18 IDFC INFRA DEBT FUND LIMITED BOARD OF DIRECTORS AUDITORS PRINCIPAL BANKER REGISTERED OFFICE

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1 18 IDFC INFRA DEBT FUND LIMITED BOARD OF DIRECTORS Dr. Rajiv B. Lall Chairman Mr. Vikram Limaye Mr. Mahendra N. Shah AUDITORS Deloitte Haskins & Sells LLP Chartered Accountants PRINCIPAL BANKER HDFC Bank Limited REGISTERED OFFICE Naman Chambers, C-32, G-Block Bandra-Kurla Complex, Bandra (East) Mumbai Tel: Fax: CIN: U67190MH2014PLC253944

2 Directors' Report TO THE MEMBERS Your Directors have pleasure in presenting the First Aual Report together with the audited accounts for the period from March 7, 2014 (date of incorporation) to March 31, INCORPORATION Your Company was incorporated on March 7, 2014 and the Certificate to Commence the Business was received from the Registrar of Companies, Maharashtra, Mumbai on March 14, FINANCIAL RESULTS PARTICULARS Total Income FOR THE PERIOD ENDED Other Income 293,384 Less: Total Expenses 1,162,233 Loss before Tax (868,849) Less: Provision for Tax 55,900 Loss after Tax (924,749) PRINCIPAL ACTIVITIES The Company has applied to Reserve Bank of India ("RBI") for registration as a NBFC. Subsequently, it would seek license from RBI for undertaking Infra Debt Fund activities, i.e. re-financing existing debt of infrastructure companies, thereby creating fresh headroom for banks to lend to fresh infrastructure projects. DIVIDEND Being the first year of operations and due to unavailability of profits for distribution, the Directors do not recommend any dividend for the period ended March 31, COMPANIES ACT, 2013 Most of the provisions of the Companies Act, 2013 and the Rules notified by the Ministry of Corporate Affairs ("MCA") in this regard, have come into force with effect from April 1, MCA issued a General Circular no. 8/2014 dated April 4, 2014 which clarified that the Financial Statements, Auditors' Report and the Board s Report in respect of the previous year ended March 31, 2014 will be in accordance with the Companies Act, 1956 and Rules made there under. Your Company shall comply with the provisions of the Companies Act, 2013, as applicable. DIRECTORS In accordance with the provisions of the Companies Act, 2013, Dr. Rajiv B. Lall (DIN ), Mr. Vikram Limaye (DIN ) and Mr. Mahendra N. Shah (DIN ), the first Directors, will retire at the ensuing Aual General Meeting ("AGM") and being eligible, offers themself for reappointment. AUDIT COMMITTEE The Audit Committee of the Company comprises of the following: 1. Dr. Rajiv B. Lall - Chairman 2. Mr. Vikram Limaye 3. Mr. Mahendra N. Shah AUDITORS Deloitte Haskins & Sells LLP, Chartered Accountants, (Registration No W / W ) Statutory Auditors of the Company will retire at the conclusion of the ensuing AGM. The Board recommends the reappointment of Deloitte Haskins & Sells LLP, Chartered Accountants, as the Statutory Auditors of the Company. PUBLIC DEPOSITS The Company has not accepted any Public Deposits under Section 58A of the Companies Act, PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION Since the Company does not own any manufacturing facility, the disclosure of information on other matters required to be disclosed in terms of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1998, are not applicable and hence not given. IDFC INFRA DEBT FUND LIMITED 297

3 Directors' Report FOREIGN EXCHANGE EARNINGS AND EXPENDITURE There was no income or expenditure in foreign currency during the period under review. PERSONNEL AND OTHER MATTERS Since your Company does not have any employees, the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are not applicable and hence not given. DIRECTORS RESPONSIBILITY STATEMENT The Directors confirm that: in the preparation of the aual accounts, the applicable accounting standards have been followed; they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2014 and the loss of the Company for the period ended on that date; they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and they have prepared the aual accounts on a going concern basis. ACKNOWLEDGEMENTS The Directors also express their gratitude for the unstinted support and guidance received from IDFC Limited and other group companies. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS RAJIV B. LALL Chairman Mumbai, April 7, IDFC ANNUAL REPORT

4 Independent Auditors' Report TO THE MEMBERS OF IDFC INFRA DEBT FUND LIMITED Report on the Financial Statements We have audited the accompanying financial statements of IDFC INFRA DEBT FUND LIMITED ( the Company ), which comprise the Balance Sheet as at March 31, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the period from March 7, 2014 (date of incorporation) to March 31, 2014 and a summary of the significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements The Company s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 ( the Act ) read with General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal controls relevant to the Company s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the maer so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014; (b) in the case of the Statement of Profit and Loss, of the loss of the Company for the period from March 7, 2014 (date of incorporation) to March 31, 2014; and (c) in the case of the Cash Flow Statement, of the cash flows of the Company for the period from March 7, 2014 (date of incorporation) to March 31, Report on Other Legal and Regulatory Requirements 1. As required by the Companies (Auditor s Report) Order, 2003 ( the Order ) issued by the Central Government in terms of Section 227(4A) of the Act, we give in the Aexure a statement on the matters specified in paragraphs 4 and 5 of the Order. 2. As required by Section 227(3) of the Act, we report that: (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. (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 Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account. (d) In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards notified under the Act read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, (e) On the basis of the written representations received from the directors as on March 31, 2014 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014 from being appointed as a director in terms of Section 274(1) (g) of the Act. FOR DELOITTE HASKINS & SELLS LLP Chartered Accountants (Registration No W/W ) Z. F. BILLIMORIA Partner (Membership No ) Mumbai, April 7, 2014 IDFC INFRA DEBT FUND LIMITED 299

5 Aexure to the Auditors' Report (Referred to in paragraph 1 under Report on Other Legal and Regulatory Requirements section of our report of even date) (i) Having regard to the nature of the Company s business/ activities/ result/ transactions, etc. clauses (i), (ii), (iii), (iv), (vi), (vii), (viii), (x), (xi), (xii), (xiii), (xiv), (xv), (xvi), (xvii), (xviii), (xix), and (xx) of CARO are not applicable. (ii) To the best of our knowledge and belief and according to the information and explanations given to us, there were no contracts or arrangements that needed to be entered in the Register maintained under Section 301 of the Companies Act, (iii) According to the information and explanations given to us, the Company has been regular in depositing undisputed statutory dues, including Income-tax and other material statutory dues applicable to it with the appropriate authorities during the period. (iv) To the best of our knowledge and according to the information and explanations given to us, no material fraud by or on the Company has been noticed or reported during the period. FOR DELOITTE HASKINS & SELLS LLP Chartered Accountants (Registration No W/W ) Z. F. BILLIMORIA Partner (Membership No ) Mumbai, April 7, IDFC ANNUAL REPORT

6 Balance Sheet EQUITY AND LIABILITIES SHAREHOLDERS FUNDS NOTES AS AT (a) Share capital 3 120,000,000 AS AT (b) Reserves and surplus 4 (924,749) 119,075,251 CURRENT LIABILITIES (a) Trade payables 5 86,233 (b) Other current liabilties 6 8,000 (c) Short-term provisions 7 68,800 TOTAL 119,238,284 ASSETS NON-CURRENT ASSETS (a) Deferred tax asset 8 12,900 CURRENT ASSETS (a) Cash and bank balances 9 118,932,000 (b) Other current assets ,384 TOTAL 119,238,284 See accompanying notes forming part of the financial statements. IN TERMS OF OUR REPORT ATTACHED. FOR DELOITTE HASKINS & SELLS LLP Chartered Accountants FOR AND ON BEHALF OF THE BOARD OF DIRECTORS OF IDFC INFRA DEBT FUND LIMITED Z. F. BILLIMORIA VIKRAM LIMAYE MAHENDRA N. SHAH Partner Director Director Mumbai April 7, 2014 IDFC INFRA DEBT FUND LIMITED 301

7 Statement of Profit and Loss FOR THE PERIOD FROM MARCH 7, 2014 (DATE OF INCORPORATION) TO I INCOME NOTES MARCH 7, 2014 TO Other income ,384 TOTAL INCOME (I) 293,384 II EXPENSES Other expenses 12 1,162,233 TOTAL EXPENSES (II) 1,162,233 III LOSS BEFORE TAX (I - II) (868,849) IV TAX EXPENSE Current tax 68,800 Deferred tax (12,900) TOTAL TAX EXPENSES (IV) 55,900 V LOSS FOR THE YEAR FROM CONTINUING OPERATIONS (III - IV) (924,749) EARNINGS PER EQUITY SHARE (NOT ANNUALISED) (NOMINAL VALUE OF SHARE 10 EACH) Basic () (0.17) Diluted () (0.17) See accompanying notes forming part of the financial statements. 15 IN TERMS OF OUR REPORT ATTACHED. FOR DELOITTE HASKINS & SELLS LLP Chartered Accountants FOR AND ON BEHALF OF THE BOARD OF DIRECTORS OF IDFC INFRA DEBT FUND LIMITED Z. F. BILLIMORIA VIKRAM LIMAYE MAHENDRA N. SHAH Partner Director Director Mumbai April 7, IDFC ANNUAL REPORT

8 Cash Flow Statement FOR THE PERIOD FROM MARCH 7, 2014 (DATE OF INCORPORATION) TO A. CASH FLOW FROM OPERATING ACTIVITIES MARCH 7, 2014 TO Loss before tax for the period (868,849) Adjustment for changes in working capital: Adjustments for increase in operating assets: Other current assets (293,384) Adjustments for increase in operating liabilities: Trade payables 86,233 Other current liabilities 8,000 NET CASH USED IN OPERATING ACTIVITIES (A) (1,068,000) B. CASH FLOW FROM INVESTING ACTIVITIES NET CASH FROM INVESTING ACTIVITIES (B) C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of Share Capital 120,000,000 NET CASH FROM FINANCING ACTIVITIES (C) 120,000,000 Cash and cash equivalents as at the end of the year (see note 9) (A+B+C) 118,932,000 IN TERMS OF OUR REPORT ATTACHED. FOR DELOITTE HASKINS & SELLS LLP Chartered Accountants FOR AND ON BEHALF OF THE BOARD OF DIRECTORS OF IDFC INFRA DEBT FUND LIMITED Z. F. BILLIMORIA VIKRAM LIMAYE MAHENDRA N. SHAH Partner Director Director Mumbai April 7, 2014 IDFC INFRA DEBT FUND LIMITED 303

9 Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED 01 Background IDFC Infra Debt Company Limited ('the Company') is a public company incorporated in India on March 7, The Company is a wholly owned subsidiary of IDFC Limited and regulated by the Reserve Bank of India ("the RBI"). The Company has applied for Non-banking financial company license to the RBI on March 28, Significant accounting policies (a) Basis of preparation The financial statements of the Company have been prepared in accordance with Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 ("the 1956 Act") (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 ("the 2013 Act") in terms of General Circular 15/ 2013 dated September 13, 2013 of the Ministry of Corporate Affairs) and the relevant provisions of the 1956 Act / 2013 Act, as applicable. The financial statements have been prepared on the accrual basis under the historical cost convention. (b) Use of estimates The preparation of the financial statements in conformity with Indian GAAP 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 during the reporting period. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates and the difference between the actual results and the estimates are recognised in the periods in which the results are known / materialise. (c) Revenue recognition Interest income on bank deposits is recognised on accrual basis. (d) Taxes on Income Income-tax expense comprises of current income tax and deferred tax. Current tax is the amount payable on the taxable income for the year as determined in accordance with the provisions of the Income-tax Act, The accounting treatment for income-tax in respect of the Company's income is based on Accounting Standard 22 on "Accounting for Taxes on Income as notified under the Companies (Accounting Standards) Rules, The provision made for income-tax in the accounts comprises both, the current tax and the deferred tax. The deferred tax assets and liabilities for the year arising on account of timing differences are recognised in the Statement of Profit and Loss and the cumulative effect thereof is reflected in the Balance Sheet. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax assets are recognised only to the extent that there is 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 carried forward losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that the same can be realised against future taxable profits. (e) Cash and cash equivalents Cash and cash equivalents for the purpose of the Cash Flow Statement comprises cash on hand, cash in bank, fixed deposits and other shortterm highly liquid investments with an original maturity of three months or less that are readily convertible into known amount of cash and which are subject to an insignificant risk of change in value. (f) Cash flow statement Cash flows are reported using the indirect method, whereby profit / (loss) before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. (g) Earnings per share Basic earnings per share is computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. (h) Provisions and contingencies A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities if any, are disclosed in the notes. Contingent assets are not recognised in the financial statements. 304 IDFC ANNUAL REPORT

10 Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED 03 Share capital NUMBER AUTHORISED SHARES Equity shares of 10 each 12,000, ,000,000 ISSUED, SUBSCRIBED & FULLY PAID-UP SHARES Equity shares of 10 each 12,000, ,000,000 (All of above shares are held by IDFC Limited, the Holding Company and its nominees ) TOTAL 120,000,000 (a) Reconciliation of the number of equity shares outstanding at the begiing and at the end of the year. NUMBER Outstanding at the begiing of the year Issued during the year 12,000, ,000,000 OUTSTANDING AT THE END OF THE YEAR 12,000, ,000,000 (b) Terms / rights attached to equity shares The Company has only one class of equity shares having a par value of 10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exists currently. The distribution will be in proportion to the number of equity shares held by the shareholders. (c) Details of shareholders holding more than 5% of the shares in the Company NAME OF EQUITY SHAREHOLDERS NUMBER % OF HOLDING IDFC Limited and its nominees 12,000, % 04 Reserves and surplus DEFICIT IN THE STATEMENT OF PROFIT AND LOSS Opening balance Loss for the period Closing balance (924,749) (924,749) 05 Trade payables Trade payables 35,053 Provision for expenses 51,180 TOTAL 86,233 No amount is payable to Suppliers under Micro, Small and Medium Enterprises Development Act, No interest has been paid / is payable by the Company during the year to the Suppliers covered under the Micro, Small and Medium Enterprises Development Act, The above information takes into account only those suppliers who have responded to inquiries made by the Company for this purpose. IDFC INFRA DEBT FUND LIMITED 305

11 Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED 06 Other current liabilities Statutory dues 8,000 TOTAL 8, Short-term provisions Provision for Income tax 68,800 TOTAL 68, Deferred tax asset Preliminary expenses 12,900 TOTAL 12, Cash and bank balances CASH AND CASH EQUIVALENTS Balance with bank: in current account 932,000 in deposit account 118,000,000 TOTAL 118,932, Other current assets Interest accrued on bank deposit 293,384 TOTAL 293, Other income MARCH 7, 2014 TO Interest on bank deposit 293,384 TOTAL 293, IDFC ANNUAL REPORT

12 Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED 12 Other expenses MARCH 7, 2014 TO Preliminary expenses written off 52,113 Auditor s remuneration* 56,180 Stamp duty and registration fees for increase in authorised share capital 1,049,600 Miscellaneous expenses 4,340 TOTAL 1,162,233 * Breakup of Auditors remuneration Audit fees 50,000 Service tax 6,180 56, The Company is yet to commence its commercial operations. Accordingly, there are no separate reportable segments as per Accounting Standard 17 on Segment Reporting as notified under the Companies (Accounting Standards) Rules, As per Accounting Standard 18 on Related Party Disclosures as notified under the Companies (Accounting Standards) Rules, 2006, the related parties of the Company are as follows: Relationship: I. Holding company: IDFC Limited The nature and volume of transactions carried out with the above related party in the ordinary course of business is as follows: Holding Company IDFC Limited Proceeds from issue of equity shares 119,999, In accordance with Accounting Standard 20 on Earnings Per Share as notified under the Companies (Accounting Standards) Rules, 2006: The earnings per share have been computed as under: CURRENT PERIOD Loss after tax () (924,749) Weighted average number of equity shares (Nos.) 5,308,000 Basic & diluted earnings per share () (0.17) Nominal value per share () Since the Company was incorporated on March 7, 2014 this is the first accounting year of the Company. Accordingly there are no comparative figures. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS OF IDFC INFRA DEBT FUND LIMITED VIKRAM LIMAYE MAHENDRA N. SHAH Mumbai April 7, 2014 Director Director IDFC INFRA DEBT FUND LIMITED 307