The parts. The whole. The Srei story.

The parts. The whole. The Srei story.

Srei Infrastructure Finance Limited Annual Report 2009-10 The parts. The whole. The Srei story. Board of Directors Salil K. Gupta Hemant Kanoria ...

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Srei Infrastructure Finance Limited Annual Report 2009-10

The parts. The whole. The Srei story.

Board of Directors Salil K. Gupta

Hemant Kanoria

Sunil Kanoria

Chief Mentor

Chairman & Managing Director

Vice Chairman

Saud Ibne Siddique

K. K. Mohanty

V. H. Pandya

Joint Managing Director

Wholetime Director

S. Rajagopal

Daljit Mirchandani

Shyamalendu Chatterjee

Chief Financial Officer

Company Secretary

Auditors

Sanjeev Sancheti

Sandeep Kr. Lakhotia

Deloitte Haskins & Sells

Satish C. Jha

Chartered Accountants

Registered Office ‘Vishwakarma’ 86C, Topsia Road (South) Kolkata - 700 046 Tel: +91 33 2285 0112-0115 / 0124-0127 +91 33 6160 7734 Fax: +91 33 2285 7542 / 8501 E-mail: [email protected] Website: www.srei.com

1 billion = 100 crore 1 million = 10 lakh

Contents Corporate preface 02

Vision, mission and core values 05

Infrastructure wisdom 10

Chairman & Managing Director’s message 06

Customer affection 14

Strategic investments 16 Collaborations and associations 29 Srei-Quippo amalgamation 40

56

Fiscal integrity 32

Group structure 44

Mapping uncertainties Managing risks 60

governance 92

Shareholders’ information 100

Rich experience 35

Infrastructure report 47

Directors’ profile 66

Innovation 38 Analysis of our financial statements

Directors’ report 68

List of promoters 108

Report on corporate

Srei Infrastructure Finance Limited is not just a simple Non Banking Finance Company. It is an Infrastructure Finance Company. A Holistic Infrastructure Institution. With a footprint across the infrastructure value chain. Operationalised through an architecture to enhance corporate value. For today. For tomorrow. For shareholders. For employees. For society. This annual report highlights the parts. The whole. The real Srei story.

The parts. The whole.

2

SEZ and Industrial Parks

Quippo Rentals

Rural IT Infrastructure

Fee Based

Power

Transportation

Telecom Infrastructure

Venture Capital/ Fund Management

Investment Banking

Fund Based

Insurance Broking

Project Advisory

Project Financing

Equipment Financing

Annual Report 2009-10

Infrastructure Business

Investments

Holistic Infrastructure Institution

3

Srei, the engine of India's speeding infrastructure train. Through a ubiquitous presence across the entire infrastructure value chain.

Parentage

Presence

Started operations in 1989 as an infrastructure-

Headquartered in Kolkata, India

focused non-banking finance company (NBFC)

Pan-India presence with 73 offices; presence in

Visionary management team is headed by Hemant

Russia with three offices

Kanoria, Chairman and Managing Director; Sunil

Listed on the Bombay, National and Calcutta stock

Kanoria, Vice Chairman; Saud Siddique, Joint

exchanges

Managing Director and; K. K. Mohanty, Wholetime

First Indian NBFC to be listed on the London Stock

Director

Exchange

Managed by experienced team of world class professionals

Srei Group

Assets under management

Net worth

Capital adequacy*

Book value per share

Srei’s team

Rs.13,265 cr

Rs.1,279 cr

21.98%

Rs.110

1,424

March 31, 2010

March 31, 2010

March 31, 2010

March 31, 2010

March 31, 2010

* Srei (standalone)

4

Annual Report 2009-10

Vision To be the most inspiring global holistic infrastructure institution

Mission To be an Indian multinational company providing innovative integrated infrastructure solutions

Core values Customer partnership: At Srei, customer satisfaction is the benchmark for success. Srei delights its customers through a comprehensive range of personalised, fast, reliable, convenient, quality driven, and yet cost-effective financial services. Integrity: Business integrity is a way of life at Srei, which stands by integrity in all its dealings and ensures strict adherence to the highest standards of business ethics. Passion for excellence: Srei’s passion for excellence is instrumental in positioning it as India’s most innovative infrastructure solution provider. Respect for people: Srei acknowledges the fact that its people are its most valuable assets and accordingly provides them with the best possible work environment and treats them like family members. The Company rewards excellence and initiative. Stakeholder value enhancement: Srei is committed to earning the trust and confidence of all its stakeholders. Its growth focus, the ability to constantly enlarge its product basket while controlling risk and reducing the cost of its services resulted in enhanced value for its stakeholders. Professional entrepreneurship: Srei’s in-depth knowledge of the infrastructural financing business in India, coupled with its spirit of entrepreneurship, helps it overcome obstacles and complexities with professional expertise.

5

Chairman and Managing Director’s message

Hemant Kanoria, Chairman and Managing Director, Srei Infrastructure Finance Limited

6

Annual Report 2009-10

India is the vanguard of sustainable

Economy outlook

and all this had happened in spite of

growth globally and the black clouds

The world has changed dramatically

India being a severely infrastructure-

of gloom have passed over our

over the last two years. The financial

deficient nation. India’s domestic

country quickly. There is reason to be

crisis that begun with the sub-prime

demand growth remains robust.

upbeat because the economy is

crisis in the US mortgage markets had

doing well. The year under review had

spread to other continents riding on

been far less challenging compared

the ignorance about financial

to the preceding one, when the global

products created, unethically, to serve

financial crisis had dried up liquidity

the interests of a select few of the

from the market. Quite contrastingly,

financial world. USA is yet to return to

2009-10 marked a period of abundant

normalcy. Continued high

liquidity, thanks to some pro-active

unemployment has diminished

and accommodative policy

consumption demand which is

interventions from the Government.

proving to be a challenge for several

With the emphasis that Government

export-oriented nations which are

has laid on infrastructure creation by

highly dependent on demand from

envisaging a mammoth investment of

USA. The crisis that has surfaced in

USD 1 trillion during the Twelfth Five

Europe happened essentially due to

Year Plan (2012-17), India’s economic

the profligate ways in which certain

prospects have brightened. This

nations had run their governments.

certainly augurs very well for your

Many experts feel that there is

Company also.

problem brewing in China too. The fastest growing nation is said to be

The year under review was not one of

overheated and the government there

crisis management. Business

is trying its best to contain asset

sentiment had started improving since

bubbles.

the beginning and by the end of the year it was business as usual, at least in India. Your Company emerged stronger from the crisis and was able to conduct business smoothly, disbursing over Rs. 9,000 crore. During the difficult phase, we stood by our customers, with a partnership approach, offering them customised solutions. This act of solidarity strengthened our bondage with the customers and paid rich dividends.

To keep the domestic engine going, the Government’s decision to add capacity to the infrastructure sector is the most logical move. The India Growth Story has plenty of takers and many are willing to invest in it. Thus, funding should not be a problem, if bankable projects can be offered. Many experts have expressed their concerns over India’s fiscal deficit. But going by the Government’s actions, it seems that fiscal prudence is not going to supersede investment in infrastructure. And that is the most logical way because the long-term multiplier benefits from infrastructure creation will be manifold leading to a stronger economy, more purchasing power in the hands of the people and a significantly better standard of living. In addition, India’s proposed move to a common Goods & Services

We are perhaps witnessing the

Tax (GST) regime, the adoption of a

formation of a new world order. The

Direct Tax Code (DTC), the decision

good news is that India figures

to make scarce resources available

prominently in this new global

through auction (e.g. telecom

equation by being an emerging

spectrum, oil & gas blocks, coal

economy recording the second

mines, etc.), the proposed

fastest growth rate consistently over

disinvestment in select public sector

several years now. During the crisis

units are all opening up revenue

year, the Indian economy registered a

avenues for the Government. So,

6.7% growth and during the year

fiscal deficit will be reined in

under review it clocked 7.4% growth,

systematically.

7

Company outlook

take-off stage. Your Company is

One of the key reasons why Srei has

Your Company has maintained its

operating in all business verticals of

grown stronger in the last two

market leadership in the infrastructure

infrastructure from advisory to

decades of its existence has been its

equipment finance business, and

financing and development. For your

risk-mitigating measures. De-risking

expanded its presence in the

Company to expand the business

has become part of your Company

infrastructure project financing space.

multifold and move into the league of

DNA. Apart from following stringent

The fee-based activities of your

large infrastructure players in the

provisioning norms for non-performing

Company also witnessed healthy

country, it requires larger net worth.

assets (NPA), there has always been

growth. Srei’s consolidated total

Therefore, the Company proposed to

an emphasis on collective decision-

income and profit (after tax) stood at

amalgamate Quippo Infrastructure

making so that chances of error

Rs. 972 crore and Rs. 157 crore

Equipment Ltd. with Srei creating a

arising from individual judgments are

respectively as on March 31, 2010.

much larger entity. This synergistic

minimised.

During the year under review, the total

integration will result in your Company

assets under management stood at

being present in all sectors of

Rs. 13,265 crore.

infrastructure like telecom, oil & gas,

With large investments envisaged by the Government in the infrastructure sector and your Company gaining knowledge and acquiring skills over a period of twenty years, it is now at a

8

roads, power, ports, industrial parks and rural IT infrastructure; besides being in equipment leasing, rentals and auctioning, project financing, project development, advisory and fund management.

The sound business model coupled with the credibility in the market helps your Company to borrow at competitive rates from both domestic and international sources. Various equity investors have also evinced interest in some of the strategic businesses. Srei shares a great

Annual Report 2009-10

rapport with global equipment

this domain is also evolving. In such a

We thank you for your support and we

manufacturers. BNP Paribas

scenario, regular feedback to the

hope that with a larger capital base,

association has added an edge to the

Government and relevant government

your Company will scale new heights

competitiveness because the market

bodies on various policy and

in its infrastructure ambitions.

leadership coupled with BNP linkage

regulatory issues is a must. Some of

has made your Company a natural

the recommendations get accepted,

point of reference for new entrants in

some not – but that is the way how it

the equipment manufacturing space.

works towards creating an

Srei’s expertise in providing finance

environment more appropriate for

and project advisory services has also

private sector involvement in

endeared it to the construction

infrastructure creation.

companies and project developers who are willing to form consortia in undertaking infrastructure projects.

Thank you.

Hemant Kanoria Chairman & Managing Director

Srei team is extremely dedicated, innovative and customer oriented. They have steered your Company

Regular dialogue with the Government

through very difficult times and almost

is an integral part of development of

doubled the growth rate in the year

infrastructure sector in the country.

under review. The cohesive and

Private sector participation in

collective teamwork will ensure a

infrastructure projects is picking up.

bright future.

Therefore, the regulatory regime in

Srei team is extremely dedicated, innovative and customer oriented. They have steered your Company through very difficult times and almost doubled the growth rate in the year under review. The cohesive and collective teamwork will ensure a bright future.

9

Infrastructure wisdom

Across the spectrum

“Srei, at the epicentre of India’s infrastructure sector”

development, equipment financing

understanding of various

(outright purchase, operating lease,

infrastructure sectors and thus

Over its two decades of existence in

rental or exchange lease), asset

provide a foundation to position itself

the field of infrastructure financing,

sale/auction, insurance broking,

as a holistic infrastructure institution.

Srei has developed a unique business

capital market and fund management.

model that ensures presence across

The journey that started with

the entire value chain – advisory

equipment financing had enabled Srei

services, project financing, project

to gain deep domain knowledge and

10

‘Relationship Management’ is one of the corner-stones on which the Srei model has been built. Srei enjoys excellent terms with various

Annual Report 2009-10

infrastructure stakeholders namely

comprising a prudent mix of fund and

project developers (big and small),

fee-based revenue verticals. The

equipment manufacturers (global and

management was aware that a

Indian), and financial institutions

presence in project financing was a

(domestic public sector banks,

must for being considered as a

private commercial banks, foreign

serious player in infrastructure. In

banks, international funding

addition, each such project opens up

institutions and institutional investors).

doors for multiple revenue

The ability to understand the

opportunities like equipment

dynamics of these players and to

financing, insurance broking, advisory

bring them together on a common

fees, etc. Srei could also become a

platform for a project-specific cause

stakeholder in a project, arrange

so that their respective strengths can

equity investment (from the capital

be harnessed is something that is

market or private investors) or engage

unique to Srei. This differentiates Srei

in debt syndication.

from its peers.

The presence across the value chain

Srei’s competitive edge thus positions

offers a win-win proposition for all. On

it favourably to leverage on the ever-

one hand, the customer gets all

expanding opportunities in this space.

services for his entire project life cycle

Srei's ability to provide all

under one umbrella and on the other,

infrastructure related services makes

a single project yields multiple

it the most preferred partner for most

revenue streams for Srei. And this

infrastructure players in India.

was possible because Srei entrenched itself firmly at the base of

“Srei, a holistic infrastructure institution”

Sunil Kanoria, Vice Chairman, Srei Infrastructure Finance Limited

the infrastructure value chain, making it easier to climb thereafter.

Having started with fund-based business of equipment financing, the

“Srei at grassroots”

Company quickly realised that in

Since its inception during the late

order to figure among the Big League

Eighties, Srei selected to cater to the

of infrastructure players, reliance on a

lower end of the infrastructure

single channel of business would not

pyramid – the equipment financing

suffice. This prompted Srei to

needs of the micro, small and medium

gradually develop supplementary fee-

entrepreneurs (MSMEs). Thereafter,

based revenue models and also make

the Company distinguished itself

strategic investments in select

beyond traditional lending and

ventures with high growth potential.

devised a novel relationship model

This evolved a business model

based on the three pillars --

The presence across the value chain offers a winwin proposition for all. On one hand, the customer gets the service for his entire project life cycle under one umbrella and on the other, a single project yields multiple revenue streams for Srei.

11

relationship (customer’s interest in

where the equipment can be re-

organised equipment market size of

mind), partnership (mutual interests in

deployed during their repayment

around USD 3.5-4 billion. This is luring

mind) and ownership (people interest

cycle. Srei, through GoIndustry Henry

a lot of global manufacturers to India.

in mind). The Company’s business

Butcher, can also provide customers

Srei, by virtue of its market position

model proved to be more emotional

a suitable exit route for disposing off

and domain knowledge, is poised to

than financial; within the financial, it

the equipment through auction.

be the first point of reference for such

proved to be more flexible than rigid.

players and reap benefits from such

The result: the Company did not

“Financer-cum-advisor”

create borrowers, it created

The value of Srei’s domain and asset

entrepreneurs.

knowledge is something that is not

new associations.

visibly captured in its balance sheet.

“Srei, adding value as a whole”

“Srei - more than just financing”

Srei’s ability to guide its customers

As the infrastructure space has

from a techno-commercial

evolved, equipment financing has

As a service provider, Srei believes in

perspective in making the right choice

become very competitive. While

expanding its role beyond financing,

of assets is a result of the deep insight

project finance forms the middle of a

especially when it comes to

on product features and their

growth curve, the highest part of the

equipment financing. Srei’s role as an

applications that Srei’s sales

curve belongs to project development

advisor to its customer is the value

executives learn diligently from

and ownership. In line with its

that it adds that differentiates it from

equipment manufacturers. This helps

commitment to enhancing

its competition. On an average, every

in strengthening the business of the

shareholder value, the Company

year at least 30-35% of Srei’s

customers and therefore minimising

graduated to the project ownership

customers are First Time Users

scope of loans going bad. And Srei

end.

(FTUs). These customers mostly

brings scale to this knowledge model

belong to MSME segment and are

because of its healthy working

small entrepreneurs about to debut in

relationships with all major

the infrastructure sector. A proper

manufacturers many of whom are

guidance to such players on the type

multinationals.

Srei sees itself as the facilitating centre of a unique model, putting together stakeholders in the following ways: Bringing in domestic partners who

of equipment that would serve their

grew into construction companies

immense value to them. This not only

“Srei is a preferred partner for equipment manufacturers”

generates customer confidence and

In the competitive domain of

knowledge, minimise construction

hence loyalty, but also leads to

equipment financing, Srei retained its

cost, mobilise faster and maintain

generation of further business through

number one position for over 20

scheduled delivery.

referrals.

years. India’s economy is expected to

purpose and the type of financial product best suited for them delivers

In certain cases, Srei even goes one step ahead. In cases where the initial project cycle (for which the equipment has been financed) is shorter than the loan repayment cycle, Srei has even guided the customer on projects

12

grow 8-9% in the next few years and to make that possible India’s infrastructure has to grow at a rate at least twice that of GDP growth rate. Over the next few years, the resultant

from being asset finance customers. These players bring in local

Bringing in international players with technical knowledge, larger balance sheet, global experience and best practices. Improving project IRR through

boom in construction equipment

financial structuring and debt

demand is expected to treble the

syndication at attractive rates.

Annual Report 2009-10

“Srei controlling business flow from both ends”

prospect the country through

When the Company’s strategic

ground-up understanding of India’s

partners bid for large contracts, Srei

complex market realities. Srei is

not only provides them with the entire

ideally poised to play that role of a

basket of services, including the

guiding partner and can provide such

option of joint bidding for the project,

players with a 360 degree picture of

but also identifies business

the infrastructure scenario and the

opportunities for its MSME and retail

opportunities to be tapped, making it

customers in terms of sub-contracting

easier for such players in making

assignments. Srei brings together

informed investment decisions. By

diverse parties with a focus on

helping entry of more foreign capital

speedy project implementation. The

into Indian infrastructure, Srei is also

various stakeholders also feel

contributing to nation building.

alliances with partners who possess a

comfortable working with Srei because of the Company’s expertise

“Srei as a policy facilitator”

in assessing various project related

A continuous dialogue with the

risks and taking steps accordingly to

Government and relevant government

mitigate them. Consequent to this

agencies is central to Srei’s business.

unique approach, major business

This helps in evolving an environment

flows through Srei.

favourable for enhanced private sector participation. Srei has made

“Srei - a beacon for global players interested in India”

several insightful representations and

The India Growth Story has generated

and regulatory issues. RBI’s recent

a lot of interest globally. Indian

move to create a new category of

infrastructure is on the cusp of a

NBFCs which are exclusively into

boom. A number of international

infrastructure creation, namely

players – both project developers as

Infrastructure Finance Company

well as global equipment

(IFC), is an endorsement of Srei’s

manufacturers are, therefore, on the

belief that the infrastructure focussed

lookout for business opportunities in

NBFCs deserve the right attention.

recommendations on various policy

Srei is ideally poised to play the role of a guiding partner and can provide international players with a 360 degree picture of the infrastructure scenario and the opportunities to be tapped, making it easier for such players in making informed investment decisions.

India. However, they find it easier to

13

Customer affection

Customer confidence = Sustained business growth

“Srei markets dreams” Srei’s biggest national contribution has been in the successful transformation of many of its retail customers into entrepreneurs. Over the years, the Company leveraged its strategic insight to provide guidance to its customers on various facets of the infrastructure business. The initial hand-holding by Srei converted many of them into credible players in the field of infrastructure. For instance, a

14

Jodhpur customer with revenues of around Rs. 30 crore approached Srei for project leads. Since Srei was bidding for a project, it asked the customer to partner. When Srei was awarded the project, it was executed by the partner, the latter’s first BOT project. This arrangement did not just grow the customer’s business, but graduated him up the infrastructure value chain. The individual is now partnering Srei for a Rs. 350 crore

project in Haryana, transforming from an EPC contractor into a BOT partner in only a year’s time. Thus, in a way, Srei actually plays a pivotal role in enabling beginners to realise their dream by igniting the streak of entrepreneurism within them.

“A complement to strategic customers” Over the years, the Company helped grow a number of MSMEs into visible

Annual Report 2009-10

infrastructure creation companies (strategic customers) through timely funding. Wherever possible, Srei forms JVs with customers, helping them bid for projects. In doing so, Srei positions itself as a project development company that can share growth prospects with MSME and retail customers. In select cases, if financial closure is delayed, Srei provides bridge finance. So a strategic partner will not only look at Srei for equipment finance, but also in how the Company can help grow their business through more orders, faster financial closures and instant equipment deployment, among others. Consequently, Srei is not only about equipment finance but a holistic business strengthening partner.

“Srei facilitates customer growth” Srei assists customers in need. For instance, once a reputed domestic manufacturer initiated a large project in north east India that needed to be outsourced to contractors. Srei organised an event that made it possible for that player to prospect contractors. All those who attended got the opportunity to pitch their competence; when selected, they were able to arrange their equipment and funding at a single location. On

the other hand, the manufacturer was delighted having been able to interact with multiple quality contractors on a single occasion. Srei’s ground-level knowledge and client database resulted in a win-win situation for all.

“Srei is present across the equipment value chain” Over the years, the Company’s unique customer proposition has comprised acquisition, deployment and exit of equipment. Acquisition: It provides customers with in-depth knowledge on products, use and project suitability. It empowers customers through loans, operating leases and exchange offers, rentals, among others. Deployment: It provides continuous asset deployment options across existing or new projects, minimising asset idling. Coverage of asset risk through provision of insurance is another value-add from Srei. Exit: It provides customers with multiple exit options. For instance, the asset owner can deposit the asset in Srei’s asset bank against rentals or make an outright sale.

D. K. Vyas, Chief Executive Officer, Srei Equipment Finance Pvt. Ltd.

Srei’s biggest national contribution has been in the successful transformation of many of its retail customers into entrepreneurs.

As a result, a Srei customer is one for life; his satisfaction keeps the Company in business.

Srei Group’s customer mix

A Srei customer is one for life; his satisfaction keeps the Company in business.

Customer base as on March 31, 2010: 18,045 MSME and retail customers as on March 31, 2010: 14,994 Strategic customers as on March 31, 2010: 3,051

15

Strategic investments

Perfect opportunities = Sterling returns

At the upper end of the infrastructure pyramid As an equipment finance company, Srei’s role was more of a facilitator in infrastructure creation. While that had a decent growth scope, the management was not content in restricting Srei’s role in just one facet of the entire

16

infrastructure value chain. Srei was keen to leverage on the knowledge and insight developed over the years in various infrastructure verticals and thus expand its ambit of activities. The logical way forward for Srei was to get into active infrastructure creation through project advisory, financing and development functions and ultimately

Annual Report 2009-10

graduate into project ownership through equity participation. Scope of growth from fund-based equipment financing is always limited. Thus, Srei’s decision to graduate into feebased advisory services and fundbased project financing was to enhance return on earnings (ROE) and increase shareholders’ value.

Important vertical for longterm sustainability Government of India realises that in order to keep the India Growth Story alive, stepping up the pace of infrastructure creation is a must. Indian infrastructure calls for urgent upgradation of its carrying capacity. After an investment target of USD 514 billion in infrastructure for the Eleventh Five Year Plan (2007-12), the Government has envisaged an even more ambitious USD 1 trillion investment for the Twelfth Plan. This speaks volumes about how infrastructure is increasingly seen as a growth driver for the economy. In keeping with this reality, Srei has identified key areas capable of growing exponentially and generate long-term sustainable returns. The Company felt that it was imperative to have project ownership in these areas and create a robust investment portfolio through equity participation. Accordingly it has made strategic investments in sectors like road, telecom tower infrastructure, rural IT infrastructure, power and industrial parks. Diverse as they may appear, the common thread that links the sector preference is their long-term relevance in accelerating the growth of the Indian economy.

The Srei edge Srei always believes in doing things differently. Its knack of venturing into unexplored territories and digging out opportunities hitherto gone unnoticed clearly demarcates Srei from the rest. This is highlighted in how Srei approaches road projects by bringing together various stakeholders and synergising their respective strengths in bringing down project cost while at the same time adhering to project schedules. This is also evident in how Srei has introduced pioneering processes and technologies to bring down operating costs of telecom service providers and thereby enhance telecom penetration. This is also showcased in how Srei is building up a rural IT infrastructure aimed at bridging the urban-rural digital divide by grooming a breed of village level entrepreneurs who work towards changing the face of rural India.

Anjan Mitra, Chief Investment Officer, Srei Infrastructure Finance Limited

Srei has identified key areas capable of growing exponentially and generate long-term sustainable returns.

Shareholder value creation Success in such innovative initiatives opens up a whole new horizon for Srei. With growth prospects very high for each of these segments, the sky is the limit for the ventures in which Srei has made strategic investments and these are expected to be huge valuespinners for the Company. Therefore, while presently the Company’s infrastructure investment portfolio stands at Rs. 542 crore, there lies huge intrinsic value in the ventures. As per the investment policy, Srei would like to stay invested in these ventures for a medium to long-term and look for an opportune time to unlock value through divestment.

17

Roads

Bridging India

18

Annual Report 2009-10

“Opportune sectoral entry” The business of equipment financing evolved from niche to commodity, a trend noticed early by the Company due to its longstanding experience. Consequently, it graduated along the infrastructure value chain to establish a strong foothold in project development, the highest rung of the infrastructure value chain. The Company’s experience made it possible to enter at the right junctures leading to maximum benefit. After prudent analysis, the Company entered the roads segment when the supporting Public-Private Partnership (PPP) model was still in its growth phase, maximising benefits. It was awarded 12 projects following an indepth analysis (facilitated by Srei’s understanding of terrain, environment and traffic) and innovative model developed for its project development business. Srei’s success in road projects was largely due to its unique business model whereby it collaborated with partners who brought in the experience and best practices thereby reducing project cost and ensuring timely project delivery.

“Srei facilitating growth during critical phases” While the Company may not intend to take an unduly large financial exposure on a project, it comes in early to disburse the first amount at the time of project groundbreaking. This early move is critical for timely project delivery, which in turn, leads to additional toll collection, reduces overheads and enhances credibility. This delivery is evident in the numbers: of the 12 projects awarded to the

Company, three are operational and generating more revenue than estimated. The remaining projects, at various stages, are expected to be completed on schedule. The result is that Srei is today a leading player in the country’s road-building industry.

“Srei derives multiple revenues from a single project” The revenue possibilities from a single project are lucrative in the following ways: Through road building, it is creating increased equipment finance opportunities; a quarter of road project cost comprises construction equipment. The Company also provides bridge loan financing (seed capital to start the project) to initiate projects before schedule and earn additional toll and other benefits following implementation. In turn, this creates an opportunity to invest in the project as a first mile financer. Srei is able to syndicate debt, widening its non-fund based income basket and exit when other lenders come in. When the Company invests in project equity, it adds value at each business stage.

K. K. Mohanty, Wholetime Director, Srei Infrastructure Finance Limited

Srei’s success in road projects was largely due to its unique business model whereby it collaborated with partners who brought in the experience and best practices thereby reducing project cost and ensuring timely project delivery.

While the average investment tenure for road projects stands at around 3 years, each project generates longterm cash flows that stretch up to 2025 years. On completion of projects, Srei can securitise toll revenues, an area where it possesses expertise. Besides, for road maintenance and toll collection Srei partners with companies that provide such services.

19

Telecom infrastructure

Connecting the world

20

Annual Report 2009-10

“Scaling towering heights” Quippo Telecom Infrastructure

“The company’s unparalleled implementation capabilities”

Limited (QTIL) was set up in the year

QUIPPO-WTTIL has witnessed an

2005 with a mission to provide

impressive all-round growth and

innovative shared telecom

success during the last financial year.

infrastructure solutions with world

The network roll-out of over 18,000

class technological prowess. QTIL

towers by Quippo-WTTIL in the last

was the first independent telecom

financial year is one of the largest in

infrastructure company in the country

the world. The company’s

and started its operations with a

Infrastructure Market Share (IMS) has

portfolio of around 100 towers and

gone up from 7% (March 2009) to

only one tenant per tower. Driven by

11% (March 2010). The incremental

the business strategy of innovation

Infrastructure Market Share (IIMS) of

and customer centricity, the company

the company has been the highest

has seen phenomenal growth in the

during this period at 35%. The

last five years, while providing end-to-

Tenancy Market Share (TMS) of the

end infrastructure solutions to its

company has also gone up from 8.5%

customers.

to 15% during this period.

In 2009, QTIL announced its

Additionally, QUIPPO-WTTIL entered

partnership with Tata Teleservices

into an exclusive tower sharing

Ltd. (TTSL) with the merger of their

contract with Unitech Wireless

passive infrastructure businesses,

following their foray into the Indian

resulting in the formation of Quippo-

telecom market with Telenor - world’s

WTTIL. The company further

seventh largest telecom company.

strengthened its leadership position

The roll-out of their services has been

with the acquisition of the tower arm

accredited as the most cost effective

of Tata Teleservices (Maharashtra)

rollout in the world by the Global CEO

Limited in early 2010. Today Quippo-

of Telenor. It helped Unitech Wirless

WTTIL is well positioned as one of the

reduce its capex by 70% and opex by

world’s largest independent telecom

50%, thus making it extremely

infrastructure companies with over

competitive from the beginning of its

39,000 towers and plans of rolling out

operations.

Arun Kapur, Chief Executive Officer, Quippo-WTTIL

QUIPPO-WTTIL has by far the highest tenancy of over 2 tenants per tower. Also, it is the strongest player in neutral host shared In-Building Communication Solutions (IBS) with installations already completed at most of the major airports.

nearly 25,000-30,000 additional company has by far the highest

“Value add through innovative technology play”

tenancy of over 2 tenants per tower.

As a true network enabler, Quippo-

Also, it is the strongest player in

WTTIL has always adopted a holistic

neutral host shared In-Building

approach towards its customers.

Communication Solutions (IBS) with

Today, QUIPPO-WTTIL is the

installations already completed at

strongest player in neutral host

most of the major airports.

shared IBS. This innovative service

towers in the next two years. The

21

enables seamless signals and offers

Another step reinforcing the

enhanced connectivity inside the

company’s commitment towards its

buildings through a unified interface

customers is the introduction of the

with any network available around the

one-of-its-kind Tower Operating

building, where the telecom operators

Centre (TOC). TOC connects all the

can simply plug-in for network

39,000 towers spread across the

coverage. IBS offered by the

length and breadth of the country with

company has seen strong traction

a 24x7 monitoring system. It is also

among telecom operators and owners

supported by a field work-force of

of public establishments, thus forming

more than 30,000 resulting in reduced

critical component of quality of

downtime and efficient remote

service improvement initiatives of

monitoring mechanism.

telecom operators. Base Transceiver Station (BTS) Hotel is another innovative and pioneering concept designed by the company to provide uninterrupted connectivity to operators at complex locations using the existing street level infrastructure. Quippo-WTTIL has successfully piloted the first ever shared BTS Hotel concept of the country in Bangalore. Catering to all cellular technologies, this model will offer reduced opex by enabling unlimited number of operators to share the same infrastructure more efficiently. This concept will be best suited for institutions such as congested localities, airports, industrial areas, townships, high-rise apartments and can be enhanced even for rural

“Attractively positioned for the future” The company’s telecom business possesses an ability to grow attractively and sustainably. For instance, QUIPPO-WTTIL has contracts with major airports in the country to provide connectivity using its shared telecom infrastructure. This

2005 Quippo Telecom Infrastructure Ltd. (QTIL) was incorporated, India’s first independent shared telecom infrastructure company.

2006 One of the first and foremost partners in the "Project MOST (Mobile Operators’ Shared Towers)" upgrading world's first ever multitechnology, multi-shared tower, used by six operators (4 GSM & 2 CDMA) at Dhansa, New Delhi.

2007 QTIL acquired ~1,000 towers from Spice along with rights to roll out 12,000 towers.

represents a strong business upside

2009

assuring robust revenue growth

QTIL and TTSL merged their passive infrastructure businesses.

because any operator willing to provide services in these exclusive and high priority areas will now need to connect through the company’s

QUIPPO-WTTIL signed up a tower sharing agreement with Unitech Wireless.

unique in-building network, reassuring strong returns with constant increase

2010

in traffic and entry of more service

100% acquisition of tower business

providers.

of TTML by QUIPPO-WTTIL.

connectivity. This unique proposition

By the virtue of its sizeable tower

will prove to be a boon for offering

portfolio and a 3G-ready

seamless coverage in no entry zones

infrastructure, Quippo-WTTIL is

such as Raj Bhavan (Central Delhi),

strongly positioned as a preferred

Brigade Road (Bangalore) and

telecom infrastructure partner for the

Banjara Hills (Hyderabad) where

telecom operators to launch their 3G,

usually towers are not permitted.

WiMax and other value-added services.

22

Milestones

Annual Report 2009-10

Rural IT infrastructure

300 million rural customers

“Srei deepens its reach” Srei Sahaj e-Village Ltd., a subsidiary of Srei Infrastructure Finance Ltd., is an initiative aimed at bridging the digital divide between urban and rural India, supplementing the efforts of Government of India’s National eGovernance Project (NeGP). In six states viz. Assam, Bihar, Orissa, Tamil Nadu, Uttar Pradesh and West Bengal, Srei Sahaj has a mandate of setting up over 28,000 Common Service Centres (CSCs) which would

provide to rural households a host of G2C and B2C services on-line to over 300 million rural customers. Such services range from railway ticket booking, e-payment of telephone bills, electricity bills, insurance premium, offering e-learning courses and computer courses, digital photography, registration of birth and death records, maintenance of land records and soil testing records, etc. The onus of operations and management of the CSCs rests on the Village Level Entrepreneurs (VLEs)

who become stakeholders in the CSCs with an initial investment. The CSCs are therefore sources of new employment generation. For decades, rural India remained under-served on account of limited access to technology. In one sweep, Sahaj expects to level the playing field. With an agenda of promoting inclusive growth, provision of such services through Sahaj facilitates bringing remote rural areas into the mainstream economy.

23

“Bringing rural India within service providers’ reach” Rural India accounts for nearly 40% of GDP and almost 70% of India’s population reside there. The network of CSCs (though restricted to only six states now) is poised to serve as an invaluable avenue for extending numerous services in the rural hinterland. Consider the following - for a utility provider who needs to collect outstanding in a cost-effective way or a product manufacturer who needs instant national reach or a mobile operator which wants to market its offerings or an insurance company collecting a premium. All such service providers can use Sahaj’s ready-toserve distribution network that extends beyond the block and gram panchayat level accessible only to a few. Successful roll-out of such services can end the tedious practice of villagers commuting to the nearest town to avail such services. This is a revolutionary initiative and needs to be replicated in all states.

“A viable marketing and distribution platform” There is a rich distribution capital resident within the company. Srei Sahaj has established an identity of its own in rural India, at least in the six states where it is presently operational. This is a kind of firstmover advantage which can be explored in order to market products/services or even in launching new products/services in the rural economy. Srei Sahaj, now being characterised by government recognition, people trust and brand confidence, can serve as an ideal platform for doing this.

24

“Opportunities unlimited” Rural India continues to lag behind urban India on crucial parameters. For example, India’s telecommunication network – 654 million subscribers and 618 million mobile phone connections as on May 2010 – is the world’s second largest, but in terms of tele-density rural cellular penetration is at around 30% compared to 90% plus figure in urban India. This reflects the huge scope of growth in rural cellular telephony. Similarly, the penetration of insurance in rural India is dismal. Even as India accounts for 16% of the world’s population, nearly 80% have no access to life, health and non-life insurance products. Life insurance penetration is a low 4.1%; non-life penetration 0.6%. Penetration is very low in rural India. These are expected to correct faster due to increasing rural incomes, growing needs for insurance products among rural masses and increasing penetration of banking in rural areas. In fact, even after 60 years of independence, financial inclusion remains a challenge for rural India. As rural cellular penetration increases and as the situation of financial inclusion improves in rural India, the CSCs can emerge as the perfect platform for services like payment of phone bills and insurance premium. Also, the government’s thrust on basic amenities like electricity and water has the potential of creating revenueearning opportunities for CSCs when rural households start paying those bills through these centres. The National Rural Employment Guarantee Act (NREGA) further expands Sahaj’s scope of activities.

Srei Sahaj outlets grew from 1,600 as on March 31, 2008 to 11,317 as on March 31, 2009 and 15,513 as on March 31, 2010. Each Srei Sahaj centre has a partnership approach; physical infrastructure is invested by the VLE, while the IT infrastructure networking and basic endsupport are invested by the company.

Annual Report 2009-10

Power

Distribution to generation

25

“Foray into power sector” With India’s peak power deficit at around 15% and growing, and with power generation targets in government plans increasing by the year, Srei realises how essential it is to have a presence in the power sector. The Company secured its place in the power sector through India Power Corporation Limited (IPCL) and subsequently ventured into providing rental proposition in the area of gasbased power generation through Quippo Energy Pvt. Ltd. (Quippo Energy) following Quippo’s amalgamation into Srei. Aiming to carve out a bigger pie in the power sector opportunities in the country, Srei, along with consortium partners, successfully steered ahead of its peers through acquisition of controlling stake in DPSC Ltd. (formerly Dishergarh Power Supply Corporation Ltd.), second of the two private sector power distribution companies in Bengal – in January 2010. Established in the year 1919, DPSC Ltd. is engaged in power generation, transmission and distribution, specifically in the industrial belt of Asansol in West Bengal, having an installed capacity of 42.2 MW and combined distribution capacity of 170 MVA. Aligned to its business proposition, Srei expects to reap benefits from its power sector initiative capitalising on opportunities in equipment financing, project advisory and contract syndication due to its longstanding experience in designing and implementing costeffective projects.

26

“Pioneering concept of providing gas-based power solutions through leasing” Srei entered in the area of providing gas-based, eco-friendly power solutions through Quippo Energy which provides users a unique rental proposition - an alternative to "buy" equipment for gas-based power generation. Quippo Energy possesses gas-based power and steam generation capacity of 54 MW. While customers operate these assets to generate power and steam, Quippo Energy provides back-up support that ensures uninterrupted cost-effective power generation, a unique solution in a power deficit nation. With power deficit expected to continue over the medium term, the relevance of this business model is expected to gain currency.

“Quippo’s efficient model” The use of natural gas is being preferred in industrial uses – from 1 kcal of gas 70% energy can be extracted in terms of steam whereas coal generates only around 25% – Quippo Energy’s asset management efficiency facilitates an average asset uptime of 98.75%, resulting in the supply of clean, reliable and costeffective power. This competence was demonstrated: Quippo Energy facilitated a fuel switch change in a reputed multinational automobile company from diesel to natural gas with spectacular results.

Aligned to its business proposition, Srei expects to reap benefits from its power sector initiative capitalising on opportunities in equipment financing, project advisory and contract syndication due to its longstanding experience in designing and implementing costeffective projects.

Annual Report 2009-10

Industrial parks

Uniquely positioned -- West and East

“The right sector at the right time”

from the industrial sector are also

creates an environment for seamless

exhibiting a steady growth with India

exports. Industrial parks and Special

The Indian industrial sector is booming.

emerging as the preferred supplier of

Economic Zones (SEZs) have emerged

The manufacturing sector, constituting

numerous engineering and capital

as a preferred platforms for rapid

80% of the Index of Industrial

goods worldwide.

capacity creation as they provide a

Production (IIP), grew at 3.2% in 200809 and 10.6% in 2009-10, highlighting the growing significance of the industrial sector in accelerating India’s

Both these factors make it imperative to create a robust platform, which supports the rapid creation of manufacturing capacities as well as

plug-and-play environment for occupants, hastening capacity commissioning and a faster project payback.

economic growth. In addition, exports

27

“Srei’s involvement in industrial park projects is growing” As a responsible infrastructure player, Srei entered the growing industrial park space in 2008-09. It is currently developing two industrial parks – one near Navi Mumbai and the other near Kharagpur. The cumulative investment for these projects is

a hindrance. The land acquisition is expected to be completed in the current year. The industrial parks will provide a plug-and-play environment for occupants, whereby the developers will provide all infrastructures (power, utilities, roads, effluent treatment and land development) and open up the following windows from Srei:

estimated at Rs. 3,000 crore. Part of these industrial zones are designated as SEZs.

project blueprint counsel can be provided by the infrastructure advisory team

Srei is implementing the industrial park near Kharagpur through a

project funding can be managed by

Special Purpose Vehicle (SPV),

the infrastructure financing team. In

Bengal Integrated Auto Industrial Park

specific cases, the equipment finance

Private Limited. BIAIPPL is a joint

division could also participate in end

venture with West Bengal Industrial

product financing

Infrastructure Development

Srei-approved contractors –

Corporation with Srei holding indirect

customers for their equipment finance

economic interest. Part of the park is

business – could participate in the

designated as SEZ. This park focuses

land development process and this

on creating infrastructure for auto

could generate business for the

component industry and allied

equipment finance team

engineering and capital goods.

power can be provided by IPCL

The industrial park near Navi Mumbai

engaged in power generation and

is being implemented through another

distribution

SPV, Mumbai Futuristic Economic Zone Private Limited. This company will be a 100% subsidiary of Srei

internal roadways can be created by the infrastructure development team

(through Quippo). This park focuses

Srei’s business model therefore

on the engineering sector and part of

creates stakeholder value through a

this park is also designated as SEZ.

growing presence in India’s infrastructure space and a potential

“Srei is adding value to land”

generation of a multifold realisation

Srei selected non-fertile lands to

over purchase and development cost

establish industrial parks at both

in addition to miscellaneous business

locations. Consequently, land

opportunities.

acquisition – usually a challenge for infrastructure creation in India – is not

28

Srei’s business model therefore creates stakeholder value through a growing presence in India’s infrastructure space and a potential generation of a multifold realisation over purchase and development cost in addition to miscellaneous business opportunities.

Annual Report 2009-10

Collaborations and associations

Value enrichment

29

“Srei – the natural choice for being a partner”

much bigger than that of the

When it comes to forging a

stakeholders. This is essentially

partnership for prospecting

possible because of the fact that the

infrastructure opportunities in India,

Srei management is committed

Srei is almost an automatic choice.

towards keeping alive the

The various reasons that may be

entrepreneurial streak within its team

attributed to this are the following :

members. This is the source of the

two decade plus experience in infrastructure financing and a bottoms-up understanding of doing business in different verticals

combined value of the individual

path-breaking innovations that Srei has introduced over the years. This is what takes Srei’s managerial capability to an altogether different level.

adherence to the most stringent risk mitigation practices (those followed by Srei’s global fund providers) and therefore keeping NPAs at a minimum

This particular attribute of Srei has

Saud Ibne Siddique, Joint Managing Director, Srei Infrastructure Finance Limited

brought it closer to two very respected brands – BNP Paribas of France and the Tata Group in India –

ability to provide all services across the value chain excellent relationship with

who have forged two different types of collaboration with Srei. BNP belongs to that rare species of international

equipment manufacturers (both

financial giants who have emerged

Indian and foreign)

almost unscathed from the financial crisis, a testimony to its prudent risk

foray into project financing adopting a consortium approach in collaboration with project developers knack of thinking out of the box

management practices. The Tata name in itself is an epitome of integrity. While the Srei brand gets considerably enriched because of

while coming up with innovations to

these associations, the arrangements

provide customised solutions to its

are mutually beneficial. It is only

customers and also the ability to spot

because of the hidden value within

investment opportunities in

the Group that such reputed brands

unconventional areas

have selected it as a partner.

In addition, Srei has a unique strength

“Association with BNP expands the horizon of opportunity”

– its managerial acumen. On the basis of the requirements of a particular project, the Company can bring together different players on a common platform and synergise their strengths in order to generate a value

30

BNP Paribas Lease Group (BPLG), a wholly owned subsidiary of French financial behemoth BNP Paribas, is the market leader in equipment

When it comes to forging a partnership for prospecting infrastructure opportunities in India, Srei is almost an automatic choice.

Annual Report 2009-10

financing in Europe. When it decided

The already robust risk management

to enter the India market, Srei being

system of the JV stands further

the Indian market leader in the

strengthened.

corresponding field was an automatic

BNP) was formed as a 50:50 JV

“Association with Tata Group adding a new level of reverence”

between Srei and BPLG with

The demerger of Quippo Telecom

managerial control residing with Srei.

Infrastructure Ltd. (QTIL), the

Srei’s managerial competence and

business of passive telecom

robust systems and procedures were

infrastructure through tower sharing,

few of the key aspects that made this

and amalgamating it into Wireless TT

JV possible.

Infoservices Ltd., a Tata Group

Joint Venture (JV) candidate. Srei Equipment Finance Pvt. Ltd. (Srei

company in January 2009, has The BNP association has benefitted the JV in various ways : In addition to infrastructure and

created one of the largest independently managed tower companies in India. The portfolio of

construction equipment financing, the

more than 39,000 towers presents a

JV also decided to get into financing

huge opportunity of growth, especially

of the following equipment classes –

with the start of the next phase of

IT, medical and agriculture, drawing

telecom revolution when operators

on the expertise that BPLG already

start rolling out 3G, WiMax and other

has in these fields.

value-added services.

Global IT vendors, who are familiar with BNP, feel comfortable in dealing with the JV in India. Global equipment manufacturers (most of whom have dealt with BNP

The Tata association brings to the table multiple value propositions : Unmatched governance standards leading to greater transparency. Assured tenancies of more than two

abroad) making their debut in India

for more than 35,000 towers since

automatically approach the JV.

Tata Teleservices extend both GSM

When the JV enters into an association with global equipment manufacturers to finance its products,

and CDMA services using these towers. Adopting Tata Group’s processes

it can plug into all existing customers

and integrating those with Srei’s

of those players as also prospective

innovations will create unmatched

clients interested in products of those

value to the operators.

manufacturers.

31

Fiscal integrity

Reputation = Security + earnings

32

Annual Report 2009-10

“Deep networking insights” Srei’s growing funding of India’s infrastructure is supported by one of the largest banking consortia in the country. Besides, Srei brought investments from international institutions like DEG (Germany) in 1995, IFC (Washington) and FMO (Netherlands) in 1997 and thereafter from BIO (Belgium), Nordic Investment Bank (Finland) and Proparco (France). These institutions have reconciled their comprehensive due diligence with growing disbursements to Srei, an endorsement of the robustness of the latter’s business model. The result of these relationships translated into an ability to mobilise funds with speed: the Company has expanded the list of lenders by introducing new banks, mutual funds and financial institutions, a vindication of its longstanding industry respect. More importantly, the value of these relationships with bankers, mutual funds and financial institutions provided the Company with an insight into trends ahead of industry cycles. For instance, indicators that the global economy was at a tipping point came well before the September 2008 meltdown. The Company moved with speed, liquidated its short-term exposure and concluded borrowing deals at the best market costs. Based on its deep familiarity with financial products and reach into the market within India and abroad, the Company almost doubled securitisation volumes even as the securitisation market witnessed

shrank in volume. The Company’s depth was reflected in premium for deals arising out of superior asset quality, indicating the comfort of financial institutions, bankers and mutual funds in lending to Srei even in adverse external environment.

“On time. Every time.” The trust and credibility that Srei enjoys with its lenders is not captured by conventional accounting. For one, Srei survived economic slowdowns and periodic industry busts without corresponding liquidity issues or repayment rescheduling. The reality: Srei has grown consistently across a 20 year period in a business marked by high mortality.

“A pioneer in tapping international funding” Srei was among the first Indian NBFCs to access the international market for funds, opening the way for others to do the same. In 2005, it became the first Indian infrastructure financing NBFC to get listed on the London Stock Exchange.

“Optimising borrowing costs” Over the years, Srei created a buyer leadership in India’s financial sector, resulting in access to the best terms and lowest borrowing costs.

S. B. Tiwari, Head-Treasury, Srei Infrastructure Finance Limited

Srei was among the first Indian NBFCs to access the international market for funds, opening the way for others to do the same. In 2005, it became the first Indian infrastructure financing NBFC to get listed on the London Stock Exchange.

“Srei’s flexibility reduces delinquencies” Srei’s business focuses on the MSME and retail segment, marked by a mismatch between project cycle (about two to three years) and repayment cycle (about five years). In view of these realities, it is imperative

33

to evolve from the role of a traditional financer towards a business manager. The result: the Company provides advisory services in prudent equipment selection, project planning, manage clients’ business cycles, cash flow, profitability, adequate equipment redeployment and exit flexibility in addition to financing. The result: timely debt and interest consideration leading to significantly low NPAs. Even when the external environment became challenging (September 2008), Srei responded innovatively. It created a unique Srei Partnership Week during which its senior management interacted with customers in a personalised environment for a realistic insight into their respective businesses against the backdrop of the downturn. The Company was able to provide customised solutions which, in turn, improved the Company’s collections even during the difficult financial phase between September 2008 and March 2009.

“Srei provisioning in line with global standards” As regards management of NPAs and provisioning for bad loans, the Company has always adhered to the most stringent norms as followed by global financial institutions like IFC of Washington, DEG and KfW of Germany, FMO of The Netherlands, BIO of Belgium, among others. Those norms are even stricter than the RBI prescribed guidelines. The integrity of Srei’s balance sheet had been strengthened through the following

34

initiatives: Institutionalised capital adequacy ratio in 1997, a year before RBI stipulation. Its capital adequacy ratio was consistently higher than the RBI stipulation. Institutionalised its asset-liability maturity five years before RBI’s insistence on covering asset-liability mismatch (ALM) monitoring with processes and the creation of an asset liability management committee (ALCO).

P.C. Patni, Head-Treasury, Srei Equipment Finance Pvt. Ltd.

Created quarter-wise reports highlighting its performance and covenant adherence.

“Srei is environmentally more responsible” Srei began to respect global environment and social responsibility criteria well before the turn of the century. The guidelines stipulated that it could not lend to projects that displaced people, harmed people or adversely impacted the environment.

Srei’s financial snapshot, 2009-10 Capital employed was Rs. 7,849 crore as on March 31, 2010 Average debt cost for Srei was 9.82% in 2009-10 (10.63% in 2008-09) Cash balance was Rs. 291 crore as on March 31, 2010 Debt-equity ratio was 5.09 in 2009-10

Over the years, Srei created a buyer leadership in India’s financial sector, resulting in access to the best terms and lowest borrowing costs.

Annual Report 2009-10

Rich experience

Leveraging intellectual capital

35

“Srei, a strong foundation”

business partners for the project and

Connaught Place in New Delhi, Bus

The business of advisory and

contractors for managing parts of the

Rapid Transport System (BRTS)

consulting is brand-enhancing,

projects and all possible

project in Vizag and a number of

business-accretive and margin-

infrastructure related services.

JNNURM-linked transport projects in

widening. The business represents a logical extension of the Company’s conventional financing for the following reasons: The Company manages the businesses of its customers through

Over the last four years, the Company has provided advisory services for

knowledge repository.

advisor.

more than 68 projects with project

Others: The Company advised a

cost of over Rs. 70,000 crore; out of

number of projects in the social and

which 23 projects are at various

healthcare infrastructure spaces; it

implementation stages.

has worked on six major urban holistic development projects in Uttar

strategic advice and guidance, when consolidated, this represents a huge

various cities in the role of a project

“Srei’s experience in growth sectors”

Pradesh covering roads, bridges, car parks, solid waste management, etc.

Srei possesses rich experience in Private sector as well as government

various infrastructure segments.

sector project sizes are becoming larger and more complex, increasing

Roads: The Company has played the

the need for specialised advice. Srei

role of Advisor for various road

leverages its relationship-driven

projects. One of them is the

financial solutions model to provide

prestigious Ganga Expressway

project advisory services.

project; costing Rs. 30,000 crore

The Company’s advisory business is

“Working with dynamic corporates” The Company advised large and reputed corporates for some projects. Some of these are as follows: Siemens hired Srei Advisory team

which is the largest single Project

for the traction design work of the

under the PPP.

metro connecting Delhi airport and

fee-based and not constrained by

Connaught Place.

funds availability. The large balance

The Rs. 1,098 crore part elevated

sheet size of the company and deep

Agra Ring Road expressway project,

knowledge in regularity compliance

connecting the Taj Mahal to the

Lucknow Metro with Delhi Metro Rail

need are useful for eligibility for large

Yamuna Expressway, is another

Corporation.

projects.

milestone of the Advisory groups’ achievements in the road sector.

Srei’s services span the entire value chain: project conceptualisation,

Power Transmission: The Central

feasibility and detailed project report

Government launched three power

preparation, design support,

transmission projects and Srei has

attracting potential investors,

become project advisor for all three,

facilitating bid preparation and

the cumulative project size of which is

managing bid process, selecting

Rs. 5,550 crore.

potential developers, converting ideas

Transportation: The Company is

into value added business

present in Bangalore and Lucknow

opportunities, project funding, debt

metro rail projects and in monorail

syndication, equipment financing,

projects in Mumbai and Kolkata, the

insurance, getting international

airport linkage of Delhi Metro with

36

Detailed Project Report (DPR) of

Mumbai’s monorail project under execution by L&T appointed Srei as advisors. The Company was engaged in the detailed design of Bangalore Metro Track and Traction System with DB International of Germany. Srei has prepared the DPR for BRT Vizag and now is the Quality Control consultant for the same with McCormick Rankin International, Canada.

Annual Report 2009-10

Successful project management for

“In road to social sector”

these large clients will open avenues

The Srei Advisory is poised to enter

for the Advisory in generating more

into the social services including

business.

education, healthcare, skill development and rural employment

“Innovating the financial deal”

generation in a big way. The structure

The Srei advisory has enriched itself in

an advanced stage of preparation.

and software for such services are at

innovative financial structuring of PPP projects wherein the investment

“A step ahead”

requirement by the government

Srei Advisory is also working closely

authorities is reduced to the bare

with the other wings of the Company

minimum. Holistic development of all

including development and financing

civic amenities including roads, water

to bring best synergy and business

supply, sewerage treatment, car

opportunities for the group as a whole.

parking, decongestion, etc. were

We are targeting the power sector,

structured with no financial outgo from

city development, roads, industrial

the government even for the

parks, tourism, non-conventional

consulting services for six major cities.

energy sectors and others.

Such innovative models will be worked for many other cities and towns in the country.

Dr. Ratiranjan Mandal, CEOInfrastructure Advisory Group, Srei Infrastructure Finance Limited

The Srei advisory has enriched itself in innovative financial structuring of PPP projects wherein the investment requirement by the government authorities is reduced to the bare minimum.

37

Innovation

Mind power = Money power

38

Annual Report 2009-10

“Srei occupies attractive mind space”

the third largest construction

Srei stands for new business

464 exhibitors (140 international

concepts, unique business models,

exhibitors), Srei launched three

pioneering services, progressive

innovative customer engagement

management services, fresh revenue

programmes and the result was that

streams and new customer

in just four days, the Company

engagement schemes. The result:

created an unmistakable recall value

Srei has created more business

and concluded business for more

avenues and across sectors than any

than 1,000 equipment. Some of Srei’s

other Indian NBFC in the last two

path-breaking schemes which have

decades in the following manner:

made Srei synonymous with

Quippo Telecom: Pioneer in shared telecom infrastructure. Some of the

equipment exhibition in Asia featuring

innovation in the infrastructure fraternity of the country are as follows:

existing towers can accommodate up

Paison ki Nilaami: Srei auctioned

to 7-10 operators, enhancing viability.

equipment interest rates for the first

Besides, the entity’s technological

time in India in 2004 after the

solutions for enabling seamless signal

equipment cost, tenure and down

receiving in otherwise inaccessible

payment was fixed.

areas/zones add greater value to telecom operators. Further, the entity’s commissioning of ATMs inside telecom tower base stations has created additional revenue streams.

Srei Partnership Week: This was an innovative response to a The Company created this event to communicate with clients face-to-face

Quippo Energy Rental: India’s first

in a relaxed environment, covering 90% of its customers across all its

friendly, gas-based power solutions.

branches in India. The result: a

Also provides gas-based combined

decline in the number of potential

steam solutions.

NPAs through timely action. It also

public partnership to set up a rural IT infrastructure of over 28,000 CSCs in six states, aimed at bridging the country’s urban-rural digital divide, is fast emerging as India’s leading government-people interface.

Srei stands for new business concepts, unique business models, pioneering services, progressive management services, fresh revenue streams and new customer engagement schemes.

challenging marketplace in 2008-09.

energy rental company. Provides eco-

Srei Sahaj e-Village: A private-

V.V. Ramana, Zonal Head (North & West), Srei Equipment Finance Pvt. Ltd.

invited manufacturers to market equipment concurrently; the result was increased acquisition and financing activity; Srei generated business worth Rs. 600 crore. Insuring three-in-one: In 2008-09,

Debnil Chakravarty, Zonal Head (South & East), Srei Equipment Finance Pvt. Ltd.

the Company launched a new product wherein it arranged for an

“Introducing novel schemes”

insurance company to provide three

Srei enjoys an attractive track record

annual policies successively, the

of introducing novel schemes aimed

policy period synchronised with the

at enhancing customer delight and at

loan. The result: the client does not

the same time enhancing stakeholder

have to apply for renewing the

value. For instance, at EXCON 2009,

insurance policy for three years.

Srei enjoys an attractive track record of introducing novel schemes aimed at enhancing customer delight and at the same time enhancing stakeholder value.

39

Srei-Quippo amalgamation

Srei grows into a giant

40

Annual Report 2009-10

“Value Unlocking” Realising the ever increasing thrust that Government of India is putting on infrastructure sector, Srei sensed that this is the opportune time to explore the rich embedded value within the organisation. Accordingly a Committee of Independent Directors was set up in October 2009 to explore the growth opportunities and business restructuring/consolidation possibilities. Following the Committee’s recommendations, the Board of Directors of Srei at the meeting held on January 28, 2010 approved the proposal to amalgamate Quippo Infrastructure Equipment Ltd. (Quippo) into and with Srei with an objective to bring in synergistic integration among the various verticals of infrastructure businesses of Srei and Quippo.

“A perfect fit for the larger platform” The merger does not mean that Srei is merely adding a new business portfolio. It implies expansion of existing Srei portfolios in a wider spectrum of infrastructure services and a vital step in bringing all

infrastructure businesses under one fold. Following the amalgamation, Srei will be able to create a fully integrated and holistic infrastructure institution and expand the spectrum of its services to the high growth verticals of Construction, Oil & Gas, Telecom and Energy, hitherto managed by Quippo. This wider service portfolio will lead to increased degree of business de-risking and create an efficient and functional structure for the businesses, reducing operational costs and thereby increasing profitability. This will make each business to grow independently and the Group to grow collectively without any conflict of interest.

“Timed to perfection” Today as the Indian infrastructure sector is presenting huge opportunities, Srei and Quippo are well poised to reap benefits by leveraging on their longstanding expertise. The amalgamation would enable them to have access to greater financial resources, as well as enhance the managerial efficiencies, by effectively pooling the technical, distribution and marketing skills of

Bajrang Kr. Choudhary, Senior Vice President, Srei Infrastructure Finance Limited

The merger means expansion of existing Srei portfolios in a wider spectrum of infrastructure services and a vital step in bringing all infrastructure businesses under one fold.

“One initiative - Multifold growth opportunity”

India’s first tower rental company

India’s first integrated rig rental services

India’s first equipment rental company

Provides ecofriendly gasbased power solutions for short to medium term Provides gasbased combined heat solutions

Valuation and asset disposal

Provides equipment on rentals along with trained qualified and experienced operators

Quippo Energy Rental

Provides state-of-theart drilling equipment along with qualified operators

Quippo Construction

Over 39,000 telecom towers

Quippo Oil & Gas

Quippo Telecom

QUIPPO WORLD One of the largest independent tower company in the world

Provides online and offline auctioning and disposal services for plant and machinery

India’s first energy India’s first rental company equipment and industrial auctioneer & valuer

41

each other. It would definitely help them build up a much larger institution better placed to capitalise on the fast growing infrastructure opportunity.

“The merger unlocks fundbased growth potential” The Srei-Quippo merger is expected to increase Srei’s net worth from about Rs. 790 crore as on March 31, 2010 to an estimated Rs. 2,400 crore. Correspondingly, capital-adequacy ratio is expected to strengthen significantly. This provides an opportunity to grow the fund-based business manifold.

“Rich embedded value” The proposed merger will achieve the following things for Srei: Brand: Srei will emerge as a holistic infrastructure institution, extending from financing infrastructure to a significant presence in rapidly growing infrastructure spaces.

merger, the promoters’ holding will increase from 30% to 46%, strengthening their commitment to grow the business further and faster.

The swap ratio for the merger is fixed at 3 equity shares of Srei for every 2 equity shares held in Quippo Srei also proposes to make bonus issue of 4 equity shares for every 5 equity shares held in the company by its shareholders. The swap ratio shall accordingly stand adjusted. The Appointed Date of the amalgamation shall be April 1, 2010 Key Advisors for the transaction include: Transaction Advisors: Kotak Mahindra Capital Company Limited; DBD Business Solution Pvt. Ltd.

Greater Synergy: Synergies across the group as well as tie-ups/alliances with companies, government agencies, etc., and niche expertise within the individual businesses can be utilised to capture greater share of market and to provide more comprehensive services to its customers.

Fairness Opinion: ICICI Securities Limited (to Srei); JM Financial Consultants Pvt. Ltd. (to QIEL)

Enhanced Net worth: Increase in net worth of the combined entity to facilitate capitalising on future infrastructure opportunities.

Due Diligence: Accounting – Ernst & Young Pvt. Ltd.; Legal – Amarchand & Mangaldas & Suresh A. Shroff & Co.

Skills: Earlier, diverse competencies in the two companies could not be leveraged effectively. The merged entity will now possess skills and knowledge needed to grow across in diverse segments. Promoter’s stake: Following the

42

Sanjeev Sancheti, Chief Financial Officer, Srei Infrastructure Finance Limited

Valuation Report: KPMG India Private Limited; BDO Consulting Private Limited Legal Advisors: Amarchand & Mangaldas & Suresh A. Shroff & Co.

The aforesaid Scheme of Amalgamation has been approved by Equity shareholders of the Company with requisite majority on May 31, 2010.

The Srei-Quippo merger is expected to increase Srei’s net worth from about Rs. 790 crore as on March 31, 2010 to an estimated Rs. 2,400 crore.

Annual Report 2009-10

43

Group structure Srei Infrastructure Finance Ltd.

Subsidiaries*

Sub-subsidiaries

Joint Ventures

Srei Capital Markets Ltd.

Srei Venture Capital Ltd.

Srei Infrastructure Advisors Ltd.

Srei Sahaj e-Village Ltd.

International Infrastructure Services GmbH

Global Investment Trust Ltd.

Bengal Srei Infrastructure Development Ltd. (JV with WBIDC)

Zao Srei Leasing

Hyderabad Information Technology Venture Enterprises Ltd.

Cyberabad Trustee Company Pvt. Ltd.

Srei Equipment Finance Pvt. Ltd. (Srei BNP Paribas Lease Group JV )

Srei Insurance Broking Pvt. Ltd.

*Other subsidiaries are Srei Forex Ltd., Controlla Electrotech Pvt. Ltd., Srei Infocomm Services Ltd., Srei Mutual Fund Asset Management Pvt. Ltd., Srei Mutual Fund Trust Pvt. Ltd. and Srei Advisors Pte. Ltd.

44

Annual Report 2009-10

Srei Equipment Finance Private Limited

Srei Infrastructure Advisors Limited

Srei Equipment Finance Private Limited (Srei BNP) is a

Srei Infrastructure Advisors Limited (SIAL) provides

50:50 joint venture between Srei Infrastructure Finance

advisory services in the infrastructure sector including

Ltd. and BNP Paribas Lease Group (BPLG), a wholly-

debt and equity syndications and investments.

owned subsidiary of BNP Paribas, France.

Leveraging on Srei’s wide experience and functional

The Company caters to the equipment finance

expertise in infrastructure sector, SIAL offers integrated

requirements of the infrastructure and mining industries

and comprehensive professional services towards

and enjoys a dominant leadership position in this segment

management and implementation of infrastructure

besides expanding its product line to the financing of IT,

projects and related components.

medical equipment and other asset classes.

Srei Insurance Broking Private Limited

Bengal Srei Infrastructure Development Limited

This is a unique, all encompassing insurance services

Bengal Srei Infrastructure Development Ltd. was formed

and brokerage company. Registered with the Insurance

as a joint venture with West Bengal Industrial

Regulatory Development Authority (IRDA), it is a

Development Corporation Limited. It commenced

composite broker offering services in the domains of

operations in early 2005 with a view to create, expand and

Life Insurance, General Insurance and Reinsurance, as

modernise infrastructure facilities in West Bengal and

well as risk management advisory services.

other states of India.

Srei Capital Markets Limited

Srei Sahaj e-Village Limited

Srei Capital Markets Limited (SCML) is a SEBI registered

Srei Sahaj e-Village Limited is involved in setting up

Merchant Banker.

Common Service Centres (CSCs), under the National

Active across the entire gamut of Merchant Banking & Corporate Advisory Services, SCML offers end-to-end solutions from concept to implementation. The offerings range from managing Equity & Debt Offerings, Private Equity & Institutional Placements, Debt Syndication, Mergers & Acquisitions and Valuations, Disinvestment related services.

e-Governance Plan (NeGP). The venture, launched at the end of 2006, started out as an outreach attempt to provide internet based services to the rural community. Sahaj has a mandate of setting up, operating and managing over 28,000 CSCs across six states namely West Bengal, Assam, Orissa, Bihar, Tamil Nadu and Uttar Pradesh.

45

IIS International Infrastructure Services GmbH, Germany

Srei Venture Capital Limited Srei Venture Capital Limited (SVCL), a SEBI-registered

IIS International Infrastructure Services GmbH ("IIS") has

venture capital fund, is committed to investing in the

been incorporated and is registered in Bonn, Germany

private equity, venture capital and mezzanine space

to act as a holding company for investment in other

with a primary focus on high growth sectors of the

countries.

economy. Total funds under management as on March 31, 2010 is around Rs. 482 crore.

ZAO Srei Leasing, Russia ZAO Srei Leasing, a leasing company in Russia, is a subsidiary of IIS and has investments from EBRD, DEG and FMO. It has expanded its operation successfully in the equipment financing business.

Hyderabad Information Technology Venture Enterprises Ltd. (HITVEL) HITVEL, a subsidiary of SVCL, is an asset management company which manages SEBI-registered HIVE Fund (formed for providing financial assistance for IT & ITES sector in Andhra Pradesh). Currently, HITVEL is managing a corpus of Rs. 15 crore of HIVE Fund. HITVEL has been jointly promoted by APIDC, APIIC, SIDBI and SVCL.

Global Investment Trust Limited Global Investment Trust Limited was set up with the objective of carrying out Trusteeship services and other functions incidental to it.

46

Cyberabad Trustee Company Pvt. Ltd. Cyberabad Trustee Company Private Limited (CTCPL), a subsidiary of SVCL, currently acts as a trustee company for SEBI-registered HIVE Fund.

Annual Report 2009-10

Infrastructure report Dr. Manmohan Singh, Hon’ble Prime Minister of India, on March 23, 2010 while addressing a conference at Vigyan Bhawan, New Delhi, pegged the required investment in India’s infrastructure at Rs. 41 lakh crore for the entire Twelfth Five Year Plan (2012-17), double the infrastructure investment target for the Eleventh Plan (2007-12). Mid-term appraisal of Eleventh Plan (2007-12) infrastructure investments Rs. lakh crore Sector

Eleventh Plan projection

Eleventh Plan revised projections in March 2010

Power

6.67

6.59

Roads and bridges

3.14

2.79

Telecom

2.58

3.45

Railways

2.62

2.01

Irrigation

2.53

2.46

Water supply and sanitation

1.44

1.12

Ports

0.88

0.40

Airports

0.31

0.36

Storage

0.22

0.09

Oil and gas pipelines

0.17

1.27

20.56

20.54

Total

Growing role of the private sector in infrastructure creation The private sector share in total infrastructure investment is expected to be 36% during the Eleventh Plan, up from 25% achieved during the Tenth Plan. For the Twelfth Plan, the share of private sector in investment infrastructure is expected to be 50%.

Construction The construction sector is the biggest beneficiary of India’s infrastructure expansion. In a decade, India’s position is expected to improve from ninth to third in the world construction markets. India’s construction sector, which accounted for 8.5% of GDP in 2007-08, is expected to create multiple downstream opportunities for industries like steel, cement and construction equipment.

47

Power Overview India has an installed generation capacity of 159,648.49 MW – 64.4% from thermal, 24.7% from hydro, 2.9% from nuclear and 7.8% from renewable energy sources Although India accounts for about 4% of the world’s total annual energy consumption, its per capita consumption stands at a low 704.2 kWh (as in 2007-08) vis-à-vis the global average of over 2,800 kWh A peak demand shortage of 12.6%

Targets Achieve an Eleventh Plan power capacity target of 92,700 MW by 2012 instead of the earlier estimate of 78,577 MW (as of June 2007) to sustain the country’s economic growth Strengthen the National Power Grid through the addition of over 60,000 km of transmission network by 2012 which will carry 60% of the country’s generated power Achieve an investment of USD 17.36 billion and USD 12.5 billion in

transmission and distribution respectively across the Eleventh Plan Initiate 13 Ultra Mega Power Projects (of 4,000 MW generation capacity each) Reach electricity to all un-electrified hamlets and provide an access to all rural households through the Rajeev Gandhi Grameen Vidyutikaran Yojna (RGGVY) by 2012

Increased annual allocation for power to Rs. 5,130 crore (130% rise over previous year) and for renewable energy sector to Rs. 1,000 crore (61% increase) in the Union Budget, 2010-11

Government policy and initiatives

Clean energy cess of Rs. 50/MT on domestic and imported coal

100% FDI under automatic route allowed for power projects (except nuclear power) in generation, transmission and distribution, including the renewable energy sector No income tax for a block of 10 years in the first 15 years of operation and an import duty waiver on capital goods used for mega power projects (above 1,000 MW generation capacity) Permission to establish coal, gas or liquid-based thermal projects of any size in the private sector.

Source : Ministry of Power, Central Electricity Authority, Economic Survey 2009-10

48

Introduction of Restructured Accelerated Power Development and Reforms Programme (R-APDRP) to bring down AT&C loss levels to 15% by 2011-12

Optimism India’s power demand is expected to increase 315-335 GW by 2017, if India’s economy continues grow annually at 8% average rate. This will require a five to ten-fold rise in power generation, entailing investments worth USD 600 billion. India launched its ambitious solar energy mission aimed at generating 20,000 MW of solar power by 2022. An additional 60,000 circuit km of transmission networks are expected by 2012.

Annual Report 2009-10

Roads Overview India has the world’s second largest road network, aggregating over 3.34 million km Carries 85% of the country’s passenger traffic and 61% of the freight traffic Although national highways account for only 2% of the road network, they carry 40% of the traffic PPP route preferred for road projects; increasing emphasis on BOT (toll) model

Targets Six-lane 6,500 km of Golden Quadrilateral and select National Highways by 2012 Four-lane 7,300 km on North-South and East-West corridors by 2012 Four-lane 20,000 km of National Highways by 2012 Widen 20,000 km of two-lane National Highways by 2012

Develop 1,000 km of Expressways by 2012 Undertake building and upgrading of 9,940 km of National and State Highways under the Special Accelerated Road Development Programme in the North-East (SARDPNE) region by 2012 Construct 129,707 km of new rural roads and renew/upgrade 100,740 km of existing roads by 2012 under Pradhan Mantri Gram Sadak Yojana (PMGSY) covering 60,638 rural habitations

Government policy and initiatives 100% FDI under the automatic route in all road development projects Full income tax exemption for a period of 10 years Formulation of a Model Concession Agreement IIFCL to provide viability gap

funding up to 40% of the project cost (entire amount to be made available during the construction phase) Concession period allowed to be extended up to 30 years Annual allocation increased to Rs. 19,894 crore (13.5% rise over previous year) in Union Budget 2010-11

Optimism Road freight traffic is projected to grow at 15-18% annually and passenger traffic at 12-15%. With an announced target of constructing 20 km of national highways per day, NHAI proposes to award around 12,000 km of road building contracts to the private sectors in 2010-11. Government intends to award 7,000 km of road construction on BOT basis and 5,000 km on EPC basis in 201011. NHAI plans to increase road building outlay for 2010-11 by 64.6% to Rs. 47,736 crore.

Source : Planning Commission, Ministry of Road Transport & Highways, Ministry of Commerce & Industry, Economic Survey 2009-10, Business Standard, The Economic Times

49

Ports Overview India’s 13 major ports (handling 75% of the total traffic) and 200 non-major ports together handle around 95% of India’s total merchandise trade by volume Total traffic at ports is estimated to increase by 5.6% from 732 million tonnes in 2008-09 to 773 million tonnes in 2009-10 Total port capacity is estimated to grow from 885 million tonnes in 200809 to 947 million tonnes in 2009-10

facilitate private investment for improving efficiency of port infrastructure at major ports; an estimated investment of USD 12.4 billion envisaged for NMDP

and 25 projects have been dropped

Government policy and initiatives

Private sector allowed to undertake construction of cargo-handling berths and dry docks, container terminals, warehouses and ship-repair facilities on BOT basis

100% FDI permitted for port projects (all areas of operation) under the automatic route Full income tax exemption for a period of 10 years

Traffic handled by non-major ports estimated at 27.6% in 2009-10

Formulation of Model Concession Agreement

Average turnaround time at India’s major ports stood at 3.87 days in 2008-09

Tariff Authority for Major Ports (TAMP) regulates the ceiling for tariffs charged at major ports

Targets Create additional capacity of 485 million tonnes in major ports and 345 million tonnes in non-major ports by 2012 National Maritime Development Programme (NMDP) formulated to

Of the 276 projects identified under NMDP, 50 projects worth Rs. 5,717.28 crore stand completed and work is in progress for 74 projects worth Rs. 16,502.68 crore. Of the remaining, 16 projects have been approved but yet to be awarded, 29 are pending approval, 82 are in planning stage

Autonomy given to non-major ports to set their own tariffs has led to healthy growth in traffic and also greater private sector investment

Optimism With India experiencing robust growth in its foreign trade, in order to meet the projected traffic demand India’s ports need to increase cargo handling capacity to 1,855 million tonnes by 2012 with an investment of about USD 20.61 billion. The capacity addition target for major ports stands at 168.45 million tonnes for 2010-11. Growing importance of non-major ports is likely to witness greater private sector investment. Gujarat, Maharashtra and Andhra Pradesh are likely to drive the port capacity expansion of the country over the next five years.

Source : Planning Commission, Ministry of Shipping, Tariff Authority for Major Ports, Economic Survey 2009-10, CRISIL, IBEF, Construction Week 50

Annual Report 2009-10

Airports Overview

estimated cost of Rs. 4,662 crore

2012 respectively

India has 126 airports – 11 international, 89 domestic airports and 26 civil enclaves in defence airfields

Develop city-side infrastructure at 24 non-metro airports through PPP mode

Nine of the 35 non-metro airports completed and operative

Upgrade CNS/ATM facilities and other equipment

Encouraged by the example set by the greenfield airports set up in Hyderabad and Bangalore, an ‘inprinciple’ approval given to 12 more

15 scheduled passenger airline operators with a fleet of more than 400 aircraft providing services to/from 82 airports Top six airports handle about 73% of the country’s total passenger traffic 69 foreign carriers from 49 countries allowing 706 flights per week Growth in domestic passenger traffic has been robust in 2009-10 owing to sustained improvement in economic environment ; however cargo traffic has stagnated

Targets Modernise and redevelop four metro airports totalling almost Rs. 24,000 crore by 2012 Develop 35 non-metro airports at an

Government policy and initiatives 100% FDI permissible for existing airports, approval of Foreign Investment Promotion Bureau (FIPB) needed for FDI beyond 74% 100% FDI permissible for greenfield airports under automatic route 49% FDI permissible under automatic route in domestic airlines, but not by foreign airline companies Full income tax exemption for a period of 10 years Among the metro airports, work in Delhi and Kolkata is almost completed, while that in Chennai and Mumbai to be completed in 2011 and

Optimism With India’s healthy economic growth and consequent rise in disposable incomes, aviation is bound to grow. With a domestic air passenger volume at more than 44 million (fourth in the world after the USA. China and Japan), the figure is expected to grow at 9-10% annually. The number of international passengers is also bound to multiply owing to India’s growing stature as an investment and tourism destination. Additional capacity creation at the airports is the need of the hour.

Source : Ministry of Civil Aviation, Economic Survey 2009-10

51

Railways Overview Indian Railways is the third largest rail network in the world under a single management Carrying more than 2 million tonnes of freight traffic and nearly 19 million passengers daily Out of freight and passenger traffic, the freight segment accounts for about 70% of the revenue

Targets Construct dedicated freight corridors (DFCs) – western DFC (1,483 km) from Mumbai to Dadri/Tughlakabad catering largely to container transport requirement and eastern DFC (1,806 km) from Ludhiana to Dankuni to transport mostly coal and steel 4 logistic hubs in Rewari (Haryana), Navi Mumbai, Ahmedabad and Kanpur to come up along the DFCs by 2018

Commercial exploitation of vacant railway land and air space

construction and operation of private freight terminals

Promote PPP in various facets of railway operations

RailTel created 37,000 route km long optic fibre cable (OFC)-based communication infrastructure to improve Indian Railway’s communication and safety systems

High speed rail corridors envisaged 50 stations to be upgraded to worldclass standards

Government policy and initiatives Private sector involvement encouraged in building healthcare and educational institutes, commercial complexes, cold storages, etc. on railway land for creating new revenue streams Special Task Force to clear investment proposals within 100 days Private sector allowed to participate in wagon leasing Private operators allowed to run special freight trains New policy to be launched for the

Source : Ministry of Railways, Economic Survey 2009-10, Business Standard, Financial Express

52

The OFC network, of which 26,650 route km is of high bandwidth capacity, can also be commercially exploited

Optimism Private investment in railways is expected to increase from the current USD 217.88 million to USD 1.08 billion across the next three years. Around 700 km of railway tracks have been targeted for doubling during the next financial year. Indian Railways proposes to import 50 electric and 50 diesel locomotives in three years, expecting a freight load of 1,100 million tonne and passenger traffic of 8,400 million by 2012.

Annual Report 2009-10

Oil & Gas Overview Around 75% of the total domestic oil consumption was met through imports; the dependence on petroleum and petroleum products continued to be high. The projected production of crude oil is 36.7 MMT (million metric tonne) during 2009-10 vis-à-vis 33.5 MMT in 2008-09 and the projected production for natural gas (including coal bed methane [CBM]) for 2009-10 is 50.2 BCM (billion cubic metric tonne) vis-àvis 32.8 BCM in 2008-09. Total installed capacity of refineries stood at 177.97 MMTPA (million metric tonne per annum) on April 2009

Targets Achieve a total refinery capacity of 240.96 MMTPA by 2012 Establish the Rajiv Gandhi Institute of Petroleum Technology, an institute to cater to the education and training

requirements of all segments of the petroleum and natural gas industry (estimated cost Rs. 695.58 crore) Vision 2015 to expand marketing network as well as quality of products and services to customers covering four broad areas of LPG (liquefied petroleum gas), kerosene, auto fuels and compressed natural gas/piped natural gas

Government policy and initiatives 100% FDI allowed in exploration of crude oil and natural gas under automatic route 100% FDI allowed in pipelines for petroleum products, natural gas and LNG The government is exploring the PPP route to set up a network of gas pipelines across India resulting in a National Gas Grid The eighth round of the New Exploration Licensing Policy (NELP

VIII), which put up for bid 70 oil and gas blocks covering an area of about 163,535 sq.km., attracted investments of around USD 1.34 billion for the 36 blocks awarded In the fourth round of CBM (CBM IV), out of 10 new blocks, eight were awarded

Optimism As an emerging economy, India is poised to experience a significant rise in the demand for oil and gas: expected to increase from 186.54 million tonnes of oil equivalent (MMTOE) in 2009-10 to 233.58 MMTOE in 2011-12. During 2009-10, crude oil production is projected to grow by 11% and natural gas production by 53%. Pipe consumption in the oil and gas sector is expected to grow at 25% annually. The rise in exploration activities will result in a growing demand for drilling equipment and oil rigs.

Source : Ministry of Petroleum & Natural Gas, Ministry of Commerce & Industry, Economic Survey 2009-10, CRISIL, IBEF

53

Telecom Overview India has the third largest communication network after China and the USA with a subscriber base of 653.92 million (as on May 2010)

Make India a telecom manufacturing hub by facilitating the establishment of telecom specific SEZs

Government policy and initiatives

Second largest wireless network in the world with 617.53 million wireless connections (as on May 2010)

100% FDI allowed under automatic route in telecom equipment financing

All-India tele-density at 55.38% (as on May 2010)

FDI ceiling of 74% for the telecom services (automatic up to 49%, FIPB approval needed beyond 49%)

Broadband subscription at 9.24 million (as on May 2010)

Targets Activate 3G services in all cities/towns with more than 1 lakh population Achieve a broadband coverage of 20 million and 40 million internet connections by 2012 Provide broadband connectivity to every school, healthcare facility and Gram Panchayat by 2012

Introduction of a unified access licensing regime for telecom services on a pan-India basis In Union Budget 2010-11, it was announced that exemption from basic counter veiling duty and special additional duties would be extended to parts of battery chargers and hands-free headphones (earlier only applicable for parts of mobile phones)

Optimism The next spurt in telecom growth is

Source : Economic Survey 2009-10, Telecom Regulatory Authority of India

54

expected to happen in villages and smaller towns. The Government set a target of 200 million rural subscribers by 2012 to narrow down the urbanrural digital divide from the present 25:1 to 5:1. The tower sharing business is expected to grow exponentially as the sharing of passive infrastructure like towers substantially reduces operational costs and encourages new players to enter the business and roll out services quickly. Now that the auction of 3G spectrum is completed, roll-out of new value-added 3G-enabled services will be the key to telecom growth especially in urban India. This will provide a further boost to the handset industry. Revenue from India’s telecom services industry which stood at USD 31 billion in 2008 is estimated to increase to USD 54 billion by 2012.

Annual Report 2009-10

Mining Overview The mining industry, catering to a range of basic industries, including power generation, steel, metals and cement, accounts for around 3% of India’s GDP India’s 25.2 billion tonnes of iron ore, 257.4 billion tonnes of coal and 3.3 billion tonnes of bauxite constitute 3%, 10% and 4% respectively of the world’s resources 80% of mining is in coal and the balance 20% is in various metals and other raw materials such as gold, copper, iron, lead, bauxite, zinc and uranium India produces 450 million tonnes of coal annually, around 50 million

tonnes less than domestic demand

Targets

participation in production from these blocks

Achieve 680 million tonnes of coal production by 2012

Establishment of a Coal Regulatory Authority to create a level playing field in the coal sector

De-block 20 billion tonnes of coal reserves for power projects

Optimism

Government policy and initiatives 100% FDI allowed under automatic route for mining of coal and lignite for captive consumption in iron, steel and cement production Introduction of a competitive bidding process for allocating coal blocks for captive mining to ensure greater transparency and increased

With coal accounting for nearly 55% of India’s power generation and India’s demand for power outstripping supply, coal mining will continue to grow. The dual effect of a rise in industrial production in India and recovery of global demand will encourage the mining of other minerals as well. All these will have a cumulative impact on the growth of demand for mining equipment.

Source : Ministry of Coal & Mines, Economic Survey 2009-10, CRISIL, IBEF

55

Analysis of our financial statements* 1. Review of the Profit and Loss Account Highlights, 2009-10 Disbursements increased 36% from Rs. 6,620 crore in 2008-09 to Rs. 9,017 crore in 2009-10 Total assets under management increased 28% from Rs. 10,367 crore in 2008-09 to Rs. 13,265 crore in 2009-10 Income from operations increased 15% from Rs. 843 crore in 2008-09 to Rs. 970 crore in 2009-10 Profit before tax increased 107% from Rs. 105 crore in 2008-09 to Rs. 218 crore in 2009-10

Rs. 730 crore in 2008-09 to Rs. 858 crore in 2009-10. This was largely attributed to a rise in the project financing business where assets under management increased by around 114%.

to Rs. 6 crore in 2009-10. Other income accounted for only 0.3% of the total income of 2009-10, reflecting the continuing strength of the core businesses.

The Company’s fee-based businesses generated a revenue of Rs. 60 crore in 2009-10 against Rs. 87 crore in 2008-09. Interestingly, fee-based income in 2009-10 was evenly spread across a number of projects (preferred revenue stream) as against a single large fee of Rs. 61 crore from the Ganga Expressway project in 2008-09.

The Group’s total operating cost (before interest and depreciation) was Rs. 149 crore in 2009-10 (Rs. 160 crore in 2008-09) despite increased operations.

Income from rural IT infrastructure (Srei Sahaj) grew 86% from Rs. 18 crore in 2008-09 to Rs. 34 crore in 2009-10 following a significant increase in operational CSCs in 2009-10.

Profit after tax increased 90% from Rs. 83 crore in 2008-09 to Rs. 157 crore in 2009-10 Earning per share increased from Rs. 7.07 in 2008-09 to Rs. 13.42 in 2009-10

Group revenues grew from Rs. 852 crore in 2008-09 to Rs. 972 crore in 2009-10. Group revenues accrued from three verticals – fund-based businesses, fee-based businesses and investments.

Income from proprietary investments increased from Rs. 6 crore in 2008-09 to Rs. 13 crore in 2009-10. This income largely accrued from monetisation of existing investments. Since income from proprietary investments will depend on the timing of divestment of such investments, income from this may vary from year to year.

Income from the fund-based businesses increased 20% from

The Group’s non-core income declined from Rs. 11 crore in 2008-09

Net interest margin increased from 3.29% in 2008-09 to 4.31% in 2009-10

Revenue

Employee costs: Expenses grew 16% from Rs. 54 crore in 2008-09 to Rs. 63 crore in 2009-10, attributed to an increase in team strength from 1,083 as on March 31, 2009 to 1,424 as on March 31, 2010. Administrative costs: Expenses declined from Rs. 107 crore in 200809 to Rs. 86 crore in 2009-10 owing to a significant drop in professional fee from Rs. 64 crore in 2008-09 (largely owing to the additional one-time professional fee expenses incurred for the execution of Ganga Expressway project) to Rs. 35 crore in 2009-10.

Interest liability Finance charges increased 2% from Rs. 522 crore in 2008-09 to Rs. 533 crore in 2009-10. Total interest liability during the year increased only marginally owing to the following factors:

Total income

Profit after tax

Disbursement

AuM

32.64%

25.54%

29.45%

31.32%

5-year CAGR

5-year CAGR

5-year CAGR

5-year CAGR

* Based on consolidated figures 56

Operational expenses

Annual Report 2009-10

Efficient cost management Easing of interest rates in the domestic market Favourable movement in the exchange and LIBOR rates

Taxation The Group’s current tax liability increased from Rs. 7 crore in 2008-09 to Rs. 37 crore in 2009-10 owing to a considerable increase in profit before tax. This was partly offset by the MAT credit entitlement, which reduced net tax outflow to Rs. 15 crore for 200910. However, the total tax expense including deferred tax liability increased from Rs. 22 crore in 2008-

09 to Rs. 61 crore in 2009-10. This was mainly due to a sharp increase in the deferred tax liability from Rs. 22 crore in 2008-09 to Rs. 46 crore in 2009-10. The average tax expense rate was about 28% in 2009-10 as against 21% in 2008-09.

2. Analysis of the Balance Sheet

to Rs. 110.14 as on March 31, 2010 Shareholders’ funds increased 12% from Rs. 1,149 crore as on March 31, 2009 to Rs. 1,290 crore as on March 31, 2010 Debt-equity ratio was 5.09 as on March 31, 2010 against 3.73 as on March 31, 2009

Capital employed

Highlights, 2009-10 Capital adequacy ratio was 21.98% as on March 31, 2010 against 39.18% as on March 31, 2009 Book value per share increased from Rs. 98.20 as on March 31, 2009

The employed capital increased 45% from Rs. 5,481 crore as on March 31, 2009 to Rs. 7,957 crore as on March 31, 2010 owing to increased operations across all business verticals.

Sources of funds 2009-10 Amount Percentage (Rs. crore) of total Share capital (including warrants) Reserves and surplus Minority interest Secured loans Unsecured loans Deferred tax liability Total

Equity: Share capital comprised 116,144,798 equity shares with a face value of Rs. 10 totaling Rs. 116 crore. The promoters’ holding constituted 30.02% and foreign holdings 20.22% as on March 31, 2010. Reserves: Group reserves grew 16% from Rs. 1,015 crore as on March 31, 2009 to Rs. 1,173 crore as on March 31, 2010. External funds: Secured debt increased 48.67% from Rs. 3,752

2008-09 Amount Percentage (Rs. crore) of total

Y-o-Y growth (%)

116

1.46

134

2.45

(13)

1,173

14.74

1,015

18.52

16

24

0.30

22

0.40

7

5,578

70.10

3,752

68.45

49

992

12.47

531

9.69

87

74

0.93

27

0.49

168

7,957

100.00

5,481

100.00

45

crore as on March 31, 2009 to Rs. 5,577 crore as on March 31, 2010. Secured loans comprised debentures, term loans and working capital loans. The growth in secured debt was largely due to an increase in term loans (46.56%) and working capital loans (84.89%). Of the outstanding term loans, 64.20% (52.10% in the previous year) was rupeedenominated debt and 35.80% (47.90% in the previous year) was

from international sources. Unsecured loans experienced a churn in the debt mix from conventional short-term loans from banks and institutions to low-cost debentures and commercial paper. The Group increased its subordinated debentures/bonds/loans exposure by 174.24%, strengthening its capital adequacy.

57

Public deposits The total deposits outstanding as on March 31, 2010 was Rs. 5.20 crore as compared with Rs. 5.15 crore as on March 31, 2009. In April 2010, the Company decided to convert itself

into a non-deposit-taking NBFC in order to qualify for registration as an Infrastructure Finance Company (IFC) and subsequently stopped accepting public deposits or renew such maturing deposits in any manner

w.e.f. April 20, 2010. The Company subsequently received the regulatory approval for the category of a nondeposit-taking NBFC.

Application of funds 2009-10 Amount Percentage (Rs. crore) of total Net block

2008-09 Amount Percentage (Rs. crore) of total

Y-o-y growth (%)

317

3.98

314

5.73

1

Goodwill

6

0.08

6

0.11



Deferred tax assets

1

0.01

0.22



282

671

8.43

444

8.10%

51

6,958

87.45

4,714

86.00

48

4

0.05

3

0.05

64

7,957

100.00

5,481

100.00

45

Investments Net current assets Miscelleneous expenditure Total

Net block: The Group’s net block was Rs. 317 crore as on March 31, 2010 against Rs. 314 crore as on March 31, 2009. The net block comprised own assets (15% as on March 31, 2010), intangible assets (1% as on March 31, 2010) and assets for operating lease (84% as on March 31, 2010). The Group added assets worth Rs. 49 crore in 2009-10 of which assets totalling Rs. 43 crore were operating lease assets for growing the business. Sundry debtors: Sundry debtors increased 60.43% to Rs. 108 crore as on March 31, 2010. The debtors largely comprised receivables from rural entrepreneurs (Srei Sahaj business) for the IT infrastructure provided to them; the large rollout of CSCs in 2009-10 resulted in a significant increase in the sale of IT assets and consequently outstanding

debtors’ balance. Financial and other current assets: This segment mainly represented the outstanding principal amount of equipment finance loans given to customers. The outstanding balance under this account grew 4.9% to Rs. 3,143 crore as on March 31, 2010 against Rs. 2,996 crore as on March 31, 2009 owing to a growth in the equipment finance business. Loans and advances: This account mainly represented outstanding principal amount of project finance loans disbursed. Outstanding loans and advances grew 169.3% to Rs. 3,619 crore as on March 31, 2010 from Rs. 1,344 crore as on March 31, 2009, owing to a sharp increase in the project financing business.

Non-performing assets Gross NPA on a consolidated basis,

58

as per RBI, increased to 0.90% of total assets in 2009-10 from 0.79% in 2008-09. On a net basis, the consolidated NPAs as per RBI were 0.29%. As per FLI standards, the gross NPA was 1.06% in 2009-10 as against 1.33% in 2008-09. The net NPA was 0.45% for this year against 0.47% for the previous year. Over a period of time, Srei has consistently kept NPA levels under check primarily owing to its robust due diligence mechanism prior to disbursement and its conservative approach in NPA provisions that conforms with standards set by Indian regulatory authorities, foreign lending institutions and credit rating agency parameters.

Annual Report 2009-10

Performance scorecard Total income

Profit after tax

Net worth

Disbursement #

Assets under management #

(Rs. crore)

(Rs. crore)

(Rs. crore)

(Rs. crore)

(Rs. crore)

Net profit margin (%)

Return on average net worth *

Return on average assets

Return on average capital employed

Net interest margin

(%)

(%)

(%)

(%)

Book value per share

Earning per share

NPA as per FLI

NPA as per RBI

(Rs.)

(Rs.)

(%)

(%)

All figures on consolidated basis # For Disbursement and Assets under Management, 100% of Srei BNP (50:50 JV between SIFL and BPLG) has been considered * On standalone net worth

59

Mapping uncertainties Managing risks

The business of financing is really the business of managing risk. The recent global financial crisis not only disrupted all kinds of financial markets, it also gave way to bankruptcies of bank and non-bank finance companies across the globe. While the exact causes are yet to be fully comprehended, most analysts identified risk management failure as one of the key factors that cause the

60

unprecedented increase in asset prices, the availability of cheap credit leading to build-up of excessive leverage and the massive underpricing of risk. The crisis has therefore, not only vilified the risk management function of financial institutions, but also vindicated the importance of this function for the survival of finance companies and the stability of the financial system.

Srei uses a multi-faceted approach to manage its risks, aimed at insuring the net income against disruptions from any kind of risk, minimising volatility in income with a procyclically bias. Risk in general terms is defined as uncertainties in the achievement of objectives, leading to a negative organisational effect. These uncertainties may either be systemic

Annual Report 2009-10

i.e. caused by the factors affecting an entire industry, sector, or economic such as interest rate risk, foreign exchange risk and regulatory risk, among others, or unsystemic i.e. caused by factors specific to a particular firm, like fire, theft, project failure, bad debt and shortage of liquidity, among others. In an organisation like Srei, there are risks present at all levels and across all aspects of its functioning, including business, strategic, operational, market, credit, liquidity, reputation and processes, among others. To manage and mitigate these risks and reduce the uncertainties prevalent, an enterprise-wide risk management framework was established that allows all risks to be aggregated using a consistent measurement system as well as take account of the correlation between these risks. An enterprise’s risk management framework includes

all systems and processes that lead to managing risks and seizing opportunities towards the achievement of objectives. These seven steps constitute a comprehensive risk management framework. Thus, Srei aims to gain a complete knowledge of the internal and external operating environment to identify all potential threats that negatively affect its market position and achievement of its objectives. The quantitative assessment of loss pertaining to each risk helps in the aggregation of all risks to determine the overall impact on the company, prioritisation of risks within the aggregate risk profile, and decisionmaking regarding which risks to mitigate, while assuming the residual risks so as to maintain the required risk-return profile of the Company. There is also a constant need to

review and monitor the risk profile and assess the viability of policy measures in today’s dynamic environment to attain long-term viability and sustainability. These step-by-step processes of enterprise-wide risk management help Srei optimise its returns, given the portfolio of risks it assumes. Prudent risk management is the goal of any business enterprise. For a finance company like Srei, these risks take on a multitude of forms – from dominant risks such as credit risk to small but significant risks like sustainability risk or legal risk. The ultimate goal of risk management is to keep the aggregate risk within the Company’s risk appetite or risk tolerance limit, so as to ensure longterm survival despite all the business uncertainties that Srei is exposed to. In particular, the key risks are:

Enterprise Risk Management 01

02

03

04

05

06

Establish context: Gain knowledge of macro and micro operating fundamentals and situations to strategically place itself for better risk management.

Identify risks: Identify potential events and factors that pose material threats for achievement of objectives and hinder the exploitation of competitive advantages.

Quantify risks: Quantitative assessment and measurement of each type of risk, based on the likelihood of occurrence and the associated severity of loss.

Integrate risks: Aggregate all risk distributions, reflecting correlations and portfolio effects; formulate the results to assess an impact on key performance metrics.

Assess risks: Determination of the contribution of each risk to the profile and appropriate prioritisation.

Treat / Exploit risks: Mitigate risk with appropriate measures and assume residual risks under robust framework of management to maintain required risk return profile.

07 Monitor Risks: Continued monitoring of risk portfolio for effectiveness of policies in dynamic environment.

61

01 Credit risk Credit risk is the risk of a financial loss

customer segment for two decades

manner such that all risks are duly

arising if a borrower or counter-party

now and is completely aware of the

identified along with appropriate

fails to meet a contractual payment

intricacies of this kind of business. It

mitigants. All projects and their

obligation. It arises principally from

has created a multi-check credit

various parts and components

direct lending and leasing business,

appraisal system verifying project

undergo detailed due diligence and

as well as from off-balance sheet

details, project and entrepreneur’s

review during the credit appraisal

products like derivatives transaction

credit worthiness. The Company

process and are further examined by

and from Srei Group debt security

maintains a continuous relationship

a dedicated and independent credit

holdings. Credit risk requires the

with all its clients that helps in

function. Srei also has strong systems

largest regulatory capital requirement.

collaborative addressal of business

and processes in place to manage

uncertainties. All these have resulted

and administer its collaterals on

in keeping NPAs well below the

project finance. Due to its effective

national average.

risk mitigation techniques and

Mitigation measures: This is more relevant for fund-based businesses, namely equipment financing and project financing. Equipment finance: Srei’s customers belong to the micro, small and medium enterprise (MSME) category. The Company has been financing this

Project finance: Srei provides senior secured loans to various infrastructure projects both, as the sole lender and a consortium of lenders. The highly

transaction structuring expertise, the project finance division achieved a zero NPA portfolio as on March 31, 2010.

experienced project finance team structures non-recourse funding in a

02 Liquidity risk Srei may not have sufficient financial

repayment cycle with the funds

Company also monitors its cash-flow

resources to meet its liabilities as they

receivable cycle affects viability. Srei

situation, asset-liability positions and

fall due, or to meet its commitments.

created a framework for the stringent

market conditions, on a daily basis

This risk could arise from a mismatch

and regular mapping of assets and

that enables it to identify probable

in the timing of cash flows of the

liabilities to avoid such mismatches.

mismatches between receipts and

Company with its repayment

The Company aligns its interest

payments well in advance. All these

commitment.

payment with customers’ cash flows

enable Srei to meet its financial

to achieve the most effective risk

obligations in a timely manner.

Mitigation measures: In most cases, an inability to match the debt

62

mitigation method. Additionally, the

Annual Report 2009-10

03 Funding risk Funding risk, a form of liquidity risk, arises when the liquidity needed to fund illiquid asset positions cannot be obtained at the expected terms as and when required.

a zero-default repayment record and reliable asset financing opportunities, making it a preferred borrowing company (for providers). Also, the Company’s modest gearing of 4.48 (standalone) and strong capital adequacy ratio 21.98% (standalone) as on March 31, 2010, positioned it attractively to mobilise funds. Besides, the Company has on average utilised less than 50% of its working capital limit of Rs. 1,775 crore during the year 2009-10, reflecting its liquidity to fund

future growth initiatives over the longterm. In addition, the Srei-Quippo merger has strengthened its financial ratios and its ability to borrow large sums of low-cost funds from the market to fund its future growth. In addition, the Company raised its borrowing limits with its domestic banking consortium which is expected to seamlessly accommodate its growth appetite.

Certain fluctuating market factors,

risk and foreign exchange risk. The

assets. The ALCO continuously

such as foreign exchange rates,

interest rate risk exposure emanates

monitors these mismatches and

market prices, interest rates, credit

from a mismatch, if any, in the interest

suggests strategies to manage them.

spreads and equity prices could

rates on the Company’s assets and

The Company’s risk from currency

reduce Srei’s income or portfolio

liabilities. Since both, assets and

fluctuation is restricted to its foreign

value.

liabilities, are typically floating, the

currency debt of Rs. 755.52 crore.

limited risk on our asset-liability

The Company mitigates this risk

mismatch is in the form of a basis risk

through a prudent hedging strategy

between the benchmark used on the

which covers its earnings against

liabilities against the ones on the

adverse currency fluctuations.

Residual value risk arises because of

its operating lease transactions in a

potential of re-letting of operating

operating lease transactions, a

robust manner, wherein it is ensured

lease assets and their projected

situation where the values recovered

that the lease period is less than the

disposal proceeds at the end of their

from disposing of leased assets or re-

economic life of the leased

lease terms. The Company also has

letting them at the end of the leased

equipment. The business regularly

the option to operate the leased

term, called the ‘residual values’,

monitors residual value exposure by

equipment itself, in order to recover

differ from those projected at the

reviewing the recoverability of the

the residual value, should there be an

lease inception.

residual value projected at lease

erosion in the market value of the

inception. This entails considering the

leased facility.

Mitigation measures: The Company enjoys sound relationships with most scheduled banks and financial institutions in India and with leading international financial institutions (like DEG, FMO, KfW, HSBC and UPS, among others.). Besides, Srei enjoys

04 Market risk

Mitigation measures: The Company has limited exposure to market risk, primarily in the form of interest rate

05 Residual value risk

Mitigation measures: Srei structures

63

06 Operational risk Operational risk is the risk of loss arising from fraud, unauthorised activities, errors, omissions, inefficiencies, systems failure or from some external events. Operational risks can be further divided into the following categories:

a Legal risk Legal risk arises owing to various

Mitigation measures: The

ensure that the transactions are

factors such as defective contractual

Company’s legal team is involved in

based on unambiguous legal opinions

relationships, involvement in actual or

every transaction – from the

and also provides legal support in

potential disputes, failure to adhere to

documentation to its closure –

cases of customer default, facilitating

the laws of the jurisdiction in which

ensuring transparent and water-tight

faster resolution of the cases.

Srei operates, illegal infringement on

documentation. The legal team works

assets and rights and so on.

closely with the business teams to

b Compliance risk Compliance risk is the risk of loss

Company has a competent team that

The Company has never been

caused by failure in compliance with

monitors regulations, changes,

censured for regulatory non-

domestic and overseas laws and

alternatives and applicability. This

compliance across its two decade

regulations.

enables Srei to improve systems and

history, attracting the association of

processes to ensure a complete and

leading global brands, with BNP

consistent regulatory adherence.

Paribas and Tatas being the most

Mitigation measures: Srei belongs to a regulated NBFC sector. The

prominent.

c Business processing risk Risk of loss caused by clerical

functioning of all departments of the

proposes to introduce a risk and

mistakes or by the breakdown or

Company. It has a well defined control

control self-assessment (RCSA)

malfunction of corporate systems.

mechanism with a system of checks

system to identify gaps in its

and balances that controls the

processes and design mitigation

negative effects of business

initiatives accordingly.

Mitigation measures: Srei has in place a system of laid down processes and policies that guide the

processing risk. The Company also

d Information security risk Risk arising because of unauthorised

information security as well as

back-up management systems.

access, use, disclosure, disruption or

business continuity planning through

Reports on deviations and/or

modification of information and data

an off-site disaster recovery. Standard

irregularities, if any, are checked by

systems that are useful to Srei,

globally accepted security features

the internal audit department.

resulting in a loss or breakdown.

covering firewalls, encryption

Findings on control points are

technologies and spam-guards are

circulated on a monthly basis.

also in place. Srei’s system provides

Corrective actions, wherever

for controlled access with very

necessary, are taken, either on a

stringent password protection

reactive or proactive basis.

Mitigation measures: Srei manages an elaborate information technology set-up and resources. Well defined policies are in place to ensure

facilities and appropriate document

64

Annual Report 2009-10

07 Reputational risk Reputational risk arises owing to

reputation of Srei in the financial

safeguard itself against reputational

negligence of various concerns such

world. Reputational risk can also arise

and operational risks. Srei has always

as environmental protection, social

because of misconduct by Srei’s

aspired to the highest standards of

responsibility, governance and

stakeholders.

conduct and, as a matter of practice,

operation rules and regulations, that can lead to a total loss of goodwill and

Mitigation measures: Srei regularly reviews its policies and procedures to

takes account of reputational risks to its business.

08 Sustainability risk Sustainability risk is especially relevant for Srei due to its project financing activities, and it arises owing to the provision of financial services to companies or projects, which run counter to the needs of Srei’s sustainable development. In effect, these risks arise when the environmental and social effects outweigh the economic benefits. Sustainability risks can be avoided and even mitigated if environmental, social, health and safety issues related to infrastructure projects can be properly identified and mitigation

measures adopted accordingly. Mitigation measures: Assessment of the environmental and social impact of projects financed by Srei is firmly embedded in Srei’s overall risk management processes. Srei adopted an environmental policy in August 1999. The policy is based on the

management system screens all medium and large projects for categorisation based on the sensitivity of the environmental issues involved. Small projects, that mainly involve individual financing, are assessed informally by verbal questioning for environmental impacts.

guidelines and norms of best

These policies are currently being

international practices, also referred

reviewed with the objective of

to as IFC Standards and incorporates

updating its policy on environmental

requirements under Indian

as well as the introduction of social,

environmental regulations and rules.

health and safety (ESHS) issues.

Srei’s environmental and social

While most banks and financial institutions face these risks, the approaches adopted by each to manage the risks vary significantly. Sophistication of risk measurement methods, that utilise all data and information available within the Company to arrive at a better estimation of its risk profile, is one of the key differentiating factors between institutions. At Srei, there is a constant effort to improve its risk management system. The lessons learnt from the global financial crisis, especially with respect to scenario stress-testing and contingent planning, will be incorporated into the existing risk system to be better prepared to deal with market turbulences.

65

Directors’ profile Salil K. Gupta Chief Mentor

He has over fifty two years of experience. He has been the former Chairman of West Bengal Industrial Development Corporation Ltd. (a leading State financial institution) and has also been the former President of the Institute of Chartered Accountants of India.

Hemant Kanoria Chairman & Managing Director

He has over thirty years of industry experience. He is the former President of the Calcutta Chamber of Commerce, former member of Board of Governors of Indian Institute of Management, Calcutta, past Chairman of the NBFI Task Force, the Federation of Indian Chamber of Commerce and Industry (FICCI), a member of the Steering Committee of The Energy & Resources Institute’s (TERI’s) Repository of Environmental Activities and Technology and Chairman, Infrastructure Committee, Confederation of Indian Industry (Eastern Region).

Sunil Kanoria Vice Chairman

He has over twenty two years of experience in the financial services industry. He is a governing body member of Construction Industry Development Council (CIDC), ASSOCHAM and among other responsibilities, has served as past President in Merchants’ Chamber of Commerce, Federation of Indian Hire Purchase Association (FIHPA) and Hire Purchase & Lease Association (HPLA).

Saud Ibne Siddique Joint Managing Director

He has over twenty six years of rich experience in global infrastructure financing. He has worked with the International Finance Corporation (IFC), the private sector arm of the World Bank, for more than sixteen years. During 2004-07, he was based out of Hong Kong and was the head of business development for infrastructure projects in the East Asia and Pacific region for IFC. He has also served as the CEO and Board Member of a publicly listed water infrastructure fund in Singapore. He was a member of the top management of Hyflux Ltd. in Singapore, one of the leading water infrastructure companies in Asia.

K. K. Mohanty

He has over thirty five years of experience in asset financing, project funding, profit and

Wholetime Director

credit appraisal, structuring syndication and receivables management including eleven years’ experience in the Orissa State Financial Corporation.

66

Annual Report 2009-10

V. H. Pandya

He is an associate of the Indian Institute of Bankers. He has spent over forty five years in the banking and financial industry, holding offices with India’s central bank, the Reserve Bank of India (RBI), the capital markets regulator, Securities and Exchange Board of India (SEBI) and the Industrial Development Bank of India (IDBI).

S. Rajagopal

He possesses over thirty seven years of experience in the banking industry. He has been the former Chairman & Managing Director of Bank of India and a former Chairman of Indian Bank.

Daljit Mirchandani

He is currently the Chairman of Ingersoll-Rand in India. Mr. Mirchandani has held several key positions in the Kirloskar Group, including Executive Director in Kirloskar Oil Engines, the flagship company of the Kirloskar Group (KOEL). He was also the Chairman of the Karnataka State Council of the Confederation of Indian Industry (CII) in 2005.

Shyamalendu Chatterjee

He has over forty three years of experience in Commercial and Investment Banking. He was the Executive Director of UTI Bank Ltd., Mumbai since May 2002. He has extensive exposure in the areas of International Banking and has also worked in SBI, London for three years and in Washington D.C. for five years. He has achieved expertise in the areas of Corporate Finance, International Banking, Retail Banking, Project Financing, Balance Sheet Management etc.

Satish C. Jha

He was a former Director and Chief Economist of Asian Development Bank, Manila and President of Bihar Council of Economic Development. He was also a Member, Economic Advisory Council to the Prime Minister and Chairman, Special Task Force on Bihar.

67

Directors’ Report Your Directors are pleased to present the Twenty Fifth Annual Report together with the Audited Accounts of your Company for the financial year ended March 31, 2010. 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, 2010

March 31, 2009

March 31, 2010

March 31, 2009

Total Income

97,216

85,153

47,013

32,643

Total Expenditure

68,234

68,313

30,809

26,666

Profit before Depreciation

28,982

16,840

16,204

5,977

4,328

3,658

1,014

769

24,654

13,182

15,190

5,208

2,888

2,688

377

171

21,766

10,494

14,813

5,037

5,866

2,235

3,440

-

220

2

224

1

Profit After Tax

15,680

8,257

11,149

5,036

Minority Interest

94

49

-

-

-

(4)

-

-

Surplus brought forward from Previous Year

15,775

13,353

12,685

12,135

Profit Available For Appropriation

31,361

21,557

23,834

17,171

Paid up Equity Share Capital

11,629

11,629

11,629

11,629

4,118

4,279

2,530

3,128

Depreciation Profit Before Bad debts / provisions and Tax Bad Debts / Provisions etc. Profit Before Tax Provision for Taxation Income Tax in respect of earlier years

Pre Acquisition Adjustment

Amount transferred to Reserves

68

Annual Report 2009-10

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, bad debts, provision and tax) is Rs. 16,204 lakh as against Rs. 5,977 lakh in the last year. Profit before taxation is Rs.14,813 lakh as against Rs. 5,037 lakh in the last year. Net profit after taxation is Rs. 11,149 lakh as against Rs. 5,036 lakh in the last year. The total assets under management of the Srei Group is Rs. 13,26,508 lakh as against Rs. 10,36,685 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. Your Company has complied with all the norms prescribed by the Reserve

Bank of India including the Fair practices, Anti money laundering and 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 guidelines laid down by the Foreign Financial Institutions, which are more stringent than the guidelines of the Reserve Bank of India.

AMALGAMATION OF QUIPPO INFRASTRUCTURE EQUIPMENT LIMITED INTO AND WITH THE COMPANY The Board of Directors of your Company at its meeting held on January 28, 2010 has, based on the recommendations of the Committee of Independent Directors, approved amalgamation of Quippo Infrastructure Equipment Limited (Quippo) into and with your Company in terms of a Scheme of Amalgamation (“the Scheme”) under Sections 391 to 394 of the Companies Act, 1956. The Board has approved the share swap ratio of 3:2, meaning thereby 3 (Three) equity shares of Rs.10/- each fully paid-up in your Company for every 2 (Two) equity shares of Rs. 10/- each fully paid-up in

Quippo. Such swap ratio is based upon the reports submitted by M/s. BDO Consulting Private Limited and KPMG India Private Limited respectively, and the fairness of the same has been confirmed by ICICI Securities Limited, an independent merchant banker. The Appointed Date of the amalgamation shall be April 01, 2010. The Board, in the same meeting, has also decided to issue bonus shares in the ratio of 4:5, meaning thereby, 4 (Four) bonus equity shares of your Company of Rs. 10/- each fully paid-up for every 5 (Five) existing equity shares of Rs. 10/- each. The Board has also proposed that the bonus issue be made a part of the Scheme. Thus, the Scheme provides that the bonus shares shall be issued and allotted to the shareholders of your Company upon the Scheme becoming effective but as per a record date, which shall be a date prior to the Record Date fixed by Quippo in terms of the Scheme for the purpose of allotment of equity shares of your Company to the shareholders of Quippo in consideration of the amalgamation. In the light of the proposed bonus issue, the share swap ratio of 3:2 as mentioned above will stand adjusted. It is also proposed under the Scheme that upon the same becoming effective,

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Your Board has recommended a Dividend of Rs. 1.20 per Equity Share (12%) for the Financial year 2009-10 to the Equity shareholders of your Company. The Dividend for the Financial year 2009-10 shall be subject to tax on dividend to be paid by your Company but will be taxfree in the hands of the shareholders.

the shareholding of your Company in Quippo shall not be cancelled, and accordingly, your Company shall be entitled to be allotted appropriate number of its equity shares in lieu of its current shareholding in Quippo, in accordance with the share swap ratio. However, since a company in India is not permitted to hold its own shares, the equity shares in your Company to be allotted in lieu of your Company’s current shareholding in Quippo, shall be allotted to one or more persons who shall hold the said shares (together with any and all additions and accretions as may happen to the same in future) in trust and for the benefit of your Company and/or its shareholders. Such trustee(s) shall within a period of 3 (three) years from the date of such allotment or within such extended period as may be agreed to by your Company and the trustee(s), shall transfer or dispose of the said shares. Until such sale or disposal, the trustee(s) shall be entitled to exercise the voting rights in respect of such shares held by them in your Company, in a manner deemed expedient by them. The Board of Directors of your Company believes that synergistic integration through amalgamation of Quippo into and with your Company shall result in: (a) integration of the businesses presently being carried on by Quippo and your Company, which shall be beneficial to the interests of the shareholders, creditors and

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employees of both companies and to the interests of public at large, as such amalgamation would create greater synergies between the businesses of the two companies and would enable them to have access to better financial resources, as well as would increase the managerial efficiencies, while effectively pooling the technical, distribution and marketing skills of each other; (b) enhancement of net worth of the combined business to capitalise on future infrastructure growth potential; (c) creation of a fully integrated and holistic infrastructure institution bringing all infrastructure business under one umbrella, i.e., the present infrastructure leasing, development, advisory and financing business of your Company, and the present infrastructure business of Quippo together; (d) synergies across the group as well as tie-ups/alliances with companies, govt. agencies, etc., and niche expertise within the individual business can be utilized to capture greater share of market and to provide more comprehensive services to its customers; and (e) de-risking and augmenting shareholders’ value besides aligning interest of shareholders in a single entity.

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The aforesaid Scheme of Amalgamation of Quippo into and with your Company has been approved by Equity shareholders of your Company with requisite majority at their meeting held on May 31, 2010.

NON-ACCEPTANCE OF PUBLIC DEPOSITS AND APPLICATION TO RESERVE BANK OF INDIA FOR REGISTRATION AS AN ‘INFRASTRUCTURE FINANCE COMPANY’ During the year under review, the Reserve Bank of India (RBI) vide circular DNBS.PD. CC No. 168 / 03.02.089 /2009-10 dated February 12, 2010 introduced a separate category of Non Banking Finance Companies (NBFCs) as ‘Infrastructure Finance Companies’ (IFCs) based on the representations made by the NBFCs engaged predominantly in infrastructure financing. An ‘Infrastructure Finance Company’ means a non deposit taking nonbanking finance company (NBFC) which – i) deploys a minimum 75 per cent of its total assets in infrastructure loans; ii) has net owned funds of Rs. 300 crore or above; iii) has a minimum credit rating ‘A’ or equivalent of CRISIL, FITCH, CARE, ICRA or equivalent rating by any other accredited rating agencies; and iv) has a CRAR of 15 percent (with a minimum Tier I capital of 10 per cent).

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 has since applied to the Reserve Bank of India (RBI) for change in classification of your Company from ‘Asset Finance Company’ to ‘Infrastructure Finance Company’.

redeemed on August 25, 2009, being fourth 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 stands reduced to Rs. 40 per Bond w.e.f. August 26, 2009. The aggregate principal amount outstanding as on March 31, 2010 is Rs. 21.06 crore.

MUTUAL FUND ACTIVITY During the year under review, your Company has received an in-principle approval from the Securities and Exchange Board of India (SEBI) for setting up a Mutual Fund and accordingly, Srei Mutual Fund Asset Management Private Limited and Srei Mutual Fund Trust Private Limited were incorporated on November 27, 2009 as wholly owned subsidiaries of your Company.

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 percent 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

DIVIDEND Your Board has recommended a Dividend of Rs. 1.20 per Equity Share (12%) for the Financial year 2009-10 to the Equity shareholders of your Company. The Dividend for the Financial year 2009-10 shall be subject to tax on dividend to be paid by your Company but will be tax-free in the hands of the shareholders.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT ECONOMIC REVIEW a. Global Outlook The financial crisis that engulfed the world after the collapse of Lehman Brothers in September 2008 had affected the developed nations more severely. A sharp fall in gross domestic product (GDP) coupled with rising unemployment was a common feature in most of these nations. To counter the crisis, they introduced massive doses of monetary and fiscal stimuli. By the third quarter of 2009, the advanced economies returned to the path of positive growth. However, what these

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economies are mostly experiencing is jobless growth which implies that their road to recovery will be a prolonged one. Compared to the advanced economies, the impact of the crisis on emerging economies has been muted. While the governments of these countries also resorted to accommodative policies, these economies maintained positive growth even during the crisis and bounced back much faster. There has been some decline in exports, but robust domestic demand has served as a growth engine in these economies. According to the World Economic Outlook (WEO) of the International Monetary Fund (IMF), global GDP growth for 2010 is estimated to be 4.25%. This is in stark contrast to the 1.9% growth projected for 2010 in last year’s WEO. Such recovery in global growth has been entirely due to the unprecedented government support across economies. In 2010, growth rates in USA, Euro Zone, U.K. and China are expected at 3.1%, 1%, 1.3% and 10% respectively. Growth projections for emerging economies for 2010 and 2011 are markedly higher. However, policy makers across the world need to be vigilant on the possible problem of sovereign debt default that looms large on several nations (includes a few Euro Zone nations) and accordingly gear up for the consequences from such eventualities.

b. Situation in India Despite the global slowdown, FY09 saw India growing at 6.7% as was predicted by the Reserve Bank of India (RBI) last year. However, the FY10 GDP growth is now projected at a healthy 7.2%, a figure far better than all estimates made a year back. Apart from China, India is the only major economy that escaped negative GDP growth rate on a consistent basis quarter after quarter. Fiscal stimulus in India was miniscule, so the impact on growth will not be much even as government starts unwinding a part of it. With headline inflation touching double digits, RBI has initiated monetary tightening in a calibrated manner. Projections for GDP growth in FY11 are also robust. While RBI has estimated GDP to grow at 8% with an upward bias, the IMF’s projection is even higher at 8.8%. Consumption had all along remained strong in India. Going ahead, capacity expansion is the key. Typically capex starts picking up after few months of a pick up in Index of Industrial Production (IIP). With industrial recovery gaining momentum and core infrastructure sectors like cement, coal, electricity and steel registering decent growth, capex is not far behind. India continues to remain an attractive investment destination. In FY09, India received USD 35 billion as FDI. FII inflow has also remained robust. The government is working on creating an FDI-friendly regime. The government remains committed towards economic

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reforms. Roadmaps stand prepared for a gradual phasing down of the fiscal deficit, introduction of a unified Goods & Services Tax (GST) regime and implementation of a Direct Tax Code (DTC). Emphasis on infrastructure creation is central to the government’s development plans. All these steps augur well for India’s future.

NBFIs IN INDIA The role of Non Banking Financial Institutions (NBFIs) in asset creation and infrastructure development is well acknowledged. They act as principal channels of credit delivery to the micro, small and medium enterprises (MSMEs) which remain under-served by banks and other financial institutions in spite of being the back-bone of the India Growth Story. On the infrastructure front, the MSMEs account for majority of the contractors and transporters whose service is central to the infrastructure creation process. Thus, by serving these MSMEs, the NBFIs are promoting inclusive growth and contributing to the nation-building process. The year under review witnessed many developments in the NBFI space, especially those which belonging to the infrastructure financing domain. Acknowledging the fact that NBFIs which are exclusively into financing of infrastructure are doing a great service to the nation, recently RBI has created a new category of NBFIs, namely the Infrastructure Finance Companies (IFCs). Quite expectedly, IFCs are likely to be treated differently from other

Annual Report 2009-10

NBFIs and are likely to have policy guidelines which will enable them for longer tenure borrowing and also realise their dues effectively. As it is, IFCs were allowed to source ECB from multilateral / regional financial institutions and governmentowned development financial institutions under the ‘approval route’. To facilitate their borrowing, RBI has expanded the list of eligible lenders by including reputed international banks. However, the total outstanding ECBs including the proposed ECB cannot exceed 50% of the owned funds of the IFC. The IFCs also stand to benefit from government’s proposed move to allow private financial institutions to issue taxfree infrastructure bonds. While government is yet to finalise on the eligibility criteria of such players, IFCs are most likely to fit the bill as they already have to abide by certain stringent criteria. So far, the privilege of floating infrastructure bonds had been restricted to select state-owned firms. Inclusion of IFCs will greatly revolutionise infrastructure financing in India.

BUSINESS OUTLOOK AND FUTURE PLANS The Eleventh Five Year Plan (FYP) covering 2007-12 envisaged a total investment of USD 514 billion in the various infrastructure sectors. With an emphasis on public-private partnership (PPP), the private sector was expected to bear 30% of the total investment. However, a mid-term appraisal of the

Eleventh Plan shows that the private sector response has been phenomenal and they have invested more than expected. Private sector investments accounted for 80% of total investments in ports, 82% in telecom, 64% in airports, 44% in electricity, 16% in roads and 4% in railways. This has encouraged the government to go for a more ambitious infrastructure creation drive for the Twelfth FYP (2012-17) where the total investment figure for infrastructure stands doubled at USD 1 trillion and within that 50% of the investment is expected to come from the private sector.

Projections for GDP growth in FY11 are also robust. While RBI has estimated GDP to grow at 8% with an upward bias, the IMF’s projection is even higher at 8.8%.

However, availability of long-term finance remains a challenge in India. Asset-liability mismatch discourages banks to take too much exposure in infrastructure projects. The option of borrowing long-term capital from abroad is there, but restricted. Project developers are allowed to access external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs), but usually it is the bigger players with better credit ratings who can tap such funds. But keeping in mind the surfeit of foreign exchange inflow due to India’s attractiveness as an emerging market destination, government tries to limit entry of foreign capital (for various considerations like resultant inflation, appreciation of domestic currency to hurt exports, etc.) and thus imposes restrictions in terms of quantum, enduse, approvals, etc. It is not that India does not have longterm capital. India has huge reserves

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Private sector share in the infrastructure spending is expected to increase from an estimated 36 per cent in the Eleventh FYP to 50 per cent in the Twelfth FYP (2012-17). Thus, the role of the financial institutions such as Banks, NBFCs, Foreign Institutional Investors, Private Equity firms and the capital markets has become vitally important in the Indian infrastructure market.

of long-term capital in insurance and pension funds which can typically match infrastructure project tenure. But government allows a very limited exposure for these funds to invest in infrastructure projects. Government is aware that across the world there have been numerous instances where misadventure by fund managers had wiped out life-time savings of millions of people. Therefore, with limited availability of long-term capital in the country and a restricted window to tap foreign capital, the focus has to be on creating an atmosphere where the large domestic savings can be mobilised into infrastructure investment. As it is, India’s domestic savings account for almost 33% of GDP. To facilitate resource mobilisation for infrastructure financing, the government is now actively considering a proposal to allow private financial institutions to issue taxfree infrastructure bonds. Government promoted Indian Infrastructure Finance Company Ltd. (IIFCL), which was set up to provide a boost for PPP projects, has so far had a mixed track record. Its Rs. 10,000 crore re-financing facility is still to receive an overwhelming response, especially the scheme being restricted to only road and port sectors. So Rs. 3,000 crore from the corpus is now being made available for direct lending (where infrastructure projects from all sectors are eligible to borrow). IIFCL is expected to disburse Rs. 11,000 crore in FY11.

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To catalyse long-term lending for infrastructure projects, government has introduced the take-out financing scheme through IIFCL. For the time being, IIFCL’s total exposure to this scheme has been capped at Rs. 25,000 crore. Once implemented, the scheme would help banks by-pass the asset-liability mismatch problem. The scheme awaits a final approval from the government. A decision is yet to be taken whether take-out financing facility would be available to only new projects (to be launched) or ongoing projects as well. With an enhanced emphasis on infrastructure creation, your Company is well positioned and well capitalised to tap the opportunities and expand its business portfolio. Both project financing and equipment financing are expected to pick up riding on a robust demand-led growth of the domestic economy. However, the developments in the advanced economies in the aftermath of the rollback of stimulus packages need to be monitored closely. Any adverse development in those countries is bound to have some impact on India. The management of your Company continues to be vigilant on these fronts. Thus, there are enough reasons for your Company to be cautiously optimistic.

BUSINESS REVIEW The three main business areas of your Company have been in Infrastructure Equipment Financing, Infrastructure Project Financing and Infrastructure Project Advisory.

Annual Report 2009-10

INFRASTRUCTURE EQUIPMENT FINANCE SREI EQUIPMENT FINANCE PRIVATE LIMITED (SREI BNP) Srei BNP, the joint venture between your Company and BNP Paribas Lease Group, is registered with the Reserve Bank of India (RBI) as a non-deposit taking Non-Banking Finance Company (NBFC) (Category - Asset Finance) and is in the business of equipment financing. In the year under review, the total disbursements of Srei BNP grew by 8.76 per cent from Rs. 5,519 crore to Rs. 6,003 crore. Srei BNP has been able to consolidate and increase its market share during the year and all other operational metrics are higher. The year under review began with some challenges, but as the outlook improved the disbursements grew. With the formation of the stable government, several new projects were announced and the demand for equipment increased. Srei BNP introduced several new schemes in association with the manufacturers to spur the demand, and accelerate the sales - like Srei Partnership Week (SPW), which served the dual purpose of getting confidence back among customers and increasing customer reach. Srei BNP also started a new business line this year - Technology Solutions, for financing equipment in the Technology and Telecom sector. This was a very successful initiative and was done in association with the knowhow from

BNP Paribas, who have sectoral expertise in this field. Srei BNP has been able to forge relationships with some global majors for financing mutual customers. Srei BNP has also selectively started financing healthcare equipment to large hospitals and diagnostic centres. Srei BNP has clients who are among the best in Technology and Healthcare in India, and acts as a substantial sectoral risk diversification. The partnership with BNP Paribas Lease group has been fruitful, and there is substantial mutual learning. On the human resources front, there has been minimal attrition and Srei BNP has been able to attract good talent into the organisation in the past year. The morale of the employees is high and the business is expected to grow substantially in the forthcoming year.

INFRASTRUCTURE PROJECT FINANCE The recent global financial crisis, which is now receding, has had a less severe impact on the Indian economy than it had on the rest of the world. Infrastructure sector investments are expected to drive India’s economic growth and development during the next decade. The Government of India has placed an increased focus on infrastructure development with a planned expenditure of about USD 1 trillion during the Twelfth FYP, more than double the allocation under the current plan. Private sector share in the infrastructure spending is expected to increase from an estimated 36 per cent

in the Eleventh FYP to 50 per cent in the Twelfth FYP (2012-17). Thus, the role of the financial institutions such as Banks, NBFCs, Foreign Institutional Investors, Private Equity firms and the capital markets has become vitally important in the Indian infrastructure market. Private sector investment in infrastructure depends on two key aspects – economic viability of projects and investor friendly regulatory framework. Various drivers such as consistently high GDP growth rates during the last decade, changing GDP composition, India’s demographic transition and high rates of industrial growth have resulted in a rising price inelasticity of demand for infrastructure facilities. This means that both businesses and households are now able and willing to pay such user charges for infrastructure facilities that make these projects economically viable. Furthermore, the ongoing regulatory reforms and incentives provided by the government, including different schemes for various PPP projects, provide an impetus as well as regulatory certainty for such projects. As a result, infrastructure development projects are not only becoming economically viable but also investor friendly for private sector participation. In recognition of this growth potential, your Company has remained focused on infrastructure financing for the last twenty years, and has established itself as a holistic infrastructure finance company, providing a range of innovative financial solutions including

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equipment finance, asset hypothecation loans, operating leases, project loans, syndication, etc. Over the years, your Company has financed various small and medium sized projects that have contributed to the symbiotic growth of both the project developers and your Company. Leveraging upon its acute and in-depth knowledge of the infrastructure sector, combined with its expertise in financial structuring and the continued support of various bilateral/multilateral agencies, your Company got the impetus to make a foray into infrastructure project finance and has emerged as a strong niche player. While there are many financial institutions like IIFCL, IDFC, PFC, etc. to fund infrastructure development in the country, NBFCs like your Company have been active in financing the small and medium sector projects, thus facilitating a more inclusive growth. Your Company also structures and syndicates debt transactions for midsized projects as well as participates in debt consortia for large projects. During the year under review, your Company has had an impressive growth. It has increased its aggregate portfolio size to Rs. 3,586 crore in financial year 2009-10, as compared to Rs. 1,368 crore in financial year 200809. The key infrastructure investments have included the following sectors: Power, Ports, Roads, Aviation, Oil and Gas, Mining, Logistics, Industrial Parks, Telecommunications, SEZs, Urban Infrastructure and the like. Through its structured risk mitigation techniques, its

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appetite to experiment with financing structures, security packages and maturity profiles of loans, your Company has contributed to innovation and greater efficiency in financing, contributing to an increased availability of infrastructure services in the country.

Power: The power sector in India continues to suffer from a large peak demand deficit. The Eleventh Plan targeted an additional capacity generation of 92,700 MW by investing Rs. 6.59 lakh crore in this sector. The investment opportunity for the private sector is Rs. 1.86 lakh crore during this five year period and Rs. 43,726 crore for financial year 2010-11 alone. Capitalising on this opportunity, your Company has allocated over 20 per cent of its total allocation to this sector. With an interest in thermal power, renewable energy, hydroelectric power, and co-generation and waste heat recovery systems, your Company has executed several transactions with power generation companies including interim finance for a 600 MW thermal power plant in Andhra Pradesh, short term loan for a gas based power project, project finance for 300 MW coal-based power plant, among other approvals.

Railways and Logistics: Indian railways suffers from some serious deficiencies in terms of track coverage, age of rolling stock, average speed, etc. leading to high logistics cost for the economy (13-14 per cent of GDP). The Eleventh Plan’s investment

of Rs. 2.10 lakh crore in this sector envisages private investment opportunity of Rs. 61,543 crore in railways and logistics. Your Company has examined investment opportunities in financing rolling stocks, setting up of Inland Container Depots (ICDs), warehouses and cold storages, and development of railway sidings. On March 31, 2010, the total exposure of your Company to this sector stood at approximately Rs. 48 crore, and your Company is exploring various financing options under the new scheme declared in the Railway Budget of 2010. Your Company is already a pioneer in rolling stock financing in India, and with the entry of new private sector players in this sector, it is evaluating PPP models for asset backed financing of rolling stock, containers, and terminal facilities, so as to provide a more efficient logistics system of freight movement.

Aviation and Airports: Airport standards across India, with a few recent exceptions, need considerable upgradation to come up to global benchmarks. The Eleventh Plan’s investment of around Rs. 36,000 crore for the development of this sector, envisages 70 per cent to be financed by the private sector. This includes modernisation of passenger services, air traffic management as well as aircraft and ground handling facilities. Due to the steady growth of passenger traffic, both domestic and international, capacity augmentation is paramount. The aviation sector, along with air cargo services and logistics, would require

Annual Report 2009-10

large investments to meet the growing demand. Risk mitigation covenants and asset back comforts are critical inputs to financial structures in airline transactions. Your Company participated in a number of transactions in the aviation sector, using its understanding of the sector to provide innovative solutions to its customers. Your Company’s exposure to this industry stood at Rs. 170 crore at the end of the financial year. It has primarily financed aircraft and helicopters for non scheduled and private operators backed by charter hire arrangements with creditworthy clients.

Ports and Port Equipment: Modern ports are crucial support to the country’s growing international trade. The sector requires large investments to expand capacity of existing ports and to replace obsolete equipment and cranes, so as to improve loading and unloading time. Dredging of waterway is another critical area of investment. To overcome these impediments, the Eleventh Plan envisages investment of around Rs. 40,000 crore to this sector, of which around 60 per cent is expected to be financed by the private sector. Your Company has participated in the modernisation of ports through financing of greenfield non-major ports, material handling systems, dredging vessels, and has also developed and expanded multi-modal transport facilities. As equipment financing forms a major part of your Company’s activity, increased focus has been placed on financing port equipment, dredgers, etc. It is also looking into financing

construction of new ports and expansion of existing ports through consortia.

Mining: Mining is a very important sector because minerals like coal and iron ore play a significant role in the growth of an economy. India has huge untapped deposits of minerals like coal, iron, manganese, chrome, bauxite, alumina, copper, etc. Thus, the Eleventh Plan envisages private sector investment opportunity of Rs. 14,120 crore in the mining sector. Even though private sector has always had a significant presence in this industry, there is a huge opportunity to mechanise and upgrade mining and related equipment. Your Company, with its major operations based in Eastern India, is strategically located to provide financial solutions to mining companies in Chhattisgarh, Jharkhand and Orissa. It has undertaken several transactions and has a total exposure of Rs. 157 crore in the mining sector. It is involved in the development of captive coal mines for power plants in Orissa. It is also devising plans to increase exposure by way of financing other mining developmental projects such as land acquisition, construction of haulage roads, railway sidings and coal washeries.

The power sector in India continues to suffer from a large peak demand deficit. The Eleventh Plan targeted an additional capacity generation of 92,700 MW by investing Rs. 6.59 lakh crore in this sector. The investment opportunity for the private sector is Rs. 1.86 lakh crore during this five year period and Rs. 43,726 crore for financial year 2010-11 alone.

Telecommunications: The Indian telecom industry has expanded tremendously in size and reach, with the total number of landline and mobile subscribers reaching 654 million in May 2010. However, there is

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The Eleventh Plan envisages an investment of about Rs. 2.79 lakh crore to this sector, of which around 34 per cent is to be financed by the private sector. Your Company has invested selectively in road projects allotted by NHAI with an exposure of Rs. 301 crore as on March 31, 2010.

much scope to increase reach in rural India, improve broadband facilities, and increase 3G and other value added services. To meet these goals, the Eleventh Plan envisages an investment of Rs. 3.45 lakh crore, 69 per cent of which is expected to be financed by the private sector. With such a huge investment opportunity, your Company reported a total exposure of Rs. 1,235 crore in this sector. Leveraging on its acute understanding of this industry and its long standing relationships with vendors, your Company has structured financing packages that include investment in critical equipment, telecom towers, license acquisition, etc. In the last financial year, your Company has financed the expansion of cable broadband network in multiple states in India.

Roads: Roads are essential for commerce in any country as it connects ports, ICDs and warehouses to cities and other markets. The roads in India need massive investment to increase and improve network coverage, quality of roads and highways, rural penetration to connect villages to cities, etc. The Eleventh Plan envisages an investment of about Rs. 2.79 lakh crore to this sector, of which around 34 per cent is to be financed by the private sector. Your Company has invested selectively in road projects allotted by NHAI with an exposure of Rs. 301 crore as on March 31, 2010. During the year, your Company has provided debt syndication facilities for several road

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projects to develop portions of the National Highway and other toll roads. It also participated in NHAI annuity based projects for select developers.

Oil and Gas: Though oil and gas sector is a very volatile industry, it is a critical economic driver. The Eleventh Plan envisages an investment of Rs. 22,500 crore for this sector, of which 32 per cent is envisaged to be financed by the private sector. This includes development of onshore and offshore oil rigs and drilling vessels. Your Company, with its high expertise in structuring risk mitigation deals and asset-backed funding, has structured operating leases for onshore rigs and specialised deep sea pipe laying vessels. On March 31, 2010, its total exposure to this sector is Rs. 427 crore and is continuously increasing. Since infrastructure projects are capital intensive, they need a range of other financial services in addition to provisioning of debt capital pre-project advisory for project conceptualisation and appraisal, capital markets intermediation, debt and equity fund raising, bond placement, general insurance risk cover, project development, equipment financing, etc. Your Company, with the help of its different divisions and subsidiaries, attempts to cross-sell these products and services over the project life cycle with an aim to increase its pre-tax return on equity. Your Company has successfully leveraged its strengths such as sector

Annual Report 2009-10

expertise, innovative risk mitigation techniques, competitive pricing, and transaction structuring to form strong corporate relationships with clients and gain privileged access to project developers. Moreover, to keep up this growth momentum, your Company continues to hire professionals with vast experience in infrastructure financing to augment and build its repository of quality intellectual capital so as to differentiate itself and gain from it. These positive developments position your Company well to take advantage of the huge investment opportunity provided by the Indian Government in this sector, and to strengthen its position as one of the leading players in the infrastructure financing arena.

INFRASTRUCTURE PROJECT ADVISORY The Infrastructure Project Advisory group of your Company is moving ahead with renewed strength in the areas of Project Planning and Conceptualisation, Preparation of Feasibility Reports and Detailed Project Reports, Bid Process Management, Evaluation of Bids and Selection of Partners, SPV Structuring and Financial Structuring for various PPP infrastructure projects. Your Company provides integrated and comprehensive professional services towards development of infrastructure projects with a focus on sectors like Roads, Ports, Energy, Airports, SEZs, Industrial Parks, Urban Transport (MRTS/BRTS), Water Supply and Sanitation, Tourism Infrastructure,

Education, Health Services, etc. In the transportation space, your Company has been associated with several prestigious projects in different Indian cities: Under Mass Rapid Transport System (MRTS), your Company has been involved in various capacities in the Delhi Airport High Speed Metro Link, Bangalore Metro Project, Mumbai Monorail System, Lucknow Metro System and the proposed Light Rail Transit System in Kolkata. Under Bus Rapid Transport System (BRTS), your Company has also been entrusted with the preparation of detailed project report (DPR) and quality supervision for implementation of BRTS on two corridors in Vishakhapatnam and also been given the exclusive mandate for transaction advisory services for implementation for BRTS bus stations and pedestrian grade separated facilities for Greater Vishakhapatnam Municipal Corporation. Under National Urban Transport Policy (NUTP), your Company also has the mandate for preparing a Transportation Mobility Plan for Vadodara and providing advisory services for studies on ‘Establishment of Traffic & Transit Management Centres’ for Bangalore. In power sector, your Company was appointed as Consultants by Rural Electrification Corporation Ltd. to undertake selection of private

developer for two Power Transmission Projects through international competitive bidding route, namely Transmission Strengthening System associated with North Karanpura (1,980 MW) and Augmentation of Talcher-II Transmission System and also as review consultants by Power Finance Corporation for the third project, namely import of NER/ER surplus power by Northern Region. With this, your Company now holds the distinction of advising all the three transmission projects, set up under the aegis of Ministry of Power, for selection of private developer. The bidding documents have been finalised in consultation with Central Electricity Authority and Ministry of Power and based on these documents the successful bidders have been selected for all the three transmission projects through tariff based competitive bidding process. Your Company has been appointed as Consultant by India Power Corporation Ltd. to undertake techno-economic feasibility study for setting up of 2x660 MW coal-based thermal power project in Gujarat. Your Company has carried out the requisite pre-feasibility studies and submitted its report. In the urban infrastructure space, your Company provided consultancy to the Government of Uttar Pradesh for the Integrated Urban Rejuvenation Plan (IURP) project for six cities (Ghaziabad, Meerut, Agra, Aligarh, Allahabad and Varanasi) wherein the scope of the work involves IURP preparation, project identification, conceptualisation,

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conducting pre-feasibility and bidprocess management. Under this, the Agra Ring Road - a Rs. 1,098 crore project - was successfully closed. Keeping in view, the Government’s emphasis on improving the social infrastructure, your Company during the year under review, has taken up a number of innovative projects in the fields of education, healthcare and rural development which have tremendous business potential and can evolve as self-sustainable business models: Your Company had been engaged by Himachal Pradesh Infrastructure Development Board in advising them on setting up of Medical Colleges along with upgradation of District Hospitals at Hamirpur and Una to Multi-Specialty Hospitals under Public Private Partnership framework. Your Company has also evolved a business model aimed at delivering improved healthcare services in rural areas through Primary Healthcare Centres (PHCs) managed by Entrepreneur Doctors under PPP framework. Viability Gap Funding is to be provided by the Centre and State Government through schemes under National Rural Health Mission. The proposal is under active consideration of certain state governments for implementation. Your Company has developed a simplified and unbiased students performance evaluation process which reduces stress on school teachers / management under the Central Board of Secondary

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Education (CBSE) Board to a great extent while implementing the new Continuous and Comprehensive Evaluation (CCE) system. This solution is being offered to CBSE affiliated schools in some states initially but shall be extended to all states across the country in due course. In order to generate employment and livelihood opportunities for the rural masses, your Company has developed a business model for Dairy Farming undertaken through Self-Help Groups (SHGs). This project, which can be funded through the existing Government Schemes of Swarnajayanti Gram Swarojgar Yojana (SGSY) and National Rural Employment Guarantee Act (NREGA), is initially being taken up as a Demonstration Project in Madhya Pradesh and it has the potential to be replicated all across the country.

Water Supply and Sanitation: With rapid urbanisation, municipalities are grappling with the challenges related to water supply, sewerage and solid waste management. Your Company realises the untapped potential in this field and is working towards exploring that opportunity: Your Company has been involved in preparation of DPRs for various districts in the State of Arunachal Pradesh on sewerage, solid waste management, construction and improvement of storm water drains under the Urban Infrastructure

Development Scheme for Small and Medium Towns (UIDSSMT) Scheme. Your Company has provided consultancy services to Public Health Engineering Departments of Government of Bihar and Haryana with regard to preparation of Pre Feasibility Report and DPR on water supply and sewerage schemes in various towns in these states. Your Company is empanelled with various government organisations and enjoys strategic associations with some of the best players in the industry. During the year under review, your Company has signed a Memorandum of Understanding (MoU) with Aker Wirth GmbH (a global provider of engineering, construction and technology products and solutions for sectors like oil & gas, mining & metals, micro tunnelling and construction) to jointly harness emerging business opportunities in areas of common interest in procuring business, identifying opportunities for leasing of plants and machineries and looking out to supplying such plants and machineries to clients in India, Sri Lanka, Bangladesh, Nepal, Thailand and Myanmar.

INTERNATIONAL BUSINESS OPERATIONS Your Company’s international business primarily consists of its leasing business in Russia and advisory services in Saudi Arabia and Nigeria. Your Company’s Russian business, ZAO Srei Leasing, was adversely

Annual Report 2009-10

impacted by the financial crisis during last year. The global financial crisis in 2008-09 affected Russia somewhat higher than other European nations. However, since the last quarter of 2009, the Russian Economy has shown signs of improvement although it has been slow. These were challenging times but your Company has weathered the storm successfully and maintained its track record of profitability since its inception, even under adverse circumstances. These were possible through a concerted strategy comprising of proactive client partnerships coupled with active follow up and close monitoring of receivables. A high loan to value ratio, collateral of equipment and a satisfactory assetliability match added to the resilience of your Company in a market where survival was a challenge to many. Your Company is confident of taking advantage of the economic revival and generating a superior performance in the coming years. Your Company is currently concentrating on strengthening its business by building partnerships with financially strong creditworthy customers, using extensive risk management tools and diversifying into other infrastructure sectors. During the previous financial year, your Company had set up a leasing company in the UAE, Aalat LLC, in joint venture with Waha Capital but the said company could not commence its operation due to severe financial crisis and slowdown of construction activities in the UAE. The company is geared to

commence its operations as soon as the UAE economy starts showing signs of revival. Your Company has entered into a new line of business initiative last year - for providing technical advisory services for setting/scaling up leasing companies in foreign countries. The first step in this regard was to provide advisory services in Saudi Arabia followed by Nigeria. Both these assignments are progressing successfully. Your Company has also been approached by other international clients for providing similar services in other nations. This will provide opportunities to your Company to establish footprints in many foreign shores in a short period of time.

Your Company has entered into a new line of business initiative last year - for providing technical advisory services for setting/scaling up leasing companies in foreign countries. The first step in this regard was to provide advisory services in Saudi Arabia followed by Nigeria. Both these assignments are progressing successfully.

RESOURCES Your Company is an NBFC with focus on Infrastructure Finance and being uniquely poised to play a vital role in this process of nation building by extending credit to numerous borrowers in the infrastructure sector, facilitates deeper penetration of economic benefits and promote inclusive growth. Your Company requires resources on a continuous basis to equip itself with funds to disburse at all times. Your Company took up the challenge of mobilising resources at the most competitive rates and lived up to the expectations by raising the required resources from its bankers and financial institutions all the while ensuring proper asset-liability match.

81

In April 2010, your Company decided to convert itself into a nondeposit taking NBFC in order to qualify for registration as an Infrastructure Finance Company. Your Company has decided that it would not accept any further public deposits or renew such maturing deposits in any manner w.e.f. April 20, 2010.

a) Fixed Deposits The total deposits outstanding as on March 31, 2010 was Rs. 520.35 lakh as compared to Rs. 514.99 lakh as on March 31, 2009. There were unclaimed matured deposits of Rs. 51.63 lakh representing 200 depositors as at March 31, 2010 who have been informed about the maturity of deposits with a request to claim their deposits back. 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 has 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 a scheduled commercial bank.

b) Bank Finance Your Company mobilised resources to the extent of Rs. 2,900 crore during the year at the most competitive rates available in the market for the industry. Your Company continued its focus on domestic sources, comprising of a consortium of 15 banks.

c) Bonds / Debentures / Commercial Papers Your Company issued short-term debt instruments aggregating Rs. 6,543 crore during the year to various Mutual Funds. Out of above, Rs. 180 crore has been raised though commericial paper

82

and Rs. 6,363 crore all by way of Bonds/Debentures with maturities upto one year.

d) Tier II Capital To augment resources and increase the capital base, your Company has raised Tier II Capital aggregating to Rs. 200 crore during the year.

e) Foreign Institutional Borrowings Your Company has drawn ECB of USD 33.25 million during the current financial year. Beside this, your Company has RBI approval for ECB of USD 70 million which would be drawn during the forthcoming financial year.

RISK MANAGEMENT The recent global financial crisis not only disrupted all kind of financial markets, it also gave way to bankruptcies of banks and companies across the globe. While the exact causes are yet to be fully comprehended, most analysts identify risk management failure as one of the key weaknesses that caused the unprecedented increase in asset prices, the availability of cheap credit leading to build up of excessive leverage, and the resulting massive under pricing of risk. The crisis has, therefore, not only vilified the risk management function of financial institutions, but has also vindicated the importance of this function for the survival of companies and the stability of the financial system. Your Company uses a multi-faceted approach to manage its risks, which is

Annual Report 2009-10

aimed at insuring the net income against disruptions from any kind of risk, thereby minimising volatility in income with a pro-cyclically bias. In an organisation like your Company, there are risks present on all levels and aspects of its functioning, including business, strategic, operational, market, credit, liquidity, reputation, processes and the like. Hence, to manage and mitigate these risks and reduce the uncertainties that are all prevalent, an enterprise wide risk management framework has been established by your Company that allows all risks to be aggregated using a consistent measurement system as well as take account of the correlation between these risks.

HUMAN RESOURCES ACTIVITIES

While most banks and financial institutions face these risks, the approaches adopted by each to manage the risks vary significantly. Sophistication of risk measurement methods, that utilise all data and information available within the organisation to arrive at a better estimation of its risk profile, is one of the key differentiating factors between institutions. Your Company constantly reviews its risk management system with a view to improve the same. The lessons learnt from the global financial crisis, especially with respect to scenario stress testing and contingent planning, are being incorporated into the existing risk management system to get better prepared to deal with future market turbulences, such as the one faced in the recent past.

In Srei Group, which is constantly undergoing business expansion and diversification, the Human Resources (HR) Department of your Company makes continuous effort of repositioning HR as a ‘trusted business partner’ from a ‘traditional support/back-office’ function and closely align HR with business to enable business transformation and growth. This was impossible without the right design and deployment of the HR teams in terms of structure, size and distribution. Hence, Zonal HR Structure was incorporated in your Company to operate closely from customer interfacing units i.e. branches and regions pan-India.

While the world economy recovers from the economic crisis, the market is inviting for players on account of unlocking opportunities. But with this comes demanding customers, impeccable quality and crunched timelines. So as organisations battle the challenges of intense global competition, rapid technological change and a changing demographic base, it is critical that your Company has in its armoury a sound human capital strategy that creates a stakeholder focused empowered workforce thereby making Human Capital Strategy a key differentiator in corporate success.

Additionally, your Company realised the need of consolidating its diversified businesses and strategies in terms of

managing risk, execution, diversity and scale. This deliberated the initiative of standardising the Srei Policies & Processes for the entire Group. This initiative was outsourced to a reputed external expert team with the intent of creating world-class employee policies benchmarked with the industry standards and well customised to your Company’s diverse business needs. One of the most imperative efforts was to re-look into the Performance Management System (PMS) Policy with the clear purpose of creating a culturedriven organisation. Hence, the PMS process was not only simplified but also standardised for the entire Srei Group. The HR team has well begun this activity on an extensive scale with full commitment through PMS awareness programmes pan-India covering each of the appraisee and appraiser. Amidst your Company’s diversified platform in terms of businesses, market, customer-base, location and teams, HR was poised with the challenge of integrating the People Development strategy across the Group. This influenced the creation of an HR Synergy Team consisting of cross-functional team of selected top leaders. This Synergy team is partnering HR in various employee engagement, development, motivation and hygiene-enabling activities. Your Company has identified Leadership Development as a critical issue for viability of its business goals. As part of this endeavour, your

83

Company focuses upon the nurturing and development of leaders wherein your Company has sponsored for its leaders to attend international and national management development programmes. At the broader spectrum, your Company lives by its DNA and ‘entrepreneurship’ is one of them. The mission to nurture ‘entrepreneurs’ or ‘leaders for future’ has proudly shaped into an innovative and unique initiative LeAD Srei. LeAD Srei is a Srei Institute of Entrepreneurship Development which envisions the development and nurturing of entrepreneurs. A pilot project is already underway wherein the first batch constituting of selected relationship Managers, leaders and vendor/client partners would undergo a high-end, customer-based and business-based development curriculum. The infrastructure and faculty base is being organised. This innovative initiative would perhaps change the landscape of People Development Area. For the first time, your Company participated in the Great Place to Work Study conducted by Economic Times on a pan-India scale. This has helped your Company to benchmark with the best workplaces in India and further sketch a guiding agenda for its leaders and HR department for organisational development. Your Company continues to induct talent for its present and future needs. The number of employees of Srei Group increased from 1,083 on March

84

31, 2009 to 1,424 on March 31, 2010.

INFORMATION TECHNOLOGY Your Company realises how technology can provide the edge to remain ahead of competition and thus constantly upgrade its technology both in terms of hardware and software. Your Company has already networked all the offices and integrated front-office with backoffice operations through Microsoft Dynamics (AXAPTA), an ERP Solution which enables faster information exchange and dissemination, thereby expediting all decision making. Over the years with changing business needs, the ERP solution was customised to handle newer business rules and MIS needs. As the user base grew, the performance of the solution began to degrade considerably. Being a mission critical solution, it was necessary to address the problems without affecting the business and completely mitigate any risk of technical failure. Your Company decided to approach the challenge and entrusted the responsibility to Microsoft Consulting Services with an objective to improve the performance of the application. Based on the study conducted, the ERP application along with the Database was successfully upgraded resulting in significant improvement in the performance of the application and has brought stability to the application. On one hand, the application performance was improved by well over 35 per cent and on the other hand,

the connectivity cost for both data as well as voice for the entire group was reduced by almost 50 per cent. Additional 12 branches were enabled through virtual private network (VPN) during the year under review. Your Company now enjoys the facility of both audio as well as video conferencing facilities that can reduce the travel cost of the senior executives significantly and improve the communication across India and abroad. The entire Srei group companies were integrated through their mailing system seamlessly to provide significant improvement in collaboration across the group companies.

INTERNAL CONTROL AND AUDIT Your Company is having an independent Internal Audit Department reporting directly to the Audit Committee of the Board. Internal Audit Team is involved in constant evaluation and implementation of adequate internal control measures to ensure good governance. The Team ensures seamless efficient business operation and supports mitigation of associated risks by the process owners. The follow up role of the Internal Audit Team involves implementation of corrective actions and improvements in business processes. The Audit Committee and Senior Management review the reports and implementation status of suggestion made by Audit Department from time to time. The effectiveness and quality of internal

Annual Report 2009-10

audit functions are monitored by the Audit Committee on an ongoing basis. The Internal Audit and the Internal Control procedures adopted in your Company are adequate and commensurate with the size and complexity of its business.

ENVIRONMENT PROTECTION POLICY Your Company is getting support and guidance from International Finance Corporation (IFC) of the World Bank Group, DEG-Germany, FMONetherlands and other highly reputed multi-lateral agencies on environmental issues. While endorsing the view that environment protection is the key to any long-term sustainable development, your Company ensures that environmental dimensions are factored into all of your Company’s business considerations and activities especially while undertaking review, clearance and supervision of projects. Your Company ensures that its assets and project financing do not cause adverse environmental and social impacts. Non-conventional sources of energy have emerged as the only viable option to achieve the goal of sustainable development. India is at the forefront of international effort to harness renewable energy resources. In line with its concern for environmental issues, your Company has a fully operational renewable energy department which finances pollutionfree renewable energy technologies.

SOCIAL RESPONSIBILITY Recognising its social responsibility, your Company had created 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 Twenty Five Lakh to Srei Foundation during the financial year 2009-10. Your Company also promotes all-round development of a clean environment and help in propagating and imparting

At the broader spectrum, your Company lives by its DNA and ‘entrepreneurship’ is one of them. The mission to nurture ‘entrepreneurs’ or ‘leaders for future’ has proudly shaped into an innovative and unique initiative - LeAD Srei. LeAD Srei is a Srei Institute of Entrepreneurship Development which envisions the development and nurturing of entrepreneurs.

education for the betterment of agriculture / horticulture and other similar activities.

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.

85

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.

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND During the year under review, your Company has transferred a sum of Rs. 3,18,028.90 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 till March 31, 2010 was Rs. 21,81,380.69.

SUBSIDIARY COMPANIES During the year under review, Srei Mutual Fund Asset Management Private Limited and Srei Mutual Fund Trust Private Limited were incorporated on November 27, 2009 as wholly owned subsidiaries of your Company with initial capital of Rs. 5 lakh (Rupees Five lakh) each. The Share Capital of Srei Mutual Fund Asset Management Private Limited was subsequently increased to Rs. 10 lakh (Rupees Ten lakh) on February 17, 2010 and thereafter to Rs. 10.10 crore (Rupees Ten crore ten lakh) on April14, 2010 consequent upon infusion of fresh capital by your Company. During the year under review, a short term investment was made in the Equity shares of Orbis Power Venture Private Limited (Orbis) and thereby it became a subsidiary of your Company w.e.f. January 2, 2010. Subsequently, Orbis acquired 57.17% shareholding in DPSC Limited on January 29, 2010 and therefore, DPSC Limited became a

86

subsidiary of your Company. Consequent upon increase in paid up share capital of Orbis, Orbis and its subsidiary company, DPSC Limited ceased to be subsidiaries of your Company w.e.f. March 31, 2010. Further, Srei Advisors Pte. Limited, Singapore became a subsidiary of IIS International Infrastructure Services GmbH, Germany, a subsidiary of your Company, w.e.f. February 25, 2010. The statement pursuant to Section 212 of the Companies Act, 1956, containing details of Company’s subsidiaries in India and Overseas, forms part of the Annual Report. In view of the exemption received from Ministry of Corporate Affairs, Government of India vide Letter no. 47/52/2010-CL-III dated March 26, 2010, 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 viz., Srei Capital Markets Limited, Srei Venture Capital Limited, Srei Forex Limited, Global Investment Trust Limited, Srei Sahaj eVillage Limited, Srei Infrastructure Advisors Limited, Controlla Electrotech Private Limited, Srei Infocomm Services Limited (subsidiary of Srei Infrastructure Advisors Limited), Bengal Srei Infrastructure Development Limited (subsidiary of Srei Infrastructure Advisors Limited), Hyderabad Information Technology Venture Enterprises Limited (subsidiary of Srei Venture Capital Limited), Cyberabad Trustee Company Private

Annual Report 2009-10

Limited (subsidiary of Srei Venture Capital Limited) and IIS International Infrastructure Services GmbH, Germany for the financial year ended March 31, 2010, and ZAO Srei Leasing, Russia (subsidiary of IIS International Infrastructure Services GmbH, Germany) for the financial year ended December 31, 2009 are not annexed as required under Section 212(8) 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 the 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.

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. 47 lakh and Rs. 8,542 lakh respectively (previous year Rs. 7 lakh and Rs. 15,930 lakh respectively).

SREI WEBSITE The website of your Company, www.srei.com, carries a comprehensive database of information of interest to the investors including the financial results of your Company, dividend declared, any price sensitive information disclosed to the regulatory authorities from time to time, analyst presentations, corporate profile and business activities of your Company and the services rendered by your Company to its investors.

PROMOTER GROUP COMPANIES Pursuant to intimation from Promoters of your Company, the names of Promoters and companies comprising the “group” as defined in the

Monopolies and Restrictive Trade Practices Act, 1969, have been disclosed in the Annual Report of your Company for the purpose of Regulation 3(1)(e) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

DIRECTORS During the year under review, Dr. Satish C. Jha was appointed as an Additional Director of your Company w.e.f. January 28, 2010 and he shall hold office upto the date of the ensuing Annual General Meeting. Your Company has received a notice from a member pursuant to Section 257 of the Companies Act, 1956 signifying his intention to propose the candidature of Dr. Satish C. Jha for the office of director. Mr. Hemant Kanoria and Mr. K. K. Mohanty were re-appointed as Chairman & Managing Director and Wholetime Director respectively of your Company for a period of five years w.e.f. April 1, 2010. 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. Hemant Kanoria as Chairman & Managing Director and Mr. K. K. Mohanty as Wholetime Director of your Company w.e.f. April 1, 2010. Mr. Somabrata Mandal resigned as director of your Company w.e.f. September 12, 2009 due to his personal preoccupations. The Board wishes to place on record deep appreciation of the contribution, advice

87

The website of your Company, www.srei.com, carries a comprehensive database of information of interest to the investors including the financial results of your Company, dividend declared, any price sensitive information disclosed to the regulatory authorities from time to time, analyst presentations, corporate profile and business activities of your Company and the services rendered by your Company to its investors.

and guidance extended by him during his tenure as Director of your Company. Your Company has received approval of the Central Government, Ministry of Corporate Affairs vide Letter No. A59154211-CL.VII dated June 14, 2010 regarding appointment of Mr. Saud Ibne Siddique as Joint Managing Director of your Company for a period of three years w.e.f. 01.04.2009 to 31.03.2012. In accordance with the provisions of the Companies Act, 1956 and your Company's Articles of Association, Mr. V. H. Pandya and Mr. Sunil Kanoria retire by rotation at the ensuing Annual General Meeting 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 / reappointed are furnished in the Notice of the ensuing Annual General Meeting. In accordance with the approval of Central Government, your Company has paid remuneration of Rs. 35 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 financial year 2009-10.

AUDIT COMMITTEE The Audit Committee comprises of Mr. Salil K. Gupta, Mr. V. H. Pandya, Mr. S.

88

Rajagopal, Independent & Non Executive Directors and Mr. Sunil Kanoria, Non Executive Director. Mr. Salil K. Gupta, Chief Mentor & Director of the 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, 2010, 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 the Company at the end of the financial year and of the profit of the 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 the Company and for preventing and detecting fraud and other irregularities; and (iv) the directors have prepared the annual accounts for the financial

Annual Report 2009-10

year ended March 31, 2010 on a going concern basis.

AUDITORS Messrs Deloitte Haskins & Sells, Chartered Accountants, the Auditors of your Company will hold office till the conclusion of the ensuing Annual General Meeting. The retiring auditors have not offered themselves for reappointment. It is proposed to appoint Messrs Haribhakti & Co., Chartered Accountants having registration No. 103523W allotted by The Institute of Chartered Accountants of India (ICAI), as Auditors of your Company in place of the retiring

auditors. Your Company has obtained a written consent from Messrs Haribhakti & Co., Chartered Accountants to the effect that their appointment, if made, will be within the limits specified under Section 224(1B) of the Companies Act, 1956. The Audit Committee and the Board of Directors of your Company recommend the appointment of Messrs Haribhakti & Co., Chartered Accountants as the Auditors of your Company.

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, Reserve Bank of India, Securities & Exchange Board of India, Indian and overseas Stock Exchanges, Credit Rating Agencies, Customers, Manufacturers, Vendors, Suppliers, Depositors, Shareholders and other Stakeholders during the year under review. Your Directors also place on record their deep appreciation of 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 Kolkata, June 28, 2010

Chairman & Managing Director

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Particulars of Employees Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 referred to in the Directors’ Report for the year ended March 31, 2010 and forming part thereof. Sl. Name No.

Age (Yrs.)

Designation

Qualification

Remuneration Date of Working Previous (Rs.) Commencement experience Employment of Employment in years

1

Mr. Abhilash Kamti*

32

Senior Vice President - Treasury

BBM, MBA (Fin & Mktg)

1,405,001

01-12-2008

11

Paramount Airways

2

Dr. Ahindra Chakrabarti*

61

Advisor - Training

M.Com., LLB, Ph.D.

1,647,081

14-05-2008

31

Fortune Institute of International Business

3

Mr. Anil Kumar Yadav*

40

Senior Vice PresidentInfrastructure Project Finance

B.E.(Civil), MBM, Diploma in Steel Manufacturing

569,316

17-08-2009

18

Gulf International Bank

4

Mr. Ankur Rajan

37

Vice President Advisory Services

B.E. (Electrical), MBA (Finance)

2,659,201

17-01-2009

15

IL&FS Infrastructure Dev. Corp. Ltd.

5

Mr. Arnab Basu

43

Head - International Business

B.E., PGDBM

4,104,700

05-09-2006

14

ICICI Bank Ltd.

6

Mr. Arunava Sengupta

46

Head - Infrastructure Project Development

B.E.(Civil)

3,079,046

07-12-2007

24

Banowarilal & Agarwal (P) Ltd.

7

Mr. Bajrang Kumar Choudhary

41

Senior Vice President MD's Secreteriat

B.Com., ACA

4,260,721

05-09-2005

15

Apeejay Surrendra Group

8

Mr. Debashish Chakraborty*

46

Senior Vice President Advisory Services

MA, PGDBA

1,726,397

17-09-2009

20

Essar Investment Ltd.

9

Mr. Deepak Kumar Gupta*

44

Head - Human Resource

B.Sc., PGDBM & IR, MBA

1,097,003

08-01-2008

22

Enam Securities Pvt. Ltd.

10 Mr. Hemant Kanoria

47

Chairman & Managing Director

B. Com (H)

12,264,000

07-05-1994

30

Not Applicable

11 Mr. Indranil Sarkar*

43

Senior Vice President Infrastructure Project Finance

B.E, MBA (Fin), Master of International Affairs

1,009,118

07-12-2009

20

Infrastructure Devlopment Finance Co. Ltd.

12 Mr. Kishore Kumar Mohanty

52

Wholetime Director

B. Tech, MBA

6,432,000

18-03-1995

35

Orissa State Financial Corporation

13 Mr. Madhusudan Dutta*

57

Group Head - HR

B.Com, PGDBM (HR), LLB

3,414,926

01-07-2009

28

Quippo Infrastructure Equipment Limited

14 Ms. Monika Pal Bharti

40

Vice President Advisory Services

B.Sc., PGDM (Mkt, Fin, HR, Ob & Comp)

3,974,343

01-07-2006

18

Pradeshiya Industrial & Investment Corporation of U.P. Ltd.

15 Mr. Naveen Bansal

45

Vice President & Head Special Project

B Com (H)

2,824,166

14-06-2006

25

Shree Sidhi Silicons (P) Ltd.

16 Mr. Navodit Mehra

42

Vice President - Legal

B.A (H), LLB, Dll

2,457,118

17-09-2007

17

Deccan Aviation Ltd.

17 Mr. Praveen Mohanty*

44

Senior Vice President Infrastructure Project Finance

B.A (H), PHD

1,675,772

01-09-2009

23

Not Applicable

18 Mr. Praveen Sethia*

43

Senior Vice President & Head Infrastructure Project Development

B.Com, ACA, AICWA

3,452,463

10-03-2007

16

ICICI Bank Ltd.

19 Mr. Raghuvir Bhandari*

59

Group Finance Advisor Strategic Planning Cell

B.A., ACA

1,041,731

01-07-2008

37

Electrosteel Castings Ltd.

20 Mr. Rajdeep Khullar

48

Head - Legal

B.Com, LLB

4,265,226

02-02-1998

26

The Right Address Ltd.

21 Dr. Ratiranjan Mandal

60

CEO - Advisory Services

B.Tech, M.Tech, Ph.D., PG in Project Mgmt.

4,868,750

12-11-2007

34

Govt. of India (Planning Commission)

22 Mr. S. Balasubramanian*

52

Senior Vice President Core (IPF)

B.Com, ICWA, CAIIB (Part - I)

2,626,242

01-07-2008

32

Infrastructure Development Finance Co. Ltd.

23 Mr. Sanjeev Sancheti

42

Chief Financial Officer

B.Com (H), ACA, AICWA

4,807,230

14-11-2007

19

Tebma Shipyards Ltd.

24 Mr. Saud Ibne Siddique

51

Joint Managing Director

B.Sc (Engg.), MBA

33,495,319

01-04-2009

26

Hyflux Water Management Pte. Ltd., Singapore

25 Mr. Shashi Bhushan Tiwari

53

Head - Treasury

B.Sc (H), LLB, DBM, CAIIB

2,858,025

03-12-1999

31

IDBI Bank Ltd.

26 Mr. Talluri Raghupati Rao*

46

Senior Vice President Advisory Services

B.E (Civil), PG Diploma in Const. Mgt, Master of Planning

1,939,202

03-09-2009

27

IL&FS Infrastructure Dev. Corp. Ltd.

*denotes that the person was in employment for part of the year Notes: 1) The aforesaid appointment is contractual and is terminable by giving one / three / six months notice by either side. 2) Remuneration includes basic salary, commission, LTA, medical, leave encashment, employer's contribution to provident fund, incentives and other perquisites. 3) Mr. Hemant Kanoria is related to Mr. Sunil Kanoria, a Director of the Company. 4) None of the employees hold 2% or more of the paid-up share capital of the Company.

90

Annual Report 2009-10

Certificate by Chief Executive Officer (CEO) and Chief Financial Officer (CFO) The Board of Directors Srei Infrastructure Finance Limited ‘Vishwakarma’, 86C Topsia Road (South) Kolkata – 700046 We, Hemant Kanoria, Chairman & Managing Director (CEO) and Sanjeev Sancheti, Chief Financial Officer (CFO) of Srei Infrastructure Finance Limited both certify to the Board that we have reviewed the financial statements of the Company for the twelve months ended March 31, 2010 and to the best of our knowledge and belief, we certify that – 1. The Statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; that the Statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations. 2. There are no fraudulent or illegal transactions. 3. For the purposes of financial reporting, we accept the responsibility for establishing and maintaining the internal controls which are monitored by the Company’s Internal Audit Team and have evaluated based on feedbacks received from the Company’s Internal Audit Team, the effectiveness of the internal control systems of the Company pertaining to financial

May 11, 2010

reporting and have reported to the Auditors and the Audit Committee, the deficiencies, if any, in the operation and design of such internal controls. 4. We have indicated to the Auditors and the Audit committee: (i) significant changes, if any in the internal controls over financial reporting during the year; (ii) significant changes, if any in accounting policies made during the year and the same have been disclosed in the notes to the financial statements; and (iii) instances of significant fraud, if any of which we have become aware and the involvement therein, if any of the management or an employee having a significant role in the Company’s internal control system over financial reporting.

Hemant Kanoria

Sanjeev Sancheti

Chairman & Managing Director (CEO)

Chief Financial Officer (CFO)

Auditors’ Certificate on Corporate Governance To The Members, Srei Infrastructure Finance Limited We have examined the compliance of conditions of Corporate Governance by Srei Infrastructure Finance Limited for the year ended March 31, 2010 as stipulated in Clause 49 of the Listing Agreements of the said Company with stock exchanges.

above mentioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency with which the Management has conducted the affairs of the Company.

The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor expression of opinion on the Financial Statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the

For Deloitte Haskins & Sells Chartered Accountants Registration No. 302009E

Abhijit Bandyopadhyay Place : Kolkata Dated : May 11, 2010

Partner Membership No. 054785 91

Report on Corporate Governance Corporate

Governance

the

Agreement with the domestic Stock

combination of voluntary practices and

Exchanges. In accordance with Clause

compliance with laws and regulations

49 of the Listing Agreement with the

The Board has strength of 10 (Ten)

leading

to

effective

is

control

2. Board of Directors Composition

and

domestic Stock Exchanges and best

Directors as on March 31, 2010. The

management of the organisation. Good

practices followed internationally on

Board comprises of Executive, Non-

Corporate Governance leads to long-

Corporate Governance, the details of

Executive and Independent Directors.

term shareholder value and enhances

compliances by the Company for the

Two

interest of other stakeholders.

year ended March 31, 2010 are as

directors, three directors are executive

under:

directors (including the Chairman) and

Srei believes in adopting and adhering to the best Corporate Governance practices

and

continuously

benchmarking itself against each such

and trusteeship role and responsibility

The Company has endeavoured to

to its stakeholders and strives hard to

benchmark

meet their expectations.

standards in all areas, including

the

industry.

Srei

The Company’s Equity shares are presently

listed

on

three

Stock

Exchanges in India and the Global Depository Receipts (GDRs) are listed on London Stock Exchange. Srei has complied in all material respects with the features of Corporate Governance Code as per Clause 49 of the Listing

92

itself

against

Corporate

Governance.

Corporate

Governance

non-executive

independent directors.

understands and respects its fiduciary

in

are

five directors are non-executive and

A. MANDATORY REQUIREMENTS 1. Company’s philosophy on Code of Governance

practice

directors

global Good implies

optimum utilisation of the resources

None of the Directors on the Board is a member of more than 10 committees and

Chairman

of

more

than

5

committees across all companies in which he is a Director. All the Directors have made necessary disclosures regarding

committee

positions

occupied by them in other companies.

and ethical behaviour of the enterprise

The Composition of the Board of

to enhance the shareholders’ value with

Directors as on March 31, 2010 is in

strong emphasis on transparency,

conformity with the provisions of Clause

accountability and integrity, which are

49 of the Listing Agreement. The details

the primary objectives of Srei.

of the Board of Directors as on March 31, 2010 are as follows:

Annual Report 2009-10

Sl. No.

Directors

1

Mr. Salil K. Gupta (Chief Mentor)

Non Executive & Independent

2

Mr. Hemant Kanoria (Chairman)

Chairman & Managing Director

3

Mr. Sunil Kanoria (Vice Chairman)

4

Mr. V. H. Pandya

Non Executive & Independent

5

Mr. S. Rajagopal

Non Executive & Independent

6

Mr. Daljit Mirchandani

Non Executive & Independent

7

Mr. Somabrata Mandal*

Non Executive & Independent

8

Mr. S. Chatterjee**

9

Dr. Satish C. Jha***

Non Executive & Independent

10

Mr. Saud Siddique#

Joint Managing Director

11

Mr. K. K. Mohanty

Non Executive

Non Executive

Wholetime Director

* Resigned w.e.f. September 12, 2009 ** Appointed w.e.f. April 29, 2009

*** Appointed w.e.f. January 28, 2010 # Appointed as Joint Managing Director w.e.f. April 1, 2009

Mr. Hemant Kanoria and Mr. K. K.

annually that they qualify the tests of

Mohanty hold 234296 and 172000

their being independent as laid down

Equity

under Clause 49. All such declarations

Six Board meetings were held during

are placed before the Board.

the year 2009-2010 on April 29, 2009,

shares

in

the

Company

respectively as on March 31, 2010. None of the other directors hold any Equity shares in the Company.

Except Mr. Hemant Kanoria and Mr. Sunil Kanoria, no Director of the

All the Independent Directors of the

Company is related to any other

Company furnish a declaration at the

Director on the Board.

time of their appointment as also

Number of Board meetings held and the dates on which held

June

12,

2009,

July

27,

2009,

September 12, 2009, October 26, 2009 and January 28, 2010. The maximum time gap between any two consecutive meetings did not exceed four months.

Attendance of each Director at Board meetings and at the last AGM Directors

No. of Board meetings attended

Attendance at the last AGM held on September 12, 2009

Mr. Salil K. Gupta

6

Yes

Mr. Hemant Kanoria

6

Yes

Mr. Sunil Kanoria

6

Yes

Mr. V. H. Pandya

6

Yes

Mr. S. Rajagopal

6

Yes

Mr. Daljit Mirchandani

4

No

Mr. Somabrata Mandal*

-

No

Mr. S. Chatterjee**

6

Yes

Dr. Satish C. Jha***

1

N.A.

Mr. Saud Siddique#

6

Yes

Mr. K. K. Mohanty

3

No

* Resigned w.e.f. September 12, 2009 ** Appointed w.e.f. April 29, 2009

*** Appointed w.e.f. January 28, 2010 # Appointed as Joint Managing Director w.e.f. April 1, 2009 93

Number of other Companies or Committees in which the Director is a Director / Chairman The following table gives the number of outside directorships and the Committee positions held by each of the Directors as on March 31, 2010 Directors

No. of Directorship in other Companies

No. of Committee positions held in Indian Public Limited Companies (other than Srei Infrastructure Finance Limited)

Indian Public Limited Companies

Others

Chairman

Member

Mr. Salil K. Gupta

1

2





Mr. Hemant Kanoria

10

6

1

2

Mr. Sunil Kanoria

8

7



6

Mr. V. H. Pandya

4

1

2



Mr. S. Rajagopal

9

6

2

4

Mr. Daljit Mirchandani

2

1

2

1

Mr. S. Chatterjee*



1





Dr. Satish C. Jha**

3





1

Mr. Saud Siddique***

2

1





Mr. K. K. Mohanty

6

2



1

* Appointed w.e.f. April 29, 2009 ** Appointed w.e.f. January 28, 2010 *** Appointed as Joint Managing Director w.e.f. April 1, 2009

Department and the Chief Financial

remuneration,

Terms of Reference, Composition,

Officer attends the meetings of the

financial statements before submission

Name of Members and Chairman

Audit Committee and the Company

to the Board, reviewing adequacy of

The Audit Committee comprises of Mr.

Secretary acts as the Secretary to the

internal control systems and other

Salil K. Gupta, Mr. V. H. Pandya, Mr. S.

Audit Committee. The Committee also

matters specified for Audit Committee

Rajagopal,

invites

in Section 292A of the Companies Act,

3. Audit Committee

Independent

&

Non

senior

executives,

as

it

reviewing

annual

Executive Directors and Mr. Sunil

considers appropriate to be present at

1956

Kanoria, Non Executive Director. Mr.

the meetings of the Committee. The

Agreements. The Chairman of the Audit

Salil K. Gupta, Chief Mentor & Director

Terms of Reference of this Committee

Committee was present at the last

of the Company is the Chairman of the

includes ensuring proper disclosures in

Annual

Audit Committee. All the members of

the

Company

the Audit Committee are financially

recommending

literate. The Head of Internal Audit

statutory auditors and fixation of their

94

financial

statements,

re-appointment

of

queries.

and

under

General to

the

Meeting

answer

Listing

of

the

shareholder

Annual Report 2009-10

Meetings and attendance during the year Five meetings of the Audit Committee were held during the year 2009-2010 on April 29, 2009, June 12, 2009, July 27, 2009, October 26, 2009 and January 28, 2010. The attendance of each member of the Committee is given below : Members

No. of Meetings attended

Mr. Salil K. Gupta

5

Mr. Sunil Kanoria

5

Mr. V. H. Pandya

5

Mr. S. Rajagopal

5

4. Remuneration of Directors Details of remuneration paid/payable to Directors for the year ended March 31, 2010 are as follows: (Amount in Rupees) Directors Mr. Salil K. Gupta (Chief Mentor)

Sitting Fees*

Salary & Perquisites

1

Commission2

Total

2,37,500



10,00,000

12,37,500

N.A.

86,64,000

36,00,000

1,22,64,000

3,02,500



4,00,000

7,02,500

Mr. V. H. Pandya

97,500



4,00,000

4,97,500

Mr. S. Rajagopal

97,500



4,00,000

4,97,500

Mr. Daljit Mirchandani

40,000



10,00,000

10,40,000

-







Mr. S. Chatterjee***

60,000



3,00,000

3,60,000

Dr. Satish C. Jha#

10,000





10,000

Mr. Saud Siddique (Joint Managing Director)@

N.A.

3,34,95,319



3,34,95,319

Mr. K. K. Mohanty (Wholetime Director)

N.A.

64,32,000



64,32,000

Mr. Hemant Kanoria (Chairman & Managing Director) Mr. Sunil Kanoria (Vice Chairman)

Mr. Somabrata Mandal**

* includes sitting fees paid for various Board Committee meetings

1

includes basic salary, incentives, allowances, contribution to provident fund, leave encashment and other perquisites

2

The Commission for the year ended March 31, 2010 will be paid, subject to deduction of tax after adoption of the accounts by the members at the Annual General Meeting

** Resigned w.e.f. September 12, 2009 *** Appointed w.e.f. April 29, 2009 # Appointed w.e.f. January 28, 2010 @ Appointed as Joint Managing Director w.e.f. April 1, 2009

95

The

appointment

of

Managing

to

be

divided

amongst

Non-

Director, Joint Managing Director

Executive Directors in such manner

6. Share Transfer and Investors’ Grievance Committee

and Wholetime Director is governed

as may be decided by the Board

Details of the Members, Compliance

by resolutions passed by the Board

from time to time. No pecuniary

Officer

of Directors and the Shareholders of

transactions have been entered into

received

the Company, which covers the

by the Company with any of the Non-

To expedite the process of share

terms

such

Executive Directors of the Company,

transfers, the Board of the Company

appointment, and approval of Central

save and except the payment of

has delegated the power of share

Government, wherever applicable.

sitting fees and commission to them.

transfers to the Share Transfer and

The

Investors’ Grievance Committee. The

and

Payment

conditions

of

of

remuneration

to

Managing Director, Joint Managing Director and Wholetime Director is governed

by

the

respective

Agreements executed between them and the Company, and approval of Central

Government,

wherever

applicable. The agreement with the Joint Managing Director is entered into by the Company for a period of 3

remuneration

by

way

of

Directors is decided by the Board of Directors and distributed to them

once in a fortnight to approve share

based on their attendance and

transfer

contribution at the Board and certain

Committee comprises Mr. Salil K.

Committee meetings as well as time

Gupta, Chief Mentor & Director, Mr.

spent on operational matters other

Hemant

than at the meetings.

Managing Director and Mr. Sunil

Managing Director and Wholetime

A code of conduct as applicable to the

Director is entered into by the

Directors and Members of the Senior

Company for a period of 5 (Five)

Management has been approved by

years w.e.f. 01.04.2010.

the Board. The said code has also

remuneration by way of Sitting Fees for each meeting of the Board or any Committee thereof attended by them. However,

the

members

of

the

Company at their meeting held on September 20, 2008 as well as the

Complaints

Grievance Committee meets at least

been displayed on the Company’s website www.srei.com. The Board members and Senior Executives have affirmed their compliance with the Code and a declaration signed by the Chairman & Managing Director (CEO in terms of Clause 49) is given below:

Kanoria,

Transfer

of

Share

whereas the agreement with the

The Non-Executive Directors are paid

No.

commission to the Non-Executive

5. Code of Conduct for Directors and Senior Executives

(Three) years w.e.f. 01.04.2009

and

and

and

other

Kanoria, Vice

Investors’

matters.

The

Chairman

Chairman

&

& Non

Executive Director of the Company. Mr. Salil K. Gupta, Chief Mentor & Director of the Company is the Chairman of the Share

Transfer

and

Investors’

Grievance Committee. During the year 2009-2010, the Share Transfer and Investors’ Grievance Committee met 27 times. Mr. Sandeep Lakhotia, Company Secretary is the Compliance Officer of the Company and assigned with the responsibilities of overseeing investor grievances. Total number of shares physically

Central Government vide its letter

It is hereby declared that the Company

dated June 5, 2009 have approved

has obtained from all the Board

payment of commission to Non-

members and Senior Executives an

Executive Directors of the Company

affirmation that they have complied with

annually for each of the three

the Code of Conduct for the year

During the financial year ended March

financial years of the Company

2009-10.

31, 2010, the Company received 11

commencing from Financial Year

sd/-

2008-09, upto a maximum limit of Rs. 35 lakh payable in one financial year

Hemant Kanoria Chairman & Managing Director

96

transferred during the year 2009-2010 was 9,680 shares compared to 13,637 shares during the year 2008-2009.

complaints from the shareholders and none of the complaints received were pending as on that date.

Annual Report 2009-10

containing

7. General Body Meetings

transactions,

in

which

Details of the location of the last three

directors are interested, is placed

AGMs

before the Board regularly.

and

the

details

of

the

resolutions passed

and

Company

Secretary

of

the

Company is still continuing. Srei Code of Conduct for Prevention

Transactions effected with the related

of Insider Trading

The date, time and venue of the last

parties are disclosed in Note No. 26 of

In accordance with the Securities and

three AGMs of the Company have been

Schedule 18 to the Accounts in the

Exchange Board of India (Prohibition of

provided

on

Annual Report, in accordance with the

Insider Trading) Regulations, 1992, the

Shareholders’ Information in the Annual

requirements of Accounting Standard

Board of Directors of the Company has

Report. All the resolutions set out in the

AS 18 issued by The Institute of

formulated ‘Srei Code of Conduct for

respective Notices were passed by the

Chartered Accountants of India.

Prevention of Insider Trading’ (Srei

in

the

section

Shareholders.

Details of non-compliance by the

No Special Resolution requiring a

Company,

postal ballot was placed before the last

imposed on the Company by Stock

Annual

General

the Company by its Directors and designated employees.

the

Exchange or SEBI or any statutory

Mr.

authority, on any matter related to

Secretary is the Compliance Officer for

Similarly,

capital markets, during the last three

monitoring

years

Regulations for the preservation of

Special

of

strictures

Company held on September 12, 2009. no

Meeting

penalties,

Code) in the shares and securities of

Resolution

requiring a postal ballot is being proposed at the ensuing Annual

During the last three years, there were

General Meeting of the Company.

no strictures or penalties imposed by

8. Disclosures

either Stock Exchanges or SEBI or any

price

Sandeep

Lakhotia,

Company

adherence

sensitive

clearance

of

to

the

information,

pre-

trades

and

implementation of the Code of Conduct for the prevention of Insider Trading.

Disclosures on materially significant

statutory authority for non-compliance

related

of any matter related to the capital

9. Means of Communication

transactions of the Company of

markets.

The Company regularly interacts with

material nature, with its promoters,

In regard to the Application under

the directors or the management,

Section 633 of the Companies Act,

their subsidiaries or relatives etc. that

1956 filed on November 26, 2008 in the

may have potential conflict with the

Hon’ble Calcutta High Court by the

interests of Company at large

Directors and Company Secretary of

party

transactions

i.e.

No transaction of material nature has

the Company, the Ad-interim order of

been entered into by the Company with

injunction restraining the Regional

its directors or management and their

Director

relatives, etc. that may have a potential

Companies,

conflict with the interests of the

instituting or causing to be instituted

Company. The Register of Contracts

any proceedings against the Directors

and

the West

Registrar Bengal

of from

the shareholders through the multiple channels of communication such as publication of results, Annual Report, Press Release and the Company’s Website. The Company also informs the Stock Exchanges in a prompt manner, all price sensitive and all such other matters which in its opinion, are material

and

relevant

for

the

shareholders.

97

Half-yearly report sent to each household of

Since half-yearly and annual results of the Company are published in

shareholders

prominent English daily newspaper having a nationwide circulation and prominent Bengali daily newspaper (having circulation in Kolkata) and regularly hosted on Company’s website, these are not sent individually to the shareholders of the Company. There is no declaration/publication of second half yearly results as the audited annual results are taken on record by the Board and then communicated to the shareholders through the Annual Report.

Quarterly results

The Quarterly results of the Company are published in prominent Newspapers having nationwide circulation and regularly hosted on Company’s website.

Newspapers in which results are normally published

Business Standard and Aajkaal. Pursuant to Clause 51 of the Listing Agreement, all data related to quarterly financial results, shareholding pattern, etc. are hosted on the Electronic Data Information Filing and Retrieval (EDIFAR) website maintained by SEBI in association with National Informatics Centre, within the time frame prescribed in this regard. However, SEBI has since discontinued the EDIFAR system w.e.f. April 1, 2010.

Any website, where displayed

Yes, at the Company’s website www.srei.com

Whether it also displays official news

Yes

releases The presentations made to institutional

Yes

investors or to the analysts Whether MD & A is a part of Annual Report

Yes

or not

10. General Shareholders’ Information A section on Shareholders’ Information is separately provided in the Annual Report.

B. NON MANDATORY REQUIREMENTS a) Chairman of the Board Whether Non-executive Chairman is entitled to maintain a Chairman’s office at the Company’s expense and also allowed reimbursement of expenses incurred in performance of his duties

98

Not Applicable as the Company has an Executive Chairman.

Annual Report 2009-10

b) Independent Directors

Not adopted.

Independent Directors may have a tenure not exceeding, in the aggregate, a period of nine years, on the Board of the Company

c) Remuneration Committee

No, but the Company already has a Compensation Committee of the Board in place and the same comprises of majority of non-executive directors; the Chairman of the Committee being an Independent Director. One meeting of the Compensation Committee was held during the year 2009-2010 on January 27, 2010. The Chairman of Compensation Committee was present at the last Annual General Meeting of the Company to answer shareholder queries.

d) Shareholder rights

Since half-yearly and annual results of the Company are published in a

A half-yearly declaration of financial performance including summary of the significant events in last six-months, may be sent to each household of shareholders

leading English daily newspaper having a nationwide circulation and a Bengali daily newspaper (having circulation in Kolkata) and regularly hosted on Company’s website, these are not sent individually to the shareholders of the Company. There is no declaration/publication of second half yearly results as the audited annual results are taken on record by the Board and then communicated to the shareholders through the Annual Report.

e) Audit qualifications

Presently not applicable to the Company.

Company may move towards a regime of unqualified financial statements

f) Training of Board Members

Presently the Company does not have such a training programme.

A Company may train its Board members in the business model of the Company as well as the risk profile of the business parameters of the Company, their responsibilities as directors, and the best ways to discharge them

g) Mechanism for evaluating nonexecutive Board Members

Presently the Company does not have such a mechanism as contemplated for evaluating the performance of Non - Executive Directors.

The performance evaluation of Non-Executive directors could be done by a peer group comprising the entire Board of Directors, excluding the director being evaluated; and Peer Group evaluation could be the mechanism to determine whether to extend/continue the terms of appointment of Non-Executive directors

h) Whistle Blower Policy

Not adopted.

99

Shareholders’ Information 1. Annual General Meeting a. Date and Time

Monday, the August 9, 2010 at 10.30 a.m.

b. Venue

Science City Mini Auditorium, JBS Haldane Avenue, Kolkata – 700046

2. Financial Calendar (Tentative) a. Financial reporting for 2010-2011 Quarter ending June 30, 2010

July/August, 2010

Quarter/Half year ending September 30, 2010

October, 2010

Quarter ending December 31, 2010

January, 2011

Year ending March 31, 2011

May 2011

b. Annual General Meeting for the year ending on March 31, 2011

August/September, 2011

3. Book Closure Date

Friday, July 23, 2010 to Monday, the August 9, 2010 (both days inclusive)

4. Date for payment of Dividend

On or after August 10, 2010

5. Listing on Stock Exchanges

The Equity Shares and other Securities of the Company are presently listed on the following Stock Exchanges: a. The Calcutta Stock Exchange Association Limited 7, Lyons Range, Kolkata – 700 001 b. Bombay Stock Exchange Limited Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai – 400 001 c. National Stock Exchange of India Limited Exchange Plaza, 5th Floor, Plot no. C/1, G Block, Bandra-Kurla Complex, Bandra (E), Mumbai – 400 051 The Global Depository Receipts (GDRs) issued by the Company are listed and admitted to trading on London Stock Exchange w.e.f. April 21, 2005. The Debt securities of the Company are listed on the Wholesale Debt Market (WDM) Segment of Bombay Stock Exchange Limited (BSE).

6. Listing Fees

Listing fees for 2010-2011 have been paid to all the abovementioned domestic and overseas Stock Exchanges as per the Listing Agreement. The Company has paid custodial fees for the year 2010-2011 to National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) on the basis of number of beneficial accounts maintained by them as on March 31, 2010.

100

Annual Report 2009-10

7. ISIN Numbers

Equity Shares - INE872A01014 Unsecured Subordinated Bonds - INE872A10015 Global Depository Receipts (GDRs) - US78465V2043

8. Stock Codes (Equity Shares & GDRs)

Equity Shares CSE - 29051, BSE - 523756 and NSE - SREINTFIN Global Depository Receipts (GDRs) London Stock Exchange - SRI Month

National Stock Exchange High Low Rs. Rs.

Mumbai Stock Exchange High Low Rs. Rs.

April, 2009

43.50

24.65

43.30

24.55

May, 2009

83.00

39.55

83.00

39.50

June, 2009

88.50

59.15

88.80

59.00

July, 2009

83.40

45.10

83.25

45.15

August, 2009

75.50

59.55

75.45

59.55

September, 2009

82.25

69.00

82.20

69.10

October, 2009

89.35

70.00

89.20

68.50

November, 2009

82.40

63.00

82.20

62.40

December, 2009

83.70

67.15

83.70

67.25

January, 2010

94.00

67.00

94.20

67.00

February, 2010

72.50

60.55

72.40

60.55

March, 2010

78.20

66.00

78.20

66.30

Performance in comparison to BSE Sensex (monthly High) 180 155

18500 17500

130

16500

105

15500 14500

80

13500 12500

BSE Sensex

19500

11500 10500

55

9500

Months

Mar

Feb

Jan

Dec

Nov

Oct

Sep

Aug

Jul

Jun

8500 May

30 Apr

Srei Infra Price (Rs.)

9. Stock Market Data

BSE Sensex Srei Infra Price

101

10.Registered Office a.

Address

“Vishwakarma”, 86C Topsia Road (South), Kolkata – 700 046

b.

Telephone No.

91-33-3988 7734

c.

Facsimile Nos.

91-33-2285 7542/8501

d.

Website

www.srei.com

e.

Email

[email protected]

11.Registrar and Share Transfer Agent’s details a.

Name & Address

Maheshwari Datamatics Private Limited, 6 Mangoe Lane, 2nd Floor, Kolkata 700001

b.

Telephone Nos.

91-33-2243 5029/5809, 2248 2248

c.

Facsimile No.

91-33-2248 4787

d.

Email

[email protected]

12.Financial Year 13.Particulars of Past three AGMs

April 1 to March 31 AGM

Year

Venue

Date

Time

24th*

2008/09

‘Science City Mini Auditorium’,

12/09/2009

10.30 a.m.

JBS Haldane Avenue, Kolkata - 700046

(Saturday)

23rd**

2007/08

22nd*** 2006/07

‘Science City Mini Auditorium’,

20/09/2008

JBS Haldane Avenue, Kolkata - 700046

(Saturday)

‘Science City Mini Auditorium’,

25/09/2007

JBS Haldane Avenue, Kolkata - 700046

(Tuesday)

10.30 a.m. 10.30 a.m.

* Two Special resolutions were passed: To approve holding of an office or place of profit by Mr. Saud Ibne Siddique, Joint Managing Director of the Company in Srei Venture Capital Limited, subsidiary of the Company. To approve holding of an office or place of profit by Mr. Saud Ibne Siddique, Joint Managing Director of the Company in Srei Capital Markets Limited, subsidiary of the Company. ** Three Special resolutions were passed: To approve holding of an office or place of profit by Mr. Hemant Kanoria, Chairman & Managing Director of the Company in Srei Sahaj e-Village Limited, subsidiary of the Company. To approve holding of an office or place of profit by Mr. Salil K. Gupta, Chief Mentor & Director of the Company in Srei Sahaj e-Village Limited, subsidiary of the Company.

102

Annual Report 2009-10

To approve payment of commission to Non-executive Directors of the Company annually for each of the three financial years of the Company commencing from Financial Year 2008-2009. *** One Special resolution was passed: To approve holding of an office or place of profit by Mr. K. K. Mohanty, Wholetime Director of the Company in Srei Insurance Broking Private Limited (formerly Srei Insurance Services Limited), erstwhile subsidiary of the Company.

14. Distribution of Shareholding as on March 31, 2010

No. of Shares Up to 500

No. of Shares Total % 6929569 5.96

501 to 1000

4133

7.83

3483802

3.00

1001 to 2000

1952

3.70

3074398

2.65

2001 to 3000

753

1.43

1958210

1.69

3001 to 4000

294

0.55

1076945

0.93

4001 to 5000

370

0.70

1774139

1.53

5001 to 10000

504

0.95

3779480

3.25

10001 and above

545

1.03

94068255

80.99

100.00

116144798

100.00

Total

15. Dividend History (Last 5 Years)

No. of Shareholders Total % 44254 83.81

Financial Year ended

52805

Dividend Per Share (Rs.)

Total Dividend* (Rs. in lakh)

31.03.2009

1.00

1359.00

31.03.2008

1.20

1631.00

31.03.2007

1.00

1274.00

31.03.2006

1.65

2050.00

31.03.2005

1.50

1335.65

*inclusive of dividend distribution tax

16. Categories of Shareholders as on March 31, 2010

Category

No. of Shares held

Percentage of Shareholding

Promoters (including promoters group)

34871985

30.02

Foreign Institutional Investors (FIIs)

22169214

19.09

6718703

5.78

- Private Corporate Bodies

17656712

15.20

- Indian Public

33409367

28.77

1306817

1.13

12000

0.01

116144798

100.00

Banks, Mutual Funds & Institutional Investors Public

NRIs / Foreign National Shares underlying Global Depository Receipts Grand Total

103

17. Equity Share Capital history

The Paid up Capital of the Company consists of 11,61,44,798 Equity shares of Rs. 10/- each fully paid up and allotted as under : Date of Allotment

No. of Shares

Issue Price (Rs. per Share)

30.03.1985

2742

10

27.06.1986

31600

10

24.05.1987

16000

10

13.12.1988

5000

10

30.05.1990

608558

10

20.04.1991

256100

10

31.08.1992

3220000

10

13.01.1994

4140000

20

13.11.1997

45454545

22

05.09.1998

27688

15

01.06.1999

5500

10

18.04.2005

34594000

44.38

22.11.2005

21050056

33

20.02.2006

3556

37

13.05.2006

880

39

19.02.2007

200

28

11.05.2007

400

29

08.11.2007

800

41

31.03.2008

7200000

100

Total Less: Shares forfeited on 14.03.2000 Total Shares as on date

18. Credit Ratings

Agency Secured NCDs / Bonds Fixed Deposits* Short term Debt Instruments Unsecured Subordinated Bonds/

116617625 472827 116144798

CARE

FITCH

ICRA

CARE AA CARE AA (FD)

MAA-

PR1+

F1+(ind)

A1+

CARE AA-

AA-(ind)

LA+

Debts (Tier II Capital)

* The Company has decided not to accept any further public deposits or renew any maturing deposits w.e.f. April 20, 2010

104

Annual Report 2009-10

19. Measures adopted to protect the interests of the Shareholders a.

Share Transfer Processing

Requests for share transfers are cleared and advices mailed within a time period of 30 days from the date of receipt, if the same are found to be valid in all respects. The Share Transfer and Investors’ Grievance Committee meets at least once in a fortnight. During the year 20092010, the Share Transfer and Investors’ Grievance Committee met 27 times. Total number of shares physically transferred during the year 2009-2010 was 9,680 Equity shares. There are no legal cases relating to transfer of shares.

b.

Bad Delivery

In case of Bad Delivery, the relevant documents are sent immediately after specifying the defects through a covering letter.

c.

Redressal of Grievances

Necessary system has been put in place in order to attend with promptness any grievances or queries by the Shareholders. An exclusive email id has also been designated by the Company for prompt redressal of shareholder grievances. The Shareholders can email their queries/grievances to [email protected]

d.

Prevention of Fraudulent Transfers

A locking provision is in existence whereby, whenever any intimation is received from the shareholders regarding loss of shares or of any legal dispute, the shares are immediately kept locked so that fraudulent transfer is stalled.

e.

Dematerialisation of Shares

Based on a SEBI directive, the Equity shares of the Company are permitted to be traded only in dematerialised form and are available for demat under both the Depository Systems in India - National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). As on March 31, 2010, a total of 10,79,71,289 Equity shares of the Company representing 92.96% of the total Equity Share Capital were held in dematerialised form. The bifurcation of shares held in Physical and Demat form as on March 31, 2010 is given below Particulars Physical Segment

No. of Holders 4291

No. of Shares 8173509

Percentage 7.04

Demat Segment NSDL

33101

88447719

76.15

CDSL

15413

19523570

16.81

Total

52805

116144798

100.00

105

20. Outstanding GDRs / ADRs / Warrants / any Convertible Instruments, conversion date and likely impact on Equity

In April 2005, 86,48,500 Global Depository Receipts (GDRs) were issued by the Company through book building process at a price of US$ 4.05 per GDR, each GDR representing four underlying Equity shares of the Company. The GDRs are presently listed and traded on the London Stock Exchange. As on March 31, 2010, 12,000 Equity shares of the Company representing 0.01% of the paid up Share Capital of the Company are held as shares underlying the GDRs. In October 2007, the Company issued and allotted 2,50,00,000 convertible Warrants to the entities belonging to the Promoters’ Group of the Company. Each Warrant was convertible into one Equity share of Rs. 10/- each in one or more tranches at a price of Rs. 100/- per Equity share (including premium of Rs. 90/-) within a period of 18 months from date of the allotment. 72,00,000 Equity shares were allotted to the Promoters’ Group of the Company during the financial year 2007-2008 on exercise of conversion option against Warrants held by them and the said Equity shares are presently under lock-in. The balance 1,78,00,000 Warrants stand lapsed and the amount of Rs. 17.80 crore received earlier from the Promoters’ Group as subscription money was forfeited by the Company in April 2009.

21. Address for Shareholders’ correspondence

The Company Secretary Srei Infrastructure Finance Limited ‘Vishwakarma’, 86C Topsia Road (South), Kolkata - 700 046 Email : [email protected], [email protected]

22. Transfer of Unclaimed amounts to Investor Education and Protection Fund

Pursuant to Section 205C of the Companies Act, 1956, dividends that are unpaid/unclaimed for a period of seven years from the date they became due for payment are required to be transferred by the Company to the Investor Education and Protection Fund (IEPF) administered by the Central Government. Given below are the dates of declaration of dividend and corresponding dates when unpaid/unclaimed dividends are due for transfer to IEPF: Financial Year 2002 - 2003

Date of Declaration of Dividend August 30, 2003

Due Date of Transfer to IEPF October 5, 2010

2003 - 2004

August 28, 2004

October 3, 2011

2004 - 2005

September 17, 2005

October 23, 2012

2005 - 2006

August 19, 2006

September 24, 2013

2006 - 2007

September 25, 2007

October 31, 2014

2007 - 2008

September 20, 2008

October 26, 2015

2008 - 2009

September 12, 2009

October 14, 2016

The shareholders are regularly advised to claim the unencashed dividends lying in the unpaid dividend accounts of the Company before the due dates for crediting the same to the Investor Education and Protection Fund. Separate letters have been sent on

106

Annual Report 2009-10

February 16, 2010 to the shareholders who are yet to encash the dividend for the financial year 2002-2003 indicating that the unclaimed amount will be transferred to the Investor Education and Protection Fund (IEPF), if not claimed by the shareholders before the due date of transfer to the said Fund. During the year under review, the Company has credited a sum of Rs. 3,18,028.90 to the Investor Education and Protection Fund pursuant to Section 205C of the Companies Act, 1956 and the Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001. Cumulatively, the aggregate dividend amount transferred to the said Fund as on March 31, 2010 stands at Rs. 21,81,380.69.

23. Nomination

Individual shareholders holding shares singly or jointly in physical form can nominate a person in whose name the shares shall be transferable in case of death of the registered shareholder(s). Nomination facility in respect of shares held in electronic form is also available with the depository participants as per bye-laws and business rules applicable to NSDL and CDSL. Nomination forms can be obtained from the Company’s Registrar and Share Transfer Agent.

24. National Electronic Clearing Service (NECS)

SEBI had vide its Circular No. DCC/FITTCIR-3/2001 dated October 15, 2001 advised that all companies should mandatorily use ECS facility, wherever available. In the absence of ECS facility, companies may use warrants for distributing the dividends and vide its Circular No. D&CC/FITTCIR-04/2001 dated November 13, 2001, SEBI had advised companies to mandatorily print the Bank Account details furnished by the Depositories, on the dividend warrants. This ensures that the dividend warrants, even if lost or stolen, cannot be used for any purpose other than for depositing the money in the accounts specified on the dividend warrants and ensures safety for the investors. However, members who wish to receive dividend in an account other than the one specified while opening the Depository Account, may notify their DPs about any change in the Bank Account details. Remittance of money through Electronic Clearing System (ECS) has been replaced by National Electronic Clearing Service (NECS) with effect from October 1, 2009. Advantages of NECS over ECS include faster credit to the beneficiary’s account and ease of operations for the remitting agency.

25. Secretarial Audit for Reconciliation of Capital

As stipulated by SEBI, a qualified practising Company Secretary carries out Secretarial Audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. This audit is carried out every quarter and the report thereon is submitted to the concerned Stock Exchanges. The audit confirms that the total Listed and Paid-up Capital is in agreement with the aggregate of the total number of shares in dematerialised form (held with NSDL and CDSL) and total number of shares in physical form.

26. Compliance Officer

Mr. Sandeep Lakhotia Company Secretary “Vishwakarma”, 86C Topsia Road (South), Kolkata - 700 046 Tel : 91-33-3988 7734 Fax : 91-33-2285 7542/8501 E-mail : [email protected], [email protected]

107

List of Promoters List of Promoters of the Company forming part of the same ‘Group’ for the purposes of Regulation 3(1)(e)(i) of SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997. Sl. No.

Names

1.

Hemant Kanoria & Family

2.

Adisri Investment Limited and subsidiaries

3.

Bharat Connect Limited and subsidiaries

4.

Adhyatma Commercial Private Limited and subsidiaries

5.

Hari Prasad Kanoria Family Nidhi

6.

Hari Prasad Sanjeev Kumar HUF

7.

Hari Prasad Hemant Kumar HUF

8.

Sujit Kanoria HUF

9.

Hemant Kanoria HUF

10.

Anantraj Kanoria & Family

11.

Raghavraj Kanoria & Family

12.

Champa Devi Kanoria & Family

13.

Sunil Kanoria HUF

14.

Hari Prasad Kanoria & Family

15.

Sangita Kanoria & Family

16.

Divita Kanoria & Family

17.

Sujit Kanoria & Family

18.

Madhulika Kanoria & Family

19.

Sunita Kanoria & Family

20.

Sunil Kanoria & Family

21.

Nityashree Kanoria & Family

22.

Sidhishree Kanoria & Family

23.

Avanishree Kanoria & Family

24.

Sanjeev Kanoria HUF

25.

Sanjeev Kanoria & Family

26.

Manisha Lohia & Family

27.

Mukundraj Kanoria & Family

28.

Vatsalraj Kanoria & Family

29.

Any Company / entity promoted by any of the above

Family for this purpose includes spouse, dependent children and parents

108

Annual Report 2009-10

Auditors’ Report To the Members, Srei Infrastructure Finance Limited 1.

2.

We have audited the attached Balance Sheet of SREI INFRASTRUCTURE FINANCE LIMITED (“the Company”) as at 31st March, 2010, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financial statements based on our audit.

(d) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956; (e) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3.

As required by the Companies (Auditor’s Report) Order, 2003 (CARO) issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4.

Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows:

5.

(i)

in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

(ii)

in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date and

(iii)

in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

On the basis of the written representations received from the Directors as on 31st March, 2010 taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March, 2010 from being appointed as a director in terms of Section 274(1)(g) of the Companies Act, 1956.

(a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

For Deloitte Haskins & Sells Chartered Accountants (Registration No.302009E)

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books; (c) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

Abhijit Bandyopadhyay Place : Kolkata Date

: 11th May, 2010

Partner Membership No. 054785

109

Annexure to the Auditors’ Report (Referred to in paragraph 3 of our report of even date)

The nature of the Company’s business/activities during the year

under that section. Accordingly clauses 4(v) (a) and (b)

is such that clauses 4 (viii) and (xiii) are not applicable to the

are not applicable to the Company.

Company. (i)

(vi)

the directives issued by the Reserve Bank of India and

(a) The Company has maintained proper records

the relevant provisions of Sections 58A, provisions of

showing full particulars, including quantitative details

Section 58AA or any other relevant provisions of the

and situation of fixed assets.

Companies Act, 1956 and the Companies (Acceptance

(b) All the fixed assets were verified during the year and

of Deposits) Rules, 1975 with regard to the deposits

no material discrepancies were observed as per the reports submitted to us.

accepted from the public. (vii)

(c) The fixed assets disposed off during the year, in our

in our opinion, not affected the going concern status of the Company. (ii)

In respect of shares and securities held as stock in trade:

In our opinion, the Company has an adequate internal audit system commensurate with the size and nature of its

opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal, has

In our opinion and according to the information and explanations given to us, the Company has complied with

In respect of its fixed assets:

business. (viii)

In respect of statutory dues: (a) According to the information and explanations given to us, the Company has been generally regular in depositing undisputed statutory dues including

(a) As explained to us, stock in trade was physically

Provident Fund, Investor Education and Protection

verified during the year by the management at

Fund, Employees’ State Insurance, Income-tax,

reasonable intervals.

Sales-tax, Wealth Tax, Custom Duty, Cess and any

(b) In our opinion and according to the information and

other material statutory dues with the appropriate

explanations given to us, the procedures of physical

authorities during the year.

verification of stock in trade followed by the

According to the information and explanations given

management were reasonable and adequate in

to us, no undisputed amounts payable in respect of

relation to the size of the company and the nature of

income tax, wealth tax, sales tax, customs duty,

its business.

excise duty, cess and other material statutory dues,

(c) In our opinion and according to the information and

were in arrears, as at 31 March, 2010 for a period of

explanations given to us, the Company has

more than six months from the date they became

maintained proper records of stock in trade and no

payable. We are informed that the Company intends

material discrepancies were noticed on physical

to file a writ petition with respect to the amendments

verification.

made by the Finance Act, 2009 disallowing the provision in the value of diminution in the value of

(iii)

The Company has neither granted nor taken any loans,

assets with retrospective effect from 2001 for the

secured or unsecured to or from companies, firms or

purpose of determining tax liability as per the

other parties covered in the register maintained under

provision of Section 115JB of the Income Tax Act.

Section 301 of the Companies Act, 1956. Accordingly clauses 4 (iii) (a) to (g) are not applicable to the Company.

(b) According to the information and explanations given to us, details of dues of income tax, sales tax, wealth

(iv)

In our opinion and according to the information and

tax, service tax, custom duty, excise duty and cess

explanations given to us, there are adequate internal

which have not been deposited as on 31st March,

control procedures commensurate with the size of the

2010 on account of any dispute are given below:

Company and the nature of its business for the purchase of fixed assets and shares and securities held as stock in trade and for the sale of services. We have not observed any continuing failure to correct major weaknesses in such internal controls. (v)

There were no contracts or arrangements referred to in Section 301 of the Companies Act, 1956, during the year that need to have been entered in the register maintained

110

Name Nature of of Statue dues

Amount (Rs)

Period to Forum which the where amount dispute relates is pending

Income Income 187,824,192 2005-06; ITAT, Tax Act, Tax 2006-07 New Delhi 1961 and 2007-08

Annual Report 2009-10

The levy of service-tax on hire purchase and leasing

The Company has not given any guarantee for loans

transactions introduced with effect from 16 July, 2001

taken by others from financial institutions.

has been challenged by Trade Associations and the Company before the Hon’ble High Court at Calcutta

(xiv)

centralised bank accounts from where utilisation is made.

and Chennai High Court and a stay has been obtained.

To the best of our knowledge and belief and according to

Pending disposal of writ petitions, the

the information and explanations given to us, these term

Company is not recognizing service-tax on the

loans availed were prima facie, applied by the Company

aforesaid transactions.

during the year for the purposes for which the loans were

The Assessment Order disallowing special reserve

obtained, other than temporary deployment pending

(created as per Section 45IC of the RBI Act, 1934)

application.

and Debt Redemption Reserve for the purpose of determining tax liability as per the provision of Section

(xv)

of the Company, funds raised on short-term basis have,

being challenged by the company, before the Hon’ble

prima facie, not been used during the year for long-term

Income Tax Appellate Tribunal, New Delhi. The Company does not have any accumulated losses as at the end of the year. The Company has not incurred

investment. (xvi)

maintained under Section 301 of the Companies Act,

and the immediately preceding financial year. In our opinion and according to the information and explanations given to us, the Company has not defaulted

1956. (xvii)

been issued by the Company requiring the creation of

and debenture holders. In our opinion and according to the information and explanations given to us, the Company has maintained

security/charge. (xviii)

(xii)

The Company has not raised money by any public issue during the year.

adequate documents and records in cases where the Company has granted loans and advances on the basis

According to the information and explanations given to us and the records examined by us, no debentures have

in the repayment of dues to financial institutions, banks

(xi)

The Company has not made any preferential allotment of shares to parties and companies covered in the Register

cash losses during the financial year covered by our audit

(x)

According to the information and explanations given to us, and on an overall examination of the balance sheet

115JB of the Income Tax Act is in the process of

(ix)

Term loans availed by the Company are deposited in

(xix)

To the best of our knowledge and belief and according to

of security by way of pledge of shares, debentures and

the information and explanations given to us, no fraud on

other securities.

or by the Company was noticed or reported during

Based on our examination of the records and evaluation

the year.

of the related internal controls, the Company has maintained proper records of transactions and contracts in respect of its dealing in shares, securities, debentures and other investments and timely entries have been made For Deloitte Haskins & Sells

therein. The aforesaid securities have been held by the Company in its own name, except to the extent of the

Chartered Accountants

exemption granted under Section 49 of the Companies

(Registration No.302009E)

Act, 1956. (xiii)

According to the information and explanations given to us, the terms and conditions of the guarantees given by

Abhijit Bandyopadhyay

the Company for loans taken by others from banks are

Place : Kolkata

not prima facie prejudicial to the interest of the Company.

Date : 11th May, 2010

Partner Membership No. 054785

111

Balance Sheet as at 31st March, 2010 (Rupees in Lakh) Schedule

2010

2009

SOURCES OF FUNDS Shareholders' Funds Share Capital

1

11,629

11,629

-

1,780

Equity Warrants Issued and Subscribed Reserves and Surplus

2

67,381

79,010

56,077

Secured

3

284,071

115,161

Unsecured

4

70,256

19,100

69,486

Loan Funds

Deferred Tax Liability Total

354,327

134,261

3,440

-

436,777

203,747

APPLICATION OF FUNDS 5

Fixed Assets Gross Block

10,104

Less: Depreciation

8,814

1,793

Net Block 6

Investments

779 8,311

8,035

70,733

48,051

Current Assets, Loans and Advances Sundry Debtors

7

365

722

Cash & Bank Balances

8

5,255

29,708

Other Current Assets

9

95

107

Loans & Advances

10

359,722

121,078

365,437

151,615

Less: Current Liabilities and Provisions Current Liabilities

11

5,628

2,072

Provisions

12

2,076

1,882

7,704

3,954

Net Current Assets

357,733

147,661

Total

436,777

203,747

Significant Accounting Policies and Notes to Financial Statements as per our report of even date

18

The Schedules referred to above form an integral part of the Balance Sheet. This is the Balance Sheet referred to in our report of even date.

For Deloitte Haskins & Sells

On behalf of the Board of Directors

Chartered Accountants (Regn No. 302009E) Abhijit Bandyopadhyay Partner M. No. 054785 Place : Kolkata Date : 11th May, 2010 10 Lakh is equal to 1 Million

112

Hemant Kanoria

Salil K. Gupta

Sandeep Lakhotia

Chairman & Managing Director

Chief Mentor & Director

Company Secretary

Annual Report 2009-10

Profit and Loss Account for the year ended 31st March, 2010 (Rupees in Lakh) Schedule

2010

2009

46,997

32,227

INCOME Income from Operations

13

Other Income

14

Total

16

416

47,013

32,643

1,968

1,438

EXPENDITURE Staff Expenses

15

Administrative & Other Expenses

16

3,963

5,835

Finance Charges

17

24,878

19,393

Depreciation Total PROFIT BEFORE BAD DEBTS, PROVISIONS AND TAX Bad Debts written off

1,014

769

31,823

27,435

15,190

5,208

289

83

-

-

Provisions as per the norms of Reserve Bank of India & Foreign Financial Institutions Provision for Premium on Unsecured Subordinated Bonds PROFIT BEFORE TAX

88

88

377

171

14,813

5,037

2,190

211

(2,190)

(211)

3,440

-

Provision for Tax: - Current Tax - Mat credit entitlement - Deferred Tax - Income Tax in respect of Earlier Years PROFIT AFTER TAX Surplus brought forward from previous year PROFIT AVAILABLE FOR APPROPRIATION

224

1

11,149

5,036

12,685

12,135

23,834

17,171

APPROPRIATIONS Special Reserve (As per Reserve Bank of India guidelines)

2,280

1,020

Debt Redemption Reserve (Refer Note II 4 of Schedule 18)

(50)

2,108

General Reserve Proposed Dividend Corporate Dividend Tax on Proposed Dividend

300

-

1,394

1,161

231

197

Surplus carried to Balance Sheet

19,679

12,685

Total

23,834

17,171

9.60

4.34

Earnings Per Equity Share (Basic & Diluted) in Rs. (Face Value Rs. 10/- per Share) Significant Accounting Policies and Notes to Financial Statements as per our report of even date

18

For Deloitte Haskins & Sells Chartered Accountants (Regn No. 302009E) Abhijit Bandyopadhyay Partner M. No. 054785

On behalf of the Board of Directors

Hemant Kanoria Chairman & Managing Director

Salil K. Gupta Chief Mentor & Director

Sandeep Lakhotia Company Secretary

Place : Kolkata Date : 11th May, 2010 10 Lakh is equal to 1 Million

113

Cash Flow Statement for the period ended 31st March, 2010 (Rupees in Lakh) A. Cash Flow from Operating Activities1 Net Profit Before Tax Adjustment for : Depreciation Bad Debts written off Provision for Premium on Unsecured Subordinated Bonds Profit on sale of Fixed Assets Interest Expenses Income from Trade Investments Profit on sale of Investments(net) Dividend Income Provision for Diminution in value of Stock for Trade Provision for Dimunition in value of Investments Operating Profit before Working Capital Changes Adjustments for: (Increase) / Decrease in Receivables/Others (Increase) / Decrease in Stock for Trade (Decrease) / Increase in Trade Payables Cash Generated from Operations Interest Paid(net of foreign exchange fluctuation) Direct Taxes paid Net Cash (Used in) / Generated from Operating Activities B. Cash Flows from Investing Activities Purchase of Fixed Assets Proceeds from Sale of Fixed Assets Amount received towards transfer of business (Increase) in Investments (Increase) of Investments in Subsidiary Investments in Joint Venture Income from Trade Investments Dividend Received Net Cash (Used) / Generated in Investing Activities C. Cash Flows from Financing Activities Net Increase in Borrowings Dividend Paid Dividend Tax Net Cash (Used) / Generated in Financing Activities Net Increase / (Decrease) in Cash & Cash Equivalents Cash & Cash Equivalents as on 1st April 2009 Cash & Cash Equivalents as on 31st March 2010 Notes: 1 The above Cash Flow Statement has been prepared under the Indirect Method as set out in the Accounting Standard 3 (AS 3) 'Cash Flow Statements' notified by the Central Government under Companies (Accounting Standards) Rules, 2006 1. Cash and Cash Equivalent at the end of the year as per Balance Sheet Less: Fixed Deposits under Lien

2010

2009

14,813

5,037

1,014 289 88 24,878 (1,185) (1,123) (143) 7 138 38,776

769 83 88 (354) 19,393 (2,452) (94) (62) 5 216 22,629

(236,673) 26 2,689 (195,182) (24,173) (2,148) (221,503)

(34,436) 25 (6,573) (18,355) (19,660) (562) (38,577)

(1,290) (21,682) (15) 1,185 143 (21,659)

(8,540) 534 37,500 (13,015) (45) (2,295) 2,452 62 16,653

220,066 (1,160) (197) 218,709 (24,453) 29,708 5,255

44,842 (1,394) (237) 43,211 21,287 8,421 29,708

5,255 750 4,505

29,708 130 29,578

2. Previous year's figures have been regrouped wherever necessary to conform to the current year's classification. This is the Cash Flow Statement referred to in our report of even date. For Deloitte Haskins & Sells Chartered Accountants (Regn No. 302009E) Abhijit Bandyopadhyay Partner M. No. 054785 Place : Kolkata Date : 11th May, 2010 10 Lakh is equal to 1 million

114

On behalf of the Board of Directors

Hemant Kanoria Chairman & Managing Director

Salil K. Gupta Chief Mentor & Director

Sandeep Lakhotia Company Secretary

Annual Report 2009-10

Schedules to the Balance Sheet as at 31st March, 2010 (Rupees in Lakh) SCHEDULE 1 - SHARE CAPITAL Authorised 400,000,000 Equity Shares of Rs. 10/- each (Previous year 400,000,000 shares of Rs.10/- each) 30,000,000 Preference Shares of Rs. 100/- each (Previous year 30,000,000 shares of Rs. 100/- each) Issued and Subscribed 116,617,625 Equity Shares of Rs. 10/- each (Previous year 116,617,625 shares of Rs. 10/ each) Paid up 116,144,798 Equity Shares of Rs.10/- each fully paid up (Previous year 116,144,798 shares of Rs. 10/- each) Add : Forfeited Shares

2010

2009

40,000

40,000

30,000

30,000

70,000

70,000

11,661

11,661

11,614

11,614

15 11,629

15 11,629 (Rupees in Lakh)

SCHEDULE 2 - RESERVES & SURPLUS Capital Reserves As per Last Balance Sheet Add: Addition during the year (Refer Note II 1 of Schedule 18) Securities Premium Account Other Reserves: General Reserve As per Last Balance Sheet Add: Addition during the year Bond/Debt Redemption Reserve As per Last Balance Sheet Add: Addition during the year Less: Reversal due to repayment of Bond/ Debt Special Reserve as per Reserve Bank of India Guidelines As per Last Balance Sheet Add: Addition during the year Profit & Loss Account As per Last Balance Sheet Add: Addition during the year

165 1780

1,434 300

2010

2009

1,945

165

29,046

29,046

1,734

1,434 -

1,434

4,300 742 5,042 792

4,250

2,192 2,900 5,092 792

4,300

8,447 2,280

10,727

7,427 1,020

8,447

12,685 6,994

19,679 67,381

12,135 550

12,685 56,077

(Rupees in Lakh) SCHEDULE 3 - SECURED LOANS Term Loans: Domestic Banks (Refer Note II 3.3 of Schedule 18) Foreign Banks (Refer Note II 3.2 of Schedule 18) Foreign Financial Institutions (Refer Note II 3.2 of Schedule 18) Working Capital Facilities from Banks (Refer Note II 3.1 of Schedule 18) Public Deposits (Refer Note II 3.4 of Schedule 18)

2010

2009

131,702

30,000

44,890

50,720

30,572

21,556

76,439

12,432

468

453

284,071

115,161

10 Lakh is equal to 1 Million

115

Schedules to the Balance Sheet as at 31st March, 2010 (Rupees in Lakh) SCHEDULE 4 - UNSECURED LOANS Debentures (Refer Note II 3.7 of Schedule 18) Subordinated Bonds (Refer Note II 2 of Schedule 18) Short Term Loans and Advances: (Refer Note II 3.6 of Schedule 18) Domestic Banks Commercial Paper Others

2010

2009

30,500

-

27,106

7,896

12,500 150 70,256

10,000 1,204 19,100

SCHEDULE 5 - FIXED ASSETS

(Rupees in Lakh)

Particulars As of 1st April, 2009

Gross Block Additions Sales / during Adjustments the year during the year

As of 31st March, 2010

Depreciation / Amortisation As of For Sales / As of 31st 1st April, the year Adjustments March, 2009 during 2010 the year

Net Block As of 31st As of 31st March, March, 2010 2009

Assets for Own use: Freehold Land Buildings Leasehold Improvements Furniture & Fixtures Machinery

224

-

-

224

-

-

-

-

224

224

49

-

-

49

10

1

-

11

38

39

-

21

-

21

-

-

-

-

21

-

19

57

-

76

2

8

-

10

66

17

43

97

-

140

4

11

-

15

125

39

335

175

-

510

16

20

-

36

474

319

Software

5

15

-

20

-

2

-

2

18

5

Total (B)

5

15

-

20

-

2

-

2

18

5

340

190

-

530

16

22

-

38

492

324

Total (A) Intangible Assets - Others

Total (C) (A+B) Assets for Operating Lease: Aeroplanes/Aircraft

1,987

-

-

1,987

212

224

-

436

1,551

1,775

Plant & Machinery

6,487

1,100

-

7,587

551

768

-

1,319

6,268

5,936

Total (D)

8,474

1,100

-

9,574

763

992

-

1,755

7,819

7,711

Total (C+D)

8,814

1,290

-

10,104

779

1,014

-

1,793

8,311

8,035

454

8,540

180

8,814

10

769

-

779

8,035

Previous Year

10 Lakh is equal to 1 million

116

Annual Report 2009-10

Schedules to the Balance Sheet as at 31st March, 2010 SCHEDULE 6 - INVESTMENTS Fully Paid Up Long Term - At Cost Particulars

(Rupees in Lakh) Face Value (Rs.)

I.

Quantity

Amount

2010

2009

15,000

-

-

0.15 0.15

0.15 0.15

Quoted 10.65% Andhra Pradesh Power Finance Corporation Loan, 2013 (Refer Note 1) 100,000 7.77% Karnataka State Development Loan, 2015 (Refer Note 1) 100 7.77% Tamilnadu State Development Loan, 2015 (Refer Note 1) 100 8.40% Transmission Corporation of Andhra Pradesh Ltd, 2014 (Refer Note 1) 1,000,000

120 57500 16020 1

120 57500 16020 1

120.97 58.36 16.26 9.92

120.97 58.36 16.26 9.92

100 100

6066 9099

6066 9099

6.74 9.99

6.74 9.99

1,000,000

2

2

20.45 242.69 242.84

20.45 242.69 242.84

10

5050000

5050000

505.00

505.00

10 10 10 10 10 10

500000 250000 50000 500000 510000 35305 ** 100000 50000

500000 250000 50000 500000 510000 35305 ** -

25.00 25.00 5.00 5.00 50.00 50.00 51.00 51.00 707.87 707.87 3,389.96 3,389.96 10.00 5.00 4,748.83 4,733.83

10 25000000 25000000

2,500.00 2,500.00 2,500.00 2,500.00

In Government / Government Guaranteed Securities, Bonds & Units Unquoted National Saving Certificate (Lodged with Sales Tax authorities)

11.50% West Bengal Finance Corporation, 2011 (Refer Note 1) 11.50% West Bengal Finance Corporation, 2010 (Refer Note 1) 9.10% West Bengal Infrastructure Development Finance Corporation Ltd., 2016 (Refer Note 1) Sub Total - I II. In Subsidiary Companies - In Equity Shares Unquoted Srei Capital Markets Ltd. Srei Forex Ltd. (net of provision for diminution Rs.50 Lakh (Previous year Rs.50 Lakh) Srei Venture Capital Ltd. Global Investment Trust Ltd. Srei Infrastructure Advisors Ltd. Srei Sahaj e-Village Ltd. Controlla Electrotech Private Ltd. IIS International Infrastructure Services GmbH, Germany Srei Mutual Fund Asset Management Private Ltd. Srei Mutual Fund Trust Private Ltd. Sub-Total - II ** There is no system of issuance of distinctive shares in the country of registration. III. In Joint Venture - In Equity Shares Unquoted Srei Equipment Finance Private Ltd. Sub-Total - III IV. In Equity Shares i) Unquoted - Trade New India Co-operative Bank Ltd. Quippo Infrastructure Equipment Ltd. (Refer Note 5) National Stock Exchange of India Ltd. TN (DK) Expressways Ltd. (Refer Note 2) Madurai Tuticorin Expressways Ltd. (Refer Note 2) Guruvayoor Infrastructure Private Ltd. (Refer Note 2) Jaora-Nayagaon Toll Road Co. Ltd. (Refer Note 2) Mahakaleshwar Tollways Private Limited Diana Capital Ltd. Wireless TT Info Services Ltd. Nagpur Seoni Expressway Ltd. (Refer Note 2) Orbis Power Venture Private Limited

10 573 573 10 18000000 14000000 10 57200 57200 10 13000 13000 10 19500 19500 10 20010000 20010000 10 2800 2800 10 5000 10 87500 10 6451613 10 4800000 4800000 10 8500 -

ii) Quoted - Trade Alpic Finance Ltd. (net of provision for diminution Rs.0.01 Lakh (Previous year Rs.0.01 Lakh))

10

100

10 10 10

100 402 200

Apple Finance Ltd. (net of provision for diminution Rs.0.02 Lakh (Previous year Rs.0.02 Lakh)) HDFC Bank Ltd. CRISIL Ltd.

10 10

2010

2009

0.06 1,851.50 2,062.06 1.30 1.95 2,001.00 0.28 0.50 175.00 10,000.00 480.00 0.85 16,574.50

0.06 1,851.50 2,062.06 1.30 1.95 2,001.00 0.28 480.00 6,398.15

100

-

-

100 402 200

1.00 0.10

1.00 0.10

10 Lakh is equal to 1 million

117

Schedules to the Balance Sheet as at 31st March, 2010 SCHEDULE 6 - INVESTMENTS Fully Paid Up Long Term - At Cost Particulars

(Rupees in Lakh) Face Value (Rs.)

GAIL India Ltd. Hotline Glass Ltd. (net of provision for diminution Rs.218.34 Lakh (Previous year Rs.166 Lakh)) Indian Metal & Ferro Alloys Ltd. ICICI Bank Ltd. (net of provision for diminution Rs.86.01 Lakh (Previous year Nil)) IDFC Ltd. Kotak Mahindra Bank Ltd. Century Plyboards (India) Ltd. Mahanagar Telephone Nigam Ltd. Mahindra & Mahindra Ltd. Power Grid Corporation of India Ltd. Steel Authority of India Ltd. Tata Steel Ltd. iii) Quoted - Non Trade New Era Urban Amenities Ltd. (net of provision for diminution Rs. 0.01 Lakh (Previous year Nil)) Sub-Total - IV (i+ii+iii) V. In Preference Shares i) Unquoted - Trade 0.1% Non-convertible Cumulative Redeemable Preference Shares, 2019 - Quippo Construction Equipment Ltd. - (Refer Note 3) 0.1% Non-convertible Cumulative Redeemable Preference Shares, 2019 - Quippo Energy Private Ltd. (Refer Note 4) Sub-Total - V VI. In Bonds/Debentures/Units i) Quoted - Trade Morgan Stanley Mutual Fund Unit Trust of India ii) Unquoted - Trade India Global Competitive Fund Infrastructure Project Development Fund Infrastructure Project Development Capital Medium and Small Infrastructure Fund Bharat Opportunity Fund Sunshine Fund Prithvi Infrastructure Fund Infra Construction Fund Sub-Total - VI (i+ii) TOTAL = I + II + III + IV + V + VI Less: Amortisation of Premium/Discount on Government Securities Aggregate Book Value of Quoted Investment Aggregate Market Value of Quoted Investment Aggregate Book Value of Unquoted Investment

Quantity

Amount

2010

2009

2010

10

-

66000

2009

10 10 10 10 10 10 10 10 10 10 10

8006030 165596 10000 91000 500 140000 14000 4000

8006030 642182 445419 91000 500 1725000 140000 10000 160000 85000 4000

52.04 231.83 1,076.06 95.25 4,491.34 183.35 183.35 0.02 0.02 984.54 182.80 182.80 65.17 16.53 180.41 182.92 28.34 28.34 739.23 7,616.66

10

100

100

0.01 0.01 17,313.73 14,014.82

100

9961

-

-

-

100

2353

-

-

-

10 10

2000 400

2000 400

0.20 0.04 0.24

0.20 0.04 0.24

-

188.57

100 3875000 3375000 3,875.00 3,375.00 100 13219900 13219900 13,219.90 13,219.90 100 9987800 6247800 9,987.80 6,247.80 100 700000 700000 700.00 700.00 100 770000 770.00 100 2250500 2250500 2,250.50 2,250.50 100 9999000 - 9,999.00 100 5898800 - 5,898.80 45,931.00 26,563.20 45,931.24 26,563.44 70,736.64 48,054.93 4.00 4.00 70,732.64 48,050.93 978.16 7,855.60 1,871.47 3,876.53 69,754.48 40,195.33

Note: (1) Under Pledge With Bank as Trustee for Public depositors as per RBI circular dated 04.01.2007 (2) Under Pledge With Bank. (3) These preference shares have been allotted pursuant to Scheme of Arrangement between Quippo Infrastructure Equipment Ltd. and Quippo Construction Equipment Ltd. as sanctioned by Hon'ble High Courts of Delhi and Andhra Pradesh vide their orders dated 28.11.08 & 05.12.08 respectively. (4) These preference shares have been allotted pursuant to Scheme of Arrangement between Quippo Infrastructure Equipment Ltd. and Quippo Energy Private Ltd. as sanctioned by Hon'ble High Courts of Delhi and Andhra Pradesh vide their orders dated 28.11.08 & 05.12.08 respectively. (5) Received 40,00,000 (Forty Lakh Only) nos. Equity shares of Rs. 10/- as bonus during the year. (6) Refer Note II 25 of Schedule 18 for movement in Investments.

10 Lakh is equal to 1 million

118

Annual Report 2009-10

Schedules to the Balance Sheet as at 31st March, 2010 (Rupees in Lakh) SCHEDULE 7 - SUNDRY DEBTORS Sundry Debtors Operating Lease - Secured, Considered good Debts outstanding for a period exceeding six months Other Debts (Refer Note II 6 of Schedule 18) Sundry Debtors - Others (Unsecured, Considered good) Debts outstanding for a period exceeding six months Other Debts SCHEDULE 8 - CASH AND BANK BALANCES Cash & Bank Balances Cash in hand With Scheduled Banks - In Unclaimed Dividend Account - In Current Account - In Fixed Deposit Account [includes Rs. 750 Lakh under lien (previous year - Rs. 130 Lakh under lien)] SCHEDULE 9 - OTHER CURRENT ASSETS Interest accrued but not due on investments/ Fixed deposits/ Loans Stock for Trade (Refer Annexure 1 to Schedule 18) SCHEDULE 10 - LOANS & ADVANCES Secured, Considered Good: - Loan (Refer Note II 6 of Schedule 18) - Loan to Subsidiary Companies (Refer Note II 22 of Schedule 18) - Advance for Operating Lease Unsecured, Considered Good: - Loan to Subsidiary Companies (Refer Note II 22 of Schedule 18) - Loan Others (Refer Note II 6 of Schedule 18) Advances recoverable in cash or in kind or for value to be received Advance Tax [net of provision for tax Rs. 3,700 Lakh (previous year Rs. 1,510 Lakh)] MAT credit entitlement Other Advances - Subsidiary Companies (Refer Note II 22 of Schedule 18) - Others SCHEDULE 11 - CURRENT LIABILITIES Sundry Creditors - Others - total outstanding dues of micro, small and medium enterprises - total outstanding dues of creditors other than micro, small and medium enterprises Amounts to be credited to Investor Education and Protection Fund* Unpaid dividend Unpaid matured deposits Other liabilities Interest accrued but not due on loans * There is no amount overdue as at Balance Sheet date SCHEDULE 12 - PROVISIONS Proposed Dividends Provision for Corporate Dividend Tax Provision as per the norms of Reserve Bank of India & Foreign Financial Institution Provision for Employee Benefits Provision for Premium on Unsecured Subordinated Bonds

2010

2009

36

267

329 365

455 722

7

4

36 4,462

35 6,018

750 5,255

23,651 29,708

84 11 95

63 44 107

171,785 5,710 140,030

94,886 3,594

1,490 14,172

1,584 1,400

781 2,401 2,411 20,942 359,722

1,047 211 2,411 15,945 121,078

18

56

36 52 4,265 1,257 5,628

35 62 1,525 394 2,072

1,394 231 203 248 2,076

1,161 197 206 318 1,882

10 Lakh is equal to 1 million

119

Schdules to the Profit and Loss Account for the year ended 31st March, 2010 (Rupees in Lakh) SCHEDULE 13 - INCOME FROM OPERATIONS Income from Loans Income from Operating Lease Assignment Receipt Fee Based Income

2010

2009

38,586

10,919

256

1,529

-

8,900

4,852

7,406

1,185

2,452

Income from Trade Investments -

Long term

Profit on Sale of Trade Investments (net) -

Long term

-

Stock for Trade

1,123

94

42

113

-

5

Interest from Trade Investments -

Long term

-

Stock for Trade

34

79

143

62

Income from Sub-letting

642

464

Interest received from Govt. Securities/Banks

134

204

46,997

32,227

-

354

Dividend from Trade Investments

SCHEDULE 14 - OTHER INCOME Profit on sale of Fixed Assets Other Income SCHEDULE 15 - STAFF EXPENSES Salaries, Allowances, Commission & Bonus Contribution to Provident and Other Funds Staff Welfare Expenses SCHEDULE 16 - ADMINISTRATIVE & OTHER EXPENSES Communication Expenses Legal & Professional Fees Electricity Charges

16

62

16

416

1,785

1,329

156

99

27

10

1,968

1,438

59

41

2,182

4,538

47

11

443

150

21

15

8

11

Auditors' Remuneration (Refer Note II 18 of Schedule 18)

38

27

Repairs - Building

69

-

Rent (Refer Note II 7 of Schedule 18) Rates and Taxes Brokerage and Service Charges

- Machinery - Others Travelling and Conveyance Director Fees

20

15

121

61

550

493

9

10

Insurance

11

2

Printing and Stationery

62

45

106

105

7

5

138

216

72

90

3,963

5,835

Advertisement and Subscription Provision for Diminution in value of Stock for Trade Provision for Diminution in value of Investments Miscellaneous Expenses

10 Lakh is equal to 1 million

120

Annual Report 2009-10

Schdules to the Balance Sheet and Profit and Loss Account (Rupees in Lakh) SCHEDULE 17 - FINANCE CHARGES Interest on Debentures

2010

2009

2,751

424

Interest on Other Fixed Loans -

Term Loans from Domestic Banks/Financial Institutions

9,182

1,901

-

Term Loans from Foreign Banks/Financial Institutions

7,968

15,308

-

Public Deposits

-

Bonds

Interest on Working Capital Facilities Interest - Others Other Financial Charges (Refer Note II 23 of Schedule 18)

43

48

895

919

2,172

550

51

180

1,816

63

24,878

19,393

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS I.

Significant Accounting Policies

1.

Basis of Preparation

1.1

The financial statements are prepared in accordance with the historical cost convention and the accrual basis of accounting.

1.2

These are presented in accordance with Generally Accepted Accounting Principles in India, provisions of the Companies Act, 1956, Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006 and the guidelines issued by the Reserve Bank of India, wherever applicable.

1.3

The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities including Contingent Liabilities as of the date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2.

Revenue Recognition Income from Operations is recognised in the Profit & Loss Account on accrual basis as stated herein except in the case of nonperforming assets where it is recognised, upon realisation, as per the Prudential Norms of Reserve Bank of India, applicable to Non-Banking Financial Companies.

2.1

Income from Loans It is recognised based on the internal rate of return to provide a constant periodic rate of return on the net investment outstanding over the period of the contract or as per the terms of the contract.

2.2

Income from Operating Lease It is recognised as rentals, as accrued over the period of lease, net of value added tax, if applicable.

2.3

Securitisations, Assignments and Co-Branded Arrangements Income arising from securitisation and assignment of loans is amortised over the life of the contract. In case of co-branded arrangements income is accounted on accrual basis over the life of the contract as provided under respective arrangements. These are included in income from loans under Income from Operations.

2.4

Fee Based Income Fees for advisory services are accounted based on the stage of completion of assignments, when there is reasonable certainty of its ultimate realisation/ collection.

2.5

Other Operating Income Dividend Income is accounted when the right to receive the payment is established. Income from investment in Funds is recognised on cash basis as per the Prudential Norms of the Reserve Bank of India. All other operating income is accounted for on accrual basis.

10 Lakh is equal to 1 million

121

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 2.6

Other Income Other income is accounted for on accrual basis.

3.

Fixed Assets and Depreciation/Amortisation

3.1

Fixed Assets include assets given under Operating Lease. Fixed Assets are stated at Cost less accumulated depreciation. Cost includes taxes, duties, freight and incidental expenses related to the acquisition and installation of the assets.

3.2

Intangible Assets expected to provide future enduring economic benefits are stated at cost less amortisation. Cost comprises purchase price and directly attributable expenditure on making the asset ready for its intended use.

3.3

Depreciation is provided on straight line method applying the rates prescribed in Schedule XIV to the Companies Act, 1956 or based on estimated useful life, whichever is higher. The details of estimated useful life for each category of assets are as under: Asset category

Estimated Useful Life

I

Assets for Own Use

i)

Buildings

61 years

ii)

Furniture & Fixture

16 years

iii)

Computers

6 years

iv)

General Plant & Machinery

21 years

v)

Intangible Assets

6 years

II

Assets for Operating Lease

vi)

Aeroplanes / Aircrafts

9 years

vii)

Oil Rig

9 years

viii)

Gas Gensets

10 years

ix)

Intangible Assets

3 - 6 years

However, Fixed Assets costing up to Rs. 5,000/- are depreciated fully over a period of 12 months from the date of purchase. 3.4

Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date of sale.

3.5

Lease-hold assets are amortised over the period of the lease.

4.

Impairment of Fixed Assets Wherever events or changes in circumstances indicate that the carrying amount of fixed assets may be impaired, the Company subjects such assets to a test of recoverability, based on discounted cash flows expected from use or disposal thereof. If the assets are impaired, the Company recognises an impairment loss as the excess of the carrying amount over the recoverable amount. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However the carrying amount after reversal is not increased beyond the carrying amount that would have prevailed by charging usual depreciation if there was no impairment.

5.

Capital Work in Progress / Advance for Operating Lease Capital work in progress / advance for operating lease is stated at cost and includes development and other expenses including interest during construction period.

6.

Investments

6.1

Investments are classified into “Current” and “Long Term” investment.

6.2

All long term investments including investments in Subsidiary Companies are stated at cost. Provision for diminution in value, other than temporary, is considered wherever necessary on individual basis.

6.3

Cost is arrived at on weighted average method for the purpose of valuation of investment.

6.4

Investments held as stock for trade are valued at lower of cost and market price determined category-wise.

7.

Loan Assets

7.1

Loan Assets include loans advanced by the Company secured by collateral offered by the customers if applicable. These are shown net of assets securitised.

7.2

Loan assets are valued at net investment amount including installments fallen due and net of unmatured / unearned finance charges, amounts received, assets not paid for, etc.

122

Annual Report 2009-10

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 8.

Provision for Non-Performing Assets and Bad Debts

8.1

Relating to Loans Assets & Operating Lease Receivables:

8.1.1

Provisions for non performing assets are considered in the financial statements according to Prudential Norms prescribed by the Reserve Bank of India (RBI) for Non-Banking Financial Companies. Additional provision as per the norms of Foreign Financial Institutions (FFI) has also been made as follows: Loan Assets: Asset Classification

Arrear Period

Provision as per RBI % of Portfolio

Provision as per FFI % of Portfolio Nil

Provision adopted by the Company % of Portfolio

Standard

Upto 90 days

Nil

Nil

91 to 180 days

Nil

20

20

Sub-Standard

181 to 360 days

10

50

50

361 to 365 days

10

100

100

More than 12 months to 24 months

10

100

100

Doubtful (Unsecured)

More than 24 months

100

100

100

Doubtful (Secured)

More than 24 months to 36 months

20

100

100

Loss

More than 36 months to 60 months

30

100

100

Above 60 months

50

100

100

100

100

100

As per Management discretion

Operating Lease Receivables: Asset Classification

Standard

Sub-Standard

Doubtful

Loss

Arrear Period

Provision as per RBI % of Outstanding

Provision as per FFI % of Outstanding

Provision adopted by the Company % of Outstanding

Upto 90 days

Nil

Nil

91 to 180 days

Nil

20

Nil 20

181 to 360 days

Nil

50

50

361 to 365 days

Nil

100

100

More than 12 months to 24 months

10

100

100

More than 24 months to 30 months

40

100

100

More than 30 months to 36 months

40

100

100

More than 36 months to 48 months

70

100

100

More than 48 months

100

100

100

As per Management discretion

100

100

100

8.1.2

Loan Assets overdue for more than four years or as per the management discretion are considered as bad debts and written off.

8.2

Provision for other debts arising from services is considered in the financial statements according to the Prudential Norms prescribed by the Reserve Bank of India for Non-Banking Financial Companies.

9.

Foreign Currency Transactions

9.1

Foreign currency transactions are recorded at the exchange rates prevailing at the time of transaction.

9.2

Monetary Assets and liabilities expressed in foreign currencies are translated into the reporting currency at the exchange rate prevailing at the Balance Sheet date except with respect to liabilities where exchange fluctuation losses are to be borne by customers. Any loss or gain arising on loans payable has been included in Finance Charges as per the provisions of Accounting Standard - 16 “Borrowing Costs” and Accounting Standard – 11 (revised 2003) “The Effect of Changes in Foreign Exchange Rates” notified by the Central Government under the Companies (Accounting Standards) Rules, 2006.

123

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 9.3

In respect of forward exchange contracts entered into by the Company, the difference between the forward rate and the exchange rate on the date of the transaction are recognised as income or expense over the life of the contract. Gain/loss on settlement of transactions arising on renewal/cancellation are recognised as income or expense in the period in which these are renewed or cancelled.

9.4

In respect of Derivative contracts, premium paid, gains/losses on settlement and provisions for losses determined in accordance with principles of prudence, on category wise basis, are recognised in the Profit & Loss Account.

10.

Prior Period and Extra Ordinary Items Prior Period and Extra Ordinary items having material impact on the financial affairs of the Company are disclosed separately.

11.

Borrowing Costs Borrowing costs to the extent attributed to the acquisition/construction of qualifying assets are capitalised up to the date when such assets are ready for its intended use and all other borrowing costs are recognised as an expense in the period in which they are incurred.

12.

Employee Benefits

12.1

Short term employee benefits Short term employee benefits based on expected obligation on undiscounted basis are recognised as expense in the Profit and Loss Account of the period in which the related service is rendered.

12.2

Defined contribution plan Company’s contribution towards Regional Provident Fund Authority and Employee State Insurance Corporation are charged to the Profit and Loss Account.

12.3

Defined benefit plan Company’s liability towards gratuity is a defined benefit plan. Such liabilities are ascertained by an independent actuary as per the requirements of Accounting Standard – 15 (revised 2005) “Employee Benefits”. All actuarial gains and losses are recognised in Profit and Loss Account in the year in which they occur.

13.

Segment Reporting Segment information is reported in the consolidated financial statements.

14.

Taxes on Income

14.1

Current tax is the amount of tax payable on the taxable income for the year determined in accordance with the provisions of the Income Tax Act, 1961.

14.2

Deferred tax is recognised on timing differences, being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets subject to the consideration of prudence are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits.

15.

Provision, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events; it is probable that there will be an outflow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.

16.

Earnings per Share The Company reports basic and diluted earnings per equity share in accordance with Accounting Standard-20, Earnings Per Share notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. Basic earnings per equity share has been computed by dividing net profit after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per equity share is computed by dividing the net profit after tax for the year by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.

17.

Assets under Management

17.1

Contracts securitised or assigned are derecognised from the books of accounts. Co-branded loan transactions are originated by the Company on behalf of partner bank/financial institution.

17.2

Contingent liabilities, if any, for such contracts are disclosed separately.

124

Annual Report 2009-10

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 18.

Miscellaneous Expenditure Miscellaneous Expenditure on issue of Bonds and Debentures are being amortised over the tenure of the respective Bonds and Debentures.

II.

Notes to the Financial Statements

1.

Issue of Warrants on Preferential Allotment basis The Company on 30th October, 2007 issued and allotted 25,000,000 warrants of Rs. 10/- each to the Promoters’ Group of the Company by way of Preferential Allotment . Each warrant was convertible into Equity shares of Rs. 10/- each in one or more tranches at a price of Rs. 100/- per share (including premium of Rs. 90/-) within a period of 18 months from the date of allotment of the warrants. Out of 25,000,000 warrants, conversion option for 7,200,000 warrants was exercised in 2007-08. Conversion option for balance 17,800,000 warrants were not exercised during the year ended 31st March, 2009 and has since expired and hence forfeited on 29th April, 2009. The amount of Rs. 1,780 Lakh received as subscription money has been transferred to Capital Reserve.

2.

Tier II Capital

2.1

Unsecured Subordinated Redeemable Non Convertible Bonds

2.1.1

During the year, the Company has allotted 2,000 Unsecured Subordinated Redeemable Non-Convertible Bonds in the nature of Debentures of Rs. 10 Lakh each on private placement basis forming part of Tier II Capital aggregating to Rs. 20,000 Lakh for cash at par on 23rd March, 2010. Each bond is having an overall tenure of 10 years, reckoned from the date of allotment. The face value of the bonds shall be redeemed at the end of 10 years from the date of allotment i.e. 23rd March, 2020. Interest is payable semi annually @ 10.20% p.a.

2.1.2

The Company has allotted 500 Unsecured Subordinated Redeemable Non- Convertible Bonds in the nature of Debentures of Rs. 10 Lakh each on private placement basis forming part of Tier II Capital aggregating to Rs. 5,000 Lakh for cash at par on 30th March, 2007. Each bond is having an overall tenure of 10 years, reckoned from the date of allotment. The face value of the bonds shall be redeemed at the end of 10 years from the date of allotment i.e. 29th March, 2017. Interest is payable annually @ 12% p.a.

2.1.3

The unsecured subordinated redeemable non convertible bonds repayable within one year amounts to Rs Nil (Previous year Nil).

2.2

Unsecured Subordinated Bonds

2.2.1

The Company has allotted 5,266,075 Unsecured Subordinated Bonds to the equity shareholders in the nature of Tier II Capital of Rs. 100 each aggregating to Rs. 5,266 Lakh for cash at par on 25th August, 2000 on right basis. Each bond is having an overall tenure of 12 years, reckoned from the date of allotment. The face value of the bonds shall be redeemed in 7 installments at a premium of 20% of the original face value starting from 6th year on 25th August, 2006 at the rate of 15% of the face value and premium thereon for 6 years and balance 10% in the year thereafter. The fourth such installment of Rs. 948 Lakh representing 15% of the face value together with 20% of the premium towards redemption has been paid on 25th August, 2009 being fourth redemption date. The face value of the aforesaid Bonds stands reduced to Rs. 40/- per Bond. Premium payable on redemption of these Subordinated Bonds is provided over the tenure of the bond.

2.2.2

The unsecured subordinated bonds redeemable within one year amounts to Rs. 790 Lakh (Previous year Rs. 790 Lakh)

3.

Loans

3.1

Working Capital facilities from banks are secured by hypothecation of assets covered by loan assets/ hypothecation/ Operating Lease agreements and receivables arising there from ranking pari passu (excluding assets which are specifically charged to others).

3.2

Term loan from Foreign Banks & Foreign Financial Institutions are secured by hypothecation of specific assets covered by loan assets/ hypothecation agreements and Operating Lease agreement and receivables arising there from.

3.3

Term loan from Domestic Banks are secured by hypothecation/assignment of specific assets covered by loan assets/ hypothecation agreements and Operating Lease agreement and receivables arising there from.

3.4

Public Deposits are secured by pledge of certain Government Securities as per RBI Circular dated 04.01.2007. Public Deposits (including matured and unclaimed) repayable within one year aggregate to Rs. 468 Lakh (Previous year Rs. 488 Lakh).

3.5

Secured Loans and advances from Domestic Banks include Rs Nil Lakh (Previous year Rs. 30,000 Lakh) guaranteed by the directors.

3.6

Unsecured Short Term Loans and Advances include amount repayable within one year amounting to Rs. 12,650 Lakh (Previous year Rs. 11,204 Lakh).

125

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 3.7

Company has issued on private placement basis Non-Convertible debentures (NCDs) aggregating to Rs. 637,300 Lakh during the year ended 31st March, 2010 (Previous year Rs. 43,500 Lakh). The outstanding balance as on 31st March, 2010 is Rs. 30,500 Lakh (Previous year Rs. Nil). All the NCDs outstanding as on 31st March, 2010 are redeemable at par and are unsecured. Details of such privately placed NCDs are given below: (Rupees in Lakh)

(A)

CARE AA Rated Paper Date of Allotment

(B)

(C)

As at 31st March, 2010

As at 31st March, 2009

Earliest Redemption Date 15-09-2011

23-03-2010

1,000

-

Sub-Total (A)

1,000

-

Date of Allotment

As at 31st March, 2010

As at 31st March, 2009

Earliest Redemption Date

19-02-2010

2,500

-

28-04-2010 19-05-2010

CARE PR1+ Rated Paper

19-02-2010

1,500

-

Sub – Total (B)

4,000

-

Date of Allotment

As at 31st March, 2010

As at 31st March, 2009

Earliest Redemption Date

19-03-2010

7,000

-

16-07-2010

19-03-2010

10,000

-

16-06-2010

22-12-2009

2,500

-

18-06-2010

05-10-2009

1,000

-

27-09-2010 23-09-2010

ICRA A1+ Rated Paper

24-09-2009

5,000

-

Sub - Total (C)

25,500

-

30,500

-

Total (A+B+C) 3.8

Commercial Paper outstanding as at 31st March, 2010 amounts to Rs. 12,500 Lakh (as at 31st March 2009 – Nil). Maximum outstanding at any time during the year ended 31st March, 2010 was Rs. 18,000 Lakh (Previous year – Nil).

4.

During the year, the Company has created Debt Redemption Reserve of Rs. 742 Lakh (Previous year Rs. 2,900 Lakh) towards redemption of Unsecured Subordinated Debenture/Bonds/Debt i.e. Mezzanine Capital (Tier II Capital). Debt Redemption Reserve of Rs. 792 Lakh (Previous year Rs. 792 Lakh) has been reversed due to repayment of loan during the year.

5.

Assets under Management

5.1

Securitisation In terms of Reserve Bank of India Guidelines on securitisation of assets issued on 1st February 2006, details of loans securitised by the Company are as under: (Rupees in Lakh) Particulars

31.03.2010

31.03.2009

Total number of contracts securitised during the year

-

1

Book Value of contracts securitised (on date of securitisation)

-

6,019

Sale consideration (on date of securitisation)

-

6,026

(Loss)/Gain on securitisation (on date of securitisation)*

-

7

Subordinated assets as on balance sheet date

-

-

Bank/Other deposits provided as collateral as on balance sheet date

-

-

Guarantee against securitised contracts

-

Nil

* Gain from securitisation is amortised over the life of the contracts and loss is charged off upfront in Profit and Loss Account.

126

Annual Report 2009-10

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 5.2

There are no contracts outstanding in terms of foregoing paragraph 5.1 above as at 31st March, 2010.

6.

Performance wise classification of assets and total provision made thereon:

Loan Assets:

(Rupees in Lakh)

Asset Classification

Standard

Arrear Period

Upto 90 days 91 to 180 days Sub Total

Sub-Standard

Loss

Provisions as at 31st March, 2010 As per Additional RBI Provision as per FFI

Total Provision as at 31st March, 2010

193,157

-

-

-

-

-

-

-

193,157

-

-

-

181 to 360 days

-

-

-

-

361 to 365 days

-

-

-

-

More than 12 months to 24 months

-

-

-

-

Sub Total

-

-

-

-

-

-

-

-

-

-

-

-

Doubtful (Unsecured) More than 24 months Doubtful (Secured)

Book Value as at 31st March, 2010

More than 24 months to 36 months More than 36 months to 60 months

-

-

-

-

Above 60 Months

-

-

-

-

Sub Total

-

-

-

-

As per Management discretion

-

-

-

-

Sub Total Grand Total

-

-

-

-

193,157

-

-

-

Secured loan assets include Rs. 12,261 Lakh for which charge is in the process of creation. Operating Lease Receivables: Asset Classification

Standard

(Rupees in Lakh) Arrear Period

Upto 90 days

Doubtful

Loss

Grand Total

Provisions as at 31st March, 2010 As per Additional RBI Provision as per FFI

Total Provision as at 31st March, 2010

36

-

-

-

91 to 180 days

-

-

-

-

181 to 360 days

-

-

-

-

361 to 365 days

-

-

-

-

36

-

-

-

More than 12 months to 24 months

-

-

-

-

More than 24 months to 30 months

-

-

-

-

Sub Total

-

-

-

-

More than 30 months to 36 months

-

-

-

-

Sub Total Sub-Standard

Outstanding as at 31st March, 2010

More than 36 months to 48 months

-

-

-

-

Above 48 months

-

-

-

-

Sub Total

-

-

-

-

As per Management discretion

-

-

-

-

Sub Total

-

-

-

-

36

-

-

-

127

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 7.

In accordance with the Accounting Standard 19 on ‘Leases’ as notified by the Companies (Accounting Standards) Rules, 2006 the following disclosures in respect of Operating Leases is made : a. In the capacity of Lessee The Company has leasing arrangements in respect of operating leases for office premises. These leasing arrangements which are not non-cancellable in nature range between 11 months and 21 years, generally and are usually renewable by mutual consent on mutually agreeable terms. Minimum lease payments charged to the Profit and Loss Account with respect to the leasing arrangements referred to above aggregate Rs. 443 Lakh (Previous year Rs. 150 Lakh). Sub lease payments received or receivable recognised in the Profit and Loss Account for the year ended 31 March, 2010 aggregates Rs. 642 Lakh (Previous year Rs. 464 Lakh). b. In the capacity of Lessor The Company has given assets on Operating lease for periods ranging between 5 to 6 years based on the nature of equipment.

8.

The Company is of the opinion that Service-tax on property rental received is not payable based on legal opinion obtained and accordingly is not collecting Service-tax on such rental received.

9.

Loans & Advances include amounts of Rs. 3,793 Lakh (Previous year Rs. 2,528 Lakh) due from private companies having at least one common director with the Company.

10.

None of the Company’s Fixed Assets are considered impaired as on the Balance Sheet date.

11.

Disclosure pursuant to Accounting Standard (AS) 15 (Revised): Contribution to Regional Provident Fund Authority charged to Profit and Loss Account aggregates to Rs. 104 Lakh (Previous year Rs. 28 Lakh). Besides, Rs.1 Lakh (Previous year Rs. 14 Lakh) has been paid to “Srei International Finance Provident Fund Trust” towards Company’s share of shortfall between the return from the investments of the trust and the Government notified interest rate. Contribution to Employee State Insurance Corporation charged to Profit and Loss Account aggregates to Rs. 0.19 Lakh (Previous year Rs. 0.07 Lakh). Gratuity benefits to employees have been funded under separate arrangement with the Life Insurance Corporation of India (LIC). The following table sets out the details of amount recognised in the financial statements in respect of employee benefit schemes. (Rupees in Lakh)

Employee Benefits: Defined benefit plans (As per actuarial valuation) I

II

III

128

Gratuity 31st March, 2010

31st March, 2009

27

15

Components of employer expenses 1

Current Service Cost

2

Interest cost

3

Expected return on plan assets

4

Curtailment cost / (credit)

5

Settlement cost / (credit)

-

-

6

Past Service Cost

16

-

7

Actuarial Losses / (Gains)

(3)

6

8

Other Adjustments

-

-

9

Employee Contributions

-

-

10

Total expenses recognised in the Statement of Profit & Loss Account for the year ended (Total 1 to 9)

41

22

6

3

(5)

(2)

-

-

Actual Contribution and Benefits Payments for the year ended 1

Actual benefit payments

(4)

-

2

Actual Contributions

28

25

100

59

69

41

(31)

(18)

Net assets / (liability) recognised in balance sheet as at 1

Present value of Defined Benefit Obligation

2

Fair value of plan assets

3

Funded status [Surplus/(Deficit)]

4

Unrecognised past service cost

5

Net asset/ (liability) recognised in balance sheet as at

-

-

(31)

(18)

Annual Report 2009-10

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) (Rupees in Lakh) Employee Benefits: Defined benefit plans (As per actuarial valuation) IV

V

VI

31st March, 2010

31st March, 2009

Change in Defined Benefit Obligations during the year ended 1

Present Value of DBO at beginning of year

59

36

2

Current Service cost

27

15

3

Interest cost

6

3

4

Curtailment cost / (credit)

-

-

5

Settlement cost / (credit)

-

-

6

Plan amendments

16

-

7

Acquisitions

-

-

8

Actuarial (Gains) / Losses

(4)

5

9

Benefits paid

(4)

-

10

Employee Contribution

-

-

11

Other Adjustments

-

-

12

Present Value of DBO at the end of year

100

59

41

15

Change in Fair value of Assets during the year ended 1

Plan assets at beginning of year

2

Acquisition/Settlement Adjustment

-

-

3

Expected return on plan assets

5

2

4

Actual Company contribution

27

25

5

Employees contribution

-

-

6

Benefits paid

(4)

-

7

Actuarial Gains / (Losses)

(1)

(1)

8

Other Adjustments

-

-

9

Plan assets at the end of the year

69

41

Actuarial Calculation 1

Experience Loss / (Gain) adjustment on plan liabilities

-

-

2

Actuarial Loss / (Gain) due to change in assumptions

(4)

5

Actuarial Loss / (Gain) due on Defined Benefit Obligations

(4)

5

1

1

3 VII

Gratuity

Experience Loss / (Gain) adjustment on plan assets

Actuarial Assumptions 1

Discount Rate

8.30%

8.00%

2

Expected return on plan assets

9.15%

9.15%*

3

Salary Escalation

10.00%

10.00%

4

Mortality

LIC

LIC

(1994-96)

(1994-96)

Ultimate

Ultimate

60 yrs.

60 yrs.

Ages from 20-24

5.00%

5.00%

Ages from 25-29

3.00%

3.00%

Ages from 30-34

2.00%

2.00%

Ages from 35-49

1.00%

1.00%

Ages from 50-54

2.00%

2.00%

Ages from 55+

3.00%

3.00%

5

Retirement/ Superannuation Age

6

Withdrawal Rate for Gratuity:

* The rate of return declared by LIC has been taken as expected rate of return on plan assets.

129

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 12.

The Company has challenged constitutional validity of Fringe Benefits Tax before the Hon’ble High Court at Calcutta and the Hon’ble Court has granted interim stay on levy of such Fringe Benefits Tax on the Company. In view of this, the Company has not provided for any liability against Fringe Benefits Tax till 31st March, 2009. However, consequent upon abolition of Fringe Benefit Tax from Financial Year 2009-10, no liability arises for the year.

13.

No interest was payable by the Company during the year to the ‘suppliers’ covered under the Micro, Small and Medium Enterprises Development Act, 2006. The above information takes into account only those suppliers who have responded to enquiries made by the Company for this purpose.

14.

Interest income includes Rs. 26 Lakh (Previous year Rs. 27 Lakh) on long term investments.

15.

Interest from Government Securities/Banks, Loan Assets, fee based income and other income wherever applicable includes tax deducted at source of Rs. 2,268 Lakh (Previous year Rs. 1,029 Lakh).

16.1

The Deferred tax liability of Rs. 3,440 Lakh (as at 31st March, 2009 Rs. Nil) arising out of timing difference as on 31 March, 2010 is on account of the following: (Rupees in Lakh) Components of Deferred Tax

As at 31st March, 2010

As at 31st March, 2009

Asset / (Liability)

Asset / (Liability)

Depreciation

(1,688)

(1,341)

Deferred Revenue Expenditure

(2,289)

(14)

514

1,355*

23

-

(3,440)

Nil

Unabsorbed Depreciation Others Net Deferred Tax Asset / (Liability) * recognised to the extent of deferred tax liability 16.2

Provision for Income Tax has been computed on the basis of Minimum Alternate Tax (MAT) in accordance with Sec 115JB of the Income Tax Act, 1961. Considering the future profitability and taxable positions in the subsequent years, the Company has recognised ‘MAT credit entitlement’ of Rs. 2,190 Lakh (Previous year Rs. 211 Lakh) as an asset by crediting to the Profit and Loss account an equivalent amount and included under “Loans & Advances” in accordance with the Guidance Note on “Accounting for credit available in respect of Minimum Alternate Tax under Income Tax Act, 1961” issued by The Institute of Chartered Accountants of India.

17.

The Company has entered into Options/Swaps/Forward contracts (being derivative instruments) which are not intended for trading or speculation, for the purpose of hedging currency and interest rate related risks. Option, Forwards and Swap contracts outstanding as at 31st March, 2010 are as follows: Amount in million Category

Currency

As at 31st March, 2010

As at 31st March, 2009

No. of Contracts

Amount in Foreign Currency

No. of Contracts

Amount in Foreign Currency

Options

USD/INR

7

USD 127.86

7

USD 135.00

Forwards

USD/INR

2

USD 1.94

-

-

Forwards

Euro/INR

4

Euro 3.82

-

-

1 million = 10 Lakh Foreign currency exposures, which are not hedged by derivative instruments, as at 31st March, 2010 amounts to Rs. 18,066 Lakh (Previous year Rs. 3,804 Lakh). 18.

Auditor’s Remuneration Particulars

2009-10

2008-09

26

26

Taxation Matters

5

-

Other Services

6

-

Out of Pocket Expenses

1

1

38

27

Audit & Limited Review Fees

Total

130

(Rupees in Lakh)

Annual Report 2009-10

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 19. (a)

Managerial Remuneration Managing Executive and Non Executive Directors’ remuneration for the year ended: Particulars

31st March, 2009

426

193

Salary Allowances

25

49

Contribution to Provident Fund

35

19

Commission to Chairman & Managing Director

36

36

Commission to Non Executive Directors

35

35

557

332

31st March, 2010

31st March, 2009

14,813

5,037

557

332

Total (b)

Computation of Net Profit in accordance with Section 198 of the Companies Act, 1956: Particulars Profit Before Tax for the year ended

Add:

(Rupees in Lakh)

31st March, 2010

Director’s remuneration (including commission) Sitting Fees Depreciation as per book of accounts Provision for diminution in value of investments Loss on sale etc. of Fixed Assets for Own Use (Net)

Less: Depreciation as envisaged under section 350 of the Companies Act, 1956 Profit on sale etc. of Fixed Assets for Own Use Profit on sale of Investments (Net) Net Profit for the year ended Non-Executive Director's Commission @ 1% of the above

(Rupees in Lakh)

9

10

1,014

769

138

216

-

-

16,531

6,364

1,014

769

-

354

1,123

94

14,394

5,147

144

51

For Non-Executive Directors, restricted to

35

35

For Chairman cum Managing Director restricted to

36

36

(c)

Salary includes provision of Rs. 35 Lakh (Previous year Rs. 35 Lakh) towards commission payable to non-executive directors of the Company, in terms of approval from Shareholders and Central Government.

(d)

Provision for gratuity in respect of Directors is not included above, as actuarial valuation is done on an overall basis.

20.

Capital Commitments Particulars

Estimated amount of capital contracts remaining to be executed (Net of advances) 21.

(Rupees in Lakh) As at 31st March, 2010

As at 31st March, 2009

757

77

Contingent Liabilities Particulars

(Rupees in Lakh) As at 31st March, 2010

As at 31st March, 2009

a.

Bank Guarantee

4,575

3,088

b.

Corporate Guarantee to bank

1,095

5,180

c.

Disputed income tax demand for AY 2006-07 #

82

287

d.

Disputed income tax demand for AY 2007-08 #

389

462

e.

Disputed income tax demand for AY 2008-09 #

1,407

-

Total

7,548

9,017

# The Assessment Orders disallowing Special Reserve (created as per Section 45IC of the RBI Act, 1934) and Debt Redemption Reserve for the purpose of determining tax liability as per the provision of Section 115JB, Disallowances under section 14A, Disallowance of Provision for NPA, Provision for earned leave encashment and Interest on certain loans under the normal provision of the Income Tax Act have been challenged by the company before the appropriate authorities. Pending disposal of the cases filed, the Company has not provided for the Income Tax liabilities arising out of the same.

131

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 22.

Details of loans/advances to Subsidiaries:

(Rupees in Lakh)

Name of Company

Maximum Amount Outstanding during the period

Amount Outstanding as at 31st March, 2010

Srei Capital Markets Ltd.

412

189

Srei Sahaj e-Village Ltd.

8,794

6,885

Srei Infrastructure Advisors Ltd. Bengal Srei Infrastructure Development Ltd. Controlla Electrotech Private Ltd. Srei Forex Ltd. Srei Venture Capital Ltd. Srei Mutual Fund Asset Management Private Limited Orbis Power Venture Private Limited (subsidiary w.e.f 02.01.10 and ceased to be a subsidiary w.e.f. 31.03.10)

66

9

127

117

2,431

2,411

1

-

332

-

7

-

13,000

The amounts are repayable on demand except that of Controlla Electrotech Private Ltd., Bengal Srei Infrastructure Development Ltd. and Srei Sahaj e-Village Ltd. The outstanding loans and advances are interest bearing except that of Srei Capital Markets Ltd. and Controlla Electrotech Private Ltd. 23.

Other financial expenses include Rs. 1,264 Lakh (Previous year Rs. 40 Lakh) paid towards upfront fees on loan processing.

24.

CIF Value of Imports

(Rupees in Lakh)

Particulars

For the year ended 31st March, 2010

For the year ended 31st March, 2009

17,518

11,231

Operating Lease Assets 25.

Details of movements in long term investments during the year are given as follows: Particulars

Face Value Rs.

Purchase Quantity

Sale/Redemption

Cost (Rs. in Lakh)

Quantity

Cost (Rs. in Lakh)

Equity Shares: Srei Mutual Fund Asset Management Private Ltd.

10

100,000

10

-

-

Srei Mutual Fund Trust Private Ltd.

10

50,000

5

-

-

Mahakaleshwar Tollways Private Ltd.

10

5,000

1

-

-

Diana Capital Ltd.

10

87,500

175

-

-

Wireless TT Info Services Ltd.

10

6,451,613

10,000

-

-

Orbis Power Venture Private Ltd.

10

8,500

1

-

-

GAIL India Ltd.

10

-

-

66,000

189

Indian Metal & Ferro Alloys Ltd.

10

-

-

476,586

844

ICICI Bank Ltd.

10

-

-

435,419

4,310

Century Plyboards (India) Ltd.

10

-

-

1,725,000

985

Mahindra & Mahindra Ltd.

10

-

-

10,000

65

Power Grid Corporation of India Ltd.

10

-

-

146,000

164

Steel Authority of India Ltd.

10

-

-

85,000

183

Machilipatnam Port Ltd

10

38,000

4

38,000

4

Bharat Opportunity Fund

100

-

-

770,000

770

India Global Competitive Fund

100

500,000

500

-

-

Infrastructure Project Development Capital

100

3,740,000

3,740

-

-

Prithvi Infrastructure Fund

100

10,000,000

10,000

1,000

1

Infra Construction Fund

100

5,900,000

5,900

1,200

1

Bonds/Debentures/Units:

132

Annual Report 2009-10

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 26.

Related Party Transactions Related parties: Subsidiary Companies: Srei Infrastructure Advisors Ltd.

Global Investment Trust Ltd.

Srei Venture Capital Ltd.

Srei Forex Ltd.

Srei Sahaj e-Village Ltd.

Srei Capital Markets Ltd.

Srei Infocomm Services Ltd. (Subsidiary of Srei Infrastructure Advisors Ltd.)

Hyderabad Information Technology Venture Enterprises Ltd. (Subsidiary of Srei Venture Capital Ltd.)

Bengal Srei Infrastructure Development Ltd. (Subsidiary of Srei Infrastructure Advisors Ltd.)

IIS International Infrastructure Services GmbH, Germany

Cyberabad Trustee Company Pvt. Ltd. (Subsidiary of Srei Venture Capital Ltd.)

Controlla Electrotech Private Ltd.

Srei Mutual Fund Trust Private Ltd. w.e.f. 27.11.09

Srei Mutual Fund Asset Management Private Ltd. w.e.f. 27.11.09

Orbis Power Venture Private Ltd. (w.e.f. 02.01.2010 and ceased to be a subsidiary w.e.f. 31.03.2010)

DPSC Ltd. (Subsidiary of Orbis Power Venture Private Ltd w.e.f.29.01.2010)

Srei Advisors Pte Ltd., Singapore (Subsidiary of IIS International Infrastructure Services GmbH, Germany w.e.f. 25.02.10)

ZAO Srei Leasing, Russia (Subsidiary of IIS International Infrastructure Services GmbH, Germany)

Joint Venture: Srei Equipment Finance Private Ltd. Key Management Personnel Name

Designation

Hemant Kanoria

Chairman & Managing Director

Saud Ibne Siddique

Joint Managing Director w.e.f. 01.04.2009

Kishore Kumar Mohanty

Whole time Director

Sanjeev Sancheti

Chief Financial Officer

Summary of Transactions with Related Parties Name of related party & Nature of relationship

(Rupees in Lakh)

Nature of Transactions and Outstanding balances

2010

2009

Subscription to Equity Shares Loan advanced Refund of Loan advanced Interest received on Loan Business Auxilliary Services rendered Balance receivable Loan/advance given Refund of Loan/advance Interest received on Loan Loan advanced Refund of Loan advanced Interest received on Loan Business Auxilliary Services rendered Recovery of Rent Recovery of Bank Guarantee Charges Bank Guarantee Arranged Corporate guarantee given on behalf of Subsidiary Corporate guarantee expired Corporate guarantee – Outstanding as at year end Loan receivable Bank Guarantee Outstanding

1 58 8 1 9 325 325 23 7,210 1,500 745 1 21 52 2,572 6,000 2,981 6,885 2,572

45 66 4 70 26 26 830 166 6,000 8,981 1,175 -

(A) Subsidiaries: Srei Infrastructure Advisors Ltd.

Srei Venture Capital Ltd.

Srei Sahaj e-Village Ltd.

133

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) (Rupees in Lakh) Name of related party & Nature of relationship

Nature of Transactions and Outstanding balances

2010

2009

Bengal Srei Infrastructure Development Ltd.

Loan advanced Refund of Loan advanced Interest received on Loan Balance receivable Loan advanced Refund of Loan advanced Fixed Assets Purchased Loan advanced Business Auxilliary Services rendered Loan Write-off Balance receivable Loan advanced Refund of Loan advanced Consultancy Fees paid Balance receivable Subscription to Equity Shares Subscription to Equity Shares

33 26 14 117 3 1 0.05 1 0.05 367 403 43 189 5 10

150 40 5 115 1 2 3 83 510 685 225 -

Security deposit paid Rent Paid Business Auxilliary Services rendered Security Deposit receivable Loan advanced Loan Processing Fees Received Refund of Loan advanced Interest received on Loan

8 0.10 2,411 13,020 260 138 13

2,411 6 2,411 -

43,544 43,544 35 24 1,600 104 642

2,295 37,500 46,997 46,997 5,937 27,991 717 72 2,083 49 36 464

752 96

717 72

87 36 2 335 64 1 48

103 36 2 65 1 41

Global Investment Trust Ltd.

Srei Forex Ltd.

Srei Capital Markets Ltd.

Srei Mutual Fund Trust Pvt. Ltd. Srei Mutual Fund Asset Management Private Ltd. Controlla Electrotech Pvt. Ltd.

Orbis Power Venture Pvt. Ltd.

(B)

(C)

Joint Venture: Srei Equipment Finance Pvt. Ltd. Subscription to Equity Shares Amount received towards transfer as per Scheme of Arrangement Loan advanced Refund of loan advanced Loan received Refund of Loan received Security deposit received Security deposit paid Interest received on Loan Interest paid on Loan Rent paid Rent received Balances Outstanding: Security Deposit payable Security Deposit receivable Key Management Personnel: Hemant Kanoria

Saud Ibne Siddique Kishore Kumar Mohanty Sanjeev Sancheti

134

Remuneration Commission Dividend paid Remuneration Remuneration Dividend paid Remuneration

Annual Report 2009-10

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 27.

Disclosure in respect of Company’s Joint Venture in India pursuant to Accounting Standard 27 ‘Financial Reporting of Interest in Joint Ventures’ as at 31st March 2010:

a)

Name of the Venture

Country of Incorporation

Proportion of Ownership Interest

India

50%

Srei Equipment Finance Private Ltd b)

The aggregate of the Company’s share in the above venture is: Particulars

2009

20,176

20,095

Net Current Assets

316,853

300,713

Loans/ Borrowings

284,798

274,005

Net Fixed Assets

Income

43,650

46,765

Expenses (Including Depreciation & Taxation)

39,294

43,638

7,729

4,026

8

56

2010

2009

11,149

5,036

116144798

116144798

-

-

116144798

116144798

10

10

Contingent Liabilities Capital Commitments (Net of Advances) 28.

(Rupees in Lakh) 2010

Earnings Per Share - Basic and Diluted Earnings per Share Particulars

1

Net Profit after tax attributable to Equity Shareholders (Rs. In Lakh)

2

Weighted average number of Equity Shares Basic (Nos.)

3

Weighted average number of Potential Equity Shares (Nos.)

4

Weighted average number of Equity Shares Diluted (Nos.)

5

Nominal Value of Equity per share (Rs.)

6

Basic Earning per share (Rs.)

9.60

4.34

7

Diluted Earnings per share (Rs.)

9.60

4.34

29.

Schedule to the Balance Sheet as required by the Reserve Bank of India vide notification dated 29th March, 2003 (as per Annexure – II attached).

Additional information pursuant to the provisions of para 3, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956 (Rupees in Lakh) Particulars 30.

31.

31.03.2009

8,015

15,509

223

285

9

-

295

136

47

7

Expenditure in foreign currencies: a)

Finance charges

b)

Professional / Consultation Fees

c)

Staff welfare

d)

On other matter

Earning in foreign currencies: Fee Based Income

32.

31.03.2010

Amount remitted in foreign currencies for dividend (including one Foreign Financial Institution): a)

Number of Non Resident Shareholders

b)

Number of Shares held (Equity Shares of Rs. 10/- each)

c)

Dividend Remitted (Rs. in Lakh)

d)

Related Year

9

12

143,451

166,175

1

2

2008-09

2007-08

135

Schdules to the Balance Sheet and Profit and Loss Account SCHEDULE 18 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.) 33.

The Company is a Non Banking Finance Company (NBFC) and being currently classified as Asset Finance Company (Deposit Taking). In terms of Reserve Bank of India (RBI) Circular DNBS.PD.CC.No.168/03.02.089/2009-10 dated 12th February, 2010, the Company has approached RBI for change in classification as Infrastructure Finance Company (IFC) based on the asset pattern for the year ended 31st March, 2009. However the Company has been advised by RBI to convert into non deposit taking NBFC in order to qualify for classification as IFC in terms of the captioned circular. Accordingly, the Company has complied with the steps advised by RBI and has requested RBI for change in classification as Infrastructure Finance Company. As a result, the Company has decided that it would not accept any further public deposits or renew the maturing deposits in any manner w.e.f. 20th April, 2010.

34.

The Board of Directors of the Company at its meeting held on 28th January, 2010 has, based on the recommendation of the Committee of Independent Directors, approved amalgamation of Quippo Infrastructure Equipment Limited (Quippo) into and with the Company in terms of a Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956. The Appointed Date of the amalgamation shall be 1st April, 2010.

35.

Previous year figures have been regrouped / rearranged, wherever considered necessary.

Signatories to Schedules 1 to 18.

For Deloitte Haskins & Sells

On behalf of the Board of Directors

Chartered Accountants (Regn. No. 302009E) Abhijit Bandyopadhyay Partner M. No. 054785 Place : Kolkata Date

136

: 11th May, 2010

Hemant Kanoria

Salil K. Gupta

Sandeep Lakhotia

Chairman & Managing Director

Chief Mentor & Director

Company Secretary

Annual Report 2009-10

ANNEXURE I - NOTES TO THE FINANCIAL STATEMENTS Stock for Trade as at 31st March, 2010 Equity Shares: Trade

Face Value

Quantity

(Rs.)

Cost

(Nos.)

Value

(Rs. in Lakh)

Bala Techno Synthetics Ltd.

10

5000

1

0

Hotline Glass Ltd.

10

110609

12

0

Kamala Tea Co. Ltd.

10

25000

11

31

Shanghi Polyster Ltd.

10

2000

0*

0#

L.D.Textile Industries Ltd.

10

42000

0*

0#

Shentracon Chemicals Ltd.

10

99400

0*

0#

India Lead Ltd.

10

418668

0*

0#

Mega Marketshare Resources Ltd.

10

6000

0*

0#

PAAM Pharmaceuticals (Delhi) Ltd.

10

1210

0*

0#

Standard Chrome Limited

10

300

0*

0#

Kanel Oil & Export Ltd.

10

3100

0*

0#

Kesoram Textiles Ltd.

10

20

0*

0#

NEPC Agro Foods Ltd.

10

1333

0*

0#

24 Less: Provision for diminution

13

Total

11

* Book value Re.1; # Valued at Re.1 Equity Shares purchased and/or sold during the year Face Value Equity Shares: Trade

Purchase

Sale/Redemption

Quantity

Cost

Quantity

Cost

(Nos.)

(Rs. in Lakh)

(Nos.)

(Rs. in Lakh)

Shriram Asset Management Company Ltd.

10

-

-

15000

2

Dwarikesh Sugar Mills Ltd

10

-

-

25,000

23

Bonds / Debentures / Government Securities purchased and sold during the year Purchase Bonds / Debentures / Government Securities : Trade

Face Value

Sale/Redemption Cost

Face Value

(Rs. in Lakh) (Rs. in Lakh)

Cost

(Rs. in Lakh) (Rs. in Lakh)

0% Infrastructure Development Finance Corporation, 2011

5,500

5,132

5,500

5,132

0% National Bank For Agriculture & Rural Development, 2017

5,987

7,726

5,987

7,726

0% National Bank For Agriculture & Rural Development, 2018

3,696

4,493

3,696

4,493

0% National Bank For Agriculture & Rural Development, 2019

12,734

14,246

12,734

14,246

0% National Housing Bank, 2018

12,664

13,748

12,664

13,748

0% National Housing Bank, 2019

4,592

5,002

4,592

5,002

10.25% Tech Mahindra Ltd, 2013

1,000

1,038

1,000

1,038

10.40% Tata Steel Limited, 2019

1,100

1,103

1,100

1,103

130

152

130

152

10.85% Cholamandalam DBS Finance Ltd, 2013

30

30

30

30

11.25% Power Finance Corporation, 2018

40

46

40

46

11.75% Jaiprakash Associates Ltd, 2014

2,000

2,035

2,000

2,035

11.75% Jaiprakash Associates Ltd, 2015

450

457

450

457

2,000

2,111

2,000

2,111

3

3

3

3

10.70% Indian Railway Finance Corporation Ltd, 2023

12.50% Deccan Chronicle Holdings Ltd, 2011 6% Industrial Development Bank Of India,2011

137

ANNEXURE I - NOTES TO THE FINANCIAL STATEMENTS Bonds / Debentures / Government Securities purchased and sold during the year (Contd.) Purchase Bonds / Debentures / Government Securities : Trade

Face Value

Sale/Redemption Cost

Face Value

(Rs. in Lakh) (Rs. in Lakh) 6.75% Industrial Credit And Investment Corporation Of India Limited, 2010 6.85% Indian Infrastructure Finance Company Ltd, 2014 7.05% National Textile Corporation Limited, 2010 7.40% Industrial Development Bank Of India, 2010 7.50% Industrial Credit And Investment Corporation Of India Limited, 2015 8.00% Industrial Development Bank Of India, 2013 8.45% Indian Railway Finance Corporation Ltd, 2018 8.49% Power Finance Corporation Ltd, 2011

(Rs. in Lakh) (Rs. in Lakh)

2

2

2

2

1,700

1,707

1,700

1,707

10

10

10

10

2

2

2

2

10

9

10

9

5

5

5

5

500

494

500

494

20

20

20

20

8.50% Nuclear Power Corporation Of India Ltd, 2019

500

502

500

502

8.55% Indian Railway Finance Corporation Ltd, 2019

2,000

2,002

2,000

2,002

130

130

130

130

8.65% Rural Electrification Corporation Ltd, 2019

80

80

80

80

8.70% Power Finance Corporation Ltd, 2020

50

50

50

50

500

505

500

505

50

50

50

50

8.58% Allahabad Bank, 2024

8.70% PNB Housing Finance Ltd, 2016 8.80 % Central Bank Of India, 2024 8.80% Powergrid Corporation Ltd, 2020

1,000

998

1,000

998

8.80% Rural Electrification Corporation Ltd, 2019

1,000

1,003

1,000

1,003

8.80% Steel Authority Of India Ltd, 2019

5,000

5,005

5,000

5,005

8.81% Tamil Nadu Electricity Board, 2019

1,900

1,911

1,900

1,911

8.85% Industrial Development Bank Of India, 2016

330

334

330

334

8.90% Industrial Development Bank Of India, 2024

100

101

100

101

8.95% Bank Of Maharashtra, 2024

100

100

100

100

8.95% Industrial Development Bank Of India, 2024

100

101

100

101

9.00% Industrial Development Bank Of India, 2012

8

8

8

8

9.00% Industrial Development Bank Of India, 2013

3

3

3

3

9.00% Industrial Development Bank Of India, 2024

260

262

260

262

1,000

1,009

1,000

1,009

9.00% L&T Infrastructure Finance Co Ltd, 2012 9.10% Bank Of Maharashtra, 2021

100

101

100

101

9.15% Bank Of Baroda ( Perpetual), 2019

1,000

1,001

1,000

1,001

9.20% Housing Development Finance Corporation Ltd, 2018

1,000

1,016

1,000

1,016

9.25% IDBI Bank Ltd, 2014

2,500

2,567

2,500

2,567

5

5

5

5

500

506

500

506

10

10

10

10

9.25% Power Finance Corporation Ltd, 2012 9.40% Syndicate Bank( Perpetual), 2019 9.48% Citi Finance Ltd, 2013 9.50% Housing Development Finance Corporation Ltd, 2017

1,000

1,029

1,000

1,029

9.50% Tourism Finance Corporation Of India Ltd, 2019

100

103

100

103

9.50%, Axis Bank Ltd, 2022

500

504

500

504

1,000

1,016

1,000

1,016

9.60% Reliance Capital Ltd, 2012 9.75% ICICI Home Finance Company Ltd , 2019

1,000

1,023

1,000

1,023

9.75% LIC Housing Finance Ltd, 2017

1,000

1,046

1,000

1,046

9.85% Mahindra & Mahindra Financial Services Ltd, 2019

2,500

2,484

2,500

2,484

9.90% Housing Development Finance Corporation Ltd, 2018

1,000

1,053

1,000

1,053

Tata Steel Ltd (NSE Mibor +2.5% ), 2011

2,000

1,965

2,000

1,965

6

6

6

6

500

559

500

559

10.25% Government Of India, 2012 10.85% HDFC Bank Ltd, 2023

138

Cost

Annual Report 2009-10

ANNEXURE I - NOTES TO THE FINANCIAL STATEMENTS Bonds / Debentures / Government Securities purchased and sold during the year (Contd.) Purchase

Sale/Redemption

Bonds / Debentures / Government Securities : Trade

Face Value

Cost

Face Value

10.90 % Andhra Pradesh Power Finance Corporation Ltd, 2013

(Rs. in Lakh) (Rs. in Lakh) 10 10

Cost

(Rs. in Lakh) (Rs. in Lakh) 10 10

11.30% Government Of India, 2010

12

13

12

13

11.50 % Maharashtra State Financial Corporation, 2011

10

10

10

10

11.50% Sardar Sarovar Nagar Nigam Ltd, 2012

30

31

30

31

12.32% Government Of India, 2011

3

3

3

3

12.40% Government Of India, 2013

17

20

17

20

12.50% Andhra Pradesh Power Finance Corporation Ltd, 2013

5

5

5

5

13.50%Maharashtra State Road Development Corporation, 2016

7

8

7

8

6.17% Government Of India, 2023

50

45

50

45

6.25% Government Of India, 2018

400

376

400

376

17

16

17

16

6.40% State Development Loan, Tamil Nadu, 2013 6.80% State Development Loan, Karnataka, 2012

4

4

4

4

7.36% State Development Loan, Andhra Pradesh, 2014

4

4

4

4

7.37% Government Of India, 2014

2

2

2

2

7.39% State Development Loan, Andhra Pradesh, 2015

5

5

5

5

7.40% Government Of India, 2035

100

93

100

93

7.49% Government Of India, 2017

6

6

6

6

7.50% Government Of India, 2034

180

166

180

166

7.77% State Development Loan, Karnataka, 2015

2

2

2

2

7.77% State Development Loan, Andhra Pradesh, 2015

6

6

6

6

7.77% State Development Loan, Kerala, 2015

6

6

6

6

7.80% State Development Loan, Andhra Pradesh, 2012

2

2

2

2

8.00% State Development Loan, Karnataka, 2012

7

7

7

7

8.00% Tamil Nadu Electricity Board, 2011

11

11

11

11

8.00% Oil Bond, 2026

75

73

75

73

4

4

4

4

1,000

996

1,000

996

8.20% Indian Railway Finance Corporation Ltd, 2024

600

594

600

594

8.20% Indian Railway Finance Corporation Ltd, 2020

1,000

994

1,000

994

8.20% Oil Bond, 2024

130

129

130

129

8.24% Government Of India (Oil Bond), 2027

188

191

188

191

8.24% Government Of India, 2027

100

99

100

99

8.28% Government Of India, 2032

330

328

330

328

8.07% Government Of India, 2017 8.20% Indian Railway Finance Corporation Ltd, 2019

8.30% Fertilizer Bond, 2023

39

40

39

40

8.32% State Development Loan, Uttar Pradesh, 2019

20

20

20

20

8.33% State Development Loan, Gujarat, 2020

77

78

77

78

8.40% Government Of India (Oil Bond), 2025

55

57

55

57

8.42% State Development Loan, West Bengal, 2019

45

45

45

45

8.44% State Development Loan, Uttar Pradesh, 2019

50

50

50

50

8.45% Andhra Pradesh State Development Loan, 2018

25

25

25

25

8.49% State Development Loan, Bihar, 2019

50

51

50

51

240

242

240

242

8.90% State Bank Of India, 2023 9.40% Government Of India, 2012

5

5

5

5

9.40% State Development Loan, Andhra Pradesh, 2018

30

32

30

32

9.85% Government Of India, 2015

10

11

10

11

139

ANNEXURE I - NOTES TO THE FINANCIAL STATEMENTS Mutual Funds units purchased and redeemed during the year Purchase Mutual Fund Units : Trade

Units

Sale/Redemption Cost

Units

(Rs. in Lakh) NLPIDD Canara Robeco Treasury Advantage Institutional Daily Dividend Fund DWS Ultra Short Term Fund - Institutional Daily Dividend HDFC Cash Management Fund- Treasury Advantage Plan-Wholesale-Daily Dividend-Option Reinvest

140

Cost (Rs. in Lakh)

8,060,643

1,000

8,060,643

1,000

184,689,493

18,502

184,689,493

18,502

19,949,125

2,001

19,949,125

2,001

HSBC Ultra Short Term Bond Fund- Institutional - Daily Dividend

9,989,883

1,000

9,989,883

1,000

ICICI Prudential Flexible Income Plan Premium -Daily Dividend

9,458,639

1,000

9,458,639

1,000

Kotak Flexi Debt Scheme Institutional-Daily Dividend

9,953,865

1,000

9,953,865

1,000

LIC MF Liquid Fund-Dividend Plan

9,110,165

1,000

9,110,165

1,000

Principal Ultra Short Term Fund --Dividend Reinvestment Daily

9,982,054

1,000

9,982,054

1,000

Principal Cash Management Fund -Liquid Option-Institutional Premium Plan-Dividend Reinvestment Daily

20,003,477

2,000

20,003,477

2,000

Reliance Liquidity Fund - Daily Dividend Reinvestment Option

169,963,204

17,002

169,963,204

17,002

Reliance money manager fund - Institutional Option -Daily Dividend Plan

1,748,798

17,508

1,748,798

17,508

SBI Magnum Insta Cash Fund-Daily Dividend Option

5,971,703

1,000

5,971,703

1,000

Annual Report 2009-10

ANNEXURE II - NOTES TO THE FINANCIAL STATEMENTS Disclosure of details as required in terms of paragraph 13 of Non Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007

(Rupees in Lakh) Particulars Liabilities Side: (1)

Amount Outstanding

Amount Overdue

Loans and advances availed by the non-banking financial company inclusive of interest accrued thereon but not paid (a) Secured Debentures /Bonds Secured Unsecured (Other than falling within the meaning of public deposit) (b) Deferred Credits (c) Term Loans (d) Inter-corporate loans and borrowing (e) Commercial Papers (f)

Public Deposits (Refer Note 1)

(g) Other Loans (Working capital facility) (2)

-

-

58,039

-

-

-

207,773

-

150

-

12,500

-

541

52

76,633

-

-

-

Break up of (1)(f) above (Outstanding Public Deposits inclusive of interest accrued thereon but not paid): (a) In the form of Unsecured Debentures (b) In the form of partly secured Debentures i.e. Debentures where there is a shortfall in the value of security (c) Other public deposits (Refer Note 1)

-

-

541

52

Assets Side : (3)

Amount Outstanding

Break-up of Loans and Advances including bills receivables [other than those included in (4) below]: (a) Secured

177,495

(b) Unsecured (4)

Break-up of Leased Assets and Stock on Hire and other assets counting towards AFC activities (a) Financial assets (b) Assets and advance for Operating Lease (c) Repossessed Assets

(5)

42,197

147,885 -

Break up of Investments Current Investments (1)

(2)

Quoted: (i)

Shares: Equity

(ii)

Debentures and bonds

0.11 -

(iii)

Units of mutual funds

-

(iv)

Government Securities

-

(v)

Others

-

Unquoted: (i)

Shares: Equity

(ii)

Debentures and bonds

11 -

(iii)

Units of mutual funds

-

(iv)

Government Securities

-

(v)

Others

-

141

ANNEXURE II - NOTES TO THE FINANCIAL STATEMENTS Disclosure of details as required in terms of paragraph 13 of Non Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007

Assets Side : Long term investments (1) Quoted: (i) Shares: Equity (ii) Debentures and bonds (iii) Units of mutual funds (iv) Government Securities (v) Others (2) Unquoted: (i) Shares: Equity (ii) Debentures, bonds / units (iii) Units of mutual funds (iv) Government Securities (v) Others (Investment in Funds) (6)

Borrower group-wise classification of assets financed as in (3) and (4) above: Category Amount net of provisions Secured Unsecured 1. Related Parties (a) Subsidiaries 5,710 3,901 (b) Companies in the same group (c) Other related parties 96 2. Other than related parties 319,670 38,200 Total 325,380 42,197

Amount Outstanding

739 0.24 239 23,823 0.15 45,931

Total 9,611 96 357,870 367,577

(7)

Investor group wise classification of all investments (current and long term) in shares and securities (both quoted and unquoted): Category Market Value / Break Book Value (net of up or fair value or NAV provisions) 1. Related Parties (a) Subsidiaries 4,749 4,749 (b) Companies in the same group (c) Other related parties 2,500 2,500 2. Other than related parties 64,408 63,495 Total 71,657 70,744

(8)

Other Information: Particulars i. Gross Non-Performing Assets (a) Related Parties (b) Other than related Parties ii. Net Non-Performing Assets (a) Related Parties (b) Other than related Parties iii. Assets acquired in satisfaction of debt

Amount

Note-1: As defined in Paragraph 2(1) (xii) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.

142

-

Annual Report 2009-10

BALANCE SHEET ABSTRACT INFORMATION PURSUANT TO PART IV OF SCHEDULE VI TO COMPANIES ACT, 1956 (AS AMENDED) Balance Sheet Abstract and Company's General Business Profile I.

Registration Details Registration No

L29219WB1985PLC055352

State Code

21

Nil

Right Issue

Nil

Bonus Issue

Nil

Private Placement

Nil

Preferential Allotment

Nil

Balance Sheet Date II.

31st March 2010

Capital Raised during the year (Amount in Rs.Thousands) Public Issue

III.

Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities

44,448,071

Total Assets

44,448,071

Source of Funds Paid up Capital

1,162,962

Equity Warrants

-

Secured Loans

28,407,199

Reserves & Surplus

6,737,905

Unsecured Loans

7,025,643

Deferred Tax

344,000

Application of Funds Net Fixed Assets

831,061

Net Current Assets

35,773,387

Accumulated Losses IV.

Investments

7,073,261

Misc. Expenditure

-

-

Performance of the Company (Amount in Rs. Thousand) Turnover

4,701,324

Total Expenditure

3,219,983

Profit Before Tax [+]

1,481,341

Profit After Tax [+]

1,114,977

(+ for Profit, - for Loss) Earnings Per Share (in Rs.)

V.

Dividend Per Share

Basic

9.60

Dilutive

9.60

Dividend Rate(%)

Re.1.20 12%

Generic names of Three Principal Products / Services of Company (as per monetary terms) Item Code No (ITC Code) Products Description

Not Applicable Financing Activity

Item code No. (ITC Code)

-

Products Description

-

Item Code No. (ITC Code)

-

Products Description

-

On behalf of the Board of Directors

Hemant Kanoria

Salil K. Gupta

Sandeep Lakhotia

Chairman & Managing Director

Chief Mentor & Director

Company Secretary

Place : Kolkata Date : 11th May, 2010

143

144

Extent of holding

b.

for the Subsidiary's financial year ended March 31, 2010

Rs. Nil

Rs. 97,867,277

Rs. 725,319

100%

fully paid up

ii for the previous financial years of the Subsidiary since it became the Holding Company's Subsidiary

# There is no system of issuance of distinctive shares in the country of registration.

Date : 11th May, 2010

Srei Capital Markets Ltd.

Srei Forex Ltd.

Srei Infrastructure Advisors Ltd.

5,050,000 Equity Shares

500,000 Equity Shares

500,000 Equity Shares

Rs. 644,191

100%

fully paid up

Rs. (13,326)

100%

fully paid up

Rs. Nil

Rs. Nil

Controlla Electrotech Private Ltd.

Srei Sahaj e - Village Ltd.

Bengal Srei Infrastructure Development Ltd.

Hyderabad Information Technology Venture Enterprises Ltd.

100%

fully paid up

Cyberabad Srei Infocomm IIS International Trustee Services Ltd. Infrastructure Company Services GmbH Private Ltd.

Rs. Nil

Rs. Nil

Rs. Nil

Rs. Nil

Rs. Nil

Rs. Nil

Rs. 5,906,105

Chief Mentor & Director

Rs. Nil

Rs. Nil

Rs. 1,809,493

Chairman & Managing Director

Rs. Nil

Rs. Nil

Rs. 615,567 Rs. (4,021,206) Rs. 13,552,617

Rs. 464,331

Rs. Nil

Rs. Nil

Rs. 12,780

Rs. 12,435

Infrastructure

330,750

Euro 1,065 RUB 3,282,264 @

Services Gmbh

Infrastructure

IIS International

92.54% 63.49% Held by

fully paid up

1000/- each

Euro# Shares of RUB

6,370,000

Dec 31, 2009

ZAO Srei Leasing

N.A

N.A

N.A

N.A

Company Secretary

Sandeep Lakhotia

On behalf of the Board of Directors

Rs. Nil

Rs. Nil

Rs. (174,312) Euro (237,336) RUB 6,119,159

Rs. 8,322

& its Nominees

Capital Ltd.

Srei

100% Held by

& its Nominees

Capital Ltd.

Infrastructure

Srei Venture

51% Held by

fully paid up

Rs.10/- each

Shares of

50,000 Equity

Advisors Ltd.

Srei Venture

fully paid up

Rs.10/- each

Shares of

50,000 Equity

Advisors Ltd.

51% Held by

Srei

fully paid up

Rs.10/- each

Shares of

51% Held by

fully paid up

Rs.10/- each

Rs. 7,966,332 Rs. (1,236,489)

51%

fully paid up

Shares of

50,000 Equity 250,000 Equity

Salil K. Gupta

Rs. Nil

Rs. Nil

1,000,000 Equity Shares

Rs.10/- each of Rs.10/- each

Rs. 27,380 Rs. (4,049,316)

100%

fully paid up

Shares of

35,305 Equity

Hemant Kanoria

Rs. Nil

Rs. Nil

Rs. 609,989 Rs. 12,025,532 Rs. (1,360,895)

Rs. 73,938

100%

fully paid up

Rs.10/- each of Rs.10/- each of Rs.10/- each of Rs.10/- each

Shares of

of Rs.10/- each

50,000 Equity

250,000

Equity Shares

Rs. Nil

Place : Kolkata

Global Investment Trust Ltd.

March 31, 2010 March 31, 2010 March 31, 2010 March 31, 2010 March 31, 2010 March 31, 2010 March 31, 2010 March 31, 2010 March 31, 2010 March 31, 2010 March 31, 2010 March 31, 2010

Srei Venture Capital Ltd.

i for the Subsidiary's financial year ended March 31, 2010

Dealt with in the Account of SreI Infrastructure Finance Limited for the year ended March 31, 2010

ii for the previous financial years of the Subsidiary since it became the Holding Company's Subsidiary

i

Not dealt with in the Account of Srei Infrastructure Finance Limited for the year ended March 31, 2010

@ For the financial year ended 31st December, 2009

b.

a.

Net Aggregate amount of Profit/(Loss) of the Subsidiary Company so far as it concerns the members of Srei Infrastructure Finance Limited.

Number and Face Value

a.

Shares of the Subsidiary Company

Accounting year of the Subsidiary Company

Name of the Subsidiary Company

Statement Pursuant to Section 212 of The Companies Act, 1956 Relating to Subsidiary Companies

Annual Report 2009-10

Consolidated Financial Statements Auditors’ Report To The Board Of Directors Of Srei Infrastructure Finance Limited 1.

2.

We have audited the attached Consolidated Balance Sheet of SREI INFRASTRUCTURE FINANCE LIMITED (“the Company”), its subsidiaries (including its subsidiaries and joint venture) and jointly controlled entities (including its subsidiary) (the Company, its subsidiaries and jointly controlled entities constitute “the Group”) as at 31st March, 2010, the Consolidated Profit and Loss Account and the Consolidated Cash Flow Statement of the Group for the year ended on that date, both annexed thereto. The Consolidated Financial Statements include investments in the jointly controlled entities accounted in accordance with Accounting Standard 27 (Financial Reporting of Interests in Joint Ventures) as notified under the Companies (Accounting Standards) Rules, 2006. These financial statements are the responsibility of the Company’s Management and have been prepared on the basis of the separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audit.

case of a foreign sub subsidiary where reliance has also been placed on the management accounts for the 3 month period ended 31st March 2010 and 31st March 2009.

b.

Without qualifying our opinion we draw attention to the note no. 8 to Schedule 19(II) regarding certain long term project loans of the Joint Venture Company. We have not been provided appropriate audit evidence to justify the recoverability of these loans.

4.

We report that the Consolidated Financial Statements have been prepared by the Company in accordance with the requirements of Accounting Standard 21 (Consolidated Financial Statements) and Accounting Standard 27 (Financial Reporting of Interests in Joint Ventures) as notified under the Companies (Accounting Standards) Rules, 2006.

5.

Based on our audit and on consideration of the separate audit reports on individual financial statements of the Company, its aforesaid subsidiaries (including its subidiaries and joint venture) and joint ventures (including its subsidiary) and to the best of our information and according to the explanations given to us the Consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India:

We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. a. We did not audit the financial statements of certain subsidiaries (including their subsidiaries and joint venture), whose financial statements reflect total assets of Rs. 46,073 lakh as at 31st March, 2010, total revenues of Rs. 14,057 lakh and net cash inflows amounting to Rs. 1,451 lakh for the year ended on that date as considered in the Consolidated Financial Statements. We have also not reviewed the financial statements of a subsidiary of the joint venture of the Company whose financial statements reflect total assets of Rs. 304 lakh, total revenues of Rs. 194 lakh and net cash outflows amounting to Rs. 22 lakh for the year then ended. These financial statements have been audited by other auditors whose reports have been furnished to us and our opinion in so far as it relates to the amounts included in respect of these subsidiaries (including their subsidiaries and joint venture) and the subsidiary of the joint ventures is based solely on the reports of the other auditors except for in

(i) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at 31st March, 2010; (ii) in the case of the Consolidated Profit and Loss Account, of the profit of the Group for the year ended on that date and (iii) in the case of the Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended on that date.

For Deloitte Haskins & Sells Chartered Accountants (Registration No.302009E)

Abhijit Bandyopadhyay Place : Kolkata Date

: 11th May, 2010

Partner Membership No. 054785

145

Consolidated Balance Sheet as at 31st March, 2010 (Rupees in Lakh) Schedule

2010

2009

SOURCES OF FUNDS Shareholders' Funds Share Capital

1

11,629

11,629

-

1,780

Equity Warrants Issued and Subscribed Reserves and Surplus

2

117,338

128,967

101,529

2,361

Minority Interest

114,938 2,211

Loan Funds Secured

3

557,747

Unsecured

4

99,212

375,155 53,074 656,959

Deferred Tax Liability Total

428,229

7,363

2,743

795,650

548,121

APPLICATION OF FUNDS Fixed Assets Gross Block

5

Less: Depreciation

40,130

35,610

8,422

4,223

Net Block Goodwill Deferred Tax Assets 6

Investments

31,708

31,387

622

622

84

22

67,074

44,382

Current Assets, Loans and Advances Inventories

1,007

2,401

Sundry Debtors

7

10,844

6,759

Cash & Bank Balances

8

29,097

48,308

Financial & Other Current Assets

9

314,299

299,623

Loans & Advances

10

361,851

134,363

717,098

491,454 12,884

Less: Current Liabilities and Provisions Liabilities

11

13,977

Provisions

12

7,385

7,122

21,362

20,006

Net Current Assets 13

Miscellaneous Expenditure

695,736

471,448

426

260

795,650

548,121

(To the extent not written off or adjusted) Total Significant Accounting Policies and Notes to Financial Statements as per our report of even date

19

The Schedules referred to above form an integral part of the Balance Sheet. This is the Balance Sheet referred to in our report of even date.

For Deloitte Haskins & Sells

On behalf of the Board of Directors

Chartered Accountants (Regn. No. : 302009E) Abhijit Bandyopadhyay Partner M. No. : 054785 Place : Kolkata Date : 11th May 2010 10 Lakh is equal to 1 Million

146

Hemant Kanoria

Salil K. Gupta

Sandeep Lakhotia

Chairman & Managing Director

Chief Mentor & Director

Company Secretary

Annual Report 2009-10

Consolidated Profit and Loss Account for the year ended 31st March, 2010 (Rupees in Lakh) Schedule INCOME Income from Operations Other Income Total EXPENDITURE Staff Expenses Administrative & Other Expenses Finance Charges Depreciation Miscellaneous Expenditure written off Total PROFIT BEFORE BAD DEBTS AND PROVISIONS Bad Debts/Advances written off Provisions as per the norms of Reserve Bank of India & Foreign Financial Institutions Provision for Premium on Unsecured Subordinated Bonds PROFIT BEFORE TAX Provision for Tax: - Current Tax - MAT Credit Entitlement - Deferred Tax - Fringe Benefits Tax - Income Tax in respect of earlier years PROFIT AFTER TAX BEFORE SHARE OF RESULTS OF ASSOCIATE AND MINORITY INTERESTS Share of loss of Associates PROFIT AFTER TAX BEFORE MINORITY INTERESTS Minority Interest NET PROFIT Minority Interest of Pre Acquisiton (Profit)/ Loss PROFIT AFTER TAX AFTER ADJUSTMENT OF MINORITY INTERESTS Surplus brought forward from previous year PROFIT AVAILABLE FOR APPROPRIATION APPROPRIATIONS Special Reserve (As per Reserve Bank of India Guidelines) Debt Redemption Reserve (Net) General Reserve Proposed Dividend Corporate Dividend Tax on Proposed Dividend Adjustment due to conversion of Subsidiary into Joint Venture Surplus carried to Balance Sheet Total Earnings Per Equity Share (Basic & Diluted) in Rs. (Face Value Rs. 10/- per Share) Significant Accounting Policies and Notes to Financial Statements as per our report of even date

2010

2009

14 15

96,957 259 97,216

84,313 840 85,153

16 17 18

6,259 8,623 53,279 4,328 73 72,562 24,654 2,590

5,383 10,665 52,221 3,658 44 71,971 13,182 87

210 88 2,888 21,766

2,513 88 2,688 10,494

3,437 (2,190) 4,619 220

701 (711) 2,199 46 2

15,680 15,680 94 15,586 15,586 15,775 31,361

8,257 8,257 49 8,208 (4) 8,204 13,353 21,557

3,151 667 300 1,394 231 25,618 31,361 13.42

1,647 2,629 3 1,163 198 142 15,775 21,557 7.07

19

The Schedules referred to above form an integral part of the Profit and Loss Account. This is the Profit and Loss Account referred to in our report of even date. For Deloitte Haskins & Sells Chartered Accountants (Regn. No. : 302009E) Abhijit Bandyopadhyay Partner M. No. : 054785

On behalf of the Board of Directors

Hemant Kanoria Chairman & Managing Director

Salil K. Gupta Chief Mentor & Director

Sandeep Lakhotia Company Secretary

Place : Kolkata Date : 11th May 2010 10 Lakh is equal to 1 Million

147

Consolidated Cash Flow Statement for the year ended 31st March, 2010 (Rupees in Lakh) A. Cash Flow from Operating Activities1 Net Profit Before Tax Adjustment for : Depreciation Bad Debts/stock for trade written off Provision for Non- Performing Assets & Doubtful debts Provision for Premium on Unsecured Subordinated Bonds Loss on sale of Fixed Assets(net) Profit on sale of Fixed Assets Interest Expenses Income from Trade Investments Miscellaneous Expenditure Written off Liabilities No Longer Required Now Written Back Dividend Income Provision for Diminution in value of Stock for Trade Provision for Dimunition in value of Investments Operating Profit before Working Capital Changes Adjustments for: (Increase) / Decrease in Receivables/Others (Increase) / Decrease in Stock for Trade (Increase) / Decrease in Financial Assets (Decrease) / Increase in Trade Payables Cash Generated from Operations Interest Paid Direct Taxes paid Net Cash (Used in) / Generated from Operating Activities B. Cash Flows from Investing Activities Purchase of Fixed Assets Proceeds from Sale of Fixed Assets (Increase) / Decrease in Investments Income from Trade Investments Dividend Received Net Cash (Used) / Generated in Investing Activities C. Cash Flows from Financing Activities Issue of Equity Capital (including premium) Net Increase in Borrowings Dividend Paid Dividend Tax Net Cash (Used) / Generated in Financing Activities Net Increase / (Decrease) in Cash & Cash Equivalents Cash & Cash Equivalents as on 1st April, 2009 Cash & Cash Equivalents as on 31st March, 2010 Notes: 1 The above Cash Flows from operating activities have been prepared under the Indirect Method as set out in the Accounting Standard 3 (AS 3) 'Cash Flow Statements' notified by the Central Government under Companies (Accounting Standards) Rules, 2006 1 Cash and Cash Equivalent at the end of the year as per Balance Sheet Less: Fixed Deposits under Lien 2

2010

2009

21,766

10,494

4,328 2,590 210 88 13 53,279 (1,185) 73 (4) (145) 7 138 81,158

3,658 87 2,513 88 353 52,221 (2,452) 44 (67) 5 166 67,110

(229,089) 26 (17,374) 4,150 (161,129) (55,683) (2,768) (219,580)

(70,277) 25 163,961 6,382 167,201 (54,661) (963) 111,577

(5,621) 202 (22,968) 1,185 145 (27,057)

5,806 1,604 (12,359) 2,452 67 (2,430)

228,786 (1,162) (198) 227,426 (19,211) 48,308 29,097

37,582 (124,719) (1,396) (237) (88,770) 20,377 27,931 48,308

29,097 17,608 11,489

48,308 14,592 33,716

Previous year’s figures have been regrouped wherever necessary to conform to the current year’s classification.

This is the Cash Flow Statement referred to in our report of even date. For Deloitte Haskins & Sells Chartered Accountants [Regn No. 302009E] Abhijit Bandyopadhyay Partner M. No. 054785 Place : Kolkata Date : 11th May, 2010 10 Lakh is equal to 1 Million

148

On behalf of the Board of Directors

Hemant Kanoria

Salil K. Gupta

Sandeep Lakhotia

Chairman & Managing Director

Chief Mentor & Director

Company Secretary

Annual Report 2009-10

Schedules to the Consolidated Balance Sheet as at 31st March, 2010 (Rupees in Lakh) SCHEDULE 1 - SHARE CAPITAL Authorised 400,000,000 Equity Shares of Rs. 10/- each (Previous year 400,000,000 shares of Rs.10/- each) 30,000,000 Preference Shares of Rs. 100/- each (Previous year 30,000,000 shares of Rs. 100/- each) Issued and Subscribed 116,617,625 Equity Shares of Rs. 10/- each (Previous year 116,617,625 shares of Rs. 10/ each) Paid up 116,144,798 Equity Shares of Rs.10/- each fully paid up (Previous year 116,144,798 shares of Rs. 10/- each) Add : Forfeited Shares SCHEDULE 2 - RESERVES & SURPLUS Capital Reserves As per Last Balance Sheet Add: Addition during the year Share Premium Account As per Last Balance Sheet Add: Addition during the year General Reserve As per Last Balance Sheet Add: Addition during the year Bond/Debt Redemption Reserve As per Last Balance Sheet Add: Addition during the year Special Reserve as per Reserve Bank of India Guidelines As per Last Balance Sheet Add: Addition during the year Foreign currency translation reserve As per Last Balance Sheet Add: Addition during the year Profit & Loss Account As per Last Balance Sheet Add: Addition during the year

2010

2009

40,000

40,000

30,000

30,000

70,000

70,000

11,661

11,661

11,614

11,614

15 11,629

15 11,629

199 1,780

1,979

184 15

199

69,574 -

69,574

31,992 37,582

69,574

1,437 300

1,737

1,434 3

1,437

5,636 667

6,303

3,822 1,814

5,636

9,312 3,151

12,463

7,909 1,403

9,312

(404) 68

(336)

181 (585)

(404)

15,775 9,843

25,618 117,338

13,353 2,422

15,775 101,529

SCHEDULE 3 - SECURED LOANS Debentures

42,729

41,348

242,543

124,687

92,417

86,237

5,590

12,814

Foreign Financial Institutions

46,152

40,107

Working Capital Facilities from Banks

Term Loans: Banks Foreign Banks Domestic Financial Institutions

127,472

68,943

Foreign Guaranteed Local Currency Bonds

375

563

Public Deposits

468

453

1

3

557,747

375,155

Other Secured Loans

10 Lakh is equal to 1 Million

149

10 Lakh is equal to 1 Million

Schedules to the Consolidated Balance Sheet as at 31st March, 2010 (Rupees in Lakh) SCHEDULE 4 - UNSECURED LOANS Debentures Subordinated Debenture/Bonds/Loan Short Term Loans and Advances: Domestic Banks Domestic Financial Institutions Others Other Loans and Advances: Commercial Papers Domestic Banks Foreign Banks Domestic Financial Institutions Foreign Financial Institutions

2010

2009

34,650 44,888

16,368

150

12,500 10,250 1,204

17,750 678 1,096 99,212

3,750 1,220 6,250 1,532 53,074 (Rupees in Lakh)

SCHEDULE 5 - FIXED ASSETS Particulars As of 1st April, 2009

Gross Block Additions Sales / during Adjustments the year during the year

As of 31st March, 2010

As of 1st April, 2009

Depreciation / Amortisation For Sales / As of 31st the year Adjustments March, during 2010 the year

Net Block As of 31st As of 31st March, March, 2010 2009

Assets for Own use: Freehold Land Buildings

235

-

-

235

-

-

2,501

-

17

2,484

34

-

21

-

21

-

1,150

177

37

1,290

115

Leasehold Improvements Furniture & Fixtures Motor Vehicles

-

-

235

235

40

-

74

2,410

2,467

-

-

-

21

-

138

10

243

1,047

1,035

80

7

5

82

11

11

1

21

61

69

Machinery

1,394

198

5

1,587

269

240

1

508

1,079

1,125

Total (A)

5,360

403

64

5,699

429

429

12

846

4,853

4,931

334

153

-

487

57

42

-

99

388

277

4

-

-

4

1

1

-

2

2

3

338

153

-

491

58

43

-

101

390

280

5,698

556

64

6,190

487

472

12

947

5,243

5,211

Intangible Assets Others Software Tenancy Right Total (B) Total (C) (A+B) Assets for Operating Lease: Aeroplanes/Aircraft

3,058

-

-

3,058

297

291

-

588

2,470

2,761

Earthmoving Equipments

3,261

162

94

3,329

556

463

30

989

2,340

2,705

Motor Vehicles

7,869

577

186

8,260

1,713

1,582

87

3,208

5,052

6,156

Plant & Machinery

7,858

1,100

-

8,958

621

838

-

1,459

7,499

7,237

Wind Mills

7,737

-

-

7,737

541

433

-

974

6,763

7,196

129

803

-

932

8

106

-

114

818

121

-

750

-

750

-

102

-

102

648

-

1

22

-

7,435 25,612

26,176

Computers Furnitures and Fixtures Solar Equipments

-

23

-

23

-

1

-

29,912

3,415

280

33,047

3,736

3,816

117

Software

-

893

-

893

-

40

-

40

853

-

Total (E)

-

893

-

893

-

40

-

40

853

31,387

Total (D) Intangible Assets

Total (C+D+E)

35,610

4,864

344

40,130

4,223

4,328

129

8,422 31,708

Previous year

53,024

14,383

31,797

35,610

9,651

3,658

9,086

4,223 31,387

10 Lakh is equal to 1 Million

150

Annual Report 2009-10

Schedules to the Consolidated Balance Sheet as at 31st March, 2010 (Rupees in Lakh) SCHEDULE 6 - INVESTMENTS, FULLY PAID UP In Government, Government guaranteed securities, bonds & units In Other Securities SCHEDULE 7 - SUNDRY DEBTORS Sundry Debtors Operating Lease - Secured, Considered good Debts outstanding for a period exceeding six months Other Debts Sundry Debtors Others - Unsecured, Considered good Debts outstanding for a period exceeding six months Other Debts SCHEDULE 8 - CASH AND BANK BALANCES Cash & Bank Balances Cash in hand With Scheduled Banks - In Unclaimed Dividend Account - In Current Account - In Fixed Deposit Account [includes Rs 17608 Lakh under lien (previous year Rs. 14,592 Lakh)] SCHEDULE 9 - FINANCIAL & OTHER CURRENT ASSETS Interest accrued but not due on investments/Fixed deposits/Loans Stock for Trade Financial Assets SCHEDULE 10 - LOANS & ADVANCES Secured, Considered Good: - Loan - Advance for Operating Lease Unsecured Loan, Considered Good: - Loan Others Advances recoverable in cash or in kind or for value to be received Advance Tax [net of provision for tax Rs.5,325 Lakh (previous year Rs. 2,159 Lakh)] MAT Credit Entitlement Others SCHEDULE 11 - CURRENT LIABILITIES Sundry Creditors for Operating Lease - total outstanding dues of micro,small and medium enterprises - total outstanding dues of creditors other than micro,small and medium enterprises Sundry Creditors - Others - total outstanding dues of micro,small and medium enterprises - total outstanding dues of creditors other than micro,small and medium enterprises Amounts to be credited to Investor Education and Protection Fund* Unpaid dividend Unpaid matured deposits Other liabilities Interest accrued but not due on loans

2010

2009

243 66,831 67,074

243 44,139 44,382

89 342

77 466

5,874 4,539 10,844

1,534 4,682 6,759

53

58

36 9,909 19,099 29,097

35 9,104 39,111 48,308

161 11 314,127 314,299

236 44 299,343 299,623

171,785 140,030

94,886 3,594

14,172

1,400

913 2,727 32,224 361,851

1,594 792 32,097 134,363

54

811

1,633

3,077

36 52 8,384 3,818 13,977

35 62 2,835 6,064 12,884

* There is no amount overdue as at Balance Sheet date

10 Lakh is equal to 1 Million

151

Schedules to the Consolidated Balance Sheet as at 31st March, 2010 (Rupees in Lakh) SCHEDULE 12 - PROVISIONS Provision for Fringe Benefits Tax Proposed Dividend Provision for Corporate Dividend Tax Provision as per the norms of Reserve Bank of India & Foreign Financial Institution Provision for Employee Benefits Provision for Premium on Unsecured Subordinated Bonds SCHEDULE 13 - MISCELLANEOUS EXPENDITURE (To the extent not written off or Adjusted) Opening Balance Share issue expenses Bonds and Debentures issue expenses Share issue expenses (GDR) Add: Addition during the year Bonds and Debentures issue expenses Less: Adjustment Share issue expenses Bonds and Debentures issue expenses Share issue expenses (GDR) Less: Amounts written off during the year Share issue expenses Bonds and Debentures issue expenses Share issue expenses (GDR) Closing Balance Share issue expenses Bonds and Debentures issue expenses Share issue expenses (GDR)

2010

2009

7 1,394 231

54 1,163 198

4,992 513 248 7,385

4,903 486 318 7,122

39 51 170 260

41 128 398 567

239 499

567

-

64 199 263

44 29 73

2 13 29 44

39 246 141 426

39 51 170 260

Schedules to the Consolidated Profit and Loss Account for the year ended 31st March, 2010 SCHEDULE 14 - INCOME FROM OPERATIONS Income from Financial Assets & Loans Income from Operating Lease Assignment Receipt Income from I T Infrastructure and CSC Services Fee Based Income Professional Fees Income from Trade Investments - Long term Interest from Trade Investments - Long term - Stock for Trade Profit/Loss on sale of Investments(net) - Long term - Stock for Trade Interest received from Govt. Securities/Banks Dividend from Trade Investments Income from Sub-letting 10 Lakh is equal to 1 Million

152

(Rupees in Lakh) 2010

2009

78,714 4,352 3,436 4,852 1,170

55,044 5,376 8,900 1,847 7,406 1,252

1,185

2,452

121

5 79

1,123 42 1,435 145 382 96,957

94 393 1,166 67 232 84,313

Annual Report 2009-10

Schedules to the Consolidated Profit and Loss Account for the year ended 31st March, 2010 SCHEDULE 15 - OTHER INCOME Profit on sale of Fixed Assets Liabilities No Longer Required Written Back Others SCHEDULE 16 - STAFF EXPENSES Salaries, Allowances, Commission & Bonus Contribution to Provident and Other Funds Staff Welfare Expenses SCHEDULE 17 - ADMINISTRATIVE & OTHER EXPENSES Communication Expenses Legal & Professional Fees Electricity Charges Rent Rates and Taxes Brokerage and Service Charges Auditors' Remuneration Repairs Building Machinery Others Travelling and Conveyance Directors' Fees Insurance Printing and Stationery Advertisement and Subscription Provision for Diminution in value of Stock for Trade Provision for Diminution in value of Investments Loss on sale of Fixed Assets(net) Miscellaneous Expenses SCHEDULE 18 - FINANCE CHARGES Interest on Debentures Interest on Other Fixed Loans: Term Loans from Domestic Banks/Financial Institutions Term Loans from Foreign Banks/Financial Institutions Public Deposits Bonds Interest on Working Capital Facilities Interest Others Other Financial Charges

(Rupees in Lakh) 2010

2009

4 255 259

353 487 840

5,815 355 89 6,259

5,044 273 66 5,383

749 3,496 181 763 274 150 70 72 176 346 1,341 16 52 139 271 7 138 13 369 8,623

217 6,404 95 582 286 157 57 155 296 1,288 15 54 129 370 5 166 389 10,665

7,729

6,624

21,767 12,262 43 1,746 5,667 102 3,963 53,279

13,204 22,614 48 1,724 6,262 164 1,581 52,221

10 Lakh is equal to 1 Million

153

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS I-A

Principal Accounting Policies

1.

Basis of Preparation

1.1

The Consolidated financial statements are prepared in accordance with the historical cost convention and the accrual basis of accounting.

1.2

These are presented in accordance with Generally Accepted Accounting Principles in India, provisions of the Companies Act, 1956, Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006 and the guidelines issued by the Reserve Bank of India, wherever applicable.

1.3

The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities including Contingent Liabilities as of the date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2.

Principles of Consolidation The consolidated financial statements have been prepared in accordance with Accounting Standard 21 (AS-21) “Consolidated Financial Statements”, Accounting Standard 23 (AS-23) “Accounting for Investments in Associates in Consolidated Financial Statements” and Accounting Standard 27 (AS-27) “Financial Reporting of Interests in Joint Ventures” notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. The consolidated financial statements have been prepared on the following basis: a) The financial statements of Srei Infrastructure Finance Limited (the Holding Company) and its subsidiary companies have been combined on line by line basis by adding together the book value of like items of Assets, Liabilities, Income and Expenses after fully eliminating intra-group balances and intra-group transactions resulting in unrealized profits or losses. b) In case of investments in subsidiaries where the holdings are less than100%, minority interest in the net assets of consolidated subsidiaries consist of: i)

The amount of equity attributable to minorities at the date on which Investment in the subsidiary is made.

ii) The minorities’ share of movements in equity since the date the holding subsidiary relationship came into existence. iii) Minority interest’s share of net profit for the year of consolidated subsidiaries as identified and adjusted against profit after tax of the group. c) Foreign subsidiaries representing non integral foreign operations are translated for the purpose of consolidation as follows (in accordance with AS – 11): i)

The assets and liabilities, both monetary and non-monetary are translated at closing rate.

ii) Income and expense items are translated at average rate for the period. iii) All resulting exchange differences are accumulated in foreign currency translation reserve until disposal of net investment. d) Uniform accounting policies for like transactions and other events in similar circumstances have been adopted and presented to the extent possible, in the same manner as the Holding Company’s separate financial statements. e) The excess of cost of the Holding Company of its investment in the subsidiary over the Holding Company’s portion of equity of the subsidiary as at the date of investment is recognized in the financial statements as Goodwill. It is tested for impairment on a periodic basis and written-off if found impaired. f)

The excess of Holding Company’s portion of equity of the Subsidiary over cost as at the date of investment is treated as Capital Reserve.

g) Investment in associate is accounted using the equity method and disclosed separately in the Consolidated Balance Sheet. h) Interests in Joint Ventures have been accounted by using the proportionate consolidation method as per Accounting Standard 27 – “Financial Reporting of Interests in Joint Ventures” notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. I-B

Significant Accounting Policies

1.1

Revenue Recognition Income from Operations is recognized in the Profit & Loss Account on accrual basis as stated herein except in the case of nonperforming assets where it is recognized, upon realisation, as per the Prudential Norms of Reserve Bank of India, applicable to Non-Banking Financial Companies.

1.2

Income from Financial Assets & Loans It is recognized based on the internal rate of return to provide a constant periodic rate of return on the net investment outstanding over the period of the contract or as per the terms of the contract.

154

Annual Report 2009-10

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.) 1.3

Income from Operating Lease It is recognized as rentals, as accrued over the period of lease, net of value added tax, if applicable.

1.4

Securitizations, Assignments and Co-Branded Agreements Income arising from securitization and assignment of Financial Assets & Loans is amortized over the life of the contract. In case of co-branded arrangements income is accounted on accrual basis over the life of the contract as provided under respective arrangements.These are included in Income from Financial Assets & Loans under Income from Operations.

1.5

Fee Based Income Fee for advisory services are accounted based on stage of completion of assignments, when there is reasonable certainty of its ultimate realization/ collection.

1.6

Income from IT Infrastructure Income from IT infrastructure has been disclosed net of associated costs. The associated costs comprise of movement in inventory and other direct expenses.

1.7

Other Operating Income Dividend Income is accounted when the right to receive the payment is established. Income from investment in Funds is recognized on cash basis as per the Prudential Norms of the Reserve Bank of India. All other operating income is accounted for on accrual basis.

1.8

Government support Government support is recognised on the basis of claims raised arising out of reasonable assurance that the Company will comply with the conditions attached with them and there is reasonable certainty of collection of the grants.

1.9

Other Income All other income is accounted for on accrual basis.

2.

Fixed Assets and Depreciation/Amortization

2.1

Fixed Assets include assets given under Operating Lease. Fixed Assets are stated at Cost less accumulated depreciation. Cost includes taxes, duties, freight and incidental expenses related to the acquisition and installation of the assets.

2.2

Intangible Assets expected to provide future enduring economic benefits are stated at cost less amortization. Cost comprises purchase price and directly attributable expenditure in making the asset ready for its intended use.

2.3

Depreciation is provided on straight line method applying the rates prescribed in Schedule XIV to the Companies Act, 1956 or based on estimated useful life, whichever is higher. The details of estimated useful life for each category of assets are as under:

I.

II.

Asset category Assets for Own Use i) Buildings ii) Furniture & Fixture iii) Motor Vehicles iv) Computers v) General Plant & Machinery vi) Intangible Assets Assets for Operating Lease vii) Aeroplanes/ Aircrafts viii) Ships ix) Earthmoving Equipments x) Motor Vehicles xi) Plant & Machinery xii) Wind mills xiii) Computers xiv) Furniture & Fixture xv) Solar Equipments xvi) Oil Rig xvii) Gas Gensets xviii) Intangible Assets

Estimated Useful Life 61 years 16 years 11 years 6 years 21 years 6 years 9 - 18 years 10 years 3 – 9 years 3 – 6 years 21 years 19 years 3 – 6 years 3 – 5 years 5 years 9 years 10 years 3 – 6 years

However, Fixed Assets costing up to Rs.5,000/- are depreciated fully over a period of 12 months from the date of purchase.

155

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.) 2.4

Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date of sale.

2.5

Lease-hold assets are amortized over the period of the Lease.

3.

Impairment of Fixed Assets Wherever events or changes in circumstances indicate that the carrying amount of fixed assets may be impaired, the Company subjects such assets to a test of recoverability, based on discounted cash flows expected from use or disposal thereof. If the assets are impaired, the Company recognizes an impairment loss as the excess of the carrying amount over the recoverable amount. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However the carrying amount after reversal is not increased beyond the carrying amount that would have prevailed by charging usual depreciation if there was no impairment.

4.

Capital Work in Progress / Advance for Operating Lease Capital work in progress / advance for operating lease is stated at cost and includes development and other expenses including interest during construction period.

5.

Investments

5.1

Investments are classified into “Current” and “Long Term” investments.

5.2

All long term investments including investments in subsidiary companies are stated at cost. Provision for diminution in value, other than temporary, is considered wherever necessary on an individual basis.

5.3

Cost is arrived at on weighted average method for the purpose of valuation of investments.

5.4

Investments held as stock for trade are valued at lower of cost and market price determined category-wise.

6.

Financial Assets

6.1

Financial Assets includes assets under Loan / Hypothecation facility. These are shown net of assets securitized.

6.2

Financial Assets are valued at net investment amount including installments fallen due and net of unmatured / unearned finance charges etc., amounts received, assets not paid for and include assets acquired in satisfaction of debt.

7.

Loan Assets

7.1

Loan Assets include loans advanced by the Company secured by collateral offered by the customers, if applicable. These are shown net of assets securitized.

7.2

Loan assets are valued at net investment amount including installments fallen due and net of unmatured / unearned finance charges etc. amounts received and assets not paid for.

8.

Provision for Non-Performing Assets and Bad Debts

8.1

Relating to Loans & Operating Lease Receivables:

8.1.1

Provisions for Non-Performing assets are considered in the financial statements according to Prudential Norms prescribed by the Reserve Bank of India (RBI). Additional provision as per the norms of Foreign Financial Institutions (FFI) has also been made as follows:

Financial & Loan Assets: Asset Classification Standard Sub-Standard

Doubtful (Unsecured) Doubtful (Secured)

Loss

156

Arrear Period

Upto 90 days 91 to 180 days 181 to 360 days 361 to 365 days More than 12 months to 24 months More than 24 months More than 24 months to 36 months More than 36 months to 60 months Above 60 months As per Management discretion

Provision as per RBI % of Portfolio

Provision as per FFI % of Portfolio

Provision adopted by the Company % of Portfolio

Nil Nil 10 10

Nil 20 50 100

Nil 20 50 100

10 100

100 100

100 100

20

100

100

30 50

100 100

100 100

100

100

100

Annual Report 2009-10

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.) Operating Lease Receivables: Asset Classification

Standard

Sub-Standard

Doubtful

Loss

Arrear Period

Upto 90 days 91 to 180 days 181 to 360 days 361 to 365 days More than 12 months to 24 months More than 24 months to 30 months More than 30 months to 36 months More than 36 months to 48 months More than 48 months As per Management Discretion

Provision as per RBI % of Outstanding

Provision as per FFI % of Outstanding

Provision adopted by the Company % of Outstanding

Nil Nil Nil Nil

Nil 20 50 100

Nil 20 50 100

10

100

100

40

100

100

40

100

100

70 100

100 100

100 100

100

100

100

8.1.2

Loan and financial assets overdue for more than four years or as per the management discretion are considered as bad debts and written off.

8.2

In the financial statements of a foreign sub-subsidiary, provision for doubtful debtors has been determined based on specific customer identification, customer payment trends, subsequent receipts and settlements and analysis of expected future cash flows.

8.3

Provision for other debts arising from services is considered in the financial statements according to the Prudential Norms prescribed by the Reserve Bank of India.

9.

Foreign Currency Transactions

9.1

Foreign currency transactions are recorded at the exchange rates prevailing at the time of transaction.

9.2

Monetary Assets and liabilities expressed in foreign currencies are translated into Indian Rupees at the exchange rate prevailing at the Balance Sheet date except with respect to liabilities where exchange fluctuation losses are to be borne by customers. Any loss or gain arising from loans payable has been included in Finance Charges as per the provisions of Accounting Standards 16 and 11 notified by the Central Government under the Companies (Accounting Standards) Rules, 2006.

9.3

In respect of forward exchange contracts entered into by the Company, the difference between the forward rate and the exchange rate on the date of the transaction are recognized as income or expense over the life of the contract. Gain/loss on settlement of transactions arising on renewal/cancellation are recognized as income or expense in the period in which these are renewed or cancelled.

9.4

In respect of Derivative contracts, premium paid, gains/losses on settlement and provisions for losses determined in accordance with principles of prudence, on category wise basis, are recognized in the Profit & Loss Account.

10.

Prior Period and Extra Ordinary Items Prior Period and Extra Ordinary items having material impact on the financial affairs of the Company are disclosed.

11.

Borrowing Costs Borrowing costs to the extent attributed to the acquisition/construction of qualifying assets are capitalized up to the date when such assets are ready for its intended use and all other borrowing costs are recognized as an expense in the period in which they are incurred.

12.

Employee Benefits

12.1

Short term employee benefits Short term employee benefits based on expected obligation on undiscounted basis are recognized as expense in the Profit and Loss account of the period in which the related service is rendered.

12.2

Defined contribution plan Company’s contribution towards Regional Provident Fund Authority and Employee State Insurance Corporation are charged to the Profit and Loss Account.

12.3

Defined benefit plan Company’s liability towards gratuity is a defined benefit plan. Such liabilities are ascertained by an independent actuarial as per the requirements of Accounting Standard – 15 (revised 2005) “Employee Benefits”. All actuarial gains and losses are recognized in Profit and Loss Account in the year in which they occur.

157

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.) 13.

Taxes on Income

13.1

Current tax is the amount of tax payable on the taxable income for the year determined in accordance with the provisions of the Income Tax Act 1961.

13.2

Deferred tax is recognized on timing differences being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

13.3

Deferred tax assets subject to the consideration of prudence are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

13.4

In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.

14.

Provision, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events; it is probable that there will be an outflow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements.

15.

Earnings per Share The Company reports basic and diluted earnings per equity share in accordance with Accounting Standard-20, Earnings Per Share notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. Basic earnings per equity share has been computed by dividing net profit after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per equity share is computed by dividing the net profit after tax for the year by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.

16.

Assets under Management

16.1

Contracts securitised or assigned are derecognised from the books of accounts. Co-branded loan transactions are originated by the Company on behalf of partner bank/financial institution.

16.2

Contingent liabilities, if any, for such contracts are disclosed separately.

17.

Inventories Inventories have been valued at purchase cost on weighted average method or net realisable value whichever is lower.

18.

Miscellaneous Expenditure: Miscellaneous Expenditure represents: i.

Expenses incurred on issue of Equity Shares, Global Depository Receipts (GDRs), Long Term Bonds and Debentures, which are amortized as follows:(a) The expenses on issue of Equity Shares, GDRs are amortized over a period of ten years from the year in which the same was incurred (b) The expenses on issue of Bonds and Debentures are being amortized over the tenure of the respective Bonds and Debentures.

ii. Preliminary expenses are written off in the year of incurrence. II.

Notes on Consolidated Financial Statements

1.

In accordance with Accounting Standard 21 “Consolidated Financial Statements” notified by Central Government under Companies (Accounting Standards) Rules, 2006, the Consolidated Financial Statements of the Holding Company includes the financial statements of all its subsidiaries and sub-subsidiaries which are more than 50% owned and controlled. Enterprises over which the Company exercise significant influence are considered for preparation of the Consolidated Financial Statements as per Accounting Standard 23 “Accounting for Investments in Associates in Consolidated Financial Statements” and Interests in Joint Ventures have been accounted by using the proportionate consolidation method as per Accounting Standard 27 “Financial Reporting of Interests in Joint Ventures”, notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. Investments that are acquired and held exclusively with a view to subsequent disposal in the near future are not considered for consolidation.

158

Annual Report 2009-10

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.) 2.

The details of subsidiaries (including their subsidiaries and joint ventures), associates and joint ventures (including their subsidiary) are as follows – Name of the Company

Subsidiary Srei Infrastructure Advisors Ltd. Srei Venture Capital Ltd. Srei Sahaj e-Village Ltd. Srei Capital Markets Ltd. Srei Forex Ltd. Global Investment Trust Ltd. Controlla Electrotech Private Ltd. IIS International Infrastructure Services GmbH Srei Mutual Fund Trust Private Ltd. w.e.f. 27.11.2009 Srei Mutual Fund Asset Management Private Ltd w.e.f. 27.11.2009 Orbis Power Venture Private Ltd.(refer note no. 6 below) Sub-Subsidiaries Srei Infocomm Services Ltd. (Subsidiary of Srei Infrastructure Advisors Ltd.) Bengal Srei Infrastructure Development Limited (Subsidiary of Srei Infrastructure Advisors Ltd.) ZAO SREI Leasing (Subsidiary of IIS International Infrastructure Services GmbH) Hyderabad Information Technology Venture Enterprises Ltd. (Subsidiary of Srei Venture Capital Ltd.) Cyberabad Trustee Company Pvt. Ltd. (Subsidiary of Srei Venture Capital Ltd.) Srei Advisors Pte Ltd., (Subsidiary of IIS International Infrastructure Services GmbH, Germany w.e.f. 25.02.2010) DPSC Ltd. (Subsidiary of Orbis Power Venture Private Ltd w.e.f.29.01.2010) (refer note no. 6 below) Associate Quippo Infrastructure Equipment Ltd. (ceased to be associate w.e.f. 30.09.2008) Joint Venture (including its subsidiary) Srei Equipment Finance Pvt. Ltd. (SEFPL) Srei Insurance Broking Pvt. Ltd. (Subsidiary of SEFPL) Joint Venture of Subsidiary Srei (Mauritius) Infrastructure Development Corporation Ltd. (JV between Srei Infrastructure Advisors Ltd and The State Investment Corporation Ltd of Mauritius) Aalat LLC (JV between IIS International Infrastructure Services GmbH and Waha Capital PJSC w.e.f. 30.12.2009) Associate of Subsidiary Spice Internet Service Provider Private Ltd. (Associate of Srei Sahaj e-Village Ltd. w.e.f. 16.03.2010) 3.

Country of incorporation

% Holding As at 31st March, 2010

% Holding As at 31st March, 2009

India India India India India India India Germany India

100 100 51 100 100 100 100 92.54 100

100 100 51 100 100 100 100 92.54 -

India India

100 17

-

India

100

100

India

51

51

Russia

63.49

63.49

India

51

51

India

51

51

Singapore

85

-

India

58.88

-

India

16.85

16.85

India

50

50

India

100

100

Mauritius United Arab Emirates, Abu Dhabi

50

50

49

-

India

49

-

The audited financial statements of IIS International Infrastructure Services GmbH (IIS) and management accounts of Srei (Mauritius) Infrastructure Development Corporation Ltd. up to 31st March 2010 have been prepared in accordance with

159

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.) International Financial Reporting Standards. Differences in accounting policies arising there from are not material. The audited Balance Sheet of ZAO Srei Leasing (ZAO), subsidiary of IIS is prepared upto 31st December every year. Management accounts for the period 1st January, 2009 to 31st March, 2009 and 1st January 2010 to 31st March 2010 has been used for consolidation with IIS. The accounts of ZAO have been prepared in accordance with International Financial Reporting Standards. Differences in accounting policies arising there from are not material. 4.

During the year, the Company has invested 100% equity stake in Srei Mutual Fund Asset Management Private Ltd. and Srei Mutual Fund Trust Private Ltd. and accordingly have became subsidiaries of the Company w.e.f. 27th November, 2010.

5.

Srei Mutual Fund Trust Private Ltd, Srei Mutual Fund Asset Management Private Ltd., Srei Advisors Pte Ltd., Aalat LLC and Spice Internet Service Provider Private Ltd. have not been consolidated since the amounts involved in respect of the same are not material and the first financial year of these companies have not yet ended.

6.

Orbis Power Venture Private Ltd. and its subsidiary, DPSC Ltd. have not been considered for consolidation since the control was intended to be temporary. Orbis Power Venture Private Limited became the subsidiary of the Company w.e.f. 2nd January, 2010 and it ceased to be a subsidiary w.e.f. 31st March, 2010.

7.

The Reporting Company’s Proportionate share in the assets, liabilities, income and expenses of its Joint Venture Company included in these consolidated financial statements are given below:

Particulars Balance Sheet SOURCES OF FUNDS Shareholders' Funds Share Capital Reserves and Surplus Loan Funds Secured Unsecured Deferred Tax Liability Total APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Net Block Current Assets, Loans and Advances Sundry Debtors Cash & Bank Balances Financial & Other Current Assets Loans & Advances Less: Current Liabilities and Provisions Liabilities Provisions Net Current Assets Miscellaneous Expenditure Total Profit and Loss Account INCOME Income from Operations Other Income Total EXPENDITURE Staff Expenses Administrative & Other Expenses Finance Charges Depreciation

160

(Rupees in Lakh) 2009-10 2008-09

2,500 46,198

2,500 41,842

257,864 26,933 3,922 337,417

242,327 31,678 2,683 321,030

26,347 6,171 20,176

23,281 3,186 20,095

411 18,331 297,997 8,970 325,709

289 15,649 282,505 13,967 312,410

4,232 4,624 8,856 316,853 388 337,417

7,291 4,406 11,697 300,713 222 321,030

43,629 21 43,650

46,560 205 46,765

2,194 2,502 26,748 3,106

2,305 2,439 31,962 2,711

Annual Report 2009-10

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.) (Rupees in Lakh) 2009-10 2008-09

Particulars Miscellaneous Expenditure written off Total PROFIT BEFORE BAD DEBTS AND PROVISIONS Bad Debts/Advances written off Provisions as per the norms of Reserve Bank of India & Foreign Financial Institutions PROFIT BEFORE TAX Provision for Tax PROFIT AFTER TAX Proportionate Share in Reserves of Joint Venture: Capital Reserves Debt Redemption Reserve Special Reserve as per Reserve Bank of India Guidelines Securities Premium Account Profit and Loss Account Contingent Liabilities Capital Commitments (Net of Advances)

73 34,623 9,027 2,302 6,725 2,369 4,356

42 39,459 7,306 81 1,933 5,292 2,165 3,127

18 2,053 1,735 37,500 4,892 46,198 7,729 8

18 1,336 865 37,500 2,123 41,842 4,026 56

8.

Financial Assets includes certain long term project loans amounting to Rs. 5,375 lakh, being share of the Company in Joint Venture. There has been considerable delay in executing these projects; the Joint Venture is in the process of assessing the status of these projects. However in view of the Joint Venture, the principal amounts in these loans are recoverable as per the respective loan agreements.

9.

Related Party Transactions Joint Venture: Srei Equipment Finance Private Ltd.

Key Management Personnel Name

Designation

Hemant Kanoria

Chairman & Managing Director

Saud Ibne Siddique

Joint Managing Director (w.e.f. 01.04.2009)

Kishore Kumar Mohanty

Wholetime Director

Sanjeev Sancheti

Chief Financial Officer

Summary of Transactions with Related Parties (Rupees in Lakh) Value of

Amount

Value of

Amount

Name of related party and Nature

Transaction/

Considered

Transaction/

Considered in

of transaction

Outstanding

in Consolidation

Outstanding

Consolidation

2009-10

2008-09

(A) Joint Venture: Subscription to Equity Shares

-

-

2,295

1,148

Amount received towards transfer as per Scheme of Arrangement

-

-

37,500

18,750

Loan advanced

43,544

21,772

46,997

23,499

Refund of loan advanced

43,544

21,772

46,997

23,499

Loan received

-

-

5,937

2,969

Refund of Loan received

-

-

27,991

13,996

161

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

(Rupees in Lakh) Name of related party and Nature of transaction

Value of

Amount

Value of

Amount

Transaction/

Considered

Transaction/

Considered in

Outstanding

in Consolidation

Outstanding

Consolidation

2009-10 Security deposit received Security deposit paid

2008-09

35

18

717

359

24

12

72

36

1,600

800

2,083

1,042

Rent paid

104

52

36

18

Rent received

642

321

464

232

752

376

717

359

96

48

72

36

Interest received on Loan

Balances Outstanding: Security Deposit payable Security Deposit receivable

(Rupees in Lakh) Name of related party and Nature of relationship

Nature of Transactions and

2009-10

2008-09

Outstanding balances (B) Associate: Quippo Infrastructure Equipment Limited (ceased to be associate w.e.f. 30.09.2008)

Interest/ Finance Charges received

-

637

Loan Advanced

-

4183

Sale of Assets

-

3

Remuneration

87

103

Commission

36

36

Dividend paid

2

2

Saud Ibne Siddique

Remuneration

335

-

Kishore Kumar Mohanty

Remuneration

64

65

Dividend paid

1

1

Remuneration

48

41

(C) Key Management Personnel: Hemant Kanoria

Sanjeev Sancheti 10.

Capital Commitments (Rupees in Lakh)

Sr. 10.1

Particulars Estimated amount of capital contracts remaining to be executed (Net of advances)

2009-10

2008-09

761

163

11. Contingent Liabilities (Rupees in Lakh) Sr.

Particulars

2009-10

2008-09

9,139

3,512

11.1

Bank Guarantee

11.2

Guarantee against receivables assigned

85

599

11.3

Guarantee against co-branded agreements

40

88

162

Annual Report 2009-10

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.) (Rupees in Lakh) Sr.

Particulars

11.4

Legal Cases

11.5

Disputed tax demands

11.6

Claims against the Company not acknowledged as debts

12.

2009-10

2008-09

-

28

5,448

3,664

3

-

Earnings Per Share Basic and Diluted Earnings Per Share Particulars

i

Net Profit after Tax attributable to Equity Shareholders (Rs. in Lakh)

ii

Weighted average number of Equity Shares Basic (Nos.)

iii

Weighted average number of Potential Equity Shares (Nos.)

iv

Weighted average number of Equity Shares Diluted (Nos.)

v

Nominal Value of Equity per share (Rs.)

Year ended 31st March 2010

2009

15,586

8,204

116144798

116144798

-

-

116144798

116144798

10

10

vi

Basic Earnings per share (Rs.)

13.42

7.07

vii

Diluted Earnings per share (Rs.)

13.42

7.07

13.

Segment wise details as required by AS - 17 “Segment Reporting” notified by the Central Government under the Companies (Accounting Standards) Rules, 2006 is as under: (Rupees in Lakh) Particulars Segment Revenue

Segment Result before Finance Charges

Finance Charges

Tax Expenses

Net Profit After Tax

Segment Assets

Segment Liabilities

Capital Expenditure

Depreciation

Other non-cash expenditure

Financing Activity

Others

Total

92,594

5,435

98,029

(81,767)

(3,386)

(85,153)

72,576

2,557

75,133

(61,337)

(1,466)

(62,803)

51,908

1,459

53,367

-

-

(52,309)

-

-

4,619

(2,129)

(108)

(2,237)

-

-

15,680

-

-

(8,257)

787,796

25,456

813,252

(563,851)

(6,413)

(570,264)

662,332

14,328

676,660

(452,034)

(11,796)

(449,597)

4,650

214

4,864

(11,119)

(3,264)

(14,383)

4,130

198

4,328

(3,486)

(172)

(3,658)

73

-

73

(42)

(2)

(44)

Amount in brackets represent previous year figures

163

Schdules to the Consolidated Balance Sheet and Profit and Loss Account SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.) 14.

The Company is a Non Banking Finance Company (NBFC) and being currently classified as Asset Finance Company (Deposit Taking). In terms of Reserve Bank of India (RBI) Circular DNBS.PD.CC.No.168/03.02.089/2009-10 dated 12th February, 2010, the Company has approached RBI for change in classification as Infrastructure Finance Company (IFC) based on the asset pattern for the year ended 31st March, 2009. However the Company has been advised by RBI to convert into non deposit taking NBFC in order to qualify for classification as IFC in terms of the captioned circular. Accordingly, the Company has complied with the steps advised by RBI and has requested RBI for change in classification as Infrastructure Finance Company. As a result, the Company has decided that it would not accept any further public deposits or renew the maturing deposits in any manner w.e.f. 20th April, 2010.

15.

The Board of Directors of the Company at its meeting held on 28th January, 2010 has, based on the recommendation of the Committee of Independent Directors, approved amalgamation of Quippo Infrastructure Equipment Limited (Quippo) into and with the Company in terms of a Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956. The Appointed Date of the amalgamation shall be 1st April, 2010.

16.

The previous year’s figures have been regrouped /rearranged wherever considered necessary.

Signatories to Schedules 1 to 19

For Deloitte Haskins & Sells

On behalf of the Board of Directors

Chartered Accountants (Regn. No. 302009E)

Abhijit Bandyopadhyay Partner M. No. 054785

Place : Kolkata Date

164

: 11th May, 2010

Hemant Kanoria

Salil K. Gupta

Sandeep Lakhotia

Chairman & Managing Director

Chief Mentor & Director

Company Secretary

Reserves & Surplus

Liabilities

Total Liabilities

Total Assets

Investments (Refer Annexure)

Turnover

Profit/(Loss) beforeTaxation

Provision for Taxation:

2

3

4

5

6

7

8

9

Proposed Dividend

11

Date : 11th May, 2010

Place : Kolkata

Profit after Taxation

10

Income tax of earlier years

Deferred Tax

MAT Credit Entitlement

Current Tax

Share Capital

Exchange rate on last day of the financial year

Currency

Financial year ending on

Particulars

1

Sl.No.

-

0.74

-

(0.06)

-

0.39

1.07

4.00

-

14.12

14.12

2.28

6.84

Chairman & Managing Director

Hemant Kanoria

-

7.25

0.43

(1.23)

-

9.32

15.77

579.60

731.68

1,283.16

1,283.16

272.23

985.93

5.00

2010

25.00

31st March,

2010

Global Investment Trust Ltd.

31st March,

Srei Venture Capital Ltd.

-

6.44

(3.64)

-

-

6.80

9.60

444.88

1.81

893.97

893.97

262.27

126.70

505.00

2010

31st March,

Srei Capital Markets Ltd.

-

(0.13)

-

-

-

-

(0.13)

0.15

-

122.17

122.17

85.91

(13.74)

50.00

2010

31st March,

Srei Forex Ltd.

-

0.28

-

-

-

0.12

0.40

10.83

52.41

67.15

67.15

10.72

6.43

50.00

2010

31st March,

Srei Infrastructure Advisors Ltd.

-

4.64

-

(0.04)

-

2.12

6.72

14.46

-

139.77

139.77

51.07

63.70

25.00

2010

31st March,

Hyderabad Information Technology Venture Enterprises Ltd.

Salil K. Gupta

-

79.66

-

(58.76)

-

-

20.90

8,917.15

0.49

17,343.90

17,343.90

17,028.71

215.19

100.00

2010

31st March,

Srei Sahaj e - Village Ltd.

Chief Mentor & Director

-

(40.49)

-

0.20

-

1.83

(38.46)

11.19

-

2,365.43

2,365.43

2,410.87

(48.97)

3.53

2010

31st March,

Controlla Electrotech Private Ltd.

-

0.13

-

-

-

0.05

0.18

0.35

-

5.36

5.36

0.11

0.25

5.00

2010

31st March,

Cyberabad Trustee Co. Pvt. Ltd.

-

0.08

-

-

-

0.04

0.12

0.26

-

3.46

3.46

0.12

(1.66)

5.00

2010

31st March,

ZAO Srei Leasing

-

(12.36)

(0.33)

-

-

-

(12.69)

78.87

100.00

139.46

139.46

125.39

9.07

5.00

2010

-

51.31

-

-

-

70.08

121.39

43,428.18

-

18,898.81

18,898.81

13,531.55

289.42

5,077.84

1,535

Rubble

2009

31st March, 31st December,

Bengal Srei Infrastructure Development Ltd.

Company Secretary

Sandeep Lakhotia

On behalf of the Board of Directors

-

0.68

-

-

-

6.39

7.07

33.87

3,627.43

3,750.87

3,750.87

29.05

(143.36)

3,865.18

60,6778

Euro

2010

31st March,

Srei IIS International Infocomm Infrastructure Services Services Ltd. GmbH

(Rupees in Lakh)

Information on Subsidiary Companies Pursuant to Direction Under Section 212 (8) of The Companies Act, 1956

Annual Report 2009-10

165

Annexure to Information on Subsidiary Companies Pursuant to Direction Under Section 212 (8) of The Companies Act, 1956 Details of Investments as at 31st March, 2010 Sl.

Name of the Company

No. of shares / Face Value

No. units / bonds 1. Srei Venture Capital Limited Long term Investments (at cost) In Subsidiary Company: Cyberabad Trustee Company Private Limited 25500 Hyderabad Information Technology Venture Enterprises Limited 127500 In Equity Shares: Reliance Power Ltd. 5115 Pilani Investment & Industries Corporation Ltd. 3000 In Bonds / Debentures / Units: Medium & Small Infrastructure Fund (Class A) 55000 Medium & Small Infrastructure Fund (Class B) 5000 Infrastructure Project Development Fund 500000 TOTAL 2. Srei Capital Markets Limited Long term Investments (at cost) In Equity Shares: Andhra Bank Limited 100 Bank of Baroda Limited 100 Bank of India Limited 100 Corporation Bank Limited 100 HDFC Bank Limited 100 ICICI Bank Limited 100 IDBI Bank Limited 120 Oriental Bank of Commerce Limited 100 State Bank of India Limited 134 ING Vysya Bank Limited 415 TOTAL 3. Srei Infrastructure Advisors Limited Long term Investments (at cost) In Subsidiary Company: Srei Infocomm Services Limited 50000 Bengal Srei Infrastructure Development Limited 25500 In Joint Venture: Srei (Mauritius) Infrastructure Development Company Ltd. 292800 TOTAL 4. Srei Sahaj e-Village Limited Long term Investments (at cost) In Associate: Spice Internet Service Provider Private Ltd. 4900 TOTAL 5. IIS International Infrastructure Services GmbH Long term Investments (at cost) In Subsidiary Company: ZAO Srei Leasing 210000 Srei Advisory Pte Ltd. 17085 In Joint Venture: Aalat LLC # TOTAL 6. Bengal Srei Infrastructure Development Ltd. Long term Investments (at cost) In Equity Shares: Bengal Integrated Auto Industrial Park Pvt. Ltd. 1000000 TOTAL * In Mauritius Rupees ** In Rubbles *** In Singapore Dollar # There is no system of issuance of distinctive shares in the country of registration

166

Book Value

Quoted /

(Rupees)

(Rs. Lakh)

Unquoted

10 10

2.55 46.74

Unquoted Unquoted

10 10

14.39 108.00

Quoted Unquoted

100 100 100

55.00 5.00 500.00 731.68

Unquoted Unquoted Unquoted

10 10 10 10 10 10 10 10 10 10

0.01 0.07 0.02 0.13 0.25 0.19 0.04 0.04 0.80 0.26 1.81

Quoted Quoted Quoted Quoted Quoted Quoted Quoted Quoted Quoted Quoted

10 10

5.00 2.55

Unquoted Unquoted

10*

44.86 52.41

Unquoted

10

0.49 0.49

Unquoted

1000** 1***

3,607.17 5.02

Unquoted Unquoted

#

15.24 3,627.43

Unquoted

10

100.00 100.00

Unquoted

Annual Report 2008-09

Notes

167

Notes

168

Cautionary Statement This report contains forward looking statements, which may be identified by their use of words like ‘plans’, ‘expects’, ‘will’, ‘anticipates’, ‘believes’, ‘intends’, ‘projects’, ‘estimates’ or other words of similar meaning. All statements that address expectations or projections about the future, including but not limited to statements about the Company’s strategy for growth, product development, market position, expenditures and financial results, are forward looking statements. Forward looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. The Company’s actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

Srei Infrastructure Finance Limited Registered Office: ‘Vishwakarma’, 86C, Topsia Road (South) Kolkata - 700 046 www.srei.com