The Directors have pleasure in presenting the Fourteenth Annual Report
 together with the audited accounts for the year ended March 31, 2011.
 
 DIRECTORS REPORT TO THE SHAREHOLDERS
 
 Your Directors have pleasure in presenting the Fourteenth Annual Report
 together with the audited accounts for the year ended March 31, 2011.
 
 Financial Results (Standalone)              (Figures in Rs. crore)
 
 Particulars                              FY 2010-11     FY 2009-10
 
 Operating Income                          4,545.96      3,569.98
 
 Other Income                                 14.40         27.13
 
 Total Income                              4,560.36      3,597.11
 
 Less: Administrative Expenses *             208.45        199.38
 
 Less: Provision for assets and losses       234.94        130.36
 
 Profit Before Interest and Taxes          4,116.97      3,267.37
 
 Less: Interest and Other Charges          2,386.52      1,950.23
 
 Profit Before Tax                         1,730.45      1,317.14
 
 Less: Provision for Tax **                  453.30        304.30
 
 Profit After Tax                          1,277.15      1,012.84
 
 * Administrative expenses include staff expenses; travelling &
 conveyance; postage, telephone & telex; establishment expenses; other
 expenses and depreciation as reduced by shared service cost recovered
 from subsidiaries.  ** Provision for Tax is net of Deferred Tax.
 
 Income from operations increased by 27.34% from Rs. 3,569.98 crore in FY
 10 to Rs. 4,545.96 crore in FY 11. Other income reduced by 46.92% from Rs.
 27.13 crore in FY 10 to Rs. 14.40 crore in FY 11. IDFCs total income,
 increased by 26.78% from Rs. 3,597.11 crore in FY 10 to Rs. 4,560.36 crore
 in FY 11.
 
 Profit Before Tax (PBT) increased by 31.38% from Rs. 1,317.14 crore in FY
 10 to Rs. 1,730.45 crore in FY 11. Profit After Tax (PAT) increased by
 26.10% from Rs. 1,012.84 crore in FY 10 to Rs. 1,277.15 crore in FY 11.
 
 IDFCs quality of assets continued to be good with Net NPAs at Rs.
 38.91crore as on March 31, 2011.
 
 DIVIDEND
 
 Your Directors are pleased to recommend a dividend of X 2/- per share
 (i.e. 20%) for the year ended March 31, 2011 on equity shares.
 
 The Company will pay a dividend @ 6% on Compulsorily Convertible
 Cumulative Preference Shares as per the terms of issue.
 
 OPERATIONS REVIEW
 
 The global economy witnessed two speed growths. While the emerging
 economies grew by 7% in 2010, the advanced economies grew by 3% in
 2010. World output, which had fallen by 0.6% in 2009 grew by 5% in
 2010. Clearly, the global economy is in recovery mode. With the
 financial turbulence firmly behind it, global financial markets also
 recovered and capital flows re-emerged with increase in flows into
 emerging economies. However, issues with Government finances in the
 Euro area provided vulnerability to the system. Overall, while the
 global financial system is improving from the debacle of 2008, there
 are still some uncertainties and volatility in the system. The other
 factor has been growing commodity and oil prices, which is leading to
 inflation and a higher interest regime. In this environment, IDFC has
 had to be very proactive in raising capital and managing liquidity for
 the operations of its financing business.
 
 While domestic GDP is expected to record an impressive 8.5% growth in
 FY 11, there were some issues with the infrastructure sector.
 Consequently, after a flurry of activity in the first half, project
 development opportunities in the market reduced substantially in the
 second half. The slowdown was particularly apparent in the road and
 power sectors. However, the slowdown was primarily due to
 administrative issues while the intrinsic demand for infrastructure
 continues to grow.
 
 Leveraging the opportunities provided by a growing economy, the Company
 adopted a high growth model focused on significantly increasing the
 project finance operations by growing the balance sheet. Gross
 approvals increased by 40% to Rs. 42,716 crore (Rs. 427 billion) in FY 11.
 Gross disbursements, increased by 106% to Rs. 26,702 crore (Rs. 267
 billion) in FY 11.
 
 Net loans increased by 50% to Rs. 37,652 crore, while the balance sheet
 has grown by 42% to Rs. 47,367 crore.
 
 As on March 31, 2011, IDFCs total exposure to infrastructure projects
 was Rs. 58,273 crore of which Energy was the highest 45.8%, followed by
 Transportation 28.7%, Telecommunication & IT 15.8% and Commercial &
 Industrial sector 9.7% .
 
 While the investment strategy for treasury operations continues to
 ensure adequate levels of liquidity to support core business
 requirements, it has started focusing on optimising levels of return
 and functioning as a profit centre investing in fixed income assets,
 while maintaining prudent safety norms. Net interest income from
 treasury operations for IDFC increased by 61% from Rs. 75 crore in FY 10
 to Rs. 121 crore in FY 11.
 
 The financial markets were volatile during FY 11. Consequently, there
 was a fall in fee- based non interest income. The investment banking
 business under IDFC Capital and the institutional brokerage business
 under IDFC Securities witnessed a drop in incomes. The mutual fund
 business that was acquired in FY 09 and operated by IDFC-AMC also saw a
 reduction in assets under management and management fees.
 
 The Policy Advisory Group and CSR activities have been brought under
 one umbrella with the formation of IDFC Foundation in FY 11. This SBU
 continued to contribute to IDFCs mandate of leading private capital to
 infrastructure projects, by providing impetus to rationalisation of
 policy and regulatory frameworks, promoting PPP models, policy advocacy
 and direct CSR activities.
 
 IDFC Private Equity and IDFC Project Equity continue to be committed to
 the development of infrastructure in the country. IDFC Private Equity
 manages three funds - India Development Fund, IDFC Private Equity Fund
 II and IDFC Private Equity Fund III having a total capital commitment
 of X 5,735 crore or? 57.3 billion and IDFC Project Equity manages the X
 3,837 crore India Infrastructure fund. The focus on asset management
 was on maintenance of the funds.
 
 During the year, fee income from managing third party asset decreased
 by 14% from X 290 crore in FY 10 to X 249 crore in FY 11.
 
 Detailed analysis of the performance of the Company and its businesses,
 including initiatives in the area of Information Technology, has been
 presented in the section on Management Discussion & Analysis of this
 Annual Report.
 
 - SUBSIDIARY COMPANIES
 
 IDFC has eleven direct wholly owned subsidiary companies - IDFC Private
 Equity Company Limited, IDFC Trustee Company Limited, IDFC Project
 Equity Company Limited, IDFC Finance Limited, IDFC Securities Limited,
 IDFC PPP Trusteeship Company Limited, IDFC Projects Limited, IDFC Asset
 Management Company Limited, IDFC AMC Trustee Company Limited, IDFC
 Foundation (a Section 25 Company) and Uniquest Infra Ventures Private
 Limited. In addition IDFC Securities Limited has three wholly owned
 subsidiary companies namely, IDFC Capital Limited (earlier known as
 IDFC- SSKI Limited), IDFC Distribution Company Limited (earlier known
 as IDFC-SSKI Stock Broking Limited) and IDFC Capital USA Inc.  IDFC
 Capital Limited has three wholly owned subsidiaries called IDFC Capital
 (Singapore) Pte. Limited, IDFC Fund of Funds Limited and IDFC General
 Partners Limited.
 
 During the year, Jetpur Somnath Highway Limited (earlier known as IDFC
 Capital Company Limited and a direct subsidiary of IDFC) has become a
 subsidiary of IDFC Projects Limited. A company under the name of Jetpur
 Somnath Tollways Limited, has been incorporated as a Subsidiary of IDFC
 Projects Limited. IDFC Projects, alongwith the other companies, has
 further floated Dheeru Powergen Limited, which was converted from
 Private Limited Company to a Public Limited Company.
 
 IDFC Asset Management Company Limited has further floated IDFC Pension
 Fund Management Limited, one of the Pension Fund Managers appointed by
 the Pension Fund Regulatory and Development Authority (PFRDA) to manage
 retirement funds under the New Pension Scheme (NPS) open to individuals
 in the private sector, and IDFC Investment Advisors Ltd. A company
 under the name of IDFC Investment Managers (Mauritius) Limited, has
 been incorporated as a Subsidiary of IDFC Asset Management Company
 Limited.
 
 During the year, IDFC Foundation (a Non- Profit Organisation) was
 incorporated under Section 25 of the Companies Act, 1956, as a wholly
 owned subsidiary company of IDFC. Further, the shares of the three
 Joint ventures namely, Infrastructure Development Corporation
 (Karnataka) Limited (iDeCK), Uttarakhand Infrastructure Development
 Company Limited (UDeC) and Delhi Integrated Multi-Modal Transit System
 Limited (DIMTS), which were initially held by IDFC, have been
 transferred to IDFC Foundation and similarly, the units of the Trust,
 namely India Infrastructure Initiative Trust & India PPP Capacity
 Building Trust which were initially held by IDFC have also been
 transferred to IDFC Foundation. Further during the year, Uniquest Infra
 Ventures Private Limited was incorporated as a direct subsidiary of the
 Company and IDFC Capital USA Inc. was also incorporated as a subsidiary
 company of IDFC Securities Limited.
 
 A statement of particulars of IDFCs subsidiaries is annexed to this
 Annual Report.
 
 Detailed analysis of the performance of IDFC and its businesses —
 financing and advisory, including initiatives in the area of Human
 Resources, Information Technology, and Risk Management has been
 presented in the Leveraging the opportunities provided by a growing
 economy, the Company adopted a high growth model focused on
 significantly increasing the project finance operations by growing the
 balance sheet.  section on Management Discussion & Analysis of this
 Annual Report.
 
 In view of the General Circular no. 2/2011 dated February 8, 2011
 issued by the Ministry of Corporate Affairs, granting a general
 exemption under Section 212(8) of the Companies Act, 1956, copies of
 Balance Sheet, Profit and Loss Account, Reports of the Board of
 Directors and Auditors of each of the subsidiary companies have not
 been attached to the accounts of the Company for the FY 11. The Company
 undertakes to make available these documents/details upon request by
 any member of the Company at any point of time. These documents/details
 will be available on the Companys website www.idfc.com and will also
 be available for inspection by any of the members of the Company at its
 Registered and Corporate Offices and also at the Registered Office of
 the concerned subsidiaries. In accordance with the requirements of
 Accounting Standard 21 (Consolidated Financial Statements), Accounting
 Standard 23 (Accounting for Investment in Associates in Consolidated
 Financial Statements) and Accounting Standard 27 [Financial Reporting
 of Interests in Joint Ventures notified by the Companies (Accounting
 Standards)] Rules, 2006, the Consolidated Accounts of IDFC and its
 subsidiaries have been prepared and the same are annexed to this Annual
 Report.
 
 PARTICULARS OF EMPLOYEES
 
 IDFC had 586 employees as on March 31, 2011. Particulars of Employees
 as required to be furnished pursuant to Section 217(2A) of the
 Companies Act, 1956, read with the rules thereunder, forms part of this
 Report. However, as per the provision of Section 219(1)(b)(iv) of the
 Companies Act, 1956, the reports and accounts are being sent to all the
 shareholders of the Company excluding the statement of particulars of
 employees. Any shareholder interested in obtaining a copy of the same
 may write to the Company Secretary of the Company.
 
 EMPLOYEE STOCK OPTION
 
 SCHEME (ESOS)
 
 Pursuant to the resolution passed by the members at the Annual General
 Meeting held on August 2, 2006, IDFC has introduced Employee Stock
 Option Scheme 2007 (referred to as the Scheme) to enable the
 employees of IDFC and its subsidiaries to participate in the future
 growth and financial success of the Company. Out of the 16,548,268
 options outstanding at the beginning of the year, 673,790 options
 lapsed on account of resignations and 2,583,065 options were exercised
 during the year.
 
 Additionally, during the year, 7,459,308 options were granted to
 eligible employees under the Scheme. Accordingly, 20,750,721 options
 remain outstanding as of March 31, 2011.
 
 All options vest in graded manner and are required to be exercised
 within a specific period. The Company has used the intrinsic value
 method to account for the compensation cost of stock to employees of
 the Company.  Intrinsic value is the amount by which the quoted market
 price of the underlying share on the date prior to the date of the
 grant exceeds the exercise price on the option.
 
 Disclosures as required by Clause 12 of the Securities & Exchange Board
 of India (Employee Stock Option Scheme and Employee Stock Purchase
 Scheme) Guidelines, 1999 are annexed to this Report.
 
 CORPORATE GOVERNANCE
 
 Separate detailed chapters on Corporate Governance, Additional
 Shareholder Information and Management Discussion & Analysis are
 attached herewith and form part of this Annual Report.
 
 PUBLIC DEPOSITS
 
 During the year FY 11, your Company has not accepted any deposits from
 the public within the meaning of the provisions of the Non- Banking
 Financial Companies (Reserve Bank) Directions, 1998.
 
 FOREIGN EXCHANGE
 
 The particulars regarding foreign exchange earnings and expenditure are
 furnished at Item Nos. 24 & 25 in the Notes to the Accounts. Since the
 Company does not own any manufacturing facility, the other particulars
 in the Companies (Disclosure of Particulars in the Report of the Board
 of Directors) Rules, 1998 are not applicable.
 
 FUND RAISING
 
 During the year, the Company had issued and allotted 157,752,090 equity
 shares of Rs. 10/- each to Qualified Institutional Buyers (QIBs) under
 Chapter VIII of the Securities & Exchange Board of India (Issue of
 Capital & Disclosure Requirements) Regulations, 2009 at a premium of Rs.
 158.25 per equity share aggregating to Rs. 2,654.18 crore.
 
 During the year, the Company had issued 84,000,000 Compulsorily
 Convertible Cumulative Preference Shares (CCCPS) having face value of Rs.
 100 each of the Company on preferential basis in terms of Chapter VII
 of the Securities & Exchange Board of India (Issue of Capital and
 Disclosure Requirements) Regulations, 2009 aggregating to Rs. 840 crore.
 
 During the financial year, the Company also made a fresh issue
 aggregating to Rs. 1,451.76 crore by way of issuance of long-term
 infrastructure bonds of face value of Rs. 5,000 each, in the nature of
 secured, redeemable, non-convertible debentures, having benefits under
 Section 80 CCF of the Income-tax Act, 1961, under the applicable SEBI
 Guidelines.
 
 LISTING OF SHARES
 
 The Companys shares are listed on National Stock Exchange of India
 Limited (NSE) and Bombay Stock Exchange Limited (BSE).
 
 DIRECTORS
 
 Ministry of Finance, Government of India, nominated Mr. Bimal Julka,
 Director General, Currency, Department of Economic Affairs, Ministry of
 Finance and Additional Secretary to Government of India, Ministry of
 Finance, as a Nominee Director on the Board of IDFC in place of Mr. G.
 C. Chaturvedi, Additional Secretary, Department of Financial Services.
 Accordingly, Mr. G. C. Chaturvedi ceased to be Director with effect
 from November 07, 2010.  The Board placed on record its appreciation of
 the invaluable guidance provided by Mr. G. C.  Chaturvedi to the
 Company.
 
 The Board, at its meeting held on November 08, 2010, appointed Mr.
 Bimal Julka, as a Director with effect from November 08, 2010 and he
 holds office up to the date of the ensuing Annual General Meeting
 (AGM).  The Company has received notice from a Member of the Company
 under Section 257 of the Companies Act, 1956 proposing the candidature
 of Mr. Bimal Julka as a Director.
 
 In accordance with the Articles of Association of the Company and
 provisions of the Companies Act, 1956, Dr. Omkar Goswami, Mr. Shardul
 Shroff and Mr. S. H. Khan would retire by rotation and being eligible,
 offer themselves for re-appointment at the AGM.
 
 The Board of Directors recommends appointment/re-appointment of all the
 above Directors at the ensuing AGM.
 
 INTERNAL CONTROL SYSTEMS
 
 The Company has in place adequate systems of Internal Control to ensure
 compliance
 
 with policies and procedures. Internal Audits of all the units of the
 Company are regularly carried out to review the internal control
 systems. The Internal Audit Reports alongwith implementation and
 recommendations contained therein are constantly reviewed by the Audit
 Committee of the Board.
 
 AUDITORS
 
 Messrs Deloitte Haskins & Sells, Chartered Accountants, will retire as
 the statutory auditors of the Company at the ensuing AGM.  The Board at
 its meeting held on April 29, 2011, has proposed their re-appointment
 as Auditors to audit the accounts of the Company for the financial year
 ending March 31, 2012.
 
 Messrs Deloitte Haskins & Sells, the retiring auditors, have confirmed
 that their re- appointment, if made, would be in conformity with the
 provisions of Sections 224 and 226 of the Companies Act, 1956, and also
 indicated their willingness to be re-appointed.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 The Directors confirm that:
 
 - in the preparation of the annual accounts, the applicable accounting
 standards have been followed;
 
 - 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 at the end of the financial year and of the profits of the
 Company for the year;
 
 - they have taken proper and sufficient care for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956, for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities; and
 
 - they have prepared the annual accounts on a going concern basis.
 
 ACKNOWLEDGEMENTS
 
 IDFC has developed close relationships with the Ministry of Finance
 (MoF), Banking Division, Ministry of Surface Transport, National
 Highways Authority of India, Ministry of Power, Department of
 Telecommunications,
 
 Ministry of Petroleum and other Ministries of the Government of India
 involved with infrastructure development; Reserve Bank of India,
 Securities & Exchange Board of India and regulatory bodies, TRAI, the
 Central Electricity Regulatory Commission and State Electricity
 Regulatory Commissions; the Planning Commission; IIT (Kanpur); IIM
 (Ahmedabad); the State Governments and all IDFCs shareholders.  The
 Board of Directors wishes to gratefully acknowledge the assistance and
 guidance received from all of them. IDFC could make the progress it has
 in these years due to the dedication and creativity of its staff at all
 levels. The Board of Directors wishes to place on record their warm
 appreciation for these efforts.
 
 For and on behalf of the Board
 
 DEEPAK S. PAREKH
 
 Chairman
 
 Mumbai, June 13, 2011