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Directors Report of Motilal Oswal Financial Services Ltd.

Mar 31, 2017

To the Members

The Directors have pleasure in presenting their 12th Report together with the audited Financial Statements of your Company for the year ended 31st March, 2017.

Financial Highlights

The Financial Highlights for the year are as under:

Motilal Oswal Financial Services Limited (Standalone)

Rs. in Lakhs

Particulars

Year ended 31st March, 2017

Year ended 31st March, 2016

Total Revenue

14,235.71

11,086.10

Profit before Interest, Depreciation, Taxation and exceptional items

12,292.08

9,101.23

Interest

(3,638.08)

(2,952.64)

Depreciation

(693.61)

(802.14)

Profit before Taxation and exceptional items

7,960.39

5,346.45

Add/(Less): Exceptional Items

610.81

-

Profit before taxation

8,571.20

5,346.45

Add/(Less) : Provision for Taxation

Current Tax

(662.81)

(1,166.66)

Deferred Tax

(354.86)

494.85

Minimum Alternate Tax

790.46

-

Less : Tax for earlier year(s)

285.70

-

Tax Expenses

(58.49)

671.81

Profit after Taxation

8,629.69

4,674.64

Add: Balance brought forward from previous year

4,334.35

6,312.79

Profit Available for appropriation

8,629.69

4,674.64

Less: Appropriations

Transfer to Statutory Reserve

(1,725.94)

(934.95)

Interim Dividend/ Proposed dividend

(3,588.13)

(4,987.17)

Dividend Distribution Tax

(730.45)

(1,012.76)

Credit of Dividend Distribution Tax

-

281.80

Balance of Profit carried forward

6,919.52

4,334.35

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 Lakhs

Particulars

Year ended 31st March, 2017

Year ended 31st March, 2016

Total Revenue

180,870.87

108,064.10

Profit before Interest, Depreciation, Taxation and exceptional items

91,946.86

43,324.46

Interest

44,225.82

17,376.61

Depreciation

3,283.83

3,494.28

Profit before Taxation and exceptional items

44,437.60

22,453.57

Add: Exceptional Items

6,125.03

-

Profit before taxation

50,562.23

22,453.57

Add/(Less) : Provision for Taxation

Current Tax

(13,610.74)

(6,566.86)

Deferred Tax

(3,096.94)

581.23

Minimum Alternate Tax

1,458.24

(151.05)

Less: Tax for earlier year (s)

(1,140.63)

(15.00)

Tax Expenses

14,108.82

6,121.68

Profit after Taxation, before minority Interest

36,453.41

16,331.89

Minority interest in profits

(1,060.25)

(255.37)

Share of profit from Associates

603.87

831.08

Profit after Taxation and minority Interest

35,997.03

16,907.60

Balance brought forward from previous year

77,615.78

6,8117.69

Profit Available for appropriation

113,612.81

8,5025.30

Add/(Less): Appropriations

Transfer to Statutory Reserve

(3,378.80)

(1,730.51)

Interim Dividend/ Proposed dividend

(3,588.13)

(4,974.83)

Dividend Distribution Tax

(730.45)

(730.96)

Capital Redemption Reserve

(840.00)

-

Prior Year dividend, dividend distribution and other adjustments

19.03

(12.31)

Prior Year Adjustments

-

40.54

Balance of Profit carried forward

105,094.46

77,617.22

State of Company’s Affairs

Results: MOFSL Standalone

During the year under review, the standalone revenues for the year were RS.142.36 crores, increase of 28.41% as compared to RS.110.86 crores last year. Interest income declined 18.91% to RS.43.69 crores. Dividend income from subsidiary companies was RS.48.53 crores, as compared to RS.13.98 crores in the previous year. Profit on sale of investments was RS.30.21 crores, as compared to RS.27.81 crores last year. Rent income was RS.17.21 crores in FY2017, up 28.67%. Other operating income was RS.1.81 crores in FY2017, while other income was RS.90.07 lakhs.

Total expenses (before depreciation, interest and exceptional items) decreased during the year, from RS.19.84 crores a year back to RS.19.44 crores this year. Profit before depreciation, interest, exceptional item and taxation (EBITDA) increased by 35.06% this year, from RS.91.01 crores to RS.122.92 crores. Interest and finance charges increased from RS.29.53 crores to RS.36.38 crores.

Reported net profit increased by 84.60% to RS.86.30 crores. MOFSL Standalone’s commitments to our own mutual fund products stood at RS.381.51 crores, as of March 2017. The unrealized gain on these investments is RS.195.56 crores as of March 2017. The same is not reflected in the profit and loss account for the year.

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 for the year were RS.1818.32 crores for the year under review, an increase of 66.25% as compared to the previous year.

- Broking revenues increased by 30.04% to RS.661.67 crores. Average daily volumes in the equity markets were RS.4.07 lakh crores in FY2017, up 35.27% from last year. Cash market volumes were up 22.52% YoY to RS.24,687.58 crores. Within cash, delivery was up 33.12% YoY to RS.8,075.90 crores. Also, cash volumes were 83.94% higher than the average seen between FY2012-14. Delivery volumes were 106.78% higher than the FY2012-14 average. Within derivatives, futures rose up 24.73% YoY to RS.62,623.52 crores. This year, options were up 38.68% YoY to RS.3.19 lakh crores, a reversal from last year when options were dipped in the overall market volumes. Amongst cash market participants, prop saw a decline of 2.43% YoY while retail was up 38.54% YoY. DII cash volumes increased 30.66% YoY, led by renewed interest in equity mutual funds from retail/HNI investors. The proportion of retail within cash volumes increased from 48.88% to 55.27% YoY while that of DII increased from 8.67% to 9.25% YoY. Our overall equity market share increased from 1.96% to 2.10% on a YoY basis. Due to our continued focus and investments into this business, we succeeded in capturing a larger chunk of the incremental volumes this year across both cash and derivatives. As of March 2017, our client base included more than 850,000 retail broking and distribution clients and 630 institutions. Our Pan-India distribution reach stood at 2,200 business locations across 588 cities. Our depository assets was RS.44,962.52 crores, up 75.78% YoY, and distribution AUM was RS.4,392.98 crores, up 147.08% YoY.

- Investment banking fee saw a 254.20% growth over the previous year, to RS.85.52 crores. The IPO & QIP transactions gathered significant momentum this year. FY2017 saw the business clock it’s all time high revenues since inception.

- Asset management fees also saw significant traction, increasing 67.59% to RS.375.11 crores, as compared to last year. Total assets under management/advice across mutual funds, PMS and private equity businesses was RS.23,375.76 crores, up 76.10% YoY. Within this, the mutual fund AUM was RS.9,289.82 crores, PMS AUM was RS.10,473.22 crores, AIF AUM was RS.539.72 crores and private equity AUA was RS.3,073.00 crores. The company saw increased mobilization into its open-end equity mutual fund products and PMS products. In the private equity business, the 3rd real estate fund - India Realty Excellence Fund III, achieved its first close.

- Housing finance related income increased by 159.91% to RS.570.53 crores as the business gained traction this year in terms of clients, network, banking lines and loan book. HFC loan book was RS.4,141.33 crores, as compared to RS.2,087.24 crores last year.

- Fund based income increased by 4.14% to RS.117.41 crores. In line with the long term strategy to grow Return on Equity sustainably, MOFSL made strategic allocation of capital to long term RoE enhancing opportunities like Aspire Home Finance and sponsor commitments to mutual fund and private equity funds of MOFSL group. The NBFC loan book, previously run from equity capital, is now being run as a spread business. The year also included profit earned on exits in the Private Equity fund in which MOFSL made sponsor commitments.

- Other income increased by 72.84% YoY to RS.8.07 crores.

Total expenses (before interest and depreciation) for the year at RS.889.23 crores registered a 37.36% jump over last year. People cost increased by 35.87% to RS.340.98 crores. This was largely owing to an increase in hiring in housing finance business. Operating expenses increased by 53.17% to RS.356.12 crores. Other costs were RS.192.13 crores, an increase of 17.19% over last year. The profit before depreciation, interest, exceptional items and taxation (EBITDA) increased by 108.17% to RS.929.09 crores.

Reported net profit for the year after minority interest stood at RS.359.99 crores, an increase of 112.91%.

MOFSL group’s commitments to our own mutual fund products stood at RS.642.95 crores, as of March, 2017. The unrealized gain on these investments is RS.333.91 crores, as of March 2017. The same is not reflected in the profit and loss account for the year. MOFSL group’s commitments to our alternative investment products stood at RS.257.00 crores, as of March, 2017.

Future Outlook

To sum up, our strategy to diversify our business model towards more annuity sources of earnings is showing definite results. The annuity nature of earnings in the new businesses like asset based businesses and housing finance business has brought in visibility of our earnings. Our businesses built scale during FY2017, while maintaining operating parameters. Our brand is now being recognized across each of our businesses. We achieved a 20% ROE in FY2017, and are well on course to achieve this on a sustainable basis. The opportunity size in all our business segments is still huge, and our businesses are well placed to benefit from the growth potential they offer.

Credit Rating

During the year, CRISIL Limited reaffirmed the Credit Rating of “CRISIL A1 ”to the Commercial Programme of RS.250 crores of the Company. ICRA Limited assigned the credit rating of [ICRA] AA” Rating with a stable outlook to the NCD Programme of RS.150 crores of the Company. ICRA Limited assigned the credit rating of [ICRA] AA” Rating with a stable outlook to the NCD Programme of RS.50 crores of Motilal Oswal Securities Limited (MOSL), a wholly owned subsidiary of the Company. CRISIL Limited also reaffirmed the Credit Rating of “CRISIL A1 ”to the Commercial Programme of RS.700 crores of MOSL. The ratings indicate a very strong degree of safety regarding timely servicing of financial obligations. ICRA Limited assigned the credit rating of [ICRA]A1 to the Commercial Paper Programme of RS.700 crores of Aspire Home Finance Corporation Limited (AHFCL), material step down subsidiary of the Company. ICRA Limited assigned the long term credit rating of [ICRA]AA- with a Stable Outlook and CRSIL Limited assigned “CRISIL A /Stable” Rating to the NCD Programme of RS.500 crores of AHFCL.

Dividend and Reserves

The Company at the Meeting of its Board of Directors held on 30th January, 2017, had declared an interim dividend of RS.2.50 per Equity Share, out of the profits of the Company for the third quarter and nine months ended 31st December, 2016 on 14,35,25,725 Equity Shares of R 1.00 each aggregating to RS.35,88,14,313/-.

As per the requirement of the Reserve Bank of India Guidelines, your Company has transferred a sum of RS.17.26 crores to the Statutory Reserves. Further, during the year under review, the Company has not transferred any amount to the General Reserves.

Share Capital

During the year under review, the Company allotted 22,83,401 equity shares under various employee stock option schemes of the Company.

Accordingly, the paid up share capital of the Company as on 31st March, 2017 is RS.14,44,57,476 (Rupees Fourteen Crores Forty Four Lakhs Fifty Seven Thousand and Four Seventy Six only).

The Company has redeemed 500 Series A Secured Redeemable Non-Convertible Debentures of RS.10 lakhs each amounting to RS.50 crores during the year 2016-2017.

The disclosures in compliance with Section 62 of the Companies Act, 2013 read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014, SEBI (Share Based Employee Benefits) Regulations, 2014 are set out to the report as “Annexure 1”.

The Employee Stock Option Scheme is administered by the Nomination and Remuneration/Compensation Committee of the Board of the Company, in accordance with the applicable SEBI (Share Based Employee Benefits) Regulations, 2014.

Fixed Deposits

Since your Company is the non deposit taking Non Banking Financial Company, it has not accepted any deposits under Chapter V of Companies Act, 2013 during the year under review.

Subsidiaries

During the year under review, Motilal Oswal Investment Advisors Limited, subsidiary of the Company, became Public Limited Company on 31st March, 2017. Motilal Oswal Capital Limited was incorporated on 19th September, 2016 as Wholly Owned Subsidiary of Motilal Oswal Asset Management Company Limited.

Further, Motilal Oswal Securities Limited (MOSL), material wholly owned subsidiary of the Company has issued and allotted 500 Non Convertible Debentures (NCDs) of face value ofRS.10 lakhs each aggregating to RS.50 crores, on private placement basis during the said financial year. The said debentures are listed on BSE Limited. Pursuant to the listing of said debentures, MOSL is now categorized as listed entity as per Listing Regulations, 2015.

Accordingly, as on March 31, 2017, the Company has the following subsidiary companies:

Sr. No. Name of the subsidiaries

1. Motilal Oswal Securities Limited (MOSL)

2. Motilal Oswal Investment Advisors Limited

3. MOPE Investment Advisors Private Limited (MOPE)

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 (MOAMC) (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 (MORE)

(Subsidiary of MOPE Investment Advisors Private Limited)

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

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

17. Motilal Oswal Asset Management (Mauritius) Private Limited (Subsidiary of MOAMC)

18. Motilal Oswal Capital Limited (Subsidiary of MOAMC)

The policy for determining material subsidiaries as approved by the Board is displayed on the Company’s website at www.motilaloswalgroup.com.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing salient features of financial statement of subsidiaries in Form AOC-1 is annexed to the Financial Statement in the Annual Report. Your Company will also make available copy of separate audited financial statement in respect of each of the subsidiary companies upon request by any Member of the Company interested in obtaining the same. In accordance with section 136 of the Companies Act, 2013, the separate audited financial statement in respect of each of the subsidiary companies is also available on the website of your Company at www.motilaloswalgroup.com. These documents will also be available for inspection till the date of AGM during the business hours at our registered office of the Company.

The financial performance of each of the subsidiary included in the consolidated financial statement of your Company is annexed herewith to this Report as “Annexure 2”.

Directors and Key Managerial Personnel

Directors

The Company has 6 (Six) Directors comprising of 1 (One) Chairman, Managing Director & Chief Executive Officer, 1 (One) Joint Managing Director, 1 (One) Non-executive Director and 3 (Three) Independent Directors.

Mr. Navin Agarwal retires by rotation at the forthcoming Annual General Meeting and being eligible, offer himself for reappointment. The details of Mr. Navin Agarwal is stated in the notice of the Annual General Meeting of the Company.

The Company has received necessary declarations from Mr. Vivek Paranjpe, Mr. PraveenTripathi and Ms. Sharda Agarwal, Independent Directors of the Company under section 149(7) of the Companies Act, 2013.

In accordance to the provisions of Companies Act, 2013, Mr. Vivek Paranjpe, Mr. Praveen Tripathi and Ms. Sharda Agarwal were appointed as Independent Directors of Company for the period of 3 years for holding office as Independent Director from the conclusion of 9th Annual General Meeting (AGM) till the conclusion of ensuing 12th Annual General Meeting (AGM). Pursuant to recommendation of Nomination and Remuneration/Compensation Committee and based on the performance evaluation report, members of the Board recommended their reappointment in Board meeting dated 27th April, 2017, subject to approval of the members for the second term of three years for holding office as Independent Director of the Company from conclusion of forthcoming AGMtill the conclusion of 15th AGM of the Company.

The Appropriate resolutions for the appointment/re-appointment of Directors as detailed in the notice of forthcoming AGM would be placed for your approval at the forthcoming AGM.

Key Managerial Personnel

In accordance to the provisions of Companies Act, 2013, Mr. Motilal Oswal, Chairman, Chief Executive Officer and Managing Director, Mr. Raamdeo Agarawal, Joint Managing Director, Mr. Shalibhadra Shah, Chief Financial Officer and Mr. Murli Krishnan Iyer, Company Secretary and Compliance Officer are Key Managerial Personnel of the Company.

Mr. Shalibhadra Shah has been appointed as the Chief Financial Officer of the Company with effect from 27th April, 2017 in place of Mr. Sameer Vasudev Kamath who stepped down from the position of Chief Financial Officer with effect from 27th April, 2017. Further, in accordance to the provisions of Section 203 of the Companies Act, 2013, Mr. Shah has also been designated as Key Managerial Personnel of the Company.

Committees of the Board

The details of all the Committees of the Board along with their charters, composition and meetings held during the year, are provided in the Report on Corporate Governance which forms part of this Annual Report. The Board has accepted all the recommendations of the Audit Committee.

Corporate Social Responsibility (CSR)

The Company, Motilal Oswal Financial Services Limited recognizes the responsibilities towards society and strongly intends to contribute towards development of knowledge based economy.

The Company has also framed the Corporate Social Responsibility (CSR) Policy containing the details of activities to be undertaken under CSR, prohibited activities under CSR, CSR Projects and Implementation Schedule, Budgeting and Allocation of funds, monitoring and evaluation of CSR activities.

As the part of the initiatives under Corporate Social Responsibility, during the year under review, the Company has made contribution in area of education and drought relief. The details of contribution is stated in Annual Report on CSR activities as annexed herewith to this Report as “Annexure 3”.

The Company has made direct contribution and also through Motilal Oswal Foundation, a not-for-profit charitable company incorporated under Section 25 of the Companies Act, 1956.

Further, Motilal Oswal Foundation has also executed the Memorandum of Understanding with Kalinga Institute of Social Sciences (KISS) for construction of residential school for tribal students.

Performance Evaluation

Pursuant to the provisions of section 134(3)(p) of the Companies Act, 2013 and Schedule IV of the Companies Act, 2013 and in accordance to Regulation 17(10), 25(4) of the Listing Regulations, 2015, the Board has carried out the annual performance evaluation of the Board as a whole, various Committees of the Board and of the Directors. The performance evaluation of the Independent Directors was carried out by the entire Board. The Directors expressed their satisfaction with the evaluation process. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report annexed to this Report.

A declaration to the effect that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 has also been received from Independent Directors of the Company.

The Board and the Nomination and Remuneration /Compensation Committee reviewed the performance of the individual Directors on the basis of the criteria such as Transparency, Performance, etc.

In a separate meeting of Independent Directors, performance of non-independent Directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of the executive directors and nonexecutive directors. The same was discussed in the Board meeting that followed the meeting of independent directors, at which the performance of the Board, its committee and individual Directors was also discussed.

Corporate Governance

A separate report on Corporate Governance is annexed to this Report. The certificate received from the Auditors of the Company confirming compliance to the conditions of Corporate Governance as stipulated in Regulation 34 and Schedule V to the Listing Regulations, 2015, is annexed to Report on Corporate Governance.

Management Discussion and Analysis

The Management Discussion and Analysis Report for the year under review as stipulated in Regulation 34 of the Listing Regulations, 2015 is annexed to this Report.

Vigil Mechanism / Whistle Blower Policy

The Company has established the Vigil Mechanism/Whistle Blower Policy for the Directors and employees for reporting the genuine concerns or grievances, significant deviations from key management policies and reports any non-compliance and wrong practices, e.g., unethical behavior, fraud, violation of law, inappropriate behavior / conduct etc.

The functioning of the vigil mechanism is reviewed by the Audit Committee from time to time. None of the Directors or employees have been denied access to the Audit Committee of the Board.

The Vigil Mechanism/Whistle Blower Policy is uploaded on the Website of the Company at www.motilaloswalgroup.com.

Business Responsibility Report

In accordance with the provisions of SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2015, the Company has prepared the Business Responsibility Report for initiatives taken by the Board from an environmental, Social and Governance perspective.

The Company has also constituted the Business Responsibility Committee to overview the Business Responsibility Report and frame and overview such polices as may be required from time to time.

The separate Business Responsibility Report is annexed to this Report and said Report is also uploaded on the website of the Company at www.motilaloswalgroup.com.

Dividend Distribution Policy

In pursuant to the provisions of SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2015, the Company has framed the Dividend Distribution Policy including the various parameters as stated in the regulations.

The dividend distribution policy is annexed to this report as “Annexure 9” and said Policy is also uploaded on the website of the Company at www.motilaloswalgroup.com.

Business Risk Management

The Company realizes the importance of Enterprise Risk Management (ERM) framework and had taken early initiatives towards its implementation.

A systematic approach has been adopted that originates with the identification of risk, categorization and assessment of identified risk, evaluating effectiveness of existing controls and building additional controls to mitigate risk and monitoring the residual risk through effective Key Risk Indicators (KRI).The implementation is being carried out in phased manner with the objective to encompass the entire line of businesses.

Effective ERM involves a robust implementation of three lines of defense-first line of defense is the front-line employees, the second line of defense is the risk and compliance function and the third line of defense is external and internal auditors. To build an effective risk culture significant effort has been made towards robustness of these lines of defense.

In the opinion of Board, there are no elements of risks threatening the existence of the company.

Internal Financial Controls

The Internal Financial Controls with reference to financial statements as designed and implemented by the Company are adequate. The Internal Financial Control procedure adopted by the Company are adequate for safeguarding its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. During the year under review, the Internal Financial Controls were operating effectively and no material or serious observation has been received from the Auditors of the Company for inefficiency or inadequacy of such controls.

Particulars of Loans, Guarantees or Investments

Your Company being the Non Banking Financial Company having the principal business of providing loans is exempted from the provisions of Section 186 of the Companies Act, 2013 to the extent of providing loans, giving guarantee and providing security in connection with loan.

However, the details of investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in note no. 11 to the financial statement.

The particulars of loans / advances in the nature of loans to subsidiaries required to be disclosed in the annual accounts of the Company as stipulated in Regulation 34 and Schedule V to the Listing Regulations, 2015 are annexed to the financial statement in the Annual Report.

Related Party Transactions

All related party transactions entered into during the financial year were on an arm’s length basis and in the ordinary course of business.

All Related Party Transactions were placed before the Audit Committee for prior approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of unforeseen or repetitive in nature. The details of all such related party transactions entered into pursuant to the omnibus approval of the Committee, were placed before the Audit Committee on a quarterly basis for its review.

Details of particulars of material contracts or arrangements or transactions entered into by the Company under section 188(1) of the Companies Act, 2013, with related parties in form AOC-2 are provided in “Annexure 4” as required under Section 134(3)(h) of Companies Act, 2013 and Rules made there under.

The policy on Materiality of Related Party Transactions as approved by the Board is uploaded on the Company’s Website at www.motilaloswalgroup.com.

Statutory Auditors

Your Company has appointed M/s. Haribhakti & Co. LLP, Chartered Accountants, as Statutory Auditors for the period of three years at its Annual General Meeting held on 22nd August, 2014. However, it was mandatory for the Company to rotate the Statutory Auditors of the Company on completion of maximum term under Section 139 of Companies Act, 2013. Hence due to expiry of term of existing Auditor of the Company, in accordance to the provisions of Section 139 of Companies Act, 2013 the members of the Audit Committee and Board in its Meeting on 27th April, 2017, recommended the appointment of M/s. Walker Chandiok & Co. LLP (Auditing arm of Grant Thornton) as Statutory Auditor of the Company, for the period of five years to hold the office from the conclusion of 12th AGM till the conclusion of 17th AGM of the Company. Accordingly, the members will be required to approve the terms & conditions ofappointment including remuneration in consultation with Auditors.

There were no qualifications, reservations, adverse remarks or disclaimers in the report of Statutory Auditors of the Company.

Secretarial Audit

In accordance with the provisions of Section 204 of the Companies Act, 2013 read with rules there under, the Company had appointed M/s. U. Hegde and Associates, Practicing Company Secretaries, for conducting the secretarial audit of the Company for the Financial Year 2016-17.

There were no qualifications, reservations, adverse remarks or disclaimers in the Secretarial Audit Report of the Company.

The secretarial audit report is annexed to this Report as “Annexure 5”.

Particulars of employees as required under Section 197 of the Companies Act, 2013 and Rules framed there under

In accordance with the provisions of Section 197(12) of Companies Act, 2013, the ratio of the remuneration of each Director to the median employee’s remuneration and other details in terms of sub-section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as “Annexure 6”.

In accordance with the provisions of Section 197 of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the annexure pertaining to the names and other particulars of employees 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.

Directors’ Responsibility Statement

Pursuant to Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, your Directors confirms that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. the directors had 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 at the end of the financial year and of the profit and loss of the Company for that period;

c. the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. the directors had prepared the annual accounts on a going concern basis;

e. the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f. the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Extract of Annual Return

The details forming part of extract of annual return of the Company in Form MGT 9 is annexed herewith to the report as “Annexure 7”.

Number of Board Meetings

Four Board Meetings were held during the year under review. The details of such Board Meetings are stated in Corporate Governance Report forming part of this Annual Report.

Significant and Material Orders

There were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and company’s operations in future during the year 31st March, 2017.

Material changes and commitments, affecting the financial position of the Company

There have been no material changes and commitments, affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this Report.

Nomination and Remuneration Policy

The Board has on the recommendation of Nomination and Remuneration/Compensation Committee framed a policy on Directors’ appointment and remuneration of Directors including criteria for determining qualification, positive attributes, independence of directors and remuneration for Directors, Key Managerial Personnel and other employees. The policy is annexed to this report as “Annexure 8”.

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, Rule 8(3) of the Companies (Accounts) Rules, 2014 concerning conservation of energy and technology absorption respectively are not applicable to the Company.

There was no inflow or outflow of foreign exchange during the year under review.

Transfer of Shares pertaining to Unclaimed / Unpaid Dividend to Investor Education and Protection Fund

Pursuant to Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the shares of the shareholders in respect of whom the dividend is unpaid/unclaimed for seven consecutive years are required to be transferred to Investor Education and Protection Fund (IEPF) after giving an opportunity to shareholders to claim the said unpaid/unclaimed dividend.

Accordingly, Company issued the reminder letters to such shareholders to claim the dividend and also published the notice to such effect in the leading newspaper in English and regional language having wide circulation and accordingly informed them that in the event of failure to claim said dividend, the unpaid/unclaimed dividend along with shares pertaining to unpaid/unclaimed dividend would be transferred to IEPF.

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 of

Motilal Oswal Financial Services Limited

Motilal Oswal

Chairman & Managing Director

(DIN:00024503)

Mumbai, 27th April, 2017


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, 2011

The Directors have pleasure in presenting their 6th Report together with the audited Accounts of your Company for the year ended 31st March, 2011.

Financial Highlights

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

Motilal Oswal Financial Services Limited (Standalone)

Rs. in Crores Year ended Year ended 31st March, 2011 31st March, 2010

Income 64.25 64.26

Profit before Interest and Taxation 57.70 60.16

Interest (1.16) (2.85)

Profit before Taxation 56.54 57.31

Less : Provision for Taxation

Current Tax 12.73 13.74

Deferred Tax Asset 1.15 1.17

Profit for the year 42.66 42.40

Balance brought forward from previous year 35.13 22.41

Profit Available for appropriation 77.79 64.81

Less: Appropriations

Transfer to Statutory Reserve 8.53 8.48

Proposed Dividend 20.23 17.18

Dividend Distribution Tax 3.28 0.63

Transfer to General Reserve 4.27 3.39

Balance of Profit carried forward 41.48 35.13

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

Rs. in Crores 31st March, 2011 31st March, 2010

Income 600.37 645.32

Profit before Interest, Depreciation and Taxation and Exceptional Items 229.56 276.98

Interest (5.69) (9.62)

Depreciation (13.13) (14.19)

Profit before Taxation and Exceptional Items 210.74 253.17

Exceptional Items – 0.06

Profit before Taxation 210.74 253.23

Less : Provision for Taxation

Current Tax 67.25 80.19

Deferred Tax Asset / (Liability) 3.30 (1.79)

Wealth Tax 0.03 0.02

Tax for the prior year 0.66 0.39



Profit after tax before Minority Interest 139.50 174.42

Minority Interest in profits (2.44) (3.97)

Profit after Tax and Minority Interest 137.06 170.45

Profit brought forward from previous year 418.98 282.09

Profit available for the Appropriations 556.04 452.54

Less: Appropriations

Transfer to Statutory Reserve & Capital Redemption Reserve 9.13 8.48

Pre acquisition (Profits) / Loss – (0.51)

Proposed Dividend 21.54 17.18

Distribution tax on Proposed Dividend 6.76 2.85

Transfer to General Reserve 15.64 5.56

Balance of Profit carried to Balance Sheet 502.96 418.98

Dividend

Keeping in view the overall performance during the year, your Directors are pleased to recommend a dividend of Rs. 1.40 per Equity Share on the face value of Rs. 1 each being 140% 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. 23.5 crores.

Results of Operations (MOFSL Standalone)

The standalone revenues for the year were Rs. 64.25 crores, largely flat as compared to Rs. 64.26 crores last year. Interest income went up by 55% to Rs. 39.66 crores, on account of an increase in the average loan book size, as well as participation in certain IPO financing transactions for the Coal India, Power Grid and MOIL issues. Income from arbitrage operations was lower as compared to last financial year due to lower deployment of surplus funds in arbitrage.

Due to higher operating expenses and provisioning for standard loan assets as required by the RBI, the total expenses (before depreciation and interest) registered a 59.44% jump to Rs. 6.54 crores this year. Profit before depreciation, interest, and taxation (EBITDA) decreased by 4.07% this year, from Rs. 60.16 crores to Rs. 57.71 crores. With a reduction in the Companys average borrowing this year, interest and finance charges fell by 59.40%. Hence, the Companys net profit increased marginally by 0.62% to Rs. 42.66 crores.

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. 600.37 crores, a decline of 6.97% as compared to the previous year.

– Broking and related revenues declined by 4.78% to Rs. 433.37 crores this year. The market volumes have seen a dramatic shift towards the low-yield options segment which contributed 57% of total volumes, as compared to 37% a year back. This disproportionate rise of low yielding options segment has resulted in a drop of our overall market share from 3.2% to 2.5% this year. However, our market share in the cash segment remains stable. As of 31st March, 2011 we had a total of 709,041 customers, including 628,012 retail and distribution clients. Our retail distribution stands at 1,644 outlets across 611 cities.

– Investment banking fees fell by 38.70% to Rs. 39.81 crores this year. This is attributed to revenue booking on few deals in advanced stages of execution getting postponed to the next year. However, the deal pipeline remains robust for the next year.

– Fund-based income for the year was Rs. 73.79 crores, a growth of 13.73%. This was boosted by a 53.89% growth in interest income to Rs. 38.94 crores, as a result of the increase in the average loan book size this year.

– Asset management fees increased by 6.66% to Rs. 42.73 crores. With Rs. 374 crores of assets managed under our three ETFs, the mutual fund fees increased this year. PMS fees went up by 18.08% to Rs. 29.28 crores, as PMS assets grew from Rs. 981.7 crores to Rs. 1,258.4 crores this year.

– Other income declined by 47.45% to Rs. 10.67 crores, as the previous year included profit on sale of investments of Rs. 11.23 crores.

Total expenses remained largely flat for the year, at Rs. 370.81 crores. The decline in brokerage commission earned reduced the brokerage shared with intermediaries by 10.95% to Rs. 138.96 crores. On the other hand, other operating costs and marketing/ brand promotion expenses increased, due to the launch of the three mutual funds this year. Due to the lower revenues and constant costs level this year, Profit before depreciation, interest, exceptional items and taxation (EBITDA) decreased by 17.12% to Rs. 229.56 crores. EBITDA margin reduced from 43% to 38%. Net profit for the year after minority interest stood at Rs. 137.06 crores, a decline of 19.59%.

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 capital markets witnessed a challenging year with volatile FII net flows, muted retail participation in equities, growing shift towards low-yielding options and lower value of ECM deals. These were reflected in the overall market performance as well as in our own business performance.

We strongly believe that India is a great growth story and is likely to become a US$ 5 trillion economy by 2020. Backed by strong savings, there would be tremendous growth opportunities for the firms operating in the financial services space.

During the current year, we have laid a strong foundation for each of our business to scale up and grab a meaningful share of these opportunities.

Credit Rating

The Company continues to enjoy the highest rating of ‘P1+ assigned by CRISIL Limited to the Short-term Debt Programme of Rs. 400 crores 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 ‘P1+ to the Short-term Debt Programme of Rs. 400 crores 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. Ramesh Agarwal and Mr. Madhav Bhatkuly, Independent Directors retire by rotation at the forthcoming Annual General Meeting and due to their respective preoccupations do not offer themselves for re-appointment.

The Board of Directors re-appointed Mr. Motilal Oswal as the Managing Director of the Company, for a further period of 5 years, with effect from 18th January, 2011, subject to the approval of the Members at the forthcoming Annual General Meeting of the Company.

Mr. Vivek Paranjpe was appointed as an Additional Director on 28th January, 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.

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, 2011 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. Balkumar Agarwal (Chairman of the Committee), Mr. Ramesh 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 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.

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.

Acknowledgements

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, 30th April, 2011


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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