Prudence and Simplicity - Kotak Mahindra Bank · 2015-01-06 · Prudence and Simplicity Kotak...

ANNUAL REPORT2012-13

Prudenceand Simplicity

Kotak Mahindra Inc.

1ANNUAL REPORT 2012-13

BOARD OF DIRECTORS: MR. MANISH MEHTA, MR. VISWANATH VARDARAJAN, MR. GAURANG SHAH, MR. C. JAYARAM

Directors’ Report I

To the shareholders of Kotak Mahindra Inc The Directors have pleasure in presenting their Annual Report together with the audited accounts of your Company for the year ended 31st March, 2013. OPERATIONS The Company is a 'broker- dealer' registered with the FINRA. FINANCIAL RESULTS AND DIVIDEND The Company's loss for the financial year ended 31st March, 2013 amounted to INR 52,787,231 (Previous Year loss - INR 47,002,505).The Directors do not recommend any dividend for the year under review. DIRECTOR'S RESPONSIBILITY STATEMENT The Directors state as an averment of their responsibility that: (a) the Company has, in the preparation of the annual accounts for the year ended 31st March, 2013,

followed the applicable accounting standards along with proper explanations relating to material departures, if any;

(b) the Directors have selected such accounting policies and applied them consistently and made judgment

and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2013 and of the profit/loss of the Company for the financial year ended 31st March, 2013;

(c) the Directors have taken proper and sufficient care to the best of their knowledge and ability, for the

maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(d) the Directors have prepared the annual accounts on a going concern basis. For and on behalf of the Board of Directors Ravilochan Pola Varadarajan Viswanathan Director Director

Date: 27th April 2013

2 KOTAK MAHINDRA INC.

INDEPENDENT AUDITORS’ REPORT

To The Members of Kotak Mahindra, Inc. The financial statements of Kotak Mahindra, Inc. as at 31st March 2013, being a company registered in the United States of America, are audited by Rothstein Kass, Certified Public Accountants, New Jersey and we have been furnished with their audit report dated 15th April, 2013. We are presented with the accounts in Indian Rupees prepared on the basis of aforesaid accounts to comply with requirements of section 212 of the Companies Act 1956. We give our report hereunder: Report on the Financial Statements We have audited the accompanying financial statements of Kotak Mahindra, Inc., which comprise the Balance Sheet as at 31st March 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the


appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2013; (b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Report on Other Legal and Regulatory Requirements In view of the facts specified in Para 1 and 2 herein above, the requirements of Companies (Auditor’s Report) Order, 2003, report under section 227(3) of the Act, report on directors disqualification in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 and payment of cess under section 441A of the Companies Act, 1956 are not applicable.

For V.C. Shah & Co. Chartered Accountants

Firm Registration No.109818W

A.N Shah. Place: Mumbai Partner Date: April, 2013 Membership No.: 42649


Note No. As at 31st March, 2013 As at 31st March, 2012

I. EQUITY AND LIABILITIES

1 Shareholders’ funds

(a) Share capital 3.1 698,645 698,645

(b) Reserves and surplus 3.2 226,434,199 261,538,846

2 Non-current liabilities

(a) Long-term provisions 3.3 5,245,573 6,478,018

3 Current liabilities

(a) Trade payables 2,433,778 2,333,320

(b) Short-term provisions 3.4 8,061,282 4,938,754

TOTAL 242,873,477 275,987,583

II. ASSETS

Non-current assets

1 (a) Fixed assets

Tangible assets 3.5 1,225,739 1,364,651

(b) Non-current investments 3.6 8,143 7,631

(c) Deferred tax assets (net) - 12,049,133

(d) Long-term loans and advances 3.7 - 42,430

(e) Other non-current assets 3.8 1,642,121 1,851,850

2 Current assets

(a) Current investments 3.9 44,591,937 39,622,865

(b) Trade receivables 3.10 5,741,296 4,696,501

(c) Cash and bank balance 3.11 50,550,208 85,168,415

(d) Short-term loans and advances 3.12 138,774,300 130,833,844

(e) Other current assets 3.13 339,733 350,263

TOTAL 242,873,477 275,987,583

Significant Accounting Policies and Notes to Accounts 2&3

In terms of our report of even date

For V . C. Shah & Co. For and on Behalf of the Board of Directors

Chartered Accountants

A.N. Shah Ravilochan Pola V Varadarajan

Partner Director Director

Mumbai Dated: 27th April, 2013

Dated: 29th April, 2013

Kotak Mahindra, Inc

Balance Sheet as at 31st March 2013

Particulars


Note No. For the year ended 31

March 2013

For the year ended 31

March 2012

I. Revenues from operations

(a) Advisory Fee income 40,085,328 37,458,041

(b) Referral Fee Income 37,857,536 71,770,478

II. Other income 3.14 6,425,247 3,708,871

III. Total Revenue 84,368,111 112,937,390

IV. Expenses:

Employee cost 3.15 111,471,627 131,508,984

Depreciation and Amortization 3.5 506,397 238,620

Unrealised loss on Investment - 6,786,890

Other expenses 3.16 24,568,378 31,678,360

Total expenses 136,546,402 170,212,854

V. LOSS BEFORE TAX (52,178,291) (57,275,464)

VI. Tax expense:

(a) Current tax (11,552,177) (21,786,159)

(b) Deferred tax 12,161,117 11,513,200

608,940 (10,272,959)

VII. LOSS FOR THE PERIOD (52,787,231) (47,002,505)

VIII. Earnings per equity share:

Basic and Diluted 3.22 (34.49) (30.71)

Significant Accounting Policies and Notes to Accounts 2&3








Particulars

Kotak Mahindra, Inc

Statement of Profit and loss for the year ended 31st March 2013


KOTAK MAHINDRA, INC.

Cash Flow Statement for the year ended 31st March, 2013

For the year ended For the year ended

31st March, 2013 31st March, 2012

Cash Flow from Operating Activities

Net Profit / (Loss) before taxation (52,178,291) (57,275,464)

Adjustments for:

- Interest (3,952,675) (3,531,875)

- Dividend (6,364) (22,795)

- Unrealised (gain)/ loss on investment (2,317,913) 6,786,890

- Exchange Adjustments 14,826,446 33,239,003

- Depreciation 506,397 238,620

Operating Profit before Working Capital Changes (43,122,400) (20,565,621)

Adjustments for:

(Increase) / Decrease in Trade Receivable (1,044,795) 1,435,514

Increase / (Decrease) in Long-term provisions (1,232,445) 4,488,944

Increase / (Decrease) in Other current liabilities 0 0

(Increase) / Decrease in Other Non-Current assets 209,729 (736,975)

Increase / (Decrease) in Short term provisions 3,205,403 3,040,365

(Increase) / Decrease in Long-term loans and advances 42,430 (42,430)

(Increase) / Decrease in Short-term loans and advances (7,901,099) 448,126

(Increase) / Decrease in Other Current assets (1,449) 109,177

Increase / (Decrease) in Trade payables 100,458 (3,319,067)

Cash Generated from Operations (49,744,168) (15,141,967)

Direct taxes (paid)/ refund 11,429,945 34,336,750

NET CASH FLOW (USED IN)/ FROM OPERATING ACTIVITIES (A) (38,314,223) 19,194,783

Cash Flow from Investing Activities

Purchase of fixed assets (275,002) (1,190,072)

Purchase of Investments - (43,289,047)

Dividend Received 6,364 22,795

Repayment of loan by fellow subsidiary - 73,490,000

Interest received 3,964,654 3,531,875

NET CASH FLOW (USED IN) / FROM INVESTING ACTIVITIES (B) 3,696,016 32,565,551

Net Increase in Cash and Cash Equivalents (A + B) (34,618,207) 51,760,334

Cash and Cash Equivalents at the beginning of the year 85,168,415 33,408,081

Cash and Cash Equivalents at the end of the year 50,550,208 85,168,415

(34,618,207) 51,760,334

Notes:

1 The Cash Flow Statement has been prepared under the 'Indirect Method' as set out in the Accounting Standard -3 on

Cash Flow Statements notified under the Companies (Accounting Standard) Rules, 2006 “as amended”

2 Figures in brackets indicate cash outflow.

3 The previous year's figures have been re-grouped, wherever necessary in order to conform to this year's presentation.

This is the Cash Flow Statement referred to in our report of even date

For and on Behalf of the Board of Directors

For V . C. Shah & Co.


Ravilochan Pola V Varadarajan

Director Director

A. N. Shah

Partner Dated: 27th April, 2013

Mumbai



1 Organisation and Nature of Business

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS

2 Significant Accounting Policies:

2.1 Basis of Preparation

2.2 Conversion to Indian Rupees

2.3 Use of estimates

2.4 Revenue Recognition

2.5 Fixed Assets

Furniture and Fittings 5 years

Computers 3 years

Office Equipment 3 years

2.6 Investments

2.7 Leases

2.8 Cash and cash equivalent

For the purposes of the cash flow statement, cash and cash equivalent consists of cash in hand, bank balances and short-

term deposits with an original maturity of three months or less, net of outstanding bank overdrafts, if any.

Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are

classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss

on a straight-line basis over the lease term.

KOTAK MAHINDRA, INC.

Kotak Mahindra, Inc. (the “Company”), a majority owned subsidiary of Kotak Mahindra Bank Limited (the “Parent”), is a broker-

dealer registered with the Securities and Exchange Commission (“SEC”) and is a member of the Financial Industry Regulatory

Authority (“FINRA”). The Company’s operations consist primarily of engaging in agency transactions that are settled on a delivery

versus payment basis. These include shares trading on the Indian stock exchange that are executed and handled by its fellow

subsidiary, Kotak Securities Limited (“KS”) and Global and American Depository Receipts (GDR’s and ADR’s) that are executed

and handled by another fellow subsidiary, Kotak Mahindra (UK) Limited. The company distributes research reports developed by

its fellow subsidiary, KS and provides sales services and earns revenue for this service.

The accounts are prepared in accordance with accounting principles generally accepted in India. The Company follows

accrual method of accounting.

For the purpose of accounts, all income and expense items are converted at the average rate of exchange applicable for

the period. All assets and liabilities are translated at the closing rate as on the Balance Sheet date. The Share Capital is

carried forward at the rate of exchange prevailing on the transaction date. The resulting exchange difference on account of

translation at the year end is transferred to Translation Reserve Account and the said account is being treated as

“Reserves and Surplus”.

The preparation of financial statements requires the management to make estimates and assumptions considered in the

reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the

reported income and expenses during the reporting period. Management believes that the estimates used in preparation of

the financial statements are prudent and reasonable. Actual results could differ from these estimates.

The Company receives referral fees for referring clients to fellow subsidiaries of the Company. Referral fees are based (a)

on the month-end net asset value of the clients’ holdings and (b) on the equity brokerage and derivative trades as a

percentage of each trade. The percentage of commissions is determined based on a pre-defined fee structure agreed by

the clients at the time of opening the accounts or as per an amendment. The Company also receives advisory fees for

providing research to clients and records the income at the time the services are provided.

Fixed assets are stated net of depreciation. Depreciation has been provided on Straight Line Method over an estimated

useful life between three and five years. The rates of depreciation are determined after considering the management’s

estimation of the useful life of the asset.

Investments are classified into long-term investments and current investments. Investments which are intended to be held

for more than one year are classified as long term investments and investments which are intended to be held for less than

one year are classified as current investments. Long-term investments are stated at cost less other than temporary

diminution. Current investments are valued at cost or market value / fair value which ever is lower.


2.9 Taxes

2.10 Earnings per share

2.11 Provisions and Contingencies

2.12 Employee Share based payments

Cash-settled scheme:

Provision is recognised when there is a present obligation as a result of past event; it is probable that an outflow of

resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not

discounted to its present value and are determined based on best estimate required to settle the obligation at the balance

sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Contingent Liabilities are not recognized but are disclosed in the notes unless the outflow of resources is remote.

Contingent assets are neither recognised nor disclosed in the financial statements.

The cost of cash-settled scheme (stock appreciation rights) is measured initially using intrinsic value method at the grant

date taking into account the terms and conditions upon which the instruments were granted. This intrinsic value is

amortised on a straightline basis over the vesting period with a recognition of corresponding liability. This liability is

remeasured at each balance sheet date up to and including the settlement date with changes in intrinsic value recognised

in profit and loss account in ‘Employee Cost’.

Current tax is expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at

the balance sheet date and any adjustments payable / refund received in respect of previous years.

Deferred Tax is recognized, subject to the consideration of prudence in respect of deferred tax assets, on timing

differences, being the differences between taxable income and accounting income that originate in one period and are

capable of reversal in one or more subsequent periods.

Deferred tax assets arising mainly on account of carry forward of losses and unabsorbed depreciation under tax laws are

recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable

income against which such deferred tax assets can be realised. Deferred tax assets on account of other timing differences

are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available

against which such deferred tax assets can be realised.

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders

(after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity

shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all

dilutive potential equity shares.


3 Notes to the Accounts

3.1 (a) Share capital

As at 31st

March 2013

As at 31st

March 2012

2,000,000 (31st March 2012: 2,000,000) equity shares of USD 0.01 each $20,000 $20,000

698,645 698,645

698,645 698,645

(b) Equity shares

As at 31

March 2013

As at 31 March

2013

As at 31

March 2012

As at 31

March 2012

Quantity Quantity Share capital outstanding at the beginning of the year 1,530,621 698,645 1,530,621 698,645

- - - -

1,530,621 698,645 1,530,621 698,645

(c) Terms/rights attached to equity shares

(d) Shares held by holding/ultimate holding company and/or their subsidiaries/associates

As at 31

March 2013

As at 31

March 2012

Kotak Mahindra Bank Limited, the holding company 780,620 780,620

Kotak Mahindra Capital Company Limited, subsidiary of Kotak Mahindra Bank Limited 750,001 750,001

(e) Details of shareholders holding more than 5% shares in the company

Equity shares of USD 0.01 fully paid up

number % holding number % holding

Kotak Mahindra Bank Limited, holding company 780,620 51.00% 780,620 51.00%

750,001 49.00% 750,001 49.00%

Kotak Mahindra Capital Company Limited, subsidiary of Kotak Mahindra Bank

Limited

As at 31 March 2013 As at 31 March 2012

Share Capital

Authorised shares

1,530,621 (31st March 2012: 1,530,621) Equity Shares of USD 0.01 each

Reconciliation of equity share capital

Number of equity share

Issued, Subscribed and fully Paid up

Total

Issued during the period

Share capital outstanding at the end of the year

The company has only one class of equity shares having a par value of USD 0.01 per share. Each holder of equity shares is entitled to one vote per

share. The company declares and pays dividends in USD. The dividend proposed by the Board of Directors is subject to the approval of the

shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all

preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Out of equity shares issued by the company, shares held by its holding company, ultimate holding company and their subsidiaries/ associates are as

below:


3.2 Reserves and Surplus


a. Securities Premium Reserve

Opening Balance 34,033,725 34,033,725

Closing Balance 34,033,725 34,033,725

b. Translation Reserve

Opening Balance 45,233,927 9,607,557

Additions/(deductions) during the period 17,682,584 35,626,370

Closing Balance 62,916,511 45,233,927

c. Surplus in the statement of profit and loss

Opening balance 182,271,194 229,273,699

Net Loss For the current year (52,787,231) (47,002,505)

Closing Balance 129,483,963 182,271,194

226,434,199 261,538,846

3.3 Long Term Provisions


Provision for employee benefits

Stock Appreciation Rights (refer note 3.25) 5,245,573 6,478,018

5,245,573 6,478,018

3.4 Short-term Provisions


Provision for Stock Appreciation Rights (refer note 3.25) 8,061,282 4,855,879

Provision for taxes - 82,875 8,061,282 4,938,754 Total

Total

Short-term Provisions

Reserves and Surplus

Long Term Provisions

Total


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0.50$ 300 8,143 300 7,631

8,143 7,631

8,143 7,631

As at 31 March

2013

As at 31 March

2012

- 42,430

- 42,430

3.8

As at 31 March

2013

As at 31 March

2012

1,642,121 1,851,850

1,642,121 1,851,850

3.9

Quantity Quantity

10.00$ 90,666.8 44,591,937 90,666.8 39,622,865

Total Current Investments 44,591,937 39,622,865

3.10

As at 31 March

2013

As at 31 March

2012

5,741,296 4,696,501

5,741,296 4,696,501

3.11

As at 31 March

2013

As at 31 March

2012

As at 31st March, 2012

Current Investments

Total

Long Term Loans and Advances

Unsecured, considered good

Current Investments Face

Value

As at 31st March, 2013 As at 31st March, 2012

Other Non-current Investments

National Association of Security Dealers

Aggregate amount of unquoted investments

Total Non Current Investments

Capital Advances

Other Non-Current Assets


Total

Outstanding for a period less than six months from the date they are due for payment

Cash and bank balances

Cash and cash equivalents

Non Current Investments Face

Value

As at 31st March, 2013

Alps Kotak India Growth Fund

Trade Receivables


Deposits

Total


50,550,208 85,168,415

50,550,208 85,168,415

3.12

As at 31 March

2013

As at 31 March

2012

135,712,500 127,187,500

135,712,500 127,187,500

3,022,443 3,646,344

39,357 -

3,061,800 3,646,344

138,774,300 130,833,844

3.13

As at 31 March

2013

As at 31 March

2012

316,662 328,641

23,071 21,622

339,733 350,263

For the year ended

31st March, 2013

For the year

ended

31st March,

2012

148,295 154,201

3,952,675 3,531,875

6,364 22,795

Provision written back on investsments 2,317,913 -

6,425,247 3,708,871

For the year ended

31st March, 2013

For the year

ended

31st March,

2012

Loans and advances to related parties

Total

Short-term Loans and Advances


In November 2007, the Company provided 112,250,000 three-month term loan to Kotak Mahindra International Limited, a stock holder and fellow

subsidiary, which was renewable upon notice. The note was last renewed in February 2013 and bears interest of 2.8% per annum and is due 30th April,

2013. As of 31st March, 2013, the total notes receivable outstanding was 135,712,500. The Company earned interest income of 3,952,675 (Previous

Year 3,531,875) related to the notes, which is included in Interest Income in the accompanying profit and loss account of which interest income

receivable of 316,662 (Previous Year 328,641) was included in Other Current Assets in the accompanying Balance Sheet.

Other current assets

Interest accrued on loan

Other receivables

Total

Total

Balances with banks:

Interest income on fixed deposits

Employee Cost

Other Income

Interest income on loans

Dividend Income

Total


93,873,736 112,459,524

7,284,640 9,900,917

10,313,251 9,148,543

111,471,627 131,508,984

For the year ended

31st March, 2013

For the year

ended

31st March,

2012

6,514,860 8,479,889

4,168,415 3,763,554

731,211 1,346,425

961,303 848,854

4,529,084 6,991,527

692,426 1,094,750

3,733,241 5,367,449

1,387,047 1,581,155

1,850,791 1,356,934

- 847,823

24,568,378 31,678,360

3.17

3.18

3.19

3.20

3.21 Income Taxes

3.22 Earnings per equity share

As at 31 March

2013

As at 31 March

2012

Earnings / (loss) used in the computation of basic and diluted earnings per share (`) (A) (52,787,231) (47,002,505)

Weighted average number of equity shares used in computation of basic earnings per share (B) 1,530,621 1,530,621

Nominal value of Equity shares 0.01$ 0.01$

(34.49) (30.71)

3.23

Salaries, bonus and allowances

Employee Stock Option Scheme

Miscellaneous expenses

Recruitment Expenses

Staff welfare expenses

Total

Other expenses

Rent, rates & taxes

Insurance

Professional and legal fees

Auditor’s remuneration

Communication expenses

Advertising, Business Promotion and Entertainment

Repairs and maintenance

Travel expenses

Total

Basic and diluted earnings / (loss) per share () (A/B)

As at 31st March, 2013, the Company had net operating loss carry forwards of approximately 67,421,970 and 187,663,245 for federal and state income

tax purposes, respectively. No deferred tax assets as at 31st March, 2013 has been recognisd on account of carry forward of losses as there is no virtual

certainty supported by convincing evidence that there will be sufficient future taxable income against which such deferred tax assets can be realised. A

deferred tax asset of 12,049,133 had been included in the balance sheet as of 31st March, 2012 to the extent of carry back available.

Particulars

The Company is the subsidiary of Kotak Mahindra Bank Limited (KMBL). The accounts have been prepared and audited to attach with the accounts of

KMBL, the holding company to comply with the provisions of the Indian Companies Act, 1956.

The transactions are in local currency (US Dollars), which have been converted into Indian Currency (Indian Rupees) for reporting and the rate applied is

as per para 2.2 of the significant accounting policies

The Company appointed Kotak Mahindra (UK) Limited, a fellow subsidiary, as its clearing agent to execute and process the settlement of its ADR and

GDR business. For the year ended 31st March, 2013, there were no commissions earned for transactions that cleared through Kotak Mahindra (UK)

Limited.

The Company received referral fees from two fellow subsidiaries who managed accounts referred to them by the Company. The Company had referral

fees from these two fellow subsidiaries of approximately 29,644,730 (Previous year 66,887,665 ) for the year ended 31st March, 2013. Amounts due

from these two fellow subsidiaries at 31st March, 2013 were approximately 2,008,545 (Previous year 3,408,625)

The Company has non-cancelable operating leases for office facilities in White Plains and New York, which expire in August 2015 and March 2014,

respectively. These leases are subject to escalations for increases in real estate taxes and other operating costs.

Aggregate future minimum rental payments under the leases as of 31st March, 2013 are as follows:


7,599,900

2015 4,125,660

2016 1,737,120

13,462,680

3.24 Contingencies and other commitments

3.25 Stock appreciation rights (SARs)

Detail of activity under SAR is summarized below:

No. of SARs

For the year ended

31st March, 2013

For the year

ended

31st March,

2012

79,880 23,530

- 65,040

19,637 6,850

Employees transferred during the year - 1,840

Expired during the year 10,153 -

Outstanding at the end of the year 50,090 79,880

Effect of share based payment to employees on the profit and loss account and on its financial position

2013 2012

7,284,640 9,900,917

13,306,855 11,333,897

3.26








Year ending 31 March

2014

Outstanding at the beginning of the year

Granted during the year

Exercised during the year

Office rent expenses amounted to 5,049,693 for the year ended 31st March, 2013 (Previous Year 6,818,041). On 1st April, 2013 the Company entered

into a new one year lease agreement for office space in New York City, with monthly lease payments of approximately 271,425.

The Company is subject to various regulatory examinations that arise in the ordinary course of business. In the opinion of management, after consultation

with legal counsel, results of these examinations will not materially affect the Company’s financial position or results of operations.

The Management grants SARs to eligible employees as and when it deems fit. The SARs are to be settled in cash and will vest in the manner as provided

in the scheme / grant letters to employees.

No SARs were granted during the year.

Previous years figures have been regrouped, reclassified wherever necessary to confirm with figures of the current year.

Year ended March 31,

Total Employee Compensation Cost pertaining to share-based payment plans

Closing balance of liability for cash-settled options

Had the company recorded the compensation cost computed on the basis of fair valuation method instead of intrinsic value method, employee

compensation cost would have been lower by 409,539 (Previous year higher by 1,009,719) and the loss after tax would have been lower (Previous

year higher) by the same amount.

ANNUAL REPORT2012-13

Prudenceand Simplicity

Kotak Mahindra, Inc

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