Indiabulls Real Estate

I.  Overview:
 
 a) Indiabulls Real Estate Limited (the Company, IBREL) was
 incorporated on April 04,2006. The Company was incorporated with the
 main objects of carrying on the business of Real Estate Projects
 Advisory, Construction and Development of Real Estate Projects.
 
 b) A Scheme of Arrangement (Scheme) between Indiabulls Financial
 Services Limited (Demerged Company, IBFSL) and the Company
 (IBREL, Resulting Company) and their respective shareholders and
 creditors under Sections 391 -394 of the Companies Act, 1956, was
 sanctioned by the Honble High Court of Delhi on November 24,2006. Upon
 coming into effect of the Scheme on December 20,2006 and with effect
 from the Appointed Date on May 01,2006, the real estate undertaking
 stands demerged from IBFSL and transferred to and vested in IBRELon a
 going concern basis.
 
 The Company was incorporated with the Authorized Capital of Rs.
 5,000,000 divided into 500,000 Equity Shares of Rs.10 each. The
 Authorized Capital has been reorganized and increased to
 Rs.5,140,000,000 divided into 500,000,000 Equity Shares of Rs. 2 each
 and 30,000,000 Preference Shares of Rs.138 each w.e.f. December 20,2006
 pursuant to the Scheme.
 
 On August 02,2006, IBFSL had issued and allotted 11,500,000 Cumulative,
 Redeemable, Fully Convertible Preference Shares of face value Rs. 300
 per share to Oberon Limited. Pursuant to the Scheme the face value of
 Rs.300 had been allocated proportionately, in the ratio of the net
 worth (as on the Appointed Date i.e.  May 01,2006) of IBFSL to the net
 worth of demerged undertaking such that the face value of Convertible
 Preference Share stood paid up to Rs. 138 each of the Company; thus the
 Company issued and allotted 11,500,000 Cumulative, Redeemable,
 Convertible Preference Shares of face value Rs.138 each to Oberon
 Limited. The Convertible Preference Shares have been converted into
 11,500,000 Equity Shares of face value Rs. 2 each at a conversion price
 of Rs. 138 per share on July 21,2007.
 
 On August 02,2006, IBFSL had issued and allotted 9,966,667 Cumulative,
 Redeemable, Non Convertible Preference shares of face value Rs. 300 per
 share to Oberon Limited. Pursuant to the Scheme the face value of Rs
 300 had been allocated proportionately, in the ratio of the net worth
 (as on the Appointed Date i.e.  May 01, 2006) of IBFSL to the net worth
 of demerged undertaking such that the face value of Non Convertible
 Preference Share stood paid up to Rs. 138 each of the Company; thus the
 Company issued and allotted 9,966,667 Cumulative, Redeemable, Non
 Convertible Preference Shares of face value Rs. 138 each to the Oberon
 Limited. These shares are redeemable in whole or in part at any time,
 subject to fulfillment of certain terms and conditions and on obtaining
 requisite approvals on expiry of 60 months from the date of their
 issuance i.e. August 02,2006. The dividend is payable on a quarterly
 basis @ 5% p.a. on the face value of the Preference Share. The dividend
 rate on these Preference Shares has been increased from 5% to 10% with
 effect from February 02,2008 as per the terms of the issue of the
 Preference Shares by the Company.
 
 II.  Change in capital structure during the year.
 
 a) On July 10,2007, the Company issued 38,759,688 Global Depository
 Receipts (GDRs) which were listed at the Luxembourg Stock Exchange, at
 an offer price of USD 10.32 per GDR equivalent to Rs. 416.76 per share
 and raised a proceeds of USD 400 Million (equivalent to Rs.
 16,153,521,977). Each GDR represents one (1) Equity Share of face value
 Rs. 2 each fully paid up of the Company.
 
 b) During the year, Oberon Limited, sole holder of Convertible
 Preference Shares exercised their option to convert 11,500,000
 Convertible Preference Shares of face value Rs. 138 each into
 11,500,000 Equity Shares of face value Rs. 2 each at the premium of Rs.
 136 per share. Pursuant to the exercise of option to convert by Oberon
 Limited, Board of Directors of the Company at their meeting held on
 July 21,2007 issued and allotted 11,500,000 Equity Shares of face value
 Rs. 2 each at the conversion price of Rs. 138 per share.
 
 c) On November 05,2007, the promoters of the Company exercised their
 options in respect of the Companys Share Warrants II, allotted to them
 pursuant to the Scheme, and the Company received a sum of Rs.
 1,036,200,000 being the balance exercise money due on these share
 warrants. An amount equal to 10% of the Share Warrants II exercisable
 amounting to Rs 115,100,000 had been paid upfront at the time of
 subscription in the previous period being the proportionate amount
 allocated to the Company under Scheme of Arrangement and the same was
 adjusted against conversion price paid for the allotment of the Equity
 Shares on conversion of the said Share Warrants. Consequently, the
 Board of Directors of the Company at their meeting held on November
 05,2007 allotted 10,000,000 Equity Shares of face value Rs.2 each at a
 price of Rs. 115.13 per share to its promoters on conversion of the
 said Share Warrants 11.
 
 d) During the year, upon exercise of options vested in terms of
 Indiabulls Real Estate Limited Employees Stock Option Scheme 2006 by
 eligible employees and receipt of exercise amount in full, the Board of
 Directors of the Company at its meeting held on January 23,2008, has
 allotted an aggregate of 900,000 Equity Shares of face value Rs. 2 each
 to eligible employees of the Company and subsidiary companies at the
 exercise price of Rs. 60 per share.
 
 e) The Board of Directors of the Company at their meeting held on
 August 09,2007 and as already approved by the shareholders of the
 Company on May 08, 2007 has allotted 15,000,000 Share Warrants (Series
 III), convertible into 15,000,000 Equity Shares of face value Rs. 2
 each to the promoters of the Company on a preferential allotment basis,
 pursuant to Section 81 (1 A) of the Companies Act, 1956, at a
 conversion price of Rs. 300 per Equity Share of the Company, arrived at
 in accordance with SEBI (Disclosure & Investor Protection) Guidelines,
 2000 and 10% application money amounting to Rs. 450,000,000 was
 received from them.
 
 Further, the Board of Directors of the Company at their meeting held on
 November 05,2007 and as already approved by the shareholders of the
 Company on October 25,2007 has allotted 43,000,000 Share Warrants
 (Series IV), convertible into 43,000,000 Equity Shares of face value
 Rs. 2 each to the Promoters and Joint Managing Directors of the Company
 on a preferential allotment basis, pursuant to Section 81(1 A) of the
 Companies Act, 1956, at a conversion price of Rs. 540 per Equity Share
 of the Company, arrived at in accordance with SEBI (Disclosure &
 Investor Protection) Guidelines, 2000 and 10% application money
 amounting to Rs. 2,322,000,000 was received from them.
 
 III. Employees Stock Options Schemes:
 
 Indiabulls Real Estate Limited Employees Stock Options Scheme - 2006:
 
 During the previous period Indiabulls Real Estate Limited (IBREL)
 established the Indiabulls Real Estate Limited Employees Stock Options
 Scheme (IBREL ESOS-I or Plan-I). Under the Plan-1, the Company has
 issued options that entitle the Company to issue and the eligible
 employees of the Company and its subsidiary companies to subscribe up
 to 9,000,000 Equity Shares of Rs. 2 each at exercise price of Rs. 60
 per equity share.  Employees covered by the Plan-1 are granted an
 option to purchase the shares of the Company subject to the
 requirements of vesting. These options vest uniformly over a period of
 10 years, w.e.f. November 01, 2007, whereby 10% of the options vest on
 each vesting date as per the vesting schedule. A Compensation Committee
 constituted by the Board of Directors of the Company administers the
 Plan-1.
 
 The Company follows the Intrinsic Value method of accounting as is
 prescribed in the Guidance Note issued by the Institute of Chartered
 Accountants of India on Accounting for Employees Share based Payments
 (the guidelines). As per the Intrinsic Value method adopted, the
 value of the share as worked out by an independent valuer works out to
 Rs. 58.20 per share on the date of grant which is less than exercise
 price and hence there is no Deferred Employee Stock Compensation Cost.
 Had the Company followed the Fair value method, there would not have
 also been Deferred Employee Stock Compensation Cost as the fair value
 as on the date of grant is also less than the exercise price and hence
 there is no impact on the Profit After Tax of the Company and on the
 Basic and Dilutive Earnings per Share of the Company.
 
 Stock option scheme of Subsidiary Companies: 
 
 a) Indiabulls Power Services Limited
 
 The subsidiary of the Company viz. Indiabulls Power Services Limited
 (IBPSL) has announced Indiabulls Power Services Limited Employee
 Stock Option Plan 2008 (IPSL ESOP - 2008) for its employees and its
 subsidiary companies, existing now or in future, and employees of
 holding company (IBREL) and IBRELs subsidiary company Sophia Power
 Company Limited (SPCL). The Company has adopted the scheme in respect
 of its employees. The eligible employees covered under IPSL ESOP - 2008
 are granted an option to purchase the shares of IBPSL subject to the
 requirements of vesting. These options vest uniformly over a period of
 10 years, with effect from March 01,2009, whereby 10% of the options
 vest on each vesting date as per the vesting schedule. A Compensation
 Committee constituted by the Board of Directors of IBPSL administers
 the IPSL ESOP-2008.
 
 Pursuant to the Scheme for Amalgamation between IBPSL and SPCL as
 referred to in Note V (b), the SPCL shall, subject to necessary
 approvals, create an employee stock option scheme for the benefit of
 such employees, where under the stock options shall be issued to such
 employees taking into account the share exchange ratio on the terms &
 conditions not less favorable than those provided under the IPSLESOP -
 2008.On the basis of share exchange ratio, for every one (1) option
 held by the employees of IBPSL including the employees of its holding
 and subsidiary companies which entitle such employees to one (1) Equity
 Share in IBPSL, such employee shall be entitled to and conferred one
 (1) option in SPCL, entitling him to acquire one (1) fully paid up
 Equity Share in the SPCL on payment of exercise consideration payable
 which shall be equivalent to the exercise consideration payable by such
 employee under the IPSL ESOP - 2008, for such options.
 
 b) Indiabulls Wholesale Services Limited
 
 The subsidiary of the Company viz. Indiabulls Wholesale Services
 Limited (IBWSL) has announced Indiabulls Wholesale Services Limited
 Employee Stock Option Plan 2007 (IWSL ESOP 2007) for its employees
 and its subsidiary companies, existing now or in future and employees
 of holding company (IBREL). The Company has adopted the scheme in
 respect of its employees. The eligible employees covered under IWSL
 ESOP 2007 are granted an option to purchase the shares of IBWSL subject
 to the requirements of vesting. These options vest uniformly over a
 period of 10 years, with effect from November 01,2008, whereby 10% of
 the options vest on each vesting date as per the vesting schedule. A
 Compensation Committee constituted by the Board of Directors of IBWSL
 administers the IWSL ESOP 2007.
 
 IV.  Significant Events after the Balance Sheet date
 
 a) The Company proposed to acquire 100% shareholding of Dev Property
 Development Plc, (DPD) an Isle of Man registered company listed on the
 London Stock Exchanges AIM by an issuance of Equity Shares of the
 Company represented by Global Depository Receipts to the Shareholders
 of Dev Property Development Pic. Accordingly on February 28, 2008, the
 Board of Directors passed a resolution for issuance of Equity Shares of
 the Company and / or Global Depository Receipts and / or Equity Shares
 through Depository Receipts Mechanism or any combination of the
 Securities for a value up to GBP 150,000,000 to the shareholders of Dev
 Property Development Plc. On March 29,2008 the Company received the
 consent of the Shareholders for the same.
 
 Subsequent to the year end, the relevant court has sanctioned the
 Scheme on May 07,2008 and accordingly approved the acquisition of 100%
 ordinary shares of DPD by the Company. The Scheme has become effective
 since May 08,2008 and the settlement of all consideration (0.12091 GDR
 of the Company will be issued for each share of DPD) will occur within
 14 days of this date.
 
 b) On February 12, 2008, the Company has entered into an agreement
 namely Shareholders Agreement with Sophia Power Company Limited
 (SPCL), Indiabulls Power Services Limited (IBPSL), Subsidiary
 companies, Promoters of the Company and Investors namely FIM Limited
 (FIM) and LNM India Internet Ventures Limited (LNM) and a Share
 Subscription Agreement with SPCL, IBPSL and Investors namely FIM and
 LNM. These agreements were subsequently amended on February 14,2008.
 
 Further, pursuant to the above agreements it is contemplated to merge
 the two Subsidiaries of the Company namely, IBPSL and SPCL. Accordingly
 the Board of Directors of the IBPSL, at their meeting held on March
 27,2008 approved the scheme for amalgamation of IBPSL and SPCL. On the
 same date members of the Company has given their consent to the scheme
 subject to the sanction by the Honble High Court of Delhi.
 
 SPCL has issued equity shares at Rs. 66.67 per share to FIM Limited and
 LNM India Internet Ventures Limited for consideration of Rs.
 15,800,000,000, aggregating to 37.50% of its post issue Equity Share
 Capital of SPCL. It is anticipated that IBREL will hold 71.40% of SPCL,
 merged entity, with the balance 17.90% held by FIM Limited and 10.70%
 held by LNM India Internet Ventures Limited
 
 Subsequent to the year end, the above scheme has been filed with
 Honble High Court of Delhi.
 
 c) On April 22,2008 the Company established the Indiabulls Real Estate
 Limited Employees Stock Option Plan -2008 (IBREL ESOS 2008 or
 Plan-ll). Under the Plan-ll the Company is authorized to issue up to
 1,500,000 Equity Shares of face value Rs. 2 each to eligible employees
 including employees of its subsidiary companies. Employees covered by
 the Plan-ll are granted an option to purchase shares of the Company
 subject to the requirements of vesting. A Compensation Committee
 constituted by the Board of Directors of the Company administers the
 plan. On April 22, 2008, the Company granted 1,500,000 options at an
 exercise price of Rs.495.70 per share at the available closing market
 price of the shares on the grant date under Plan-ll as per the SEBI
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
 Guidelines, 1999. These options vest uniformly over a period of 10
 years, with effect from April 23, 2009, whereby 10% of the options vest
 on each vesting date as per the vesting schedule.
 
 V.  Contingent Liability not provided for in respect of:
 
 a) Claims from third parties not acknowledged as debt amounting Rs NIL
 (Previous Period Rs. NIL)
 
 b) Estimated amount of Contracts remaining to be executed on Capital
 Account and not provided for (net of advances) of Rs 3,397,270
 (Previous Period Rs. 600,760,703).
 
 c) Corporate Guarantees outstanding in respect of credit facilities
 amounting to Rs. 5,250,000,000 (Previous Period Rs. NIL).
 
 VI.  Employee benefits:
 
 Contributions are made to Government Provident Fund and Family Pension
 Fund, ESIC and other statutory funds which cover all eligible
 employees. Both the employees and the Company make predetermined
 contributions to the Provident Fund and ESIC. The contributions are
 normally based on a certain proportion of the employees salary.
 
 Provision for Gratuity and Compensated Absences for all employees is
 based upon actuarial valuation done at the end of every financial
 year/period. Major drivers in the actuarial assumptions, typically, are
 years of service and employee compensation. After the issuance of
 Accounting Standard 15 (revised) on Employee Benefits, (as notified
 under the Companies (Accounting Standards) Rules, 2006) commitments are
 actuarially determined using Project Unit Credit (PUC) actuarial
 method. Gains and Losses on changes in actuarial assumptions are
 accounted for in the Profit and Loss Account.
 
 VII. Fixed Deposits Includes Rs. 500,000,000 (Previous Period Rs. Nil)
 pledged against Bank Guarantees issued by bank for business
 requirements of the subsidiary company and Rs. 300,000,000 (Previous
 Period Rs. Nil) pledged against the credit facilities available to the
 Company.
 
 VIII.  Provision for current tax includes provision for wealth tax of Rs.
 158,885 (Previous Period Rs. Nil)
 
 IX.  During the year 900,000 Equity Shares were issued pursuant to the
 exercise of stock option by employees under IBREL ESOS-I stock option
 plan. The liability on account of Fringe Benefit Tax of Rs. 148,874,430
 on exercise of stock option has been recovered from the eligible
 employees of the Company and discharged by the Company.  Consequently,
 there is no impact on the Profit and Loss Account.
 
 X.  Auditors remuneration for the year is exclusive of Service Tax
 whereas in Previous Period it was inclusive of Service Tax.
 
 XI.  Disclosure in respect of Accounting Standard (AS) - 18 Related
 Party Disclosures as notified under the Companies (Accounting
 Standards) Rules, 2006:
 
 (I) Sale of Investment in Equity Shares of Subsidiary Companies
 
 During the year, the Company has transferred its holding in 26
 Subsidiary Companies to one of its subsidiary company i.e. Indiabulls
 Power Services Limited. In the previous period the Company had
 transferred its holding in one subsidiary company to one of its
 subsidiary company i.e. Aurora Land Development Private Limited.