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Directors Report of IDFC Ltd.

Mar 31, 2015

Dear Members,

The Directors have pleasure in presenting the Eighteenth Annual Report on the business and operations of the Company together with the audited financial statements for the financial year ended March 31,2015.

The Company''s financial performance, for the year ended March 31, 2015 is summarised on the facing page.

OPERATIONS REVIEW

Your Company is engaged inter alia in the business of financing infrastructure projects in sectors like energy, telecommunication, transportation, commercial and industrial projects including hospitals, education, tourism and hotels.

Balance Sheet grew by 17% Year on Year (YoY) to reach H 86,520 crore and Net Loans at H 52,427 crore witnessed a reduction of 10% YoY As on March 31,2015, IDFC''s total exposure was H 75,573 crore, of which Energy was highest at 37%, followed by Telecommunication 24%, Transportation 24%, and Others 15%.

DIVIDEND

Your Directors are pleased to recommend a dividend of H 2.60 per equity share of H 10 each (i.e. 26%) for the year ended March 31,2015.

The Register of Members and Share Transfer Books will remain closed from July 25, 2015 to July 30, 2015 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31,2015.

Dividend will be paid to those Members whose names appear in the Register of Members as on July 24, 2015; in respect of shares held in dematerialised form, it will be paid to those Members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date.

Above dividend would be paid subject to approval by the Members at the ensuing Annual General Meeting ("AGM").

DEMERGER

IDFC Limited ("IDFC" or "the Company") was granted an In-principle approval by the Reserve Bank of India on April 9, 2014 ("RBI In-Principle Approval") to set up a new bank in the private sector under Section 22 of the Banking Regulation Act, 1949. Accordingly, a new company namely IDFC Bank Limited

("IDFC Bank" ) was incorporated on October 21,2014.

The terms and conditions contained in the RBI in principle approval and the Guidelines for Licensing of New Banks in the Private Sector dated February 22, 2013 ("RBI New Banking Guidelines") requires IDFC to transfer all lending and financing business ("Financing Undertaking") to IDFC Bank. Accordingly, the Financing Undertaking is to be demerged into IDFC Bank pursuant to a Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956 ("Demerger Scheme").

IDFC Bank will, without any further act or deed, issue and allot to the Shareholders of IDFC whose name is recorded in the register of members of IDFC as on the Record Date, equity shares of IDFC Bank in the ratio of one (1) equity share having a face value of H 10 each of IDFC Bank for every one (1) equity share having a face value of H 10 each of IDFC, each equity share being fully paid-up.

On completion of demerger, equity share capital of IDFC Bank will be held approximately 53% by IDFC Financial Holding Company Limited ("IDFC FHCL''), a 100% subsidiary of IDFC and approximately 47% by the Shareholders of IDFC (as on the Record Date).

The Board of Directors of the Company at its meeting held on October 30, 2014 approved the Demerger Scheme.

The Shareholders of IDFC at the Court Convened Meeting held on April 9, 2015 unanimously approved the Demerger Scheme. The Hon''ble High Court of Judicature at Madras, vide it''s Order dated June 25, 2015, has sanctioned the Demerger Scheme.

The Demerger Scheme will be effective inter alia upon receipt of final approval from the RBI for undertaking banking operations. After the Scheme becoming effective, the shares of IDFC Bank will be listed on National Stock Exchange of India Limited ("NSE") and BSE Limited ("BSE").

SUBSIDIARY COMPANIES

IDFC has nine direct subsidiary companies, as on date which are as follows:

- IDFC Financial Holding Company Limited

- IDFC Alternatives Limited

- IDFC Trustee Company Limited

- IDFC Projects Limited

- IDFC Finance Limited

- IDFC Securities Limited

- IDFC Asset Management Company Limited

- IDFC AMC Trustee Company Limited

- IDFC Foundation (a Company within the meaning of Section 8 of the Companies Act, 2013)

In addition,

a. IDFC Financial Holding Company Limited has a wholly owned subsidiary company namely IDFC Bank Limited.

b. IDFC Alternatives Limited has one wholly owned subsidiary company, namely IDFC Capital (Singapore) Pte. Limited.

c. IDFC Securities Limited has two wholly owned subsidiary companies namely IDFC Securities Singapore Pte. Limited and IDFC Capital (USA) Inc.

d. IDFC Asset Management Company Limited has one subsidiary, namely IDFC Investment Managers (Mauritius) Limited.

e. IDFC holds 49% stake in IDFC Infra Debt Fund Limited and the remaining 51% is held by IDFC Alternatives Limited and IDFC Finance Limited.

During the year under review the following changes took place in the group corporate structure of your Company:

1. On August 28, 2014, the entire equity stake in IDFC Primary Dealership Company Limited and IDFC Housing Finance Company Limited which was held by IDFC was transferred to IDFC Alternatives Limited, thereby making the said companies wholly owned subsidiaries of IDFC Alternatives Limited.

On September 26, 2014, the Scheme of Amalgamation under Sections 391 to 394 of Companies Act, 1956 was filed with the Hon''ble High Court of Bombay to amalgamate IDFC Project Equity Company Limited, IDFC Housing Finance Company Limited and IDFC Primary Dealership Company Limited (the wholly owned subsidiaries of IDFC Alternatives Limited) with IDFC Alternatives Limited. The Hon''ble High Court of Bombay approved the amalgamation of the above entities on January 30, 2015 and the merger became effective post filing of the court order with the Registrar of Companies on March 12, 2015, with appointed date October 1,2014.

2. On September 29, 2014, the entire equity stake held by IDFC in Galaxy Mercantiles Limited and Neopro Technologies Private Limited were sold.

3. IDFC Bank Limited was incorporated as a wholly owned subsidiary of IDFC on October 21, 2014.

4. IDFC Financial Holding Company Limited was incorporated as a wholly owned subsidiary of IDFC on November 7, 2014.

On December 26, 2014, the entire equity Stake of IDFC Bank Limited which was held by IDFC was transferred to IDFC Financial Holding Company Limited, thereby making IDFC Bank Limited wholly owned subsidiary of IDFC Financial Holding Company Limited.

5. An application was filed with Hon''ble High Court of Bombay for merger of IDFC Investment Advisors Limited with IDFC Asset Management Company Limited on November 26, 2014. The Hon''ble High Court of Bombay approved the amalgamation of the above entities on April 18, 2015 and merger became effective post filing of the court order with the Registrar of Companies on June 23, 2015, with appointed date April 1, 2015.

6. On December 12, 2014, an application for voluntary winding up of IDFC Fund of Funds Limited was filed with the concerned regulatory authority and the same was dissolved.

7. IDFC Infra Debt Fund Limited was incorporated on March 7, 2014 as a wholly owned subsidiary of IDFC Limited, an Infrastructure Finance Company ("IFC"). As per RBI guidelines prescribed for Infra Debt Fund ("IDFs"), Sponsor IFCs would be allowed to contribute a maximum up to 49% of the equity capital of IDF NBFCs. Accordingly, IDFC Infra Debt Fund Limited made a preferential allotment to two of the wholly owned subsidiaries of IDFC Limited namely IDFC Alternatives Limited and IDFC Finance Limited. Post preferential allotment, IDFC holds 49% stake in IDFC Infra Debt Fund Limited and the remaining 51% is held by IDFC Alternatives Limited and IDFC Finance Limited.

8. On March 26, 2015, the entire equity stake of IDFC Capital (Singapore) Pte. Limited was transferred from IDFC Securities Limited to IDFC Alternatives Limited.

The Board of Directors of IDFC reviews the affairs of its subsidiary companies regularly.

In accordance with the provisions of Section 129(3) of the Companies Act, 2013, the Company has prepared Consolidated Financial Statement including requisite details of all the subsidiaries. Further, a statement containing the salient features of the financial statement and all other requisite details of all the subsidiary companies in the format AOC-I is appended as Annexure 1. The statement also provides details of performance, financial positions of each of the subsidiaries.

In accordance with Section 136 of the Companies Act, 2013, the audited Financial Statements together with the Consolidated Financial Statement and related information of the Company and audited accounts of each subsidiary company are available on the website of the Company www.idfc.com.

Detailed analysis of the performance of IDFC and its businesses, including initiatives in the areas of Risk Management, Human Resources, Information Technology and IDFC Foundation activities, has been presented in the section on Management Discussion & Analysis of this Annual Report.

JOINT VENTURES

IDFC Foundation, a Section 8 Company within meaning of the Companies Act, 2013 and a wholly owned subsidiary of the Company has following three Joint Ventures:

- Delhi Integrated Multi-Modal Transit System Limited ("DIMTS")

- Infrastructure Development Corporation (Karnataka) Limited ("iDeCK")

- Uttarakhand Infrastructure Development Company Limited ("UDeC")

ASSOCIATES

IDFC has two associate companies namely Feedback Infra Private Limited and Millennium City Expressways Private Limited.

During the year, the Company acquired 29.98% equity stake in Millennium City Expressways Private Limited.

In addition, IDFC Projects Limited, a wholly owned subsidiary of the Company, has one associate company namely Jetpur Somnath Tollways Private Limited.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

IDFC had 529 employees as on March 31,2015 and 881 employees at the group level.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in this Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the Registered Office and Corporate Office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure 2.

SHARE CAPITAL UPDATE

During the year, the Company issued and allotted 3,494,615 equity shares of the Company to eligible employees of IDFC and its subsidiaries on exercise of options granted under Employee Stock Option Scheme 2007.

On September 16, 2014, the Company raised an amount of over H 1,000 crore by allotment of 73,000,000 equity shares of the Company by way of Qualified Institutional Placement to Domestic Institutions. This issue of capital was required to achieve domestic company status and bring down the foreign shareholding in IDFC below 50% as required by RBI New Banking Guidelines.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

Pursuant to the resolution passed by the Members at the AGM held on August 2, 2006, IDFC had introduced Employee Stock Option Scheme 2007 ("the ESOS Scheme") to enable the employees of IDFC and its subsidiaries to participate in the future growth and financial success of the Company. Out of 32,889,410 Options outstanding at the beginning of the current financial year, 1,209,752 Options lapsed on account of cancellations and 3,494,615 Options were exercised during the year.

Additionally, during the year, 3,300,000 Options were granted to eligible employees under the ESOS Scheme. Accordingly, 31,485,043 Options remain outstanding as of March 31,2015.

All Options vest in graded manner and are required to be exercised within a specific period. The Company has used the intrinsic value method to account for the compensation cost of stock to employees of the Company. Intrinsic value is the amount by which the quoted market price of the underlying share on the date, prior to the date of the grant, exceeds the exercise price on the Option.

Disclosures as required by Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are appended as Annexure 3.

MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE

In compliance with the provisions of Clause 49 of the Listing Agreement, separate detailed chapters on Management Discussion & Analysis, Report on Corporate Governance and Additional Shareholder Information forms part of this Annual Report.

BUSINESS RESPONSIBILITY REPORT

SEBI, through its circular CIR/CFD/DIL/8/2012 dated August 13, 2012, mandated inclusion of Business Responsibility Report ("BRR") as part of the Annual Report for top 100 listed entities based on market capitalisation at BSE and NSE as on March 31 2012.

In compliance with the said circular, a separate report called BRR forms part of this Annual Report which is hosted on the Company''s website: http://www.idfc.com/ investor_relations/annual_report.htm

PUBLIC DEPOSITS

During FY15, your Company has not accepted any deposits from the public within the meaning of the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 or under Chapter V of the Companies Act, 2013.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Pursuant to Section 186(11) of the Companies Act, 2013 loans made, guarantees given or securities provided or acquisition of securities by a company engaged in the business of financing of companies or of providing infrastructural facilities in the ordinary course of its business are not applicable, hence not given.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

IDFC had already adopted a Whistle Blower Policy, which included reporting to the Management instances of unethical behaviour, actual or suspected fraud or violation of the Company''s Code of Conduct or Ethics Policy. The Whistle Blower Policy had been modified in light of the new provisions prescribed under the Companies Act, 2013 to ensure that the Audit Committee directly oversees the Vigil Mechanism.

The details of Vigil Mechanism are posted on the website of the Company www.idfc.com

FOREIGN EXCHANGE

The particulars regarding foreign exchange expenditure and earnings are furnished at Item Nos. 29 & 30 in the Notes forming part of the Standalone Financial Statements.

PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Since the Company does not carry out any manufacturing activity, the particulars regarding conservation of energy, technology absorption and other particulars as required by the Companies (Accounts) Rules, 2014 are not applicable.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

In accordance with the Articles of Association of the Company and pursuant to the provisions of Section 152 of the Companies Act, 2013,

Mr. Joseph Dominic Silva (DIN: 06388807)

would retire by rotation at the ensuing AGM and being eligible, offers himself for reappointment.

During the year, Mr. Shardul Shroff, Independent Director ("ID") of the Company resigned from the Board with effect from June 3, 2014. The Board placed on record its appreciation for the valuable services rendered by him during his tenure as an ID of the Company.

Based on the recommendation of Nomination and Remuneration Committee ("NRC") of the Company and subject to the approval of the Members at the AGM, the Board of Directors of the Company at its meeting held on June 3, 2014, accorded its consent to appoint Mr. S. H. Khan (DIN: 00006170), Mr. Gautam Kaji (DIN: 02333127) and Mr. Donald Peck (DIN: 00140734) as IDs of the Company under the Companies Act, 2013, for a period of two (2) consecutive years to hold office from the conclusion of

the 17th AGM till the conclusion of the 19th AGM of the Company. The Shareholders of the Company at the 17th AGM held on July 29, 2014 approved the appointment of Mr. S. H. Khan, Mr. Gautam Kaji and Mr. Donald Peck as IDs of the Company.

Based on the recommendation of NRC, the Board of Directors at its meeting held on January 29, 2015 accorded its consent to appoint remaining IDs namely Mr. S. S Kohli (DIN: 00169907), Ms. Marianne 0kland (DIN: 03581266) and Dr. Omkar Goswami (DIN: 00004258) as IDs of the Company under the Companies Act, 2013, for a period of three (3) consecutive years to hold office till the conclusion of the 20th AGM of the Company. The Shareholders of the Company approved the appointment of Mr. S. S. Kohli, Ms. Marianne 0kland and Dr. Omkar Goswami as IDs of the Company by way of Postal Ballot on March 30, 2015.

Based on the recommendation of the NRC of the Company and subject to the approval of the Members at the AGM, the Board has, on June 30, 2015, appointed Mr. Vinod Rai (DIN: 01119922) as an Additional Director in the category of Independent Director of the Company. It is proposed to appoint him for a period of three (3) consecutive years at the ensuing AGM to hold office from the conclusion of the 18th AGM till the conclusion of the 21st AGM of the Company.

The Company has received a declaration from the aforesaid Directors, at the time of appointment and also on or before first meeting of the Board of Directors held in FY15, that they meet the criteria of independence specified under sub-section (6) of Section 149 of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Qualification of Directors) Rules 2014, for holding the position of ID and that they shall abide by the "Code for Independent Directors" as per Schedule IV of the Companies Act, 2013.

The Board at its meeting held on June 3, 2014 identified the following officials as Key Managerial Personnel pursuant to Section 203 of the Companies Act, 2013:

1. Mr. Vikram Limaye - Managing Director & CEO

2. Mr. Sunil Kakar - Chief Financial Officer

3. Mr. Mahendra N. Shah - Company Secretary

BOARD AND AUDIT COMMITTEE

During the year six Board Meetings and four Audit Committee Meetings were held.

Audit Committee comprises of Mr. S. H. Khan-Chairman (DIN: 00006170),

Ms. Marianne 0kland (DIN: 03581266),

Mr. Gautam Kaji (DIN: 02333127), Dr. Omkar Goswami (DIN: 00004258) and Ms. Snehlata Shrivastava (DIN: 06478173).

All the recommendations made by the Audit Committee during the year were accepted by the Board.

The details of the constitution and meetings of the Board and the Committees held during the year are provided in the Corporate Governance Report which forms part of this Annual Report.

BOARD EVALUATION

The process indicating the manner in which formal annual evaluation of the Directors,

Board and Board level committees are given in detail in the Corporate Governance Report, which forms part of this Annual Report.

NRC / REMUNERATION POLICY

The Company has a policy in place for identification of Independence, Qualifications and positive attributes of Directors. IDFC is in the process of developing a Remuneration Policy for the Directors, Key Managerial Personnel, Senior Management and Other Employees.

The remuneration of the Executive Directors is recommended by NRC to the Board for their approval.

SPECIAL BUSINESS

The Board of Directors recommends the following items under special business for approval of the Shareholders at the ensuing AGM:

a. Appointment of Mr. Vinod Rai (DIN: 01119922) as a Director in the category of Independent Director, of the Company, for a period of three (3) consecutive years to hold office from the conclusion of the 18th AGM till the conclusion of the 21st AGM of the Company,

b. Approval to offer & issue non-convertible securities under Private Placement.

AUDITORS

Deloitte Haskins & Sells LLP Chartered Accountants ("DHS") (Registration No. 117366W / W-100018), will retire as the Statutory Auditors of the Company at the ensuing AGM.

DHS, the retiring auditors, have confirmed that their appointment, if made, would be in conformity with the provisions of Section 139(1) read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and Section 141 of the Companies Act, 2013, and have given their consent to be appointed.

The approval of the Members is requested, by passing an Ordinary Resolution, to reappoint DHS as Statutory Auditors of the Company for a period of 1 (one) year, to hold office from the conclusion of this AGM up to the conclusion of the next AGM of the Company.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed BNP & Associates, Company Secretaries to undertake the Secretarial Audit of the Company for FY15.

The Secretarial Audit Report is appended as Annexure 4.

INTERNAL CONTROL SYSTEMS

The Company has in place, adequate systems of Internal Control to ensure compliance with policies and procedures. It is being constantly assessed and strengthened with new / revised standard operating procedures and tighter Information Technology controls. Internal audits of all the business units of the Company are regularly carried out to review the Internal Control Systems. The Audit Reports of Internal Auditors i.e. KPMG along with their recommendations and implementation contained therein are regularly reviewed by the Audit Committee of the Board.

KPMG verified the key Internal Financial Control by reviewing key controls impacting financial reporting and overall risk management procedures of the Company and found the same satisfactory. It was placed before the Audit Committee of the Company.

CONCURRENT AUDIT

KPMG has been appointed as Concurrent Auditors for FY16 to augment the existing internal control framework and ensure compliance to the policies and procedures as laid out by the Company. The scope of coverage includes the areas of Fixed Income Treasury, Proprietary Equity, Borrowing and Regulatory Compliance & Reporting.

RISK MANAGEMENT POLICY

IDFC has a robust risk management practice that enables it to book, manage and mitigate risks in its businesses. The Company has a comprehensive Enterprise Risk Management framework which has been adopted across all entities in the group and covers all three types of risks—credit, market and operational risks. The Board through its Risk Committee monitors and reviews Risk Management of the Company on a regular basis. Our Company has Board approved Group Operational Risk Management Policy which endeavours to lay down broad principles for operational risk management. The Risk Management Group is headed by the Chief Risk Officer. The details of Risk Management Framework are provided in Management Discussion and Analysis.

INSTANCES OF FRAUD, IF ANY REPORTED BY THE AUDITORS

There have been no instances of fraud reported by the Auditors under Section 143(12) of the Companies Act, 2013.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNAL

The Hon''ble High Court of Judicature at Madras by an Order dated February 20, 2015 in Company Application No. 169, 170 and 171 of 2015 directed to convene the meeting of the equity Shareholders to approve the Demerger Scheme, dispensed with the convening and holding of the meeting of the secured creditors subject to fulfilling conditions and dispensed with the requirement of following the procedure under Section 101(2) of the Companies Act, 1956 by IDFC Limited. The Company has complied with the aforesaid Court Orders.

The Hon''ble High Court of Judicature at Madras, vide it''s Order dated June 25, 2015, has sanctioned the Scheme of Arrangement among IDFC Limited and IDFC Bank Limited and their respective Shareholders and Creditors under Sections 391 to 394 of the Companies Act, 1956.

ANTI SEXUAL HARASSMENT POLICY

The Company at its Board Meeting held on April 30, 2015 adopted a policy on Anti Sexual Harassment. There were no instances of Sexual Harassment that were reported during the period under review.

TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the applicable provisions of Companies Act, 1956 / 2013, the dividend / interest / refund of applications which remains unclaimed / unpaid for a period of seven years from the date of transfer to the unpaid dividend / interest / refund account was required to be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government and no claim shall lie against the Company.

Accordingly, an amount of H 12,34,533 being unclaimed / unpaid dividend for the year 2006-07 and which remained unpaid and unclaimed for a period of 7 years has been transferred by the Company to the IEPF.

The Company updates the details of unclaimed / unpaid dividend / interest on the Company''s website (www.idfc.com) and on MCA website (www.mca.gov.in) from time to time.

Further, the unpaid dividend amount pertaining to the financial year 2007-08 will be transferred to IEPF during FY16.

DIRECTORS'' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3) (c) of the Companies Act, 2013: t That in the preparation of the annual financial statements for the year ended March 31,2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

That such accounting policies have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profit of the Company for the year ended on that date except having regard to the Part C of schedule II of the Companies Act, 2013, the Company has reviewed its policy of providing for depreciation on its tangible fixed assets on straight line basis. Previously straight line method was used for depreciating certain office equipment and leasehold improvements while other tangible fixed assets were depreciated using written down value method. t That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- That the annual financial statements have been prepared on a going concern basis;

- That proper internal financial controls were in place and that the financial controls were adequate and were operating effectively.

- That systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

GREEN INITIATIVE

In accordance with the ''Green Initiative'', the Company has been sending the Annual Report / Notice of AGM in electronic mode to those Shareholders whose e-mail Ids are registered with the Company and / or the Depository Participants.

Your Directors are thankful to the Shareholders for actively participating in the Green Initiative.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return in the prescribed Form No. MGT 9 is appended as Annexure 5.

CORPORATE SOCIAL RESPONSIBLITY

Corporate Social Responsibility Committee was constituted during the year comprising of Dr. Rajiv B. Lall, Chairman (DIN: 00131782);

Mr. Vikram Limaye (DIN: 00488534) and Dr. Omkar Goswami (DIN: 00004258). The disclosure of contents of the Corporate Social Responsibility Policy of the Company as prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014 is appended as Annexure 6.

RELATED PARTY TRANSACTION

In all related party transactions that were entered into during the financial year, an endeavour was made consistently that they were on an arm''s length basis and were in the ordinary course of business. IDFC has always been committed to good corporate governance practices, including matters relating to Related Party Transactions.

Pursuant to the provisions of Companies Act, 2013 and Rules made there under & recent amendments in Clause 49 of the Listing Agreement and in the back-drop of the Company''s philosophy on such matters, on the recommendation of the Audit Committee the Board approved "Policy on Related Party Transactions" at it''s meeting held on January 29, 2015. The said policy is also uploaded on the website of the Company.

Since all related party transactions entered into by the Company were in the ordinary course of business and were on an arm''s length basis, Form AOC-2 is not applicable to the Company.

ACKNOWLEDGEMENTS

We are grateful to the Government of India, State Governments, National Highways Authority of India, RBI, SEBI, Stock Exchanges, Hon''ble Madras High Court, Hon''ble Bombay High Court, various Ministries and other domestic and overseas regulatory bodies for their continuous collaboration and support.

We would like to thank all our Shareholders, Bondholders, Banks and Financial Institutions for their co-operation and assistance during the year under review.

We would like to express our deep sense of appreciation for the hard work and efforts put in by the employees at all levels of the Company.

For and on behalf of the Board

RAJIV B. LALL

Executive Chairman

Mumbai,

June 30, 2015


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting the Seventeenth Annual Report on the business and operations of the Company together with the audited accounts for the financial year ended March 31, 2014.

FINANCIAL RESULTS (STANDALONE) (RS. IN CRORE)

ARTICULARS FY14 FY13

Revenue from Operations 8,214.21 7,765.30

Other Income 17.72 11.19

Total Income 8,231.93 7,776.49

Less: Administrative Expenses * 237.95 249.21

Less: Provisions and Contingencies 628.83 394.11

Profit Before Finance Costs and Taxes 7,365.15 7,133.17

Less: Finance Costs 5,006.96 4,665.19

Profit Before Tax 2,358.19 2,467.98

Less: Tax Expenses ** 657.07 703.00

Profit After Tax 1,701.12 1,764.98

* Administrative Expenses include employee benefits expense, other expenses and depreciation and amortisation expense.

**Tax Expenses is net of deferred tax.

APPROPRIATIONS Transfer to Reserves:

Debenture Redemption Reserve 177.00 150.00

Special Reserve u/s. 36(1)(viii) of the Income-tax Act, 1961 423.00 400.00

Special Reserve u/s. 45-IC of the RBI Act, 1934 341.00 353.00

General Reserve 170.11 176.50

Dividend & Dividend Distribution Tax:

Proposed Dividend on Equity Shares 394.24 393.84 [Rs. 2.60 per share (Previous Year Rs. 2.60 per share)]

Dividend on Equity Shares pertaining to previous year 0.15 0.20

Tax on proposed Equity Dividend 67.00 63.04

Tax on Equity Dividend for previous year (4.75) (0.04)

OPERATIONS REVIEW

Your Company is engaged inter alia in the business of financing infrastructure projects in sectors like energy, telecommunication, transportation, commercial and industrial projects including hospitals, education, tourism and hotels.

Balance Sheet grew by 5.4% Year on Year (YoY) to reach C 73,764 crore and Net Loans at C 58,545 crore witnessed an increase of 5% YoY. As on March 31, 2014, IDFC''s total exposure was C 77,621 crore, of which Energy was highest at 37%, followed by Telecommunication 28%, Transportation 22% and Others 13%.

DIVIDEND

Your Directors are pleased to recommend a dividend of Rs. 2.60 per equity share of Rs. 10 each (i.e. 26 %) for the year ended March 31, 2014.

The Register of Members and Share Transfer Books will remain closed from July 19, 2014 to July 29, 2014 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2014.

Dividend will be paid to those Members whose names appear in the Register of Members as on July 18, 2014; in respect of shares held in dematerialised form, it will be paid to those Members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date.

Above dividend would be paid subject to approval by the Members at the ensuing Annual General Meeting ("AGM").

SUBSIDIARY COMPANIES

DFC Limited ("IDFC" or "the Company") has thirteen direct subsidiary companies which are as follows

- IDFC Alternatives Limited

- IDFC Trustee Company Limited

- IDFC Projects Limited

- IDFC Finance Limited

- IDFC Securities Limited

- IDFC Primary Dealership Company Limited

- IDFC Asset Management Company Limited

- IDFC AMC Trustee Company Limited

- IDFC Foundation (Section 25 Company under Companies Act, 1956)

- IDFC Housing Finance Company Limited

- IDFC Infra Debt Fund Limited

- Neopro Technologies Private Limited

- Galaxy Mercantiles Limited In addition,

a. IDFC Alternatives Limited has a wholly owned subsidiary company namely, DFC Project Equity Company Limited.

b. IDFC Securities Limited has four wholly owned subsidiary companies namely, IDFC Fund of Funds Limited, IDFC Capital (Singapore) Pte. Limited, IDFC Securities Singapore Pte. Limited and IDFC Capital (USA) Inc.

c. IDFC Asset Management Company Limited has two subsidiaries namely, IDFC nvestment Advisors Limited and IDFC nvestment Managers (Mauritius) Limited.

During the year under review, the following changes took place in the group corporate structure of your Company –

1. On August 23, 2013, the name of IDFC PPP Trusteeship Company Limited (subsidiary company of IDFC Foundation) was struck off from the Register of Registrar of Companies and was dissolved pursuant to Section 560 of the Companies Act, 1956 through Fast Track Exit Mode.

2. On October 18, 2013, the entire equity stake in IDFC Pension Fund Management Company Limited, which was held by IDFC and IDFC Asset Management Company Limited, was transferred to IDFC Securities Limited, thereby making IDFC Pension Fund Management Company Limited a wholly owned subsidiary of IDFC Securities Limited.

3. On November 16, 2013, the Scheme of Amalgamation under Sections 391 to 394 of Companies Act, 1956 was filed with the Hon''ble High Court of Bombay to amalgamate IDFC Distribution Company Limited, IDFC Capital Limited and IDFC Pension Fund Management Company Limited (the wholly owned subsidiaries of IDFC Securities Limited) with IDFC Securities Limited and their respective shareholders. The Hon''ble High Court of Bombay approved the amalgamation of the above entities on March 28, 2014.

4. By virtue of the above amalgamation, the subsidiaries of IDFC Capital Limited i.e. IDFC Fund of Funds Limited, IDFC Capital (Singapore) Pte. Limited and IDFC Securities Singapore Pte. Limited, became direct subsidiaries of IDFC Securities Limited.

5. IDFC Housing Finance Company Limited was incorporated as a wholly owned subsidiary of IDFC on March 4, 2014.

6. IDFC Infra Debt Fund Limited was incorporated as a wholly owned subsidiary of IDFC on March 7, 2014.

7. During the year, IDFC increased its share of investment in equity shares of Galaxy Mercantiles Limited from 43.44% in previous year to 100% in current year, and by virtue of the same, Galaxy Mercantiles Limited, which was earlier an associate company of IDFC, has now become a wholly owned subsidiary of IDFC.

Detailed analysis of the performance of IDFC and its businesses, including initiatives in the areas of Risk Management, Human Resources, Information Technology and IDFC Foundation activities, has been presented in the section on Management Discussion & Analysis of this Annual Report. The Ministry of Corporate Affairs ("MCA") vide its General Circular No. 2 / 2011 dated February 8, 2011 granted general exemption under Section 212(8) of the Companies Act, 1956, to companies from attaching accounts of its subsidiaries in its Annual Report subject to fulfilment of certain conditions prescribed therein. The Board of Directors of the Company at it''s meeting held on March 14, 2014, noted the provisions of the above mentioned circular of MCA and passed the necessary resolution granting the requisite approvals for not attaching copies of Balance Sheet, Statement of Profit and Loss, Reports of the Board of Directors and Auditors of each of the subsidiary companies to the accounts of the Company for FY14, subject to complying with the provisions of the said circular.

The Company undertakes that annual accounts of the subsidiary companies and the related detailed information will be made available to the Shareholders of the holding and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies will be available on the Company''s website: www.idfc.com and will also be available for inspection by any Shareholder at the Registered and Corporate Offices of the Company and the concerned subsidiaries. The Company shall furnish a hardcopy of details of accounts of subsidiaries to Shareholders on demand. In accordance with the requirements of Accounting Standard 21 (Consolidated Financial Statements) and Accounting Standard 23 (Accounting for Investment in Associates in Consolidated Financial Statements) notified by the Companies (Accounting Standards) Rules, 2006, the Consolidated Accounts of IDFC and its subsidiaries have been prepared and the same forms part of this Annual Report.

Statement of particulars of IDFC''s subsidiaries under Section 212 of the Companies Act, 1956 is provided in Note 41 of the Notes forming part of the Consolidated Financial Statements.

JOINT VENTURES

DFC Foundation, a Section 25 Company under the Companies Act, 1956 and a wholly owned subsidiary of the Company has following three Joint Ventures

- Delhi Integrated Multi-Modal Transit System Limited ("DIMTS")

- Infrastructure Development Corporation (Karnataka) Limited ("iDeCK")

- Uttarakhand Infrastructure Development Company Limited ("UDeC")

ASSOCIATES

DFC has one associate company namely Feedback Infra Private Limited (formerly known as Feedback Infrastructure Services Private Limited).

In addition, IDFC Projects Limited, a wholly owned subsidiary of the Company, has one associate company namely Jetpur Somnath Tollways Private Limited.

PARTICULARS OF EMPLOYEES

DFC had 225 employees as on March 31, 2014 and 570 employees at the group level. Particulars of employees as required to be furnished pursuant to Section 217(2A) of the Companies Act, 1956, read with the rules thereunder, form part of this Report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the reports and accounts are being sent to all the Shareholders of the Company excluding the statement of particulars of employees. Any Shareholder interested in obtaining a copy of the same may write to the Company Secretary of the Company.

EMPLOYEE STOCK OPTION SCHEME

Pursuant to the resolution passed by the Members at the AGM held on August 2, 2006, DFC had introduced Employee Stock Option Scheme 2007 (referred to as "the Scheme") to enable the employees of IDFC and its subsidiaries to participate in the future growth and financial success of the Company. Out of 35,568,940 Options outstanding at the beginning of the current financial year, 3,367,575 Options lapsed on account of resignation and 1,558,622 Options were exercised during the year.

Additionally, during the year, 2,246,667 Options were granted to eligible employees under the Scheme. Accordingly, 32,889,410 Options remain outstanding as of March 31, 2014.

All Options vest in graded manner and are required to be exercised within a specific period. The Company has used the intrinsic value method to account for the compensation cost of stock to employees of the Company. Intrinsic value is the amount by which the quoted market price of the underlying share on the date, prior to the date of the grant, exceeds the exercise price on the option.

Disclosures as required by Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are annexed to this Report.

MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE

In compliance with the provisions of Clause 49 of the Listing Agreement, separate detailed chapters on Management Discussion & Analysis, Report on Corporate Governance and Additional Shareholder Information forms part of this Annual Report.

BUSINESS RESPONSIBILITY REPORT

SEBI, through its circular CIR / CFD / DIL / 8 / 2012 dated August 13, 2012, mandated inclusion of Business Responsibility Report ("BRR") as part of the Annual Report for top 100 listed entities based on market capitalisation at BSE and NSE as on March 31, 2012. In compliance with the said circular, a separate report called BRR forms part of this Annual Report and is also hosted on the Company''s website: http://www.idfc.com/investor_relations/annual_ report.htm

PUBLIC DEPOSITS

During FY14, your Company has not accepted any deposits from the public within the meaning of the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.

FOREIGN EXCHANGE

The particulars regarding foreign exchange expenditure and earnings are furnished at Item

Your Directors have pleasure in informing you that RBI, vide its letter dated April 9, 2014, granted its In-principle approval to IDFC to establish a new bank in the private sector under Section 22 of the Banking Regulation Act, 1949. One of the conditions of the letter is that the bank is required to be established within 18 months from April 9, 2014.

Nos. 29 & 30 respectively, in the Notes forming part of the Financial Statements.

PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Since the Company does not carry out any manufacturing activity, the particulars regarding conservation of energy, technology absorption and other particulars as required by the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1998, are not applicable.

DIRECTORS

Mr. Shardul Shroff (DIN-00009379), an Independent Director of the Company, tendered his resignation from the Board of the Company w.e.f. June 3, 2014. The Board placed on record it''s appreciation for the valuable services rendered by him during his tenure as an Independent Director of the Company.

In accordance with the Articles of Association of the Company and pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. Joseph Dominic Silva (DIN - 06388807) would retire by rotation at the ensuing AGM and being eligible, offers himself for reappointment. Mr. S. H. Khan (DIN - 00006170), Mr. Gautam Kaji (DIN - 02333127) and Mr. Donald Peck (DIN - 00140734) were liable to retire by rotation at the ensuing AGM under the erstwhile Companies Act, 1956.

Accordingly, on the recommendation of Nomination and Remuneration Committee of the Company and subject to the approval of the Members at the AGM, the Board of Directors of the Company at its meeting held on June 3, 2014, accorded its consent to appoint the above Directors as Independent Directors of the Company under the Companies Act, 2013 for a period of two (2) consecutive years to hold office from the conclusion of the Seventeenth AGM till the conclusion of the Nineteenth AGM of the Company. The Company has received a declaration from the aforesaid Directors that they meet the criteria of independence specified under sub-section (6) of Section 149 of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and

Qualification of Directors) Rules 2014, for holding the position of Independent Directors and that they shall abide by the "Code for Independent Directors" as per Schedule IV of the Companies Act, 2013.

MCA vide its circular dated June 9, 2014 clarified that if the existing Independent Directors are to be appointed under Companies Act, 2013, the Company would be required to appoint those Independent Directors within a period of one year from April 1, 2014. Accordingly, the Company would appoint the remaining existing Independent Directors within the prescribed period.

The Profiles of all the above Directors are provided in the Exhibit to the Notice convening the ensuing AGM sent along with this Annual Report.

The Board of Directors recommends appointment / reappointment of all the above Directors at the ensuing AGM.

SHAREHOLDERS'' UPDATE

BANKING LICENSE

Your Company had filed an application with the Reserve Bank of India ("RBI") on July 1, 2013, seeking a banking license.

Your Directors have pleasure in informing you that RBI, vide its letter dated April 9, 2014, granted its In-principle approval to IDFC to establish a new bank in the private sector under Section 22 of the Banking Regulation Act, 1949. One of the conditions of the letter is that the bank is required to be established within 18 months from April 9, 2014.

The Board of Directors recommend the following items under special business for approval of the shareholders at the ensuing AGM.

ALTERATION IN THE OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION

On receipt of the In-principle approval from RBI to set up a new bank in the private sector, the Company is required to alter the Object Clause of Memorandum of Association("MoA") of the Company by inserting a new Object Clause no. 29A pertaining to banking business to be carried out through a subsidiary company. Also, the existing Clause no. 31 relating to restructuring / rearrangement would be required to be replaced with a new clause so as to insert few more restructuring options that the Company can opt from time to time.

The approval of the Shareholders by passing of a Special Resolution at the ensuing AGM would be required for alteration of "Objects incidental and ancillary to the attainment of the Main Objects" of MoA of the Company.

FURTHER ISSUE OF SECURITIES

RBI introduced the guidelines for licensing of new banks in the Private Sector on February 22, 2013, which inter alia states that the promoters eligible to promote a bank pursuant to the said guidelines should be ''owned and controlled by residents''. Your Company received In-principal approval for banking license from RBI on April 9, 2014. One of the conditions of the letter requires IDFC to reduce foreign shareholding below 50% so as to make the Company ''owned and controlled by residents''. To achieve this, IDFC proposes to offer securities to the domestic investors, in one or more tranches.

The approval of the Shareholders by passing of a Special Resolution at the ensuing AGM would be required for the aforesaid further issue of securities.

APPROVAL OF THE BORROWING LIMITS OF THE COMPANY

The Company at its 13th AGM held on June 28, 2010, had approved the proposal to borrow monies up to C 80,000 crore under the then applicable Section 293(1)(d) of the Companies Act, 1956.

In compliance with the provisions of Section 180(1)(c) of the Companies Act, 2013 and after

taking into consideration Circular No. 4 / 2014 of MCA dated March 25, 2014, it is proposed to seek the approval of the Shareholders by way of a Special Resolution at the ensuing AGM to approve the limit of borrowings of the Company not exceeding C 80,000 crore.

APPROVAL TO OFFER & ISSUE NON-CONVERTIBLE SECURITIES UNDER PRIVATE PLACEMENT

In compliance with the provisions of Section 42 of the Companies Act, 2013 read with Rule 14 of Companies (Prospectus and Allotment of Securities) Rules 2014, it is proposed to seek the approval of the Shareholders by way of a Special Resolution at the ensuing AGM for borrowing funds through issuance of Non-Convertible Securities on Private Placement basis for an amount not exceeding the overall borrowing limit of C 80,000 crore, as may be approved under Section 180(1)(c) of the Companies Act, 2013 by the Shareholders at the ensuing AGM.

AUDITORS

Deloitte Haskins & Sells LLP ("DHS"), Chartered Accountants (Registration No. 117366W/W-100018), along with their associates, have been Statutory Auditors of the Company for an aggregate period of more than 10 years. DHS will retire as the Statutory Auditors of the Company at the ensuing AGM.

DHS, the retiring Auditors, have confirmed that their reappointment, if made, would be in conformity with the provisions of Section 139(1) of Companies Act, 2013 read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and Section 141 of the Companies Act, 2013 and have given their consent to be reappointed.

The approval of the Members is requested to reappoint DHS, by passing an Ordinary Resolution, as Statutory Auditors of the Company for a period of one (1) year, to hold office from the conclusion of this AGM up to the conclusion of the next AGM of the Company.

INTERNAL CONTROL SYSTEMS

The Company has in place, adequate systems of Internal Control to ensure compliance with policies and procedures. It is being constantly assessed and strengthened with new / revised standard operating procedures and tighter Information Technology controls. nternal audits of all the units of the Company are regularly carried out to review the Internal Control Systems. The Internal Audit Reports along with the recommendations and mplementation contained therein are regularly reviewed by the Audit Committee of the Board.

CONCURRENT AUDIT

The Company has appointed KPMG as Concurrent Auditors for FY15 to augment the existing internal control framework and ensure compliance to the policies and procedures as laid out by the Company. The scope of coverage covers the areas of Fixed Income Treasury, Proprietary Equity, Resources and Regulatory Compliance and Reporting.

TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Sections 205A and 205C of the Companies Act, 1956, the dividend / interest / refund of applications which remains unclaimed / unpaid for a period of seven years from the date of transfer to the unpaid dividend / interest / refund account was required to be transferred to the Investor Education and Protection Fund ("IEPF") established by the Central Government.

Accordingly, an amount of Rs. 1,722,962 being unclaimed / unpaid dividend for the year FY06 and which remained unpaid and unclaimed for a period of 7 years has been transferred by the Company to the IEPF

The Company updates the details of unclaimed / unpaid dividend / interest on the Company''s website (www.idfc.com) and on MCA website from time to time.

Further, the unpaid dividend amount pertaining to the financial year FY07 will be transferred to IEPF during this year.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that: - in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

- appropriate accounting policies have been selected and applied consistently and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year ended March 31, 2014;

- proper and sufficient care has been taken for 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;

- the annual accounts have been prepared on a going concern basis.

GREEN INITIATIVE

In accordance with the ''Green Initiative'' the Company has been sending Annual Report, Notice of AGM etc. in electronic mode to those Shareholders whose e-mail ids are registered with the Company and / or the Depository Participants.

Your Directors are thankful to the Shareholders for actively participating in the Green Initiative.

ACKNOWLEDGEMENTS

We are grateful to the Government of India, State Governments, National Highways Authority of India, RBI, SEBI, Stock Exchanges, various Ministries and other domestic and overseas regulatory bodies for their continuous collaboration and support.

We would like to thank all our Shareholders, Bondholders, Banks and Financial Institutions for their co-operation and assistance during the year under review.

We would like to express our deep sense of appreciation for the hard work and efforts put in by the employees at all levels of the Company.

FOR AND ON BEHALF OF THE BOARD RAJIV B. LALL

Executive Chairman Mumbai, June 30, 2014

IN-PRINCIPLE APPROVAL FOR BANKING LICENSE


Mar 31, 2013

The Directors have pleasure in presenting the Sixteenth Annual Report on our business and operations together with the audited accounts for the year ended March 31, 2013.

OPERATIONS REVIEW

The Company is engaged in financing infrastructure projects in sectors like energy, telecommunication, transportation, commercial and industrial projects including hospitals, education, tourism and hotels. Balance Sheet grew by 15% Year on Year (YoY) to reach H 69,994 crore and Net Loans at H 55,736 crore witnessed an increase of 16% YoY As on March 31, 2013, IDFC''s total exposure was H 72,597 crore, of which Energy was highest at 41%, followed by Transportation 25%, Telecommunication 23% and Others 11%.

DIVIDEND

Your Directors are pleased to recommend a dividend of H 2.60 per equity share of H 10 each (i.e. 26%) for the year ended March 31, 2013. Above dividend would be paid subject to approval by the Members in the ensuing Annual General Meeting (AGM).

SUBSIDIARY COMPANIES

IDFC has ten direct subsidiary companies as follows:

1. IDFC Alternatives Limited

2. IDFC Trustee Company Limited

3. IDFC Projects Limited

4. IDFC Finance Limited

5. IDFC Securities Limited

6. IDFC Primary Dealership Company Limited

7. IDFC AMC Trustee Company Limited

8. IDFC Asset Management Company Limited

9. IDFC Foundation (Section 25 Company)

10. Neopro Technologies Private Limited In addition,

A. IDFC Alternatives Limited has one wholly owned subsidiary company namely IDFC Project Equity Company Limited.

B. IDFC Securities Limited has three wholly owned subsidiary companies namely IDFC Capital Limited, IDFC Distribution Company Limited and IDFC Capital (USA) Inc. Further, IDFC Capital Limited has three wholly owned foreign subsidiaries namely IDFC Fund of Funds Limited, IDFC Capital (Singapore) Pte. Limited and IDFC Securities Singapore Pte. Limited.

C. IDFC Asset Management Company Limited also has three subsidiaries, namely IDFC Pension Fund Management Company Limited, IDFC Investment Advisors Limited and IDFC Investment Managers (Mauritius) Limited.

During the year, IDFC General Partners Limited, a wholly owned subsidiary of IDFC Capital Limited was dissolved under voluntary liquidation process with effect from September 21, 2012.

IDFC PPP Trusteeship Company Limited which is a subsidiary company of IDFC Foundation had made an application to the Registrar of Companies, Maharashtra, Mumbai (ROC) under Fast Track Exit Mode 2011 on April 25, 2013 to get its name struck off from the Register of Companies maintained by ROC.

During the year, the Company divested its stake in Dheeru Powergen Limited, a subsidiary of IDFC Projects Limited.

During the year under review, the Company acquired 71% stake in Neopro Technologies Private Limited, making it a direct subsidiary of the Company.

Statement of particulars of IDFC''s subsidiaries under Section 212 is provided in Note 47 of the Notes forming part of the Consolidated Financial Statements.

Detailed analysis of the performance of IDFC and its businesses - financing and advisory, including initiatives in the areas of Resource Raising, Human Resources, Information Technology and Risk Management has been presented in the section on Management Discussion & Analysis of this Annual Report.

The Ministry of Corporate Affairs (MCA) vide its General Circular No. 2/2011 dated February 8, 2011 has granted general exemption under Section 212(8) of the Companies Act, 1956, to companies from attaching accounts of its subsidiaries in its Annual Report subject to fulfilment of certain conditions prescribed therein. The Board of Directors of the Company at its meeting held on March 14, 2013, noted the provisions of the above mentioned circular of MCA and passed the necessary resolution granting the requisite approvals for not attaching copies of Balance Sheet, Statement of Profit and Loss, Reports of the Board of Directors and Auditors of each of the subsidiary companies to the accounts of the Company for FY13 subject to complying with the provisions of the said circular. The Company also undertakes that annual accounts of the subsidiary companies and the related detailed information will be made available to the Shareholders of the holding and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies will be available on the Company''s website: www.idfc. com and will also be available for inspection by any Shareholder at the Registered and Corporate Offices of the Company and the concerned subsidiaries. The Company shall furnish a hard copy of details of accounts of subsidiaries to Shareholders on demand.In accordance with the requirements of Accounting Standard 21 (Consolidated Financial Statements) and Accounting Standard 23 (Accounting for Investment in Associates in Consolidated Financial Statements) notified by the Companies (Accounting Standards) Rules, 2006, the Consolidated Accounts of IDFC and its subsidiaries have been prepared and the same forms part of this Annual Report.

JOINT VENTURES

IDFC Foundation, a Section 25 Company and a wholly owned subsidiary of the Company has following three Joint Ventures:

1. Delhi Integrated Multi-Modal Transit System Limited

2. Infrastructure Development Corporation (Karnataka) Limited

3. Uttarakhand Infrastructure Development Company Limited

ASSOCIATES

IDFC has two associate companies as follows:

1. Feedback Infrastructure Services Private Limited

2. Galaxy Mercantiles Limited

In addition, IDFC Projects Limited, a wholly owned subsidiary of the Company, has one associate company namely Jetpur Somnath Tollways Private Limited.

PARTICULARS OF EMPLOYEES

IDFC had 238 employees as on March 31, 2013 and 586 employees at the group level . Particulars of employees as required to be furnished pursuant to Section 217(2A) of the Companies Act, 1956, read with the rules thereunder, forms part of this Report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the reports and accounts are being sent to all the Shareholders of the Company excluding the statement of particulars of employees. Any Shareholder interested in obtaining a copy of the same may write to the Company Secretary of the Company.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

Pursuant to the resolution passed by the Members at the AGM held on August 2, 2006, IDFC had introduced Employee Stock Option Scheme 2007 (referred to as "the Scheme") to enable the employees of IDFC and its subsidiaries to participate in the future growth and financial success of the Company. Out of 37,970,105 options outstanding at the beginning of the current financial year, 919,304 options lapsed on account of resignations and 2,364,861 options were exercised during the year

Additionally, during the year, 883,000 options were granted to eligible employees under the Scheme. Accordingly, 35,568,940 options remain outstanding as of March 31, 2013.

All options vest in graded manner and are required to be exercised within a specific period. The Company has used the intrinsic value method to account for the compensation cost of stock to employees of the Company. Intrinsic value is the amount by which the quoted market price of the underlying share on the date, prior to the date of the grant, exceeds the exercise price on the option.

Disclosures as required by Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are annexed to this Report.

MD&A AND CORPORATE GOVERNANCE

Separate detailed chapters on Management Discussion & Analysis, Corporate Governance and Additional Shareholder Information form part of this Annual Report.

PUBLIC DEPOSITS

During FY13, your Company has not accepted any deposits from the public within the meaning of the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.

FOREIGN EXCHANGE

The particulars regarding foreign exchange expenditure and earnings are furnished at Item Nos. 29 & 30 in the Notes forming part of the Financial Statements.

PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Since the Company does not carry out any manufacturing activity, the particulars regarding conservation of energy, technology absorption and other particulars as required by the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1998, are not applicable.

DIRECTORS

The Board, at its meeting held on October 26, 2012, appointed Mr. Joseph Dominic Silva, nominee of Sipadan Investments (Mauritius) Limited as an Additional Director in place of Mr. Abdul Rahim Abu Bakar. Upon the resignation of Mr. Abdul Rahim Abu Bakar on October 26, 2012, his Alternate Director Mr. Michael Fernandes also ceased to hold the position of Alternate Director with effect from October 26, 2012.

Ministry of Finance (MoF), Government of India nominated Ms. Snehlata Shrivastava, Additional Secretary, Department of Financial Services, MoF, as Director on the Board of IDFC in place of Mr. Sunil Soni (former Additional Secretary, Department of Financial Services, MoF). Accordingly, at the Board Meeting dated February 1, 2013, Ms. Snehlata Shrivastava was appointed as an Additional Director in place of Mr. Sunil Soni.

At the Board Meeting held on May 1, 2013, Mr. Deepak Parekh, the Founding Chairman of the Company resigned as the Non - executive Chairman of the Company. The Board accepted his resignation with deep regret. However, at the request of the Board, Mr. Parekh would remain associated with your Company in his new role as Chairman of IDFC''s Advisory Council, a consultative body, comprising of 3-4 eminent persons, to be constituted by your Company in a few months.

The Nomination Committee of the Company, at its meeting held on May 1, 2013, recommended the appointment of:

Dr. Rajiv B. Lall as Executive Chairman of the Company, and Mr. Vikram Limaye as Managing Director & CEO of the Company, on the same terms and conditions as approved by Shareholders at the last AGM held on July 9, 2012.

The Compensation Committee of the Company, at its meeting held on May 1, 2013, also recommended the terms of appointment of Dr. Rajiv B. Lall and Mr. Vikram Limaye, to be the same as were approved by Shareholders at the AGM held on July 9, 2012.

Based on the recommendation of Nomination and Compensation Committees, and subject to the approval of the Members at the ensuing AGM, the Board of Directors at its meeting held on May 1, 2013, granted its approval for the appointment of Dr. Rajiv B. Lall as Executive Chairman and Mr. Vikram Limaye as Managing Director & CEO with effect from May 2, 2013 for a period of 3 years, other terms of their appointment being same as approved by Shareholders at the last AGM held on July 9, 2012. Both these appointments are subject to ratification by the Shareholders in the ensuing AGM, the resolutions for which have been included in the Notice.

Your Directors wish to place on record their appreciation for the valuable services rendered by all the outgoing Directors during their tenure as Directors of the Company

Mr. Joseph Dominic Silva and Ms. Snehlata Shrivastava hold their respective offices as Additional Directors up to the date of the ensuing AGM.

The Company has received notices from Members of the Company under Section 257 of the Companies Act, 1956, proposing the candidature of Mr. Joseph Dominic Silva and Ms. Snehlata Shrivastava as Directors at the ensuing AGM.

Dr. Omkar Goswami and Mr. Shardul Shroff will retire by rotation and being eligible, offer themselves for re-appointment at the ensuing AGM.

The profiles of the above Directors are provided in the Notice convening the ensuing AGM.

The Board of Directors recommends appointment / re-appointment of all the above Directors at the ensuing AGM.

SHAREHOLDERS'' UPDATE

PAYMENT OF COMMISSION TO NON- EXECUTIVE DIRECTORS (NEDs)

The Company, at its 11th AGM held on July 18, 2008, had approved the payment of remuneration by way of commission or otherwise, not exceeding 1% of the Net Profits of the Company, to NEDs for the period of 5 years ended on March 31, 2013. It is proposed to seek the approval of the Shareholders by way of a Special Resolution at the ensuing AGM for continuing payment of commission to NEDs, other than Whole-time Directors, which shall not exceed 1% of the Net Profits of the Company as computed in the manner referred to in Sections 198, 349 and 350 of the Companies Act, 1956.

ADDITIONAL 2% ISSUANCE OF SHARES UNDER ESOS

It is proposed to set aside additional 2% shares for issuance under IDFC Employee Stock Option Scheme - 2007 ("ESOS-2007") of the issued Equity Share Capital of the Company, from time to time.

DECREASE IN LIMIT OF FOREIGN INSTITUTIONAL INVESTORS'' (FIIs) HOLDING IN THE EQUITY SHARE CAPITAL FROM 74% TO 54%

The Board of Directors of your Company had decided at its Board Meeting held on June 18, 2013 to apply to RBI for a banking license pursuant to the guidelines for licensing of new banks in the Private Sector announced by RBI on February 22, 2013.

The said guidelines states that the eligible applicant entities/promoter groups in private sectors must be owned and controlled by residents i.e. the aggregate non-resident shareholding including through Foreign Direct Investment, Non-Resident Indians and FIIs shall not exceed 49% of the paid up Equity capital of the Company.

In view of the above provisions, it is proposed to seek the approval of the Shareholders by way of a Special Resolution at the ensuing AGM to authorise the Board to reduce the ceiling limit of foreign shareholding to 54% as and when the Board thinks it appropriate considering the extant foreign holding in the Company at that point of time. As and when RBI''s in-principle approval for banking license is received, the Company will seek Shareholders'' approval for further reducing the foreign shareholding ceiling limit to 49%.

AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, will retire as the Statutory Auditors of the Company at the ensuing AGM. The Members are requested to re-appoint M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company for FY14 and to authorize the Board of Directors to fix their remuneration by way of Special Resolution as per Notice convening the AGM.

M/s. Deloitte Haskins & Sells, the retiring auditors, have confirmed that their re- appointment, if made, would be in conformity with the provisions of Sections 224 and 226 of the Companies Act, 1956 and also indicated their willingness to be re-appointed.

INTERNAL CONTROL SYSTEMS

The Company has in place, adequate systems of Internal Control to ensure compliance with policies and procedures. It is being constantly assessed and strengthened with new / revised standard operating procedures and tighter Information Technology controls. Internal Audits of all the units of the Company are regularly carried out to review the Internal Control Systems. The Internal Audit Reports along with the recommendations and implementation contained therein are regularly reviewed by the Audit Committee of the Board.

CONCURRENT AUDITORS

KPMG were appointed as Concurrent Auditors for the FY14 for systematic examination of all financial transactions of treasury department to ensure accuracy and compliance of internal systems and procedures as laid out by the Company

TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Sections 205A and 205C of the Companies Act, 1956, the dividend/interest/refund of applications which remains unclaimed/ unpaid for a period of seven years from the date of transfer to the unpaid dividend /interest/refund account is required to be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government. In terms of the provisions of Section 205C of the Companies Act, 1956, no claim shall lie against the Company or IEPF after the said transfer.

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, an amount of H 408,980 being the refund of the application money received by IDFC at the time of its Initial Public Offer (IPO) in July/ August, 2005 and which remained unpaid and unclaimed for a period of 7 years has been transferred by the Company to the IEPF Further, the unpaid dividend amount pertaining to the financial year 2005-06 will be transferred to IEPF during this year

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that:

- In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

- Appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year ended March 31, 2013;

- Proper and sufficient care has been taken for 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;

- The annual accounts have been prepared on a going concern basis.

ACKNOWLEDGEMENTS

IDFC has developed close relationships with the Ministry of Finance, Banking Division, Department of Economic Affairs; Ministry of Surface Transport; National Highways Authority of India; Ministry of Power; Department of Telecommunications; Ministry of Petroleum; Ministry of Corporate Affairs and other Ministries of the Government of India involved with infrastructure development; Reserve Bank of India; National Stock Exchange of India Limited; BSE Limited; Securities and Exchange Board of India and other regulatory bodies; Telecom Regulatory Authority of India; the Central Electricity Regulatory Commission and State Electricity Regulatory Commissions; Planning Commission; State Governments and all IDFC''s Shareholders and Bondholders. The Board of Directors would like to take this opportunity to express sincere thanks to all Banks and Financial Institutions for their continuous co-operation and support. The Directors express their appreciation for the good work and efforts put in by the employees at all levels of the Company. IS

For and on behalf of the Board

RAJIV B. LALL

Executive Chairman

Mumbai, July 1, 2013.

 
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