UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
20-F
(Mark
One)
[ ] 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
|
|
|
[ ]
|
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
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|
|
Date
of event requiring this shell company report. . . . . . . . . .
. . . . .
. . . .
|
For
the transition period from _____________ to _____________
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
+91-22-2444-9144
(Address
of principal executive offices)
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
|
|
None
|
Not
Applicable
|
Securities
registered pursuant to Section 12(g) of the Act:
American
Depositary Shares,
each
represented by one-half of one equity share, par value Rs.5 per
share.
(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:
14,603,800 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.
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.
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.
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 [X]
|
Non-accelerated
filer [ ]
|
Indicate
by check mark which financial statement item the registrant has elected to
follow.
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).
TABLE
OF CONTENTS
Page
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CROSS
REFERENCE SHEET
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1
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CURRENCY
OF PRESENTATION AND CERTAIN DEFINED TERMS
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3
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FORWARD-LOOKING
STATEMENTS
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4
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EXCHANGE
RATES
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5
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SELECTED
CONSOLIDATED FINANCIAL DATA
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6
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|
RISK
FACTORS
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8
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BUSINESS
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25
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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42
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MANAGEMENT
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53
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RELATED
PARTY TRANSACTIONS
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62
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EXCHANGE
CONTROLS
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63
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TRADING
MARKET
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66
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RESTRICTION
ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
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67
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PRINCIPAL
SHAREHOLDERS
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71
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TAXATION
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73
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USE
OF PROCEEDS
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79
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CONTROLS
AND PROCEDURES
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80
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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81
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PRESENTATION
OF FINANCIAL INFORMATION
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82
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ADDITIONAL
INFORMATION
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83
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EXHIBIT
INDEX
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89
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INDEX
TO FINANCIAL STATEMENTS
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F-1
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CROSS
REFERENCE SHEET
PART
I
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Item
1.
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Identity
of Directors, Senior Management and
Advisers
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Item
2.
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Offer
Statistics and Expected Timetable
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See
“Exchange Rates”, “Risk Factors” and “Selected Consolidated Financial
Data”.
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See
“Business”, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and “Additional
Information”.
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Item
4A.
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Unresolved
Staff Comments
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Item
5.
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Operating
and Financial Review and Prospects
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|
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See
“Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of
Operations”.
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Item
6.
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Directors,
Senior Management and Employees
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Item
7.
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Major
Shareholders and Related Party
Transactions
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See
“Principal Shareholders” and “Related Party
Transactions”.
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Item
8.
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Financial
Information
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See
the Report of Independent Registered Public Accounting Firm, U.S. GAAP
Consolidated financial statements and the notes thereto for Rediff.com India
Limited for the fiscal years ended March 31, 2005, 2006 and 2007 and the
related
three-year period ended March 31, 2007. Also see “Business – Legal Proceedings”
and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations”.
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Item
9.
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The
Offer and Listing
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Item
10.
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Additional
Information
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See
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Acquisitions and Divestments – Value Communications Corporation”,
“Exchange Controls”, “Restriction on Foreign Ownership of Indian Securities”,
“Taxation” and “Additional Information”.
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Item
11.
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Quantitative
and Qualitative Disclosures About Market
Risk
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See
“Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Market Risks”.
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Item
12.
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Description
of Securities Other than Equity
Securities
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| |
Not
applicable.
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PART
II
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Item
13.
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Defaults,
Dividend Arrearages and Delinquencies
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| |
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Not
applicable.
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Item
14.
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Material
Modifications to the Rights of Security Holders and Use of
Proceeds
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See
“Use of Proceeds”.
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Item
15.
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Controls
and Procedures
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| |
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See
“Controls and Procedures”.
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Item
16A.
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Independent
Audit Committee Financial Expert
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See
“Management”.
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Item
16B.
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Code
of Ethics
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See
“Management”.
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Item
16C.
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Principal
Accountant Fees and Services
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See
“Principal Accountant Fees and Services”.
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Item
16D.
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Exemptions
from the Listing Standards for Audit Committees
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Not
applicable.
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Item
16E.
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Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
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| |
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Not
applicable.
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| |
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PART
III
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Item
17.
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Financial
Statements
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| |
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| |
Not
applicable.
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| |
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Item
18.
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Financial
Statements
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| |
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| |
See
the Report of Independent Registered Public Accounting Firm,
U.S. GAAP
Consolidated financial statements and the notes thereto for Rediff.com
India Limited and its consolidated subsidiaries for the fiscal
years ended
March 31, 2005, 2006 and 2007 and the related three-year period
ended
March 31, 2007.
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| |
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Item
19.
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Exhibits
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| |
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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 “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 in case of our U.S. subsidiaries which
are
prepared 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 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
noon buying rate, in the City of New York, on March 31, 2007, for cable
transfers in Indian Rupees as certified for customs purposes by the Federal
Reserve Bank of New York, which was Rs.43.10 to 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 have been performed using rates specified by the Reserve
Bank of India.
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, that 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:
|
·
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our
goals and strategies;
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·
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our
recently acquired businesses and other acquisitions, investments
and
divestments;
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·
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the
importance and expected growth of Internet technology, including
sales of
personal computers and mobile
phones;
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|
·
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the
pace of change in the Internet
market;
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|
·
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the
demand for Internet services; and
|
|
·
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advertising
demand and revenues.
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Actual
results may differ materially from those suggested by the forward-looking
statements due to certain risks or uncertainties associated with our
expectations with respect to, but not limited to, 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
the
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 impact 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, general economic and political
conditions in India and the United States, changes in the value of the Rupee,
foreign currency exchange rates, equity prices or other rates or prices,
and 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 on the factors that could cause
actual results to differ, see the discussion 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 these 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 with the U.S. Securities and Exchange Commission (the “SEC”), from time to
time. We undertake no obligation to update forward-looking statements to
reflect
events or circumstances after the date hereof.
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 will also
affect the U.S. dollar conversion 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
the noon buying rate in the City of New York for cable transfers in Rupees
as
certified for customs purposes by the Federal Reserve Bank of New
York:
Fiscal
Year Ended March 31,
|
|
|
|
|
|
|
|
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| |
|
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(Rs.)
|
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2003
|
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47.53
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48.36
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49.07
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47.53
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2004
|
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43.40
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45.78
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47.46
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43.40
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|
2005
|
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43.62
|
|
44.87
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46.45
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|
43.27
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|
2006
|
|
44.48
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|
44.21
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46.26
|
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43.05
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|
2007
|
|
43.10
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|
45.06
|
|
46.83
|
|
42.78
|
The
following table sets forth the high and low exchange rates for the previous
six
months and are based on the average of the noon buying rate in the City of
New
York on the last business day of each month during the period for cable
transfers in Indian Rupees as certified for customs purposes by the Federal
Reserve Bank of New York:
|
Month
|
|
|
|
| |
(Rs.)
|
|
March
2007
|
44.43
|
|
42.78
|
|
April
2007
|
43.05
|
|
40.56
|
|
May
2007
|
41.04
|
|
40.14
|
|
June
2007
|
40.90
|
|
40.27
|
|
July
2007
|
40.42
|
|
40.12
|
|
August
2007
|
41.15
|
|
40.25
|
|
|
40.81
|
|
39.81
|
On
September 21, 2007, the noon buying rate in the City of New York was Rs.39.84
to
US$1.00.
|
(1)
|
The
noon buying rate at each period end and the average rate for each
period
differed from the exchange rates used in the preparation of our
financial
statements.
|
|
(2)
|
Represents
the average of the noon buying rate on the last day of each month
during
the period.
|
SELECTED
CONSOLIDATED FINANCIAL DATA
Our
consolidated financial statements are presented in U.S. dollars and prepared
in
accordance with U.S. GAAP. The selected balance sheet data set forth below
as of
March 31, 2006 and 2007 and the selected statement of operations data for
the
fiscal years ended March 31, 2005, 2006 and 2007 has been derived from our
audited financial statements presented elsewhere in this annual report and
which
have been audited by Deloitte Haskins & Sells, an independent registered
public accounting firm. The selected balance sheet data set forth below as
of
March 31, 2003, 2004 and 2005 and the selected statement of operations data
for
the fiscal years ended March 31, 2003 and 2004 are derived from U.S. GAAP
financial statements which are not included in this annual report.*
| |
Fiscal
Years Ended March 31, -
|
| |
|
|
|
|
|
|
|
|
|
| |
(in
US$ thousands, except per share data)
|
| |
|
|
|
|
|
|
|
|
|
|
Statement
of Operations data:
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
US$8,572
|
|
US$9,446
|
|
US$12,627
|
|
US$18,701
|
|
US$28,676
|
|
Cost
of revenues
|
5,560
|
|
4,738
|
|
5,113
|
|
5,039
|
|
5,416
|
|
Operating
expenses
|
14,903
|
|
7,927
|
|
9,227
|
|
12,683
|
|
20,195
|
|
(Loss)/
Income from continuing operations
|
(12,177)
|
|
(3,349)
|
|
(1,220)
|
|
1,213
|
|
3,065
|
|
(Loss)/
Income from discontinued
operations
|
(6,804)
|
|
(2,371)
|
|
(208)
|
|
--
|
|
--
|
|
Net
(loss)/ income
|
US$(18,981)
|
|
US$(5,720)
|
|
US$(1,428)
|
|
US$1,213
|
|
US$6,963
|
|
(Loss)/
Earnings per Equity Share
|
|
|
|
|
|
|
|
|
|
(from
continuing operations) –
basic
|
US$(0.95)
|
|
US$(0.26)
|
|
US$(0.10)
|
|
US$0.089
|
|
US$0.48
|
(from
discontinued operations)
– basic
|
US$(0.53)
|
|
US$(0.19)
|
|
US$(0.01)
|
|
--
|
|
--
|
|
(Loss)/
Earnings per Equity Share – basic
|
US$(1.48)
|
|
US$(0.45)
|
|
US$(0.11)
|
|
US$0.089
|
|
US$0.48
|
|
(Loss)/
Earnings per Equity Share
|
|
|
|
|
|
|
|
|
|
(from
continuing operations) –
diluted
|
US$(0.95)
|
|
US$(0.26)
|
|
US$(0.10)
|
|
US$0.088
|
|
US$0.47
|
(from
discontinued operations)
– diluted
|
US$(0.53)
|
|
US$(0.19)
|
|
US$(0.01)
|
|
--
|
|
--
|
|
(Loss)
Earnings per Equity Share – diluted
|
US$(1.48)
|
|
US$(0.45)
|
|
US$(0.11)
|
|
US$0.088
|
|
US$0.47
|
|
Weighted
average number of equity shares
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
12,795
|
|
12,800
|
|
12,850
|
|
13,487
|
|
14,543
|
|
-
Diluted
|
12,795
|
|
12,800
|
|
12,850
|
|
13,764
|
|
14,924
|
| |
|
| |
|
|
|
|
|
|
|
|
|
| |
(in
US$ thousands)
|
| |
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
US$14,384
|
|
US$11,639
|
|
US$10,069
|
|
US$53,094
|
|
US$53,546
|
|
Current
assets
|
18,015
|
|
15,293
|
|
15,323
|
|
60,652
|
|
65,851
|
|
Current
liabilities
|
4,777
|
|
3,825
|
|
5,878
|
|
7,239
|
|
8,933
|
|
Total
assets
|
30,332
|
|
24,868
|
|
25,690
|
|
74,110
|
|
86,493
|
|
Total
shareholders’ equity
|
25,541
|
|
21,027
|
|
19,797
|
|
66,870
|
|
77,223
|
|
*
|
The
selected financial data set forth above should be read in conjunction
with
Item 5. “Operating and Financial Review and Prospects” and the financial
statements and the notes to those statements included elsewhere
in this
annual report.
|
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
Pending
and potential litigation against us could have a material adverse effect
on our
business and operating results and lower the market price of our
ADSs.
RCC
Complaint
On
June 21, 2000, we and our directors and others (including 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, the “RCC Complaint”), filed by Mr. Abinav Bhatt, a 22-year-old student,
before the Judicial Magistrate, First Class, Pune, India, alleging commission
of
an offense under Section 292 of the Indian Penal Code, 1860, as amended,
or IPC,
for distributing, publicly exhibiting and putting into circulation obscene,
pornographic and objectionable material. The Complaint alleged that we, through
our 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 in the RCC 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, or Writ Petition, was filed in the High Court of
Mumbai
(Criminal Writ Petition Number 1754 of 2000) seeking, among other things,
relief
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 the Judicial Magistrate
pending final disposal of the Writ Petition. The Writ Petition has been admitted
by the High Court of Mumbai. In the event that we are unsuccessful in our
defense, we and our directors may face both criminal penalties and monetary
fines.
IMI
Complaint
A
complaint was filed by the Indian Music Industry (“IMI”), a society representing
various music companies in Magistrate’s Court India against three of our
directors. The complaint alleges that by providing links to MP3 sites through
its directory we have been guilty of violating Section 51 of the Indian
Copyright Act 1957. The complaint alleges that the MP3 sites to which links
were
provided permitted downloading of music, which had not been authorized to
be so
downloaded by copyright owners who are members of IMI. Our directors are
named
as parties to the lawsuit because, according to the complaint, the directors
are
in charge of our affairs and are hence deemed to be guilty of committing
the
offense. Our directors have presently been exempted from personal appearance.
Our directors filed an application for discharge of the complaint before
the
Magistrate. The application is pending hearing. Although our directors believe
they have valid defenses, if they are unsuccessful after exhausting all legal
remedies, our directors could face both criminal penalties and monetary
fines.
All
of the foregoing actions require management time and cost. In addition, we
can
give no assurances that we will be successful in our defense of such actions.
If
any of our directors are subject to criminal penalties, we may be deprived
of
their services as directors.
Super
Cassette Industries Complaint
A
complaint was filed by Super Cassettes Industries Limited (“SCIL”), a producer
and publisher of sound recordings and audio visual songs in India, against
us
and our Chairman/Chief Executive Officer as well as Ram Gopal Verma Films
Private Limited, in the High Court of Delhi (Suit No. C.S. (O.S.) 736 of
2007).
The complaint alleges violations of the Indian Copyright Law of 1957 through
our
placement on our website of video clips of certain songs from two Hindi films
(Nishabd and Honeymoon Travels Pvt Ltd). Pursuant to an
assignment,
SCIL claims to own sole copyrights in the
audio visual songs, sound recordings, lyrics and musical composition in the
two
films. The complaint seeks injunction relief, damages in the amount of Rs.2.0
million (approximately US$50,000) and other relief. In June 2007, we filed
a
written reply. We have since removed these clips from our website. The matter
is
now pending before the High Court of Delhi. All of these actions require
management time and cost. In the event that we are unsuccessful in our defense,
we and our Chairman/Chief Executive Officer may face penalties and fines.
Please
see the section entitled “Business ¾ Legal
Proceedings”
in this annual report for more information on the litigation.
Other
proceedings
We
are also subject to other legal proceedings and claims, which have arisen
in the
ordinary course of our business. Those actions, when ultimately concluded
and
determined, will not, in the opinion of management, have a material effect
on
our results of operations or financial position.
For
additional information regarding pending litigation filed against us, please
see
“Business — Legal Proceedings” in this annual report.
A
slowdown in the Indian and the U.S. economies and in certain sectors could
adversely affect our business, operating results and financial
condition.
We
are dependent on the health of the Indian and the U.S. economies. A slowdown
in
the United States and Indian economies or sectors in which our clients are
based, including the Internet and technology-based sectors, or an overall
reduction in consumer and business spending, could have a materially adverse
impact on our business and our prospects. A significant portion of our revenues
are derived from retail customers and from companies that operate in various
sectors, including the Internet and technology-based sectors as well as
insurance, financial services, banking and consumer goods sectors. Many of
these
sectors could experience slowdown in growth. As a result, advertisers may
reduce
advertising expenditures or may not spend as much money on online and offline
advertising as anticipated. A prolonged or material decline in Internet
advertising expenditure will have a material adverse effect on our operating
results. Further, a slowdown in the Indian and U.S. economies may make it
difficult for us to raise money in the equity and debt markets on terms
favorable to us or at all, which may have an adverse effect on our financial
condition and operating results.
We
have a history of losses. We may incur losses in the future and we may not
achieve or maintain profitability.
We
have incurred significant net losses and negative cash flows since our inception
in January 1996. As of March 31, 2007, we had an accumulated deficit of
approximately US$47.65 million. While we earned a net income of US$6.96 million
for the fiscal year ending March 31, 2007, we may in the future incur additional
net losses and negative operating cash flows. We expect to increase our spending
as we continue to expand our services, advertise and promote our brand, and
invest in the expansion of our infrastructure and sales and marketing staff.
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 remain profitable. We may not be able to
do so.
Our business model is not yet proven in India or the United States, and we
cannot assure you that we will sustain our profitability or that we will
not
incur operating losses in the future. If we are unable to maintain
profitability, we will be unable to build a sustainable business. In this
event,
the price of our ADSs and the value of your investment would likely
decline.
Intense
competition in our businesses could prevent us from sustaining our
profitability.
Our
businesses compete in various sectors including with Indian and foreign online
content and services providers, and traditional print and television media
companies. In recent
times, we have witnessed increased competition in India from established
foreign
brands such as Google, Yahoo and MSN. 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. Many of our competitors have a longer operating
history, greater name recognition and customer base, and greater management,
financial, technical, marketing, sales, brand, and other resources than we
do.
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. There has also been a trend toward industry consolidation
so
our smaller competitors today may become part of larger competitors in the
future. If our competitors in our online business are more successful than
we
are at generating visitors and website traffic due to
superior content and other service offerings or our
competitors in our publication business are more successful at growing their
circulation and advertising share, our revenues may decline.
In
addition to Internet companies, our online business faces competition from
other
companies that offer traditional media advertising opportunities, including
print and television companies. Most large advertisers have set advertising
budgets, a portion of which is allocated to Internet advertising. For the
near
future, we expect that large advertisers will continue to focus their
advertising efforts on traditional media. If we fail to convince these companies
to spend a larger portion of their advertising budgets with us, or if our
existing advertisers reduce the amount they spend on Internet advertising,
our
operating results may decline.
Competition
for visitors, customers, subscribers, advertisers and e-commerce partners
is
intense and is expected to increase significantly in the future because there
are no substantial barriers to entry in 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.
Our
Indian advertising revenues include revenues from other Internet companies,
including those engaged in the business of job searches, travel, matrimonial
and
online shopping. Some of these companies are startups without proven long-term
business models and are dependent on external funding for future growth.
Any
downturn in advertising spending from this segment could have an adverse
impact
on our revenues and profitability.
Our
publication business in the United States and Canada 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 for paying subscribers for our India
Abroad newspaper, which is subscription-based, is intense due to the presence
of
other paid newspapers such as New India Times, Indian Express and India West.
Further, our publications also face competition from free newspapers and
from
electronic media, such as television and online publications and
services.
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. For example,
we
understand certain of our competitors have been willing to charge for job-site
advertising, not on the basis of clicks on hyperlinks, but only if clicks
result
in résumés being sent to the customers. Increased competition or the actions of
our existing competitors may result in:
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loss
of visitors and website traffic;
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loss
of paid subscribers;
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reduced
operating margins;
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loss
of market share; and
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diminished
value in our services.
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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.
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 may also fluctuate significantly in the future based on
a
variety of factors. These factors could affect our long-term performance.
Some
of these factors include:
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lower
than expected revenues from one or more of our
customers;
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changes
in prices for our product and service
offerings;
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increase
in personnel, marketing and other operating
expenses;
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our
ability to attract new users and to retain existing users at reasonable
costs;
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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;
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the
timing of our expansion plans in India and other geographic
markets;
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seasonality
in retail sales;
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technical
difficulties, system or website downtime or Internet service disruptions;
and
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