IL

1

IL&FS Investment Managers Ltd

January 2009

2

Structure of Presentation

! Section A : Overview

! Section B : Investment Environment

! Section C : Funds Under Management

! Section D : Future Strategy

3

Section A : Overview

44

IL&FS Group Business Canvas

Financial Services

Investment Banking

Structured / Asset Finance

Project & Corporate Advisory

Private Capital Mobilization

Mergers and Acquisitions

Asset Management

Private Equity

Infrastructure

InfrastructureProject DevelopmentProject Sponsorship

SEZ / Industrial ParksPower Advisory

Surface Transport & Maritime

Social Infrastructure

Training

Education

Property Management

Environment & Social

Management

Advisory

Training

Waste & Water Management

Composite Service Platform

5

IL&FS Investment Managers

! Acquired by IL&FS in 1996 – Early recognition of establishing PE practice

– Structured as a pure asset management play

– Strong linkages forged with domestic and international investors

! Maturity through exposure

– Seen the PE world expand from < US$ 20 mn to > US$ 15 bn

– Investment spectrum spanning VC to PE; Buy-outs to PIPEs

– Cross sectoral presence

! Strong support of local partners / investees

– Over 60% of deal flow proprietary in nature

– Largely off-market deals, resulting from relationships; leads to better control on entry pricing/terms

! Team experience straddles fund and economic cycles

– 96 investments since 1998

– 47 exits / liquidity events

– Realized gross US$ IRR > 27%

Over US$ 1.9 bn under management

6

5%

6

Shareholding

IIML• IIML = “IL&FS

Investment Managers Limited”

• Focused solely on alternative asset management

IL&FS• IL&FS = “Infrastructure

Leasing & Financial Services”

• Founded 1987• Over US$ 2.96 bn of assets• Shareholders include ORIX,

ADIA, LIC, SBI, HDFC• 1,500 employees in 60

offices• Acquired IIML in 1996

Publicly Held

52%IIML

Employees

Note: Shareholding is as on March 31, 2008

43%

77

Key Persons

B.Com, ACA1220Chief Financial Officer

Manoj Borkar

B.A, MBA, PGDBA 226Chief Operating Officer

Mark Silgardo

B.A. (Economics), MBA, Ph.D

1222CEO & Executive Director

Dr Archana Hingorani

Name DesignationExperience

(Yrs)

PE Experience

(Yrs)Qualification

Shahzaad Dalal Vice Chairman 27 11 B.Com, MBA

Alok Bhargava Executive Director 22 6 B. Tech, MBA

Sanjay Mitra Company Secretary

12 6 M.Com, ICWA, CS

88

Business Model

Management Fee:- Typically 1.5-2% of AUM for the fund life - Highly visible, annuity revenue stream over 6-10 years

Carry:- Performance upside through profit share- Hurdle rate ranges between 8-11% p.a.- Carry is 20% of profits from investments - A upside component as Fund size / Asset under

Management increases

Revenue Stream

- Long-term investment horizon of 3-5 years- Majority investments in unlisted companies- Active investors with clear focus on value creation- Mitigates risk of stock market volatility

Investment Model

99

Uniquely Placed Business

The uniquely placed business model offers the following

! Retail participation in an otherwise exclusive institutional domain

! Indirect exposure to growth potential of large unlisted companies

! Stable predictable revenue stream (through management fees) with defined performance

upsides

! Manager (IIML) better positioned to create upsides vs managers of other asset classes

! Documented advantages of PE participation in the value of unlisted companies

! Higher degree of value add and relatively early stage of investment provides

significant upside at exit

! This upside captured through the Carry Structure

1010

Edge over other Classes

PE Fund Management

! Long term committed investors; predictable AUM, Fees

! High level of investor ‘stickiness’ with the Manager, with investor ‘reups’ in follow-on funds

! Proprietary deals result in entry at lower than market comparables

! No redemption pressure and need to ‘manage’ NAVs

! Significant ability to guide investee companies and control outcomes

! Carry structure captures upside

! Limited regulation / compliance issues

Mutual Funds

! Fund AUM subject to market conditions

! Varying investor interest depending on extraneous factors such as distribution reach, marketing, sentiment

! Entry at market prices

! Investment strategy hostage to NAV fluctuations and redemptions

! Inability to exercise any control

! No such profit sharing structure

! Higher degree of compliance/risks

11

AUM Growth

301

871

1,713

-

500

1,000

1,500

2,000

FY2006 FY2007 FY2008

$ m

n

AUM has risen at 1

39% CAGR

12

Income & PAT Growth

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

FY2005 FY2006 FY2007 FY2008

Inco

me

(R

s m

n)

0.00

50.00

100.00

150.00

200.00

250.00

300.00

PA

T (

Rs m

n)

Income (Rs mn) PAT (Rs mn)

IIML PAT has grown at 7

9% CAGR

FY2008 Consolidated Income & PAT of Rs 1.06 bn & Rs 319.6 mn

13

Financials

Rs mn

FY2008 FY2007 FY2006 FY2005 FY2004 FY2003

Total Income 825.54 502.93 253.41 180.83 150.08 155.96

Total Operating Costs 398.31 211.12 121.55 76.63 58.38 77.03

PBT 423.73 267.23 107.61 83.71 66.99 50.09

PBT Margin (%) 51.33 53.13 42.46 46.29 44.64 32.12

PAT 280.35 173.01 71.51 52.21 47.67 31.79

PAT Margin (%) 33.96 34.40 28.22 28.87 31.76 20.38

EPS (Basic) 10.82 7.11 * 4.63 3.48 3.19 2.17

Networth 594.26 398.39 261.42 229.88 223.84 217.03

Dividend 55% 40% 35% 30% 25% 17%

* Post Bonus Issuance

14

Cerebral Business = Higher Returns

35%41%

67% 71%

34%45%

67%

106%

0%

20%

40%

60%

80%

100%

120%

FY2005 FY2006 FY2007 FY2008

ROCE ROE

15

Section B : Investment Environment

16

1,160 937 591 4701,650 2,200

6,700

17,129

339

276

146

715678

280

110

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2000 2001 2002 2003 2004 2005 2006 2007

Valu

e of

Dea

ls (U

S$ m

n)

0

50

100

150

200

250

300

350

400

No o

f Dea

ls

Value of Deals (US$ mn) Number of Deals

! Growing Private Equity space in India– In 2007, India was the largest recipient of PE in

Asia, ahead of Australia (US$ 14.6 bn), Japan (US$ 14.4 bn) and China (US$ 11.5 bn)

– About US$ 3.3 bn invested in Jan-Mar 2008 and US$ 17 bn invested in 2007

– Fund sizes have increased from US$ 25 – 100 mn, to about US$ 400 – 1,000 mn

– Increasing deal sizes: average investment size up from US$ 4 mn in 2000 to US$ 50 mn

India : Emerging PE Destination

! India – increasing attractiveness as a PE destination– Strong economic growth leading to a majority of Indian companies looking for growth capital

– PE has fast emerged as an alternate source of funds for companies to support expansion plans

– Large Global PE investors are either setting up dedicated Indian funds or increasing allocations for Indian investments in their global portfolios

Source : Grant Thornton, IVCJ, AVCJ, Venture Intelligence

! Huge scope for catch-up to global levels– Indian PE is approx. 1% of GDP; Mature markets like US and UK have a PE to GDP ratio of 1.5-2%

– PE investment in US, for instance, was $ 191 billion last year

– This indicates the tremendous scope for growth, not just on account of the underlying GDP growth but also on account of catch-up to global levels

17

PE: Competitive Landscape

0

5

10

10 5030

No

of y

ears

in m

arke

t

Approx. Deal Size

Govt FundsSIDBI

HelionAureos

UTI Ventures

New Silk Route

New Vernon

IIMLChrys Cap

BlackstoneCarlyle

Newbridge3 i

Temasek

WarburgICICI Venture

StanChartSequoia

Blue RiverTano

Kotak

GW Capital

Experienced an entire fund cycle in India

Not experienced an entire fund cycle in India

ActisCitibankBarings

! IRR on exited investments : ~27%

! Three PE funds managed since inception

! US$ 190 mn invested in 45 companies

– Retail, Media : 23%– Life Sciences : 13%– Manufacturing : 40%– IT & ITES : 24%

! No losses till date

! First investors in Retail, Shipyard, Media

! Signature deals : Shoppers Stop, IBN18, ABG Shipyard, JBF

IIML Experience

18

! Infrastructure investments to rise from 4.5% to 8% of GDP by 2012

– Imperative for a 10% GDP growth– Translates into $495 bn investments in the next 5 years– Opportunities across sectors

PE Opportunity – Infrastructure

Source : SSKI

! Private players– Well entrenched in Roads, Telecom, Power, Ports, Airports– Opportunities in Urban Infrastructure, Railways and pipelines– Sector wise independent regulators

! Outcome : A mix of public private participation expected, increasingly skewed towards private contribution

– Private players to invest over $ 200 bn

! Key drivers in place– Regulations : Investments not permitted in areas like power distribution, airports, railways etc – now history– Independent regulators add to investor comfort– Government driven “packaged” mega projects like NHDP and UMPPs– Funds Availability

• Government contribution : Viability Gap funding, project specific cess• Cost efficient borrowing with sufficient depth possible• Growing size of project executors of comfort to international lenders

– Attitude : Willingness to pay commercial user charges– Growth Story : Sheer demand turning hitherto unviable opportunities into doable business plans

19

Infra : Competitive Landscape

No of Deals2010

10

0

No

of y

ears

in m

arke

t

5

30 40

IIML

IDFC

2010

10

0

No

of y

ears

in m

arke

t

AMPAIG

5

Blackstone Macquarie

3i

Chrys Capital

Citibank

30 40

! Signature Deals : Indraprastha Gas, Max Telecom, Noida Toll Bridge, Gujarat Pipavav Port, Ramky Infra

! IRR on exited investments : ~28%

! US$ 270 mn invested in 27 companies

! Early investors in Infra, Telecom, Roads, City Gas, Rail

IIML Experience

ICICI

CDC

Proposed Standard Chartered IL&FS Asia Infrastructure Fund with a corpus of US$ 800 mn

Telecom9%

Cable / IT linked Infra38%

Ancillary19%

Construction, Water, SEZ

8%Port5%

Power / Gas6%Roads / Rail

15%

20

PE Opportunity – Real Estate

RE expected to capture 20-25% of FDI inflows *Source: Commerce and Industry Dept, GoI. FDI has gone up from $ 5.5 bn to $ 20.1 bn in the same period

FDI in Real Estate as a % of Total FDI in India*

3.4 %

9.2 %

16.5 %

2005-06 2006-07 2007-08

Real Estate PE Investment by Asset Class

! This growth is expected due to the following factors :

– Strong economic fundamentals– Large and Growing middle class; changing

socio-economic trends – Increasing demand for good quality office

space driven by IT and KPO companies– Increasing investment in Infrastructure– New investment platforms emerging : REIT,

REMF

! Opportunities in Real Estate exist in :– Integrated Townships– Organized Retail– Adaptive Re-use of Industrial Land– Urban Site Rehabilitation– SEZs – IT / ITeS Sector

Expected size of Real Estate market in India :About US$ 90 – 150 bn by 2015

21

RE : Competitive Landscape

0

450

900

To

tal Fu

nd

Siz

e (

US

$ M

n)

Rate of Deployment (% of Total Corpus)

Sun-Apollo

Trikona-Trinity

ICICI

Venture

Urban Infra REF

Tata Infra & Real estate

Fund

HDFC Realty Fund

FDI Real Estate Funds Raised between 2005-07

Funds managed by IIML

Competitors: comparatively slower pace of deployment

Note: Analysis covers Existing FDI real estate dedicated funds (fund size>US$ 300mn; and does not include Global Proprietary Funds

Red Fort Capital

Infinite India Real Estate

Fund

100%

IL&FS India Realty Fund-I & II

! Early investors in SRA, Industrial Parks, 100% asset buyouts

! Signature Deals : QVC, Ansal, Mantri, IRPPL, Akruti City, ETL, DB Realty, MK Malls

! US$ 663 mn committed in 24 transactions

IIML Experience

! Two active funds under management with total Fund size ~ US$ 1.4 bn

! Pioneer in India : First RE fund launched in 2005 / 2006

! US$ 557 mn already deployed in 19 transactions

– Mumbai : 32%– Multi City : 21%– NCR : 19%– Bangalore : 8%– Pune : 7%– Others : 13%

22

Section C : Funds Under Management

2323

Fund – Across Spectrum

Private Equity

• Two active funds

aggregating US$ 378 mn

• First fund fully divested –

distributed carry

Real Estate

• Established 2005

• Two funds aggregating

US$ 1.4 bn

Infrastructure

• Proposed SCI Asia

Infrastructure

Growth Fund

• Pan Asian focus

Private Equity Investment Spectrum

24

Milestones

25

Diversified Exit Strategy

47 Exits / Liquidity Events

Exit Returns of 27% in US$ terms with a multiple of 2.5x

Buyback21%

Listed / IPO42%

Strategic Sale26%

Trade Sale11%

26

Existing Funds

Fund Vintage Corpus (mn)

Hurdle Rate

No. of Investments #

No. of Exits

Capital Refunded

(mn)

Profits Returned

(mn)

Expected End of Fund

SARA Mar-98 1100 (Rs) 18% 26 15 429 (Rs) 590 (Rs) 2010

PAPDF May-06* 1800 (Rs) 6%** 7 - - - 2012

LIF Apr-05 6713 (Rs) 7% 27 9 2252 (Rs) 484 (Rs) 2011

REF - I Apr-06 525 ($) 11% 17 - - - 2014

REF-II Dec-07 895 ($) 10% 7 - - - 2015

TARA Sep-07 225 ($) 8% 5 - - - 2017

* Singapore Fund in June 2007** Compounded semi-annually

# Includes Commitments

27

Section D : Future Strategy

28

! From around a billion dollars 3 years ago; projected to grow to $ 20 bn by 2010

! Cross sectoral investments opportunities to increase – A third of investments in 2007 went into Real Estate– Robust levels in Banking, Financial services, Telecom, IT and manufacturing – Infrastructure set to capture a larger share – Increasing opportunities as sectoral caps are relaxed

• Single Brand Retailing• Cargo Aviation

! Tried and tested exit routes provide comfort to foreign capital– Public markets have proved to be preferred choice– Trade sales to increase as capital with different risk / return profile flows in

! Outcome : PE activity levels will accelerate – Key to success : Global sources ; Local partners

PE : Deepening Markets

29

! IIML has a successful business model built assiduously over the last decade– Fund Manager of repute – A port of first call for investees

! Business model to be replicated resulting in enhanced AUM / revenues through – Larger follow on funds– New emerging opportunities– Extending Geographies

! Substantial increase in activity levels on all counts in the next 2-3 years– Enhanced Fund raising– High level of investment deal flow– More investments to reach liquidity / exit stage

• Carry in the medium term

Into the Future…