Dear shareholder''s 
 
 The year 2011-12 has been quite challenging, when we have witnessed a
 good growth in disbursements, but tardy growth in profits. It is only
 because of our unique business model of being a holistic infrastructure
 institution that we have been able to withstand the downturn in the
 economy. Our business has therefore been well insulated as our
 infrastructure portfolio is well diversified, both in terms of the
 sectors and clients. The biggest advantage for the Company has been its
 deep understanding of the risks in the sector and ways to mitigate it
 which has been learnt over more than two decades of arduous practice.
 
 Economy outlook
 
 According to the Twelfth Five Year Plan (2012-17) projections, it is
 estimated that USD 200 billion is to be invested annually in
 infrastructure, of which 50 per cent is expected to come from the
 private sector. Srei, being one of the leading private sector
 infrastructure institutions in the country, is well positioned to
 capitalise on this opportunity. With over twenty three years of rich
 experience, Srei has a pivotal role to play in the coming years in
 driving the infrastructure success story, in partnership with its key
 stakeholders.
 
 However, the macroeconomic scenario, both in India and abroad, is
 presently quite stressed. None of the key economic indicators are
 encouraging at this juncture. High interest rate, plunging Index for
 Industrial Production (IIP) figures, slowing export demand,
 depreciating rupee, unsustainable current account deficit and rising
 fiscal deficit have all resulted in a marked slowdown in economic
 growth as reflected in quarter-on-quarter declining GDP growth. In
 FY12, Indian economy could manage only 6.5 per cent GDP growth, far
 below expectation.  Government''s policy paralysis has further
 compounded the problem.  Over and above these, a crisis in the Eurozone
 has been building up for almost two years now. The US economy, with
 high unemployment and diminishing consumption demand, is yet to recover
 from the 2008 crisis. As I write this, a sense of déjà vu overwhelms
 me, as if I am transported back to 2009, when world over, governments
 in most countries were prompt to come up with stimulus packages that
 provided temporary relief from the downturn. This time around, the
 possibility of fresh stimulus is less and it seems that there is a lot
 of uncertainty amongst leaders on the way forward.
 
 Indian economy may remain trapped in a low growth phase for some time.
 However in spite of slowdown, during the year under review, your
 Company disbursed Rs.18,600 crore and registered almost a 50 per cent
 rise in income from Rs.1,638 crore in 2010-11 to Rs.2,446 crore in 2011-12.
 The net profits have fallen from Rs.179 crore in 2010-11 to Rs.112 crore in
 2011-12, which has been primarily due to marked-to-market (MTM) losses
 on account of foreign exchange, as rupee suddenly depreciated sharply.
 
 Though the exchange rate movements were closely followed, the magnitude
 and suddenness of the rupee depreciation caught everyone off-guard. The
 management is constantly monitoring the movement of rupee and adequate
 care is being taken to ensure that minimum impact is felt. During the
 year under review, RBI has also been successively increasing interest
 rates which have created pressure on the Net Interest Margin. The
 primary reason for RBI to do so has been to bring down inflation.
 
 A closer look at our economy will reveal that over the years inflation
 has become a recurrent and persistent problem in India, but the
 interesting fact here is that almost every time, inflation has been
 driven by supply- side factors. So, to take care of supply side
 constraints, massive investment in infrastructure is the need of the
 hour. It has been seen that the higher interest rates and depreciating
 rupee have had a negative impact on the economy. It has added ''fuel to
 fire'' in a situation where inflation remains uncontrolled and growth
 rate has declined.  Therefore, it is necessary for the government to
 act with alacrity, by introducing policies and streamlining processes
 which will accelerate growth by creating an enabling environment for
 investments in infrastructure, industrial and services sectors. The
 government would need to work towards creating a more investor-friendly
 environment by promulgating laws so that conceptualisation to 
 implementation of infrastructure projects can be carried out 
 expeditiously. We sincerely believe that the private sector needs to 
 provide continuous feedback to government and work with them to evolve 
 the regulatory regime conducive for private sector participation in 
 infrastructure. To make that happen, your Company has been in regular 
 dialogue with the government and its various departments, both at the 
 Centre and the State levels.
 
 Company outlook
 
 However, I am quite pleased to state that your Company has developed a
 remarkable resilience and is always able to bounce back
 enthusiastically while facing any challenge. Srei has maintained its
 market leadership in infrastructure equipment financing and has expanded
 its asset portfolio.  Besides financing information technology (IT) and
 healthcare equipment, we have also taken up financing of logistics and
 rural infrastructure equipment. In equipment financing, we disbursed
 over Rs.12,170 crore in FY12, up from Rs.8,108 crore in FY11, growth of 50
 per cent. In addition, your Company has expanded its project finance
 portfolio.  Under project financing, Rs.6,261 crore was disbursed in FY12
 vis-à-vis Rs.4,389 crore in FY11, growth of 43 per cent. In today''s
 scenario of scarce liquidity and high cost of credit, the only way to
 counter a fall in margins is by expanding the volume of business.  But
 the management has been extremely cautious about the selection of
 projects and asset quality. One of the key reasons for your Company''s
 growth has been its strong ability to manage risks. Every time an asset
 or a project has been financed, starting from asset quality and
 detailed project evaluation to borrower profile; his track record,
 order book and competence - everything is subjected to meticulous
 evaluation. In addition, your Company follows stringent provisioning
 norms for non-performing assets (NPAs). Collective decision- making in
 order to minimise chances of error arising from individual judgment has
 resulted in excellent asset portfolio.
 
 Our plans to replicate our business model in other geographies apart
 from Russia are still on. But keeping in mind the global slowdown, we
 have been looking at opportunities more carefully. However, the
 groundwork in terms of identifying prospective markets, understanding
 the regulatory and legal frameworks, suitable partner-search in those
 markets, is in progress. So that once the situation improves, we will
 lose no time in expanding our overseas operations.  Meanwhile, the
 Russian operations have stabilised and are now on a growth path.
 
 Your Company''s unique Corporate Social Responsibility (CSR) driven
 business model, Srei Sahaj e-Village Limited, which aims to bridge the
 urban-rural digital divide, has been scaling up its operations. Sahaj
 today has 24,275 IT-enabled Common Service Centres (CSCs), each run by
 a Village Level Entrepreneur (VLE), catering to around 300 million
 people in the remotest of villages in six states namely West Bengal,
 Assam, Odisha, Bihar, Uttar Pradesh and Tamil Nadu.  These CSCs would
 provide a bouquet of internet-driven services like issuance of birth
 and death certificates, registration of land records, offering of
 insurance and banking products, offering of e- learning courses,
 railway ticket booking, mobile recharges, utilities bill collections
 and even training rural youth to equip them for blue collar employment.
 Sahaj empowers rural youth and makes them self-reliant, but its actual
 impact on the society is transformational in nature as these VLEs
 eventually evolve into job- creators. The management remains committed
 to this initiative as we sincerely believe that this venture has the
 potential to metamorphose the socio-economic fabric of rural India.
 
 The road ahead
 
 A slowdown provides an opportunity to consolidate. We, at Srei, are
 trying to capitalise on this by investing in the training of our
 manpower and upgrading our systems, technology and processes. The
 objective is to gear up for the future - enhance our efficiency, serve
 our customers better and to enhance value for stakeholders. In the last
 few years, we have embraced technology in a big way to streamline our
 procedures.  Human intellect is our key resource for pursuing a
 multi-dimensional growth strategy. Apart from providing training, your 
 Company is continuously engaged in a process of selective recruitment 
 for strategic positions. Slowdown cannot last long, so we must be ready 
 when the opportunity beckons.
 
 To conclude, despite the gloomy outlook globally, the infrastructure
 space continues to hold tremendous promise; we are sanguine to keep on
 growing intelligently, learning, adapting and performing. In addition,
 having established a presence across the entire life-cycle of any
 infrastructure project, the management will continuously strive to
 evolve synergies so as to optimise revenues from each project. Your
 Company will do its best in mitigating those risks which are within its
 control and make suitable recommendations to the government on the
 course of policy action to be adopted.
 
 Our country continues to be one of the most promising investment
 destinations in the world and we are committed to making it
 infrastructurally strong. Your support and confidence continues to
 provide us the strength and conviction.
 
 Thank you.
 
                                                     Hemant Kanoria
 
                                                         Chairman &
                                                  Managing Director