Notes to Accounts of DFL Infrastructure Finance Ltd.

Mar 31, 2014

1) Loans from Auctus Holdings Private Limited of Rs.600 lacs is repayable on demand without any interest

2) Out of the unsecured loans an amount of Rs. 57.21 Lakhs is in default for a period of 3 years

3) All term loans from banks and financial institutions are secured by first paripasu charge on fixed assets and second pari-pasu charge on current assets of the Company.

4) All working capital borrowings are secured by first paripasu charges on current assets and second pari-pasu charge on fixed assets.

5) Working Capital Term Loan and funded interest term loan are secured by first pari-pasu charge on current and fixed assets of the company.

The following collateral security shall be available to the banks to secure their Working capital term loan by way of first pari-pasu charge and to secure other debts by way of second pari-pasu charge.

Land & Building Situated at Plot No 37, Door No. 17, Ramakrishna Street, T.Nagar, Chennai 600 017, comprised in T.S. No 106, T.Nagar Village, Mambalam - Guindy Taluk

Land situated at Chokampatti Village, Kadayanallur, Tenkasi Tirunelveli District

2 Nos of Flat @ No. 110, Bhanumathy Ramakrishna Street, Saligramam Village, Saidapet Taluk Chengalpattu District

(Amount in Rs.)

Contingent liabilities and commitments (to the extent not provided for) As at As at 31.03.2014 31.03.2013

(i) Commitments

(a) Other commitments (specify nature) - -

9% Cumulative Preference Shares Dividend 34,652,146.00 34,652,146.00

4% Cumulative Preference Shares Dividend 8,904,000.00 8,904,000.00

43,556,146.00 43,556,146.00

1. Going Concern:

The Management of the Company approached the CDR Cell for restructure of loans given by consortium banks, which was approved. However as all the Banks did not approve the CDR/CDR Re-work schemes the Company is not able to implement the CDR rework scheme. The management is taking efforts to arrive at an acceptable One Time Settlement (OTS) with Secured Creditors. Hence, the financial statements are continued to be prepared on the basis of ''Going Concern''.

2. Directions issued by Reserve Bank of India:

The Reserve Bank of India had issued certain "Prohibitory Directions" under Section 45 JA and 45 L of Reserve Bank of India Act 1934 restraining the company to Sell, transfer, create charge or mortgage or deal with its property and assets; not to declare or distribute any Dividend; not to transact any business and not to incur any further liabilities. Further, the Company has been directed to submit periodical statements to Reserve Bank of India.

3. Equity Capital:

D. B. Zwirn Mauritius, which held 30,36,703 equity shares had entered into a Share Purchase Agreement with M/s. Auctus Holdings Pvt Limited on 13 th March 2012 to sell their entire holdings in the Company. As this attracted SEBI''s (Substantial Acquisition of Shares and Takeover) Regulations 2011, M/s. Auctus Holdings Private Limited made a Public Announcement on 20th March, 2012. An open offer was made to the existing shareholders on November 15th 2012. Total of 8750 shares were received in the open offer and the entire offer was accepted.

On 06th June 2013, the entire holding aggregating to 30,36,703 shares was transferred by D B Zwirn Mauritius to M/s. Auctus Holdings Private Ltd. Effective 06th June 2013 the company has become a subsidiary of M/s. Auctus Holdings Private Limited

4. Redeemable Preference Shares:

The Company has issued 2,22,60,000 Preference Shares at a face value of Rs. 10 per Preference Share aggregating to Rs.22,26,00,000 on 30th July 2008 to M/s. Asia Pragati Capfin Pvt Ltd carrying a coupon rate of 4% payable from 01st April 2012 which were redeemable on 31st December 2009. Pursuant, to the amendment agreement dated 27 th March 2012 to the Share Purchase Agreement, these Preference Shares are redeemable at a price of Rs. 8.54 per preference share and redeemable in 3 equal annual installments commencing from 31st March 2017 and ending on 31st March 2019. And the discount on redemption of preference shares will be accounted on redemption.

As a part of Originally approved CDR Package, a part of the debt amounting to Rs. 38,50,23,840 was converted to Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) carrying a coupon rate of 9% p.a. Consortium Banks (12 participating banks) . As per the said package these OCCRPS are redeemable in four equal annual installments at a premium of 3% commencing from the year 2013-14 onwards and ending in 2016-17.

5. Un-Secured Loans:

a. Unsecured Loan include Rs.600 lakhs received from Auctus Holdings Pvt Ltd, brought in as part of the Promoters Contribution as specified in the CDR Re-work package.

b. DFL Holdings and Securities Limited, a subsidiary company has given a loan of Rs. 91.38 lakhs to the Company. The terms of settlement including interest if any will be decided mutually between the Company and the subsidiary.

6. Corporate Debt Restructuring (CDR) Package Arrangement:

a. CDR Rework Package:

As the original CDR package could not be implemented within the stipulated time frame, the Company had applied for Re-work Package under CDR System and the same was approved by the CDR Empowered Group. As per the Re-work package, Preference Shares are Redeemable in four equal yearly installments commencing from the year 2014-15 and ending in 2017-18.

b. Implementation of CDR Re-work Package by Banks:

The CDR Re-work Package has been approved by only 6 out of the 12 participating Consortium Banks. Hence, the Company could not proceed with the implementation of the CDR Re-work package and the hence the implementation of CDR Re-work Package has ended in a stalemate.

7. One Time Settlement (OTS) Scheme with Secured Creditors:

Consequent to the non implementation of the CDR Re-work Package, the Company requested Consortium Banks to consider an OTS proposal to settle the Outstanding Liabilities comprised in the ''Borrowings'' of the Company and OCCRPS issued as a part of CDR Re-work Package. The Company has received the approval from three banks and the Company is pursuing with the remaining nine participating Banks.

The OTS scheme is being implemented by the Company and the Company is yet to settle the accepted offers. Pending execution and settlement of accepted amounts, impact of OTS will be recognised in the books of accounts upon settlement of OTS offer with respective banks.

In addition to the above, the Company was liable to pay State Bank of India Rs. 1182 lakhs comprised in ''Borrowings'' of the Company. The Bank had filed a suit against the company in Debt Recovery Tribunal, Chennai for the recovery of the same. In the meanwhile, the Company has negotiated for OTS to settle the entire outstanding at Rs. 300 lakhs. The Company had also deposited an amount Rs. 25 lakhs in an Escrow Account towards part payment of OTS Scheme. Pending execution of OTS Scheme, no interest has been provided for the current financial year. Also pending execution and settlement of accepted amounts, impact of OTS will be recognised in the books of accounts upon settlement of OTS offer with respective banks.

8. Loan and Dhandapani Properties Private Limited:

The Company had given a loan of Rs. 720 lakh to Dhandapani Properties Private Ltd in 2007 secured by way of a property of approximately 1 acre of Land at Whitefield, Bangalore. The security provided is an agricultural land registered in an Individual''s name and was given to the Company by way of an irrevocable Power of Attorney in favour of erstwhile Managing Director of the Company. However, Government of Karnataka has rejected the contention of the buyer and attached the property in favour of the Government of Karnataka. The Company, through the buyer has appealed for reversing the decision.

9. Current Assets:

Secured Receivable includes Hire Charges and Sundry Debtors valued at Agreement Value less Installments received and net off Un-matured Finance Charges and write offs. These receivable are considered good by the management of the company.

10. Loans and Advances:

Loans and Advances include an amount of Rs. 216.53 lakhs paid to Mr. R Ravichandran, erstwhile Managing Director towards Managerial Remuneration. The same has not been approved by the Shareholders and the application made to the Central Government has been rejected. The Company is taking steps to recover this amount.

11. Unpaid Dividend Account:

During the year the Company has transferred the entire balance outstanding amounting to Rs. 5.13 lakhs to Investor Education and Protection Fund. As on 31.03.2014, there are no amounts outstanding to be transferred to Investor Education and Protection Fund.

12. Value of Investment in Subsidiaries:

Company has invested an amount of Rs. 29.93 Lakhs in DFL Holdings and Securities Limited (Subsidiary Company). Though the subsidiary company is not actively entered in to income generating activity, the management is of the view that the suitable activity will be carried out Subsidiary in the near future and hence no provision for depreciation in the value of investment is considered necessary.

a. Subsidiaries : DFL Holdings and Securities Limited, Smart Invest Agency.Com

Private Limited.

b. Key Management Personnel : S. Balachander and B. Prakash

Potential Convertible share arise out of 9% Optionally Convertible Cumulative Redeemable Preference Share (OCCRPS). Upon conversion, these shares do not increase the loss available to equity holders and these shares are treated non-dilutive in accordance with Accounting Standard - 18. Therefore, Basic Earnings per Share will be the Dilutive Earnings per Share.

15. Provision for Taxation:

In the absence of profits for the current and considering the accumulated business and depreciation losses, provision for taxation has not been made.

Deferred tax asset arising on account of carry forward loss and provisions has not been recognized in the books of accounts on a conservative basis.

17. Dividend On Preference Shares:

In the absence of profits, the Company could not declare dividend on the Preference Shares for the financial year 2013-14 as detailed below

a. Dividend in respect of 4% Cumulative Preference Shares for the financial year amounting to Rs. 89.04 lakhs and cumulative upto 31st March 2014 amounting to Rs. 178.08 lakhs has not been provided for.

b. Dividend in respect of 9% OCCRPS for the financial year 2013-14 amounting to Rs. 346.52 lakhs and cumulative upto 31st March 2014 amounting to Rs. 915.54 lakhs has not been provided for.

Thus, the aggregate amounts outstanding to be provided for and paid is Rs. 1,093.62 lakhs.

18. Suits against the Company:

The Company had purchased from Central Electronics Limited certain machineries for which the payments were agreed to be made on deferred payment basis over a period of ten year along with interest. The cheques issued by the Company towards payment of installments were dishonoured. Central Electronics Limited resorted to legal action for dishonor of cheques and filed 6 cases against the Company under section 138 of the Negotiable Instruments Act claiming Rs. 51.20 lakhs which is pending before the Magistrate Court, Gazhiabad. In the meanwhile the Company negotiated for withdrawal of suit to arrive at an out of Court settlement and accepted to clear the dues in installments of Rs. 2 lakhs per month. The company had paid Rs. 4 lakhs and 1 case has been withdrawn.

The Company has obtained stay against the remaining cases from Hon''ble High Court of Allahabad and the matter is pending before the Magistrate Court, Gazhiabad.

The amounts payable by the Company is included under the head ''Unsecured Loans''.

Pending disposal of appeal the Company has not accounted for interest payable by it.

2. Contingent Liability:

Disputed Income Tax demand of Rs. 1648.07 lakhs (after adjustment of TDS Refunds of various assessment year amounting to Rs. 96.75 lakhs) together with interest is pending in appeal/representation before various forums. These cases pertain to Assessment years 1997-98 to 2011-12.

3. Previous year''s figures have been regrouped / reclassified to confirm to current period''s classification wherever necessary.

---

Mar 31, 2013

1. Equity Capital

D.B.Zwirn Mauritius, which hold as on the date of this report 30,36,703 equity shares has entered into a Share Purchase Agreement with M/s.Auctus Holdings Pvt Limited on 13th March 2012 to sell their entire holdings in the Company. As this action has triggered SEBI''s (Substantial Acquisition Of Shares and Takeover) Regulations 2011, Auctus Holdings Private Limited has made an Public Announcement on 20th March, 2012. An open offer has been made to the existing shareholders on November 15th 2012. Total of 8750 shares were received in the open offer and the entire offer has been accepted and payment completed. The transfer of shares from D.B.Zwirn to Auctus Holdings Pvt Limited is in progress.

2. Redeemable Preference Shares:

22,260,000 Preference Shares aggregating to Rs.222,600,000 are issued to M/s.AsiaPragatiCapfinPvt Ltd

a) Period of redemption :

l 1/3 by 31st March 2017 l 1/3 by 31st March 2018 l 1/3 by 31st March 2019

b) These Preference Shares will be redeemed at a price of Rs. 8.54 per share and discount on redemption of preference shares will be accounted at the time of redemption.

c) The RPS will carry a cumulative dividend @ 4% with effect from 01st April, 2012.

3. Optionally Convertible Cumulative Redeemable Preference Shares:

The Company had allotted 3,85,02,384 Optionally Convertible Cumulative Redeemable Preference Shares aggregating to Rs. 38,50,23,840/- with a Coupon Rate of 9% to the Consortium Banks as per the terms of the CDR Approval. As per the Re-worked CDR package these Preference Shares are Redeemable in four equal yearly installments commencing from the year 2014-15.

4. Corporate Debt Restructuring (C D R):

The Company received the Letter of Approval for the Re-work package of the Debt Restructuring proposal given by the company. However, only five of the Consortium Banks had given approval for this revised proposal approved by CDR. Hence the Company could not proceed ahead with the implementation of the CDR Re-work package.

5. Secured Loans:

l Secured Loans have been reclassified as: (i) Cash Credit Loans of Rs. 5724.42 lacs

(ii) Working Capital Term Loan of Rs.1650.11 lacs. Working Capital Term Loan is repayable in the subsequent six years commencing from the year 2012-13 and ending during the year 2017-18. However, the repayment for the same hasn''t started during the year 2012-13 and

(iii) Term Loan from Financial Institution of Rs. 254.70 Lakhs.

l Funded Interest Term Loans:

i. Interest Funded upto 30th September 2011 ( First CDR Package) is shown under FITL I and the Interest Funded thereafter is shown under FITL II.

ii. The Funded Interest is repayable five years commencing from the year 2013-14.

6. Un-Secured Loans:

Unsecured Loan include Rs.600 lacs from Auctus Holdings Pvt Ltd, brought in as part of the Promoters Contribution as specified in the CDR Re-work package.

7. Current Assets:

Stock on Hire /Hypothecation includes Hire Charges and Sundry Debtors valued at Agreement Value less Installments received and net off Un-matured Finance Charges and write offs. These are secured by the assets under the Agreements and considered good.

8. Loans and Advances:

Loans and Advances includes an amount of Rs. 216.53 lacs which was paid to Mr. R Ravichandran, erstwhile Managing Director towards Managerial Remuneration and yet to be approved by the Shareholders / Central Government.

9. Deposit account

The total deposit with bank as on 31.03.2013 includes Rs.5.13 Lakhs towards deposits maintained for unclaimed dividend. As on 31.03.2013, there are no amounts outstanding to be transferred to Investor Protection Fund.

Deferred tax asset arising on account of carry forward loss and provisions has not been recognized in the books of accounts on a conservative basis.

10. Dividend On Preference Shares :

In the absence of profits, the Company could not declare and pay dividend on the Preference Shares for the financial year 2012 -13. This dividend of Rs. 435.56 lacs has not been Charged to P&L and not provided for. The Provision will be made in the subsequent years subject to the availability of Profits.

11. Disputed Liability:

An amount of Rs.1200 Lakhs, Classified under ''Secured Loans'', pending before Debt Recovery tribunal, and an amount of Rs.61,20,799, classified under ''Other Liabilities'' is under dispute.

12. Contingent Liability:

Disputed Income Tax demand of Rs. 451.60 Lakhs together with interest pending in appeal/representation before various income tax authorities for the Assessment years 1997-98 to 2007-08.

13. The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard 17.

14. The Company had applied to Reserve Bank of India for classification as "Non-Deposit Taking NBFC". This was approved by RBI and a new certificate of Registration was issued.

15. Previous year''s figures have been regrouped / reclassified to confirm to current period''s classification wherever necessary.

16. Related parties Disclosures:

a. Subsidiaries : DFL Holdings and Securities Limited, Smart Invest

Agency.Com Private Limited.

b. Key Management Personnel : S. Balachander and B. Prakash

---

Mar 31, 2012

Note : 1 - BORROWINGS

Loans from related parties will be settled on demand

Unsecured loan of Rs. 61.21 Lakhs is in default for a period of 2 years

Residual Working Capital shall carry interest rate @ 10% pa upto 30.9.2011 and thereafter @ 10.75% pa.

All term loans from banks and financial institutions are secured by first pari-pasu charge on fixed assets and second pari-pasu charge on current assets of the Company.

All working capital borrowings are secured by first paripasu charge on current assets and second pari- pasu charge on fixed assets.

Working Capital Term Loan and funded interest term loan are secured by first pari-pasu charge on current and fixed assets of the company.

The following collateral security shall be available to the banks to secure their Working Capital Term Loan by way of first pari-pasu charge and to secure other debts by way of second pari-pasu charge.

Note - 2

The current Period figures are for 12 months whereas the previous period figures are for 18 months.

The formats of presentation of the financial figures have been changed from the previous format to comply with provisions relating to Revised Schedule VI of Companies act 1956.

1. Equity Capital

D. B. Zwirn Mauritius, which hold as on the date of this report 30,36,703 equity shares has entered into a Share Purchase Agreement with M/s. Auctus Holdings Pvt. Limited on 13th March 2012 to sell their entire holdings in the Company. As this action has triggered SEBI's (Substantial Acquisition Of Shares and Takeover) Regulations 2011, Auctus Holdings Private Limited has made an Public Announcement on 20th March, 2012 and has filed the Draft Offer Document with SEBI for the "Open Public Offer". Auctus Holdings Private Limited has also applied to Reserve Bank of India for approval of Change in the Promoters of the Company.

2. Preference Shares:

22,260,000 Preference Shares aggregating to Rs. 222,600,000 issued to M/s. Zwirn Pragati Capfin Pvt. Ltd., (now known as Asia Pragati Capfin Private Limited) should have been redeemed on 31st December 2009 at par value. However due to the financial position of the company, these preference shares have not been redeemed. The Company and the Preference shareholders have signed an MOU dated 27th March 2012 to amend the terms of the Preference shares as follows:

i. Period of redemption of the Preference Shares extended as below:

a. 1/3 by 31st March 2017

b. 1/3 by 31st March 2018

c. 1/3 by 31st March 2019

ii. These Preference Shares will be redeemed at a price of Rs. 8.54 per share and discount on redemption of preference shares will be accounted at the time of redemption.

iii. The RPS will carry a cumulative dividend @ 4% with effect from 01st April, 2012.

3. Optionally Convertible Cumulative Redeemable Preference Shares:

During the Year under Review, the Company had allotted 3,85,02,384 Optionally Convertible Cumulative Redeemable Preference Shares aggregating to Rs. 38,50,23,840/- with a Coupon Rate of 9% to the Consortium Banks as per the terms of the CDR Approval. As per the Re-worked CDR package these Preference Shares are Redeemable in four equal yearly installments commencing from the year 2014-15.

4. Corporate Debt Restructuring (CDR):

The Company had approached the Corporate Debt Restructuring Cell in July 2010 for restructuring of the Debts of the company. The Company's request was considered in the CDR Empowered Group and the CDR Package was approved in September 2010.

However, due to certain critical Conditions as laid down in the CDR Package could not be completed in time, the full implementation of the CDR was not possible. Subsequently, the Company had applied for a "Re-work" of the package which was approved by the CDR EG during March 2012. The salient features of the "Re-work" package are:

i. The cut-off date is 30th September 2011.

ii. Holding -on-operations is to be allowed to the Company till implementation of the CDR rework package which includes, non- recovery of installments falling due, non levy of penal charges for delays/irregularities and refund any such charges already charged and funding of interest on all term loans and working capital fund based limits for a period of 18 months from cut-off date.

iii. Fresh Working Capital facility to the tune of Rs. 13.24 crores to be sanctioned by the Banks for the financial year 2012-13.

iv. Promoters to contribute Rs. 6.00 crores during the Financial year 2012-13 apart from Rs. 4.00 crores brought in during financial year 2011-12 and further sum of Rs. 8.04 crores in subsequent two years.

v. The company has charged interest for the year in accordance with CDR scheme. The reconciliation with the banks in respect of interest are in progress.

5. Secured Loans:

a. Secured Loans have been reclassified as:

(i) Cash Credit Loans of Rs. 6704.16 lacs

(ii) Working Capital Term Loan of Rs. 1650.11 lacs. Working Capital Term Loan is repayable in the subsequent six years commencing from the year 2012-13 and ending during the year 2017-18 and

(iii) Term Loan from Financial Institution of Rs. 254.70 Lakhs and Term Loan from Banks of Rs. 13.35 Lakhs

b. Funded Interest Term Loans:

i. Interest Funded upto 30th September 2011 (First CDR Package) is shown under FITL I and the Interest Funded thereafter is shown under FITL II.

ii. The Funded Interest is repayable five years commencing from the year 2013-14.

6. Un-Secured Loans:

Unsecured Loan include Rs. 400 lacs from Auctus Holdings Pvt. Ltd, brought in as part of the Promoters Contribution as specified in the CDR Terms.

7. Current Assets:

a. Stock on Hire/Hypothecation includes Hire Charges and Sundry Debtors valued at Agreement Value less Installments received and net off Un-matured Finance Charges and write offs. These are secured by the assets under the Agreements and considered good.

b. Current Account Balance includes Rs. 400 lacs from Auctus Holdings Pvt. Limited towards Promoters Contribution kept in "No-lien" Account.

8. Loans and Advances:

An amount of Rs. 216.53 lacs was paid to Mr. R Ravichandran, erstwhile Managing Director towards Managerial Remuneration. However, this was not approved by the Shareholders in the Postal Ballet dated 18th December 2010. Subsequently, the Company had approached the Central Government for condonation which was not taken up pending Shareholders approval. Hence this amount was treated as Loan given to Mr. R Ravichandran and recoverable. The Company is taking steps for recovering this amount from Mr. R. Ravichandran.

9. Deposit account

The total deposit with bank as on 31.03.2012 includes Rs. 5.30 Lakhs towards deposits maintained for unclaimed dividend. As on 31.03.2012, there are no amounts outstanding to be transferred to Investor Protection Fund.

10. Agreements:

During the period under review, the Company has discontinued the arrangement with M/s Fullerton India Credit Company Limited which involved the collection of receivables on behalf of M/s. Fullerton India Credit Company Limited.

11. Dividend On Preference Shares Issued to Banks:

The Company has issued 3,85,02,384 Preference Shares to the Consortium Banks as per the CDR terms. The Preference Shares carry a cumulative Dividend of 9%. However, due to the absence of profits, the Company could not declare and pay this dividend for the financial year 2011-12. This dividend of Rs. 2,22,49,328 has not been Charged to P&L and not provided for. The Provision will be made in the subsequent years subject to the availability of Profits.

12. Property of approximately 1 acre of Land at Whitefield, Bangalore, was offered as a security for an advance of Rs. 7,20,02,000 given to Dhandapani Properties Pvt. Limited in the year 2007. This Loan was completely provided for during the year 2011 and charged off in the Profit & Loss Account. A suitable Note was also mentioned in that years Audited Accounts.

The Property under question - since it is an agricultural land was registered in an individual's name (agriculturalist) and power of attorney obtained in the erstwhile MD's name. However, Govt of Karnataka has rejected the contention of the buyer and attached the property in favour of the Government of Karnataka. The Company, through the buyer is making efforts to appeal and get the decision reversed. If the company is successful in the appeal, it will be reckoned as income in the year of occurrence.

As the advance was completely provided for and written off in the previous year itself and as stated above, no mention of the property is made in the books.

13. Contingent Liability:

Disputed Income Tax demand of Rs. 451.60 Lakhs together with interest pending in appeal/representation before various income tax authorities for the Assessment years 1997-98 to 2007-08.

14. The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard 17.

15. Previous year's figures have been regrouped/reclassified to conform to current period's classification wherever necessary.

16. Related parties Disclosures:

a. Subsidiaries : DFL Holdings and Securities Limited, Smart Invest Agency.Com Private Limited.

b. Key Management Personnel :

S. Balachander, B. Prakash, P. Sudhakar and A. Ramesh Kumar

---

Mar 31, 2011

1. Preference Shares:

22,260,000 Preference Shares aggregating to Rs.222,600,000 issued to M/s. Zwirn Pragati Capfin Pvt Ltd., (now known as Asia Pragati Capfin Private Limited) was to have been redeemed on 31st December 2009 at par value. However due to the financial position of the company, these preference shares have not been redeemed. The Company has received a communication dated 6th April 2011 from M/s. Asia Pragati Capfin Private Limited intimating the company of the default and calling upon the company to cure the event of default.

2. Corporate Debt Restructuring (C D R):

The Company had approached the Corporate Debt Restructuring Cell in July 2010 for restructuring of the Debts of the company. The Companys request was considered in the CDR Empowered Group and the CDR Package was approved in September 2010. The Banks Associated with this CDR Package have given their individual approvals. The Salient Features of the CDR Package are:

(a) The cut-off date is reckoned as 31 st March 2010

(b) Holding on operations will be allowed till the CDR package is implemented

(c) Individual Lenders with exposure less than Rs. 1 crore will have the option of exiting at a discount of 40%

(d) Principal payment moratorium upto 30.09.2011 for Term Loans and repayment in 72 monthly installments commencing from 01.10.2011

(e) Term Loans to carry ballooning interest rate varying between 7% and 16.5%

(f) Interest on Term Loans upto 30.09.2011 to be funded through FITL

(g) The irregular portion of the Working Capital amounting to Rs. 5928.35 lacs would be converted into 9% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) (70%) and Working capital Term Loans (WCTL) (30%).

(h) The OCCRPS shall be redeemed in 4 equal installments starting from 2013-14 with a premium of 3%

(i) The WCTL shall be repaid in 72 monthly installments.

(j) The lenders shall extend additional limits to the tune of Rs. 1664.14 lacs

(k) The promoters will have to bring additional contribution of Rs. 17 crores over the next 5 years.

Based on the Letter of Approval, the Master Restructuring Agreement (M R A) has been signed by the

Consortium Banks.

The Company would get the following benefits:

Particulars Rs in Lakhs

Reduction in interest 316.08

Conversion of irregular portion of the working capital to Preference Shares 4149.85

Capital,Infusion by Promoters over the next 5 years 1700.00

Additional Credit from the Consortium Banks 1800.00

With the CDR Proposal fully implemented and put through effectively the Net worth of the company is expected to improve and become positive.

3. Reduction in interest consequent to adoption of approved CDR package

As per the Corporate Debt Restructuring package approved by the consortium banks the Company is entitled for a reduction in the interest rates on the outstanding amounts as on 01st July, 2010 compared to the rates generally charged by the respective banks on the approved financial facilities extended by each of them. The

Company had serviced the interest upto 30th June 2010 and due to this interest reduction the company has saved Rs.767.40 Lakhs in the interest charges debited to the Profit and Loss account for the period (July 2010 to March 2011).

4. Secured Advances

tSecured advances include an amount of Rs.720.02 lakhs due from Dhandapani Properties Private Limited for which necessary full provision has been made in the accounts during the year. The Security being land for which the title is in dispute with the Government of Karnataka, necessary steps are being taken by the company to regularize the same.

EXTRA ORDINARY ITEMS

5. One time Settlements

a. State bank of India:

Asia Pragati Capfin Private Limited had settled the loan of Rs. 10 crores to State bank of India. State Bank of India had approved a loan of Rs. 12 crores to the Company. In the settlement of Rs 10 crores to SBI after adjusting the interest Rs 833.41 lakhs is taken to profit & Loss account, being the reduction in the liability.

b. Bank of Baroda:

tAs per the approved package of the CDR the lenders whose outstanding is less than Rs. 1-00 lakhs on IstApril can opt to settle the amount at a discount of 40%. On moving he matter with BANK OF BARODA against the outstanding amount of Rs. 14.79 lakhs the company settled Rs, 9.22 lakhs leaving Rs. 5.58 lakhs transferred to Profit & Loss account

c. HSBC

The Company moved HSBC for one time settlement as per the mutual agreement reached against the outstanding as per books of Rs 937.80 lakhs the Company settled Rs. 187.56 lakhs leaving Rs. 750.24 lakhs transfer to Profit & Loss account .

6. Loans and Advances:

Loans and Advances includes Rs. 204.70 Lacs on account of Managerial Remuneration for which the Approval are awaited.

7. Deposit account

The total deposit with bank as 6n 31.03.2011 includes Rs. 5.30 Lakhs towards deposits maintained for unclaimed dividend. As on 31.03.2011, there are no amounts outstanding to be transferred to Investor Protection Fund.

8. Deferred Tax Assets / liability Rs. in Lakhs

Particulars 3I.03.20H 30.09.2009

Opening Balance NIL NIL

Less Reversal of Deferred tax asset NIL NIL

Add: Liability on account of depreciation NIL NIL

Total NIL NIL

Deferred tax asset arising on account of carry forward loss and provisions has not been recognized in the books of accounts on a conservative basis.

9. Assignment:

During the period under review, the Company has terminated the agreement with M/s Fullerton which involved the assignment of the assets / receivables .

10. (A) Remuneration to Managing Director

a. (Period - 1.10.2009 - 31.03.2010) Rs. In Lakhs

31.03.2011 30.09.2009

Salary 12.00 23.75

House Rent allowance 3.60 7.06

Companys Contribution to PF 1.44 2.85

Others 12.21 23.71 Total 29.25 57.37

b. The re-appointment and increase in remuneration of the Managing Director as approved by the Board of Directors in their meeting held on 17.04.2010 was placed before the shareholders through Postal Ballot on the 18th December 2010 and since it was not passed the company is taking appropriate actions in this direction. The amount for the period 1.4.2010 to 31.03.2011 is shown under Advances.

(B) Remuneration to Whole Time Director (Period - 14.02.2011 - 31.03.2011)

Rs. In Lakhs

31.03.2011 30.09.2009

Salary 1.20 Nil

House Rent allowance 0.60 Nil

Companys Contribution to PF 0.14 Nil

Others 1.21 Nil

Total 3.15 Nil

The remuneration of the whole time director has been approved by the Board of Directors in their meeting held on 3rd March 2011, and by shareholders through the postal ballot where the results were pronounced on 20.05.2011

Determination of net profits in accordance with Sec 349 of the Companies Act. 1956 for remuneration

payable to Directors

Rs. In Lakhs Loss before tax as per Profit & Loss Account (2142.78)

Add: Directors remuneration charged in the accounts 32.40

Net loss (2110.38)

11. Earnings per share Rs. In Lakhs

Profit after tax excluding extra ordinary item (3732.02)

Weighted average number of equity shares 5954320

Earnings after tax (Basic) (62.68)

Face value per share 10.00

12. Contingent Liability:

Disputed Income tax demand of Rs.451.60 lakhs together with interest pending in appeal/representation before various income tax authorities for the Assessment years 1997-98 to 2007-08

13. The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard 17.

14. Previous years figures have been regrouped / reclassified to conform to current periods classification wherever necessary.

---

Sep 30, 2009

1. EXCEPTIONAL ITEM

SLUMP SALE - EFFECT OF REVERSAL

During the FY 2007-08 the company sold its NBFC activities by way of slump sale on a going concern basis to Zwrin Pragati Capfin P Ltd, an NBFC for a lumpsum consideration of Rs.4110 lacs. Subsequently ZP made a downward revision of consideration to Rs.2800 lakhsby way of due diligence agreement. A provision for Rs.1310 lakhs towards reduction in consideration was made with approval of shareholders and a profit of Rs.404.88 was recognised.

The Slump sale could not be proceeded with, as certain conditions precedent to the transfer could not be fulfilled by DFL. Consequently the effect of slump sale recognized during the FY 2007-08 were reversed and the assets and liabilities were brought back to original state.

PROVISION FOR IMPAIRMENT

The Company undertook a review of the receivables during the year and based on the review a sum of Rs.5129.54 lakhs being outstanding debtor balances are considered to be doubtful of realization. Hence a provision towards doubtful debts has been made in the books of accounts.

B. Balance Sheet:

2.1 Deposit account *

The total deposit with bank as on 30.09.2009 includes Rs. 14.30 Lakhs towards deposits maintained for unclaimed dividend. As on 30.09.2009, there are no amounts outstanding to be transferred to Investor Protection Fund.

2.2 Valuation of Investments

Provision of Rs. 1 lakh has been made in the Profit & Loss a/c in respect of the investment in shares of Dhandapani Business Services Limited, as there is a permanent diminution in the value of the shares.

2.3 The Companys proposal to restructure its debts has. been referred to CDR forum on 10th February 2010 by lenders having the requisite percentage of exposure.

3.0 Secured Advances

Secured Advances include an amount of Rs. 720.02 lakhs due from Dhandapani Properties (P) Ltd. Steps are being taken by the management to recover the same. Hence it is not considered a doubtful debt and no provision has been made in the Profit & Loss account in respect of the same.

3.1 Secured Loans include an amount of Rs. 2050.60 lakhs which is subject to confirmation from State Bank of India.

4.0 Contingent Liability:

Disputed Income tax demand of Rs.496.4 lakhs together with interest pending in appeal/representation before various income tax authorities for the Assessment years 1997-98 to 2007-08

An amount of Rs. 1135.32 lakhs being corporate guarantee has been given to M/s. Fullerton India Credit Company Ltd for Assignment of Receivables.

4.1 The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard 17.

4.2 Previous years figures have been regrouped / reclassified to conform to current periods classification wherever necessary.

4.3 Related parties Disclosures:

a. Subsidiaries: Dhandapani Holdings & Securities Limited, Smart Invest Agency.Com Private Limited.

b. Group Company of D B Zwim Mauritius - D B Zwim Mauritius Trading No.2 Ltd. - Zwirn Pragati Capfin Private Limited

c. Key Management Personnel: R. Ravichandran, Managing Director, Prakash Rayen, B Prakash and V S Murthy