UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

¨ Registration statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended March 31, 2015

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                     

For the transition period from                      to                     

Commission File Number 000-30735

REDIFF.COM INDIA LIMITED

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Republic of India

(Jurisdiction of incorporation or organization)

Mahalaxmi Engineering Estate

1st Floor, L. J. First Cross Road

Mahim (West)

Mumbai - 400016, India

+91-22-6182-0000

(Address of principal executive offices)

Swasti Bhowmick

Tel No - +91-22-6182-0000 ext 390 Facsimile - +91-22- 2445-5346

(Name, telephone, e-mail and/or facsimile number of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each Class	Name of each exchange on which registered
American Depositary Shares, each represented by one-half of one equity share, par value ₹5 per share	NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Not Applicable

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 13,795,178 Equity Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.    Yes  ¨    No  x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No   x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨            Accelerated filer  ¨            Non-accelerated filer  x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: 

U.S. GAAP  x International Financial Reporting Standards as issued by the International Accounting Standards Board  ¨ Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

	Page
CROSS REFERENCE TO FORM 20-F ITEM HEADINGS	1
CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS	3
FORWARD-LOOKING STATEMENTS	4
EXCHANGE RATES	5
SELECTED CONSOLIDATED FINANCIAL DATA	6
RISK FACTORS	7
BUSINESS	26
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	35
MANAGEMENT	50
RELATED PARTY TRANSACTIONS	57
EXCHANGE CONTROLS	58
TRADING MARKET	59
RESTRICTION ON FOREIGN OWNERSHIP OF INDIAN SECURITIES	61
PRINCIPAL SHAREHOLDERS	65
TAXATION	66
CONTROLS AND PROCEDURES	72
PRINCIPAL ACCOUNTANT FEES AND SERVICES	73
PRESENTATION OF FINANCIAL INFORMATION	73
ADDITIONAL INFORMATION	74
EXHIBIT INDEX	82
INDEX TO FINANCIAL STATEMENTS	F-1

CROSS REFERENCE TO FORM 20-F ITEM HEADINGS

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

See “Exchange Rates”, “Selected Consolidated Financial Data” and “Risk Factors”.

Item 4. Information on the Company

See “Business”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Additional Information”.

Item 4A. Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

See “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Item 6. Directors, Senior Management and Employees

See “Management” and “Principal Shareholders”.

Item 7. Major Shareholders and Related Party Transactions

See “Principal Shareholders,” “Related Party Transactions” and “Additional Information”.

Item 8. Financial Information

See the Report of Independent Registered Public Accounting Firm and the U.S. GAAP consolidated financial statements and notes thereto for Rediff.com India Limited for the fiscal years ended March 31, 2013, 2014 and 2015 and the related three-year period ended March 31, 2015. See also “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Item 9. The Offer and Listing

See “Trading Market”.

Item 10. Additional Information

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Exchange Controls”, “Restriction on Foreign Ownership of Indian Securities”, “Taxation” and “Additional Information”. 

Item 11. Quantitative and Qualitative Disclosures About Market Risk

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risks”.

Item 12. Description of Securities Other than Equity Securities

See “Trading Market”.

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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

Not applicable.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

See “Additional Information – Memorandum and Articles of Association”.

Item 15. Controls and Procedures

See “Controls and Procedures”.

Item 16A. Audit Committee Financial Expert

See “Management”.

Item 16B. Code of Ethics

See “Management”.

Item 16C. Principal Accountant Fees and Services

See “Principal Accountant Fees and Services”.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

See “Management – NASDAQ Corporate Governance Requirements”.

Item 16H. Mine Safety Disclosure

Not applicable.

PART III

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

See the Report of Independent Registered Public Accounting Firm and the U.S. GAAP consolidated financial statements and notes thereto for Rediff.com India Limited and its consolidated subsidiaries for the fiscal years ended March 31, 2013, 2014 and 2015 and the related three-year period ended March 31, 2015.

Item 19. Exhibits

See the Exhibit Index and the attached exhibits.

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CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS

In this annual report, all references to “we”, “our”, “us”, “Rediff”, “Rediff.com” and the “Company”, unless otherwise relevant to the context, are to Rediff.com India Limited, a limited liability company organized under the laws of the Republic of India, and its consolidated subsidiaries. References to “U.S.” or the “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India.

In this annual report, references to “$” or “US$” or “dollars” or “U.S. dollars” are to the legal currency of the United States and references to “₹” or “Rs” or “Rs.” or “Rupees” or “Indian Rupees” are to the legal currency of India. Our financial statements are prepared in Indian Rupees and presented in U.S. dollars except for the financial statements of our U.S. subsidiaries which are prepared and presented in U.S. dollars. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). References to a particular “fiscal” or “financial” year are to Rediff’s fiscal year ended March 31 of such year.

Although we have presented Indian Rupee amounts in this annual report in U.S. dollars, this does not mean that the Indian Rupee amounts referred to have been, or could be, converted into dollars at any particular rate, the rates stated below in the section of this annual report entitled “Exchange Rates”, or at all. Except as otherwise stated in this annual report and except for the information derived from our financial statements included in this annual report, all translations from Indian Rupees to U.S. dollars contained in this annual report are based on the exchange rates published by The Reserve Bank of India, as at the close of March 31, 2015 which was ₹62.59 to US$1.00. The translation from Indian Rupees to U.S. dollars of the information derived from our financial statements included in this annual report are based on daily rates published by the Reserve Bank of India.

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FORWARD-LOOKING STATEMENTS

We have included statements in this annual report which contain words or phrases such as “may”, “will”, “aim”, “will likely result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, all of which are “forward-looking statements”, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and reflect our current expectations. We have made forward-looking statements with respect to the following, among others:

• our goals and strategies;

• our recently acquired businesses and other acquisitions, investments and divestments;

• the impact of regulations and court orders on our business;

• our future investments, costs and working capital;

• the importance and expected growth of Internet technology, including sales of personal computers and smart phones, and the development of broadband Internet, 3G and 4G networks in India;

• the pace of change in the Internet market;

• the demand for Internet services;

• advertising demand and revenues; and

• new product and services.

These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These include, but are not limited to, risks or uncertainties associated with our ability to successfully implement our strategy, our ability to successfully integrate the businesses we have acquired with our business, demand for e-commerce and changes in the Internet marketplace, technological changes, investment income, cash flow projections and our exposure to market risks. By their nature, certain of our market risk disclosures are only estimates and could be materially different from what actually occur in the future. As a result, actual future gains, losses or impacts on net interest income could materially differ from those that have been estimated.

In addition, other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to, the slowdown in Indian economy and in the sectors in which our clients are based, general economic and political conditions in India and the United States, acceptance of new products and services, the development of broadband Internet and 3G and 4G networks in India, changes in the value of the Rupee, foreign currency exchange rates, equity prices or other rates or prices, the level of Internet penetration in India and globally, changes in domestic and foreign laws, regulations and taxes, changes in competition, and other factors beyond our control. For further discussion of factors that could cause actual results to differ, see the discussions under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this annual report. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s analysis only as of the date hereof. In addition, readers should review the other information contained in this annual report and in our periodic reports filed from time to time with the U.S. Securities and Exchange Commission (the “SEC”). We undertake no obligation to update or revise this annual report in order to amend its forward-looking statements to reflect events or circumstances after the date hereof, whether as a result of new information, future events or otherwise.

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EXCHANGE RATES

Fluctuations in the exchange rate between the Indian Rupee and the U.S. dollar may affect the market price of our American Depositary Shares (the “ADSs”), which trade on the NASDAQ Global Market. Such fluctuations may also affect U.S. dollar conversions made by our depositary for the ADSs, Citibank, N.A. (the “Depositary”), of any cash dividends paid in Indian Rupees on our Equity Shares represented by the ADSs.

The following table sets forth, for the periods indicated, certain information concerning the exchange rates between Indian Rupees and U.S. dollars based on rates published by the Reserve Bank of India:

Fiscal Year Ended March 31,	Period End		Average (1)(2)		High		Low
	₹		₹		₹		₹
2011		44.65		45.57		47.57		44.03
2012		51.16		48.11		54.23		43.95
2013		54.39		54.53		57.22		50.56
2014		60.10		60.94		68.36		53.74
2015		62.59		61.22		63.75		58.43

Notes:

(1) The average rate for each period differed from the exchange rates used in the preparation of our financial statements.

(2) The column titled “Average” represents the average of the closing rate as at the last day of each month during the period.

The following table sets forth the high and low exchange rates for the previous six months and are based on daily closing rates published by the Reserve Bank of India:

Month	High		Low
	₹		₹
January 2015		63.45		61.41
February 2015		62.43		61.68
March 2015		62.82		61.82
April 2015		63.61		62.16
May 2015		64.20		63.52
June 2015		64.18		63.51
July 2015		64.03		63.37

On July 30, 2015, the closing exchange rate in India was ₹64.01 to US$1.00

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SELECTED CONSOLIDATED FINANCIAL DATA

Our consolidated financial statements are presented in U.S. dollars and prepared in accordance with U.S. GAAP. The selected balance sheet data set forth below as of March 31, 2014 and 2015, and the selected statement of comprehensive loss data for the fiscal years ended March 31 2013, 2014 and 2015, have been derived from our audited consolidated financial statements presented elsewhere in this annual report. The selected balance sheet data set forth below as of March 31, 2011, 2012 and 2013 and the selected statement of comprehensive loss data for the fiscal years ended March 31, 2011 and 2012 are derived from U.S. GAAP financial statements which are not included in this annual report. (See note 1 below)

	Fiscal Years Ended March 31,
	2011			2012			2013			2014			2015
	(in US$ thousands, except per share data)
Statement of Comprehensive Loss:
Revenues		21,795			19,942			15,659			16,121			15,338
Cost of revenues		10,796			10,774			9,952			10,413			10,836
Operating expenses		19,696			20,006			19,571			18,048			19,534
Net loss		(6,572	)		(7,677	)		(11,432	)		(7,471	)		(13,813	)
Earnings (loss) per Equity Share – basic	US$	(0.477 )		US$	(0.558 )		US$	(0.828 )		US$	(0.542)		US$	(1.000)
Earnings (loss) per Equity Share – diluted	US$	(0.477 )		US$	(0.558 )		US$	(0.828 )		US$	(0.542)		US$	(1.000)
Weighted average number of equity shares
- Basic		13,783,033			13,758,635			13,795,178			13,795,178			13,795,178
- Diluted		13,783,033			13,758,635			13,795,178			13,795,178			13,795,178

	As of March 31,
	2011		2012		2013		2014		2015
	(in US$ thousands)
Balance Sheet Data:
Current assets		45,804		32,073		24,718		21,274		12,044
Current liabilities		8,773		6,530		6,963		6,556		6,795
Total assets		63,940		50,468		37,849		27,454		13,943
Total liabilities		9,838		7,732		8,043		7,495		7,799
Total shareholders’ equity		54,102		42,736		29,806		19,959		6,144

Notes:

1. The selected consolidated financial data set forth above should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the notes to those statements included elsewhere in this annual report.

2. The company has established an ESOP trust for the benefit of employees, which has acquired 1,015,000 shares. These shares are treated as treasury stock and therefore are excluded from the EPS calculations.

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RISK FACTORS

An investment in our ADSs involves a high degree of risk. You should carefully consider the following information about risks, together with the other information contained in this annual report on Form 20-F, including our consolidated financial statements and related notes, before you decide to buy our ADSs. If any of the circumstances or events described below actually arises or occurs, our business, results of operations and financial condition would likely suffer. In any such case, the market price of our ADSs could decline, and you may lose all or part of your investment. This annual report also contains forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risks faced by us described below and elsewhere in this annual report.

Risks Related to our Business and Company

We have a history of losses. We may incur losses in the future and we may not achieve or maintain profitability, which may impact our balance sheet and thus, the successful implementation of our growth plan.

We have incurred significant net losses and negative cash flows since our inception in January 1996. As of March 31, 2015, we had an accumulated deficit of approximately US$109 million. We incurred a net loss of US$13.8 million for the fiscal year ended March 31, 2015. We may in the future incur additional net losses and negative operating cash flows which could have a material adverse impact on our balance sheet and lead to the need for additional capital to implement our growth strategy.

As display advertising is facing challenging time which is part of a longer term industry trend. In order to grow our online user base and attract new user base through mobile applications, we are investing in making all of our services mobile friendly product and service offerings. Our ability to grow such revenues is dependent on the deployment of 3G and 4G data services by Indian mobile phone operators which we do not control. At present, we believe we have enough resources to continue to invest in our product and service offerings. If we make such investments or if such deployment does not occur, and if we are not yet generating free cash flow, we may need additional capital to implement this facet of our growth plans.

We have incurred and in the future may incur expenses in connection with acquisitions and investments. Accordingly, we will need to generate significant additional revenues in order to become profitable and may not be able to do so. If we are not yet profitable or generating free cash flow, we may need to raise additional capital. Our business model is not yet proven in India or the United States, and we cannot assure you that we will achieve profitability or that we will not incur operating losses in the future. If we are unable to achieve profitability, we will be unable to build a sustainable business. In this event, the price of our ADSs and the value of investments in our company would likely decline.

We cannot ensure that our existing cash balances will be sufficient to meet our future operating and capital requirements.

As of March 31, 2015 our cash balances was approximately US$8.3 million, and while we believe that based on the current cash use rate this cash balance will be sufficient to meet our operating and capital requirements for the next five to seven quarters, there can be no assurance that will be the case. The adequacy of our available funds to meet our operating and capital requirements will depend on many factors, such as our ability to control our expenses, the growth in e-commerce marketplace, display advertising, optimization of cost of revenues relating to fee based services and cost saving initiatives in operating and other expenses.  If we are unable to control our costs or do not generate sufficient revenue, we may need to seek alternative financing sources to fund our operations. There can be no assurance that such financing sources will be available when needed, whether they would be available on commercially reasonable terms or at all, or that our actual cash requirements will not be greater than anticipated. If we are unable to obtain future financing through the alternative financing sources or through other means, we may be unable to continue operations, which would have a material adverse effect on our business and financial condition.

We face significant competition in the India market for users, advertisers, publishers and distributors, principally from Google, Yahoo, Facebook, Microsoft and AOL and also from other traditional media companies and a host of other smaller competitors.

We face significant competition from Google, Yahoo, Facebook, Microsoft and AOL among other companies, each offering an integrated variety of Internet products, advertising services, technologies, online services and content in a manner similar to us.

These large competitors offer products and services that directly compete with our offerings, including consumer e-mail, search, instant messaging, photos, maps, video and photo sharing, content channels, mobile applications, and shopping services, among other offerings.

7

We also compete with traditional media companies to attract advertising revenues, both domestically and internationally. Currently, many advertisers allocate a portion of their advertising budgets to Internet advertising. In response, traditional media companies are increasingly expanding their content offerings on the Web and are competing for both offline and online revenues. We also compete with a variety of other providers of online services, including social media and networking sites like Facebook and Orkut for users, advertisers and developers. Social networking sites in particular are attracting a substantial and increasing share of users and user’s online time, which could enable them to attract an increasing share of online advertising.

Some of our existing competitors and possible market entrants may have greater brand recognition for certain products and services, more expertise in a particular segment of the market, and/or greater operational, strategic, technological, financial, personnel, or other related resources than we do. In addition, Google, Yahoo, Facebook and Microsoft, among other companies, have access to considerable financial and technical resources with which to compete aggressively, including funding future growth and expansion by investing in acquisitions and/or in research and development. Further, emerging start-ups may be able to innovate and provide products and services faster than we can and in a manner more appealing to our target users. In addition, competitors may consolidate with each other or collaborate, and new competitors may enter the market.

We are also subject to competition from companies known as “aggregators”, which aggregate advertising space in third-party websites and resell such space to our customers or potential customers. There has also been a trend toward industry consolidation so our smaller competitors today may become part of larger competitors in the future.

We may also face competition from companies engaged in providing mailing services to mobile users. Some of our existing competitors and possible additional entrants may have greater brand recognition for certain products and services and greater operational, strategic, technological, financial, personnel, or other resources than we do. In addition our e-commerce services face competition from the existing leading e-commerce companies who have significantly greater financial resources, longer operating histories and more experience in attracting and retaining users and managing customers than we do.

We may also face competition from companies engaged in procuring advertisement from advertisers who want to reach out to a niche customer segment by choosing to advertise in a particular city or specific area within a city and cannot afford to advertise on television channels. Some of our existing competitors (like Amagi Media Labs Pvt. Ltd.) and possible additional entrants may have greater brand recognition for certain products and services and greater operational, strategic, technological, financial, personnel, or other resources than we do.

If our competitors are more successful than we are in developing compelling products or services or attracting and retaining users, advertisers, publishers, developers, or distributors, our revenues and potential growth rates could decline. In addition, new competitors may enter the market which may adversely impact our financial performance.

8

Competition for visitors, customers, subscribers, advertisers and shopping partners is intense and is expected to increase significantly in the future as there are no substantial barriers to entry into our market. Furthermore, it is difficult to predict which online advertising pricing model, if any, will emerge as the industry standard. This makes it difficult to predict our future advertising rates and revenues. Intense competition in our businesses could have a material adverse effect on our results of operation, including our ability to achieve and sustain profitability. For additional information regarding our competition, please see “Business – Competition” in this annual report.

We face strong competition in our marketplace e-commerce business.

We have significant competition in the India market for e-commerce business from Snapdeal, Flipkart, Amazon and Ebay. Some of our current and potential competitors have greater resources, longer histories, more customers, and/or greater brand recognition. They may secure better terms from vendors, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfilment, and marketing.

Competition may intensify as our competitors enter into business combinations or alliances and established companies in other market segments expand to become competitive with our marketplace e-commerce business. In addition, new and enhanced technologies, including search, web and infrastructure computing services, digital content and electronic devices, may increase our competition. The Internet facilitates competitive entry and comparison shopping, and increased competition may reduce our sales and profits.

Gross margin from marketplace e-commerce is lower than advertising business.

Currently we are focused on growing our ability to monetize the e-commerce marketplace and share of e-commerce marketplace has gone up from 19% in the fiscal 2013-14 to 27% in the fiscal year 2014-15. The cost of revenue relating to ecommerce marketplace is significantly variable and directly linked to revenue. Presently, e-commerce marketplace revenue has a lower gross margin than advertising revenues, which has resulted in a decline in average gross margin for the India Online business segment. The lower gross margin on account of higher variable cost of revenue for the e-commerce marketplace is because this business is in its early stages of market adoption, as our e-commerce marketplace grows relative to the rest of our business, it could negatively affect our ability to become profitable.

We could be liable for fraudulent or unlawful activities of sellers in our marketplace e-commerce business.

Under our seller programs, we may be unable to prevent sellers from collecting payments, fraudulently or otherwise, if buyers do not receive the products they ordered or if the products received are materially different from the sellers’ descriptions. Under our Rediff Assurance, we reimburse buyers for payments in these situations, and as our marketplace seller sales grow, the cost of this program will increase and could negatively affect our operating results. We also may be unable to prevent sellers on our sites or through other seller sites from selling unlawful goods, selling goods in an unlawful manner, or violating the proprietary rights of others, and could face civil or criminal liability for unlawful activities by such sellers.

We are subject to payments-related risks.

We accept payments using a variety of methods, including credit card, debit card, credit accounts (including promotional financing), gift cards, direct debit from a customer’s bank account, consumer invoicing, physical bank check, and payment upon delivery. For existing and future payment options we offer to our customers, we may become subject to additional regulations, compliance requirements, and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, electronic checks, and promotional financing, and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, including data security rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating results could be adversely affected. We also offer co-branded credit card programs, which could adversely affect our operating results if terminated.

9

Our marketplace supplier relationships subject us to risks.

We have large number of marketplace suppliers that are important to our ongoing servicing of merchandise. We do not have long-term arrangements with most of our suppliers to guarantee availability of merchandise, components, or services, particular payment terms, or the extension of credit limits. If our current suppliers were to stop selling merchandise, components, or services to us on acceptable terms, or delay delivery, including as a result of one or more supplier bankruptcies due to poor economic conditions, as a result of natural disasters, or for other reasons, we may be unable to procure alternatives from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

If we fail to optimize revenues through effective splicing in our local TV advertising business, we will continue to have negative gross margin.

The success of our local TV advertizing business is dependent on effective splicing of advertising between national broadcasting and local (city specific) advertising. Effective splicing is the key factor to generate more revenues to recover broadcaster’s cost and other direct costs. If we fail to effectively splice between national and local broadcasting, then our gross margins from these business will continue to be negative and result in higher operating losses.

Our future results and growth prospects may be materially and adversely affected if our expansion into new business segments and verticals is not successful.

We, as part of our growth strategy, have, from time to time, entered into new Internet business segments by leveraging our large Internet user base to generate additional revenue streams. For each new internet business or segment we enter into, we may face competition from existing leading players in that business. Further the operating and marketing challenges of the new Internet business segment(s) may be different from those that we currently face. If we cannot successfully compete and meet the challenges in the new Internet business segment(s), we may not be able to recover costs incurred for developing and marketing new businesses and accordingly our future results and growth prospects may be materially and adversely affected.

Our business could be disrupted if our investment in new products, services, technologies and new business strategy is not successful. Our current plans for growth depend in significant part on the further development of broadband internet and 3G and 4G networks in India.

We have invested significantly in the development of new products, services, technologies and new business strategies and will continue to so invest in the future. Such investment may involve significant risks and uncertainties including but not limited to inadequate returns on capital on our investments, and distractions of management from current and future operations. On account of the inherent risk involved in such investments, we offer no assurance that such investments will be successful and will not adversely affect our reputation, financial condition and operating results. Additionally, delay in rollout of 3G and 4G network in India will affect internet penetration and therefore, our revenue growth.

The success of our products and services depends on the acceptance of the internet in India, which may be slowed by cost and affordability issues, technical obstacles and unfavorable Government policies.

The growth of our India Online business is highly dependent on the growth in India of the number of PCs in use, the growth of Internet and broadband use and the growth of use of smart phones and other mobile devices such as tablets.

The growth of the telecom and mobile industry in India will be a significant factor in determining whether we can grow our business. As with many developing nations, the fixed line telecommunications infrastructure in India is not fully developed. Although this industry has been opened for private sector participation, service levels remain inferior to service levels in most developed countries. Further, telephone penetration rates, measured by the number of telephone lines per one thousand persons in India, are low when compared to most developed countries. In addition, limitations in network architecture in India sometimes limit Internet connection speeds. Network speed and cost constraint may severely limit the quality and desirability of using the Internet in India, which consequently may limit our ability to expand our pool of customers and reduce our desirability to online advertisers.

Further, our growth could be limited by the cost of obtaining hardware, software and communications links necessary to connect to the Internet in India. If much of India’s population is not able to afford access to the Internet, it may be difficult for us to execute our business strategy.

In other developing Asian markets such as South Korea and Malaysia, an increase in broadband penetration rates led to rapid growth in the number of online subscribers. Currently, broadband penetration rates in India are very low compared to other developing countries. Several industry and government agencies believe that India could be a hotbed for broadband growth in future years based on the population and country demographics. However, if the broadband and telecom industry in India fails to register significant growth, our potential growth may also be affected.

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If we are unable to develop new services or enhance existing services in anticipation of our users’ needs, our users’ level of engagement with our services may decline and our business could suffer as a result.

Our success is dependent, in part, on our ability to anticipate customers’ needs in advance and develop new services or enhance the existing services to fulfill those needs, on a cost-effective and timely basis. For example, Customer Delight Centre, Data Journalism and Recommendation framework etc. The development and implementation of such services and any new services including the enhancement of existing service(s), entails significant technical and business risks. There can be no assurance that we will successfully implement new services or that any of our new products or services will be accepted by our users.

New technologies are giving rise to new business opportunities, such as in local search and social networking. We believe that much of our future growth will depend on our ability to seize upon these opportunities and successfully launch new products and services, and our ability to retain or improve the level of user engagement with our services. If we are unable, for technical, legal, financial or other reasons, to adapt in a timely manner to changing market conditions or customer requirements, our business and our future financial performance could be materially adversely affected.

Our strategy of acquiring businesses to complement our existing market offering may fail.

As part of our growth strategy, we have made selective strategic and opportunistic acquisitions of businesses that complement our existing market offering. Such acquisitions may involve uncertainties and risks, including but not limited to, government regulations, diversion of resources and management attention, costs and difficulties of integrating acquired businesses and managing a larger business, unforeseen liabilities and ongoing financial obligations.

If we fail to address such risks successfully, it may have a material adverse effect on our financial condition and growth prospects. Further, such acquisition(s) could require a significant amount of capital investment, which could decrease the amount of cash available to us for working capital or capital expenditures. In addition, if we fund the acquisition(s) through the use of our equity securities, we may dilute the value of our ADSs and the underlying ordinary shares.

More individuals are utilizing non-PC devices to access the Internet, and versions of our services developed for these devices might not gain widespread adoption by the devices’ users, manufacturers, or distributors or might fail to function as intended on some devices.

The number of individuals, who access the Internet through devices other than a PC, such as mobile telephones and related “smartphones” or “tablet-based” devices, has substantially increased, and the trend is likely to continue. While we have dedicated significant resources over the past few years to develop offerings for mobile devices, our services were originally designed for rich, graphical environments such as those available on the desktop and PC. The different hardware and software, memory, operating systems, resolution, and other functionality associated with alternative devices may make our services unusable or difficult to use on such devices, and the versions of our services developed for these devices may not be compelling to users, manufacturers, or distributors of alternative devices. Similarly, the licenses we have negotiated to present third-party content to desktop and PC users may not extend to users of alternative devices. In those cases, we may need to enter into new or amended agreements with content providers in order to present a similar user-experience on the new devices. The content providers may not be willing to enter into such new or amended agreements on reasonable terms or at all.

Further, new devices, operating systems, networks, and platforms are continually being released. It is difficult to predict the problems we may encounter in developing versions of our services for use on these alternative devices and platforms. We may also need to devote significant resources to the creation, support and maintenance of such versions.

If we fail to detect click fraud or other invalid clicks, we could lose the confidence of our advertisers, which would cause our business to suffer.

We are exposed to the risk of fraudulent clicks and other invalid clicks on our ads from a variety of potential sources. Invalid clicks are clicks that we have determined are not intended by the user to link to the underlying content, such as inadvertent clicks on the same ad twice and clicks resulting from click fraud. Click fraud occurs when a user intentionally clicks on an ad displayed on a website for a reason other than to view the underlying content. An increase in click fraud or invalid clicks could cause our advertisers to lose confidence in the effectiveness of our services, which could negatively damage our brand and impact our performance.

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New technologies could block our ads, which would harm our business.

Technologies have been developed that can block the display of industry ads, including our own. Most of our revenues are derived from fees paid to us by advertisers in connection with the display of ads on web pages. As a result, ad-blocking technology could adversely affect our operating results.

The ongoing economic slowdown in India, could continue to negatively impact revenues from some of our key customers and thus, negatively impact our business.

We are dependent on the health of the Indian and U.S. economies. A continued slowdown in Indian economy, an overall reduction in consumer and business spending, or future difficulties experienced in either country could have a material adverse impact on our business and our prospects.

Advertisement expenditures tend to be cyclical, reflecting overall economic conditions and the nature of industry, budgeting and buying patterns. Since a significant portion of our revenue is derived from advertisements, the adverse economic conditions have caused, and a continuation of adverse economic conditions could cause, additional decreases in or delays in advertising spending and internet user base is shifting from PC to Mobile and Non PC , a reduction in our revenues and a negative impact on our short-term ability to grow our revenues.

A significant portion of our Indian advertising revenues include revenues from the Banking Financial Services and Insurance (BFSI) segments and from other Internet companies, including those engaged in the business of jobs, travel, matrimonial, real estate and online shopping. Some of these companies are startups without proven long-term business models and are dependent on external funding for future growth. These companies have been adversely affected by the global economic slowdown, resulting in lower online advertising revenues than in the past. While general economic conditions have recently improved compared to the heart of the global economic recession, the robustness and pace of the global economic recovery remains uncertain and there is no assurance that these and other segments will recover from the impact of the recession, succeed in raising financial resources and increase online advertising spends.

Further, a future slowdown in the Indian economy may make it difficult for us to raise money in the equity and debt markets on terms favorable to us or at all, if we choose to conduct capital raises in accordance with our business plan and future growth opportunities, which may have an adverse effect on our financial condition and operating results.

Our publication business in the United States faces competition and industry-wide declines.

Our publication business in the United States faces competition from not only Internet-based publications but also from other publications targeted at Indian-Americans and from television channels featuring Indian news and programming. In addition, competition to provide news and information regarding India or content that is of interest to Indian-Americans in these markets for paying subscribers for our India Abroad newspaper, which is subscription-based, is intense due to the presence of other paid newspapers such as News India Times, Indian Express and India West, among others. Further, our publications also face competition from free newspapers and from electronic media, such as television channels dedicated to Indian news and programming and online publications and services. If our U.S. publishing businesses are unable to successfully compete, our results of operation could be adversely affected.

A slowdown in economic growth, in particular, a slowdown in the growth of companies that advertise products or services targeted at Indian-Americans, may also reduce advertising revenues for our U.S. publications. Further, as is the case with our contracts with online advertisers, our contracts with advertising customers for our India Abroad business usually do not commit them to continue to provide us with a specific volume of business and can typically be terminated by them with or without cause, with little or no advance notice and without penalty. Any of these factors could have an adverse effect on our business and our future financial performance.

Our revenues could be adversely affected if we are unable to successfully adapt to new forms of pricing for the services and products we offer.

Increased competition or the actions of our existing competitors may result in:

• loss of visitors and decreased website traffic;

• loss of paid subscribers;

• loss of advertisers;

• reduced operating margins;

• loss of market share; and

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• diminished value in our services.

Any one of these factors could materially and adversely affect our business, financial condition and operating results. For additional information regarding our competition, please see “Business – Competition” in this annual report.

Increasing consumer resistance to online advertising may result in loss of revenues

There is a growing consumer resistance to intrusive advertising online. In our desire to improve the user experience on our site, we have reduced the number of advertisements on our site and in particular, eliminated all advertising from our home page. As a consequence of this, we experienced a decline in our advertising revenues and this may continue to decline based on market conditions. Although we are hopeful that a better user experience will lead to a higher number of users over time, we can however give no assurances that this will happen. If we are unable to compensate for the loss of advertising revenues from such restriction with incremental revenues from e-commerce marketplace and display advertising due to increased user traffic, our results of operations could be materially adversely impacted.

Our quarterly operating results may fluctuate significantly and may fail to meet the expectations of securities analysts and investors, which may cause the price of our ADSs to decline.

Our quarterly results have fluctuated significantly in the past and may continue to fluctuate significantly in the future based on a variety of factors. These factors could affect both our near and long-term performance. Some of these factors include but are not limited to:

• increased competition;

• slowdown in the Indian and global economies;

• lower than expected revenues from one or more of our customers;

• changes in prices for our product and service offerings;

• increases in personnel, marketing and other operating expenses;

• our ability to attract new users and to retain existing users at reasonable costs;

• our ability to adequately maintain, upgrade and develop our website, our computer network and the systems that we use to process customer orders and payments;

• the timing of our expansion plans in India and other geographic markets;

• seasonality in retail sales;

• technical difficulties, system or website downtime or Internet service disruptions; and

• entry into new businesses or development of new products or services requiring substantial investments.

Our operating results are volatile and can be difficult to predict. As a result, quarter-to-quarter comparisons of our operating results may not be good indicators of our future performance. In addition, it is possible that our operating results in any future quarter could be below the expectations of investors generally and any published reports or analyses on us. In that event, the market price of our ADSs may decline.

We may not be able to grow our business if online advertising in our markets does not expand.

Our business strategy depends heavily on the anticipated growth of e-commerce marketplace and online advertising in our markets and the growth of our revenues depends on increased revenues generated by e-commerce marketplace and online advertising. We anticipate that a high portion of our future revenues will continue to be derived from e-commerce marketplace and online advertising on our website. Online advertising is an evolving business and our ability to generate and maintain significant advertising revenues will (among other factors) depend on:

• our ability to attract and retain advertisers at profitable rates in light of intense competition;

• our ability to generate and continue to grow a large community of users with demographics attractive to advertisers;

• advertisers’ acceptance of the Internet as an effective and sustainable medium;

• the effectiveness of our advertising delivery, tracking and reporting systems; and

• our ability to adapt, including technologically, to new forms of Internet advertising.

Different pricing models are used to sell online advertising, and it is difficult to predict which, if any, of the models will emerge as the industry standard or standards. This makes it difficult to project our future advertising rates and revenues. A reduction in traffic on our website may cause new advertisers not to enter into contracts with us and could cause existing advertisers not to renew their contractual arrangements with us, each of which, in turn, would reduce our potential advertising revenues. Additionally, any development of Internet software that blocks advertisements before they appear on a user’s screen, may hinder the growth of online advertising and could materially and adversely affect our ability to grow our online advertising revenues and our business. Also, a slowdown in economic growth, whether in India or the United States, and in particular a slowdown in the growth of companies that advertise on the Internet, may result in a reduction in our advertising revenues.

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Our contracts with advertising customers do not commit them to continue to provide us with a specific volume of business and can typically be terminated by them with or without cause, with little or no advance notice and without penalty. Additionally, our contracts with advertising customers are usually limited to a specific project and/or for a specific time period and not any future work. There are also a number of factors, other than our performance, which are not within our control that could cause the loss of advertising customers. Early termination of material contracts or non-renewal of an expired material contract could have a material adverse effect on our business and our future financial performance.

The loss of one or more significant advertisers could adversely affect our revenues.

We derive a considerable portion of our revenues from certain key advertisers. For the fiscal year ended March 31, 2015, our top ten advertisers in India accounted for approximately 17% of our India Online advertising revenues and approximately 7% of our India Online receivables. For the same period, for our U.S. publishing business, our top ten advertisers contributed approximately 31% of total U.S. publishing revenues. Any failure to meet advertiser expectations could result in the cancellation or non-renewal of contracts, which typically can be terminated by advertisers with or without cause, with little or no advance notice and without penalty. The loss of, or a significant reduction in the volume of business from, one or more of our large advertisers could have a material adverse effect on our operating results and financial condition.

Our operations could be disrupted by unexpected network interruptions caused by system failures, natural disasters or unauthorized tampering of our systems.

Our online businesses rely heavily on the Internet and, accordingly, depend upon the continuous, reliable and secure operation of Internet servers, related hardware and software and network infrastructure, such as telephone lines leased from service providers. The continual accessibility of our websites and the performance and reliability of our network infrastructure are critical to our reputation, and our ability to attract and retain users, advertisers and merchants. Any system failure or performance inadequacy that causes interruptions in the availability of our services or increases the response time of our services could reduce our appeal to advertisers and consumers. Factors that could significantly disrupt our operations include but are not limited to:

• system failures and outages caused by fire, floods, earthquakes, tsunamis, power loss, telecommunications failures and similar events;

• software errors; computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems;

• security breaches related to the storage and transmission of proprietary information, such as credit card numbers or other personal information; and

• terrorist acts or other acts of violence.

While we have taken steps to improve security and network reliability, we have limited backup systems and redundancy. The failure of these backup systems could lead to the disruption of our services and the loss of important data. We have suffered temporary service outages in the past from time to time that have resulted in a disruption of our services. Future disruptions or the occurrence of any of the foregoing factors may result in users being temporarily unable to access our services. Any sustained disruption will reduce the number of visitors to our website and could have a material adverse impact on the transactions handled through our website. Such disruptions could also reduce the number of advertisers and online shopping on our site and materially affect our operating results, which may lead to a decline in the market price of our ADSs.

We seek to protect our computer systems and network infrastructure from physical break-ins, as well as security breaches and other disruptive problems. We employ security systems, including firewalls and password encryption, designed to minimize the risk of security breaches. There can be no assurance that these security measures will be effective.

If someone breaches our network security or otherwise misappropriates sensitive data about our users, we could be subject to liability. These liabilities could include fraud claims and other claims for misuses of personal information, such as unauthorized marketing purposes. These claims could result in litigation and could have a material adverse effect on our business, results of operations and financial condition.

We do not carry material business interruption insurance to protect us in the event of a catastrophe, even though such an event could lead to a significant negative impact on our business. Any sustained disruption in Internet access provided by third parties could also adversely affect our business.

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We may lose a significant portion of our assets if banks in India collapse.

A significant portion of our assets is held in the form of cash and cash equivalents. We maintain a majority of such cash and cash equivalents in Indian Rupees with banks in India. In case one or more of these banks collapses due to financial crisis, or any futures ones, we may lose a substantial portion of our cash and cash equivalents. This could have a material adverse effect on our business, results of operations and financial condition.

We may not benefit from our acquisitions and investments and our acquired businesses could increase our net losses.

We have made several strategic and opportunistic acquisitions and investments in order to penetrate new markets, generate additional revenue streams and provide value-added services to our users. We may, if opportunities arise, acquire or invest in developing products, technologies or companies in the future. However, there can be no assurance that our acquisition and investment strategy will be successful or that we will realize the anticipated benefits from such acquisitions or investments. Lack of success in our acquisition and investment strategy could result in significant write-offs relating to such acquisitions and investments and thus, adversely impact our financial performance. Such transactions are accompanied by a number of risks, including:

• the failure to identify operating weaknesses of the acquired business during the course of due diligence and negotiations of these transactions;

• the difficulty of assimilating the operations, third-party relationships and personnel of the acquired companies with our operations;

• diversion of management time and focus from operating our business to acquisition integration process;

• the difficulty of incorporating acquired technology, software or content into our products, and unanticipated expenses related to such integration;

• the impairment of relationships with employees and customers as a result of any integration of new management personnel;

• the potential unknown liabilities associated with acquired businesses;

• the failure to develop successfully new products or technologies;

• the failure to popularize such products or technologies and/or derive expected revenues therefrom;

• unfavorable changes in business environment and government regulations;

• unfavorable changes in accounting rules and guidelines relating to our acquisitions;

• cultural challenges associated with integrating employees from the acquired company into our organization;

• retention of employees from the businesses we acquire; and

• litigation or other claims in connection with the acquisition or investment, including claims from terminated employees, customers, former stockholders, or other third parties.

Any or all of our future acquisitions may face similar risks and we may not be successful in addressing these risks or any other problems encountered in connection with such acquisitions.

Our business and growth will be impaired if we are unable to retain our existing key personnel and hire additional skilled employees.

We are dependent on certain key members of our management team. In particular, our success depends upon the continued efforts of our Chairman and Managing Director, Ajit Balakrishnan. All of our employees are located in India and the United States, and each may voluntarily terminate his or her employment with us. Our planned activities will require additional expertise in sales and marketing, technology and other areas. The labor market for skilled employees is extremely competitive, and the process of hiring employees with the necessary skills is time consuming and may lead to the diversion of resources. We may not be able to continue to retain existing personnel or identify, hire and successfully integrate additional qualified personnel in the future. The loss of the services of key personnel, especially the unexpected death or disability of such personnel, or the inability to attract additional or replacement qualified personnel, could impair the growth of our business.

We are dependent on our agreements with mobile service providers for service delivery and fee collection.

Our mobile value added services, depend mainly on the cooperation of a large number of private and government mobile phone operators who have the necessary licenses to provide mobile services to consumers across various states/cities in India. We rely on all of these mobile phone operators to provide network and gateways for our mobile value added services. We also utilize their billing systems to collect service fees from customers. Certain of these mobile phone operators also provide services to their customers (such as the downloading of ringtones), which compete with the mobile services we offer. This may make them less eager to cooperate with us. If any or all of these mobile service providers encounter technical problems, or if they refuse to cooperate with us or reduce fees payable to us, our ability to provide mobile services may cease or be severely disrupted, which may have a significant and adverse impact on our future operating results.

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We rely on increased sales of, and high renewal rates for, our subscription and fee-based products and services.

Growth in our India Online revenues will depend on the increase in users of our fee-based Internet services, including paid e-mail services, other subscription services and mobile value added service in India. If not enough users adopt and use our fee-based Internet services, our India Online revenue may not increase.

We depend on mobile operators to reach out to their customers.

We have arrangements with most Indian mobile operators which allow the customers of such mobile operators to download ringtones, wallpapers and other products from our servers. These customers can also access information relating to news, business and other information from us by using short messaging services. Some operators permit us to selectively send SMS messages, advertising our mobile products to a section of their customer base. The Telecom Regulatory Authority of India (“TRAI”) framed rules to prevent unsolicited commercial communications to mobile phone users who sign up for a “Do Not Disturb” registry. TRAI has directed operators to get written consent from users for activating value-added services (VAS) such as call ring back tone and hello tunes on their mobile phones. These and any other regulatory actions may have a material adverse impact on our future mobile VAS revenues.

Potential liability for information we publish may require us to defend against legal claims, which may cause significant operational expenditures and have an adverse impact on our financial results.

We may be subject to claims for defamation, libel, copyright or trademark infringement or other legal actions relating to the information we publish. For example, recently our Managing Director, Editor-in-chief and an Assistant Editor have been named as defendants in a complaint made at the Sessions Court in Chennai which has alleged that an article published on our website on the health status  of the Chief Minister of Tamilnadu amounts to a defamation of her reputation. These types of claims have been brought, sometimes successfully, against news and opinion publishing businesses in the past. Our insurance coverage may not adequately protect us against these claims. Liability claims could require us to spend significant time and money in litigation and to pay significant damages. As a result, liability claims, whether or not successful, could seriously damage our reputation and business.

For information regarding pending litigation filed against us, please see “Business — Litigation and other legal matters” in this annual report.

We may be liable to third parties for information uploaded on or retrieved from our website.

We could be exposed to liability for content that may be accessible through our website or content and materials that we develop or that our users may upload or post in our social networking sites, message boards, chat rooms, blogs or via our other interactive services. For example, we are a party to a criminal writ petition filed in the High Court of Mumbai, India, which alleged that we, through our website, www.rediff.com, provided a search facility that enabled Internet users to view pornographic, objectionable and obscene material.

We may also be subject to claims for defamation, negligence, copyright or trademark infringement, personal injury or other legal theories relating to the information we post or products sold by third parties on our website. For example, we had been named as a defendant in proceedings filed by The Board of Control of Cricket in India (“BCCI”) in the High Court of Madras, where BCCI sought to obtain a permanent injunction against a vendor who depicted the image of “IPL”. We could also become liable if confidential information is disclosed inappropriately on or through our website.

It is also possible that if any information provided through our services contains errors, third parties could make claims against us for losses incurred in reliance on the information. Please see the section entitled “Business – Litigation and other legal matters” in this annual report for more information on the litigation described above.

We also offer Internet-based e-mail services, which could expose us to potential liabilities or claims resulting from:

• unsolicited e-mail;

• lost or misdirected e-mail;

• illegal or fraudulent use of e-mail;

• interruptions or delays in e-mail service; and

• loss or deletion of data stored in mailboxes.

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Our video sharing platform, called iShare, allows members to upload and share music, videos and photos. Under our terms of use, our members are responsible for their accounts and must agree and undertake not to post or upload any material that violates or infringes any copyright or other privacy laws and acknowledge that Rediff.com assumes no responsibility for the content accessed or uploaded through this service. Nonetheless, we could be subject to litigation within or outside of India which could include civil or criminal prosecution and civil liability. Defending such litigation could involve substantial management time and cost and we can give no assurance that we would succeed in defending any such litigation.

The laws in India and the United States relating to the liability of companies which provide online services, like ours, for activities of their users, are still relatively unclear. Investigating and defending these claims is an expensive process, even if they do not result in liability. We do not carry insurance to protect us against all types of claims, and there is no precedent governing such liabilities under Indian law. Further, our business is based on establishing the Rediff.com website as a trustworthy and dependable provider of content and services. Allegations of impropriety, even if unfounded, could damage our reputation, disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses.

For information regarding pending litigation filed against us, please see “Business — Litigation and other legal matters” in this annual report.

If we are unable to provide innovative search experiences and other services that generate significant traffic to our website(s), our business could be harmed, causing our revenues to decline.

Internet search is characterized by rapidly changing technology, significant competition, evolving industry standards, and frequent product and service enhancements. We must continually invest in improving our users’ search experience—including improving the relevance of our search results, as well as presenting users with a search experience that is responsive to their needs and preferences in order to continue to attract, retain, and expand our user base. We currently deploy our own technology to provide search results on our network and failure to keep pace with industry and/or develop new innovative search offering could adversely impact our operating results.

We may be liable to third parties for the products they purchase online.

Consumers may sue us if any of the products or services offered on our website’s marketplace are defective, fail to perform properly and/or injures the user. Although our agreements with manufacturers and distributors whose products are displayed on our website’s marketplace typically contain provisions intended to limit our exposure to such liability claims, these provisions may not be sufficient to limit all of our liability from such claims. Product warranties are the responsibility of those who sell products on our website’s marketplace, although our reputation can be adversely affected if a user is not satisfied with a purchase. Liability claims could require us to spend a considerable amount of resources, time and money in litigation and to pay significant damages. Allegations of impropriety, even if unfounded, or poor service provided by manufacturers and distributors on our website’s marketplace, could damage our reputation, disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses.

For information regarding pending litigation filed against us, please see “Business — Litigation and other legal matters” in this annual report.

In addition, the laws relating to the online sale of goods and services are not fully developed. The various laws and regulations covering online sale of products and their interpretation involve a significant degree of uncertainty. Further, the application of tax law as it relates to online transactions for goods and services is likewise uncertain. Our business, financial condition and operating results may be materially affected if we were required to obtain such registrations or comply with various additional laws and regulations or pay additional taxes.

Privacy concerns may prevent us from selling demographically targeted advertising in the future and make us less attractive to advertisers.

We collect personal data from our user base in order to better understand our users and their needs and to help our advertisers target specific demographic groups. If privacy concerns or regulatory restrictions prevent us from selling demographically targeted advertising, we may become less attractive to advertisers. For example, as part of our future advertisement delivery system, we may integrate user information such as advertisement response rate, name, address, age or e-mail address, with third-party databases to generate comprehensive demographic profiles for individual users. However, if we are unable to construct demographic profiles for Internet users because users refuse to give consent, we will be less attractive to advertisers and our business may suffer.

Regulatory authorities around the world are considering a number of legislative proposals concerning data protection. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

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Further, failure or perceived failure by us to comply with our policies, applicable legal and other requirements, related to the collection, use, sharing or security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user confidence in us, damage to our brands, resulting in a loss of users, advertising partners, or affiliates, which could adversely affect our business.

We may not be able to manage our operations effectively if we grow, which could harm our business.

We anticipate expansion of our business in India as we address growth in our customer base and market opportunities. In order to manage the expected growth of our operations and personnel, we will be required to improve existing and implement new operational and financial systems, procedures and controls, and to expand, train and manage our employee base. Further, our management will be required to maintain and expand our relationships with various other partners, including but not limited to, mobile phone operators, Internet and other online service providers and other third parties necessary to operate and grow our business. We cannot assure you that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations or that such relationships will be maintained or developed.

Currency exchange rate fluctuations may adversely impact our operating results and financial condition.

The exchange rate between the Indian Rupee and the U.S. dollar has fluctuated substantially both historically and in recent years, and could continue to fluctuate substantially in the future. Our Indian revenues are translated into U.S. Dollars for reporting purposes at average annual U.S. Dollar/Indian Rupee exchange rates, which are computed by us based on daily closing rates published by the Reserve Bank of India. If the Indian Rupee depreciates further, such depreciation may adversely affect our reported revenues and operating results in U.S. Dollars.

Additionally, because a substantial portion of our cash and cash equivalents is currently held in Indian Rupees, devaluation or depreciation of the value of the Indian Rupee will adversely affect the value of our cash reserves in foreign currency terms. In addition, our market valuation could be materially adversely affected by the devaluation of the Indian Rupee if U.S. investors analyze our value and performance based on the U.S. dollar equivalent of our financial condition and operating results.

A small group of our existing shareholders control our Company and may have interests which conflict with those of our other shareholders or owners of our ADSs.

As of March 31, 2015 our six largest shareholders beneficially owned an aggregate of approximately 63% of our Equity Shares.

As a result, such shareholders could act collectively to exercise control over most matters requiring approval by our shareholders, including the election of directors and approval of significant corporate transactions among other matters. Under Indian law, a simple majority is sufficient to control all shareholder action except for those items which require approval by a special resolution. In case of a special resolution, approval of three-fourths of the shareholders present and voting is required. Examples of actions that require a special resolution include:

• amending our Articles of Association;

• issuing additional shares of capital stock, except for pro rata issuance to existing shareholders;

• commencing any new line of business; and

• commencing liquidation.

Further, Ajit Balakrishnan, Diwan Arun Nanda and Rediffusion Holdings Private Limited (formerly Rediffusion Advertising Private Limited), are entitled to appoint and have appointed Mr. Balakrishnan as a Director and as our Chairman so long as they hold, singly or jointly, not less than 10% of our issued, subscribed and paid-up capital. Mr. Balakrishnan currently serves an indefinite term as a Director and is not required to retire by rotation.

The interests of our controlling shareholders may differ from our other shareholders or owners of our ADSs and could result in a delay or prevention of a change in control of our Company even if a transaction of that sort would be beneficial to our other shareholders, including the owners of our ADSs, or in the best interest of our Company.

For additional information regarding our principal shareholders, please see “Principal Shareholders” in this annual report.

The laws of India do not protect intellectual property rights to the same extent as those of the United States, and we may be unsuccessful in protecting our intellectual property rights, which could lead to a reduction in our revenues and an increase in our expenses.

Our intellectual property rights are important to our business. We rely on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property.

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Our efforts to protect our intellectual property may not be adequate. Our competitors may independently develop similar technology or duplicate our products or services. Unauthorized parties may infringe upon or misappropriate our products, services or proprietary information. In addition, the laws of India do not protect proprietary rights to the same extent as the laws of the United States, and the global nature of the Internet makes it difficult to control the ultimate destination of our products and services. The misappropriation or duplication of our intellectual property could disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses. We may need to litigate to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time-consuming and costly and may not ultimately prove successful which could have an adverse effect on our financial results.

We could be subject to intellectual property infringement claims as the number of our competitors grows and the content and functionality of our website or other product or service offerings overlap with competitive offerings. Defending against these claims, even if not meritorious, could be expensive and divert our attention and resources from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay substantial damages awards and forced to develop non-infringing technology, obtain a license or cease selling the applications that contain the infringing technology. We may be unable to develop non-infringing technology or obtain a license on commercially reasonable terms, or at all.

For additional information regarding our intellectual property rights, please see “Business - Intellectual Property” in this annual report.

The limited installed personal computer base in India limits our pool of potential customers and restricts the growth of our business.

The market penetration of, or access to, personal computers, or PCs, and, consequently, the Internet in India is far lower than in the United States. Alternate methods of obtaining access to the Internet, such as through smart phones, cable television modems or set-top boxes for televisions, although available, are available in a limited manner in India. We cannot assure you that the market penetration of personal computers in India will increase rapidly or at all, or that alternate means of accessing the Internet will develop and become widely available in India. If these events do not occur we may not be able to expand our customer base, which will make it difficult for us to execute our business strategy.

The success of our e-commerce platform depends on its acceptance and growth in India, which is uncertain.

Many of our existing and proposed products and services are designed to facilitate e-commerce in India, and demand and market acceptance for these products and services by consumers is highly uncertain. Critical issues concerning the commercial use of the Internet, such as legal recognition of electronic records, validity of contracts entered into through the Internet and the validity of digital signatures, are governed in India by the Information Technology Act, 2000 (the “IT Act”). In addition, many Indian businesses have deferred deploying e-commerce initiatives for a number of reasons, including the existence or perception of, among other things:

• inconsistent quality of service;

• lack of legal infrastructure relating to e-commerce in India;

• lack of security of commercial data such as credit card numbers;

• low number of Internet users in India; and

• low levels of credit card penetration in India.

If usage of the Internet, credit cards and e-commerce in India does not substantially increase and the legal infrastructure and network infrastructure in India are not further developed, we are not likely to achieve significant growth of our e-commerce products and services which could adversely impact our operating result.

Management’s use of estimates may affect our income and financial position.

To comply with GAAP, management is required to make various estimates, judgments and assumptions. The facts and circumstances on which management bases these estimates, judgments, assumptions, and management’s judgment of the facts and circumstances, may change from time to time and this may result in significant changes in the estimates, with an impact on our assets or income. Current and future accounting pronouncements and other financial reporting standards may adversely affect the financial information we present. We regularly monitor our compliance with all of the financial reporting standards that are applicable to us and any new pronouncements that are relevant to us. Findings of our monitoring activity or new financial reporting standards may require us to change our internal accounting policies and to alter our operational policy so that it reflects new or amended financial reporting standards. We cannot exclude the possibility that this may have a material impact on our assets, income, or cash flows.

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If we fail to or are unable to implement and maintain effective internal controls over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected.

We are subject to reporting obligations under U.S. securities laws. The SEC, as required under Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring every public company to include a report of management on the effectiveness of such company’s internal control over financial reporting in its annual report. In addition, an independent registered public accounting firm must issue an attestation report on the effectiveness of the company’s internal control over financial reporting.

We recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. If we fail to maintain effective internal control over financial reporting in the future, we and our independent registered public accounting firm may not be able to conclude that we have effective internal control over financial reporting at a reasonable assurance level. This could in turn result in the loss of investor confidence in the reliability of our financial statements. Furthermore, we have incurred and anticipate that we will continue to incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. If we are not able to continue to meet the requirements of Section 404 in a timely manner or with adequate compliance, we might be subject to sanctions or investigation by the SEC or other regulatory authorities. Any such action could adversely affect the accuracy and timeliness of our financial reporting.

Risks Related to Investments in Indian Companies.

We are incorporated in India, and a large part of our assets, business operations and employees are located in India. Consequently, our financial performance and the market price of our ADSs will be affected by social and economic developments in India and the policies of the Government of India, including taxation and foreign investment policies, as well as changes in exchange rates, interest rates and controls, among other matters.

Terrorist attacks and other acts of violence or war involving India, the United States, and other countries could adversely affect the financial markets, result in a loss of business confidence and adversely affect our business, results of operations and financial condition.

Terrorist attacks, such as the ones that occurred in New York and Washington, D.C., on September 11, 2001, New Delhi on December 13, 2001, the Mumbai train bombings on July 11, 2006, the terror attacks in Mumbai on November 26, 2008 and July 13, 2011 as well as other acts of violence or war, including those involving India, the United States or other countries, may adversely affect Indian and worldwide financial markets. These acts may also result in a loss of business confidence and have other consequences that could adversely affect our business, results of operations and financial condition. Travel restrictions as a result of such attacks may have an adverse impact on our ability to operate effectively. Increased volatility in the financial markets can have an adverse impact on the economies of India and other countries, including economic recession.

If communal disturbances or riots erupt in India, or if regional hostilities increase, this would adversely affect the Indian economy, the health of which our business depends upon.

Some parts of India have experienced communal disturbances, terrorist attacks and riots during recent years. If such events recur, the market for our services may be adversely affected, resulting in a decline in our income.

The Asian region has from time to time, experienced instances of civil unrest and hostilities among neighboring countries, including those between India and Pakistan. Since May 1999, military confrontations between India and Pakistan have occurred in Kashmir. The hostilities between India and Pakistan are particularly threatening because both India and Pakistan are nuclear powers. Hostilities and tensions may occur in the future and on a wider scale. Also, since 2003, there have been military hostilities and continuing civil unrest and instability in Iraq, Afghanistan, Egypt, Libya, Syria and other part of Middle East. Events of this nature in the future, as well as social and civil unrest within other countries in Asia, could influence the Indian economy and could have a material adverse effect on the market for securities of Indian companies, including our ADSs, and on the market for our services.

Future political instability in India could halt or delay the liberalization of the Indian economy and adversely affect economic conditions in India generally and our business in particular.

The Government of India has traditionally exercised and continues to exercise significant influence over many aspects of the economy. Our business, and the market price and liquidity of our ADSs, may be affected by interest rates, changes in Government policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India.

Since 1991, successive Indian governments have pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. We cannot assure you that these liberalization policies will continue in the future. Any significant change in India’s economic liberalization and deregulation policies could adversely affect business and economic conditions in India generally, including our business.

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In the event that the Government of India changes its tax policies in a manner that is adverse to us, our tax expense may materially increase. 

In the Finance Act, 2012, the Government of India introduced a new service tax based on a negative list of services. Consequently, all services have become taxable, except specifically exempted services. The Finance Act, 2015 has increased the rate from the 12% plus 0.36% surcharge to a combined rate of 14% effective from 1^st June 2015. Further the Act also introduced Swachh Bharat Cess (clean India campaign) on all or certain taxable services at a rate of 2% on the value of such taxable services, which is not yet in effect. This would increase the cost of input services.

The Union Budget, 2015 has proposed to implement Goods and Service Tax (GST) starting April 1, 2016. It is proposed to combine other indirect taxes such as Central Excise duty, Service tax, Octroi, VAT and Sales tax, entry tax, etc., into GST, thus avoiding multiple layers of taxation that currently exist in India. The proposed levying of GST on the supply of Goods and Services will harmonize the Indirect Tax structure in the country.

 The Finance Act, 2012 has also made certain retrospective amendments effective June 1, 1976, such as broadening the term “royalty”. Any retrospective tax amendments may adversely affect our financial condition and results of operations.

The Finance Act, 2013 has increased the tax withholding rate from 10% to 25% in respect of the payment to be made to non-residents towards "Royalty" and / or "Fees for Technical Services". However, the Finance Act, 2015 has amended the rate of tax withholding on payment made to non-residents to 10% from 25% at present, subject to furnishing of Indian PAN by such non-residents. The new rates are effective from April 1, 2015. In case Double Taxation Avoidance Agreements prescribing lower withholding tax rate than the above, such rate would be applicable subject to fulfillment of prescribed conditions and documentation including furnishing of Indian PAN. As we procure various software licenses and technical services from non-residents in course of delivering our products and services, the cost of withholding tax on such procurements may increase and adversely affect our results of operations.

We operate in jurisdictions that impose transfer pricing and other tax-related regulations on us, and any failure to comply could materially and adversely affect our profitability.

 We are required to comply with various transfer pricing regulations in India. Failure to comply with such regulations may impact our effective tax rates and consequently affect our net margins.

Indian law limits our ability to raise capital and the ability of others to acquire us, which could prevent us from operating our business or entering into a transaction that is in the best interests of our shareholders.

Indian law constrains our ability to raise capital through the issuance of equity or convertible debt securities. Foreign investment in an Indian company may require approval from relevant government authorities in India including the Reserve Bank of India. The Government of India has classified existing businesses into various categories for automatic approval of foreign direct investment up to certain prescribed percentages. Under the current guidelines, the Government of India provides for approval under the automatic route for foreign direct investment proposals relating to the information technology sector.

We cannot assure you that equity or other forms of financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, our ability to fund our operations, take advantage of anticipated or unanticipated opportunities, develop or enhance our infrastructure and services, or otherwise respond to competitive pressures would be significantly limited. Our business, operating results and financial condition could be adversely affected by any such limitation.

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Our ability to acquire companies organized outside of India may depend on the approval of the Government of India and the Reserve Bank of India. Our failure to obtain approval for acquisitions of companies organized outside India may restrict our growth, which could negatively affect our revenues.

As part of our business strategy, we may plan to acquire complementary businesses, including businesses based outside of India. For the acquisition of a business based outside India we may, under certain circumstances, be required to obtain approval of the Reserve Bank of India and/or the Government of India. Under guidelines issued by the Reserve Bank of India, the acquisition of companies organized outside India is permitted under certain circumstances without prior approval if such acquisition does not exceed 400% of the net worth of the acquiring company as of the date of the last audited balance sheet or unless the acquisition is funded with cash from acquiring company’s existing foreign currency accounts or with cash proceeds from the issuance of ADRs/ADSs. This ceiling includes contribution to the capital of companies organized outside India, loans granted by the Indian party to such companies organized outside India and all of the guarantees issued by the Indian party to or on behalf of such companies organized outside India.

If we move forward with such an acquisition outside of India, we cannot assure you that we will be able to obtain any required approval from the Reserve Bank of India and/or the Government of India. Our failure to obtain approval from the Reserve Bank of India and/or the Government of India for acquisitions of companies organized outside India may restrict our growth, which could negatively impact our business and prospects and the market value of our ADSs.

Statistical and third-party data in this document and documents incorporated by reference herein may be incomplete or unreliable.

We have not independently verified data from industry publications and other third-party sources and therefore cannot assure you that they are complete or reliable. Such data may also be produced on different bases from those used in Western countries. Therefore, discussions of matters relating to India, its economy or our industry are subject to the caveat that the statistical and other data upon which such discussions are based may be incomplete or unreliable.

It may be difficult for you to enforce any judgment obtained in the United States against us, or our affiliates.

We are incorporated under the laws of the Republic of India and many of our directors and executive officers reside outside of the United States. In addition, a large part of our assets and the assets of many of these persons are located outside of the United States. As a result, you may be unable to:

• effect service of process upon us outside India or these persons outside the jurisdiction of their residence; or

• enforce against us in courts outside of India or these persons outside the jurisdiction of their residence, judgments obtained in U.S. courts, including judgments predicated upon the federal securities laws of the United States.

We have been advised by our Indian counsel that the United States and India do not currently have a treaty providing for reciprocal recognition and enforcement of judgments of courts in the United States in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States on civil liability, whether or not predicated solely upon the federal securities laws of the United States, would not be enforceable in India. However, the party in whose favor such final judgment is rendered may bring a new suit in a competent court in India based on a final judgment which has been obtained in the United States. A judgment of the courts in the United States shall be conclusive as to any matter directly adjudicated between the parties to the suit except if Indian courts were of the opinion that such judgment:

• was not rendered by a court of competent jurisdiction;

• was not rendered on the merits of the case;

• appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is applicable;

• was obtained in proceedings which are opposed to “natural justice”; or

• sustains a claim founded on a breach of any law in force in India.

Risks Related to the ADSs and Our Trading Market

An active or liquid market for our ADSs is not assured.

Trading volume in our ADSs is inconsistent and we cannot assure you that an active, liquid trading market in our ADSs will be established. Holders of our ADSs are entitled to withdraw the Equity Shares underlying the ADSs from our depositary facility at any time, subject to certain legal restrictions.

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In addition, under current Indian law, Equity Shares may only be deposited into our depositary facility in exchange for ADSs and, under certain circumstances, the number of ADSs that can be outstanding at any time is limited as follows: after any offering of ADSs, Equity Shares can be deposited for issuance of ADSs only to the extent that (a) holders have surrendered ADSs and withdrawn Equity Shares from the ADS facility and (b) such holders sold such Equity Shares through stockbrokers registered with the Securities and Exchange Board of India (“SEBI”) in a domestic Indian stock market. Therefore, unless the law is changed, the number of outstanding ADSs and the trading volumes for all ADSs may significantly decrease at any time to the extent that Equity Shares are withdrawn from our depositary facility and not deposited for the re-issuance of ADSs, which may adversely affect the market price and the liquidity of the market for our ADSs.

Currently there is no public trading market for our Equity Shares in India or elsewhere, which, together with existing Indian laws that restrict the conversion of outstanding equity shares into ADSs, reduces your ability to sell our Equity Shares represented by ADSs.

Currently there is no public trading market for our Equity Shares in India or elsewhere, and we cannot assure you that we will take steps to develop one or that we will be able to meet applicable listing guidelines or regulations to list our Equity Shares on a stock exchange in India or elsewhere. Our Equity Shares are currently only traded on the NASDAQ Global Market in the form of ADSs. Under current Indian laws and regulations, outstanding Equity Shares not listed in India may not be deposited into our depositary facility except in certain limited circumstances or with certain regulatory approvals. Thus, if you elect to surrender your ADSs and receive Equity Shares, you will not be able to trade those Equity Shares on any securities market. Further, you will be prohibited from re-depositing such unlisted outstanding Equity Shares with our Depositary.

Under current Indian regulations and practice, approval of the Reserve Bank of India is not required for a renunciation in favor of a resident of India of rights to subscribe to equity shares pursuant to a rights offering or for the sale of equity shares underlying ADSs by a non-resident of India to a resident of India, unless the sale breaches the pricing guidelines laid down for this purpose by the RBI, which specify that where the equity shares of an Indian company are not listed on a stock exchange in India, the transfer of shares shall be at a price not less than the fair value to be determined by a SEBI registered Category-I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method. The price per share arrived at should be certified by a SEBI registered Category-I Merchant Banker/Chartered Accountant.

Our management has broad discretion in using the proceeds from our securities offerings and cash from operations and therefore investors will be relying on the judgment of our management to invest those funds effectively.

Our management has broad discretion with respect to the use of the net proceeds from our securities offerings and cash from our operations. As of March 31, 2015, we held approximately US$8.3 million as cash and cash equivalents and short term deposits with banks on which we are earning interest.

We intend to use these funds primarily to develop additional platforms for the growth of our online business, product development, and general corporate purposes, including capital expenditures and strategic investments, partnerships and acquisitions. However, there is a possibility that we may be unable to make successful strategic investments, partnerships or acquisitions in the near future. Further, there could be a risk that our management may use these funds in an inefficient or ineffective manner.

Our ADS market price is highly volatile and could drop unexpectedly in the future. Should our ADS market price drop below $1.00, our ADSs may be delisted from the NASDAQ Global Market.

The stock markets in the United States have from time to time experienced significant price and volume fluctuations that have affected the market prices for the securities of technology companies, particularly Internet companies. Volatility in the price of our ADSs may be caused by factors outside of our control and may be unrelated or disproportionate to our operating results. In the event that the bid price of our ADSs falls below $1.00 and remains below $1.00 for more than 30 consecutive days, our ADSs may be delisted from the NASDAQ Global Market. The delisting of our ADSs from the NASDAQ Global Market could negatively affect the market price of our ADSs and impair your ability to sell such ADSs.

In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against that company. Securities class action litigation had been instituted against us in the United States in the past. Such litigation, if brought against us in the future, even if unsuccessful, could damage our reputation and result in substantial costs and a diversion of our management’s attention and resources.

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Owners of our ADSs may be restricted in their ability to exercise preemptive rights and thereby may suffer future dilution of their ownership position.

Under the Indian Companies Act, 2013, a company incorporated in India must offer its holders of equity shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any new equity shares, unless the preemptive rights have been waived by adopting a special resolution by holders of three-fourths of the company’s equity shares which are voted on the resolution. U.S. owners of ADSs may not be able to exercise preemptive rights for Equity Shares underlying ADSs unless a registration statement under the Securities Act is effective with respect to the rights or an exemption from the registration requirements of the Securities Act is available. Our decision to file a registration statement will depend on the costs and potential liabilities associated with any given registration statement as well as the perceived benefits of enabling the owners of our ADSs to exercise their preemptive rights and any other factors that we deem appropriate to consider at the time the decision must be made. We may elect not to file a registration statement related to preemptive rights otherwise available by law to our shareholders. In the case of such future issuance, the new securities may be issued to our Depositary, which, if there is a trading market for such new securities which may not be the case, may sell the securities for the benefit of the owners of our ADSs. The value, if any, our Depositary would receive upon the sale of such securities cannot be predicted. To the extent that owners of ADSs are unable to exercise preemptive rights granted in respect of the Equity Shares represented by their ADSs, their proportional interests in our Company would be reduced.

Owners of our ADSs may be restricted in their ability to exercise voting rights because of the practical and legal limitations associated with instructing our Depositary to vote on your behalf.

Holders of ADSs may exercise voting rights only through a depositary, unlike an owner of Equity Shares, who can exercise voting rights directly. An owner of ADSs generally will have the right under the deposit agreement to instruct our Depositary to exercise the voting rights for the Equity Shares represented by the ADSs. Owners of ADSs have no rights pursuant to the Companies Act, under which we are incorporated, and are limited to those rights granted to them pursuant to the depository agreement.

If our Depositary timely receives voting instructions from an owner of ADSs, it will endeavor to vote the securities represented by those ADSs in accordance with such voting instructions. In the event that voting takes place by a show of hands, our Depositary will cause the custodian to vote all deposited securities in accordance with the instructions received from owners of a majority of the ADSs for which our Depositary receives voting instructions. However, the ability of our Depositary to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. We cannot assure that holders of ADSs will receive voting materials in time to enable them to return voting instructions to our Depositary in a timely manner.

In June 2009 The Ministry of Company Affairs (MCA) of the Government of India has clarified that a depositary receipt holder cannot be considered to be a shareholder of the Company until such time as the holder elects to transfer / redeem depositary receipts for underlying equity shares. It has been further clarified that the depositary bank cannot be considered a nominee of the holder under the Indian Companies Act.

We do not pay dividends and currently have no plan to pay dividends in the foreseeable future.

We currently do not pay cash dividends and do not anticipate paying cash dividends to the owners of our Equity Shares or ADSs in the foreseeable future. Accordingly, investors must rely on sales of their Equity Shares or ADSs, which may increase or decrease in value, as the only way to realize cash from their investment. Investors seeking cash dividends should not purchase our ADSs.

We may be classified as a passive foreign investment company for United States federal income tax purposes, which could subject United States investors in the ADSs or Equity Shares to adverse tax consequences.

We do not expect to be classified as a passive foreign investment company (“PFIC”) for United States federal income tax purposes for the most recent taxable year ended March 31, 2015. However, there is no guarantee that the Internal Revenue Service will agree with our determination. Moreover, it is uncertain whether we will be classified as a PFIC for any future taxable year. PFIC status is a factual determination made annually on the basis of the composition of our income and the value of our active versus passive assets. We currently maintain a significant amount of passive assets, including cash, which contributes significantly to the risk that we may be or become classified as a PFIC. If we do not spend substantial amounts of our liquid assets for business development purposes or if our market capitalization does not substantially increase, we may also be classified as a PFIC for one or more future taxable years. If we are or become classified as a PFIC, United States investors holding our ADSs or our Equity Shares may be subject to penalizing tax and interest charge rules on gain recognized on the sale or other disposition of our ADSs or our Equity Shares and on the receipt of distributions on our ADSs or Equity Shares to the extent such distributions are treated as an “excess distribution” under the United States federal income tax rules. Please see the section in this annual report entitled “Taxation – United States Federal Income Tax Considerations – Passive Foreign Investment Company Rules”.

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Sales of substantial amounts of securities in the public market could depress the price of our ADSs and could impair our ability to raise capital through the sale of additional Equity Shares.

The market price of our ADSs could decline as a result of sales of a large number of Equity Shares represented by ADSs on a U.S. stock exchange or elsewhere, or the perception that such sales could occur. Such sales also might make it more difficult for us to sell Equity Shares in the future at a time and at a price that we deem appropriate. As of March 31, 2015, we had an aggregate of 13,795,178 Equity Shares outstanding. Of the outstanding Equity Shares, 9,295,956 ADSs, representing 4,647,978 Equity Shares, are freely tradable. Our remaining Equity Shares may be sold in the United States pursuant to a registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act. Further, certain holders of at least 30% of our Equity Shares can require us, subject to limitations, to effect a registration of such Equity Shares and/or to list the Equity Shares either on the NASDAQ Global Market (formerly the NASDAQ National Market), the National Stock Exchange of India or the Bombay Stock Exchange Limited (formerly The Stock Exchange, Mumbai).

We may be required to list our Equity Shares on an Indian stock exchange. If we were to list our Equity Shares on an Indian stock exchange, conditions in the Indian securities market may require compliance with new and changing regulations framed by Securities Exchange Board of India(SEBI), listing requirements of stock exchange, corporate governance, accounting and public disclosure requirements which might add uncertainty to our compliance policies and increases our costs of compliance. Further, If we were to list our Equity Shares on an Indian stock exchange, conditions in the Indian securities market may affect the price or liquidity of our Equity Shares and indirectly of our ADSs.

On June 28, 2006, the Ministry of Finance (MoF) of the Republic of India issued amendments to the “Issue Of Foreign Currency Convertible Bonds And Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993” (the “Scheme”). The amendments included a statement that Indian companies that have issued depositary receipts and/or foreign currency convertible bonds prior to August 31, 2005 will be permitted to comply with listing conditions on the Indian stock exchanges within three years of starting to make profits. However, by virtue of notification issued by the MoF on October 21, 2014, the issuance of depository receipts has been taken out of the 1993 Scheme and is now regulated by the Depository Receipts Scheme, 2014. The 2014 Scheme allows Indian companies, whether listed or unlisted, to access the international capital markets using depository receipts. Such issuances can either be through a public offering of depository receipts or through a preferential allotment or qualified institutional placement. They can also either be sponsored by the issuer company or unsponsored such as when an existing shareholder sells its holding through the issue of depository receipts. These issuances are subject to the usual foreign investment regime, including in relation to sectoral caps as well as pricing.  Moreover, such issuances are permitted only to investors in certain specific jurisdictions as listed in the 2014 Scheme, which currently consists of a list of 34 countries. The earlier condition of mandatory listing in India is dispensed with.

We may be required by the Government of India at some point in time to list on a local Indian stock exchange. We may not be able to comply with any timeline for listing and other standards imposed on us, and we are uncertain as to the consequences to us of any non-compliance. If we were to list our equity shares on an Indian stock exchange, we will have to comply with changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the SEBI rules and regulations and stock exchange listing requirements which may create uncertainty for companies like ours. These new or changed laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.

The Indian securities markets are smaller than securities markets in more developed economies and are more volatile than the securities markets in other countries. Indian stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities.

Indian stock exchanges have also experienced problems that have affected the market price and liquidity of the securities of Indian companies. These problems have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. In addition, the governing bodies of the Indian stock exchanges have from time to time restricted securities from trading, limited price movements and restricted margin requirements. Further, from time to time, disputes have occurred between listed companies and the Indian stock exchanges and other regulatory bodies that, in some cases, have had a negative effect on market sentiment. If we were to list our Equity Shares on an Indian Stock Exchange and similar problems occur in the future, they could harm the market price and liquidity of the Equity Shares and this could have an adverse effect on the price and liquidity of our ADSs.

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BUSINESS

Overview

Our legal name is Rediff.com India Limited and our commercial name is Rediff.com. We were incorporated in India on January 9, 1996 as Rediff Communication Private Limited under the Indian Companies Act. We converted to a public company on May 29, 1998. On February 15, 2000, we changed our name to Rediff.com India Limited. Our principal office is located at Mahalaxmi Engineering Estate, 1st Floor, L. J. First Cross Road No-1, Mahim (West), Mumbai 400 016, India, and our telephone number is +91-22-6182-0000. Our Internet address is www.rediff.com. Other information included in the website is not incorporated by reference into this document.

We are a leading internet platform that enables content sharing and e-commerce for consumers and enterprises through our website and mobile application in India and elsewhere in the world.

Through Vubites, we also provide a platform for TV advertising targeting for small, medium and large corporate enterprises. In the United States, our news and information platform comprises of a weekly print newspaper named “India Abroad” and an internet website under the name “Rediff India Abroad”.

In June 2000, we issued 5.3 million ADSs, representing 2.65 million Equity Shares, at a price of US$12.00 per ADS, raising net proceeds of US$57.3 million, after underwriting discounts and other expenses, and we listed our ADSs on the NASDAQ Global Market (formerly the NASDAQ National Market). In November 2005, we issued an additional 3.0 million ADSs, representing 1.5 million Equity Shares, at a price of US$15.86 per ADS, raising net proceeds of US$44.1 million, after underwriting discounts and other expenses, and these ADSs were also listed on the NASDAQ Global Market. Our ADSs are listed and traded on the NASDAQ Global Market under the ticker symbol REDF. The net proceeds of our ADS offerings have been used by us, and in future, are intended to be used by us, to develop content for our Internet website, to advertise and promote our brand, to improve the technological capabilities of our company, and for general corporate purposes, including capital expenditures, strategic investments, partnerships and acquisitions.

On November 26, 2010, we acquired Vubites India Private Limited (“Vubites”) for approximately US$0.30 million in cash and the assumption of a $2.7 million loan. Vubites helps small and local businesses advertise on national TV channels within their cities to reach their target audiences.

Our Markets

We believe that the growth of our revenues and profits from our India Online business is dependent on the growth of the Indian Internet market accessed from PCs and smartphones, which in turn is dependent on public and private investment for broadband infrastructure, the evolution of adequate online payment mechanisms and e-commerce logistic in India, as well as the adoption of online advertising by advertisers, and our ability to execute on our plans.

Our market share of internet users in India accessing the internet from home and the office using PCs as measured by ComScore is presently 20%, and our future growth and profitability is directly dependent on our maintaining this market share as India’s internet user growth increases with the planned launch by mobile phone operators of 3G and 4G mobile data services. 

The growth of our international business, particularly our US operations, is dependent on our ability to deliver PC and mobile based services that appeal to the Indian American population that we presently serve with our weekly print newspaper India Abroad and our website Rediff India Abroad.

Our overall growth is also dependent on general economic conditions in all our markets, particularly India and the adoption of internet advertising by consumer companies in the finance, consumer durable and consumer electronics and auto industries and increase in monetization of our user base for e-commerce marketplace.

Our Opportunities

We believe our opportunities are driven by the following factors, among others:

• We were an early entrant in the Indian Internet market and our brand continues to be recognized and trusted by Indian Internet users. We were the first company in India to introduce an e-commerce platform and related services and through the expansion of our service offering, have retained a loyal user base following, with opportunities for expansion;

• We offer services based on contemporary technology, thus making them easy to use and accessible through PCs, smart phones and tablet-based devices that have Internet capabilities. We have invested over the years in our news media and e-commerce platforms to ensure our services are readily available and easy to use across virtually all operating systems, mobile devices and communications platforms;

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• We expect the growth of e-commerce in India to be fueled by anticipated improvements in broadband access, online payment infrastructure and distribution and fulfillment facilities, an increase in credit and debit card penetration rates, and the development of alternative payment mechanisms for online purchases, such as cash on delivery; and

• We expect the growth in Internet access in India through PCs, smart phones and other mobile devices such as tablets to be further fueled by the recent issuance of 3G licenses in India and the expected roll out of both 3G and 4G services.

We believe that, as an operator of an internet platform with a large number of users, we are well positioned to benefit from the anticipated growth of revenues generated from these services, as well as new services we may offer in the future.

Our Strategy

We are focused on providing an internet platform that makes it easy for consumers and online shoppers to discover content and products that is to their liking. We make continuous efforts to improve the usability of our platform, add new features and improve the security and robustness of transactions on our platform.

We also make continuous efforts to make it easy for merchants and content creators to list their products and services on our platform and we provide them with analytics to help them improve their business on our platform.

Our news and information services are made up of both original content that we create, as well as content that we crawl and index from the world-wide web, as well as content that is licensed from third party providers. Such content is in the form of text, audio and video.

Our free and reliable email service, rediffmail, is a key draw for users to come to our site repeatedly. This email service is continuously improved by reducing spam and improving usability. A paid version of this service is in use with highly discerning customers, including many insurance and pharmaceutical companies. We have created mobile apps to use this mail service across many popular platforms, including Android and Apple iPhone.

Our e-commerce marketplace platform has continuously improved services to help merchants list their products and we continuously expand the number of logistics services available to these merchants and also widen the number and type of payment mechanisms available to shoppers. In the past few months we have fundamentally upgraded the analytics support we provide to merchants and we are presently testing with them a new mobile app to help merchants manage their business with us with less effort.

Presently, we are able to get a fraction of our user base to shop on our website. With the deployment of mobile applications we expect our user base to grow significantly. With the help of mobile technology we are helping our merchants to list their products and services at a faster pace. We also intend to increase the current merchant base, which will help to increase product listings / SKUs. We continue to invest in creating and deploying algorithms that help match users with the content and product listings on our platform. We believe that all this will help us to increase the monetization of e-commerce marketplace.

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Our India Online Business

Our Rediff.com India website consists of information, communication and content services, free community products and platforms, e-commerce and mobile services. With 17 million monthly active users in India, as reported by ComScore Media Metrix (March 2015 report) we believe Rediff.com is one of the most recognized online brands in India and among the Indian community worldwide.

Information and Content

We deliver information and content to our users in an easy-to-use interface for both PC and mobile phones. The information and content channels currently available to our users include news, business, movies, cricket/sports and several other topics of interest. We currently offer this information and content without charge to our users.

We believe, based on the data provided by the ComScore, that a significant percentage of our online users are in the 18- to 34-year old age group. As such, we place emphasis on reaching younger users through focused information and content relevant to this audience, and target our marketing efforts to reach this demographic, as well as others, both in metro and small towns in India. Our specific offerings include:

E-mail

We offer our users a variety of e-mail solutions tailored to their needs.

• Rediffmail, our flagship e-mail service, is provided free of charge to our users. We have now made our interface more user friendly by providing easy navigation tools to quickly perform actions like reading unread mails, composing a new mail, deleting mails and accessing the calendar and contacts. The service is also accessible on mobile devices and is designed to work seamlessly on most mobile phones.

• Rediffmail PRO is aimed at the small and medium sized enterprise (“SME”) segment in India. Rediffmail ePro services are designed for use by large enterprises.

Local TV Advertising

Vubites enables local businesses to advertise on national TV channels within their city. Vubites works with TV broadcasters and cable multi-system operators (MSOs) in the principal cities of India, enhancing local advertiser’s revenues by helping to make advertising on TV more affordable. Vubites offers web-based tools that small merchants can use to create low cost TV ads in mpeg2 format, which play on television directly, an online media planning tool with which advertisers can create their media plan without any assistance, and a technology to insert TV ads at the city level.

Content Sharing Platform

Our content sharing platform has several components. Rediff Blogs enables users to set up their own blogs and publish their thoughts and ideas directly and instantly on the web as well as the ability to visit other blogs and comment on them. Users can also post pictures and create multiple blogs under a single username and password.

On our video sharing platform, Rediff iShare, videos are now available for viewing on iPhones and other operating systems (OS). Video files are now available in both MP4 and flash video formats.

Rediff MyPage is our free online social networking product which allows users to become part of a network by creating and uploading profiles that include details about their profession, education and interests. Thereafter, users can invite friends to join their network and can become linked to a larger network.

Get Ahead, our editorial content channel, also supports a forum for questions and answers. This social media platform allows users to post questions and answers on various issues, and vote for the most relevant answers within a community environment. ZaraBol allows users to share messages.

MONEYWIZ provides stock market quotes, company information and a personal portfolio tracker, business news, feature articles, expert columns and interviews. Our business channel offers business news from India and coverage of Indian stock markets. This channel also provides regular columns and feature stories, as well as personal finance information. Our free, real-time stock market indices and stock quotes tool, which enables users to benchmark returns on their investments has been well received by users.

e-commerce Marketplace

Rediff Shopping is an online marketplace which allows users to purchase products and services listed on our platform by various merchants. We offer products and services from merchants in various categories which currently include apparel and accessories, mobile phones and accessories, electronics, automobiles, home décor and related furnishings, toys, games, flowers, jewelry and a host of other products. 

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Customers can pay for their purchases using a variety of payment options, including credit cards, debit cards, online banking services, cash on delivery, gift vouchers and checks/demand drafts. We have entered into agreements with leading Indian banks to facilitate payment processes. In our effort to provide more users with the convenience of online shopping, we partnered with India Post as a logistics partner. This allows us to service more than 26,000 pin codes (similar to zip codes in the United States) across the country. We also continue to work with our vendors to improve delivery cycles to better serve our customers and believe our logistics network enables us to reach virtually all regions of India, a key competitive differentiator.

Rediff Shopping also features a vendor rating system to enable online shoppers on our e-commerce platform to rate their shopping experience with different online merchants. Customers are invited to provide feedback when items are delivered, rating their experience with the vendor as satisfactory, unsatisfactory or undecided. Vendors are rated based on the feedback provided.

Our Revenue Sources

Our India online business primarily includes revenues from both advertising and fee-based services. Online advertising includes revenues from advertisements and sponsorships of events on web. Fee-based services include revenues from online shopping, subscription services.

Advertising

Advertising includes revenues from banner advertising, performance-based advertising, e-mail and text link campaigns and sponsorships of events on web. Our advertisers enter into agreements pursuant to which they either pay a fixed fee per thousand banner impressions for a given time-period, usually ranging from a few weeks to months, or a variable fee depending upon the number of clicks or leads provided to them through our website.

Some of our advertisers also enter into agreements pursuant to which they pay a fixed fee for a guaranteed number of impressions on our site. Our rate per thousand impressions, commonly referred to as CPMs, for banner advertisements varies depending on banner size, location of the advertisements on our site, the targeted geographical areas and the extent to which the advertisements are targeted to a particular audience. Discounts from standard CPM rates may be provided for higher volume and longer-term advertising contracts. We have introduced other formats for advertisers to broaden the appeal of the advertisements to our users, such as text links, image ads, video ads and any combinations of these options.

We had over 379 advertisers on our Rediff.com India website during the fiscal year ended March 31, 2015. Our top ten advertisers accounted for approximately 17% of our India advertising revenues for the fiscal year ended March 31, 2015.

Fee-based services

Revenues from fee-based services primarily includes income from various paid subscription service products, and from our online shopping marketplace.

Subscription service revenues primarily include income from our various paid e-mail service products and domain name registration and web hosting services. The revenue for subscription based products is recognized over the period of the subscription.

Online shopping revenues primarily consist of commissions earned on the sale of electronics, books, music, apparel, confectionery, gifts and other items to customers who shop from vendors on our online store. Revenues from online shopping services also include fees charged to vendors for creating, designing and hosting the vendors’ product information on our website.

Our Infrastructure

Technology

Our operating infrastructure is scalable and has been designed with a view to deliver many millions of page views per day and allow users to access our products and services quickly and efficiently from different locations and devices worldwide. Our web pages are generated, served and cached by servers all over India.

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We use a wide range of web application servers on Linux and Windows platforms. Servers are maintained mainly at telecom companies data centers in India and abroad. In addition we use the cloud infrastructure offered by Amazon Web Services and Akamai to extend our reach. We have the capability to deliver content using our own content delivery network and also use a third party content delivery network when needed. We have architected our service in such a way as to protect our systems from the effects power outages, break-ins and other service interruptions. We continuously monitor our system for accessibility, load, system resources, network intrusion and latency. We have built a scalable column store data warehouse to cater to surges in demand for storage and for faster retrieval of data.

Our services are accessible over PCs and mobile devices, such as smart phones and tablets. We have the ability to detect the browser capabilities and geographic location of the user to serve pages with appropriate layouts and supported features. We log user activity while at the same time protecting their privacy.

Advertising

Our sales and marketing professionals are responsible for securing advertisers and shopping merchants, planning and creating advertising campaigns and obtaining and analyzing customer feedback. Sales team members are based in Mumbai, New Delhi, Bangalore, Chennai, Hyderabad and New York. The sales team coordinates regularly regarding advertising across all of our businesses. Our sales team includes designers, copywriters, programmers and campaign managers.

In India, our sales team focuses its sales efforts on major advertisers as well as smaller corporations and advertising agencies and provides them with consultation on the design and placement of their web-based advertising and advertising measurement analysis. In the past few years, a number of advertising agencies have been established in India to promote the Internet as an advertising medium among Indian advertisers. In addition, several full-service advertising agencies in India have expanded their operations by creating and growing their Internet / interactive advertising divisions. These agencies manage the advertisement purchases of their customers (third party advertisers) across media (TV, Print, Radio, Internet etc.) and are referred as digital agencies. We present the merits of our internet user base visiting our website www. Rediff.com to these digital agencies and attempt to be included in the internet display advertisement budget of their customers. These digital agencies place purchase orders for specific campaigns on behalf of their customers with credit terms ranging from 60 to 90 days and for period ranging up to four weeks. Our advertising business from digital agencies were accounted for approximately 60% of our advertisement revenues during fiscal year ended March 31, 2015.

Online Shopping

Our shopping platform has a host of user-friendly features such as product search and detailed product category listings. The “tracking order”, “view account”, “shopping bag details” and “order status update by automated e-mail” features make online shopping convenient for users. Users can place orders from anywhere in the world for delivery in India. They can pay for purchases by credit card, local check, cash-on-delivery or direct debit to an Internet banking account with designated Indian banks. Our customer service officers address customer inquiries and solicit feedback from users to seek to continuously improve our offerings. Customers are invited to provide feedback when items are delivered using our vendor rating system, rating their experience with three options — satisfied, unsatisfied or undecided.

Once a user places an order on our website, we process and collect payment (except where the method of payment is C.O.D.) and notify the merchant, who then packages the product and arranges for delivery through one of our designated couriers or the user’s designated courier. We make payment to the merchant once we receive proof that the merchant has delivered the product. Most products purchased through our website are delivered within ten business days. Product warranties are the responsibility of those who sell products on our website’s marketplace, although our reputation can be adversely affected if a user is not satisfied with a purchase. Therefore, we monitor complaints and merchant’s rating and remove merchant with bad satisfaction record.

Pursuant to the terms of our agreements with merchants, we may receive a one-time entry fee and a separate commission on the sale of each product posted on our website.

Our sales force targets manufacturers and vendors of the leading products in India for them to offer their products through the Rediff Shopping platform. We also target manufacturers and vendors that supply products in categories that are fast moving over the Internet.

Electronic Payments

We were among the first Internet companies in India to accept credit cards for online payments. Users can use leading international and Indian credit cards and online money transfer methods for online payments. All online transactions are secured by VeriSign Secure Socket Layer (SSL) technology.

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We have entered into agreements with Axis Bank, Citibank N.A., and ICICI Bank Limited to automate Visa and Master Card credit card payments through our website.

United States Publishing Business

Our United States publishing business consists of the India Abroad weekly print news paper and the Rediff India Abroad website, which is targeted at the Indian-American community in North America.

India Abroad, which we acquired in April 2001, was established over 40 years ago and is one of the oldest weekly newspapers focused on the Indian community residing in North America and Canada. The newspaper is published in the United States.

The paper is divided into five sections: News, Community, Business and Sports, Classifieds and Magazine. India Abroad offers classified advertising, which includes advertisements listed together in sequence by the nature of the advertisement, such as matrimonial, business/finance, employment, medical and real estate. The paper also has a Bulletin Board on the back cover which offers enhanced classified advertising. India Abroad also has an associated website, www.indiaabroad.com, which allows users to start and renew subscriptions, make payments and change their delivery addresses. Users can also place classified advertisements through this website. Subscribers can have copies of e-edition e-mailed to them for their convenience. The Rediff India Abroad website offers information and content that is similar to the information and content on our Rediff.com India website, along with additional offerings relevant to North American users.

Competition

There are a large number of companies, both in India and internationally and based both in India and in other countries that provide websites and mobile application focusing on users in India who compete with us for website visitors, online advertising and online shopping, and subscription revenues. Our current and anticipated competitors include Google, Yahoo, Facebook, Microsoft, AOL, eBay, Amazon, Snapdeal, Flipkart as well as a host of other international and Indian companies.

Competition is intense and is expected to increase in the future, as there are no barriers to entry into the markets that we serve. Our competitive ability is determined by how quickly we anticipate user needs and respond with new features on our various service offerings, our execution skills and our financial management skills.

We also need to continue to make investments in our marketing efforts.

We also compete for advertising revenue with other forms of media, such as print media, radio and television, as well as companies known as “aggregators”, which aggregate advertising space in third party websites and resell such space to, among others, our customers and potential customers.

In our e-commerce marketplace we face competition not only from other e-commerce players but also from physical-world retailers, publishers and their vendors, distributors and manufacturers.

Many of our competitors have a longer operating history, greater name recognition, larger customer base and greater management, financial, technical, marketing, sales, brand and other resources than we do. They may secure better terms from suppliers, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing. Further, they can use their superior experience and resources in a variety of competitive ways, including by investing more aggressively in research and development, creating superior content, making acquisitions and competing more aggressively for advertisers also may enter into business combinations or alliances that strengthen their competitive positions. In addition, emerging start-ups may be able to innovate and provide products and services faster than we can. There has also been a trend toward industry consolidation, as a result of which our smaller competitors today may become larger in the future. If our competitors are more successful than we are at generating visitors and website traffic, our revenues may decline.

Intellectual Property

Intellectual property rights are important to our business. We rely on a combination of copyright, trademark and trade secret laws, confidentiality procedures and contractual provisions to protect our intellectual property. We require employees, independent contractors and, when practicable, vendors to enter into confidentiality agreements upon the commencement of their relationships with us. These agreements generally provide that confidential information developed or made known during the course of a relationship with us must be kept confidential.

Our efforts to protect our intellectual property may not be adequate. Our competitors may independently develop similar technology or duplicate our products or services. Unauthorized parties may infringe upon or misappropriate our products, services or proprietary information, including our domain name. For example, there are some parties who have registered domain names similar to or slightly different from our domain name, Rediff.com, and we have taken legal action in India and overseas to protect our rights in respect of our domain names. We do not believe that the outcome of these lawsuits will have a material adverse effect on our business. However, the laws of India do not protect proprietary rights to the same extent as the laws of the United States. Further, the global nature of the Internet makes it difficult to control the ultimate destination of our products and services. In the future, further litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time-consuming and costly, and there can be no assurance we would prevail in it.

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We could be subject to intellectual property infringement claims as the number of our competitors grows and the content and functionality of our websites or other product or service offerings overlap with competitive offerings. Defending against these claims, even if they are not meritorious, could be expensive and divert our attention from our operations. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay substantial damage awards and be forced to try to obtain or develop non-infringing assets, obtain a license or cease selling the applications that contain the infringing matter. If this were to occur, we may be unable to develop non-infringing assets or obtain a license on commercially reasonable terms, or at all.

We rely on a variety of technologies that are licensed from third parties. The software developed by these third parties is used in our website to perform key functions. These and other third-party licenses may not be available to us on commercially reasonable terms in the future. The loss or inability to obtain or retain any of these licenses could delay the introduction of software enhancements, interactive tools and other features until equivalent technology can be licensed or developed. Any such delays could materially adversely affect our business, operating results and financial condition.

We have registered our trademarks for “Rediff”, “Rediff on the Net and Design (Square)” and “Rediff.com” under various classes with the United States Patent and Trademark Office. We have received registration for our trademarks “Rediff”, “Rediff.com”, “Rediffmail”, “Rediffmail Mobile”, “Rediff Mobile”, “Rediff Bol”, “Rediffmail NG Mobile”, “Rediff iShare”, “Sociali” and “Rediff Shopping”, and have applied for registration for “RediffDeal Ho Jaye” and “Rediff ZaraBol”, in India. We have also received copyright registration for our artworks entitled “How Hot Is This Stock”, “origami dog” and “sociali” and for 40 “profile photo illustrations” in India.

Facilities

India

Our corporate headquarters are located in Mumbai, India, where we lease approximately 22,700 square feet in two buildings. In one facility we lease approximately 10,800 square feet and in the other we lease a total of approximately 11,900 square feet under three separate lease agreements. The lease for our 10,800 square-foot facility will expire on January 20, 2017. In regard to our 11,900 square-foot facility, one lease, for 3,000 square feet, expires on October 31, 2015, a second lease, for 3,000 square feet of adjoining offices, expired on September 30, 2014 and was renewed for another three years to until September 30, 2017. The third lease, for 5,900 square feet will expire on April 30, 2017. Further, we lease offices in Delhi and Bangalore.

 United States

Our U.S. subsidiary leases approximately 6,300 square feet of office space in New York, the lease for which expires on May 31, 2018.

We do not anticipate having material difficulties renewing any of our current leases or, alternatively, entering into different space arrangements if necessary.

Seasonality

Seasonal fluctuations in Internet advertising have affected, and are likely to continue to affect, our business. Internet advertising in India is generally slow during the first half of the fiscal year for most Indian companies. Such seasonal trends have in the past caused, and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.

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Litigation and Other Legal Matters

Action Relating to Access to Pornographic Material

On June 21, 2000, the Company, certain of our present and then directors and others (Ajit Balakrishnan, Arun Nanda, Abhay Havaldar, Sunil Phatarphekar, Charles Robert Kaye and Tony Janz) were named as defendants in a criminal complaint (RCC Complaint Number 76 of 2000) filed by Mr. Abinav Bhatt, who was then a 22-year old student, before the Judicial Magistrate, First Class, Pune, India, alleging commission of an offence under Section 292 of the Indian Penal Code (IPC) for distributing, publicly exhibiting and putting into circulation obscene, pornographic and objectionable material. The RCC Complaint alleged that we, through our website www.rediff.com, provided a search facility that enabled Internet users to view obscene, pornographic and objectionable material. On November 27, 2000, the Judicial Magistrate passed an order on the complaint holding that a prima facie case under Section 292 of the IPC had been made out against us and directed commencement of criminal proceedings against all the defendants. A criminal writ petition was filed in the High Court of Mumbai (Sunil N. Phatarphekar & Ors. v. Abhinav Bhatt and Ors., Mumbai High Court, Criminal Writ Petition No. 1754 of 2000), seeking, among other relief, the setting aside of the order of the Judicial Magistrate. The High Court of Mumbai, in its order dated December 20, 2000, while granting interim relief to the petitioners in the Writ Petition, stayed the order of the Judicial Magistrate pending final disposal of the Writ Petition. The Writ Petition has been admitted by the High Court of Mumbai and currently hearings have commenced. While we believe that the lawsuit is without merit, and that we and our directors have a valid defense to the charges, in the event that we are unsuccessful in our defense, we and our directors may face both criminal penalties and monetary fines or damages. Under Indian law, any person who publishes or transmits or causes to be published in electronic form any material which is lascivious or appeals to the prurient interest, or whose effect is such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it, shall be punished (i) for the first conviction, with imprisonment of up to five years and with a fine of up to Rs.100,000 (approximately US$1,700); and (ii) in the event of a second conviction, with imprisonment of up to ten years and with a fine of up to Rs.200,000 (approximately US$3,400).

Actions Relating to Trademark Infringement

In May, 2008, a complaint was filed by The Board of Control of Cricket in India (“BCCI”) against Sandeep Goyal and us, alleging that the depiction of images in the online game known as Indian Fantasy League, started by Sandeep Goyal and hosted on the Web through our hosting services, infringed the Indian Premier League (“IPL”) trademark. BCCI is seeking (a) a permanent injunction restraining defendants from the use of logo “Indian Fantasy League.com”; (b) shutdown of the website Indianfantasyleague.com; and (c) a rendering of the accounts of all profits earned by the website and damages of Rs.1.0 million (approximately US$17,000). We have filed our response to the BCCI complaint, and among the defenses we have raised are: (a) it is Sandeep Goyal who has infringed the trademark of IPL and not Rediff.com; (b) Rediff.com only provides the domain hosting and web based e-mail solution services which enables the subscriber to set up and manage their website as per the terms and conditions of Rediff business solutions; and (c) subscribers such as Sandeep Goyal are required to abide by and comply with the terms and conditions we impose on our subscribers, which provide that the subscriber shall be solely responsible for producing, electronically uploading and maintaining such subscriber’s website, and such subscriber shall ensure that all uploaded material shall be owned and/or properly licensed by the subscriber and shall not adversely affect any rights of any third party. Although we and our legal counsel believe that we have valid defenses to the charges and we do not ascertain any monetary claims against us. But if we are unsuccessful in our defense, we could be subject to monetary fines or damages.

In February, 2006, a complaint was filed by Marksman Pvt. Ltd. against various telecom operators and internet service providers and Rediff.com, alleging infringement of Marksman’s copyright by way of the dissemination of information relating to scores, alerts, updates and other events, via Short Message Service (SMS) technology on wireless and mobile telephones, in respect of One Day International Cricket Matches (“ODIs”) during India’s tour of Pakistan scheduled in February, 2006. We have filed our response, and among the defenses we have raised are: (a) Rediff.com, along with other telecom operators and service providers, has not infringed Marksman copyrights; and (b) the information relating to scores, alerts, updates and other events were sourced from the public domain and as such no exclusivity can be claimed. The one-judge panel, while dismissing a request for an interim order, has directed the defendants to maintain the accounts of the SMSs received during the ODIs. Marksman would have to first amend the suit to seek damages before any claim could stand against Rediff.com. In 2006, Marksman sought to amend the suit to include damages. Although we believe we have valid defenses to the charges, if we are unsuccessful in our defense, we could be subject to monetary fines or damages.

We cannot predict the outcome of these lawsuits, nor can we predict the amount of time and expense that may be required to resolve these lawsuits. If these lawsuits become time-consuming and expensive, or if there are unfavorable outcomes against us in these cases, there could be a material adverse effect on our business, financial condition and results of operations. We may be subject to additional lawsuits filed in the future.

We currently hold insurance policies for the benefit of our directors and officers (the “D&O Policy”), which provide coverage against certain claims. However, the amount of coverage may not be sufficient for our needs, or the various exclusions in the D&O Policy could result in denial of coverage. In any such case, we would have to self-fund all or a substantial portion of our indemnification obligations.

Other proceedings

We are also subject to other legal proceedings and claims, which have arisen in the ordinary course of our business and which include some claims from the Indian tax authorities. These proceedings and claims, when ultimately concluded and determined, will likely not, in the opinion of management, have a material effect on our results of operations or financial statements.

We have not recognized any loss accrual for the litigation disputes as the Company believes that it is probable that it would be successful on resolution of the litigation. The maximum total loss relating to these disputes would be approximately US$20,400 excluding any interest and penalties, which amounts cannot be reasonably estimated at this point of time.

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Subsidiaries

Rediff Holdings, Inc. (“Rediff Holdings”) is a wholly owned subsidiary of ours and is incorporated in the State of Delaware. Rediff Holdings holds all of the outstanding voting shares of Rediff.com, Inc. (formerly thinkindia.com) and all of the outstanding voting shares of India Abroad Publications Inc.

Rediff.com, Inc. runs our North America - based Internet website operations, is incorporated in Delaware. India Abroad Publications Inc., which publishes India Abroad, is a New York corporation,. Value Communication Corporation, an Illinois corporation incorporated in 1996, is another subsidiary of ours. In April 2004, we sold its business to Worldquest Networks, Inc. (“WQN”).

Vubites India Private Limited. Vubites is a wholly owned subsidiary of ours and an Indian-incorporated entity that offers affordable local TV advertising in India.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and operating results should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report particularly in the “Risk Factors” section of this annual report.

Overview

We are a leading internet platform for content sharing and e-commerce in India. Our websites and Mobile apps offer a variety of internet-based consumer and enterprise services.

Through our subsidiary company Vubites, we provide a platform for targeting TV advertising. According to ComScore, in March 2015, India had 80 million unique individuals accessing the internet using PCs from home and the office, of which 17.5 million, or 20%, visited Rediff.com.

In addition to our Indian business we operate a subsidiary in the United States, “India Abroad”, which operates both a weekly print newspaper as well as an online website providing news and information services to users in the United States.

We have incurred significant net losses and negative cash flows in the process of creating and establishing a variety of internet-based services and achieving a critical mass since our inception in January 1996. We incurred a net loss of US$13.8 million for the fiscal year ended March 31, 2015, taking into account an impairment charge of US$3.2, and as of the same date we had an accumulated deficit of US$109 million, compare to a net loss of US$7.5 million and an accumulated deficit of US$95.2 million for the fiscal year ended March 31, 2014. As of March 31, 2015, our cash balance was approximately US$8.3 million, and we believe that based on the current cash use rate this cash balance will be sufficient to meet our operating and capital requirements for next five to seven quarters. On July 29, 2015, as described in Note 26, we have entered into an arrangement with an investor in accordance with which the Company, at its option, has the right to obtain financing in exchange for issuance of ADS, subject to certain conditions as described in Note 26. We are focused on expanding the reach of our services and on generating additional revenues, while controlling our expenses, and to achieve profitability in the near future.

Our reportable business segments are:

• India Online business, comprised of revenues from online advertising (which includes display, performance and sponsorship formats) and fee-based services (which includes e-commerce marketplace fees and revenues from subscription-based email services and mobile value added services).

• US Publishing business, comprised of revenues from advertising and subscription for India Abroad print and online properties and online advertising revenue from the Rediff India Abroad website.

Critical accounting policies and the use of estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent liabilities. On an on-going basis, we evaluate our estimates, including but not limited to allowances for doubtful trade accounts receivables, impairment of goodwill, property, plant and equipment, intangible and investments, useful lives of property, plant and equipment and intangible assets, valuation of deferred tax assets, stock based compensation and employee benefits. We base our estimates on historical experience and on assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The following are the critical accounting policies used in the preparation of our consolidated financial statements. Refer to Note 2 to the Consolidated Financial Statements for a more complete discussion of all of the Company’s significant accounting policies.

Revenue Recognition

India Online business

India Online business includes revenues from advertising, sponsorship and fee based services. Advertisement and sponsorship income is derived from customers who advertise on our website or from targeted mailers to Rediffmail subscribers. Fee based services include fee we earn from our e-commerce marketplace, subscription fees for our email services and our share of revenues from mobile value added services.

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Revenue from display advertisement is recognized as impressions of or clicks on display advertisements are delivered or broadcast. Impressions are delivered when a sold advertisement appears in pages viewed by users. Clicks are delivered when a user clicks on the advertisement. Revenues are also derived from sponsor links placed in specific areas of the Company’s website, which generally provide users with direct links to sponsor websites. Revenue from sponsor links is recognized ratably over the period in which the advertisement is displayed, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Company obligations may include guarantees of a minimum number of impressions, or times, that an advertisement appears in pages viewed by users of the Company’s website. To the extent that minimum guaranteed impressions are not met, the Company defers recognition of the corresponding revenues until the guaranteed impression levels are achieved. The Company also earns revenues from the sending of mail shots to its users on behalf of advertisers and such revenues are recognized on delivery. We report our online advertisement revenues on a gross basis principally because we are the primary obligor to our advertisers.

e-commerce marketplace fee, which is comprised of the commissions and shipping revenue is recognized after receipt of confirmation that the online customer has accepted delivery of the goods. The cost of incentives provided to online customers like coupons and promo codes are reduced from revenue and where such incentives exceed the revenue amount, the excess is recognized as cost of revenue.

Subscription service revenue, which is comprised of subscription fees for email and related services provided to small and large enterprises is deferred and recognized pro rata over the terms of such subscription.

Mobile value-added services revenues are derived from providing value added short messaging services (“SMS”), ring tones, picture messages, logos, wallpapers and other related services to mobile phone users. The company contracts with third-party mobile phone operators for sharing revenues from this service. Mobile value- added services revenue is recognized when this service is rendered.

US Publishing business

US Publishing business primarily include advertising and sponsorship revenues and consumer subscription revenues earned from the publication of India Abroad, a weekly newspaper distributed primarily in the United States. It also includes the advertising revenues of Rediff India Abroad, the website catering to the Indian community in the United States.

Advertising revenues are recognized at the time of publication of the related advertisement. Subscription income is deferred and recognized pro rata as fulfilled over the terms of such subscription.

Revenues from banners and sponsorships are recognized over the contractual period of the advertisement, commencing when the advertisement is placed on the website, provided that no significant obligations remain and collection of the resulting receivable is probable. Obligations may include guarantee of a minimum number of impressions, or times that an advertisement appears in pages viewed by users of the Company’s website. To the extent that minimum guaranteed impressions are not met, the Company defers recognition of the corresponding revenues until the guaranteed impression levels are achieved.

Allowances for doubtful accounts receivable and other recoverable

We maintain allowances for doubtful accounts receivable and other recoverable for estimated losses resulting from the inability of our customers to make contractually agreed payments. We establish an allowance for doubtful accounts on trade accounts receivable after considering the financial condition of the customer, ageing of the accounts receivable, historical experience and the current economic environment. Trade account receivable balances are written off against allowances only after all means of collections have been exhausted and potential of recovery is considered remote.

Depreciation and amortization

We depreciate/amortize our assets on a straight-line basis over the useful life of the assets, which range from one to ten years.

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Goodwill

Goodwill is tested for potential impairment on an annual basis, which is performed on January 1 or in interim periods if events and circumstances indicate a potential impairment. As reporting units are determined after an acquisition or evolve with changes in business strategy, goodwill is assigned and it may no longer retain its association with a particular transaction. All revenue streams and related activities of a reporting unit, whether acquired or organic, are available to support the carrying amount of goodwill. The reporting units for impairment assessment have been identified as the US Publishing business. Under the applicable accounting standard, goodwill impairment analysis is a two-step test. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, the second step is performed. The second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated possible impairment. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. The adjustments to measure the assets, liabilities and intangibles at fair value are only for the purpose of measuring the implied fair value of goodwill and these adjustments are not reflected in the consolidated balance sheet. If the implied fair value of goodwill exceeds the goodwill assigned to the reporting unit, there is no impairment. If the goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss recognized cannot exceed the amount of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversals of goodwill impairment losses are not permitted.

Estimating the fair value of reporting units is a subjective process that requires significant estimates and assumptions, particularly related to cash flows and the appropriate discount rates. The fair values of the reporting units were determined using a valuation technique consistent with the income approach. For the purposes of the income approach, internal forecasts were used to estimate the future cash flows (including a terminal value approach to estimate cash flows beyond the final year of the forecast) after considering current economic conditions and trends, estimated future operating results and growth rates. Due to the inherent uncertainty involved in making those estimates, actual results could differ from the estimates. The Company evaluates the merits of each significant assumption, both individually and in aggregate, used to determine the fair value of the reporting unit, as well as the fair values of the corresponding assets and liabilities within the reporting unit, for reasonableness. Cash flows are discounted based on a discount rate which the Company believes adequately reflects the inherent risk in the businesses of the reporting unit, uncertainty in the economic environment and risks associated with the internally developed forecasts.

During the fiscal year 2013, we tested the goodwill of the US Publishing business, which arose from the acquisition of the print newspaper India Abroad in 2001, for impairment. As a result of the goodwill impairment test, we concluded that goodwill was impaired and accordingly we recorded a goodwill impairment charge of US$2.0 million. The impairment was on account of the weakness in the publishing industry which resulted in reduction of the US publishing business projected operating results and estimated future cash flows.

Impairment or disposal of long-lived assets (excluding goodwill)

We evaluate long-lived assets, such as property, plant and equipment and purchased or internally developed intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. When such events occur, we assess the recoverability of the assets group based on the undiscounted future cash flow the assets group is expected to generate and recognize an impairment loss when estimated undiscounted future cash flow expected to result from the use of the assets group plus net proceeds expected from disposition of the assets group, if any, is less than the carrying value of the assets group. If we identify an impairment, we reduce the carrying amount of the assets group to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values. We use estimates and judgments in our impairment tests and if different estimates or judgments had been utilized, the timing or the amount of any impairment charges could be different.

During the fiscal year ended March 31, 2015, we recognized an impairment loss of US$ 3,200,089 on its Property, plant and equipment relating to its India Online business. India Online business includes revenue from advertising and fee based services. The impairment was on account of decline in advertisement revenue as there has been a continued reduction in spends by customers which is consistent with industry trends. As a consequence, we have been experiencing a decline in our display advertisement revenue, and incurring net operating cash losses. The fair value of the India Online business asset group is insignificant.

Intangible Assets

Intangible assets consist of customer contracts and intellectual property carried at cost and amortized over their estimated useful lives, generally on a straight-line basis over three and seven years, respectively, that best reflects the economic benefits of the intangible assets.

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Impairment of Intangible Assets

Intangible assets, such as purchased technology, are generally recorded in connection with a business acquisition. The value assigned to intangible assets is usually based on estimates and judgments regarding expectations for the success and life cycle of the acquired technology. We monitor acquired intangible assets for impairment on a periodic basis by reviewing indicators of impairment. If an indicator exists we compare the fair value to the unamortized cost of the intangible asset. The recoverability of the intangible assets is primarily dependent upon our ability to commercialize the acquired technology, secure new customers and retain existing customers, increase and maintain awareness of the acquired technology and the related service. The fair value of the acquired intangible assets is based on the estimated undiscounted future cash flows derived from such intangible asset. Our assumptions about future revenues and expenses require significant judgment associated with forecast of the performance of the acquired technology and the related service, ability to secure customers and maintain our market position. Actual revenues and costs could vary significantly from these forecasted amounts.

Current Trends and Business Outlook

Our overall revenue for fiscal 2015 was US$15.3 million, a decline of 5% as compared to the previous year. Our revenue from India Online was US$ 13.1 million, a decline of 2% and our revenue from our US Publishing business was US$2.2 million, a decline of 19% as compared to the previous fiscal year.

Within the India Online business, the fee-based business grew strongly at 25% year-over-year led by our e-commerce marketplace fees that grew 35%. This was not enough to overcome a decline of 19% in online advertising revenue. We continue to invest our marketplace technology platform, invest in algorithms to improve customer service and expand the number of merchants on our platform.

The challenges we faced in our India online advertising segment is partly a reflection of the challenge that display advertising is facing worldwide, and in part also a reflection of difficult business conditions in India for advertisers in the consumer finance and consumer durable industries.

There are three different factors that have an influence on advertising revenues in our India Online segment. First, online display advertising (this is advertising where banner ads are shown to users who visit Rediff’s website and where Rediff gets paid for the number of times these banners are displayed to these users), like all forms of advertising is very sensitive to the economic environment particularly as it affects consumer products and services and consumer durables industries. Second, size and growth of online advertising as a category is dependent on the size and growth of the internet user base in India. Finally, the prices that Rediff gets for our display advertising inventory is dependent on Rediff’s pricing power, which in turn is dependent on our share of the internet users in India.

Taking the first factor, economic environment, the Indian government, through its Central Statistical Organization, has recently released figures for 2014 which says that while India’s GDP (at factor cost) grew 4.9% on a year-on- year basis in the first half of 2014 and 4.6% in the second half of 2014, the Manufacturing sector (which contains the consumer industries critical for advertising) grew a mere 0.1% in the first half of 2014 and actually declined 1.5% in the second half. The index of industrial production, also recently released, shows the consumer goods industries declined 18.6% in November 2014, the most recent month of 2014 for which figures are available, on a year-on-year basis.

The second driver of online advertising revenue is the size and growth of the internet user base, and a good proxy for this is the internet penetration rate. India’s internet penetration rate in 2013-14 was estimated to be in the low double digits 11%, compared to 43% for China and 23% for Indonesia according to Mary Meeker of Kleiner Perkins. This low penetration is inhibiting the shift from other media to internet as has been seen in other countries.

The third driver for the Company’s online advertising growth is Company’s share of India’s internet user base. According to ComScore, Rediff’s monthly unique users for the month March 2015 was 17 million compared to 80 million for India which represents a 20% share, a relatively large share, which gives us a reasonable pricing power.

The decline in advertising revenue for India Abroad, a print newspaper, and an iconic voice for the Indian American community is because in the United States the print newspaper industry has been continuously declining since fiscal 2007. Revenue from the US Publishing business has been declining coincident with the overall decline in publishing industry. However, our target audience for the newspaper is niche and the Indian diaspora and hence we believe that with our efforts it is possible to arrest this decline in revenues from the publishing business and make it remain flat in the near future.

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Revenue from fee-based business accounted 32%, 39% and 50% respectively, of India Online business revenues for the fiscal years ended March 31, 2013, 2014, and 2015 respectively. This increasing share is due to both a year over year increase in absolute fee-based revenues, as well as an absolute decline in advertising revenue. Cost of revenue relating to advertising is largely fixed in nature. Whereas cost of revenue relating to fee-based services are significantly variable and directly linked to fee-based revenue. Presently fee-based revenues have a lower gross margin than advertising revenues, which has resulted in a decline in average gross margin for the India Online business segment from 40% in March 31, 2013, to 38% in March 31, 2014, and to 32% in March 31, 2015. The lower gross margin on account of higher variable cost of revenue for the fee-based businesses is because the fee based business are in their early stages of market adoption, and are likely to reach their optimum scale in the next two to three years.

Our subscription based email services for enterprise scored many wins from high quality and discerning customers. This service won the CIO award in its category for the second year in succession.

Vubites, our TV ad targeting platform gained wider acceptance during the year from advertisers, TV networks and Cable Operators.

In order to grow our online user base and attract new advertisers, we expect to continue to invest in new products and product enhancements, expand the content and services on our network and procure more bandwidth and network equipment.

We believe that the growth of our revenues and profits from our India Online business is dependent on the growth of the Indian Internet market and mobile phone user base, the evolution of adequate online payment mechanisms, a consequent increase in advertising and fee-based revenues and our ability to capture a sizeable share of any increases in revenues from such developments. In this context we look forward to the proposed aggressive deployment of 3G and 4G data services by Indian mobile phone operators which is expected in late 2015. We are preparing for this new mobile era by investing in making all our services mobile friendly.

Actual results may differ materially from those suggested by our forward-looking statements due to certain risks or uncertainties associated with our expectations with respect to, but not limited to, the impact on our business of a continued economic slowdown or a downturn in the sectors in which our clients operate, our ability to successfully implement our strategy, acceptance of new products and services, the development of broadband Internet and 3G and 4G networks in India, our ability to successfully integrate the businesses we have acquired, competition, demand for our online and offline service offerings, changes in the Internet marketplace, technological changes, investment income, cash flow and our exposure to market risks. By their nature, certain of our disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains, losses or impacts could materially differ from those that have been estimated. For further discussion of forward-looking statements, see the discussion under the “Forward-Looking Statements” section of this annual report.

Operating Results

Results of our reportable business segments were as follows (amount in US$ million):

	2013						2014						2015
	India Online Business		US Publishing Business		Total		India Online Business		US Publishing Business		Total		India Online Business		US Publishing Business		Total
Revenues from external customers:
Advertising		8.5		2.9		11.4		8.2		2.5		10.7		6.6		2.1		8.7
Fee based services		4.0		0.3		4.3		5.2		0.2		5.4		6.5		0.1		6.6
Total revenues		12.5		3.2		15.7		13.4		2.7		16.1		13.1		2.2		15.3
Cost of revenues		7.5		2.5		10.0		8.3		2.1		10.4		8.9		1.9		10.8
Segment Results		5.0		0.7		5.7		5.1		0.6		5.7		4.2		0.3		4.5

The comparative analysis presented below relates to our operations.

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Fiscal Year Ended March 31, 2015 compared to Fiscal Year Ended March 31, 2014

Revenues

Our overall revenues for the fiscal year ended March 31, 2015 declined by 5% to US$15.3 as compared to US$16.1 million for the previous fiscal year.

India Online business

We recognized US$13.1 million in revenues from our India Online business for the fiscal year ended March 31, 2015, as compared to US$13.4 million for the fiscal year ended March 31, 2014, a decrease of 2%, over the previous fiscal year. This decrease is primarily due to a decline of 19% in India online advertising revenue. Our India Online business is comprised of advertising business and fee-based business. Our advertising revenue is declining because display advertising is facing challenges worldwide and in India advertisers in the consumer finance and consumer durable industries are facing difficult business conditions. Within the India Online business segment the fee-based business grew by 25% year-on-year led by our e-commerce marketplace fees that grew by 35% as compared to previous fiscal year.

During the fiscal year ended March 31, 2015, the Indian rupee depreciated against the US dollar by approximately 1% and hence did not have any significant impact on revenue due to currency translation.

U.S. Publishing business

We recognized US$2.2 million revenues for the U.S. Publishing business for the fiscal year ended March 31, 2015, as compared to US$2.7 million for the fiscal year ended March 31, 2014, representing a decrease of approximately US$0.5 million, or 19%, over the previous fiscal year. In the United States the newspaper industry has been continuously declining since fiscal 2007. Revenue from US Publishing business has been declining coincident with the overall decline in publishing industry. However, our target audience for the newspaper is niche and Indian Diaspora and hence we expect that our revenues from publishing business will continue to remain flat in near future.

Cost of revenues

In the fiscal year ended March 31, 2015 cost of revenues were US$10.8 million as compared to US$10.4 million in the previous fiscal year, an increase of US$0.4 million or by 4%. During the fiscal year ended March 31, 2015, cost of revenue was 71% of the total revenues as compared to 65% of total revenues for the fiscal year ended March 31, 2014.

India Online business

Cost of revenues for the India online business includes Internet communication, data storage and software usage costs, the cost of content for the Rediff websites, the cost of editorial functions (including payroll costs and travel costs of staff in the editorial department), stock-based compensation costs, the direct costs of providing fee-based services such as courier charges, content cost for mobile value-added services, cost of domain registrations and the cost relates to broadcaster.

In the fiscal year ended March 31, 2015 cost of revenues for the India Online business was US $8.9 million (68% of revenue) as compared to US $8.3 million (62% of revenue) for the fiscal year ended March 31, 2014. This represents an increase of US$0.6 million, or 6% over the previous fiscal year. This increase was primarily related to increase in direct costs of providing fee- based services.

Cost of revenue relating to advertising business consists of mostly fixed in nature. Whereas cost of revenue relating to fee-based services are variable in nature and directly linked to fee-based revenue. An increase in fee-based revenue increases the corresponding cost of revenue. As fee-based revenues presently have a lower gross margin than advertising revenues, this has resulted in a decline in average gross margin for the India Online business segment from 38% in March 31, 2014 to 32% in March 31, 2015.

During the fiscal year ended March 31, 2015, the Indian rupee depreciated against the US dollar by approximately 1% and hence did not have any significant impact on cost of revenue due to currency translation.

We anticipate that our cost of revenues in absolute dollar terms for our India Online business will increase during the fiscal year ended March 31, 2016, as compared to the fiscal year ended March 31, 2015, as we expect to incur additional costs to continue to grow our business.

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U.S. Publishing business

Cost of revenues for the U.S. Publishing business includes printing and circulation costs (including payroll costs) for our weekly news paper “India Abroad”.

In the fiscal year ended March 31, 2015 cost of revenues for the U.S. Publishing business was US $1.9 million (88% of revenue) as compared to US $2.1 million (76% of revenue) for the fiscal year ended March 31, 2014. This represents a decrease of US$0.2 million over the previous fiscal year.

Segment results

Analysis of the results presented below is based on the segment results as assessed by the Company’s chief operating decision maker and has been determined as revenues less cost of revenues before operating expenses.

India Online business

Segment profit of the India Online business was US$4.2 million and US$5.1 million for the fiscal year ended March 31, 2015 and 2014. However, fee based revenues grew significantly but this growth was offset by increased cost of revenues and decrease in revenues from online advertising which has higher gross margin.

U.S. Publishing business

Segment profit of the U.S. publishing business was US$0.3 million and US$0.6 million for the fiscal year ended March 31, 2015 and 2014.

Operating expenses

Operating expenses include sales and marketing expenses, product development expenses, depreciation and amortization, general and administrative expenses, long-lived impairment and foreign exchange loss (gain) net.

In the fiscal year ended March 31, 2015, operating expenses were US $19.5 million as compared to US $18.1 million for the fiscal year ended March 31, 2014. This represents an increase of US$1.4 million, or 8% over the previous fiscal year.

During the fiscal year ended March 31, 2015, the Indian rupee depreciated against the US dollar by approximately 1% and hence did not have any significant impact on operating expenses due to currency translation.

Sales and marketing expenses

Sales and marketing expenses primarily include employee compensation for sales and marketing personnel, stock-based compensation cost, advertising and promotion expenses, sales support cost, distribution cost and market research costs. For the fiscal year ended March 31, 2015, sales and marketing expenses were US$5.5 million, compared to US$3.9 million for the fiscal year ended March 31, 2014, representing an increase of US $1.6 million over the previous fiscal year. This increase was mainly on account of marketing spends incurred for the brand building of the Company.

We expect that our sales and marketing expenses in absolute dollar terms will not increase substantially for the fiscal year ended March 31, 2016.

Product development expenses

Product development expenses primarily include software development expenses and compensation for product development personnel including stock-based compensation costs. Third-party technology and development expense, and other related operating costs are also included in product development expenses. For the fiscal year ended March 31, 2014 and 2015, product development expenses were US$2.3 million.

We expect to continue to invest in product development to maintain our position as a leading Internet destination for the global Indian community. Therefore, we expect our product development expenses in absolute dollar terms to increase in the future.

Depreciation and amortization expenses

For the fiscal year ended March 31, 2015, depreciation and amortization expense was US$1.7 million compared to US$3.1million for the fiscal year ended March 31, 2014, representing a decrease of US$1.4 million, or 44%. This decrease was due to a lower base of depreciable assets.

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General and administrative expenses

General and administrative costs primarily consist of compensation for administrative personnel, fees for legal and professional services, allowances for doubtful accounts and promissory notes, insurance premiums, stock-based compensation costs and general administrative costs. For the fiscal year ended March 31, 2015 and 2014, general and administrative expenses were US$6.7 and US$7.2 million, respectively, a decrease of US$0.5 million or 8%, as compared to previous fiscal year 2014.

Long-lived assets impairment

During the fiscal year ended March 31, 2015, we recognized an impairment loss of US$ 3,200,089 on its Property, plant and equipment relating to its India Online business. India Online business includes revenue from advertising and fee based services. The impairment was on account of decline in advertisement revenue as there has been a continued reduction in spends by customers which is consistent with industry trends. As a consequence, we have been experiencing a decline in our display advertisement revenue, and incurring net operating cash losses. The fair value of the India Online business asset group is insignificant.

Other income (expenses), net

Other income (expenses), net, primarily comprised of interest income, interest income on income tax refunds, gain on sale of investments and miscellaneous income. During the fiscal year ended March 31, 2015 and 2014, net other income were US$1.2 million and US$4.7 million, respectively.

Interest income

Interest income for the fiscal year ended March 31, 2015 was US$0.9 million, compared to US$1.3 million for the fiscal year ended March 31, 2014, representing a decrease of US$0.4 million, or 31%. The decrease in interest income was primarily due to utilization of bank deposits held under cash and cash equivalents.

Interest income on Income tax refunds

During the fiscal year ended March 31, 2015 and 2014, we received income tax refunds for prior income tax assessment years along with the interest of US$0.1 million and US$0.6 million, respectively.

Miscellaneous income

During the fiscal year ended March 31, 2015, we received our share of depository service fees (DSF) of US$0.19 million for the fiscal years 2012, 2013 and 2014.

Net income (loss)

As a result of the foregoing, our net loss for the fiscal year ended March 31, 2015 was US$13.8 million, taking into account the long lived assets impairment loss of US$3.2million, as compared to a net loss of US$7.5 million for the fiscal year ended March 31, 2014.

Fiscal Year Ended March 31, 2014 compared to Fiscal Year Ended March 31, 2013

Revenues

Total revenues for the fiscal year ended March 31, 2014 increased by 3% to US$16.1 million from US$15.7 million for the fiscal year ended March 31, 2013.

India Online business

We recognized US$13.4 million in revenues from our India Online business for the fiscal year ended March 31, 2014, as compared to US$12.5 million for the fiscal year ended March 31, 2013,an increase of US$0.9 million, or 7%, over the previous fiscal year. This increase resulted primarily from the growth in our online marketplace business. Our India Online business comprises of advertising business and fee-based business. Fee-based business revenues accounted for approximately 39% of total India Online business revenues. During the fiscal year ended March 31, 2014, fee-based revenue grew by 30% whereas advertising revenue declined by 4%. The advertising business is declining because of slow growth in Indian economic environment, Indian internet user base and our share in Indian internet user base.

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In addition, our reported revenues in fiscal year 2014 were adversely affected by currency translation of Indian Rupee to US dollar. During the fiscal year ended March 31, 2014, the Indian rupee depreciated against the US dollar by approximately 12%. Had the exchange rate between Indian rupees and US dollars remained constant, our India Online revenues in constant currency terms for fiscal 2014 would have been approximately US$14.9 million, rather than our reported revenues of US$13.4 million, or an increase of 19% rather than our reported increase of 7%. 

U.S. Publishing business

We recognized US$2.7 million in revenues for the U.S. Publishing business for the fiscal year ended March 31, 2014, as compared to US$3.2 million for the fiscal year ended March 31, 2013, representing a decrease of approximately US$0.5 million, or 12%, over the previous fiscal year. The decrease in revenues was primarily due to a decrease in print revenues from our weekly newspapers “India Abroad” and “India in New York”. In the United States, the newspaper industry has been continuously declining since fiscal 2007. Our US Publishing business is also declining at a similar pace as the overall decline in publishing industry in the United States.

Cost of revenues

In the fiscal year ended March 31, 2014 and 2013, cost of revenues were US$10.4 million, or 65% of the total revenues for the fiscal year ended March 31, 2014 as compared to 64% of total revenues for the fiscal year ended March 31, 2013.

India Online business

Cost of revenues for the India online business includes Internet communication, data storage and software usage costs, the cost of content for the Rediff websites, the cost of editorial functions (including payroll costs and travel costs of staff in the editorial department), stock-based compensation costs, the direct costs of providing fee-based services such as courier charges, content cost for mobile value-added services, cost of domain registrations and the cost relates to broadcaster..

In the fiscal year ended March 31, 2014 cost of revenues for the India Online business was US $8.3 million (62% of revenue) as compared to US $7.5 million (60% of revenue) for the fiscal year ended March 31, 2013. This represents increase of US$0.8 million, or 12% over the previous fiscal year. This increase was primarily related to increase in direct costs of providing fee- based services and higher costs of buying spots from broadcaster.

Cost of revenue relating to advertising consists of mostly fixed costs in nature. Whereas cost of revenue relating to fee-based services are variable in nature and directly linked to fee-based revenue. An increase in fee-based revenue increases the corresponding cost of revenue. As fee-based revenues presently have a lower gross margin than advertising revenues, this has resulted in a decline in average gross margin for the India Online business segment from 40% in March 31, 2013 to 38% in March 31, 2014.

During the fiscal year ended March 31, 2014, the Indian rupee depreciated against the US dollar by approximately 12%. Had the exchange rate between Indian rupees and US dollars remained constant, our India Online cost of revenues in constant currency terms for fiscal 2014 would have been approximately US$9.2 million, rather than our reported cost of revenue of US$8.3 million, or an increase of 23% rather than our reported increase of 11%.

U.S. Publishing business

Cost of revenues for the U.S. Publishing business includes printing and circulation costs (including payroll costs) for the “India Abroad” and “India in New York” newspapers.

In the fiscal year ended March 31, 2014 cost of revenues for the U.S. Publishing business was US $2.1 million (76% of revenue) as compared to US $2.5 million (78% of revenue) for the fiscal year ended March 31, 2013. This represents a decrease of US$0.4 million, or 16% over the previous fiscal year. U.S. Publishing cost of revenue is largely fixed in nature and this small reduction was on account of saving in paper printing and mailing costs.

Segment results

Analysis of the results presented below is based on the segment results as assessed by the Company’s chief operating decision maker and has been determined as revenues less cost of revenues before operating expenses.

India Online business

Segment profit of the India Online business was US$5.1 million and US$5.0 million for the fiscal year ended March 31, 2014 and 2013. There was increase in the revenues on account of excellent growth in the fee based revenues but this growth was offset by increased cost of revenues.

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U.S. Publishing business

Segment profit of the U.S. publishing business was US$0.6 million and US$0.7 million for the fiscal year ended March 31, 2014 and 2013.

Operating expenses

Operating expenses include sales and marketing expenses, product development expenses, depreciation and amortization, general and administrative expenses, long-lived impairment and foreign exchange loss (gain) net.

In the fiscal year ended March 31, 2014, operating expenses were US $18.1 million as compared to US $19.6 million for the fiscal year ended March 31, 2013. This represents decrease of US$1.5 million, or 8% over the previous fiscal year.

During the fiscal year ended March 31, 2014, the Indian rupee depreciated against the US dollar by approximately 12%. Had the exchange rate between the Indian rupee and the US dollar remained constant, our India Online cost of revenues in constant currency terms for fiscal 2014 would have been approximately US$20.1 million, rather than our reported operating expenses of US$19.6 million, or an increase of 3% rather than our reported decrease of 8%.

Sales and marketing expenses

Sales and marketing expenses primarily include employee compensation for sales and marketing personnel, stock-based compensation cost, advertising and promotion expenses, sales support cost, distribution cost and market research costs. For the fiscal year ended March 31, 2014, sales and marketing expenses were US$3.9 million, compared to US$3.3 million for the fiscal year ended March 31, 2013, representing an increase of US $0.6 million, or 19%, over the previous fiscal year. This increase was mainly on account of marketing spends and higher sales support and distribution costs for online marketplace business.

Product development expenses

Product development expenses primarily include software development expenses and compensation for product development personnel including stock-based compensation costs. Third-party technology and development expense, and other related operating costs are also included in product development. For the fiscal year ended March 31, 2014, product development expenses were US$2.3 million, compared to US$2.9 million for the fiscal year ended March 31, 2013, representing a decrease of US $0.6 million, or 22%, over the previous fiscal year. This decreased was mainly on account of optimizing the technical support cost.

Depreciation and amortization expenses

For the fiscal year ended March 31, 2014, depreciation and amortization expense was US$3.1 million compared to US$3.7 million for the fiscal year ended March 31, 2013, representing a decrease of US$0.6 million, or 16%. This decrease was due to lower capital expenditures in previous reporting years which resulted in a lower base of depreciable assets.

General and administrative expenses

General and administrative costs primarily consist of compensation for administrative personnel, fees for legal and professional services, allowances for doubtful accounts and promissory notes, insurance premium, stock-based compensation cost and general administrative costs. For the fiscal year ended March 31, 2014 and 2013, general and administrative expenses were US$7.2 and US$7.6 million, respectively. There was decrease in expenses by US$0.4 million or 5% as compared to previous fiscal year 2013. During the fiscal year 2014, we saved costs in various expenses like insurance, repairs and maintenance and admin /office related expenses.

Long-lived assets impairment

In fiscal year 2014, we recognized impairment loss of US$1,550,991comprising mainly of intellectual property and computer equipment relating to the Company’s subsidiary Vubites, which enables businesses to advertise locally (targeted advertising in local and specific cities in India) on national television channels. Vubites offers web based tools for small businesses to create low cost advertisement for television broadcast. This business is dependent on effective splicing and sale to local businesses in different cities of broadcasting spots purchased from national television channels. The impairment resulted from similar targeted advertising services now being offered directly by the television channels and on account of aggressive sales and marketing strategy launched by competitors which have provided them with deeper market access. Additionally, in fiscal 2014, the Company abandoned an application related project included in ‘Capital work-in-progress’ and as a result impaired an amount of US$39,380.

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Other income (expenses), net

Other income (expenses), net, primarily comprised of interest income, interest income on income tax refunds, gain on sale of investment /equity method investee, promissory note impairment and miscellaneous income. During the fiscal year ended March 31, 2014 and 2013, net other income were US$4.7 million and US$2.3 million, respectively.

Interest income

Interest income for the fiscal year ended March 31, 2014 was US$1.3 million, compared to US$2.0 million for the fiscal year ended March 31, 2013, representing a decrease of US$0.7 million, or 35%. The decrease in interest income was primarily due to utilization of bank deposits held under cash and cash equivalents.

Interest income on Income tax refunds

During the fiscal year ended March 31, 2014 and 2013, we received income tax refunds for the earlier income tax assessment years along with the interest of US$0.6 million and US$0.04 million, respectively.

Gain on sale of investment

During the fiscal year ended March 31, 2014, the Company sold its investment in Runa Inc. for a total consideration of US$4,145,927 and recognized a gain of US$2,740,940. An amount of US$613,992 of the total consideration has been held in escrow for certain representations and warranties contained in the sale agreement. These representations and warranties have been assessed as accurate and the fair value of any obligation resulting from these representations and warranties is insignificant. Of the total amount held in escrow US$152,457 and US$461,545 was recovered in October, 2014 and recoverable in April, 2015 respectively.

Net loss

As a result of the foregoing, our net loss for the fiscal year ended March 31, 2014 was US$7.5 million, taking into account a one-time gain on a sale of investment of US$2.74 million and long lived assets impairment loss of US$ 1.59 million, as compared to a net loss of US$11.4 million for the fiscal year ended March 31, 2013, a decrease of 35%. The prime reason for this decline was increase in our overall revenues, saving in our overall costs, interest income on income tax refunds and the one-time gain on sale of investment.

Cash Flows

	For the Fiscal Year Ended March 31,
	2013			2014			2015
	US$			US$			US$
Net cash used in from operating activities		(2,540,551	)		(2,832,837	)		(7,339,013	)
Net cash generated by (used in) investing activities		(547,678	)		2,067,248			(1,056,092	)
Net cash provided by financing activities		—			—			—
Net decrease in cash and cash equivalents		(3,088,229	)		(765,589	)		(8,395,105	)
Effect of exchange rate changes on cash		(1,433,127	)		(2,107,705	)		(461,323	)

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Fiscal Year Ended March 31, 2015

Net cash used in operations was US$7.3 million, after adjusting our net loss of US$13.8 million to account for non-cash items and changes in working capital. Non-cash items, comprising depreciation, amortization, allowances for doubtful debts, impairment and stock-based compensation costs, totaled US$5.5 million. Despite the net cash used in operations, our working capital only decreased by US$1.0 million due to efficient management of working capital.

Net cash used in investing activities was US$1.1 million, consisting of purchases of servers and other capital equipment. As of March 31, 2014, we had cash and cash equivalents of US$8.3 million. We believe that based on the current cash use rate this cash balance will be sufficient to meet our operating and capital requirements for the next five to seven quarters. However, we will require additional financing in the future to fund our operations and capital requirements.

On July 29, 2015, the Company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC, an Illinois limited liability company (“Investor”). The Purchase Agreement provides that the Company has the right to sell to the Investor, and the Investor has the obligation to purchase from the Company, up to an aggregate of US$15 Million of the Company’s American Depositary Shares (“ADSs”) over the 36-month term of the Agreement in amount as described in the Purchase Agreement. Upon shareholder approval and upon effectiveness of registration statement covering the resale of ADSs, the Company can elect its discretion to sell ADSs to the investor pursuant to either regular purchase amounts or accelerated purchase amounts. The amounts of ADSs which may be sold to the Investor pursuant to any regular purchase range from 40,000 ADSs to 100,000 ADSs, depending on the then current trading price of the Company’s ADSs on Nasdaq (but not to exceed US$500,000 on any single purchase date). In addition, the Company has the right, but not the obligation, to sell accelerated purchase amounts. The purchase price for any ADSs sold pursuant a regular purchase , will be 98% of the lower of (a) the lowest sale price of the ADSs on Nasdaq on the regular purchase date or (b) the average of the three lowest closing sale prices over the preceding 10 trading-day period. The purchase price for any ADSs sold pursuant to an accelerated purchase, will be 98% of the lower of (a) the closing sale price of the ADSs on Nasdaq on the accelerated purchase date or (b) 94% of a volume weighted average purchase price on the accelerated purchase date. The Company will file an application with the Nasdaq to list the ADSs to be sold to the Investor pursuant to the Purchase Agreement. The Company is required to file a  registration statement covering the resale of the ADSs, so that such ADSs may be sold by the Investor from time to time pursuant to a Registration Rights Agreement entered into between the Company and Investor. Under the Purchase Agreement, the Investor and its affiliates have a beneficial ownership limitation of 4.99% of the then issued and outstanding equity securities of the Company. The issuance of the shares underlying the ADSs must be approved by the Company’s shareholders prior to any purchases under the Purchase Agreement. The Purchase Agreement and Registration Rights Agreement also contain customary representations, warranties, conditions and indemnification provisions. A copy of the Purchase Agreement has been filed with this 20F as Exhibit 4.15.

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Fiscal Year Ended March 31, 2014

Net cash used in operations was US$2.8 million, after adjusting our net loss of US$7.5 million to account for non-cash items and changes in working capital. Non-cash items, comprising the sale of investment, depreciation, amortization, allowances for doubtful debts, impairment and stock-based compensation costs, totaled US$2.7 million. Our working capital decreased by US$2.0 million. The decrease was a result of better cash management process in receivables and payables and recoverable taxes.

Net cash generated by investing activities was US$2.1 million, consisting of purchases of servers and other capital equipment aggregating US$1.4 million in connection with the expansion of our network and data storage facility, fully offset by the sale of investment that generated cash of US$3.5 million.

As of March 31, 2014, we had cash and cash equivalents of US$17.2 million.

Fiscal Year Ended March 31, 2013

Net cash used in operations was US$2.5 million, after adjusting our net loss of US$11.4 million to account for non-cash items and changes in working capital. Non-cash items, comprising the sale of equity investments, depreciation, amortization, allowances for doubtful debts, goodwill and promissory note impairment and stock-based compensation costs, totaled US$6.1 million. Our working capital decreased by US$2.8 million. The decrease was a result of better cash management process in receivables and payables.

Net cash used in investing activities was US$0.5 million, consisting of purchases of servers and other capital equipment aggregating US$1.9 million in connection with the expansion of our network and data storage facility, partially offset by the sale of an equity investment that generated cash of US$1.4 million.

As of March 31, 2013, we had cash and cash equivalents of US$20.0 million.

Contractual Obligations

Our contractual obligations relate to operating leases and capital commitments, payments for which are to be made as per the table below:

			Capital
	Operating leases		commitments
Year ended March 31,	US$		US$
2016		492,935		424,517
2017		293,624		—
2018		237,989		—
2019		40,753		—
Total		1,065,301		424,517

Capital Expenditures

Our principal capital expenditures are for purchase of computer equipment, such as servers for our websites. In the fiscal years ended 2015, 2014 and 2013, we had capital expenditures of US$1.4 million, US$1.5 million and US$2.1 million, respectively.

Internal and external costs incurred to develop internal use software during an application development stage is capitalized when the Company’s managing director has authorized and committed to funding the development, and it is probable that the software development will be complete and the software will perform the function intended. Upgrades and enhancements are capitalized only when these relate to additional features or result in additional functionality that the existing software is incapable of performing. All costs incurred during the preliminary project, post-implementation and operation stages are expensed as incurred.

Dividends

We have not declared or paid any cash dividends on our equity shares since our inception and we do not expect to pay any cash dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business. For additional information, please see the sections of this annual report entitled “Risk Factors — Risks Related to our Business” and “Taxation”.

We believe our cash balances and liquid assets and cash generated from future operations will be adequate to satisfy anticipated working capital requirements, capital expenditures and investment commitments for the next twelve months. As business and market conditions permit, we may from time to time, invest in or acquire complementary businesses, products or technologies. These activities may require us to seek additional equity or debt financing to fund such activities, which could result in ownership dilution to existing shareholders, including holders of our ADSs. We believe that our working capital is sufficient for our present requirements.

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Income Tax Matters

The reconciliation of estimated income tax expense at Indian statutory income tax rate to income tax expense reported in our statement of comprehensive loss is as follows:

	2013			2014			2015
	US$			US$			US$
Loss before income taxes and equity in net loss (earning) of equity method investee		(11,549,781	)		(7,624,180	)		(13,797,779	)
Indian statutory income tax rate		32.445	%		33.990	%		34.608	%
Expected income tax expense (benefit)		(3,747,327	)		(2.591,459	)		(4,775,135	)
Tax effect of:–
Adjustments to reconcile expected income tax expense to reported income tax expense:
Employee stock-based compensation		245,313			163,683			147,674
Valuation allowance recognized during the year		3,060,830			1,998,669			4,875,019
Goodwill impairment		648,900			—			—
Tax in foreign jurisdictions		(142,710	)		262,459			(247,558	)
Earnings (loss) of equity method investees		27,354			—			—
Others		(125,608	)		13,874			14,791
Income tax expense (benefit)		(33,248	)		(152,774	)		14,791

The reconciliation of income tax expenses are as follows:

Income tax expense/(benefit) for the year ended March 31, 2015 of US $ 14,791. The reasons for major reconciliation items are i) Change in Valuation allowance recognized during fiscal year ended March 31, 2015 amounting to $ 4,875,019 on account of recurring loss. ii) Effect of different overseas tax rate of US $ 247,558 for the year ended March 31, 2015. iii) Effect of Non-deductible expense of Employee stock option of US $ 147,674 for the fiscal year ended March 31, 2015.

Rediff India’s (including Vubites) net operating loss carry forwards aggregating approximately US$16,942,394 as of March 31, 2015 will expire between April 2015 and March 2021.

As of March 31, 2015, ValuCom has net operating loss carry forwards available to offset future federal taxable income of US$3,033,000, which expire in years 2020 through 2035.

As of March 31, 2015, Rediff Holdings, Inc. has net operating loss carry forwards of approximately US$6,229,000 for federal income tax purposes, which expire in years 2020 through 2035.

Rediff’s unabsorbed depreciation of US$18,642,739 can be indefinitely carried forward.

Market Risks

Foreign Currency Exchange Rate Risk

The functional currency for our Indian operations is the Indian Rupee. We are exposed to foreign currency exchange rate fluctuations, principally the fluctuations of the U.S. dollar to Indian Rupee exchange rate. We face foreign currency exchange risk with respect to funds held in foreign currencies and in particular will have foreign exchange losses with respect to these funds, if there is an appreciation in the value of the Indian Rupee compared to such foreign currency. We also face foreign currency exchange risk from accounts payable to overseas vendors, which we partially mitigate with receivables in foreign currency from overseas customers and balances in foreign currency with overseas banks.

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The following table sets forth information about our net foreign currency exchange (U.S. dollars) exposure as of March 31, 2015:

	As of March 31, 2015 (in US$ thousands)
Accounts payable in U.S. dollars (include intercompany payable of US$950,661)		(1,183	)
Accounts receivable in U.S. dollars, net of allowance (include intercompany receivable of US$123,286)		501
Cash balances held in U.S. dollars		24
Net foreign currency exchange exposure		(658	)

We are not currently trying to reduce our exposure to foreign currency exchange rate fluctuations by using hedging transactions. However, we may choose to do so in the future. We may not be able to do this successfully. Accordingly, we may experience economic losses and negative impacts on earnings and equity as a result of foreign currency exchange rate fluctuations. If the Indian Rupee appreciates against the U.S. dollar by one Rupee, the net foreign currency exchange loss as of March 31, 2016 would be approximately US$11,000.

Interest Rate Risk

We hold interest-bearing accounts in India and fluctuations in interest rates affected our interest earnings for the fiscal year ended March 31, 2015. These interest rates are linked to the interest rates prevailing in India. We expect that our interest earnings will continue to be affected in the future by fluctuations in interest rates. A hypothetical 1% increase or decrease in the prevailing interest rates applicable to cash deposits during such period would have affected our interest income by approximately US$84,000.

Off-balance Sheet Arrangements

As of the date of this annual report, we are not a party to any off-balance sheet obligations or arrangements.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with early application not permitted. We are currently evaluating the effects, if any, that the adoption of this guidance will have on the Company’s financial position, results of operations and cash flows."

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern. The amendments in this ASU provides guidance about managements responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as going concern and to provide related disclosures. In accordance with this guidance, in connection with preparing financial statements, and entity’s management should evaluate whether there are conditions or events considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810) - Amendments to the Consolidation Analysis”, which provides guidance for reporting entities that are required to evaluate whether they should consolidate certain legal entities. In accordance with ASU 2015-02, all legal entities are subject to reevaluation under the revised consolidation model. ASU 2015-02 is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2015-02 on our consolidated financial statements.

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MANAGEMENT

The following table sets forth, as of June 30, 2015, the name, age and position of each of our directors and executive officers.

Name	Age	Position
Ajit Balakrishnan(1)(2)	67	Chairman and Managing Director
Swasti Bhowmick	49	Chief Financial Officer
Diwan Arun Nanda(1)(2)	71	Director
Sunil N. Phatarphekar(1)(2)(3)	51	Director
Ashok Narasimhan(1)	67	Director
Sridar Iyengar(1)(3)	68	Director
M. Madhavan Nambiar(1) (3)	64	Director

(1) Member of the Board of Directors

(2) Member of the Compensation Committee

(3) Member of the Audit Committee

Ajit Balakrishnan is the founder, Chairman and Managing Director of the Company. He is a director of Rediffusion Holdings Private Limited, Rediffusion Dentsu Young & Rubicam Private Limited, Quintrol Technologies Private Limited, Rediff Holdings Inc USA, India Abroad Publications, Inc., India In New York, Inc., India Abroad Publications (Canada) Inc., Rediff.com Inc USA and Value Communications Corporation. Mr. Balakrishnan is also Chairman of the Board of Governors of The Indian Institute of Management Calcutta and Chairman of the Working Group of Internet Governance set up by the Government of India. Mr. Balakrishnan holds a Bachelor’s Degree in Physics from Kerala University and a Post Graduate Diploma in Management from the Indian Institute of Management, Calcutta. At our annual general meeting held on September 30, 2013, our shareholders re-appointed Mr. Balakrishnan for a five-year term as Managing Director with effect from August 22, 2013.

Swasti Bhowmick joined us in February 2012 as our Chief Financial Officer. He joined us from Tata TeleServices Ltd., where he helped create the Finance Transformation Roadmap. He has over 20 years of experience in Sales Accounting, Cost Management, MIS, Budgeting, Credit Control and Operations Finance in IT/Telecom, including managing startups and established FMCG brands. Swasti is a member of The Institute of Chartered Accountants of India and a member of The Institute of Cost Accountants of India. He also holds an Executive MBA from the Indian Institute of Management, Calcutta.

Diwan  Arun Nanda has been a director of the Company since its incorporation in 1996. Mr. Nanda is also a director of Rediffusion Holdings Private Limited, Arion Horse Company Private Limited, Rediffusion Dentsu, Young & Rubicam Private Ltd., Wunderman India Private Limited, Rediffusion Dentsu, Young & Rubicam Pvt. Ltd. Sri Lanka, Everest Brand Solutions Pvt. Ltd., Clariant Chemicals (India) Limited, Yes Bank. and Oriental Hotels Ltd. Mr. Nanda holds a Bachelor’s Degree in Commerce from Loyola College, Chennai University, and a Post Graduate Diploma in Management from the Indian Institute of Management, Ahmedabad.

Sunil N. Phatarphekar is an Attorney and has been a director of the Company since 1998. Mr. Phatarphekar is also a director of several other Indian companies. Mr. Phatarphekar is proprietor of SNP Legal (Advocates), a Mumbai law firm. Prior to that, he was a partner of Doijode, Phatarphekar & Associates. After obtaining his Bachelor’s Degree in Commerce from Jai Hind College, Bombay University, and a Bachelor’s Degree in Law from Government Law College, Bombay University, he joined Crawford Bayley & Company. Thereafter, he was a partner at two Mumbai law firms, Mahimtura & Co. and Shah Desai Doijode & Phatarphekar.

Ashok Narasimhan has been a director of the Company since 2002. He is a limited partner and advisor for a number of U.S. and Indian venture capital funds. He is also a director on the board of Tarang Software Technologies Pvt. Limited, Genie Technologies India Pvt. Limited, Atma Investments and Resources Pvt. Limited. Earlier, he was Chairman and Co-Founder of July Systems Inc and prior to that, he was founder of Prio, Inc., where he served as Chairman and CEO from early 1996 until its merger with InfoSpace. He subsequently served on the Board of InfoSpace. Prior to that, he served as Head of Worldwide Marketing and Business Development of VeriFone, a leader in automated electronic payment transactions. Earlier, he was the founding President of Wipro’s IT organizations. He holds a Bachelor’s Degree in Physics from Madras University and a Post-Graduate Diploma in Management from the Indian Institute of Management, Calcutta.

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Sridar A. Iyengar has been a director of the Company since September 2004. He is co-founder of ‘The Sounding Board’ and serves on the Board of various companies, and other companies. He advises many early-stage companies in the United States and India. From 1968 until his retirement in March 2002, he was employed by KPMG, retiring as the Partner-in-Charge of KPMG’s Emerging Business Practice. He worked as a partner in all three of KPMG’s regions - Europe, America and Asia Pacific - as well as in all four of KPMG’s functional disciplines - assurance, tax, consulting and financial advisory services. He was Chairman and CEO of KPMG’s India operations between 1997 and 2000 and during that period was a member of the Executive Board of KPMG’s Asia Pacific practice. Prior to that, he headed up the International Services practice on the west coast of the United States. On his return from India in 2000 he was asked to lead a major effort of KPMG’s focused on delivering audit and advisory services to early stage companies. He also served as a member of the Audit Strategy group of KPMG LLP. He is a Fellow of the Institute of Chartered Accountants in England and Wales, and holds a Bachelor’s Degree in Commerce (Honors) from the University of Calcutta.

M. Madhavan Nambiar has spent over 36 years in the Indian Administrative Service with many years focused on Information Technology. Mr. Nambiar most recently served as Secretary to the Government of India, first in the Ministry of Information Technology and then in the Ministry of Civil Aviation. Mr. Nambiar is a Fellow at the Judge Business School, University of Cambridge. He serves on the Board of various companies such as Hotel Leelaaventure Ltd., Loyal Textile Mills Ltd, Catholic Syrian Bank Ltd etc. He holds a Bachelor of Arts Degree from Loyola College, Madras University and a Master of Business Administration Degree from the Faculty of Management Studies, Delhi University. He has been recently appointed as Chairman, Indian Institute of Technology and Management, Trivandrum.

Board Composition

On March 16, 2000, we amended our Articles of Association to set the minimum number of directors at three and the maximum number of directors at seven. We currently have seven directors. Our Articles of Association provide as follows:

• Ajit Balakrishnan, Diwan Arun Nanda and Rediffusion Holdings Private Limited (earlier called Rediffusion Advertising Private Limited), are entitled to appoint and have appointed Mr. Balakrishnan as Director on the Board and Chairman of Rediff.com India Ltd. so long as they hold, singly or jointly, not less than 10% of the issued, subscribed and paid up capital of Rediff.com India Ltd. Mr. Balakrishnan serves an indefinite term and is not required to retire by rotation.

• The remaining directors on the Board of Directors are non-permanent directors who are appointed by shareholders and retire by rotation. Ashok Narasimhan and Rashesh Shah retired by rotation and were re-elected by the shareholders at our last annual general meeting held on September 29, 2014. Diwan Arun Nanda and Madhavan Nambiar will retire by rotation at our next Annual General Meeting of shareholders, which is scheduled to be held on or before September 30, 2015.

As of the date of this annual report, our Board has determined that the following members qualify as independent directors: Sunil N. Phatarphekar; Sridar A. Iyengar; Ashok Narsimhan and M. Madhavan Nambiar.

No directors have service contracts with us providing for benefits upon termination of their service as a director.

Code of Ethics

Effective February 15, 2004, we adopted a code of ethics for all of our employees and for all of our directors and senior officers in accordance with the provisions of the Sarbanes-Oxley Act of 2002. On July 19, 2005, we adopted amendments to the code of ethics for our officers. On August 19, 2005, we adopted amendments to the code of ethics for our directors.

We will provide a copy of the codes of ethics for our directors, officers and employees to any person without charge, upon a written request sent to our principal executive office.

Audit Committee

The Audit Committee of the Board of Directors reviews, acts on and reports to the Board of Directors with respect to various auditing and accounting matters, including the recommendation of our independent auditors, the scope of the annual audits, fees to be paid to the independent auditors, the performance of our independent auditors and our accounting practices.

As of the date of this annual report, our Audit Committee is comprised of the following members, all of whom are independent directors, as determined by the NASDAQ listing standards applicable to us: Sridar A. Iyengar, Sunil N. Phatarphekar and M. Madhavan Nambiar.

Audit Committee Financial Expert

Mr. Sridar A. Iyengar has been designated the independent audit committee financial expert as defined under the applicable rules of the SEC issued pursuant to Section 407 of the Sarbanes Oxley Act of 2002. Prior to his appointment as a member of our Board of Directors, Mr. Iyengar was a partner at KPMG, retiring in March 2002 as Partner-in-Charge of KPMG’s Emerging Business Practice.

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Compensation Committee

The Compensation Committee of the Board of Directors administers our stock option plans. The members of the Compensation Committee are Ajit Balakrishnan, Diwan Arun Nanda and Sunil N. Phatarphekar.

NASDAQ Corporate Governance Requirements

In general, corporate governance principles for Indian companies whose shares are not traded on any Indian stock exchange are set forth in India’s Companies Act. Corporate governance principles under provisions of Indian law may differ in significant ways from corporate governance standards for U.S. NASDAQ-listed companies. The corporate governance standards for U.S. NASDAQ-listed companies are included in the “5000” series of the NASDAQ Stock Market Rules, known as the NASDAQ Listing Rules and referred to herein as the “Rules”. Under Rule 5615(a)(3), foreign private issuers such as ourselves are permitted to follow certain home country corporate governance practices in lieu of certain of the requirements of the Rules. Under the Rules, foreign private issuers must disclose any alternative home country practices that they follow.

The following are the requirements of the Rules we do not follow and the home country practices we follow in lieu of these Rule requirements. Our independent Indian counsel has submitted to the NASDAQ a letter, dated June 27, 2005, certifying that our corporate governance practices as described below are not prohibited by and are consistent with Indian law.

(i) Rule 5250(d)(2) and Rule 5250 (d)(3) - Distribution of quarterly and interim reports

In lieu of the requirements of Rule 5250(d)(2) and Rule 5250(d)(3), we follow Indian law, under which companies whose shares are not traded on any Indian stock exchange are not required to prepare and/or distribute quarterly and interim reports to shareholders. However, we have in the past regularly released copies of press releases and conference call transcripts relating to our quarterly results of operations by posting them on our website. Further, we furnish press releases relating to our quarterly results of operations with the SEC on Form 6-K and we currently intend to continue to do so.

(ii) Rule 5605(b)(1) - Independent Directors

In lieu of the requirements of Rule 5605(b)(1), we follow the Companies Act, which does not require that a majority of the Board of Directors of Indian companies be comprised of independent directors. Nevertheless, as of the date of this annual report, our Board has determined that four out of its seven members are independent.

(iii) Rule5605(b)(2) - Executive sessions of Independent Directors

In lieu of the requirements of Rule 5605(b)(2), we follow the Companies Act, which does not require independent directors to hold regularly scheduled meetings at which only such independent directors are present (i.e., executive sessions). Under the Companies Act, our Board of Directors as a whole is responsible for monitoring our business, although it is permitted to delegate specific responsibilities to designated directors or to non-director executive officers.

(iv) Rule 5605(d) - Compensation of Officers

In lieu of the requirements of Rule 5605(d), we follow Indian law, which requires companies to form a Compensation Committee in case of remuneration payable to specified managerial personnel by companies having no profits or inadequate profits. In such a case, a “Remuneration Committee” is required to be constituted for approving the payment of remuneration to certain specified “managerial personnel” as defined in the Companies Act. Such Remuneration Committee, if constituted for this purpose, should consist of at least three non-executive independent directors including nominee directors, if any. For purposes of the Companies Act “managerial personnel” include the company’s managing director, whole time director and manager, each as defined under the Companies Act.

We do not pay and currently do not intend to pay any remuneration to any of our managerial personnel as defined in the Companies Act. As such, we are not required to constitute a Remuneration Committee under the Companies Act. However our Board of Directors has formed a compensation committee, which currently comprises of three directors including one independent director, for the sole purpose of administering our stock option plans and other compensation plans as may be approved by our shareholders from time to time.

Four of our directors, Mr. Ajit Balakrishnan, Mr. Sridar Iyengar, Mr. Sunil Phatarphekar and M. Madhavan Nambiar, receive remuneration from our wholly-owned US subsidiary Rediff Holdings, Inc., in their capacity as directors of that subsidiary. There is no restriction under Indian law on paying remuneration to directors of an Indian company having no profits or inadequate profits who are, at the same time, also directors of a non-Indian subsidiary.

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(v) Rule 5605(e) - Nomination of Directors

In lieu of the requirements of Rule 5605(e), we follow the requirements of the Companies Act pursuant to which directors are required to be appointed by shareholders at their general meeting. In addition, under the Companies Act, our board can make appointments, subject to any regulations in a company’s articles of association, to fill any casual vacancies caused if the office of a director is vacated before his term of office has expired. Any person so appointed shall hold office only up to the date up to which the director in whose place he is appointed would have held office. Our board also has the power to appoint additional directors who shall hold office only up to the date of our next annual general meeting of the company. The Companies Act also allows our board to appoint an alternate director to act for a director during his absence for a period of not less than three months from the state in which the board meetings are ordinarily held. Finally, our Articles of Association states that Ajit Balakrishnan, Diwan Arun Nanda and Rediffusion Holdings Private Limited (earlier called Rediffusion Advertising Private Limited), are entitled to appoint and have appointed Mr. Balakrishnan as Director on the Board and Chairman of Rediff.com India Ltd. so long as they hold, singly or jointly, not less than 10% of the issued, subscribed and paid up capital of Rediff.com India Ltd. Mr. Balakrishnan serves an indefinite term and is not required to retire by rotation.

(vi) Rule 5620(c) - Quorum

In lieu of the requirements of Rule 5620(c), we follow the Companies Act, under which a quorum for purposes of a meeting of the holders of our common stock is considered present as long as five of our members are present in person.

(vii) Rule 5620(b) - Solicitation of Proxies

As a foreign private issuer, we are not subject to Regulations 14A and 14C under the Securities and Exchange Act of 1934, as amended. As such, in lieu of the requirements of Rule 5620(b), we follow the requirements of the Companies Act. Section 105 of the Companies Act, 2013 prohibits a company incorporated there-under, such as us, from soliciting proxies. Because we are prohibited from soliciting proxies under Indian law, we will not meet the proxy solicitation requirement of Rule 5620(b). However, in accordance with Indian law, we give written notices of all our shareholder meetings (containing a statement that a shareholder is entitled to appoint a proxy, or, where that is allowed, one or more proxies, to attend and vote instead of himself, and that a proxy need not be a member) to all our shareholders and we also furnish such notices with the SEC under Form 6-K.

Other than as noted above, we intend to comply with all other applicable NASDAQ corporate governance standards.

Employees

As of March 31, 2015, we had 338 employees and full-time consultants. Of such employees, 129 are in our shopping, sales and marketing teams, 78 are creative and editorial, 98 are dedicated to technology and product development, 3 are dedicated to production and circulation and 30 are administrative. We believe that our relationship with our employees is good. The table sets forth the distribution of our employees by main category of activity:

	As at March 31,
Department	2013		2014		2015
Technology and Product Development		122		107		98
Sales and Marketing		144		127		129
Editorial		79		78		70
General & Administration		32		31		30
Creative		13		14		8
Production & Circulation		7		7		3
Total		397		364		338

Compensation

Our Articles of Association provide that each of our directors may receive an attendance fee for every Board and Committee meeting, provided that no director shall be entitled to an attendance fee in excess of Rs.2,000 per meeting. During the fiscal year ended March 31, 2015, we did not pay any attendance fees to our directors. Mr. Ajit Balakrishnan, who is our Managing Director, does not receive any additional compensation for his service on our Board of Directors. Directors of our US subsidiaries receive compensation for their service on the boards of these subsidiaries. 

The following table sets forth details regarding compensation paid to executive officers and directors of the Company during the fiscal year ended March 31, 2015.

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Name	Salary and other compensation (US$)
Ajit Balakrishnan		200,000	(1)
Swasti Bhowmick		136,209	(2)
Sridar A. Iyengar		25,000	(1)
Sunil Phatarphekar		20,000	(1)
M. Madhavan Nambiar		20,000	(1)

(1) Each of Mr. Balakrishnan, Mr. Iyengar Mr. Phatarphekar and Mr Nambiar receive a salary and/or other compensation from Rediff Holdings, Inc., our wholly-owned U.S.-incorporated subsidiary, in their capacity as directors of Rediff Holdings, Inc. None of them receive any salary from Rediff.com India Limited. During the fiscal year ended March 31, 2012, Sridar Iyengar was granted 9,000 options (equivalent to 9,000 shares) under Employee Stock option Plan 2006 at exercise price of US$21.25.

(2) Swasti Bhowmick was granted 10,000 options (equivalent to 5,000 equity shares) under ADR linked Employee Stock option Plan 2006 at exercise price of $6.34 in the fiscal year ended March 31, 2012. The Plan will expire in February 2022.

Employee Benefit Plans

2002 Stock Option Plan

In January 2002, our Board of Directors approved the 2002 Stock Option Plan (“2002 plan”) which provides for the grant of incentive stock options and non-statutory stock options to our employees. All options under these plans are exercisable for our ADSs. Necessary approvals from the regulators in India have been obtained. During the fiscal year ended March 31, 2004, we made appropriate filings with the SEC prior to the first exercise date of the options granted under the 2002 plan. Unless terminated sooner, this plan will terminate automatically in January 2012. A total of 280,000 of our Equity Shares were reserved for issuance under the 2002 plan of which 12,000 equity shares were reserved under 2015 Stock Option Plan.

During the fiscal year ended March 31, 2015, 7,000 options equivalent to 3,500 equity shares lapsed at a weighted average price of $11.37 per share.

Unless otherwise determined by the Board of Directors, the warrants granted under the 2002 plan vest at a rate of 25% on each successive anniversary of the grant date, until fully vested. The options granted under the 2002 ADR plan vest at the rates set forth in every award.

2004 Stock Option Plan

In June 2004, our Board of Directors approved the 2004 Stock Option Plan (“2004 plan”), which provides for the grant of stock options to our employees. All options under the 2004 plan are exercisable for our ADSs. Unless terminated sooner, the 2004 plan will terminate automatically in January 2014. A total of 358,000 Equity Shares are currently reserved for issuance pursuant to the 2004 plan of which 91,000 equity shares were reserved under 2015 Stock Option Plan.

During the fiscal year ended March 31, 2015, 45,500 options equivalent to 22,750 equity shares were granted at the price of US$3.74 per share. During the same fiscal year, 110,224 and 3,000 options equivalent to 55,112 and 1,500 equity shares at a weighted average exercise price of US$10.97 and US$3.74 per share lapsed and forfeited due to resignation of the employees.

Under the terms of the 2004 plan, our Board of Directors or a committee or a sub-committee of the board will determine and authorize the grant of options to eligible employees. These options will vest at the rates set forth in each award. Each option grant carries with it the right to purchase a specified number of our ADSs at the exercise price during the exercise period, which expires ten years from the date of grant. The exercise price is determined by our Board of Directors (or a committee or a sub-committee of the board) and shall be no more than 110% of the fair market value and no less than 50% of the fair market value of our ADSs on the date of the grant.

We have obtained the approvals for the implementation of the 2004 plan. We also made the necessary filings with the SEC prior to the first exercise date of the options granted under the 2004 plan.

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2006 Employee Stock Option Plan

Our 2006 Employee Stock Option Plan (the “ESOP 2006”) allows for the grant to our employees of options to purchase our Equity Shares. Each option granted gives the employee the right to purchase a specified number of our Equity Shares under the ESOP 2006. The ESOP 2006 was adopted and approved by our Compensation Committee on June 20, 2006 in accordance with the approval granted by our shareholders on March 31, 2006. A total of 150,000 Equity Shares were approved for issuance under the ESOP 2006.

During the fiscal year ended March 31, 2015, 1,250 options equivalent to 1,250 equity shares at a weighted average exercise price of US$0.16 per share were forfeited due to resignation of the employees.

Equity Shares acquired upon the exercise of options granted pursuant to the terms of the ESOP 2006 are not subject to any lock-ups. In the case of termination or resignation of the employee, the employee shall have the right to exercise only the options vested up to the time of termination or resignation, and the unvested warrants options shall lapse. In the case of the death of an employee, all options granted to him or her shall vest in full on his or her legal heirs. The period during which vested options may be exercised expires ten years after the date of grant.

2006 ADR Linked Employee Stock Option Plan

Our 2006 ADR Linked Employee Stock Option Plan (the “ADR Linked ESOP 2006”) allows for the grant to our employees of options to purchase our ADRs representing Equity Shares of the Company. Each option granted gives the employee the right to purchase a specified number of our ADRs under the ADR Linked ESOP 2006. The ADR Linked ESOP 2006 was adopted and approved by our Compensation Committee on October 3, 2006 in accordance with the approval granted by our shareholders on March 31, 2006. A total of 520,000 Equity Shares (equivalent to 1,040,000 ADRs) were approved for issuance under the ADR Linked ESOP 2006.

ADRs acquired upon the exercise of options granted pursuant to the terms of the ADR Linked ESOP 2006 are not subject to any lock-ups. In the case of termination or resignation of the employee, the employee shall have the right to exercise only the options vested up to the time of termination or resignation, and the unvested options shall lapse. In the case of the death of an employee, all options granted to him or her shall vest in full on his or her legal heirs. The period during which vested options may be exercised expires ten years after the date of grant. 

2015 Stock Option Plan

The compensation committee authorized the 2015 stock option plan in their meeting held on January 27, 2015. Under the plan 103,000 equity shares (comprising of 12,000 equity shares from 2002 Stock Option Plan and 91,000 equity shares from 2004 Stock Option Plan) were reserved. Unless terminated sooner, any grant under this plan will terminate automatically after expiry of 10 years from the date of grant.

During the year ended March 31, 2015, 73,600 options equivalent to 36,800 equity shares were granted at the exercise price of US$3.74.

Under the terms of the 2015 plan, the board or a committee or a sub-committee of the board will determine and authorize the grant of options to eligible employees. Such options vest at the rate of 25% on each successive anniversary of the grant date, until fully vested. Each option grant carries with it the right to purchase one ADS at the exercise price during the exercise period, which expires ten years from the date of grant.

Retirement Plans

Gratuity

The Company provides for gratuity on an actuarial valuation. The Company has an unfunded defined benefit retirement plan covering eligible employees in India. This plan provides for a lump-sum payment to be made to vested employees at retirement, death or termination of employment of an amount equivalent to 15 days basic salary, payable for each completed year of service. These gratuity benefits vest upon an employee’s completion of five years of service.

The following tables set out the amounts recognized in the Company’s consolidated financial statements for the fiscal years ended March 31, 2013, 2014 and 2015. The measurement date used is March 31 of the relevant fiscal year.

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	2013			2014			2015
	US$			US$			US$
Change in benefit obligation
Benefit obligation at the beginning of the year		446,146			527,512			511,506
Actuarial (gain) loss		14,941			(60,402	)		27,963
Service cost		75,039			75,405			69,402
Interest cost		44,025			46,086			52,790
Benefits paid		(26,382	)		(27,314	)		(70,427	)
Effect of exchange rate changes		(26,257	)		(49,781	)		(22,184	)
Benefit obligation at the end of the year		527,512			511,506			569,050

Accumulated benefit obligation was US$292,701 and US$319,026 as of March 31, 2014 and 2015 respectively.

Net gratuity cost for the years ended March 31, 2013, 2014 and 2015 comprise of the following:

	2013		2014			2015
	US$		US$			US$
Service cost		75,039		75,405			69,402
Interest cost		44,025		46,086			52,790
Recognized net actuarial (gain) loss		14,941		(60,402	)		27,963
Net gratuity cost		134,005		61,089			150,155

The assumptions used in accounting for gratuity in the years ended March 31, 2013, 2014 and 2015 were as follows:

	2013			2014			2015
Discount rate		8.75	%		9.60	%		8.45	%
Rate of increase in compensation		7.00	%		7.00	%		7.00	%

The following benefit payments, which reflect expected future services, are expected to be paid:

Year ending March 31,	US$
2016		37,961
2017		123,838
2018		45,854
2019		62,965
2020		57,837
2021-2025		493,338

The expected benefits are based on the same assumptions used to measure the company’s benefit obligation as of March 31, 2015.

Provident Fund

Employees based in India and the Company each, contribute at the rate of 12% of salaries to a provident fund maintained by the Government of India for the benefit of such employees. The provident fund is a defined contribution plan. Accordingly, the Company expenses such contributions as incurred. Amounts contributed by the Company to the provident fund, in aggregate, were US$259,684, US$228,075 and US$231,528 for the years ended March 31, 2013, 2014 and 2015 respectively.

Compensated Absences

The Company provided US$161,779, US$155,598 and US$114,634 for the years ended March 31, 2013, 2014 and 2015, respectively, as the compensated absences liability for the amounts to be paid as a result of employee’s rights to compensated absences, considering anticipated forfeiture, in the year in which earned.

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RELATED PARTY TRANSACTIONS

Six of our largest shareholders beneficially hold an aggregate of approximately 63% of our Equity Share capital. As a result, such shareholders, if they were to act collectively, could exercise control or significantly influence most matters requiring shareholder approval, including significant corporate transactions.

Product Development Expenses

During the fiscal years ended March 31, 2013, we incurred product development expenses (including amounts capitalized) of US$95,395 on account of services rendered by Tachyon Technologies Private Ltd, an equity method investee.

Trade account receivable write off

During the year ended March 31, 2013, we wrote off US$206,974 trade account receivables from Edelweiss Capital Service Ltd. in which a director of Rediff is shareholder and director, against the recorded allowance. The allowance for trade account receivables were made in fiscal year ended March 31, 2012. 

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EXCHANGE CONTROLS

Foreign investments in India are governed by the provisions of the Foreign Exchange Management Act 1999 (“FEMA”) and are subject to the regulations issued by the Reserve Bank of India ("RBI") from time to time. The Foreign Direct Investment Scheme under the Reserve Bank’s Automatic Route enables Indian companies, other than those specifically excluded, to issue shares to persons residing outside India without prior permission from the RBI, subject to certain conditions. Subject to certain exceptions and compliance with pricing and reporting requirements prescribed by the RBI, general permission has been granted for: (i) for transfers of shares or convertible debentures held by a person resident outside India other than Non-Resident Indian (“NRI”), to any person resident outside India and (ii) NRIs are permitted to transfer shares or convertible debentures of Indian company to other NRIs.

General permission has also been granted for transfers between a person resident in India and a person resident outside India subject to stipulated conditions. In cases where such conditions are not met, approval of the Central Government and the Reserve Bank of India may be also required. Banks in India may currently allow remittance from India by a person resident in India of up to US$250,000, per financial year, for any permitted current or capital account transaction or a combination of both under liberalized remittance scheme.

Issue of securities through the depository receipt mechanism

Until December 2014, the issuance of securities through the depository receipts mechanism was governed by the Foreign Currency Convertible GDRs and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 ("1993 Scheme") as amended from time to time. On October 21, 2014, the Ministry of Finance ("MoF") implemented the Depository Receipts Scheme, 2014 ("New Scheme") by virtue of which issuance of depository receipts has been taken out of the 1993 Scheme and is now regulated by the New Scheme, the Companies Act and Companies (Issue of Global Depository Receipts) Rules, 2014 (Depository Receipts Rules). The New Scheme has come into effect from December 15, 2014.

Under the New Scheme, any Indian company, listed or unlisted, private or public or any other issuer or person holding permissible securities is eligible to issue or transfer permissible securities (including inter alia, shares, bonds, derivatives and unit of mutual funds, and similar instruments issued by private companies, provided that such securities are in dematerialized form to a foreign depository for the purpose of issuance of depository receipts in permissible jurisdictions that are FATC and IOSC compliant. Persons barred from accessing international capital markets, are not permitted to issue securities through the depository mechanism.

A foreign depository may issue depository receipts by way of a public offering or private placement or in any other manner prevalent in a permissible jurisdiction. An issuer may issue permissible securities to a foreign depository for the purpose of issuing depository receipts by any mode permissible for such issuance to investors. Further, holders of permissible securities may transfer such securities to a foreign depository for the purpose of the issue of depository receipts, with or without the approval of the issuer company, through transactions on a recognized stock exchange, bilateral transactions or by tendering through a public platform.

Under the New Scheme, securities can be issued through the depository receipt mechanism up to such a limit that the aggregate underlying securities issued to foreign depositories for issuance of depository receipts along with securities already held by persons resident outside India, does not exceed the applicable foreign investment limits prescribed by regulations framed under the Foreign Exchange Management Act, 1999.

The New Scheme provides that underlying securities shall not be issued to a foreign depository for issuance of depository receipts at a price which is less than the price applicable to a corresponding mode of issuance to domestic investors. A foreign depository may exercise voting rights, if any, associated with the underlying securities whether pursuant to voting instructions from the holder of depository receipts or otherwise. Further, a holder of depository receipts issued against underlying equity shares shall have the same obligations as if it is the holder of the equity shares if it has the right to issue voting instruction.  

Restrictions on Sale of the Equity Shares Underlying the ADSs and for Repatriation of Sale Proceeds

A person resident outside India may transfer the ADSs held in Indian companies to another person resident outside India without any permission. An ADS holder is permitted to surrender the ADSs held by him in an Indian company and to receive the underlying equity shares under the terms of the Deposit Agreement. Under Indian regulations, the re-deposit of these equity shares with the depositary to ADSs may not be permitted.

An Active or Liquid Market for Our ADSs is Not Assured

Active, liquid trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors. Liquidity of a securities market is often a function of the volume of the shares that are publicly held by unrelated parties. Although ADS owners are entitled to withdraw the Equity Shares underlying the ADSs from the depository facility at any time, subject to certain legal restrictions, there is no public market for our Equity Shares in India or elsewhere and consequently we cannot assure you of an active or liquid market for the Equity Shares. 

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TRADING MARKET

General

There is no public market for our Equity Shares in India, the United States or any other market. Our ADSs evidenced by ADRs have been traded in the United States, initially on the NASDAQ National Market (now the NASDAQ Global Market), under the ticker symbol “REDF” since June 14, 2000, when they were issued by our depositary, Citibank, N.A., pursuant to a Deposit Agreement. From June 24, 2002 to October 6, 2006, our ADSs traded on the NASDAQ Capital Market (formerly the NASDAQ Small Cap Market) under the same ticker symbol. Beginning on October 9, 2006, our ADSs have been trading on the NASDAQ Global Market. Each ADS represents one-half of one Equity Share.

The number of outstanding Equity Shares as of March 31, 2015 was 13,795,178. We have been informed by our depository that as of March 31, 2015, there were 23 record holders of ADRs evidencing 9,295,956 ADSs (representing 4,647,978 Equity Shares) in the United States.

Annual and Quarterly high-low price history:

	Price Per ADS (in U.S. dollars)
	High		Low
Fiscal year ending March 31, 2010		4.50		1.75
Fiscal year ending March 31, 2011		9.90		1.69
Fiscal year ended March 31, 2012		17.98		4.89
Fiscal year ending March 31, 2013		7.21		1.82
Fiscal year ending March 31, 2014
First Quarter (April 1, 2013 to June 30, 2013)		3.54		2.30
Second Quarter (July 1, 2013 to September 30, 2013)		2.81		2.05
Third Quarter (October 1, 2013 to December 31, 2013)		3.35		2.10
Fourth Quarter (January 1, 2014 to March 31, 2014)		2.62		2.01
Fiscal year ending March 31, 2015
First Quarter (April 1, 2014 to June 30, 2014)		3.85		2.03
Second Quarter (July 1, 2014 to September 30, 2014)		3.31		2.25
Third Quarter (October 1, 2014 to December 31, 2014)		2.47		1.80
Fourth Quarter (January 1, 2015 to March 31, 2015)		2.33		1.73
Fiscal year ending March 31, 2016
First Quarter (April 1, 2015 to June 30, 2015)		2.19		1.77

Monthly high-low price history for previous six months:

Previous six months	High		Low
February 2015		2.02		1.82
March 2015		2.00		1.73
April 2015		2.19		1.80
May 2015		1.92		1.78
June 2015		2.08		1.77
July 2015		1.87		1.59

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Fees and other payments made by the Depository

During fiscal year ended March 31, 2015, the Company received US$185,000 towards sharing of depository service fees for the fiscal years 2012, 2013 and 2014.

Fees charged by the Depositary from our ADS holders

Under the terms of the ADS deposit agreement and related arrangements under which the depositary provides its services, the depositary may charge persons holding or beneficially owning ADSs on applicable record dates established by the depositary up to $2.00 per 100 ADSs (or fractions thereof) held, as a “depositary services fee”. A portion of the aggregate depositary services fees that the depositary may collect in a given year, as well as certain other amounts, may be made available to the Company, solely to defray costs the Company may incur in conducting certain investor relations and other activities related to the ADS program.

In addition to the depositary services fee, the depositary retains the right under the ADS deposit agreement to charge holders or beneficial owners of ADSs certain other fees, including in the event a holder or beneficial owner withdraws from the ADS program the shares underlying its ADSs, or in the event the Company distributes cash or stock dividends or makes other distributions to ADS holders. In most of these cases, the depositary has the right to charge up to $5.00 per 100 ADSs (or fractions thereof) as to which the particular service is being provided.

For further information concerning the fees that the depositary retains the right to charge, and other aspects of the terms under which the depositary provides its services, see the deposit agreement filed as an exhibit to the post-effective amendment no. 1 to the registration statement on Form F-6, filed with the U.S. Securities and Exchange Commission on August 2, 2012, in connection with the ADS program and the amending of the terms of the deposit agreement.

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RESTRICTION ON FOREIGN OWNERSHIP OF INDIAN SECURITIES

Foreign investment in Indian securities is regulated through Foreign Direct Investment Policy (FDI Policy) of the Government of India and FEMA. While the FDI Policy prescribes the limits and the conditions subject to which foreign investment can be made in different sectors of the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under the FDI Policy, unless specifically restricted, foreign investment is freely permitted in all sectors of Indian economy up to any amount and without any prior approvals, but the foreign investor is required to follow certain prescribed procedures for making such investment. The government bodies responsible for granting foreign investment approvals are FIPB and the RBI. The Government has from time to time made policy pronouncements on FDI through press notes and press releases. The DIPP issued D/o IPP F. No. 5(1)/2015-FC-1 dated May 12, 2015 ("FDI Policy"), which went in to effect on May 12, 2015, consolidates and supersedes all previous press notes, press releases and clarifications on Foreign Direct Investment ("FDI") issued by the DIPP that were in force and effect as on May 11, 2015, other than with respect to the pension sector.

ADR Scheme

For further details please refer section 'Issue of securities through the depository receipt mechanism' on page 58.

Foreign Direct Investment

Pursuant to its liberalisation policy, the Indian Government set up the Foreign Investment Promotion Board ("FIPB") under the Ministry of Finance, Government of India ("MOF") to regulate all investments by way of subscription and/or purchase and/or transfer and/or gift of securities of an Indian company by a person resident outside India or FDI into India. Prior permission of the FIPB is required for investments in excess of specified sectoral caps or in sectors in which FDI is not permitted or in sectors which specifically require prior approval of the FIPB or in proposals for investments in real estate business, atomic energy etc. The Indian Government has indicated that in all cases where FDI is allowed on an automatic basis without FIPB approval, the RBI would continue to be the primary agency for the purposes of monitoring and regulating foreign investment. The prescribed applicable norms with respect to determining the price at which shares may be issued by an Indian company to a non resident investor and the price at which shares may be sold by a resident to a non-resident or by a non-resident to a resident would need to be complied with, and a declaration in the prescribed form is required to be filed with the RBI once the issuance/transfer of shares of the Indian company is complete.

Portfolio Investment by Non-Resident Indians

Investments by persons of Indian nationality or origin residing outside of India ("NRIs") are made under the Foreign Portfolio Investments mechanism.

NRIs are permitted to make Portfolio Investments by purchase up to 5% of the paid-up value of the shares issued by a company, subject to the condition that the aggregate paid-up value of shares purchased by all NRIs does not exceed 10% of the paid-up capital of the company. The 10% ceiling may be exceeded if a special resolution is passed in a General Meeting of the shareholders of the Company subject to overall ceiling of 24%. In addition to Portfolio Investments in Indian companies, NRIs may also make foreign direct investments in Indian companies pursuant to the foreign direct investment route discussed above.

Overseas corporate bodies controlled by NRIs or OCBs were previously permitted to invest on favourable terms under the Portfolio Investment Scheme. The RBI no longer recognizes OCBs as an eligible class of investment vehicle under various routes and schemes under the foreign exchange regulations.

Investment by Foreign Portfolio Investors (“FPIs”)

An investment by FPIs is governed by the SEBI (Foreign Portfolio Investors) Regulations, 2014 ("FPI Regulations"). FPIs are required to be registered with the designated depositary participant on behalf of the Securities Exchange Board of India subject to compliance with ‘Know Your Customer’ norms. FPIs are permitted to invest only in the following securities:

a. securities in the primary and secondary markets including shares, debentures and warrants of companies, listed or to be listed on a recognized stock exchange in India;

b. units of schemes floated by domestic mutual funds, whether listed on a recognized stock exchange or not;

c. units of schemes floated by a collective investment scheme;

d. derivatives traded on a recognized stock exchange;

e. treasury bills and dated government securities;

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f. commercial papers issued by an Indian company;

g. Rupee denominated credit enhanced bonds;

h. security receipts issued by asset reconstruction companies;

i. perpetual debt instruments and debt capital instruments, as specified by the RBI from time to time;

j. listed and unlisted non-convertible debentures / bonds issued by an Indian company in the infrastructure sector, where ‘infrastructure’ is defined in terms of the extant External Commercial Borrowings guidelines;

k. non-convertible debentures or bonds issued by Non-Banking Financial Companies categorized as ‘Infrastructure Finance Companies’ by the RBI;

l. Rupee denominated bonds or units issued by infrastructure debt funds;

m. Indian depository receipts; and

n. such other instruments specified by the Securities and Exchange Board of India from time to time.

A foreign portfolio investor shall transact in the securities in India only on the basis of taking and giving delivery of securities purchased or sold except certain carve outs.

A single FPI or an investor group is permitted to purchase equity shares of a company only below 10% of the total issued capital of the company. Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of the FPI Regulations, an FPI, other than Category III FPIs and unregulated broad based funds, which are classified as Category II FPIs by virtue of their investment manager being appropriately regulated, may issue or otherwise deal in offshore derivative instruments (defined under the FPI Regulations as any instrument, by whatever name called, which is issued overseas by a FPI against securities held by it that are listed or proposed to be listed on any recognized stock exchange in India, as its underlying) directly or indirectly, only in the event (i) such offshore derivative instruments are issued to persons who are regulated by an appropriate foreign regulatory authority; and (ii) such offshore derivative instruments are issued after compliance with ‘know your client’ norms. An FPI is also required to ensure that further issue or transfer of any offshore derivative instrument is made by or on behalf of it to any persons that are regulated by an appropriate foreign regulatory authority.

The FPI Regulations became effective as of June 1, 2014. Any Foreign Institutional Investor ("FII") or Qualified Foreign Investor ("QFI") who holds a valid certificate of registration will be deemed to be a FPI till the expiry of the block of three years for which fees has been paid per the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995. All existing FIIs and sub accounts, subject to payment of conversion fees specified in the FPI Regulations, may continue to buy, sell or otherwise deal in securities subject to the provisions of the FPI Regulations, until the earlier of (i) expiry of its registration as a FII or sub-account, or (ii) obtaining a certificate of registration as foreign portfolio investor. All QFIs may continue to buy, sell or otherwise deal in securities until the earlier of (i) up to a period of a one year from the date of commencement of the FPI Regulations; (ii) obtaining a certificate of registration as a foreign portfolio investor.

In furtherance of the FPI Regulations, the RBI amended relevant provisions of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 by a notification dated March 13, 2014. The portfolio investor registered in accordance with the FPI Regulations would be called ‘Registered Foreign Portfolio Investor ("RFPI"). Accordingly, RFPI may purchase and sell shares and convertible debentures of an Indian company through a registered broker as well as purchase shares and convertible debentures offered to the public under the FPI Regulations. Further, RFPI may sell shares or convertible debentures so acquired (i) in an open offer in accordance with the Securities Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or (ii) in an open offer in accordance with the Securities Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; or (iii) through buyback of shares by a listed Indian company in accordance with the Securities Exchange Board of India (Buy-back of Securities) Regulations, 1998. RFPI may also acquire shares or convertible debentures (i) in any bid for, or acquisition of securities in response to an offer for disinvestment of shares made by the Central Government or any State Government; or (ii) in any transaction in securities pursuant to an agreement entered into with merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with Chapter XB of the SEBI (ICDR) Regulations, 2009.

The individual and aggregate investment limits for the RFPIs should be below 10% or 24% respectively of the total paid-up equity capital or 10% or 24% respectively of the paid-up value of each series of convertible debentures issued by an Indian company and such investment should be within the overall sectoral caps prescribed under the FDI Policy. The aggregate investment limits for the RFPI can also be increased to the sectoral cap / statutory ceiling, as applicable, by the Indian company concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its shareholders and subject to prior notification to RBI. RFPI may invest in government securities and corporate debt subject to limits specified by the RBI and SEBI from time to time and to trade in all exchange traded derivative contracts on the stock exchanges in India subject to the position limits as specified by Securities and Exchange Board of India from time to time.

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With a move to further simplify the FDI Policy and in line with earlier announcement, Union Cabinet has, on 16 July 2015, approved the implementation of "composite cap" for FDI, essentially doing away with the distinction between various foreign investment by FIIs, NRIs and other FDIs.

Portfolio investment, upto aggregate foreign investment level of 49%, will be permitted without government approval or compliance of sectoral conditions, if such investment does not result in transfer of ownership and / or control of Indian entities from resident Indian citizens to non-resident entities.

Takeover and Insider Trading Regulations

Under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended, or Takeover Code, upon the acquisition of more than 5% of the outstanding shares or voting rights of an Indian public listed company, a purchaser is required to notify the company, and the company and the purchaser are required to notify all the stock exchanges on which the shares of such company are listed. Upon the acquisition of 25% or more of such shares or voting rights or a change in control of the company, the acquirer must make an open offer to the other shareholders, offering to purchase at least 26% of the outstanding shares of the company at a minimum offer price as determined pursuant to the Takeover Code. Upon conversion of ADSs into equity shares, an ADS holder may be subject to the Takeover Code; if the shareholding of the ADS holder on conversion exceeds 25% of the paid up capital of the Indian company and the Indian company is listed in India. A holder of ADS issued by a listed company may also be subject to the Takeover Code if the ADS holder becomes entitled to exercise voting rights, in any manner whatsoever, on the underlying shares. Similar disclosures may be made under the SEBI (Prohibition of Insider Trading), Regulations, 2015, if the equity shares of the Indian company are listed on a recognized stock exchange in India. So long as our Equity Shares are unlisted in India / are not proposed to be listed, the provisions of the Takeover Code and the Insider Trading Regulations will not be applicable.

Qualified Institutional Placement under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009

In order to make Indian markets more competitive and efficient, the Government of India introduced an additional instrument for listed companies to raise funds from domestic markets in the form of a Qualified Institutional Placement, or QIP. Key features of the QIP program are as follows:

• Issuers. A company whose equity shares are listed on an Indian stock exchange with nationwide trading terminals and which is in compliance with the prescribed requirements of minimum public shareholding in its listing agreement will be eligible to raise funds in the domestic market by placing securities with Qualified Institutional Buyers or QIBs.

QIBs are defined as:

• Public financial institution as defined in Section 4A of the Companies Act;

• Scheduled commercial banks;

• Mutual funds;

• Foreign portfolio investor other than Category III foreign portfolio investor registered with SEBI;;

• Multilateral and bilateral development financial institutions;

• Venture capital funds / alternative investment fund registered with SEBI;

• Foreign venture capital investors registered with SEBI;

• State industrial development corporations;

• Insurance companies registered with the Insurance Regulatory and Development Authority;

• Provident funds with minimum corpus of Rs.250 million;

• Pension funds with minimum corpus of Rs.250 million; or National Investment Fund set up by the Government of India;

• National Investment Funds;

• Insurance funds set up and managed by Army, Navy or Air Force of the Union of India; and

• Insurance funds set up and managed by the Department of Posts, India

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• Securities: Securities which can be issued through the QIP program are equity shares, non-convertible debt instruments along with warrants and convertible securities other than warrants (hereinafter referred to as “eligible securities”). A security which is convertible into or exchangeable with equity shares at a later date, may be converted or exchanged into equity shares at any time after allotment of security but not later than sixty months from the date of allotment. The eligible securities must be fully paid up at the time of allotment.

• Investors/Allottees: The specified securities can be issued only to QIBs, as defined above. Such QIBs must not be promoters or related to promoters of the issuer, either directly or indirectly. Each placement of the eligible securities issued through the QIP program shall be on a private placement basis, in compliance with the requirements of the Companies Act and the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Minimum number of allottees should be 2 for issue size less than Rs. 2.5 billion and 3 in case of issue size exceeding Rs. 2.5 billion. A single allottee shall not be allotted more than 50% of the issue size. A minimum of 10% of the securities in each placement must be offered to mutual funds. If no mutual fund agrees to take up the minimum portion or any part thereof, such minimum portion or part thereof may be allotted to other QIBs.

• Issue Size: The aggregate funds that can be raised through the QIP program in one financial year shall not exceed five times of the net worth of the issuer as of the end of its previous financial year.

• Placement Document: The issuer shall prepare a placement document containing all the relevant and material disclosures. There will be no pre-issue filing of the placement document with SEBI. The placement document will be placed on the websites of the relevant Indian stock exchanges and of the issuer, with appropriate disclaimer to the effect that the placement is meant only for QIBs on a private placement basis and is not an offer to the public. Such Placement Document must also comply with the requirement of section 42 of the Companies Act, 2013 with respect to disclosures.

• Pricing: The price of the shares issued under the QIP program must not be less than the average of the weekly high and low of the closing prices of the shares quoted on the stock exchange during the two weeks preceding the relevant date. By an amendment to the ICDR Regulations in October 2012, SEBI permitted Indian companies to offer a discount of up to five (5) percent on the issue price. “Relevant date” has been defined to mean the date of the meeting in which the Board of the company or the Committee of Directors duly authorized by the Board of the company decides to open the proposed issue. The issue price for convertible instruments is subject to adjustment in case of corporate actions such as stock splits, rights issues and bonus issues.

Because our Equity Shares are not listed on any Indian stock exchange, we are not eligible to participate in the QIP program.

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PRINCIPAL SHAREHOLDERS

The following table provides information relating to the beneficial ownership of our equity shares for:

• each of the executive officers named in the summary compensation table and each of our directors;

• all of our directors and executive officers as a group; and

• each person or group of affiliated persons who is, to the extent known by us or ascertained from public filing, to beneficially own 5.0% or more of our Equity Shares.

	Shares Beneficially Owned As of June 30, 2015					Shares Beneficially Owned As of June 30, 2014					Shares Beneficially Owned As of June 30, 2013
Name of Beneficial Owner	Number of Equity Shares held		Percent of total Equity Shares outstanding			Number of Equity Shares held		Percent of total Equity Shares outstanding			Number of Equity Shares held		Percent of total Equity Shares outstanding
Officers and Directors
Ajit Balakrishnan (1)(1A) (1B) (1C)		2,363,952		15.96	%		2,363,981		15.96	%		2,363,981		15.96	%
Diwan Arun Nanda (1)		2,344,741		15.83	%		2,344,741		15.83	%		2,344,741		15.83	%
All Directors and Officers as a Group (4 persons)		4,720,693		31.87	%		4,720,722		31.87	%		4,720,722		31.87	%
Other shareholders holding more than 5% shareholding
Rediffusion Holdings Private Limited(1)		2,200,002		14.85	%		2,200,002		14.85	%		2,200,002		14.85	%
Draper International India LP		2,178,000		14.71	%		2,178,000		14.71	%		2,178,000		14.71	%
Rediff.com India limited Employee Trust (1C)		1,015,000		6.85	%		1,015,000		6.85	%		1,015,000		6.85	%
Edelweiss Finance and Investment Ltd (1D).		1,523,000		10.28	%		1,523,000		10.28	%		1,523,000		10.28	%

Notes:

(1) Includes 2,200,002 Equity Shares held by Rediffusion Holdings Private Limited, previously called Rediffusion Advertising Private Limited, of which Ajit Balakrishnan is a 50.0% shareholder and Director and Diwan Arun Nanda is a 50.0% shareholder and Director.

(1A) Includes 144,540 Equity Shares held by Quintrol Technologies Private Limited, of which Ajit Balakrishnan is a director as well as a 99.9% stockholder.

(1B) Includes 38,441 ADSs of the Company held by Mr. Ajit Balakrishnan.

(1C) The trustees of the trust consist of 3 executive officers of Rediff.

(1D) Edelweiss Finance and Investment Ltd is wholly owned subsidiary of Edelweiss Financial Service Ltd in which Rashesh Shah is a Chairman and Managing Director and holds 17.5% shareholding.

Sunil N. Phatarphekar, a director of the Company, holds 6,000 equity shares which resulted from the exercise of the stock options.

Ashok Narasimhan, a director of the Company, holds 6,000 equity shares which resulted from the exercise of the stock options.

Our ADSs are currently listed and traded on the NASDAQ Global Market and each ADS is represented by one-half of one Equity Share of par value of ₹5 per share.

Our ADSs are registered pursuant to Section 12(b) of the Securities Act. We have been informed by our depository that as of June 30, 2015, 9,295,956 ADSs were held by 23 record holders of ADRs in the United States.

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TAXATION

Indian Tax

The following discussion of Indian tax consequences for investors in ADSs and Equity Shares received upon redemption of ADSs who are not resident in India, whether of Indian origin or not, is based on the current provisions of the Indian Income-tax Act as amended by the Finance Act, 2015, including the special tax regime for ADSs contained in Section 115AC and 115AC, as amended, read with the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993, or the Scheme, as amended. The Indian Income-tax Act is amended every year by the Finance Act of the relevant year. Some or all of the tax consequences of Section 115AC and other relevant provisions may be amended or modified by future amendments to the Indian Income-tax Act.

In the event there is any Double Taxation Avoidance Agreement (DTAA) between two states and an investor is a resident of either of the states; then to the extent the provisions of the DTAA are more favorable to the investor, under the Indian Income-tax Act, the provisions of the DTAA would prevail. However, The Finance Act, 2012 included General Anti-Avoidance Rule (GAAR), wherein the tax authority may declare an arrangement as an impermissible avoidance arrangement if an arrangement is not entered at arm’s length, results in misuse / abuse of provisions of Income Tax Act, 1961 lacks commercial substance or the purpose of arrangement is for obtaining a tax benefit. If any of our transactions are found to be ‘impermissible avoidance arrangements’ under GAAR, our business may be adversely affected.

The GAAR was originally proposed to become effective for transactions entered into on or after April 1, 2013. In September 2013, vide Notification No. 75, the Government of India had notified the applicability of the GAAR provisions along with certain threshold limits which will become effective from April 1, 2015. However vide Finance Act, 2015 the implementation of GAAR has been deferred by 2 years so as to implement it as part of a comprehensive regime to deal with OECD’s BEPS project of which India is an active participant. Thus, GAAR provisions shall be applicable from Financial Year 2017-18.

The Union Budget, 2015 has proposed to implement Goods and Service Tax (GST) from April 1, 2016. GST will put in place a new indirect tax system which will integrate State economies and boost overall growth. It is proposed to incorporate other taxes such as Central Excise duty, Service tax, Octroi, VAT and Sales tax, entry tax, etc., into GST, thus avoiding multiple layers of taxation that currently exist in India.

The following summary is not intended to constitute a complete analysis of the tax consequences under Indian law of the acquisition, ownership and sale of our ADSs and our Equity Shares by non-resident investors. Potential investors should, therefore, consult their own tax advisers on the tax consequences of such acquisition, ownership and sale, including specifically the tax consequences under Indian law, the law of the jurisdiction of their residence, any tax treaty between India and their country of residence, and in particular the application of the regulations implementing the Section 115AC regime.

Residence

For purposes of the Indian Income-tax Act, an individual is a resident of India during any fiscal year, if he (i) is in India in that year for 182 days or more or (ii) having within the four years preceding that year been in India for a period or periods amounting in all to 365 days or more, is in India for period or periods amounting in all to 60 days or more in that year. The period of 60 days is substituted by 182 days in case of an Indian citizen or person of Indian origin who being resident outside India comes on a visit to India during the financial year or an Indian citizen who leaves India as a member of the crew of an Indian ship or for the purposes of employment outside India. Explanation 2 to section 6(1) inserted by Finance Act, 2015 provides that in case of an individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.

A company is resident in India in any fiscal year if it is an Indian company or the control and management of its affairs is situated wholly in India in that year. A firm or other association of persons is resident in India except where the control and the management of its affairs are situated wholly outside India. The Finance Act, 2015 has amended this definition and brought in the concept of Place of Effective Management (PoEM) i.e., a company would be considered a resident in India if its place of effective management in that year is in India. Thus a foreign company will be resident in India, if its PoEM in that year is in India. The term ‘PoEM’ has been explained to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole, are in substance made. As per explanation to section 6(3) of the Indian Income-tax Act. Set of guiding principles to determine place of effective management is also proposed to be issued. A firm or other association of persons is resident in India except where the control and the management of its affairs are situated wholly outside India during that year. This may increase the compliance of filing of returns and assessment of our subsidiary company situated outside India.

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Taxation of Distributions

Shareholders who receive dividends by a domestic company will not be subject to tax on the distribution if the company has paid the dividend distribution tax (DDT). Consequently, withholding tax on dividends paid to shareholders does not apply. The rate of DDT is 15%. The rate is to be applied on the grossed up amount of dividend. The DDT is to be further increased by surcharge and education cess. If the company has not paid the DTT, the shareholder would be taxable at the applicable Indian Income-tax rates depending on the legal status of the shareholders.

Minimum Alternate Tax

Companies are liable to pay Minimum Alternate Tax (MAT) in a fiscal year if the income-tax payable on the total income computed under the Indian Income-tax Act is less than 18.5% of its book profit. In such cases, the book profit shall be deemed to be the total income of the company and tax payable shall be @ 18.5%. In case of domestic companies, surcharge @ 7% will be levied if the total income exceeds Rs. 1 crore (Rs. 10 million) but does not exceed Rs. 10 crore (Rs. 100 million). The rate of surcharge will be 12% if total income exceeds Rs. 10 crore (Rs. 100 million). In case of companies other than domestic companies, surcharge @ 2% will be levied if the total income exceeds Rs. 1 crore (Rs. 10 million) but does not exceed Rs. 10 crore (Rs. 100 million). The rate of surcharge will be 5% if total income exceeds Rs. 10 crore (Rs. 100 million). Additional surcharge called the “Education Cess on Income-tax” and “Secondary and Higher Education Cess on Income-tax” shall continue to be levied @ 2% and 1% respectively on the amount of tax computed. As per clause (iid) to Explanation 1 to section 115JB(2) of the Indian Income-tax Act, the book profit shall be reduced by the amount of income accruing or arising to a foreign company from the capital gains arising on transactions in securities if such income is credited to the profit and loss account and the tax payable under normal provisions of the Indian Income-tax Act is less than 18.5%. The Indian Income Tax Act provides that the MAT paid by companies can be adjusted against its tax liability over the next ten years.

Taxation on Sale of ADSs

Any transfer of ADSs outside India by a non-resident investor to another non-resident investor does not give rise to Indian capital gains tax.

Taxation on Redemption of ADSs

In the present case, there is no conversion but redemption, i.e. receipt of shares over which the ADS holder has a pre-existing right, therefore there is no transfer and consequently, no capital gains.

Taxation on Sale of Equity Shares

Subject to any relief under any relevant double taxation treaty, a gain arising on the sale of an equity share by a non-resident investor will generally give rise to a liability for Indian capital gains tax and tax is required to be withheld at source. However, as per section 196D(2) of the Indian Income-tax Act, tax is not required to be deducted from any income by way of capital gains arising from the transfer of securities referred to in section 115AD of the Indian Income-tax Act, payable to a Foreign Institutional Investor. Capital gains on sale of equity shares not listed on a recognized stock exchange in India, which have been held for more than 36 months (measured from the date of request for redemption of ADSs where applicable) are considered as long-term capital gains and generally taxable at the rate of 20% plus surcharge and education cess. Surcharge on this tax would be applicable at the rate of 2% in the case of non-resident corporations if the total income exceeds Rs.1 Crore (Rs.10 million) but not exceeding Rs. 10 Crores (Rs. 100 million). Surcharge at the rate of 5% would be applicable if the total income exceeds Rs. 10 crore (Rs. 100 million). However, surcharge is leviable @ 12% where income exceeds Rs. 1 crore (Rs. 10 million) on non-resident individuals or an association of persons. In all the above cases, the amount of tax and surcharge, if any, would be increased by an Education Cess of 2% and Secondary and Higher Education Cess of 1% resulting in an aggregate Education Cess of 3%.

Though section 115AC provides for lower rate of tax (i.e., 10% plus surcharge where applicable and Education Cess of 3%) on long term capital gains arising from transfer of ADSs (other than one between two non-residents made outside India), it is unclear whether the lower rate of tax would also extend to gains arising from transfer of shares converted from ADSs under the amended provisions of Section 115AC. However, it may be noted that certain other provisions of the Indian Income-tax Act also provide for lower rate of tax (i.e., 10% plus surcharge where applicable and Education Cess of 3%) for specific classes of taxpayers, such as Foreign Portfolio Investors, registered with SEBI. Section 112(1)(c)(iii) of the Indian Income-tax Act provides that in case of a non-resident not being a company or a foreign company, the rate of tax will be 10% plus surcharge and cess as applicable, in respect of long term capital gains arising from the transfer of unlisted securities. The gains shall be computed without giving effect to the first and second proviso to section 48 of the Indian Income-tax Act.

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Where unlisted equity shares have been held for 36 months or less, the rate of tax varies and will be subject to tax at normal rates of income tax applicable to non-residents under the provisions of the Indian Income-tax Act, subject to a maximum of 40% (plus applicable surcharge and Education Cess as mentioned above). The actual rate of tax on short-term gains depends on a number of factors, including the legal status of the non-resident holder and the type of income chargeable in India.

During the period the underlying equity shares are held by non-resident investors on a transfer from our depository upon redemption of ADSs, the provisions of the DTAA entered into by the Government of India with the country of residence of the non-resident investors will be applicable in the matter of taxation of any capital gain arising on a transfer of our equity shares.

As per section 49(2ABB) of the Indian Income-tax Act, where shares of a company are acquired by a non-resident investor on redemption of ADSs, the cost of acquisition of shares shall be the price of such share prevailing on any recognized stock exchange on the date on which a request for such redemption was made.

In case of shares which are acquired by the non-resident investor on redemption of ADSs, the period of holding shall be reckoned from the date on which a request for such redemption was made as per clause (he) of Explanation 1 to section 2(42A) of the Indian Income-tax Act.

Withholding Tax on Capital Gains

Tax on long term and short term capital gains, if payable as discussed above, upon sale of equity shares is to be deducted at source by the person responsible for paying the non-resident, in accordance with the relevant provisions of the Indian Income-tax Act, and the non-resident will be entitled to a certificate evidencing such tax deduction in accordance with the provisions of section 203 of the Indian Income-tax Act. However, as per section 196D(2) of the Indian Income-tax Act, tax is not required to be deducted from any income by way of capital gains arising from the transfer of securities referred to in section 115AD of the Indian Income-tax Act, payable to a Foreign Institutional Investor.

Rights

Issuance to non-resident holders of additional ADSs or equity shares or rights to subscribe for equity shares made with respect to ADSs or equity shares are not subject to tax in the hands of the non-resident holder.

However, under section 56(2)(viia) of the Indian Income-tax Act, where a firm or a closely held company receives any share of another closely held company without consideration or for a consideration which is less than the fair market value (fair market value exceeding INR 0.05 million), the fair market value /excess shall be taxable in the hands of the recipient. There is a possibility that the tax authorities may tax the recipient under section 56(2)(viia) of the Indian Income-tax Act. A view may be taken that there is no transfer of shares when fresh shares or rights are allotted and that consequently the provisions of section 56(2)(viia) are not attracted. However, litigation with the tax authorities cannot be ruled out on this issue.

It is unclear as to whether capital gain derived from the sale of rights by a non-resident holder, not entitled to exemption under a tax treaty, to another non-resident holder outside India will be subject to Indian capital gains tax. If rights are deemed by the Indian tax authorities to be situated within India, considering situs is in India, the gains realized on the sale of rights will be subject to Indian taxation. These rights would generally be in the nature of short-term capital assets.

Stamp Duty

Upon the issuance of the Equity Shares underlying our ADSs, we are required to pay a stamp duty of 0.1% per share of the issue price. A transfer of ADSs is not subject to Indian stamp duty. Normally, upon the acquisition of equity shares from a depositary in exchange for ADSs representing these equity shares in physical form, an investor would be liable for Indian stamp duty at the rate of 0.25% of the market value of the equity shares at the date of registration. Similarly, a sale of equity shares by an investor would also be subject to Indian stamp duty at the rate of 0.25% of the market value of the equity shares on the trade date, although customarily the tax is borne by the transferee, that is, the purchaser. In case the equity shares of the company are held in a “dematerialized” form, such as a book-entry system, no stamp duty would be payable on the acquisition or transfer of the equity shares.

Other Taxes

At present, there are no Indian taxes on wealth, gifts or inheritance, which may apply to our ADSs and any underlying Equity Shares.

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Buy-back of Securities

As per section 115QA of the Indian Income-tax Act, any amount of distributed income by the company on buy-back of shares (not being shares listed on a recognised stock exchange) from a shareholder shall be charged to tax in the hands of the company @ 20% plus surcharge and cess as applicable on such distributed income. Any income arising to an assessee, being a shareholder, on account of buyback of shares (not being listed on a recognised stock exchange) by the company as referred to in section 115QA shall be exempt under section 10(34A) of the Indian Income-tax Act.

Service Tax

Brokerage or commissions paid to stockbrokers in connection with the sale or purchase of shares traded in India is subject to a service tax of 12.36%. The stockbroker is responsible for collecting the service tax and paying it to the relevant authority. The Finance Act 2015 has increased the rate of service tax from the present 12.36% (inclusive of surcharge and cess) to a consolidated rate of 14%. This has been notified to be applicable with effect from 1st June 2015. Further, it has also introduced Swachh Bharat Cess (Clean India Campaign) on all or certain taxable services at a rate of 2% on the value of such taxable services, the notification for which is still awaited.

United States Federal Income Tax Considerations

The following is a summary of United States federal income tax considerations relating to the acquisition, ownership, and disposition of ADSs or Equity Shares by U.S. Holders (as defined below) that will hold their ADSs or Equity Shares as “capital assets” (generally, property held for investment) under the United States Internal Revenue Code (the “Code”). This summary is based upon existing United States federal income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. This summary does not discuss all aspects of United States federal income taxation which may be important to particular investors in light of their individual investment circumstances, including holders subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers, partnerships and their partners, and tax-exempt organizations (including private foundations), holders that are not U.S. Holders, holders that own (directly, indirectly, or constructively) 10% or more of the total combined voting power of all classes of our Equity Shares entitled to vote, holders that will hold our ADSs or our Equity Shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for United States federal income tax purposes, or holders that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not discuss any non-United States, state, or local tax considerations. Prospective investors are urged to consult their tax advisors regarding the United States federal, state, local, and non-United States income and other tax considerations of an investment in our ADSs or our Equity Shares.

For purposes of this summary, a “U.S. Holder” is a beneficial owner of ADSs or Equity Shares that, for United States federal income tax purposes, is (i) an individual who is a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation for United States federal income tax purposes created in, or organized under the law of, the United States or any State or political subdivision thereof, (iii) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust.

If a partnership is a beneficial owner of our ADSs or Equity Shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership.

For United States federal income tax purposes, U.S. Holders of ADSs will be treated as the beneficial owners of the underlying shares represented by the ADSs.

EACH PROSPECTIVE INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING OF EQUITY SHARES OR ADSs.

General

A primary consideration related to making an investment in ADSs or Equity Shares for United States investors is whether we will become classified as a “passive foreign investment company” (a “PFIC”). A foreign corporation, such as us, will be treated as a PFIC, for United States federal income tax purposes, if 75% or more of its gross income consists of certain types of “passive” income or 50% or more of its assets are passive. For the purpose of applying the income and assets tests described above, we will be treated as owning its proportionate share of the assets and earning the proportionate share of the income of any other corporation that we own, directly or indirectly, 25% or more (by value) of the stock of such corporation.

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We do not expect to be classified as a passive foreign investment company (“PFIC”) for United States federal income tax purposes for the most recent taxable year ended March 31, 2015. However, there is no guaranty that the Internal Revenue Service will agree with our determination. Moreover, we may become classified as a PFIC for one or more future taxable years, particularly under circumstances where we determine not to deploy significant amounts of cash for business development purposes. The determination of whether we are, or will become, classified as a PFIC is a fact intensive determination that is made annually based on the composition and amounts of income that we earn and the composition and valuation of our assets, all of which are subject to change. For purposes of determining whether we are, or will become, classified as a PFIC, cash and other liquid assets are categorized as passive assets and the value of our goodwill and other unbooked intangibles are taken into account. The value of our assets for a taxable year is determined by reference to the average of the fair market values of our assets determined as of the end of each quarterly period during the taxable year. In addition, the composition of our assets will be affected by how, and how quickly, we spend our liquid assets that we presently hold. To the extent we are able to deploy substantial amounts of cash for business development purposes, our level of active assets, as compared with our passive assets, may become more prominent.

If we are classified as a PFIC for any year during which a U.S. Holder holds our ADSs or Equity Shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or Equity Shares.

Because PFIC status is a fact intensive determination made on an annual basis, no assurance can be given regarding our classification as a PFIC. The discussion immediately below under the headings “Distributions” and “Sale or Other Disposition of ADSs or Equity Shares” describes certain tax considerations if we are not subject to classification as a PFIC for United States federal income tax purposes, and are followed by a summary of the PFIC rules under the heading “Passive Foreign Investment Company” if we were to be classified as a PFIC. United States investors are urged to consult their tax advisors regarding the potential application and effect of the PFIC rules in connection with their prospective investment in our ADSs or our Equity Shares.

Distributions

The gross amount of cash distributions with respect to the ADSs (or Equity Shares) will, upon receipt by the Depositary (or by you), be includible in your gross income as dividend income to the extent of our current and accumulated earnings and profits, as determined under United States federal income tax principles. Because we do not intend to determine our earnings and profits on the basis of United States federal income tax principles, any distribution paid may generally be treated as a dividend for United States federal income tax purposes. A non-corporate recipient of dividend income will generally be subject to tax on dividend income from a “qualified foreign corporation” at a maximum United States federal tax rate of 20% rather than the marginal tax rates generally applicable to ordinary income so long as certain holding period requirements are met. A non-United States corporation (other than a PFIC) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. There is currently a tax treaty in effect between the United States and India which the Secretary of Treasury has determined is satisfactory for these purposes and we believe we should be eligible for the benefits of the treaty. United States corporate holders will generally not be eligible for the dividends received deduction for distributions to domestic corporations in respect of distributions on our ADSs or our Equity Shares.

An additional tax on net investment income imposed at a 3.8% rate will also apply to dividends received by certain individuals who meet specified income thresholds ($250,000 for joint returns).

The United States dollar value of any distribution made by us in Rupees will be determined by reference to the exchange rate in effect on the date the distribution is received by the Depositary (or you if you hold our Equity Shares), regardless of whether the payment is in fact converted into U.S. dollars on that date. Any subsequent gain or loss in respect of such Rupees arising from exchange rate fluctuations will be ordinary income or loss. This gain or loss will generally be treated as United States source gain or loss for United States foreign tax credit limitation purposes.

Dividends generally will be treated as income from foreign sources for United States foreign tax credit limitation purposes. You may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on the ADSs or the Equity Shares. If you do not elect to claim a foreign tax credit for foreign tax withheld, you may instead claim a deduction, for United States federal income tax purposes, in respect of such withholding, but only for a year in which you elect to do so for all creditable foreign income taxes.

Sale or Other Disposition of ADSs or Equity Shares

You generally will recognize capital gain or loss for United States federal income tax purposes upon a sale or other disposition of ADSs or Equity Shares in an amount equal to the difference between the amount realized from the sale or disposition and your adjusted tax basis in the ADSs or the Equity Shares. Such gain generally will be long-term if, on the date of such sale or disposition, you held such ADSs or Equity Shares for more than one year and will generally be treated as United States source gain or loss for United States foreign tax credit limitation purposes. The deductibility of a capital loss may be subject to limitations.

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Passive Foreign Investment Company

If we are or were to become classified as a PFIC for any taxable year, and unless you make a special election (including a “mark-to-market” election, as described below), you would be subject to special rules with respect to (i) any gain realized on the sale or other disposition of ADSs or Equity Shares, and (ii) any “excess distribution” made by us on the ADSs or Equity Shares (generally, any distributions paid to you in respect of ADSs or Equity Shares during a single taxable year that are greater than 125% of the average annual distributions received by you during the three preceding taxable years or, if shorter, your holding period for such ADSs or Equity Shares).

Under the PFIC rules:

• the gain or excess distribution would be allocated ratably over your holding period for ADSs or Equity Shares;

• the amount allocated to the taxable year in which the gain or excess distribution was realized, and any taxable year that you held our ADSs or our Equity Shares prior to the first taxable year in which we are classified as a PFIC (a “pre-PFIC year”), would be taxable as ordinary income; and

• the amount allocated to each prior year, other than the current year and any pre-PFIC year, would be subject to (i) tax at the highest tax rate in effect for that year and (ii) an interest charge generally applicable to underpayments of tax based on the amount of the tax deferred during the time in which you owned ADSs or Equity Shares.

As an alternative to the foregoing rules, a holder of “marketable stock” in a PFIC may make a mark-to-market election, provided that the shares are “regularly traded” on a “qualified exchange.” So long as our ADSs are regularly traded on the NASDAQ Global Market, our ADSs should be treated as marketable stock on a qualified exchange for this purpose. No assurances, however, may be given whether the ADSs would be treated, or continue to be treated, as “regularly traded” on such exchange. If you make a valid mark-to-market election, you will generally (i) include as ordinary income for each taxable year the excess, if any, of the fair market value of your ADSs or Equity Shares as determined at the end of the taxable year over the adjusted tax basis of such ADSs or Equity Shares and (ii) deduct as a loss the excess, if any, of the adjusted tax basis of your ADSs or Equity Shares over the fair market value of such ADSs or Equity Shares as determined at the end of the taxable year, but only to the extent of the amount previously included in income as a result of the mark-to-market election. Your adjusted tax basis in your ADSs or Equity Shares would be adjusted to reflect any income or loss resulting from the mark-to-market election.

The rules for PFICs are complex and several other special elections are available, including the election to treat us as a “qualified electing fund” (“QEF”). A QEF election would require a holder of Equity Shares or ADSs to include in its income a share of our income on an annual basis even absent a distribution to pay taxes on that share of income.

If you own ADSs or Equity Shares during any year that we are classified as a PFIC, subject to certain exception, you may be required to file an annual Internal Revenue Service Form 8621 that describes the distributions received on ADSs or Equity Shares and the gain realized on the disposition of ADSs or Equity Shares. You are urged to consult your tax advisor concerning the United States federal, state and local income tax consequences of acquiring, holding, and disposing of ADSs or Equity Shares.

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CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the objectives of the control system. As such, disclosure controls and procedures or internal control systems may not prevent all error and all fraud. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, at our Company have been detected.

Our management, with the participation of our Chairman and Managing director, who serves as our Principal Executive Officer, and our Chief Financial Officer who serves as Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 referred as the “Exchange Act “) as of the end of the period covered by this annual report. Based on such evaluation, our Chairman and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chairman and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is the process designed by, or under the supervision of, our Chairman and Managing director, who serves as our Principal Executive Officer, and our Chief Financial Officer who serves as Principal Financial Officer, and effected by our management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with established policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chairman and Managing director and our Chief Financial Officer, our Management conducted an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2015. In making this assessment, our management primarily used the criteria set forth in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO”). Based on such assessment, our management has concluded that we maintained effective internal control over financial reporting as of March 31, 2015.

Our independent registered public accounting firm, Deloitte Haskins & Sells LLP, has audited the consolidated financial statements included in this annual report on Form 20-F, and as part of their audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting as of March 31, 2015.

Changes in Internal Controls over Financial Reporting

During the period covered by this annual report, there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table summarizes the fees billed to us by our principal accountant, Deloitte Haskins & Sells LLP (formerly Deloitte Haskins & Sells), Mumbai, India and its affiliates (collectively “Deloitte”) for various services rendered to us during the fiscal years ended March 31, 2013, 2014 and 2015, respectively.

	Fiscal year ended March 31,
	2013		2014		2015
	US$		US$		US$
Audit Fee		226,974		209,094		207,997
Tax Fees		12,915		3,295		3,271
Total		239,889		212,389		211,267

Audit fee represents the aggregate fees for Deloitte in connection with the audits of our annual integrated consolidated financial statements and statutory audit of Rediff. Tax fees primarily comprise fees for tax audit and permitted tax advisory services. Our Audit Committee charter requires us to obtain the prior approval of our Audit Committee on every occasion we engage our principal accountants or their associated entities to provide us any audit or non-audit services. We disclose to our Audit Committee the nature of services that are provided. All of the services provided by our principal accountants or their associated entities in the previous three fiscal years (since the emergence of the pre-approval rules), have been pre-approved by our Audit Committee.

PRESENTATION OF FINANCIAL INFORMATION

The consolidated financial statements in this annual report have been prepared in accordance with U.S. GAAP. Our fiscal year ends on March 31 of each year so all references to a particular fiscal year are to the year ended March 31 of that year. The consolidated financial statements, including the notes to these financial statements, audited by Deloitte Haskins & Sells LLP, an independent registered public accounting firm, are set forth at the end of this annual report.

Although we have translated in this annual report certain Indian Rupee amounts into U.S. dollars, this does not mean that the Indian Rupee amounts referred to could have been, or could be, converted into U.S. dollars at any particular rate, the rates stated earlier in this annual report, or at all. The Reserve Bank of India publishes the exchange rate on each date. The published rate on March 31, 2015 was ₹62.59 per US$1.00. The reporting currency for the financial statements is the U.S. dollar and the translation from Indian Rupees to U.S. dollars has been performed using rates specified by the Reserve Bank of India.

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ADDITIONAL INFORMATION

The principle legislation on company law in India viz. Companies Act, 1956 has been replaced by the Companies Act, 2013 ("2013 Companies Act"). While most of the provisions of the 2013 Companies Act have as on date been notified and have replaced the corresponding provisions of the Companies Act, 1956, certain provisions of the 2013 Companies Act are still to be made effective. Pending such publication, certain provisions of the Companies Act, 1956, continue to be effective, along with the already notified sections of the 2013 Companies Act.

Consequently, we are currently governed by the 2013 Companies Act (to the extent of the published provisions) and the Companies Act, 1956 (to the extent still in force) as amended from time to time, as applicable ("Companies Act").

Description of Share Capital

The following description of our share capital does not purport to be complete and is subject to and qualified in its entirety by the Company’s Articles of Association and Memorandum of Association, the provisions of the Companies Act, as currently in effect, and other applicable provisions of Indian law.

Share Capital

Our authorized share capital as on March 31, 2015 is ₹120,000,000 divided in to 24,000,000 Equity Shares of ₹5/- each. As of March 31, 2015, 14,810,178 Equity Shares par value of were issued and fully paid-up. Out of which 1,015,000 Equity shares were held by Rediff.com India Limited Employee Trust, controlled by Rediff.com India Limited. Hence, effectively 13,795,178 Equity Shares par value of ₹5/- each were issued, outstanding and fully paid-up.

Currently we have only one class of share capital, being Equity Shares. However, in terms of our Amended and Restated Articles of Association and the Companies Act, we may issue different classes of securities in addition to the Equity Shares. For the purposes of this annual report, “shareholder” means a shareholder who is registered as a member in the register of members of our Company.

Shareholder Rights Agreements

In connection with our sales of Equity Shares to our investors from April 1998 through December 1999, we entered into nine separate shareholders rights agreements with our shareholders which provide for, inter alia, certain preemptive, registration, co-sale and information rights, as well as the right of some shareholders to appoint members or observers to our Board of Directors. Some of the agreements also provide the shareholders with protective rights that require us to obtain their consent and /or shareholders consent in respect of certain actions that would otherwise only require Board approval.

Amended and Restated Shareholders’ Rights Agreement

On February 24, 2000, we entered into an Amended and Restated Shareholders’ Rights Agreement with certain of our shareholders to amend, restate, supersede and replace all the previous nine shareholder agreements. The Amended and Restated Shareholders’ Rights Agreement, became effective on the completion of our initial ADR offering, and inter alia, provides for the following shareholder rights:

Registration Rights

Certain holders of at least 30% of our Equity Shares can require us, subject to limitations, to effect a registration or qualification of the securities either with the NASDAQ Global Market (formerly the NASDAQ National Market), the NSE or the BSE. We are not required to effect:

• More than two such registrations or qualifications pursuant to such demand registration rights;

• a registration or qualification prior to the earlier of December 31, 2002, or six months after the effective date of any Indian law, regulation or other governmental order which allows our Equity Shares to be offered to the public on an Indian stock exchange; or

• a registration for a period not to exceed 120 days, if our Board of Directors has made a good faith determination that such registration would be detrimental to us or our shareholders.

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At any time after we become eligible to file a registration statement on Form F-3, certain holders of our Equity Shares may require us to file registration statements on Form F-3 with respect to their Equity Shares. We are not required to affect this registration:

• more than once in a twelve month period;

• unless the registration relates to securities that are valued in excess of US$1,000,000; or

• if our Board of Directors has made a good faith determination that such registration would be detrimental to us or our shareholders.

Each of the foregoing registration rights is subject to conditions and limitations, including the right of the underwriters in any underwritten offering to limit the number of Equity Shares to be included in such registration. We are required to bear all the expenses of all such registrations, except underwriting discounts and commissions. The registration rights with respect to any holder thereof terminate upon the earlier of when the holder may sell the Equity Shares within a three-month period pursuant to Rule 144 of the Securities Act, or the time when the holder is able to convert the registrable securities into ADSs which are traded on the NASDAQ Global Market.

Other Rights

The Amended and Restated Shareholders’ Rights Agreement also grants preemptive, information and co-sale rights to our shareholders.

Memorandum and Articles of Association

Our Company was incorporated under the Companies Act, 1956, and is registered with the Registrar of Companies, Maharashtra at Mumbai, India with Company Identification Number U22100MH1996PLC096077.

The Memorandum and Articles of Association- Objectives and Purposes

The main objects of our Company, as stated in our Memorandum of Association is to carry on and undertake the business of providing online information services in various languages via electronic and other forms of communications for local and other subscribers in India and abroad and to deal in all the materials connected therewith.

In order to effectively undertake business authorised by our main objects, our Memorandum of Association also authorises us to carry on and undertake the business of publishers of dailies, weeklies, fortnightly, newspapers, periodicals, journals, magazines, directories, souvenirs, year-books and other literary works in the electronic and other forms in any language and on any subject and marketing including export markets, sell/distribute such published items to subscribers in India and abroad.

Our Articles of Association provide that the minimum number of directors shall be four and the maximum number of directors shall be fifteen. As of June 30, 2015, we have six directors. Our Articles of Association provide that at least two thirds of our directors shall be subject to retirement by rotation. One third of these directors must retire from office at each Annual General Meeting of the Shareholders. A retiring director is eligible for re-election. Up to one-third of our directors can be appointed as permanent directors. Our Articles of Association do not mandate the retirement of our directors under an age limit requirement. Our Articles of Association do not require our Board members to be shareholders in our company. Under the Companies Act, independent directors are to retire after five years and may be re-appointed only for two consecutive terms.

Dividends

Under Indian law, a company pays dividends upon a recommendation by its board of directors and approval by a majority of the shareholders at the annual general meeting held each fiscal year. However the Board is not obliged to recommend the payment of a dividend.

The Companies Act provides that any dividends that remain unpaid or unclaimed after a period of 30 days from the date of declaration of a dividend are to be transferred to a special bank account opened by the company at an approved bank. We must transfer any dividends that remain unclaimed after 30 days to such an account. If any amount in this account has not been claimed by the eligible shareholders within seven years from the date of the transfer, we must transfer the unclaimed dividends to an Investor Education and Protection Fund established by the Government of India under the provisions of the Companies Act. After the transfer to this fund, such unclaimed dividends may not be claimed by the shareholders entitled to receive such dividends from the company.

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Under the Companies Act, dividends may be paid out of profits of a company in the year in which the dividend is declared or out of the undistributed profits of previous fiscal years after providing for depreciation. Before declaring any dividend in any financial year, a company may transfer a percentage of its profits which it considers appropriate to its reserves.

The Companies Act further provides that, in the event of an inadequacy or absence of profits in any year, a dividend may be declared for such year out of the company’s accumulated profits that have been transferred to its reserves, subject to the following conditions:

• the dividend rate declared shall not exceed the average of the rates at which dividends were declared by the company in the three years immediately preceding that year;

• the total amount to be drawn from the accumulated profits earned in the previous years and transferred to reserves may not exceed an amount equivalent to 10% of the sum of its paid-up capital and free reserves as appearing in the latest audited financial statement and the amount so drawn is to be used first to set off the losses incurred in the fiscal year in which dividends is declared

• the balance of reserves after such withdrawals shall not fall below 15% of the company’s paid-up capital as appearing in the latest audited financial statements; and

• a dividend may be declared only after set off of carried over losses and depreciation (whichever is less), not provided in previous years against the profit of the company of the current year for which the dividend is declared or paid. We are subject to taxation for each dividend declared, distributed or paid for a relevant period by our company.

Bonus Shares

In addition to permitting dividends to be paid out of current or retained earnings as described above, the Companies Act permits the board of directors of our Company, if so approved by shareholders in a general meeting, to distribute an amount transferred from the general reserve or the securities premium account or the capital redemption reserve account to shareholders, in the form of fully paid up bonus equity shares, which are similar to a stock dividend. These bonus equity shares must be distributed to shareholders in proportion to the number of equity shares owned by them as recommended by the board of directors. No issue of bonus shares may be made by capitalizing reserves created by revaluation of assets.

Preemptive Rights and Issue of Additional Shares

The Companies Act gives shareholders the right to subscribe for new shares in proportion to their respective existing shareholding unless otherwise approved by a special resolution passed by a general meeting of the shareholders. According to section 62(1)(c) of the Companies Act such new shares shall be offered to existing shareholders in proportion to the amount paid up on those shares offered and the date (being not less than 15 days and not exceeding 30 days from the date of the offer) within which the offer. If not accepted the offer will be deemed to have been declined. After such date, the Board may dispose of the shares offered in respect of which no acceptance has been received which shall not be disadvantageous to the shareholders of the Company. The offer is deemed to include a right exercisable by the person concerned to renounce the shares offered to him in favour of any other person.

Under the provisions of Section 62(1)(c) of the Companies Act, new shares may be offered to any persons whether or not those persons include existing shareholders, either for cash or for consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer subject to condition prescribed under the Companies (Share Capital and Debentures) Rules, 2014, if a special resolution to that effect is passed by the Company’s shareholders in a general meeting.

Annual General Meetings of Shareholders

We may at any time convene general meetings of shareholders when necessary or on request by shareholder(s) holding at least 10% of our paid up capital carrying voting rights. We must convene an annual general meeting of shareholders within 15 months of the previous annual general meeting or within six months after the end of each fiscal year. Written notice setting out the agenda of the meeting must be given at least 21 clear days (excluding the days of mailing and receipt) prior to the date of the general meeting to the shareholders of record. Such notice may be sent through electronic mode as well. Shareholders who are registered as shareholders on the date of the general meeting are entitled to attend and vote at such meeting. A general meeting may be called after giving shorter notice if consent is received from shareholders holding not less than 95 per cent of the paid-up capital of our Company.

The annual general meeting of shareholders must be held at our registered office or at such other place within the city in which the registered office is located; meetings other than the annual general meeting may be held at any other place if so determined by the Board of Directors. Our registered office is located at 1st floor, Mahalaxmi Engineering Estate, L. J. First Cross Road, Mahim (West), Mumbai 400 016.

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The Board of Directors may in accordance with the Articles of Association convene an extraordinary general meeting of shareholders when necessary or at the request of a shareholder or shareholders holding in the aggregate not less than 10% of the paid-up capital of our Company (carrying a right to vote in respect of the relevant matter on the date of the deposit of the requisition).

The Act and our Articles of Association provide that a quorum for a general meeting is the presence of at least five shareholders in person. Institutional shareholders shall be deemed to be personally present, if their authorized representative attends the meeting.

Voting Rights

Subject to any special terms as to voting on which any shares may have been issued, every shareholder entitled to vote who is present in person (including any corporation present by its duly authorized representative) shall on a show of hands have one vote and every shareholder present in person or by proxy shall on a ballot have one vote for each share of which he is the holder. In the case of joint holders, only one of them may vote and in the absence of election as to who is to vote, the vote of the senior of the joint holders who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. Seniority is determined by the order in which the names appear in the register of members.

Voting is by show of hands, unless a ballot is ordered by the chairman of the meeting, who is generally the chairman of our board of directors, but may be another director or other person selected by our board or the shareholders present at the meeting in the absence of the chairman, or demanded by a shareholder or shareholders holding at least 10% of the total voting right or holding paid up capital of at least Rs.500,000. Upon a show of hands, every shareholder entitled to vote and present in person has one vote and, on a poll, every shareholder entitled to vote and present in person or by proxy has voting rights in proportion to the paid up capital held by such shareholders.

Any shareholder may appoint a proxy. The instrument appointing a proxy must be delivered to us at least 48 hours prior to the meeting. A proxy may not vote except on a poll. A corporate shareholder may appoint an authorized representative who can vote on behalf of the shareholder, both upon a show of hands and upon a poll.

Shareholders Resolutions

Ordinary resolutions may be passed by simple majority of those present and voting at any general meeting for which the required period of notice has been given. Special resolutions such as amendments to our Amended and Restated Articles of Association and the Memorandum of Association, commencement of a new line of business, the waiver of preemptive rights for the issuance of any new shares and a reduction of share capital, require that votes cast in favor of the resolution (whether by show of hands or poll) are not less than three times the number of votes, if any, cast against the resolution. Under the Companies Act, matters that require special resolution include change in the registered office of the Company outside local limits, change in the name of the Company amendments to the articles of association, member's voluntary winding-up, dissolution, merger or consolidation, variation in terms of contract or objects in prospectus, issue of depository receipts, issue of sweat equity, reduction in share capital, issue of debentures with an option to convert such debentures, and the issue of shares to persons other than existing shareholders. Furthermore, under the Companies Act, the approval of a scheme of compromise or arrangement requires the approval of a majority of at least 75 per cent in value of the shareholders or creditors present and voting,

Pursuant to the Companies (Share Capital and Debentures) Rules, 2014, effective on and from April 1, 2014, a company limited by shares is authorized to issue shares with differential voting rights if the articles of association of the company so authorizes and the shares with differentials rights should not exceed twenty-six percent (26%) of the total post-issue paid up equity share capital. Our Amended and Restated Articles of Association do not authorize issuance of shares with differential voting rights.

Pursuant to Section 110 of the Companies Act, a company must pass certain corporate resolutions, as notified by the Central Government, only through postal ballot. Some of the resolutions that must be passed through postal ballot include alteration of main objects, buy-back of shares, issue of shares with differential voting rights, sale of an undertaking and variation of shareholder or debenture holder rights.

Holders of our ADS may exercise voting rights only through a depositary, unlike an owner of Equity Shares, who can exercise voting rights directly. An owner of ADS generally will have the right under the deposit agreement to instruct the Depositary to exercise the voting rights for the Equity Shares represented by the ADS. Owners of ADS have no rights pursuant to the 1956 Companies Act, under which we were incorporated, and are limited to those rights granted to them pursuant to the deposit agreement.

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It is our expectation that our Depositary will forward notices of shareholders’ meetings to the ADS holders together with information explaining how to instruct the Depositary to exercise the voting rights on the Equity Shares represented by ADS. If the Depositary receives voting instructions from an owner of ADS on time, it will endeavor to vote the securities represented by those ADS in accordance with such voting instructions. In the event that voting takes place by a show of hands, the Depositary will cause the custodian to vote all deposited securities in accordance with the instructions received from owners of a majority of the ADS for which the Depository receives voting instructions. However, the ability of the Depositary to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. We cannot assure that holders of ADS will receive voting materials in time to enable them to return voting instructions to the Depository in a timely manner.

Register of Shareholders; Record Dates; Transfer of Shares

Our Company is obliged to maintain a register of shareholders at its registered office or, with the approval of its shareholders by way of a special resolution and with prior intimation to the Registrar of Companies, at some other place in the same city. For the purpose of determining the shares entitled to annual dividends, the register is closed for a specified period prior to the annual general meeting. The date on which this period begins is the record date.

To determine which shareholders are entitled to specified shareholder rights, we may close the register of shareholders. The Companies Act requires us to give at least seven days’ prior notice to the shareholders before such closure. We may not close the register of shareholders for more than thirty consecutive days, and in no event for more than forty-five days in a year.

Following the introduction of the Depositories Act, 1996, as amended, and the repeal of Section 22A of the Securities Contracts (Regulation) Act, 1956, as amended, which enabled companies to refuse to register transfers of shares in some circumstances, the equity shares of a public company are freely transferable, subject only to the provisions of Section 58 (1) of the 2013 Companies Act. Since we are a public limited company, the provisions of Section 58 (1) will apply to us. Our Articles of Association currently contain provisions which give our directors discretion to refuse to register a transfer of shares in some circumstances. Furthermore, in accordance with the provisions of Section 58 (4) of the Companies Act, our directors may refuse to register a transfer of shares if they have sufficient cause to do so. If our directors refuse to register a transfer of shares, the shareholder wishing to transfer his, her or its shares may file a civil suit or an appeal with the Company Law Board (till National Company Law Tribunal is constituted under Section 408 of the 2013 Companies Act). Pursuant to Section 59 (4) of the Companies Act, if a transfer of shares contravenes any of the provisions of the Securities and Exchange Board of India Act, 1992 or the regulations issued there- under or the Sick Industrial Companies (Special Provisions) Act, 1985 or any other Indian laws, the Company Law Board (National Company Law Tribunal as and when operational) may, on application made by the company, a depository incorporated in India, an investor, the Securities and Exchange Board of India or other parties, direct the rectification of the register of records. The Company Law Board (National Company Law Tribunal as and when operational) may, in its discretion, issue an interim order suspending the voting rights attached to the relevant shares before making or completing its investigation into the alleged contravention. Notwithstanding such investigation, the rights of a shareholder to transfer the shares will not be restricted.

Under the Companies Act, unless the shares of a company are held in dematerialized form, a transfer of shares is effected by an instrument of transfer in the form prescribed by the Companies Act and the rules there-under together with delivery of the share certificates.

Disclosure of Ownership Interest

Section 89 of the Companies Act requires beneficial owners of shares of Indian companies who are not holders of record to declare to us details of the holder of record and the holder of record to declare details of the beneficial owner. Any person who fails to make the required declaration within 30 days may be liable for a fine of up to ₹50,000 and if the failure continues, with a fine of ₹1,000 for each day the declaration is not made. Any lien, promissory note or other collateral agreement created, executed or entered into with respect to any equity share by its registered owner, or any hypothecation by the registered owner of any equity share, shall not be enforceable by the beneficial owner or any person claiming through the beneficial owner if such declaration is not made. Failure to comply with Section 89 will not affect our obligation to register a transfer of shares or to pay any dividends to the registered holder of any shares pursuant to which the declaration has not been made. While it is unclear under Indian law whether Section 89 applies to holders of ADS, investors who exchange ADS for the underlying Equity Shares will be subject to the restrictions of Section 89. The provisions of Section 89 of the Companies Act do not, however, apply to a trustee holding shares of a company for the benefit of the beneficiaries of a trust.

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Audit and Annual Report

From fiscal 2015, our Company's audited financial statements, and consolidated audited financial statements of our Company and all its subsidiaries (as defined under the Companies Act for the relevant Fiscal Year, the directors' report and the auditors' report (collectively the "Annual Report"), must be laid before the annual general meeting. The Annual Report must be distributed by our Company to our shareholders at least 21 days before the annual general meeting of shareholders (excluding the days of mailing and date of meeting), including a detailed version of our audited balance sheet and profit and loss account and the related reports of the Board and the auditors, together with a notice convening the annual general meeting.

Pursuant to a green initiative, Indian companies are permitted to effect service of documents to its members through an electronic mode, provided the company has obtained e-mail addresses of its members for sending the documents through e-mail. In cases where any member has not registered his e-mail address with the company, service of documents will be effected by other modes of service.

Company Acquisition of Equity Shares

We are prohibited from acquiring its own Equity Shares unless the consequent reduction of capital is effected by a special resolution of its Shareholders voting on the matter in accordance with the 2013 Companies Act. Moreover, other than in certain exceptions, our Company is prohibited from giving, whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any Shares in our Company or its holding company.

Under the Companies Act, a company may purchase its own shares or other specified securities out of its free reserves, the securities premium account or the proceeds of any shares or other specified securities (other than the kind of shares or other specified securities proposed to be bought back), subject to certain conditions, including:

(i) the buyback being authorised by the articles of association of our Company;

(ii) the buyback being authorised by a special resolution passed by our shareholders in a general meeting of our company;

(iii) the buyback is for less than 25 per cent of the total paid-up capital and free reserves, provided that the buyback of Equity Shares in any financial year shall not exceed 25 per cent of the total paid-up equity share capital in that year;

(iv) the ratio of the debt (including all amounts of unsecured and secured debt) owed by our company after buyback is not more than twice the capital and free reserves after such buyback; and

(v) all the shares or other specified securities for buyback are fully paid up.

No shareholder approval is required if the buyback is for less than 10 per cent of the total paid-up equity capital and free reserves of our Company, provided that such buyback has been authorized by the board of directors of our Company. Further, a company, after buying back its securities, is not permitted to buy back any securities for a period of 365 days from the buyback or to issue new securities for six months from the buyback date except by way of bonus issue or the conversion of warrants, sweat equity, stock option schemes, preference shares or debentures into equity shares.

Each buyback has to be completed within a period of 12 months from the date of the passing of the special resolution or the resolution of the board of directors, as the case may be.

A company buying back its securities is required to extinguish and physically destroy the securities bought back within seven days of the last date of completion of the buyback.

A company is also prohibited from purchasing its own shares or specified securities (i) through any subsidiary company, or (ii) through any investment company or group of investment companies (other than a purchase of shares in accordance with a scheme that is in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2015 (erstwhile SEBI (Employee Stock Option Schemes and Employee Stock Purchase Schemes) Guidelines, 1999) and clause 35C of the Listing Agreement, for the purchase or subscription of shares by trustees of, or for shares to be held by or for the benefit of employees of our Company) (iii) or if our Company is defaulting on the repayment of deposit or interest, redemption of debentures or preference shares or payment of dividend to a shareholder or repayment of any term loan or interest payable thereon to any financial institution or bank. If we become listed and wish to buy back our shares or specified securities for the purpose of delisting our shares or specified securities or in the event of non-compliance with certain other provisions of the Companies Act, then the buyback of securities can be from existing security holders on a proportionate basis or from the open market or from odd lots or by purchasing securities issued to the employees of our Company pursuant to a scheme of stock option or sweat equity.

79

Alteration of Shareholder Rights

Under the Companies Act, and subject to the provisions of the articles of association of a company, the rights of any class of shareholders can be altered or varied (i) with the consent in writing of the holders of not less than three-fourths of the issued shares of that class; or (ii) by special resolution passed at a separate meeting of the holders of the issued shares of that class. However, if the variation by one class of shareholders affects the rights of any other class of shareholders, the consent of three-fourths of such other class of shareholders shall also be required. In the absence of any such provision in the articles, such alteration or variation is permitted as long as it is not prohibited by the terms of the issue of shares of such a class.

Limitations on the Rights to Own Securities

The limitations on the rights to own securities of Indian companies, including the rights of non-resident or foreign shareholders to hold securities, are discussed in the sections entitled ‘Currency Exchange Controls’ and ‘Risk Factors’ in this Annual Report on Form 20-F.

Provisions on Changes in Capital

Our authorized capital can be altered by an ordinary resolution of the shareholders in a General Meeting. The additional issue of shares is subject to the pre-emptive rights of the shareholders. In addition, a company may increase its share capital, consolidate its share capital into shares of larger face value than that of its existing shares or sub-divide its shares by reducing their par value, subject to an ordinary resolution of the shareholders in a General Meeting.

Liquidation Rights

In the event that our Company is wound up, and the assets available for distribution among the shareholders as such are insufficient to repay the whole of the paid up capital, such assets shall be distributed so that as nearly as may be, the losses shall be borne by the shareholders in proportion to the capital paid up or which ought to have been paid up at the commencement of the winding up on the shares held by them respectively and if in a winding up the assets available for distribution among the shareholders is more than sufficient to repay the whole of the paid up capital at the commencement of the winding up the excess shall be distributed amongst the shareholders but this shall be without prejudice to the rights of shareholder registered in respect of shares issued upon special terms and conditions.

Material Contracts

None.

Documents on Display

This annual report and other information filed or to be filed by the Company can be inspected and copied at the public reference facilities maintained by the SEC at:

Office of Investor Education and Assistance

100 F Street, NE

Washington, D.C. 20549

You may obtain information on the operation of the Public Reference Room by calling the SEC at 1800-SEC-0330.

Copies of these materials can also be obtained upon written request from the U.S. Securities and Exchange Commission, Office of Investor Education and Assistance, by mail: 100 F Street, NE, Washington, D.C. 20549, or by e-mail: PublicInfo@sec.gov

80

The SEC maintains a website at www.sec.gov that contains reports and other information regarding registrants that make electronic filings with the SEC using its EDGAR system.

Additionally, documents referred to in this Form 20-F may be inspected at our registered office, which is located at Mahalaxmi Engineering Estate, 1st Floor, L.J. First Cross Road, Mahim (West), Mumbai 400 016, India.

81

EXHIBIT INDEX

Exhibit No.	Description of Document
*1.1	Articles of Association, as amended.
*1.2	Memorandum of Association, as amended.
*1.3	Certificate of Incorporation, as amended.
*2.1(a)	Form of Deposit Agreement among Rediff.com, Citibank, N.A., and holders from time to time of American Depository Receipts issued thereunder (including as an exhibit, the form of American Depository Receipt).
**2.1(b)	Form of Amendment Number 1 to Deposit Agreement among Rediff.com, Citibank, N.A., and holders from time to time of American Depository Receipts issued thereunder.
*2.2	Rediff.com’s specimen certificate for equity shares.
*2.3	Amended and Restated Shareholder Rights Agreement dated February 24, 2000 between Rediff.com and the shareholders of Rediff.com.
***4.3	2002 Stock Option Plan.
****4.4	2004 Stock Option Plan.
*******4.5	2006 Employee Stock Option Plan.
********4.6	2006 ADR Linked Employee Stock Option Plan.
*4.7	Form of Indemnification Agreement.
*******4.8	Indemnification Agreement dated November 8, 2005 between Rediff.com and Sridar A. Iyengar.
*******4.9	Indemnification Agreement dated November 8, 2005 between Rediff.com and Ashok Narasimhan.
*******4.10	Indemnification Agreement dated November 8, 2005 between Rediff.com and Pulak Chandan Prasad.
*4.13	Letter Agreement dated December 28, 1998 between Rediffusion-Dentsu, Young & Rubicam Limited and Rediff.com.
*4.14	Promoters Agreement dated January 9, 1996 between Ajit Balakrishnan and Diwan Arun Nanda.
†4.15	Purchase Agreement dated July 29, 2015 between Rediff.com and Lincoln Park Capital Fund, LLC.
†4.16	Registration Right Agreement dated July 29, 2015 between Rediff.com and Lincoln Park Capital Fund, LLC.
†12.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†12.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†13.1	Certification of Principal Executive Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†13.2	Certification of Principal Financial Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†15.1	Consent of Independent Registered Public Accounting Firm

*	Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form F-1 (File No. 333-37376).
*	Incorporated by reference to exhibits filed with the Registrant’s Form 20-F for the fiscal year ended March 31, 2001.
**	Incorporated by reference to Exhibit (a)(i) to the Post Effective Amendment to Form F-6, filed on August 2,2012.
***	Incorporated by reference to exhibits filed with the Registrant’s Form 20-F for the fiscal year ended March 31, 2003.
****	Incorporated by reference to exhibits filed with the Registrant’s Form S-8 filed on December 30, 2004.
*****	Incorporated by reference to exhibits filed with the Registrant’s Form 20-F for the fiscal year ended March 31, 2004.
******	Incorporated by reference to exhibits filed with the Registrant’s Form 6-K filed on November 9, 2005.
*******	Incorporated by reference to exhibits filed with the Registrant’s Form 20-F for the fiscal year ended March 31, 2006.
********	Incorporated by reference to exhibits filed with the Registrant’s Form 20-F for the fiscal year ended March 31, 2007.
†	Filed herewith.

82

INDEX TO FINANCIAL STATEMENTS

	Page(s)
Reports of Independent Registered Public Accounting Firm	F-2 – F-3
Consolidated Balance Sheets as of March 31, 2014 and  2015	F-4
Consolidated Statements of Comprehensive loss for the years ended March 31, 2013, 2014 and 2015	F-5
Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2013, 2014 and 2015	F-6
Consolidated Statements of Cash Flows for the years ended March 31, 2013, 2014 and  2015	F-7
Notes to Consolidated Financial Statements	F-8 – F-32

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Rediff.com India Limited

Mumbai, India

We have audited the accompanying consolidated balance sheets of Rediff.com India Limited and subsidiaries (“the Company”) as of March 31, 2015 and 2014, and the related consolidated statements of comprehensive loss, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Rediff.com India Limited and subsidiaries as of March 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of March 31, 2015, based on the criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 31, 2015 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE HASKINS & SELLS LLP

Chartered Accountants

Mumbai, India

July 31, 2015

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Rediff.com India Limited

Mumbai, India

We have audited the internal control over financial reporting of Rediff.com India Limited and subsidiaries (“the Company”) as of March 31, 2015, based on the criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Item 15 under Controls and Procedures of the accompanying Form 20-F titled Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2015, based on the criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended March 31, 2015 of the Company and our report dated July 31, 2015 expressed an unqualified opinion on those financial statements.

/s/ DELOITTE HASKINS & SELLS LLP

Chartered Accountants

Mumbai, India

July 31, 2015

F-3

REDIFF.COM INDIA LIMITED

CONSOLIDATED BALANCE SHEETS

as of March 31, 2014 and 2015

	2014			2015
	US$			US$
Assets
Current Assets
Cash and cash equivalents		17,151,189			8,294,761
Trade accounts receivable (net of allowances of US$618,054 and US$625,917  as of March 31, 2014 and 2015, respectively)		3,137,099			2,475,913
Prepaid expenses and other current assets (See Note 4)		986,149			1,273,015
Total current assets		21,274,437			12,043,689
Property, plant and equipment – net (See Note 5)		3,571,222			—
Recoverable taxes		1,149,031			1,195,469
Other non-current assets (See Note 9)		1,458,849			893,814
Total non-current assets		6,179,102			2,089,283
Total assets		27,453,539			14,132,972
Liabilities and Shareholders’ Equity
Liabilities
Current liabilities
Accounts payable and accrued liabilities (See Note 10)		4,783,412			5,200,972
Customer advances and unearned revenues		1,772,273			1,783,414
Total current liabilities		6,555,685			6,984,386
Other non-current liabilities (See Note 11)		938,999			1,004,317
Total liabilities		7,494,684			7,988,703
Commitments and contingencies (See Note 24)
Shareholders’ Equity
Equity shares: par value – Rs.5, Authorized: 24,000,000 equity shares as of March 31, 2014 and 2015; Issued: 14,810,178 equity shares as of March 31, 2014 and 2015 and outstanding 13,795,178 equity shares as of March 31, 2014 and 2015		1,756,726			1,756,726
Additional paid-in-capital		132,195,927			132,622,632
Accumulated other comprehensive loss		(14,389,651	)		(14,818,372	)
Accumulated deficit		(95,177,542	)		(108,990,112	)
Treasury shares, at cost (See Note 12) (1,015,000 equity shares as of March 31, 2014 and  2015)		(4,426,605	)		(4,426,605	)
Total shareholders’ equity		19,958,855			6,144,269
Total liabilities and shareholders’ equity		27,453,539			14,132,972

See accompanying notes to the consolidated financial statements

F-4

REDIFF.COM INDIA LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For each of the years ended March 31, 2013, 2014 and 2015

	2013			2014			2015
	US$			US$			US$
Revenues
India Online		12,527,464			13,368,042			13,095,126
U.S. Publishing		3,131,240			2,752,755			2,243,050
Total revenues		15,658,704			16,120,797			15,338,176
Cost of revenues (excluding depreciation and amortization separately disclosed below) (See Note 13)
India Online		7,470,935			8,330,948			8,854,598
U.S. Publishing		2,480,949			2,082,116			1,981,319
Total cost of revenues		9,951,884			10,413,064			10,835,917
Operating expenses
Sales and marketing (See Note 14)		3,266,790			3,896,073			5,478,876
Product development		2,920,824			2,287,488			2,323,759
Depreciation and amortization		3,664,376			3,060,269			1,719,327
General and administrative		7,615,588			7,239,847			6,689,128
Goodwill Impairment (See Note 7)		2,000,000			—			—
Long-lived assets impairment (See Note 5 and 8)		—			1,590,371			3,200,089
Foreign exchange loss (gain), net		103,744			(26,003	)		123,274
Total operating expenses		19,571,322			18,048,045			19,534,453
Operating loss		(13,864,502	)		(12,340,312	)		(15,032,194	)
Other income (expense), net
Interest income		1,952,345			1,334,610			923,692
Interest income on income tax refunds		44,529			613,698			77,764
Promissory note impairment (See Note 9)		(1,100,000	)		—			—
Gain on sale of investment (See Note 6)		—			2,740,940			—
Gain on sale of equity method investee (See Note 6)		1,292,168			—			—
Miscellaneous income		125,679			26,884			232,959
Total other income, net		2,314,721			4,716,132			1,234,415
Loss before income taxes and equity in net loss of equity method investees		(11,549,781	)		(7,624,180	)		(13,797,779	)
Income tax benefit (expense) (See Note 17)		33,248			152,774			(14,791	)
Equity in net earnings (loss) of equity method investees		84,310			—			—
Net loss		(11,432,223	)		(7,471,406	)		(13,812,570	)
(Loss) earnings per share – basic		(0.828	)		(0.542	)		(1.000	)
(Loss) earnings per share – diluted		(0.828	)		(0.542	)		(1.000	)
(Loss) earnings per ADS – (where 2 ADSs represent 1 equity share) – basic		(0.414	)		(0.271	)		(0.500	)
(Loss) earnings per ADS – (where 2 ADSs represent 1 equity share) – diluted		(0.414	)		(0.271	)		(0.500	)
Weighted average number of equity shares – basic		13,795,178			13,795,178			13,795,178
Weighted average number of equity shares – diluted		13,795,178			13,795,178			13,795,178
Other comprehensive income (loss)
Foreign currency translation adjustment and total other comprehensive income (loss)		(2,254,312	)		(2,857,261	)		(428,721	)
Comprehensive loss attributable to shareholders		(13,686,535	)		(10,328,667	)		(14,241,291	)

See accompanying notes to the consolidated financial statements

F-5

REDIFF.COM INDIA LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For each of the years ended March 31, 2013, 2014 and 2015

	Equity shares				Additional		Accumulated other						Treasury shares (Equity shares held by						Total
			Equity share		paid-in-		comprehensive			Accumulated			controlled trust)						shareholders’
	Number of shares		capital US$		capital US$		income (loss) US$			deficit US$			No of shares			US$			equity US$
Balance as of March 31, 2012		14,810,178		1,756,726		130,958,274		(9,278,078	)		(76,273,913	)		(1,015,000	)		(4,426,605	)		42,736,404
Stock-based compensation						756,090														756,090
Net loss											(11,432,223	)								(11,432,223	)
Foreign currency translation adjustment								(2,254,312	)											(2,254,312	)
Balance as of March 31, 2013		14,810,178		1,756,726		131,714,364		(11,532,390	)		(87,706,136	)		(1,015,000	)		(4,426,605	)		29,805,959
Stock-based compensation						481,563														481,563
Net loss											(7,471,406	)								(7,471,406	)
Foreign currency translation adjustment								(2,857,261	)											(2,857,261	)
Balance as of March 31, 2014		14,810,178		1,756,726		132,195,927		(14,389,651	)		(95,177,542)			(1,015,000	)		(4,426,605	)		19,958,855
Stock-based compensation						426,705														426,705
Net loss											(13,812,570	)								(13,812,570	)
Foreign currency translation adjustment								(428,721	)											(428,721	)
Balance as of March 31, 2015		14,810,178		1,756,726		132,622,632		(14,818,372	)		(108,990,112	)		(1,015,000	)		(4,426,605	)		6,144,269

See accompanying notes to the consolidated financial statements

F-6

REDIFF.COM INDIA LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

For each of the years ended March 31,

	2013			2014			2015
	US $			US $			US $
Cash flows from operating activities
Net loss		(11,432,223	)		(7,471,406	)		(13,812,570	)
Adjustments to reconcile net loss to net cash generated from operating activities:
Gain on sale of investment in equity method investee		(1,292,168	)		—			—
Goodwill impairment		2,000,000			—			—
Long-lived assets impairment		—			1,590,371			3,200,089
Gain on sale of investment		—			(2,740,940	)		—
Equity in net loss (earnings) of equity method investees		(84,310	)		—			—
Depreciation and amortization		3,664,376			3,060,269			1,719,327
Allowances / (write-back) for doubtful trade accounts		(48,580	)		190,493			41,509
Promissory note impairment		1,100,000			—			—
Loss (profit) on sale of property, plant and equipment		(1,701	)		(460	)		2,021
Stock-based compensation expense		756,090			481,563			426,705
Unrealized exchange loss (gain)		11,808			146,784			90,394
Changes in assets and liabilities:
Trade accounts receivable		2,104,717			116,034			463,392
Prepaid expenses and other current assets		449,452			9,215			(9,252	)
Accounts payable, accrued liabilities and other liabilities		1,156,450			(78,956	)		225,228
Customer advances and unearned revenues		(621,397	)		377,713			70,361
Recoverable taxes		(193,869	)		1,531,255			175,463
Other non-current assets		(109,196	)		(44,772	)		68,320
Net cash used in operating activities		(2,540,551	)		(2,832,837	)		(7,339,013	)
Cash flows from investing activities
Payments to acquire property, plant and equipment		(1,903,229	)		(1,472,422	)		(1,211,445	)
Purchase of investment		(104,987	)		—			—
Sale of investment in equity method investee		1,452,944			—			—
Sale of investment		—			3,531,935			152,447
Proceeds from sale of property, plant and equipment		7,594			7,735			2,906
Net cash generated from / (used in) investing activities		(547,678	)		2,067,248			(1,056,092	)
Cash flows from financing activities
Proceeds from issue of shares		—			—			—
Net cash generated from financing activities		—			—			—
Net decrease in cash and cash equivalents		(3,088,229	)		(765,589	)		(8,395,105	)
Cash and cash equivalents at the beginning of the year		24,545,839			20,024,483			17,151,189
Effect of exchange rate changes on cash and cash equivalents		(1,433,127	)		(2,107,705	)		(461,323	)
Cash and cash equivalents at the end of the year		20,024,483			17,151,189			8,294,761
Supplementary cash flow information:
Income taxes paid		448,393			358,587			305,768
Supplementary disclosure of non-cash investing activity:
Payables for purchase of property, plant and equipment		204,638			2,940			205,786

See accompanying notes to the consolidated financial statements

F-7

REDIFF.COM INDIA LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and business

Rediff.com India Limited (“Rediff”) was incorporated as a private limited company in India on January 9, 1996 under the Indian Companies Act, 1956 and was converted to a public limited company on May 29, 1998. Rediff’s American Depository Shares (“ADSs”) are listed on the NASDAQ Global Market.

In February 2001, Rediff established Rediff Holdings, Inc. (“RHI”), a Delaware Corporation, as a wholly-owned subsidiary to be a holding company for certain investments in the United States of America. In March 2001, Rediff acquired Value Communication Corporation (“ValuCom”). On February 27, 2001, RHI acquired thinkindia.com, Inc (“thinkindia”), later renamed Rediff.com Inc. On April 27, 2001, RHI acquired India Abroad Publications, Inc. (“India Abroad”), a print and online news company.

On November 26, 2010, Rediff acquired Vubites India Private Limited (“Vubites”) from the Chairman and Managing Director of Rediff (referred to as “the CMD”) and a principal shareholder in Rediff. Vubites enables small and local businesses to advertise on national TV channels within their city to reach their target audiences.

Rediff with its branch and subsidiaries (“the Company”) is in the business of providing online internet based services, focusing on India and the global Indian community. Its websites consists of channels relevant to Indian interests such as cricket, astrology, matchmaker and movies, content on various matters like news and finance, search facilities, a range of community features such as e-mail, chat, messenger, e-commerce, broadband wireless content and mobile value-added services to mobile phone subscribers in India. The Company also enables its customers to insert localized advertisements on national television channels by providing a platform to create an advertisement and prepare a media plan. Additionally, the Company publishes weekly newspapers ‘India Abroad’ in North America.

2. Significant accounting policies

(a) Basis of preparation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

In the year ended March 31, 2015, the Company incurred a net loss of US$ 13,812,570, had an accumulated deficit of US$108,990,112, and net cash outflows of US$8,395,105. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has carried out a review of its cash flow forecast for a period of twelve months from the date of these financial statements considering historical cash requirements and has taken the assumption that there will not be any significant decline in advertising revenues and an increase in e-commerce marketplace fees. As described in Note 26, the Company has entered into an arrangement with an investor in accordance with which the Company, at its option, has the right to obtain financing subject to certain conditions, in exchange for issuance of ADS.

On the basis of the factors stated in the preceding paragraph, the Company believes it will have sufficient resources to meets its obligations as they become due within one year from the date of these financial statements

(b) Basis of consolidation

The consolidated financial statements include the financial statements of Rediff and its wholly – owned subsidiaries and variable interest entity (VIE) in which the Company is the primary beneficiary. All inter-company accounts and transactions are eliminated on consolidation.

(c) Investments in equity method investees

Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise control, are accounted for using the equity method. The Company records its share of the results of these companies in the consolidated statement of comprehensive loss as equity in net earnings (loss) of equity method investees. The Company reviews its investments for other-than-temporary impairment whenever events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable. Investments identified as having an indication of impairment are subject to further analysis to determine if the impairment is other-than-temporary and this analysis requires estimating the fair value of the investment. The determination of fair value of the investment involves considering factors such as current economic and market conditions, the operating performance of the companies including current earnings trends and forecasted cash flows, and other company and industry specific information. Measurement of any impairment loss is based on its excess of the carrying value of the investment over its fair value.

F-8

(d) Use of estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles (US GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities on the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include allowances for doubtful trade accounts receivables, impairment of goodwill, property, plant and equipment, intangible and investments, useful lives of property, plant and equipment and intangible assets, valuation of deferred tax assets, stock based compensation and employee benefits. Actual results could differ from those estimates.

F-9

(e) Revenue recognition

India Online business

India Online business includes revenues from advertising, sponsorship and fee based services. Advertisement and sponsorship income is derived from customers who advertise on our website or from targeted mailers to Rediffmail subscribers. Fee based services include fee we earn from our e-commerce marketplace, subscription fees for our email services and our share of revenues from mobile value added services.

Revenue from display advertisement is recognized as impressions of or clicks on display advertisements are delivered or broadcast. Impressions are delivered when a sold advertisement appears in pages viewed by users. Clicks are delivered when a user clicks on the advertisement. Revenues are also derived from sponsor links placed in specific areas of the Company’s website, which generally provide users with direct links to sponsor websites. Revenue from sponsor link is recognized ratably over the period in which the advertisement is displayed, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Company obligations may include guarantees of a minimum number of impressions, or times, that an advertisement appears in pages viewed by users of the Company’s website. To the extent that minimum guaranteed impressions are not met, the Company defers recognition of the corresponding revenues until the guaranteed impression levels are achieved. The Company also earns revenues from the sending of mail shots to its users on behalf of advertisers and such revenues are recognized on delivery. We report our online advertisement revenues on a gross basis principally because we are the primary obligor to our advertisers.

E-commerce marketplace fee, which is comprised of the commission and shipping revenue is recognized after receipt of confirmation that the online customer has accepted delivery of the goods. The cost of incentives provided to online customers like coupons and promo codes are reduced from revenue and where such incentives exceed the revenue amount, the excess is recognized as cost of revenue.

Subscription service revenue which is comprised of subscription fees for email and related services provided to small and large enterprises is deferred and recognized pro rata over the terms of such subscription.

Mobile value-added services revenues are derived from providing value added short messaging services (“SMS”), ring tones, picture messages, logos, wallpapers and other related services to mobile phone users. The Company contracts with third-party mobile phone operators for sharing revenues from this service. Mobile value- added services revenue is recognized when this service is rendered.

US Publishing business

US Publishing business primarily include advertising and sponsorship revenues and consumer subscription revenues earned from the publication of India Abroad, a weekly newspaper distributed primarily in the United States. It also includes the advertising revenues of Rediff India Abroad, the website catering to the Indian community in the United States.

Advertising revenues are recognized at the time of publication of the related advertisement. Subscription income is deferred and recognized pro rata as fulfilled over the terms of such subscription.

Revenues from banners and sponsorships are recognized over the contractual period of the advertisement, commencing when the advertisement is placed on the website, provided that no significant obligations remain and collection of the resulting receivable is probable. Obligations may include guarantee of a minimum number of impressions, or times that an advertisement appears in pages viewed by users of the Company’s website. To the extent that minimum guaranteed impressions are not met, the Company defers recognition of the corresponding revenues until the guaranteed impression levels are achieved.

(f) Costs and expenses

Costs and expenses have been classified according to their primary functions in the following categories:

Cost of revenues

Cost of revenues primarily include cost of content for the Rediff websites, editorial costs, shipping cost, employee compensation, stock-based compensation, internet communication, data storage, software usage, printing and circulation costs for the India Abroad and India in New York newspapers and fee based services related costs.

F-10

Sales and marketing

Sales and marketing expenses primarily include employee compensation for sales and marketing personnel, advertising and promotion expenses, market research costs and stock-based compensation. The costs of advertising are expensed as and when incurred.

Product development

Product development costs primarily include software development expenses, compensation of product development personnel and stock-based compensation. Internal and external costs incurred to develop internal use software during application development stage is capitalized when the Company’s managing director has authorized and committed to funding the development, and it is probable that the software development will be completed and the software will perform the function intended. Upgrades and enhancements are capitalized only when these relate to additional features or result in additional functionality which the existing software is incapable of performing. All costs incurred during the preliminary project and post implementation and operation stages are expensed as incurred.

General and administrative

These costs primarily include employee compensation of administrative and supervisory staff whose time is mainly devoted to strategic and managerial functions, rent, insurance premiums, electricity, telecommunication costs, legal and professional fees, stock-based compensation costs and other general expenses.

(g) Cash and cash equivalents

The Company considers all highly liquid investments with a maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

Cash and cash equivalents consist of cash on hand, balances in current accounts, deposits with banks which are unrestricted as to withdrawal and use.

(h) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation. The Company computes depreciation for all property, plant and equipment using the straight-line method so as to expense the costs over the estimated useful lives of assets. The estimated useful lives of assets are as follows:

Furniture and fixtures	10 years
Computer equipment and software	1 to 3 years
Office equipment	3 to 10 years
Vehicles	8 years
Leasehold improvements	6 years
Website development costs	3 to 5 years

Capital work-in-progress is not depreciated until the construction and installation of the asset is complete, and the asset is available for use.

(i) Website development costs

Costs incurred in the operations stage that provides additional functions or features to the Company’s website are capitalized. The estimated useful life is evaluated for each specific project and ranges from three to five years. Maintenance expenses or costs that do not result in significant new features or functions are expensed as product development costs.

(j) Investments, at cost

Securities that do not have readily determinable fair market values are recorded at cost, subject to an impairment charge for any other than temporary decline in value. The fair values of these securities are not estimated if there are no events or changes in circumstances that may have a significant effect on the fair value. It is not practicable to estimate the fair value of these securities.

(k) Business Combination

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. Acquisition related costs are recognized in statement of comprehensive loss as incurred. The acquiree’s identifiable assets and liabilities are recognized at their fair value at the acquisition date.

F-11

Purchase consideration in excess of the identifiable assets and liabilities is recognized as goodwill. Gain resulting from excess of the acquiree’s identifiable assets and liabilities over the purchase consideration is recognized, after reassessment, in the statement of comprehensive loss.

(l) Goodwill

Goodwill represents the excess of purchase consideration over the fair values of the aquiree’s identifiable assets acquired and liabilities assumed in a business combination. Goodwill is assessed for impairment on an annual basis on January 1 or earlier when events or circumstances indicate that the carrying amount of goodwill exceeds its implied fair value.

Goodwill impairment assessment is a two-step test. The first step compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the impairment loss amount, if any.

The Company uses an income-based valuation approach to determine the fair value of the reporting unit by estimating the present value of future cash flows after considering current economic conditions and trends, estimated future operating results and growth rates, anticipated future economic and regulatory conditions and availability of necessary technology.

When required to perform the second step, the Company compares the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount exceeds the implied fair value, an impairment loss equal to that excess amount is recognized, not to exceed the goodwill carrying amount. The Company determines the implied fair value of goodwill for a reporting unit by assigning the fair value of the reporting unit to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of the goodwill. This assignment process is only for purposes of testing goodwill impairment and the Company does not adjust the carrying amounts of the recognized assets and liabilities (other than goodwill, if appropriate) or recognize previously unrecognized intangible assets in the consolidated balance sheet as a result of this assignment process.

(m) Foreign currency

The accompanying consolidated financial statements have been presented in US dollars as the reporting currency. The functional currency of Rediff is the Indian Rupee (“Rs.” or “Rupee”) while that of its subsidiaries domiciled in the United States is the US dollar and in Canada is the Canadian dollar. Transactions in foreign currency are recorded at the original rates of exchange prevailing at the time of the transactions. Monetary assets and liabilities denominated in foreign currency are restated using the exchange rates prevailing at the date of the balance sheet. Exchange differences arising on settlement of transactions and restatement of monetary assets and liabilities at the balance sheet date are recognized in the statement of comprehensive loss.

For the purposes of presenting the consolidated financial statements, Rupees have been converted into US dollars for balance sheet accounts using the exchange rate in effect at the balance sheet date, and for revenue and expense accounts using a monthly weighted-average exchange rate. The gains or losses resulting from such translation are reported as other comprehensive income or loss.

(n) Earnings per share

Basic earnings per share has been computed by dividing the net income (loss) from operations by the weighted average number of equity shares outstanding during the period, including equity share equivalents for ADSs issued. Diluted earnings per share is computed using the weighted average number of equity shares including equity share equivalents for ADSs issued and dilutive potential equity shares outstanding during the period, using the treasury stock method for options, except where the results would be anti-dilutive. Dilutive potential equity shares consist of the incremental equity shares issuable upon the exercise of stock options. The Company also reports earnings (loss) per ADS, where two ADSs represent one equity share.

F-12

(o) Income taxes

Income taxes consist of current income taxes and the change in the deferred tax balances during the year. Deferred tax assets and liabilities are recognized for each entity and taxing jurisdiction for future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities and their respective tax bases and net operating loss carry-forwards, measured using the enacted tax rates expected to apply in the years in which such temporary differences are expected to be recovered or settled. The effect of changes in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain.

The Company evaluates each tax positions to determine if it is more likely than not that a tax position is sustainable, based on its technical merits. If a tax position does not meet the more likely than not threshold, a liability is recorded. Additionally, for a position that is determined to, more likely than not, be sustainable, the Company measures the benefit at the highest cumulative probability of greater than 50% of being realized and establish a liability for the remaining portion.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. Interest income on repayment of income taxes is presented separately in the statement of comprehensive loss as an element of other income (expense), net.

(p) Impairment or disposal of long-lived assets (excluding goodwill)

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable. The Company subjects such long-lived assets to a test of recoverability based on the undiscounted cash flows expected from use or disposition of such assets. Such events or circumstances would include changes in the market, technological obsolescence and adverse changes in profitability or regulation. If the asset is impaired, the Company recognizes an impairment loss as the difference between the estimated fair values determined using discounted cash flows and the carrying value of the asset. Assets to be disposed of are reported at the lower of the carrying value or the fair value less the cost to sell.

(q) Intangible assets

Intangible assets consist of customer contracts and intellectual property carried at cost and amortized over their estimated useful lives, generally on a straight-line basis over three and seven years, respectively, that best reflects the economic benefits of the intangible assets.

(r) Stock-based compensation

The Company measures the cost of services received from employees, associates, retainers and non-employee directors in exchange for share based compensation at the grant date fair value award. The Company recognizes stock-based compensation on a straight line basis over the vesting period.

(s) Allowances for doubtful trade accounts receivable

The Company establishes an allowance for doubtful accounts on trade accounts receivable after considering the financial condition of the customer, ageing of the accounts receivable, historical experience and the current economic environment. Trade accounts receivable balances are written off against allowances only after all means of collections have been exhausted and potential of recovery is considered remote.

(t) Employee benefit

Gratuity

The Company provided for gratuity, a defined benefit retirement plan (the Gratuity Plan) covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Vesting occurs upon completion of five years of service. The defined benefit liability is determined by actuarial valuation, at each balance sheet date, using the projected unit credit method.

Provident fund

Eligible employees of the Company receive benefits from a provident fund, a defined contribution plan. Both the employee and the Company make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee’s salary. Amounts collected under the provident fund plan are deposited in a government administered provident fund. The Company’s contribution to fund the benefits is expensed as incurred.

F-13

Compensated absences

The Company provided the compensated absences liability for the amounts to be paid as a result of employee’s rights to compensated absences in the year in which it is earned.

(u) Comprehensive income (loss)

Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Comprehensive income (loss) for the periods presented includes net income (loss) and foreign currency translation adjustments.

3. New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with early application not permitted. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on the Company’s financial position, results of operations and cash flows.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern. The amendments in this ASU provides guidance about managements responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as going concern and to provide related disclosures. In accordance with this guidance, in connection with preparing financial statements, an entity’s management should evaluate whether there are conditions or events considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810) - Amendments to the Consolidation Analysis”, which provides guidance for reporting entities that are required to evaluate whether they should consolidate certain legal entities. In accordance with ASU 2015-02, all legal entities are subject to reevaluation under the revised consolidation model. ASU 2015-02 is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2015-02 on its consolidated financial statements.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets comprise:

	As of March 31,
	2014		2015
	US$		US$
Prepaid expenses		513,348		482,149
Supplier advances		193,871		156,828
Rent deposits		39,434		20,125
Other advances and deposits		38,122		28,881
Loans to employees		48,927		50,370
Amount receivable on sale of investment (See Note 6)		152,447		461,545
Accrued interest		-		73,117
Total		986,149		1,273,015

F-14

5. Property, Plant and Equipment

Property, plant and equipment comprise:

	As of March 31,
	2014			2015
	US$			US$
Furniture and fixtures		367,535			224,163
Computer equipment and software		17,873,525			13,623,704
Office equipment		276,115			242,401
Vehicles		251,362			228,976
Leasehold improvements		444,467			399,271
Website development costs		4,110,523			4,276,892
Property, plant and equipment – at cost		23,323,527			18,995,407
Less: Accumulated depreciation and amortization		(20,160,336	)		(16,655,463	)
		3,163,191			2,339,944
Currency translation adjustment		(1,994	)		73,606
Capital work-in-progress		649,026			786,539
		3,810,223			3,200,089
Less: Impairment loss		(239,001	)		(3,200,089	)
Property, plant and equipment – net		3,571,222			—

In fiscal 2015, the Company has recognized an impairment loss of US$ 3,200,089 on its Property, plant and equipment relating to its India Online business. India Online business includes revenue from advertising and fee based services. The impairment was on account of significant decline in advertisement revenue as there has been a continued reduction in spends by customers which is consistent with industry trends. As a consequence the Company has been experiencing a decline in its display advertisement revenue, and incurring net operating cash losses. The fair value of the India Online business asset group is insignificant.

In fiscal 2014, the Company had recognized an impairment loss of US$199,621 mainly in respect of computer equipment relating to its subsidiary Vubites (see note 8). Additionally, in fiscal 2014, the Company abandoned an application related project included in ‘Capital work-in-progress’ and as a result impaired an amount of US$39,380.

In the fiscal years 2013, 2014 and 2015, the Company incurred depreciation and amortization expense of US$3,249,417, US$2,688,989 and US$1,719,327 respectively.

6. Investments

Investment, cost method

During the fiscal year ended March 31 2014, the Company sold its investment in Runa Inc. for a total consideration of US$4,145,927 and recognized a gain of US$2,740,940. An amount of US$ 613,992 of the total consideration has been held in escrow for certain representations and warranties contained in the sale agreement. These representations and warranties have been assessed as accurate and the fair value of any obligation resulting from these representations and warranties is insignificant. Of the total amount held in escrow US$ 461,545 which were recoverable by April, 2015 has been subsequently received by the Company.

Investments in equity interest

The Company’s investments in equity method investees interest were as follows:

	Percent of ownership of equity shares
Tachyon Technology Private Limited (Impaired in fiscal 2011)		26	%
Imere Technology Private Limited (up to October 8, 2012)		44	%
Bigslick Infotech Private Limited (Impaired in fiscal 2010)		37	%

F-15

The following table presents financial information for equity method investees:

	For years ended March 31,
	2013#		2014		2015
	US$		US$		US$
Revenues		320,005		—		—
Total costs		72,910		—		—
Profit (loss) from operations		247,095		—		—
Earnings (loss) attributable to Rediff*		84,310		—		—

# Information provided for the period ended October 8, 2012, relates to Imere Technology Private Limited which was sold as on same date.

During the fiscal year ended March 31, 2013, the Company sold its investment in Imere Technology Private Limited for a consideration of US$1,452,944 and recorded a gain of US$1,292,168 and included as “Gain on sale of equity method investee” in consolidated statement of comprehensive loss.

7. Goodwill

The Company’s goodwill is in respect of its acquisition of India Abroad. The goodwill has been allocated to the US Publishing business, reporting unit.

F-16

The changes in the carrying amount of goodwill for the fiscal years ended March 31, 2014 and 2015 were as follows:

	For the year ended March 31,
	2014						2015
	Gross		Accumulated impairment		Net		Gross		Accumulated impairment		Net
	US$		US$		US$		US$		US$		US$
As at beginning of the year		10,515,168		10,515,168		—		10,515,168		10,515,168		—
As at end of the year		10,515,168		10,515,168		—		10,515,168		10,515,168		—

In fiscal year 2013, the Company recognized a goodwill impairment loss of US$2,000,000. The impairment was on account of the weakness in the publishing industry which resulted in reduction of the US publishing business’s projected operating results and estimated future cash flows. The Company used an income-based valuation approach to determine the fair value of the reporting unit by estimating the present value of future cash flows after considering current economic conditions and trends, estimated future operating results and growth rates.

8. Intangible assets, net

The following table summarizes the carrying amount of intangible assets:

	As of March 31, 2014
	Gross carrying value		Accumulated amortization		Impairment loss		Net carrying value
	US$		US$		US$		US$
Customer contracts		12,383		12,383		-		-
Intellectual property		2,605,644		1,254,274		1,351,370		-
Total intangible assets, net		2,618,027		1,266,657		1,351,370		-

Customer contracts and intellectual property are amortized on a straight line basis over a period of three and seven years, respectively. The Company recognized amortization expense of intangible assets of US$414,959 and US$371,280 in fiscal 2013 and 2014, respectively.

The impairment loss relates to the Company’s subsidiary Vubites which enables businesses to advertise locally (targeted advertising in local and specific cities in India) on national television channels. Vubites offers web based tools for small businesses to create low cost advertisement for television broadcast. This business is dependent on effective splicing and sale to local businesses in different cities of broadcasting spots purchased from national television channels. The impairment resulted from similar targeted advertising services now being offered directly by the television channels and on account of aggressive sales and marketing strategy launched by competitors which have provided them with deeper market access. The fair value of the reporting unit is insignificant.

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9. Other non-current assets

Other non-current assets comprise:

	As of March 31,
	2014		2015
	US$		US$
Prepaid expenses		177,659		129,517
Rent deposits		767,616		731,479
Loans to employees		52,029		32,818
Amount receivable on sale of investment (See Note - 6)		461,545		—
Total		1,458,849		893,814

The Company had subscribed to convertible promissory notes (referred to as the “notes”) issued by Examville.com LLC, for total cash consideration of US$1,100,000. During the year ended March 31, 2013, the Company recorded other than temporary impairment loss of US$1,100,000 because the Company did not expect to recover the carrying amount.

10. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities comprise:

	As of March 31,
	2014		2015
	US$		US$
Accounts payable		1,637,008		2,200,219
Accrued expenses		1,500,002		1,428,089
Taxes payable		369,314		412,667
Employee incentive payable		155,281		117,424
Other employee payables		1,056,857		976,749
Other current liabilities		64,950		65,824
Total		4,783,412		5,200,972

11. Other non-current liabilities

Other non-current liabilities comprise:

	As of March 31,
	2014		2015
	US$		US$
Unearned revenues		320,977		329,581
Retirement benefits		466,280		531,089
Other liabilities		151,742		143,647
Total		938,999		1,004,317

12. Shareholders’ equity

Treasury shares

During the fiscal year ended March 31, 2010 the Company formed Rediff.com India Limited Employee Trust (“Trust”). The Trust is controlled and administrated by senior employees of the Company. The Company is the primary beneficiary of the Trust and, accordingly has consolidated the Trust. The Trust acquired 1,015,000 shares for a consideration of US$4,426,605 and reserved these shares for benefit of Company’s employees and directors.

F-18

13. Cost of revenues

Cost of revenues includes shipping cost of US$1,164,812, US$1,815,301 and US$2,402,700 for the fiscal years ended March 31, 2013, 2014 and 2015 respectively.

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14. Sales and marketing

Sales and marketing expense includes advertising cost of US$92,135, US$313,336 and US$1,579,550 for the fiscal years ended March 31, 2013, 2014 and 2015 respectively.

15. Related party transactions

The Company’s principal related parties are its founder shareholders, directors and companies that the founder shareholders and directors control. The Company enters into transactions with such related parties in the normal course of business. Related party transactions and balances are as follows:

Product Development Expenses

During the fiscal year ended March 31, 2013, the Company incurred product development expenses (including amount capitalized) of US$95,395on account of services rendered by Tachyon Technologies Private Ltd, an equity method investee.

Trade account receivables write off

During the fiscal year ended March 31, 2013, the Company wrote off US$206,974 trade account receivables from Edelweiss Capital Services Ltd, in which a director of Rediff is shareholder and director, against the recorded allowance. The allowance for trade account receivables was recorded in the year ended March 31, 2012.

16. Retirement Benefits

Gratuity

The Company provides for gratuity on an actuarial valuation. The Company has an unfunded defined benefit retirement plan covering eligible employees in India. This plan provides for a lump-sum payment to be made to vested employees at retirement, death or termination of employment of an amount equivalent to 15 days basic salary, payable for each completed year of service. These gratuity benefits vest upon an employee’s completion of five years of service.

F-20

The following tables set out the amounts recognized in the Company’s consolidated financial statements for the fiscal years ended March 31, 2013, 2014 and 2015. The measurement date used is March 31 of the relevant fiscal year.

	2013			2014			2015
	US$			US$			US$
Change in benefit obligation
Benefit obligation at the beginning of the year		446,146			527,512			511,506
Actuarial (gain) loss		14,941			(60,402	)		27,963
Service cost		75,039			75,405			69,402
Interest cost		44,025			46,086			52,790
Benefits paid		(26,382	)		(27,314	)		(70,427	)
Effect of exchange rate changes		(26,257	)		(49,781	)		(22,184	)
Benefit obligation at the end of the year		527,512			511,506			569,050
Current – (included in other employee payables)		47,713			45,226			37,961
Non-current – (included in retirement benefits)		479,799			466,280			531,089

Accumulated benefit obligation was US$292,701 and US$319,026 as of March 31, 2014 and 2015 respectively.

Net gratuity cost for the years ended March 31, 2012, 2013 and 2014 comprise of the following:

	2013		2014			2015
	US$		US$			US$
Service cost		75,039		75,405			69,402
Interest cost		44,025		46,086			52,790
Recognized net actuarial (gain) loss		14,941		(60,402	)		27,963
Net gratuity cost		134,005		61,089			150,155

The assumptions used in accounting for gratuity in the years ended March 31, 2013, 2014 and 2015 were as follows:

	2013			2014			2015
Discount rate		8.75	%		9.60	%		8.45	%
Rate of increase in compensation		7.00	%		7.00	%		7.00	%

The following benefit payments, which reflect expected future services, as appropriate are expected to be paid

Year ending March 31,	US$
2016		37,961
2017		123,838
2018		45,854
2019		62,965
2020		57,837
2021-2025		493,338

The expected benefits are based on the same assumptions used to measure the Company’s benefit obligation as of March 31, 2015.

Provident Fund

Employees based in India and the Company each, contribute at the rate of 12% of salaries to a provident fund maintained by the Government of India for the benefit of such employees. The provident fund is a defined contribution plan. Accordingly, the Company expenses such contributions as incurred. Amounts contributed by the Company to the provident fund, in aggregate, were US$259,684, US$228,075 and US$231,528 for the years ended March 31, 2013, 2014 and 2015, respectively.

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17. Income Taxes

The components of income before income taxes and equity in net earnings of equity method investees are as follows:

	2013			2014			2015
	US$			US$			US$
– Domestic		(7,177,897	)		(9,264,032	)		(12,188,901	)
– Foreign		(4,371,884	)		1,639,852			(1,608,878	)
Loss before income taxes and equity in net loss (earning) of equity method investee		(11,549,781	)		(7,624,180	)		(13,797,779	)
Current income tax expense (benefit)		(33,248	)		(152,774	)		14,791

The reconciliation of estimated income tax expense at Indian statutory income tax rate to income tax expense reported in the statements of comprehensive loss is as follows:

	2013			2014			2015
	US$			US$			US$
Loss before income taxes and equity in net loss (earning) of equity method investee		(11,549,781	)		(7,624,180	)		(13,797,779	)
Indian statutory income tax rate		32.445	%		33.990	%		34.608	%
Expected income tax expense		(3,747,327	)		(2,591,459	)		(4,775,135	)
Tax effect of:–
Adjustments to reconcile expected income tax expense to reported income tax expense:
Employee stock-based compensation		245,313			163,683			147,674
Valuation allowance recognized during the year		3,060,830			1,998,669			4,875,019
Goodwill impairment		648,900			—			—
Tax in foreign jurisdictions		(142,710	)		262,459			(247,558	)
Earnings (loss) of equity method investees		27,354			—			—
Others		(125,608	)		13,874			14,791
Income tax expense (benefit)		(33,248	)		(152,774	)		14,791

The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are as follows:

	As of March 31,
	2014			2015
	US$			US$
Net operating loss carry forwards		7,262,789			10,354,525
Depreciation and amortization		5,573,817			7,530,972
Allowances for doubtful accounts receivables		218,415			229,168
Employee benefits		320,564			330,849
Minimum alternate tax credit		284,859			273,526
Loss of equity method investees		256,483			250,758
Gross deferred tax assets		13,916,927			18,969,798
Valuation allowance		(13,916,927	)		(18,969,798	)
Deferred tax assets		—			—

F-22

Movements in valuation allowance:

	As of March 31,
	2014			2015
	US$			US$
Balance as at beginning of the year		12,673,121			13,916,927
Valuation allowance recognized during the year		1,998,669			4,875,019
Increase (reduction) in deferred tax asset and corresponding valuation allowance pertaining  to earlier years		(41,757	)		691,218
Effect of currency translation		(713,106	)		(513,366	)
Balance as at end of the year		13,916,927			18,969,798

Rediff India’s (including Vubites) net operating loss carry forwards aggregating approximately US$16,942,394 as of March 31, 2015 will expire between April 2015 and March 2023.

As of March 31, 2015, ValuCom has net operating loss carry forwards available to offset future federal taxable income of US$3,033,000, which expire in years 2021 through 2031.

As of March 31, 2015, Rediff Holdings, Inc. has net operating loss carry forwards of approximately US$6,229,000 for federal income tax purposes, which expire in years 2020 through 2035.

Rediff’s unabsorbed depreciation of US$18,642,739 can be indefinitely carried forward.

Realization of the future tax benefits related to the deferred tax asset is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carry forward period. Management has considered these factors and believes that a valuation allowance is required for each of the periods presented.

Recoverable taxes mainly consist of withholding tax on income from advertising services and interest income, which the Company claimed as refund.

There were no unrecognised tax benefit as at fiscal year ended March 31, 2013, 2014 and 2015.

The Company’s two major tax jurisdictions are India and the U.S. In India, tax returns from fiscal year 2010 are subject to examination by the direct taxing authority. The assessments for fiscal year 2000 onwards are subject matters of appeals with the direct taxing authorities. The Company’s U.S. federal and state tax returns pertaining to fiscal year 2012 onwards remains subject to examination in accordance with the statute of limitation prescribed by the relevant authorities.

18. Segments

The chief operating decision maker’s (Rediff’s Chairman and Managing Director) allocates resources to and assess the performance of the segments of the Company. The chief operating decision maker evaluates segment performance primarily by results of the segment before operating expenses.

The Company has two operating segments, namely, the India Online business and the U.S. Publishing business.

(i) India Online business, comprised of revenues from online advertising (which includes display, performance and sponsorship formats) and fee-based services (which includes e-commerce marketplace fees and revenues from subscription-based email services and mobile value added services).

(ii) US Publishing business, comprised of revenues from advertising and subscription for India Abroad print and online properties and online advertising revenue from the Rediff India Abroad website.

Following are the segment results and segment assets for the years ended March 31, 2013, 2014 and 2015.

	2013						2014						2015
	India Online Business		US Publishing Business		Total		India Online Business		US Publishing Business		Total		India Online Business		US Publishing Business		Total
	US$		US$		US$		US$		US$		US$		US$		US$		US$
Revenues from external customers:
Advertising		8,485,560		2,872,638		11,358,198		8,161,964		2,534,345		10,696,309		6,583,878		2,085,218		8,669,096
Fee based services		4,041,904		258,602		4,300,506		5,206,078		218,410		5,424,488		6,511,248		157,832		6,669,080
Total revenues		12,527,464		3,131,240		15,658,704		13,368,042		2,752,755		16,120,797		13,095,126		2,243,050		15,338,176
Cost of revenues (excluding depreciation and amortization)		7,470,935		2,480,949		9,951,884		8,330,948		2,082,116		10,413,064		8,854,598		1,981,319		10,835,917
Segment Results		5,056,529		650,291		5,706,820		5,037,094		670,639		5,707,733		4,240,528		261,731		4,502,259
Segment Assets		35,577,371		820,713		36,398,084		24,960,743		2,447,659		27,408,402		13,204,415		881,567		14,085,982
Capital expenditure		2,105,552		2,315		2,107,867		1,469,037		6,325		1,475,362		1,416,692		539		1,417,231
Depreciation/amortization		3,651,816		12,560		3,664,376		3,054,173		6,096		3,060,269		1,713,662		5,665		1,719,327

F-23

The following is a reconciliation of the segment results to (loss) income before income taxes of the Company for the years ended March 31, 2013, 2014 and 2015.

	2013			2014			2015
	US$			US$			US$
Segment result		5,706,820			5,707,733			4,502,259
Operating expenses (including depreciation and amortization)		(19,571,322	)		(18,048,045	)		(19,534,453	)
Other income, net		2,314,721			4,716,132			1,234,415
Net loss before income taxes and equity in net earnings (loss) of equity method investees		(11,549,781	)		(7,624,180	)		(13,797,779	)

Revenues from fee based services are as follows:

	As at March 31,
	2013		2014		2015
	US$		US$		US$
e-commerce marketplace fees		2,147,008		3,249,096		4,255,268
Subscription service		1,894,896		1,956,982		2,255,980
Total		4,041,904		5,206,078		6,511,248

The following is a reconciliation of the segment assets to the total assets as at March 31, 2014 and 2015.

	As at March 31,
	2013		2014		2015
	US$		US$		US$
India Online business		35,577,371		24,960,743		13,204,415
US Publishing business		820,713		2,447,659		881,567
Total segment assets		36,398,084		27,408,402		14,085,982
Investment, at cost		1,404,987		—		—
Rediff.com India Employee trust		45,931		45,137		46,990
Total assets		37,849,002		27,453,539		14,132,972

Revenues are attributed to individual countries according to the location of the customers.

F-24

Revenues derived from external customers are as follows:

	Years ended March 31,
	2013		2014		2015
	US$		US$		US$
United States and Canada		3,030,249		3,314,354		2,372,700
India		12,241,845		12,176,561		12,306,537
Rest of the world		386,610		629,882		658,939
Total revenues		15,658,704		16,120,797		15,338,176

No single customer accounted for 10 percent or more of the total revenues for the years ended March 31, 2013, 2014 and 2015.

Long-lived assets by location are as follows:

	As of March 31,
	2014		2015
	US$		US$
United States and Canada		5,912		—
India		3,565,310		—
Total		3,571,222		—

19. Concentration of credit risk

Concentrations of credit risk exist when changes in economic or geographic factors affect groups of counter parties whose aggregate credit exposure is material in relation to the Company’s total credit exposure.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents and accounts receivable.

The Company maintains the majority of its cash in Indian Rupees with reputed banks in India with high quality credit rating.

The Company performs ongoing evaluations to determine customer credit limit, but no collateral is required. In 2014 and 2015, approximately 89% and 85% of our accounts receivable were derived from revenues earned from customers located in India. The majority of the customers outside India are located in the United States.

20. Stock-based compensation

2002 Stock Option Plan

In January 2002 the Company’s Board of Directors approved the 2002 Stock Option Plan (“2002 plan”), which provides for the grant of stock options to the Company’s employees. Unless terminated sooner, a grant under this plan will terminate automatically after expiry of 10 years from the date of issue of such grant. A total of 280,000 of the Company’s equity shares were reserved pursuant to 2002 plan. Of which 12,000 equity shares were reserved under 2015 Stock Option Plan.

Under the terms of the 2002 plan, the board or a committee or a sub-committee of the board will determine and authorize the grant of options to eligible employees. Such options vest at the rate of 25% on each successive anniversary of the grant date, until fully vested. Each option grant carries with it the right to purchase Company’s one ADS at the exercise price during the exercise period, which expires ten years from the date of grant. The exercise price is determined by the board (or a committee or a sub-committee of the board) and shall be no more than 110% of the fair market value of ADS and no less than 50% of the fair market value of ADS on the date of the grant.

F-25

A summary of option activity under the 2002 ESOP plan as of March 31, 2015, and changes during the year then ended is presented below:

Options	Number of Options (in terms of shares)		Weighted average exercise price		Weighted average remaining contractual term (year)	Aggregate intrinsic value
			US$			US$
Outstanding as at April 1, 2014		11,750		18.88
Expired		3,500		11.37
Outstanding as at March 31, 2015		8,250		22.06	6.3		—
Exercisable as at March 31, 2015		6,375		22.06	6.3		—

The total grant date fair value of stock options vested during the year ended March 31, 2013, 2014 and 2015 were US$78,645, US$123,585 and US$56,175.

There were no options granted during the years ended March 31, 2013, 2014 and 2015. There were no options exercised during the years ended March 31, 2013, 2014 and 2015.

As of March 31, 2015, there was US$6,718 of total unrecognized option cost related to non-vested stock options granted under the plan. That cost is expected to be recognized over a weighted average period of 0.31 year. To the extent the forfeiture rate is different from what we have anticipated stock-based compensation related to these awards will be different from our expectations.

2004 Stock Option Plan

In June 2004, the Company’s Board of Directors approved the 2004 Stock Option Plan (“2004 plan”), which provide for the grant of stock options to the Company’s employees. Unless terminated sooner, the grant under this plan will terminate automatically after expiry of 10 years from the date of issue of such grant. A total of 358,000 of the Company’s equity shares were reserved pursuant to 2004 plan. Of which 91,000 equity shares were reserved under 2015 Stock Option Plan.

Under the terms of the 2004 plan, the board or a committee or a sub-committee of the board will determine and authorize the grant of options to eligible employees. Such options vest at the rate of 25% on each successive anniversary of the grant date, until fully vested. Each option grant carries with it the right to purchase Company’s one ADS at the exercise price during the exercise period, which expires ten years from the date of grant. The exercise price is determined by the board (or a committee or a sub-committee of the board) and shall be no more than 110% of the fair market value of ADS and no less than 50% of the fair market value of ADS on the date of the grant.

A summary of option activity under the 2004 ESOP plan as of March 31, 2015, and changes during the year then ended is presented below:

Options	Number of options (in  terms of shares)		Weighted average exercise price		Weighted average remaining contractual term (year)		Aggregate intrinsic value
			US$				US$
Outstanding as at April 1, 2014		131,237		11.59
Granted		22,750		3.74
Expired		55,112		10.97
Forfeited		1,500		3.74
Outstanding as at March 31, 2015		97,375		10.22		4.4		2,125
Exercisable as at March 31, 2015		76,125		12.03		3.0		—

The total grant date fair value of stock options vested during the year ended March 31, 2013, 2014 and 2015 was US$108,481, US$53,126 and US$Nil, respectively.

The weighted-average grant-date fair value of options granted during the year ended March 31, 2015, was US$3.02 each option.There were no options granted during the years ended March 31, 2013 and 2014. There were no options exercised during the years ended March 31, 2013, 2014 and 2015.

F-26

As of March 31, 2015, there was US$48,012 of total unrecognized option cost related to non-vested stock options granted under the plan. That cost is expected to be recognized over a weighted-average period of 3.12 years. To the extent the forfeiture rate is different from what we have anticipated stock-based compensation related to these awards will be different from our expectations.

2006 Stock Option Plan

The 2006 Stock Option Plan (“2006 ESOP”) consists of two plans, namely the ADR Linked Employee Stock Option Plan-2006 and Employee Stock Option Plan-2006 which is linked to the shares of the Company. These plans were adopted and approved by the Compensation committee on June 20, 2006 in accordance with the approval granted by shareholders on March 31, 2006. Unless terminated sooner, the grant under this plan will terminate automatically after expiry of 10 years from the date of issue of such grant. A total of 670,000 equity shares were approved for issuance under both the plans.

Under the terms of the 2006 plans, the board or a committee or a sub-committee of the board will determine and authorize the grant of options to eligible employees. Such options vest at the rate of 20% - 25% on each successive anniversary of the grant date, until fully vested. Each option grant carries with it the right to purchase Company’s one equity share / ADS depending on the plan to which the option relates at the exercise price during the exercise period, which expires ten years from the date of grant. The exercise price for the ADR Linked Employee Stock Option Plan-2006 is determined by the board (or a committee or a sub-committee of the board) and shall be no more than 110% of the fair market value of ADS and no less than 50% of the fair market value of ADS on the date of the grant. The exercise price for the Employee Stock Option Plan-2006 is also determined by the board (or a committee or a sub-committee of the board) and shall not be less than the face value of equity shares.

A summary of option activity under the 2006 ESOP plan as of March 31, 2015, and changes during the year then ended is presented below:

Options	Number of options (in terms of shares)		Weighted average exercise price		Weighted average remaining contractual term (year)		Aggregate intrinsic  value
			US$				US$
Outstanding as at April 1, 2014		490,563		8.54
Forfeited		1,250		0.16
Outstanding as at March 31, 2015		489,313		8.54		3.8		288,898
Exercisable as at March 31, 2015		477,313		8.47		3.8		288,898

The total grant date fair value of stock options vested during the year ended March 31, 2013, 2014 and 2015 was US$1,542,072, US$967,248 and US$662,350 respectively.

The weighted-average grant-date fair value of options granted during the year ended March 31, 2014 was US$3.76. There were no new grants during the year ended March 31, 2013 and 2015. There were no stock options exercised during the years ended March 31, 2013, 2014 and 2015.

As of March 31, 2015, there was US$41,726 of total unrecognized option cost related to non-vested stock options granted under the plan. That cost is expected to be recognized over a weighted-average period of 0.7 years. To the extent the forfeiture rate is different from what we have anticipated stock-based compensation related to these awards will be different from our expectations.

2015 Stock Option Plan

The compensation committee authorized the 2015 stock option plan in their meeting held on January 27, 2015. Under the plan 103,000 equity shares (comprising of 12,000 equity shares from 2002 Stock Option Plan and 91,000 equity shares from 2004 Stock Option Plan) were reserved. Unless terminated sooner, the grant under this plan will terminate automatically after expiry of 10 years from the date of grant.

Under the terms of the 2015 plan, the board or a committee or a sub-committee of the board will determine and authorize the grant of options to eligible employees. Such options vest at the rate of 25% on each successive anniversary of the grant date, until fully vested. Each option grant carries with it the right to purchase Company’s one ADS at the exercise price during the exercise period, which expires ten years from the date of grant. The exercise price for the ADR Linked Employee Stock Option Plan-2015 is determined by the board (or a committee or a sub-committee of the board) and shall be no more than 110% of the fair market value of ADS and no less than 50% of the fair market value of ADS on the date of the grant.

F-27

A summary of option activity under the 2015 ESOP plan as of March 31, 2015, and changes during the year then ended is presented below:

Options	Number of options (in  terms of shares)		Weighted average exercise price		Weighted average remaining contractual term (year)		Aggregate intrinsic value
			US$				US$
Granted		36,800		3.74
Outstanding as at March 31, 2015		36,800		3.74		9.8		3,680
Exercisable as at March 31, 2015		—		—		—		—

The weighted-average grant-date fair value of options granted during the year ended March 31, 2015, was US$3.00 per equity share.

As of March 31, 2015, there was US$103,440 of total unrecognized option cost related to non-vested stock options granted under the plan. That cost is expected to be recognized over a weighted-average period of 3.8 years. To the extent the forfeiture rate is different from what we have anticipated stock-based compensation related to these awards will be different from our expectations.

F-28

The fair value of each option is estimated on the date of grant using the Black-Scholes model with the following assumptions:

	Years ended March 31,
	2013		2014			2015
Dividend yield		—		0	%		0	%
Expected term		—		5.5 – 7 years			5.5 – 7 years
Risk free interest rates		—		0.71% - 1.14	%		1.41% - 2.10	%
Expected volatility		—		81.27% - 86.68	%		79.72%% - 83.64	%

Expected volatilities are based on the historical volatility of the Company’s stock. The expected term of stock options granted under the Plans is based on historical exercise patterns, which the Company believes are representative of future behavior. The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Total stock-based compensation cost recognized under the various employee stock option plans were US$756,090, US$481,563 and US$426,705 for the year ended March 31, 2013, 2014 and 2015 respectively. The compensation cost has been allocated to cost of revenues and operating expenses as follows:

	Year ended March 31,
	2013		2014		2015
	US$		US$		US$
Cost of revenues		50,151		17,425		466
Sales and marketing		122,316		119,653		80,793
Product development		321,473		207,400		175,616
General and administrative		262,150		137,085		169,830

21. Earnings (loss) per share and ADS

For the years ended March 31, 2012, 2013 and 2014, the following table sets forth the computation of basic and diluted earnings per share and ADS:

	Year ended March 31,
	2013			2014			2015
Net loss (US$)		(11,432,223	)		(7,471,406	)		(13,812,570	)
Weighted average equity shares for basic and diluted earnings (loss) per share		13,795,178			13,795,178			13,795,178
Earnings /(loss) per share – basic (US$)		(0.828	)		(0.542	)		(1.000	)
– diluted (US$)		(0.828	)		(0.542	)		(1.000	)
Earnings / (loss) per ADS – basic (US$)		(0.414	)		(0.271	)		(0.500	)
– diluted (US$)		(0.414	)		(0.271	)		(0.500	)

Potentially dilutive shares relating to outstanding employee stock option aggregating 140,247, 124,214 and 209,599 as at March 31, 2013, 2014 and 2015, respectively have been excluded from the computation of diluted earnings per share for these periods as their effect was anti-dilutive.

22. Dividends

Dividends, if any, will be declared and paid in Indian Rupees. Indian law requires that any dividend be declared out of accumulated distributable profits only after the transfer to a general reserve of a specified percentage of net profit computed in accordance with current regulations. The remittance of dividends outside India is governed by Indian law on foreign exchange and is subject to applicable taxes.

F-29

23. Allowance for doubtful trade accounts receivables

Description	Balance at Beginning  of year		Expense / (Reversal)			Bad debts written off			Effect of exchange rate changes			Balance at end of year
	US$		US$			US$			US$			US$
Fiscal 2015		618,054		41,509			(11,172	)		(22,474	)		625,917
Fiscal 2014		876,300		190,493			(420,018	)		(28,721	)		618,054
Fiscal 2013		3,200,434		(48,580	)		(2,106,011	)		(169,543	)		876,300

24. Fair value of financial instruments

The carrying amounts of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities, approximate their fair values due to the short- term nature of these instruments.

25. Commitments and contingencies

As of March 31, 2015 and 2014, the Company has commitment for purchase of computer equipment and cost to develop internal use software aggregating US$424,517 and US$774,735, respectively.

Commitment relating to operating leases is as below:

The Company leases office premises and residential apartments for employees under various operating leases. Certain of these arrangements have free or escalating rent payment provisions. The Company recognized rent expense under such arrangements on a straight-line basis. Operating lease expense that has been included in the determination of the net income is as follows:

	Years ended March 31,
	2013		2014		2015
	US$		US$		US$
Office premises		726,893		700,402		668,676
Residential apartments for employees		104,557		81,308		81,980
Total operating lease expense		831,450		781,710		750,656

The minimum annual lease commitments under the above operating leases that have initial or remaining terms in excess of one year are as follows:

For the year ending March 31,	US$
2016		492,935
2017		293,624
2018		237,989
2019		40,753
2020		—

F-30

Litigation and Other Legal Matters

Action Relating to Access to Pornographic Material

On June 21, 2000, Rediff, certain of its current and then directors and others (Ajit Balakrishnan, Arun Nanda, Abhay Havaldar, Sunil Phatarphekar, Charles Robert Kaye and Tony Janz) were named as defendants in a criminal complaint (RCC Complaint Number 76 of 2000) filed by Mr. Abinav Bhatt, who was then a 22 year old student, before the Judicial Magistrate, First Class, Pune, India, alleging commission of an offence, under Section 292 of the IPC for distributing, publicly exhibiting and putting into circulation obscene, pornographic and objectionable material. The RCC Complaint alleged that Rediff, through its website “www.rediff.com”, provided a search facility that enabled Internet users to view pornographic, objectionable and obscene material. On November 27, 2000, the Judicial Magistrate passed an order on the Complaint holding that a prima facie case under Section 292 of the IPC had been made out against Rediff and directed commencement of criminal proceedings against all the defendants. A criminal writ petition was filed in the High Court of Mumbai (Sunil N. Phatarphekar & Ors. v. Abhinav Bhatt and Ors., Mumbai High Court, Criminal Writ Petition No. 1754 of 2000) by the aforementioned defendants, seeking among other relief the setting aside of the order of the Judicial Magistrate. The High Court of Mumbai in its order dated December 20, 2000, while granting ad-interim relief to the petitioners in the Writ Petition, stayed the order of Judicial Magistrate pending final disposal of the Writ Petition. The Writ Petition has been admitted by the High Court of Mumbai. While Rediff believes that the lawsuit is without merit, and that it and its directors have a valid defense to the charges, in the event that it is unsuccessful in its defense, Rediff and its directors may face both criminal penalties and monetary fines or damages.

Under Indian law, any person who publishes or transmits or causes to be published in the electronic form, any material which is lascivious or appeals to the prurient interest or if its effect is such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it, shall be punished (i) for the first conviction, with imprisonment of up to five years and with a fine of up to Rs.100,000 (approximately US$1,700); and (ii) in the event of a second conviction, with imprisonment of up to ten years and with a fine of up to Rs.200,000 (approximately US$3,400).

Actions Relating to Trademark Infringement

In May, 2008, a complaint was filed by The Board of Control of Cricket in India (“BCCI”) against Sandeep Goyal and Rediff alleging that the depiction of images on the online game known as Indian Fantasy League started by Sandeep Goyal has been violative of the Indian Premier League (“IPL”) trademark. BCCI is seeking (a) a permanent injunction restraining defendants from the use of logo “Indian Fantasy League.com”; (b) shutdown of the website Indianfantasyleague.com; (c) to render the accounts of all profits earned by the said website and damages to the tune of Rs.1.0 million (approximately US$17,000). Rediff has filed its response to BCCI Complaint, and among the defenses Rediff has raised are: (a) it is Sandeep Goyal who has infringed the trademark of IPL and not Rediff.com; (b) Rediff.com only provides the domain hosting and web based email solution services which enables the subscriber to set up and manage their website as per the terms and conditions of Rediff business solutions; (c) subscribers such as Sandeep Goyal are required to abide by and comply with the terms and conditions Rediff imposes on its subscribers which provides that the subscriber shall be solely responsible for producing, electronically uploading and maintaining his website and such subscriber shall ensure that all upload material shall be owned and/or properly licensed by the Subscriber and shall not adversely affect any rights of any third party. Although Rediff believes that it has valid defenses to the charges, if Rediff is unsuccessful after exhausting all legal remedies, we could be subject to monetary fines or damages.

In February, 2006, a complaint was filed by Marksman Pvt. Ltd. against various telecom operators and internet service providers and Rediff.com alleging infringement of copyright of Marksman by way of dissemination of information relating to scores, alerts and updates and or other events happenings via Short Message Service (SMS) Technology on wireless and mobile telephones in respect of One Day International Cricket Matches (“ODIs”) during India’s tour of Pakistan Scheduled in February, 2006. The Company has filed its response and among the defenses raised were: (a) Rediff.com along with other telecom operators and service providers have not infringed the copyrights of Marksman; (b) the information relating to scores, alerts and updates and or other events happening via Short Message Service (SMS) Technology on wireless and mobile telephones in respect of ODIs which was being provided to subscribers was sourced from public domain and as such no exclusivity can be claimed since it falls into public domain. The one judge panel, while dismissing a request for an interim order, has directed the defendants to maintain the accounts of the SMS received during the ODIs. Marksman will have to first amend the suit to seek damages before any claim is made against Rediff.com. In 2006, Marksman has sought to amend the suit prayer to include damages. Although the Company believes that it has valid defenses to the charges, if the Company is unsuccessful after exhausting all legal remedies, the Company could be subject to monetary fines or damages.

The Company is also subject to other legal proceedings and claims, which have arisen in the ordinary course of its business. Those actions, when ultimately concluded and determined, will not, in the opinion of management, have a material effect on the results of operations, cash flows or the financial position of the Company.

F-31

The Company has not recognized any loss accrual for the litigation disputes as the Company believes that it is probable that it would be successful on resolution of the litigation. The maximum total loss relating to these disputes would be approximately US$20,400 excluding any interest and penalties, which amounts cannot be reasonably estimated at this point of time.

26. Subsequent event

On July 29, 2015, the Company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC, an Illinois limited liability company (“Investor”). The Purchase Agreement provides that the Company has the right to sell to the Investor, and the Investor has the obligation to purchase from the Company, up to an aggregate of US$15 Million of the Company’s American Depositary Shares (“ADSs”) over the 36-month term of the Agreement in amount as described in the Purchase Agreement. Upon shareholder approval and upon effectiveness of registration statement covering the resale of ADSs, the Company can elect its discretion to sell ADSs to the investor pursuant to either regular purchase amounts or accelerated purchase amounts. The amounts of ADSs which may be sold to the Investor pursuant to any regular purchase range from 40,000 ADSs to 100,000 ADSs, depending on the then current trading price of the Company’s ADSs on Nasdaq (but not to exceed US$500,000 on any single purchase date). In addition, the Company has the right, but not the obligation, to sell accelerated purchase amounts. The purchase price for any ADSs sold pursuant a regular purchase, will be 98% of the lower of the (a) the lowest sale price of the ADSs on Nasdaq on the regular purchase date or (b) the average of the three lowest closing sale prices over the preceding 10 trading-day period. The purchase price for any ADSs sold pursuant to an accelerated purchase, will be 98% of the lower of (a) the closing sale price of the ADSs on Nasdaq on the accelerated purchase date or (b) 94% of a volume weighted average purchase price on the accelerated purchase date. The Company will file an application with the Nasdaq to list the ADSs to be sold to the Investor pursuant to the Purchase Agreement. The Company is required to file a registration statement covering the resale of the ADSs, so that such ADSs may be sold by the Investor from time to time pursuant to a Registration Rights Agreement entered into between the Company and Investor. Under the Purchase Agreement, the Investor and its affiliates have a beneficial ownership limitation of 4.99% of the then issued and outstanding equity securities of the Company. The issuance of the shares underlying the ADSs must be approved by the Company’s shareholders prior to any purchases under the Purchase Agreement. The Purchase Agreement and Registration Rights Agreement also contain customary representations, warranties, conditions and indemnification provisions.

F-32

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

REDIFF.COM INDIA LIMITED
By:	/s/ Ajit Balakrishnan
	Name:	Ajit Balakrishnan
	Title:	Chairman and Managing Director (Principal Executive Officer)

Date: July 31, 2015

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

REDIFF.COM INDIA LIMITED
By:	/s/ Swasti Bhowmick
	Name:	Swasti Bhowmick
	Title:	Chief Financial Officer (Principal Financial Officer)

Date: July 31, 2015