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Q1 Earnings Conference Call

Friday, July 31, 2015

Rediff.com India Limited Q1 2015-2016 Earnings Conference Call
July 31, 2015

Moderator: Good morning, ladies and gentlemen. My name is Sourodip and I am the moderator for this conference. Welcome to Rediff.com India Limited’s Fiscal Q1 2015-2016 earnings conference call. I would like to hand over to Mr. Mandar Narvekar. Thank you and over to you.

Mandar Narvekar: Thank you Sourodip. Good morning everyone and thank you for being with us to discuss Rediff.com’s financial results for the first fiscal quarter ended June 30, 2015.

I would like to introduce you to the members of management present on this call, who will take you through the highlights of the company’s performance. We have with us Mr. Ajit Balakrishnan, Chairman and CEO; and Mr. Swasti Bhowmick, CFO.

For your immediate reference, we have also posted the earnings release for the first fiscal quarter ended June 30, 2015, dated today, on our website at investor.rediff.com. You may also call our Indian office at +91 22-6182-0000, and we will be glad to fax or email you a copy during the course of this call.

Before proceeding, I would like to mention that during the conference call, except for the historical information and discussions contained herein, statements may constitute forward-looking statements for the purpose of the safe harbor provision under the US Private Securities Litigation Reform Act of 1995.

Forward-looking statements may be identified by the use of forward-looking terminology such as may, will, expect, believe, will continue, anticipate, estimate, intent, plan, contemplate, seek to, future, objective, goal, project, should, will perceive or similar terms, variations of those terms or the negatives of those terms.

These statements involve a number of risks, uncertainties, and other factors that can cause actual results to differ materially from those that may be projected by the forward-looking statements.

These risks and uncertainties include but are not limited to a slowdown in the economy worldwide and in the sectors in which our clients are based, a slowdown in internet and IT sectors worldwide, competition, the success or failure of our past or future acquisitions, attracting, recruiting and retaining highly skilled employees, technology, acceptance of new products or services, the development of broadband Internet and 3G networks in India, legal and regulatory policies, managing risks associated with customer products and a widespread acceptance of the internet.

Listeners should review the risk factors contained in our latest annual report on Form 20-F and other reports filed by Rediff.com with the U.S. Securities and Exchange Commission from time to time. These reports are available on the SEC website, from the SEC’s offices in Washington D.C. and on request by emailing us at investor.rediff.co.in
Rediff.com and its subsidiaries may from time to time make additional written and oral forward-looking statements. Rediff.com and its subsidiaries do not undertake to update any forward-looking statements that may be made from time to time by Rediff.com or on its behalf.

Please also note that the results presented today include results that are on a non-GAAP basis. A full reconciliation table of the non-GAAP measures to GAAP measures can be found in the Company press release issued earlier today.

These financial measures are included for the benefit of investors and should be considered in addition to and not instead of GAAP measures.

Swasti Bhowmick, Chief Financial Officer of Rediff.com, will now take you through the highlights of the company’s performance this quarter ended June 30, 2015 and this will be followed by an address by our Chairman and CEO, Mr. Ajit Balakrishnan.

Swasti Bhowmick: Thank you everyone for joining us on the call this morning. We appreciate your interest in our Company. I will take your through our Company’s performance this quarter before passing the call over to Mr. Ajit Balakrishnan, our Chairman and CEO, who will conclude the call.

As I mentioned in the previous quarter, our objective is to position Rediff to take advantage of the surge in internet usage as the transition to mobile based internet access continues. And this implies that our efforts in product development, marketing and operations are aimed at preserving our reach amongst the PC based users, reducing operational expenditure and developing new products which will help us grow our user base on mobile.

As we have seen in the past few quarters, Display advertising has continued to face headwinds with a 20% decline in the quarter ended June 30, 2015 as compared to the same quarter in the previous year. This is part of a longer term industry trend in India and Worldwide, and underscores the importance of our strategy to balance our portfolio by growing our ability to monetize the online marketplace, which will be an even more important source of revenue when the user base moves onto mobile.

We have made progress in this direction. In the revenue mix, on a quarter over quarter basis, we have held the share of revenues from marketplace at 28%. On the cost front, we are pleased to have significantly reduced total expenditures while retaining our focus on long-term growth initiatives. We have managed to bring down operational costs by 39% in the quarter ended June 30, 2015 as compared to the same quarter last year. These measures have helped us reduce the net loss for the quarter ended June 30, 2015 by 50% as compared to the net loss in the same quarter last year. And our gross margin is 29% in the quarter ended June 30, 2015.

In our marketplace business, we have a healthy 27% take rate (defined as fees earned as a percentage of value of products transacted) at the end of the June 30, 2015 quarter. The current take rate per approved order among our own users is better than what we get from users acquired through paid campaigns. Our goal is to drive the marketplace revenue further by increasing the order conversion among our own visitors, which is currently at 0.17% with significant room for growth.

In our continued efforts to rollout new services for our PC-based users and future mobile users, we are Beta testing Rediffmail CRM Lite, a cost effective CRM product for small and medium enterprises with a field force. The product enables merchants to store sales records, emails and contact details all in one place. The interface is simple and easy to use as compared to some of the more established CRM modules, and is accessible from almost all types of mobile devices, specifically designed to meet the needs of the sales personnel who are constantly on the move. Merchants can view complete details of the prospects, monitor their team’s sales funnels in near real time and generate customized reports in CSV formats. We are very excited to gather feedback for Rediffmail CRM Lite and believe that tapping into the growing need for workplace mobility in small and medium business puts us ahead of the curve technologically and is an important element in our strategy to identify and proactively target industry trends.

Our user base as measured by ComScore Media Metrix in June 2015 has continued to grow 17% year on year in unique user terms and now reaches 16.2 million users which is 20% of all Indians accessing the internet via a personal computer. At 21 mins per user per month, the present user engagement on our site, is better than that of sites like Twitter (12 mins/user) as reported by ComScore Media Metrix in India.

We have published the details of our financial results for the quarter ended June 30, 2015 in the press release dated today. A quick summary of the financial performance is as follows:

1. Overall revenues for the quarter ended June 30, 2015 were $3.29 million, down 19% over the corresponding quarter last fiscal year.
2. Operating expenses for the quarter ended June 30, 2015 were down by 39% at $2.86 million, as compared to $4.70 million for the same quarter.
3. Operating EBITDA showed a loss of $1.92 million for the quarter ended June 30, 2015, as compared to an Operating EBITDA loss of $3.44 million for the corresponding quarter last year.
4. Net loss per ADS for the quarter was $0.063, as compared to net loss per ADS of $0.126, for the same quarter last fiscal year.

Total cash and cash equivalents stood at $7.6 million (Rs. 488 million) as of June 30, 2015, as compared to $8.39 million (Rs. 525 million) as of March 31, 2015, which at the present rate should be enough to meet our requirement for six quarters. In addition, we have at our disposal an ability to draw on up to US$ 15 million through the sale of additional ADSs.

I would now like to turn the call over to Mr. Balakrishnan.

Ajit Balakrishnan: Good morning to you all. Our strategy to decrease the Company’s dependence on display advertising and increase our fee-based revenues started to take hold this quarter and we are pleased to report that approximately 28% of revenue is now generated by Rediff’s online marketplace. Our efforts are directed at leveraging our media business customer base to increase traffic on our e-commerce platform.

Currently only 0.17% of the website visitors shop on our marketplace, which leaves us ample opportunity for growth even among our current users. We hope that, with our improved recommendation algorithm and a more extended merchant base, we can continue to grow this consumer base.

We believe that deployment of our proprietary data analytics software and data driven algorithms, which improves customer service and enables quick approval of cash on delivery orders and customized product recommendations, separates us from the competition in the industry and this has resulted in a high marketplace ‘take rate’ of 27%, defined as fees earned as a percentage of total transaction.

In our Paid Enterprise Email business, which was voted the best enterprise email solution in India by top Chief Information Officers, we are now beta testing Rediffmail CRM Lite, a CRM product that enables small and medium enterprises with a field force to track their sales performance and is specifically designed to work across multiple mobile devices.

Our high engagement rates and the strong reputation of our email platform among Chief Information Officers, combined with the growing population and increasing technological capabilities in India, puts Rediff in a strong position to grow and expand its business.

With 16.2 million users, we have a significant reach of 21% among all internet users in India as measured by ComScore. Our goal is to maintain the same reach on mobile when the expected user explosion happens. All our efforts, including product development, marketing and operations, are focused on driving our reach and engagement in the context of this anticipated growth in the mobile internet usage.

I thank you all for joining us on this call.

Mandar Narvekar: Thank you, Mr Balakrishnan. We would like to again inform everyone that we have posted the details of our financials for the fiscal first quarter ended June 30, 2015 on our website at investor.rediff.com and we will also file such details with the SEC on a Form 6-K. You are welcome to email us any questions you may have and we will gladly post the answers to all appropriate questions on our investor website for everyone’s reference.

I once again thank you all for joining us on this call.

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