Dear Shareholders,
 
 It gives me great pleasure to wecome you to the 10th Annual General
 Meeting of the IFCI Ltd. The Annual Report on the operations of your
 Company, together with the Statement of Accounts for the year ended the
 31st March, 2003 and the Auditors REport are already with you and with
 your permission I shall take them as read.
 
 At the outset, I am pleased to inform that the financial loss fot the
 year has been much lower compared with the previous year, despite
 making significantlly larger provisions, for bad and doubtful
 asstets.The loss has been contained in view of the financial support
 received from Government of India-in particular, by way of taking
 government guaranteed liabilities and retail liabilities of your
 company as also restructuring of othre institutional liabilities.
 
 At the Annual General Meeting of the shareholders last year, I has
 mentioned how important it was to make ongoing attempts to restructure
 the liabilities of IFCI. I had also stated how the problem of
 Non-Performing Assets (NPAs) was a challenge for theentire financial
 sector and needed to be addresed from a macro perspective, and that
 concerted efforts were being made by your company to reduce NPAs. I had
 further emphasized the need to increase the thrust on fee-based
 services. I now wish to apprise you of the developments during the year
 in these areas which are the crucial determinants of the performance of
 your company.
 
 RESTRUCTURING OF LIABILITIES
 
 Your company has been able to acheive a major breakthrough in
 restructuirng of its rupee liabilities that was made possible with the
 active support and help of all major stake-holders and the Government
 of India. On completion of the restructuring of the liabilities and
 reduction in NPAs, the credit rating of your company is expected to
 improve significantly. This would enable IFCI to be better poised to
 raise resources from teh market oat competitive costs and undertake
 substantial fund-based and fee-based business in future.
 
 MANAGEMENT OF NON-PERFORMING ASSETS
 
 The Government and the Reserve Bank of India(RBI) habe in recent years
 taken a number of major initiatives to resolve the problem of NPAs in
 Banks and financial institutions, which include, among others, the
 revised guidelines issued by RBI for compromise settlement of chronic
 NPAs the introduction of the corporate Debt restructuring system and
 the enactment of the Securitisation and Reconstruction of Financial
 Assets & Enforce ment of Security Interest Act, 2002 (SRFA). The effect
 of these meaures, which is expected to be very significant, is
 beginning to be realised to varying degrees by the individual Banks and
 Financial Institutions.
 
 The increase in NPAs of your company during the year is mainly due to
 the reclassification of a mjor portion of hte assets, strictly in
 cconformity with the guidelines of RBI. Your company is continuing to
 make efforts to resolve NPAs through focussed attention on large NPA
 cases, restructuing of debt of the borrowers where necessary and
 feasible, aggressive one time / negotiated settlements where
 restructuring s not feasible and initiating legal action through Debt
 Recovery Tribunals (DRTs) / action under SRFA in cases where loan
 recovery is otehr wise not possible. The main thrust in the resolution
 of NPAs would be to hive them off through a Securitization and
 REconstruction Company including the one promoted by your company biz.
 Assets Care Enteprise Ltd. (ACE). A number of foreign investors,
 including distressed assets management specialists, have shown interest
 in ACE and their association is expected to be beneficial.
 
 DEVELOPMENT OF FEE-BASED BUSINESS
 
 Your company incresed its thrust on expanding advisory services
 business during the year under review. This was based on nurturing its
 core strenths and keeping in view the constraints in raising fresh
 resources, from the market for fund-based activities and the lesser
 number of projects seeking financial assistance. IFCI has been able to
 get many prestigious assigments through competitive bidding from the
 Government public sector organisations. Your company has carved a niche
 for iteself in teh field of Corporate Advisory Services by Getting
 itself empanelled with many prestigious organisation.
 
 CURRENT OPERATION
 
 In keeping with the ongoing consolidation of operations in IFCI, the
 assistance sanctioned during the first quarter of 2003-04 was to a
 significant extent towads restructuring. Your company sanctioned
 aggregate net assistance of Rs.5,070 million during the first quarter
 of 2003-04 for 35 cases compared with Rs.2,412 million for 9 cases
 during the first quarter of 2002-03. Total disbursements during the
 first quareter of 2003-04 amounted to Rs.4,344 million compared with
 Rs.1,496 million during the corresponding period of the previous year.
 
 The peformance and prospects fo the industries in which IFCI has large
 exposure imporved significantly during 2002-03. Textile proudcts among
 the various industries, wxhibited the strongest showing with growth of
 almost 16% in 2002-03 compared with 2.4% in the previous year. Not
 suprisingly this growth in respect of textile products was backed by
 similar strong expansion in the production of man-made fibres viz.
 polyster filament yam and viscose staple fibre. Output of finished
 steel grew by about 6% in 2002-03 and by 7.5% during Apirl-June 2003.
 steel sector witnessed a turnaround durig 2002-03, with a substntial
 increase in steel consumptio on account of steady demend from
 international and domestic markets. Improved profitability and thus
 repayment capacity of assisted units in these industrial sectors, which
 are expected to continue in 2003-04, would have a positive impact on
 your company's future business prospects.
 
 OPERATION ENVIRONMENT
 
 Indian industry, as a whole, witnessed a significant imporvement in
 performance during 2002-03 recording a grwoth of 6% in 2002-03 compared
 with 3.3% in the previous year. The mnaufacturing sector grew by 6%
 during the year up sharply from the modest 2.9% increase in the
 previous year. In 2003-04, industry should continue to show good
 perfomance and is expected to grow by 6 to 8%. Real GDP is projected to
 grow by at lease 6.5% in 2003-04, significantly higher than the
 previous year. The industrial and economic recovery is thus likely to
 gain momentum in 2003-04, butterssed further by the good monsoon rains.
 
 Improved performance of industries so far, however has not resulted in
 a commesurate growth of industrial investments. Although the number of
 Industrial Enterprenueurs Memoranda (IEMs) filed in each of the last
 years has howevered around the 3,00 mark, in terms of the amounts
 involved, investments peaked in 1999-2000 at Rs.1,165 billion and have
 then dipped to an annual level of Rs.800 billion in recent years. a
 similar ternd is descernible in respect of hte santions and
 disbursements by All-India Financial Institutions. Their santions and
 disbursements peaked in 1999-2000 at Rs.1,013 billion and Rs.676
 billion respectively, but have since dropped sharply to a mere Rs.169
 billion and Rs.125 billion in 2002-03.
 
 In the context of hthis laclustre grwoth in investments, it is
 important to ponder why industry is not taking up the challenge of
 exploring new opportunities. In my view, there are four critical issues
 that need to be addressed in order for investment growth to revive.
 These issues relate to the competitiveness of indian industry, the
 removal of systemic imperfections futher development of enterpreneurial
 talent, and ensuring the balanced regional development.
 
 Competitiveness:
 
 Slow investment growth may be traced to the persistent doubts amongst
 enterpreneurs and financiers about the competitveness fo upcoming
 industrial projects in an environment of liberalized imports and the
 impact of the WTO provisions now being increasingly evident.
 
 Competitiveness can no longer be viewed only in a domestic cotext, as
 had been the case after the end of hte industrila licensing system in
 the earlly 1990s. It is now essential for Indian industry to achieve
 global competitiveness. Indian companies must now not only complete
 with foreign companies operating in India, but also equally with the
 likely increase in imports of the final proudcts. For a long time
 Indian industry has had a high cost structure, partly due to the high
 cost of capital and rigidites in the labour market. To a large extent,
 the competitiveness of Indian industry could be significantly improved
 through a lower cost of finance, better availablitity and quality of
 physical infrastructure, adopting a 'cluster-based' approach to
 industrial development, ensuring good corporate governance and
 benchmarking against global players.
 
 Systemic Imperfections
 
 The raising of funds by corporates from the capitaql market has been
 constrined by the level of investors confidence in the market and the
 increase in the volatility of hte capital market after it was opened up
 to Foreign Institutional Investors. The primary issues market has been
 quite small, The long term debt market is yet to acquire sufficient
 depth, liquidity and stability to enable all types of ventures and
 industrial projects to successfully raise funds. The disparties in the
 availability and cost of cpaitla betwwen large and successful
 corporates on the one hand, and the SME segment on the other, are very
 significant. Start-up ventures in this segment as well as
 infrastructure and core sector projects, in particulars, face
 significant hurdles in fying up funds.
 
 Enterpreneurial Development
 
 The slow growth of investments and ther realtively fewer ventures
 coming up for financial also point ot the need to develop
 enterpreneurship. This is so not only in terms of the number of
 enterprenues or a wide enough enterpreneurial base, but also the
 quality of enterpreneurship and the availability of venture capital to
 nuture enterprenerrial talent. It is somewhat disconcerting to note
 risk aversion in enterpreneurs and bankds while investmens have yet to
 gather the required momentum to achieve targeted growth levels. Perhaps
 this is a pointer to the necessity of increasing the risk taking
 abilities of Banks and Financial institutions as well as enterpreneurs
 through increased savings, strenthening of the capital base of banks
 and Financial Institutions and expanding venture capital and equity
 financing.
 
 Balanced Regional Development
 
 Notwithstnding various government initiatives, the regional pattern
 ofinvestments has remained skewed, Investments in recent year have been
 concentrated in a few relatively developed sates. On the other hand,
 invesments in West Bengal, Orissa, Bihar and Assam have been
 significantly lower than national trends. There is thus a continued
 need to address regional imbalance in the growth of industries.
 
 THE CONTINUEING ROLE OF DFIs
 
 In the context of the above-outlined issues as well a sthe erecongnized
 need to mobilize large investments in industry and infrastructure to
 meet the targeted 8% growth rate of GDP in the Tenth plan period, there
 is need to strenthen the institutional set up of the DFIs. While
 mentioning the critical importance of private participation in
 infrastructure sector and basic industries, the tenth plan document
 aptly notes that 'The financial sector is heavily biased towars short
 and medium term debt... Unless availability of equity and ong term debt
 to the private sector is increased substantially in the coming years,
 the likehood of adequate private investment in infrastructure sector is
 increased substantially in the coming years, the likelihood of adequate
 private investment in infrastuctrure sector and basic industries
 appears to be remote. DFIs have a critical role to play in this
 respect, more so, in view of the limitations of commercial banks to
 provide long-term finance, especially to green-field projects. While
 amny banks habe been progressively increasing their retail focus, gaps
 are bginning to emrege in corporate banking especially in medium and
 long term lending to corporates and in invesments banking for
 infrastucture projects and SME sector.
 
 It is therefore, important that the capital base of DFIs be enlarged,
 the weaker among them be re-capitalised, and there is consolidation
 through organisational and financial restructuring. To survive in a
 liberalizing economy, DFIs need to have strong risk bearing ability and
 access to tools to manage votality in financial markets and interest
 rates.DFIs need to have the strenth to be anble to address NPA related
 issues, some of which may be teh legacy of past business environment.
 They need access to low-xost funds through Government-guarnteed bonds
 or through multi-lateral agencies to be able to provide finance for
 industrial projects at a cost which would enable industry to achieve
 global competitiveness and stustained competitive advantage. They need
 to be able to acess idal long term sources of funds like insurance,
 provident funds and pension funds. These low cost long trem sources
 ahve yet to play an appropriately significant role in providing finance
 for growth and development. The additional issues that need to be
 addressed relate to greater autonomy and ensuring good coprorate
 governance for the benefit of all stakeholders-not just in case of the
 DFIs, but also in case of the corporates assited by the DFIs, but also
 in case of the corporates assisted by the DFIs, but also in case of the
 corporates assisted by the DFIs. There is also a need to increase the
 ability of DFIs backed as they were by strong government support, led
 economic and industrial growth from one phase and milestone to another.
 
 EVOLVING A NEW BUSINESS MODEL
 
 Your company's future business strategy will be largely based on the
 backdrop that I have outlined so far. As we embark on a new road,
 theree will necessarity be some impartant issues that will need to be
 resolved quickly. These include restructuring the balance liabilities,
 aggressively addressing the NPA-related problems, improving
 profitability and addressing critical organisational issues.
 
 The strategy to improve profitability will include pursuing business
 activities in the SME segment, increasing income from fee-based
 activities and strigent cost control. Efforts would also be made to
 effectively manage asset-liability mis matches and to strengthen the
 risk management system.
 
 The SME segment has been identified as one with good potential for
 business for IFCI. While the financial needs of the smaller end of hte
 SME segment are met by a number of banks. State Financial Corporation
 and the Small Industries Development Bank of India, your Company's
 niche area is the mid-corporate sub-segment in which it has been having
 a presence for along time. As a mid-corporate specialist,your company
 intends to provide a judicious combination of fund based and fee-based
 services and broaden as well depen the existing range of services
 provided to cleints in his category. Some of the innnovations recently
 employed by successful players in financing the SME segment will be
 used by your Company with necessary modifications. These include,
 illustratively, the internsive-use of credit scoring and risk
 management techniques to control loan deiquencies, 'cluster-based'
 finance and lending based on supply chain linkages, credit enhancement
 through guarantees, risk sharing arrangements etc. Among other things,
 a 'Cluster based; approach to the development and financing of the SME
 sector can enable the enterprise in this sector to complete effectively
 with large-scale enterprises and imports.
 
 As part of evolving a new business model, your company intends to
 utilize its loan origination capabilites to increase business through
 the securitisation route and by exploring potential tie-ups with other
 banks/financial isntitutions which have large funds and who may need
 loan origination and project evaluation expertise. Essential this would
 involve less risk than holding long-term loans up to full maturity and
 lesser requirement of financial resources, while facilitating higher
 turnover and a faster chuming of the portfolio.
 
 
 It is also envisaged to have a higher proportion of asset financing
 than project financing in the loan protfolio, to achieve better
 diversification across industries to have larger proportionate exposure
 in sunrise industries that have high growth potential and enjoy strong
 competitive advantage and to have a higher proportion of short-and
 medium-term loans in the portfolio. In turn, such efforts should help
 in the better management of liquidity and market risks, particularly
 the interst risk.
 
 Efforts are being made to achieve a quantum leap in performance through
 indentifying the right strategic ti-ups and partnerships. Your company
 would also endeavour to strengthen the subsidiary and associate
 companies, make efforts to harness the benefits of group synergy,
 develop commonally of purpose, optimize utilization of group resource,
 and promote an identity for the group as a well diversified financial
 institution. with this broad vision in mind, IFCI with its venture
 capital subidiary i.e. IFCI Venture Capital Funds ltd. And Management
 Development Institute, intends to set up Enterprise Development Centers
 which could catalyze growth of industry through enterprise creation and
 promote ventures through conceptualisatoin, incubation and
 transformation into commercial enterprises.
 
 ACKNOWLEDGEMENTS
 
 Before concluding, I wish to express my sincere gratitude to the
 esteemed shareholders, investors and customer for their continued
 support and trust reposed by them in the Management and the Members of
 the Board. I would also like to thank the Government of India, the
 Reserve Bank of India, the Securties and Exchange Board of India, IDBI
 and other institutional shareholders and various regulatory agencies
 for thier continued support and guidance. Lastly, I also wish to place
 on record our appreciation for the dedicated services rendered by
 employees at all levels.
 
 Thank you, 
                                                          V.P. Singh
 September 12, 2003 
 New Delhi