Indiabulls Securities

1) Indiabulls Securities Limited (ISL or the Company) carries on
 the business as stock and share brokers on the National Stock Exchange
 of India Limited and Bombay Stock Exchange Limited: depository
 participants and other related ancillary services. On February 1,1996
 ISL. received a certificate of registration from the Securities and
 Exchange Board of India under sub-section 1 of section 12 of the
 Securities and Exchange Board of India Act, 1992 to carry on the
 business as a stock broker. Accordingly, all provisions of the
 Securities and Exchange Board of India Act, 1992, and rules and
 regulations relating thereto are applicable to ISL.
 
 2) The Board of Directors of Indiabulls Financial Services Limited
 (1BFSL) the erstwhile holding Company, at their meeting held on
 February 15,2007, approved the restructuring / re-organization (the
 Scheme) of the business of the Company. In pursuance of section
 391-394 of the Companies Act, 1956 the said Scheme has been approved by
 the members of the erstwhile holding Company and sanctioned by the
 Honorable High Court of New Delhi dated November 23 2007.
 
 Upon coming into effect of the Scheme with effect from the appointed
 date i.e - April 1,2007, IBFSLs securities broking and advisory
 service business had been demerged and transferred to the Company on a
 going concern basis. The Scheme has been given effect to in the
 financial statements and accordingly, the assets comprising of fixed
 assets, investments, sundry debtors, loans and advances, security
 deposits and cash aggregating to Rs.  461,032,891; current liabilities
 (including general purpose liabilities ) amounting to Rs. 272,156,401;
 proportionate liability of Rs. 45,946,335 in respect of Preference
 Share Capital, and an amount of Rs. 93,001,590 related to the advisory
 income (net of expenses, for the current period), which had been
 recorded by the IBFSL in trust on behalf of the Company have been so
 transferred by IBFSL to the Company.  In terms of the Scheme, the
 Company has issued and allotted 253,426,989 Equity shares of face value
 of Rs. 2 each aggregating to Rs. 506,853,978 and 9,966,667 cumulative,
 non convertible redeemable Preference Shares of face value of Rs. 4.61
 each aggregating to Rs. 45,946,335 to the respective shareholders of
 IBFSL.  The existing Equity Share capital of the Company before giving
 effect to the Scheme amounting to Rs.  178,340,990 has been cancelled
 in terms of the Scheme.
 
 In terms of the Scheme, the net adjustment aggregating to Rs.
 185,582,833 has been reduced from the Capital Redemption Reserve.
 
 3) Reorganisation of capital
 
 In consideration of Demerger, including the transfer and vesting of
 securities broking and advisory service business of Indiabulls
 Financial Services Limited (Demerged undertaking) in Indiabulls
 Securities Limited (Resulting Company), the Company issued and allotted
 to each member of the IBFSL whose name is recorded in the register of
 members and records of the depositary as members of the IBFSL on
 January 8,2008 (Demerger record date) equity shares in ISL in the ratio
 of 1 (one) equity shares in ISL of face value of Rs. 2/- each credited
 as fully paid-up for every 1 (one) equity share of Rs.2/- each fully
 paid up held by such member in IBFSL.  As a result the existing equity
 capital consisting of 17,834,099 Equity shares of face value of Rs. 10
 each of ISL has been cancelled and a fresh equity capital consisting of
 253,426,989 Equity shares of face vale of Rs. 2 each has been issued.
 Further, the face vale of existing 9,966,667 Cumulative, Redeemable,
 Non-convertible Preference Shares of face value of Rs 162 each of IBFSL
 has been allocated proportionately as per the ratio of the net worth of
 the Demerged Undertaking to the net worth of the IBFSL immediately
 before the Demerger and accordingly, ISL has issued and allotted
 9,966,667 Cumulative, Redeemable, Non-convertible Preference Shares of
 face value of Rs. 4.61 to the respective preference shareholder of
 IBFSL as on the record date. The terms and conditions including
 dividend and redemption on which IBFSL preference shares were issued
 and allotted would mutatis mutandis applyto preference shares issued by
 ISL. Accordingly, these Preference shares will be redeemed at par after
 five years from the date of issue of the Preference Shares i.e. August
 2.2006. The dividend rate on these preference shares has changed from 5
 % to 10% w.e.f February 2,2008 in terms of its issue by IBFSL.
 
 In terms of the Scheme the Authorised Capital of the Company has been
 reorganised to Rs. 1,115,250,000 divided into 500,000,000 Equity Shares
 of Rs. 2/- each and 25,000,000 Preference Shares of Rs. 4.61 each.  4)
 On March 30,2007, Indiabuffe Securities Limited implemented the
 Employees Stock Option Scheme 2007 (ISL ESOS - 2007 or Scheme).
 Under the plan, Indiabulls Securities Limited is authorised to issue up
 to 3,000,000 options, each convertible into one equity shares of Rs. 10
 each, to eligible employees of the Company and its subsidiary including
 employees of its erstwhile holding Company at an exercise price of Rs.
 200 per share.  Employees covered by the plan are granted an option to
 purchase shares under the ISL ESOS - 2007, subject to the requirements
 of vesting. These options vest uniformly over a period of 5 years,
 whereby 20% 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.
 
 Pursuant to the shareholders authorisation dated November 24,2007,
 these options would be convertible into an equivalent number of equity
 shares of the Company over a period of ten years beginning from April
 1,2008.  Further, as a consequence of the change in the face value of
 the equity shares of the Company from Rs. 10/- to Rs. 2/- each pursuant
 to the Scheme, the 3,000,000 stock options granted by the Company prior
 to the Demerger Effective Date (giving right to an option holder to
 subscribe for one equity share of Rs. 10/- each at an exercise price of
 Rs. 200/- per share) would stand increased to 15,000,000 stock options
 (giving right to an option holder to subscribe for one Equity Share of
 Rs. 2I- each at an exercise price of Rs. 40/- per share).  The Company
 follows the intrinsic 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 said intrinsic method adopted, the value of the equity share as
 worked out by an independent valuer works out to Rs. 39.16 per share
 (Previous Year Rs.195.80 per share) on the date of grant.  Accordingly,
 the Company does not have any compensation expense in respect of the
 options under the plans and there is no impact on the profit after tax
 of the Company for the year.
 
 The fair value of the options under the plan using the binomial option
 pricing model based on the following parameters is Nil.
 
 (i)   Fair value of share at grant date            Rs. 35.30*
 (ii)  Exercise price                               Rs. 40.00
 (iii) Expected volatility                              0%
 (iv)  Expected forfeiture percentage on each 
 vesting date                                           5%
 (v)   Option life                                  1 through 10 years
 (vi)  Expected dividends                               8%
 (vii) Risk-free interest rate                          8%
 
 The expected volatility has been taken as 0% since the Company was not
 listed on the date of grant / as at March 31,2008. As the fair value of
 the options is lower than the exercise price of the option there is no
 compensation expense in respect of the options granted based on the
 fair value and accordingly there is no impact on the profit after tax
 and on the Basic and Diluted Earnings per Share of the Company for the
 year.
 
 [(*) The Fair value of the share as worked out by an independent valuer
 works out to Rs. 176.50 per equity share of face value of Rs 10 each on
 the date of grant. As the face value of the Equity Share of the Company
 stands reorganized to Rs 2 each, accordingly the valuation has been
 reduced proportionately to Rs 35.30 per equity share of Rs 2 each.]
 
 5) Subsequent to the year end the equity shares of the Company were
 listed on National Stock Exchange of India Limited (NSE) and Bombay
 Stock Exchange Limited (BSE) on April 2,2008.
 
 6) Contingent liability not provided for in respect of:
 
 a) Bank guarantees outstanding in respect of credit facilities availed
 from banks Rs. 5,850,000,000 (Previous Year Rs. 4,600,000,000).
 
 b) Capital commitments in respect of interior works and acquisition of
 fixed assets as at the year end (net of advances)Rs. 18,655,387
 (Previous Year Rs. 15,401,012).
 
 7) Secured Loans
 
 a) Vehicles Loans of Rs. 47,058,929 (Previous Year Rs. 45,501,234) are
 secured against hypothecation of Vehicles.
 
 b) Working Capital loan of Rs. 400,000,000 (Previous Year Rs. Nil) is
 secured against Fixed Deposits with Banks and personal guarantee of a
 promoter director and a promoter of the Company.
 
 8) Fixed deposits include Rs. 2,925,000,000 (Previous Year Rs.
 2,300,000,000) pledged against bank guarantees issued by various banks
 for base capital and additional base capital with Bombay Stock Exchange
 Limited and National Stock Exchange of India Limited. Fixed Deposits
 include Rs. 200,000,000 (Previous Year Nil) pledged against working
 capital loan taken from bank.
 
 9) The profit on squaring off of erroneous transactions amounting to
 Rs. 3,428,597 (Net) (Previous Year loss Rs.  2,171,724 (Net)) has been
 adjusted to Profit and Loss account.
 
 10) Remittance during the year in foreign currency on account of
 preference dividend interim Dividend (Year ended March 2008)
 
 Number of Shareholders: 1 (Previous Year: Nil)
 
 Preference Shares held on which dividend is remitted: 9,966,667
 (Previous Year Nil)
 
 Amount Remitted: Rs. 1,722,987* (Previous Year Nil)
 
 * The above remittance includes preference dividend for the half year
 ended September 30,2007 amounting to Rs. 1,148,658 paid by the
 erstwhile holding Company to the preference shareholders and is being
 transferred to the Company in accordance with the Scheme.
 
 Note: The Company does not have information as to the extent to which
 remittances, if any, in foreign currencies on account of dividend have
 been made by non- resident shareholders.
 
 11) During the year the Company has apportioned personnel cost
 amounting to Rs 146,257,558, Rs. 31,404,402 to Indiabulls Financial
 Services Limited and Indiabulls Finance Company Private Limited
 respectively being cost of employees on deputation to erstwhile group
 companies.
 
 12) During the year, the Company acquired 1,098,317 Ordinary Shares of
 face value of £ .001in Copal Partners Limited amounting to Rs
 476,694,683.
 
 13) During the year the Company invested an amount of Rs. 500,000 in
 one wholly owned subsidiary Devata Tradelink Limited
 
 14) Disclosures under the Micro, Small and Medium Enterprises
 Development Act, 2006:
 
 a) An amount of Rs. Nil (Previous Year Nil) and Rs. Nil (Previous Year
 Nil) was due and outstanding to suppliers as at the end of the
 accounting year on account of Principal and Interest respectively.
 
 b) No interest was paid during the year.
 
 c) No interest is payable at the end of the year other than interest
 under Micro, Small and Medium Enterprises Development Act, 2006.
 
 d) No amount of interest was accrued and unpaid at the end of the
 accounting year.
 
 The above information and that given in Schedule H - Current
 Liabilities and Provisions regarding Micro, Small and Medium
 Enterprises has been determined to the extent such parties have been
 identified on the basis of information available with the Company. This
 has been relied upon by the auditors.
 
 15) No borrowing cost has been capitalised during the year.
 
 16) Derivative Instruments:
 
 The Company has not entered into any derivative instrument during the
 year. The Company does not have any foreign currency exposures towards
 receivables, payables or any other derivative instrument that have not
 been hedged.
 
 17) Provision for Current Tax includes provision for Wealth Tax of Rs.
 361,000 (Previous year Rs. 271,000).
 
 18) As per the best estimate of the management, no provision is
 required to be made as per Accounting Standard (AS) 29 - Provisions,
 Contingent Liabilities and Contingent Assets as notified under the
 Companies (Accounting Standards) Rules, 2006, in respect of any present
 obligation as a result of a past event that could lead to a probable
 outflow of resources, which would be required to settle the obligation.
 
 19) In respect of amounts as mentioned under Section 205C of the
 Companies Act, 1956, there were no dues required to be credited to the
 Investor Education and Protection Fund as at March 31,2008.
 
 20) Previous years figures have been re-grouped / re-arranged wherever
 considered necessary to confirm to current years groupings and
 classifications.