kotak_mahindra_group_0 by jizhen1947

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									MACRO-ECONOMIC AND INDUSTRY DEVELOPMENTS                                           February 2008 indicates a gradual deceleration in housing and real estate
                                                                                   loans to 12.0% (25.8% last year) and 26.7% (79% last year) respectively.
India continued to grow at a rapid pace in 2007-08, albeit slightly slower         On the other hand, there was a sizeable increase in loans to areas such as
than in the previous financial year. The advance estimates from the Central        infrastructure, food processing and engineering.
Statistical Organization placed the rise in GDP for 2007-08 at 8.7%,
compared to a rise of 9.6% in 2006-07. Agriculture and allied activities           Reserve money increased by 30.9%, much higher than 23.7% in the
clocked a growth of 2.6% in 2007-08 (3.8% in the last year) while                  previous year. Among the sources of reserve money, the Reserve Bank’s
industry GDP slowed to 8.6% in 2007-08 (10.6% in 2006-07). Services                foreign currency assets (adjusted for revaluation) increased sharply by
sector grew by 10.6% in 2007-08 as against 11.2% a year ago.                       Rs. 3,70,550 crore as compared with the increase of Rs. 1,64,601 crore
                                                                                   in the previous year. RBI used a combination of LAF, Market Stabilization
The Index of Industrial Production (IIP) rose by 8.7% in April-February            Scheme and CRR increases (raised by 150 bps in 2007-08) to moderate
2007-08 as against 11.2% a year ago. The growth in output of the                   the huge surge in rupee liquidity resulting out of dollar buying by the RBI
manufacturing sector was at 9.1% in the first 11 months of FY08, slower            to prevent a significant appreciation in the Indian Rupee against the USD.
than 12.2% recorded in the same period last year. The industry groups that         Consequent to the use of instruments to moderate rupee liquidity, the
registered slower growth in 2007-08 were textiles, paper and products,             growth in the Money Supply (M3) was restricted to 20.7% in 2007-08 as
non-metallic mineral products and transport equipments and parts. On               against 21.5% rise in 2006-07.
the other hand, while mining grew by 5.1% (5.0% last year), electricity
generation rose by 6.6% (7.2% last year).                                          Inflation flared near to the close of FY08 to end the year at 7.4% compared
                                                                                   to 5.9% at end-March 2007. This was despite WPI inflation declining from
In terms of the use-based classification of industries, capital goods production   6.4% in the beginning of FY08 to a low of 3.1% in mid-October 2007. The
continued to expand at a rapid pace, rising 17.5% in April-February 2007-08        average WPI inflation for 2007-08 was at 4.7% compared to the average
on top of a rise of 18.3% a year ago. The basic, intermediate and consumer         of 5.4% in 2006-07. WPI inflation surged from around mid-February 2008
non-durable goods segments recorded lower growths of 7.4%, 9.2% and                due to a sharp increase in the prices of food articles and non-food articles
8.9%, respectively, as against 10.1%, 11.7% and 9.5% a year ago. On the            such as cotton and oilseeds on the primary side. On the manufactured
other hand, the production of consumer durables declined by 1% compared            articles side, a sharp rise in prices was evident in edible oils, oil cakes,
to a rise of 9.7% a year ago, mostly a result of the monetary policy tightening    basic metals, alloys and metal products and heavy inorganic chemicals.
and the consequent hardening of interest rates during 2007-08.                     Despite the average price of the Indian basket of international crude oil
                                                                                   increasing by 27.6% in 2007-08, domestic retail prices of petrol and diesel
The above indicates that aggregate demand conditions were dominated                were revised up only once in 2007-08 in February 2008. Indian inflation
by investment spending in 2007-08. Real private final consumption                  was thus anyways repressed to a large extent by administrative measures.
expenditure rose by 6.8% compared to 7.1% in the previous year while               Ex-fuel inflation (a measure for core inflation) ended 2007-08 at 7.6%
its share in GDP in nominal terms declined from 55.5% to 55.8% at                  compared to 7.4% a year ago.
current market prices. On the other hand, real gross fixed capital formation
increased by 15.7% compared to 15.1% in the previous year with the                 Despite a moderation in growth, the Indian economy’s performance was
corresponding share in GDP in nominal terms increasing from 32.5% in               commendable given the sharply lower growth in the rest of the world
2006-07 to 34.6% in 2007-08.                                                       (the US economy is already thought to be exhibiting recessionary trends)
                                                                                   and also against the backdrop of the global financial markets witnessing
The overall moderation in real sector activity was also reflected in the           turbulent conditions. The genesis of the crisis in the global financial
monetary and banking developments of 2007-08. Non-food credit growth               markets was the sharp rise in defaults on US sub-prime mortgages as US
moderated to 22.3%, much lower than 28.5% in the previous year. The                housing prices started to correct sharply lower. This deepened over the
incremental non-food credit-deposit ratio for the banking system dropped           course of 2007-08 and spilled over to other asset categories. On the other
to 72.3% in 2007-08 from 83.2% in 2006-07, 109.3% in 2005-06 and                   hand, confidence between players in the financial markets waned and the
130% in 2004-05. Data on sectoral deployment of bank credit available till         uncertainties of the situation led to a seizing of the credit markets, leading



                                                                                                                          Kotak Mahindra Bank Limited          II
to a very sharp increase in the short-term money market rates. In August       8.00-9.25% in March 2008, while deposit rates for shorter term deposits
2007, central banks in US and other affected economies injected liquidity      of upto 1 year maturity moved lower from 2.75-8.75% to 2.75-8.50%
in various ways to stabilize the inter-bank market. Important among these      in the same period. Private Sector banks increased interest rates for
measures were an enhancement in the type of securities against which the       long-term deposits of > 1 year maturity from 6.75-9.75% to 7.25-9.75%
banks could borrow, including the mortgage back securities.                    in the above period. On the lending side, the benchmark PLR of PSU banks
                                                                               increased by 75 bps from a range of 12.25-12.75% to 12.25-13.50%
The significant volatility of the global financial markets, unlike previous    in 2007-08. The private sector banks increased their BPLR from a range
occasions, failed to translate in a too-severe impact on the financial         of 12.00-16.50% to 13.00-16.50% in the same period. The range of
markets in the Emerging Market Economies (EME). Between end-October            BPLRs for foreign banks, however, remained unchanged at 10.00-15.50%.
2007 and January 23 2008, the MSCI developed markets index declined by         The median lending rates for term loans (at which maximum business is
17% while the equity markets in the EMEs recorded gains in most part of        contracted) in respect of PSU banks moved from a range of 9.13-12.50%
2007-08 though with sharp intermittent corrections. However, some              in March 2007 to 10.00-13.00% by March 2008.
pronounced weakness in the EME equity markets was witnessed from
January 2008 as risk aversion took over and earning expectations reduced.      In the G-Sec market, primary market yields of 91-day, 182-day and
Overall in end-March 2007 to end-March 2008, the MSCI emerging market          364-day T-bills softened in 2007-08, declining by 63-84 bps to 7.23%, 7.36%
index rose by 18.9% but the MSCI developed markets index fell by 5.1%.         and 7.35% respectively by end-March 2008. In the secondary market, G-Sec
                                                                               yield with 1-year residual maturity declined from 7.55% at end-March 2007
The Indian equity market witnessed large swings in 2007-08 with the BSE        to 7.49% in March 2008. The yield on G-Sec with 10-year residual maturity
Sensex increasing by 19.7% to 15,644 at end-March 2008 but with the            declined marginally from 7.97% in March 2007 to 7.93% in March 2008.
intra-year peak at 20,873. Sound macroeconomic fundamentals, increase          Consequently, the yield spread between 10-year and 1-year G-sec increased
in corporate profitability and foreign fund inflows through the FIIs could     from 42 bps at end-March 2007 to 44 bps at end-March 2008.
be some of the reasons for the general positive sentiments that prevailed
in the Indian equity markets.                                                  The positive development on the external front included a sharp increase
                                                                               in the net capital inflows through Foreign Direct Investments, FII flows
On the other hand, 2007-08 saw alternating ease and tightness in rupee         to equity markets, short-term credit as also through External Commercial
liquidity conditions. To a large extent these fluctuations were conditioned    Borrowings. The inflows on the capital account side were more than enough
by policy changes by the monetary authority. On a net basis, average daily     to accommodate a significant rise in the trade deficit for 2007-08 to
LAF repo injections stood at Rs. 4,568 crore in Q1, 2007-08 and increased      USD 80 billion compared to around USD 59 billion in 2006-07, thereby
to Rs. 13,472 crore in Q2 but dropped significantly to Rs. 7,820 crore in      leading to a total accretion to foreign currency reserves of the RBI at
Q3 and further to Rs. 2,116 crore in the last quarter. The above alternating   around USD 110 billion (including valuation changes) for 2007-08.
rupee liquidity conditions also implied that the overnight money market
rates swung between the lower and the upper end of the LAF corridor.           The Indian foreign exchange market witnessed generally orderly conditions
The weighted average call market rates declined from 8.33% in April            in 2007-08 with the exchange rate exhibiting two-way movements. The
2007 to 0.73% in July 2007 on account of a ceiling of Rs. 3,000 crore          exchange rate of the Rupee against the USD was at Rs. 43.59 at end-March
placed on daily Reverse Repo from March 5, 2007. However, once this            2007 and appreciated by 5.6% to Rs. 41.29 at end-April 2007 and further
ceiling was removed, the overnight money market rate moved up in August        to Rs. 39.27 by January 8, 2008. In the subsequent period the exchange
but broadly stayed within the LAF corridor till December 2007. Liquidity       rate depreciated, easing to Rs. 39.97 per USD by end-March 2008. The
conditions tightened in the 4th quarter and overnight money market rates       Rupee-Euro exchange rate depreciated from Rs. 58.14 at end-March 2007 to
moved above the Repo Rate in the last fortnight of February and in March       Rs. 63.09 by end-March 2008. Overall, during 2007-08, the Rupee appreciated
2008. The CBLO rates and the market repo rates moved in tandem with the        by 9.1% against the USD and by 7.5% against Pound Sterling but depreciated
overnight money market rates.                                                  by 7.7% against the Japanese Yen and by 7.8% against the Euro.


The interest rates offered by the PSU banks on deposits for greater than       Source: “Macroeconomic and Monetary Developments in 2007-08”
1 year tenor moved from the range of 7.25-9.50% in March 2007 to               published by RBI on April 29, 2008


III   Kotak Mahindra Bank Limited
CONSOLIDATED FINANCIAL PERFORMANCE                                                In October 2007, the Bank raised Rs. 1,615 crore (approximately USD 410
                                                                                  million) by allotting 1,70,00,000 equity shares through a Qualified Institutional
Overview                                                                          Placement (QIP). The QIP issue was priced at Rs. 950 per equity share.
The Bank along with its subsidiaries continues to grow and this year saw
the Bank and the subsidiaries progressing well in terms of reach, customer        Consolidated Financials
acquisition, addition of employees and improving its market position in           The consolidated financial performance of the Bank for the year ended
the various new businesses. The Group continues to invest significantly in        March 31, 2008 including key ratios is summarized below:
building two of its key businesses - branch banking and retail liabilities, and
                                                                                                                                                          Rs. crore
life insurance. As on March 31, 2008, the Group employed around 20,000
                                                                                   Income and Profit                     2007-08        2006-07       Growth %
people (10,800 people as on March 31, 2007) in its various businesses
                                                                                   Total income *                        7,549.39      4,293.95             76%
and has a distribution network of branches, franchisees, representative
                                                                                   Operating profit                      1,770.94        931.19             90%
offices and satellite offices across 370 cities and towns in India and offices
                                                                                   Consolidated Profit                    991.23         538.24             84%
in New York, London, San Francisco, Dubai, Mauritius and Singapore. The
                                                                                   after tax (PAT)
Group services around 4.4 million customer accounts.
                                                                                  * Brokerage income is considered net of sub-brokerage

During the year Kotak Mahindra Bank was in the Top 5 for Corporate                                                                                        Rs. crore
Governance amongst companies by technical criteria in the IR Global Rankings       Key Financial Indicators -                       2007-08             2006-07
2008 for the Asia Pacific / Africa region and Kotak’s Investor Relation website    Consolidated
was adjudged the most voted company in Asia Pacific / Africa by IR Global          Net worth after minority interest                5,823.91           3,233.02
Rankings 2008 in five categories: Corporate Governance Practices, Financial        (Rs. crore)
Disclosure Procedures, IR Team, IR Program and IR Website.                         Earnings per share (diluted) (Rs. )                 29.18               16.47
                                                                                   Book value per share (Rs. )                        168.97               99.12
Kotak Mahindra Bank completed 5 years as a scheduled commercial bank               Net Interest Margins (NIMs) %                        5.6%               5.2%
in 2007-08. The Bank opened its 150th branch in January 2008. As on                Return on Average Net Worth %                      22.3%               19.6%
March 31, 2008, the Bank has built a network of 178 full fledged branches          (Rs. )
spread across 109 cities and towns and had 313 ATMs. The Bank proposes             Net NPA % excluding stressed assets                0.33%               0.17%
to open another 100 branches in the next year.                                     portfolio
                                                                                   Consolidated capital adequacy ratio (%)            20.2%               15.6%
Kotak Mahindra Capital Company and Kotak Securities continued to report
good financial performance on the back of strong capital markets and the          Consolidated profit after tax (after minority interest and share of profit in
robust overall economic growth.                                                   associates) was up 84% to Rs. 991.23 crore for 2007-08 from Rs. 538.24
                                                                                  crore in 2006-07 on account of strong growth shown by Bank, car finance
The life insurance subsidiary, Kotak Mahindra Old Mutual Life Insurance           business, investment banking and securities broking,
continued its growth momentum but posted an accounting loss.
                                                                                  For 2007-08 the consolidated earnings per share was Rs. 29.18 (Rs. 16.47
Assets under management (AUM) as on March 31, 2008 was over Rs.                   for 2006-07). The consolidated book value per share was Rs. 168.97 as on
36,500 crore comprising assets managed and advised by the Group. Of the           March 31, 2008 (Rs. 99.12 as on March 31, 2007).
above AUM, equity assets managed / advised by the Group as on March
31, 2008 were around Rs. 23,970 crore. AUM of Kotak Mahindra Mutual               The consolidated total income was Rs. 7,549.39 crore up 76% during
Fund (Kotak Mutual) was over Rs. 16,100 crore as on March 31, 2008.               2007-08. Other income grew 69% from Rs. 2,311.92 crore in 2006-07
                                                                                  to Rs. 3,901.10 crore in 2007-08. Consolidated “other income” had three
The stressed assets portfolio acquired from other banks/ NBFCs was                main components: Commission, fees, exchange & brokerage, profit-on-sale
Rs. 677 crore with principal outstanding of over Rs. 4,100 crore as on            of investments and premium on life insurance business. Commission, fees,
March 31, 2008.
exchange & brokerage net of sub brokerage increased by 59% to Rs. 1,676.29       relationships across the Group. The banking business model is directed
crore in FY08 from Rs. 1,052.77 crore in FY07, with key growth drivers being     towards maximising revenue generation from customers by offering a wide
fee income from the stock broking business, asset management/ advisory           range of products and services to address all their banking needs.
fees and investment banking. Premium income from life insurance business         The Bank has five broad business segments:
grew by over 75% to Rs. 1,661.99 crore reflecting significant momentum in
                                                                                        Lending
the business.
                                                                                        Retail liabilities
Operating expenses other than policy holders reserves increased from                    Corporate banking (including small and medium enterprises - SME)
Rs. 1,803.75 crore in 2006-07 to Rs. 2,929.22 crore in 2007-08, driven
                                                                                        Treasury and investments
primarily by an increase in employee costs by 74% from Rs. 688.08 crore
to Rs. 1,197.89 crore, expenses pertaining to rent taxes & lighting by                  Venture fund management (up to September 30, 2007)
83% to Rs. 150.54 crore and the expenses pertaining to advertisement,
publicity and promotion by 79% from Rs. 72.22 crore in 2006-07 to Rs.            The profit before tax of the Bank after taking a provision of Rs. 86 crore
129.26 crore in 2007-08.                                                         towards stressed cases in forex derivatives for 2007-08 was Rs. 397.78
                                                                                 crore up 96% as compared to Rs. 203.25 crore in 2006-07. The profit
Consolidated advances were up 41% from Rs. 15,573.44 crore as on                 after tax of the Bank was up 108% to Rs. 293.93 crore as compared to
March 31, 2007 to Rs. 21,984.68 crore as on March 31, 2008. As on                Rs. 141.37 crore in 2006-07.
March 31, 2008, consolidated net NPAs were 0.33% of net advances
(0.17% as on March 31, 2007) excluding stressed assets portfolio. The            From the year ended 31st March, 2008, the Bank has adopted RBI’s revised
breakup of the consolidated advances is given below:                             guidelines issued in April 2007 on segment reporting, however In order
                                                                     Rs. crore   to facilitate comparison, given below is the summary of the operating
 Advances                       March 31,        March 31,      Growth %         segments of the Bank for the year ended 31st March, 2007 in accordance
                                    2008             2007                        with Accounting Standard 17 (AS-17) on Segment Reporting issued by the
 Commercial Vehicles &           3,628.51         2,578.07            41%        Institute of Chartered Accountants of India & the comparative numbers for
 Construction Equipments                                                         the year ended 31st March, 2008:
 Auto Loans                      4,735.36         3,610.79            31%                                                                             Rs. crore
 Personal Loans                  3,112.65         1,976.29            58%         Segmental Results                    2007-08     2006-07      Growth %
 Home Loans                      2,639.98         1,753.32            51%         Lending                                339.95     112.41            202%
 Corporate Banking               2,386.69         2,378.49                –       Corporate Banking                      202.64     101.65             99%
 Agriculture Finance             1,664.25           677.63          146%          Retail liabilities                   (146.68)     (42.33)                 –
 Stressed Assets Portfolio         549.63           512.30             7%         Treasury and investments                (5.83)      23.61                 –
 Others                          3,267.60         2,086.55            57%         Venture Fund Management                  2.92        7.88                 –
 Total Advances                 21,984.68       15,573.44             41%         Un-allocable revenue (net)               4.78        0.03                 –
                                                                                  Profit before tax                      397.78     203.25             96%
                                                                                  Profit after tax                       293.93     141.37            108%
BANK AND ITS KEY SUBSIDIARIES: FINANCIAL AND
OPERATING PERFORMANCE
                                                                                 The capital adequacy of the Bank as on March 31, 2008 was 18.65%
The Bank along with its subsidiaries, offers wide range of financial products    (Previous year 13.46 %). Tier I ratio was 14.46% (Previous year 8.81%).
and services to its customers. The key businesses are commercial banking,
investment banking, stock broking, car finance, asset management and
life insurance.


Kotak Mahindra Bank (Commercial Banking)
Kotak Mahindra Bank completed 5 full years of operation as a commercial
bank in 2007-08. The Bank is the central platform for customer

V      Kotak Mahindra Bank Limited
The advances of the Bank as on March 31, 2008, stood at Rs. 15,552.22            loans and agri-finance. The Bank has a widespread geographical
crore up 42% YoY. As on March 31, 2008, the net NPAs of the Bank were            distribution network to distribute its retail lending products.
at 0.38% of net advances excluding stressed assets portfolio (0.18% of net
advances excluding stressed assets portfolio as on March 31, 2007). The Net      Commercial vehicles & construction equipments advances recorded a
NPAs of the Bank including stressed assets portfolio were at 1.78% (1.98%        growth of 41% to Rs. 3,628.52 crore in 2007-08. Margins continue to
of net advances excluding stressed assets portfolio as on March 31, 2007).       be under pressure due to the competitive nature of the industry. However,
                                                                                 the Bank has maintained operating economies and delinquency levels
As on March 31, 2008, the deposits of the Bank increased by 49% to               comparable to among the best in the industry. Now, commercial vehicles
Rs. 16,423.65 crore as compared to Rs. 11,000.09 crore as on March               & construction equipments division has become a one stop shop for the
31, 2007. Excluding the monies held as collection bankers, the deposits          needs of transportation industry through the unique set of products to
of the Bank increased by 56% to Rs. 16,004.80 crore as compared to               meet their specific requirements.
Rs. 10,251.41 crore as on March 31, 2007.
                                                                                 Saral loans which are essentially targeted at asset backed lending to
As on March 31, 2008, total deposits comprised of Rs. 3,152.36 crore of          customers, where organized credit does not reach easily, continued to
demand deposits (Rs. 2,108.68 crore as on March 31, 2007), Rs. 1,517.54          expand its scope during 2007-08 to prime category of customers through
crore of savings deposits (Rs. 887.70 crore as on March 31, 2007) and            business loans with or without asset backed security.
Rs. 11,753.74 crore of term deposits (Rs. 8,003.71 crore as on March 31,
2007). The demand and savings deposits as on March 31, 2008 (excluding           In 2006-07, personal loans grew by 48% to Rs. 2,896.24 crore and the Bank
monies held as collection banker) increased by 89% to Rs. 4,251.06 crore from    improved its presence across newer geographies. The Bank had launched
Rs. 2,247.70 crore as on March 31, 2007. The Bank had over 7,49,000              home loans in 2003, which has grown 51% YoY to Rs. 2,639.98 crore.
deposit accounts as on March 31, 2008 (3,50,000 as on March 31,
2007).                                                                           With a view to focus on the agricultural sector, the Bank has a full fledged agri
                                                                                 business division which has the required expertise and offers a range of project
Lending                                                                          finance and working capital funding to meet the financing requirements of
The Bank continues to leverage its experience in the field of retail lending     agricultural machinery, horticultural projects, storage warehouses and farmers
business and has shown a robust growth in disbursements and advances             implementing new farming techniques. The agriculture finance recorded a
in this area. The total advances of the Bank increased by 42% from               growth of 146% to Rs. 1,664.25 crore in 2007-08.
Rs. 10,924.07 crore in 2006-07 to Rs. 15,552.22 crore in 2007-08. The
break up of the advances of the Bank is given below:                             Asset reconstruction business is one of the key focus areas of the Bank,
                                                                     Rs. crore   and the Bank has a pre-eminent position in the industry. The asset
 Advances                            March 31,      March 31,      Growth        reconstruction division purchases NPAs from various banks, financial
                                         2008           2007           %         institutions, non-banking finance companies and corporates at prices that
 Commercial Vehicles & Con-           3,628.52       2,578.07         41%        it believes are at a significant discount to the recoverable amount. Besides
 struction Equipments                                                            purchasing stressed assets, Kotak Bank also engages in the recovery of
 Personal Loans                       2,896.24       1,955.34         48%        NPAs on behalf of other banks, NBFCs and financial institutions and
 Home Loans                           2,639.98       1,753.32         51%        provides advisory services to distressed companies.
 Corporate Banking                    2,386.69       2,382.54             –
 Agriculture Finance                  1,664.25         677.63        146%        The profit before tax for the lending segment grew by more than 200%
 Others                               2,336.55       1,577.17         48%        from Rs. 112.41 crore in 2006-07 to Rs. 339.95 crore in 2007-08.
 Total Advances                      15,552.22     10,924.07          42%
                                                                                 Retail Liabilities
Retail and commercial advances grew 54% from Rs. 8,541.53 crore in               As on March 31, 2008, the Bank had 178 full-fledged branches across 109
2006-07 to Rs. 13,165.53 crore in 2007-08. The Bank has witnessed                towns and cities (105 branches across 69 cities as on March 31, 2007)
significant traction in some of the products like home finance, personal         and 313 ATMs.



                                                                                                                         Kotak Mahindra Bank Limited           VI
The Bank offers a very wide range of products and services targeted at retail      Corporate Banking
customers, delivered through a state-of-the-art technology platform. In            Kotak Bank’s corporate banking revenues are derived from loan products
addition to branch banking, it offers a wide range of products and advisory        and other value-added services offered by Kotak Bank to large and
services from everyday banking to long-term investments which are delivered        medium-sized corporations, financial institutions and public sector
with a genuine understanding of the specific needs of the customer. The focus      undertakings. These products include working capital facilities,
is on establishing a wider distribution network and operational efficiency         medium-term financing, trade services, transaction banking, fixed-income
thereby ensuring a controlled and profitable growth in business. In line with      and foreign exchange services, as well as cash management services and
the concept of instant banking, the Bank has developed fully integrated free       the distribution of third party products.
of cost Internet Banking Services with a host of value-added services. Kotak
Internet Banking permits transfer of funds to accounts with the Bank as well       The Bank offers the entire range of debt and fixed-income products with
as other banks across the country through savings and current accounts and         a team of experienced and highly qualified professionals who structure
complete access to Investment accounts and demat accounts. Kotak Bill Pay          products to suit the dynamic and varied needs of customers across
- a value added service, offers the convenience of paying over 115 service         segments. The Bank’s strength lies in its ability to customise instruments
providers across the country. This includes telephone service providers,           & structures, develop innovative products and then deliver these through
insurance, charities and many more.                                                high level of execution capabilities and a wide distribution network
                                                                                   across the country.
As part of its platform, Kotak Bank offers depository services that allow
customers to hold equity shares, Government securities, bonds and other            The Bank’s strategy in this business is to align the resources with the
securities in electronic form or DMAT form. Kotak Bank offers certified gold       sectors where it can deliver value-added financial advisory solutions to the
coins and bars, locker facilities, home banking, telephone banking, mobile         clients. The focus is on orientation of all organisational silos to customer
banking, internet banking, SMS banking, direct pay services for online             service through greater cross-functional synergies. The Bank has managed
payments and debit cards, which are aided by a toll free, multi-product            to improvise the ‘solutions approach’ to meet varied needs of the clients.
and multi-service contact centre that allows customers ease of accessing
various products made available through Kotak Bank.                                In spite of intense competition, the Bank witnessed a significant growth
                                                                                   in corporate bank advances (including SME). The profit before tax for
Kotak Bank offers home banking services to its customers which allows a            the Corporate Banking segment was up 99% from Rs. 101.65 crore in
customer to have cash or instruments picked up or delivered to the customer.       2006-07 to Rs. 202.64 crore in 2007-08.
Kotak Bank was among the first banks in India to offer home banking
services. Kotak Bank also offers beat services which provides customers the        Treasury
facility of predefining the services and the time at which such services are       Global financial markets witnessed significant volatilities in 2007-08,
required and unlike in home banking services the customer does not need            precipitated mainly by the emergence of sub-prime mortgage crisis in the
to call Kotak Bank on need. Kotak Bank also has customised offerings for           US. Credit markets were in the danger of seizing up and major central
its corporate salary customers under the office banking services.                  banks injected liquidity in a collaborated manner. As the risks to economic
                                                                                   growth increased, US Federal Reserve Board started to reduce the
Kotak Bank’s online platform also offers a number of services and payment          Fed Funds Target Rate in September 2007. Bank of England and Bank of
solutions. The online trading platform of Kotak Bank is integrated with Kotak      Canada reduced policy rates in December 2007. In contrast, economies
Securities. Kotak Bank also offers an online remittance service for non-resident   such as China and India faced pressures of foreign capital flows and
Indians, called ‘Funds to Home’, along with other remittance services.             maintained a tight monetary policy. The RBI increased the Repo Rate by 25
                                                                                   bps to 7.75% on 3rd April 2007 and also increased CRR from 6.50% to
The retail liabilities segment reported a loss of Rs. 146.68 crore in 2007-08
as compared to a loss of Rs. 42.33 crore in 2006-07. The Bank continues
to invest in this segment and expand its branch network with the objective
of building a long-term, low-cost and stable deposit base.


The Bank proposes to have around 275 full-fledged branches by next year.

VII    Kotak Mahindra Bank Limited
7.50% in August and November 2007. Market Stabilization Scheme was             Venture Fund Management
used to a significant extent in 2007-08 to moderate rupee liquidity.           The Bank has co-sponsored Kotak SEAF India Fund which has been set
                                                                               up as a Trust registered with the Securities and Exchange Board of India
Consequently, 2007-08 saw alternating ease and tightness in rupee              (SEBI) as a Venture Capital Fund. India Growth Fund (the Fund) was set
liquidity conditions dependant on policy changes of the RBI. On a net          up as a unit scheme of Kotak SEAF India Fund. The Private Equity division
basis, average daily LAF repo injections stood at Rs. 4,568 crore in Q1,       has an experienced investment management team with a successful track
2007-08 and increased to Rs. 13,472 crore in Q2 but dropped significantly to   record in the venture capital industry. With effect from October 1, 2007
Rs. 7,820 crore in Q3 and further to Rs. 2,116 crore in Q4. Overnight          the investment management function for private equity funds has been
money market rates swung between the lower and the upper end of the            assigned by the Bank to Kotak Investment Advisors Limited (erstwhile
LAF corridor to reflect the conditions on rupee liquidity. The weighted        Kotak Mahindra Securities Limited), which is 100% beneficially owned by
average call market rates declined from 8.33% in April 2007 to 0.73% in        Bank.
July 2007 on account of a ceiling of Rs. 3,000 crore placed on daily Reverse
Repo from March 5, 2007. However, once this ceiling was removed, the call      Kotak Mahindra Capital Company
money rate moved up in August and broadly stayed within the LAF corridor       (Investment Banking)
till December 2007. Liquidity conditions tightened in the Q4 and overnight     Kotak Mahindra Capital Company (KMCC) primarily operates as a full
money market rates moved above the Repo Rate in the last fortnight of          service Investment Bank. KMCC is also a trading cum Clearing Member
February and in March 2008. The CBLO rates and the market Repo Rates           of the National Stock Exchange on all three segments viz. Cash, F&O
moved in tandem with the overnight money market rates.                         and WDM. KMCC has two main segments of business (a) Advisory and
                                                                               Transactional Services (b) Trading and Principal Investments.
In the G-Sec market, primary market yields of 91-day, 182-day and                                                                                 Rs. crore
364-day T-bills softened in 2007-08, declining by 63-84 bps to 7.23%, 7.36%     Segment Results                      2007-08      2006-07      Growth %
and 7.35% respectively by end-March 2008. In the secondary market, G-Sec        Advisory and Transactional            160.36         64.72        148%
yield with 1-year residual maturity declined from 7.55% at end-March 2007       Services
to 7.49% in March 2008. The yield on G-Sec with 10-year residual maturity       Trading and Principal Investments        13.55       28.58             –
declined marginally from 7.97% in March 2007 to 7.93% in March 2008.            Add Unallocated Income                     1.58       0.60             –
Consequently, the yield spread between 10-year and 1-year G-sec increased       Less Unallocated expenses                  0.30           –            –
from 42 bps at end-March 2007 to 44 bps at end-March 2008.                      Profit before tax                     175.19         93.90        175%
                                                                                Profit after tax                      115.31         67.88         70%
A sharp rise was witnessed in net capital inflows through FDI, FII flows
to equity markets, short-term credit and through ECBs. These inflows           The year under review saw KMCC regaining its top slot for IPOs in India
were more than enough to accommodate a trade deficit of the size of            with a market share of 79% in a market which saw 85 IPOs (previous year
USD 80 billion. The accretion to FX reserves of RBI was at USD 110 billion     76) worth Rs. 41,358 crores. KMCC also retained its number one position
(including valuation changes) in 2007-08. The Indian rupee exhibited           in QIPs (including Government divestments) for the third year in a row with
two-way movements in 2007-08. Rupee was at Rs. 43.59 per USD at                a market share of 58% of the total value of issuances. Notable deals where
end-March 2007 and appreciated by 5.6% to Rs. 41.29 by end-April               Kotak Investment Banking played the book runner role were:
2007 and further to Rs. 39.27 by January 8, 2008. The Rupee depreciated
thereafter to Rs. 39.97 per USD by end-March 2008. The Rupee-Euro              IPOs
exchange rate depreciated from Rs. 58.14 at end-March 2007 to Rs. 63.09 by
                                                                                      Rs. 10,123 crore Reliance Power
end-March 2008. Overall, in 2007-08, the Rupee appreciated by 9.1% against
USD and by 7.5% against Pound Sterling but depreciated by 7.7% against                Rs. 9,188 crore DLF
the Japanese Yen and by 7.8% against the Euro.                                        Rs. 2,984 crore Power Grid

                                                                                      Rs. 1,771 crore Mundra Port & Special Economic Zone Ltd.
The Bank Treasury continued its endeavour of diversifying revenue sources.
Bullion desk and Custodial services consolidated its operation during the             Rs. 1,708 crore HDIL
year and contributed towards treasury revenues.                                       Rs. 856 crore Purvankara Projects

                                                                                                                     Kotak Mahindra Bank Limited       VIII
        Rs. 816 crore Central Bank of India                                           Pioneer Asset Management Company Limited Joint Venture with
                                                                                        BOB AMC
        Rs. 778 crore IVR Prime Urban Developers Ltd.
                                                                                       CAMS - sale of 30% equity stake to Private Equity investor Advent
        Rs. 692 crore Edelweiss Capital Ltd.
                                                                                        International
        Rs. 494 crore Fortis Healthcare Ltd.
                                                                                       Mahindra & Mahindra - merger of all its forging entities into
        Rs. 491 crore Future Capital Holdings Ltd.                                     Mahindra Forgings Limited creating the 2nd largest forging
                                                                                        company in India.
        Rs. 439 crore BGR Energy Systems Ltd.
                                                                                       Wadhawan Retail - acquisition of “Sabka Bazaar” and “Home
                                                                                        Store” chains of retail operations
QIPs
                                                                                       Private Equity Placement of Luminous Power Technologies Limited
        Rs. 3,966 crore GMR Infrastructure Ltd.
                                                                                       The following deals were announced and are expected to close in
        Rs. 2,100 crore IDFC Ltd.                                                      the first quarter of FY 09.
        Rs. 1,615 crore Kotak Mahindra Bank Ltd.                                      CRH Plc - acquisition of MyHome Industries for a transaction value
        Rs. 1,360 crore Bank of India                                                  of Rs. 1,850 crore

        Rs. 1,221 crore GVK Power & Infrastructure Ltd.                               Thomas Cook- acquisition of Thomas Cook (India) & Thomas Cook
                                                                                        Egypt etc for a transaction value of Rs. 1,500 crore.
        Rs. 1,200 crore PTC India Ltd.
                                                                                KMCC has a healthy pipeline of mandates in various sectors for both equity
        Rs. 814 crore Punj Lloyd Ltd.
                                                                                offerings and Mergers & Acquisitions which are expected to be closed in 2008-09.
KMCC was also awarded the “Best Investment Bank” in the domestic
category in India by Finance Asia for the second year in a row. KMCC also       Kotak Securities (Stock broking)
successfully completed the divestment of the Government stake in Maruti         Kotak Securities (KS) is India’s leading stock broking company and accounted for
Udyog Limited valued at USD 582 million through an innovative French            7.3% of total average daily market volumes in 2007-08 (9.0% in2006-07).
auction sale. KMCC helped corporates raise over ~USD 1,600 million of
private equity funding with 18% market share.                                   Whereas the year 2006-07 was an historic year for the Indian economy, as
                                                                                the benchmark BSE Sensex crossed the 14,800 mark, the year 2007-08,
During the year 2007-08, Kotak Investment Banking was very active in the        saw the benchmark BSE Sensex crossing the 21,200 mark on 10th January,
M&A space and was ranked no. 1 in the India Advisory Partners League Tables     2008. Similarly the benchmark Nifty which had touched the year’s high of
for India Deals and ranked no. 4 in the Bloomberg M&A Financial Advisory        4,200 in 2006-07 crossed the 6,300 mark in the year 2007-08.
League Tables for India Announced deals with a 22.9% market share. Some of
the notable deals where KMCC was exclusive Financial Advisor were :             KS clocked average daily volumes of over Rs. 5,300 crore during FY08 as
                                                                                compared to around Rs. 3,700 crore during FY07.
        SREI Infrastructure Finance Limited - Joint venture with BNP Paribas
         Leasing Group in a transaction valued at approx USD 190 million                                                                                Rs. crore
                                                                                 Particulars                          2007-08         2006-07         Growth
        Gokaldas Exports sale of 50.1% stake to Blackstone and
                                                                                 Total Income                        1,330.03           833.93           59%
         consequential open offer in a transaction with a aggregate value
         of USD 165 million                                                      Profit before Tax                      580.21          365.12           59%
                                                                                 Profit after Tax                       408.69          255.71           60%
        Nagarjuna Construction Company Limited - Private Placement of
         Shares to Blackstone for USD 150 million
                                                                                The profit after tax grew by 60% YoY to Rs. 408.69 crore in 2007-08. The
        Kotak Investment Banking was Financial Advisor to the Sheth            growth was achieved due to increased volumes.
         Family in restructuring their shareholding in Great Offshore Limited
         in a transaction valued at approx USD 145 million
                                                                                As on March 31, 2008, in the retail segment, KS had around 4,30,000
        Apollo Hospitals Enterprise Limited - Private placement of shares to   secondary market customers and serviced them through a network of 870
         Apax Partners for USD 104 million                                      offices (own and franchised) across 309 cities.

IX       Kotak Mahindra Bank Limited
The online trading portal continued to do well. A number of new schemes                                                                                   Rs. crore
and products for online customers were launched. The number of online                 Particulars                          2007-08        2006-07       Growth
registered customers as on March 31, 2008 was in excess of 1,60,000. The
                                                                                      Total Income                           739.97         443.63         67%
online volumes continued to grow and crossed the Rs. 1,400 crore mark
                                                                                      Profit before tax                      154.63          84.25         84%
in the year 2007-08.
                                                                                      Profit after tax                       100.62          57.34         75%

In the Portfolio Management Services (PMS), two of the close-ended
schemes launched in earlier years matured in 2007-08. KS continues to                The passenger car market in India saw a growth of 11% for financial year
focus on increasing product offerings and improving service standards.               2007-08 as compared to a growth of 21% for 2006-07. Total unit sales of
                                                                                     cars and MUV’s crossed 15.18 lac units in financial year 2007-08. The car
The buoyant capital markets saw the number of primary market issues increasing       market has grown at a rapid pace due to robust economic growth, launch
over the last year. KS participated in the distribution of 90 public offer issues,   of new and improved models and stable automotive prices.
mobilizing in excess of Rs. 73,200 crore in the retail segment itself.
                                                                                     KMP has, carved out a niche for itself in the car-financing segment focusing
KS’s institutional equities division has made steady growth during the               on distribution and relationship management across manufacturers, dealers,
year. This was achieved through a larger customer base and servicing                 channel partners and customers. Fee based income is an important initiative
of global and domestic asset managers. Kotak Institutional Equities                  of KMP. Dedicated infrastructure is in place to give a further impetus to the
strives to provide high quality fundamental equity research and globally             growth of fee based income with a twin objective of offering value added
compliant execution service to clients. It has a strong research team                services to customers and leveraging the large existing customer database
with wide research coverage of over 130 companies. Kotak Institutional               to generate further fee based income.
Equities clientele includes Foreign Institutional Investors, Financial
Institutions, Banks, Mutual Funds and Insurance companies. Significant               Customer knowledge, easy accessibility through its wide network of
focus on Futures & Options segment contributed substantially to the                  branches and a firm commitment to deliver superior customer service are
revenue growth and market share.                                                     key drivers for KMP’s performance.


Kotak Mahindra Prime Limited                                                         KOTAK MAhINDRA ASSET MANAGEMENT COMPANY LIMITED
(Car finance, Other lending)                                                         KOTAK MAhINDRA TRUSTEE COMPANY LIMITED
Kotak Mahindra Prime Limited (KMP) is into car finance, engaged in                   (Mutual Fund)

financing of retail customers of passenger cars and multi-utility vehicles
and inventory and term funding to car dealers.The Company finances                   Kotak Mahindra Asset Management Company Limited (KMAMC) and Kotak
new and used cars under retail loan, hire purchase and lease contracts. In           Mahindra Trustee Company Limited (KMTC) are wholly owned subsidiaries
addition to car finance, KMP also carries out other lending activities.              of Kotak Mahindra Bank. KMAMC is the asset manager of Kotak Mahindra
                                                                                     Mutual Fund (KMMF) and KMTC is the trustee company.
During 2007-08, KMP’s gross advances crossed Rs. 5,900 crore mark
recording an increase of 44% as compared to FY07.                                    Indian mutual funds industry is evolving, in terms of breadth and depth.
                                                                                     It is broadening in terms of total number of investors it is catering to and
FY08 witnessed volatile interest and increased interest rates being charged          deepening in terms of its product offering and investment and distribution
to the car finance customer. The pressure continued on maintaining the               practices.
margins in the retail car finance business. KMP continued to focus on
control over cost and credit losses, while maintaining its positioning in the
car finance market. KMP also maintained its good relationships across car
manufacturers, dealers and channel partners in the country.
The following is the list of policy level changes effected during 2007-2008        the category of open-ended debt -short term for one year as well as 3
that had an influence on the mutual funds industry:                                year period ending December 31, 2007. Kotak Flexi Debt was ranked
                                                                                   5 Star - indicating performance among the top 10% in the category of
        With effect from April 16, 2007, guidelines have been introduced
         for parking of funds in short term deposits of scheduled commercial       open ended liquid plus for three year period ending December 31, 2007.
         banks, pending deployment.                                                Kotak Floater Long Term was ranked 5 star fund - indicating performance
                                                                                   among the top 10% in the category of Open Ended Floating Rate Fund for
        With effect from July 2, 2007, Permanent Account Number (PAN)
         would be the sole identification number for all participants              one year period ending December 31, 2007.
         transacting in the securities market irrespective of the amount
         of transaction with a view to strengthen Know Your Client (KYC)           The debt schemes managed by Kotak Mahindra Mutual Funds have
         norms, identify every participant in the securities market and ensure     received over 14 Performance awards over the past eight years from CNBC,
         a sound audit trail.                                                      CRISIL, OUTLOOK MONEY, ICRA online and Lipper Fund Awards.
        The applicable limits for overseas investments by mutual funds has
         been increased to USD 7 billion subject to a maximum of USD 300           Kotak Mutual Fund was also adjudged the Best Debt Fund House at
         million per mutual fund. The overall ceiling for investment in overseas   Outlook Money Awards 2007.
         exchange traded funds that invest in securities has been limited to
         USD 1 billion subject to a maximum of USD 50 million per mutual
                                                                                   The performance of the diversified equity schemes remained satisfactory
         fund.
                                                                                   with   Kotak        Opportunities   showing     commendable   performance.
        With effect from January 4, 2008, No entry load will be charged           Kotak Opportunities was rated 5 Star by value research as on 31st March
         for direct applications received by an asset management company
                                                                                   2008. It was also ranked 56th in the Lipper’s list of worlds 100 top
         either through the internet, submitted to the asset management
                                                                                   performing stock funds of 2007 out of a set of 24, 887 funds tracked
         company or collection centre/investor services centre which are not
         routed through any distributor/ broker.                                   by it. During the year under review, Kotak 30, Kotak Opportunities,
                                                                                   Kotak Tax Saver, Kotak Balance paid out dividends.
        With effect from January 31, 2008, the provision of charging initial
                                                                                                                                                      Rs. crore
         issue expense and amortization of the same has been removed.
                                                                                    KMAMC                               2007-08        2006-07       Growth
         All mutual fund schemes shall meet the sales, marketing and other
         such expenses connected with sales and distribution of schemes             Total Income                          68.08          54.43         25%
         only from the entry load.                                                  Profit before tax                      2.22          10.60              -
                                                                                    Profit after tax                       1.03           6.83              -
The Average Assets under Management (AAUM) for the year 2007-2008                                                                                     Rs. crore
was Rs. 19,739 Crores, as compared to Rs. 12,829 crores for the year                KMTC                                2007-08        2006-07    Growth %
2006-2007 a growth of 54%. The number of folios as on March 31, 2008                Total Income                           10.98          7.35         49%
was about 9.40 lakhs as compared to about 5.36 lakhs as of March 31,                Profit before tax                      10.11          6.74         50%
2007, a growth of 75%.                                                              Profit after tax                        6.89          4.64         48%

The year saw the launch of several new schemes and facilities, increased           The two key growth drivers would be to increase visibility further in metro
distribution reach and market expansion. During the year under review,             and non-metro regions and focus on geographic expansion. New product
the mainstream debt schemes of the Fund continued their satisfactory               offerings, value added service initiatives and continued focus on fund
performance. Debt schemes of Kotak Mahindra Mutual Fund won awards                 performance would also hold key to growth.
at the ICRA Mutual Fund Awards 2008. Kotak Bond Short Term was ranked
7-star and has been awarded the Gold Award for Best Performance in                 KOTAK INVESTMENT ADVISORS LIMITED (FORMERLY KOTAK
                                                                                   MAhINDRA SECURITIES LIMITED)

                                                                                   (Alternate asset management & advisory)


                                                                                   Demerger and restructuring
                                                                                   During 2006-07, a petition was filed before the Hon’ble High Court of
                                                                                   Judicature at Mumbai in respect of a Scheme of Arrangement between the

XI       Kotak Mahindra Bank Limited
Company (i.e. erstwhile Kotak Mahindra Securities Limited), Kotak Mahindra               IGF had its final closing in September 2005 with aggregate capital
Capital Company Limited (KMCC) and their respective shareholders and                     commitments of Rs. 707 crores. IGF has made 15 investments
creditors (Scheme) for demerger of undertaking comprising of the Trading                 across diversified sectors such as logistics, technology services,
and Clearing operations and strategic investments of the Company to                      retail, media and entertainment, engineering, bio-technology,
KMCC. Upon receipt of necessary approvals, the demerger was completed                    textiles, aviation, telecom and power infrastructure and financial
on 3rd September, 2007.                                                                  exchanges.


The name of the Company was changed from Kotak Mahindra Securities                    (b) Kotak India Venture Fund I
Limited to Kotak Investment Advisors Limited from August 20, 2007. The                   Kotak India Venture Fund I (KIVF-I) is a domestic venture capital
new name is in consonance with the Company’s new main objects and                        fund with the investment objective of making investments primarily
business activity i.e. alternate asset management/ advisory services.                    in companies operating in Biotechnology and Life Sciences sector.
                                                                                         KIVF-I held its final closing in July 2007 with a total corpus of Rs.
The Group wanted to expand its presence in the alternate asset                           205 crore. KIVF-I has made three investments till date.
management business. To facilitate and expedite the same, all alternate
asset management / advisory activities of the Group were assigned to                  (c) Kotak India Growth Fund II
Kotak Investment Advisors Limited (KIAL or the Company).                                 During the year, Kotak Private Equity Group launched its second
                                                                                         growth fund named, Kotak India Growth Fund II (KIGF-II) and
With effect from October 1, 2007, KIAL became the investment manager                     KIAL was appointed as the Investment Manager. The investment
and advisor for all private equity and realty funds of Kotak Mahindra Group.             objective of KIGF-II is to provide long-term capital appreciation to
The Private Equity team (which was earlier functioning as part of Kotak                  its investors by investing in privately negotiated equity and equity
Mahindra Bank Limited (“the Bank”)) and the Realty Fund team (which                      related instruments in mid-sized corporates and working with
was part of Kotak Mahindra Investments Limited, a subsidiary of the Bank)                the managements of such corporates to accelerate their growth.
have move to KIAL.                                                                       KIGF-II shall target companies with strong management teams
                                                                                         and stable cash flows that are seeking capital for their organic
The aggregate alternate assets managed / advised by the Company as March                 and inorganic growth plans.
31, 2008 was Rs. 5,636 crore (USD 1.4 billion). During 2007-08, the Group
raised Rs. 4,471 crore (USD 1.1 billion) as commitments for private equity and           KIGF-II held its closing on March 27, 2008 with aggregate capital
realty funds. The funds were primarily raised from the Group’s customer base.            commitments of Rs. 1,749 crore from Kotak Group’s customers on
                                                                                         a private placement basis.
Since this business was not carried out in the Company during the previous
year the financial results are not comparable.                                    Realty Funds
                                                                      Rs. crore       (a) Kotak Mahindra Realty Fund
 Particulars                                      2007-08          2006-07               Kotak Mahindra Realty Fund (KMRF) was formed in May 2005 as
 Total Income                                        37.81              2.73             a trust and registered as a venture capital fund with SEBI.
 Profit before tax                                   20.71              0.60
 Profit after tax                                    13.47              0.35             KMRF is an umbrella trust and the trustees have the power to
                                                                                         form various schemes. The primary objective of KMRF is to invest
Private Equity Funds                                                                     in and provide finance to real estate sector and allied services
     (a) Kotak SEAF India Fund                                                           sectors in India with an intention to generate long-term capital
         Kotak SEAF India Fund was formed in August 2004 and is                          appreciation. Kotak India Real Estate Fund-I (KIREF-I) has been
         registered with SEBI as a Venture Capital Fund. India Growth Fund               set up as a unit scheme of KMRF. KIREF-I had its final closing
         (IGF) was set up as a unit scheme of Kotak SEAF India Fund with                 in February 2006 with committed contributions of Rs. 458 crore
         investors from select institutional and high net worth investors,               from the domestic, institutional and HNI investors Rs. KIREF-I has
         from both India and abroad, on a private placement basis.                       drawn down 100% of its commitments and has fully committed its
                                                                                         capital (net of expenses and management fees) in 8 investments

                                                                                                                       Kotak Mahindra Bank Limited         XII
          across various assets classes in the real estate sector. KIREF-I       of social security and the governments support through tax benefits have
          made a part divestment from one of its portfolio investments and       only added to this growth story.
          distributed Rs. 23.76 crore to its investors. KIREF-I’s investments
          have begun to mature, and KIAL expects to harvest some of the          All these factors were favourable to the industry in the year 2007-08,
          investments over the next couple of years.                             which is reflected in the growth in premium income over last year.
       (b) Kotak Alternate Opportunities (India) Fund
          Kotak Alternate Opportunities (India) Fund (KAOIF) is the second       The premium income for the year grew to Rs. 1691.14 crore (previous
          domestic real estate fund of the alternate assets business group       year Rs. 971.51 crore). During the year, Kotak Life Insurance wrote over
          set up with an objective of investing in the securities of companies   3,13,771 policies (previous year 1,65,203 policies) of adjusted first year
          operating in real estate, infrastructure and allied services           annualized premium (single premium weighted at 1/10th) of Rs. 1,051.68
          sectors in India with an intention to provide long-term capital        crore (previous year Rs. 572.62 crore), representing a sum assured of Rs.
          appreciation to its investors. KAOIF held its closing in July 2007     33,102 crore (previous year Rs. 20,163 crore).
          with the aggregate capital commitments of Rs. 1,577 crore from
          Kotak Group’s customers on a private placement basis. KAOIF            Introduction of new products and focus on service delivery were primary
          has drawn down 37% of its corpus and has till date made five           drivers for the growth of the private life insurers during 2007-08. Keeping
          investments. KAOIF is a 7-year fund with an option to increase         with our product philosophy of delivering innovative & pragmatic financial
          up to two additional one year periods. KAOIF proposes to have          solution to our customers, Kotak Life Insurance introduced four new
          a well diversified portfolio of its investments in large integrated    products, targeted at different consumer needs.
          residential townships, state-of-the-art IT parks, contemporary
          shopping mall destinations and hospitality projects.                    (i) Kotak Platinum Advantage Plan - A unique blend of safety and
                                                                                      returns, featuring capital protection and embedded investment advice
Apart from acting as investment manager to the above domestic private equity          which works to maximize customer’s wealth. Features like aggressive
and realty funds, the Company also provides non-binding advisory services to          market-linked growth options and life cover make this plan a well-
offshore funds managed by Kotak Group’s international subsidiaries.                   rounded financial solution.


During the next financial year i.e. 2008-09, the Group plans to raise an          (ii) Kotak Eternal Life Plans - Participating whole life plans that provide
infrastructure fund from domestic and offshore investors.                             enhanced protection till the golden age of 99. The plans provide for a
                                                                                      high cover at lower premiums, cash lumpsum benefits at desired stage
Kotak Mahindra Old Mutual Life Insurance                                              and also the means to care for loved ones in the second innings of life.
Kotak Mahindra Old Mutual Life Insurance is a 74:26 joint venture between
Kotak Mahindra Group & Old Mutual Plc; South Africa                               (iii) Kotak Surakshit Jeevan - An enhanced protection & long-term savings
                                                                                      plan with the assurance of delivering financial independence. This
Kotak Life Insurance offers life insurance, deferred annuity and employee             plan keeps pace with the customer’s changing needs at every step of
benefit products to individuals and groups. The business is distributed               life, be it protection for the family or savings for the future.
through three distribution channels viz. Tied Agency, Alternate Channels
and Group Insurance. The business is value-driven with a focus on long-term       (iv) Kotak Smart Advantage - This plan offers guaranteed returns on the
shareholder value and an aspiration to meet policyholder expectations.                first year premium and upto 100% premium allocation from second
                                                                                      year onwards. This Unit-Linked plan also gives guaranteed bonus
Since its inception in 2001, Kotak Life Insurance has been witnessing a               additions at regular intervals helping the customer to accumulate
steady growth and is expected to continue these upward trends.                        wealth systematically, over the long-term.


Currently the penetration of life insurance in India is 4% (approx) and          As of March 31, 2008, Kotak Life Insurance had around 35,000 active life
3/4th of the insurable population is without life insurance cover. This          advisors who are continuously being trained to facilitate them to advise
signifies a huge potential for growth for the insurance industry. And factors    customers in a proper manner. As on 31st March, 2008, the Company
like a burgeoning middle & affluent class, rise in disposable income, lack       had 235 corporate agents and 143 empanelled brokers. In addition, the

XIII    Kotak Mahindra Bank Limited
Company also had referral bancassurance tie-ups with 36 co-operative            The Company proposes to shift some of its Investment Management activities to
banks during the year under review                                              Singapore on receiving permission from the Monetary Authority of Singapore.


Currently, Kotak Life Insurance operates from 150 branches in 109 cities        Technology
with a primary focus on the mass affluent and affluent population. During       Scaling business volumes in 2007-2008, were ably supported by technology
the year 76 new branches were opened and this expansion was in second           with a concentration on customer service, information security, and, as in
tier cities which offer good opportunity and also provide a window to           previous years, innovation.
                                                                    Rs. crore
                                        2007-08      2006-07      Growth        New services were launched, and existing services were extended to
 Premium income                        1,691.14        971.51        74%        serve customers better. A new statementing engine provided customers
 New Business (Gross)                  1,106.62        614.94        80%        with information across products availed by them. Services such as RTGS
 New Business (APE)                    1,051.68        572.62        84%        and NEFT payments were made available on the internet and through
 First year regular premium            1,045.57        553.04        89%        the branches. In addition, to ensure that the customer gets an improved
 Deficit                                  71.81         58.35            –      (and similar) experience across the Group, implementation of a common
                                                                                CRM platform was commenced. The first stage of which went live this
International Subsidiaries                                                      year, making Kotak the second largest Siebel-CRM installation in India.
The Bank has overseas subsidiaries with offices in Mauritius, London,
Dubai, Singapore, New York and San Francisco. Kotak Mahindra Inc set up         The year also saw a launch of an extensive Information Security Program,
a branch in San Francisco in September 2007.                                    to strengthen processes and further raise awareness. Continuous patrolling
                                                                                of Kotak websites was instituted, 2-factor authentication for the complete
The overseas subsidiaries are mainly engaged in investment advisory and         security of our online trading customers was introduced, and the Bank
investment management of funds, management of GDR/FCCB issuances,               acquired ISO 27001 certification in DC operations & Network operations.
broker and broker dealer activities as well as investments.
                                                                                The efficacy of these measures, have been validated by multiple external
The assets under management through international operations increased          sources. Kotak Bank received the Asian Banker Summit award for the Best
from USD 1.4 billion as on March 31, 2007 to USD 2.1 billion as on              Banking Securities Systems Project, the Best IT Implementation Award for
March 31, 2008 translating to an increase of 26%. During the year under         the Security Assurance Program, the Microsoft Security Strategist award
review, the Kotak Mahindra (UK) was appointed Investment Manager                for Outstanding Leadership in the field of information security, and the
to a number of India focussed funds including Kotak India Focus Fund,           Banking Technology Award 2008 for its security policy & procedures.
Kotak Fund - Indian Multicap Fund, Kotak India Concentrated Growth
Fund. The Kotak Fund - Indian Multicap Fund will be the principal vehicle       Technology innovation was lead by the launch of Mobile Banking Services.
for raising funds from European Investors. During the forthcoming year,         The bank architected an operator independent, device independent
the international business intends to launch a number of niche asset            platform that can be extended to multiple products and launched payment
management products, which shall increase the presence and penetration          and mutual fund transactions on it.
of the Group in the international markets.
                                                                                The Brokerage business launched account information available on mobile
Buoyancy in the Indian capital markets led to an increased activity level       phones.
during the year. The Company has increased staff levels in the UK, Dubai
and Singapore and foresees significant increase in fund flows.


It is expected that sustained investment activity into the Indian Equity
markets will result in a substantial increase in the assets under management
and this will provide a significant boost to the revenues of the Company.



                                                                                                                       Kotak Mahindra Bank Limited        XIV
Productivity improvements resulting from workflow automation was a              Bank, at an integrated level, covering all activities of the Bank. Development
focus for the year. A state of the art product was evaluated and procured,      of the risk strategy and risk appetite is an ongoing process and is based on
to be implemented across the Group. The life insurance business proved          past experience and future plans. The risk strategy is consistent with the
the business benefits of workflow automation, with enhancements that            Board’s overall risk tolerance, management’s expertise in each business
resulted in straight through processing proposals increasing from 32% to        unit and the total financial amount that the Bank is prepared to place at
50%, and total processing time decreasing from 4 hours to 2 hours per           risk of loss (Capital at risk).
proposal.
                                                                                The Management Committee provides overall risk management supervision
The strategy of integrated technology platforms, to provide synergies across    for the consolidated Group as a whole. Various risk committees, namely
the Kotak Group was extended during the year. 13 entities of the Kotak          Asset Liability Committee (ALCO), Credit Committee, First Tier Audit
Group migrated to a common General Ledger system, and the Anti-Money            Committee, Risk Management Committee, Information Security Committee
Laundering solution already in use by the Bank, was extended to Kotak           etc, review specific risk areas and supervise the activities of enterprise wide
Life Insurance and Kotak Securities. In addition, a common Document             risk management.
Management System was introduced for the Group.
                                                                                Categories of Risk
As the business scaled, technology upgraded its infrastructure for firewalls,   The most important risks are specific banking risks and reputation risk as
storage, processors, backups and desktop management across the Group.           well as risk arising from the general business environment.
With centralization of datacenters (for life insurance, asset management,
treasury and international businesses) and common networks, infrastructure      Specific Banking Risks
is now shareable across the Group. Unified procurement arising from             In consonance with the guidelines of Reserve Bank of India with regards to
centralizing was leveraged to obtain improved terms for purchasing from         BASEL II, the risk management processes of the Bank distinguish among
vendors.                                                                        four kinds of banking risk: credit, market, liquidity and operational risk.


Ultimately, there is no better acknowledgement of excellence, than one          Risk Management Tools
conferred by peers. The Indian Banking Associating bestowed 6 of its 15         The Bank uses a comprehensive range of quantitative tools and metrics
awards, including the prestigious ‘IT Team of the Year’ to Kotak Bank. Thus,    for monitoring and managing risks. Some of these tools are common to a
setting it apart, as a leader in technology solutions.                          number of risk categories whereas the others are tailored to address the
                                                                                particular features of specific risk categories.

RISK MANAGEMENT
                                                                                Both with a view to bringing in risk sensitivity through policies and to
The diversified business activities require the Bank to identify, measure,      duly meet the regulatory requirements, the Bank continually assesses the
aggregate and manage risks effectively and to allocate capital among its        appropriateness and the reliability of the quantitative tools and metrics in
businesses appropriately. The risk management framework lays emphasis on        the light of the changing risk environment
the Group’s risk philosophy, proper organizational structure, risk and reward
balance and is supported by dedicated monitoring and risk measuring             Credit Risk
mechanism.                                                                      Credit risk arises from all transactions that give rise to actual, contingent
                                                                                or potential claims against any counterparty, borrower or obligor. The
Risk Control systems are being enhanced with a view to enable business          Bank’s credit exposure is primarily categorized into retail and wholesale
gain and maintain competitive advantage while growing assets profitably.        borrowers. Retail exposure is mostly term loans and asset backed other
Consumer Banking continues to take initiatives to further improve its risk      than personal loans. Wholesale borrowers are internally categorized into
management capability.                                                          emerging corporate, corporate and financial institutional group. While retail
                                                                                credit lending is largely based on predefined parameters and is mostly
Basic Principles and Risk and Capital Management                                decentralized, credit appraisal is undertaken by an independent dedicated
The Board is involved in defining risk appetite and capital at risk for the     credit risk team for wholesale exposure.

XV     Kotak Mahindra Bank Limited
Credit Risk Management Tools
During the year the Bank has put in place an internal credit rating model
for the comprehensive risk assessment of the wholesale banking credit
exposures. Each obligation is evaluated on two dimensions to assign
obligor and facility rating. The rating tool rates Large Corporates, SMEs,          The robustness of the risk management systems put in place is evident
Brokers, Traders and Services separately. The parameters in each risk entity        from the healthy portfolio maintained by the Bank.
(viz. business risk, industry risk, management risk and financial risk) to
evaluate ratings and appropriate weight-age to these parameters have                Counterparty credit risk arising out of derivatives and
been decided based on past experience and after assessing the rating                forward contracts
methodology. The final output of the model helps the bank to assess                 The bank has adopted current exposure method to measure counterparty
the expected probable loss number attached to each borrower after duly              credit exposure. This comprises marked to market value of outstanding
considering the securities provided to mitigate the risk. The internal credit       contracts and potential future exposure for the remaining maturity. The
rating system would facilitate Bank’s migration to internal rating-based            bank earmarks an estimated maximum exposure against a counterparty
approaches of Basel II Accord in due course. The rating tool grades obligors        limit at the time of entering into a transaction based observed movement
into 18 categories and each rating category has been assigned a Probability         of various risk factors.
of Default (PD) number. The facility extended by the bank to the borrower
is also rated on a comprehensive scale of 30 categories of ratings. Such a          Credit Risk Management Principles
facility rating provides the Loss Given Default (LGD) number to each facility       The Bank measures and manages its credit risk based on the following
rating category. The combination of Obligor and Facility Rating provides            principles
Combined Rating which is divided into 18 categories.
                                                                                           The extension & renewal of any Credit Facility to a particular
                                                                                            borrower requires Credit Approval at the appropriate authority level.
Internal rating is assigned to each obligor based on quantitative and                       The Rating Tool, which is already in place, helps the authorities in
qualitative factors and forms an important element of credit lending                        such decision
decision. These ratings are reviewed at least annually.                                    The approval of all the limits to the counterparties should be in line
                                                                                            with the Corporate Credit Policy and Collateral Risk Management
Independent credit appraisal, credit administration, credit monitoring, credit              Policy of the bank. Such approval should generally be within the
measurement and industry research group are in place encompassing the                       Bank’s portfolio guidelines and credit strategies
entire gamut functions facilitating integrated credit risk management.                     There will be a regular review of the credit worthiness of the
                                                                                            borrowers not only using the rating tool of the bank but also by its
The Bank’s Credit Appraisal process incorporates a review of all aspects of                 Credit Risk Management team
the proposals including all risks to ensure that it is within the acceptable risk
framework decided by the Board and earns the indicated risk-adjusted return.        Market Risk
                                                                                    Market risk arises from the uncertainty concerning changes in market
The Credit Administration team ensures that all credit covenants are                prices and rates viz. interest rates, equity prices, foreign exchange rates,
properly fulfilled prior to disbursal. Once a credit has been extended,             the correlations among them and their levels of volatility.
adherence of the same to sanctioned terms is scrupulously monitored by
the Credit Monitoring team.                                                         Market risk management framework is laid down in the investment and
                                                                                    ALM policy of the bank. The bank runs exposure on interest rates, equity,
The Industry Research Group guides the bank in building its portfolio               foreign exchange and a combination of them through derivatives. Exposure
with emphasis on reducing sector concentration and identifying sectors              is managed through a set of risk limits such as open position, PVO1, gap
to grow the business. The Group conducts regular portfolio reviews tracks           limits, cash value etc. These limits are monitored on daily basis by the
significant change in the operating environment and undertakes rapid                independent mid-office cell and are reviewed based on market conditions
impact analysis on the portfolio.                                                   on frequent basis by ALCO.



                                                                                                                           Kotak Mahindra Bank Limited        XVI
The Bank computes value at risk (VAR) for the aforesaid risk on an                managed through setting limits on the negative gap for maturity bucket. As
individual portfolio basis as well as on aggregated portfolios basis after        part of liquidity risk management the bank conducts behaviour analysis of its
considering correlation effect. Value at risk is reported on a daily basis and    CASA, term deposits and other products to analyze the impact of the inbuilt
back testing and stress testing is undertaken to confirm the validity of the      option. The Bank has also put in place a formal Contingency Liquidity Plan to
measurement models.                                                               forewarn/mitigate adverse liquidity situations.


Value at Risk:                                                                    Operational Risk
Value at Risk (VaR) is among one of the techniques used to monitor and            Operational risk is the potential for incurring losses due to failure of
measure the market risk. The VaR approach derives a quantitative measure          employees, technology, system or a process and disasters, projects, external
of market risk under normal market conditions, estimates the potential            factors, frauds etc, including legal and regulatory risk. The bank seeks to
future loss that will not be exceeded in a defined period of time and with        ensure that key operational risk are managed in a timely and effective
a defined confidence level. VaR is calculated for internal reporting purpose      manner through a framework of policies, procedures and tools to identify,
using a 99% confidence level and 10 days holding period on daily basis.           assess, monitor, control and report such risks. The Group internal audit team
The VaR model takes into account all the material risk factors assuming           and the compliance department have set a sound platform for operational
normal market conditions. We calculate VaR using the historical observation       risk management, along with the operational risk management unit.
techniques giving more weights to the recent observed movements.
                                                                                  The following techniques are applied by bank to manage operational risks
Value at Risk Analysis for the year 2007-08 is as below:                           – All products and process notes need review by all concerned
                                                                      Rs. crore        departments including Compliance, Legal and Risk Management.
 Value at Risk                                                Amount crore
 Maximum                                                              65.73        – Unusual event reporting and creation of loss database have been
 Minimum                                                              11.58            institutionalized as a stepping stone towards measurement of operational
 Average                                                              30.90            risk. Analysis of unusual events assists identifying sources of operational
 Year End 31.03.2008                                                  28.89            risks and taking adequate risk mitigating measures to minimize those
                                                                                       risks.
Back Testing:
We use back testing to verify the accuracy of the VaR calculations. We             – During the year, bank launched ‘the focus initiative’. Through this
compare the actual movement in the portfolio with the VaR estimates.                   initiative, Bank aims to increase the overall level of operational
                                                                                       risk awareness amongst staff using various tools. The workshops
Stress Testing:                                                                        conducted as part of the initiative rolled out bank’s ‘Risks and Controls
While Value at Risk, calculated on the daily basis, measures the maximum               Self Assessment’ program for formally assessing the operational risks
potential loss in the normal market conditions, we also value our                      and related key risk indicators to monitor these risks. These workshops
portfolio under the extreme market condition by using the Stress testing               were attended by large number of participants representing different
methodology. According to the predefined stress scenarios, underlying                  business/ operations/ support functions from across bank. Bank plans
risk factors are stressed for sudden and extreme change in the market                  to hold more such programs to cover all business/operating/support
movement rate risk of the balance sheet is managed through gap analysis,               functions.
especially duration gap of the assets and liabilities.
                                                                                  Bank is already calculating operational risk capital charge using ‘Basic
Liquidity Risk                                                                    Indicator Approach’ as prescribed under the guidelines issued by the
Liquidity risk is the risk arising from the potential inability of the Bank       Reserve Bank of India. Above measures will equip bank in adopting
to meet all payment obligations when they become due. Liquidity risk is           more sophisticated risk based approaches in future for the purpose of
                                                                                  computing operational risk capital charge (subject to regulatory review
                                                                                  and approval).
Basel II                                                                         Compliance Policy. The compliance function is headed by a senior resource
The Bank has made considerable progress in capturing data and                    in all Group companies. The Compliance function in the Bank was also
implementing systems with regards to computing capital adequacy                  suitably strengthened to meet the requirements of the RBI guidelines on
as per the standardized approach of Basel II for credit risk. Efforts are        Compliance Management issued during the year. The Compliance function
on to automate the process of capital computation as per Basel II and            for international subsidiaries was enhanced significantly by recruitment
application system is being implemented to that effect. As on March 31,          of several senior resources. The Group Head Compliance reports to the
2008 the estimated capital adequacy ratio as per the new guidelines is           Board of Directors of the Bank. The Compliance Department oversees
17.53% as compared to 17.36% under the current guidelines.                       adherence to all regulatory prescriptions both domestic and international.
                                                                                 The department is also responsible for ensuring adherence to Know Your
The revised framework of capital adequacy norms is applicable to Indian          Customer (KYC) and Anti-Money Laundering (AML) standards. The senior
banks having operational presence outside India and foreign banks with           compliance resource in each of the Group companies is also designated
effect from March 31, 2008 and other scheduled commercial banks have             as the Principal Officer under the Prevention of Money Laundering Act
been encouraged to migrate with effect from March 31, 2008, but not              2002. The Bank and the Insurance subsidiary have implemented a
later than March 31, 2009. A multi-disciplinary group having members             sophisticated AML application. The application is being rolled across all
from various department of the banks have been formed to ensure setting          key subsidiaries.
process and develop infrastructure to comply with the requirements of
Basel II.                                                                        Dissemination of regulatory information in the Bank is done on an online
                                                                                 basis by using knowledge management tools. Dissemination of regulatory
During the year the Bank has successfully implemented the K-Ram rating           information in key subsidiaries was also enhanced significantly during the
system. The rating is based on management, industry, financial and business      year. The department also brings out a quarterly compliance newsletter to
risk parameters all of which are evaluated to give an obligor rating to the      update employees on regulatory developments. The Department is actively
borrower. In addition, a separate facility risk rating is also undertaken by     involved in both onsite and online training for the employees in Compliance
K-RAM, which assists in appropriate structuring of facilities. This issuer       matters. During the year the Department has brought a Handbook on Foreign
and facility rating is in line with Basel II requirements. All customers are     Exchange Transactions to facilitate education of employees and customers.
compulsorily rated and these ratings are subject to periodic reviews. The
Bank also has in place a system to track rating migration.                       The department is also responsible for ensuring adherence to standards
                                                                                 and codes by Reserve Bank of India (RBI), Banking Codes and Standards
A stress testing policy has also been formulated to periodically review the      Board of India (BCSBI), Indian Banks Association (IBA), Foreign
impact of the dynamic external environment on the portfolio. The Bank is         Exchange Dealers’ Association of India (FEDAI), Fixed Income Money
also compiling a document on the RAROC framework for pricing of loans            Market and Derivatives Association (FIMMDA), Securities and Exchange
as is required by the Reserve Bank of India.                                     Board of India (SEBI), Association of Mutual Funds in India (AMFI),
                                                                                 Insurance Regulatory and Development Authority (IRDA), and international
Bank’s Operational risk capital charge using Basic Indicator Approach as         regulators / SRO’s.
per Reserve Bank of India guidelines worked out to Rs. 160.23 Crores
(Rs. 1,602.30 million) as on March 31, 2008.                                     The Bank and its subsidiaries have adequate compliance monitoring and
                                                                                 reporting systems in place. They have also adopted a ‘Whistle Blower
In addition to the regular monitoring and oversight, in the coming years,        Policy’ encouraging employees to report any instances of irregularity to
the focus of risk function would be to develop sophisticated measurement         senior management.
tools to statistically quantify risk in all lending businesses and operations.
                                                                                 The Group has hired a reputed consulting firm to benchmark the compliance
Compliance                                                                       processes and practices with the best in the world. During the year the
The Group has in place an independent and comprehensive compliance               exercise has been completed in Kotak Securities Limited.
structure to address compliance and reputation risk on a group wide
basis. The Board of the Bank has adopted during the year a Group Wide            Internal Controls

                                                                                                                      Kotak Mahindra Bank Limited XVIII
The Bank’s internal audit department undertakes a comprehensive
audit of all branches and businesses under a risk-based internal audit
model recommended by the Reserve Bank of India and approved by the
Audit Committee of the Board of Directors. An annual risk-based internal
audit plan is drawn up on the basis of risk profiling of Bank’s branches and
businesses/ departments which is approved by the Audit Committee. The
internal audit department seeks assistance from external firms in respect
of Information Technology audits.                                                      the best talent is acquired, nurtured and developed. This year the Bank
                                                                                       through its Corporate Social Responsibility initiative has also embarked on
After assessing the overall risk of a branch or business or department, the            projects relating to Environment protection and helping the cause of the
Bank takes measures to minimize such risk. Senior officers also assess and             underprivileged.
evaluate the mitigating measures taken by the branch during their visits.
Higher risk areas and branches are targeted for more frequent audits.                  Through some best-in-class and innovative HR practices, the Bank and its
                                                                                       subsidiaries strive to build a work force that is committed to delivering
The Bank has a process of concurrent audit of critical functions using external        world class products & services to its customers across the globe.
consulting and/or accounting firm(s). Concurrent audit is also carried out for
the Bank’s treasury operations, in particular for sovereign and corporate debt         Opportunities and Threats
investments and foreign exchange operations. This has been undertaken to
ensure the existence of and adherence to internal and regulatory controls.             Opportunities

                                                                                             Scalability through increased brand awareness, market penetration
The subsidiaries of the Bank, are also subjected to internal audit, either by                 and service offerings across all categories of financial services
internal teams or by external auditors. All auditors report to the respective
                                                                                             Increase in customer’s wallet share
Audit Committees. The scope of all companies is approved by the respective
Audit Committees. All audit reports are placed before the Audit Committee                    Leveraging the latest technology for providing quality and client
of the respective companies and key and significant issues communicated                       centric services
to the Bank (the holding company). Mitigating measures are taken where
risk is more than acceptable levels.                                                   Threats

                                                                                             Oil prices and rising inflation
human Resources
As on March 31, 2008, the Bank along with its subsidiaries employed around                   Increasing interest rate scenario
20,000 employees at various locations in India and abroad, an addition of                    Competition from local and multinational players
around 9,000 employees over 2007-08. The Bank was adjudged the 10th
                                                                                             Changing global financial markets
Best Employer in India by the Hewitt Best Employer Survey in 2007.
                                                                                       Outlook
The Bank and its subsidiaries continue to invest substantially in people               Kotak Mahindra Group’s results for the financial year demonstrate the
development and have in place policies & processes to ensure employee                  strong fundamental growth in the India story. However, the economy
welfare and skill development. The training programs ensure holistic                   inhibits the concerns over the impact of inflation, the weakening of the
development of the employees by equipping them with not only functional                global economy and rising crude oil prices.
skills, but with skills necessary for leadership effectiveness and self-development.
A robust performance and Talent Management system ensures that                         The Group believes that the present economic scenario offers immense




XIX    Kotak Mahindra Bank Limited
opportunities for it to grow in scale and reach coupled with value creation.
The Group is confident that with its integrated business model it shall
be able to take advantage of the significant growth opportunities in the
coming years.


Safe harbour
This document contains certain forward-looking statements based on
current expectations of Kotak Mahindra management. Actual results
may vary significantly from the forward-looking statements contained
in this document due to various risks and uncertainties. These risks and
uncertainties include the effect of economic and political conditions in
India and outside India, volatility in interest rates and in the securities
market, new regulations and Government policies that may impact the
businesses of Kotak Mahindra Group as well as its ability to implement the
strategy. Kotak Mahindra does not undertake to update these statements.


This document does not constitute an offer or recommendation to buy or
sell any securities of Kotak Mahindra Bank or any of its subsidiaries and
associate companies. This document also does not constitute an offer or
recommendation to buy or sell any financial products offered by Kotak
Mahindra, including but not limited to units of its mutual fund and life
insurance policies.


All investments in mutual funds and securities are subject to market risks
and the NAV of the schemes may go up or down depending upon the
factors and forces affecting the securities market. The performance of the
sponsor, Kotak Mahindra Bank Limited, has no bearing on the expected
performance of Kotak Mahindra Mutual Fund or any schemes thereunder.


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




                                                                               Kotak Mahindra Bank Limited   XXI
Group Consolidated Financial Statements

Group Consolidated Financial Statements ..................................................................................................................... 2

Kotak Mahindra Bank Limited ........................................................................................................................................ 43



Subsidiaries
Kotak Mahindra Capital Company Limited ..................................................................................................................... 109

Kotak Securities Limited................................................................................................................................................. 140

Kotak Mahindra Old Mutual Life Insurance Limited......................................................................................................... 187

Kotak Mahindra Prime Limited ....................................................................................................................................... 289

Kotak Mahindra Assets Management Company Limited.................................................................................................. 333

Kotak Mahindra Trustee Company Limited...................................................................................................................... 356

Kotak Mahindra Investments Limited ............................................................................................................................. 367

Kotak Mahindra (International) Limited .......................................................................................................................... 399

Kotak Mahindra (UK) Limited ......................................................................................................................................... 411

Kotak Mahindra Inc. ...................................................................................................................................................... 422

Global Investment Opportunities Fund Limited ............................................................................................................... 433

Kotak Investment Advisors Limited (Formerly Kotak Mahindra Securities Limited) ............................................................ 447

Kotak Mahindra Trusteeship Services Limited .................................................................................................................. 468

Kotak Forex Brokerage Limited....................................................................................................................................... 480




                                                                                                                        Kotak Mahindra Bank Limited                              1
Consolidation at a Glance



                                                                                                                               Rupees in Lakhs

                                                           2007 - 08                    2006 - 07              March 31, 2008 March 31, 2007

                                                       Profit         Profit         Profit    Profit after
                                                   before Tax      after Tax     before Tax            Tax         Networth        Networth

    Kotak Mahindra Bank Limited                     39,778.05     29,393.28      20,324.52     14,136.52          353,549.48     163,349.84

    Subsidiaries

    Kotak Mahindra Capital Company Limited          17,519.22     11,530.91       9,390.00          6,788.00       40,090.68       26,905.00

    Kotak Securities Limited                        58,021.71     40,869.22      36,512.14     25,571.42          114,245.12       75,080.05

    Kotak Mahindra Prime Limited                    15,463.23     10,062.14       8,425.20          5,734.04       70,791.63       55,728.35

    Kotak Mahindra Old Mutual Life Insurance
    Limited                                        (6,988.89)     (7,187.45)     (5,563.16)    (5,834.88)          19,736.39       11,920.99

    Kotak Mahindra Asset Management Limited             222.14         102.53     1,059.92           682.91         2,806.42        2,703.89

    Kotak Mahindra Trustee Company Limited           1,010.51          688.80       674.45           464.28         1,564.47        1,227.15

    Kotak Mahindra Investments Limited               6,538.23      4,259.97       3,567.53          2,705.83       18,023.13       13,773.75

    Kotak Mahindra (International) Limited           1,969.73      1,935.17       1,332.40          1,300.96        6,390.37        4,824.49

    Kotak Mahindra (UK) Limited                      5,040.78      3,474.99       2,012.76          1,406.16        6,046.71        2,810.55

    Kotak Mahindra Inc.                              1,766.66      1,040.24       1,321.08           793.57         2,041.27        1,092.48

    Kotak Investment Advisors Limited
    (Formerly known as Kotak Mahindra Securities
    Limited)                                         2,071.00      1,346.80          60.19            34.45         3,557.04        3,864.82

    Kotak Mahindra Trusteeship Services Limited          69.21          48.73        30.45            20.35            90.46           41.74

    Kotak Forex Brokerage Limited                       (58.62)        (58.85)      (51.76)          (52.01)           47.43           56.28

       Total                                       142,422.96     97,506.48      79,095.72     53,751.61          638,980.60     363,379.38

    Add: Associates                                                1,381.27                         1,442.55       42,175.65       40,766.72

    Less: Dividend, Minority Interest, inter
          company and other adjustment                             (234.91)                         1,369.96       98,765.62       80,844.63

    Consolidated Profit After Tax / Net Worth                     99,122.66                    53,824.20          582,390.63     323,301.47

    Consolidated Earnings per Share (Rs.)                               29.18                         16.47

    Consolidated Book Value per Share (Rs.)                                                                           168.97           99.12




2          Kotak Mahindra Bank Limited (Consolidated)
Auditors’ Report

To                                                                                     appointed actuary. The actuarial valuation of these liabilities as at
The Board of Directors                                                                 March 31, 2008 has been duly certified by the appointed actuary, and
Kotak Mahindra Bank Limited                                                            in his opinion, the assumptions for such valuation are in accordance
                                                                                       with the guidelines and norms issued by the Insurance Regulatory
1.   We have audited the attached consolidated balance sheet of KoTaK
                                                                                       and Development Authority (‘IRDA’) and Institute of Actuaries of India
     MahinDra BanK LiMiTeD (‘the Bank’) and its subsidiaries (collectively
                                                                                       in concurrence with IRDA. The auditors of the insurance subsidiary
     ‘the Group’) as at March 31, 2008, and also the consolidated profit
                                                                                       have relied upon the appointed actuary’s certificate in this regard for
     and loss account and the consolidated cash flow statement for the year
                                                                                       forming their opinion on the financial statements of the insurance
     ended on that date, annexed thereto. These financial statements are
                                                                                       subsidiary.
     the responsibility of the Bank’s management and have been prepared
     by the management on the basis of separate financial statements and          5.   We report that the consolidated financial statements have been
     other financial information regarding components. Our responsibility              prepared by the Bank’s management in accordance with the
     is to express an opinion on these financial statements based on our               requirements of Accounting Standard 21: Consolidated Financial
     audit.                                                                            Statements and Accounting Standard 23: Accounting for Investments
                                                                                       in Associates in Consolidated Financial Statements, issued by the
2.   We conducted our audit in accordance with the auditing standards
                                                                                       Institute of Chartered Accountants of India.
     generally accepted in India. Those Standards require that we plan
     and perform the audit to obtain reasonable assurance about whether           6.   Based on our audit and on consideration of reports of other
     the financial statements are free of material misstatement. An                    auditors on separate financial statements and on the other financial
     audit includes examining, on a test basis, evidence supporting the                information of the components, and to the best of our information
     amounts and disclosures in the financial statements. An audit also                and according to explanations given to us, we are of the opinion that
     includes assessing the accounting principles used and significant                 the attached consolidated financial statements gives a true and fair
     estimates made by management, as well as evaluating the overall                   view in conformity with the accounting principles generally accepted
     financial statement presentation. We believe that our audit provides a            in India:
     reasonable basis for our opinion.
                                                                                       (i)    in the case of the consolidated balance sheet, of the state of
3.   We did not audit the financial statements of any of the subsidiaries                     affairs of the Group as at March 31, 2008;
     whose financial statement reflect total assets of Rs. 15,719.49 crores
                                                                                       (ii)   in the case of the consolidated profit and loss account, of the
     as at March 31, 2008, total revenues of Rs. 4,739.40 crores and cash
                                                                                              profit for the year ended on that date; and
     flows amounting to Rs. 1,937.64 crores for the year then ended.
     These financial statements and other financial information have been              (iii) in the case of the consolidated cash flow statement, the cash
     audited by other auditors whose reports have been furnished to us,                      flows for the year ended on that date.
     and our opinion is based solely on the report of other auditors. Further,
                                                                                                                                      For S. r. Batliboi & Co.
     the financial statements of the associates have not been audited.
                                                                                                                                      Chartered Accountants
     The share of the Group in the profit of associates for the year ended
     March 31, 2008, is Rs. 13.81 crores.                                                                                              per Viren h. Mehta
                                                                                                                                                 a Partner
4.   The auditors of the insurance subsidiary of the Bank have reported that
                                                                                                                                  (Membership No. 048749)
     the actuarial valuation of policyholder’s liabilities other than provision
     for linked liabilities is the responsibility of the insurance subsidiary’s   Mumbai, 9th May, 2008




                                                                                                    Kotak Mahindra Bank Limited (Consolidated)              3
Consolidated Balance Sheet as at 31st March, 2008

                                                                                      Schedule                        As at                       As at
                                                                                                          31st March, 2008           31st March, 2007
                                                                                                          (Rupees in lakhs)           (Rupees in lakhs)

Capital and Liabilities
    Capital                                                                              1                           34,467.28              32,615.57
    Reserves and Surplus                                                                 2                      547,923.35                 290,685.90
    Minority Interest                                                                    2A                           5,123.34                 3,094.00
    Employees’ Stock Options (Grants) Outstanding                                                                     5,821.40                 2,842.64
    Deposits                                                                             3                    1,369,193.18                 966,097.22
    Borrowings                                                                           4                    1,277,281.30                 998,591.28
    Policyholders’ Funds                                                                                        284,161.51                 167,978.84
    Other Liabilities and Provisions                                                     5                      535,746.02                 401,175.49

         Total                                                                                                4,059,717.38               2,863,080.94




Assets
    Cash and Balances with Reserve Bank of India                                         6                      176,422.56                  79,194.61
    Balances with Banks and Money at Call and Short Notice                               7                      160,512.85                 135,057.92
    Investments                                                                          8                    1,256,967.64                 912,847.08
    Advances                                                                             9                    2,198,468.17               1,557,344.20
    Fixed Assets                                                                         10                          33,302.88              23,534.62
    Other Assets                                                                         11                     233,701.34                 154,760.57
    Goodwill on Consolidation                                                                                          341.94                   341.94

         Total                                                                                                4,059,717.38               2,863,080.94

Contingent Liabilities                                                                   12                  12,191,869.05              10,121,320.10
Bills for Collection                                                                                                 29,088.37              21,944.14
Significant Accounting Policies and Notes to the Consolidated Financial Statements       18


As per our report of even date.                                                      For and on behalf of the Board of Directors


For S. R. Batliboi & Co.                                                             Dr. Shankar Acharya                   Uday Kotak
Chartered Accountants                                                                Chairman                              Executive Vice Chairman &
                                                                                                                           Managing Director
per Viren Mehta                                                                      Dipak Gupta
a Partner                                                                            Executive Director
(Membership No. 048749)
                                                                                     Jaimin Bhatt                          Bina Chandarana
Mumbai, 9th May, 2008                                                                Group Chief Financial Officer         Company Secretary



4         Kotak Mahindra Bank Limited (Consolidated)
Consolidated Profit And Loss Account for the Year Ended 31st March, 2008

                                                                                             Schedule                  Year ended               Year ended
                                                                                                                 31st March, 2008         31st March, 2007
                                                                                                                 (Rupees in lakhs)         (Rupees in lakhs)
I.     Income
       Interest earned                                                                          13                    364,838.80               198,202.99
       Other Income                                                                             14                    403,007.95               237,026.87
           Total                                                                                                      767,846.75               435,229.86

II.    Expenditure
       Interest expended                                                                        15                    181,647.70                97,705.69
       Operating expenses                                                                       16                    409,105.13               244,405.30
       Provisions & Contingencies                                                               17                     81,221.28                40,670.84
           Total                                                                                                      671,974.11               382,781.83

III.   Profit
       Net Profit for the year                                                                                         95,872.64                52,448.03
       Less: Share of Minority Interest                                                                                 (1,868.75)                  66.37
       Add: Share in profit of Associates                                                                                1,381.27                1,442.54
       Consolidated Profit for the year attributable to the Group                                                      99,122.66                53,824.20
       Add: Surplus brought forward from previous year                                                                149,587.62                98,692.78
          Total                                                                                                       248,710.28               152,516.98

IV.    Appropriations
       Transfer to Statutory Reserve                                                                                     7,350.00                 3,550.00
       Transfer to/ (from) Special Reserve u/s 45 IC of RBI Act, 1934                                                    2,864.43                (7,006.19)
       Transfer to General Reserve                                                                                       5,626.91                   725.00
       Transfer to Capital Reserve                                                                                         148.00                   405.00
       Transfer to Debenture Redemption Reserve                                                                         28,584.82                 2,581.06
       Transfer from Debenture Redemption Reserve                                                                      (10,048.48)                      —
       Proposed Dividend                                                                                                 2,586.99                 2,286.06
       Corporate Dividend Tax                                                                                              762.64                   388.43
       Balance carried over to Balance Sheet                                                                          210,834.97               149,587.62
           Total                                                                                                      248,710.28               152,516.98
V.     Earnings Per Share [Refer Note 14 - Schedule 18]
       Basic                                                                                                                29.62                    16.60
       Diluted                                                                                                              29.18                    16.47
       Significant Accounting Policies and Notes to the Consolidated Financial Statements       18


As per our report of even date.                                                             For and on behalf of the Board of Directors


For S. R. Batliboi & Co.                                                                    Dr. Shankar Acharya                Uday Kotak
Chartered Accountants                                                                       Chairman                           Executive Vice Chairman &
                                                                                                                               Managing Director
per Viren Mehta                                                                             Dipak Gupta
a Partner                                                                                   Executive Director
(Membership No. 048749)
                                                                                            Jaimin Bhatt                       Bina Chandarana
Mumbai, 9th May, 2008                                                                       Group Chief Financial Officer      Company Secretary



                                                                                                     Kotak Mahindra Bank Limited (Consolidated)            5
Consolidated Cash Flow Statement for the Year Ended 31st March, 2008

                                                                                     Year Ended          Year Ended
                                                                               31st March, 2008    31st March, 2007
                                                                               (Rupees in lakhs)    (Rupees in lakhs)
CASH FLOW FROM OPERATING ACTIVITIES
    Net Profit After Tax                                                             99,122.66           53,824.20
    Add: Provision for Income tax and Fringe benefit tax                             44,911.49           25,417.59
    Profit before tax                                                               144,034.15           79,241.79
    Adjustments for:
    Employee Stock Options Grants                                                     4,887.48            1,658.26
    Depreciation on Group’s property                                                  9,866.71            7,368.43
    Premium amortisation on investments                                               4,171.61            4,205.56
    Diminution in the value of investments                                                (0.06)             (53.17)
    Loss on revaluation of investments (net)                                         17,142.60            2,668.72
    Interest paid on subordinated debt and Upper Tier II                              6,130.08            2,388.17
    Provision for Non Performing Assets and contingencies                            27,545.19           15,302.79
    Profit on sale of assets                                                           (103.19)              (99.35)
    Increase/ (decrease) in Translation Reserve [Refer Note 2(F)(xi) –
    Schedule 18]                                                                       (699.05)             (285.64)
    Wealth tax                                                                            7.12                 3.63
                                                                                    212,982.64          112,399.19

    Adjustements for:
    Increase in Investments other than Associates                                  (364,161.59)        (403,429.48)
    Increase in Advances                                                           (663,740.35)        (523,572.57)
    Increase in Other Assets                                                        (65,695.91)         (29,389.90)
    (Increase)/ Decrease in Cash Collateral with Banks                                  961.80            (1,221.10)
    Increase in Deposits                                                            403,095.96          404,429.06
    Increase in Borrowings                                                          278,859.82          419,113.27
    Debenture issue expenses                                                             (19.13)             (91.17)
    Increase in Policyholders’ Funds                                                116,182.67           64,023.27
    Increase in Other Liabilities & Provisions                                      107,914.33           54,833.08
                                                                                   (186,602.40)         (15,305.54)
Income Taxes Paid                                                                   (57,138.34)         (25,371.73)
Net Cash Flow from Operating Activities                                  (A)        (30,758.09)          71,721.92

CASH FLOW FROM INVESTING ACTIVITIES
    Purchase of Fixed assets                                                        (20,052.65)         (13,618.51)
    Sale of Fixed assets                                                                520.87              358.97
    Increase in Investments in Associates                                             (1,273.12)        (11,364.85)
    Acquisition of additional stake in subsidiaries                                         —           (33,300.00)


Net Cash Used in Investment Activities                                   (B)        (20,804.90)         (57,924.39)




6        Kotak Mahindra Bank Limited (Consolidated)
Consolidated Cash Flow Statement for the Year Ended 31st March 2008 (Contd.)

                                                                                                 Year Ended                             Year Ended
                                                                                           31st March, 2008                       31st March, 2007
                                                                                           (Rupees in lakhs)                       (Rupees in lakhs)

CASH FLOW FROM FINANCING ACTIVITIES
   Dividend paid including Corporate Dividend Tax                                                 (2,673.38)                             (2,222.09)
   Fresh issue of share/Money received on exercise of stock options                             162,827.55                              46,840.25
   Share issue expenses                                                                             (878.26)                               (429.84)
   Interest paid on subordinated debt and Upper Tier II                                           (6,130.08)                             (2,388.17)
   Increase in subordinated debt and Upper Tier II                                               20,032.50                              38,551.50
   Increase in Minority Interest                                                                  2,029.34                              12,122.56
Net Cash Flow from Financing Activities                                 (C)                     175,207.67                              92,474.21
Net Increase in Cash & Cash Equivalents                         (A + B + C)                     123,644.68                             106,271.74

Cash & Cash Equivalents at the Beginning of the Year                                            211,523.65                             105,251.91
(Refer Note below)

Cash & Cash Equivalents at the end of the Year                                                  335,168.33                             211,523.65
(Refer Note below)

Note:
        Balance with banks in India in Fixed Deposit
        (As per Schedule 7 I (i)(b))                                          80,300.09                             65,744.72
        Cash Collateral Security shown separately in operating activities     (1,767.08)         78,533.01          (2,728.88)          63,015.84
   Balance with banks in India in current account                                                40,372.18                              24,469.27
   (As per Schedule 7 I(i)(a))

   Money at call and short notice in India (As per Schedule 7 I (ii))                            14,000.00                                      —

   Cash in hand (As per Schedule 6 I)                                                            19,829.24                              13,074.35

   Balance with RBI in current account (As per Schedule 6 II)                                   156,593.32                              66,120.26

   Balance with banks Outside India:
   (i) In current account (As per Schedule 7 II (i))                                             17,474.84                              11,372.03
   (ii) In Other Deposit Accounts (As per Schedule 7 II (ii))                                     8,365.74                              33,471.90
Cash & Cash Equivalents at the end of the Year                                                  335,168.33                             211,523.65


As per our report of even date.                                                     For and on behalf of the Board of Directors


For S. R. Batliboi & Co.                                                            Dr. Shankar Acharya                Uday Kotak
Chartered Accountants                                                               Chairman                           Executive Vice Chairman &
                                                                                                                       Managing Director
per Viren Mehta                                                                     Dipak Gupta
a Partner                                                                           Executive Director
(Membership No. 048749)
                                                                                    Jaimin Bhatt                       Bina Chandarana
Mumbai, 9th May, 2008                                                               Group Chief Financial Officer      Company Secretary



                                                                                              Kotak Mahindra Bank Limited (Consolidated)           7
Schedules forming part of Consolidated Balance Sheet as at 31st March, 2008

                                                                                                                   As at                As at
                                                                                                       31st March, 2008    31st March, 2007
                                                                                                       (Rupees in lakhs)    (Rupees in lakhs)
Schedule 1 — Capital
       Authorised Capital
          40,00,00,000 (31st March, 2007: 35,00,00,000) Equity Shares of Rs. 10/- each                       40,000.00           35,000.00
       Issued Subscribed & Paid-up Capital
          34,46,72,842 (31st March, 2007: 32,61,55,708) Equity Shares of Rs. 10/- each fully paid-up         34,467.28           32,615.57
            Total                                                                                            34,467.28           32,615.57

Schedule 2 — Reserves & Surplus
I.      Statutory Reserve
        Opening Balance                                                                                      16,426.00           12,876.00
        Add: Transfer from Profit and Loss Account                                                            7,350.00            3,550.00
            Total                                                                                            23,776.00           16,426.00

II.     Capital Reserve
        Opening Balance                                                                                       1,681.03            1,276.03
        Add: Transfer from Profit and Loss Account                                                              148.00              405.00
            Total                                                                                             1,829.03            1,681.03

III.    General Reserve
        Opening Balance                                                                                       9,589.03            9,202.06
        Add: Transfer from Profit and Loss Account                                                            5,626.91              725.00
        Add: Transfer from Capital Redemption Reserve                                                               —             1,045.10
        Add: Transfer from share of Retained Earnings in Associates                                                 —               546.97
        Less: Transitional adjustment for Employee Benefits                                                         —             1,644.46
        Add/(Less) : Translation Reserve [Refer Note 2(F)(xi) – Schedule 18]                                   (699.05)             (285.64)
            Total                                                                                            14,516.89            9,589.03

IV.     Securities Premium Account
        Opening Balance                                                                                      86,395.54           41,525.60
        Add:Received during the year (net of tax)                                                           163,054.36           45,360.26
        Less: Utilised for Share Issue Expenses                                                                 878.26              429.84
        Less: Utilised for Debenture Issue Expenses (net of tax)                                                 12.63                60.48
            Total                                                                                           248,559.01           86,395.54

V.      Special Reserve under Section 45IC of the RBI Act, 1934
        Opening Balance                                                                                       2,333.14            9,339.33
        Add: Transfer from Profit and Loss Account                                                            2,864.43                   —
        Less: Transfer to Profit and Loss Account                                                                   —             7,006.19
            Total                                                                                             5,197.57            2,333.14




8           Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of Consolidated Balance Sheet as at 31st March, 2008 (Contd.)


                                                                                                                        As at                     As at
                                                                                                            31st March, 2008         31st March, 2007
                                                                                                            (Rupees in lakhs)         (Rupees in lakhs)
Schedule 2 — Reserves & Surplus (Contd.)
VI. Debenture Redemption Reserve
       Opening Balance                                                                                               9,928.08               7,347.02
       Add: Transfer from Profit and Loss Account                                                                   28,584.82               2,581.06
       Less:Transfer to Profit and Loss Account                                                                     10,048.48                       —
          Total                                                                                                     28,464.42               9,928.08

VII. Capital Redemption Reserve
       Opening Balance                                                                                                     —                1,045.10
       Less: Transfer to General Reserve                                                                                   —                1,045.10
          Total                                                                                                            —                        —

VIII. Capital Reserve on Consolidation
       Opening Balance                                                                                              14,745.46              11,930.40
       Addition during the year                                                                                            —                2,815.06
          Total                                                                                                     14,745.46              14,745.46

IX. Share of Retained Earnings in Associates
       Opening Balance                                                                                                     —                    546.97
       Less: Transfer to General Reserve                                                                                   —                    546.97
          Total                                                                                                            —                        —

X.     Profit and Loss Account                                                                                     210,834.97             149,587.62
          Total                                                                                                    547,923.35             290,685.90

Schedule 2A — Minority Interest
       Minority Interest at the date on which parent subsidiary relationship came into existence                     3,967.00               3,967.00
       Subsequent Increase/(Decrease)                                                                                1,156.34                   (873.00)
          Total                                                                                                      5,123.34               3,094.00

Schedule 3 — Deposits
I.     Demand Deposits
       i. From Banks                                                                                                 5,412.64               2,061.21
       ii. From Others                                                                                             292,696.11             200,656.54
          Total                                                                                                    298,108.75             202,717.75
II.    Savings Bank Deposits                                                                                       151,754.30              88,770.34
III.   Term Deposits
       i. From Banks                                                                                                54,118.84             314,435.88
       ii. From Others                                                                                             865,211.29             360,173.25
              Total                                                                                                919,330.13             674,609.13
              Total Deposits of branches in India (I to III)                                                     1,369,193.18             966,097.22



                                                                                                   Kotak Mahindra Bank Limited (Consolidated)         9
Schedules forming part of Consolidated Balance Sheet as at 31st March, 2008 (Contd.)

                                                                                                         As at                As at
                                                                                             31st March, 2008    31st March, 2007
                                                                                             (Rupees in lakhs)    (Rupees in lakhs)
Schedule 4 — Borrowings
I.     Borrowings in India
       (i) Reserve Bank of India                                                                  151,100.00           159,323.00
       (ii) Other Banks                                                                           240,938.62           279,798.70
       (iii) Institutions, Agencies and others*                                                   860,640.69           537,734.58
          Total                                                                                  1,252,679.31          976,856.28
II.    Borrowings outside India                                                                     24,601.99           21,735.00
       Total Borrowings (I & II)                                                                 1,277,281.30          998,591.28
       Secured Borrowings included in I & II above                                                  73,381.73           26,634.74
       *Includes Debenture application money pending allotment amounting to Rs. 9.25 Lakhs
       (Previous Year: Rs. 9,400 Lakhs)

Schedule 5 — Other Liabilities & Provisions
I.     Bills Payable                                                                                50,440.04           28,309.00
II.    Interest Accrued                                                                             53,738.16           27,498.08
III.   Others (including provisions)                                                              345,636.47           280,145.81
IV.    Proposed Dividend (includes tax on dividend)                                                  3,347.35            2,671.10
V.     Sub-ordinated Debt (Tier II Capital)                                                         50,930.00           42,990.00
VI.    Upper Tier II Bonds                                                                         31,654.00            19,561.50
          Total                                                                                   535,746.02           401,175.49

Schedule 6 — Cash and Balances with Reserve Bank of India
I.     Cash and cheques on hand (including foreign currency notes)                                  19,829.24           13,074.35
II.    Balances with RBI in current account                                                       156,593.32            66,120.26
          Total                                                                                   176,422.56            79,194.61

Schedule 7 — Balances with Banks and Money at Call and Short Notice
I.   In India
       (i) Balances with Banks [Refer Note 8 – Schedule 18]
          (a) In Current Accounts                                                                   40,372.18           24,469.27
          (b) In Other Deposit Accounts                                                             80,300.09           65,744.72
          Total                                                                                   120,672.27            90,213.99
       (ii) Money at call and Short Notice
          With Banks                                                                                14,000.00                   —
          Total                                                                                     14,000.00                   —
          Total (i + ii)                                                                          134,672.27            90,213.99
II.    Outside India
       (i) In Current Accounts                                                                      17,474.84           11,372.03
       (ii) In Other Deposit Accounts                                                                8,365.74           33,471.90
          Total                                                                                    25,840.58            44,843.93
          Total (I & II)                                                                          160,512.85           135,057.92



10        Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of Consolidated Balance Sheet as at 31st March, 2008 (Contd.)

                                                                                                                         As at                     As at
                                                                                                             31st March, 2008         31st March, 2007
                                                                                                             (Rupees in lakhs)         (Rupees in lakhs)
Schedule 8 — Investments
I.    Investments in India in
      i. Government Securities                                                                                    1,081,285.46              613,508.08
      ii. Other approved Securities                                                                                         —                     1.00
      iii. Shares                                                                                                    25,223.77               88,485.24
      iv. Debentures and Bonds                                                                                       43,558.49               74,769.01
      v. Associates **                                                                                               44,543.69               43,270.57
      vi. Others [Units, Certificate of Deposits, Commercial Paper (CP), Security Receipts, RIDF Deposit
           & Pass Through Certificates (PTC)]                                                                        60,942.15               92,444.49
         Total                                                                                                    1,255,553.56              912,478.39

II.   Investments Outside India in
      i. Shares                                                                                                         367.33                  220.13
      ii. Others                                                                                                      1,046.75                  148.56
          Total                                                                                                       1,414.08                  368.69
          Total Investments (I and II)                                                                            1,256,967.64              912,847.08
**    Investment in Associates
      Equity Investment in Associates                                                                                   306.39                  468.59
      Add: Goodwill on acquisition of Associates                                                                      2,061.65                2,061.65
      (Share of pre-acquisition losses)
      Cost of Investment in Associates                                                                                2,368.04                2,530.24
      Less: Provision for diminution in value                                                                               —                    26.39
                                                                                                                      2,368.04                2,503.85
      Add: Post-acquisition profit/loss of Associates (Equity method)                                                42,175.65               40,766.72
         Total                                                                                                       44,543.69               43,270.57


Schedule 9 — Advances
A. (i) Bills purchased and discounted #                                                                              42,881.49               25,080.50
     (ii) Cash Credits Overdrafts and loans repayable on demand                                                     141,637.70               86,930.99
     (iii) Term Loans                                                                                             2,013,948.98            1,445,332.71
     # Bills purchased and discounted is net off Bills Rediscounted Rs. 29,730.00 lakhs
           (Previous Year: Rs. 18,065.91 lakhs)
           Total                                                                                                  2,198,468.17            1,557,344.20
B.    (i) Secured by tangible assets *                                                                            1,730,228.12            1,229,890.16
      (ii) Unsecured                                                                                                468,240.05              327,454.04
           Total                                                                                                  2,198,468.17            1,557,344.20
      * including advances against book debts
C.    Advances in India
      (i) Priority Sector                                                                                           590,300.92              396,409.74
      (ii) Public Sector                                                                                                    —                    11.00
      (iii) Banks                                                                                                           —                       —
      (iv) Others                                                                                                 1,608,167.25            1,160,923.46
         Total                                                                                                    2,198,468.17            1,557,344.20



                                                                                                    Kotak Mahindra Bank Limited (Consolidated)       11
Schedules forming part of Consolidated Balance Sheet as at 31st March, 2008 (Contd.)

                                                                                              As at                As at
                                                                                  31st March, 2008    31st March, 2007
                                                                                  (Rupees in lakhs)    (Rupees in lakhs)
Schedule 10 — Fixed Assets
A.     Premises (Including Land)
       Gross Block
       At cost on 31st March of the preceding year                                       10,329.36            7,829.17
       Additions during the year                                                            534.65            2,511.30
       Deductions during the year                                                            10.13                11.11
          Total                                                                          10,853.88           10,329.36

       Depreciation
       As at 31st March of the preceding year                                             2,994.78            2,857.65
       Charge for the year                                                                  179.07              141.39
       Deductions during the year                                                             4.71                 4.26
       Depreciation to date                                                               3,169.14            2,994.78
       Net Block                                                                          7,684.74            7,334.58


B.     Other Fixed Assets (including furniture & fixtures)
       Gross Block
       At cost on 31st March of the preceding year                                       38,899.55           28,734.34
       Additions during the year                                                         19,518.00           11,107.21
       Deductions during the year                                                         1,392.81              942.00
          Total                                                                          57,024.74           38,899.55

       Depreciation
       As at 31st March of the preceding year                                            22,699.51           16,161.69
       Charge for the year                                                                9,687.64            7,227.04
       Deductions during the year                                                           980.55              689.22
       Depreciation to date                                                              31,406.60           22,699.51
       Net Block                                                                         25,618.14           16,200.04
          Total (A) +(B)                                                                 33,302.88           23,534.62



Schedule 11 — Other Assets
I.     Interest accrued                                                                  40,602.42           26,080.14
II.    Advance tax (net of provision)                                                     3,076.60            2,161.45
III.   Stationery and Stamps                                                                302.24                61.97
IV.    Non Banking assets acquired in satisfaction of claims                              1,610.92            1,792.98
V.     Cheques in course of collection                                                    1,942.90              843.88
VI.    Others                                                                          186,166.26           123,820.15
          Total                                                                        233,701.34           154,760.57



12        Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of Consolidated Balance Sheet as at 31st March, 2008 (Contd.)


                                                                                                               As at                     As at
                                                                                                   31st March, 2008         31st March, 2007
                                                                                                   (Rupees in lakhs)         (Rupees in lakhs)
Schedule 12 — Contingent Liabilities
I.     Claims not acknowledged as debts                                                                     4,995.59                4,325.17
II.    Liability on account of outstanding forward exchange contracts                                     642,915.71              387,019.92
III.   Guarantees on behalf of constituents in India                                                       70,548.31               49,194.83
IV.    Guarantees on behalf of constituents outside India                                                  14,968.50               14,087.30
V.     Acceptances, Endorsements and Other Obligations                                                     55,211.87               29,279.70
VI.    Other items for which the Group is contingently liable:
       Liability in respect of interest rate & currency swaps & forward rate agreements               10,221,662.11             8,230,709.14
       Liability in respect of options contracts                                                        1,152,558.56            1,394,995.07
       Capital commitments                                                                                 29,008.40               11,708.97
          Total                                                                                       12,191,869.05           10,121,320.10




Schedules Forming Part of Consolidated Profit and Loss Account for the Year Ended 31st March, 2008

                                                                                                        Year ended               Year ended
                                                                                                  31st March, 2008         31st March, 2007
                                                                                                  (Rupees in lakhs)         (Rupees in lakhs)
Schedule 13 — Interest Earned
I.     Interest/discount on advances/bills                                                               260,768.46              148,117.05
II.    Income from investments                                                                            85,879.03               40,601.77
III.   Interest on balance with RBI and other inter-bank funds                                             9,037.14                4,894.09
IV.    Others                                                                                              9,154.17                4,590.08
          Total                                                                                          364,838.80              198,202.99


Schedule 14 — Other Income
I.     Commission exchange and brokerage                                                                 180,536.46              111,428.25
II.    Profit on sale of Investments (net)                                                                46,741.78               18,556.25
III.   Loss on revaluation of investments                                                                (17,142.60)               (2,668.72)
IV.    Profit on sale of building & other assets (net)                                                       103.19                    99.34
V.     Profit/(Loss) on exchange transactions (net)                                                        (2,849.42)              1,597.96
VI.    Premium on Insurance business                                                                     166,199.05               95,046.13
VII. Profit on recoveries of non-performing assets acquired                                               17,237.58                4,353.75
VIII. Profit on Derivatives                                                                                9,043.33                6,235.58
IX.    Miscellaneous Income                                                                                3,138.58                2,378.33
          Total                                                                                          403,007.95              237,026.87



                                                                                          Kotak Mahindra Bank Limited (Consolidated)       13
Schedules Forming Part of Consolidated Profit and Loss Account for the Year Ended 31st March, 2008 (Contd.)

                                                                                                                Year ended           Year ended
                                                                                                          31st March, 2008     31st March, 2007
                                                                                                          (Rupees in lakhs)     (Rupees in lakhs)
Schedule 15 — Interest Expended
I.     Interest on Deposits                                                                                      85,442.35            41,731.67
II.    Interest on RBI/Inter-Bank Borrowings                                                                     24,726.19            19,306.25
III.   Other Interest                                                                                            71,479.16            36,667.77
          Total                                                                                                181,647.70             97,705.69



Schedule 16 — Operating Expenses
I.     Payments to and provision for employees [Refer Note 7 – Schedule 18]                                    119,789.20             68,808.47
II.    Rent, taxes and lighting                                                                                  15,053.68             8,215.63
III.   Printing and Stationery                                                                                    4,586.55             2,908.94
IV.    Advertisement, Publicity and Promotion                                                                    12,926.09             7,222.21
V.     Depreciation on Group’s property                                                                           9,866.71             7,368.43
VI.    Directors’ fees, allowances & expenses                                                                        82.69                 35.66
VII. Auditors’ fees and expenses                                                                                    336.94               267.47
VIII. Law Charges                                                                                                 1,492.41               707.08
IX.    Postage, telephones etc.                                                                                   8,184.66             5,636.79
X.     Repairs and maintenance                                                                                    7,942.54             3,913.33
XI.    Insurance                                                                                                    952.07               460.35
XII. Travel and Conveyance                                                                                        7,898.43             5,646.66
XIII. Professional Charges                                                                                       15,734.66             9,381.89
XIV. Brokerage                                                                                                   38,395.55            23,330.76
XV. Stamping expenses                                                                                             3,397.89             2,728.94
XVI. Policyholders’ reserves                                                                                   116,182.67             64,029.86
XVII. Insurance Business Expenses (Claims and benefits paid)                                                     26,146.48            17,058.52
XVIII.Other Expenditure                                                                                          20,135.91            16,684.31
          Total                                                                                                409,105.13            244,405.30



Schedule 17 — Provisions & Contingencies
I.     Provision for taxation [Refer Note 11 – Schedule 18]                                                      44,918.61            25,421.22
II.    Provision for Non-performing Assets, Standard Assets and Contingencies (including write-offs and
       net of recoveries)                                                                                        27,545.19            15,302.79
III.   Provision for Diminution in value of Investments                                                               (0.06)              (53.17)
IV.    Provision Others [Refer Note 12 – Schedule 18]                                                             8,757.54                    —
          Total                                                                                                  81,221.28            40,670.84




14        Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account

Schedule 18 – Significant Accounting Policies And Notes To The Financial Statements

1.   BASIS OF CONSOLIDATION
     a.   The Consolidated Financial Statements of Kotak Mahindra Bank Limited (“the Bank”) are prepared in accordance with Accounting Standard 21
          (AS-21), “Consolidated Financial Statements” and Accounting Standard 23 (AS-23), “Accounting for Investments in Associates in Consolidated
          Financial Statements” issued by the Institute of Chartered Accountants of India (“ICAI”). The Bank consolidates all subsidiaries as defined in
          AS-21 on a line by line basis by adding together like items of assets, liabilities, income and expenses. Kotak Mahindra Bank Limited (KMBL) and
          its subsidiaries which have been consolidated, constitute the “Group”. Further, the Bank accounts for investments in Associates as defined by
          AS- 23 by the equity method of accounting. The list of subsidiaries is as under:
     b.   The list of subsidiaries is as under:

            Name of the Subsidiary                                            Country of Origin            % Shareholding              % Shareholding
                                                                                                                 of group                     of group
                                                                                                        (31st March, 2008)          (31st March, 2007)
           Kotak Mahindra Capital Company Limited                              India                                 100.00                     100.00
           Kotak Securities Limited                                            India                                 100.00                     100.00
           Kotak Mahindra Old Mutual Life Insurance Limited *                  India                                   74.00                     74.00
           Kotak Mahindra Prime Limited                                        India                                 100.00                     100.00
           Kotak Mahindra Asset Management Company Limited                     India                                 100.00                     100.00
           Kotak Mahindra Trustee Company Limited                              India                                 100.00                     100.00
           Kotak Mahindra Investments Limited                                  India                                 100.00                     100.00
           Kotak Mahindra (International) Limited                              Mauritius                             100.00                     100.00
           Kotak Mahindra (UK) Limited                                         U.K.                                  100.00                     100.00
           Kotak Mahindra Inc.                                                 USA                                   100.00                     100.00
           Global Investments Opportunities Fund Limited (GIOFL) #             Mauritius                             100.00                     100.00
           Kotak Investment Advisors Limited (Formerly known as
           Kotak Mahindra Securities Limited)                                  India                                 100.00                     100.00
           Kotak Mahindra Trusteeship Services Limited                         India                                 100.00                     100.00
           Kotak Forex Brokerage Limited                                       India                                 100.00                     100.00
          * The Bank, together with its subsidiaries Kotak Mahindra Prime Limited and Kotak Mahindra Capital Company Limited, holds 74% in the subsidiary.
          # Global Investments Opportunities Fund Limited is a hybrid entity comprising of asset management and mutual fund activities. Consolidation
            is done in respect of the asset management portion of the entity having regard to the substance over form of the entity.
     c.   As per AS-23 issued by the ICAI, the Consolidated Financial Statements incorporate the financial statements of the following associates
          except as indicated:

            Name of the Associate                                             Country of Origin            % Shareholding              % Shareholding
                                                                                                              of the group                of the group
                                                                                                        (31st March, 2008)          (31st March, 2007)
            Business Standard Limited (Unaudited)                             India                                39.98                    39.98
            Business Standard Digital Limited (wholly owned subsidiary of                                          39.98                    39.98
            Business Standard Limited) (Unaudited)                            India
            IndiaCar Private Limited (Up to 25th November, 2007) (#)          India                                    —                    30.00
            Infina Finance Private Limited (Formerly known as Multifaced
            Finstock Private Limited)                                         India                                49.99                    49.99
            Kotak Mahindra Asset Reconstruction Company Limited (*)           India                                30.00                    30.00
            Phoenix ARC Private Limited (**)                                  India                                49.00                       —
          #     On 25th November, 2007, the Bank sold its entire stake in IndiaCar Private Limited.
          *     The financial statements of Kotak Mahindra Asset Reconstruction Company Limited have not been consolidated under AS-23, as the
                permanent diminution in the value of the same is fully provided for.
          ** The financial statements of Phoneix ARC Private Limited have not been consolidated as there are no operations during the year.



                                                                                                  Kotak Mahindra Bank Limited (Consolidated)           15
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

2.   SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     A.    ACCOUNTING METHODOLOGY
           The Financial Statements have been prepared on historical cost basis of accounting. The Group adopts the accrual system of accounting and the
           financial statements conform with the Accounting Standards issued by the ICAI, guidelines issued by the Reserve Bank of India (“RBI”), Insurance
           Regulatory and Development Authority (“IRDA”) from time to time as applicable to relevant companies and the generally accepted accounting
           principles prevailing in India.
           The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of
           assets and liabilities (including contingent liabilities) as on the date of the financial statements and the reported income and expenses during the
           reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual
           results could differ from these estimates.

     B.    REVENUE RECOGNITION
           a.   Banking/Investing Activity:
                i.     Interest income is recognised on accrual basis except in case of non-performing assets where it is recognized, upon realisation, as per
                       RBI guidelines. In respect of non-performing assets, overdue interest is recognised as income on realisation.
                ii.    Interest income in respect of retail advances {except for the subsidiary, Kotak Mahindra Prime Limited – (KMPL)} is accounted for
                       by using the internal rate of return method to provide a constant periodic rate of return on the net investment outstanding on the
                       contract.
                iii.   KMPL accrues for auto finance income (including service charges and incentives) by using the internal rate of return method to provide
                       a constant periodic rate of return after adjustment of brokerage expenses on the net investment outstanding on the contract.
                iv.    Service charges, Fees and Commission income are recognised when due except for Guarantee Commission which is recognised over
                       the period of the guarantee, except as indicated in para iii above.
                v.     Interest income on discounted instruments is recognised over the tenure of the instruments so as to provide a constant periodic rate
                       of return.
                vi.    Gain on account of securitisation of assets is amortised over the life of the securities issued in accordance with the guidelines issued
                       by the RBI.
                vii. Dividend income is accounted on an accrual basis when the right to receive the dividend is established.
                viii. In respect of non-performing assets acquired from other banks and NBFCs, collections in excess of the consideration paid at each asset
                      level or portfolio level is treated as income in accordance with RBI guidelines and clarifications.

           b.   Investment Banking Activity:
                i.     Issue management fees, underwriting commission, financial advisory fees and placement fees are accounted for based on stage of
                       completion of assignments.
                ii.    Brokerage and sub-brokerage on fixed income securities placements are accounted on completion of the transaction.

           c.   Insurance Activity:
                i.     Premium is recognised as income when it is due from policyholders except on unit linked policies, where the premium is recognised
                       when associated units are allotted.
                ii.    Uncollected premium on lapsed policies is not recognised as income until revived.
                iii.   Top Up/Lump sum contributions are accounted as a part of the single premium.
                iv.    Income from linked policies, which include asset management fees and other charges, if any, are recovered from the linked fund in
                       accordance with the terms and conditions of the policies.
                v.     Premium payable on re-insurance ceded is accounted at the time of recognition of the premium income in accordance with the treaty
                       arrangements with the re-insurers.
                vi.    Re-insurance premium and commission is recognised over the period of the risk.



16        Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

         d.      Broking Activity:
                 i.      Placement and other fee based income are accounted for on the basis of the progress of the assignment.
                 ii.     Brokerage Income:
	   	    	       	       •	   On	fixed	deposit	management,	is	accounted	on	completion	of	the	transaction.
	   	    	       	       •	   On	primary	market	subscription/mobilisation	is	accounted	on	receipt	of	intimation	of	allotment.
	   	    	       	       •	   On	secondary	market	transaction	is	recognised	net	of	service	tax	on	the	date	of	the	transaction.
                 iii.    Underwriting commission is accounted on allotment.
                 iv.     Incentive on primary market subscription/mobilisation is accounted on the basis of receipt of intimation of allotment.
                 v.      In respect of depository activity, transaction fees are recognised on completion of transaction. Account maintenance charges are
                         recognised on time basis over the period of contract.
                 vi.     Stock lending fees and borrowing expenses are recognised on time basis over the period of contract.
                 vii. Portfolio management fees are accounted on accrual basis as follows:
                         a.   In case of fees based on fixed percentage of the corpus/fixed amount, income is accrued over the period of the agreement.
                         b.   In case of fees, based on the returns of the portfolio, income is accounted on the termination of the portfolio agreement/on each
                              anniversary as per the agreement.
                         c.   In case of upfront non-refundable fee, income is accounted in the year of receipt.

         e.      Asset Management – Mutual Fund:
                 Management fee is recognised at specific rates agreed with the relevant schemes, applied on the average daily net assets of each scheme
                 (excluding inter-scheme investments, where applicable, and investments made by the Company in the respective scheme), and are in
                 conformity with the limits specified under SEBI (Mutual Funds) Regulations, 1996.


    C.   FIXED ASSETS AND INTANGIBLE ASSETS
         Fixed assets/Intangible assets have been stated at cost inclusive of incidental expenses less accumulated depreciation/amortisation.

         DEPRECIATION / AMORTISATION:
         The Group has adopted the Straight Line Method of depreciation so as to write off 100% of the cost of the assets at rates higher than those
         prescribed under Schedule XIV to the Companies Act, 1956 for all assets other than premises, based on the Management’s estimates of useful
         lives of these assets. Estimated useful lives over which assets are depreciated are as follows:

              Asset Type                                                                         Useful life in years
              Premises                                                                           58
              Improvement to leasehold premises                                                  Over the period of lease subject to a maximum of 6 years
              Office equipments                                                                    5
              Computers                                                                            3
              Furniture and Fixtures                                                               6
              Vehicles                                                                             4
              ATMs                                                                                 5
              Software (including development) expenditure                                         3
              Forex Broking Business Rights                                                      10
              Goodwill (Other than on consolidation)                                               5
              Membership Card of the Bombay Stock Exchange Limited                               20
         Assets costing less than Rs. 5,000 are fully depreciated in the year of purchase.



                                                                                                       Kotak Mahindra Bank Limited (Consolidated)           17
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

     D.    EMPLOYEE BENEFITS
           i.     Provident Fund – Defined Contribution Plan:
                  Contribution as required by the Statute made to the Government Provident Fund is debited to the Profit and Loss Account.
           ii.    Gratuity – Defined Benefit Plan:
                  The Group accounts for the liability for future gratuity benefits based on an actuarial valuation. The Bank makes annual contribution to a
                  Gratuity Fund administered by trustees and managed by a life insurance company. In other entities gratuity obligation is wholly unfunded.
                  The net present value of the Group’s obligation towards the same is actuarially determined based on the projected unit credit method as at
                  the Balance Sheet date.
           iii.   Actuarial gains/losses are immediately recognised in the profit and loss account and are not deferred.
           iv.    Superannuation Fund – Defined Contribution Plan:
                  The Group contributes a sum equivalent to 15% subject to a maximum of Rs. 1 lakh per annum per employee, of eligible employees’
                  eligible salary to a Superannuation Fund administered by trustees and managed by a Life Insurance Company. The Group recognises such
                  contributions as an expense in the year they are incurred. The Life Insurance subsidiary’s liability towards superannuation fund is accrued
                  for the relevant period of employee participation.
           v.     Compensated Absences – Defined Benefit Plan:
                  The Company accrues the liability for compensated absences based on the actuarial valuation as at the balance sheet date conducted by
                  an independent actuary (Refer Note 7).
           vi.    Other Employee Benefits:
                  The undiscounted amount of employee benefits expected to be paid in exchange for the services rendered by employees is recognised during
                  the period when the employee renders the service. These benefits include performance incentives.

     E.    INVESTMENTS
           For the Bank:
           1.     Classification:
                  In accordance with the RBI guidelines, investments are categorised into “Held for Trading”, “Available for Sale” and “Held to Maturity” and
                  further classified under six groups, namely, Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments
                  in Associates and Other Investments for the purpose of disclosure in the balance sheet.
                  i.     Investments that are held for resale within 90 days from the date of purchase are classified as “Held for Trading”.
                  ii.    Investments that the Bank intends to hold to maturity are classified as “Held to Maturity”.
                  iii.   Investments which are not classified in the above categories are classified as “Available for Sale”.

           2.     Valuation:
                  The cost of investments is determined on the weighted average basis. Broken period interest on debt instruments is treated as revenue item.
                  The transaction costs including brokerage, commission etc. paid at the time of acquisition of investments is charged to revenue.
                  The valuation of investments is made in accordance with the RBI guidelines as indicated hereunder:
                  a.     Held for Trading/Available for Sale – Each security in this category is revalued at the market price or fair value and the net depreciation
                         of each group is recognised in the Profit and Loss Account. Net appreciation, if any, is ignored. Further, provision for diminution other
                         than temporary is made for, at the individual security level.
                  b.     Held to Maturity – These are carried at their acquisition cost. Any premium on acquisition of debt instruments is amortised over the
                         balance maturity of the security. Any diminution, other than temporary, in the value of securities, is provided for.
                         The market value of investments where current quotations are not available is determined as per the norms laid down by the RBI.
                  c.     Repurchase and reverse repurchase transactions – These are accounted as outright purchase and outright sale respectively.
                         The difference between the clean price of the first leg and the clean price of the second leg is recognised as interest income/interest
                         expense over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is provided for.



18        Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

        3.   Transfer Between Categories:
             Transfer between categories is done at the lower of acquisition cost/book value/market value on the date of the transfer, and depreciation,
             if any, on such transfer is fully provided for.

        4.   Profit or Loss on Sale/Redemption of Investments:
             a.   Held For Trading and Available for Sale:
                  Profit or loss on sale/redemption is included in the Profit and Loss Account.
             b.   Held to Maturity:
                  Profit on sale/redemption of investments is included in the Profit and Loss Account. Loss on sale is charged off to the Profit and Loss
                  Account. In case of profits, the same is appropriated to Capital Reserve after adjustments for tax and Statutory Reserve transfer.
             For The Insurance Company:
             a.   Investments are recorded at cost on the date of purchase which include transaction costs and excludes pre-acquisition interest, if any.
             b.   Diminution in the value of investments as at the Balance Sheet date which is other than temporary, is provided for.
             c.   Investments maturing within twelve months from the Balance Sheet date and investments made with the specific intention to dispose
                  them off within twelve months from the Balance Sheet date are classified as ‘Short Term Investments.’ Investments other than Short
                  Term Investments are classified as ‘Long Term Investments.’
             d.   All debt securities are considered as “held to maturity” and accordingly recorded at historical cost (excluding interest paid, if any).
                  Debt securities including government securities are stated at net amortised cost. The premium/discount, if any, on purchase of debt
                  securities is amortised/accrued over the period to maturity on a straight line basis.
             e.   In respect of unit linked business, the gain/loss on sale of investments is the difference between the sale consideration and the book
                  cost, which is computed on weighted average basis, on the date of sale.
             f.   In respect of unit linked business, all Government securities, except treasury bills, are valued at prices obtained from Crisil Limited. Debt
                  Securities other than Government Securities are valued on the basis of Crisil Bond valuer. Floating rate instruments are valued at cost.
                  The discount on purchase of treasury bills, certificate of deposit, commercial papers, deep discount bonds and zero coupon bonds is
                  amortised over the period to maturity on a straight line basis.
                  Listed equity shares are valued at fair value, being the last quoted closing price on the National Stock Exchange of India Limited (NSE)
                  [In case of securities not listed on NSE, the last quoted closing price on Bombay Stock Exchange Limited (BSE) is used] Equity shares
                  awaiting listing are stated at historical cost subject to provision for diminution, if any, in the value of such investment determined
                  separately for each individual investment. Unrealised gains and losses are recognised in the respective scheme’s revenue account.
             g.   In respect of shareholders’ and non-linked policyholders’ investments, listed equity shares as at Balance Sheet date are stated at fair
                  value being the lower of last quoted closing price on BSE and NSE. Equity shares awaiting listing are stated at historical cost subject to
                  provision for diminution, if any, in the value of such investment determined separately for each individual investment. Unrealised gains/
                  losses arising due to changes in the fair value of listed equity shares are taken to “Fair Value Change Account” and carried forward to
                  Balance Sheet. The profit or loss on actual sale of listed equity includes the accumulated changes in the fair value previously recognised
                  under “Fair Value Change Account”.
             h.   Transfer of debt securities from shareholders’ to policyholders’ fund is transacted at the lower of net amortised cost or market value.
                  Transfer of securities between unit linked funds is done at market value.

             For Other Entities:
             As required by Accounting Standard-13 (AS-13) issued by the ICAI, “Accounting for Investments”, investments are classified into long
             term investments and current investments. Investments, which are intended to be held for more than one year are classified as long
             term investments and investments, which are intended to be held for less than one year, are classified as current investments. Long term
             investments are accounted at cost and any decline in value, other than temporary is provided for. Current investments are valued at cost
             (calculated by applying weighted average cost method) or market/fair value whichever is lower. Securities acquired with the intention to
             trade are considered as Stock-in-Trade. Investments classified as “Stock in Trade” by some of the subsidiaries are valued at cost (calculated by
             applying weighted average cost method) or market price, whichever is lower. Brokerage, stamping and additional charges paid are included
             in the cost of investments.



                                                                                                  Kotak Mahindra Bank Limited (Consolidated)                19
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

     F.    FOREIGN CURRENCY AND DERIVATIVE TRANSACTIONS
           For The Bank:
           i.     Foreign currency assets and liabilities are translated at the balance sheet date at rates notified by the Foreign Exchange Dealers’ Association
                  of India (FEDAI).
           ii.    Income and Expenditure items are translated at the rates of exchange prevailing on the date of the transaction.
           iii.   Foreign Exchange contracts (other than deposit and placement swaps) outstanding at the balance sheet date are revalued at rates notified
                  by FEDAI and resulting profits or losses are included in the Profit and Loss Account. Foreign exchange swaps “linked” to foreign currency
                  deposits and placements are translated at the ruling spot rate at the time of swap. The premium/discount on the swap arising out of the
                  difference in the exchange rate of the swap date and the maturity date of the underlying forward contract is amortised over the period of
                  the swap and the same is recognised as income/expense.
           iv.    Derivative transactions comprising of swaps and options are disclosed as off balance sheet exposures. The swaps are segregated into trading
                  or hedge transactions. Trading swaps outstanding as at the Balance Sheet dates are marked to market and the resulting profits or losses,
                  are recorded in the Profit and Loss Account. Outstanding derivative transactions designated as “Hedges” are accounted on an accrual basis
                  over the life of the transaction. Option premium paid is accounted for in the Profit and Loss Account on expiry of the option.
           v.     Contingent liabilities at the balance sheet date on account of outstanding foreign exchange contracts are restated at year end rates reported
                  by FEDAI.
           For Other Entities:
           vi.    Transactions in foreign currencies are translated to Indian Rupees at the rate of exchange ruling on the date of the transaction.
           vii. Assets and liabilities contracted in foreign currencies are translated into Indian Rupees at the rate of exchange ruling at the Balance Sheet date.
           viii. Exchange differences arising on settlement of the transaction and on account of restatement of assets and liabilities are dealt with in the
                 Profit and Loss Account. In case of items which are covered by forward exchange contracts entered to hedge the foreign currency risk, the
                 difference between the year end rate and the rate on the date of the contract is recognized as exchange difference and the premium paid
                 on forward contracts is recognized over the life of the contract.
           ix.    The outstanding swap trades at the reporting date are disclosed at the contract amount. These swaps are in the nature of hedges and are
                  accounted on an accrual basis; these transactions are not marked to market. Accrued interest is adjusted against the interest cost/income of
                  the underlying liability/asset. The foreign currency balances on account of principal of currency swaps outstanding as at the Balance Sheet
                  date is revalued using the closing rate.

           Currency options:
           x.     The outstanding Option trades, in the nature of hedge, at the reporting date are disclosed at the contract amount. The premium paid is
                  amortised over the life of the contract.

           xi.    The financial statements of all subsidiaries incorporated outside India which are in the nature of non-integral foreign operations are
                  converted on the following basis: (a) Income and expenses are converted at the average rate of exchange applicable for the year and (b)
                  All assets and liabilities are translated at the closing rate as on the balance sheet date. The exchange difference arising out of year end
                  translation is debited or credited as “Translation Reserve” forming part of General Reserve in Reserves and Surplus.

           Equity Index/Stock Futures/options:
           xii. Gains are recognised only on settlement/expiry of the derivative instruments.
           xiii. All open positions are marked to market and the unrealised gains/loss are netted on a scripwise basis. Mark to market gains, if any, are not
                 recognised.
           xiv. Debit/credit balances on open positions are shown as other assets/other liabilities, as the case may be.

     G.    ADVANCES
           i.     Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the RBI guidelines and are stated net of
                  provisions made towards non-performing assets.
           ii.    Provision for non-performing assets comprising sub-standard, doubtful and loss assets is made in accordance with the RBI guidelines. In
                  addition, the Group adopts an approach to provisioning that is based on past experience, evaluation of security and other related factors.



20        Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

         iii.   In accordance with the RBI guidelines, the Bank provides general provision in respect of Standard Assets as follows:
                 Category of Advance                                                                                      General Provision
                 All Direct Advances to Agricultural and SME sector                                                       0.25%
                 Residential Housing loans beyond Rs. 20 lakhs                                                            1.00%
                 Personal loans, Loans and Advances qualifying as Capital Market exposures and                            2.00%
                 Commercial Real Estate loans
                 All other Standard Advances                                                                              0.40%
                One of the Non-Banking Finance Company subsidiary provides general provision in respect of Standard Assets as follows:
                 Category of Advance                                                                                      General Provision
                 Vehicle Loans                                                                                            0.15%
                 Dealer Finance                                                                                           1.00%
                 Personal Loans to existing vehicle loan customers                                                        0.15%
                 Personal Loans                                                                                           1.00%
         iv.    Amounts paid for acquiring non-performing assets from other banks and NBFCs are considered as advances. Actual collections received
                on such non-performing assets are compared with the cash flows estimated while purchasing the asset to ascertain default. If the default
                is in excess of 90 days, the Bank classifies such assets into sub-standard, doubtful or loss as required by the RBI guidelines on purchase of
                non-performing assets. In respect of NBFCs, if the default is in excess of 180 days, then the assets are classified into sub-standard, doubtful
                and loss as required by the guidelines on purchase/sale of non-performing assets issued by the Reserve Bank of India.
    H.   ACTUARIAL METHOD – LIFE INSURANCE
         i.     Actuarial method and assumptions : The actuarial liabilities have been calculated in accordance with generally accepted actuarial principles,
                the requirements of the Insurance Act 1938, IRDA regulations and the prescribed guidance notes of the Actuarial Society of India. In respect
                of unit linked policies, a unit reserve equal to the value of units as on the balance sheet date and an additional non-unit reserve calculated
                on gross premium prospective valuation method is created. The method adopted for par policies (accumulation contracts) is the value of the
                accumulated fund and an additional non-unit reserve calculated on gross premium prospective valuation method. For non-par conventional
                business the gross premium prospective method is used.
         ii.    The assumptions used in the Gross Premium valuation are based on conservative best estimates together with appropriate margins for
                adverse deviations from experience. The principal assumptions are interest, inflation, return to policyholders’ accounts, lapses, expenses,
                mortality and morbidity.
         iii.   Reserves for group life business are calculated as the risk premium for the unexpired term with an allowance for expenses and a margin for
                adverse deviations.
    I.   DISCOUNTED INSTRUMENTS
         The liability is recognized at face value at the time of issuance of discounted instruments. The discount on the issue is amortised over the tenure
         of the instrument.
    J.   ACQUISITION COSTS
         Acquisition costs such as commission and other costs are expensed in the year in which they are incurred.
    K.   TAXES ON INCOME
         The Income Tax expense comprises Current tax, Deferred tax and Fringe Benefit tax. Current tax is measured at the amount expected to be paid in
         respect of taxable income for the year in accordance with the Income tax Act. Deferred tax adjustments comprises of changes in the deferred tax
         assets and liabilities. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences being the difference
         between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent
         periods. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be
         available against which such deferred tax assets can be realised. Deferred tax assets and liabilities are measured using tax rates and tax laws
         that have been enacted or substantially enacted before the balance sheet date. Changes in deferred tax assets/liabilities on account of changes
         in enacted tax rates are given effect to in the Profit and Loss Account in the period of the change. Provision for Fringe benefit tax is made on the
         basis of applicable fringe benefit tax on the taxable value of chargeable expenditure as prescribed under Income Tax Act.
         Deferred tax assets and deferred tax liabilities across various entities are not set off against each other as the Group does not have a legal right
         to do so.



                                                                                                    Kotak Mahindra Bank Limited (Consolidated)              21
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

     L.    SEGMENT REPORTING
           In accordance with Accounting Standard-17 (AS-17) on “Segment Reporting” issued by the ICAI, the Group’s business had been segregated into
           the following segments up to the year ended 31st March, 2007 whose principal activities were as under:
             Segment                                  Principal activity
             Lending                                  Car finance, commercial vehicle finance, personal loans, home loans, agriculture finance, other
                                                      loans/services and fee income from distribution of products.
             Corporate Banking                        Wholesale borrowings and lendings and other related services to the corporate sector.
             Treasury and Investments                 Dealing in debt, equity, money market, forex market, derivatives and investments.
             Retail Liabilities                       Retail borrowings covering savings and current accounts and Branch Banking network and services.
             Broking                                  Brokerage income on market transactions done on behalf of clients, interest on delayed payments,
                                                      distribution of financial products and forex broking.
             Advisory and Transactional Services      Providing financial advisory and transactional services such as mergers and acquisition advice and
                                                      equity/debt issue management services and revenue from being a professional clearing member.
             Asset Management                         Management of investments on behalf of clients and funds.
             Insurance                                Life insurance.

           From the year ended 31st March, 2008, the Group has realigned its business segments after considering internal financial reporting and RBI’s
           revised guidelines issued in April, 2007 on segment reporting for Banks. The reportable segments for the Group are as under:
            Segment                                   Principal activity
            Treasury and Investments                  Dealing in debt, equity, money market, forex market, derivatives and investments and primary
                                                      dealership of Government securities.
            Retail Banking                            Includes:
                                                      (1)   Commercial vehicle finance, personal loans, home loans, agriculture finance, other loans/
                                                            services & exposures which fulfill the four criteria’s for retail exposures laid down in Basel
                                                            Committee on Banking Supervision document “International Convergence of Capital
                                                            Measurement and Capital Standards : A Revised Framework”.
                                                      (2)   Retail borrowings covering savings and current accounts and Branch Banking network and
                                                            services including distribution of financial products.
            Corporate Banking                         Wholesale borrowings and lendings and other related services to the corporate sector which are
                                                      not included in Retail Banking.
            Vehicle Financing                         Retail vehicle finance and wholesale trade finance.
            Other Lending Activities                  Financing against securities, securitization and other loans/services not included under Retail
                                                      Banking and Corporate Banking.
            Broking                                   Brokerage income on market transactions done on behalf of clients, interest on delayed payments,
                                                      distribution of financial products and forex broking.
            Advisory and Transactional Services       Providing financial advisory and transactional services such as mergers and acquisition advice and
                                                      equity/debt issue management services and revenue from being a professional clearing member.
            Asset Management                          Management of investments on behalf of clients and funds.
            Insurance                                 Life insurance.

           The above segments have been identified based on the organisation structure, the customer segment, products and services offered and its
           relation to risk and reward, and the internal reporting process.
           A transfer pricing mechanism between segments has been established to arrive at interest cost on the borrowings of the segments and which is
           disclosed as part of Segment Revenue.
           Segment revenue consists of earnings from external customers and inter-segment revenue as stated above. Segment expenses consist of interest
           expenses including those allocated, operating expenses and provisions.



22        Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

         Segment results are a result of segment revenue and segment expenses.
         Segment assets include assets related to segments and exclude tax related assets. Segment liabilities include liabilities related to the segment
         excluding net worth, minority interest and employees’ stock option (grants outstanding), proposed dividend and dividend tax thereon.
         Since the business operations of the Group are primarily concentrated in India, the Group is considered to operate only in the domestic segment.

    M. EMPLOYEE STOCK OPTION SCHEME
         The Bank has formulated Employee Stock Option Schemes (ESOSs) in accordance with SEBI (Employee Stock Option Scheme) Guidelines, 1999.
         The Schemes provide for grant of options to employees of the Group to acquire the equity shares of the Bank that vest in cliff vesting or in a graded
         manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines and the guidance note on “ Accounting for
         Employee Share based payments” issued by the ICAI, the excess, if any, of the market price of the share preceding the date of grant of the option
         under ESOSs over the exercise price of the option is amortised on a straight-line basis over the vesting period.

    N.   CLAIMS/BENEFITS
         Benefits paid comprise of policy benefit amount, surrenders and specific claims settlement costs where applicable. Surrender and claims by death
         are accounted when intimated. Survival benefits are accounted when due. Maturity claims are accounted on the date of maturity. Amounts
         recoverable from reinsurers are accounted for in the same period as the related claim.

    O.   SECURITISATION
         The Group enters into sale of loans through Special Purpose Vehicles (SPVs). In most cases, post securitisation, the Group continues to service the
         loans transferred to the SPV. The Group also provides credit enhancement in the form of cash collaterals and/or by subordination of cash flows to
         Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future
         servicing etc.) accepted by the Group, appropriate provision/disclosure is made at the time of sale in accordance with Accounting Standard 29,
         “Provisions, Contingent Liabilities and Contingent Assets”.
         The gain/premium on account of securitisation of assets at the time of sale based on the difference between the sale consideration and the book
         value of the securitised asset is amortised over the tenure of the securities issued.

    P.   LEASES
         Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases.
         Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.
         Assets given under a finance lease are recognised as a receivable at an amount equal to the net investment in the lease.

    Q.   PROVISIONS
         Provision is recognised when there is a present obligation as a result of past event; it is probable that an outflow of resources will be required to
         settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined
         based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted
         to reflect the current best estimates.

    R.   EARNINGS PER SHARE
         Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting
         attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity
         shares outstanding during the period are adjusted for events of bonus issue.
         For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted
         average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

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

    T.   CASH AND CASH EQUIVALENTS
         Cash and cash equivalents in the balance sheet comprise Cash and Balances with Reserve Bank of India and Balances with Banks and Money at
         Call and Short Notice (including the effect of changes in exchange rates on cash and cash equivalents in foreign currency).



                                                                                                     Kotak Mahindra Bank Limited (Consolidated)                23
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

3.   Qualified Institutional Placement (QIP)

     The Bank raised Rs. 161,500.00 lakhs by allotting 17,000,000 equity shares of Rs. 10/- each through a Qualified Institutional Placement (QIP) at a price
     of Rs. 950/-. The net issue expenses of Rs. 878.26 lakhs related to the aforesaid issue have been charged to the share premium account as allowed
     under section 78 of the Companies Act, 1956. The above expenses include Rs. 50 lakhs paid to the auditors in connection with the issue.

4.   The Bank charges off to the Profit and Loss Account all expenses related to acquisition costs of advances in the year in which they are incurred. KMPL,
     a subsidiary of the Bank, charges off such costs based on the Internal Rate of Return of a contract. On account of this difference in accounting policy,
     unamortised brokerage amounting to Rs. 4,752.60 lakhs (Previous year Rs. 3,529.63 lakhs) is carried forward in the Balance Sheet under “Other Assets”.

5.   Investments include Rs. Nil (Previous year Rs. 5,749.18 lakhs) as securities earmarked, partially or wholly towards initial margin for equity index/stock
     futures account, stocks pledged with National Securities Clearing Corporation Limited towards exposure in derivatives and stocks pledged with Bombay
     Stock Exchange Limited towards additional base capital in cash segment.

6.   Investments include investments totalling Rs. 151.33 lakhs (Previous year Rs. 106.63 lakhs) in GDRs.

7.   EMPLOYEE BENEFITS
     a.    The Group has recognised the following amounts in the Profit and Loss Account towards contributions to Provident Fund and Other Funds:
             Provident Fund                                                       Rs. 3,622.07 lakhs
                                                                  (Previous Year Rs. 2,178.18 lakhs)
             Superannuation Fund                                                     Rs. 107.40 lakhs
                                                                       (Previous Year Rs. 51.54 lakhs)

     b.    In accordance with Indian regulations, the Group provides for gratuity, a defined benefit retirement plan covering all employees. The plan provides
           a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years
           of employment with the Company subject to maximum of Rs. 3.50 lakhs.
           The gratuity benefit is provided to the employees of the Bank through a fund administered by a Board of Trustees and managed by a life insurance
           company. The Bank is responsible for settling the gratuity obligation through contributions to the fund. The plan is fully funded.
           In respect of other companies in the Group, the gratuity obligation is wholly unfunded.
     c.    Reconciliation of opening and closing balance of the present value of the defined benefit obligation for gratuity benefits is given below:
                                                                                                                                                  Rs. in lakhs
                                                                                                 As of 31st March, 2008             As of 31st March, 2007
                                                                                                    Funded       Others              Funded         Others
           Change in benefit obligations
              Liability at the beginning of the year                                                 854.09        740.71              573.14           541.33
              Current Service cost                                                                   385.68        347.01              237.47           192.38
              Interest cost                                                                              63.13       54.84              41.10            41.26
              Actuarial (gain)/loss on obligations                                                   172.27          35.29              31.86            90.99
              Liability assumed on transfer of employees                                                 (3.15)      13.84                 —              5.75
              Benefits paid                                                                          (30.76)       (77.67)             (29.48)      (131.00)
           Liability at the end of the year                                                       1,441.26        1,114.02             854.09           740.71
           Change in plan assets
              Fair value of plan assets at the beginning of the year                                 925.87              —             332.74              —
              Expected return on plan assets                                                             63.13           —              43.10              —
              Actuarial Gain                                                                         137.66              —              48.51              —
              Benefits paid                                                                          (30.77)             —             (29.48)             —
              Employer contributions                                                                 300.00              —             531.00              —
           Fair value of plan assets as at the end of the year                                    1,395.89               —             925.87              —



24        Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

          Reconciliation of present value of the obligation and the fair value of the plan assets
                                                                                                                                                      Rs. in lakhs
                                                                                                     As of 31st March, 2008              As of 31st March, 2007
                                                                                                       Funded           Others            Funded           Others
          Fair value of plan assets as at the end of the year                                       1,395.89                —              925.87              —
          Liability at the end of the year                                                          1,441.26         1,114.02              854.09         740.71
          Net Asset/(Liabilities) included in “Others” under “Other Assets” and
          “Others Liabilities”                                                                         (45.37)      (1,114.02)              71.78        (740.71)
          Expenses recognised for the period
          Current service cost                                                                         385.68          347.01              237.47         192.38
          Interest cost                                                                                 63.13           54.84               41.10           41.26
          Expected return on plan assets                                                               (63.12)              —             (43.10)              —
          Actuarial (gain)/loss                                                                         34.61           35.29             (16.65)           90.99
          Net gratuity expense included in “[payments to and provision for employees]”
          under “Operating Expenses” [Schedule 16 (1)]                                                 420.30          437.14              218.82         324.63
          Actual return on plan assets                                                                 200.78               —               91.61              —

          Reconciliation of the Liability recognised in the Balance Sheet
          Net Liability at the beginning of the year                                                   (71.78)         740.71              240.41         541.33
          Expense recognised                                                                           420.30          437.14              218.82         324.63
          Liability assumed on transfer of employees                                                    (3.15)          13.84               38.59            5.75
          Employer contributions/Transfers                                                           (300.00)          (77.67)           (569.60)        (131.00)
          Net (asset)/liability is included in “Others” under “Other Assets” and
          “Other Liabilities”                                                                           45.37        1,114.02             (71.78)         740.71
          Investment details of plan assets
          Majority of the plan assets are invested in insurer managed funds.

          Actuarial assumptions used
           Interest rate                                                                 8.14% p.a. (Previous Year 8.20% p.a.)
           Salary escalation rate                                                        15% p.a.for first 2 yrs,
                                                                                         10% p.a. for next 2 yrs
                                                                                          & 6% p.a. thereafter
           Expected rate of return on plan assets                                        7.50% p.a.

          The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors.
          The above information is as certified by the actuary and relied upon by the auditors.
          In accordance with Accounting Standard Board guidance on implementing AS 15, Employee Benefits (revised 2005), the Company has changed
          the method of estimating liability for compensated absences from full cost method to determination on the basis of a actuarial valuation. If the
          liability had been determined based on the full cost method the profit for the year would have been lower by Rs. 1,348.68 lakhs.
8.   Balances in Banks in other deposit accounts include Rs. 67,001.63 lakhs (Previous year Rs. 26,010.90 lakhs) which are under lien. The Balances with
     Banks in Current Accounts {Schedule 7-I (i)(a)} include Rs. 1,767.08 lakhs (Previous year Rs. 2,728.88 lakhs) maintained as collateral in respect of
     receivables securitised by the Bank.
9.   “Others” in Other Liabilities and Provisions (Schedule 5) include the following items shown as “Provision for Contingencies” by the Bank and a
     subsidiary, which have been recognised in the accounts in respect of obligations arising from past event, the settlement of which is expected to result
     in an outflow embodying economic benefits.



                                                                                                      Kotak Mahindra Bank Limited (Consolidated)               25
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

     Provision for Contingencies:
                                                                                                                                                      Rs. in lakhs
                                                                               Balance as on             Addition          Reversed/paid     Balance as on
     Description                                                              1st April, 2007      during the year        during the year 31st March, 2008
     Interest on Stamp Duty*                                                         160.56                     —                       —                160.56
     Stamp duty on Proprietary Trades*                                               885.96              1,675.93                       —              2,561.89
     Provision on securitised assets**                                               131.77                     —                       —                131.77
     Total                                                                         1,178.29              1,675.93                       —              2,854.22

     (*)     The aforesaid provision is based on the likely levy of duty/interest on transactions carried out on the stock exchanges.
     (**) The aforesaid provision is based on the past history of losses on the asset/product securitised and the outflows are expected over the tenure of
          the securitisation, which is spread over a period of three years.

10. Interest Expended-Others (Schedule 15(III)) includes interest on subordinated debts (Lower and Upper Tier II) Rs. 6,130.08 lakhs
    (Previous Year Rs. 2,388.17 lakhs).

11. PROVISION MADE FOR TAXES DURING THE YEAR:
                                                                                                                                                      Rs. in lakhs
                                                                                                                  31st March, 2008             31st March, 2007
     Current tax                                                                                                          55,984.83                   30,494.67
     Deferred tax                                                                                                        (12,332.84)                  (5,923.11)
     Fringe benefit tax                                                                                                     1,259.50                      846.03
     Wealth Tax                                                                                                                  7.12                        3.63
     Total                                                                                                                44,918.61                   25,421.22

12. Provision others – (Schedule 17.(IV)) for the year ended 31st March, 2008 includes contingent provisions against derivatives contracts Rs. 8,600.00
    lakhs and provisions for fees receivable Rs. 157.54 lakhs.

13. DESCRIPTION OF CONTINGENT LIABILITIES:

       Sr. No.     Contingent Liability*                  Brief Description

       1.          Claims not acknowledged as             This includes liability on account of income tax, interest tax, sales tax, lease tax demands and legal
                   debts                                  cases filed against the Group.
                                                          The Group is a party to various legal proceedings in the normal course of business. The Group does
                                                          not expect the outcome of these proceedings to have a material adverse effect on the Group’s
                                                          financial conditions, result of operations or cash flows. Against the above Rs. 720.53 lakhs
                                                          (Previous year Rs. 1,280.24 lakhs) have been paid, which shall be refunded to the Group, if the
                                                          outcome of the legal proceedings will be in the favour of the Group.

       2.          Liability on account of                The Bank enters into foreign exchange contracts with inter-bank participants on its own account
                   outstanding forward exchange           and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at
                   contracts                              a future date at the contracted rate.

       3.          Guarantees on behalf of                The Group issues documentary credit and guarantees on behalf of its customers. Documentary
                   constituents in India                  credits such as letters of obligations, enhance the credit standing of the customers of the Group.
                                                          Guarantees generally represent irrevocable assurances that the Group will make payments in the
                                                          event of customer failing to fulfill its financial or performance obligations.




26         Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

      Sr. No.     Contingent Liability*                 Brief Description

      4.          Acceptances, endorsements and         These include contingent liabilities on account of bills re-discounted by the Group and cash
                  other obligations                     collateral provided by the Group on assets which have been securitised.

      5.          Other items for which the Group       These include liabilities in respect of interest rate and currency swaps and forward rate agreements,
                  is contingently liable                liability in respect of options contracts and capital commitments, which includes undrawn
                                                        commitments in respect of investments.
                                                        The Group enters into currency options, forward rate agreements, currency swaps and interest
                                                        rate swaps with inter bank participants on its own account and for customers. Currency swaps
                                                        are commitments to exchange cash flows by way of interest/principal in one currency against
                                                        another, based on predetermined rates. Interest rate swaps are commitments to exchange fixed
                                                        and floating interest rate cash flows. The notional amounts that are recorded as contingent
                                                        liabilities are amounts used as a benchmark for the calculation of interest component of the
                                                        contracts.

    * Also refer Schedule 12 – Contingent Liabilities

14. EARNINGS PER EQUITY SHARE:


    Particulars                                                                                                            As at                        As at
                                                                                                               31st March, 2008             31st March, 2007
    Reconciliation between weighted shares used in the computation of basic and diluted earnings
    per share:
    Weighted average number of equity shares used in computation of basic earnings per share                        33,46,94,328                32,41,86,155
    Effect of potential equity shares for stock options outstanding                                                    50,14,491                   25,76,394
    Weighted average number of equity shares used in computation of diluted earnings per share                      33,97,08,819                32,67,62,549
    Following is the reconciliation between basic and diluted earnings per share:
    Nominal value per share (Rs.)                                                                                            10.00                      10.00
    Basic earnings per share (Rs.)                                                                                           29.62                      16.60
    Effect of potential equity shares for stock options (Rs.)                                                                 0.44                       0.13
    Diluted earnings per share (Rs.)                                                                                         29.18                      16.47
    Earnings used in the computation of basic and diluted earnings per share (Rs. in lakhs)                            99,122.66                   53,824.20


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

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

    Consequent to the above, the Bank has granted stock options to the employees of the Company. The Bank under its various plan/schemes, has granted
    in aggregate 1,99,53,150 options as on 31st March, 2008 (Previous year 1,49,45,100)




                                                                                                   Kotak Mahindra Bank Limited (Consolidated)               27
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

     The Bank has provided various share-based payment schemes to its employees. During the year ended 31st March, 2008, the following schemes were
     in operation:

                                                 Plan 2002-03*                       Plan 2005                           Plan 2007
      Date of grant                              Various Dates                       Various Dates                       Various Dates
      Date of Board Approval                     Various Dates                       Various Dates                       Various Dates
      Date of Shareholder’s approval             26th July, 2004                     26th July, 2005                     5th July, 2007 and
                                                                                                                         21st August, 2007
      Number of options granted                  28,52,500                           54,86,600                           50,08,050
      Method of Settlement (Cash/Equity)         Equity                              Equity                              Equity
      Vesting Period                             1 – 3.08 years                      1 – 4.13 years                      1.08 – 4.25 Years
      Exercise Period                            0.58 – 0.75 years                   0.42 – 0.83 years                   0.42 – 0.92 Years
      Vesting Conditions                         Graded Vesting                      Graded/Cliff vesting                Graded/Cliff vesting

     The details of activity under Plan 2002-03* have been summarized below:

                                                              Year ended 31st March, 2008                         Year ended 31st March, 2007
                                                          Number of Shares    Weighted Average                Number of Shares      Weighted Average
                                                                             Exercise Price (Rs.)                                   Exercise Price (Rs.)
     Outstanding at the beginning of the year                      17,40,034                     79.92                37,01,250                     61.18
     Granted during the year                                             Nil                                                  Nil
     Forfeited during the year                                           Nil                                                  Nil
     Exercised during the year                                      8,23,904                     80.00                18,61,083                     43.11
     Expired during the year                                        1,03,328                     78.73                 1,00,133                     71.17
     Outstanding at the end of the year                             8,12,802                     80.00                17,40,034                     79.92
     Exercisable at the end of the year                                   —                           —                       —                         —
     Weighted average remaining contractual life                                                  0.31                                                0.96
     (in years)
     Weighted average fair value of options granted                                                  Nil                                                Nil
     * The options have been adjusted for issue of bonus shares – one share for every share allotted on 28th August, 2004 and three equity shares for every
       two shares allotted on 30th August, 2005.

     The details of activity under Plan 2005 have been summarized below:
                                                             Year ended 31st March, 2008                          Year ended 31st March, 2007
                                                          Number of Shares   Weighted Average                  Number of Shares     Weighted Average
                                                                             Exercise Price (Rs.)                                   Exercise Price (Rs.)
     Outstanding at the beginning of the year                      53,24,600                   247.59                         Nil                       Nil
     Granted during the year                                              Nil                        Nil              54,86,600                    245.37
     Forfeited during the year                                            Nil                        Nil                      Nil                       Nil
     Exercised during the year                                      6,93,230                     96.42                        Nil                       Nil
     Expired during the year                                        3,56,370                   240.82                  1,62,000                    172.70
     Outstanding at the end of the year                            42,75,000                   272.66                 53,24,600                    247.59
     Exercisable at the end of the year                             1,54,760                   189.74                         —                         —
     Weighted average remaining contractual life                                                  2.19                                                3.00
     (in years)
     Weighted average fair value of options granted                                                  Nil                                           174.86




28      Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

    The details of activity under Plan 2007 have been summarized below:
                                                                 Year ended 31st March, 2008                        Year ended 31st March, 2007
                                                              Number of Shares Weighted Average                  Number of Shares    Weighted Average
                                                                                Exercise Price (Rs.)                                 Exercise Price (Rs.)
    Outstanding at the beginning of the year                                Nil                                               Nil                     Nil
    Granted during the year                                          50,08,050              506.63                            Nil                     Nil
    Forfeited during the year                                               Nil                                               Nil                     Nil
    Exercised during the year                                               Nil                                               Nil                     Nil
    Expired during the year                                           2,59,500              406.16                            Nil                     Nil
    Outstanding at the end of the year                               47,48,550              512.13                            Nil                     Nil
    Exercisable at the end of the year                                      Nil                  Nil                          Nil                     Nil
    Weighted average remaining contractual life (in years)                                     2.92                           Nil                     Nil
    Weighted average fair value of options granted                                          371.97                            Nil                     Nil

    The details of exercise price for stock options outstanding at the end of the year are:
    31st March, 2008
     Range of exercise prices (Rs.)                                              Number of options          Weighted average          Weighted average
                                                                                   outstanding            remaining contractual        exercise price
                                                                                                             life of options                (Rs.)
                                                                                                                (in years)
     0-100                                                                                    11,62,952                     0.42                     58.92
     101-200                                                                                  11,39,150                     1.07                    150.44
     201-300                                                                                   2,65,000                     2.28                    300.00
     301-400                                                                                  47,33,250                     1.97                    333.93
     601-700                                                                                  24,53,000                     3.04                    679.63
     901-1000                                                                                    33,000                     2.68                    996.36
     1201-1300                                                                                   50,000                     3.38                  1,250.00

    31st March, 2007
     Range of exercise prices (Rs.)                                             Number of options           Weighted average         Weighted average
                                                                                  outstanding             remaining contractual       exercise price
                                                                                                             life of options               (Rs.)
                                                                                                                (in years)
     0-100                                                                                    22,68,934                     0.71                     63.62
     101-200                                                                                  16,10,700                     2.55                   150.31
     201-300                                                                                   3,00,000                     4.17                   300.00
     301-400                                                                                  28,85,000                     3.76                   340.00

    Stock Options granted:
                                                                                                                    Year ended                  Year ended
                                                                                                              31st March, 2008            31st March, 2007
    Exercise Price Rs.                                                                                             10 – 1,250                     10 – 340
    Expected Volatility                                                                                      37.09% – 52.76%             38.19% – 52.43%
    Historical Volatility                                                                                    37.09% – 52.76%             38.19% – 52.43%
    Life of the options granted (Vesting and exercise period) in years                                             1.29 – 4.50                 1.27 – 4.58
    Average risk-free interest rate                                                                            7.35% – 7.94%               6.30% – 7.63%
    Expected dividend rate                                                                                     0.07% – 0.11%                        0.19%
    The expected volatility was determined based on historical volatility data; historical volatility includes early years of the Company’s life; the Company
    expects the volatility of its share price to reduce as it matures.



                                                                                                   Kotak Mahindra Bank Limited (Consolidated)             29
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

     Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
                                                                                                                                             Rs. in lakhs
                                                                                                                  Year ended                 Year ended
                                                                                                            31st March, 2008           31st March, 2007
     Total Employee Compensation Cost pertaining to share-based payment plans                                          4,887.48                2,691.22
     Compensation Cost pertaining to equity-settled employee share-based payment plan included above                   4,887.48                2,691.22
     Liability for employee stock options outstanding as at year end                                                  11,499.77                5,133.72
     Deferred Compensation Cost                                                                                        5,678.37                2,291.08
     Had the company recorded the compensation cost computed on the basis of Fair Valuation method instead of Intrinsic value method, employee
     compensation cost would have been higher by Rs. 2,915.09 lakhs and the profit after tax would have been lower by the same amount. Consequently
     the basic and diluted EPS would have been Rs. 28.74 and Rs. 28.32 respectively.
     In computing the above information, certain estimates and assumptions have been made by the Management which have been relied upon by the auditors.

16. SEGMENT REPORTING
     Effective 1st April 2007, the Bank has adopted RBI’s revised guidelines issued in April 2007 on segment. Consequently, the Group has realigned its
     reporting segments as outlined in para “L” of Significant Accounting Policies. The Summary of the operating segments of the Group for the year ended
     31st March, 2008 are as given below:
                                                                                                                                            Rs. in lakhs
                                                                                                                                     31st March, 2008
     Segmental Revenues:
     Treasury and Investments                                                                                                               109,384.38
     Retail Banking
         (a) Lending                                                                                                                       145,865.33
         (b) Branch banking                                                                                                                  64,508.80
     Corporate Banking                                                                                                                       95,498.73
     Vehicle Financing                                                                                                                       47,658.73
     Other Lending Activities                                                                                                                37,498.27
     Broking                                                                                                                               105,397.64
     Advisory and Transactional Services                                                                                                     27,985.34
     Asset Management                                                                                                                        38,553.02
     Insurance                                                                                                                             193,493.35
     Sub-total                                                                                                                             865,843.59
     Add: Unallocated Income                                                                                                                    631.04
     Less: inter-segmental revenues                                                                                                        (98,627.88)
     Total Income                                                                                                                          767,846.75
     Segmental Results:
     Treasury and Investments                                                                                                                 6,872.08
     Retail Banking
         (a) Lending                                                                                                                         20,896.93
         (b) Branch banking                                                                                                                (14,668.30)
     Corporate Banking                                                                                                                       33,362.93
     Vehicle Financing                                                                                                                        6,469.85
     Other Lending Activities                                                                                                                12,646.91
     Broking                                                                                                                                 47,899.00
     Advisory and Transactional Services                                                                                                     18,400.89
     Asset Management                                                                                                                        15,270.08
     Insurance                                                                                                                              (6,990.16)
     Segmental results                                                                                                                     140,160.21
     Add: Unallocated Income                                                                                                                    631.04
     Total Profit before tax and before minority interest and associates                                                                   140,791.25



30      Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                 Rs. in lakhs
                                                                                                          31st March, 2008
    Assets
    Treasury and Investments                                                                                  1,631,520.88
    Retail Banking
        (a) Lending                                                                                            1,158,096.24
        (b) Branch banking                                                                                       799,651.11
    Corporate Banking                                                                                            821,633.05
    Vehicle Financing                                                                                            464,795.10
    Other Lending Activities                                                                                     186,976.64
    Broking                                                                                                       58,403.44
    Advisory and Transactional Services                                                                            4,285.78
    Asset Management                                                                                              37,078.71
    Insurance                                                                                                    301,276.55
    Total Segmental Assets                                                                                     5,463,717.50
    Less: inter-segmental assets                                                                             (1,428,314.62)
    Total Assets                                                                                               4,035,402.88
    Liabilities
    Treasury and Investments                                                                                  1,312,551.47
    Retail Banking
        (a) Lending                                                                                            1,088,125.37
        (b) Branch banking                                                                                       814,242.62
    Corporate Banking                                                                                            665,997.26
    Vehicle Financing                                                                                            497,382.87
    Other Lending Activities                                                                                      61,284.77
    Broking                                                                                                      119,313.16
    Advisory and Transactional Services                                                                            5,386.68
    Asset Management                                                                                              16,322.68
    Insurance                                                                                                    309,513.79
    Total Segmental Liabilities                                                                                4,890,120.67
    Less: inter-segmental liabilities                                                                        (1,428,314.62)
    Total Liabilities                                                                                          3,461,806.05
    Unallocated assets net of liabilities                                                                         13,917.14
    Capital Expenditure
    Treasury and Investments                                                                                       3,072.70
    Retail Banking
        (a) Lending                                                                                                1,663.60
        (b) Branch banking                                                                                         6,873.12
    Corporate Banking                                                                                                612.44
    Vehicle Financing                                                                                                452.24
    Other Lending Activities                                                                                          34.85
    Broking                                                                                                        2,970.48
    Advisory and Transactional Services                                                                              276.31
    Asset Management                                                                                                 833.96
    Insurance                                                                                                      3,262.95
          Total                                                                                                   20,052.65



                                                                          Kotak Mahindra Bank Limited (Consolidated)      31
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                                            Rs. in lakhs
                                                                                                                                     31st March, 2008
     Depreciation
     Treasury and Investments                                                                                                                  1,479.10
     Retail Banking
         (a) Lending                                                                                                                             701.15
         (b) Branch banking                                                                                                                    2,499.05
     Corporate Banking                                                                                                                           435.93
     Vehicle Financing                                                                                                                           173.77
     Other Lending Activities                                                                                                                     10.69
     Broking                                                                                                                                   2,711.33
     Advisory and Transactional Services                                                                                                         169.67
     Asset Management                                                                                                                            322.47
     Insurance                                                                                                                                 1,363.55
           Total                                                                                                                               9,866.71

     In accordance with Accounting Standard 17 (AS-17) on Segment Reporting issued by the Institute of Chartered Accountants of India, the Group had
     determined business segments as outlined in para “L” of Significant Accounting Policies for the year ended 31st March, 2007. Summary of the operating
     segments of the Group for the year ended 31st March, 2007 and the comparative numbers for the year ended 31st March, 2008 are given below:

                                                                                                                                              Rs. in lakhs
                                                                                                           31st March, 2008            31st March, 2007
     Segmental Revenues:
     Lending                                                                                                      259,440.29                 143,549.92
     Corporate Banking                                                                                              67,016.82                  37,418.74
     Treasury and Investments                                                                                     109,448.33                   65,099.89
     Retail Liabilities                                                                                             64,508.80                  36,217.10
     Broking                                                                                                      105,397.64                   64,835.59
     Advisory and Transactional Services                                                                            27,985.34                  12,809.15
     Asset Management                                                                                               38,553.02                  24,791.05
     Insurance                                                                                                    193,493.35                 107,933.71
     Sub-total                                                                                                    865,843.59                 492,655.15
     Add: Unallocated Income                                                                                           631.04                     159.22
     Less: inter-segmental revenues                                                                               (98,627.88)                (57,584.51)
     Total Income                                                                                                 767,846.75                 435,229.86
     Segmental Results:
     Lending                                                                                                        53,203.95                 23,506.37
     Corporate Banking                                                                                              20,264.50                 10,165.42
     Treasury and Investments                                                                                        6,780.25                 11,016.86
     Retail Liabilities                                                                                           (14,668.30)                 (4,232.64)
     Broking                                                                                                        47,899.00                 27,041.99
     Advisory and Transactional Services                                                                            18,400.89                   6,741.15
     Asset Management                                                                                               15,270.08                   9,092.79
     Insurance                                                                                                     (6,990.16)                 (5,563.17)
     Segmental results                                                                                            140,160.21                  77,768.77
     Add: Unallocated Income                                                                                           631.04                      96.85
     Total Profit before tax and before minority interest and associates                                          140,791.25                  77,865.62




32      Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                                           Rs. in lakhs
                                                                                                         31st March, 2008            31st March, 2007
    Assets
    Lending                                                                                                    1,972,844.47              1,356,442.79
    Corporate Banking                                                                                            654,315.86                443,331.71
    Treasury and Investments                                                                                   1,635,861.58              1,124,065.04
    Retail Liabilities                                                                                           799,651.11                488,162.09
    Broking                                                                                                       58,403.44                 49,567.78
    Advisory and Transactional Services                                                                            4,285.78                 60,447.26
    Asset Management                                                                                              37,078.71                 13,639.92
    Insurance                                                                                                    301,276.55                202,002.39
    Total Segmental Assets                                                                                     5,463,717.50              3,737,658.98
    Less: inter-segmental assets                                                                             (1,428,314.62)              (885,304.65)
    Total Assets                                                                                               4,035,402.88              2,852,354.33
    Liabilities
    Lending                                                                                                    1,177,965.68              1,166,942.22
    Corporate Banking                                                                                            652,229.22                409,566.30
    Treasury and Investments                                                                                   1,795,146.84              1,017,649.55
    Retail Liabilities                                                                                           814,242.62                492,644.25
    Broking                                                                                                      119,313.16                 71,828.72
    Advisory and Transactional Services                                                                            5,386.68                 62,234.15
    Asset Management                                                                                              16,322.68                  5,268.85
    Insurance                                                                                                    309,513.79                190,071.24
    Total Segmental Liabilities                                                                                4,890,120.67              3,416,205.28
    Less: inter-segmental liabilities                                                                        (1,428,314.62)              (885,304.65)
    Total Liabilities                                                                                          3,461,806.05              2,530,900.63
    Unallocated assets net of liabilities                                                                         13,917.14                  4,941.77
    Capital Expenditure
    Lending                                                                                                        2,244.46                  1,041.75
    Corporate Banking                                                                                                518.66                    765.69
    Treasury and Investments                                                                                       3072.71                   1,931.40
    Retail Liabilities                                                                                             6,873.12                  3,693.27
    Broking                                                                                                        2,970.48                  2,712.05
    Advisory and Transactional Services                                                                              276.31                  1,894.02
    Asset Management                                                                                                 833.96                    210.96
    Insurance                                                                                                      3,262.95                  1,369.37
          Total                                                                                                   20,052.65                 13,618.51
    Depreciation
    Lending                                                                                                          926.88                    712.87
    Corporate Banking                                                                                                394.66                    432.58
    Treasury and Investments                                                                                       1,479.10                    755.05
    Retail Liabilities                                                                                             2,499.05                  1,756.76
    Broking                                                                                                        2,711.33                  2,368.25
    Advisory and Transactional Services                                                                              169.67                    123.82
    Asset Management                                                                                                 322.47                    192.49
    Insurance                                                                                                      1,363.55                  1,026.61
          Total                                                                                                    9,866.71                  7,368.43
    In computing the above information, certain estimates and assumptions have been made by the Management which have been relied upon by the auditors.



                                                                                               Kotak Mahindra Bank Limited (Consolidated)           33
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

17. The Group has taken various premises under operating lease. The lease payments recognised in the Profit and Loss Account are Rs. 11,785.14 lakhs
    (Previous Year Rs. 5,837.59 lakhs). The sub-lease income recognised in the Profit and Loss Account is Rs. 69.12 lakhs (Previous Year Rs. 17.28 lakhs).

18. The future minimum lease payments under non cancelable operating lease – not later than one year is Rs. 9,473.50 lakhs (Previous Year Rs. 3,679.13 lakhs),
    later than one year but not later than five years is Rs. 31,378.02 lakhs (Previous Year Rs. 16,055.01 lakhs) and later than five years Rs. 13,822.67 lakhs
    (Previous Year Rs. 23,542.65 lakhs).

     Details of gross investments, unearned finance income in respect of assets given under finance lease are as under:
                                                                                                                                                   Rs. in lakhs
     Particulars                                                                                                           As at                        As at
                                                                                                               31st March, 2008             31st March, 2007
     Gross Investments:
     (i)     Not later than 1 year                                                                                          797.76                   2,059.25
     (ii)    Between 1-5 years                                                                                              720.97                   1,350.16
             Total                                                                                                        1,518.73                   3,409.41
     Unearned Finance Income:
     (i)     Not later than 1 year                                                                                           17.63                     185.61
     (ii)    Between 1-5 years                                                                                              114.02                      55.48
             Total                                                                                                          131.65                     241.09
     Present Value of Rentals
     (i)     Not later than 1 year                                                                                          780.13                   2,874.64
     (ii)    Between 1-5 years                                                                                              606.95                   1,294.68
             Total                                                                                                        1,387.08                   4,169.32
     Accumulated provision on the Gross Investments                                                                          14.43                      67.17

19. Other Liabilities and Provisions (Schedule 5.III) includes Deferred Tax Liability and “Others – Other Assets” (Schedule 11.VI) includes Deferred Tax Assets
    as follows:
                                                                                                                                                   Rs. in lakhs
     Particulars                                                                                                           As at                        As at
                                                                                                               31st March, 2008             31st March, 2007
     Deferred Tax Assets
     Provision for doubtful debts and contingencies                                                                     16,362.68                    6,431.10
     Depreciation on assets                                                                                               1,689.18                   1,325.19
     Unabsorbed capital losses/business losses/provision for investments*                                                    92.69                      37.00
     Unamortised Income                                                                                                   1,164.70                          —
     Expenditure allowed on payment basis and others                                                                      3,531.40                   2,192.35
     Total Deferred Tax Assets                                                                                          22,840.65                    9,985.64
     Deferred Tax Liabilities
     Deferred expenses                                                                                                    1,615.41                   1,301.48
     Depreciation on assets                                                                                                 326.49                     118.33
     Others                                                                                                                    3.67                       3.68
     Total Deferred Tax Liabilities                                                                                       1,945.57                   1,423.49
     Net Deferred Tax Assets/(Liabilities)                                                                              20,895.08                    8,562.15
     (*)     Deferred Tax assets on Unabsorbed Capital Loss is recognised as there are investments which are intended to be sold and the capital gains arising
             therefrom will be used for setting off the unabsorbed capital loss.



34          Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

20. FIXED ASSETS
    a.   Fixed Assets as per Schedule 10 include intangible assets, details of which are as follows:
                                                                                                                                         Rs. in lakhs
         Particulars                                                                                            Year ended               Year ended
                                                                                                          31st March, 2008         31st March, 2007
         SOFTWARE
         Gross Block
         At cost on 31st March of the preceding year                                                               6,278.93                4,701.23
         Additions during the year                                                                                 2,119.74                1,593.70
         Deductions during the year                                                                                    9.60                    16.00
            Total                                                                                                  8,389.07                6,278.93
         Depreciation
         As at 31st March of the preceding year                                                                    4,241.42                3,027.97
         Charge for the year                                                                                       1,465.36                1,225.21
         Deductions during the year                                                                                    6.08                    11.76
         Depreciation to date                                                                                      5,700.70                4,241.42
         Net Block                                                                                                 2,688.37                2,037.51
         MEMBERSHIP CARDS OF STOCK EXCHANGE
         Gross Block
         At cost on 31st March of the preceding year                                                                466.00                    466.00
            Total                                                                                                   466.00                    466.00
         Depreciation
         As at 31st March of the preceding year                                                                     233.45                    216.05
         Charge for the year                                                                                          24.93                    17.40
         Depreciation to date                                                                                       258.38                    233.45
         Net Block                                                                                                  207.62                    232.55
         GOODWILL
         Gross Block
         At cost on 31st March of the preceding year                                                                188.40                    188.40
            Total                                                                                                   188.40                    188.40
         Depreciation
         As at 31st March of the preceding year                                                                     188.40                    188.40
         Depreciation to date                                                                                       188.40                    188.40
         Net Block                                                                                                       —                        —
         FOREX BROKING BUSINESS RIGHTS
         Gross Block
         At cost on 31st March of the preceding year                                                                383.00                    383.00
         Total                                                                                                      383.00                    383.00
         Depreciation
         As at 31st March of the preceding year                                                                     232.99                    194.69
         Charge for the year                                                                                          38.30                    38.30
         Depreciation to date                                                                                       271.29                    232.99
         Net Block                                                                                                  111.71                    150.01




                                                                                                 Kotak Mahindra Bank Limited (Consolidated)       35
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

21. RELATED PARTY DISCLOSURES:

     A       Nature of relationship                   Name of Related Party
             Individual having control over the       Effective 15th October, 2007, Uday S. Kotak, Executive Vice Chairman and Managing Director
             enterprise                               (also considered as Key Management Personnel), along with relatives and enterprises in
                                                      which he has beneficial interest, ceased to hold more than 50% of the equity share capital of
                                                      Kotak Mahindra Bank Limited. Uday S. Kotak along with relatives and enterprises in which
                                                      he has beneficial interest holds 48.69% of the equity share capital of Kotak Mahindra Bank
                                                      Limited as on 31st March, 2008.
     B       Other Related Parties:
             Associates                               Business Standard Limited
                                                      IndiaCar Private Limited (up to 25th November, 2007)
                                                      Kotak Mahindra Asset Reconstruction Company Limited
             Investing Party of the subsidiaries      Old Mutual Plc.
                                                      Old Mutual Life Assurance Company (South Africa) Limited
                                                      Goldman Sachs (Mauritius) LLC (up to 30th May, 2006)
             Associate of the subsidiary              Infina Finance Private Limited (formerly known as Multifaced Finstock Private Limited)
                                                      Phoenix ARC Private Limited
             Enterprises over which relatives of      Aero Agencies Limited
             Key Management Personnel have
                                                      Kotak and Company Limited
             significant influence
                                                      Kotak Commodity Services Limited
             Key Management Personnel                 Mr. Uday S. Kotak – Executive Vice Chairman & Managing Director- KMBL
                                                      Mr. C. Jayaram - Executive Director- KMBL
                                                      Mr. Dipak Gupta - Executive Director- KMBL
             Relatives of Key Management              Ms. Pallavi Kotak
             Personnel
                                                      Mr. Suresh Kotak
                                                      Ms. Indira Kotak
                                                      Mr. Jay Kotak
                                                      Mr. Dhawal Kotak
                                                      Ms. Aarti Chandaria
                                                      Ms. Usha Jayaram
                                                      Ms. Anita Gupta
                                                      Ms. Urmila Gupta




36       Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

C.      Details of related party transactions:
                                                                                                                                          Rs. in lakhs
 Sr.        Items/Related Party              Individual   Associates      Investing    Associate         Enterprises            Key       Relatives
 No.                                            having                  Party of the       of the        over which     Management          of Key
                                               Control                  subsidiaries   subsidiary   relatives of Key      Personnel    Management
                                                                                                      Management                         Personnel
                                                                                                    Personnel have
                                                                                                          significant
                                                                                                           influence
 I.        Liabilities
           Other Liabilities                                                  58.88                           19.16
                                                                             (46.91)                          (7.04)
            Deposits                                           18.24
                                                              (14.49)
 II.       Assets
           Investments/Goodwill-Gross                       3,400.89
                                                           (3,563.09)
           Diminution on Investments                          697.08
                                                             (723.47)
           Others                                                                —                               —
                                                                              (1.37)                         (25.89)
           Advances                                           313.80
                                                             (333.84)
 III.      Expenses
           Salaries/fees*                                                                                                    803.59
                                                                                                                            (432.33)
           Others                                                                                            940.32
                                                                                                            (792.61)
           Interest Paid                                        0.07                        0.78
                                                               (3.78)                     (80.07)
 IV.       Income
           Dividend                                               —
                                                               (4.50)
           Others                                                                —                            87.59
                                                                          (1,359.16)                         (71.93)
           Interest income                                     31.08                        5.33
                                                              (17.71)                      (8.24)
 V.        Other Transactions
           Dividend paid                     1,071.92                                                                          3.68            6.92
                                              (918.79)                                                                        (2.48)          (5.93)
           Reimbursement to companies                                         17.91                           86.25
                                                                             (51.57)                         (82.56)
           Reimbursement from
           companies                                                          2.25         10.00              11.23
                                                                             (6.03)          (—)             (19.59)
           Issue of Share Capital                                         3,898.09
                                                                         (2,229.87)
           Purchase of Investments                                              —         107.80
                                                                        (33,300.00)          (—)
           Loan taken during the year                         650.00
                                                                  —
           Loans repaid during the year                       650.00
                                                          (10,525.00)
* includes incentive paid during the year



                                                                                                Kotak Mahindra Bank Limited (Consolidated)        37
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

D.    Material transactions with related parties:
                                                                                                                                Rs. in lakhs
Sr. Items/Related Party               Individual Associates   Investing    Associate      Enterprises        Key Relatives of         TOTAL
No.                                      having             Party of the party of the     over which Management          Key
                                         control             subsidiary subsidiary relatives of Key    Personnel   Manage-
                                                                                       Management                       ment
                                                                                      Personnel have              Personnel
                                                                                           significant
                                                                                            influence
I.     Liabilities:
       Other liabilities
       Old Mutual Life Assurance
       Company (South Africa)
       Limited                                                    58.88                                                              58.88
                                                                 (46.91)                                                            (46.91)
       Aero Agencies Limited                                                                   4.66                                   4.66
                                                                                              (7.04)                                 (7.04)
       Kotak Commodity Services
       Limited                                                                               14.50                                   14.50
                                                                                               (—)                                     (—)
II.    Assets:
       Investments/Goodwill
       Business Standard Limited                     3,291.59                                                                    3,291.59
                                                    (3,291.59)                                                                  (3,291.59)
       IndiaCar Private Limited                           —                                                                            —
                                                     (270.00)                                                                     (270.00)
       Kotak Mahindra Asset
       Reconstruction Company
       Limited                                           1.50                                                                         1.50
                                                        (1.50)                                                                       (1.50)
       Phoenix ARC Private Limited                    107.80                                                                       107.80
                                                         (—)                                                                          (—)
       Diminution on investments
       Business Standard Limited                      695.58                                                                       695.58
                                                     (695.58)                                                                     (695.58)
       IndiaCar Private Limited                           —                                                                            —
                                                      (26.39)                                                                      (26.39)
       Kotak Mahindra Asset
       Reconstruction Company
       Limited                                           1.50                                                                         1.50
                                                        (1.50)                                                                       (1.50)
       Others
       Kotak Commodity Services
       Limited                                                                                   —                                       —
                                                                                            (25.89)                                 (25.89)
       Old Mutual PLC                                                —                                                                   —
                                                                  (1.37)                                                             (1.37)



38       Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                               Rs. in lakhs
Sr. Items/Related Party              Individual Associates   Investing    Associate      Enterprises        Key Relatives of         TOTAL
No.                                     having             Party of the party of the     over which Management          Key
                                        control             subsidiary subsidiary relatives of Key    Personnel   Manage-
                                                                                      Management                       ment
                                                                                     Personnel have              Personnel
                                                                                          significant
                                                                                           influence
III.   Expenses:
       Salaries
       Mr. Uday Kotak*                                                                                   153.05                   153.05
                                                                                                         (92.07)                  (92.07)
       Mr. C. Jayaram*                                                                                   330.74                   330.74
                                                                                                        (172.70)                 (172.70)
       Mr. Dipak Gupta*                                                                                  319.80                   319.80
                                                                                                        (167.56)                 (167.56)
       Interest paid
       Infina Finance Private
       Limited (Formerly known as
       Multifaced Finstock Private
       Limited)                                                               0.78                                                     0.78
                                                                            (80.07)                                                  (80.07)
       Other parties                                 0.07                                                                              0.07
                                                    (3.78)                                                                            (3.78)
       Others
       Aero Agencies Limited                                                               901.41                                 901.41
                                                                                          (772.00)                               (772.00)
       Other parties                                                                        38.91                                  38.91
                                                                                           (20.61)                                (20.61)

IV.    Income:
       Dividend
       IndiaCar Private Limited                        —                                                                                 —
                                                    (4.50)                                                                            (4.50)
       Interest income
       Infina Finance Private
       Limited (Formerly known
       as Multifaced Finstock
       Private Limited)                                                       5.33                                                     5.33
                                                                             (8.24)                                                   (8.24)
       Other parties                               31.08                                                                              31.08
                                                  (17.71)                                                                            (17.71)
       Others
       Brokerage
       Goldman Sachs (Mauritius)
       LLC                                                          —                                                                 —
                                                             (1,359.16)                                                        (1,359.16)



                                                                                        Kotak Mahindra Bank Limited (Consolidated)        39
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                             Rs. in lakhs
Sr. Items/Related Party            Individual Associates   Investing    Associate      Enterprises        Key Relatives of         TOTAL
No.                                   having             Party of the party of the     over which Management          Key
                                      control             subsidiary subsidiary relatives of Key    Personnel   Manage-
                                                                                    Management                       ment
                                                                                   Personnel have              Personnel
                                                                                        significant
                                                                                         influence
     Others                                                                                   —                                      —
                                                                                           (2.60)                                 (2.60)
     Fee Income
     Kotak Commodity Services
     Limited                                                                              66.29                                   66.29
                                                                                         (69.33)                                 (69.33)
     Others                                                                               21.30                                   21.30
                                                                                            (—)                                     (—)
V.   Other Transactions:
     Dividend Paid
     Mr. Uday Kotak                1,071.92                                                                                   1,071.92
                                    (918.79)                                                                                   (918.79)
     Mr. C. Jayaram                                                                                      1.92                     1.92
                                                                                                        (1.11)                   (1.11)
     Mr. Dipak Gupta                                                                                     1.76                     1.76
                                                                                                        (1.37)                   (1.37)
     Ms. Pallavi Kotak                                                                                               1.94         1.94
                                                                                                                    (1.67)       (1.67)
     Ms. Indira Kotak                                                                                                4.25         4.25
                                                                                                                    (3.64)       (3.64)
     Others                                                                                                          0.73          0.73
                                                                                                                    (0.62)        (0.62)
     Reimbursements made
     Aero Agencies Limited                                                                86.25                                   86.25
                                                                                         (82.56)                                 (82.56)
     Old Mutual Life Assurance
     Company (South Africa)
     Limited                                                  17.91                                                               17.91
                                                             (51.57)                                                             (51.57)
     Reimbursements received
     Old Mutual Life Assurance
     Company (South Africa)
     Limited                                                   2.25                                                                2.25
                                                              (4.66)                                                              (4.66)
     Old Mutual PLC                                              —                                                                   —
                                                              (1.37)                                                              (1.37)
     Kotak Commodity Services
     Limited                                                                              11.23                                   11.23
                                                                                         (19.59)                                 (19.59)
     Phoenix ARC Private Limited                                           10.00                                                  10.00
                                                                             (—)                                                    (—)



40     Kotak Mahindra Bank Limited (Consolidated)
Schedules forming part of the Consolidated Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                                             Rs. in lakhs
Sr. Items/Related Party                Individual Associates   Investing    Associate      Enterprises        Key Relatives of                     TOTAL
No.                                       having             Party of the party of the     over which Management          Key
                                          control             subsidiary subsidiary relatives of Key    Personnel   Manage-
                                                                                        Management                       ment
                                                                                       Personnel have              Personnel
                                                                                            significant
                                                                                             influence
       Issue of Share Capital
       Old Mutual Plc                                              3,898.09                                                                    3,898.09
                                                                  (2,229.87)                                                                  (2,229.87)
       Purchase of Investments
       Goldman Sachs                                                     —                                                                          —
                                                                 (33,300.00)                                                                (33,300.00)
       Phoenix ARC Private Limited                                                107.80                                                        107.80
                                                                                     (—)                                                           (—)
       Loan taken during the year
       Infina Finance Private
       Limited (Formerly known as
       Multifaced Finstock Private
       Limited)                                        650.00                                                                                   650.00
                                                          (—)                                                                                      (—)
       Loan repaid during the
       year
       Infina Finance Private
       Limited (Formerly known as
       Multifaced Finstock Private
       Limited)                                        650.00                                                                                   650.00
                                                   (10,525,00)                                                                              (10,525.00)

* includes incentive paid during the year
Note: Figures of Previous Year are given in bracket.

22. Figures for the Previous Year have been regrouped/reclassified wherever necessary to conform to current year’s presentation. The figures of previous
    year were audited by a firm of Chartered Accountants other than S. R. Batliboi & Co.




                                                                                       For and on behalf of the Board of Directors


                                                                                       Dr. Shankar Acharya                  Uday Kotak
                                                                                       Chairman                             Executive Vice Chairman &
                                                                                                                            Managing Director
                                                                                       Dipak Gupta
                                                                                       Executive Director

                                                                                       Jaimin Bhatt                         Bina Chandarana
Mumbai, 9th May, 2008                                                                  Group Chief Financial Officer        Company Secretary



                                                                                                 Kotak Mahindra Bank Limited (Consolidated)             41
42
                                             Financial Information of Subsidiaries for the year ended 31st March, 2008                                                                                                                                         Rs. in Lakhs
                                             Particulars                                 Kotak        Kotak       Kotak         Kotak       Kotak    Kotak       Kotak               Kotak     Kotak  Kotak          Global      Kotak       Kotak      Kotak
                                                                                      Mahindra    Securities   Mahindra     Mahindra    Mahindra Mahindra     Mahindra            Mahindra Mahindra Mahindra    Investment Investment Mahindra          Forex
                                                                                        Capital     Limited       Prime           Old       Asset  Trustee Investments               (Inter-    (UK)     Inc. Opportunities   Advisors Trusteeship Brokerage
                                                                                      Company                   Limited        Mutual Management Company       Limited            national)  Limited                  Fund     Limited    Services    Limited
                                                                                       Limited                                    Life   Company  Limited                          Limited                          Limited (Formerly      Limited
                                                                                                                            Insurance     Limited                                                                               known
                                                                                                                            Company                                                                                           as Kotak
                                                                                                                              Limited                                                                                        Mahindra
                                                                                                                                                                                                                             Securities
                                                                                                                                                                                                                              Limited)

                                             Capital                                     411.62      160.00      326.19     48,027.32         1,980.00       5.01       305.03     1,615.98    700.78          6.99           0.10         459.20       5.00        300.00

                                             Reserves                                 39,679.06 114,085.12     70,465.44   (28,290.93)         826.42     1,559.46    17,718.10    4,774.39   5,345.93      2,034.28         (0.01)    3,097.84        85.46    (252.57)

                                             Total Networth                           40,090.68 114,245.12     70,791.63    19,736.39         2,806.42    1,564.47    18,023.13    6,390.37   6,046.71      2,041.27          0.09     3,557.04        90.46         47.43

                                             Total Assets                             45,341.08 413,662.14 636,028.51      327,911.41         4,726.23    1,929.80   109,483.13   14,964.67 10,824.41       2,406.44          0.09     4,380.91        95.74        195.00




Kotak Mahindra Bank Limited (Consolidated)
                                             Total Liabilites                          5,250.00 299,417.02 565,236.88      308,175.02         1,919.81     365.33     91,460.00    8,574.30   4,777.70       365.17             —          823.87       5.28        147.57

                                             Investments                              15,763.00    5,550.93     1,439.82   299,896.95               —      794.05      3,352.91    1,414.02         —          0.06             —      2,641.03          —           14.34
                                             (excluding investment in subsidiaries)

                                             Turnover                                 28,561.00 133,003.16     73,997.32   194,184.73         6,808.44    1,098.21    16,893.52    2,429.29 10,073.74       2,985.35            —      3,780.82        72.14         51.92

                                             Profit before taxation                   17,519.22   58,021.71    15,463.23    (6,988.89)         222.14     1,010.51     6,538.23    1,969.73   5,040.78      1,766.66            —      2,071.00        69.21        (58.62)

                                             Provision for taxation                    5,988.31   17,152.49     5,401.09        198.56         119.61      321.71      2,278.26      34.56    1,565.79       726.42             —          724.20      20.48          0.23

                                             Profit after taxation                    11,530.91   40,869.22    10,062.14    (7,187.45)         102.53      688.80      4,259.97    1,935.17   3,474.99      1,040.24            —      1,346.80        48.73        (58.85)

                                             Proposed Dividend                              Nil          Nil         Nil            Nil             Nil    300.42           Nil         Nil         Nil          Nil            Nil           Nil        Nil            Nil

                                             (1)    Total liabilities include current liabilities and provision and exclude capital and reserves.

                                             (2)    Turnover is the total income reported by each of the entities in the financial statements.
                                             (3)    Investments include investments and stock in Trade reported by the above entities and also include investments held to cover policyholders’ liabilities and unit linked liabilities.




                                                                                                                                                                      For and on behalf of the Board of Directors

                                                                                                   Bina Chandarana                   Jaimin Bhatt                     Dr. Shankar Acharya                 Uday Kotak                           Dipak Gupta
                                                                                                   Company Secretary                 Group Chief                      Chairman                            Executive Vice Chairman &            Executive Director
                                                                                                                                     Financial Officer                                                    Managing Director

                                             Mumbai, 9th May, 2008
Directors’ Report

To the Members of                                                                                               31st March 2008 31st March 2007
KOTAK MAHINDRA BANK LIMITED                                                                                            Rs. crore        Rs. crore
The Directors present their Twenty Third Annual Report together with the         Appropriations:
audited accounts of your Bank for the year ended 31st March 2008.                Transfer from Kotak Mahindra
                                                                                 Capital Company Limited on
FINANCIAL HIGHLIGHTS                                                             demerger appropriated to
(A) Kotak Mahindra Bank Limited – Consolidated financial highlights:             General Reserve                                —              216.76
                                                                                 Statutory Reserve under
                                     31st March 2008 31st March 2007
                                                                                 Section 17 of the Banking
                                            Rs. crore        Rs. crore           Regulation Act, 1949                       73.50               35.50
     Total income                          7,678.47         4,352.30             General Reserve                            14.70                7.25
     Total expenditure, excluding                                                Transfer to Capital Reserve                 1.48                4.05
     provisions and contingencies           5,907.53           3,421.11          Proposed Dividend                          25.87               22.86
     Operating Profit                       1,770.94             931.19          Corporate Dividend Tax                      4.40                3.89
     Provisions and contingencies,                                               Surplus carried to Balance
     excluding provision for tax              363.02             152.50          Sheet                                     528.17              354.18
     Profit before tax                      1,407.92             778.69
                                                                            DIVIDEND
     Provision for taxes                      449.19             254.21
                                                                            Keeping in mind the overall performance and the outlook for your Bank,
     Profit after tax                         958.73             524.48
                                                                            the Directors recommend a dividend of 7.5% (previous year 7%), entailing
     Less: Share of minority
                                                                            a payout of Rs. 25.87 crore (previous year Rs. 22.86 crore). The dividend
            interest                          (18.69)                0.66
                                                                            would be paid to all the shareholders, whose names appear on the Register
     Add: Share in profit of
                                                                            of Members/Beneficial Holders list on the Book Closure date.
            Associates                         13.81              14.42
     Consolidated profit for the                                            CAPITAL
     Group                                   991.23              538.24     Tier – I Capital
     Earnings per Equity Share                                              During the year, your Bank raised Rs. 1,615 crore through issue of
     Basic (Rs.)                               29.62              16.60     1,70,00,000 equity shares to Qualified Institutional Buyers (QIBs) at an
     Diluted (Rs.)                             29.18              16.47     issue price of Rs. 950/- per share.
(B) Kotak Mahindra Bank Limited – Standalone financial highlights:          Also, during the year, your Bank has allotted 15,17,134 shares arising
                                                                            out of the exercise of Employees Stock Options granted to the employees,
                                     31st March 2008 31st March 2007
                                                                            employees of your subsidiaries and Executive Directors of your Bank.
                                            Rs. crore        Rs. crore
                                                                            Tier – II Capital
     Total Income                           2,998.83        1,637.76
     Operating Profit                         669.89           325.8        Subordinated debt:
     Total expenditure, excluding                                           During the year your Bank has issued Unsecured, Redeemable,
     provisions and contingencies           2,328.94           1,311.94     Non-Convertible Subordinated Debt Bonds in the form of Promissory
     Provisions and contingencies,                                          Notes/Debentures through private placement for an amount aggregating to
     excluding tax provisions                 272.11            122.57      Rs. 35.80 crore to augment the Tier-II capital to meet the growth in assets
     Profit before tax                        397.78            203.25      of your Bank and to enhance overall Capital Adequacy Ratio. These
     Provision for taxes                      103.85             61.88      Bonds were issued in demat and were listed on the Wholesale Debt
     Profit after tax                         293.93            141.37      Market segment of the National Stock Exchange of India Limited. Your
                                                                            Bank has appointed IDBI Trusteeship Services Limited as the Trustees for
     Add: Surplus brought
                                                                            these Bonds, as aforesaid. Outstanding Unsecured, Redeemable Non-
            forward from the
                                                                            Convertible, Subordinated Debt Bonds as at 31st March 2008 stood at
            previous year                     354.18            286.36
                                                                            Rs. 465.70 crore.
     Add: Transfer from Kotak
            Mahindra Capital                                                Hybrid debt capital instruments: Upper Tier – II Capital
            Company Limited on                                              During the year your Bank has issued and allotted Unsecured, Non
            demerger                               —            216.76      Convertible, Redeemable Debt Capital Instruments through private
     Amount available for                                                   placement for an amount aggregating to Rs. 136 crore to augment the
     appropriation                            648.12            644.49      Upper Tier-II capital to meet the growth in assets of your Bank and to



                                                                                                             Kotak Mahindra Bank Limited            43
enhance overall Capital Adequacy Ratio. These Bonds were listed on                  of financial institutions group through customized credit and transaction
the Wholesale Debt Market segment of the National Stock Exchange of                 banking offerings. Your Bank continued its presence as a “collection banker”
India Limited. Your Bank has appointed IDBI Trusteeship Services Limited            in a number of the Initial Public Offers and New Fund Offers.
as the Trustees for these Bonds, as aforesaid. Outstanding Unsecured,               Disbursements in the Commercial Vehicles and Infrastructure Finance
Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II as at            divisions grew in line with the industry trends. Whereas the commercial
31st March 2008 stood at Rs. 136 crore.                                             vehicle sector showed a marked tapering down of growth rates, the
During the year your Bank has not issued any Foreign Currency denominated           construction equipment sector continued its robust growth. Keeping in
Subordinated Debt Bonds or Debt Capital Instruments Upper Tier-II to                view the opportunities in both the sectors, in addition to traditional asset
augment the Tier-II capital of the bank.                                            funding, the businesses focused on growing its book on the transaction
                                                                                    banking and non fund based products. The thrust given on cross sell of
OPERATIONS                                                                          other banking products also got further momentum during the year. The
The Branch Banking Business completed its fifth year of operations. The             businesses will continue to give focus on building customer value, going
network expansion momentum has significantly increased in the current               forward. A risk control unit was established during the year to supplement
year with addition of 73 new full fledged branches & 179 new ATMs,                  its robust risk management practices.
taking the network size to 178 branches & 314 ATMs in 107 locations. The            The Agri Business has further consolidated comprising short term and long
momentum of expansion will continue with addition of 80 -100 branches               term loans, working capital facilities to farmers and other agri intermediaries.
in the next year. The Branches and ATMs have helped expand our reach                Funding was extended for improved agriculture projects like horticulture,
and increase our brand presence in the minds of customers. The pace of              poultry, floriculture, bee keeping and other allied activities. Working capital
acquisition of customers and deposits from the branch network continued             facilities were extended to distinctive agri sectors like oils, cotton, agro
to be very satisfactory and in line with the best in the industry. Currently, the   processors, rice millers and sugar. The division also has developed the
network acquires about 40000 deposit accounts every month & has more or             portfolio & expertise in funding against commodities. The agri division is
less doubled the account base from 3,50,000 last year to around 7,00,000            becoming the predominant vehicle for identifying & servicing the financial
this year. The penetration into Corporate Salary segment of Customers has           requirements for agriculture & other rural segments.
given a significant impetus to the customer acquisition programme.
                                                                                    The Home Finance business saw the continued growth rate it has witnessed
Your Bank added new products & services like Gold debit card, Smart fee             since inception as a result of the growth in the real estate market. Similarly
(a fee solution for Educational Institutions), GPRS based mobile banking,           the Personal loan business grew significantly and your Bank improved its
Bill presentment and payment facility, online term deposits etc. to meet the        presence across newer geographies.
needs of the customers. Several new initiatives were taken during the year
                                                                                    Last year several auctions of the NPA portfolios by banks/NBFCs and
to improve the operations and service levels to customers, through mystery
                                                                                    institutions failed due to pricing mismatch between the buyers and
shopping, customer feedback surveys and dedicated Control Unit. The
                                                                                    sellers. Your bank made an entry in purchasing retail assets by acquiring a
customer response to our service levels continues to be heartening. Your
                                                                                    portfolio, as there is good opportunity in this space, moving forward. Your
Bank has won several awards for high quality implementation of various
                                                                                    bank resolved several accounts resulting in good recoveries and continued
technology aspects of the business which help your Bank in delivering its
                                                                                    to invest in attractive single asset transactions with good turnaround
proposition to customers in a manner most secure & most desirable to
                                                                                    prospects.
them, yet keeping it cost efficient for your Bank.
                                                                                    Your Bank has an active proprietary desk trading in all products such as
The distribution of third party products remains strong from the Branch
                                                                                    Fixed Income, Money Markets, Derivatives, Foreign Exchange and Bullion.
Network, contributing to a good mix of Fee Income to Net Interest Income.
                                                                                    The treasury plays an important role in balance sheet management and
Overall the progress of the business gives us the confidence to invest in           implementation of Funds Transfer Price between various business units. In the
further network expansion.                                                          area of Debt Capital Markets (DCM) the Bank offered the following products:
The year saw a continued increase in coverage of top corporate and mid              Securitisation, Loan and Bond syndication, mezzanine financing, promoter
market corporate clients and your bank widened and deepened its franchise           funding and acquisition financing. The Bank is one of the active players
in these segments. The year continued to see a surge in credit demand from          in the Securitisation market particularly in Corporate Loan securitization.
the corporate and mid market business segments both for working capital             In respect of forex derivatives transactions with corporate customers of
and term facilities. Your Bank was able to tap this opportunity by offering a       the Bank, as on May 8, 2008 customers of the Bank had negative MTM
variety of products from plain vanilla debt issuance to structured products         exposures aggregating Rs. 612 crore. As on March 31, 2008, Bank carries a
and loan syndication.                                                               provision of Rs. 86 crore towards stressed cases.
The year also saw an increase in demand for trade finance both domestic             After many months of market research and product development, your bank
and international and your Bank was able to tap this opportunity through            launched the Credit Cards business on April 15th 2008. Kotak Cards has
structured product offerings to customers. Volumes saw a significant                taken a fresh approach to card design, and has introduced India’s 1st vertical
increase.                                                                           card. Kotak Cards have been built on 3 core tenets – Relevant benefits that
Your Bank increased its thrust in offering customized solutions on foreign          reflect what customers do most, Simplified credit that is easy to use and
exchange, and cash management services across the spectrum of customers.            Transparent communication of charges. The Credit Cards are available in
Your Bank was also able to provide products and services to segments                4 variants to cater to the specific needs of distinct customer segments. With



44       Kotak Mahindra Bank Limited
the launch of its credit cards, your Bank now offers a complete range of       Options granted during    Plan 2002 – 03
retail financial services.                                                     the year                  Nil
As at the end of the year, your Bank’s capital adequacy was 18.65% and                                   Scheme 2005
the Tier 1 capital adequacy ratio was 14.46% and the net NPAs were at                                    Nil
0.38% of net advances excluding stressed assets portfolio. The Net NPAs of                               Scheme 2007
the Bank including stressed assets portfolio were at 1.78%.                                              50,08,050 options – Series 1 to 11.
                                                                               Options Vested            Plan 2002-03
SUBSIDIARIES                                                                                             9,41,325 options.
                                                                                                         Scheme 2005
Your Bank along with its subsidiaries offers complete financial solutions to
                                                                                                         9,28,970 options.
its customers. The key business segments where the subsidiaries operate
                                                                               Options exercised         Plan 2002-03
include investment banking, stock broking, car finance, asset management
                                                                                                         8,23,904 options.
and life insurance.
                                                                                                         Scheme 2005
Kotak Mahindra Capital Company Limited and Kotak Securities Limited                                      6,93,230 options.
posted a good financial performance on the back of strong capital markets      Total number of shares    Plan 2002-03
and the robust overall economic growth. The life insurance subsidiary,         arising as a result of    8,23,904 equity shares of Rs. 10/- each.
Kotak Mahindra Old Mutual Life Insurance Limited continued its growth          exercise of options       Scheme 2005
momentum in premium income. The international subsidiaries have gained                                   6,93,230 equity shares of Rs. 10/- each.
impetus and have now become gainful contributors to the profits of the         Options lapsed            Plan 2002-03
Group. Kotak Mahindra Asset Management Company Limited, Kotak                                            1,03,318 options.
Mahindra Prime Limited and the other subsidiaries also posted growth in                                  Scheme 2005
profits and had a good year.                                                                             3,56,380 options.
                                                                                                         Scheme 2007
The various activities of the subsidiaries are outlined in the Management
                                                                                                         2,59,500 options.
Discussion and Analysis section appended to this Report.
                                                                               Variation of terms of     No variations made in the terms of the
In the year 2006-07 a petition was filed before the Hon’ble High Court         options                   options granted except in respect of
of Judicature at Bombay in respect of a Scheme of Arrangement between                                    Scheme 2002-03 and Scheme 2005 with
Kotak Mahindra Securities Limited (KMSL), Kotak Mahindra Capital                                         respect to recovery from the relevant
Company Limited (KMCC) for demerger of undertaking comprising of the                                     eligible employees, the Fringe Benefit Tax
trading and clearing operations and strategic investments of KMSL to KMCC.                               on exercise of options as permitted by
Upon receipt of all necessary approvals, the demerger was completed on                                   regulations.
3rd September, 2007 to take effect from 31st March, 2007.                      Money realized by         Exercise amount received:
                                                                               exercise of options       Plan 2002-03
During the year, the name of KMSL was changed to Kotak Investment
                                                                                                         Rs. 6,59,12,320/-
Advisors Limited (KIAL). With effect from 1st October, 2007, the alternate
                                                                                                         Scheme 2005
asset management business i.e. management of private equity and realty
                                                                                                         Rs. 6,68,42,500/-
funds of Kotak Mahindra Group was assigned to KIAL.
                                                                               Total number of options   Plan 2002-03
In terms of the approval granted by the Central Government vide their letter   in force                  Outstanding options not yet vested -
dated 14th January 2008 under Section 212(8) of the Companies Act, 1956,                                 8,12,812 options.
abridged Annual Report which consists of the financial statements of your                                Scheme 2005
Bank on standalone basis as well as consolidated financial statements of                                 Outstanding options not yet vested -
the group for the year ended 31st March 2008, have been sent to all the                                  42,74,990 options.
members of the Bank. It does not contain Annual Reports of the Bank’s                                    Scheme 2007
subsidiary companies. The Bank will make available full Annual Report                                    Outstanding options not yet vested -
(including the Annual Reports of all subsidiaries) upon request by any                                   47,48,550 options.
member of the Bank. These Annual Reports will be available on Bank’s           Details of options        Plan 2002-03
website and will also be available for inspection by any member at the         granted during the        Nil
Registered Office of the Bank.                                                 year to                   Scheme 2005
                                                                                                         Nil
                                                                               (i) Senior management
EMPLOYEE STOCK OPTION SCHEME                                                                             Scheme 2007
                                                                                   personnel
The stock options granted to the employees currently operate under three                                 Name of Senior              No. of options
schemes, namely Kotak Mahindra Equity Option Plan 2002 – 2003 (“Plan                                     Management                  granted
                                                                                                         Personnel
2002-03”), Kotak Mahindra Equity Option Scheme 2005 (“Scheme 2005”)
and Kotak Mahindra Equity Option Scheme 2007 (“Scheme 2007”). The                                        Mr. C. Jayaram              97,000
disclosures below are in respect of the year ended 31st March 2008.                                      Mr. Dipak Gupta             1,00,000



                                                                                                            Kotak Mahindra Bank Limited               45
 (ii) Any other employee     Plan 2002-03                                  A description of the        A. Stock price
      who receives a grant   Nil                                           method and significant
      in any one year of     Scheme 2005                                                                  It is the closing market price on the
                                                                           assumptions used               National Stock Exchange of India
      options amounting      Nil                                           during the year to
      to 5% or more of       Scheme 2007                                                                  Limited (NSE) on the date of the
                                                                           estimate the fair values       respective grant.
      options granted        Nil                                           of options, including the
      during that year                                                                                 B. Volatility
                                                                           following weighted –
 (iii) Identified            Plan 2002-03                                  average information:           Volatility is a measure of the amount
      employees who          Nil
                                                                                                          by which a price has fluctuated or is
      were granted           Scheme 2005
                                                                                                          expected to fluctuate during a period.
      option, during any     Nil
                                                                                                          The measure of volatility used in the
      one year, equal        Scheme 2007
      to or exceeding        Nil                                                                          Black-Scholes option-pricing model is
      1% of the issued                                                                                    the annualized standard deviation of
      capital (excluding                                                                                  the continuously compounded rates
      outstanding                                                                                         of return on the stock over a period of
      warrants and                                                                                        time.
      conversions) of the                                                                                 Accordingly, daily volatility of the
      company at the time                                                                                 Bank’s stock price on the NSE for the
      of grant                                                                                            period corresponding to the respective
 Diluted Earnings Per        * The diluted Earnings Per Share (EPS)                                       expected live of the different vests,
 Share (EPS) pursuant        pursuant to issue of shares on exercise                                      prior to the grant date has been
 to issue of shares on       of options calculated in accordance                                          considered.
 exercise of options         with AS20 is 29.18 (Consolidated) 8.65
 calculated in accordance    (standalone).                                                             C. Risk free interest rate
 with AS20 Earnings Per                                                                                   The risk-free interest rate being
 Share                                                                                                    considered for the calculation is the
 Where the company has       * Had the Bank (Consolidated) followed                                       interest rate applicable for maturity
 calculated the employee     the fair value method for accounting                                         equal to the expected life of the
 compensation cost           the stock option compensation expense                                        options based on the zero-coupon
 using the intrinsic value   would have been higher by                                                    yield curve for Government Securities
 of stock options, the       Rs. 291,509,467, with consequent lower                                       as on the date of the respective grant.
 difference between the      Consolidated profits. On account of
 employee compensation       the same the diluted EPS of the Bank                                      D. Time to Maturity/Expected Life of
 cost so computed            (Consolidated) would have been less by                                       options
 and the employee            Rs. 28.32 per share.                                                         The minimum life of a stock option is
 compensation cost                                                                                        the vesting period and the maximum
 that shall have been                                                                                     life is vesting period plus the exercise
 recognized if it had                                                                                     period. The Expected life of the
 used the fair value of                                                                                   options has been calculated as the
 the options, shall be                                                                                    average of the two extremes – the
 disclosed. The impact                                                                                    minimum life and the maximum life.
 of this difference on                                                                                    Since each vest has been considered
 profits and on EPS of
                                                                                                          as a separate grant, the expected life
 the company shall also
                                                                                                          has been calculated for each vest
 be disclosed.
                                                                                                          separately.
 Weighted – average          * The weighted average price of the stock
 exercise prices and         options exercised is Rs. 87.50 and the                                    E. Dividend yield
 weighted – average fair     weighted average fair value is Rs. 193.48.                                   The dividend yield for each year has
 values of options shall                                                                                  been derived by dividing the dividend
 be disclosed separately                                                                                  per share by the average market price
 for options whose                                                                                        per share.
 exercise price either
 equals or exceeds or
 is less than the market                                                  CORPORATE GOVERNANCE
 price of the stock.                                                      Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges,
* Note: Above figures are derived by considering the Kotak group as a     a separate section entitled ‘Corporate Governance’ has been included in
        whole (Consolidated).                                             this Annual Report.



46      Kotak Mahindra Bank Limited
DIRECTORS                                                                           year and 82 employees employed for part of the year were in receipt of
Mr. Shivaji Dam retires at the Twenty Third Annual General Meeting and is           remuneration of Rs. 24 lacs or more per annum.
eligible for re-appointment.                                                        Your Bank has in place policies relating to employee service conditions,
                                                                                    welfare and training which are reviewed on an ongoing basis by your Bank’s
The Reserve Bank of India (“RBI”), vide its letter no. DBOD No.
                                                                                    Management Committee.
17/08.140.001/2006-07 dated July 14, 2006 had approved the continuation
of Mr. K. M. Gherda as a Director till he retires by rotation. Mr. Gherda retires   Your Bank continues to focus on training its employees on a continuing
by rotation at this Annual General Meeting and accordingly the term of              basis by deputation to reputed training institutions by holding workshops
Mr. Gherda expires at this Meeting.                                                 on various areas including Regulatory Compliance, Risk Management,
                                                                                    Customer Care and Communication, Trade Finance, Foreign Exchange Rules
Mr. Asim Ghosh was appointed as an Additional Director of the Bank with
                                                                                    and Treasury.
effect from 9th May 2008 and, pursuant to the proviso to Section 260 of
the Companies Act, 1956, holds office as a Director up to the date of this          In accordance with the provisions of Section 217(2A) of the Companies Act,
Annual General Meeting but is eligible to be appointed as a Director. In            1956 and the rules framed thereunder, the names and other particulars of
terms of Section 257 of the Companies Act, 1956 the Bank has received               employees are set out in the annexure to the Directors’ Report. In terms of
notice in writing from the member along with a requisite deposit of                 the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, the
Rs. 500/- proposing the candidature of Mr. Asim Ghosh for his appointment           Directors’ Report is being sent to all the shareholders of the Bank excluding
as a Director.                                                                      the aforesaid annexure. The annexure is available for inspection at the
                                                                                    Registered Office of the Bank. Any shareholder interested in obtaining
Mr. Asim Ghosh is an MBA from Wharton School, University of Pennsylvania            a copy of the said annexure may write to the Company Secretary at the
and a B.Tech from IIT Delhi. Mr. Ghosh commenced his career in consumer             Registered Office of the Bank.
goods marketing with Procter & Gamble in the U.S. and Canada, and
worked subsequently with Rothmans International as a Board member of                DIRECTORS’ RESPONSIBILITY STATEMENT
one of Canada’s major breweries. He moved to Asia in 1989 as CEO of                 The Directors, based on the representations received from the operational
the Frito Lay (Pepsi Foods) start up in India. Thereafter, he was in executive      management, confirm in pursuance of Section 217 (2AA) of the Companies
positions with Hutchison in Hong Kong and India for the past 16 years, and          Act, 1956, that:
is currently CEO of Vodafone Essar Limited since 1998.                              (i)    your Bank has, in the preparation of the annual accounts for the year
The Board of Directors of the Bank, at its meeting held on 9th May 2008, has               ended 31st March 2008, followed the applicable accounting standards
re-appointed Mr. Uday Kotak as the Executive Vice-Chairman and Managing                    along with proper explanations relating to material departures, if any;
Director for a period up to 21st March 2012, subject to the approval of             (ii)   they have selected such accounting policies and applied them
the Members and of the Reserve Bank of India. Mr. Dipak Gupta and                          consistently and made judgements and estimates that are reasonable
Mr. C. Jayaram have been appointed as Executive Directors for a further period             and prudent so as to give a true and fair view of the state of affairs of
up to 31st December 2011, subject to the approval of the shareholders and                  the Bank as at 31st March 2008 and of the profit of your Bank for the
of the Reserve Bank of India. The approval of the shareholders in this regard              financial year ended 31st March 2008;
is being sought at the ensuing Annual General Meeting of the Bank.
                                                                                    (iii) they have taken proper and sufficient care to the best of their
AUDITORS                                                                                  knowledge and ability, for the maintenance of adequate accounting
                                                                                          records in accordance with the provisions of the Act for safeguarding
Messrs S. R. Batliboi & Co., Chartered Accountants, auditors of your Bank,
                                                                                          the assets of the Bank and for preventing and detecting fraud and
retire on the conclusion of Twenty Third Annual General Meeting and are
                                                                                          other irregularities; and
eligible for reappointment. You are requested to appoint auditors for the
current financial year and to fix their remuneration.                               (iv) the annual accounts have been prepared on a going concern basis.

                                                                                    ACKNOWLEDGEMENTS
STATUTORY INFORMATION
                                                                                    Your Directors would like to place on record their gratitude for the valuable
The Companies (Disclosure of Particulars in the Report of Board of Directors)
                                                                                    guidance and support received from the Reserve Bank of India, Securities
Rules, 1998, are not applicable to your Bank.
                                                                                    and Exchange Board of India, Insurance Regulatory and Development
EMPLOYEES                                                                           Authority and other Government and Regulatory agencies. Your Directors
                                                                                    acknowledge the support of the shareholders and also wish to place on
There was a significant increase in your Bank’s staffing particularly in the
                                                                                    record their appreciation of employees for their commendable efforts,
Retail Banking business. The employee strength of your Bank along with its
                                                                                    teamwork and professionalism.
subsidiaries as of 31st March 2008 was around 20,000, as compared to
10,800 employees a year ago.                                                                                        For and on behalf of the Board of Directors
The Bank standalone had around 9,000 employees as of 31st March 2008                                                                         Dr. Shankar Acharya
(previous year around 5,400). 177 employees employed throughout the                 Mumbai, 9th May 2008.                                              Chairman



                                                                                                                        Kotak Mahindra Bank Limited              47
Report On Corporate Governance

Good governance is about both achieving desired results and achieving               A	brief	description	of	the	Directors,	along	with	the	companies	in	which	they	
them in the right way. It is also about the processes by which stakeholders         hold directorship and the membership of the committees of the Board are
articulate their interests, their input is absorbed, decisions are taken and        furnished hereunder:
decision-makers are accountable. (Institute On Governance, Canada).
                                                                                    Dr. Shankar Acharya, Non-Executive Part-time Chairman
The Bank believes in adopting and adhering to the best standards                    Dr.	 Shankar	 Acharya,	 B.A.	 (Hons.)	 from	 Oxford	 University	 and	 Ph.	 D.	
of corporate governance to all the stakeholders. The Bank’s corporate               (Economics)	 from	 Harvard	 University,	 aged	 62	 years,	 has	 considerable	
governance is, therefore based on the following principles:                         experience	 in	 various	 fields	 of	 economics	 and	 finance.	 He	 is	 a	 honorary	
                                                                                    professor	 at	 the	 Indian	 Council	 for	 Research	 on	 International	 Economic	
•	   Appropriate	 composition,	 size	 of	 the	 Board	 and	 commitment	 to	          Relations	(ICRIER)	and	a	Board	Member	of	ICRIER,	the	National	Council	of	
     adequately discharge its responsibilities and duties.                          Applied	&	Economic	Research	and	the	National	Institute	of	Public	Finance	
                                                                                    and	 Policy.	 He	 was	 Chief	 Economic	Adviser,	 Ministry	 of	 Finance	 and	 has	
•	   Transparency	 and	 independence	 in	 the	 functions	 of	 the	 Board.
                                                                                    held	several	senior	positions	in	the	World	Bank,	including	Director	of	World	
•	   Independent	verification	and	assured	integrity	of	financial	reporting.         Development	 Report	 (1979)	 and	 Research	Adviser.	 He	 was	 appointed	 as	
                                                                                    the	Non-Executive	Part-time	Chairman	of	the	Bank	at	the	Annual	General	
•	   Adequate	 risk	 management	 and	 Internal	 Control.                            Meeting	held	on	20th	July,	2006.	
                                                                                    Dr.	Shankar	Acharya	was	a	member	of	Audit	Committee	of	the	Bank	until	
•	   Protection	of	shareholders’	rights	and	priority	for	investor	relations.
                                                                                    8th	May	2007.	
•	   Timely	and	accurate	disclosure	on	all	matters	concerning	operations	           Mr. Uday Kotak, Executive Vice-Chairman and Managing Director
     and performance of the Bank.
                                                                                    Mr.	 Uday	 Kotak,	 B.Com,	 MMS	 (Masters	 in	 Management	 Studies),	 aged	
The Bank believes that good corporate governance leads to the optimal               49	years,	is	the	Executive	Vice-Chairman	and	Managing	Director	of	the	Bank	
utilization	of	resources	and	enhances	the	value	of	the	enterprise	and	an	           and	 its	 principal	 founder	 and	 promoter.	 Over	 the	 past	 22	 years,	 he	 has	
ethical behavior of the enterprise leads to honouring and protecting the            built a team of professionals who have been given independent charge of
rights of all the stakeholders.                                                     various	businesses	in	Kotak	Mahindra	group.	He	was	responsible	for	starting	
                                                                                    the business as a start-up venture in a limited range of activities and then
The	 Bank	 was	 ranked	 among	 the	 top	 five	 companies	 from	 Asia	 Pacific	      building	it	up	into	a	full	financial	services	group,	many	of	the	constituents	
and	Africa	 regions	 by	 the	 IR	 Global	 Rankings	 2008	 for	 adhering	 to	 the	   of	which	are	among	the	leading	players	in	their	respective	fields.	He	is	also	
best corporate governance practices.                                                on	 the	 Board	 of	 Indian	 Council	 for	 Research	 on	 International	 Economic	
                                                                                    Relations	(ICRIER)	and	Indian	Institute	of	Banking	and	Finance.
Also	 the	 Bank	 is	 adjudged	 the	 most	 voted	 Company	 in	 Asia	 Pacific	
and	Africa	 region	 by	 IR	 Global	 Rankings	 in	 five	 categories (i) Corporate    He	is	on	the	Board	of	the	following	companies:
Governance	 Practices	 (ii)	 Financial	 Disclosure	 Procedures	 (iii)	 Investor	    Indian	Council	for	Research	on	International	Economic	Relations
Relations	 (IR)	Website	 (iv)	 IR	Team	 (v)	 IR	 Program.                           Indian	Institute	of	Banking	&	Finance
                                                                                    Indian	School	of	Business
The	 Report	 on	 the	 Bank’s	 corporate	 governance,	 as	 per	 the	 applicable	     Kotak	Forex	Brokerage	Limited
provisions of the Clause 49 is as under:                                            Kotak	Mahindra	Asset	Management	Company	Limited
                                                                                    Kotak	Mahindra	Capital	Company	Limited
Board of Directors
                                                                                    Kotak	Mahindra	Prime	Limited
Composition, Meeting and Attendance                                                 Kotak	Mahindra	Old	Mutual	Life	Insurance	Limited
The	composition	of	the	Board	of	Directors	of	the	Bank	is	governed	by	the	           Kotak	Securities	Limited
Banking	 Regulation	Act,	 1949	 and	 Clause	 49	 of	 the	 Listing	Agreement.	       The	Mahindra	United	World	College	of	India
The	 Board	 of	 Directors,	 comprising	 a	 combination	 of	 executive	 and	         Mr.	Uday	Kotak	is	also	a	member	of	the	Investor	Relations	(Shareholders’/
non-executive	 Directors,	 presently	 consists	 of	 ten	 members,	 of	 whom	        Investor	 Grievance)	 Committee	 of	 the	 Bank,	 Chairman	 of	 the	 Audit	
seven	 are	 non-executive	 Directors.	 The	 Chairman	 of	 the	 Board	 is	 a	        Committees	 of	 Kotak	 Mahindra	 Capital	 Company	 Limited	 and	 Kotak	
Non-Executive	 Independent	 Director	 and	 six	 out	 of	 ten	 Directors	 are	       Securities	Limited	and	member	of	the	Audit	Committee	of	Kotak	Mahindra	
independent.	The	 Board	 mix	 provides	 a	 combination	 of	 professionalism,	       Asset	Management	Company	Limited.
knowledge	 and	 experience	 required	 in	 the	 banking	 industry.	 The	
responsibilities of the Board inter alia include formulation of policies,           Mr. K. M. Gherda
taking new initiatives, performance review, monitoring of plans, pursuing           Mr.	 K.	 M.	 Gherda,	 B.Com.,	A.C.A.,	 F.C.A.	 (England	 &	Wales),	 F.C.S.,	 aged	
of policies and procedures.                                                         79	years,	was	the	Non-Executive	Chairman	of	the	Bank	till	July	2006.	He	



48       Kotak Mahindra Bank Limited
continues	on	the	Board	of	the	Bank	as	a	Non-Executive	Director.	Mr.	Gherda	           Mahindra	&	Mahindra	Limited
has	over	52	years	of	financial	and	management	experience	with	foreign	and	            Mahindra	Holdings	&	Finance	Limited
Indian	 companies.	 He	 served	 27	 years	 with	Tata	 Electric	 Companies	 and	       Mahindra	Sona	Limited
retired	as	their	Vice-Chairman	and	Managing	Director.	He	was	also	on	the	             Mahindra	Ugine	Steel	Company	Limited
Local	Advisory	Board	of	the	Bank	of	Nova	Scotia	in	India	and	was,	at	one	             Mahindra	International	Limited
point,	it’s	Chairman.	He	has	a	long	association	with	the	Bank	and	has	been	           Mahindra	(China)	Tractor	Company	Limited
on	its	Board	as	an	independent	director	since	1986.	He	was	the	President	of	          Mahindra	Holdings	Limited
the	Bombay	Management	Association	and	the	Regional	Director	for	India	of	             Mahindra	Lifespace	Developers	Limited	
the	Institute	of	Internal	Auditors,	Florida.	He	is	on	the	Board	of	the	following	     (Formerly	known	as	Mahindra	Gesco	Developers	Limited)	
companies:                                                                            MW.Com	India	Private	Limited
ASL	Advanced	Systems	Private	Limited	                                                 National	Stock	Exchange	of	India	Limited
Deutsche	Asset	Management	(India)	Private	Limited                                     Tech	Mahindra	Foundation
Emersons	Network	Power	India	Private	Limited	                                         Tech	Mahindra	Limited	
Hirco	Plc.                                                                            Tech	Mahindra	(Americas)	Inc.
K	M	Dastur	Reinsurance	Brokers	Private	Limited	                                       Prana	Holdings	Inc.
Kotak	Mahindra	Trusteeship	Services	Limited	
Nelito	Systems	Limited                                                                He	is	a	member	of	the	Share	Transfer	&	Shareholders/Investors	Grievance	
Pallonji	Leasing	Private	Limited                                                      Committee	of	Mahindra	&	Mahindra	Limited.
Tata	Ceramics	Limited
                                                                                      Mr. Cyril Shroff
Universal	Ferro	&	Allied	Chemicals	Limited	
Vakksh	Capital	Company	Limited	                                                       Mr.	 Cyril	 Shroff,	 B.Com,	 L.L.B.,	 aged	 48	 years,	 is	 a	 Solicitor,	 High	 Court,	
WTI	Advanced	Technology	Limited	                                                      Mumbai	 and	 Advocate	 on	 record,	 Supreme	 Court	 of	 India.	 He	 is	 the	
Yashmun	Engineers	Limited                                                             managing	partner	of	the	law	firm	M/s.	Amarchand	&	Mangaldas	&	Suresh	A.	
                                                                                      Shroff	&	Co.	and	practices	in	the	area	of	corporate	law	and	project	finance.	
Mr.	K.	M.	Gherda	is	also	Chairman	of	the	Audit	Committee	of	the	Bank,	
                                                                                      He	has	been	a	member	of	numerous	Government	committees.	He	is	on	the	
member	 of	 the	Audit	 Committee	 of	Tata	 Ceramics	 Limited	 and	 Deutsche	
                                                                                      Board of the following companies:
Asset	Management	(India)	Private	Limited.	
                                                                                      Grasim	Industries	Limited
The	 Reserve	 Bank	 of	 India	 (“RBI”),	 vide	 its	 letter	 no.	 DBOD	 No.	
                                                                                      Osian’s	Connoisseurs	of	Art	Private	Limited	
17/08.140.001/2006-07	dated	July	14,	2006	had	approved	the	continuation	
of	Mr.	K.	M.	Gherda	as	a	Director	till	he	retires	by	rotation.	Mr.	Gherda	retires	    Mr.	 Cyril	 Shroff	 is	 also	 a	 partner	 in	 M/s.	 Suresh	 A.	 Shroff	 &	 Co.	 and	
by	rotation	at	ensuing	Annual	General	Meeting	and	accordingly	the	term	of	            M/s.	Amarchand	Mangaldas	&	Hiralal	Shroff	&	Co.	
Mr.	Gherda	expires	at	the	forthcoming	Annual	General	Meeting.	
                                                                                      Mr.	Cyril	Shroff	is	the	Chairman	of	the	Shareholders’	Grievance/Allotment	
Mr. Anand Mahindra                                                                    and	Transfer	Committee	of	Grasim	Industries	Limited.
Mr.	Anand	Mahindra,	aged	53	years,	a	graduate	of	Harvard	University	and	
                                                                                      Mr. Pradeep N. Kotak
a	MBA	from	Harvard	Business	School,	is	the	co-promoter	of	the	Bank.	He	
is	also	the	Vice-Chairman	and	Managing	Director	of	Mahindra	&	Mahindra	               Mr.	 Pradeep	 N.	 Kotak,	 B.Com,	 aged	 54	 years,	 is	 the	 Chairman	 and	
Limited.	He	was	the	President	of	the	Confederation	of	Indian	Industry	(CII)	          Managing	 Director	 of	 Kotak	 Agri	 International	 Private	 Limited	 and	 has	
for	2003-04,	Vice	President	of	the	CII	for	2002-03	and	was	the	Chairman	              vast	 experience	 in	 agricultural	 sector.	 Mr.	 Pradeep	 Kotak	 has	 been	 in	
of	the	CII	Agriculture	Committee	for	2000-03	and	CII	Agro	Tech	for	2002.	             both the domestic and international commodities market, for more than
Additionally,	 he	 is	 the	 key	 promoter	 of	 the	 Indian	 Farmers	 and	 Industry	   34	 years.	 He	 has	 also	 served	 as	 Chairman	 of	 the	 Indian	 Oilseeds	 and	
Alliance	(IFIA),	which	has	been	established	to	promote	farmers’	interests	            Producers	 Exporters	 Association	 (IOPEA),	 Mumbai	 where	 he	 led	 many	
and	bring	about	more	effective	management	of	the	agricultural	sector.	He	             delegations	 to	 foreign	 countries	 throughout	 North	America,	 the	 Far	 East	
is on the Board of the following companies:                                           and	 the	 Middle	 East.	 He	 has	 represented	 India	 at	 many	 international	
                                                                                      conferences.	He	has	also	served	as	the	Vice	President	of	The	Federation	of	
Angular	Constructions	Private	Limited
                                                                                      Oilseeds	and	Foods	Association	(FOFSA),	International	Consultative	Group,	
Avion	Aerosols	Private	Limited
                                                                                      London,	where	he	used	to	be	consulted	by	the	U.	K.	Agricultural	Ministry	
Bristlecone	Limited,	Cayman	Islands
                                                                                      and	other	world	bodies.	He	is	on	the	Board	of	the	following	companies:
First	Choice	Wheels	Limited	
(Formerly	known	as	Automartindia	Limited)                                             Asian	Machinery	&	Equipment	Private	Limited	
M.A.R.K.	Hotels	Private	Limited                                                       Indian	Oil	Seeds	&	Produce	Exporters	Association
Mahindra	Forgings	Limited	                                                            Indian	Merchant	Chambers
(Formerly	known	as	Mahindra	Automotive	Steels	Limited)                                Kotak	Agri	International	Private	Limited	
Mahindra	&	Mahindra	Financial	Services	Limited                                        Kotak	Thaker	Farm	Private	Limited	



                                                                                                                             Kotak Mahindra Bank Limited                  49
Mr.	Pradeep	Kotak	is	a	Chairman	of	the	Investor	Relations	(Shareholders’/            Kotak	Mahindra	Investments	Limited
Investor	 Grievance)	 Committee	 of	 the	 Bank	 and	 member	 of	 the	 Audit	         Kotak	Mahindra	Prime	Limited
Committee of the Bank.                                                               Kotak	Mahindra	Old	Mutual	Life	Insurance	Limited
Mr. Shivaji Dam                                                                      Mr.	 Dipak	 Gupta	 is	 also	 member	 of	 the	 Shareholder’s	 Grievance/Investor	
Mr.	 Shivaji	 Dam,	 B.Com,	AICWA,	ACA,	ACS,	 aged	 51	 years,	 has	 a	 strong	       Relations	Committee	of	the	Bank,	Audit	Committee	of	Kotak	Mahindra	Prime	
accounting	and	cost	accounting	background	with	over	24	years	experience,	            Limited,	Kotak	Mahindra	Capital	Company	Limited	and	Kotak	Mahindra	Old	
of	 which	 17	 years	 have	 been	 with	 the	 Kotak	 Group.	 He	 has	 experience	     Mutual	Life	Insurance	Limited.	He	is	the	Chairman	of	the	Audit	Committee	
in	 fields	 such	 as	 corporate	 finance,	 proprietary	 investments,	 investment	    of	Kotak	Mahindra	Investments	Limited.
banking	and	operating	management	within	the	Kotak	Group.	He	led	the	
Kotak	Group	into	the	life	insurance	business	and	was	managing	director	of	           Mr. Asim Ghosh
Kotak	Mahindra	Old	Mutual	Life	Insurance	Limited,	a	subsidiary	of	the	Bank,	         Mr.	Asim	Ghosh,	B.Tech,	Delhi	and	MBA	from	the	Wharton	School,	University	
for	four	years.	He	is	on	the	Board	of	the	following	companies:                       of	Pennsylvania,	aged	60	years	has	been	appointed	as	an	Additional	Director	
Kotak	Mahindra	Old	Mutual	Life	Insurance	Limited	                                    of	the	Bank	with	effect	from	9th	May	2008	and	holds	office	upto	the	date	
Kotak	Mahindra	Prime	Limited                                                         of	 ensuing	Annual	 General	 Meeting	 but	 is	 eligible	 to	 be	 appointed	 as	 a	
Kotak	Securities	Limited                                                             Director.	Mr.	Ghosh	has	commenced	his	career	in	consumer	goods	marketing	
Kotak	Mahindra	Trusteeship	Services	Limited	                                         with	Procter	&	Gamble	in	the	U.S.	and	Canada,	and	worked	subsequently	
                                                                                     with	Rothmans	International	as	a	Board	member	of	one	of	Canada’s	major	
Mr.	Shivaji	Dam	is	a	member	of	the	Audit	Committee	of	the	Bank.
                                                                                     breweries.	He	moved	to	Asia	in	1989	as	CEO	of	the	Frito	Lay	(Pepsi	Foods)	
Mr. C. Jayaram, Executive Director                                                   start	up	in	India.	Thereafter,	he	was	in	executive	positions	with	Hutchison	in	
Mr.	 C.	 Jayaram,	 B.	A.	 (Economics),	 PGDM-IIM,	 Kolkata,	 aged	 52	 years,	 is	   Hong	Kong	and	India	for	the	past	16	years,	and	has	continued	as	the	CEO	
an	Executive	Director	of	the	Bank	and	is	currently	in	charge	of	the	Wealth	          of	Vodafone	Essar	Limited	since	its	recent	change	of	shareholding.	He	is	on	
Management	Business	of	the	Kotak	Group.	He	has	a	varied	experience	of	               the Board of the following companies:
over	25	years	in	many	areas	of	finance	and	business	and	was	the	CEO	of	              AG	Mercantile	Company	Private	Limited
Kotak	Securities	Limited.	He	has	been	with	the	Kotak	Group	for	16	years	             Indus	Towers	Limited
and has been instrumental in building a number of the new businesses of
                                                                                     Jaykay	Finholding	(India)	Private	Limited
the	Kotak	Group.	He	is	on	the	Board	of	the	following	companies:
                                                                                     Nadal	Trading	Company	Private	Limited
Financial	Planning	Standards	Board	of	India                                          Plustech	Mercantile	Company	Private	Limited
Kotak	 Investment	Advisors	 Limited	 (Formerly	 known	 as	 Kotak	 Mahindra	
                                                                                     Telecom	Investments	India	Private	Limited
Securities	Limited)
                                                                                     UMT	Investments	Limited
Kotak	Mahindra	Asset	Management	Company	Limited	
Kotak	Mahindra	Investments	Limited                                                   Usha	Martin	Telematics	Limited
Kotak	Mahindra	Inc	                                                                  Vodafone	Essar	Cellular	Limited
Kotak	Mahindra	Prime	Limited                                                         Vodafone	Essar	Digilink	Limited
Kotak	Mahindra	(UK)	Limited                                                          Vodafone	Essar	East	Limited
Kotak	Securities	Limited                                                             Vodafone	Essar	Gujarat	Limited
Mr.	C.	Jayaram	is	a	member	of	Investor	Relations	(Shareholders’/Investor	            Vodafone	Essar	Limited
Grievance)	 Committee	 of	 the	 Bank	 and	 Audit	 Committee	 of	 Kotak	              Vodafone	Essar	Mobile	Services	Limited
Securities	Limited	He	was	a	member	of	Audit	Committee	of	the	Bank	until	             Vodafone	Essar	South	Limited
8th	May	2007.                                                                        Vodafone	Essar	Spacetel	Limited
Mr. Dipak Gupta, Executive Director                                                  Vodafone	Essar	Towers	Limited
                                                                                     Wanless	Property	Holdings	Private	Limited
Mr.	Dipak	Gupta,	B.E.	(Electronics),	PGDM-IIM,	Ahmedabad,	aged	47	years,	
is	an	Executive	Director	of	Kotak	Bank	and	has	over	20	years	of	experience	          Mr.	Ghosh	is	a	member	of	Audit	Committees	of	Jaykay	Finholding	(India)	
in	the	financial	services	sector,	16	years	of	which	have	been	with	the	Kotak	        Private	Limited,	Telecom	Investments	India	Private	Limited,	UMT	Investments	
Group.	He	is	in	charge	of	the	retail	business	and	banking	operations,	and	           Limited	and	Usha	Martin	Telematics	Limited.
was	responsible	for	leading	the	Kotak	Group’s	initiatives	into	the	banking	
                                                                                     Note:	The	Committee	Memberships	of	Audit	Committee	and	Shareholders’/	
arena.	Prior	to	this,	he	was	the	CEO	of	Kotak	Prime.	Prior	to	joining	the	
                                                                                     Investors Grievance Committee have been considered.
Kotak	Group,	he	was	with	AF	Ferguson	&	Company	for	approximately	six	
years.	He	is	on	the	Board	of	the	following	companies:                                The following table gives the composition of Bank’s Board and the number
Kotak	Forex	Brokerage	Limited                                                        of	outside	directorships	held	by	each	of	the	Directors	and	the	committee	
Kotak	Mahindra	Capital	Company	Limited                                               positions	held	by	the	Directors	as	on	31st	March	2008.



50        Kotak Mahindra Bank Limited
                                                                              No. of Directorships in other                 No. of Committee Positions held in
                                                                                       Companies                            Bank and other Public Companies
  Name of Directors                Position
                                                                           Indian Public                 Other                Chairman               Member
                                                                            Companies

  Dr.	Shankar	Acharya              Independent	Non-Executive	                      Nil                     Nil                    Nil                   Nil
                                   Part-time	Chairman
  Mr.	Uday	Kotak                   Executive	Vice-Chairman	&	                      6                        4                     2                      2
                                   Managing	Director,	Promoter
  Mr.	K.	M.	Gherda                 Independent	Non-Executive	                      7                        6                     1                      2
                                   Director
  Mr.	Anand	Mahindra               Non-Executive	Director,	                        11                      10                     Nil                    1
                                   Promoter
  Mr.	Cyril	Shroff                 Independent	Non-Executive	                      1                        1                     1                     Nil
                                   Director
  Mr.	Pradeep	N.	Kotak             Independent	Non-Executive	                      Nil                      5                     1                      1
                                   Director
  Mr.	Shivaji	Dam                  Independent	Non-Executive	                      4                       Nil                    Nil                    1
                                   Director
  Mr.	C.	Jayaram                   Executive	Director                              5                        3                     Nil                    2
  Mr.	Dipak	Gupta                  Executive	Director                              5                       Nil                    1                      4
  Mr.	Asim	Ghosh                   Independent	Non-Executive	                      12                       6                     Nil                    4
                                   Director

Notes:
1.	 The	Committee	Memberships	mentioned	above	are	of	only	Statutory	Committees	as	per	Clause	49	of	the	Listing	Agreement	with	Stock	Exchanges,	
     namely	Audit	Committee	and	Shareholders’/Investors	Grievance	Committee.
2.	 None	of	the	Directors	on	the	Board	is	a	member	of	more	than	ten	committees	and	the	Chairman	of	more	than	five	committees	in	all	the	companies	
     in	 which	 he	 is	 a	 Director	 (for	 this	 purpose	 the	 membership	 of	Audit	 Committee	 and	 Shareholders’	 Grievance	 Committee	 have	 been	 taken	 into	
     consideration).	All	the	Directors	have	made	disclosures	regarding	their	membership	on	various	committees	in	other	companies.	
3.	 In	compliance	with	the	Clause	49	of	the	Listing	Agreement,	an	independent	director	on	the	Board	of	the	Bank	has	been	appointed	on	the	boards	of	
     material non listed Indian subsidiaries of the Bank as mentioned below:
	    Kotak	Mahindra	Old	Mutual	Life	Insurance	Limited
	    Kotak	Securities	Limited	
	    Kotak	Mahindra	Prime	Limited	*
*	ceased	to	be	material	non	listed	Indian	subsidiary	during	the	year

Board Meetings                                                                           requiring	 discussion/approval/decision	 in	 the	 Board/Committee	 Meetings.	
Scheduling	and	selection	of	agenda	items	for	Board	Meetings                              All	such	matters	are	communicated	to	the	Company	Secretary	in	advance	so	
                                                                                         that	the	same	could	be	included	in	the	Agenda	for	the	Board	Meetings.	
Dates	of	the	Board	Meetings	are	decided	in	advance.	The	Board	Meetings	
are convened by giving appropriate notice after obtaining the approval of                The	agenda	papers	are	prepared	by	the	concerned	officials	of	the	respective	
the	Chairman	and	the	Executive	Vice-Chairman	and	Managing	Director.	The	                 department	and	are	approved	by	the	Executive	Director/s	and/or	Executive	
Board meets at least once a quarter to review the results and other items on             Vice-Chairman	and	Managing	Director.	Duly	approved	agenda	papers	are	
the agenda and also on the occasion of the annual shareholders’ meeting.                 circulated	to	the	Board	by	the	Company	Secretary.	Additional	items	on	the	
When	necessary,	additional	meetings	are	held.                                            agenda are permitted with the permission of the Chairman.
                                                                                         To	address	specific	urgent	need,	meetings	are	also	convened	at	short	notice.	
The	 agenda	 of	 the	 board	 meetings	 is	 drafted	 by	 the	 Company	 Secretary	
                                                                                         The Board also passes resolution by Circulation on need basis.
along	with	the	explanatory	notes	and	these	are	distributed	in	advance	to	
the	Directors.	Every	Board	member	is	free	to	suggest	the	inclusion	of	items	             Minutes	of	the	proceedings	of	the	board	meeting	are	prepared	within	48	
on	the	agenda.	All	divisions/departments	in	the	Bank	are	encouraged	to	                  hours	of	the	Meeting	as	per	the	requirement	laid	down	by	the	Reserve	Bank	
plan their functions well in advance, particularly with regard to matters                of	India.	Draft	minutes	are	circulated	to	the	Chairman	for	his	comments.	The	



                                                                                                                           Kotak Mahindra Bank Limited            51
minutes	of	all	the	Committees	of	the	Board	of	Directors	of	the	Bank	and	the	            Directors’ Remuneration
minutes	of	the	Board	of	Directors	of	the	subsidiary	companies	of	the	Bank	              Remuneration	of	the	Directors	for	the	year	ended	31st	March	2008	is	as	
are placed before the Board.                                                            follows:
The quarterly, half-yearly and the annual results for the consolidated entity             Name of Director                   Sitting fees        Salary & Perquisites
and	for	the	Bank	stand	alone	are	first	placed	before	the	Audit	Committee	of	                                                  (Rs.‘000)               (Rs. ‘000)
the	Bank	and	thereafter	the	same	are	placed	before	the	Board	of	Directors.	               Dr.	Shankar	Acharya	                  90.00                   683.87	
A	 Compliance	 Certificate,	 signed	 by	 the	 Executive	 Vice-Chairman	 and	                                                                      (See	Note	1	below)
Managing	 Director	 in	 respect	 of	 various	 laws,	 rules	 and	 regulations	             Mr.	Uday	Kotak	                         —                   15305.00	
applicable to the Bank is placed before the Board, every quarter.                                                                                *	(See	Note	2	below)
                                                                                          Mr.	K.	M.	Gherda                      305.00                     —
The Bank has put in place a post meeting follow-up, review and reporting
process for the action taken on decisions of the Board. The Company                       Mr.	Anand	Mahindra                    110.00                     —
Secretary	 submits	 follow-up	 Action	 Taken	 Report	 to	 the	 Board	 at	 each	           Mr.	Cyril	Shroff	                     115.00                     —
meeting	on	the	compliance	of	the	decisions/instructions	of	the	Board.                     Mr.	Pradeep	N.	Kotak	                 310.00                     —
During	the	year	under	review,	nine	meetings	of	the	Board	of	Directors	were	               Mr.	Shivaji	Dam	                      210.00                     —
held	on	8th	May	2007,	5th	July	2007,	24th	July	2007,	9th	August	2007,	                    Mr.	C.	Jayaram	                         —                   33173.94
18th	September	2007,	26th	October	2007,	21st	January	2008,	7th	March	                                                                            *	(See	Note	2	below)
2008	and	28th	March	2008.	Subsequently,	one	meeting	of	the	Board	of	                      Mr.	Dipak	Gupta                         —                   32079.93	
Directors	 was	 held	 on	 9th	 May	 2008.	The	 maximum	 time	 gap	 between	                                                                      *	(See	Note	2	below)
any two meetings was not more than three calendar months. The average
duration	of	the	Board	Meetings	held	is	approximately	three	hours.	                      *The	amount	shown	above	excludes	gratuity	payable	under	the	Payment	
                                                                                        of	Gratuity	Act	and	value	of	car	perquisites	under	the	Income	Tax	Act,	1961	
The	details	of	Directors’	attendance	at	Board	Meetings	held	during	the	year	            but	includes	ESOP	compensation	expenditure	and	superannuation	if	any.	
commencing	1st	April	2007	and	ending	31st	March	2008	and	at	the	last	                   Further,	performance	incentive	included	is	for	FY	2006-07.
AGM	are	as	under:	
                                                                                        Notes:
 Sr.    Directors                    Board Meetings              Whether
 No.                                    attended              attended last             1.	   Dr.	 Shankar	 Acharya	 was	 appointed	 as	 the	 Non-Executive	 Part-
                                     during the year         AGM held on 5th                  time	Chairman	of	the	Bank	at	the	Annual	General	Meeting	held	on	
                                        2007-08                 July 2007                     20th	July,	2006.	The	Reserve	Bank	of	India	(“RBI”)	vide	its	letter	dated	
  1.    Dr.	Shankar	Acharya	                  5                       No                      16th	August	 2007	 has	 approved	 an	 increase	 in	 remuneration	 from	
  2.    Mr.	Uday	Kotak	                       9                      Yes                      Rs.	6	lakhs	to	Rs.	7.20	lakhs	per	annum	with	effect	from	20th	July	2007.
  3.    Mr.	K.	M.	Gherda                      8                      Yes                2.	   The	Reserve	Bank	of	India	(“RBI”)	vide	its	letter	dated	16th	August	
  4.    Mr.	Anand	Mahindra                    2                      Yes                      2007	has	approved	the	revision	in	remuneration	to	Mr.	Uday	Kotak,	
  5.    Mr.	Cyril	Shroff	                     3                       No                      Executive	Vice-Chairman	and	Managing	Director,	Mr.	C.	Jayaram	and	
  6.    Mr.	Pradeep	N.	Kotak	                 9                      Yes                      Mr.	 Dipak	 Gupta,	 Executive	 Directors	 and	 annual	 incentive	 payable	
  7.    Mr.	Shivaji	Dam	                      8                      Yes                      to	Mr.	Uday	Kotak,	Executive	Vice-Chairman	and	Managing	Director	
  8.    Mr.	C.	Jayaram                        9                      Yes                      (Rs.	 40	 lakhs),	 Mr.	 C.	 Jayaram	 (Rs.	 60	 lakhs)	 and	 Mr.	 Dipak	 Gupta	
                                                                                              (Rs.	50	lakhs),	Executive	Directors	of	the	Bank	for	the	financial	year	
  9.    Mr.	Dipak	Gupta                       9                      Yes
                                                                                              ended	31st	March	2007.	
Information supplied to the Board is as under:
                                                                                        3.	   The	performance	incentives	to	the	Executive	Directors	are	based	on	
The	Directors	are	presented	with	important	information	on	operations	of	                      the	recommendation	of	the	Executive	Vice-Chairman	and	Managing	
the Bank as well as that which requires deliberation at the highest level.                    Director	of	the	Bank.	The	Board	of	Directors	of	the	Bank	decides	the	
Information is provided on various critical items such as annual operating                    performance	 bonus	 to	 be	 paid	 to	 the	 Executive	Vice-Chairman	 and	
plans	 and	 budgets,	 minutes	 of	 meetings	 of	 the	 Audit	 Committee	 and	                  Managing	 Director	 and	 the	 Executive	 Directors	 on	 the	 basis	 of	 the	
other	 committees	 of	 the	 Board,	 details	 of	 joint	 ventures	 or	 collaboration	          performance	of	the	Bank	and	the	fulfilment	of	responsibilities	assigned	
agreements and non-compliance, if any with regulatory or statutory                            to them.
guidelines or with the listing requirements etc.
                                                                                        4.	   At	the	Extraordinary	General	Meeting	of	the	Bank	held	on	21st	August	
Disclosures	 of	 interest	 are	 duly	 received	 from	 all	 Directors	 and	 there	 is	         2007,	 the	 shareholders	 approved	 the	 revision	 in	 remuneration	 to	
no potential conflict of interest in any transaction of the Bank with any                     Mr.	Uday	Kotak,	Executive	Vice-Chairman	&	Managing	Director	of	the	
Directors.                                                                                    Bank	till	21st	March	2009.	



52        Kotak Mahindra Bank Limited
5.	   At	the	Extraordinary	General	Meeting	of	the	Bank	held	on	21st	August	             the	salary	and	perquisites	as	prescribed	by	the	Agreement	for	a	period	
      2007,	 the	 shareholders	 approved	 the	 revision	 in	 remuneration	 to	          of three months from the date of notice.
      Mr.	C.	Jayaram	and	Mr.	Dipak	Gupta,	the	Executive	Directors	of	the	
                                                                                  7.	   The	Non-Executive	Directors	of	the	Bank	except	Dr.	Shankar	Acharya	
      Bank	till	31st	December	2008	
                                                                                        are not paid any remuneration other than the sitting fees.
6.	   The	Agreements	with	Mr.	Uday	Kotak,	Mr.	C.	Jayaram	and	Mr.	Dipak	
      Gupta may be terminated by mutual consent or by giving not less than        Employee Stock Options
      3	calendar	months	notice	in	writing.	In	the	event	of	termination	of	the	    The	details	of	the	options	granted	during	the	year	under	the	Kotak	Mahindra	
      Agreement,	the	liability	of	the	Bank	shall	be	limited	to	providing	only	    Equity	Option	Scheme	2007	to	the	Directors	are	as	under:


  Name of Director          Date of Grant          No. of Options            Exercise Price       Exercise Period           Options        Vesting Date
                                                   granted                                                                  Vested


  Series	1	of	Kotak	Mahindra	Equity	Option	Scheme	2007



  Mr.	C.	Jayaram                                   77,000                                         31st	October	2008	to	     35%            31st	October	




                                                                       }
                                                                                                  30th	June	2009                           2008



                                                                             Rs.	325/-	per	       1st	October	2009	to	      35%            1st	October	
                            5th	July	2007
                                                                             share                30th June	2010                           2009



  Mr.	Dipak	Gupta                                  75,000                                         30th	November	2009	       30%            30th	November	
                                                                                                  to	30th	June	2010                        2009




  Series	4	of	Kotak	Mahindra	Equity	Option	Scheme	2007




                                                                       }
  Mr.	C.	Jayaram                                   20,000                                         31st	July	2010	to	        100%           31st	July	2010
                                                                                                  31st	December	2010
                                                                             Rs.	325/-	per	
                            5th	July	2007
                                                                             share

  Mr.	Dipak	Gupta                                  25,000



Note:
The	RBI	vide	its	letter	dated	16th	August	2007	has	approved	stock	options	granted	under	Series	1	and	4	of	Kotak	Mahindra	Equity	Option	Scheme	2007	to	
Mr.	Dipak	Gupta	and	Mr.	C.	Jayaram.	




                                                                                                                    Kotak Mahindra Bank Limited             53
Committees of the Board of Directors                                                 f.	      Reviewing	 with	 the	 management,	 performance	 of	 statutory	 and	
The	Board	has	constituted	several	committees	to	deal	with	specific	matters	                   internal auditors, and adequacy of the internal control systems.
and	delegated	powers	for	different	functional	areas.	The	Audit	Committee	            g.	      Reviewing	the	adequacy	of	internal	audit	function,	if	any,	including	
and	 Shareholders’/Investor	 Grievance	 Committee	 have	 been	 constituted                    the	structure	of	the	internal	audit	department,	staffing	and	seniority	
in	 accordance	 with	 the	 guidelines	 issued	 by	 the	 Reserve	 Bank	 of	 India,	            of	the	official	heading	the	department,	reporting	structure	coverage	
Securities	 and	 Exchange	 Board	 of	 India	 read	 with	 requirements	 of	 the	               and frequency of internal audit.
Companies	Act,	1956.	Besides	the	above,	the	Board	has	also	set	up	other	
committees	 such	 as	 ESOP/Compensation	 Committee,	 Share	Transfer	 and	            h.	      Discussion	with	internal	auditors	any	significant	findings	and	follow	
Routine	 Transactions	 Committee	 (START),	 Management	 Committee,	                           up there on.
Premises	 Committee,	 Asset	 Liability	 Committee	 (ALCO),	 Nomination	
                                                                                     i.	      Reviewing	the	findings	of	any	internal	investigations	by	the	internal	
Committee,	 Investment	 Committee,	 Risk	 Management	 Committee,	
                                                                                              auditors into matters where there is suspected fraud or irregularity or
Information	Technology	Committee,	First	Tier	Audit	Committee,	Customer	
                                                                                              a failure of internal control systems of a material nature and reporting
Services	Committee	and	Committee	on	Frauds.
                                                                                              the matter to the board.

Audit Committee                                                                      j.	      To	look	into	the	reasons	for	substantial	defaults	in	the	payment	to	the	
The	Audit	Committee	of	the	Bank	comprises	of	three	members,	with	any	                         depositors, debenture holders, shareholders (in case of non payment
two	forming	the	quorum.	The	terms	of	reference	of	the	Audit	Committee	of	                     of declared dividends) and creditors.
the Bank are as follows:
                                                                                     k.	      To	review	the	functioning	of	the	Whistle	Blower	mechanism.	
a.	   Oversight	of	the	Bank’s	financial	reporting	process	and	the	disclosure	        l.       Carrying out any other function as is mentioned in the terms of
      of	its	financial	information	to	ensure	that	the	financial	statement	is	                 reference	of	the	Audit	Committee.
      correct,	sufficient	and	credible.
                                                                                     All	members	of	the	Committee	are	non-executive	independent	Directors.	All	
b.	   Recommending	to	the	Board,	the	appointment,	reappointment	and,	if	             members	of	the	Committee	are	financial	literate	within	the	meaning	of	the	
      required, the replacement or removal of the statutory auditor and the          Clause	49	of	the	listing	agreement.	Mr.	K.	M.	Gherda	and	Mr.	Shivaji	Dam	
      fixation	of	audit	fees.	                                                       possess	accounting	and	financial	management	expertise.	

c.	   Approval	 of	 payment	 to	 statutory	 auditors	 for	 any	 other	 services	     Mr.	 K.	 M.	 Gherda	 is	 the	 Chairman	 and	 the	 Company	 Secretary	 acts	 as	
      rendered by the statutory auditors.                                            the	 Secretary	 to	 the	 Committee.	 The	 Chairman	 of	 the	 Committee	 was	
                                                                                     present	at	the	last	Annual	General	Meeting	to	answer	the	queries	of	the	
d.	   Reviewing,	 with	 the	 management,	 the	 annual	 financial	 statements	        shareholders.
      before submission to the board for approval, with particular
      reference to:                                                                  During	the	year,	eight	meetings	of	the	Committee	were	held	on	8th	May	
                                                                                     2007,	24th	July	2007,	3rd	August	2007,	9th	August	2007,	18th	October	
	     •	    Matters	required	to	be	included	in	the	Director’s	Responsibility	        2007,	 26th	 October	 2007,	 21st	 January	 2008	 and	 8th	 February	 2008.
            Statement	to	be	included	in	the	Board’s	report	in	terms	of	clause	       The	 Committee	 meets	 for	 approximately	 two	 hours.	 The	 maximum	
            (2AA)	of	Section	217	of	the	Companies	Act,	1956.                         time gap between any two meetings was not more than three calendar
	     •	    Changes,	if	any,	in	accounting	policies	and	practices	and	reasons	       months.	The	Meetings	were	attended	by	the	members	of	the	Committee,	
            for the same.                                                            as detailed below:

	     •	    Major	 accounting	 entries	 involving	 estimates	 based	 on	 the	              Name of Members of               Meetings held            Meetings
            exercise	of	judgment	by	management.                                            Audit Committee                 during the tenure      Attended during
                                                                                                                            of the member        the year 2007-08
	     •	    Significant	adjustments	made	in	the	financial	statements	arising	
            out	of	audit	findings.                                                         Mr.	K.	M.	Gherda	(Chairman)             8                     7
	     •	    Compliance	with	listing	and	other	legal	requirements	relating	to	
                                                                                           Mr.	Shivaji	Dam                         8                     6
            the	financial	statements.	

	     •	    Disclosure	of	any	related	party	transactions.                                  Mr.	Pradeep	Kotak*                      7                     7

	     •	    Qualifications	in	the	draft	audit	report.	                                     Mr.	C.	Jayaram*                         1                     1

                                                                                           Dr.	Shankar	Acharya*                    1                     1
e.	   Reviewing	with	the	management,	the	quarterly	financial	statements	
      before submission to the board for approval.                                   Note	(*)



54         Kotak Mahindra Bank Limited
In	view	of	the	reconstitution	of	the	Audit	Committee	w.e.f	8th	May	2007,	          The	ESOP/Compensation	Committee	has	been	constituted	to	recommend/
Mr.	 Pradeep	 Kotak	 has	 been	 appointed	 as	 its	 Member	 and	 Dr.	 Shankar	     review overall compensation structure and policies; consider grant
Acharya	and	Mr.	C.	Jayaram	have	ceased	to	be	its	members	effective	from	           of stock options to employees; review compensation levels vis-à-vis
that date.                                                                         other banks and industry in general and determine the compensation
                                                                                   payable	 to	 the	 Directors	 including	 performance/achievement	 bonus	
The	Audit	Committee	was	reconstituted	by	the	Board	at	its	meeting	held	
                                                                                   and	 perquisites.	 The	 performance	 bonus	 to	 the	 Executive	 Directors	 is	
on	8th	May	2007	consisting	of	Mr.	K.	M.	Gherda	(Chairman),	Mr.	Pradeep	
                                                                                   based	 on	 the	 recommendation	 of	 the	 Executive	 Vice-Chairman	
Kotak	and	Mr.	Shivaji	Dam	with	any	two	forming	the	quorum.
                                                                                   and	 Managing	 Director	 of	 the	 Bank.	 The	 Board	 of	 Directors	 of	 the	
The	Bank	has	constituted	a	First	Tier	Audit	Committee	as	per	the	guidelines	       Bank	 decides	 the	 performance	 bonus	 to	 be	 paid	 to	 the	 Executive	
issued	 by	 the	 Reserve	 Bank	 of	 India.	 The	 Committee	 comprises	 of	 five	   Vice-Chairman	 and	 Managing	 Director	 and	 the	 Executive	 Directors	
members	 viz.,	 Mr.	 Dipak	 Gupta-Executive	 Director,	 Mr.	 Chandrashekhar	       on	 the	 basis	 of	 the	 performance	 of	 the	 Bank	 and	 the	 fulfilment	 of	
Sathe-Group	 Head-Risk	 Management,	 Mr.	 Ravi	 Duvvuru	 –	 Group	                 responsibilities	assigned	to	them.	Non-Executive	Directors	at	present,	are	
Head-Compliance,	 Mr.	 Jaimin	 Bhatt-Group	 Chief	 Financial	 Officer	 and	        not paid commission over and above the sitting fees. The Bank has issued
Mr.	Vikram	 Sud,	 Group	 Chief	 Operating	 Officer.	Where	 the	 internal	 audit	   stock options to its employees and the employees of its subsidiaries under
report	pertains	to	specific	businesses,	the	specific	Business	Head	also	attends	   various	stock	option	plans,	details	of	which	are	provided	in	the	Directors’	
the	 meeting.	The	 Committee	 screens	 the	 matters	 entrusted	 to	 the	Audit	     Report.
Committee and also the routine matters such as overseeing the programme            During	 the	 year,	 eight	 meetings	 of	 the	 Committee	 were	 held	 on
of inspections and compliance of inspection reports so as not to burden            29th	 May	 2007,	 22nd	 June	 2007,	 5th	 July	 2007,	 19th	 July	 2007,	
the	Audit	Committee	with	matters	of	detail.	During	the	year,	12	meetings	          31st	 August	 2007,	 1st	 September	 2007,	 22nd	 January	 2008	 and	
of	 the	 Committee	 were	 held.	 The	 Committee	 meets	 for	 approximately         7th	 March	 2008.	 Mr.	 Anand	 Mahindra	 and	 Mr.	 K.M.	 Gherda	 have	
three hours.                                                                       attended	 all	 the	 eight	 meetings,	 while	 Mr.	 Cyril	 Shroff	 has	 attended
                                                                                   seven	 meetings.	 The	 Committee	 meets	 for	 approximately	 thirty
Investor Relations (Shareholders’/Investor Grievance) Committee                    minutes.
The	Investor	Relations	Committee	of	the	Bank	consists	of	four	members,	
                                                                                   Share Transfer and Routine Transactions (Start) Committee
with	 any	 two	 forming	 the	 quorum.	 Presently	 the	 Committee	 consists	 of	
Mr.	 Pradeep	 Kotak	 (Chairman),	 Mr.	 Uday	 Kotak,	 Mr.	 C.	 Jayaram	 and	        The	 START	 Committee	 of	 the	 Bank	 consists	 of	 three	 members,	 with	 any	
Mr.	Dipak	Gupta.	The	Investor	Relations	Committee	reviews	the	complaints	          two	forming	the	quorum.	The	term	of	reference	of	the	START	Committee	
received from the shareholders and ensures redressal thereof. The                  is as follows:
constitution and composition of the Committee is in accordance with the            (a)   To approve transfer, transmission, transposition, name deletion,
provisions	of	Clause	49	of	the	Listing	Agreement	with	the	Stock	Exchanges	               consolidation	and	splitting	of	share	and	debenture	certificates	of	the	
and	 the	 criteria	 specified	 by	 the	 Reserve	 Bank	 of	 India.	 The	 Company	         Company.
Secretary	acts	as	the	Secretary	and	has	been	appointed	as	the	Compliance	
                                                                                   (b)		 To	issue	duplicate	share/debenture	certificates.
Officer	of	the	Committee.
                                                                                   (c)   To apply for registration of the Company with various authorities
During	the	year,	two	meetings	of	the	Committee	were	held	on	6th	September	
                                                                                         of	 any	 state	 or	 Centre	 including	 sales	 tax	 authorities,	 income	 tax	
2007	and	18th	December	2007.	The	Committee	meets	for	approximately	
                                                                                         authorities,	shops	&	establishment	authorities,	and	to	do	or	perform	
thirty	minutes.	All	the	meetings	were	attended	by	all	the	members	of	the	
                                                                                         all matters relating to such matters.
Committee.
                                                                                   (d)		 To	apply,	in	the	name	of	and	for	the	Company	for	telephone,	telex,	
On monthly basis, the members of the Committee are sent investor grievance
                                                                                         fax	and	other	telecommunication	and	electrical/electronic	connections	
reports	giving	brief	details	of	the	complaints	received	by	the	Bank.	During	
                                                                                         and to do all matters relating to such applications.
the	year	under	review,	119	investor	complaints	were	received.	All	of	these	
have	been	resolved	during	the	year.	As	on	31st	March	2008,	5	instruments	          (e)		 To	 open,	 operate	 and	 close	 Bank	 Accounts	 of	 the	 Company	 and	
of	transfer	of	shares,	comprising	5800	shares	were	pending	and	since	then	               change	 the	 operating	 instructions	 of	 existing	 Bank	Accounts	 of	 the	
the same have been processed. No penalties or strictures were imposed                    Company.
on	the	Bank	by	any	of	the	Stock	Exchanges,	SEBI	or	any	other	statutory	            (f)		 To	 authorise	 persons	 to	 sign	 on	 behalf	 of	 the	 Company	 Share	
authority on any matter related to capital markets, during the last three years.         Certificates,	Share	Allotment	Letters,	Deposit	Receipts.

ESOP/Compensation Committee                                                        (g)		 To	authorise	persons	to	represent	the	Company	at	General	Meetings	
                                                                                         of any company or cooperative society of which the Company is a
The	 ESOP/Compensation	 Committee	 of	 the	 Bank	 comprises	 of	 three	
                                                                                         shareholder/member.
members, with any two forming the quorum. The constitution and
composition of the Committee is in accordance with the guidelines issued           (h)		 To	fix	the	dates	for	Closure	of	the	Company’s	Register	of	Members
by	Reserve	Bank	of	India.	                                                               and	Debenture	holders	and	Transfer	Books	of	Shares	or	Debentures	



                                                                                                                        Kotak Mahindra Bank Limited               55
      and/or	 fixing	 Record	 Dates,	 in	 consultation	 with	 the	 Stock	             Management Committee
      Exchanges.                                                                      The	Management	Committee	of	the	Bank	consists	of	four	members,	with	
(i)		 To	authorise	the	opening	of	Securities	General	Ledger	Account	or	any	           any three forming the quorum. The Committee has been constituted
      other account with any scheduled banks or with any department of                to review all important matters to be placed before the Board; assess
      the	Reserve	Bank	of	India.	                                                     adequacy of policies on an on-going basis; review business operations;
                                                                                      corporate governance; implementation of policies; to establish systems for
(j)		 To	authorise	persons	to	execute	Loan	Agreements,	Demand	Promissory	
                                                                                      facilitating	efficient	operations	and	to	approve	donations.	The	Committee	
      Notes and any other documents as may be necessary for lending out
                                                                                      consists	of	Mr.	Uday	Kotak	(Chairman),	Mr.	C.	Jayaram,	Mr.	Dipak	Gupta	
      of any line of credit sanctioned to the Company.
                                                                                      and	Mr.	Shivaji	Dam.
(k)		 To	authorise	officials	of	the	Company	to	execute	transfer	deeds	on	             During	 the	 year,	 fourteen	 meetings	 of	 the	 Committee	 were	 held
      behalf of the Company.                                                          on	 16th	 April,	 2007,	 3rd	 May	 2007,	 8th	 June	 2007,	 23rd	 July	 2007,	
(l)		 To	authorise	officials	of	the	Company	to	sign	documents	for	registration	       30th	July	2007,	21st	August	2007,	14th	September	2007,	12th	October	
      of motor vehicles and to do all acts and things for the transfer of any         2007,	 23rd	 October	 2007,	 21st December	 2007,	 7th	 January	 2008,
      such motor vehicles.                                                            18th	 January	 2008,	 4th	 March	 2008	 and	 24th	 March	 2008.	 Mr.	 Uday	
                                                                                      Kotak,	Mr.	Dipak	Gupta	and	Mr.	C.	Jayaran	have	attended	all	the	meetings.	
(m)		 To	authorise	employee(s)	or	others	to	execute,	for	and	on	behalf	of	            Mr.	Shivaji	Dam	has	not	attended	any	of	the	meetings.
      the Company, agreements, applications, deeds, documents and any
      other writings in connection with the business of the Company and, if           Committee on Frauds
      required,	to	issue	Power	of	Attorney	in	favour	of	such	persons	for	the	
                                                                                      Pursuant	 to	 the	 directives	 of	 the	 Reserve	 Bank	 of	 India,	 the	 Bank	 has	
      purpose.
                                                                                      constituted	a	Committee	on	Frauds	on	27th	January	2004	for	monitoring	
(n)   To authorise employee(s) or others to represent the Company before              and	reviewing	all	the	frauds	involving	amounts	of	Rs.	1	crore	and	above.	The	
      any	 Court,	 Tribunal,	 Consumer	 Redressal	 Forum	 or	 any	 Statutory	         Committee	consists	of	five	members	viz.,	Mr.	Uday	Kotak,	Mr.	K.	M.	Gherda,	
      or	 other	Authority	 on	 any	 matter	 relating	 to	 the	 operations	 of	 the	   Mr.	Pradeep	N.	Kotak,	Mr.	C.	Jayaram	and	Mr.	Dipak	Gupta	with	any	two	
      Company or with which the Company is in any way connected or                    forming	 the	 quorum.	 During	 the	 year,	 no	 fraud	 of	 an	 amount	 exceeding	
      to	 represent	 the	 Company	 generally	 or	 for	 any	 specific	 purpose	 or	    Rs.	1	crores	was	reported	and	as	a	result,	no	meeting	of	the	Committee	was	
      purposes	and,	if	required,	issue	Power	of	Attorney	in	favour	of	such	           held during the year.
      persons for the purpose.

(o)   To appoint or change nominees to hold shares for and on behalf of               Customer Services Committee
      the	Company	in	any	subsidiary/associate	companies.                              The	 Bank	 has,	 pursuant	 to	 the	 directives	 issued	 by	 the	 Reserve	
                                                                                      Bank	 of	 India,	 constituted	 a	 Customer	 Services	 Committee	 on	 22nd	
(p)   To grant permission and authorise incorporation of companies, with a
                                                                                      September	 2004.	 The	 Committee	 consists	 of	 three	 members	 viz;	
      prefix	“Kotak	Mahindra”	before	the	name.
                                                                                      Mr.	 Pradeep	 Kotak	 (Chairman),	 Mr.	 Uday	 Kotak	 and	 Mr.	 Dipak	 Gupta	
(q)		 To	 authorise	 the	 use	 of	 the	 Common	 Seal	 of	 the	 Company	 and	 to	      The Committee has been constituted to bring about ongoing improvements
      appoint	 persons	 to	 sign/countersign	 documents,	 etc.	 on	 which	 the	       in the quality of customer services provided by the Bank. The Committee
      Common	Seal	is	to	be	affixed.                                                   would	 also	 oversee	 the	 functioning	 of	 the	 Customer	 Service	 Standing	
                                                                                      Committee, compliance with the recommendations of the Committee on
During	the	year,	forty	five	meetings	of	the	Committee	were	held;	Mr.	Uday	
Kotak	attended	forty	three	meetings,	Mr.	C.	Jayaram	attended	thirty	four	             Procedures	and	Performance	Audit	and	Public	Services	(CPPAPS)	and	also	
meetings	and	Mr.	Dipak	Gupta	attended	forty	two	meetings.	The	Committee	              mount innovative measures for enhancing the quality of customer service
meets	for	approximately	thirty	minutes.	                                              and improving the level of customer satisfaction for all categories of cliental,
                                                                                      at all times.
Nomination Committee                                                                  During	the	year,	two	meetings	of	the	Committee	were	held	on	6th	September	
The Nomination Committee of the Bank consists of three members,                       2007	and	18th	December	2007.	All	the	meetings	were	attended	by	all	the	
with	 any	 two	 forming	 the	 quorum.	 Presently,	 the	 Committee	 consists	 of	      members of the Committee.
Mr.	Uday	Kotak	(Chairman),	Mr.	C.	Jayaram	and	Mr.	Dipak	Gupta.	The	terms	
of reference of the Committee include appointment of senior management                Code of Conduct
personnel and making recommendations to the Board for appointment of
                                                                                      The	 Board	 of	 Directors	 of	 the	 Bank	 at	 its	 meeting	 held	 on	 15th	 May	
Directors	or	filling	of	vacancies	on	the	Board.	
                                                                                      2006	 adopted	 the	 Code	 of	 Conduct	 for	 the	 purpose	 of	 Clause	 49	
During	 the	 year,	 two	 meetings	 of	 the	 Committee	 were	 held	 on                 applicable	 to	 Directors	 and	 Senior	 Management	 personnel.	 This	 Code
27th	 April	 2007	 and	 on	 8th	 June	 2007	 and	 all	 Directors	 attended	 the	      of Conduct has been posted on the website of the Bank, i.e.
meetings.                                                                             www.kotak.com.



56        Kotak Mahindra Bank Limited
General Meetings                                                                   General Meetings Day, Date and             Special Resolutions passed
During	 the	 last	 three	 years,	 two	 Extraordinary	 General	 Meetings,	 three	                    Time                      thereat
Annual	 General	 Meetings	 i.e.	 Twenty	 Second,	 Twenty	 First,	 Twentieth	
                                                                                   Twenty	Second	       Thursday,	5th	July	   1.	 Special	 Resolution	 to	
Annual	General	Meetings	of	the	Bank	and	a	Court	Convened	meeting	of	               Annual	General	      2007	at	12	noon       vary/modify	 the	 Kotak	
equity	shareholders	were	all	held	at	Indian	Merchants’	Chamber,	Walchand	          Meeting                                    Mahindra	 Equity	 Option	
Hirachand	Hall,	4th	Floor,	Churchgate,	Mumbai	400	020.                                                                        Plan	 2002-03,	 the	 Kotak	
                                                                                                                              Mahindra	 Equity	 Option	
 General Meetings Day, Date and                Special Resolutions passed
                                                                                                                              Scheme	 2005	 and	 the	
                  Time                         thereat
                                                                                                                              Agreement	 entered	 into	
 Extraordinary	        Tuesday,                1.	 Special	 Resolution	 u/s	                                                  by the Bank with the
 General	Meeting       21st	August,	2007	      81	 (1A)	 of	 the	 Companies	                                                  employees of the Bank and
                       at	4.00	p.m             Act,	 1956	 for	 issue	 and	                                                   its subsidiaries at the time
                                               allotment of equity shares                                                     of grant of options in order
                                               and/or	equity	shares	through	                                                  to enable the Bank and its
                                               depository receipts, in the                                                    subsidiary companies to
                                               course of one or more                                                          recover from the relevant
                                               international or domestic                                                      eligible employees, the fringe
                                               public	 offerings	 and/or	                                                     benefit	 tax	 in	 respect	 of	
                                               private placements basis in                                                    options	 which	 are	 exercised	
                                               domestic	and/or	one	or	more	                                                   by the eligible employee on
                                               international market(s).                                                       or	 after	 the	 1st	 April	 2007	
                                                                                                                              pursuant to the provisions
                                                                                                                              of	 sections	 115WKA	 of	 the	
                                               2.	 Special	 Resolution	 in	                                                   Income	Tax	Act,	1961.
                                               partial	 modification	 of	
                                               the resolution passed by
                                               the shareholders of the                                                        2.	 Special	Resolution	u/s	81	
                                               Bank	 on	 5th	 July	 2007	                                                     (1A)	 of	 the	 Companies	 Act,	
                                               for	 modification	 of	 the	                                                    1956	for	issue	and	allotment	
                                               Employee	 Stock	 Option	                                                       of equity shares to the
                                               Scheme	 of	 the	 Bank	 under	                                                  employees of the Bank under
                                               the name and style of                                                          “Kotak	 Mahindra	 Equity	
                                               “Kotak	 Mahindra	 Equity	                                                      Option	Scheme	2007”.
                                               Option	 Scheme	 2007”	 to	
                                               create, issue and allot upto
                                                                                                                              3.	 Special	 Resolution	 u/s	
                                               2,00,00,000	 (Two	 Crore)	
                                                                                                                              81	 (1A)	 of	 the	 Companies	
                                               equity	shares	of	Rs.	10	each	
                                                                                                                              Act,	 1956	 for	 issue	 and	
                                               to employees of the Bank.
                                                                                                                              allotment of equity shares
                                                                                                                              to the employees of the
                                               3.	 Special	 Resolution	 in	                                                   subsidiaries	 under	 “Kotak	
                                               partial	 modification	 of	                                                     Mahindra	 Equity	 Option	
                                               the resolution passed by                                                       Scheme	2007”
                                               the shareholders of the
                                               Bank	 on	 5th	 July	 2007	
                                               for	 modification	 of	 the	         Court Convened       Tuesday,              Resolution	      with	      the	
                                               Employee	 Stock	 Option	            Meeting	of	Equity	   5th	December	         requisite	 majority	 prescribed	
                                               Scheme	 of	 the	 Bank	 under	       Shareholders	        2006	11:00	a.m.	      under	 Section	 391	 of	 the	
                                               the name and style of                                                          Companies	 Act,	 1956	 for	
                                               “Kotak	 Mahindra	 Equity	                                                      approving the arrangement
                                               Option	 Scheme	 2007”	 to	                                                     embodied	 in	 the	 Scheme	 of	
                                               create, issue and allot upto                                                   Arrangement	between	Kotak	
                                               2,00,00,000	 (Two	 Crore)	                                                     Mahindra	 Capital	 Company	
                                               equity	 shares	 of	 Rs.	 10	                                                   Limited,	 the	 Bank	 and	 their	
                                               each to employees of the                                                       respective shareholders and
                                               subsidiaries of the Bank.                                                      creditors.




                                                                                                                   Kotak Mahindra Bank Limited              57
 General Meetings Day, Date and                   Special Resolutions passed             •	    During	 the	 last	 three	 years,	 there	 were	 no	 penalties	 or	 strictures	
                  Time                            thereat                                      imposed	on	the	Bank	by	the	Stock	Exchange(s)	and/or	SEBI	and/or	
                                                                                               any other statutory authorities on matters relating to capital market.
 Twenty	First	          Thursday,	20th July,	 Special	 Resolution	 u/s	 309	
 Annual	General	        2006	12:00	noon       (4)	 of	 the	 Companies	 Act,	             Shareholders’ Information
 Meeting	                                     1956	 and	 u/s	 35-B	 of	 the	
                                              Banking	 Regulation	 Act,	                 Date	of	Incorporation	 :	 21st	November	1985.
                                              1949	 for	 appointment	 of	                Registration	No.		       :			11-38137	TA
                                              Dr.	 Shankar	 Acharya	 as	
                                              part-time Chairman of the                  Corporate
                                              Bank for three years on terms              Identification	No.		     :	 L65110MH1985PLC038137
                                              of	 remuneration	 to	 be	 fixed	
                                                                                         Address	for	Correspondence:
                                              by	the	Board	of	Directors	of	
                                                                                         Registered	Office	   :	 36-38A,	Nariman	Bhavan,	227,	Nariman	Point,	
                                              the Bank.
                                                                                                                 Mumbai-	400	021.	
 Extraordinary	         Thursday,          Special	 Resolution	 u/s	 81	                                         Tel.	No.	(022)	66581100
 General	Meeting        27th	October	2005	 (1A)	 of	 the	 Companies	 Act,	
                                                                                                                 Fax	No.	:	(022)	22855577
                        12:00	noon         1956	for	issue	and	allotment	
                                                                                                                 Website	:	www.kotak.com
                                           of	equity	shares	and/or	equity	
                                           shares through depository                     Contact																					 :		 Ms.	Bina	Chandarana,	Company	Secretary
                                           receipts, in the course of
                                           one or more international                     Registrars	&	Share	      :	 Karvy	 Computershare	 Private	 Limited	 (earlier
                                           or domestic public offerings                  Transfer	Agents	         	 Karvy	Consultants	Limited)
                                           and/or	 private	 placements	                  	                        	 (i)	 Karvy	House,	46,	Avenue	4,	Street	No.	1,	
                                           basis	 in	 domestic	 and/or	                                                  Banjara	Hills,	Hyderabad-500	034
                                           one or more international
                                                                                                                         Tel	Nos.	:		(040)	23420815/816/817
                                           market(s).
                                                                                                                         Fax	No.	:			(040)	23420814
 Twentieth	Annual	      Tuesday,	26th	July	       1.	 Special	Resolution	u/s	81	
 General	Meeting        2005	12:00	noon           (1A)	 of	 the	 Companies	 Act,	        	                        	 (ii)	 7,	Andheri	Industrial	Estate,	Off	Veera	Desai	
                                                  1956	for	issue	and	allotment	                                           Road,	Andheri	(West),	Mumbai-400	058.
                                                  of equity shares to the                                                 Tel	Nos.	:		(022)	2636	7226/2636	9044		
                                                  employees of the Bank under                                             Fax	No.	:	(022)	26310882	
                                                  “Kotak	 Mahindra	 Equity	                                               Website	:	www.karvycomputershare.com
                                                  Option	Scheme	2005”.
                                                  2.	 Special	Resolution	u/s	81	         Annual General Meeting
                                                  (1A)	 of	 the	 Companies	 Act,	        Date	and	Time	           :	 Monday,	28th	July	2008	at	11.30	a.m.
                                                  1956	for	issue	and	allotment	
                                                  of equity shares to the                Venue	                   :	 Indian	 Merchants’	 Chamber,	Walchnd	 Hirachand	
                                                  employees of the subsidiaries                                      Hall,	4th	Floor,	Churchgate,	Mumbai	-	400	020.	
                                                  of	 the	 Bank	 under	 “Kotak	
                                                                                         Date	of	Book	Closure	 :		 16th	 July	 2008	 to	 28th	 July	 2008	 (both	 days	
                                                  Mahindra	 Equity	 Option	
                                                  Scheme	2005”.                                                    inclusive) for payment of dividend.
                                                                                         Dividend	Payment	        :		 On	or	after	Tuesday,	29th	July	2008.
No	resolutions	were	passed	through	postal	ballot	during	the	last	financial	
                                                                                         Date
year.
Disclosures                                                                              Investor Relations
•	   The	Bank	has	not	entered	into	any	material	financial	or	commercial	                 The Bank publishes consolidated results on a quarterly basis. The same are
     transactions	with	the	Directors	or	the	Management	or	their	relatives	               also	 reviewed	 by	 the	Audit	 Committee	 before	 submission	 to	 the	 Board.	
     or	the	companies	and	firms	etc.,	in	which	they	are	either	directly	or	              The	 consolidated	 financial	 results	 of	 the	 Banks	 and	 its	 subsidiaries	 are	
     through	 their	 relatives	 interested	 as	 Directors	 and/or	 Partners.	 The	       prepared	and	posted	on	the	Website	of	the	Bank	for	the	current	as	well	as	
     Bank	consults	the	firm	in	which	one	of	the	Bank’s	director	is	a	partner	            last	five	financial	years.	Also	the	quarterly	results	and	an	earnings	update	
     from	 time	 to	 time	 and	 bills	 are	 raised	 by	 the	 firm	 on	 the	 Bank	 for	   is	 also	 posted	 on	 the	 website	 of	 the	 Bank.	 Every	 quarter,	 the	 Executive	
     professional services. The Bank has not entered into any material                   Vice-Chairman	 and	 Managing	 Director	 and	 the	 Executive	 Director(s)	
     financial	 or	 commercial	 transactions	 with	 its	 subsidiaries	 and	 other	       participate	 on	 a	 call	 with	 the	 analysts/shareholders,	 the	 transcripts	 of	
     related	parties	as	per	AS-18	that	may	have	potential	conflict	with	the	             which are posted on the website of the Bank. The Bank also has dedicated
     interest of the Bank at large.                                                      personnel to respond to queries from investors.



58       Kotak Mahindra Bank Limited
Financial Calendar:	 For	 each	 calendar	 quarter,	 the	 financial	 results	 are	   for	dematerialisation	with	the	National	Securities	Depository	Limited	with	
reviewed and taken on record by the Board around the last week of the               effect	from	4th	August	1998	and	with	the	Central	Depository	Services	(India)	
month subsequent to the quarter ending. The audited annual accounts as at           Limited	 with	 effect	 from	 26th	 February	 1999	 vide	 ISIN	 INE237A01010.
31st	March	are	approved	by	the	Board,	after	a	review	thereof	by	the	Audit	
Committee.	The	Annual	General	Meeting	to	consider	such	annual	accounts	             Share Transfer System:	 Applications	 for	 transfers,	 transmission	 and	
is	held	in	the	second	quarter	of	the	financial	year.	                               transposition	 are	 received	 by	 the	 Bank	 at	 its	 Registered	 Office	 or	 at	 the	
                                                                                    office(s)	of	its	Registrars	&	Share	Transfer	Agents.	As	the	shares	of	the	Bank	
Stock Exchanges on which listed:                                                    are	in	dematerialised	form,	the	transfers	are	duly	processed	by	NSDL/CDSL	in	
                                                                                    electronic	form	through	the	respective	depository	participants.	Shares	which	
 Sr.     Name & Address of Stock Exchange                  Market Scrip             are	in	physical	form	are	processed	by	the	Registrars	&	Share	Transfer	Agents	
 No.                                                       Code                     on	a	regular	basis	and	the	certificates	despatched	directly	to	the	investors.

                                                                                    Investor Helpdesk:	 Share	 transfers,	 dividend	 payments	 and	 all	 other	
 1.      The	Bombay	Stock	Exchange	Limited                 500247                   investor	 related	 activities	 are	 attended	 to	 and	 processed	 at	 the	 office	 of	
         Phiroze	Jeejeebhoy	Towers
                                                                                    our	 Registrars	 &	 Share	Transfer	Agents.	 For	 lodgement	 of	Transfer	 Deeds	
         Dalal	Street,	Fort,	Mumbai	400	023
                                                                                    and	any	other	documents	or	for	any	grievances/complaints,	kindly	contact	
                                                                                    Karvy	Computershare	Private	Limited,	contact	details	of	which	are	provided	
 2.      National	Stock	Exchange	of	India	Limited          KOTAKBANK                elsewhere	in	the	Report.
         Exchange	Plaza,	5th	Floor,	Bandra-Kurla	
         Complex,	Bandra,	Mumbai	400	051                                            For	 the	 convenience	 of	 the	 investors,	 transfers	 and	 complaints	 from	 the	
                                                                                    investors	are	accepted	at	the	Registered	Office	between	9:30	a.m.	to	5:30	
 3.      Luxembourg	Stock	Exchange                         US50071Q2003             p.m.	from	Monday	to	Friday	except	on	bank	holidays:
         BP	165,	L-2011
                                                                                    As	advised	by	Securities	and	Exchange	Board	of	India	(“SEBI”)	the	Bank	has	
         Luxembourg
                                                                                    designated	email-	id	of	its	Compliance	Officer	i.e.	bina.chandarana@kotak.
                                                                                    com for the purpose of registering complaints by the investors. The same
The	annual	fees	for	2008-09	have	been	paid	to	the	Bombay	Stock	Exchange	            has also been displayed on the website of the Bank.
Limited	and	the	National	Stock	Exchange	of	India	Limited,	where	the	shares	
of	the	Bank	are	listed.	Also	maintenance	charges	are	being	paid	periodically	       Transfer to Investor Education and Protection Fund:	Pursuant	to	Section	
to	Luxembourg	Stock	Exchange.                                                       205C	of	the	Companies	Act,	1956,	dividends	that	are	unclaimed	for	a	period	
                                                                                    of	 seven	 years	 get	 transferred	 to	 the	 Investor	 Education	 and	 Protection	
Trading of shares to be in compulsorily dematerialized form:	The	Securities	        Fund	administered	by	the	Central	Government.	The	table	given	below	gives	
and	Exchange	Board	of	India	has	included	the	equity	shares	of	the	Bank	in	          the	 dates	 of	 dividend	 declaration	 since	 2000-01	 and	 the	 corresponding	
the	list	of	shares	in	which	trading	is	compulsorily	in	dematerialized	form,	from	   dates when unclaimed dividends are due to be transferred to the Central
29th	November	1999.	The	equity	shares	of	the	Bank	have	been	activated	              Government.


  Year                                     Dividend-Type                            Date of Declaration                        Due Date of Transfer

  2000-01                                  Final	                                   3rd	August	2001                            3rd	September	2008

  2001-02                                  Special	Interim	                         28th	January	2002                          10th	March	2009

  2001-02                                  Final	                                   26th	September	2002                        26th	October	2009

  2002-03                                  Final	                                   31st	July	2003                             1st	August	2010

  2003-04                                  Final                                    26th	July	2004                             27th	August	2011

  2004-05                                  Final                                    26th	July	2005                             27th	August	2012

  2005-06                                  Final                                    20th July	2006                             19th	August	2013

  2006-07                                  Final                                    5th	July	2007                              4th August	2014




                                                                                                                          Kotak Mahindra Bank Limited                 59
Share Price Details
The Monthly high and low quotation of shares traded on BSE:               The Monthly high and low quotation of shares traded on NSE:

                                                                          Month                High      Low      Close S&p & Cnx         Bank
Month                    High      Low      Close Bse Sensex    Bankex
                                                                                               (Rs.)     (Rs.)     (Rs.)     Nifty        Nifty
                         (Rs.)     (Rs.)     (Rs.)    (Close)   (Close)
                                                                                                                           (Close)      (Close)

April	2007             547.75    445.00    544.05   13872.37 6882.89      April	2007         547.00    441.90    543.50    4087.90 5621.00

May	2007               628.50    509.60    572.65   14544.46 7607.35      May	2007           629.00    518.00    572.30    4295.80 6324.50

June	2007              677.00    550.00    672.50   14650.51 8009.94      June	2007          678.00    550.00    673.05    4318.30 6740.10

July	2007              750.00    635.00    740.90   15550.99 8148.68      July	2007          754.90    593.00    740.70    4528.85 6928.45

August	2007            816.00    611.05    706.90   15318.60 7858.79      August	2007        815.00    612.35    706.85    4464.00 6675.85

September	2007         936.00    697.40    921.65   17291.10 9469.26      September	2007     938.00    651.65    922.20    5021.35 8042.20

October	2007          1074.00    796.20 1000.00     19837.99 10655.33     October	2007      1067.90    801.00 1000.85      5900.65 9013.15

November	2007 1245.00 	910.00 1234.30               19363.19 10870.88     November	2007 1248.00        895.00 1233.50      5762.75 9375.75

December	2007         1334.80 1085.00 1296.20       20286.99 11418.00     December	2007     1399.00 1090.00 1296.60        6138.60 9863.45

January	2008          1435.55    799.95 1032.80     17648.71 10713.91     January	2008      1438.00    800.00 1028.60      5137.45 9226.25

February	2008         1047.00    765.00    801.35   17578.72 10113.73     February	2008     1047.00    763.00    802.10    5223.50 8688.35

March	2008             800.00    536.55    628.55   15644.44 7717.61      March	2008         792.00    537.00    625.90    4734.50 6655.00




60       Kotak Mahindra Bank Limited
Share Holding:
Shareholding Pattern:

                                                                                  As on 31st March 2008                   As on 31st March 2007
 Category                                                                      No. of Shares       Percentage of        No. of Shares      Percentage of
                                                                                        Held              Shares                 Held             Shares
 A.     Promoters Holding
        Promoters                                                              18,11,40,319                52.55        18,13,04,442                55.59
        Sub-Total                                                              18,11,40,319                52.55        18,13,04,442                55.59
 B.     Non-Promoters Holding
        1.	 Institutional	Investors
        	   a.	 Mutual	Funds	&	UTI                                               14,182,365                 4.12         1,38,14,183                 4.24
        	   b.	 Banks,	Financial	Institutions,	Insurance	Companies		
        	   	 (State/Central	Govt.	Institutions)                                  22,46,672                 0.65            5,40,427                 0.16
        	   c.	 Foreign	Institutional	Investors                                 8,75,54,429                25.40         7,31,54,886                22.43
        Sub-Total                                                              10,39,83,466                30.17         8,75,09,496                26.83
 C.     Others
        a.	 Private	Corporate	Bodies                                              76,07,664                 2.21           41,99,692                 1.29
        b.	 Indian	Public	including	Directors	&	Relatives                       4,42,77,898                12.85         4,40,82,937                13.51
        c.	 NRIs/OCBs/Foreign	Bodies                                              47,00,751                 1.37           45,06,974                 1.38
        d.	 Global	Depository	Shares	(GDS)                                        25,63,223                 0.74           37,08,523                 1.14
        e.		 Foreign	Bodies	DR                                                     2,83,610                 0.08            5,91,259                 0.18
        f.	 Clearing	Members                                                       1,15,911                 0.03            2,52,385                 0.08
        Sub-Total                                                               5,95,49,057                17.28         5,73,41,770                17.58
        Grand Total                                                            34,46,72,842               100.00        32,61,55,708              100.00

The	increase	in	capital	is	due	to	allotment	of	15,17,134	equity	shares	of	Rs.	10/-	each	under	various	ESOP	Schemes	of	the	Bank	and	allotment	of	1,70,00,000	
equity	shares	to	Qualified	Institutional	Buyers	during	the	financial	year	2007-08.

Shareholding of Directors of the Bank:

                                                                                                                   As on 31st March 2008
 Name of the Director
                                                                                                         No. of Shares Held         Percentage of Shares
 Dr.	Shankar	Acharya,	Independent	Non-Executive	Part	time	Chairman                                                        —                            —
 Mr.	Uday	Kotak,	Executive	Vice	Chairman	and	Managing	Director                                                15,31,31,775                          44.43
 Mr.	K.	M.	Gherda,	Independent	Non-Executive	Director                                                                 10,000                         0.00
 Mr.	Anand	Mahindra,	Non-Executive	Promoter	Director                                                                6,10,590                         0.18
 Mr.	Cyril	Shroff,	Independent	Non-Executive	Director                                                               8,76,875                         0.25
 Mr.	Pradeep	N.	Kotak,	Independent	Non-Executive	Director                                                           4,94,050                         0.14
 Mr.	Shivaji	Dam,	Independent	Non-Executive	Director                                                                2,56,542                         0.07
 Mr.	C.	Jayaram,	Executive	Director                                                                                 2,99,750                         0.09
 Mr.	Dipak	Gupta,	Executive	Director                                                                                2,77,000                         0.08

Note:
Mr.	Asim	Ghosh,	appointed	as	an	Additional	Director	of	the	Bank	with	effect	from	9th	May	2008	does	not	hold	any	equity	Shares	whether	directly	or	on	
beneficial	basis	in	the	Bank.



                                                                                                                   Kotak Mahindra Bank Limited          61
List of Top 10 Shareholders of Kotak Mahindra Bank Limited as on 31st March 2008:
                                                  List of Top Ten Share Holders as on 31st March 2008
                                                                                  Total No. of Shares 344672842
 Sr.   Name of the investor                                                   Total shares held            % holding Categories
 No.
 1.    Uday	Suresh	Kotak                                                              153131775                  44.43 Indian	Promoter
 2.    Melany	Holdings	Limited                                                         14946659                   4.34 FII
 3.    Madison	Holding	Ltd.                                                            14946659                   4.34 FII
 4.    Kotak	Trustee	Company	Pvt.	Ltd.	
       (Beneficial	Owner	Mr.	Uday	S.	Kotak)                                            13448530                   3.90 Indian	Promoter's	Co.
 5.    Anuradha	Mahindra                                                                8619550                   2.50 Indian	Promoter
 6.    ING	Bank	N	V	Singapore	Branch                                                    8597328                   2.49 FII
 7.    Small	Cap	World	Fund	Inc.                                                        5493262                   1.59 FII
 8.    J.	P.	Morgan	Fleming	Asset	Management	(Europe)	S.A.R.L.
       A/c	Flagship	Indian	Investment	Company	(Mauritius)	Limited                       4893281                   1.42 FII
 9.    Avion	Aerosols	Pvt.	Ltd.                                                         3813275                   1.11 Indian	Promoter's	Co.
 10.   Europacific	Growth	Fund                                                          3550000                   1.03 FII
Note:	Melany	Holdings	Limited	and	Madison	Holding	Ltd.	are	the	registered	sub-accounts	of	M/s.	Warburg	Pincus	International	LLC,	which	is	a	Foreign	
Institutional	Investor	registered	as	such	with	Securities	and	Exchange	Board	of	India.
Distribution Schedule as on 31st March, 2008                                  The Bank has complied with all the mandatory and some of the non
                                                                              mandatory requirements of the Code of Corporate Governance stipulated
 Sr.       Category          No. of      % of           No. of      % of
 No.     From      To       Holders    Holders         Shares     Shares      under	Clause	49	of	the	Listing	Agreement	with	the	Stock	Exchanges.

 1.    	 	 	 1	-		 	 100      62061      67.29      1981592        0.57       Compliance with Non-mandatory Requirements:
 2.    	 	 101	-		 	 200       6346       6.88      1032003        0.30       (1)	 The Board
 3.    	 	 201	-		 	 300       3815       4.14      1004200        0.29       	      The	 office	 of	 non-executive	 Chairman	 of	 the	 Bank	 as	 well	 as	 that	
 4.    	 	 301	-		 	 400       1936       2.10       722994        0.21              of	the	chairman	of	the	Audit	Committee	is	maintained	by	the	Bank	
 5.    	 	 401	-		 	 500       3858       4.18      1899531        0.55              at	its	expenses	and	all	the	expenses	incurred	in	performance	of	his	
 6.    	 	 501	-		 1000        7735       8.39      6719658        1.95              duties	are	reimbursed	by	the	Bank.	Pursuant	to	Section	10(2A)	of	the	
                                                                                     Banking	Regulation	Act,	1949	all	Directors	other	than	its	Chairman	
 7.    	 1001	-		 2000         4022       4.36      5922473        1.72
                                                                                     and/or	 Whole-time	 Directors	 cannot	 hold	 office	 continuously	 for	 a	
 8.    	 2001	-		 3000         1036       1.12      2615746        0.76
                                                                                     period	exceeding	eight	years.	
 9.    	 3001	-		 4000          273       0.30       963057        0.28
                                                                              (2)	 Remuneration Committee
 10.   	 4001	-		 5000          195       0.21       910478        0.26
                                                                              	      The	Bank	has	set	up	ESOP/Compensation	Committee	of	Directors	to	
 11.   	 5001	-	10000           324       0.35      2322944        0.67
                                                                                     recommend/review	 overall	 compensation	 structure	 and	 policies	 of	
 12.   10001	&	ABOVE            626       0.68    318578166       92.43
                                                                                     the	Bank.	Details	of	the	said	Committee	have	already	been	provided	
       Total                  92227     100.00    344672842      100.00              hereinabove.
Shares	held	in	physical	and	electronic	mode	by	the	promoters	and	others	as	   (3)	 Shareholders’ Rights
on	31st	March,	2008	are	given	in	the	below	mentioned	table:                          The quarterly results of the Bank are published in one English and
                       Physical mode               Electronic mode                   one	 Marathi	 newspaper,	 having	 wide	 circulation	 in	 Maharashtra.	
 Category           Total Shares     % to        Total Shares      % to              Further,	the	quarterly	results	are	also	posted	on	the	website	of	the	
                                    Equity                       Equity              Bank	 –	 www.kotak.com.	Along	 with	 the	 quarterly	 results,	 detailed	
 Promoters	          167479296 48.59%              13661023      3.96%               earnings	updates	are	also	given	on	the	website	of	the	Bank.	Further,	
 Others                5332656     1.55%          158199867 45.90%                   the	 quarterly	 investors’/analysts’	 conference	 call	 is	 made	 to	 discuss	
                                                                                     the	 financial	 results	 and	 performance	 of	 the	 Bank	 and	 the	 Group.	
 Total               172811952 50.14%             171860890 49.86%
                                                                                     The results are also available on www.sebiedifar.nic.in. In view of
The	Bank	has	25,63,223	GDS	outstanding	which	constituted	0.74%	of	the	               the foregoing, the half-yearly results of the Bank are not sent to the
Bank’s	equity	capital	as	at	March	31,	2008.                                          shareholders individually.



62       Kotak Mahindra Bank Limited
(4)   Audit qualifications                                                                  results	are	promptly	forwarded	to	the	stock	exchanges	and	published	
	     During	 the	 period	 under	 review,	 there	 were	 no	 audit	 qualifications	          in	 Business	 Standard	 in	 English	 and	 Sakal,	 Mumbai	 in	 Marathi	
      in	the	Bank’s	financial	statements.	The	Bank	continues	to	adopt	best	                 (Regional	Language),	within	48	hours	of	the	conclusion	of	the	Board	
      accounting	practices	and	has	complied	with	the	Accounting	Standards	                  Meeting.	The	results	as	well	as	other	press	releases	are	simultaneously	
      and there is no difference in the treatment.                                          displayed on the Bank’s website www.kotak.com. The website also
                                                                                            displays	all	official	news	releases	by	the	Bank	from	time	to	time	as	
(5)   Mechanism for evaluating non-executive Board Members                                  also	the	Earnings	Updates	and	presentations	made	to	investors	and	
      The Bank has constituted the Nomimation Committee which                               analysts. In addition to this, the quarterly results and earnings update
      evaluates every year whether the members of the Board adhere to                       are also prepared and posted on the website of the Bank. The Bank
      the	‘fit	and	proper’	criteria	as	prescribed	by	the	Reserve	Bank	of	India.	            also	publishes	its	Balance	Sheet	and	Profit	and	Loss	Account	together	
      The	 adherence	 to	 the	‘fit	 &	 proper’	 criteria	 by	 the	 members	 of	 the	        with	 the	Auditors’	 Report	 in	 a	 newspaper	 as	 required	 in	 terms	 of	
      Nomination	Committee,	i.e.	the	Executive	Directors	is	evaluated	by	the	               Section	31	of	the	Banking	Regulation	Act,	1949	and	Rule	15	of	the	
      Board	of	Directors.                                                                   Banking	Regulation	(Companies)	Rules,	1949.

(6)	 Whistle Blower Policy                                                             	    The	Bank	has	also	posted	information	relating	to	its	financial	results	
	     The	Bank	has	adopted	the	Whistle	Blower	Policy	pursuant	to	which	                     and	 shareholding	 pattern	 on	 Corporate	 Filing	 and	 Dissemination	
      employees of the Bank can raise their concerns relating to the fraud,                 System	(Corp	filing)	at	www.corpfiling.co.in
      malpractice or any other untoward activity or event which is against             Declaration
      the	interest	of	the	Bank	or	society	as	a	whole.The	Bank	hereby	affirms	
                                                                                       In	 accordance	 with	 Clause	 49	 of	 the	 Listing	Agreement	 with	 the	 Stock	
      that no personnel has been denied access to the audit Committee.
                                                                                       Exchanges,	 I	 hereby	 confirm	 that,	 all	 the	 Directors	 and	 the	 Senior	
Other Disclosures                                                                      Management	personnel	of	the	Bank	have	affirmed	compliance	to	the	Code	
                                                                                       of	Conduct	for	the	financial	year	ended	March	31,	2008.
(A)	 The Management Discussion & Analysis Report
	     The	Management	Discussion	&	Analysis	Report,	giving	an	overview	
      of	 the	 industry,	 the	 Bank’s	 business	 and	 its	 financials	 is	 provided	   For Kotak Mahindra Bank Limited
      separately	as	a	part	of	this	Annual	Report.	

(B) Means of Communication                                                             Uday Kotak
                                                                                       Executive	Vice	Chairman	and	Managing	Director
	     The	Board	of	Directors	of	the	Bank	approves	the	unaudited	financial	
      results on a quarterly basis within one month of the quarter and the             Dated	9th	May,	2008




                                                                                                                          Kotak Mahindra Bank Limited              63
Auditors’ Certificate
To the Members of KOTAK MAHINDRA BANK LIMITED                                    conditions of corporate governance as stipulated in the above mentioned
                                                                                 Listing	Agreement.
We	have	examined	the	compliance	of	conditions	of	corporate	governance	
by KOTAK MAHINDRA BANK LIMITED (‘the Bank’), for the year ended on               We	 further	 state	 that	 such	 compliance	 is	 neither	 an	 assurance	 as	 to	 the	
March	31,	2008,	as	stipulated	in	clause	49	of	the	Listing	Agreement	of	the	      future	viability	of	the	Bank	nor	the	efficiency	or	effectiveness	with	which	
said	Bank	with	stock	exchanges.                                                  the management has conducted the affairs of the Bank.
The compliance of the conditions of corporate governance is the responsibility
of	 the	 management.	 Our	 examination	 was	 limited	 to	 procedures	 and	                                                                For S. R. Batliboi & Co.
implementation thereof, adopted by the Bank for ensuring compliance                                                                       Chartered	Accountants
of the conditions of corporate governance. It is neither an audit nor an
                                                                                                                                           per Viren H. Mehta
expression	of	opinion	on	the	financial	statements	of	the	Bank.
                                                                                                                                                     a	Partner
In our opinion and to the best of our information and according to the                                                                  Membership	No.	048749	
explanations	given	to	us,	we	certify	that	the	Bank	has	complied	with	the	        Mumbai,	21st	May,	2008




64       Kotak Mahindra Bank Limited
Auditors’ Report

To The Members of Kotak Mahindra Bank Limited                                      (d)   The balance sheet, profit and loss account and cash flow
                                                                                         statement dealt with by this report are in agreement with the
1.   We have audited the attached balance sheet of KoTaK Mahindra
                                                                                         books of account;
     BanK LiMiTed (‘the Bank’) as at March 31, 2008 and also the profit
     and loss account and cash flow statement for the year ended on that           (e)   In our opinion, the balance sheet, profit and loss account and
     date annexed thereto. These financial statements are the responsibility             cash flow statement dealt with by this report comply with
     of the Bank’s management. Our responsibility is to express an opinion               the accounting standards referred to in sub-section (3C) of
     on these financial statements based on our audit.                                   Section 211 of the Companies Act, read with the guidelines
                                                                                         issued by Reserve Bank of India insofar as they apply to the Bank;
2.   We conducted our audit in accordance with auditing standards
     generally accepted in India. Those Standards require that we plan             (f)   On the basis of written representations received from the
     and perform the audit to obtain reasonable assurance about whether                  directors, as on March 31, 2008, and taken on record by the
     the financial statements are free of material misstatement. An                      Board of Directors, we report that none of the directors are
     audit includes examining, on a test basis, evidence supporting the                  disqualified from being appointed as a director in terms of clause
     amounts and disclosures in the financial statements. An audit also                  (g) of sub-section (1) of Section 274 of the Companies Act;
     includes assessing the accounting principles used and significant             (g)   In our opinion and to the best of our information and according
     estimates made by management, as well as evaluating the overall                     to the explanations given to us, the said accounts give the
     financial statement presentation. We believe that our audit provides a              information required by the Companies Act in the manner so
     reasonable basis for our opinion.                                                   required for banking companies, and give a true and fair view in
                                                                                         conformity with the accounting principles generally accepted in
3.   The balance sheet and profit and loss account are drawn up in
                                                                                         India;
     conformity with Forms A and B (revised) of the Third Schedule to
     the Banking Regulation Act, 1949, read with Section 211 of the                      (i)    in case of the balance sheet, of the state of the affairs of
     Companies Act, 1956 (‘the Companies Act’).                                                 the Bank as at March 31, 2008;

4.   We report that:                                                                     (ii)   in case of the profit and loss account, of the profit for the
                                                                                                year ended on that date; and
     (a)   We have obtained all the information and explanations, which
           to the best of our knowledge and belief were necessary for the                (iii) in case of cash flow statement, of the cash flows for the
           purposes of our audit and have found them to be satisfactory;                       year ended on that date.

     (b)   In our opinion, the transactions of the Bank which have come to                                                          For S. r. Batliboi & Co.
           our notice have been within its powers;                                                                                  Chartered Accountants

     (c)   In our opinion, proper books of account as required by law have                                                            per Viren h. Mehta
           been kept by the Bank so far as appears from our examination                                                                         a Partner
           of those books and proper returns adequate for the purposes of                                                        (Membership No. 048749)
           our audit have been received from branches not visited by us;       Mumbai, 9th May, 2008




                                                                                                                  Kotak Mahindra Bank Limited             65
Balance Sheet as at 31st March, 2008

                                                                                                         As at                      As at
                                                                                             31st March, 2008           31st March, 2007
                                                                         Schedule             Rupees in lakhs             Rupees in lakhs
Capital and Liabilities
     Capital                                                                1                           34,467.28              32,615.57

     Reserves and Surplus                                                   2                      319,082.20                 130,734.27

     Employees’ Stock Options (Grants) Outstanding                                                       5,821.40                 2,842.64

     Deposits                                                               3                    1,642,364.56               1,100,009.14

     Borrowings                                                             4                      511,925.32                 509,975.20

     Other Liabilities and Provisions                                       5                      317,575.39                 215,365.09

           Total                                                                                 2,831,236.15               1,991,541.91




Assets
     Cash and Balances with Reserve Bank of India                           6                      171,028.76                  75,121.59

     Balances with Banks and Money at Call and Short Notice                 7                           43,917.90              54,474.96

     Investments                                                            8                      914,198.85                 686,196.48

     Advances                                                               9                    1,555,222.32               1,092,406.94

     Fixed Assets                                                           10                          21,024.87              14,108.71

     Other Assets                                                           11                     125,843.45                  69,233.23

           Total                                                                                 2,831,236.15               1,991,541.91

     Contingent Liabilities                                                 12                  12,162,757.62              10,065,470.36

     Bills for Collection                                                                               29,088.37              21,944.14



Significant Accounting Policies and Notes to the Financial Statements    17 & 18


As per our report of even date.                                         For and on behalf of the Board of Directors


For S. R. Batliboi & Co.                                                Dr. Shankar Acharya                   Uday Kotak
Chartered Accountants                                                   Chairman                              Executive Vice Chairman &
                                                                                                              Managing Director
per Viren Mehta                                                         Dipak Gupta
a Partner                                                               Executive Director
(Membership No. 048749)
                                                                        Jaimin Bhatt                          Bina Chandarana
Mumbai, 9th May, 2008                                                   Group Chief Financial Officer         Company Secretary



66       Kotak Mahindra Bank Limited
Profit and Loss Account for the Year Ended 31st March, 2008

                                                                                                               Year ended                 Year ended
                                                                                                         31st March, 2008           31st March, 2007
                                                                                     Schedule             Rupees in lakhs             Rupees in lakhs
I.     Income
       Interest earned                                                                  13                     253,536.43                 131,910.42
       Other Income                                                                     14                      46,346.33                  31,865.44
           Total                                                                                               299,882.76                 163,775.86

II.    Expenditure
       Interest expended                                                                15                     130,956.34                  69,923.97
       Operating expenses                                                               16                     101,937.38                  61,270.73
       Provisions and Contingencies [includes tax provision of Rs.10,384.77 lakhs
       (previous year Rs. 6,188 lakhs)] [Refer Note 13 -schedule 18 A]                                          37,595.76                  18,444.64
           Total                                                                                               270,489.48                 149,639.34

III.   Profit
       Net Profit for the year                                                                                      29,393.28              14,136.52
       Add: Surplus brought forward from previous year                                                              35,418.28              28,636.25
       Add: Transfer from Kotak Mahindra Capital Company Limited on demerger                                               —               21,676.06
          Total                                                                                                     64,811.56              64,448.83

IV.    Appropriations
       Transfer from Kotak Mahindra Capital Company Limited                                                               —                21,676.06
       on demerger appropriated to General Reserve
       Transfer to Statutory Reserve                                                                                 7,350.00               3,550.00
       Transfer to General Reserve                                                                                   1,470.00                 725.00
       Transfer to Capital Reserve                                                                                     148.00                 405.00
       Proposed Dividend                                                                                             2,586.99               2,286.06
       Corporate Dividend Tax                                                                                          439.66                 388.43
       Balance carried over to Balance Sheet                                                                        52,816.91              35,418.28
           Total                                                                                                    64,811.56              64,448.83

V.     Earnings Per Share (Face value of Rs. 10/-)
       Basic (Refer Note 2 - Schedule 18 B)                                                                              8.78                    4.36
       Diluted (Refer Note 2 - Schedule 18 B)                                                                            8.65                    4.33


Significant Accounting Policies and Notes to the Financial Statements                17 & 18


As per our report of even date.                                                     For and on behalf of the Board of Directors


For S. R. Batliboi & Co.                                                            Dr. Shankar Acharya                   Uday Kotak
Chartered Accountants                                                               Chairman                              Executive Vice Chairman &
                                                                                                                          Managing Director
per Viren Mehta                                                                     Dipak Gupta
a Partner                                                                           Executive Director
(Membership No. 048749)
                                                                                    Jaimin Bhatt                          Bina Chandarana
Mumbai, 9th May, 2008                                                               Group Chief Financial Officer         Company Secretary



                                                                                                              Kotak Mahindra Bank Limited             67
Cash Flow Statement for the Year Ended 31st March, 2008

                                                                             Year ended         Year ended
                                                                       31st March, 2008   31st March, 2007
                                                                        Rupees in lakhs     Rupees in lakhs

CASH FLOW FROM OPERATING ACTIVITIES
     Profit after Tax                                                        29,393.28          14,136.52
     Add: Provision for Income Tax & FBT                                     10,379.77            6,187.00
     Net Profit Before Taxes                                                 39,773.05          20,323.52

     Adjustments for :
        Employee Stock Options Grants                                         2,129.70              978.84
        Depreciation on bank property                                         5,085.54            3,473.94
        Diminution in the value of Investments written back                     (48.45)            (53.17)
        Dividend from Subsidiaries/Joint Ventures                            (1,199.99)              (4.50)
        Premium on amortization of HTM Investments                            4,142.52            3,499.72
        Loss on revaluation of Investments (net)                              5,826.28              892.70
        Interest on Subordinated Debt                                         5,967.71            2,388.17
        Provision for Non Performing Assets, Standard Assets &
        other provisions                                                     27,259.43          12,309.81
        Wealth Tax                                                                5.00                1.00
        Profit on sale of fixed assets                                         (112.15)            (54.87)
                                                                             88,828.64          43,755.16
     Adjustments for :
        Increase in Investments other than Subsidiaries,
        Joint Ventures & Other Long Term Investments                       (230,546.47)       (377,711.50)
        Increase in Advances                                               (477,184.08)       (463,595.54)
        Increase in Other Assets                                            (49,457.47)        (37,213.94)
        Increase in Cash Collateral with Banks                                  (31.24)           (628.06)
        Increase in Deposits                                                542,355.42         443,417.30
        Increase in Borrowings                                                1,950.12         349,052.36
        Increase in Other Liabilities & Provisions                           76,051.56          55,381.82
                                                                           (136,862.16)        (31,297.56)

     Direct Taxes Paid                                                      (17,537.51)        (10,143.27)

Net Cash Flow From Operating Activities                          (A)        (65,571.03)           2,314.33


CASH FLOW FROM INVESTING ACTIVITIES
     Purchase of Fixed assets                                               (12,126.64)         (7,125.25)
     Sale of Fixed assets                                                       237.09              166.39
     (Increase)/Decrease in Investments in Subsidiaries &
     Joint Ventures                                                          (7,376.25)         (5,564.55)
     Dividend from Subsidiaries/Joint Ventures                                1,199.99                4.50
Net Cash Flow From/(used in) Investment Activities               (B)        (18,065.81)        (12,518.91)



68        Kotak Mahindra Bank Limited
Cash Flow Statement for the Year Ended 31st March 2008 (Contd.)

                                                                                           Year ended                                Year ended
                                                                                     31st March, 2008                          31st March, 2007
                                                                                      Rupees in lakhs                            Rupees in lakhs
CASH FLOW FROM FINANCING ACTIVITIES
   Increase in Subordinated Debt                                                           15,672.50                                 38,551.50
   Interest paid on Subordinated Debt                                                      (5,967.71)                                (2,388.17)
   Fresh issue of shares/Money received on exercise of
   stock options                                                                          162,827.55                                 46,840.25
   Share issue expenses                                                                      (903.26)                                   (879.89)
   Dividend paid including Corporate Dividend Tax                                          (2,673.38)                                (2,222.10)
Net Cash Flow From Financing Activities                           (C)                     168,955.70                                 79,901.59
Net Increase in Cash & Cash Equivalents                    (A+B+C)                         85,318.86                                 69,697.01
Cash & Cash Equivalents at the beginning of the year
(Refer Note below)                                                                        127,860.71                                 58,143.05
Cash & Cash Equivalents at the end of the year
(Refer Note below)                                                                        213,179.57                                127,840.06


Note:
   Balance with banks in India in Fixed Deposit
   (As per Schedule 7 I (i) (b))                                                                40.71                                   5,084.46
   Balance with banks in India in current account
   (As per Schedule 7 I (i) (a))                                        18,994.69                                13,486.29
   Less: Bank balances on acquisition of business from a
         subsidiary                                                            —                                    (20.65)
   Less: Cash Collateral Security shown separately in Operating
         Activities                                                     (1,767.08)         17,227.61             (1,735.84)          11,729.80
   Money at call and short notice in India (as per Schedule 7 I (ii))                      14,000.00                                         —
   Cash in hand (including foreign currency notes)
   (As per Schedule 6 I)                                                                   14,435.43                                    9,001.33
   Balance with RBI in current accounts (As per Schedule 6 II)                            156,593.32                                 66,120.26
   Balance with banks outside India:
   (i)    In current account (As per Schedule 7 II (i))                                     5,265.70                                    2,432.31
   (ii)   In other Deposit Accounts (As per Schedule 7 II (ii))                             5,616.80                                 33,471.90
Cash & Cash Equivalents at the end of the year                                            213,179.57                                127,840.06

As per our report of even date.                                                  For and on behalf of the Board of Directors


For S. R. Batliboi & Co.                                                         Dr. Shankar Acharya                Uday Kotak
Chartered Accountants                                                            Chairman                           Executive Vice Chairman &
                                                                                                                    Managing Director
per Viren Mehta                                                                  Dipak Gupta
a Partner                                                                        Executive Director
(Membership No. 048749)
                                                                                 Jaimin Bhatt                       Bina Chandarana
Mumbai, 9th May, 2008                                                            Group Chief Financial Officer      Company Secretary



                                                                                                           Kotak Mahindra Bank Limited          69
Schedules forming part of Balance Sheet as at 31st March, 2008

                                                                                                                    As at               As at
                                                                                                        31st March, 2008    31st March, 2007
                                                                                                         Rupees in lakhs      Rupees in lakhs

Schedule 1 — Capital
       Authorised Capital
          40,00,00,000 Equity Shares of Rs.10/- each
          (31st March, 2007: 35,00,00,000 Equity Shares of Rs.10/- each)                                       40,000.00          35,000.00

       Issued, Subscribed and Paid-up Capital
          34,46,72,842 ( 31st March, 2007: 32,61,55,708) Equity Shares of Rs.10/- each, fully paid-up          34,467.28          32,615.57
          (Of the above 18,49,85,250 Equity Shares have been issued as bonus shares by capitalisation
          of Reserves)
              Total                                                                                            34,467.28          32,615.57




Schedule 2 — Reserves And Surplus
I.        Statutory Reserve
          Opening Balance                                                                                      16,426.00          12,876.00
          Add: Transfer from Profit and Loss Account                                                            7,350.00           3,550.00
             Total                                                                                             23,776.00          16,426.00

II.       Capital Reserve
          Opening Balance                                                                                       1,681.03            1,276.03
          Add: Transfer from Profit and Loss Account                                                              148.00              405.00
              Total                                                                                             1,829.03            1,681.03

III.      General Reserve
          Opening Balance                                                                                      25,323.02            3,945.24
          Add: Transfer from Profit and Loss Account being transfer from Kotak Mahindra Capital
                Company Limited on demerger                                                                           —           21,676.06
          Add: Transfer from Profit and Loss Account                                                            1,470.00             725.00
          Less: Transitional adjustment for Employee Benefits                                                         —            1,023.28
          Less: Utilised for Issue of Bonus shares                                                                    —                  —
             Total                                                                                             26,793.02          25,323.02

IV.       Share Premium Account
          Opening Balance                                                                                     51,885.94            7,611.69
          Add: Received during the year *                                                                    162,884.56           45,154.14
          Less: Utilised for Issue of Bonus shares                                                                   —                   —
          Less: Utilised for Share Issue Expenses **                                                             903.26              879.89
            Total                                                                                            213,867.24           51,885.94
          *   Includes Rs. 159,800.00 lakhs raised by issue through a Qualified Institutional
              Placement (QIP).
          ** Represents Qualified Institutional Placement expenses written-off
              (refer Note 1 – Schedule 18 B)
V.        Balance in the Profit and Loss Account                                                               52,816.91          35,418.28
              Total                                                                                          319,082.20          130,734.27



70         Kotak Mahindra Bank Limited
Schedules forming part of Balance Sheet as at 31st March, 2008 (Contd.)

                                                                                       As at                  As at
                                                                           31st March, 2008       31st March, 2007
                                                                            Rupees in lakhs         Rupees in lakhs
Schedule 3 — Deposits
I.     Demand Deposits
       i.     From Banks                                                           5,412.64               2,061.21
       ii.    From Others                                                       309,823.74             208,806.55
              Total                                                             315,236.38             210,867.76


II.    Savings Bank Deposits                                                    151,754.30              88,770.34


III.   Term Deposits
       i.     From Banks                                                          54,118.84             39,642.09
       ii.    From Others [refer Note 16 - Schedule 18 B]                      1,121,255.04            760,728.95

              Total                                                            1,175,373.88            800,371.04

Total Deposits of branches in India (I to III)                                 1,642,364.56          1,100,009.14




Schedule 4 — Borrowings
I.     Borrowings in India
       i.     Reserve Bank of India                                             151,100.00             159,323.00
       ii.    Other Banks                                                       147,771.95             219,152.62
       iii.   Other Institutions and Agencies                                   188,451.38             109,764.58
              Total                                                             487,323.33             488,240.20
II.    Borrowings outside India                                                   24,601.99             21,735.00

Total Borrowings (I and II)                                                     511,925.32             509,975.20
Secured Borrowings under CBLO included in I (iii) above                           64,984.77             14,991.73




Schedule 5 — Other Liabilities and Provisions
I.     Bills Payable                                                              50,440.04             28,309.00
II.    Interest Accrued                                                           31,608.28             16,754.86
III.   Others (including provisions)                                            154,278.70             105,078.63
IV     Proposed Dividend (includes tax on dividend for the current year)           3,024.37               2,671.10
V.     Lower Tier II Bonds (refer Note 17 - Schedule 18 B)                        46,570.00             42,990.00
VI.    Upper Tier II Bonds (refer Note 18 - Schedule 18 B)                        31,654.00             19,561.50

              Total                                                             317,575.39             215,365.09




                                                                               Kotak Mahindra Bank Limited      71
Schedules forming part of Balance Sheet as at 31st March, 2008 (Contd.)

                                                                                                               As at               As at
                                                                                                   31st March, 2008    31st March, 2007
                                                                                                    Rupees in lakhs      Rupees in lakhs

Schedule 6 — Cash and Balances with Reserve Bank of India
I.    Cash and cheques on hand (including foreign currency notes)                                         14,435.44            9,001.33
II.   Balances with RBI in current account                                                              156,593.32           66,120.26
               Total                                                                                    171,028.76           75,121.59


Schedule 7 — Balances with Banks and Money at Call and Short Notice
I.    In India
      (i)      Balances with Banks
               (a)     In Current Accounts (refer Note 7-Schedule 18 B)                                   18,994.69          13,486.29
               (b)     In Other Deposit Accounts                                                              40.71            5,084.46
                                                                                                          19,035.40          18,570.75
      (ii)     Money at Call and Short Notice
               With Banks                                                                                 14,000.00                  —
                                                                                                          14,000.00                  —
               Total                                                                                      33,035.40          18,570.75
II.   Outside India
      (i)      In Current Accounts                                                                         5,265.70            2,432.31
      (ii)     In Other Deposit Accounts                                                                   5,616.80          33,471.90
               Total                                                                                      10,882.50          35,904.21
               Total (I and II)                                                                           43,917.90          54,474.96


Schedule 8 — Investments
I.    Investments in India in
      I.       Government Securities*                                                                   810,701.40          586,366.64
      II.      Other approved Securities                                                                         —                 1.00
      III.     Shares                                                                                      4,549.78              425.14
      IV.      Debentures and Bonds                                                                       14,972.79          17,679.98
      V.       Subsidiaries and Joint Ventures                                                            29,340.08          21,937.44
      VI. Others [Units, Certificate of Deposits, Commercial Paper (CP), Security Receipts, RIDF
          Deposit & Pass Through Certificates (PTC)]                                                      53,258.36          58,409.84
               Total                                                                                    912,822.41          684,820.04
      * Investments are net of Repo Rs. 90,906.40 lakhs (Previous Year Rs. 2,919 lakhs)
II.   Investments outside India in
      I.       Subsidiaries and Joint Ventures                                                             1,376.44            1,376.44
               Total                                                                                       1,376.44            1,376.44
               Total Investments (I and II)                                                             914,198.85          686,196.48




72           Kotak Mahindra Bank Limited
Schedules forming part of Balance Sheet as at 31st March, 2008 (Contd.)

                                                                                        As at                  As at
                                                                            31st March, 2008       31st March, 2007
                                                                             Rupees in lakhs         Rupees in lakhs

Schedule 9 — Advances
A.   (i) Bills purchased and discounted#                                           42,881.49             25,080.50
     (ii) Cash Credits, Overdrafts and Loans repayable on demand                  141,675.87             84,624.22
     (iii) Term Loans                                                           1,370,664.96            982,702.22
             Total                                                              1,555,222.32          1,092,406.94
     #       Bills purchased and discounted is net off Bills Rediscounted
             Rs.29730.00 lakhs (Previous Year Rs.18,065.91 lakhs)
B.   (i)     Secured by tangible assets *                                       1,145,165.22            781,211.12
     (ii)    Unsecured                                                            410,057.10            311,195.82
             Total                                                              1,555,222.32          1,092,406.94
     *       including advances against book debts

C.   Advances in India
     (i) Priority Sector                                                          590,300.92            396,409.74
     (ii) Public Sector                                                                   —                  11.00
     (iii) Banks                                                                          —                     —
     (iv) Others                                                                  964,921.40            695,986.20
           Total                                                                1,555,222.32          1,092,406.94

Schedule 10 — Fixed Assets
A. Premises (including Land)
     Gross Block
     At cost on 31st March of the preceding year                                    8,524.03               7,796.84
     Add: Additions during the year                                                   534.64                 738.30
     Less: Deductions during the year                                                  10.26                  11.11
             Total                                                                  9,048.41               8,524.03
     Depreciation
     As at 31st March of the preceding year                                         2,981.79               2,852.18
     Add: Charge for the year                                                         148.02                 133.86
     Less: Deductions during the year                                                   5.34                   4.25
     Depreciation to date                                                           3,124.47               2,981.79
     Net Block                                                                      5,923.94               5,542.24
B.   Other Fixed Assets (including Furniture and Fixtures)
     Gross Block
     At cost on 31st March of the preceding year                                   18,832.50             12,730.72
     Add: Additions during the year                                                11,592.00              6,433.37
     Less: Deductions during the year                                                 330.85                  331.59
           Total                                                                   30,093.65             18,832.50
     Depreciation
     As at 31st March of the preceding year                                        10,266.03               7,152.86
     Add: Charge for the year                                                       4,937.52               3,340.08
     Less: Deductions during the year                                                 210.83                 226.91
     Depreciation to date                                                          14,992.72             10,266.03
     Net Block (Refer Note 6 - Schedule 18 B)                                      15,100.93              8,566.47
            Total (A) + (B)                                                        21,024.87             14,108.71



                                                                                Kotak Mahindra Bank Limited      73
Schedules forming part of Balance Sheet as at 31st March, 2008 (Contd.)

                                                                                                        As at               As at
                                                                                            31st March, 2008    31st March, 2007
                                                                                             Rupees in lakhs      Rupees in lakhs
Schedule 11 — Other Assets
I.   Interest accrued                                                                              29,471.43          20,057.19
II. Advance Tax (net of provision)                                                                  1,111.50           1,307.92
III. Stationery and Stamps                                                                             87.61              61.97
IV. Cheques in course of collection                                                                 1,942.90             843.89
V. Non banking assets acquired in satisfaction of claims                                            1,610.92           1,792.98
VI. Others (refer Note 5 – Schedule 18 B)                                                          91,619.09          45,169.28
            Total                                                                                 125,843.45          69,233.23

Schedule 12 — Contingent Liabilities
I.   Claims not acknowledged as debts                                                               3,905.22           2,189.83
II. Liability on account of Outstanding Forward Exchange Contracts                                642,915.71         387,019.92
III. Guarantees on behalf of Constituents in India                                                 70,458.00          15,744.33
IV. Acceptances, Endorsements and other obligations                                                53,566.70          28,286.66
V. Other Items for which the Bank is contingently liable :
     (a) Liability in respect of Interest Rate & Currency Swaps & Forward Rate Agreements     10,221,662.11        8,230,709.14
     (b) Liability in respect of Options Contracts                                             1,146,432.88        1,394,995.07
     (c) Capital commitments not provided                                                         23,817.00            6,525.41
            Total                                                                             12,162,757.62       10,065,470.36




Schedules forming part of Profit and Loss Account for the Year Ended 31st March, 2008
                                                                                                  Year ended          Year ended
                                                                                            31st March, 2008    31st March, 2007
                                                                                             Rupees in lakhs      Rupees in lakhs
Schedule 13 — Interest Earned
I.     Interest/Discount on Advances/Bills                                                       180,204.79          100,378.68
II.    Income on Investments (refer Note 12 - Schedule 18 B)                                       70,831.20          28,083.60
III.   Interest on balances with RBI and other inter-bank funds                                     1,804.06            3,312.16
IV.    Others                                                                                         696.38              135.98
            Total                                                                                253,536.43          131,910.42
Schedule 14 — Other Income
I.     Commission, exchange and brokerage                                                          22,208.14          18,731.63
II.    Profit on sale of Investments (net)                                                          7,299.34            2,473.82
III.   Loss on revaluation of Investments (net) (refer Note 12 - Schedule 18 B)                    (5,826.28)           (892.70)
IV.    Profit on sale of building and other assets (net)                                              112.15               54.87
V.     Profit on exchange transactions (net)                                                       (2,735.89)           1,520.64
VI.    Income earned from Subsidiaries/Joint Ventures                                               2,756.49              919.03
VII. Profit on recoveries of non-performing assets acquired                                        16,381.50            3,975.15
VIII. Profit/(Loss) on Derivatives                                                                  4,743.08            4,489.81
IX.    Miscellaneous Income                                                                         1,407.80              593.19
            Total                                                                                  46,346.33          31,865.44



74        Kotak Mahindra Bank Limited
Schedules forming part of Profit and Loss Account for the Year Ended 31st March, 2008

                                                                                         Year ended              Year ended
                                                                                   31st March, 2008        31st March, 2007
                                                                                    Rupees in lakhs          Rupees in lakhs
Schedule 15 — Interest Expended
I.     Interest on Deposits                                                               96,483.73              52,145.49
II.    Interest on RBI/Inter-Bank Borrowings                                              19,014.74                9,905.45
III.   Others (refer Note 13 - Schedule 18 B)                                             15,457.87                7,873.03
            Total                                                                        130,956.34              69,923.97


Schedule 16 — Operating Expenses
I.     Payments to and provision for employees (refer Note 15 – Schedule 18 B)            51,923.19              29,298.22
II.    Rent, taxes and lighting (refer Note 4(a) – Schedule 18 B)                           8,424.92               4,100.21
III.   Printing and Stationery                                                              2,757.53               1,552.99
IV.    Advertisement, Publicity and Promotion                                               2,201.45               1,500.15
V.     Depreciation on Bank’s property                                                      5,085.54               3,473.94
VI.    Directors’ fees, allowances and expenses                                                18.59                   19.66
VII. Auditors’ fees and expenses (refer Note 1 – Schedule 18 B)                                94.71                   86.91
VIII. Law Charges                                                                           1,116.58                  614.25
IX.    Postage, telephone etc.                                                              3,408.41               2,072.67
X.     Repairs and maintenance                                                              4,628.34               2,603.95
XI.    Insurance (refer Note 20 – Schedule 18 B)                                             903.11                   417.43
XII. Travel and Conveyance                                                                  3,676.40               2,453.69
XIII. Professional Charges                                                                  9,013.85               4,009.67
XIV. Brokerage                                                                              7,030.82               6,261.66
XV. Stamping Expenses                                                                       1,275.33                  748.47
XVI. Other Expenditure                                                                      5,547.90               5,310.80
                                                                                         107,106.67              64,524.67
Less: Recovery of Costs from Group Companies                                                5,169.29               3,253.94
            Total                                                                        101,937.38              61,270.73




                                                                                        Kotak Mahindra Bank Limited      75
Schedules forming part of the Balance Sheet and Profit and Loss Account

Schedule 17 – Significant Accounting Policies and Notes to the Financial Statements

A.   ACCOUNTING METHODOLOGY
     The Financial Statements have been prepared on historical cost basis of accounting. The Bank adopts the accrual system of accounting and it conforms
     to statutory provisions, practices prevailing within the banking industry and the guidelines issued by the Reserve Bank of India (“RBI”) for banks.
     The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets
     and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting
     period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual results could differ
     from these estimates.

B.   REVENUE RECOGNITION
     a.    Interest income is recognised on accrual basis except in case of non-performing assets where it is recognised, upon realisation, as per RBI
           guidelines. Penal interest is recognised as income on realisation.
     b.    Interest income in respect of retail advances is accounted for by using the internal rate of return method to provide a constant periodic rate of
           return on the net investment outstanding on the contract.
     c.    Interest income on discounted instruments is recognised over the tenure of the instruments so as to provide a constant periodic rate of return.
     d.    Service charges, Fees and Commission income are recognised when due except for Guarantee Commission which is recognised over the period
           of the guarantee.
     e.    Dividend income is accounted on an accrual basis when the Bank’s right to receive the dividend is established.
     f.    Gain on account of securitisation of assets is amortised over the life of the securities issued in accordance with the guidelines issued by the RBI.
     g.    In respect of non-performing assets acquired from other Banks/FIs and NBFCs, collections in excess of the consideration paid at each asset level
           or portfolio level is treated as income in accordance with RBI guidelines and clarifications.

C.   FIXED ASSETS
     a.    Fixed assets have been stated at cost inclusive of incidental expenses less accumulated depreciation.
     b.    Depreciation: The Bank adopts the Straight Line Method of depreciation so as to write off 100% of the cost of assets at rates higher than those
           prescribed under Schedule XIV to the Companies Act, 1956 for all assets other than premises, based on the Management’s estimate of useful
           lives of all assets as follows:

             Asset Type                                                            Useful life in years
             Premises                                                              58
             Improvement to Leasehold premises                                     Over the primary period of lease subject to a maximum of 6 years.
             Office equipments                                                     5
             Computers                                                             3
             Furniture and Fixtures                                                6
             Vehicles                                                              4
             ATMs                                                                  5
             Software (including development) expenditure                          3
           Items costing less than Rs. 5,000 are fully depreciated in the year of purchase.

D.   EMPLOYEE BENEFITS
     a.    Provident Fund – Defined Contribution Plan
           Contribution as required by the Statute made to the Government Provident Fund is debited to the Profit and Loss Account.

     b.    Gratuity – Defined Benefit Plan
           The Bank makes annual contribution to a Gratuity Fund administered by trustees and managed by a life insurance company. The net present value
           of the Bank’s obligation towards the same is actuarially determined based on the projected unit credit method as at the Balance Sheet date.
           Actuarial gains and losses are immediately recognised in the Profit and Loss Account.



76        Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

     c.   Superannuation Fund – Defined Contribution Plan
          The Bank contributes a sum equivalent to 15% of eligible employee’s salary, subject to a maximum of Rs. 1 lakh per employee per annum to a
          fund administered by trustees and managed by a life insurance company. The Bank recognises such contributions as an expense in the year they
          are incurred.

     d.   Compensated Absences – Defined Benefit Plan
          The Bank accrues the liability for compensated absences based on the actuarial valuation as at the Balance Sheet date conducted by an
          independent actuary.

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

E.   INVESTMENTS
     1.   Classification
          a.   In accordance with the RBI guidelines, investments are categorised into “Held for Trading”, “Available for Sale” and “Held to Maturity” and
               further classified under six groups namely, Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in
               Subsidiaries /Joint Ventures and Other Investments for the purposes of disclosure in the Balance Sheet.
          b.   Investments which are held for resale within 90 days from the date of purchase are classified as “Held for Trading”.
          c.   Investments which the Bank intends to hold till maturity are classified as “Held to Maturity”. The Bank has classified investments in
               subsidiaries and joint ventures as “Held to Maturity”.
          d.   Investments which are not classified in either of the above two categories are classified as “Available for Sale”.

     2.   Valuation
          The cost of investments is determined on the weighted average basis. Broken period interest on debt instruments is treated as a revenue item.
          The transaction costs including brokerage, commission etc. paid at the time of acquisition of investments is charged to revenue.
          The valuation of investments is made in accordance with the RBI guidelines:
          a.   Held for Trading /Available for Sale – Each security in this category is revalued at the market price or fair value and the net depreciation of
               each group is recognised in the Profit and Loss Account. Net appreciation, if any, is ignored. Further, provision for diminution other than
               temporary is made for, at the individual security level.
          b.   Held to Maturity – These are carried at their acquisition cost. Any premium on acquisition of debt instruments is amortised over the balance
               maturity of the security. Any diminution, other than temporary, in the value of such securities is provided for.
          c.   The market value of investments where current quotations are not available is determined as per the norms laid down by the RBI.
          d.   Repurchase and reverse repurchase transactions – These are accounted as outright purchase and outright sale respectively. The difference
               between the clean price of the first leg and the clean price of the second leg is recognised as interest income/interest expense over the
               period of the transaction. However, depreciation in their value, if any, compared to their original cost, is provided for.

     3.   Transfer between Categories
          Transfer between categories is done at the lower of the acquisition cost /book value /market value on the date of the transfer and depreciation, if
          any, on such transfer is fully provided for.

     4.   Profit or Loss on sale/redemption of Investments
          a.   Held for Trading and Available for Sale – Profit or loss on sale/redemption is included in the Profit and Loss Account.
          b.   Held to Maturity – Profit on sale/redemption of investments is included in the Profit and Loss Account and is appropriated to Capital Reserve
               after adjustments for tax and transfer to Statutory Reserve. Loss on sale/redemption is charged off to the Profit and Loss Account.

F.   FOREIGN CURRENCY AND DERIVATIVE TRANSACTIONS
     a.   Foreign currency assets and liabilities are translated as at the Balance Sheet date at rates notified by the Foreign Exchange Dealers’ Association
          of India (FEDAI).



                                                                                                                   Kotak Mahindra Bank Limited             77
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

     b.    Income and Expenditure items are translated at the rates of exchange prevailing on the date of the transactions.
     c.    Foreign Exchange contracts (other than deposit and placement swaps) outstanding at the Balance Sheet date are revalued at rates notified by
           FEDAI and resulting profits or losses are included in the Profit and Loss Account. Foreign Exchange swaps “linked” to foreign currency deposits
           and placements are translated at the prevailing spot rate at the time of swap. The premium/discount on the swap arising out of the difference in
           the exchange rate of the swap date and the maturity date of the underlying forward contract is amortised over the period of the swap and the
           same is recognised as income/expense.
     d.    Derivative transactions comprising of swaps and options are disclosed as off Balance Sheet exposures. The swaps are segregated into trading or
           hedge transactions. Trading swaps outstanding as at the Balance Sheet dates are marked to market and the resulting profits or losses, are recorded
           in the Profit and Loss Account. Outstanding derivative transactions designated as “Hedges” are accounted on an accrual basis over the life of the
           transaction. Option premium paid is accounted for in the Profit and Loss Account on expiry of the option.
     e.    Contingent liabilities as at the Balance Sheet date on account of outstanding foreign exchange contracts are restated at year end rates notified
           by FEDAI.

G.   ADVANCES
     a.    Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the RBI guidelines and are stated net of
           provisions made towards non-performing advances.
     b.    Provision for non-performing advances comprising sub-standard, doubtful and loss assets is made in accordance with the RBI guidelines. In
           addition, the Bank adopts an approach to provisioning that is based on past experience, evaluation of security and other related factors.
     c.    In accordance with the RBI guidelines, the Bank provides general provision in respect of Standard Assets as follows:

             Category of Advance                                                                                          General Provision
             All Direct Advances to Agricultural and SME sector                                                           0.25%
             Residential Housing loans beyond Rs. 20 lakhs                                                                1.00%
             Personal Loans, Loans and Advances qualifying as Capital Market exposures, Commercial Real Estate            2.00%
             loans and Loans and Advances to Systemically Important NBFC-ND
             All other Standard Advances                                                                                  0.40%
     d.    Amounts paid for acquiring non-performing assets from other banks and NBFCs are considered as advances. Actual collections received on such
           non-performing assets are compared with the cash flows estimated while purchasing the asset to ascertain default. If the default is in excess of
           90 days, then the assets are classified into sub-standard, doubtful or loss as required by the RBI guidelines on purchase of non-performing assets.

H.   SECURITISATION
     The Bank enters into arrangements for sale of loans through Special Purpose Vehicles (SPVs). In most cases, post securitisation, the Bank continues
     to service the loans transferred to the SPV. The Bank also provides credit enhancement in the form of cash collaterals and/or by subordination of cash
     flows to Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies,
     future servicing etc.) accepted by the Bank, appropriate provision/disclosure is made at the time of sale in accordance with Accounting Standard 29,
     “Provisions, Contingent Liabilities and Contingent Assets”.
     The profit/premium on account of securitisation of assets at the time of sale computed based on the difference between the sale consideration and
     the book value of the securitised asset is amortised over the tenure of the securities issued. Loss on account of securitisation on assets is charged off
     to the Profit and Loss Account.

I.   TAXES ON INCOME
     The Income Tax expense comprises current tax, deferred tax and fringe benefit tax. Current tax is measured at the amount expected to be paid in respect
     of taxable income for the year in accordance with the Income Tax Act, 1961. Deferred tax adjustments comprise of changes in the deferred tax assets
     and liabilities. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences being the difference between the
     taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax
     assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such
     deferred tax assets can be realised. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially
     enacted before the Balance Sheet date. Changes in deferred tax assets/liabilities on account of changes in enacted tax rates are given effect to in the
     Profit and Loss Account in the period of the change.



78        Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

J.   SEGMENT REPORTING
     In accordance with Accounting Standard 17 (AS-17) on Segment Reporting, upto year ended 31st March, 2007, the Bank’s business was segregated
     into the following segments whose principal activities are as under:

      Segment                                                        Principal activity
      Corporate Banking                                              Wholesale borrowings and lendings and other related services to the corporate
                                                                     sector.
      Lending                                                        Commercial vehicle finance, personal loans, home loans, agriculture finance, asset
                                                                     reconstruction and other loans/services.
      Retail Liabilities                                             Retail borrowings covering savings and current accounts and Branch Banking network
                                                                     and services.
      Treasury and Investments                                       Money market, forex market, derivatives, investments and primary dealership of
                                                                     government securities.
      Venture Fund Management                                        Management of Venture capital and private equity fund.

     From the year ended 31st March, 2008, the Bank has adopted RBI’s revised guidelines issued in April 2007 on segment reporting in terms of which
     the reportable segments are as under:

      Segment                                                        Principal activity
      Treasury                                                       Money market, forex market, derivatives, investments and primary dealership of
                                                                     government securities.
      Retail Banking                                                 Includes:
                                                                     (1) Commercial vehicle finance, personal loans, home loans, agriculture finance, other
                                                                         loans/services & exposures which fulfill the four criteria’s for retail exposures
                                                                         laid down in Basel Committee on Banking Supervision document “International
                                                                         Convergence of Capital Measurement and Capital Standards : A Revised
                                                                         Framework”.
                                                                     (2) Retail borrowings covering savings and current accounts and Branch Banking
                                                                         network and services including distribution of financial products.
      Corporate/Wholesale Banking                                    Wholesale borrowings and lendings and other related services to the corporate sector
                                                                     which are not included under retail banking.
      Other Banking Business                                         Management of Venture capital and private equity fund (upto 30th September,
                                                                     2007).

     A transfer pricing mechanism between all the above segments has been established to arrive at interest cost on the borrowings of the segments.
     Segment revenues consist of earnings from external customers and inter-segment revenues based on a transfer pricing mechanism. Segment expenses
     consist of interest expenses including allocated, operating expenses and provisions.
     Segment results are net of segment revenues and segment expenses.
     Segment assets include assets related to segments and exclude tax related assets. Segment liabilities include liabilities related to the segment excluding
     networth, employee’s stock option (grants outstanding) and proposed dividend and dividend tax thereon.
     Since the business operations of the Bank are concentrated in India, the Bank is considered to operate only in the domestic segment.

K.   LEASES
     Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases.
     Operating lease payments are recognized as an expense in the Profit and Loss Account on a straight-line basis over the lease term.

L.   CASH AND CASH EQUIVALENTS
     Cash and cash equivalents include cash in hand, balances with Reserve Bank of India and Balances with Other Banks/Institutions and Money at Call
     and Short Notice (including the effect of changes in exchange rates on cash and cash equivalents in foreign currency).



                                                                                                                    Kotak Mahindra Bank Limited             79
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

M. EARNINGS PER SHARE
     Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable
     taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding
     during the period are adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split
     (consolidation of shares).
     For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted
     average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
N.   PROVISIONS
     A provision is recognised when the Bank has a present obligation as a result of past event; it is probable that an outflow of resources will be required to
     settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based
     on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the
     current best estimates.
O.   IMPAIRMENT
     The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors.
P.   EMPLOYEE STOCK OPTION SCHEME
     The Bank has formulated Employee Stock Option Schemes (ESOS) in accordance with SEBI (Employee Stock Option Scheme) Guidelines, 1999. The
     Schemes provide for grant of options to employees of the Bank and its subsidiaries to acquire the equity shares of the Bank that vest in cliff vesting or in
     a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines and the guidance note on “Accounting
     for Employee Share based payments” issued by the ICAI, the excess, if any, of the market price of the share preceding the date of grant of the option
     under ESOS over the exercise price of the option is amortised on a straight-line basis over the vesting period. In respect of options granted to employees
     of the subsidiaries, the Bank recovers the related compensation cost from the respective subsidiaries.

Schedule 18 – NOTES TO ACCOUNTS

A.   DISCLOSURES AS LAID DOWN BY RBI CIRCULARS:
     1.    Capital Adequacy Ratio:
           The Bank’s Capital Adequacy Ratios calculated in accordance with the RBI Guidelines are as follows:
                                                                                                                                                Rupees in lakhs
                                                                                                                             As at                        As at
                                                                                                                 31st March, 2008             31st March, 2007
           Tier I Capital                                                                                              308,269.12                  133,856.85
           Tier II Capital                                                                                              89,307.54                   70,569.84
               Total Capital                                                                                           397,576.66                  204,426.69
               Total Risk weighted assets and contingencies                                                          2,131,864.22                1,518,878.70
           Capital Ratios:
           CRAR – Tier I Capital (%)                                                                                        14.46%                      8.81%
           CRAR – Tier II Capital (%)                                                                                        4.19%                      4.65%
           CRAR (%)                                                                                                         18.65%                     13.46%
           Amount of subordinated debt considered in Tier II Capital                                                      45,370.00                  42,890.00
           Amount of subordinated debt considered in Upper Tier II Capital                                                31,654.00                  19,561.50
           Note:
           Tier I Capital includes Equity Share Capital and Free Reserves and, in accordance with the RBI guidelines, is net of the following items:
           (a) intangible assets consisting of deferred tax asset and capitalised software.
           (b) equity investments in subsidiaries made by the Bank.
           (c) 50% of credit enhancement provided for securitisation transactions.
           Tier II Capital consists of eligible Lower Tier II Bonds, Upper Tier II Bonds and Provision on Standard Assets/Contingencies and is net of balance
           50% of the credit enhancement provided for securitisation transactions.
           The Capital Adequacy Ratios have been calculated after factoring the capital requirement for market risk on the Held for Trading, Available for
           Sale and other off Balance Sheet exposures as prescribed by the RBI.



80        Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

    2.   Business Ratios / Information:

                                                                                                                 Year ended                   Year ended
                                                                                                           31st March, 2008             31st March, 2007
         Interest income as a percentage of working funds                                                               9.48%                        8.75%
         Non interest income as a percentage of working funds                                                           1.73%                        2.11%
         Operating profit as a percentage of working funds                                                              2.51%                        2.16%
         Return on assets (average)                                                                                     1.10%                        0.94%
         Business (deposit plus advance) per employee (Rs. in lakhs)                                                    383.84                       383.91
         Profit per employee (Rs. in lakhs)                                                                               3.81                         3.13
         Definitions:
         (A) Working funds is the monthly average of total assets as reported to the RBI under Section 27 of the Banking Regulation Act, 1949.
         (B) Operating Profit = (Interest Income + Other Income – Interest Expenses – Operating Expenses).
         (C) Business is monthly average of net advances and deposits. Inter bank deposits are excluded for the purposes of computation of this ratio.
         (D) Productivity ratios are based on average number of employees.

    3.   Investments held under the 3 categories viz. “Held for Trading (HFT)” “Available for Sale (AFS)” and “Held to Maturity (HTM)” are as under:
                                                                                                                                             Rupees in lakhs
                                                        As at 31st March, 2008                                      As at 31st March, 2007
                                                  HFT       AFS        HTM        Total                     HFT          AFS           HTM            Total
         Government Securities             101,152.74 438,027.81 271,520.85 810,701.40                58,503.04    407,875.81    119,987.79     586,366.64
         Other Approved Securities                 —          —          —          —                        —           1.00           —             1.00
         Shares                                    —    4,549.78         —    4,549.78                       —         425.14           —           425.14
         Debentures and Bonds                9,912.55   5,060.24         — 14,972.79                   2,500.00     11,889.98      3,290.00      17,679.98
         Subsidiaries and Joint
         Ventures                                 —              —      30,716.52       30,716.52            —            —       23,313.88      23,313.88
         Units, Certificate of Deposits,
         CP, SRs, RIDF, PTCs etc.           10,015.69   37,910.51        5,332.16       53,258.36      8,605.81     49,554.68       249.35       58,409.84
         Total                             121,080.98 485,548.34 307,569.53 914,198.85                69,608.85    469,746.61    146,841.02     686,196.48

    4.   Movement in Provisions for Depreciation on Investments:
                                                                                                                                             Rupees in lakhs
                                                                                                                 Year ended                   Year ended
                                                                                                           31st March, 2008             31st March, 2007
         1.    Value of Investments
               i.   Gross value of Investments
                    a. In India                                                                                    921,981.89                  688,232.99
                    b. Outside India                                                                                 1,376.44                    1,376.44
               ii. Provision for Depreciation
                    c. In India                                                                                     (9,159.48)                   (3,412.95)
                    d. Outside India                                                                                       —                            —
               iii. Net value of Investments
                    e. In India                                                                                    912,822.41                  684,820.04
                    f.    Outside India                                                                              1,376.44                    1,376.44
         2.    Movement of provisions held towards depreciation on investments
               i.   Opening balance                                                                                  3,412.95                     2,296.27
               ii. Add: Provisions made during the year                                                             10,106.70                     3,367.04
               iii. Less: Write-off / write-back of excess provisions during the year                                4,360.17                     2,250.36
               iv. Closing balance                                                                                   9,159.48                     3,412.95



                                                                                                                  Kotak Mahindra Bank Limited             81
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

     5.    Disclosure in respect of Non-SLR Investments:
           (i)    Issuer composition of Non-SLR Investments as at 31st March, 2008:
                                                                                                                                          Rupees in lakhs
                  No. Issuer                                       Amount          Extent of Extent of ‘Below              Extent of           Extent of
                                                                                     Private      Investment              ‘Unrated’           ‘Unlisted’
                                                                                  Placement Grade’ Securities             Securities          Securities
                  (1)   (2)                                              (3)                 (4)                 (5)             (6)                  (7)
                  1.    PSUs                                     2,015.53             1,730.00                  —           285.53              620.00
                  2.    FIs                                             —                   —                   —                —                   —
                  3.    Banks                                   15,709.36         12,031.79                     —         1,700.00            7,135.49
                  4.    Private Corporates                      12,062.39             6,546.84                  —         5,562.39            4,240.05
                  5.    Subsidiaries/Joint Ventures             30,718.02         30,718.02                     —        30,718.02           30,718.02
                  6.    Others                                  46,409.89         46,409.89                     —        12,456.55           46,409.89
                  7.    Provision held towards depreciation      (3,417.74)                 —                   —                —                   —
                        Total                                  103,497.45         97,436.54                     —        50,722.49           89,123.45

                  Issuer composition of Non-SLR Investments as at 31st March, 2007:
                                                                                                                                          Rupees in lakhs
                  No. Issuer                                                           Extent of   Extent of ‘Below         Extent of           Extent of
                                                                                         Private        Investment         ‘Unrated’           ‘Unlisted’
                                                                    Amount            Placement    Grade’ Securities       Securities          Securities
                  (1) (2)                                                (3)                 (4)                 (5)              (6)                 (7)
                  1.    PSUs                                     12,910.00            6,410.00                  —         1,540.00             2,910.00
                  2.    FIs                                             —                   —                   —                —                   —
                  3.    Banks                                     1,977.58            1,977.58                  —                —                   —
                  4.    Private Corporates                          500.00              500.00                  —                —                   —
                  5.    Subsidiaries/Joint Ventures              23,341.77        23,341.77                     —        23,341.77            23,341.77
                  6.    Others                                   62,300.92            2,500.00                  —                —                   —
                  7.    Provision held towards depreciation      (1,201.43)                 —                   —                —                   —
                        Total                                    99,828.84        34,729.35                     —        24,881.77            26,251.77

                  The above does not include Non-SLR Government Securities Rs. 21,733.78 lakhs (Previous Year Rs. 11,966.75 lakhs) which are included
                  under Government Securities in the Schedule 8 – Investments.

           (ii)   Non-performing Non-SLR Investments:
                                                                                                                                          Rupees in lakhs
                  Particulars                                                                              31st March, 2008             31st March, 2007
                  Opening balance                                                                                      440.39                     440.12
                  Additions during the year since 1st April                                                            110.00                       0.27
                  Reductions during the above period                                                                   308.84                         —
                  Closing balance                                                                                      241.55                     440.39
                  Total provisions held                                                                                234.44                     180.00



82        Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

    6.   Details of Repo / Reverse Repo (excluding LAF transactions for the year) deals:
         Done during the year ended 31st March 2008:
                                                                                                                                  Rupees in lakhs
         Particulars                                                       Minimum               Maximum         Daily Average             As at
                                                                        outstanding            outstanding         outstanding 31st March, 2008
                                                                     during the year        during the year     during the year
         Securities sold under repos                                         399.83             332,888.84           47,269.39       90,906.40
         Securities purchased under reverse repos                            173.10             163,460.03           19,904.21       98,785.80
         Done during the year ended 31st March, 2007:
                                                                                                                                      Rupees in lakhs
         Particulars                                                         Minimum               Maximum         Daily Average                As at
                                                                           outstanding           outstanding         outstanding    31st March, 2007
                                                                        during the year       during the year     during the year
         Securities sold under repos                                            490.63             42,921.40           15,553.16           2,919.00
         Securities purchased under reverse repos                               165.58             67,504.22           12,270.87         142,940.40
    7.   Lending to Sensitive Sectors:
         (a) Exposure to Capital Markets:
                                                                                                                                      Rupees in lakhs
              Particulars                                                                                              As at                    As at
                                                                                                           31st March, 2008         31st March, 2007
              i.    Direct investment in equity shares, convertible bonds, convertible debentures
                    and units of equity-oriented mutual funds the corpus of which is not exclusively
                    invested in corporate debt;                                                                     8,517.18                3,049.75
              ii. Advances against shares / bonds / debentures or other securities or on clean basis
                    to individuals for investment in shares (including IPOs/ESOPs), convertible bonds,
                    convertible debentures and units of equity-oriented mutual funds;                                  99.59                  315.95
              iii. Advances for any other purposes where shares or convertible bonds or convertible
                    debentures or units of equity oriented mutual funds are taken as primary
                    security;                                                                                             —                       —
              iv. Advances for any other purposes to the extent secured by the collateral security of
                    shares or convertible bonds or convertible debentures or units of equity oriented
                    mutual funds i.e. where the primary security other than shares/convertible bonds /
                    convertible debentures / units of equity oriented mutual funds does not fully cover
                    the advances;                                                                                         —                       —
              v. Secured and unsecured advances to stockbrokers and guarantees issued on behalf
                    of stockbrokers and market makers;                                                             33,994.14              12,008.24
              vi. Loans sanctioned to corporates against the security of shares / bonds / debentures
                    or other securities or on clean basis for meeting promoter’s contribution to the
                    equity of new companies in anticipation of raising resources;                                         —                       —
              vii. Bridge loans to companies against expected equity flows/issues;                                  2,500.00                      —
              viii. Underwriting commitments taken up by the banks in respect of primary issue of
                    shares or convertible bonds or convertible debentures or units of equity oriented
                    mutual funds;                                                                                         —                       —
              ix. Financing to stockbrokers for margin trading;                                                           —                       —
              x. All exposures to Venture Capital Funds (both registered and unregistered) will be
                    deemed to be on par with equity and hence will be reckoned for compliance with
                    the capital market exposure ceilings (both direct and indirect)                                 2,230.85               1,361.49
              xi. Initial Public Offer Bidding                                                                            —                3,199.98
              Total Exposure to Capital Market*                                                                    47,341.76              19,935.41
              * on limit basis or outstanding basis whichever is higher



                                                                                                                Kotak Mahindra Bank Limited       83
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

           (b) Real Estate Sector*
                                                                                                                                               Rupees in lakhs
                 Particulars                                                                                                As at                        As at
                                                                                                                31st March, 2008             31st March, 2007
                 (a)     Direct exposure                                                                               383,366.61                  214,213.70
                         i.    Residential Mortgages —
                               Lending fully secured by mortgages on residential property that is or will
                               be occupied by the borrower or that is rented; [Includes Individual housing
                               loans up to Rs. 15 lakhs as at 31st March, 2008 Rs. 36,854.30 lakhs (as at
                               31st March, 2007 Rs. 36,672.32 lakhs)]                                                  237,908.41                  150,631.47
                         ii.   Commercial Real Estate —
                               Lending secured by mortgages on commercial real estates (office buildings,
                               retail space, multi-purpose commercial premises, multi-family residential
                               buildings, multi-tenanted commercial premises, industrial or warehouse
                               space, hotels, land acquisition, development and construction, etc.). Exposure
                               also includes non-fund based (NFB) limits.                                              145,458.20                    63,582.23
                         iii   Investments in Mortgage Backed Securities (MBS) and other securitised
                               exposures —
                               a.   Residential                                                                                   —                          —
                               b.   Commercial Real Estate                                                                        —                          —
                 (b)     Indirect Exposure                                                                                1,620.00                    4,370.00
                         Fund based and non-fund based exposures on National Housing Bank (NHB)
                         and Housing Finance Companies (HFCs).                                                            1,620.00                    4,370.00
                         * on limit basis or outstanding basis whichever is higher

           (c)   Risk category wise country exposure
                 As Per extant RBI guidelines, the country exposure of the Bank is categorised into various risk categories listed in following table. Since the
                 country exposure (net) of the Bank in respect of any country does not exceed 1% of the total funded assets, no provision is required to be
                 maintained on country exposure as on 31st March, 2008.
                                                                                                                                               Rupees in lakhs

                 Risk Category                                             Exposure (net)    Provision held              Exposure (net)         Provision held
                                                                                     as at            as at                       as at                  as at
                                                                         31st March, 2008 31st March, 2008            31st March, 2007       31st March, 2007
                 Insignificant                                                   11,056.24                      —             22,222.85                  14.00
                 Low                                                                   16.46                    —                     —                      —
                 Total                                                           11,072.70                      —             22,222.85                  14.00


     8.    Movements in NPAs (Funded):
                                                                                                                                               Rupees in lakhs
           Particulars                                                                                                Year ended                   Year ended
                                                                                                                31st March, 2008             31st March, 2007
           i.    Net NPAs to Net Advances %                                                                                  1.78%                      1.98%
           ii.   Net NPA to Net Advances % (excluding NPAs acquired from other Banks / FIs and                               0.38%                      0.18%
                 NBFCs)



84        Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

    8.   Movements in NPAs (Funded): (Contd.)
                                                                                                                               Rupees in lakhs
         Particulars                                                                                     Year ended                Year ended
                                                                                                   31st March, 2008          31st March, 2007
         iii.   Movement of NPAs (Gross)
                a.     Opening balance                                                                    27,754.67                 3,771.11
                       Opening Interest Suspense                                                              458.19                  219.87
                b.     Additions during the year                                                          24,973.75                28,184.02
                c.     Reductions during the year                                                          (7,878.71)               (3,962.14)
                       Closing Interest Suspense                                                           (1,390.04)                 (458.19)
                d.     Closing balance                                                                    43,917.86                27,754.67

         iv     Movement of Net NPAs
                a.     Opening balance                                                                    21,680.34                 1,499.84
                b.     Additions during the year                                                            9,196.03               21,392.25
                c.     Reductions during the year                                                          (3,260.70)               (1,211.75)
                d.     Closing balance                                                                    27,615.67                21,680.34

         v.     Movement of provisions for NPAs (excluding provisions on standard assets)
                a.     Opening balance                                                                      6,074.33                2,271.27
                       Opening Interest Suspense                                                              458.19                  219.87
                b.     Provision made during the year                                                     15,777.72                 6,791.77
                c.     Write-off / write-back of excess provisions                                         (4,618.01)               (2,750.39)
                       Closing Interest Suspense                                                           (1,390.04)                 (458.19)
                d.     Closing balance                                                                    16,302.19                 6,074.33

         Provisions on Standard Assets
                                                                                                                               Rupees in lakhs
         Particulars                                                                                     Year ended                Year ended
                                                                                                   31st March, 2008          31st March, 2007
         Provisions towards Standard Assets                                                               13,081.14                 8,933.95

    9.   Gross NPA, Provisions for NPA and Net NPA above include the following in respect of non-performing assets acquired from other Banks /
         FIs and NBFCs:
                                                                                                                               Rupees in lakhs
         Particulars                                                                                           As at                     As at
                                                                                                   31st March, 2008          31st March, 2007
         Gross NPA                                                                                        30,303.40                22,751.42
         Provision for NPA                                                                                 (8,412.67)               (2,928.78)
         Net NPA                                                                                          21,890.73                19,822.64



                                                                                                        Kotak Mahindra Bank Limited        85
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

          Details of non-performing financial assets purchased:
                                                                                                                                              Rupees in lakhs
          Particulars                                                                                                    As at                          As at
                                                                                                             31st March, 2008               31st March, 2007
          (a)    Number of accounts purchased during the year*                                                                   37                       95
          (b)    Aggregate outstanding in the banks books**                                                          51,921.60                    42,743.86

          * Retail assets portfolio purchased by the Bank has been considered as single portfolio.
          ** Represents outstanding balance of total non-performing financial assets purchased by the Bank at the year end.
          None of the non-performing financial assets purchased have been restructured during the year (previous year Nil).
          There were no non-performing financial assets sold by the Bank during the current year (Previous year Nil).

          Details of Loan Assets subjected to Restructuring
                                                                                                                                              Rupees in lakhs
          Particulars                                                                                                    As at                          As at
                                                                                                             31st March, 2008               31st March, 2007
          (i)    Total amount of loan assets subjected to restructuring, rescheduling,
                 renegotiation;                                                                                             606.77                        —
                 of which under CDR                                                                                              —                        —
          (ii)   The amount of Standard assets subjected to restructuring, rescheduling,
                 renegotiation;                                                                                             291.38                        —
                 of which under CDR                                                                                              —                        —
          (iii) The amount of Sub-Standard assets subjected to restructuring, rescheduling,
                renegotiation;                                                                                              315.39                        —
                 of which under CDR                                                                                              —                        —
          (iv) The amount of Doubtful assets subjected to restructuring, rescheduling,
               renegotiation;                                                                                                    —                        —
                 of which under CDR                                                                                              —                        —

          The Bank has not sold any financial asset to securitization or reconstruction company for asset reconstruction.

     10. Maturity pattern of certain items of assets and liabilities:
          As at 31st March, 2008:                                                                                                             Rupees in lakhs

                                   1-14 days 15-28 days       29 days –      Over 3         Over 6         Over       Over 3              Over
                                                              3 months     months to     months to     1 year to   years to 5           5 years         Total
                                                                           6 months      12 months       3 years       years

          Advances*                84,588.99    45,931.57 141,957.82 137,893.17 215,441.47 617,749.26              99,532.11 209,224.17 1,552,318.56

          Investments            300,502.67     60,512.57 176,053.60       70,781.70       59,377.75 124,431.57    48,331.44          74,207.55   914,198.85

          Deposits               227,507.34 118,721.63 270,238.09 314,471.69 241,427.42 441,476.57                 21,457.00           7,064.82 1,642,364.56

          Borrowings             239,693.38     19,364.81 112,259.09       28,514.94       32,546.76   55,444.75   24,100.93               0.66   511,925.32

          Foreign Currency
          Assets                   13,387.96      4,379.92     9,440.67      8,500.31         41.11      446.29              —         1,444.32    37,640.58

          Foreign Currency
          Liabilites                4,864.23      4,100.15     1,024.26    12,409.80        3,421.97    9,235.42        34.29         18,135.50    53,225.62

          (*) Advances shown above are net of the Advance EMI received amounting to Rs. 2,903.76 lakhs.



86      Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

        As at 31st March, 2007:                                                                                                              Rupees in lakhs

                                  1-14 days    15-28 days    29 days –       Over 3         Over 6         Over          Over 3          Over
                                                             3 Months      months to     months to     1 year to       year to 5       5 years           Total
                                                                           6 months      12 months       3 years          years

        Advances*               46,360.21      28,025.42    137,850.87     94,506.14    142,219.97   421,488.61       96,507.08    123,150.59     1,090,108.89

        Investments            193,734.69      47,010.10    161,351.95     60,468.57     70,058.61    81,620.83       29,344.71     42,607.02      686,196.48

        Deposits               149,421.89      91,922.70    187,824.18   203,474.52     191,447.60   265,056.70        6,789.38      4,072.17     1,100,009.14

        Borrowings             260,747.58      26,750.00    102,109.09     28,370.75     37,509.81    35,749.31       18,738.66            —       509,975.20

        Foreign Currency
        Assets**                32,163.04           1.35      6,230.18      5,860.23     20,428.48    18,519.03              —       1,797.54       84,999.85

        Foreign Currency
        Liabilities**                68.03        111.88      1,646.98      3,410.00      5,409.52    13,511.71            3.72     19,635.58       43,797.42

        (*) Advances shown above are net of the Advance EMI received amounting to Rs. 2,298.05 lakhs.
        (**) Excludes Advances, Investments, Deposits and Borrowings in foreign currency already included under respective heads in the table.
        In computing the above information, certain estimates and assumptions have been made by the Management which have been relied upon by
        the auditors.

    11. Derivatives:
        A.   Forward Rate Agreements / Interest Rate Swaps:
                                                                                                                                             Rupees in lakhs

             Particulars                                                                                    31st March, 2008               31st March, 2007

             The notional principal of swap agreements                                                             10,102,379.84                 8,103,635.09
             Losses which would be incurred if counterparties failed to fulfill their obligations                      55,231.98                   76,712.42
             under the agreements
             Collateral required by the Bank upon entering into swaps                                                          NA                         NA
             Concentration of credit risk arising from the swaps                                                         82.98%                       81.40%
                                                                                                                         (Banks)                      (Banks)
             The fair value of the swap book                                                                                36.90                     481.11


        B.   Exchange Traded Interest Rate Derivatives:
                                                                                                                                             Rupees in lakhs

             Particulars                                                                                    31st March, 2008               31st March, 2007

             Notional principal amount of exchange traded interest rate derivatives undertaken                                 NA                         NA
             during the year (instrument wise)
             Notional principal amount of exchange traded interest rate derivatives outstanding as                             NA                         NA
             on 31st March, 2008
             Notional principal amount of exchange traded interest rate derivatives outstanding                                NA                         NA
             and not “highly effective” (instrument wise)
             Mark to market value of exchange traded interest rate derivatives outstanding and not                             NA                         NA
             “highly effective”




                                                                                                                    Kotak Mahindra Bank Limited            87
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

          C.   Disclosures on risk exposures in derivatives:
               Qualitative disclosures:
               i.     Structure and organisation for management of risk in derivatives trading, the scope and nature of risk measurement, risk reporting and
                      risk monitoring systems and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants:
                      The Bank enters into derivative transactions for trading and hedging purposes. The Derivative policy defines the framework for carrying
                      out the Derivative business and lays down the policies and processes adopted to measure, monitor and report risk arising from
                      derivative transactions.
                      The Asset Liability Management Committee (“ALCO”) is responsible for implementing the derivative policy. To effect this, the ALCO:
	    	    	    	      •	   determines	appropriate	limits	for	different	derivative	products	within	broad	policy	framework	
	    	    	    	      •	   reviews	the	limit	breaches	and	take	appropriate	actions
                      The Risk department of the Bank is responsible for measuring, reporting and monitoring risk arising from Derivative transactions and
                      functions independently of the Treasury. The risk management methods generally applied are quantitative like counter party limits, deal
                      sizes, overnight, PVBP and stop-loss limits.
                      During the year the Bank has put in place a ‘Customer Appropriateness Policy’ which is used to classify the clients depending on their
                      understanding of the derivative products. Further the Bank has also constituted a New Product Committee that is responsible for
                      approving any new derivative structure and also for deciding to which category of clients the product can be offered.
                      The Risk Management function undertakes the following activities:-
	    	    	    	      •	   monitors	daily	derivatives	operations	against	the	set	out	policies	and	limits	
	    	    	    	      •	   reviews	daily	dealers	profitability	and	activity	reports	for	derivative	operations
	    	    	    	      •	   reports	MIS	to	the	ALCO	on	a	periodic	basis	as	well	as	exception	reporting
	    	    	    	      •	   approves	non-vanilla	derivative	deals	for	proprietary	business
	    	    	    	      •	   ensures	 monitoring	 the	 continuing	 effectiveness	 of	 derivative	 deals	 identified	 as	 hedges	 having	 regard	 to	 the	 terms	 of	 the	
                           hedging instrument and the underlying hedged risk.

               ii.    Accounting policy for recording hedge and non-hedge transactions, recognition of income, premiums and discounts, valuation of
                      outstanding contracts:
                      Derivative transactions identified as “Hedges” are not marked to market and income on these is recorded on an accrual basis. All other
                      derivative transactions are marked to market and the resultant gains / loss is accounted for in the Profit and Loss Account. Option
                      premia paid is accounted for in the Profit and Loss Account on expiry of the Option.

               iii.   Provisioning, collateral and credit risk mitigation:
                      The derivative limit sanctioned to clients is part of the overall limit sanctioned post credit appraisal. Collateral is accepted on a case to
                      case basis considering the volatility of the price of the collateral and any increase in operational, legal and liquidity risk.

                      Quantitative Disclosures:
                                                                                                                                                     Rupees in lakhs
                      Sr. Particulars                                                                                         Currency                Interest rate
                      No.                                                                                                   Derivatives                Derivatives
                      1.   Derivatives (Notional Principal Amount)                                                        1,908,630.86              10,102,379.84
                           (a)   For hedging                                                                                  24,673.80                  28,024.00
                           (b)   For trading                                                                              1,883,957.06              10,074,355.84
                      2.   Marked to Market Positions **
                           (a)   Asset (+)                                                                                    89,982.10                  43,802.69
                           (b)   Liability (–)                                                                                89,982.28                  43,765.79



88       Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

                       Quantitative Disclosures: (Contd.)
                                                                                                                                              Rupees in lakhs
                       Sr. Particulars                                                                                       Currency          Interest rate
                       No.                                                                                                 Derivatives          Derivatives
                       3.   Credit Exposure                                                                                132,324.53             76,109.29
                       4.   Likely impact of one percentage change in interest rate (100*PV01)
                            (a)   on hedging derivatives                                                                       628.96                  284.47
                            (b)   on trading derivatives                                                                        41.18                  136.07
                       5.   Maximum of 100*PV01 observed during the year
                            (a)   on hedging derivatives                                                                     1,911.87                  403.29
                            (b)   on trading derivatives                                                                     1,885.14              3,971.57
                       6.   Minimum of 100*PV01 observed during the year
                            (a)   on hedging derivatives                                                                        18.74                   17.49
                            (b)   on trading derivatives                                                                          5.33                  14.35

                       Currency interest rate swaps have been included under currency derivatives.
                       ** MTM has been considered at product level.
                       The net position is shown under asset / liability, as the case is for each type of derivatives.
                       The overnight Net open position as at 31st March, 2008 is Rs. 4,478.00 lakhs (Previous Year Rs. 6,681.00 lakhs).

    12. During the year ended 31st March, 2008, the Bank has not exceeded the prudential exposure limits as laid down by RBI guidelines for Single
        Borrower Limit (SGL) and Group Borrower Limit (GBL).

    13. Provisions and Contingencies:
         Breakup of “Provisions and Contingencies” shown under the head Expenditure in Profit and Loss Account
                                                                                                                                              Rupees in lakhs
         Particulars                                                                                               31st March, 2008         31st March, 2007
         Provisions for depreciation on Investment                                                                            (48.45)                  (53.17)
         Provision towards NPA (including write-offs net of write-backs)                                                   14,368.71               6,019.50
         Provision towards Standard Asset                                                                                   4,147.19               6,276.31
         Provision for Country Risk                                                                                           (14.00)                   14.00
         Provision for Taxes                                                                                               10,384.77               6,188.00
         Other Provision and Contingencies*                                                                                 8,757.54                      —
         Total                                                                                                             37,595.76              18,444.64
         * For the year ended 31st March, 2008 includes contingent provisions against derivative contracts Rs. 8,600.00 lakhs & provisions for fees
         receivable Rs. 157.54 lakhs.

    14. Provision made for taxes during the year:
                                                                                                                                              Rupees in lakhs
                                                                                                                   31st March, 2008         31st March, 2007
         Current Tax                                                                                                       17,178.93               9,177.00
         Deferred Tax                                                                                                      (7,349.16)             (3,340.00)
         Fringe Benefit Tax                                                                                                   550.00                   350.00
         Wealth Tax                                                                                                             5.00                     1.00
         Total                                                                                                             10,384.77               6,188.00



                                                                                                                         Kotak Mahindra Bank Limited       89
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

     15. No penalties or strictures have been imposed on the Bank during the year by the RBI.
     16. (a)     Status of Shareholder Complaints:
                                                                                                             31st March, 2008            31st March, 2007
                 (a)   No. of complaints pending at the beginning of the year                                               NIL                        NIL
                 (b)   No. of complaints received during the year                                                           119                        135
                 (c)   No. of complaints redressed during the year                                                          119                        135
                 (d)   No. of complaints pending at the end of the year                                                     NIL                        NIL

           (b)   Status of Customer Complaints:
                                                                                                             31st March, 2008            31st March, 2007
                 (a)   No. of complaints pending at the beginning of the year                                               150                       127
                 (b)   No. of complaints received during the year                                                        20,894                    11,299
                 (c)   No. of complaints redressed during the year                                                       20,803                    11,276
                 (d)   No. of complaints pending at the end of the year                                                     241                       150

           (c)   Status of Awards passed by the Banking Ombudsman:
                                                                                                             31st March, 2008            31st March, 2007
                 (a)   No. of unimplemented Awards at the beginning of the year                                                1                         0
                 (b)   No. of Awards passed by the Banking Ombudsman during the year                                         NIL                         2
                 (c)   No. of Awards implemented during the year                                                               1                         1
                 (d)   No. of unimplemented Awards at the end of the year                                                    NIL                        1*
                 * Award received on 26th March, 2007 and award implemented on 12th April, 2007
                 This has been furnished by the Management and relied upon by the auditors.


B.   OTHER DISCLOSURES :
     1.    Qualified Institutional Placement (QIP)
           The Bank raised Rs 161,500.00 lakhs by allotting 17,000,000 equity shares of Rs. 10/- each through a Qualified Institutional Placement (QIP) at
           a price of Rs. 950/- per share. The net issue expenses of Rs. 903.26 lakhs related to the aforesaid issue have been charged to the share premium
           account as allowed under section 78 of the Companies Act, 1956. The above expenses include Rs. 50 lakhs paid to the auditors in connection
           with the issue.
     2.    Earnings per Equity Share:
                                                                                                                   Year ended                  Year ended
                                                                                                             31st March, 2008            31st March, 2007
           Reconciliation between weighted shares used in the computation of basic and diluted
           earnings per share:
           Weighted average number of equity shares used in computation of basic earnings per share               33,46,94,328               32,41,86,155
           Effect of potential equity shares for stock options outstanding                                           50,14,491                  25,76,394
           Weighted average number of equity shares used in computation of diluted earnings per
           share                                                                                                  33,97,08,819               32,67,62,549
           Following is the reconciliation between basic and diluted earnings per share
           Nominal value per share:                                                                                       10.00                      10.00
           Basic earnings per share                                                                                         8.78                      4.36
           Effect of potential equity shares for stock options                                                              0.13                      0.03
           Diluted earnings per share                                                                                       8.65                      4.33
           Earnings used in the computation of basic and diluted earnings per share (Rs. lakhs)                      29,393.28                  14,136.52



90        Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

    3.   Segment Reporting:
         Effective 31st March, 2008, the Bank has adopted RBI’s revised guidelines issued in April 2007 on segment reporting in terms of which the
         reportable segments are as outlined in para “J” of Significant Accounting Policies. Summary of the operating segments of the Bank for the year
         ended 31st March, 2008 are as given below:
                                                                                                                                       Rupees in lakhs

                                                                                                                                   31st March, 2008

         1.   Segment Revenue
              a.   Treasury                                                                                                               74,364.89
              b.   Corporate / Wholesale Banking                                                                                          95,498.73
              c.   Retail Banking:
                   (i)     Lending                                                                                                       145,865.33
                   (ii)    Branch Banking                                                                                                 64,508.80
                               Sub-total                                                                                                 210,374.13
              d.   Other Banking business                                                                                                     911.70
                   Sub-total                                                                                                             381,149.45
              Less: Inter-segmental revenue                                                                                               81,744.16
              Add: Unallocated Income                                                                                                         477.47
                   Total                                                                                                                 299,882.76

         2.   Segment Results
              a.   Treasury                                                                                                                  (582.57)
              b.   Corporate / Wholesale Banking                                                                                          33,362.92
              c.   Retail Banking:
                   (i)     Lending                                                                                                        20,896.93
                   (ii)    Branch Banking                                                                                                 (14,668.30)
                               Sub-total                                                                                                    6,228.63
              d.   Other Banking business                                                                                                     291.60
                   Sub-total                                                                                                              39,300.58
              Add: Unallocated Income                                                                                                         477.47
                   Total Profit Before Tax                                                                                                39,778.05

         3.   Segment Assets
              a.   Treasury                                                                                                            1,183,461.05
              b.   Corporate / Wholesale Banking                                                                                         821,633.05
              c.   Retail Banking:
                   (i)     Lending                                                                                                     1,158,096.24
                   (ii)    Branch Banking                                                                                                799,651.11
                               Sub-total                                                                                               1,957,747.35
              d.   Other Banking business                                                                                                          —
                   Sub-total                                                                                                           3,962,841.45
              Less: Inter-segmental Assets                                                                                             1,145,792.42
                   Total                                                                                                               2,817,049.03



                                                                                                              Kotak Mahindra Bank Limited           91
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                                   Rupees in lakhs

                                                                                                                               31st March, 2008

        4.   Segment Liabilities
             a.   Treasury                                                                                                          1,046,265.80
             b.   Corporate / Wholesale Banking                                                                                       665,997.26
             c.   Retail Banking:
                  (i)     Lending                                                                                                   1,088,125.37
                  (ii)    Branch Banking                                                                                              814,242.62
                              Sub-total                                                                                             1,902,367.99
             d.   Other Banking business                                                                                                        —
                  Sub-total                                                                                                         3,614,631.05
             Less: Inter-segmental Liabilities                                                                                      1,145,792.42
                  Total                                                                                                             2,468,838.63

        5.   Unallocated Assets net of Liabilities                                                                                       5,341.36

        6.   Capital Expenditure
             a.   Treasury                                                                                                               2,930.99
             b.   Corporate / Wholesale Banking                                                                                            612.44
             c.   Retail Banking:
                  (i)     Lending                                                                                                        1,663.60
                  (ii)    Branch Banking                                                                                                 6,873.12
                              Sub-total                                                                                                  8,536.72
             d.   Other Banking business                                                                                                    46.49
                  Total                                                                                                                12,126.64

        7.   Depreciation
             a.   Treasury                                                                                                               1,443.61
             b.   Corporate / Wholesale Banking                                                                                            435.93
             c.   Retail Banking:
                  (i)     Lending                                                                                                          701.15
                  (ii)    Branch Banking                                                                                                 2,499.05
                              Sub-total                                                                                                  3,200.20
             d.   Other Banking business                                                                                                      5.80
                  Total                                                                                                                  5,085.54

        In accordance with Accounting Standard 17 (AS-17) on Segment Reporting issued by the Institute of Chartered Accountants of India, the Bank
        had determined business segments as outlined in para “J” of Significant Accounting Policies for the year ended 31st March, 2007. Summary of



92     Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

        the operating segments of the Bank for the year ended 31st March, 2007 & the comparative numbers for the year ended 31st March, 2008 are
        given below:
                                                                                                                                 Rupees in lakhs

                                                                                                    31st March, 2008           31st March, 2007

        1.   Segment Revenue
             a.   Lending                                                                                 174,347.24                 91,643.97
             b.   Corporate Banking                                                                        67,016.82                 37,418.74
             c.   Treasury & Investments                                                                   74,364.89                 40,848.52
             d.   Retail Liabilities                                                                       64,508.80                 36,217.10
             e.   Venture Fund Management                                                                      911.70                 1,783.71
                          Sub-total                                                                       381,149.45               207,912.04
             Less: Inter-segmental revenue                                                                 81,744.16                 44,138.77
             Add: Unallocated Income                                                                           477.47                     2.59
                  Total                                                                                   299,882.76               163,775.86
        2.   Segment Results
             a.   Lending                                                                                  33,995.36                 11,240.52
             b.   Corporate Banking                                                                        20,264.49                 10,165.42
             c.   Treasury & Investments                                                                      (582.57)                 2,360.52
             d.   Retail Liabilities                                                                       (14,668.30)               (4,232.64)
             e.   Venture Fund Management                                                                      291.60                   788.11
                  Total                                                                                    39,300.58                 20,321.93
             Add: Unallocated Income                                                                           477.47                     2.59
                  Total Profit Before Tax                                                                  39,778.05                 20,324.52
        3.   Segment Assets
             a.   Lending                                                                               1,325,413.43               868,847.51
             b.   Corporate Banking                                                                       654,315.86               443,331.71
             c.   Treasury & Investments                                                                1,183,461.05               932,133.34
             d.   Retail Liabilities                                                                      799,651.11               488,162.09
             e.   Venture Fund Management                                                                           —                   771.93
                          Sub-total                                                                     3,962,841.45              2,733,246.58
             Less: Inter-segmental Assets                                                               1,145,792.42               748,739.08
                  Total                                                                                 2,817,049.03              1,984,507.50
        4.   Segment Liabilities
             a.   Lending                                                                               1,101,893.44               784,185.78
             b.   Corporate Banking                                                                       652,229.22               409,566.30
             c.   Treasury & Investments                                                                1,046,265.80               884,925.86
             d.   Retail Liabilities                                                                      814,242.62               492,644.25
             8.   Venture Fund Management                                                                           —                    63.20
                          Sub-total                                                                     3,614,631.08              2,571,385.39
             Less: Inter-segmental Liabilities                                                          1,145,792.42               748,739.08
                  Total                                                                                 2,468,838.66              1,822,646.31



                                                                                                         Kotak Mahindra Bank Limited         93
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                                           Rupees in lakhs

                                                                                                            31st March, 2008            31st March, 2007

           5.   Unallocated Assets net of Liabilities                                                                 5,341.36                   1,488.65

           6.   Capital Expenditure
                a.     Lending                                                                                        1,757.37                     845.89
                b.     Corporate Banking                                                                                 518.67                    765.69
                c.     Treasury & Investments                                                                         2,930.99                   1,859.58
                d.     Retail Liabilities and Branch Banking                                                          6,873.12                   3,693.27
                e.     Venture Fund Management                                                                            46.49                       7.24
                       Total                                                                                         12,126.64                   7,171.67

           7.   Depreciation
                a.     Lending                                                                                           742.43                    602.08
                b.     Corporate Banking                                                                                 394.65                    432.58
                c.     Treasury & Investments                                                                         1,443.61                     681.01
                d.     Retail Liabilities and Branch Banking                                                          2,499.05                   1,756.76
                e.     Venture Fund Management                                                                             5.80                       1.51
                       Total                                                                                          5,085.54                   3,473.94

           In computing the above information, certain estimates and assumptions have been made by the Management which have been relied upon by
           the auditors

     4.    Lease Disclosures:
           a.   The Bank has taken various premises under operating lease. The lease payments recognised in the Profit and Loss Account are Rs. 6,888.84
                lakhs (previous year Rs. 3,191.90 lakhs). The sub-lease income recognised in the Profit and Loss Account is Rs. 441.86 lakhs (previous year
                Rs. 314.94 lakhs).

           b.   The future minimum lease payments under non cancellable operating lease – not later than one year is Rs. 7,776.37 lakhs (previous year
                Rs. 2,901.54 lakhs), later than one year but not later than five years is Rs. 28,280.61 lakhs (previous year Rs. 13,846.08 lakhs) and later
                than five years Rs. 13,819.98 lakhs (previous year Rs. 23,414.64 lakhs).
           c.   Details of gross investments, unearned finance income in respect of assets given under finance lease are as under:
                                                                                                                                           Rupees in lakhs
                Particulars                                                                                             As at                       As at
                                                                                                            31st March, 2008            31st March, 2007
                Gross Investments:
                (i)    Not later than 1 year                                                                                  —                     39.15
                (ii)   Between 1-5 years                                                                                      —                         —
                               Total                                                                                          —                     39.15
                Unearned Finance Income:
                (i)    Not later than 1 year                                                                                  —                       0.04
                (ii)   Between 1-5 years                                                                                      —                         —
                               Total                                                                                          —                       0.04
                Accumulated provision on the Gross Investments                                                                —                     39.15




94        Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

    5.   Deferred Taxes:
         “Others” in Other Assets [Schedule 11 (VI)] includes deferred tax asset (net) of Rs. 13,075.63 lakhs (previous year Rs. 5,726.47 lakhs). The
         components of the same are as follows:
                                                                                                                                      Rupees in lakhs
         Particulars                                                                                           Year ended                 Year ended
                                                                                                        31st March, 2008            31st March, 2007
         Deferred Tax Liability:
         Depreciation                                                                                               294.84                    116.40
             Sub-total                                                                                              294.84                    116.40
         Deferred Tax Assets:
         Provision for NPA and general provision on standard assets                                              12,553.76                  4,995.38
         Expenditure allowed on payment basis / others                                                              816.71                    847.49
             Sub-total                                                                                           13,370.47                  5,842.87
         Net Deferred Tax Asset                                                                                  13,075.63                  5,726.47
    6.   Fixed Assets as per Schedule 10 include intangible assets relating to software and system development expenditure which are as follows:
                                                                                                                                      Rupees in lakhs
         Particulars                                                                                            Year ended                  Year ended
                                                                                                          31st March, 2008          31st March, 2007
         Gross Block
         At cost on 31st March of the preceding year                                                               2,791.02                   2,046.63
         Additions during the year                                                                                 1,437.88                     744.39
         Deductions during the year                                                                                       —                         —
             Total                                                                                                 4,228.90                   2,791.02
         Depreciation
         As at 31st March of the preceeding year                                                                   1,996.61                   1,572.58
         Charge for the year                                                                                         613.91                     424.03
         Deductions during the year                                                                                       —                         —
         Depreciation to date                                                                                      2,610.52                   1,996.61
         Net Block                                                                                                 1,618.38                     794.41
    7.   Balances with banks in current accounts [Schedule 7 – I (i) (a)] include Rs. 1,767.08 lakhs (previous year Rs. 1,735.84 lakhs) maintained as
         collateral in respect of receivables securitised by the Bank.
    8.   Related Party Disclosures:
         A. Parties where control exists:
                Nature of relationship                     Related Party
                Individual having control over the         Effective October 15, 2007, Uday S. Kotak, Executive Vice Chairman and Managing Director
                enterprise                                 (also considered as Key Management Personnel), along with relatives and enterprises in
                                                           which he has beneficial interest, ceased to hold more than 50% of the equity share capital
                                                           of Kotak Mahindra Bank Limited. Uday S. Kotak along with relatives and enterprises in
                                                           which he has beneficial interest holds 48.69% of the equity share capital of Kotak Mahindra
                                                           Bank Limited as on 31st March, 2008.
                Subsidiary Companies                       Kotak Mahindra Prime Limited
                                                           Kotak Securities Limited
                                                           Kotak Mahindra Capital Company Limited
                                                           Kotak Investment Advisors Limited (Formerly known as Kotak Mahindra Securities Limited)
                                                           Kotak Mahindra (International) Limited
                                                           Kotak Mahindra (UK) Limited
                                                           Kotak Mahindra Inc.
                                                           Global Investment Opportunities Fund Ltd.
                                                           Kotak Mahindra Old Mutual Life Insurance Limited
                                                           Kotak Mahindra Asset Management Company Limited
                                                           Kotak Mahindra Trusteeship Services Limited
                                                           Kotak Mahindra Trustee Company Limited
                                                           Kotak Forex Brokerage Limited
                                                           Kotak Mahindra Investments Limited



                                                                                                              Kotak Mahindra Bank Limited            95
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

        B.   Other Related Parties:

              Nature of Relationship                  Related Party
              Associates                              Business Standard Limited
                                                      India Car Private Limited (Upto 25th November, 2007)
                                                      Kotak Mahindra Asset Reconstruction Company Limited
              Key Management Personnel                Mr. Uday S. Kotak, Executive Vice Chairman and Managing Director
                                                      Mr. C. Jayaram, Executive Director
                                                      Mr. Dipak Gupta, Executive Director
              Relatives of Key Management Personnel   Ms. Pallavi Kotak
                                                      Mr. Suresh Kotak
                                                      Ms. Indira Kotak
                                                      Mr. Jay Kotak
                                                      Mr. Dhawal Kotak
                                                      Ms. Aarti Chandaria
                                                      Ms. Anita Gupta
                                                      Ms. Urmila Gupta
                                                      Ms. Usha Jayaram


        C.   Related Parties:
                                                                                                                             Rupees in lakhs

              Sr.     Items/Related Party                     Individual       Subsidiary     Associates             Key        Relatives
              No.                                                having       Companies                      Management           of Key
                                                                Control                                        Personnel     Management
                                                                                                                               Personnel
              I.      Liabilities
                      Deposits                                              273,171.53           18.24
                                                                            (133,910.79)         (14.49)
                      Other Liabilities                                           27.31
                                                                                  (20.28)
              II.     Assets
                      Advances                                                    48.32         313.80
                                                                                   (0.00)       (333.84)
                      Investments-Gross                                      29,788.75          929.27
                                                                             (22,142.50)      (1,199.27)
                      Diminution on Investments                                                    1.50
                                                                                                 (27.89)
                      Commission Receivable                                     401.15
                                                                                (226.34)
                      Others                                                  2,232.14
                                                                                (333.27)
              III.    Expenses
                      Salaries/fees                                                                               803.59
                                                                                                                  (432.33)
                      Interest Paid                                          11,041.38              0.07
                                                                             (10,413.82)           (3.78)
                      Others                                                      98.48
                                                                                (155.07)



96     Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                               Rupees in lakhs

              Sr.   Items/Related Party                     Individual       Subsidiary        Associates           Key           Relatives
              No.                                              having       Companies                       Management              of Key
                                                              Control                                         Personnel        Management
                                                                                                                                 Personnel
              IV.   Income
                    Dividend                                                1,199.99                  —
                                                                                 (—)               (4.50)
                    Interest Received                                            15.76            31.08
                                                                                   (—)            (17.77)
                    Others                                                  3,928.57
                                                                            (2,018.88)
              V.    Other Transactions
                    Issue Management Fees                                         25.00
                                                                                (450.05)
                    Dividend paid                           1,071.92                                                3.68               6.92
                                                              (918.79)                                             (2.48)             (5.93)
                    Reimbursement to companies                                  587.63
                                                                                (208.36)
                    Reimbursement from companies                            9,224.39
                                                                            (5,912.35)
                    Purchase of Fixed assets                                     32.75
                                                                                 (45.57)
                    Sale of Fixed assets                                         59.44
                                                                                  (8.33)

                                                                                                                               Rupees in lakhs
              Sr.   Items/Related Party              Individual    Subsidiary     Associates            Key Relatives of Key          TOTAL
              No.                                       having    Companies                     Management    Management
                                                       Control                                    Personnel       Personnel
              I.    Liabilities:
                    Other liabilities
                    Brokerage payable
                    Kotak Mahindra Prime Limited                         —                                                               —
                                                                     (20.28)                                                         (20.28)
                    Other Payable
                    Kotak Mahindra Investments
                    Limited                                              6.55                                                          6.55
                                                                          (—)                                                           (—)
                    Kotak Mahindra Prime Limited                         5.63                                                          5.63
                                                                          (—)                                                           (—)
                    Kotak Mahindra (International)
                    Limited                                              9.79                                                          9.79
                                                                          (—)                                                           (—)
                    Kotak Mahindra (UK) Limited                          3.63                                                          3.63
                                                                          (—)                                                           (—)
                    Other Subsidiaries                                   1.71                                                          1.71
                                                                          (—)                                                           (—)



                                                                                                       Kotak Mahindra Bank Limited         97
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                             Rupees in lakhs
              Sr.    Items/Related Party              Individual    Subsidiary   Associates           Key Relatives of Key          TOTAL
              No.                                        having    Companies                  Management    Management
                                                        Control                                 Personnel       Personnel
              II.    Assets:
                     Investments
                     Kotak Mahindra Old Mutual Life
                     Insurance Limited                             24,493.93                                                   24,493.93
                                                                   (16,847.68)                                                 (16,847.68)
                     Kotak Mahindra Asset
                     Management Company Limited                     1,980.00                                                    1,980.00
                                                                    (1,980.00)                                                  (1,980.00)
                     Kotak Mahindra Investments
                     Limited                                          305.03                                                      305.03
                                                                      (305.03)                                                    (305.03)
                     Other Subsidiaries                             3,009.79                                                    3,009.79
                                                                    (3,009.79)                                                  (3,009.79)
                     Business Standard Limited                                     927.77                                         927.77
                                                                                   (927.77)                                       (927.77)
                     India Car Private Limited                                          —                                              —
                                                                                   (270.00)                                       (270.00)
                     Kotak Mahindra Asset
                     Reconstruction Company
                     Limited                                                          1.50                                           1.50
                                                                                     (1.50)                                         (1.50)
                     Diminution on Investments
                     India Car Private Limited                                          —                                              —
                                                                                    (26.39)                                        (26.39)
                     Kotak Mahindra Asset
                     Reconstruction Company
                     Limited                                                          1.50                                           1.50
                                                                                     (1.50)                                         (1.50)
                     Commission Receivable
                     Kotak Mahindra Old Mutual Life
                     Insurance Limited                                401.15                                                      401.15
                                                                      (226.34)                                                    (226.34)
                     Others
                     Kotak Mahindra Prime Limited                     250.43                                                      250.43
                                                                       (68.05)                                                     (68.05)
                     Kotak Securities Limited                       1,645.45                                                    1,645.45
                                                                       (67.43)                                                     (67.43)
                     Kotak Mahindra Old Mutual Life
                     Insurance Limited                                   1.00                                                        1.00
                                                                       (61.80)                                                     (61.80)
                     Kotak Mahindra Capital
                     Company Limited                                   56.14                                                       56.14
                                                                       (67.07)                                                     (67.07)



98     Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                             Rupees in lakhs
              Sr.    Items/Related Party              Individual    Subsidiary   Associates           Key Relatives of Key          TOTAL
              No.                                        having    Companies                  Management    Management
                                                        Control                                 Personnel       Personnel
                     Kotak Mahindra Asset
                     Management Company Limited                       19.26                                                        19.26
                                                                      (36.81)                                                      (36.81)
                     Kotak Mahindra (UK) Limited                     190.19                                                       190.19
                                                                        (—)                                                          (—)
                     Other Subsidiaries                               69.67                                                        69.67
                                                                      (32.11)                                                      (32.11)
              III.   Expenses:
                     Salaries
                     Mr. Uday Kotak                                                               153.05                          153.05
                                                                                                   (92.07)                         (92.07)
                     Mr. C. Jayaram                                                               330.74                          330.74
                                                                                                  (172.70)                        (172.70)
                     Mr. Dipak Gupta                                                              319.80                          319.80
                                                                                                  (167.56)                        (167.56)
                     Other Expenses
                     Brokerage
                     Kotak Mahindra Prime Limited                         —                                                            —
                                                                      (62.19)                                                      (62.19)
                     Kotak Securities Limited                         20.60                                                        20.60
                                                                      (13.76)                                                      (13.76)
                     Premium
                     Kotak Mahindra Old Mutual Life
                     Insurance Limited                                77.88                                                        77.88
                                                                      (79.12)                                                      (79.12)
              IV.    Income:
                     Dividend
                     Kotak Securities Limited                      1,199.99                                                     1,199.99
                                                                        (—)                                                          (—)
                     India Car Private Limited                                          —                                              —
                                                                                     (4.50)                                         (4.50)
                     Other Income
                     Insurance Commission and
                     Rental Income
                     Kotak Mahindra Old Mutual Life
                     Insurance Limited                             2,395.70                                                     2,395.70
                                                                   (1,085.06)                                                   (1,085.06)
                     Rental and other Income
                     Kotak Securities Limited                        645.63                                                       645.63
                                                                     (356.21)                                                     (356.21)




                                                                                                    Kotak Mahindra Bank Limited          99
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

              Sr.    Items/Related Party              Individual    Subsidiary   Associates           Key Relatives of Key      TOTAL
              No.                                        having    Companies                  Management    Management
                                                        Control                                 Personnel       Personnel
                     Kotak Mahindra Capital
                     Company Limited                                 275.65                                                   275.65
                                                                     (178.53)                                                 (178.53)
                     Kotak Mahindra Asset
                     Management Company Limited                      180.02                                                    180.02
                                                                      (95.26)                                                   (95.26)
                     Kotak Mahindra Prime Limited
                                                                     331.80                                                   331.80
                                                                     (275.32)                                                 (275.32)
                     Other Subsidiaries                               99.77                                                     99.77
                                                                      (28.50)                                                   (28.50)
              V.     Other Transactions:
                     Issue Management Fees                             25.00                                                    25.00
                                                                     (450.05)                                                 (450.05)
                     Dividend paid
                     Mr. Uday Kotak                   1,071.92                                                               1,071.92
                                                        (918.79)                                                               (918.79)
                     Mr. C. Jayaram                                                                  1.92                         1.92
                                                                                                    (1.11)                       (1.11)
                     Mr. Dipak Gupta                                                                 1.76                         1.76
                                                                                                    (1.37)                       (1.37)
                     Ms. Pallavi Kotak                                                                               1.94         1.94
                                                                                                                    (1.67)       (1.67)
                     Ms. Indira Kotak                                                                                4.25         4.25
                                                                                                                    (3.64)       (3.64)
                     Others                                                                                          0.73         0.73
                                                                                                                    (0.62)       (0.62)
                     Reimbursements to companies
                     Kotak Mahindra Capital
                     Company Limited                                 183.12                                                    183.12
                                                                      (38.41)                                                   (38.41)
                     Kotak Mahindra Prime Limited                     33.01                                                     33.01
                                                                      (23.30)                                                   (23.30)
                     Kotak Mahindra Old Mutual Life
                     Insurance Limited                               108.92                                                   108.92
                                                                      (92.70)                                                  (92.70)
                     Kotak Securities Limited                         46.49                                                     46.49
                                                                      (15.29)                                                   (15.29)
                     Kotak Mahindra Asset
                     Management Company Limited                          8.13                                                     8.13
                                                                        (9.44)                                                   (9.44)
                     Kotak Mahindra Investments
                     Limited                                         170.15                                                   170.15
                                                                      (28.10)                                                  (28.10)



100    Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

              Sr.    Items/Related Party                    Individual      Subsidiary   Associates           Key Relatives of Key        TOTAL
              No.                                              having      Companies                  Management    Management
                                                              Control                                   Personnel       Personnel
                     Other Subsidiaries                                        37.81                                                      37.81
                                                                                (1.12)                                                     (1.12)
                     Reimbursements from
                     companies
                     Kotak Mahindra Capital
                     Company Limited                                       1,104.42                                                  1,104.42
                                                                             (909.14)                                                  (909.14)
                     Kotak Mahindra Prime Limited                            442.19                                                   442.19
                                                                             (306.76)                                                 (306.76)
                     Kotak Mahindra Old Mutual Life
                     Insurance Limited                                       713.42                                                   713.42
                                                                             (315.16)                                                 (315.16)
                     Kotak Securities Limited                              6,133.04                                                  6,133.04
                                                                           (3,840.24)                                                (3,840.24)
                     Other Subsidiaries                                      831.32                                                   831.32
                                                                             (541.05)                                                 (541.05)
                     Purchase of Fixed assets
                     Kotak Mahindra Prime Limited                              15.16                                                      15.16
                                                                                (2.91)                                                     (2.91)
                     Kotak Mahindra Asset
                     Management Company Limited                                    —                                                          —
                                                                                (1.53)                                                     (1.53)
                     Kotak Securities Limited                                      —                                                          —
                                                                                (5.49)                                                     (5.49)
                     Kotak Mahindra Capital
                     Company Limited                                          14.60                                                       14.60
                                                                              (35.64)                                                     (35.64)
                     Kotak Mahindra Investments
                     Limited                                                    2.99                                                       2.99
                                                                                 (—)                                                        (—)
                     Sale of Fixed assets
                     Kotak Mahindra Old Mutual Life
                     Insurance Limited                                           4.74                                                       4.74
                                                                                (6.78)                                                     (6.78)
                     Kotak Mahindra Capital
                     Company Limited                                             5.77                                                       5.77
                                                                                (1.55)                                                     (1.55)
                     Kotak Investment Advisors
                     Limited                                                   36.98                                                      36.98
                                                                                 (—)                                                        (—)
                     Other Subsidiaries                                        11.95                                                      11.95
                                                                                 (—)                                                        (—)

            Note: Figures in brackets represent previous year’s figures.



                                                                                                            Kotak Mahindra Bank Limited       101
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

      9.    ESOPs :
            At the General Meetings of the holding company, Kotak Mahindra Bank Limited, the shareholders of the Bank had unanimously passed Special
            Resolution on 28th July, 2000, 26th July, 2004, 26th July, 2005, 5th July, 2007 and 21st August, 2007, to grant options to the Eligible Employees
            of the Bank and its subsidiaries companies. Pursuant to these resolutions, the following four Employees Stock Option Schemes had been
            formulated and adopted:
            (a)   Kotak Mahindra Equity Option Scheme 2001-02
            (b)   Kotak Mahindra Equity Option Scheme 2002-03
            (c)   Kotak Mahindra Equity Option Scheme 2005
            (d)   Kotak Mahindra Equity Option Scheme 2007

            Consequent to the above, the Bank has granted stock options to the employees of the Company. The Bank under its various plan/schemes, has
            granted in aggregate 1,99,53,150 options as on 31st March, 2008 (previous year 1,49,45,100).

            The Bank has provided various share-based payment schemes to its employees. During the year ended 31st March, 2008, the following schemes
            were in operation:
                                                                                        Plan 2002-03*                   Plan 2005                       Plan 2007
            Date of grant                                                                  Various Dates              Various Dates                Various Dates
            Date of Board Approval                                                         Various Dates              Various Dates                Various Dates
            Date of Shareholder’s approval                                                 July 26, 2004              July 26, 2005             July 5, 2007 and
                                                                                                                                                August 21, 2007
            Number of options granted                                                         28,52,500                     54,86,600                   50,08,050
            Method of Settlement (Cash/Equity)                                                    Equity                       Equity                        Equity
            Vesting Period                                                                1 – 3.08 years             1 – 4.13 years             1.08 – 4.25 Years
            Exercise Period                                                           0.58 – 0.75 years           0.42 – 0.83 years             0.42 – 0.92 Years
            Vesting Conditions                                                           Graded Vesting         Graded/Cliff vesting       Graded/Cliff vesting

            The details of activity under Plan 2002-03* have been summarized below:

                                                                                                 Year ended                                Year ended
                                                                                              31st March, 2008                          31st March, 2007
                                                                                                              Weighted                                   Weighted
                                                                                                               Average                                    Average
                                                                                           Number               Exercise            Number                 Exercise
                                                                                          of Shares           Price (Rs.)          of Shares             Price (Rs.)
            Outstanding at the beginning of the year                                     17,40,034                79.92           37,01,250                  61.18
            Granted during the year                                                              Nil                 Nil                  Nil                   Nil
            Forfeited during the year                                                            Nil                 Nil                  Nil                   Nil
            Exercised during the year                                                      8,23,904               80.00           18,61,083                  43.11
            Expired during the year                                                        1,03,318               78.73            1,00,133                  71.17
            Outstanding at the end of the year                                             8,12,802               80.00           17,40,034                  79.92
            Exercisable at the end of the year                                                    —                   —                   —                     —
            Weighted average remaining contractual life (in years)                                     0.31                                      0.96
            Weighted average fair value of options granted                                             Nil                                       Nil

            *The options have been adjusted for issue of bonus shares – one share for every share allotted on 28th August, 2004 and three equity shares for
            every two shares allotted on 30th August, 2005.



102        Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

        The details of activity under Plan 2005 have been summarized below:
                                                                                               Year ended                        Year ended
                                                                                            31st March, 2008                  31st March, 2007
                                                                                                       Weighted                            Weighted
                                                                                                         Average                            Average
                                                                                         Number          Exercise          Number            Exercise
                                                                                        of Shares      Price (Rs.)        of Shares        Price (Rs.)
        Outstanding at the beginning of the year                                       53,24,600          247.59                Nil                Nil
        Granted during the year                                                               Nil              Nil       54,86,600            245.37
        Forfeited during the year                                                             Nil              Nil              Nil                Nil
        Exercised during the year                                                       6,93,230           96.42                Nil                Nil
        Expired during the year                                                         3,56,380          240.82          1,62,000            172.70
        Outstanding at the end of the year                                             42,75,000          272.66         53,24,600            247.59
        Exercisable at the end of the year                                              1,54,760          189.74                —                  —
        Weighted average remaining contractual life (in years)                                    2.19                               3.00
        Weighted average fair value of options granted                                             Nil                              174.86

        The details of activity under Plan 2007 have been summarized below:
                                                                                               Year ended                        Year ended
                                                                                            31st March, 2008                  31st March, 2007
                                                                                                        Weighted                           Weighted
                                                                                                         Average                            Average
                                                                                         Number           Exercise         Number            Exercise
                                                                                        of Shares       Price (Rs.)       of Shares        Price (Rs.)
        Outstanding at the beginning of the year                                              Nil               Nil             Nil                Nil
        Granted during the year                                                        50,08,050           506.63               Nil                Nil
        Forfeited during the year                                                             Nil               Nil             Nil                Nil
        Exercised during the year                                                             Nil               Nil             Nil                Nil
        Expired during the year                                                         2,59,500           406.16               Nil                Nil
        Outstanding at the end of the year                                             47,48,550           512.13               Nil                Nil
        Exercisable at the end of the year                                                     —                —               Nil                Nil
        Weighted average remaining contractual life (in years)                                     2.92                              Nil
        Weighted average fair value of options granted                                            371.97                             Nil

        The details of exercise price for stock options outstanding at the end of the year are:
        31st March, 2008
                                                                                         Weighted average
                                                         Number of
        Range of exercise                                                              remaining contractual             Weighted average
                                                          options
        prices                                                                            life of options                 exercise price
                                                        outstanding
                                                                                             (in years)
        0-100                                            11,62,952                              0.42                             58.92
        101-200                                          11,39,150                              1.07                            150.44
        201-300                                           2,65,000                              2.28                            300.00
        301-400                                          47,33,250                              1.97                            333.93
        601-700                                          24,53,000                              3.04                            679.63
        901-1000                                           33,000                               2.68                            996.36
        1201-1300                                          50,000                               3.38                           1,250.00



                                                                                                               Kotak Mahindra Bank Limited        103
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

          31st March, 2007
                                                                                           Weighted average
                                                           Number of
          Range of exercise                                                              remaining contractual                 Weighted average
                                                             options
          prices                                                                            life of options                     exercise price
                                                           outstanding
                                                                                               (in years)
          0-100                                            22,68,934                              0.71                                63.62
          101-200                                          16,10,700                              2.55                               150.31
          201-300                                           3,00,000                              4.17                               300.00
          301-400                                          28,85,000                              3.76                               340.00

          Stock Options granted
                                                                                                                  Year ended                  Year ended
                                                                                                            31st March, 2008            31st March, 2007
          Exercise Price Rs.                                                                                       10 – 1,250                    10-340
          Expected Volatility                                                                               37.09% – 52.76%            38.19% – 52.43%
          Historical Volatility                                                                             37.09% – 52.76%            38.19% – 52.43%
          Life of the options granted (Vesting and exercise period) in years                                       1.29 – 4.50                1.27 – 4.58
          Average risk-free interest rate                                                                      7.35% – 7.94%              6.30% – 7.63%
          Expected dividend rate                                                                               0.07% – 0.11%                        0.19%
          The expected volatility was determined based on historical volatility data; historical volatility includes early years of the Company’s life; the
          Company expects the volatility of its share price to reduce as it matures.

          Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
                                                                                                                                          Rupees in lakhs
                                                                                                                  Year ended                  Year ended
                                                                                                            31st March, 2008            31st March, 2007
          Total Employee Compensation Cost pertaining to share-based payment plans                                  2,129.70                      978.84
          Compensation Cost pertaining to equity-settled employee share-based payment plan                          2,129.70                      978.84
          included above
          Liability for employee stock options outstanding as at year end                                            11,499.77                   5,133.72
          Deferred Compensation Cost                                                                                  5,678.37                   2,291.08
          Had the company recorded the compensation cost computed on the basis of Fair Valuation method instead of Intrinsic value method, employee
          compensation cost would have been higher by Rs. 1,498.53 lakhs and the profit after tax would have been lower by the same amount.
          Consequently the basic and diluted EPS would have been Rs. 8.33 and Rs. 8.21 respectively.
          In computing the above information, certain estimates and assumptions have been made by the Management which have been relied upon by
          the auditors.

      10. Advances securitised by the Bank:
                                                                                                                                           Rupees in lakhs
          Particulars                                                                                                   As at                         As at
                                                                                                            31st March, 2008             31st March, 2007
          Book value of advances securitized                                                                      394,458.03                   169,118.48
          Number of accounts*                                                                                              44                        1,087
          Sale consideration received for the accounts securitized                                                395,947.34                   169,629.79
          Gain on securitization                                                                                    1,272.78                       367.00
          Credit enhancement, liquidity support provided                                                            1,767.08                     1,735.84
          Nature of post securitisation support                                                        Collection and paying         Collection and paying
                                                                                                            agent or servicer             agent or servicer
          *Retail loan portfolio securitized by the bank has been considered as single loan.



104      Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

    11. Provisions on securitised assets:
                                                                                                                                               Rupees in lakhs
         Particulars                                                                                                  Year ended                   Year ended
                                                                                                                31st March, 2008             31st March, 2007
         a.     Opening balance                                                                                             131.77                       78.06
         b.     Provision made during the year                                                                                    —                      53.71
         c.     Closing balance                                                                                             131.77                      131.77
         The aforesaid provision is based on the past history of losses on the asset/product securitised and the outflows are expected over the tenure of
         the securitisation, which is spread over a period of three years.

    12. As per RBI general clarification dated 11th July, 2007,amortisation of premium in respect of government securities under HTM category aggregating
        to Rs. 4,142.52 lakhs for the year ended 31st March, 2008 (Rs. 3,499.72 lakhs for the year ended 31st March, 2007) is now classified under
        “Interest earned – Income on investments”, which was earlier classified under “Other income”. Prior period figures have been reclassified to
        conform to the current classification.

    13. Interest Expended-Others (Schedule 15(III)) includes interest on subordinated debts (Lower and Upper Tier II) Rs. 5,967.71 lakhs (Previous Year
        Rs. 2,388.17 lakhs).

    14. The Bank has agreed with International Finance Corporation (“IFC”) in a loan agreement dated 8th November, 2004 that it shall (i) not create or
        permit to exist any lien over and above what was existing prior to the Bank converting into a scheduled commercial bank (ii) request IFC’s consent
        before granting any lien which is not pre-authorised, should the Reserve Bank of India allow the Bank to grant liens and (iii) grant in favour of
        IFC a similar lien which shall rank pari passu with the lien created in case it creates any such lien which is not a pre-authorised lien.

    15. Employee Benefits
         i.     The Bank has recognised the following amounts in the Profit and Loss Account towards contributions to Provident Fund and Other Funds.
                  Provident Fund                                                                  Rs. 1,803.41 lakhs
                                                                                  (Previous Year Rs. 1,020.70 lakhs)
                  Superannuation Fund                                                                 Rs. 51.22 lakhs
                                                                                     (Previous Year Rs. 49.01 lakhs)
         ii.    In accordance with law, the Bank provides for gratuity, a defined benefit retirement plan covering all employees. The plan provides a lump
                sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years of
                employment with the Bank subject to maximum of Rs. 3.50 lakhs.
                The gratuity benefit is provided to the employees through a fund administered by a Board of Trustees and managed by Kotak Mahindra Old
                Mutual Life Insurance Limited. The Bank is responsible for settling the gratuity obligation through contributions to the fund. The plan is fully
                funded.

         iii.   Reconciliation of opening and closing balance of present value of defined benefit obligation for gratuity benefits is given below.
                                                                                                                                               Rupees in lakhs
                Particulars                                                                                                 As of                        As of
                                                                                                                31st March, 2008             31st March, 2007
                Change in benefit obligations
                Liability at the beginning of the year                                                                      854.09                     573.14
                Current Service cost                                                                                        385.68                     237.47
                Interest cost                                                                                                63.13                      41.10
                Actuarial Losses/(Gain)                                                                                     172.27                      31.86
                Liability assumed on acquisition/(Settled on divestiture)                                                     (3.15)                        —
                Benefits paid                                                                                               (30.76)                     (29.48)
                Liability at the end of the year                                                                         1,441.26                      854.09



                                                                                                                     Kotak Mahindra Bank Limited           105
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

                                                                                                                                            Rupees in lakhs
             Particulars                                                                                                 As of                        As of
                                                                                                             31st March, 2008             31st March, 2007
             Change in plan assets
             Fair value of plan assets at the beginning of the year                                                      925.87                    332.74
             Expected return on plan assets                                                                               63.13                     43.10
             Actuarial Gain / (Losses)                                                                                   137.66                     48.51
             Benefits paid                                                                                               (30.77)                    (29.48)
             Employer contributions                                                                                      300.00                    531.00
             Fair value of plan assets at the end of the year                                                          1,395.89                    925.87
             Reconciliation of present value of the obligation and the fair value of the plan
             assets
             Fair value of plan assets at the end of the year                                                          1,395.89                    925.87
             Liability at the end of the year                                                                          1,441.26                    854.09
             Net Asset / (Liability)                                                                                     (45.37)                    71.78
             Expense recognised for the year
             Current Service cost                                                                                        385.68                    237.47
             Interest cost                                                                                                63.13                     41.10
             Expected return on plan assets                                                                              (63.12)                    (43.10)
             Actuarial (gain) / loss                                                                                      34.61                     (16.65)
             Net gratuity expense                                                                                        420.30                    218.82
             Actual return on plan assets                                                                                200.78                    916.14
             Reconciliation of the Liability recognised in the Balance Sheet
             Net Liability / (Asset) at the beginning of the year                                                        (71.78)                   240.40
             Expense recognised                                                                                          420.30                    218.82
             Liability assumed on acquisition/(Settled on divestiture)                                                     (3.15)                      —
             Employer contributions                                                                                     (300.00)                   (531.00)
             Net Liability / (Asset)                                                                                      45.37                     (71.78)

             Investment details of plan assets
             Majority of the plan assets are invested in insurer managed funds.
             Actuarial assumptions used

               Interest rate                                             8.14% p.a. (Previous Year 8.20% p.a.)
               Salary escalation rate                                    15% p.a. for first 2 yrs. 10% p.a. for next 2 yrs. & 6% p.a. thereafter
               Expected return on plan assets                            7.50% p.a.

        The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant
        factors.
        The above information is as certified by the actuary and relied upon by the auditors.
        In accordance with Accounting Standard Board guidance on implementing AS-15, Employee Benefits (revised 2005), the Bank has changed the
        method of estimating liability for compensated absences from full cost method to determination on the basis of an actuarial valuation. If the
        liability had been determined based on the full cost method the profit for the year would have been lower by Rs. 969.85 lakhs.



106    Kotak Mahindra Bank Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

    16. The Bank receives deposits from customers as part of margin requirements in respect of its professional clearing member (PCM) business with
        National Securities Clearing Corporation Ltd. (NSCCL). Correspondingly, the Bank is required to maintain margins/ deposits with NSCCL. For the
        said purpose of placing margins/deposits, the Bank has issued its own Fixed Deposit receipts amounting to Rs. 69,401.50 lakhs (Previous year
        Rs. 53,134 lakhs) in favour of NSCCL which have not been included in “Term Deposits from Others” [Schedule 3 (III) (ii)].

    17. Lower Tier II Bonds
         Lower Tier II Bonds outstanding as at 31st March 2008 Rs. 46,570.00 lakhs (previous year Rs. 42,990.00 lakhs).
         During the year, the Bank raised Rs. 3,580 lakhs (previous year 18,990 lakhs) of lower Tier II bonds with fixed rate annualised coupon of
         10.25% with tenure of 10 years and 10 months. In accordance with the RBI requirements lower Tier II bonds of Rs. 1,200 lakhs (previous year
         Rs. 100 lakhs) are not considered as Tier II capital for the purposes of capital adequacy computation.

    18. Upper Tier II Bonds
         Upper Tier II Bonds outstanding as at 31st March, 2008 Rs. 31,654 lakhs (previous year Rs. 19,561.50 lakhs).
         During the year, the Bank raised Rs. 13,600 lakhs of upper Tier II bonds with annualized coupon between 9.95% to 10.80% rates with tenure of
         15 years.

    19. Description of Contingent Liabilities:

           Sr. No.    Contingent Liability*          Brief Description

           1.         Claims not acknowledged        This includes liability on account of income tax, interest tax, sales tax and lease tax demands and
                      as debts                       legal cases filed against the Bank.
                                                     The Bank is a party to various legal proceedings in the normal course of business. The Bank does
                                                     not expect the outcome of these proceedings to have a material adverse effect on the Bank’s
                                                     financial conditions, result of operations or cash flows. Against the above Rs. 363.88 lakhs have
                                                     been paid, which shall be refunded to the Bank, if the outcome of the legal proceedings will be in
                                                     the favour of the Bank.

           2.         Liability on account of        The Bank enters into foreign exchange contracts with inter bank participants on its own account
                      outstanding forward            and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at
                      exchange contracts             a future date at the contracted rate.

           3.         Guarantees on behalf of        As a part of its banking activities, the Bank issues documentary credit and guarantees on behalf of
                      constituents in India          its customers. Documentary credits such as letters of obligations, enhance the credit standing of the
                                                     customers of the Bank. Guarantees generally represent irrevocable assurances that the Bank will
                                                     make payments in the event of customer failing to fulfill its financial or performance obligations.

           4.         Acceptances, endorsements      These include contingent liabilities on account of bills re-discounted by the Bank and cash collateral
                      and other obligations          provided by the Bank on assets which have been securitised. The maximum liability in respect of
                                                     cash collateral provided is Rs. 1,767.08 lakhs.

           5.         Other items for which the      These include Liabilities in respect of interest rate and currency swaps and forward rate agreements,
                      Bank is contingently liable    liability in respect of options contracts and Capital commitments, which includes undrawn
                                                     commitments in respect of investments.
                                                     The Bank enters into currency options, forward rate agreements, currency swaps and interest
                                                     rate swaps with inter bank participants on its own account and for customers. Currency Swaps
                                                     are commitments to exchange cash flows by way of interest/principal in one currency against
                                                     another, based on predetermined rates. Interest rate swaps are commitments to exchange fixed and
                                                     floating interest rate cash flows. The notional amounts that are recorded as contingent liabilities are
                                                     amounts used as a benchmark for the calculation of interest component of the contracts.

         * Also refer Schedule 12 – Contingent Liabilities



                                                                                                                  Kotak Mahindra Bank Limited            107
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

      20. The Bank has received a confirmation from Deposit Insurance and Credit Guarantee Corporation to adjust excess insurance premium paid in
          respect of earlier years against the future payments. An amount of Rs. 155.17 lakhs (previous year Rs. 301.35 lakhs) has been recognised by the
          Bank during the year with a corresponding reduction to insurance expenses under Schedule 16 (XI).

      21. With effect from 1st October, 2007, the investment management function in the Bank for Venture Capital has been assigned to Kotak Investment
          Advisors Limited (KIAL) (erstwhile Kotak Mahindra Securities Limited) which is 100% beneficially owned by Bank.

      22. The Bank has not received any intimation from “suppliers” regarding their status under the Micro, Small and Medium Enterprises Development
          Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid/payable as required under the
          said Act have not been given.

      23. Figures for the previous year have been regrouped/reclassified wherever necessary to conform to current year’s presentation. The figures of
          previous year were audited by a firm of chartered accountants other than S. R. Batliboi & Co.




                                                                                        For and on behalf of the Board of Directors


                                                                                        Dr. Shankar Acharya                 Uday Kotak
                                                                                        Chairman                            Executive Vice Chairman &
                                                                                                                            Managing Director
                                                                                        Dipak Gupta
                                                                                        Executive Director

                                                                                        Jaimin Bhatt                        Bina Chandarana
Mumbai, 9th May, 2008                                                                   Group Chief Financial Officer       Company Secretary




108      Kotak Mahindra Bank Limited
BOARD OF DIRECTORS: MR. UDAY KOTAK, MS. FALGUNI NAYAR, MR. JAIMIN BHATT, MS. SHANTI EKAMBARAM, MR. DIPAK GUPTA

Directors’ Report
To the Members of                                                                       Limited, IDFC Limited, Godrej Industries Ltd., Bank of India and
Kotak Mahindra Capital Company Limited                                                  Maruti Udyog Limited.
The Directors present their Thirteenth Annual Report together with the                  Your Company also managed the Rights Issue of State Bank of
audited accounts of your Company for the year ended 31st March, 2008.                   India which is the largest Rights Issue in India till date.
1.    Financial Results                                                                 Kotak Investment Banking continued to have its presence in
                                                                                        the overseas capital markets, having managed the FCCB issues
Particulars                                        Year Ended        Year ended
                                                  31st March,       31st March,
                                                                                        of Prime Focus Limited and Kinetic Engineering Limited. The
                                                          2008             2007         overseas offerings are managed and executed by overseas
                                               Rupees in Lakhs   Rupees in Lakhs        affiliates of your Company.
Gross Income                                           28,561            20,518         Your Company was once again the recipient of prestigious
Profit before Tax                                      17,519             9,390         awards such as the Best Investment Bank, in India, 2007 by
Provision for Tax                                       5,988             2,602         Finance Asia and the Best Domestic Investment Bank, 2007 from
Profit after Tax                                       11,531             6,788         Asset Asia.
Balance of Profit from previous years                  20,319            21,979
                                                                                        Your Company has a robust pipeline of mandates in across
Amount available for appropriation                     33,489            28,767
                                                                                        various sectors and would strive to be positioned as the most
Appropriations:                                                                         preferred Investment Banker.
Special Reserve under section 45 I C of                    —              8,693
The Reserve Bank of India Act, 1934.                                               B.   Advisory
Difference between the value of assets and                 —             17,141         The Advisory business of your company did well during the year.
liabilities transferred pursuant to a scheme                                            Some significant transactions achieved closure. Your Company
of demerger
                                                                                        was the exclusive adviser to Srei Infrastructure Finance Limited in
General Reserve                                            —                 —
                                                                                        respect of a strategic partnership with BNP Paribas, to Mahindra
Dividend (including Distribution Tax)                      —                 —
                                                                                        Forgings Limited in respect of their consolidated of their global
Surplus carried forward to the Balance Sheet           33,489            20,318
                                                                                        business, to promoters of Gokaldas Exports Limited in their
2.    Dividend                                                                          strategic divestment. Your Company also acted as the exclusive
      The Directors do not recommend any dividend for the year.                         financial advisor to Thomas Cook for purchase of up to 74.9%
                                                                                        of the issued share capital in Thomas Cook India Limited and
3.    Business Operations                                                               100% of Thomas Cook branded businesses in Egypt, as well as
      A.      Equities                                                                  licences for the Thomas Cook brand in a total of 15 Middle East
              The buoyancy in the primary market continued this year, with 85           countries. Also your company acted as the advisors to CRH for
              initial public offerings (IPOs) raising Rs. 41,357.95 crore and 39        an acquisition of a 50% shareholding in My Home Industries
              Qualified Institutional Placement (QIPs) cum PSU Disinvestments           Limited.
              through Auctions raising Rs. 28,075.87 crore.                             Your Company also successful completed the assignment of
              Your Company once again maintained its dominant position in               demutualisation of the Bombay Stock Exchange.
              the equity market in India and managed 19 IPOs and 11 QIPs                The financial sponsors group was well positioned to capitalise
              cum PSU Disinvestments through Auctions. Your company was                 on opportunities for fund raising on private placement basis. In
              ranked No.1 by PRIME Database for IPOs and QIPs cum PSU                   this segment, your Company was the financial adviser for Apollo
              Disinvestments through Auctions in the year 2007-08 with value            Hospital Enterprises Limited, Mahindra and Mahindra Financial
              market share of around 78.6% and 58.2% respectively.                      Services Limited, Nagarjuna Construction Company Limited,
                                                                                        Aster Teleservices Private Limited and Aster Infrastructure Private
              The IPOs managed by your company include large equity offerings
                                                                                        Limited, Luminous Power Technologies Limited, Computer Age
              such as Reliance Power Ltd., DLF Limited, Power Grid Corporation
                                                                                        Management Services Limited and Allcargo Global Logistics
              of India Limited, Housing Development & Infrastructure Limited,
                                                                                        Limited.
              IRB Infrastructure Developers Limited, Central Bank of India and
              Edelweiss Capital Limited.                                                Your Company also managed six open offer during the year.
              The QIPs & PSU Disinvestments through Auctions managed                    Your Company has a healthy pipeline of advisory transactions
              by your Company include transactions of GMR Infrastructure                and hopes to close significant transactions during FY09.



                                                                                                   Kotak Mahindra Capital Company Limited             109
      C.    Trading Cum Clearing Membership                                         the Companies (Disclosure of Particulars in the Report of Board of
            Post receipt of all statutory approvals, the Trading and Clearing       Directors) Rules, 1988, are not applicable since your Company is not
            operations and strategic investments of Kotak Investment                a manufacturing company.
            Advisers Limited were demerged into your Company.                    9. Director’s Responsibility Statement
            Subsequently your company has commenced business as a
            clearing and trading member of the National Stock Exchange              Based on representations from the Management, the Directors state,
            of India.                                                               in pursuance of Section 217 (2AA) of the Companies Act, 1956, that:

4.    Human Resources                                                               Your Company has, in the preparation of the annual accounts for the
                                                                                    year ended 31st March, 2008, followed the applicable accounting
      Your Company recognizes that human capital is the key to success              standards along with proper explanations relating to material
      and growth in the financial sector. Your Company recruited some               departures, if any;
      senior level employees to improve client coverage as well as execution
      capabilities . Your company also continues to be a preferred employer         The Directors have selected such accounting policies and applied
      at all leading management schools.                                            them consistently and made judgments and estimates that are
                                                                                    reasonable and prudent so as to give a true and fair view of the
5.    Directors                                                                     state of affairs of the Company as at 31st March, 2008 and of
      Mr. Uday Kotak and Mr. Dipak Gupta retire at the ensuing Thirteenth           profit/loss of the Company for the financial year ended 31st March,
      Annual General Meeting and are eligible for re-appointment.                   2008;

6.    Audit Committee                                                               The Directors have taken proper and sufficient care to the best of their
                                                                                    knowledge and ability, for the maintenance of adequate accounting
      The constitution of the Audit Committee of the Company is as set out          records in accordance with the provisions of the Act for safeguarding
      below:                                                                        the assets of the Company and for preventing and detecting fraud and
      Mr. Uday Kotak                                                                other irregularities; and

      Mr. Dipak Gupta                                                               The Directors have prepared the annual accounts on a going concern
      Mr. Jaimin Bhatt                                                              basis.

7.    Auditors                                                                  10. Acknowledgements

      The statutory auditors Messrs. Deloitte Haskins & Sells, Chartered            Your Directors would like to place on record their gratitude for the
      Accountants retire at the ensuing Annual General Meeting and are              valuable support received from the Reserve Bank of India, Securities
      eligible for reappointment.                                                   and Exchange Board of India and other Government and Regulatory
                                                                                    agencies. Your Directors acknowledge and wish to place their
8.    Statutory Information
                                                                                    appreciation of employees for their commendable efforts, teamwork
      A statement giving the particulars of employees as required under             and professionalism.
      Section 217 (2A) of the Companies Act, 1956, read with the Companies
      (Particulars of Employees) Rules, 1975, is annexed.

      During the year under review, your Company did not accept any
      deposits from the public. There are no deposits due and outstanding                                    For and on behalf of the Board of Directors
      as on 31st March 2008.                                                                                                                 Uday S. Kotak
                                                                                                                                                Chairman
      Your Company’s foreign exchange income was Rs. 2,319 lakhs
      while the outgo was Rs. 126 Lakhs. The other particulars under            Mumbai, 30th April, 2008




110        Kotak Mahindra Capital Company Limited
Auditors’ Report

To The Members of                                                                   (c)   The balance sheet, profit and loss account and cash flow
Kotak Mahindra Capital Company Limited                                                    statement dealt with by this report are in agreement with the
                                                                                          books of account;
1.   We have audited the attached balance sheet of Kotak Mahindra
                                                                                    (d)   In our opinion, the balance sheet, profit and loss account and
     Capital Company Limited, as at 31st March, 2008, the profit and loss
                                                                                          cash flow statement dealt with by this report comply with
     account and also the cash flow statement for the year ended on that
                                                                                          the accounting standards referred to in sub-section (3C) of
     date annexed thereto. These financial statements are the responsibility
                                                                                          Section 211 of the Companies Act, 1956;
     of the company’s management. Our responsibility is to express an
     opinion on these financial statements based on our audit.                      (e)   On the basis of written representations received from the
                                                                                          directors, as on 31st March, 2008 and taken on record by
2.   We conducted our audit in accordance with the auditing standards
                                                                                          the Board of Directors, we report that none of the Directors is
     generally accepted in India. Those standards require that we plan
                                                                                          disqualified as on 31st March, 2008 from being appointed as a
     and perform the audit to obtain reasonable assurance about whether
                                                                                          Director in terms of clause (g) of sub-section (1) of Section 274
     the financial statements are free of material misstatement. An
                                                                                          of the Companies Act, 1956;
     audit includes examining, on a test basis, evidence supporting the
     amounts and disclosures in the financial statements. An audit also             (f)   In our opinion and to the best of our information and according
     includes assessing the accounting principles used and significant                    to the explanations given to us, the said accounts give the
     estimates made by management, as well as evaluating the overall                      information required by the Companies Act, 1956, in the manner
     financial statement presentation. We believe that our audit provides a               so required and give a true and fair view in conformity with the
     reasonable basis for our opinion.                                                    accounting principles generally accepted in India:
3.   As required by the Companies (Auditor’s Report) Order, 2003 issued by                (i)    in the case of the balance sheet, of the state of affairs of
     the Central Government of India in terms of sub-section (4A) of Section                     the Company as at 31st March, 2008;
     227 of the Companies Act, 1956 and on the basis of such checks of the
                                                                                          (ii)   in the case of the profit and loss account, of the profit for
     books and records of the Company as we considered appropriate and
                                                                                                 the year ended on that date; and
     according to the information and explanations given to us, we give in
     the Annexure a statement on the matters specified in paragraphs 4                    (iii) in the case of the cash flow statement, of the cash flows
     and 5 of the said Order.                                                                   for the year ended on that date.
4.   Further to our comments in the Annexure referred to above, we report                                                     For Deloitte Haskins & Sells
     that:                                                                                                                    Chartered Accountants
     (a)   We have obtained all the information and explanations, which
           to the best of our knowledge and belief were necessary for the                                                     R. Laxminarayan
           purposes of our audit;                                                                                             Partner
                                                                                                                              Membership Number: 33023
     (b)   In our opinion, proper books of account as required by law
           have been kept by the Company so far as appears from our            Mumbai
           examination of those books;                                         Dated: April 30, 2008




                                                                                                     Kotak Mahindra Capital Company Limited              111
Annexure to the Auditors‘ Report

(Referred to in paragraph 3 of our Report of even date to the Members of             5. The Company has not accepted any deposits from the public during
Kotak Mahindra Capital Company Limited on the accounts for the year                     the year. Hence, clause (vi) of paragraph 4 of the said Order is not
ended 31st March, 2008)                                                                 applicable to the Company.
The nature of the Company’s activities during the year has been such that            6. In our opinion, the internal audit functions carried out during the year
clauses (ii), (viii) and (xiii) of paragraph 4 of the Order are not applicable to       by a firm of Chartered Accountants appointed by the management
the Company for the year.                                                               have been commensurate with the size of the Company and the
                                                                                        nature of its business.
1.    (a)    The Company has maintained proper records showing full
             particulars, including quantitative details and situation of its        7. In respect of Statutory dues:
             fixed assets.
                                                                                         (a)   According to the information and explanations given to us,
      (b)    Some of the fixed assets were physically verified during the year by              the Company has been regular in depositing undisputed
             the management in accordance with a programme of verification,                    statutory dues, including Provident Fund, Investor Education and
             which in our opinion provides for physical verification of all the                Protection Fund, Employees’ State Insurance, Income tax, Sales
             fixed assets at reasonable intervals. According to the information                tax, Wealth tax, Service tax, Customs Duty, Excise Duty, Cess
             and explanations given to us, no material discrepancies were                      and any other material statutory dues applicable to it with the
             noticed on such verification.                                                     appropriate authorities during the year.

      (c)    The fixed assets disposed off during the year, in our opinion,              (b)   According to the information and explanations given to us,
             do not constitute a substantial part of the fixed assets of the                   there are no dues of Income tax, Wealth tax, Service tax, Sales
             Company and such disposal has, in our opinion, not affected the                   tax, Customs duty, Excise duty and cess which have not been
             going concern status of the Company.                                              deposited on account of any dispute.
                                                                                     8. The Company has no accumulated losses as at 31st March, 2008 and
2.    (a)    According to the information and explanations given to us,
                                                                                        has not incurred any cash loss during the financial year ended on that
             the Company has not granted any loans to or taken any
                                                                                        date and in the immediately preceding financial year.
             loans from companies, firms or other parties covered under
             Section 301 of the Companies Act, 1956. Hence, clause (iii) of          9. According to the books and records and as per the information and
             paragraph 4 of the Order is not applicable to the Company for              explanations given to us, the Company has not defaulted in repayment
             the year.                                                                  of dues to any financial institution or bank during the year.
3.    In our opinion and according to the information and explanations given        10. According to the information and explanations given to us, the
      to us, there is an adequate internal control system commensurate with             Company has not granted any loans or advances on the basis of
      the size of the Company and the nature of its business with regards to            security by way of pledge of shares, debentures and other securities.
      purchase of fixed assets and for the sale of goods and services and we
      have not observed any continuing failure to correct major weaknesses          11. Based on our examination of the records and evaluation of the
      in such internal control system.                                                  related internal controls, the Company has maintained proper records
                                                                                        of transactions and contracts in respect of its dealing in securities
4.    In respect of the contracts or arrangements entered in the                        and timely entries have been made therein. The aforesaid securities
      Register maintained in pursuance of Section 301 of the Companies                  have been held by the Company in its own name, except to the
      Act, 1956:                                                                        extent of the exemption granted under Section 49 of the
      (a)    To the best of our knowledge and belief and according to the               Companies Act, 1956.
             information and explanations given to us, the particulars of
                                                                                    12. In our opinion and according to the information and explanations
             contracts or arrangements referred to in Section 301 of the Act
                                                                                        given to us, the terms and conditions on which the Company has
             that needed to be entered into the register, maintained under
                                                                                        given guarantees for loans taken by others from banks and financial
             that section have been so entered; and
                                                                                        institutions, are not prima facie prejudicial to the interests of the
      (b)    In our opinion and according to the information and explanations           Company.
             given to us, the transactions exceeding Rs. 500,000/- each
                                                                                    13. To the best of our knowledge and belief and according to the
             made in pursuance of such contracts or arrangements have
                                                                                        information and explanations given to us, there have been no term
             been made at prices which are reasonable having regard to the
                                                                                        loans availed during the year. Hence clause (xvi) of paragraph 4 of the
             prevailing market prices at the relevant time or at the prices at
                                                                                        said Order is not applicable to the Company.
             which similar transactions have been made with other parties as
             per the information available with the Company.                        14. According to the information and explanations given to us and on



112         Kotak Mahindra Capital Company Limited
     an overall examination of the Balance Sheet and other records of the           Hence, clause (xx) of paragraph 4 of the Order is not applicable to the
     Company, we report that no funds raised on short-term basis have               Company for the year.
     been used for long-term investment.
                                                                               18. To the best of our knowledge and belief and according to the
15. The Company has not made any preferential allotment of shares                  information and explanations given to us, no fraud on or by the
    to parties and companies covered in the register maintained under              Company was noticed or reported during the year.
    section 301 of the Companies Act, 1956 during the year. Hence
    clause (xviii) of paragraph 4 of the said Order is not applicable to the
    Company.                                                                                                               For Deloitte Haskins & Sells
                                                                                                                           Chartered Accountants
16. According to the information and explanations given to us, the
    Company has issued and redeemed unsecured debentures during the                                                        R. Laxminarayan
    year. Hence clause (xix) of paragraph 4 of the Order is not applicable                                                 Partner
    to the Company for the year.                                                                                           Membership Number: 33023

17. According to the information and explanations given to us, the             Mumbai
    Company has not raised any money by public issue during the year.          Dated: April 30, 2008




                                                                                                   Kotak Mahindra Capital Company Limited             113
Balance Sheet as at 31st March, 2008

                                                        Schedule                             As at 31st               As at 31st
                                                                                           March, 2008             March, 2007
                                                                   (Rs. in Lakhs)         (Rs. in Lakhs)           (Rs. in Lakhs)
Sources of Funds
Shareholders’ Funds :
   Capital                                                 1                412                                             396
   Reserves and Surplus                                    2             39,679                                          26,509
                                                                                                40,091                   26,905
Loan Funds :
   Unsecured Loans                                         3                                         —                    3,419
       Total                                                                                    40,091                   30,324

Application of Funds




Fixed Assets :
   Gross Block                                             4              2,736                                           2,542
   Less : Depreciation                                                      656                                             528
Net Block                                                                                        2,080                    2,014
Investments                                                5                                    34,997                   27,316
Deferred Tax Asset (Net)                                                                           182                      218
Current Assets, Loans and Advances :
   Sundry Debtors                                          6              3,005                                           2,228
   Cash and Bank Balances                                  7              3,395                                          55,026
   Other Current Assets                                    8                620                                             576
   Loans and Advances                                      9              1,062                                           1,500
                                                                          8,082                                          59,330
Less : Current Liabilities and Provisions :
            Liabilities                                   10              4,953                                          58,187
            Provisions                                    11                297                                             367
                                                                          5,250                                          58,554
Net Current Assets                                                                               2,832                      776
       Total                                                                                    40,091                   30,324

Significant Accounting Policies and Notes to Accounts     18


As per our attached report of even date                                  For and on behalf of the Board of Directors
For Deloitte Haskins and Sells
Chartered Accountants
R. Laxminarayan                                                          Uday Kotak                        Falguni Nayar
Partner                                                                  Chairman                          Managing Director

                                                                         Ajay Vaidya                       Shanti Ekambaram
Mumbai, April 30, 2008                                                   Company Secretary                 Director


114      Kotak Mahindra Capital Company Limited
Profit and Loss Account for the year ended 31st March, 2008

                                                                             Schedule                       Year Ended 31st          Year Ended 31st
                                                                                                                March, 2008             March, 2007
                                                                                           (Rs. in Lakhs)      (Rs. in Lakhs)           (Rs. in Lakhs)
Income
Financial Advisory and Transactional Services                                   12                                    25,484                   8,936
Interest and Discounting Income                                                 13                                     1,285                   8,985
Profit on Sale of Investments (Net)                                                                                       —                      539
Profit on Trading in Securities (Net)                                                                                  1,020                     919
Other Income                                                                    14                                       772                   1,139
        Total Income                                                                                                  28,561                  20,518
Expenditure
Personnel                                                                       15                                     6,891                   4,060
Interest and other Financial Charges                                            16                                     1,012                   4,589
Other Expenses                                                                  17                                     2,969                   2,322
Depreciation                                                                                                             170                     157
        Total Expenditure                                                                                             11,042                  11,128
Profit Before Taxation *                                                                                              17,519                   9,391
Provision for Taxation *
Current Tax                                                                                       5,890                                        2,686
(Excess) Provision in Respect of Earlier Years                                                       (7)                                          (9)
Deferred Tax                                                                                         36                                        (112)
Fringe Benefits Tax                                                                                  69                                           37
                                                                                                                       5,988                   2,602
Profit After Taxation                                                                                                 11,531                   6,788
Add: Transfer From Kotak Investment Advisors Ltd.
        (Formerly Known As Kotak Mahindra Securities Ltd) On Demerger.
        (Refer Note 03 Of Schedule 18)                                                                                 1,639                     —
Balance Brought Forward from Previous Year                                                                            20,319                 21,979
                                                                                                                      33,489                 28,767
Appropriations
Transfer (from)/to Special Reserve Under Section 45IC of
The Reserve Bank of India Act, 1934                                                                                        —                  (8,693)
Less: Difference Between the Value of Assets and Liabilities Transferred
       Pursuant to a Scheme of Demerger                                                                                   —                   17,141
Balance Carried to Balance Sheet                                                                                      33,489                  20,319
                                                                                                                      33,489                  28,767
Earnings per share: Face value of Rs. 10/-
Basic and Diluted Earnings Per Share (In Rs.) Including Discontinuing Operations                                          —                   171.41
Basic and Diluted Earnings Per Share (In Rs.) (Refer Note 16 of Schedule 18)                                          284.71                  120.90
 * Includes Profit from Discontinuing Operations Rs. Nil (Previous Year Rs. 2,115 Lakhs)
   and Related Tax Expense thereon Rs. Nil (Previous Year Rs. 115 Lakhs)

As per our attached report of even date                                                      For and on behalf of the Board of Directors
For Deloitte Haskins and Sells
Chartered Accountants
R. Laxminarayan                                                                              Uday Kotak                         Falguni Nayar
Partner                                                                                      Chairman                           Managing Director

                                                                                             Ajay Vaidya                        Shanti Ekambaram
Mumbai, April 30, 2008                                                                       Company Secretary                  Director


                                                                                                   Kotak Mahindra Capital Company Limited        115
Cash Flow Statement for the Year Ended 31st March, 2008

                                                                                              Rs. in Lakhs   Rs. in Lakhs
                                                                                               2007-2008     2006-2007
Cash Flow from Operating Activities
   Net Profit before taxation                                                                     17,519          9,390
   Adjustments for:
   Depreciation                                                                                       170           157
   Dimunition in value of current Investments                                                         271           208
   (Profit) on sale of Current Investments (net)                                                       77          (539)
   Interest/dividend received on Investments                                                        (999)         (1207)
   Interest on Income Tax Refund                                                                     (13)           (34)
   Dimunition in value of long term investments written back                                           —           (172)
   (Profit)/loss on sale of assets                                                                     (7)          (14)
   OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES                                                17,018          7,789
   Adjustments for:
   (Increase)/Decrease in stock-in-trade                                                               —         27,227
   Increase/(Decrease) in money market borrowings                                                 (3,419)       (14,606)
   (Increase)/Decrease in loans and advances                                                          380         7,676
   (Increase)/Decrease in sundry debtors                                                            (776)         2,519
   (Increase)/Decrease in other current assets                                                       (43)           190
   Increase/(Decrease) in current liabilities                                                    (53,234)        10,457
   Increase in provision for gratuity and leave encashment                                           (42)           226
   Leave encashment /gratuity provision adjusted in General Reserve - gross of deferred tax            —           (210)
   Net current assets transferred under the scheme of demerger                                      1,655        (7,833)
   Cash Generated From Operations                                                                (38,461)        33,435
   Direct taxes paid (net of refunds and Interest thereon)                                        (5,911)        (2,229)

   Net Cash Flow from Operating Activities                            (A)                        (44,371)        31,206

Cash Flow from Investing Activities


   Purchase of fixed assets                                                                         (276)        (1,974)
   Sale of fixed assets                                                                          411,483              86
   Purchase of other investments                                                                (419,513)       (97,413)
   Sale of other investments                                                                           47        95,500
   Transfer of investments under demerger                                                              —        (13,776)
   Interest/dividend received on Investments                                                          999         1,207

   Net Cash Flow (Used in)/from Investing Activities                  (B)                         (7,260)       (16,370)




116     Kotak Mahindra Capital Company Limited
Cash Flow Statement for the Year Ended 31st March, 2008 (Contd.)

                                                                                                                   Rs. in Lakhs               Rs. in Lakhs
                                                                                                                    2007-2008                 2006-2007

   Cash Flow from Financing Activities
   Proceeds/(repayment) of long term borrowings                                                                               —                     (156)
   Cash transferred pursuant to the scheme of demerger                                                                        —                      (21)

   Net Cash Flow (Used in)/from Financing Activities                    (C)                                                 (—)                     (177)

   Net Increase/(Decrease) in Cash and Cash Equivalents (A + B + C)                                                    (51,631)                   14,659

   Cash and Cash Equivalents at the beginning of the Year                                                                55,026                   40,367
   Cash and Cash Equivalents at the end of the Year                                                                       3,395                   55,026

                                                                                                                       (51,631)                   14,659

Notes:
1. The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in Accounting Standard-3 on Cash Flow Statements issued
   by the Institute of Chartered Accountants of India.
2. Direct Taxes paid are treated as arising from operating activities and are not bifurcated between investing and financing activities.
3. Figures of the previous year are recast wherever necessary to conform to figures of the previous year.



As per our attached report of even date
For Deloitte Haskins and Sells
Chartered Accountants                                                                           For and on behalf of the Board of Directors
R. Laxminarayan                                                                                 Uday Kotak                            Falguni Nayar
Partner                                                                                         Chairman                              Managing Director

                                                                                                Ajay Vaidya                           Shanti Ekambaram
Mumbai, April 30, 2008                                                                          Company Secretary                     Director




                                                                                                       Kotak Mahindra Capital Company Limited         117
Schedules forming part of the Balance Sheet

                                                                                                                                                     31st March,                           31st March,
                                                                                                                                                             2008                                  2007
                                                                                                                    (Rs. in Lakhs)                  (Rs. in Lakhs)                        (Rs. in Lakhs)
Schedule 1 – Capital
Authorised
10,000,000 equity shares of Rs. 10 each                                                                                                                      1,000                                1,000
        Total                                                                                                                                                1,000                                1,000
Issued and Subscribed
4,116,149 (Previous Year 3,960,020) equity shares of Rs.10 each fully paid up
(Of the above, 3,126,134 (Previous Year 2,970,005) shares are held by Kotak
Mahindra Bank Limited, the holding company and its nominees and 990,015
shares are held by Kotak Securities Limited, a subsidiary of the holding company)                                                                               412                                  396
(Of the above 156,129 (Previous year Nil) equity shares of Rs 10 each are
allotted as fully paid up for consideration other than cash, pursuant to the
Scheme of Arrangement as approved by the Honorable High Court)
        Total                                                                                                                                                   412                                  396
Schedule 2 – Reserves and Surplus
Share Premium Account
As per last Balance Sheet                                                                                                                                    6,190                                6,190
Special Reserve under Section 45-IC of The Reserve Bank of India Act, 1934
As per last Balance Sheet                                                                                                        —                                                                8,693
(Less): Transfer (to)/from Profit and Loss Account                                                                               —                                                              (8,693)
                                                                                                                                                                  —                                  —
General Reserve
As per last Balance Sheet                                                                                                        —                                                                4,675
Less: Leave encashment/gratuity liability as on 01.04.06 adjusted                                                                —                                                                (140)
Less: Difference between the value of assets and liabilities transferred pursuant
      to scheme of Demerger                                                                                                      —                                                              (4,535)
                                                                                                                                                               —                                    —
Balance in Profit and Loss Account                                                                                                                         33,489                               20,319
       Total                                                                                                                                               39,679                               26,509
Schedule 3 – Unsecured Loans
(Repayable within one year)
Commercial Paper (Maximum balance outstanding during the year
Rs. 3,419 Lakhs; Previous year Rs. 4,917 Lakhs)                                                                                                                   —                               3,419
      Total                                                                                                                                                       —                               3,419
Schedule 4 – Fixed Assets
                                                                                                                                                                                           Rupees in lakhs
DESCRIPTION                                           Gross Block (At Cost)                                                   Depreciation                                     Net Block
                                          As at       Additions     Deductions            As at            As at      For the year     Deductions           As at             As at            As at
                                      1st April,                                    31st March,        1st April,                                     31st March,       31st March,      31st March,
                                          2007                                            2008             2007                                             2008              2008             2007
Assets
Premises*                                1,773               —               —              1,773             7               30               —                37                1,736             1,766
Leasehold Improvement                      100               27              —                127            98                2               —               100                   27                 2
Computers                                  229               64               2               291           203               31                1              233                   58                26
Furniture                                   49               —               —                 49            40                5               —                45                    4                 9
Office Equipment #                          81               30               2               109            73               12                1               84                   25                 8
Vehicles                                   276              141              78               339            93               77               40              130                  209               183
Intangible Assets
Software                                    34               14              —                 48            14               13               —                27                   21                20
Total                                    2,542              276              82             2,736           528              170               42              656                2,080             2,014
Previous Year                              846            1,975             279             2,542           532              157              161              528                2,014
* represents premises given on operating lease
# Office equipments include assets aggregating to Rs. 6.22 lakhs (Previous year Rs. 6.22 lakhs) (50% of the original cost) jointly owned with other enterprises.
  The depreciation for the year is Rs. Nil (Previous Year Rs. 0.04 lakh) and the written down value of the asset as on March 31, 2008 is Rs. NIL (Previous year Rs. Nil lakhs).




118        Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet (Contd.)

                                                                                        Quantity                            Amount
                                                                    Face Value         As at             As at    31st March,       31st March,
                                                                      (Rupees)   31st March,       31st March,            2008              2007
                                                                                       2008              2007    (Rs. in Lakhs)    (Rs. in Lakhs)
Schedule 5 – Investments (Non Trade)
Long Term Investments (at cost, fully paid)

In Equity Shares of Other Companies (Unquoted)
Kotak Mahindra (International) Limited @                               US $ 1     2,000,000         2,000,000             718                718
Kotak Mahindra Inc @                                                US $ 0.01       750,000           750,000             344                344
Kotak Investment Advisors Limited                                          10     2,250,070         2,250,070             226                226
(Formerly known as Kotak Mahindra Securities Limited) @
Kotak Securities Limited @                                                 10       400,010           400,010          12,300             12,300
Infina Finance Private Limited                                             10     1,100,240           660,040             110                 66
(Formerly known as Multifaced Finstock Private Limited @)
Kotak Mahindra Old Mutual Life Insurance Limited @                         10    56,462,826        21,979,721           5,646              2,198
INX Media Private Ltd.                                                     10       128,400           128,400               13                13
Phoenix ARC Pvt Limited @                                                  10       660,000                —                66                —
ACME Telepower Ltd                                                          2       145,348                —            1,000                 —
Techpro Systems Ltd                                                        10       300,000                —              720                 —
@ Companies under the same management

In Units of Venture Capital Fund (Unquoted)
Kotak India Growth Fund                                                1,000         50,000                —              453
Kotak India Real Estate Fund                                         100,000            958                —              958
Kotak Alternate Opportunities (India) Fund*                                                                —              740

In Bonds (Quoted)
SIDBI Capital Gains Bond #                                             10,000       105,247           105,247          10,525             10,525
                                                            (A)                                                        33,819             26,390
Current Investments (Fully paid)
(at cost or fair/market value, whichever is lower)

In Units of Mutual Fund (Unquoted)
DSP Merrill Lynch Top 100 Equity Fund–Regular–Growth Plan                  10       499,868                —              354                 —
Kotak Mahindra Mutual Fund–Kotak-30–Growth Plan                            10       325,153                —              278                 —
ICICI Prudential Infrastructure Fund–Growth Plan                           10     1,320,132                —              355                 —
Sundaram BNP Paribas Select Focus–Growth Plan                              10       251,954                —              191                 —
Kotak Floater Short term Plan–Weekly dividend                              10            —          9,247,472               —                926
                                                            (B)                                                         1,178                926
                                                       (A)+(B)                                                         34,997             27,316
Aggregate Value of Quoted Investments         — At Book Value                                                          10,525             10,525
                                              — Market Value#                                                              —                  —
Aggregate Value of Unquoted Investments — At Book Value                                                                24,472             16,790

# Listed but not traded, hence market value is not ascertainable.
* represents Company’s share of beneficial interest in a trust.



                                                                                               Kotak Mahindra Capital Company Limited        119
Schedules forming part of the Balance Sheet (Contd.)


                                                                                                                As at            As at
                                                                                                        31st March,      31st March,
                                                                                                                2008             2007
                                                                                      (Rs. in Lakhs)   (Rs. in Lakhs)   (Rs. in Lakhs)
Schedule 6 – Sundry Debtors (Unsecured)
Debts outstanding for a period exceeding six months
   – considered good                                                                             —                                —
   – considered doubtful                                                                         53                                28
                                                                                                 53                                28
   Less: Provision for doubtful debts                                                          (53)                              (28)
                                                                                                                 —                —
   Other debts (considered good)                                                                              3,005            2,228
   (above includes Rs. 7 lakhs (previous year Rs. Nil) due from Kotak Mahindra UK a
   company under same management)
          Total                                                                                               3,005            2,228

Schedule 7 – Cash and Bank Balances
Cash on hand #                                                                                                    —               —
Balances with :
    – Scheduled banks in current account                                                                        111               17
    – Scheduled banks in Deposit account                                                                      3,284           55,009
        [Including Rs. 223 lakhs (Previous year Rs. 43,893 lakhs) under lien of
        National Securities Clearing Corporation Limited and Rs. 1,048 lakhs
        (Previous year Rs. 12.50 lakhs) under lien for Bank Guarantee and
        Bank Overdraft facilities]
# Less than Rs. 1 Lakh
            Total                                                                                             3,395           55,026

Schedule 8 – Other Current Assets
Interest accrued on Investments                                                                                 189              189
Interest accrued -others                                                                                         31              387
Dividend receivable                                                                                             400               —
            Total                                                                                               620              576

Schedule 9 – Loans and Advances
(Unsecured, considered good unless otherwise stated)
Advances recoverable in cash or in kind or for value to be received                                             416              861
[includes deposit with the Clearing Corporation of India Limited Rs. Nil
(Previous year Rs. 0.01 lakhs)]
Deposits                                                                                                        589              639
Advance tax (Net of provision for taxation Rs. 11,134 lakhs)                                                     57
           Total                                                                                              1,062            1,500
Advances include:
Due from, a company under same management
Kotak Investment Advisors Limited                                                                               195              250
Kotak Mahindra Asset Management Company Limited                                                                   3               —
Maximum amount outstanding during the year
Kotak Investment Advisors Limited                                                                               395              250
Kotak Mahindra Asset Management Company Limited                                                                   5               —



120      Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet (Contd.)


                                                                                                             As at                 As at
                                                                                                     31st March,           31st March,
                                                                                                             2008                  2007
                                                                                (Rs. in Lakhs)      (Rs. in Lakhs)        (Rs. in Lakhs)
Schedule 10 – Liabilities
Sundry creditors (Other than outstanding dues of micro and small enterprises;
Refer Note 15 of Schedule No. 18)                                                                          4,407                57,718
Other liabilities                                                                                            546                   469
            Total                                                                                          4,953                58,187



Schedule 11 – Provisions
Provision for Gratuity and Leave encashment                                                                  297                   339
Provision for Tax                                                                                              —                     28
(Net of Advance Tax Previous year Rs. 4,642 lakhs)
            Total                                                                                            297                   367


Schedules forming part of the Profit and Loss Account
                                                                                                     For the year          For the year
                                                                                               ended 31st March,     ended 31st March,
                                                                                                             2008                  2007
                                                                                (Rs. in Lakhs)      (Rs. in Lakhs)        (Rs. in Lakhs)
Schedule 12 – Advisory And Transactional Services
Issue management and placement fees and underwriting commission
(Refer Note No. 5 in Schedule 18)                                                                         13,660                 3,321
Financial advisory fees                                                                                   11,712                 4,664
Clearing Commission                                                                                          103                   951
Brokerage Income                                                                                                9                    —
            Total                                                                                         25,484                 8,936


Schedule 13 – Interest And Discounting Income
Interest on :
    – Stock-in-trade ( Government dated securities, bonds and debentures)                                      —                 4,560
    – Repo Lendings                                                                                            —                      1
    – Current investments (Gross)                                                                            571                   571
    – Call lendings and money at short notice                                                                  —                      2
    – Interest on Income tax refund                                                                            13                    34
Other interest (Gross)                                                                                       701                 3,083
 (Tax deducted at source Rs. 153 lakhs; Previous Year Rs. 692 lakhs)
Discounting and redemption premium income on:
    – Stock in trade – treasury bills                                                                          —                   734
            Total                                                                                          1,285                 8,985



                                                                                     Kotak Mahindra Capital Company Limited        121
Schedules forming part of the Profit and Loss Account (Contd.)

                                                                                                     For the year          For the year
                                                                                               ended 31st March,     ended 31st March,
                                                                                                             2008                  2007
                                                                                (Rs. in Lakhs)      (Rs. in Lakhs)        (Rs. in Lakhs)
Schedule 14 – Other Income
Dividend Income on :
   – Current investments                                                                                       28                  635
   – Long term investments                                                                                   400                     —
   – Stock-in-trade                                                                                             3                    21
Profit on sale of fixed assets (net)                                                                            7                    14
Provision for doubtful debts no longer required written back                                                   28                    14
Foreign Exchange gain                                                                                          —                      3
Provision for dimunition in value of Long term Investments no longer required                                  —                   172
Rent Income                                                                                                  145                     26
Service Income                                                                                               153                   179
Miscellaneous income                                                                                            8                    75
           Total                                                                                             772                 1,139


Schedule 15 – Personnel
Salaries, allowances and bonus                                                                             6,991                 4,081
Contribution to employees’ provident and other funds                                                         148                   116
Gratuity and Leave encashment benefits                                                                       (36)                    99
Staff welfare                                                                                                  29                    24
Less: Recovery of expenses                                                                                  (241)                 (260)
           Total                                                                                           6,891                 4,060


Schedule 16 – Interest And Other Financial Charges
Interest on :
   – Inter corporate deposits                                                                                  14                    23
   – Borrowings on call/short notice/Debentures                                                              915                   841
   – Interest Rate Swaps                                                                                       —                 3,135
   – Repo borrowings                                                                                           —                   478
   – Commercial paper                                                                                          81                    95
Other interest                                                                                                 —                     15
Bank Guarantee Expenses                                                                                         1                    —
Bank and other charges                                                                                          1                     2
           Total                                                                                           1,012                 4,589




122      Kotak Mahindra Capital Company Limited
Schedules forming part of the Profit and Loss Account (Contd.)

                                                                                               For the year          For the year
                                                                                         ended 31st March,     ended 31st March,
                                                                                                       2008                  2007
                                                                          (Rs. in Lakhs)      (Rs. in Lakhs)        (Rs. in Lakhs)

Schedule 17 – Other Expenses
Travelling, conveyance and vehicle expenses                                                            484                   379
Auditors’ remuneration
    Audit fees                                                                       12                                        10
    Tax audit fees                                                                   —                                          2
    In other capacity                                                                —                                          1
    Out of pocket expenses                                                           —                                         —
                                                                                                         12                    13
Legal and professional fees                                                                            165                   273
Office Expenses                                                                                        217                   163
Advertisement                                                                                          119                   110
Electricity                                                                                              66                    43
Communication                                                                                            87                    82
Rent                                                                                                   323                   207
Rates and taxes                                                                                           4                     2
Insurance                                                                                                17                    18
Repairs and maintenance – others                                                                         36                    49
Common establishment expenses – reimbursement                                                          774                   610
Service charges                                                                                          —                     60
Diminution in value of investments – Current investments                                               271                   208
                                    – Loss on Sale of Investments (Net)                                  77                    —
Commission to a Non-Whole time Director                                                                  50                    —
Donation                                                                                                  6                    12
Bad debts written off                                                                                  116                     55
Provision for doubtful debts                                                                             52                    28
Foreign exchange loss (net)                                                                              31                    —
Other expenses                                                                                         151                   128
Less: Recovery of expenses                                                                             (89)                 (118)
              Total                                                                                  2,969                 2,322




                                                                               Kotak Mahindra Capital Company Limited        123
Schedules forming part of the Balance Sheet and Profit and Loss Account

Schedule 18 – Significant Accounting Policies and Notes to the Financial Statements

1.    Significant Accounting Policies:

      A.    BASIS OF ACCOUNTING

            The accounts are prepared on accrual basis under the historical cost convention and to comply in all material aspects with applicable accounting
            principles in India, the accounting standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies
            Act, 1956.

            The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of
            assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the
            reported period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual
            results could differ from these estimates.

      B.    REVENUE RECOGNITION

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

            (i)    Issue management and placement fees, underwriting commission and financial advisory fees are accounted based on stage of completion
                   of assignments.

            (ii)   Brokerage and clearing fees are recognized as on date of contract.

      C.    FIXED ASSETS AND DEPRECIATION

            (i)    Fixed assets are stated at cost inclusive of incidental expenses less accumulated depreciation.

            (ii)   The Company adopts the Straight Line Method of depreciation so as to write off 100% of the cost of the assets at rates higher than those
                   prescribed under Schedule XIV of the Companies Act, 1956 based on the Managements estimate of the useful lives of all the assets as
                   follows:
                    Leasehold improvements                            Over the primary period of lease
                    Computers                                         3 years

                    Furniture                                         6 years

                    Office Equipment                                  5 years

                    Vehicles                                          4 years

                    Premises                                          58 years

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

      D.    INTANGIBLE ASSETS

            Intangible assets (software) are amortised over a period of three years, on a straight-line basis.

      E.    IMPAIRMENT OF ASSETS

            An asset is impaired when the carrying amount of the asset exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss
            account in the year in which an asset is identified as impaired. An impairment loss recognized in prior accounting periods is reversed if there has
            been a change in the estimate of the recoverable amount.

      F.    INVESTMENTS

            Investments are classified into long-term investments and current investments.

            Investments, which are intended to be held for more than one year, are classified as long-term investments and investments which are intended to
            be held for less than one year, are classified as current investments. Long-term investments are accounted at cost and any decline in the carrying
            value, other than temporary in nature is provided for.



124        Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

         Current investments are valued at cost or market/fair value whichever is lower.
         In case of investments in units of mutual funds, the net asset value of units is considered as the market/fair value.
         Investments include investments in shares of companies registered outside India. They are stated at cost by converting at the rate of exchange
         prevalent at the time of acquisition thereof.
    G.   STOCK-IN-TRADE
         Securities acquired with the intention to trade are considered as stock in trade. Stock-in -trade is valued at cost (inclusive of brokerage and stamp
         charges in case of equity shares), calculated by applying the weighted average cost method or market/fair value whichever is lower.
    H.   FOREIGN CURRENCY TRANSACTIONS
         (i)    Transactions in foreign currencies are recorded at the rate of exchange in force at the time of occurrence of the transactions.
         (ii)   Exchange differences arising on settlement of revenue transactions are recognized in the profit and loss account.
         (iii) Monetary items (other than those related to acquisition of fixed assets) denominated in a foreign currency are restated using the exchange
               rates prevailing at the date of balance sheet and the resulting net exchange difference is recognized in the profit and loss account, if no
               forward cover is taken.
    I.   TAXES ON INCOME
         Income Taxes are accounted for in accordance with Accounting Standard (AS-22) – “Accounting for Taxes on Income” issued by the Institute of
         Chartered Accountants of India. Income Tax comprises of Current and Deferred tax.
         Current tax is measured on the basis of estimated taxable income and tax credits compared in accordance with the provisions of the income Tax
         Act, 1961.
         Provision for Fringe Benefits Tax is made in accordance with Chapter XII-H of the Income Tax Act, 1961.
         The tax effect of the timing differences between taxable income and accounting income that originate in one period and are capable of reversal in
         one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using the substantively enacted
         tax rates and tax regulations as of the Balance Sheet date.
         Deferred tax assets arising mainly on account of carry forward losses and unabsorbed depreciation under tax laws, are recognized, only if there
         is virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized
         only to the extent there is reasonable certainty of its realization.
    J.   EMPLOYEE BENEFITS
         (a)    Provident fund is a defined contribution scheme and the contributions as required by the statute to Government Provident Fund are charged
                to profit and loss account.
         (b)    Gratuity liability is defined benefit obligation and is wholly unfunded. The Company accounts for liability for future gratuity benefits based
                on actuarial valuation at the end of each financial year.
         (c)    Superannuation fund is a defined contribution scheme. The Company contributes a sum equivalent to 15%, subject to a maximum of
                Rs. 1.00 lakhs, of eligible employees’ salary to Superannuation Fund administered by trustee and managed by a life insurance company. The
                Company recognizes such contribution as an expense as and when incurred.
         (d)    The Company accrues the liability for compensated absences based on the actuarial valuation as at the balance sheet conducted by an
                independent actuary.
    K.   Borrowing costs
         Borrowing costs other than those directly attributable to qualifying fixed assets are recognized as an expense in the period in which they are incurred.
    L.   Provisions, Contingent Liabilities & Contingent Assets
         Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events
         and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent
         assets are neither recognized nor disclosed in the financial statements.



                                                                                                        Kotak Mahindra Capital Company Limited              125
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

      M. Operating lease:
             As lessee:
                   Assets acquired on leases where significant portions of the risks and rewards incidental to ownership are retained by the lessors are classified
                   as Operating Leases. Lease rentals are charged to the Profit and Loss account on accrual basis.
             As Lessor:
                   Assets given on leases where significant portions of risks and rewards incidental to ownership are retained by the Company are classified
                   as Operating Leases. Lease incomes are recognized in the Profit and Loss account on accrual basis. Initial direct costs incurred specifically
                   to earn revenue from operating leases are charged to Profit and Loss account as and when incurred.
      N.     SEGMENT ACCOUNTING POLICIES
             (a)   Segment assets and liabilities:
                   All Segment assets and liabilities are directly attributable to the segment.
                   Segment assets include all operating assets used by the segment and consist principally of fixed assets, investments, stock in trade, sundry
                   debtors, loans and advances and cash and bank balances. Segment assets and liabilities do not include share capital, reserves and surplus
                   and income tax (both current and deferred).
             (b)   Segment revenue and expenses:
                   Segment revenue and expenses are directly attributable to segment. It does not include provision for income tax.
      O.     DERIVATIVE TRANSACTIONS
             Open Derivatives contracts comprising of equity index/stock Futures and Options are off balance sheet items.
             (a)   Gains are recognized only on settlement/expiry of the derivative instruments.
             (b)   All open positions are marked to market and the unrealized loss is netted off on a scrip wise basis. Mark to market gains, if any are not
                   recognized.
             (c)   Debit/credit balance on open positions are shown as current assets/current liabilities, as the case may be.
2.    Contingent Liability:
      (a)    Guarantee of Rs. 3,997 lakhs (Rupee equivalent of US $10,000,000) [(Previous year Rs. 4,359 lakhs (Rupee equivalent of US $10,000,000)] given
             to Standard Chartered Bank (Mauritius) Limited in respect of borrowings by an associate.
      (b)    Guarantee of Rs. 400 lakhs (Rupee equivalent of US $1,000,000) [Previous year Rs. 436 lakhs (Rupee equivalent of US $1,000,000)] given to
             Bank of India on behalf of an associate.
      (c)    Guarantee of Rs. 9,993 lakhs (Rupee equivalent of US $25,000,000) [Previous year Rs. 5,667 (Rupee equivalent of US $13,000,000)] given to
             Hongkong and Shanghai Banking Corporation Limited on behalf of an associate.
      (d)    Guarantee of Rs. 578 lakhs (Rupee equivalent of Sing $2,000,000) [Previous year Rs. 574 lakhs (Rupee equivalent of Sing $2,000,000)] given to
             Hongkong and Shanghai Banking Corporation Limited on behalf of an associate.
      (e)    Guarantee of Rs. Nil (Previous year Rs. 2,500 Lakhs) given to Standard Chartered Bank, Mumbai on behalf of an associate.
      (f)    Guarantee of Rs. 50 Lakhs (Previous year Rs. 25 Lakhs) given on behalf of the Company in favour of National Securities Clearing Corporation
             Limited towards base capital.
      (g)    Commitment towards investment in venture capital funds – Kotak India Growth fund Rs. 50 Lakhs (Previous year Rs. Nil), Kotak Alternate
             Opportunities India Fund Rs. 1260 Lakhs (Previous year Rs. Nil).
      (h)    Show cause cum demand in respect of service tax Rs. 10 lakhs (Previous year Rs. 10 lakhs).
      (i)    Taxation matters in respect of which appeal is pending Rs. 82 lakhs (Previous year Rs. 283 lakhs).
      (j)    As part of its lead management business, the company had an outstanding obligation to procure subscribers for shares or subscribe to shares of
             a company amounting to a maximum of Rs. 40 crores.



126         Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

3.   Demerger of the Trading and Clearing activity of Kotak Investment Advisors Limited (“KIAL”) (Formerly known as Kotak Mahindra Securities Limited)
     with Kotak Mahindra Capital Company Limited (“KMCC”):

     The Scheme of Arrangement under Section 391 and 394 of the Companies Act, 1956 between KMCC and KIAL and their respective shareholders, for the
     vesting of the Trading and Clearing operations, Trading and Clearing membership of the National Stock Exchange in the cash and futures and options
     segment and in the wholesale debt market and strategic investments (Demerged Undertaking) to and in KMCC for a consideration of Rs. 1,654.59
     Lakhs, was approved by the Honorable High Court at Mumbai on 15th February, 2007.

     Pursuant to the Scheme of Demerger, the eligible shareholders of KIAL have been issued shares in consideration for the demerger.

     In accordance with the demerger scheme, all the assets and liabilities pertaining to the Demerged Undertaking have been transferred to and vested in
     KMCC at book values with effect from 31st March, 2007, being the Appointed Date.

     The excess of the book value of the assets over the book value of the liabilities as at the appointed date, amounting to Rs. 1,638.98 has been taken
     to the Profit and Loss Account in terms of the Scheme of Arrangement as approved by the Honorable High Court at Mumbai on 15th February, 2007.

     The scheme has accordingly, been given effect to in these accounts. Figures for the current year include the figures for Demerged Undertaking.

     The result of acquired business has been reflected in the segmental reporting.

4.   Components of deferred tax balances:
                                                                                                                                              (Rupees in Lakhs)
                                                                                                                 31st March, 2008             31st March, 2007
     Deferred tax liability
     Depreciation                                                                                                                  18                         —
                                                                                                                                   —                          —
     Deferred tax asset
     Provision for doubtful debts                                                                                                  18                         10
     Depreciation                                                                                                                  —                          54
     Provision for gratuity and leave encashment                                                                                 101                        115
     Unabsorbed Capital loss                                                                                                       79                         37
     Others                                                                                                                         2                          2
     Deferred Tax Asset (Net)                                                                                                    182                        218

     Deferred tax benefits are recognized on assets to the extent that it is more likely than not that future taxable profits will be available against which the
     asset can be utilized.

     Deferred Tax assets on Unabsorbed Capital Loss is recognized as the Company has investments which it intends to sell and the capital gains there from
     will be used for setting off the unabsorbed capital loss.

5.   Issue management and placement fees and underwriting commission is net of incentives/brokerages paid to investors/brokers and fees/commission
     shared aggregating to Rs. 9,718 lakhs (Previous year Rs. 2,595 lakhs).

6.   At the General Meetings of the holding company, Kotak Mahindra Bank Limited (“the Bank”), the shareholders of the Bank had unanimously passed
     Special Resolutions on 28th July, 2000, 26th July, 2004, 26th July, 2005, 5th July, 2007 and 21st August, 2007, to grant options to the Eligible
     Employees of the Bank and its subsidiary companies.

     Pursuant to these resolutions, the following four Employees Stock Option Schemes had been formulated and adopted:
     (a)   Kotak Mahindra Equity Option Scheme 2001-02
     (b)   Kotak Mahindra Equity Option Scheme 2002-03
     (c)   Kotak Mahindra Equity Option Scheme 2005
     (d)   Kotak Mahindra Equity Option Scheme 2007



                                                                                                        Kotak Mahindra Capital Company Limited              127
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

      Consequent to the above, the Bank has granted stock options to employees of the Company under the above schemes. In terms of the Guidance Note
      on Employee Share – Based Payments, issued by the ICAI, the option discount (being excess of the market price of the share over the exercise price of
      the option) is to be accounted for as employee compensation and shall be amortised on a straight line basis over the vesting period. During the year
      the Company has reimbursed the Bank Rs. 820 lakhs (Previous year Rs. 563 lakhs) on account of such costs and the same is forming part of Employee
      costs under Schedule 15.

      Had the company recorded the compensation cost computed on the basis of Fair Valuation method instead of Intrinsic value method, employee
      compensation cost would have been higher by Rs. 356 lakhs and the profit after tax would have been lower by the same amount. Consequently the
      basic and diluted EPS would have been Rs. 275.92.

7.    Reconciliation of opening and closing balance of the present value of the defined benefit obligation for gratuity benefits is given below.
                                                                                                                                                    Rs. in Lakhs
                                                                                                                       As of 31st                   As of 31st
                                                                                                                      March, 2008                  March, 2007
      Change in Unfunded benefit obligations
      Opening deferred benefit obligation                                                                                        65                          72
      Service cost                                                                                                               15                          15
      Interest cost                                                                                                               5                           5
      Benefits paid                                                                                                              —                           —
      Actuarial (gain)/loss on obligations                                                                                       14                          14
      Liability assumed on acquisition/(Settled on Divestiture)                                                                 (14)                         —
      Benefits paid                                                                                                              —                          (41)
      Present value of unfunded benefit obligations as at the end of the year                                                    85                          65
                                                                                                                                                    Rs. in Lakhs
      Reconciliation of present value of the obligation and the fair value of the plan assets
      Fair value of plan assets                                                                                                  —                           —
      Present value of benefit obligations                                                                                       85                          65
      Net asset/(liability) as at 31st March, 2007                                                                              (85)                        (65)
      Cost recognised for the period
      Current service cost                                                                                                       15                         15
      Interest cost                                                                                                               5                          5
      Expected return on plan assets                                                                                             —                          —
      Actuarial (gain)/loss                                                                                                      14                         14
      Net gratuity cost                                                                                                          34                         34
      Actuarial assumptions used
      Discount rate                                                                                                       8.14%                    8.20% p.a.
      Salary escalation rate                                                                                  15% p.a. for first 2         15% p.a. for first 2
                                                                                                              years; 10% p.a. for          years; 10% p.a. for
                                                                                                                next 2 years and             next 2 years and
                                                                                                              6% p.a. thereafter            6% p.a. thereafter
      Expected return on plan assets                                                                                         N.A.                         N.A.
      The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors
      such as supply and demand in the employment market.

      Gratuity

      In accordance with Payment of Gratuity Act, the Company provides for gratuity, a defined benefit retirement plan covering all employees. The plan
      provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the
      years of employment with the Company subject to maximum of Rs. 3.50 lakhs.
      The gratuity benefit is provided through unfunded plan and annual contributions are charged to profit and loss account. Under the scheme, the
      settlement obligation remains with the Company.



128      Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

8.   Quantitative information in respect of trading in securities.
                                                                                          2007-08                                 2006-07
                                                                           Quantity                  Value             Quantity                Value
                                                                              Nos.            Rs. in Lakhs                Nos.          Rs. in Lakhs
     Opening Stock
     Equity shares of Rs. 2 each                                                  —                      —             328,750                   720
     Equity shares of Rs. 4 each                                                  —                      —              95,700                   203
     Equity shares of Rs. 5 each                                                  —                      —             153,600                   398
     Equity shares of Rs. 10 each                                                 —                      —           2,868,375                13,729
     Treasury bills*                                                              —                      —                  —                  4,038
     Government dated securities*                                                 —                      —                  —                  8,139
        Total (a)                                                                 —                      —                                    27,227
     Purchases
     Equity shares of Re. 1 each                                            652,512                   1,903          3,698,505                 6,578
     Equity shares of Rs. 2 each                                            628,865                   3,860          2,260,397                 6,243
     Equity shares of Rs. 4 each                                                  —                      —              14,950                    37
     Equity shares of Rs. 5 each                                          3,976,062                  13,379          1,768,346                 9,207
     Equity shares of Rs. 10 each                                         8,709,982                  63,585         15,410,145                56,815
     Treasury bills*                                                              —                      —                  —                887,790
     Government dated securities*#                                                —                      —                  —               2,210,955
        Total (b)                                                                                    82,727                                 3,171,047
     Sales
     Equity shares of Re. 1 each                                            652,512                   1,977          3,698,505                 6,568
     Equity shares of Rs. 2 each                                            628,865                   3,733          2,589,147                 6,820
     Equity shares of Rs. 4 each                                                  —                      —             110,650                   235
     Equity shares of Rs. 5 each                                          3,976,062                  14,175          1,921,946                 9,613
     Equity shares of Rs. 10 each                                         8,709,982                  61,823         18,369,805                70,207
     Treasury bills*#                                                             —                      —                  —                891,784
     Government dated securities*#                                                —                      —                  —               2,218,686
        Total (c)                                                                                    81,708                                 3,197,343
     Closing Stock
     Equity shares of Rs. 2 each                                                  —                      —                  —                     —
     Equity shares of Rs. 4 each                                                  —                      —                  —                     —
     Equity shares of Rs. 5 each                                                  —                      —                  —                     —
     Equity shares of Rs. 10 each                                                 —                      —                  —                     —
     Treasury bills*#                                                             —                      —                  —                     —
     Government dated securities*#                                                —                      —                  —                     —
        Total (d)                                                                                        —                                        —
     Profit /(loss) on trading in futures (net) (e)                                                   2,288                                    1,850
     Profit /(loss) on trading in Interest Rate Swaps (net) (f)                                          —                                       259
     Securities transaction tax and transaction charges (g)                                             249                                      253
     Profit/(loss) on trading in securities = c + d + e + f - a - b - g                               1,020                                      919
     * represents securities purchased and sold on the basis of face value
     # includes/excludes securities bought/sold under reverse repos/repos transactions
       Purchase and sale transactions of equity stock futures have not been considered.



                                                                                                    Kotak Mahindra Capital Company Limited       129
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

9.    (a) Managerial Remuneration under Section 198 of the Companies Act, 1956
                                                                                                                                     (Rupees in Lakhs)
                                                                                                                 2007-2008*               2006-2007
      Salaries and allowances                                                                                           403                       304
      Contribution to provident fund                                                                                       6                        5
      Perquisites                                                                                                          5                        5
      Employee stock option plan                                                                                        176                        85
                                                                                                                          590                     400
      * The above excludes provision for gratuity and leave encashment since these are based on actuarial valuations done on an overall Company basis.
      (b) Computation of net profits as per Section 349 read with Section 309 (5) and Section 198 of the Companies Act, 1956
                                                                                                                 2007-2008                2006-2007
                                                                                                                Rs. in Lakhs              Rs. in Lakhs
           Profit before taxation as per Profit and Loss account                                                     17,519                        —
           Add:
           Depreciation as per financial statements                                                                     170                        —
           Managerial remuneration                                                                                      590                        —
           Directors sitting fees                                                                                        —                         —
           Provision for doubtful debts                                                                                  53                        —
           Provision for doubtful debts no longer required                                                              (28)                       —
           Book deficit/(surplus) on fixed assets sold (net)                                                             —                         —
           Less:
           Depreciation under Section 350 of the Companies Act, 1956                                                    170                        —
           Deficit/(surplus) (net) on disposal of fixed assets under Section 350 of the Companies Act,                   —                         —
           1956
           Profits on sale of Long Term Investments                                                                      —                         —
           Net Profit for Section 198 of Companies Act, 1956                                                         18,134                        —
           Calculation of Commission to a non-whole time director @ 1% of net profit as above in                        181                        —
           terms of Special Resolution of the Members dated April 30, 2008.
           Determined and limited by the Board to                                                                        50                        —

                                                                                                               2007-2008                  2006-2007
                                                                                                         (Rupees in Lakhs)           (Rupees in Lakhs)
10. Earnings in foreign exchange
      Financial advisory fees                                                                                        2,319                      1,918

11. Expenditure in foreign currency
      Travelling                                                                                                          6                          8

      Professional fees                                                                                                  79*                         4

      Membership and subscription                                                                                        36                        11

      Other expenses                                                                                                      5                          2

      * Amount is recovered from clients and hence not debited to Profit & Loss account.




130      Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

12. Segmental Information:
    The Company is organised into two segments namely - “Advisory and Transactional Services” and “Trading and Principal Investments”
    The “Advisory and Transactional services” segment provides financial advisory services such as mergers and acquisition advice and equity-debt issue
    management services and Trading/Professional Clearing operations of National Securities Clearing Corporation Limited.
    The “Trading and Principal Investments” segment deals in equity and derivatives, loans/deposits and investments.
    Segments have been identified and reported taking into account the nature of products and services, the differing risks and returns and the internal
    financial reporting system.
    Segment information:
                                                                                                                                       (Rupees in Lakhs)
                                                                   31st March, 2008                                     31st March, 2007

                                                      Advisory and         Trading and           Total     Advisory and       Trading and          Total
                                                      Transactional           Principal                    Transactional         Principal
                                                           Services       Investments                           Services      Investments

    Segment Revenue

    Income from external customers                           25,678              2,725        28,403             12,109             8,349       20,458

    Income from inter segments                                     —                 —             —                   —               —             —

         Total Revenue                                       25,678              2,725        28,403             12,109             8,349       20,458

    Segment result

    Results                                                  16,036              1,355        17,391               6,472            2,858         9,330

    Add: Unallocated income                                        —                 —            158                  —               —             60

    Less: Unallocated expenses                                     —                 —             30                  —               —             —

    Less: Income tax (including deferred tax)                      —                 —          5,988                  —               —          2,602

    Net Profit                                                                                11,531                                              6,788

    Other Information

    Carrying amount of segment assets                          4,075            39,211        43,286             59,768           26,579        86,347

    Unallocated corporate assets                                   —                 —          2,055                  —               —          2,531

         Total Assets                                                                         45,341                                            88,878

    Carrying amount of segment liabilities                     5,250                 —          5,250            61,944                —        61,944

    Unallocated corporate liabilities                              —                 —             —                   —               —             29

         Total Liabilities                                                                      5,250                                           61,973

    Capital Expenditure

    Tangible                                                     262                 —            262              1,932               35         1,967

    Intangible                                                    14                 —             14                    8             —              8

    Depreciation/                                                157                 —            157                  124             33           157

    Amortisation                                                  13                 —             13                  —               —             —




                                                                                                  Kotak Mahindra Capital Company Limited            131
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

      Segment revenue comprises of:
                                                                                                                                           (Rupees in Lakhs)
                                                                                                               31st March, 2008           31st March, 2007

      Income from services                                                                                                 25,645                     8,936

      Interest and discounting income                                                                                       1,299                     8,951

      Profit on sale of current investments (net)                                                                               —                       539

      Profit on trading in securities (net)                                                                                 1,020                       919

      Other Income:
      Dividend income on:

            Current investments                                                                                               400                       635

            Stock-in-trade                                                                                                       3                        21

      Provision for doubtful debts no longer required written back                                                              28                        14

      Provision for diminiution in value of long term investments no longer required                                            —                       172

      Others                                                                                                                     8                      271

      Total Segment Revenue                                                                                                28,403                    20,458

      Add: Unallocated Income                                                                                                 158                         60

             Total Income                                                                                                  28,561                     20518
      # less than Rs. 1 Lakh
      Segment assets comprise mainly of trade and other receivables, investments, stock-in-trade and accrued income. Unallocated assets for the current year
      represent investments in subsidiary companies, and deferred taxes. Segment liabilities include loans, trade and other payables and sundry creditors.
      Unallocated liabilities for the current year include deferred taxes and other liabilities.

13. Related parties disclosures
      (i)    Relationships (During the year)

             A.    Related parties where control exists:

                   Nature of relationship                        Related Party

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

                   Effective October 15, 2007, Uday S. Kotak along with relatives and entities controlled by him ceased to hold more than 50% of the equity
                   share capital of Kotak Mahindra Bank Limited. Uday S. Kotak along with relatives and entities controlled by him holds 48.69% of the equity
                   share capital of Kotak Mahindra Bank Limited as on March 31, 2008

                   Subsidiary Companies:                         N.A.




132         Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

        B.   Other Related parties:

             (i)    Fellow Subsidiaries:                   Kotak Securities Limited

                                                           Kotak Mahindra Prime Limited

                                                           Kotak Mahindra Asset Management Company Limited

                                                           Kotak Mahindra Old Mutual Life Insurance Company Limited

                                                           Kotak Forex Brokerage Limited

                                                           Kotak Mahindra Investments Limited

                                                           Kotak Investment Advisors Ltd.
                                                           (formerly known as Kotak Mahindra Securities Limited)

                                                           Kotak Mahindra Inc.

                                                           Kotak Mahindra (UK) Limited

                                                           Kotak Mahindra (International) Ltd.

                                                           Global Investment Opportunities Fund Limited

                                                           Kotak Mahindra Trustee Co. Ltd.

                                                           Kotak Mahindra Trusteeship Services Ltd.

             (ii)   Associates (Enterprises in which the   Infina Finance Private Limited (formerly known as Multifaced Finstock Private Limited)
                    Company has significant influence)     Phoenix ARC Private Limited

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

             (iv) Key management personnel                 Mr. Uday S. Kotak, Non executive Chairman
                                                           Ms Falguni Nayar, Managing Director




                                                                                                 Kotak Mahindra Capital Company Limited             133
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

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

                                                                          Holding                             Fellow subsidiary Companies
Nature of Transaction
                                                                         Company
                                                                                Kotak               (Kotak             Kotak               Kotak      Koak
                                                                            Mahindra           Investment          Mahindra        Mahindra (UK)   Mahindra
                                                                         Bank Limited   Advisors Limited)     (International)            Limited        Inc.
                                                                                         Kotak Mahindra              Limited
                                                                                        Securities Limited
Finance
Interest paid                                                                   —                   —                  —                    —          —
                                                                         (3,138.69)                 —                  —                    —          —
Loans given                                                                     —             425.00                   —                    —          —
                                                                         (2,985.00)           (250.00)                 —                    —          —
Loan taken                                                                      —                   —                  —                    —          —
                                                                         (2,000.00)                 —                  —                    —          —
Loans given repaid                                                              —             675.00                   —                    —          —
                                                                         (2,985.00)               —                    —                    —          —
Loan taken repaid                                                               —                   —                  —                    —          —
                                                                         (2,000.00)                 —                  —                    —          —
Interest received                                                          670.44                   —                  —                    —          —
                                                                         (6,298.26)              (0.50)                —                    —          —
Fixed Deposit Placed                                                   48,941.40                    —                  —                    —          —
                                                                      (331,598.00)                  —                  —                    —          —
 Fixed Deposit encashed/Matured                                       100,665.95                    —                  —                    —          —
                                                                      (288,657.03)                  —                  —                    —          —
 Outstanding
 Loan taken                                                                     —                    —                 —                    —          —
                                                                                —                    —                 —                    —          —
 Loan given                                                                     —                  —                   —                    —          —
                                                                                —             (250.00)                 —                    —          —
 Advances Given
 Bank Balance                                                               91.72                    —                 —                    —          —
                                                                            (11.01)                  —                 —                    —          —
Fixed Deposit Balance                                                    3,271.40                   —                  —                    —          —
                                                                        43,893.00                   —                  —                    —          —
Investments
Purchase/subscription                                                           —                   —                  —                    —          —
                                                                                —                   —                  —                    —          —
Sale/redemption                                                                 —                  —                   —                    —          —
                                                                                —             (703.02)                 —                    —          —
Interest/Dividend/Premium on Investments                                        —                   —                  —                    —          —
                                                                                —                   —                  —                    —          —
Stock-in-trade (Securities)
Purchases/subscription                                                          —                   —                  —                    —          —
                                                                         (4,880.64)                 —                  —                    —          —
 Sales                                                                         —                    —                  —                    —          —
                                                                      (230,934.91)                  —                  —                    —          —
 Interest/dividend – stock-in-trade                                           —                 —                —               —                     —
                                                                              —                 —                —               —                     —
# Includes transactions in respect of investments in, borrowing from, and purchase from/sale to – schemes of Kotak Mahindra Mutual Fund,
  managed by a fellow subsidiary.
  Figures in brackets relates to the pervious year.



134      Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)



                      Fellow subsidiary Companies                                            Joint Venture                Associates                 Key Management
                                                                                                                                                           Personnel
          Koak               Kotak               Kotak           Kotak           Total               Kotak         Infina Finance         Phoenix       Falguni Nayar
      Securities     Mahindra Asset          Mahindra       Mahindra                             Mahindra         Private Limited      ARC Private
        Limited       Management             Prime Ltd.   Investments                      Old Mutual Life   (Formerly known as           Limited
                      Company Ltd.                             Limited                   Insurance Limited   Multifaced Finstock
                                                                                                                 Private Limited)


          —                  —                   —               —                —                  —                   0.78                —                  —
          —                  —               (14.56)             —            (14.56)                —                 (23.36)               —                  —
          —                  —                      —            —           425.00                  —                      —                —                  —
          —                  —                      —            —           (250.00)                —                      —                —                  —
          —                  —                   —               —                —                  —               650.00                  —                  —
          —                  —              (132.92)             —           (132.92)                —                   —                   —                  —
          —                  —                      —            —           675.00                  —                      —                —                  —
          —                  —                      —            —               —                   —                      —                —                  —
          —                  —                   —               —                —                  —              650.00                   —                  —
          —                  —              (288.84)             —           (288.84)                —           (10,525.00)                 —                  —
          —                  —                      —            —                —                  —                      —                —                  —
          —                  —                      —            —             (0.50)                —                      —                —                  —
          —                  —                      —            —               —                   —                      —                —                  —
          —                  —                      —            —               —                   —                      —                —                  —
          —                  —                      —            —               —                   —                      —                —                  —
          —                  —                      —            —               —                   —                      —                —                  —

          —                  —                      —            —               —                   —                      —                —                  —
          —                  —                      —            —               —                   —                      —                —                  —
          —                  —                      —            —                —                  —                      —                —                  —
          —                  —                      —            —           (250.00)                —                      —                —                  —

          —                  —                      —            —               —                   —                      —                —                  —
          —                  —                      —            —               —                   —                      —                —                  —
          —                  —                      —            —               —                   —                      —                —                  —
          —                  —                      —            —               —                   —                      —                —                  —

          —        408,722.86                    —               —       408,722.86          3,448.31                       —            66.00                  —
          —         (80,293.57) #         (1,723.10)             —        (82,016.66)          (474.87)                     —               —                   —
          —        409,298.92                       —            —       409,298.92                  —                      —                —                  —
          —         (77,532.22) #                   —            —        (78,235.24)                —                      —                —                  —
     400.01              12.85                      —            —           412.86                  —                      —                —                  —
         —             (284.58)                     —            —           (284.58)                —                      —                —                  —

   3,057.65                 —                       —            —         3,057.65                  —                      —                —                  —
 (501,933.15)      (274,214.44) #                   —            —       (776,147.59)                —                      —                —                  —
   2,505.50                 —                       —            —         2,505.50                  —                      —                —                  —
 (538,785.59)      (273,589.54) #                   —            —       (812,375.13)                —                      —                —                  —
          —                  —                      —            —                —                  —                      —                —                  —
          —                (55.51)                  —            —            (55.51)                —                      —                —                  —




                                                                                                        Kotak Mahindra Capital Company Limited                  135
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

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

                                                                          Holding                             Fellow subsidiary Companies
Nature of Transaction
                                                                         Company
                                                                                 Kotak               (Kotak            Kotak                Kotak      Koak
                                                                             Mahindra           Investment         Mahindra         Mahindra (UK)   Mahindra
                                                                          Bank Limited   Advisors Limited)    (International)             Limited        Inc.
                                                                                          Kotak Mahindra             Limited
                                                                                         Securities Limited
Outstandings in Respect of Stock-in-trade
Payables                                                                         —                   —                 —                     —          —
                                                                                 —                   —                 —                     —          —
Receivable                                                                       —                   —                 —                     —          —
                                                                                 —                   —                 —                     —          —
 Other receipt and payments
 Sale of Fixed assets                                                        14.60                 4.05                —                     —          —
                                                                             (35.64)                 —                 —                     —          —
 Purchase of Fixed assets                                                        —                    —                —                     —          —
                                                                              (1.55)                  —                —                     —          —
 Income from Services                                                        25.00                   —                 —                 60.44          —
                                                                                —                (12.00)               —               (203.02)         —
 Others – Receipts                                                               —                    —                —                     —          —
                                                                              (8.89)                  —                —                     —          —
 Net Income transferred under the scheme of demerger                             —                 4.14                —                     —          —
                                                                                 —                   —                 —                     —          —
 Expenses reimbursement to other companies                                 258.04                  3.36                —                     —        5.95
                                                                           (259.92)                  —                 —                     —       (1.17)
 Expenses reimbursement by other companies                                 516.77                  0.83                —                     —          —
                                                                           (129.78)                  —                 —                     —          —
 Other expenses paid/brokerage paid/fee/commission sharing                 819.93                     —                —                     —          —
                                                                           (964.26)                   —                —                     —          —
 Remuneration*                                                                   —                    —                —                     —          —
                                                                                 —                    —                —                     —          —
Dividend paid/payable – Gross                                                    —                   —                 —                     —          —
                                                                                 —                   —                 —                     —          —
Guarantees given                                                                 —                   —                 —                    —           —
                                                                                 —                   —                 —               (574.00)         —
Payables                                                                     66.28                   —                 —                     —        0.42
                                                                             (67.07)              (6.50)               —                     —       (1.17)
 Receivables                                                                 42.04             195.51                  —                    7.02        —
                                                                                —                  —                   —                      —         —
 Guarantees Outstanding                                                      50.00                  —         13,989.50                977.84           —
                                                                                —            (2,500.00)       (10,026.00)            (1,010.00)         —
 Net Assets transferred under scheme of demerger                                —            1,654.59                  —                     —          —
                                                                        (21,676.06)                —                   —                     —          —
* Excludes provision for gratuity and leave encashment, since these are based on actuarial valuations done on an overall Company basis.
  Figures in brackets relates to the pervious year.




136       Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)



                    Fellow subsidiary Companies                                            Joint Venture                Associates                 Key Management
                                                                                                                                                         Personnel
          Koak             Kotak               Kotak           Kotak          Total               Kotak          Infina Finance         Phoenix      Falguni Nayar
      Securities   Mahindra Asset          Mahindra       Mahindra                            Mahindra          Private Limited      ARC Private
        Limited     Management             Prime Ltd.   Investments                     Old Mutual Life    (Formerly known as           Limited
                    Company Ltd.                             Limited                  Insurance Limited    Multifaced Finstock
                                                                                                               Private Limited)


          —                  —                    —            —              —                   —                       —                —                 —
          —                  —                    —            —              —                   —                       —                —                 —
        2.92                 —                    —            —            2.92                  —                       —                —                 —
          —                  —                    —            —              —                   —                       —                —                 —


        3.80                 —                    —            —            7.85                  —                       —                —                 —
          —                  —                    —            —              —                   —                       —                —                 —
          —                  —                    —            —              —                   —                       —                —                 —
          —                  —                    —            —              —                   —                       —                —                 —
          —                  —                    —            —            60.44                 —                       —                —                 —
     (193.26)                —                    —            —          (408.27)                —                       —                —                 —
      19.34                 —                     —            —           19.34                  —                       —                —                 —
         —                 0.04                   —            —            0.04                  —                       —                —                 —
          —                  —                    —            —            4.14                  —                       —                —                 —
          —                  —                    —            —              —                   —                       —                —                 —
     537.81                  —                    —         4.03          551.15                  —                       —                —                 —
     (440.37)                —                    —           —           (441.54)                —                       —                —                 —
     630.99             17.27                     —         0.74          649.83                  —                       —            10.00                 —
     (438.37)           (17.79)                   —           —           (456.16)                —                       —               —                  —
   9,729.79                  —                    —            —        9,729.79                4.10                      —                —                 —
   (2,575.61)                —                    —            —        (2,575.61)             (3.01)                     —                —                 —
          —                  —                    —            —              —                   —                       —                —            589.98
          —                  —                    —            —              —                   —                       —                —            (365.00)
          —                  —                    —            —              —                   —                       —                —                 —
          —                  —                    —            —              —                   —                       —                —                 —
          —                  —                    —            —               —                  —                       —                —                 —
          —                  —                    —            —          (574.00)                —                       —                —                 —
   1,050.02                  —                    —            —        1,050.44                  —                       —                —                 —
     (559.12)                —                    —            —          (566.80)                —                       —                —                 —
        6.27              2.91                    —            —          211.71                  —                       —                —                 —
          —                 —                     —            —              —                   —                       —                —                 —
          —                  —                    —            —       14,967.34                  —                       —                —                 —
          —                  —                    —            —       (13,536.00)                —                       —                —                 —
          —                  —                    —            —        1,654.59                  —                       —                —                 —
          —                  —                    —            —              —                   —                       —                —                 —




                                                                                                     Kotak Mahindra Capital Company Limited                   137
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

14. Operating Lease

            A.      Assets taken on lease

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

                    (ii)   Rent payments are recognized in the Profit and Loss Account under “Rent” and are disclosed in Schedule 17.

            B.      Assets given on lease

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

                    (ii)   Rent receipts are recognized in the Profit and Loss Account under “Rent” are disclosed in Schedule 14.

                    (iii) The future minimum lease payments under non-cancellable operating lease – not later than one year as at 31st March, 2008 aggregate
                          to Rs. 145 lakhs (Previous year Rs. 72 lakhs) and those for period between one to five years aggregate to Rs. 29 lakhs (Previous year
                          Rs. 92 lakhs).

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

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

                                                                                               31st March, 2008                     31st March, 2007
                                                                                                                               Including            Excluding
                                                                                                                           Discontinuing        Discontinuing
      Profit attributable to Equity shareholders (Rs.) – (A)                                      1,153,091,014            678,787,000           478,780,304
      Basic /Weighted average number of Equity shares outstanding
      during the year – (B)                                                                            4,050,029              3,960,020             3,960,020
      Nominal value of Equity shares (Rs.)                                                                     10                      10                   10
      Basic Earnings per share – (A)/(B)                                                                  284.71                    171.41             120.90

17. In terms of a joint venture agreement entered into by the Company with Kotak Mahindra Bank Limited, Old Mutual Plc. And Kotak Mahindra Prime
    Limited, the Company holds 11.76% (Previous year 6.65%) ownership interest in Kotak Mahindra Old mutual Life insurance Limited (incorporated in
    India) which falls under the category of Jointly Controlled Entity as per accounting Standard 27 Financial Reporting of Interests in Joint Ventures issued
    by the Institute of Chartered Accountants of India.

      Aggregate amounts of assets, liabilities, income and expenses related to the interest in the jointly controlled equity based on the accounts for the year
      ended 31st March, 2008 (subject to audit):
                                                                                                                                                     Rs. Lakhs
                                                                                                                 31st March, 2008            31st March, 2007
      Assets                                                                                                                 38,551                    13,009
      Liabilities                                                                                                            36,274                    12,324
      Income                                                                                                                 22,829                     7,220
      Expenses                                                                                                               22,684                     7,608

18. Recovery of expenses in schedule 15 and schedule 17 are amounts recovered from the holding company, subsidiaries and fellow subsidiaries towards
    the value of costs apportioned of the Company’s employees and facilities in accordance with the agreements on allocation of expenses with the
    companies.
19. Figures for the previous year have been regrouped wherever necessary to confirm to current year classification.



138       Kotak Mahindra Capital Company Limited
Schedules forming part of the Balance Sheet and Profit and Loss Account (Contd.)

20. Balance Sheet Abstract and Company’s General Business Profile

    (a) Position of Mobilisation and Deployment of Funds                                                   (Amount in Rs. Lakhs)
          Total Liabilities                                                                                              45,341
          Total Assets                                                                                                   45,341
          Sources of Funds
          Paid up Capital                                                                                                   412
          Reserves and Surplus                                                                                           39,679
          Secured Loans                                                                                                      —
          Unsecured Loans                                                                                                    —
          Current Liabilities                                                                                             5,250
          Application of Funds
          Net Fixed Assets                                                                                                2,080
          Investments                                                                                                    34,997
          Deferred Tax Asset                                                                                                182
          Current Assets                                                                                                  8,082
          Miscellaneous Expenditure                                                                                          —

    (b) Performance of Company
          Turnover/Income                                                                                                28,561
          Total Expenditure                                                                                              11,042
          Profit before Tax                                                                                              17,519
          Profit after Tax                                                                                               11,531
          Earnings Per Share (in Rs)                                                                                     284.71
          Dividend Rate (%)                                                                                                  Nil

    (c)   Generic Names of Three Principal Products/Services of Company
          Product Description                                                                                     Item Code No.
          Investment Banking and Clearing                                                                                   N/A




                                                                          For and on behalf of the Board of Directors



                                                                          Uday Kotak                       Falguni Nayar
                                                                          Chairman                         Managing Director

                                                                          Ajay Vaidya                      Shanti Ekambaram
Mumbai, 30th April, 2008                                                  Company Secretary                Director



                                                                               Kotak Mahindra Capital Company Limited       139
BOARD OF DIRECTORS: MR. UDAY KOTAK (C), MR. NARAYAN S.A. (MD), MR. VIKRAM SUD (D), MR. C. JAYARAM (D), MS. FALGUNI NAYAR (D), MR. ShIVAJI DAM (D),
MR. D. KANNAN (ED & COO)

Directors‘ Report
To the Members of                                                                     The volume traded by your Company in the financial year
Kotak Securities Limited                                                              (FY) 2007-08 as compared with the aggregate reported equity
                                                                                      turnover of NSE and BSE for the said FY was in excess of 7%.
Your Directors are pleased to present the 14th Annual Report and the
Audited Accounts for the year ended 31st March, 2008.                                 Retail Segment
I.     Financial Highlights                                                           Your company continued its focus on increasing its retail presence
                                                                                      and towards this end, your company now has more than 870 outlets
                                      (Rupees in Lakhs except per share data)         across the country comprising own as well as sub-broker outlets. The
                                                 31st March, 31st March,              number of registered sub-brokers stood at 902 for NSE and 820 for
                                                       2008        2007               BSE on March 31, 2008. The customer base has increased to more
       Gross Income                              1,33,003.16      83,393.26           than 4,30,000. The focus is on opening more online accounts and
       Profit/(Loss) before Depreciation                                              encouraging existing customers to use the Online engine. As one more
       and Tax                                     60,750.57      38,833.90           step in improving Customer Service, your company has commenced
                                                                                      using services of a listed BPO service provider. Your company is also
       Depreciation                                 2,728.86       2,321.76
                                                                                      focusing on deepening the relationship with existing customers.
       Profit/(Loss) before Tax                    58,021.71      36,512.14
       Provision for Tax                           17,152.49      10,940.72           Institutional Equities
       Profit/(Loss) After Tax                     40,869.22      25,571.42           The Company’s Institutional division understands the unique business
       Transfer from Debenture Redemption                                             requirements of its clients and has tailor-made products to meet their
       Reserve                                     10,048.48       7,467.42           requirements. The Company is committed to provide high quality
                                                                                      execution and fundamental equity research services to global and
       Balance brought forward from
                                                                                      domestic assets managers. Its research cell provides comprehensive
       previous year                               60,786.98      37,796.62
                                                                                      macro economic, industry and company – specific equity research.
       Amount available for appropriation        1,11,704.68      70,835.46           The Company continues to have a significant presence in the Futures
       Transfer to Debenture Redemption                                               & Options segment.
       Reserve                                     28,584.82      10,048.48
       Profit/(Loss) carried forward to the                                           Primary Market
       Balance Sheet                               77,161.02      60,786.98           Active and buoyant capital markets saw a number of corporates
       Earnings per share on equity shares                                            accessing the Capital Markets for Equity Issuances. Your company has
       of Rs. 10 each (Basic and Diluted)           2,554.33       1,598.21           participated in the distribution of 90 Public offer issues, mobilising in
                                                                                      excess of Rs. 73,200 crores in the retail segment itself.
II.    Dividend
       During the financial year 2007-08, Board of directors of your company          Portfolio Management Services
       has declared an interim dividend of Rs. 100/- per equity share. The            During the year, your company has launched Non-Discretionary
       same has been paid to the members appearing on the register of                 Services in addition to Discretionary Services already being provided.
       members/Depository records as on 31st March, 2008.                             The focus on attracting retail investors continues and your company
III.   Operations                                                                     also has a separate Fund Management team for the same. Two of the
                                                                                      Close-ended schemes launched in earlier years matured in the financial
       Whereas, the fiscal year 2006-2007 was a historic year for the Indian
                                                                                      year 2007-08. Your company continues to focus on increasing product
       economy, as the benchmark BSE Sensex crossed 14,800 during the
                                                                                      offerings and improving service standards. The total equity Assets
       year, the fiscal year 2007-08 saw the benchmark BSE Sensex gaining
                                                                                      Under Management (AUM) as on 31st March, 2008 was around
       further ground and crossing the 21,200 mark on 10th January, 2008.
                                                                                      Rs. 3,300 crores.
       Similarly, the benchmark Nifty, which had touched the years high of
       4,200 in 2006-2007 crossed the 6,300 mark in fiscal year 2007-2008.      Iv.   Awards and Recognitions
       The average daily volumes in the Cash Segment grew from 11,643.09
                                                                                      Your Company has been awarded the following awards during the
       crores in 2006-2007 to 20,418.75 crores in 2007-08, an increase of
                                                                                      financial year 2007-08.
       75%. On the derivative segment on NSE, the Average Daily volumes
       increased from Rs. 29,439.68 crores in 2006-2007 to Rs. 52,153.30        	     •	   Best	Performing	Equity	Broker	in	India	–	CNBC	Financial	Advisor	
       crores in 2007-2008, an increase of 77%.                                            Awards 2008.



140        Kotak Securities Limited
	    •	    Avaya	 Customer	 Responsiveness	 Awards	 (2007)	 in	 Financial	          IX. Statutory Information
           Services Sector.                                                              The information required under Section 217(2A) of the Companies
	    •	    Best	Brokerage	Firm	in	India	by	Asiamoney	in	2007.	                           Act, 1956 read with the Companies (Particulars of Employees) Rules,
                                                                                         1975 as amended, is given in the Annexure appended hereto and
	    •	    The	 Leading	 Equity	 House	 in	 India	 in	 Thomson	 Extel	 Surveys	          forms part of this Report.
           Awards for the year 2007.
                                                                                         The requirement of disclosure, in terms of Section 217(1)(e) of the
	    •	    Euromoney	 Award	 (2007)	 –	 Best	 Provider	 of	 Portfolio	                   Companies Act, 1956, as regards the steps taken for conservation of
           Management: Equities.                                                         energy and technology absorption is not applicable to the Company
                                                                                         as the Company does not own any manufacturing facility.
v.   Future Outlook
     The year ended March 31, 2008 saw unprecedented volatility with the                 Foreign exchange earnings and foreign exchange outgo during the
     second half of January seeing a significant fall in valuations and market           year under review were Rs. 206.39 lacs (Previous year Rs. 6.40 Lacs)
     indices. American and European Banks have taken large write offs for                and Rs. 1058.75 lacs (Previous year Rs. 353.77 Lacs) respectively.
     deterioration in asset values leading to a crisis. Uncertainties still exist
                                                                                    X.   Directors’ Responsibility Statement
     on whether the crisis is over or there is more to come. India has also
     seen a sharp rise in inflation rates with Oil and metal prices increasing.          Based on representations from the management, the Directors state,
     A number of Indian corporates had entered into Foreign Exchange                     in pursuance of Section 217(2AA) of the Companies Act, 1956, that:
     Derivative Transactions which has resulted in Mark to Market losses
                                                                                         (i)    the Company has, in the preparation of the annual accounts
     as underlying currency movement have been unfavorable to them. The
                                                                                                for the year ended 31st March, 2008, followed the applicable
     extent of these losses is not yet crystalised.
                                                                                                accounting standards along with proper explanations relating
     The environment for investments therefore has been one of extreme                          to material departures, if any;
     caution. Some investors have adopted a wait and watch approach,
     while others are still trying to recoup losses suffered in the aftermath            (ii)   the Directors have selected such accounting policies and applied
     of the January 2008, market crash.                                                         them consistently and made judgments and estimates that are
                                                                                                reasonable and prudent so as to give a true and fair view of
     This has led to a steep fall in traded volumes in the Indian Stock                         the state of affairs of the Company as at 31st March, 2008
     Exchanges resulting in lower brokerage income for the last quarter of                      and of the profit of the Company for the financial year ended
     FY 2008. Pressure on realization rates continues unabated. Primary                         31st March, 2008.
     Market Offerings have also reduced as valuations from issuers’
     perspective are not attractive. Regulatory challenges continue with the             (iii) the Directors have taken proper and sufficient care to the best
     number of recent changes introduced by the Regulator. Your company                        of their knowledge and ability, for the maintenance of adequate
     has been proactive and has been adopting a business strategy to meet                      accounting records in accordance with the provisions of the Act
     the emerging market environment.                                                          for safeguarding the assets of the Company and for preventing
                                                                                               and detecting fraud and other irregularities; and
vI. Directors
     Mr. D. Kannan and Mr. Shivaji Dam retire by rotation at the ensuing                 (iv) the Directors have prepared the annual accounts on a going
     Annual General Meeting and are eligible for re-appointment.                              concern basis.

     During the year under review, Mr. Alroy Lobo resigned from the office          XI. Acknowledgements
     of Managing Director – Institutional Equities on 31st May, 2007 and                 The Directors wish to thank Securities and Exchange Board of India,
     continued to act as director of the Company till 31st October, 2007.                the Stock Exchanges, the Depositories and the Company’s Bankers for
     Further, Mr. Vikram Sud was appointed as an additional director on                  their support. The Directors commend the employees of the Company
     22nd October, 2007 on the Board of your company.                                    for their dedicated efforts that made these results achievable.

vII. Auditors
     The company’s auditors, M/s Price Waterhouse, Chartered Accountants,
     Mumbai, retire at the ensuing Annual General Meeting and are eligible
     for re-appointment.                                                                                                        For and on behalf of the
                                                                                                                                Board of Directors
vIII. Public Deposits
                                                                                                                                UDAY S. KOTAK
     During the year under review, the Company did not accept any                                                               Chairman
     deposits from the public.                                                      Mumbai, 7th May, 2008



                                                                                                                             Kotak Securities Limited      141
Auditors’ Report

To the Members of                                                                      the Board of Directors of the Company, none of the Directors of the
Kotak Securities Limited                                                               Company is disqualified as on 31st March, 2008 from being appointed
                                                                                       as a Director in terms of clause (g) of sub-section (1) of Section 274 of
1.    We have audited the attached Balance Sheet of Kotak Securities
                                                                                       the Act.
      Limited (the Company), as at 31st March, 2008, the related Profit and
      Loss Account for the year ended on that date annexed thereto and            9.   As required by the Companies (Auditor’s Report) Order, 2003 as
      the Cash Flow Statement for the year ended on that date, which we                amended by the Companies (Auditor’s Report) (Amendment) Order,
      have signed under reference to this report. These financial statements           2004 issued by the Central Government of India in terms of sub-
      are the responsibility of the Management of the Company. Our                     section (4A) of Section 227 of the Act and on the basis of such checks
      responsibility is to express an opinion on these financial statements            as we considered appropriate and according to the information and
      based on our audit.                                                              explanations given to us, we further report that:
2.    We conducted our audit in accordance with the auditing standards                 (i)    (a)   The Company has maintained proper records to show full
      generally accepted in India. Those Standards require that we plan                             particulars including quantitative details and situation of
      and perform the audit to obtain reasonable assurance about whether                            its fixed assets.
      the financial statements are free of material misstatement. An
      audit includes examining, on a test basis, evidence supporting the                      (b)   The fixed assets of the Company are physically verified
      amounts and disclosures in the financial statements. An audit also                            by the Management according to a phased programme
      includes assessing the accounting principles used and significant                             designed to cover all the items over a period of two years,
      estimates made by the Management, as well as evaluating the overall                           which in our opinion, is reasonable having regard to the
      presentation of the financial statements. We believe that our audit                           size of the Company and the nature of its assets. Pursuant
      provides a reasonable basis for our opinion.                                                  to the programme, a portion of the fixed assets have been
                                                                                                    physically verified by the Management during the year and
3.    In our opinion and to the best of our information and according to the                        no material discrepancies between the book records and
      explanations given to us, the said financial statements together with                         the physical inventory have been noticed.
      the notes thereon and attached thereto give in the prescribed manner
      the information required by The Companies Act, 1956 of India (the                       (c)   In our opinion, a substantial part of the Company’s fixed
      Act), and give, a true and fair view in conformity with the accounting                        assets have not been disposed off by the Company during
      principles generally accepted in India:                                                       the year.

      (a)     in the case of the Balance Sheet, of the state of affairs of the         (ii)   (a)   The securities held as stock in trade have been confirmed
              Company as at 31st March, 2008;                                                       with the statement of holdings provided by the National
                                                                                                    Securities Depository Limited (NSDL) and Central Depository
      (b)     in the case of the Profit and Loss Account, of the profit for the                     Services (India) Limited (CDSL) at the financial year end. In
              year ended on that date and                                                           our opinion, the frequency of confirmation is reasonable.
      (c)     in the case of the Cash Flow Statement, of the cash flows for the
                                                                                              (b)   In our opinion, the procedures of confirmation of securities
              year ended on that date.
                                                                                                    held as stock in trade followed by the Management are
4.    We have obtained all the information and explanations, which to the                           reasonable and adequate in relation to the size of the
      best of our knowledge and belief were necessary for the purposes of                           Company and the nature of its business.
      our audit.
                                                                                              (c)   On the basis of our examination of the records of the
5.    In our opinion, proper books of account as required by law have been                          Company relating to securities held as stock in trade, in
      kept by the Company so far as appears from our examination of those                           our opinion, the Company has maintained proper records
      books.                                                                                        of stock in trade and no material discrepancies between
                                                                                                    the book records and the statement of holdings provided
6.    The Balance Sheet, Profit and Loss Account and Cash Flow Statement
                                                                                                    by NSDL and CDSL have been noticed.
      dealt with by this report are in agreement with the books of account.
                                                                                       (iii) (a)    (i)   The Company has placed fixed deposits with its
7.    In our opinion, the Balance Sheet, Profit and Loss Account and Cash
                                                                                                          holding company covered in the register maintained
      Flow Statement dealt with by this report comply with the accounting
                                                                                                          under Section 301 of the Act. The maximum amount
      standards referred to in sub-section (3C) of Section 211 of the Act.
                                                                                                          involved during the year aggregates Rs. 21,196,072
8.    On the basis of written representations received from the Directors                                 (‘000s) and the year end balance of such fixed
      of the Company, as on 31st March, 2008, and taken on record by                                      deposits aggregates Rs. 21,196,072 (‘000s).



142         Kotak Securities Limited
Auditors’ Report (Contd.)

              (ii)   In our opinion, the rate of interest and other terms                                  exceeding the value of Rs. 500 (‘000s) in respect
                     and conditions of such fixed deposits placed are                                      of any party during the year have been made
                     not prima facie prejudicial to the interest of the                                    at prices which are reasonable having regard
                     Company.                                                                              to the prevailing market prices at the relevant
                                                                                                           time or are considered to be of special nature
              (iii) In respect of aforesaid fixed deposits placed, the
                                                                                                           for which no comparison of prices could be
                    holding company is regular in repaying the principal
                                                                                                           made as explained by the Management of the
                    amounts as stipulated and is also regular in the
                                                                                                           Company.
                    payment of interest.
                                                                                                   (vi) The Company has not accepted any deposits
        (b)   (i)    The Company has taken overdraft facility from its
                                                                                                        from the public under the provisions of Section
                     holding company covered in the register maintained
                                                                                                        58A and 58AA of the Act and the rules framed
                     under Section 301 of the Act. The facility available
                                                                                                        there under.
                     to the Company during the year aggregates
                     Rs. 1,000,000 (‘000s) and the year end book balance                           (vii) In our opinion, the Company has an internal
                     of such overdrafts aggregates Rs. 799,467 (‘000s).                                  audit system commensurate with its size and
                     The Company has issued unsecured debentures to a                                    nature of its business.
                     Director. The maximum amount of such debentures                               (viii) (a)      According to the books of account and
                     outstanding during the year and the year end balance                                          records as produced and examined by
                     of such debentures is Rs. 3,000 (‘000s).                                                      us, in accordance with the generally
              (ii)   In our opinion, the rate of interest and other terms                                          accepted auditing practices in India and
                     and conditions of such overdrafts and debentures                                              also Management representations, in
                     are not prima facie prejudicial to the interest of the                                        our opinion, the Company is generally
                     Company.                                                                                      regular in depositing undisputed statutory
                                                                                                                   dues in respect of provident fund,
              (iii) The repayment of principal amounts and payment                                                 investor education and protection fund,
                    of interest in case of the aforesaid overdrafts and                                            employees’ state insurance, income-tax,
                    debentures is as per stipulations.                                                             sales-tax, wealth tax, service tax, customs
              (iv) In our opinion and according to the information and                                             duty, excise duty, cess and other material
                   explanations given to us there is an adequate internal                                          statutory dues as applicable with the
                   control system commensurate with the size of the                                                appropriate authorities in India.
                   Company and the nature of its business in respect                                       (b)     According to the information and
                   of purchase and sale of securities held as stock in                                             explanations given to us, as at
                   trade, purchase of fixed assets and sale of services.                                           31st March, 2008 there are no dues
                   Further on the basis of our examination of the books                                            which have not been deposited on
                   of account and according to the information and                                                 account of any dispute in respect of sales
                   explanations given to us, we have not come across                                               tax, income tax, customs duty, wealth tax,
                   nor have we been informed of any instance of major                                              service tax, excise duty and cess except
                   weaknesses in the internal control system.                                                      as follows:
              (v)    (a)   In our opinion and according to the information
                           and explanations given to us, the particulars of    Name of the Nature of             Amount        Period to      Forum where
                           contracts or arrangements referred to in Section    statute     dues                  (Rs. (‘000s)) which the      dispute is
                           301 of the Act, have been entered in the register                                                   amount         pending
                           required to be maintained under Section 301 of                                                      relates
                           the Act.                                            The Income Income tax             217.37       Assessment      Income-Tax
                                                                               Tax Act, 1961                                  Year            Appellate
                     (b)   In our opinion and according to the information
                                                                                                                              2005-2006       Tribunal
                           and explanations given to us, the transactions
                           made in pursuance of such contracts or              The Central   Service tax         32.58        2000-2001       Commissioner
                           arrangements entered in the register in             Excise Act,                                                    (Appeals)
                           pursuance of Section 301 of the Act and             1944



                                                                                                                          Kotak Securities Limited       143
Auditors’ Report (Contd.)

                   (ix) The Company has neither accumulated losses                              (xv) The Company has not made any preferential
                        as at 31st March, 2008 nor has it incurred any                               allotment of shares to parties and companies
                        cash loss either during the financial year ended                             listed in the register maintained under Section
                        on that date or in the immediately preceding                                 301 of the Act during the year.
                        financial year.
                                                                                                (xvi) All debentures issued and outstanding at
                   (x)   According to the books of account and records                                the year end are unsecured. Accordingly, the
                         of the Company, there has been no default in                                 Company is not required to and has not created
                         repayment of dues to any financial institution or                            a charge in respect of these debentures.
                         bank or debenture holders during the year.
                                                                                                (xvii) During the course of our examination of the
                   (xi) In our opinion, the Company has maintained                                     books of account and records of the Company,
                        adequate documents and records in the                                          carried out in accordance with the generally
                        cases where the Company has granted loans                                      accepted auditing practices in India, and
                        and advances on the basis of security by way                                   according to the information and explanations
                        of pledge of shares, debentures and other                                      given to us, we have not come across any
                        securities.                                                                    instance of fraud on or by the Company, noticed
                   (xii) The Company is dealing in securities for which                                or reported during the year, nor have we been
                         proper records have been maintained of the                                    informed of such case by the Management.
                         transactions and timely entries have been made
                                                                                                (xviii) The other clauses of the Companies (Auditor’s
                         therein. Securities held as stock in trade by the
                                                                                                        Report) Order, 2003 as amended by the
                         Company are held in the name of the Company
                                                                                                        Companies (Auditor’s Report) (Amendment)
                         or in the name of its nominees except to the
                                                                                                        Order, 2004 issued by the Central Government
                         extent of the exemption granted under Section
                                                                                                        of India are not applicable to the Company for
                         49 of the Act.
                                                                                                        the current year.
                   (xiii) In our opinion and according to the information
                          and explanations given to us, on an overall
                          basis, the term loans have been applied for the
                          purpose for which they were obtained.
                                                                                                                          K. H. Vachha
                   (xiv) Based on the information and explanations                                                        Partner
                         given to us and on an overall examination                                                        Membership No. F30798
                         of the Balance Sheet of the Company, in our
                         opinion there are no funds raised on a short                                                      For and on behalf of
                         term basis which have been used for a long                                                        Price Waterhouse
                         term investment.                                    Mumbai, 7th May, 2008                         Chartered Accountants




144    Kotak Securities Limited
Balance Sheet as at 31st March, 2008

                                                                                            31st March, 2008            31st March, 2007
                                                                         Schedule                 Rs. in Lacs                 Rs. in Lacs
SOURCES OF FUNDS
   Shareholders' Funds:
   Capital                                                                  1                           160.00                     160.00
   Reserves and Surplus                                                     2                       114,085.12                   74,920.05
   Loan Funds:
   Secured Loans                                                            3                         8,276.63                    3,023.01
   Unsecured Loans                                                          4                       170,704.95                   57,701.94
             Total                                                                                  293,226.70                135,805.00
APPLICATION OF FUNDS
   Fixed Assets:                                                            5
   Gross Block                                                                                       12,957.66                   10,061.76
   Less: Depreciation/Amortisation                                                                    8,364.23                    5,852.06
   Net Block                                                                                          4,593.43                    4,209.70
   Investments                                                              6                        39,845.19                   34,062.25
   Deferred Tax (Refer Note 4 on Schedule 20)
   Deferred Tax Asset                                                                                 3,410.78                     989.27
   Current Assets, Loans and Advances :
   Stock In Trade                                                           7                         4,506.38                   12,972.84
   Sundry Debtors                                                           8                        51,378.08                   37,843.31
   Cash and Bank Balances                                                   9                       292,326.61                107,835.34
   Other Current Assets                                                    10                         4,176.25                     936.30
   Loans and Advances                                                      11                        13,425.42                   14,203.42
                                                                                                    365,812.74                173,791.21
   Less: Current Liabilities and Provisions
   Liabilities                                                             12                       116,367.96                   75,140.48
   Provisions                                                              13                         4,067.48                    2,106.95
                                                                                                    120,435.44                   77,247.43
   Net Current Assets                                                                               245,377.30                   96,543.78
             Total                                                                                  293,226.70                135,805.00
Notes to the Financial Statements                                          20
Schedules referred to above form an integral part of the Balance Sheet


This is the Balance Sheet referred to in our report of even date                For and on behalf of the Board of Directors
K. H. VACHHA
Partner                                                                         Sandeep Chordia                  Uday S. Kotak
Membership No : F30798                                                          Company Secretary                Chairman

For and on behalf of
PRICE WATERHOUSE                                                                Narayan S. A.                    Falguni Nayar
Chartered Accountants                                                           Managing Director                Director

Mumbai, Dated : 7th May, 2008                                                   Mumbai, Dated : 30th April, 2008



                                                                                                       Kotak Securities Limited       145
Profit and Loss Account for the year ended 31st March, 2008

                                                                                                      31st March, 2008             31st March, 2007
                                                                                   Schedule                 Rs. in Lacs                  Rs. in Lacs
INCOmE
Income from Services                                                                 14                        94,403.34                    61,882.45
Interest Income                                                                      15                        24,852.28                    12,677.87
Other Income                                                                         16                        13,747.54                     8,832.94
        Total Income                                                                                          133,003.16                    83,393.26
ExPENDITURE
Personnel                                                                            17                        27,666.76                    16,826.84
Interest and Other Finance Charges                                                   18                        11,852.19                     6,196.94
Other Expenses                                                                       19                        32,733.64                    21,535.58
        Total Expenditure                                                                                      72,252.59                    44,559.36
Profit Before Depreciation/Amortisation and Taxation                                                           60,750.57                    38,833.90
Depreciation/Amortisation                                                                                       2,728.86                     2,321.76
Profit Before Taxation                                                                                         58,021.71                    36,512.14
Provision For Taxation
Current Tax [Includes write back of excess provision for taxation relating to
earlier years Rs. 125.04 Lacs (net) (Previous Year short provision for taxation
relating to earlier years Rs. 23.23 Lacs (Net)]                                                                19,336.68                    11,431.24
Deferred Tax (Refer Note 4 on Schedule 20)                                                                     (2,421.51)                     (674.32)
Fringe Benefits Tax                                                                                               237.32                       183.80
Profit After Taxation                                                                                          40,869.22                    25,571.42
Transfer from Debenture Redemption Reserve                                                                     10,048.48                     7,467.42
Balance Brought Forward                                                                                        60,786.98                    37,796.62
                                                                                                              111,704.68                    70,835.46
APPROPRIATIONS
Transfer to Debenture Redemption Reserve                                                                       28,584.82                    10,048.48
Interim Dividend                                                                                                1,600.00                           —
Tax on Distributed Profit                                                                                         271.92                           —
Transfer to General Reserve                                                                                     4,086.92                           —
Balance Carried Forward                                                                                        77,161.02                    60,786.98
                                                                                                              111,704.68                    70,835.46
Earnings per Share on Equity Shares of Rs. 10 each
Basic and Diluted (In Rupees)                                                                                   2,554.33                     1,598.21
Notes to the Financial Statements                                                    20
Schedules referred to above form an integral part of the Profit and Loss Account


This is the Profit and Loss Account referred to in our report of even date                For and on behalf of the Board of Directors
K. H. VACHHA
Partner                                                                                   Sandeep Chordia                   Uday S. Kotak
Membership No : F30798                                                                    Company Secretary                 Chairman

For and on behalf of
PRICE WATERHOUSE                                                                          Narayan S. A.                     Falguni Nayar
Chartered Accountants                                                                     Managing Director                 Director

Mumbai, Dated : 7th May, 2008                                                             Mumbai, Dated : 30th April, 2008



146      Kotak Securities Limited
Cash Flow Statement for the year ended 31st March, 2008

                                                                                                              Rs in lacs
                                                                    Schedule   31st March, 2008       31st March, 2007
Cash flow from operating activities

Net profit before taxation                                                           58,021.72              36,512.14

Add adjustments for:

Depreciation/amortisation                                                             2,728.86                2,321.76

Interest and other finance charges                                                   11,852.19                6,196.94

Interest income                                                                     (24,852.28)             (12,677.87)

Operating interest income                                                             8,052.58                4,202.64

Provision for doubtful debts                                                          3,387.90                    135.12

Provision for contingencies                                                           1,675.93                    793.69

Dividend income                                                                      (1,597.72)              (1,022.68)

Dividend income on stock in trade                                                       419.95                    230.14

(Profit)/loss on sale of fixed assets (net)                                             (29.30)                    (8.73)

(Profit)/loss on sale of investments (net)                                                  —                      (0.18)

Operating profit before working capital changes                                      59,659.83              36,682.97

Adjustments for changes in working capital:

– Trade and other receivables                                                       (16,922.67)             24,865.49

– Stock in trade                                                                      8,466.46              13,021.54

– Loans and advances                                                                  3,051.75                2,245.45

– Trade and other payables                                                           38,003.04              (31,028.78)

Cash generated from operations                                                       92,258.41              45,786.67

– Taxes paid including fringe benefits tax (net of refunds)                         (20,257.75)             (11,255.97)

Net cash from operating activities                            (A)                    72,000.66              34,530.70

Cash flow from investing activities:

Purchase of fixed assets (including capital advances)                                (4,794.02)              (5,528.09)

Proceeds from sale of fixed assets                                                      120.73                     33.25

Sale of investments                                                               3,880,023.00           2,717,664.75

Purchase of investments                                                          (3,885,805.94)          (2,742,913.05)

Interest received                                                                    13,559.75                7,984.09

Dividend on current investments                                                       1,177.77                    792.54

Net cash from/(used in) investing activities                  (B)                     4,281.29              (21,966.51)




                                                                                       Kotak Securities Limited      147
Cash Flow Statement for the year ended 31st March, 2007 (Contd.)

                                                                                                                                                 Rs in lacs
                                                                                       Schedule            31st March, 2008            31st March, 2007
Cash flow from financing activities:

Proceeds/(repayments) from/of borrowings (net)                                                                     118,424.40                   27,472.59

Interest and other finance charges paid                                                                            (10,215.08)                  (5,729.21)

Net cash from financing activities                                       (C)                                       108,209.32                   21,743.38

Net Increase in Cash and cash equivalents                     (A)+(B)+(C)                                          184,491.27                   34,307.57

Cash and cash equivalents at the beginning of the year                                                             107,835.34                   73,527.77

Cash and cash equivalents at the end of the year                                                                   292,326.61                107,835.34

Cash and cash equivalents comprise of

Cash on hand                                                                                                            25.24                      20.45

Balances with scheduled banks                                                                                      292,301.37                107,814.89

       Total                                                                                                       292,326.61                107,835.34

Notes to the Financial Statements                                                         20

1.    The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in Accounting Standard - 3 on Cash Flow Statements issued
      by the Institute of Chartered Accountants of India.
2.    Balances with scheduled banks include fixed deposits of Rs. 192,087.15 Lacs (Previous Year Rs. 75,493.10 Lacs) which is under the lien of National
      Securities Clearing Corporation Limited, Rs. 19,330.00 Lacs (Previous Year Rs