daga leasing Directors report

DIRECTORS

To the member

Your Directors have pleasure in presenting the Twentieth Annual Report and Audited Accounts of the Company for the year ended March 31, 2012.

I. Operations and major developments during the year

1.1 Global rankings - Equity Derivatives Market 1.1.1 Stock Futures

During the year 2011, NSE was ranked as the 4th largest exchange in respect of contracts traded in stock futures. The details of top 5 exchanges trading stock futures are given in Table 1 below:

Table 1	(in millions)
Exchange	Contracts traded during 2011
1 RTS Exchange	355.37
2 NYSE Liffe (Europe)	250.44
3 Eurex	174.29
4 National Stock Exchange India	160.88
5 Korea Exchange	59.97

Source: WFE

1.1.2 Index Options

NSE continues to be ranked as the 2nd largest exchange in the world in index options. The details of top 5 exchanges in index options are given in Table 2 below:

Table 2
	(in millions)
Exchange	Contracts traded during 2011
1 Korea Exchange	3671.66
2 National Stock Exchange India	870.92
3 Eurex	468.38
4 Chicago Board Options Exchange	320.39
5 TAIFEX	126.39

Source: WFE

1.1.3 Index Futures

During the year 2011, NSE was ranked as the 4th largest exchange in the world in index futures. The details of top 5 exchanges in index futures are given in Table 3 as under:

Table 3
	(in millions)
Exchange	Contracts traded during 2011
1 CME Group	735.85
2 Eurex	486.33
3 RTS Exchange	379.81
4 National Stock Exchange India	155.71
5 Osaka SE	137.20

Source: WFE

1.1.4 Nifty Index Global rankings

Nifty Index options ranked 2nd across the top 20 Index options traded globally during the year 2011. Nifty Index futures ranked 4th across the top 20 Index futures traded globally during the year 2011.

(Source: www.futuresindustry.org rankings based on number of contracts traded or cleared between Jan 11 - Dec 11)

1.1.5 All products

NSE continued to be ranked 5th across all the Derivatives exchanges in the world based on the volume of contracts traded during the year 2011.

(Source: www.futuresindustry.org rankings based on number of contracts traded or cleared between Jan 11 - Dec 11)

1.2 Global rankings-Capital Market

In Capital Market segment, NSE improved its ranking to third largest exchange from being fourth largest last year in the world based on the number of transactions during the calendar year 2011. The details of top 10 Exchanges are given in the Table 4 below.

Table 4
	(in Thousands)
Exchange	No. of transactions
1 NYSE Euronext (US)	1832922.0
2 NASDAQ OMX	1702749.6
3 National Stock Exchange India	1384112.0
4 Shanghai SE	1273276.9
5 Korea Exchange	1191124.0
6 Shenzhen SE	1030323.5
7 Bombay SE	393222.6
8 Tokyo SE Group	340643.9
9 London SE Group	237938.5
10 TMX Group	222777.4

Source: WFE. The sale and purchase of a share are counted as one transaction

1.3 Membership at NSE

46 new members (24 in CM, F&O and CD segments; 12 in CM and F&O segments; 3 in CM segment; 6 in CD segment; and 1 in CM and CD segments) were registered during the Financial Year 2011-12.

The Exchange also granted additional segment membership to 44 members during the Financial Year 2011-12.

Table 5 showing membership details for the Financial Year 2011-12

Particulars	CM segment	WDM segment	F&O segment	CD segment
SEBI registered trading members	1,344	71	1,232	793
Members registered in additional segments	1	4	6	35
Registered
Sub-brokers / Authorised persons	64,127	Nil	55,041	5,874
Surrender of membership	19	4	18	9

1.4 Wholesale Debt Market (WDM) segment

The WDM segment provides a trading platform for trading of a wide range of fixed income securities. Initially, government securities, treasury bills and bonds issued by public sector undertakings (PSUs) were made available for trading. This range has been widened to include non-traditional instruments like floating rate bonds, zero coupon bonds, index bonds, structured products, corporate debentures, state government loans, SLR and non-SLR bonds issued by financial institutions, units of mutual funds and Supra Institutions (Foreign institutions). There were 5,148 securities available for trading as on March 31, 2012 all belonging to listed category.

The turnover on WDM segment increased in the financial year 2011-12. The turnover increased from Rs 559,446.75 crores in 2010-11 to Rs 6,33,178.59 crores in 2011-12 registering an increase of 13.18%. The average daily turnover increased to Rs 2,649.28 crores in 2011-12 from Rs 2,255.83 crores in 2010-11.

The business growth on the WDM segment of the Exchange is presented in Figure 1.

Turnover in WDM segment for FY 2011-12 is presented in Figure 2 as under:

The transaction in dated government securities account for a substantial share of transaction on the WDM segment with 51.31% in 2011-12. Market capitalisation of the WDM segment has witnessed a constant increase indicating an increase in the number of securities available for trading on this segment. Total market capitalisaton of the securities available for trading on WDM segment stood at Rs 42,72,736.48 crores as on March 31, 2012.

Table 6: Trades in WDM segment

Particulars	2011-12	2010-11
Number of Trades	23,447	20,383
Average monthly number of trades	1,954	1,699
Average daily number of trades	98	82
Average Trade Value ( Rs in crores)	27.00	27.45
Average Daily Turnover ( Rs in crores)	2,649.28	2,255.83
Turnover ( Rs in crores)	6,33,178.59	5,59,446.75
Number of Active Scrips	1,140	1,111
Number of Active members	33	35

1.4.1 Securities Profile

The turnover of Government securities in WDM segment increased by 6.57 % during 2011-12. Its share in total turnover decreased from 54.49% in 2010-11 to 51.31% in 2011-12. The share of Treasury Bills increased from 17.64% in 2010-11 to 22.03% in 2011-12. The turnover of Non Government securities in WDM segment increased by 8.27% during 2011-12. During 2011-12 the share of Non Government Securities in total turnover decreased to 26.66% as compared to 27.87% in 2010-11.

Table 7 and Figure 3 represent security-wise distribution of turnover.

Table 7: Security-wise Distribution of Turnover

Securities	2011-12		2010-11
	Turnover	% of Turnover	Turnover	% of Turnover
	( Rs in crores)		( Rs in crores)
Government
Securities	3,24,867.28	51.31	3,04,836.02	54.49
T-Bills	1,39,518.71	22.03	98,713.15	17.64
PSU Bonds	62,067.32	9.80	53,641.20	9.59
Institutional
Bonds	57,835.72	9.13	55,944.31	10.00
Bank Bonds	633.00	0.10	2,475.30	0.44
Corporate
Bonds	48,256.56	7.62	43,836.77	7.84
Total	6,33,178.59	100.00	5,59,446.75	100.00

1.4.2 Issuance in WDM

A total of 1,508 securities were listed during the financial year 2011-12. As at end of March 2012, 5,148 securities were available for trading on the WDM segment. Details of Issuance in WDM are provided in Table 8.

Table 8: Issuance in WDM

Financial Year	No. of New Securities Listed	Total No. of Securities (at year end)	Market Capitalisation (at year end Rs in Crores)
2004-05	1,299	3097	14,61,734.37
2005-06	564	3177	15,67,573.81
2006-07	661	3252	17,84,800.57
2007-08	856	3566	21,23,346.28
2008-09	1,026	3954	28,48,315.50
2009-10	959	4140	31,65,929.48
2010-11	1,080	4479	35,94,877.15
2011-12	1,508	5148	42,72,736.48

1.4.3 Market Capitalisation

Total Market capitalisation of the securities available for trading in WDM segment increased to Rs 42,72,736.48 crores in 2011-12 from Rs 35,94,877.15 crores in the previous year registering a growth of 18.86%. The Central Government securities accounted for the largest share of the market capitalisation with 57.86% while Non Government Securities accounted for18.35%. The composition of market capitalisation of various securities on WDM is presented in Table 9.

Table 9: Market Capitalisation of WDM segment

Securities	As on March 2012		As on March 2011
	Market Capitalisation	% of total	Market Capitalisation	% of total
	Rs ( in crores)		( Rs in crores)
Central
Government
Securities	24,72,178.60	57.86	21,85,721.40	60.80
PSU Bonds	2,44,165.01	5.71	1,90,921.58	5.31
State Loans	7,57,281.28	17.72	6,22,069.31	17.30
T-Bills	2,59,270.89	6.07	1,37,677.03	3.83
Others	5,39,840.70	12.64	4,58,487.83	12.76
Total	42,72,736.48	100.00	35,94,877.15	100.00

1.4.4 Corporate Bond Market

Currently for reporting trades in corporate bonds, Exchanges provides two platforms namely NEAT WDM and Report CBT. The average daily traded value reported through corporate bond for 2011-12 was Rs 809.83 crores (NEAT WDM & Report CBT) as compared to Rs 628.84 crores for 2010-11 with an average of around 50 trades being reported on a daily basis as compared to 32 trades for 2010-11.

Turnover of Corporate Bond is presented in Table 10 and Figure 5

Table 10: Corporate Bond Turnover

Corporate Bond Turnover	2011-12	2010-11	% Change
Total Turnover ( Rs Crs)	1,93,550.40	1,55,951.24	24.11
Average Daily Turnover
( Rs Crs)	809.83	628.84	28.78
Total Number of Trades	11,977	8,006	49.60
Average Daily Trades	50	32	56.25

1.5 Capital Market (CM) segment

The total turnover of CM segment in the year 2011-12 is Rs 28,10,893 crores as compared to Rs 35,77,410 crores in the year 2010-11, showing a decrease of 21%. The average daily traded value in 2011-12 is Rs 11,288.73 crores as compared to Rs 14,029.06 crores in 2010-11.

As on March 31, 2012, the number of listed companies available for trading was 1,563 compared to 1,484 at the end of March 31, 2011. In current year, Exchange allowed trading facility in 73 securities in permitted to trade category.

Figure 6: Month-wise Turnover and Average Daily Turnover in CM segment

The changes in turnover statistics over the preceding year are presented in Table No. 11

Table No. 11: Turnover Statistics on CM segment

Details	2011-12	2010-11	% Rise / (Fall) in 2011-12
1 Total number of trades (In lakhs)	14,377	15,507	(7.28)
2 Total number of shares traded (in lakhs)	16,16,978	18,24,515	(11.37)
3 Total turnover ( Rs Cr.)	28,10,893	35,77,410	(21.43)
4 Market Capitalisation at the end of year ( Rs Cr.)	60,96,518	67,02,616	(9.04)
5 Turnover of S&P CNX Nifty Securities ( Rs Cr.)	15,11,340.23	16,89,977.59	(10.57)
6 Total number of listed companies	1,646	1,574	4.57

1.5.1 Index Movement:-

S & P CNX Nifty saw downward movement of 9.23% moving from 5,833.75 to 5,292.55 over the financial year 2011-12.

During the year 2011-12, the S&P CNX Nifty touched a high of 5,944.45 on April 06, 2011 and low of 4,531.15 on December 20, 2011. Movement of S&P CNX Nifty is shown in Figure 7:

The turnover of S&P CNX Nifty securities was Rs 15,11,340.26 crores in the year 2011-12 as compared to Rs 16,89,977.59 crores. The contribution of S&P CNX Nifty securities turnover to total turnover during the year 2011-12 was 53.77% compared to 47.24% in the year 2010-11.

Figure 7: S & P Nifty movement

1.5.2 Market Capitalisation

The market capitalisation of securities available for trading on CM segment has decreased by 9.04% during 2011-12 from Rs 67,02,616 crores as on March 31, 2011 to Rs 60,96,517.55 crores as on March 31, 2012. Out of total market capitalisation of Rs 60,96,518 crores as on March 30, 2012, Rs 39,948 crores was contributed by newly listed securities. The market capitalisation growth is shown in Figure 8.

During the year, the market capitalisation of S&P CNX Nifty decreased by 4.06% and S&P CNX Nifty Junior decreased by 1.48%.

1.5.3 Distribution of Turnover

Turnover-wise distribution of trading members

About 74% of the trading members had an average daily turnover of Rs 1 crore or more in 2011-12 and 2010-11. In 2011-12, around 25% of the trading members have daily turnover more than Rs 10 crores as against 28% in 2010-11.

1.5.4 Listing: Initiatives taken during the financial year 2011-12 (i) NEAPS (NSE Electronic Application Processing System)

The Exchange had launched online application – NEAPS – to facilitate filing of listing applications by companies for various further issues like ADR, FCCB, GDR, etc. During the financial year, the said application was successfully extended to filing of quarterly Shareholding Pattern and Corporate Governance Report as required under the Listing Agreement. During the quarter ended December 31, 2011, around 80% and quarter ended March 31, 2012 around 85% of the active listed companies filed the Shareholding Pattern and Corporate Governance Reports through NEAPS.

The Mutual Fund module (listing and compliance) in NEAPS was released in ‘Live environment’ on March 25, 2012 granting access to AMCs with effect from April 1, 2012. In order to familiarise and popularise the interface, demos were conducted for AMCs. This initiative is facilitating Mutual Funds to submit applications and receive approvals online. This NEAPS initiative has further enhanced the quality and speed of processing the quarterly submission from listed corporates and will facilitate the companies, AMCs to move towards paperless processing. The Exchange had initiated the process of developing a system to provide online the Annual Listing Fees Bills and the collection of the same from listed corporates seamlessly. This project has been made Live in NEAPS on March 31, 2012. The companies can download their respective Annual Listing fees bills from NEAPS and also make payment by way of e-payment, RTGS/NEFT, cheque payment mode through the same system. This project is expected to eliminate manual billing system, manual collection system and manual reconciliation for annual listing fees.

(ii) Tie up with Madhya Pradesh Stock Exchange (MPSE):

The Exchange has made a tie up with MPSE in the FY 2011-12. Pursuant to the MoU signed up with MPSE, the Exchange has permitted trading in 7 companies listed on MPSE.

(iii) ‘Know Your NSE Program

‘Know your NSE is an initiative aimed at building relationship with corporates and to provide an insight into functioning of the Exchange. An overview about live trading, capital market, futures and options, clearing, settlement, risk management, listing and surveillance was imparted during the session. During the year 2011-12, the said program was organised at Mumbai, Kolkatta and New Delhi. The program was attended by the Chief Financial Officers and Company Secretaries from various listed / unlisted corporates.

(iv) Relationship Manager for NIFTY / JUNIOR NIFTY companies

"Relationship Manager" is an initiative aimed at improving the quality of services rendered to listed corporates. To start with, companies forming part of NIFTY and Junior NIFTY have been assigned Relationship Manager who will serve as first point of contact for all correspondence with the Exchange. This initiative is expected to immensely improve the service experience of listed companies.

(v) Corporate Visits

"Corporate Visits" is an initiative aimed at seeking feedback from the listed companies with regard to service efficiency of the Exchange. This initiative has provided an impetus to further improve the quality of service being provided to listed companies.

(vi) Webcast of Listing Ceremony

"Webcast of Listing Ceremony" is an initiative aimed at providing live experience of listing ceremonies vide Internet. The listing ceremony of L&T Finance Holdings Limited was webcasted by the Exchange.

1.5.5 New Developments during the year

In year 2011-12 various new developments have been taken by the Exchange. The details of the same are given below:-

September 2011 Web platform for Mutual Fund Service System (MFSS)

The Exchange has launched a web interface to place bids through the MFSS platform. Its architecture provides scalable operation and flexible deployment options while ensuring data integrity for improved performance. The platform is feature-rich and highly flexible. It has facility for one-time registration of client, detailed easy-to-use information on various schemes being offered through the platform and report management features.

October 2011 Revision in Market Timings of closing session

The Exchange has revised the market timings of Closing Session w.e.f. October 03, 2011. The closing session now open at 3:40 p.m. in place of earlier open time of 3:50 p.m.

February 2012 Back office Application for MFSS

The Exchange has provided Back Office application to the participants of MFSS. The back-office application is integrated with the Exchange MFSS platform. It provides an end to end solution to the participants for their MFSS transactions. It captures details starting from client registration, client accounting, client billing, client holding, transaction history, etc.

March 2012 Dissemination of Nifty Dividend Index on trading system in capital market segment

The Exchange incorporated Nifty Dividend Index in trading system for its on-line dissemination. The S&P CNX Nifty Dividend Index is designed to track the total dividend points of the S&P CNX Nifty Index constituents. The value of S&P CNX Nifty Dividend index does not change throughout the day. The S&P CNX Nifty Dividend Index segregates the dividend cash flow of the S&P CNX Nifty Index and provides investors with the ability to hedge against the dividend risk that it is implicit in the value of exchange traded derivative products linked to S&P CNX Nifty Index. The Index resets to zero every year after the close of the settlement of exchange traded derivative contracts linked to S&P CNX Nifty Index in the month of March every year (normally the last Thursday in March).

March 2012 Investment by Qualified Foreign Investors (QFI) in Indian Equity Shares

SEBI issued circular in Jan 2012 regarding investment by Qualified Institutional Investors (QFIs) in India and their eligibility criteria. SEBI also advised the Exchange to provide facility for QFIs to trade in companies where the caution limit of QFI investment has been reached and QFI wish to buy without the prior approval of the depositories. As per the SEBI circular, when the aggregate shareholding of all the QFIs in a company reaches 8% of the equity paid up capital, the company’s name along with ISIN shall be published in caution list by the depositories and no fresh purchases shall be allowed without prior approval of the depositories. On March 20, 2012, the Exchange introduced new segment viz: QFI segment (series IQ) to facilitate intra QFI transactions in companies where the caution limit of QFI investment has been reached and QFI wish to buy without the prior approval of the depositories.

March 2012 Introduction of Call Auction in Pre-open session for Initial Public Offering (IPO) and other category of scrips

The Exchange has extended the call auction in pre-open session for securities listed on Exchange due to Initial Public Offering (IPO) and Re-listing (as defined under para 1( c ) of SEBI circular no. SEBI/CIR/ISD/1/2010 dated September 02, 2010). This pre-open session is addition to the existing call auction in pre-open session available for securities forming part of Nifty indices.

The salient features of above call-auction in pre-open session are given below:-

• The pre-open session is introduced for IPO and Re-listed securities.

• The duration of pre-open session is of 60 minutes i.e. 9.00 a.m. to 10.00 a.m. out of which 45 minutes is for order entry, order modification and order cancellation which closes randomly during last one minute, 10 minutes for order matching and trade confirmation and remaining 5 minutes is buffer period to facilitate transition from pre-open to normal trading session.

• Market orders are not accepted in pre-open session.

• The equilibrium price is a price at which maximum value is executable.

• The equilibrium price of pre-open is an opening price of a security.

• Risk management at order level in pre-open session.

• Trading in security moves in the normal market only after the prescribed time subject to certain conditions.

• All unmatched orders within applicable price range are moved to the normal market at their limit price on the basis of the price time priority subject to certain condition.

March 2012 Offer for Sale through Exchange Platform

The Exchange has introduced "Offer for Sale" (OFS) facility to promoters to dilute/offload their holding in listed companies in a transparent manner with wider participation. The salient features of the same are given below:-

Salient features:

• All eligible trading members of the capital market segment and their clients are eligible to bid in OFS.

• Separate window is provided in the IPO bidding platform to facilitate bidding in OFS.

• The duration of the offer for sale is for a maximum of one trading day i.e. 9:15 a.m. to 3:30 p.m. subject to minimum period of one hour.

• Dissemination of information on Indicative Price and Cumulative orders / bid quantity on the website at specific time intervals.

• Only limit orders / bids are allowed.

• In case floor price is not disclosed, then no price band is applicable for the orders/ bids placed in the OFS. However, where floor price is disclosed, orders/ bids below floor price are not accepted.

• 100% of the order value is collected at the order level for every buy order including institutional orders.

• A facility for confirmation of orders bearing Custodian Participant (CP) codes are provided to the Custodians. Custodian confirmations are subject to sufficiency of funds.

• The allocation is done by the designated stock exchange. The method of allocation is either a single price or multiple prices based on the specifications received from the promoter in this regard.

• Funds and Securities pay-out on T+2 as per existing secondary market procedure.

• Member issues contract notes for transactions executed in OFS.

March 2012 Facility for Institutional Placement Programme

The Exchange has introduced "Institutional Placement Programme" (IPP) facility to the issuers for issuance of fresh shares and/ or offer for sale of shares in a listed issuer for the purpose of achieving minimum public shareholding in terms of Rule 19(2)(b) and 19A of the Securities Contracts (Regulation) Rules, 1957. The salient features of the same are given below:-

• Exchange provides a separate bidding system in existing IPO bidding platform.

• Bids accepted only through ASBA mechanism.

• Only qualified institutional investors allowed to bid in IPP.

• Withdrawal of a bid or downward revision of a bid is not allowed.

• The issue is kept open for a day and a maximum of two days.

• The eligible seller announces a floor price or price band at least one day prior to the opening of institutional placement programme.

• Dissemination of aggregate demand schedule on the Exchange’s web site without disclosing the price.

• Allocation/allotment is overseen by the stock exchange before final allotment.

1.6 Futures and Options segment

The financial year 2011-12 witnessed an increase of 7.19% in volumes and 16.52% in number of contracts vis--vis 2010-11 in the F&O segment of the Exchange. The daily average open interest was reduced by 15.32% over previous year. The average contribution of proprietary category increased to 43.31% in 2011-12 from 38.14% in 2010-11.

1.6.1 Comparison of the close prices of the NIFTY Near Month Futures Contract (F&O segment) with the underlying movement of the NIFTY Index (Cash segment) along with the Daily Traded value of the F&O segment (Figure 10):

Note: Special trading sessions on October 26, 2011 (Muhurat trading), January 7, 2012 and March 3, 2012

1.6.2 Records achieved in the F&O segment during 2011-12 (Table 12):

Category	Traded	Date of
	Value	Record
	( Rs crores)
Stock Options	9,009.45	17-Feb-12
Number of trades	33,26,270	24-Nov-11
Number of contracts traded	1,11,36,171	24-Nov-11

It may be observed that during 2011-12, new records were set in stock options traded value, number of trades and number of contracts traded.

1.6.3(a) Basic Statistics of the F&O Segment (Table 13):

	Apr 11 to Jun 11	July 11 to Sep 11	Oct 11 to Dec 11	Jan 11 to Mar 12	2011-12	2010-11	% Change
Traded Value ( Rs in crores)
Daily Average	1,19,268	1,32,762	1,28,644	1,23,008	1,25,903	1,15,150	9.34
Number of Contracts
Daily Average	4,327,842	5,120,145	5,270,854	4,654,670	4,839,540	4,071,701	18.86
Open Interest ( Rs in crores)
End of day averages	136,418	129,034	122,353	127,227	128,758	152,057	-15.32
% of Open interest to Daily Average Traded value	114	97	95	103	102	132

Among all products, Index Options continue to dominate the total turnover with their contribution observed at 72.47% in 2011-12

1.6.4 Institutional Retail & Proprietary Investors – Turnover Analysis (Table 14):

	Institutional		Retail		Proprietary
Month	Average Gross Traded Value ( Rs Crs.)	Percentage Contribution	Average Gross Traded Value ( Rs Crs.)	Percentage Contribution	Average Gross Traded Value ( Rs Crs.)	Percentage Contribution
1 2010-11	618,641	12.69	2,396,870	49.17	1,859,193	38.14
2 2011-12	847,559	16.22	2,114,543	40.47	2,262,854	43.31

It may be observed that average contribution of institutional as well as proprietary categories have increased in 2011-12 as compared to 2010-11.

Cash segment turnover as a percentage of F&O segment turnover was 11.15% for the year 2011-12 as compared to 8.18% for 2010-2011.

1.6.6 Product-wise Basic Statistics (Table 15):

Category	Product	Apr 11 to Jun 11	July 11 to Sep 11	Oct 11 to Dec 11	Jan 12 to Mar 12	2011-12	2010-11	% Change
Daily Average	Stock Futures	16,331	16,031	14,422	18,544	16,364	21,637	-24.37
Traded Value ( Rs Crs)	Index Futures	13,762	15,232	14,755	13,748	14,369	17,153	-16.23
	Stock Options	3,315	3,673	3,516	5,144	3,924	4,056	-3.26
	Index Options	85,860	97,825	95,952	85,572	91,245	72,305	26.19
Daily Average	Stock Futures	634,653	618,357	625,213	664,482	635,922	732,447	-13.53
No. of Contracts	Index Futures	523,768	625,889	644,103	556,843	587,103	649,699	-10.00
	Stock Options	122,659	137,291	145,315	180,020	146,564	127,986	14.06
	Index Options	3,046,762	3,738,608	3,856,223	3,253,325	3,469,951	2,561,569	34.92
Average	Stock Futures	36,925	33,471	31,325	34,402	136,123	42,843	-20.57
OI Value ( Rs Crs)	Index Futures	21,319	18,295	19,260	22,921	81,795	23,767	-13.96
	Stock Options	8,107	7,779	7,285	9,942	33,113	9,344	-11.41
	Index Options	92,761	89,472	86,949	91,032	360,214	1,00,239	-10.16
Average	Stock Futures	1,448,510	1,346,613	1,372,071	1,228,371	1,348,891	15,52,169	-13.10
Number of OI contracts	Index Futures	799,947	756,440	837,782	906,861	825,258	8,96,601	-7.96
	Stock Options	317,623	316,689	324,647	355,758	328,679	3,24,465	1.30
	Index Options	3,307,793	3,512,326	3,582,853	3,456,499	3,464,868	35,81,184	-3.25
Number of trading Days		62	63	60	64	249	254

1.6.8 New Developments during the year for the year 2011-12 Introduction of derivative contracts on Global Indices

The Exchange has introduced futures contracts on S&P 500 index and Dow Jones Industrial Average index and options contracts on S&P 500 index in the F&O segment with effect from August 29, 2011. It was the first time in India that derivative contracts on a foreign index was made available for trading by an Exchange. The turnover on the first trading day was Rs 121.81 crores.

Liquidity Enhancement Scheme on Global Indices

Based on the guidelines issued by SEBI, the Exchange introduced a Liquidity Enhancement Scheme (LES) on the derivative contracts of Global Indices in September 2011 for a period of 6 months. The scheme provided for incentives on order, trade and open interest level to encourage market participants. The daily average turnover observed till March 2012 in the above mentioned contracts was Rs 187 crores.

Introduction of new trading application - Advanced NEAT F&O (NEATPro)

The Exchange has launched a new Trading Work Station NEATPro in the Futures & Options segment. The NEATPro application supports advanced version of already popular NEAT-F&O which is based on improved system architecture.

1.7 Currency Derivatives segment

The financial year 2011-12 witnessed a considerable growth in currency derivatives (Currency Futures and Options) volumes. The average daily turnover in currency derivatives has grown by 41% and stood at Rs 19,479 crores in 2011-12 compared to Rs 13,855 crores in 2010-11.

The daily average number of contracts also increased by 34.72% in 2011-12 and stood at 40,55,601 contracts as compared to 30,10,450 contracts traded in 2010-11.

The daily average open interest also increased substantially by 114% in 2011-12 as compared to what was observed last year during November 2010 - March 2011 after launch of currency options.

The number of members registered in currency derivative segment has risen to 797, of which 32 are banks and 1 Primary dealer.

Currency Futures: Turnover in Currency futures for the financial year 2011-12 was Rs 33,78,489 crores as compared to Rs 32,79,002 crores during 2010-11. The average daily turnover was Rs 14,077 crores contributing to 72% of the total turnover. Futures on USD-INR currency pair were the most traded contracts.

Currency Options: Turnover in currency options for the financial year 2011-12 was Rs 12,96,501 crores with average daily turnover at Rs 5,402 crores compared to Rs 1,627 crores observed during November 2010 – March 2011.

The Exchange has started levying transaction charges in currency derivatives from August 22, 2011. Since then, the Exchange has recorded a decline of approximately 37% in average daily volume in both currency futures and options contracts till March 2012 as compared to the average of April 2011 – August 2011. The average daily open interest too has registered a decline of 37% in currency options contracts whereas currency futures contracts observed a marginal increase of 4% in open interest.

Interest Rate futures had significant growth in volume in the FY 2011-12 after the introduction of futures contracts on 91 Day T-Bill from July 4, 2011. The total volume observed in Interest Rate futures segment in 2011-12 was Rs 3,959 crores as compared to Rs 62 crores in 2010-11.

1.7.1 New Development during the year for the year 2011-12 Introduction of derivatives contracts on GOI T-Bill

The Exchange introduced Futures contracts on 91 Day GOI Treasury Bill with effect from July 4, 2011.Subsequent to the permission by SEBI and RBI, three monthly and one quarterly contract were introduced for trading. The turnover on the first day was Rs. 731.24 crores.

1.8 Surveillance System

The Exchange ensures market safety and integrity through a combination of state of the art surveillance system, wide ranging use of cutting edge data analytics and experienced team of analysts.

The surveillance system which monitors trading activity at every order and trade level has been developed piecing together experience gathered over the years. The system generates alerts based on multiple parameters using a complex algorithm. The parameters and the thresholds beyond which alerts are generated have been decided after detailed statistical analysis and back testing. The Exchange has implemented series of pattern recognition models which unearth manipulative activity such as front running, insider trading, circular trading, etc.

Surveillance system has been designed and tuned to sift through the gigantic mix of orders, trades to generate meaningful alerts that point to possible market abuse. The system also has the capability to replay the market at a much slower pace wherever market abuse is suspected, so as to enable the analysts to examine the identified deviant activity order by order to piece together evidence for proving manipulation.

Unlike, markets in US and Europe where exchanges have access only up to the first layer of market participants, namely, the trading members, the exchanges in India are in a unique position to identify and monitor trading activity at client level. As on March 31, 2012, there are 1.40 crore unique investors registered with the trading members.

During the period from April 1, 2011 to March 31, 2012, 116 reports on the investigations conducted were completed of which 93 reports were submitted to SEBI. NSEs expertise in putting data analytics tools to optimum use to mine this wealth of data to establish patterns in trading activity at client level enables the Exchange to quickly identify potential market abuse and refer the matter to the Regulator.

2. Services to Investors

To enhance investor safety, the Exchange has commenced facility to directly send SMS and email alerts, providing details of the transactions to the investors at end of the day. The investors are required to register for the facility with the trading members. The registered investors receive a welcome SMS and email for confirmation from the Exchange. On confirmation, the facility is activated and the Exchange would then send SMS giving summarised trading activity and an email providing the trading details at the end of each trading day to such investors.

3. NSE’s Research Initiative

NSE Commissioned Research Initiative

In 2011-12, NSE started ‘NSE Commissioned Research Initiative’ under which the NSE’s Economic Policy and Research (EPR) department commissions papers from academicians and practitioners on topical issues related to Indian Securities market. In the first year of the initiative, four papers were completed which are available on NSE website.

NSEs ‘Student Research Project initiative

In 2011-12, NSE started an initiative called ‘NSE Student Research Project’ with an objective of encouraging research work in the area of securities market among the student fraternity. Under the initiative, university students (Management/ Law/ Economics at Masters or PhD level) undertake research projects (in the form of research papers) on topics related to securities market in India and abroad under the guidance of a faculty of their respective college / university. In the first year of the initiative, six papers were completed which are available on NSE website.

Tie up with the Conference Board (TCB), USA

NSE collaborated with The Conference Board (TCB), USA to conduct a corporate governance survey in India for developing a handbook on Corporate Governance for India.

Tie up with IFMR for NSE-IFMR Financial Inclusion Research Initiative

NSE has collaborated with Institute of Financial Management and Research (IFMR), Chennai for research initiative in the area of financial inclusion.

Seminars and Panel Discussion

In 2011-12, the Economic Policy and Research department started organising seminars and panel discussions by eminent people on securities market and Corporate Governance issues once a quarter for NSE Staff, Exchange Trading members and NSE Listed Companies. There are also presentations on the state of the Indian economy.

Publications of NSE

Indian Securities Market Review and the NSE Factbook are two NSE publications which are prepared on an annual basis. In addition to these two publications, NSE had come out with the book on Corporate Governance: an Emerging Scenario. The book has 15 essays on topics related to corporate governance contributed by various eminent people and has been edited by Prof. N. Balasubramanian and Mr. Deepak Satwalekar. This collection offers the experience and insights of authors from a wide spectrum: academics, bureaucrats, regulators, executives and professionals from diverse disciplines.

4. Financial Results and Appropriation of Profits

The working of the Company during the year has resulted in a net profit after tax of Rs 704.89 crores as per particulars given in Table 16 below:-

Table 16		( Rs In crores)
Particulars	2011-12	2010-11
Income	1,533.87	1,378.47
Expenditure (excluding Depreciation)	477.76	427.07
Profit before depreciation, prior-period adjustment and tax	1,056.11	951.40
Depreciation	89.02	91.35
Profit before prior period adjustments	967.09	860.05
Add/(Less): Prior period adjustment	(0.41)	(0.74)
Profit before tax	966.68	859.31
Provision for tax	261.79	221.80
Profit after tax	704.89	637.51
Surplus brought forward from previous year	117.40	105.26
Excess Corporate Dividend Tax for last year transferred back	15.33	14.95
Amount available for appropriation	837.62	757.72
Appropriations
General Reserve	400.00	530.00
Investor Compensation Reserve	0.06	0.14
Proposed Dividend	180.00	94.50
Corporate Dividend Tax	29.20	15.33
Staff Welfare Reserve	1.00	0.35
Balance carried to Balance Sheet	227.36	117.40

5. Dividend

In view of the above results, your Directors recommend payment of dividend of Rs 40/- per share for the year 2011-12.

6. Subsidiary Companies

6.1 National Securities Clearing Corporation Limited (NSCCL)

CM segment: NSCCL successfully continued its track record of completing all settlements in a timely manner. During the period under review, 249 rolling settlements were handled in dematerialised mode. Per settlement figures in value terms in the current year are as given below:

The average value of securities handled per settlement was Rs 3,153.69 crores in 2011-12 compared to Rs 3,840 crores in 2010-11. The average funds pay-in per settlement during the above periods was Rs 1,011 crores and Rs 1,150 crores respectively. The average number of shares processed per settlement was about 1,783 lakhs in 2011-12 compared to 1,954 lakhs in 2010-11. Short deliveries per settlement averaged around 0.16% in 2011-12 as compared to 0.13% in 2010-11.

The highest deliverable value of Rs 10,831.64 crores was observed on February 28, 2012. Percentage of number of shares deliverable to number of shares traded increased to 27.66% in 2011-12 from 27.51% in 2010-11. Percentage of value of shares deliverable to value of shares traded increased to 28.01% in 2011-12 from 27.47% in 2010-11. The Settlement Guarantee Fund stood at Rs 4,820.83 crores as on 31st March 2012.

F&O segment: The period 2011-12 witnessed a decrease in the total settlement value from around Rs 83,700.87 crores in 2010-11 to Rs 72,296.22 crores. The highest monthly settlement was for Rs 9,358.72 crores in the month of August 2011. March 2012 witnessed the highest monthly trading volumes of Rs 29,79,231.03 crores while the highest daily trading volumes on NSE during this period was Rs 2,59,284.55 crores, witnessed on November 24, 2011 with total of 1,11,36,171 contracts being traded.

Currency Derivatives segment: The year 2011-12 witnessed an increase in the total settlement values from around Rs 2,577.08 crores in 2010-11 to Rs 7,171.65 crores. The highest monthly settlement value was Rs 917.06 crores in the month of September

2011. The highest trading volume in currency futures on NSE during this period was Rs 33,422.90 crores, witnessed on August 09, 2011 with total of 72,31,120 contracts being traded and in currency options, it was Rs 17,305.21 crores, witnessed on August 18, 2011 with total of 37,92,800 contracts being traded.

NSCCL also began clearing and settlement of Interest Rate Derivatives based on Government of India Treasury Bills in July 2011 as trading in futures on these instruments was launched on NSEIL.

Securities Lending & Borrowing Scheme: NSCCL is an Approved Intermediary (AI) for SLBS with SEBI. In 2011-12, the volumes in SLBS increased over 350% from Rs 754.16 crores in 2010-11 to Rs 2,729.67 crores As compared to previous year, during 2011-12, securities traded in SLBS increased from 41 to 87 and number of participants traded too increased from 16 to 25. As on date, total number of participants in SLBS stands at 93.

Mutual Fund Service System (MFSS)

As on March 31, 2012, 31 mutual fund houses with 1,991 schemes were enabled under the revised MFSS scheme. The average daily value of funds settled for subscription of mutual fund units for the period April 1, 2011 to March 31, 2012 was Rs 1.99 crores. The average daily quantity of units allotted under subscription for the period April 1, 2011 to March 31, 2012 was 10.37 lakhs. The average daily value of funds settled for redemption of mutual fund units for the period April 1, 2011 to March 31, 2012 was Rs 1.36 crores. The average daily quantity of units redeemed for the period April 1, 2011 to March 31, 2012 was 6.04 lakhs.

During the financial year 2011-12, NSCCL earned net profit after tax of Rs 240.91 crores as compared to net profit after tax of Rs 238.13 crores during 2010-11. The Board of NSCCL has recommended a dividend of Rs 45/- per equity share to its shareholders in respect of the financial year 2011-12.

6.2 NSE.IT Limited (NSE.IT)

Continuing its foray to become a leading vertical specialist enterprise offering end-to-end Information Technology (IT) products, solutions and services as well as specialising in providing complete IT solutions to Stock Exchanges, Clearing Corporations, Brokerage Firms, Insurance Firms and other organisations in the Capital Market, Banking and Insurance industry in India as well as overseas, NSE.IT, achieved a robust turnover of Rs 11,989 lakhs during the year which was more than 16% higher than the previous corresponding year.

Continuing with its foray in online examinations of IRDA, NSE.IT was successful in achieving 100% online examination status for all its 222 centers covering 26 states and 3 Union Territories was successful in adding new clients to its list. During the year, NSE.IT undertook bidding for examination tenders floated by several entities. The assessments are conducted pan India for the insurance companies and NSE.IT executes the end-to-end process from registration to examination certificates.

During the year, NSE.IT embarked on quality journey to certify its online examination centers for ISO 9001:2008 certification from Bureau Veritas Certification Institute (BVCI) and was successful in obtaining the said certification for all its centers on pan India basis. During the year NSE.IT also underwent a surveillance audit which was successfully conducted in all the centers.

During the year, NSE.IT has expanded its product portfolio with the introduction of an Algorithmic Trading solution, called AlgoNomics. The product provides various standard algorithmic trading strategies (viz. Cash-Futures arbitrage, Futures-Futures arbitrage, Cash-Cash arbitrage) as well as custom strategies, taken up as be-spoke development. NSE.IT has also tied up with a strategic software partner and has successfully launched a new chart-based automated trading solution named TradeGenie, a joint solution for the Indian Capital Markets.

During the year, the US subsidiary of NSE.IT was successful in forging a technology partnership with four companies, all based out of USA. Similarly the US Subsidiary won several contracts from US clients.

The most important achievement for the Tea Board e-Auction project this year, was the launch of Bulk-tea auction, roll out of e-Settlement application, conducting auction of Specialty Tea e-auction, and completion of a major milestone for e-auction of 1 billion KG tea.

During the year, NSE.IT conducted "Nilgiris Planters Association –Specialty Tea Auction". This specialty auction saw specialty teas from South India with participation of buyers from all the six auction centers. NSE.IT also conducted "The Golden Leaf India Awards – Southern Tea Competition" again this year, after successfully conducting it last year.

During the financial year 2011-12, NSE.IT earned net profit after tax of Rs 14.31 crores as compared to the net profit after tax of Rs 13.64 crores in the previous year. The Board of NSE.IT has recommended a dividend of Rs 3.70 per equity share to its shareholders in respect of the financial year 2011-12.

6.3 DotEx International Limited

6.3.1 Infofeed Business

DotEx manages the infofeed of NSEIL and supplies the same to its clients. Currently, the following products are offered by DotEx namely Real Time Data, Snapshot Data, End of Day Data, Historical Data and Corporate Data

The products related to real time data, snapshot data, end of day data and historical data are further segregated into the following segments namely Capital Market [CM] segment, Futures and Options Market [F&O] segment, Wholesale Debt Market [WDM] segment, Securities Lending & Borrowing Market [SLBM] segment and Currency & Interest Rate Futures Market segment

Currently, real time feed is being subscribed by 35 clients, snapshot feed by 36 clients, end of day feed by 24 clients and corporate data by 2 clients. During the year, DotEx started disseminating data pertaining to futures contracts on international indices (S&P 500 and DJIA) that are traded in the Futures & Options Market segment of NSE.

6.3.2 NOW (NEAT on Web) Platform

DotEx also provides a shared platform called NEAT on Web (NOW) which is a shared CTCL and risk management tool for the trading members.

During the year, DotEx started providing the following additional facilities through NOW platform viz., access to BSE Cash and Derivatives markets, NCDEX market and value added services like advanced charting, technical analysis, third party news, etc. provided by Nest Plus platform of Omnesys. The mobile application was also made available to cater to iPad and other Android based tablet versions.

The above initiatives have resulted in a significant increase in the number of users (+35%) and trading turnover through NOW platform during the financial year 2011-12.

6.3.3 Know Your Client (KYC) Registration Agency [KRA]

As an initiative to serve investors, SEBI has simplified client registration process and introduced uniform KYC in securities market. Further, to serve investors better and to avoid duplication of KYC process with every intermediary, SEBI introduced mechanism for centralisation of KYC records. Accordingly SEBI formulated the KYC Registration Authority (KRA) Regulations and notified the same on December 02, 2011. As per the above Regulations, a wholly owned subsidiary of Stock Exchange is permitted to apply for getting certificate from SEBI to provide KRA services as an intermediary.

In view of the above, DotEx, with a view to boost SEBI initiative and serve investors community, applied for the same and got SEBI registration certificate on February 28, 2012 to act as a KRA intermediary. DotEx started its operations as KRA with effect from March 06, 2012. As on April 23, 2012, 407 intermediaries are recognised by DotEx and 4150 KYC forms are uploaded on the KRA system called ‘Vishwas’. DotEx also launched its website www.nsekra.com and its KRA operations are fully functional.

During the year 2011-12, DotEx earned a profit of Rs 1,456.71 lakhs as compared to a profit of Rs 1,416.68 lakhs during 2010-11. The Board of DotEx has recommended a dividend of Rs 2/- per equity share to its shareholders in respect of the financial year 2011-12.

6.4 India Index Services & Products Limited (IISL)

During the year under review, IISL continued to be the primary provider of indices and related products and services to various participants in the Capital Market in India in the fourteenth year of its operation. IISL has granted seven additional licenses to asset management companies for launching Exchange traded Index funds. Currently, there are around 41 funds linked to IISL’s indices. IISL provides index and index related services to various mutual funds, investment banks and other financial institutions across the globe for business purposes. Apart from the indices being used for Index Funds and trading of index based derivative contracts, the indices of IISL are being used by the mutual funds for benchmarking the performance of their funds. During the year, IISL provided licenses to various clients for using IISL’s indices as underlying for their products. These clients issue products such as index linked notes / certificates, index linked bonds, index linked certificates of deposit, Exchange Traded Funds (ETFs) etc., using IISL Indices as the underlying for their products. IISL also provides annual licenses to its clients who issue many structured products with IISL indices as underlying for such products.

During the year under review, IISL has widened the client base that uses IISL Indices and index data. IISL has the following major sources of income viz. income from licensing indices to stock exchanges for trading in derivative contracts linked to such indices, income from licensing indices to asset management companies for Index Funds/Exchange Traded Funds, income from licensing indices to finance and insurance companies for debentures/ insurance products, income from licensing indices to investment banks for structured products, income from calculation of customised indices and income from data subscription services.

During the year 2011–12, IISL earned profit of Rs 1,504.22 lakhs, as compared to a profit of Rs 1,183.74 lakhs during 2010–11. The Board of IISL has recommended a dividend of Rs 12/- per equity share to its shareholders in respect of the financial year 2011-12.

6.5 NSE Infotech Services Limited (NSETECH)

Technology has been a key differentiator and a strategic driver for NSE. Towards this, NSETECH continues to deliver and maintain technology products and services for NSE.

6.5.1 New Generation Initiatives

The Trading system has seen volumes grow in leaps and bounds and the architecture of the system has been changed to meet with the changing requirements. Major architectural changes were carried out in the Trading systems towards achieving the objectives of throughput and latency. The new market in F&O system ushers a new era for the Exchange, by future proofing Trading system to face the ensuing challenges of the coming years. As a move towards next generation trading system in the CM segment, the in-memory database in the Post trade layer has also been moved to state of the art SMFS (Shared Memory File System).

6.5.2 Global Benchmarks

International Network Services facility has been enabled for DMA clients hosting their Algo engines in the Co-location area. This setup is dedicated for the purpose of accessing NSE’s Co-location facilities from across the globe. A few DMA clients have gone live using Transaction Network Services (TNS).

Electronic readable news in Co-location has been made live to provide trading firms access to data required to fuel Algorithmic trading strategies. This facility is currently limited to NSE feed data only.

6.5.3 New Product Launches

New business products like Global Indices, 91 day T-Bill, SME segment, Exchange hosted Algorithms (TWAP/VWAP), Secondary Market Listing (SML), Offer for Sale (OFS), NSE’s new website, NEATPro (NEAT skin in NEATPLUS), NSE Electronic Application Processing System (NEAPS) – Corporate Governance and Share holding Pattern modules have been introduced.

6.5.4 Customer Benefits (self service)

Several initiatives have been taken to provide self service capabilities and improved benefits to customers. Some of these are Voluntary Closeout and Security Specific disablement, SMS intimation to clients for trades executed, Margins UI integration with Member portal, Open Ended Mutual Funds as Collaterals, Document Repository in ENIT, Intraday margin reports, Automatic Delivery Out, Depository-wise MFSS allocation, Liquidity Enhancement Scheme, Optimisation of IP’s available per full rack in Co-location and C2N migration from obsolete MPLS to N3 platform

6.5.5 Operational Excellence

BCP external mock was successfully carried out in October 2011 for CM, F&O and CD market segments along with interfacing applications. Parallel operations were conducted from command center in Kohinoor and DR site.

As a step towards capacity readiness for the budget session in the month of March 2012, the Market 1 machine was upgraded to a higher capacity V6308 server capable of handling additional load. Moreover, load balancing of securities across the four market machines has been done so that volumes get distributed across the market machines.

Various steps have been taken for automation of operational procedures which will lead to improved reliability of operations. Trading Mock setup, Operational health checks of Production systems management team and Telecom teams are few examples in which automation has been achieved.

A full-fledged Security Operations center (SOC) has been established which will help in timely detection, response and resolution of security threats.

The development setup has been successfully and smoothly relocated to Kohinoor premises which involved movement of around 150+ servers along with Network equipment and relocation of around 250+ resources.

6.5.6 Awards/Recognition

EMC Cloud Pioneer Award (Nov 2011) – NSE on Web (NOW) project was recognised as being one of India’s leading Cloud computing implementation.

6.5.7 During the financial year 2011–12, NSETECH earned net profit after tax of Rs 51.56 lakhs, as compared to net profit after tax of Rs 94.61 lakhs during 2010–11. As the profit is required to augment operational needs of the Company, the Board of NSETECH did not recommend any dividend to its shareholders.

6.6 National Commodity Clearing Limited

NCCL has completed the fifth full year of operations, since its commencement from September 1, 2006, in providing IT and process support to NCDEX in respect of its clearing and settlement of trades done in derivatives segment. The clearing and settlement covers contracts in 32 products ranging from agricultural commodities to base metals, ferrous metals, energy, polymers and precious metals. NCCL carries out funds settlement through 14 clearing banks.

During the financial year 2011–12, NCCL earned net profit after tax of Rs 106.06 lakhs, as compared to net profit after tax of Rs 99.54 lakhs during 2010–11. As the profit is required to augment operational needs of the Company, the Board of NCCL did not recommend any dividend to its shareholders.

7. Material Developments in Human Resources

Following developments have taken place in Human Resources / Industrial Relations front in the Financial Year 2011-12 :-

1) Job Description and Job Evaluation: NSEIL has undertaken a study on Job Description and Job Evaluation in the FY 2011-12 in association with Pricewaterhouse coopers. NSEIL has drafted Job descriptions for 106 unique positions across the Company and accordingly evaluated the positions in terms of its relative worth. The recommendation of the study is been implemented in the Company in terms of organisational restructuring.

2) Employee Engagement Study: The Company has undertaken a study on the Employee Engagement levels in association with Great Place to work. The HR Policies of NSEIL was also audited as part of the culture audit process by Great Place to work team. Based on the report, the Company has devised the action plan to work on the recommendations of Great Place to Work team. The Company has conducted communication sessions to inform the employees on the action plans for the Company to improve the engagement levels. The Company has started various Employee Engagement Initiatives to raise the engagement levels of the employees across the organisation. Some of them are NSE’s participation in Standard Chartered Bank’s Mumbai Marathon 2012, employees’ participation in the investothon, zumba training, Kick boxing training, employee appreciation corner, coffee day express outlet, dental awareness and check up camp, cancer awareness program and various Staff Welfare initiatives so as to build synergy among the various teams.

3) Talent Management and Development: During the Financial

Year 2011-12, NSEIL has focused on the implementation of the Talent Management Study undertaken in the previous financial year. The Company has mapped the behavioral and functional competencies to the training need identification process. In line with the Business Strategy, the Company has continued to focus on the functional and behavioral training based on the individual and the organisational need. In the past year, the Company has focused more on the Regional offices to meet their strategic learning & development needs. Based on the Talent Assessment vis –a vis the Strength finder mechanism, the Company has identified High Potential employees and plotted them on the Performance – Potential grid. The Company is working on their career pathing for their career development.

4) Employee Relations: The employee relations scenario has been harmonious throughout the period under consideration.

The employee strength as on March 31, 2012 is 519.

8. Corporate Governance

The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements.

The Company being an unlisted Company has voluntarily adopted compliance of corporate governance norms provided in Clause 49 of the Listing Agreement applicable to the Companies which are listed with the Stock Exchanges. A report on corporate governance for the financial year 2011-12 is accordingly furnished as part of the Annual Report for the information of all its stakeholders. The certificate from a Practicing Company Secretary confirming compliance with the conditions of Corporate Governance as stipulated under clause 49 of Listing Agreement, is also attached with the above report.

9. Management Discussion and Analysis Report

Management’s Discussion and Analysis Report for the year under review is presented in a separate section forming part of the Annual Report.

10. Corporate Social Responsibility (CSR) Initiatives

Your Company, being an integral part of society, recognises its corporate social responsibilities and has been engaged in various CSR initiatives. Several energy efficiency measures have been taken to reduce the consumption of energy and promote use of renewable energy. The details of various energy conservation measures taken by your Company are given under the heading ‘Conservation of energy, technology absorption and foreign exchange earnings/outgo’ in the Directors’ Report.

11. Directors

Mr. Y. H. Malegam, Dr. K.R.S Murthy, Dr. V.A. Sastry retire by rotation at the ensuing Annual General Meeting and are eligible for reappointment subject to approval of SEBI .

Mrs. Shyamala Gopinath was appointed as a Public Interest Director on the Board of NSEIL with effect from March 5, 2012. Mrs. Bhagyam Ramani and Mr. Anjan Barua ceased to be the Directors of the Company consequent upon their resignations from the Board with effect from February 1, 2012 and March 22, 2012 respectively. The Board regrets to report the sad demise of Dr. R. H.Patil, a member of the Board and former Managing Director of NSEIL, on April 12, 2012 and Mr. C. Achuthan, a member of the Board, on September 19, 2011 and their consequent cessation as Directors of the Company.

The Board wishes to place on record its sincere appreciation and gratitude for their valuable contribution made during their tenure as Directors.

12. Directors’ Responsibility Statement

Your Your Directors confirm that – i. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any; ii. the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year i.e., 31st March, 2012 and of the profit of the Company for that year; iii. the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and iv. the Directors had prepared the annual accounts on a going concern basis.

13. Audit Committee

The Audit Committee comprises four Directors viz., *Dr. R. H. Patil, Mr. Y. H. Malegam, Mr. A. P. Kurian and Dr. V. A. Sastry as its members. Mr. Y. H. Malegam is the Chairman of the Audit Committee. The Committee met four times during the year i.e., on April 28, 2011, August 02, 2011, November 14, 2011 and January 17, 2012. The details of the attendance of members of the Audit Committee at their meetings held on the above dates are given in Table 17 hereunder:-

Table 17

Name	Number of meetings held during the year	Number of meetings attended during the year
*Dr. R. H. Patil	4	4
Mr. Y. H. Malegam	4	4
Mr. A. P. Kurian	4	4
Dr. V. A. Sastry	4	3

*Dr. R. H. Patil ceased to be the Chairman of the Committee wef April 12, 2012 consequent upon his demise

14. Auditors

M/s. Khandelwal Jain & Co., Chartered Accountants, Auditors of the Company, retire at the forthcoming Annual General Meeting of the Company and are eligible for re-appointment. The Company has received a certificate from the Auditors to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224 (1B) of the Companies Act, 1956. Their re-appointment is required to be made by a Special Resolution pursuant to Section 224A of the Companies Act, 1956.

15. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings / Outgo

a) Conservation of Energy, Technology Absorption

As the Company does not fall under any of the industries listed out in the schedule appended to Companies (Disclosure of Particulars in the report of the Board of Directors) Rules, 1988, particulars required to be disclosed with respect to conservation of energy and technology absorption in terms of Section 217(1)(e) of the Companies Act, 1956, read with the aforesaid Rules are not applicable to the Company.

However, NSEIL continues to use the following major technological initiatives towards ‘‘Effective Energy Conservation’’ as well as ‘‘Load Management System’’

1) ‘Thermal Energy Storage System for air-conditioning system during the peak hours.

2) ‘Building Management System for automation in operations of services in the building.

3) ‘Lighting Transformers’ for regulated voltage of Lighting system.

4) ‘Electronic Ballast and Compact Fluorescent Lamps’ in lighting system.

5) ‘Automatic Power Factor Control Units’ to step up power factor of the building.

6) ‘Solar Power Plant’ which harnesses the solar power to cater the part of lighting load at Exchange Plaza.

7) ‘Rain Water Harvesting System’ to harvest the rain water in the periphery of Exchange Plaza.

8) ‘Sewerage Treatment Plant’ to reuse buildings domestic and flushing water (i.e. after treatment) for its Cooling Towers associated with HVAC System and for Gardening purposes every day.

9) ‘Vermiculture Plant’ wherein compostable material like food waste collected from canteen, garden organics and paper & cardboard gets collected and post processing into vermiculture unit manure get generated and used for gardening purposes.

In its pursuit of building a system for effective energy conservation, NSEIL has used the following further technological initiatives during the year:-

1) The ‘Tire-IV compatible Services Design’ for new Data Centres to ensure that the ‘Power Utilisation Effectiveness’ (PUE) of new Data Centre does not exceed the benchmarked PUE of 1.7.

2) Participating in ‘Demand Response Event’ programme as and when conducted by M/s. Tata Power Co. (TPC) whereby NSE reduces power consumption at Exchange Plaza for 2 hours in a given time slot of a day as directed by TPC.

3) Wind Energy System – In addition to various power saving measures being undertaken at the building, NSE also undertaken a study to ascertain the possible alternatives of energy conservation including sourcing of energy from natural resources which is environment friendly (i.e. Green Power). In that direction, Wind Energy Project of the capacity of 6 MW is under study to set off around 65 % of energy consumption at Exchange Plaza building.

b) Foreign Exchange earnings/ outgo during the year under review:

The foreign exchange earnings during the year were Rs 15.63 crores whereas the foreign exchange outgo during the year was Rs 12.71 crores.

16. Statement of Particulars of Employees covered under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 is annexed. 17. Your Directors are grateful for the support and co-operation extended by the Government of India, Securities and Exchange Board of India and Reserve Bank of India. Your Directors would like to place on record their sincere appreciation of support provided by the shareholders and also their deep appreciation of the contribution made by employees at all levels to the continued growth of the Company.

	For and on behalf of the Board of Directors
Place: Mumbai	VIJAY KELKAR
Date: May 14, 2012	Chairman

ANNEXURE TO DIRECTORS REPORT

STATEMENT PURSUANT TO SECTION 217 (2A) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975.

Name & Qualifications	Age in years	Designation/ Nature of Duties	Remuneration Received ( Rs )		Experience (No.of years)	Date of Commencement of Employment	Last Employment
			Gross	Net
1 Mr. Ravi Narain M.A. (Eco.), MBA	56	Managing Director	78823011	41044947	33	April 15, 1994	Dy. General Manager, Industrial Development Bank of India
2 Ms. Chitra Ramkrishna B. Com, FCA	49	Joint Managing Director	56422505	29315535	27	October 15, 1994	Dy. Manager, Industrial Development Bank of India
3 Mr. J. Ravichandran B. Com, B.L.,FCS	51	Director (F&L) & Company Secretary	24690958	13621466	26	August 12, 1994	Dy. Secretary & Manager (Legal), Raymond Synthetics Limited
4 Mr. Yatrik Vin M.Com, AICWA	45	Senior Vice President	12565633	7250556	25	February 21, 2000	Manager (Finance & Accounts), Godrej & Boyce Mfg. Co. Ltd.
5 Mr. Ravi Varanasi B. Sc., ACA	49	Senior Vice President	13131530	8853925	25	July 3, 1995	Sr. Dy. Manager, Vysya Bank
6 Mr. R Nandakumar * B. Com., Grad. CWA, MBA, CAIIB, FIII	46	Senior Vice President	14780462	9955147	25	March 15, 1995	Staff Officer (Finance), Unit Trust of India
7 Ms. Kamala B.Com, ACA	46	Vice President	11607814	6666474	21	March 16, 2006	Vice President (Risk Mgmt. & Ops.), IL&FS Investsmart Limited
8 Mr. Chandrashekhar Mukherjee, B.Com, PGPM & IR	47	Vice President	9012922	6173879	19	April 09, 2010	Associate Vice President Bennett Coleman & Company Ltd.
9 Mr. Hari K. AICWA, ACS	45	Vice President	10378506	5850101	21	May 29, 1995	Cost Accountant, KCP Ltd.
9 Mr. Vidhu Shekhar PGDBM, CFA	47	Vice President	8914736	5075072	25	October 3, 2005	Sr. Vice President, IDBI Capital Market Services Ltd
11 Mr. T Venkat Rao B.Com., LL.B.	54	Vice President	9705572	6012956	30	December 21, 2000	Manager, Global Trust Bank Limited
12 Mr. Suresh Narayan # B.Com, Grad. CWA	42	Vice President	8202175	5594111	22	January 24, 2005	Manager, National Securities Depository Limited
13 Mr. Suprabhat Lala B. Sc.	45	Vice President	8671228	5942036	22	October 1, 2001	Sr. Vice President, Geojit Securities Ltd.
14 Mr. Chandrakant Upadhyay, ACA, LL.M	48	Asst. Vice President	6476091	3709978	20	September 16, 2004	Executive Director, Saurashtra Kutch Stock Exchange Limited
15 Mr. Mahesh Haldipur B.E. (Civil), AMIE	52	Asst. Vice President	6195878	3544073	29	April 25, 1995	Project Engineer, Tata Electric Company Limited

Notes:

1 Gross Remuneration includes Salary and other benefits, Companys contribution to Provident Fund, Superannuation Fund, taxable value of perquisites, etc. Net remuneration represents gross remuneration less Companys contribution to provident and superannuation funds, taxable value of perquisites, profession tax and income tax. Where applicable, the amounts also include certain allowances accrued during previous year(s) but claimed in the current year.

2 Mr. Ravi Narain was re-appointed as Managing Director for a period of three years with effect from April 1, 2010.

3 Ms. Chitra Ramkrishna was re-appointed as Deputy Managing Director for a period of five years with effect from April 1,2008. She was re-designated as Joint Managing Director with effect from September 1, 2009.

4 Other employees are in permanent employment of the Company on contractual basis governed by the employment terms & conditions and service rules.

5 None of the employees mentioned above is a relative of any Director.

6 Employees, in respect of whom Section 217 (2A) applies but are on deputation to subsidiary company and in respect of whom the remuneration is recovered, are shown under statement prepared under Section 217 (2A) of that subsidiary company to avoid duplication. Employee whose name has been marked with # is on deputation to two subsidiary companies and his remuneration has been shared amongst the two subsidiary companies. Employee whose name has been marked with * is also on deputation to subsidiary company and in respect of whom the proportionate remuneration recovered from the subsidiary company is shown in the statement prepared under Section 217 2(A) of that subsidiary company.

7 None of the employees is holding equity share(s) in the Company within the meaning of sub-clause (iii) of clause (a) of sub-section (2A) of Section 217 of the Companies Act, 1956.

8 The Company does not have any Employees Stock Option Plan(ESOP) Scheme for its employees.