The Directors have pleasure in presenting the Sixteenth Annual Report
on our business and operations together with the audited accounts for
the year ended March 31, 2013.
The Company is engaged in financing infrastructure projects in sectors
like energy, telecommunication, transportation, commercial and
industrial projects including hospitals, education, tourism and hotels.
Balance Sheet grew by 15% Year on Year (YoY) to reach H 69,994 crore
and Net Loans at H 55,736 crore witnessed an increase of 16% YoY As on
March 31, 2013, IDFC''s total exposure was H 72,597 crore, of which
Energy was highest at 41%, followed by Transportation 25%,
Telecommunication 23% and Others 11%.
Your Directors are pleased to recommend a dividend of H 2.60 per equity
share of H 10 each (i.e. 26%) for the year ended March 31, 2013. Above
dividend would be paid subject to approval by the Members in the
ensuing Annual General Meeting (AGM).
IDFC has ten direct subsidiary companies as follows:
1. IDFC Alternatives Limited
2. IDFC Trustee Company Limited
3. IDFC Projects Limited
4. IDFC Finance Limited
5. IDFC Securities Limited
6. IDFC Primary Dealership Company Limited
7. IDFC AMC Trustee Company Limited
8. IDFC Asset Management Company Limited
9. IDFC Foundation (Section 25 Company)
10. Neopro Technologies Private Limited In addition,
A. IDFC Alternatives Limited has one wholly owned subsidiary company
namely IDFC Project Equity Company Limited.
B. IDFC Securities Limited has three wholly owned subsidiary companies
namely IDFC Capital Limited, IDFC Distribution Company Limited and IDFC
Capital (USA) Inc. Further, IDFC Capital Limited has three wholly owned
foreign subsidiaries namely IDFC Fund of Funds Limited, IDFC Capital
(Singapore) Pte. Limited and IDFC Securities Singapore Pte. Limited.
C. IDFC Asset Management Company Limited also has three subsidiaries,
namely IDFC Pension Fund Management Company Limited, IDFC Investment
Advisors Limited and IDFC Investment Managers (Mauritius) Limited.
During the year, IDFC General Partners Limited, a wholly owned
subsidiary of IDFC Capital Limited was dissolved under voluntary
liquidation process with effect from September 21, 2012.
IDFC PPP Trusteeship Company Limited which is a subsidiary company of
IDFC Foundation had made an application to the Registrar of Companies,
Maharashtra, Mumbai (ROC) under Fast Track Exit Mode 2011 on April 25,
2013 to get its name struck off from the Register of Companies
maintained by ROC.
During the year, the Company divested its stake in Dheeru Powergen
Limited, a subsidiary of IDFC Projects Limited.
During the year under review, the Company acquired 71% stake in Neopro
Technologies Private Limited, making it a direct subsidiary of the
Statement of particulars of IDFC''s subsidiaries under Section 212 is
provided in Note 47 of the Notes forming part of the Consolidated
Detailed analysis of the performance of IDFC and its businesses -
financing and advisory, including initiatives in the areas of Resource
Raising, Human Resources, Information Technology and Risk Management
has been presented in the section on Management Discussion & Analysis
of this Annual Report.
The Ministry of Corporate Affairs (MCA) vide its General Circular No.
2/2011 dated February 8, 2011 has granted general exemption under
Section 212(8) of the Companies Act, 1956, to companies from attaching
accounts of its subsidiaries in its Annual Report subject to fulfilment
of certain conditions prescribed therein. The Board of Directors of the
Company at its meeting held on March 14, 2013, noted the provisions of
the above mentioned circular of MCA and passed the necessary resolution
granting the requisite approvals for not attaching copies of Balance
Sheet, Statement of Profit and Loss, Reports of the Board of Directors
and Auditors of each of the subsidiary companies to the accounts of the
Company for FY13 subject to complying with the provisions of the said
circular. The Company also undertakes that annual accounts of the
subsidiary companies and the related detailed information will be made
available to the Shareholders of the holding and subsidiary companies
seeking such information at any point of time. The annual accounts of
the subsidiary companies will be available on the Company''s website:
www.idfc. com and will also be available for inspection by any
Shareholder at the Registered and Corporate Offices of the Company and
the concerned subsidiaries. The Company shall furnish a hard copy of
details of accounts of subsidiaries to Shareholders on demand.In
accordance with the requirements of Accounting Standard 21
(Consolidated Financial Statements) and Accounting Standard 23
(Accounting for Investment in Associates in Consolidated Financial
Statements) notified by the Companies (Accounting Standards) Rules,
2006, the Consolidated Accounts of IDFC and its subsidiaries have been
prepared and the same forms part of this Annual Report.
IDFC Foundation, a Section 25 Company and a wholly owned subsidiary of
the Company has following three Joint Ventures:
1. Delhi Integrated Multi-Modal Transit System Limited
2. Infrastructure Development Corporation (Karnataka) Limited
3. Uttarakhand Infrastructure Development Company Limited
IDFC has two associate companies as follows:
1. Feedback Infrastructure Services Private Limited
2. Galaxy Mercantiles Limited
In addition, IDFC Projects Limited, a wholly owned subsidiary of the
Company, has one associate company namely Jetpur Somnath Tollways
PARTICULARS OF EMPLOYEES
IDFC had 238 employees as on March 31, 2013 and 586 employees at the
group level . 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
provisions 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 AGM held on
August 2, 2006, IDFC had 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 37,970,105 options outstanding at the beginning
of the current financial year, 919,304 options lapsed on account of
resignations and 2,364,861 options were exercised during the year
Additionally, during the year, 883,000 options were granted to eligible
employees under the Scheme. Accordingly, 35,568,940 options remain
outstanding as of March 31, 2013.
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 and Exchange
Board of India (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999, are annexed to this Report.
MD&A AND CORPORATE GOVERNANCE
Separate detailed chapters on Management Discussion & Analysis,
Corporate Governance and Additional Shareholder Information form part
of this Annual Report.
During FY13, your Company has not accepted any deposits from the public
within the meaning of the provisions of the Non-Banking Financial
Companies Acceptance of Public Deposits (Reserve Bank) Directions,
The particulars regarding foreign exchange expenditure and earnings are
furnished at Item Nos. 29 & 30 in the Notes forming part of the
PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
Since the Company does not carry out any manufacturing activity, the
particulars regarding conservation of energy, technology absorption and
other particulars as required by the Companies (Disclosure of
Particulars in the Report of the Board of Directors) Rules, 1998, are
The Board, at its meeting held on October 26, 2012, appointed Mr.
Joseph Dominic Silva, nominee of Sipadan Investments (Mauritius)
Limited as an Additional Director in place of Mr. Abdul Rahim Abu
Bakar. Upon the resignation of Mr. Abdul Rahim Abu Bakar on October 26,
2012, his Alternate Director Mr. Michael Fernandes also ceased to hold
the position of Alternate Director with effect from October 26, 2012.
Ministry of Finance (MoF), Government of India nominated Ms. Snehlata
Shrivastava, Additional Secretary, Department of Financial Services,
MoF, as Director on the Board of IDFC in place of Mr. Sunil Soni
(former Additional Secretary, Department of Financial Services, MoF).
Accordingly, at the Board Meeting dated February 1, 2013, Ms. Snehlata
Shrivastava was appointed as an Additional Director in place of Mr.
At the Board Meeting held on May 1, 2013, Mr. Deepak Parekh, the
Founding Chairman of the Company resigned as the Non - executive
Chairman of the Company. The Board accepted his resignation with deep
regret. However, at the request of the Board, Mr. Parekh would remain
associated with your Company in his new role as Chairman of IDFC''s
Advisory Council, a consultative body, comprising of 3-4 eminent
persons, to be constituted by your Company in a few months.
The Nomination Committee of the Company, at its meeting held on May 1,
2013, recommended the appointment of:
Dr. Rajiv B. Lall as Executive Chairman of the Company, and Mr. Vikram
Limaye as Managing Director & CEO of the Company, on the same terms and
conditions as approved by Shareholders at the last AGM held on July 9,
The Compensation Committee of the Company, at its meeting held on May
1, 2013, also recommended the terms of appointment of Dr. Rajiv B. Lall
and Mr. Vikram Limaye, to be the same as were approved by Shareholders
at the AGM held on July 9, 2012.
Based on the recommendation of Nomination and Compensation Committees,
and subject to the approval of the Members at the ensuing AGM, the
Board of Directors at its meeting held on May 1, 2013, granted its
approval for the appointment of Dr. Rajiv B. Lall as Executive Chairman
and Mr. Vikram Limaye as Managing Director & CEO with effect from May
2, 2013 for a period of 3 years, other terms of their appointment being
same as approved by Shareholders at the last AGM held on July 9, 2012.
Both these appointments are subject to ratification by the Shareholders
in the ensuing AGM, the resolutions for which have been included in the
Your Directors wish to place on record their appreciation for the
valuable services rendered by all the outgoing Directors during their
tenure as Directors of the Company
Mr. Joseph Dominic Silva and Ms. Snehlata Shrivastava hold their
respective offices as Additional Directors up to the date of the
The Company has received notices from Members of the Company under
Section 257 of the Companies Act, 1956, proposing the candidature of
Mr. Joseph Dominic Silva and Ms. Snehlata Shrivastava as Directors at
the ensuing AGM.
Dr. Omkar Goswami and Mr. Shardul Shroff will retire by rotation and
being eligible, offer themselves for re-appointment at the ensuing AGM.
The profiles of the above Directors are provided in the Notice
convening the ensuing AGM.
The Board of Directors recommends appointment / re-appointment of all
the above Directors at the ensuing AGM.
PAYMENT OF COMMISSION TO NON- EXECUTIVE DIRECTORS (NEDs)
The Company, at its 11th AGM held on July 18, 2008, had approved the
payment of remuneration by way of commission or otherwise, not
exceeding 1% of the Net Profits of the Company, to NEDs for the period
of 5 years ended on March 31, 2013. It is proposed to seek the approval
of the Shareholders by way of a Special Resolution at the ensuing AGM
for continuing payment of commission to NEDs, other than Whole-time
Directors, which shall not exceed 1% of the Net Profits of the Company
as computed in the manner referred to in Sections 198, 349 and 350 of
the Companies Act, 1956.
ADDITIONAL 2% ISSUANCE OF SHARES UNDER ESOS
It is proposed to set aside additional 2% shares for issuance under
IDFC Employee Stock Option Scheme - 2007 (ESOS-2007) of the
issued Equity Share Capital of the Company, from time to time.
DECREASE IN LIMIT OF FOREIGN INSTITUTIONAL INVESTORS'' (FIIs) HOLDING
IN THE EQUITY SHARE CAPITAL FROM 74% TO 54%
The Board of Directors of your Company had decided at its Board Meeting
held on June 18, 2013 to apply to RBI for a banking license pursuant to
the guidelines for licensing of new banks in the Private Sector
announced by RBI on February 22, 2013.
The said guidelines states that the eligible applicant
entities/promoter groups in private sectors must be owned and
controlled by residents i.e. the aggregate non-resident shareholding
including through Foreign Direct Investment, Non-Resident Indians and
FIIs shall not exceed 49% of the paid up Equity capital of the Company.
In view of the above provisions, it is proposed to seek the approval of
the Shareholders by way of a Special Resolution at the ensuing AGM to
authorise the Board to reduce the ceiling limit of foreign shareholding
to 54% as and when the Board thinks it appropriate considering the
extant foreign holding in the Company at that point of time. As and
when RBI''s in-principle approval for banking license is received, the
Company will seek Shareholders'' approval for further reducing the
foreign shareholding ceiling limit to 49%.
M/s. Deloitte Haskins & Sells, Chartered Accountants, will retire as
the Statutory Auditors of the Company at the ensuing AGM. The Members
are requested to re-appoint M/s. Deloitte Haskins & Sells, Chartered
Accountants, as Statutory Auditors of the Company for FY14 and to
authorize the Board of Directors to fix their remuneration by way of
Special Resolution as per Notice convening the AGM.
M/s. 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.
INTERNAL CONTROL SYSTEMS
The Company has in place, adequate systems of Internal Control to
ensure compliance with policies and procedures. It is being constantly
assessed and strengthened with new / revised standard operating
procedures and tighter Information Technology controls. 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 the
recommendations and implementation contained therein are regularly
reviewed by the Audit Committee of the Board.
KPMG were appointed as Concurrent Auditors for the FY14 for systematic
examination of all financial transactions of treasury department to
ensure accuracy and compliance of internal systems and procedures as
laid out by the Company
TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of Sections 205A and 205C of the Companies
Act, 1956, the dividend/interest/refund of applications which remains
unclaimed/ unpaid for a period of seven years from the date of transfer
to the unpaid dividend /interest/refund account is required to be
transferred to the Investor Education and Protection Fund (IEPF)
established by the Central Government. In terms of the provisions of
Section 205C of the Companies Act, 1956, no claim shall lie against the
Company or IEPF after the said transfer.
Pursuant to the provisions of Section 205A(5) of the Companies Act,
1956, an amount of H 408,980 being the refund of the application money
received by IDFC at the time of its Initial Public Offer (IPO) in July/
August, 2005 and which remained unpaid and unclaimed for a period of 7
years has been transferred by the Company to the IEPF Further, the
unpaid dividend amount pertaining to the financial year 2005-06 will be
transferred to IEPF during this year
DIRECTORS'' RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
- In the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper explanation
relating to material departures;
- Appropriate accounting policies have been selected and applied
consistently and have 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 of
the Company for the year ended March 31, 2013;
- Proper and sufficient care has been taken for 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;
- The annual accounts have been prepared on a going concern basis.
IDFC has developed close relationships with the Ministry of Finance,
Banking Division, Department of Economic Affairs; Ministry of Surface
Transport; National Highways Authority of India; Ministry of Power;
Department of Telecommunications; Ministry of Petroleum; Ministry of
Corporate Affairs and other Ministries of the Government of India
involved with infrastructure development; Reserve Bank of India;
National Stock Exchange of India Limited; BSE Limited; Securities and
Exchange Board of India and other regulatory bodies; Telecom Regulatory
Authority of India; the Central Electricity Regulatory Commission and
State Electricity Regulatory Commissions; Planning Commission; State
Governments and all IDFC''s Shareholders and Bondholders. The Board
of Directors would like to take this opportunity to express sincere
thanks to all Banks and Financial Institutions for their continuous
co-operation and support. The Directors express their appreciation for
the good work and efforts put in by the employees at all levels of the
For and on behalf of the Board
RAJIV B. LALL
Mumbai, July 1, 2013.