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Directors Report of IL&FS Investment Managers Ltd.

Mar 31, 2018

To The Shareholders of IL&FS Investment Managers Limited

The Directors have pleasure in presenting for your consideration and approval the Thirty-second Annual Report with the Audited Financials of the Company for the year ended March 31, 2018

FINANCIAL ACHIEVEMENTS AND DIVIDEND

For the year ended March 31, 2018 (Rs. mn)

For the year ended March 31, 2017 (Rs.mn)

For the year ended March 31, 2018 (Rs. mn)

For the year ended March 31, 2017 (Rs. mn)

Standalone

Standalone

Consolidated

Consolidated

Total Income

546.50

688.84

1,225.58

1,151.72

Profit before Taxation

95.32

281.28

213.93

138.81

Provision for Taxation

55.60

41.58

119.43

70.32

Net Profit after Taxation

39.72

239.70

65.62*

61.26*

Dividend (inclusive of dividend tax)

197.05

195.25

197.05

195.25

* after Minority Interest

The Company does not propose to transfer any amount to the General Reserve

DIVIDEND

During the year, your Company achieved a Net Profit after tax of Rs. 39.72 mn. Your Directors recommend a Dividend of Rs. 0.60 per share of the Face Value of Rs. 2/- each. The total amount of Dividend is Rs. 197.05 mn (inclusive of dividend tax of Rs. 8.63 mn)

REVIEW OF OPERATIONS

The performance of the global economy has been encouraging, with global GDP growth picking up from 3.2% in CY2016 to 3.7% in CY2017. The growth is expected to further accelerate to 3.9% in CY2018. Increased demand driven by higher capital expenditure and accelerated manufacturing activity has led to a robust growth in global trade. However, protectionist measures announced by the US and retaliatory actions could exacerbate trade wars and undermine global growth, trade and welfare. Volatility in financial markets stemming mainly from the uncertainty over the pace of normalisation of monetary policy in Advanced Economies could also pose a challenge to the Emerging Market Economies

In India, real GDP growth is projected to improve from 6.6% in FY2018 to 7.4% in FY2019. The key factors which are expected to drive growth in FY2019 are robust implementation of GST, recapitalization of public sector banks and resolution of distressed assets under Insolvency and Bankruptcy Code. However, uncertainty over the pace and timing of monetary policy normalisation by the advanced economies, protectionist tendencies and fears of a global trade war pose significant risks to growth

The Private Equity (PE) environment in India was favourable during FY2018. Fund raising during FY2018 increased by 41% over the previous year to touch US$ 5.43 billion. This growth is in line with global trends with Emerging Market Private Equity funds having raised US$ 61 billion in CY2017 vis-a-vis US$ 48 billion raised during CY2016

On the investments front, the value of PE transactions grew 31% in FY2018, with a total investment of US$ 20.2 billion. On the other hand, transaction activity went down by 35% to 1,018 deals in FY2018, indicating a trend towards higher transaction ticket sizes. Likewise, exit activity (217 exits undertaken) reduced in number terms during FY2018 compared to the previous year (309 exits undertaken), while exit value (US$ 9.69 billion) increased by ~13% over the previous year

On a sectoral basis, investors have showcased a strong bias towards investing into operating assets which generate a running yield. Opportunities across operating road and renewable power projects on the infrastructure side and towards commercial real estate have witnessed a strong deal pipeline. The success of the Toll-Operate-Transfer model of auctioning Government owned road projects is a case in point. Likewise, the stressed asset space has emerged as a key area of investor interest. Products centered on these themes are likely to deliver success for asset managers in India

During the year, IIML undertook investments across a variety of sectors/businesses like neonatal healthcare, medical devices and diagnostics, e-governance, agri-technology and education. IIML also undertook divestments aggregating Rs. 9.42 billion during FY2018

On the debt side, IIML, through its subsidiary which operates in the Infrastructure Debt Fund (IDF) space, has now invested across 14 investments. Given the healthy deal flow, IDF has, during FY2018, raised an additional Rs. 1.4 billion from provident and retirement funds, thereby taking its AUM to ~Rs. 18 billion

IIML is also working with Lone Star, a US based global private equity firm, to invest in distressed assets in the roads and thermal power space in India. IIML had also been working on establishing and managing an Infrastructure Investment Trust (InvIT). However, certain changes made to tax laws during FY2018 adversely impacted InvITs. Consequently, despite having built a reasonable demand for the product, the Fund raise efforts had to be suspended

During FY2018, IIML achieved significant progress in two of its new initiatives. First, IIML signed a joint venture agreement with the Islamic Corporation for the Development of the Private Sector (ICD) for establishing a US$ 1 billion fund focussed on providing Shariah Compliant infrastructure debt finance to projects in Africa. Second, IIML entered into a Joint Venture Partnership with the Government of Andhra Pradesh to manage an Urban Infrastructure Fund, which would focus on investing into smart cities, sewerage and water supply projects and other such urban infrastructure projects in the State. These new initiatives would help IIML build sustainable platforms and thereby accord long term revenue visibility for the Company. Fund raise efforts in these initiatives are progressing at a satisfactory pace and the outcomes are expected to add to the revenue line during the course of FY2019

IIML’s fee earning assets under management (AUM) in relation to existing Funds has reduced on account of divestments undertaken during the course of FY2018. Furthermore, certain existing Funds have attained end of Fund Term, consequently, fee levels have reduced from the existing Funds. This reduction has been partly offset by cost reductions, effected largely by way of manpower rationalization and also by way of more robust financials posted by IIML subsidiaries which manage the Infrastructure Debt Fund and the Fund with the Government of Andhra Pradesh

On a consolidated basis, the Income from Operations of the Company for FY2018 was Rs. 1,124.93 mn, Income from Investment and Other Income was Rs. 100.65 mn. Accordingly, the Total Income on a consolidated basis for FY2018 was Rs. 1,225.58 mn. The resultant Profit after Tax on a consolidated basis for FY2018 was Rs. 65.62 mn

On a standalone basis, the Total Income of the Company for FY2018 was Rs. 546.50 mn and the Total Expenses for the year were Rs. 451.18 mn and the resultant Profit after Tax for FY2018 was Rs. 39.72 mn

There have been no material changes and commitments affecting the financial position of the Company, which have occurred from the end of the financial year for the Company to which the financial statement relates and till the date of the Directors’ Report

SUBSIDIARIES AND JOINT VENTURES

Your Company has Six Domestic Subsidiaries viz. IL&FS Asian Infrastructure Managers Limited, IL&FS Urban Infrastructure Managers Limited, IIML Asset Advisors Limited, Andhra Pradesh Urban Infrastructure Asset Management Limited, IL&FS Infra Asset Management Limited and IL&FS AMC Trustee Limited and two Offshore Subsidiaries viz. IL&FS Investment Advisors LLC, Mauritius and IIML Fund Managers (Singapore) Pte Ltd, Singapore

Your Company also has two Joint Venture Companies viz. Standard Chartered IL&FS Management (Singapore) Pte Limited, Singapore and IL&FS Milestone Realty Advisors Private Limited

As per Section 129(3) of the Companies Act, 2013 and Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 [LODR] the consolidated financial statements of the Company with its Subsidiaries forms part of the Annual Report

The copies of the Audited Annual Accounts and other related documents of the Company’s Subsidiaries can be sought by any shareholder 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 shareholder at the Company’s Registered Office

A separate statement pursuant to Section 129(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 containing the salient features of the Financial Statements of the Company’s Subsidiaries and Joint Ventures in Form AOC 1 is given as an Annexure to the Standalone Financial Statements

Performance and Financial position of the Subsidiaries and the Joint Venture 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, invested across seven investments. Six of these investments have been divested and the balance one investment is partially divested. The team at IAIML is working actively to fully divest from the residual investment of the Fund

The Total Income for FY2018 was Rs. 3.90 mn. The Total Expenses of IAIML for the year were Rs. 0.69 mn and the resultant Profit after Tax for the year was Rs. 2.49 mn

During the year, the Company acquired 49% equity stake in IAIML from ORIX Corporation, Japan. Accordingly, IAIML became a wholly owned subsidiary of the Company

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 Company’s role as an asset manager is to identify and appraise the eligible projects and obtain sanctions from the lenders and thereafter facilitate the borrowers to seek disbursement from the lenders, monitor and administer the project assets until entire repayment of the loan

The amount outstanding under the PMDO Facility as on March 31, 2018 was at Rs. 13.84 bn

The Total Income for FY2018 was Rs. 101.75 mn inclusive of Other Income of Rs. 12.05 mn. The Total Expenses of IUIML for the year were Rs. 107.73 mn and the resultant loss net of taxes for the year was Rs. 12.77 mn

IIML Asset Advisors Limited :

IIML Asset Advisors Limited (IAAL) acts as India Advisor to two Offshore Real Estate funds. It was also to act as the Manager for a road sector infrastructure investment trust (InvIT) being raised by IL&FS Transportation Networks Limited

The Total Income of IAAL for FY2018 was Rs. 57.07 mn inclusive of Income from Investments and Other Income of Rs. 11.12 mn. The Total Expenses of IAAL for the year were Rs. 39.67 mn and the resultant Profit after Tax for the year was Rs. 12.56 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, IL&FS India Realty Fund II LLC, Tara India Fund III LLC, K2 Property Limited and Saffron India Real Estate Fund

The Total Income of IIAL for FY2018 was US$ 7.39 mn. The Total Expenses of IIAL for the year were US$ 7.80 mn and the resultant loss for the year was US$ 0.41 mn

IIML Fund Managers (Singapore) Pte Ltd :

IIML Fund Managers (Singapore) Pte Ltd (IFMPL) was incorporated for the purposes of managing funds from Singapore. The Company is currently acting as a Manager to a Fund and as an Advisor to another Fund

The Total Income of IFMPL for FY2018 was US$ 0.50 mn. The Total Expenses of IFMPL for the year were US$ 0.34 mn and the resultant profit for the year was US$ 0.16 mn

Andhra Pradesh Urban Infrastructure Asset Management Limited :

The Company has set up a subsidiary namely, ‘Andhra Pradesh Urban Infrastructure Asset Management Limited’ (APUIAML) along with the Government of Andhra Pradesh. The Company and the Government of Andhra Pradesh hold 51% : 49% equity stake, respectively in APUIAML

APUIAML has been formed with an objective of acting as the Fund Manager for the Andhra Pradesh Urban Development Fund (APUDF). APUDF has been registered with SEBI as an Alternative Investment Category - II Fund

APUDF had been created with the objective to finance the Urban Local Bodies in the State of Andhra Pradesh. APUIAML will also be involved in integrated urban infrastructure project development and program management for the Urban Local Bodies and provide end to end solutions to them

APUIAML will help the State Government of Andhra Pradesh to manage APUDF by mobilizing resources from different sources like banks and financial institutions, including private sector arms of multilateral and bilateral agencies and by leveraging Government and other financial assistance. These funds would be deployed in the urban areas on various infrastructure projects including public private partnership projects

APUIAML Projects to the extent of Rs. 205,000 mn are under development of which projects of about Rs. 20,010 mn are in the tendering stage

The Total Income for FY2018 was Rs. 182 mn inclusive of Other Income of Rs. 9 mn. The Total Expenses for the year were Rs. 131 mn and the resultant Profit after Tax for the year was Rs. 37 mn

IL&FS Infra Asset Management Limited :

IL&FS Infra Asset Management Limited (IIAML) is the asset manager of the IL&FS Mutual Fund which is an Infrastructure Debt Fund (IDF) as per SEBI Mutual Fund Regulations

The IDF has closed ended schemes with a commitment of Rs. 14,650 mn and Rs. 1,725 mn is yet to be drawn down as of March 31, 2018. The Fund has made 14 investments as on March 31, 2018 and AUM as of March 31, 2018 was Rs. 18,175 mn

The Total Income for FY2018 was Rs. 211.37 mn inclusive of Other Income of Rs. 17.04 mn. The Total Expenses for the year were Rs. 97.91 mn and the resultant Profit After Tax for the year was Rs. 80.53 mn

IL&FS AMC Trustee Limited :

IL&FS AMC Trustee Limited (IATL) acts as the Trustee of the IDF

The Total Income for FY2018 was Rs. 1.66 mn inclusive of Other Income of Rs. 0.05 mn. The Total Expenses for the year were Rs. 1.57 mn and the resultant Profit After Tax for the year was Rs. 0.09 mn

Standard Chartered IL&FS Management (Singapore) Pte Limited :

Standard Chartered IL&FS Management (Singapore) Pte Limited (SCIMPL), is a 50:50 Joint Venture Company established with the Standard Chartered Bank to manage the Standard Chartered IL&FS Asia Infrastructure Growth Fund. The Manager is playing an active role in managing and monitoring the investments made by the Fund

The Total Income of SCIMPL for FY2018 was US$ 1.76 mn. The Total Expenses of SCIMPL for the year were US$ 0.82 mn and the resultant Profit after Tax for the year was US$ 0.82 mn

IL&FS Milestone Realty Advisors Private Limited :

IL&FS Milestone Realty Advisors Private Limited (IMRAPL), is a Joint Venture (JV) Company established with the objective of raising funds that would invest in income yielding assets. Since inception, the JV raised three funds and the Company has been able to successfully divest from all the investments of these three funds

The Total Income of IMRAPL for FY2018 was Rs. 1.14 mn inclusive of Income from Investments and Other Income of Rs. 1.14 mn. The Total Expenses of IMRAPL for the year were Rs. 2.18 mn and the resultant loss for the year was Rs. 1.04 mn

FUTURE OUTLOOK

The pace of economic activity is expected to accelerate in India in FY2019. This would be driven by revival in investment activity within the country and the improvement in global demand. Additionally, the long-term growth potential of the country is expected to be reinforced by various structural reforms introduced in the recent past such as the launch of the Good and Services Tax and consequently, the GDP growth is expected to strengthen from 6.6% in FY2018 to 7.4% in FY2019. On the downside, the deterioration in public finances could crowd out private financing and investment. Furthermore, rising trade protectionism and financial market volatility could derail the ongoing global recovery. In order to mitigate these risks, the focus of policy action needs to be on strengthening macroeconomic fundamentals, deleveraging stressed corporates and on rebuilding of bank balance sheets

In order to capture the opportunities which arise from a favorable outlook, IIML has been working on various new initiatives. Initiatives like the joint ventures with ICD and that with Government of Andhra Pradesh provide a platform for generating long term sustainable revenue streams for the Company. Other initiatives like the one with Lone Star for buying out stressed assets would provide incremental one-time income

Furthermore, while the primary focus of the teams managing the existing infrastructure and real estate funds will continue to divest from existing investments, IIML would also begin efforts to launching new products in these two verticals during FY2019. Likewise, the Private Equity Fund managed by IIML, which is currently in the investment stage, would attain full deployment in the next 6-9 months. IIML will therefore also focus on leveraging the investment experience in this space to develop a potentially larger sized follow-on Fund during the course of FY2019. Similarly, the Infrastructure Debt Fund is also expected to add to its AUM during FY2019 by way of launch of newer series/ rounds of capital raise from a diverse set of investors

The above initiatives are targeted to generate a higher revenue base for the Company. However, as is the case with any private equity fund raising, timelines for taking a product to a revenue generation stage are uncertain. It is likely that many of the above mentioned initiatives would only get to a revenue generation stage by the latter part of the current financial year

DIRECTORS & KEY MANAGERIAL PERSONNEL

Dr Archana Hingorani resigned as the Chief Executive Officer & Executive Director with effect from April 30, 2017; Mr Milind Patel resigned as a Non-Executive Director with effect from March 31, 2018 and Mr Krishna Kumar was appointed as the Chief Executive Officer, in the capacity of a Key Managerial Personnel of the Company with effect from May 29, 2017

Mr Hari Sankaran shall retire by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment There have been no changes in the Directors and Key Managerial Personnel of the Company other than the above

BOARD INDEPENDENCE

The Company has received Declarations of Independence pursuant to Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) and Regulation 25(1) of the LODR from all the Independent Directors

NUMBER OF MEETINGS OF THE BOARD

The Board of Directors met four times during the Financial Year ended March 31, 2018. The meetings were held during the year on May 29, 2017, July 31, 2017, November 10, 2017 and January 30, 2018. The details of the composition of the Board Committees and attendance of the Directors at the Board/Committee meetings are given in the Corporate Governance Report

SELECTION CRITERIA FOR APPOINTMENT OF DIRECTORS

The Board has framed a selection criteria for determining the necessary qualifications and attributes for appointment of Directors and also to ensure Board diversity. The details of the same are provided in the Corporate Governance Report

BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and the LODR, the Board has carried out an annual performance evaluation of the Board and Committees thereof. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report

DIRECTORS’ RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013 :

(a) in the preparation of the Annual Accounts for the year ended March 31, 2018, the applicable Accounting Standards have been followed along with proper explanations relating to material departures, if any;

(b) that such accounting policies as mentioned in Note 1 of the Notes to the Annual Accounts have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of March 31, 2018 and of the Profit of the Company for the year ended on that date;

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) that the Annual Accounts are prepared on a going concern basis;

(e) that proper internal financial controls were in place and that the internal financial controls were adequate and were operating effectively; and

(f) that proper systems were devised to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively

RISK MANAGEMENT & INTERNAL CONTROL SYSTEMS

Risk Management forms an integral part of the business of the Company. The Company has a Risk Management Framework, which not only ensures timely identification of risks, analysis of the reasons for such risk, assessment of its materiality, assessment of its impact but also adequate risk mitigation processes. The Risk Management Framework encompasses all areas of the Company’s business and the Funds under its management. The Risk Management Framework ensures that all risks which could potentially threaten the existence of the Company are identified and risk mitigation steps identified for them

The Company has an adequate system of internal controls commensurate with the nature of its business and complexity of its operations to ensure accuracy of accounting records, compliance with all laws and regulations and compliance with all rules, processes and guidelines prescribed by the management

An extensive internal audit is carried out by an independent firm of Chartered Accountants. Post audit reviews are also carried out to ensure follow up on the observations made. The scope of the internal audit is determined by the Audit Committee and the Internal Audit Reports are reviewed by the Audit Committee on a regular basis

RELATED PARTY TRANSACTIONS

All Related Party Transactions that were entered into during the Financial Year were on an arm’s length basis and were in the ordinary course of business. There are no materially significant Related Party Transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. No new Material Related Party Transactions were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3) of the Companies Act, 2013 in Form AOC 2 is not applicable

The disclosure of transactions with Related Parties is set out in Note No. 27 of the Standalone Financial Statements, forming part of the Annual Report

The Company has developed a Related Party Transactions Framework for the purpose of identification and approval of such transactions. The Policy on Related Party Transactions as approved by the Board has been uploaded on the Company’s website and is available at the link http://www.iimlindia.com/Policies.aspx

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Details of the Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in Note No. 27 of the Standalone Financial Statements

KEY MANAGERIAL PERSONNEL

Pursuant to Section 203 of the Companies Act, 2013, the Company has designated Mr Krishnakumar Gangadharan, Chief Executive Officer, Mr Manoj Borkar, Chief Financial Officer and Mr Sanjay Mitra, Company Secretary as the Key Managerial Personnel of the Company

PARTICULARS OF EMPLOYEES

The particulars of the employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of the Directors’ Report for the year ended March 31, 2018 and are annexed as Annexure 1 and Annexure 2, respectively

DETAILS OF EMPLOYEE STOCK OPTION PLANS

The Shareholders of the Company had approved the Employee Stock Option Scheme 2003 (“ESOP 2003”) and the Employee Stock Option Scheme 2004 (“ESOP 2004”) for granting Options to the Directors and Employees of the Company and the Employee Stock Option Scheme 2006 (“ESOP 2006”) for granting Options to the Directors and Employees of the Company and of the Holding and Subsidiary Companies of the Company

During FY2018, the Nomination & Remuneration Committee of the Company did not grant any Options under the above schemes. Further, please note that there are no options vested/exercised/lapsed during FY2018

The number of Options available for Grant in future under ESOP 2003, ESOP 2004 and ESOP 2006 are as follows :

ESOP 2003 - 37,815 Options

ESOP 2004 - 130,928 Options

ESOP 2006 - 1,935,000 Options

All the options granted till date under ESOP 2003, ESOP 2004 and ESOP 2006 have either vested or lapsed on or before March 31, 2018 and accordingly there is no employee compensation cost for the year ended March 31, 2018

The Auditors’ Report for review of ESOP 2003, ESOP 2004 and ESOP 2006 is annexed as Annexure 3

REMUNERATION POLICY

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The remuneration paid to the Directors and the Senior Management is as per the Managerial Remuneration Policy of the Company. Brief details of the Managerial Remuneration Policy are provided in the Corporate Governance Report

POLICY FOR PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

The Company has always been committed to provide a safe and dignified work environment for its employees which is free of discrimination, intimidation and abuse. The Company has adopted a Policy for Prevention of Sexual Harassment of Women at Workplace under the provisions of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The objective of this policy is to provide protection against sexual harassment of women at workplace and for redressal of complaints of any such harassment. The Company has also constituted an Internal Complaints Committee (ICC) to redress the complaints received under this policy. During the year, no complaints were received by the ICC

STATUTORY AUDITORS

M/s B S R & Associates LLP, Chartered Accountants, were appointed as the Statutory Auditors of the Company for a term of five consecutive years at the 31st Annual General Meeting held on September 6, 2017. They have confirmed that they are not disqualified from continuing as Auditors of the Company

SECRETARIAL AUDIT

The Company has appointed M/s Mehta & Mehta, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report for the Financial Year ended March 31, 2018 is annexed herewith as Annexure 4

QUALIFICATIONS IN THE AUDITORS’ REPORT

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s B S R & Associates LLP, in their Statutory Audit report and by M/s Mehta & Mehta, Company Secretaries in Practice, in their Secretarial Audit Report. The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review

INCREASE IN SHARE CAPITAL

No new shares were allotted during the year and there has been no change in the share capital of the Company

SECRETARIAL STANDARDS

The Directors state that applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ‘Meetings of the Board of Directors’ and ‘General Meetings’, respectively, have been duly followed by the Company during FY2018

CORPORATE GOVERNANCE

Pursuant to Regulation 34(3) and 53(f) of the LODR, Related Party Disclosures, Management Discussion and Analysis, Disclosure of Accounting treatment, Report on Corporate Governance along with the Auditors’ Certificate on compliance with the Corporate Governance requirements have been included in this Annual Report as separate sections

CORPORATE SOCIAL RESPONSIBILITY

The Company has adopted a Corporate Social Responsibility (CSR) Policy, which aims at nurturing socio-economic development schemes for capacity building, livelihood creation, quality education, empowerment of people, etc., with the primary objective of ensuring that the benefits reach the targeted beneficiaries. The approach of the Company for implementation of the CSR activities is to identify and fund projects in response to the needs of the society, devise transparent monitoring mechanisms and ensure whole hearted commitment to get the desired results

The Company undertakes specific CSR projects that are in conformity with Schedule VII of the Companies Act, 2013. Given that the Company is in the private equity fund management business and invests across India and in all sectors, the Company undertakes CSR activities in Mumbai and also across the country

The Annual Plan for CSR is approved at the start of each financial year. Reviews and/or modifications to the projects and allocations are undertaken periodically. The CSR Policy is posted at the Company’s website at the link http://iimlindia.com/Policies.aspx

The Company has been actively involved in various CSR initiatives over the last few years, long before it was mandated by the Companies Act, 2013. With the advent of the Companies Act, 2013, it was thought prudent to channelise the Company’s CSR effort along with the Infrastructure Leasing & Financial Services Limited (IL&FS) Group’s CSR initiatives. The Company engages with Nalanda Foundation, a Charitable Trust, established by IL&FS for its group CSR activities, in order to make a more significant impact. The Company continues to support its earlier CSR initiatives in addition to the initiatives through Nalanda Foundation

The disbursement of the amounts is linked to the achievement of certain pre-identified milestones by the implementing agency. The implementing agencies have informed the Company that there have been lags in achieving the pre-identified milestones on account of delay in obtaining the necessary approvals, mobilisation of students and completion of training, etc. Consequently the Company is marginally falling short of expending the entire statutory amount

The Composition of the CSR Committee is given in the Corporate Governance Report. The Annual Report on the CSR activities is annexed herewith as Annexure 5

WHISTLE BLOWER POLICY/VIGIL MECHANISM

The Company has adopted a Whistle Blower Policy/Vigil Mechanism for Employees and Directors to report instances of unethical behaviour, actual or suspected fraud or violation of the Company’s Code of Conduct. During the year, no personnel has been denied access to the Audit Committee

The details of the Whistle Blower Policy is explained in the Corporate Governance Report and also posted at the Company’s website http://iimlindia.com/Policies.aspx

DEPOSITS

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

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Since the Company does not own any manufacturing facility, the Energy Conservation and Technology Absorption particulars in the Companies (Accounts) Rules, 2014, are not applicable

The particulars regarding foreign earnings and expenditure appear as Note Nos. 21(c) and 21(d) of the Notes to Accounts of the Standalone Financial Statements respectively

EXTRACT OF THE ANNUAL RETURN

The details forming part of the extract of the Annual Return pursuant to Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 in Form MGT 9 are annexed herewith as Annexure 6

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There are no significant and material orders passed by the Regulators/Courts/Tribunals which would impact the going concern status of the Company and its future operations

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 : May 4, 2018


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, 2011

The Directors have pleasure in presenting for your consideration and approval the Twenty Fifth Annual Report with the Audited Financials of the Company fortheyearended March 31,2011

FINANCIAL ACHIEVEMENTS AND DIVIDEND

For the year ended For the year ended For the year ended For the year ended March 31, 2011 March 31, 2010 March 31, 2011 March 31, 2010 (Rs.mn) (Rs.mn) (Rs.mn) (Rs.mn) Standalone Standalone Consolidated Consolidated

Total Income 949.44 957.07 2,012.19 1,813.37

Profit before Taxation 554.53 588.64 905.19 956.92

Provision for Taxation 180.47 195.78 212.27 215.38

Net Profit after Taxation 374.06 392.86 690.20* 738.49*

Profit available for appropriation 501.71 522.77 1,472.20 1,177.12

Appropriations :

General Reserve 38.00 40.00 38.00 40.00

Dividend (inclusive of dividend tax) 358.48 355.12 358.48 355.12

•afterMinority Interest

DIVIDEND

During the year, your Company achieved a net profit aftertax of X 374.06 mn. Your Directors recommend a dividend of X 1.50 per share efface value r2/-each.The total amount ofdividend is 1358.48 mn (inclusive ofdividend tax oft50.04mn)

REVIEW OF OPERATIONS

The year under review has been uncertain, contrary to earlier expectations. India faced headwinds in the form of concerns on inflation, interest rates, and oil price. Lower industrial growth since September 2010 and slowdown in foreign direct investment could translate into lower than expected GDP growth forFY2011 and FY2012. The fragile global and local economic scenarios have reflected on the private equity environment as well. Fund raising continues to be sluggish and PE fund raising by India-focused funds saw a dip of 19% on a year on year basis

In this backdrop, the year has been one of consolidation for the Company. During the year your Company acquired the shares of Saffron Asset Advisors Private Limited (name changed to IIML Asset Advisors Private Limited), thus making it a subsidiary of Company. In addition to the above Saffron Capital Securities Limited and Saffron Capital Advisors Limited, both Mauritius based real estate focused managers, amalgamated with IL&FS Investment Advisors LLC, a Mauritius based wholly owned subsidiary of the Company. As a result of the foregoing, the total Assets Under Management (AUM") of your Company along with its affiliates stands increased to USD 3.2 bn and your Company alongwith its affiliates also has undents management Yatra Capital Limited which is listed on the Euronext Stock Exchange. Your Company will seek to leverage the listed vehicle for raising fresh listed private equity funds

Your Company invested X 8.27 bn during FY2011, a 43% increase over the previous year. More importantly, your Company was also able to provide significant return of capital to its fund investors, with US$ 221 mn being realized through divestments from 15 investee companies

Given that the fund raising process is episodic, the increase in revenues of your Company is more a step function, linked to fresh funds closed as also to the investment cycle for the current funds under management. Strategic initiatives including opening of the Dubai office with a view to expand business presence in the region and the Saffron merger are expected to fructify over the next two fiscals. Given the lack of demand and the greaterriskaversion of the investment community, investmentcycles have elongated, thereby impacting pace of fresh fund raises. Accordingly, the Company initiated fund raising for three new funds only in the latter part of 2011. The enhancement in assets under management of US$ 400 mn came from the amalgamation of the Saffron platform; however depreciation costs related to the transaction have resulted in a lower Profit After Tax than planned

On a consolidated basis, the Income from Operations of the Company for the financial year 2010-2011 was X 1.9 bn. Inclusive of Income from Investments of X 72.39 mn and Other Income of X 39.45 mn, the Total Income on a consolidated basis for the Financial Year 2010-2011 was X 2.01 bn. The resultant Profit afterTaxon consolidated basisforthefinancial year2010-2011 was X690.20 mn

On a standalone basis, the Income from Operations of the Company for the financial year 2010-2011 was X 852.77 mn. Inclusive of Income from Investments of ? 61.64 mn and Other Income of ? 35.03 mn, the Total Income of the Company for the Financial Year 2010-2011 was ? 949.44 mn. The total Expensesfortheyearweret394.90mn and the resultant ProfitafterTaxforthe financial year2010-2011 wast 374.06mn

FUTURE OUTLOOK

The emerging weak and uncertain economic data points to a possible downgrading of the growth forecasts for FY2012. Scaling down of FY2012 growth expectations by 0.5-1.0% is already being sounded out by various agencies, with the Government reaffirming that it would be willing to sacrifice growth in the interest of reigning in inflation

However, notwithstanding the challenging macro-economic environment, India continues to present a compelling investment opportunity. In order to address this opportunity, your Company has started marketing of three new funds. Leveraging its parentage, the Company would in this fiscal launch a variety of funds covering the infrastructure lifecycle. The new Funds collectively target to raise US$1 bn overthe next 12-18 months, with some achieving a First Close during this fiscal. Achallenging global investment environment would dictate the Companys ability to raise new Funds within the planned timelines. Despite having a competitive advantage and performance recognition among global investors, the active divestment of olderfunds coupled with longer lead times forfund raising are expected to keep assets under management flat

DIRECTORS

Mr Arun Saha and Mr Vibhav Kapoor retire by rotation at the ensuing Annual General Meeting of the Company and being eligible offer themselves for re-appointment. Mr Jitender Balakrishnan was appointed as an Additional Director of the Company at the Board Meeting held on July 30, 2010 and Mr Ramesh Bawa and Mr Siddharth Mehta were appointed as Additional Directors of the Company at the Board Meeting held on February 11, 2011. Since Mr Jitender Balakrishnan, Mr Ramesh Bawa and Mr Siddharth Mehta were appointed as Additional Directors of the Company they hold office upto the date of ensuing Annual General Meeting of the Company and being eligible offers themselves for appointment. The Company has received a notice under Section 257 of the Companies Act, 1956 proposing appointment of Mr Jitender Balakrishnan, Mr Ramesh Bawa and MrSiddharth Mehta as Directors of the Company. During the yearMrAlokBhargava resigned and ceased to beaDirectorand consequently ceased to be an Executive Director of the Company with effect from July 15, 2010. DrArchana Hingorani was appointed as an Executive Director of the Company for a period of five years with effect from July 17, 2006. With the tenure of Dr Hingorani as an Executive Director coming to an end on July 16, 2011, the Board of Directors of the Company at its meeting held on April 21, 2011 approved the re-appointment of DrArchana Hingorani as an Executive Director of the Company for a further period of five years with effect from April 21, 2011, subject to the approval of the members. The resolution for re-appointment of Dr Hingorani as an Executive Directorof the Companyforafurtherperiod of fiveyears with effect fromApril21,2011 is being placed before the members in the ensuing Annual General Meeting

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

INCREASE IN SHARE CAPITAL

During the year your Company allotted 2,598,660 Equity Shares of ? 21- 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 the following subsidiaries IL&FS Asian Infrastructure Managers Limited, IL&FS Urban Infrastructure Managers Limited, IIML AssetAdvisors Private Limited and IL&FS Investment Advisors LLC, Mauritius

The Company had in the past obtained exemption from the Central Government under Section 212 of the Companies Act, 1956, from attaching the Accounts of each of the Subsidiary Companies of the Company to its Balance Sheet. However the Ministry of Corporate Affairs vide General Circular No 2/2011 file no 51/12/2007-CL-lll 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 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 memberatthe Companys 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) has been set up to manage Pan Asia Project Development Fund, India (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 r 1,125 mn. IAIML 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 year2010-2011 was X 20.04 mn. Inclusive of Income from Investments and Otherlncome of X 3.45 mn, the Total Income for Financial Year 2010-2011 was X 23.49 mn. The total Expenses of IAIML for the year were X 19.05 mn and the resultant Profit aftertaxfortheyearwast 3.96mn

IL&FS Urban Infrastructure Managers Limited:

IL&FS Urban Infrastructure Managers Limited (IUIML) functions as the Asset Managerfor 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 X 27,500 mn

As part of the efforts of increasing the total corpus available, a new lender Indian Overseas Bank has joined the consortium with a commitment of X 2,500 mn. Further the existing lenders have also increased their commitment amounts. Accordingly, the total corpus is expected to be increased to X 47,775 mn. The Memorandum of Agreement for the revised commitment amount is expected to be signed in the first quarterof FY2012

lUIMLs 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 administerthe loan assets until repayment

By March 31, 2011, projects for a term loan of X 30,783.35 mn have been sanctioned from the PMDO facility and the assets under management amounted tor 8,747 mn

Thelncome from Operations of lUIMLfor the financial year 2010-2011 wast 89.21 mn. Inclusive of Income from Investments and Otherlncome of X 1.79 mn, the Total Income for Financial Year2010-2011 wasf91 mn. The total Expenses of lUIMLfortheyearweref 64.34 mn and the resultant ProfitafterTaxforthe yearwas X17.76 mn

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

IIMLAsset Advisors Private Limited (IAAPL) is in the business of providing advice on investments, finance, management and consultancy and acts as the India Advisorto two Mauritius based real estate funds

The Income from Operations of IAAPL for the financial year 2010-2011 was X 305.36 mn. Inclusive of Other Income of X 0.89 mn, the Total Income for FinancialYear 2010-2011 wast 306.25 mn. The total Expenses of IAAPL fortheyearweret 255.83mn and the resultant ProfitafterTaxforthe yearwas X 32.30 mn

IL&FS Investment Advisors LLC:

IL&FS InvestmentAdvisors LLC, Mauritius (HAL) acts as the Investment Managerto IL&FS India Realty Fund LLC, IL&FS India Realty Fund II LLC. Tara India Fund III LLC, K2 Property Limited and Saffron India Real Estate Fund I

The Total Income of HAL for the financial year 2010-2011 was USD 30.90 mn. The total Expenses of HAL for the year were USD 24.94 mn and the resultant Profit after Taxforthe yearwas USD 5.73 mn

DEPOSITS

YourCompany has notaccepted any deposits from the publicfortheyearunderconsideration

FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars regarding foreign expenditure and earnings appearas Item Nos. 8(ii) and 8(iii) 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 31,2011. However, as perthe 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

DIRECTORSRESPONSIBILITYSTATEMENT

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 attheend of the financial yearand of the profitof the Company for thatyear;

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

(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 lookforward to receiving theircontinued support and encouragement

For and on behalf of the Board

Place : Mumbai

Date : April 21, 2011 S M DATTA

Chairman


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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