contents · 68 profit & loss account of indiabulls financial ... indiabulls housing finance ......

CONTENTS

1 Letter to Shareholders

3 Scaling New Peaks

4 Company Information

5 PAN India Footprint

6 Consistent Growth Over 6 Years

7 Financial Highlights (Consolidated)

8 Management Discussion and Analysis

11 Report on Corporate Governance

23 Shareholders’ Referencer*

31 Directors’ Report

38 Auditors' Report on Consolidated Financial Statements

39 Consolidated Balance Sheet

40 Consolidated Profit and Loss Account

41 Consolidated Cash flow Statement

42 Schedules forming part of the Consolidated Balance Sheet & Profit &

Loss Account

64 Auditors’ Report on Financial Statements of Indiabulls Financial

Services Limited

67 Balance Sheet of Indiabulls Financial Services Limited

68 Profit & Loss Account of Indiabulls Financial Services Limited

69 Cash Flow Statements of Indiabulls Financial Services Limited

70 Schedules forming part of Balance sheet & Profit & Loss Account of

Indiabulls Financial Services Limited

91 Statement pursuant to Section 212 of the Companies Act, 1956

92 Details of Subsidiary Companies

93 Balance Sheet Abstract

ANNUAL REPORT 2005-2006

1


Letter to Shareholders

Dear Shareholders,

FY 2006 was a transformational year for Indiabulls as the company executed on its vision to be a leader in diversified financial

services and branch out beyond our heritage in the Securities Business. We launched our Housing Finance Company,

Indiabulls Housing Finance Limited, strengthened the position of Indiabulls Credit Services Limited, and continued to show

our leadership and momentum in Securities business.

Our real estate business has traveled a remarkable journey from March last year when we acquired the first NTC Mill in an

auction and we have developed into one of the largest real estate developers in the country with many high value projects

in Delhi and Mumbai. We have ambitious growth plans in the business and thus announced shortly after the fiscal year end

that we plan to separate the real estate business into a separate public company with an independent and dedicated

management team.

Extraordinary Financial Performance

We had an extraordinary year of financial performance as our revenues more than tripled to Rs 613.15 crores, our net profits

after tax more than quadrupled to Rs 253.36 crores and our consolidated net worth expanded manifold to over 1,681 crores.

Our customer base expanded by over four times to 3,75,000 approximately as we continued our national expansion and have

over 400 offices in 127 cities across our various businesses.

Continue to Execute on Long term Vision and Strategy

We believe that the rapid growth and maturation of Indian financial markets provide a unique opportunity to create a leader

in diversified financial services, who is able to offer a one-stop shop for all investments and credit needs of retail clients, and

build a long term relationship with its customers. We believe that ultimately a handful of big players will emerge as winners

as the credit and securities business continue to grow and consolidate, and barriers to entry and scale advantages dominate

the business. Technology, analytics and national scale provide unique advantages to our business model when combined with

strong sales and marketing and local presence. Only a handful of financial institutions are building a national brand and

serving the customer across product needs. With the power of information, technology and strong local presence, we could

build a winning national scale credit and securities business.

Securities Business continues to provide Exceptional Results

Our retail brokerage and securities business continued to generate exceptional results. Every business metric exceeded our

expectations and we delivered record revenues and profits in each quarter of the year. Our client acquisition strategy has

been bearing fruit as we ramped up our monthly customer adds from a few thousands to over 25,000 per month by the end

of the fiscal year, providing us with one of the fastest growing and most valuable consumer franchise in the country. The

securities industry is undergoing consolidation as the top five leaders continue to increase their market share, and we have

retained our leadership position in both volumes and profits in the business. Our customers have multiple product

relationships with us including brokerage transactions across various asset classes, depositary and research services, financing

products and many other innovations. Given our success in customer acquisition, we are very confident of our continued

strong growth and business performance.

Our Credit businesses have gained a strong footing

Indiabulls consumer credit and housing loan products have been well established in the market place and are now offered

out of over 165 locations. We have a strong credit sales team in place across the country and our sales volume and credit

performance has been ahead of business expectations. We believe that 2007 fiscal year will demonstrate the earning power

of the business as product ramp-up starts to show through the bottom line. We are growing our business at high triple digit

rates organically and continue to add products and segments to the portfolio.


2

We’re Creating A Leading Financial Services Brand

Indiabulls has built one of the largest customer franchises in India with almost 3,00,000 customers as of March 2006. We

believe that building a great brand that customers trust is essential to creating a diversified financial services company. The

most important aspect our brand building is that it has not been achieved by spending lots of money on advertising, but by

living up to our promise of unparalleled customer service and satisfaction and through our dedicated and skilled sales and

delivery channels. We are completely focused on delivering great value and convenience to our customers and to retain and

build on their trust.

Our Real Estate Development business has become a national leader

Indiabulls entered into the real estate development through its associate companies in March 2005 to exploit the huge

opportunity in an unconsolidated industry with fat margins and huge market opportunity, where we can bring our strong

execution skills and create a national leader. We partnered with strong international investors to acquire projects in Delhi

and Mumbai and have seen significant appreciation in the value of our holdings.

Our associate companies have acquired 19 acres in Central Business District of Mumbai at a total cost of Rs 718 crores. The

sale had hit a roadblock with an adverse judgment from the Bombay High Court in October 2005. In a petition by Indiabulls

and other affected parties, the Supreme Court passed an order earlier this year dismissing the High Court judgment and

providing clearance for the redevelopment of the mill lands in Mumbai clearing all the legal and regulatory hurdles to develop

our landmark projects.

With the legal battle behind us, we are executing our plan to separate the real estate business into a separate company to

provide our shareholders to directly participate in this huge opportunity.

Our People Drive Our Success

This year was the most transformational year in the company’s history, and our people delivered tremendous results. Our

employees stepped up to deliver on some of the most audacious goals in financial services. Our Board of Directors continued

to provide strong leadership and guidance, and our executive management was augmented by the addition of many

experienced and talented executives from leading companies. Our people philosophy sounds simple – we search the country

to find great people and then give them an opportunity to be great.

Attracting great talent is one of the most talked about and least delivered on things in business. At Indiabulls, we’ve always

made finding and empowering the best people the number one job of every manager in our company. The power of attracting

great people outweighs everything else we do. Our success over the years is directly attributable to the tremendous skills and

determination of our associates. We feel lucky and proud to work alongside them as we continue our company’s journey.

Above everything else we feel that Indiabulls has progressed due to the grace of God and with His divine blessings bestowed

upon us all along, we have been able to come so far. We have both hope and confidence to go further from here.

Sincerely,

Sameer Gehlaut Rajiv Rattan

Chairman and CEO Co-Founder, President & CFO

3


SCALING NEW PEAKS

• Rated as the “Fastest Growing Large Cap Company” in India in a report by Business

Today magazine in April, 2006

• Ranked No. 82 in BT 500, the Business Today rankings for India’s corporates

• More than 15,000 employees in over 400 Group offices spread over 127 cities reach

out to customers across the country; Company’s personal/housing loan business expands

to 168 branches in 26 cities, while customer base in the securities business exceeds

300,000 even as the Company makes aggressive inroads into commercial vehicle loans,

home loans, and loan against property market

• The Company kicks off strategic diversification by foraying into the booming real estate

sector by:

- winning bids for the Jupiter and Elphinstone Mills in Mumbai as part of the NTC

Mills auction

- forming joint venture with DLF Universal to acquire 35.8 acres of prime land in

south Delhi by putting in the highest bid of Rs 450 crore in the auction carried out

by Delhi Development Authority

- acquiring over 150 acres of land in Sonepat in the National Capital Region (NCR) to

develop prime residential housing project

• Global steel magnate Mr. L N Mittal, through the LNM India Internet Ventures Ltd.

(LNMIIV), reiterates his commitment to the Group by acquiring 8.2% stake in Indiabulls

Credit Services Limited.

• The Company completes share subscription agreement with Oberon Limited, a special

purpose vehicle wholly owned by funds managed and controlled by Farallon Capital

Management L.L.C. Under the terms of the agreement, Oberon to be allotted convertible

preference and non-convertible preference shares for a total consideration of Rs. 644

crores.


4

Board of Directors BankersMr. Sameer Gehlaut ABN Amro BankMr. Rajiv Rattan Andhra BankMr. Saurabh K. Mittal Bank of MaharashtraMr. Aishwarya Katoch Bank of RajasthanMr. Shamsher Singh Canara BankMr. Karan Singh Centurion Bank of Punjab Ltd.Mr. Kartar Singh Gulia Citi BankMr. Gagan Banga Dena Bank

HDFC Bank Ltd.Company Secretary: Hongkong & Sanghai BankingMr. Amit Jain Corporation Limited

ICICI Bank LimitedInternal Auditors: IDBI Bank LimitedGupta Kapoor & Co. Indusind BankChartered Accountants ING Vysya Bank419, GH-13, Paschim Vihar, Karnataka BankNew Delhi-110 087 Karur Vysya Bank

Lord Krishna BankStatutory Auditors: Punjab National BankDeloitte Haskins & Sells, Standard Chartered Bank12, Dr. Annie Besant Road, State Bank of IndiaOpp. Shiv Sagar Estate, Syndicate BankWorli, Mumbai UCO Bank

Union Bank of IndiaRegistrars & Transfer Agents: UTI Bank Ltd.Karvy Computershare Private Limited, YES Bank46, Avenue 4, Street No.1,Banjara Hills, Hyderabad – 500 034

Registered OfficeF – 60, Malhotra Building,2nd Floor, Connaught Place,New Delhi – 110 001, INDIAwebsite: www.indiabulls.com

Corporate Office1. S. P. Centre, 41/44 – Minoo Desai Road,

Near Radio, Club, Colaba,MUMBAI – 400 005

2. “Indiabulls House”, 448 – 451,Udyog Vihar, Phase – V,GURGAON – 122 001

Company Information

5


PAN India Footprint


6

CONSISTENT GROWTH SINCE INCEPTION

Revenues (Rs. In Lacs) Net Profit (Rs. In Lacs)

Book Value Per Share (Rs.) Basic Earning Per Share (Rs.)

Net Worth (Rs. In Lacs) Market Capitalisation (Rs. In Lacs)

7


Financial Highlights (Consolidated)

Rs. In Lacs

05-06 04-05 03-04 02-03 01-02 00-01

Total Income 61,316 16,841 7,195 2,667 1,283 15

Earning before Interest, Tax & Depreciation 41,212 10,556 3,654 1,182 599 1

Interest 3,149 1,338 453 296 92 -

Depreciation 725 217 111 92 72 0

Profit Before Tax 37,337 9,001 3,090 794 435 1

Tax 12,000 3,330 1,154 283 27 0

Profit After Tax 25,337 5,671 1,935 511 409 1

Equity Dividend % 90.00% - - - - -

Dividend Payout 2,906 - - - - -

Equity Share Capital 3,205 2,665 1,631 1,571 1,554 1,554

Reserves & Surplus 164,909 53,300 8,601 1,462 866 459

Net Worth 168,114 54,038 9,468 2,267 1,654 1,248

Gross Fixed Assets 8,580 2,728 1,069 681 543

Net Fixed Assets 7,245 2,118 676 400 354

Total Assets 255,557 122,146 27,721 7,418 6,897 4,057

Market Capitalisation 409,696 163,085

Debts - - - - - -

Key Indicators

Basic Earnings Per Share - Rs. 15.6106 5.1040 2.3700 0.6524 0.5226 0.0006

Income per share - Rs. 38.27 12.64 8.82 3.39 1.65 0.02

Book Value per share - Rs. 104.92 40.56 11.61 2.89 2.13 1.61

Debt : Equity Ratio - - - - - -

EBIDT/Total Income % 67.21% 62.68% 50.78% 44.32% 46.70% 5.28%

Net Profit margin % 41.32% 33.67% 26.90% 19.15% 31.88% 3.24%

Return on Net Worth % 15.07% 10.49% 20.44% 22.53% 24.73% 0.04%


8

Management Discussion and Analysis

Introduction

The Company through its subsidiaries provides a variety of financial services, such as equity, debt and derivatives brokerage, commoditiestrading, depositary services, equity research services, consumer loans, housing loans and other secured and unsecured loans, through itsbranch office network, call centers, and the internet distribution channels. The branch office network is spread over 400 branches acrossmore than 127 cities and is complemented by a regional network of independent authorized intermediaries.

The Company completed its initial public offering ("IPO") in September 2004 and a GDR offering in February 2005 raising a total of Rs313.48 crores before expenses. The Company recently completed a subsequent GDR offering in August 2005 at USD 5.42 per share andissued 27,600,000 Global Depositary Receipts each representing 1 equity share of par value Rs 2. A total of Rs. 650.55 crores was raisedfrom the second GDR issue. The Company has used the proceeds from its initial public offerings to consolidate its market leadership andenter new businesses.

The Company and its subsidiaries have over 300,000 unique client relationships as of 31 March 2006, spread across its Securities, depositariesand credit services businesses, almost four times higher than the approximately 80,000 relationships at the end of March 2005 and almostten fold higher than the approximately 30,000 relationships at the end of March 2004. The Company plans to continue to invest aggressivelyin growing its unique client relationships. The Company currently operates through its head office in New Delhi and 400 offices in 127cities throughout India.

The Company, through its associate companies, is engaged in real estate development and construction in Delhi (National Capital Region)

and Mumbai, and is developing high-end residential, integrated township and office complexes.

Corporate Structure

The principal group companies are listed below:

Note:

(a) Funds owned and managed by Farallon Capital Management LLC, one of the largest and most prestigious private investmentpartnerships in US, own 32%; LN Mittal (through LNM India Internet Ventures Limited) owns 8.2% in Indiabulls Credit ServicesLimited.

(b) FCM SPV I Limited based in Mauritius owns 33.33% in Indiabulls Housing Finance Limited

(c) Amaranth Capital a US based multi strategy investment fund managed by Farallon Capital Management LLC owns 42.5% in IndiabullsFinance Company Private Limited

(d) FIM Limited, a company incorporated in Mauritius and managed by Farallon Capital Management LLC owns 60% of each of

Indiabulls Estate Limited, Indiabulls Properties Private Limited, and Indiabulls Real Estate Company Private Limited and Indiabulls

Financial Services Business Description

Indiabulls Securities Limited (IBSL)

IBSL is India's largest retail brokerage and securities related company with a client base of over 236,000 customers (up from 79,932

customers at the end of FY 2005), and a market share of 6.73% in calendar 2005 on the cash segment of NSE (up from 3.92% share incalendar 2004). IBSL is a corporate member of the Wholesale Debt Market (WDM) of NSE and capital market segment of BSE. IBSL'srevenue for the year ended March 31, 2006 accounted for 51.71% of the Group's total revenue.

IBSL provides various types of brokerage accounts and services related to the purchase and sale of securities such as equity, debt, andderivatives listed on the BSE and NSE. It also provides depositary services, equity research services, mutual fund and IPO distribution to itsclients. ISL provides these services through on-line distribution channels; the latter primarily through its relationship managers and marketing

associates. ISL has invested heavily in building a strong sales team, as on 31 March 2006, it had 5484 relationship managers.

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Indiabulls Credit Services Limited (IBCSL)

IBCSL provides secured and unsecured consumer loans to individuals in the middle-income sector of Indian consumer credit market. The

company operates many credit products including direct consumer loans, loans for two-wheelers and cars, loans for commercial trucks,

loan against property and home equity products. The company believes that it has achieved management and operational scale in each

product segment and plans to introduce new products throughout FY 2007.

Historically, Indian retail lending sector has been split into the high-end customer base, targeted by large financial institutions and banks,

and the lower end customers who typically either have no access to credit or rely on moneylender operations to gain credit. The unregulated

moneylender segment not only charges excessive rates but also operates with unscrupulous practices that cause extreme hardships to

consumers as well as stunt the growth of the segment.

IBCSL has changed the business paradigm by targeting the middle income segment with a highly efficient distribution model and a rigorous

credit scoring model that reduces risks of fraud and subsequent defaults, and thus allows the company to offer credit on terms reasonable to

the customers and yet earn high returns on capital. IBCSL offers its products under the "Easy Money" brand with a focus on making the loan

application; approval and disbursement process smooth and hassle free for customers, while maintaining rigorous credit standards. IBCSL

believes that its branch network model with use of technology, systems and data processing capabilities allow it to offer a compelling

business proposition and will help it penetrate the market further in FY 2007.

Indiabulls Housing Finance Limited (IBHFL)

IBHFL provides housing loans to middle income segment under the National Housing Bank (NHB) guidelines. IBHFL is registered as a

Housing Finance Company with NHB (an RBI subsidiary) and is one of the few private sector institutions to have this unique charter which

allows it to avail financing at attractive rates as well as avail many tax incentives available for mortgage and housing finance companies.

The Company is focused on the middle-income segment and finances both primary purchase of property and refinancing of existing

properties to provide access to liquidity and credit to its customer base. The company has developed extensive in-house systems to originate,

process and distribute these loans through its branch network and service and collect the loan repayments efficiently. The Indian housing

finance market is relatively under-penetrated and the larger banks are focused on the higher end new house purchase market. IBHFL aims

to fill in an important market opportunity and be a leading provider of financing to the middle income segment.

Indiabulls Finance Company Private Limited (IBFCPL)

IBFCPL provides financing loans to retail customers. IBFCPL enables consumers to avail of loans and credits with a convenient procedure.

Real Estate Services Business Description

Historically, the real estate sector has been extremely fragmented with local developers dominating the market and producing uneven

quality of finished real estate product. Additionally, due to a historical lack of capital, the development of commercial and office complex

stock has been quite low compared to demand. In March 2005, the government opened the real estate sector to FDI as long as the projects

met certain development criteria (including size, period of holding and value considerations) and has allowed FDI under the automatic

route. This is expected to provide much needed capital and professionalism to the sector and help in the emergence of national scale players

who have the relationships with financiers and large corporate customers on the one hand, and have deep local market knowledge and

expertise to execute projects on time and under budget on the other hand. Indiabulls has positioned its real estate businesses to benefit from

this market opportunity, and has three major projects under development.

Indiabulls Properties Private Limited (IPPL)

IPPL successfully acquired 11 acre site of Jupiter Mills auctioned by NTC in Mumbai for a total consideration of Rs 276.6 crores and is

currently developing a world class IT office complex on the site with an expected leasable square footage of over two million square feet.

Jupiter Mills was acquired for a consideration of Rs 25 crores per acre compared to recent market transactions of over 100 crores per acre

in the area. Indiabulls owns 40% of IPPL and FIM Ltd owns 60%. FIM ltd is wholly owned by Farallon Capital partnerships. Under certain

conditions, Indiabulls can exercise its right to purchase shares from FIM Ltd and increase its ownership to 50.5%.

Indiabulls Real Estate Company Private Limited (IRECPL)

IRECPL successfully acquired 8 acre site of Elphinstone Mills auctioned by NTC in Mumbai for a total consideration of Rs 441.51 crores and

is currently developing a world class IT office complex on the site with an expected leasable square footage of around 1.5 million square

feet. Elphinstone Mills was acquired for a consideration of Rs 56 crores per acre compared to recent market transactions of over 100 crores

per acre in the area. Indiabulls owns 40% of IRECPL and FIM Ltd owns 60%. FIM Ltd. is wholly owned by Farallon Capital partnerships.

Under certain conditions, Indiabulls can exercise its right to purchase shares from FIM Ltd and increase its ownership to 50.5%.


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Indiabulls Estate Limited (IEL)

IEL is currently acquiring land in Sonepat, a part of the National Capital Region and a rapidly developing suburb of Delhi. IEL has already

acquired over 150 acres and plans to build a mega township on the site. Indiabulls owns 40% of IEL and FIM Ltd owns 60%. FIM ltd is

wholly owned by Farallon Capital partnerships. Under certain conditions, Indiabulls can exercise its right to purchase shares from FIM Ltd

and increase its ownership to 50.5%.

Business Outlook

Indiabulls is very positioned with to be the market leader in retail financial services and continue to expand its product offerings, geographical

presence and customer relationships. The company enjoys the market leadership position in the retail Securities business and believes that

it will continue to grow that business through client acquisitions. The credit businesses, particularly personal loans and housing loans, have

achieved critical scale in sales, credit and operations and are positioned to witness significant growth in portfolio size and profits in the

coming year.

The company is continuing to invest aggressively in its retail footprint and human resources to leverage the growth opportunities offered by

the rapid economic growth in India.

Indiabulls is witnessing huge opportunities in the real estate sector where sustained economic development and secular demand growth

from emerging middle class is driving huge growth. This market is forecast to grow at over 25-30 per cent per annum for the foreseeable

future, and the Company has established a strong foothold with its initial acquisitions and team development.

Internal Control Systems

The Company has a well-defined organization structure, clearly laid out policy guidelines, and an extensive system of internal controls.

These systems protect the company's resources, enhance security of Company data, and ensure compliance of all applicable laws and

regulations. An extensive internal audit is carried out with a mandate to examine the effectiveness of the control systems and compliance

with all regulations. The scope of the internal audit is decided by the Audit Committee, which along with the top management reviews the

findings and recommendations of the audit body.

Safe Harbour Clause

The statements in this document, other than factual / historical information, contain the words or phrases such as "believe", "expect", "plan",

"objective" and other similar words, which are forward looking in nature. Such forward looking statements may be subject to a variety of

risks and uncertainties that could result in actual results differing materially from those indicated in this document. The Company is not

under any obligation to update such forward looking statements after this date.

11


REPORT ON CORPORATE GOVERNANCE

Corporate Governance has evolved over the years through recommendations and inputs from various quarters. Internationally, the Cadbury

Report in the UK in 1992, The Sarbanes-Oxley Act which was made into a law in the US in 2002, and the revised version of the Principles

of Corporate Governance of the 30-member Organisation for Economic and Development (OECD) countries in 2004 have all enriched the

concept. In India, the recommendations of the Kumar Mangalam Birla Committee and that of the N R Narayana Murthy Committee and

Naresh Chandra Committee on Corporate Governance instituted by the Securities and Exchange Board of India (SEBI) have added a lot ofvalue to the initiative taken by the Confederation of Indian Industry (CII) in framing a Code of Corporate Governance way back in 1998.

These recommendations are now enshrined in clause 49 of the listing agreement of every Indian Stock Exchange.

1.The Company’s philosophy on Corporate Governance

At Indiabulls Financial Services Limited (IBFSL), we are committed to the best corporate governance practices, adherence thereto in true

spirit and conduct of its affairs in a manner which is transparent, clear and evident to those having dealings with or having a stake in theCompany.

In line with IBFSL’s vision and long-term objectives, all corporate decisions are taken by the Company’s Board in conjunction with acompetent management team, keeping in view the best interest of all its stakeholders.

Corporate Governance in the Company is based on the following key principles: -

• Constitution of a Board of Directors comprising people of the highest integrity and commitment to discharge their duties in a responsible

and honest manner

• Adherenece to Code of Business Conduct and Ethics for Directors and Senior Management. The comprehensive code is binding upon

all Directors, and the Senior Management.

• The Subsidiary Monitoring Mechanism which ensures that the group companies conduct their respective businesses in keeping with

the value system of the Company. The business conduct and performance of subsidiaries are monitored frequently through various

means, such as their financial statements, minutes of meetings, and reportings of all their business transactions.

• Compliance with all applicable laws, rules and regulations, not only in letter but also in their spirit

• Independent verification and safeguarding the integrity of the Company’s financial reporting

• Fair and equitable treatment of all its stakeholders, including employees, shareholders, customers and investors

2. Board of Directors ( Board)

(A) Composition and size of the Board

Board of Directors of the Company consists of eight Directors, three of whom including the Chairman & CEO are Whole-time Executive

Directors. The remaining five Directors are Non-Executive Directors, with four of such directors being independent directors and one

director being a Promoter Director. The details of Directors, number of directorships held by them in other companies as also the number

of their memberships on various board committees, are depicted in the table given below:

S.no Name of the Director Category of No. of Directorships No.of Memberships in

Directorship in other Companies other Board Committees

1. Mr. Sameer Gehlaut Promoter –Whole time Director 2 3

2. Mr. Rajiv Rattan Promoter –Whole time Director 13 4

3. Mr. Saurabh K Mittal Non-Executive Promoter Director 1 1

4. Mr. Gagan Banga Executive- Whole time Director 14 2

5. Mr. Aishwarya Katoch Non-Executive Independent Director 4 4

6. Mr. Shamsher Singh Non-Executive Independent Director 1 4

7. Mr. K.S.Gulia Non-Executive Independent Director 1 1

8. Mr. Karan Singh Non-Executive Independent Director 1 -

(B) Number and Dates of Board Meetings held, the attendance record of Directors thereat and at the last AGM held

During the financial year 2005-2006 the Board met 25 (Twenty five) times on April 18, 2005, May 9, 2005, May 25, 2005, June 2, 2005,

June 15, 2005, July 2, 2005, July 11, 2005, July 26, 2005, August 3, 2005, August 9, 2005, August 17, 2005, August 23, 2005, September


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22, 2005, October 10, 2005, October 17, 2005, November 3, 2005, November 17, 2005, November 18, 2005, November 18, 2005*,December 21, 2005, January 18, 2006, January 24, 2006, January 27 2006, February 22, 2006 and March 24, 2006. The last AnnualGeneral Meeting of the company was held on July 26, 2005.

* Two meetings of Board of Directors of the Company were held on November 18, 2005.

A table depicting the attendance of Directors at various board meetings held during the financial year 2005-2006 and at the Annual GeneralMeeting last held, is given below:

Sr. no. Name of the Director No. of board No. of board Attendance atmeetings held meetings attended the last AGM

1. Mr. Sameer Gehlaut 25 25 Yes

2. Mr. Rajiv Rattan 25 25 Yes

3. Mr. Saurabh K. Mittal 25 4 Yes

4. Mr. Gagan Banga 25 18 Yes

5. Mr. Aishwarya Katoch 25 23 Yes

6. Mr. Shamsher Singh 25 23 Yes

7. Mr. K.S. Gulia 25 10 No

8. Mr. Karan Singh 25 9 No

(C) Code of Conduct

In consonance with the requirements of the amended clause 49 of the listing agreement, Board of Directors has laid down a code of conduct

for the Board members and Senior Management of the Company. The said code of conduct has also been posted on the website of the

Company www. Indiabulls.com

The Directors and the senior management is committed to keep updating this Code to keep it relevant with the changing dynamics of the

business and environment. The strict adherence to the Code, in its letter and spirit, by the upper echelons of the Company, also acts as an

example for our committee work force through the chain of hierarchy to conduct their businesses in an ethical and transparent manner.

3. Audit Committee

In keeping with the requirements of section 292A of the Companies Act, 1956 and the Clause 49 set out in the Listing Agreement with the

Stock Exchanges, the Company has an Audit Committee in place.

The Audit Committee comprises of three members namely Mr. Shamsher Singh as the Chairman, Mr. Aishwarya Katoch and Mr. Saurabh K.

Mittal all non-executive Directors. Two out of the three members comprising the committee i.e. Mr. Shamsher Singh and Mr. Aishwarya

Katoch, are independent Directors.

Members of the Audit Committee have requisite financial and management expertise and have held or hold senior positions in otherreputed organizations.

(A) Terms of reference

The terms of reference of Audit Committee include:

• Overseeing financial reporting process.

• Recommending the appointment of Statutory Auditors.

• Reviewing with management the quarterly, half yearly and annual financial statements of the Company.

• Reviewing with the management and internal auditors, the adequacy of internal control systems, approving the internal audit plans andreviewing efficacy of the function, including discussion and review of periodic audit reports.

• Reviewing the Company’s financial and risk management policies

• Discussing with the Statutory Auditors about the nature and scope of audit.

(B) Meetings and Attendance during the year

During the year ended March 31st, 2006, the committee met eight times on April 12, 2005, June 25, 2005, July 9, 2005, October 8, 2005,November 17, 2005, December 24, 2005, January 16, 2006 and March 9, 2006.

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The attendance record of committee members to the meetings so held, is depicted in the table given below:

Name of the Member No. of meetings held No. of meetings attended

Mr. Shamsher Singh 8 8

Mr. Aishwarya Katoch 8 8

Mr. Saurabh Mittal 8 3

The Chief Financial Officer, Statutory and Internal Auditors attend the meetings by invitation.

4. Remuneration Committee

(A) Composition

The Remuneration committee consists of three non- executive independent directors namely Mr. Aishwarya Katoch as the Chairman, Mr.

Kartar Singh Gulia and Mr. Shamsher Singh.

(B) Terms of reference

Recommending the remuneration package of Managing/ Whole time Director keeping in view the applicable provisions of the Companies

Act, 1956.

(C) Meetings

No meeting of the remuneration committee was held during the year 2005-2006.

5. Share Transfer cum Shareholders’/ Investors’ Grievance Committee

The Share Transfer cum Shareholders’/ Investors’ Grievance Committee has been in place since 27.02.2004.

The committee at present comprises of three Directors namely Mr. Aishwarya Katoch, Mr.Sameer Gehlaut and Mr. Rajiv Rattan.

Mr. Aishwarya Katoch is a non-executive independent Director and acts as the Chairman of the committee.

The Share Transfer cum Shareholders’ / Investors’ Grievance Committee (the Committee), inter alia, approves share transfers, transmissions

as also requests for issue of duplicate certificates, split / consolidation of shares etc. and oversees and reviews all matters connected with

securities transfers and other processes. To expedite the process, the required authority has been delegated to Mr. Rajiv Rattan, to scrutinize

and approve the relevant requests, the approvals being subsequently ratified by the committee. The Committee also looks into redressal of

shareholders’ complaints related to transfer of shares, non-receipt of balance sheet, non-receipt of declared dividend etc. The Committee

oversees performance of the R&TA and recommends measures for overall improvement in the quality of investor services. The summary

statement of investor related transactions and details are also considered by the Board of Directors of the Company.

6. Name and designation of compliance officer

Mr. Amit Jain, Company Secretary is the Compliance Officer pursuant to clause 47(a) of the Listing Agreement with Stock Exchanges.

7. Number of complaints received, redressed, pending or not solved to the satisfaction of the Investors

During the year 2005-2006, 80 (eighty) complaints were received and were redressed to the satisfaction of the complaining investors. No

investor complaint was pending as on 31.03.2006 and no requests for share transfer were pending.

8. Particulars of past three Annual General Meetings

Year Venue Date Time

2002-2003 F-60, Malhotra Building ,2ndFloor,

Connaught Place, New Delhi-110001 29th September 2003 4.00 P.M.

2003-2004 F-60, Malhotra Building, 2nd Floor,

Connaught Place, New Delhi-110001 5th August 2004 10.00 A.M.

2004-2005 Ansal’s Farm House no. 42 Salahpur,

Tehsil Vasant Vihar, District South West,

New Delhi-110 061 26th July 2005 10.00 A.M.


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9. Special Resolutions

In the AGM of the Company for the year 2004-2005, held on 26/07/2005, seven special resolutions as briefly described below, werepassed:

(i) Special resolution in terms of Section 372 A of the Companies Act, 1956 pertaining to investment of the Company’s funds in IndiabullsProperties Limited an associate company, upto an aggregate sum of Rs. 500 Crores.

(ii) Special resolution in terms of Section 372 A of the Companies Act, 1956 pertaining to investment of the Company’s funds in IndiabullsReal Estate Company Private Limited an associate company, upto an aggregate sum of Rs. 500 Crore.

(iii) Special resolution in terms of Section 372 A of the Companies Act, 1956 pertaining to investment of the Company’s funds in IndiabullsFinance Company Private Limited a subsidiary, upto an aggregate sum of Rs. 500 Crore.

(iv) Special resolution in terms of Section 81(1A) of the Companies Act, 1956 authorising the preferential allotment of 11,000,000 (ElevenMillion) warrants convertible into 11,000,000 equity shares of Rs. 2 each at a conversion price of Rs.152/- per equity share, to thepromoters of the Company

(v) Special resolution in terms of Section 81(1A) of the Companies Act, 1956 authorising the Company to raise money from internationalinstitutional investors through the issue of Convertible Securities / FCCBs / ADRs / GDRs upto USD 150 million.

(vi) Special resolution in terms of Section 81(1A) of the Companies Act, 1956 authorising the issue of 5,000,000 (Five Million) equityoptions of Rs. 2 each convertible into as many equity shares at the price specified under the Employee Stock Option plan-2005 (ESOP-II) of the Company to the employees in permanent employment of the Company including Directors (except the promoter Directors).

(vii) Special resolution in terms of Section 81(1A) of the Companies Act, 1956 authorising the extension of the benefits of ESOP II to the

employees in permanent employment of subsidiaries of the Company including Directors (except the promoter Directors).

10. Special Resolutions passed through postal ballot in the previous financial year.

(i) In the financial year 2005-06, the company passed ten special resolutions through postal ballot, the results of the postal ballot being

declared on 4th August 2005.

A detail of the resolutions passed through postal ballot and the pattern of voting is depicted in the table given below:

Resolution Description Percentage of votes Percentage of votes

No. in favour of resolution against resolution

1 Special Resolution under Section 372A of the Companies Act 99.9991 .0009

1956, for giving loans from time to time to subsidiary company

viz Indiabulls Securities Limited (“IBSL”) upto Rs. 500 Crores.

2 Special Resolution under Section 372A of the Companies Act, 99.9985 .0015

1956, to give any Guarantee, or provide any Security,

in connection with the loan or loans made by any other person

to, or to any other person by subsidiary company viz Indiabulls

Securities Limited (“IBSL”) upto Rs. 500 Crores.


1956, for giving loans from time to time to subsidiary company viz

Indiabulls Credit Services Limited (“IBCSL”) upto Rs. 500 Crores.


1956, to give any Guarantee, or provide any Security, inconnection with the loan or loans made by any other person

to, or to any other person by subsidiary company viz IndiabullsCredit Services Limited (“IBCSL”) upto Rs. 500 Crores.

5 Special Resolution under Section 372A of the Companies 99.9991 .0009

Act, 1956, for giving loans from time to time to IndiabullsProperties Private Limited (“IBPPL”) upto Rs. 500 Crores.


Act, 1956, to give any Guarantee, or to provide any Security,in connection with the loan or loans made by any other person

to, or to any other person by Indiabulls Properties PrivateLimited (“IBPPL”) upto Rs. 750 Crores.


1956, for giving loans from time to time to Indiabulls Real EstateCompany Private Limited (“IBRECPL”) upto Rs. 500 Crores.

15


8 Special Resolution under Section 372A of the Companies Act, 99.9985 .00151956,to give any Guarantee, or to provide any Security, inconnection with the loan or loans made by any other person to,or to any other person by Indiabulls Real Estate Company PrivateLimited (“IBRECPL”) upto Rs. 500 Crores.

9 Special Resolution under Section 372A of the Companies Act,, 99.9990 .00101956 for giving loans from time to time to subsidiary companyviz Indiabulls Finance Company Private Limited (“IBFCPL”)upto Rs. 500 Crores.

10 Special resolution under Section 372A of the Companies 99.9983 .0017Act, 1956, to give any Guarantee, or to provide any Security,in connection with the loan or loans made by any other personto, or to any other person by subsidiary company viz IndiabullsFinance Company Private Limited (“IBFCPL”) upto Rs. 500 Crores.

The postal ballot was conducted by Mr. Sanjay Khandelwal, Practicing Company Secretary, who was appointed as the scrutinizer for thepurpose of conducting the exercise in a free and fair manner.

(ii) In the current financial year the company passed ten special resolutions through postal ballot, the results of the postal ballot beingdeclared on 4th June 2006.

A detail of the resolutions passed through postal ballot and the pattern of voting is depicted in the table given below:

Resolution Description Percentage of votes Percentage of votes

No. in favour of resolution against resolution

1 Special Resolution under Section 372A of the 99.9991 .0009

Companies Act, 1956, for giving loans from time to time toIndiabulls Securities Limited (“IBSL”) upto Rs. 1500 Crores.


1956, to give any Guarantee, or provide any Security, in

connection with the loan or loans made by any other person

to, or to any other person by Indiabulls Securities Limited(“IBSL”) upto Rs. 1500 Crores.


Act, 1956, for giving loans from time to time to Indiabulls Credit

Services Limited (“IBCSL”) upto Rs. 1000 Crores.


Act, 1956, to give any Guarantee, or provide any Security,

in connection with the loan or loans made by any other person

to, or to any other person by Indiabulls Credit Services Limited(“IBCSL”) upto Rs. 1500 Crores.


Act, 1956, for giving loans from time to time to Indiabulls

Finance Company Private Limited (“IBFCPL”) upto Rs. 1000 Crores.

6 Special Resolution under Section 372A of the Companies 99.9981 .0019Act, 1956, to give any Guarantee, or to provide any Security,in connection with the loan or loans made by any other person

to, or to any other person by Indiabulls Finance CompanyPrivate Limited (“IBFCPL”) upto Rs. 1500 Crores.

7 Special Resolution under Section 372A of the Companies Act, 99.9981 .00191956, for giving loans from time to time to Indiabulls Housing

Finance Limited “IBHFL”) upto Rs. 1000 Crores.

8 Special Resolution under Section 372A of the Companies 99.9981 .0019Act, 1956, to give any Guarantee, or to provide any Security,in connection with the loan or loans made by any other person

to, or to any other person by Indiabulls Housing FinanceLimited (“IBHFL”) upto Rs. 1500 Crores.

9 Special Resolution under Section 372A of the Companies 99.9990 .0010Act, 1956, for giving loans from time to time to Indiabulls

Capital Services Limited (“IBCapSL”) upto Rs. 300 Crores.


16

10 Special resolution under Section 372A of the Companies Act, 99.9981 .00191956, to give any Guarantee, or to provide any Security, inconnection with the loan or loans made by any other personto, or to any other person by Indiabulls Finance CompanyPrivate Limited (“IBCapSL”) upto Rs. 300 Crores.

The postal ballot was conducted by Mr. Sanjay Khandelwal, Practicing Company Secretary, who was appointed as the scrutinizer for the

purpose of conducting the exercise in a free and fair manner.

(iii) Resolutions proposed to be passed through postal ballot

(a) In the current financial year the Company proposes to pass the following resolutions through postal ballot.

1. Resolution pursuant to Section 94(1)(a) of the Companies Act-1956 regarding increase in the Authorised capital of the Company from the

present Rs. 50,00,00,000 divided into 25,00,00,000 Equity shares of Rs. 2 each to Rs. 1255,00,00,000 divided into 50,00,00,000 Equity

shares of the face value of Rs. 2 per share 2,50,00,000 Preference shares of the face value of Rs. 300/- per share and 2,50,00,000 Preference

shares of the face value of Rs. 162/- per share.

2. Resolution in accordance with the provisions of section 81(1A) of the Companies Act, 1956 and other applicable provisions thereof as

also the applicable provisions of the company’s Memorandum and Articles of Association, Listing agreements with the Stock Exchanges,

SEBI guidelines and RBI regulations, regarding allotment of 9,966,667 Cumulative Redeemable non Convertible Preference shares of the

face value Rs. 300/- each and 11,500,000 Cumulative Redeemable Convertible Preference shares of the face value Rs. 300/- each to Oberon

Ltd. a foreign entity, not an existing shareholder of the Company.

3. Resolution under section 31 regarding alteration in the Articles of Association of the Company pursuant to a Share Subscription Agreement

entered into by the Company with Oberon Limited, a foreign entity.

(b) Procedure for postal ballot

A notice specifying the resolutions proposed to be passed through postal ballot as also the relevant explanatory statement and the postal

ballot forms, will be dispatched to all the shareholders along with self addressed postage pre paid envelopes. The shareholders have to send

back the postal ballot forms duly filled up and signed, in the postage pre paid envelopes sent to them by the Company for this purpose, so

as to reach the Scrutinizer (in whose name the envelopes are marked) on or before 2. p.m. on 20th July 2006.

On the said date the Scrutinizer will compile the postal ballot result out of the postal ballot forms found valid and shall hand over the result

to the Chairman. The Chairman shall then declare the results of the postal ballot at 5.00 p.m. on 20th July 2006.

The postal ballot result shall also be displayed by way of a notice pasted out side the Registered office of the Company, on the same day.

11. Disclosures

(A)Details on materially significant related party transactions

Details of materially significant related party transactions made during the year 2005-2006, are contained in the notes to the annual accounts

which form a part of the Annual report.

(B) Details of non–compliance, penalties etc imposed by Stock Exchange, SEBI etc. on any matter related to capital markets, during the

last three years.

During the last three years, no strictures or penalties were imposed on the Company by either SEBI, the stock exchanges or any other

statutory authority, for non compliance of any matter related to the capital markets.

(C) Means of Communication

(i) The quarterly /Half yearly / Annual Results of the Company are published in the leading newspapers viz The Economic Times /

Financial Express (English) and Jansatta (Hindi).

(ii) The Company has its own website www.indiabulls.com and all the vital information relating to the Company and its performance

including financial results, press releases pertaining to important developments, performance updates and corporate presentations

etc. are regularly posted on the website

(iii) Pursuant to clause 51 of the listing agreement information like quarterly/ half yearly / annual financial statements, shareholding

patterns are regularly updated on the SEBI’s web-site www. Sebiedifar.nic.in

(iv) Management’s Discussion and Analysis Report has been included in the Annual Report, which forms a part of the Annual Report

being sent to the shareholders of the Company.

17


(D) Details of Directors’ remuneration

(i) Remuneration of Executive Directors

The Table given below specifies the details of remuneration package of Executive Directors and their relationships with each other

Name of the Relationship With Sitting fee Commission Salary and Performance linked Monetary Value of

Director other Directors on profits allowances (Rs.) incentive (Rs.) perquisites (Rs.)

Sameer Gehlaut None nil nil 1,20,00,000 N.A. 4,70,035

Rajiv Rattan None nil nil 1,20,00,000 N.A. 4,81,155

Gagan Banga None nil nil 12,00,000 26,51,651 -

Notes:

1. In the case of Mr. Sameer Gehlaut and Mr. Rajiv Rattan, various components of salary include the Basic salary, House rent allowance andperquisites in the shape of Gratuity, Provident fund, Leave encashment, Medical reimbursement, Medical Insurance for self and family andpension

2. In the case of Mr. Gagan Banga various components of salary include Basic Salary and Incentive based on performance. Further, Mr.

Gagan Banga has also been given 9,00,000 equity stock options out of which 3,60,000 equity shares have been so far been allotted to him

against the options vested and exercised.

3. The figures given in respect of perquisites represent either the actual expenditure incurred or the annualized figures for provisions made

by the company for the financial year 2005-2006.

(ii) Remuneration of Non Executive Directors

Non- Executive Directors have not been paid any remuneration/sitting fees during the financial year 2005-2006.

12. General Shareholders’ Information

(A) Date of AGM

As indicated in the notice to the shareholders, the Annual General Meeting of the Company will be held on 17th July 2006. The time and

venue of the meeting is also indicated in the notice.

(B) Profile of Directors seeking re-appointment

At the ensuing Annual General Meeting of the Company, Mr. Aishwarya Katoch and Mr. Shamsher Singh would be retiring by rotation and

being eligible for reappointment, have offered themselves for the same. A brief profile of the said directors is given below:

Mr. Aishwarya Katoch holds a bachelor’s degree in Business Administration and Merchandising from American College of Applied Arts,

London. Mr. Kaotch runs a successful business that has interests in leisure and heritage hotels. The Company has gained a lot from his

business acumen and experience and the public relation skills acquired by him through the years spent in the hospitality industry. Apart

from being a director on the board of the Company, Mr. Katoch holds the membership and chairmanship of the Remuneration Committeemembership of the Audit committee, Share Transfer cum Shareholders’ / Investors’ Grievance Committee and Compensation Committee.

Further, Mr. Katoch also holds directorships in four other companies namely (1) Indiabulls Securities Limited (2) Indiabulls Real Estate

Limited (3) Royal Expeditions (P) Ltd. and (4) Kangra Hotels (P) Ltd.

Mr. Shamsher Singh holds a post graduate degree in History from St. Stephens College, New Delhi. He is an ex- banker and academicianwith years of experience behind him. His expertise includes a sound understanding of the developments in the economic arena.Apart from

being a director on the board of the Company, Mr. Singh is a member of the audit committee constituted by the board and also holds thechairman ship of the committee. He is also a member of the Remuneration Committee and Compensation Committee. Mr. Shamsher Singh

also holds directorship in Indiabulls Real Estate Limited.

(C) Financial Calendar 2006-2007 (tentative)

Tentative Schedule Tentative Date

Financial reporting for the quarter ending 30th June 2006 End July 2006

Financial reporting for the half year ending 30th September 2006 End October 2006

Financial reporting for the quarter ending 31st December 2006 End January 2007

Financial reporting for the quarter and year ending 31st March 2007 End April 2007 *

Annual General Meeting for the year ending 31st March 2007 End July 2007


18

*As provided in clause 41 of the listing agreement, Board may also consider publication of Audited results for the financial year 2006-2007instead of publishing unaudited results for the fourth quarter, by 30th June 2007.

(D) Date of Book Closure

The Register of members and share transfer books of the Company will remain closed from 13th July 2006 to 17th July 2006 (both daysinclusive) for the purpose of the AGM and the dividend sought to be declared at the AGM.

(E) Dividend Payment date

The dividend if declared at the AGM, shall be paid to those shareholders whose names appear on the Company’s Register of members as on12th July 2006. The pay out of dividend commences on 10th August 2006.

(F) (i) Distribution of shareholding as on 31st March 2006

SL.NO. Category of Shares No of holders % to total shares Value in Rs. % to nominal valueFrom - To

1 Upto - 5,000 23080 97.79 7857708.00 2.45

2 5,001 - 10,000 258 1.09 1922356.00 0.60

3 10,001 - 20,000 89 0.38 1337934.00 0.42

4 20,001 - 30,000 30 0.13 761728.00 0.24

5 30,001 - 40,000 16 0.07 556704.00 0.17

6 40,001 - 50,000 17 0.07 769964.00 0.24

7 50,001 - 1,00,000 26 0.11 1811232.00 0.57

8 1,00,001 and above 86 0.36 305433130.00 95.31

TOTAL 23602 100.00 320450756.00 100.00

(ii) Shareholding pattern as on 31st March 2006

Sr. no. Category No. of Shares % holding

1. Promoters 48616685 30.34

2. Mutual Funds 4472242 2.79

3. Banks 27100 0.02

4. FIIs 52699725 32.89

5. Private Bodies Corporate 6281250 3.92

6. Indian Public 5917526 3.69

7. NRIs / OCBs 16224503 10.13

8. Foreign Companies 2193022 1.37

9. GDRs (Shares underlying) 19163495 11.96

10. Other foreign entities 3000000 1.87

11. Others 1629830 1.02

Total 160225378 100

(G) Dematerialization of shares and liquidity

Shares of the Company are compulsorily traded in dematerialized form and are available for trading under both the depositories i.e. NSDLand CDSL.

As on 31st March 2006, 99.99% shares of the Company representing 160224903 out of a total of 160225378 shares, were held indematerialized form and the balance 475 shares were held in physical form.

19


(H) Outstanding GDRs

The number of outstanding GDRs as on 31.03.2006 was 19163495. Each GDR represents one equity share of Rs. 2 each in the Company

(I) Listing on stock Exchanges

The shares of the Company are regularly traded at the Bombay Stock Exchange (BSE) and National Stock Exchange(NSE). The GDRs of theCompany are listed on the Luxembourg Stock Exchange.

(J) Stock Code

Bombay Stock Exchange Ltd.- 532544

National Stock Exchange of India Ltd- INDIABULLS EQ

ISIN for Dematerialisation – INE894F01025

(K) Stock Market Price at National Stock Exchange and Bombay Stock Exchange (BSE)

Month Share Prices at NSE Share Prices at BSE

High Low High Low

April 2005 116.35 105.20 116.15 105.10

May 2005 122.35 108.90 119.05 109.05

June 2005 162.55 126.85 163.65 126.90

July 2005 256.45 158.95 254.95 159.60

August 2005 257.10 212.85 257.75 211.55

September 2005 233.35 180.50 232.90 179.80

October 2005 189.60 146.00 189.55 146.70

November 2005 180.50 158.30 180.05 157.65

December 2005 201.25 156.25 201.65 156.20

January 2006 211.40 187.05 211.50 186.55

February 2006 208.35 184.50 208.45 183.45

March 2006 255.50 189.05 255.70 189.45

(L) Comparison of monthly closing prices of the Company’s share with the broad-based indices viz

NSE Nifty & BSE Sensex.


20

(M) Registrar and Transfer Agents

M/s Karvy Computershare Private Limited are acting as the Registrar and Transfer Agents of the Company for handling the share related

matters both in physical and dematerialsed mode.

The contact details are as under:

Karvy House

46, Avenue 4, Street No. 1,

Banjara Hills

Hyderabad- 500 034

Contact person: Mr. K. Sreedharmurthy, Senior Manager

Tel : 040- 23420818

Fax: 040- 23420814

(N) Share Transfer System

The power to approve transfer of shares, remat requests etc. has been delegated to Mr. Rajiv Rattan, Director. The share transfers/ remat

requests are approved once in a fortnight on the first and third Monday of every month. Accordingly the average time taken for transfer of

shares is less than 15 days.

(O)Address for Correspondence

(i) Registered Office:


F-60, Malhotra Building, 2nd Floor,

Connaught Place, New Delhi- 110 001

(ii) Corporate Office:

(1) Indiabulls House

448-451, Udyog Vihar, Phase V,

Gurgaon – 122 001, Haryana

(2) S.P. Center, C-Wing,

41/44, Minoo Desai Marg,

Near Radio Club, Colaba,

Mumbai- 400 005

13. Compliance Certificate from the Practicing Company Secretary

A certificate from a Practicing Company Secretary, Mr. Sanjay Khandelwal certifying the Company’s compliance with conditions of Corporate

Governance as stipulated under clause 49 of the Listing Agreement, is annexed to and forms a part of this report.

The certificate is also being forwarded to the Stock Exchanges in India where the Securities of the Company are listed.

21


14. CEO & CFO Certification

The CEO and the CFO have certified to the Board of Directors of the Company that:

(a) They have reviewed financial statements and cash flow statement for the year and that to the best of their knowledge and belief:

(i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be

misleading;

(ii) these statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting

standards, applicable laws and regulations.

(b) There are, to the best of their knowledge and belief, no transactions entered into by the company during the year which are fraudulent,

illegal or violate the Company’s code of conduct.

(c) They accept responsibility for establishing and maintaining internal controls for financial reporting and that they have evaluated the

effectiveness of internal control systems of the company pertaining to financial reporting and they have disclosed to the Auditors and

the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which they are aware and the steps they

have taken or propose to take to rectify these deficiencies.

(d) They have indicated to the Auditors and the Audit Committee that there is

(i) No significant change in internal control over financial reporting during the year

(ii) No significant change in accounting policies during the year under review and

(iii) No instance of any fraud in the company in which the management has any role.

Non-Mandatory Requirements

(A) Non –Executive Chairman

The Company has an executive Chairman and hence the requirements recommended as to a non –executive chairman under the clause 49,

are not required to be adopted by the Company.

(B) Remuneration Committee

Please refer to S.No. 4 of this report.

(C) Shareholders Rights

The Company is getting its quarterly / half yearly and Annual financial results published in leading newspapers with wide distribution across

the country and regularly updates the same on its public domain website.

In view of the same individual communication of quarterly / half yearly/ annual financial results to the shareholders is not being made.

(D) Whistle Blower Policy

The Company has a Whistle blower policy mechanism wherein the employees are free to report violations of laws, rules, regulations or

unethical conduct to their immediate supervisor or such other person as may be notified by the management to such workgroups.

(E) Postal ballot

The details of resolutions passed by the company through postal ballot in the financial year 2005-2006 and in the current financial year and

those proposed to be so passed, have been provided in the earlier part of this report at S.no. 10.


22

CERTIFICATE ON CORPORATE GOVERNANCE

To the Members of Indiabulls Financial Services Limited

We have examined the compliance of the conditions of Corporate Governance by ‘Indiabulls Financial Services

Limited’ (“the Company”) for the year ended on 31st March, 2006 as stipulated in clause 49 of the Listing Agreement

of the Company with the Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of management. Our examination was

limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the

conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements

of the Company.

In our opinion, and to the best of our information and according to the explanations given to us, we certify that the

Company has complied with the conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreement

entered by the Company with the Exchanges.

We state that there is no investor grievances pending as on March 31, 2006 as per the records maintained by the

Company.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the

efficiency or effectiveness with which the management has conducted the affairs of the Company.

For S. Khandelwal & Co.

Company Secretaries

-sd-

Sanjay Khandelwal

Proprietor

Membership No: 18028

Place: New Delhi

Date: 18th June, 2006

23


Shareholders’ Referencer*

Contents

23 At a Glance

23 Investor Service and Grievance Handling Mechanism

24 Matters Relating to Shareholders

I. Dividend

(A) Course of Action in case of Non-receipt of Dividend, Revalidation of Dividend Warrantsetc.

(B) Payment of Dividend through ECS Facility

(C) Unclaimed Dividend

25 II. Dematerialization / Rematerialization of Shares

26 III. Nomination Facility

27 IV. Transfer / Transmission / Transposition / Duplicate Certificates etc.

28 V. Miscellaneous

(A) Change of address

(B) Change of name

(C) Authority to another person to deal with shares

28 VI. Shareholders’ General Rights

29 VII. Duties / Responsibilities of Investors

29 VIII. General Safeguards

29 Information Regarding Tax on Dividend and Sale of Shares

30 Contact Details

* This referencer has been prepared to facilitate shareholders to understand the procedures involved in completing various

investor-related transactions expeditiously and properly. It is also endeavoured to provide the related forms and other

information that may be required by shareholders.

At a Glance

• Presently, the Company has about 28,000 folios of shareholders holding Equity Shares in the Company.

• Face value of the Company’s Equity Shares is Rs 2.

• The Company’s Equity Shares are under compulsory trading in demat form only.

• Over 99% of the Company’s Equity Shares are held in demat form.

• The Company’s Equity Shares are freely transferable except as may be required statutorily.

• Karvy Computershare Private Limited, Hyderabad, an ISO 9002 Certified Registrar and Transfer Agent, is the Registrar and TransferAgent of the Company.

• The Company’s Equity Shares are listed on the National Stock Exchange of India Limited (NSE) and the Bombay Stock Exchange Limited

(BSE). The Global Depository Receipts (GDRs) issued by the Company are listed on Luxembourg Stock Exchange.

Investor Service and Grievance Handling Mechanism

All share related matters viz., transfer, transmission, transposition, nomination, dividend, change of name / address / signature, registration

of mandate / Power of Attorney, replacement / split / consolidation of share certificate / demat / remat of shares, issue of duplicate certificatesetc. are being handled by the Company’s Registrars and Transfer Agents (R&TA) M/s. Karvy Computershare Private Limited (Karvy). Karvy,the largest Registrar in the country, having a vast number of Investor Service Centres across the country, discharges investor service functions

effectively and expeditiously.

Investors are requested to correspond directly with Karvy, on all share related matters.

The Company has an established mechanism for investor service and grievance handling, with Karvy and the Compliance Officer appointed

by the Company for this purpose, being the important functional nodes.

The Board of Directors of the Company has constituted a Share Transfer cum Shareholders’ / Investors’ Grievance Committee (the Committee)

which, inter alia, approves share transfers , transmissions as also requests for issue of duplicate certificates, split / consolidation of shares etc.

and oversees and reviews all matters connected with securities transfers and other processes. To expedite the process, the required authority

has been delegated to Mr. Rajiv Rattan, CFO & President of the Company, to scrutinize and approve the relevant requests, the approvals

being subsequently ratified by the Committee. The Committee also looks into redressal of shareholders’ complaints related to transfer of


24

shares, non-receipt of balance sheet, non-receipt of declared dividend etc. The Committee oversees performance of the R&TA and recommends

measures for overall improvement in the quality of investor services. The summary statement of investor related transactions and details are

also considered by the Board of Directors of the Company.

Investor Services under MCA 21 Portal

Ministry of Company Affairs (MCA) has launched a major e-Governance initiative christened as “MCA 21” on the MCA portal

(www.mca.gov.in). One of the key benefits of this initiative includes timely redressal of investor grievances.

MCA 21 system accepts complaints under the e-Form prescribed, which has to be filed online. The nature of complaint may relate to

• Shares / Dividend

• Debentures / Bond

• Fixed Deposits -non receipt of amount

• Miscellaneous -non receipts

• Any other

The status of complaint can be viewed by quoting the Service Request Number (SRN) provided at the time of filing the complaint.

Matters Relating to Shareholders

I. Dividend

(A) Course of Action in case of Non - receipt of Dividend, Revalidation of Dividend Warrant etc.

What should a shareholder do in case of non-receipt of dividend?

Shareholders may write to the Company’s R&TA furnishing the particulars of the dividend not received and quoting the folio number / DP

ID - Client ID particulars (in case of dematerialised shares). The R&TA shall check the records and issue duplicate dividend warrant if the

dividend remains unpaid in the records of the Company after expiry of the validity period of the warrant. The R&TA would request the

concerned shareholder to execute an indemnity before issuing the duplicate warrant.

If the validity period of the lost dividend warrant has not expired, shareholders will have to wait till the expiry date since duplicate warrant

cannot be issued during the validity of the original warrant. On expiry of the validity period, if the dividend warrant is still shown as unpaid

in records of the Company, duplicate warrant will be issued.

However, duplicate warrants will not be issued against those shares wherein a ‘stop transfer indicator’ has been instituted either by virtue

of a complaint or by law, unless the procedure for releasing the same has been completed.

No duplicate warrant will be issued in respect of dividends which have remained unpaid / unclaimed for a period of seven years in the

unpaid dividend account of the Company as they are required to be transferred to the Investor Education and Protection Fund (IEPF)

constituted by the Central Government.

Why do the shareholders have to wait till the expiry of the validity period of the original warrant?

Since the dividend warrants are payable at par at several centres across the country, banks do not accept ‘stop payment’ instructions.

Hence, shareholders have to wait till the expiry of the validity of the original warrant.

What is the procedure for revalidation of dividend warrants?

Shareholders who have not encashed their dividend warrants within the validity period may send their request of revalidation to the

Company’s R&TA enclosing the said dividend warrants. The Company’s R&TA will after due verification of the records, issue a revalidated

dividend warrant. The revalidated warrant will be valid for a period of 3 months from the date of such warrant. Alternatively, the Company

may also consider issuance of demand drafts / pay orders in lieu of expired warrants.

How can a bank or any other person be authorised to receive dividends on behalf of shareholders?

Shareholders may write to the Company’s R&TA furnishing the name and address of the authorised person/bank alongwith folio number

and current communication address. The Company’s R&TA will despatch the respective shareholders’ dividend warrants to the concerned

person / bank. This facility is applicable only for the shareholders holding shares in physical form.

(B) Payment of dividend through Electronic Clearing Service (ECS) facility

What is payment of dividend through ECS Facility and how does it operate?

Reserve Bank of India’s Electronic Clearance Service (ECS) Facility provides investors an option to collect dividend / interest directly through

their bank accounts rather than receiving the same through post. Under this option, investor’s bank account is directly credited and an

advice thereof is issued by the Company after the transaction is effected. The concerned bank branch credits investor’s account and indicate

the credit entry as “ECS” in his / her pass book / statement of account. If any investor maintains more than one bank account, payment can

be received at any one of his / her accounts as per the preference of the investor. The investor does not have to open a new bank account

for the purpose.

25


What are the benefits of ECS Facility?

Some of the major benefits of ECS Facility are:

a. Prompt credit to the bank account of the investor through electronic clearing at no extra cost.

b. Exposure to delays / loss in postal service avoided.

c. As there can be no loss in transit of warrants, issue of duplicate warrants is avoided.

d. Fraudulent encashment of warrants is avoided.

Where all the ECS Facility is available?

ECS Facility is presently made available to the investors residing at 19 centres, viz., Ahmedabad, Bangalore, Bhubhaneshwar, Chandigarh,Chennai, Coimbatore, Guwahati, Hyderabad, Jaipur, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Patna, Pune, Surat, Thiruvananthapuramand Vadodara. As per Reserve Bank of India, this service will be extended to some more centres.

How to avail of ECS Facility?

Investors holding shares in physical form may send their ECS Mandate Form, duly filled in, to the Company’s R&TA.

However, if shares are held in dematerialised form, ECS mandate has to be sent to the concerned Depository Participant (DP) directly, in theformat prescribed by the DP.

Why cannot the Company take on record bank details in case of dematerialised shares?

As per the Depository Regulations, the Company is obliged to pay dividend on dematerialised shares as per the details furnished by the

concerned Depository. The Company cannot make any change in such records received from the Depository.

Can ECS Facility be opted out by investors?

ECS would be an additional mode of payment. Investors would have the right to opt out from this mode of payment by giving an advance

notice of four weeks either to the Company’s R&TA or to the concerned DP, as the case may be.

(C) Unclaimed Dividend

What are the statutory provisions governing unclaimed dividend?

Prior to amendment of Section 205A and enactment of Section 205C by the Companies (Amendment) Act, 1999 effective October 31, 1998,

companies were required to transfer to the General Revenue Account of the Central Government, any moneys transferred to the ‘unpaid

dividend account’ which remained unpaid or unclaimed for a period of 3 years from the date of transfer to the unpaid dividend account.

With effect from October 31, 1998, any moneys transferred to the ‘unpaid dividend account’ of the Company and remaining unpaid or

unclaimed for a period of 7 years from the date of such transfer shall have to be transferred to the Investor Education and Protection Fund

(IEPF). Investors are requested to note that no claims shall lie against the Company or IEPF for any moneys transferred to IEPF in accordance

with the provisions of Section 205C of the Companies Act, 1956.

II. Dematerialisation / Rematerialisation of Shares

What is dematerialisation of shares?

Dematerialisation (Demat) is the process by which securities held in physical form evidencing the holding of securities by any person are

cancelled and destroyed and the ownership thereof is entered into and retained in a fungible form on a depository by way of electronicbalances.

Demat facilitates paperless trading whereby securities transactions are executed electronically reducing / mitigating possibility of loss ofrelated documents and / or fraudulent transactions.

Trading in demat form is regulated by the Depositories Act, 1996 and is monitored by the Securities and Exchange Board of India (SEBI). Thetwo depositories presently functioning in India are National Securities Depository Limited (NSDL) and Central Depository Services (India)

Limited (CDSL).

Why dematerialise shares?

1. Trading in Compulsory Demat

SEBI has notified various companies whose shares shall be traded in demat form only. By virtue of such notification, the shares of the

Company are also subject to compulsory trading in demat form only on the Stock Exchanges.

2. Benefits of Demat

• Immediate transfer of shares.

• No formal registration required.

• No stamp duty applicable.

• No additional holding/transaction cost to Shareholders pursuant to SEBI directions of January 28, 2005.• No requirement for approval of Board of Directors of the Company for transfers.

• Quick settlements.


26

• Shareholders need not worry about the space required for preserving certificates in case of large holdings.

• Avoidance of loss through loss in transit, theft, mutilation, forging of share certificates.

• Widely accepted for pledging against borrowings with lower interest rates.

• SEBI Guidelines prescribe further issues in electronic mode only.

• Facilitates the Company to determine entitlements easily and faster.

• Details of investors are obtained from the Beneficiary Position (Benpos) and hence cannot be manipulated by companies.

• Dematerialised shares can be rematerialised or changed into physical form whenever the shareholders so wish.

How to dematerialise shares?

The procedure for dematerialising shares is as under:

• Open Beneficiary Account with a Depository Participant (DP) registered with SEBI.

• Submit Demat Request Form (DRF) as given by the DP, duly signed by all the holders with the names and signatures in the same order

as appearing in the concerned certificate(s) and the Company records, alongwith requisite documentary proof and PAN details.

• Obtain acknowledgment from the DP on handing over the share certificate(s).

• Demat transfers are required to be completed in 21 days as against 30 days (excluding time for despatch) for physical transfer. Service

standard prescribed by the Company for completing demat is three days from the date of the receipt of requisite documents for the

purpose.

• Receive a confirmation statement of holdings from the DP. Statement of holdings is sent by the DPs from time to time. Presently,

confirmation is given by DPs on an immediate basis through email or SMS facilities, thus enabling shareholders to further trade in the

securities immediately.

Shareholders should not send share certificate(s) / documents to the Company / Company’s R&TA directly.

Additional information on the matter may be received from-

Shri K. Sreedharmurthy

Senior Manager

Karvy Computershare Private Limited

46, Avenue 4, Street No.1

Banjara Hills Hyderabad 500 034,

India Telephone Nos: +91 40 2332 0666 / 2332 0711 / 2332 3031 / 2332 3037

e-mail: [email protected]

How to get dividend on dematerialised shares? Will such shareholders be eligible for receiving Annual Report every year and also to

attend General Meetings?

Dividend of shareholders holding shares in dematerialized form (residing at 19 centres stated hereinabove) will be credited through ECS to

the bank accounts as opted by them while opening the Beneficiary Accounts with the DP. In other cases, dividend warrants will be

despatched to them with the bank account details, as furnished by the Depositories, printed thereon.

Holding shares in dematerialised form will not affect the rights of the Shareholders. They, as members of the Company, will be entitled to

receive Annual Report, attend General Meetings and participate and vote thereat to the extent of their entitlement.

Is pledge of dematerialised shares possible?

Dematerialised shares can be pledged for the purpose of availing of any funding / loan arrangement with a bank.

What is rematerialisation of shares?

It is the process through which shares held in demat form are converted into physical form in the form of share certificate(s).

What is the procedure for rematerialisation of shares ?

• Shareholders should submit duly filled in Rematerialisation Request Form (RRF) to the concerned DP.

• DP intimates the relevant Depository of the request through the system.

• DP submits RRF to the Company’s R&TA.

• Depository confirms rematerialisation request to the Company’s R&TA.

• The Company’s R&TA updates accounts and prints certificate(s) and informs the Depository.

• Depository updates the Beneficiary Account of the shareholder by deleting the shares so rematerialised.

• Share certificate(s) is despatched to the shareholder.

III. Nomination Facility

What is nomination facility and to whom it is more useful? What is the procedure of appointing a nominee?

Section 109A of the Companies Act, 1956 provides the facility of nomination to share / debentureholders. This facility is mainly useful for

individuals holding shares / debentures in sole name. In the case of joint holding of shares / debentures by individuals, nomination will be

effective only in the event of the death of all joint holders.

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Investors, especially those who are holding shares / debentures in single name, are advised to avail of the nomination facility by submitting

the prescribed Form 2B to the Company’s R&TA.

However, if shares / debentures are held in dematerialised form, nomination has to be registered with the concerned DP directly, as per the

format prescribed by the DP.

Who can appoint a nominee and who can be appointed as a nominee?

Individual shareholders holding the shares / debentures in single name or joint names can appoint a nominee. While an individual can be

appointed as a nominee, a trust, society, body corporate, partnership firm, karta of HUF or a power of attorney holder will not be nominee(s).

Minors can, however, be appointed as a nominee.

How to avail of nomination facility for more than one folio?

There can be only one nomination for one folio. Folios having different order or combination of names of shareholders will require separate

nominations.

Can a nomination once made be revoked / varied?

It is possible to revoke / vary a nomination once made. If nomination is made by joint holders, and one of the joint holders dies, the

remaining joint holder(s) can make a fresh nomination by revoking the existing nomination.

Are the joint holders deemed to be nominees to the shares?

Joint holders are not nominees; they are joint holders of the relevant shares having joint rights on the same. In the event of death of any one

of the joint holders, the surviving joint holder(s) of the shares is / are the only person(s) recognised under law as holder(s) of the shares. Joint

Shareholders may together appoint a nominee.

What rights are conferred on the nominee and how can he exercise the same?

The nominee is entitled to all the rights of the deceased shareholder to the exclusion of all other persons. In the event of death of the

shareholder, all the rights of the shareholder shall vest in the nominee. In case of joint holding, all the rights shall vest in the nominee only

in the event of death of all the joint holders. The nominee is required to apply to the Company by reporting the attested copy of the death

of the nominator along with the death certificate.

The nominee has an option to decide to register himself as a shareholder or he could send an application to have the shares transferred to

any other person to whom the nominator could have otherwise transferred the shares. If the nominee opts to transfer the shares to a third

party, he should submit to the Company’s R&TA, the transfer deed(s) duly stamped and executed accompanied by the relevant certificate(s)

and other documentary proof(s).

If shares are held in dematerialised form, nomination has to be registered with the concerned DP directly, as per the format prescribed by the

DP.

IV. Transfer / Transmission / Transposition / Duplicate Certificates etc.

How to get shares registered in favour of transferee(s)?

Transferee(s) need to send share certificate(s) alongwith share transfer deed, duly filled in, executed and affixed with share transfer stamps,

to the Company’s R&TA. It takes about 7 days for the Company’s R&TA to process the transfer, although the statutory time limit fixed for

completing a transfer is one month.

The Government of India, Ministry of Finance, Department of Revenue, has fixed the Stamp Duty on Transfer (whether with or without

consideration) of shares at the rate of twenty five paise (25 paise) for every Rs. 100 or part thereof of the market value of the shares on the

date of execution of the transfer deed. The transfer deed is valid for a period of one year from the date of presentation or till the book closure

date, whichever is later.

In case of dematerialised shares, the shares are credited to the purchaser’s account by the respective Depository Participant under the

directions of the concerned Depository. Presently, transfer of dematerialised shares does not attract stamp duty.

How to get shares registered which are received by way of gift? Does it attract stamp duty?

The procedure for registration of shares gifted (held in physical form) is same as the procedure for a normal transfer. The stamp duty payable

for registration of gifted shares would be @ 25 paise for every Rs. 100 or part thereof, of the face value or the market value of the shares

prevailing as on the date of the document, if any, conveying the gift or the date of execution of the transfer deed, whichever is higher.

The procedure for registration of shares gifted (held in demat form) is the same as the procedure for transfer of shares in demat form in off

market mode.

What is the procedure for getting shares in the name of surviving shareholder(s), in the event of death of one shareholder?

The surviving shareholder(s) will have to submit a request letter supported by an attested copy of the death certificate of the deceased

shareholder and accompanied by the relevant share certificate(s). The Company’s R&TA on receipt of the said documents and after due

scrutiny, will delete the name of deceased shareholder from its records and return the share certificate(s) to the surviving shareholder(s) with

necessary endorsement.

If a shareholder who holds shares in his sole name dies without leaving a Will, how can his legal heir(s) claim the shares?

The legal heir(s) should obtain a Succession Certificate or Letter of Administration with respect to the shares and send a true copy of the

same, duly attested, alongwith a request letter, transmission form, and the share certificate(s) in Original, to the Company’s R&TA for

transmission of the shares in his / their name(s).


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In case of a deceased shareholder who held shares in his / her own name (single) and had left a Will, how do the legal heir(s) get the sharestransmitted in their name(s)?

The legal heir(s) will have to get the Will probated by the Court of competent jurisdiction and then send to the Company’s R&TA a copy ofthe probated copy of the Will, alongwith relevant details of the shares, the relevant share certificate(s) in Original and transmission form fortransmission of the shares in his / their name(s).

How can the change in order of names (i.e. transposition) be effected?

Share certificates alongwith a request letter duly signed by all the joint holders may be sent to the Company’s R&TA for change in order ofnames, known as ‘transposition’. Transposition can be done only for the entire holdings under a folio and therefore, requests for transpositionof part holding cannot be accepted by the Company / R&TA.

For shares held in demat form, investors are advised to approach their DP concerned for transmission/transposition of the shares theCompany.

What is the procedure for obtaining duplicate share certificate(s) in case of loss / misplacement of original share certificate(s)?

Shareholders who have lost / misplaced share certificate(s) should inform the Company’s R&TA, immediately about loss of share certificate(s),quoting their folio number and details of share certificate(s), if available. The R&TA shall immediately mark a ‘stop transfer’ on the folio toprevent any further transfer of shares covered by the lost share certificate(s).

It is recommended that the shareholders should lodge a FIR with the police regarding loss of share certificate(s). They should send theirrequest for duplicate share certificate(s) to the Company’s R&TA. Documents required to be submitted alongwith the application includeIndemnity Bond, Surety Form, copy of FIR, Memorandum of Association and Certified Copy of the Board Resolution (in case of companies).

What should a shareholder do in case he finds the original share certificate(s) after receipt of duplicate share certificate(s)?

Such a shareholder is requested to surrender the original share certificate(s), after cancellation, to the Company’s R&TA immediately, if the

duplicate share certificate(s) have been issued to him. Further, as the shareholder has been issued duplicate share certificate(s), he would be

liable to indemnify any innocent third party(ies) purchasing the original share certificate(s), directly or indirectly, with or without the

knowledge of the original shareholder, as it tantamounts to passing of adverse title.

What is the procedure for splitting of a share certificate into smaller lots?

Shareholders may write to the Company’s R&TA enclosing the relevant share certificate for splitting into smaller lots. The share certificates,

after splitting, will be sent by the Company’s R&TA to the shareholders at their registered address.

V. Miscellaneous

(A) Change of address

What is the procedure to get changes in address registered in the Company’s records?

Shareholders holding shares in physical form, may send a request letter duly signed by all the holders giving the new address alongwith Pin

Code. Shareholders are also requested to quote their folio number and furnish proof such as attested copies of Ration Card / PAN Card /

Passport / Latest Electricity or Telephone Bill / Lease Agreement etc. If shares are held in dematerialised form, information about change in

address needs to be sent to the DP concerned.

Can there be multiple addresses for a single folio?

There can only be one registered address for one folio.

(B) Change of name

What is the procedure for registering change of name of shareholders?

Shareholders may request the Company’s R&TA for effecting change of name in the share certificate(s) and records of the Company.Original share certificate(s) alongwith the supporting documents like marriage certificate, court order etc. should be enclosed. The Company’s

R&TA, after verification, will effect the change of name and send the share certificate(s) in the new name of the shareholders. Shareholdersholding shares in demat form, may request the concerned DP in the format prescribed by DP.

(C) Authority to another person to deal with shares

What is the procedure for authorising any other person to deal with the shares of the Company?

Shareholders need to execute a Power of Attorney in favour of the concerned person and submit a notarised copy of the same to theCompany’s R&TA. After scrutiny of the documents, the R&TA shall register the Power of Attorney and inform the shareholders concerned

about the registration number of the same.

VI. Shareholders’ General Rights

• To receive not less than 21 clear days’ notice of general meetings unless consented for a shorter notice.

• To receive notice and forms for Postal Ballots in terms of the provisions of the Companies Act, 1956 and the concerned Rules issued

thereunder.

• To receive copies of Balance Sheet and Profit and Loss Account alongwith all annexures / attachments (Generally known as AnnualReport).

29


• To participate and vote at general meetings either personally or through proxy (proxy can vote only in case of a Poll).

• To receive dividends and other corporate benefits like bonus, rights etc. once approved.

• To demand poll on any resolution at a general meeting in accordance with the provisions of the Companies Act, 1956.

• To inspect statutory registers and documents as permitted under law.

VII. Duties / Responsibilities of Investors

• To remain abreast of corporate developments, company specific information and take informed

• To be aware of relevant statutory provisions and ensure effective compliance therewith.

• Not to indulge in fraudulent and unfair trading in securities nor to act upon any unpublished price sensitive information.

• To participate effectively in the proceedings of shareholder’ meetings.

• To respond to communications seeking shareholders’ approval through Postal Ballot.

• To respond to communications of SEBI / Depository / Depository Participant / Brokers / Sub-brokers / Other Intermediaries / Company,

seeking investor feedback / comments.

VIII. General Safeguards

In pursuit of the Company’s objective to mitigate / avoid risk while dealing with securities and related matters, the following are certain

general safeguards suggested for investors to follow:

• Folio number (Client ID and DP ID number in respect of dematerialized securities) should not be disclosed to unknown persons. Signed

blank transfer deeds (delivery instruction slips in respect of dematerialized shares) should not be given to unknown persons.

• Off-market deals and dealings with / through unregistered intermediaries should be avoided.

• Demat Account should not be kept dormant for long; periodic statement of holdings should be obtained from the concerned DP and

holdings verified.

• Correspondence containing certificates of securities and high value dividend / interest warrants / cheques / demand drafts should not be

sent by ordinary post.

• A valid Contract Note / Confirmation Memo should be obtained from the broker / sub-broker, within 24 hours of execution of the trade

and it should be ensured that the Contract Note / Confirmation Memo contains order no., trade no., trade time, quantity, price and

brokerage.

• Investors should restrain themselves from indulging into insider trading and fraudulent trading practices.

• Investors should convert their physical holdings of securities into demat holdings.

Undelivered Share Certificates & Warrants

The Company with the help of its R&TA has been engaged in a continuous exercise of tracking investors who could not be reached at their

existing address.

Intimation Letters to Investors

The Company gives an opportunity by sending intimation letters to investors for claiming their outstanding dividend / interest amount which

is due for transfer to Investor Education & Protection Fund.

Information Regarding Tax on Dividend and Sale of Shares

The provisions relating to tax on dividend and sale of shares are provided for ready reference of Shareholders:

• No tax is payable by shareholders on dividend. However, the Company is required to pay dividend tax @12.5% and surcharge @10%,

together with education cess @ 2%.

• Short Term Capital Gains (STCG) tax is payable @ 10% and surcharge (@ 10% above income level of Rs 10 lakh) together with

education cess @ 2%, by the shareholders in case shares are sold within 12 months from the date of purchase.

• No Long Term Capital Gains (LTCG) tax is payable on sale of shares through a recognized stock exchange.

• Securities Transaction Tax (STT) is payable as under –

– @ 0.125% (w.e.f. June 1, 2006) on both the purchaser and the seller in respect of delivery based transactions.

– @ 0.017% (w.e.f. June 1, 2006) on the seller in respect of derivatives.

– @ 0.025% (w.e.f. June 1, 2006) on the seller in respect of transactions in securities not being settled by actual delivery.


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Contact DetailsDepositories

National Securities Depository Limited

Trade World, A Wing,

4th Floor, Kamala Mills Compound,

Senapati Bapat Marg, Lower Parel,

Mumbai 400 013

Tel +91 22 2499 4200

Fax +91 22 2497 2993 / 2497 6351

Central Depository Services (India) Limited

Phiroze Jeejeebhoy Towers,

16th Floor, Dalal Street, Mumbai 400 023

Tel +91 22 2272 3333

Fax +91 22 2272 3199 / 2272 2072

www.cdslindia.com

Registrars and Transfer Agents

Karvy Computershare Private Limited

46, Avenue 4, Street No. 1,

Banjara Hills,

Hyderabad 500 034

Tel +91 40 2332 0666 / 2332 0711 /

2332 3037 / 2332 3031

Fax +91 40 2332 3058

Securities and Exchange Board of India Office of Investor Assistance and Education

Exchange Plaza, Wing II,

4th Floor, Bandra-Kurla Complex, Bandra (E),

Mumbai 400 051

Tel +91 22 2659 8510 -13 / 2659 8526 -27

Fax +91 22 2659 8514 / 18

www.sebi.gov.in

Registrar of Companies, New Delhi

B-Block Paryavaran Bhawan,

CGO Complex, Lodhi Road,

New Delhi - 110003

Phone: 011 - 24362708

Fax: 011 – 24364570

Bombay Stock Exchange Limited (BSE)

Phrioze Jeejeebhoy Towers,

Dalal Street, Mumbai 400 001

Tel +91 22 2272 1233 / 4

Fax +91 22 2272 1919

www.bseindia.com

The National Stock Exchange of India Limited (NSE)

“Exchange Plaza” Plot No. C/1,

“G” Block Bandra-Kurla Complex, Bandra (E),

Mumbai 400 051

Tel +91 22 2659 8100 / 8114

Fax +91 22 2659 8120

www.nseindia.com

General Shareholder Information covering inter alia listing details, stock market data, the Company’s share price performance etc. is

provided in the Report on Corporate Governance forming part of the Annual Report.

NOTE

The terms ‘shareholders’ and ‘investors’ have been used interchangeably.

The contents of this Referencer are for the purpose of general information of readers; for full particulars / provisions, readers are advised to

refer to the relevant Acts / Rules / Regulations / Guidelines / Clarifications.

31


Directors’ Report

Dear Shareholders

It is with great pleasure that your Directors present the 7th AnnualReport together with the Audited Accounts for the financial year

ended March 31, 2006.

FINANCIAL RESULTS

The highlights of the financial results of the Company for the

financial year ended March 31, 2006 are as under:

For the year ended For the year ended

March 31, 2006. March 31, 2005.

(Amount in Rs.) (Amount in Rs.)

Profit before Depreciation 109,34,74,140 38,11,99,061

Less: Depreciation 30,06,075 1,36,074

Profit before Tax 109,04,68,065 38,10,62,987

Less: Provision for Tax 34,78,98,969 14,50,05,412

Profit after Tax 74,25,69,096 23,60,57,575

Add brought forward balance 19,28,97,592 40,51,532

Profit available for appropriation 93,54,66,688 24,01,09,107

APPROPRIATIONSYour Directors recommend appropriation as under:

Interim Dividend 24,21,51,763 -

Proposed Final Dividend 4,84,27,613 -

Corporate Dividend Tax paid on

Interim Dividend 3,39,61,785 -

Corporate Dividend Tax proposed

On Final Dividend 67,91,973 -

Premium paid on Buyback

of equity shares 37,61,02,085 -

Capital Redemption Reserve on Buyback

Of Equity Shares 36,27,392 -

Transfer to Reserve Fund (u/s 45IC of the

R.B.I. Act, 1934) 14,85,13,820 4,72,11,515

Transfer to General Reserves 7,43,00,000 -

Balance carried to Balance Sheet 15,90,257 19,28,97,592

RESULTS OF OPERATIONS

The Revenue for the year increased by 304% from Rs 5234 lacs to

21158 lacs. The Company’s net profit for the year was Rs 7426

lacs (last year Rs. 2361 lacs) thereby registering a Annual Growth

Rate of 215%.

FUTURE OUTLOOK

Your Company continues to scale new heights by registering

phenomenal growth on a sustained basis year-on-year. The

Company conducts its business with an objective to forge long-

term relationships with its customers by providing them a diverserange of tailor-made financial products and services to meet their

various requirements. Your Company is committed to winning its

customers’ trust and ensuring customer satisfaction. It is a testimony

to the trust that thousands of our customers across the country have

reposed in the Company that the Company’s Securities and

Consumer finance businesses continue to churn out record results.The Company’s outstanding financial performance during fiscal

2005-06 demonstrates the strong business momentum that the

Company has been able to generate, by utilising multi-faceted

growth opportunities. Your Directors are delighted to inform you

that Indiabulls Financial Services Limited was adjudged as the

“Fastest Growing Large Cap Company” in India in a report carriedout by Business Today magazine in April 2006.

The Company looks forward to maintaining this momentum ofgrowth in the financial year 2006-07 as the Indiabulls Groupcontinues to invest in growing its business franchise. The “IndiaStory” keeps up its winning streak with the GDP registering anunprecedented growth and the Indian economy promising to growat a healthy pace. This kind of a scenario presents huge opportunitiesfor the financial sector to play a ‘catalyst’ role in stimulatingeconomic growth. The Indiabulls Group, with its team of dedicatedand committed high performers, is poised to take on the challengesand leveraging the opportunities of this new robust economy.

DIVIDEND

For the year 2005-06, two interim dividends were paid – Rs. 1 pershare (50% on the face value of Rs. 2 per share) on November 08,2005 and Re. 0.50 per share (25% on the face value of Rs. 2 pershare) on February 09, 2006.

In addition to the above, Directors of your Company recommend afinal dividend of Re. 0.30 per share (15% on the face value of Rs. 2per share), which, if approved at the ensuing Annual GeneralMeeting, will be paid to (i) all those Members whose names appearin the Register of Members as on 12th July, 2006 and (ii) all those

Members whose names appear on that date as beneficial owner as

furnished by National Securities Depository Limited and Central

Depository Services (India) Limited.

The total dividend payout for the year ended March 31, 2006 works

out to Rs. 1.80 per share (90% on the face value of Rs. 2 per share)

MANAGEMENT DISCUSSION & ANALYSIS REPORT

Management’s Discussion and Analysis Report for the year under

review, as stipulated under clause 49 of the Listing Agreement with

the Stock Exchanges in India, is presented in a separate section

forming part of the Annual Report.

IMPORTANT DEVELOPMENTS

The Group took some significant steps towards consolidation and

diversification of its businesses:

• Mr. L. N. Mittal, the renowned steel magnate and world’s third

richest man acquired 8.2% stake in Indiabulls Credit Services

Limited, the majority owned subsidiary of Indiabulls Financial

Services Limited for approximately Rs 90 crores, through LNM

India Internet Ventures Limited. The investment at

approximately Rs 62 per share valued Indiabulls Credit Services

Limited at Rs 1,100 crores. This investment followed Farallon

Capital’s two prior rounds of investments in Indiabulls Credit

Services Limited. Recently Farallon had paid Rs 55 per shareand invested $ 20 million in the company and last year Farallon

had paid Rs 22 per share to buy 33% stake for Rs 88 crores in

Indiabulls Credit Services Limited.

• In a strategic move, the Board of Directors of your Companyapproved the proposal to demerge the real estate undertaking

of the Company into Indiabulls Real Estate Ltd; its wholly ownedsubsidiary, in terms of a scheme of arrangement under section

391-394 of the Companies Act, 1956, subject to approval ofthe High Court, Delhi. Post the demerger Indiabulls Real Estate

Limited will be an umbrella company of the Group’sinvestments in all real estate undertakings, viz. Indiabulls

Properties Private Limited, Indiabulls Real Estate CompanyPrivate Limited, Indiabulls Estate Limited, Indiabulls Resources

Limited and Indiabulls Infrastructure Limited.

Indiabulls Infrastructure Limited, an associate Company,through its wholly owned subsidiary owns 50% shareholding

in Kenneth Builders & Developers Private Limited, a companythat recently won the auction of 35.8 acres of residential land


32

located in South Delhi offered in a public-private partnershipproject by the Delhi Development Authority (DDA).

The de-merger is set to unlock tremendous value for allshareholders as they can participate directly in both financialservices and real estate construction-development business thatIBFSL has nurtured and brought to stature.

• The Company also successfully completed its Second GDROfferings and has allotted 2,76,00,000 Equity Shares of parvalue Rs.2 per share, as underlying shares representing2,76,00,000 GDRs, each GDR representing 1 equity share andpriced at US $ 5.42. The GDRs of the company are traded atthe Luxembourg Stock Exchange. The issue was lead managedby Citigroup and Merrill Lynch International. During the yearunder review the Company completed buy back of its equityshares pursuant to which 18,13,696 equity shares of the facevalue of Rs 2/- per share, were bought back at an average priceof Rs. 209.37 per share for a sum aggregating to Rs. 37.97crores.

• Your Directors have completed a Share Subscription Agreementwith Oberon Limited, a special purpose vehicle wholly owned

by funds managed and controlled by Farallon Capital

Management L.L.C., the details of which have been sent to

you, separately for your approval. Under the terms of the

agreement, Oberon will be allotted convertible preference and

non-convertible preference shares for a total consideration of

Rs. 644 crores.

UTILISATION OF ISSUE PROCEEDS

The details of utilisation of proceeds of the money raised by the

Company through its IPO and subsequently the GDR’s are as under:

Year ended Year ended

March 31, 2006 March 31, 2005

Balance amount to be utilised in

the beginning of the year 2,208,766,192 —

Gross Proceeds of Issue raised

through Initial Public Offering — 516,562,861


through GDR 6,505,560,960 2,618,212,500


through ESOP 2,400,000 —

Total Proceeds raised (A) 8,716,727,152 3,134,775,361

Less: Utilisation of Issue Proceeds

Share issue expenses – Initial Public Offering — (65,278,675)

Share issue expenses - GDR (223,741,386) (93,827,333)

Investment in Subsidiary (3,167,550,000) (334,025,000)

Investment in Associate (782,000,000) (4,000,000)

Investment in Debentures of

Associate Companies (1,858,665,000) —

Share Application money in

Indiabulls Properties Private Limited — (427,614,225)

Security deposit for expansion of offices (35,524,740) —

Purchase of fixed assets (161,920,020) (1,263,936)

Total Utilisation of Proceeds (B) (6,229,401,146) (926,009,169)

Balance amount being temporary

utilization of Proceeds* 2,487,326,006 2,208,766,192

*The balance amount of Rs. 2,487,326,006 (Previous Year Rs.2,208,766,192) has been deployed on a temporary basis towardsworking capital to reduce short term bank borrowing requirements.

ESOP ALLOTMENT

The Second tranche of 12,00,000 equity shares of Rs.2/- per sharewere allotted to the employees on 20th April, 2006 against theoptions exercised by them under the Employee Stock Option Plan– 2004.

The disclosures required to be made in the Directors’ Report inrespect of the above referred stock options, in terms of the SEBI(EMPLOYEE STOCK OPTION SCHEME AND STOCK PURCHASESCHEME) GUIDELINES, 1999, are contained in the Annexureforming part of the Directors report.

SUBSIDIARIES

The statement pursuant to Section 212(1)(e) of the Companies Act,1956 relating to subsidiary companies forms a part of the financialstatement.

The Company has made an application under section 212(8) of theCompanies Act, 1956 to the Central Government seeking exemptionfrom attaching the Report and Accounts of its subsidiary companieswith the Balance Sheet of the Parent Company and the same isawaited. Members, who wish to have a copy of the full report and

accounts of the subsidiaries, will be provided the same on receipt

of a written request from them.

In accordance with the Accounting Standard AS-21 read with

Accounting Standard AS-23 on “Accounting for Investment in

Associates” on Consolidated Financial Statements, your Directors

have pleasure in attaching the Consolidated Financial Statements,

which forms part of the Annual Report and Accounts. Such

Consolidated Financial Statements, presented by the Company

includes financial information of its subsidiaries.

FIXED DEPOSITS

The Company has not accepted any fixed deposits from the public

during the year.

DIRECTORS

In accordance with the provisions of Section 255 & 256 of the

Companies Act, 1956 and Article 121 of the Company’s Articles of

Association, Mr. Aishwarya Katoch and Mr. Shamsher Singh,

Directors, retire by rotation and being eligible, offer themselves for

reappointment at the ensuing Annual General Meeting.

Brief resume of Directors proposed to be reappointed, nature of

their expertise in specific functional areas and names of companies

in which they hold directorships and memberships/ chairmanships

of Board Committees, as stipulated under Clause 49 of ListingAgreement with the Stock Exchanges in India, are provided in theReport on Corporate Governance forming part of the Annual Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956your Directors confirm that:

1. in the preparation of the annual accounts, the applicable

accounting standards have been followed and that there areno material departures from the same;

2. the Directors have selected such accounting policies and

applied them consistently and made judgments and estimates

that are reasonable and prudent so as to give a true and fairview of the state of affairs of the company as at 31st March,2006 and the profit of the company for the year ended on that

date;3. the Directors have taken proper and sufficient care for

maintaining of adequate accounting records in accordance with

the provisions of the Companies Act, 1956 for safeguarding

33


the assets of the Company and for preventing and detectingfraud and other irregularities; and

4. the Directors have prepared the Annual Accounts of theCompany on a ‘going concern’ basis.

AUDITORS AND AUDITORS’ REPORT

M/s. Deloitte Haskins & Sells, Chartered Accountants, Auditors ofthe company will retire at the conclusion of the ensuing AnnualGeneral Meeting and being eligible offer themselves forreappointment. The Company has received a certificate from theAuditors to the effect that their reappointment, if made would be inaccordance with Section 224(1B) of the Companies Act-1956. TheBoard recommends their re-appointment.

The Notes to the Accounts referred to in the Auditors’ Report areself–explanatory and therefore do not call for any furtherexplanation.

LISTING WITH STOCK EXCHANGES

The equity shares of the Company continue to remain listed withthe Bombay Stock Exchange Limited (BSE) and the National StockExchange of India Limited (NSE). The listing fees payable to both

the exchanges for the year 2006-07 have been paid. Global

Depositary Receipts (GDRs) of the Company continued to be listed

on Luxembourg Stock Exchange.

CORPORATE GOVERNANCE REPORT

Pursuant to clause 49 of the Listing Agreements with the Stock

Exchanges, a detailed report on Corporate Governance is included

in the Annual Report. A Practicing Company Secretary’s Certificate

certifying the Company’s compliance with the requirements of

Corporate Governance in relation to clause 49 of the Listing

Agreement is attached with the Corporate Governance Report.

INFORMATION PURSUANT TO SECTION 217 OF THECOMPANIES ACT, 1956

The information required to be disclosed under Section 217 (1) (e)of the Companies Act, 1956, read with the Companies (Disclosureof Particulars in the Report of the Board of Directors) Rules, 1988with respect to conservation of Energy, Technology absorption andForeign Exchange earnings and outgo, is given in Annexure andforms a part of this Report.

In terms of provisions of Section 217 (2A) of the Companies Act,1956 read with the Companies (Particular of Employees) Rules,1975 as amended, the names and other particulars of the employeesare required to be set out in the Annexure to the Directors’ Report.However, as per the provisions of Section 219(1)(b)(iv) of the saidAct, the Annual Report excluding the aforesaid information is beingsent to all the Members of the Company and others entitled thereto.Any member who is interested in obtaining such particulars maywrite to the Company at its Registered Office.

ACKNOWLEDGEMENT

Your Directors wish to express their gratitude for the continuousassistance and support received from the investors, clients, bankers,

regulatory and government authorities, during the year.

Your directors also place on record their deep sense appreciation

for the contributions made by employees at various levels to the

growth and success of the Company.

For and on behalf of the Board of Directors

Sameer Gehlaut

New Delhi, June 18, 2006 Chairman


34

Annexure to the Directors’ ReportANNEXURE FORMING PART OF THE DIRECTORS’ REPORT

INFORMATION PURSUANT TO SECTION 217 (1)(e) OF THE COMPANIES ACT, 1956, READ WITH THE COMPANIES (DISCLOSURE OF

PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY,

TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO.

A. CONSERVATION OF ENERGY

a) The Company uses electric energy for its equipment such as office equipment, computers, lighting and utilities in the work premises. As

an ongoing process, the following measures are undertaken to conserve energy:

b) Implementation of viable energy saving proposals

c) Installation of automatic power controllers to save maximum demand charges and energy.

d) Training front-end operational personnel on opportunities of energy conservation.

e) Awareness and training sessions for maintenance personnel conducted by experts.

B. TECHNOLOGY ABSORPTION

The Company believes that technological obsolescence is a practical reality. Our research activities will help us to prepare for future growth

& opportunities.

At the Company we encourage continuous innovation with the prime purpose of providing maximum benefits to our clients and other users

by working proactively (self driven research and reactively (client driven research).

Our objective is to carry out applied research in the years that are closely related to realization of the business objectives of the company

and seek to encash available business opportunities.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO:

During the year under review, there was no foreign exchange earning. However there was an outgo of USD equivalent to Rs. 9187440/-

towards dividend remitted outside India in foreign currency.

Annexure to the Directors’ Report regarding the ESOP issue

Particulars

a. Options Granted 60,00,000

b. Exercise price Rs.2

c. Options vested (during the year) 12,00,000

d. Options exercised (during the year) 12,00,000

e. The total number of Shares arising as a result of exercise of option 12,00,000

f. Options lapsed Nil

g. Variation in terms of options Not applicable

h. Money realized by exercise of options Rs.24,00,000/-

i. Total number of options in force 36,00,000 (after conversion of second slab of 20%)

j. Employee wise details of options granted to;

i. Senior Management personnel Nil

ii. any other employee who received a grant in any Tejinderpal Singh Miglani 20,00,000

one year of option amounting to 5% or more of Gagan Banga 9,00,000

option granted during that year Divyesh B. Shah 7,50,000

Kavi Kumar 5,00,000

iii. identified employees who were granted option, Tejinderpal Singh Miglani 20,00,000

during any one year, equal to or exceeding 1% of the Gagan Banga 9,00,000

issued capital (excluding outstanding warrants and

conversions) of the company at the time of grant

k. Diluted Earnings Per Share (EPS) pursuant to issue of

shares on exercise of option calculated in accordance with

[Accounting Standard (AS) 20 ‘Earnings Per Share’] Rs. 4.776 per share

l. Where the Company has calculated the employee compensation Not Applicable

cost using the intrinsic value of the stock options, the difference

between the employee compensation cost so computed and the

employee compensation cost that shall have been recognized if it

had used the fair value of the options, shall be disclosed. The impact

of this difference on profits and on EPS of the Company shall also

be disclosed

35


m. Weighted – average exercise prices and weighted – average fair Average exercise price –Rs.2/- per option

values of options shall be disclosed separately for options whose Average Fair value – Rs. 9.50 per option

exercise price either equals or exceeds or is less than the market

price of the stock.

n. A description of the method and significant assumptions used during As per the guidelines issued by the erstwhile Controller

the year to estimate the fair values of options, including the following of Capital Issues , simple average of Net Asset Value

weighted – average information: ( NAV) method and Price Earning Capacity Value (PECV)

method have been used for arriving at the estimated fair

values of the options Some of the significant assumptions

used were:

i. risk free interest rate 1. Capitalization rate is assumed at 15%

ii. expected life 2. The Profit & Loss account for the last four years are

iii. expected volatility considered as the adequate basis for the future

iv. expected dividends, and profitability of the company.

3. Weighted average is used to calculate the average

profits. Profits of the latest years are assigned

maximum weights

4. All foreseeable provisions and contingent liabilities

affecting the financial position of the company have

been taken into consideration.

5. All material events and circumstances existing on the

date of valuation and those foreseeable, affecting the

values of the assets, liabilities and profitability of the

company have been duly considered.

v. the price of the underlying share in market at the time of option grant The shares were not listed at the time of grant.

Consolidated Financial

Statements and Notes

37



38

Auditors' Report To The Board of Directors of

Indiabulls Financial Services Limited Group

1. We have audited the attached Consolidated Balance Sheet of Indiabulls Financial Services Limited Group as

at March 31, 2006, the Consolidated Profit and Loss Account and also the Consolidated Cash Flow Statement

for the year ended on that date annexed thereto. These financial statements are the responsibility of Indiabulls

Financial Services Limited's ("the Company") management and have been prepared by the management on

the basis of separate financial statements and other financial information regarding components. Our

responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. 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 audit provides a reasonable basis for our opinion.

3. We did not audit the financial statements of one subsidiary, whose financial statements reflect total assets

(net) of Rs. 4,072,572 as at March 31, 2006, total revenue of Rs. Nil and net cash inflows amounting to Rs.

3,664,222 for the year then ended. These financial statements and other financial information has been

audited by other auditor whose report have been furnished to us, and our opinion is based solely on the

report of the other auditor.

4. We report that the consolidated financial statements have been prepared by Indiabulls Financial Services

Limited's management in accordance with the requirements of Accounting Standard (AS) 21, Consolidated

Financial Statements and Accounting Standard (AS) 23, Accounting for Investment in Associates in Consolidated

Financial Statements issued by the Institute of Chartered Accountants of India.

5. Based on our audit and on consideration of the report of the other auditor on separate financial statements

and on the other financial information of the components, and to the best of our information and according

to the explanations given to us, we are of the opinion that the attached consolidated financial statements give

a true and fair view in conformity with the accounting principles generally accepted in India:

a. in the case of the consolidated balance sheet, of the state of affairs of Indiabulls Financial Services

Limited Group as at March 31, 2006.

b. in the case of the consolidated profit and loss account, of the profit for the year ended on that date; and

c. in the case of the consolidated cash flow statement, of the cash flows for the year ended on that date.

For Deloitte Haskins & Sells

Chartered Accountants

K. A.Katki

Partner

Membership No. : 038568

Mumbai: April 24, 2006

39


Indiabulls Financial Services Limited GroupConsolidated Balance Sheet as at March 31, 2006

As at As at

Schedule March 31, 2006 March 31, 2005 Amount (Rs.) Amount (Rs.)

I. SOURCES OF FUNDSShareholders' Funds

Share Capital A 320,450,756 266,478,148Share Warrants 167,200,000 -(Refer Note B 7(a) of Schedule O)Reserves and Surplus B 12,793,943,219 4,217,670,520

13,281,593,975 4,484,148,668

Minority Interest 3,696,950,662 1,112,331,130

16,978,544,637 5,596,479,798Loan Funds C

Secured Loans 29,682,942 3,821,822,121Unsecured Loans 3,000,000,000 1,132,500,000

3,029,682,942 4,954,322,121

Deferred Tax Liability (Net) 131,577,159 19,018,893

TOTAL 20,139,804,738 10,569,820,812

II. APPLICATION OF FUNDS

Fixed Assets D

Gross Block 825,947,240 256,288,519

Less: Depreciation / Amortisation 133,506,495 60,999,995

Net Block 692,440,745 195,288,524

Capital work in progress 32,098,518 16,528,463

724,539,263 211,816,987

Goodwill on consolidation E - 192,656,594

Investments F 2,674,175,636 7,186,046

Current Assets, Loans & Advances G

Interest Accrued 45,078,239 13,090,882

Land under Development 64,400 -

Sundry Debtors 819,046,209 11,760,159

Cash & Bank Balances 8,910,276,571 3,325,819,382

Loans & Advances 12,382,542,461 8,452,387,088

22,157,007,880 11,803,057,511

Less : Current Liabilities & Provisions H

Current Liabilities 3,710,991,412 1,186,381,068

Provisions 1,704,926,629 458,515,258

5,415,918,041 1,644,896,326

Net Current Assets 16,741,089,839 10,158,161,185

TOTAL 20,139,804,738 10,569,820,812

Significant accounting policies and notes Oforming part of accounts

As per our report of even date attached

For Deloitte Haskins & Sells For and on behalf of the Board


K. A. Katki Rajiv Rattan Sameer Gehlaut Amit JainPartner Whole time Director Whole time Director Company Secretary

Mumbai: April 24, 2006 Mumbai: April 24, 2006


40

Indiabulls Financial Services Limited GroupConsolidated Profit and Loss Account for the Year ended March 31, 2006

Year ended Year endedSchedule March 31, 2006 March 31, 2005

No. Amount (Rs.) Amount (Rs.)

INCOMERevenue from Operations I 6,103,328,485 1,676,298,397Other Income J 28,303,760 7,805,410

6,131,632,245 1,684,103,807EXPENDITURE

Operating Expenses K 547,861,922 220,167,653Employees Remuneration & Benefits L 795,034,434 225,183,165Administrative & Other Expenses M 667,522,207 183,143,563Interest & Finance Charges N 314,941,796 133,799,635Depreciation / Amortisation 72,534,596 21,742,878

2,397,894,955 784,036,894

Profit before Tax 3,733,737,290 900,066,913

Provision for Taxation- Current Tax 1,079,450,000 319,580,000

- Deferred Tax (Net) 112,639,119 13,408,832- Fringe Benefit Tax 7,937,571 -

Net Profit after tax 2,533,710,600 567,078,081

Provision for Preference Dividend - Subsidiary Company - 4,527,000Interim Dividend on Preference Shares Paid - Subsidiary Company 5,403,194 49,797,000Corporate Dividend Tax thereon 757,798 7,076,264

Net Profit Before Minority Interest 2,527,549,608 505,677,817Minority Interest (Refer Note B 2 of Schedule O) 159,388,229 7,010,757

Net Profit After Minority Interest 2,368,161,379 498,667,060

Add:- Balance of Profit Brought Forward 728,646,860 277,191,315

Amount Available for appropriation 3,096,808,239 775,858,375

Appropriations:Interim Dividend on Equity Shares 242,151,763 -Proposed Final Dividend 48,427,613 -Corporate Dividend Tax on Proposed Final Dividend 6,791,973 -

Corporate Dividend Tax on Interim dividend 33,961,785 -Premium paid on Buyback of Equity Shares 376,102,085 -Capital Redemption Reserve on Redemption ofPreference Share Capital of Subsidiary 452,700,000 -Capital Redemption Reserve on Buyback of Equity Shares 3,627,392 -Transfer to General Reserve 74,300,000 -Transfer To Reserve Fund (U/s 29C of the N.H.B. Act, 1987) 4,756,709 -Transfer To Reserve Fund (U/s 45IC of the R.B.I. Act, 1934) 232,615,456 47,211,515

1,475,434,776 47,211,515

Balance of Profit Carried forward 1,621,373,463 728,646,860

Earnings Per Share (Refer Note B 23 of Schedule O) - Basic (Rs.) 15.61 5.10 - Diluted (Rs.) 15.23 4.87

Significant Accounting Policies andNotes forming part of Accounts O


For Deloitte Haskins & Sells For and on behalf of the BoardChartered Accountants

K. A. Katki Rajiv Rattan Sameer Gehlaut Amit JainPartner Whole Time Director Whole Time Director Company SecretaryMumbai: April 24, 2006 Mumbai: April 24, 2006

41


Indiabulls Financial Services Limited GroupConsolidated Cash flow for the Year ended March 31, 2006

Year ended Year endedMarch 31, 2006 March 31, 2005

Amount Amount Amount Amount(Rs.) (Rs.) (Rs.) (Rs.)

A Cash flow from operating activities :Net Profit before tax 3,733,737,290 900,066,913

Adjustments for :

Share of Reserves and Surplus of Associate (26,613,065) (3,186,046)Depreciation / Amortisation 72,534,596 21,742,878Provision for doubtful debts / Bad Debts written off 118,399,732 14,884,910Provisioin for Gratuity 8,171,205 458,730Provisioin for Leave Encashmemts 5,006,241 179,317Loss on sale on fixed assets 113,715 37,711Liability/Provision Written Back (377,089) (2,734,239)Employee compensation expense 9,000,000 9,000,000Interest Income (195,744,386) (31,819,760)Interest Expense 277,332,178 120,574,954

267,823,127 129,138,455

4,001,560,417 1,029,205,368Operating Profit before working capital changes

Adjustments for:

Trade and other receivables (3,879,940,354) (5,911,418,869)Stock of Securities - 11,533,767Trade Payables and other liabilities 2,524,987,433 801,869,162

(1,354,952,921) (5,098,015,940)

2,646,607,496 (4,068,810,572)

Cash used in operations

Direct taxes paid (884,746,813) (398,223,123) (884,746,813) (398,223,123)

Net cash generated / (used in) operating activities 1,761,860,683 (4,467,033,695)

B Cash flow from investing activities :Purchase of fixed assets (432,533,663) (92,103,537)Intangible Assets Capitalised (137,380,613) (57,366,135)Sale of Fixed Assets 113,744 -Capital work in Progress (15,570,055) (16,528,463)Contigent liability paid to erstwhile shareholders Subsidiary - (11,800,000)Excess of assets taken over considerationpaid for acquisition of subsidiary 909,996,807 (104,436,196)Investments in Associates (2,640,665,000) (4,000,000)Investment in Equity Shares (10,000) -Share application money to Associate - (427,614,225)Interest Received 163,757,029 20,978,077

Net cash used in investing activities (2,152,291,751) (692,870,479)

C Cash flow from financing activities

Net proceeds from Issue of Equity Shares (including Securities Premium) 6,510,691,471 3,134,775,361

Premium paid on Buyback of Equity Shares (379,810,330) -

Net proceeds from Issue of Share Warrants 167,200,000 -

Net Proceeds from Issue of Equity Share Capital by

Subsidiaries (including Securities Premium) 2,842,613,019 1,084,646,562

Redemption of Preference Share Capital by Subsidiary (452,700,000) -

Proceeds from Intercorporate Deposits taken from Associates 11,659,250,000 -

Repayment of Intercorporate Deposits to Associates (12,591,750,000) -

Intercorporate Deposit given to Associates (2,930,426,000) -

Intercorporate Deposit repaid by Associates 2,930,426,000 -

Intercorporate Deposit given to Subsidiary of Associates (515,524,502) -

Intercorporate Deposit repaid by Subsidiary of Associates 515,524,502 -

Share issue expenses (223,741,386) (159,106,008)

Net Proceeds from Loans (989,019,391) 3,734,599,640

Payment of Preference Dividend by Subsidiary (9,930,194) (56,033,903)

Corporate dividend tax on Preference Dividend (1,349,418) (7,280,354)

Interim Dividend Paid on Equity Shares (242,151,763) -

Corporate dividend tax thereon on Interim Dividend (33,961,785) -

Interest paid (280,451,966) (118,473,660)

Net cash generated from financing activities 5,974,888,257 7,613,127,638

D Net Increase in cash and cash equivalents ( A+B+C ) 5,584,457,189 2,453,223,464

E Cash and cash equivalents at the beginning of the year 3,325,819,382* 872,595,918

F Cash and cash equivalents at the end of the year ( D + E ) 8,910,276,571* 3,325,819,382

*Includes Fixed deposits pledged Rs. 3,673,537,295 (Previous Year Rs. 576,500,000)

Note :

1 The above Cash Flow Statement has been prepared under the " Indirect Method ' as set out in Accounting Standard - 3 on Cash Flow Statements issued by the Institute ofChartered Accountants of India.

2. Cash and Bank balances include Rs. 4,044,078,994 (Previous Year 627,219,052) on account of fixed deposit placed with banks.



K. A. Katki Rajiv Rattan Sameer Gehlaut Amit JainPartner Whole Time Director Whole Time Director Company SecretaryMumbai: April 24, 2006 Mumbai: April 24, 2006


42

Indiabulls Financial Services Limited GroupSchedules forming part of the Consolidated Balance Sheet as at March 31, 2006

As at As atMarch 31, 2006 March 31, 2005

Amount (Rs.) Amount (Rs.)Schedule A

SHARE CAPITAL

Authorised

250,000,000 (Previous Year 250,000,000) Equity Shares of Rs. 2 each 500,000,000 500,000,000

500,000,000 500,000,000

Issued, Subscribed and Paid up

160,225,378 (Previous Year 133,239,074) Equity Shares of Rs. 2 each fully paid up 320,450,756 266,478,148(Refer Note B 3, 4 & 6 of Schedule O)

(Of the above:(a) 76,935,375 (Previous Year 76,935,375) Equity Shares of Rs. 2 each are alloted as

fully paid up Bonus Shares by capitalisation of Securities Premium Account

(b) 500,000 (Previous Year 500,000) Equity Shares of Rs. 2 each

fully paid up are issued for consideration other than cash)

Per Balance Sheet 320,450,756 266,478,148

Schedule B

RESERVE AND SURPLUS

1. Capital Reserve on Consolidation (Refer Note B 15 of Schedule O) 717,340,213 -

2. Capital Redemption Reserve

Balance as per last balance sheet - -

Add: Amount transferred during the year pursuant to buyback of Equity Shares 3,627,392 -

Add: Amount transferred during the year on redemption of Preference Share

Capital of subsidiary company 452,700,000 -

456,327,392 -

3. Securities Premium Account:

Balance as per last balance sheet 3,424,459,455 115,530,237

Add:- Additions during the year on issue of Equity Shares / GDR 6,462,091,471 3,031,422,323

Add:- Premium on acquisition of subsidiary - 436,612,903

Less:- Proportionate Share of post acquisition movement in Reserves of Associates 298,475 -

Less:- Share / GDR issue expenses written off 223,741,386 159,106,008

9,662,511,065 3,424,459,455

4. Stock Compensation adjustment (Refer note B 4 of Schedule O)

Employee Stock option outstanding 36,000,000 45,000,000

Less: Deferred Employee Compensation expense 27,000,000 36,000,000

9,000,000 9,000,000

5. Reserve Fund (u/s 45 IC of the R.B.I. Act, 1934)

Balance as per last balance sheet 48,229,280 1,017,765Add: Transferred from Profit and Loss account during the year 232,615,456 47,211,515Less: Transferred to Minority Interest 38,259,873 -

242,584,863 48,229,2806. Reserve Fund (u/s 29C of N.H.B. Act,1987)

Balance as per last balance sheet - -Add: Transferred from Profit and Loss account during the year 4,756,709 -

Less: Transferred to Minority Interest 1,585,411 -

3,171,298 -

7. General ReservesBalance as per last Balance Sheet 7,334,925 7,334,925Add: Transferred from Profit and Loss account during the year 74,300,000 -

81,634,925 7,334,925

8. Surplus as per Profit and Loss account 1,621,373,463 728,646,860

Per Balance Sheet 12,793,943,219 4,217,670,520

43




Amount (Rs.) Amount (Rs.)

Schedule C

1. SECURED LOANS

(Refer Note B 18 & 19 of Schedule O)From Banks- Working Capital Loans (Repayable within one year) - 3,411,475,869- Vehicle Loans 29,682,942 7,226,464Short Term Loans from Others (Repayable within one year) - 400,000,000Interest Accured and Due on the above - 3,119,788

29,682,942 3,821,822,1212. UNSECURED LOANS (Repayable within one year)

From Banks

- Commercial Papers (Refer Note B 17 of Schedule O) 3,000,000,000 200,000,000

From Others - 932,500,000

3,000,000,000 1,132,500,000



44

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45





Schedule E

Goodwill on Consolidation (Refer Note B 15 of Schedule O) - 192,656,594

Schedule FInvestments (At Cost, Long Term, Non-Trade, Unquoted)10,000 (Previous Year Nil) fully paid up Equity Shares of Rs. 1 eachof Bombay Stock Exchange Limited 10,000 -

In Associate Companies:

Indiabulls Properties Private Limited- Carrying cost of acquisition of Associate

396,000 (Previous Year 100,000 ) Fully paid up Equity shares of face value Rs. 10 each 300,000,000 4,000,000

Add: Proportionate share of post acquisition Reserves & Surplus 22,495,252 3,186,046

322,495,252 7,186,046

739,108 (Previous Year Nil ) 0.0001% fully paid up Optionally Convertable

Debentures of face value of Rs. 1,000 each in Indiabulls Properties Private Ltd. 739,108,000 -

Indiabulls Real Estate Company Private Limited

- Carrying cost of acquisition of Associate

396,000 (Previous Year Nil ) Fully paid up Equity shares of face value Rs. 10 each 300,000,000 -

Add: Proportionate share of post acquisition Reserves & Surplus 6,212,741 -

306,212,741 -

822,890 (Previous Year Nil ) 0.0001% fully paid up Optionally Convertible

Debentures of Rs. 1,000 each in Indiabulls Real Estate Company Private Ltd. 822,890,000 -

Indiabulls Infrastructure Limited -



Add: Proportionate share of post acquisition Reserves & Surplus 370,702 -

100,370,702 -

Indiabulls Estate Limited



Add: Proportionate share of post acquisition Reserves & Surplus 421,941 -

86,421,941 -- 296,667 (Previous Year Nil ) 0.0001% fully paid up Optionally Convertible

Debentures of Rs. 1,000 each in Indiabulls Estate Limited 296,667,000 -

2,674,175,636 7,186,046Schedule G

A. CURRENT ASSETS, LOANS & ADVANCES

1. Interest Accrued 45,078,239 13,090,882

2. Land under Development 64,400 -

3. Sundry Debtors (Unsecured considered good, unless otherwise stated)

Debts outstanding for a period exceeding six months

Considered Good 1,246,293 2,259,885Considered Doubtful 14,992,174 8,943,938

16,238,467 11,203,823

Other DebtsConsidered Good 817,799,916 9,500,274

Considered Doubtful 17,587,893 4,447,476

835,387,809 13,947,750

Less: Provision for Doubtful Debts 32,580,067 13,391,414

819,046,209 11,760,159


46




4. Cash and Bank BalancesCash on hand 5,626,215 481,922

Balances with Scheduled BanksIn Current Accounts 4,860,571,362 2,698,118,408In Fixed Deposit Accounts (Refer Note B 10 & 20 of Schedule O) 4,044,078,994 627,219,052

8,910,276,571 3,325,819,382

Total (A) 9,774,465,419 3,350,670,423B. LOANS & ADVANCES

(Unsecured considered good, unless otherwise stated)1. Loans and Other Credit facilities

Standard Assets - Secured- Considered Good (Refer Note B 12 of Schedule O) 9,747,928,139 7,163,277,525Standard Assets - Unsecured- Considered Good 847,597,790 66,569,666- Considered Doubtful 9,989,774 97,295

10,605,515,703 7,229,944,486Less: Securitised debts 468,218,773 34,165,268

10,137,296,930 7,195,779,218Add: Sub standard asset 9,165,562 -

10,146,462,492 7,195,779,218

2. Retained Interest on Securitisation / Assignment of Loans 353,134,265 9,988,740

3. Installments due from borrowers of Housing Loans (Secured) 11,900,000 -(Refer Note B 13 of Schedule O)

4. Advances recoverable in cash or in kind or for value to be received:-Considered Good 182,469,389 59,221,035Considered Doubtful 1,538,690 1,538,690

184,008,079 60,759,725Less: Provision for Doubtful Advances 1,538,690 1,538,690

182,469,389 59,221,0355. Advances to Associate Company -

Amount paid towards share application money pendingallotment in Indiabulls Properties Private Limited - 427,614,225(Maximum balance outstanding at any time during the yearRs. 2,851,750,000 (Previous Year Rs. 431,114,225))

Indiabulls Real Estate Company Private Limited - -(Maximum balance outstanding at any time during the yearRs. 2,409,100,000 (Previous Year Rs. Nil))

Indiabulls Infrastructure Limited - -(Maximum balance outstanding at any time during the yearRs. 249,500,000 (Previous Year Rs. Nil))

Indiabulls Estate Limited - -(Maximum balance outstanding at any time during the yearRs. 149,600,000 (Previous Year Rs. Nil))

6. Earnest Money Deposit (Refer Note B 9 of Schedule O) 34,510,000 -

7. Security DepositsConsidered Good 140,561,999 52,778,934Considered Doubtful - 200,000

140,561,999 52,978,934Less: Provision for Doubtful Deposits - 200,000

140,561,999 52,778,934

8. Deposits (including margin money) with Exchanges 175,212,339 246,114,339

9. Advance Income Tax / Tax Deducted At Source 1,338,291,977 460,890,597

Total (B) 12,382,542,461 8,452,387,088

Per Balance Sheet (A+B) 22,157,007,880 11,803,057,511

47


Schedule H

CURRENT LIABILITIES AND PROVISIONS

A. CURRENT LIABILITIES

1. Sundry Creditors 18,707,447 10,120,3532. Advances from Customers 2,825,814,395 988,951,4693. Temporary Overdrawn Balances with Scheduled Banks 512,663,451 77,068,0494. Other Liabilities 353,806,119 110,241,197

Total 3,710,991,412 1,186,381,068Note : Sundry Creditors include:

Dues to Small Scale Industrial Undertakings - - Dues to Others 18,707,447 10,120,353

18,707,447 10,120,353B. PROVISIONS1. Provision for Taxation 1,532,843,271 453,192,4102. Provision for Fringe Benefits Tax (net of advances) 391,277 -3. Provision for Gratuity & Other Retirement Benefits 11,519,254 3,348,0494. Provision for Leave Encashment 6,292,125 1,285,884

5. Provision for Indemnity 32,463,031 -6. Provision for Loans and Other Credit Facilities 66,198,085 97,2957. Provision for Corporate Dividend Tax on Interim Dividend - 591,6208. Provision for Proposed Final Dividend 48,427,613 -9. Provision for Corporate Dividend Tax on Proposed Final Dividend 6,791,973 -

Total 1,704,926,629 458,515,258






48

Indiabulls Financial Services Limited GroupSchedules forming part of the Consolidated Profit & Loss Account for the year ended March 31, 2006



Schedule I

REVENUE FROM OPERATIONS

Brokerage Income 2,608,540,884 995,796,403

Interest from Financing Activites 2,235,883,165 497,185,126

Retained Interest Income on Securtisation 368,149,837 9,988,740

Profit on Investment / Dealing in securities (Net) 167,444,524 2,968,647

Dividend on Units of Mutual Fund Income 94,889,337 2,916,500

Income From Equity Analysis, Mutual Funds, Account Opening & Other Charges 90,733,259 20,030,953

Other Operating Income (Refer Note B 29 of Schedule O) 537,687,479 147,412,028

Per Profit and Loss Account 6,103,328,485 1,676,298,397

Schedule J

OTHER INCOME

Advisory charges 69,475 1,885,125

Sundry Credit balances written back 377,089 2,734,239

Share of Reserves and Surplus in Associate 26,613,065 3,186,046

Miscellaneous Income 1,244,131 -

Per Profit and Loss Account 28,303,760 7,805,410

Schedule K

OPERATING EXPENSES

Stamp Duty 128,223,767 72,931,823

Demat Charges 743,811 1,262,943

SEBI Charges 24,782,588 445,085

Commission on Brokerage 254,162,598 83,267,573

Transaction Charges 80,581,411 36,577,229

NSDL Charges 18,665,681 3,046,675

Membership Fees 875,652 842,751

Web Hosting Expenses 9,066,230 3,095,402

VSAT Charges 12,975,548 9,386,927

Leased Line Expenses 13,960,176 5,277,628

Content Expenses 2,655,192 1,486,868

Software Expenses 1,169,268 1,534,875

Service Charges - 1,011,874


Schedule L

EMPLOYEES REMUNERATION & BENEFITS

Salaries 761,877,390 212,747,005

Contribution to Provident Fund and Other funds 24,157,044 3,436,160

Employee compensation expense (Refer Note B 4 of Schedule O) 9,000,000 9,000,000


49


Schedule MADMINISTRATIVE & OTHER EXPENSES

Staff Welfare Expenses 12,818,630 6,886,855

Lease Rent 105,022,084 39,085,509

Recruitment Expenes 7,327,533 121,876

Rates & Taxes 4,688,284 1,531,340

Electricity Expenses 31,150,853 7,808,608

Insurance 130,970 43,121

Communication Expenses 137,610,275 32,162,438

Professional Charges 40,257,298 6,774,278

Travelling & Conveyance 21,553,441 9,251,808

Printing & Stationery 46,058,552 9,342,053

Repairs & Maintenance - Others 24,625,919 9,136,173

Business Promotion 10,977,688 2,589,645

Advertisement 57,337,483 18,600,184

Office Maintenance 25,914,735 17,939,346

Auditors Remuneration (Excluding Service Tax of Rs. 697,680 (Previous Year Rs. 317,220)

Audit Fees 5,400,000 2,460,000

Other Services - Certification 400,000 650,000

Out of Pocket Expenses 500,000 200,000

Loss on securities pending for disposal (Refer Note B 21 of Schedule O) 442,188 568,219

Loss on sale of fixed assets 113,715 37,711

Preliminary Expenses 474,300 -

Bad Debts written off 1,191,199 694,663

Less: Adjusted against provision of earlier years 1,189,949 1,250 -

Provision for Indemnity (Refer Note B 11 of Schedule O) 32,463,031 -

Provision for Loans and Other Credit Facilities (Refer Note B 14 of Schedule O) 85,935,451 14,190,247

Miscellaneous Expenses 16,318,527 3,069,489


Schedule N

INTEREST & FINANCE CHARGES

Bank Charges 37,609,618 13,224,681

Interest on fixed loans 101,961,241 19,135,938

Interest on other loans 175,370,937 101,439,016


Indiabulls Financial Services Limited GroupSchedules forming part of the Consolidated Profit & Loss Account for the year ended March 31, 2006




50

Schedule 'O'

Significant Accounting Policies and Notes forming part of the Consolidated Balance Sheet as at March 31, 2006 and Profit and Loss Account

for the year ended March 31, 2006.

A. Significant Accounting Policies:

a) Basis of Consolidation:

i. Basis of preparation

The consolidated financial statements are prepared in accordance with Accounting Standard 21 on Consolidated Financial

Statements issued by the Institute of Chartered Accountant of India. Reference in these notes to Company, Holding Company,

Companies or Group shall mean to include Indiabulls Financial Services Limited or any of its subsidiaries, unless otherwise

stated.

ii. Principles of consolidation

The consolidated financial statements comprise of the Financial Statements of Indiabulls Financial Services Limited, its subsidiaries

and associate. The financial statements of the group companies are prepared according to uniform accounting policies, in

accordance with accounting principles generally accepted in India. The effects of inter company transactions are eliminated on

consolidation.

iii. Goodwill / Capital Reserve

Goodwill represents the difference between the company's share in the net worth of subsidiaries, and the cost of acquisition at

each point of time of making the investment in the subsidiaries. For this purpose, the company's share of net worth is determined

on the basis of the latest financial statements prior to the acquisition after making necessary adjustments for material events

between the date of such financial statements and the date of respective acquisition. Capital Reserve on consolidation is

adjusted against Goodwill. The Goodwill recorded in these consolidated financial statements has not been amortised, but

instead evaluated for impairment whenever events or changes in circumstances indicate that its carrying amount may be

impaired.

iv. Investment in Associates

Investment in entities in which the holding company has significant influence but not a controlling interest are reported according

to the equity method i.e. the investment is initially recoded at cost, identifying any goodwill / capital reserve arising at the time

of acquisition. The carrying amount of the investment is adjusted thereafter for the post acquisition change in the investor's

share of net assets of the investee. The consolidated profit and loss account includes the investor's share of the results of the

operations of the investee.

Indiabulls Financial Services Limited GroupSignificant Accounting Policies and Notes to Accounts

The particulars of investment in associate company as at March 31, 2006, are as under:

Share of post

acquisition

Country of Ownership Original cost Reserves and Carrying cost

Incorporation Year / Period interest of investment Surplus of Investment

Name of Associates (%) (Rs.) (Rs.) (Rs.)

Indiabulls Properties India Year ended 40% 300,000,000 22,495,252 322,495,252

Private Limited March 31, 2006

Indiabulls Estate India August 16, 2005 40% 86,000,000 421,941 86,421,941

Limited to March 31, 2006

Indiabulls Real

Estate Company India May 10, 2005 to 40% 300,000,000 6,212,741 306,212,741

Private Limited March 31, 2006

Indiabulls India November 21,2005 40% 100,000,000 370,702 100,370,702

Infrastructure Limited to March 31, 2006

51


v. Companies included in consolidation:

Period / year Proportion ofName of subsidiaries Country of ended includedIn Ownership

Incorporation In consolidation Interest Audited by

India March 31, 2006 100% Deloitte

Indiabulls Securities Limited March 31, 2005 99.99% Haskins & Sells

Indiabulls Insurance Advisors India March 31, 2006 100% Deloitte

Private Limited March 31, 2005 100% Haskins & Sells

Indiabulls Commodities Private India March 31, 2006 100% DeloitteLimited Haskins & Sells

March 31, 2005 100%

Indiabulls Credit Services Limited India March 31, 2006 53.02% Deloitte

October 26, 2004 50.67% Haskins & Sells

to March 31, 2005

Indiabulls Finance Company Private Limited India March 31, 2006 57.50% Deloitte

(Formerly Indiabulls March 18 2005 to 100% Haskins & Sells

Investment Private Limited) March 31, 2005

Indiabulls Capital Services Limited India April 13, 2005 to 100% Deloitte

March 31, 2006 Haskins & Sells

Indiabulls Resources Limited India February 20, 2006 100% Ajay Sardana

to March 31, 2006 Associates

Indiabulls Housing Finance Limited India May 10, 2005 to 66.66% Deloitte

March 31, 2006 Haskins & Sells

Nilgiri Financial Consultants Private India December 14, 2005 100% Deloitte

Limited (Formerly Nilgiri Software to March 31, 2006 Haskins & Sells

Solutions Private Limited)

The consolidated financial statements are presented, to the extent possible, in the same format as that adopted by the holding company for

its independent financial statements.

b) Basis of Accounting:

The financial statements are prepared under historical cost convention on an accrual basis.

c) Use of Estimates:

The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assump-

tions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of

revenues and expenses during year. Difference between the actual result and estimates are recognised in the year in which the results are

known / materialised.

d) Revenue Recognition:

• Revenue from brokerage activities is accounted on the trade dates of transactions.

• Revenue from interest charged to customers on delayed payments is recognised on a daily / weekly basis up to the last day of

accounting year.

• Interest income is recognised on an accrual basis.

• Commission on insurance policies sold is recognised when the company under its agency code sells the insurance policies andwhen the same is accepted by the principal insurance company.

• Depository income is accounted for on accrual basis.

• Commission on Mutual Funds is recognised on accrual basis.

• Income from Advisory Charges is recorded on transaction dates.

• Transactions in respect of Investment / dealing in securities are recognised on trade dates.

• Processing Fee received in respect of a housing loan is accounted for in the year in which the loan is sanctioned

• Repayment of housing loans is by way of Equated Monthly Installments (EMIs) comprising principal and interest. EMIs commenceonce the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is payable every month and accounted for onaccrual basis.

• Dividend income is recognised when the right to receive the dividend is unconditional at the balance sheet date.

• Income from Non-performing Assets (NPA) is recognized in accordance with the guidelines on the prudential norms of National

Housing Bank (NHB). Provision for NPA is made in accordance with such guidelines.

• Prudential norms prescribed by Reserve Bank of India for NBFC's for revenue recognition, asset classification and provisioning arefollowed, wherever the same are applicable.


52

e) Fixed Assets:

(i) Tangible Assets:Fixed assets are stated at cost, less accumulated depreciation / impairment losses, if any. Cost includesoriginal cost of acquisition, in-cluding incidental expenses related to such acquisition and installation.

(ii) Intangible Assets:Intangible assets are stated at cost, less any accumulated amortisation / impairment losses. Cost includes original cost of acquisition,including incidental expenses related to such acquisition

f) Depreciation / Amortisation:(i) Depreciation on tangible fixed assets is provided on the straight -line method at rate specified in Schedule XIV of the Companies Act,

1956.Depreciation on addition to fixed assets is provided on pro-rata basis from the date the asset is put to use. Depreciation on sale/ deduction from fixed asset is provided for up to the date of sale/deduction, as the case may be. Assets costing less than Rs. 5,000 arefully depreciated in the year of purchase.

(ii) Intangible assets consisting of Membership Rights of the Bombay Stock Exchange Limited are amortised on straight-line method basisover a period of five years from the date when the Rights became available for use. Intangible assets consisting of Software areamortised on a straight line basis over a period of four years from the date when the assets are available for use.

g) Investments:Investments are classified as long term and current investments. Long term investments are carried at cost less provision, if any, forpermanent diminution in their value. Current investments are valued at lower of cost and fair value.

h) Retirement benefits:Company's contribution to Provident Fund is charged to profit and loss account. Gratuity, leave encashment and other retirement benefits

in the form of pension, medical benefits and termination compensation payable to employees is provided on the basis of actuarial

valuation as at the Balance Sheet date, certain subsidiaries, wherein liability for gratuity and leave encashment have been provided based

on actual basis.

i) Deferred Employee Stock Compensation Cost:

Deferred employee stock compensation cost for stock option are recognized on the basis of generally accepted accounting principles and

are measured by the difference between the estimated fair value of the company's shares on stock options grant date and the exercise price

to be paid by the option holders. The compensation expense is amortised uniformly over the vesting period of the options. The fair value

of options is measured on the basis of an independent valuation performed in respect of stock options granted.

j) Taxes on Income:

Current tax is determined as the tax payable in respect of taxable income for the year and is computed in accordance with relevant tax

regulations.

Deferred tax resulting from timing differences between book and tax profits is accounted for at the current rate of tax / substantively

enacted tax rates, as applicable, to the extent that the timing differ ences are expected to crystalise.

k) Fringe Benefit Tax:

The Fringe Benefit Tax has been calculated and accounted for in accordance with the provisions of the Income tax Act, 1961 and the

guidance note on Accounting for Fringe Benefits Tax issued by the Institute of Chartered Accountants of India.

l) Leases:

In case of assets taken on operating lease, the lease rentals are charged to the profit and loss account in accordance with Accounting

Standard 19 on Leases issued by the Institute of Chartered Accoun tants of India.

Assets taken on finance lease are capitalised in accordance with Accounting Stanadard - 19 on Leasesissued by the Institute of Chartered

Accountants of India.

m) Borrowing Cost:

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of cost of the

asset. All other borrowing costs are charged to revenue.

n) Share Issue Expenses:Share issue expenses are adjusted against securities premium account to the extent of balance available and thereafter the balance portionis charged off to the Profit and Loss account, as incurred.

o) Stock of Securities:Stock of securities is valued at lower of cost and net realizable value. Cost is determined on weighted average basis.

p) Equity Index / Stock Futures:

(i) Initial Margin - Equity Index/ Stock Futures, representing the initial margin paid, and Margin Deposits representing additional marginpaid over and above the initial margin, for entering into a contract for equity index/ stock futures which are released on final settle-

ment/squaring-up of the underlying contract, are disclosed under Loans and Advances.

(ii) Equity index/ stock futures are marked-to-market on a daily basis. Debit or credit balance disclosed under Loans and Advances orCurrent Liabilities, respectively, in the Mark-to-Market Margin - Equity Index/ Stock Futures Account, represents the net amount paid

or received on the basis of movement in the prices of index/ stock futures till the balance sheet date.

(iii) As on the balance sheet date, profit/loss on open positions in equity index/ stock futures is accounted for as follows:

• Credit balance in the Mark-to-Market Margin - Equity Index/Stock Futures Account, being the anticipated profit, is ignored and nocredit for the same is taken in the profit and loss account.

53


• Debit balance in the Mark-to-Market Margin - Equity Index/Stock Futures Account, being the anticipated loss, is adjusted in the

profit and loss account.

(iv) On final settlement or squaring-up of contracts for equity index/stock futures, the profit or loss is calculated as the difference between

the settlement/squaring-up price and the contract price. Accordingly, debit or credit balance pertaining to the settled/squared-up

contract in Mark-to-Market Margin - Equity Index/Stock Futures Account after adjustment of the provision for anticipated losses isrecognised in the profit and loss account. When more than one contract in respect of the relevant series of equity index/stock futures

contract to which the squared-up contract pertains is outstanding at the time of the squaring-up of the contract, the contract price of

the contract so squared-up is determined using the weighted average cost method for calculating the profit/loss on squaring-up.

q) Land under Development:Land under Development has been valued at lower of cost and net realizable value.

r) Provisions, Contingent Liabilities and Contingent Assets:

Provisions are recognised only when there is a present obligation as a result of past events and when areliable estimate of the amount ofobligation can be made. Contingent liability is disclosed for (1) Possible obligations which will be confirmed only by future events not

wholly within the control of the Company or (2) Present obligations arising from past events where it is not probable that an outflow of

resources will be required to settle the obligation or a reliable estimate of the amount of the obligationcan not be made. Contingent As-

sets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.

B. Notes to accounts :

1. Overview:Indiabulls Financial Services Limited ("IFSL") ("Holding Company") was incorporated as a Private Limited company in India on January 10,2000 to invest in various subsidiaries and also to invest, acquire, hold, purchase or procure equity shares, debentures, bonds, mortgages,

obligations, securities of any kind issued or guaranteed by any company. On March 31, 2001 IFSL was registered under section 45-IA of

the Reserve Bank of India Act, 1934 to carry on the business of a Non Banking Financial Company but is prohibited from accepting public

deposits. With effect from the previous financial year, the company has commenced operations in respect of loans and other credit

facilities.

On March 31, 2001, IFSL acquired Indiabulls Securities Limited ("ISL"), which carries on the business as stock and share brokers, deposi-

tory participants and other related ancillary services. As on the balance sheet date IFSL holds 100% of ISL. 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 stockbroker. Accordingly, the relevant provisions of the Securities and

Exchange Board of India Act, 1992, and the rules and regulations made there under are applicable to ISL.

Indiabulls Securities Limited was converted into a Public Limited Company vide resolution of the members at their Extraordinary General

Meeting held on October 31, 2003, and the approval of the Registrar of Companies dated January 5, 2004. The members of the Company

at their Extraordinary General Meeting held on January 22, 2004, resolved to change the name of the Company to Indiabulls Securities

Limited. The Company has since received the said approval dated February 16, 2004, from the Registrar of Companies as regards the said

change in name.

Indiabulls Insurance Advisors Private Limited ("the Company") was incorporated on February 18, 2002. The company is in the business of

selling various insurance products as a Licensed Corporate Agent. On December 27, 2003 IFSL acquired Indiabulls Insurance Advisors

Private Limited ("IIAPL") a wholly owned subsidiary company, which carries on business of Insurance agency. The members of the

Company at their Extraordinary General Meeting held on January 5, 2004, resolved to change the name of the Company to Indiabulls

Insurance Advisors Private Limited. The Company has since received approval dated February 9, 2004 from the Registrar of Companies as

regards the said change in name.

Nilgiri Financial Consultants Private Limited ("NFCPL") (formerly Nilgiri Software Solutions Private Limited) ("the Company") was incorpo-

rated as a wholly owned subsidiary of IIAPL on December 14, 2005. The company plans to engage in the business of providing of all types

of consultancy relating to investment, acquiring, holding, procuring, purchasing equity shares, stocks, debentures, bonds, obligations andall type of securities. The members of the company at their Extraordinary General Meeting held on January 10, 2006, have resolved tochange the name of the company from 'Nilgiri Software Solutions Private Limited' to 'Nilgiri Financial Consultants Private Limited'. The

company has since received approval from the Department of Company affairs u/s 21 of the Companies Act, 1956; vide their letter dated

January 27, 2006, as regards the said change in name of the company.

Indiabulls Commodities Private Limited ("ICPL") was incorporated in India on October 31, 2003 as a wholly owned subsidiary company

of IFSL, to operate as a commodity broker. ICPL is a member of National Commodities and Derivatives Exchange Limited and MultiCommodity Exchange of India Limited.

Indiabulls Credit Services Limited ("ICSL") was incorporated on October 26, 2004. The Company is engaged in the business of providingloans of different types such as personal loans, consumer goods loans, home loans, loans against property, auto loans, two wheeler loansto retail customers and such other activity as permitted under the main objects of ICSL. On January 3, 2005, the Company made an

application with the Reserve Bank of India to be registered as a Non Banking Financial Company in terms of sub section (2) of Section 45

IA of the Reserve Bank of India Act, 1934. The Company has since received approval from RBI on April 16, 2005 vide certificate no.N.14.03065. As at the year end, IFSL holds 53.02% share in ICSL.

Indiabulls Finance Company Private Limited ("IFCPL") (formerly Indiabulls Investment Private Limited) was incorporated as a whollyowned subsidiary on March 18, 2005. The members at its Extraordinary General Meeting held April 12, 2005 changed the object clauseto engage in the business of financing, borrowing, lending, advancing money or to give credit and such other related activities. The

members of the Company at their Extraordinary General Meeting held on April 29, 2005, resolved to change the name of the Company toIndiabulls Finance Company Private Limited. The Company has since received the said approval dated May 5, 2005 from the Registrar of

Companies as regards the said change in name. On February 27, 2006, the Company was registered under section 45-IA of the Reserve


54

Bank of India (R.B.I) Act, 1934 to carry on the business of a Non Banking Financial Company but does not have permission from the R.B.I.to accept public deposits. As at the year end, IFSL holds 57.50% share in IFCPL.

Indiabulls Capital Services Limited ("ICAPL") was incorporated as a wholly owned subsidiary on April 13, 2005. ICAPL is engaged in thebusiness of financing, borrowing, lending, advancing money, dealing in debt instrument, investing, depository services, portfolio manage-ment services and such other activities as may be permitted under the main objects of the Company. As at the year end, the Company hasnot commenced its business activities.

Indiabulls Housing Finance Limited ("IHFL") was incorporated on May 10, 2005. The Company is engaged in the business of providingfinance to persons, body of individuals, companies, institutions, firms, builders, contractors etc, for construction, erection, building,repair, remodeling, development, improvement, purchase etc; to build, to take on lease, purchase or acquire in any manner whatsoeverany apartments, houses, flats, bungalows, township, rooms etc; to carry on the business of financial advisors and consultants on its own orjointly with others; and such other activities as may be permitted under the main objects of the Company. On December 28, 2005 theCompany was registered under section 29 A of the National Housing Bank Act 1987 to carry on the business of a Housing FinanceInstitution but does not have permission from the National Housing bank to accept public deposits. The Company is required to complywith provisions of National Housing Bank Act 1987, the Housing Finance Companies (NHB) Directions 2001 and other guidelines/instructions etc. issued by National Housing Bank from time to time. As at the year end, IFSL holds 66.66% share in IHFL.

Indiabulls Resources Limited ("IRL") was incorporated as a wholly owned subsidiary on February 20, 2006. IRL is in the business ofpurchase, sale, development, construction, acquisition on lease / hire purchase and dealing in real estate / properties.

Indiabulls Properties Private Limited ("IPPL") was incorporated on March 18, 2005. The Company is in the business of investing, holding,selling, purchasing, developing or constructing any kind of movable or immovable properties, assets, plant and machinery and theirrelated activities. As at the year end IFSL holds 40% share in IPPL.

Indiabulls Estate Limited ("IEL") was incorporated on August 16, 2005. The Company is in the business of investing, holding, selling,

purchasing, developing or constructing any kind of movable or immovable properties, assets, plant and machinery and their related

activities. As at the year end, IFSL holds 40% share in IEL.

Indiabulls Real Estate Company Private Limited ("IRCEPL") was incorporated on May 10, 2005. The Company is in the business of

investing, holding, selling, purchasing, developing or constructing any kind of movable or immovable properties, assets, plant and ma-

chinery and their related activities. As at the year end, IFSL holds 40% share in IRCEPL.

Indiabulls Infrastructure Limited ("IIL") was incorporated on 21 November, 2005. The Company is in the business of investing, holding,

selling, purchasing, developing or constructing any kind of movable or immovable properties, assets, plant and machinery and their

related activities. As at the year end, IFSL holds 40% share in IIL.

2. Minority Interest includes:

a) 3,233,696 (Previous Year Nil) Equity Shares of Rs. 10 each fully paid up issued by subsidiary company Indiabulls Finance Company

Private Limited.

b) 82,660,865 (Previous Year 11,840,000) Equity Shares of Rs. 10 each fully paid up issued by subsidiary company Indiabulls Credit

Services Limited.

c) 45,000,000 (Previous Year Nil) Equity Shares of Rs. 10 each fully paid up issued by subsidiary company Indiabulls Housing Finance

Limited.

d) Nil (Previous Year 45,270,000) 12% Redeemable Cumulative Preference Shares of Rs. 10 each fully paid up and Nil (Previous Year

1,000) Equity Shares of Rs. 10 each fully paid up, issued by subsidiary company - Indiabulls Securities Limited.

e) Proportionate share in the movements in Reserves & Surplus of the subsidiaries.

3. During the previous year, the Company completed listing of its Equity Shares on the Stock Exchange, Mumbai and the National Stock

Exchange by way of an Initial Public Offering consisting of 27,187,519 Equity Shares of Rs. 2 each at a premium of Rs. 17 per share.

During the current year, the Company issued 27,600,000 (Previous Year 24,489,000) Global Depository Receipts (GDR) which werelisted at the Luxembourg Stock Exchange, at an offer price of US$ 5.42 (Previous Year US$ 2.45) per GDR. Each GDR represents 1 EquityShare of Rs. 2 each of the Company.

As a result of the same, the paid-up equity share capital of the Company has, at the year end, increased by Rs. 55,200,000 (Previous YearRs. 103,353,038) to Rs. 320,450,756 (Previous Year Rs. 266,478,148) and the Securities Premium Account increased by Rs. 6,462,091,471

(Previous Year Rs. 3,031,422,323) to Rs. 9,449,938,023 (Previous Year Rs. 3,146,952,560). An amount of Rs. 223,741,386 (PreviousYear Rs. 159,106,008) has been adjusted against the Securities Premium Account as Share Issue expenses pursuant to the provisions of

Section 78 (2) of the Companies Act, 1956. During the year, 32,925,505 (Previous Year Nil) Equity shares were allotted consequent toconversion of 32,925,505 (Previous Year Nil) GDR's. As at the year end, 19,163,495 (Previous Year 24,489,000) GDR's were outstanding

and were eligible for conversion into equity shares.

4. On February 28, 2004, the Company established the Indiabulls Employees Stock Options Scheme ("Indiabulls ESOS or Plan"). Under theplan, the company is authorised to issue up to 6,000,000 equity shares of Rs. 2 each to eligible employees including employees of its

subsidiary companies. Employees covered by the plan are granted an option to purchase shares of the Company subject to the require-

ments of vesting. A Compensation Committee constituted by the Board of Directors of the Company administers the plan.

On February 28, 2004, the Company granted 6,000,000 options at an exercise price of Rs. 2 per share. These options vest uniformly overa period of 5 years, with effect from April 1, 2004, whereby 20% of the options vest on each vesting date as per the vesting schedule, thedifference between the grant price and the fair value aggregating to Rs. 45,000,000 is treated as deferred stock compensation to be

amortised over the vesting period of 5 years. Accordingly, an amount of Rs. 9,000,000 (Previous Year Rs. 9,000,000) has been charged asdeferred stock compensation expense for the year. As at the year ended March 31, 2006, 1,200,000 stock options that vested under the

55


Indiabulls ESOS were exercised and allotted. As a consequence of the above, the proportionate amount of Rs. 9,000,000 has beentransferred from Employee stock compensation outstanding account to Securities Premium account.

The fair value of options as at the grant date is measured on the basis of an independent valuation performed in respect of stock optionsgranted.

Year ended March 31, 2006

Shares Exercise Remaining arising out price contractual life

of options Rs. (months)

Outstanding at the beginning of the year 4,800,000 2 48

Vested during the year 1,200,000 2 --

Forfeited during the year -- -- --

Exercised during the year 1,200,000 2 --

Outstanding at the end of the year 3,600,000 2 36

Exercisable at the end of the year 1,200,000 2 12

The SEBI (ESOP & ESPS) Guidelines, 1999 ("the guidelines") were not applicable to the company, being an unlisted company, when the

Indiabulls ESOS was established. The Company had also been legally advised as regards the non-applicability of the guidelines. The

Company has also been further advised that per disclosure requirement clause 15.3 and accounting treatment to be followed per 13.1 of

the guidelines.

The Guidance Note on "Accounting for Employee Share-based Payments" is effective for all employee share based plans the grant date in

respect of which falls on or after April 1, 2005. Accordingly, the said Guidance Note is not applicable to the Company.

5 On January 2, 2006, Indiabulls Credit Services Limited, a subsidiary company, established the Indiabulls Credit Employees Stock Options

Scheme ("Indiabulls Credit ESOS" or "Plan"). Under the plan, Indiabulls Credit Services Limited is authorised to issue up to 6,000,000

options, each convertible into one equity shares of Rs. 10 each, to eligible employees including employees of its holding company and

other group companies at an exercise price of Rs. 12.50 per share. Employees covered by the plan are granted an option to purchase

shares under the Indiabulls Credit ESOS, 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 Indiabulls Credit Services Limited administers the plan. Subsequent to the year end, the company has adopted the plan in

respect of its employees.

6. During the year ended March 31 2006, the company has bought back 1,813,696 equity shares at a premium of Rs. 207.37 per share,

pursuant to which the paid up equity share capital stands reduced to Rs. 320,450,756 and the aggregate non-promoter shareholding

stands at 111,608,693 shares (69.66%). As required by section 77A of the companies Act 1956, the company has transferred an amount

of Rs. 3,627,392 to the Capital Redemption Reserve.

7. The Board of Directors of the company at their meeting held on July 2, 2005 and as approved at its Annual General Meeting held on July

26, 2005 have resolved, to:

a) create, offer, issue and allot up to 11,000,000 warrants, convertible into 11,000,000 equity shares of Rs. 2 each on a preferential

allotment basis, pursuant to Section 81(1A) of The Companies Act, 1956, at a conversion price of Rs. 152 per equity share of the

company, arrived at in accordance with SEBI Guidelines in this regard and subsequently these Warrants were allotted on August 9,

2005 to the promoters and the 10% application money amounting to Rs. 167,200,000 was received from them.

b) issue Stock Options pursuant to provisions of Section 81 (1A) and all other applicable provisions of The Companies Act, 1956, as per

"Employees Stock Option Plan - 2005", as announced by the company. A compensation committee, which has been authorised by

the Board of Directors, has also been constituted. Under the said plan the company would issue 5,000,000 Equity Options of face

value of Rs. 2 each at such price, and on such terms and conditions as may be decided by the Board.

8. Contingent liability not provided for in respect of:

a) The company has provided counter guarantees to banks amounting Rs. 700,000,000 (Previous Year Rs. 700,000,000) in respect of

bank guarantees given by banks on behalf of its subsidiary company.

b) Bank guarantees outstanding in respect of credit facilities availed by subsidiary company, Indiabulls Securities Limited, from banks Rs.

4,050,000,000 (Previous Year Rs. 1,350,000,000).

c) Claims from third parties not acknowledged as debt amounting Rs. 521,475 (Previous Year Rs. 521,475).

d) Capital commitments as at the year end (net of advances) Rs. 14,523,517 (Previous Year Rs. 5,655,000).

e) Counter guarantees outstanding in respect of credit facilities availed by associate companies Rs. 885,120,000 (Previous Year Rs. Nil).

9. The Company has on February 21, 2006, filed an application for allotment of land with Haryana Urban Development Authority to set up

its Corporate Office and accordingly deposited 10% of the application money amounting to a sum of Rs. 34,510,000 (Previous Year Rs.

Nil) with the said authority. As at the year end, Haryana Urban Development Authority has not communicated the allotment of the said

land to the Company and accordingly, the said amount is reflected as Earnest Money Deposit under Loans & Advances.


56

10. During the year the Company has entered into various agreements for the assignment by way of Securitisation with an assignee and aninvestor, wherein it has securitised a part of its unsecured loan portfolio (receivables) for a purchase consideration, aggregating to Rs.490,083,865 (Previous Year Rs. 34,165,268), calculated based on the Book Value of receivables. In accordance with the Guidance Noteon Accounting for Securitisation issued by Institute of Chartered Accountant of India, the company has de-recognised the said securitisedreceivables. The company has placed a collateral security deposit being margin money on said securitisation amounting to Rs.98,537,290, which is reflected under the Fixed Deposits and Rs. 5,124,820 which is reflected under the unsecured portion of loans andother credit facilities in the previous year.

The Company has recognised the interest strip receivable on such securitised assets and a gain of Rs. 240,468,606 (Previous Year Rs.9,988,740) has been recognized in the Profit & Loss Account and is included as retained interest in the securitised asset under loans andother credit facilities.

During the current year, two of the subsidiary companies have entered into an option agreement with the assignee, whereby the assigneehas a right to sell the overdues in the securitised portfolio based on certain terms and conditions. The company has agreed to indemnifythe subsidiaries for any losses they may incur as a result of the assignee exercising its option. The company does not anticipate any losseson account of the said option agreement in the event of the option being exercised.

During the year the above put option has been exercised and consequently an amount of Rs. 2,007,084 has been reversed from RetainedInterest.

11. Indiabulls Credit Services Limited, a subsidiary of the Company has entered into a agreement for assignment of receivables (together withinterest, additional interest, liquidated damages, etc) during the year, wherein it has assigned a part of its unsecured loan portfolio for apurchase consideration aggregating to Rs. 496,132,265 calculated based book value of receivables assigned. IFSL has issued a corporateguarantee for indemnity to the assignee up to a maximum extent of 20% of the outstanding receivables, for any default in complying with

the terms and conditions by the obligors / subsidiary. IFSL does not anticipate any losses on account of the said corporate guarantee, in the

event of the rights under guarantee being exercised by the assignee. However, as a matter of prudence, the Company based on its

estimates of recoveries and likely delinquencies, has made a provision for indemnity of Rs. 32,463,031 on the total future value of

receivables in respect of the said assignment.

The Company has recognised a gain of Rs. 132,640,273 has been recognized in the Profit & Loss Account and is included as retained

interest under Loans and Advances.

12. Secured Loans and Other Credit Facilities given to customers amounting to Rs. 9,747,928,139 (Previous Year Rs. 7,163,277,525) are

secured against securities both tradable and listed lying in the depository accounts of the Company.

13. Housing loans granted by the Company are secured by equitable mortgage of property and/ or undertaking to create a security and / or

pledge of shares, units, other securities, assignment of Life Insurance Policies, and/ or personal guarantees and/ or hypothecation of assets.

14. Provision for Loans and Other Credit Facilities is in respect of Unsecured Personal Loans granted is made as per the Prudential norms

applicable to Non-Banking Finance Company. In addition the Company has made additional provision based on the underlying risk

factors and on the best estimates of the management taking in to consideration the outstanding balances.

15. Goodwill / Capital Reserve:

As at the beginning of the year, the Company had recorded Goodwill on consolidation of Rs. 192,656,594 (Net of Capital Reserve of

Rs.185,281). During the year, the Company's subsidiary Indiabulls Credit Services Limited issued bonus equity shares in the ratio of 4:1.

The Company also acquired additional capital in ICSL during the year. Further, during the year, the Company's stake in its wholly owned

subsidiaries IHFL & IFCPL reduced to 66.67% and 57.50% respectively, on issue of further capital. As a result of the above, as at the year

end, there arose a net capital reserve on consolidation of Rs. 717,340,213 (Net of goodwill Rs. 294,451,185) which is shown under

Reserves & Surplus.

16. Pursuant an agreement dated February 13, 2004 with ISL and two overseas investors, ISL had issued 45,270,000, 12% Redeemable

Preference Shares of Rs. 10 each at par; and 1,000 Equity Shares of Rs. 10 each at a premium of Rs. 40 per share to two overseas investors.The said preference shares were redeemable at par on maturity on February 13, 2007. The Company reserved the right to redeem 50% or100% of the said preference shares at any time before the date of maturity. The said Preference Shares were fully redeemed during the year

and has appropriated a sum of Rs. 452,700,000 from the profits for the year to Capital Redemption Reserve.

17. Maximum amount outstanding on commercial papers during the year is Rs. 3,000,000,000 (Previous Year Rs. 230,000,000).

18. Secured loans from banks include:

a. Loan of Rs. Nil (Previous Year Rs. 3,411,475,869) secured against hypothecation of balances of receivables lying in loans and other

credit facilities, pledge of current assets as collateral against exposure / loan given, personal guarantees provided by promoters and

corporate guarantee provided by the company.

b. Loan of Rs. 29,682,942 (Previous Year Rs 7,226,464) secured against hypothecation of Vehicles.

19. Secured loans from others Rs. Nil (Previous Year Rs. 400,000,000) is secured against book debts and pledge of current assets as collateralagainst exposure / loan given.

20. Fixed deposits include Rs. 1,500,000,005 (Previous Year Rs. Nil) pledged with National Securities Clearing Corporation Limited, Rs. Nil(Previous Year Rs. 10,000,000) pledged with Bombay Stock Exchange Limited and Rs. 2,075,000,000 (Previous Year Rs. 566,500,000)pledged against bank guarantees issued by various banks for base capital and additional base capital.

21. The loss on squaring off of erroneous transactions amounting to Rs. 442,188 (Net) (Previous Year Rs. 568,219 (Net)) has been adjusted toProfit and Loss account.

57


22. The breakup of deferred tax into major components as at March 31, 2006 is as under:

23. The basic earning per share is computed by dividing the net profit attributable to equity shareholders for the year by the weighted average

number of equity shares outstanding during the reporting year. Diluted earnings per share are computed using the weighted average

number of equity shares and also the weighted average number of equity shares that could have been issued on the conversion of all

dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been actually

issued at fair value.

Dilutive potential equity shares are deemed converted as of the beginning of the year, unless they have been issued at a later date. The

number of equity shares and potential diluted equity shares are adjusted for stock split, bonus shares and the potential dilutive effect of

Employee Stock Option Plan as appropriate.

For the year For the year

ended ended

March 31, 2006 March 31, 2005

Profit After Tax (Rs.) 2,533,710,600 567,078,081

Less: Adjustment for preference dividend

and tax there on of subsidiary (Rs.) 6,160,992 61,400,264

Less: Share of Minority (Rs.) 158,338,229 7,010,757

Profit available for Equity Shareholders (Rs.) 2,368,161,379 498,667,060

Weighted average number of Shares used

in computing Basic earning per share 151,701,991 97,701,613

Add: Potential number of Equity share that

could arise on exercise of Employee Stock Options 3,789,474 4,736,842

Weighted average number of Shares used

in computing Diluted earning per share 155,491,464 102,438,455

Nominal Value of Equity Shares - (Rs.) 2.00 2.00

Basic Earnings Per Share - (Rs.) 15.61 5.10

Diluted earnings Per Share - (Rs.) 15.23 4.87

24. The company has taken office premises on operating lease at various locations and lease rent in respect of the same have been charged to

Profit and Loss account. The agreements are executed for a period ranging from 1 year to 9 years with a renewable clause and in some

cases also provide for termination at will by either party giving a prior notice period between 30 to 90 days. The minimum lease rentals

outstanding as at March 31, 2006, are as under:

Minimum lease rentals

As at As at

31.03.2006 31.03.2005

(Rs.) (Rs.)

Within one year 148,758,480 63,903,262

One to five years 326,051,617 115,374,218

More than five year 44,182,489 --

As at As at31.03.2006 31.03.2005

(Rs.) (Rs.)

Deferred Tax Assets

Provision for Bad & Doubtful Debts 11,226,873 5,092,79

Disallowance u/s 43B of the Income Tax Act, 1961 39,286,955 1,695,244

Preliminary expenses 204,056 --

Others 195,539 157,263

50,913,423 6,945,300

Deferred Tax Liabilities

Depreciation (64,038,016) (25,964,193)

Others (118,452,566) --

(182,490,582) (25,964,193)

Net Deferred Tax Liabilities (131,577,159) (19,018,893)


58

25. The Company has taken Vehicles on Finance lease. The minimum lease rental outstanding as at March 31, 2006 are as under:Reconciliation of Minimum Lease Payments and their Present Value as at the balance sheet date

Particulars As at As at31.03.2006 31.03.2005

(Rs.) (Rs.)

Minimum Lease Payments 32,072,605 7,645,956

Less: Present Value of Minimum Lease Payments 2,962,944 7,226,464

Unexpired Finance Charges 2,389,661 419,492

As at 31.03.2006 As at 31.03.2005

Particulars Minimum Lease Present Minimum Lease PresentPayments Value Payments Value

(Rs.) (Rs.) (Rs.) (Rs.)

Not later than one year 10,150,771 8,466,835 1,646,388 1,234,362

Later than one year and notlater than five years 21,921,834 21,216,109 5,999,568 5,992,101

26. Segment Reporting:Segment information for the year ended March 31, 2006

(a) Primary segment information (by business segments)

(Amount in Rs.)

Broking related Investing and Investing

activities financing activities advisory services Others Total

(i) Segment Revenue 3,183,084,831 2,916,186,605 4,057,049 28,303,761 6,131,632,246

1,145,668,241 526,378,664 4,168,512 8,263,078 1,684,478,495

(ii) Segment Results 1,863,346,188 2,179,125,226 (4,726,788) 28,303,762 4,066,048,388

529,518,438 397,848,501 701,539 (3,789,853) 924,278,625

Less: Interest Expenses 277,332,175

36,281

Add: Interest Income

Less: Unallocated Expenditure net of

other unallocated Income 54,978,923

24,174,891

Less: Income taxes 1,200,026,689

332,988,832

Total Profit after tax 2,533,629,748

567,078,081

(iii) Segment Assets 2,488,328,892 10,182,271,464 3,422,229 -- 12,674,022,585

540,715,220 7,721,558,216 613,200 815,913 8,263,702,549

Unallocated Corporate Assets 12,881,700,195

3,950,917,294

Total Assets 25,555,722,78012,214,619,843

(iv) Segment Liabilities 3,200,300,456 3,493,862,296 2,318,513 -- 6,696,481,2651,996,833,650 4,118,612,507 734,212 -- 6,116,180,369

Unallocated Corporate Liabilities 1,880,696,880

501,959,676

Total Liabilities 8,577,178,145

6,618,140,045

(v) Capital Expenditure 372,619,488 212,153,426 455,862 -- 585,228,776148,280,736 1,263,936 -- -- 149,544,672

(vi) Depreciation 65,666,291 6,868,306 -- -- 72,534,59721,606,804 136,074 21,742,878

(vii)Non cash expenditureother than depreciation 28,260,344 112,431,256 19,642 -- 140,711,242

727,368 6,750,000 -- -- 7,477,368

Figures for Previous Year are stated in italics

59


(b) The Company operates solely in one Geographic segment namely “Within India” and hence no separate information for Geographicsegment wise disclosure is require

(c) The group’s primary business segments are reflected based on principal business activities carried on by the group. The group’s primarybusiness activities are to carry on business of investing in subsidiary companies, financing of loans and credit activities, selling of Insur-ance products as a Licensed Corporate Agent, commodity broker on National Commodities and Derivatives Exchange Limited and MultiCommodity Exchange of India Limited, stock and share broker on National Stock Exchange of India Limited and The Stock Exchange,Mumbai; and other related ancillary services.

“Others” business segment constitutes profit on investment / dealing in securities. This not being the normal business activity of thecompany the same is shown as “Others”.

(d) Segment revenue, results, assets and liabilities include amounts identifiable to each segment and amounts allocated on a reasonable basis.

(e) The accounting policies adopted for segment reporting are in line with the accounting policies adopted for preparation of financialinformation as disclosed in (A) above

27. Disclosures in respect of Accounting Standard - 18 Related Party disclosures:

Nature of relationship Related party

(a) Related parties where significant influence exist

Associates Indiabulls Properties Private LimitedIndiabulls Real Estate Company Private LimitedIndiabulls Estate Limited

Indiabulls Infrastructure Limited

Others ** Indiabulls Commercial Estate Ltd.

(Subsidiaries of Associate) Indiabulls Infrastructure Projects limited

Indiabulls Land Holdings Limited

Indiabulls Engineering Limited

Nilgiri Lands Limited

Nilgiri Land Development Private Limited

Nilgiri Land Holdings Limited

** All these companies were subsidiaries till 28Th March 2006 and all transactions which are mentioned here below under "Others" were

carried out while these companies were subsidiaries.

(b) Other related parties

Key Management Personnel Mr. Sameer Gehlaut, Director

Mr. Rajiv Rattan, Director

Mr. Saurabh Mittal, Director

Mr. Gagan Banga, Director

Mr. T S Miglani, Director of Subsidiary

Mr. Divyesh Shah, Director of subsidiary

Mr.Ashok Sharma, Director of subsidiary

Mr.Vikas Saxena, Director of subsidiary

Mr.Vipul Bansal, Director of subsidiary

Mr.Sandeep Bhammer, Director of subsidiary

(c) The following transactions were carried out during the year with related parties in the ordinary course of business:

(Amount in Rs.)

Key TotalNature of Transaction Shareholder Associate Others Management

Personnel

Finance

Intercrporate received by Holding Company(Maximum Balance outstanding during the year) -- 5,659,950,000 -- -- 5,659,950,000

-- 932,500,000 -- -- 932,500,000

Repayment of Intercorporate

Deposits by Holding Company -- 6,592,450,000 -- -- 6,592,450,000

-- -- -- -- --

Interest Expense on short term loan -- 115,536,916 -- -- 115,536,916

2,075,851 1,344,383 -- -- 3,420,234

Inter Corporate Deposit given byHolding Company (Maximum Balance

outstanding during the year) -- 1,242,401,000 515,654,302 -- 1,758,055,302

-- -- -- --


60

Repayment of Inter Corporate Depositgiven by Holding Company -- 1,242,401,000 515,654,302 -- 1,758,055,302

-- -- -- -- --

Interest income on short term loan -- 5,469,027 -- -- 5,469,027

-- -- -- -- --

Short term loan taken by Subsidiary company -- 3,700,000 -- -- 3,700,000

-- -- -- 9,120,000 9,120,000

Repayment of short term loanby Subsidiary company -- 3,700,000 -- -- --

40,000,000 -- -- 26,420,000 66,420,000

Interest Expenses on Short TermLoan taken by Subsidiary Company -- 2,433 -- -- 2,433

-- -- -- -- --

Expenses reimbursement received byHolding Company -- 430,750 933,665 -- 1,364,415

-- 123,900 -- -- 123,900

Investments

Purchase of Equity Shares -- -- -- 51,000 51,000

-- -- -- 102,000 102,000

Investment in 15% OptionallyConvertible Debentures -- 1,858,665,000 -- -- 1,858,665,000

-- -- -- -- --

Investment in Equity Shares -- 781,949,000 3,500,000 -- 785,449,000

-- 3,949,000 -- -- 3,949,000

Share Application Money receivedand repaid by Subsidiary Company -- -- -- -- --

-- -- -- 37,812,600 37,812,600

Sale of Investment in Subsidiary Companies -- 3,500,000 -- -- 3,500,000

-- -- -- -- --

Share Application Money given -- -- -- -- --

-- 427,614,225 -- -- 427,614,225

Purchase of Equity Shares of Subsidiary Company -- -- -- -- --

-- -- -- 105,600,000 105,600,000

Issue of Equity Shares under ESOP -- -- -- 1,540,000 1,540,000

-- -- -- -- --

Issue of Bonus Shares of Subsidiaries Companies -- -- -- 125,952,000 125,952,000

-- -- -- -- --

Issue of Shares Warrants -- -- -- 167,200,000 167,200,000

-- -- -- -- --

Other receipts and payments

Remuneration (including perquisite and retirementbenefits) by Holding & Subsidiary Company -- -- -- 60,144,881 60,144,881

-- -- -- 22,753,597 22,753,597

Figures in respect of previous years are stated in Italics

d) Outstanding as at March 31, 2006(Amount in Rs.)

Key TotalShareholder Associate Others Management

Personnel

Remuneration -- -- -- 42,75,000 42,75,000

-- -- -- 2,207,325 2,207,325

Short- term loans taken -- -- -- -- --

-- 932,500,000 -- -- 932,500,000

Share Application money given -- -- -- -- --

-- 427,614,225 -- -- 427,614,225

Figures in respect of previous years are stated in Italics

61


e) Statement of Material Transactions;-

(Amount in Rs.)

For the year For the yearended ended

March 31, 2006 March 31, 2005Purchase of Equity Shares

- Rajiv Rattan 50,990 101,980

- T. S. Miglani 10 20

Issue of Equity Shares under ESOP

- T. S. Miglani 800,000 --

- Gagan Banga 360,000 --

- Divyesh Shah 300,000 --

- Ashok Sharma 80,000 --

Issue of Shares Warrant

- Rajiv Rattan 41,800,000 --

- Sameer Gehlaut 83,600,000 --

- Saurabh Mittal 41,800,000 --

Purchase of Equity Shares of Subsidiary Company

- Rajiv Rattan -- 21,120,000

- Sameer Gehlaut -- 42,240,000

- Saurabh Mittal -- 42,240,000

Issue of Bonus Equity Shares of Subsidiary

Company by capitalization of Securities Premium account

- Rajiv Rattan 3,072,000 --



Intercorporate Deposit received by Holding

Company (maximum balance outstanding)

- Indiabulls Real Estate Company Private Limited 2,409,100,000 --

- Indiabulls Estate Limited 149,600,000 --

- Indiabulls Properties Private Limited 2,851,750,000 --

- Indiabulls Infrastructure Limited 249,500,000 --

Intercorporate Deposit given by Holding Company

(maximum balance outstanding)



Short term loan taken by Subsidiary Company

- Rajiv Rattan -- 9,120,000

- Infinity Technology Trustee Private Limited -- 40,000,000


Share Application Money Received and repaid

- Saurabh Mittal -- 37,812,600

Interest Expense on Short term Loan

- Shareholder

Infinity Technology Trustee Private Limited -- 2,075,851

Remuneration

- Rajiv Rattan 15,244,000 8,473,238

- Sameer Gehlaut 15,244,000 8,157,883

- T. S. Miglani 3,397,000 2,634,100

- Gagan Banga 10,184,529 3,488,377

- Divyesh Shah 12,065,317 --

- Ashok Sharma 2,775,000 --

Investment in Equity Shares

Indiabulls Real Estate Company Private Limited 300,000,000 --

Indiabulls Properties Limited 296,000,000 3,949,000

Indiabulls Estate Limited 86,000,000 --

Indiabulls Infrastructure Limited 100,000,000 --


62

Sale of Investments in Subsidiaries Companies


Investment in 15% Optionally Convertible Debentures

- Indiabulls Real Estate Company Private Limited 822,890,000 --

- Indiabulls Properties Private Limited 739,108,000 --


Interest Expense



- Indiabulls Estate Limited 186,880 --


Interest Received



Reimbursement of Expenses


- Indiabulls Infrastructure Limited 128,100 --

- Indiabulls Real Estate Company Private Limited 116,200 --

- Indiabulls Properties Private Limited -- 123,900

- Indiabulls Commercial Estate Limited 131,461 --

- Nilgiri Lands Limited 131,461 --

- Nilgiri Land Development Private Limited 28,271 --

- Indiabulls Land Holdings Limited 128,100 --

- Nilgiri Lands Holdings Limited 251,450 --

- Indiabulls Engineering Limited 131,461 --

- Indiabulls Infrastructure Projects Limited 131,461

28. No borrowing cost has been capitalised during the year.

29. Other Operating Income includes:

Particulars Year ended Year ended

March 31, 2006 March 31, 2005

Income from Depository Services 35,699,634 8,392,122

Fees / Charges recovered 230,812,904 98,818,879

Interest on Deposits [Tax Deducted at Source

Rs.22, 618,919 (Previous Year Rs. 3,539,254)] 95,744,386 31,819,760

Interest on Intercorporate deposits 5,918,959 --

Commission on Insurance Premium

[Tax Deducted at Source Rs. 751,030

(Previous Year Rs. 885,557)] 4,057,049 4,168,512

Income from Advisory Fees 56,000,000 --

Miscellaneous Income 15,373,506 4,212,755

Total 543,606,438 147,412,028

30. As per the best estimate of the management, no provision is required to be made as per Accounting Standard - 29 issued by the Instituteof Chartered Accountants of India, 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.

31. Figures for the previous year have been re-grouped and re-arranged wherever considered necessary to confirm to current year's

groupings and classification.




K. A. Katki Rajiv Rattan Sameer Gehlaut Amit JainPartner Whole Time Director Whole Time Director Company Secretary


63


Financial Statements of



64

Auditors’ Report to the Members of Indiabulls Financial Services Limited

1. We have audited the attached Balance Sheet of Indiabulls Financial Services Limited (“the Company”) as at March 31, 2006, the Profit

and Loss Account and also the Cash Flow Statement for the ended on that date annexed thereto. These financial statements are the

responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our

audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. 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 audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A)

of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of

the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

(i) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the

purposes of our audit;

(ii) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination

of those books;

(iii) the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of

account;

(iv) in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the

accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(v) on the basis of written representations received from directors as on March 31, 2006 and taken on record by the Board of

Directors, we report that none of the directors is disqualified as on March 31, 2006 from being appointed as a director in terms of

clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

(vi) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the

information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the

accounting principles generally accepted in India:

(a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;

(b) in the case of the profit and loss account, of the profit for the year ended on March 31, 2006; and

(c) in the case of the cash flow statement, of the cash flows for the year ended on March 31, 2006.



K. A. Katki

Partner

Mumbai, April 24, 2006 Membership No. 038568

65


ANNEXURE TO THE AUDITORS’ REPORT(Referred to in paragraph 3 of our report of even date)


1. In our opinion and according to the information and explanations given to us, the nature of the Company’s business / activities during

the year are such that clauses ii, viii, xiii, xix of Companies (Auditors’ Report) Order, 2003 are not applicable to the Company.

2. In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) Some of the fixed assets were physically verified during the year by the management in accordance with a programme of verification,

which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According to the information

and explanations given to us no material discrepancies were noticed on such verification.

(c) During the year, the Company has not disposed any of the fixed assets.

3. In respect of loans, secured or unsecured, granted or taken by the Company to companies, firms or other parties covered in the register

maintained under section 301 of the Companies Act 1956, according to the information and explanations given to us:

(a) The Company has granted loan to thirteen Companies. As at the year-end, the outstanding balance of such loan granted aggregated

to Rs. 3,617,515,000 from three Companies and the maximum amount involved during the year was Rs. 6,709,970,302.

(b) The rate of interest wherever applicable and other terms and conditions of such loan is, in our opinion, prima facie not prejudicial

to the interest of the Company.

(c) The receipt of principal amount and interest has during the year been as per stipulations.

(d) There is no overdue amount in excess of Rs. 1 lakh in respect of loans granted to Companies, firms or other parties listed in the

register maintained under section 301 of the Companies Act, 1956.

(e) The Company has taken loans from ten Companies. As at the year-end, the outstanding balance of such loan taken aggregated to

Rs. 7,242,900,000 from three companies and the maximum amount involved during the year was Rs. 15,804,350,000.

(f) The rate of interest and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interest of

the Company.

(g) The payment of principal amount and interest in respect of such loans are as per stipulations.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate

with the size of the Company and the nature of its business for the purchase of fixed assets and for the sale of services and we have not

observed any continuing failure to correct major weaknesses in such internal controls. There were no transactions in respect of

purchase of inventory and sale of goods during the year.

5. In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the Companies Act 1956, to

the best of our knowledge and belief and according to the information and explanations given to us:

(a) The particulars of contracts or arrangements referred to Section 301 that needed to be entered into the register, maintained under

the said section have been so entered.

(b) According to the information and explanations given to us, where each of such transactions, (excluding loans reported in Paragraph

3 above), is in excess of Rs. 5 Lakhs in respect of any party, the transactions have been made at prices which are prima facie,

reasonable having regard to the prevailing market prices at the relevant time, except that in respect of sale of services, no comparison

of prices could be made as the Company informed us that there are no prevailing market prices / alternate sources of supply.

6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from public

within the meaning of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies

(Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

7. In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointed by the management

have been commensurate with the size of the Company and the nature of its business.


66

8. According to the information and explanations given to us in respect of Statutory dues:

(a) The Company has been regular in depositing undisputed statutory dues, including Income-tax and any other material statutory

dues with the appropriate authorities during the year. During the year there were no dues payable in respect of Provident Fund,

Investor Education and Protection Fund, Employees’ State Insurance, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise

Duty and Cess. Further, since the central government has till date not prescribed the amount of Cess payable under section 441A

of the Companies Act , 1956 , we are not in a position to comment upon the regularity or otherwise of the company in depositing

the same.

(b) During the year there were no disputed dues payable in respect of sales tax, income tax, customs duty, wealth tax, service tax,

excise duty and Cess.

9. In our opinion and according to information and explanations given to us, the company does not have any accumulated losses as at the

end of the year. The Company has not incurred cash losses during the financial year covered by our audit and the immediately

preceeding financial year.

10. In our opinion and according to the information and explanations given to us, the company has not defaulted in the repayment of dues

to banks and financial institutions. In our opinion and according to the information and explanations given to us, the company has not

obtained any borrowings by way of debentures.

11. In our opinion the Company has maintained adequate documents and records where it has granted loans and advances on the basis of

security by way of pledge of shares. The Company has not granted loans and advances on the basis of security by way of debentures

and other securities.

12. Based on our examination of the records and evaluation of the related internal controls, the Company has maintained proper records

of transactions and contracts in respect of its dealing in shares, securities, debentures and other investments and timely entries have

been made therein. The aforesaid securities have been held by the Company in its own name, except to the extent of the exemption

granted under Section 49 of the Companies Act, 1956.

13. In our opinion and according to the information and explanation given to us, the terms and conditions of the guarantees given by the

Company for loans taken by others from banks and financial institutions, are not prima facie prejudicial to the interests of the Company.

14. To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans

availed by the Company were, prima facie, applied by the Company during the year for the purposes for which the loans were

obtained, other than temporary deployment pending application.

15. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, funds

raised on short term basis have, prima facie, not been used during the year for long term investment.

16. According to the information and explanations given to us, the price at which the Company has made preferential allotment of shares

to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956 is not prima facie

prejudicial to the interests of the Company.

17. We have verified the end use of money raised by public issues as disclosed in the notes to the financial statements.

18. To the best of our knowledge and belief and according to the information and explanation given to us, no fraud on or by the Company

was noticed or reported during year.



K. A. Katki

Partner

Mumbai, April 24, 2006 Membership No. 038568

67


Indiabulls Financial Services LimitedBalance Sheet as at March 31, 2006

As at As atSchedule March 31, 2006 March 31, 2005

No. Amount (Rs.) Amount (Rs.)Sources of Funds

Shareholders’ FundsShare Capital 1 320,450,756 266,478,148Share Warrants 167,200,000 -(Refer Note B 6 of Schedule 18)Reserves and Surplus 2 9,511,457,386 3,237,973,424

9,999,108,142 3,504,451,572Loan Funds

Secured Loans 3 - 3,160,928,516Unsecured Loans 4 10,242,900,000 1,512,500,000

10,242,900,000 4,673,428,516Deferred Tax Liability (net) - 6,673

Total 20,242,008,142 8,177,886,761

Application of Funds

Fixed Assets 5

Gross Block 163,213,456 1,293,436

Less: Depreciation 3,160,831 154,756

Net Block 160,052,625 1,138,680

Investments 6 6,349,859,757 541,644,757

Deferred Tax Asset (net) 5,758,118 -

Current Assets, Loans and Advances

Interest Accrued 2,634,209 -

Sundry Debtors 7 - -

Cash and Bank Balances 8 680,274,156 31,981,255

Loans and Advances 9 13,939,208,286 7,800,714,196

14,622,116,651 7,832,695,451

Less: Current Liabilities and Provisions

Current Liabilities 10 290,166,741 49,619,014

Provisions 11 605,612,268 147,973,113

895,779,009 197,592,127

Net Current Assets 13,726,337,642 7,635,103,324

Total 20,242,008,142 8,177,886,761

Significant Accounting Policies andNotes to Accounts 18



K. A. Katki Sameer Gehlaut Rajiv Rattan Amit JainPartner Whole Time Director Whole Time Director Company Secretary



68

Indiabulls Financial Services LimitedProfit and Loss Account for the Year ended March 31, 2006

Year ended Year endedSchedule March 31, 2006 March 31, 2005

No. Amount (Rs.) Amount (Rs.)INCOME

Revenue from Operations 12 2,058,627,680 518,906,568Other Income 13 57,150,991 4,529,745

Total 2,115,778,671 523,436,313EXPENDITURE

Operating Expenses 14 17,188,076 10,297,907Employee Cost 15 129,092,567 16,521,561Administrative and Other expenses 16 236,292,054 16,565,206Interest 17 639,731,834 98,852,578Depreciation 3,006,075 136,074

Total 1,025,310,606 142,373,326

Profit before tax 1,090,468,065 381,062,987

Provision for taxation

- Current Tax 351,000,000 145,000,000

- Deferred Tax (credit) / expense - (net) (5,764,791) 5,412

- Fringe Benefits Tax 2,663,760 -

Profit After Tax 742,569,096 236,057,575

Balance of Profit brought forward 192,897,592 4,051,532

Amount available for appropriation 935,466,688 240,109,107

Appropriation:

Interim Dividend paid 242,151,763 -

Proposed Final Dividend 48,427,613 -

Corporate Dividend Tax thereon on Proposed Final Dividend 6,791,973 -

Corporate Dividend Tax thereon on Interim Dividend paid 33,961,785 -

Premium Paid on Buyback of Equity Shares 376,102,085 -

Capital Redemption Reserve on Buyback of Equity Shares 3,627,392 -

Transfer to Reserve Fund (U/s 45IC of R.B.I. Act, 1934) 148,513,820 47,211,515

Transfer to General Reserves 74,300,000 -

Balance of Profit carried forward 1,590,257 192,897,592

Earnings Per Share - Basic and Diluted

(Refer Note B 19 of Schedule 18)

- Basic (Rs.) 4.895 2.416- Diluted (Rs.) 4.776 2.304

Significant Accounting Policies andNotes to Accounts 18





69


Indiabulls Financial Services LimitedCash flow statement for the Year ended March 31, 2006

Year ended Year endedMarch 31, 2006 March 31, 2005

Amount Amount Amount Amount(Rs.) (Rs.) (Rs.) (Rs.)

A Cash flow from operating activities :Net Profit before tax 1,090,468,065 381,062,987Adjustments for :

Employee Stock Compensation 9,000,000 9,000,000Depreciation 3,006,075 136,074Profit on Sale of Investment / Dealing in Securities (202,563) -Dividend on Units of Mutual fund (84,158,836) -Provision for Gratuity 401,560 -Provision for Leave Encashment 34,750 -Provision for Superannuation 755,000 -Provision for Indemnity 32,463,031 -Provision for Loans & Other Credit Facilities 17,572,349 -

(21,128,634) 9,136,074

Operating Profit before working capital changes 1,069,339,431 390,199,061

Adjustments for:

Trade and Other Receivables (2,313,932,227) (7,137,228,541)Stock of Securities - 3,798,192Trade Payables and other liabilities 240,547,727 49,641,391

(2,073,384,500) (7,083,788,958)

Cash generated used in operations (1,004,045,069) (6,693,589,897)Direct taxes paid (212,151,953) (131,755,606)

(212,151,953) (131,755,606)

Net cash used in operating activities (1,216,197,022) (6,825,345,503)

B Cash flow from investing activities :Advance against Share application money - (18,800,000)Refund of Share application money - 18,800,000Receipt of Indemnification Money - 1,519,000,000Refund of Indemnification Money - (1,519,000,000)Investments in Units of Mutual Fund (24,791,175,508) -Redemption of Units of Mutual Fund 24,791,381,229 -Dividend on units of Mutual fund 84,158,836 -Investment in Equity Shares (30,508) -Sale of Equity Shares 27,350 -Purchase of Fixed Assets (161,920,020) (1,263,936)Investments in Subsidaries (3,171,050,000) (345,825,000)Investments in Associates (2,640,665,000) (4,000,000)Sale of Subsidaries 3,500,000 -Share application money to Associate - (427,614,225)

Net cash used in investing activities (5,885,773,621) (778,703,161)

C Cash flow from financing activitiesNet proceeds from issue of Equity ShareCapital (including Securities Premium) 6,510,691,471 3,134,775,361Buyback of Equity Shares (379,729,477) -Net Proceeds from issue of Share warrants 167,200,000 -Share issue expenses (223,741,386) (159,106,008)Intercorporate Deposit placed with Subsidiaries (4,951,915,000) -Intercorporate Deposit placed with Associate (1,242,401,000) -Intercorporate Deposit placed with Subsidiaries of Associate (515,654,302) -Repayment of Intercorporate Deposit placed with Subsidiaries 1,334,400,000 -Repayment of Intercorporate Deposit placed with Associate 1,242,401,000 -Repayment of Intercorporate Deposit placed with Subsidiaries of Associate 515,654,302 -Intercorporate / Loan Deposit taken from Subsidiaries 10,144,400,000 -Intercorporate Deposit taken from Associates 5,659,950,000 -Repayment of Intercorporate Deposit taken from Subsidiaries (2,901,500,000) -Repayment of Intercorporate / Loan Deposit taken from Associates (6,592,450,000) -Interim Dividend paid (includind corporate dividend tax) (276,113,548) -Repayment of Loans by Subsidiary Companies - 46,000,000Net Proceeds from / (Repayment of) Borrowings (160,928,516) 4,033,578,516Deposit for Corporate Gurantee received from / (repaid to) Subsidiaries (580,000,000) 580,000,000

Net cash generated from financing activities 7,750,263,544 7,635,247,869

D Net Increase / (Decrease) in cash and cash equivalents ( A+B+C ) 648,292,901 31,199,205

E Cash and cash equivalents at the beginning of the year 31,981,255 782,050

F Cash and cash equivalents at the close of the year ( D + E ) 680,274,156* 31,981,255* Includes Fixed Deposits Pledged Rs. 20,307,748 (Previous Year Rs. 5,124,820))

Note :

The above Cash Flow Statement has been prepared under the " Indirect Method " as set out in Accounting Standard - 3 on Cash Flow Statements issued by the Institute of CharteredAccountants of India.







70

Indiabulls Financial Services LimitedSchedules forming part of Balance Sheet as at March 31, 2006


Amount (Rs.) Amount (Rs.)(1) Share Capital

Authorised250,000,000 (Previous Year 250,000,000) Equity Shares of Rs. 2 each 500,000,000 500,000,000

Issued, subscribed and paid up160,225,378 (Previous Year 133,239,074) Equity Shares 320,450,756 266,478,148of Rs. 2 each fully paid up(Refer Note B 3 & 5 of Schedule 18)

(Of the above:(a) 76,935,375 (Previous Year 76,935,375) Equity Shares ofRs. 2 each are alloted as fully paid up Bonus Shares bycapitalisation of Securities Premium Account

(b) 500,000 (Previous Year 500,000) Equity Shares ofRs. 2 each are issued for consideration other than cash)

320,450,756 266,478,148(2) Reserves and Surplus

Capital Redemption ReserveBalance as per last Balance Sheet - -Add: Amount Transferred during the year pursuant to buyback of equity shares 3,627,392 -

3,627,392 -Securities Premium AccountBalance as per last Balance Sheet 2,987,846,552 115,530,237Add: Additions during the year 6,462,091,471 3,031,422,323

9,449,938,023 3,146,952,560Less: Share / GDR issue expenses written off 223,741,386 159,106,008

9,226,196,637 2,987,846,552

Stock Compensation adjustment (Refer Note B 2 of Schedule 18)Employee Stock options outstanding 36,000,000 45,000,000Less: Deferred Employee Compensation expense 27,000,000 36,000,000

9,000,000 9,000,000Reserve Fund (U/s. 45IC of the R.B.I. Act, 1934)Balance as per last Balance Sheet 48,229,280 1,017,765Add: Amount Transferred during the year 148,513,820 47,211,515

196,743,100 48,229,280General ReservesBalance as per last Balance Sheet - -Add: Transferred from profit and loss account 74,300,000 -

74,300,000 -

Surplus as per Profit & Loss Account 1,590,257 192,897,592

9,511,457,386 3,237,973,424(3) Secured Loans (Repayable within one year)

(Refer Note B 8 of Schedule 18)

Working Capital LoansFrom Banks - 2,757,808,728

Short Term Loans from others - 400,000,000Interest Accrued and Due on the above - 3,119,788

- 3,160,928,516 (4) Unsecured Loans

Deposit from Subsidiary Companies:- Security Deposit for Corporate Guarantee (Refer Note B 13 of Schedule 17) - 580,000,000

Short Term Loans (Repayable within one year)From Banks- Commercial Paper (maximum balance outstanding 3,000,000,000 -

during the year Rs. 3,000,000,000)

From Others 7,242,900,000 932,500,000

10,242,900,000 1,512,500,000

71


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76,8

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164,9

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241,7

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31,2

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205,5

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20

163,2

13,4

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154,7

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52,6

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93,4

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154,7

56

1,1

38,6

80

-


72



Amount (Rs.) Amount (Rs.) (6) Investments - Non Trade, Long Term, Unquoted (At Cost)

In Subsidiary Companies:- 17,834,099 (Previous Year 17,833,099) Fully paid up

Equity shares of face value of Rs.10 each in Indiabulls Securities Limited. 197,169,757 197,119,757

- 600,000 (Previous Year 600,000) Fully paid upEquity shares of face value Rs. 10 each in Indiabulls Commodities Private Limited 6,000,000 6,000,000

- 50,000 (Previous Year 50,000) Fully paid upEquity shares of face value Rs. 10 each in IndiabullsInsurance Advisors Private Limited. 500,000 500,000

- 93,300,000 (Previous Year 12,160,000 ) Fully paid upEquity shares of face value Rs. 10 each in Indiabulls Credit Services Limited. 2,113,525,000 333,525,000

- 4,375,000 (Previous Year 50,000 ) Fully paid up

Equity shares of face value Rs. 10 each in Indiabulls

Finance Company Private Limited (formerly Indiabulls 437,500,000 500,000

Investment Private Limited)

- 5,000,000 (Previous Year Nil ) Fully paid up Equity shares of

face value Rs. 10 each in Indiabulls Capital Service Limited 50,000,000 -

- 90,000,000 (Previous Year Nil ) Fully paid up Equity shares of

face value Rs. 10 each in Indiabulls Housing Finance Limited 900,000,000 -

- 50,000 (Previous Year Nil ) Fully paid up Equity shares of

face value Rs. 10 each in Indiabulls Resources Limited 500,000 -

In Associate Companies:

- 396,000 (Previous Year 100,000 ) Fully paid up Equity shares

of face value Rs. 10 each in Indiabulls Properties Private Limited 300,000,000 4,000,000


face value Rs. 10 each in Indiabulls Real Estate Company Private Ltd. 300,000,000 -

- 739,108 (Previous Year Nil ) 0.0001% fully paid up Optionally Convertable

Debentures of face value of Rs. 1,000 each in Indiabulls Properties Private Ltd. 739,108,000 -

- 822,890 (Previous Year Nil ) 0.0001% fully paid up Optionally Convertible

Debentures of Rs. 1,000 each in Indiabulls Real Estate Company Private Ltd. 822,890,000 -

- 182,000 (Previous Year Nil ) Fully paid up Equity shares

of face value Rs. 10 each in Indiabulls Estate Limited 86,000,000 -

- 296,667 (Previous Year Nil ) 0.0001% fully paid up Optionally Convertible

Debentures of Rs. 1,000 each in Indiabulls Estate Limited 296,667,000 -


face value Rs. 10 each in Indiabulls Infrastructure Limited 100,000,000 -

6,349,859,757 541,644,757

(7) Sundry Debtors (unsecured, considered good)Debts outstanding for a period less than six months - Other Debts - -

(including Rs. Nil (Previous Year Rs. Nil) recoverable from

Subsidiary company - Indiabulls Securities LimitedMaximum balance outstanding during the year Rs. Nil

(Previous Year Rs. 12,665,903)) - -

(8) Cash and Bank Balances

Cash on hand 76,111 42,871

Balances with scheduled banksin current accounts 659,890,297 31,895,100- in deposit accounts 20,307,748 43,284

680,274,156 31,981,255

73




Amount (Rs.) Amount (Rs.) (9) Loans and Advances (Unsecured, considered good, unless

otherwise stated)

(i) Loans and Other Credit Facilities(a) Standard Assets - Secured, Considered Good

- Considered Good (Refer Note B 12 of Schedule 18) 9,747,928,139 7,163,277,525

(b) Standard Assets - Unsecured- Standard Assets - Considered Good 118,215,754 66,569,666- Considered Doubtful 10,087,069 97,295

9,876,230,962 7,229,944,486Less: Securitised 103,600,248 34,165,268

9,772,630,714 7,195,779,218

(ii) Retained interest on Securitisation of Loans 27,481,192 9,988,740

(iii) Loans to Subsidiary Companies (Repayble on demand) -

(a) Indiabulls Securities Limited 3,493,000,000 -

(Maximum balance outstanding at any time during the year

Rs. 3,646,500,000 (Previous Year Rs. 990,081,000))

(b) Indiabulls Commodities Private Limited 120,815,000 -

(Interest free loans - Maximum balance outstanding at any time during

the year Rs. 358,715,000 (Previous Year Rs.164,000,000))

(c) Indiabulls Resources Limited 3,700,000 -


the year Rs. 3,700,000) (Previous Year Rs.Nil))

(d) Indiabulls Insurance Advisors Private Limited - -


the year Rs. Nil) (Previous Year Rs. 204,000,000))

(iv)Advances to Subsidiary Companies -

Amount paid towards share application money pending allotment in

(a) Indiabulls Insurance Advisors Private Limited - -

(Maximum balance outstanding at any time during


(b) Indiabulls Commodities Private Limited - -

(Maximum balance outstanding at any time during


(v) Advances to Associate Company -Amount paid towards share application money pending allotment in

Indiabulls Properties Private Limited - 427,614,225

(Maximum balance outstanding at any time during the year Rs. Nil (Previous Year Rs. 431,114,225))

(vi) Earnest Money Deposit (Refer Note B 9 of Schedule 18) 24,510,000 -

(vii) Advances recoverable in cash or kind or for value to be received 114,301,335 29,767,780

(viii) Security Deposit for Premises 35,524,740 -

(ix)Security Deposit with others 5,165,628 5,165,628

(x) Advance Tax / Tax Deducted at Source 342,079,677 132,398,605

13,939,208,286 7,800,714,196(10) Current Liabilities

Sundry Creditors 13,276,186 6,666,128

Temporary Overdrawn Bank Balances 245,286,141 18,502,863

Other Current Liabilities 31,604,414 24,450,023

290,166,741 49,619,014

Note: Sundry Creditors includeDues to Small Scale Industrial Undertakings - -Dues to others 13,276,186 6,666,128

13,276,186 6,666,128


74

(11) Provisions

Provision for Taxation 498,796,641 147,796,641

Provision for Fringe Benefits Tax (net of advances) 192,879 -

Provision for Leave Encashment 79,445 44,695

Provision for Gratuity 436,042 34,482

Provision for Indemnity 32,463,031 -

Provision for Loans and Other Credit Facilities 17,669,644 97,295

Provision for Superannuation 755,000 -

Proposed Final Dividend 48,427,613 -

Corporate Dividend Tax on Proposed Final Dividend 6,791,973 -

605,612,268 147,973,113




75


Indiabulls Financial Services LimitedSchedules forming part of Profit and Loss Account for the year ended March 31, 2006



(12) Revenue from OperationsInterest from Financing Activities (Tax Deducted at Source Rs. 79,502,006 1,930,102,601 497,185,126(Previous Year Rs. 11,241,578))Interest from subsidiaries / associates 13,593,356 11,731,427(Tax Deducted at Source Rs. 3,050,349 (Previous Year Rs. 2,453,044))Retained Interest Income on Securtisation 30,009,975 9,988,740Dividend on Units of Mutual Funds 84,158,836 -Interest on deposits 762,912 1,275(Tax Deducted at Source Rs. 170,820 (Previous Year Rs. Nil))

2,058,627,680 518,906,568(13) Other Income

Income from Advisory Services 56,000,000 -License Fees - 598,354Profit on Investment / Dealing in securities (Refer Note B 22 of Schedule 18) 202,563 -Miscellaneous Income 948,428 3,931,391

57,150,991 4,529,745(14) Operating Expenses

Commission 4,465,973 -Demat Charges 270,462 11,020Stamp Duty 12,451,641 10,286,887

17,188,076 10,297,907(15) Employee Costs

Salaries 113,893,460 7,472,961Employee Compensation Expense (Refer Note B 2 of Schedule 18) 9,000,000 9,000,000Contribution to Provident Fund & Other funds 1,254,918 -Staff Welfare 4,944,189 48,600

129,092,567 16,521,561(16) Administrative and Other Expenses

Rent 54,392,901 180,000Recruitment Expenses 1,463,136 25,897Rates and Taxes 760,469 1,326,124Advertisement Expenses 8,430,813 3,486,149Office Maintenance 14,291,183 5,055,390Repairs and Maintenance - Others 11,458,834 98,901Electricity Expenses 9,727,064 -Conference Expenses - 3,000Printing and Stationery 16,923,006 603,700Bank Charges 57,044 189,939Communication Expenses 35,316,854 959,186Travelling and Conveyance 10,976,845 607,952Professional Charges 8,653,253 2,160,512Legal expenses - 2,002Auditors' remuneration (Excluding Service Tax Rs. 391,680 (Previous Year Rs. 86,700)) - Audit fees 3,000,000 500,000 - Certification 200,000 350,000 - Out of Pocket expenses 100,000 -Provision for Indemnity (Refer Note B 11 of Schedule 18) 32,463,031 -Provision for Loans and Other Credit Facilities (Refer Note B 14 of Schedule 18) 17,572,348 -Bad Debts written off - 87,396Loss on Investment / Dealing in securities (Refer Note B 22 of Schedule 18) - 160,743Miscellaneous expenses 10,505,273 768,315

236,292,054 16,565,206(17) Interest

Interest of Fixed Loans 101,961,241 19,135,938Interest on Others 537,770,593 79,716,640

639,731,834 98,852,578


76

SCHEDULE: 18

Significant Accounting Policies and Notes forming part of Balance Sheet as at March 31, 2006 and Profit and Loss Account for the yearended March 31, 2006.

A Significant Accounting Policies

i) Basis of Accounting:

The financial statements are prepared under the historical cost convention on an accrual basis.

ii) Use of Estimates:

The presentation of financial statement in conformity with the generally accepted accounting principles requires estimates and assumptionsto be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount ofrevenues and expenses during the reporting period. Difference between the actual result and estimates are recognised in the year inwhich the results are known / materialised.

iii) Revenue Recognition:

Interest Income from financing activities and others is recognised on an accrual basis.

Transactions in respect of Investment / Dealing in Securities are recognised on trade dates.

Dividend Income on units of Mutual Fund is recognized on receipt basis and any gains/losses are recognized on the date of sale.

Prudential norms prescribed by Reserve Bank of India for revenue recognition, Asset classification and provisioning are followed.

iv) Fixed Assets:

Fixed assets are stated at cost, less accumulated depreciation / impairment losses, if any. Cost includes original cost of acquisition,including incidental expenses related to such acquisition and installation.

v) Depreciation:

Depreciation on all fixed assets is provided on the straight-line method at the rates specified in Schedule XIV of the Companies Act,1956.

Depreciation on additions / deletions to fixed assets is provided on pro-rata basis from the date the asset is put to use/discarded. Assetscosting less than Rs. 5,000 per item are fully depreciated in the year of purchase.

vi) Investments:

Investments are classified as long term and current investments. Long term investments are carried at cost less provision, if any, forpermanent diminution in their value. Current investments are valued at lower of cost and fair value.

vii) Stock of Securities:

Stock of securities is valued at lower of cost and net realizable value. Cost is determined on weighted average basis.

viii) Borrowing Cost:

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of cost ofthe asset. All other borrowing costs are charged to revenue.

ix) Retirement benefits:

Gratuity and Leave Encashment benefits payable to the employees are provided for on the basis of actuarial valuation as at the balancesheet date. Superannuation payable to employees is provided on actual basis. Company's contribution to Provident Fund is charged toprofit and loss account.

x) Deferred Employee Stock Compensation Cost:

Deferred employee stock compensation cost for stock options are recognised on the basis of generally accepted accounting principlesand are measured by the difference between the estimated fair value of the company's shares on stock options grant date and theexercise price to be paid by the option holders. The compensation expense is amortised uniformly over the vesting period of theoptions. The fair value of options is measured on the basis of an independent valuation performed in respect of stock options granted.

xi) Taxes on Income:

Current tax is determined as the tax payable in respect of taxable income for the year and is computed in accordance with relevant taxregulations.

Deferred tax resulting from timing differences between book and tax profits is accounted for at the current rate of tax / substantivelyenacted tax rates, as applicable, to the extent that the timing differences are expected to crystalise.

xii) Fringe Benefits Tax:

The Fringe Benefits Tax has been calculated in accordance with the provisions off the Income tax Act, 1961.

xiii) Share Issue Expenses:

Share issue expenses are adjusted against securities premium account to the extent of balance available and thereafter, the balanceportion is charged off to the profit and loss account, as incurred.

xiv) Equity Index / Stock Futures:

a. Initial Margin - Equity Index/ Stock Futures, representing the initial margin paid, and Margin Deposits representing additional marginpaid over and above the initial margin, for entering into a contract for equity index/ stock futures which are released on final settlement/squaring-up of the underlying contract, are disclosed under Loans and Advances.

b. Equity index/ stock futures are marked-to-market on a daily basis. Debit or credit balance disclosed under Loans and Advances orCurrent Liabilities, respectively, in the Mark-to-Market Margin - Equity Index/ Stock Futures Account, represents the net amount paid orreceived on the basis of movement in the prices of index/ stock futures till the balance sheet date.

Indiabulls Financial Services LimitedSignificant Accounting Policies and Notes to Accounts

77


Year ended March 31, 2006

Shares arising Exercise price Remainingout of options contractual life

Rs. (months)

Outstanding at the beginning of the year 4,800,000 2 48

Vested during the year 1,200,000 2 --

Forfeited during the year -- -- --

Exercised during the year 1,200,000 2 --

Outstanding at the end of the year 3,600,000 2 36

Exercisable at the end of the year 1,200,000 2 12

c. As on the balance sheet date, profit/loss on open positions in equity index/ stock futures is accounted for as follows:

• Credit balance in the Mark-to-Market Margin - Equity Index/Stock Futures Account, being the anticipated profit, is ignored and no

credit for the same is taken in the profit and loss account.

• Debit balance in the Mark-to-Market Margin - Equity Index/Stock Futures Account, being the anticipated loss, is adjusted in the

profit and loss account.

d. On final settlement or squaring-up of contracts for equity index/stock futures, the profit or loss is calculated as the difference between

the settlement/squaring-up price and the contract price. Accordingly, debit or credit balance pertaining to the settled/squared-up

contract in Mark-to-Market Margin - Equity Index/Stock Futures Account after adjustment of the provision for anticipated losses is

recognised in the profit and loss account. When more than one contract in respect of the relevant series of equity index/stock futures

contract to which the squared-up contract pertains is outstanding at the time of the squaring-up of the contract, the contract price of the

contract so squared-up is determined using the weighted average cost method for calculating the profit/loss on squaring-up.

xv) Leases:

In case of assets taken on operating lease, the lease rentals are charged to the profit and loss account in accordance with Accounting

Standard 19 on Leases issued by the Institute of Chartered Accountants of India.

xvi) Provisions, Contingent Liabilities and Contingent Assets:

Provisions are recognised only when there is a present obligation as a result of past events and when a reliable estimate of the amount

of obligation can be made. Contingent liability is disclosed for (1) Possible obligations which will be confirmed only by future events

not wholly within the control of the Company or (2) Present obligations arising from past events where it is not probable that an

outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation can not be made.

Contingent Assets are not recognised in the financial statements since this may result in the recognition of income that may never be

realised.

B Notes to Accounts:

1. Overview:

Indiabulls Financial Services Limited ("the Company") was incorporated on January 10, 2000 as a Private Limited Company to invest

in various subsidiaries and also to invest, acquire, hold, purchase or procure equity shares, debentures, bonds, mortgages, obligations,

securities of any kind issued or guaranteed by any company. The company has also commenced operations in respect of providing

loans and other credit facilities.

On March 30, 2001, the Company was registered under section 45-IA of the Reserve Bank of India (R.B.I.) Act, 1934 to carry on the

business of a Non Banking Financial Company but does not have permission from the R.B.I. to accept public deposits. The Company

was converted into public limited company pursuant to Section 44 of the Companies Act, 1956 on February 3, 2004.

2. On February 28, 2004, the Company established the Indiabulls Employees Stock Options Scheme ("Indiabulls ESOS or Plan"). Under

the plan, the company is authorised to issue up to 6,000,000 equity shares of Rs. 2 each to eligible employees including employees of

its subsidiary companies. Employees covered by the plan 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 February 28, 2004, the Company granted 6,000,000 options at an exercise price of Rs. 2 per share. These options vest uniformly

over a period of 5 years, with effect from April 1, 2004, whereby 20% of the options vest on each vesting date as per the vesting

schedule, the difference between the grant price and the fair value aggregating to Rs. 45,000,000 is treated as deferred stock compensation

to be amortised over the vesting period of 5 years. Accordingly, an amount of Rs. 9,000,000 (Previous Year Rs. 9,000,000) has been

charged as deferred stock compensation expense for the year. As at the year ended March 31, 2006, 1,200,000 stock options that

vested under the Indiabulls ESOS were exercised and allotted. As a consequence of the above, the proportionate amount of Rs.

9,000,000 has been transferred from Employee stock compensation outstanding account to Securities Premium account.

The fair value of options as at the grant date is measured on the basis of an independent valuation performed in respect of stock options

granted.s


78

The SEBI (ESOP & ESPS) Guidelines, 1999 ("the guidelines") were not applicable to the company, being an unlisted company, whenthe Indiabulls ESOS was established. The Company had also been legally advised as regards the non-applicability of the guidelines.The Company has also been further advised that per disclosure requirement clause 15.3 and accounting treatment to be followed per13.1 of the guidelines.

The Guidance Note on "Accounting for Employee Share-based Payments" is effective for all employee share based plans the grant datein respect of which falls on or after April 1, 2005. Accordingly, the said Guidance Note is not applicable to the Company.

3. During the previous year, the Company completed listing of its equity shares on the Stock Exchange, Mumbai and the National StockExchange by way of an Initial Public Offering consisting of 27,187,519 Equity Shares of Rs. 2 each at a premium of Rs. 17 per share.

During the current year, the Company issued 27,600,000 (Previous Year 24,489,000) Global Depository Receipts (GDR) which werelisted at the Luxembourg Stock Exchange, at an offer price of US$ 5.42 (Previous Year US$ 2.45) per GDR. Each GDR represents 1Equity Share of Rs. 2 each of the Company.

As a result of the same, the paid-up equity share capital of the Company has, at the year end, increased by Rs. 55,200,000 (PreviousYear Rs. 103,353,038) to Rs. 320,450,756 (Previous Year Rs. 266,478,148) and the Securities Premium Account increased by Rs.6,462,091,471 (Previous Year Rs. 3,031,422,323) to Rs. 9,449,938,023 (Previous Year Rs. 3,146,952,560). An amount of Rs.223,741,386 (Previous Year Rs. 159,106,008) has been adjusted against the Securities Premium Account as Share Issue expensespursuant to the provisions of Section 78 (2) of the Companies Act, 1956. During the year, 32,925,505 (Previous Year Nil) Equity shareswere allotted consequent to conversion of 32,925,505 (Previous Year Nil) GDR's. As at the year end, 19,163,495 (Previous Year24,489,000) GDR's were outstanding and were eligible for conversion into equity shares.

The utilization of proceeds of issue of shares by way of IPO and GDR as referred to above, is as under:

(Amount in Rs.)

Year ended Year ended

March 31, 2006 March 31, 2005

Balance amount to be utilised in the beginning of the year 2,208,766,192 —

Gross Proceeds of Issue raised through Initial Public Offering — 516,562,861

Gross Proceeds of Issue raised through GDR 6,505,560,960 2,618,212,500

Gross Proceeds of Issue raised through ESOP 2,400,000 —

Total Proceeds raised (A) 8,716,727,152 3,134,775,361

Less: Utilsation of Issue Proceeds

Share issue expenses – Initial Public Offering — (65,278,675)

Share issue expenses - GDR (223,741,386) (93,827,333)

Investment in Subsidiary – Indiabulls Securities Limited (50,000) —

Investment in Subsidiary – Indiabulls Resources Limited (500,000) —

Investment in Subsidiary – Indiabulls Credit Services Limited (1,780,000,000) (333,525,000)

Investment in Subsidiary – Indiabulls Housing Finance Limited (900,000,000) —

Investment in Subsidiary - Indiabulls Capital Services Limited (50,000,000) —

Investment in Subsidiary – Indiabulls Finance Company Private Limited

(Formerly Indiabulls Investment Private Limited) (437,000,000) (500,000)

Investment in Associate – Indiabulls Properties Private Limited (296,000,000) (4,000,000)

Investment in Associate – Indiabulls Real Estate Company Private Limited (300,000,000) —

Investment in Associate – Indiabulls Infrastructure Limited (100,000,000) —

Investment in Associate - Indiabulls Estate Limited (86,000,000) —

Investment in Debentures of Associate Companies

– Indiabulls Properties Private Limited (739,108,000) —

– Indiabulls Real Estate Company Private Limited (822,890,000) —

– Indiabulls Estate Limited (296,667,000) —

Share Application money in Indiabulls Properties Private Limited — (427,614,225)

Security deposit for expansion of offices (35,524,740) —

Purchase of fixed assets (161,920,020) (1,263,936)

Total Utilisation of Proceeds (B) (6,229,401,146) (926,009,169)

Balance amount being temporary utilization of Proceeds 2,487,326,006 2,208,766,192

The balance amount of Rs. 2,487,326,006 (Previous Year Rs. 2,208,766,192) has been deployed on a temporary basis towards

working capital to reduce short term bank borrowing requirements.

79


4. On January 2, 2006, Indiabulls Credit Services Limited, a subsidiary company, established the Indiabulls Credit Employees StockOptions Scheme (“Indiabulls Credit ESOS” or “Plan”). Under the plan, Indiabulls Credit Services Limited is authorised to issue up to6,000,000 options, each convertible into one equity shares of Rs. 10 each, to eligible employees including employees of its holdingcompany and other group companies at an exercise price of Rs. 12.50 per share. Employees covered by the plan are granted an optionto purchase shares under the Indiabulls Credit ESOS, subject to the requirements of vesting. These options vest uniformly over a periodof 5 years, whereby 20% of the options vest on each vesting date as per the vesting schedule. A Compensation Committee constitutedby the Board of Directors of Indiabulls Credit Services Limited administers the plan. Subsequent to the year end, the company hasadopted the plan in respect of its employees.

5. During the year ended March 31, 2006:

a. the company issued 1,200,000 shares under ESOS at Rs. 2 each. As a result of the same, the paid-up equity share capital of theCompany has, at the year end, increased by Rs. 2,400,000.

b. the company has completed listing of 27,600,000 Global Depositary Receipts (GDRs) at the Luxembourg Stock Exchange. GDRswere offered at US$ 5.42 per GDR, each GDR representing one equity share of Rs. 2 each of the Company. As a result of the same,the paid-up equity share capital of the Company has, at the year-end, increased by Rs. 27,600,000.

c. During the year ended March 31 2006, the company has bought back 1,813,696 equity shares at a premium of Rs. 207.37 pershare, pursuant to which the paid up equity share capital stands reduced to Rs. 320,450,756 and the aggregate non-promotershareholding stands at 111,608,693 shares (69.66%). As required by section 77A of the companies Act 1956, the company hastransferred an amount of Rs. 3,627,392 to the Capital Redemption Reserve.

6. The Board of Directors of the company at their meeting held on July 2, 2005 and as approved at its Annual General Meeting held onJuly 26, 2005 have resolved, to:

a) create, offer, issue and allot up to 11,000,000 warrants, convertible into 11,000,000 equity shares of Rs. 2 each on a preferential

allotment basis, pursuant to Section 81(1A) of The Companies Act, 1956, at a conversion price of Rs. 152 per equity share of the

company, arrived at in accordance with SEBI Guidelines in this regard and subsequently these Warrants were allotted on August 9,

2005 to the promoters and the 10% application money amounting to Rs. 167,200,000 was received from them.

b) issue Stock Options pursuant to provisions of Section 81 (1A) and all other applicable provisions of The Companies Act, 1956, as

per “Employees Stock Option Plan – 2005”, as announced by the company. A compensation committee, which has been authorised

by the Board of Directors, has also been constituted. Under the said plan the company would issue 5,000,000 Equity Options of

face value of Rs. 2 each at such price, and on such terms and conditions as may be decided by the Board.

7. Contingent liability not provided for in respect of:

(a) Corporate counter guarantees outstanding in respect of credit facilities availed by subsidiary Rs. 4,750,000,000 (Previous Year Rs.

2,050,000,000).

(b) Corporate counter guarantees outstanding in respect of credit facilities availed by associate companies Rs. 885,120,000 (Previous

Year Rs. Nil).

8. Secured loans from banks and others include:

Loan for Rs. Nil (Previous Year Rs. 2,757,808,728) from Banks and Secured loans from others Rs. Nil (Previous Year Rs. 400,000,000)

are secured against hypothecation of balances of receivables lying in loans and other credit facilities, and pledge of current assets as

collateral against exposure / loan given.

9. The Company has on February 21, 2006, filed an application for allotment of land with Haryana Urban Development Authority to set

up its Corporate Office and accordingly deposited 10% of the application money amounting to a sum of Rs. 24,510,000 (Previous Year

Rs. Nil) with the said authority. As at the year end, Haryana Urban Development Authority has not communicated the allotment of thesaid land to the Company and accordingly, the said amount is reflected as Earnest Money Deposit under Loans & Advances.

10. During the year the Company has entered into various agreements for the assignment by way of Securitisation with an assignee and an

investor, wherein it has securitised a part of its unsecured loan portfolio (receivables) for a purchase consideration, aggregating to Rs.

101,485,816 (Previous Year Rs. 34,165,268), calculated based on the Book Value of receivables. In accordance with the GuidanceNote on Accounting for Securitisation issued by Institute of Chartered Accountant of India, the company has de-recognised the saidsecuritised receivables. The company has placed a collateral security deposit being margin money on said securitisation

amounting to Rs. 20,307,748, which is reflected under the Fixed Deposits and Rs. 5,124,820 which is reflected under the unsecured

portion of loans and other credit facilities in the previous year.

The Company has recognised the interest strip receivable on such securitised assets and a gain of Rs. 34,211,003 (Previous Year Rs.

9,988,740) has been recognized in the Profit & Loss Account and is included as retained interest in the securitised asset under loansand other credit facilities.

During the current year, two of the subsidiary companies have entered into an option agreement with the assignee, whereby theassignee has a right to sell the overdues in the securitised portfolio based on certain terms and conditions. The company has agreed to

indemnify the subsidiaries for any losses they may incur as a result of the assignee exercising its option. The company does notanticipate any losses on account of the said option agreement in the event of the option being exercised.

During the year the above put option has been exercised and the Company has paid Rs. 2,837,935 and Rs. 1,438,327 as payment

made on account of put option to Indiabulls Credit Services Limited and Indiabulls Insurance Advisors Private Limited respectively.Consequently an amount of Rs.1,249,100 has been reversed from Retained Interest income.


80

11. Indiabulls Credit Services Limited, a subsidiary of the Company has entered into a agreement for assignment of receivables (togetherwith interest, additional interest, liquidated damages, etc) during the year, wherein it has assigned a part of its unsecured loan portfoliofor a purchase consideration aggregating to Rs. 496,132,265 calculated based book value of receivables assigned. The Company hasissued a corporate guarantee for indemnity to the assignee up to a maximum extent of 20% of the outstanding receivables, for anydefault in complying with the terms and conditions by the obligors / subsidiary. The Company does not anticipate any losses onaccount of the said corporate guarantee, in the event of the rights under guarantee being exercised by the assignee. However, as amatter of prudence, the Company based on its estimates of recoveries and likely delinquencies, has made a provision for indemnity ofRs. 32,463,031 on the total future value of receivables in respect of the said assignment.

12. Secured Loans and Other Credit Facilities given to customers amounting to Rs. 9,747,928,139 (Previous Year Rs. 7,163,277,525) aresecured against securities both tradable and listed lying in the depository accounts of the Company.

13. The Company by an agreement dated November 17, 2004 with its Subsidiary Company, Indiabulls Securities Limited, has agreed toprovide corporate guarantee in respect of outstanding loans of its subsidiary. For the said purpose, the Company has an interest freeSecurity Deposit towards such Corporate Guarantee amounting to Rs. Nil (Previous Year Rs. 580,000,000). The said amount has beenrepaid to Indiabulls Securities Limited during the previous year end.

14. Provision for Loans and Other Credit Facilities is in respect of Unsecured Personal Loans granted is made as per the Prudential normsapplicable to Non-Banking Finance Company. In addition the Company has made additional provision based on the underlying riskfactors and on the best estimates of the management taking in to consideration the outstanding balances.

15. The company has taken office premises on operating lease at various locations and lease rent amounting to Rs. 12,624,603 in respectof the same have been charged to Profit and Loss account. The agreements are executed for a period ranging from 1 year to 5 years witha renewable clause and in some cases also provide for termination at will by either party giving a prior notice period between 30 to 90

days. The minimum lease rentals outstanding as at March 31, 2006, are as under:

Minimum lease rentals As At As At

31.03.2006 31.03.2005

(Rs.) (Rs.)

Within one year 54,38L6,040 --

One to five years 183,3d50,741 --

16. a) Managerial Remuneration under Section 198 of the Companies Act, 1956 (included under Employees Remuneration and Benefits

in Schedule K)


March 31, 2006 March 31, 2005

(Rs.) (Rs.)

Salary 27,851,651 61,600

Leave Encashment 22,370 --

Gratuity 171,900 --

Superannuation 755,000 --

Total 28,800,921 61,600

As no commission is payable to Directors, the computation of net profits in accordance with section 309(5) read with section 349

of the Companies Act, 1956 has not been given.

b) Expenditure in Foreign Currency


March 31, 2006 March 31, 2005

(Rs.) (Rs.)

Professional Expenses 635,496 --

GDR Issue Expenses 231,571,244 68,853,375

c) Remittance during the year in Foreign Currency on account of dividend

Interim Dividend I (Year End March 31, 2006)Number of Shareholders: 3

Equity Shares held on which dividend is remitted: number of Equity Shares - 7,124,960

Amount Remitted - Rs. 7,124,960

Interim Dividend II (Year End March 31, 2006)

Number of Shareholders: 1Equity Shares held on which dividend is remitted: number of Equity Shares - 4,124,960Amount Remitted - Rs. 2,062,480

81


17. Segment Reporting:Segment information for the year ended March 31, 2006(a) Primary segment information (by business segments)

(Amount in Rs.)

Investing andfinancing

related activities Others Total

(i) Segment Revenue 2,058,987,872 202,563 2,059,190,435

523,058,842 -- 523,058,842

(ii) Segment Result 1,056,082,463 202,563 1,056,285,026384,596,124 (160,743) 384,435,381

Add: Unallocated income net of otherunallocated expenditure 34,183,040

--

Less: Unallocated expenditure net of otherunallocated income --

3,372,394

Less: Income taxes 347,898,969

145,005,412

Total Profit after tax 742,569,097236,057,575

(iii) Segment Assets 20,100,307,321 -- 20,100,307,321

8,205,836,105 -- 8,205,836,105

Unallocated Corporate Assets 1,037,479,831

169,545,488

Total Assets 21,137,787,1528,375,381,593

(iv) Segment Liabilities 10,552,865,489 -- 10,552,865,489

4,698,597,507 -- 4,698,597,507

Unallocated Corporate Liabilities 585,813,520

172,332,514

Total Liabilities 11,138,679,009

4,870,930,021

(v) Capital Expenditure 161,920,020 -- 161,920,0201,263,936 -- 1,263,936

(vi) Depreciation 3,006,075 -- 3,006,075

136,074 -- 136,074

(vii) Non-Cash expenditure other than depreciation 60,226,690 -- 60,226,690

9,000,000 -- 9,000,000

Figures in respect of previous years are stated in italics

(b) The Company operates solely in one Geographic segment namely "Within India" and hence no separate information for Geographicsegment wise disclosure is required.

(c) The Company's primary business segment is reflected based on principal business activities carried on by the company. TheCompany's primary business comprises of investing in various subsidiaries, financing of loans and credit activities.

"Others" business segment constitutes profit on investment / dealing in securities. This not being the normal business activity of

the company the same is shown as "Others"

(d) Segment revenue, results, assets and liabilities include amounts identifiable to each segment and amounts allocated on a reasonable

basis.

(e) The accounting policies adopted for segment reporting are in line with the accounting policies adopted for preparation of financialinformation as disclosed in (A) above.


82

18. Disclosures in respect of applicability of AS - 18 Related Party Disclosures:

Nature of relationship Related party

a) Related parties where control exists:

Subsidiaries Indiabulls Securities Limited.Indiabulls Commodities Private LimitedIndiabulls Insurance Advisors Private LimitedIndiabulls Credit Services LimitedIndiabulls Finance Company Private Limited(formerly Indiabulls Investment Private Limited)Indiabulls Capital Service LimitedIndiabulls Housing Finance LimitedIndiabulls Resources LimitedNilgiri Financial Consultants Private Limited(formerly Nilgiri Software Services Private Limited)

b) Related Party where significant influence exist

Associate Indiabulls Properties Private LimitedIndiabulls Estate LimitedIndiabulls Real Estate Company Private LimitedIndiabulls Infrastructure Limited

Other Companies Indiabulls Infrastructure Projects Limited

(Subsidiary upto March 29, 2006) Indiabulls Engineering Limited

Nilgiri Lands Limited

Nilgiri Land Development Private Limited

Nilgiri Land Holdings Limited

Indiabulls Land Holdings Limited

Indiabulls Commercial Estate Limited

c) Other related parties:

Key Management Personnel Mr. Sameer Gehlaut, Director #

Mr. Rajiv Rattan, Director #

Mr. Saurabh Mittal, Director

Mr. Gagan Banga, Director*

* for part of previous year

# for part of the current year

d) Significant Transactions with Related Parties

(Amount in Rs.)

Nature of Transaction Subsidiary Associate Others Key Total

Companies Management

Personnel

Finance

Deposit for Indemnity accepted and repaid -- -- -- -- --1,519,000,000 -- -- -- 1,519,000,000

Intercorporate Deposit received

(maximum balance outstanding during the year) 6,560,400,000 5,659,950,000 -- -- 12,220,350,000-- -- -- -- --

Intercorporate Deposit given(maximum balance outstanding during the year) 4,951,915,000 1,242,401,000 515,654,302 -- 6,709,970,302

-- -- -- -- --

Short- term loans taken(maximum balance outstanding during the year) 3,584,000,000 -- -- -- 3,584,000,000

1,270,000,000 932,500,000 -- -- 2,202,500,000

Short term loan repaid

(maximum balance outstanding during the year) -- 932,500,000 -- -- 932,500,0001,270,000,000 -- -- -- 1,270,000,000

Interest Expense 369,500,626 115,536,916 -- -- 485,037,542

10,020,822 1,344,383 -- -- 11,365,205

Security Deposit for Corporate Guarantee Given -- -- -- -- --

890,000,000 -- -- -- 890,000,000

83


Security Deposit for Corporate Guarantee -- -- -- -- --received back

310,000,000 -- -- -- 310,000,000

Short - term loans given -- -- -- -- --1,358,081,000 -- -- -- 1,358,081,000

Investments

Investments in Equity Shares 3,167,550,000 781,949,000 3,500,000 -- 3,949,499,000333,974,000 3,949,000 -- -- 337,923,000

Sale of Investments -- 3,500,000 -- -- 3,500,000-- -- -- -- --

Purchase of Equity Shares -- -- -- 51,000 51,000

-- -- -- 102,000 102,000

Investment in Debentures -- 1,858,665,000 -- -- 1,858,665,000-- -- -- -- --

Advance Share application money -- -- -- -- --18,800,000 427,614,225 -- -- 446,414,225

Advance Share application received back -- 427,614,225 -- -- 427,614,22518,800,000 -- -- -- 18,800,000

Income

License Fees -- -- -- -- --598,354 -- -- -- 598,354

Interest Income 8,124,329 5,469,027 -- -- 13,593,356

11,731,439 -- -- -- 11,731,439

Expenses

Brokerage -- -- -- -- --

238,099 -- -- -- 238,099

Remuneration -- -- -- 28,800,921 28,800,921-- -- -- 61,600 61,600

Apportionment of Expenses 206,859,481 -- -- -- 206,859,481

-- -- -- --

Reimbursement of Expenses received 6,171,103 430,750 933,665 -- 7,523,218

1,757,000 -- -- -- 1,757,000

Issue of Share Warrants -- -- -- 167,200,000 167,200,000-- -- -- -- --

Other receipts and payments

Counter guarantees provided to third parties 4,750,000,000 885,120,000 -- -- 5,635,120,000

2,050,000,000 -- -- -- 2,050,000,000


e) Outstanding balances as on March 31, 2006

(Amount in Rs.)

Nature of Transaction Subsidiary Associate Others Key Total

Companies ManagementPersonnel

Security Deposit towards Corporate Guarantee -- -- -- -- --

580,000,000 -- -- -- 580,000,000

Short- term loans taken 3,584,000,000 -- -- -- 3,584,000,000

-- 932,500,000 -- -- 932,500,000

Intercorporate Deposit given 3,617,515,000 -- -- -- 3,617,515,000

-- -- -- -- --

Intercorporate Deposit received 3,658,900,000 -- -- -- 6,087,500,000-- -- -- -- --

Advance Share application money -- -- -- -- ---- 427,614,225 -- -- 427,614,225

Remuneration -- -- -- 3,000,000 3,000,000-- -- -- 61,600 61,600



84

f) Statement of Material Transactions:

Particulars For the year For the yearended March 31, 2006 ended March 31, 2005


Deposit for Indemnity accepted and repaid

- Indiabulls Securities Limited -- 1,500,000,000

- Indiabulls Insurance Advisors Private Limited -- 8,000,000

- Indiabulls Commodities Private Limited -- 11,000,000

Intercorporate Deposit received (maximum balance outstanding)

- Indiabulls Securities Limited 2,775,000,000 --

- Indiabulls Insurance Advisors Private Limited 2,000,000 --

- Indiabulls Finance Company Private Limited 1,838,900,000 --

- Indiabulls Capital Services Private Limited 19,500,000 --

- Indiabulls Housing Finance Limited 1,925,000,000 --



- Indiabulls Properties Private Limited 2,851,750,000 --- Indiabulls Infrastructure Limited 249,500,000 --

Intercorporate Deposit given (maximum balance outstanding)

- Indiabulls Securities Limited 3,646,500,000 --

- Indiabulls Commodities Private Limited 358,715,000 --


- Indiabulls Resources Limited 3,700,000 --



- Indiabulls Land Holdings Limited 103,601,900 --

- Nilgiri Land Development Private Limited 96,551,900 --

- Indiabulls Infrastructure Projects Limited 27,000,000 --

- Indiabulls Engineering Limited 106,000,000 --

- Indiabulls Commercial Estate Limited 86,863,000 --

- Nilgiri Lands Limited 50,414,000 --

- Nilgiri Land Holdings Limited 45,223,502 --

Short term loan Given (Maximum balance outstanding during the year)

- Indiabulls Securities Limited -- 990,081,000



Short term loan taken (Maximum balance outstanding during the year)

- Indiabulls Credit Services Limited 3,584,000,000 --

Advance Share Application money given and received back



Counter Guarantee to third parties

- Indiabulls Securities Limited 4750,000,000 2,050,000,000


Brokerage Expense

- Indiabulls Securities Limited -- 238,099

License Fees

- Indiabulls Securities Limited -- 598,354

85


Security deposit received (net of recoveries)


Interest Received





Investment in Equity Shares

- Indiabulls Credit Services Limited 1780,000,000 333,525,000

- Indiabulls Securities Limited 50,000 --

- Indiabulls Finance Company Private Limited 437,000,000 --


- Indiabulls Capital Services Limited 50,000,000 --

- Indiabulls Housing Finance Limited 900,000,000 --




Investment in 15% Optionally Convertible Debentures




Short term loan taken and repaid (maximum balance outstanding)

- Indiabulls Credit Services Limited -- 1,270,000,000

Interest Expense

- Indiabulls Credit Services Limited 161,221,865 10,020,822

- Indiabulls Housing Finance Limited 21,138,970 --

- Indiabulls Capital Services Limited 837,725 --

- Indiabulls Finance Company Private Limited 186,302,066 --





Remuneration

- Gagan Banga 3,851,651 61,600

- Rajiv Rattan 12,480,195 --

- Sameer Ghelaut 12,469,075 --

Reimbursement of Expenses

- Indiabulls Housing Finance Limited 520,000 --

- Indiabulls Credit Services Limited 240,200 --

- Indiabulls Capital Services Private Limited 3,433,362 --

- Indiabulls Resources Limited 131,461 --

- Indiabulls Commercial Estate Limited 131,461 --

- Nilgiri Lands Limited 131,461 --

- Nilgiri Land Development Private Limited 28,271 --

- Indiabulls Land Holdings Limited 128,100 --

- Nilgiri Lands Holdings Limited 251,450 --

- Indiabulls Engineering Limited 131,461 --



86

- Indiabulls Infrastructure Limited 128,100 --

- Indiabulls Securities Limited 1,846,080 --

Sale of Investments


Issue of Share Warrants


- Rajiv Rattan 41,800,000 --


Apportionment of Expenses

- Indiabulls Securities Limited 206,859,481 --

19. Earning Per Share:

The basic earning per share is computed by dividing the net profit attributable to equity shareholders for the year by the weightedaverage number of equity shares outstanding during the reporting year. Diluted earnings per share are computed using the weightedaverage number of equity shares and also the weighted average number of equity shares that could have been issued on the conversionof all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares beenactually issued at fair value.

Dilutive potential equity shares are deemed converted as of the beginning of the year, unless they have been issued at a later date. The

number of equity shares and potential diluted equity shares are adjusted for stock split, bonus shares and the potential dilutive effect of

Employee Stock Option Plan as appropriate.

For the year For the year

ended March 31, 2006 ended March 31, 2005

Profit available for Equity Shareholders (Rs.) 742,569,097 236,057,575

Weighted average number of Shares used in 151,701,991 97,701,613computing Basic earning per share

Add: Potential number of Equity share that could 3,789,474 4,736,842

arise on exercise of Employee Stock Options

Weighted average number of Shares used in 155,491,464 102,438,455

computing Diluted earning per share

Nominal Value of Equity Shares - (Rs.) 2.00 2.00

Basic Earnings Per Share - (Rs.) 4.895 2.416

Diluted earnings Per Share - (Rs.) 4.776 2.304

20. Deferred Tax:

The breakup of deferred tax into major components as at March 31, 2006 is as under:

As at As at

March 31, 2006 March 31, 2005Amount (Rs.) Amount (Rs.)

Deferred tax Liability

Depreciation (2,647,045) (67,420)

Others (8,837,741) --

Deferred tax Asset

Preliminary expenses -- 1,346

Disallowance u/s. 43 B of the Income Tax Act, 1944. 17,242,904 59,401

Net Deferred tax Asset / (Liability) 5,758,118 (6,673)

21. Details of Purchase and Sale of long term, non-trade investments during the year ended March 31, 2006:

Shares in Subsidiaries Cost of Acquisition Cost of Sales

Units Amount (Rs.) Units Amount (Rs.)

Nilgiri Land Holdings Limited 50,000 500,000 50,000 500,000

Indiabulls Land Holdings Limited 50,000 500,000 50,000 500,000

Nilgiri Land Development Private Limited 50,000 500,000 50,000 500,000

Nilgiri Lands Limited 50,000 500,000 50,000 500,000

Indiabulls Commercial Estate Limited 50,000 500,000 50,000 500,000

Indiabulls Resources Limited 50,000 500,000 -- --

87


Indiabulls Engineering Limited 50,000 500,000 50,000 500,000

Indiabulls Infrastructure Projects Limited 50,000 500,000 50,000 500,000

Indiabulls Capital Services Limited 5,000,000 50,000,000 -- --

Indiabulls Credit Services Limited 81,140,000 1,780,000,000 -- --

Indiabulls Finance Company Private Limited 4,325,000 437,000,000 -- --

Indiabulls Securities Limited 1,000 50,000 -- --

Indiabulls Housing Finance Limited 90,000,000 900,000,000 -- --

Indiabulls Commodities Private Limited -- -- -- --

Indiabulls Insurance Advisors Limited -- -- -- --

Shares in Associate

Indiabulls Real Estate Company Private Limited 396,000 300,000,000 -- --

Indiabulls Properties Limited 296,000 296,000,000 -- --

Indiabulls Estate Limited 182,000 86,000,000 -- --

Indiabulls Infrastructure Limited 196,000 100,000,000 -- --

Debentures in Associates

Indiabulls Properties Limited 739,108 739,108,000 -- --

Indiabulls Real Estate Company Private Limited 822,890 822,890,000 -- --

Indiabulls Estate Limited 296,667 296,667,000 -- --

22. Additional information pursuant to paragraphs 4C and 4D of Part II of Schedule VI to the Companies Act, 1956, are stated to the extent

applicable.

(a) Quantitative information in respect of dealing in securities

March 31, 2006 March 31, 2005

Quantity Amount (Rs.) Quantity Amount (Rs.)

Opening Stock

Equity Shares -- -- 5,024 3,798,192

Mutual Fund -- -- -- --

Total (A) -- -- 5,024 3,798,192

Purchases

Equity Shares 100 30,508 25,627 14,362,271

Mutual Fund 2,157,485,074 24,791,175,508 -- --

Total (B) 2,157,485,174 24,791,206,016 25,627 14,362,271

Sales

Equity Shares 100 27,350 30,651 17,399,323

Mutual Fund 2,157,485,074 24,791,381,229 -- --

Total (C) 2,157,485,174 24,791,408,579 30,651 17,399,323

Closing Stock

Equity Shares -- -- -- --

Mutual Fund -- -- -- --

Total (D) -- -- -- --

Profit / (Loss) on Derivative trading (E) -- 600,397

Profit / (Loss) (C+D+E-A-B) 202,563 (160,743)


88

(b) Quantitative information in respect of dealing in securities

In Mutual Funds Type Purchases Sales

No of units Rupees No of units Rupees

ABN Amro Daily Dividend 1,125,247,419 11,986,399,547 1,125,247,419 11,986,399,547— — — —

Prudential ICICI Daily Dividend 657,795,522 7,796,565,614 657,795,522 7,796,565,614— — — —

Standard Chartered Daily Dividend 100,172,649 1,001,826,662 100,172,649 1,001,826,662

— — — —

HDFC Daily Dividend 81,716,389 1,001,826,580 81,716,389 1,001,826,580— — — —

LIC Daily Dividend 91,418,699 1,001,080,448 91,418,698 1,001,080,448

— — — —

HSBC Daily Dividend 100,132,853 1,001,889,188 100,132,844 1,001,889,188

— — — —

Franklin Templeton Daily Dividend 1,001,543 1,001,793,191 1,001,543 1,001,793,191

— — — —

In Equity Shares - Non-Trade(Quoted)

ONGC Ltd. — — — —

4,427 3,803,238 9,451 7,601,430

Oriental Bank of Commerce Ltd. 100 30,508 100 27,350

100 36,946 100 36,946

Bharat Heavy Electricals Ltd. — — — — 21,100 10,522,087 21,100 10,522,088

TOTAL 23,789,585,158 24,791,408,580

14,362,271 18,160,464


23. Schedule in terms of Paragraph 9BB of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998.

Particulars (Amount in Rs.)

Liabilities side :

Amount Amount

Outstanding Overdue

(1) Loans and advances availed by the NBFCs inclusive of

interest accrued thereon but not paid:

(a) Debentures : Secured NIL NIL

: Unsecured NIL NIL

(other than falling within the

meaning of public deposits*)

(b) Deferred Credits NIL NIL

(c) Term Loans NIL NIL

(d) Inter-corporate loans and borrowing 7,242,900,000 NIL

(e) Commercial Paper 3,000,000,000 NIL

(f) Public Deposits NIL NIL

(g) Other Loans - NIL NIL

(i) Working Capital Loans from Banks NIL NIL

(ii) Security Deposit for Corporate Guarantee NIL NIL

(iii) Secured Loans NIL NIL

(2) Break-up of (1)(f) above (Outstanding public deposits

inclusive of interest accrued thereon but not paid):

(a) In the form of Unsecured debentures: NIL NIL

(b) In the form of partly secured debentures i.e. debentures

where there is a shortfall in the value of security NIL NIL

(c) Other public deposits NIL NIL

89


Assets side :

Amount Outstanding (Rs.)

(3) Break-up of Loans and Advances including bills receivables[other than those included in (4) below: ]

(a) Secured 9,747,928,139

(b) Unsecured (net of provisions) 3,831,530,826

(4) Break up of Leased Assets and stock on hire andhypothecation loans counting towards EL / HP activities(net of provision)

(i) Lease assets including lease rentals under sundry debtors(a) Financial lease NIL(b) Operating lease NIL

(ii) Stock on hire including hire charges under sundry debtors:(a) Assets on hire NIL(b) Repossessed Assets NIL

(iii) Hypothecation loans counting towards EL / HP activities(a) Loans where assets have been repossessed NIL

(b) Loans other than (a) above NIL

(5) Break-up of Investments :Current Investments :

1. Quoted :

(i) Shares : (a) Equity NIL

(b) Preference NIL

(ii) Debentures and Bonds NIL

(iii) Units of mutual funds NIL

(iv) Government Securities NIL

(v) Others (please specify) NIL

2. Unquoted :


(b) Preference NIL





Long Term investments :

1. Quoted :


(b) Preference NIL





2. Unquoted :

(i) Shares : (a) Equity shares of subsidiary companies 3,705,194,757

Equity shares in an associate company 786,000,000

(b) Preference NIL

(ii) Debentures and Bonds 1,858,665,000(iii) Units of mutual funds NIL



1) Borrower group-wise classification of all leased assets, stock-on hire and loans and advances:

Category Amount net of provisions

(Rs.)

1. Related Parties Secured Unsecured Total

(a) Subsidiaries -- -- --

(b) Companies in the same group -- 3,617,515,000 3,617,515,000

(c) Other related parties -- -- --

2. Other than related parties 9,747,928,139 214,015,826 9,979,613,610

Total 9,747,928,139 3,831,530,826 13,579,458,966


90

2) Investor group-wise classification of all investments (current and long term) in shares and securities (both quotedand unquoted):

Category Break up value Book Value (Net of

per share (Rs.) Provision) (Rs.)1. Related Parties

(a) Subsidiaries

i. Indiabulls Securities Limited 101.92 197,169,757

ii. Indiabulls Commodities Private Limited 17.62 6,000,000

iii. Indiabulls Insurance Advisors Private Limited 2,678.35 500,000

iv. Indiabulls Credit Services Limited 26.80 2,113,525,000

v. Indiabulls Finance Company Private Limited.(Formerly Indiabulls Investment Private Limited) 247.93 437,500,000

vi. Indiabulls Capital Service Limited. 10.15 50,000,000

vii. Indiabulls Housing Finance Limited. 15.11 900,000,000

viii. Indiabulls Resources Limited 10.00 500,000

(b) Companies in the same group

i. Indiabulls Properties Private Limited-Equity Shares 815.23 300,000,000-Debentures 1,000.00 739,108,000

ii. Indiabulls Real Estate Company Private Limited

-Equity Shares 773.26 300,000,000

-Debentures 1,000.00 822,890,000

iii. Indiabulls Estate Limited

- Equity Shares 475.39 86,000,000- Debentures 1,000.00 296,667,000

iv. Indiabulls Infrastructure Ltd.- Equity Shares 512.36 100,000,000

(c) Other related parties - --

2. Other than related parties - --

Total - 6,349,859,757

Other Information

Particulars Amount (Rs.)

(I) Gross Non-Performing Assets

(a) Related parties -

(b) Other than related parties 10,087,069

(II) Net Non-Performing Assets

(a) Related parties -

(b) Other than related parties -

(III) Assets acquired in satisfaction of debt -

24. The Company has obtained registrations under the provisions of the Employees Provident Funds and Miscellaneous Provisions Act,

1952 and Employee State Insurance Act, 1948. There are no dues in respect of the same as at the year end.

25. In respect of amounts as mentioned under Section 205C of the Companies Act, 1956, there were no dues required to be credited tothe Investor Education and Protection Fund as on March 31, 2006.

26. Previous year's figures have been regrouped and/ or re-arranged wherever necessary to confirm to current year's groupings andclassifications.




K. A. Katki Sameer Gehlaut Rajiv Rattan Amit Jain

Partner Whole Time Director Whole Time Director Company Secretary


91


Statement Pursuant to Section 212 of the Companies Act, 1956, relating to

Company’s Interest in Subsidiary Companies for the financial year 2005-06

Sr. Name of the Subsidiary Indiabulls Indiabulls Indiabulls Indiabulls Indiabulls Indiabulls Indiabulls Indiabulls Nilgiri

No. Company Securities Commodities Insurance Credit Finance Capital Resources Housing Financial

Limited Private Advisors Services Company Services Limited Finance Consultants

Limited Private Limited Private Limited Limited Limited Private

Limited Limited

1 Financial year

ending of the Subsidiary 31-Mar-06 31-Mar-06 31-Mar-06 31-Mar-06 31-Mar-06 31-Mar-06 31-Mar-06 31-Mar-06 31-Mar-06

2. Date from which they 30-Mar-01 31-Oct-03 27-Mar-03 26-Oct-04 18-Mar-05 13-Apr-05 28-Feb-06 10-May-05 14-Dec-05

became Subsidiary

Companies

3. a. Number of shares held 17834099 600000 50000 93300000 437500000 5000000 50000 90000000 50000

by Indiabulls Financial Equity Equity Equity Equity Equity Equity Equity Equity Equity

Services Limited along shares of shares of shares of shares of shares of shares of shares of shares of shares of

its nominees at the end face value of face value of face value of face value of face value of face value of face value of face value of face value of

of the financial year of Rs.10 each Rs.10 each Rs.10 each Rs.10 each Rs.10 each Rs.10 each Rs.10 each Rs.10 each Rs.10 each

the Subsidiary fully paid up fully paid up fully paid up fully paid up fully paid up fully paid up fully paid up fully paid up fully paid up

Companies

b. Extent of Holding 100.00% 100.00% 100.00% 53.02% 57.50% 100.00% 100.00% 66.66% 100.00%

4. The net aggregate

amount of profits/(losses)

so far as it concerns

the members of the

Holding Company

a. Not dealt with in

the Holding

Company Accounts

i) For the financial Rs. 1,186,058,623 Rs. 407,067 Rs. 127,267,126 Rs. 149,027,074 Rs. 80,172,876 Rs. 734,131 Rs. (155,524) Rs. 15,854,111 Rs. (235,706)

year ended

31st March 2006

ii) For the previous Rs. 445,900,033 Rs. 4,163,320 Rs. 6,150,440 Rs. 7,184,268 Rs. (256,639) - - - -

financial years of

the Subsidiary

Companies since

they become

Holding Company’s

subsidiaries

b. Dealt with in the

Holding Company

Accounts

i) For the financial

year ended - - - - - - - - -

31st March 2006

ii) For the previous - - - - - - - - -

financial years of the

Subsidiary Companies

since they become

Holding Company’s

subsidiaries

For and on behalf of the Board

Sameer Gehlaut Rajiv Rattan Amit Jain

Whole Time Director Whole Time Director Company Secretary

Mumbai: April 24, 2006


92

Particulars Indiabulls Indiabulls Indiabulls Indiabulls Indiabulls Indiabulls Indiabulls Indiabulls Nilgiri

Securities Commodities Insurance Credit Finance Capital Resources Housing Financial

Limited Private Advisors Services Company Services Limited Finance Consultants

Limited Private Limited Private Limited Limited Private

Limited Lmited Limited

Share Capital 178,340,990 6,000,000 500,000 1,759,608,650 76,086,960 50,000,000 500,000 1,350,000,000 500,000

Reserves and Surplus 1,639,349,012 4,570,387 133,417,566 2,956,457,004 1,810,302,943 734,131 (155,524) 689,654,198 (235,706)

Total Assets 9,659,162,087 145,419,188 159,859,758 5,051,964,717 1,957,219,489 51,475,164 4,072,572 2,049,593,961 376,534

Total Liabilities 9,659,162,087 145,419,188 159,859,758 5,051,964,717 1,957,219,489 51,475,164 4,072,572 2,049,593,961 376,534

Investments 10,000 - - - - - - - -

Revenue 3,179,855,601 12,667,769 163,224,858 787,027,927 210,858,190 2,354,426 - 33,726,534 -

Profit Before Taxation 1,802,890,458 618,189 145,155,431 425,123,845 210,127,943 1,240,368 (155,524) 31,891,152 (235,706)

Provision For Taxation 610,670,843 211,122 17,888,305 144,046,754 70,696,854 506,237 - 8,107,606 -

Profit After Tax 1,192,219,615 407,067 127,267,126 281,077,091 139,431,089 734,131 (155,524) 23,783,546 (235,706)

Proposed Dividend - - - - - - - - -

DETAILS OF SUBSIDIARY COMPANIES (Amount in Rs.)

93


BALANCE-SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. Registration details

Registration No. State Code

Balance Sheet Date

Date Month Year

II. Capital raised during the year (Amount in Rs. thousands)

Public Issue Rights Issue

Bonus Issue Private Placement

Global Depository Receipt Employees Stock Options Plan

III. Position of mobilisation and deployment of funds (Amount in Rs. thousands)

Total liabilities Total assets

Source of funds

Paid-up capital Reserves and surplus

Secured loans Unsecured loans

Application of funds

Net fixed assets Investments

Net current assets Misc. expenditure

Accumulated losses Deferred Tax Assets (Net)

IV. Performance of Company (Amount in Rs. thousands)Turnover Total expenditure

Profit before tax Profit after tax

(Please tick appropricate Box + For Profit, - for Loss)

Earning per share in Rs. (BASIC) Dividend rate %

V. Generic names of three principal Produced of the Company (as per monetary terms)

Item Code No.(ITC Code)

Product Description

Item Code No.(ITC Code)

Product

Description

Item Code No.

1 0 3 1 8 3 5 5

N I L

N I L N I L

N I L N I L

1 0 2 4 2 9 0 0

3 1 0 3 2 0 0 6

2 1 1 3 7 7 8 7

9 5 1 1 4 5 7

N I L

1 6 0 0 5 3 6 3 4 9 8 6 0

1 3 7 2 6 3 3 8 N I L

2 1 1 5 7 7 9 1 0 2 5 3 1 1

+ 1 0 9 0 4 6 8 + 7 4 2 5 7 0

2 1 1 3 7 7 8 7

3 2 0 4 5 1

5 7 5 8

N A

N A

N O N B A N K I N G F I N A N C I A L

S E R V I C E S

6 5 0 5 5 6 1 2 4 0 0

N A

N A

N A

4 . 8 9 5 9 0


96


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