REDFY Rediff com India Limited (CE)

See the Exhibit Index and the attached exhibits.

CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS

In this annual report, all references to “we”, “our”, “us”, “Rediff”, “Rediff.com” and the “Company”, unless otherwise relevant to the context, are to Rediff.com India Limited, a limited liability company organized under the laws of the Republic of India, and its consolidated subsidiaries. References to “U.S.” or the “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India.

In this annual report, references to “$” or “US$” or “dollars” or “U.S. dollars” are to the legal currency of the United States and references to “ ₹” or “Rs” or “Rs.” or “Rupees” or “Indian Rupees” are to the legal currency of India. Our financial statements are prepared in Indian Rupees and presented in U.S. dollars except for the financial statements of our U.S. subsidiaries which are prepared and presented in U.S. dollars. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). References to a particular “fiscal” or “financial” year are to Rediff’s fiscal year ended March 31 of such year.

Although we have presented Indian Rupee amounts in this annual report in U.S. dollars, this does not mean that the Indian Rupee amounts referred to have been, or could be, converted into dollars at any particular rate, the rates stated below in the section of this annual report entitled “Exchange Rates”, or at all. Except as otherwise stated in this annual report and except for the information derived from our financial statements included in this annual report, all translations from Indian Rupees to U.S. dollars contained in this annual report are based on the exchange rates published by The Reserve Bank of India, as at the close of March 31, 2014 which was ₹60.10 to US$1.00. The translation from Indian Rupees to U.S. dollars of the information derived from our financial statements included in this annual report are based on daily rates published by the Reserve Bank of India.

FORWARD-LOOKING STATEMENTS

We have included statements in this annual report which contain words or phrases such as “may”, “will”, “aim”, “will likely result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, all of which are “forward-looking statements”, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and reflect our current expectations. We have made forward-looking statements with respect to the following, among others:

These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These include, but are not limited to, risks or uncertainties associated with our ability to successfully implement our strategy, our ability to successfully integrate the businesses we have acquired with our business, demand for e-commerce and changes in the Internet marketplace, technological changes, investment income, cash flow projections and our exposure to market risks. By their nature, certain of our market risk disclosures are only estimates and could be materially different from what actually occur in the future. As a result, actual future gains, losses or impacts on net interest income could materially differ from those that have been estimated.

In addition, other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to, the slowdown in Indian economy and in the sectors in which our clients are based, general economic and political conditions in India and the United States, acceptance of new products and services, the development of broadband Internet and 3G networks in India, changes in the value of the Rupee, foreign currency exchange rates, equity prices or other rates or prices, the level of Internet penetration in India and globally, changes in domestic and foreign laws, regulations and taxes, changes in competition, and other factors beyond our control. For further discussion of factors that could cause actual results to differ, see the discussions under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this annual report. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s analysis only as of the date hereof. In addition, readers should review the other information contained in this annual report and in our periodic reports filed from time to time with the U.S. Securities and Exchange Commission (the “SEC”). We undertake no obligation to update or revise this annual report in order to amend its forward-looking statements to reflect events or circumstances after the date hereof, whether as a result of new information, future events or otherwise.

EXCHANGE RATES

Fluctuations in the exchange rate between the Indian Rupee and the U.S. dollar may affect the market price of our American Depositary Shares (the “ADSs”), which trade on the NASDAQ Global Market. Such fluctuations may also affect U.S. dollar conversions made by our depositary for the ADSs, Citibank, N.A. (the “Depositary”), of any cash dividends paid in Indian Rupees on our Equity Shares represented by the ADSs.

The following table sets forth, for the periods indicated, certain information concerning the exchange rates between Indian Rupees and U.S. dollars based on rates published by the Reserve Bank of India:

Notes:

The following table sets forth the high and low exchange rates for the previous six months and are based on daily closing rates published by the Reserve Bank of India:

On August 12, 2014, the closing exchange rate in India was ₹ 61.18 to US$1.00

SELECTED CONSOLIDATED FINANCIAL DATA

Our consolidated financial statements are presented in U.S. dollars and prepared in accordance with U.S. GAAP. The selected balance sheet data set forth below as of March 31, 2013 and 2014, and the selected statement of comprehensive loss data for the fiscal years ended March 31 2012, 2013 and 2014, have been derived from our audited consolidated financial statements presented elsewhere in this annual report. The selected balance sheet data set forth below as of March 31, 2010, 2011 and 2012 and the selected statement of comprehensive loss data for the fiscal years ended March 31, 2010 and 2011 are derived from U.S. GAAP financial statements which are not included in this annual report. (See note 1 below)

Notes:

RISK FACTORS

An investment in our ADSs involves a high degree of risk. You should carefully consider the following information about risks, together with the other information contained in this annual report on Form 20-F, including our consolidated financial statements and related notes, before you decide to buy our ADSs. If any of the circumstances or events described below actually arises or occurs, our business, results of operations and financial condition would likely suffer. In any such case, the market price of our ADSs could decline, and you may lose all or part of your investment. This annual report also contains forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risks faced by us described below and elsewhere in this annual report.

Risks Related to our Business

We face significant competition in the India market for users, advertisers, publishers and distributors, principally from Google, Yahoo, Facebook, Microsoft and AOL and also from other traditional media companies and a host of other smaller competitors.

We face significant competition from Google, Yahoo, Facebook, Microsoft and AOL among other companies, each offering an integrated variety of Internet products, advertising services, technologies, online services and content in a manner similar to us.

These large competitors offer products and services that directly compete with our offerings, including consumer e-mail, search, instant messaging, photos, maps, video and photo sharing, content channels, mobile applications, and shopping services, among other offerings.

We also compete with traditional media companies to attract advertising revenues, both domestically and internationally. Currently, many advertisers allocate a portion of their advertising budgets to Internet advertising. In response, traditional media companies are increasingly expanding their content offerings on the Web and are competing for both offline and online revenues. We also compete with a variety of other providers of online services, including social media and networking sites like Facebook and Orkut for users, advertisers and developers. Social networking sites in particular are attracting a substantial and increasing share of users and user’s online time, which could enable them to attract an increasing share of online advertising.

Some of our existing competitors and possible market entrants may have greater brand recognition for certain products and services, more expertise in a particular segment of the market, and/or greater operational, strategic, technological, financial, personnel, or other related resources than we do. In addition, Google, Yahoo, Facebook and Microsoft, among other companies, have access to considerable financial and technical resources with which to compete aggressively, including funding future growth and expansion by investing in acquisitions and/or in research and development. Further, emerging start-ups may be able to innovate and provide products and services faster than we can and in a manner more appealing to our target users. In addition, competitors may consolidate with each other or collaborate, and new competitors may enter the market.

We are also subject to competition from companies known as “aggregators”, which aggregate advertising space in third-party websites and resell such space to our customers or potential customers. There has also been a trend toward industry consolidation so our smaller competitors today may become part of larger competitors in the future.

We may also face competition from companies engaged in providing mailing services to mobile users. Some of our existing competitors and possible additional entrants may have greater brand recognition for certain products and services and greater operational, strategic, technological, financial, personnel, or other resources than we do. In addition our e-commerce services face competition from the existing leading e-commerce companies who have significantly greater financial resources, longer operating histories and more experience in attracting and retaining users and managing customers than we do.

We may also face competition from companies engaged in procuring advertisement from advertisers who want to reach out to a niche customer segment by choosing to advertise in a particular city or specific area within a city and cannot afford to advertise on television channels. Some of our existing competitors (like Amagi) and possible additional entrants may have greater brand recognition for certain products and services and greater operational, strategic, technological, financial, personnel, or other resources than we do.

If our competitors are more successful than we are in developing compelling products or services or attracting and retaining users, advertisers, publishers, developers, or distributors, our revenues and potential growth rates could decline. In addition, new competitors may enter the market which may adversely impact our financial performance.

Competition for visitors, customers, subscribers, advertisers and shopping partners is intense and is expected to increase significantly in the future as there are no substantial barriers to entry into our market. Furthermore, it is difficult to predict which online advertising pricing model, if any, will emerge as the industry standard. This makes it difficult to predict our future advertising rates and revenues. Intense competition in our businesses could have a material adverse effect on our results of operation, including our ability to achieve and sustain profitability. For additional information regarding our competition, please see “Business – Competition” in this annual report.

We face strong competition in our marketplace e-commerce business.

We have significant competition in the India market for e-commerce business from Snapdeal, Flipkart, Amazon and Ebay. Some of our current and potential competitors have greater resources, longer histories, more customers, and/or greater brand recognition. They may secure better terms from vendors, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing.

Competition may intensify as our competitors enter into business combinations or alliances and established companies in other market segments expand to become competitive with our marketplace e-commerce business. In addition, new and enhanced technologies, including search, web and infrastructure computing services, digital content and electronic devices, may increase our competition. The Internet facilitates competitive entry and comparison shopping, and increased competition may reduce our sales and profits.

We could be liable for fraudulent or unlawful activities of sellers in our marketplace e-commerce business.

Under our seller programs, we may be unable to prevent sellers from collecting payments, fraudulently or otherwise, if buyers do not receive the products they ordered or if the products received are materially different from the sellers’ descriptions. Under our Rediff Assurance , we reimburse buyers for payments in these situations, and as our marketplace seller sales grow, the cost of this program will increase and could negatively affect our operating results. We also may be unable to prevent sellers on our sites or through other seller sites from selling unlawful goods, selling goods in an unlawful manner, or violating the proprietary rights of others, and could face civil or criminal liability for unlawful activities by such sellers.

We are subject to payments-related risks.

We accept payments using a variety of methods, including credit card, debit card, credit accounts (including promotional financing), gift cards, direct debit from a customer’s bank account, consumer invoicing, physical bank check, and payment upon delivery. For existing and future payment options we offer to our customers, we may become subject to additional regulations, compliance requirements, and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, electronic checks, and promotional financing, and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, including data security rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating results could be adversely affected. We also offer co-branded credit card programs, which could adversely affect our operating results if terminated.

Our marketplace supplier relationships subject us to risks .

We have large number of marketplace suppliers that are important to our ongoing servicing of merchandise. We do not have long-term arrangements with most of our suppliers to guarantee availability of merchandise, components, or services, particular payment terms, or the extension of credit limits. If our current suppliers were to stop selling merchandise, components, or services to us on acceptable terms, or delay delivery, including as a result of one or more supplier bankruptcies due to poor economic conditions, as a result of natural disasters, or for other reasons, we may be unable to procure alternatives from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

If we fail to optimize revenues through effective splicing in our local TV advertising business, we will continue to have negative gross margin.

The success of our local TV advertizing business is dependent on effective splicing of advertising between national broadcasting and local (city specific) advertising. Effective splicing is the key factor to generate more revenues to recover broadcaster’s cost and other direct costs. If we fail to effectively splice between national and local broadcasting, then our gross margins from these business will continue to be negative and result in higher operating losses.

Our future results and growth prospects may be materially and adversely affected if our expansion into new business segments and verticals is not successful.

We, as part of our growth strategy, have, from time to time, entered into new Internet business segments by leveraging our large Internet user base to generate additional revenue streams. For each new internet business or segment we enter into, we may face competition from existing leading players in that business. Further the operating and marketing challenges of the new Internet business segment(s) may be different from those that we currently face. If we cannot successfully compete and meet the challenges in the new Internet business segment(s), we may not be able to recover costs incurred for developing and marketing new businesses and accordingly our future results and growth prospects may be materially and adversely affected.

Our business could be disrupted if our investment in new products, services, technologies and new business strategy is not successful. Our current plans for growth depend in significant part on the further development of broadband internet and 3G and 4G networks in India.

We have invested significantly in the development of new products, services, technologies and new business strategies and will continue to so invest in the future. Such investment may involve significant risks and uncertainties including but not limited to inadequate returns on capital on our investments, and distractions of management from current and future operations. On account of the inherent risk involved in such investments, we offer no assurance that such investments will be successful and will not adversely affect our reputation, financial condition and operating results. Additionally, delay in rollout of 3G and 4G network in India will affect internet penetration and therefore, our revenue growth.

The success of our products and services depends on the acceptance of the internet in India, which may be slowed by cost and affordability issues, technical obstacles and unfavorable Government policies.

The growth of our India Online business is highly dependent on the growth in India of the number of PCs in use, the growth of Internet and broadband use and the growth of use of smart phones and other mobile devices such as tablets.

The growth of the telecom and mobile industry in India will be a significant factor in determining whether we can grow our business. As with many developing nations, the fixed line telecommunications infrastructure in India is not fully developed. Although this industry has been opened for private sector participation, service levels remain inferior to service levels in most developed countries. Further, telephone penetration rates, measured by the number of telephone lines per one thousand persons in India, are low when compared to most developed countries. In addition, limitations in network architecture in India sometimes limit Internet connection speeds to 28 Kbps or less, which are less than the 56 Kbps connection speeds on conventional dial-up telephone lines, and significantly less than the up to 1.5 Mbps connection speeds on direct satellite links, digital subscriber lines and cable modems in the United States. These speed and cost constraints may severely limit the quality and desirability of using the Internet in India, which consequently may limit our ability to expand our pool of customers and reduce our desirability to online advertisers.

Further, our growth could be limited by the cost of obtaining hardware, software and communications links necessary to connect to the Internet in India. If much of India’s population is not able to afford access to the Internet, it may be difficult for us to execute our business strategy.

In other developing Asian markets such as South Korea and Malaysia, an increase in broadband penetration rates led to rapid growth in the number of online subscribers. Currently, broadband penetration rates in India are very low compared to other developing countries. According to the Telecom Regulatory Authority of India (the “TRAI”), India had an estimated broadband subscriber base of 61.74 million as of April 2014 of which 46.42 million were mobile users. Several industry and government agencies believe that India could be a hotbed for broadband growth in future years based on the population and country demographics. However, if the broadband and telecom industry in India fails to register significant growth, our potential growth may also be affected.

If we are unable to develop new services or enhance existing services in anticipation of our users’ needs, our users’ level of engagement with our services may decline and our business could suffer as a result.

Our success is dependent, in part, on our ability to anticipate customers’ needs in advance and develop new services or enhance the existing services to fulfill those needs, on a cost-effective and timely basis. For example, some time ago, we formally launched “Rediff Realtime News Search” an innovative news search engine which delivers fresh and recent news from India and the world and also predicts user search terms and returns results within milliseconds of a query being made. We also re-launched “Rediffmail PRO” a web solutions for professionals. The development and implementation of such services and any new services including the enhancement of existing service(s), entails significant technical and business risks. There can be no assurance that we will successfully implement new services or that any of our new products or services will be accepted by our users.

New technologies are giving rise to new business opportunities, such as in local search and social networking. We believe that much of our future growth will depend on our ability to seize upon these opportunities and successfully launch new products and services, and our ability to retain or improve the level of user engagement with our services. If we are unable, for technical, legal, financial or other reasons, to adapt in a timely manner to changing market conditions or customer requirements, our business and our future financial performance could be materially adversely affected.

Our strategy of acquiring businesses to complement our existing market offering may fail.

As part of our growth strategy, we have made selective strategic and opportunistic acquisitions of businesses that complement our existing market offering. Such acquisitions may involve uncertainties and risks, including but not limited to, government regulations, diversion of resources and management attention, costs and difficulties of integrating acquired businesses and managing a larger business, unforeseen liabilities and ongoing financial obligations.

If we fail to address such risks successfully, it may have a material adverse effect on our financial condition and growth prospects. Further, such acquisition(s) could require a significant amount of capital investment, which could decrease the amount of cash available to us for working capital or capital expenditures. In addition, if we fund the acquisition(s) through the use of our equity securities, we may dilute the value of our ADSs and the underlying ordinary shares.

More individuals are utilizing non-PC devices to access the Internet, and versions of our services developed for these devices might not gain widespread adoption by the devices’ users, manufacturers, or distributors or might fail to function as intended on some devices.

The number of individuals, who access the Internet through devices other than a PC, such as mobile telephones and related “smartphones” or “tablet-based” devices, has substantially increased, and the trend is likely to continue. While we have dedicated significant resources over the past few years to develop offerings for mobile devices and believe we are highly competitive in the mobile arena, our services were originally designed for rich, graphical environments such as those available on the desktop and PC. The different hardware and software, memory, operating systems, resolution, and other functionality associated with alternative devices may make our services unusable or difficult to use on such devices, and the versions of our services developed for these devices may not be compelling to users, manufacturers, or distributors of alternative devices. Similarly, the licenses we have negotiated to present third-party content to desktop and PC users may not extend to users of alternative devices. In those cases, we may need to enter into new or amended agreements with content providers in order to present a similar user-experience on the new devices. The content providers may not be willing to enter into such new or amended agreements on reasonable terms or at all.

Further, new devices, operating systems, networks, and platforms are continually being released. It is difficult to predict the problems we may encounter in developing versions of our services for use on these alternative devices and platforms. We may also need to devote significant resources to the creation, support and maintenance of such versions.

If we fail to detect click fraud or other invalid clicks, we could lose the confidence of our advertisers, which would cause our business to suffer.

We are exposed to the risk of fraudulent clicks and other invalid clicks on our ads from a variety of potential sources. Invalid clicks are clicks that we have determined are not intended by the user to link to the underlying content, such as inadvertent clicks on the same ad twice and clicks resulting from click fraud. Click fraud occurs when a user intentionally clicks on an ad displayed on a website for a reason other than to view the underlying content. An increase in click fraud or invalid clicks could cause our advertisers to lose confidence in the effectiveness of our services, which could negatively damage our brand and impact our performance.

New technologies could block our ads, which would harm our business.

Technologies have been developed that can block the display of industry ads, including our own. Most of our revenues are derived from fees paid to us by advertisers in connection with the display of ads on web pages. As a result, ad-blocking technology could adversely affect our operating results.

The ongoing global slowdown, especially in India, could continue to negatively impact revenues from some of our key customers and thus, negatively impact our business.

We are dependent on the health of the Indian and U.S. economies. A continued slowdown in Indian economy, an overall reduction in consumer and business spending, or future difficulties experienced in either country could have a material adverse impact on our business and our prospects.

Advertisement expenditures tend to be cyclical, reflecting overall economic conditions and the nature of industry, budgeting and buying patterns. Since a significant portion of our revenue is derived from advertisements, the adverse economic conditions have caused, and a continuation of adverse economic conditions could cause, additional decreases in or delays in advertising spending, a reduction in our revenues and a negative impact on our short-term ability to grow our revenues.

A significant portion of our Indian advertising revenues include revenues from the Banking, Financial Services and Insurance (BFSI) segments and from other Internet companies, including those engaged in the business of jobs, travel, matrimonial, real estate and online shopping. Some of these companies are startups without proven long-term business models and are dependent on external funding for future growth. These companies have been adversely affected by the global economic slowdown, resulting in lower online advertising revenues than in the past. While general economic conditions have recently improved compared to the heart of the global economic recession, the robustness and pace of the global economic recovery remains uncertain and there is no assurance that these and other segments will recover from the impact of the recession, succeed in raising financial resources and increase online advertising spends.

Further, a future slowdown in the Indian economy may make it difficult for us to raise money in the equity and debt markets on terms favorable to us or at all, if we choose to conduct capital raises in accordance with our business plan and future growth opportunities, which may have an adverse effect on our financial condition and operating results.

Our publication business in the United States faces competition and industry-wide declines.

Our publication business in the United States faces competition from not only Internet-based publications but also from other publications targeted at Indian-Americans and from television channels featuring Indian news and programming. In addition, competition to provide news and information regarding India or content that is of interest to Indian-Americans in these markets for paying subscribers for our India Abroad newspaper, which is subscription-based, is intense due to the presence of other paid newspapers such as News India Times, Indian Express and India West, among others. Further, our publications also face competition from free newspapers and from electronic media, such as television channels dedicated to Indian news and programming and online publications and services. If our U.S. publishing businesses are unable to successfully compete, our results of operation could be adversely affected.

A slowdown in economic growth, in particular, a slowdown in the growth of companies that advertise products or services targeted at Indian-Americans, may also reduce advertising revenues for our U.S. publications. Further, as is the case with our contracts with online advertisers, our contracts with advertising customers for our India Abroad business usually do not commit them to continue to provide us with a specific volume of business and can typically be terminated by them with or without cause, with little or no advance notice and without penalty. Any of these factors could have an adverse effect on our business and our future financial performance.

We may be required to record a significant charge to earnings if our intangible assets and long-lived assets become impaired.

We are required under Generally Accepted Accounting Principles (GAAP) to review our intangible assets and long-lived assets for impairment when events or changes in circumstance indicate the carrying value may not be recoverable. Factors that could lead to impairment of intangible assets and long-lived assets include significant adverse changes in the business climate and declines in the financial condition of our business. Our online businesses in India has been facing pressures on account of the economic slowdown and increasing competition for online revenues. As on March 31, 2014 we recorded an impairment charge of US$1,550,991 on the acquired intellectual property and related property, plant and equipment (long lived assets) pertaining to our TV advertising business. We may be required in the future to record additional significant charges to earnings if a portion of our long-lived assets become impaired. Any such charge would adversely impact our results of operations.

We have a history of losses. We may incur losses in the future and we may not achieve or maintain profitability, which may impact our balance sheet and thus, the successful implementation of our growth plan.

We have incurred significant net losses and negative cash flows since our inception in January 1996. As of March 31, 2014, we had an accumulated deficit of approximately US$95.2 million. We incurred a net loss of US$7.5 million for the fiscal year ended March 31, 2014. We may in the future incur additional net losses and negative operating cash flows which could have a material adverse impact on our balance sheet and lead to the need for additional capital to implement our growth strategy.

In order to grow our online user base and attract new advertisers, we expect to continue to invest in new and innovative products and product enhancements, expand the content and services on our network and procure more bandwidth and network equipment. At present, we believe we have enough resources to continue to invest in our product and service offerings, though we may, at any time, expedite or intensify our investments should market conditions improve and new opportunities avail themselves. If we do so, and if we are not yet generating free cash flow, we may need additional capital to implement this facet of our growth plans.

We have incurred and in the future may incur expenses in connection with acquisitions and investments. Accordingly, we will need to generate significant additional revenues in order to become profitable and may not be able to do so. If we are not yet profitable or generating free cash flow, we may need to raise additional capital. Our business model is not yet proven in India or the United States, and we cannot assure you that we will achieve profitability or that we will not incur operating losses in the future. If we are unable to achieve profitability, we will be unable to build a sustainable business. In this event, the price of our ADSs and the value of investments in our company would likely decline.

Our revenues could be adversely affected if we are unable to successfully adapt to new forms of pricing for the services and products we offer.

Increased competition or the actions of our existing competitors may result in:

Any one of these factors could materially and adversely affect our business, financial condition and operating results. For additional information regarding our competition, please see “Business – Competition” in this annual report.

Increasing consumer resistance to online advertising may result in loss of revenues .

There is a growing consumer resistance to intrusive advertising online. In our desire to improve the user experience on our site, we have reduced the number of advertisements on our site and in particular, eliminated all advertising from our home page. As a consequence of this, we experienced a decline in our advertising revenues and expect the same to continue based on current market conditions. Although we are hopeful that a better user experience will lead to a higher number of users over time, we can however give no assurances that this will happen. If we are unable to compensate for the loss of advertising revenues from such restriction with incremental revenues due to increased user traffic, our results of operations could be materially adversely impacted.

Our quarterly operating results may fluctuate significantly and may fail to meet the expectations of securities analysts and investors, which may cause the price of our ADSs to decline.

Our quarterly results have fluctuated significantly in the past and may continue to fluctuate significantly in the future based on a variety of factors. These factors could affect both our near and long-term performance. Some of these factors include but are not limited to:

Our operating results are volatile and can be difficult to predict. As a result, quarter-to-quarter comparisons of our operating results may not be good indicators of our future performance. In addition, it is possible that our operating results in any future quarter could be below the expectations of investors generally and any published reports or analyses on us. In that event, the market price of our ADSs may decline.

We may not be able to grow our business if online advertising in our markets does not expand.

Our business strategy depends heavily on the anticipated growth of online advertising in our markets and the growth of our revenues depends on increased revenues generated by online advertising. We anticipate that a high portion of our future revenues will continue to be derived from online advertising on our website. Online advertising is an evolving business and our ability to generate and maintain significant advertising revenues will (among other factors) depend on:

Different pricing models are used to sell online advertising, and it is difficult to predict which, if any, of the models will emerge as the industry standard or standards. This makes it difficult to project our future advertising rates and revenues. A reduction in traffic on our website may cause new advertisers not to enter into contracts with us and could cause existing advertisers not to renew their contractual arrangements with us, each of which, in turn, would reduce our potential advertising revenues. Additionally, any development of Internet software that blocks advertisements before they appear on a user’s screen, may hinder the growth of online advertising and could materially and adversely affect our ability to grow our online advertising revenues and our business. Also, a slowdown in economic growth, whether in India or the United States, and in particular a slowdown in the growth of companies that advertise on the Internet, may result in a reduction in our advertising revenues.

Our contracts with advertising customers do not commit them to continue to provide us with a specific volume of business and can typically be terminated by them with or without cause, with little or no advance notice and without penalty. Additionally, our contracts with advertising customers are usually limited to a specific project and/or for a specific time period and not any future work. There are also a number of factors, other than our performance, which are not within our control that could cause the loss of advertising customers. Early termination of material contracts or non-renewal of an expired material contract could have a material adverse effect on our business and our future financial performance.

The loss of one or more significant advertisers could adversely affect our revenues.

We derive a considerable portion of our revenues from certain key advertisers. For the fiscal year ended March 31, 2014, our top ten advertisers in India accounted for approximately 22% of our India Online advertising revenues and 7% of our India Online receivables. For the same period, for our U.S. publishing business, our top ten advertisers contributed approximately 37% of total U.S. publishing revenues. Any failure to meet advertiser expectations could result in the cancellation or non-renewal of contracts, which typically can be terminated by advertisers with or without cause, with little or no advance notice and without penalty. The loss of, or a significant reduction in the volume of business from, one or more of our large advertisers could have a material adverse effect on our operating results and financial condition.

Our operations could be disrupted by unexpected network interruptions caused by system failures, natural disasters or unauthorized tampering of our systems.

Our online businesses rely heavily on the Internet and, accordingly, depend upon the continuous, reliable and secure operation of Internet servers, related hardware and software and network infrastructure, such as telephone lines leased from service providers. The continual accessibility of our websites and the performance and reliability of our network infrastructure are critical to our reputation, and our ability to attract and retain users, advertisers and merchants. Any system failure or performance inadequacy that causes interruptions in the availability of our services or increases the response time of our services could reduce our appeal to advertisers and consumers. Factors that could significantly disrupt our operations include but are not limited to:

While we have taken steps to improve security and network reliability, we have limited backup systems and redundancy. The failure of these backup systems could lead to the disruption of our services and the loss of important data. We have suffered temporary service outages in the past from time to time that have resulted in a disruption of our services. Future disruptions or the occurrence of any of the foregoing factors may result in users being temporarily unable to access our services. Any sustained disruption will reduce the number of visitors to our website and could have a material adverse impact on the transactions handled through our website. Such disruptions could also reduce the number of advertisers and online shopping on our site and materially affect our operating results, which may lead to a decline in the market price of our ADSs.

We seek to protect our computer systems and network infrastructure from physical break-ins, as well as security breaches and other disruptive problems. We employ security systems, including firewalls and password encryption, designed to minimize the risk of security breaches. There can be no assurance that these security measures will be effective.

If someone breaches our network security or otherwise misappropriates sensitive data about our users, we could be subject to liability. These liabilities could include fraud claims and other claims for misuses of personal information, such as unauthorized marketing purposes. These claims could result in litigation and could have a material adverse effect on our business, results of operations and financial condition.

We do not carry material business interruption insurance to protect us in the event of a catastrophe, even though such an event could lead to a significant negative impact on our business. Any sustained disruption in Internet access provided by third parties could also adversely affect our business.

We may lose a significant portion of our assets if banks in India collapse.

A significant portion of our assets is held in the form of cash and cash equivalents. We maintain a majority of such cash and cash equivalents in Indian Rupees with banks in India. In case one or more of these banks collapses due to financial crisis, or any futures ones, we may lose a substantial portion of our cash and cash equivalents. This could have a material adverse effect on our business, results of operations and financial condition.

We may not benefit from our acquisitions and investments and our acquired businesses could increase our net losses.

We have made several strategic and opportunistic acquisitions and investments in order to penetrate new markets, generate additional revenue streams and provide value-added services to our users. We may, if opportunities arise, acquire or invest in developing products, technologies or companies in the future. However, there can be no assurance that our acquisition and investment strategy will be successful or that we will realize the anticipated benefits from such acquisitions or investments. Lack of success in our acquisition and investment strategy could result in significant write-offs relating to such acquisitions and investments and thus, adversely impact our financial performance. Such transactions are accompanied by a number of risks, including:

Any or all of our future acquisitions may face similar risks and we may not be successful in addressing these risks or any other problems encountered in connection with such acquisitions.

Our business and growth will be impaired if we are unable to retain our existing key personnel and hire additional skilled employees.

We are dependent on certain key members of our management team. In particular, our success depends upon the continued efforts of our Chairman and Managing Director, Ajit Balakrishnan. All of our employees are located in India and the United States, and each may voluntarily terminate his or her employment with us. Our planned activities will require additional expertise in sales and marketing, technology and other areas. The labor market for skilled employees is extremely competitive, and the process of hiring employees with the necessary skills is time consuming and may lead to the diversion of resources. We may not be able to continue to retain existing personnel or identify, hire and successfully integrate additional qualified personnel in the future. The loss of the services of key personnel, especially the unexpected death or disability of such personnel, or the inability to attract additional or replacement qualified personnel, could impair the growth of our business.

We are dependent on our agreements with mobile service providers for service delivery and fee collection.

Our mobile value added services, depend mainly on the cooperation of a large number of private and government mobile phone operators who have the necessary licenses to provide mobile services to consumers across various states/cities in India. We rely on all of these mobile phone operators to provide network and gateways for our mobile value added services. We also utilize their billing systems to collect service fees from customers. Certain of these mobile phone operators also provide services to their customers (such as the downloading of ringtones), which compete with the mobile services we offer. This may make them less eager to cooperate with us. If any or all of these mobile service providers encounter technical problems, or if they refuse to cooperate with us or reduce fees payable to us, our ability to provide mobile services may cease or be severely disrupted, which may have a significant and adverse impact on our future operating results.

We rely on increased sales of, and high renewal rates for, our subscription and fee-based products and services.

Growth in our India Online revenues will depend on the increase in users of our fee-based Internet services, including paid e-mail services, other subscription services and mobile value added service in India. If not enough users adopt and use our fee-based Internet services, our India Online revenue may not increase.

We depend on mobile operators to reach out to their customers.

We have arrangements with most Indian mobile operators which allow the customers of such mobile operators to download ringtones, wallpapers and other products from our servers. These customers can also access information relating to news, business and other information from us by using short messaging services. Some operators permit us to selectively send SMS messages, advertising our mobile products to a section of their customer base. The Telecom Regulatory Authority of India (“TRAI”) framed rules to prevent unsolicited commercial communications to mobile phone users who sign up for a “Do Not Disturb” registry. Subsequently, recently TRAI has directed operators to get written consent from users for activating value-added services (VAS) such as call ring back tone and hello tunes on their mobile phones. These and any other regulatory actions may have a material adverse impact on our future mobile VAS revenues.

Potential liability for information we publish may require us to defend against legal claims, which may cause significant operational expenditures and have an adverse impact on our financial results.

We may be subject to claims for defamation, libel, copyright or trademark infringement or other legal actions relating to the information we publish. These types of claims have been brought, sometimes successfully, against news and opinion publishing businesses in the past. Our insurance coverage may not adequately protect us against these claims. Liability claims could require us to spend significant time and money in litigation and to pay significant damages. As a result, liability claims, whether or not successful, could seriously damage our reputation and business.

For information regarding pending litigation filed against us, please see “Business — Litigation and other legal matters” in this annual report.

We may be liable to third parties for information uploaded on or retrieved from our website.

We could be exposed to liability for content that may be accessible through our website or content and materials that we develop or that our users may upload or post in our social networking sites, message boards, chat rooms, blogs or via our other interactive services. For example, we are a party to a criminal writ petition filed in the High Court of Mumbai, India, which alleged that we, through our website, www.rediff.com, provided a search facility that enabled Internet users to view pornographic, objectionable and obscene material.

We may also be subject to claims for defamation, negligence, copyright or trademark infringement, personal injury or other legal theories relating to the information we post or products sold by third parties on our website. For example, we had been named as a defendant in proceedings filed by The Board of Control of Cricket in India (“BCCI”) in the High Court of Madras, where BCCI sought to obtain a permanent injunction against a vendor who depicted the image of “IPL”. We could also become liable if confidential information is disclosed inappropriately on or through our website.

It is also possible that if any information provided through our services contains errors, third parties could make claims against us for losses incurred in reliance on the information. Please see the section entitled “Business – Litigation and other legal matters” in this annual report for more information on the litigation described above.

We also offer Internet-based e-mail services, which could expose us to potential liabilities or claims resulting from:

Our video sharing platform, called iShare, allows members to upload and share music, videos and photos. Under our terms of use, our members are responsible for their accounts and must agree and undertake not to post or upload any material that violates or infringes any copyright or other privacy laws and acknowledge that Rediff.com assumes no responsibility for the content accessed or uploaded through this service. Nonetheless, we could be subject to litigation within or outside of India which could include civil or criminal prosecution and civil liability. Defending such litigation could involve substantial management time and cost and we can give no assurance that we would succeed in defending any such litigation.

The laws in India and the United States relating to the liability of companies which provide online services, like ours, for activities of their users, are still relatively unclear. Investigating and defending these claims is an expensive process, even if they do not result in liability. We do not carry insurance to protect us against all types of claims, and there is no precedent governing such liabilities under Indian law. Further, our business is based on establishing the Rediff.com website as a trustworthy and dependable provider of content and services. Allegations of impropriety, even if unfounded, could damage our reputation, disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses.

For information regarding pending litigation filed against us, please see “Business — Litigation and other legal matters” in this annual report.

If we are unable to provide innovative search experiences and other services that generate significant traffic to our website(s), our business could be harmed, causing our revenues to decline.

Internet search is characterized by rapidly changing technology, significant competition, evolving industry standards, and frequent product and service enhancements. We must continually invest in improving our users’ search experience—including improving the relevance of our search results, as well as presenting users with a search experience that is responsive to their needs and preferences in order to continue to attract, retain, and expand our user base. We currently deploy our own technology to provide search results on our network and failure to keep pace with industry and/or develop new innovative search offering could adversely impact our operating results.

We may be liable to third parties for the products they purchase online.

Consumers may sue us if any of the products or services offered on our website’s marketplace are defective, fail to perform properly and/or injures the user. Although our agreements with manufacturers and distributors whose products are displayed on our website’s marketplace typically contain provisions intended to limit our exposure to such liability claims, these provisions may not be sufficient to limit all of our liability from such claims. Product warranties are the responsibility of those who sell products on our website’s marketplace, although our reputation can be adversely affected if a user is not satisfied with a purchase. Liability claims could require us to spend a considerable amount of resources, time and money in litigation and to pay significant damages. Allegations of impropriety, even if unfounded, or poor service provided by manufacturers and distributors on our website’s marketplace, could damage our reputation, disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses.

For information regarding pending litigation filed against us, please see “Business — Litigation and other legal matters” in this annual report.

In addition, the laws relating to the online sale of goods and services are not fully developed. The various laws and regulations covering online sale of products and their interpretation involve a significant degree of uncertainty. Further, the application of tax law as it relates to online transactions for goods and services is likewise uncertain. Our business, financial condition and operating results may be materially affected if we were required to obtain such registrations or comply with various additional laws and regulations or pay additional taxes.

Privacy concerns may prevent us from selling demographically targeted advertising in the future and make us less attractive to advertisers.

We collect personal data from our user base in order to better understand our users and their needs and to help our advertisers target specific demographic groups. If privacy concerns or regulatory restrictions prevent us from selling demographically targeted advertising, we may become less attractive to advertisers. For example, as part of our future advertisement delivery system, we may integrate user information such as advertisement response rate, name, address, age or e-mail address, with third-party databases to generate comprehensive demographic profiles for individual users. However, if we are unable to construct demographic profiles for Internet users because users refuse to give consent, we will be less attractive to advertisers and our business may suffer.

Regulatory authorities around the world are considering a number of legislative proposals concerning data protection. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

Further, failure or perceived failure by us to comply with our policies, applicable legal and other requirements, related to the collection, use, sharing or security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user confidence in us, damage to our brands, resulting in a loss of users, advertising partners, or affiliates, which could adversely affect our business.

We may not be able to manage our operations effectively if we grow, which could harm our business.

We anticipate expansion of our business in India as we address growth in our customer base and market opportunities. In order to manage the expected growth of our operations and personnel, we will be required to improve existing and implement new operational and financial systems, procedures and controls, and to expand, train and manage our employee base. Further, our management will be required to maintain and expand our relationships with various other partners, including but not limited to, mobile phone operators, Internet and other online service providers and other third parties necessary to operate and grow our business. We cannot assure you that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations or that such relationships will be maintained or developed.

Currency exchange rate fluctuations may adversely impact our operating results and financial condition.

The exchange rate between the Indian Rupee and the U.S. dollar has fluctuated substantially both historically and in recent years, and could continue to fluctuate substantially in the future. Our Indian revenues are translated into U.S. Dollars for reporting purposes at average annual U.S. Dollar/Indian Rupee exchange rates, which are computed by us based on daily closing rates published by the Reserve Bank of India. If the Indian Rupee depreciates further, such depreciation may adversely affect our reported revenues and operating results in U.S. Dollars.

Additionally, because a substantial portion of our cash and cash equivalents is currently held in Indian Rupees, devaluation or depreciation of the value of the Indian Rupee will adversely affect the value of our cash reserves in foreign currency terms. In addition, our market valuation could be materially adversely affected by the devaluation of the Indian Rupee if U.S. investors analyze our value and performance based on the U.S. dollar equivalent of our financial condition and operating results.

A small group of our existing shareholders control our Company and may have interests which conflict with those of our other shareholders or owners of our ADSs.

As of March 31, 2014 our six largest shareholders beneficially owned an aggregate of approximately 63% of our Equity Shares.

As a result, such shareholders could act collectively to exercise control over most matters requiring approval by our shareholders, including the election of directors and approval of significant corporate transactions among other matters. Under Indian law, a simple majority is sufficient to control all shareholder action except for those items which require approval by a special resolution. In case of a special resolution, approval of three-fourths of the shareholders present and voting is required. Examples of actions that require a special resolution include:

Further, Ajit Balakrishnan, Diwan Arun Nanda and Rediffusion Holdings Private Limited (formerly Rediffusion Advertising Private Limited), are entitled to appoint and have appointed Mr. Balakrishnan as a Director and as our Chairman so long as they hold, singly or jointly, not less than 10% of our issued, subscribed and paid-up capital. Mr. Balakrishnan currently serves an indefinite term as a Director and is not required to retire by rotation.

The interests of our controlling shareholders may differ from our other shareholders or owners of our ADSs and could result in a delay or prevention of a change in control of our Company even if a transaction of that sort would be beneficial to our other shareholders, including the owners of our ADSs, or in the best interest of our Company.

For additional information regarding our principal shareholders, please see “Principal Shareholders” in this annual report.

The laws of India do not protect intellectual property rights to the same extent as those of the United States, and we may be unsuccessful in protecting our intellectual property rights, which could lead to a reduction in our revenues and an increase in our expenses.

Our intellectual property rights are important to our business. We rely on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property.

Our efforts to protect our intellectual property may not be adequate. Our competitors may independently develop similar technology or duplicate our products or services. Unauthorized parties may infringe upon or misappropriate our products, services or proprietary information. In addition, the laws of India do not protect proprietary rights to the same extent as the laws of the United States, and the global nature of the Internet makes it difficult to control the ultimate destination of our products and services. The misappropriation or duplication of our intellectual property could disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses. We may need to litigate to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time-consuming and costly and may not ultimately prove successful which could have an adverse effect on our financial results.

We could be subject to intellectual property infringement claims as the number of our competitors grows and the content and functionality of our website or other product or service offerings overlap with competitive offerings. Defending against these claims, even if not meritorious, could be expensive and divert our attention and resources from operating our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay substantial damages awards and forced to develop non-infringing technology, obtain a license or cease selling the applications that contain the infringing technology. We may be unable to develop non-infringing technology or obtain a license on commercially reasonable terms, or at all.

For additional information regarding our intellectual property rights, please see “Business - Intellectual Property” in this annual report.

The limited installed personal computer base in India limits our pool of potential customers and restricts the growth of our business.

The market penetration of, or access to, personal computers, or PCs, and, consequently, the Internet in India is far lower than in the United States. Alternate methods of obtaining access to the Internet, such as through smart phones, cable television modems or set-top boxes for televisions, although available, are available in a limited manner in India. We cannot assure you that the market penetration of personal computers in India will increase rapidly or at all, or that alternate means of accessing the Internet will develop and become widely available in India. If these events do not occur we may not be able to expand our customer base, which will make it difficult for us to execute our business strategy.

The success of our e-commerce platform depends on its acceptance and growth in India, which is uncertain.

Many of our existing and proposed products and services are designed to facilitate e-commerce in India, and demand and market acceptance for these products and services by consumers is highly uncertain. Critical issues concerning the commercial use of the Internet, such as legal recognition of electronic records, validity of contracts entered into through the Internet and the validity of digital signatures, are governed in India by the Information Technology Act, 2000 (the “IT Act”). In addition, many Indian businesses have deferred deploying e-commerce initiatives for a number of reasons, including the existence or perception of, among other things:

If usage of the Internet, credit cards and e-commerce in India does not substantially increase and the legal infrastructure and network infrastructure in India are not further developed, we are not likely to achieve significant growth of our e-commerce products and services which could adversely impact our operating result.

Compliance with corporate governance and public disclosure requirements may increase our costs of compliance.

Regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations, Information Technology (Intermediaries Guidelines) Rules, 2011, Information Technology (Reasonable security practices and procedure and sensitive personal data or information) Rules, 2011 are resulting in additional costs for companies like ours. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance.

In particular, continuing compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal control over financial reporting requires the commitment of significant financial and managerial resources and external auditor’s independent assessment of the internal control over financial reporting.

At this time many of the provisions relating to corporate governance under new Companies Act 2013 are not applicable to us. However, if our paid up capital increases to Rs. 100 mn all of these provision will be applicable to us. This could result in higher costs of compliance.

In connection with this annual report, our management assessed our internal controls over financial reporting, and determined that our internal controls were effective as of March 31, 2014 and our independent auditors have expressed an unqualified opinion over the effectiveness of our internal control over financial reporting as of the end of such period. However, we will undertake management assessments of our internal controls over financial reporting in connection with each annual report, and any deficiencies uncovered by these assessments or any inability of our auditors to issue an unqualified opinion could harm our reputation and the price of our equity shares and ADSs. Our efforts to comply with laws, regulations and standards in this regard have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Further, if we fail to comply with new or changed laws or regulations, our business and reputation may be harmed.

Risks Related to Investments in Indian Companies.

We are incorporated in India, and a large part of our assets, business operations and employees are located in India. Consequently, our financial performance and the market price of our ADSs will be affected by social and economic developments in India and the policies of the Government of India, including taxation and foreign investment policies, as well as changes in exchange rates, interest rates and controls, among other matters.

Terrorist attacks and other acts of violence or war involving India, the United States, and other countries could adversely affect the financial markets, result in a loss of business confidence and adversely affect our business, results of operations and financial condition.

Terrorist attacks, such as the ones that occurred in New York and Washington, D.C., on September 11, 2001, New Delhi on December 13, 2001, the Mumbai train bombings on July 11, 2006, the terror attacks in Mumbai on November 26, 2008 and July 13, 2011 as well as other acts of violence or war, including those involving India, the United States or other countries, may adversely affect Indian and worldwide financial markets. These acts may also result in a loss of business confidence and have other consequences that could adversely affect our business, results of operations and financial condition. Travel restrictions as a result of such attacks may have an adverse impact on our ability to operate effectively. Increased volatility in the financial markets can have an adverse impact on the economies of India and other countries, including economic recession.

If communal disturbances or riots erupt in India, or if regional hostilities increase, this would adversely affect the Indian economy, the health of which our business depends upon.

Some parts of India have experienced communal disturbances, terrorist attacks and riots during recent years. If such events recur, the market for our services may be adversely affected, resulting in a decline in our income.

The Asian region has from time to time, experienced instances of civil unrest and hostilities among neighboring countries, including those between India and Pakistan. Since May 1999, military confrontations between India and Pakistan have occurred in Kashmir. The hostilities between India and Pakistan are particularly threatening because both India and Pakistan are nuclear powers. Hostilities and tensions may occur in the future and on a wider scale. Also, since 2003, there have been military hostilities and continuing civil unrest and instability in Iraq, Afghanistan, Egypt, Libya, Syria and other part of Middle East. Events of this nature in the future, as well as social and civil unrest within other countries in Asia, could influence the Indian economy and could have a material adverse effect on the market for securities of Indian companies, including our ADSs, and on the market for our services.

Future political instability in India could halt or delay the liberalization of the Indian economy and adversely affect economic conditions in India generally and our business in particular.

The Government of India has traditionally exercised and continues to exercise significant influence over many aspects of the economy. Our business, and the market price and liquidity of our ADSs, may be affected by interest rates, changes in Government policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India.

Since 1991, successive Indian governments have pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. We cannot assure you that these liberalization policies will continue in the future. Any significant change in India’s economic liberalization and deregulation policies could adversely affect business and economic conditions in India generally, including our business.

In the event that the Government of India changes its tax policies in a manner that is adverse to us, our tax expense may materially increase.

In the Finance Act, 2012, the Government of India introduced a new service tax based on a negative list of services. Consequently, all services have become taxable, except specifically exempted services. The rate of service tax has been increased from 10% to 12%. Pursuant to the law, our digital advertising service has designated as non-taxable service, and hence, service tax paid on input services taken for this service are not eligible for Service Tax Cenvat Credit. This has resulted in an increase in the cost of input services, which could adversely affect our results of operations. However, in Union Budget 2014 government of India our digital advertising service again designated as taxable service.

 The Finance Act, 2012 has also made certain retrospective amendments effective June 1, 1976, such as broadening the term “royalty”. Any retrospective tax amendments may adversely affect our financial condition and results of operations.

The Finance Act, 2013 has increased the tax withholding rate from 10% to 25% in respect of the payment to be made to non-residents towards "Royalty" and / or "Fees for Technical Services". However, an option to follow a rate prescribed under the applicable Double Taxation Avoidance Agreement has been given subject to comply of prescribed conditions and documentation. As we procure various software licenses and technical services from non-residents in course of delivering our products and services, as a result of the increase in the withholding rate, the cost of purchasing of such software and services may increase and adversely affect our results of operations.

We operate in jurisdictions that impose transfer pricing and other tax-related regulations on us, and any failure to comply could materially and adversely affect our profitability.

  We are required to comply with various transfer pricing regulations in India. Failure to comply with such regulations may impact our effective tax rates and consequently affect our net margins.

Indian law limits our ability to raise capital and the ability of others to acquire us, which could prevent us from operating our business or entering into a transaction that is in the best interests of our shareholders.

Indian law constrains our ability to raise capital through the issuance of equity or convertible debt securities. Foreign investment in an Indian company may require approval from relevant government authorities in India including the Reserve Bank of India. The Government of India has classified existing businesses into various categories for automatic approval of foreign direct investment up to certain prescribed percentages. Under the current guidelines, the Government of India provides for approval under the automatic route for foreign direct investment proposals relating to the information technology sector.

We cannot assure you that equity or other forms of financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, our ability to fund our operations, take advantage of anticipated or unanticipated opportunities, develop or enhance our infrastructure and services, or otherwise respond to competitive pressures would be significantly limited. Our business, operating results and financial condition could be adversely affected by any such limitation.

Our ability to acquire companies organized outside of India may depend on the approval of the Government of India and the Reserve Bank of India. Our failure to obtain approval for acquisitions of companies organized outside India may restrict our growth, which could negatively affect our revenues.

As part of our business strategy, we may plan to acquire complementary businesses, including businesses based outside of India. For the acquisition of a business based outside India we may, under certain circumstances, be required to obtain approval of the Reserve Bank of India and/or the Government of India. Under guidelines issued by the Reserve Bank of India, the acquisition of companies organized outside India is permitted under certain circumstances without prior approval if such acquisition does not exceed 400% of the net worth of the acquiring company as of the date of the last audited balance sheet or unless the acquisition is funded with cash from acquiring company’s existing foreign currency accounts or with cash proceeds from the issuance of ADRs/ADSs. This ceiling includes contribution to the capital of companies organized outside India, loans granted by the Indian party to such companies organized outside India and all of the guarantees issued by the Indian party to or on behalf of such companies organized outside India.

If we move forward with such an acquisition outside of India, we cannot assure you that we will be able to obtain any required approval from the Reserve Bank of India and/or the Government of India. Our failure to obtain approval from the Reserve Bank of India and/or the Government of India for acquisitions of companies organized outside India may restrict our growth, which could negatively impact our business and prospects and the market value of our ADSs.

Statistical and third-party data in this document and documents incorporated by reference herein may be incomplete or unreliable.

We have not independently verified data from industry publications and other third-party sources and therefore cannot assure you that they are complete or reliable. Such data may also be produced on different bases from those used in Western countries. Therefore, discussions of matters relating to India, its economy or our industry are subject to the caveat that the statistical and other data upon which such discussions are based may be incomplete or unreliable.

It may be difficult for you to enforce any judgment obtained in the United States against us, or our affiliates.

We are incorporated under the laws of the Republic of India and many of our directors and executive officers reside outside of the United States. In addition, a large part of our assets and the assets of many of these persons are located outside of the United States. As a result, you may be unable to:

We have been advised by our Indian counsel that the United States and India do not currently have a treaty providing for reciprocal recognition and enforcement of judgments of courts in the United States in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States on civil liability, whether or not predicated solely upon the federal securities laws of the United States, would not be enforceable in India. However, the party in whose favor such final judgment is rendered may bring a new suit in a competent court in India based on a final judgment which has been obtained in the United States. A judgment of the courts in the United States shall be conclusive as to any matter directly adjudicated between the parties to the suit except if Indian courts were of the opinion that such judgment:

Risks Related to the ADSs and Our Trading Market

An active or liquid market for our ADSs is not assured.

Trading volume in our ADSs is inconsistent and we cannot assure you that an active, liquid trading market in our ADSs will be established. Holders of our ADSs are entitled to withdraw the Equity Shares underlying the ADSs from our depositary facility at any time, subject to certain legal restrictions.

In addition, under current Indian law, Equity Shares may only be deposited into our depositary facility in exchange for ADSs and, under certain circumstances, the number of ADSs that can be outstanding at any time is limited as follows: after any offering of ADSs, Equity Shares can be deposited for issuance of ADSs only to the extent that (a) holders have surrendered ADSs and withdrawn Equity Shares from the ADS facility and (b) such holders sold such Equity Shares through stockbrokers registered with the Securities and Exchange Board of India (“SEBI”) in a domestic Indian stock market. Therefore, unless the law is changed, the number of outstanding ADSs and the trading volumes for all ADSs may significantly decrease at any time to the extent that Equity Shares are withdrawn from our depositary facility and not deposited for the re-issuance of ADSs, which may adversely affect the market price and the liquidity of the market for our ADSs.

Currently there is no public trading market for our Equity Shares in India or elsewhere, which, together with existing Indian laws that restrict the conversion of outstanding equity shares into ADSs, reduces your ability to sell our Equity Shares represented by ADSs.

Currently there is no public trading market for our Equity Shares in India or elsewhere, and we cannot assure you that we will take steps to develop one or that we will be able to meet applicable listing guidelines or regulations to list our Equity Shares on a stock exchange in India or elsewhere. Our Equity Shares are currently only traded on the NASDAQ Global Market in the form of ADSs. Under current Indian laws and regulations, outstanding Equity Shares not listed in India may not be deposited into our depositary facility except in certain limited circumstances or with certain regulatory approvals. Thus, if you elect to surrender your ADSs and receive Equity Shares, you will not be able to trade those Equity Shares on any securities market. Further, you will be prohibited from re-depositing such unlisted outstanding Equity Shares with our Depositary.

Under current Indian regulations and practice, approval of the Reserve Bank of India is not required for a renunciation in favor of a resident of India of rights to subscribe to equity shares pursuant to a rights offering or for the sale of equity shares underlying ADSs by a non-resident of India to a resident of India, unless the sale breaches the pricing guidelines laid down for this purpose by the RBI, which specify that where the equity shares of an Indian company are not listed on a stock exchange in India, the transfer of shares shall be at a price not less than the fair value to be determined by a SEBI registered Category-I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method. The price per share arrived at should be certified by a SEBI registered Category-I Merchant Banker/Chartered Accountant.

Our management has broad discretion in using the proceeds from our securities offerings and cash from operations and therefore investors will be relying on the judgment of our management to invest those funds effectively.

Our management has broad discretion with respect to the use of the net proceeds from our securities offerings and cash from our operations. As of March 31, 2014, we held approximately US$17 million as cash and cash equivalents and short term deposits with banks on which we are earning interest.

We intend to use these funds primarily to develop additional platforms for the growth of our online business, product development, and general corporate purposes, including capital expenditures and strategic investments, partnerships and acquisitions. However, there is a possibility that we may be unable to make successful strategic investments, partnerships or acquisitions in the near future. Further, there could be a risk that our management may use these funds in an inefficient or ineffective manner.

Our ADS market price is highly volatile and could drop unexpectedly in the future. Should our ADS market price drop below $1.00, our ADSs may be delisted from the NASDAQ Global Market.

The stock markets in the United States have from time to time experienced significant price and volume fluctuations that have affected the market prices for the securities of technology companies, particularly Internet companies. Volatility in the price of our ADSs may be caused by factors outside of our control and may be unrelated or disproportionate to our operating results. In the event that the bid price of our ADSs falls below $1.00 and remains below $1.00 for more than 30 consecutive days, our ADSs may be delisted from the NASDAQ Global Market. The delisting of our ADSs from the NASDAQ Global Market could negatively affect the market price of our ADSs and impair your ability to sell such ADSs.

In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against that company. Securities class action litigation had been instituted against us in the United States in the past. Such litigation, if brought against us in the future, even if unsuccessful, could damage our reputation and result in substantial costs and a diversion of our management’s attention and resources.

Owners of our ADSs may be restricted in their ability to exercise preemptive rights and thereby may suffer future dilution of their ownership position.

Under the Indian Companies Act, 1956, as amended (the “2013 Companies Act”), a company incorporated in India must offer its holders of equity shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any new equity shares, unless the preemptive rights have been waived by adopting a special resolution by holders of three-fourths of the company’s equity shares which are voted on the resolution. U.S. owners of ADSs may not be able to exercise preemptive rights for Equity Shares underlying ADSs unless a registration statement under the Securities Act is effective with respect to the rights or an exemption from the registration requirements of the Securities Act is available. Our decision to file a registration statement will depend on the costs and potential liabilities associated with any given registration statement as well as the perceived benefits of enabling the owners of our ADSs to exercise their preemptive rights and any other factors that we deem appropriate to consider at the time the decision must be made. We may elect not to file a registration statement related to preemptive rights otherwise available by law to our shareholders. In the case of such future issuance, the new securities may be issued to our Depositary, which, if there is a trading market for such new securities which may not be the case, may sell the securities for the benefit of the owners of our ADSs. The value, if any, our Depositary would receive upon the sale of such securities cannot be predicted. To the extent that owners of ADSs are unable to exercise preemptive rights granted in respect of the Equity Shares represented by their ADSs, their proportional interests in our Company would be reduced.

Owners of our ADSs may be restricted in their ability to exercise voting rights because of the practical and legal limitations associated with instructing our Depositary to vote on your behalf.

Holders of ADSs may exercise voting rights only through a depositary, unlike an owner of Equity Shares, who can exercise voting rights directly. An owner of ADSs generally will have the right under the deposit agreement to instruct our Depositary to exercise the voting rights for the Equity Shares represented by the ADSs. Owners of ADSs have no rights pursuant to the Companies Act, under which we are incorporated, and are limited to those rights granted to them pursuant to the depository agreement.

If our Depositary timely receives voting instructions from an owner of ADSs, it will endeavor to vote the securities represented by those ADSs in accordance with such voting instructions. In the event that voting takes place by a show of hands, our Depositary will cause the custodian to vote all deposited securities in accordance with the instructions received from owners of a majority of the ADSs for which our Depositary receives voting instructions. However, the ability of our Depositary to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. We cannot assure that holders of ADSs will receive voting materials in time to enable them to return voting instructions to our Depositary in a timely manner.

In June 2009 The Ministry of Company Affairs (MCA) of the Government of India has clarified that a depositary receipt holder cannot be considered to be a shareholder of the Company until such time as the holder elects to transfer / redeem depositary receipts for underlying equity shares. It has been further clarified that the depositary bank cannot be considered a nominee of the holder under the Indian Companies Act.

We do not pay dividends and currently have no plan to pay dividends in the foreseeable future.

We currently do not pay cash dividends and do not anticipate paying cash dividends to the owners of our Equity Shares or ADSs in the foreseeable future. Accordingly, investors must rely on sales of their Equity Shares or ADSs, which may increase or decrease in value, as the only way to realize cash from their investment. Investors seeking cash dividends should not purchase our ADSs.

We may be classified as a passive foreign investment company for United States federal income tax purposes, which could subject United States investors in the ADSs or Equity Shares to adverse tax consequences.

We do not expect to be classified as a passive foreign investment company (“PFIC”) for United States federal income tax purposes for the most recent taxable year ended March 31, 2014 . However, there is no guarantee that the Internal Revenue Service will agree with our determination. Moreover, it is uncertain whether we will be classified as a PFIC for any future taxable year. PFIC status is a factual determination made annually on the basis of the composition of our income and the value of our active versus passive assets. We currently maintain a significant amount of passive assets, including cash, which contributes significantly to the risk that we may be or become classified as a PFIC. If we do not spend substantial amounts of our liquid assets for business development purposes or if our market capitalization does not substantially increase, we may also be classified as a PFIC for one or more future taxable years. If we are or become classified as a PFIC, United States investors holding our ADSs or our Equity Shares may be subject to penalizing tax and interest charge rules on gain recognized on the sale or other disposition of our ADSs or our Equity Shares and on the receipt of distributions on our ADSs or Equity Shares to the extent such distributions are treated as an “excess distribution” under the United States federal income tax rules. Please see the section in this annual report entitled “Taxation – United States Federal Income Tax Considerations – Passive Foreign Investment Company Rules”.

Sales of substantial amounts of securities in the public market could depress the price of our ADSs and could impair our ability to raise capital through the sale of additional Equity Shares.

The market price of our ADSs could decline as a result of sales of a large number of Equity Shares represented by ADSs on a U.S. stock exchange or elsewhere, or the perception that such sales could occur. Such sales also might make it more difficult for us to sell Equity Shares in the future at a time and at a price that we deem appropriate. As of March 31, 2014, we had an aggregate of 13,795,178 Equity Shares outstanding. Of the outstanding Equity Shares, 9,295,956 ADSs, representing 4,647,978 Equity Shares, are freely tradable. Our remaining Equity Shares may be sold in the United States pursuant to a registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act. Further, certain holders of at least 30% of our Equity Shares can require us, subject to limitations, to effect a registration of such Equity Shares and/or to list the Equity Shares either on the NASDAQ Global Market (formerly the NASDAQ National Market), the National Stock Exchange of India or the Bombay Stock Exchange Limited (formerly The Stock Exchange, Mumbai).

We may be required to list our Equity Shares on an Indian stock exchange. If we were to list our Equity Shares on an Indian stock exchange, conditions in the Indian securities market may affect the price or liquidity of our Equity Shares and indirectly of our ADSs.

On June 28, 2006, the Ministry of Finance of the Republic of India issued amendments to the “Issue Of Foreign Currency Convertible Bonds And Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993” (the “Scheme”). The amendments included a statement that Indian companies that have issued depositary receipts and/or foreign currency convertible bonds prior to August 31, 2005 will be permitted to comply with listing conditions on the Indian stock exchanges within three years of having started to make profits. At present, the manner in which the amendments to the Scheme prescribed by the Ministry of Finance will be interpreted and implemented, and how they would apply to us, is still uncertain.

We may be required by the Government of India at some point in time to list on a local Indian stock exchange. We may not be able to comply with any timeline for listing and other standards imposed on us, and we are uncertain as to the consequences to us of any non-compliance.

The Indian securities markets are smaller than securities markets in more developed economies and are more volatile than the securities markets in other countries. Indian stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities.

Indian stock exchanges have also experienced problems that have affected the market price and liquidity of the securities of Indian companies. These problems have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. In addition, the governing bodies of the Indian stock exchanges have from time to time restricted securities from trading, limited price movements and restricted margin requirements. Further, from time to time, disputes have occurred between listed companies and the Indian stock exchanges and other regulatory bodies that, in some cases, have had a negative effect on market sentiment. If we were to list our Equity Shares on an Indian Stock Exchange and similar problems occur in the future, they could harm the market price and liquidity of the Equity Shares and this could have an adverse effect on the price and liquidity of our ADSs.

BUSINESS

Overview

Our legal name is Rediff.com India Limited and our commercial name is Rediff.com. We were incorporated in India on January 9, 1996 as Rediff Communication Private Limited under the Indian Companies Act. We converted to a public company on May 29, 1998. On February 15, 2000, we changed our name to Rediff.com India Limited. Our principal office is located at Mahalaxmi Engineering Estate, 1st Floor, L.J. First Cross Road No-1, Mahim (West), Mumbai 400 016, India, and our telephone number is +91-22-6182-0000. Our Internet address is www.rediff.com.

We are a leading news media and online marketplace in India, focusing on providing world-class online business and consumer offerings both in India and to the global Indian community. Our websites in India and North America consist of various communication services, such as consumer and enterprise email, web hosting and search, real-time news and information channels, which consist of our own editorial content, as well as fresh and recent news sourced from over 30,000 news sites from India and the world. Through Rediff.com, we provide new and innovative community features including a social networking platform, photo/video and music sharing capabilities, and a robust and expanding e-commerce marketplace.

Our web hosting and business email service is available to all India internet users under the Rediffmail and Rediffmail Pro brands, and provides an affordable and easy-to-use way to set up and own domain name e-mail services, and manage them through both the desktop and virtually all mobile devices and platforms.

Our e-commerce marketplace provides consumers throughout India with national and localized products and services across a wide variety of vertical markets, including apparel and accessories, electronics, home décor and furnishings, mobile phones and accessories, automobiles, toys, games, books and a host of other sough after categories.

Through Vubites, we also provide local TV advertising tools, applications and services to small, medium and large corporate enterprises, which expands our reach throughout India and offers a new and innovative medium for businesses to reach target consumers.

Our new data analytics platform, under the Rediff Labs component of our website, complements our news media offerings and provides users, whether on their PC or mobile devices with new search and analytics tools that combine domain knowledge and big data simultaneously to analyze and predict various business issues and outcomes, whether it be for cricket, elections, advertising sales and trends, e-commerce and news analysis.

In addition to our online services, we publish two weekly newspapers, “India Abroad” and “India in New York”, both of which are targeted at the Indian-American community in the United States and Canada and which complements our online news media offerings.

In June 2000, we issued 5.3 million ADSs, representing 2.65 million Equity Shares, at a price of US$12.00 per ADS, raising net proceeds of US$57.3 million, after underwriting discounts and other expenses, and we listed our ADSs on the NASDAQ Global Market (formerly the NASDAQ National Market). In November 2005, we issued an additional 3.0 million ADSs, representing 1.5 million Equity Shares, at a price of US$15.86 per ADS, raising net proceeds of US$44.1 million, after underwriting discounts and other expenses, and these ADSs were also listed on the NASDAQ Global Market. Our ADSs are listed and traded on the NASDAQ Global Market under the ticker symbol REDF. The net proceeds of our ADS offerings have been used by us, and in future, are intended to be used by us, to develop content for our Internet website, to advertise and promote our brand, to improve the technological capabilities of our company, and for general corporate purposes, including capital expenditures, strategic investments, partnerships and acquisitions.

On November 26, 2010, we acquired Vubites India Private Limited (“Vubites”) for approximately US$0.30 million in cash and the assumption of a $2.7 million loan. Vubites helps small and local businesses advertise on national TV channels within their cities to reach their target audiences.

Our Markets

We believe that the growth of our revenues and profits from our India Online business is dependent on the growth of the Indian Internet market and mobile phone, smartphone and tablet user base, improvements in broadband infrastructure in the mass-Indian market and particularly in highly populated areas, the evolution of adequate online payment mechanisms in India, a consequent increase in online advertising, and our ability to capture as revenues a sizeable share of any increases in online advertizing spending.

The growth of the user base for Internet, mobile phones and related devices is dependent on Indian government policies that facilitate a competitive and financially healthy telecom industry and stimulate broadband Internet investments by telecom companies. During the last few years, the Government of India has taken a number of steps in this direction, opening most sectors of the telecom industry to the private sector and foreign capital, establishing independent regulatory authorities and reducing taxes (mainly indirect taxes) on personal computers and smart phones. Active mobile user base in India stood at 791 million as of April 30, 2014 (source: TRAI). We expect that the growth of the Internet market in India will be driven by an increase in broadband subscribers. The number of such subscribers stood at 61.74 million as of April 2014, of which 46.42 million are mobile device users (mobile + dongle) (source: TRAI).

The growth of our international business, particularly our North American operations, is dependent on our ability to launch new services that appeal to our worldwide user base, which consists principally of Indians living outside India, and potential new users of our service, as well as revenue growth from our weekly newspapers, India Abroad and India in New York.

Our overall growth is also dependent on general economic conditions in all our markets, particularly India and the United States, and on the pace of economic expansion in India and other emerging markets where we do business. We believe we are positioned for growth given the new services introduced and planned for over the coming years, We believe much of our near-term growth will be driven by our expanding e-commerce services and longer-term, complemented by growth in our local TV advertising business through Vubites. We have focused on growing in our markets by simplifying the user experience and making our site more informative, user-friendly and geared to transactions on both desktops and the rapidly expanding use of mobile devices throughout India.

Our Opportunities

In India, Internet access and usage through PCs, smart phones and related devices is still at an early stage of development and adoption. Given the demographics in India and market dynamics, principally driven by both the Government of India and private sector investments in the Indian market, we believe that over time there will be growth in demand for the services provided by our Company. We believe our opportunities are driven by the following factors, among others:

We believe we have opportunities to expand and create new revenue streams through both our new data analytics platform and through our local TV advertising service, Vubites, the latter of which offers a new, innovative and cost-friendly medium for small, medium and large enterprises to advertise locally and reach their targeted demographic.

We believe that, as an operator of a website with a large number of users, we are well positioned to benefit from the anticipated growth of revenues generated from these services, as well as new services we may offer in the future.

Our Strategy

We are focused on providing a full range of culturally relevant online products and services to Indians living in India and other parts of the world. We intend to continue this strategy, and may from time to time introduce new products and services or make strategic investments in related areas to further increase our brand name recognition and our user base to improve our operating and financial performance. The products and services we currently offer include:

Our India Online Business

Our Rediff.com India website consists of information, communication and content services, free community products and platforms, e-commerce and mobile services. With 14.6 million monthly active users worldwide, as reported by ComScore Media Metrix (May 2014 report) we believe Rediff.com is one of the most recognized online brands in India and among the Indian community worldwide.

Information and Content

We deliver information and content to our users in an easy-to-use interface. The information and content channels currently available to our users include news, business, movies, cricket/sports and several other topics of interest. We currently offer this information and content without charge to our users.

In our endeavor to enhance the user’s browsing experience, our website now sports a tiled design, clean user interface and easy navigation aids, all of which make it convenient for the user to discover content. We have aggressively focused on improving the user experience on Rediff.com to retain our current subscriber base and attract new users to our site.

We believe that a significant percentage of our online users are in the 18- to 34-year old age group. As such, we place emphasis on reaching younger users through focused information and content relevant to this audience, and target our marketing efforts to reach this demographic, as well as others, both in rural and urban regions across India.

Our primary information and content channels are broadly classified into news content and interest specific subjects. News content includes c urrent affairs, business and finance, movies and sports. We provide our users with up-to-date news of interest to Indians, including feature stories, interviews and online chats with leading Indian personalities in public life, as well as sports and entertainment, breaking news and in-depth coverage of significant events. We use our in-house staff to generate this content as well as freelancers and news feeds from wire services and other online and offline media houses. This content can be in text, audio and video formats and we offer our users tools to search this content, opt to get news items by e-mail or on their mobile phones and share the content with other users in their network by adding it to their individualized web page using our “MyPage” service.

Recently, we introduced a Real-time News service that delivers recent news from across 30,000 news sources in India and worldwide, within minutes of the news appearing on these sources. The service also offers the latest images from these sources and currently has an index size of 55 million images. In addition to high quality images published on news sites, it also contains a real-time feed of photographs taken at live Bollywood and sports celebrity events. We believe the functionality, ease of use and search results of our Rediff Realtime News service offers us a competitive advantage in the India market.

Community Features and Products

Through a single login facility, we provide a combination of free and paid community features and products to consumers and businesses. Our offerings include e-mail, blogs, message boards, shopping, social networking and mobile related services. Some of these features and products are offered without charge, while others are offered on a subscription or fee basis. Payment for our fee-based services can be made by credit card and within India by check/demand draft or through direct debit of the user’s Internet banking account. In case of shopping, we also offer the additional payment option of cash on delivery.

Our specific offerings include:

E-mail

We offer our users a variety of e-mail solutions tailored to their needs. We believe that we have priced each of our branded e-mail products competitively. All of our e-mail services offer spam control and support the use of English and eight Indian languages — Hindi, Gujarati, Marathi, Tamil, Telugu, Malayalam, Bengali and Kannada. Our e-mail offerings are described below.

Local TV Advertising

Vubites enables local businesses to advertise on national TV channels within their city. Vubites works with TV broadcasters and cable multi-system operators (MSOs) in the principal cities of India, enhancing local advertiser’s revenues by helping to make advertising on TV more affordable. Vubites offers web-based tools that small merchants can use to create low cost TV ads in mpeg2 format, which play on television directly, an online media planning tool with which advertisers can create their media plan without any assistance, and a technology to insert TV ads at the city level. The addition of Vubites has expanded our reach in local markets and provides our customers and prospects with an added conduit to reach their target audiences.

Blogs

Rediff Blogs enables users to set up their own blogs and publish their thoughts and ideas directly and instantly on the web as well as the ability to visit other blogs and comment on them. Users can also post pictures and create multiple blogs under a single username and password. We provide users with the option of blogging in eight different Indian languages — Hindi, Gujarati, Marathi, Tamil, Telugu, Malayalam, Bengali and Kannada.

Social Networking

Our video sharing platform, Rediff iShare, videos are now available for viewing on iPhones and other operating systems (OS). Video files are now available in both MP4 and flash video formats.

Rediff MyPage is our free online social networking product which allows users to become part of a network by creating and uploading profiles that include details about their profession, education and interests. Thereafter, users can invite friends to join their network and can become linked to a larger network. Our MyPage service enables users to capture photos via mobile devices and upload and share them within their social network on the service. Other features include bookmarks, viewing profiles of persons, adding friends, posting on message boards, receiving updates from other social networks and personalization tools. Rediff MyPage allows companies, colleges, celebrities and individuals to create their respective profiles where their communities can connect with them and receive updates on their latest offerings, events and releases.

Get Ahead, our editorial content channel, also supports a forum for questions and answers. This social media platform allows users to post questions and answers on various issues, and vote for the most relevant answers within a community environment.

Finance Channel

Our Finance platform, Moneywiz, provides stock market quotes, company information and a personal portfolio tracker. In addition, we provide business news, feature articles, expert columns and interviews. Our business channel offers business news from India and coverage of Indian stock markets. This channel also provides regular columns and feature stories, as well as personal finance information. Our free, real-time stock market indices and stock quotes tool, which enables users to benchmark returns on their investments has been well received by users.

Online Shopping

Rediff Shopping is an online marketplace which allows users to purchase products and services from various merchants. We offer products and services from merchants in various categories, the most popular of which currently include apparel and accessories, mobile phones and accessories, electronics, automobiles, home décor and related furnishings, toys, games, flowers, jewelry and a host of other products.

Customers can pay for their purchases using a variety of payment options, including credit cards, debit cards, online banking services, cash on delivery, gift vouchers and checks/demand drafts. We have entered into agreements with leading Indian banks to facilitate payment processes. In our effort to provide more users with the convenience of online shopping, we partnered with India Post as a logistics partner. This allows us to service more than 26,000 pin codes (similar to zip codes in the United States) across the country. We also continue to work with our vendors to improve delivery cycles to better serve our customers and believe our logistics network enables us to reach virtually all regions of India, a key competitive differentiator.

Rediff Shopping also features a vendor rating system to enable online shoppers on our e-commerce platform to rate their shopping experience with different online merchants. Customers are invited to provide feedback when items are delivered, rating their experience with the vendor as satisfactory, unsatisfactory or undecided. Vendors are rated based on the feedback provided.

We are focused on further developing and enhancing our social media, e-commerce and search capabilities and believe our individual and collective offerings will help us grow our market presence, expand our reach and increase Rediff’s brand name recognition throughout India and to Indians worldwide.

Our Revenue Sources

Our India online business primarily includes revenues from advertising and fee-based services. Online advertising includes revenues from advertisements and sponsorships of events on web. Fee-based services include revenues from online shopping, subscription services and mobile value-added services.

Advertising

Advertising includes revenues from banner advertising, performance-based advertising, e-mail and text link campaigns and sponsorships of events on web. Our advertisers enter into agreements pursuant to which they either pay a fixed fee per thousand banner impressions for a given time-period, usually ranging from a few weeks to months, or a variable fee depending upon the number of clicks or leads provided to them through our website.

Some of our advertisers also enter into agreements pursuant to which they pay a fixed fee for a guaranteed number of impressions on our site. Our rate per thousand impressions, commonly referred to as CPMs, for banner advertisements varies depending on banner size, location of the advertisements on our site, the targeted geographical areas and the extent to which the advertisements are targeted to a particular audience. Discounts from standard CPM rates may be provided for higher volume and longer-term advertising contracts. We have introduced other formats for advertisers to broaden the appeal of the advertisements to our users, such as text links, image ads, video ads and any combinations of these options.

We had over 455 advertisers on our Rediff.com India website during the fiscal year ended March 31, 2014. Our top ten advertisers accounted for approximately 22% of our India advertising revenues for the fiscal year ended March 31, 2014.

Fee-based services

Revenues from fee-based services primarily includes income from various paid subscription service products, and from our online shopping marketplace.

Subscription service revenues primarily include income from our various paid e-mail service products and domain name registration and web hosting services. The revenue for subscription based products is recognized ratably over the period of subscription.

Online shopping revenues primarily consist of commissions earned on the sale of electronics, books, music, apparel, confectionery, gifts and other items to customers who shop from vendors on our online store. Revenues from online shopping services also include fees charged to vendors for creating, designing and hosting the vendors’ product information on our website.

Our Infrastructure

Technology

Our operating infrastructure is scalable and has been designed with a view to serve and deliver millions of page views per day and allow users to access our products and services quickly and efficiently from different locations worldwide. Our infrastructure is also designed to provide high-speed access by forwarding queries to web-hosting sites with greater resources or lower loads. Our web pages are generated, served and cached by servers located at co-location web hosting sites in India.

We use a wide range of web application servers such as Apache, TomCat, Resin and IIS on Linux and Windows platforms. Servers are maintained mainly at Internet Service Providers’ co-location facilities in India and we leverage the benefit of using the cloud infrastructure offered by Amazon Web Services and Akamai to complete the reach worldwide.. We have the capability to deliver content using our own content delivery network and also use an external content delivery network where we are not present if and as needed. We believe that using these hosting services enhances our ability to protect our systems from power loss, break-ins and other potential external causes of service interruption. These hosting services also provide continuous customer service, multiple Internet connections and continuous power supply to our systems. In addition, we conduct online monitoring of all our systems for accessibility, load, system resources, network-server intrusion and timeliness of content. We have built a scalable column store data warehouse to cater to the increasing demand of storage and faster retrieval of users’ data.

Our services are accessible with equal ease over PCs and mobile devices, such as smart phones and tablets. We have the ability to detect the browser capabilities and geographic location of the user to serve pages with appropriate layouts and supported features. We can engage in real time log capturing and the analyzing of internally developed systems in order to provide an online capability to mine information. The domain + mailbox product is improved to cater to large enterprises with capabilities to access mail on mobile, web or mail clients such as Outlook. We have also added the support for calendar and contacts synchronization across devices. We have improved upon our search technology and have introduced social, collective intelligence features and Bayesian network based inference analysis across all our services. Data mining technologies are used in news products for data oriented journalism.

Advertising

Our sales and marketing professionals are responsible for securing advertisers and shopping merchants, planning and creating advertising campaigns and obtaining and analyzing customer feedback. Sales team members are based in Mumbai, New Delhi, Bangalore, Chennai, Hyderabad and New York. The sales team coordinates regularly regarding advertising across all of our businesses. Our sales team includes designers, copywriters, programmers and campaign managers.

In India, our sales team focuses its sales efforts on major advertisers as well as smaller corporations. Our sales team consults regularly with advertisers on the design and placement of their web-based advertising, provides advertisers with advertising measurement analysis and focuses on providing a high level of customer service satisfaction.

In the past few years, a number of advertising agencies have been established in India to promote the Internet as an advertising medium among Indian advertisers. In addition, several full-service advertising agencies in India have expanded their operations by creating and growing their Internet / interactive advertising divisions. Our advertising business from digital agencies were accounted for approximately 60% of our advertisement revenues during fiscal year ended March 31, 2014.

Online Shopping

Our shopping platform has a host of user-friendly features such as product search and detailed product category listings. The “tracking order”, “view account”, “shopping bag details” and “order status update by automated e-mail” features make online shopping convenient for users. Users can place orders from anywhere in the world for delivery in India. They can pay for purchases by credit card, local check, cash-on-delivery or direct debit to an Internet banking account with designated Indian banks. Our customer service officers address customer inquiries and solicit feedback from users to seek to continuously improve our offerings. Customers are invited to provide feedback when items are delivered using our vendor rating system, rating their experience with three options — satisfied, unsatisfied or undecided.

Once a user places an order on our website, we process and collect payment (except where the method of payment is C.O.D.) and notify the merchant, who then packages the product and arranges for delivery through one of our designated couriers or the user’s designated courier. We make payment to the merchant once we receive proof that the merchant has delivered the product. Most products purchased through our website are delivered within ten business days. Product warranties are the responsibility of those who sell products on our website’s marketplace, although our reputation can be adversely affected if a user is not satisfied with a purchase. Therefore, we monitor complaints and merchant’s rating and remove merchant with bad satisfaction record.

Pursuant to the terms of our agreements with merchants, we may receive a one-time entry fee and a separate commission on the sale of each product posted on our website.

Our sales force targets manufacturers and vendors of the leading products in India for them to offer their products through the Rediff Shopping platform. We also target manufacturers and vendors that supply products in categories that are fast moving over the Internet.

Electronic Payments

We were among the first Internet companies in India to accept credit cards for online payments. Users can use leading international and Indian credit cards and online money transfer methods for online payments. All online transactions are secured by VeriSign Secure Socket Layer (SSL) technology.

We have entered into agreements with Axis Bank, Citibank N.A., and ICICI Bank Limited to automate Visa and Master Card credit card payments through our website.

United States Publishing Business

Our United States publishing business consists primarily of the Rediff India Abroad website, which is targeted at the Indian-American community in North America, and our two flagship newspapers, India Abroad and India in New York.

Rediff India Abroad website (http://ia.rediff.com)

The Rediff India Abroad website offers information and content that is similar to the information and content on our Rediff.com India website, along with additional offerings relevant to North American users.

India Abroad newspaper

India Abroad, which we acquired in April 2001, was established over 39 years ago and is one of the oldest weekly newspapers focused on the Indian community residing in North America and Canada. The newspaper is published in four North America editions - New York “Tristate”, Chicago, Dallas and Los Angeles.

The paper is divided into five sections: News, Community, Business and Sports, Classifieds and Magazine. India Abroad’s content is targeted at Indians living in North America.

India Abroad offers classified advertising, which includes advertisements listed together in sequence by the nature of the advertisement, such as matrimonial, business/finance, employment, medical and real estate. The paper also has a Bulletin Board on the back cover which offers enhanced classified advertising. India Abroad also has an associated website, www.indiaabroad.com, which allows users to start and renew subscriptions, make payments and change their delivery addresses. Users can also place classified advertisements through this website. Since previous year, we launched the e-edition of this publication. Subscribers can have copies e-mailed to them for their convenience.

India in New York newspaper

India in New York was started in 1997 as a sister publication of India Abroad. India in New York features news, events, sports and entertainment and a wide array of classifieds. The India in New York newspaper is distributed free in the Tristate area of New York, New Jersey and Connecticut. India in New York is available at restaurants, Hindu temples, Indian associations, community events and Indian grocery stores in the Tristate area.

Competition

       Online

There are a number of companies that provide websites focusing on India and the global Indian community. These companies compete with us for website visitors, online advertising and online shopping, and subscription revenues. Competition is intense and is expected to increase in the future, as there are no substantial barriers to entry into these markets, although we believe our current position in the market and strength of the Rediff brand provide us with competitive advantages today and will continue to do so in the future. Our competitive ability is determined by how quickly we adopt new technologies, the user friendliness of our site designs, our ability to develop and roll out new popular online products and services, our execution skills and our financial management skills.

We compete with providers of Indian content over the Internet, including web directories, search engines, content sites, websites, horizontal sites and Internet Service Providers (“ISPs”). Our current and anticipated competitors include Google, Yahoo, Facebook, Microsoft, AOL, eBay and Snapdeal, Flipkart as well as a host of other international and Indian companies. As we embark on new initiatives in the mobile arena, we anticipate that competition will intensify and we are taking steps to address this competition.

Consequently, we may continue to make strategic investments in our business and in our marketing efforts to reach a wider demographic.

We also compete for advertising revenue with other forms of media, such as print media, radio and television, as well as companies known as “aggregators”, which aggregate advertising space in third party websites and resell such space to, among others, our customers and potential customers.

Market place e-commerce

As our Marketplace e-commerce business product offerings continue to broaden into new categories of items and new commerce formats, we expect to face additional competition from other online, mobile and offline channels for those new offerings. We compete on the basis of price, product selection and services. Our current and potential competitors include:

Many of our competitors have a longer operating history, greater name recognition, larger customer base and greater management, financial, technical, marketing, sales, brand and other resources than we do. They may secure better terms from suppliers, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing. Further, they can use their superior experience and resources in a variety of competitive ways, including by investing more aggressively in research and development, creating superior content, making acquisitions and competing more aggressively for advertisers also may enter into business combinations or alliances that strengthen their competitive positions. In addition, emerging start-ups may be able to innovate and provide products and services faster than we can. There has also been a trend toward industry consolidation, as a result of which our smaller competitors today may become larger in the future. If our competitors are more successful than we are at generating visitors and website traffic, our revenues may decline.

Print

There are a limited number of companies in the United States that provide newspapers focusing on India and the global Indian community. These newspapers compete with our US publishing outlets for advertising revenues. One of our newspaper competitors is India West.

Intellectual Property

Intellectual property rights are important to our business. We rely on a combination of copyright, trademark and trade secret laws, confidentiality procedures and contractual provisions to protect our intellectual property. We require employees, independent contractors and, when practicable, vendors to enter into confidentiality agreements upon the commencement of their relationships with us. These agreements generally provide that confidential information developed or made known during the course of a relationship with us must be kept confidential.

Our efforts to protect our intellectual property may not be adequate. Our competitors may independently develop similar technology or duplicate our products or services. Unauthorized parties may infringe upon or misappropriate our products, services or proprietary information, including our domain name. For example, there are some parties who have registered domain names similar to or slightly different from our domain name, Rediff.com, and we have taken legal action in India and overseas to protect our rights in respect of our domain names. We do not believe that the outcome of these lawsuits will have a material adverse effect on our business. However, the laws of India do not protect proprietary rights to the same extent as the laws of the United States. Further, the global nature of the Internet makes it difficult to control the ultimate destination of our products and services. In the future, further litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time-consuming and costly, and there can be no assurance we would prevail in it.

We could be subject to intellectual property infringement claims as the number of our competitors grows and the content and functionality of our websites or other product or service offerings overlap with competitive offerings. Defending against these claims, even if they are not meritorious, could be expensive and divert our attention from our operations. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay substantial damage awards and be forced to try to obtain or develop non-infringing assets, obtain a license or cease selling the applications that contain the infringing matter. If this were to occur, we may be unable to develop non-infringing assets or obtain a license on commercially reasonable terms, or at all.

We rely on a variety of technologies that are licensed from third parties. The software developed by these third parties is used in our website to perform key functions. These and other third-party licenses may not be available to us on commercially reasonable terms in the future. The loss or inability to obtain or retain any of these licenses could delay the introduction of software enhancements, interactive tools and other features until equivalent technology can be licensed or developed. Any such delays could materially adversely affect our business, operating results and financial condition.

We have registered our trademarks for “Rediff”, “Rediff on the Net and Design (Square)” and “Rediff.com” under various classes with the United States Patent and Trademark Office. We have received registration for our trademarks “Rediff”, “Rediff.com”, “Rediffmail”, “Rediffmail Mobile”, “Rediff Mobile”, “Rediff Bol”, “Rediffmail NG Mobile”, “Rediff iShare”, “Sociali” and “Rediff Shopping”, and have applied for registration for “RediffDeal Ho Jaye” and “Rediff ZaraBol”, in India. We have also received copyright registration for our artworks entitled “How Hot Is This Stock”, “origami dog” and “sociali” and for 40 “profile photo illustrations” in India.

Facilities

India

Our corporate headquarters are located in Mumbai, India, where we lease approximately 22,700 square feet in two buildings. In one facility we lease approximately 10,800 square feet and in the other we lease a total of approximately 11,900 square feet under three separate lease agreements. The lease for our 10,800 square-foot facility expired on January 20, 2014 and renewed the same for another three years to till January 20, 2017. In regard to our 11,900 square-foot facility, one lease, for 3,000 square feet, expires on October 31, 2015, a second lease, for 3,000 square feet of adjoining offices, expires on September 30, 2014 and the third lease, for 5,900 square feet, expired on April 30, 2014 and was renewed for another three years till April 30, 2017.

We lease office space for our various offices in India. Our lease for approximately 3,165 square feet of office space in New Delhi will expire on November 30, 2015 and our lease for 5,200 square feet of office space in Bangalore, will expire on January 31, 2017.

United States

Our U.S. subsidiary leases approximately 6,300 square feet of office space in New York, the lease for which expires on May 31, 2018.

We do not anticipate having material difficulties renewing any of our current leases or, alternatively, entering into different space arrangements if necessary.

Seasonality

Seasonal fluctuations in Internet advertising have affected, and are likely to continue to affect, our business. Internet advertising in India is generally slow during the first half of the fiscal year for most Indian companies. Such seasonal trends have in the past caused, and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.

Litigation and Other Legal Matters

Action Relating to Access to Pornographic Material

On June 21, 2000, the Company, certain of our present and then directors and others (Ajit Balakrishnan, Arun Nanda, Abhay Havaldar, Sunil Phatarphekar, Charles Robert Kaye and Tony Janz) were named as defendants in a criminal complaint (RCC Complaint Number 76 of 2000) filed by Mr. Abinav Bhatt, who was then a 22-year old student, before the Judicial Magistrate, First Class, Pune, India, alleging commission of an offence under Section 292 of the Indian Penal Code (IPC) for distributing, publicly exhibiting and putting into circulation obscene, pornographic and objectionable material. The RCC Complaint alleged that we, through our website www.rediff.com, provided a search facility that enabled Internet users to view obscene, pornographic and objectionable material. On November 27, 2000, the Judicial Magistrate passed an order on the complaint holding that a prima facie case under Section 292 of the IPC had been made out against us and directed commencement of criminal proceedings against all the defendants. A criminal writ petition was filed in the High Court of Mumbai ( Sunil N. Phatarphekar & Ors. v. Abhinav Bhatt and Ors. , Mumbai High Court, Criminal Writ Petition No. 1754 of 2000), seeking, among other relief, the setting aside of the order of the Judicial Magistrate. The High Court of Mumbai, in its order dated December 20, 2000, while granting interim relief to the petitioners in the Writ Petition, stayed the order of the Judicial Magistrate pending final disposal of the Writ Petition. The Writ Petition has been admitted by the High Court of Mumbai [and currently hearings have commenced. While we believe that the lawsuit is without merit, and that we and our directors have a valid defense to the charges, in the event that we are unsuccessful in our defense, we and our directors may face both criminal penalties and monetary fines or damages. Under Indian law, any person who publishes or transmits or causes to be published in electronic form any material which is lascivious or appeals to the prurient interest, or whose effect is such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it, shall be punished (i) for the first conviction, with imprisonment of up to five years and with a fine of up to Rs.100,000 (approximately US$1,700); and (ii) in the event of a second conviction, with imprisonment of up to ten years and with a fine of up to Rs.200,000 (approximately US$3,400).

Actions Relating to Trademark Infringement

In May, 2008, a complaint was filed by The Board of Control of Cricket in India (“BCCI”) against Sandeep Goyal and us, alleging that the depiction of images in the online game known as Indian Fantasy League, started by Sandeep Goyal and hosted on the Web through our hosting services, infringed the Indian Premier League (“IPL”) trademark. BCCI is seeking (a) a permanent injunction restraining defendants from the use of logo “Indian Fantasy League.com”; (b) shutdown of the website Indianfantasyleague.com; and (c) a rendering of the accounts of all profits earned by the website and damages of Rs.1.0 million (approximately US$17,000). We have filed our response to the BCCI complaint, and among the defenses we have raised are: (a) it is Sandeep Goyal who has infringed the trademark of IPL and not Rediff.com; (b) Rediff.com only provides the domain hosting and web based e-mail solution services which enables the subscriber to set up and manage their website as per the terms and conditions of Rediff business solutions; and (c) subscribers such as Sandeep Goyal are required to abide by and comply with the terms and conditions we impose on our subscribers, which provide that the subscriber shall be solely responsible for producing, electronically uploading and maintaining such subscriber’s website, and such subscriber shall ensure that all uploaded material shall be owned and/or properly licensed by the subscriber and shall not adversely affect any rights of any third party. Although we believe we have valid defenses to the charges, if we are unsuccessful in our defense, we could be subject to monetary fines or damages.

In February, 2006, a complaint was filed by Marksman Pvt. Ltd. against various telecom operators and internet service providers and Rediff.com, alleging infringement of Marksman’s copyright by way of the dissemination of information relating to scores, alerts, updates and other events, via Short Message Service (SMS) technology on wireless and mobile telephones, in respect of One Day International Cricket Matches (“ODIs”) during India’s tour of Pakistan scheduled in February, 2006. We have filed our response, and among the defenses we have raised are: (a) Rediff.com, along with other telecom operators and service providers, has not infringed Marksman copyrights; and (b) the information relating to scores, alerts, updates and other events were sourced from the public domain and as such no exclusivity can be claimed. The one-judge panel, while dismissing a request for an interim order, has directed the defendants to maintain the accounts of the SMSs received during the ODIs. Marksman would have to first amend the suit to seek damages before any claim could stand against Rediff.com. In 2006, Marksman sought to amend the suit to include damages. Although we believe we have valid defenses to the charges, if we are unsuccessful in our defense, we could be subject to monetary fines or damages.

Actions Relating to Patent Infringement

In March, 2009, a complaint was filed against Rediff.com and 12 other defendants by S. Ramkumar, alleging violation of his patent rights in respect of mobile phones with a plurality of SIM cards sold through the Rediff Shopping website. S. Ramkumar is seeking a permanent injunction restraining the defendants, including us, from infringing upon his patent with respect to mobile phones with a plurality of SIM cards allocated to different communication networks. S. Ramkumar is also claiming damages in the amount of Rs.1.0 million (approximately US$17,000). We have filed our response, based on the following defenses: (a) it is the vendors, and not Rediff.com, that sell shopping products on the Rediff website, and we have not infringed any of Ramkumar’s intellectual property rights; (b) the Rediff Shopping website only provides an online platform that enables customers and sellers to enter into sale/purchase transactions and we are not involved in the sale or purchase of the goods/products listed on our website; and (c) vendors are required to comply with the terms and conditions we impose on them in exchange for using Rediff Shopping, which include providing us with a description of their products, prices and product images, and which require that vendors do not infringe third party rights, including third-party intellectual property rights. Although we believe that we have valid defenses to the charges, if we are unsuccessful in our defense, we could be subject to monetary fines or damages. However, given the nature of the suit and pleadings, there should not be any substantial monetary claim against us.

We cannot predict the outcome of these lawsuits, nor can we predict the amount of time and expense that may be required to resolve these lawsuits. If these lawsuits become time-consuming and expensive, or if there are unfavorable outcomes against us in these cases, there could be a material adverse effect on our business, financial condition and results of operations. We may be subject to additional lawsuits filed in the future.

We currently hold insurance policies for the benefit of our directors and officers (the “D&O Policy”), which provide coverage against certain claims. However, the amount of coverage may not be sufficient for our needs, or the various exclusions in the D&O Policy could result in denial of coverage. In any such case, we would have to self-fund all or a substantial portion of our indemnification obligations.

Other proceedings

We are also subject to other legal proceedings and claims, which have arisen in the ordinary course of our business and which include some claims from the Indian tax authorities. These proceedings and claims, when ultimately concluded and determined, will likely not, in the opinion of management, have a material effect on our results of operations or financial position.

Subsidiaries

Rediff Holdings, Inc. (“Rediff Holdings”) is a wholly owned subsidiary of ours and is incorporated in the State of Delaware. Rediff Holdings holds all of the outstanding voting shares of Rediff.com, Inc. (formerly thinkindia.com) and all of the outstanding voting shares of India Abroad Publications Inc.

Rediff.com, Inc. runs our North America - based Internet website operations, is incorporated in Delaware. India Abroad Publications Inc., which publishes India Abroad, is a New York corporation,. Value Communication Corporation, an Illinois corporation incorporated in 1996, is another subsidiary of ours. In April 2004, we sold its business to Worldquest Networks, Inc. (“WQN”).

In November 2010, we acquired a 100% equity stake in Vubites India Private Limited. Vubites is an Indian-incorporated entity that offers affordable local TV advertising in India.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and operating results should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report particularly in the “Risk Factors” section of this annual report.

Overview

We are a leading online news media and online marketplace in India, focusing on providing world-class online business and consumer offerings both in India and to the global Indian community. Our websites in India and the U.S. consist of communication services, such as consumer and enterprise e-mail, web hosting and search, real-time news and information channels which consist of our own editorial content as well as fresh and recent news sourced from over 30,000 news sites from India and the world. Through Rediff.com, we provide new and innovative community features including a social networking platform, photo/video and music sharing capabilities, and a robust and expanding e-commerce marketplace.

Our web hosting and business email service is available to all India internet users under the Rediffmail and Rediffmail Pro brands, and provides an affordable and easy-to-use way to set up and own domain name e-mail services, and manage them through both the desktop and smart phone devices and platforms.

Our e-commerce marketplace provides consumers throughout India with national and localized products and services across a wide variety of vertical markets, including apparel and accessories, electronics, home décor and furnishings, mobile phones and accessories, automobiles, toys, games, books and a host of other sough after categories.

Through Vubites, we also provide local TV advertising tools, applications and services to small, medium and large corporate enterprises, which expands our reach throughout India and offers a new and innovative medium for businesses to reach target consumers.

Our new data analytics platform, under the Rediff Labs component of our website, complements our news media offerings and provides users, whether on their PC or mobile devices with new search and analytics tools that combine domain knowledge and big data simultaneously to analyze and predict various business issues and outcomes, whether it be for cricket, elections, advertising sales and trends, e-commerce and news analysis.

According to a report issued by the Internet and Mobile Association of India (IMAI), there are an estimated 243 million internet users in India as of June 2014, making India the world’s second largest internet base after China. However, it is estimated that Internet penetration in the country may not have crossed 16% of the population yet, and that a portion these internet users are not considered “active users”. It is estimated that India has 110 million mobile internet users of which, 25 million are in rural India. In this same IMAI report, it is estimated that 70% of rural India’s active internet population accesses the web via mobile phones, given connection difficulties on personal computers, making India a potential ground for growth over the coming years, especially as the country’s infrastructure is further developed.

To that end, there have been several initiatives by industry and government to invest in India’s broadband infrastructure over the past few years. In fact, in April, the newly elected BJP party released its 2014 manifesto promising a Digital India, with broadband deployed in every village. According to recent media reports, it is believed that the Indian government plans to launch a broadband policy that would establish broadband connectivity as a basic fundamental right like education and health, and a big push to make affordable broadband access in rural and remote areas, with the end goal being, an “always connected society”. The investments in 3G networks and now in 4G-LTE networks has improved Internet availability and connection speeds, though India still ranks low in terms of connectivity. Cable operators and internet service providers continue to invest in networks to improve their reach in both urban and rural areas and to ensure connectivity on mobile devices continues to improve, given the rapid growth of mobile throughout India.

It is estimated that India’s mobile phone customer base, as of March 2014, rose to 904.5 million according to data released by the sector regulator. By comparison, China, the world’s largest mobile phone market, reported 1.25 billion. Within India, active mobile subscriptions in March were 790.87 million, or about 87.4 percent of total connections and total broadband connections were 60.9 million, of which 46 million were wireless broadband users and 14.9 million, wire line broadband users. With the continued rise in mobile devices and smart phone adoption, it is imperative that broadband infrastructure continues to improve as connectivity can fundamentally change the way people live and interact, both on business and personal levels. With 14.6 million active users and an 18% market share in the Indian Internet market, we believe we are poised to take advantage of this anticipated growth, especially as we continue to build out our e-commerce offering and related news media, social media and interactive services.

In addition to our online services, we publish two weekly newspapers, “India Abroad” and “India in New York”, both of which are targeted at the Indian-American community in the United States and Canada and which complements our online news media offerings.

By providing a platform for users that combines our technology, content, and communities and allow our users to personalize and integrate products and services across devices, we aim to become more relevant to our existing users and to increase the number of users of our products and services. We believe that a deeper engagement with new and existing users, coupled with expected growth of PC and mobile based Internet in India as an advertising medium, may enable us to increase our revenues in the future. Over the past few years, we have focused on improving the user experience and enhancing our technology platform in anticipation of further improvements in India’s broadband infrastructure and the anticipated growth of Internet in India, both on PCs and mobile devices. Additionally, we have introduced and expect to continue to introduce new products and services, such as data analytics, Real-time News and local TV advertising, that we believe, will appeal to our target demographic. This strategy should enable us to improve customer retention and help us reach a larger user base throughout India.

We have incurred significant net losses and negative cash flows since our inception in January 1996. We incurred a net loss of US$7.5 million for the fiscal year ended March 31, 2014, taking into account a one-time gain on a sale of investment of US$2.74 million and an impairment charge of US$1.6 million, and as of the same date we had an accumulated deficit of US$95.2 million, compare to a net loss of US$11.4 million and an accumulated deficit of US$87.7 million for the fiscal year ended March 31, 2013. We are focused on generating additional revenues, while controlling our expenses, to achieve profitability and to reduce our accumulated deficit.

Our reportable business segments are:

Critical accounting policies and the use of estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent liabilities. On an on-going basis, we evaluate our estimates, including but not limited to allowances for doubtful trade accounts receivables, impairment of goodwill, property, plant and equipment, intangible and investments, useful lives of property, plant and equipment and intangible assets, valuation of deferred tax assets, stock based compensation and employee benefits. We base our estimates on historical experience and on assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The following are the critical accounting policies used in the preparation of our consolidated financial statements. Refer to Note 2 to the Consolidated Financial Statements for a more complete discussion of all of the Company’s significant accounting policies.

Revenue Recognition

India Online business

India Online business includes revenues from advertising, sponsorship and fee based services. Advertisement and sponsorship income is derived from customers who advertise on our website or from targeted advertisement - direct links from our website, targeted emails to Rediffmail subscribers and ad slots to regional advertisers. Fee based services include e-commerce, subscription services and mobile value-added services. E-commerce revenues primarily consist of commission earned on sale of items to customers who shop online while subscription services consist of subscriptions received for using e-mail and other subscriber services. Mobile value-added services include revenues derived from providing value added short messaging services and other related products to mobile phone users.

Revenue from display of advertisement and sponsorship is recognized ratably based on delivery over the contractual period of the advertisement, commencing when the advertisement is placed on the website or broadcast. Revenues are also derived from sponsor buttons placed in specific areas of the Company’s website, which generally provide users with direct links to sponsor websites. These revenues are recognized ratably over the period in which the advertisement is displayed, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Our obligations may include guarantees of a minimum number of impressions, or times, that an advertisement appears in pages viewed by users of the Company’s website. To the extent that minimum guaranteed impressions are not met, the Company defers recognition of the corresponding revenues until the guaranteed impression levels are achieved. We also earn revenues from the sending of e-mail messages to its users on behalf of advertisers and such revenues are recognized ratably over the contracted period.

E-commerce revenue primarily consists of commission from the sale of books, music, apparel, confectionery, gifts and other items to retail customers who shop at the Company’s online store. Customers directly place orders with vendors through the Company’s website. When an order is placed, we inform the vendor through an intranet and also confirms whether payment has already been collected by the Company through credit card/debit card or cheques, or whether the payment is to be made by the customer on cash-on-delivery (“COD”) basis. The vendor then dispatches the products to the customers. The vendor sends a periodic summary of the transactions executed for which we have collected payments on its behalf. We make payment to the vendor after deduction of its share of margin, commission and costs. We recognize as revenues the commission earned on these transactions and shipping costs recovered from customers. We provide incentives to our customers in the form of coupons and promo codes. These incentives are treated as reductions in revenue and in cases where such incentives exceed the commission amount, the excess is recognized as cost of revenue.

Subscription service revenues primarily include income from our various paid e-mail service products and our domain name registration and web hosting services. Revenues for subscription based products are deferred and recognized pro-rata as fulfilled over the terms of such subscription.

We also derive revenues from providing mobile value-added services such as ring tones, picture messages, logos, wallpapers and other related products to mobile phone users. Our contracts are with third-party mobile phone operators from whom we receive a share of revenues for such services. Mobile value added services revenues are recognized when the service is first performed.

US Publishing business

Our US Publishing business primarily includes revenues from subscription and advertising services from the publication of India Abroad, India in New York and our Rediff India Abroad website.

We recognize advertising revenues at the time of publication of the related advertisement. Subscription income is deferred and recognized pro rata over the term of the subscription. Revenues from banners and sponsorships on our Rediff India Abroad website are recognized over the contractual period of the advertisement, commencing from the date the advertisement is placed on the website, provided that no significant obligations remain and collection of the resulting receivable is probable. Obligations may include guarantee of a minimum number of impressions, or times that an advertisement appears in pages viewed by users of our website. To the extent that minimum guaranteed impressions are not met, we defer recognition of the corresponding revenues until the guaranteed impression levels are achieved.

Allowances for doubtful accounts receivable and other recoverables

We maintain allowances for doubtful accounts receivable and other recoverables for estimated losses resulting from the inability of our customers to make contractually agreed payments. We establish an allowance for doubtful accounts on trade accounts receivable after considering the financial condition of the customer, ageing of the accounts receivable, historical experience and the current economic environment. Trade account receivable balances are written off against allowances only after all means of collections have been exhausted and potential of recovery is considered remote.

Depreciation and amortization

We depreciate/amortize our assets on a straight-line basis over the useful life of the assets, which range from one to ten years.

Goodwill

Goodwill is tested for potential impairment on an annual basis, which is performed on January 1 or in interim periods if events and circumstances indicate a potential impairment. As reporting units are determined after an acquisition or evolve with changes in business strategy, goodwill is assigned and it may no longer retain its association with a particular transaction. All revenue streams and related activities of a reporting unit, whether acquired or organic, are available to support the carrying amount of goodwill. The reporting units for impairment assessment have been identified as the US Publishing business. Under the applicable accounting standard, goodwill impairment analysis is a two-step test. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, the second step is performed. The second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated possible impairment. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. The adjustments to measure the assets, liabilities and intangibles at fair value are only for the purpose of measuring the implied fair value of goodwill and these adjustments are not reflected in the consolidated balance sheet. If the implied fair value of goodwill exceeds the goodwill assigned to the reporting unit, there is no impairment. If the goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss recognized cannot exceed the amount of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversals of goodwill impairment losses are not permitted.

Estimating the fair value of reporting units is a subjective process that requires significant estimates and assumptions, particularly related to cash flows and the appropriate discount rates. The fair values of the reporting units were determined using a valuation technique consistent with the income approach. For the purposes of the income approach, internal forecasts were used to estimate the future cash flows (including a terminal value approach to estimate cash flows beyond the final year of the forecast) after considering current economic conditions and trends, estimated future operating results and growth rates. Due to the inherent uncertainty involved in making those estimates, actual results could differ from the estimates. The Company evaluates the merits of each significant assumption, both individually and in aggregate, used to determine the fair value of the reporting unit, as well as the fair values of the corresponding assets and liabilities within the reporting unit, for reasonableness. Cash flows are discounted based on a discount rate which the Company believes adequately reflects the inherent risk in the businesses of the reporting unit, uncertainty in the economic environment and risks associated with the internally developed forecasts.

During the fiscal year 2013, we tested the goodwill of the US Publishing business, which arose from the acquisition of the print newspaper India Abroad in 2001, for impairment. As a result of the goodwill impairment test, we concluded that goodwill was impaired and accordingly we recorded a goodwill impairment charge of US$2.0 million. The impairment was on account of the weakness in the publishing industry which resulted in reduction of the US publishing business projected operating results and estimated future cash flows.

Impairment or disposal of long-lived assets (excluding goodwill)

We evaluate long-lived assets, such as property, plant and equipment and purchased or internally developed intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. When such events occur, we assess the recoverability of the assets group based on the undiscounted future cash flow the assets group is expected to generate and recognize an impairment loss when estimated undiscounted future cash flow expected to result from the use of the assets group plus net proceeds expected from disposition of the assets group, if any, is less than the carrying value of the assets group. If we identify an impairment, we reduce the carrying amount of the assets group to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values. We use estimates and judgments in our impairment tests and if different estimates or judgments had been utilized, the timing or the amount of any impairment charges could be different.

Intangible Assets

Intangible assets consist of customer contracts and intellectual property carried at cost and amortized over their estimated useful lives, generally on a straight-line basis over three and seven years, respectively, that best reflects the economic benefits of the intangible assets.

Impairment of Intangible Assets

Intangible assets, such as purchased technology, are generally recorded in connection with a business acquisition. The value assigned to intangible assets is usually based on estimates and judgments regarding expectations for the success and life cycle of the acquired technology. We monitor acquired intangible assets for impairment on a periodic basis by reviewing indicators of impairment. If an indicator exists we compare the fair value to the unamortized cost of the intangible asset. The recoverability of the intangible assets is primarily dependent upon our ability to commercialize the acquired technology, secure new customers and retain existing customers, increase and maintain awareness of the acquired technology and the related service. The fair value of the acquired intangible assets is based on the estimated undiscounted future cash flows derived from such intangible asset. Our assumptions about future revenues and expenses require significant judgment associated with forecast of the performance of the acquired technology and the related service, ability to secure customers and maintain our market position. Actual revenues and costs could vary significantly from these forecasted amounts.

Current Trends and Business Outlook

Our overall revenues increased by 3% to $16.12 million for fiscal 2014, as compared to $15.66 million for fiscal 2013. Our revenues from India Online were $13.37 million, an increase of 7% over the corresponding previous fiscal year. Revenues from our US Publishing business were $2.75 million, a decrease of 12% compared to the last fiscal year.

During the fiscal year ended March 31, 2014, our India Online business segment revenue grew by 7% from the previous fiscal year ended March 31, 2013. This was in large part, due to excellent growth that we achieved in our Online Marketplace, a trend we believe should continue over the coming year given the past steps we’ve taken to improve and expand our offering, and, the investments we are making to support this business segment. We have invested resources in our technology platform, customer service capabilities and similarly, have expanded the number of goods and services offered on our website, along with the number of merchant partners we do business with. We believe our offering provides a unique shopping experience along with a localized approach that brings consumers and businesses together.

Our India online revenues, despite the growth, have been affected by the fluctuation in the value of the rupee versus the US dollar and general weaknesses in the Indian economies. The 7% increase in India online revenues from fiscal 2013 to fiscal 2014 is after adjusting to the approximately 12% loss of value of the Indian rupee against the US dollar over the same period.

During fiscal 2014, our India Online fee-based services business increased by approximately 30% from fiscal 2013. The total number of merchants on our online marketplace increased to 1,400 as at March 31, 2014 from 690 as at June 30, 2013, while our SKU range also increased to 450,000 from 281,384 over the same time period. We have successfully grown our marketplace business while maintaining a positive product margin of 14%, something we believe is unique in our sector. We are pursuing a marketplace model with no inventory holding of our own and believe we rank within the top 7 players in the industry in India in terms of daily shipments.

In addition to our Online Shopping Marketplace, we believe our Enterprise Class Email Businesses will be another near-term growth driver for our company, with the bulk of our growth coming from Online Shopping Marketplace. Our award-winning Enterprise email business continues to grow quarter over quarter, given the ease of use and enhanced functionality, along with the fact that it can be used by both small and medium sized corporations, as well as by large corporations who may have engaged anther email service provider but wants a less costly solution for their mobile workforce. Additionally, we operate Vubites, our local TV advertising services, which we believe, presents one of the biggest long-term growth drivers for our Company. Vubites provides small and medium sized businesses with a full-service TV advertising experience, from content and video creation, to full-scale commercials, to TV buying services and more. This complete solution helps merchants advertise in local markets and reach their target demographic. Similarly, for larger businesses who may not want to pay national advertising prices, it is a valuable channel to reach a more localized consumer on a highly targeted basis. We are confident that in longer-term, we will see meaningful growth from our Vubites platform to turbo-charge TV advertising using internet technology, which will have a carry- over affect on other aspects of our business.

We continue to believe Rediff will be one of the primary beneficiaries of the anticipated growth in India broadband and mobile expansion over the coming years. We now believe that with the National elections behind us, investments by the government and by the industry will intensify. There is currently a $10 billion fiber optic investment planned by the government over the next 3 years to layout the National Optical Fiber Network, according to Bharat Broadband Network Ltd. of the Govt. of India. ( www.bbnl.nic.in ) which should increase India’s internet penetration and reach substantially. We are encouraged by recent reports [Source : Morgan Stanley based on Prime Minister Narendra Modi comment on May 20, 2014] that show India’s GDP is estimated to expand at a 4-year high of 6.5% through March of 2016 as economists expect favorable business policies from the newly elected government. We’ve been operating in a very challenging environment for the past two years, both with sub- 5% GDP, so recent reports are encouraging. We have been managing our capital resources tightly over the past few years, given the economic and political challenges while continuing to invest in our infrastructure and service offerings. With increased investments by government now underway and expected to increase, we intend to invest in more consumer-facing initiatives in anticipation of a coming growth cycle.

We believe that the growth of our revenues and profits from our India Online business is dependent on the growth of the Indian Internet market and mobile phone user base, the evolution of adequate online payment mechanisms, a consequent increase in advertising and fee-based revenues and our ability to capture a sizeable share of any increases in revenues from such developments. We continue to make strategic investments to improve our technology platform and website functionality and launch new Internet based services, and we remain focused on growing our subscriber base within India and in Indian communities worldwide.

In order to grow our online user base and attract new advertisers, we expect to continue to invest in new products and product enhancements, expand the content and services on our network and procure more bandwidth and network equipment.

We’re focused on maintaining our cash position to ensure that we have the resources needed to drive growth throughout our businesses as the market gains traction. We’re also focused on top-line growth and expanding our margins. We believe that over the coming years, Rediff is well positioned for growth, driven by e-commerce, news and ideas and TV advertising. We further believe that our investments in technology to improve the customer experience and upcoming investments to expand brand awareness and our reach, will positively impact our operational and financial performance.

Actual results may differ materially from those suggested by our forward-looking statements due to certain risks or uncertainties associated with our expectations with respect to, but not limited to, the impact on our business of a continued economic slowdown or a downturn in the sectors in which our clients operate, our ability to successfully implement our strategy, acceptance of new products and services, the development of broadband Internet and 3G and 4G networks in India, our ability to successfully integrate the businesses we have acquired, demand for our online and offline service offerings, changes in the Internet marketplace, technological changes, investment income, cash flow and our exposure to market risks. By their nature, certain of our disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains, losses or impacts could materially differ from those that have been estimated. For further discussion of forward-looking statements, see the discussion under the “Forward-Looking Statements” section of this annual report.

The comparative analysis presented below relates to our operations.

Fiscal Year Ended March 31, 2014 compared to Fiscal Year Ended March 31, 2013

Revenues

Total revenues for the fiscal year ended March 31, 2014 increased by 3% to US$16.1 million from US$15.7 million for the fiscal year ended March 31, 2013.

India Online business

We recognized US$13.4 million in revenues from our India Online business for the fiscal year ended March 31, 2014, as compared to US$12.5 million for the fiscal year ended March 31, 2013,an increase of US$0.9 million, or 7%, over the previous fiscal year. This increase resulted primarily from the growth in our online marketplace business.

In addition, our reported revenues in fiscal year 2014 were adversely affected by currency translation of Indian Rupee to US dollar. During the fiscal year ended March 31, 2014, the Indian rupee depreciated against the US dollar by approximately 12%. Had the exchange rate between Indian rupees and US dollars remained constant, our India Online revenues in constant currency terms for fiscal 2014 would have been approximately US$14.9 million, rather than our reported revenues of US$13.4 million, or an increase of 19% rather than our reported increase of 7%.

U.S. Publishing business

We recognized US$2.7 million in revenues for the U.S. Publishing business for the fiscal year ended March 31, 2014, as compared to US$3.2 million for the fiscal year ended March 31, 2013, representing a decrease of approximately US$0.5 million, or 12%, over the previous fiscal year. The decrease in revenues was primarily due to a decrease in print revenues from our weekly newspapers “India Abroad” and “India in New York”.

Cost of revenues

In the fiscal year ended March 31, 2014 and 2013, cost of revenues were US$10.4 million, or 65% of the total revenues for the fiscal year ended March 31, 2014 as compared to 64% of total revenues for the fiscal year ended March 31, 2013.

India Online business

Cost of revenues for the India online business includes Internet communication, data storage and software usage costs, the cost of content for the Rediff websites, the cost of editorial functions (including payroll costs and travel costs of staff in the editorial department), stock-based compensation costs, the direct costs of providing fee-based services such as courier charges, content cost for mobile value-added services, cost of domain registrations and the cost relates to broadcaster..

In the fiscal year ended March 31, 2014 cost of revenues for the India Online business was US $8.3 million (62% of revenue) as compared to US $7.5 million (60% of revenue) for the fiscal year ended March 31, 2013. This represents increase of US$0.8 million, or 12% over the previous fiscal year. This increase was primarily related to increase in direct costs of providing fee- based services and higher costs of buying spots from broadcaster.

We anticipate that our cost of revenues in absolute dollar terms for our India Online business will increase during the fiscal year ended March 31, 2015, as compared to the fiscal year ended March 31, 2014, as we expect to incur additional costs to continue to grow our business.

U.S. Publishing business

Cost of revenues for the U.S. Publishing business includes printing and circulation costs (including payroll costs) for the “India Abroad” and “India in New York” newspapers.

In the fiscal year ended March 31, 2014 cost of revenues for the U.S. Publishing business was US $2.1 million (76% of revenue) as compared to US $2.5 million (78% of revenue) for the fiscal year ended March 31, 2013. This represents a decrease of US$0.4 million, or 16% over the previous fiscal year.

Segment results

Analysis of the results presented below is based on the segment results as assessed by the Company’s chief operating decision maker and has been determined as revenues less cost of revenues before operating expenses.

India Online business

Segment profit of the India Online business was US$5.1 million and US$5.0 million for the fiscal year ended March 31, 2014 and 2013. There was increase in the revenues on account of excellent growth in the fee based revenues but this growth was offset by increased cost of revenues.

U.S. Publishing business

Segment profit of the U.S. publishing business was US$0.6 million and US$0.7 million for the fiscal year ended March 31, 2014 and 2013.

Sales and marketing expenses

Sales and marketing expenses primarily include employee compensation for sales and marketing personnel, stock-based compensation cost, advertising and promotion expenses, sales support cost, distribution cost and market research costs. For the fiscal year ended March 31, 2014, sales and marketing expenses were US$3.9 million, compared to US$3.3 million for the fiscal year ended March 31, 2013, representing an increase of US $0.6 million, or 19%, over the previous fiscal year. This increase was mainly on account of marketing spends and higher sales support and distribution costs for online marketplace business.

We expect that our sales and marketing expenses in absolute dollar terms will increase for the fiscal year ended March 31, 2015, as compared to the fiscal year ended March 31, 2014, as we launch more products and services, expand the range of offerings on our websites and invest further in brand building, advertising and personnel. All of these investments are being made to position us for expected growth, in terms of revenues and subscribers in the coming years given the increased investments by the Government of India and many global corporations in India’s telecommunication infrastructure.

Product development expenses

Product development expenses primarily include software development expenses and compensation for product development personnel including stock-based compensation costs. Third-party technology and development expense, and other related operating costs are also included in product development. For the fiscal year ended March 31, 2014, product development expenses were US$2.3 million, compared to US$2.9 million for the fiscal year ended March 31, 2013, representing a decrease of US $0.6 million, or 22%, over the previous fiscal year. This decreased was mainly on account of optimizing the technical support cost.

We expect to continue to invest in product development to maintain our position as a leading Internet destination for the global Indian community. Therefore, we expect our product development expenses in absolute dollar terms to increase in the future.

Depreciation and amortization expenses

For the fiscal year ended March 31, 2014, depreciation and amortization expense was US$3.1 million compared to US$3.7 million for the fiscal year ended March 31, 2013, representing a decrease of US$0.6 million, or 16%. This decrease was due to lower capital expenditures in previous reporting years which resulted in a lower base of depreciable assets.

General and administrative expenses

General and administrative costs primarily consist of compensation for administrative personnel, fees for legal and professional services, allowances for doubtful accounts and promissory notes, insurance premium, stock-based compensation cost and general administrative costs. For the fiscal year ended March 31, 2014 and 2013, general and administrative expenses were US$7.2 and US$7.6 million, respectively. There was decrease in expenses by US$0.4 million or 5% as compared to previous fiscal year 2013. During the fiscal year 2014, we saved costs in various expenses like insurance, repairs and maintenance and admin /office related expenses.

Long-lived assets impairment

In fiscal year 2014, we recognized impairment loss of US$1,550,991comprising mainly of intellectual property and computer equipment relating to the Company’s subsidiary Vubites, which enables businesses to advertise locally (targeted advertising in local and specific cities in India) on national television channels. Vubites offers web based tools for small businesses to create low cost advertisement for television broadcast. This business is dependent on effective splicing and sale to local businesses in different cities of broadcasting spots purchased from national television channels. The impairment resulted from similar targeted advertising services now being offered directly by the television channels and on account of aggressive sales and marketing strategy launched by competitors which have provided them with deeper market access. Additionally, in fiscal 2014, the Company abandoned an application related project included in ‘Capital work-in-progress’ and as a result impaired an amount of US$39,380.

Other income (expenses), net

Other income (expenses), net, primarily comprised of interest income, interest income on income tax refunds, gain on sale of investment /equity method investee, promissory note impairment and miscellaneous income. During the fiscal year ended March 31, 2014 and 2013, net other income were US$4.7 million and US$2.3 million, respectively.

Interest income

Interest income for the fiscal year ended March 31, 2014 was US$1.3 million, compared to US$2.0 million for the fiscal year ended March 31, 2013, representing a decrease of US$0.7 million, or 35%. The decrease in interest income was primarily due to utilization of bank deposits held under cash and cash equivalents.

Interest income on Income tax refunds

During the fiscal year ended March 31, 2014 and 2013, we received income tax refunds for the earlier income tax assessment years along with the interest of US$0.6 million and US$0.04 million, respectively.

Gain on sale of investment

During the fiscal year ended March 31 2014, the Company sold its investment in Runa Inc. for a total consideration of US$4,145,927 and recognized a gain of US$2,740,940. An amount of US$613,992 of the total consideration has been held in escrow for certain representations and warranties contained in the sale agreement. These representations and warranties have been assessed as accurate and the fair value of any obligation resulting from these representations and warranties is insignificant. Of the total amount held in escrow US$152,457 and US$461,545 are recoverable by October, 2014 and April, 2015 respectively.

Net income (loss)

As a result of the foregoing, our net loss for the fiscal year ended March 31, 2014 was US$7.5 million, taking into account a one-time gain on a sale of investment of US$2.74 million and long lived assets impairment loss of US$ 1.59 million, as compared to a net loss of US$11.4 million for the fiscal year ended March 31, 2013, a decrease of 35%. The prime reason for this decline was increase in our overall revenues, saving in our overall costs, interest income on income tax refunds and the one-time gain on sale of investment.

Fiscal Year Ended March 31, 2013 compared to Fiscal Year Ended March 31, 2012

Revenues

Total revenues for the fiscal year ended March 31, 2013 decreased by 21% to US$15.7 million from US$19.9 million for the fiscal year ended March 31, 2012.

India O nline business

We recognized US$12.5 million in revenues from our India Online business for the fiscal year ended March 31, 2013, as compared to US$16.2 million for the fiscal year ended March 31, 2012, representing a decrease of US$3.7 million, or 23%, over the previous fiscal year. This decrease resulted from a decline in India Online advertising revenue mostly due to weakness in the BFSI Sector.

In addition, our reported revenues in fiscal year 2013 were adversely affected by currency translation of Indian Rupee to US dollar. During the fiscal year ended March 31, 2013, the Indian rupee depreciated against the US dollar by approximately 13%. Had the exchange rate between Indian rupees and US dollars remained constant, our India Online revenues in constant currency terms for fiscal 2013 would have been US$14.2 million, rather than our reported revenues of US$12.5 million, or a decrease of 12% rather than our reported decline of 23%.

U.S. Publishing business

We recognized US$3.2 million in revenues for the U.S. Publishing business for the fiscal year ended March 31, 2013, as compared to US$3.7 million for the fiscal year ended March 31, 2012, representing a decrease of US$0.5 million, or 14%, over the previous fiscal year. The decrease in revenues was primarily due to a decrease in print revenues from our weekly newspapers “India Abroad” and “India in New York”.

Cost of revenues

In the fiscal year ended March 31, 2013, cost of revenues was US$10.0 million, or 64% of total revenues, compared to US $10.7 million, or 54% of total revenues in the fiscal year 2012.

India Online business

Cost of revenues for the India online business includes Internet communication, data storage and software usage costs, the cost of content for the Rediff websites, the cost of editorial functions (including payroll costs and travel costs of staff in the editorial department), stock-based compensation costs, the direct costs of providing fee-based services such as courier charges, content cost for mobile value-added services, cost of domain registrations and the costs relates to broadcaster.

In the fiscal year ended March 31, 2013 cost of revenues for the India Online business was US $7.5 million (60% of revenue) as compared to US $8.2 million (51% of revenue) for the fiscal year ended March 31, 2012. This represents a decrease of US$0.7 million, or 9% over the fiscal year ended March 31, 2012, although cost of revenues increased as a percentage of revenues due to the decline in revenues.

U.S. Publishing business

Cost of revenues for the U.S. Publishing business includes printing and circulation costs (including payroll costs) for the “India Abroad” and “India in New York” newspapers.

In the fiscal years ended March 31, 2013 and 2012 cost of revenues for the U.S. Publishing business remained steady at US$2.5 million (78% of revenue for fiscal year ended March 31, 2013 as compared to 68% of revenue for the fiscal year ended March 31, 2012), although cost of revenues increased as a percentage of revenues due to the decline in revenues. As majority of our costs for the US Publishing business are on account of salary, printing and rent which are fixed in nature in the short term, decline in revenues has not resulted in an immediate reduction in the costs and therefore cost of revenues as percentage of revenues has increased from 68% to 78% of revenue.

Segment results

Analysis of the results presented below is based on the segment results as assessed by the Company’s chief operating decision maker and has been determined as revenues less cost of revenues before operating expenses.

India Online business

As a result of the decrease in the revenues described in the preceding paragraphs, segment profit of the India Online business decreased by 38% to US$5.0 million for the fiscal year ended March 31, 2013, as compared to US$8.0 million for the fiscal year ended March 31, 2012. The decline was due to decline in the online advertising revenues.

U.S. Publishing business

As a result of the decrease in the revenues described in the preceding paragraph, segment profit of the U.S. publishing business decreased by 42% to US$0.7 million for the fiscal year ended March 31, 2013, as compared to US$1.2 million for the fiscal year ended March 31, 2012, mainly on account of the reduction in revenues.

Sales and marketing expenses

Sales and marketing expenses primarily include employee compensation for sales and marketing personnel, stock-based compensation cost, advertising and promotion expenses, market research costs and sales support and distribution costs. For the fiscal year ended March 31, 2013, sales and marketing expenses were US$3.3 million, compared to US$5.3 million for the fiscal year ended March 31, 2012, representing a decrease of US $2.0 million, or 39%, over the fiscal year 2012. This decrease was mainly attributable to strategically lower marketing spend.

Product development expenses

Product development expenses primarily include software development expenses and compensation for product development personnel including stock-based compensation costs. Third-party technology and development expense, and other related operating costs are also included in product development. For the fiscal year ended March 31, 2013, product development expenses were US$2.9 million, compared to US$3.1 million for the fiscal year ended March 31, 2012, representing a decrease of US $0.2 million, or 7%, over the fiscal year 2012. This decreased was mainly on account of optimizing the technical support cost.

Depreciation and amortization expenses

For the fiscal year ended March 31, 2013, depreciation and amortization expense was US$3.7 million compared to US$3.5 million for the fiscal year ended March 31, 2012, representing an increase of US$0.2 million, or 5%. This increase was due to higher capital expenditure in previous two years and resulted in a higher base of depreciable assets.

General and administrative expenses

General and administrative costs primarily consist of compensation for administrative personnel, fees for legal and professional services, allowances for doubtful accounts and promissory notes, insurance premium, stock-based compensation cost and sundry administrative costs. For the fiscal year ended March 31, 2013, general and administrative expenses were US$7.6 million, compared to US$7.9 million for the fiscal year ended March 31, 2012, decrease of US$0.3 million or 4%. This decrease was represented by the saving in office establishment expenses.

Goodwill impairment

During the fiscal year ended March 31, 2013, the Company recorded a goodwill impairment charge of US$2.0 million which arose at the time of acquisition of India Abroad Publication Inc. in the fiscal 2001. The impairment was on account of the weakness in the publishing industry which resulted in reduction of the US publishing business’s projected operating results and estimated future cash flows. The Company used an income-based valuation approach to determine the fair value of the reporting unit by estimating the present value of future cash flows after considering current economic conditions and trends, estimated future operating results and growth rates.

Foreign exchange gain or (loss)

In the fiscal year ended March 31, 2013 and 2012, we recorded a US$0.1 million foreign exchange loss, arising from the conversion of U.S. dollar amounts held by us into our functional currency for financial reporting purposes (i.e., the Indian Rupee).

Other income (expenses), net

Other income (expenses), net, primarily comprised of interest income, gain on sale of equity method investee, promissory note impairment and miscellaneous income. During the fiscal year ended March 31, 2013 and 2012, net other income were US$2.3 million and US$3.4 million, respectively.

Interest income

Interest income for the fiscal year ended March 31, 2013 was US$2.0 million, compared to US$2.6 million for the fiscal year ended March 31, 2012, representing a decrease of US$0.6 million, or 24%. The decrease in interest income was primarily due to utilization of bank deposits held under cash and cash equivalents.

Promissory note impairment

During the year ended March 31, 2013, the Company recorded an other than temporary impairment of US$1.1 million because the Company does not expect to recover the carrying amount of promissory note.

Gain on sale of equity method investee

During the fiscal year ended March 31, 2013, the Company sold its equity investment in Imere Technology Private Limited for a consideration of US$1.5 million and recorded a gain of US$1.3 million.

Equity in net earnings of affiliate

During the fiscal year ended March 31, 2013, we recorded a earnings of approximately US$0.1 million as our share of the earning of our investee companies as compared to a loss of US$0.2 million in the fiscal year ended March 31, 2012.

Net income (loss)

As a result of the foregoing, our net loss for the fiscal year ended March 31, 2013 was US$11.4 million, as compared to a net loss of US$7.7 million for the fiscal year ended March 31, 2012, an increase in net loss of 49%. The prime reason for this decline was decline in our overall revenues and charge of goodwill and promissory note impairment.

Fiscal Year Ended March 31, 2014

Net cash used in operations was US$2.8 million, after adjusting our net loss of US$7.5 million to account for non-cash items and changes in working capital. Non-cash items, comprising the sale of investment, depreciation, amortization, allowances for doubtful debts, impairment and stock-based compensation costs, totaled US$2.7 million. Our working capital decreased by US$2.0 million. The decrease was a result of better cash management process in receivables and payables and recoverable taxes.

Net cash generated by investing activities was US$2.1 million, consisting of purchases of servers and other capital equipment aggregating US$1.4 million in connection with the expansion of our network and data storage facility, fully offset by the sale of investment that generated cash of US$3.5 million.

As of March 31, 2014, we had cash and cash equivalents of US$17.2 million.

Fiscal Year Ended March 31, 2013

Net cash used in operations was US$2.5 million, after adjusting our net loss of US$11.4 million to account for non-cash items and changes in working capital. Non-cash items, comprising the sale of equity investments, depreciation, amortization, allowances for doubtful debts, goodwill and promissory note impairment and stock-based compensation costs, totaled US$6.1 million. Our working capital decreased by US$2.8 million. The decrease was a result of better cash management process in receivables and payables.

Net cash used in investing activities was US$0.5 million, consisting of purchases of servers and other capital equipment aggregating US$1.9 million in connection with the expansion of our network and data storage facility, partially offset by the sale of an equity investment that generated cash of US$1.4 million.

As of March 31, 2013, we had cash and cash equivalents of US$20.0 million.

Fiscal Year Ended March 31, 2012

Net cash used in operations was US$5.2 million, after adjusting our net loss of US$7.7 million to account for non-cash items and changes in working capital. Non-cash items, comprising the sale of equity investments, depreciation, amortization, allowances for doubtful debts and stock-based compensation costs, totaled US$3.9 million. Our working capital increased by US$1.4 million.

Net cash used in investing activities was US$4.4 million, consisting of purchases of servers and other capital equipment aggregating to US$5.4 million in connection with the expansion of our network and data storage facility, partially offset by the sale of an equity investment that generated cash of US$0.9 million.

Net cash provided by financing activities was US$1.4 million, which represented the cash proceeds from the issue of shares during the year due to the exercise of stock options by our employees.

As of March 31, 2012, we had cash and cash equivalents of US$24.5 million.

Capital Expenditures

Our principal capital expenditures are for purchase of computer equipment, such as servers for our websites. In the fiscal years ended 2014, 2013 and 2012, we had capital expenditures of US$1.5 million, US$2.1 million and US$5.4 million, respectively.

Internal and external costs incurred to develop internal use software during an application development stage is capitalized when the Company’s managing director has authorized and committed to funding the development, and it is probable that the software development will be complete and the software will perform the function intended. Upgrades and enhancements are capitalized only when these relate to additional features or result in additional functionality that the existing software is incapable of performing. All costs incurred during the preliminary project, post-implementation and operation stages are expensed as incurred.

Dividends

We have not declared or paid any cash dividends on our equity shares since our inception and we do not expect to pay any cash dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business. For additional information, please see the sections of this annual report entitled “Risk Factors — Risks Related to our Business” and “Taxation”.

We believe our cash balances and liquid assets and cash generated from future operations will be adequate to satisfy anticipated working capital requirements, capital expenditures and investment commitments for the next twelve months. As business and market conditions permit, we may from time to time, invest in or acquire complementary businesses, products or technologies. These activities may require us to seek additional equity or debt financing to fund such activities, which could result in ownership dilution to existing shareholders, including holders of our ADSs. We believe that our working capital is sufficient for our present requirements.

Rediff’s net operating loss carry forwards aggregating approximately US$11,011,441 as of March 31, 2014 will expire between April 2014 and March 2020.

As of March 31, 2014, ValuCom has net operating loss carry forwards available to offset future federal taxable income of US$3,033,000, which expire in years 2021 through 2031.

As of March 31, 2014, Rediff Holdings, Inc. has net operating loss carry forwards of approximately US$4,014,000 for federal income tax purposes, which expire in years 2020 through 2032.

Rediff’s unabsorbed depreciation of US$15,915,398 can be indefinitely carried forward.

Market Risks

Foreign Currency Exchange Rate Risk

The functional currency for our Indian operations is the Indian Rupee. We are exposed to foreign currency exchange rate fluctuations, principally the fluctuations of the U.S. dollar to Indian Rupee exchange rate. We face foreign currency exchange risk with respect to funds held in foreign currencies and in particular will have foreign exchange losses with respect to these funds, if there is an appreciation in the value of the Indian Rupee compared to such foreign currency. We also face foreign currency exchange risk from accounts payable to overseas vendors, which we partially mitigate with receivables in foreign currency from overseas customers and balances in foreign currency with overseas banks.

The following table sets forth information about our net foreign currency exchange (U.S. dollars) exposure as of March 31, 2014:

We are not currently trying to reduce our exposure to foreign currency exchange rate fluctuations by using hedging transactions. However, we may choose to do so in the future. We may not be able to do this successfully. Accordingly, we may experience economic losses and negative impacts on earnings and equity as a result of foreign currency exchange rate fluctuations. If the Indian Rupee appreciates against the U.S. dollar by one Rupee, the net foreign currency exchange loss as of March 31, 2015 would be approximately US$11,000.

Interest Rate Risk

We hold interest-bearing accounts in India and fluctuations in interest rates affected our interest earnings for the fiscal year ended March 31, 2014. These interest rates are linked to the interest rates prevailing in India. We expect that our interest earnings will continue to be affected in the future by fluctuations in interest rates. A hypothetical 1% increase or decrease in the prevailing interest rates applicable to cash deposits during such period would have affected our interest income by approximately US$172,000.

Off-balance Sheet Arrangements

As of the date of this annual report, we are not a party to any off-balance sheet obligations or arrangements.

New Accounting Pronouncements

In 2013, the FASB issued a new accounting standard that will require the presentation of certain unrecognized tax benefits as reductions to deferred tax assets rather than as liabilities in the Consolidated Balance Sheets when a net operating loss carry-forward, a similar tax loss, or a tax credit carry-forward exists. The new standard requires adoption on a prospective basis in the first quarter of 2015; however, early adoption is permitted. We do not anticipate that this adoption will have a significant impact on our financial position, results of operations, or cash flows.

In May 2014, the FASB issued accounting standard update on revenue from contracts with customers. This update clarifies the principles for revenue recognition in transactions involving contracts with customers. The guidance will be effective for the interim and annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. We have not yet evaluated what impact, if any, the adoption of this guidance may have on our financial condition, results of operations, or disclosures.