Infrastructure Development Finance Company

The directors have pleasure in presenting the Eleventh Annual Report
 together with the audited accounts for the year ended March 31, 2008.
 
 Financial Results
 
 particulars (figures in rs. million)       fY 2007-08      fY 2006-07
 
 Operating incOme                               25,237          15,005
 Other income                                      117              52
 tOtal income                                   25,354          15,057
 Less administrative expenses*                   1,133             614
 Less provision for assets and losses              688             174
 Less interest and Other charges                14,802           8,554
 Profit Before tax                               8,731             715
 Less provision for tax **                       2,039           1,086
 Profit after tax                                6,692           4,629
 
 * Administrative expenses include staff expenses; travelling &
 conveyance; postage telephone & telex; establishment expenses; other
 expenses and depreciation
 
 ** Provision for Tax is net of Deferred Tax income from operations
 increased by 68% from Rs.15,005 million in 2006- 07 to Rs.25,237
 million in 2007-08.  IDFC’s total income, increased by 68% from
 Rs.15,057 million in 2006-07 to Rs. 25,354 million in 2007-08.
 
 Proft Before Tax (PBT) increased by 53% from Rs.5,715 million in
 2006-07 to Rs.8,731 million in 2007-08. Proft After Tax (PAT) increased
 by 45% from Rs.4,629 million in 2006-07 to Rs.6,692 million in 2007-08.
 
 IDFC’s quality of assets continued to be good with 0.03% Net NPAs as on
 March 31, 2008.
 
 Dividend
 
 Your Directors are pleased to recommend a dividend of 12% for the year
 ended March 31, 2008.
 
 Operations Review
 
 Leveraging the opportunities provided by a growing economy, the Company
 continues to see healthy growth in its lending activities. Gross
 approvals increased by 56% from Rs.130,530 million in 2006-07 to
 Rs.203,090 million in 2007-08, while net approvals increased by 104%
 from Rs.78,530 million in 2006-07 to Rs.159,900 million in 2007-08.
 Gross disbursements, increased by 67% from Rs.72,070 million in 2006-07
 to Rs.120,060 million in 2007-08, while net disbursements increased by
 85% from Rs.41,910 million in 2006-07 to Rs.77,550 million in 2007-08.
 
 As on March 31, 2008, IDFC’s total exposure to infrastructure projects
 was Rs.340,000 million of which Energy was the highest (36.9%),
 followed by Transportation (23.3%) and Telecommunication & IT (15.8% ).
 IDFC’s exposure to Commercial and Industrial sector was at 9.8%.
 
 IDFC continued to strengthen its proprietary equity business and in
 2007- 08, net approvals were Rs.7,480 million, while net disbursements
 were Rs.3,080 million.
 
 While the investment strategy for treasury operations continues to
 ensure adequate levels of liquidity to support core business
 requirements, it has started focusing on optimizing levels of return
 and functioning as a proft centre investing in fxed income securities,
 while maintaining prudent safety norms. Net interest income from
 treasury operations increased by 249% from Rs. 370 million in 2006-07
 to Rs. 1,290 million in 2007-08.
 
 With the acquisition of SSKI there has been a structural shift in its
 advisory services practice. The Companys entire suite of advisory
 services ranging from debt syndication, structured fnance to equity and
 debt market services has been brought under one platform to supplement
 the existing stock broking
 
 and investment banking services already existing within SSKI.
 
 The Policy Advisory Group continued to contribute to IDFC’s mandate of
 leading private capital to infrastructure projects, by providing
 impetus to rationalisation of policy and regulatory frameworks.
 
 In private equity, the Company is in the process of funding the frst
 tranche for the landmark US.25 billion project equity fund being
 developed by IDFC along with Citigroup and IIFCL.
 
 During the year, fee income increased substantially on account of
 increasing focus on asset management business and structured deals in
 debt syndication and private equity placement.
 
 Detailed analysis of the performance of the Company and its businesses,
 including initiatives in the area of Human Resources, Information
 Technology and Risk Management, has been presented in the section on
 Management Discussion and Analysis of this Annual Report
 
 Subsidiary Companies
 
 As the Company expanded its business domain, it has also increased its
 subsidiary companies. IDFC has eight direct subsidiary companies - IDFC
 Private Equity Company Limited, IDFC Trustee Company Limited, IDFC
 Investment Advisors Ltd, IDFC-SSKI Securities Limited, IDFC Project
 Equity Company Limited, IDFC PPP Trusteeship Company Limited, IDFC
 Capital Company Limited and Feedback First Urban Infrastructure
 Development Company Limited. IDFC-SSKI Private Limited and IDFC-SSKI
 Stock Broking Limited are subsidiaries of IDFC-SSKI Securities Limited.
 Similarly, Feedback First Urban Infrastructure Development Company
 Limited has further foated a subsidiary called IDFC Projects Limited,
 which will be a stand-alone infrastructure developer.
 
 A statement of particulars of IDFC’s subsidiaries is annexed to this
 report.
 
 Joint Ventures
 
 IDFC has two joint ventures - Infrastructure Development Corporation
 (Karnataka) Limited (iDeCK) in the state of Karnataka and Uttaranchal
 Infrastructure Development Company Limited (UDeC) in the state of
 Uttaranchal. These joint venture companies are engaged in advisory and
 project development work in the area of infrastructure at respective
 state level.
 
 Particulars OF Employees
 
 IDFC had 199 employees as on March 31, 2008. Particulars of employees
 as required to be furnished pursuant to Section 217(2A) of the
 Companies Act, 1956, read with the rules there under, 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 may write
 to the Company Secretary of the Company.
 
 Employees Stock Option scheme (Esos)
 
 Pursuant to the resolution passed by the members at the Extra -
 Ordinary 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 fnancial success of the Company. Out of the 7,194,683
 options outstanding at the beginning of the year, 388,164 options
 lapsed on account of resignations and 3,016,583 options were exercised
 during the year.
 
 Additionally, during 2007-08, 2,486,203 options were granted to
 eligible employees under the Scheme. Accordingly, 6,276,139 options
 remain outstanding as of March 31, 2008.
 
 All options vest over 3 years - 30% each vest after frst and second
 year of the grant and 40% vest after the third year.  The Company has
 used the intrinsic value method to account for the compensation cost of
 option 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 SEBI Employees 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 and Analysis are
 attached herewith and forms part of this annual report.
 
 Public Deposits
 
 During 2007-08, 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 expenditure and earnings are
 furnished at Item No. 15 & 16 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.
 
 Raising Of Funds
 
 The Company raied Rs. 21,000 million by way of QIP during the year. The
 funds have been used for the purpose of general business of the
 Company. The Company is also seeking an enabling resolution to raise
 US$ 750 million over next 12 - 18 months.
 
 Directors
 
 The Board, at its meeting held on July 25, 2007, appointed Mr. Abdul
 Rahim Abu Bakar as Director with effect from July 25, 2007 and he holds
 offce up to the date of the ensuing Annual General Meeting (AGM).
 
 Mr. Mohan Rajasooria, Alternate Director for Mr. Abdul Rahim Abu Bakar,
 resigned with effect from November 23, 2007.  The Board wishes to place
 on record its sincere appreciation of his valuable contribution to the
 Company.
 
 Mr. Vinod Rai, Secretary (Financial Services), Ministry of Finance,
 Government of India, ceased to be Director with effect from January 3,
 2008.  The Board wishes to place on record its sincere appreciation of
 his valuable contribution to the Company.
 
 The Board, at its meeting held on February 19, 2008, appointed Mr. Arun
 Ramanathan, Secretary (Financial Sevices), Ministry of Finance,
 Government of India, as Director with effect from February 19, 2008 and
 he holds offce up to the date of the ensuing Annual General Meeting.
 
 In accordance with the Articles of Association of the Company and
 provisions of the Companies Act, 1956, Mr. Dimitris Tsitsiragos, Dr.
 Omkar Goswami and Mr. Shardul Shroff retire by rotation and being
 eligible, offer themselves for re-appointment 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 along with implementation
 and recommendations contained therein are constantly reviewed by the
 Audit Committee of the Board.
 
 Auditors
 
 Messrs. Deloitte Haskins and Sells, Chartered Acountants, will retire
 as the statutory auditors of the Company at the ensuing AGM. The Board,
 at its meeting held on April 28, 2008, has proposed their
 re-appointment as Auditors to audit the accounts of the Company for the
 fnancial year ending March 31, 2009.
 
 Messrs. Deloitte Haskins and Sells, the retiring auditors, have
 confrmed that their re-appointment, if made, would be in conformity
 with the provisions of Sec- tions 224 and 226 of the Companies Act,
 1956, as also indicated their willingness to be re-appointed.
 
 Diectors Responsibility statement
 
 The Directors confrm 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
 fnancial year and of the profts of the Company for the year;
 
 - they have taken proper and suffcient 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), Financial Services Division (MoF), 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; the Reserve Bank of India and regulatory bodies, TRAI, the
 Central Electricity Regulatory Commission and State Electricity
 Regulatory Commission; the Planning Commission; IIT (Kanpur); IIM
 (Ahmedabad); the State Governments and all IDFC’s 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 its warm
 appreciation for these efforts.
 
                                   For and on behalf of the Board
 
                                          Deepak s. Parekh
                                             Chairman
 
 Mumbai  June 7, 2008