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Directors Report of IL&FS Investment Managers Ltd.

Mar 31, 2013

To The Members of IL&FS Investment Managers Limited

The Directors have pleasure in presenting for your consideration and approval the Twenty Seventh Annual Report with the Audited Financials of the Company for the year ended March 31, 2013

FINANCIAL ACHIEVEMENTS AND DIVIDEND

For the year ended For the year ended For the year ended For the year ended March 31, 2013 March 31, 2012 March 31, 2013 March 31, 2012 (Rs. mn) (Rs. mn) (Rs. mn) (Rs. mn) Standalone Standalone Consolidated Consolidated

Total Income 1032.12 1042.75 2269.27 2247.01

Proft before Taxation 615.77 575.64 1011.39 953.14

Provision for Taxation 191.34 165.21 244.73 215.04

Net Proft after Taxation 424.43 410.43 766.30* 735.33*

Proft available for appropriation 535.00 515.66 2172.25 1811.05

(Inclusive of balance carried forward from the previous year)

Appropriations :

General Reserve 43.00 42.00 43.00 42.00

Dividend (inclusive of dividend tax) 366.10 363.09 366.10 363.09

* after Minority Interest

DIVIDEND

During the year, your Company achieved a net proft after tax of Rs. 424.43 mn. Your Directors recommend a dividend of Rs. 1.50 per share of face value Rs. 2/- each. The total amount of dividend is Rs. 366.10 (inclusive of dividend tax of Rs. 53.52 mn)

REVIEW OF OPERATIONS

The multiple challenges that the global economies have been facing over the previous few years have continued to impact global growth. Whilst most policymakers have tried to limit the downside risks by issuing various stimuli packages, the process of reigniting growth in most economies is a slow process. Austerity and focus on fscal consolidation has had some impact and signifcant downside risk have now abated. Most major economies have started seeing some positive movement in the process and in the next few years slowly but steadily, growth prospects of most economies are expected to improve. The focus as always will be on strengthening the existing situation whilst focusing on investments in critical areas to encourage sustainable growth

India has also seen headwinds in the form of slowing growth and a growing fscal imbalance. The Indian economy is expected to register a GDP growth of 5% or lower in FY2013, as against the original projections of over 6%, the lowest in a decade. Infation has remained consistently above the comfort level and currency problems have compounded in the last 18 months, with all-time high current account defcit levels

The last couple of quarters provided some ray of hope with the Finance Minister pushing for several reforms, controlling FY2013 fscal defcit to 5.2% of GDP, and targeting to lower it further to 4.8% for FY2014. The RBI cut its repo rate twice this year, to bring the rate down to 7.5%, in a bid to stimulate growth. The Indian economy seems to be showing early signs of recovery. Industrial production growth for March 2013 accelerated from the previous month. More importantly, the ‘growth quality’ improved as capital goods output increased for the second consecutive month. Further, for the quarter ending March 2013, private projects under implementation increased, albeit marginally, in year on year terms after nine quarters of deceleration

The key concerns for India’s fscal imbalance and high infation have abated and provided room for the RBI to adopt a more lenient monetary policy. This has been primarily due to a drop in gold and oil prices in the recent past and positive predictions of a normal monsoon. If the above trends persist, the economy should perform well in the medium term to long term, as the true impact of these tailwinds will provide an opportunity for some of the macro variables to self correct

Fund raising also continues to be challenging. There was a 40% contraction in new fund raising plans announced in 2012 as compared to 2011. Fund raising timelines continued to be stretched as the regulatory uncertainty around GAAR, retrospective taxation and the Mauritius DTAA also impacted investor sentiment. When compared to other emerging markets, such as China and Brazil, India ranked lowest in terms of funds raised in 2012

FY2013 was similar in many respects to a diffcult FY2012 and conditions for Private Equity investors continued to be tough. The year saw a moderation in PE investment on the back of overall weak fundamentals. During FY2013, 410 transactions saw US$ 8.8 bn of investments as compared to US$ 12.2 bn invested in 568 deals in FY2012. Against this backdrop, IIML continued to invest US$ 143 mn (Rs. 7.72 bn) in attractive opportunities across the Infrastructure and Real Estate verticals

The scenario for exits in FY2013 also continued to be hampered largely by the slowing growth. However, it was marginally better than FY2012. In FY2013, there were 146 exits announced for US$ 4.3 bn (Rs. 232 bn) as compared to 140 exits announced for US$ 3.4 bn (Rs. 192 bn) in FY2012. However, IIML was successful in generating exits of Rs. 5.37 bn across the verticals of Growth Private Equity and Real Estate

On a consolidated basis, the Income from Operations of the Company for the Financial Year 2012-2013 was Rs. 2244.91 mn, inclusive of Income from Investments of Rs. 83.81 mn. Other Income was Rs. 24.36 mn and the Total Income on a consolidated basis for the Financial Year 2012-2013 was Rs. 2269.27 mn. The total Operating Expenses for the year were Rs. 1257.88 mn and the resultant Proft after Tax on a consolidated basis for the Financial Year 2012-2013 was Rs. 766.29 mn (after minority interest)

On a standalone basis, the Income from Operations of the Company for the Financial Year 2012-2013 was Rs. 1010.80 mn inclusive of Income from Investments of Rs. 104.32 mn, Other Income of Rs. 21.32 mn resulting in the Total Income of the Company for the Financial Year 2012-2013 of Rs. 1032.12 mn. The total Operating Expenses for the year were Rs. 416.35 mn and the resultant Proft after Tax for the Financial Year 2012-2013 was Rs. 424.43 mn

FUTURE OUTLOOK

The beginning of FY2014 has witnessed improvement is some of the macro-economic parameters. There is confdence that fscal defcit may be controlled and factors contributing to higher defcit viz. Oil and Gold prices will remain moderated. Thus, while growth for FY2014, expected at around 6%, is signifcantly lower than that attained during the 2005-2008 period, it would be a marked improvement over FY2013

Against this backdrop, your Company continues to seek out fund management opportunities in products and geographies, which enhance our present offerings. The wider product spectrum will cater to a more diverse set of investors, and would de-risk our India centric business model. This strategy is expected to play out in the next 2-3 years of years. In the immediate term, your Company is focussing on Closing the fund in the Middle East as also the follow-on SCI Asia Fund II

All the funds managed by your Company have now been fully invested and the Company has now moved focus on asset management. The team has been working closely with investee companies and partners to ensure that investments are being managed effectively to ensure that they achieve optimum valuations. A large emphasis for this year will also be on exits, as many assets mature and some Funds get closer to the end of their Fund lives. This would mean a continued effort on part of the management team to ensure that these assets achieve their potential value and are exited in a value accretive manner

DIRECTORS

Mr Ravi Parthasarathy, Mr Arun Saha, and Mr Vibhav Kapoor shall retire by rotation in the ensuing Annual General Meeting and being eligible offer themselves for re-appointment

STATUTORY AUDITORS

The Statutory Auditors of the Company M/s Deloitte Haskins & Sells, Chartered Accountants, Mumbai, Registration Number 117366W, retire at the conclusion of the ensuing Annual General Meeting and have expressed their willingness to continue as Auditors, if re-appointed, at the ensuing Annual General Meeting of the Company

The Company has also received a certifcate from M/s Deloitte Haskins & Sells under Section 224(1B) of the Companies Act, 1956 confrming their eligibility for re-appointment. M/s Deloitte Haskins & Sells, Mumbai, have also confrmed to the Company that the frm is subjected to the Peer Review Process of the Institute of Chartered Accountants of India

INCREASE IN SHARE CAPITAL

During the year your Company allotted 628,500 Equity Shares of Rs. 2/- each on the exercise of Options issued under the Employee Stock Option Plan 2006

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Report on Corporate Governance along with the Management Discussion and Analysis and Auditors’ Certifcate on compliance with the Corporate Governance requirements have been included in this Annual Report as separate sections

SUBSIDIARY COMPANIES

Your Company has three domestic subsidiaries namely, IL&FS Asian Infrastructure Managers Limited, IL&FS Urban Infrastructure Managers Limited and IIML Asset Advisors Limited and three offshore subsidiaries namely IL&FS Investment Advisors LLC, Mauritius, IIML Advisors LLC, Mauritius and IIML Fund Managers (Singapore) Pte. Ltd., Singapore

The Ministry of Corporate Affairs vide General Circular No. 2/2011 fle No. 51/12/2007-CL-III dated February 8, 2011, had issued directions under Section 212(8) of the Companies Act, 1956 to grant a general exemption from attaching the fnancials along with the Directors’ Report and the Auditors’ Report of the subsidiary companies to the fnancials of the holding company on fulfllment of certain conditions. In compliance with the said circular of the Ministry of Corporate Affairs, the Company has attached a summary of the fnancial statements of each of the Subsidiary Companies

As per Clause 32 of the Listing Agreement the consolidated fnancial statements of the Company with its Subsidiaries form part of the Annual Report. The copies of the audited annual accounts of the Company’s Subsidiaries and other related documents can also be sought by any member of the Company or its Subsidiaries on making a written request to the Company Secretary in this regard. The Annual Accounts of the Subsidiary Companies are also available for inspection by any member at the Company’s and/or the concerned Subsidiary’s registered offce

Review of Operations of Subsidiary Companies

IL&FS Asian Infrastructure Managers Limited :

IL&FS Asian Infrastructure Managers Limited (IAIML) had been set up to manage the Pan Asia Project Development Fund, India (the Fund). The Fund, having a corpus of Rs. 1,125 mn, had the mandate to support initiatives for development of infrastructure projects in the Asian region. IAIML is playing an active role in managing and monitoring the investments made by the Fund. The Fund expects to complete full divestment by the frst half of FY2014

The Total Income for Financial Year 2012-2013 was Rs. 19.60 mn inclusive of Income from Investments and Other Income of Rs. 3.43 mn. The Total Expenses of IAIML for the year were Rs. 18.85 mn and the resultant Proft after tax for the year was Rs. 0.75 mn

IL&FS Urban Infrastructure Managers Limited :

IL&FS Urban Infrastructure Managers Limited (IUIML) functions as the Asset Manager for the Pooled Municipal Debt Obligations (PMDO) Facility. The objective of the PMDO Facility is to provide long tenure term loans to meet the debt requirements of urban infrastructure projects across cities in India

The corpus of PMDO Facility stands at Rs. 50 bn and a new lender Indian Overseas Bank has joined the consortium with a commitment of Rs. 2.5 bn. The Company’s role as an Asset Manager is to identify and appraise the eligible projects and obtain sanctions of the lenders and thereafter assist the lenders to disburse, monitor and administer the loan assets until entire repayment of the loan. By March 31, 2013, projects for a term loan of Rs. 33.97 bn have been sanctioned from the PMDO facility and the assets under management were at Rs. 14.12 bn

The Total Income for the Financial Year 2012-2013 was Rs. 146.39 mn inclusive of Income from Investments and Other Income of Rs. 4.26 mn. The Total Expenses of IUIML for the year were Rs. 81.31 mn and the resultant Proft after Tax for the year was Rs. 43.90 mn

IIML Asset Advisors Limited :

IIML Asset Advisors Limited (IAAL) is in the business of providing advice on investments, fnance, management and consultancy and acts as the India Advisor to IL&FS Investment Advisors LLC for two funds

The Total Income of IAAL for the Financial Year 2012-2013 was Rs. 111.38 mn. The Total Expenses of IAAL for the year were Rs. 76.62 mn and the resultant Proft after Tax for the year was Rs. 25.38 mn

IL&FS Investment Advisors LLC :

IL&FS Investment Advisors LLC, Mauritius (IIAL) acts as the Investment Manager to IL&FS India Realty Fund LLC, Tara India Fund III LLC, IL&FS India Realty Fund II LLC, K2 Property Limited and Saffron India Real Estate Fund I

The Total Income of IIAL for the Financial Year 2012-2013 was US$ 33.88 mn. The Total Expenses of IIAL for the year was US$ 27.52 mn and the resultant Proft after Tax for the year was US$ 6.14 mn

IIML Advisors LLC :

IIML Advisors LLC was incorporated during the last year for the purposes of managing certain funds from Mauritius. The Company expects to start its operations during this year

IIML Fund Managers (Singapore) Pte. Ltd. :

IIML Fund Managers (Singapore) Pte. Ltd. was incorporated during the year for the purposes of managing funds from Singapore. The Company has started operations during the year

DEPOSITS

Your Company has not accepted any deposits from the public for the year under consideration

FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars regarding foreign expenditure and earnings appear as Item Nos. 24(c) and 24(d) respectively, of the Notes to Accounts

Since the Company does not own any manufacturing facility, the other particulars in the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not applicable

PERSONNEL

Your Directors wish to place on record their appreciation for the services rendered by the employees of the Company at all levels. The particulars of the employees as required under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 forms part of the Directors’ Report for the year ended March 31, 2013. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Directors’ Report and Accounts are being sent to all shareholders of the Company, excluding the statement of particulars of employees under Section 217(2A) of the Act. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Offce of the Company

DETAILS OF EMPLOYEE STOCK OPTION PLANS

The detailed disclosures as per SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 of the ESOP Schemes of the Company are annexed to the Directors’ Report

DIRECTORS’ RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956 your Directors hereby confrm that :

(a) in preparation of the annual accounts, the applicable accounting standards have been followed;

(b) 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 true and fair view of the state of affairs of the Company as at 31st March, 2013 and of the proft of the Company for the year ended on that date;

(c) the Directors have taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(d) the Annual Accounts for the year ended 31st March, 2013 have been prepared on a going concern basis

ACKNOWLEDGEMENT

The Board of Directors take this opportunity to thank the Investors of the funds under management, shareholders, employees, bankers, Reserve Bank of India, Securities and Exchange Board of India, other Regulatory authorities for their co-operation and continued support to the Company. We look forward to their continued patronage and encouragement in all our future endeavours

For and on behalf of the Board

S M DATTA

Chairman

Place : Mumbai

Date : April 30, 2013


Mar 31, 2012

To The Members of IL&FS Investment Managers Limited

The Directors have pleasure in presenting for your consideration and approval the Twenty Sixth Annual Report with the Audited Financials of the Company for the year ended March 31, 2012

FINANCIAL ACHIEVEMENTS AND DIVIDEND

For the year ended For the year ended March 31, 2012 March 31, 2011 (Rs.mn) (Rs.mn) Standalone Standalone

Total Income 1042.75 949.44

Profit before Taxation 575.64 554.53

Provision for Taxation 165.21 180.47

Net Profit after Taxation 410.43 374.06

Profit available for appropriation 515.66 501.71 (Inclusive of balance carried forward from the previous year)

Appropriations :

General Reserve 42.00 38.00

Dividend (inclusive of dividend tax) 363.09 358.48



For the year ended For the year ended March 31, 2012 March 31, 2011 (Rs.mn) (Rs.mn) Consolidated Consolidated

Total Income 2247.01 2,012.19

Profit before Taxation 953.14 905.19

Provision for Taxation 215.04 212.27

Net Profit after Taxation 735.33* 690.20*

Profit available for appropriation (Inclusive of Balance carried forward from the previous year) 1811.05 1,472.20

Appropriations:

General Reserve 42.00 38.00

Dividend (inclusive of dividend tax) 363.09 358.48

* after Minority Interest

DIVIDEND

During the year, your Company achieved a net profit after tax of Rs 410.43 mn. Your Directors recommend a dividend of Rs 1.50 per share of face value Rs 2/- each. The total amount of dividend is Rs 363.09 mn (inclusive of dividend tax of Rs 50.68 mn)

REVIEW OF OPERATIONS

The year under review has been characterized by a rapidly cooling global economy. Global output expanded at a slower pace of 3.5% in 2012, compared to 3.9% in 2011 and 5.3% in 2010. More particularly, growth in emerging and developing economies has also started to slow down from the second quarter of 2011. According to recent United Nations estimates, growth in emerging and developing economies is expected to average 5.75% during 2012 - significant slowdown from the 6.75% growth registered during 2011

The Indian economy is not impervious to these global macro-economic dynamics. The Index of Industrial Production (IIP) has been volatile throughout FY2012 and the third quarter FY2012 GDP growth numbers, at 6.1%, are the lowest since Q4 FY2009. It is expected that the slowdown in GDP growth witnessed over the last two quarters is likely to extend into FY2013 on account of the weakness in investments. Government's limited ability to contain the subsidy burden coupled with slower growth is expected to result in higher fiscal deficit, thereby exerting further pressure on the Rupee and capital flows

Compounding these issues has been recent announcements of changes in tax rules including retrospective changes in relation to offshore transactions. Such changes in rules have only added to the increasing discomfort of foreign investors, which is reflected in the Indian Private Equity (PE) environment. PE Fund raisers in India have hit a 7 year low, PE investments during 2011 are down 37% compared to 2007 and PE exits have slowed down compared to the previous year

The resultant general risk aversion and cautious approach being adopted by global investors has impacted your Company's fund raiser plans. During the year under review, your Company had limited success with global investors, who while recognizing the Company's track record and experience, have deferred investment plans. As a result, your Company could not attain the targeted First Close for any new Funds during the year. However, building on its leadership position in the PE space in India, your Company deployed Rs18.8 bn across 19 investments during the year under review, a marked increase compared to Rs 8.3 bn invested during the previous year

With the US$ 895 mn IL&FS India Real Estate Fund II and the US$ 225 mn Tara India Fund III fully deployed during the year, the Fund teams have began to focus exclusively on asset management to ensure that the investments made generate strong returns. As a result, your Company leveraged multiple exit strategies to effect divestments aggregating Rs 5.2 bn across 8 Investee Companies during the year under review

Despite the flat Assets Under Management (AUM) during the year under review and significant divestments undertaken during the year, your Company, on the back of its strong business model, was able to prevent erosion in financial performance

On a consolidated basis, the Income from Operations of the Company for the Financial Year 2011-2012 was Rs 2205.68 mn, inclusive of Income from Investments of Rs 79.81 mn. Other Income was Rs 41.33 mn, the Total Income on a consolidated basis for the Financial Year 2011-2012 was Rs 2247.01 mn. The resultant Profit after Tax on a consolidated basis for the Financial Year 2011-2012 was Rs 735.33 mn (after minority interest)

On a standalone basis, the Income from Operations of the Company for the Financial Year 2011-2012 was Rs 1026.19 mn. inclusive of Income from Investments of Rs 174.10 mn. Other Income of Rs 16.57 mn, the Total Income of the Company for the Financial Year 2011-2012 was Rs 1042.75 mn. The total Operating Expenses for the year were Rs 467.11 mn and the resultant Profit after Tax for the Financial Year 2011- 2012 was Rs 410.43 mn

FUTURE OUTLOOK

The underlying factors which have created financial stress and have resulted in growth moderation continue to be at play. More particularly for India, Investors will closely look at Government's policy action in enabling investments on one hand and outcome of contentions issues including retrospective taxation and GAAR on the other. These will be key determinants to the timelines associated with your Company's Fund raise plans. Your Company, however, continues to reach out to investors and, in a business as usual' scenario, expects to obtain commitments for at least two Funds by the first half of FY2013

Likewise, policy action and macro-economic scenario will determine your Company's ability to effect divestments within anticipated timelines and at expected valuations. Your Company will continue to focus on executing its divestment plan which comprises of exits from some of its listed portfolio along with planned exits by way of trade sale and IPOs in a manner that divestment momentum of the year under review is also being maintained during FY2013. The Fund teams are focused on reducing divestment timelines and on value maximization

Your Company has also been working on various strategic initiatives. Post investing the balance funds from its Infrastructure Fund, your Company has plans for new Fund raisers in the Infrastructure and Real Estate space. Your Company also plans to operationalise its subsidiary's office in Singapore, in early FY2013, which will along with the Dubai office then be leveraged to reach out to investors and address the new Fund raiser requirements. Given the nature of such strategic initiatives and the prevalent environment, gestation periods are expected to be longer and spread across fiscals

DIRECTORS

Mr Shahzaad Dalal, Mr S M Datta, and Mr Bansi Mehta shall retire by rotation in the ensuing Annual General Meeting and being eligible offer themselves for re-appointment

STATUTORY AUDITORS

The Statutory Auditors of the Company M/s Deloitte Haskins & Sells, Chartered Accountants, Mumbai, retire at the conclusion of the ensuing Annual General Meeting and have expressed their willingness to continue as Auditors, if re-appointed, at the ensuing Annual General Meeting of the Company

The Company has also received a certificate from M/s Deloitte Haskins & Sells under Section 224(1B) of the Companies Act, 1956 confirming their eligibility for re-appointment. M/s Deloitte Haskins & Sells, Mumbai, have also confirmed to the Company that the firm is subjected to the Peer Review Process of the Institute of Chartered Accountants of India

INCREASE IN SHARE CAPITAL

During the year your Company allotted 2,649,155 Equity Shares of Rs 2/- each on the exercise of Options issued under the Employee Stock Option Plans 2004 & 2006

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Report on Corporate Governance along with the Management Discussion and Analysis and Auditors' Certificate on compliance with the Corporate Governance requirements have been included in this Annual Report as separate sections

SUBSIDIARY COMPANIES

Your Company has three domestic subsidiaries namely, IL&FS Asian Infrastructure Managers Limited, IL&FS Urban Infrastructure Managers Limited and IIML Asset Advisors Limited and three offshore subsidiaries namely IL&FS Investment Advisors LLC, Mauritius, IIML Advisors LLC, Mauritius and IIML Fund Managers (Singapore) Pte. Ltd., Singapore

The Ministry of Corporate Affairs vide General Circular No. 2/2011 file No. 51/12/2007-CL-III dated February 8, 2011, had issued directions under Section 212(8) of the Companies Act, 1956 to grant a general exemption from attaching the financials along with the Directors' Report and the Auditors' Report of the subsidiary companies to the financials of the holding company on fulfillment of certain conditions. In compliance with the said circular of the Ministry of Corporate Affairs, the Company has attached a summary of the financial statements of each of the Subsidiary Companies

As per Clause 32 of the Listing Agreement the consolidated financial statements of the Company with its Subsidiaries form part of the Annual Report. The copies of the audited annual accounts of the Company's Subsidiaries and other related documents can also be sought by any member of the Company or its Subsidiaries on making a written request to the Company Secretary in this regard. The Annual Accounts of the Subsidiary Companies are also available for inspection by any member at the Company's and/or the concerned Subsidiaries' registered office

Review of Operations of Subsidiary Companies IL&FS Asian Infrastructure Managers Limited :

IL&FS Asian Infrastructure Managers Limited (IAIML) had been set up to manage Pan Asia Project Development Fund, India (the Fund). The Fund, having a corpus of Rs 1,125 mn, had the mandate to support initiatives for development of infrastructure projects in the Asian region. IAIML is playing an active role in managing and monitoring the investments made by the Fund. Of the 7 investments undertaken, the Fund has, till date, exited 2 investments, representing 26.6% of the portfolio by value. The exits have provided gross IRR of 23.3%

The Total Income for Financial Year 2011-2012 was Rs 20.03 mn inclusive of Income from Investments and Other Income of Rs 3.9 mn. The Total Expenses of IAIML for the year were Rs 13.41 mn and the resultant Profit after tax for the year was Rs 5.66 mn

IL&FS Urban Infrastructure Managers Limited :

IL&FS Urban Infrastructure Managers Limited (IUIML) functions as the Asset Manager for the Pooled Municipal Debt Obligations (PMDO) Facility. The objective of the PMDO Facility is to provide long tenure term loans to meet the debt requirements of urban infrastructure projects across cities in India

As per the amended MOU signed on May 9, 2011, the corpus of PMDO Facility stands at Rs 50 bn and a new lender Indian Overseas Bank has joined the consortium with a commitment of Rs 2.5 bn

IUIML's role as an Asset Manager is to identify and appraise the eligible projects and obtain sanctions of the lenders and thereafter assist the lenders to disburse, monitor and administer the loan assets until entire repayment of the loan

By March 31, 2012, projects for a term loan of Rs 35.69 bn have been sanctioned from the PMDO facility and the assets under management were at Rs 11.69 bn

The Total Income for the Financial Year 2011-2012 was Rs 130.21 mn inclusive of Income from Investments and Other Income of Rs 3.78 mn. The Total Expenses of IUIML for the year were Rs 73.58 mn and the resultant Profit after Tax for the year was Rs 38.03 mn

IIML Asset Advisors Limited (formerly known as IIML Asset Advisors Private Limited) :

IIML Asset Advisors Limited (IAAL) is in the business of providing advice on investments, finance, management and consultancy and acts as a India Advisor to IL&FS Investment Advisors LLC for two funds

The Total Income of IAAL for the Financial Year 2010-2011 was Rs 111.86 mn. The Total Expenses of IAAL for the year were Rs 84.73 mn and the resultant Profit after Tax for the year was Rs 19.05 mn

IL&FS Investment Advisors LLC :

IL&FS Investment Advisors LLC, Mauritius (IIAL) acts as the Investment Manager to IL&FS India Realty Fund LLC, Tara India Fund III LLC, IL&FS India Realty Fund II LLC, K2 Property Limited, Saffron India Real Estate Fund I and Tara India Fund IV LLC

The Total Income of IIAL for the Financial Year 2011-2012 was US$ 32.39 mn. The Total Expenses of IIAL for the year was US$ 24.46 mn and the resultant Profit after Tax for the year was US$ 7.63 mn

IIML Advisors LLC :

IIML Advisors LLC was incorporated during the year for the purpose of managing certain funds from Mauritius. The Company has not started operations yet

IIML Fund Managers (Singapore) Pte. Ltd. :

IIML Fund Managers (Singapore) Pte. Ltd. was incorporated during the year for the purposes of managing funds from Singapore. The Company is expected to contribute significantly over the coming years. The Company has not started operations yet

DEPOSITS

Your Company has not accepted any deposits from the public for the year under consideration

FOREIGN EXCHANGE EARNINGS AND OUTGO H

The particulars regarding foreign expenditure and earnings appear as Item Nos. 22(c) and 22(d) respectively, of Notes to Accounts

Since the Company does not own any manufacturing facility, the other particulars in the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not applicable

PERSONNEL

Your Directors wish to place on record their appreciation for the services rendered by the employees of the Company at all levels. The particulars of the employees as required under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees)

Rules, 1975 forms part of the Directors' Report for the year ended March 31, 2012. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Directors' Report and Accounts are being sent to all shareholders of the Company, excluding the statement of particulars of employees under Section 217(2A) of the Act. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company

DETAILS OF EMPLOYEE STOCK OPTION PLANS

The detailed disclosures as per SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 of the ESOP Schemes of the Company are annexed to the Directors' Report

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956 your Directors hereby confirm that :

(a) in preparation of the annual accounts, the applicable accounting standards have been followed;

(b) 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 true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the profit of the Company for the year ended on that date;

(c) 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; and

(d) the Annual Accounts for the year ended 31st March, 2012 have been prepared on a going concern basis ACKNOWLEDGEMENT

The Board of Directors take this opportunity to thank the Investors of the funds under management, shareholders, employees, bankers,

Reserve Bank of India, Securities and Exchange Board of India, other Regulatory authorities for their co-operation and continued support to the Company. We look forward to their continued patronage and encouragement in all our future endeavors

For and on behalf of the Board

S M DATTA

Chairman

Place: Mumbai

Date: May 3, 2012


Mar 31, 2010

The Directors have pleasure in presenting for your consideration and approval the Twenty Fourth Annual Report with the Audited Financials of the Company fortheyearended March 31,2010

FINANCIALACHIEVEMENTSANDDIVIDEND

For the For the For the year ended year ended year ended March 31, 2010 March 31, 2009 March 31,2010 (Rs Million) (Rs Million) (Rs Million) Standalone Standalone Consolidated Total Income 957.06 1009.39 1813.37 Profit before Taxation 588.64 578.09 956.92 Provision for Taxation 195.78 211.72 215.38 Net Profit after Taxation 392.86 366.37 738.49* Profit available for appropriation 522.77 492.75 997.53 Appropriations : General Reserve 40 37 40 Dividend (inclusive of dividend tax) 355.12 325.84 355.12

For the year ended March 31, 2009 (Rs Million) Consolidated Total Income 1641.61 Profit before Taxation 846.03 Provision for Taxation 222.65 Net Profit after Taxation 621.88* Profit available for appropriation 740.84 Appropriations : General Reserve 37 Dividend (inclusive of dividend tax) 325.84

*after Minority Interest

DIVIDEND

During the year, your Company achieved a net profit after tax of Rs 392.86 million. Your Directors recommend a dividend of Rs 1.50 per share of face value Rs 21- each. The total amount of dividend is Rs 355.12 million (inclusive of dividend tax of Rs 50.58 million)

REVIEW OF OPERATIONS

The year under review witnessed a strong revival of real economy and financial markets across the globe, more particularly in India. The Indian economy saw a marked increase in industrial production and trade, which coupled with higher global liquidity and increased FN inflows lead to a sharp recovery in the public markets

Backed by management fee from the two large real estate Funds managed by your Company and incremental fee arising post Final Close of the new Standard Chartered IL&FS Asia Infrastructure Growth Fund, your Company was able to exhibit strong revenue growth, with Consolidated Income increasing 10% on a year-on-year basis to Rs 1.81 billion during FY2010

On a consolidated basis, the Income from Operations of the Company for the financial year 2009-2010 was Rs 1.7 billion. Inclusive of Income from Investments of Rs 61.11 million and Other Income of Rs 53.86 million, the Total Income on a consolidated basis for the Financial Year 2009-2010 was Rs 1.81 billion. The total Operating Expenses for the year were Rs 680.13 million and the resultant Profit after Tax on consolidated basis for the financial year 2009-2010 was Rs 738.49 million, a 19% increase overthe previous year

On a standalone basis, the Income from Operations of the Company for the financial year 2009-2010 was Rs 845.93 million. Inclusive of Income from Investments of Rs 57.35 million and Other Income of Rs 53.78 million, the Total Income of the Company for the Financial Year 2009-2010 was Rs 957.06 million. The total Operating Expenses forthe year were Rs 362.81 million and the resultant Profit after Tax for the financial year 2009-2010 was Rs 392.86 million, a 7% increase over the previous year

FUTURE OUTLOOK

Business environment in India has improved significantly over the previous financial year and the Indian economy is expected to register a strong GDP growth in the region of 8% for FY2011. Increased corporate spending and revival of the IPO markets augurs wellforyourCompanyintermsof higherdealflow and increased exitevents

However, certain concerns in relation to global financial market stability remain, more particularly on account of developments in Dubai and Greece. The Indian economy is also expected to face challenges of higher than desired inflation and current account deficit, which may adversely impact the anticipated growth

Your Company will seek to capitalize on the improved business environment by seeking to deploy existing active funds. by opportunistically exiting from the listed Fund portfolio, and by raising fresh Funds in niche sectors. During the course of FY2011, your Company seeks to attain significant divestment in two of its Funds and would seek to fully commit three other Funds, thereby paving the way for raising larger sized follow-on Funds in each of its verticals viz. general purpose private equity, real estate and infrastructure. These new Funds will add to the revenue growth of your Company in the short to medium term future

DIRECTORS

Mr Bansi Mehta and Mr Ravi Parthasarathy retire by rotation at the ensuing Annual General Meeting of the Company and being eligible offer themselves for re-appointment

STATUTORYAUDITORS

The Statutory Auditors of the Company M/s Deloitte Haskins & Sells, Chartered Accountants, Mumbai, retire at the conclusion of the ensuing Annual General Meeting and have expressed their willingness to continue as Auditors, if re-appointed, at the ensuing Annual General Meeting of the Company

The Company has also received a certificate from M/s Deloitte Haskins & Sells under Section 224(1 B) of the Companies Act. 1956 confirming their eligibility for re-appointment. M/s Deloitte Haskins & Sells, Mumbai, have also confirmed to the Company that the firm is subjected to the Peer Review Process of the Institute of Chartered Accountants of India

SHARE CAPITAL

During the year the members of the Company had approved the sub-division of the Equity Shares of the Company from a face value of Rs 10/- each to a face value of Rs 21- each. Accordingly, the Authorised, Issued, Subscribed and Paid-up Share Capital of the Company have been changed to reflect the revised face value of Rs 2/- each

During the year your Company allotted 4,091,490 Equity Shares of Rs 2/- each on the exercise of Options issued under the Employee Stock Option Plans

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Report on Corporate Governance along with the Management Discussion and Analysis and Auditors Certificate on compliance with the Corporate Governance requirements have been included in this Annual Report as separate sections

SUBSIDIARY COMPANIES

During theyear2009-2010yourCompany had thefollowing subsidiaries IL&FSAsian Infrastructure Managers Limited, IL&FS Urban Infrastructure Managers Limited, IL&FS Investment Advisors LLC and IL&FS Singapore Asset Management Company Pte.Ltd.

Pursuant to Section 212 of the Companies Act, 1956 the Company had made an application to the Ministry of Corporate Affairs. Government of India and sought exemption from attaching with the Balance Sheet of the Company, the Accounts and other documents of each of the Subsidiary Companies of the Company. The Ministry of Corporate Affairs, Government of India vide its letter no. 47/33/2010-CL-l 11 dated January 13, 2010, has granted the exemption to the Company. In compliance with the terms of said exemption the Company has attached a summary financial statement of each of the Subsidiary Companies

As per Clause 32 of the Listing Agreement the consolidated financial statements of the Company with its Subsidiaries form part of the Annual Report. The copies of the audited annual accounts of the Companys Subsidiaries and other related documents, can also be sought by any member of the Company or its Subsidiaries on making a written request to the Company Secretary in this regard. The Annual Accounts of the Subsidiary Companies are also available for inspection by any member at the Companys and/or the concerned Subsidiaries registered office

Review of Operations of Subsidiary Companies

IL&FSAsian Infrastructure Managers Limited:

IL&FS Asian Infrastructure Managers Limited (IAIML) has been set up to manage the Pan Asia Project Development Fund. India (PAPDF/the Fund). The Fund has been set up in order to support initiatives for development of infrastructure projects in the Asian region. The Fund has a corpus of Rs 1,125 million. The Company is playing an active role in managing and monitoring the investments made by the Fund. The performance of these investments has been satisfactory

The Income from Operations of IAIML for the financial year 2009-2010 was Rs 21.92 million. Inclusive of Income from Investments and Other Income of Rs 2.05 million, the Total Income for Financial Year 2009-2010 was Rs 23.97 million. The total Operating Expenses of IAIML for the year were Rs 20.11 million and the resultant Profit after Tax for the year was Rs 3.17 million

IL&FS Urban Infrastructure Managers Limited:

IL&FS Urban Infrastructure Managers Limited (IUIML) functions as the Asset Manager for the Pooled Municipal Debt Obligations (PMDO) Facility. The objective of the PMDO Facility is to provide long tenure term loans to meet the debt requirements of urban infrastructure projects across cities in India. The total corpus of the PMDO Facility is Rs 2,750 crores. lUIMLs role as an Asset Manager is to identify and appraise the eligible projects and obtain sanctions of the lenders and the re after assistthe lenders to disburse, monitorandadministerthe loan assets until repayment

By March 31,2010, projects fora term loan of Rs 2,070.75 crores have been sanctioned from the PMDO facility and the assets under management amounted to Rs 588.29 crores. It is envisaged that the existing PMDO facility can achieve the target of Rs2,750 crores before the end of the commitment period of October2010

The Income from Operations of IUIML for the financial year 2009-2010 was Rs 67.45 million. Inclusive of Income from Investments and Other Income of Rs 0.93 million, the Total Income for Financial Year 2009-2010 was Rs 68.38 million. The total Operating Expenses of lUIMLfor the year were Rs 55.34 million and the resultant Profit after Tax for the yearwasRs 7.68 million

IL&FS Investment Advisors LLC:

IL&FS Investment Advisors LLC (HAL) acts as the Investment Manager to IL&FS India Realty Fund LLC, IL&FS India Realty Fund II LLCand Tara India Fund III LLC. The totalfunds underthe management of HAL are USD 1.5 billion

The Total Income of HAL for the financial year 2009-2010 was USD 27.18 million. The total Operating Expenses of HAL for the yearwere USD 20.10 million and the resultant Profit after Taxforthe year was USD 6.87 million

IL&FS Singapore Asset Management Company Pte. Ltd.:

IL&FS Singapore Asset Management Company Pte. Ltd. (ISAMCPL) is in the business of providing Investment Management Services to Pan Asia Project Development Fund (Singapore). The total funds under the management of ISAMCPL are USD 20 million

The Total Income of ISAMCPL for the financial year 2009-2010 was USD 404,000. The total Operating Expenses of ISAMCPL forthe yearwere USD 333,860 and the resultant Profit afterTaxfor the year was USD 64,684

DEPOSITS

Your Company has not accepted any deposits from the public for the year under consideration

FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars regarding foreign expenditure and earnings appear as Item Nos. 8(iii) and 8(iv) respectively, of Schedule 13B to the Accounts

Since the Company does not own any manufacturing facility, the other particulars in the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not applicable

PERSONNEL

Your Directors wish to place on record their appreciation of the services rendered by the employees of the Company at all levels. The particulars of the employees as required under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 forms part of the Directors Report for the year ended March 31, 2010. However, as per the provisions of Section 219(1 )(b)(iv) of the Companies Act, 1956, the Directors Report and Accounts are being sent to all shareholders of the Company, excluding the statement of particulars of employees under Section 217(2A) of the Act. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company

DETAILS OF EMPLOYEE STOCK OPTION PLANS

The detailed disclosures as per SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines. 1999 of the ESOP Schemes of the Company are annexed to the Directors Report

DIRECTORS RESPONSIBILITY STATEMENT

Your Directors wish to state that:

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

(b) they had 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 yearand of the profitof the Company forthatyear;

(c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the CompaniesAct, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud andotherirregularities;

(d) they had prepared the annual accounts on a going concern basis

ACKNOWLEDGEMENT

Relationship with Members, Investors of the funds under management, Reserve Bank of India, Securities and Exchange Board of India, other Regulatory authorities, investee companies and our bankers remained excellent during the year under review. Your Directors are grateful for the support extended by them and look forward to receiving their continued support and encouragement

For and on behalf of the Board Place : Mumbai Date: April 26, 2010 S M DATTA Chairman

 
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