IFCI

The Directors present the Fifteenth Annual Report of the Company
 together with the Audited Statements of Accounts for the year ended the
 March 31, 2006.
 
 FINANCIAL RESULTS
                                                 (Rs. crore) 
                                                   2007-08     2006-07
 
 1.       Operational Income                        1,963        1,990
 
 2.       Total Income                              2,111        2,047
 
 3.       Cost of Borrowings                          821          731
 
 4.       Staff Cost/Other Expenditure                152           54
 
 5.       Depreciation                                  7            9
 
 6.       Total Expenditure                           980          794
 
 7.       Profit before provisions/write-off        1,131        1,253
 
 8.       Write-off/Provisions for Bad
          & Doubtful Assets (net of reversal)        (953)          15
 
 9.       Profit before Exceptional Items           2,084        1,238
 
 10.      Amount Receivable from
          Government of India written-off            (416)         -
 
 11.      Transfer from Restructuring Reserve          -            24
 
 12.      Profit before Tax                         1,668        1,262
 
 13.      Tax Expenses                                648          364
 
 14.      Profit after Tax and Exceptional Items    1,020          898
 
 15.      Deficit brought forward from
          previous year                              (836)      (4,772)
 
 16.      Appropriations:
          Reserve u/s 45IC of RBI Act                  37           -
          Transfer to Capital Redemption Reserve       21           -
          Dividend on Preference Shares (incl. Tax)   114           -
 
 17.      Balance carried to Balance Sheet             12         (836)
 
 The total income of your Company rose by 3% to Rs.2,111 crore during
 the current year vis-a-vis Rs.2,047 crore in the previous year. The
 rate of growth in the total income of the Company needs to be viewed in
 the context of the downturn in the operations of the Company in the
 second half of 1990s which finally ended up in a full blown crisis by
 2002-03.  Eventually, the Government of India (Gol) in consultation
 with other stakeholders put together a package for restructuring of the
 Companys liabilities with a view to its revival. In terms of the
 restructuring package, the Company confined its operations to
 recoveries from standard assets and resolution of non- performing
 assets eschewing fresh business entirely. Gol was bearing part of the
 interest cost in respect of certain liabilities taken over/serviced by
 Gol. However, Gol informed IFCI on December 12, 2007 that further
 release of funds to the Company from Gol as a part of the package of
 assistance for restructuring would be made only in case of need. In
 view of its financial performance IFCI has informed Gol that further
 assistance from the Government may not be necessary. Due to non-receipt
 of any such grant during the year, the cost of borrowings has gone up
 by Rs.162 crore. Further, an amount of Rs.416 crore, receivable from
 Gol in respect of certain rupee liabilities which had been taken in the
 Companys accounts in 2002-03 needs to be reversed. The amount of
 Rs.416 crore has been written off. Employee expenses for the year
 included one-time expense of approximately Rs.74 crore on account of
 arrears, voluntary retirement etc. Your Companys emphasis on
 resolution of Non- Performing Assets (NPAs), resulted in higher
 reversal of provisions and thus higher profit before tax of Rs.2,084
 crore in the current year up by 68.34% from Rs.1,238 crore in the
 previous year.
 
 The profit after tax (after accounting for the exceptional items
 relating to reversal of Rs.162 crore on account of package of
 assistance from the Government and writing off of Rs.416 crore shown as
 income during 2002-03 and transfer from restructuring reserve) of your
 Company was Rs. 1,020 crore in 2007-08 against Rs.898 crore in the
 previous year, showing an increase of 13.6%.
 
 Dividend
 
 During the year 2007-08, the accumulated loss has been fully written
 off and an amount of Rs.114 crore (including accumulated dividend and
 tax) was distributed as dividend to preference shareholders. In the
 absence of adequate profit, Directors are unable to recommend dividend
 on equity shares.
 
 Significant Developments
 
 (i) Sanctions and Disbursements
 
 During the year 2007-08, total sanctions were Rs.2,550.49 crore
 compared to Rs. 1,050 crore in the previous year.  Out of this, medium
 term rupee loans of tenor between two to five years were of the order
 of Rs.1,028.50 crore and the balance Rs.1,521.99 crore were of tenor of
 less than two years.
 
 Total disbursements during the year stood at Rs.2,280.09 crore compared
 to Rs.550 crore in the previous year. Out of this, Rs.263.50 crore were
 in the form of medium term loans and Rs.2,016.59 crore were by way of
 short term loans.
 
 (ii) Treasury and Investment Operations
 
 During the year, your Company earned an income of Rs. 275.05 crore from
 treasury operations mainly through investment of surplus funds in fixed
 deposits with banks.  As a prudential measure your Company did not
 invest in any instrument below AAA category. Your Company, in spite of
 a volatile exchange rate regime, also managed to cover the exchange
 risk effectively by following a suitable hedging strategy and earned a
 modest profit of Rs.1.69 crore on this account.
 
 During the year, your Company took a conscious decision to benefit from
 the buoyant secondary market and earned a profit of Rs.649.69 crore
 through sale of shares. This includes profit of Rs.647.01 crore under
 long term investments and Rs.2.68 crore under current investments.
 Even so, the net investment portfolio of your Company as of March 31,
 2008 was Rs.2,270.72 crore which is higher than the net investment
 amount of Rs.2,170.53 crore as at the end of financial year 2006-07. It
 is quite evident from the above that your Company realized handsome
 profit in the prevailing bull run without any dilution in the quality
 of the portfolio. Your Company did not use any exotic derivatives
 products during the year and did not have any exotic derivatives
 exposure in the equity/debt market at the end of the year.
 
 (iii) Corporate and Infrastructure Advisory Services
 
 In the area of providing customized corporate and infrastructure
 advisory services, your Company during the year, despite stiff
 competition has not only been able to retain its existing clients but
 has also been able to secure some prestigious new assignments relating
 to financial/investment appraisal, business re-engineering, IPO
 monitoring and bid process management from both public and private
 sector entities.
 
 (iv) Management of Non-Performing Assets
 
 Your Company maintained the status of having zero net Non-Performing
 Assets (NPAs) as of March 31, 2008, as full provisioning has been made
 in respect thereof.
 
 Measures for prevention of slippage of performing assets to NPAs, need
 based restructuring of debt and settlements during the year contributed
 to maintaining the status of zero net NPAs and in some cases reversal
 of provisions for bad and doubtful debts made earlier. The industrial
 sectors in which your Company has major exposure viz.  power, telecom
 and other infrastructure and iron & steel did well during the year,
 despite a trend of rising input costs. This had a positive influence on
 the asset portfolio of your Company.
 
 During the year under report, debt restructuring packages were
 formulated in 12 cases with restructured amount involved being
 Rs.272.74 crore. Where recovery through the debt restructuring or legal
 routes was found not feasible or very time consuming, your Company took
 recourse to Negotiated/One Time Settlement (OTS) of dues. During
 2007-08, OTS was entered into in respect of 136 cases for an aggregate
 amount settled of Rs.1,497 crore compared to 105 cases for an amount of
 Rs.917 crore in the previous year.
 
 Your Company initiated and pursued legal action where recovery of dues
 was not found possible in the normal course. As of March 31, 2007, 734
 recovery applications filed by your Company involving an amount of
 Rs.11,621.80 crore were pending in Debt Recovery Tribunals/Courts in
 India. During 2007-08, 4 new cases were filed, involving an amount of
 Rs.338.79 crore. Your Company has also obtained recovery certificates
 through DRT in 21 cases for an aggregate amount of Rs.825.36 crore. As
 of March 31, 2008, 695 applications were pending in various Debt
 Recovery Tribunals/Courts in India for an aggregate amount of
 Rs.9,967.18 crore.
 
 The recovery from sale of assets through DRT/Company Courts in suit
 filed cases has yielded Rs.573.48 crore during 2007-08 as compared to
 Rs.313.71 crore during the previous year.
 
 In addition to the above, your Company initiated action under the
 Securitization and Reconstruction of Financial Assets and Enforcement
 of Security Interest Act, 2002 and notices were issued and consent
 letters to co-lenders were given, wherever necessary under the Act.
 
 (v) Resources
 
 Your Company did not raise any fresh resources during the year. The
 servicing of liabilities was done entirely from own sources. The
 foreign currency loan of USS 200 million from Bank of Baroda was fully
 repaid during the year and other foreign currency and rupee liabilities
 were serviced consistently in a timely manner during the year.
 Investors, who had not lodged their claims, even after maturity of the
 bonds held by them, were being regularly followed up to register their
 claims by surrendering the discharged certificates. During the year, an
 amount of Rs.3.42 crore was transferred to the Investors Protection
 Fund of the Government, against unclaimed and unpaid education and
 retirement bonds, as per the provisions of the Companies Act, 1956. A
 very small portion of the outstanding liabilities of your Company still
 remains to be restructured. Negotiations are being carried on with the
 concerned investors for restructuring or prepayment.
 
 As a part of the restructuring of liabilities of IFCI, the public
 sector banks and financial institutions had converted a part of their
 investment in IFCI, as of April 1, 2002, into Zero Coupon Optionally
 Convertible Debentures (ZCOCDs) of Rs.1,479.22 crore. During the year
 under report, ZCOCDs of Rs. 1,323.99 crore were converted into equity
 shares of your Company at a price of Rs.107/- per share (including
 premium of Rs.97/- per share), determined as per SEBI (Disclosure &
 Investor Protection) Guidelines, 2000. Accordingly, 12,37,37,735 number
 of equity shares of your Company have been allotted in favour of the
 concerned investors.
 
 (vi) Public Deposits
 
 During the year, your Company was categorized as a Systemically
 Important Non-Deposit taking Non- Banking Financial Company
 (NBFC-ND-SI) by the Reserve Bank of India. Your Company did not raise
 any fresh Public Deposit during the year under report nor renew any
 existing deposits. During the year, there was no case where any public
 deposit was claimed but not paid. Outstanding public deposits of
 Rs.0.05 crore, as at the end of the year, along with the accrued and
 due interest of Rs.0.02 crore remained unclaimed. This whole amount has
 been kept in an earmarked bank account for being utilized exclusively
 for repayment of the deposits, as and when claimed.
 
 Subsidiary Organizations
 
 IFCI Venture Capital Funds Limited (IVCF), a subsidiary of your
 Company, is primarily engaged in the management of venture capital
 funds. Another subsidiary, IFCI Financial Services Limited (IFIN),
 carries on the business of stock broking and selling of mutual
 fund/insurance products. Both IVCF and IFIN earned profits during the
 year 2007-08.
 
 In order to leverage the experience and knowledge gained by IFCI over
 the years in the areas of infrastructure and real estate which have
 been growing at an impressive pace, IFCI has promoted IFCI
 Infrastructure Development Limited (HDL), during the year as a wholly
 owned subsidiary.
 
 Information Technology and Communications
 
 The focus of the Information Technology Department was on up-gradation
 of existing hardware, software and communication facilities.
 
 The process in regard to the centralization of loan accounts at the
 Head Office was also completed during the year. One of the major
 decisions taken during the year was to implement a Document Management
 System (DMS) in the Company. The DMS software was procured and
 installed and the digitization of the records, which were required to
 be retained, was taken up at Delhi and Mumbai Regional Offices. The
 system would help to free up the space occupied by the old documents
 and in moving towards a paperless environment.
 
 New application systems in the areas of Real Estate, Sugar Development
 Fund Accounting, Management Information and Pension and Gratuity
 Accounting were developed and implemented during the year.
 
 Further, during the year, the systems in the areas of Investment
 Portfolio Management, Legal Monitoring, People Resource Information and
 Asset Classification were modified and upgraded to meet the additional
 requirements.
 
 Nominee Directors
 
 Your Company appoints Nominee Directors on the Board of assisted
 companies as well as other companies, in which it has substantial stake
 to safeguard its interests. The Nominee Directors appointed by your
 Company have played a proactive role in the development of professional
 management and formulation of proper corporate policies and strategies
 to improve the performance and corporate governance of the assisted
 companies. The feedback reports received from Nominee Directors act as
 a useful tool for credit monitoring.  The system of Nominee Directors
 is functioning effectively in your Company.
 
 Corporate Governance
 
 A comprehensive report on corporate governance as stipulated under
 Clause 49 of the Listing Agreement is attached to this Report.
 
 IFCI has obtained a certificate from the Statutory Auditors regarding
 compliance of conditions of Corporate Governance as stipulated in
 Clause 49 of the Listing Agreement and the same is annexed at the end
 of Corporate Governance Report.
 
 Conservation of Energy, Technology Absorption, Foreign Exchange
 Earnings and Outgo
 
 As the Companys operations do not involve any manufacturing or
 processing activities, the particulars as per the Companies
 (Disclosures of Particulars in the Report of the Board of Directors)
 Rules, 1988, regarding conservation of energy and technology
 absorption, are not applicable. The particulars regarding expenditure
 and earnings in foreign exchange are given in Item Nos. 11 and 12 in
 the Notes to the Accounts.
 
 Directors and other Managerial Persons
 
 Since the last Annual Report, Shri N. Balasubramanian, the then
 Chairman of the Board resigned from the Board w.e.f.  September 15,
 2007 and Shri Vinayak Chatterjee resigned from the Board w.e.f.
 September 18, 2007. The Board has placed on record its appreciation for
 the valuable services rendered and the contribution made by them.
 
 Government of India has nominated Smt. Sukriti Likhi, Director (IF),
 Ministry of Finance, Department of Financial Services, as a Government
 Nominee on the Board of the Company w.e.f. September 20, 2007.
 
 Shri R.C. Razdan, pursuant to his deputation to SHCIL (Stock Holding
 Corporation of India Limited) by IDBI, resigned from the Board of the
 Company w.e.f. October 4, 2007.  Shri R. K. Kapoor, CGM, IDBI has been
 appointed on the Board, in his place, to fill the casual vacancy so
 caused, w.e.f.  October 15, 2007.
 
 Shri P. S. Shenoy resigned from the Board w.e.f. March 8, 2008.
 
 Auditors
 
 M/s Ray & Ray, Chartered Accountants, Auditors of the Company, hold
 office until the conclusion of the ensuing Annual General Meeting and
 being eligible, offer themselves for re-appointment.
 
 The Company has received a letter from them to the effect that their
 appointment, if made, would be within the prescribed limits under
 Section 224 (1-B) of the Companies Act, 1956.  Your Directors recommend
 re-appointment of M/s Ray & Ray, as Auditors of the Company at the
 ensuing Annual General Meeting.
 
 Directors Responsibility Statement
 
 Pursuant to the requirement under Section 217(2AA) of the Companies Act
 1956, with respect to Directors Responsibility Statement, it is hereby
 confirmed:
 
 i) that in the preparation of annual accounts, the applicable
 accounting standards have been followed along with proper explanation
 relating to any departures;
 
 ii) that the Directors have selected such accounting policies and
 applied them consistently and made judgments and estimates that are
 reasonable and prudent, so as to give a true and fair view of the state
 of affairs of the Company at the end of the financial year and of the
 profit or loss of the Company for the year under review;
 
 iii) that the Directors 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;
 
 iv) that the Directors have prepared the annual accounts for the year
 ended on March 31, 2008 on a going concern basis.
 
 Particulars of Employees
 
 No employee of the Company was in receipt of remuneration above the
 limit specified under Section 217 (2A) of the Companies Act, 1956.
 
 Appreciation
 
 The Board of Directors of your Company wishes to express gratitude for
 the cooperation, guidance and support received from the Ministry of
 Finance, various other Ministries and Departments of the Government of
 India and the Reserve Bank of India. The Board of Directors also
 acknowledges the continued cooperation received from all overseas
 correspondent banks and other members of the banking fraternity. The
 Board of Directors would like to sincerely thank the various Banks,
 Financial Institutions and other investors and shareholders for their
 continued support.
 
 The Directors of your Company place on record their appreciation for
 the dedicated and sincere services rendered by the officers and staff
 at all levels.
 
 
                            For and on behalf of the Board of Directors
 
 ATUL KUMAR RAI            P. G. MURALIDHARAN          RUPA SARKAR
 Chief Executive Officer &      Director            Company Secretary
 Managing Director
 
 Place:  New Delhi
 Dated:  July 12, 2008