IDFC Alternatives Limited DIRECTORS Dr. Rajiv B. Lall - Chairman Mr. Gautam Kaji Mr. Bharat Shah Mr. Vikram Limaye Mr. Sunil Kakar Mr. Sadashiv S. Rao Dr. Rajeev Uberoi AUDITORS Deloitte Haskins & Sells Chartered Accountants PRINCIPAL BANKERS HDFC Bank Limited REGISTERED OFFICE Naman Chambers, C-32, G-Block Bandra-Kurla Complex Bandra (East) Mumbai - 400 051 TEL: +91 22 4222 2000 FAX: +91 22 2654 0354 Website: www.idfc.com
s' Report TO THE MEMBERS Your s have pleasure in presenting the Eleventh Annual Report together with the audited accounts for the year ended. OPERATIONAL REVIEW Your Company continues to invest in high-potential companies across the infrastructure value-chain in India. Through three funds - the India Development Fund, IDFC Private Equity Fund II and IDFC Private Equity Fund III - your Company manages capital commitments aggregating to H 57.35 billion. Till date, these funds have made 38 investments in 33 companies. This year, your Company remained focused on managing the portfolio of existing investments, strategically unlocking value in portfolio companies where investments have matured and selectively deploying capital into new investments in sectors that are at the confluence of infrastructure and consumption. In FY13, your Company made two new investments for the funds Parag Milk Foods Private Limited and Manipal Integrated Services Private Limited. During the year, your Company made three full exits and two partial exits for the Funds managed. Your Company s track record in terms of the number of liquidity events and capital returned to investors places it among the leading private equity funds in India. Over 60% of the funds managed (i.e. over H 30 billion) has been returned to investors with an average internal rate of return (IRR) on investments sold of over 30%. Importantly, your Company has been able to secure liquidity and exit events despite challenging market conditions by leveraging its influence and strong promoter relationships. Your Company further strengthened its team of investment professionals with the addition of an Associate. Your Company continues its track record of being an industry pioneer in identifying newer sectors/ opportunities for making its investments. Your Company will continue to play a leadership role in the Indian private equity landscape by securing profitable exits for mature investments and by deploying new funds into the country s fast growing infrastructure-related and consumption sectors. FINANCIAL RESULTS PARTICULARS FOR THE YEAR ENDED MARCH 31, 2013 FOR THE YEAR ENDED MARCH 31, 2012 Total Income 666,232,531 640,488,194 Less: Total Expenses 299,634,910 325,118,757 Profit/(Loss) before Tax 366,597,621 315,369,437 Less: Provision for Tax 94,832,000 99,057,000 Profit/(Loss) after Tax 271,765,621 216,312,437 DIVIDEND Your s are pleased to recommend a dividend of H 1,100 per equity share (i.e. 11,000 %) for the year ended on equity shares. This dividend would be paid subject to approval by the Members in the ensuing Annual General Meeting (AGM). Further at the Board Meeting held on October 25, 2012, the Board had approved interim dividend amounting to H 24 crore at the rate of 48,000% i.e. H 4,800 per equity share and the same has been paid. SUBSIDIARY COMPANIES Your Company has one wholly owned subsidiary company namely IDFC Project Equity Company Limited. As required under the provisions of Section 212 of the Companies Act, 1956, a statement of holding company s interest in the subsidiary company and the Annual Report of such subsidiary company have been attached to this report. DIRECTORS The Board, at its meeting held on October 25, 2012, appointed Mr. Bharat Shah as Additional with effect from October 25, 2012. He would hold office up to the date of the ensuing AGM. The Company has received notice from a Member of the Company under Section 257 of the Companies Act, 1956, proposing the appointment of Mr. Bharat Shah as at the ensuing AGM. Mr. Kishor Chaukar who was on the Board of the Company, resigned as of the Company with effect from August 26, 2012. The Board has placed on record it's appreciation for the valuable services rendered by Mr. Chaukar during his tenure as of the Company. In accordance with the Articles of Association of the Company and provisions of the Companies Act, 1956, Mr. Gautam Kaji and Mr. Vikram Limaye would retire by rotation and being eligible, offer themselves for re-appointment at the ensuing AGM. The Board of s recommends appointment / re-appointment of all the above s at the ensuing AGM. AUDIT COMMITTEE The Audit Committee of the Company comprises of Mr. Sunil Kakar, Dr. Rajeev Uberoi and Mr. Sadashiv S. Rao as it s members. The Audit Committee met four times during the year. IDFC Alternatives Limited 3
s' Report AUDITORS M/s. Deloitte Haskins & Sells, Chartered Accountants having Registration No. 117366W will retire as the statutory auditors of the Company at the conclusion of the ensuing AGM. The Board at its meeting held on April 29, 2013 has proposed their re-appointment as Auditors to audit the accounts of the Company for the financial year ending March 31, 2014. M/s. Deloitte Haskins & Sells, the retiring Auditors, have confirmed that their re-appointment, if made, would be in conformity with the provisions of Sections 224 and 226 of the Companies Act, 1956 and also indicated their willingness to be re-appointed. You are requested to consider their re-appointment. PUBLIC DEPOSITs Your Company has not accepted any public deposits under Section 58A of the Companies Act, 1956 during the year under review. 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 s) Rules, 1988, are not applicable and hence not given. FOREIGN EXCHANGE EARNINGS and EXPENDITURE Your Company has no earnings in Foreign Exchange. The particulars regarding foreign exchange expenditure are furnished in Note No 18 of the Notes forming part of the Financial Statements. PARTICULARS OF EMPLOYEES AND REMUNERATION Your Company had 24 employees as on. As required by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in Annexure to the s Report. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, the s confirm that: in preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanation relating to the material departures; they have selected such accounting policies and applied them consistently and made judgments 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 and the profit of the Company for the year 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 annual accounts on a going concern basis. ACKNOWLEDGEMENTS The Board acknowledges the invaluable support extended to the Company by the investors of the Funds, Ministry of Finance, Reserve Bank of India and Securities and Exchange Board of India. The Board would like to express its gratitude for the unstinted support and guidance received from IDFC Limited and also from other group companies. The Board would also like to express their sincere thanks and appreciation to all the employees for their contribution made during the year. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS RAJIV B. LALL Chairman Mumbai, July 1, 2013 4 IDFC ANNUAL REPORT 2012 2013
Auditors' Report TO THE MEMBERS OF IDFC ALTERNATIVES LIMITED (FORMERLY, IDFC PRIVATE EQUITY COMPANY LIMITED) Report on the Financial Statements We have audited the accompanying financial statements of IDFC ALTERNATIVES LIMITED (FORMERLY, IDFC PRIVATE EQUITY COMPANY LIMITED) ( the Company ), which comprise the Balance Sheet as at, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended 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 referred to in Section 211(3C) of the Companies Act, 1956 ( the Act ). This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatements, 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 manner 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 ; (b) in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date and (c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. 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 Annexure 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 referred to in Section 211(3C) of the Act. (e) On the basis of the written representation received from the s as on taken on record by the Board of s, none of the s is disqualified as on from being appointed as a director in terms of Section 274(1) (g) of the Act. For DELOITTE HASKINS & SELLS Chartered Accountants (Registration No. 117366W) Z. F. Billimoria Partner (Membership No. 42791) Mumbai, April 29, 2013 IDFC Alternatives Limited 5
Annexure 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) (ii) Having regard to the nature of the Company s business / activities / result / transactions, etc. clauses (ii), (vi), (viii), (x), (xi), (xii), (xiii), (xv), (xvi), (xvii), (xviii), (xix), and (xx) of CARO are not applicable. In respect of its fixed assets: (a) (b) (c) The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets. The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanations given to us, no material discrepancies were noticed on such verification. The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company. (iii) The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. (iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of fixed assets and for the sale of services. During the course of our audit, we have not observed any continuing failure to correct major weakness in such internal control system. (v) 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, 1956. (vi) In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointed by the Management have been commensurate with the size of the Company and the nature of its business. (vii) According to the information and explanations given to us in respect of statutory dues: (a) (b) (c) The Company has been regular in depositing undisputed statutory dues, including Provident Fund, Income-tax, Service Tax, Cess and other material statutory dues applicable to it with the appropriate authorities. There were no undisputed amounts payable in respect of Provident Fund, Income-tax, Service Tax, Cess and other material statutory dues in arrears as at for a period of more than six months from the date they became payable. There were no disputed Provident Fund, Income-tax, Service Tax, Cess and other material statutory dues which were not deposited as on. (viii) Based on our examination of the records and evaluation of the related internal controls, the Company has maintained proper records of the transactions and contracts in respect of its dealing in mutual fund investments and timely entries have been made therein. The aforesaid securities have been held by the Company in its own name. (ix) To the best of our knowledge and according to the information and explanations given to us, no fraud by or on the Company has been noticed or reported during the year. For DELOITTE HASKINS & SELLS Chartered Accountants (Registration No. 117366W) Z. F. Billimoria Partner (Membership No. 42791) Mumbai, April 29, 2013 6 IDFC ANNUAL REPORT 2012 2013
Balance Sheet AS AT MARCH 31, 2013 Notes Equity and liabilities Shareholders funds (a) Share capital 3 500,000 500,000 (b) Reserves and surplus 4 476,709,411 535,247,040 Non-current liabilities (a) Deferred tax liabilities (net) 5 32,931,000 21,859,000 (b) Long-term provisions 6-13,610,321 Current liabilities (a) Trade payables 7 86,334,999 110,611,552 (b) Other current liabilities 8 120,848,185 144,086,222 (c) Short-term provisions 6 72,223,921 2,203,946 Total 789,547,516 828,118,081 Assets Non-current assets (a) Fixed assets i) Tangible assets 9a 434,437,190 455,057,177 ii) Intangible assets 9b 299,453 668,585 434,736,643 455,725,762 (b) Non-current investments 10 51,767,085 12,906,293 (c) Long-term loans and advances 11 83,730,623 85,986,915 Current assets (a) Cash and cash equivalents 12 211,934,295 266,353,225 (b) Short-term loans and advances 11 4,185,956 6,914,655 (c) Other current assets 13 3,192,914 231,231 Total 789,547,516 828,118,081 See accompanying notes forming part of the financial statements In terms of our report attached. For Deloitte Haskins & Sells Chartered Accountants For and on behalf of the Board of s of IDFC Alternatives Limited Z. F. Billimoria Partner Sunil Kakar Rajeev Uberoi Mumbai April 29, 2013 IDFC Alternatives Limited 7
Statement of Profit and Loss FOR THE YEAR ENDED MARCH 31, 2013 Notes I Income Revenue from operations 14 566,605,921 620,164,823 Other income 15 99,626,610 20,323,371 Total income (I) 666,232,531 640,488,194 II Expenses Employee benefit expenses 16 221,289,487 234,838,558 Depreciation and amortisation expense 9 24,646,516 26,134,581 Other expenses 17 53,698,907 64,145,618 Total expenses (II) 299,634,910 325,118,757 III Profit before tax (I- II) 366,597,621 315,369,437 IV Tax expense Current tax 83,760,000 92,540,000 Deferred tax 5 11,072,000 6,517,000 Total tax expense 94,832,000 99,057,000 V Profit for the year from continuing operations (III-IV) 271,765,621 216,312,437 Earnings per share (nominal value of 10 per share) 24 (a) Basic () 5,435.31 4,326.25 (b) Diluted () 5,435.31 4,326.25 See accompanying notes forming part of the financial statements In terms of our report attached. For Deloitte Haskins & Sells Chartered Accountants For and on behalf of the Board of s of IDFC Alternatives Limited Z. F. Billimoria Partner Sunil Kakar Rajeev Uberoi Mumbai April 29, 2013 8 IDFC ANNUAL REPORT 2012 2013
Cash Flow Statement FOR THE YEAR ENDED MARCH 31, 2013 A. Cash flow from operating activities Net profit before tax 366,597,621 315,369,437 Adjustments for: Depreciation and amortisation expenses 24,646,516 26,134,581 Loss on sale / write off of fixed assets 64,094 181,114 Provision for employee benefits - gratuity - 2,277,864 Interest income on bank deposits (14,203,706) (8,780,577) Dividend received from subsidiary company (80,000,000) - Dividend income on current investments (5,422,904) (10,937,095) Operating profit before working capital changes 291,681,621 324,245,324 Changes in working capital: Adjustments for (increase) / decrease in operating assets: Long-term loans and advances (11,697) 3,689,900 Short-term loans and advances 2,728,699 (5,342,929) Other current assets (2,954,830) - Adjustments for increase / (decrease) in operating liabilities: Long-term provision (13,610,321) - Short-term provision (1,523,116) - Other long-term liabilities - (387,436) Trade payables (24,276,553) 18,543,995 Other current liabilities (23,238,037) (23,285,622) Cash generated from operations 228,795,766 317,463,232 Net income tax paid (74,296,171) (116,768,948) Net cash from operating activities (A) 154,499,595 200,694,284 B. Cash flows from investing activities Purchase of fixed assets (3,721,490) (1,027,553) Proceeds from sale of fixed assets - 88,583 Bank balances not considered as cash and cash equivalents Placed - (150,000,000) Matured 150,000,000 100,000,000 Purchase of current investments (668,941,463) (877,219,416) Sale proceeds of current investments 668,941,463 877,219,416 Investment in subsidiary company (37,895,070) - Purchase of non-current investments (2,263,026) (3,887,147) Proceeds from sale of non-current investments 1,297,304 1,840 Interest income on bank deposit 14,196,853 8,615,972 Dividend received from subsidiary company 80,000,000 - Dividend income on current investments 5,422,904 10,937,095 Net cash from / (used in) investing activities (B) 207,037,475 (35,271,210) C. Cash flows from financing activities Interim dividend paid (including dividend distribution tax) (265,956,000) (232,445,000) Net cash used in financing activities (C) (265,956,000) (232,445,000) Net increase / (decrease) in cash and cash equivalents (A+B+C) 95,581,070 (67,021,926) Cash and cash equivalents at the beginning of the year (see note 12) 116,353,225 183,375,151 Cash and cash equivalents at the end of the year (see note 12) 211,934,295 116,353,225 95,581,070 (67,021,926) In terms of our report attached. For Deloitte Haskins & Sells Chartered Accountants For and on behalf of the Board of s of IDFC Alternatives Limited Z. F. Billimoria Partner Sunil Kakar Rajeev Uberoi Mumbai April 29, 2013 IDFC Alternatives Limited 9
Notes forming part of the Financial Statements as AT AND 01 Background IDFC Alternatives Limited (formerly, IDFC Private Equity Company Limited) is a wholly owned subsidiary of IDFC Limited (formerly, Infrastructure Development Finance Company Limited)('IDFC'), incorporated in India, providing Investment Management and Advisory Services and is the Investment Manager to IDFC Infrastructure Fund of which India Development Fund is a unit scheme ( IDF ), IDFC Infrastructure Fund 2 of which IDFC Private Equity Fund II is a unit scheme ( Fund II ) and IDFC Infrastructure Fund 3 of which IDFC Private Equity Fund III is a unit scheme ( Fund III ) - domestic venture capital funds registered under the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996. 02 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. The Company has prepared these financial statements to comply in all material aspects with the accounting standards notified by the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under historical cost convention. B. Use of estimates The Company adopts the accrual concept in the preparation of the accounts. 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 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. C. 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. D. Cash flow statements Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and 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. E. Inflation Assets and liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money. F. Revenue recognition i Management fees are recognised on accrual basis as per the terms of the agreement. ii Interest and other dues are accounted on accrual basis. iii Dividend is accounted when the right to receive is established. G. Fixed assets Fixed assets are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated depreciation. H. Intangible assets Intangible Assets comprising of system software are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated amortisation. Any expenses on such software for support and maintenance payable annually are charged to the Statement of Profit and Loss. I. Depreciation and amortisation Tangible assets Depreciation for all Fixed Assets, excluding certain electronic items, is provided on the written down value method, at the rates prescribed by Schedule XIV of the Companies Act, 1956. Certain electronic items are depreciated over a period of two years on a straight-line method based on the Management s estimate of useful life of assets. Depreciation on additions during the year is provided on a pro-rata basis. Assets costing less than H 5,000/- each are written off in the year of capitalisation. 10 IDFC ANNUAL REPORT 2012 2013
Notes forming part of the Financial Statements as AT AND Intangible assets Intangible assets consisting of computer software are being amortised over a period of three years on the straight-line method. J. Investments Non-current investments are carried at acquisition cost. A provision is made for diminution other than temporary on an individual basis. Current investments are carried at the lower of cost or fair value on an individual basis. K. Employee benefits Defined contribution plans The contribution to provident fund, superannuation fund and pension fund are considered as defined contribution plans and are charged as an expense as they fall due based on the amount of contribution required to be made. Defined benefit plan The net present value of the Company s obligation towards Gratuity to employees is funded and actuarially determined as at the Balance Sheet date based on the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss for the year. Compensated absences Employees are not permitted to accumulate leave. Based on the leave rules unavailed privilege leave to the extent encashable is paid to the employees and charged to the Statement of Profit and Loss for the year. L. Operating leases Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the lease term in accordance with Accounting Standard 19 on 'Leases' as notified under the Companies (Accounting Standard) Rules, 2006. Initial direct cost incurred specifically for operating leases are recognised as expense in the year in which they are incurred. M. 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. N. Income-tax The accounting treatment for income-tax in respect of the Company's income is based on the Accounting Standard 22 on 'Accounting for Taxes on Income' as notified by the Companies (Accounting Standards) Rules, 2006. 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 Balance Sheet date. Deferred tax asset is recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax asset 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. O. 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 are disclosed in the Notes. P. Foreign currency transactions Foreign currency transactions are accounted at the exchange rates prevailing on the date of the transaction. Foreign currency monetary items outstanding as at the Balance Sheet date are reported using the closing rate. Gains and losses resulting from the settlement of such transactions and translation of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Profit and Loss. Q. Impairment of assets The carrying amount of assets at each Balance Sheet date are reviewed for impairment. If any indication of impairment based on internal / external factors exists, the recoverable amount of such assets is estimated and impairment is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and its value in use, which is arrived at by discounting the future cash flows to their present value, based on an appropriate discounting factor. If at the Balance sheet date, there is a indication that previously recognised impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount, subject to a maximum of the depreciable historical cost and reversal of such impairment loss is recognised in the Statement of Profit and Loss, except in case of revalued assets. IDFC Alternatives Limited 11
Notes forming part of the Financial Statements as AT AND 03 Share capital Number H Number H (a) Authorised Equity shares of H 10 each 5,000,000 50,000,000 5,000,000 50,000,000 (b) Issued, subscribed & fully paid up Equity shares of 10 each 50,000 500,000 50,000 500,000 All the above equity shares are held by IDFC Limited (formerly, Infrastructure Development Finance Company Limited), the holding company and its nominees. Total Issued, subscribed & fully paid up share capital 500,000 500,000 (a) Terms/rights attached to equity shares The Company has only one class of equity share having a par value of H 10 each. Each holder of equity share is entitled to one vote per share. In the event of liquidation of Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of preferential amount. However, no such preferential amount exists currently. The distribution will be in proportion to the number of equity shares held by the shareholder. (b) Details of the Shareholders holding more than 5% of the Share capital Name of Shareholder IDFC Limited (formerly, Infrastructure Development Finance Company Limited) No. of Shares held % of Holding No. of Shares held % of Holding 50,000 100% 50,000 100% 50,000 100% 50,000 100% (c) During the year ended, the Board of s, in the meeting held on October 25, 2012 had declared interim dividend of H 4,800 per equity share (previous year H 2,400 per share and H 1,600 per share in the meeting held on July 22, 2011 and November 1, 2011 respectively). Also during the year ended, the Board of s have proposed dividend of H 1,100 (previous year Nil) per share which is recognised as amount distributable to equity shareholders and is subject to approval of the shareholders at the ensuing Annual General Meeting. The total dividend appropriation amounted to H 330,303,250 (previous year H 232,445,000) including dividend distribution tax of H 35,303,250 (previous year H 32,445,000). 04 Reserves and surplus H H (a) General reserve Opening balance 158,531,244 136,900,000 Add: Transferred from surplus in Statement of Profit and Loss 27,176,562 21,631,244 Closing balance 185,707,806 158,531,244 (b) Surplus in Statement of Profit and Loss Opening balance 376,715,796 414,479,603 Add: Profit for the year 271,765,621 216,312,437 Less: Interim dividend (see note 22) (240,000,000) (200,000,000) Proposed equity dividend (55,000,000) - Tax on equity dividend (35,303,250) (32,445,000) Transfer to general reserve (27,176,562) (21,631,244) Closing balance 291,001,605 376,715,796 Total 476,709,411 535,247,040 Dividend distribution tax for the year is net of dividend distribution tax of H 12,978,000 (previous year Nil) paid by the subsidiary company under Section 115-O of the Income-tax Act, 1961. 12 IDFC ANNUAL REPORT 2012 2013
Notes forming part of the Financial Statements as AT AND 05 Deferred tax liability H H Tax effect of items constituting deferred tax liability (a) On difference between book balance and tax balance of fixed assets 32,931,000 26,854,837 Tax effect of items constituting deferred tax liability 32,931,000 26,854,837 Tax effect of items constituting deferred tax assets (a) Provision for gratuity and other employee benefits - 4,995,837 Tax effect of items constituting deferred tax asset - 4,995,837 Deferred tax liability (net) 32,931,000 21,859,000 In compliance with Accounting Standard 22 relating to 'Accounting for Taxes on Income' as notified under the Companies (Accounting Standards) Rules, 2006, H 11,072,000 (previous year H 6,517,000) has been debited to the Statement of Profit and Loss towards deferred tax (net) on account of timing differences. 06 Provisions Non-current portion Current portion Non-current portion Current portion H H H H Provision for employee benefits - gratuity (see note 20) - - 13,610,321 1,523,116 Provision for income tax [net of taxes paid H 152,267,360 (previous - 7,492,640-296,799 year H 75,703,201)] Provision for fringe benefit tax [net of taxes paid H 14,876,617-384,031-384,031 (previous year H 14,876,617)] Proposed equity dividend [see note 3(c)] - 55,000,000 - - Tax on proposed equity dividend - 9,347,250 - - Total - 72,223,921 13,610,321 2,203,946 07 Trade payables H H Provision for expenses 86,334,999 110,611,552 Total 86,334,999 110,611,552 No amount is payable to Suppliers registered under the Micro, Small and Medium Enterprises Development Act, 2006. No interest has been paid / 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 inquiries made by the Company for this purpose. 08 Other current liabilities H H Fees received in advance 117,185,547 139,936,143 Others Statutory remittances 3,662,638 4,150,079 Total 120,848,185 144,086,222 IDFC Alternatives Limited 13
Notes forming part of the Financial Statements as AT AND 09 Fixed assets a b Tangible assets Balance as at April 1, 2012 Gross block Depreciation/Amortisation Net block Additions Deletions Balance as at March 31, 2013 Balance as at April 1, 2012 Charge for the year On deduction during the year Balance as at March 31, 2013 Balance as at March 31, 2013 Balance as at March 31, 2012 H H H Buildings 523,563,116 - - 523,563,116 75,597,854 22,398,263-97,996,117 425,566,999 447,965,262 Computer hardware 7,553,905 140,431 461,582 7,232,754 6,047,107 639,632 450,974 6,235,765 996,989 1,506,798 Furniture and fixtures 1,732,278 1,173,532-2,905,810 865,544 259,226-1,124,770 1,781,040 866,734 Office equipment 9,490,263 2,407,527 163,800 11,733,990 4,771,880 980,263 110,315 5,641,828 6,092,162 4,718,383 Total (A) 542,339,562 3,721,490 625,382 545,435,670 87,282,385 24,277,384 561,289 110,998,480 434,437,190 455,057,177 Previous year 544,029,034 1,003,232 2,692,704 542,339,562 64,057,333 25,648,060 2,423,008 87,282,385 455,057,177 Intangible assets Computer software 4,474,051 - - 4,474,051 3,805,466 369,132-4,174,598 299,453 668,585 Total (B) 4,474,051 - - 4,474,051 3,805,466 369,132-4,174,598 299,453 668,585 Previous year 4,449,730 24,321-4,474,051 3,318,945 486,521-3,805,466 668,585 Total (A) + (B) 546,813,613 3,721,490 625,382 549,909,721 91,087,851 24,646,516 561,289 115,173,078 434,736,643 455,725,762 Total of previous year 548,478,764 1,027,553 2,692,704 546,813,613 67,376,278 26,134,581 2,423,008 91,087,851 455,725,762 10 Non-current investments (unquoted) (at cost) Investment in subsidiary company (trade) IDFC Project Equity Company Limited 50,000 equity shares of 10 each fully paid up 37,895,070 - Investments in venture capital units (Non-trade) IDFC Infrastructure Fund 3- IDFC Private Equity Fund III - Class C 2,550,000 (previous year 2,550,000) units of 10 each, 4.92 (previous year 4.94) paid 10,135,770 10,184,096 up per unit, commitment restricted to 7.143 per unit IDFC Infrastructure Fund 3- IDFC Private Equity Fund III - Class F 728,535 (previous year 728,535) units of 10 each, 5.12 (previous Year 3.74) paid up 3,736,245 2,722,197 per unit Total 51,767,085 12,906,293 The above investments in venture capital units are subject to restrictive covenants. 11 Loans and advances (unsecured, considered good) Non-current portion Current portion Non-current portion Current portion Security deposits 90,191-94,191 - Prepaid expenses 15,697 2,906,024-2,673,792 Balances with government authorities Service tax credit receivable - 857,558-3,775,319 Advance payment of income tax [net provision for tax 83,624,735-85,892,724-1,061,715,407 (previous year 1,061,715,407)] Others - 422,374-465,544 Total 83,730,623 4,185,956 85,986,915 6,914,655 14 IDFC ANNUAL REPORT 2012 2013
Notes forming part of the Financial Statements as AT AND 12 Cash and cash equivalents (a) Cash and cash equivalents Cash on hand 12,887 6,663 Balances with banks In current accounts 1,921,408 16,446,562 In deposit accounts 210,000,000 99,900,000 211,934,295 116,353,225 (b) Other bank balance In deposit accounts - 150,000,000 Total 211,934,295 266,353,225 13 Other current assets Interest accrued on term deposits with banks 238,084 231,231 Amount recoverable from new funds 2,954,830 - Total 3,192,914 231,231 14 Revenue from operations Management fees 566,605,921 620,164,823 Total 566,605,921 620,164,823 15 Other income Dividend income from subsidiary company (see note 22) 80,000,000 - Interest income on bank deposits 14,203,706 8,780,577 Dividend income from current investments 5,422,904 10,937,095 Others - 605,699 Total 99,626,610 20,323,371 16 Employee benefit expenses Salaries and bonus (see note 23) 201,072,325 218,176,210 Contribution to provident and other funds (see note 20) 18,052,656 11,959,628 Staff welfare expenses 2,164,506 4,702,720 Total 221,289,487 234,838,558 IDFC Alternatives Limited 15
Notes forming part of the Financial Statements as AT AND 17 Other expenses Rent (see note 23) 28,800 110,481 Rates and taxes 2,860,813 1,310,580 Repairs and maintenance Building 127,360 170,538 Equipment 699 1,999 Others 1,695,279 2,802,147 Insurance charges 2,233,670 215,450 Travelling and conveyance (see note 18) 11,330,557 12,105,156 Realised loss on foreign currency transactions 2,125 12,466 Printing and stationery 466,618 291,558 Postage, telephone and fax 843,468 788,505 Advertisement and publicity 6,597,740 5,266,945 Professional fees (see note 18) 11,626,976 10,455,388 s' fees (see note 18) 140,000 160,000 Auditors' remuneration [see note (a) below] 1,575,000 1,309,358 Shared service cost [see note (b) below] (see note 22) 10,792,752 27,099,895 Loss on sale / write off of fixed assets 64,094 181,114 Miscellaneous expenses 3,312,956 1,864,038 Total 53,698,907 64,145,618 (a) Break up of auditors remuneration: Audit fees 750,000 750,000 Tax audit fees 175,000 175,000 Other services 650,000 375,000 Out of pocket expenses - 9,358 Service tax 194,670 153,919 Total 1,769,670 1,463,277 Less: Service tax set off claimed 194,670 153,919 Total 1,575,000 1,309,358 (b) Shared service cost of 10,792,752 (previous year 27,099,895) represents cost allocated by the holding company under a service level agreement. 18 Expenditure in foreign currency (on payment basis) Travelling expenses 116,270 115,968 Professional fees 2,138,320 - sitting fees 80,000 20,000 Others 442,945 26,878 16 IDFC ANNUAL REPORT 2012 2013
Notes forming part of the Financial Statements as AT AND 19 Earnings in foreign currencies: There are no earnings in foreign currencies 20 Employee benefits In accordance with the Accounting Standard 15 on 'Employee Benefits' as notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures have been made: The Company has recognised the following amounts in the Statement of Profit and Loss towards contribution to defined contribution plans which are included under contribution to provident and other funds: Provident fund 5,841,859 4,944,703 Pension fund 2,382,673 2,011,807 Superannuation fund 1,836,632 1,550,316 The details of the Company s post retirement benefit plans for gratuity for its employees are given below which is certified by the actuary and relied upon by the auditors: Change in the defined benefit obligations: Liability at the beginning of the year 15,133,437 12,855,573 Current service cost 3,486,949 2,788,702 Interest cost 1,496,570 1,274,290 Benefits paid (365,083) (1,174,938) Actuarial loss/ (gain) 3,007,973 (610,190) Liability at the end of the year 22,759,846 15,133,437 Fair value of plan assets: Fair value of plan assets at the beginning of the year - - Expected return on plan assets - - Contributions 23,124,929 1,174,938 Benefits paid (365,083) (1,174,938) Actuarial loss on plan assets - - Fair value of plan assets at the end of the year 22,759,846 - Total actuarial loss/(gain) to be recognised 3,007,973 (610,190) Actual return on plan assets: Expected return on plan assets - - Actuarial loss on plan assets - - Actual return on plan assets - - Amount recognised in the Balance Sheet: Liability at the end of the year 22,759,846 15,133,437 Fair value of plan assets at the end of the year 22,759,846 - Amount recognised in the Balance Sheet under Current liabilities / Provision for employee - 15,133,437 benefits Expense recognised in the Statement of Profit and Loss: Current service cost 3,486,949 2,788,702 Interest cost 1,496,570 1,274,290 Expected return on plan assets - - Net actuarial loss/ (gain) to be recognised 3,007,973 (610,190) Expense recognised in the Statement of Profit and Loss under "Employee benefit expenses" 7,991,492 3,452,802 IDFC Alternatives Limited 17
Notes forming part of the Financial Statements as AT AND Reconciliation of the liability recognised in the Balance Sheet: Opening net liability 15,133,437 - Expense recognised 7,991,492 3,452,802 Contribution by the Company (23,124,929) (1,174,938) Amount recognised in the Balance Sheet under Current liabilities / Provision for employee benefits Current - 1,523,116 Non-current - 13,610,321 Expected employer s contribution for the next year 4,000,000 1,523,116 Experience adjustments: March 31, 2011 March 31, 2010 March 31, 2009 Defined benefit obligation 22,759,846 15,133,437 12,855,573 9,255,401 7,328,873 Plan assets 22,759,846 - - - - Surplus/(deficit) - (15,133,437) (12,855,573) (9,255,401) (7,328,873) Experience adjustment on plan liabilities 2,298,723 (618,889) 3,897,432 (708,140) 7,628,333 Experience adjustment on plan assets - - - - - % % Investment pattern: Insurer managed funds Government securities 37.41 - Deposit and money market securities 29.58 - Debentures/bonds 33.01 - Principal assumptions: Discount rate (per annum) 8.05 8.38 Expected rate of return on assets (per annum) 8.00 - Salary escalation rate (per annum) 8.00 8.00 The estimate of future salary increases takes into account inflation, seniority, promotion and other relevant factors. 21 Segment reporting The Company s main business is to provide asset management services. All other activities revolve around the main business. The Company does not have any geographic segments. As such, there are no separate reportable segments as per Accounting Standard 17 on Segment Reporting as notified by the Companies (Accounting Standards) Rules, 2006. 22 Related party disclosures As per the Accounting Standard 18 on Related Party Disclosures as notified by the Companies (Accounting Standards) Rules, 2006, the related parties of the Company are as follows: I Holding Company: IDFC Limited (formerly, Infrastructure Development Finance Company Limited) II Subsidiary Company IDFC Project Equity Company Limited (w.e.f. May 17, 2012) III Key Management Personnel: Mr. Satish Mandhana Managing Partner & CIO 18 IDFC ANNUAL REPORT 2012 2013
Notes forming part of the Financial Statements as AT AND The nature and volume of transactions carried out with the above related parties in the ordinary course of business are as follows: Name of the related party and nature of the relationship (a) Holding Company IDFC Limited (formerly, Infrastructure Development Finance Company Limited) (b) Subsidisary Company Shared Services Cost paid 10,792,752 27,099,895 Interim Dividend paid 240,000,000 200,000,000 Purchase of Investment 37,800,000 - IDFC Project Equity Company Limited Interim Dividend received 80,000,000 - (c) Key Management Personnel Mr. Satish Mandhana Remuneration paid* 40,682,332 38,070,604 * Excludes contribution of gratuity and insurance premium. 23 Lease disclosure In accordance with the Accounting Standard 19 on Leases as notified by the Companies (Accounting Standards) Rules, 2006, the following disclosure in respect of operating leases is made: The Company has taken premise for an employee under operating lease which expired on July 31, 2011. Rent include gross rental expenses of Nil (previous year 110,481). The Company has taken vehicles for certain employees under operating leases, which expires between May 2015 to January 2016 (previous year May 2015 to January 2016). Salaries include gross rental expenses of 1,283,233 (previous year 688,388). The committed lease rentals in the future are: Not later than one year 1,283,233 1,283,233 Later than one year and not later than five years 1,878,080 3,161,313 24 Earnings per share In accordance with the Accounting Standard 20 on Earnings Per Share, as notified under the Companies (Accounting Standards) Rules, 2006 the earning per share has been computed as under: Net profit after tax for the year 271,765,621 216,312,437 Weighted average number of equity shares 50,000 50,000 Par value per share 10 10 Earnings per share - Basic 5,435.31 4,326.25 Earnings per share - Diluted 5,435.31 4,326.25 IDFC Alternatives Limited 19
Notes forming part of the Financial Statements as AT AND 25 Provision and contingencies 1) Contingent liabilities Claims against the Company not acknowledged as debt in respect of: Income-tax demands disputed by the Company, net of amount provided. The matter - 117,948,648 in dispute is under appeal. The demand have been paid/adjusted and will be received as refund if the matter is decided in favour of the Company. Other claims 14,052,000-2) Commitments Uncalled liability on shares and other investments partly paid 7,919,583 10,182,609 21,971,583 128,131,257 26 Prior years figures Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure. For and on behalf of the Board of s of IDFC Alternatives Limited Mumbai April 29, 2013 Sunil Kakar Rajeev Uberoi Statement Pursuant to Section 212 of the companies ACT, 1956 Name of Subsidiary Company IDFC Project Equity Company Limited 1 Financial year of the Subsidiary Company ended on 2 Equity Shares of 10 each a) Number of Shares 50,000 Shares of 10 each b) Extent of Holding 100% 3 Net aggregate amount of Profit / (Loss) of the Subsidiary, so far as they concern members of IDFC Alternatives Limited i. For the Financial Year of the Subsidiary a) Dealt with in the accounts of the Holding Company. 80,000,000 b) Not dealt with in the accounts of the Holding Company. 72,855,918 ii. For the previous financial years of the Subsidiary since it became the Holding Company s Subsidiary. a) Dealt with in the accounts of the Holding Company. Nil b) Not dealt with in the accounts of the Holding Company. Nil For and on behalf of the Board of s of IDFC Alternatives Limited Mumbai April 29, 2013 Sunil Kakar Rajeev Uberoi 20 IDFC ANNUAL REPORT 2012 2013