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ProspectusAugust 27 , 2012

INDIA INFOLINE FINANCE LIMITED(Formerly known as India Infoline Investment Services Limited)

A Public Limited Company Incorporated under the Companies Act, 1956, as amended (the Act).Registered as a Non-Banking Financial Company within the meaning of the Reserve Bank of India Act, 1934 (2 of 1934).

Registered Office: IIFL House, Sun Infotech Park, Road No. 16V, Plot No.B-23, Thane Industrial Area, Wagle Estate, Thane400 604Tel: +91 22 2580 6650 Fax: +91 22 2580 6654

Corporate Office:IIFL Center, Kamala City, Senapati Bapat Marg, Lower Parel, Mumbai400 013Tel.:+91 22 4249 9000 Fax: +91 22 2495 4313 Website:www.iiflfinance.com

For details of changes in Name and Registered Office, see the section titled History and certain other Corporate Mattersbeginning on page 79 of this Prospectus

Compliance Officer and Contact Person: Mr. Dilip Vaidya; E-mail: dilip.vaidya@indiainfoline.com

Public Issue by India Infoline Finance Limited, ( Company or Issuer) of Un-Secured Redeemable Non-Convertible Debentures of face value of 1000 each,

(NCDs), aggregating upto 2,500 million, hereinafter referred to as the Base Issue with an option to retain over-subscription upto 2,500 million aggregating to a total

of upto 5,000 million, hereinafter referred to as the Overall Issue size. The NCDs are in the nature of subordinated debt and will be eligible for Tier II capital.

GENERAL RISKS

Investors are advised to read the Risk Factors carefully before taking an investment decision in the Issue. For taking an investment decision, the investors must rely on their own examinationof the Issuer and the Issue, including the risks involved. Specific attention of the investors is invited to the chapter titled Risk Factorson pages XI to XXVII of this Prospectus.

ISSUERS ABSOLUTE RESPONSIBILITY

The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Prospectus contains all information with regard to the Issuer and the Issue, which is materialin the context of the Issue, that the information contained in this Prospectus is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentionsexpressed herein are honestly held and that there are no other facts, the omission of which makes this Prospectus as a whole or any of such information or the expression of any such opinions orintentions misleading in any material respect.

CREDIT RATINGThe NCDs proposed to be issued under this Issue have been rated [ICRA]AA- (stable)by ICRA for an amount of upto`5,000 million videits letter dated August 14, 2012, and CRISILAA-/Stableby CRISIL for an amount of upto`5,000 million videits letter dated August 13, 2012. The rating of the NCDs by ICRA indicates a high degree of safety regarding timelyservicing of financial obligations. Such instruments carry very low credit risk. The modifier -(minus) reflects the comparative standing within the category. The rating of NCDs by

CRISIL indicates instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.The ratings provided by ICRA and/or CRISIL may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any otherrating. These ratings are not a recommendation to buy, sell or hold securities and investors should take their own decisions. Please refer to page 9 of this Prospectus for the rationale for theabove ratings.

LISTING

The NCDs offered through this Prospectus are proposed to be listed on the NSE and BSE. Our Company has obtained in-principle approvalsfor the Issue from the NSE and BSE videtheirletter(s) both dated August 27, 2012. For the purposes of the Issue, NSE shall be the Designated Stock Exchange.

PUBLIC COMMENTS

The Draft Prospectus dated August 16, 2012 was filed with National Stock Exchange of India Limited (NSE) and BSE Limited (BSE), pursuant to the provisions of SEBI DebtRegulations and was open for public comments for a period of 7 Working Days, i.e. until 5 p.m. on August 25, 2012

LEAD MANAGERS TO THE ISSUE REGISTRAR TO THE ISSUE

Axis Bank LimitedFirst floor, Axis House,C-2, Wadia International Centre,

P.B. Marg, Worli,Mumbai 400 025, Maharashtra, India.Tel: +91 22 4325 2175Fax: +91 22 4325 3000Email: ifl.ncd@axisbank.comInvestor Grievance Email:axbmbd@axisbank.comWebsite:www.axisbank.comContact Person: Mr. Vishal SharanCompliance Officer: Mr. AdvaitMajmudarSEBI Regn. No. INM000006104

SBI Capital Markets Limited202, Maker Tower E, Cuffe ParadeMumbai 400 005, Maharashtra, IndiaTel: +91 22 2217 8300Fax+91 22 2218 8332Email ID: ifl.ncd@sbicaps.comWebsite:www.sbicaps.comInvestor Grievance ID:investor.relations@sbicaps.comContact Person : Mr. Nithin Kanuganti/ Ms.Rajalakshmi VCompliance Officer: Mr. Bhaskar ChakrabortySEBI Regn. No.: INM000003531

Edelweiss Financial Services Limited

Edelweiss House, 14th Floor,

Off CST Road, Kalina,Mumbai 400 098, Maharashtra, IndiaTel: +91 22 4086 3535Fax+91 22 4086 3610Email ID: ifl.ncd@edelcap.comWebsite:www.edelweissfin.comInvestor Grievance ID:customerservice.mb@edelcap.comContact Person : Mr. Sumeet Lath/ Mr. Viral ShahCompliance Officer: Mr. B RenganathanSEBI Regn. No.: INM0000010650

Link Intime India Private Limited

C- 13 Pannalal Silk Mills, Compound,

LBS Marg, Bhandup (West),Mumbai 400 078, Maharashtra, IndiaTel: +91 22 2596 0320;Fax: +91 22 2596 0329Tollfree: 1-800-220320Email: ifl.ncd@linkintime.co.inInvestorGrievancemail:ifl.ncd@linkintime.co.inWebsite:www.linkintime.co.inContactPerson: Mr. Sanjog SudSEBI Regn. Number: INR000004058

LEAD MANAGERS TO THE ISSUE CO-LEAD MANAGERS TO THE ISSUE

Trust Investment Advisors Pvt. Ltd.

109//110, 1st Floor,Balarama,

Village Parigkhari,Bandra Kurla Complex,Bandra (East), Mumbai400 051Tel. : +9122 40845000Fax.: +9122 40845066/07

Email id : info@trustgroup.co.in

Investor Grievance mail:

customercare@trustgroup.co.inWebsite: www.trustgroup.co.inContact Person: Anindya SenCompliance Officer: Balkrishna Shah

SEBI Regn Number: INM000011120

India Infoline Limited**8th Floor, IIFL Centre, Kamala City,

Senapati Bapat Marg,Lower Parel (West),Mumbai 400 013, Maharashtra, IndiaTel: +91 22 4646 4700Fax: +91 22 2493 1073Email:ifl.ncd@iiflcap.comInvestor Grievance mail: ig.ib@iiflcap.comWebsite: www.iiflcap.comContact Person: Sachin KapoorCompliance Officer: R. MohanSEBI Regn. No.: INM 000010940

RR Investors Capital Services (P) Limited

133A, Mittal Tower, A Wing,Nariman point,Mumbai 400 021,Maharashtra, IndiaTel:+ 91 22 2288 6627Fax: +91 22 2285 1925Email:iifl.ncd@rrfcl.comInvestor Grievance Email:investors@rrfclWebsite:www.rrfinance.com/rrfcl.comContact Person :Mr. Brahmdutta SinghCompliance Officer:Mr. Sandeep MahajanSEBI Regn. No.:INM000007508

Karvy Investor Services Limited

702, Hallmark Business Plaza,Sant Dnyaneshwar Marg,Off. Bandra Kurla Complex, Bandra (East),Mumbai 400 051, Maharashtra, IndiaTel:+ 91 22 6149 1500Fax: +91 22 61491515Email:iiflncd@karvy.comInvestor Grievance Email:CMG@karvyWebsite:www.karvy.comContact Person :Mr. Sumit Singh/ Mr SwapnilMahajanCompliance Officer:Mr. V. Madhusudhan RaoSEBI Regn. No.:INM000008365

ISSUE SCHEDULEIssue Opens on September 5, 2012 Issue closes on September 18, 2012

** India Infoline Limited (IIFL) is the Promoter of our Company. As there ar e common directors between IIFL and our Company, IIFL is deemed to be our associate as per the Securities and Exchange Board of India(Merchant Bankers) Regulations, 1992, as amended (Merchant Bankers Regulations). IIFL has signed the due diligence certificate and accordingly been disclosed as a Lead Manager. Further, in compliance with the

provision to Regulation 21A(1) and explanation to Regulation 21A(1) of the Merchant Bankers Regulations, IIFL would be involved only in marketing of the Issue.

The subscription list for the Issue shall remain open for subscription upto 5pm., with an option for early closure or extension by such period, upto a period of 30 days from the date of opening of the Issue, as may bedecided at the discretion of the duly authorised committee of Directors of our Company subject to necessary approvals. In the event of such early closure of the Issue or extension of the Issue, our Company shall ensure

that notice of such early closure or extension of the Issue is given as the case may be on such date of closure through advertisement/s in a leading national daily newspaper.

A copy of the Prospectus and wr itten consents of our Directors, our Company Secretary and Compliance Officer, our Auditor, the Chartered Accountant issuing statement of tax benefit the legal advisor, the Lead Managers,the Co-Lead Managers, the Registrar to the Issue, Escrow Collection Bank(s), Refund Bank, Credit Rating Agencies, the Bankers to our Company, the Debenture Trustee, and the Lead Brokers to act in their respectivecapacities shall be filed with the Registrar of Companies, Mumbai, in terms of section 58 and section 60 of the Act along with the requisite endorsed/certified copies of all requisite documents. For further details please r eferto the chapter titled Material Contracts and Documents for Inspectionbeginning on page 320 of this Prospectus.

mailto:axbmbd@axisbank.comhttp://www.axisbank.com/http://www.axisbank.com/http://www.linkintime.co.in/http://www.iiflcap.com/http://www.iiflcap.com/http://www.linkintime.co.in/http://www.axisbank.com/mailto:axbmbd@axisbank.com

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TABLE OF CONTENTS

SECTIONI-GENERAL ............................................................................................................................................I

DEFINITIONSANDABBREVIATIONS ............................................................... .................................................IPRESENTATIONOFFINANCIAL,INDUSTRYANDOTHERINFORMATION .............................................. VIIIFORWARDLOOKINGSTATEMENTS ................................................................................................. ..............IX

SECTIONII-RISKFACTORS ...............................................................................................................................XI

SECTIONIII-INTRODUCTION ............................................................................................................................ 1

GENERALINFORMATION .......................................................... ................................................................... .... 1SUMMARYOFBUSINESS,STRENGTHSANDSTRATEGIES........................................................................ .. 11SUMMARYFINANCIALINFORMATION ........................................................... .............................................. 16THEISSUE ............................................................... ................................................................. ......................... 21CAPITALSTRUCTURE ....................................................................................... .............................................. 23OBJECTSOFTHEISSUE ............................................................. ................................................................... .. 44

STATEMENTOFTAXBENEFITS ........................................................... .......................................................... 45

SECTIONIV-ABOUTOURCOMPANY ............................................................................................................ 49

INDUSTRY ............................................................... ................................................................. ......................... 49OURBUSINESS ................................................................ .................................................................... ............. 59HISTORYANDCERTAINOTHERCORPORATEMATTERS ............................................................... ............ 79OURMANAGEMENT ................................................................... ................................................................... .. 82OURPROMOTER ............................................................... .................................................................. ............. 93OURSUBSIDIARIES .................................................................... ................................................................... 104

SECTIONV-FINANCIALINFORMATION .................................................................................................... 106

FINANCIALSTATEMENTS ................................................................................................................................ 106

MATERIALDEVELOPMENTS........................................................................................................................... 233FINANCIALINDEBTEDNESS............................................................................................................................ 234

SECTION VI - ISSUE RELATED INFORMATION ................................................................... ....................... 248

ISSUE STRUCTURE ........................................................... ................................................................... .......... 248TERMS OF THE ISSUE ............................................................................................................ ....................... 258ISSUE PROCEDURE ........................................................ ..................................................................... .......... 262

SECTION VII - LEGAL AND OTHER INFORMATION ................................................................................. 282

OUTSTANDING LITIGATIONS .............................................................. ........................................................ 282OTHER REGULATORY AND STATUTORY DISCLOSURES ......................................................................... 304KEY REGULATIONS AND POLICIES ................................................................ ............................................ 309

SECTION VIII - SUMMARY OF MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ........... 315

SECTION IX -OTHER INFORMATION ........................................................................... ................................. 320

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION .............................................................. 320DECLARATION ................................................................ .................................................................... ........... 322

ANNEXURE I ................................................................ ................................................................... ....................... 323

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SECTION I - GENERAL

DEFINITIONS AND ABBREVIATIONS

Unless the context otherwise requires the following terms shall have the following meanings ascribed thereto inthis Prospectus. Reference to any statutes, regulations and policies shall include amendments thereto, from time

to time.

All references to Issuer, we, and us, ourand our Companyare to India Infoline Finance Limited andits Subsidiaries, unless the context requires otherwise. In this Prospectus, all references to IIFL Groupare toIndia Infoline Limited and its subsidiaries.

Company Related Terms

Term Description

Issuer, theCompanyand ourCompany

India Infoline Finance Limited, a company incorporated under the CompaniesAct, 1956 and registered as a Non-Banking Financial Company with the ReserveBank of India under Section 45-IA of the Reserve Bank of India Act, 1934, and

having its Registered Office at IIFL House, Sun Infotech Park, Road No. 16V,Plot No.B-23, Thane Industrial Area, Wagle Estate, Thane400 604.

Act / Companies Act The Companies Act, 1956, as amended from time to time

AOA / Articles /Articles of Association

Articles of Association of our Company

Board / Board ofDirectors

The Board of Directors of our Company and includes any Committee thereof

DIN Director Identification Number

ESOP / ESOS Companys Employee Stock Option Plan, 2007

Equity Shares Equity shares of face value of`10 each of our Company

IIFL Group India Infoline Limited and its subsidiaries

IIDCL India Infoline Distribution Company LimitedIIHFL India Infoline Housing Finance Company Limited

Loan Assets Assets under financing activities

MIS Management Information System of our Company

Memorandum / MOA /Memorandum ofAssociation

Memorandum of Association of our Company

Net Loan Assets Assets under financing activities net of Provision for non-performing assets

NAV Net Asset Value

NBFC Non-Banking Financial Company as defined under Section 45-IA of the RBI Act,1934

NBFC-ND-SI Non-Deposit Accepting or Holding Systemically Important NBFC

NPA Non Performing Asset

Promoter / IIFL India Infoline Limited

`/ Rs./ INR / Rupees Indian Rupees

ReformattedConsolidated FinancialStatements

The statement of reformatted audited consolidated assets and liabilities as atMarch 31, 2008, March 31, 2009, March 31, 2010, March 31, 2011 and March31, 2012 and the related statement of reformatted consolidated statement of profitand loss and the related statement of reformatted consolidated cash flow for theFinancial Years ending March 31, 2008, March 31, 2009, March 31, 2010,March 31, 2011 and March 31, 2012 and the notes thereto, extracted from theaudited consolidated balance sheet of our Company, its Subsidiaries as at March31, 2008, March 31, 2009, March 31, 2010, March 31, 2011 and March 31, 2012and the related consolidated statement of profit and loss and consolidated cashflow statement for the Financial Years ending March 31, 2008, March 31, 2009,

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Term Description

March 31, 2010, March 31, 2011 and March 31, 2012 as examined by ourCompanys Statutory Auditors, Sharp & Tannan Associates

ReformattedUnconsolidated

Financial Statements

The statement of reformatted audited unconsolidated assets and liabilities of ourCompany, and the related statement of reformatted unconsolidated statement of

profit and loss of our Company and the related statement of reformattedunconsolidated cash flow of our Company as at and for the Financial Yearsending March 31, 2008, 2009, 2010 and 2011 and March 31, 2012, extractedfrom the audited unconsolidated financial statements as at and for the FinancialYears ended March 31, 2008, March 31, 2009, March 31, 2010, March 31, 2011and March 31, 2012 and the notes thereto, as examined by our Company sStatutory Auditors, Sharp & Tannan Associates

Share SubscriptionAgreement

Share Subscription Agreement dated January 18, 2008 entered into with Bennett,Coleman & Company Limited, IIFL (our Promoter) and our Company

Statutory Auditors /Auditors

Our statutory auditors being Sharp & Tannan Associates

Subsidiaries Subsidiaries of our Company namely India Infoline Housing Finance Limitedand India Infoline Distribution Company Limited

We, usand our Our Company and/or its Subsidiaries, unless the context otherwise requires

Issue Related Terms

Term Description

Allotment / Allotted Unless the context otherwise requires, the allotment of the NCDs pursuant to theIssue to the Allottees

Allottee The successful Applicant to whom the NCDs are being / have been Allotted

Applicant Any prospective applicant who is eligible to participate in this Issue and makes anApplication pursuant to the Prospectus and the Application Form. For moreinformation on eligibility of the prospective applicant please refer to the chaptertitled I ssue Procedureon page 262

Application Form The form used by an applicant to apply for NCDs being issued through theProspectus

Application Supportedby Blocked Amount/ASBA, ASBAApplication

Shall mean the application (whether physical or electronic) used by an investor tomake an application authorizing the SCSB to block the amount payable onapplication in its specified bank account;

ASBA Account Means an account maintained by an ASBA Applicant with a SCSB which will beblocked by such SCSB to the extent of the Application Amount in relation to theApplication Form made in ASBA mode.

Bankers to the Issue /Escrow Collection

Banks

The banks which are clearing members and registered with SEBI as Bankers to theIssue, with whom the Escrow Account will be opened and in this case being Axis

Bank Limited, ICICI Bank Limited, HDFC Bank Limited, IndusInd Bank Limitedand State Bank of India

Base Issue Public Issue of NCDs by our Company aggregating upto`2,500 million

Basis of Allotment The basis on which NCDs will be allotted to successful applicants under the Issueand which is described in I ssue Procedure Basis of A ll otmenton page 262 ofthis Prospectus.

Co- Lead Managers Co Lead Managers shall mean Karvy Investor Services Limited and RR InvestorsCapital Services Private Limited

CRISIL CRISIL Limited

Debentures / NCDs Un-Secured Redeemable Non-Convertible Debentures of face value of ` 1000each, aggregating upto`2,500 million with an option to retain over-subscription

upto`2,500 million for issuance of additional NCDs aggregating to a total of upto

` 5,000 million. The NCDs are in the nature of subordinated debt and will beeligible for Tier II capital.

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Term Description

Debenture Holder (s) /NCD Holder(s)

The holders of the NCDs

Debt Listing Agreement The listing agreement between our Company and the relevant stock exchange(s) inconnection with the listing of debt securities of our Company

Deemed Date ofAllotment

The date on which the Board of Directors/or duly authorised Committee ofDirectors approves the Allotment of the NCDs. All benefits relating to the NCDsincluding interest on NCDs shall be available to the Debenture Holders from theDeemed Date of Allotment. The actual allotment of NCDs may take place on adate other than the Deemed Date of Allotment

Demographic Details On the basis of name of the applicant, PAN details, Depository Participants name,Depository Participant-Identification number and Beneficiary Account Number

provided by the Applicants in the Application Form, the Registrar to the Issue willobtain from the Depository, demographic details of the investor such as address,PAN, bank account details for printing on refund orders or used for refundingthrough electronic mode, as applicable and occupation.These Demographic Details would be used for all correspondence with theapplicants including mailing of the refund orders/ Allotment Advice and printing

of bank particulars on the refund/interest order and the Demographic Details givenby applicant in the Application Form would not be used for these purposes by theRegistrar.

Depositories Act The Depositories Act, 1996, as amended from time to time

Depository(ies) National Securities Depository Limited (NSDL) and /or Central DepositoryServices (India) Limited (CDSL)

DP / DepositoryParticipant

A depository participant as defined under the Depositories Act

Designated StockExchange/ DSE

National Stock Exchange of India Limited

Designated Branches Such branches of the SCSBs which shall collect the Application Forms used by theASBA Applicants and a list of which is available athttp://www.sebi.gov.in/pmd/scsb.html

Designated Date The date on which the Escrow Collection Banks transfer the funds from theEscrow Account to the Public Issue Account or the amount blocked by the SCSBsis transferred from the ASBA Accounts specified by the ASBA Applicants to thePublic Issue Account, as the case may be, following which the Board approves theAllotment of the NCDs

Draft Prospectus / DraftOffer Document

This draft prospectus dated August 16, 2012 filed with the Designated StockExchange and BSE for receiving public comments in accordance with the

provisions of the Act and the SEBI Debt Regulations

Escrow Agreement Agreement dated August 25, 2012 entered into amongst our Company, the Registrar,the Escrow Collection Bank, Lead Managers and the Co-Lead Managers forcollection of the application amounts and for remitting refunds, if any, of theamounts collected, to the applicants (excluding the ASBA Applicants) on the termsand conditions contained thereof

Escrow Account Accounts opened in connection with the Issue with the Escrow Collection Bank(s)and in whose favour the applicant will issue cheques or bank drafts in respect ofthe application amount while submitting the application

Institutional Portion Portion of applications received from Category I of persons eligible to apply forthe issue which includes Public Financial Institutions, Statutory Corporations,Commercial Banks, Co-operative Banks and Regional Rural Banks, which areauthorised to invest in the NCDs, Provident Funds, Pension Funds,Superannuation Funds and Gratuity Funds, which are authorised to invest in the

NCDs, Venture Capital funds registered with SEBI, Insurance Companies

registered with the IRDA, National Investment Fund; and Mutual Funds

ICRA ICRA Limited

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Term Description

Issue Public Issue of NCDs by our Company aggregating upto`2,500 million with anoption to retain over-subscription upto`2,500 million for issuance of additional

NCDs aggregating to a total of upto`5,000 million

Issue Opening Date September 5, 2012Issue Closing Date September 18, 2012, or such earlier or later date that the Board of Directors/

authorized Committee of the Board of Directors of our Company decide, as thecase may be, and communicated to the prospective investors and the StockExchanges through notice of such early/ late closure given on such early date ofclosure through advertisement/s in a leading national daily newspaper

Lead Managers Axis Bank Limited, SBI Capital Markets Limited, Edelweiss Financial ServicesLimited, Trust Investment Advisors Private Limited and IIFL

Lead Brokers Lead Brokers who have been appointed vide memorandum of understanding datedAugust 25, 2012

Market Lot One NCD

Members of Syndicate Members of Syndicate includes Lead Managers, Co-Lead Managers, Lead Brokers

and Sub Brokers

NCD Holder Any debenture holder who holds the NCDs issued in this Issue and whose nameappears in the register of debenture holders.

Non-InstitutionalPortion

Category II of persons eligible to apply for the Issue which includes Companies,Bodies Corporate and Societies registered under the applicable laws in India andauthorised to invest in NCDs, Public/Private Charitable/Religious Trusts which areauthorised to invest in the NCDs, Scientific and/or Industrial ResearchOrganisations, which are authorised to invest in the NCDs, Partnership Firms inthe name of the partners and Limited Liability partnerships formed and registeredunder the provisions of the Limited Liability Partnership Act, 2008 (No. 6 of2009)

Options Options being offered to the applicants as stated in the chapter titled I ssue

Structurebeginning on page 248 of this Prospectus

Previous Issue 7,500,000 Secured Redeemable Non-Convertible Debentures of face value of `1,000 each aggregating to 7,500 million in the year 2011- 2012

Prospectus / OfferDocument

The Prospectus dated August 27, 2012 filed with the ROC in accordance with theSEBI Debt Regulations

Public Issue Account Account opened with the Bankers to the Issue to receive monies from the EscrowAccount and from the SCSBs on the Designated Date

Registrar to theIssue/Registrar

Link Intime India Private Limited

Refund Account The account opened with the Escrow Banks, from which refunds, if any, of thewhole or part of the Application Amount (excluding the ASBA Applicant) shall be

madeSBICAP SBI Capital Markets Limited.

SEBI DebtRegulations/DebtRegulations/SEBIRegulations

Securities and Exchange Board of India (Issue and Listing of Debt Securities)Regulations, 2008, as amended from time to time.

Specified Cities Cities as specified in the SEBI circular no. CIR/CFD/DIL/1/2011 dated April 29,2011, namely, Mumbai, Chennai, Kolkata, Delhi, Ahmedabad, Rajkot, Jaipur,Bangalore, Hyderabad, Pune, Baroda and Surat

Stock Exchange(s) BSE Limited and National Stock Exchange of India Limited

Subordinated Debt Subordinated Debt means an instrument, which is fully paid up, is unsecuredand is subordinated to the claims of other creditors and is free from restrictive

clauses and is not redeemable at the instance of the holder or without the consentof the supervisory authority of the non-banking financial company. The book

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Term Description

value of such instrument shall be subjected to discounting as provided hereunder:

Remaining Maturity of the instruments Rate of discount

(a) Upto one year 100%

(b) More than one year but upto two years 80%(c) More than two years but upto three years 60%(d) More than three years but upto four years 40%(e) More than four years but upto five years 20%

to the extent such discounted value does not exceed fifty per cent of Tier I capital;

Trading member Trading members registered with the stock exchanges who are not empanelled asLead Brokers or sub brokers

Trustees / DebentureTrustee

Trustees for the holders of the NCDs, in this case being IDBI Trusteeship ServicesLimited

Working Days All days excluding Sundays and a public holiday in Mumbai or at any other paymentcentre notified in terms of the Negotiable Instruments Act, 1881.

Business/Industry Related Terms

Term Description

ALM Asset Liability Management

ALCO AssetLiability Committee

Average Cost ofBorrowing

Amount that is calculated by dividing the interest paid during the period byaverage of the monthly outstanding

CAR Capital Adequacy Ratio computed on the basis of applicable RBI requirements

Capital Market Finance Loans against Securities, Promoter Funding, Margin Funding, IPO financing andother structured lending transactions

CRAR Capital-to-Risk-Weighted Assets RatioDSA Direct Sales Agent

FOS Feet on Street

FIR First Information Report

FTU(s) First Time Users

Gold Loans Finance against security of gold jewellery

Gross Spread Yield on the average minus the cost of funds

Healthcare Finance Finance for medical equipments and project funding in the healthcare sector

KYC Norms Customer identification procedure for opening of accounts and monitoringtransactions of suspicious nature followed by NBFCs for the purpose of reporting itto appropriate authority

LC Loan Company

Loan Book Outstanding loans net of provisions made for NPAs

Mortgage Loans Housing Loans and Loans against Property

Non-Deposit AcceptingNBFC Directions

Non-Banking Financial (Non-Deposit Accepting or Holding) CompaniesPrudential Norms (Reserve Bank) Directions, 2007, as amended from time to time

NBFC-D NBFC registered as a deposit accepting NBFC

NBFC-ND NBFC registered as a non-deposit accepting NBFC

NBFC-ND-SI Systemically Important NBFC-ND

Prudential Norms Non-Banking Financial (Non-Deposit Accepting or Holding) CompaniesPrudential Norms (Reserve Bank) Directions, 2007, as amended from time to time

Public DepositDirections The Non-Banking Financial Companies Acceptance of Public Deposits (ReserveBank) Directions, 1998, as amended from time to time

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Term Description

Secured Loan Book Secured loan given against hypothecation of asset

SME Small and Medium Enterprises

Tier I Capital Tier I Capital means owned fund as reduced by investment in shares of othernon-banking financial companies and in shares, debentures, bonds, outstanding

loans and advances including hire purchase and lease finance made to anddeposits with subsidiaries and companies in the same group exceeding, inaggregate, ten per cent of the owned fund and perpetual debt instruments issued

by a Systemically important non-deposit taking non-banking financial companyin each year to the extent it does not exceed 15% of the aggregate Tier I Capitalof such company as on March 31 of the previous accounting year

Tier II Capital Tier II capital includes the following:

(a) preference shares other than those which are compulsorily convertible intoequity;

(b) revaluation reserves at discounted rate of fifty five percent;(c) General Provisions (including that for Standard Assets) and loss reserves to

the extent these are not attributable to actual diminution in value or

identifiable potential loss in any specific asset and are available to meetunexpected losses, to the extent of one and one fourth percent of risk weightedassets;

(d) hybrid debt capital instruments;(e) subordinated debt; and(f) perpetual debt instruments issued by a Systemically important non- deposit

taking non-banking financial company which is in excess of what qualifies forTier I Capital.

to the extent the aggregate does not exceed Tier I capital.

Conventional and General Terms or Abbreviations

Term Description

AGM Annual General Meeting

BSE BSE Limited

CAGR Compounded Annual Growth Rate

CDSL Central Depository Services (India) Limited

CRISIL Crisil Limited

DRR Debenture Redemption Reserve

EGM Extraordinary General Meeting

EPS Earnings Per Share

FDI Policy FDI in an Indian company is governed by the provisions of the FEMA read withthe FEMA Regulations and the Foreign Direct Investment Policy

FEMA Foreign Exchange Management Act, 1999, as amended from time to timeFEMA Regulations Foreign Exchange Management (Transfer or Issue of Security by a Person

Resident Outside India) Regulations, 2000, as amended from time to time

FII/FIIs Foreign Institutional Investor(s)

Financial Year / FY Financial Year ending March 31

GDP Gross Domestic Product

GoI Government of India

G-Sec Government Securities

HUF Hindu Undivided Family

IFRS International Financial Reporting Standards

IFSC Indian Financial System Code

Indian GAAP Generally Accepted Accounting Principles in India

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Term Description

IRDA Insurance Regulatory and Development Authority

IT Act The Income Tax Act, 1961, as amended from time to time

IT Information Technology

KYC Know Your Customer

LTV Loan to value

MCA Ministry of Corporate Affairs, Government of India

MICR Magnetic Ink Character Recognition

MIS Management Information System

NECS National Electronic Clearing Services

NEFT National Electronic Funds Transfer

NII(s) Non-Institutional Investor(s)

NRI Non Resident Indian

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

PAN Permanent Account Number

RBI The Reserve Bank of India

RBI Act The Reserve Bank of India Act, 1934, as amended from time to time

RM Relationship Manager

ROC Registrar of Companies, Maharashtra, Mumbai

RTGS Real Time Gross Settlement

SBI State Bank of India

SCRA Securities Contracts (Regulation) Act, 1956, as amended from time to time

SCRR The Securities Contracts (Regulation) Rules, 1957, as amended from time to time

SEBI The Securities and Exchange Board of India constituted under the Securities and

Exchange Board of India Act, 1992SEBI Act The Securities and Exchange Board of India Act, 1992 as amended from time to

time

TDS Tax Deducted at Source

WDM Wholesale Debt Market

Notwithstanding the foregoing:

1. In the chapter titled Summary of Main Pr ovisions of the Ar ticles of Associationbeginning on page 315,defined terms have the meaning given to such terms in that section.

2. In the chapter titled F inancial Statementsbeginning on page 106, defined terms have the meaning givento such terms in that chapter.

3. In the paragraphs titled Disclaimer Clause of NSEand Disclaimer Clause of BSEbeginning on page304 in the chapter Other Regulatory and Statutory Disclosuresbeginning on page 304, defined termsshall have the meaning given to such terms in those paragraphs.

4. In the chapter titled Statement of Tax Benefi tsbeginning on page 45, defined terms have the meaninggiven to such terms in that chapter.

5. In the chapter titled Key Regulations and Policies beginning on page 309, defined terms have themeaning given to such terms in that chapter.

6. In the chapter titled Our Businessbeginning on page 59, defined terms have the meaning given to suchterms in that chapter.

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PRESENTATION OF FINANCIAL, INDUSTRY AND OTHER INFORMATION

Certain Conventions

In this Prospectus, unless otherwise specified or the context otherwise indicates or implies the terms, allreferences to India Infoline Finance Limited, Issuer, we, us, our and our Company are to India

Infoline Finance Limited and its Subsidiaries.

All references to Indiaare to the Republic of India and its territories and possessions and all references to theGovernmentor the State Governmentare to the Government of India, central or state, as applicable.

Financial Data

Our Company publishes its financial statements in Rupees. Our Company s financial statements are prepared inaccordance with Indian GAAP and the Companies Act.

The Reformatted Unconsolidated Financial Statements and the Reformatted Consolidated Financial Statementsare included in this Prospectus are collectively referred to hereinafter as the Reformatted FinancialStatements. The examination reports on the Reformatted Summary Financial Statements, as issued by our

Companys Statutory Auditors, Sharp & Tannan Associates, are included in this Prospectus in the chapter titledF inancial Statementsbeginning at page 106.

In this Prospectus, any discrepancies in any table, including Capital Structure and Objects of the Issuebetween the total and the sum of the amounts listed are due to rounding off. All the decimals have been roundedoff to two decimal places.

There are significant differences between Indian GAAP, US GAAP and IFRS. We urge you to consult your ownadvisors regarding such differences and their impact on our financial data. Accordingly, the degree to which theIndian GAAP financial statements included in this Prospectus will provide meaningful information is entirelydependent on the readers level of familiarity with Indian GAAP. Any reliance by persons not familiar withIndian accounting practices on the financial disclosures presented in this Prospectus should accordingly belimited.

Currency and units of Presentation

In this Prospectus, all references to Rupees/ Rs./ INR/ `are to Indian Rupees, the official currency of theRepublic of India.

Except where stated otherwise in this Prospectus, all figures have been expressed in Millions. All references tomillion/Million/Mn refer to one million, which is equivalent to ten lakhs or ten lacs, the wordLakhs/Lacs/Lac means one hundred thousand and Crore means ten million and billion/bn./Billionsmeans one hundred crores.

Industry and Market Data

Unless stated otherwise, industry and market data used throughout this Prospectus has been obtained fromindustry publications. Industry publications generally state that the information contained in those publicationshas been obtained from sources believed to be reliable but that their accuracy and completeness are notguaranteed and their reliability cannot be assured. Accordingly no investment decision should be made on the

basis of such information. Although our Company believes that industry data used in this Prospectus is reliable,it has not been independently verified. Also, data from these sources may not be comparable. Similarly, internalreports, while believed by us to be reliable, have not been verified by any independent sources.

The extent to which the market and industry data used in this Prospectus is meaningful depends on the readersfamiliarity with and understanding of the methodologies used in compiling such data.

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FORWARD LOOKING STATEMENTS

This Prospectus contains certain statements that are not statements of historical fact and are in the nature offorward-looking statements. These forward-looking statements generally can be identified by words or

phrases such as aim, anticipate, believe, continue, expect, estimate, intend, objective, plan,potential, project, will, will continue, will pursue, will likely result, will seek to, seekor other

words or phrases of similar import. All statements regarding our expected financial condition and results ofoperations and business plans and prospects are forward-looking statements. These forward-looking statementsinclude statements as to our business strategy, revenue and profitability and other matters discussed in thisProspectus that are not historical facts.

All forward-looking statements are subject to risks, uncertainties and assumptions about us that could causeactual results, performance or achievements to differ materially from those contemplated by the relevantstatement.

Actual results may differ materially from those suggested by the forward looking statements due to risks oruncertainties associated with our expectations with respect to, but not limited to, regulatory changes pertainingto the our businesses and our ability to respond to them, our ability to successfully implement our strategies, ourgrowth and expansion, technological changes, our exposure to market risks, general economic and political

conditions in India and which have an impact on our business activities or investments, the monetary and fiscalpolicies of India, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates orprices, the performance of the financial markets in India and globally, changes in domestic laws, regulations andtaxes and changes in competition in our industry.

Important factors that could cause actual results to differ materially from our expectations include, but notlimited to, the following:

Any increase in the levels of non performing assets ( NPA) on our loan portfolio, for any reasonwhatsoever, would adversely affect our business and results of operations;

Any volatility in interest rates which could cause our Gross Spreads to decline and consequently affectour profitability;

Changes in the value of Rupee and other currency changes; Unanticipated turbulence in interest rates or other rates or prices; the performance of the financial andcapital markets in India and globally; Changes in political conditions in India; The rate of growth of our loan assets; The outcome of any legal or regulatory proceedings we are or may become a party to; Changes in Indian and/or foreign laws and regulations, including tax, accounting, banking, securities,

insurance and other regulations; changes in competition and the pricing environment in India; andregional or general changes in asset valuations;

Any changes in connection with policies, statutory provisions, regulations and/or RBI directions inconnection with NBFCs, including laws that impact our lending rates and our ability to enforce ourcollateral;

Emergence of new competitors; Performance of the Indian debt and equity markets; Occurrence of natural calamities or natural disasters affecting the areas in which our Company has

operations; The performance of the financial markets in India and globally; Our ability to attract and retain qualified personnel; and Other factors discussed in this Prospectus, including under the chapter titled Risk Factorsbeginning on

page XI of this Prospectus.

For further discussion of factors that could cause our actual results to differ from our expectations, please referto the section titled Risk Factorsand chapters titled Industryand Our Businessbeginning on pages XI,49 and 59 respectively.

By their nature, certain market risk disclosures are only estimates and could be materially different from whatactually occurs in the future. As a result, actual future gains or losses could materially differ from those that

have been estimated. Forward looking statements speak only as on the date of this Prospectus. The forward-looking statements contained in this Prospectus are based on the beliefs of management, as well as the

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assumptions made by and information currently available to management. Although we believe that theexpectations reflected in such forward-looking statements are reasonable at this time, it cannot assure investorsthat such expectations will prove to be correct or will hold good at all times. Given these uncertainties, investorsare cautioned not to place undue reliance on such forward-looking statements. If any of these risks anduncertainties materialise, or if any of our underlying assumptions prove to be incorrect, our actual results ofoperations or financial condition could differ materially from that described herein as anticipated, believed,

estimated or expected. All subsequent forward-looking statements attributable to us are expressly qualified intheir entirety by reference to these cautionary statements. Neither our Company or the Lead Managers or Co-Lead Managers, nor any of their respective affiliates has any obligation to, and do not intend to, update orotherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrenceof underlying events, even if the underlying assumptions do not come to fruition. Our Company, Lead Managersand Co-Lead Managers will ensure that investors in India are informed of material developments until the timeof the grant of listing and trading permission by the Stock Exchange(s).

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SECTION II - RISK FACTORS

An investment in NCDs involves a certain degree of risk. You should carefully consider all the informationcontained in this Prospectus, including the risks and uncertainties described below, before making aninvestment decision. The risk factors set forth below do not purport to be complete or comprehensive in terms ofall the risk factors that may arise in connection with our business or any decision to purchase, own or dispose of

the NCDs. The following risk factors are determined on the basis of their materiality. In determining themateriality of risk factors, we have considered risks which may not be material individually but may be materialwhen considered collectively, which may have a qualitative impact though not quantitative, which may not bematerial at present but may have a material impact in the future. Additional risks, which are currently unknown,if materialises, may in the future have a material adverse effect on our business, financial condition and resultsof operations. The market prices of the NCDs could decline due to such risks and you may lose all or part ofyour investment.

Unless specified or quantified in the relevant risk factors below, we are not in a position to quantify thefinancial or other implication of any of the risks described in this section. This Prospectus also containsforward-looking statements that involve risks and uncertainties. Our results could differ materially from thoseanticipated in these forward-looking statements as a result of certain factors, including events described below

and elsewhere in this Prospectus. Unless otherwise stated, the financial information used in this section is

derived from and should be read in conjunction with reformatted consolidated financial statements of ourCompany as of and for the Financial Year ended March 31, 2012, March 31, 2011, March 31, 2010, March 31,2009 and March 31, 2008 in each case prepared in accordance with Indian GAAP, including the annexure andnotes thereto.

I nternal Risk Factors

1. Any increase in the levels of non performi ng assets (NPA) on our loan port fol io, for any reasonwhatsoever , would adversely aff ect our business and resul ts of operations

Consistent with the growth of our branch network and our product portfolio, we expect an increase in ourloan assets. Should the overall credit quality of our loan portfolio deteriorate, the current level of our

provisions may not be adequate to cover further increases in the amount of our NPAs. Moreover, there also

can be no assurance that there will be no further deterioration in our provisioning coverage as a percentageof Gross NPAs or otherwise, or that the percentage of NPAs that we will be able to recover will be similarto our past experience of recoveries of NPAs. As of March 31, 2012, the gross value of NPAs on our books

of accounts on a consolidated basis was`377.90 million which is 0.56% of the value of our total assets.While we believe that we have adequately provided for NPAs to cover known or expected losses whichmay arise in our asset portfolio, any increase in the level of final credit losses shall adversely affect our

business and future financial performance.

2. We may be impacted by volati li ty in interest rates which could cause our Gross Spreads to decli ne andconsequently affect our profi tabili ty.

We are exposed to interest rate risks as a result of lending to customers at fixed/ floating interest rates andin amounts and for periods which may differ from our funding sources. While we seek to match our interest

rate positions to minimise interest rate risk, we are unable to assure you that significant variation in interestrates will not have an effect on our results of operations. Moreover, volatility in interest rates is sensitive tofactors which are beyond our control, including the monetary policies of the RBI, deregulation of thefinancial sector in India, domestic and international economic and political conditions, inflation and othersuch considerations. In a rising interest rate environment, if the yield on our interest-earning assets does notincrease simultaneously with or to the same extent as our cost of funds, or, in a declining interest rateenvironment, if our cost of funds does not decline simultaneously or to the same extent as the yield on ourinterest-earning assets, our net interest income and net interest margin would be adversely impacted.There can be no assurance that we will be able to adequately manage our interest rate risk in the future andany significant increase in interest rates would adversely affect our business and results of operations.

3. We are subjected to supervision and regulation by the RBI as a systemicall y impor tant NBFC, andchanges in RBIs regulations govern ing us could adversely aff ect our business.

We are subject to the RBIs guidelines on financial regulation of NBFCs, including capital adequacy,

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exposure and other prudential norms. The RBI also regulates the credit flow by banks to NBFCs andprovides guidelines to commercial banks with respect to their investment and credit exposure norms forlending to NBFCs. The RBIs regulations of NBFCs could change in the future which may require us torestructure our activities, incur additional cost or could otherwise adversely affect our business and ourfinancial performance.

Moreover, the RBI in its notification (No.RBI/2006 07/204/DNBS.PD/CC.No.86 / 03.02.089 /2006-07)dated December 12, 2006 has amended the regulatory framework governing NBFCs to address concernsarising from certain divergent regulatory requirements for banks and NBFCs. Under the amendment, theRBI brought all deposit taking and systemically important NBFCs, which are defined as NBFCs having anasset size of ` 1,000 million or more, such as us, under the provisions of the Non-Banking FinancialCompanies Prudential Norms (Reserve Bank) Directions, 1998. We cannot assure you that this notificationand its applicability to us will not have a material and adverse affect on our future financial conditions andresults of operations.

The RBI has not provided for any restriction on interest rates that can be charged by non-deposit takingNBFCs. Although the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions2007 may not be fully applicable to a non-deposit taking NBFC, there can be no assurance that the RBIand/or the Government will not implement regulations or policies, including policies or regulations or legal

interpretations of existing regulations, relating to or affecting interest rates, taxation, inflation or exchangecontrols, or otherwise take action, that could have an adverse affect on non-deposit taking NBFCs. Inaddition, there can be no assurance that any changes in the laws and regulations relative to the Indianfinancial services industry will not adversely impact our business.

4. Our abili ty to borrow f rom vari ous banks may be restri cted on account of gui deli nes issued by the RBIimposing restri ctions on banks in relation to their exposure to NBFCs.

The RBI in its notification (No. RBI/2006-07/205/DBOD.No. FSD.BC.46 / 24.01.028 /2006-07) datedDecember 12, 2006 has amended the regulatory framework governing banks to address concerns arisingfrom divergent regulatory requirements for banks and NBFCs. This notification reduces the exposure (bothlending and investment, including off balance sheet exposures) of a bank to NBFCs like us. Accordingly,

banks exposure limits on any NBFC are reduced from the current 25% of the bankscapital funds to 10% of

its capital funds. Furthermore, RBI has suggested that banks may consider fixing internal limits for theiraggregate exposure to all NBFCs combined. This notification limits a banks exposure to NBFCs whichconsequently restricts our ability to borrow from banks and thereby increasing the cost of our borrowing.

This notification has adversely affected our business and any similar notifications released by the RBI in thefuture, which has a similar impact on our business could affect our growth, margins and businessoperations.

5. Our abil ity to lend against the coll ateral of gold jewell ery has been restr icted on account of gu ideli nesissued by RBI , which may have a negative impact on our business and results of operation .

RBI vide notification (DNBS.CC.PD.No.265/03.10.01/2011-12) dated March 21, 2012 has stipulated allNBFCs to maintain a loan to value (LTV) ratio not exceeding 60 percent for loans granted against the

collateral of gold jewellery and further bars lending against bullion/primary gold and gold coins. Thisnotification will limit our ability to provide loan on the collateral of gold jewellery and thereby putting us ata disadvantage viz-a-viz banks offering similar products and other unregulated money lenders. Further, thenotification also mandates NBFCs primarily engaged in lending against gold jewellery (such loanscomprising 50% or more of their financial assets) to maintain a minimum Tier 1 capital of 12% by April 1,2014. Such restrictions imposed by RBI may erode our margins, curtail our future growth and businessoperations.

6. We may not be able to reali se the ful l value of our pledged gold jewell ery, which exposes us to potenti alloss.

We may not be able to realise the full value of our pledged gold jewellery, due to, among other things,defects in the quality of gold. In the case of a default, we may auction the pledged gold. We cannot assure

you that we will be able to auction such pledged gold jewellery at prices sufficient to cover the amountsunder default. Moreover, there may be delays associated with the auction process. Any failure to recover the

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expected value of pledged gold could expose us to a potential loss. Any such losses could adversely affectour financial condition and results of operations.

7. The fi nancing industry is becoming increasingly competiti ve and our growth wil l depend on our abili ty tocompete effectively.

The sector in which we operate is highly competitive and we face significant competition from banks andother NBFCs. Many of our competitors are larger institutions, which may have much larger customer andfunding sources, larger branch networks and more capital than we do. Some of our competitors may bemore flexible and better-positioned to take advantage of market opportunities. In particular, private banks inIndia and many of our competitors outside of India may have operational advantages in implementing newtechnologies and rationalising branches. These competitive pressures affect the industry in which weoperate as a whole, and our future success will depend in large part on our ability to respond in an effectiveand timely manner to these competitive pressures.

In our housing finance and gold loan business, we face increasing competition from commercial banks andother players in the unorganized sector. Interest rate deregulation and other liberalization measures affectingthe housing finance industry, together with increased demand for home finance, have also increased ourexposure to competition. The demand for housing loans has also increased due to the increase in demand of

real estate, stable property prices, higher disposable incomes and increased fiscal incentives for borrowers.The demand for Gold Loans has also increased due to urgent borrowing or bridge financing requirementsand the need for liquidity for assets held in gold and also due to increased awareness among customers ofGold Loans as a source of quick access to funds. All of these factors have resulted in the housing financeand gold loan industry, including our Company, facing increased competition from other lenders to theretail housing market, including commercial banks. Unlike commercial banks, we do not have access tofunding from savings and current deposits of customers. Instead, we are reliant on higher cost syndicatedloans and debentures for our funding requirements, which may reduce our margins compared tocompetitors. Our ability to compete effectively with commercial banks will depend, to some extent, on ourability to raise low-cost sources of funding in the future. If we are unable to compete effectively with other

participants in the housing finance and gold loan industry, our business, future financial performance andthe trading price of the NCDs may be adversely affected.

Furthermore, as a result of increased competition in the housing finance and gold loan industry, home loansand gold loans are becoming increasingly standardized and terms such as floating rate interest options forhousing loans, lower processing fees, monthly rest periods and no prepayment penalties are becomingincreasingly common in India. There can be no assurance that we will be able to react effectively to these orother market developments or compete effectively with new and existing players in the increasinglycompetitive housing finance industry. Increasing competition may have an adverse affect on our net interestmargin and other income, and if we are unable to compete successfully, the origination of new loans willdecline and we may not be able to achieve our growth objectives.

8. We are dependent on I I FL , our holding company, for our clientele, goodwill that we enjoy in theindustry and our brand name and any factor aff ecting the business and reputation of I I FL may have a

concur rent adverse eff ect on our business and resul ts of operat ions.

As on date, IIFL directly holds 98.87% of our paid up capital. We source our clients from IIFL and alsosignificantly benefit from the goodwill that IIFL enjoys in the market. We believe that this goodwill ensuresa steady inflow of business. In the event the IIFL is unable to maintain the quality of its services or itsgoodwill deteriorates for any reason whatsoever, our business and results of operations may be adverselyaffected. Moreover, we have not entered into any formal arrangements for usage of the IIFLbrand nameand logo which is owned by IIFL. We operate in a competitive environment, and we believe that our brandrecognition is a significant competitive advantage to us. Any failure to retain our Company name maydeprive us of the associated brand equity that we have developed which may have a material adverse affecton our business and operations.

9. I f we are unable to manage our rapid growth effectively, our business and f inancial resul ts could beadversely affected.

A principal component of our strategy is to continue to grow by expanding the size and geographical scopeof our businesses, as well as the development of our new business streams viz. Healthcare Finance. This

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growth strategy will place significant demands on our management, financial and other resources. It willrequire us to continuously develop and improve our operational, financial and internal controls. Continuousexpansion increases the challenges involved in financial management, recruitment, training and retaininghigh quality human resources, preserving our culture, values and entrepreneurial environment, anddeveloping and improving our internal administrative infrastructure. Failure to train our employees properlymay result in an increase in employee attrition rates, require additional hiring, erode the quality of customer

service, divert management resources, increase our exposure to high-risk credit and impose significant costson us. If we grow our loan book too rapidly or fail to make proper assessments of credit risks associatedwith new borrowers, a higher percentage of our loans may become non-performing, which would have anegative impact on the quality of our assets and our financial condition. Any inability on our part to managesuch growth could disrupt our business prospects, impact our financial condition and adversely affect ourresults of operations.

10.Our growth wi ll depend on our continued abili ty to access funds at competiti ve rates which aredependent on a number of factors including our abil ity to maintain our credit ratings.

As we are a systemically important non-deposit acceptingNBFC and do not have access to deposits, ourliquidity and ongoing profitability are primarily dependent upon our timely access to, and the costsassociated with raising capital. Our business is significantly dependent on funding from the debt capital

markets and commercial borrowings. The demand for such funds is competitive and our ability to obtainfunds at competitive rates will depend on various factors including our ability to maintain positive creditratings. Ratings reflect a rating agencys opinion of our financial strength, operating performance, strategic

position, and ability to meet our obligations. In relation to our long-term debt instruments, we currentlyhave long term ratings of AA- with stable outlook from CRISIL, CARE and ICRA. In relation to ourshort-term debt instruments, we have also received short term ratings of A1+from ICRA and CRISIL.Any downgrade of our credit ratings would increase borrowing costs and constrain our access to capital anddebt markets and, as a result, would negatively affect our net interest margin and our business. In addition,downgrades of our credit ratings could increase the possibility of additional terms and conditions beingadded to any additional financing or refinancing arrangements in the future. Any such adverse developmentcould adversely affect our business, financial condition and results of operations.

Our business depends and will continue to depend on our ability to access diversified funding sources.

Changes in economic and financial conditions or continuing lack of liquidity in the market could make itdifficult for us to access funds at competitive rates. As an NBFC, we also face certain restrictions on ourability to raise money from international markets which may further constrain our ability to raise funds atattractive rates. While our borrowing costs have been competitive in the past due to our ability to raise debt

products, credit rating and our asset portfolio, in the event we are unable to access funds at an effective costthat is comparable to or lower than our competitors, we may not be able to offer competitive interest ratesfor our loans. This may adversely impact our business and results of operations.

11.We are subject to certain legal proceedingsand we cannot assur e you that we wil l be successful in all ofthese actions. In the event we are unsuccessful in li tigati ng any or all of the disputes, our business and

resul ts of operati ons may be adversely af fected.

We are subject to a number of legal proceedings. We incur a substantial cost in defending these proceedings

before a court of law. Moreover, we are unable to assure you that we shall be successful in any or all ofthese actions.

Further, IIFL, our Promoter in the normal course of broking and depository service caters to a large clientbase. In the course of such activities arbitration matters/client complaints/grievances/ exchange referencesetc. are received by IIFL through SEBI/ exchanges/depository/forums, etc. The same are resolved in thenormal course of business from time to time. Also in the normal course of broking and depository business,

pursuant to the exchanges/ depositories normal inspections / observations/ findings, etc. exchanges /depositories had issued warnings / minor monetary penalties, etc. against IIFL. These are paid and suitablecorrective / rectification actions are taken by IIFL and reported to exchanges/ depositories from time totime. Similarly, IIFL has received requests / notices / summons from various regulatory authorities /enforcement agencies seeking submissions/ appearance /production of information / documents etc. relatingto some of the clients/ transactions etc. with regard to their investigation/ enquiries and the same are

submitted / attended to / complied with by IIFL from time to time. These investigations / enquiries arebasically in the nature of requests / notices / summons for submission of information/ documents which are

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duly complied with by IIFL. These are not material and are not likely to have any material effect on theoperations and finances of IIFL. In the event we suffer any adverse order, our reputation may suffer andmay have an adverse impact on our business.

For further details of the legal proceedings that we are subject to, please refer to the chapter titledOutstanding L itigations.

12.There are certain r isks in connection wi th the NCDs being unsecured.The NCDs will be in the nature of subordinated debt and hence the claims of the holders thereof will besubordinated to the claims of other secured and other unsecured creditors of our Company. Further, since nocharge upon the assets of our Company would be created in connection with the NCDs, in the event ofdefault in connection therewith, the holders of NCDs may not be able to recover their principal amountand/or the interest accrued therein in a timely manner, for the entire value of the NCDs held by them or atall. Accordingly, in such a case the holders of NCDs may lose all or a part of their investment therein.Further, the payment of interest and the repayment of the principal amount in connection with the NCDswould be subject to the requirements of RBI, which may also require our Company to obtain a priorapproval from the RBI in certain circumstances.

13.We face asset-l iabi li ty mismatches which could affect our l iqu idi ty and consequently may adverselyaff ect our operations and profi tabili ty.We may face potential liquidity risks due to varying periods over which our assets and liabilities mature. Asis typical for NBFCs, a portion of our funding requirements is met through short-term funding sources suchas bank loans, working capital demand loans, cash credit, short term loans and commercial papers. Ourinability to obtain additional credit facilities or renew our existing credit facilities, in a timely and cost-effective manner or at all, may lead to mismatches between our assets and liabilities, which in turn mayadversely affect our operations and financial performance.

14.We extend margin funding loans, or loans against shares, to our cl ients, and any defau l t by a cli entcoupled with a downturn in the stock markets could result in substanti al losses for us.

We extend loans against shares, or margin funding loans, which are secured by liquid, marketablesecurities at appropriate or pre-determined margin levels. In the event of a volatile stock market or adversemovements in stock prices, the collateral securing the loans may have decreased significantly in value,resulting in losses which we may not be able to support. Customers may default on their obligations to us asa result of various factors including bankruptcy, lack of liquidity, lack of business and operational failure.There is little financial information available about the creditworthiness of our customers. It is thereforedifficult to carry out precise credit risk analysis on our clients. Although we use a technology-based riskmanagement system and follow strict internal risk management guidelines on portfolio monitoring, whichinclude limits on the amount of margin, the quality of collateral provided by the client and pre-determinedmargin call thresholds, no assurance can be given that if the financial markets witnessed a significantsingle-day or general downturn, our financial condition and results of operations would not be adverselyaffected.

15.For our Gold L oan and Healthcare F inance business, the value of our collateral may decrease or wemay experience delays in enfor cing our coll ateral when our customers defaul t on payment obli gations

whi ch may resul t in fail ure to recover the expected value of the coll ateral and adversely affect our

fi nancial perf ormance.

As part of our gold financing business, we extend loans secured by gold jewellery provided as collateral bythe customer. A sharp downward movement in the price of gold for any reason whatsoever could result in afall in collateral values. In the event customers defaults in repayment of loans secured by gold and the valueof the collateral has decreased since disbursement, our results of operations may be adversely affected.Additionally, we may not be able to realise the full value of our collateral, due to defects in the quality ofgold. In addition, failure by our employees to properly appraise the value of the collateral provides us withno recourse against the borrower. A failure to recover the expected value of collateral security could expose

us to a potential loss. Any such losses could adversely affect our financial condition and results ofoperations.

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Further, the security for our Healthcare Finance is usually movable equipment, making it difficult to locateor seize in the event of any default by our customers. There can also be no assurance that we will be able tosell such collaterals at prices sufficient to cover the amounts under default. In addition, there may be delaysassociated with seizure and disposal of such collaterals, including litigations and court proceedings which isgenerally a slow and potentially expensive process in India. A failure or delay to recover the expected valuefrom sale of collateral security could expose us to a potential loss. Any such losses could adversely affect

our financial condition and results of operations. Accordingly, it may be difficult for us to recover amountsowed by defaulting customers in a timely manner or at all. The recovery of monies from defaultingcustomers may be further compounded by the fact that we do not generally insist on, or receive post datedcheques as security towards the timely repayment of dues from customers to whom we have provided loans.

16.I naccurate appraisal of pledged gold jewellery by our personnel may adversely affect our business andfi nancial condition.

The accurate appraisal of pledged gold jewellery is a significant factor in the successful operation of ourbusiness and such appraisal requires a skilled and reliable workforce. Inaccurate appraisal of gold by ourworkforce may result in gold being overvalued and pledged for a loan that is higher in value than the gold sactual value, which could adversely affect our reputation and business.

Further, we are subject to the risk that our gold appraisers may engage in fraud regarding their estimation ofthe value of pledged gold. Any such inaccuracies or fraud in relation to our appraisal of gold may adverselyaffect our reputation, business and financial condition.

17.We do not own the premises where our Registered Offi ce and our branch of fi ces are located and in theevent our r igh ts over the properti es is not renewed or is revoked or is renewed on terms less favourable to

us, our business activit ies may be disrupted.

At present we do not own the premises that we use as our Registered Office and our branch offices. In theevent the owner of the premises revokes the consent granted to us or fails to renew the tenancy, we maysuffer disruption in our operations.

18.One of our subsidiar ies has been i ssued notices by the NHB and any adverse decision may affect ourconsolidated financial statements and results of operations.

NHB has issued a showcause notice dated September 20, 2010 to India Infoline Housing Finance CompanyLimited (IIHFL), our Subsidiary alleging contraventions of Paragraphs 24 and 26 of the HFC (NHB)Directions, 2010 and as to why IIHFL should continue to be regarded as a housing finance company. IIHFLhas vide its letter dated October 6, 2010 clarified the position and has furnished information as wasrequisitioned by NHB. There has been no further communication in this matter. In the event NHB takes anadverse decision, our consolidated numbers may be adversely affected.

19.We require several l icenses and approvals for ou r business and in the event we are unable to procur e orrenew them in t ime or at al l, our business may be adversely aff ected

We require several licenses, approvals and registration in order to undertake our business activities. These

registrations include registrations with the RBI as a systemically important non-deposit taking NBFC andregistration with the NHB. We are also required to maintain licenses under various state Shops andEstablishment Acts for some of our offices. Failure by us to comply with the terms and conditions to whichsuch permits or approvals are subject, and/or to renew, maintain or obtain the required permits or approvalsmay result in the interruption of our operations and may have a material adverse effect on our business,financial condition and results of operations.

20.Al l of the gold loans we off er are due within one year of disbursement, and a failure to disburse newloans may resul t in a r eduction of our loan portf oli o and a corresponding decrease in our in terest

income.

All of the gold loans we offer are due within one year of disbursement with an average tenure of fourmonths. The relatively short-term nature of our loans means that our long-term interest income stream is

less certain. In addition, our existing customers may not obtain new loans from us upon maturity of theirexisting loans, particularly if competition increases. The potential instability of our interest income could

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materially and adversely affect our results of operations and financial position.

21.We handle cash on a regular basis and are hence exposed to the risk of fr aud and misappropr iati on offunds.

We mainly service rural and semi-urban customers who primarily conduct their business in cash.

Accordingly, we usually collect cash installments from our customers and this exposes us to the risk offraud and misappropriation of funds.

Our insurance policies, security systems and measures undertaken to detect and prevent these risks may notbe sufficient to prevent or deter such activities in all cases, which may adversely affect our operations andprofitability. While we have not faced any major problem in the past and while we have taken insurancepolicies including fidelity cover and cover for cash in safes and in transit, we cannot assure you that noincident of fraud or misappropriation of funds will occur in the future. If such events occur, there could bean adverse affect on the profitability of our business and it could increase our insurance costs.

22.We have entered into assignment agreements to sell cer tain loans fr om our outstanding loan portf oli o.Our business, fi nanci al condi tion and r esul ts of operati ons could be adversely af fected due to some of the

restr icti ons imposed under such agreements or downgr ade in the rati ngs of our secur iti zed debt or i f

such assignment of l oan is held to be unenfor ceable.

We have sold and assigned a group of similar loans from our outstanding loan portfolio to financialinstitutions in return for an upfront fixed consideration. As of March 31, 2012, our outstanding portfolio ofassigned loans was ` 5269.54 million on a consolidated basis, constituting 7.24% of our gross loan

portfolio. Under such assignment agreements, we have provided credit enhancement through fixed depositswith banks and/or have issued corporate guarantees to the purchaser for an amount equal to a negotiated

percentage of the value of the loans being assigned. If the relevant bank does not realize the receivables dueunder such assigned loans, the relevant bank would have recourse to the corporate guarantee, cash collateraland the underlying security. We are also liable to indemnify the relevant banks in the occurrence of an eventof default stated under such assignment agreements. We make a general provision for all loans and specific

provisions on our non-performing loans. Further any downgrade in the ratings of our securitized debt maylead to additional collaterals or corporate guarantees required to be provided. In the event the corporate

guarantee and/or cash collateral underlying the security and general provisioning are inadequate, and theassigned loans are put back to us, this could have a material adverse effect on our operating results andfinancial condition.

Further, in January 2009, the High Court of Gujarat held that the provisions of the Banking Regulation Act,1949 do not permit banks to assign debt due to them, including the assignment of debt between two banks.However, on appeal, the Supreme Court of India reversed the decision of the Gujarat High Court and heldthat a bank to bank transfer of debt is not barred by law. If, in the future, one or more of the assignmentagreements entered into by us is held to be unenforceable by a court of law, we may be required toterminate the assignment agreement(s) and may suffer losses.

23.As part of our business strategy we assign or secur i tize a substanti al por tion of our loan assets to banksand other institu tions. Any deteriorati on in the performance of any pool of receivables assigned or

secur it ized to banks and other institut ions may adversely impact our f inancial per formance and/or cashflows.

As part of our means of raising and/or managing our funds, we assign or securitize a substantial portion ofthe receivables from our loan portfolio to banks and other institutions. Such assignment or securitizationtransactions are conducted on the basis of our internal estimates of our funding requirements, which mayvary from time to time. In fiscal 2012 we securitized and assigned assets of a book value of `5,456.43million on a consolidated basis. Any change in statutory and/regulatory requirements such as SecuritisationGuidelines issued by RBI in August 2012 in relation to assignments or securitizations by financialinstitutions, including the requirements prescribed by RBI and the Government of India, could have anadverse impact on our assignment or securitization transactions. Any adverse changes in the policy and/orregulations in connection with securitization of assets by NBFCs and/or new circulars and/or directionsissued by the RBI in this regard, affecting NBFCs or the purchasers of assets, would affect the

securitization market in general and our ability to securitize and/or assign our assets.

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We are also required to provide a credit enhancement for the securitization and assignment transactions byway of either fixed deposits or corporate guarantees and the aggregate credit enhancement amountoutstanding as on March 31, 2012 on a consolidated basis was `692.36 million and on an unconsolidated

basis was`586.79 million. In the event a relevant bank or institution does not realize the receivables dueunder such loan assets, such bank or institution would have recourse to such credit enhancement, whichcould have a material adverse effect on our results of operations, financial condition and/or cash flows.

24.A decline in our capital adequacy ratio could restri ct our fu ture business growth.As per RBI notification dated February 17, 2011, all non - deposit taking NBFCs have to maintain aminimum capital ratio, consisting of Tier I and Tier II capital, which shall not be less than 15% of itsaggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items w.e.f.March 31, 2012. On an unconsolidated basis, our capital adequacy ratio computed on the basis of applicableRBI requirements was 17.86% as of March 31, 2012, with Tier I capital comprising 15.46%. If we continueto grow our loan portfolio and asset base, we will be required to raise additional Tier I and Tier II capital inorder to continue to meet applicable capital adequacy ratios with respect to our business. There can be noassurance that we will be able to raise adequate additional capital in the future on terms favourable to us orat all, and this may adversely affect the growth of our business

25. Our branches are vulnerable to theft wh ich could adversely af fect our r eputat ion, business and resul tsof operation.

Storage of pledged gold jewellery as part of our business entails the risk of theft and resulting in loss to ourreputation and business. The short tenure of the loans advanced by us and our practice of processing loanrepayments within short timelines require us to store pledged gold jewellery in our premises at all points intime. With regard to any theft, we may not be able to recover the entire amount of the loss suffered and mayreceive only a partial payment of the insurance claim. There is no guarantee that thefts may or may not becommitted in the future, which could adversely affect our reputation, business and results of operations.

26.We may have to comply wi th stricter regulations and guideli nes issued by regulatory authori ties in I ndia.We are regulated principally by and have reporting obligations to the RBI. We are also subject to the

corporate, taxation and other laws in effect in India. In recent years, existing rules and regulations havebeen modified, new rules and regulations have been enacted and reforms have been implemented which areintended to provide tighter control and more transparency in India s Gold Loan industry. Moreover newregulations may be passed that restrict our ability to do business. For example, regulatory restrictions onsecuritisation may be extended to bilateral assignment transactions, resulting in loss of arbitrage options.

We cannot assure you that we will not be subject to any adverse regulatory action in the future. Further,these regulations are subject to frequent amendments and depend upon government policy. The costs ofcompliance may be high, which may affect our profitability. If we are unable to comply with any suchregulatory requirements, our business and results of operations may be materially and adversely affected.

27.Our loan por tfoli o is not classif ied as pri ori ty sector advances by the RBI.The RBI currently mandates domestic commercial banks operating in India to maintain an aggregate 40.0%(32.0% for foreign banks) of their adjusted net bank credit or credit equivalent amount of off- balance sheetexposure, whichever is higher as priority sector advances. These include advances to agriculture, smallenterprises, exports and similar sectors where the Government seeks to encourage flow of credit fordevelopmental reasons. Banks in India that have traditionally been constrained or unable to meet theserequirements organically, have relied on specialised institutions like our Company that are better positionedto or focus on originating such assets through on-lending or purchase of assets or securitised pools tocomply with these targets.

Notification issued by the RBI in February 2011, has stipulated that loans sanctioned to NBFCs for onlending to individuals or other entities against gold jewellery would not be eligible for classification asagriculture sector advances in the context of priority sector lending guidelines. Further in term of the RBInotification dated July 2012, investments made by banks in securitized assets originated by NBFC and

purchase/ assignment transaction by banks with NBFCs, where the underlying assets are loans against goldjewellery, are not eligible for priority sector status. Accordingly, our ability to raise capital by selling down

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our gold loan portfolio under bilateral assignments will be hampered in the future and impact our ability toraise funds through loans from banks, which may adversely affect our financial condition and results ofoperations.

28.Our contingent liabil iti es could adversely affect our fi nancial conditi on.As per the consolidated reformatted audited financial statements of our Company for year ended March 31,2012, we had certain contingent liabilities not provided for, amounting to`135.95 million. The contingentliability amounts disclosed in our consolidated reformatted audited financial statements represent estimatesand assumptions of our management based on advice received. For further details, please refer to sectiontitled Statement of Contingent li abili ty Annexure 19in the chapter F inancial Statementsbeginningon page 106.

29.We are subject to certain restr icti ve covenants in our loan documents, which may restr ict our operati onsand abil ity to grow and may adversely affect our business.

There are restrictive covenants in the agreements we have entered into with our lenders. These restrictivecovenants require us to maintain certain financial ratios and seek the prior permission of these

banks/financial in