Prudence and Simplicity

Transcription

1 Prudence and Simplicity Kotak Mahindra (UK) Limited ANNUAL REPORT

2 BOARD OF DIRECTORS: MR. HASAN ASKARI, MR. ABHISHEK BHALOTIA, MR. CHENGALATH JAYARAM, MR. GIJO JOSEPH, MR. RUCHIT PURI, MR. VISWANATHAN VARADARAJAN, MR. GAURANG SHAH Directors Report KOTAK MAHINDRA (UK) LIMITED The directors present their Directors Report and the audited financial statements of Kotak Mahindra (UK) Limited the Company for the year ended 31 March PRINCIPAL ACTIVITY AND BUSINESS REVIEW The Company s primary focus is investment management, broker dealing and corporate finance. As a broker dealer the Company arranges deals in bonds as well as in depository receipts. The Company is authorised and regulated by the Financial Services Authority ( FSA ). The Company has two branches Dubai (regulated by the Dubai Financial Services Authority) and Singapore (regulated by the Monetary Authority of Singapore). The financial year was a challenging year for the Indian economy as a whole with various macro-economic concerns like GDP growth, fiscal and the current account deficit and the overall political scenario. Despite these, the benchmark index, Nifty reported marginal gains of approximate 1% in US Dollar terms. India dedicated equity funds witnessed outflows during the year reflecting investor s preference for diversified country exposures. In this difficult environment, the Company focussed on providing access solutions to India (through its sub-accounts), discretionary debt and fixed income trading opportunities. The limits for Foreign Institutional Investors ( FII ) in Indian debt have been progressively increased and the Company has capitalised on this to raise INR 24,808 million in newly launched debt-oriented funds (net inflow was INR 5,157 million after considering redemptions of Fixed Maturity Plans to the tune of INR 19,651 million). In March 2013, The Company also completed the first closing of INR 4,831 million into a fund investing into infrastructure opportunities located in India. The expanded strong network of market counterparties and clients also helped in growing the fixed income trading business. The assets managed/ advised by the Company closed the year at INR 98,147 million (2012: INR 79,111 million). POLITICAL AND CHARITABLE DONATIONS The Company has made no political or charitable donations during the year (2012: NIL). FUTURE OUTLOOK India s Finance Minister was changed during the year, post which the much needed growth momentum has picked up. Several macro-economic variables are likely to show gradual improvement during the financial year This will likely be driven by easing monetary policy, tighter focus on fiscal deficit, improvement in India s high current account deficit and a mild economic recovery. The recent correction in gold and oil prices augurs well for India. Indian political scenario is also likely to be watched very closely as the General Elections are currently scheduled for mid Annual Report

3 During the year, the company re-aligned its sales force, improved its sales processes, sharpened its focus on key market segments and laid emphasis on building a high quality customer base to enhance sales productivity. The Company expects the benefits of these initiatives to pay off in the coming years. The company is reasonably positioned to meet the challenges ahead and capitalize on a market upturn. FINANCIAL RESULTS The loss on ordinary activities after taxation for the year ended 31 March 2013 was INR 135,446,646 (2012: INR 12,181,869). DIVIDEND The directors do not recommend payment of any dividend (2012: NIL). KEY RISKS The activity profile of the Company is focused on India and hence the Company is significantly exposed to an emerging market economy risk. The services rendered as a Foreign Institutional Investor are dependent on continued registration with the Indian Securities Regulator. The reporting currency of the Company is the US Dollar and the Company is consequently exposed to the currency risk posed by adverse movements in US Dollar vis-à-vis Pound Sterling and the Singapore Dollar. The Company s nature of business does not directly expose it to either the governments of, or the institutions or corporates in Greece, Portugal or any other country which would fall to be included in any credit rating lower than the investment grade. DIRECTORS The directors as at the date of this Report and who served during the period are: Mr. Varadarajan Viswanathan Mr. Paul Verghese Parambi (Resigned w.e.f 01 July 2012) Mr. Gaurang Shah (Appointed w.e.f 04 July 2012) Mr. Abhishek Bhalotia Mr. C. Jayaram Mr. Hasan Askari Mr. Ruchit Puri Mr. Gijo Joseph QUALIFYING THIRD PARTY INDEMNITIES There are no qualifying third party indemnities in force for the benefit of one or more of the directors and officers at the time of this report. GOING CONCERN The directors have considered the Company s ability to continue as a going concern and after due inquiry to the management, believe that the Company has sufficient resources to continue operating for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis. FIXED ASSETS Information on the tangible fixed assets of the Company is given in the financial statements. 2 Kotak MAHINDRA (UK) Limited

4 DIRECTORS DECLARATION The directors who held office at the date of approval of this Directors Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company s auditor are unaware; and each director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Company s auditor are aware of that information. AUDITORS In accordance with Section 485 of the Companies Act 2006, a resolution to reappoint KPMG Audit Plc as auditor of the Company will be proposed at the next Annual General Meeting. By Order of the Board of Directors, Abhishek Bhalotia Director and CEO Registered Office: Farringdon Place, 20 Farringdon Road London EC1M 3AP Date: 17 April 2013 Annual Report

5 To The Members of Kotak Mahindra (UK) Limited. INDEPENDENT AUDITORS REPORT The financial statements of Kotak Mahindra (UK) Limited for the year ended 31 st March, 2013, being a company registered in the United Kingdom, are audited by KPMG Audit Plc, Chartered Accountants, London and we have been furnished with their audit report dated 17 th April, We are presented with the accounts in Indian Rupees prepared on the basis of aforesaid accounts to comply with requirements of section 212 of the Companies Act We give our report hereunder: Report on the Financial Statements We have audited the accompanying financial statements of Kotak Mahindra (UK) Limited, which comprise the Balance Sheet as at 31 st March 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the 4 Kotak MAHINDRA (UK) Limited

6 appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 st March 2013; (b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Report on Other Legal and Regulatory Requirements In view of the facts specified in Para 1 and 2 herein above, the requirements of Companies (Auditor s Report) Order, 2003, report under section 227(3) of the Act, report on directors disqualification in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 and payment of cess under section 441A of the Companies Act, 1956 are not applicable. For V.C. Shah & Co. Chartered Accountants Firm Registration No W A.N Shah. Place: Mumbai Partner Date: 27 April, 2013 Membership No.: Annual Report

7 Kotak Mahindra (UK) Limited Balance Sheet as at 31st March, 2013 Particulars I. EQUITY AND LIABILITIES Note No. 1 Shareholders funds (a) Share capital ,078,422 70,078,422 (b) Reserves and surplus ,137,833 1,007,111,587 2 Non-current liabilities (a) Long-term borrowings 3.3 4,125,117 4,072,035 (b) Long-term provisions ,583,810 11,346,708 3 Current liabilities (a) Trade payables 1,114,865, ,518,178 (b) Other current liabilities ,530,838 10,533,367 (c) Short-term provisions ,851,418 31,443,985 TOTAL 2,218,172,901 1,733,104,282 II. ASSETS Non-current assets 1 (a) Fixed assets Tangible assets ,213,133 21,695,648 (b) Long-term loans and advances ,458,828 21,468,675 2 Current assets (a) Trade receivables ,458, ,801,545 (b) Cash and bank balance ,447,152,872 1,138,792,890 (c) Short-term loans and advances ,413,035 32,055,478 (d) Other current assets ,476,445 3,290,046 TOTAL 2,218,172,901 1,733,104,282 Significant Accounting Policies and Notes to Accounts 2 & 3 In terms of our report of even date For V C Shah & Co Chartered Accountants For and on behalf of the Board of Directors A. N. Shah V. Varadarajan A. Bhalotia Partner Director Director Mumbai Dated: 25th April, 2013 Dated: 27 April, Kotak MAHINDRA (UK) Limited

8 Kotak Mahindra (UK) Limited Statement of Profit and loss for the year ended 31st March 2013 Particulars Note No. 31st March, st March, 2012 I. Revenues from operations (a) Service Income (net) 658,045, ,693,462 (b) Interest Income ,116,841 14,690,262 II. Other income ,194 2,783,063 III. Revenue 674,854, ,166,787 IV. Expenses: Employee cost ,649, ,480,521 Finance cost ,828,581 1,530,815 Depreciation and Amortization ,578,983 10,056,143 Other expenses ,244, ,300,944 expenses 810,301, ,368,423 V. LOSS BEFORE TAX (135,446,646) (15,201,636) VI. Tax expense: (a) Current tax - (3,019,767) (b) Deferred tax (3,019,767) VII. LOSS FOR THE PERIOD (135,446,646) (12,181,869) VIII. Earnings per equity share: Basic and Diluted 3.20 (141.21) (12.70) Significant Accounting Policies and Notes to Accounts 2 & 3 In terms of our report of even date For V. C. Shah & Co. Chartered Accountants For and on Behalf of the Board of Directors A. N. Shah V. Varadarajan A. Bhalotia Partner Director Director Mumbai Dated: 25th April, 2013 Dated: 27 April, Annual Report

9 KOTAK MAHINDRA (UK) LIMITED Cash Flow Statement for the year ended March 31, 2013 Particulars 31st March, st March, 2012 Cash Flow from Operating Activities Net Loss before taxation (135,446,646) (15,201,636) Adjustments for: - Interest Income (57,308) (785,655) - Gain on sale of Fixed Asset (148,415) - - Interest Expenses 656, ,074 - Exchange Adjustments 71,038, ,638,964 - Interest on Fixed deposit (16,059,533) (13,904,607) - Depreciation 16,578,983 10,056,143 Operating Profit before Working Capital Changes (63,437,495) 113,581,283 Adjustments for: (Increase) / Decrease in Long-term loans and advances 10,009,847 (5,193,926) (Increase) / Decrease in Trade receivables (183,657,043) 636,988,092 (Increase) / Decrease in Short-term loans and advances (418,763) (3,554,422) (Increase) / Decrease in Other current assets 813,601 (1,980,057) Increase / (Decrease) in Long-term provisions 4,237,102 9,093,722 Increase / (Decrease) in Trade payables 516,347,285 (1,006,554,108) Increase / (Decrease) in Other current liabilities 13,997,471 (200,375) Increase / (Decrease) in Short-term provisions 13,407,433 9,200,668 Cash Generated from Operations 311,299,438 (248,619,123) Direct taxes paid (1,938,794) (7,843,511) NET CASH FLOW FROM OPERATING ACTIVITIES (A) 309,360,644 (256,462,634) Cash Flow from Investing Activities Fixed deposits placed (81,427,500) Purchase of Fixed Assets (16,609,050) (13,993,185) Proceeds from sale of Fixed Asset 148,415 - Interest on Fixed deposit 16,059,533 13,904,607 Interest Income on Term Loan 57, ,655 NET CASH FLOW FROM INVESTING ACTIVITIES (B) (81,771,294) 697,077 Cash Flow from Financing Activities Interest Expenses (656,868) (778,074) NET CASH FLOW USED IN FINANCING ACTIVITIES (C) (656,868) (778,074) Net Increase in Cash and Cash Equivalents (A + B + C) 226,932,482 (256,543,631) Cash and Cash Equivalents at the beginning of the year 1,138,792,890 1,395,336,521 Cash and Cash Equivalents at the end of the year 1,365,725,372 1,138,792, ,932,482 (256,543,631) Notes: 1 The Cash Flow Statement has been prepared under the 'Indirect Method' as set out in the Accounting Standard -3 on Cash Flow Statements notified under the Companies (Accounting Standard) Rules, 2006 as amended 2 Figures in brackets indicate cash outflow. 3 The previous year's figures have been re-grouped, wherever necessary in order to conform to current year's presentation. This is the Cash Flow Statement referred to in our report of even date For V. C. Shah & Co. Chartered Accountants For and on Behalf of the Board of Directors A. N. Shah V. Varadarajan A. Bhalotia Partner Director Director Mumbai Dated: 25th April, 2013 Dated: 27 April, Kotak MAHINDRA (UK) Limited

10 KOTAK MAHINDRA (UK) Limited 1 Organisation and Nature of Business The Company s primary focus is investment management, broker dealing and corporate finance. As a broker dealer the Company arranges deals in bonds as well as in depository receipts. The Company is authorised and regulated by the Financial Services Authority ( FSA ) and is a member of the London Stock Exchange ( LSE ). The Company has two branches Dubai (regulated by the Dubai Financial Services Authority) and Singapore (regulated by the Monetary Authority of Singapore). SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 2 Significant Accounting Policies: 2.1 Basis of Preparation The accounts are prepared in accordance with accounting principles generally accepted in India. The Company follows accrual method of accounting. 2.2 Conversion to Indian Rupees For the purpose of accounts, all income and expense items are converted at the average rate of exchange applicable for the period. All assets and liabilities are translated at the closing rate as on the Balance Sheet date. The Share Capital is carried forward at the rate of exchange prevailing on the transaction date. The resulting exchange difference on account of translation at the year end is transferred to Translation Reserve Account and the said account is being treated as Reserves and Surplus. 2.3 Use of estimates The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. 2.4 Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Company, and the revenue can be reliably measured. Commission, fees and other revenue are invoiced and recognised on an accrual basis. Interest income is recognised in the income statement as accrued. Premium or discount is amortised or accreted on debt securities over the maturity period of such investments using effective interest rate method. 2.5 Fixed Assets Fixed assets are stated net of depreciation. Depreciation has been provided on Straight Line Method over an estimated useful life between three and five years. The rates of depreciation are determined after considering the management s estimation of the useful life of the asset. Furniture and Fittings Computer & Software Office Equipment Motor Vehicles Leasehold Improvements 3 years 3 years 5 years 3 years 3 years 2.6 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 stated at cost less other than temporary diminution. Current investments are valued at cost or market value / fair value which ever is lower. 2.7 Leases Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term. 2.8 Cash and cash equivalent For the purposes of the cash flow statement, cash and cash equivalent consists of cash in hand, bank balances and shortterm, deposits with an original maturity of three months or less, net of outstanding bank overdrafts, if any. Annual Report

11 2.9 Taxes Current tax is expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date and any adjustments payable / refund received in respect of previous years. Deferred Tax is recognized, subject to the consideration of prudence in respect of deferred tax assets, on timing differences, being the differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets arising mainly on account of carry forward of losses and unabsorbed depreciation under tax laws are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income against which such deferred tax assets can be realised. Deferred tax assets on account of other timing differences are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares Provisions and Contingencies Provision is recognised when there is a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent Liabilities are not recognized but are disclosed in the notes unless the outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements Employee Share based payments Cash-settled scheme: The cost of cash-settled scheme (stock appreciation rights) is measured initially using intrinsic value method at the grant date taking into account the terms and conditions upon which the instruments were granted. This intrinsic value is amortised on a straight-line basis over the vesting period with a recognition of corresponding liability. This liability is remeasured at each balance sheet date up to and including the settlement date with changes in intrinsic value recognised in the statement of profit and loss under Employee cost. 10 Kotak MAHINDRA (UK) Limited

12 3 3.1 (a) Share capital Share Capital Authorised shares As at 31 March 2013 As at 31 March ,000,000 (Previous year 1,000,000) Ordinary shares of 1 each 1,000,000 1,000,000 Issued, Subscribed and fully Paid up 959,200 (Previous year 959,200) Equity Shares of 1 each 70,078,422 70,078,422 70,078,422 70,078,422 (b) (c') Equity shares Reconciliation of equity share capital As at 31 March 2013 As at 31 March 2013 As at 31 March 2012 As at 31 March 2012 Quantity Quantity Share capital outstanding at the beginning of the year 959,200 70,078, ,200 70,078,422 Issued during the period Share capital outstanding at the end of the year 959,200 70,078, ,200 70,078,422 Terms/rights attached to equity shares The Company has only one class of equity shares having a par value of 1 per share. Each holder of equity shares is entitled to one vote per share. Each share holder is entitled to receive dividend as may be approved by Board/ Annual General Meeting. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. (d) Shares held by holding/ultimate holding company and/or their subsidiaries/associates Out of equity shares issued by the company, shares held by its holding company, ultimate holding company and their subsidiaries/ associates are as below: Number of equity share As at 31 March 2013 As at 31 March 2012 Kotak Mahindra Bank Limited, the holding company 489, ,200 Kotak Mahindra (International) Limited, subsidiary of Kotak Mahindra Bank Limited 470, ,000 (e) Details of shareholders holding more than 5% shares in the company Equity shares of 1 fully paid up Particulars number % holding number % holding Kotak Mahindra Bank Limited, holding company 489, % 489, % Kotak Mahindra (International) Limited, subsidiary of Kotak Mahindra Bank Limited 470, % 470, % Annual Report

13 3.2 Reserve and Surplus a. Translation Reserve Opening Balance 159,424,481 25,636,369 Additions/(deductions) during the period 72,472, ,788,112 Closing Balance 231,897, ,424,481 b. Surplus in the statement of profit and loss Opening balance 847,687, ,868,975 Net Loss For the current year (135,446,646) (12,181,869) Closing Balance 712,240, ,687, ,137,833 1,007,111, Long-term borrowings Unsecured Loans from fellow subsidiary 4,125,117 4,072,035 4,125,117 4,072,035 The long-term borrowing represents a long-term subordinated loan of 4,125,117 (Previous year 4,072,035) from the fellow subsidiary company, Kotak Mahindra (International) Limited. The loan is unsecured, interest-free and constitutes regulatory capital as approved by the Regulatory Authority - FSA. It is repayable upon giving or receiving two years notice to or from the fellow subsidiary company. No such notice had been given or received as at 31st March, Long-term provisions Provision for employee benefits Stock Appreciation Rights (refer note 3.25) 15,583,810 11,346,708 15,583,810 11,346, Other current liabilities Income received in advance - 1,281,204 Annual Incentive 23,999,750 9,157,500 GST Payable 366,645 12,916 Other payable 164,443 81,747 24,530,838 10,533, Short-term Provisions Provision for employee benefits: Provision for gratuity 21,994,247 16,042,477 Provision for Stock Appreciation Rights (refer note 3.25) 16,694,650 8,874,840 Payable to statutory funds 6,162,521 6,526,668 44,851,418 31,443, Kotak MAHINDRA (UK) Limited

14 3.7 Fixed Assets Gross Block Accumulated Depreciation Net Block Balance as at 1st April, 2012 Additions Deduction / Adjustment* Balance as at 31st March, 2013 Balance as at 1st April, 2012 Depreciation charge for the year Deduction / Adjustment* Balance as at 31st March, 2013 Balance as at 31st March, 2013 Balance as at 31st March, 2012 Tangible Assets Computer & Software 29,077,225 15,736,913 1,948,960 46,763,098 24,308,213 7,828,755 1,613,619 33,750,587 13,012,511 4,769,012 Furniture and Fixtures 45,786, ,053 3,068,938 49,613,562 29,178,771 8,588,882 1,938,555 39,706,208 9,907,354 16,607,800 Motor Vehicles 1,049,927 (1,049,927) - 1,049,927 (1,049,927) Office equipment 3,094, , ,407 3,415,869 2,775, , ,713 3,122, , ,836 Leasehold Improvements 2,504, ,889 2,672,692 2,504, ,889 2,672, ,512,904 16,609,050 4,343, ,465,221 59,817,256 16,578,983 2,855,849 79,252,088 23,213,133 21,695,648 Previous Year 59,185,096 13,993,186 8,334,622 81,512,904 43,073,830 10,056,143 6,687,282 59,817,256 21,695,648 * Deduction / adjustments include effect of translation reserve Annual Report

15 3.8 Long Term Loans and Advances Unsecured, considered good a. Capital Advances - 9,525,857 b. Security Deposits 11,458,828 11,942,818 11,458,828 21,468, Trade Receivables Unsecured, considered good Outstanding for a period less than six months from the date they are due for payment 699,458, ,801,545 Considered doubtful 1,357,125 - Less: Provision for doubtful debts (1,357,125) ,458, ,801, Cash and bank balances Cash and cash equivalent Balances with banks: On Current accounts* 588,904, ,495,526 Deposits with original maturity of less than three months 776,820, ,297,364 Other Bank Balances Deposits with residual maturity of less than twelve months 81,427,500-1,447,152,872 1,138,792,890 * Includes client money deposits aggregating to 451,242,903 (previous year 164,917,933) earmarked in a separate bank account held in the name of the Company 3.11 Short-term Loans and Advances Unsecured, considered good Employee Loan 2,018,198 1,324,634 Prepaid expenses 17,164,502 17,707,454 VAT Input Credit 1,416,598 1,740,580 Advance to Suppliers - 2,285 Advance Income tax 11,734,774 9,795,980 Security Deposits 2,078,963 1,484,545 34,413,035 32,055, Other current assets Interest accrued on deposits 2,220,692 1,100,449 Other receivables 255,753 - Receivable from fellow subsidiary - 2,189,597 2,476,445 3,290, Kotak MAHINDRA (UK) Limited

16 3.13 Interest Income 31st March, st March, 2012 Interest income on loans Interest income on deposits with banks 57, ,655 16,059,533 13,904,607 16,116,841 14,690, Other Income 31st March, st March, 2012 Profit on sale of Fixed Assets Miscellaneous income 148, ,779 2,783, ,194 2,783, Employee Cost 31st March, st March, 2012 Salaries, bonus and allowances 465,240, ,134,474 Contribution to statutory funds 25,484,379 22,407,800 Reimbursement of employee stock option expenses 2,383,046 4,918,791 Expenses on stock appreciation rights 29,726,202 19,391,536 Staff welfare expenses 17,815,301 11,627, ,649, ,480, Finance cost 31st March, st March, 2012 Bank Charges Interest on borrowings 1,171, , , ,074 1,828,581 1,530, Other expenses 31st March, st March, 2012 Rent, rates & taxes 32,634,222 26,755,233 Communication expenses 17,294,818 15,758,902 Printing and stationery 2,324,751 2,190,996 Repairs and maintenance 7,887,689 6,079,287 Advertising, business promotion and entertainment 4,866,687 7,235,829 Foreign exchange loss (net) 656,933 - Travel expenses 25,104,973 25,282,790 Insurance 4,374,180 4,156,727 Electricity expenses 461, ,605 Professional and legal fees 110,524, ,067,841 Membership and subscription 10,364,644 4,091,843 Recruitment expenses 845,364 2,207,160 Dealing charges 24,964,725 23,791,052 Auditor s remuneration Audit fees 8,142,473 7,054,975 Miscellaneous expenses 796,400 1,017, ,244, ,300,944 Annual Report

17 3.18 The Company is the subsidiary of Kotak Mahindra Bank Limited (KMBL). The accounts have been prepared and audited to attach with the accounts of KMBL, the holding company to comply with the provisions of the Indian Companies Act, The transactions have been converted into Indian Currency (Indian Rupees) for reporting and the rate applied is as per para 2.2 of the significant accounting policies 3.20 Earnings per equity share Particulars Earnings / (loss) used in the computation of basic and diluted earnings per share (A) (135,446,646) (12,181,869) Weighted average number of equity shares used in computation of basic earnings per share (B) 959, ,200 Nominal value of Equity shares 1 1 Basic and diluted earnings / (loss) per share () A/B (141.21) (12.70) 3.21 Leases The total annual commitments of the Company under non-cancellable operating leases are as under: Land and Building Operating leases which expire : Within one year 25,785,375 23,911,250 Between one to five years 9,771,300 32,560, Contingencies liabilities During the year the Company s banker have issued a guarantee for 87,440,000 (Previous year 80,955,000) in favour of the Monetary Authority of Singapore. No loss is expected on this guarantee at the Balance Sheet date 3.23 The Company has taken advantage of the exemptions in Financial Reporting Standard No. 8 Related party transactions, not to disclose transactions with Kotak Mahindra Bank Limited and other group companies as it is a subsidiary of Kotak Mahindra Bank Limited (see note 3.18) The following amounts are due from directors as at 31st March, Mr. V. Varadarajan 2,341 (Previous Year NIL) Maximum balance due during the year is 93,137 (Previous Year 166,472) Mr. Abhishek Bhalotia 31,895 (Previous Year Nil) Maximum balance due during the year is 65,710 (Previous Year 45,891) Mr. Gijo Joseph 266,611 (Previous Year 242,922) Maximum balance due during the year is (Previous Year 371,013) Mr. Hasan Askari 22,629 (Previous Year 132,247) Maximum balance due during the year is 400,796 (Previous Year 442,784) Mr. Ruchit Puri Nil (Previous Year Nil) Maximum balance due during the year is 2,243 (Previous Year 190,227) 3.24 Stock Option Scheme Kotak Mahindra Bank Limited, the Parent Company of Kotak Mahindra (UK) Limited has formulated and adopted the following Employee Stock Option Schemes (ESOS) in accordance with the SEBI (Employee Stock Option Scheme) Guidelines, 1999 issued by the Securities and Exchange Board of India (SEBI). a) Kotak Mahindra Equity Option Scheme 2005 b) Kotak Mahindra Equity Option Scheme 2007 In accordance with SEBI (Employees Stock Option Scheme and Employee Stock Purchase) Guidelines, 1999 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 share preceding the date of grant of the option under ESOPs over the exercise price of option is amortised on a straightline basis over the vesting period. The Company has reimbursed the Bank 2,383,046 (Previous year 4,918,791) during the year on account of such cost and the same is forming part of employee cost and included under the head Employee Cost. Stock appreciation rights (SARs) During the year, the Management had approved (SARs) to be granted to eligible employees as and when deemed fit. The SARs are to be settled in cash and will vest in the manner as provided in the scheme / grant letters to employees. The contractual life (which is equivalent to the vesting period) of the SARs granted during the year ranges from 0.25 years to 3.38 years 16 Kotak MAHINDRA (UK) Limited

18 Detail of activity under SAR is summarized below: 31st March, 2013 No. of SARs 31st March, 2012 Outstanding at the beginning of the year Granted during the year 154,160 40,730 71, ,850 47,616 20,480 Exercised during the year Lapsed during the year 3,360 16,140 Transferes during the year 4,730 3,200 Outstanding at the end of the year 169, ,160 Effect of share based payment to employees on the profit and loss account and on its financial position Year ended March 31, Employee Compensation Cost pertaining to share-based payment plans 32,109,248 24,310,327 Closing balance of liability for cash-settled options 32,278,460 20,221,548 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 7,707,064 (Previous year higher by 11,254,045) and the loss after tax would have been higher (Previous year higher) by the same amount Previous years figures have been regrouped, reclassified wherever necessary to confirm with figures of the current year. In terms of our report of even date For V. C. Shah & Co. Chartered Accountants For and on Behalf of the Board of Directors A. N. Shah V Varadarajan A. Bhalotia Partner Director Director Mumbai Dated: 25th April, 2013 Dated: 27 April, April, Annual Report

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