The Directors have pleasure in presenting the Twelfth Annual Report
 together with the Audited Accounts of the Company for the year ended 31st March, 1998.
 
 AMALGAMATION OF ONLINE FINANCIAL SERVICES LIMITED
 
 The scheme of Amalgamation of Online Financial Services Ltd. (ONLINE)
 with the Company, which was approved at the Extra Ordinary General Meeting of the Company held on 9th March,
1998 was approved by the High
 Court of Judicature at Madras vide its Order dated 24th April, 1998 and
 the Amalgamation is effective from 1st April, 1997.  Accordingly, the
 Annual accounts being presented to the Members are the merged accounts
 in which the accounts of ONLINE for the year ended 31st March, 1998 have been incorporated.  As provided in
the scheme of Amalgamation, the allotment of the Company shares to erstwhile shareholders of ONLINE was
 made on 21st August, 1998.
 
 FINANCIAL RESULTS AND APPROPRIATIONS
 
 	                                           For the	        For the
 	                                        year ended	     year ended
 	                                          31 03.98	       31.03.97
 	                                      (Rs in lacs)	  (Rs. in lacs)
 
 
 Gross Income	                                571.35		     962.86
 Profit/(Loss) Before Depreciation	          (128.31)	         254.56
 Less : Depreciation	                            275.79	         229.39
 Operating Profit/(Loss)	                      (404.10)	          25.71
 Less : Miscellaneous
        Expenditure written	                  9.60	          19.46
 Profit/(Loss) Before Tax	                  (413.70)		       5.71
 Less : Provision for NPA (Net)	                543.91	           3.00
 Less : Provision for Taxation	                     - 	           2.00
 Profit/(Loss) After Tax	                      (957.61)	           0.71
 Amount brought forward
      from previous year	                         53.55	          17.16
 Less : Transfer to General
      Reserve II	                                     - 		      12.00
 Add  : Transfer from General
      Reserve I	                                124.60		          -
 
 Surplus/(Deficit) carried
 forward to Balance Sheet	                  (779 47)	           5.87
 
 REVIEW OF OPERATIONS
 
 The Company, as a matter of its corporate policy, has been extending
 Lease/Hire Purchase finance mainly to the corporate segment.  On account of the liquidity constraints faced
by this sector, there were defaults in repayment of lease and hire purchase instalments resulting in
significant increase in the level of Non Performing Assets (NPAs) of the Company for the year ended 31st
March, 1998.
 
 The low collections from the corporate segment together with the reduction in Fixed Deposit base adversely
affected the liquidity position of the Company.  Accordingly, the Company was forced to reduce the size of
its business, resulting in increase in the NPAs as a percentage of total business done during the year under
reference.
 
 In January, 1998, Reserve Bark of India (RBI) had prescribed stricter
 prudential norms with regard to provisioning for NPAs, income recognition, capital adequacy ratio, etc.  The
cumulative problems faced by Non Banking Finance Companies (NBFCs) during the last two years resulted in the
Company suffering a loss of Rs. 9 crores for the year ended 31st March, 1998.
 
 The Company is seized of the problems and is exploring various alternatives of its revival including the
identification of a new Partner who could help the Company to survive in a more competitive 
 environment.  The Directors are confident that with an improvement in the economy a ma)or portion of the
overdues will be recovered and the
 provisions made during the year under reference in accordance with the
 RBI guidelines reversed.
 
 The Company has recently reorganised its existing manpower with a view
 to improving the collection performance.  The Company has also drawn up
 strategies to downsize the business levels, reduction of overheads, etc., to improve the profitability and
liquidity in the light of the
 changing economic scenario.
 
 The Directors are pleased to inform that the Foreign Investment Promotion Board (FIPB), vide its letter
No.3/ 69/SIA/NFC/97-NRI dated
 August 4, 1998, has approved the investment of 12,50,000 - 7%
 Cumulative Convertible Preference Shares of Rs. 100/- each aggregating
 Rs. 12,50,00,000/- by Maika Holdings Berhad, Malaysia, (MAIKA) in the
 Company.  Despite the South East Asian crisis, the Directors are
 confident of pursuing MAIKA to go through the investment.
 
 DIVIDEND
 
 In view of the losses incurred for the year ended 31st March, 1998, the Board of Directors considered it
prudent not to recommend dividend for the year.
 
 FIXED DEPOSITS
 
 The new regulatory framework issued by RBI also contained severe restrictions on the mobilisation of
deposits by the NBFCs.  The Company
 is well positioned to meet the revised guidelines on deposits within the time stipulated by RBI.  The fixed
deposits held on 31st March, 1998 stood at Rs. 3.81 crores (previous year Rs. 7.77 crores).  At the close of
the year there were deposits aggregating Rs. 1.22 crores remaining unclaimed or due to be renewed and efforts
are being made to obtain the depositors instructions.  With continued apathy of depositors towards NBFCs, the
refund requests were in far excess of the renewals.  As a result of this trend, there had been a delay to
meet the depositors' obligation on due dates.  The Company, in fact, prematurely encashed investment in
Government Securities to pay off refund requests from depositors resulting in a shortfall in the maintenance
of liquid assets.
 
 DIRECTORS
 
 During the year, Messrs V. Srinivasan, Ram V.  Tyagarajan, Manikam
 Ramaswamy, S. Nandagopal and P.C.D. Nambiar resigned from the Board. The Board places on record its
appreciation of the valuable services rendered by them during their tenure on the Board of the Company.
 
 Mr. V.S. Narasimhan was appointed as an additional director, pursuant to Section 260 of the Companies Act,
1956.  He vacates the office at the ensuing Annual General Meeting and a Notice has been received from a
Member proposing his appointment on the Board of the Company.
 
 Mr. M Narayanamurthi was appointed as a Managing Director for a period of five years with effect from 1st
July, 1998 at the Board Meeting held
 on 29th June, 1998.  Mr M. Narayanamurthi is also the Managing Director
 of Premier Housing and Industrial Enterprises Limited.
 
 Mr. M. Narayanamurthi, retires by rotation and is eligible for re-appointment.
 
 AUDITORS
 
 M/s. Price Waterhouse, Chartered Accountants, Chennai, retire from the
 office of Auditors and are eligible for re-appointment as Auditors of the Company till the conclusion of the
next Annual General Meeting.
 
 INFORMATION AS PER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956
 
 The Company has no activity relating to conservation of energy or
 technology absorption.
 
 During the year under reference, the Company did not have any foreign
 exchange earnings or outgo.