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Directors Report of IFCI Ltd.

Mar 31, 2015

Dear Members,

The Board of Directors of your Company has the pleasure of presenting the Twenty Second Annual Report of IFCI Ltd together with the Audited Financial Statement for the year ended March 31, 2015.

FINANCIAL SUMMARY OR HIGHLIGHTS AND STATE OF COMPANY''S AFFAIRS

(Rs. in crore)

Sl. PARTICULARS FY FY

No. 2014-15 2013-14

1. Operational Income 3,251 2,886

2. Total Income 3,348 2,953

3. Cost of Borrowings 2,102 1,666

4. Staff Cost/Other Expenditure 104 93

5. Depreciation (10) 13

6. Total Expenditure 2,196 1,772

7. Profit Before Provisions/write-off 1,152 1,181

8. Provision for Bad & Doubtful Assets 434 520 and Others (Net of Write off)

9. Profit before Tax 718 660

10. Tax Expense 196 152

11. Profit After Tax 522 508

12. Surplus Brought forward from 1,845 1,648

Previous Year

Less: WDV of the Assets with no useful life 2 -

13. Appropriations:

Reserve u/s 451C of RBI Act 104 102

Special Reserve u/s 36(1)(viii) 15 15 of the Income Tax Act

Debenture Redemption Reserve 19 0

Expenditure on Corporate Social 8 0 Responsibility Activities

Dividend on Equity Shares 296 194 (incl. tax)

Dividend on Preference Shares 0* 0* (incl. Tax)

14. Balance carried to Balance Sheet 1,923 1,845

*0.31 crore

Operational income for FY 2015 was higher than that of FY 2014 by 12.7% due to increase in interest income, the interest income though was impacted by Rs. 247 crore due to reversal of income on account of fresh Non-Performing Assets (NPAs) (Rs. 55 crore) and interest funding of restructured assets (Rs. 192 crore). The operational income included income of Rs. 251 crore from NPAs as against Rs. 166 crore in FY 2014. However, income from other financial services was lower at Rs. 355 crore vis-a-vis Rs. 491 crore in FY 2014 mainly due to lower profit on sale of shares/debentures at Rs. 269 crore in FY 2015 as against Rs. 365 crore in FY 2014. Other income at Rs. 97 crore was higher by 45% than Rs. 67 crore in FY 2014, the increase primarily being due to profit of Rs. 29 crore on sale of surplus properties during the current year.

The finance cost of borrowing continued to increase due to higher borrowing required for growth in business at average cost of 10.24% as against average carrying cost of existing borrowing of 9.55%. The cost of borrowing for FY 2015 at Rs. 2,102 crore was higher by 26.17% than Rs. 1,666 crore for FY 2014. During the year, long term borrowing of Rs. 7,947 crore was made while Rs. 3,258 crore was repaid as per the schedule. The carrying cost of borrowings as at March 31, 2015 increased to 9.6% as compared to 9.5% as at March 31, 2014. The increasing trend is expected to continue for some more time till the cost of fresh borrowing falls below the carrying cost of borrowing. The overhead expense towards employee benefits and establishment cost for FY 2015 at Rs. 104 crore was also higher by 11.8% than Rs. 93 crore for FY 2015. This was mainly due to increase in employee benefit expenses and new recruitments and increase in corporate campaigning and advertisement expenses for branding prior to public issue as also for various business transactions through open tender process. However, overall the ratio of overhead expenses (excl. depreciation) to total income stood favourably at 3.2% for the year ended March 31, 2015, same as that for the year ended March 31, 2014.

DIVIDEND

Your Directors declared a Dividend of ''1/- per equity share i.e. 10% of the face value of Rs. 10/- each as interim dividend for the financial year 2014-15. Your Directors have also recommended dividend of Rs. 0.50 per equity share, i.e. 5% of the face value of Rs. 10/- each as final dividend, subject to the approval of the shareholders at the ensuing Annual General Meeting. Your Company also paid dividend of Rs. 0.31 crore on preference shares.

CHANGE IN NATURE OF BUSINESS & MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT

There has been no change in the business of the Company during the reporting period. Further, there have been no material changes and commitments which affect the financial position between the end of financial year and date of Board''s Report.

OWNERSHIP/CAPITAL STRUCTURE/CHANGE IN SECURITIES

There was no change in the ownership of the Government of India in your Company during the FY 2014-15 and it continued to hold 55.53% equity stake in IFCI as on March 31, 2015. There has also been no change in the capital structure of the Company. However, during FY

2015-16, Government of India acquired 6,00,00,000 Preference Shares of Rs. 10/- each of the Company from certain Scheduled Commercial Banks and consequently increased its holding from 47.93% to 51.04% of the Paid-up Share Capital of the Company. Consequently, the Company became a Government Company in terms of Section 2(45) of the Companies Act, 2013, w.e.f. April 7, 2015.

The change in the Debt Structure of the Company is as under:

Total Number of Issued Redemption Total Number of Securities at the during made during Securities at beginning of the the the year the end of the year year year

4,201,749,118 19,722,593 57,366 4,221,414,345 Nos. Nos. Nos. Nos.

(Rs. 10,649.87 (Rs. 1,972.26 (Rs. 473.71 (Rs. 12,148.43 crore) crore) crore) crore)

DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP) APPOINTED OR RESIGNED DURING THE YEAR

Since the last Board''s Report the following changes have occurred in the composition of the Board of Directors and in the KMP of your Company: Prof Omprakash Mishra (DIN: 03068103) ceased to be Director on the Board of the Company w.e.f. August 27, 2014 (for want of majority in the proposal for his appointment as Independent Director at the last Annual General Meeting of the Company held on August 27, 2014). Prof Arvind Sahay (DIN: 03218334) was inducted on the Board as Additional and Independent Director w.e.f. September 12, 2014. Shri Anurag Jain (DIN: 01779759), Government Nominee Director ceased to be Director on the Board of the Company w.e.f. February 16, 2015, due to withdrawal of nomination from Government of India. Shri Rajesh Aggarwal (DIN: 03566931), Joint Secretary, Ministry of Finance, Department of Financial Services, New Delhi, was appointed as Director w.e.f. February 19, 2015 vice Shri Anurag Jain (DIN: 01779759). Shri P G Muralidharan (DIN: 00960475) resigned w.e.f. March 30, 2015 in view of his having reached the maximum age to act as Director of NBFC prescribed by Reserve Bank of India as per Revised Regulatory Framework for NBFC. Shri S N Ananthasubramanian (DIN: 00001399) resigned from the Board of the Company with effect from June 13, 2015 owing to professional commitments.

Shri B N Nayak, who had been acting as CFO pursuant to the provisions of Clause 49 of the Listing Agreement was designated as KMP in the category of CFO, w.e.f. May 26, 2014 pursuant to the provisions of the Companies Act, 2013.

DIRECTOR LIABLE TO RETIRE BY ROTATION

Ms Kiran Sahdev (DIN: 06718968) will retire by rotation at the conclusion of the forthcoming Annual General Meeting and being eligible has offered herself for re-appointment.

NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS

The details of the Meetings of the Board of Directors forms part of the Corporate Governance Report appearing separately in the Annual Report.

COMPOSITION OF AUDIT COMMITTEE

Your Company has in place an Audit Committee of Directors in compliance with the provisions of the Listing Agreement and Companies Act, 2013. The details of Composition forms part of the Corporate Governance Report appearing separately in the Annual Report.

Your Directors would further like to inform that there has been no matter where the Board has not accepted recommendations of the Committee.

DISCLOSURE OF NOMINATION AND REMUNERATION POLICY

Pursuant to the provisions of the Companies Act, 2013 and Listing Agreement, the Company has put in place a Nomination as well as a Remuneration Policy. The Nomination & Remuneration Policy are atteched at Annexure I. The Policies have also been placed on the website of your company at www.ifciltd.com.

POLICY ON DEALINGS WITH RELATED PARTY TRANSACTIONS A. Approvals

I. Approval by Audit Committee

1. All Related Party Transactions (including any subsequent modifications thereof) shall require prior approval of the Audit Committee of Directors. However, the Audit Committee of Directors may grant omnibus approval for the RPTs proposed to be entered into by the Company subject to the following conditions:

(a) The Audit Committee shall lay down the criteria for granting the omnibus approval in line with the policy on Related Party Transactions of IFCI and such approval shall be applicable in respect of transactions which are repetitive in nature.

(b) The Audit Committee shall satisfy itself the need for such omnibus approval and that such approval is in the interest of IFCI.

(c) Such omnibus approval shall specify:

i. The name(s) of the Related Party, nature of transaction, period of transaction, maximum amount of transaction that can be entered into.

ii. The indicative base price/current contracted price and the formula for variation in the price, if any, and

iii. Such other conditions as the Audit Committee may deem fit.

(d) Audit Committee shall review, on a quarterly basis, the details of RPTs entered into by IFCI pursuant to each of the omnibus approval given.

(e) Such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year.

Proviso:

The above clause will not be applicable in the following cases:

i. Transactions entered into between 2 Government Companies.

ii. Transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.

Explanation: All entities falling under the definition of related parties shall abstain from voting irrespective of whether the entity is a party to the particular transaction or not.

II. Approval by Board of Directors

Except with the consent of the Board of Directors given by a resolution at a meeting of the Board, IFCI shall not enter into any contract or arrangement with a related party with respect to:

* Sale, purchase or supply of any goods or materials;

* Selling or otherwise disposing of, or buying, property of any kind;

* Leasing of property of any kind;

* Availing or rendering of any services;

* Appointment of any agent for purchase or sale of goods, materials, services or property;

* Such related party''s appointment to any office or place of profit in the company, its subsidiary company or associate company; and Related Party Transactions.

* Underwriting the subscription of any securities or derivatives thereof, of the company:

Provided that nothing of the above shall apply to any transactions entered into by IFCI in its ordinary course of business other than transactions which are not on an arm''s length basis.

{Ordinary Course of Business shall include those business which forms part of the Object Clause of the Memorandum of Association of the Company}

Explanation:

The expression "office or place of profit" means any office or place:

Where such office or place is held by a director, if the director holding it receives from IFCI anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent- free accommodation, or otherwise;

Where such office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it receives from IFCI anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;

The expression "arm''s length transaction" means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.

III. Approval by Shareholders

1. Except with the prior approval of the company by a special resolution, IFCI shall not enter into a transaction or transactions, where the transaction or transactions to be entered into:

As contracts or arrangements with respect to Clauses (a) to (e) of Sub-Section (1) of Section 188 of the Companies Act 2013, with criteria as mentioned below:

* Sale, purchase or supply of any goods or materials, directly or through appointment of agent, exceeding 10% of the turnover of the company or rupees one hundred crore, whichever is lower, as mentioned in Clause (a) and Clause (e) respectively of Sub-Section (1) of Section 188;

* Selling or otherwise disposing of or buying property of any kind, directly or through appointment of agent, exceeding ten per cent of net worth of the company or rupees one hundred crore, whichever is lower, as mentioned in Clause (b) and Clause (e) respectively of Sub-Section (1) of Section 188;

* Leasing of property of any kind exceeding ten percent of the net worth of the company or ten per cent of turnover of the company or rupees one hundred crore, whichever is lower, as mentioned in Clause (c) of Sub-Section (1) of Section 188;

* Availing or rendering of any services, directly or through appointment of agent, exceeding ten per cent of the turnover of the company or rupees fifty crore, whichever is lower, as mentioned in Clause (d) and clause (e) respectively of Sub-Section (1) of section 188.

Explanation — It is hereby clarified that the limits specified in Sub-Clauses (i) to (iv) shall apply for transaction or transactions to be entered into either individually or taken together with the previous transactions during a financial year. Is for appointment to any office or place of profit in the Company, its subsidiary company or associate company at a monthly remuneration exceeding two and half lakh rupees as mentioned in Clause (f) of Sub-Section (1) of Section 188; or

Is for remuneration for underwriting the subscription of any securities or derivatives thereof of the company exceeding one per cent of the net worth as mentioned in Clause (g) of Sub-Section (1) of Section 188. Explanation: (1) The Turnover or Net Worth referred in the above Sub-rules shall be computed on the basis of the Audited Financial Statement of the preceding Financial Year. (2) In case of a wholly owned subsidiary, the special resolution passed by the IFCI shall be sufficient for the purpose of entering into the transactions between the wholly owned subsidiary and IFCI.

2. All Material RPTs shall require approval of the shareholders through Special Resolution and the related parties shall abstain from voting on such resolutions.

3. No Member of IFCI shall vote on such Special Resolution, to approve any contract or arrangement which may be entered into by the Company, if such member is a related party.

Proviso:

The above Clause will not be applicable in the following cases:

* Transactions entered into between 2 Government Companies.

* Transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

Disclosure on Related Party Transactions during FY 2014-15 in the prescribed Form AOC-2 is provided in Annexure II.

EXTRACT OF ANNUAL RETURN

Pursuant to the provisions of the Companies Act, 2013, the extract of the Annual Return in the prescribed format of Form MGT - 9 is at Annexure III.

CORPORATE SOCIAL RESPONSIBILITY - DETAILS ABOUT THE POLICY DEVELOPED AND IMPLEMENTED ON CORPORATE SOCIAL RESPONSIBILITY INITIATIVES DURING THE YEAR

In pursuance of Section 135 of the Companies Act, 2013, the Board of IFCI after the recommendation of the Corporate Social Responsibility Committee of Directors (CSR Committee) approved CSR policy for IFCI.The contents of the policy is on the website of IFCI at www. ifciltd.com.

The CSR Committee recommends to the Board of Directors on activities to be undertaken by the company as specified in Schedule VII of the Companies Act, 2013 and Companies (CSR policy) Rules, 2014. The CSR Committee recommends the amount to be incurred on the activities and earmarked funds for the envisaged priority areas, as per vision of the company for a particular financial year.

To associate with the CSR Activities of IFCI and its Subsidiaries and Associates, a Trust, by the name of "IFCI Social Foundation" has also been established. The investment in CSR activities is project based and for every project, time frame and periodic milestones are set at the outset. Utilisation Certificate with regard to the approved and disbursed amount is obtained from the concerned executing NGO/Trust/Specialised Agency. The progress of activities are reviewed and monitored very closely for optimum utilisation of CSR funds.

The Disclosure of contents of Corporate Social Responsibility Policy in the Board''s Report pursuant to the provisions of Companies (Corporate Social Responsibility Policy) Rules, 2014 is at Annexure IV.

PARTICULARS OF EMPLOYEES AND REMUNERATION - PURSUANT TO RULE V OF COMPANIES (APPOINTMENT AND REMUNERATION) RULES, 2014

The requisite details envisaged under the provisions of Rule V of Companies (Appointment and Remuneration) Rules, 2014 are annexed with this report at Annexure V.

EMPLOYEE STOCK OPTION DETAILS

The requisite details pursuant to the provisions of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and pursuant to the provisions of Rule 12 (9) of the Companies (Share Capital and Debentures) Rules, 2014 are at Annexure VI. Though the ESOP Scheme has been discontinued, the disclosures are made in term of the above Guidelines.

ANNUAL EVALUATION ON PERFOMANCE

The performance evaluation of the Board, its Committees and individual Directors was conducted. The same was based on feedback from all the Directors on the Board as a whole, Committees and individual evaluation, as per the Nomination Policy.

Based on the feedback, the performance was evaluated in the Meetings of the Nomination and Remuneration Committee (NRC), Independent Directors and the Board, in terms of the provisions of Companies Act, 2013 and Listing Agreement.

DISCLOSURE AS PER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company is fully committed to take appropriate measures against Sexual Harassment of Women at Workplace as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 which came into force in April, 2013. Requisite organizational architecture in terms of constitution of Committee, amending the IFCI Staff Regulations etc. to comply with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 has been created. IFCI continues to adhere to the framework stipulated under the Sexual Harassment of Women at Workplace as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. During the year 2014-15, no complaint on this ground has been received.

PARTICULARS OF LOAN, GUARANTEES OR INVESTMENT UNDER SECTION 186 OF THE COMPANIES ACT, 2013

As the Company is primarily engaged in the business of financing Corporates in the capacity of being a Non-Banking Financial Company, therefore the provisions of Section 186 [except for Sub-Section (1)] of the Companies Act, 2013 are not applicable to the Company.

DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY

Disclosure indicating development and implementation of Risk Management Policy is provided in the Management Discussion and Analysis Report forming part of this Report.

PUBLIC DEPOSITS

Your Company did not raise any public deposit during the year. There was no public deposit outstanding as at the beginning or end of the year ended on March 31, 2015.

DISCLOSURE ON RECEIPT OF COMMISSION BY A DIRECTOR FROM SUBSIDIARY COMPANY

No Director of the Company, including the CEO&MD and DMD was paid any commission during the FY 2014-15 from any subsidiaries of your Company on whose Boards they were Directors as nominees of the Company.

SIGNIFICANT OR MATERIAL ORDERS PASSED BY REGULATORS OR COURT OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OF THE COMPANY AND COMPANY''S OPERATIONS IN FUTURE

There has been no such order passed by any Regulator or Court impacting the going concern status of the Company and Company''s operations.

VIGILANCE

During the financial year 2014-15, the Company has established a Vigil Mechanism under the provisions of Section 177 (9) and (10) of the Companies Act, 2013. In this regard, the Board of Directors of the Company has approved a Whistle Blower Policy under which its director(s) and employee(s) can report to the management their concerns about unethical behaviour, actual or suspected fraud or violation of the IFCI''s code of conduct or ethics policy and to provide adequate safeguards to them against any sort of victimization on raising an alarm. The Policy also provides for direct access to the Chairman of the Audit Committee in exceptional cases. During the year under review, no instance of the protected disclosure has been made to the Designated Authority or to the Chairman of the Audit Committee. Details of vigil mechanism is also available on Company''s website at www.ifciltd.com.

PERFORMANCE OF SUBSIDIARIES AND ASSOCIATES PROMOTED BY IFCI

SUBSIDIARIES

Stock Holding Corporation of India Ltd (SHCIL)

SHCIL was promoted by the public financial institutions and incorporated as a limited company on July 28, 1986. SHCIL, one of the largest Depository Participants, besides being the country''s largest premier Custodian in terms of assets under custody, provides post trading and custodial services to institutional investors, mutual funds, banks, insurance companies, etc. It acts as a Central Record Keeping Agency (CRA) for collection of stamp duty in 15 States and 3 Union Territories on pan India basis. It is one of the largest Professional Clearing Members of the country. It distributes Fixed Deposits, Bonds and NCDs of reputed Institutes and Corporates, Mutual Fund Schemes, Initial Public Offers (IPO''s) and National Pension System (NPS) etc. SHCIL has its registered office at Mumbai and a world class main operations office at Navi Mumbai and operates through its 188 retail branches all over India. SHCIL has presence in 18 States/Union Territories for stamping.

SHCIL has two wholly owned subsidiaries viz. (i) SHCIL Services Ltd (SSL) and (ii) SHCIL Projects Ltd (SPL); SSL, the broking arm of SHCIL, is providing stock broking services to retail and institutional clients across the country. SSL offers services in Cash & F & O segment of BSE & NSE. SPL is a Microsoft Gold certified partner for all its products and services is ISO 9001:2008 and CMMI Level-3 certified. SPL provides End to End Document Management Solutions and acts as an Insurance Repository. SPL has been granted a Certificate of Registration to act as an "Insurance Repository (IR)" by Insurance Regulatory & Development Authority (IRDA).

IFCI Infrastructure Development Ltd (IIDL)

IIDL was set up by IFCI Ltd in the year 2007 to venture into the real estate and infrastructure sector. Being a wholly owned subsidiary of IFCI Ltd, a Government of India Undertaking, IIDL has ventured into the Infrastructure Sector as an institutional player. IIDL is committed to the principles of transparency, professionalism and integrity with clients aspirations and interests being the driving force. The company since its inception has developed projects all over India focusing on construction that is driven by the overall infrastructure development of the country.

IIDL has successfully completed its flagship state of the art Serviced apartment project known as "Fraser Suites" being managed by Frasers Hospitality Pte Ltd, Singapore. IIDL was awarded a prestigious project spread over an area of 50 acre for developing a "Financial City" near Bengaluru International Airport by Karnataka Industrial Areas Development Board (KIADB), Government of Karnataka in the Global Investors Meet 2010. The Company has also been allotted 15 Acre of Land in Bengaluru Hardware Park adjacent to IFCI Financial City, Bengaluru for establishing "Supporting Infrastructure for Financial City" by KIADB, which is under planning stage.

IIDL has been appointed as the Project Management Consultants for developing "Management Development Institute" Murshidabad, West Bengal, a sprawling residential campus spread over 10 Acre of land on Turnkey basis. The Project was inaugurated on August 24, 2014 by Hon''ble President of India Shri Pranab Mukherjee along with Finance Minister, Shri Arun Jaitley.

On the residential front, "21st Milestone Residency" at, Ghaziabad, Uttar Pradesh offers 4,50,000 sq ft of living space spread over 4.0 Acre of land. "IIDL Aerie" located at prime residential area of Panampilly Nagar, Kochi, offers high end living space of around 1,50,000 sq ft with all modern amenities.

IIDL executed various projects as Project Management Consultants like "IFCI Bhawan" an office complex at Bengaluru, Ahmedabad for IFCI and Interior, fit outs and allied works including furnishing, civil and electrical works for the branches of "Bhartiya Mahila Bank" at New Delhi, Ahmedabad, Guwahati, Kolkata, Bangalore and Chennai.

IFCI Venture Capital Funds Ltd (IFCI Venture)

IFCI Venture was set-up in 1975 by your Company with the objective to broaden entrepreneurship base in India by providing risk capital mainly to first generation entrepreneurs under "Risk Capital Scheme". In 1988, IFCI Venture launched "Technology Finance and Development Scheme", to provide financial assistance for setting up projects aimed at commercialization of indigenous technologies.

In the year 2008, IFCI Venture undertook management of 3 new PE/VC funds viz. India Automotive Component Manufacturers Private Equity Fund-1-Domestic (IACM-1-D), Green India Venture Fund (GIVF) and India Enterprise Development Fund (IEDF) with an aggregate corpus of Rs. 508 crore, where investment have been done in 29 companies. All the three funds focused on investments in mid-sized companies involved in setting up niche business models in respective industry sectors with prospects of scalability. These funds were fully invested by 2011 and are currently under exit mode.

In the year 2014-15, IFCI Venture has initiated setting-up of three funds viz.

(a) Venture Capital Fund for Scheduled Castes (VCF-SC) - a Government of India initiative to promote entrepreneurship amongst Scheduled Castes entrepreneurs in India. The corpus of the fund is Rs. 250 crore with Government of India contribution of Rs. 200 crore and IFCI Ltd has committed Rs. 50 crore towards the corpus. It was registered with SEBI and launched on January 16, 2015.

(b) Green India Venture Fund-II.

(c) Small and Medium Enterprises Advantage Fund.

For both the above funds, in-principle approval has been received and IFCI Ltd has committed Rs. 50 crore each in both the Funds. IFCI Venture is expected to start operations under these two new funds during FY 2015-16.

IFCI Venture is also registered with RBI as an NBFC and provides secured Corporate Loans to profit making mid-market companies in the range of ''5-20 crore with security of shares of listed companies and/or mortgage of property. The Company has a well-defined credit policy for sanction of loans.

IFCI Financial Services Ltd (IFIN)

IFIN was set up in 1995, by IFCI Ltd, to provide a wide range of financial products and services to institutional and retail clients. IFIN is primarily involved in the business of Stock Broking, Currency Trading, Depository Participant Services, Merchant and Investment Banking, Insurance (Corporate agent for both life and General Insurance), Mutual Fund Products Distribution and Corporate Advisory Services. IFIN has three wholly-owned subsidiaries namely IFIN Securities Finance Ltd, IFIN Commodities Ltd and IFIN Credit Ltd. IFIN Securities Finance Ltd, an NBFC is primarily engaged in the business of margin funding, providing loan against shares & property, promoter funding etc. IFIN Commodities Ltd, a registered member of the Multi Commodity Exchange of India Ltd (MCX), National Commodity and Derivatives Exchange Ltd (NCDEX) and National Spot Exchange Ltd (NSEL), is primarily engaged in the business of providing Commodity market related transaction services. IFIN Credit Ltd is not engaged in any major business activity.

IFCI Factors Ltd (IFL)

During the year under report, IFL continued to be a major provider of factoring services in India. After registering sizeable growth year on year in business following its acquisition by IFCI Ltd, the company has been in a phase of consolidation over FY 2013-14 and FY 2014-15 in the wake of adverse economic environment. The FY 2014-15 has been a tough year for the Company, amidst the challenging macro-economic environment. The RBI has taken notable step to address the economic slowdown and has relaxed the Income Asset pattern guideline for Factoring to Non-factoring ratio from the prevailing 75:25 to 50:50. This provides ample opportunity for the Company to offer secured structured products and enables the Company to operate both in working capital space as well as corporate loan market.

Further, with the enactment and implementation of the Factoring Regulation Act, 2011, initiative for setting up a Credit Guarantee Fund of Rs. 500 crore for factoring business as announced in the Union Budget for FY 2013-14, and initiative by the RBI of exploring the possibility of setting up of a Trade Credit Exchange for electronic factoring of bills, in the times to come, factoring business in India is poised for growth.

MPCON Ltd

MPCON Ltd is a professionally managed Technical Consultancy Organization promoted by your Company established in 1979. It is a premier consulting organization having base in Central India, providing quality consulting services. During FY 2014-15, it consolidated its project consultancy business and also enhanced its presence in the training and capacity building spheres. It has bagged skilling projects for training close to 4500 candidates in Madhya Pradesh and Chhattisgarh from the Ministry of Rural Development, Govt. of India. It also participated in the STAR programme run by the National Skills Development Corporation. Apart from Training and Skill Development, the financial inclusion project has been expanded further to cover more areas in Madhya Pradesh. MPCON has also proved its worth in the other spheres of consultancy services such as Solid & Liquid Waste Management, Development of Course curriculum under National Vocational Education Framework, Impact Assessment Studies etc. for various departments of the State Government as well as the Central Government.

ASSOCIATES

Tourism Finance Corporation of India Ltd (TFCI)

TFCI, a Public Financial Institution was established in 1989, pursuant to the recommendations of the National Committee on Tourism set up under the aegis of the Planning Commission, Government of India. Your Company along with other All-India Financial/Investment Institutions and Nationalised Banks promoted TFCI to cater to the financial needs of burgeoning tourism industry. Since its inception, TFCI has provided high-quality research and consultancy services to the tourism industry in general and to the investors in tourism industry in particular. It provides financial assistance to enterprises for setting up and/or development of hotels, resorts, amusement parks and tourism-related projects, facilities and services. It undertakes appraisal of individual projects, project studies, and surveys for various State Government agencies/individual clients.

HARDICON Ltd

HARDICON was set up in 1985, jointly by all India Financial Institutions, PSU Banks & State level insttitutions viz. IFCI, SIDBI, SBI. Haryana Financial Corporation, Haryana State Industrial and Infrastructure Development Corporation and Delhi Financial Corporation of the two State Governments with the twin objectives of facilitating overall industrial development of the country by catering to the technical consultancy needs of the industry and promoting entrepreneurship. In the initial years, the focus of operations was confined to the states of Haryana and Delhi. Post liberalization HARDICON expanded its service base beyond Haryana and Delhi and now undertakes nationwide assignments. Its broad spectrum of activities include Preparation of Techno-Economic Feasibility Reports, Project Appraisals, Valuation of Assets, Business Valuation, Skill & Entrepreneurship Development Training, Market Research/ Impact Assessment Studies, Implementation of Corporate Social Responsibility (CSR) activities of PSUs. Its portfolio of clients includes PSUs, large scale industrial sector enterprises as well as traditional SME sector clients.

Himachal Consultancy Organisation Ltd (HIMCON)

HIMCON was promoted in 1977 with your Company as the lead institution, along with other FIs such as IDBI, ICICI in collaboration with Nationalised Banks and state level Corporations and Institutions. HIMCON is a multi-functional and multi- disciplinary organization offering a wide range of services to the industrial and infrastructure development, and to a wider spectrum of clientele including those outside the state of Himachal Pradesh. The major thrust areas of HIMCON''s service base includes Evaluation Studies, Project Appraisals, Compilation of Project Reports, Compilation of Pre- Feasibility/Feasibility Reports, TEVs, Services under SARFA&ESI Act 2002, Preparations of comprehensive development plans of the area, act as Project Monitoring Consultants and Conducting EDPs & Skill Development Training Programmes and Awareness Programmes. HIMCON has bagged first of its kind of mandate of Transforming Village Taseeng in Alwar District of Rajasthan into "World Class Model Heritage Village" as a part of Pradhan Mantri Adarsh Gram Yojna.

Rajasthan Consultancy Organisation Ltd (RAJCON)

RAJCON, jointly promoted by IFCI, SIDBI, ICICI along with State Finance Corporations viz. Rajasthan State Industrial Development and Investment Corporation Ltd, Rajasthan Financial Corporation, Rajasthan Small Industries Corporation Ltd and Commercial Banks namely State Bank of Bikaner & Jaipur (SBBJ), Central Bank of India (CBI), Punjab National Bank (PNB), Bank of Baroda (BOB) and United Commercial Bank (UCO), was set-up in March 1978 with the twin objectives of facilitating overall industrial development of the country by way of providing technical consultancy services as well as promoting entrepreneurship. At present, RAJCON is carrying out varied nature of services which inter-alia includes Skill & Entrepreneurs Development Services, Technical Consultancy Services, etc. The Skill & Entrepreneurship based activities are undertaken on behalf of All India/State Level Corporations and Social Justice and Empowerment/Department of Government of India, while Technical Consultancy based activities are undertaken on behalf of Banks/FI''s, Industrial/Business Groups, Individual Entrepreneurs etc.

North India Technical Consultancy Organisation Ltd (NITCON)

NITCON set up in 1984, is a joint venture of IFCI, SIDBI, ICICI Bank Ltd, State Level Corporations and Public Sector Commercial Banks to render cost effective professional consultancy services to units in small/medium/large scale industries/Entrepreneurs/Institutions/ Government and Government Agencies. NITCON has been an all time associate of the SME movement. NITCON has gained considerable expertise in undertaking Detailed Techno-Economic Appraisals/ TEFRs of investment proposals envisaging green field projects as also of expansion, modernization, diversification proposals. NITCON also takes up TEVS of existing industrial units for revival/rehabilitation involving BIFR/CDR cases, Energy Audits, Advisory Assignments and preparation of inventory and valuation of assets to help the institutions/banks in valuation of securities, sale of assets and one time settlement (OTS).

NITCON has over 3 decades of experience in promoting self- employment and wage employment, through Entrepreneurship Development Programmes (EDPs) as well as Skill Development Programmes (SDPs), having trained over 1 lac beneficiaries.

KITCO Ltd

KITCO Ltd (formerly Kerala Industrial and Technical Consultancy Organization Ltd) established in 1972, is one of the premier Engineering, Management & Project consultancy firm in India promoted by your Company jointly with IDBI, ICICI and other State Level Institutions. Some of the key fields where KITCO is a prominent player are Energy Studies, Skill Certification and Placement services. The company provides professional technical consultancy services to Small and Medium Enterprise (SME). KITCO is the only consultancy organization in the state having EIA accreditation. During the year under report, KITCO has been instrumental in setting up of TCO consortium having its office in Delhi. While KITCO will be the National Coordinating agency for the consortium, the other TCO members are: NITCON (Punjab), MITCON (Maharashtra), ITCOT (Tamil Nadu), APITCO (Andhra Pradesh), GITCO (Gujarat), HARDICON (Haryana), MPCON (Madhya Pradesh), UPICO (Uttar Pradesh), HIMCON (Himachal Pradesh) and RAJCON (Rajasthan).

JOINT VENTURE

IFCI Sycamore Capital Advisors Pvt Ltd

The Company has 50% interest in one joint venture viz. IFCI Sycamore Capital Advisors Pvt Ltd (ISCAPL) incorporated in India in November 2011 which is under voluntary liquidation and Official liquidator has been appointed. The investment of IFCI Ltd in ISCAPL as on March 31, 2015 was at Rs. 0.01 crore Class A Equity Shares and Rs. 2.64 crore Fully Convertible Debentures against which adequate provision has been made considering the probability and quantum of share in distribution upon liquidation of the Company. Therefore, the same has not been considered for the purpose of consolidation of financial statements.

SOCIETIES

Institute of Leadership Development (ILD)

ILD - erstwhile Institute of Labour Development was established in 1992, by your Company recognizing the fact that, alongside the management, the workers have to be provided with opportunities and external facilities of training and development for meeting the continuous challenges of change. The name was rechristened as Institute of Leadership Development in the year 2008. ILD is working towards its mission to build capacities, hone up and infuse leadership skills among all levels of human resources in all types of organizations i.e., business and corporate entities, Banks, SMEs, NGOs, social action groups, key developmental sectors like education, health, energy and environment and the wide sweep of the government sector. ILD is also engaged in imparting skill development programmes for the unemployed youths of the state of Rajasthan and giving them job placements as well with the CSR fund support from different organizations. ILD is also an empanelled agency with Rajasthan Skill and Livelihoods Development Corporation (RSLDC), Jaipur, to carry out skill development programmes in the areas of Textile technology, Fashion Technology, Hospitality etc.

Management Development Institute (MDI)

MDI is one of India''s premiere Business Schools promoted by IFCI Ltd, the Institute aims to inculcate professionalism in management education and enhance the effectiveness of organizations through education, training and research. MDI presently is self-financing educational society. MDI has the distinction of being the first internationally accredited Indian Business School having received international accreditation by AMBA in 2006. The long-term programmes of MDI have received global, regional and national accreditations - accreditation of Association of MBAs (AMBA) London, South Asian Regional Accreditation (SAQS) and National Board of Accreditation (NBA). MDI also has the distinction of being the only Indian B-school that has a community outreach programme, the International Summer University (ISU) wherein MDI has joined hands with nine Indian universities and institutions to form a network of learning.During the year under report MDI received AICTE approval for conducting PG Level Management Programmes at its Murshidabad campus. The Hon''ble President of India inaugurated the new academic session at Murshidabad campus.

Rashtriya Gramin Vikas Nidhi (RGVN)

RGVN having its headquarter in Guwahati, Assam was established in April 1990, as an autonomous, non-profit organization registered under the Society''s Registration Act of 1860. Your Company being a founding promoter of RGVN, provided the initial set-up support and with time the Industrial Development Bank of India (IDBI), the National Bank for Agriculture and Rural Development (NABARD) and the Tata Social Welfare Trust (TSWT) also became its promoters. RGVN is a national level multi-state development and support organization working in the states of Assam, Arunachal Pradesh, Meghalaya, Mizoram, Nagaland, Manipur, Tripura, Sikkim, Odisha, Jharkhand and Bihar. After expanding operations in the Northeast, development activities of RGVN were also extended to the poverty stricken pockets of Eastern Uttar Pradesh, coastal Andhra Pradesh and Chhattisgarh. RGVN''s core strength comes from its network of NGOs and Self Help Groups, which are capable of handling large development projects. Over the years, RGVN has been able to groom and support small Community based Organizations involved in a variety of livelihood enhancement programmes.

COMPANIES WHICH HAVE BECOME OR CEASED TO BE SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES DURING THE YEAR

During FY 2014-15, IFCI acquired 980 equity shares of Rajasthan Consultancy Organisation Ltd (RAJCON), equivalent to 49% of equity shareholding, from HARDICON, as a result of which RAJCON has become an Associate Company of IFCI.

IFCI''s shareholding in Asset Care and Reconstruction Enterprise Ltd (ACRE) has declined from 37.91% to 19.55%, due to preferential allotment by ACRE and acquisition of 80,000 equity shares of ACRE, by your Company from MPCON.

Details on performance and financial position of subsidiaries, associates and joint venture(s), as on March 31, 2015 are provided in Annexure VII.

COMPLIANCE

Submission of various returns and data/information to RBI, SEBI and other regulatory bodies and the Government of India was complied with during FY 2014-15.

DOCUMENTS PLACED ON THE WEBSITE

Pursuant to the provisions of the Companies Act, 2013, Listing Agreement and various other Regulatory Requiremnts, the Company is required to place various Policies/Documents/Details on the Website of the Company. The list of Documents placed on the website at www. ifciltd.com, inter-alia are as under:

* Corporate Social Responsibility Policy.

* Financial Statements of the Company and Consolidated Financial Statements along with relevant documents.

* Audited Accounts of the Subsidiaries.

* Details of unpaid dividend.

* Details of Vigil Mechanism for Directors and employees to report genuine concerns.

* The terms and conditions of the appointment of Independent Directors.

* Policy on Material Subsidiary.

* Policy on Related Party Transactions and Dealing with Related Party Transactions.

CORPORATE GOVERNANCE

A detailed report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement, is attached to the Annual Report. Certificate from Practicing Company Secretary regarding compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement has been obtained and is annexed at the end of Corporate Governance Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Conservation of Energy - The Company''s operations do not involve any manufacturing or processing activities. It is involved in providing financial assistance, therefore the Company requires normal consumption of electricity. Therefore the provisions of Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 (3) of Companies (Accounts) Rules, 2014 are not applicable on the Company. Further, the Company is not an industry as listed in Schedule to Rule 2 of the Companies(Disclosure of Particulars in the Report of Board of Directors) Rule, 1988.

Technology Absorption - In constant endeavour to drive competitive advantage through Operational Excellence, your organization is taking proactive steps towards Business Continuity planning. With regard to the same it is proposed to upgrade DC/DR as well as establish a Near Site. Further your Company is also working towards establishment of industry standard Network security policies and standards in line with the latest technology adoption. Your Company is also working towards implementing a standard product for Loan accounting, Treasury Operations, Asset Classification System, General Financial Accounting System, Loan/Debenture Accounting Systems, Asset & Liability Management (ALM), Bonds Monitoring and Processing System, Market Risk Management. Further, in order to integrate the customer services for our Customers, Shareholders and Bondholders your Company is planning to have an integrated customer service portal.

Foreign Exchange Earnings

The details in respect of foreign expenditure/earnings are as follows:

(Rs. crore)

Particulars Year ended Year ended 31.03.2015 31.03.2014

Expenditure in Foreign Currencies:

Interest on borrowings 4.45 4.78

Other matters 0.16 0.29

TOTAL 4.61 5.07

Earnings in Foreign Currency:

Earnings in Foreign Currency - -

QUALIFICATIONS, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE BY THE STATUTORY AUDITORS

There were no qualifications or reservations or adverse remarks made by the Statutory Auditors for the stand alone Financial Statements or for the consolidated Financial Statements. However, the auditors had following observations on the consolidated Financial Statements : "Emphasis of Matters :

The holding company holds investments in eight companies to the extent of 20% or more of their respective total share capital and accordingly these companies are the associates of the holding company as per the Companies Act 2013, for the reasons stated in the para 26.1 of the Financial Statements of the Group. Our report is not modified on the matter."

EXPLANATIONS OR COMMENTS BY THE BOARD:

In the case of the referred companies, the shares to the extent of 20% or more were acquired by the holding company as a part of regular business activity of financing through equity participation with firm commitment of buy-back with the promoters/group companies of the investee companies at pre-determined Rate of Return (ROR) after a pre-determined period. Since the shares had been acquired with an intention to dispose-off at a pre-determined ROR, the shares in networth of the investee company following "Equity Method" was not considered appropriate indictor of the real economic interest of IFCI Ltd. and therefore, the investment in these companies have not been considered in ''Consolidated Financial Statements'' following AS-13.

QUALIFICATIONS, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE BY THE SECRETARIAL AUDITORS

M/s Navneet K Arora & Co., Company Secretaries was appointed as Secretarial Auditor of the Company for the Financial Year 2014-15.

REPORT OF SECRETARIAL AUDITOR

"The Company has, in our opinion, complied with the applicable provisions of the Companies Act, 1956 and the Rules made under that Act and the provisions of Companies Act, 2013 and the Rules made thereunder as notified by Ministry of Corporate Affairs and the Memorandum and Articles of Association of the Company. During the period under review the Company has complied with the provisions of the Reserve Bank of India Act read with applicable Non-Banking Financial Companies (Reserve Bank) Directions as amended till date except delay in filing of e-returns in Form No.(s) NBS-7 for the quarter ended 30th September 2014, NBS-ALM-2 & 3 for Half Yearly ended on 30th September 2014 and NBS-7 for the quarter ended 31st December 2014 with the Reserve Bank of India."

EXPLANATIONS OR COMMENTS BY THE BOARD Provisional NBS-ALM 2 & 3 were filed with RBI within the stipulated time period and subsequently the final returns were filed with RBI after approval of final accounts for the respective period. Similarily, the e-return NBS-7 was also filed only after Board''s approval of final accounts for the period. The Company being listed, the results, which is part of NBS-7 return can not be disclosed prior to the same being provided to the stock exchanges. Reserve Bank of India was informed of the position and has not objected to the request of the Company considering the facts. The Secretarial Audit Report in the Form MR-3 is annexed at Annexure VIII.

STATEMENT ON DECLARATION BY INDEPENDENT DIRECTORS

Your Company has requisite number of Independent Directors on the Board. Pursuant to the provisions of the Companies Act, 2013, your Company has obtained Declaration of Independence from the Independent Directors under Section 149 of the Companies Act, 2013.

INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THE FINANCIAL STATEMENTS

Your Company has in place an Internal Financial Control driven by the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. However, as regular review for improvement & upgradation are the need of the hour, it is constant endeavour of the Company to improve the processes & policies and put in place improved internal financial controls.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134 of the Companies Act 2013, with respect to Directors'' Responsibility Statement, it is hereby confirmed that:

(i) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(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 and of the profit and loss of the Company for that period;

(iii) The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(iv) The directors had prepared the annual accounts on a ''going concern basis'';

(v) The directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. The "internal financial controls" means the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information; and

(vi) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Auditors

M/s ASA & Associates, LLP (DE1187) (Firm Regn. No. 009571N) and M/s Andros & Co. (DE1122) (Firm Regn. No. 08976N) were appointed by the Comptroller & Auditor General of India (C&AG) as Joint Statutory Auditors of your Company for FY 2014-15. C&AG has appointed Ms ASA & Associates, LLP (DE1187) (Firm Regn. No. 009571N) and Ms KPMR & Associates (DE0637) (Firm Regn. No. 02504N) as Joint Statutory Auditors of your Company for FY 2015-16.

DEPARTMENTS AT IFCI

(A) Credit Appraisal, Monitoring and Industry Research (CAMIR)

With a view to pitch in new business for IFCI, carry out quality appraisal and timely recovery in standard assets in sectors other than infrastructure, a dedicated department viz. Credit Appraisal, Monitoring and Industry Research was created in your Company. The department dealt inter-alia, with business development, credit appraisal of proposals, monitoring of existing standard cases of Delhi, Mumbai and Ahmedabad Regional Offices and need-based reliefs/concessions/restructuring of stressed accounts.

(B) Project Development Group (PDG)

Project Development Group (PDG) was established in FY 2008- 09, as a part of IFCI''s strategy to enter into infrastructure projects early in their life cycle, so as to ensure a good return on IFCI''s investments. Since then, PDG developed strong relationships with India''s leading infrastructure companies and had been associated with them throughout the project development life cycle from inception to commissioning and thereafter to nurturing the projects to realize returns. PDG developed invaluable insights into the technical, practical and financial aspects of the infrastructure sector in general and the power generation and road sectors in particular. The group managed IFCI''s exposure to infrastructure projects by way of vanilla equity investments, mezzanine instruments and term loans to infrastructure projects and their holding companies. The department also dealt with business development, credit appraisal and post disbursement monitoring and review of standard cases of all regional offices based out of northern, southern and eastern region of India.

During FY 2014-15, aligning with various external challenges being faced by the infrastructure sector, the department focused on consolidation of the investment portfolio from a value preservation standpoint. Simultaneously, it also achieved exits in some of the investments with reasonable returns.

(C) CREDIT I & II

In view of opening of new Regional Offices and expansion in business and with view to leveraging the credit expertise of both CAMIR and PDG better, it was decided to merge the activities of both the Groups and create two independent departments Credit-I and Credit-II with control of nine Regional Offices each. The new departments have started functioning from April, 2015. For 2015-16, IFCI''s focus is not only to grow loan book but also to improve the quality of loan portfolio. Steps taken/being taken in this direction are:

(i) Improvement in Credit Appraisal System.

(ii) Improving skills in the area of credit appraisals.

(iii) Activation of Regional Offices at 6 centres viz. Bhopal, Bhubaneswar, Kochi, Lucknow, Patna and Pune for sourcing proposals at these centres. Regional Offices at 2 new centres, Vijayawada and Raipur are being opened.

(iv) Thrust on marketing quality business.

(D) Corporate Advisory Group

IFCI today provides an entire gamut of financial advisory services to clients across different sectors of the economy. In the area of providing customized corporate advisory services, your Company, despite stiff competition during the year, has not only been able to retain its existing clients but has also been able to secure some prestigious new assignments including management consultancy assignments with respect to bid advisory, due diligence, project appraisal, business re-engineering, valuation, feasibility study etc. from various private/public sector entities/ banks and Central/State Government(s). During the year, your Company has also been empanelled with many prestigious clients for various consultancy assignments.

(E) Sugar Development Fund

Your Company has been acting as the nodal agency of the Government of India since inception of the Sugar Development Fund (SDF) for the purpose of disbursement, follow-up and recovery of SDF loans sanctioned for modernization of sugar factories, setting-up of bagasse based cogeneration projects, ethanol projects and cane development schemes. Cumulative sanctions and disbursements under SDF up to March 31, 2015 stood at Rs. 5,604 crore and Rs. 4,795 crore respectively. The agency commission booked for the FY 2014-15 is Rs. 17.20 crore. In addition, IFCI also carries out financial appraisals of projects for availing SDF loans by sugar mills.

IFCI is in the process of making SDF portal functional and same will be utilized by SDF, GoI and sugar companies. It will make SDF operations efficient and also contributes towards image building of IFCI.

(F) Scheduled Caste Guarantee Enhancement Fund

Your Company has also been designated by Government of India, as the Nodal Agency under the Scheme of Credit Enhancement Guarantee for Scheduled Castes Entrepreneurs to provide guarantee to banks against loans to young and start-up entrepreneurs belonging to scheduled caste with an objective to encourage entrepreneurship in marginal strata of the society. The Government of India has provided Rs. 200 crore to your Company during FY 2014-15 for this purpose.

(G) Human Resources

Your Company has continued to lay focus on enhancement in productivity of employees and their skill upgradation. In this regard, 222 employees have been sent on trainings organized in house and at training programmes organized by other Training Institutes and foreign trainings Your Company has been awarded by Asia Pacific HRM Congress for managing health of its employees at work for the year 2014. The level of satisfaction among employees has improved which resulted into lower attrition rate as compared to previous year.

(H) Information Technology and Communication

IT has emerged as an important medium for delivery of financial products and services. Information Technology (IT) enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographical distant and diversified markets.

The most noteworthy developments related to IT sector in your Company during FY 2014-15 are:

Formulation of e-Governance Committee of Board of Directors headed by a renowned IT Professor as its Chairman having exhaustive knowledge in the IT field which will be of immense value to the Company. E-Governance Committee has been formed inter-alia, for revamping the IT structure at IFCI for a secured and more effective structure to enable seemless transactions in your growing Company.

Technology Adoption

In constant endeavour to drive competitive advantage through Operational Excellence, your organization is taking proactive steps towards Business Continuity planning. With regard to the same, the process is on to upgrade disaster recovery infrastructure. Further your Company is also working towards establishment of industry standard Network security policies and standards in line with the latest technology adoption.

Your Company is also working towards implementing a standard product for Loan Accounting, Treasury Operations, Asset Classification System, General Financial Accounting System, Loan/Debenture Accounting Systems, Asset & Liability Management (ALM), Bonds Monitoring and Processing System, Market Risk Management, through a reputed IT Service provider in substitution of the in-house developed system on oracle 10G plateform.

Further, in order to integrate the customer services for our Customers, Shareholders and Bondholders your Company is planning to have an integrated customer service portal.

(I) Legal

On the legal front, your Company has carried out the legal activities for facilitation of sanctions and disbursements and has ensured compliance with statutory requirements during the year. Further, your Company was also able to defend successfully before the Hon''ble Supreme Court of India in the suits filed against it during the year 2014-15.

(J) Management of Non-Performing Assets (NPAs)

Your Company continued its efforts to exploit aggressively all channels available to reduce its NPAs. A considerable success was achieved in past few years and last year also by way of substantial recovery from the NPAs as reflected in the recovery as under:

(Rs. crore)

Sl. Resolution Strategy Amount

1. Sale of Assets/Sale of Shares 351.74

2. Sale of NPA Accounts 276.67

3. Settlement 177.01

4. Other Secoveries 21.92

TOTAL 827.34

To resolve and minimize the NPAs, your company has been taking all possible legal actions and also adopting all techniques and filing necessary applications before Debt Recovery Tribunal and also by adopting other methods of recovery viz. filing of criminal complaints u/s 138 of Negotiable Instruments Act, 1881 lodging FIR, attachment of secured and unsecured properties of the borrower and guarantor, arrest of absconding guarantor and taking stringent steps under the provisions of SARFAESI Act, 2002. Efforts were also made to ensure that the Loan Accounts are closely monitored so as to avoid slippage of accounts to NPA.

(K) Right to Information

IFCI has implemented the Right to Information Act, 2005 from 2013 onwards following the applicability of the RTI Act to IFCI and has been providing information to the applicants as per the provisions of the RTI Act. The relevant information as per the RTI Act has been posted on IFCI''s website at www.ifciltd.com. During the year, IFCI received 110 applications and 30 appeals seeking information under RTI Act, which were replied to as per the provisions of the RTI Act within the stipulated time.

(L) Promotion of Rajbhasha

During the year, your Company continued its efforts towards promoting the use of Hindi in its official work. With a view to motivating and encouraging the officers to use Hindi in official work, Hindi competitions were organized at Head Office as well as other offices of the Company. The officers of your Company at Corporate Office bagged prizes in various Hindi Competitions organized by Town Official Language Implementation Committee. The quarterly meetings of Official Language Committee and Annual Hindi week were duly held in various offices of your Company. All the computers available with your Company have been upgraded with Unicode facility and the website of your Company has also been made bilingual for the benefit of the stakeholders and to further promote use of Hindi.

(M) NOMINEE DIRECTORS

Your Company appoints Nominee Directors on the Boards of assisted concerns following the established practice of Institutions and Banks to monitor the performance of the companies where they have provided financial assistance. The underlying objective of making such appointment is to help build professional management and facilitate effective functioning of the Board as well as formulation of proper corporate policies and strategies to improve productive efficiency and promote long term growth of the assisted companies, keeping in view the overall interest of the shareholders and financial institutions. The feedback received from Nominee Directors act as a tool for credit monitoring. The system of Nominee Directors is functioning effectively in your Company.

With the Companies Act, 2013 coming into force, the Nominee Directors on assisted concerns need to be more vigilant with regard to functioning of assisted concern as well as reporting and reviewing the performance of the concerned company. Your Company has taken steps to update its officers about the new Act so that they may contribute effectively as Nominee Directors on the Boards of assisted concerns.

COMMENTS OF COMPTROLLER & AUDITOR GENERAL OF INDIA

The comments of Comptroller & Auditor General of India (C&AG) are at Addendum.

Appreciation

Your Directors wish to express gratitude for the cooperation, guidance and support from the Ministry of Finance, various other Ministries and Departments of the Government of India, Securities and Exchange Board of India, Reserve Bank of India, Stock Exchanges, other regulatory bodies, Comptroller & Auditor General of India and State Governments. Your Directors also acknowledge the valuable assistance and continued cooperation received from all banks, financial institutions, overseas correspondent banks, other members of the banking fraternity and investors. Your Directors would also like to express their apprication for the efforts and dedicated service put in by the employes at all levels of your Company.

S V Ranganath Non-Executive Chairman of the Board DIN : 00323799 Address: IFCI Tower 61 Nehru Place Dated: August 11, 2015 New Delhi - 110 019


Mar 31, 2014

To the Members

The Board of Directors of your Company has the pleasure of presenting the Twenty First Annual Report of IFCI Limited together with the Audited Statement of Accounts for the year ended March 31, 2014.

FINANCIAL RESULTS

(Rs. Crore)

PARTICULARS 2013-14 2012-13

1. Operational Income 2,885 2,706

2. Total Income 2,951 2,759

3. Cost of Borrowings 1,666 1,815

4. Staff Cost/Other Expenditure 91 105

5. Depreciation 13 10

6. Total Expenditure 1,770 1,930

7. Profit Before Provisions/write-off 1,181 829

8. Provision for Bad & Doubtful 520 165 Assets and Others (Net of Write off)

9. Profit Before Tax 660 664

10. Tax Expense 152 213

11. Profit After Tax 508 451

12. Surplus Brought forward from 1,648 1,496 Previous year

13. Appropriations:

Reserve u/s 451C of RBI Act 102 90

Special Reserve u/s 36(1)(viii) 15 15 of the Income Tax Act

Dividend on Equity Shares (incl. tax) 194 193

Dividend on Preference Shares (incl. Tax) 0* 0*

14. Balance carried to Balance Sheet 1,845 1,649 *Rs. 0.31 crore.

The total income of your Company for the year under report was Rs. 2,951 crore which was higher by 7% than total income of Rs. 2,759 crore in the previous year. There was reduction in cost of borrowings by 8.2% to Rs. 1,666 crore in the current year from Rs. 1,815 crore in the previous year on the back of substantial reduction in interest rates on bank loans and prepayment of certain high cost bank borrowings. Your Company also took steps to rationalize overhead cost which resulted in a saving of Rs.11 crore in the FY 2013-14 as compared to previous year.

Dividend

Your Directors have recommended a dividend of Rs. 1/- per equity share, i.e. 10% of the face value of Rs. 10/- each for the FY 2013-14. Further, dividend at the applicable rates aggregating to Rs. 0.31 crore (including corporate dividend tax) on Preference shares paid as interim dividend, has been proposed by your Directors for your confirmation. The dividend proposed by your Company on the equity shares does not exceed 10% (ten percent) of the paid up equity share capital. Hence, no amount is mandatorily required to be transferred to the General Reserves as per Companies (Transfer of Profits to Reserves) Rules, 1975.

Ownership & Equity Shareholding

There is no change in the ownership of the Government of India in your Company during the FY 2013-14 as Government of India continues to hold 55.53% equity stake in IFCI as on March 31, 2014 thereby continuing to be the majority stakeholder of the Company. The equity shareholding pattern of your Company as on March 31, 2014 is depicted below:

Particulars % Share No. of Equity Shares

Government of India 55.53 92,30,00,000

Banks, Financial Institution, 6.28 10,43,57,628

UTI and Mutual Funds

Insurance Companies 6.42 10,66,98,758

Foreign Institutional Investors,

NRIs & OCBs 6.00 9,97,19,180

Bodies Corporate 6.12 10,17,37,323

Individuals and Trust & Foundation 19.65 32,65,24,346

TOTAL 100.00 1,66,20,37,235

Composition of the Board

Since the last Board''s Report, the following changes occurred on the Board of IFCI:

Shri Santosh B Nayar who was appointed as CEO & Managing Director of your Company w.e.f. 15th July, 2013 ceased to be on Board of Company w.e.f. 11th December, 2013. Subsequent to the resignation of Shri Santosh B Nayar from the post of CEO & MD, the charge of CEO & MD was handed over to Shri Malay Mukherjee w.e.f. December 12, 2013. Shri Achal Kumar Gupta was also appointed during the year as Whole Time Director designated as Deputy Managing Director of your Company w.e.f. 12th December, 2013.

Shri S V Ranganath, who retired as Chief Secretary, Government of Karnataka, Ex-IAS Officer of Karnataka-75 cadre was appointed as Additional Director on Board of the Company w.e.f. November 22, 2013 and was made Non-Executive Chairman on the Board w.e.f. January 6, 2014. Consequently, Shri P G Muralidharan who was earlier Non-Executive Chairman on the Board of your Company ceased to be the Chairman of the Board w.e.f. January 6, 2014. However, he continues to be Non-Executive Director on the Board of your Company.

The Government of India nominated Shri Arvind Kumar, Joint Secretary, Department of Financial Services (DFS), New Delhi on the Board of the Company who was appointed as Director w.e.f. July 30, 2013 vice Shri Sanjeev Kumar Jindal.

Shri Ashok Kumar Jha ceased to be a Director on the Board of your Company w.e.f. December 02, 2013. Ms Kiran Sahdev, Executive Director, LIC of India was appointed as Director in casual vacancy w.e.f. October 24, 2013 vice Mrs Usha Sangwan.

The Government of India nominated Shri Alok Tandon, Joint Secretary, Ministry of Finance, Department of Financial Services, New Delhi on the Board of the Company who was appointed as Director w.e.f. June 10, 2014 vice Shri Arvind Kumar, Joint Secretary, Ministry of Finance Department of Financial Services, New Delhi.

Shri K S Sreenivasan was appointed as Additional Director on the Board of your Company w.e.f. March 31, 2014.

Prof N Balakrishnan was appointed as Additional Director on the Board of the Company w.e.f. June 26, 2014.

Shri S N Ananthasubramanian was appointed as Additional Director on the Board of the company w.e.f. July 4, 2014.

Directors Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility Statement, it is hereby confirmed:

(i) That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) That 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 and of the profit or loss of the Company for that period;

(iii) That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) That the Directors had prepared the annual accounts on a going concern basis.

Auditors

M/s Thakur Vaidyanath Aiyar & Co. (DE0016) (Firm Reg. No. 000038N) and M/s ANDROS & Co. (DE1122) (Firm Reg. No. 08976N) were appointed by the Comptroller & Auditor General of India (C&AG) as Joint Statutory Auditors of Your Company for FY 2013-14. C&AG shall appoint Statutory Auditor(s) of Your Company for FY 2014-15.

Corporate Governance

A detailed report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement, is attached to this Report.

Certificate from Practicing Company Secretary regarding compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement has been obtained and is annexed at the end of Corporate Governance Report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

As the Company''s operations do not involve any manufacturing or processing activities, the particulars as per Companies (Disclosures of Particulars in the Report of the Board of Directors) Rules, 1988 regarding conservation of energy and technology absorption, are not applicable. The Company is also not engaged in any activity relating to exports. The particulars regarding expenditure and earning in the foreign exchange are as under:

Particulars of Employees

In terms of provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in Annexure-2 to the Directors'' Report.

Comments of Comptroller & Auditor General of India

The Comments of Comptroller & Auditor General of India (C&AG) is at Addendum.

Appreciation

Your Directors wish to express gratitude for the cooperation, guidance and support from the Ministry of Finance, various other Ministries and Departments of the Government of India, Securities and Exchange Board of India, Reserve Bank of India, other regulatory bodies, Comptroller & Auditor General of India and State Governments. Your Directors are also grateful to all the employees of the Company for their dedicated service. Your Directors also acknowledge the valuable assistance and continued cooperation received from all banks, financial institutions, overseas correspondent banks, other members of the banking fraternity and investors.

For and on behalf of the Board of Directors

Malay Mukherjee Achal Kumar Gupta B N Nayak Rupa Sarkar

Chief Executive Officer & Deputy Managing Director Chief Financial Officer Company Secretary Managing Director

Place: New Delhi Date : July 4, 2014


Mar 31, 2013

To the Members

The Board of Directors of your Company has the pleasure of presenting the Twentieth Annual Report of IFCI Limited together with the Audited Statements of Accounts for the year ended March 31, 2013.

FINANCIAL RESULTS

(Rs. crore) PARTICULARS 2012-13 2011-12

1. Operational Income 2,706 2,801

2. Total Income 2,759 2,850

3. Cost of Borrowings 1,815 1,871

4. Staff Cost/Other Expenditure 105 122

5. Depreciation 10 12

6. Total Expenditure 1,930 2,005

7. Profit before provisions/write-off 829 845

8. Provision for Bad & Doubtful 165 (113) Assets and others (Net of Write-off)

9. Profit before Tax 664 958

10. Tax Expense 213 294

11. Profit after Tax 451 664

12. Surplus brought forward from 1,496 1,066 previous year

13. Appropriations:

Reserve u/s 45IC of RBI Act 90 133

Special Reserve u/s 36(1)(viii) of the 15 15 Income Tax Act

Dividend on Equity Shares (incl. Tax) 193 86

Dividend on Preference Shares (incl. Tax) 0* 0*

14. Balance carried to Balance Sheet 1,648 1,496* Rs.0.31 crore

Your Company''s total income declined marginally by 3.2% to Rs.2,759 crore in 2012-13 from Rs.2,850 crore in 2011-12, mainly due to subdued fresh asset creation in an uncertain environment and downgrading of certain assets during the year. However, lower income was partly offset by reduction in cost of borrowings by 3.0% to Rs.1,815 crore in 2012-13 from Rs.1,871 crore in 2011-12, due to substantial downward revision in interest rates on existing bank loans and prepayment of certain high cost bank borrowings. Your Company also took steps for rationalization of overhead cost which resulted in a saving of Rs.19 crore during 2012-13.

Dividend

Your Directors have recommended a dividend of Rs.1/- per equity share, i.e. 10% of the face value of Rs.10/- for the FY 2012-13. Further, dividend at the applicable rates aggregating to Rs.0.31 crore (including corporate dividend tax) on Preference Shares, paid as interim dividend has been proposed by your Directors for your confirmation.

The dividend proposed by your Company does not exceed 10 percent of the paid up share capital. Thus, the amount to be transferred to reserves is nil as per the Companies (Transfer of Profits to Reserves) Rules, 1975.

Change in Ownership and Reconstitution of the Board

The most significant development in 2012-13 was the assumption by the Government of India of 55.57% (Currently 55.53%) equity holding in IFCI on December 20, 2012, thereby making it the majority stakeholder of the Company.

Since the last Annual General Meeting, the following changes occurred on the Board of IFCI:

S/Shri Prakash P. Mallya, Shilabhadra Banerjee, K. Raghuraman, Sujit Kumar Mandal, Vijay Kumar Chopra, Atul Ashok Galande, Vijendra Singh Jafa, S. Shabbeer Pasha, Rakesh Bharti Mittal, Chandan Bhattacharya and Prof. Shobhit Mahajan ceased to be Directors on the Board of the Company.

The Government of India nominated Shri Anurag Jain, Joint Secretary, Ministry of Finance, Department of Financial Services, New Delhi as Government Director. Shri Sanjeev Kumar Jindal, Director, Ministry of Finance, Department of Financial Services, New Delhi whose nomination was withdrawn by the Government of India was later re-nominated as Government Director on the Board of IFCI Ltd. However, on July 29, 2013 the Government of India nominated Shri Arvind Kumar, Joint Secretary, Ministry of Finance, Department of Financial Services, New Delhi as Government Director vice Shri Sanjeev Kumar Jindal.

Smt. Savita Mahajan was appointed as Additional Director on the Board of your Company w.e.f. February 12, 2013.

Shri Atul Kumar Rai ceased to be on Board of the Company and CEO & Managing Director w.e.f. May 31, 2013 and Shri Anurag Jain, Joint Secretary, Ministry of Finance, Department of Financial Services, was appointed as CEO & Managing Director of the Company w.e.f. May 31, 2013.

Subsequently, Shri Anurag Jain handed over the charge of CEO & MD to Shri Santosh B. Nayar, who was appointed as Additional Director and CEO & MD w.e.f. July 15, 2013.

Shri Ashok Kumar Jha was appointed as Additional Director on the Board w.e.f. July 15, 2013.

At this Annual General Meeting, Prof. Omprakash Mishra, is retiring by rotation and being eligible, has offered himself for re-appointment.

Directors'' Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors’ Responsibility Statement, it is hereby confirmed:

(i) that in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) that the Directors have 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 and of the profit or loss of the Company for the year under report;

(iii) that the Directors have 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;

(iv) that the Directors have prepared the annual accounts for the year ended March 31, 2013 on a ''going concern basis’.

Auditors

M/s Ray & Ray, Chartered Accountants, the current Statutory Auditors of your Company shall hold office till this Annual General Meeting. Consequent on the change in the equity structure of your Company, henceforth, the Statutory Auditors of your Company shall be appointed by the Comptroller & Auditor General of India (CAG). CAG has appointed M/s Thakur Vaidyanath Aiyar & Co. (DE0016) and Andros & Co. (DE1122) as Joint Statutory Auditors for FY 2013-14.

Corporate Governance

A detailed report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement, is attached to this Report.

Certificate from Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement has been obtained and is annexed at the end of Corporate Governance Report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

As the Company’s operations do not involve any manufacturing or processing activities, the particulars as per Companies (Disclosures of particulars in the Report of the Board of Directors) Rules, 1998 regarding conservation of energy and technology absorption, are not applicable. The Company is also not engaged in any acitivity relating to exports. The particulars regarding expenditure and earning in the foreign exchange are as under:

(Rs. crore) Particulars Year ended Year ended 31.03.2013 31.03.2012

Foreign Exchange used:

Interest on borrowings 4.41 4.29

Other matters 0.01 0.19

TOTAL 4.42 4.48

Earnings in Foreign Exchange:

Earnings in Foreign Currency

Particulars of Employees

In terms of provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in Annexure-2 to the Directors’ Report.

Comments of Comptroller & Auditor General of India

The Comments of Comptroller & Auditor General of India (CAG) form part of this report as per Annexure-3. CAG has given "No Comments" Audit Report under Section 619(4) of the Companies Act, 1956.

Appreciation

Your Directors wish to express gratitude for the cooperation, guidance and support received from the Ministry of Finance, various other Ministries and Departments of the Government of India, Securities and Exchange Board of India, Reserve Bank of India, other regulatory bodies, Comptroller & Auditor General of India and State Governments. Your Directors are also grateful to all the employees of the Company for their dedicated service. Your Directors also acknowledge the valuable assistance and continued cooperation received from all banks, financial institutions, overseas correspondent banks, other members of the banking fraternity and investors.

For and on behalf of the Board of Directors

Place: New Delhi P. G. MURALIDHARAN

Dated: September 19, 2013 Chairman of the Board


Mar 31, 2011

To the Members

The Board of Directors of your Company has the pleasure of presenting the Eighteenth Annual Report of IFCI Limited together with the Audited Statements of Accounts for the year ended March 31, 2011.

FINANCIAL RESULTS

(Rs. crore)

PARTICULARS 2010-11 2009-10

1. Operational Income 2,422 1,657

2. Total Income 2,486 1,679

3. Cost of Borrowings 1,319 891

4. Staff Cost/Other Expenditure 141 112

5. Depreciation 10 9

6. Total Expenditure 1,470 1,012

7. Profit before provisions/write-off 1,016 667

8. Write-off/Provisions for Bad & Doubtful Assets(net of reversal) (150) (448)

9. Profit Before Tax 1,166 1,115

10. Tax Expense 460 444

11. Profit After Tax 706 671

12. Surplus brought forward from previous year 608 312

13. Appropriations: Reserve u/s 45 IC of RBI Act 142 134

Capital Redemption Reserve – 82

General Reserve – 65

Special Reserve u/s 36(1)(viii) 10 10

Corporate Social Responsibility Fund 10 –

Dividend on Equity Shares (incl. Tax) 86 84

Dividend on Preference Shares (incl. Tax) 0* 0*

14. Balance carried to Balance Sheet 1,066 608 * Rs. 0.31 crore

Your Company, during FY 2010-11, has clocked a growth of 48% in total income, which has grown to Rs. 2,486 crore from the total income of Rs. 1,679 crore in the previous year on the strength of creation of fresh assets, which increased from Rs. 7,846 crore as on March 31, 2009 to Rs. 15,942 crore as on March 31, 2011. The Balance Sheet size of Rs. 24,268 crore as at March 31, 2011 is the highest in the history of IFCI since 1948.

The cost of borrowings increased to Rs. 1,319 crore for the current year from Rs. 891 crore in the previous year, since, in order to create fresh assets, fresh borrowings had to be made. The total borrowing increased from Rs. 13,562 crore as at March 31, 2010 to Rs. 19,264 crore as at March 31, 2011.

Profit from operations has significantly improved by 47% to Rs. 951 crore for the current year over Rs. 645 crore for the previous year. Profit before tax and after tax of Rs. 1,166 crore and Rs. 706 crore respectively has increased by 5% over corresponding amount of Rs. 1,115 crore and Rs. 671 crore respectively for the previous year.

Dividend

Your Directors have recommended a Dividend @ Re.1 per equity share (10%) of face value of Rs. 10/- for the year 2010-11. Further, Dividend at the applicable rate i.e. Rs. 0.31 crore (including Corporate Dividend Tax) on Preference Shares has been paid as Interim Dividend.

Directors

Since the last Annual General Meeting, Shri Tejinder Singh Laschar resigned from the Board on August 31, 2010. Shri Rakesh Bharti Mittal joined the Board as Additional Director on October 27, 2010.

Directors' Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed:

(i) that in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to any departures;

(ii) that the Directors have selected such accounting policies and applied them consistently and 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 or loss of the Company for the year under review;

(iii) that the Directors have 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;

(iv) that the Directors have prepared the annual accounts for the year ended March 31, 2011 on a 'going concern basis'.

Auditors

M/s Chokshi & Chokshi, Chartered Accountants (Firm Registration No. 101872W), Mumbai, Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956. You are requested to consider their appointment.

MANAGEMENT DISCUSSION AND ANALYSIS

(i) Operating Environment and Outlook

Macroeconomic conditions, after contraction in 2009 on a heterogeneous scale, witnessed improvement all over the world in FY 2010-11. IMF, in their 'Global Financial Stability Report' published in April, 2011 observed that improvements in macroeconomic performance in advanced economies and strong prospects for emerging markets are supporting overall financial stability and that risks to global financial stability have declined. However, structural weakness and vulnerabilities in euro area pose significant risks to bank balance sheets, which have thin capital buffers apart from uncertain assets quality and sovereigns facing debt sustainability challenges.

Reserve Bank of India (RBI), in its 'Financial Stability Report' dated June 14, 2011 somewhat differently observes

that 'the growth is slackening in most parts of the world, even as the risks from global imbalances and sovereign debt crisis in Europe continue to hover' and subsequently in the monetary policy review on June 16, 2011, it observed that the global environment has changed for the worse, after its last review made on May 3, 2011. RBI also noted that 'Lead indicators suggest that growth moderated in both advanced economies and emerging market economies (EMEs) under the impact of high oil and other commodity prices, the spill-over from the Japanese natural disasters and monetary tightening in EMEs to contain inflationary pressures. Uncertainty about the resolution of the sovereign debt problem in the euro area has increased. These developments increase downside risks to global growth prospects'.

The Indian economy, on the back of improved agricultural output, strong private consumption, robust investment and a pick-up in exports, has rebounded strongly during 2010-11. GDP growth however, decelerated to 7.8% in Q4 of 2010-11 from 8.3% in the previous quarter and 9.4% in the corresponding quarter a year ago. For the year as a whole, GDP growth in 2010-11 was 8.5%. While private consumption was robust, investment activity moderated in Q4 of 2010-11. IIP growth, on year-on-year basis, moderated to 6.3% in April 2011, but growth in capital goods production at 14.5% was buoyant.

Domestic inflation remains high and much above the comfort zone of RBI. The headline Wholesale Price Index (WPI) inflation rate was 9.7% in March 2011. The main drivers of WPI inflation in April-May 2011 were non-food primary articles, fuel group and non-food manufactured products. The consumer price inflation for industrial workers (CPI - IW) rose from 8.8% in March 2011 to 9.4% in April 2011. Domestic fuel prices do not yet reflect the current trends of global prices. Although global commodity prices moderated in recent weeks, it is too early to downgrade this as a risk factor. Year-on-year non-food credit growth moderated from 21.3% in March 2011 to 20.6% in early June 2011, but remained above the indicative projection of 19%. The year-on-year deposit growth increased to 18.2% in early June 2011 from 17.0% in March 2011. However, corporate earnings growth and profit margins in the fourth quarter of 2010-11 were already showing stresses in their performance and ever since then the investment climate has weakened further.

We believe that growth would be adversely affected in the days to come on account of tight monetary conditions and worsening investor sentiment.

Initiatives of IFCI

Your Company, during the year under review, accelerated its operations and re-established its presence in the financial market by enlarging and retaining high value customer base. The business model adopted by IFCI has been guided by maximization of return on investment, while maintaining

emphasis on due diligence, as well as appropriate risk mitigants. High yielding short term lending, backed by strong and easily enforceable security of highly rated companies, formed the key strengths helping your Company to expand its asset base without any Non Proforming Assets (NPAs). Your Company will continue to explore possibilities for new business in the short and medium term with the aim of establishing a niche market for itself in financial products like loans against liquid securities, working capital gap, pre-operative expenses, acquisition, financing and participation in QIPs and IPOs.

The Government of India has developed an ambitious plan for infrastructure investment, involving both public and private sector. Developing roads, ports, power generation and transmission infrastructure forms an integral part of the plan. Furthermore, there is an increased focus on evaluating new sectors in Indian infrastructure and developing an infrastructure advisory division for providing holistic solutions to existing and potential clients. In keeping with the dynamics of the sector, your Company's Project Development Group (PDG) has scouted for the best investment opportunities in the Indian infrastructure space. The group proposes to make further investments in infrastructure while nurturing projects in its portfolio. While adding to its existing portfolio of investments in roads, thermal power and hydro power generation, the group has forayed into power transmission, solar power generation and wind energy generation through its investments during FY 2010-11 and is looking forward to investing in the logistic sector.

Your Company has strengthened the Treasury team by creating a dedicated Research Desk for making better and more informed investment decisions with the aim of maximizing profits in all treasury operations. The Treasury Department has been equipped with necessary tools and technology to meet the challenges in the rapidly changing environment. Your Company has also initiated operations in new segments viz. Collateralized Borrowing & Lending Obligation (CBLO) and Overnight Interest Swaps (OIS) to manage liquidity risk.

Your Company, after strengthening the activities of its Corporate Advisory Group, has diversified in areas of high value segments of financial consultancy. As a result, currently, IFCI provides the entire gamut of financial advisory services to clients across different sectors of the economy. IFCI has been able to create a space for itself in the niche bid advisory segment, where only a handful of global consultants have the expertise to provide consultancy services for competitive tariff based power projects, Ultra Mega Power Projects (UMPP), City Gas Distribution (CGD), Gas Pipeline Projects etc. During the current FY 2011-12, the thrust would be to get more Transaction Advisory assignments in the infrastructure sector, which will provide the impetus to further expand the footprints of IFCI in advisory business.

IFCI is the nodal agency for channelizing the Sugar Development Fund (SDF) Loans of the Government of India. Your Company, besides financial appraisal for SDF loans, disinvestment and monitoring, is exploring new avenues to increase fee based income by providing consultancy to sugar industry in almost every area, which includes restructuring, syndication and getting technical and financial partners; both to private and co-operative sector and preparing schemes for sugar factories to avail assistance from SDF for cane development activities. During the year 2010-11, fee based income from financial appraisals for SDF assistance, was higher by about 49% vis-a-vis previous year, as a result of continued efforts made in this direction.

Your Company, consequent on its demonstrated success in NPA resolution, took the initiative for the acquisition of NPAs from Banks/other FIs after complying with RBI guidelines on the subject. Your Company acquired NPAs from Banks/other FIs, and earned attractive returns. Your Company proposes to acquire further NPAs from Banks/other FIs by way of participating in public auction and/or through bilateral deals, to ensure that the momentum of earning profit with a substantial return is maintained. Innovative strategies are being adopted for the resolution of NPAs including assets under the control of Official Liquidators and companies before BIFR.

Your Company has been continuously posting profits. After paying dividend @ 8% for the year 2008-09 and @ 10% for the year 2009-10, the Board of Directors is now recommending to pay dividend @ 10% subject to your approval. The capital adequacy ratio of your Company as on March 31, 2011 at 16.4% is comfortable. Your Company is poised to raise resources in a big way to ensure accelerated growth in the years to come.

As per the study carried out by 'The Economic Times and Great Place to Work Institute', on "India's Best Companies to Work for-2011", your Company, for the second consecutive year, maintained its position as third best place to work for in the Financial Services Sector.

Your Company is keeping a close watch on the various developments in connection with the issue of new Banking Licenses and evaluating its strategy for foray into the Banking arena.

Your Company, in order to provide the requisite fillip to more effective management development in relation to significant and growing sectors of the economy, established Management Development Institute (MDI) in 1973 and another campus of MDI is now proposed to be set up at Murshidabad, West Bengal for which the foundation stone was laid by the Hon'ble Finance Minister of India on October 31, 2010. An MoU was signed between MDI and your Company in this regard. MDI has now emerged as one of the most prominent Business Schools of the country and as per CNBC Survey for the year 2011, it ranked 5th among the top 10 business institutes of the country. MDI is also in the process of acquiring land in Bengaluru for setting up a third campus.

The Technical Consultancy Organisations (TCOs) promoted by your Company provide a complete set of consultancy services in the areas of project conceptualization and other related services, credit syndication, preparation of various project specific agreements including credit documents, restructuring of projects, valuation of assets, stock audits, assessment studies on working capital, project monitoring consultancy, securitization services and secretarial assistance, in conducting training, entrepreneurship development programmes. IFCI is the lead promoter Institution for MPCON, HIMCON, HARDICON and NITCON.

Corporate Social Responsibility

Your Company has taken the initiative for undertaking Corporate Social Responsibility (CSR) from the year 2010-11. The main objective of the CSR initiative is to provide a platform to specialized agencies for enabling their involvement in CSR related activities with special focus on public health, education, environment and micro-finance. Under this initiative, in the year 2010-11, your Company released an amount ofRs. 50 lakh to Institute of Leadership Development (ILD) for upgradation and strengthening of infrastructure as well as to pursue its project for adoption of 3 villages for the purpose of social and economic development of the area, capacity building for enhancing the level of education and training as well as implementation of developmental programmes on health, energy, environment, sustainable economic activities and skill development programmes. Also Rs. 26 lakh was released to Rashtriya Gramin Vikas Nidhi (RGVN), Guwahati to pursue a project on Solar Lighting and Sanitation in semi urban areas of Kamrup District, Assam which will definitely uplift the standard of people living in the area.

Subsidiary Organisations

The following subsidiary companies have synergized their operations with IFCI:

- IFCI Infrastructure Development Ltd (IIDL)

IFCI Infrastructure Development Ltd (IIDL) had been promoted as a wholly owned subsidiary of your Company, as an instrument for unlocking value from real estate held by IFCI by way of its office and residential properties, acquiring valuable and strategic real estate in the process of recovery from NPAs of IFCI and availing new opportunities in real estate development through development authorities. Over the years, IIDL has expanded its asset base by purchasing assets and intensifying development work on such assets at various geographical locations in the country and made its presence felt on a pan India basis.

IIDL, with its implementation of projects like Service Apartment Project at Delhi, Hotel Project at Lucknow, Financial City project at Bengaluru and residential projects in NCR and Kochi, is one of the growth engines in the development of real estates and infrastructure, to which impetus is given by Government of India.

IIDL has also secured an important opportunity to participate in the development of a food park approved by the Ministry of Food & Processing Industries, Government of India during the year. IIDL has formed a Special Purpose Vehicle (SPV) named "JANGIPUR BENGAL MEGA FOOD PARK" for the development of the food park. During the year 2010-11, there was a growth of 86% in the company's

assets base, which went up to Rs. 640.05 crore as against Rs. 344.04 crore at the end of previous year. The net profit increased by 7.98%, which was at Rs. 4.33 crore during the year under review as against Rs. 4.01 crore during the previous year. The gross income of the company was Rs. 29.32 crore despite the generally slow recovery rate in the real estate sector during the year under review.

- IFCI Venture Capital Funds Ltd (IVCF)

IFCI Venture Capital Funds Ltd was set up by your Company in the year 1975 with a view to promoting entrepreneurship by providing risk capital mainly to first generation entrepreneurs/technocrats to help them setup business projects. Later on, IVCF started providing capital support to Small and Medium Enterprises (SMEs) towards initial capital and growth. Since inception, it has supported entrepreneurs by providing start-up/growth capital for setting up more than 400 projects across India. IVCF closed three private equity/venture capital funds, launched in 2008, with aggregate corpus ofRs. 512 crore on June 30, 2010. During the year 2010-11, the entity sanctioned an amount of Rs. 395.14 crore and disbursed Rs. 292.14 crore out of the aggregate corpus fund. IVCF registered a growth of 166% in Profit after Tax at Rs. 13.14 crore (Rs. 4.94 crore) in 2010-11 over previous year.

- IFCI Financial Services Ltd (IFIN)

IFIN is engaged in Stock Broking, Investment Banking, Mutual Fund Distribution and Advisory Services, Depository Participant Services and Insurance Products. IFIN continued to grow both organically and inorganically. The retail branches of IFIN at the end of the year increased from 25 to 42. The size of operations has also increased considerably and reasonable growth was registered in the institutional services. A growth of 26.89% was registered in company's income from operations at Rs. 33.13 crore as compared to Rs. 26.11 crore during previous year. During the year 2010-11, the authorized share capital of the company was raised from Rs. 28.25 crore to Rs. 50 crore.

- IFCI Factors Ltd (IFL)

IFCI Factors is one of the first members of Factors Chain International from India. It has pioneered the export factoring business in India and is also providing domestic factoring services, through which it is steadily replacing the hitherto conventional modes of working capital finance in the banking space. IFL achieved a turnover of Rs. 2,683 crore, funds in use of Rs. 856 crore and net profit of Rs. 20.1 crore, registering a growth of 131% in turnover, 183% in funds in use and 90% in net profit over the corresponding numbers of financial year 2009-10, whereby the year under review had been yet another significant year. IFL hopes to maintain the momentum in growth in future and aims to become one of the major players in the factoring industry in India in the next 3-5 years. The factoring business globally grew by 28% in the year 2010 at ¤ 1648 billion as compared to ¤ 1283 billion in previous year, though the Indian factoring volume grew only at 4% at ¤ 2.75 billon ( ¤ 2.65 billion). With India's market share of 0.77% in Asia, there is vast scope for factoring business in India. However, it is going to be a continued challenge for factoring companies to raise appropriately priced funds to create quality domestic and export factoring assets and appropriately structure deals to de-risk business in the absence of supportive factoring legislations in India. The proposed Factoring Bill, if passed, is expected to create a conducive environment for further development of the factoring industry in India.

- MPCON Ltd

MPCON is providing consultancy services to small and medium enterprises, individual entrepreneurs, Government Departments and agencies, various state level institutions, commercial banks and other institutions in the States of Madhya Pradesh, Rajasthan and Chhattisgarh. The company is specialised in small business, training and skill development. During the year 2010-11, the total income of MPCON grew by 19.18% at Rs. 8.61 crore. The project consultancy income grew by 121% during the period and stood at Rs. 2.86 crore ( Rs. 1.30 crore) which constituted 33.28% share in total income. Training programmes and others constituted 65.11% share and stood atRs. 5.60 crore (Rs. 5.14 crore). The profit after tax of MPCON grew by 80.14% in the year 2010-11 and stood at Rs. 0.46 crore.

(ii) Industry Structure & Development

The industrial sectors in which your Company has major exposures and which include power generation, service sector and other infrastructure/logistics, have performed satisfactorily. Government of India, under the 'National Action Plan for Climate Change' (NAPCC) has identified measures that promote our development objectives, while yielding co-benefits for addressing climate change effectively. These developments translate into potential investment opportunities in roads, ports, renewable energy and the power sector at large. The prospects of other sectors in which your Company has major exposures, viz., iron and steel, petroleum refining, construction and real estate have improved with the upswing in economic activities.

IFCI, being categorized as an NBFC-ND-SI (Non-Banking Financial Company-Non Deposit taking Systemically Important) by RBI, has to compete, in the area of project finance, with Banks and Financial/Investment Institutions. Your Company, having embarked upon substantial asset creation in FY 2008-09, after a gap of 10 years, has been able to re-establish business relationships with several major industrial houses in the country by extending financial assistance. Your Company has endeavored to maximize returns, with the in-house experience in infrastructure projects, by investing by way of loans with a mix of equity, mezzanine and sub debt.

During FY 2010-11, looking to the maturity profile of its existing liabilities, IFCI has sanctioned term loans of one to three years duration mainly to meet the short term fund requirements of companies with excellent track record, for general corporate purposes, investment in subsidiary company/(s), acquisition, subscription to rights issue, purchase of warrants, refinancing of high cost debt, pre- operative expenses for project implementation, etc. against adequate security. Apart from fund based activity, your Company also ventured into non-fund based activities like advisory services, syndication, underwriting etc. In order to retain and enlarge the customer base, endeavours were made to develop such products which cater to the needs of corporate clients.

Your Company, during the year, also ensured improvement in various other operational areas like Treasury and Investments and posted substantially higher level of revenue and profits.

The details of various developments are given hereunder:

(a) Approvals and Disbursements:

During the FY 2010-11, total fund based approvals were Rs. 13,208.50 crore as against Rs. 6,765.56 crore in the previous year registering a rise of 95.23%. Out of the above approvals, an amount of Rs. 3,262.25 crore (24.69%) was by way of rupee term loans, Rs. 3,111 crore (23.55%) by way of corporate loans, Rs. 945 crore (7.15%) by way of short term loans and Rs. 1,460 crore (11.05%) by way of debenture. The amount approved towards equity and other investments was Rs. 4,430.25 crore (33.54%).

Total disbursements during FY 2010-11 amounted to Rs. 8,399.39 crore compared to Rs. 6,053.82 crore in the previous year registering a rise of 38.75%. Out of the said disbursement, Rs. 2,028.06 crore (24.14%) was by way of rupee term loans, Rs. 3,034.20 crore (36.12%) by way of corporate loans, Rs. 1,150.45 crore (13.69%) by way of short term loans, Rs. 110 crore (1.30%) by way of debenture and Rs. 2,076.68 crore (24.72%) by way of equity & other investments.

(b) Treasury and Investment Operations

During the FY 2010-11, your Company earned an income of Rs. 139 crore from fixed market operations. While the avenues of investment were broadened for earning higher return, safety and liquidity were the prime criteria behind all investment decisions. Your Company was able to achieve returns at par with/higher than the market returns of top rated instruments with similar maturity. During the year, operations in Collateralized Borrowing and Lending Obligation and Overnight Interest Swaps were also introduced.

In foreign currency operations, your Company managed its exposure in foreign exchange reasonably well by taking appropriate forward covers. The foreign exchange position was nearly hedged throughout the year. Your Company did not have any exotic derivatives exposure in equity/debt or foreign exchange market.

In equity operation, your Company continued with the strategy of selective disinvestment of slow moving/illiquid stocks and strengthening the portfolio through selective investment in frontline and mid cap stocks. While improving the quality of the portfolio, in FY 2010-11 your Company earned a profit of Rs. 325.39 crore from equity operations. Net investment portfolio of your Company as on March 31, 2011 stood at Rs. 8,005.56 crore which is substantially higher than the net investment amount of Rs. 5,882.43 crore as on March 31, 2010.

Your Company embarked on an ambitious drive of raising Rs. 5,000 crore during FY 2009-10 by way of bond issuance and bank loans. Buoyed by the success in FY 2009-10, your Company set a higher target for FY 2010-11 and mobilised Rs. 7,000 crore. The remarkable feat was achieved through successful nurturing of relationship developed by your Company with different market participants. The overwhelming response of investors to the maiden Infrastructure Bond issuance program of your Company demonstrates the goodwill and confidence enjoyed by your Company among investors.

(c) Management of Non-Performing Assets

Your Company continued to exploit aggressively all channels available to it to reduce its NPAs and were successful in doing so. This is evidenced by NPA recovery of more than Rs. 338 crore surpassing the recovery budget, of which Rs. 263 crore was by One Time Settlement (OTS) and Assignment and Rs. 75 crore through Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act (SARFAESI) and legal route.

In future, your Company has to meet new challenges in resolving NPA where it holds minority stake and action under SARFAESI is difficult due to non-receipt of consent from other secured creditors pursuant to settlement with them by company. IFCI intends to resolve these NPAs by adopting DRT and High Court route among other recourses available to it.

(iii) Financial Performance

Your Company's profit before tax of Rs. 1,166 crore in the current year is higher by 5% as compared to Rs. 1,115 crore in the previous year mainly on the strength of creation of fresh assets since April 2008. Profit after tax of Rs. 706 crore for the year has also shown a growth of 5% over previous year's profit after tax of Rs. 671 crore.

Standard loans to borrowers which stood at Rs. 6,425 crore as at April 1, 2008 have shown CAGR of 35% and stand at Rs. 15,942 crore as at March 31, 2011. The growth over the previous year's standard loans to borrowers of Rs. 11,022 crore is 45%. Total assets have also increased to Rs. 25,915 crore in the current year from Rs. 19,589 crore in previous year registering a growth of 32%.

Satisfactory levels have been maintained for key financial ratios viz. interest margin, capital adequacy ratio, debt-equity ratio, debt service coverage ratio, net worth, etc. Basic EPS increased to Rs. 9.6 per share for the current year vis-a-vis Rs. 9.1 per share for the previous year. Book Value (excluding Revaluation Reserve) also increased to Rs. 51 per share as at March 31, 2011 from Rs. 42.7 per share as at March 31, 2010 (FV Rs. 10/-).

Your Company's quality of assets continued to be excellent. The ratio of net NPAs to net advances was as low as 0.97% as at March 31, 2011.

(iv) Segment-wise/Product-wise Performance

Your Company operates in India and hence it is considered to operate only in the domestic segment. More than 90% of revenue for the Company comes from a single segment of financing. Accordingly, segment reporting as required under Accounting Standard-17, issued by The Institute of Chartered Accountants of India, is not applicable.

(v) Opportunities, Threats and Future Outlook

Your Company is well poised to expand and diversify its operations and performance in accordance with its business strategy. Your Company will continue to explore possibilities for new business for short term and medium term with the aim of establishing a niche market for itself in products like short and medium term loans against liquid securities, take-out finance and debt swapping. In addition to the normal lending activities, your Company continues to concentrate on private equity participation, project development activities, non-fund based income from advisory services, syndication, underwriting of loans, acquisition of NPAs from other lenders and thrust on the activities of subsidiaries/associate companies.

IFCI, as an NBFC-ND-SI, has developed for itself niche products, covering the entire range of capital structure including debt, equity, equity related products, mezzanine instruments etc. of short, medium and long term duration.

The overall economic scenario in the country is worsening and inflationary pressure has pushed up the cost of funds and impacted profit margins. However, owing to strong growth in the balance sheet without NPAs, your Company would continue to improve its top line and bottom line. On the power front, there exists a huge demand-supply gap with an all India average energy shortfall of 7% and peak demand shortfall of 12%. There is over 90,000 MW of new generation capacity required in the next seven years with over 150,000 MW of hydro power yet to be tapped. Additional 60,000 circuit km of transmission network is expected by 2012. Power generation and transmission will continue to be a potential sector for investment by your Company.

There is an annual growth of 12-15% projected for passenger traffic and a growth of 15-18% for cargo traffic. Covering 66,590 km, highways/expressways constitute only 2% of all roads and carry 40% of the road traffic. This clearly indicates the scope for further development of highways. Your Company shall leverage on its experience in bidding for attractive road projects across India.

Growth in merchandise exports projected at over 13% p.a. underlines the need for large investments in port infrastructure. It is expected that 95% of foreign trade by volume and 70% by value would be through the maritime route. The New Foreign Trade Policy envisages doubling of India's share in global exports in next five years to USD 150 billion.

Your Company shall continue to aggressively pursue project development activities in the infrastructure projects by way of participating in equity as promoter/co-promoter. This endeavour is expected to result in ample opportunities in future where your Company can involve itself in appraisal, underwriting, syndication of debt/sub-debt, equity, etc. besides acting as the lenders' agent. The said areas would improve the overall return by way of non-fund based income such as underwriting, syndication fee etc. Your Company would continue its endeavour to establish/ re-establish relationship with corporate houses of repute and standing so as to exploit emerging business opportunities during the days to come.

Your Company, with its present business model, does not envisage any major challenge in the short as-well-as medium term perspective. In the emerging scenario arising out of Government's move to modify regulatory requirements which is expected to provide the opportunity to different players to be more pro-active for economic development of the nation, your Company has geared up to find its 'niche' area.

(vi) Risk Management

Managing various types of risks is an inherent part of IFCI's business. Business and revenue growth have to be viewed in the context of the risks implicit in your Company's business strategy. Recognizing this, your Company has continued its endeavor to have in place a robust and integrated risk management system. The risk management strategy is based on a clear understanding of various risks, a multiplicity of risk assessment and measurement procedures and continuous monitoring. Forming part of the risk management architecture of your Company, the Risk Management Committee of Directors is overseeing all the risks viz. credit, market, liquidity and operational risks and any other risks, assumed by your Company. The Committee guides the development of policies, procedures and systems for managing risk at the organizational level.

The Audit Committee of Directors provides direction and monitors the quality of the internal audit function and compliance with systems and procedures. At the executive level, a Risk Management Committee of Executives has been constituted to facilitate overseeing of various risks in a focused manner, supported by an independent risk management function that looks after all aspects of enterprise-wide risk management. The risk management function endeavors to anticipate vulnerabilities at the transaction level or the portfolio level, as appropriate, through quantitative or qualitative assessment of inherent risks. Appropriate structure, approved policies and procedures and review processes are in place through which risk is managed. A well-established, effective and independent internal control mechanism exists for supplementing the risk management systems to build risk consciousness and discipline into decision-making throughout the Company.

Being primarily a lending institution, credit risk is the most important for IFCI and therefore, your Company has put in place comprehensive credit risk management architecture. With appreciable augmentation of credit portfolio during the year under report, systems and controls are in place, to mitigate credit risks including exposure limits for borrowers, borrower groups, industrial sectors, multi-tier credit appraisal system, risk-based monitoring system, committee system for considering proposals and detailed risk assessment of new proposals, which have been further strengthened commensurate with the volume of business activities. Emphasis is placed on both, evaluation and containment of risk for individual exposures and analysis of the portfolio behaviour. The loan policy and risk management policy of your Company is reviewed periodically keeping in view the changing economic and business environment. Periodic reviews of existing products and services are carried out with a view to continuously monitoring the risks and assisting in control management. Overall portfolio quality and high risk exposures are also monitored periodically.

Your Company undertakes analysis of industries/sectors where the exposure levels are sizeable as also to evaluate and capitalize on business opportunities in the prospective/ sunrise sectors.

As a part of loan review mechanism, credit audit of a majority of the standard assets with exposure of Rs. 50 crore and above, was taken up during the year under report, with the objective of detecting weaknesses, if any, in these exposures and initiating timely corrective action. The credit audit exercise also provides the top management with information on quality of credit administration including credit sanction process, risk evaluation and post-sanction follow-up. Your Company continues to undertake reviews of large borrower accounts and related industries/sectors on a regular basis with the objective of monitoring and managing the risk in the portfolio. In another initiative towards effectively monitoring the standard asset portfolio, rapid analysis of quarterly results of assisted concerns, with particular focus on assessing cash flows and debt servicing capacity as also detecting early warning signals, if any, were carried out during the year under report. Credit exposures are managed through target sectors/corporate/group identification, appropriate credit approval processes, post- disbursement monitoring and remedial management procedures.

In order to make the risk management system more robust as also a best practice, your Company has initiated steps to adopt and make internal credit risk rating models an integral part of the credit assessment process. The use of these models is being disseminated at an organizational level for measuring credit risk in new business proposals and existing loan portfolios. The internal rating models, based on two-dimensional rating methodology, have the capacity to estimate probability of default (PD), loss given default (LGD) and expected loss (EL) in a specific loan asset. During the year under report, the internal rating process has been streamlined for achieving faster turnaround time and accelerating credit delivery. From a portfolio monitoring perspective, the internal rating along with the size of the exposure would determine the monitoring frequency applicable to the exposure in line with the policies approved by the Board. With a view to initiating the process of monitoring the loan portfolio using these models, ratings of select standard cases were carried out during the year under report.

The market and liquidity risk is managed by the Asset & Liability Committee (ALCO) through analysis of structural liquidity gaps and interest rate sensitivity positions and deployment of surplus funds by Treasury besides approved limits and triggers for various types of deployment. The investment policy of your Company is reviewed periodically in the light of the prevalent market scenario. To manage the operational risks, there are adequate internal controls and systems in place aided and assisted by internal audit, remote back-up of data, disaster management policy and appropriate insurance.

Going forward, with the growth of business and augmentation of loan portfolio, risk management at IFCI would assume a larger and more complex role. Your Company would continue to work on various initiatives which would not only help to develop a more robust risk management framework but also inculcate a strong culture for risk management and awareness in the Company. The steps taken would streamline the mechanism for effective overall institutional risk management at IFCI.

(vii)Nominee Directors

Appointment of Nominee Directors on the Boards of assisted concerns has been a long and well established

practice for Institutions and Banks with a view to monitoring the performance of their borrower companies. The basic objective of such appointments is to help build up professional management and facilitate effective functioning of the Board of Directors as well as formulation of proper corporate policies and strategies to improve productive efficiency and promote long term growth of the assisted companies, keeping in view the overall interest of the shareholders and financial institutions. The feedback reports received from Nominee Directors act as a useful tool for credit monitoring. The system of Nominee Directors is functioning effectively in your Company.

(viii) Resources

Your Company continued the initiative of increased levels of resource mobilization programme undertaken during the previous year 2009-10. During the year 2010-11, an amount of Rs. 7,000 crore was mobilized mainly by way of rupee bank facilities and private placement of bonds at competitive rates. A few new instruments like Tax Saving Bonds and Commercial Paper were introduced during the year.

Your Company is privileged to have been authorized by the Government of India for issuance of Long Term Infrastructure Bonds to retail investors, having tax benefits under Section 80 CCF of Income Tax Act, 1961. The two issues floated by IFCI received overwhelming response and the total valid subscription of Rs. 370.75 crore was fully allotted. We are thankful to our investors for their investment and for reposing their faith and trust in IFCI. The entire proceeds out of these infrastructure bonds have been fully utilized during the year under report in infrastructure facilities as defined by the Reserve Bank of India.

The total borrowing of your Company stood at Rs. 19,265 crore as at March 31, 2011, which comprised of rupee and foreign currency borrowings of Rs. 18,738 crore and Rs. 527 crore respectively.

The investor-wise and instrument-wise break-up of the borrowings as at March 31, 2011 are indicated below:

Investor service continued to be of utmost importance for your Company. Investors' grievances, received in physical or electronic form or through web-based query submission system, were taken up promptly and redressed.

(ix) Public Deposits

Your Company did not raise any public deposit during the year. There was no public deposit outstanding as at the beginning or end of the year under report.

(x) Internal Control Systems and their Adequacy

Your Company has in place adequate systems of Internal Control and the Internal Audits are being carried out, based on the scope approved by the Audit Committee of the Board of Directors (ACD). A 'Risk based Internal Audit' system has already been introduced, which has made the Internal Audit more focused and such Reports are constantly reviewed by ACD.

SIGNIFICANT DEVELOPMENTS

(i) Project Development Group (PDG)

Availability of quality infrastructure is a prerequisite of the sustainable growth of any country. The present growth phase of Indian economy is also coupled with impetus on the infrastructure sector. Project development is a part of IFCI's strategy to enter infrastructure projects early in their life cycle, ensuring IFCI reasonable returns on cost of funds. It shares strong relationships with India's leading infrastructure companies and is associated with them throughout the project development life cycle from inception to commissioning and thereafter nurturing the projects to realize returns. It is these relationships and the experience of the group in Indian infrastructure which positions your Company as one of the country's largest players in infrastructure investment.

PDG, with its dedicated team of highly qualified and experienced professionals, has developed invaluable insights into the technical, practical and financial aspects of the infrastructure sector in general and power generation and roads in particular. During the year 2010-11, your Company has made investments in select coal and gas based Thermal Power, Hydro Power, Wind and Solar Power, Power Transmission, Road, Port and Logistic Projects and simultaneously increased focus on providing a gamut of fee-based services in the infrastructure sector. Going forward, your Company intends to consolidate its position as a provider of end to end financial services in the infrastructure sector.

(ii) Corporate Advisory Services

In the area of providing customized corporate advisory services, your Company, despite stiff competition during the year, has not only been able to retain its existing clients but has also been able to secure some prestigious new assignments relating to disinvestment of public sector enterprises on competitive bidding basis, management consultancy assignments with respect to bid advisory, due diligence, project appraisal, business re-engineering, besides new assignments with respect to financial restructuring, business plan, valuation and bid process management from various private/public sector entities and Central/State Government(s). During the year, your Company has also been empanelled by many prestigious clients for various consultancy assignments.

(iii) Sugar Development Fund

Your Company has been acting as an agent of the Government of India since the inception of the Sugar Development Fund (SDF) for the purpose of disbursement, follow up and recovery of SDF loans. Cumulative approvals and disbursements under SDF upto March 31, 2011 stood at Rs. 4,102 crore and Rs. 3,400 crore respectively. The agency commission accrued during the year 2009-10 was of the order of Rs. 11.40 crore, which is likely to be Rs. 14 crore for the year 2010-11. During the year 2010-11, IFCI has received Rs. 19 crore out of the outstanding agency commission.

Your Company has also carried out merchant appraisals for SDF loans, which fetched a fee of Rs. 1.85 crore during the year 2010-11 as against a sum of Rs. 1.24 crore earned during the previous year 2009-10.

(iv) NPA Acquisition and Resolution

Your Company, while managing its NPA portfolio since 2007-08 and putting exemplary performances in terms of recovery of NPAs, acquired a very strong expertise in this business segment. Making use of the said expertise, taking care of the regulatory framework and other advantageous factors, your Company has floated a separate business vertical for acquisition of NPAs from Banks and Institutions. The acquisitions were aimed at further management of the same and unlocking the true worth out of the said NPAs with substantially higher returns, compared to normal lending operations. Till date, your Company has acquired more than 80 NPAs at a total consideration of about Rs. 220 crore and has resolved a substantial number of accounts with a highly satisfactory annualized return. Your Company will endeavour to attain still higher levels of such business and to maintain a pre-eminent position in the NPA business segment.

(v) Human Resources

The revitalisation of Human Resource Management practices has immensely contributed towards the resurgence that your Company has witnessed over the last few years. Your Company strongly believes that, going forward, creating a pool of leaders would be vital for accelerated growth of the Company. Hence, in the year 2010-11, your Company laid special focus on the creation of a leadership pipeline. The identified leadership talent, on the foundation of performance driven culture is being progressively exposed to challenging assignments.

The manpower strength of your Company as on March 31, 2011 was 264 including 261 executives and professionals as compared to a total strength of 252 as on March 31, 2010.

Your Company has further strengthened its position as a preferred employer in the Indian financial sector. During the year, your Company has been able to attract talent from leading banks and multinational organizations. Besides, it has recruited 16 young professional from leading business schools like ISB Hyderabad, IIM Ahmedabad, IIM Bengaluru, IIM Kolkata and Faculty of Management Studies, New Delhi.

Your Company continued its endeavour to upgrade knowledge and skill set of its employees. Aside from regular in-house behavioural and functional interventions, employees were nominated to leading institutes in India and abroad for Executive Education programs. Employees were also nominated to participate in various conferences and discussion forums organised by industry so as to provide them platforms for keeping abreast with the latest developments and also to explore business opportunities.

(vi) Information Technology and Communications

A software package developed in-house, namely 'Central Integrated Information System, (CIIS) is an umbrella providing solutions for automating operations of various activities of your Company. During the year 2010-11, to meet the current and emerging business needs, the existing software applications were upgraded with enhanced/added features.

In a constant endeavour to induct latest technology and improve operational efficiency, "Oracle BI" business intelligence software was implemented. The application provides interactive dashboards with user level security thereby facilitating Management Information System (MIS) and facilitating the decision making process of top management. The system provides visual presentation of data, which can also be customised by the user by slicing and dicing.

In the efforts to provide IT support to its Associates and Subsidiaries, the IT team of your Company has implemented the Financial Accounting, Balance Sheet and Loan Accounting modules of CIIS at Asset Care & Reconstruction Enterprise Ltd and also implemented the Loan Accounting modules at IFCI Factors Ltd.

The Video conferencing facility has been established at the Head Office as well as in the Mumbai and Hyderabad Regional Offices. Additional firewalls were implemented to enhance the security of the Data Center. A state-of-art visitor entry and monitoring system was implemented at Head Office for enhanced security.

Compliance

Timely submission of various returns and data/information to RBI, SEBI and other regulatory bodies and the Government of India has been ensured through the Compliance and Secretarial Departments of your Company at the Head Office.

Cautionary Statement

Statements in Management Discussion and Analysis describing the Company's objectives, estimates and expectations may be 'forward looking' within the meaning of applicable laws and regulations. Actual results might differ materially from those expressed or implied.

Corporate Governance

A detailed report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement, is attached to this Report.

Certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement has been obtained and is annexed at the end of Corporate Governance Report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

As the Company's operations do not involve any manufacturing or processing activities, the particulars as per Companies (Disclosures of particulars in the Report of the

Board of Directors) Rules, 1998 regarding conservation of energy and technology absorption, are not applicable. The particulars regarding expenditure and earning in the foreign exchange are given in Item Nos.10 and 11 in the Notes on the Accounts.

Particulars of Employees

In terms of provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are required to be set out in the Annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to the Members and others entitled thereto. The Annexure is available for inspection by members at the Registered Office of the Company during business hours on working days upto the date of the ensuing Annual General Meeting.

Appreciation

The Board of Directors of your Company wishes to express its gratitude for the cooperation, guidance and support received from the Ministry of Finance, various other Ministries and Departments of the Government of India, State Governments, the Securities and Exchange Board of India, the Reserve Bank of India and other regulatory bodies. The Board of Directors also acknowledges the continued cooperation received from all overseas correspondent banks and other members of the banking fraternity.

The Board of Directors would like to thank Banks, Financial Institutions and other investors and shareholders for their continued support.

The Directors of your Company place on record their appreciation of the dedicated and sincere service rendered by the officers and staff at all levels.

For and on behalf of the Board of Directors

Place: New Delhi

Dated: July 28, 2011 P G MURALIDHARAN

Chairman of the Board

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