                 |  |      |      |   |      |  |      |      | 
|Rate of increase in compensation |  |      | 7.00 | % |      |  | 7.00 | %    | 



The following benefit payments, which reflect
expected future services, are expected to be paid:



|Year ending March 31, |  | US$ |        
|--------------------- |  | --- | -------
|                      |  |     |        
|2016                  |  |     | 37,961 
|2017                  |  |     | 123,838
|2018                  |  |     | 45,854 
|2019                  |  |     | 62,965 
|2020                  |  |     | 57,837 
|2021-2025             |  |     | 493,338



The expected benefits
are based on the same assumptions used to measure the company’s benefit obligation as of March 31, 2015.



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 aggregate, were US$259,684, US$228,075 and US$231,528
for the years ended March 31, 2013, 2014 and 2015 respectively.



Compensated Absences



The Company provided
US$161,779, US$155,598 and US$114,634 for the years ended March 31, 2013, 2014 and 2015, respectively, as the compensated
absences liability for the amounts to be paid as a result of employee’s rights to compensated absences, considering anticipated
forfeiture, in the year in which earned.



56







RELATED PARTY TRANSACTIONS



Six of our largest shareholders
beneficially hold an aggregate of approximately 63% 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.



Product Development Expenses



During the fiscal years
ended March 31, 2013, we incurred product development expenses (including amounts capitalized) of US$95,395 on account of
services rendered by Tachyon Technologies Private Ltd, an equity method investee.



Trade account receivable write
off



During the year ended
March 31, 2013, we wrote off US$206,974 trade account receivables from Edelweiss Capital Service Ltd. in which a director of Rediff
is shareholder and director, against the recorded allowance. The allowance for trade account receivables were made in fiscal year
ended March 31, 2012.



57







EXCHANGE CONTROLS



Foreign investments in
India are governed by the provisions of the Foreign Exchange Management Act 1999 (“FEMA”) and are subject to
the regulations issued by the Reserve Bank of India ("RBI") from time to time. The Foreign Direct Investment Scheme
under the Reserve Bank’s Automatic Route enables Indian companies, other than those specifically excluded, to issue shares
to persons residing outside India without prior permission from the RBI, subject to certain conditions. Subject to certain exceptions
and compliance with pricing and reporting requirements prescribed by the RBI, general permission has been granted for: (i) for
transfers of shares or convertible debentures held by a person resident outside India other than Non-Resident Indian (“NRI”),
to any person resident outside India and (ii) NRIs are permitted to transfer shares or convertible debentures of Indian company
to other NRIs.



General permission has
also been granted for transfers between a person resident in India and a person resident outside India subject to stipulated conditions.
In cases where such conditions are not met, approval of the Central Government and the Reserve Bank of India may be also required.
Banks in India may currently allow remittance from India by a person resident in India of up to US$250,000, per financial year,
for any permitted current or capital account transaction or a combination of both under liberalized remittance scheme.



Issue of securities through the depository
receipt mechanism



Until December 2014, the
issuance of securities through the depository receipts mechanism was governed by the Foreign Currency Convertible GDRs and Ordinary
Shares (Through Depositary Receipt Mechanism) Scheme, 1993 ("1993 Scheme") as amended from time to time. On October
21, 2014, the Ministry of Finance ("MoF") implemented the Depository Receipts Scheme, 2014 ("New Scheme")
by virtue of which issuance of depository receipts has been taken out of the 1993 Scheme and is now regulated by the New Scheme,
the Companies Act and Companies (Issue of Global Depository Receipts) Rules, 2014 (Depository Receipts Rules). The New Scheme has
come into effect from December 15, 2014.



Under the New Scheme, any
Indian company, listed or unlisted, private or public or any other issuer or person holding permissible securities is eligible
to issue or transfer permissible securities (including inter alia, shares, bonds, derivatives and unit of mutual funds,
and similar instruments issued by private companies, provided that such securities are in dematerialized form to a foreign depository
for the purpose of issuance of depository receipts in permissible jurisdictions that are FATC and IOSC compliant. Persons barred
from accessing international capital markets, are not permitted to issue securities through the depository mechanism.



A foreign depository may
issue depository receipts by way of a public offering or private placement or in any other manner prevalent in a permissible jurisdiction.
An issuer may issue permissible securities to a foreign depository for the purpose of issuing depository receipts by any mode permissible
for such issuance to investors. Further, holders of permissible securities may transfer such securities to a foreign depository
for the purpose of the issue of depository receipts, with or without the approval of the issuer company, through transactions on
a recognized stock exchange, bilateral transactions or by tendering through a public platform.



Under the New Scheme, securities
can be issued through the depository receipt mechanism up to such a limit that the aggregate underlying securities issued to foreign
depositories for issuance of depository receipts along with securities already held by persons resident outside India, does not
exceed the applicable foreign investment limits prescribed by regulations framed under the Foreign Exchange Management Act, 1999.



The New Scheme provides
that underlying securities shall not be issued to a foreign depository for issuance of depository receipts at a price which is
less than the price applicable to a corresponding mode of issuance to domestic investors. A foreign depository may exercise voting
rights, if any, associated with the underlying securities whether pursuant to voting instructions from the holder of depository
receipts or otherwise. Further, a holder of depository receipts issued against underlying equity shares shall have the same obligations
as if it is the holder of the equity shares if it has the right to issue voting instruction.



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



A person resident outside
India may transfer the ADSs held in Indian companies to another person resident outside India without any permission. An ADS holder
is permitted to surrender the ADSs held by him in an Indian company and to receive the underlying equity shares under the terms
of the Deposit Agreement. Under Indian regulations, the re-deposit of these equity shares with the depositary to ADSs may not be
permitted.



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 and consequently we cannot assure you
of an active or liquid market for the Equity Shares.



58







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, initially on the NASDAQ National Market (now the NASDAQ Global 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. From June 24,
2002 to October 6, 2006, our ADSs traded on the NASDAQ Capital Market (formerly the NASDAQ Small Cap Market) under the same
ticker symbol. Beginning on October 9, 2006, our ADSs have been trading on the NASDAQ Global Market. Each ADS represents one-half
of one Equity Share.



The number of outstanding
Equity Shares as of March 31, 2015 was 13,795,178. We have been informed by our depository that as of March 31, 2015, there
were 23 record holders of ADRs evidencing 9,295,956 ADSs (representing 4,647,978 Equity Shares) in the United States.



Annual and Quarterly high-low price history:



|                                                     |  | Price Per ADS (in U.S. dollars) |      
|---------------------------------------------------- |  | ------------------------------- | -----
|                                                     |  | High                            |      
|                                                     |  |                                 |      
|Fiscal year ending March 31, 2010                    |  |                                 | 4.50 
|Fiscal year ending March 31, 2011                    |  |                                 | 9.90 
|Fiscal year ended March 31, 2012                     |  |                                 | 17.98
|Fiscal year ending March 31, 2013                    |  |                                 | 7.21 
|                                                     |  |                                 |      
|Fiscal year ending March 31, 2014                    |  |                                 |      
|First Quarter (April 1, 2013 to June 30, 2013)       |  |                                 | 3.54 
|Second Quarter (July 1, 2013 to September 30, 2013)  |  |                                 | 2.81 
|Third Quarter (October 1, 2013 to December 31, 2013) |  |                                 | 3.35 
|Fourth Quarter (January 1, 2014 to March 31, 2014)   |  |                                 | 2.62 
|Fiscal year ending March 31, 2015                    |  |                                 |      
|First Quarter (April 1, 2014 to June 30, 2014)       |  |                                 | 3.85 
|Second Quarter (July 1, 2014 to September 30, 2014)  |  |                                 | 3.31 
|Third Quarter (October 1, 2014 to December 31, 2014) |  |                                 | 2.47 
|Fourth Quarter (January 1, 2015 to March 31, 2015)   |  |                                 | 2.33 
|Fiscal year ending March 31, 2016                    |  |                                 |      
|First Quarter (April 1, 2015 to June 30, 2015)       |  |                                 | 2.19 



Monthly high-low price history for previous
six months:



|Previous six months |  | High |      |  | Low | 
|------------------- |  | ---- | ---- |  | --- | 
|February 2015       |  |      | 2.02 |  |     | 
|March 2015          |  |      | 2.00 |  |     | 
|April 2015          |  |      | 2.19 |  |     | 
|May 2015            |  |      | 1.92 |  |     | 
|June 2015           |  |      | 2.08 |  |     | 
|July 2015           |  |      | 1.87 |  |     | 



59







Fees and other payments made by the Depository



During fiscal year ended
March 31, 2015, the Company received US$185,000 towards sharing of depository service fees for the fiscal years 2012, 2013
and 2014.



Fees charged by the Depositary from our
ADS holders



Under the terms of the
ADS deposit agreement and related arrangements under which the depositary provides its services, the depositary may charge persons
holding or beneficially owning ADSs on applicable record dates established by the depositary up to $2.00 per 100 ADSs (or fractions
thereof) held, as a “depositary services fee”. A portion of the aggregate depositary services fees that the depositary
may collect in a given year, as well as certain other amounts, may be made available to the Company, solely to defray costs the
Company may incur in conducting certain investor relations and other activities related to the ADS program.



In addition to the depositary
services fee, the depositary retains the right under the ADS deposit agreement to charge holders or beneficial owners of ADSs certain
other fees, including in the event a holder or beneficial owner withdraws from the ADS program the shares underlying its ADSs,
or in the event the Company distributes cash or stock dividends or makes other distributions to ADS holders. In most of these cases,
the depositary has the right to charge up to $5.00 per 100 ADSs (or fractions thereof) as to which the particular service is being
provided.



For further information
concerning the fees that the depositary retains the right to charge, and other aspects of the terms under which the depositary
provides its services, see the deposit agreement filed as an exhibit to the post-effective amendment no. 1 to the registration
statement on Form F-6, filed with the U.S. Securities and Exchange Commission on August 2, 2012, in connection with the ADS program
and the amending of the terms of the deposit agreement.



60









RESTRICTION ON FOREIGN OWNERSHIP OF INDIAN
SECURITIES



Foreign investment in
Indian securities is regulated through Foreign Direct Investment Policy (FDI Policy) of the Government of India and FEMA. While
the FDI Policy prescribes the limits and the conditions subject to which foreign investment can be made in different sectors of
the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under the FDI Policy, unless specifically
restricted, foreign investment is freely permitted in all sectors of Indian economy up to any amount and without any prior approvals,
but the foreign investor is required to follow certain prescribed procedures for making such investment. The government bodies
responsible for granting foreign investment approvals are FIPB and the RBI. The Government has from time to time made policy pronouncements
on FDI through press notes and press releases. The DIPP issued D/o IPP F. No. 5(1)/2015-FC-1 dated May 12, 2015 ("FDI Policy"),
which went in to effect on May 12, 2015, consolidates and supersedes all previous press notes, press releases and clarifications
on Foreign Direct Investment ("FDI") issued by the DIPP that were in force and effect as on May 11, 2015, other
than with respect to the pension sector.



ADR Scheme



For further details
please refer section 'Issue of securities through the depository receipt mechanism' on page 58.



Foreign Direct Investment



Pursuant to its liberalisation
policy, the Indian Government set up the Foreign Investment Promotion Board ("FIPB") under the Ministry of Finance, Government
of India ("MOF") to regulate all investments by way of subscription and/or purchase and/or transfer and/or gift of securities
of an Indian company by a person resident outside India or FDI into India. Prior permission of the FIPB is required for investments
in excess of specified sectoral caps or in sectors in which FDI is not permitted or in sectors which specifically require prior
approval of the FIPB or in proposals for investments in real estate business, atomic energy etc. The Indian Government has indicated
that in all cases where FDI is allowed on an automatic basis without FIPB approval, the RBI would continue to be the primary agency
for the purposes of monitoring and regulating foreign investment. The prescribed applicable norms with respect to determining the
price at which shares may be issued by an Indian company to a non resident investor and the price at which shares may be sold by
a resident to a non-resident or by a non-resident to a resident would need to be complied with, and a declaration in the prescribed
form is required to be filed with the RBI once the issuance/transfer of shares of the Indian company is complete.





Portfolio Investment by Non-Resident Indians



Investments by persons
of Indian nationality or origin residing outside of India ("NRIs") are made under the Foreign Portfolio Investments
mechanism.



NRIs are permitted to
make Portfolio Investments by purchase up to 5% of the paid-up value of the shares issued by a company, subject to the condition
that the aggregate paid-up value of shares purchased by all NRIs does not exceed 10% of the paid-up capital of the company. The
10% ceiling may be exceeded if a special resolution is passed in a General Meeting of the shareholders of the Company subject to
overall ceiling of 24%. In addition to Portfolio Investments in Indian companies, NRIs may also make foreign direct investments
in Indian companies pursuant to the foreign direct investment route discussed above.



Overseas corporate bodies
controlled by NRIs or OCBs were previously permitted to invest on favourable terms under the Portfolio Investment Scheme. The RBI
no longer recognizes OCBs as an eligible class of investment vehicle under various routes and schemes under the foreign exchange
regulations.



Investment by Foreign Portfolio Investors
(“FPIs”)



An investment by FPIs
is governed by the SEBI (Foreign Portfolio Investors) Regulations, 2014 ("FPI Regulations"). FPIs are required
to be registered with the designated depositary participant on behalf of the Securities Exchange Board of India subject to compliance
with ‘Know Your Customer’ norms. FPIs are permitted to invest only in the following securities:



| | a. | securities in the primary and secondary markets including shares, debentures and warrants of companies,
listed or to be listed on a recognized stock exchange in India;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | units of schemes floated by domestic mutual funds, whether listed on a recognized stock exchange
or not;
| | -- | --------------------------------------------------------------------------------------------------------

| | c. | units of schemes floated by a collective investment scheme;
| | -- | -----------------------------------------------------------

| | d. | derivatives traded on a recognized stock exchange;
| | -- | --------------------------------------------------

| | e. | treasury bills and dated government securities;
| | -- | -----------------------------------------------



61







| | f. | commercial papers issued by an Indian company;
| | -- | ----------------------------------------------

| | g. | Rupee denominated credit enhanced bonds;
| | -- | ----------------------------------------

| | h. | security receipts issued by asset reconstruction companies;
| | -- | -----------------------------------------------------------

| | i. | perpetual debt instruments and debt capital instruments, as specified by the RBI from time to time;
| | -- | ---------------------------------------------------------------------------------------------------

| | j. | listed and unlisted non-convertible debentures / bonds issued by an Indian company in the infrastructure
sector, where ‘infrastructure’ is defined in terms of the extant External Commercial Borrowings guidelines;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | k. | non-convertible debentures or bonds issued by Non-Banking Financial Companies categorized as ‘Infrastructure
Finance Companies’ by the RBI;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------

| | l. | Rupee denominated bonds or units issued by infrastructure debt funds;
| | -- | ---------------------------------------------------------------------

| | m. | Indian depository receipts; and
| | -- | -------------------------------

| | n. | such other instruments specified by the Securities and Exchange Board of India from time to time.
| | -- | -------------------------------------------------------------------------------------------------



A foreign portfolio investor
shall transact in the securities in India only on the basis of taking and giving delivery of securities purchased or sold except
certain carve outs.



A single FPI or an investor
group is permitted to purchase equity shares of a company only below 10% of the total issued capital of the company. Subject to
compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of the FPI Regulations, an FPI,
other than Category III FPIs and unregulated broad based funds, which are classified as Category II FPIs by virtue of their investment
manager being appropriately regulated, may issue or otherwise deal in offshore derivative instruments (defined under the FPI Regulations
as any instrument, by whatever name called, which is issued overseas by a FPI against securities held by it that are listed or
proposed to be listed on any recognized stock exchange in India, as its underlying) directly or indirectly, only in the event (i)
such offshore derivative instruments are issued to persons who are regulated by an appropriate foreign regulatory authority; and
(ii) such offshore derivative instruments are issued after compliance with ‘know your client’ norms. An FPI is also
required to ensure that further issue or transfer of any offshore derivative instrument is made by or on behalf of it to any persons
that are regulated by an appropriate foreign regulatory authority.



The FPI Regulations became
effective as of June 1, 2014. Any Foreign Institutional Investor ("FII") or Qualified Foreign Investor ("QFI")
who holds a valid certificate of registration will be deemed to be a FPI till the expiry of the block of three years for which
fees has been paid per the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995. All existing
FIIs and sub accounts, subject to payment of conversion fees specified in the FPI Regulations, may continue to buy, sell or otherwise
deal in securities subject to the provisions of the FPI Regulations, until the earlier of (i) expiry of its registration as a FII
or sub-account, or (ii) obtaining a certificate of registration as foreign portfolio investor. All QFIs may continue to buy, sell
or otherwise deal in securities until the earlier of (i) up to a period of a one year from the date of commencement of the FPI
Regulations; (ii) obtaining a certificate of registration as a foreign portfolio investor.



In furtherance of the
FPI Regulations, the RBI amended relevant provisions of Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) Regulations, 2000 by a notification dated March 13, 2014. The portfolio investor registered in accordance
with the FPI Regulations would be called ‘Registered Foreign Portfolio Investor ("RFPI"). Accordingly, RFPI
may purchase and sell shares and convertible debentures of an Indian company through a registered broker as well as purchase shares
and convertible debentures offered to the public under the FPI Regulations. Further, RFPI may sell shares or convertible debentures
so acquired (i) in an open offer in accordance with the Securities Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011; or (ii) in an open offer in accordance with the Securities Exchange Board of India (Delisting of
Equity Shares) Regulations, 2009; or (iii) through buyback of shares by a listed Indian company in accordance with the Securities
Exchange Board of India (Buy-back of Securities) Regulations, 1998. RFPI may also acquire shares or convertible debentures (i)
in any bid for, or acquisition of securities in response to an offer for disinvestment of shares made by the Central Government
or any State Government; or (ii) in any transaction in securities pursuant to an agreement entered into with merchant banker in
the process of market making or subscribing to unsubscribed portion of the issue in accordance with Chapter XB of the SEBI (ICDR)
Regulations, 2009.



The individual and aggregate
investment limits for the RFPIs should be below 10% or 24% respectively of the total paid-up equity capital or 10% or 24% respectively
of the paid-up value of each series of convertible debentures issued by an Indian company and such investment should be within
the overall sectoral caps prescribed under the FDI Policy. The aggregate investment limits for the RFPI can also be increased to
the sectoral cap / statutory ceiling, as applicable, by the Indian company concerned through a resolution by its Board of Directors
followed by a special resolution to that effect by its shareholders and subject to prior notification to RBI. RFPI may invest in
government securities and corporate debt subject to limits specified by the RBI and SEBI from time to time and to trade in all
exchange traded derivative contracts on the stock exchanges in India subject to the position limits as specified by Securities
and Exchange Board of India from time to time.

62







With a move to further
simplify the FDI Policy and in line with earlier announcement, Union Cabinet has, on 16 July 2015, approved the implementation
of "composite cap" for FDI, essentially doing away with the distinction between various foreign investment by FIIs, NRIs
and other FDIs.



Portfolio investment,
upto aggregate foreign investment level of 49%, will be permitted without government approval or compliance of sectoral conditions,
if such investment does not result in transfer of ownership and / or control of Indian entities from resident Indian citizens to
non-resident entities.



Takeover and Insider Trading Regulations



Under the Securities
and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended, or Takeover Code,
upon the acquisition of more than 5% of the outstanding shares or voting rights of an Indian public listed 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 25% or more of such shares or voting rights or a change in control of
the company, the acquirer must make an open offer to the other shareholders, offering to purchase at least 26% of 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 may be subject to the Takeover Code; if the shareholding of the ADS holder on conversion exceeds 25% of the
paid up capital of the Indian company and the Indian company is listed in India. A holder of ADS issued by a listed company may
also be subject to the Takeover Code if the ADS holder becomes entitled to exercise voting rights, in any manner whatsoever, on
the underlying shares. Similar disclosures may be made under the SEBI (Prohibition of Insider Trading), Regulations, 2015, if the
equity shares of the Indian company are listed on a recognized stock exchange in India. So long as our Equity Shares are unlisted
in India / are not proposed to be listed, the provisions of the Takeover Code and the Insider Trading Regulations will not be applicable.



Qualified Institutional Placement under
the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009



In order to make Indian
markets more competitive and efficient, the Government of India introduced an additional instrument for listed companies to raise
funds from domestic markets in the form of a Qualified Institutional Placement, or QIP. Key features of the QIP program are as
follows:





| | • | Issuers. A company whose equity shares are listed on an Indian stock exchange with nationwide
trading terminals and which is in compliance with the prescribed requirements of minimum public shareholding in its listing agreement
will be eligible to raise funds in the domestic market by placing securities with Qualified Institutional Buyers or QIBs.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





QIBs are defined as:



| | • | Public financial institution as defined in Section 4A of the Companies Act;
| | - | ---------------------------------------------------------------------------

| | • | Scheduled commercial banks;
| | - | ---------------------------

| | • | Mutual funds;
| | - | -------------

| | • | Foreign portfolio investor other than Category III foreign portfolio investor registered with SEBI;;
| | - | ----------------------------------------------------------------------------------------------------

| | • | Multilateral and bilateral development financial institutions;
| | - | --------------------------------------------------------------



| | • | Venture capital funds / alternative investment fund registered with SEBI;
| | - | -------------------------------------------------------------------------

| | • | Foreign venture capital investors registered with SEBI;
| | - | -------------------------------------------------------

| | • | State industrial development corporations;
| | - | ------------------------------------------

| | • | Insurance companies registered with the Insurance Regulatory and Development Authority;
| | - | ---------------------------------------------------------------------------------------

| | • | Provident funds with minimum corpus of Rs.250 million;
| | - | ------------------------------------------------------

| | • | Pension funds with minimum corpus of Rs.250 million; or National Investment Fund set up by the
Government of India;
| | - | -------------------------------------------------------------------------------------------------------------------

| | • | National Investment Funds;
| | - | --------------------------

| | • | Insurance funds set up and managed by Army, Navy or Air Force of the Union of India; and
| | - | ----------------------------------------------------------------------------------------

| | • | Insurance funds set up and managed by the Department of Posts, India
| | - | --------------------------------------------------------------------



63









| | • | Securities: Securities which can be issued through the QIP program are equity shares, non-convertible
debt instruments along with warrants and convertible securities other than warrants (hereinafter referred to as “eligible
securities”). A security which is convertible into or exchangeable with equity shares at a later date, may be converted or
exchanged into equity shares at any time after allotment of security but not later than sixty months from the date of allotment.
The eligible securities must be fully paid up at the time of allotment.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Investors/Allottees: The specified securities can be issued only to QIBs, as defined above.
Such QIBs must not be promoters or related to promoters of the issuer, either directly or indirectly. Each placement of the eligible
securities issued through the QIP program shall be on a private placement basis, in compliance with the requirements of the Companies
Act and the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Minimum number of allottees should be 2 for
issue size less than Rs. 2.5 billion and 3 in case of issue size exceeding Rs. 2.5 billion. A single allottee shall not be allotted
more than 50% of the issue size. A minimum of 10% of the securities in each placement must be offered to mutual funds. If no mutual
fund agrees to take up the minimum portion or any part thereof, such minimum portion or part thereof may be allotted to other QIBs.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Issue Size: The aggregate funds that can be raised through the QIP program in one financial
year shall not exceed five times of the net worth of the issuer as of the end of its previous financial year.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Placement Document: The issuer shall prepare a placement document containing all the relevant
and material disclosures. There will be no pre-issue filing of the placement document with SEBI. The placement document will be
placed on the websites of the relevant Indian stock exchanges and of the issuer, with appropriate disclaimer to the effect that
the placement is meant only for QIBs on a private placement basis and is not an offer to the public. Such Placement Document must
also comply with the requirement of section 42 of the Companies Act, 2013 with respect to disclosures.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Pricing: The price of the shares issued under the QIP program must not be less than the
average of the weekly high and low of the closing prices of the shares quoted on the stock exchange during the two weeks preceding
the relevant date. By an amendment to the ICDR Regulations in October 2012, SEBI permitted Indian companies to offer a discount
of up to five (5) percent on the issue price. “Relevant date” has been defined to mean the date of the meeting in which
the Board of the company or the Committee of Directors duly authorized by the Board of the company decides to open the proposed
issue. The issue price for convertible instruments is subject to adjustment in case of corporate actions such as stock splits,
rights issues and bonus issues.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Because our Equity Shares are not listed on
any Indian stock exchange, we are not eligible to participate in the QIP program.



64







PRINCIPAL SHAREHOLDERS



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



| | • | each of the executive officers named in the summary compensation table and each of our directors;
| | - | -------------------------------------------------------------------------------------------------

| | • | all of our directors and executive officers as a group; and
| | - | -----------------------------------------------------------

| | • | each person or group of affiliated persons who is, to the extent known by us or ascertained from public filing, to beneficially
own 5.0% or more of our Equity Shares.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------





|                                                     |  | Shares Beneficially Owned As of June 30, 2015 |           |  | Shares Beneficially Owned As of June 30, 2014 |  |       | Shares Beneficially Owned As of June 30, 2013 | 
|---------------------------------------------------- |  | --------------------------------------------- | --------- |  | --------------------------------------------- |  | ----- | --------------------------------------------- | 
|Name of Beneficial Owner                             |  | Number of Equity Shares held                  |           |  | Percent of total Equity Shares outstanding    |  |       | Number of Equity Shares held                  | 
|Officers and Directors                               |  |                                               |           |  |                                               |  |       |                                               | 
|Ajit Balakrishnan (1)(1A) (1B) (1C)                  |  |                                               | 2,363,952 |  |                                               |  | 15.96 | %                                             | 
|Diwan Arun Nanda (1)                                 |  |                                               | 2,344,741 |  |                                               |  | 15.83 | %                                             | 
|                                                     |  |                                               |           |  |                                               |  |       |                                               | 
|All Directors and Officers as a Group (4 persons)    |  |                                               | 4,720,693 |  |                                               |  | 31.87 | %                                             | 
|                                                     |  |                                               |           |  |                                               |  |       |                                               | 
|Other shareholders holding more than 5% shareholding |  |                                               |           |  |                                               |  |       |                                               | 
|Rediffusion Holdings PrivateLimited(1)               |  |                                               | 2,200,002 |  |                                               |  | 14.85 | %                                             | 
|                                                     |  |                                               |           |  |                                               |  |       |                                               | 
|Draper International India LP                        |  |                                               | 2,178,000 |  |                                               |  | 14.71 | %                                             | 
|Rediff.com India limited Employee Trust (1C)         |  |                                               | 1,015,000 |  |                                               |  | 6.85  | %                                             | 
|Edelweiss Finance and Investment Ltd (1D).           |  |                                               | 1,523,000 |  |                                               |  | 10.28 | %                                             | 







Notes:

| | (1) | Includes 2,200,002 Equity Shares held by Rediffusion Holdings Private Limited, previously called
Rediffusion Advertising Private Limited, of which Ajit Balakrishnan is a 50.0% shareholder and Director and Diwan Arun Nanda is
a 50.0% shareholder and Director.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (1A) | Includes 144,540 Equity Shares held by Quintrol Technologies Private Limited, of which Ajit Balakrishnan
is a director as well as a 99.9% stockholder.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | (1B) | Includes 38,441 ADSs of the Company held by Mr. Ajit Balakrishnan.
| | ---- | ------------------------------------------------------------------

| | (1C) | The trustees of the trust consist of 3 executive officers of Rediff.
| | ---- | --------------------------------------------------------------------

| | (1D) | Edelweiss Finance and Investment Ltd is wholly owned subsidiary of Edelweiss Financial Service
Ltd in which Rashesh Shah is a Chairman and Managing Director and holds 17.5% shareholding.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Sunil N. Phatarphekar,
a director of the Company, holds 6,000 equity shares which resulted from the exercise of the stock options.



Ashok Narasimhan, a director
of the Company, holds 6,000 equity shares which resulted from the exercise of the stock options.



Our
ADSs are currently listed and traded on the NASDAQ Global Market and each ADS is represented by one-half of one Equity Share of
par value of ₹5 per share.



Our ADSs are registered
pursuant to Section 12(b) of the Securities Act. We have been informed by our depository that as of June 30, 2015, 9,295,956
ADSs were held by 23 record holders of ADRs in the United States.





65







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 as amended by the Finance Act,
2015, including the special tax regime for ADSs contained in Section 115AC and 115AC, as amended, read with the Issue of Foreign
Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993, or the Scheme, as amended.
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
Section 115AC and other relevant provisions may be amended or modified by future amendments to the Indian Income-tax Act.



In the event there is
any Double Taxation Avoidance Agreement (DTAA) between two states and an investor is a resident of either of the states; then to
the extent the provisions of the DTAA are more favorable to the investor, under the Indian Income-tax Act, the provisions of the
DTAA would prevail. However, The Finance Act, 2012 included General Anti-Avoidance Rule (GAAR), wherein the tax authority may declare
an arrangement as an impermissible avoidance arrangement if an arrangement is not entered at arm’s length, results in misuse
/ abuse of provisions of Income Tax Act, 1961 lacks commercial substance or the purpose of arrangement is for obtaining a tax benefit.
If any of our transactions are found to be ‘impermissible avoidance arrangements’ under GAAR, our business may be adversely
affected.



The GAAR was originally
proposed to become effective for transactions entered into on or after April 1, 2013. In September 2013, vide Notification No.
75, the Government of India had notified the applicability of the GAAR provisions along with certain threshold limits which will
become effective from April 1, 2015. However vide Finance Act, 2015 the implementation of GAAR has been deferred by 2 years so
as to implement it as part of a comprehensive regime to deal with OECD’s BEPS project of which India is an active participant.
Thus, GAAR provisions shall be applicable from Financial Year 2017-18.



The Union Budget, 2015
has proposed to implement Goods and Service Tax (GST) from April 1, 2016. GST will put in place a new indirect tax system which
will integrate State economies and boost overall growth. It is proposed to incorporate other taxes such as Central Excise duty,
Service tax, Octroi, VAT and Sales tax, entry tax, etc., into GST, thus avoiding multiple layers of taxation that currently exist
in India.



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



Residence





For purposes of the Indian
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 an 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 or for the purposes
of employment outside India. Explanation 2 to section 6(1) inserted by Finance Act, 2015 provides that in case of an individual,
being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India
shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.



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. The Finance Act, 2015 has amended this definition and brought in the concept of Place of Effective
Management (PoEM) i.e., a company would be considered a resident in India if its place of effective management in that year is
in India. Thus a foreign company will be resident in India, if its PoEM in that year is in India. The term ‘PoEM’ has
been explained to mean a place where key management and commercial decisions that are necessary for the conduct of the business
of an entity as a whole, are in substance made. As per explanation to section 6(3) of the Indian Income-tax Act. Set of guiding
principles to determine place of effective management is also proposed to be issued. 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 during that year.
This may increase the compliance of filing of returns and assessment of our subsidiary company situated outside India.



66







Taxation of Distributions



Shareholders who receive
dividends by a domestic company will not be subject to tax on the distribution if the company has paid the dividend distribution
tax (DDT). Consequently, withholding tax on dividends paid to shareholders does not apply. The rate of DDT is 15%. The rate is
to be applied on the grossed up amount of dividend. The DDT is to be further increased by surcharge and education cess. If the
company has not paid the DTT, the shareholder would be taxable at the applicable Indian Income-tax rates depending on the legal
status of the shareholders.



Minimum Alternate
Tax



Companies are liable
to pay Minimum Alternate Tax (MAT) in a fiscal year if the income-tax payable on the total income computed under the Indian Income-tax
Act is less than 18.5% of its book profit. In such cases, the book profit shall be deemed to be the total income of the company
and tax payable shall be @ 18.5%. In case of domestic companies, surcharge @ 7% will be levied if the total income exceeds Rs.
1 crore (Rs. 10 million) but does not exceed Rs. 10 crore (Rs. 100 million). The rate of surcharge will be 12% if total income
exceeds Rs. 10 crore (Rs. 100 million). In case of companies other than domestic companies, surcharge @ 2% will be levied if the
total income exceeds Rs. 1 crore (Rs. 10 million) but does not exceed Rs. 10 crore (Rs. 100 million). The rate of surcharge will
be 5% if total income exceeds Rs. 10 crore (Rs. 100 million). Additional surcharge called the “Education Cess on Income-tax”
and “Secondary and Higher Education Cess on Income-tax” shall continue to be levied @ 2% and 1% respectively on the
amount of tax computed. As per clause (iid) to Explanation 1 to section 115JB(2) of the Indian Income-tax Act, the book profit
shall be reduced by the amount of income accruing or arising to a foreign company from the capital gains arising on transactions
in securities if such income is credited to the profit and loss account and the tax payable under normal provisions of the Indian
Income-tax Act is less than 18.5%. The Indian Income Tax Act provides that the MAT paid by companies can be adjusted against its
tax liability over the next ten years.



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



In the present case,
there is no conversion but redemption, i.e. receipt of shares over which the ADS holder has a pre-existing right, therefore there
is no transfer and consequently, no capital gains.



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. However, as per section 196D(2)
of the Indian Income-tax Act, tax is not required to be deducted from any income by way of capital gains arising from the transfer
of securities referred to in section 115AD of the Indian Income-tax Act, payable to a Foreign Institutional Investor. Capital gains
on sale of equity shares not listed on a recognized stock exchange in India, which have been held for more than 36 months (measured
from the date of request for redemption of ADSs where applicable) are considered as long-term capital gains and generally taxable
at the rate of 20% plus surcharge and education cess. Surcharge on this tax would be applicable at the rate of 2% in the case
of non-resident corporations if the total income exceeds Rs.1 Crore (Rs.10 million) but not exceeding Rs. 10 Crores (Rs. 100 million).
Surcharge at the rate of 5% would be applicable if the total income exceeds Rs. 10 crore (Rs. 100 million). However, surcharge
is leviable @ 12% where income exceeds Rs. 1 crore (Rs. 10 million) on non-resident individuals or an association of persons. In
all the above cases, the amount of tax and surcharge, if any, would be increased by an Education Cess of 2% and Secondary and Higher
Education Cess of 1% resulting in an aggregate Education Cess of 3%.



Though section 115AC
provides for lower rate of tax (i.e., 10% plus surcharge where applicable and Education Cess of 3%) on long term capital gains
arising from transfer of ADSs (other than one between two non-residents made outside India), it is unclear whether the lower rate
of tax would also extend to gains arising from transfer of shares converted from ADSs 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 3%) for specific classes of taxpayers, such as Foreign Portfolio Investors,
registered with SEBI. Section 112(1)(c)(iii) of the Indian Income-tax Act provides that in case of a non-resident not being a company
or a foreign company, the rate of tax will be 10% plus surcharge and cess as applicable, in respect of long term capital gains
arising from the transfer of unlisted securities. The gains shall be computed without giving effect to the first and second proviso
to section 48 of the Indian Income-tax Act.



67







Where unlisted equity
shares have been held for 36 months or less, the rate of tax varies and will be subject to tax at normal rates of income tax applicable
to non-residents under the provisions of the Indian Income-tax Act, subject to a maximum of 40% (plus applicable surcharge and
Education Cess as mentioned above). The actual rate of tax on short-term gains depends on a number of factors, including the legal
status of the non-resident holder and the type of income chargeable in India.



During the period the
underlying equity shares are held by non-resident investors on a transfer from our depository upon redemption of ADSs, the provisions
of the DTAA 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 our equity shares.



As per section 49(2ABB)
of the Indian Income-tax Act, where shares of a company are acquired by a non-resident investor on redemption of ADSs, the cost
of acquisition of shares shall be the price of such share prevailing on any recognized stock exchange on the date on which a request
for such redemption was made.



In case of shares which
are acquired by the non-resident investor on redemption of ADSs, the period of holding shall be reckoned from the date on which
a request for such redemption was made as per clause (he) of Explanation 1 to section 2(42A) of the Indian Income-tax Act.



Withholding Tax on Capital Gains



Tax on long term and short
term capital gains, if payable as discussed above, upon sale of equity shares is to be deducted at source by the person responsible
for paying the non-resident, in accordance with the relevant provisions of the Indian Income-tax Act, and the non-resident will
be entitled to a certificate evidencing such tax deduction in accordance with the provisions of section 203 of the Indian Income-tax
Act. However, as per section 196D(2) of the Indian Income-tax Act, tax is not required to be deducted from any income by way of
capital gains arising from the transfer of securities referred to in section 115AD of the Indian Income-tax Act, payable to a Foreign
Institutional Investor.



Rights



Issuance 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.



However, under section
56(2)(viia) of the Indian Income-tax Act, where a firm or a closely held company receives any share of another closely held company
without consideration or for a consideration which is less than the fair market value (fair market value exceeding INR 0.05 million),
the fair market value /excess shall be taxable in the hands of the recipient. There is a possibility that the tax authorities may
tax the recipient under section 56(2)(viia) of the Indian Income-tax Act. A view may be taken that there is no transfer of shares
when fresh shares or rights are allotted and that consequently the provisions of section 56(2)(viia) are not attracted. However,
litigation with the tax authorities cannot be ruled out on this issue.



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, considering situs is in India, the gains realized on the sale of rights will be subject to Indian
taxation. These rights would generally be in the nature of short-term capital assets.



Stamp Duty



Upon the issuance of
the Equity Shares underlying our 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 a depositary in exchange for
ADSs representing these 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
the tax is borne by the transferee, that is, the purchaser. In case the equity shares of the company are held in a “dematerialized”
form, such as a book-entry system, no stamp duty would be payable on the acquisition or transfer of the equity shares.



Other Taxes



At present, there are
no Indian taxes on wealth, gifts or inheritance, which may apply to our ADSs and any underlying Equity Shares.



68







Buy-back of Securities



As per section 115QA of
the Indian Income-tax Act, any amount of distributed income by the company on buy-back of shares (not being shares listed on a
recognised stock exchange) from a shareholder shall be charged to tax in the hands of the company @ 20% plus surcharge and cess
as applicable on such distributed income. Any income arising to an assessee, being a shareholder, on account of buyback of shares
(not being listed on a recognised stock exchange) by the company as referred to in section 115QA shall be exempt under section
10(34A) of the Indian Income-tax Act.



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 12.36%. The
stockbroker is responsible for collecting the service tax and paying it to the relevant authority. The Finance Act 2015 has increased
the rate of service tax from the present 12.36% (inclusive of surcharge and cess) to a consolidated rate of 14%. This has been
notified to be applicable with effect from 1st June 2015. Further, it has also introduced Swachh Bharat Cess (Clean India Campaign)
on all or certain taxable services at a rate of 2% on the value of such taxable services, the notification for which is still awaited.



United States Federal Income Tax Considerations



The following is a summary
of United States federal income tax considerations relating to the acquisition, ownership, and disposition of ADSs or Equity Shares
by U.S. Holders (as defined below) that will hold their ADSs or Equity Shares as “capital assets” (generally, property
held for investment) under the United States Internal Revenue Code (the “Code”). This summary is based upon existing
United States federal income tax law, which is subject to differing interpretations or change, possibly with retroactive effect.
This summary does not discuss all aspects of United States federal income taxation which may be important to particular investors
in light of their individual investment circumstances, including holders subject to special tax rules (e.g., financial institutions,
insurance companies, broker-dealers, partnerships and their partners, and tax-exempt organizations (including private foundations),
holders that are not U.S. Holders, holders that own (directly, indirectly, or constructively) 10% or more of the total combined
voting power of all classes of our Equity Shares entitled to vote, holders that will hold our ADSs or our Equity Shares as part
of a straddle, hedge, conversion, constructive sale, or other integrated transaction for United States federal income tax purposes,
or holders that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ
significantly from those summarized below. In addition, this summary does not discuss any non-United States, state, or local tax
considerations. Prospective investors are urged to consult their tax advisors regarding the United States federal, state, local,
and non-United States income and other tax considerations of an investment in our ADSs or our Equity Shares.



For purposes of this
summary, a “U.S. Holder” is a beneficial owner of ADSs or Equity Shares that, for United States federal income tax
purposes, is (i) an individual who is a citizen or resident of the United States, (ii) a corporation or other entity
taxable as a corporation for United States federal income tax purposes created in, or organized under the law of, the United States
or any State or political subdivision thereof, (iii) an estate the income of which is includible in gross income for United
States federal income tax purposes regardless of its source, or (iv) a trust the administration of which is subject to the
primary supervision of a United States court and which has one or more United States persons who have the authority to control
all substantial decisions of the trust.



If a partnership is a
beneficial owner of our ADSs or Equity Shares, the tax treatment of a partner in the partnership will generally depend upon the
status of the partner and the activities of the partnership.



For United States federal
income tax purposes, U.S. Holders of ADSs will be treated as the beneficial owners of the underlying shares represented by the
ADSs.



EACH PROSPECTIVE INVESTOR SHOULD CONSULT
HIS, HER OR ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF ACQUIRING, OWNING
OR DISPOSING OF EQUITY SHARES OR ADSs.



General



A primary consideration
related to making an investment in ADSs or Equity Shares for United States investors is whether we will become classified as a
“passive foreign investment company” (a “PFIC”). A foreign corporation, such as us, will be treated as
a PFIC, for United States federal income tax purposes, if 75% or more of its gross income consists of certain types of “passive”
income or 50% or more of its assets are passive. For the purpose of applying the income and assets tests described above, we will
be treated as owning its proportionate share of the assets and earning the proportionate share of the income of any other corporation
that we own, directly or indirectly, 25% or more (by value) of the stock of such corporation.



69







We do not expect to be
classified as a passive foreign investment company (“PFIC”) for United States federal income tax purposes for the most
recent taxable year ended March 31, 2015. However, there is no guaranty that the Internal Revenue Service will agree with
our determination. Moreover, we may become classified as a PFIC for one or more future taxable years, particularly under circumstances
where we determine not to deploy significant amounts of cash for business development purposes. The determination of whether we
are, or will become, classified as a PFIC is a fact intensive determination that is made annually based on the composition and
amounts of income that we earn and the composition and valuation of our assets, all of which are subject to change. For purposes
of determining whether we are, or will become, classified as a PFIC, cash and other liquid assets are categorized as passive assets
and the value of our goodwill and other unbooked intangibles are taken into account. The value of our assets for a taxable year
is determined by reference to the average of the fair market values of our assets determined as of the end of each quarterly period
during the taxable year. In addition, the composition of our assets will be affected by how, and how quickly, we spend our liquid
assets that we presently hold. To the extent we are able to deploy substantial amounts of cash for business development purposes,
our level of active assets, as compared with our passive assets, may become more prominent.



If we are classified
as a PFIC for any year during which a U.S. Holder holds our ADSs or Equity Shares, we generally will continue to be treated as
a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or Equity Shares.



Because PFIC status is
a fact intensive determination made on an annual basis, no assurance can be given regarding our classification as a PFIC. The discussion
immediately below under the headings “Distributions” and “Sale or Other Disposition of ADSs or Equity Shares”
describes certain tax considerations if we are not subject to classification as a PFIC for United States federal income tax purposes,
and are followed by a summary of the PFIC rules under the heading “Passive Foreign Investment Company” if we were to
be classified as a PFIC. United States investors are urged to consult their tax advisors regarding the potential application and
effect of the PFIC rules in connection with their prospective investment in our ADSs or our Equity Shares.



Distributions



The gross amount of cash
distributions with respect to the ADSs (or Equity Shares) will, upon receipt by the Depositary (or by you), be includible in your
gross income as dividend income to the extent of our current and accumulated earnings and profits, as determined under United States
federal income tax principles. Because we do not intend to determine our earnings and profits on the basis of United States federal
income tax principles, any distribution paid may generally be treated as a dividend for United States federal income tax 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 United States federal tax rate of 20% rather than the marginal tax rates generally applicable to
ordinary income so long as certain holding period requirements are met. A non-United States corporation (other than a PFIC) generally
will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive 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 and we believe we should be
eligible for the benefits of the treaty. United States corporate holders will generally not be eligible for the dividends received
deduction for distributions to domestic corporations in respect of distributions on our ADSs or our Equity Shares.





An additional tax on
net investment income imposed at a 3.8% rate will also apply to dividends received by certain individuals who meet specified income
thresholds ($250,000 for joint returns).



The United States dollar
value of any distribution made by us in Rupees will be determined by reference to the exchange rate in effect on the date the distribution
is received by the Depositary (or you if you hold our Equity Shares), regardless of whether the payment is in fact converted into
U.S. dollars on that date. Any subsequent gain or loss in respect of such Rupees arising from exchange rate fluctuations will be
ordinary income or loss. This gain or loss will generally be treated as United States source gain or loss for United States foreign
tax credit limitation purposes.



Dividends generally will
be treated as income from foreign sources for United States foreign tax credit limitation purposes. You may be eligible, subject
to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends
received on the ADSs or the Equity Shares. If you do not elect to claim a foreign tax credit for foreign tax withheld, you may
instead claim a deduction, for United States federal income tax purposes, in respect of such withholding, but only for a year in
which you elect to do so for all creditable foreign income taxes.



Sale or Other Disposition of ADSs or
Equity Shares



You generally will recognize
capital gain or loss for United States federal income tax purposes upon a sale or other disposition of ADSs or Equity Shares in
an amount equal to the difference between the amount realized from the sale or disposition and your adjusted tax basis in the ADSs
or the Equity Shares. Such gain generally will be long-term if, on the date of such sale or disposition, you held such ADSs or
Equity Shares for more than one year and will generally be treated as United States source gain or loss for United States foreign
tax credit limitation purposes. The deductibility of a capital loss may be subject to limitations.



70







Passive Foreign Investment Company



If we are or were to
become classified as a PFIC for any taxable year, and unless you make a special election (including a “mark-to-market”
election, as described below), you would be subject to special rules with respect to (i) any gain realized on the sale or
other disposition of ADSs or Equity Shares, and (ii) any “excess distribution” made by us on the ADSs or Equity
Shares (generally, any distributions paid to you in respect of ADSs or Equity Shares during a single taxable year that are greater
than 125% of the average annual distributions received by you during the three preceding taxable years or, if shorter, your holding
period for such ADSs or Equity Shares).



Under the PFIC rules:



| | • | the gain or excess distribution would be allocated ratably over your holding period for ADSs or
Equity Shares;
| | - | --------------------------------------------------------------------------------------------------------------



| | • | the amount allocated to the taxable year in which the gain or excess distribution was realized,
and any taxable year that you held our ADSs or our Equity Shares prior to the first taxable year in which we are classified as
a PFIC (a “pre-PFIC year”), would be taxable as ordinary income; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the amount allocated to each prior year, other than the current year and any pre-PFIC year, would
be subject to (i) tax at the highest tax rate in effect for that year and (ii) an interest charge generally applicable
to underpayments of tax based on the amount of the tax deferred during the time in which you owned ADSs or Equity Shares.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As an alternative to
the foregoing rules, a holder of “marketable stock” in a PFIC may make a mark-to-market election, provided that the
shares are “regularly traded” on a “qualified exchange.” So long as our ADSs are regularly traded on the
NASDAQ Global Market, our ADSs should be treated as marketable stock on a qualified exchange for this purpose. No assurances, however,
may be given whether the ADSs would be treated, or continue to be treated, as “regularly traded” on such exchange.
If you make a valid mark-to-market election, you will generally (i) include as ordinary income for each taxable year the excess,
if any, of the fair market value of your ADSs or Equity Shares as determined at the end of the taxable year over the adjusted tax
basis of such ADSs or Equity Shares and (ii) deduct as a loss the excess, if any, of the adjusted tax basis of your ADSs or
Equity Shares over the fair market value of such ADSs or Equity Shares as determined at the end of the taxable year, but only to
the extent of the amount previously included in income as a result of the mark-to-market election. Your adjusted tax basis in your
ADSs or Equity Shares would be adjusted to reflect any income or loss resulting from the mark-to-market election.



The rules for PFICs are
complex and several other special elections are available, including the election to treat us as a “qualified electing fund”
(“QEF”). A QEF election would require a holder of Equity Shares or ADSs to include in its income a share of our income
on an annual basis even absent a distribution to pay taxes on that share of income.



If you own ADSs or Equity
Shares during any year that we are classified as a PFIC, subject to certain exception, you may be required to file an annual Internal
Revenue Service Form 8621 that describes the distributions received on ADSs or Equity Shares and the gain realized on the disposition
of ADSs or Equity Shares. You are urged to consult your tax advisor concerning the United States federal, state and local income
tax consequences of acquiring, holding, and disposing of ADSs or Equity Shares.





71







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 and Managing director, who serves as our Principal Executive Officer, and our Chief Financial
Officer who serves as Principal 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 Securities Exchange Act of 1934 referred as 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.



Management’s Annual Report on Internal
Control over Financial Reporting



Our management is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Internal control over financial reporting is the process designed by, or under the supervision of, our
Chairman and Managing director, who serves as our Principal Executive Officer, and our Chief Financial Officer who serves as Principal
Financial Officer, and effected by our management and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles, and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect our transactions and dispositions of assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the financial statements.



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions
or that the degree of compliance with established policies or procedures may deteriorate.



Under the supervision
and with the participation of our management, including our Chairman and Managing director and our Chief Financial Officer, our
Management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31,
2015. In making this assessment, our management primarily used the criteria set forth in Internal Control - Integrated Framework
(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO”). Based on such
assessment, our management has concluded that we maintained effective internal control over financial reporting as of March 31,
2015.





Our independent registered
public accounting firm, Deloitte Haskins & Sells LLP, has audited the consolidated financial statements included in this
annual report on Form 20-F, and as part of their audit, has issued their report, included herein, on the effectiveness of our internal
control over financial reporting as of March 31, 2015.



Changes in Internal Controls over Financial
Reporting



During the period covered
by this annual report, there were no changes in our internal control over financial reporting that have materially affected or
are reasonably likely to materially affect our internal control over financial reporting.





72







PRINCIPAL ACCOUNTANT FEES AND SERVICES



The following table summarizes
the fees billed to us by our principal accountant, Deloitte Haskins & Sells LLP (formerly Deloitte Haskins & Sells), Mumbai, India and its affiliates (collectively “Deloitte”) for various services rendered to us during the fiscal
years ended March 31, 2013, 2014 and 2015, respectively.





|          |  | Fiscal year ended March 31, |        
|--------- |  | --------------------------- | -------
|          |  | 2013                        |        
|          |  | US$                         |        
|Audit Fee |  |                             | 226,974
|          |  |                             |        
|Tax Fees  |  |                             | 12,915 
|Total     |  |                             | 239,889





Audit fee represents
the aggregate fees for Deloitte in connection with the audits of our annual integrated consolidated financial statements and statutory
audit of Rediff. Tax fees primarily comprise fees for tax audit and permitted tax advisory services. 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 three 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 & Sells LLP, an 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 Reserve Bank of India publishes the exchange rate on each date. The published rate on March 31,
2015 was ₹62.59 per US$1.00. The reporting currency for the
financial statements is the U.S. dollar and the translation from Indian Rupees to U.S. dollars has been performed using rates
specified by the Reserve Bank of India.



73







ADDITIONAL INFORMATION



The principle legislation
on company law in India viz. Companies Act, 1956 has been replaced by the Companies Act, 2013 ("2013 Companies Act").
While most of the provisions of the 2013 Companies Act have as on date been notified and have replaced the corresponding provisions
of the Companies Act, 1956, certain provisions of the 2013 Companies Act are still to be made effective. Pending such publication,
certain provisions of the Companies Act, 1956, continue to be effective, along with the already notified sections of the 2013 Companies
Act.



Consequently, we are currently
governed by the 2013 Companies Act (to the extent of the published provisions) and the Companies Act, 1956 (to the extent still
in force) as amended from time to time, as applicable ("Companies Act").



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, the provisions of the Companies Act, as currently in effect, and other applicable
provisions of Indian law.



Share Capital



Our authorized share
capital as on March 31, 2015 is ₹120,000,000 divided in to 24,000,000
Equity Shares of ₹5/- each. As of March 31, 2015, 14,810,178
Equity Shares par value of were issued and fully paid-up. Out of which 1,015,000 Equity shares were held by Rediff.com India Limited
Employee Trust, controlled by Rediff.com India Limited. Hence, effectively 13,795,178 Equity Shares par value of ₹5/-
each were issued, outstanding and fully paid-up.



Currently we have only
one class of share capital, being Equity Shares. However, in terms of our Amended and Restated Articles of Association and the
Companies Act, we may issue different classes of securities in addition to the Equity Shares. For the purposes of this annual report,
“shareholder” means a shareholder who is registered as a member in the register of members of our Company.



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, inter alia, certain preemptive, registration, co-sale and information
rights, as well as the right of some shareholders to appoint members or observers to our Board of Directors. Some of the agreements
also provide the shareholders with protective rights that require us to obtain their consent and /or shareholders consent in respect
of certain actions that would otherwise only require Board 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 the previous nine shareholder agreements. The Amended and Restated Shareholders’ Rights Agreement,
became effective on the completion of our initial ADR offering, and inter alia, 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 Global Market (formerly the NASDAQ National Market), the NSE or the BSE. We are not required to effect:



| | • | More than two such registrations or qualifications pursuant to such demand registration rights;
| | - | -----------------------------------------------------------------------------------------------





| | • | a registration or qualification prior to the earlier of December 31, 2002, or six months after
the effective date of any Indian law, regulation or other governmental order which allows our Equity Shares to be offered to the
public on an Indian stock exchange; or
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | a registration for a period not to exceed 120 days, if our Board of Directors has made a good faith
determination that such registration would be detrimental to us or our shareholders.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



74







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 affect this registration:



| | • | more than once in a twelve month period;
| | - | ----------------------------------------



| | • | unless the registration relates to securities that are valued in excess of US$1,000,000; or
| | - | -------------------------------------------------------------------------------------------



| | • | if our Board of Directors has made a good faith determination that such registration would be detrimental
to us or our shareholders.
| | - | ------------------------------------------------------------------------------------------------------------------------------------



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 are traded on the NASDAQ Global
Market.



Other Rights



The Amended and Restated
Shareholders’ Rights Agreement also grants preemptive, information and co-sale rights to our shareholders.



Memorandum and Articles of Association



Our Company was incorporated
under the Companies Act, 1956, and is registered with the Registrar of Companies, Maharashtra at Mumbai, India with Company Identification
Number U22100MH1996PLC096077.



The Memorandum and Articles of Association-
Objectives and Purposes



The main objects of our
Company, 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.



In order to effectively
undertake business authorised by our main objects, our Memorandum of Association also authorises us 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.



Our Articles of Association
provide that the minimum number of directors shall be four and the maximum number of directors shall be fifteen. As of June 30,
2015, we have six directors. Our Articles of Association provide that at least two thirds of our directors shall be subject to
retirement by rotation. One third of these directors must retire from office at each Annual General Meeting of the Shareholders.
A retiring director is eligible for re-election. Up to one-third of our directors can be appointed as permanent directors. Our
Articles of Association do not mandate the retirement of our directors under an age limit requirement. Our Articles of Association
do not require our Board members to be shareholders in our company. Under the Companies Act, independent
directors are to retire after five years and may be re-appointed only for two consecutive terms.



Dividends



Under Indian law, a company
pays dividends upon a recommendation by its board of directors and approval by a majority of the shareholders at the annual general
meeting held each fiscal year. However the Board is not obliged to recommend the payment of a dividend.



The Companies Act provides
that any dividends that remain unpaid or unclaimed after a period of 30 days from the date of declaration of a dividend are to
be transferred to a special bank account opened by the company at an approved bank. We must transfer any dividends that remain
unclaimed after 30 days to such an account. If any amount in this account has not been claimed by the eligible shareholders within
seven years from the date of the transfer, we must transfer the unclaimed dividends to an Investor Education and Protection Fund
established by the Government of India under the provisions of the Companies Act. After the transfer to this fund, such unclaimed
dividends may not be claimed by the shareholders entitled to receive such dividends from the company.



75







Under the Companies Act,
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 after providing for depreciation. Before declaring any dividend in any financial year, a company may transfer
a percentage of its profits which it considers appropriate to its reserves.



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 that have been transferred to its reserves, subject to the following conditions:



| | • | the dividend rate declared shall not exceed the average of the rates at which dividends were declared
by the company in the three years immediately preceding that year;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the total amount to be drawn from the accumulated profits earned in the previous years and transferred
to reserves may not exceed an amount equivalent to 10% of the sum of its paid-up capital and free reserves as appearing in the
latest audited financial statement and the amount so drawn is to be used first to set off the losses incurred in the fiscal year
in which dividends is declared
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the balance of reserves after such withdrawals shall not fall below 15% of the company’s
paid-up capital as appearing in the latest audited financial statements; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | a dividend may be declared only after set off of carried over losses and depreciation (whichever
is less), not provided in previous years against the profit of the company of the current year for which the dividend is declared
or paid. We are subject to taxation for each dividend declared, distributed or paid for a relevant period by our company.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Bonus Shares



In addition to permitting
dividends to be paid out of current or retained earnings as described above, the Companies Act permits the board of directors of
our Company, if so approved by shareholders in a general meeting, to distribute an amount transferred from the general reserve
or the securities premium account or the capital redemption reserve account to shareholders, in the form of fully paid up bonus
equity shares, which are similar to a stock dividend. These bonus equity shares must be distributed to shareholders in proportion
to the number of equity shares owned by them as recommended by the board of directors. No issue of bonus shares may be made by
capitalizing reserves created by revaluation of assets.



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 shareholding unless otherwise approved
by a special resolution passed by a general meeting of the shareholders. According to section 62(1)(c) of the Companies Act such
new shares shall be offered to existing shareholders in proportion to the amount paid up on those shares offered and the date (being
not less than 15 days and not exceeding 30 days from the date of the offer) within which the offer. If not accepted the offer will
be deemed to have been declined. After such date, the Board may dispose of the shares offered in respect of which no acceptance
has been received which shall not be disadvantageous to the shareholders of the Company. The offer is deemed to include a right
exercisable by the person concerned to renounce the shares offered to him in favour of any other person.



Under the provisions
of Section 62(1)(c) of the Companies Act, new shares may be offered to any persons whether or not those persons include existing
shareholders, either for cash or for consideration other than cash, if the price of such shares is determined by the valuation
report of a registered valuer subject to condition prescribed under the Companies (Share Capital and Debentures) Rules, 2014, if
a special resolution to that effect is passed by the Company’s shareholders in a general meeting.



Annual General Meetings of Shareholders



We may at any time convene
general meetings of shareholders when necessary or on request by shareholder(s) holding at least 10% of our paid up capital carrying
voting rights. 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. Written notice setting out the agenda of the meeting must be given at least
21 clear days (excluding the days of mailing and receipt) prior to the date of the general meeting to the shareholders of record.
Such notice may be sent through electronic mode as well. Shareholders who are registered as shareholders on the date of the general
meeting are entitled to attend and vote at such meeting. A general meeting may be called after giving shorter notice if consent
is received from shareholders holding not less than 95 per cent of the paid-up capital of our Company.



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.



76









The Board of Directors may in accordance with
the Articles of Association convene an extraordinary general meeting of shareholders when necessary or at the request of a shareholder
or shareholders holding in the aggregate not less than 10% of the paid-up capital of our Company (carrying a right to vote in respect
of the relevant matter on the date of the deposit of the requisition).



The Act and our Articles
of Association provide that a quorum for a general meeting is the presence of at least five shareholders in person. Institutional
shareholders shall be deemed to be personally present, if their authorized representative attends the meeting.



Voting Rights



Subject to any special terms as to voting
on which any shares may have been issued, every shareholder entitled to vote who is present in person (including any corporation
present by its duly authorized representative) shall on a show of hands have one vote and every shareholder present in person or
by proxy shall on a ballot have one vote for each share of which he is the holder. In the case of joint holders, only one of them
may vote and in the absence of election as to who is to vote, the vote of the senior of the joint holders who tenders a vote, whether
in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. Seniority is determined by the
order in which the names appear in the register of members.



Voting is by show of
hands, unless a ballot is ordered by the chairman of the meeting, who is generally the chairman of our board of directors, but
may be another director or other person selected by our board or the shareholders present at the meeting in the absence of the
chairman, or demanded by a shareholder or shareholders holding at least 10% of the total voting right or holding paid up capital
of at least Rs.500,000. 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.



Shareholders Resolutions



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. Special 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. Under the Companies Act, matters that require special resolution include
change in the registered office of the Company outside local limits, change in the name of the Company amendments to the articles
of association, member's voluntary winding-up, dissolution, merger or consolidation, variation in terms of contract or objects
in prospectus, issue of depository receipts, issue of sweat equity, reduction in share capital, issue of debentures with an option
to convert such debentures, and the issue of shares to persons other than existing shareholders. Furthermore, under the Companies
Act, the approval of a scheme of compromise or arrangement requires the approval of a majority of at least 75 per cent in value
of the shareholders or creditors present and voting,



Pursuant to the Companies
(Share Capital and Debentures) Rules, 2014, effective on and from April 1, 2014, a company limited by shares is authorized to issue
shares with differential voting rights if the articles of association of the company so authorizes and the shares with differentials
rights should not exceed twenty-six percent (26%) of the total post-issue paid up equity share capital. Our Amended and Restated
Articles of Association do not authorize issuance of shares with differential voting rights.



Pursuant to Section 110
of the Companies Act, a company must pass certain corporate resolutions, as notified by the Central Government, only through postal
ballot. Some of the resolutions that must be passed through postal ballot include alteration of main objects, buy-back of shares,
issue of shares with differential voting rights, sale of an undertaking and variation of shareholder or debenture holder rights.



Holders of our ADS may
exercise voting rights only through a depositary, unlike an owner of Equity Shares, who can exercise voting rights directly. An
owner of ADS 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 ADS. Owners of ADS have no rights pursuant to the 1956 Companies Act, under which we were
incorporated, and are limited to those rights granted to them pursuant to the deposit agreement.



77







It is our expectation
that our Depositary will forward notices of shareholders’ meetings to the ADS holders together with information explaining
how to instruct the Depositary to exercise the voting rights on the Equity Shares represented by ADS. If the Depositary receives
voting instructions from an owner of ADS on time, it will endeavor to vote the securities represented by those ADS in accordance
with such voting instructions. In the event that voting takes place by a show of hands, the Depositary will cause the custodian
to vote all deposited securities in accordance with the instructions received from owners of a majority of the ADS for which the
Depository 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 ADS will receive
voting materials in time to enable them to return voting instructions to the Depository in a timely manner.



Register of Shareholders; Record Dates;
Transfer of Shares



Our Company is obliged
to maintain a register of shareholders at its registered office or, with the approval of its shareholders by way of a special resolution
and with prior intimation to the Registrar of Companies, at some other place in the same city. 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 shareholders 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 58 (1) of the 2013 Companies Act. Since we are
a public limited company, the provisions of Section 58 (1) will apply to us. Our Articles of Association 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 58 (4) 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 (till National Company Law Tribunal
is constituted under Section 408 of the 2013 Companies Act). Pursuant to Section 59 (4) of the Companies Act, if a transfer
of shares contravenes any of the provisions of the Securities and Exchange Board of India Act, 1992 or the regulations issued there-
under or the Sick Industrial Companies (Special Provisions) Act, 1985 or any other Indian laws, the Company Law Board (National
Company Law Tribunal as and when operational) 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 (National Company Law Tribunal as and when operational) 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 dematerialized form, a transfer of shares is effected by an instrument of transfer in
the form prescribed by the Companies Act and the rules there-under together with delivery of the share certificates.



Disclosure of Ownership Interest



Section 89 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 ₹50,000
and if the failure continues, with a fine of ₹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 89 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 89 applies to holders of ADS, investors who exchange ADS for the underlying Equity Shares will be subject
to the restrictions of Section 89. The provisions of Section 89 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.



78









Audit and Annual Report



From fiscal 2015, our
Company's audited financial statements, and consolidated audited financial statements of our Company and all its subsidiaries (as
defined under the Companies Act for the relevant Fiscal Year, the directors' report and the auditors' report (collectively the
"Annual Report"), must be laid before the annual general meeting. The Annual Report must be distributed by our
Company to our shareholders at least 21 days before the annual general meeting of shareholders (excluding the days of mailing and
date of meeting), including 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.



Pursuant to a green initiative,
Indian companies are permitted to effect service of documents to its members through an electronic mode, provided the company has
obtained e-mail addresses of its members for sending the documents through e-mail. In cases where any member has not registered
his e-mail address with the company, service of documents will be effected by other modes of service.



Company Acquisition of Equity Shares



We are prohibited from
acquiring its own Equity Shares unless the consequent reduction of capital is effected by a special resolution of its Shareholders
voting on the matter in accordance with the 2013 Companies Act. Moreover, other than in certain exceptions, our Company is prohibited
from giving, whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise,
any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of
or for any Shares in our Company or its holding company.



Under the Companies Act,
a company may purchase its own shares or other specified securities out of its free reserves, the securities premium account or
the proceeds of any shares or other specified securities (other than the kind of shares or other specified securities proposed
to be bought back), subject to certain conditions, including:



(i) the buyback being authorised
by the articles of association of our Company;



(ii) the buyback being authorised
by a special resolution passed by our shareholders in a general meeting of our company;



(iii) the buyback is for less than
25 per cent of the total paid-up capital and free reserves, provided that the buyback of Equity Shares in any financial year shall
not exceed 25 per cent of the total paid-up equity share capital in that year;



(iv) the ratio of the debt
(including all amounts of unsecured and secured debt) owed by our company after buyback is not more than twice the capital
and free reserves after such buyback; and



(v) all the shares or other specified
securities for buyback are fully paid up.



No shareholder approval
is required if the buyback is for less than 10 per cent of the total paid-up equity capital and free reserves of our Company, provided
that such buyback has been authorized by the board of directors of our Company. Further, a company, after buying back its securities,
is not permitted to buy back any securities for a period of 365 days from the buyback or to issue new securities for six months
from the buyback date except by way of bonus issue or the conversion of warrants, sweat equity, stock option schemes, preference
shares or debentures into equity shares.



Each buyback has to be
completed within a period of 12 months from the date of the passing of the special resolution or the resolution of the board of
directors, as the case may be.



A company buying back its
securities is required to extinguish and physically destroy the securities bought back within seven days of the last date of completion
of the buyback.



A company is also prohibited from purchasing
its own shares or specified securities (i) through any subsidiary company, or (ii) through any investment company or group of investment
companies (other than a purchase of shares in accordance with a scheme that is in compliance with the SEBI (Share Based Employee
Benefits) Regulations, 2015 (erstwhile SEBI (Employee Stock Option Schemes and Employee Stock Purchase Schemes) Guidelines, 1999)
and clause 35C of the Listing Agreement, for the purchase or subscription of shares by trustees of, or for shares to be held by
or for the benefit of employees of our Company) (iii) or if our Company is defaulting on the repayment of deposit or interest,
redemption of debentures or preference shares or payment of dividend to a shareholder or repayment of any term loan or interest
payable thereon to any financial institution or bank. If we become listed and wish to buy back our shares or specified securities
for the purpose of delisting our shares or specified securities or in the event of non-compliance with certain other provisions
of the Companies Act, then the buyback of securities can be from existing security holders on a proportionate basis or from the
open market or from odd lots or by purchasing securities issued to the employees of our Company pursuant to a scheme of stock option
or sweat equity.



79







Alteration of Shareholder Rights



Under the Companies Act,
and subject to the provisions of the articles of association of a company, the rights of any class of shareholders can be altered
or varied (i) with the consent in writing of the holders of not less than three-fourths of the issued shares of that class; or
(ii) by special resolution passed at a separate meeting of the holders of the issued shares of that class. However, if the variation
by one class of shareholders affects the rights of any other class of shareholders, the consent of three-fourths of such other
class of shareholders shall also be required. In the absence of any such provision in the articles, such alteration or variation
is permitted as long as it is not prohibited by the terms of the issue of shares of such a class.



Limitations on the Rights to Own Securities



The limitations on the
rights to own securities of Indian companies, including the rights of non-resident or foreign shareholders to hold securities,
are discussed in the sections entitled ‘Currency Exchange Controls’ and ‘Risk Factors’ in this Annual Report
on Form 20-F.



Provisions on Changes in Capital



Our
authorized capital can be altered by an ordinary resolution of the shareholders in a General Meeting. The additional issue of shares
is subject to the pre-emptive rights of the shareholders. In addition, a company may increase its share capital, consolidate its
share capital into shares of larger face value than that of its existing shares or sub-divide its shares by reducing their par
value, subject to an ordinary resolution of the shareholders in a General Meeting.



Liquidation Rights



In the event that our
Company is wound up, and the assets available for distribution among the shareholders as such are insufficient to repay the whole
of the paid up capital, such assets shall be distributed so that as nearly as may be, the losses shall be borne by the shareholders
in proportion to the capital paid up or which ought to have been paid up at the commencement of the winding up on the shares held
by them respectively and if in a winding up the assets available for distribution among the shareholders is more than sufficient
to repay the whole of the paid up capital at the commencement of the winding up the excess shall be distributed amongst the shareholders
but this shall be without prejudice to the rights of shareholder registered in respect of shares issued upon special terms and
conditions.



Material Contracts



None.



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, D.C. 20549



You may obtain information
on the operation of the Public Reference Room by calling the SEC at 1800-SEC-0330.



Copies of these materials
can also be obtained upon written request from the U.S. Securities and Exchange Commission, Office of Investor Education and Assistance,
by mail: 100 F Street, NE, Washington, D.C. 20549, or by e-mail: PublicInfo@sec.gov



80







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.



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



81







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(a)     |  | 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).
|            |  |                                                                                                                                                                                                                
|**2.1(b)    |  | Form of Amendment Number 1 to Deposit Agreement among Rediff.com, Citibank, N.A., and holders from time to time of American Depository Receipts issued thereunder.                                             
|            |  |                                                                                                                                                                                                                
|*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.                                                                               
|            |  |                                                                                                                                                                                                                
|***4.3      |  | 2002 Stock Option Plan.                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                
|****4.4     |  | 2004 Stock Option Plan.                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                
|*******4.5  |  | 2006 Employee Stock Option Plan.                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                
|********4.6 |  | 2006 ADR Linked Employee Stock Option Plan.                                                                                                                                                                    
|            |  |                                                                                                                                                                                                                
|*4.7        |  | Form of Indemnification Agreement.                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                
|*******4.8  |  | Indemnification Agreement dated November 8, 2005 between Rediff.com and Sridar A. Iyengar.                                                                                                                     
|            |  |                                                                                                                                                                                                                
|*******4.9  |  | Indemnification Agreement dated November 8, 2005 between Rediff.com and Ashok Narasimhan.                                                                                                                      
|            |  |                                                                                                                                                                                                                
|*******4.10 |  | Indemnification Agreement dated November 8, 2005 between Rediff.com and Pulak Chandan Prasad.                                                                                                                  
|            |  |                                                                                                                                                                                                                
|*4.13       |  | Letter Agreement dated December 28, 1998 between Rediffusion-Dentsu, Young & Rubicam Limited and Rediff.com.                                                                                                   
|            |  |                                                                                                                                                                                                                
|*4.14       |  | Promoters Agreement dated January 9, 1996 between Ajit Balakrishnan and Diwan Arun Nanda.                                                                                                                      
|            |  |                                                                                                                                                                                                                
|†4.15       |  | Purchase Agreement dated July 29, 2015 between Rediff.com and Lincoln Park Capital Fund, LLC.                                                                                                                  
|            |  |                                                                                                                                                                                                                
|†4.16       |  | Registration Right Agreement dated July 29, 2015 between Rediff.com and Lincoln Park Capital Fund, LLC.                                                                                                        
|            |  |                                                                                                                                                                                                                
|†12.1       |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                        
|            |  |                                                                                                                                                                                                                
|†12.2       |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                        
|            |  |                                                                                                                                                                                                                
|†13.1       |  | Certification of Principal Executive Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                        
|            |  |                                                                                                                                                                                                                
|†13.2       |  | Certification of Principal Financial Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                        
|            |  |                                                                                                                                                                                                                
|†15.1       |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                       



|*        | 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 Exhibit (a)(i) to the Post Effective Amendment to Form F-6, filed on August 2,2012.          
|***      | Incorporated by reference to exhibits filed with the Registrant’s Form 20-F for the fiscal year ended March 31, 2003.     
|****     | Incorporated by reference to exhibits filed with the Registrant’s Form S-8 filed on December 30, 2004.                    
|*****    | Incorporated by reference to exhibits filed with the Registrant’s Form 20-F for the fiscal year ended March 31, 2004.     
|******   | Incorporated by reference to exhibits filed with the Registrant’s Form 6-K filed on November 9, 2005.                     
|*******  | Incorporated by reference to exhibits filed with the Registrant’s Form 20-F for the fiscal year ended March 31, 2006.     
|******** | Incorporated by reference to exhibits filed with the Registrant’s Form 20-F for the fiscal year ended March 31, 2007.     
|†        | Filed herewith.                                                                                                           



82







INDEX TO FINANCIAL STATEMENTS



|                                                                                                  | Page(s)   
|------------------------------------------------------------------------------------------------- | ----------
|Reports of Independent Registered Public Accounting Firm                                          | F-2 – F-3 
|                                                                                                  |           
|Consolidated Balance Sheets as of March 31, 2014 and  2015                                        | F-4       
|                                                                                                  |           
|Consolidated Statements of Comprehensive loss for the years ended March 31, 2013, 2014 and 2015   | F-5       
|                                                                                                  |           
|Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2013, 2014 and 2015 | F-6       
|                                                                                                  |           
|Consolidated Statements of Cash Flows for the years ended March 31, 2013, 2014 and  2015          | F-7       
|                                                                                                  |           
|Notes to Consolidated Financial Statements                                                        | F-8 – F-32



F-1







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM



To the Board of Directors and Shareholders of

Rediff.com India Limited

Mumbai, India



We have audited the accompanying
consolidated balance sheets of Rediff.com India Limited and subsidiaries (“the Company”) as of March 31, 2015
and 2014, and the related consolidated statements of comprehensive loss, shareholders’ equity, and cash flows for each of
the three years in the period ended March 31, 2015. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the 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, such
consolidated financial statements present fairly, in all material respects, the financial position of Rediff.com India Limited and subsidiaries as of
March 31, 2015 and 2014, and the results of their operations and their  cash flows for each of the three years in the
period ended March 31, 2015, in conformity with accounting principles generally accepted in the United States of
America.



We have also audited,
in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal
control over financial reporting as of March 31, 2015, based on the criteria established in Internal Control — Integrated
Framework (1992)issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
July 31, 2015 expressed an unqualified opinion on the Company’s internal control over financial reporting.



/s/ DELOITTE HASKINS & SELLS LLP

Chartered Accountants

Mumbai, India

July 31, 2015



F-2







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM



To the Board of Directors and Shareholders of

Rediff.com India Limited

Mumbai, India



We have audited the internal
control over financial reporting of Rediff.com India Limited and subsidiaries (“the Company”) as of March 31,
2015, based on the criteria established in Internal Control — Integrated Framework (1992)issued by the Committee
of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in Item 15 under Controls and Procedures of the accompanying Form 20-F titled Management’s Annual Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit.



We conducted our audit
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 effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.



A company’s internal
control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive
and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors,
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.



Because of the inherent
limitations of internal control over financial reporting, including the possibility of collusion or improper management override
of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections
of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.



In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of March 31, 2015, based on
the criteria established in Internal Control — Integrated Framework (1992)issued by the Committee of Sponsoring
Organizations of the Treadway Commission.



We have also audited,
in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements
as of and for the year ended March 31, 2015 of the Company and our report dated July 31, 2015 expressed an unqualified
opinion on those financial statements.



/s/ DELOITTE HASKINS & SELLS LLP

Chartered Accountants

Mumbai, India

July 31, 2015

F-3







REDIFF.COM INDIA LIMITED

CONSOLIDATED BALANCE SHEETS

as of March 31, 2014 and 2015







|                                                                                                                                                                                                                                           |  | 2014 |             |   | 2015 | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- | 
|                                                                                                                                                                                                                                           |  | US$  |             |   | US$  | 
|Assets                                                                                                                                                                                                                                     |  |      |             |   |      | 
|Current Assets                                                                                                                                                                                                                             |  |      |             |   |      | 
|Cash and cash equivalents                                                                                                                                                                                                                  |  |      | 17,151,189  |   |      | 
|Trade accounts receivable (net of allowances of US$618,054 and US$625,917  as of March 31, 2014 and 2015, respectively)                                                                                                                    |  |      | 3,137,099   |   |      | 
|Prepaid expenses and other current assets (See Note 4)                                                                                                                                                                                     |  |      | 986,149     |   |      | 
|Total current assets                                                                                                                                                                                                                       |  |      | 21,274,437  |   |      | 
|Property, plant and equipment – net (See Note 5)                                                                                                                                                                                           |  |      | 3,571,222   |   |      | 
|Recoverable taxes                                                                                                                                                                                                                          |  |      | 1,149,031   |   |      | 
|Other non-current assets (See Note 9)                                                                                                                                                                                                      |  |      | 1,458,849   |   |      | 
|Total non-current assets                                                                                                                                                                                                                   |  |      | 6,179,102   |   |      | 
|Total assets                                                                                                                                                                                                                               |  |      | 27,453,539  |   |      | 
|Liabilities and Shareholders’ Equity                                                                                                                                                                                                       |  |      |             |   |      | 
|Liabilities                                                                                                                                                                                                                                |  |      |             |   |      | 
|Current liabilities                                                                                                                                                                                                                        |  |      |             |   |      | 
|Accounts payable and accrued liabilities (See Note 10)                                                                                                                                                                                     |  |      | 4,783,412   |   |      | 
|Customer advances and unearned revenues                                                                                                                                                                                                    |  |      | 1,772,273   |   |      | 
|Total current liabilities                                                                                                                                                                                                                  |  |      | 6,555,685   |   |      | 
|Other non-current liabilities (See Note 11)                                                                                                                                                                                                |  |      | 938,999     |   |      | 
|Total liabilities                                                                                                                                                                                                                          |  |      | 7,494,684   |   |      | 
|Commitments and contingencies (See Note 24)                                                                                                                                                                                                |  |      |             |   |      | 
|Shareholders’ Equity                                                                                                                                                                                                                       |  |      |             |   |      | 
|Equity shares: par value – Rs.5, Authorized: 24,000,000 equity shares as of March 31, 2014 and 2015; Issued: 14,810,178 equity shares as of March 31, 2014 and 2015 and outstanding 13,795,178 equity shares as of March 31, 2014 and 2015 |  |      | 1,756,726   |   |      | 
|                                                                                                                                                                                                                                           |  |      |             |   |      | 
|Additional paid-in-capital                                                                                                                                                                                                                 |  |      | 132,195,927 |   |      | 
|                                                                                                                                                                                                                                           |  |      |             |   |      | 
|Accumulated other comprehensive loss                                                                                                                                                                                                       |  |      | (14,389,651 | ) |      | 
|Accumulated deficit                                                                                                                                                                                                                        |  |      | (95,177,542 | ) |      | 
|Treasury shares, at cost (See Note 12) (1,015,000 equity shares as of March 31, 2014 and  2015)                                                                                                                                            |  |      | (4,426,605  | ) |      | 
|Total shareholders’ equity                                                                                                                                                                                                                 |  |      | 19,958,855  |   |      | 
|Total liabilities and shareholders’ equity                                                                                                                                                                                                 |  |      | 27,453,539  |   |      | 





See accompanying notes to the consolidated
financial statements



F-4







REDIFF.COM INDIA LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS

For each of the years ended March 31,
2013, 2014 and 2015





|                                                                                                        |  | 2013 |             |   | 2014 |  |             | 2015 | 
|------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- |  | ----------- | ---- | 
|                                                                                                        |  | US$  |             |   | US$  |  |             | US$  | 
|Revenues                                                                                                |  |      |             |   |      |  |             |      | 
|India Online                                                                                            |  |      | 12,527,464  |   |      |  | 13,368,042  |      | 
|U.S. Publishing                                                                                         |  |      | 3,131,240   |   |      |  | 2,752,755   |      | 
|Total revenues                                                                                          |  |      | 15,658,704  |   |      |  | 16,120,797  |      | 
|                                                                                                        |  |      |             |   |      |  |             |      | 
|Cost of revenues (excluding
    depreciation and amortization separately disclosed below) (See Note 13) |  |      |             |   |      |  |             |      | 
|India Online                                                                                            |  |      | 7,470,935   |   |      |  | 8,330,948   |      | 
|U.S. Publishing                                                                                         |  |      | 2,480,949   |   |      |  | 2,082,116   |      | 
|Total cost of revenues                                                                                  |  |      | 9,951,884   |   |      |  | 10,413,064  |      | 
|                                                                                                        |  |      |             |   |      |  |             |      | 
|Operating expenses                                                                                      |  |      |             |   |      |  |             |      | 
|Sales and marketing (See Note 14)                                                                       |  |      | 3,266,790   |   |      |  | 3,896,073   |      | 
|Product development                                                                                     |  |      | 2,920,824   |   |      |  | 2,287,488   |      | 
|Depreciation and amortization                                                                           |  |      | 3,664,376   |   |      |  | 3,060,269   |      | 
|General and administrative                                                                              |  |      | 7,615,588   |   |      |  | 7,239,847   |      | 
|Goodwill Impairment (See Note 7)                                                                        |  |      | 2,000,000   |   |      |  | —           |      | 
|Long-lived assets impairment (See Note 5 and 8)                                                         |  |      | —           |   |      |  | 1,590,371   |      | 
|Foreign exchange loss (gain), net                                                                       |  |      | 103,744     |   |      |  | (26,003     | )    | 
|Total operating expenses                                                                                |  |      | 19,571,322  |   |      |  | 18,048,045  |      | 
|Operating loss                                                                                          |  |      | (13,864,502 | ) |      |  | (12,340,312 | )    | 
|                                                                                                        |  |      |             |   |      |  |             |      | 
|Other income (expense), net                                                                             |  |      |             |   |      |  |             |      | 
|Interest income                                                                                         |  |      | 1,952,345   |   |      |  | 1,334,610   |      | 
|Interest income on income tax refunds                                                                   |  |      | 44,529      |   |      |  | 613,698     |      | 
|Promissory note impairment (See Note 9)                                                                 |  |      | (1,100,000  | ) |      |  | —           |      | 
|Gain on sale of investment (See Note 6)                                                                 |  |      | —           |   |      |  | 2,740,940   |      | 
|Gain on sale of equity method investee (See Note 6)                                                     |  |      | 1,292,168   |   |      |  | —           |      | 
|Miscellaneous income                                                                                    |  |      | 125,679     |   |      |  | 26,884      |      | 
|Total other income, net                                                                                 |  |      | 2,314,721   |   |      |  | 4,716,132   |      | 
|                                                                                                        |  |      |             |   |      |  |             |      | 
|Loss before income taxes and equity in net loss of equity method investees                              |  |      | (11,549,781 | ) |      |  | (7,624,180  | )    | 
|Income tax benefit (expense) (See Note 17)                                                              |  |      | 33,248      |   |      |  | 152,774     |      | 
|Equity in net earnings (loss) of equity method investees                                                |  |      | 84,310      |   |      |  | —           |      | 
|Net loss                                                                                                |  |      | (11,432,223 | ) |      |  | (7,471,406  | )    | 
|                                                                                                        |  |      |             |   |      |  |             |      | 
|(Loss) earnings per share – basic                                                                       |  |      | (0.828      | ) |      |  | (0.542      | )    | 
|(Loss) earnings per share – diluted                                                                     |  |      | (0.828      | ) |      |  | (0.542      | )    | 
|                                                                                                        |  |      |             |   |      |  |             |      | 
|(Loss) earnings per ADS – (where 2 ADSs represent 1 equity share) – basic                               |  |      | (0.414      | ) |      |  | (0.271      | )    | 
|                                                                                                        |  |      |             |   |      |  |             |      | 
|(Loss) earnings per ADS – (where 2 ADSs represent 1 equity share) – diluted                             |  |      | (0.414      | ) |      |  | (0.271      | )    | 
|Weighted average number of equity shares – basic                                                        |  |      | 13,795,178  |   |      |  | 13,795,178  |      | 
|Weighted average number of equity shares – diluted                                                      |  |      | 13,795,178  |   |      |  | 13,795,178  |      | 
|                                                                                                        |  |      |             |   |      |  |             |      | 
|Other comprehensive income (loss)                                                                       |  |      |             |   |      |  |             |      | 
|Foreign currency translation adjustment and total other comprehensive income (loss)                     |  |      | (2,254,312  | ) |      |  | (2,857,261  | )    | 
|                                                                                                        |  |      |             |   |      |  |             |      | 
|Comprehensive loss attributable to shareholders                                                         |  |      | (13,686,535 | ) |      |  | (10,328,667 | )    | 





See accompanying notes to the consolidated
financial statements



F-5







REDIFF.COM INDIA LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY

For each of the years ended March 31,
2013, 2014 and 2015





|                                            |  | Equity
    shares        |            |  | Additional      |  |           | Accumulated
    other |  |  |                       |  |  | Treasury
    shares (Equity shares held by |             |   | Total             | 
|------------------------------------------- |  | ------------------------ | ---------- |  | --------------- |  | --------- | --------------------- |  |  | --------------------- |  |  | ------------------------------------------ | ----------- | - | ----------------- | 
|                                            |  |                          |            |  | Equity share    |  |           | paid-in-              |  |  | comprehensive         |  |  | Accumulated                                |             |   | controlled trust) | 
|                                            |  | Number
    of
    shares |            |  | capital
    US$ |  |           | capital
    US$       |  |  | income
    (loss) US$ |  |  | deficit
    US$                            |             |   | No
    of shares  | 
|Balance as
    of March 31, 2012            |  |                          | 14,810,178 |  |                 |  | 1,756,726 |                       |  |  | 130,958,274           |  |  |                                            | (9,278,078  | ) |                   | 
|Stock-based compensation                    |  |                          |            |  |                 |  |           |                       |  |  | 756,090               |  |  |                                            |             |   |                   | 
|Net loss                                    |  |                          |            |  |                 |  |           |                       |  |  |                       |  |  |                                            |             |   |                   | 
|Foreign
    currency translation adjustment |  |                          |            |  |                 |  |           |                       |  |  |                       |  |  |                                            | (2,254,312  | ) |                   | 
|                                            |  |                          |            |  |                 |  |           |                       |  |  |                       |  |  |                                            |             |   |                   | 
|Balance as of March 31,
    2013            |  |                          | 14,810,178 |  |                 |  | 1,756,726 |                       |  |  | 131,714,364           |  |  |                                            | (11,532,390 | ) |                   | 
|Stock-based compensation                    |  |                          |            |  |                 |  |           |                       |  |  | 481,563               |  |  |                                            |             |   |                   | 
|Net loss                                    |  |                          |            |  |                 |  |           |                       |  |  |                       |  |  |                                            |             |   |                   | 
|Foreign
    currency translation adjustment |  |                          |            |  |                 |  |           |                       |  |  |                       |  |  |                                            | (2,857,261  | ) |                   | 
|Balance as of March 31,
    2014            |  |                          | 14,810,178 |  |                 |  | 1,756,726 |                       |  |  | 132,195,927           |  |  |                                            | (14,389,651 | ) |                   | 
|Stock-based compensation                    |  |                          |            |  |                 |  |           |                       |  |  | 426,705               |  |  |                                            |             |   |                   | 
|Net loss                                    |  |                          |            |  |                 |  |           |                       |  |  |                       |  |  |                                            |             |   |                   | 
|Foreign
    currency translation adjustment |  |                          |            |  |                 |  |           |                       |  |  |                       |  |  |                                            | (428,721    | ) |                   | 
|Balance as of March 31,
    2015            |  |                          | 14,810,178 |  |                 |  | 1,756,726 |                       |  |  | 132,622,632           |  |  |                                            | (14,818,372 | ) |                   | 



See accompanying notes to the consolidated
financial statements



F-6







REDIFF.COM INDIA LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

For each of the years ended March 31,





|                                                                                   |  | 2013 |             |   | 2014 |  |            | 2015 | 
|---------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- |  | ---------- | ---- | 
|                                                                                   |  | US $ |             |   | US $ |  |            | US $ | 
|Cash flows from operating activities                                               |  |      |             |   |      |  |            |      | 
|Net loss                                                                           |  |      | (11,432,223 | ) |      |  | (7,471,406 | )    | 
|                                                                                   |  |      |             |   |      |  |            |      | 
|Adjustments to reconcile net loss to net cash generated from operating activities: |  |      |             |   |      |  |            |      | 
|Gain on sale of investment in equity method investee                               |  |      | (1,292,168  | ) |      |  | —          |      | 
|Goodwill impairment                                                                |  |      | 2,000,000   |   |      |  | —          |      | 
|                                                                                   |  |      |             |   |      |  |            |      | 
|Long-lived assets impairment                                                       |  |      | —           |   |      |  | 1,590,371  |      | 
|Gain on sale of investment                                                         |  |      | —           |   |      |  | (2,740,940 | )    | 
|Equity in net loss (earnings) of equity method investees                           |  |      | (84,310     | ) |      |  | —          |      | 
|Depreciation and amortization                                                      |  |      | 3,664,376   |   |      |  | 3,060,269  |      | 
|Allowances / (write-back) for doubtful trade accounts                              |  |      | (48,580     | ) |      |  | 190,493    |      | 
|Promissory note impairment                                                         |  |      | 1,100,000   |   |      |  | —          |      | 
|Loss (profit) on sale of property, plant and equipment                             |  |      | (1,701      | ) |      |  | (460       | )    | 
|Stock-based compensation expense                                                   |  |      | 756,090     |   |      |  | 481,563    |      | 
|Unrealized exchange loss (gain)                                                    |  |      | 11,808      |   |      |  | 146,784    |      | 
|Changes in assets and liabilities:                                                 |  |      |             |   |      |  |            |      | 
|Trade accounts receivable                                                          |  |      | 2,104,717   |   |      |  | 116,034    |      | 
|Prepaid expenses and other current assets                                          |  |      | 449,452     |   |      |  | 9,215      |      | 
|Accounts payable, accrued liabilities and other liabilities                        |  |      | 1,156,450   |   |      |  | (78,956    | )    | 
|Customer advances and unearned revenues                                            |  |      | (621,397    | ) |      |  | 377,713    |      | 
|Recoverable taxes                                                                  |  |      | (193,869    | ) |      |  | 1,531,255  |      | 
|Other non-current assets                                                           |  |      | (109,196    | ) |      |  | (44,772    | )    | 
|Net cash used in operating activities                                              |  |      | (2,540,551  | ) |      |  | (2,832,837 | )    | 
|                                                                                   |  |      |             |   |      |  |            |      | 
|Cash flows from investing activities                                               |  |      |             |   |      |  |            |      | 
|Payments to acquire property, plant and equipment                                  |  |      | (1,903,229  | ) |      |  | (1,472,422 | )    | 
|Purchase of investment                                                             |  |      | (104,987    | ) |      |  | —          |      | 
|Sale of investment in equity method investee                                       |  |      | 1,452,944   |   |      |  | —          |      | 
|                                                                                   |  |      |             |   |      |  |            |      | 
|Sale of investment                                                                 |  |      | —           |   |      |  | 3,531,935  |      | 
|Proceeds from sale of property, plant and equipment                                |  |      | 7,594       |   |      |  | 7,735      |      | 
|Net cash generated from / (used in) investing activities                           |  |      | (547,678    | ) |      |  | 2,067,248  |      | 
|                                                                                   |  |      |             |   |      |  |            |      | 
|Cash flows from financing activities                                               |  |      |             |   |      |  |            |      | 
|Proceeds from issue of shares                                                      |  |      | —           |   |      |  | —          |      | 
|Net cash generated from financing activities                                       |  |      | —           |   |      |  | —          |      | 
|Net decrease in cash and cash equivalents                                          |  |      | (3,088,229  | ) |      |  | (765,589   | )    | 
|Cash and cash equivalents at the beginning of the year                             |  |      | 24,545,839  |   |      |  | 20,024,483 |      | 
|Effect of exchange rate changes on cash and cash equivalents                       |  |      | (1,433,127  | ) |      |  | (2,107,705 | )    | 
|Cash and cash equivalents at the end of the year                                   |  |      | 20,024,483  |   |      |  | 17,151,189 |      | 
|                                                                                   |  |      |             |   |      |  |            |      | 
|                                                                                   |  |      |             |   |      |  |            |      | 
|Supplementary cash flow information:                                               |  |      |             |   |      |  |            |      | 
|Income taxes paid                                                                  |  |      | 448,393     |   |      |  | 358,587    |      | 
|                                                                                   |  |      |             |   |      |  |            |      | 
|Supplementary disclosure of non-cash investing activity:                           |  |      |             |   |      |  |            |      | 
|Payables for purchase of property, plant and equipment                             |  |      | 204,638     |   |      |  | 2,940      |      | 





See accompanying notes to the consolidated
financial statements



F-7







REDIFF.COM INDIA LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



| | 1. | Organization and business
| | -- | -------------------------



Rediff.com India Limited
(“Rediff”) was incorporated as a private limited company in India on January 9, 1996 under the Indian Companies
Act, 1956 and was converted to a public limited company on May 29, 1998. Rediff’s American Depository Shares (“ADSs”)
are listed on the NASDAQ Global Market.



In February 2001, Rediff
established Rediff Holdings, Inc. (“RHI”), a Delaware Corporation, as a wholly-owned subsidiary to be a holding company
for certain investments in the United States of America. In March 2001, Rediff acquired Value Communication Corporation (“ValuCom”).
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”), a print and online news company.



On November 26, 2010,
Rediff acquired Vubites India Private Limited (“Vubites”) from the Chairman and Managing Director of Rediff (referred
to as “the CMD”) and a principal shareholder in Rediff. Vubites enables small and local businesses to advertise on
national TV channels within their city to reach their target audiences.



Rediff with its branch
and subsidiaries (“the Company”) is in the business of providing online internet based services, focusing on India
and the global Indian community. Its websites consists of 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 mobile value-added services to mobile phone subscribers in India. The
Company also enables its customers to insert localized advertisements on national television channels by providing a platform to
create an advertisement and prepare a media plan. Additionally, the Company publishes weekly newspapers ‘India Abroad’
in North America.



| | 2. | Significant accounting policies
| | -- | -------------------------------



| | (a) | Basis of preparation
| | --- | --------------------



The accompanying consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”).



In the year ended March
31, 2015, the Company incurred a net loss of US$ 13,812,570, had an accumulated deficit of US$108,990,112, and net cash outflows
of US$8,395,105. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business.



The Company has
carried out a review of its cash flow forecast for a period of twelve months from the date of these financial
statements considering historical cash requirements and has taken the assumption that there will not be any significant
decline in advertising revenues and an increase in e-commerce marketplace fees. As described in Note 26, the Company
has entered into an arrangement with an investor in accordance with which the Company, at its option, has the right to obtain
financing subject to certain conditions, in exchange for issuance of ADS.



On the basis of
the factors stated in the preceding paragraph, the Company believes it will have sufficient resources to meets its
obligations as they become due within one year from the date of these financial statements



| | (b) | Basis of consolidation
| | --- | ----------------------



The consolidated financial
statements include the financial statements of Rediff and its wholly – owned subsidiaries and variable interest entity (VIE)
in which the Company is the primary beneficiary. All inter-company accounts and transactions are eliminated on consolidation.



| | (c) | Investments in equity method investees
| | --- | --------------------------------------



Investments in entities
in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise control, are
accounted for using the equity method. The Company records its share of the results of these companies in the consolidated statement
of comprehensive loss as equity in net earnings (loss) of equity method investees. The Company reviews its investments for other-than-temporary
impairment whenever events or changes in business circumstances indicate that the carrying value of the investment may not be fully
recoverable. Investments identified as having an indication of impairment are subject to further analysis to determine if the impairment
is other-than-temporary and this analysis requires estimating the fair value of the investment. The determination of fair value
of the investment involves considering factors such as current economic and market conditions, the operating performance of the
companies including current earnings trends and forecasted cash flows, and other company and industry specific information. Measurement
of any impairment loss is based on its excess of the carrying value of the investment over its fair value.



F-8







| | (d) | Use of estimates
| | --- | ----------------



The preparation of consolidated
financial statements in conformity with generally accepted accounting principles (US GAAP) requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities on the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant
estimates include allowances for doubtful trade accounts receivables, impairment of goodwill, property, plant and equipment, intangible
and investments, useful lives of property, plant and equipment and intangible assets, valuation of deferred tax assets, stock based
compensation and employee benefits. Actual results could differ from those estimates.



F-9







| | (e) | Revenue recognition
| | --- | -------------------



India Online business



India Online business
includes revenues from advertising, sponsorship and fee based services. Advertisement and sponsorship income is derived from customers
who advertise on our website or from targeted mailers to Rediffmail subscribers. Fee based services include fee we earn
from our e-commerce marketplace, subscription fees for our email services and our share of revenues from mobile value added services.



Revenue from display
advertisement is recognized as impressions of or clicks on display advertisements are delivered or broadcast. Impressions are delivered
when a sold advertisement appears in pages viewed by users. Clicks are delivered when a user clicks on the advertisement. Revenues
are also derived from sponsor links placed in specific areas of the Company’s website, which generally provide users with
direct links to sponsor websites. Revenue from sponsor link is 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 from the sending
of mail shots to its users on behalf of advertisers and such revenues are recognized on delivery. We report our online advertisement
revenues on a gross basis principally because we are the primary obligor to our advertisers.



E-commerce marketplace
fee, which is comprised of the commission and shipping revenue is recognized after receipt of confirmation that the online
customer has accepted delivery of the goods. The cost of incentives provided to online customers like coupons and promo codes are
reduced from revenue and where such incentives exceed the revenue amount, the excess is recognized as cost of revenue.



Subscription service
revenue which is comprised of subscription fees for email and related services provided to small and large enterprises is deferred
and recognized pro rata over the terms of such subscription.



Mobile value-added services
revenues are derived from providing value added short messaging services (“SMS”), ring tones, picture messages, logos,
wallpapers and other related services to mobile phone users. The Company contracts with third-party mobile phone operators for
sharing revenues from this service. Mobile value- added services revenue is recognized when this service is rendered.







US Publishing business



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



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.



| | (f) | Costs and expenses
| | --- | ------------------



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



Cost of revenues



Cost of revenues primarily
include cost of content for the Rediff websites, editorial costs, shipping cost, employee compensation, stock-based compensation,
internet communication, data storage, software usage, printing and circulation costs for the India Abroad and India in New York
newspapers and fee based services related costs.



F-10







Sales and marketing



Sales and marketing expenses
primarily include employee compensation for sales and marketing personnel, advertising and promotion expenses, market research
costs and stock-based compensation. The costs of advertising are expensed as and when incurred.



Product development



Product development costs
primarily include software development expenses, compensation of product development personnel and stock-based compensation. Internal
and external costs incurred to develop internal use software during application development stage is capitalized when the Company’s
managing director has authorized and committed to funding the development, and it is probable that the software development will
be completed and the software will perform the function intended. Upgrades and enhancements are capitalized only when these relate
to additional features or result in additional functionality which the existing software is incapable of performing. All costs
incurred during the preliminary project and post implementation and operation stages are expensed as incurred.



General and administrative



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



| | (g) | Cash and cash equivalents
| | --- | -------------------------



The Company considers
all highly liquid investments with a maturity at the date of purchase of three months or less and that are readily convertible
to known amounts of cash to be cash equivalents.



Cash and cash equivalents
consist of cash on hand, balances in current accounts, deposits with banks which are unrestricted as to withdrawal and use.



| | (h) | Property, plant and equipment
| | --- | -----------------------------



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



|Furniture and fixtures          | 10 years     
|------------------------------- | -------------
|Computer equipment and software | 1 to 3 years 
|Office equipment                | 3 to 10 years
|Vehicles                        | 8 years      
|Leasehold improvements          | 6 years      
|Website development costs       | 3 to 5 years 



Capital work-in-progress
is not depreciated until the construction and installation of the asset is complete, and the asset is available for use.



| | (i) | Website development costs
| | --- | -------------------------



Costs incurred in the
operations stage that provides additional functions or features to the Company’s website are capitalized. The estimated useful
life is evaluated for each specific project and ranges from three to five years. Maintenance expenses or costs that do not result
in significant new features or functions are expensed as product development costs.



| | (j) | Investments, at cost
| | --- | --------------------



Securities that do not
have readily determinable fair market values are recorded at cost, subject to an impairment charge for any other than temporary
decline in value. The fair values of these securities are not estimated if there are no events or changes in circumstances that
may have a significant effect on the fair value. It is not practicable to estimate the fair value of these securities.



| | (k) | Business Combination
| | --- | --------------------



Acquisitions of subsidiaries
and businesses are accounted for using the acquisition method. Acquisition related costs are recognized in statement of comprehensive
loss as incurred. The acquiree’s identifiable assets and liabilities are recognized at their fair value at the acquisition
date.



F-11







Purchase consideration
in excess of the identifiable assets and liabilities is recognized as goodwill. Gain resulting from excess of the acquiree’s
identifiable assets and liabilities over the purchase consideration is recognized, after reassessment, in the statement of comprehensive
loss.



| | (l) | Goodwill
| | --- | --------



Goodwill represents the
excess of purchase consideration over the fair values of the aquiree’s identifiable assets acquired and liabilities assumed
in a business combination. Goodwill is assessed for impairment on an annual basis on January 1 or earlier when events or circumstances
indicate that the carrying amount of goodwill exceeds its implied fair value.



Goodwill impairment assessment
is a two-step test. The first step compares the fair value of the reporting unit with its carrying amount, including goodwill.
If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired;
however, if the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is
performed to measure the impairment loss amount, if any.



The Company uses an income-based
valuation approach to determine the fair value of the reporting unit by estimating the present value of future cash flows after
considering current economic conditions and trends, estimated future operating results and growth rates, anticipated future economic
and regulatory conditions and availability of necessary technology.



When required to perform
the second step, the Company compares the implied fair value of a reporting unit’s goodwill with the carrying amount of that
goodwill. If the carrying amount exceeds the implied fair value, an impairment loss equal to that excess amount is recognized,
not to exceed the goodwill carrying amount. The Company determines the implied fair value of goodwill for a reporting unit by assigning
the fair value of the reporting unit to all of the assets and liabilities of that unit (including any unrecognized intangible assets)
as if the reporting unit had been acquired in a business combination. The excess of the fair value of the reporting unit over the
amounts assigned to its assets and liabilities is the implied fair value of the goodwill. This assignment process is only for purposes
of testing goodwill impairment and the Company does not adjust the carrying amounts of the recognized assets and liabilities (other
than goodwill, if appropriate) or recognize previously unrecognized intangible assets in the consolidated balance sheet as a result
of this assignment process.



| | (m) | Foreign currency
| | --- | ----------------



The accompanying consolidated
financial statements have been presented in US dollars as the reporting currency. The functional currency of Rediff is the Indian
Rupee (“Rs.” or “Rupee”) while that of its subsidiaries domiciled in the United States is the US dollar
and in Canada is the Canadian dollar. Transactions in foreign currency are recorded at the original rates of exchange prevailing
at the time of the transactions. Monetary assets and liabilities denominated in 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
monetary assets and liabilities at the balance sheet date are recognized in the statement of comprehensive loss.



For the purposes of presenting
the consolidated financial statements, Rupees have been converted into US dollars for balance sheet accounts using the exchange
rate in effect at the balance sheet date, and for revenue and expense accounts using a monthly weighted-average exchange rate.
The gains or losses resulting from such translation are reported as other comprehensive income or loss.



| | (n) | Earnings per share
| | --- | ------------------



Basic earnings per share
has been computed by dividing the net income (loss) from operations by the weighted average number of equity shares outstanding
during the period, including equity share equivalents for ADSs issued. Diluted earnings 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, except where the results would be anti-dilutive. Dilutive potential
equity shares consist of the incremental equity shares issuable upon the exercise of stock options. The Company also reports earnings
(loss) per ADS, where two ADSs represent one equity share.



F-12







| | (o) | Income taxes
| | --- | ------------



Income taxes consist
of current income taxes and the change in the deferred tax balances during the year. 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 net 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.



The Company evaluates
each tax positions to determine if it is more likely than not that a tax position is sustainable, based on its technical merits.
If a tax position does not meet the more likely than not threshold, a liability is recorded. Additionally, for a position that
is determined to, more likely than not, be sustainable, the Company measures the benefit at the highest cumulative probability
of greater than 50% of being realized and establish a liability for the remaining portion.



The Company recognizes
interest and penalties related to unrecognized tax benefits in income tax expense. Interest income on repayment of income taxes
is presented separately in the statement of comprehensive loss as an element of other income (expense), net.



| | (p) | Impairment or disposal of long-lived assets (excluding goodwill)
| | --- | ----------------------------------------------------------------



The Company evaluates
its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of 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 and adverse changes in profitability or regulation. If the asset is impaired, the Company recognizes an impairment
loss as the difference between the estimated fair values determined 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.



| | (q) | Intangible assets
| | --- | -----------------



Intangible assets consist
of customer contracts and intellectual property carried at cost and amortized over their estimated useful lives, generally on a
straight-line basis over three and seven years, respectively, that best reflects the economic benefits of the intangible assets.



| | (r) | Stock-based compensation
| | --- | ------------------------



The Company measures
the cost of services received from employees, associates, retainers and non-employee directors in exchange for share based compensation
at the grant date fair value award. The Company recognizes stock-based compensation on a straight line basis over the vesting period.



| | (s) | Allowances for doubtful trade accounts receivable
| | --- | -------------------------------------------------



The Company establishes
an allowance for doubtful accounts on trade accounts receivable after considering the financial condition of the customer, ageing
of the accounts receivable, historical experience and the current economic environment. Trade accounts receivable balances are
written off against allowances only after all means of collections have been exhausted and potential of recovery is considered
remote.



| | (t) | Employee benefit
| | --- | ----------------



Gratuity



The Company provided
for gratuity, a defined benefit retirement plan (the Gratuity Plan) covering eligible employees. The Gratuity Plan provides a lump-sum
payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective
employee’s salary and the tenure of employment. Vesting occurs upon completion of five years of service. The defined benefit
liability is determined by actuarial valuation, at each balance sheet date, using the projected unit credit method.



Provident fund



Eligible employees of
the Company receive benefits from a provident fund, a defined contribution plan. Both the employee and the Company make monthly
contributions to this provident fund plan equal to a specified percentage of the covered employee’s salary. Amounts collected
under the provident fund plan are deposited in a government administered provident fund. The Company’s contribution to fund
the benefits is expensed as incurred.



F-13







Compensated absences



The Company provided
the compensated absences liability for the amounts to be paid as a result of employee’s rights to compensated absences in
the year in which it is earned.



| | (u) | Comprehensive income (loss)
| | --- | ---------------------------



Comprehensive income
(loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding
transactions resulting from investments from owners and distributions to owners. Comprehensive income (loss) for the periods presented
includes net income (loss) and foreign currency translation adjustments.



| | 3. | New Accounting Pronouncements
| | -- | -----------------------------



In May 2014, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from
Contracts with Customers,” which supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”
and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The
amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods
within that reporting period, with early application not permitted. The Company is currently evaluating the effects, if any, that
the adoption of this guidance will have on the Company’s financial position, results of operations and cash flows.



In August 2014,
the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern. The amendments in this ASU
provides guidance about managements responsibility to evaluate whether there is substantial doubt about an entity’s
ability to continue as going concern and to provide related disclosures. In accordance with this guidance, in connection with
preparing financial statements, an entity’s management should evaluate whether there are conditions or events
considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern
within one year after the date the financial statements are issued.



In February 2015,
the FASB issued ASU 2015-02, “Consolidation (Topic 810) - Amendments to the Consolidation Analysis”, which provides
guidance for reporting entities that are required to evaluate whether they should consolidate certain legal entities. In accordance
with ASU 2015-02, all legal entities are subject to reevaluation under the revised consolidation model. ASU 2015-02 is effective
for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15,
2015. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2015-02
on its consolidated financial statements.



| | 4. | Prepaid Expenses and Other Current Assets
| | -- | -----------------------------------------



Prepaid expenses and other current assets comprise:





|                                                     |  | As of March 31, |        
|---------------------------------------------------- |  | --------------- | -------
|                                                     |  | 2014            |        
|                                                     |  | US$             |        
|Prepaid expenses                                     |  |                 | 513,348
|Supplier advances                                    |  |                 | 193,871
|Rent deposits                                        |  |                 | 39,434 
|Other advances and deposits                          |  |                 | 38,122 
|Loans to employees                                   |  |                 | 48,927 
|Amount receivable on sale of investment (See Note 6) |  |                 | 152,447
|Accrued interest                                     |  |                 | -      
|Total                                                |  |                 | 986,149





F-14







| | 5. | Property, Plant and Equipment
| | -- | -----------------------------



Property, plant and equipment comprise:





|                                                |  | As of March 31, |            
|----------------------------------------------- |  | --------------- | -----------
|                                                |  | 2014            |            
|                                                |  | US$             |            
|Furniture and fixtures                          |  |                 | 367,535    
|Computer equipment and software                 |  |                 | 17,873,525 
|Office equipment                                |  |                 | 276,115    
|Vehicles                                        |  |                 | 251,362    
|Leasehold improvements                          |  |                 | 444,467    
|Website development costs                       |  |                 | 4,110,523  
|Property, plant and equipment – at cost         |  |                 | 23,323,527 
|Less: Accumulated depreciation and amortization |  |                 | (20,160,336
|                                                |  |                 | 3,163,191  
|Currency translation adjustment                 |  |                 | (1,994     
|Capital work-in-progress                        |  |                 | 649,026    
|                                                |  |                 | 3,810,223  
|Less: Impairment loss                           |  |                 | (239,001   
|                                                |  |                 |            
|Property, plant and equipment – net             |  |                 | 3,571,222  



In fiscal 2015, the
Company has recognized an impairment loss of US$ 3,200,089 on its Property, plant and equipment relating to its India Online
business. India Online business includes revenue from advertising and fee based services. The impairment was on account of
significant decline in advertisement revenue as there has been a continued reduction in spends by customers which is
consistent with industry trends. As a consequence the Company has been experiencing a decline in its display advertisement
revenue, and incurring net operating cash losses. The fair value of the India Online business asset group is
insignificant.



In fiscal 2014, the Company
had recognized an impairment loss of US$199,621 mainly in respect of computer equipment relating to its subsidiary Vubites (see
note 8). Additionally, in fiscal 2014, the Company abandoned an application related project included in ‘Capital work-in-progress’
and as a result impaired an amount of US$39,380.



In the fiscal years 2013,
2014 and 2015, the Company incurred depreciation and amortization expense of US$3,249,417, US$2,688,989 and US$1,719,327 respectively.



| | 6. | Investments
| | -- | -----------



Investment, cost method



During the fiscal
year ended March 31 2014, the Company sold its investment in Runa Inc. for a total consideration of US$4,145,927 and
recognized a gain of US$2,740,940. An amount of US$ 613,992 of the total consideration has been held in escrow for certain
representations and warranties contained in the sale agreement. These representations and warranties have been assessed as accurate and the fair value of any obligation resulting from these representations and warranties is
insignificant. Of the total amount held in escrow US$ 461,545 which were recoverable by April, 2015 has been subsequently
received by the Company.



Investments in equity interest



The Company’s investments in equity
method investees interest were as follows:



|                                                             |  | Percent ofownership of equityshares |   
|------------------------------------------------------------ |  | ----------------------------------- | --
|Tachyon Technology Private Limited (Impaired in fiscal 2011) |  |                                     | 26
|Imere Technology Private Limited (up to October 8, 2012)     |  |                                     | 44
|Bigslick Infotech Private Limited (Impaired in fiscal 2010)  |  |                                     | 37



F-15







The following table presents financial information
for equity method investees:





|                                        |  | For years ended March 31, |        
|--------------------------------------- |  | ------------------------- | -------
|                                        |  | 2013#                     |        
|                                        |  | US$                       |        
|Revenues                                |  |                           | 320,005
|Total costs                             |  |                           | 72,910 
|Profit (loss) from operations           |  |                           | 247,095
|Earnings (loss) attributable to Rediff* |  |                           | 84,310 





| | # | Information provided for the period ended October 8, 2012, relates to Imere Technology Private
Limited which was sold as on same date.
| | - | --------------------------------------------------------------------------------------------------------------------------------------



During the fiscal year
ended March 31, 2013, the Company sold its investment in Imere Technology Private Limited for a consideration of US$1,452,944
and recorded a gain of US$1,292,168 and included as “Gain on sale of equity method investee” in consolidated statement
of comprehensive loss.



| | 7. | Goodwill
| | -- | --------



The Company’s goodwill
is in respect of its acquisition of India Abroad. The goodwill has been allocated to the US Publishing business, reporting unit.



F-16







The changes in the carrying
amount of goodwill for the fiscal years ended March 31, 2014 and 2015 were as follows:





|                            |  | For the year ended March 31, |           
|--------------------------- |  | ---------------------------- | ----------
|                            |  | 2014                         |           
|                            |  | Gross                        |           
|                            |  | US$                          |           
|As at beginning of the year |  |                              | 10,515,168
|As at end of the year       |  |                              | 10,515,168



In fiscal year 2013,
the Company recognized a goodwill impairment loss of US$2,000,000. The impairment was on account of the weakness in the publishing
industry which resulted in reduction of the US publishing business’s projected operating results and estimated future cash
flows. The Company used an income-based valuation approach to determine the fair value of the reporting unit by estimating the
present value of future cash flows after considering current economic conditions and trends, estimated future operating results
and growth rates.



| | 8. | Intangible assets, net
| | -- | ----------------------



The following table summarizes the carrying amount of intangible
assets:





|                             |  | As of March 31, 2014 |          
|---------------------------- |  | -------------------- | ---------
|                             |  | Gross carrying value |          
|                             |  | US$                  |          
|Customer contracts           |  |                      | 12,383   
|Intellectual property        |  |                      | 2,605,644
|Total intangible assets, net |  |                      | 2,618,027





Customer contracts and intellectual property
are amortized on a straight line basis over a period of three and seven years, respectively. The Company recognized amortization
expense of intangible assets of US$414,959 and US$371,280 in fiscal 2013 and 2014, respectively.



The impairment loss relates to the Company’s subsidiary Vubites
which enables businesses to advertise locally (targeted advertising in local and specific cities in India) on national television
channels. Vubites offers web based tools for small businesses to create low cost advertisement for television broadcast. This business
is dependent on effective splicing and sale to local businesses in different cities of broadcasting spots purchased from national
television channels. The impairment resulted from similar targeted advertising services now being offered directly by the television
channels and on account of aggressive sales and marketing strategy launched by competitors which have provided them with deeper
market access. The fair value of the reporting unit is insignificant.



F-17











| | 9. | Other non-current assets
| | -- | ------------------------





Other non-current assets comprise:



|                                                       |  | As of March 31, |          
|------------------------------------------------------ |  | --------------- | ---------
|                                                       |  | 2014            |          
|                                                       |  | US$             |          
|Prepaid expenses                                       |  |                 | 177,659  
|Rent deposits                                          |  |                 | 767,616  
|Loans to employees                                     |  |                 | 52,029   
|Amount receivable on sale of investment (See Note - 6) |  |                 | 461,545  
|Total                                                  |  |                 | 1,458,849



The Company
had subscribed to convertible promissory notes (referred to as the “notes”) issued by Examville.com LLC, for total
cash consideration of US$1,100,000. During the year ended March 31, 2013, the Company recorded other than temporary impairment
loss of US$1,100,000 because the Company did not expect to recover the carrying amount.



| | 10. | Accounts payable and accrued liabilities
| | --- | ----------------------------------------



Accounts payable and accrued liabilities comprise:



|                           |  | As of March 31, |          
|-------------------------- |  | --------------- | ---------
|                           |  | 2014            |          
|                           |  | US$             |          
|Accounts payable           |  |                 | 1,637,008
|Accrued expenses           |  |                 | 1,500,002
|Taxes payable              |  |                 | 369,314  
|Employee incentive payable |  |                 | 155,281  
|Other employee payables    |  |                 | 1,056,857
|Other current liabilities  |  |                 | 64,950   
|Total                      |  |                 | 4,783,412



| | 11. | Other non-current liabilities
| | --- | -----------------------------



Other non-current liabilities comprise:



|                    |  | As of March 31, |        
|------------------- |  | --------------- | -------
|                    |  | 2014            |        
|                    |  | US$             |        
|Unearned revenues   |  |                 | 320,977
|Retirement benefits |  |                 | 466,280
|Other liabilities   |  |                 | 151,742
|Total               |  |                 | 938,999



| | 12. | Shareholders’ equity
| | --- | --------------------



Treasury shares



During the
fiscal year ended March 31, 2010 the Company formed Rediff.com India Limited Employee Trust (“Trust”). The Trust
is controlled and administrated by senior employees of the Company. The Company is the primary beneficiary of the Trust and, accordingly
has consolidated the Trust. The Trust acquired 1,015,000 shares for a consideration of US$4,426,605 and reserved these shares for
benefit of Company’s employees and directors.



F-18







| | 13. | Cost of revenues
| | --- | ----------------



Cost of revenues includes
shipping cost of US$1,164,812, US$1,815,301 and US$2,402,700 for the fiscal years ended March 31, 2013, 2014 and 2015 respectively.



F-19







| | 14. | Sales and marketing
| | --- | -------------------



Sales and marketing expense
includes advertising cost of US$92,135, US$313,336 and US$1,579,550 for the fiscal years ended March 31, 2013, 2014 and 2015
respectively.



| | 15. | Related party transactions
| | --- | --------------------------



The Company’s principal
related parties are its founder shareholders, directors and companies that the founder shareholders and directors control. The
Company enters into transactions with such related parties in the normal course of business. Related party transactions and balances
are as follows:



Product
Development Expenses



During the fiscal year
ended March 31, 2013, the Company incurred product development expenses (including amount capitalized) of US$95,395on account
of services rendered by Tachyon Technologies Private Ltd, an equity method investee.



Trade account
receivables write off



During the fiscal year
ended March 31, 2013, the Company wrote off US$206,974 trade account receivables from Edelweiss Capital Services Ltd, in which
a director of Rediff is shareholder and director, against the recorded allowance. The allowance for trade account receivables was
recorded in the year ended March 31, 2012.



| | 16. | Retirement Benefits
| | --- | -------------------



Gratuity



The Company provides
for gratuity on an actuarial valuation. The Company has 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
of an amount equivalent to 15 days basic salary, payable for each completed year of service. These gratuity benefits vest upon
an employee’s completion of five years of service.



F-20







The following tables
set out the amounts recognized in the Company’s consolidated financial statements for the fiscal years ended March 31,
2013, 2014 and 2015. The measurement date used is March 31 of the relevant fiscal year.



|                                                |  | 2013 |         |   | 2014 |  |         | 2015 | 
|----------------------------------------------- |  | ---- | ------- | - | ---- |  | ------- | ---- | 
|                                                |  | US$  |         |   | US$  |  |         | US$  | 
|Change in benefit obligation                    |  |      |         |   |      |  |         |      | 
|Benefit obligation at the beginning of the year |  |      | 446,146 |   |      |  | 527,512 |      | 
|Actuarial (gain) loss                           |  |      | 14,941  |   |      |  | (60,402 | )    | 
|Service cost                                    |  |      | 75,039  |   |      |  | 75,405  |      | 
|Interest cost                                   |  |      | 44,025  |   |      |  | 46,086  |      | 
|Benefits paid                                   |  |      | (26,382 | ) |      |  | (27,314 | )    | 
|Effect of exchange rate changes                 |  |      | (26,257 | ) |      |  | (49,781 | )    | 
|Benefit obligation at the end of the year       |  |      | 527,512 |   |      |  | 511,506 |      | 
|Current – (included in other employee payables) |  |      | 47,713  |   |      |  | 45,226  |      | 
|Non-current – (included in retirement benefits) |  |      | 479,799 |   |      |  | 466,280 |      | 



Accumulated benefit obligation was US$292,701
and US$319,026 as of March 31, 2014 and 2015 respectively.



Net gratuity cost for the years ended March 31,
2012, 2013 and 2014 comprise of the following:



|                                     |  | 2013 |         |  | 2014 |  |         | 2015 | 
|------------------------------------ |  | ---- | ------- |  | ---- |  | ------- | ---- | 
|                                     |  | US$  |         |  | US$  |  |         | US$  | 
|Service cost                         |  |      | 75,039  |  |      |  | 75,405  |      | 
|Interest cost                        |  |      | 44,025  |  |      |  | 46,086  |      | 
|Recognized net actuarial (gain) loss |  |      | 14,941  |  |      |  | (60,402 | )    | 
|Net gratuity cost                    |  |      | 134,005 |  |      |  | 61,089  |      | 



The assumptions used in accounting for gratuity
in the years ended March 31, 2013, 2014 and 2015 were as follows:



|                                 |  | 2013 |      |   | 2014 |  |      | 2015 | 
|-------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- | 
|Discount rate                    |  |      | 8.75 | % |      |  | 9.60 | %    | 
|                                 |  |      |      |   |      |  |      |      | 
|Rate of increase in compensation |  |      | 7.00 | % |      |  | 7.00 | %    | 



The following benefit payments, which reflect
expected future services, as appropriate are expected to be paid



|Year ending March 31, |  | US$ |        
|--------------------- |  | --- | -------
|2016                  |  |     | 37,961 
|2017                  |  |     | 123,838
|2018                  |  |     | 45,854 
|2019                  |  |     | 62,965 
|2020                  |  |     | 57,837 
|2021-2025             |  |     | 493,338



The expected benefits
are based on the same assumptions used to measure the Company’s benefit obligation as of March 31, 2015.



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 aggregate, were US$259,684, US$228,075 and US$231,528
for the years ended March 31, 2013, 2014 and 2015, respectively.



F-21







| | 17. | Income Taxes
| | --- | ------------



The components of income before income taxes
and equity in net earnings of equity method investees are as follows:



|                                                                                    |  | 2013 |             |   | 2014 |  |            | 2015 | 
|----------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- |  | ---------- | ---- | 
|                                                                                    |  | US$  |             |   | US$  |  |            | US$  | 
|– Domestic                                                                          |  |      | (7,177,897  | ) |      |  | (9,264,032 | )    | 
|– Foreign                                                                           |  |      | (4,371,884  | ) |      |  | 1,639,852  |      | 
|Loss before income taxes and equity in net loss (earning) of equity method investee |  |      | (11,549,781 | ) |      |  | (7,624,180 | )    | 
|Current income tax expense (benefit)                                                |  |      | (33,248     | ) |      |  | (152,774   | )    | 



The reconciliation of
estimated income tax expense at Indian statutory income tax rate to income tax expense reported in the statements of comprehensive
loss is as follows:



|                                                                                     |  | 2013 |             |   | 2014 |  |            | 2015 | 
|------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- |  | ---------- | ---- | 
|                                                                                     |  | US$  |             |   | US$  |  |            | US$  | 
|Loss before income taxes and equity in net loss (earning) of equity method investee  |  |      | (11,549,781 | ) |      |  | (7,624,180 | )    | 
|                                                                                     |  |      |             |   |      |  |            |      | 
|Indian statutory income tax rate                                                     |  |      | 32.445      | % |      |  | 33.990     | %    | 
|                                                                                     |  |      |             |   |      |  |            |      | 
|Expected income tax expense                                                          |  |      | (3,747,327  | ) |      |  | (2,591,459 | )    | 
|                                                                                     |  |      |             |   |      |  |            |      | 
|Tax effect of:–                                                                      |  |      |             |   |      |  |            |      | 
|Adjustments to reconcile expected income tax expense to reported income tax expense: |  |      |             |   |      |  |            |      | 
|                                                                                     |  |      |             |   |      |  |            |      | 
|Employee stock-based compensation                                                    |  |      | 245,313     |   |      |  | 163,683    |      | 
|Valuation allowance recognized during the year                                       |  |      | 3,060,830   |   |      |  | 1,998,669  |      | 
|Goodwill impairment                                                                  |  |      | 648,900     |   |      |  | —          |      | 
|Tax in foreign jurisdictions                                                         |  |      | (142,710    | ) |      |  | 262,459    |      | 
|Earnings (loss) of equity method investees                                           |  |      | 27,354      |   |      |  | —          |      | 
|Others                                                                               |  |      | (125,608    | ) |      |  | 13,874     |      | 
|Income tax expense (benefit)                                                         |  |      | (33,248     | ) |      |  | (152,774   | )    | 



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



|                                             |  | As of March 31, |            
|-------------------------------------------- |  | --------------- | -----------
|                                             |  | 2014            |            
|                                             |  | US$             |            
|Net operating loss carry forwards            |  |                 | 7,262,789  
|Depreciation and amortization                |  |                 | 5,573,817  
|Allowances for doubtful accounts receivables |  |                 | 218,415    
|Employee benefits                            |  |                 | 320,564    
|Minimum alternate tax credit                 |  |                 | 284,859    
|Loss of equity method investees              |  |                 | 256,483    
|Gross deferred tax assets                    |  |                 | 13,916,927 
|Valuation allowance                          |  |                 | (13,916,927
|Deferred tax assets                          |  |                 | —          



F-22







Movements in valuation allowance:



|                                                                                                              |  | As of March 31, |           
|------------------------------------------------------------------------------------------------------------- |  | --------------- | ----------
|                                                                                                              |  | 2014            |           
|                                                                                                              |  | US$             |           
|Balance as at beginning of the year                                                                           |  |                 | 12,673,121
|Valuation allowance recognized during the year                                                                |  |                 | 1,998,669 
|Increase (reduction) in deferred tax asset and corresponding valuation allowance pertaining  to earlier years |  |                 | (41,757   
|Effect of currency translation                                                                                |  |                 | (713,106  
|Balance as at end of the year                                                                                 |  |                 | 13,916,927



Rediff
India’s (including Vubites) net operating loss carry forwards aggregating approximately US$16,942,394 as of
March 31, 2015 will expire between April 2015 and March 2023.



As of March 31,
2015, ValuCom has net operating loss carry forwards available to offset future federal taxable income of US$3,033,000, which expire
in years 2021 through 2031.



As of March 31,
2015, Rediff Holdings, Inc. has net operating loss carry forwards of approximately US$6,229,000 for federal income tax purposes,
which expire in years 2020 through 2035.



Rediff’s unabsorbed
depreciation of US$18,642,739 can be indefinitely carried forward.



Realization of the future
tax benefits related to the deferred tax asset is dependent on many factors, including the Company’s ability to generate
taxable income within the net operating loss carry forward period. Management has considered these factors and believes that a
valuation allowance is required for each of the periods presented.



Recoverable taxes mainly
consist of withholding tax on income from advertising services and interest income, which the Company claimed as refund.



There were no
unrecognised tax benefit as at fiscal year ended March 31, 2013, 2014 and 2015.



The Company’s two
major tax jurisdictions are India and the U.S. In India, tax returns from fiscal year 2010 are subject to examination by the direct
taxing authority. The assessments for fiscal year 2000 onwards are subject matters of appeals with the direct taxing authorities.
The Company’s U.S. federal and state tax returns pertaining to fiscal year 2012 onwards remains subject to examination in
accordance with the statute of limitation prescribed by the relevant authorities.



| | 18. | Segments
| | --- | --------



The chief operating decision
maker’s (Rediff’s Chairman and Managing Director) allocates resources to and assess the performance of the segments
of the Company. The chief operating decision maker evaluates segment performance primarily by results of the segment before operating
expenses.



The Company has two operating
segments, namely, the India Online business and the U.S. Publishing business.



| | (i) | India Online business, comprised of revenues from online advertising (which includes display, performance
and sponsorship formats) and fee-based services (which includes e-commerce marketplace fees and revenues from subscription-based
email services and mobile value added services).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | US Publishing business, comprised of revenues from advertising and subscription for India Abroad
print and online properties and online advertising revenue from the Rediff India Abroad website.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Following are the segment results and segment
assets for the years ended March 31, 2013, 2014 and 2015.



|                                                               |  | 2013                      |            |  | 2014                       |  |           | 2015  | 
|-------------------------------------------------------------- |  | ------------------------- | ---------- |  | -------------------------- |  | --------- | ----- | 
|                                                               |  | India
    Online Business |            |  | US
    Publishing Business |  |           | Total | 
|                                                               |  | US$                       |            |  | US$                        |  |           | US$   | 
|Revenues from external
    customers:                          |  |                           |            |  |                            |  |           |       | 
|Advertising                                                    |  |                           | 8,485,560  |  |                            |  | 2,872,638 |       | 
|Fee
    based services                                         |  |                           | 4,041,904  |  |                            |  | 258,602   |       | 
|Total
    revenues                                             |  |                           | 12,527,464 |  |                            |  | 3,131,240 |       | 
|                                                               |  |                           |            |  |                            |  |           |       | 
|Cost
    of revenues (excluding depreciation and amortization) |  |                           | 7,470,935  |  |                            |  | 2,480,949 |       | 
|                                                               |  |                           |            |  |                            |  |           |       | 
|Segment
    Results                                            |  |                           | 5,056,529  |  |                            |  | 650,291   |       | 
|                                                               |  |                           |            |  |                            |  |           |       | 
|Segment
    Assets                                             |  |                           | 35,577,371 |  |                            |  | 820,713   |       | 
|                                                               |  |                           |            |  |                            |  |           |       | 
|Capital
    expenditure                                        |  |                           | 2,105,552  |  |                            |  | 2,315     |       | 
|Depreciation/amortization                                      |  |                           | 3,651,816  |  |                            |  | 12,560    |       | 



F-23









The following is a reconciliation
of the segment results to (loss) income before income taxes of the Company for the years ended March 31, 2013, 2014 and 2015.



|                                                                                          |  | 2013 |             |   | 2014 |  |             | 2015 | 
|----------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- |  | ----------- | ---- | 
|                                                                                          |  | US$  |             |   | US$  |  |             | US$  | 
|                                                                                          |  |      |             |   |      |  |             |      | 
|Segment result                                                                            |  |      | 5,706,820   |   |      |  | 5,707,733   |      | 
|Operating expenses (including depreciation and amortization)                              |  |      | (19,571,322 | ) |      |  | (18,048,045 | )    | 
|Other income, net                                                                         |  |      | 2,314,721   |   |      |  | 4,716,132   |      | 
|                                                                                          |  |      |             |   |      |  |             |      | 
|Net loss before income taxes and equity in net earnings (loss) of equity method investees |  |      | (11,549,781 | ) |      |  | (7,624,180  | )    | 





Revenues from fee based services are as follows:



|                            |  | As at March 31, |          
|--------------------------- |  | --------------- | ---------
|                            |  | 2013            |          
|                            |  | US$             |          
|e-commerce marketplace fees |  |                 | 2,147,008
|Subscription service        |  |                 | 1,894,896
|Total                       |  |                 | 4,041,904







The following is a reconciliation of the segment assets to the total
assets as at March 31, 2014 and 2015.



|                                |  | As at March 31, |           
|------------------------------- |  | --------------- | ----------
|                                |  | 2013            |           
|                                |  | US$             |           
|India Online business           |  |                 | 35,577,371
|US Publishing business          |  |                 | 820,713   
|Total segment assets            |  |                 | 36,398,084
|Investment, at cost             |  |                 | 1,404,987 
|Rediff.com India Employee trust |  |                 | 45,931    
|Total assets                    |  |                 | 37,849,002



Revenues are attributed to individual countries
according to the location of the customers.



F-24









Revenues derived from external customers are as follows:



|                         |  | Years
                                         ended March 31, |           
|------------------------ |  | -------------------------------------------------------------- | ----------
|                         |  | 2013                                                           |           
|                         |  | US$                                                            |           
|United States and Canada |  |                                                                | 3,030,249 
|India                    |  |                                                                | 12,241,845
|Rest of the world        |  |                                                                | 386,610   
|Total revenues           |  |                                                                | 15,658,704



No single customer accounted
for 10 percent or more of the total revenues for the years ended March 31, 2013, 2014 and 2015.



Long-lived assets by location are as follows:



|                         |  | As of March 31, |          
|------------------------ |  | --------------- | ---------
|                         |  | 2014            |          
|                         |  | US$             |          
|United States and Canada |  |                 | 5,912    
|India                    |  |                 | 3,565,310
|Total                    |  |                 | 3,571,222



| | 19. | Concentration of credit risk
| | --- | ----------------------------



Concentrations of credit
risk exist when changes in economic or geographic factors affect groups of counter parties whose aggregate credit exposure is material
in relation to the Company’s total credit exposure.



Financial instruments
that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents and accounts receivable.



The Company maintains
the majority of its cash in Indian Rupees with reputed banks in India with high quality credit rating.



The Company performs
ongoing evaluations to determine customer credit limit, but no collateral is required. In 2014 and 2015, approximately 89% and
85% of our accounts receivable were derived from revenues earned from customers located in India. The majority of the customers
outside India are located in the United States.



| | 20. | Stock-based compensation
| | --- | ------------------------



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. Unless terminated sooner, a grant under this plan will terminate automatically after expiry of
10 years from the date of issue of such grant. A total of 280,000 of the Company’s equity shares were reserved pursuant to
2002 plan. Of which 12,000 equity shares were reserved under 2015 Stock Option 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 rate of 25% on each successive anniversary of the grant date, until fully vested. Each option
grant carries with it the right to purchase Company’s one ADS 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 of ADS and no less than 50% of the fair market value of ADS on the date
of the grant.



F-25







A summary of option activity
under the 2002 ESOP plan as of March 31, 2015, and changes during the year then ended is presented below:



|Options                          |  | Number of Options(in terms of shares) |        |  | Weightedaverageexerciseprice |  |       | Weightedaverageremainingcontractualterm (year) |  | Aggregateintrinsicvalue | 
|-------------------------------- |  | ------------------------------------- | ------ |  | ---------------------------- |  | ----- | ---------------------------------------------- |  | ----------------------- | 
|                                 |  |                                       |        |  | US$                          |  |       |                                                |  | US$                     | 
|Outstanding as at April 1, 2014  |  |                                       | 11,750 |  |                              |  | 18.88 |                                                |  |                         | 
|Expired                          |  |                                       | 3,500  |  |                              |  | 11.37 |                                                |  |                         | 
|Outstanding as at March 31, 2015 |  |                                       | 8,250  |  |                              |  | 22.06 |                                                |  | 6.3                     | 
|Exercisable as at March 31, 2015 |  |                                       | 6,375  |  |                              |  | 22.06 |                                                |  | 6.3                     | 



The total grant date
fair value of stock options vested during the year ended March 31, 2013, 2014 and 2015 were US$78,645, US$123,585 and US$56,175.



There were no options
granted during the years ended March 31, 2013, 2014 and 2015. There were no options exercised during the years ended March 31,
2013, 2014 and 2015.



As of March 31,
2015, there was US$6,718 of total unrecognized option cost related to non-vested stock options granted under the plan. That cost
is expected to be recognized over a weighted average period of 0.31 year. To the extent the forfeiture rate is different from what
we have anticipated stock-based compensation related to these awards will be different from our expectations.



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. Unless terminated sooner, the grant under this plan will terminate automatically after expiry
of 10 years from the date of issue of such grant. A total of 358,000 of the Company’s equity shares were reserved pursuant
to 2004 plan. Of which 91,000 equity shares were reserved under 2015 Stock Option 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 rate of 25% on each successive anniversary of the grant date, until fully vested. Each option
grant carries with it the right to purchase Company’s one ADS 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 of ADS and no less than 50% of the fair market value of ADS on the date
of the grant.



A summary of option activity
under the 2004 ESOP plan as of March 31, 2015, and changes during the year then ended is presented below:



|Options                          |  | Number ofoptions (in  termsof shares) |         |  | Weightedaverageexerciseprice |  |       | Weightedaverageremainingcontractualterm (year) |  |  | Aggregateintrinsicvalue | 
|-------------------------------- |  | ------------------------------------- | ------- |  | ---------------------------- |  | ----- | ---------------------------------------------- |  |  | ----------------------- | 
|                                 |  |                                       |         |  | US$                          |  |       |                                                |  |  | US$                     | 
|Outstanding as at April 1, 2014  |  |                                       | 131,237 |  |                              |  | 11.59 |                                                |  |  |                         | 
|Granted                          |  |                                       | 22,750  |  |                              |  | 3.74  |                                                |  |  |                         | 
|Expired                          |  |                                       | 55,112  |  |                              |  | 10.97 |                                                |  |  |                         | 
|Forfeited                        |  |                                       | 1,500   |  |                              |  | 3.74  |                                                |  |  |                         | 
|Outstanding as at March 31, 2015 |  |                                       | 97,375  |  |                              |  | 10.22 |                                                |  |  | 4.4                     | 
|Exercisable as at March 31, 2015 |  |                                       | 76,125  |  |                              |  | 12.03 |                                                |  |  | 3.0                     | 



The total grant date
fair value of stock options vested during the year ended March 31, 2013, 2014 and 2015 was US$108,481, US$53,126 and US$Nil,
respectively.



The weighted-average
grant-date fair value of options granted during the year ended March 31, 2015, was US$3.02 each option.There were no options
granted during the years ended March 31, 2013 and 2014. There were no options exercised during the years ended March 31,
2013, 2014 and 2015.



F-26







As of March 31,
2015, there was US$48,012 of total unrecognized option cost related to non-vested stock options granted under the plan. That cost
is expected to be recognized over a weighted-average period of 3.12 years. To the extent the forfeiture rate is different from
what we have anticipated stock-based compensation related to these awards will be different from our expectations.



2006 Stock Option Plan



The 2006 Stock Option
Plan (“2006 ESOP”) consists of two plans, namely the ADR Linked Employee Stock Option Plan-2006 and Employee Stock
Option Plan-2006 which is linked to the shares of the Company. These plans were adopted and approved by the Compensation committee
on June 20, 2006 in accordance with the approval granted by shareholders on March 31, 2006. Unless terminated sooner,
the grant under this plan will terminate automatically after expiry of 10 years from the date of issue of such grant. A total of
670,000 equity shares were approved for issuance under both the plans.



Under the terms of the
2006 plans, 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 rate of 20% - 25% on each successive anniversary of the grant date, until fully vested. Each
option grant carries with it the right to purchase Company’s one equity share / ADS depending on the plan to which the option
relates at the exercise price during the exercise period, which expires ten years from the date of grant. The exercise price for
the ADR Linked Employee Stock Option Plan-2006 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 of ADS and no less than 50% of the fair market value of ADS on the date of
the grant. The exercise price for the Employee Stock Option Plan-2006 is also determined by the board (or a committee or a sub-committee
of the board) and shall not be less than the face value of equity shares.



A summary of option activity
under the 2006 ESOP plan as of March 31, 2015, and changes during the year then ended is presented below:



|Options                          |  | Number ofoptions (interms of shares) |         |  | Weightedaverageexerciseprice |  |      | Weightedaverageremainingcontractualterm (year) |  |  | Aggregateintrinsic  value | 
|-------------------------------- |  | ------------------------------------ | ------- |  | ---------------------------- |  | ---- | ---------------------------------------------- |  |  | ------------------------- | 
|                                 |  |                                      |         |  | US$                          |  |      |                                                |  |  | US$                       | 
|Outstanding as at April 1, 2014  |  |                                      | 490,563 |  |                              |  | 8.54 |                                                |  |  |                           | 
|Forfeited                        |  |                                      | 1,250   |  |                              |  | 0.16 |                                                |  |  |                           | 
|Outstanding as at March 31, 2015 |  |                                      | 489,313 |  |                              |  | 8.54 |                                                |  |  | 3.8                       | 
|Exercisable as at March 31, 2015 |  |                                      | 477,313 |  |                              |  | 8.47 |                                                |  |  | 3.8                       | 



The total grant date
fair value of stock options vested during the year ended March 31, 2013, 2014 and 2015 was US$1,542,072, US$967,248 and US$662,350
respectively.



The weighted-average
grant-date fair value of options granted during the year ended March 31, 2014 was US$3.76. There were no new grants during
the year ended March 31, 2013 and 2015. There were no stock options exercised during the years ended March 31, 2013, 2014
and 2015.



As of March 31,
2015, there was US$41,726 of total unrecognized option cost related to non-vested stock options granted under the plan. That cost
is expected to be recognized over a weighted-average period of 0.7 years. To the extent the forfeiture rate is different from what
we have anticipated stock-based compensation related to these awards will be different from our expectations.



2015 Stock Option Plan



The compensation committee
authorized the 2015 stock option plan in their meeting held on January 27, 2015. Under the plan 103,000 equity shares (comprising
of 12,000 equity shares from 2002 Stock Option Plan and 91,000 equity shares from 2004 Stock Option Plan) were reserved. Unless
terminated sooner, the grant under this plan will terminate automatically after expiry of 10 years from the date of grant.



Under the terms of the
2015 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 rate of 25% on each successive anniversary of the grant date, until fully vested. Each option
grant carries with it the right to purchase Company’s one ADS at the exercise price during the exercise period, which expires
ten years from the date of grant. The exercise price for the ADR Linked Employee Stock Option Plan-2015 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 of ADS and no less than
50% of the fair market value of ADS on the date of the grant.



F-27







A summary of option activity
under the 2015 ESOP plan as of March 31, 2015, and changes during the year then ended is presented below:



|Options                          |  | Number ofoptions (in  termsof shares) |        |  | Weightedaverageexerciseprice |  |      | Weightedaverageremainingcontractualterm (year) |  |  | Aggregateintrinsicvalue | 
|-------------------------------- |  | ------------------------------------- | ------ |  | ---------------------------- |  | ---- | ---------------------------------------------- |  |  | ----------------------- | 
|                                 |  |                                       |        |  | US$                          |  |      |                                                |  |  | US$                     | 
|Granted                          |  |                                       | 36,800 |  |                              |  | 3.74 |                                                |  |  |                         | 
|Outstanding as at March 31, 2015 |  |                                       | 36,800 |  |                              |  | 3.74 |                                                |  |  | 9.8                     | 
|Exercisable as at March 31, 2015 |  |                                       | —      |  |                              |  | —    |                                                |  |  | —                       | 



The weighted-average
grant-date fair value of options granted during the year ended March 31, 2015, was US$3.00 per equity share.



As of March 31,
2015, there was US$103,440 of total unrecognized option cost related to non-vested stock options granted under the plan. That cost
is expected to be recognized over a weighted-average period of 3.8 years. To the extent the forfeiture rate is different from what
we have anticipated stock-based compensation related to these awards will be different from our expectations.



F-28







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



|                         |  | Years
                                         ended March 31, |  
|------------------------ |  | -------------------------------------------------------------- | -
|                         |  | 2013                                                           |  
|Dividend yield           |  |                                                                | —
|Expected term            |  |                                                                | —
|Risk free interest rates |  |                                                                | —
|Expected volatility      |  |                                                                | —



Expected volatilities
are based on the historical volatility of the Company’s stock. The expected term of stock options granted under the Plans
is based on historical exercise patterns, which the Company believes are representative of future behavior. The risk-free rate
for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.



Total stock-based compensation
cost recognized under the various employee stock option plans were US$756,090, US$481,563 and US$426,705 for the year ended March 31,
2013, 2014 and 2015 respectively. The compensation cost has been allocated to cost of revenues and operating expenses as follows:



|                           |  | Year
                                         ended March 31, |        
|-------------------------- |  | ------------------------------------------------------------- | -------
|                           |  | 2013                                                          |        
|                           |  | US$                                                           |        
|Cost of revenues           |  |                                                               | 50,151 
|Sales and marketing        |  |                                                               | 122,316
|Product development        |  |                                                               | 321,473
|General and administrative |  |                                                               | 262,150



| | 21. | Earnings (loss) per share and ADS
| | --- | ---------------------------------



For the years ended March 31,
2012, 2013 and 2014, the following table sets forth the computation of basic and diluted earnings per share and ADS:





|                                                                               |  | Year ended March 31, |            
|------------------------------------------------------------------------------ |  | -------------------- | -----------
|                                                                               |  | 2013                 |            
|Net loss (US$)                                                                 |  |                      | (11,432,223
|Weighted average equity shares for basic and diluted earnings (loss) per share |  |                      | 13,795,178 
|Earnings /(loss) per share – basic (US$)                                       |  |                      | (0.828     
|– diluted (US$)                                                                |  |                      | (0.828     
|Earnings / (loss) per ADS
    – basic (US$)                                    |  |                      | (0.414     
|– diluted (US$)                                                                |  |                      | (0.414     





Potentially dilutive shares
relating to outstanding employee stock option aggregating 140,247, 124,214 and 209,599 as at March 31, 2013, 2014 and 2015,
respectively have been excluded from the computation of diluted earnings per share for these periods as their effect was anti-dilutive.



| | 22. | Dividends
| | --- | ---------



Dividends, if any, will
be declared and paid in Indian Rupees. Indian law requires that any dividend be declared out of accumulated distributable profits
only after the transfer to a general reserve of a specified percentage of net profit computed in accordance with current regulations.
The remittance of dividends outside India is governed by Indian law on foreign exchange and is subject to applicable taxes.



F-29







| | 23. | Allowance for doubtful trade accounts receivables
| | --- | -------------------------------------------------





|Description |  | Balance at Beginning  of year |           |  | Expense / (Reversal) |  |         | Bad debts written off |  |  | Effect of exchange rate changes |   |  | Balance at end of year |         
|----------- |  | ----------------------------- | --------- |  | -------------------- |  | ------- | --------------------- |  |  | ------------------------------- | - |  | ---------------------- | --------
|            |  | US$                           |           |  | US$                  |  |         | US$                   |  |  | US$                             |   |  | US$                    |         
|Fiscal 2015 |  |                               | 618,054   |  |                      |  | 41,509  |                       |  |  | (11,172                         | ) |  |                        | (22,474 
|Fiscal 2014 |  |                               | 876,300   |  |                      |  | 190,493 |                       |  |  | (420,018                        | ) |  |                        | (28,721 
|Fiscal 2013 |  |                               | 3,200,434 |  |                      |  | (48,580 | )                     |  |  | (2,106,011                      | ) |  |                        | (169,543





| | 24. | Fair value of financial instruments
| | --- | -----------------------------------



The carrying amounts
of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities, approximate
their fair values due to the short- term nature of these instruments.



| | 25. | Commitments and contingencies
| | --- | -----------------------------



As of March 31, 2015
and 2014, the Company has commitment for purchase of computer equipment and cost to develop internal use software aggregating US$424,517
and US$774,735, respectively.



Commitment relating to
operating leases is as below:



The Company leases office
premises and residential apartments for employees under various operating leases. Certain of these arrangements have free or escalating
rent payment provisions. The Company recognized rent expense under such arrangements on a straight-line basis. Operating lease
expense that has been included in the determination of the net income is as follows:





|                                     |  | Years ended March 31, |        
|------------------------------------ |  | --------------------- | -------
|                                     |  | 2013                  |        
|                                     |  | US$                   |        
|Office premises                      |  |                       | 726,893
|Residential apartments for employees |  |                       | 104,557
|                                     |  |                       |        
|Total operating lease expense        |  |                       | 831,450





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





|For the year ending March 31, |  | US$ |        
|----------------------------- |  | --- | -------
|2016                          |  |     | 492,935
|2017                          |  |     | 293,624
|2018                          |  |     | 237,989
|2019                          |  |     | 40,753 
|2020                          |  |     | —      





F-30







Litigation and Other Legal Matters



Action Relating to
Access to Pornographic Material



On June 21, 2000,
Rediff, certain of its current and then directors and others (Ajit Balakrishnan, Arun Nanda, Abhay Havaldar, Sunil Phatarphekar,
Charles Robert Kaye and Tony Janz) were named as defendants in a criminal complaint (RCC Complaint Number 76 of 2000) filed by
Mr. Abinav Bhatt, who was then a 22 year old student, before the Judicial Magistrate, First Class, Pune, India, alleging commission
of an offence, under Section 292 of the IPC for distributing, publicly exhibiting and putting into circulation obscene, pornographic
and objectionable material. The RCC Complaint alleged that Rediff, through its 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 on the Complaint holding that a prima facie case under Section 292 of the IPC had
been made out against Rediff and directed commencement of criminal proceedings against all the defendants. A criminal writ petition
was filed in the High Court of Mumbai (Sunil N. Phatarphekar & Ors. v. Abhinav Bhatt and Ors., Mumbai High Court,
Criminal Writ Petition No. 1754 of 2000) by the aforementioned defendants, 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 Rediff believes that the lawsuit is without merit, and that
it and its directors have a valid defense to the charges, in the event that it is unsuccessful in its defense, Rediff and its directors
may face both criminal penalties and monetary fines or damages.



Under Indian law, any
person who 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$1,700); 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$3,400).



Actions Relating to
Trademark Infringement



In May, 2008, a complaint
was filed by The Board of Control of Cricket in India (“BCCI”) against Sandeep Goyal and Rediff alleging that the depiction
of images on the online game known as Indian Fantasy League started by Sandeep Goyal has been violative of the Indian Premier League
(“IPL”) trademark. BCCI is seeking (a) a permanent injunction restraining defendants from the use of logo “Indian
Fantasy League.com”; (b) shutdown of the website Indianfantasyleague.com; (c) to render the accounts of all profits
earned by the said website and damages to the tune of Rs.1.0 million (approximately US$17,000). Rediff has filed its response to
BCCI Complaint, and among the defenses Rediff has raised are: (a) it is Sandeep Goyal who has infringed the trademark of IPL
and not Rediff.com; (b) Rediff.com only provides the domain hosting and web based email solution services which enables the
subscriber to set up and manage their website as per the terms and conditions of Rediff business solutions; (c) subscribers
such as Sandeep Goyal are required to abide by and comply with the terms and conditions Rediff imposes on its subscribers which
provides that the subscriber shall be solely responsible for producing, electronically uploading and maintaining his website and
such subscriber shall ensure that all upload material shall be owned and/or properly licensed by the Subscriber and shall not adversely
affect any rights of any third party. Although Rediff believes that it has valid defenses to the charges, if Rediff is unsuccessful
after exhausting all legal remedies, we could be subject to monetary fines or damages.



In February, 2006, a
complaint was filed by Marksman Pvt. Ltd. against various telecom operators and internet service providers and Rediff.com alleging
infringement of copyright of Marksman by way of dissemination of information relating to scores, alerts and updates and or other
events happenings via Short Message Service (SMS) Technology on wireless and mobile telephones in respect of One Day International
Cricket Matches (“ODIs”) during India’s tour of Pakistan Scheduled in February, 2006. The Company has filed its
response and among the defenses raised were: (a) Rediff.com along with other telecom operators and service providers have
not infringed the copyrights of Marksman; (b) the information relating to scores, alerts and updates and or other events happening
via Short Message Service (SMS) Technology on wireless and mobile telephones in respect of ODIs which was being provided to subscribers
was sourced from public domain and as such no exclusivity can be claimed since it falls into public domain. The one judge panel,
while dismissing a request for an interim order, has directed the defendants to maintain the accounts of the SMS received during
the ODIs. Marksman will have to first amend the suit to seek damages before any claim is made against Rediff.com. In 2006, Marksman
has sought to amend the suit prayer to include damages. Although the Company believes that it has valid defenses to the charges,
if the Company is unsuccessful after exhausting all legal remedies, the Company could be subject to monetary fines or damages.



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.



F-31







The Company has not recognized
any loss accrual for the litigation disputes as the Company believes that it is probable that it would be successful on resolution
of the litigation. The maximum total loss relating to these disputes would be approximately US$20,400 excluding any interest and
penalties, which amounts cannot be reasonably estimated at this point of time.



| | 26. | Subsequent
event
| | --- | ----------------



On July 29, 2015,
the Company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC, an Illinois limited liability company
(“Investor”). The Purchase Agreement provides that the Company has the right to sell to the Investor, and the
Investor has the obligation to purchase from the Company, up to an aggregate of US$15 Million of the Company’s American
Depositary Shares (“ADSs”) over the 36-month term of the Agreement in amount as described in the Purchase
Agreement. Upon shareholder approval and upon effectiveness of registration statement covering the resale of ADSs, the
Company can elect its discretion to sell ADSs to the investor pursuant to either regular purchase amounts or
accelerated purchase amounts. The amounts of ADSs which may be sold to the Investor pursuant to any regular purchase range
from 40,000 ADSs to 100,000 ADSs, depending on the then current trading price of the Company’s ADSs on Nasdaq (but not
to exceed US$500,000 on any single purchase date). In addition, the Company has the right, but not the obligation, to sell
accelerated purchase amounts. The purchase price for any ADSs sold pursuant a regular purchase, will be 98% of the lower of
the (a) the lowest sale price of the ADSs on Nasdaq on the regular purchase date or (b) the average of the three lowest
closing sale prices over the preceding 10 trading-day period. The purchase price for any ADSs sold pursuant to an accelerated
purchase, will be 98% of the lower of (a) the closing sale price of the ADSs on Nasdaq on the accelerated purchase date or
(b) 94% of a volume weighted average purchase price on the accelerated purchase date. The Company will file an application
with the Nasdaq to list the ADSs to be sold to the Investor pursuant to the Purchase Agreement. The Company is required to
file a registration statement covering the resale of the ADSs, so that such ADSs may be sold by the Investor from time to
time pursuant to a Registration Rights Agreement entered into between the Company and Investor. Under the Purchase Agreement,
the Investor and its affiliates have a beneficial ownership limitation of 4.99% of the then issued and outstanding equity
securities of the Company. The issuance of the shares underlying the ADSs must be approved by the Company’s
shareholders prior to any purchases under the Purchase Agreement. The Purchase Agreement and Registration Rights Agreement
also contain customary representations, warranties, conditions and indemnification provisions.



F-32







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:                     
| |                         
| |                         



Date: July 31, 2015











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:                     
| |                         
| |                         



Date: July 31, 2015