IDFC SUBSIDIARIES ANNUAL REPORT · idfc subsidiaries annual report 2013-2014 ... idfc project equity company limited 22 ... n hdfc bank limited registered office

CORPORATE OFFICE

Naman Chambers, C-32, G-BlockBandra-Kurla ComplexBandra (East)Mumbai 400 051

TEL +91 (22) 4222 2000FAX +91 (22) 2654 0354

IDFC LIMITEDwww.idfc.com | info@idfc.com

REGISTERED OFFICE

KRM Tower, 8th floorNo.1, Harrington RoadChetpetChennai 600 031

TEL +91 (44) 4564 4000FAX +91 (44) 4564 4022

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A N N U A L R E P O R T

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Printed at Repro India Ltd.

CONTENTS

TEN YEARS HIGHLIGHTS

CHAIRMANS STATEMENT COMPANY INFORMATION INFRASTRUCTURE REVIEW

DIRECTORS REPORT

MANAGEMENT DISCUSSION& ANALYSIS

CORPORATE GOVERNANCEREPORT

ADDITIONAL SHAREHOLDERINFORMATION

CEO & CFO CERTIFICATE

AUDITORS CERTIFICATE

BUSINESS RESPONSIBILITYREPORT

CONSOLIDATED GROUP ACCOUNTSWITH AUDITORS REPORT

STANDALONE ACCOUNTSWITH AUDITORS REPORT

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CONTENTS

IDFC ALTERNATIVES LIMITED 02

IDFC PROJECT EQUITY COMPANY LIMITED 22

IDFC TRUSTEE COMPANY LIMITED 40

IDFC SECURITIES LIMITED 54

IDFC FUND OF FUNDS LIMITED 81

IDFC CAPITAL (SINGAPORE) PTE. LIMITED 92

IDFC SECURITIES SINGAPORE PTE. LIMITED 111

IDFC CAPITAL (USA) INC. 127

IDFC ASSET MANAGEMENT COMPANY LIMITED 137

IDFC AMC TRUSTEE COMPANY LIMITED 161

IDFC INVESTMENT ADVISORS LIMITED 175

IDFC INVESTMENT MANAGERS (MAURITIUS) LIMITED 196

IDFC PROJECTS LIMITED 214

IDFC FINANCE LIMITED 231

IDFC PRIMARY DEALERSHIP COMPANY LIMITED 245

IDFC FOUNDATION 265

IDFC HOUSING FINANCE COMPANY LIMITED 284

IDFC INFRA DEBT FUND LIMITED 296

NEOPRO TECHNOLOGIES PRIVATE LIMITED 308

GALAXY MERCANTILES LIMITED 330

BOARD OF DIRECTORS n Dr. Rajiv B. Lall Chairman n Mr. Gautam Kaji n Mr. Bharat Shah n Mr. Vikram Limaye n Mr. Sunil Kakar n Mr. Sadashiv S. Rao n Dr. Rajeev Uberoi

AUDITORS n Deloitte Haskins & Sells LLP Chartered Accountants

PRINCIPAL BANKER n HDFC Bank Limited

REGISTERED OFFICENaman Chambers, C-32, G-Block Bandra-Kurla Complex, Bandra (East)Mumbai 400 051Tel: +91 22 4222 2000Fax: +91 22 2654 0354www.idfc.cominfo@idfc.comCIN: U67190MH2002PLC137798

01 IDFC ALTERNATIVES LIMITED

I D F C A LT E R N A T I V E S L I M I T E D | 3

Directors' ReportTO THE MEMBERSYour Directors have pleasure in presenting the Twelfth Annual Report together with the audited accounts for the year ended March 31, 2014.

FINANCIAL RESULTS

PARTICULARSFOR THE YEAR ENDED

MARCH 31, 2014 `

FOR THE YEAR ENDED MARCH 31, 2013

`

Total Income 659,016,534 666,232,531Less: Total Expenses 406,705,384 299,634,910Profit before Tax 252,311,150 366,597,621Less: Provision for Tax 63,992,000 94,832,000Profit after Tax 188,319,150 271,765,621Add: Balance Brought Forward 291,001,605 376,715,796Total Available for Appropriation 479,320,755 648,481,417APPROPRIATIONS:

Transfer to General Reserve 188,319,150 271,765,621Interim Dividend 75,000,000 240,000,000Tax on Dividend 1,699,500 35,303,250Proposed Equity Dividend 55,000,000Balance Carried Forward 383,789,340 291,001,605

OPERATIONAL REVIEW Your Company continues to be one of the leading multi-asset class fund managers in India, committed to the development of infrastructure in the country. During the year, your Company acted as fund manager for a total of five funds - India Development Fund, IDFC Private Equity Fund II and IDFC Private Equity Fund III under the private equity asset class, India Infrastructure Fund II under the infrastructure equity asset class and IDFC Real Estate Yield Fund, under the real estate asset class.The year was very eventful from multiple viewpoints. In October 2013, your Company announced the successful exit of our iconic India Development Fund, returning a multiple of capital of ~2.6x to investors at a net fund IRR of 32%. The Fund was of 2004 vintage with a total corpus of ` 8.4 billion and had made investments during the 2004-2008 period. With this event behind us, we now belong to the elite club of fund-houses in India who have seen the full lifecycle of a fund: fund-raising, investing, nurturing and exiting. During the year, private equity team made 5 complete exits and 1 partial exit, aggregating to a total of ` 3,386 millon. As on date, the private equity team has made a total of 41 investments across 36 companies.During the year, your Company had also launched its second infrastructure fund, the India Infrastructure Fund II, with a target size of ` 55 billion and has received commitments of ~` 47 billion till date in a very challenging fund raising environment. This has been the largest (and the fastest) fund-raising exercise by a domestic fund house in recent times and the fact that several key investors of the previous fund decided to re-up their commitments in the second fund is a testimony of the faith that investors repose in our investment abilities.Additionally, in February 2014, your Company announced the first close of ` 2.9 billion for its maiden domestic real estate fund, the IDFC Real Estate Yield Fund. The Fund has been entirely raised from retail investors and focuses on making opportunistic investments in the residential real estate segment in India. As on date, the fund has made investments in two properties situated at Pune and Bengaluru, respectively.The year also witnessed the closure of the commitment period of IDFC Private Equity Fund III. The fund has invested in 12 companies and the team would now focus it's attention on monitoring the assets and securing attractive exits for the investments.

DIVIDENDAt the Board Meeting held on July 26, 2013, the Board had approved interim dividend amounting to ` 7.50 crore at the rate of 15,000% i.e. ` 1,500/- per equity share. Your Directors have not recommended any further dividend and recommends confirmation of the said interim dividend as final dividend for the year.

COMPANIES ACT, 2013Most 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, 2014. MCA issued a General Circular no. 8/2014 dated April 4, 2014 which clarified that the Financial Statements, Auditors' Report and the Boards 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.

SUBSIDIARY COMPANYYour Company has one wholly owned subsidiary company namely, IDFC Project Equity Company Limited.

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Directors' ReportAs required under the provisions of Section 212 of the Companies Act, 1956, a statement of holding companys interest in the subsidiary company and the Annual Report of such subsidiary company have been attached to this report.

DIRECTORSMr. Sunil Kakar (DIN-03055561) and Mr. Sadashiv S. Rao (DIN-01245772) would retire at the ensuing Annual General Meeting ("AGM") and being eligible, offer themselves for reappointment.The Board of Directors recommends reappointment of the above retiring directors at the ensuing AGM.

AUDIT COMMITTEE The Audit Committee of the Company comprises of Mr. Sunil Kakar (DIN-03055561), Mr. Sadashiv S. Rao (DIN-01245772) and Dr. Rajeev Uberoi (DIN-01731829) as its members. The Audit Committee met four times during the year.

AUDITORSDeloitte Haskins & Sells LLP, Chartered Accountants (Registration No. 117366W / W-100018) 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 DEPOSITSThe Company has not accepted any public deposits during the year under review.

PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTIONSince 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.

FOREIGN EXCHANGE EARNINGS AND EXPENDITUREThe Company has no earnings in Foreign Exchange. The particulars regarding foreign exchange expenditure are furnished at Item No. 18 in the Notes forming part of the Financial Statements.

PERSONNEL AND OTHER MATTERSYour Company had 34 employees as on March 31, 2014. 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 Directors Report.

DIRECTORS RESPONSIBILITY STATEMENTThe Directors confirm that:

n the applicable accounting standards have been followed in preparation of annual accounts and there are no material departures; n 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 profit of the Company for the year ended on that date;

n 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

n they have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTSThe Board acknowledges the invaluable support extended to the Company by the investors of Funds, the Ministry of Finance, the Reserve Bank of India and the 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 it's 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, April 23, 2014


TO THE MEMBERS OF IDFC ALTERNATIVES LIMITED

Report on the Financial StatementsWe have audited the accompanying financial statements of IDFC ALTERNATIVES 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 year then ended and a summary of the significant accounting policies and other explanatory information.

Managements Responsibility for the Financial StatementsThe Companys 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) (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs) 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 ResponsibilityOur 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 auditors judgement, 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 Companys 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 Companys 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.

OpinionIn 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 March 31, 2014;(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 Requirements1. As required by the Companies (Auditors 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

notified under the Act (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs).

(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. 117366W/W-100018)

Z. F. BILLIMORIA

Partner(Membership No. 42791)

Mumbai, April 23 , 2014

Independent 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 Companys 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.(ii) In respect of its fixed assets: (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets. (b) 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.

(c) 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 purchase 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) The Company has been generally 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. (b) 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 March 31, 2014 for a period of more than six months from the date they became payable. (c) Details of dues of Income-tax which have not been deposited as on March 31, 2014 on account of disputes are given below:

STATUTE NATURE OF DUES FORUM WHERE DISPUTE IS PENDING

PERIOD TO WHICH THE AMOUNT RELATES

AMOUNT INVOLVED (AMOUNT IN `)

Income-tax Act, 1961 Income Tax DY. CIT(A) A.Y. 2011-12 668,825

(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.



Z. F. BILLIMORIA



Annexure to the Auditors' Report


IN TERMS OF OUR REPORT ATTACHED.


Chartered AccountantsFOR AND ON BEHALF OF THE BOARD OF DIRECTORS OF

IDFC ALTERNATIVES LIMITED

Z. F. BILLIMORIA SUNIL KAKAR RAJEEV UBEROIPartner Director Director

Mumbai | April 23, 2014

AS AT MARCH 31, 2014


NOTES ` `

EQUITY AND LIABILITIES

SHAREHOLDERS FUNDS

(a) Share capital 3 500,000 500,000 (b) Reserves and surplus 4 588,329,061 476,709,411 NON-CURRENT LIABILITIES

(a) Deferred tax liability 5 36,605,000 32,931,000 CURRENT LIABILITIES

(a) Trade payables 6 132,047,684 86,334,999 (b) Other current liabilities 7 96,972,975 120,848,185 (c) Short-term provisions 8 680,830 72,223,921 TOTAL 855,135,550 789,547,516

ASSETS

NON-CURRENT ASSETS

(a) Fixed assetsi) Tangible assets 9a 414,861,075 434,437,190 ii) Intangible assets 9b 45,909 299,453

414,906,984 434,736,643 (b) Non-current investments 10 57,939,934 51,767,085 (c) Long-term loans and advances 11 109,564,207 83,730,623 CURRENT ASSETS

(a) Cash and bank balance 12 259,304,284 211,934,295 (b) Short-term loans and advances 11 8,002,419 4,185,956 (c) Other current assets 13 5,417,722 3,192,914 TOTAL 855,135,550 789,547,516

See accompanying notes forming part of the financial statements.

Balance Sheet AS AT MARCH 31, 2014










NOTES ` `

I INCOME

Revenue from operations 14 580,692,293 566,605,921 Other income 15 78,324,241 99,626,610 TOTAL INCOME (I) 659,016,534 666,232,531

II EXPENSES

Employee benefit expenses 16 282,615,342 221,289,487 Depreciation and amortisation expense 9 24,158,137 24,646,516 Other expenses 17 99,931,905 53,698,907 TOTAL EXPENSES (II) 406,705,384 299,634,910

III PROFIT BEFORE TAX (I - II) 252,311,150 366,597,621

IV TAX EXPENSE

Current tax 60,318,000 83,760,000 Deferred tax 5 3,674,000 11,072,000 TOTAL TAX EXPENSE 63,992,000 94,832,000

V PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS (III - IV) 188,319,150 271,765,621

Earnings per share (nominal value of ` 10 per share) 24(a) Basic 3,766.38 5,435.31 (b) Diluted 3,766.38 5,435.31


Statement of Profit and Loss FOR THE YEAR ENDED MARCH 31, 2014










` `

A. CASH FLOW FROM OPERATING ACTIVITIESNET PROFIT BEFORE TAX 252,311,150 366,597,621 Adjustments for: Depreciation and amortisation expenses 24,158,137 24,646,516 Loss on sale / write off of fixed assets 64,094 Interest income on bank deposits (2,635,684) (14,203,706)Dividend received from subsidiary company (65,000,000) (80,000,000)Profit on sale of current investments (10,638,885) Dividend income on current investments (49,672) (5,422,904)Operating profit before working capital changes 198,145,046 291,681,621 Changes in working capital:Adjustments for (increase) / decrease in operating assets: Long-term loans and advances (298,878) (11,697) Short-term loans and advances (3,816,463) 2,728,699 Other current assets (2,262,960) (2,954,830)Adjustments for increase / (decrease) in operating liabilities: Long-term provisions (13,610,321) Short-term provisions (1,523,116) Trade payables 45,712,685 (24,276,553) Other current liabilities (23,875,210) (23,238,037)Cash generated from operations 213,604,220 228,795,766 Net income tax paid (93,048,547) (74,296,171)NET CASH FROM OPERATING ACTIVITIES 120,555,673 154,499,595

B. CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of fixed assets (4,386,124) (3,721,490)Proceeds from sale of fixed assets 57,646 Bank balances not considered as cash and cash equivalents Matured 150,000,000 Purchase of current investments (672,549,672) (668,941,463)Sale proceeds of current investments 683,188,557 668,941,463 Investment in subsidiary company (37,895,070)Purchase of non-current investments (6,172,849) (2,263,026)Proceeds from sale of non-current investments 1,297,304 Interest income on bank deposits 2,673,836 14,196,853 Dividend received from subsidiary company 65,000,000 80,000,000 Dividend income on current investments 49,672 5,422,904 NET CASH FROM INVESTING ACTIVITIES 67,861,066 207,037,475

C. CASH FLOWS FROM FINANCING ACTIVITIES

Interim dividend paid (including dividend distribution tax) (141,046,750) (265,956,000)NET CASH USED IN FINANCING ACTIVITIES (141,046,750) (265,956,000)Net increase in cash and cash equivalents (A+B+C) 47,369,989 95,581,070 Cash and cash equivalents at the beginning of the year (see note 12) 211,934,295 116,353,225 Cash and cash equivalents at the end of the year (see note 12) 259,304,284 211,934,295

47,369,989 95,581,070

Cash Flow Statement FOR THE YEAR ENDED MARCH 31, 2014


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 201401 BackgroundIDFC Alternatives Limited ("Company") is a wholly owned subsidiary of IDFC Limited ("IDFC"), Incorporated in India, providing Investment Management and Advisory Services and was the Investment Manager to IDFC Infrastructure Fund of which India Development Fund is a unit scheme (IDF) upto December 24, 2013. The Company is Investment Manager to 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) all of which are domestic venture capital funds registered under the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996. During the current year, the Company was appointed as the Investment Manager to the India Infrastructure Fund 2 registered under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 as a category I Alternative Investment Fund from September 18, 2013 and IDFC Real Estate Yield Fund registered under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 as a category II Alternative Investment Fund from December 9, 2013 .

02 Significant Accounting Policies(a) Basis of PreparationThe financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India ("Indian GAAP") to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 (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 accrual basis under the historical cost convention

(b) Use of estimatesThe 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 equivalentsCash and cash equivalents for the purpose of the Cash Flow Statement comprises cash on hand, cash in bank, fixed deposits and other short-term 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 statementsCash 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) InflationAssets 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 assetsFixed assets are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated depreciation.

(h) Intangible assetsIntangible 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 D F C A LT E R N A T I V E S L I M I T E D | 1 1

Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 2014(i) Depreciation and amortisationTangible assetsDepreciation 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 Managements estimate of useful life of assets. Depreciation on additions during the year is provided on a pro-rata basis. Assets costing less than ` 5,000/- each are written off in the year of capitalisation.

Intangible assetsIntangible 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 benefitsDefined contribution plansThe 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 planThe net present value of the Companys 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 accumulated 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 leasesLeases 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 by 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 shareBasic 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-taxThe accounting treatment for income-tax in respect of the Companys 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 contingenciesA 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.


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 2014(p) Foreign currency transactionsForeign 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 assetsThe 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.

(r) Service tax input creditService tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is no uncertainty in availing / utilising the credits.

(s) Operating cycleBased on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.

03 Share capital

PARTICULARS AS AT MARCH 31, 2014 AS AT MARCH 31, 2013

NUMBER ` NUMBER `

(A) AUTHORISED

Equity shares of ` 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, the Holding Company and its nominees.)

TOTAL ISSUED, SUBSCRIBED & FULLY PAID UP SHARE CAPITAL

50,000 500,000 50,000 500,000

(a) Terms / rights attached to equity shares The Company has only one class of equity share having a par value of ` 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 AS AT MARCH 31, 2014 AS AT MARCH 31, 2013

NO. OF SHARES HELD

% OF HOLDING NO. OF SHARES HELD

% OF HOLDING

IDFC Limited and its nominees 50,000 100% 50,000 100% 50,000 100% 50,000 100%

(c) During the year ended March 31, 2014, the Board of Directors, in the meeting held on July 26, 2013 had declared interim dividend of ` 1,500 per equity share (Previous Year ` 4,800 per equity share in the meeting held on October 25, 2012).Also during the year ended March 31, 2014, the Board of Directors have proposed dividend of ` Nil (Previous Year ` 1,100) per share. The total dividend appropriation amounted to ` 76,699,500 (Previous Year ` 330,303,250) including dividend distribution tax of ` 1,699,500 (Previous Year ` 35,303,250).


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 201404 Reserves and surplus

AS AT MARCH 31, 2014 AS AT MARCH 31, 2013

` `

(A) GENERAL RESERVE

Opening balance 185,707,806 158,531,244 Add: Transferred from surplus in Statement of Profit and Loss 18,831,915 27,176,562 Closing balance 204,539,721 185,707,806

(B) SURPLUS IN STATEMENT OF PROFIT AND LOSS

Opening balance 291,001,605 376,715,796 Add: Profit for the year 188,319,150 271,765,621 Less: Interim dividend (see note 22) (75,000,000) (240,000,000) Proposed equity dividend (see note 22) (55,000,000) Tax on equity dividend (see note below) (1,699,500) (35,303,250) Transfer to General reserve (18,831,915) (27,176,562)Closing balance 383,789,340 291,001,605 TOTAL 588,329,061 476,709,411

Dividend distribution tax for the year is net of dividend distribution tax of ` 11,046,750 (Previous Year ` 12,978,000) paid by the subsidiary company under Section 115-O of the Income-tax Act, 1961.

05 Deferred tax liability AS AT MARCH 31, 2014 AS AT MARCH 31, 2013

` `

TAX EFFECT OF ITEMS CONSTITUTING DEFERRED TAX LIABILITY

On difference between book balance and tax balance of fixed assets 36,605,000 32,931,000 Deferred tax liability 36,605,000 32,931,000

In compliance with Accounting Standard 22 on Accounting for Taxes on Income as notified by the Companies (Accounting Standards) Rules, 2006, ` 3,674,000 (Previous Year ` 11,072,000) has been debited to the Statement of Profit and Loss towards deferred tax on account of timing differences.

06 Trade payables AS AT MARCH 31, 2014 AS AT MARCH 31, 2013

` `

Payable to vendors 19,158,259 Provision for expenses 112,889,425 86,334,999 TOTAL 132,047,684 86,334,999

No amount is payable in the current year to 'Suppliers' 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.

07 Other current liabilities AS AT MARCH 31, 2014 AS AT MARCH 31, 2013

` `

Fees received in advance 90,996,815 117,185,547 Payable to employee benefit funds (net of receivable of ` 1,344,866) 1,480,345 Others Statutory remittances 4,495,815 3,662,638 TOTAL 96,972,975 120,848,185


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 201408 Short-term provisions


` `

Provision for income tax (net of taxes paid ` 75,703,201 (Previous Year ` 152,267,360)) 296,799 7,492,640 Provision for fringe benefit tax (net of taxes paid ` 14,876,617 (Previous Year ` 14,876,617)) 384,031 384,031 Proposed equity dividend (see note 3(c)) 55,000,000 Tax on proposed equity dividend 9,347,250 TOTAL 680,830 72,223,921

09 Fixed assetsGROSS BLOCK DEPRECIATION / AMORTISATION NET BLOCK

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` ` ` ` ` ` ` ` ` `

A TANGIBLE ASSETS Buildings 523,563,116 523,563,116 97,996,117 21,278,350 119,274,467 404,288,649 425,566,999 (Previous Year) (523,563,116) (523,563,116) (75,597,854) (22,398,263) (97,996,117) (425,566,999)Computer hardware 7,232,754 601,976 7,834,730 6,235,765 531,949 6,767,714 1,067,016 996,989 (Previous Year) (7,553,905) (140,431) (461,582) (7,232,754) (6,047,107) (639,632) (450,974) (6,235,765) (996,989)Furniture and fixtures 2,905,810 57,646 2,848,164 1,124,770 309,382 1,434,152 1,414,012 1,781,040 (Previous Year) (1,732,278) (1,173,532) (2,905,810) (865,544) (259,226) (1,124,770) (1,781,040)Office equipment 11,733,990 338,161 12,072,151 5,641,828 985,812 6,627,640 5,444,511 6,092,162 (Previous Year) (9,490,263) (2,407,527) (163,800) (11,733,990) (4,771,880) (980,263) (110,315) (5,641,828) (6,092,162)Vehicles 3,389,941 3,389,941 743,054 743,054 2,646,887 (Previous Year) TOTAL (A) 545,435,670 4,330,078 57,646 549,708,102 110,998,480 23,848,547 134,847,027 414,861,075 434,437,190 Previous Year (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)

B INTANGIBLE ASSETS- OTHER THAN INTERNALLY GENERATED Computer software 4,474,051 56,046 4,530,097 4,174,598 309,590 4,484,188 45,909 299,453 (Previous Year) (4,474,051) (4,474,051) (3,805,466) (369,132) (4,174,598) (299,453)TOTAL (B) 4,474,051 56,046 4,530,097 4,174,598 309,590 4,484,188 45,909 299,453 Previous Year (4,474,051) (4,474,051) (3,805,466) (369,132) (4,174,598) (299,453)TOTAL (A) + (B) 549,909,721 4,386,124 57,646 554,238,199 115,173,078 24,158,137 139,331,215 414,906,984 434,736,643 Total of Previous Year (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)

10 Non-current investments (unquoted)(cost) AS AT MARCH 31, 2014 AS AT MARCH 31, 2013

` `

INVESTMENT IN EQUITY SHARES (TRADE)SUBSIDIARY COMPANY

IDFC Project Equity Company Limited 37,895,070 37,895,070 50,000 equity shares of ` 10 each fully paid upOTHERS

Aavantika Gas Limited 25,000 2,500 equity shares of ` 10 each fully paid upINVESTMENTS IN VENTURE CAPITAL UNITS (NON-TRADE)

IDFC Infrastructure Fund 3- IDFC Private Equity Fund III - Class C 13,528,748 10,135,770 2,550,000 (Previous Year 2,550,000) units of ` 10 each, ` 6.25 (Previous Year ` 4.92) paid up per unit, commitment restricted to ` 7.143 per unitIDFC Infrastructure Fund 3- IDFC Private Equity Fund III - Class F 6,491,116 3,736,245 728,535 (Previous Year 728,535) units of ` 10 each, ` 8.90 (Previous Year ` 5.12) paid up per unitTOTAL 57,939,934 51,767,085

The above investments in venture capital units are subject to restrictive covenants.


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 201411 Loans and advances (unsecured, considered good)


NON-CURRENT PORTION

CURRENT PORTION

NON-CURRENT PORTION

CURRENT PORTION

` ` ` `

Security deposits 88,191 90,191 Prepaid expenses 216,575 4,935,422 15,697 2,906,024 Supplier Advance 47,146 Balances with government authoritiesService tax credit receivable 2,949,989 857,558 Advance payment of income tax (net provision for tax ` 1,205,793,407 (pervious year ` 1,061,715,407))

109,159,441 83,624,735

Others 100,000 117,008 375,228 TOTAL 109,564,207 8,002,419 83,730,623 4,185,956

12 Cash and bank balances AS AT MARCH 31, 2014 AS AT MARCH 31, 2013

` `

CASH AND CASH EQUIVALENTS

Cash on hand 9,486 12,887 Balances with banks in current accounts 29,294,798 1,921,408 in deposit accounts 230,000,000 210,000,000 TOTAL 259,304,284 211,934,295

13 Other current assets AS AT MARCH 31, 2014 AS AT MARCH 31, 2013

` `

Interest accrued on term deposits with banks 199,932 238,084 Expenses recoverable 5,217,790 2,954,830 TOTAL 5,417,722 3,192,914

14 Revenue from operationsFOR THE YEAR ENDED

MARCH 31, 2014FOR THE YEAR ENDED

MARCH 31, 2013

` `

Management fees 580,692,293 566,605,921 TOTAL 580,692,293 566,605,921

15 Other incomeFOR THE YEAR ENDED


MARCH 31, 2013

` `

Dividend income from subsidiary company (see note 22) 65,000,000 80,000,000 Interest income on bank deposits 2,635,684 14,203,706 Dividend income from current investments 49,672 5,422,904 Profit on sale of current investments 10,638,885 TOTAL 78,324,241 99,626,610


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 201416 Employee benefit expenses



` `

Salaries and bonus (see note 23) 256,976,239 201,072,325 Contribution to provident and other funds (see note 20) 22,488,283 18,052,656 Staff welfare expenses 3,150,820 2,164,506 TOTAL 282,615,342 221,289,487

17 Other expensesFOR THE YEAR ENDED


MARCH 31, 2013

` `

Rent 28,800 Rates and taxes 2,860,813 2,860,813 Repairs and maintenance Building 127,360 Equipment 103,864 699 Others 1,516,922 1,695,279 Insurance charges 1,987,979 2,233,670 Travelling and conveyance (see note 18) 17,611,986 11,330,557 Realised loss on foreign currency transactions 22,890 2,125 Printing and stationery 742,844 466,618 Postage, telephone and fax 873,773 843,468 Advertisement and publicity 14,853,259 6,597,740 Professional fees (see note 18) 14,742,489 11,626,976 Directors fees (see note 18) 140,000 140,000 Auditors remuneration (see note (a) below) 1,585,000 1,575,000 Shared service cost (see note (b) below) (see note 22) 5,742,026 10,792,752 Fund organisational expenses 11,959,278 Distribution fees 20,187,935 Loss on sale of fixed assets 64,094 Miscellaneous expenses 5,000,847 3,312,956 TOTAL 99,931,905 53,698,907

(a) Break up of auditors remuneration:



` `

Audit fees 750,000 750,000 Tax audit fees 175,000 175,000 Other services 660,000 650,000 Service tax 66,126 194,670 TOTAL 1,651,126 1,769,670 Less: Service tax set off claimed 66,126 194,670

TOTAL 1,585,000 1,575,000

(b) Shared service cost of ` 5,742,026 (Previous Year ` 10,792,752) represents cost allocated by the Holding Company under a service level agreement.


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 201418 Expenditure in foreign currency (on payment basis)



` `

Travelling expenses 172,452 116,270 Professional fees 3,781,057 2,138,320 Director sitting fees 60,000 80,000 Others 2,945,010 442,945

19 Earnings in foreign currencies:There are no earnings in foreign currencies

20 Employee benefitsIn 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 7,904,266 5,841,859 Pension fund 2,543,827 2,382,673 Superannuation fund 1,813,301 1,836,632

The details of the Companys 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 22,759,846 15,133,437 Current service cost 4,270,841 3,486,949 Interest cost 2,118,976 1,496,570 Benefits paid (1,344,866) (365,083)Actuarial loss 1,975,437 3,007,973 Liability assumed on acquisition 3,157,453 Liability at the end of the year 32,937,687 22,759,846 FAIR VALUE OF PLAN ASSETS:

Fair value of plan assets at the beginning of the year 22,759,846 Expected return on plan assets 1,898,474 Contributions 8,449,644 23,124,929 Benefits paid (1,344,866) (365,083)Actuarial loss on plan assets (602,656) Fair value of plan assets at the end of the year 31,160,442 22,759,846 Total actuarial loss to be recognised 2,578,093 3,007,973 ACTUAL RETURN ON PLAN ASSETS:

Expected return on plan assets 1,898,474 Actuarial loss on plan assets (602,656) Actual return on plan assets 1,295,818 AMOUNT RECOGNISED IN THE BALANCE SHEET:

Liability at the end of the year 32,937,687 22,759,846 Fair value of plan assets at the end of the year 31,160,442 22,759,846 Amount recognised in the Balance Sheet under Other current liabilities- Payable to employee benefit funds (Net of receivable of ` 1,344,866)

1,777,245


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 2014FOR THE YEAR ENDED


MARCH 31, 2013

` `

EXPENSE RECOGNISED IN THE STATEMENT OF PROFIT AND LOSS:

Current service cost 4,270,841 3,486,949 Interest cost 2,118,976 1,496,570 Expected return on plan assets 1,898,474 Net actuarial loss to be recognised 2,578,093 3,007,973 Liability assumed on acquisition 3,157,453 Expense recognised in the Statement of Profit and Loss under Employee benefit expenses 10,226,889 7,991,492 RECONCILIATION OF THE LIABILITY RECOGNISED IN THE BALANCE SHEET:

Opening net liability 15,133,437 Expense recognised 10,226,889 7,991,492 Contribution by the Company (8,449,644) (23,124,929)Amount recognised in the Balance Sheet under Other current liabilities- Payable to employee benefit funds (Net of receivable of ` 1,344,866)

1,777,245

EXPECTED EMPLOYERS CONTRIBUTION FOR THE NEXT YEAR 4,000,000 4,000,000

Experience adjustments: FOR THE YEAR ENDED

MARCH 31, 2014 MARCH 31, 2013 MARCH 31, 2012 MARCH 31, 2011 MARCH 31, 2010

IN `

Defined benefit obligation 32,937,687 22,759,846 15,133,437 12,855,573 9,255,401 Plan assets 31,160,442 22,759,846 Surplus / (deficit) (1,777,245) (15,133,437) (12,855,573) (9,255,401)Experience adjustment on plan liabilities 4,355,447 2,298,723 (618,889) 3,897,432 (708,140)Experience adjustment on plan assets (602,656)



% %

INVESTMENT PATTERN:

Insurer managed funds Government securities 34.27 37.41 Deposit and money market securities 14.32 29.58 Debentures / bonds 51.41 33.01 PRINCIPAL ASSUMPTIONS:

Discount rate (per annum) 8.95 8.05 Expected rate of return on assets (per annum) 8.00 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 reportingThe Companys 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.


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 201422 Related party disclosuresIn accordance with 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

II Subsidiary Company IDFC Project Equity Company Limited (w.e.f. May 17, 2012)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 Shared services cost 5,742,026 10,792,752

Interim dividend 75,000,000 240,000,000 Final dividend paid (2012-13) 55,000,000 Purchase of investment 37,800,000

(b) Subsidiary Company IDFC Project Equity Company Limited Interim dividend received 65,000,000 80,000,000

23 Lease disclosureIn 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 are made: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 ` 1,283,233).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 594,847 1,878,080

24 Earnings per shareIn accordance with the Accounting Standard 20 on Earnings Per Share as notified by the Companies (Accounting Standards) Rules, 2006, the earning per share has been computed as under:



` `

Net profit after tax for the year (`) 188,319,150 271,765,621 Weighted average number of equity shares (nos) 50,000 50,000 Par value per share (`) 10 10 Earnings per share - Basic (`) 3,766.38 5,435.31 Earnings per share - Diluted (`) 3,766.38 5,435.31


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 201425 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 paid. The matter 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.

668,825

Other claims 14,052,000 14,052,000 2) COMMITMENTS

Uncalled liability on shares and other investments partly paid 1,771,734 7,919,583 16,492,559 21,971,583

26 Prior years figuresPrevious Years figures have been regrouped / reclassified wherever necessary to correspond with the current years classification / disclosure.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS OF


SUNIL KAKAR RAJEEV UBEROIMumbai | April 23, 2014 Director Director


Statement Pursuant to Section 212 OF THE COMPANIES ACT, 1956

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS OF


SUNIL KAKAR RAJEEV UBEROIMumbai | April 23, 2014 Director Director

NAME OF SUBSIDIARY COMPANY IDFC PROJECT EQUITY COMPANY LIMITED

1 Financial year of the Subsidiary Companies ended on March 31, 20142 Equity Shares of ` 10 each

a) Number of Shares 50,000Shares of `10 each

b) Extent of Holding 100%3 Net aggregate amount of Profit / (Losses) of the Subsidiary, so far as they

concern members of IDFC Alternatives Limitedi. For the Financial Year of the Subsidiary a) Dealt with in the accounts of the Holding Company. 65,000,000 b) Not dealt with in the accounts of the Holding Company. 12,991,984 ii. For the previous financial years of the Subsidiary since it became the Holding Companys 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

BOARD OF DIRECTORS n Dr. Rajiv B. Lall Chairman n Mr. Sunil Kakar n Mr. Sadashiv S. Rao n Dr. Rajeev Uberoi

AUDITORS n Deloitte Haskins & Sells LLP Chartered Accountants

PRINCIPAL BANKER n HDFC Bank Limited

REGISTERED OFFICENaman Chambers, C-32, G-Block Bandra-Kurla Complex, Bandra (East)Mumbai 400 051Tel: +91 22 4222 2000Fax: +91 22 2654 0354www.idfc.cominfo@idfc.comCIN: U51103MH2007PLC167611

02 IDFC PROJECT EQUITY COMPANY LIMITED

I D F C P R O J E C T E Q U I T Y C O M PA N Y L I M I T E D | 2 3

Directors' ReportTO THE MEMBERSYour Directors have pleasure in presenting the Eighth Annual Report together with the audited accounts for the year ended March 31, 2014.

FINANCIAL RESULTS

PARTICULARSFOR THE YEAR ENDED

MARCH 31, 2014 `


`

Total Income 523,508,184 586,337,596Less: Total Expenses 410,648,680 363,112,678Profit / (Loss) before Tax 112,859,504 223,224,918Less: Provision for Tax 34,867,520 70,369,000Profit / (Loss) after Tax 77,991,984 152,855,918Add: Profit / (Loss) brought forward 26,391,436 5,412,518Profit Available for Appropriation 104,383,420 158,268,436APPROPRIATIONS

Transfer to General Reserve 7,800,000 15,500,000Interim Dividend 45,000,000 80,000,000Proposed Dividend 20,000,000Dividend Tax on Interim Dividend 7,647,750 16,377,000Profit / (Loss) carried forward 43,935,670 26,391,436

OPERATIONAL REVIEWYour Company continues to be committed to the development of infrastructure in the country and manage capital commitments of ` 38.37 billion through India Infrastructure Fund (Fund).During the year, your Company closed two new investments and one exit for the Fund. Your Company devoted efforts on portfolio management and generating distributions from some of the operating assets.Your Company sponsored / participated in various infrastructure focused events and conferences across the globe during the year.

DIVIDENDAt the Board Meeting held on July 26, 2013, your Board had approved interim dividend amounting to ` 4.50 crore at the rate of 9,000% i.e. ` 900/- per equity share.Your Directors have not recommended any further dividend and recommend confirmation of the said interim dividend as final dividend for the year.

COMPANIES ACT, 2013Most 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, 2014. MCA issued a General Circular no. 8/2014 dated April 4, 2014 which clarified that the Financial Statements, Auditors' Report and the Boards 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 During the year, Mr. Vikram Limaye (DIN-00488534) resigned as a director with effect from March 26, 2014. The Board placed on record its appreciation for the valuable contribution made by Mr. Vikram Limaye during his tenure as Director of the Company. Dr. Rajeev Uberoi (DIN-01731829) and Mr. Sadashiv S. Rao (DIN-01245772) would retire at the ensuing Annual General Meeting ("AGM") and being eligible, offer themselves for reappointment.The Board of Directors recommends reappointment of the above retiring Directors at the ensuing AGM.

AUDITORSDeloitte Haskins & Sells LLP, Chartered Accountants (Registration No. 117366W / W-100018), 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 DEPOSITSDuring the year under review, your Company has not accepted public deposits.


Directors' ReportPARTICULARS 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.

FOREIGN EXCHANGE EARNINGS AND EXPENDITUREThe particulars regarding foreign exchange expenditure are furnished in Note No. 19 of Notes forming part of the Financial Statements. There was no foreign currency income earned during the year.

PERSONNEL AND OTHER MATTERSYour Company had 20 employees as on March 31, 2014. 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 Directors Report.

DIRECTORS RESPONSIBILITY STATEMENTThe Directors confirm that:

n the applicable accounting standards have been followed in preparation of annual accounts and there are no material departures; n 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 profit or loss of the Company for the year ended on that date;

n 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

n they have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS The Directors thank the investors of India Infrastructure Fund, the Reserve Bank of India and the Securities and Exchange Board of India for their continued support to the Company.The Directors also express their gratitude for the unstinted support and guidance received from IDFC Limited and other group companies.The Directors would also like to express their sincere thanks and appreciation to all the employees for their commendable teamwork, exemplary professionalism and enthusiastic contribution during the year.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

RAJIV B. LALL

Chairman



TO THE MEMBERS OF IDFC PROJECT EQUITY COMPANY LIMITED

Report on the Financial StatementsWe have audited the accompanying financial statements of IDFC PROJECT EQUITY COMPANY 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 year then ended and a summary of the significant accounting policies and other explanatory information.

Managements Responsibility for the Financial StatementsThe Companys 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) (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs) 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 ResponsibilityOur 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 auditors judgement, 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 Companys 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 Companys 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.

OpinionIn 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 March 31, 2014;(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 Requirements1. As required by the Companies (Auditors 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

notified under the Act (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs).

(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.



Z. F. BILLIMORIA



Independent 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 Companys business/ activities/ result/ transactions, etc. Clauses (i)(c), (ii), (vi), (viii), (x), (xi), (xii), (xiii), (xv),

(xvi), (xvii), (xviii), (xix), and (xx) of CARO are not applicable.(ii) In respect of its fixed assets: (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets. (b) 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.

(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 purchase 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) The Company has been generally 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. (b) 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 March 31, 2014 for a period of more than six months from the date they became payable. (c) Details of dues of Income-tax which have not been deposited as on March 31, 2014 on account of disputes are given below:

STATUTE NATURE OF DUES FORUM WHERE DISPUTE IS PENDING

PERIOD TO WHICH THE AMOUNT RELATES

AMOUNT INVOLVED (AMOUNT IN `)

Income-tax Act, 1961 Income Tax DCIT(A) A.Y. 2010-11 1,250,300

(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.



Z. F. BILLIMORIA



Annexure to the Auditors' Report





IDFC PROJECT EQUITY COMPANY LIMITED


SANJAY AJGAONKARMumbai | April 23, 2014 Company Secretary

NOTES AS AT MARCH 31, 2014


` `

EQUITY AND LIABILITIES

SHAREHOLDERS FUNDS

(a) Share capital 3 500,000 500,000 (b) Reserves and surplus 4 99,058,670 73,714,436

99,558,670 74,214,436 CURRENT LIABILITIES

(a) Trade payables 5 164,491,355 123,175,961 (b) Other current liabilities 6 84,483,828 113,057,630 (c) Short-term provisions 7 23,399,000

248,975,183 259,632,591 TOTAL 348,533,853 333,847,027

ASSETS

NON-CURRENT ASSETS

(a) Fixed assets(i) Tangible assets 8 6,099,545 1,889,499 (ii) Intangible assets 8 25,888 10,736

6,125,433 1,900,235 (b) Deferred tax asset 9 225,957 205,957 (c) Long-term loans and advances 10 132,984,506 111,468,849

139,335,896 113,575,041 CURRENT ASSETS

(a) Cash and bank balances 11 192,842,904 195,689,839 (b) Short-term loans and advances 12 14,989,276 21,364,515 (c) Other current assets 13 1,365,777 3,217,632

209,197,957 220,271,986 TOTAL 348,533,853 333,847,027


Balance Sheet AS AT MARCH 31, 2014








NOTES FOR THE YEAR ENDED MARCH 31, 2014


` `

I INCOME

Revenue from operations 14 511,506,479 575,508,582 Other income 15 12,001,705 10,829,014 TOTAL REVENUE (I) 523,508,184 586,337,596

II EXPENSES

Employee benefit expenses 16 264,338,358 233,533,511 Finance cost 17 2,810 50,990 Depreciation and amortisation expense 8 1,158,770 887,061 Other expenses 18 145,148,742 128,641,116 TOTAL EXPENSES (II) 410,648,680 363,112,678

III PROFIT BEFORE TAX (I - II) 112,859,504 223,224,918

IV TAX EXPENSES:

Current tax 34,419,000 65,523,000 Deferred tax 9 (20,000) 4,846,000 Provision for tax for earlier year 468,520

V PROFIT AFTER TAX (III - IV) 77,991,984 152,855,918

Earnings per share (nominal value of ` 10 per share) 25Basic (`) 1,559.84 3,057.12 Diluted (`) 1,559.84 3,057.12


Statement of Profit and Loss FOR THE YEAR ENDED MARCH 31, 2014










` `

A. CASH FLOW FROM OPERATING ACTIVITIES

Profit before taxation 112,859,504 223,224,918 Adjustments for: Depreciation and amortisation expense 1,158,770 887,061 Loss on sale of current investments 26,446 Dividend income on current investment (11,653,890) (10,505,987)Interest income on bank deposits (347,815) (322,224)Operating profit before working capital changes 102,043,015 213,283,768 Changes in working capital:Decrease in short-term loans and advances 6,375,239 73,110,518 Increase in long- term loans and advances (55,000,000)Decrease / (increase) in other current assets 1,819,292 (2,876,003)Increase / (decrease) in trade payables 41,315,394 (5,544,208)Increase in other current liabilities (28,573,802) 1,281,939 Decrease in long-term provisions (13,162,573)Decrease in short-term provisions (23,399,000) (1,401,185)Cash generated from operations 99,580,137 209,692,256 Net income tax paid (56,403,177) (65,616,669)NET CASH FROM OPERATING ACTIVITIES (A) 43,176,960 144,075,587

B. CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of fixed assets (5,383,968) (847,412)Sale proceeds of current investments 692,127,447 714,005,991 Dividend received on current investments 11,653,890 10,505,987 Purchase of current investments (692,153,892) (714,005,991)Interest received on bank deposits 380,378 229,987 NET CASH FROM INVESTING ACTIVITIES (B) 6,623,855 9,888,562

C. CASH FLOWS FROM FINANCING ACTIVITIES

Interim equity dividend paid (including dividend distribution tax) (52,647,750) (92,978,000)NET CASH USED IN FINANCING ACTIVITIES (C) (52,647,750) (92,978,000)

Net increase / (decrease) in cash and cash equivalents (A+B+C) (2,846,935) 60,986,149 Cash and cash equivalents at the beginning of the year (see note 11) 195,689,839 134,703,690 Cash and cash equivalents at the end of the year (see note 11) 192,842,904 195,689,839

(2,846,935) 60,986,149

Cash Flow Statement FOR THE YEAR ENDED MARCH 31, 2014


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 201401 BackgroundIDFC Project Equity Company Limited (the Company) was incorporated on February 06, 2007. The Company has entered into an Investment Management Agreement with IDFC Trustee Company Limited on March 11, 2008 to act as the Investment Manager of the India Infrastructure Fund (Fund) a domestic venture capital fund registered under the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996. In accordance with the agreement, the Company is entitled to receive an investment management fee for managing the Fund beginning from the Initial Closing of the Fund.

02 Significant Accounting Policies(a) Basis of PreparationThe financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India ("Indian GAAP") to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 (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 accrual basis under the historical cost convention.

(b) Use of estimatesThe 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 due to these estimates.

(c) Cash and cash equivalentsCash and cash equivalents for the purpose of the Cash Flow Statement comprises cash on hand, cash in bank, fixed deposits and other short-term 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 changes in value.

(d) Cash flow statementsCash 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) InflationAssets 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 assetsFixed assets are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated depreciation.

(h) Intangible assetsIntangible 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 amortisationTangible assetsDepreciation 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 Managements estimate of useful life of assets. Depreciation on additions during the year is provided on a pro-rata basis. Assets costing less than ` 5,000/- each are written off in the year of capitalisation.


Notes forming part of the Financial Statements AS AT AND FOR THE YEAR ENDED MARCH 31, 2014Intangible assetsIntangible 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 and fair value on an individual basis.

(k) Employee benefitsDefined contribution plansThe companys 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 planThe net present value of the Companys obligation towards Gratuity to employees is funded and actuarially determined as at the year end 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 leasesLeases 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 shareBasic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit 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-taxThe accounting treatment for income-tax in respect of the Companys 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 using 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 contingenciesA 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 transactionsForeign 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

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