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ANNUAL REPORT2012-13

Prudenceand Simplicity

Kotak Mahindra Capital Company Limited

1AnnuAl RepoRt 2012-13

DIRECTORS’ REPORT To the Members of Kotak Mahindra Capital Company Limited The Directors present their Eighteenth Annual Report together with the audited accounts of your Company for the year ended 31st March 2013. FINANCIAL RESULTS

Particulars Year Ended 31st March, 2013

Year ended 31st March 2012

Rupees in millions Rupees in millions

Gross Income 832.6 816.5

Profit before Tax 235.3 94.2

Provision for Tax 68.2 34.8

Profit after Tax 167.1 59.4

Balance of Profit from previous years 4293.9 4234.5

Less: Utilized for buyback of equity shares 1227.4 -

Less: Transferred to Capital Redemption Reserve

6.8 -

Amount available for appropriation 3226.8 4293.9

Appropriations:

Surplus carried forward to the Balance Sheet 3226.8 4293.9

1. DIVIDEND AND BUYBACK OF EQUITY SHARES

The Directors do not recommend any dividend for the year. During the year your Company completed a buyback of equity shares aggregating to Rs. 1234.2 millions constituting 16.52 percentage of the Company’s equity capital. Further during the year Kotak Securities Limited one of our shareholders transferred 310,015 equity shares of our Company to Kotak Mahindra Bank Limited after which your Company has become a 100% subsidiary of Kotak Mahindra Bank Limited.

2 KotaK MaHINDRa CaPItaL CoMPaNY LIMIteD

2. BUSINESS OPERATIONS

A. EQUITIES

The Indian equity capital markets witnessed a modest recovery in FY 2012-13 on the back of three large Government of India disinvestments. The primary markets continued to remain subdued with Rs 267.9 billion being raised across Initial Public Offerings (IPOs), Follow-on Public Offerings (FPO), Institutional Placement Programs (IPP), Qualified Institutional Placements (QIP) and Rights issues while the secondary markets witnessed a fund raise of Rs 280.2 billion through Offers For Sale (OFS), (Source: PRIME Database). KMCC completed sixteen transactions raising a total of Rs. 245.9 billion in FY 2013. The company had a strong year managing a number of marquee transactions that straddled the entire suite of capital market products including four IPOs, seven OFS, three QIPs, one IPP and one Rights issue. (Source: PRIME Database). KMCC dominated the IPO market, managing the four largest IPO issuances to hit the markets during the year. These include: Bharti Infratel, PC Jeweller, CARE Ratings, and Speciality Restaurants. This also reinforced KMCC’s track record of introducing new sectors to India’s capital markets with the first telecom tower company and the first fine dining restaurant chain to get listed in India. The company also performed strongly in follow-on transactions across QIP, IPP and OFS formats. The spread of sectors that we brought to the market ranged from:

Consumer plays like Speciality Restaurants, PC Jeweller, Mahindra Holidays and DB Corp Companies in capital intensive industries such as Bharti Infratel, Gujarat Pipapav Port

and NTPC Financial services companies like Mahindra Finance, CARE Ratings and Cholamandalam

The Equity Deals that were concluded by the Company during the year include:

Bharti Infratel IPO: Rs 41.7 billion PC Jeweller IPO: Rs. 6.0 billion CARE Ratings IPO: Rs. 5.4 billion Speciality Restaurants IPO: Rs 1.8 billion NTPC OFS: Rs 114.7 billion Oil India OFS: Rs 31.4 billion Steel Authority of India OFS – Rs 15.2 billion Hindustan Copper OFS: Rs 8.1 billion DB Corp OFS: Rs 2.5 billion Mahindra Holidays OFS: Rs 0.9 billion Eros International OFS: Rs. 0.5 billion Mahindra & Mahindra Financial Services QIP: Rs. 8.7 billion Cholamandalam QIP: Rs. 3.0 billion Gujarat Pipavav Port QIP: Rs. 2.0 billion Godrej Industries IPP: Rs 3.7 billion EPC Industrié Rights Issue: Rs. 0.4 billion


KMCC was ranked the #1 Book Running Lead Manager for Initial Public Offerings in FY 2013. KMCC was ranked #2 across all Equity Offerings (IPO, FPO, QIP, OFS, IPP, Rights) in FY 2013. (Source: PRIME Database). The Debt Deals (Public Issue of NCDs) that were concluded by the Company during the year include:

Shriram Transport Finance Company: Rs 6.0 billion Religare Finvest: Rs 3.3 billion Rural Electrification Corporation: Rs 20.1 billion Power Finance Corporation: Rs 6.9 billion India Infrastructure Finance Company: Rs 28.8 billion Housing and Urban Development Corporation: Rs 21.9 billion Indian Railway Finance Corporation: Rs 53.7 billion Power Finance Corporation: Rs 1.6 billion Housing and Urban Development Corporation: Rs 2.0 billion Rural Electrification Corporation: Rs 1.3 billion Indian Railway Finance Corporation: Rs 4.2 billion India Infrastructure Finance Company: Rs 2.7 billion National Housing Bank: Rs 1.9 billion Jawaharlal Nehru Port Trust: Rs 0.4 billion

B. M&A, FINANCIAL SPONSORS, INFRASTRUCTURE AND RESTRUCTURING ADVISORY The ongoing Eurozone crisis accompanied by a slowdown in the Indian economy and worsening domestic macroeconomic indicators, adversely impacted M&A activity in India in FY 2013. The M&A market in India during the year saw a total deal value of US$ 36.26 billion across 828 deals as against US$ 43.09 billion across 950 deals in the previous year. (Source: Bloomberg) A moderation in India’s growth rate coupled with other factors led to a slowdown in inbound deals. The United States, United Kingdom and Japan were the top 3 countries to make acquisitions in India. With respect to outbound deals, while Indian companies continue to intently look at international markets for strategic acquisitions, global economic headwinds resulted in the mood remaining cautious through the year. Investments by private equity funds, on the other hand, continued to grow. During the year, KMCC advised on a wide array of nineteen transactions ranging from Acquisitions & India Entry, Divestments, Internal Restructurings, Private Equity investments and Open Offers/ Delistings (select transaction details below). KMCC entered into an exclusive strategic alliance for cross-border M&A advisory services between India and Japan with Sumitomo Mitsui Banking Corporation (“SMBC”) and SMBC Nikko Securities Inc. (“SMBC Nikko”), a wholly-owned subsidiary of SMBC. SMBC is the core financial institution of Sumitomo Mitsui Financial Group, the second largest financial services group in terms of market capitalization in Japan while SMBC Nikko is one of the largest full-service securities and investment banking firms in Japan. The India-Japan corridor is among the most important and active markets for cross-border M&A involving India. In 2010, Kotak and SMBC had entered into a Memorandum of Understanding (MoU) for Business Cooperation across various businesses of mutual interest, subject to relevant regulations and the investment banking alliance completes a holistic bouquet of offerings, serving corporates in India and Japan for India-Japan flows and


deals. Kotak Investment Banking and GCA Savvian Corporation have mutually concluded their exclusive strategic cooperation agreement for M&A Advisory Services between India and Japan. The Advisory deals that were announced/ concluded by the Company during the year include:

Divestment of controlling stake in Apollo Health Street Limited to Sutherland Global Services Limited

Divestment of 74% stake in GMR Jadcherla Expressways Limited by GMR Highways Limited to Macquarie SBI Infrastructure Fund – US$ 36.3 million

Acquisition of Hutchison Global Services by Tech Mahindra – US$ 87.1 million Acquisition of significant minority stake in Arch Pharmalabs Limited by Mitsui & Co.,

Ltd., Japan – US$ 68.3 million Strategic Alliance Agreement between Essar Ports Limited and Port of Antwerp

International and placement of Global Depository Receipts – US$ 31.0 million Private equity investment in TVS Logistics Limited by Kohlberg Kravis Roberts & Co. L.P.

(KKR) and Goldman Sachs – US$ 51.6 million Private equity investment in Super Religare Laboratories by Jacob Ballas and

International Finance Corporation (IFC) – US$ 66.2 million Private equity investment in Trivitron Healthcare led by Fidelity Growth Partners Preferential allotment of equity shares by Marico to GIC and Baring India Private Equity

– US$ 96.3 million Delisting Offer for Patni Computer Systems Limited – US$ 223.0 million Delisting Offer for Indo Tech Transformers Limited Merger of Hero Investments Private Limited with Hero MotoCorp Limited Merger of Suzuki Powertrain India Limited with Maruti Suzuki India Limited – US$ 269.1

million Merger of Shriram Retail Holdings Pvt. Ltd. & Shriram Enterprise Holdings Pvt. Ltd. with

Shriram City Union Finance Limited Advisor to the Promoter Group for the Demerger of non-IT business from Wipro Limited Open Offer for Capital First Limited by Warburg Pincus – US$ 46.2 million Open Offer for Shree Digvijay Cement Co. Ltd. by Votorantim Cimentos S.A. – US$ 25.3

million Open Offer for Sunshield Chemicals Limited by Solvay S.A. – US$ 1.8 million Advisor to the committee of Independent Directors for the Open Offer for GSK

Consumer Limited – US$ 864.2 million

In the M&A league tables, KMCC was ranked #4 by volume of deals and #12 by value of deals in FY 2013 (Source: Bloomberg)

3. Awards and Recognitions

During the year, KMCC received many prestigious industry awards: 1) Best Investment Bank in India by FinanceAsia – 2012 2) Best Equity House in India by FinanceAsia – 2012 3) Dealmaker of the year for Qualified Institutional Placements in the Businessworld

Awards - India’s Best Dealmakers 2012 4) Deal of the year for the M&M Financial Services QIP in the Businessworld Awards -

India’s Best Dealmakers 2012 5) Securities Advisory Firm of the Year in India, Corporate INTL Global Awards 2012


6) Investment Bank of the Year in India, ACQ Global Awards 2012 7) Best Domestic Investment Bank by Asset Asian Awards 2012

4. 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.

5. DIRECTORS

Mr. Ramesh Srinivasan and Ms Shanti Ekambaram retire at the ensuing Eighteenth Annual General Meeting and are eligible for re-appointment. Mr. T.V. Raghunath was appointed as Managing Director & CEO of the Company with effect from July 1, 2012 and Mr. Ramesh Srinivasan was appointed as Joint Managing Director also effective July 1, 2012. Mr. Ramesh Srinivasan has resigned as Joint Managing Director effective April 2, 2013. However Mr. Ramesh Srinivasan would continue as non executive director on the board of the Company.

6. 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

7. AUDITOR

The statutory auditors Messrs. Deloitte Haskins & Sells, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for reappointment. 8. 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 2013.

Your Company’s foreign exchange income was Rs. 15.99 crores while the outgo was Rs. 0.97 crore. 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.

9. 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:


Your Company has, in the preparation of the annual accounts for the year ended 31st March 2013, followed the applicable accounting standards along with proper explanations relating to material departures, if any;

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 2013 and of profit / loss of the Company for the financial year ended 31st March 2013;

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

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

10. ACKNOWLEDGEMENTS

Your Directors would like to place on record their gratitude for the valuable support received from Securities and Exchange Board of India and Reserve Bank 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 SD/-

Uday Kotak Chairman

Mumbai April 24, 2013


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF KOTAK MAHINDRA CAPITAL COMPANY LIMITED Report on the Financial Statements We have audited the accompanying financial statements of KOTAK MAHINDRA CAPITAL COMPANY LIMITED (“the Company”) which comprise the Balance Sheet as at 31st March, 2013, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements The Company’s 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 Section 211(3C) of the Companies Act, 1956 (“the Act”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditors’ 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 the 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 the 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 but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the 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 aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2013;

(b) in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on

that date; and


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

Managerial Remuneration We draw attention to Note 35 to the financial statements relating to aggregate managerial remuneration of Rs. 308.12 lakhs being in accordance with the provisions of Schedule XIII of the Companies Act, 1956 based on a legal opinion obtained and relied upon by the management. Our opinion is not qualified in respect of this matter. Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2003 (“the Order”) issued by the Central Government in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

(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, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act; and

(e) On the basis of the written representations received from the directors as on 31st March, 2013 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2013 from being appointed as a director in terms of Section 274(1)(g) of the Act.

For DELOITTE HASKINS & SELLS Chartered Accountants

(Firm Registration No. 117366W)

R. Laxminarayan Partner

(Membership No. 33023)

MUMBAI, 24th April, 2013


ANNEXURE TO THE AUDITORS’ REPORT (Referred to in paragraph under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date on the accounts for the year ended 31st March, 2013 of Kotak Mahindra Capital Company Limited (“the Company”) (i) Having regard to the nature of the Company’s activities, clauses (ii), (viii), and (xiii) of the

Order 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)

According to the information and explanations given to us 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 a 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, 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 Provident Fund, Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31st March, 2013 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, 2013 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

139.98

Service Tax Tax, Interest and Penalty

Commissioner of Central Excise

2006-07 to 2010-11

7.90

(ix) The company has no accumulated losses as at 31st March, 2013 and has not incurred any cash loss during the financial year ended on that date and in the immediately preceding financial year.

(x) According to the information and explanations given to us, there were no dues payable by the Company to financial institutions, banks and debenture holders during the year. Therefore, the provisions of paragraph 4 (xi) of the Order are not applicable to the Company.

(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) According to the information and explanations given to us, the company has not entered into transactions and contracts in respect of its dealing or trading in shares, securities, debentures and other investments during the year. Hence, clause (xiv) of Para 4 of the Order is not applicable to the Company for the year.

(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 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 Order is not applicable to the Company.

(xvii) To the best of our knowledge and belief and according to the information and explanations given to us, the Company has not issued debentures during the year. Hence clause (xix) of paragraph 4 of the Order is not applicable to the Company.

(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 material fraud on the Company was noticed or reported during the year.

For DELOITTE HASKINS & SELLS Chartered Accountants

(Firm Registration No. 117366W)

R. Laxminarayan Partner

(Membership No. 33023)

MUMBAI, 24th April, 2013


KOTAK MAHINDRA CAPITAL COMPANY LIMITEDBalance Sheet as at 31st March, 2013

As at 31 March, 2013 As at 31 March, 2012` in lakhs ` in lakhs

A EQUITY AND LIABILITIES

1 Shareholders’ funds(a) Share capital 3 343.61 411.61 (b) Reserves and surplus 4 38,514.20 49,116.85

38,857.81 49,528.46

2 Non-current liabilitiesLong-term provisions 5 751.60 652.75

751.60 652.75

3 Current liabilities(a) Trade payables 6 638.08 2,723.17 (b) Other current liabilities 7 512.52 786.96 (c) Short-term provisions 8 573.99 506.61

1,724.59 4,016.74

TOTAL 41,334.00 54,197.95

B ASSETS

1 Non-current assets(a) Fixed assets 9

(i) Tangible assets 1,822.42 1,862.94 (ii) Intangible assets 12.73 8.79

1,835.15 1,871.73

(b) Non-current investments 10 30,685.61 32,376.62 (c) Deferred tax assets (net) 31 158.00 204.23 (d) Long-term loans and advances 11 1,113.83 1,391.07 (e) Other non current assets 12 - 9,523.00

33,792.59 45,366.65 2 Current assets

(a) Current investments 13 3,723.86 3,960.33 (b) Trade receivables 14 988.03 4,453.99 (c) Cash and bank balances 15 2,711.70 165.55 (d) Short-term loans and advances 16 104.63 169.74 (e) Other current assets 17 13.19 81.69

7,541.41 8,831.30

TOTAL 41,334.00 54,197.95

In terms of our report attached. For Deloitte Haskins and Sells For and on behalf of the Board of Directors Chartered Accountants

R. Laxminarayan Uday Kotak T V RaghunathPartner Chairman Managing Director

Rajeev Saptarshi Ajay VaidyaChief Financial Officer Company Secretary

Place : Mumbai Place : MumbaiDate : 24 April, 2013 Date : 24 April, 2013

Particulars

See accompanying notes forming part of the financial statements

Note No.


KOTAK MAHINDRA CAPITAL COMPANY LIMITEDStatement of Profit and Loss for the year ended 31 March, 2013

Note No. For the year ended 31 March, 2013

For the previous year ended

31 March, 2012

` in lakhs ` in lakhs

1 Revenue from operations (net) 18 6,230.87 5,961.04

2 Other income 19 2,095.48 2,203.95

3 Total revenue (1+2) 8,326.35 8,164.99

4 Expenses(a) Employee benefits expense 20 3,846.90 4,900.23 (b) Finance costs 21 13.91 4.73 (c) Depreciation and amortisation expense 9 160.98 170.82 (d) Other expenses 22 1,951.82 2,146.91

Total expenses 5,973.61 7,222.69

5 Profit before tax (3 - 4) 2,352.74 942.30

6 Tax expense:(a) Current tax 674.00 491.00 (b) Deferred tax expense / (credit) 46.23 (116.64)(c) Excess provision for tax relating to prior years (net) (38.84) (25.87)

681.39 348.49

7 Profit for the year (5 - 6) 1,671.35 593.81

8 Earnings per share (Face value of ` 10/- each):(a) Basic 30 41.47 14.43 (b) Diluted 30 41.47 14.43

See accompanying notes forming part of the financial statements

In terms of our report attached. For Deloitte Haskins and Sells For and on behalf of the Board of Directors Chartered Accountants


Rajeev Saptarshi Ajay VaidyaChief Financial Officer Company Secretary


Particulars


KOTAK MAHINDRA CAPITAL COMPANY LIMITEDCash Flow Statement for the year ended 31 March, 2013

` in lakhs ` in lakhs ` in lakhs ` in lakhsA. Cash flow from operating activitiesNet Profit before extraordinary items and tax 2,352.74 942.30 Adjustments for:

Depreciation and amortisation 160.98 170.82Dimunition in value of non-current Investments 9.85 109.55 (Profit) / Loss on sale of current investments (31.83) 35.56(Profit) / Loss on sale of non-current investments (189.20) (85.23)Interest received on bank deposits (1,326.10) (1,542.15)Interest income from debentures (1.07) (0.02)Discounting income on commercial papers - (5.76)Dividend received from current investments (1.52) - Dividend received from non trade, non current investments (51.82) (33.45)Interest received on income tax refund (39.07) (36.04)Interest paid on delayed payment of taxes 13.91 4.73 Income distribution from Venture Funds (34.66) (13.09)(Profit) / loss on sale of fixed assets (10.01) (7.95)

(1,500.54) (1,403.03)Operating profit / (loss) before working capital changes 852.20 (460.73) Changes in working capital:

Adjustments for (increase) / decrease in operating assets:Trade receivables 3,465.96 (1,270.59)Loans and advances 239.75 (33.97)Other current assets 68.50 34.66

Adjustments for increase / (decrease) in operating liabilities:Trade payables (2,085.09) 1,698.56Other long term and current liabilities (274.44) 165.47Short-term / Long term provisions 149.29 239.51

1,563.97 833.64Cash generated from operations 2,416.17 372.91

(475.55) (772.83)

Net cash flow from / (used in) operating activities (A) 1,940.62 (399.92)

B. Cash flow from investing activities(146.99) (69.27)

Proceeds from sale of fixed assets 31.60 39.91

Purchase of current investments (962.52) (3,960.33)Purchase of non-current investments (2,500.00) (3,810.79)Proceeds from sale of current investments 4,954.68Proceeds from sale of non-current investments 646.50 1,259.37Interest received on bank deposits 1,326.10 1,542.15Interest income from debentures 1.07 0.02Discounting income on commercial papers - 5.76 Income distribution from Venture Funds 34.66 13.09Dividend received from current investments 1.52 - Dividend received from non trade, non current investments 51.82 33.45

Net cash flow from / (used in) investing activities (B) 11,040.44 99.66

C. Cash flow from financing activitiesBuyback of Equity Shares (12,342.00)Interest paid on delayed payment of taxes (13.91)

Net cash flow from / (used in) financing activities (C) (12,355.91) -

Net increase / (decrease) in Cash and cash equivalents (A+B+C) 625.15 (300.26) Cash and cash equivalents at the beginning of the year 165.55 465.81Cash and cash equivalents at the end of the year 790.70 165.55

Capital expenditure on fixed assets

Bank deposits placed during the year not considered as cash & cashequivalents (12,044.00) (22,538.00)Bank deposits matured during the year not considered as cash & cashequivalents 19,646.00 27,584.30

Particulars For the year ended 31 March, 2013

For the previous year ended 31 March, 2012

Net income tax (paid) / refunds


Notes:

1 Reconciliation of Cash and cash equivalents with the Balance Sheet:

Cash and cash balances as per Balance Sheet (Refer Note 15) 2,711.70 165.55 1,921.00 -

Cash and cash equivalents at the end of the year * 790.70 165.55

* comprises:(a) Cheques on hand - 149.95 (b) Balances with banks in current accounts 790.70 15.60

Total 790.70 165.55

2

3

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

In terms of our report attached

For Deloitte Haskins and Sells For and on behalf of the Board of DirectorsChartered Accountants


Rajeev Saptarshi Ajay Vaidya Chief Financial Officer Company Secretary


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

Net profit before tax and (Increase) / Decrease in debtors includes unrealized foreign exchange loss amounting to ` 15.55 lakhs(Previous year foreign exchange gain of ` 1.69 lakhs)

Less: Bank deposits with original maturity of more than 3 monthsnot considered as Cash and Cash equivalents as defined in AS 3Cash Flow Statements


KOTAK MAHINDRA CAPITAL COMPANY LIMITEDNotes forming part of the financial statements

1 CORPORATE INFORMATION

Kotak Mahindra Capital Company Limited (the company) is a Category I Merchant banker registered with SEBI. It operates as a full – serviceInvestment bank and is also a trading cum clearing member of the National Stock Exchange of India on all three segments viz. Cash, Futures& Options and Wholesale Debt Market.

2 SIGNIFICANT ACCOUNTING POLICIES

2.1 BASIS OF ACCOUNTING

2.2 REVENUE RECOGNITIONRevenue 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) Interest income is accounted on accrual basis.(iii) Dividend income is accounted when the right to receive is established.

2.3 TANGIBLE AND INTANGIBLE ASSETS, DEPRECIATION AND AMORTISATION

Buildings - 58 yearsComputers - 3 yearsFurniture and Fixtures - 6 yearsVehicles - 4 yearsOffice Equipment - 5 yearsComputer Software - 3 yearsLeasehold improvements - Over the primary period of lease subject to a maximum of 6 yearsFixed assets costing less than Rs. 5,000 are fully depreciated in the year of purchase.

2.4 IMPAIRMENT OF ASSETS

2.5 INVESTMENTS

Investments are classified into non current investments and current investments.

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 ofexchange prevalent at the time of acquisition thereof.

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

The Financial Statements have been prepared on historical cost basis of accounting. The company adopts the accrual system of accountingand the financial statements conform to the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, theGenerally 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 ofassets and liabilities (including contingent liabilities) as on the date of the financial statements and the reported income and expenses duringthe 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.

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

The carrying values of assets at each Balance Sheet date are reviewed for impairment. If any indication of impairment exists, the recoverableamount of such assets is estimated and impairment is recognised, if the carrying amount of these assets exceeds their recoverable amount.

The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cashflows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an assetin earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profitand Loss, except in case of revalued assets.

Investments, which are intended to be held for more than one year, are classified as non current investments and investments, which areintended to be held for less than one year, are classified as current investments. Non current investments are accounted at cost and anydecline in the value, other than temporary is provided for.


2.6 STOCK IN TRADE

2.7 CASH FLOW STATEMENT

Cash Flows are reported using indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of

non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing

activities of the Company are segregated based on the available information.

2.8 FOREIGN CURRENCY TRANSACTIONS

2.9 TAXES ON INCOME

2.10 EMPLOYEE BENEFITS

Defined contribution plan

Defined benefit plan

Actuarial gains/losses are immediately recognised in the Statement of Profit and Loss.

Other Long – term Employee Benefits

Other Employee Benefits

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.

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.

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.

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.

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.

(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 Statement

of Profit and Loss.

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 the Statement of Profit and Loss

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.

The contribution as required by the statute made to Government Provident Fund is debited to the Statement of Profit and Loss.


Stock Appreciation Rights

2.11 BORROWING COSTS

2.12 PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETS

2.13 OPERATING LEASES

2.14 SEGMENT REPORTING

(a) Segment assets and liabilities:All Segment assets and liabilities are directly attributable to the segment.

(b) Segment revenue and expenses:

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

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

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

The cost of cash-settled scheme (stock appreciation rights) is measured initially using intrinsic value method at the grant date taking intoaccount the terms and conditions upon which the instruments were granted. This intrinsic value is amortised on a straight-line basis over thevesting period with a recognition of corresponding liability. This liability is remeasured at each balance sheet date up to and including thesettlement date with changes in intrinsic value recognised in the Statement of Profit and Loss in ‘Employee benefits expense’.

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

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 requiredto settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and aredetermined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet dateand adjusted to reflect the current best estimates. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent assetsare neither recognised nor disclosed in the financial statements.



3 Share capital

Particulars Number of

shares ` in lakhs Number of shares ` in lakhs

(a) AuthorisedEquity shares of ` 10 each 10,000,000 1,000.00 10,000,000 1,000.00

(b) Issued, Subscribed and Paid upEquity shares of ` 10 each fully paid 3,436,149 343.61 4,116,149 411.61

Total 3,436,149 343.61 4,116,149 411.61

Rights, preferences and restrictions attached to equity shares :(i) Right to receive dividend as may be approved by the Board / Annual General Meeting.

Number ` in lakhs Number ` in lakhsShares outstanding at the beginning of the year 4,116,149 411.61 4,116,149 411.61 Add : Shares issued during the year - - - - Less : Shares bought back during the year 680,000 68.00 - - Shares outstanding at the end of the year 3,436,149 343.61 4,116,149 411.61

As at 31 March, 2013


Kotak Mahindra Bank Limited, the holding company 3,436,149 3,126,134 Kotak Securities Limited, a subsidiary of the holding company - 990,015

Number of shares held

% of holding Number of shares held

% of holding

Kotak Mahindra Bank Limited 3,436,149 100.00 3,126,134 75.95 Kotak Securities Limited - - 990,015 24.05






Equity shares of ` 10 each 680,000 - - -

Aggregate number and class of shares allotted as fully paid up for consideration other than cash for a period of 5 years immediately precedingthe Balance Sheet date: Nil equity shares (Previous year 156,129 equity shares – allotted as fully paid – up pursuant to the Scheme of Arrangement approved by the Bombay HighCourt during the financial year 2007-08)

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

As at 31 March, 2013 As at 31 March, 2012 Particulars

(ii) The equity shares are not repayable except in the case of a buy back, reduction of capital or winding up in terms of the provisions of the Companies Act,1956.(iii) Every member of the company holding equity shares has a right to attend the General Meeting of the company and has a right to speak and on a showof hands, has one vote if he is present in person and on a poll shall have the right to vote in proportion to his share of the paid-up capital of the company.

Details of shares held by the holding company, the ultimate holding company including shares held by subsidaries or associates of the holdingcompany or the ultimate holding company, together with their nominees, in aggregate :

Reconciliation of the number of shares and amount outstanding at the beginning and at the end of the reporting period:

Particulars Aggregate number of shares

Particulars

Details of shares held by each shareholder, together with their nominees, holding more than 5% shares:

Name of shareholder As at 31 March, 2013

Aggregate number and class of shares bought back for a period of 5 years immediately preceding the Balance Sheet date:


Number of Equity shares


Notes forming part of the financial statements


6,177.89 6,177.89 Closing balance 6,177.89 6,177.89

- - 68.00 -

Closing balance 68.00 -

42,938.96 42,345.15 1,671.35 593.81

Less: Utilized for buyback of equity shares (12,274.00) - Less: Transferred to Capital Redemption Reserve (68.00) - Closing balance 32,268.31 42,938.96

38,514.20 49,116.85


220.26 247.06 191.93 191.03

339.41 214.66

Total 751.60 652.75

6 Trade payables


638.08 2,723.17

Total 638.08 2,723.17


Other payables:226.18 457.66 100.00 100.00

- 1.00 (iv) Liabilities towards employees 185.79 227.73

0.55 0.57

Total 512.52 786.96


34.55 52.32 40.02 60.71 269.67 180.77

229.75 212.81

573.99 506.61

KOTAK MAHINDRA CAPITAL COMPANY LIMITED

4 Reserves and surplus

Particulars

Total

(c) Surplus in Statement of Profit and Loss Opening balanceAdd: Net Profit for the year

(a) Securities premium accountOpening balance

(b) Capital Redemption ReserveOpening balanceAdd: Transfered from Surplus in Statement of Profit and Loss

(ii) Provision for gratuity (Refer Note 26)(iii) Provision for other employee benefits - Stock Appreciation Rights

5 Long-term provisions

Particulars

Provision for employee benefits: (i) Provision for compensated absences

Particulars

Particulars

7 Other current liabilities

Trade payables (Other than outstanding dues to Micro, medium and smallenterprises) (Refer Note 34)

Particulars

8 Short-term provisions

(a) Provision for employee benefits:(i) Provision for compensated absences

(i) Statutory dues (Contributions to PF, TDS, Service Tax, etc.) (ii) Security deposits received(iii) Advances from customers

(iv) Others

Total

(ii) Provision for gratuity (Refer Note 26)(iii) Provision for other employee benefits - Stock Appreciation Rights

(b) Provision for tax (net of advance tax ` 960.41 lakhs (As at 31 March, 2012 ` 956.81 lakhs)


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10 Non-current investments

Face Value Quantity Amount Quantity Amount

` ` in lakhs ` in lakhsNon trade investments (Fully paid, at cost)(a) Investment in equity instruments (Unquoted)

(i) of associatesKotak Mahindra (International) Limited US$ 1 2,000,000 718.00 2,000,000 718.00 Kotak Mahindra Inc US$ 0.01 750,000 343.78 750,000 343.78 Kotak Investment Advisors Limited 10 2,250,070 226.01 2,250,070 226.01 Kotak Securities Limited 10 400,010 12,300.00 400,010 12,300.00 Infina Finance Private Limited 10 1,100,240 110.02 1,100,240 110.02

(ii) of Joint VentureKotak Mahindra Old Mutual Life Insurance Limited 10 63,366,753 6,336.68 63,366,753 6,336.68

(iii) of other entities9X Media Private Limited 10 128,400 12.84 128,400 12.84 National Stock Exchange of India Limited 10 51,334 1,509.22 51,334 1,509.22

(b) Investment in preference shares (Unquoted)Kotak Mahindra Prime Limited 10 500,000 5,000.00 500,000 5,000.00

(c) Investment in debentures or bonds (Unquoted) Kotak Forex Brokerage Limited 500,000 2 10.00 2 10.00

(d) Investment in mutual funds (Quoted)Kotak Mahindra Mutual Fund - FMP Series 84 Growth 10 - - 30,000,000 3,000.00 Kotak Mahindra Mutual Fund - FMP Series 100 Growth 10 25,000,000 2,500.00 - -

(e) Investment in Venture Capital Funds (Unquoted)Kotak India Growth Fund 1,000 - - 40,942.73 398.83 Kotak India Real Estate Fund 100,000 - - 480.23 480.23 Kotak Alternate Opportunities (India) Fund * 1,548.26 1,749.65

(f) Investment in equity instruments (Quoted)KPR Mills Limited 10 130,925 70.80 537,934 290.91 Zee Entertainment Enterprises Ltd 1 - - 3,616 -

30,685.61 32,486.17 Less: Provision for diminution in value of investments - 109.55

Total 30,685.61 32,376.62 Aggregate value of quoted investments 2,570.80 3,290.91 Aggregate market value of quoted investments 2,639.24 3,461.82 Aggregate value of unquoted investments 28,114.81 29,085.71

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

Particulars As at 31 March, 2013 As at 31 March, 2012



10 Non-current investments

Face Value Quantity Amount Quantity Amount

` ` in lakhs ` in lakhsNon trade investments (Fully paid, at cost)(a) Investment in equity instruments (Unquoted)

(i) of associatesKotak Mahindra (International) Limited US$ 1 2,000,000 718.00 2,000,000 718.00 Kotak Mahindra Inc US$ 0.01 750,000 343.78 750,000 343.78 Kotak Investment Advisors Limited 10 2,250,070 226.01 2,250,070 226.01 Kotak Securities Limited 10 400,010 12,300.00 400,010 12,300.00 Infina Finance Private Limited 10 1,100,240 110.02 1,100,240 110.02

(ii) of Joint VentureKotak Mahindra Old Mutual Life Insurance Limited 10 63,366,753 6,336.68 63,366,753 6,336.68

(iii) of other entities9X Media Private Limited 10 128,400 12.84 128,400 12.84 National Stock Exchange of India Limited 10 51,334 1,509.22 51,334 1,509.22

(b) Investment in preference shares (Unquoted)Kotak Mahindra Prime Limited 10 500,000 5,000.00 500,000 5,000.00

(c) Investment in debentures or bonds (Unquoted) Kotak Forex Brokerage Limited 500,000 2 10.00 2 10.00

(d) Investment in mutual funds (Quoted)Kotak Mahindra Mutual Fund - FMP Series 84 Growth 10 - - 30,000,000 3,000.00 Kotak Mahindra Mutual Fund - FMP Series 100 Growth 10 25,000,000 2,500.00 - -

(e) Investment in Venture Capital Funds (Unquoted)Kotak India Growth Fund 1,000 - - 40,942.73 398.83 Kotak India Real Estate Fund 100,000 - - 480.23 480.23 Kotak Alternate Opportunities (India) Fund * 1,548.26 1,749.65

(f) Investment in equity instruments (Quoted)KPR Mills Limited 10 130,925 70.80 537,934 290.91 Zee Entertainment Enterprises Ltd 1 - - 3,616 -

30,685.61 32,486.17 Less: Provision for diminution in value of investments - 109.55

Total 30,685.61 32,376.62 Aggregate value of quoted investments 2,570.80 3,290.91 Aggregate market value of quoted investments 2,639.24 3,461.82 Aggregate value of unquoted investments 28,114.81 29,085.71

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

Particulars As at 31 March, 2013 As at 31 March, 2012



(a) Capital advances 1.00 -

(b) Security deposits 204.20 377.92

(c) Prepaid expenses 0.53 1.45

(d) Advance income tax (net of provisions ` 4,005.10 lakhs (As at 31 March, 2012 ` 3,350.81 lakhs)

908.10 1,011.70

Total 1,113.83 1,391.07


Balances with banks in deposit accounts with a residual maturity of more than 12 months

- 9,523.00

Total - 9,523.00

13 Current investments (Non trade, fully paid at cost or fair value which ever is lower)


(a) Investment in Commercial papers (Unquoted)Nil (As at 31 March, 2012: 800) units of ` 500,000 each in Kotak Mahindra Investments Limited - 3,960.33

(b) Investment in mutual funds (Quoted)30,000,000 units of ` 10 each of Kotak Mahindra Mutual Fund - FMP Series 84 Growth (Non current as at 31 March, 2012) 3,000.00 -

(c) Investment in Venture Capital Funds (Unquoted)37,945.78 units of ` 1,000 each of Kotak India Growth Fund (Non current as at 31 March, 2012) 306.58 - 473.40 units of ` 100,000 each of Kotak India Real Estate Fund (Non current as at 31 March, 2012) 417.28 -

Total 3,723.86 3,960.33 Aggregate amount of quoted investments 3,000.00 - Aggregate market value of quoted investments 3,298.59 - Aggregate amount of unquoted investments 723.86 3,960.33

Particulars As at 31 March, 2013 As at 31 March, 2012` in lakhs ` in lakhs

(a) Trade receivables outstanding for a period exceeding six months from the date they were due for payment (unsecured, considered doubtful)

41.86 175.70

Less: Provision for doubtful trade receivables 41.86 175.70 - -

(b) Other Trade receivables (Unsecured, considered good) 988.03 4,453.99

Total 988.03 4,453.99

14 Trade receivables


Particulars

11 Long-term loans and advances (Unsecured, considered good)

Particulars

12 Other Non Current Assets

Particulars




(a) Cash and cash equivalents(i) Balances with banks on current accounts 790.70 15.60 (ii) Cheques on hand - 149.95

790.70 165.55

(b) Other bank balances (Refer note below)Deposits with residual maturity of less than 12 months 1,921.00 -

Total 2,711.70 165.55 Notes:


(a) Loans and advances to related parties (Refer Note 28)

0.30 24.51

(b) Security deposits 37.00 17.88 (c) Loans and advances to employees 5.62 3.15 (d) Prepaid expenses 48.39 60.29 (e) Balances with government authorities

(i) Service Tax credit receivable 11.05 25.90 (ii) Income Tax Refund receivable - 34.70

(f) Other receivables - advances to suppliers, etc 2.27 3.31

Total 104.63 169.74

17 Other current assets


(a) Interest accrued on deposits 12.20 75.90 (b) Interest accrued on investments 0.99 5.79

Total 13.19 81.69

15 Cash and Bank Balances

Particulars

(ii) Other bank balances include deposits amounting to ` 1,921.00 lakhs which have an original maturity of more than 12 months

(i) Other bank balances include margin money ` 50.00 lakhs (As at 31 March, 2012 Nil) under lien of National Securities Clearing Corporation Limited

Particulars

16 Short-term loans and advances (Unsecured, considered good)

Particulars




(a) Cash and cash equivalents(i) Balances with banks on current accounts 790.70 15.60 (ii) Cheques on hand - 149.95

790.70 165.55

(b) Other bank balances (Refer note below)Deposits with residual maturity of less than 12 months 1,921.00 -

Total 2,711.70 165.55 Notes:


(a) Loans and advances to related parties (Refer Note 28)

0.30 24.51

(b) Security deposits 37.00 17.88 (c) Loans and advances to employees 5.62 3.15 (d) Prepaid expenses 48.39 60.29 (e) Balances with government authorities

(i) Service Tax credit receivable 11.05 25.90 (ii) Income Tax Refund receivable - 34.70

(f) Other receivables - advances to suppliers, etc 2.27 3.31

Total 104.63 169.74

17 Other current assets


(a) Interest accrued on deposits 12.20 75.90 (b) Interest accrued on investments 0.99 5.79

Total 13.19 81.69

15 Cash and Bank Balances

Particulars

(ii) Other bank balances include deposits amounting to ` 1,921.00 lakhs which have an original maturity of more than 12 months

(i) Other bank balances include margin money ` 50.00 lakhs (As at 31 March, 2012 Nil) under lien of National Securities Clearing Corporation Limited

Particulars

16 Short-term loans and advances (Unsecured, considered good)

Particulars


18 Revenue from operations

For the year ended 31 March, 2013


31 March, 2012` in lakhs ` in lakhs

Sale of services :

(ii) Financial advisory fees (Refer Note 37) 3,935.46 4,581.68 Total 6,230.87 5,961.04

19 Other income




(a) Interest income (Refer Note (i) below) 1,366.24 1,583.97 (b) Dividend income:

from non trade, current investments 1.52 - from non trade, non current investments 51.82 33.45

(c) Net gain on sale of: current investments 31.83 - non current investments 189.20 85.23

(d) Net gain on foreign currency transactions and translation (other than finance cost)

- 13.62

(e) Other non-operating income (Refer Note (ii) below) 454.87 487.68

Total 2,095.48 2,203.95

Notes For the year ended 31 March, 2013



(i) Interest income comprises:Interest from bank deposits 1,326.10 1,542.15 Interest income from debentures 1.07 0.02 Interest on income tax refund 39.07 36.04 Discounting income on commercial paper - 5.76

1,366.24 1,583.97

(ii) Other non-operating income comprises:Rental income from operating leases 244.18 237.75 Profit on sale of fixed assets 10.01 7.95 Provision for doubtful debts no longer required written back 153.68 32.09 Service Income - 162.78 Income distribution on Venture Fund Investments (Net) 34.66 13.09 Miscellaneous income 12.34 34.02

454.87 487.68

Particulars

(i) Issue management and placement fees and underwriting commission (Refer Note 37) 2,295.41 1,379.36



20 Employee benefits expense




Salaries and wages 3,918.04 4,807.55 Contributions to provident and other funds 196.54 212.86 Expense on employee stock option (ESOP) scheme (Refer Note 33) 62.28 101.94 Gratuity (Refer Note 26) 18.91 72.57 Staff welfare expenses 12.76 28.70 Less : Recovery of Expenses (Refer Note 38) (361.63) (323.39)

Total 3,846.90 4,900.23

21 Finance costs




Interest on delayed / deferred payment of taxes 13.91 4.73

Total 13.91 4.73


Particulars

Particulars



22 Other expenses




Electricity 60.56 35.36 Rent including lease rentals (Refer Note 29) 430.49 422.92 Repairs and maintenance - Others 48.24 64.89 Insurance 21.44 19.58 Rates and taxes 28.21 5.98 Communication 105.50 70.11 Travelling and conveyance 262.71 272.22 Printing and stationery 35.95 34.12 Donations and contributions 2.00 0.75 Legal and professional 148.34 94.39 Payments to auditors (Refer Note below) 11.60 11.70 Bad trade and other receivables, loans and advances written off 53.25 70.81 Net loss on foreign currency transactions and translation 6.43 - Net loss on sale of current investments - 35.56 Provision for doubtful trade receivables 19.83 175.36 Dimunition in value of current investments 9.85 109.55 Office Expenses 194.57 177.60 Advertisement Expenses 19.76 23.50 Common establishment expenses 502.00 546.43 Miscellaneous expenses 73.42 73.13 Less : Recovery of Expenses (Refer Note 38) (82.33) (97.05)

Total 1,951.82 2,146.91




Payments to auditors comprises (net of service tax input credit):As auditors - statutory audit 11.00 11.00 For other services - certification work 0.60 0.70

Total 11.60 11.70


Note:

Particulars



23 As at 31 March, 2013 As at 31 March, 2012` in lakhs ` in lakhs

(a) Claims against the Company not acknowledged as debtsShow cause cum demand notice in respect of service tax 147.88 185.91 Demand notice in respect of Income tax 63.31 -

874.40 809.55

16.71 16.71

24 Earnings in foreign exchange: For the year ended 31 March, 2013


` in lakhs ` in lakhsFinancial advisory fees 1,599.38 1,680.22

25 Expenditure in foreign currency: For the year ended 31 March, 2013


` in lakhs ` in lakhsTravelling expenses 12.99 7.06 Professional fees 12.80 24.58 Membership and subscription 71.10 56.39

- 4.86 Business promotion expenses 0.13 1.74

Uncalled liability on units of Venture Capital Fund - Kotak India Growth Fund

Conference expenses


Contingent liabilities and commitments (to the extent not provided for)

Contingent liabilities

(b) Guarantee on behalf associates (Refer Note 28) Hongkong and Shanghai Banking Corporation Limited (Singapore) (Rupee equivalent of Sing $ 2,000,000)

(c) Commitments

Note : In respect of items mentioned in (a) above till the matters are finally decided, the timing of outflows of economic benefits cannot be ascertained



26 Reconciliation of opening and closing balance of the present value of the defined benefit obligation for gratuity benefits is given below.` in lakhs



Change in Unfunded benefit obligationsOpening deferred benefit obligation 251.74 217.68Service cost 22.41 30.20Interest cost 21.80 19.13

Actuarial (gain)/loss on obligations (25.30) 23.24Liability assumed /(Settled on transfer of Employees) 10.14 (11.70)Benefits paid (48.84) (26.81)

231.95 251.74

Reconciliation of present value of the obligation and the fair value of the plan assets` in lakhs



Fair value of plan assets - Present value of benefit obligations 231.95 251.74

Net asset/ (liability) as at 31st March, (231.95) (251.74)

Cost recognised for the yearCurrent service cost 22.41 30.20 Interest cost 21.80 19.13 Expected return on plan assets - - Actuarial (gain)/loss (25.30) 23.24Net gratuity cost 18.91 72.57

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






Defined Benefit Obligation 231.95 251.74 217.68 113.17 94.63Plan Assets - - - - - Surplus/ (Deficit) (231.95) (251.74) (217.68) (113.17) (94.63)Experience Adjustment on Plan Liabilities (37.18) 35.36 24.82 (1.56) (9.44)Experience Adjustment on Plan Assets - - - - -

Actuarial assumptions used

Discount rateSalary escalation rate

Expected return on plan assets

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

Gratuity

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

8.50%15% p.a. for first two years; 10% p.a. for next 2 years and 6% p.a. thereafter

NA NA

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

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 ` 10.00 lakhs.

Particulars

Present value of unfunded benefit obligations as at the end of the year

Particulars

Particulars

8.24% p.a. 8.94% p.a.





27 Segment information

Segment information:

Advisory and Transactional

Services

Trading and Principal Investments

` in lakhs ` in lakhs ` in lakhsSegment RevenueIncome from external customers 6,406.89 1,636.21 8,043.10

(6,211.49) (1,679.71) (7,891.20)

6,406.89 1,636.21 8,043.10

Total Revenue (6,211.49) (1,679.71) (7,891.20)

Segment result 518.29 1,618.22 2,136.51

(-829.87) (1,534.42) (704.55)

Unallocable income 283.25

(273.79)

Unallocable expenses 67.02

(36.04)

Profit before taxes 2,352.74

(942.30)

Tax expense 681.39

(348.49)

Net profit for the year 1,671.35

(593.81)


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

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

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 returnsand the internal financial reporting system.

Particulars For the year ended 31 March, 2013Business segments

Total


TotalAdvisory and Transactional

Services

Trading and Principal Investments

` in lakhs ` in lakhs ` in lakhsOther Information

Carrying amount of segment assets 1,351.00 37,334.35 38,685.35

(5,377.06) (45,991.93) (51,368.99)

Unallocated corporate assets 2,648.65

(2,828.96)

Total assets 41,334.00

(54,197.95)

Carrying amount of segment liabilities 2,146.43 - 2,146.43

(4,356.13) (0.55) (4,356.68)

Unallocated corporate liabilities 329.76

(312.81)

Total liabilities 2,476.19

(4,669.49)

Capital expenditure 145.99 - 145.99

(69.27) (-) (69.27)

Depreciation and amortisation 130.49 - 130.49

(140.33) (-) (140.33)

Unallocated depreciation and amortisation 30.49

(30.49)

Note: Figures in bracket relate to the previous year

Segment revenue comprises of: For the year ended 31 March, 2013


` in lakhs ` in lakhsRevenue from operations (Refer Note 18) 6,230.87 5,961.04 Interest income (Refer Note 19(i)) 1,327.17 1,547.93 Net gain on sale of non current investments 189.20 85.23 Net gain on sale of current investments 31.83 - Income distribution on Venture Fund Investments 34.66 13.09 Dividend income on :

from non trade, current investments 1.52 - from non trade, non current investments 51.82 33.45

Service Income - 162.78 Provision for doubtful debts no longer required written back 153.68 32.09 Net gain on foreign currency transactions and translation (other than finance cost) - 13.62 Profit on sale of fixed assets 10.01 7.95 Miscellaneous income 12.34 34.02 Total Segment Revenue 8,043.10 7,891.20 Add: Unallocated Income 283.25 273.79 Total Income 8,326.35 8,164.99

Particulars For the year ended 31 March, 2013Business segments

Segment assets comprise mainly of trade and other receivables, investments, fixed assets, cash & bank balances. Unallocatedcoporate assets for the current year represent advance taxes, deferred taxes, buildings given on operating lease. Segment liabilitiesinclude loans, trade and other payables. Unallocated liabilities for the current year represents deposit received for premises given onoperating lease and provision for tax .



28 Related party disclosures(a) Details of related parties:

Description of relationship

(i) Related parties where control exists:Holding Company

(ii) Other Related Parties(i) Fellow Subsidiaries: r Kotak Investment Advisors Limited

r Kotak Mahindra (International) Limitedr Kotak Mahindra (UK) Limitedr Kotak Mahindra Inc.r Kotak Securities Limitedr Kotak Mahindra Asset Management Company Limitedr Kotak Forex Brokerage Limitedr Kotak Mahindra Prime Limited

(Also Joint Venture)r Kotak Mahindra Investments Limited

r Infina Finance Private Limited.(The company holds 49.99% of the equity share capital)

(iii) Joint Venture

(iv) Key Management Personnel (KMP) r Mr. T V Raghunath (w.e.f July 1, 2012)r Mr. Srinivasan Rameshr Ms. Falguni Nayar (upto March 31, 2012)

r Kotak Mahindra Old Mutual Life Insurance Limited – Joint Venturewith Kotak Mahindra Bank Limited; Old Mutual Plc; Kotak MahindraPrime Limited.


Names of related parties

Kotak Mahindra Bank Limited (KMBL){Holds 100% of the equity share capital}

Uday S. Kotak (Non executive Chairman) along with relatives and entities controlled by him holds 44.96% of the equity share capital of Kotak Mahindra Bank Limited as on March 31, 2013

r Kotak Mahindra Old Mutual Life Insurance Limited

(ii) Associates (Enterprises in which the Company has significantinfluence)


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29 Details of leasing arrangements

(a) Assets taken on lease

(b) Asset given on lease(i) The Company has leased out certain assets under operating leases.

30 For the year ended 31 March, 2013



The numerator and denominator used to calculate Basic and Diluted Earnings per share

Profit attributable to Equity shareholders (Rs. in lakhs) – (A) 1,671.35 593.81Basic /Weighted average number of Equity shares outstanding during the year – (B) 4,030,450 4,116,149 Nominal value of Equity shares (Rs.) 10 10 Basic / Diluted Earnings per share – (A) / (B) 41.47 14.43

31 As at 31 March, 2013 As at 31 March, 2012` in lakhs ` in lakhs

Deferred tax liabilityDepreciation 131.97 108.80

Deferred tax assetProvision for gratuity, compensated absences and stock appreciation rights 275.08 249.41 Provision for doubtful debts 14.23 57.01 Carried forward short term capital loss 0.63 5.77 Others 0.03 0.84

Net deferred tax (liability) / asset 158.00 204.23

Components of deferred tax balances:


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

(ii) Rent payments are recognized in the Statement of Profit and Loss under “Rent” and are disclosed in Note 22 – Other Expenses

(ii) Rent receipts are recognized in the Statement of Profit and Loss under “Rent” are disclosed in Note 19(e) – “Other non operating Income”

(iii) The future minimum lease payments under non-cancellable operating lease – not later than one year as at 31 March, 2013 aggregate to ` Nil lakhs (Previous year ` 95.00 lakhs).

Earnings per Share (EPS)



32 Interest in joint ventures

` in croresAssets Liabilities Income Expenditure

1,351.06 1,251.38 464.30 440.40(1,195.45) (1,119.34) (395.36) (370.13)

Note: Figures in brackets relate to the previous year

33 (a) Equity Settled Options

(b) Stock Appreciation Rights (SARs)

Reconciliation of number of SARsParticulars

Outstanding at the beginning of the year:Granted during the year*Exercised during the yearForfited during the yearOutstanding at the end of the year:*Includes balance of SARs outstanding for employees transferred to the company during the year

Effect of grant of SARs to employees on the Statement of profit and loss and on its financial position:

Total Employee Compensation CostClosing balance of liability

(c) Impact of Equity settled options and SARs.

500.38 528.79 609.07 395.43

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 ` 421.35 Lakhs (Previous year ` 502.27 Lakhs) and the profit after tax would havebeen lower by ` 284.64 Lakhs (Previous year ` 339.31 Lakhs). Consequently the basic and diluted EPS would have been ` 34.41 (Previousyear ` 6.18 ).

(2,932) (46,360)144,779 169,070



` in lakhs ` in lakhs

169,070 75,410 34,515 211,810

(55,874) (71,790)

a) Kotak Mahindra Equity Option Scheme 2001-02b) Kotak Mahindra Equity Option Scheme 2002-03c) Kotak Mahindra Equity Option Scheme 2005d) Kotak Mahindra Equity Option Scheme 2007

Consequent to the above, the Bank has granted stock options to employees of the Company In accordance with the SEBI Guidelines and theguidance note on “Accounting for Employee Share based payments”, the excess, if any, of the market price of the share, preceding the date ofgrant of the option under ESOSs over the exercise price of the option is amortised on a straight-line basis over the vesting period. TheCompany has reimbursed the Bank Rs.62.28 lakhs (Previous year Rs.101.94 lakhs) during the year on account of such costs and the same isforming part of Employee costs and included under the head “Expense on ESOP Scheme” under Employee benefit expenses in Note 20.

The contractual life (which is equivalent to the vesting period) of the SARs ranges from 0.04 years to 2.75 years (Previous year 0.04 to 2.75years). Detail of activity is summarized below:

Year ended 31 March, 2013

Previous year ended 31 March, 2012

In an earlier year, the management had approved Stock Appreciation Rights (SARs) to be granted to eligible employees as and when deemedfit. The SARs are linked to the share prices of Kotak Mahindra Bank Limited and are to be settled in cash and will vest in the manner asprovided in the scheme / grant letters to employees.

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


In terms of a joint venture agreement entered into by the Company with Kotak Mahindra Bank Limited, Old Mutual Plc. and Kotak MahindraPrime Limited, the Company holds 12.42% (Previous year 12.42%) ownership interest in Kotak Mahindra Old Mutual Life insuranceLimited(incorporated in India) which falls under the category of Jointly Controlled Entity as per Accounting Standard 27 viz., FinancialReporting 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 unauditedaccounts for the year ended 31st March, 2013:

Name of companies and country of incorporationKotak Mahindra Old Mutual Life Insurance Limited, India (unaudited)



34

35

36

Receivable` in lakhs

Receivablein Foreign currency

Receivable` in lakhs

Receivablein Foreign currency

1.99 USD 3,675 97.77 USD 192,178375.56 JPY 65,111,776 249.64 JPY 40,288,209

Payable` in lakhs

Payablein Foreign currency

Payable` in lakhs

Payablein Foreign currency

95.85 USD 175,515 - -

37

38

39

Recovery of expenses in Note 20 – Employee Benefits Expenses and Note 22 – Other Expenses are amounts recovered from the holdingcompany, subsidiaries and fellow subsidiaries towards the value of costs apportioned of the Company’s employees and facilities in accordancewith the agreements on allocation of expenses with the companies.

Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.

Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006The Company has requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium EnterprisesDevelopment Act 2006.In the absence of confirmations from the suppliers, disclosures, if any, relating to unpaid amounts as at the year endtogether with interest paid/ payable as required under the said Act have not been given.

Employee Benefits Expense in the Statement of Profit and Loss includes an aggregate amount of ` 308.12 lakhs (P.Y. ` 495.00) towardsremuneration paid to the managing director and joint managing director (Previous year to the managing director and a whole-time director) whichis considered to be in accordance with the provisions of Sub-Paragraph C of Section II of part II of Schedule XIII to the Companies Act, 1956. Thecompany has obtained and placed reliance on a legal opinion to the effect that the two provisos i.e. the fourth and the fifth proviso to sub-para C ofSection II of part II of Schedule XIII as aforesaid, are independent and the requirement would be to comply with either of the said provisos in orderto avail the exemption from securing the approval of the Central Government. The company believes that in respect of the abovementionedremuneration, since it is in compliance with the requirements of proviso four as aforesaid, it is exempt from securing the approval of the CentralGovernment.

The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: As at 31 March, 2013 As at 31 March, 2012

Issue management and placement fees and underwriting commission is net of incentives / brokerages paid to brokers and fees / commissionshared aggregating to ` 1,530.70 lakhs (Previous year ` 4,170.16 lakhs). Advisory fee is net of commission shared aggregating to ` 82.00 lakhs(Previous year Nil).

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