Home  »  Company  »  SREI Infrastructure  »  Quotes  »  Directors Report
Enter the first few characters of Company and click 'Go'

Directors Report of SREI Infrastructure Finance Ltd.

Mar 31, 2016

The Directors are pleased to present the Thirty-First Annual Report together with the Audited Accounts of your Company for the financial year ended March 31, 2016. The summarised consolidated and standalone financial performance of your Company is as follows

FINANCIAL SUMMARY (Rs. in Lacs)

Consolidated Standalone

Year ended Year ended Year ended Year ended 31st March 31st March 31st March 31st March 2016 2015 2016 2015

Total Revenue 3,26,194 3,36,032 1,89,633 1,90,003

Total Expenses (including depreciation etc.) 2,88,352 2,86,229 1,75,526 1,67,156

Profit before bad debts, provisions & tax 37,842 49,803 14,107 22,847

Bad Debts & Provisions etc. 27,248 30,983 5,965 10,895

Profit Before Tax 10,594 18,820 8,142 11,952

Exceptional Items - (24) - -

Current Tax 6,037 4,369 3,241 1,818

Mat Credit entitlement (6) (22) - -

Deferred Tax (1,590) 2,354 (839) 1,041

Income Tax in respect of earlier years - 3 - -

Profit After Tax Before Minority Interest 6,153 12,140 5,740 9,093

Share of loss of Associate 25 - - -

Minority Interest (1,124) (771) - -

Net Profit 7,252 12,911 5,740 9,093

Minority Interests of Pre Acquisition Profit/(Loss) - 109 - -

Profit After Tax after adjustment for Minority Interest 7,252 13,020 5,740 9,093

Surplus brought forward from Previous Year 30,747 38,178 25,938 26,244

Profit Available For Appropriation 37,999 51,198 31,678 35,337

Paid up Equity Share Capital 50,324 50,324 50,324 50,324

Amount transferred to Reserves 6,322 17,290 1,530 6,365

Reserves and Surplus 3,12,177 3,08,139 2,26,190 2,23,478

Earning Per Share 1.44 2.57 1.14 1.81

Note: The above figures are extracted from the standalone and consolidated financial statements for the financial year ended on March 31, 2016

OPERATIONAL REVIEW

Your Company is one of the leading private sector infrastructure financing institutions in India. Some of the key highlights of your Company''s performance during the year under review are:

The gross profit (before bad debts, provision and tax) is Rs. 14,107 Lacs as against Rs. 22,847 Lacs in the last year.

Profit before taxation is Rs. 8,142 Lacs as against Rs. 11,952 Lacs in the last year.

Net profit after taxation is Rs. 5,740 Lacs as against Rs. 9,093 Lacs in the last year.

The total assets under management of the Srei Group is Rs. 36,70,283 Lacs as against Rs. 35,38,801 Lacs in the last year.

The Capital to Risk Assets Ratio (CRAR) of your Company stood at 17.54 per cent as on March 31, 2016, well above the regulatory minimum level of 15 per cent prescribed by the Reserve Bank of India for systemically important non-deposit taking NBFCs (NBFCs- ND-SI). Of this, the Tier I CRAR was 12.51 per cent.

The Financial Statements of your Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 read with Rule 7 of The Companies (Accounts) Rules, 2014) and the relevant provisions of the Companies Act, 1956 / Companies Act, 2013, as applicable and Regulation 48 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ''SEBI Listing Regulations, 2015''). Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. Your Company discloses standalone and consolidated unaudited financial results on a quarterly basis, which are subjected to limited review, and standalone and consolidated audited financial results on an annual basis.

Your Company has complied with all the norms prescribed by the Reserve Bank of India (RBI) including the Fair practices, Anti Money Laundering and Know Your Customer (KYC) guidelines.

CLASSIFICATION AS INFRASTRUCTURE FINANCE COMPANY (IFC) AND PUBLIC FINANCIAL INSTITUTION (PFI)

The Reserve Bank of India has classified your Company as an ''Infrastructure Finance Company''within the overall classification of ''Non Banking Finance Company''. Your Company is also notified as a Public Financial Institution (PFI) by the Ministry of Corporate Affairs (MCA), Government of India.

DIVIDEND

Your Company has had a consistent dividend policy that balances the dual objectives of appropriately rewarding Members through dividends and retaining capital, in order to maintain a healthy capital adequacy ratio to support long term growth of your Company. Consistent with this policy, your Board has recommended a dividend of Re. 0.50 per Equity share (5 per cent) for the financial year 2015-16 to the Members of your Company. The proposal is subject to the approval of the Members at the 31st Annual General Meeting (AGM) of your Company scheduled to be held on August 06, 2016. The dividend together with the dividend distribution tax will entail a cash outflow of Rs. 3028 Lacs (previous year Rs. 3028 Lacs).

PUBLIC DEPOSITS

In April 2010, your Company decided to convert itself into a non-deposit taking NBFC in order to qualify for registration as an ''Infrastructure Finance Company''. Your Company had decided that it would not accept any further public deposits or renew such maturing deposits in any manner w.e.f. April 20, 2010 and the entire amount of outstanding public deposits as on April 19, 2010 together with interest promised to the depositors, has been kept in an Escrow Account with Axis Bank Limited, a scheduled commercial bank for the purpose of making payment to the depositors as and when they raise the claim. Despite sustained efforts to identify and repay unclaimed deposits the amount payable to the depositors as on March 31, 2016 is Rs. 15,81,821.47.

Being a non-deposit taking Company, your Company has not accepted any deposits from the public/members under Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014 during the year and within the meaning of the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.

PUBLIC ISSUE OF SECURED REDEEMABLE NON-CONVERTIBLE DEBENTURES

During the year under review, your Company issued Secured Redeemable Non-Convertible Debentures (the "Debentures") of face value of Rs. 1,000 each, as per the details given hereunder:

Date of Base Issue Size Total Issue Size including Maturity Period Allotment Amount

opening of Issue (Rs.in Crores) Green Shoe Option (Rs.in Crores)

(Rs.in Crores)

01.07.2015* 200 Upto 1000 39 months /60 months 28.07.2015 163.54

*Issue w.r.t. Tranche 2 Prospectus dated June 26, 2015 read together with Shelf Prospectus dated September 22, 2014

Debenture Trustee Agreement(s) in favour of Axis Trustee Services Limited for the aforesaid issue was duly executed. The said Debentures are listed on the Debt Segment of the BSE Limited (BSE). The entire proceeds have been utilised for the purpose of various financing activities, repayment of existing loans and other business operations including working capital requirements. Your Company has duly paid the interest due on the aforesaid Debentures on time.

The public issue of the said Debentures has not only facilitated diversification of your Company''s sources for mobilising long term resources but has also provided the retail Investors an opportunity to participate in India''s infrastructure development and progress. Through the public issue launched in FY 2015-16, your Company has acquired nearly 13,000 retail investors. Along with previous issues, your Company has broad-based the retail base of nearly 64,000 investors. That signifies the growing confidence of investors in your Company. The various communication efforts of your Company surrounding the Debentures played a meaningful role in enhancing your Company''s brand image amongst relevant constituencies.

PROMOTER GROUP SHAREHOLDING

During the year under review, there were various instances of acquisitions as well as transfer of shares amongst the Promoter/Promoters''Group of your Company resulting in effective increase of your Company''s Promoter/Promoters'' Group shareholding by 4.9694 per cent from 53.7470 per cent to 58.7164 per cent. The aggregate shareholding of Promoter/Promoters''Group of your Company as on March 31, 2016 is as follows:

Shareholding Sl. No. Name No. %

1. Hemant Kanoria 3,80,000 0.0755

2. Sunil Kanoria 18,02,714 0.3583

3. Adisri Commercial Private Limited 29,32,01,250 58.2805

4. Bhavah Enterprise Private Limited 10,000 0.0020

Total 29,53,93,964 58.7164

Further, Adisri Commercial Private Limited acquired 1,04,74,595 equity shares representing 2.0821 per cent of the paid-up capital of your Company in an off-market transaction on April 08, 2016. The total shareholding of Adisri Commercial Private Limited as on the date of this report is 30,36,75,845 equity shares representing 60.3626 per cent of the paid-up capital of your Company.

Accordingly, after the aforesaid acquisition, the total promoter group shareholding of your Company as on the date of this report is 30,58,68,559 equity shares aggregating to 60.7984 per cent of the total paid up capital of your Company.

As on March 31, 2016, none of the Promoter/Promoters''Group shareholding is under pledge. Further, in compliance with Regulation 31(2) of SEBI Listing Regulations, 2015, the entire shareholding of promoter(s) and promoter group is in dematerialised form.

GLOBAL DEPOSITARY RECEIPTS (GDRs)

Your Company''s GDRs have been traded and listed on the Professional Securities Market ("PSM") of the London Stock Exchange ("LSE") with effect from April 21, 2005. Deutsche Bank Trust Company Americas, Depositary to the GDR program issued a notice to your Company for the termination of Deposit Agreements pursuant to which GDRs have been issued.

Intimations have been made to the Financial Conduct Authority ("FCA"), UK Listing Authority ("UKLA"), LSE, Depositary and the Custodian intimating May 16, 2016 as the date of cancellation of listing from which the holders of GDRs will no longer be able to trade their GDRs on the LSE. The GDRs will not be listed or traded anywhere after the date of cancellation of listing. The same has also been intimated to the domestic Stock Exchanges.

Presently, there are 5,400 number of GDRs outstanding which aggregates to 21,600 number of Equity Shares of your Company representing 0.004 per cent of the paid-up share capital of your Company which is very insignificant in relation to the total market capitalisation of your Company.

Cancellation of listing of GDRs on the LSE does not result in any change in the total paid up equity share capital structure of your Company.

Your Company will embrace innovative management practices, empower cross-functional teams and standardise processes to optimise the existing resources while minimising the cost which in return will enhance shareholder returns on its investment portfolio.

RESOURCES

During financial year 2015-16, the Treasury department of your Company has seamlessly mobilised resources at competitive rates in the market. Leveraging its long standing relationship and robust track record, your Company has been able to maintain cost while ensuring proper asset liability match.

i. Bank Finance

Your Company''s strong relationships and past credit record with nationalised banks and private sector banks enables it to access cost effective fund. Your Company is funded by a diversified consortium of 30 Indian banks and has enhanced the tied-up fund based working capital limit to Rs. 8,916.50 crores from consortium member banks at the end of financial year. Further, your Company also successfully mobilised long term Loans aggregating to Rs. 875 crores during the year at the most competitive rates and continued to tap resources through domestic sources.

ii. Bonds / Debentures / Commercial Papers

Your Company has allotted debentures aggregating to Rs. 163.54 crores by issue of long term Non-Convertible Debentures (NCDs) during the year under review through public issue. Your Company is focussing on diversifying liability mix and hence, going forward, NCDs will be one of the focus areas to augment long term resources. Your Company has also raised Rs. 15,519.20 crores through Commercial Papers during the year under review.

iii. Foreign Institutional Borrowings

Your Company has drawn EUR 13.19 million during the year under the credit line of Euro 40 mio provided by European Investment Bank (EIB) for climate change mitigation projects (e.g. renewable energy, energy efficiency, any other project that reduces Carbon Dioxide emissions) guaranteed by SACE S.p.A. Your Company has also signed an agreement with Deutsche Bank for USD 30 mio of which USD 18 mio is drawn in FY 2015 and balance 12 mio would be drawn in FY 2016-17.

RISK MANAGEMENT

Risk management has been an important and integral part of the operations of your Company, driven by the objectives of maintaining robust asset quality alongside growth in business, optimal allocation of capital simultaneously with enhancement of shareholders''value and hedging against unforeseen events and macro- economic or environmental conditions.

Your Company''s risk management strategy strives to balance the trade- off between risk and return and ensure optimal risk-adjusted return on capital, and entails independent identification, measurement and management of risks across the various businesses of your Company. Your Company has enunciated a framework of policies and principles derived from relevant directives provided from time to time by the Reserve Bank of India (RBI) for a specific classification of non- banking finance companies (NBFCs), and continuously benchmarked with industry best practices. The policies are approved and reviewed from time to time by the Board of Directors supported by an independent risk function, which ensures that your Company operates within a pre-defined risk appetite. In compliance with norms under RBI, your Company computed capital requirement for credit, market and operational risk as on March 31, 2016. The capital to risk-weighted assets ratio (CRAR) of your Company worked out to 17.54 per cent and based on Tier-I capital it was 12.51 per cent, above the minimum regulatory requirements of 15 per cent and 10 per cent respectively.

Governance Structure

The Risk Committee of Board (RCB), an independent Board level committee, puts in place specific policies, frameworks and systems for effective risk management. The RCB approves policies from time to time in consultation with other sub-committees of the Board, viz. the Investment Committee (IC) and the Asset Liability Management Committee (ALCO), constitute the governing framework for various types of risk and business activities undertaken within this policy framework. The overall risk management is guided by well-defined procedures appropriate for the assessment and management of individual risk categories viz. credit risk, market risk, operational risk, liquidity risk, counterparty risk and group risk supplemented by periodic validations of the methods used. Under the guidance of RCB, the risk department is responsible for assessing and managing risks on a regular and dynamic basis. This entails, as an imperative, garnering adequate knowledge of macroeconomic trends, insights into dynamics of various sectors, and understanding of regulatory environment, and application of quantitative and qualitative tools facilitating an accurate assessment of risk at all times.

Credit Risk

Your Company has a comprehensive and well-defined Credit Risk Policy for maximizing the risk-adjusted rate of return on capital by maintaining a healthy asset portfolio and managing the credit risk inherent in individual exposures as well at the portfolio level. The emphasis is placed both on evaluation and containment of risk at the individual exposures and on analysis of the portfolio behaviour. The appraisal process encompasses a detailed risk assessment and rating of all obligors using internal rating models. The ratings of customers are assessed based on their financial performance, industry characteristics, business positioning, project risks, operating performance and other non- financial parameters such as quality of management and conduct of account.

Your Company has a strong framework for the appraisal and execution of project finance transactions that involves a detailed evaluation of technical, commercial, financial, marketing and management factors including sponsor''s financial strength and experience. Your Company identifies the project risks, mitigating factors and residual risks associated with the project, and applicable risk mitigating factors, including creation of debt service reserves and channeling project revenues through a trust & retention account. In some cases, your Company also has taken additional credit comforts such as corporate or personal guarantees from one or more sponsors of the project or a pledge of the sponsors''equity holding in the project company.

The RCB periodically reviews the impact of the stress scenarios resulting from rating downgrades or drop in the asset values in case of secured exposures on the portfolio. Your Company works within identified limits on exposure to borrower groups, industry sectors and geographies, and continuously tracks portfolio level concentrations. These limits are periodically reviewed based on changes in macro-economic environment, regulatory environment and industry dynamics. Existing credit exposure in the portfolio is continuously monitored and reviewed. Key sectors are analysed in details to suggest strategies considering both risks and opportunities. Corrective action, if required, is taken well in advance based on early warning signals.

Sustainability risk is an essential and integral part of your Company''s credit risk management framework. Besides economic benefits, the environmental and social benefits of the project are assessed as these are critical aspects for sustainability of any project. Subsequent to analysing sustainability risk at the time of initial loan approval, it is also periodically monitored through the life-cycle of the exposure.

Market risk

Market risk is defined as the risk to earnings and to the value of investments arising from movements in extraneous market risk factors, namely stiff liquidity, interest rates and foreign exchange rates. The most common factors connected with market risk are interest rates, currency exchange rates, costs of investments in trade portfolio (regardless of the instruments'' character – debt or capital), prices of exchange commodities and other market variables related to the company''s activity.

Your Company''s market risk management is guided by well- laid policies, guidelines, processes and systems for the identification, measurement, monitoring and reporting of exposures against various risk limits set in accordance with the risk appetite of your Company. Treasury Mid-Office independently monitors the risk limits stipulated in the Market Risk Policy and reports deviations, if any, to the appropriate authorities as laid down in the policy.

Liquidity risk is two-dimensional: risk of being unable to fund portfolio of assets at appropriate maturity and rates (liability dimension) and the risk of being unable to liquidate assets in a timely manner at a reasonable price (asset dimension). Your Company''s Asset Liability Management Committee (ALCO) lays down a broad framework for liquidity risk management to ensure that it is in a position to meet its daily liquidity obligations as well as to withstand a period of liquidity stress from industry, market or a combination of them. The liquidity profile is analyzed on a static as well as on a dynamic basis by using the gap analysis technique supplemented by monitoring of key liquidity ratios and conduct of liquidity stress tests periodically. The ALM position of your Company is being periodically reported to ALCO, RCB and also to RBI.

Interest rate risk is the probability that variations in the interest rates will have a negative influence on the quality of a given financial instrument or portfolio, as well as on your Company''s condition as a whole. Interest rate risk is generally managed through floating rate mechanism by linking the lending rate of interest to your Company''s Benchmark Rate and is reviewed periodically with changes in your Company''s cost of funds. Your Company regularly conducts stress testing to monitor vulnerability towards interest rate unfavorable shocks.

Currency or exchange rate risk is the risk where the fair value or future cash flows of a given financial instrument fluctuate as a result from changes in the currency exchange rates. Currency exchange rates can be subject to big and unexpected changes, and managing of the risk related to the currency exchange rates''volatility can be very complicated.

Exchange rate risk management becomes necessary as your Company borrows money in foreign currency and lends in domestic currency. In order to optimize the cost of funds, your Company adopts effective hedging strategies considering the overall risk appetite of your Company. Through statistical measure like Value at Risk (VaR), stress tests, back tests, scenario analyses, your Company monitors the foreign currency portfolio.

Operational risk

Operational risk is defined as the risk of loss arising out of inadequate or failed internal processes, people and systems or from external events. Your Company in accordance with the regulatory guidelines has put in place a framework to identify, assess and monitor risks, strengthen controls, improve customer service and minimize operating losses.

Your Company has built into its operational process by segregation of duties, clear reporting structures, well defined processes, operating manuals, staff training, verification of high value transactions and strong audit trails to control and mitigate operational risks. New product and activity notes prepared by business units are reviewed by all concerned departments including compliance, risk management and legal. All concerned departments coordinate and discuss key operational risk issues involving people, process, and technology, external factors etc. so as to minimise them or ensure adequate controls over them.

A well-formulated Business Continuity Plan (BCP) is in place which ensures business continuity in unlikely event of disaster or disruption. Further to provide continued and uninterrupted service even during natural disasters, a Disaster Recovery (DR) Site is also in place. Vigorous information technology system is put in place which has been certified with globally accepted ISO2701:2005 standard, comprising features like DR, security features covering firewalls, encryption technologies, spam-guards etc. Your Company is committed towards investing in information technology to strengthen its business process.

In addition, to manage operational risk prudently, ''Know Your Customer'' (KYC) and ''Anti-Money Laundering (AML) Policy''are in place, which helps to prevent your Company from being used intentionally or unintentionally by criminal elements for money laundering.

The risk management framework of your Company is based on assessment of all risks through proper analysing and understanding the underlying risks before undertaking any transactions and changing or implementing processes and systems. All transactions and processes conform to your Company''s risk appetite and regulatory requirements and the same is achieved through a proper governance structure, which includes a multi-tiered approval levels for transactions and processes. This risk management mechanism is aided by regular review, control, self assessments and monitoring of key risk indicators.

HUMAN RESOURCES ACTIVITIES

In the prevailing scenario of business, a strong human capital base will be the differentiator. Hence this year, your Company has focused on strategies that make a stronger human capital base through talent development and talent management together with a stronger integration with technology.

Last year, your Company had formed People Council, which was a cross functional leadership team who actually led the talent pool hence their interventions in all facets of talent management would be the key to engage Human Capital. This Team steered the roll out of new Performance Management System (PMS) and Compensation Policy.

The highlight of this was an improved objectivity in performance management which had detailed job description of 60 unique roles, standardized KRA for all frontline jobs. In addition, your Company established a process of mid-year review and all the employees participated very enthusiastically. All the People Manager of your Company went through a defined set of workshops aimed at making People Managers stronger in people management and to provide employees the same experience of learning and performing hence established on standard ''Srei Way''.

For the smooth assimilation of new recruits in your organization, Design for Success was rolled out which encompassed support to the new entrants. Such initiatives brought Trust and Transparency and the effect was an all-time high score of 74 per cent under "Great Place to work" survey.

Your Company believes employees to be the most valuable asset hence through Swasth Srei, your Company intends to keep the employee base healthy and happy. Swasth Srei encouraged employees towards a healthy lifestyle and supported various health initiatives such as Marathons, in house Health talks and promoted Sports Clubs for cricket, football and badminton. Swasth Srei got recognition as Arogya World''s Healthy Workplace Gold Award and the Sports team also won few corporate tournaments.

This year, your organization took an ambitious step to implement a cloud based Human Resource Management System (HRMS) which encapsulates

Hire to Retire modules and brings high accessibility ease to employees. This has also helped in removing any manual intervention in managing employee lifecycles of the growing employee base of your Company.

Throughout, the year, your Company kept a constant and strong employee communications flowing through various channels like Townhalls, newsletters and Twitter, while the year round employee engagement activities continued to build employee bonding and boost employee morale.

The employee count of your Company stands at 209 as on March, 2016, and automating employee services has supported your Company to improve response time and service.

INFORMATION TECHNOLOGY

Information Technology (IT) in your Company has emerged as a strategic enabler and is playing a major role in improving productivity, reliability and customer satisfaction level while optimizing cost & risks. The IT function has successfully transformed its status from "Reactive" state to "Managed" state by implementing state of the art technology, integrating end to end business process along with underlying technology and transforming its vision from gaining technological expertise to offering customer focused end-to-end service.

Following the current industry trend and business need, your Company adopted cloud based sourcing strategy for many of its crucial services including enterprise e-mail, Human Resource Management System (HRMS) etc. These strategic transformation projects have not only optimized IT resource and operational cost but also improved stability and performance of business critical services.

In addition to various initiatives enabling cost variabilisation, consolidation and efficiencies and on demand scale, various initiatives in the areas of digitalization, speed, performance and mobility have been given high priority to get the competitive advantages in client and employee facing processes. To enhance end client reliability and satisfaction level, SMS facility has been provided for all transactions and payment made by cash, cheque or demand draft. Google Apps for Work has been introduced through "PIN IT" initiative that brings to users collaboration anytime, anyplace and any device and seamless integration of end to end business process was accomplished coupled with a single service desk solution across IT services.

During the year under review, the focus areas were end user mobility, uniformity in process automation and risk optimization by state of art security practice. Human Resource Management System (HRMS) solution has been moved to a cloud based solution which tracks the employee lifecycle from joining till separation with a very efficient performance management system.

Risk of internet usage has been highly mitigated by adopting a cloud based proxy solution in terms of secured communication and integrated control.

While continuing with its accreditation for ISO 27000:2013, your Company has taken its IT risk management system to the next level of maturity. Compliance to regulatory and statutory needs has always been the focus at your Company, and taking a further step in that direction, your Company has implemented a comprehensive compliance tracking solution.

Information Technology function is embarking on the next wave of maturity that will position IT as a key business driver for every employee and customer. By leveraging innovations in mobile applications, adopting best of breed solution and framework, reengineering the current process and driving continuous improvement cycle across services, your Company is aiming to move towards the next level of maturity and make a significant footprint in the world of digitalization.

INTERNAL CONTROL AND AUDIT

Your Company''s vision, mission and core values have laid the foundation for internal controls. On the administrative controls side, your Company has a proper reporting structure, oversight committees and rigorous performance appraisal system to ensure checks and balances. On the financial controls side, your Company has in place segregation of duties and reporting mechanism to deter and detect misstatements in financial reporting.

Your Company''s Internal Control System is commensurate with the nature of its business and the size and complexity of its operations and ensures compliance with policies and procedures. The Internal Control Systems are being constantly updated with new / revised standard operating procedures.

Further, in accordance with the latest legislation, your Company''s internal financial controls have been reviewed and actions have been taken to strengthen financial reporting and overall risk management procedures.

Your Company has a dedicated and independent Internal Audit Department reporting directly to the Audit Committee of the Board. The purpose, scope, authority and responsibility of the Internal Audit Department are delineated in the Audit Charter approved by the Audit Committee. Internal Audit Department influences and facilitates improvements in the control environment by constantly evaluating the risk management and internal control systems.

Furthermore, the Audit Committee of your Company evaluates and reviews the adequacy and effectiveness of the internal control systems and suggests improvements. Significant deviations are brought to the notice of the Audit Committee and corrective measures are recommended for implementation. Based on the internal audit report, process owners undertake corrective action in their respective areas. All these measures help in maintaining a healthy internal control environment.

ENVIRONMENTAL AND SOCIAL MANAGEMENT SYSTEM

To adequately meet, respond to and enhance benchmarks in Environmental and Social (E&S) management, your Company has adopted Environmental & Social Management System (ESMS) which reduces the business risk of its portfolio related to E&S issues and adhere to Sustainable Finance Practice. It has been integrated as a part of overall Credit & Risk Policy. This management system is aimed at properly evaluating, assessing and ensuring customer compliance with relevant E&S requirements and encourages clients to take corrective action & mitigation plans.

The core elements of our ESMS are a self-declared Policy Framework, due- diligence (rapid, sustainability, client risk assessment, project / activity risk categorization and if required site visiting), appraisal (analysis of E&S impacts and client''s capacity & commitment to address them), mitigation measures, action plans, monitoring & review of ongoing projects, training & workshop and continuous improvement of the system. By following ESMS practice, your Company has been able to create awareness in the market regarding relevance of E&S issues and their impacts on the society and the environment.

In your Company, a full scale E&S due-diligence is carried out for any business activity as per International Finance Corporation (IFC) Performance Standards and Country''s E&S Laws, Rules & Notifications, based on which a ''go''or ''no go''decision is given by ESMS team. Your Company neither participates nor invests in certain activities and industries, which fall in the exclusion list of your Company. Your Company does not invest in any projects that do not comply with the environmental & social norms and laws of the Country.

As a part of sustainability strategy, your Company has entered into a Capacity Development Agreement with Nederlandse Financierings- Maatschappij voor Ontwikkelingslanden N.V. (FMO) [Netherlands Development Finance Company] and Oesterreichische Entwicklungbank AG (OeEB) [Development Bank of Austria] to launch a corporate ESHS programme for its clients called Environmental & Social management System - Corporate Rollout Programme (ESMS – CRP). The purpose of the programme is to control the business risk out of different E&S issues from its own and its clients''portfolio, gain control over third party risks and carry out the business with a better E&S risk management. In the process, your Company''s brand image in the market is enhanced. Under this programme, your Company prepares sector specific ESMS policy manual based on International Finance Corporation (IFC) Performance Standards for its clients''business and provides ESHS (Environmental, Social, Health & Safety) training. In post implementation stages, your Company helps the clients in E&S monitoring and audit of ESMS. Adoption of ESMS-CRP for the clients of your Company has been made mandatory from FY 2016 onwards for any fresh exposure. On account of your Company''s collaboration with FMO & OeEB, the expenditure on ESMS-CRP for the clients of your Company has been reduced. Your Company has also taken up initiative for the preparation of Sustainability Reporting from FY 2017.

Over the past years, your Company has been able to successfully manage, reduce and control the E&S risks associated with its portfolio. Your Company has encouraged sustainable development by investing in various renewable energy projects. Your Company monitors & reviews the invested projects on a regular basis whereas shortfalls or misconducts are rectified by framing action plans for the same. Your Company continuously updates and upgrades the ESMS policy framework from time to time. Over the past years, your Company has been able to successfully manage, reduce and control the E&S risks associated with its portfolio.

Your Company believes in a Sustainable Finance Business Approach by considering conservation, management & sustainable use of human & natural resources. This endeavour certainly helps to create a strong & confident long term relationship with its stakeholders.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The total amount available for CSR spending, being 2 (two) per cent of the average net profits of your Company made during the three immediately preceding financial years, during the financial year 2015-16 aggregated to approximately Rs. 2.40 crores.

Recognising its social responsibility, your Company had earlier established a public charitable trust in the name of ''Srei Foundation''with the objective of granting scholarships and other financial assistance to deserving and talented candidates. The Fund also supports setting up of schools, colleges, medical and scientific research institutions. Donations to Srei Foundation qualify for deduction under Section 80G of the Income Tax Act, 1961. Your Company has granted donation of Rs. 50,00,000/- (Rupees Fifty Lac only) to Srei Foundation during the financial year 2015-16.

Your Company is cognizant towards promoting and encouraging education and hence donated Rs. 5,00,000/- (Rupees Five Lac only) to New Delhi Institute of Management towards sponsoring the education of a student from economically weaker section, thereby promoting higher education. Your Company also supported Gyan Prakash Foundation in its initiative of innovation towards creating a sustainable and replicable community led Social Change Model in education to benefit the underprivileged children in several blocks of Maharashtra. Towards this cause a fund of Rs. 5,00,000/- (Rupees Five Lac only) was donated.

Your Company is fully aware of the fact that as a corporate citizen, it is also entrusted with the responsibility to contribute for the betterment of the society at large. During the year under review, your Company supported ISKCON in its project – ''Food for life'' with a sum of Rs. 75,00,000/- (Rupees Seventy Five Lac only). The programme is being run at the ISKCON Temple in Dwarka where meal is made available to reach out and provide immediate food relief to the underprivileged in the vicinity of the temple.

Your Company perceives Corporate Social Responsibility (CSR) as an opportunity to contribute towards uplifting the society at large, empowering individuals, making them self-reliant. The CSR philosophy of your Company is embedded in its commitment to all stakeholders namely consumers, employees, environment and society while your Company''s approach extends both to external community as well as to your Company''s large and diverse internal employee base and their families. Your Company''s sustainable approaches towards practicing humble service to Humanity on a sustainable basis, has enabled it to continue fulfilling its commitment to be a socially responsible corporate citizen.

The CSR Committee of your Company has formulated the CSR Policy which describes the multiple lines around which the CSR activities of your Company are positioned being education and skill development, social and economic welfare, environmental sustainability and such other activities included in Schedule VII of the Companies Act, 2013 as may be identified by the CSR Committee from time to time. The said Policy is available on your Company''s website www.srei. com and a link to the said Policy has been provided elsewhere in this Annual Report. The Committee presently comprises Mr. Hemant Kanoria, Chairman & Managing Director, Mr. Sunil Kanoria, Non-Executive Director and Mr. Shyamalendu Chatterjee, Independent Director. Mr. Hemant Kanoria, Chairman and Managing Director of your Company acts as the Chairman of the CSR Committee. Mr. Madhusudan Dutta, Group Head – Corporate Strategy & Planning (Human Capital) acts as the Secretary to the CSR Committee.

4 (Four) meetings of the CSR Committee were held during the year 2015-16 on May 01, 2015, August 01, 2015, November 07, 2015 and February 11, 2016.

In the year under review, your Company could not spend the entire allocated budget of Rs. 2.40 Crores since during the year it continued to use its managerial resources to lay the basic framework for undertaking the CSR activities in accordance with the provisions of the Companies Act, 2013 including finalizing the CSR policy and identifying areas where the CSR activities can be aligned with the nature of the multiple lines of businesses of your Company along the thrust areas of CSR (Education & Skill Development, Healthcare / medical facilities, social and economic welfare, environmental sustainability).

During this year, your Company spent an aggregate amount of Rs. 1,35,00,000/- (Rupees One Crore Thirty Five Lacs only) towards CSR activities pursuant to CSR Policy of your Company. The manner in which the CSR amount was spent during the financial year is set out as an annexure to the Directors''Report and forms part of this Annual Report.

SREI WEBSITE

The website of your Company www. srei.com was revamped recently. This website has been developed on the new responsive technology based platform known as ''Drupal'', ensuring uniform display across all devices like mobile, tab, desktop etc. and all the operating systems. The website has an inbuilt sophisticated and customized content management system for easy change in content. A simple, improved navigation system needs a lesser number of clicks to reach the information available in the different sections of the website. The contemporary and smart look of the new website conforms to your Company''s new Brand guideline while taking a customer centric approach catering to the requirements of prospective customers, investors, employees and other stakeholders. The website of your Company also has ''Live Stock Ticker''with dynamic display of current stock prices in BSE and NSE with respective market caps. The site carries a comprehensive database of information of interest to the investors including the financial results of your Company, dividend declared, unclaimed dividend list, shareholding pattern, any price sensitive information disclosed to the regulatory authorities from time to time, analysts''reports, investor presentations, standard downloadable forms, media coverage, corporate profile and business activities of your Company and the services rendered by your Company to its investors. Some useful features like Online Resume Management System to pull the best talents and Online NCD Application Form download system as a part of fund raising initiatives have been duly introduced in the system. The links to different social media i.e. Facebook, Twitter, LinkedIn has been embedded in the home page of the new website to showcase the key initiatives and achievements your Company has associated itself with.

SUBSIDIARY COMPANIES

The Statement in Form AOC-I containing the salient feature of the financial statement of your Company''s subsidiaries, associates and joint venture companies pursuant to first proviso to Section 129(3) of the Companies Act, 2013 (Act) read with Rule 5 of the Companies (Accounts) Rules, 2014, forms part of the Annual Report. Further, in line with Section 129(3) of the Act read with the aforesaid Rules, SEBI Listing Regulations, 2015 and in accordance with the Accounting Standard 21 (AS-21), Consolidated Financial Statements prepared by your Company include financial information of its subsidiary companies.

A report on the performance and financial position of each of the Subsidiaries, Associate and Joint Venture companies included in the Consolidated Financial Statements prepared by your Company as per Rule 8(1) of the Companies (Accounts) Rules, 2014, forms part of the annual accounts of each of the Subsidiary, Associates and Joint venture companies which have been placed on the website of your Company www.srei.com and also forms part of Form AOC-1 pursuant to Rule 5 of the Companies (Accounts) Rules, 2014, which is set out as an annexure to the Directors''Report and forms part of this Annual Report. Members interested in obtaining a copy of the annual accounts of the subsidiary, associates and joint venture companies may write to the Company Secretary at your Company''s Registered Office. The said report is not repeated here for the sake of brevity.

The names of companies which have become or ceased to be subsidiaries, joint ventures or associate companies during the year are given below:

Name Status

Goldensons Construction Private Limited Ceased to be a wholly-owned subsidiary w.e.f. 30.06.2015

Quippo Oil & Gas Infrastructure Limited Ceased as a subsidiary and became a wholly-owned subsidiary from a subsidiary w.e.f. 15.03.2016.

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION

There is no such material change and commitment affecting the financial position of your Company which have occurred between the end of the financial year of your Company to which the financial statements relate and the date of the report.

POLICY FOR DETERMINING ''MATERIAL''SUBSIDIARIES

As on March 31, 2016, none of the Subsidiaries of your Company are material Subsidiaries. Your Company has formulated a Policy for determining Material Subsidiaries in accordance with the applicable laws. The said Policy is available on your Company''s website www.srei.com and a link to the said Policy has been provided elsewhere in this Annual Report.

KEY MANAGERIAL PERSONNEL (KMPs)

The following directors/executives of your Company are whole-time Key Managerial Persons (KMPs) as on March 31, 2016 in accordance with the provisions of Section 203 of the Companies Act, 2013 -

Name Designation

Mr. Hemant Kanoria Chairman & Managing Director

Mr. Bajrang Kumar Choudhary Chief Executive Officer Infrastructure Project Development

Mr. Bijoy Kumar Daga Chief Executive Officer Infrastructure Project Finance

Mr. Sandeep Lakhotia Company Secretary

Mr. Kishore Kumar Lodha Chief Financial Officer

During the year, Mr. John Moses Harding, Group CEO & Chief Economist – Liability & Treasury Management, resigned as a KMP of your Company and was relieved from the services of your Company w.e.f. 1st February, 2016.

Further, Mr. Bijoy Kumar Daga, Chief Executive Officer, Infrastructure Project Finance, resigned as a KMP of your Company and shall be relieved as per Company''s Policy.

NOMINATION AND REMUNERATION COMMITTEE

The Board of Directors of your Company have constituted a Nomination and Remuneration Committee in accordance with the provisions of Section 178 of the Companies Act, 2013 read with Regulation 19 of SEBI Listing Regulations, 2015. The Committee comprises Mr. Salil Kumar Gupta, Mr. Shyamalendu Chatterjee, Independent Directors and Mr. Sunil Kanoria, Non- Executive Director. Mr. Salil Kumar Gupta, Chief Mentor and Director of your Company acts as the Chairman of the Nomination and Remuneration Committee. The Terms of Reference of the Committee has been provided in the Corporate Governance Section forming part of this Report.

Two meetings of the Nomination and Remuneration Committee of your Company were held during the year 2015-16 on May 01, 2015 and August 01, 2015.

The Committee has formulated the Nomination and Remuneration Policy (''Srei Nomination and Remuneration Policy'') which broadly laid down the various principles of remuneration being support for strategic objectives, transparency, internal & external equity, flexibility, performance- driven remuneration, affordability and sustainability and covers the procedure for selection, appointment and compensation structure of Board members, Key Managerial Personnel (KMPs) and Senior Management Personnel (SMPs) of your Company. The said Policy is available on your Company''s website www.srei.com and a link to the said Policy has been provided elsewhere in this Annual Report.

WHISTLE BLOWER POLICY (VIGIL MECHANISM)

Your Company has formulated a codified Whistle Blower Policy incorporating the provisions relating to Vigil Mechanism in terms of Section 177 of the Companies Act, 2013 and Regulation 22 of SEBI Listing Regulations, 2015, in order to encourage Directors and Employees of your Company to escalate to the level of the Audit Committee any issue of concerns impacting and compromising with the interest of your Company and its stakeholders in any way. Your Company is committed to adhere to highest possible standards of ethical, moral and legal business conduct and to open communication and to provide necessary safeguards for protection of employees from reprisals or victimisation, for whistle blowing in good faith. The said Policy is available on your Company''s website www.srei. com and a link to the said Policy has been provided elsewhere in this Annual Report.

POLICY AGAINST SEXUAL AND WORKPLACE HARASSMENT

Your Company is committed to provide and promote a safe, healthy and congenial atmosphere irrespective of gender, caste, creed or social class of the employees. Your Company in its endeavour to provide a safe and healthy work environment for all its employees has developed a policy to ensure zero tolerance towards verbal, physical, psychological conduct of a sexual nature by any employee or stakeholder that directly or indirectly harasses, disrupts or interferes with another employee''s work performance or creates an intimidating, offensive or hostile environment such that each employee can realize his / her maximum potential.

Your Company has put in place a ''Policy on Prevention of Sexual Harassment''as per The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Policy is meant to sensitize the employees about their fundamental right to have safe and healthy environment at workplace. As per the Policy, any employee may report his / her complaint to the Internal Complaint Committee constituted for this purpose. The said Policy is available on your Company''s website www.srei. com and a link to the said Policy has been provided elsewhere in this Annual Report.

Your Company affirms that during the year under review adequate access was provided to any complainant who wished to register a complaint under the Policy.

During the year, your Company received 1 (One) complaint on sexual harassment. The said complaint has been investigated and duly concluded by taking appropriate action.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Your Company is exempted from the applicability of the provisions of Section 186 of the Companies Act, 2013 (Act) read with Rule 11 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Companies (Meetings of Board and its Powers) Amendment Rules, 2015 as your Company is engaged in the business of financing of companies or of providing infrastructural facilities.

PERFORMANCE EVALUATION

The Nomination and Remuneration Committee (NRC) of your Company has formulated and laid down criteria for Performance Evaluation of the Board (including Committees) and every Director (including Independent Directors) pursuant to provisions of Section 134, Section 149 read with Code of Independent Directors (Schedule IV) and Section 178 of the Companies Act, 2013 and Regulation 19(4) read with Part D of Schedule II of SEBI Listing Regulations, 2015 covering inter-alia the following parameters namely:

i) Board Evaluation - degree of fulfillment of key responsibilities; Board culture and dynamics.

ii) Board Committee Evaluation - effectiveness of meetings; Committee dynamics.

iii) Individual Director Evaluation (including IDs) - contribution at Board Meetings.

Further, the Chairman and Managing Director is evaluated on key aspects of the role which includes inter-alia effective leadership to the Board and adequate guidance to the CEOs.

Based on these criteria, the performance of the Board, various Board Committees viz. Audit Committee, Stakeholders'' Relationship Committee, Nomination and Remuneration Committee and Corporate Social Responsibility Committee, and Individual Directors (including Independent Directors) was evaluated and found to be satisfactory.

During the year under review, the Independent Directors of your Company reviewed the performance of Non- Independent Directors and Chairperson of your Company, taking into account the views of Executive Director and Non-Executive Directors.

Further, the Independent Directors hold an unanimous opinion that the Non- Independent Directors, including the Chairman and Managing Director bring to the Board, abundant knowledge in their respective field and are experts in their areas. Besides, they are insightful, convincing, astute, with a keen sense of observation, mature and have a deep knowledge of your Company.

The Board as a whole is an integrated, balanced and cohesive unit where diverse views are expressed and dialogued when required, with each Director bringing professional domain knowledge to the table. All Directors are participative, interactive and communicative.

The Chairman has abundant knowledge, experience, skills and understanding of the Board''s functioning, processes a mind for detail, is meticulous to the core and conducts the Meetings with poise and maturity.

The information flow between your Company''s Management and the Board is complete, timely with good quality and sufficient quantity.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS (IDs)

In terms of Regulation 25(7) of the SEBI Listing Regulations, 2015, your Company is required to conduct Familiarisation Programme for Independent Directors (IDs) to familiarise them about your Company including nature of industry in which your Company operates, business model of your Company, roles, rights and responsibilities of IDs and any other relevant information. Further, pursuant to Regulation 46 of the SEBI Listing Regulations, 2015, your Company is required to disseminate on its website, details of familiarisation programme imparted to IDs including the details of i) number of programmes attended by IDs (during the year and on a cumulative basis till date), ii) number of hours spent by IDs in such programmes (during the year and on a cumulative basis till date), and iii) other relevant details.

Two such specific familiarisation programmes were conducted on February 11, 2016. As a part of the first programme, presentation was made to the Independent Directors on the topic "Role and Responsibilities of Independent Directors & Corporate Governance Compliances" giving a brief overview of the layout of Companies Act, 2013, duties of directors and provisions relating to the roles, rights and responsibilities of the Independent Directors under various statutes and regulations. A handbook on the role of Independent Directors was also distributed at the meeting.

As a part of the second programme, presentation was made to the Independent Directors giving brief overview of business structure, strategic and financial alliances, snapshot of business verticals, financial and key business highlights of your Company.

At the time of appointment, a new Director is welcomed to the Board of Directors of your Company by sharing an Induction Kit containing inter-alia the Organization Chart, brief profile of all Directors and Key Managerial Personnel (KMPs), Policy Compendium, Investor Presentation, Investor call transcripts amongst others.

In addition to the above, the management of your Company makes various presentations to the Independent Directors on an ongoing basis which inter-alia includes Company overview, business verticals, latest key business highlights, financial statements, evolution as well as business model of the various business of your Company, as part of the familiarisation programme for Independent Directors.

Significant Statutory updates are circulated on a quarterly basis as a part of the agenda of the Board Meetings through which Directors are made aware of the significant news developments and highlights from various regulatory authorities viz. Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), etc.

The Company Secretary also regularly apprises the Board about their roles, rights and responsibilities in your Company from time to time as per the requirements of the SEBI Listing Regulations, 2015, Companies Act, 2013 read together with the Rules and Schedules thereunder and NBFC Corporate Governance (Reserve Bank) Directions, 2015.

The Board has open channels of communication with executive management which allows free flow of communication among Directors in terms of raising query, seeking clarifications and other related information. Directors are also informed of the various developments in your Company through e-mails, newsletters, internal magazines, etc. The same is made available on their I-Pads as well.

The link to the details of familiarisation programmes imparted to Independent Directors, as required under Regulation 46 of the SEBI Listing Regulations, 2015, has been provided elsewhere in this Annual Report.

EXTRACT OF ANNUAL RETURN

An extract of Annual Return as on the financial year ended on March 31, 2016 in Form No. MGT-9 as required under Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014 is set out as an annexure to the Directors''Report and forms part of this Annual Report.

PARTICULARS OF CONTRACTS / ARRANGEMENTS WITH RELATED PARTIES

All the related party transactions of your Company are entered on arm''s length basis and are in compliance with the applicable provisions of the Companies Act, 2013 and the SEBI Listing Regulations, 2015. There are no materially significant transactions entered into by your Company with Promoters, Directors or Key Managerial Personnel (KMPs), which have potential conflict with the interest of your Company at large. Your Company has not entered into any material related party transactions with any of its related parties during the financial year 2015-16. Members may refer to the notes to the financial statements for details of related party transactions.

Since all related party transactions entered into by your Company were in the ordinary course of business and were on an arm''s length basis, Form AOC-2 is not applicable to your Company. The related party transactions are entered into based on considerations of various business exigencies, such as synergy in operations, sectoral specialization and your Company''s long-term strategy for sectoral investments, optimization of market share, profitability, legal requirements, liquidity and capital resources of subsidiaries and associates.

In terms of Regulation 23(2) of SEBI Listing Regulations, 2015, your Company obtained prior approval of the Audit Committee for entering into any transaction with related parties except for the Related Party Transaction (RPTs) for which omnibus approval is granted by the Audit Committee from time to time. A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of the transactions. The statement is supported by the certificate from the Chief Financial officer (CFO) of your Company.

A Related Party Policy has been devised by your Company for determining the materiality of transactions with related parties and dealings with them. The said Policy is available on your Company''s website www.srei.com and a link to the said Policy has been provided elsewhere in this Annual Report.

PARTICULARS OF EMPLOYEES REQUIRED UNDER SECTION 134(3) (q) AND SECTION 197(12) READ WITH RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

The prescribed particulars of remuneration of employees pursuant to Section 134(3) (q) and Section 197(12) read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are set out as annexures to the Directors''Report and form part of this Annual Report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTFLOW

Your Company has no activity relating to Conservation of Energy and Technology Absorption as stipulated in Rule 8(3) of Companies (Accounts) Rules, 2014. However, your Company uses information technology extensively in its operations and also continues its endeavour to improve energy conservation and utilisation, safety and environment.

During the year under review, the total foreign exchange earnings and expenditure of your Company was NIL and Rs. 10,513 Lacs respectively (previous year Rs. 14 Lacs and Rs. 8,376 Lacs respectively).

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND (IEPF)

During the year under review, your Company transferred a sum of Rs. 4,15,494/- (Rupees Four Lacs Fifteen Thousand Four Hundred and Ninety Four only) to the Investor Education & Protection Fund (IEPF) of the Central Government, being the dividend amount pertaining to the financial year ended on March 31, 2008, which was due & payable and remained unclaimed and unpaid for a period of 7 (seven) years, as provided in Section 205A and 205C of the Companies Act, 1956 read with the Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001. Cumulatively, the dividend amount transferred to the said Fund upto March 31, 2016 aggregates to Rs. 47,51,424.69/- (Rupees Forty Seven Lacs Fifty One Thousand Four Hundred Twenty Four and Paisa Sixty Nine only).

AUDIT COMMITTEE

The Audit Committee comprises of Mr. Salil Kumar Gupta, Mr. Srinivasachari Rajagopal, Mr. Shyamalendu Chatterjee, Independent Directors and Mr. Sunil Kanoria, Non-Executive Director. Mr. Salil Kumar Gupta, Chief Mentor & Independent Director of your Company is the Chairman of the Audit Committee. The Company Secretary of your Company acts as the Secretary to the Audit Committee. The Terms of Reference of the Audit Committee has been provided in the Corporate Governance Section forming part of this Report.

Four meetings of the Audit Committee were held during the year 2015-16 on May 01, 2015, August 01, 2015, November 07, 2015 and February 11, 2016.

AUDITORS

At the 30th Annual General Meeting (AGM) of your Company held on August 01, 2015, Haribhakti & Co. LLP, Chartered Accountants, having registration No. 103523W allotted by The Institute of Chartered Accountants of India (ICAI), were appointed as Statutory Auditors of your Company to hold office for a term of 5 (five) years from the conclusion of 30th AGM (subject to ratification of such appointment by the Members at every AGM) till the conclusion of the 35th AGM of your Company. Accordingly, the appointment of Haribhakti & Co. LLP, Chartered Accountants, as Statutory Auditors of your Company, is placed for ratification by the Members. Your Company has received a confirmation from Haribhakti & Co. LLP, Chartered Accountants, to this effect that their appointment, if ratified, would be within the limits prescribed under Section 139 of the Companies Act, 2013 and the rules framed thereunder and in accordance with Section 141 of the Companies Act, 2013. They have also confirmed that they hold a valid peer review certificate as prescribed under Regulation 33(d) of the SEBI Listing Regulations, 2015. The Audit Committee and the Board of Directors of your Company recommend ratification of their appointment from the conclusion of this AGM upto the conclusion of the 32nd AGM of your Company.

AUDIT MODIFICATIONS

There are no modifications, reservations or adverse remarks or disclaimers made by Haribhakti & Co. LLP, Statutory Auditors, in their report on your Company''s financial statements for the year ended on March 31, 2016. Further, the Statutory Auditors have not reported any incident of fraud to the Audit Committee of your Company during the year under review.

SECRETARIAL AUDIT REPORT

Your Company appointed Dr. K. R. Chandratre, Practising Company Secretary, holding membership of The Institute of Company Secretaries of India (Membership No. FCS 1370; Certificate of Practice No. 5144) as the Secretarial Auditor of your Company for FY 2015-16 to conduct the Secretarial Audit pursuant to Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The Secretarial Audit Report confirms that your Company has complied inter alia with all the applicable provisions of the Companies Act, 1956 (as applicable), Companies Act, 2013 and the Rules made thereunder, Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder, The Listing Agreements entered into by your Company with BSE Limited, National Stock Exchange of India Limited and The Calcutta Stock Exchange Limited and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (effective from December 01, 2015), Secretarial Standards issued by The Institute of Company Secretaries of India (Secretarial Standards with respect to Meetings of Board of Directors (SS- 1) and General Meetings (SS-2) and effective from July 01, 2015), Securities Contracts (Regulation) Act, 1956 and all the Regulations and Guidelines of the Securities and Exchange Board of India (SEBI) as applicable to your Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the SEBI (Prohibition of Insider Trading) Regulations, 1992 and SEBI (Prohibition of Insider Trading) Regulations, 2015 (effective from May 15, 2015), the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 and the Reserve Bank of India Directions, Guidelines and Circulars applicable to Systemically Important Non-Deposit Accepting or Holding NBFCs (NBFC –ND – SI), Master Circular dated July 01, 2015 on Non-Banking Financial Companies- Corporate Governance (Reserve Bank) Directions, 2015 issued by the Reserve Bank of India (RBI).

The Secretarial Audit Report for the financial year ended March 31, 2016 is an unqualified Report and the same forms part of the Annual Report.

CORPORATE GOVERNANCE

Your Company has always practised sound corporate governance and takes necessary actions at appropriate times for enhancing and meeting stakeholders'' expectations while continuing to comply with the mandatory provisions of Corporate Governance.

As required under Regulation 34(3) read with Schedule V of SEBI Listing Regulations, 2015, a separate section on Corporate Governance and a Certificate from the Auditors of your Company confirming compliance with the requirements of Corporate Governance, forms part of the Annual Report.

MEETINGS OF THE BOARD

The Board meets at regular intervals to discuss and decide on policy and strategy apart from other Board business. However, in case of a special and urgent business need, the Board''s approval is taken by passing resolutions through circulation, as permitted by law, which are confirmed in the subsequent Board meeting.

5 (Five) Board meetings were held during the year 2015-16 on May 01, 2015, August 01, 2015, November 07, 2015, December 29, 2015 and February 11, 2016. The maximum time gap between any two consecutive meetings did not exceed 120 (One Hundred Twenty) days.

DIRECTORS

During the year under review, your Company appointed Dr. Tamali Sengupta (DIN 00358658) and Mr. T. C. A. Ranganathan (DIN 03091352) as Independent Directors of your Company to hold office for a period of 5 (Five) consecutive years from the date of the Thirtieth Annual General Meeting (AGM) of your Company held on August 01, 2015. In this regard, your Company issued formal letter of appointment to the Independent Directors stating inter alia the terms and conditions of their appointment and the same is also hosted on the website of your Company www.srei.com.

The Members at the 30th Annual General Meeting held on August 01, 2015, approved the re-appointment of Mr. Hemant Kanoria (DIN 00193015) as the Chairman and Managing Director (CMD) of your Company for a further period of 5 (five) years w.e.f. April 01, 2015.

Pursuant to the provisions of Section 152(6) of the Companies Act, 2013, not less than two-thirds of the total number of directors of a public company shall be persons whose period of office is liable to determination of retirement of directors by rotation. Therefore, in order to comply with the provisions of the aforesaid Section of the Companies Act, 2013 and rules made thereunder and in partial modification of the resolutions passed earlier by the Board of Directors at its meeting held on February 13, 2015, the office of Mr. Hemant Kanoria, Chairman and Managing Director was made liable to retirement by rotation by the Board of Directors at its meeting held on May 01, 2015, based on the recommendation of the Nomination & Remuneration Committee of your Company.

In accordance with the provisions of Section 152 of the Act and the aforesaid Rules and your Company''s Articles of Association, Mr. Hemant Kanoria (DIN 00193015) retires by rotation at the ensuing AGM and being eligible, offers himself for re-appointment.

Based on the recommendation of the Nomination and Remuneration Committee of your Company, the Board of Directors of your Company has appointed Mr. Ram Krishna Agarwal (DIN 00416964) as an Additional Director (Category – Non Executive and Non Independent) of your Company with effect from May 12, 2016 to hold office upto the date of Thirty-First AGM of your Company.

The brief resume / details relating to Directors who are proposed to be appointed/re-appointed are furnished in the Notice of the ensuing AGM. The Board of Directors of your Company recommends the appointment/re-appointment of all the above Directors.

Your Company has received declaration from each of the Independent Directors under Section 149(7) of the Companies Act, 2013 that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 16 of the SEBI Listing Regulations, 2015. All requisite declarations were placed before the Board.

Pursuant to Regulation 16(b) of SEBI Listing Regulations, 2015 and Section 197 of the Act read with the Rules framed thereunder, your Company has approved payment of remuneration of Rs. 50 Lacs by way of commission on net profits computed under Section 198 of the Act to Non-Executive Directors and Independent Directors of your Company for the financial year 2015- 16. The payment is within the limit of one per cent of the net profits of your Company for the financial year 2015- 16 as approved by the Members of your Company at the AGM held on August 02, 2014 and in accordance with the applicable provisions of the SEBI Listing Regulations, 2015 and the Act read with the Rules framed thereunder.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND YOUR COMPANY''S OPERATIONS IN FUTURE

There are no such orders passed by the regulators / courts / tribunals impacting the going concern status and your Company''s operations in future.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of provisions of Section 134(5) of the Companies Act, 2013 (Act), your Board of Directors to the best of their knowledge and ability confirm that:

(i) in the preparation of the annual accounts for the financial year ended March 31, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for the year;

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

(iv) they have prepared the annual accounts for the financial year ended March 31, 2016 on a going concern basis;

(v) they have laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and are operating effectively;

(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws to your Company and the systems are adequate and operating effectively.

ACKNOWLEDGEMENT

Your Directors would like to express their grateful appreciation for the excellent support and co-operation received from the Financial Institutions, Banks, Central & State Government Authorities, RBI, SEBI, MCA, Registrar of Companies, Indian and Overseas Stock Exchanges, Depositories, Credit Rating Agencies, Customers, Manufacturers, Vendors, Suppliers, Business Associates, Members, Debenture holders, Debenture Trustees and other Stakeholders during the year under review. Your Directors also place on record their deep appreciation for the valuable contribution of the employees at all levels for the progress of your Company during the year and look forward to their continued co- operation in realisation of the corporate goals in the years ahead.



On behalf of the Board of Directors

Hemant Kanoria

Chairman & Managing Director

DIN 00193015



Kolkata, May 12, 2016


Mar 31, 2015

Dear Members,

The Directors are pleased to presenHfie Thirtieth Annual Report together with the Audited Accounts of your Company for the financial year ended March 31, 2015. The summarised consolidated and standalone financial performance of your Company is as follows:

FINANCIAL RESULTS (Rs. in Lacs) Consolidated Year ended Year ended 31.03.2015 31.03.2015

Total Revenue 3,36,032 3,26,030

Total Expenses (including depreciation etc.) 2,86,656 2,86,209

Profit before bad debts, provisions & tax 49,376 39,821

Bad Debts & Provisions etc. 30,556 17,265

Profit Before Tax 18,820 22,556

Exceptional Items (24) (6)

Current Tax 4,369 8,654

Mat Credit entitlement (22) (5)

Deferred Tax 2,354 142

Income Tax in respect of earlier years 3 20

Profit After Tax Before Minority Interest 12,140 13,751

Share of loss of Associate - -

Minority Interest (771) (100)

Net Profit 12,911 13,851

Minority Interest of Pre Acquisition Profit / (Loss) 109 -

Profit After Tax after adjustment of Minority Interest 13,020 13,851

Surplus brought forward from Previous Year 38,178 39,317

Profit Available For Appropriation 51,198 53,168

Paid up Equity Share Capital 50,324 50,324

Amount transferred to Reserves 17,290 12,044

Reserves and Surplus 3,08,139 2,99,362



Standalone Year ended Year ended 31.03.2015 31.03.2015 Total Revenue 1,90,003 1,80,585

Total Expenses (including depreciation etc.) 1,67,573 1,67,922

Profit before bad debts, provisions 22,430 12,663 & tax

Bad Debts & Provisions etc. 10,478 3,900

Profit Before Tax 11,952 8,763

Exceptional Items - -

Current Tax 1,818 2,157

Mat Credit entitlement - -

Deferred Tax 1,041 660

Income Tax in respect of earlier years - 14

Profit After Tax Before Minority Interest 9.093 5,932

Share of loss of Associate - -

Minority Interest - -

Net Profit 9.093 5,932

Minority Interest of Pre Acquisition Profit / (Loss) - -

Profit After Tax after adjustment 9.093 5,932 of Minority Interest

Surplus brought forward from 26,244 25,955 Previous Year

Profit Available For Appropriation 35,337 31,887

Paid up Equity Share Capital 50,324 50,324

Amount transferred to Reserves 6,365 2,700

Reserves and Surplus 2,23,478 2,17,419



OPERATIONAL REVIEW

Your Company is one of the leading private sector infrastructure financing institutions in India. Some of the key highlights of your Company''s performance during the year under review are:

The gross profit (before bad debts, provision and tax) is Rs. 22,430 Lacs as against Rs. 12,663 Lacs in the last year.

Profit before taxation is Rs. 11,952 Lacs as against Rs. 8,763 Lacs in the last year.

Net profit after taxation is Rs. 9,093 Lacs as against Rs. 5,932 Lacs in the last year.

The total assets under management of the Srei Group is Rs. 35,24,073 Lacs as against Rs. 34,06,999 Lacs in the last year.

The Capital to Risk Assets Ratio (CRAR) of your Company stood at 16.97 per cent as on March 31, 2015, well above the regulatory minimum level of 15 per cent prescribed by the Reserve Bank of India for systemically important non- deposit taking NBFCs (NBFCs-ND-SI).

Of this, the Ter I CRAR was 11.21 per cent.

The Financial Statements of your Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of Rule 7 of The Companies (Accounts) Rules, 2014) and the relevant provisions of the Companies Act, 1956 / Companies Act, 2013, as applicable and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. Your Company discloses standalone unaudited financial results on a quarterly basis,

standalone audited financial results on an annual basis, consolidated un- audited financial results on a quarterly basis and consolidated audited financial results on an annual basis.

Your Company has complied with all the norms prescribed by the Reserve Bank of India (RBI) including the Fair practices, Anti Money Laundering and Know Your Customer (KYC) guidelines.

CLASSIFICATION AS INFRASTRUCTURE FINANCE COMPANY (IFC) AND PUBLIC FINANCIAL INSTITUTION (PFI)

The Reserve Bank of India has classified your Company as an ''Infrastructure Finance Company'' within the overall classification of ''Non Banking Finance Company''. Your Company is also notified as a Public Financial Institution (PFI) by the Ministry of Corporate Affairs (MCA), Government of India.

DIVIDEND

Your Company has had a consistent dividend policy that balances the dual objectives of appropriately rewarding

Your Company has had a consistent dividend policy

that balances the dual objectives of appropriately rewarding Members through dividends and retaining capital.

Members through dividends and retaining capital, in order to maintain a healthy capital adequacy ratio to support long term growth of your Company. Consistent with this policy, your Board has recommended a dividend of Re. 0.50 per Equity share (5 per cent) for the financial year 2014- 15 to the Members of your Company. The dividend shall be subject to tax on dividend to be paid by your Company but will be tax-free in the hands of the Members. The dividend together with the dividend distribution tax will entail a cash outflow of Rs. 3,028 Lacs (previous year Rs. 2,943 Lacs).

PUBLIC DEPOSITS

In April 2010, your Company decided to convert itself into a non-deposit taking NBFC in order to qualify for registration as an ''Infrastructure Finance Company''. Your Company had decided that it would not accept any further public deposits or renew such maturing deposits in any manner w.e.f. April 20, 2010 and the entire amount of outstanding public deposits as on

April 19, 2010 together with interest promised to the depositors, has been kept in an Escrow Account with Axis Bank Limited, a scheduled commercial bank for the purpose of making payment to the depositors as and when they raise the claim. The amount payable to the depositors as on March 31, 2015 is Rs. 21,21,000.

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

PUBLIC ISSUE OF SECURED REDEEMABLE NON-CONVERTIBLE DEBENTURES

During the year under review, your Company issued Secured Redeemable Non-Convertible Debentures (the "Debentures") of face value of Rs. 1,000 each, as per the details given hereunder:

Date of Base Issue Size Total Issue Size including Maturity Period opening of Rs.in Crores) Green Shoe Option Issue (Rs. in Crores)

09.05.2014 75 150 3 years/5 years

29.09.2014 250 Upto 1,500 2 years/3 years 5 years

Allotment Date Amount (Rs. in Crores)

09.05.2014 28.05.2014 150.00

29.09.2014 12.11.2014 326.14

Debenture Trust Agreement(s) in favour of Axis Trustee Services Limited for the aforesaid issues were duly executed. The Debentures issued on May 09, 2014 are listed on the Debt Segment of the BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) and the Debentures issued on September 29, 2014 are listed on the Debt Segment of the BSE Limited (BSE). The entire proceeds have been utilised for the purpose of various financing activities, repayment of existing loans and other business operations including working capital requirements. Your Company has duly paid the interest due on the aforesaid Debentures on time.

The public issue of the said Debentures has not only facilitated diversification of your Company''s sources for mobilising long term resources but has also provided the retail Investors an opportunity to participate in India''s infrastructure development and progress. Through the public issues launched in FY 2014-15, your Company has acquired nearly 20,000 retail investors. Along with previous issues, your Company has broad-based the retail base of nearly 50,000 investors. That signifies the growing confidence of investors in your Company. The various communication efforts of your Company surrounding the Debentures played a meaningful role in enhancing

your Company''s brand image amongst relevant constituencies.

PROMOTER GROUP SHAREHOLDING

During the year under review, there were various instances of acquisitions as well as transfer of shares amongst the Promoter/Promoters'' Group of your Company resulting in effective increase of your Company''s Promoter/Promoters'' Group shareholding by 4.9753 per cent from 48.7717 per cent to 53.7470 per cent. The aggregate shareholding of Promoter/Promoters'' Group of your Company as on March 31, 2015 is as follows:

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The total amount available for CSR spending, being 2 (two) per cent of the average net profits of your Company made during the three immediately preceding financial years, during the financial year 2014-15 aggregated to approximately Rs. 2.26 crores.

Recognising its social responsibility, your Company had earlier established a public charitable trust in the name of ''Srei Foundation'' with the objective of granting scholarships and other financial assistance to deserving and talented candidates. The Fund also supports setting up of schools, colleges, medical and scientific

Your Company perceives Corporate Social Responsibility

(CSR) as a strategic social investment aimed at uplifting the society at large, empowering i n d i vi d u a l s, m a ki n g

them self-reliant.

research institutions. Donations to Srei Foundation qualify for deduction under Section 80G of the Income Tax Act, 1961. Your Company has granted donation of Rs. 50,00,000/- (Rupees Fifty Lac only) to Srei Foundation during the financial year 2014-15.

Your Company also made donation aggregating to Rs. 5,00,000/- (Rupees Five Lac only) to Sonata Foundation towards supporting the cause of a year- long anti-drug awareness campaign. Besides extending financial support for the entire initiative, your Company actively steered this campaign along with the Sonata Foundation and volunteers to fight against this social evil.

Your Company is cognizant towards promoting and encouraging education and hence contributed Rs. 80,00,000/- (Rupees Eighty Lac only) to IIIT, Guwahati for setting up the Institute. Your Company also extended fund amounting to Rs. 2,45,962/- (Rupees Two Lacs Forty Five Thousand Nine Hundred Sixty Two only) to Arya Kanya Degree College towards the Institute''s Convocation event for motivating and felicitating the students.

Your Company is fully aware of the fact that as a corporate citizen, it is also entrusted with the responsibility to contribute for the betterment of the society at large. During the year under review, your Company supported Dignity India Foundation with a sum of Rs. 1,00,000/- (Rupees One Lac only) for its event - Art Auction. The

proceeds of the event went into running a helpline that helps senior citizens in difficult circumstances.

Your Company perceives Corporate Social Responsibility (CSR) as a strategic social investment aimed at uplifting the society at large, empowering individuals, making them self-reliant. The CSR philosophy of your Company is embedded in its commitment to all stakeholders namely consumers, employees, environment and society while your Company''s approach extends both to external community as well as to your Company''s large and diverse internal employee base and their families. Your Company''s sustainable approaches towards practicing humble service to Humanity on a sustainable basis, has enabled it to continue fulfilling its commitment to be a socially responsible corporate citizen.

The CSR Committee of your Company has formulated the CSR Policy which describes the multiple lines around which the CSR activities of your Company are positioned being education and skill development, social and economic welfare, environmental sustainability and such other activities included in Schedule VII of the Companies Act, 2013 as may be identified by the CSR Committee from time to time. The said Policy is available on your Company''s website www.srei. com and a link to the said Policy has been provided elsewhere in this Annual Report. The Committee presently comprises Mr. Hemant Kanoria,

Chairman & Managing Director, Mr. Sunil Kanoria, Non-Executive Director and Mr. Shyamalendu Chatterjee, Independent Director. Mr. Hemant Kanoria, Chairman and Managing Director of your Company acts as the Chairman of the CSR Committee. Mr. Madhusudan Dutta, Group Head - Corporate Strategy & Planning (Human Capital) acts as the Secretary to the CSR Committee.

Three meetings of the CSR Committee were held during the year 2014-15 on August 02, 2014, November 10, 2014 and February 13, 2015.

In the year under review, your Company could not spend the entire allocated budget of Rs. 2.26 crores since during the year it used its managerial resources to lay the basic framework for undertaking the CSR activities in accordance with the provisions of the Companies Act, 2013 including finalizing the CSR policy and identifying areas where the CSR activities can be aligned with the nature of the multiple lines of businesses of your Company in the thrust areas of CSR (education & skill development, healthcare / medical facilities, social and economic welfare, environmental sustainability).

During this year, your Company spent an aggregate amount of Rs. 1,38,45,962/- (Rupees One Crore Thirty Eight Lacs Forty Five Thousand Nine Hundred and Sixty Two only) towards CSR activities pursuant to CSR Policy of your Company. The manner in which the CSR amount was spent during the

financial year is set out as an annexure to the Directors'' Report and forms part of this Annual Report.

SREI WEBSITE

The newly revamped website of your Company www.srei.com was launched on March 30, 2015. This website has been developed on the new responsive technology based platform known as ''Drupal'', ensuring uniform display across all devices like mobile, tab, desktop etc. and all the operating systems. The website has an inbuilt sophisticated and customized content management system for easy change in content. A simple, improved navigation system needs a lesser number of clicks to reach the information available in the different sections of the website. The contemporary and smart look of the new website conforms to our new Brand guideline while taking a customer centric approach catering to the requirements of prospective customers, investors, employees and other stakeholders. The website of your Company also has ''Live Stock Ticker'' with dynamic display of current stock prices in BSE and NSE with respective market caps. The site carries a comprehensive database of information of interest to the investors including the financial results of your Company, dividend declared, unclaimed dividend list, shareholding pattern, any price sensitive information disclosed to the regulatory authorities from time to time, analysts'' reports, investor presentations, standard downloadable

forms, media coverage, corporate profile and business activities of your Company and the services rendered by your Company to its investors. The links to different social media i.e. Facebook, Twitter, LinkedIn has been embedded in the home page of the new website to showcase the mega events (like Kolkata Marathon) your Company has associated itself with.

SUBSIDIARY COMPANIES

The Statement in Form AOC-I containing the salient feature of the financial statement of your Company''s subsidiaries, associates and joint venture companies pursuant to first proviso to Section 129(3) of the Companies Act, 2013 (Act) read with Rule 5 of the Companies (Accounts) Rules, 2014, forms part of the Annual Report. Further, in line with Section 129(3) of the Act read with the aforesaid Rules, the Listing Agreement with the Stock Exchanges and in accordance with the Accounting Standard 21 (AS- 21), Consolidated Financial Statements prepared by your Company include financial information of its subsidiary companies.

A report on the performance and financial position of each of the subsidiaries, associate and joint venture companies included in the Consolidated Financial Statements prepared by your Company as per Rule 8(1) of the Companies (Accounts) Rules, 2014, forms part of the annual accounts of each of the subsidiary, associates and joint venture companies which have

been placed on the website of your Company www.srei.com and also forms part of Form AOC-1 pursuant to Rule 5 of the Companies (Accounts) Rules, 2014, which is set out as an annexure to the Directors'' Report and forms

part of this Annual Report. Members interested in obtaining a copy of the annual accounts of the subsidiary, associates and joint venture companies may write to the Company Secretary at your Company''s Registered Office. The said report is not repeated here for the sake of brevity. The names of companies which have become or ceased to be subsidiaries, joint ventures or associate companies during the year are given below:

Name Status

Attivo Economic Zones Private Limited Ceased to be Subsidiary w.e.f. formerly Global Investment 21.11.2014 Trust Limited)

Attivo Economic Zone (Mumbai) Private Limited Subsidiary till 29.12.2014 and became an Associate w.e.f. 30.12.2014

Srei Asset Reconstruction Private Limited Subsidiary between 30.06.2014 to 01.09.2014 andw.e.f. 31.03.2015

Performance Drilling International Private Limited Became a Step down-subsidiary w.e.f. 23.01.2015

Srei Insurance Broking Private Limited Became wholly-owned subsidiary w.e.f. 16.12.2014

Quippo Mauritius Private Limited, Mauritius Ceased to be Step down-subsidiary w.e.f. 25.02.2015

Quippo Energy Nigeria Private Limited, Nigeria Ceased to be Step-down subsidiary w.e.f. 25.02.2015

Quippo CJ Exploration & Production Private Limited Ceased to be Step down subsidiary w.e.f. 08.07.2014

Quippo Construction Equipment Limited Ceased to be an Associate w.e.f. 29.09.2014

Quippo Telecom Infrastructure Private Limited Became an Associate w.e.f. 30.09.2014

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION

There is no such material change and commitment affecting the financial position of your Company which have occurred between the end of the financial year of your Company to which the financial statements relate and the date of the report.

POLICY FOR DETERMINING ''MATERIAL'' SUBSIDIARIES

During the year under review, your Company has formulated and put in place a Policy for determining ''Material''

Subsidiaries as per the revised Clause 49(V)(D) of the Listing Agreement with the Stock Exchanges. A subsidiary shall be considered as material if the investment of your Company in the subsidiary exceeds 20% (twenty per cent) of its consolidated net worth as per the audited balance sheet of the previous financial year or if the subsidiary has generated 20% (twenty per cent) of the consolidated income of your Company during the previous financial year. The said Policy is available on your Company''s website www.srei.com and a link to the said Policy has been provided elsewhere in this Annual Report.

As on March 31, 2015, none of the subsidiaries of your Company are material Subsidiaries.

KEY MANAGERIAL PERSONNEL (KMPs)

Pursuant to the resolution of the Board of Directors passed at its meeting held on May 23, 2014, as modified by a resolution passed on November 10, 2014, the following directors/executives of the Company are whole-time Key Managerial Persons (KMPs) as on March 31, 2015 in accordance with the provisions of Section 203 of the Companies Act, 2013

Name Designation

Mr. Hemant Kanoria Chairman & Managing Director

Mr. Bajrang Kumar Choudhary Chief Executive Officer Infrastructure Project Development

Mr. Bijoy Kumar Daga Chief Executive Officer Infrastructure Project Finance

Mr. John Moses Harding Group Chief Executive Officer & Chief Economist Liability & Treasury Management

Mr. Sandeep Lakhotia Company Secretary

Mr. Kishore Kumar Lodha Chief Financial Officer

NOMINATION AND REMUNERATION

COMMITTEE

During the year under review, the Board of Directors of your Company constituted a Nomination and Remuneration Committee in accordance with the provisions of Section 178 of the Companies Act, 2013 and Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement. The Committee comprises Mr. Salil Kumar Gupta, Mr. Shyamalendu Chatterjee, Independent Directors and Mr. Sunil Kanoria, Non- Executive Director. Mr. Salil Kumar Gupta, Chief Mentor and Director of your Company acts as the Chairman of the Nomination and Remuneration Committee. The Terms of Reference of the Committee has been provided in the Corporate Governance Section forming part of this Report.

Two meetings of the Nomination and Remuneration Committee of your Company were held during the year 2014-15 on November 10, 2014 and February 13, 2015.

The Committee has formulated the Nomination and Remuneration Policy (''Srei Nomination and Remuneration Policy'') which broadly laid down the various principles of remuneration being support for strategic objectives, transparency, internal & external equity, flexibility, performance- driven remuneration, affordability and sustainability and covers the procedure for selection, appointment and compensation structure of Board members, Key Managerial Personnel (KMPs) and Senior Management Personnel (SMPs) of your Company. The said Policy is available on your Company''s website www.srei.com and a link to the said Policy has been provided elsewhere in this Annual Report.

WHISTLE BLOWER POLICY (VIGIL MECHANISM)

Your Company has formulated a codified Whistle Blower Policy incorporating the provisions relating to Vigil Mechanism in terms of Section 177 of the Companies Act, 2013 and revised

Clause 49 of the Listing Agreement, in order to encourage Directors and Employees of your Company to escalate to the level of the Audit Committee any issue of concerns impacting and compromising with the interest of your Company and its stakeholders in any way. Your Company is committed to adhere to highest possible standards of ethical, moral and legal business conduct and to open communication and to provide necessary safeguards for protection of employees from reprisals or victimisation, for whistle blowing in good faith. The said Policy is available on your Company''s website www.srei. com and a link to the said Policy has been provided elsewhere in this Annual Report.

POLICY AGAINST SEXUAL AND WORKPLACE HARASSMENT

Your Company is committed to provide and promote a safe, healthy and congenial atmosphere irrespective of gender, caste, creed or social class of the employees. Your Company in

its endeavour to provide a safe and healthy work environment for all its employees has developed a policy to ensure zero tolerance towards verbal, physical, psychological conduct of a sexual nature by any employee or stakeholder that directly or indirectly harasses, disrupts or interferes with another''s work performance or creates an intimidating, offensive or hostile environment such that each employee can realize his / her maximum potential.

Your Company has put in place a ''Policy on Prevention of Sexual Harassment'' as per The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Policy is meant to sensitize the employees about their fundamental right to have safe and healthy environment at workplace. As per the Policy, any employee may report his / her complaint to the Internal Complaint Committee constituted for this purpose. The said Policy is available on your Company''s website www.srei.com and a link to the said Policy has been provided elsewhere in this Annual Report.

Your Company affirms that during the year under review adequate access was provided to any complainant who wished to register a complaint under the Policy.

The following is a summary of sexual harassment complaints received and disposed off by your Company during the year 2014-15:

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Your Company is exempted from the applicability of the provisions of Section 186 of the Companies Act, 2013 (Act) read with Rule 11 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Companies (Meetings of Board and its Powers) Amendment Rules, 2015 as your Company is engaged in the business of financing of companies or of providing infrastructural facilities.

PERFORMANCE EVALUATION

The Nomination and Remuneration Committee (NRC) of your Company has formulated and laid down criteria for Performance Evaluation of the Board (including Committees) and every Director (including Independent Directors) pursuant to provisions of Section 134, Section 149 read with Code of Independent Directors (Schedule IV) and Section 178 of the Companies Act, 2013 and the revised Clause 49 of the Listing Agreement with Stock Exchanges covering inter-alia the following parameters namely:

i) Board Evaluation - degree of fulfillment of key responsibilities; Board culture and dynamics.

ii) Board Committee Evaluation - effectiveness of meetings; Committee dynamics.

iii) Individual Director Evaluation (including IDs) - contribution at Board Meetings. Further, the Chairman and Managing Director is evaluated on key aspects of the role which includes inter-alia

effective leadership to the Board and adequate guidance to the CEOs.

Based on these criteria, the performance of the Board, various Board Committees viz. Audit Committee, Stakeholders'' Relationship Committee, Nomination and Remuneration Committee and Corporate Social Responsibility Committee, and Individual Directors (including Independent Directors) was evaluated to be satisfactory.

During the year under review, the Independent Directors of your Company reviewed the performance of Non- Independent Directors and Chairperson of your Company, taking into account the views of Executive Directors and Non-Executive Directors.

Further, the Independent Directors hold an unanimous opinion that the Non- Independent Directors, including the Chairman and Managing Director bring to the Board, abundant knowledge in their respective field and are experts in their areas. Besides, they are insightful, convincing, astute, with a keen sense of observation, mature and have a deep knowledge of your Company.

The Board as a whole is an integrated, balanced and cohesive unit where diverse views are expressed and dialogued when required, with each Director bringing professional domain knowledge to the table. All Directors are participative, interactive and communicative.

The Chairman has abundant knowledge, experience, skills and understanding of the Board''s functioning, processes a mind for detail, is meticulous to the core and conducts

the Meetings with poise and maturity.

The information flow between your Company''s Management and the Board is complete, timely with good quality and sufficient quantity.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS (IDs)

In terms of Clause 49(II)(B)(7) of the Listing Agreement, your Company is required to conduct the Familiarisation Programme for Independent Directors (IDs) to familiarise them about their roles, rights, responsibilities in your Company, nature of the industry in which your Company operates, business model of your Company, etc., through various initiatives.

A new Director is welcomed to the Board of Directors of your Company by sharing an Induction Kit containing inter-alia Organizational Chart, brief profile of all Directors and Key Managerial Personnel (KMPs), Policy Compendium, Investor Presentation, Investor call transcripts amongst others.

Significant Statutory updates are circulated on a quarterly basis through which Directors are made aware of the significant news developments and highlights from various regulatory authorities viz. Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), etc.

The Company Secretary regularly apprises the Directors about their roles, rights and responsibilities in your Company from time to time as per the

requirements of the Listing Agreement with the Stock Exchanges and Companies Act, 2013 read together with the Rules and Schedules thereunder.

The Board has open channels of communication with executive management which allows free flow of communication among Directors in terms of raising query, seeking clarifications and other related information. Directors are also informed of the various developments in your Company through e-mails, newsletters, internal magazines, etc. The same is made available on their I-Pads as well.

The details of such familiarisation programmes are available on your Company''s website www.srei.com and a link to the said programmes has been provided elsewhere in this Annual Report.

EXTRACT OF ANNUAL RETURN

An extract of Annual Return as on the financial year ended on March 31, 2015 in Form No. MGT-9 as required under Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, is set out as an annexure to the Directors'' Report and forms part of this Annual Report.

PARTICULARS OF CONTRACTS / ARRANGEMENTS WITH RELATED PARTIES

All the related party transactions of your Company are entered on arm''s length basis and are in compliance with the applicable provisions of the Companies Act, 2013 and the Listing

Agreement. There are no materially significant transactions made by the Company with Promoters, Directors or Key Managerial Personnel (KMPs) which have potential conflict with the interest of your Company at large. Members may refer to the notes to the financial statements for details of related party transactions.

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

In terms of Clause 49 (VII) of the Listing Agreement, your Company obtained prior approval of the Audit Committee for entering into any transaction with related parties. Further, the Audit Committee granted omnibus approval for repetitive transactions to be entered with the related parties, during the year. The Audit Committee reviews all related party transactions on a quarterly basis.

A Related Party Policy has been devised by your Company for determining the materiality of transactions with related parties and dealings with them. The said Policy is available on your Company''s website www.srei.com and a link to the said Policy has been provided elsewhere in this Annual Report.

During the year under review, material Related Party Transactions (RPTs) have been entered by your Company with 1 (One) Associate Company namely Sahaj e-Village Limited. Details of all material transactions with related parties

are disclosed quarterly to the Stock Exchanges along with the Compliance Report on Corporate Governance and the first such Compliance Report has been submitted to the Stock Exchanges from December, 2014 quarter onwards. All material RPTs entered during the Financial Year 2014-15 which are likely to continue beyond March 31, 2015 is being placed for approval of the Members at the ensuing 30th Annual General Meeting in accordance with the Securities & Exchange Board of India (SEBI) Circular No. CIR/CFD/POLICY CELL/2/2014 dated April 17, 2014.

PARTICULARS OF EMPLOYEES REQUIRED UNDER SECTION 134(3)

(q) AND SECTION 197(12) READ WITH RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

The prescribed particulars of remuneration of employees pursuant to Section 134(3) (q) and Section 197(12) read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are set out as annexures to the Directors'' Report and form part of this Annual Report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTFLOW

Your Company has no activity relating to Conservation of Energy and Technology

Absorption as stipulated in Rule 8(3) of Companies (Accounts) Rules, 2014. However, your Company uses information technology extensively in its operations and also continues its endeavour to improve energy conservation and utilisation, safety and environment.

During the year under review, the total foreign exchange earnings and expenditure of your Company was Rs. 14 Lacs and Rs. 6,112 Lacs respectively (previous year Rs. 16 Lacs and Rs. 11,944 Lacs respectively).

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND (IEPF)

During the year under review, your Company transferred a sum of Rs. 3,90,293/- (Rupees Three Lacs Ninety Thousand Two Hundred and Ninety Three only) to the Investor Education & Protection Fund (IEPF) of the Central Government, being the dividend amount pertaining to the financial year ended on March 31, 2007, which was due & payable and remained unclaimed and unpaid for a period of 7 (seven) years, as provided in Section 205A and 205C of the Companies Act, 1956 read with the Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001. Cumulatively, the dividend amount transferred to the said Fund upto March 31, 2015 aggregates to Rs. 43,35,930.69 (Rupees Forty Three Lacs Thirty Five Thousand Nine Hundred Thirty and Paisa Sixty Nine only).

AUDIT COMMITTEE

The Audit Committee presently comprises of Mr. Salil Kumar Gupta,

Mr. Srinivasachari Rajagopal, Mr. Shyamalendu Chatterjee, Independent Directors and Mr. Sunil Kanoria, Non- Executive Director. Mr. Salil Kumar Gupta, Chief Mentor & Director of your Company is the Chairman of the Audit Committee. The Company Secretary of your Company acts as the Secretary to the Audit Committee. The Terms of Reference of the Audit Committee has been provided in the Corporate Governance Section forming part of this Report.

Four meetings of the Audit Committee were held during the year 2014-15 on May 23, 2014, August 02, 2014, November 10, 2014 and February 13, 2015.

AUDITORS

Haribhakti & Co. LLP, Chartered Accountants, having registration No. 103523W allotted by The Institute of Chartered Accountants of India (ICAI), retire as Auditors of your Company at the conclusion of the ensuing Annual General Meeting (AGM) and have confirmed their eligibility and willingness to accept the office of Auditors, if re- appointed. Your Company has received a confirmation from Haribhakti & Co. LLP, Chartered Accountants, to the effect that their re-appointment, if made, would be within the limits prescribed under Section 139 of the Companies Act, 2013 and the rules framed thereunder. They have also confirmed that they hold a valid peer review certificate as prescribed under Clause 41(1)(h) of the Listing Agreement.

The Audit Committee and the Board of Directors of your Company recommend the re-appointment of Haribhakti

& Co. LLP, Chartered Accountants, as the Auditors of your Company. Members are requested to consider their re-appointment as Auditors of your Company to hold office from conclusion of ensuing 30th AGM until the conclusion of 35th AGM (subject to ratification of such appointment by the Members at every AGM) by way of passing of an ordinary resolution and on remuneration to be decided by the Board of Directors based on recommendation of the Audit Committee of your Company.

AUDIT QUALIFICATIONS

There are no qualifications, reservations or adverse remarks or disclaimers made by Haribhakti & Co. LLP, Statutory Auditors, in their report on your Company''s financial statements for the year ended on March 31, 2015. Further, the Statutory Auditors have not reported any incident of fraud to the Audit Committee of your Company during the year under review.

SECRETARIAL AUDIT REPORT

Your Company appointed Dr. K. R. Chandratre, Practising Company Secretary, holding membership of The Institute of Company Secretaries of India (Membership No. FCS 1370; Certificate of Practice No. 5144) as the Secretarial Auditor of your Company for FY 2014-15 to conduct the Secretarial Audit pursuant to Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The Secretarial Audit Report confirms that your Company has complied

inter alia with all the applicable provisions of the Companies Act, 1956, Companies Act, 2013 and the Rules made thereunder, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, Securities Contracts (Regulation) Act, 1956 and all the Regulations and Guidelines of SEBI as applicable to your Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the SEBI (Prohibition of Insider Trading) Regulations, 1992, the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 and the Reserve Bank of India Directions, Guidelines and Circulars applicable to Systemically Important Non-Deposit Accepting or Holding NBFCs (NBFC -ND - SI).

The Secretarial Audit Report for the financial year ended March 31, 2015 is an unqualified Report and the same forms part of the Annual Report.

CORPORATE GOVERNANCE

Your Company has always practised sound Corporate Governance and takes necessary actions at appropriate times for enhancing and meeting stakeholders'' expectations while continuing to comply with the mandatory provisions of Corporate Governance.

A separate section on Corporate Governance and a Certificate from the Auditors of your Company regarding compliance with the requirements of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges (revised effective October 01, 2014 vide SEBI Circular nos. CIR/CFD/POLICY/

CELL/2/2014 dated April 17, 2014 and CIR/CFD/POLICY/CELL/7/2014 dated September 15, 2014), forms part of the Annual Report.

MEETINGS OF THE BOARD

The Board meets at regular intervals to discuss and decide on policy and strategy apart from other Board business. However, in case of a special and urgent business need, the Board''s approval is taken by passing resolutions through circulation, as permitted by law, which are confirmed in the subsequent Board meeting.

Four Board meetings were held during the year 2014-15 on May 23, 2014, August 02, 2014, November 10, 2014 and February 13, 2015. The maximum time gap between any two consecutive meetings did not exceed 120 days.

DIRECTORS

During the year under review, Mr. Salil Kumar Gupta (DIN 00651223), Mr. Shyamalendu Chatterjee (DIN 00048249), Mr. Srinivasachari Rajagopal (DIN 00022609), Mr. Sujitendra Krishna Deb (DIN 03524764), Dr. Satish Chandra Jha (DIN 00247427) and Dr. Punita Kumar Sinha (DIN 05229262) were appointed as Independent Directors of your Company for a period of 5 (five) consecutive years from the date of the Twenty-Ninth Annual General Meeting (AGM) of your Company held on August 02, 2014 pursuant to the provisions of Section 149 of the Companies Act, 2013 (Act) read with Companies (Appointment and Qualification of Directors) Rules, 2014, revised Clause 49 of the Listing Agreement with Stock Exchanges and

your Company''s Articles of Association. In this regard, your Company issued formal letter of appointment to the Independent Directors and the same is also hosted on the website of your Company.

Dr. Satish Chandra Jha, Independent Director of your Company expired on January 25, 2015. The Board wishes to place on record its deep appreciation for the dedication, foresightedness, leadership and contribution made by him to the growth of your Company.

The Board of Directors of your Company re-appointed Mr. Hemant Kanoria (DIN 00193015) as the Chairman and Managing Director (CMD) of your Company for a further period of 5 (five) years w.e.f. April 01, 2015 based on the recommendation of the Nomination and Remuneration Committee of your Company, subject to approval of Members at the ensuing Annual General Meeting (AGM) of your Company.

Based on the recommendation of the Nomination and Remuneration Committee of your Company, the Board of Directors of your Company has appointed both Dr. Tamali Sengupta (DIN 00358658) and Mr. T. C. A. Ranganathan (DIN 03091352) as Additional Directors (Category - Independent) with effect from May 01, 2015 to hold office as such upto the date of Thirtieth AGM of your Company. Subject to approval of the Members of your Company, the Board recommends appointment of both Dr. Tamali Sengupta and Mr. T. C. A. Ranganathan as Independent Directors

of your Company for a period of 5 (five) consecutive years from date of the Thirtieth AGM of your Company.

In accordance with the provisions of Section 152 of the Act and the aforesaid Rules and your Company''s Articles of Association, Mr. Sunil Kanoria (DIN 00421564) retires by rotation at the ensuing AGM and being eligible, offers himself for re-appointment.

Mr. Sujitendra Krishna Deb (DIN 03524764) and Mr. Saud Ibne Siddique (DIN 01873293) resigned as Directors of your Company w.e.f May 01, 2015, due to their personal preoccupations. The Board wishes to place on record its sincere appreciation of the contribution, advice and guidance extended by them during their tenure as Directors of your Company.

The brief resume / details relating to Directors who are proposed to be appointed/re-appointed are furnished in the Notice of the ensuing AGM. The Board of Directors of your Company recommends the appointment/re- appointment of all the above Directors.

All the Independent Directors of your Company furnish a declaration at the time of their appointment as also annually that they qualify the tests of their being independent as laid down under Section 149(6) of the Act and revised Clause 49 of the Listing Agreement. All requisite declarations were placed before the Board.

Pursuant to the provisions of Clause 49( 11 )(C) of the revised Listing Agreement with the Stock Exchange(s) and Section 197 of the Act read with

the Rules framed thereunder, your Company has approved payment of remuneration of Rs. 50 Lacs by way of commission on net profits computed under Sections 198 of the Act to Non- Executive Directors and Independent Directors of your Company for the financial year 2014-15. The payment is within the limit of one per cent of the net profits of your Company for the financial year 2014-15 as approved by the Members of your Company at the AGM held on August 02, 2014 and in accordance with the applicable provisions of the Listing Agreement and the Act read with the Rules framed thereunder.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND YOUR COMPANY''S OPERATIONS IN FUTURE

There are no such orders passed by the regulators / courts / tribunals impacting the going concern status and your Company''s operations in future.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of provisions of Section 134 of the Companies Act, 2013 (Act), your Directors confirm that:

(i) in the preparation of the annual accounts for the financial year ended March 31, 2015, the

applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for the year;

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

(iv) they have prepared the annual accounts for the financial year ended March 31, 2015 on a going concern basis;

(v) they have laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and are operating effectively;

(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws to your Company and the systems are adequate and operating effectively.

ACKNOWLEDGEMENT

Your Directors would like to express their grateful appreciation for the excellent support and co-operation received from the Financial Institutions, Banks, Central & State Government Authorities, RBI, SEBI, MCA, Registrar of Companies, Indian and Overseas Stock Exchanges, Depositories, Credit Rating Agencies, Customers, Manufacturers, Vendors, Suppliers, Business Associates, Members, Debenture holders, Debenture Trustees and other Stakeholders during the year under

review. Your Directors also place on record their deep appreciation for the valuable contribution of the employees at all levels for the progress of your Company during the year and look forward to their continued co-operation in realisation of the corporate goals in the years ahead.

On behalf of the Board of Directors Hemant Kanoria Chairman & Managing Director DIN 00193015 Kolkata, May 01, 2015


Mar 31, 2014

The Directors are pleased to present the Twenty-Ninth Annual Report together with the Audited Accounts of your Company for the financial year ended March 31, 2014. The summarised consolidated and standalone financial performance of your Company is as follows:

FINANCIAL RESULTS

(Rs. in Lacs)

Consolidated Standalone Year ended Year ended Year ended Year Ended March 31, March 31, March 31, March 31, 2014 2013 2014 2013 Total Revenue 3,26,030 3,10,992 1,80,585 1,66,647

Total Expenses (including depreciation etc.) 2,86,712 2,74,175 1,68,419 1,50,032

Profit before bad debts, provisions & tax 39,318 36,817 12,166 16,615

Bad Debts & Provisions etc. 16,762 10,949 3,403 3,074

Profit Before Tax 22,556 25,868 8,763 13,541

Exceptional Items (6) (10,410) - -

Current Tax 8,654 7,274 2,157 2,620

Mat Credit entitlement (5) (71) - (71)

Deferred Tax 142 3,072 660 1,496

income Tax in respect of earlier years 20 (4) 14 -

Profit After Tax Before Minority Interests 13,751 26,007 5,932 9,496

Share of loss of Associate - 100 - -

Minority Interests (100) (411) - -

Net Profit 13,851 26,318 5,932 9,496

Minority Interests of Pre Acquisition Profit/(Loss) - - - -

Profit After Tax after adjustment of Minority Interests 13,851 26,318 5,932 9,496

Surplus brought forward from Previous Year 39,317 28,925 25,955 22,486

Profit Available For Appropriation 53,168 55,243 31,887 31,982

Paid up Equity Share Capital 50,324 50,324 50,324 50,324

Amount transferred to Reserves 12,044 11,319 2,700 3,084

Reserves and Surplus 2,99,362 2,89,380 2,17,419 2,14,430

OPERATIONAL REVIEW

Your Company is one of the leading private sector infrastructure financing institutions in India. Some of the key highlights of your Company''s performance during the year under review are:

- The gross profit (before bad debts, provision and tax) is Rs. 12,166 Lacs as against Rs. 16,615 Lacs in the last year.

- Profit before taxation is Rs. 8,763 Lacs as against Rs. 13,541 Lacs in the last year.

- Net profit after taxation is Rs. 5,932 Lacs as against Rs. 9,496 Lacs in the last year.

- The total assets under management of the Srei Group is Rs. 34,06,999 Lacs as against Rs. 33,32,964 Lacs in the last year.

The Standalone and Consolidated Financial Statements have been prepared by your Company in accordance with the requirements of the accounting standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. The audited Standalone and Consolidated Financial Statements together with Auditors Report thereon forms part of the Annual Report.

The Capital to Risk Assets Ratio (CRAR) of your Company stood at 17.78% as on March 31, 2014, well above the regulatory minimum level of 15% prescribed by the Reserve Bank of India for systemically important non- deposit taking NBFCs (NBFCs-ND-SI). Of this, the Tier I CRAR was 10.69%.

Your Company has complied with all the norms prescribed by the Reserve Bank of India (RBI) including the Fair practices, Anti Money Laundering & Know Your Customer (KYC) guidelines and also all the mandatory accounting standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. It has adopted a sound and forward looking accounting policy of providing for non performing assets in terms of the management''s best estimates as well as the guidelines laid down by the Foreign Financial Institutions, which are more stringent than the guidelines of the RBI.

PUBLIC DEPOSITS

In April 2010, your Company decided to convert itself into a non-deposit taking NBFC in order to qualify for registration as an ''Infrastructure Finance Company''. Your Company had decided that it would not accept any further public deposits or renew such maturing deposits in any manner w.e.f. April 20, 2010 and the entire amount of outstanding public deposits as on April 19, 2010 together with interest promised to the depositors, has been kept in an Escrow Account with Axis Bank Limited, a scheduled commercial bank for the purpose of making payment to the depositors as and when they raise the claim. The amount payable to the depositors as on March 31, 2014 is Rs. 27,23,000/-.

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

CLASSIFICATION AS INFRASTRUCTURE FINANCE COMPANY (IFC) AND PUBLIC FINANCIAL INSTITUTION (PFI)

The Reserve Bank of India has classified your Company as an ''Infrastructure Finance Company'' within the overall classification of ''Non Banking Finance Company''. Your Company is also notified as a Public Financial Institution (PFI) under Section 4A of the Companies Act, 1956 by the Ministry of Corporate Affairs (MCA), Government of India.

MUTUAL FUND ACTIVITY

During the year under review, Srei Mutual Fund (IDF) launched its first closed ended Infrastructure Debt Scheme in the name of ''Srei Infrastructure Debt Fund – Series 1'' through private placement. The Placement period opened in January, 2014 and will close in August, 2014. The investment objective of the Scheme is to generate regular income and capital appreciation by investing primarily in a portfolio of debt instruments of infrastructure companies / SPV and other permissible instruments as defined in the Securities and Exchange Board of India (Mutual Fund) Regulations, 1996.

The Insurance Regulatory and Development Authority (IRDA) vide their circular dated September 26, 2013 has notified that investment by Insurance Companies (Life and General Insurance) in Srei Infrastructure Debt Fund - Series 1 will be reckoned as investments in infrastructure sector as per the IRDA (Investments) (Fifth Amendments) Regulations, 2013. The Scheme has also received in-principle approval from the National Stock Exchange of India Limited (NSE) for listing of proposed units of the Scheme.

PROMOTERS'' GROUP SHAREHOLDING

During the year under review, there were instances of transfers of shares amongst the Promoter/ Promoters'' Group. However, the aggregate Promoter/Promoters'' Group shareholding of your Company has remained unchanged at 48.77%.

As on March 31, 2014, none of the Promoter / Promoters'' Group shareholding is under pledge.

PUBLIC ISSUE OF SECURED REDEEMABLE NON-CONVERTIBLE DEBENTURES

During the year under review, your Company has issued Secured Redeemable Non-Convertible Debentures (the "Debentures") of face value of Rs. 1,000 each, as per the details given hereunder:

Date of Total Issue Maturity Period Allotment Date Amount issue Size (Rs. in (Including Crores) green shoe) 26.08.2013 200 Crores 3 years/5 years/6 years 3 months 26.09.2013 102.65

30.12.2013 100 Crores 2 years/3 years/5 years 11.02.2014 100.00

Debenture Trust Agreement(s) in favour of Axis Trustee Services Limited for the aforesaid issues were executed. The Debentures issued on August 26, 2013 are listed on the Debt Segment of the BSE Limited (BSE) and the Debentures issued on December 30, 2013 are listed on the Debt Segment of the BSE Limited (BSE) and National Stock Exchange of India Limited (NSE). The entire proceeds have been utilised for the purpose of various financing activities, repayment of existing loans and other business operations including capital expenditure and working capital requirements. Your Company has duly paid the interest due on the aforesaid Debentures on time.

Further, your Company has vide Prospectus dated May 05, 2014 come out with the public issue of 7,50,000 Secured Redeemable Non- Convertible Debentures of Face Value of Rs. 1,000/- each (the "Debentures" or the "NCDs") for an amount upto Rs. 750 Million ("Base Issue") with an option to retain oversubscription upto additional 7,50,000 NCDs of Rs. 1,000/- each, for an amount upto Rs. 750 Million, aggregating to Rs. 1,500 Million ("Overall Issue Size"). The Issue opened on May 09, 2014 and subject to requisite approvals, the Issue, which was scheduled to close on June 09, 2014, closed earlier by 21 (Twenty One) days on May 19, 2014 due to oversubscription.

The public issue of the said Debentures has not only facilitated diversification of your Company''s sources for mobilising long term resources but has also provided the retail Investors an opportunity to participate in India''s infrastructure development and progress. The various communication efforts of your Company surrounding the Debentures played a meaningful role in enhancing your Company''s brand image amongst relevant constituencies.

INCREASE IN AUTHORISED SHARE CAPITAL

During the year under review, the Authorised Share Capital of your Company increased from Rs. 810,00,00,000 (Rupees Eight Hundred and Ten Crores only) divided into 71,00,00,000 (Seventy One Crores only) Equity Shares of Rs. 10 (Rupees Ten) each and 1,00,00,000 (One Crore only) Preference Shares of Rs. 100 (Rupees Hundred) each to Rs. 1500,00,00,000 (Rupees Fifteen Hundred Crores only) divided into 100,00,00,000 (One Hundred Crores only) Equity Shares of Rs. 10 (Rupees Ten) each and 5,00,00,000 (Five Crores only) Preference Shares of Rs. 100 (Rupees Hundred) each, pursuant to the approval accorded by the Shareholders'' at the Annual General Meeting held on August 14, 2013. However, your Company has not issued any Equity or Preference Shares during the year under review.

SETTING UP OF WHITE LABEL ATMs

During the year under review, the Reserve Bank of India (RBI) has granted Certificate of Authorisation to your Company to set-up, own and operate payment system for White Label ATMs (WLAs) with effect from March 25, 2014. The aforesaid authorisation issued to set up WLAs under Scheme ''A'' of RBI Policy guidelines dated June 20, 2012 shall be valid upto March 31, 2019.

Through these WLAs, your Company will be able to take financial products and services of the sponsor bank to the door step of the rural population and expand your Company''s presence in the financial services sector across semi-urban and rural India. These services will include cash deposit, financing, remittances and investment products, in addition to handling cash dispensation.

DIVIDEND

Your Company has had a consistent dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital, in order to maintain a healthy capital adequacy ratio to support long term growth of your Company. Consistent with this policy, your Board has recommended a dividend of Re. 0.50 per Equity share (5%) for the financial year 2013-14 to the Equity shareholders of your Company. The dividend shall be subject to tax on dividend to be paid by your Company but will be tax-free in the hands of the shareholders. The dividend together with the dividend distribution tax will entail a cash outflow of Rs. 2943 Lacs (previous year Rs. 2943 Lacs).

CORPORATE GOVERNANCE

Your Company has always practiced sound corporate governance and takes necessary actions at appropriate times for enhancing and meeting stakeholders'' expectations while continuing to comply with the mandatory provisions of corporate governance.

A separate section on Corporate Governance and a Certificate from the Auditors of your Company regarding compliance with the requirements of corporate governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, form part of the Annual Report.

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND (IEPF)

During the year under review, your Company has transferred a sum of Rs. 7,52,561/- to the Investor Education & Protection Fund (IEPF) of the Central Government, the dividend amount pertaining to the financial year ended on March 31, 2006, which was due & payable and remained unclaimed and unpaid for a period of seven years, as provided in Section 205A and 205C of the Companies Act, 1956 read with the Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001. Cumulatively, the dividend amount transferred to the said Fund up to March 31, 2014 was Rs. 39,45,637.69/-.

SUBSIDIARY COMPANIES

During the year under review, the name of Srei Venture Capital Limited, a wholly owned subsidiary of your Company, was changed to ''Srei Alternative Investment Managers Limited'' w.e.f. May 21, 2013 pursuant to the change in the Main Objects Clause of the Memorandum of Association of the Company thereby enabling the Company to carry on business activities of Asset Management in India and/or abroad in accordance with Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.

Further, Srei (Mauritius) Infrastructure Development Company Limited, a joint venture of your Company''s subsidiary, Srei Infrastructure Advisors Limited, was deregistered from the Registrar of Companies, Port Louis, Mauritius w.e.f. July 17, 2013.

Further, the name of Mumbai Futuristic Economic Zone Private Limited, a wholly owned subsidiary of your Company, was changed to ''Attivo Economic Zone (Mumbai) Private Limited'' w.e.f. July 23, 2013 as part of brand building exercise.

Further, Goldensons Construction Private Limited became a wholly owned subsidiary of your Company w.e.f. February 07, 2014 consequent upon acquisition of entire shareholding by your Company.

Further, Quippo Valuers & Auctioneers Private Limited ceased to be a subsidiary of your Company w.e.f. October 19, 2013 consequent upon disposal of entire shareholding by your Company.

Further, Quippo Middle East Limited (formerly Quippo Energy Middle East Limited) and Quippo Energy Yemen Limited ceased to be the sub- subsidiaries of your Company w.e.f. October 28, 2013 consequent upon disposal of entire shareholding held by Quippo Energy Private Limited, a subsidiary of your Company.

Further, Srei Equipment Finance Limited, a joint venture between your Company and BNP Paribas Lease Group, converted to a Public Limited Company w.e.f. November 01, 2013.

Further, SICOM Srei Maharashtra Infrastructure Private Limited ceased to be the joint venture of your Company''s subsidiary, Srei Infrastructure Advisors Limited w.e.f. March 29, 2014 consequent upon disposal of entire shareholding by your Company''s subsidiary.

Further, the share capital of Srei Mutual Fund Asset Management Private Limited, a wholly owned subsidiary of your Company, was enhanced to Rs. 15.50 Crores during the year consequent upon infusion, in tranches, of fresh capital by your Company.

The Statement pursuant to Section 212 of the Companies Act, 1956, containing details of your Company''s subsidiaries in India and Overseas, forms part of the Annual Report.

In compliance with General Circular No: 2/2011 dated February 08, 2011 of Government of India, Ministry of Corporate Affairs, the audited statement of accounts along with the reports of the Board of Directors and Auditors relating to your Company''s subsidiaries in India and Overseas are not annexed as required under Section 212 of the Companies Act, 1956. Shareholders who wish to have a copy of the full report and accounts of the aforesaid subsidiary companies will be provided the same by the Company Secretary on receipt of a written request from them. These documents will also be available for inspection by any shareholder at the Registered Office of your Company and the concerned subsidiary companies during business hours on all working days. Further, the documents shall be available on the website of your Company. However, as directed by the Ministry of Corporate Affairs, Government of India, the financial data of the subsidiaries have been separately furnished and forms part of the Annual Report. Further, in line with the Listing Agreement with the Stock Exchanges and in accordance with the Accounting Standard 21 (AS-21), Consolidated Financial Statements prepared by your Company include financial information of its subsidiary companies.

PARTICULARS OF EMPLOYEES

The names and other particulars of the employees as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, are set out in the annexure to the Directors'' Report and form part of this report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTFLOW

Your Company has no activity relating to Conservation of Energy and Technology Absorption as stipulated in the

Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988. However, your Company uses information technology extensively in its operations and also continues its endeavour to improve energy conservation and utilisation, safety and environment.

During the year under review, the total foreign exchange earnings and expenditure of your Company was Rs. 16 Lacs and Rs. 11,944 Lacs respectively (previous year Rs. 228 Lacs and Rs. 17,386 Lacs respectively).

SREI WEBSITE

The website of your Company, www. srei.com, has been designed to present the Company''s businesses up-front on the home page. The site carries a comprehensive database of information of interest to the investors including the financial results of your Company, dividend declared, unclaimed dividend list, shareholding pattern, any price sensitive information disclosed to the regulatory authorities from time to time, analyst reports, investor presentations, standard downloadable forms, media coverage, corporate profile and business activities of your Company and the services rendered by your Company to its investors. The ''Investor Relations'' Section'' of your Company''s website contains an array of information on investor services, financials, listing of securities, dividend and Investors''

Frequently Asked Question (FAQs).

DIRECTORS

During the year under review, Dr. Martin Czurda resigned as a Director of your Company w.e.f. December 24, 2013 due to his personal preoccupations. The Board wishes to place on record its sincere appreciation of the contribution, advice and guidance extended by Dr. Czurda during his tenure as a Director of your Company.

In accordance with the provisions of Section 149 of the Companies Act, 2013 (''Act'') read with Companies (Appointment and Qualification of Directors) Rules, 2014, recently amended Clause 49 of the Listing Agreement with Stock Exchanges (''Listing Agreement'') and your Company''s Articles of Association, the Board of Directors of your Company is seeking appointment of Mr. Salil Kumar Gupta, Mr. Shyamalendu Chatterjee, Mr. Sujitendra Krishna Deb, Mr. Srinivasachari Rajagopal, Dr. Satish Chandra Jha and Dr. Punita Kumar Sinha as Independent Directors of the Company for a period of 5 (five) consecutive years from the date of the forthcoming Twenty-Ninth Annual General Meeting (AGM) of the Company. All these Directors have filed with your Company consent in Form DIR-2, intimation in Form DIR-8 under Section 164(2) of the Act and the aforesaid Rules and declaration of independence pursuant to Section 149(6) of the Act and the aforesaid Rules and the Listing Agreement with the Stock Exchanges.

In accordance with the provisions of Section 152 of the Act and the aforesaid Rules and your Company''s Articles of Association, Mr. Sunil Kanoria retires by rotation at the ensuing AGM and being eligible, offers himself for re- appointment.

The brief resume / details relating to Directors who are to be appointed / re- appointed are furnished in the Notice of the ensuing AGM. The Board of Directors of your Company recommends the appointment/re-appointment of all the above Directors.

Pursuant to Section 309(4) and other applicable provisions of the Companies Act, 1956 read with General Circular No: 4/2011 dated March 04, 2011 of Government of India, Ministry of Corporate Affairs, your Company has approved payment of remuneration of Rs. 50 Lacs by way of commission on net profits computed under Sections 198, 349 and 350 of the Companies Act, 1956 to Non-Executive Directors of your Company for the financial year 2013-14. The payment is within the limit of one per cent of the net profits of the Company for the financial year 2013-14 as approved by the Members of your Company at the Annual General Meeting held on August 14, 2013 and in accordance with the applicable provisions of the Companies Act, 1956.

AUDIT COMMITTEE

The Audit Committee comprises of Mr. Salil K. Gupta, Mr. S. Rajagopal, Mr. Sujitendra Krishna Deb, Mr. Shyamalendu Chatterjee, Non- Executive & Independent Directors and Mr. Sunil Kanoria, Non-Executive Director. Mr. Salil K. Gupta, Chief Mentor & Director of your Company is the Chairman of the Audit Committee. The Company Secretary of your Company acts as the Secretary to the Audit Committee.

DIRECTORS'' RESPONSIBILITY

STATEMENT

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

(i) in the preparation of the annual accounts for the financial year ended March 31, 2014, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for the year;

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

(iv) they have prepared the annual accounts for the financial year ended March 31, 2014 on a going concern basis.

Further, your Directors confirm that your Company has adequate internal systems and controls in place to ensure compliance of laws applicable to your Company.

AUDITORS

Haribhakti & Co., Chartered Accountants having registration No. 103523W allotted by The Institute of Chartered Accountants of India (ICAI), retire as Auditors of your Company at the conclusion of the ensuing Annual General Meeting (AGM) and have confirmed their eligibility and willingness to accept the office of Auditors, if re- appointed. Your Company has received a confirmation from Haribhakti & Co., Chartered Accountants to the effect that their re-appointment, if made, would be within the limits prescribed under Section 139 of the Companies Act, 2013 and the rules framed there under. They have also confirmed that they hold a valid peer review certificate as prescribed under Clause 41(1)(h) of the Listing Agreement.

The Audit Committee and the Board of Directors of your Company recommend the re-appointment of Haribhakti & Co., Chartered Accountants, as the Auditors of your Company. Members are requested to consider their re- appointment as Auditors of your Company to hold office from conclusion of ensuing AGM until the conclusion of next AGM on remuneration to be decided by the Board of Directors based on recommendation of the Audit Committee of your Company.

SECRETARIAL AUDIT REPORT

As a measure of good Corporate Governance practice, your Company appointed Dr. K. R. Chandratre, Practising Company Secretary of repute, to conduct the Secretarial Audit. The Secretarial Audit Report for the financial year ended March 31, 2014 is provided in the Annual Report.

The Secretarial Audit Report confirms that your Company has complied inter alia with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, Securities Contracts (Regulation) Act, 1956 and all the Regulations and Guidelines of SEBI as applicable to your Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and the SEBI (Prohibition of Insider Trading) Regulations, 1992.

ACKNOWLEDGEMENT

Your Directors would like to express their grateful appreciation for the excellent support and co-operation received from the Financial Institutions, Banks, Central & State Government Authorities, RBI, SEBI, Ministry of Corporate Affairs (MCA), Registrar of Companies, Indian and Overseas Stock Exchanges, Depositories, Credit Rating Agencies, Customers, Manufacturers, Vendors, Suppliers, Business Associates, Shareholders, Debenture holders, Debenture Trustees and other Stakeholders during the year under review. Your Directors also place on record their deep appreciation for the valuable contribution of the employees at all levels for the progress of your Company during the year and look forward to their continued co-operation in realisation of the corporate goals in the years ahead

On behalf of the Board of Directors

Hemant Kanoria

Chairman & Managing Director

Kolkata, May 23, 2014


Mar 31, 2013

The Directors are pleased to present the Twenty-Eighth Annual Report together with the Audited Accounts of your Company for the financial year ended March 31, 2013. The summarised consolidated and standalone financial performance of your Company is as follows:

FINANCIAL RESULTS

(Rs. in Lakh)

Consolidated Standalone Year ended Year ended Year ended Year ended March 31, March 31, March 31, March 31, 2013 2012 2013 2012

Total Revenue 3,10,992 2,44,633 1,66,647 1,18,069

Total Expenses (includingdepre ciationetc.) 2,74,175 2,12,504 1,50,032 1,05,017

Profitbe forebaddebts, provisions & tax 36,817 32,129 16,615 13,052

BadDebts & Provisionsetc. 10,949 8,452 3,074 2,173

Profit Before Tax 25,868 23,677 13,541 10,879

Exceptional Items (10,410)

Current Tax 7,274 5,466 2,620 1,760

Mat Creditentitlement (71) (189) (71) (49)

Deferred Tax 3,072 3,674 1,496 1,198

Income Tax in respect of earlier years (4) 2,411 2,174

Profit After Tax Before Minority lnterests 26,007 12,315 9,496 5,796

Share of loss of Associate 100 - - -

Minority Interests (411) 1,134

Net Profit 26,318 11,181 9,496 5,796

Minority lnterests of Pre Acquisition Profit/(Loss) (39)

Profit After Tax afterad justment of Minority interests 26,318 11,142 9,496 5,796

Surplus brought forward from Previous Year 28,925 30,339 22,486 23,791

Profit Available For Appropriation 55,243 41,481 31,982 29,587

Paid up Equity Share Capital 50,324 50,324 50,324 50,324

Amount transferred to Reserves 11,319 9,965 3,084 4,193

Reserves and Surplus 2,89,380 2,67,543 2,14,430 2,07,877

OPERATIONAL REVIEW

Your Company is one of the leading private sector infrastructure financing institutions in India. Some of the key highlights of your Company''s performance during the year under review are:

- The gross profit (before bad debts, provision and tax) is Rs.16,615 Lakhs as againstRs.13,052 Lakhs in the last year.

- Profit before taxation is Rs.13,541 Lakhs as against Rs.10,879 Lakhs in the last year.

- Net profit after taxation is Rs.9,496 Lakhs as against Rs.5,796 Lakhs in the last year.

- The total assets under management of the Srei Group is Rs.33,32,964 Lakhs as against Rs.30,76,435 Lakhs in the last year.

The Consolidated Financial Statements have been prepared by your Company in accordance with the requirements of the accounting standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. The audited Consolidated Financial Statements together with Auditors Report thereon forms part of the Annual Report.

The Capital Adequacy Ratio (CAR) of your Company stood at 21.68 per cent as on March 31, 2013, well above the regulatory minimum level of 15 per cent prescribed by the Reserve Bank of India for systemically important non-deposit taking NBFCs (NBFCs- ND-SI). Of this, the Tier I CAR was 14.28 per cent.

Your Company has complied with all the norms prescribed by the Reserve Bank of India (RBI) including the Fair practices, Anti Money Laundering & Know Your Customer (KYC) guidelines and also all the mandatory accounting standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. It has adopted a sound and forward looking accounting policy of providing for non performing assets in terms of the management''s best estimates as well as the guidelines laid down by the Foreign Financial Institutions, which are more stringent than the guidelines of the RBI.

PUBLIC DEPOSITS

In April 2010, your Company decided to convert itself into a non-deposit taking NBFC in order to qualify for registration as an ''Infrastructure Finance

Company''. Your Company had decided that it would not accept any further public deposits or renew such maturing deposits in any manner w.e.f. April 20, 2010 and the entire amount of outstanding public deposits as on April 19, 2010 together with interest promised to the depositors, has been kept in an Escrow Account with Axis Bank Limited, a scheduled commercial bank for the purpose of making payment to the depositors as and when they raise the claim. The amount payable to the depositors as on March 31, 2013 is Rs.30,44,394/-.

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

CLASSIFICATION AS INFRASTRUCTURE FINANCE COMPANY (IFC) AND PUBLIC FINANCIAL INSTITUTION (PFI)

The Reserve Bank of India has classified your Company as an ''Infrastructure Finance Company'' within the overall classification of ''Non Banking Finance Company''. Your Company is also notified as

a Public Financial Institution (PFI) under Section 4A of the Companies Act, 1956 by the Ministry of Corporate Affairs (MCA), Government of India.

MUTUAL FUND ACTIVITY

In terms of Regulation 9 of the Securities and Exchange Board of India (Mutual Fund) Regulations, 1996, an Infrastructure Debt Fund set up by your Company in the name of ''Srei Mutual Fund (IDF)'' was granted the Certificate of Registration by the Securities and Exchange Board of India on November 15, 2012. Infrastructure Debt Fund via mutual fund route opens up long term funding options for the infrastructure sector in India which offers a good long term opportunity for debt investors.

Furthermore, in terms of Regulation 21(2) of the said Regulations, approval was also granted to Srei Mutual Fund Asset Management Private Limited, a '' subsidiary of your Company, to act as the Asset Management Company for Srei Mutual Fund (IDF).

PROMOTERS GROUP SHAREHOLDING

The Promoters'' Group of your Company has increased their net shareholding in your Company during the year by 1.70 per cent from 47.07 per centto 48.77 percent, through the creeping acquisition route allowed as per SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

The Promoters'' Group has shown increased commitment to the business strategy and substantial growth of your Company and your Company believes that this will result in enhanced value for all the stakeholders.

As on March 31, 2013, 16.47 per cent (out of 48.77 per cent) of shareholding held by the Promoters'' Group of your Company is under pledge.

UBLIC ISSUE OF SECURED REDEEMABLE NON-CONVERTIBLE DEBENTURES

During the year under review, your Company has issued Secured Redeemable Non-Convertible

Debentures (the "Debentures") of face value of Rs.1,000 each, as per the details given hereunder:

I Date of Issue Total Issue Size Maturity Period Allotment Date Amount

(including green shoe) (Rs. in Crores)

20.09.2012 150 Crores 7years 05.11.2012 76.79

04.04.2013 150 Crores 3years/5years/6years6months 06.05.2013 133.70

Debenture Trust Agreement(s) in favour of Axis Trustee Services Limited for the aforesaid issues were executed. These Debentures are listed on the Debt Segment of the BSE Limited. The entire proceeds have been utilised for the purpose of various financing activities, repayment of existing loans and other business operations including capital expenditure and working capital requirements. Your Company has duly paid the interest due on the aforesaid Debentures on time.

The public issue of the said Debentures has not only facilitated diversification of your Company''s sources for mobilising long term resources but has also provided the retail Investors an opportunity to participate in India''s infrastructure development and progress. The various communication efforts of your Company surrounding the Debentures played a meaningful role in enhancing your Company''s brand image amongst relevant constituencies.

UNSECURED SUBORDINATED BONDS

In the year 2000, your Company had issued on rights basis 5266075 Unsecured Subordinated Bonds of Rs.100/- each aggregating to Rs.52,66,07,500/- vide Letter of Offer dated June 16, 2000. Each Bond has an overall tenure of 12 years, reckoned from the date of allotment

viz. August 25, 2000 and the face value of the Bonds along with an overall premium of 20 per cent of the original face value was to be redeemed in seven installments, commencing from the completion of sixth year from the date of allotment.

Your Company has accordingly redeemed on August 25, 2012, being seventh & the final redemption date, Rs.10/- towards principal amount and Rs.2/- towards premium amount, total aggregating to Rs.12/- per Unsecured Subordinated Bond. Accordingly, the face value of the aforesaid Bonds stand reduced to NIL per Bond as a result of full and final redemption of the said Bonds on completion of the tenure of 12 years. Thus, the said Bonds have been fully extinguished post August 25, 2012.

ISSUE OF REDEEMABLE NON-CONVERTIBLE PREFERENCE SHARES AND INCREASE IN AUTHORISED SHARE CAPITAL

With a view to augment long term resources, improve debt-equity ratio and to strengthen the capital base, your Company proposes to raise an amount aggregating upto Rs.500 Crores by way of issue of Redeemable Non-Convertible Preference Shares in one or more tranches, subject to the Shareholders'' approval and other requisite approvals.

Further, the Board of Directors of your

Company have decided to increase the existing Authorised Share Capital of your Company from Rs.810 Crores to Rs.1500 Crores (Equity Capital being increased from Rs.710 Crores to Rs.1,000 Crores and Preference Capital being increased from Rs.100 Crores to Rs.500 Crores), subject to the Shareholders'' approval.

SETTING UP OF WHITE LABEL ATMs

During the year under review, approval of the Members of the Company was sought by way of Postal Ballot conducted pursuant to Section 192A of the Companies Act, 1956 read with Companies (Passing of the Resolution by Postal Ballot) Rules, 2011 in respect of amendment to the "Other Objects" Clause of the Memorandum of Association of the Company and commencement of operation of new business as mentioned in the "Other Objects" Clause of the Memorandum of Association of the Company pertaining to White Label ATM Networks.

Your Company, being one of the top 500 companies as per market capitalisation, entered into an agreement with National Securities Depository Limited on October 29, 2012 to implement the e-voting process effectively so as to enable the Members to cast their votes through electronic mode. By providing the Members an option to cast their vote electronically, it was observed that the Member participation increased substantially and that Members holding shares aggregating to 84.02 per cent of the total paid up capital of the Company casted their votes. Such an initiative also gave the Members the freedom to cast their vote till the closing date, from a place of their convenience.

Your Company appointed Dr. K. R. Chandratre, Practising Company Secretary, as the Scrutiniser for conducting the Postal Ballot exercise in a fair and transparent manner. The Special Resolutions as set out in the Postal Ballot Notice dated November

09, 2012 were approved by the Members with a requisite majority of 99.99 per cent of the votes polled. The result of the Postal Ballot was declared on December 21, 2012, and the same was displayed at the Registered Office as well as the website of your Company, www.srei.com. Thereafter, the results were disseminated to the various Regulators and published in newspapers.

Your Company has received an in-principle authorisation from the Reserve Bank of India (RBI) for setting up of White Label ATMs.

DIVIDEND

Your Company has had a consistent dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital, in order to maintain a healthy capital adequacy ratio to support long term growth of your Company. Consistent with this policy, your Board has recommended a dividend of Re. 0.50 per Equity share (5 per cent) for the financial year 2012-13 to the Equity shareholders of your Company. The dividend shall be subject to tax on dividend to be paid by your Company but will be tax-free in the hands of the shareholders. The dividend together with the dividend distribution tax will entail a cash outflow of Rs.2943 Lakhs (previous year Rs.2923 Lakhs).

ENVIRONMENTAL AND SOCIAL MANAGEMENT SYSTEM

Your Company has been in the process of sustainable business practice through its implemented Environmental & Social Management System (ESMS) to adequately meet, respond to and enhance benchmarks in Environmental and Social (E&S) management. ESMS takes care of E&S risks associated with a proposal considered for investment as well as its existing portfolio. Your Company decided to adopt ESMS to reduce the business risk of its portfolio related to E&S issues and adhere

to sustainable finance practice, which has been integrated as a part of overall Credit & Risk Policy. This management system is aimed at properly evaluating, assessing and ensuring customer compliance with relevant E&S requirements and encourages clients to take corrective action & mitigation plans.

The core element of our ESMS is a self declared policy framework which includes due-diligence (rapid, sustainability, client risk assessment, project/activity risk categorization and if required site visiting), appraisal (analysis of E&S impacts and client''s capacity & commitment to address them), mitigation measures, action plans, monitoring & review of ongoing projects, training & workshop and continuous improvement of the system. By following ESMS practice, your Company has been able to create awareness in the market regarding relevance of E&S issues and their impacts on the society and the environment.

Your Company does not invest in any projects that do not comply with the environmental & social norms and laws of the Country. Your Company neither participates nor invests in certain activities and industries, which fall in the exclusion list of your Company. In your Company, a full scale E&S due- diligence is carried out for any business activity as per International Finance Corporation (IFC) Performance

Standards and Country''s E&S Laws, Rules & Notifications, based on which a ''go'' or ''no go'' decision is given by ESMS team.

Another sustainability strategy of your Company is to increase investment in green projects steadily. Your Company monitors & reviews the invested projects on a regular basis whereas shortfalls or misconducts are rectified by framing action plans for the same. Your Company continuously updates and upgrades the ESMS policy framework from time to time. Over the past years, your Company has been able to successfully manage, reduce and control the E&S risks associated with its portfolio. In FY 2012-13, your Company rejected several business opportunities due to non-conformity to E&S policy like absence of sufficient regulatory clearances, public interest litigation, land and other issues. On the other hand, your Company has encouraged sustainable development by investing in various renewable energy projects.

As a part of its sustainability strategy, your Company has entered into a capacity development agreement with Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO) [Netherlands Development Finance Company] and Oesterreichische Entwicklungbank AG (OeEB) [Development Bank of Austria] to launch a Corporate Rollout

Programme (CRP) on ESMS for its clients across the Country for carrying out business with better management of E&S risks, thereby enhancing your Company''s brand image in the market. The ESMS-CRP will help clients to build their own sector specific ESMS Policy, facilitate training program on different ESHS (Environmental, Social, Health & Safety) issues, frame action plans against identified E&S risks and assist them in obtaining ISO standard E&S certificates. Your Company believes in a sustainable finance business approach by considering conservation, management & sustainable use of human & natural resources. This endeavour helps in creating a strong & confident long term relationship with its stakeholders.

CORPORATE SOCIAL RESPONSIBILITY

With a view to contribute towards the betterment and welfare of the society and discharge its Corporate Social Responsibility, the Board of Directors of your Company granted approval for making donations in any financial year upto an aggregate maximum limit of 2 per cent of its Net profits in that financial year.

Recognising its social responsibility, your Company had established a public charitable trust in the name of ''Srei Foundation'' with the objective of granting scholarships and other financial assistance to deserving and talented candidates. The Fund also supports setting up of schools, colleges, medical and scientific research institutions. Donations to Srei Foundation qualify for deduction under Section 80G of the Income Tax Act, 1961. Your Company has granted donation of Rs.50,00,000/- (Rupees Fifty Lakhs only) to Srei Foundation during the financial year 2012-13.

Your Company also made donations aggregating to Rs.15,50,000/- (Rupees Fifteen Lakhs Fifty Thousand only) to Suryodaya Schools, a division of USD Edu World, established with the intent to promote and spread education among the under-privileged and weaker sections of the society.

A donation of Rs.12,50,000/- (Rupees Twelve Lakhs and Fifty Thousand only) was also made to Gyan Prakash Foundation, a public charitable trust set up to develop sustainable and scalable models of self-learning that taps a child''s natural curiosity and ability to explore, discover and learn with the ultimate aim of teaching the underprivileged children all over the country.

Your Company also promotes all- round development of a clean environment and help in propagating and imparting education for the betterment of agriculture / horticulture and other similar activities.

Your Company is fully aware of the fact that as a corporate citizen, it is

also entrusted with the responsibility to contribute for the betterment of the community at large. During the year under review, your Company supported a variety of charitable projects and social welfare activities and has contributed an aggregate sum of Rs.79,84,301/- (Rupees Seventy Nine Lakhs Eighty Four Thousand and Three Hundred One only) to several welfare and charitable organisations.

CORPORATE GOVERNANCE

Your Company has always practised sound corporate governance and takes necessary actions at appropriate times for enhancing and meeting stakeholders'' expectations while continuing to comply with the mandatory provisions of corporate governance.

A separate section on Corporate Governance and a Certificate from the Auditors of your Company regarding compliance with the requirements of corporate governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, form part of the Annual Report.

During the year under review, your Company has been recognised as the "Best Entity in the area of Corporate Governance" by the ET Bengal Corporate Awards organised by the Association of Corporate Advisers and Executives, Kolkata and The Economic Times.

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND (IEPF)

During the year under review, your Company has transferred a sum of Rs.3,59,234/- to the investor Education & Protection Fund (IEPF) of the Central Government, the dividend amount pertaining to the financial year ended on March 31, 2005, which was due & payable and remained unclaimed and unpaid for a period of seven years, as provided in Section 205A(5) of the Companies Act, 1956. Cumulatively, the dividend amount transferred to the said Fund upto March 31, 2013 was Rs.31,93,076.69/-.

SUBSIDIARY COMPANIES

During the year under review, the name of IIS International Infrastructure Services GmbH, Germany, a subsidiary of your Company, was changed to ''Srei International Infrastructure Services GmbH'' (SIIS) w.e.f. September 14, 2012. Further, the Share Capital of Srei Advisors Pte. Limited, Singapore, a wholly owned subsidiary of SIIS and a step down subsidiary of your Company, was enhanced from SGD 70,100 to SGD 370,100 (Singapore Dollars Three Hundred Seventy Thousand and One Hundred only) consequent upon infusion of 300000 ordinary shares of SGD 1/- each in tranches aggregating to SGD 300,000 (Singapore Dollars Three Hundred Thousand only) by SIIS.

Moreover, subsequent to the transfer of 49 per cent of the share capital of Aalat LLC (Aalat) (a joint venture company between SIIS and Al Waha Capital PJSC) by SIIS to Al Waha Capital PJSC and Al Waha Maritime LLC, Aalat has ceased to be a Joint Venture of SIIS, your Company''s subsidiary, w.e.f. November 28, 2012.

Further, Quippo Prakash Pte. Limited, Singapore has ceased to be a sub- subsidiary of your Company w.e.f. August 28, 2012 consequent upon the sale of 51 ordinary shares held by Quippo Oil & Gas Infrastructure Limited (QOGIL), a subsidiary of your Company, and 73900 ordinary shares held by Quippo Prakash Marine Holdings Pte. Limited, Singapore, (QPMHPL) a subsidiary of QOGIL, to Geomark Sdn Bhd., Malaysia.

Further, Quippo Prakash Marine Holdings Pte. Limited, Singapore, has ceased to be a sub-subsidiary of your Company w.e.f. November 26, 2012 consequent upon the sale of 51 ordinary shares held by Quippo Oil & Gas Infrastructure Limited (QOGIL), a subsidiary of your Company, to MDL Marine Holdings Pte. Ltd., Singapore.

Further, Quippo Construction Equipment Limited (QCEL) has ceased to be a subsidiary of your Company w.e.f. March 31, 2013 pursuant to infusion of fresh capital in QCEL. Consequently, QCEL has become an associate of your Company w.e.f. March 31, 2013.

Further, Quippo CJ Exploration and Production Private Limited was incorporated on May 01, 2013 as a subsidiary of Quippo Oil and Gas Infrastructure Limited, a subsidiary of your Company.

During the year under review, the Authorised Share Capital of Srei Sahaj e-Village Limited (Sahaj), a subsidiary of your Company, was increased from Rs.10 Crores to Rs.25 Crores. Further, consequent to transfer of 3.90 per cent stake by Opulent Venture Capital Trust and further issue of 10000000 Equity shares of Rs.10 each by Sahaj on preferential basis to Mr. Anil Choudhary, Trustee representing Srei Venture Capital Trust A/c - IPDC, Sahaj has ceased to be a subsidiary of your Company and has become an associate w.e.f. August

13, 2012. Subsequent to the de- subsidiarisation, the name of Sahaj was changed to ''Sahaj e-Village Limited'' w.e.f. August 21, 2012. Further, your Company enhanced its stake from 47.55 per cent to 48.32 per cent in Sahaj by way of further subscription.

Further, the Certificate of Registration of Srei Venture Capital Limited (SVCL), a wholly owned subsidiary of your Company, granted by Securities and Exchange Board of India (SEBI), for acting as a Venture Capital Fund, has been surrendered to SEBI on February 14, 2013 for cancellation since the Company is presently not acting as a Venture Capital Fund in lieu of notification of SEBI (Alternative Investment Funds) Regulations, 2012.

The Statement pursuant to Section 212 of the Companies Act, 1956, containing details of your Company''s subsidiaries in India and Overseas, forms part of the Annual Report.

In compliance with General Circular No: 2/2011 dated February 08, 2011 of Government of India, Ministry of Corporate Affairs, the audited statement of accounts along with the reports of the Board of Directors and Auditors relating to your Company''s subsidiaries in India and Overseas are not annexed as required under Section 212 of the Companies Act, 1956. Shareholders who wish to have a copy of the full report and accounts of the aforesaid subsidiary companies will be provided the same by the Company Secretary on receipt of a written request from them. These documents will also be available for inspection by any shareholder at the Registered OfficeofyourCompanyand the concerned subsidiary companies during business hours on all working days. Further, the documents shall be available on the website of your Company. However, as directed by the Ministry of Corporate Affairs, Government of India, the financial data of the subsidiaries have been separately furnished and forms part of the Annual Report. Further, in line with the Listing Agreement with the Stock

Exchanges and in accordance with the Accounting Standard 21 (AS-21), Consolidated Financial Statements prepared by your Company include financial information of its subsidiary companies.

PARTICULARS OF EMPLOYEES

The names and other particulars of the employees as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, are set out in the annexure to the Directors'' Report and form part of this report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTFLOW

Your Company has no activity relating to Conservation of Energy and Technology Absorption as stipulated in the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988. However, your Company uses information technology extensively in its operations and also continues its endeavour to improve energy conservation and utilisation, safety and environment.

During the year under review, the total foreign exchange earnings and expenditure of your Company was Rs.228 Lakhs and Rs.17,386 Lakhs respectively (previous year Rs.117 Lakhs and Rs.18,972 Lakhs respectively).

SREI WEBSITE

The website of your Company, www. srei.com, has been redesigned to present the Company''s businesses up-front on the home page. The redesigned site carries a comprehensive database of information of interest to the investors including the financial results of your Company, dividend declared, unclaimed dividend list, shareholding pattern, any price sensitive information disclosed to the regulatory authorities from time to time, analyst reports, investor presentations, standard downloadable forms, media coverage, corporate profile and business activities of your Company and the services rendered by your Company to its investors. The ''Investor Relations'' Section'' of your Company''s website contains an array of information on investor services, financials, listing of securities, dividend and Investors'' Frequently Asked Question (FAQs).

DIRECTORS

During the year under review, Dr. Martin Czurda and Dr. Punita Kumar Sinha were appointed as Additional Directors of your Company w.e.f. November 09,2012 and May 20,2013 respectively, with a view to broadbase expertise of the Board of Directors. They shall hold office upto the date of the ensuing Annual General Meeting of your Company. Your Company has received individual notices from Members pursuant to Section 257 of the Companies Act, 1956, signifying their intention to propose the candidatures of Dr. Martin Czurda and Dr. Punita Kumar Sinha for the office of Directors.

Mr. V. H. Pandya resigned as a Director of your Company w.e.f. November 10, 2012 due to his personal preoccupations. The Board wishes to place on record its sincere appreciation of the sterling contribution made by Mr. Pandya towards the growth and development of your Company through his wealth of knowledge and experience during his long tenure of more than eighteen years as a Director of your Company.

Mr. Saud Ibne Siddique resigned as the Joint Managing Director of your Company w.e.f. close of business hours on April 30, 2013 due to his shifting back to Singapore in view of his urgent family needs. However, he continued as a Director (Category

- Non-Executive) of your Company w.e.f. May01,2013. The Board wishes to place on record deep appreciation of his contribution during his tenure as the Joint Managing Director of your Company.

In accordance with the provisions of the Companies Act, 1956 and your Company''s Articles of Association, Mr. Sunil Kanoria, Mr. S. Rajagopal and Mr. Saud Ibne Siddique retire by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offer themselves for re-appointment. All these Directors have filed Form DDA with your Company as required under the Companies (Disqualification of Directors under Section 274(1)(g) of the Companies Act, 1956) Rules, 2003. The brief resume / details relating to Directors who are to be appointed / re-appointed are furnished in the Notice of the ensuing AGM. The Board of Directors of your Company recommends the re-appointment of all the above Directors at the ensuing AGM.

In accordance with the approval of Central Government read with General Circular No: 4/2011 dated March 04, 2011 of Government of India, Ministry of Corporate Affairs, your Company has approved payment of remuneration of Rs.50 Lakhs by way of commission on net profits calculated under Section 198 of the Companies Act, 1956 to Non- Executive Directors of your Company for the financial year 2012-13.

AUDIT COMMITTEE

The Audit Committee comprises of Mr. Salil K. Gupta, Mr. S. Rajagopal,

78

Mr. Sujitendra Krishna Deb, Mr. Shyamalendu Chatterjee, Non- Executive & Independent Directors and Mr. Sunil Kanoria, Non-Executive Director. Mr. Salil K. Gupta, Chief Mentor & Director of your Company is the Chairman of the Audit Committee. The Company Secretary of your Company acts as the Secretary to the Audit Committee.

DIRECTORS'' RESPONSIBILITY STATEMENT

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

(i) in the preparation of the annual accounts for the financial year ended March 31, 2013, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profits of your Company for the year;

(iii)they have taken proper and sufficient care for the maintenance of adequate accounting records

in accordance with the provisions of this Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and

(iv)they have prepared the annual accounts for the financial year ended March 31, 2013 on a going concern basis.

Further, your Directors confirm that your Company has adequate internal systems and controls in place to ensure compliance of laws applicable to your Company.

AUDITORS

Messrs Haribhakti & Co., Chartered Accountants having registration No. 103523W allotted by The Institute of Chartered Accountants of India (ICAI), retire as Auditors of your Company at the conclusion of the ensuing Annual General Meeting (AGM) and have confirmed their eligibility and willingness to accept the office of Auditors, if re-appointed. Your Company has received a confirmation from Messrs Haribhakti & Co., Chartered Accountants to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. They have also confirmed that they hold a valid peer review certificate as prescribed under Clause 41(1)(h) of the Listing Agreement.

The Audit Committee and the Board of Directors of your Company recommend the re-appointment of Messrs Haribhakti & Co., Chartered Accountants, as the Auditors of your Company. Members are requested to consider their re-appointment as Auditors of your Company to hold office from conclusion of ensuing AGM to the conclusion of next AGM on remuneration to be decided by the Board of Directors based on recommendation of the Audit Committee of your Company.

SECRETARIAL AUDIT REPORT

As a measure of good Corporate Governance practice, your Company appointed Dr. K. R. Chandratre, Practising Company Secretary, to conduct the Secretarial Audit. The Secretarial Audit Report for the financial year ended March 31, 2013 is provided in the Annual Report.

The Secretarial Audit Report confirms that your Company has complied inter alia with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, Securities Contracts (Regulation) Act, 1956 and all the Regulations and Guidelines of SEBI as applicable to your Company, including the SEBI (Substantial Acquisition of Shares and Takeovers)

Regulations, 2011 and the SEBI (Prohibition of Insider Trading) Regulations, 1992.

ACKNOWLEDGEMENT

Your Directors would like to express their grateful appreciation for the excellent support and co-operation received from the Financial Institutions, Banks, Central & State Government Authorities, RBI, SEBI, Ministry of Corporate Affairs (MCA), Registrar of Companies, Indian and Overseas Stock Exchanges, Depositories, Credit Rating Agencies, Customers, Manufacturers, Vendors, Suppliers, Business Associates, Shareholders and other Stakeholders during the year under review. Your Directors also place on record their deep appreciation for the valuable contribution of the employees at all levels for the progress of your Company during the year and look forward to their continued co-operation in realisation of the corporate goals in the years ahead.

On behalf of the Board of Directors

Hemant Kanoria Chairman & Managing Director Kolkata, May 20, 2013


Mar 31, 2012

The Directors are pleased to present the Twenty Seventh Annual Report together with the Audited Accounts of your Company for the financial year ended March 31, 2012. The summarised consolidated and standalone financial performance of your Company is as follows:

Financial Results (Rs. in Lakh)

Consolidated Standalone Year ended Year ended Year ended Year ended March 31, 2012 March 31, 2011 March 31, 2012 March 31, 2011

Total Revenue 2,44,633 1,63,809 1,18,069 74,624

Total Expenses (including depreciation etc.) 2,12,504 1,27,072 1,05,017 52,213

Profit before bad debts, provisions & tax 32,129 36,737 13,052 22,411

Bad Debts & Provisions etc. 8,452 7,840 2,173 1,197

Profit Before Tax 23,677 28,897 10,879 21,214

Current Tax 5,466 8,267 1,760 4,185

Mat Credit entitlement (189) (94) (49) -

Deferred Tax 3,674 (203) 1,198 3,350

Income Tax in respect of earlier years 2,411 1,309 2,174 249

Profit After Tax before Minority Interest 12,315 19,618 5,796 13,430

Minority Interests 1,134 1,694 - -

Net Profit 11,181 17,924 - -

Pre Acquisition Profit/(Loss) - 474 - -

Minority Interests of Pre Acquisition Profit/(Loss) (39) (474) - -

Profit After Tax after adjustment of Minority Interests 11,142 17,924 - -

Adjustment on account of Amalgamation - (570) - -

Surplus brought forward from Previous Year 30,339 25,618 23,791 19,679

Profit Available For Appropriation 41,481 42,972 29,587 33,109

Paid up Equity Share Capital 50,324 50,324 50,324 50,324

Amount transferred to Reserves 9,965 8,227 4,193 4,918

OPERATIONAL REVIEW

Your Company is one of the leading private sector infrastructure financing institutions in India. Some of the key highlights of your Company's performance during the year under review are:

The gross profit (before depreciation/ amortisation, bad debts, provision and tax) is Rs.14,592 lakh as against Rs.24,219 lakh in the last year.

Profit before taxation is Rs.10,879 lakh as against Rs.21,214 lakh in the last year.

Net profit after taxation is Rs.5,796 lakh as against Rs.13,430 lakh in the last year.

The total assets under management of the Srei Group is Rs.30,76,435 lakh as against Rs.20,50,524 lakh in the last year.

The Consolidated Financial Statements have been prepared by your Company in accordance with the requirements of the accounting standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. The audited Consolidated Financial Statements together with

Auditors Report thereon forms part of the Annual Report.

The capital adequacy ratio (CAR) of your Company stood at 20.17 per cent as on March 31, 2012, well above the regulatory minimum level of 15 per cent prescribed by the Reserve Bank of India for systemically important non- deposit taking NBFCs (NBFCs-ND-SI). Of this, the Tier I CAR was 14.59 per cent.

Your Company has complied with all the norms prescribed by the Reserve Bank of India (RBI) including the Fair practices, Anti money laundering & Know your customer (KYC) guidelines and also all the mandatory accounting standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. It has adopted a sound and forward looking accounting policy of providing for non performing assets in terms of the management's best estimates as well as the guidelines laid down by the Foreign Financial Institutions, which are more stringent than the guidelines of the RBI.

AMALGAMATION OF QUIPPO INFRASTRUCTURE EQUIPMENT LIMITED INTO AND WITH YOUR COMPANY

The Scheme of Amalgamation of Quippo Infrastructure Equipment Limited (Quippo) into and with your Company was approved by the Hon'ble High Court at Calcutta vide its Order made on January 18, 2011. The Scheme has become effective w.e.f. March 04, 2011 after filing of certified copy of the Order with the Registrar of Companies, West Bengal at Kolkata. Consequently, all the assets and liabilities and the entire business of Quippo stand transferred to and vested in your Company, as a going concern, with effect from the Appointed Date i.e. April 01, 2010.

During the year under review, an application for dissolution without winding up of Quippo was filed before the Hon'ble High Court at Calcutta which approved the same vide its Order dated November 22, 2011. The said dissolution has become effective w.e.f. December 21, 2011 after filing of certified copy of the Order with the Registrar of Companies, West Bengal at Kolkata.

During the year under review, your Company has been notified as a Public Financial Institution (PFI) under Section 4A of the Companies Act, 1956 by the Ministry of Corporate Affairs (MCA), Government of India vide its notification dated September 26, 2011.

PUBLIC DEPOSITS

In April 2010, your Company decided to convert itself into a non-deposit taking NBFC in order to qualify for registration as an 'Infrastructure Finance Company'. Your Company had decided that it would not accept any further public deposits or renew such maturing deposits in any manner w.e.f. April 20, 2010 and the entire amount of outstanding public deposits as on April 19, 2010 together with interest promised to the depositors, has been kept in an Escrow Account with Axis Bank Limited, a scheduled commercial bank for the purpose of making payment to the depositors as and when they raise the claim. The amount payable to the depositors as on March 31, 2012 is Rs.49,73,000/-.

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

PUBLIC FINANCIAL INSTITUTION (PFI)

During the year under review, your Company has been notified as a Public Financial Institution (PFI) under Section 4A of the Companies Act, 1956 by the Ministry of Corporate Affairs (MCA), Government of India vide its notification dated September 26, 2011.

MUTUAL FUND ACTIVITY

During the year under review, the

Securities and Exchange Board of India (SEBI) has permitted your Company to set up a Mutual Fund for Infrastructure Debt Fund Schemes. Accordingly, your Company is in the process of complying with the necessary requirements for the grant of Certificate of Registration for the Mutual Fund.

PROMOTERS GROUP SHAREHOLDING

The Promoters' Group of your Company has increased their net shareholding in your Company during the year by 0.85 per cent from 46.22 per cent to 47.07 per cent, through the creeping acquisition route allowed as per SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

The Promoters' Group has shown increased commitment to the business strategy and substantial growth of your Company and your Company believes that this will result in enhanced value for all the stakeholders.

As on March 31, 2012, 17.23 per cent (out of 47.07 per cent) of shareholding held by the Promoters' Group of your Company is under pledge.

PUBLIC ISSUE OF LONG TERM INFRASTRUCTURE BONDS IN THE NATURE OF SECURED REDEEMABLE NON- CONVERTIBLE DEBENTURES

Your Company was classified by the

RBI as 'Infrastructure Finance Company' (IFC) within the overall classification of 'Non Banking Finance Company' in March, 2011. Consequently, your Company became eligible to issue Long Term Infrastructure Bonds eligible for deduction under Section 80CCF of Income Tax Act, 1961.

During the year under review, your Company raised Rs.24,88,56,000 (Rupees Twenty four crore eighty eight lakh fifty six thousand only) through the public issue of Long Term Infrastructure Bonds of face value of Rs.1000 each, in the nature of Secured Redeemable Non-convertible Debentures (the Bonds), eligible for deduction under Section 80CCF of the Income Tax Act, 1961. The issue opened on December 31, 2011 and closed on March 06, 2012. The Bonds were thereafter allotted on March 22, 2012. These Bonds are listed on the Wholesale Debt Market (WDM) Segment of the Bombay Stock Exchange Limited (BSE). The entire proceeds have been utilised for the purpose of 'Infrastructure Lending' in terms of Central Board of Direct Taxes (CBDT) Notification dated September 09, 2011.

The public issue of Long Term Infrastructure Bonds has not only facilitated diversification of your Company's sources for mobilising long term resources but has also provided the retail investors an opportunity to participate in India's infrastructure development and progress. The various communication efforts of your

Company surrounding the Bonds played a meaningful role in enhancing your Company's brand image amongst relevant constituencies.

UNSECURED SUBORDINATED BONDS

In the year 2000, your Company had issued on rights basis 52,66,075 Unsecured Subordinated Bonds of Rs.100/- each aggregating to Rs.52,66,07,500/- vide Letter of Offer dated June 16, 2000. Each Bond has an overall tenure of 12 years, reckoned from the date of allotment viz. August 25, 2000 and the face value of the Bonds along with an overall premium of 20 per cent of the original face value is to be redeemed in seven installments, commencing from the completion of sixth year from the date of allotment.

Your Company has accordingly redeemed on August 25, 2011, being sixth redemption date, Rs.15/- towards principal amount and Rs.3/- towards premium amount total aggregating to Rs.18/- per Unsecured Subordinated Bond and the face value of the aforesaid Bonds accordingly stands reduced to Rs.10/- per Bond. The aggregate principal amount outstanding as on March 31, 2012 is Rs.5.27 crore.

DIVIDEND

Your Company has had a consistent dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital, in order to maintain a

healthy capital adequacy ratio to support long term growth of your Company. Consistent with this policy, your Board has recommended a Dividend of Rs.0.50 per Equity Share (5 per cent) for the Financial year 2011-12 to the Equity shareholders of your Company. The Dividend shall be subject to tax on dividend to be paid by your Company but will be tax-free in the hands of the shareholders.

CORPORATE SOCIAL RESPONSIBILITY

Recognising its social responsibility, your Company had established a public charitable trust in the name of 'Srei Foundation' with the objective of granting scholarships and other financial assistance to deserving and talented candidates. The Fund also supports setting up of schools, colleges, medical and scientific research institutions. Donations to Srei Foundation qualify for deduction under Section 80G of the Income Tax Act, 1961. Your Company has granted donation of Rupees Fifty lakh to Srei Foundation during the financial year 2011-12.

Your Company also promotes all-round development of a clean environment and help in propagating and imparting education for the betterment of agriculture / horticulture and other similar activities.

Your Company is fully aware of the fact that as a corporate citizen, it is also entrusted with the responsibility to contribute for the betterment of the community at large. During the year under review, your Company supported a variety of charitable projects and social welfare activities and has contributed a sum of Rs.82,13,082/- (Rupees Eighty two lakh thirteen thousand and eighty two only) to several welfare and charitable organisations.

CORPORATE GOVERNANCE

Your Company has always practised sound corporate governance and takes necessary actions at appropriate times for enhancing and meeting stakeholders' expectations while continuing to comply with mandatory provisions of corporate governance.

A separate section on Corporate Governance and a Certificate from the Auditors of your Company regarding compliance with the requirements of corporate governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, form part of the Annual Report.

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND

During the year under review, your

Company has transferred a sum of Rs.3,54,549/- to the Investor Education & Protection Fund, the dividend amount which was due & payable and remained unclaimed and unpaid for a period of seven years, as provided in Section 205A(5) of the Companies Act, 1956. Cumulatively, the dividend amount transferred to the said Fund upto March 31, 2012 was Rs.28,33,842.69.

SUBSIDIARY COMPANIES

During the year under review, the Share Capital of Srei Mutual Fund Asset Management Private Limited, a wholly owned subsidiary of your Company was enhanced to Rs.13 crore (Rupees Thirteen crore only) consequent upon infusion of fresh capital by your Company.

Your Company enhanced its aggregate stake from 99.80 per cent to 99.90 per cent in Quippo Oil & Gas Infrastructure Limited, a subsidiary of your Company by acquisition of 30,000 equity shares. IIS International Infrastructure Services GmbH (IIS), Germany, a subsidiary of your Company has enhanced its stake in Zao Srei Leasing, Russia, a sub- subsidiary of your Company, from 57.14 per cent to 64.20 per cent by acquisition of 25,950 equity shares. Further, IIS has infused further capital of SGD 50,000 (Singapore Dollars Fifty Thousand only) in Srei Advisors Pte. Limited, Singapore, a wholly owned subsidiary of IIS. Quippo Infocomm Limited (QIL) has ceased to be a sub- subsidiary of your Company w.e.f. July 16, 2011 consequent upon sale of 43,000 equity shares of QIL by Srei Infrastructure Advisors Limited, a subsidiary of your Company, at par value.

Further, Quippo Construction Equipment Limited (QCEL), a subsidiary of your Company reduced its stake from 68 per cent to 40.28 per cent in Kasco Steel Limited (KSL) pursuant to which KSL ceased to be a sub-subsidiary of your Company w.e.f. September 22, 2011. Subsequently, QCEL disposed off its entire shareholding in KSL on December 03, 2011.

Further, Quippo Holding Cooperatief U.A., Netherlands, a subsidiary of Quippo Oil and Gas Infrastructure Limited and Quippo International B.V., Netherlands, a subsidiary of Quippo Holding Cooperatief U.A., Netherlands were liquidated w.e.f. February 13, 2012. Quippo Mara Infrastructure Limited, British Virgin Islands, a subsidiary of Quippo International B.V., Netherlands ceased to be a sub- subsidiary of your Company w.e.f. February 13, 2012 on account of liquidation of its holding company.

During the year under review, Quippo Mauritius Private Limited, Mauritius was incorporated on March 05, 2012 as a wholly owned subsidiary of Quippo Energy Private Limited, a wholly owned subsidiary of your Company. Thereafter, Quippo Energy Nigeria Private Limited, Nigeria was incorporated on March 22, 2012 as a wholly owned subsidiary of Quippo Mauritius Private Limited,

Mauritius.

Further, consequent upon receipt of requisite approvals of the regulatory authorities, your Company has acquired 51 per cent shareholding in Srei Insurance Broking Private Limited (SIBPL) and hence, SIBPL has become a subsidiary of your Company w.e.f. March 31, 2012.

The Statement pursuant to Section 212 of the Companies Act, 1956, containing details of your Company's subsidiaries in India and Overseas, forms part of the Annual Report.

In compliance with General Circular No: 2/2011 dated February 08, 2011 of Government of India, Ministry of Corporate Affairs, the audited statement of accounts along with the reports of the Board of Directors and Auditors relating to your Company's subsidiaries in India and Overseas are not annexed as required under Section 212 of the Companies Act, 1956. Shareholders who wish to have a copy of the full report and accounts of the aforesaid subsidiary companies will be provided the same by the Company Secretary on receipt of a written request from them. These documents will also be available for inspection by any shareholder at the Registered Office of your Company and the concerned subsidiary companies during business hours on all working days. Further, the documents shall be available on the website of your Company. However, as directed by the Ministry of Corporate Affairs, Government of India, the financial data of the subsidiaries have been separately furnished and form part of the Annual Report. Further, in line with the Listing Agreement with the Stock Exchanges and in accordance with the Accounting Standard 21 (AS- 21), Consolidated Financial Statements prepared by your Company include financial information of its subsidiary companies.

PARTICULARS OF EMPLOYEES

The names and other particulars of the employees as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, are set out in the annexure to the Directors' Report and form part of this report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTFLOW

Your Company has no activity relating to Conservation of Energy and Technology Absorption as stipulated in the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988. However, your Company uses information technology extensively in its operations.

During the year under review, the total foreign exchange earnings and expenditure of your Company was Rs.117 lakh and Rs.18,972 lakh respectively (previous year Rs.238 lakh and Rs.10,953 lakh respectively).

SREI WEBSITE

The website of your Company, www.srei.com, has been redesigned to present the Company's businesses up- front on the home page. The redesigned site carries a comprehensive database of information of interest to the investors including the financial results of your Company, dividend declared, shareholding pattern, any price sensitive information disclosed to the regulatory authorities from time to time, analyst reports, investor presentations, media coverage, corporate profile and business activities of your Company and the services rendered by your Company to its investors.

DIRECTORS

During the year under review, Mr. Kishore Kumar Mohanty resigned as Director of your Company w.e.f. June 07, 2011 due to his personal preoccupations. The Board wishes to place on record its sincere appreciation of the sterling contribution made by Mr. Mohanty towards the growth and development of your Company through his wealth of knowledge and experience during his long tenure of over ten years as a Director of your Company.

Further, Mr. Avinder Singh Bindra resigned as Director of your Company w.e.f. February 07, 2012 due to his personal preoccupations. The Board wishes to place on record deep appreciation of the contribution, advice and guidance extended by him during his tenure as a Director of your Company.

Mr. Saud Ibne Siddique was re- appointed as the Joint Managing Director of your Company for a further period of 3 (three) years w.e.f. April 01, 2012 based on the recommendation of the Compensation Committee of your Company. In accordance with the provisions of Section 302 of the Companies Act, 1956, the Members were furnished an abstract of the terms of re-appointment and payment of remuneration to Mr. Saud Ibne Siddique as Joint Managing Director of your Company.

Further, the status of directorship of Mr. Shyamalendu Chatterjee was changed from being a Non-Executive Director to an Independent Director w.e.f. April 01, 2012 in accordance with Clause 49I(A) of the Listing Agreement.

In accordance with the provisions of the Companies Act, 1956 and your Company's Articles of Association, Mr. Salil K. Gupta, Mr. Shyamalendu Chatterjee and Dr. Satish C. Jha retire by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offer themselves for re- appointment. All these Directors have filed Form DDA with your Company as required under the Companies (Disqualification of Directors under Section 274(1)(g) of the Companies Act, 1956) Rules, 2003. The brief resume / details relating to Directors who are to be appointed / re-appointed are furnished in the Notice of the ensuing AGM. The Board of Directors of your Company recommends the re- appointment of all the above Directors at the ensuing AGM.

In accordance with the approval of Central Government read with General Circular No: 4/2011 dated March 04, 2011 of Government of India, Ministry of Corporate Affairs, your Company has approved payment of remuneration of Rs.50 lakh by way of commission on net profits calculated under Section 198 of the Companies Act, 1956 to Non- executive Directors of your Company for the financial year 2011-12.

AUDIT COMMITTEE

The Audit Committee comprises of Mr. Salil K. Gupta, Mr. V. H. Pandya, Mr. S. Rajagopal, Mr. Sujitendra Krishna Deb, Mr. Shyamalendu Chatterjee, Independent & Non Executive Directors and Mr. Sunil Kanoria, Non Executive Director. Mr. Salil K. Gupta, Chief Mentor & Director of your Company is the Chairman of the Audit Committee.

DIRECTORS

RESPONSIBILITY

STATEMENT

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

(i) In the preparation of the annual accounts for the financial year ended March 31, 2012, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for the year;

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

(iv) the Directors have prepared the annual accounts for the financial year ended March 31, 2012 on a going concern basis.

AUDITORS

Messrs Haribhakti & Co., Chartered Accountants having registration No. 103523W allotted by The Institute of Chartered Accountants of India (ICAI), retire as Auditors of your Company at the conclusion of the ensuing Annual General Meeting (AGM) and have confirmed their eligibility and willingness to accept the office of Auditors, if re-appointed. Your Company has received a confirmation from Messrs Haribhakti & Co., Chartered Accountants to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. They have also confirmed that they hold a valid peer review certificate as prescribed under Clause 41(1)(h) of the Listing Agreement.

The Audit Committee and the Board of Directors of your Company recommend the re-appointment of Messrs Haribhakti & Co., Chartered Accountants, as the Auditors of your Company. Members are requested to consider their re-appointment as Auditors of your Company to hold office from conclusion of ensuing AGM to the conclusion of next AGM on remuneration to be decided by the Board of Directors based on recommendation of the Audit Committee of your Company.

SECRETARIAL AUDIT REPORT

As a measure of good corporate governance practice, your Company appointed Dr. K. R. Chandratre, Practising Company Secretary, to conduct the Secretarial Audit. The Secretarial Audit Report for the financial year ended March 31, 2012 is provided in the Annual Report.

The Secretarial Audit Report confirms that your Company has complied inter alia with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, Securities Contracts (Regulation) Act, 1956 and all the Regulations and Guidelines of SEBI as applicable to your Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and the SEBI (Prohibition of Insider Trading) Regulations, 1992.

ACKNOWLEDGEMENT

Your Directors would like to express their grateful appreciation for the excellent support and co-operation received from the Financial Institutions, Banks, Central & State Government Authorities, RBI, SEBI, Ministry of Corporate Affairs (MCA), Registrar of Companies, Indian and Overseas Stock Exchanges, Depositories, Credit Rating Agencies, Customers, Manufacturers, Vendors, Suppliers, Business Associates, Shareholders and other Stakeholders during the year under review. Your Directors also place on record their deep appreciation for the valuable contribution of the employees at all levels for the progress of your Company during the year and look forward to their continued co- operation in realisation of the corporate goals in the years ahead.

On behalf of the Board of Directors

Kolkata Hemant Kanoria

May 14, 2012 Chairman & Managing Director

 
Subscribe now to get personal finance updates in your inbox!