India Infoline

The Directors have pleasure in presenting the 13th Annual Report along
 with the audited statements of accounts of your Company for the
 financial year ended March 31, 2008.
 
 1. Financial results
 
 A snapshot of the financial performance of the Company and its major
 subsidiaries for the year 2007-08 is as under:
 
                                                                (Rs mn)
 
                        Revenues   Profit before interest,     Profit 
                                                               after tax
                                   depreciation and tax
 
 India Infoline Ltd       6,724.4              2,772.5         1,286.9
 India Infoline 
 Investment Services Ltd  1,522.1              1,208.9           315.5
 Moneyline Credit Ltd       113.2                (19.4)          (20.7)
 India Infoline 
 Distribution Company Ltd    18.4                (71.3)          (56.0)
 India Infoline Marketing 
 Services Ltd               405.0                129.7            75.3
 India Infoline Insurance 
 Services Ltd               688.1                 (4.2)          (41.7)
 India Infoline 
 Commodities Ltd            170.1                 14.7             8.3
 India Infoline Media and 
 Research Services Ltd      823.8                 98.1            63.0
 Other subsidiaries          96.9                 62.4            51.2
 Inter-company adjustments (326.1)              (169.2)          (42.5)
 Aggregate               10,235.9              4,022.2         1,639.3
 
 
 Before exceptional items
 
 A snapshot of the stand-alone financial performance of India Infoline
 Limited is as under:
 
                                                                (Rs mn)
                                               2007-08         2007-06
 
 Gross total income                            6,724.4         2,867.2
 Profit before interest, depreciation and 
 taxation                                      2,772.5           983.4
 Interest and financial charges                  211.6            63.9
 Depreciation                                    194.4           123.3
 Profit before tax                             2,366.5           796.2
 Taxation - Current                              793.4           260.7
 - Deferred                                      (20.3)            2.4
 - Fringe benefit tax                             10.9            11.9
 - Short or excess provision of income-tax         5.3             0.0 
 Net profit for the year                       1,577.2           521.2 
 Less: Extraordinary items (Net of tax)          290.4             0.0
 Less: Appropriations
 Dividend:
 Interim dividend                                  0.0           149.6
 Proposed final dividend                         342.6             0.0
 Dividend distribution tax                        58.2            21.0
 Transfer to general reserves                    131.0            53.0
 Add: Balance brought forward from previous year 474.1            83.5
 Add: Other adjustments (profits of India 
 Infoline Securities Private Limited added 
 pursuant to merger)                               0.0            93.0
 Balance to be carried forward                 1,229.1           474.1
 
 2.  Review of operations
 
 The Company has emerged as a strong player in the financial services
 space and continues to scale new heights on a sustained basis year on
 year.  On a consolidated basis, the Company’s income posted a strong
 growth of 140% to reach Rs 10,235.9 mn, while profit after tax rose by
 111% to Rs 1,598.8 mn.
 
 Income from the core business of equities broking grew by 155% to Rs
 5,896.6 mn, whereas life insurance agency income grew by 80% to Rs
 1,065.5 mn, income from distribution of mutual funds grew by 27% and
 stood at Rs 190.9 mn. The income from financing grew by 450% to Rs
 1,937.5 mn, whereas income from merchant banking activities grew by
 473% and stood at Rs 161.4 mn. The other businesses viz., commodity
 broking and online & other media also showed healthy growth.
 
 The Company continues to strengthen its network and by end of year had
 758 business locations spread across 346 cities and towns. The employee
 strength also rose significantly to 14,105 as at March 31, 2008.
 
 3.  Key initiatives
 
 Your Company has taken several new initiatives during the year. The new
 institutional broking business set up during the year has started
 showing results and is expected to grow even further. The institutional
 broking division (IIFL) has entered into an exclusive partnership with
 Auerbach Grayson & Company, Inc., a New York-based brokerage firm to
 offer US investors premium access to invest in India’s capital markets.
 Through this partnership, IIFL will offer Auerbach Grayson’s
 institutional clients in the US, on-the-ground research and trade
 execution. This tie-up will enhance your Company’s distribution reach
 in the US.
 
 The Company has launched consumer finance business under the brand name
 ’Moneyline’ which has received a very encouraging response. The
 Company’s product offerings include personal loans for salaried /
 self-employed people, loan against residential, commercial and
 industrial property as collaterals, apart from business loans and loans
 against securities.
 
 The Company has identified Wealth Management as another area of growth
 in the future. In this regard, it has setup a subsidiary, IIFL Wealth
 Management Ltd., to provide focused services to its clients. A seasoned
 wealth management team has been established with proven professionals
 from the industry. New products are to be launched from the first
 quarter of the coming year.
 
 With the addition of experienced professionals your Company’s
 investment banking services have also gained significant traction
 during the year.
 
 Keeping in mind long-term requirements and expansion plans for the
 group, your company has procured offices at strategic locations in
 Ahmedabad, Pune, Delhi, Rajkot and Chennai during the year through a
 wholly owned subsidiary, IIFL Realty Ltd.
 
 4.  Dividend on equity shares
 
 Considering the strong performance and in line with the payout policy,
 the Directors recommend a dividend of Rs 6 per share of Rs 10 (previous
 year Rs 3).  The total outflow on account of dividend payout (including
 dividend distribution tax and surcharge), if approved at the ensuing
 Annual General Meeting, will be Rs 400.8 mn (previous year Rs 170.6
 mn). The dividend will be paid to all the shareholders, whose names
 appear in the register of members/ beneficial holders list on the book
 closure date.
 
 5.  Changes in equity capital
 
 During the year, the following changes were effected in the capital of
 the Company:
 
 a) The authorised share capital of the Company was increased from Rs
 0.8 bn to Rs 1 bn, pursuant to the approval of shareholders in the
 Extraordinary General Meeting of the Company held on January 17, 2008.
 
 b) Upon the exercise of balance conversion of 1,000 optionally
 convertible bonds into equity shares, the Company had allotted 588,235
 equity shares to DSP Merrill Lynch Capital Ltd on June 7, 2007, at a
 conversion price of Rs 170 per share as per the terms of preferential
 issue and SEBI (Disclosure and Investor Protection) guidelines.
 
 c) Upon the exercise of 2,600,000 equity warrants issued to promoters
 on February 7, 2006, the Company had allotted 2,600,000 equity shares
 on August 6, 2007, at a conversion price of Rs 170 per share as per the
 terms of preferential issue and SEBI (Disclosure and Investor
 Protection) guidelines.
 
 d) The Company has allotted 3,700,000 equity shares to Orient Global
 Tamarind Fund Pte. Ltd., Singapore on January 30, 2008, on preferential
 basis at the price of Rs 1,500 per share as per SEBI (Disclosure and
 Investor Protection) guidelines.
 
 e) During the year, the Company allotted 47,500 equity shares pursuant
 to exercising of options by the employees under the ESOP scheme 2005.
 
 6.  Deposits
 
 During the period under review, your Company has not accepted/ renewed
 any deposits within the meaning of Section 58 A of the Companies Act,
 1956, and the rules thereunder.
 
 7.  Subsidiary companies
 
 As at March 31, 2008, the Company had following major operating
 subsidiaries:
 
 India Infoline Investment Services Ltd
 
 Moneyline Credit Ltd
 
 India Infoline Distribution Company Ltd
 
 India Infoline Marketing Services Ltd
 
 India Infoline Insurance Services Ltd
 
 India Infoline Commodities Ltd
 
 India Infoline Media and Research Services Ltd
 
 IIFL (Asia) Pte Ltd
 
 IIFL Realty Ltd
 
 IIFL Wealth Management Ltd
 
 As approved by the Central Government under Section 212(8) of the
 Companies Act, 1956, copies of the balance sheet, profit & loss
 account, report of the Board of Directors and report of the auditors of
 each of the subsidiary companies have not been attached to the accounts
 of the Company for financial year 2008. The Company will make available
 these documents/details upon request by any member of the Company.
 These documents/details will also be available for inspection by any
 member of the Company at its registered office and also at the
 registered offices of the concerned subsidiaries. As required by
 Accounting Standard- 21 (AS-21) issued by the Institute of Chartered
 Accountants of India, the Company’s consolidated financial statements
 included in this Annual Report incorporate the accounts of its
 subsidiaries. A summary of key financials of the Company’s subsidiaries
 is also included in this Annual Report.
 
 8.  Management Discussion and Analysis
 
 The Management Discussion and Analysis Report for the year under review
 as required under Clause 49 of the Listing Agreement, is given as a
 separate statement in the annual report.
 
 9.  Disclosure of employee stock options
 
 Besides the existing Employees Stock Option Scheme 2005 (ESOP 2005)
 providing for 25,00,000 stock options to the employees, the Company
 also implemented an Employees Stock Option Scheme 2007 (ESOP 2007),
 under SEBI (Employee Stock Option Scheme and Employee Stock Purchase
 Scheme) Guidelines, 1999, as approved by shareholders on October 20,
 2007.  The ESOP 2007 provides for 1,500,000 stock options.
 
 During the year, the Company has granted 1,000,000 stock options
 (1,500,000 stock options granted in the previous year) to the employees
 under its ESOP 2005 and 655,000 stock options under ESOP 2007 out of
 the ESOP pool consisting of unissued and lapsed options.
 
 Following are the disclosures in terms of Clause 12 of the SEBI
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
 Guidelines, 1999.
 
 
 Particulars                        ESOP 2000   ESOP 2005      ESOP 2007
 
 Options outstanding as at              2,000   1,500,000             0
 the beginning of the year
 
 a Options granted during the year          0   1,000,000       655,000
 b Pricing formula                      Rs 10          
 
 The exercise price may be                The exercise price may be
 decided by the Compensation              decided by the compensation
 Committee in accordance with             committee in accordance
 the Securities and Exchange              with Securities and Exchange
 Board of India (Employee Stock           Board of India (Employee
 Option Scheme and Employee               Stock Option Scheme and
 Stock Purchase Scheme)                   Employee Stock Purchase
 Guidelines and any                       Scheme) Guidelines and any
 amendments thereto, subject              amendments thereto, subject
 to a maximum discount of 25%             to a maximum discount of
 to the market price.                     25% to the market price.
 
 c     Options vested                    0       137,500           0
 d     Options exercised                 0        47,500           0
 e     Total no. of shares arising       0        47,500           0
 as result of exercise of options
 
 f     Options lapsed *                  0       150,000        11,000
 g    Variation in terms of options      None       None         None
 H    Money realised by exercise         0          7.13             0
      of options (in mn)
   Total number of options in force  2,000     2,302,500       644,000
 
 Lapsed options include options cancelled/lapsed.
 
 J     Employee-wise details of options granted to:
 
 - Senior management             Mr. Nilesh Vikamsey,           6,000
                                 Independent Director
 
                                 Mr. Kranti Sinha,
                                 Independent Director           5,000
 
 - Any other employee who 
 receives a grant in any        Mr. Prabodh Agrawal           200,000
 one year of option amounting 
 to 5% or more of
 option granted during that year
 
 - Employees who were granted option,             Nil             Nil
 during any one year, equal to or exceeding
 1% of the issued capital (excluding warrants
 and conversions) of the Company
 at the time of grant
 
 K Diluted earnings per share pursuant to issue     Rs 20.1
 of shares on exercise of options calculated in
 accordance with AS 20 earnings per share
 
 Pro forma adjusted net income and earning per share
 Net income as reported                               1,286,868,137
 Add: intrinsic value compensation cost                  59,974,467
 Less: fair value compensation cost                     171,803,467
 Adjusted pro forma net income                        1,175,039,137
 Earning per share: basic as reported                          24.3
 Adjusted pro forma                                            22.2
 Earning per share: diluted as reported                        20.1
 Adjusted pro forma                                            18.4
 
 m weighted average exercise price of options   ESOP 2005    ESOP 2007
 
 granted during the year whose
 
 (a)    Exercise price equals market price             NA         NA
 
 (b)    Exercise price is greater than market price    NA         NA
 
 (c)    Exercise price is less than market price       700.2   1,004.6
        Weighted average fair value of options granted 
        during the year whose
 
 (a)    Exercise price equals market price             NA         NA
 
 (b)    Exercise price is greater than market price    NA         NA
 
 (c)    Exercise price is less than market price       542.0     622.9
 
 n   Description of method and significant assumptions          
 
 The fair value of the options granted has been estimated using used to
 estimate the fair value of options the Black-Scholes option pricing
 model. Each tranche of vesting has been considered as a separate grant
 for the purpose of valuation. The assumptions used in the estimation of
 the same has been detailed below:
 
 Weighted average values for options granted during the year
 
 
 Variables                              ESOP 2005        ESOP 2007
 
 Stock price                              905.7           1,103.3
 Volatility                                73.4%             74.1%
 Risk-free rate                             7.7%              7.3%
 Exercise price                           700.2           1,004.6
 Time to maturity                           4.4               4.0
 Dividend yield                             1.9%             1.87%
                                          542.0             622.9
 
 Stock price: Closing price on NSE as on the date of grant has been
 considered for valuing the grants.
 
 Volatility: We have considered the historical volatility of the stock
 from the date of listing of the shares of the Company on NSE till the
 date of grant to calculate the fair value.
 
 Risk-free rate of return: The risk-free interest rate being considered
 for the calculation is the interest rate applicable for a maturity
 equal to the expected life of the options based on the zero-coupon
 yield curve for government securities.
 
 Exercise price: The exercise price may be decided by the Compensation
 Committee in accordance with the Securities and Exchange Board of India
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
 guidelines and any amendments thereto, subject to a maximum discount of
 25% to the market price.
 
 Time to maturity: Time to maturity / expected life of options is the
 period for which the Company expects the options to be live. The
 minimum life of a stock option is the minimum period before which the
 options cannot be exercised and the maximum life is the maximum period
 after which the options cannot be exercised.
 
 Expected dividend yield: Expected dividend yield has been calculated as
 an average of dividend yields for the two financial years preceding the
 date of the grant.
 
 10. Directors
 
 Mr. Sanjiv Ahuja, resigned as an Independent Director from the Board of
 the Company on October 23, 2007.
 
 In accordance with Section 255 and 256 of the Companies Act, 1956, and
 with Article 137 of the Articles of Association of the Company, Mr.
 Nilesh Vikamsey, retires by rotation and, being eligible, offers
 himself for reappointment at the ensuing Annual General Meeting of the
 Company.
 
 Pursuant to the provisions of Section 260 of the Companies Act, 1956,
 Mr. A. K. Purwar was appointed as an Additional Director on the Board
 of the Company on March 10, 2008.  Mr. Purwar would hold office up to
 the date of the ensuing Annual General Meeting. The Company has
 received notice in writing from a member proposing the candidature of
 Mr. A. K.  Purwar for the office of Director, liable to retirement by
 rotation.
 
 Brief profiles of the Directors proposed to be appointed/ reappointed;
 qualification, experience and the names of the Companies in which they
 hold directorship, membership of the Board committees, as stipulated in
 the Clause 49 of the Listing Agreement are provided as an annexure to
 the Notice convening the Annual General Meeting.
 
 11. Directors’ Responsibility Statement
 
 As required by Section 217 (2AA) of the Companies Act, 1956, your
 Directors confirm that:
 
 (a) In the preparation of the annual accounts, the applicable
 accounting standards have been followed;
 
 (b) Appropriate accounting policies have been selected and applied
 consistently and that judgments and estimates made are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 your Company as at March 31, 2008, and of its profit for the year ended
 on that date;
 
 (c) Proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956, for safeguarding the assets of your Company and
 for preventing and detecting fraud and other irregularities;
 
 (d) The annual accounts have been prepared on a going concern basis.
 
 12.  Conservation of energy, technology absorption, foreign exchange
 earnings and outgo The additional information required in accordance
 with Sub-section (1)(e) of Section 217 of the Companies Act, 1956, read
 with the Companies (Disclosure of Particulars in the Report of the
 Board of Directors) Rules,1988, is appended to and forms part of this
 report.
 
 13.  Corporate Governance Report
 
 Your Company has complied with all the mandatory provisions of the
 revised Clause 49 of the Listing Agreement. As part of the Company’s
 efforts towards better corporate practice and transparency, a separate
 report on Corporate Governance compliances is included as a part of the
 Annual Report.
 
 A certificate from the Statutory Auditors M/s. Sharp & Tannan
 Associates, Chartered Accountants, regarding compliance with the
 conditions of Corporate Governance as stipulated under Clause 49 of the
 Listing Agreement is attached to this report on Corporate Governance.
 
 14.  Particulars of employees
 
 In accordance with the provisions of Section 217(2A) of the Companies
 Act, 1956, and the rules framed thereunder, the names and other
 particulars of employees are set out in the annexure to the Directors’
 Report. In terms of the provisions of Section 219 (1)(b)(iv) of the
 Companies Act, 1956, the Directors’ Report is being sent to all the
 shareholders of the Company excluding the aforesaid information. The
 annexure is available for inspection at the registered office of the
 Company. Any shareholder interested in the said information may write
 to the Company Secretary at the registered office of the Company.
 
 15.  Auditors and Auditors’ Report:
 
 M/s. Sharp & Tannan Associates, Chartered Accountants, Mumbai, the
 Company’s Statutory Auditors, retire at the ensuing Annual General
 Meeting and being eligible offer themselves for re appointment. M/s.
 Sharp & Tannan Associates have sought re-appointment and confirmed that
 their re-appointment shall be within the limits of Section 224(1B) of
 the Companies Act, 1956.
 
 The necessary eligibility certificate under Section 224(1B) of the
 Companies Act, 1956, has been received from them.  The Audit Committee
 and Board of Directors recommend the appointment of M/s. Sharp & Tannan
 Associates, Chartered Accountants, as the Auditors of the Company.
 
 The notes to the accounts referred to in the Auditors Report are self
 explanatory and therefore do not call for any further comments.
 
 Acknowledgement
 
 The Directors place on record their gratitude to the Government,
 regulators, stock exchanges, other statutory bodies and the Company’s
 bankers for the assistance, co-operation and encouragement extended to
 the Company. The Directors also place on record their sincere
 appreciation of the employees for their continuing support and
 unstinting efforts in ensuring an excellent all-round operational
 performance. Last but not the least, the Directors would like to thank
 valuable shareholders for their support and contribution. We look
 forward to their continued support in the future.
 
                                             On behalf of the Board
 
                                             Nirmal Jain
                                        Chairman and Managing Director
 Dated: April 26, 2008
 
 Registered Office:
 75, Nirlon Complex,
 Off Western Express Highway,
 Goregaon (East),
 Mumbai - 400 063.