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Kotak Mahindra Capital Company Limited

Kotak Mahindra Capita l Company L imited 1

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Directors’ Report

To the Members ofKotak Mahindra Capital Company Limited

The Directors present their Fifteenth Annual Report together with the audited accounts of your Company for the year ended 31st March 2010.

FINANCIAL RESULTS

Particulars Year Ended 31st March, 2010

Rupees in Lakhs

Year ended 31st March 2009 Rupees in Lakhs

Gross Income 10,140 9,781

Profit before Tax 3,461 2,161

Provision for Tax 1,075 880

Profit after Tax 2,386 1,281

Balance of Profit from previous years 34,770 33,489

Amount available for appropriation 37,156 34,770

Appropriations:

Surplus carried forward to the Balance Sheet 37,156 34,770

1. DIVIDEND

The Directors do not recommend any dividend for the year.

2. BUSINESS OPERATIONS

A. EQUITIES

The last financial year saw a revival of the capital markets in India after the adverse impact of the global financial crises in the previous year. Total funds raised in public offerings, including follow on offering and debt offering during the year was Rs. 49,442 crores against Rs. 2034 Crores raised in the previous year. There were 67 Qualified Institutional Placement (QIPs) made raising Rs. 43,968 crores in FY 10 as against just 2 in the previous year. Your Company completed 29 transactions in FY 2010. Offerings managed were across sectors: real estate, consumer (food), media, leisure, power, financial services, construction and also included 4 of the 5 PSU offerings in FY10, viz. NMDC, NTPC, NHPC and REC. Also successfully concluded the First QIP of NCD with Warrants for HDFC.

Your Company was No. 6 in Asia (ex Japan) and No. 17 globally for CY 2010 (Bloomberg) in equity offering, No. 1 in the Prime League tables for IPOs and No. 2 in follow-on offering. Your Company was once again the recipient of prestigious awards such as Best Investment Bank in India by Finance Asia 2009.

B. M&A, FINANCIAL SPONSORS, INFRASTRUCTURE AND RESTRUCTURING ADVISORY

Your Company acted as financial advisor in many significant transactions such as Tech Mahindra Limited’s acquisition of Mahindra Satyam Limited (Formerly known as Satyam Computer Services Limited) for Rs. 2,911 crore (US$591 mn). Kotak Group brought to the fore its vast experience in handling complex transactions and provided an entire bouquet of investment banking (advisory, financing, execution and open offer management) services to the client through a seamlessly coordinated effort across various functions under extremely aggressive timelines. Other transaction in which your company was involved was (i) the demerger of 6 regional channels from Zee News into Zee Entertainment and also provided the fairness opinion for the transaction, (2) as independent valuer for the integration of Caraf Builders & Constructions (including DLF Assets Pvt. Ltd.) with DLF Cyber City, a wholly owned subsidiary of DLF, (3) financial advisor to Tube Investments of India (TII), a Murugappa Group company for acquisition of 77% stake in Financiere C10, a leading European manufacturer of industrial and auto chains based out of France, (4) financial advisor to The Mobile Store for private placement of shares to IL&FS Private Equity, (5) exclusive financial advisor to GMR Energy for private placement of shares to Temasek Holdings to fund the company’s expansion plans. This investment of Rs. 930 crore (US$ 200 million) is one of the largest PE investments in India’s power sector and is Temasek’s first investment in the power generation sector in India and (6). Managers to the first successful delisting offer of Rs. 398 crore (US$90 mn) for Micro Inks Limited.

BOARD OF DIRECTORS: MR. UDAY S. KOTAK, MS. FALGUNI NAYAR, MS. SHANTI EKAMBARAM, MR. DIPAK GUPTA, MR. JAIMIN BHATT

2 Kotak Mahindra Capita l Company L imited

Your Company has a good pipeline of advisory transactions of which some may see successful closure during the current year.

Your company and Renaissance Capital, the leading investment bank in Russia/CIS and Sub-Saharan Africa, entered into a co-operation agreement for cross-border mergers and acquisitions advisory between the markets in which they operate.

3. HUMAN RESOURCES

Your Company recognizes that human capital is the key to success and growth in the financial sector. Towards this goal, retaining good talent and providing career growth is the focus of Company.

4. DIRECTORS

Mr. Uday Kotak and Mr. Dipak Gupta retire at the ensuing Fifteenth Annual General Meeting and are eligible for re-appointment.

5. AUDIT COMMITTEE

The constitution of the Audit Committee of the Company is as set out below:

Mr. Uday Kotak Mr. Dipak Gupta Mr. Jaimin Bhatt

6. AUDITORS

The statutory auditors Messrs. Deloitte Haskins & Sells, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for reappointment.

7. STATUTORY INFORMATION

A statement giving the particulars of employees as required under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, is annexed.

During the year under review, your Company did not accept any deposits from the public. There are no deposits due and outstanding as on 31st March 2010.

Your Company’s foreign exchange income was Rs. 306 lakhs while the outgo was Rs. 101 Lakhs. The other particulars under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are not applicable since your Company is not a manufacturing company.

8. DIRECTOR’S RESPONSIBILITY STATEMENT

Based on representations from the Management, the Directors state, in pursuance of Section 217 (2AA) of the Companies Act, 1956, that:

I. Your Company has, in the preparation of the annual accounts for the year ended 31st March 2010, followed the applicable accounting standards along with proper explanations relating to material departures, if any;

II. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2010 and of profit/loss of the Company for the financial year ended 31st March 2010;

III. 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

IV. The Directors have prepared the annual accounts on a going concern basis.

9. ACKNOWLEDGEMENTS

Your Directors would like to place on record their gratitude for the valuable support received from the Reserve Bank of India, Securities and Exchange Board of India and other Government and Regulatory agencies. Your Directors acknowledge and wish to place their appreciation of employees for their commendable efforts, teamwork and professionalism.

For and on behalf of the Board of Directors

Uday S. Kotak Place : MumbaiChairman Date : April 28, 2010


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Auditors’ Report

To The Members ofKotak Mahindra Capital Company Limited

1. We have audited the attached Balance Sheet of Kotak Mahindra Capital Company Limited (“the Company”) as at 31st March, 2010, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 (CARO) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows:

(a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956;

(e) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

(ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

5. On the basis of written representations received from the Directors, as on 31st March, 2010 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2010 from being appointed as a Director in terms of Section 274(1)(g) of the Companies Act, 1956.

For Deloitte Haskins & SellsChartered Accountants (Registration No. 117366W)

R. LaxminarayanPartner Place : MumbaiMembership Number: 33023 Date : April 28, 2010


Annexure to the Auditors’ Report

Annexure to the Auditors’ Report (Referred to in paragraph 3 of our Report of even date)

(i) Having regard to the nature of the Company’s activities, clauses (ii), (viii), and (xiii) of CARO are not applicable.

(ii) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets.

(b) The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

(iii) The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

(v) In respect of the contracts or arrangements entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

(a) The Company has not entered into any contracts or arrangements that need to be entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956. Hence, clause (v) of Para 4 of the Order is not applicable to the Company for the year.

(vi) According to the information and explanations given to us, the Company has not accepted any deposit from the public during the year.

(vii) In our opinion, the internal audit functions carried out during the year by the firm of Chartered Accountants appointed by the Management have been commensurate with the size of the Company and the nature of its business.

(viii) According to the information and explanations given to us in respect of statutory dues:

(a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Income-tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31st March, 2010 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess which have not been deposited as on 31st March, 2010 on account of disputes are given below:

Statute Nature of Dues Forum where Dispute is pending

Period to which the amount relates

Amount involved (Rs. in lakhs)

Service Tax Tax, Interest and Penalty Commissioner of Central Excise 2000-01 to 2002-03 148.16

Service Tax Tax, Interest and Penalty Commissioner of Central Excise 2004-05 to 2008-09 35.37

Service Tax Penalty Commissioner of Central Excise 2008-09 to 2009-10 7.42

(ix) The Company has no accumulated losses as at 31st March, 2010 and has not incurred any cash loss during the financial year ended on that date and in the immediately preceding financial year.

(x) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to debenture holders.


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(xi) According to the information and explanations given to us, the Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities.

(xii) Based on our examination of the records and evaluation of the related internal controls, the Company has maintained proper records of transactions and contracts in respect of its dealing in shares, securities, debentures and other investments and timely entries have been made therein. The aforesaid securities have been held by the Company in its own name.

(xiii) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interest of the Company.

(xiv) To the best of our knowledge and belief and according to the information and explanations given to us, there have been no term loans availed during the year. Hence clause (xvi) of paragraph 4 of the said Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, we report that funds raised on short-term basis have not been used during the year for long- term investment.

(xvi) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the year. Hence clause (xviii) of paragraph 4 of the said Order is not applicable to the Company.

(xvii) According to the information and explanations given to us, during the year, the Company had issued 75 unsecured debentures of Rs. 10,000,000 each and redeemed the said debentures during the year. Hence, the question of creating security does not arise.

(xviii) According to the information and explanations given to us, the Company has not raised any money by public issue during the year. Hence, Clause (xx) of paragraph 4 of the Order is not applicable to the Company for the year.

(xix) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company was noticed or reported during the year.

For Deloitte Haskins & SellsChartered Accountants(Registration No. 117366W)

R. LaxminarayanPartner Place : MumbaiMembership Number: 33023 Date : April 28, 2010


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Balance Sheet as at 31st March, 2010

Schedule Rupees in lakhs

As at 31st March, 2010 (Rupees in lakhs)


SouRceS of fundS

Shareholders’ funds:

Capital 1 411.61 411.61

Reserves and Surplus 2 43,334.18 40,948.00

Total 43,745.79 41,359.61

Application of funds

fixed Assets:

Gross Block 3 2,759.16 2,745.58

Less: Depreciation and Amortisation 729.01 732.27

Net Block 2,030.15 2,013.31

Investments 4 30,971.90 23,739.10

deferred Tax Asset (net) 74.51 243.98

current Assets, Loans and Advances:

Sundry Debtors 5 1,573.27 412.26

Cash and Bank Balances 6 9,219.36 14,372.95

Other Current Assets 7 16.79 37.70

Loans and Advances 8 1,946.46 1,632.99

12,755.88 16,455.90

Less: current Liabilities and Provisions:

Liabilities 9 1,693.68 786.38

Provisions 10 392.97 306.30

2,086.65 1,092.68

Net Current Assets 10,669.23 15,363.22

Total 43,745.79 41,359.61

Significant Accounting policies and notes to Accounts 17

In terms of our report attached For and on behalf of the Board of Directors

for deloitte Haskins and SellsChartered Accountants

R. Laxminarayan uday Kotak falguni nayar Shanti ekambaramPartner Chairman Managing Director Director

Place : Mumbai Ajay Vaidya Rajeev SaptarshiDate : April 28, 2010 Company Secretary Chief Financial Officer


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Profit and Loss Account for the Year ended 31st March, 2010

Schedule Rupees in lakhs

Year ended 31st March, 2010 (Rupees in lakhs)

Year ended 31st March, 2009 (Rupees in lakhs)

Income

Financial Advisory and Transactional Services 11 8,359.74 8,118.56

Interest Income 12 302.90 883.10

Other Income 13 1,477.53 779.97

Total Income 10,140.17 9,781.63

expenditure

Personnel Expenses 14 4,221.94 4,466.09

Interest and Other Financial Charges 15 28.36 —

Other Expenses 16 2,233.73 2,963.59

Depreciation and Amortisation 194.57 190.63

Total expenditure 6,678.60 7,620.31

Profit Before Taxation 3,461.57 2,161.32

Provision for Taxation

– Current Tax 926.00 896.00

– (Excess)/Short Provision in Respect of Earlier Years (22.47) 6.04

– Deferred Tax 169.48 (62.26)

– Fringe Benefits Tax — 38.00

– Wealth Tax 2.38 2.46

1,075.39 880.24

Profit After Taxation 2,386.18 1,281.08

Balance Brought Forward from Previous Year 34,770.11 33,489.03

Balance Carried to Balance Sheet 37,156.29 34,770.11

Earnings Per Share: Face Value of Rs. 10/-

Basic and Diluted Earnings Per Share (in Rs.) 57.97 31.12

(Refer Note 15 of Schedule 17)

Significant Accounting Policies and Notes to Accounts 17






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cash flow Statement for the Year ended 31st March, 2010

for the year ended 31st March, 2010

Rs. in lakhs

For the year ended 31st March, 2009

Rs. in lakhs

cASH fLoW fRoM oPeRATInG AcTIVITIeS

Net Profit before taxation 3,461.57 2,161.32

Adjustments for:

Depreciation 194.57 190.63

Dimunition in value of long term Investments — 178.40

(Profit)/Loss on sale of current investments (531.44) 111.23

(Profit)/Loss on sale of long term investments (259.75)

Interest/dividend received on Investments (42.96) (608.82)

Reversal of Diminution in value of long term investments (52.68) —

Interest on Income Tax Refund — (50.58)

Interest paid on debentures 28.36 —

Income distribution from Venture Funds (38.34) (4.38)

(Profit)/loss on sale of fixed assets (7.96) (11.60)

oPeRATInG PRofIT BefoRe WoRKInG cAPITAL cHAnGeS 2,751.37 1,966.20

Adjustments for:

(Increase)/Decrease in loans and advances (120.35) (273.82)

(Increase)/Decrease in sundry debtors (1,161.01) 2,592.50

(Increase)/Decrease in other current assets 20.91 582.57

Increase/(Decrease) in current liabilities 907.30 (4,167.10)

Increase/(Decrease) in provision for gratuity and leave encashment 86.67 9.74

cash Generated from operations 2,484.89 710.09

Direct taxes paid (net of refunds and Interest thereon) (1,098.92) (1,188.65)

Expenses in relation to shares issued during the previous year debited to share premium account — (12.17)

net cash flow from/(used in) operating Activities (A) 1,385.97 (490.73)

cash flow from Investing Activities

Purchase of fixed assets (227.52) (173.81)

Sale of fixed assets 23.94 60.98

Purchase of investments (58,975.62) (5,588.30)

Sale of investments 52,586.70 16,556.79

Interest/dividend received on Investments 42.96 608.82

Income distribution from Venture Funds 38.34 4.38

net cash flow (used in)/from Investing Activities (B) (6,511.20) 11,468.86


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cash flow Statement for the Year ended 31st March, 2010 (contd.)

for the year ended 31st March, 2010

Rs. in lakhs

For the year ended 31st March, 2009

Rs. in lakhs

cASH fLoW fRoM fInAncInG AcTIVITIeS

Issue of optionally convertible debentures 7,500.00 —

Repayment of optionally convertible debentures (7,500.00) —

Interest paid on borrowings (28.36) —

net cash flow (used in)/from financing Activities (c) (28.36) —

Net Increase/(Decrease) in Cash and Cash Equivalents (A + B + C) (5,153.59) 10,978.13

Cash and Cash Equivalents at the beginning of the year 14,372.95 3,394.82

Cash and cash Equivalents at the end of the year 9,219.36 14,372.95

(5,153.59) 10,978.13

notes:

1. Components of Cash and Cash Equivalents comprises of 31st March, 2010 31st March, 2009 Rs. in lakhs Rs. in lakhs

Cash on hand — —

Balances with:

– Scheduled banks in current account 6,925.86 22.95

– Scheduled bank in Deposit account 2,293.50 14,350.00

2. Cash and Cash Equivalents include fixed deposits of Rs. 50.00 lakhs (Previous year Rs. 75.00 lakhs) under lien of National Securities Clearing Corporation Limited, Rs. 2,243.50 lakhs (Previous year Rs. 3,755.00 lakhs), held by bank as margin money against intraday overdraft facilities.

3. The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in Accounting Standard-3 on Cash Flow Statements issued by the under the Companies (Accounting Standards) Rules, 2006.

4. Direct Taxes paid and Expenses in relation to shares issued during the previous year debited to securities premium account are treated as arising from operating activities and are not bifurcated between investing and financing activities.

5. Figures of the previous year are recast wherever necessary to conform to figures of the current year.






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Schedules forming part of the Balance Sheet as at 31st March, 2010

Rupees in lakhs



Schedule 1 – Capital

Authorised 10,000,000 equity shares of Rs. 10 each 1,000.00 1,000.00

Total 1,000.00 1,000.00

Issued and Subscribed

4,116,149 equity shares of Rs. 10 each fully paid up(Of the above : 3,126,134 shares are held by Kotak Mahindra Bank Limited, the holding company and its nominees and 990,015 shares are held by Kotak Securities Limited, a subsidiary of the holding company

156,129 equity shares of Rs. 10 each are allotted as fully paid up for consideration other than cash in financial year 2007-08, pursuant to the Scheme of Arrangement as approved by the Bombay High Court.)

411.61 411.61

Total 411.61 411.61

Schedule 2 – Reserves and Surplus

Share Premium AccountAs per last Balance Sheet 6,177.89 6,190.06

Less : Expenses in relation to shares issued during the previous year pursuant to the scheme of arrangement as approved by the Bombay High Court.

— (12.17)

6,177.89 6,177.89

Balance in Profit and Loss Account 37,156.29 34,770.11

Total 43,334.18 40,948.00

Schedule 3 – Fixed Assets(Rs. in lakhs)

Description Gross Block (At Cost) Depreciation Net Block

As at 1st April,

2009

Additions Deductions As at 31st

March, 2010

As at 1st April,

2009

For the year

Deductions As at 31st

March, 2010

As at 31st

March, 2010

As at 31st

March, 2009

Intangible Assets

Software - Acquired 61.02 5.30 — 66.32 44.41 10.25 — 54.66 11.66 16.61

Tangible Assets

Premises* 1,772.87 — — 1,772.87 67.35 30.49 — 97.84 1,675.03 1,705.52

Leasehold Improvements 127.01 47.22 81.14 93.09 109.15 24.79 81.00 52.94 40.15 17.86

Computers 265.52 1.16 3.91 262.77 216.15 27.89 3.20 240.84 21.93 49.37

Furnitures 47.11 0.10 37.91 9.30 46.78 0.25 37.91 9.12 0.18 0.33

Office Equipments # 111.34 4.68 34.07 81.95 90.19 6.77 33.70 63.26 18.69 21.15

Vehicles 360.71 169.06 56.91 472.86 158.24 94.13 42.02 210.35 262.51 202.47

Total 2,745.58 227.52 213.94 2,759.16 732.27 194.57 197.83 729.01 2,030.15 2,013.31

Previous Year 2,735.63 173.81 163.86 2,745.58 656.12 190.63 114.48 732.27 2,013.31

* Represents premises given on operating lease# Office equipments include assets aggregating to Rs. 6.22 lakhs (Previous year Rs. 6.22 lakhs) (50% of the original cost) jointly owned with other enterprises. The depreciation for the year is Rs. Nil (Previous Year Rs. Nil) and the written down value of the asset as on March 31, 2010 is Rs. Nil (Previous year Rs. Nil).


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Schedules forming part of the Balance Sheet as at 31st March, 2010 (Contd.)

Schedule 4 – Investments (Non-Trade)

Quantity Amount

Face Value (Rupees)

As at 31st March, 2010

As at 31st March, 2009

31st March, 2010(Rupees in lakhs)

31st March, 2009 (Rupees in lakhs)

Long Term Investments (at cost, fully paid)

In Equity Shares of Companies (Unquoted)

Kotak Mahindra (International) Limited @ US $ 1 2,000,000 2,000,000 718.00 718.00

Kotak Mahindra Inc @ US $ 0.01 750,000 750,000 343.78 343.78

Kotak Investment Advisors Limited @ 10 2,250,070 2,250,070 226.01 226.01

Kotak Securities Limited@ 10 400,010 400,010 12,300.00 12,300.00

Infina Finance Private Limited @ 10 1,100,240 1,100,240 110.02 110.02

Kotak Mahindra Old Mutual Life Insurance Limited@ 10 63,366,753 63,366,753 6,336.68 6,336.68

INX Media Private Limited 10 128,400 128,400 12.84 12.84

National Stock Exchange of India Limited 10 51,334 51,334 1,509.22 1,509.22

@ Companies under the same management

In Equity Shares of Companies (Quoted)

KPR Mills Limited 10 1,093,322 — 591.27 —

In Units of Venture Capital Fund (Unquoted)

Kotak India Growth Fund 1,000 50,000 50,000 478.02 463.02

Kotak India Real Estate Fund 100,000 880 958 880.06 957.93

Kotak Alternate Opportunities (India) Fund* — — 1,395.45 940.00

Less : Provision for Diminution in value of units of Venture Capital Funds

(125.72) (178.40)

(A) 24,775.63 23,739.10

Current Investments (Fully paid)(at cost or fair value, whichever is lower)

In Units of Mutual Fund (Unquoted)Kotak Floater Long Term Growth 10.00 42,800,111 — 6,196.27 —

(B) 6,196.27 —

(A)+(B) 30,971.90 23,739.10

Aggregate Value of Quoted Investments – At Book Value 591.27 —

Market Value of Quoted Investments – Market Value 1,223.43 —

Aggregate Value of Unquoted Investments – At Book Value 30,380.63 23,739.10

* represents Company’s share of beneficial interest in a trust.

Investments purchased and sold during the year

Kotak Floater Short Term Daily Dividend 10.00 — 30,655,675 — 3,078.69

HDFC Mutual Fund - Top 200 Fund - Growth 10.00 — 77,067 — 100.00

DSP Blackrock Small & Midcapfund - Growth Plan 10.00 662,208 — 100.00 —

Principal Emerging Blue Chip Fund - Growth Plan 10.00 373,832 — 100.00 —

Sundaram BNP Paribas-Select Midcap - Growth Plan 10.00 95,497 — 100.00 —

Sundaram BNP Paribas-S.M.I.L.E. - Growth Plan 10.00 678,743 — 200.00 —

SBI MF - Magnum Global Fund - Growth 10.00 260,078 — 100.00 —

ICICI PRU Emerging Star Fund - Growth 10.00 316,857 — 100.00 —

Kotak Liquid (Institutional Premium) - Daily Dividend 10.00 216,090,356 — 26,423.74 —

Kotak Floater Long Term Growth 10.00 169,946,309 — 24,157.43 —

KPR Mills Limited 10.00 606,678 — 328.09 —


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Schedule 5 – Sundry Debtors (Unsecured)

Rupees in lakhs

As at 31st March, 2010(Rupees in lakhs)


Debts outstanding for a period exceeding six months

– considered good — —

– considered doubtful 44.15 128.39

44.15 128.39

Less: Provision for doubtful debts (44.15) (128.39)

— —

Other debts (considered good) 1,573.27 412.26

Total 1,573.27 412.26

Debtors Include

Due from a company under the same management

Kotak Mahindra (UK) Limited 2.07 80.89

Maximum amount outstanding during the year 80.89 80.89

Schedule 6 – Cash and Bank Balances

Balances with scheduled banks in :

– current account 6,925.86 22.95

– deposit account 2,293.50 14,350.00

[Including Rs. 50.00 lakhs (Previous year Rs. 75.00 lakhs) under lien of National Securities Clearing Corporation Limited and Rs. 2,243.50 lakhs (Previous year Rs. 3,755.00 lakhs) under lien for Bank Overdraft facilities]

Total 9,219.36 14,372.95

Schedule 7 – Other Current Assets

Interest accrued on deposits 16.79 37.70

Total 16.79 37.70



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Schedule 8 – Loans and Advances

(Unsecured, considered good unless otherwise stated)



Advances recoverable in cash or in kind or for value to be received 995.51 271.29

Deposits 404.52 1,008.39

Advance tax 546.43 353.31

[Net of Provision for tax Rs. 8,806.02 lakhs (Previous year Rs. 10,548.91 lakhs)]

Total 1,946.46 1,632.99

Advances include:

Due from Holding Company

Kotak Mahindra Bank Limited 58.27 197.96

Due from companies under the same management

Phoenix ARC Pvt. Ltd. — 0.32

Maximum amount outstanding during the year

Kotak Mahindra Bank Limited 197.96 197.96

Phoenix ARC Pvt. Ltd. 0.32 0.32

Due from the Managing Director* 20.00 9.00

Maximum amount outstanding during the year 20.00 9.00

* represents remuneration paid in excess of limits u/s/198 of the Companies Act, 1956 which has been recovered subsequently.

Schedule 9 – Liabilities

Sundry creditors (Other than outstanding dues of Micro, Medium and Small enterprises) (Refer Note 14 of Schedule 17)

1,400.18 565.49

Other liabilities 293.50 220.89

Total 1,693.68 786.38

Schedule 10 – Provisions

Provision for Gratuity, Leave encashment and Employee benefits 392.97 306.30

Total 392.97 306.30



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Schedule 11 – Financial Advisory and Transactional Services



Issue management and placement fees and underwriting commission (Refer Note No. 4 in Schedule 17)

4,385.68 1,502.91

Financial advisory fees 3,974.06 6,615.65

Total 8,359.74 8,118.56

Schedule 12 – Interest Income

Interest on :

– Long term investments — 569.93

– Income tax refund — 50.58

– Interest on debentures 34.75 —

(Tax deducted at source Rs. 2.80 lakhs; Previous Year Rs. Nil)

– Fixed deposit with scheduled banks (Gross) 268.15 262.59

(Tax deducted at source Rs. 42.42 lakhs; Previous Year Rs. 52.22 lakhs)

Total 302.90 883.10

Schedule 13 – Other Income

Dividend Income on:

– Current investments 2.74 33.69

– Long term investments 40.22 5.20

Profit on sale of fixed assets (net) 7.96 11.60

Provision for doubtful debts no longer required written back 181.76 45.28

Profit on sale of current investments 531.44 —

Profit on sale of long term investments 259.75 —

Profit on Trading in Debentures 29.78 —

Excess provision for Leave Encashment benefits written back — 32.83

Reversal of diminution in value of long term investments 52.68 —

Foreign Exchange gain (Net) — 120.61

Rent Income 176.56 145.44

Service Income 149.95 364.20

Income distribution on Venture Fund Investments 38.34 4.38

Miscellaneous income 6.35 16.74

Total 1,477.53 779.97



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Schedule 14 – Personnel Expenses

Rupees in lakhs

For the year ended31st March, 2010(Rupees in lakhs)

For the year ended 31st March, 2009 (Rupees in lakhs)

Salaries, allowances and bonus 4,214.65 4,552.93

Contribution to employees’ provident and other funds 179.67 195.84

Staff welfare 13.91 20.73

Gratuity benefits 22.89 23.65

Less: Recovery of expenses (209.18) (327.06)

Total 4,221.94 4,466.09

Schedule 15 – Interest and other Financial Charges

Interest on debentures 28.36 —

Total 28.36 —

Schedule 16 – Other Expenses

Travelling, conveyance and vehicle expenses 266.52 228.91

Auditors’ remuneration

– Audit fees (excluding Service Tax) 13.00 11.00

– Out of pocket expenses 0.06 —

13.06 11.00

Legal and professional fees 65.96 201.90

Office Expenses 230.00 157.75

Advertisement 19.06 32.32

Electricity 67.26 59.91

Communication 57.40 50.75

Rent 636.01 704.01

Rates and taxes 4.20 10.33

Insurance 15.86 17.22

Repairs and maintenance - others 47.40 35.03

Common establishment expenses -reimbursement 556.84 956.49

Diminution in value of investments

– Long term investments — 178.40

Loss on Sale of Current Investments (Net) — 111.23

Bad debts written off 134.73 152.71

Provision for doubtful debts 97.51 120.95

Foreign exchange loss (net) 13.89 —

Other expenses 133.35 70.35

Less: Recovery of expenses (125.32) (135.67)

Total 2,233.73 2,963.59



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SCHEDULE 17 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES:

A. BASIS OF ACCOUNTING

The Financial Statements have been prepared on historical cost basis of accounting. The company adopts the accrual system of accounting and the financial statements conform with the Accounting Standards notified under the Companies (Accounting Standard) Rules, 2006, the generally accepted accounting principles prevailing in India and the relevant provisions of the Companies Act, 1956.

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 on the date of the financial statements and the reported income and expenses during the reported period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates.

B. REVENUE RECOGNITION

Revenue is recognized when there is reasonable certainty of its ultimate realization/collection.

i. Issue management and placement fees, underwriting commission and financial advisory fees are accounted on completion of milestones specified in the contract.

ii. Brokerage and clearing fees are recognized on the date of transaction.

C. TANGIBLE AND INTANGIBLE ASSETS, DEPRECIATION AND AMORTISATION

Fixed assets are stated at cost inclusive of incidental expenses less accumulated depreciation/amortization. The Company adopts the Straight Line Method of depreciation so as to write off 100% of the cost of the assets at rates higher than those prescribed under Schedule XIV to the Companies Act, 1956 based on the Management’s estimate of the useful lives of all the assets. Estimated useful lives over which assets are depreciated are as follows:

Leasehold improvements: Over the primary period of lease Subject to a maximum of 6 years

Computers: 3 years

Software: 3 years

Furniture: 6 years

Office Equipment: 5 years

Vehicles: 4 years

Premises: 58 years

i. Fixed assets costing less than Rs. 5,000 are fully depreciated in the year of purchase.

D. IMPAIRMENT OF ASSETS

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors.

An impairment loss is charged to the Profit and Loss account in the year in which an asset is identified as impaired.

E. INVESTMENTS

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 accounted at cost and any decline in the value, other than temporary is provided for.

Current investments are valued at cost (calculated by applying weighted average cost method) or fair value whichever is lower.

Brokerage, stamping and additional charges paid are included in the cost of investments.

In case of investments in units of mutual funds, the net asset value of units is considered as the fair value.

Investments include investments in shares of companies registered outside India. They are stated at cost by converting at the rate of exchange prevalent at the time of acquisition thereof.

Schedules forming part of the Balance Sheet and the Profit and Loss Account


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F. STOCK IN TRADE

Securities acquired with the intention to trade are classified as stock- in- trade. Stock-in -trade is valued at cost (inclusive of brokerage and stamp charges in case of equity shares), calculated by applying the weighted average cost method or fair value whichever is lower.

G. FOREIGN CURRENCY TRANSACTIONS

i. Transactions in foreign currencies are recorded at the rate of exchange prevailing on the date of the transaction.

ii. Monetary assets and liabilities contracted in foreign currencies are restated at the rate of exchange prevailing at the Balance Sheet date.

iii. Exchange differences arising on settlement of the transaction and on account of restatement of assets and liabilities are dealt with in the Profit and Loss Account.

H. TAXES ON INCOME

Income Taxes are accounted for in accordance with Accounting Standard (AS-22) “Accounting for Taxes on Income” issued under the Companies (Accounting Standards) Rules, 2006. The Income Tax expense comprises Current tax and Deferred tax. Current tax is measured at the amount expected to be paid in respect of taxable income for the year in accordance with the Income tax Act, 1961.

Deferred tax adjustments comprises of changes in the deferred tax assets and liabilities. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences being the difference between the taxable income and the 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.

Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted before the balance sheet date. Changes in deferred tax assets/liabilities on account of changes in enacted tax rates are given effect to in the Profit and Loss Account in the period of the change. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized.

I. EMPLOYEE BENEFITS

a. Defined Contribution Plan

The contribution as required by the statute made to Government Provident Fund is debited to profit and loss account.

The company contributes a sum equivalent to 15% subject to a maximum of Rs. 1 lakh per annum per employee, of eligible employees’ eligible salary to a Superannuation Fund administered by trustees and managed by a Life Insurance Company. The company recognises such contributions as an expense in the year they are incurred.

b. Defined Benefit Plan

The company accounts for the liability for future gratuity benefits based on an actuarial valuation conducted by an independent actuary. The gratuity obligation is wholly unfunded. The net present value of the company’s obligation is determined based on the projected unit credit method as at the Balance Sheet date.

Actuarial gains/losses are immediately recognised in the profit and loss account.

c. Other Long-term Employee Benefits

The company accrues the liability for compensated absences based on the actuarial valuation conducted by an independent actuary. The net present value of the company’s obligation is determined based on the projected unit credit method as at the Balance Sheet date.

d. Other Employee Benefits

The undiscounted amount of employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include performance incentives.

J. BORROwING COSTS

Borrowing costs other than those directly attributable to qualifying fixed assets are recognized as an expense in the period in which they are incurred.

Schedules forming part of the Balance Sheet and the Profit and Loss Account (Contd.)


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K. PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETS

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

L. OPERATING LEASE

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, are classified as operating leases. Operating lease payments/receipts are recognised as an expense/income in the Profit and Loss account on a straight-line basis over the lease term.

M. SEGMENT ACCOUNTING POLICIES

(a) Segment assets and liabilities:

All Segment assets and liabilities are directly attributable to the segment.

Segment assets include all operating assets used by the segment and consist principally of fixed assets, investments, stock in trade, sundry debtors, loans and advances and cash and bank balances. Segment assets and liabilities do not include share capital, reserves and surplus and income tax (both current and deferred).

(b) Segment revenue and expenses:

Segment revenue and expenses are directly attributable to segment. It does not include provision for income tax.

2. CONTINGENT LIABILITIES:

a) Guarantee of Rs. 4,490.00 lakhs (Rupee equivalent of US $ 10,000,000) [(Previous year Rs. 5,072.00 lakhs (Rupee equivalent of US $ 10,000,000)] given to Standard Chartered Bank (Mauritius) Limited on behalf an associate.

b) Guarantee of Rs. 449.00 lakhs (Rupee equivalent of US $ 1,000,000) [Previous year Rs. 507.20 lakhs] (Rupee equivalent of US $ 1,000,000) given to Bank of India (London) on behalf of an associate.

c) Guarantee of Rs. 11,225.00 lakhs (Rupee equivalent of US $ 25,000,000) [Previous year Rs. 12,680.00 (Rupee equivalent of US $ 25,000,000)] given to Hongkong and Shanghai Banking Corporation Limited (Mauritius) for an overdraft facility. The amount of overdraft facility availed Rs. 5206.16 lakhs (Rupee equivalent of US $ 11,595,009) [Previous Year Rs. 5,607.14 lakhs (Rupee equivalent of US $ 11,055,095 )] by an associate.

d) Guarantee of Rs. 641.55 lakhs (Rupee equivalent of Sing $ 2,000,000) [Previous year Rs. 667.00 lakhs (Rupee equivalent of Sing $ 2,000,000)] given to Hongkong and Shanghai Banking Corporation Limited (Singapore) on behalf of an associate.

e) Commitment towards investment in venture capital funds – Kotak India Growth fund Rs. 25.00 Lakhs (Previous year Rs. 40.00 Lakhs ), Kotak Alternate Opportunities India Fund Rs. 500.00 Lakhs (previous year Rs. 1,060.00 Lakhs).

f) Show cause cum demand in respect of service tax Rs. 190.95 lakhs (Previous year Rs. 143.00 lakhs).

g) As part of its lead management business, the company has underwriting commitment for its clients towards equity issuance amounting to Rs. Nil (Previous Year Rs. 95,000.00 lakhs).

3. COMPONENTS OF DEFERRED TAX BALANCES:

Rs. in lakhs

31st March, 2010 31st March, 2009

Deferred tax liability Depreciation 76.50 53.20

Deferred tax asset

Provision for doubtful debts 14.66 43.64

Provision for gratuity and compensated absences 129.15 104.11

Unabsorbed Capital loss — 133.96

Others 7.20 15.47

Deferred Tax Asset (Net) 74.51 243.98



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4. Issue management and placement fees and underwriting commission is net of incentives/brokerages paid to brokers and fees/commission shared aggregating to Rs. 2,980.73 lakhs (Previous year Rs. 343.95 lakhs).

5. At the Annual General Meetings of the holding company, Kotak Mahindra Bank Limited, the shareholders of the Bank had unanimously passed Special Resolutions on 28th July, 2000, 26th July, 2004, 26th July, 2005, 5th July, 2007 and 21st August, 2007, to grant options to the Eligible Employees of the Bank and its, subsidiary companies. Pursuant to these resolutions, the following four Employees Stock Option Schemes had been formulated and adopted:

a) Kotak Mahindra Equity Option Scheme 2001-02

b) Kotak Mahindra Equity Option Scheme 2002-03

c) Kotak Mahindra Equity Option Scheme 2005

d) Kotak Mahindra Equity Option Scheme 2007

In accordance with the SEBI Guidelines and the guidance note on “ Accounting for Employee Share based payments” issued by The Institute of Chartered Accountants Of India, the excess, if any, of the market price of the share preceding the date of grant of the option under ESOPs over the exercise price of the option is amortised on a straight-line basis over the vesting period. During the year the Company has reimbursed the Bank Rs. 250.06 lakhs (Previous year Rs. 441.79 Lakhs) on account of such costs and the same is forming part of Employee costs under Schedule 14 – Personnel Expenses. The above reimbursement excludes an amount of Rs. 102.26 Lakhs (Previous Year Rs. 205.40 Lakhs) towards Employee Stock Option Plan for the managing director incurred by the Bank on behalf of the company, but not passed on to the Company.

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 higher by Rs. 409.82 Lakhs (Previous year Rs. 374.19 Lakhs) and the profit after tax would have been lower by Rs. 270.52 Lakhs (Previous Year Rs. 247.00 Lakhs). Consequently the basic and diluted EPS would have been Rs. 51.40 (Previous year Rs. 25.76).

6. Reconciliation of opening and closing balance of the present value of the defined benefit obligation for gratuity benefits is given below.

Rs. in lakhs

As of 31st March, 2010




Change in Unfunded benefit obligations

Opening deferred benefit obligation 94.63 84.72 65.15 72.19

Service cost 26.04 24.24 14.74 14.77

Interest cost 8.08 8.25 4.93 5.20

Actuarial (gain)/loss on obligations (4.26) (8.84) 14.23 14.48

Liability assumed on acquisition/(Settled on Divestiture) (5.65) 2.85 (14.33) 0.30

Benefits paid (5.67) (16.59) — (41.79)

Present value of unfunded benefit obligations as at the end of the year 113.17 94.63 84.72 65.15

Rs. in lakhs





Reconciliation of present value of the obligation and the fair value of the plan assets

Fair value of plan assets — — — —

Present value of benefit obligations 113.17 94.63 84.72 65.15

Net asset/(liability) as at 31st March, 2010 (113.17) (94.63) (84.72) (65.15)

Cost recognised for the year

Current service cost 26.04 24.24 14.74 14.77

Interest cost 8.08 8.25 4.97 5.20

Expected return on plan assets — — — —

Actuarial (gain)/loss (4.26) (8.84) 14.23 14.48

Net gratuity cost 29.86 23.65 33.94 34.45



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Experience Adjustments for the current annual period and previous four annual periods: Rs. in lakhs

Period Ended

31st March, 2010

31st March, 2009

31st March, 2008

31st March, 2007

31st March, 2006

Defined Benefit Obligation 113.17 94.63 84.72 65.15 72.19

Plan Assets — — — — —

Surplus/(Deficit) (113.17) (94.63) (84.72) (65.15) (72.19)

Experience Adjustment on Plan Liabilities (1.56) (9.44) 11.55 17.34 —

Experience Adjustment on Plan Assets — — — — —

Actuarial assumptions used

Discount rate 8.01% p.a. 7.18% p.a.

Salary escalation rate 15% p.a. for first two years; 10% p.a. for next 2 years

and 6% p.a. thereafter

0% p.a. for first year; 10% p.a. for next 2 years

and 6% p.a. thereafter

Expected return on plan assets NA NA

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

The above information is certified by the actuary and relied upon by the Auditors.

Gratuity

In accordance with Payment of Gratuity Act, the Company provides for gratuity, a defined benefit retirement plan covering all employees. The plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years of employment with the Company subject to maximum of Rs. 3.50 lakhs.

The gratuity benefit is provided through unfunded plan and annual contributions are charged to profit and loss account. Under the scheme, the settlement obligation remains with the Company.

7. Quantitative information in respect of trading in debentures:

2009-2010 2008-2009

Quantity Value Rs. in Lakhs Quantity Value Rs. in Lakhs

Opening — — — —

Purchase during the year 208,803 2,088.03 — —

Sold during the year 208,803 2,117.81 — —

Closing Stock — — — —

Profit/(loss) on trading — 29.78 — —

8. Managerial Remuneration under Section 198 of the Companies Act, 1956

Rs. in lakhs

2009-2010* 2008-2009*

Salaries and allowances 120.98 114.60

Contribution to provident fund 6.72 6.72

Perquisites 5.00 4.75

132.70 126.07

* Excludes provision for gratuity and leave encashment since these are based on actuarial valuations done on an overall Company basis.



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9. Earnings in foreign exchange

Rs. in lakhs

2009-2010 2008-2009

Financial advisory fees 306.17 4,205.71

10. Expenditure in foreign currency

Rs. in lakhs

2009-2010 2008-2009

Travelling 7.98 8.64

Professional fees 45.01 1.60

Membership and subscription 43.12 41.03

Conference Expenses 5.43 —

Other expenses — 1.89

11. Segmental Information:

The Company’s business is organised into two segments namely - “Advisory and Transactional Services” and “Trading and Principal Investments”

The “Advisory and Transactional services” segment provides financial advisory services such as mergers and acquisition advice and equity-debt issue management services and Trading/Professional Clearing operations of National Securities Clearing Corporation Limited.

The “Trading and Principal Investments” segment deals in equity and derivatives, loans/deposits and investments.

Segments have been identified and reported taking into account the nature of products and services, the differing risks and returns and the internal financial reporting system.

Segment Information: Rs. in lakhs

31st March 2010 31st March 2009

Advisory and Transactional

Services

Trading and Principal

Investments

Total Advisory and Transactional

Services


Investments

Total

Segment Revenue

Income from external customers 8,705.75 1,257.86 9,963.61 8,705.85 879.76 9,585.61

Income from inter segments — — — — — —

Total Revenue 8,705.75 1,257.86 9,963.61 8,705.85 879.76 9,585.61

Segment result

Results 2,085.99 1,229.51 3,315.50 1,407.03 588.76 1,995.79

Add: Unallocated income — — 176.56 — — 196.02

Less: Unallocated expenses — — 30.49 — — 30.49

Less: Income tax (including deferred tax) — — 1,075.39 — — 880.24

Net Profit — — 2,386.18 — — 1,281.08

Other Information

Carrying amount of segment assets 2,475.67 41,061.81 43,537.48 1,999.47 38,151.00 40,150.47

Unallocated corporate assets — — 2,294.96 — — 2,301.82

Total Assets — — 45,832.44 — — 42,452.29

Carrying amount of segment liabilities 1,986.65 — 1,986.65 1,092.68 — 1,092.68



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Advisory and Transactional

Services


Investments

Total Advisory and Transactional

Services


Investments

Total

Unallocated corporate liabilities — — 100.00 — — —

Total Liabilities — — 2,086.65 — — 1,092.68

Capital Expenditure

Tangible 222.22 — 222.22 160.49 — 160.49

Intangible 5.30 — 5.30 13.32 — 13.32

Depreciation/ 184.32 — 184.32 173.24 — 173.24

Amortisation 10.25 — 10.25 17.39 — 17.39

Segment revenue comprises of:

Rs. in lakhs


Income from services 8,509.69 8,482.76

Interest and discounting income 302.90 836.59

Profit on trading in debentures 29.78 —

Profit on sale of long term Investments 259.75 —

Profit on sale of current Investments 531.44 —

Income distribution on Venture Fund Investments 38.34 —

Other Income:

Dividend income on :

Current investments 2.74 33.69

Long term investments 40.22 5.20

Provision for doubtful debts no longer required written back 181.76 45.28

Others 66.99 182.09

Total Segment Revenue 9963.61 9,585.61

Add: Unallocated Income 176.56 196.02

Total Income 10,140.17 9,781.63

Segment assets comprise mainly of trade and other receivables, investments, Fixed Assets, Cash & Bank Balances. Unallocated assets for the current year represent taxes, deferred taxes, Premises given on operating lease. Segment liabilities include loans, trade and other payables and sundry creditors. Unallocated liabilities for the current year represents deposit received for premises given on operating lease.

12. Related parties disclosures

(i) Relationships (During the year)

A. Related parties where control exists :

Nature of relationship Related Party

Holding Company Kotak Mahindra Bank Limited (KMBL) {Holds 75.95% of the equity share capital}

Uday S. Kotak along with relatives and entities controlled by him holds 48.21% of the equity share capital of Kotak Mahindra Bank Limited as on March 31, 2010

Subsidiary Companies: No Subsidiaries



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B. Other Related parties:

(i) Fellow Subsidiaries: Kotak Investment Advisors Limited

Kotak Mahindra (International) Limited

Kotak Mahindra (UK) Limited

Kotak Mahindra Inc.

Kotak Securities Limited

Kotak Mahindra Asset Management Company Limited

Kotak Forex Brokerage Limited

Kotak Mahindra Prime Limited

Kotak Mahindra Old Mutual Life Insurance Limited (Also Joint Venture)

(ii) Associates (Enterprises in which the Company has significant influence)

Infina Finance Private Limited. (KMCC holds 49.98% of the equity share capital)

Phoenix ARC Private Limited (Upto 29th July, 2008)

(iii) Joint venture Kotak Mahindra Old Mutual Life Insurance Limited – Joint Venture with Kotak Mahindra Bank Limited; Old Mutual Plc; Kotak Mahindra Prime Limited.

(iv) Key management personnel Mr. Uday S. Kotak, Non executive Chairman

Ms. Falguni Nayar, Managing Director

(ii) The following transactions were carried out with related parties in the ordinary course of business.



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The following transactions were carried out with related parties in the ordinary course of business (all figures in Rupees Lakhs)

Nature of Transaction Holding Company

Fellow subsidiary Companies Fellow subsidiary Companies Joint Venture Associates Key Management Personnel

Kotak Mahindra Bank

Limited

Kotak Investment

Advisors Limited

Kotak Mahindra

(International) Limited

Kotak Mahindra

(UK) Limited

Kotak Mahindra Inc.

Kotak Securities

Limited

Kotak Mahindra Asset

Management Company Ltd.


Kotak Mahindra Prime Ltd Total Kotak Mahindra Old Mutual Life

Insurance Limited

Phoenix ARC Private Limited

Falguni Nayar

Finance

Interest received 268.15 — — — — — — — — — — — —

(262.08) — — — — — — — — — — — —

Fixed Deposit Placed 20,262.00 — — — — — — — — — — — —

(25,380.98) — — — — — — — — — — — —

Fixed Deposit encashed/Matured 32,318.50 — — — — — — — — — — — —

(14,302.39) — — — — — — — — — — — —

Advances Given

Bank Balance 6,925.24 — — — — — — — — — — — —

(22.92) — — — — — — — — — — — —

Fixed Deposit Balance including accrued

interest 2,310.29 — — — — — — — — — — — —

(14,350.00) — — — — — — — — — — — —

Investments

Purchase/subscription — 575.00# — — — — 56777.45# — — 57,352.45 — — —

— 210.00# — — — — (3078.69)# — Right renounciation of 33,75,000 equity

shares of Kotak mahindra Old Mutual Life

Insurance Limited

(3,288.69) (690.39) — —

Sale/ redemption — 220.76# — — — — 51041.08# — — 51,261.84 — — —

— (4.38)# — — — — (3428.69)# — — (3,433.07) — — —

Interest/Dividend/Premium on Investments — — — — — — 2.74 — — 2.74 — — —

— — — — — — (33.69) — — (33.69) — — —

Stock-in-trade (Debentures)

Sales and interest 2,124.58 — — — — — — — — — — — —

— — — — — — — — — — — — —

Other receipt and payments

Sale of Fixed assets 10.65 1.34 — — — — — — — 1.34 — — —

(16.81) — — — — (3.63) — — — (3.63) — (3.38) —

Purchase of Fixed assets 5.94 — — — — 1.19 — — — 1.19 — — —

(39.50) — — — — — — — — — — — —

Income from Services — — — — — — — — — — — — —

— — — (81.39) — — — — — (81.39) — — —

Expenses reimbursement to other

companies 637.50 15.25 — — 1.49 342.86 — — — 359.60 2.54 — —

(708.92) (8.78) — — (0.90) (712.77) — — — (722.44) (1.03) (3.06) —

Expenses reimbursement by other

companies 112.02 7.46 — 7.00 — 757.55 42.36 0.01 — 814.39 — — —

(169.41) (6.02) — — — (1,115.74) (38.01) — (0.00) (1,159.77) — — —



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The following transactions were carried out with related parties in the ordinary course of business (all figures in Rupees Lakhs)



Kotak Mahindra Bank

Limited

Kotak Investment

Advisors Limited

Kotak Mahindra


Kotak Mahindra

(UK) Limited

Kotak Mahindra Inc.

Kotak Securities

Limited





Insurance Limited


Falguni Nayar

Finance

Interest received 268.15 — — — — — — — — — — — —

(262.08) — — — — — — — — — — — —

Fixed Deposit Placed 20,262.00 — — — — — — — — — — — —

(25,380.98) — — — — — — — — — — — —

Fixed Deposit encashed/Matured 32,318.50 — — — — — — — — — — — —

(14,302.39) — — — — — — — — — — — —

Advances Given

Bank Balance 6,925.24 — — — — — — — — — — — —

(22.92) — — — — — — — — — — — —

Fixed Deposit Balance including accrued

interest 2,310.29 — — — — — — — — — — — —

(14,350.00) — — — — — — — — — — — —

Investments

Purchase/subscription — 575.00# — — — — 56777.45# — — 57,352.45 — — —

— 210.00# — — — — (3078.69)# — Right renounciation of 33,75,000 equity

shares of Kotak mahindra Old Mutual Life

Insurance Limited

(3,288.69) (690.39) — —

Sale/ redemption — 220.76# — — — — 51041.08# — — 51,261.84 — — —

— (4.38)# — — — — (3428.69)# — — (3,433.07) — — —

Interest/Dividend/Premium on Investments — — — — — — 2.74 — — 2.74 — — —

— — — — — — (33.69) — — (33.69) — — —

Stock-in-trade (Debentures)

Sales and interest 2,124.58 — — — — — — — — — — — —

— — — — — — — — — — — — —

Other receipt and payments

Sale of Fixed assets 10.65 1.34 — — — — — — — 1.34 — — —

(16.81) — — — — (3.63) — — — (3.63) — (3.38) —

Purchase of Fixed assets 5.94 — — — — 1.19 — — — 1.19 — — —

(39.50) — — — — — — — — — — — —

Income from Services — — — — — — — — — — — — —

— — — (81.39) — — — — — (81.39) — — —

Expenses reimbursement to other

companies 637.50 15.25 — — 1.49 342.86 — — — 359.60 2.54 — —

(708.92) (8.78) — — (0.90) (712.77) — — — (722.44) (1.03) (3.06) —

Expenses reimbursement by other

companies 112.02 7.46 — 7.00 — 757.55 42.36 0.01 — 814.39 — — —

(169.41) (6.02) — — — (1,115.74) (38.01) — (0.00) (1,159.77) — — —



datta



Kotak Mahindra Bank

Limited

Kotak Investment

Advisors Limited

Kotak Mahindra


Kotak Mahindra

(UK) Limited

Kotak Mahindra Inc.

Kotak Securities

Limited





Insurance Limited


Falguni Nayar

Other expenses paid/brokerage paid/fee/

commission sharing 250.06 — — — — 2,833.48 — — 2,833.48 — — —

(441.79) — — — — (278.43) — — — (278.43) — — —

Remuneration* — — — — — — — — — — — — 132.70

— — — — — — — — — — — — (126.07)

Payables 44.95 — — — — 360.97 — — — 360.97 — — —

(13.06) (1.85) — — — (350.99) — — — (352.84) — — —

Receivables 103.22 — — 2.07 — 52.19 — — — 54.26 — — 20.00

(248.72) — — (80.89) — (91.82) — — — (172.71) — (0.32) (9.00)

Guarantees Outstanding — — 15,715.00 1,090.55 — — — — — 16,805.55 — — —

— — (17,752.00) (1,174.20) — — — — — (18,926.20) — — —

Figures in brackets relates to the previous year.

* Excludes provision for gratuity and leave encashment, since these are based on actuarial valuations done on an overall Company basis.

# Represents investment & redemption of units of the Mutual/Venture Capital Fund.



datta



Kotak Mahindra Bank

Limited

Kotak Investment

Advisors Limited

Kotak Mahindra


Kotak Mahindra

(UK) Limited

Kotak Mahindra Inc.

Kotak Securities

Limited





Insurance Limited


Falguni Nayar

Other expenses paid/brokerage paid/fee/

commission sharing 250.06 — — — — 2,833.48 — — 2,833.48 — — —

(441.79) — — — — (278.43) — — — (278.43) — — —

Remuneration* — — — — — — — — — — — — 132.70

— — — — — — — — — — — — (126.07)

Payables 44.95 — — — — 360.97 — — — 360.97 — — —

(13.06) (1.85) — — — (350.99) — — — (352.84) — — —

Receivables 103.22 — — 2.07 — 52.19 — — — 54.26 — — 20.00

(248.72) — — (80.89) — (91.82) — — — (172.71) — (0.32) (9.00)

Guarantees Outstanding — — 15,715.00 1,090.55 — — — — — 16,805.55 — — —

— — (17,752.00) (1,174.20) — — — — — (18,926.20) — — —


* Excludes provision for gratuity and leave encashment, since these are based on actuarial valuations done on an overall Company basis.

# Represents investment & redemption of units of the Mutual/Venture Capital Fund.



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13. Operating Lease

A. Assets taken on lease

(i) The Company has taken office and residential premises under operating lease or leave and license agreements. These are generally renewable or cancelable at the option of the Company and range between 11 months to 36 months.

(ii) Rent payments are recognized in the Profit and Loss Account under “Rent” and are disclosed in Schedule 16 – Other Expenses.

B. Asset given on lease

(i) The Company has leased out certain assets under operating leases.

(ii) Rent receipts are recognized in the Profit and Loss Account under “Rent” are disclosed in Schedule 13 – “Other Income”.

(iii) The future minimum lease payments under non-cancellable operating lease – not later than one year as at 31st March, 2010 aggregate to Rs. 114.00 lakhs (Previous year Rs. 105.40 lakhs) and those for period between one to five years aggregate to Rs. 209.00 lakhs (Previous year Rs. 323.00 lakhs).

14. The Company has requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act 2006.In the absence of confirmations from the suppliers, disclosures, if any , relating to unpaid as at the year end together with interest paid/ payable as required under the said Act have not been given.

15. Earnings per Share (EPS) –The numerator and denominator used to calculate Basic and Diluted Earnings per share:


Profit attributable to Equity shareholders (Rs. in lakhs) – (A) 2,386.18 1,281.08

Basic/Weighted average number of Equity shares outstanding during the year – (B) 4,116,149 4,116,149

Nominal value of Equity shares (Rs.) 10 10

Basic Earnings per share – (A)/(B) 57.97 31.12

16. In terms of a joint venture agreement entered into by the Company with Kotak Mahindra Bank Limited, Old Mutual Plc. and Kotak Mahindra Prime Limited, the Company holds 12.42% (Previous year 12.42%) ownership interest in Kotak Mahindra Old mutual Life insurance Limited(incorporated in India) which falls under the category of Jointly Controlled Entity as per Accounting Standard 27 Financial Reporting of Interests in Joint Ventures issued under The Companies Accounting Standard Rules, 2006.

Aggregate amounts of assets, liabilities, income and expenses related to the interest in the jointly controlled entity based on the accounts for the year ended 31st March, 2010:

31st March 2010(unaudited)

31st March 2009(unaudited)

Assets 86,480.15 52,474.43

Liabilities 82,666.95 49,519.62

Income 48,765.88 24,732.31

Expenses 46,672.92 23,860.98

17. Recovery of expenses in Schedule 14 – Personnel Expenses and Schedule 16 – Other Expenses are amounts recovered from the holding company, subsidiaries and fellow subsidiaries towards the value of costs apportioned of the Company’s employees and facilities in accordance with the agreements on allocation of expenses with the companies.

18. The year end foreign currency exposures which have not been hedged by a derivative instrument or otherwise are as given below:

Particulars Rs. in Lakhs USD GBP Euro

Amount receivable in foreign currency on account of revenue

250.49

(80.89)

—

(159,488)

—

(—)

413,625

(—)




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19. Figures for the previous year have been regrouped wherever necessary to conform to current year’s classification.

Balance Sheet Abstract and Company’s General Business Profile

(a) Position of Mobilisation and Deployment of Funds (Amount in Rs. ‘000)

Total Liabilities 4,583,244

Total Assets 4,583,244

Sources of Funds

Paid up Capital 41,161

Reserves and Surplus 4,333,418

Secured Loans —

Unsecured Loans —

Current Liabilities 208,665

Application of Funds

Net Fixed Assets 203,015

Investments 3,097,190

Deferred Tax Asset 7,451

Current Assets 1,275,588

Miscellaneous Expenditure —

(b) Performance of Company (Amount in Rs. ‘000)

Turnover/Income 1,014,017

Total Expenditure 667,860

Profit before Tax 346,157

Profit after Tax 238,618

Earnings Per Share (in Rs) 57.97

Dividend Rate (%) —

(c) Generic Names of Three Principal Products/Services of company

Product Description Item Code No.

Investment Banking and Clearing NA


For and on behalf of the Board of Directors

Uday KotakChairman

Falguni NayarManaging Director

Shanti EkambaramDirector

Ajay Vaidya Rajeev SaptarshiPlace : Mumbai Company Secretary Chief Financial Officer

Date : April 28, 2010.

Kotak Mahindra Capital Company Limitedir.kotak.com/downloads/annual-reports-2009-10/pdf/Kotak Mahindra... · of India (TII), a Murugappa Group company for acquisition of 77% stake

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