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Directors Report of Motilal Oswal Financial Services Ltd.

Mar 31, 2014

To the Members

The Directors have pleasure in presenting their 9th Report together with the audited Accounts of your Company for the year ended 31st March, 2014.

Financial Highlights

Summary of Financial results for the year is as under:

Motilal Oswal Financial Services Limited (Standalone)

Rs. in millions

Year ended Year ended 31st March, 2014 31st March, 2013

Revenue 977.36 949.04

Profit before Finance Cost, Taxation and Exceptional Items 652.07 752.31

Finance Cost (190.09) (134.50)

Profit before Taxation and exceptional items 461.97 617.81

Add/(Less): Exceptional Items [Income / (Expense)] (12.95) (163.80)

Profit before taxation 449.02 454.01

Add/(Less) : Provision for Taxation

Current Tax (53.97) (64.77)

Deferred Tax 3.27 (1.75)

Tax for earlier year(s) (5.24) -

Profit after Taxation, before extraordinary items for the year 393.08 387.48

Balance brought forward from previous year 600.03 623.36

Profit Available for appropriation 993.11 1,010.84

Less: Appropriations

Transfer to Statutory Reserve (78.62) (77.50)

Proposed Dividend / Interim Dividend (273.20) (290.47)

Dividend Distribution Tax (0.05) (11.84)

Transfer to General Reserve (31.45) (31.00)

Transfer to Capital Redemption Reserve (7.07) -

Balance of Profit carried forward 602.73 600.03

Summary of Consolidated Financial results of the Company and its subsidiaries for the year is as under: Motilal Oswal Financial Services Limited - Consolidated

Rs. in millions

Year ended Year ended 31st March, 2014 31st March, 2013

Revenue 4,682.64 4,728.77

Profit before Interest, Depreciation, Taxation and exceptional items 1,421.87 1,743.99

Interest (28.61) (48.03)

Depreciation (242.65) (258.55)

Profit before Taxation and exceptional items 1,150.61 1,437.41

Add/(Less) : Exceptional Items [Income / (Expense)] (555.86) 180.77

Rs. in millions

Year ended Year ended 31st March, 2014 31st March, 2013

Profit before taxation 594.75 1,618.18

Less : Provision for Taxation

Current Tax 235.94 390.29

Deferred Tax (62.41) 132.41

Minimum Alternate Tax (0.89) (8.30)

Tax for earlier year(s) 6.60 3.97

Profit after Taxation, before extraordinary items and minority interest for the year 415.51 1,099.81

Minority interest in profits (20.51) (8.95)

Profit after Taxation and minority Interest 395.01 1,090.86

Balance brought forward from previous year 6,163.65 5,597.06

Profit Available for appropriation 6,558.66 6,687.92

Less: Appropriations

Transfer to Statutory Reserve (78.62) (77.50)

Proposed dividend/Interim Dividend (273.32) (290.53)

Dividend Distribution Tax (47.57) (58.91)

Transfer to General Reserve (48.52) (113.08)

Prior Year dividend, dividend distribution and other adjustments 0.10 15.75

Transfer to Capital Redemption Reserve (7.07) -

Balance of Profit carried forward 6,103.65 6,163.65

Dividend

The Company at the Meeting of its Board of Directors held on 26th October, 2013, had declared an interim dividend of Rs. 1.00 per Equity Share, out of the profits of the Company for the six months ended 30th September, 2013 on 138,831,665 Equity Shares of Rs. 1.00 each aggregating to Rs. 138,831,665/-.

Keeping in view the overall performance during the year, your Directors are pleased to recommend a final dividend of Rs. 1 per Equity Share on 138,165,831 Equity Shares of Rs. 1.00 each aggregating to Rs. 138,165,831, payable to those members whose names appear in the Register of Members as on the Book Closure Date. The dividend distribution tax will absorb a sum of Rs. 47.57 mn.

Standalone Results

During the year under review, the standalone revenues for the year were Rs. 977.36 mn, a growth of 2.98% as compared to Rs. 949 mn last year. Within fund based income, interest income was up by 10.59% to Rs. 677.42 mn. This was largely on account of an increase in the average loan book size across the year. Other operating income was Rs. 43.50 mn in FY2014, down 62.97% YoY. The previous year had included profit earned on partial exits in few investments of the Private Equity Fund in which MOFSL made sponsor commitments. Arbitrage opportunities were also lower in the market this year, which impacted arbitrage income this year. Other income, which includes dividend from subsidiaries, was Rs. 280.20 mn.

Total expenses (before depreciation, interest and exceptional) almost doubled during the year, from Rs. 113.11 mn a year back to Rs. 242.1 mn this year. The company has made provisions for some debts where the collateral cover has fallen below acceptable thresholds.

profit before depreciation, interest, and taxation (EBITDA) decreased by 12% this year to Rs. 735.29 mn. Interest and fi nance charges increased from Rs. 134.50 mn to Rs. 190.1 mn. Exceptional item of Rs. 12.95 mn (pre-tax) represents amounts provided for positions related to exposure in the National Spot Exchange Limited. The reported net profi t increased by 1.45% to Rs. 393.1 mn.

The detailed results of operations of the Company are given in the Management Discussion & Analysis forming part of this Report.

Consolidated Results

The Consolidated Revenues of the Company for the year were Rs. 4,682.64 mn for the year under review, a marginal decrease of 0.98% as compared to the previous year.

– Broking revenues declined by 2.70% to Rs 2,884.24 mn, as secondary market activity remained muted in the cash equities segment. Average daily volumes in the equity markets reached Rs. 2 tn in FY2014, up 20.43% from last year. But this uptick was almost entirely led by the options segment, yet again. Options increased 22.84% YoY, and comprised 77.38% of overall market volumes in FY2014. Futures were up 18.1% YoY, and comprised 16.1% of market volumes, same as last year. Average daily volumes in cash equities, at Rs. 132.68 bn in FY2014, was just marginally up by 1.84% as compared to FY2013. Within this, the high-yield delivery segment showed an uptick of 3.97%. The fact that cash equities volumes have held in the Rs. 130-140 bn range since last three years possibly indicates that cash volumes might have bottomed out at last. Our overall equity market share increased marginally from 1.53% to 1.56% on a YoY basis. As on 31st March, 2014, total client base has increased to 800,385, which includes 701,845 retail broking and distribution clients. Our Pan-India distribution reach stood at 1,534 business locations across 507 cities.

– Investment banking fee at Rs. 67.52 mn saw a 13.45% decline over the previous year. Fee income was impacted due to delays in closure of few deals which are in advanced stages, although deal closures gathered some momentum this year. Continued slowdown in the corporate capex cycle and policy making impacted equity raising activities like IPO, FPO and QIP in the market. Companies continued to remain cautious and very few projects were announced. However, the deal pipeline remains healthy and the business sentiments appear to be improving in light of the evolving political scenario.

– Fund based income declined by 14.61% to Rs. 857.84 mn due to lower arbitrage opportunities in the market this year. The previous year had also included profit earned on partial exits in few investments of the Private Equity Fund in which MOFSL made sponsor commitments.

– Asset management fees saw traction this year, increasing 26.57% to Rs. 758.77 mn as compared to last year. Total assets under management/advice across mutual funds, PMS and private equity businesses was Rs. 39.21 bn. Within this, our mutual funds AUM was Rs. 5.82 bn, PE AUA was Rs. 18.90 bn, while PMS AUM was Rs. 14.49 bn. During the year, the private equity business announced the final close of its 2nd growth capital fund - India Business Excellence Fund II raising commitments of Rs. 9.54 bn from domestic and off shore investors, as well as the fi rst close of its 2nd real estate fund - India Realty Excellence Fund II raising commitments of Rs. 1.86 bn.

– Other income increased by 38.53% to Rs. 114.27 mn as compared to last year

Total expenses (before interest and depreciation) for the year at Rs. 3,260.77 mn registered a 9.25% jump over last year. People cost increased by 17.93% to Rs 1,273.25 mn. This was largely owing to an increase in hiring in the broking, wealth management, asset management and commodity businesses, as well as performance-based compensation in the private equity business. The decline in brokerage commission earned reduced the brokerage shared with intermediaries by 4.76% to Rs. 1,053.44 mn. Other costs were Rs.934.1 mn, an increase of 16.89% over last year. This was largely due to higher provisions made during this year for debts where collateral cover has fallen below acceptable thresholds. The profit before depreciation, interest, exceptional items and taxation (EBITDA) decreased by 18.47% to Rs. 1,421.87 mn. EBITDA margin decreased from 36.88% to 30.36%.

The company had exposure to National Spot Exchange Limited (NSEL). However, NSEL has not been able to adhere to its payment obligations, and the company has perused legal action against it. Pending final outcome which is uncertain, the company has fully written off /provided for these positions in the P/L to the tune of Rs. 555.86 mn (pre-tax) during the year, which is disclosed under "Exceptional Items". Reported net profit for the year after minority interest stood at Rs. 395 mn, a decline of 63.79%.

Buyback of Equity Shares

- The Board of Directors at its Meeting held on 27th April, 2013 accorded consent for the Buyback of shares of the Company from open market through the Stock Exchange Mechanism at a price not exceeding Rs 90/- per share upto a maximum of 75,00,000 fully paid-up Equity Shares of Rs 1 each (equivalent to 5.16% of Equity Share Capital outstanding as on 31st March, 2013) and a minimum of 18,75,000 fully paid-up Equity Shares of Rs. 1 each (equivalent to 1.29% of Equity Share Capital outstanding as on 31st March, 2013), subject further to the condition that the aggregate amount to be paid by the Company for the said Buy-back (excluding brokerage and other charges, if any) shall not exceed Rs. 650 mn.

- The shareholders of the Company approved the Buyback of Equity shares by Special Resolution through Postal Ballot process on 21st June, 2013. The Company published the Public Announcement for Buyback of Shares in the newspapers and filed it with Securities Exchange Board of India (SEBI) on 25th June, 2013.

- On receiving the requisite approval from the SEBI and the Stock Exchanges, the Buyback of shares commenced from 8th July, 2013 and would remain open till 9th June, 2014. Upto 31st March, 2014 the Company had bought back 94.30% of 75,00,000 shares (Maximum Off er Shares) amounting to 7,072,701 shares for a consideration of Rs. 560.10 mn (excluding brokerage and other charges).

- The Company extinguished 7,069,945 shares out of the 7,072,701 bought back shares as on 31st March, 2014. The balance 2,756 shares were extinguished on 9th April, 2014.

Future Outlook

Investor sentiments seem to be building up in light of the stability in certain macro indicators, as well as the evolving political scenario over the elections. Sustenance of macro indicators at reasonable levels, along with a revival in the capex cycle and manufacturing segment following clarity on the political front and policy/reforms movement should help increase activity levels in the capital markets. Initial evidence of this can already be seen in the early months of FY 2015. Volume levels in the cash equities market have increased since March onwards, especially in the high-yield delivery segment. Equity mutual funds are also evincing interest in terms of inflows.

Credit Rating

During the year, Crisil Limited reaffirmed the Credit Rating of "CRISIL A1 " to the Short Term Debt Programme of Rs. 1,500 mn of the Company. ICRA Limited assigned the credit rating of "PP-MLD[ICRA] AA-" Rating with a stable outlook to the Long Term Debt Programme of Rs. 250 mn of the company. Crisil Limited also reaffirmed the Credit Rating of "CRISIL A1 " to the Short Term Debt Programme of Rs. 1,000 mn of Motilal Oswal Securities Limited, a subsidiary of the Company. The ratings indicate a very strong degree of safety regarding timely servicing of financial obligations.

Employees'' Stock Option Schemes (ESOS)

Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure to this Report.

Directors

Mr. Navin Agarwal retires by rotation at the forthcoming Annual General Meeting and being eligible, off er himself for reappointment. The details of the Director to be reappointed is set out in the Report on Corporate Governance annexed to this Report.

Directors'' Responsibility Statement

Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors confi rm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of Affairs of the Company as at 31st March, 2014 and of the profit of the Company for the year ended on that date;

(iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the annual accounts have been prepared on a going concern basis.

Corporate Social Responsibility (CSR) initiatives by the Group

As per section 135 of the Companies Act, 2013 every company having net worth of Rs 500 crore or more or turnover of Rs. 1,000 crore or more or a net profit of Rs. 5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee and shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

At Motilal Oswal Group, our motto is ''Knowledge First'' and we believe that education can bring prosperity and equality in the society. In line with our motto we believe in enhancing the only human intangible asset. Recognizing our responsibilities towards the society, we intend to carry out various initiatives like supporting education, medical treatments, various other charitable and noble aids, etc.

Motilal Oswal Group resolves to contribute towards development of knowledge based economy by discharging CSR that would positively infl uence the customers, employees, shareholders, communities and other stakeholders in various aspects of its operations.

Motilal Oswal Group makes contributions to various causes directly through the individual companies and through Motilal Oswal Foundation, a charitable company of our Group.

Activities undertaken by the Group

1. The Motilal Oswal Foundation has recently set up a hostel at Lallubhai Park, Andheri (West), Mumbai - 400 058, called "Agrawal Oswal Chhatrawas" in collaboration with the Rajasthan Vidyarthi Griha. The Agrawal Oswal Chhatrawas is a state of the art hostel for students from various parts of the country who aspire for the professional course of Chartered Accountancy. It''s a 5-storey building with total capacity of approximately 210 students on triple sharing basis (with attached toilet & bath).

2. Initiated "Gyan Daan", a learning program at Janta Shikshan Sanstha, Government School which serves the children belonging to the underprivileged section of the society.

3. "Mid-day meals" to school children through the ISKCON Food Relief Foundation and thus feeding approximately 600 childrens everyday.

4. Contribution through cash and kind to various NGOs like Goonj, through the Joy of Giving Week.

5. Collection drives throughout India of toys, stationery, toiletries and clothes, etc. every year for distribution amongst the underprivileged section of society.

6. Sponsored education for 3 underprivileged children for consecutive two academic years.

7. Tie up with Light of Life Trust for providing books, study materials, school kits, etc. to the underprivileged children.

8. Celebrating the festivities with the underprivileged by giving lectures, arranging workshops, etc.

Proposed CSR Projects for FY 2014-2015

1. Ashoka University

Motilal Oswal Group is in the process of making contributions to Ashoka University. Ashoka University is envisioned to be India''s fi rst higher education institution in the class of the celebrated Ivy League and the world''s top ranked universities. Indian students can now avail of a topnotch liberal arts education at a fraction of its cost in India.

The Group intends to make an initial contribution of Rs. 2.50 crores during the year 2014-15 for the establishment of the University in New Delhi.

2. Shloka Missionaries

Motilal Oswal Group is in the process of making contributions to Shloka Missionaries, a Trust set up for setting up and running English medium schools for the underprivileged in the rural India.

The Group intends to make contribution of Rs. 50 lakhs during the year 2014-15 for the establishment of a School for the underprivileged at Umarkhed town of Maharashtra.

3. ISKCON Food Relief Foundation

Motilal Oswal Group is making contributions to ISKCON Food Relief Foundation funding the mid-day meals of approximately 600 school students daily, throughout the academic year.

The Group intends to make contribution of Rs 10 lakhs during the year 2014-15 to ISKCON Food Relief Foundation.

4. Gyan Daan at Janta Shikshan Sanstha, Government School at Worli, Mumbai.

Motilal Oswal Group has started an associate volunteering program called ''Gyan Daan'' in Mumbai. Gyan daan has initiated a learning program at a school serving children from the underprivileged section of society. The main objectives of the program are enhancing the quality of education at the school, building confi dence, developing intellectual curiosity and improving the ability of students to communicate in English. The Group works with a dedicated set of volunteers from various departments of the Motilal Oswal Group.

The Group has already made contributions to improve the physical infrastructures of Janta Sikshan Sanstha, Government School at Mumbai.

5. Muskan Foundation

Motilal Oswal Group is in the process of making contributions to Muskan Foundation, Mumbai, a foundation set up for perpetuating a new lease of life for children with multiple disabilities and visual impairment.

The Group intends to make contribution of Rs.2 lakhs during the year 2014-15 to Muskan Foundation.

6. Emergency Medical Aid to financially weak people

Motilal Oswal Group is making contributions to meet the needs of Emergency Medical Aid to financially weak people on case to case basis. The payments in this case are generally made directly to the concerned hospitals.

Committees of the Board

- Audit Committee

The Audit Committee presently comprises of Mr. Balkumar Agarwal (Chairman of the Committee), Mr. Raamdeo Agarawal, Mr. Vivek Paranjpe and Mr. Praveen Tripathi.

- Remuneration/Compensation Committee

The Remuneration/Compensation Committee of the Board of Directors presently comprises of Mr. Vivek Paranjpe (Chairman of the Committee), Mr. Balkumar Agarwal and Mr. Motilal Oswal.

- Shareholders/Investors'' Grievance Committee

The Shareholders/Investors Grievance Committee of the Board of Directors presently comprises of Mr. Balkumar Agarwal (Chairman of the Committee), Mr. Motilal Oswal and Mr. Raamdeo Agarawal.

- Debenture Committee

The Debenture Committee of the Board of Directors presently comprises of Mr. Motilal Oswal, Mr. Raamdeo Agarawal, Mr. Navin Agarwal and Mr. Balkumar Agarwal.

- Nomination Committee

The Nomination Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Raamdeo Agarawal.

- Risk Management Committee

The Risk Management Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Navin Agarwal.

- Asset Liability Management Committee (ALCO)

The Asset Liability Management Committee (ALCO) of the Board of Directors presently comprises of Mr. Motilal Oswal (Chairman of the Committee), Mr. Raamdeo Agarawal, Mr. Navin Agarwal and Mr. Ajay Menon.

- ESOP Committee

The ESOP Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Raamdeo Agarawal.

Corporate Governance

A report on the Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance of conditions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement are annexed to this Report.

Auditors

Messrs. Haribhakti & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment for 3 years. The members will be required to appoint Auditors for 3 years and fix their remuneration.

Subsidiaries

The Company has the following subsidiary companies:

1. Motilal Oswal Securities Limited (MOSL)

2. Motilal Oswal Investment Advisors Private Limited

3. MOPE Investment Advisors Private Limited (Formerly known as Motilal Oswal Private Equity Advisors Pvt. Ltd.)

4. Motilal Oswal Commodities Broker Private Limited

5. Motilal Oswal Insurance Brokers Private Limited

6. Motilal Oswal Capital Markets Private Limited (Subsidiary of MOSL)

7. Motilal Oswal Asset Management Company Limited (Subsidiary of MOSL)

8. Motilal Oswal Trustee Company Limited (Subsidiary of MOSL)

9. Motilal Oswal Wealth Management Limited (Subsidiary of MOSL)

10. Motilal Oswal Securities International Private Limited. (Subsidiary of MOSL)

11. Motilal Oswal Capital Markets (Hong Kong) Private Limited (Subsidiary of MOSL)

12. Motilal Oswal Capital Markets (Singapore) Pte. Limited. (Subsidiary of MOSL)

13. Aspire Home Finance Corporation Limited (Subsidiary of MOSL)

14. Motilal Oswal Real Estate Investment Advisors Private Limited (Subsidiary of MOPE Investment Advisors Private Limited)

15. Motilal Oswal Real Estate Investment Advisors II Private Limited (Subsidiary of MORE Investment Advisors Private Limited)

16. India Business Excellence Management Co. (Subsidiary of MOPE Investment Advisors Private Limited)

The Statement pursuant to section 212 of the Companies Act, 1956, containing details of the Company''s subsidiaries is attached herewith.

Fixed Deposits And Loans/Advances

The Company has not accepted any deposits from the public or employees during the year under review. The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the company pursuant to Clause 32 of the Listing Agreement with the Company, are furnished separately.

Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outgo

In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 concerning conservation of energy and technology absorption respectively are not applicable to the Company.

There was no inflow of foreign exchange during the year under review. Details of the foreign exchange outflow are given in the notes to Accounts.

Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and

Rules framed thereunder

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the Rules framed thereunder, the names and other particulars of employees are set out in the Annexure to the Directors'' Report. In terms of the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Directors'' Report is being sent to all the Shareholders of the Company excluding the aforesaid Annexure. The Annexure is available for inspection at the Registered Offi ce of the Company. Any shareholder interested in obtaining a copy of the said Annexure may write to the Company Secretary & Compliance Offi cer at the Registered Offi ce of the Company.

Acknowledgments

Your Directors take this opportunity to thank the Authorities, Bankers, Shareholders and the Customers of the Company for their continued support to the Company. The Directors also place on record their sincere appreciation of the contributions made by every member of the MOFSL family for their dedicated eff orts that made these results achievable.

For and on behalf of the Board

Motilal Oswal

Chairman & Managing Director

Mumbai, 26th April, 2014


Mar 31, 2013

To the Members

The Directors have pleasure in presenting their 8th Report together with the audited Accounts of your Company for the year ended 31st March, 2013.

Financial Highlights

Summary of Financial results for the year is as under:

Motilal Oswal Financial Services Limited (Standalone)

Rs. in millions

Year ended Year ended 31st March, 2013 31st March, 2012

Revenue 949.04 819.48

Profit before Finance cost, Taxation and exceptional items 752.31 694.31

Finance cost (134.50) (8.97)

Profit before Taxation and exceptional items 617.81 685.34

Add / (Less): Exceptional Items (163.80) (23.14)

Profit before taxation 454.01 662.20

Add / (Less): Provision for Taxation

Current Tax (64.77) (88.85)

Deferred Tax (1.75) (11.72)

Tax for earlier year(s) - 1.33

Profit after Taxation, before extraordinary items for the year 387.48 562.96

Balance brought forward from previous year 623.36 414.85

Profit Available for appropriation 1,010.84 977.81

Less: Appropriations

Transfer to Statutory Reserve (77.50) (112.59)

Proposed dividend / Interim Dividend (290.48) (217.68)

Dividend Distribution Tax (11.84) 20.86

Transfer to General Reserve (31.00) (45.04)

Balance of Profit carried forward 600.02 623.36

Summary of Consolidated Financial results of the Company and its subsidiaries for the year is as under:

Rs. in millions

31st March, 2013 31st March, 2012

Revenue 4,728.77 4,711.37

Profit before Finance cost, Taxation and exceptional items 1,485.44 1,455.64

Finance cost (48.03) (36.20)

Profit before Taxation and exceptional items 1,437.41 1,419.44

Add / (Less): Exceptional Items 180.77 106.73

Profit before taxation 1,618.18 1,526.17

Add / (Less): Provision for Taxation

Current Tax (390.29) (442.26)

Deferred Tax (132.41) (45.16)

Minimum Alternate Tax 8.30 -

Tax for earlier year(s) (3.97) 2.98

Profit after Taxation, before minority Interest 1,099.81 1,041.72

Minority interest in profits (8.95) (2.86)

Profit after Taxation and minority Interest 1,090.86 1,038.86

Balance brought forward from previous year 5,597.06 5,029.57

Profit Available for appropriation 6,687.92 6,068.43

Less: Appropriations:

Transfer to Statutory Reserve (77.50) (112.59)

Proposed dividend / Interim Dividend (290.53) (217.77)

Dividend Distribution Tax (43.16) (14.45)

Transfer to General Reserve (113.08) (126.56)

Balance of Profit carried forward 6,163.65 5,597.06

Dividend

The Company at the Meeting of its Board of Directors held on 18th October, 2012, had declared an interim dividend of R 1.00 per Equity Share, out of the profits of the Company for the six months ended 30th September, 2012 on 145,235,776 Equity Shares of R 1.00 each aggregating to R 145,235,776/- .

Keeping in view the overall performance during the year, your Directors are pleased to recommend a final dividend of R 1 per Equity Share on 145,235,776 Equity Shares of R1.00 each aggregating to R 145,235,776/-, payable to those members whose names appear in the Register of Members as on the Book Closure Date. The dividend distribution tax will absorb a sum of R 23,560,874/-.

Results: MOFSL Standalone

During the year under review, the standalone revenues for the year were R 949.04 million, a growth of 15.81% as compared to R 819.48 million last year. Interest income went up by 35.34% to R 612.56 million, on account of an increase in the average loan book size. Other operating income was R 89.48 million, which includes profit earned on partial exits in few investments of the Private Equity Fund in which MOFSL made sponsor commitments. Other income, which includes dividend from subsidiaries, was R 248.99 million as compared to R 355.18 million in the last year.

Due to slightly lower operating expenses, the total expenses (before depreciation, interest and exceptional items) registered a 2.42% decline to R 113.11 million this year. Profit before depreciation, interest, exceptional items, and taxation (EBITDA) increased by 18.81% this year, from R 703.58 million to R 835.93 million. Interest and finance charges increased from R 8.97 million to R 134.50 million. Exceptional item of R 163.80 million represents provision for doubtful advances / write offs. The Company''s net profit decreased by 31.17% to R 387.48 million.

The detailed results of operations of the Company are given in the Management Discussion & Analysis forming part of this Report. Consolidated Results:

The Consolidated Revenues of the Company for the year were R 4,728.77 million for the year under review, a marginal increase of 0.37% as compared to the previous year.

- Broking and related revenues declined by 8.00% to R 2,980.43 million this year. Daily volumes in the equity markets reached a high of R 1.68 trillion in FY2013, up 17% from last year. Options continue to comprise an increasing share of market volumes, from 68% in FY2012 to 76% in FY2013. Cash volumes in the market declined by 7% YoY to R 130.28 billion. Within cash, the delivery volumes were down 1% YoY and delivery''s proportion within market volumes dipped from 2.7% to 2.3%. However, there was a spurt in delivery volumes during the months of September, October, December and January coinciding with the trends in FII inflows. Our overall equity market share declined from 1.9% to 1.5% on a YoY basis. As on 31st March, 2013, total client base has increased to 773,716 while Pan-India distribution reach stood at 1,484 business locations across 527 cities. Despite challenging market conditions, we remain committed to building a strong broking franchise and our efforts were recognized at several industry platforms where we were ranked the best equity broker.

- Investment banking fees fell by 10.87% to R 78.01 million this year. Fee income was impacted due to delays in closure of few deals which are in advanced stages. Subdued equity markets impacted equity raising activities like IPO and FPOs in the market. Deal making was impacted across the industry given regulatory uncertainty, slow policy making and high borrowing costs which led to delays in transaction closures. In this environment, companies continued to remain cautious. Very few projects were announced resulting in low requirement by companies to raise capital. However, the business is well aligned to arising market opportunities.

- Fund-based income for the year was R 996.63 million, a growth of 21.21%. This is attributable to growth in interest income due to higher average loan book this year. This also includes profit earned on partial exits in few investments of the Private Equity Fund in which MOFSL made sponsor commitments.

- Asset management fees increased by 17.41% to R 591.21 million. The total assets under management / advice across mutual funds, PMS and private equity businesses were R 30.29 billion of which mutual funds AUM was R 4.64 billion, private equity AUA was R 13.05 billion and PMS AUM was R 12.60 billion. During the current year, the private equity business announced the third closing of its new PE fund - India Business Excellence Fund II raising R 5.55 billion through a combination of domestic and offshore investors.

- Other income increased by 40.75% to R 82.49 million as compared to last year

Total expenses (before interest, depreciation and exceptional items) for the year at R 2,984.78 million registered a 4.52% decline over last year. The decline in brokerage commission earned reduced the brokerage shared with intermediaries. Operating expenses declined by 7.91% to R 1,106.06 million. People costs at R 1,079.63 million declined by 5.98% compared to last year. Other operating costs which include facilities, marketing, communication, travel and other costs was R 799.09 million, an increase of 2.89% over last year. The profit before depreciation, interest, exceptional items and taxation (EBITDA) increased by 10.01% to R 1,743.99 million. EBITDA margin increased from 33.65% to 36.88%.

Exceptional item of R 180.77 million represents profit from sale of fixed assets, provision for doubtful advances / write offs and settlement payment. Reported net profit for the year after minority interest stood at R 1,090.86 million, an increase of 5.01%.

The Consolidated Financial Statements of the Company and its subsidiaries prepared in accordance with ''Accounting Standard - 21'' prescribed by The Institute of Chartered Accountants of India, form part of the Annual Report and the Accounts. The Balance Sheet, Profit and Loss Account, Reports of the Board of Directors and Auditors of the subsidiaries have not been attached with the Balance Sheet of the Company as per the general exemption provided under Section 212(8) of the Companies Act, 1956 by the Ministry of Corporate Affairs, issued vide General Circular No. 2 / 2011 dated 8th February, 2011.

The Company hereby undertakes that annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders of the holding and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the registered office of the Company and of the subsidiary companies concerned. The Company shall furnish a hard copy of details of accounts of subsidiaries to any shareholder on demand.

The detailed results of operations of the Company and its subsidiaries are given in the Management Discussion & Analysis forming part of this report.

Buyback of Equity Shares

The Board of Directors at its meeting held on 27th April, 2013 approved the following matters:-

- Amendment to the Existing Articles of Association of the Company by insertion of Article 12A for empowering the Company to Buyback its own shares, subject to the approval of the Members.

- Buyback of Equity Shares subject to the provisions of Section 77A, 77AA, 77B and other applicable provisions, if any, of the Companies Act, 1 956, provisions contained in the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998, including any amendments, statutory modification(s) or re-enactment(s) thereof (hereinafter referred to as ''Buy Back Regulations'') and approval of the Members of the Company.

The Company would Buyback fully paid-up equity shares of R1/- each from open market through the Stock Exchange mechanism, for an amount not exceeding R 65 Crores (Rupees Sixty Five Crores only) in cash from the BSE Limited and the National Stock Exchange of India Limited, subject to a price not exceeding R 90/- per equity share and subject to a maximum of 7.5 million fully paid-up Equity Shares of R1 each (equivalent to 5.16% of Equity shares of R1 each outstanding as on 31st March, 2013) and minimum of 1.875 million fully paid-up Equity Shares of R 1 each (equivalent to 1.29% of Equity shares of R 1 each outstanding as on 31st March, 2013).

Future Outlook

Indian Stock Markets had a mixed year in 2012-13. Multiple headwinds like inflation, volatile commodity prices, slowdown in the investment cycle, policy slowdown, depreciating Rupee impacted corporate performance and earnings visibility. However, newsflow in the second half of the year like moderation in Wholesale Price Index due to easing in commodity prices and some action on reforms created positive triggers. As inflation stability sustains and liquidity improves, it can lead to further monetary easing which should eventually help to lower the cost of borrowing and revive the investment cycle. At our end, we are building-up all our businesses relentlessly, in such a way that we are ready to en-cash on any up-turn in the market.

Credit Rating

During the year, CRISIL Limited reaffirmed the Credit Rating of "CRISIL A1 " to the Short Term Debt Program of R 1500 million of the Company. ICRA Limited assigned the credit rating of "PP-MLD[ICRA] AA-" Rating with a stable outlook to the Long Term Debt Program of R 250 million of the company. CRISIL Limited also reaffirmed the Credit Rating of "CRISIL A1 " to the Short Term Debt Program of R 1000 million of Motilal Oswal Securities Limited, a subsidiary of the Company. The ratings indicate a very strong degree of safety regarding timely servicing of financial obligations.

Finance

Issue and Allotment of 2500 Principal Protected Secured Redeemable Non-Convertible Debentures

The Company has issued and allotted 2500 Principal Protected Secured Redeemable Non-Convertible Debentures of face value of R 1,00,000 (Rupees One lakh) each aggregating to R 25,00,00,000/- (Rupees Twenty Five crores) by way of a Private Placement, which is listed at BSE Limited.

The issue proceeds will be utilized for general business purposes including capital expenditure, working capital, loan against shares and securities, repayment / prepayment of existing borrowings, etc., acquisition or purchase of land, investment in capital markets and real estate purposes.

The terms of issue are as follows:-

- The date of Allotment was 11th December, 2012.

- The tenor is 3 years, 3 months and 20 days from the Date of Allotment

- The Coupon Rate is reference Index linked return over the tenure of debenture.

- Reference Index Linked Return=Debenture Face Value* Reference Index Return Factor

- Coupon rate shall be payable on Redemption / Maturity Date

- Repayment of 100% of the Principal Amount applies to this Debenture issue.

Also during the year under review, to meet the working capital requirements, the Company has issued Commercial Papers. Employees'' Stock Option Schemes (ESOS)

Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure to this Report.

Directors

Mr. Vivek Paranjpe and Mr. Praveen Tripathi retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment. The details of the Directors to be reappointed is set out in the Report on Corporate Governance annexed to this Report.

Directors'' Responsibility Statement

Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2013 and of the Profit of the Company for the year ended on that date;

(iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the annual accounts have been prepared on a going concern basis.

Corporate Social Responsibility (CSR) Initiatives by the Group

The Motilal Oswal Group strongly believes in giving back to the Society. The Group makes contributions to various causes through the various Group Companies and through the Motilal Oswal Foundation.

In line with the Group''s motto of "Knowledge First", the Group has contributed largely to the education & learning front. The Motilal Oswal Foundation has recently set up a hostel at Lallubhai Park, Andheri (West) called "Agrawal Oswal Chhatrawas" in collaboration with the Rajasthan Vidyarthi Griha. The Agrawal Oswal Chhatrawas is a state of the art hostel for students from Rajasthan & other parts of the country who aspire for the professional course of Chartered Accountancy. It''s a 5-storey building with total capacity of approx. 210 students on triple sharing basis with attached toilet & bath.

The Group sponsors "mid-day meals" to school children through the Radhakrishna Trust and thus feeding 300 children every day, throughout the year.

The Group has also contributed in cash and kind to various NGOs like Goonj, through the Joy of Giving Week. We have collected items throughout India with different drives like collection of toys, stationery, toiletries and clothes every year for distribution towards the underprivileged.

The Group has sponsored education for 3 underprivileged children for consecutive two academic years.

The Group has also tied up with Light of Life Trust so as to provide books, study material, school kits etc to the kids.

The Group''s employees contribute by celebrating the festivities with the underprivileged and also volunteering by giving lectures, arranging workshops etc. and thereby developing the underprivileged.

Audit Committee

The Audit Committee presently comprises of Mr. Balkumar Agarwal (Chairman of the Committee), Mr. Raamdeo Agarawal, Mr. Vivek Paranjpe and Mr. Praveen Tripathi.

Remuneration / Compensation Committee

The Remuneration / Compensation Committee of the Board of Directors presently comprises of Mr. Vivek Paranjpe (Chairman of the Committee), Mr. Balkumar Agarwal and Mr. Motilal Oswal.

Shareholders / Investors'' Grievance Committee

The Shareholders / Investors Grievance Committee of the Board of Directors presently comprises of Mr. Balkumar Agarwal (Chairman of the Committee), Mr. Motilal Oswal and Mr. Raamdeo Agarawal.

Debenture Committee

The Debenture Committee of the Board of Directors presently comprises of Mr. Motilal Oswal, Mr. Raamdeo Agarawal, Mr. Navin Agarwal and Mr. Balkumar Agarwal.

Nomination Committee

The Nomination Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Raamdeo Agarawal.

Risk Management Committee

The Risk Management Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Navin Agarwal. Asset Liability Management Committee (ALCO)

The Asset Liability Management Committee (ALCO) of the Board of Directors presently comprises of Mr. Motilal Oswal (Chairman of the Committee), Mr. Raamdeo Agarawal, Mr. Navin Agarwal and Mr. Ajay Menon.

ESOP Committee

The ESOP Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Raamdeo Agarawal. Corporate Governance

A report on the Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance of conditions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement are annexed to this Report.

Auditors

Messrs. Haribhakti & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The members will be required to appoint Auditors for the current year and fix their remuneration.

Subsidiaries

The Company has the following subsidiary companies:

1 Motilal Oswal Securities Limited (MOSL).

2 Motilal Oswal Investment Advisors Private Limited

3 Motilal Oswal Private Equity Advisors Private Limited

4 Motilal Oswal Commodities Broker Private Limited

5 Motilal Oswal Insurance Brokers Private Limited

6 Motilal Oswal Capital Markets Private Limited (Subsidiary of MOSL)

7 Motilal Oswal Asset Management Company Limited (Subsidiary of MOSL)

8 Motilal Oswal Trustee Company Limited (Subsidiary of MOSL)

9 Motilal Oswal Wealth Management Private Limited (Subsidiary of MOSL)

10 Motilal Oswal Securities International Private Limited. (Subsidiary of MOSL)

11 Motilal Oswal Capital Markets (Hong Kong) Private Limited (Subsidiary of MOSL)

12 Motilal Oswal Capital Markets (Singapore) Pte. Limited. (Subsidiary of MOSL)

The Statement pursuant to section 212 of the Companies Act, 1956, containing details of the Company''s subsidiaries is attached herewith.

Fixed Deposits And Loans / Advances

The Company has not accepted any deposits from the public or employees during the year under review.

The particulars of loans / advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the company pursuant to Clause 32 of the Listing Agreement with the Company, are furnished separately.

Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outgo

In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 concerning conservation of energy and technology absorption respectively are not applicable to the Company.

There was no inflow of foreign exchange during the year under review. Details of the foreign exchange outflow are given in the notes to Accounts.

Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and Rules framed thereunder

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the Rules framed thereunder, the names and other particulars of employees are set out in the Annexure to the Directors'' Report. In terms of the provisions of Section 219(1) (b)(iv) of the Companies Act, 1956, the Directors'' Report is being sent to all the Shareholders of the Company excluding the aforesaid Annexure. The Annexure is available for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the said Annexure may write to the Company Secretary & Compliance Officer at the Registered Office of the Company.

Acknowledgments

Your Directors take this opportunity to thank the Authorities, Bankers, Shareholders and the Customers of the Company for their continued support to the Company. The Directors also place on record their sincere appreciation of the contributions made by every member of the MOFSL family for their dedicated efforts that made these results achievable.

For and on behalf of the Board

Motilal Oswal

Chairman & Managing Director

Mumbai, 27th April, 2013


Mar 31, 2012

The Directors have pleasure in presenting their 7th Report together with the audited Accounts of your Company for the year ended 31st March, 2012.

Financial Highlights

Summary of Financial results for the year is as under: - Motilal Oswal Financial Services Limited (Standalone)

Rs in million Year ended 31st Year ended 31st March, 2012 March, 2011

Income 819.48 643.41

Profit before Finance Cost and Taxation 671.17 576.80

Finance Cost (8.97) (11.42)

Profit before Taxation 662.20 565.38

Less : Provision for Taxation

Current Tax 88.85 126.65

Deferred Tax Asset 11.72 11.50

For previous year (s) (1.33) 0.63

Profit for the year 562.96 426.60

Balance brought forward from previous year 414.85 351.30

Profit Available for appropriation 977.81 777.90

Less: Appropriations

Transfer to Statutory Reserve (112.59) (85.32)

Proposed dividend/Interim Dividend (217.68) (202.26)

Dividend Distribution Tax 20.86 (32.81)

Transfer to General Reserve (45.04) (42.66)

Balance of Profit carried forward 623.36 414.85

Summary of Consolidated Financial results of the Company and its subsidiaries for the year is as under: -

Rs in million 31st March, 2012 31st March, 2011

Income 4655.27 6,007.57

Profit before Finance cost, Depreciation and Taxation and Exceptional Items 1561.99 2,294.98

Finance Cost (35.99) (56.64)

Depreciation (129.70) (131.28)

Profit before Taxation and Exceptional Items 1396.30 2,107.06

Exceptional Items 129.87 -

Profit before Taxation 1,526.17 2,107.06

Less : Provision for Taxation

Current Tax 442.26 672.47

Deferred Tax 45.16 32.97

Tax for the prior year (2.98) 6.57

Profit after tax before Minority Interest 1041.72 1395.05

Minority Interest in profits (2.86) (24.44)

Profit after tax and Minority Interest 1038.86 1370.60

Profit brought forward from previous year 5,029.57 4189.77

Profit available for the Appropriations 6,068.42 5560.37

Less: Appropriations

Transfer to Statutory Reserve & Capital Redemption Reserve (112.59) (91.32)

Proposed Dividend /Interim Dividend (217.77) (215.44)

Distribution tax on proposed/Interim Dividend (14.45) (67.60)

Transfer to General Reserve (126.56) (156.45)

Balance of Profit carried to Balance Sheet 5597.06 5029.57

Dividend

The Company at the Meeting of its Board of Directors held on 16th January, 2012, had declared an interim dividend of Rs 1.00 per Equity Share, out of the profits of the Company for the nine months ended 31st December, 2011 on 14,51,19,469 Equity Shares of Rs 1.00 each aggregating to Rs 14,51,19,469/- .

Keeping in view the overall performance during the year, your Directors are pleased to recommend a final dividend of Rs 0.50 per Equity Share on the face value of Rs 1.00 each aggregating to Rs 72,561,435, payable to those members whose names appear in the Register of Members as on the Book Closure Date. The dividend distribution tax will absorb a sum of Rs 11,771,279.

Results of Operations (MOFSL Standalone)

The standalone revenues for the year were Rs 819.48 million, a growth of 27% compared to Rs 643.41 million last year. Interest income went up by 14% to Rs 452.60 million, on account of an increase in the average loan book size. Income from arbitrage operations was lower as compared to last financial year due to non deployment of surplus fund in arbitrage business. Other income includes dividend from subsidiaries (including interim dividend declared in current year) Rs 346.29 million compared to Rs 134.06 million in the last year.

Due to higher operating expenses and provision created for Sub-Standard Assets, the total expenses (before depreciation and interest) registered a 109% jump to Rs 139.04 million this year. Profit before depreciation, interest, and taxation (EBITDA) increased by 18% this year, from Rs 576.88 million to Rs 680.44 million. With a reduction in the Company's average borrowing this year, interest and finance charges fell by 21%. The Company's net profit increased by 32% to Rs 562.96 million.

The detailed results of operations of the Company are given in the Management Discussion & Analysis forming part of this Report. Consolidated Results of Operations

The Consolidated Revenues of the Company for the year were Rs 4,655.27 million, a decline of 22.51% as compared to the previous year.

- Broking and related revenues declined by 25.7% to Rs 3,201.13 million this year. The dramatic shift towards the low-yield options segment continues through this year as well, contributing to 68% of total volumes, as compared to 57% a year back. The cash segment of the market (which is also the most profitable) registered a decline of 24% in the average daily volume at Rs 139.7 billion as compared to last year whereas the overall market volumes actually saw a growth of 7% in the same period. This disproportionate rise of low yielding options segment has resulted in a drop of our overall market share from 2.5% to 1.9% this year. As on 31st March, 2012, total client base has increased to 746,932 while Pan-India distribution reach stood at 1,579 business locations across 552 cities. Despite challenging market conditions we remain committed to building a strong franchise in the broking space and our efforts were recognized at several industry platforms.

- Investment banking fees fell by 78.4% to Rs 86.33 million this year. Poor performance of equity markets adversely impacted equity raising activities by both IPO and QIPs in the market. The global slowdown and uncertainty in the government policies clubbed with high borrowing costs, has had an adverse impact on the decision making by the corporates and investors, causing a slowdown in deal activities in the current year. However, the business is well aligned to arising market opportunities and the execution pipeline remains robust.

- Fund-based income for the year was Rs 822.2 million, a growth of 7.5%. This is attributable to growth in interest income due to higher average loan book this year.

- Asset management fees increased by 17.4% to R 503.53 million. The total assets under management/advice across mutual funds, PMS and private equity businesses was Rs 29.1 billion of which mutual funds AUM was Rs 4.5 billion, private equity AUA was Rs 11.0 billion and PMS AUM was Rs 13.6 billion. During the current year, the mutual fund business launches two new schemes - Gilt Fund and Gold ETF, which saw good investor participation. The private equity business announced the first closing of its new fund - India Business Excellence Fund II raising Rs 3.5 billion through a combination of domestic and offshore investors.

- Other income declined by 61.0% to Rs 42.08 million as compared to last year.

Total expenses for the year (before interest and depreciation) at Rs 3,093.29 million registered a 16.7% decline over last year. The decline in brokerage commission earned reduced the brokerage shared with intermediaries by 19.9% to Rs 1,164.33 million. People costs at Rs 1,138.57 million declined by 17.0% as compared to last year. Other operating costs which include facilities, marketing, communication, travel and other costs declined by 10.8% to Rs 790.38 million. The profit before depreciation, interest, exceptional items and taxation (EBITDA) decreased by 31.9% to Rs 1,561.99 million. EBITDA margin reduced from 38% to 34%.

Towards consolidation of office premises at the Corporate Headquarters at Prabhadevi, some of the existing office premises in South Mumbai area were sold during the current quarter for a profit of Rs 129.87 million.

Reported net profit for the year after minority interest stood at Rs 1,038.86 million, a decline of 24.2%.

The Consolidated Financial Statements of the Company and its subsidiaries prepared in accordance with 'Accounting Standard - 21' prescribed by The Institute of Chartered Accountants of India, form part of the Annual Report and the Accounts. The Balance Sheet, Profit and Loss Account, Reports of the Board of Directors and Auditors of the subsidiaries have not been attached with the Balance Sheet of the Company as per the general exemption provided under Section 212(8) of the Companies Act, 1956 by the Ministry of Corporate Affairs, issued vide General Circular No. 2/2011 dated 8th February, 2011.

The Company hereby undertakes that annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders of the holding and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the registered office of the Company and of the subsidiary companies concerned. The Company shall furnish a hard copy of details of accounts of subsidiaries to any shareholder on demand.

The detailed results of operations of the Company and its subsidiaries are given in the Management Discussion & Analysis forming part of this report.

Future Outlook

Indian Stock Markets had a muted year in 2011-12, due to rupee depreciation, high inflation and high interest rates. FII and retail participation have been weak due to un-exciting outlook. The valuations have corrected significantly and are at a reasonable level. Global equity markets had a better year, but India turned out to be the worst performing market in dollar terms.

Corporate earnings growth still looks to be in single digit for the current year. Lot of hope is built on the possibility of interest rate cuts in the quarters ahead. At our end, we are building-up all our businesses relentlessly, in such a way that we are ready to en-cash on any up-turn in the market.

Credit Rating

The Company enjoys the highest rating of 'A1 ' assigned by CRISIL Limited to the Short-term Debt Programme of Rs 1.5 billion of your Company. The rating indicates the highest degree of safety with regard to timely payment of interest and principal on the instrument.

CRISIL Limited also reaffirmed the rating of 'A1 ' to the Short-term Debt Programme of R 1billion of Motilal Oswal Securities Limited, a subsidiary of the Company.

Finance

During the year under review, to meet the working capital requirements, the Company had issued Commercial Papers.

Employees' Stock Option Schemes (ESOS)

Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure to this Report.

Directors

Mr. Praveen Tripathi was appointed as an Additional Director on 22nd July, 2011 by the Board of Directors. It would be required to appoint him as a Director by the Members at the forthcoming Annual General Meeting. The credentials of Mr. Praveen Tripathi is given in the Corporate Governance Report annexed herewith.

The Company has received a notice from a Member signifying his intention to propose the name of Mr. Praveen Tripathi for appointment as a Director of your Company at the forthcoming Annual General Meeting of the Company.

Mr. Navin Agarwal and Mr. Balkumar Agarwal retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment.

Directors' Responsibility Statement

Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the Profit of the Company for the year ended on that date;

(iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the annual accounts have been prepared on a going concern basis.

Audit Committee

The Audit Committee presently comprises of Mr. Balkumar Agarwal (Chairman of the Committee), Mr. Raamdeo Agrawal, Mr. Vivek Paranjpe and Mr. Praveen Tripathi.

Remuneration/Compensation Committee

The Remuneration/Compensation Committee of the Board of Directors presently comprises of Mr. Vivek Paranjpe (Chairman of the Committee), Mr. Balkumar Agarwal and Mr. Motilal Oswal.

Shareholders/Investors' Grievance Committee

The Shareholders/Investors Grievance Committee of the Board of Directors presently comprises of Mr. Balkumar Agarwal (Chairman of the Committee), Mr. Motilal Oswal and Mr. Raamdeo Agrawal.

Nomination Committee

The Nomination Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Raamdeo Agrawal.

Risk Management Committee

The Risk Management Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Navin Agarwal.

Asset Liability Management Committee (ALCO)

Asset Liability Management Committee (ALCO) of the Board of Directors presently comprises of Mr. Motilal Oswal (Chairman of the Committee), Mr. Raamdeo Agrawal, Mr. Navin Agarwal and Mr. Ajay Menon.

ESOP Committee

The ESOP Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Raamdeo Agrawal. Corporate Governance

A report on the Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance of conditions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement are annexed to this Report.

Auditors

Messrs. Haribhakti & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The members will be required to appoint Auditors for the current year and fix their remuneration.

Subsidiaries

The Company has the following subsidiary companies:

1 Motilal Oswal Securities Limited (MOSL).

2 Motilal Oswal Investment Advisors Private Limited

3 Motilal Oswal Private Equity Advisors Private Limited

4 Motilal Oswal Commodities Broker Private Limited

5 Motilal Oswal Insurance Brokers Private Limited

6 Motilal Oswal Capital Markets Private Limited (Subsidiary of MOSL)

7 Motilal Oswal Asset Management Company Limited (Subsidiary of MOSL)

8 Motilal Oswal Trustee Company Limited (Subsidiary of MOSL)

9 Motilal Oswal Wealth Management Private Limited (Subsidiary of MOSL)

10 Motilal Oswal Securities International Private Limited. (Subsidiary of MOSL) (incorporated during FY 2011-12 in India)

11 Motilal Oswal Capital Markets (Hong Kong) Private Limited (Subsidiary of MOSL) (incorporated during FY 2011-12 in Hong Kong)

12 Motilal Oswal Capital Markets (Singapore) Pte. Limited. (Subsidiary of MOSL) (incorporated during FY 2011-12 in Singapore)

The Statement pursuant to section 212 of the Companies Act, 1956, containing details of the Company's subsidiaries is attached herewith.

Fixed Deposits And Loans/Advances

The Company has not accepted any deposits from the public or employees during the year under review.

The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the Company, are furnished separately.

Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outgo

In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 concerning conservation of energy and technology absorption respectively are not applicable to the Company.

There was no inflow of foreign exchange during the year under review. Details of the foreign exchange outflow are given in the notes to Accounts.

Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and Rules framed thereunder

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the Rules framed thereunder, the names and other particulars of employees are set out in the Annexure to the Directors' Report. In terms of the provisions of Section 219(1)

(b)(iv) of the Companies Act, 1956, the Directors' Report is being sent to all the Shareholders of the Company excluding the aforesaid Annexure. The Annexure is available for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the said Annexure may write to the Company Secretary & Compliance Officer at the Registered Office of the Company.

Acknowledgments

Your Directors take this opportunity to thank the Authorities, Bankers, Shareholders and the Customers of the Company for their continued support to the Company. The Directors also place on record their sincere appreciation of the contributions made by every member of the MOFSL family for their dedicated efforts that made these results achievable.

For and on behalf of the Board

Motilal Oswal

Chairman & Managing Director

Mumbai, 25th April, 2012


Mar 31, 2010

The Directors have pleasure in presenting their 5th Report together with the audited Accounts of your Company for the year ended 3 1st March, 2010.

Financial Highlights

Summary of Financial results for the year is as under: -

Motilal Oswal Financial Services Limited (Standalone)

Rs. in million Year ended Year ended 31 st March, 31 st March, 2010 2009 Income 642.59 722.36 Profit before Interest and Taxation 601.56 683.33 Interest (28.46) (73.18) Profit before Taxation 573.10 610.15 Less : Provision for Taxation Current Tax 137.43 156.76 Deferred Tax 11.71 0.05 Fringe Benefit Tax - 0.22 Profit for the year 423.96 453.12 Balance brought forward from previous year 224.13 16.60 Profit Available for appropriation 648.09 469.72 Less: Appropriations Transfer to Statutory Reserve 84.79 90.62 Proposed dividend 171.81 113.62 Dividend Distribution Tax 6.27 5.10 Transfer to General Reserve 33.92 36.25 Balance of Profit carried forward 351.30 224.13

Dividend

Keeping in view the overall performance during the year, your Directors are pleased to recommend a dividend of Rs. 1.20 per Equity Share on the face value of Re. I each, being i 20% dividend, payable to those members whose names appear in the Register of Members as on the Book Closure Date. The Dividend and dividend distribution tax will absorb a sum of Rs. 178.08 million.

Results of Operations (MOFSL Standalone)

The Revenue for the year decreased by I 1.04% from Rs. 722.36 million to Rs. 642.59 million. The Profit before interest and taxation registered a decrease of I 1.97% and were down from Rs. 683.33 million to Rs. 601.56 million. The Companys net profit for the year is Rs. 423.96 million down from Rs. 453.12 million in the previous year, a decrease of 6.44% over the previous financial year.

The detailed results of operations of the Company are given in the Management Discussion & Analysis forming part of this Report. Subsidiary Companies and Consolidated Results of Operations

The subsidiary companies of your Company are moving on from strength to strength and contributing to the overall growth of your Company. These subsidiaries have created a niche for themselves with their excellent performance and are continuing to add to the shareholders value.

The Consolidated Group Profit for the year after exceptional items, prior period adjustments and tax and after deducting minority interests is Rs. 1,704.47 million as against Rs. 895.96 million earned last year - a growth of 90.24%. During the year under review, Motilal Oswal Securities Limited (MOSL), the Material Non-listed Subsidiary of the Company earned the revenues of Rs. 5,158.99 million and PAT of Rs. I 191.41 million. During the year under review, the market share of MOSL was 3.2% as against 4.2% in the previous financial year.

During the year under review, Motilal Oswal Insurance Brokers Private Limited became a subsidiary of the Company and Motilal Oswal Asset Management Company Limited and Motilal Oswal Trustee Company Limited became the subsidiary of MOSL and in turn of the Company. The Statement pursuant to section 212 of the Companies Act, 1956, containing details of the Companys Subsidiaries is attached.

The Consolidated Financial Statements of your Company and its subsidiaries prepared in accordance with Accounting Standard -21 prescribed by The Institute of Chartered Accountants of India, form part of the Annual Report and the Accounts. In terms of approval granted by the Central Government under section 212(8) of the Companies Act, 1956, copy of the Balance Sheet, Profit and Loss Account, Reports of the Board of Directors and Auditors of the subsidiaries have not been attached with the Balance Sheet of the Company. The Company Secretary & Compliance Officer will make these documents available upon receipt of request from any Member of the Company interested in obtaining the same. However, as directed by the Central Government, the financial data of the subsidiaries have been separately furnished forming part of the Annual Report. These documents will also be available for inspection at the Registered Office of the Company and the concerned subsidiary companies, during 2 p.m. to S p.m. on all working days upto the date of the Annual General Meeting.

The detailed results of operations of the Company and its subsidiaries are given in the Management Discussion & Analysis forming part of this report.

Credit Rating

The Company continued to enjoy the highest rating of PI + assigned by CRISIL Limited to the Short-term Debt Programme of Rs. 4 billion of your Company. The rating indicates the highest degree of safety with regard to timely payment of interest and principal on the instrument.

CRISIL Limited also reaffirmed the rating of PI + to the Short-term Debt Programme of Rs. 4 billion of Motilal Oswal Securities Limited, a subsidiary of the Company.

Finance

During the year under review, to meet the working capital requirements, the Company has issued Commercial Papers and Unsecured Non- convertible Debentures.

Employees Stock Option Schemes (ESOS)

Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure to this Report.

Directors

Mr. Raamdeo Agrawal was appointed as the Joint Managing Director of the Company by the Board of Directors, for a period of 5 years, with effect from 14th October, 2009, without any remuneration, subject to the approval of the Members in the ensuing Annual General Meeting of the Company. Mr. Agrawal is also the Joint Managing Director in Motilal Oswal Securities Limited, a material unlisted subsidiary of the Company.

Mr. Navin Agarwal and Mr. Balkumar Agarwal retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment.

Directors Responsibility Statement

Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 3 I st March, 2010 and of the Profit of the Company for the year ended on that date;

(iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the annual accounts have been prepared on a going concern basis.

Audit Committee

The Audit Committee presently comprises of Mr. Balkumar Agarwal (Chairman of the Committee), Mr. Ramesh Agarwal, Mr. Madhav Bhatkuly and Mr. Raamdeo Agrawal.

Remuneration/Compensation Committee

The Remuneration/Compensation Committee of the Board of Directors presently comprises of Mr. Ramesh Agarwal (Chairman of the Committee), Mr. Balkumar Agarwal and Mr. Motilal Oswal.

Shareholders/Investors Grievance Committee

The Shareholders/Investors Grievance Committee of the Board of Directors presently comprises of Mr. Balkumar Agarwal (Chairman of the Committee), Mr. Motilal Oswal and Mr. Raamdeo Agrawal.

Nomination Committee

The Nomination Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Raamdeo Agrawal.

Risk Management Committee

The Risk Management Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Navin Agarwal.

Corporate Governance

A report on the Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance of conditions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49 of the Listing Agreement are annexed to this Report.

Auditors

Messrs Haribhakti & Co., Chartered Accountants, retire as the Statutory Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. The members will be required to appoint the Statutory Auditors for the current year and fix their remuneration.

Fixed Deposits and Loans/Advances

The Company has not accepted any deposits from the public or employees during the year under review.

The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement with the Company, are furnished separately.

Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outgo

In view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 concerning conservation of energy and technology absorption respectively are not applicable to the Company.

There was no inflow of foreign exchange during the year under review. Details of the foreign exchange outflow are given in the notes to Accounts.

Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and Rules framed thereunder

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the Rules framed thereunder, the names and other particulars of employees are set out in the Annexure to the Directors Report. In terms of the provisions of Section 219( I )(b)(iv) of the Companies Act, 1956, the Directors Report is being sent to all the Shareholders of the Company excluding the aforesaid Annexure. The Annexure is available for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the said Annexure may write to the Company Secretary & Compliance Officer at the Registered Office of the Company.

Acknowledgements

Your Directors take this opportunity to thank the Authorities, Bankers of the Company, Shareholders and the Customers for their continued support to the Company. The Directors also place on record their sincere appreciation of the contributions made by every member of the MOFSL family for their dedicated efforts that made these results achievable.

For and on behalf of the Board

Motilal Oswal Chairman & Managing Director Mumbai, 19th June, 2010

 
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