LIQUID - Srei Infrastructure Finance Limited

Promoters’ stake30.02%Foreign holding41.48%Team strength1,083Srei Infrastructure FinanceLimited. A holisticinfrastructure institutionfuelling India’s growth storyHistoryStarting operations in 1989, Srei is a leading infrastructurefocusedprivate sector Non Banking Finance Company (NBFC) inIndia with total assets worth Rs. 10,367 crore under managementSrei is currently the only institution in India offering holisticinfrastructure solutions – financing, advisory services anddevelopmentTotalassets undermanagementRs.10,367CroreConsolidatednet worthRs.1,141CroreConsolidatedbook valueRs.98.20per shareOver the years1989Started operationsand identified theinfrastructuresector as its corebusiness area1992Initial PublicOffering with listingon all major stockexchanges1997IFC, FMO andDEG invested asstrategic equitypartnersThe figures above are as on 31st March, 2009.2

Annual Report 2008-09ServicesInfrastructure Equipment Financing & LeasingInfrastructure Project : Financing, Advisory Servicesand DevelopmentInsurance BrokingPresence Headquartered in Kolkata (India), the Company has 63offices in India and three offices in RussiaListed on Calcutta, Bombay, National Stock Exchangesand London Stock ExchangeVenture CapitalCapital MarketSahaj e-VillageQuippo - Equipment Bank200220042005200620072008ConceivedQuippo, India’sfirst equipmentbankAll Indiapresence,currently 63officesFirst IndianNBFC to belisted on theLondon StockExchangeGeographicalexpansion intoRussia; equitypartners EBRD,DEG and FMOJoint venturewith BNPParibas LeaseGroup, 100%subsidiary ofBNP ParibasHolisticInfrastructureInstitution –financing,advisoryservices anddevelopment3

VISIONTo be the most inspiring global infrastructure financialinstitutionMISSIONTo be an Indian multinational company providing innovativeinfrastructure financial solutions with focus on equipment,projects and renewable energy4

Annual Report 2008-09CORE VALUESCustomer partnershipAt Srei, customer satisfaction is thebenchmark for success. Srei delights itscustomers through a comprehensiverange of financial services that arepersonalised, fast, reliable, convenient,quality-driven, and yet cost-effective.IntegrityBusiness integrity is a way of life atSrei. The Company strongly stands byintegrity in all its dealings and ensuresstrict adherence to the higheststandards of business ethics.Passion for excellenceSrei’s passion for excellence isinstrumental in positioning theCompany as the most innovativeinfrastructure solution provider in India.Respect for peopleSrei acknowledges the fact that itspeople are its most valuable assets andaccordingly provides them the bestpossible work environment and treatsthem like family members. TheCompany rewards excellence andinitiative.Stakeholder valueenhancementSrei is committed to earning the trustand confidence of all its stakeholders.Its growth focus, the ability to constantlyenlarge its product basket whilecontrolling risk and reducing the cost ofits services have resulted in enhancedvalue for its stakeholders.ProfessionalentrepreneurshipSrei’s in-depth knowledge of theinfrastructure financing business inIndia, coupled with its spirit ofentrepreneurship, helps the Company toovercome obstacles and complexitieswith professional expertise.5

CHAIRMAN & MANAGINGDIRECTOR’S MESSAGEWe are glad that one of themost difficult and tumultuousyears in the history of ourCompany is over and wehave stepped, with hope, ina year, again promising abright future for Srei. We aresanguine that India is out ofthe global gloom and is nowthe new torchbearer of theworld economic revival. Thefinancial crisis that hasravaged the world economyand shaken to its very rootsthe developed countries,has had less impact onIndia, primarily due to itssound policies and robustregulations that haveweaved India’s financialsystem.6

Annual Report 2008-092008-09 will be remembered as one of the mosteventful years in the history of most companies.However, Srei will remember it as a period ofself-discovery – a year when the Company re-learntits way of doing business and in the process actuallybecame aware of many of its latent strengths.The credit goes to ourGovernment and theReserve Bank of India thatthey reacted with alacrity inpreventing the financialcontagion to plague ourcountry’s economy, lastyear in October. Theliquidity crisis was avoidedby immediate measurestaken towards reducingCRR and SLR with banks,so that there were sufficientfunds within the system.Stimulus packages, policychanges and many othersteps were proactivelytaken to restore confidencein the economy. To a largeextent it has facilitatedIndian economy toresiliently bounce back, butit will, realistically, still takesome time to completelyget back to normalcy.Srei, being in the businessof financing, was affectedby the sudden drying up ofliquidity from the systemwhen the crisis broke out inSeptember 2008. But Sreinot only withstood thestorm, but emerged from itmuch stronger and mostlyunscathed. The creditshould go to the dedicatedand sincere effort of theteam at Srei who workedrelentlessly towardssteering the Company outof turbulent water. The Sreiteam realised that giving into panic and following herdmentality in resorting todrastic steps would only bedamaging. Instead they puton their thinking caps andinnovatively addressed theproblem by taking all Sreipartners namely customers,suppliers, financialinstitutions, governmentand investors, intoconfidence. The entireteam, being clearlyintimated to dispel any jobor emolument-relatedworry, had thrown its fullweight behind themanagement tosuccessfully tide over thecrisis. In the process, Sreionce again established thatit is one of the mostrespected institutions ininfrastructure sector today.2008-09 will beremembered as one of themost eventful years in thehistory of most companies.However, Srei willremember it as a period ofself-discovery – a yearwhen the Companyre-learnt its way of doingbusiness and in the processactually became aware ofmany of its latent strengths.The Annual Report for theyear ended 31st March,2009 is a testament to thatindomitable Srei spirit.ECONOMICOUTLOOKGovernments across theworld intervened withmonetary and fiscalmeasures to tide over thefinancial crisis in theirrespective countries.Substantial liquidity waspumped in by allgovernments. It was widelyexpected that governmentsupport will make therecovery process faster.Even a slight hint ofrecovery in some of themacro indicators wasconstrued as the onset ofgrowth revival. The mentionof ‘green shoots’ wasalmost everywhere even acouple of months back.However, with littleevidence of actual growthrecovery from the realeconomy, the ‘green shoot’euphoria seems to havesubsided. Indicators fromUSA, Europe, Japan andother developed nationsseem to say that thoseeconomies are definitelynot out of the woods. Theearlier notion of a U-shapedor even V-shaped recoveryis no longer entertained. Infact, a W-shaped recoverynow looks more probable.The Indian government toowas prompt to act. Startingfrom December 2008, aseries of monetary andfiscal stimuli wereintroduced to revivedomestic demand. After7

Srei’s consolidated total income and profit (after tax)stood at Rs. 851.53 crore and Rs. 82.57 crore,respectively as on 31st March, 2009. During the yearunder review, the total assets under management stoodat Rs. 10,367 crore.three successive years of 9percent plus annual growth,India grew by 6.7 percent inthe year under reviewbecause of a drasticslowdown during the lasttwo quarters. The carryingcapacity of India’s existinginfrastructure has almostreached saturation point.Government intends to usethe present slowdown toemphasise on creation ofnew and scaling up ofexisting physicalinfrastructure and therebykick-start the domesticeconomy. It is expectedthat riding on the impendinginfrastructure boom, theeconomy will be able toregister a growth of at least7.5 percent during 2009-10.2009-10 has witnessedinflation entering negativeterritory, although it isexpected to re-enterpositive territory during thethird quarter. This is in starkcontrast with the year underreview when inflation hadreached double-digit figuresforcing the central bank tohike policy interest rates.The high rates coupled withhigh commodity pricesslowed down economicgrowth. This eventuallypushed down prices andbrought down inflation.Then when the globalfinancial crisis hit India,government had to reduceinterest rates and tax ratesto stimulate demand. Theslowdown and stimulusmeasures also impactedadversely the fiscal andrevenue deficits of thegovernment. Fiscal deficitfor FY10 is projected to be6.8 percent of GDP, andthis figure does not takeinto account the off-balancesheet items. In addition, thestate governments havebeen allowed to borrow anadditional 0.5 percent oftheir gross state domesticproduct (GSDP) for FY10by relaxing their fiscaldeficit target from 3.5 to 4.0percent of GSDP.According to FinanceMinistry, the Reserve Bankof India (RBI) will supporthalf the government’sborrowing programme bydirectly buying governmentsecurities. Such a measurewill push up inflation. Inaddition, for the other halfof the borrowing plansgovernment will have tocompete with private sectorin the credit market. This isbound to create an upwardpressure on interest rate innear future. Thus, with thelikelihood of privateinvestment gettingimpacted by rising rates,government spending willbe the principal determinantfor economic growth inFY10.Other macro fundamentalsremain steady. At aroundUSD 265 billion, India’sforeign exchange reserveposition is comfortable –good enough to absorb anysudden external shock.Gross Domestic Savings asa percentage of GDP is ataround a healthy 35percent. After a sharpdepreciation against theUSD, the Rupee seems tohave stabilised and isexpected to appreciate fromhere onwards. However,with no major improvementin other economies, theexport sector is expected toremain subdued in themedium term. When othereconomies areexperiencing near-zero orsub-zero growth, Indiaremains an oasis to theglobal investor community.India’s growth rate and itsrelative invulnerability to thefinancial crisis continue tocatch the imagination of theglobal investor. Steadyinflow of foreign capital,especially foreign directinvestment (FDI),establishes that Indiacontinues to be a preferredinvestment destination. Infact, it is quite likely that asizable amount of theliquidity that governmentsacross the world haveinjected will eventually find8

Annual Report 2008-09its way to Indian markets.This, too, will ultimatelypush up inflation and ifprices start rising fastergovernment will have toincrease key policy rates.Though the governmenthas taken on itself a hugeportion of the total spendingon infrastructure, publicprivatepartnership (PPP)continues to be thefavoured mode forinfrastructure creation.However, attention needsto be given so as toexpedite projectimplementation in order toensure greater privatesector participation. Thereis full clarity to the fact thatIndia will continue to grow,reasonably well, withinfrastructure being thegrowth engine.COMPANYOUTLOOKDespite a difficult financialenvironment, this year tooSrei has maintained itsmarket leadership in theinfrastructure equipmentfinance business. Srei’sconsolidated total incomeand profit (after tax) stoodat Rs. 851.53 crore andRs. 82.57 crore respectivelyas on 31st March, 2009.During the year underreview, the total assetsunder management stoodat Rs. 10,367 crore. This isindeed a creditable feat in ayear which witnessed thependulum of fortune swingfrom one extreme toanother.FY09 has been a difficultyear for the manufacturers,financiers and customersalike. Srei has used thisperiod to intensify itsrelationship with bothcustomers andmanufacturers by forging astronger partnership withthem. The managementrealises how important it isto provide support andassistance to its partners ata time of distress and hastried its best to extend thathelping hand whereverpossible, withoutcompromising the interestof the organisation. This actof empathy and solidaritywith the customers andmanufacturers has certainlyenhanced Srei’s reputationas a valued financier and atotal solution provider.FY09 has been a rollercoasterride for theCompany. At the start ofthe year, even afterachieving phenomenalgrowth in FY08 Srei’shunger was very muchintact. So, we wasted notime, maintained ourmomentum and challengedthe limits of performancewhich resulted in the‘Mother of all Events’ - the9x9 PKN-s in August – nineeditions of ‘Paison ki Nilami’(Srei’s flagship event ofequipment financingthrough auction of interestrates) in nine different citiesone after the other in thenine different demarcatedregions in Srei’s sales map.In retrospect, themanagement’s decision toorganise the PKN-s wasinstrumental in achieving alarge size of business forthe entire year before theglobal crisis hit India inSeptember. This helpedSrei to get a head-start overits competitors.While October onwardsbusiness got affected bythe global financial crisis,Srei focused more on thecollections, became extravigilant on risk assessmentand credit disbursal. Sreicontinued to emphasise onattending to customer’sproblems and offering themcustomised solutions. Ourassessment is thatbusiness will start pickingup from the third quarter ofthis year. In addition, Srei isexpanding its portfolio ofproject financing. This,along with the Company’sother value-added servicesacross the infrastructurevalue-chain, will propel bothtopline and bottomlinegrowth.9

As you are aware, the JointVenture between Srei andBNP Paribas Lease Groupwhich was announced on31st May, 2007, has beeneffectively operating from2nd April, 2008 after receiptof all necessary legal andstatutory clearances.During the year underreview, the new company,Srei Equipment FinancePvt. Ltd. disbursedRs. 5,519 crore, despitethe adverse global financialsituation. Srei Equipmenthas also retained itsleadership in theInfrastructure EquipmentFinance, whereas manyother competitors exited outof the business during theyear as they were not ableto weather the storm.With a view to increase thepromoters’ holding in theCompany, reflecting theirconfidence even during theperiod of crisis, thePromoters’ Groupincreased theirshareholding in the Sreiduring the year underreview by 4.97% from25.05% to 30.02%, throughthe acquisition routeallowed as per SEBI(Substantial Acquisition ofShares and Takeovers)Regulations, 1997. ThePromoters’ Group hasshown increasedcommitment to thebusiness strategy andpotential growthopportunities which, wehope, will result inenhanced value for all thestakeholders.Having established a firmfoot-print in Russia, Sreihas decided to expand itsgeographical reach byentering into an MoU forsetting up a LeasingCompany in the UAE inJoint Venture with WahaCapital PJSC, which is aneminent public joint stockcompany listed in the AbuDhabi Stock Exchange andengaged in leasing ofaircraft, shipping, financialservices and real estate.Waha is backed by severalprominent equity investorsincluding MubadalaDevelopment Company (aState organisation of AbuDhabi) and Abu DhabiInvestment Company. Theexpertise of Srei as aholistic infrastructureinstitution paired with thebusiness relationships &contacts of WAHA in UAEis expected to scale up thebusiness successfullywithin a short span of time.The company expects tocommence operations in2009-10.Srei’s Corporate SocialResponsibility (CSR) drivenbusiness model, Srei Sahaje-Village Ltd. which aims tobridge the urban-ruraldigital divide, has scaled upits activity. Essentially apartnership with stategovernments, the Sahajinitiative aims at enhancingpenetration of informationtechnology (IT) into India’srural hinterland and helpdevelop villageentrepreneurs, who canmetamorphose the socioeconomicfabric of thecountry. Sahaj has amandate to set up over27,000 Common ServiceCentres (CSCs) across 7states (West Bengal, Bihar,Orissa, Assam, UttarPradesh, Tamil Nadu andJammu & Kashmir), each tobe run by a Village LevelEntrepreneur (VLE) whoare being aptly trained.11,000 CSCs are alreadyoperational. The CSCs areprimarily IT kiosks whichprovide a bouquet ofinternet-driven servicesfrom e-governance toe-commerce ande-learning. Apart frommaintaining land and birthrecords for localadministration, the CSCsprovide information likecommodity rates, weatherforecasts, railway ticketbooking, e-learning,e-commerce and myriadother services. This is justthe beginning and we are10

Annual Report 2008-09With government’s thrust in the infrastructure sector, weare sure that the business will grow by leaps andbounds, but we would move cautiously by takingjudicious credit decisions after thorough due diligence.Risk evaluation would be rigorous so that we do nothave NPAs in the future.excited about the futurepotential which is pregnantwith tremendousopportunities to unleash therural economy of ourcountry.Srei is now becomingincreasingly active in thefield of project financingafter making reasonableprogress in the projectadvisory and developmentareas. With the thrust of theGovernment in theinfrastructure sector, we aresure that the business willgrow by leaps and bounds,but we would movecautiously by takingjudicious credit decisionsafter thorough duediligence. Risk evaluationwould be rigorous so thatwe do not have NPAs in thefuture.Srei realises that in order topursue its multi-dimensionalgrowth strategy andmaintain the growthmomentum it is imperativeto nurture human capitaland embrace technologicaldevelopment. Themanagement is payingadequate attention to thesefacets. Robust systems,processes, procedures andpolicies are being built on acontinuous basis in order tocope with the changingbusiness dynamics.To reiterate, the range ofopportunities that beckonus is mammoth,notwithstanding thedomestic and globaleconomic scenario. Srei willcontinue to bank oninnovation and would like toensure that its own growthtranslates into higherprofitability, substantialvalue appreciation for allstakeholders andcontributes to thedevelopment of our society.We hope to continue to getyour support in our futureendeavours and we aresure that the journey thatwe traverse together in thefuture will be fulfilling andenriching.Thank you.Hemant KanoriaChairman &Managing Director11

INFRASTRUCTURE OPPORTUNITY“We provide you with an opportunity to be a part of theIndian infrastructure growth – partner with us.”Q: Do you feel that Srei is a fair representation ofIndia’s infrastructure story?A: Absolutely! Now, more than ever before, we are atrue proxy of India’s infrastructure sector for a numberof credible reasons:We span the entire infrastructure value chain: fromfeasibility studies to conceptualisation to developmentto financing to the maintenance of infrastructureprojects.We are a leader in the infrastructure equipmentspace, offering services like leasing and finance, rentaland equipment disposal.We offer above services in all the verticals ofinfrastructure.Consequently, we recognise the emerging trends in theIndian infrastructure story faster than our industry peers.Q: What makes Srei thepreferred player in theIndian infrastructure space?A: Our business model. Weare a holistic infrastructureinstitution with a presenceacross the entire valuechain – advisory services,project financing, projectdevelopment, equipmentfinancing (outrightpurchase, operating lease,rental), asset sale/auction,capital market and venturecapital.Our more than two decadesof rich experience in India’sinfrastructure space hasreinforced our competitiveedge and helped us createan unparalleled network toextend our presence acrossthe infrastructure valuechain.Q: How does this benefitSrei?A: It has opened up diverseincome opportunities thathave de-risked our revenuemodel from fund-basedrevenues to a prudent mixbetween fund and feebasedrevenue verticals.We don’t just advisecustomers on whatequipment they shouldacquire; we may also guidethem towards an IPO or PEinvestments with multipleexit options followingproject completion. In doingso, we have transformed anumber of erstwhilecontractors into developers,which is really the reasonwhy customers prefer towork with us. They primarily12

Annual Report 2008-09Our more than two decadesof rich experience in India’sinfrastructure space hasreinforced our competitiveedge and helped us createan unparalleled network.Sunil Kanoria, Vice Chairman, Srei Infrastructure Finance Ltd.see their growth in ourengagement, which is reallya creditable thing to say forour business.So a project financingassignment could generateequipment financingrevenue, insurance revenueand advisory fees. Wecould take a stake in theproject, arrange equityinvestment (from the capitalmarket or private investors),engage in debt syndicationand so on. We haverelationships with over15,000 customers only inequipment financebusiness, creating a strongfoundation for data miningand cross-selling our otherservices.Q: What is lifecycle fundingand why is it relevanttoday?A: Transaction funding isprovided once, whilelifecycle funding is providedat every key stage of thecycle as per requirement.With transaction funding acompany stays with thecustomer on a specificoccasion and no longer,while with lifecycle fundingthe company stays with thecustomer along the entirecycle of the projectengagement – from projectconceptualisation to projectfinance to equipmentfinance/rental to equipmentdisposal. The growingrelevance of this conceptcan be traced to thefollowing realities:A large number of13

To be part of the Indian infrastructure story, one needsto select partners from various segments – the advisor,developer and financer, among others. Srei is all inone; the only organisation to be present across all thetouch points of India’s infrastructure canvas.entrepreneurs in thebusiness that need adviceas much they need funding.Proactive assessmentof client needs andproviding financialsolutions.Need to reduce clientappraisal tenures leading totimely fund availability.Q: How will this enable youto grow shareholderwealth?A: Significantly! Look whatwe have achieved with onlyequipment financing.Revenue grew at a 58.85%CAGR over the last fiveyears leading to 2008-09,while profit after tax grew ata 30.75% CAGR over thesame period. Now, with bigticket projects and highyieldingfee-based income,organisational growth is setto accelerate over arelatively shorter period.Q: How would you want theshareholder to perceiveSrei?A: As an India-focusedinfrastructure-centricdiversified financialinstitution. To be part of theIndian infrastructure story,one needs to selectpartners from varioussegments – the advisor,developer and financer,among others. Srei is all inone; the only organisationto be present across all thetouch points of India’sinfrastructure canvas.Q: Srei’s holisticinfrastructure financingposition is yet to becaptured in its valuation.A: I think so too. Sreipossesses differentrevenue streams. One isthe income that comes fromfund and fee-basedbusinesses; the other is thepotential income, whichcould be derived from theCompany’s projectinvestment portfolio. As wesee it, the income fromequipment and projectfinance will be predictablyconsistent while incomefrom investment andadvisory portfolio may beless frequent butconsiderably larger.Q: Any other observationon the challenges in valuingSrei?14

Annual Report 2008-09Srei, the holistic infrastructure institutionEquipment Project Financing Project Development Advisory Venture FundsEquipment Financing Debt Roads Project Conceptualisation EquityAsset Insurance Mezzanine Power Project Monitoring MezzanineEquity Ports Fund Mobilisation DebtMass Rapid Transit SystemInvestment BankingEquipment RentalValuation & DisposalIndustrial Parks & SEZsTelecom InfrastructureA: When it comes toinfrastructure financingcompanies, Srei belongs toa niche that is underrepresentedon the stockmarket. It is our experiencethat when a niche maturesand provides visiblebenchmarks forcomparison, the valuationtrends closer tofundamentals. Because ofthe nascence of our niche,this is yet to happen but Iam optimistic that with theinfrastructure financingspace widening over thenext few years – no twoways about it – thisanomaly will correct and weexpect to offer moreattractive returns to ourshareholders.Q: What are your growthengines for the comingyears?A: Essentially six:In project advisory, astrong fee-based businessmodel, we have establishedour credentials with stategovernments, utilities andlarge corporates.In project financing, areasonable interest earningbusiness vertical, weestablished a significantclient base which will growover the coming years,enhancing our profitability.In project investment, ahuge value-spinner for theCompany, we have madestrategic investments in anumber of projects, whichwill significantly strengthenshareholder value. Being a 50%stakeholder in the jointventure with BNP ParibasLease Group (BPLG), wewill continue to benefit fromthe growing business ofequipment financing.In Srei Sahaj, ourpartnership with villagelevel entrepreneurs underthe public-privatepartnership, will lead to asustained generation ofrevenue streams.We have successfullyreplicated our infrastructureequipment financingbusiness model in Russiaand are exploring similaropportunities in othercountries.15

PROJECT FINANCING“The Eleventh Plan emphasises public-privatepartnership investments, increasing the relevanceof project financing.”Q: How will you explain the optimism behindproject financing in India?A: Of the 45-odd countries where I have beenexposed to at various points in my career, India isthe most exciting when it comes to infrastructurefinancing for a number of reasons:India remains an infrastructurally underpenetratedmarket resulting in a huge mismatch instandard of living between India and developednations as also some of its peers.Government of India is strengthening theinfrastructure-specific regulatory frameworks toattract greater private sector participation.A one-and-a-half trillion dollar investment isenvisaged in infrastructure in the Eleventh andTwelfth Plans.Saud Ibne Siddique, Joint Managing Director, Srei Infrastructure Finance Ltd.Q: What makes the projectfinancing space attractivefor Srei?A: Three realities.Downstream projects thatneed to be financed aregenerally profitable acrossthe long-term, protectingtheir popularity.There is also a growingneed for single-pointfinancial intermediation toaccelerate financial closureand project implementation.Furthermore, Srei hastraditionally been anequipment financing leaderin the mid-market segmentthat is relatively underpenetratedin the area ofproject financing.The convergence of theserealities indicates that Sreiwill extend its equipmentfinance leadership to play aleading project financingrole. As a result, projectfinancing will probablyemerge as the fastestgrowing segment within theCompany.Q: What strengths doesSrei possess to growsuccessfully in this space?A: For two decades, wehave demonstrated asensitive understanding ofall the equipment-relatedrisks and a thoroughunderstanding of diversecustomer business modelsand their requirements.Srei has been engaged ininfrastructure projectfinancing since 1997 and inthe last twelve years wehave gained substantialexpertise with a trackrecord of almost zerodefaults.We have now extendedthese insights into a deepunderstanding of the risksassociated with projects aswell. Just as we havetraditionally deployed ourknowledge in assistingentrepreneurs select theright equipment and deploythem profitably, we alsopossess the capability toassist developers structuretheir projects to lower risks16

Annual Report 2008-09In the project financing business, thisin-depth understanding of the entire project cyclerepresents a distinctive value-add over banks andinstitutions. As a result, our contribution can beencapsulated in an effective phrase: ‘finance-plus’.leading to sustainableprofitability. In the projectfinancing business, this indepthunderstanding of theentire project cyclerepresents a distinctivevalue-add over banks andinstitutions. As a result, ourcontribution can beencapsulated in an effectivephrase: ‘finance-plus’.Q: Is project financingsynergic with the other linesof Srei’s activity?A: It very much is. It doesnot just feed onopportunities coming out ofthe other businesses, but isalso positioned to createsimilar opportunities forthose – an organisationalwin-win.For instance, in a numberof cases, our equipmentowningcustomersreinvested their surpluses,grew in size and graduatedto project ownership. As aresult, Srei stands to extendits existing equipmentfinancing relationship withthese customers to projectfinancing.There is another way inwhich our project financingworks. A number of suchassignments will createattractive opportunities forSrei to lend or invest insuch projects, grow itsinvestments and encash atappropriate junctures.When we fund the projectsof our clients with equity(through PE), we originatebusiness for our venturefund business. Or when thefunded entity intends to gopublic, this could translateinto an opportunity for ourcapital market business.This is in addition to Sreimobilising funds from otherlenders (debt syndication)to facilitate financial closureleading to attractive feeimplications from client andlender.When you combine theserealities with a largetransaction scale –generally higher in thissegment of the businesswhen compared withequipment financing – thenthe sum of the constituentswill be bigger than thewhole.Q: How does Srei expect tocompete in this space withlarger entities?A: We recognise that weare not as large as some ofour institutional competitorsin this business and nor dowe enjoy an access tofunds as low in cost assome of them. However, weare confident of oursuccess in this space forspecific reasons. Wepossess a long-standingknowledge of risk in India’smid-market segment. Wehave strengthened theentrepreneurial mindsetamong our professionals tocapitalise on emergingopportunities in India’sinfrastructure sector. Wecan leverage our globallinkages to source largeand low-cost internationalcapital. We are lot quickerand more flexible in ourdecision-making withoutcompromising our strongcredit risk integrity that isstill in line with the bestinternational standards.17

VALUE INTANGIBLES“We are leveraging the power of the intangibles investedin our business in a bigger way.”Q: Why are advisory services critical in today’sinfrastructure environment?A: Due to the incidence of multi-crore projects,unprecedented scale, reduced project duration, growingproject complexity (especially in the area of finance) andassociated risks, there is a greater role for advisory intoday’s infrastructure environment. In fact, in-depth advice– project and terrain specific – is often the differencebetween success and failure. There is another reason: thegovernment requires advisory services to replicate thereality of developed economies in India through feasibleprojects and an enabling policy framework. As a result,advisory services help establish project confidence andattract investments.Dr. Ratiranjan Mandal, CEO - Infrastructure Advisory Group,Srei Infrastructure Finance Ltd.Q: What is Srei’scompetence in this area?A: Our long presence in theequipment financingbusiness, healthy relationswith most of our clients invarious state governmentand corporate entities, pan-India terrain knowledge andover two decades ofexperience in theinfrastructure sector(reflected in linkages withlarge infrastructuredevelopers) have given usa competitive edge in thisbusiness.We have become apreferred advisory partnerfor various stategovernments not only dueto our competencies andexpertise in the sector, butalso for our sensitiveunderstanding thatgovernment resources arelimited and need to beutilised more productively insocial areas that may notinterest the private sector.So we structure thefinancial model of theseprojects innovatively tominimise the government’sfinancial commitment.Our other strength lies in18

Annual Report 2008-09We have established our presence asadvisors in a number of infrastructuresegments like power, transport, urbaninfrastructure, education and healthcareamong others – within only two years.our relations with largeinfrastructure players thatfacilitate marketing projectsfaster than competitors.This has helped us work onvarious governmentinitiatedprojects. The resultis that we are the preferredpartner of several stategovernments for thedevelopment of variousinfrastructure projectsunder the public-privatepartnership ambit, reflectingthe government'sconfidence in ourcapabilities. The GangaExpressway was one suchinstance.On the other hand, privatepartners prefer us as theyfind us best suited toprovide advisory servicesas a large part of theproject is usually conceivedand designed by us. Wealso provide projectfinancing, equipmentfinancing, capital marketservices (IPO or PEplacement), debtsyndication and equipmentrent, among other services.Q: How does this help Srei?A: Advisory services areimportant for us for thefollowing reasons:This fee-based revenuevertical drives profitablegrowth.The service helpsbalance the proportion offund-based and fee-basedrevenues.The service leads toother businessopportunities for theCompany.Q: In which areas does Sreiexcel?We have established ourpresence as advisors in anumber of infrastructuresegments like power,transport, urbaninfrastructure, educationand healthcare amongothers – within only twoyears and we are workingon a number of prestigiousprojects.19

INFRASTRUCTURE DEVELOPMENT“As infrastructure investors, we stand to create biggervalue for the Company and shareholders.”Q. What was the rationale for Srei to extend fromequipment financing to the opportunistic space ofproject financing and investment?A. To enhance value for the Company andstakeholders. For years we would approachcustomers to finance their equipment; thanks to ourreputation and financial position, it became possible tofinance and invest in projects as well. So frompartners to businesses that had already been created,we moved along the value chain creating businessopportunities for ourselves, widening our revenuesand strengthening . . .K. K. Mohanty, Wholetime Director, Srei Infrastructure Finance Ltd.. . . our business continuity.So when we finance aproject and come to own (orco-own) and if we ownequity in the project, thenover time there is apossibility of thatinvestment being divestedafter the project hasbecome operational. So ourdirect involvement in projectfinancing carries theimplications of a futurepayback, which could besignificantly larger than areasonable interest inflow.Q. How is Srei placed toleverage the full value fromits investment?A. By investing resources,implementing the projectand leading it to successfulcommissioning. By playingthe role of a financier andproject co-ordinator, we areable to leverage the fullvalue of our investment.Srei owns diversecompetencies and insightswhich enhance theconfidence of othersponsors to join us and thisin turn, enhances theconfidence of bankers tosupport us. Thiscomplement is unique andhas eventually translatedinto a distinctive industryrecall to progressivelyenhance the value we canderive out of timelydisinvestments.There is another point thatneeds to be considered.When we finance projects,we are laying thefoundation for being able togenerate spin-off revenueopportunities for our otherdivisions as well –equipment financing,venture capital and capitalmarket – as our projectmatures. So our projectinvestment must not beseen from a singledimension, but from theperspective of generatingmultiple revenue spin-offsand controlling the overalloperational environmentthat protects theseinvestments. This structureis largely unique within ourindustry.20

Annual Report 2008-09Srei’s technical team adds value throughthe right EPC contract pricing, prudentproject implementation tenures, superiordesigning and effective engineering,technical presentations when liaisoningwith the project implementing authority,financial planning and fund raising.Q. How does Srei enhanceproject value as an owner?A. First, by leveraging allthe organisationalcompetencies starting fromthe bidding stage tosuccessful projectimplementation, anadvantage not alwaysavailable to other projectinvestors.Second, a holistic financingpicture makes it possible forSrei to extend beyondconventional resourcemobilisation: we leverageour consortium advantageto raise necessary funds;we identify the juncturewhen more capital needs tobe pooled; we concentrateon creating improvedfinancing structures toenhance value creation; weweigh our entry/exitoptions; we appraiseswitchover options tocounter foreign exchangevolatility and comply withregulatory issues beforedraw-down. This translatesinto sound banker relationsthat could lead to lowerinterest rates and if theproject has beenimplemented on time and isbeing competentlymanaged, we can alsorequest for short-termbridge loans to plugtemporary cash flowmismatches to strengthenproject viability.Third, we exercise capitalflexibility through theinfusion of debt or equitybased on the situation,though it must be said thatwe prefer equity holdingswith a Board presence,making it possible for us tosteward investments totheir profitable conclusion.Additionally, we influencepre-project financialplanning leading to projectviability through prudentcapital structuring, use ofsenior and subordinate debtas well as conversiontiming, among otherstrategic calls.Fourth, Srei’s technicalteam adds value throughthe right EPC contractpricing, prudent projectimplementation tenures,superior designing andeffective engineering,technical presentationswhen liaisoning with theproject implementingauthority, financial planningand fund raising.21

EQUIPMENT FINANCING“We are increasing our market share in the growingmarket size of the equipment financing business.”Q: What growth is expected in India’s equipmentindustry?A: India is at the cusp of an infrastructure boom. Theconstruction sector is expected to be the biggestbeneficiary, the construction equipment segment is poisedto witness a huge upsurge in demand. It has beenprojected that the present USD 2.3 bn constructionequipment industry will touch about USD 15 bn by 2015.Admittedly, India’s per capita number of machines isabysmally low at 13 machines per million as compared to396 in America and 96 in China. Thus, we foresee amassive growth in India’s equipment finance industry inthe coming years.D. K. Vyas, CEO, Srei Equipment Finance Pvt. Ltd.Q: A number of largeinstitutions are also presentin the equipment financingspace. How do you scoreabove them?A: We are market leaders inthe infrastructureequipment financing spacewith a share of over 30%because we went beyondinterest rates as a driver ofour business. Whatdifferentiates us from otherfund providers is ourservice where we deliverunmatched value. We arenot just an equipmentfinancer, we also ensure,through our industryinsights, that the borrowerhas right projects to makethe adequate use ofequipment.Q: How does Srei stand togain in its partnership withBNP Paribas Lease Group(BPLG)?A: Srei is the equipmentfinance leader in India,whereas BPLG is theequipment finance leader inEurope with a similaroperating model.On the existing businessside, Srei will benefit fromBPLG’s expertise insourcing funds at betterterms. On the new businessfront, BPLG will help Sreiintroduce new revenueverticals as under:Financing IT equipment:IT equipment in India isgetting more sophisticatedand expensive, making itdifficult for start-ups toafford them. Further, BPLGwill progressively capitaliseon its relationships with22

Annual Report 2008-09“We decided to go with Srei for”a logical reason: Srei is theequipment finance leader inIndia. We sought to absorbSrei’s focus on numbers andhow to leverage them for betterpreparation for meetings withmanufacturers and dealers.Jean Claude Ferre, Vice President - BusinessDevelopment, Srei Equipment Finance Pvt. Ltd.European IT equipmentmanufacturers and bringthem to Srei.Financing medicalequipment: Medicalequipment is gettingincreasingly complex and inthis space BPLG enjoysalliances with leadingmanufacturers which againwill be leveraged for Srei’sbenefit.Thus, the partnershipbrings a huge benefit toSrei.Q: Why should a customerlike to work with Srei BNPParibas?A: For an unmatchedholistic experience:Advisory function: Ourteams possess specialisedexpertise across variousfields covering intricateequipment detailsculminating in client handholdingto arrive at aninformed acquisition.Flexibility: When we cannotprovide our customers thedesired loan quantum, weprovide them with operatingleases wherein we canreduce the interest with adeposit. The net result isenhanced flexibility overbanks and enhancedcustomer proximity.Payment: We can disbursefaster than banks becauseour credit process isstreamlined for quickdisbursements.Innovation: Paison ki Nilamiis a prime example of ourinnovation capability.It has been projected thatthe present USD 2.3 bnconstruction equipmentindustry will touch aboutUSD15 bnby 2015.23

EQUIPMENT FINANCINGMinimising NPAs“Srei-customer relationship management isthe best insurance against NPAs.”Q: What makes this model unique?A: Srei’s business model is based onrelationship (with the customer’s interest inmind), partnership (with mutual long-terminterests in mind) and ownership (with ourpeople interest in mind). This is how they playout: for instance, if our competitors financeequipment and if the client does not pay ontime (or at all), they initiate routine recoverymeasures, repossess the asset, dispose itand recover proceeds . . .Our consolidated net NPAs,as per FLI (foreign lendinginstitution), stood at only0.47 percentin 2008-09, which is animpressive figure by anystandards, especially intoday’s scenario ofeconomic slowdown.. . . for onward deployment.Predictable. At Srei, werespond differently. Weexplore all possibleinitiatives to make thecustomer’s businesssuccessful by suggestingnew projects to execute. Inthe extreme case if thecustomer’s business doesnot remain viable, we playour role as asset managerswherein we repossess theasset and examine allopportunities of deployment– sale, lease or refinance,etc. As a result, ourbusiness model is moreemotional than financialand when it comes down tothe financial, it is moreflexible than rigid.Absolutely unique.This flexibility is unmatchedand this has helped usgraduate from being alender to actually becominga partner: one who stayswith the customer throughthick and thin. Ourapproach distinguishes usfrom banks and otherequipment financers. Theresult is a brand recall oftrust. Around 85-90 percentof our revenues in 2008-09were derived from repeatbusiness from longstandingcustomers.Q: You indicated a largeproportion of yourcustomers is small. Isn’tthis a risk?A: Yes, small playersconstitute a significantproportion of our clientbase. Our credit philosophyis different. What we look atis whether the customerhas the orders andtechnical capability. In asense, we don’t finance -we provide assets for himto execute the assignmentand grow the business.24

Annual Report 2008-09Debnil Chakravarty, Zonal Head (South & East),Srei Equipment Finance Pvt. Ltd.Mudit Gupta, Zonal Head (North & West),Srei Equipment Finance Pvt. Ltd.Besides, we don’t only lookQ: How did this flexibilitycustomers. While thisOur consolidated net NPAs,at profit, we look at thehelp during the economicbrought us closer to ouras per FLI (foreign lendingcash flow that can beslowdown?customers, this also helpedinstitution), stood at onlygenerated from theequipment’s engagement. Ifthese are broadly in place,then much of the risk hasbeen competentlymitigated.A: Our new businessgeneration declined as theeconomic crisis deepenedin the second half of theyear. But we used therecession to intensify ourengagement withus considerably inrecovering our outstandingdues. Thus, our collectionsincreased by 90-100percent, which surprisedother players in theequipment finance industry.0.47 percent in 2008-09,which is an impressivefigure by any standards,especially in today’sscenario of economicslowdown.“Only recently we had a customer in Durgapur who bagged a contract for Tata Motors’ land development in Singur.He had got 30 equipment financed through us. The first six months were smooth but the political upheavalcompelled all his equipment to remain idle. He tried his hand at another assignment, but without success. We wentbeyond the call of normal duty and provided him with a customer in Nagpur, enabling him to service hisoutstandings smoothly. At one point, the case appeared lost, but Srei’s operational flexibility saved the situation.”25

EQUIPMENT FINANCINGManufacturer Partnership“Srei-manufacturer partnership is key to the significantgrowth of both businesses”Q: Why is an equipment manufacturer’s relationshipimportant to Srei?A: Because we are an asset provider whose success isinfluenced by the robustness of equipment performance.The better the equipment performs, the better is ourfinancial returns. So a safe index of our manufacturerselectivity can be derived from numbers like NPAs. Ourlow NPA figure is indicative of the fact that Srei facilitatesthe selection of right equipment for its customers therebydelivering high uptimes and compatibility with . . .Sound relationship with manufacturersalso ensures good flow of referralbusiness for us.. . . the project requirement.This knowledge cannot justbe derived from readingbrochures, but from a deepunderstanding of what oneequipment can deliver andwhat another may not beable to. In turn, this cannotbe derived from a fleetingengagement with amanufacturer but anenduring relationship.Q: But how does suchrelationship withmanufacturers benefit thecustomer?A: It starts a virtuous cycle.Since Srei generatesextensive sales of a specificmanufacturer, it leveragesthat relationship in gettingthat manufacturer to attendto specific customercomplaints on time. As aresult, a sound Sreimanufacturerrelationship isthe cornerstone forsuccessful Srei-customerengagements. Further, wealso arrange attractivediscounts on equipment forour customers, encouragingthem to get financed by us.Sound relationship withmanufacturers also ensuresa good flow of referralbusiness for us.26

Annual Report 2008-09V. V. Ramana, Vice President - BusinessDevelopment, Srei Equipment Finance Pvt. Ltd.Sibadatta Mohanty, Vice President - Asset ReceivableManagement, Srei Equipment Finance Pvt. Ltd.27

RURAL INFRASTRUCTURE“We are creating a robust and sustainable infrastructure inrural India.”Q: What was the rationale for Srei’s extension torural IT infrastructure?A: There is a growing realisation that for India to besuccessful, its infrastructure will have to extend beyondbridges and roads and actually connect villages digitally tothe knowledge universe. This thinking encouraged us tocreate of e-infrastructure through Sahaj, and extendbeyond urban infrastructure to the rural space.Q: So what is Sahaj?A: Seen from oneperspective, Sahaj is apublic-private partnershipmodel to bridge India’surban-rural divide. Seen fromanother, it is an ambitiousinitiative to enhance India’srural life quality.To make this a reality, weare setting up the world’sarguably largest IT-basedaccess network and theworld’s largestentrepreneurial networkthrough a proposed 27,000Common Service Centres(CSCs) in public-privatepartnership with the centralgovernment and sevenstate governments, takingIT benefits to 287 millionpeople across rural India.Each CSC will be operatedby a Village LevelEntrepreneur (VLE).Q: How will this ITinfrastructure serve as abusiness model?A: Consider the benefit thatthis huge network canleverage.To start with, a host ofbusiness-to-consumer (B2C)services (like railway booking,banking services, insuranceservices, top-up prepaid mobileetc.) will be rolled out. Theseservices can be rolled out at afaster pace and will generatequick revenues for the VLE.In the next stage, thegovernment-to-consumer(G2C) services (like issuanceof birth certificate, deathcertificate, etc.) will be rolledout.In addition, the CSCs havestarted to act as retail centresand if you can fathom, thepossibility of businessopportunities is mammoth.We have tied up withleading banks to providefinance to entrepreneursand help them achievefinancial closure. In doingso, we are playing the roleof a business integrator.Q: How will Sahaj enhancethe livelihood of rural India?A: This is where we expectSahaj to play the role of ameaningful intermediary.28

Annual Report 2008-09Dr. Sabahat Azim, CEO, Srei Sahaj e-Village Ltd.For this purpose, we have economic growth in only alaunched a portallimited way.www.chaakri.in with acompletely rural focus. The Q: How do you ensure thatrural youth can register their the rural youth match theCVs directly with the VLEs skill sets required for theor directly on the web. job?A: We provide skillAnother team of oursenhancement trainingsources jobs that match thethrough our e-formatprofile of these rural youth.wherein all services andThus, we are creating atests are automated. Wesustainable model of jobhave in-house trainers whomatching for the large ruralupgrade rural skills so thatpopulation that had so farthey fit our needs. There isreaped the benefits ofa cost to the training, butthe key differentiator in ourmodel is that these traineeswill be deployed in suitablejobs after training.Moreover, we have createda Sahaj Academy to train –live and virtual training –entrepreneurs manage ourvarious areas of ruralpresence. The kind ofvirtualisation that we willintroduce will be absolutelyunprecedented in ruralIndia with correspondingcustomisation.Q: What are the otherservices you are providingthrough this model?A: The first phase of theorganisation was to create asizeable infrastructure, whichwe have done. We are in thesecond phase of the project,where we are rolling outservices and scaling thereach of the Company. In2008-09 we launched anumber of first time servicesthrough our CSCs:We launched agriculturalservices facilitating villagersto conduct soil testing anddetermine the suitability ofsoil for the growth ofdifferent crops in diverseseasons.We launched therailway and air ticketingservices, eliminating theneed for people to traveldistances to avail of suchservicesQ: You hinted about theviability of the model. Whathave been the results?A: Here, let me explain:Sahaj is a business modelthat provides IT access topeople and generatesenough revenue to makethe service sustainable.The offline revenue isearned by theentrepreneurs, while Sreiearns from online revenues.This joint sharing makesthe system sustainable andwidens its influence for thebenefit of all. A number ofthese Sahaj centres earnmore than Rs. 50,000 amonth, vindicating thevision with which theconcept was launched. Asa result, Sahaj is emergingas the world’s largestnetwork of entrepreneursand is uniquely positionedto emerge as the world’slargest relationshipcompany extending fromthe government to eachpanchayat member andindividual.29

FINANCIAL ALLIES“We strengthened prospects of higher profitability and growth in a challengingslowdown.”Q: Shareholders would be keen to know how Srei saw through the liquiditycrunch that started from Q3/2008-09.A: We resorted to minimal borrowing during Q3FY09. We maintained robustasset-liability management by reviewing our liabilities weekly for three monthsand relevantly filling gaps through short-term funding. Importantly, we hadsensed the impending crisis from as early as August 2008 and stoppedexercising put and call options.In order to service the funding deals that Srei had inked just prior to the crisis,we went to our bankers. Most said that they would prefer to wait and watch.However, as soon as there was an indication of a mood shift, Srei was one ofthe first companies to be funded.Our consolidated net interestmargin (NIM) stood at3.61 percentin 2008-09.Q: Shareholders would alsobe keen to understand howSrei can grow business in aperiod of tight liquidity.A: We remainedinnovatively flexible during2008-09 when weintroduced co-branding withICICI, Axis, HDFC andSIDBI. In this arrangement,we sourced customers,filtered them across ourstringent credit parametersbut booked the customerwith these banks withoutdeploying our funds. Weacted as service providers,while banks acted asfinancers. The customerbenefited from theadvantage of the Sreibankerrelationship througha lower interest rate, whilewe earned a fee-basedservice in a largely fundbasedbusiness model.Q: Will Srei surviveincreasing competition frombanks?A: We need to understandan important issue. Sreilargely caters to the micro,small and mediumenterprise (MSME)segment. Many of theseplayers are first-timers,trying to establish afoothold in the complexinfrastructure space. Wementor these entrants andhelp transform theirentrepreneurial dream intobusiness realities inexchange for the extrainterest that we chargemore than banks and otherplayers. This helps us earna healthy spread and ourprofitability is testified byour growing fee-basedservice (advisory). As aresult, our consolidated netinterest margin (NIM) stoodat 3.61 percent in 2008-09.Q: How will profitabilityincrease?A: Going ahead, ourprofitability is expected toincrease due to the growingshare of project advisory,project financing andproject investment – thesesegments would provide aprudent mix of fund andfee-based income streams:Equipment30

Annual Report 2008-09S. B. Tiwari, Head - Treasury,Srei Infrastructure Finance Ltd.P. C. Patni, Head - Resource Mobilisation,Srei Equipment Finance Pvt. Ltd.finance/leasing/rental wouldProject financingAdvisory services toArranging for equity andbe done from within thethrough our innovativegenerate fee-baseddebt syndication for thegroup coupled withfinancial engineeringincome.financial closure of projects.insurance broking.expertise.Financing source*(Rs. in Crore)Domestic Banks / Finacial Institutions 2,391.9Foreign Lending Institutions 1,291.0Debentures / Bonds 577.2Public Deposits 4.5Others 17.7Credit rating #Agency CARE FITCH ICRASecured NCDs / BondsCARE AAFixed Deposits CARE AA (FD) MAA-Short-term Debt Instruments PR1+ F1+(ind) A1+Unsecured Subordinated Bonds / Debts CARE AA- LA+National Long-term RatingAA-(ind)* Based on consolidated figures.# These ratings are provided for instruments issued by SIFL.31

32THE SREI STAKEHOLDERS

Annual Report 2008-09THEDNA33

ENTREPRENEURIAL MINDSET“Combination of knowledge and accountability hashelped unleash an entrepreneurial mindset at Srei.”Q: Just how critical is knowledge ?A: Other than buying and selling it is the recoverythat makes the business challenging, requiring oneto understand terrains, businesses, economies,governments, personalities and intentions. In acomplex country like India where the socioeconomicrealities change every few hundredkilometers, it is only our combined knowledge andyears of experience that hold us . . .. . . in good stead. In thefirst few years of thisdecade, when globalfinancial heavyweightsentered India, there wasthis general perception thatsuch global giants withdeep pockets would wipeIndian entities off the map.On the contrary, mostglobal heavyweights eitherincurred huge losses orexited. Why? Because mostunderstood the financialissues of the businesswithout recognising theneed to patientlyunderstand the culturalones. On the other hand,Srei – with a deeper insight– survived and succeeded.Q: So what is the Sreidifference?A: Proximity to reality,markets and customers.The Srei representative,deep down in a districtwhere a capital asset needsto be financed, does not actas if he were merely abusiness intermediatetransferring cash from onepoint to another; on thecontrary, the Sreirepresentative acts as if heis a business ownerresponsible for clientappraisal, loan structuring,cash disbursement andloan recovery. He has 4-in-1 functions. He is Srei. Thebuck starts and ends withhim. It is our experiencethat when an executive onlyhas the responsibility toprovide loans without anycorresponding responsibilityto collect them, there is agreater possibility of anumber of sub-quality loans34

Annual Report 2008-09Madhusudan Dutta, Group Head - Human Resourcesbeing made. This can lead empathise and understandto internal dissent where customer needs and oftenone individual issues bad argue the customer’s caseloans and the other has to effectively within Srei. I amgo around trying to recover quite proud to state that atthem. On the other hand, Srei we sometimes get thewhen you have the same feeling that ourindividual responsible for entrepreneurs are beingloan disbursal andremunerated by us butcollection, there willworking for the customers,inevitably be a greater which is precisely the kindresponsibility in theof mindset that we wish tocustomer selection and loan imbibe across thestructuring.organisation.We have groomed our Q: How does thisemployees to be self-styled partnership model translateentrepreneurs. They can into ground reality?A: At the end of the day, forany model to be successfulit must reflect in thenumbers. And at Srei, themost visible proof of thismodel is our NPA level. Ourfocus on minimising NPAshas worked effectivelyduring the slowdown whenwe consciously scaleddown our business volume.The result was that anumber of Sreientrepreneurs now hadmore time on their hands tospend with customers andreturn with deeper insightson how prevailing realitieswere affecting theirrespective businesses. Inturn, they advocated how itwould be imperative toproactively restructurerepayment – not as muchfrom the perspective ofprotecting our interests onlybut also from the point ofstrengthening the customerbusinesses, which wouldthen be capable of repayingus faster. There was abroader internal acceptanceof this model. This flexibilityof being able to restructureloan agreements within therigid guidelines of mutualprotection is really ourcompetitive advantage.The Srei representativeacts as if he is a businessowner responsible for clientappraisal, loan structuring,cash disbursement andloan recovery. He has4-in-1functions. He is Srei.35

VALUE INNOVATION“At Srei, innovation cuts the clutter, enhances marketshare and reinforces profitability.”Q: Why is innovation necessary in the infrastructurefinancing space?A: In the competitive environment of financing, innovationis imperative to retain viability. The fundamental reality isthat although we are not necessarily the lowest costasset providers, we have remained consistently viable.This has been ensured only on account of our ability toinnovate, draw in customers and protect our marketshare. Besides, innovation helps us beat market clutter,enhances returns, catalyses brand awareness, providesvalue for both customers and manufacturers andimproves negotiation room. Innovation is in our DNA withthe potential to unleash significant shareholder value.In August 2008, Sreiconducted the 9x9 PKN –nine PKNs in nine days innine cities, where we bookedbusiness overRs. 4,000 crore.Q: Can you talk about someof the hallmark productinnovations in Srei?A: One of the mostremarkable innovationsintroduced by Srei was‘Paison ki Nilami’, first in2004. We auctioned interestrates, hitherto a relativelyunknown concept in India.Equipment price, tenureand down payment werefixed; the variable interestrate was auctioned. Bothour customers andmanufacturer partnersgreatly benefited from this.We have organised thisevent a number of times allover India, and everywherethe response has beenphenomenal.Srei ‘Money Bag’ wasanother path breakinginitiative. In 2005, inEXCON, a biennialexhibition for infrastructuresector and constructionequipment, Srei positionedits stall amongmanufacturers. Prior to theexhibition, Srei shortlistedlarge customers andpresented them plasticcards with pre-approvedcredit limits at acceptablerates. The value-add to thecustomer was that he couldindulge in instant purchaseduring his visit to theexhibition, whereas for themanufacturer this converteda passive equipmentdisplay into active revenue36

Annual Report 2008-09Sanjeev Sancheti, Chief Financial Officer,Srei Infrastructure Finance Ltd.generation.construction equipmentrental business. It hasSrei ‘Lotto’ was anotherhelped entrepreneursinitiative launched in 2005reduce capex and opt forwhere the rate of interest torenting equipment; it hasbe charged was decidedalso encouraged equipmentthrough a Lotto game whichowners with idle assetsthe customer had to play.(between projects) to parkQ: Can you cite innovative them at Quippo so thatand profitable ventures those can be re-deployed inundertaken by Srei?other projects. Besides, theQuippo subsidiaries haveA: Quippo, the equipmentalso been pioneeringbank, has been ainitiatives: Quippo Telecompioneering concept for thepioneered the concept ofpassive infrastructuresharing (telecom towers) inIndia, Quippo Oil and Gasis the first integrated rigrental service in the countryand Quippo Energy Rentalis the first energy rentalcompany in India.We realised that when theclient intends to switch, heis able to prospect ahandful of buyers for hisused equipment and onmost occasions he has topart with his asset at anunsatisfactory price. At Srei,we responded innovativelyby creating a live auctionplatform through a jointventure between Quippoand GoIndustry. Theauction exposed aprospective customer’sused equipment to multiplebuyers resulting in quickestsale and the highestpossible realisation. Theproceeds are then redeployedin acquiring newequipment financed by us.This was a totally newconcept in India’sinfrastructure industry whenintroduced in 2005.Srei Sahaj is a public -private partnership initiativeaimed at bridging India’surban-rural digital divideand enhancing rural lifequality. We are setting upone of the world’s largestIT-based access networksand an extensiveentrepreneurial venture.The success of theseventures is drawingprominent corporates topartner us and facilitatevalue unlocking; the jointventure with BNP ParibasLease Group in ourequipment business andthe investment by TataTeleservices in Quippo aretwo prime examples.Q: What are the keyinnovative measuresimplemented in 2008-09?A: In August 2008, Sreiconducted the 9x9 PKN –nine PKNs in nine days innine cities, where webooked business overRs. 4,000 crore. Inretrospect, this move wasinstrumental in generating abulk of the entire year’sbusiness before thefinancial crisis hit India. Themanufacturers too greatlybenefited from this.Customers too were happyas they got equipment oftheir choice at lower thanthe prevailing interest rates.37

Group StructureSrei Infrastructure Finance Ltd.Srei CapitalMarkets Ltd.Srei VentureCapital Ltd.SreiInfrastructureAdvisors Ltd.Subsidiaries*Srei Sahaje-Village Ltd.InternationalInfrastructureServices GmbHGlobal InvestmentTrust Ltd.Sub-subsidiariesBengal SreiInfrastructureDevelopmentLtd. (JVwith WBIDC)Zao SreiLeasingHyderabadInformationTechnology VentureEnterprises Ltd.Cyberabad TrusteeCompany Pvt. Ltd.Joint VenturesSrei EquipmentFinance Pvt. Ltd.(Srei-BNPParibas LeaseGroup JV )Srei InsuranceBrokingPvt. Ltd.*Other subsidiaries are Controlla Electrotech Pvt. Ltd., Srei Forex Ltd. and Srei Infocomm Services Ltd. (a subsidiary of Srei Infrastructure Advisors Ltd.)38

Annual Report 2008-09Srei Equipment Finance Private LimitedSrei Equipment Finance Private Limited (SEFPL) is a50:50 joint venture between Srei Infrastructure FinanceLtd. and BNP Paribas Lease Group (BPLG), a whollyownedsubsidiary of BNP Paribas, France.The Company caters to the equipment financerequirements of the infrastructure and mining industriesand enjoys a dominant leadership position in this segmentbesides expanding its product line to the financing of IT,medical equipment and other asset classes.Srei Infrastructure Advisors LimitedSrei Infrastructure Advisors Limited (SIAL) providesadvisory services in the infrastructure sector includingdebt and equity syndications and investments.Leveraging on Srei’s wide experience and functionalexpertise in infrastructure sector, SIAL offers integratedand comprehensive professional services towardsmanagement and implementation of infrastructureprojects and related components.Srei Insurance Broking Private LimitedThis is a unique, all encompassing insurance servicesand brokerage company. Registered with the InsuranceRegulatory Development Authority (IRDA), it is acomposite broker offering services in the domains of LifeInsurance, General Insurance and Reinsurance, as wellas risk management advisory services.Bengal Srei Infrastructure Development LimitedBengal Srei Infrastructure Development Ltd. was formedas a joint venture with West Bengal Industrial DevelopmentCorporation Limited. It commenced operations in early2005 with a view to create, expand and moderniseinfrastructure facilities in West Bengal and other states ofIndia.Srei Capital Markets LimitedSrei Capital Markets Limited (SCML) is a SEBI registeredMerchant Banker.Active across the entire gamut of Merchant Banking &Corporate Advisory Services, SCML offers end-to-endsolutions from concept to implementation. The offeringsrange from managing Equity & Debt Offerings, PrivateEquity & Institutional Placements, Debt Syndication,Mergers & Acquisitions and Valuations, Disinvestmentrelated Services.Srei Sahaj e-Village LimitedSrei Sahaj e-Village Limited is involved in setting upCommon Service Centres (CSCs), under the Nationale-Governance Plan (NeGP). The venture, launched atthe end of 2006, started out as an outreach attempt toprovide internet based services to the rural community.Sahaj has a mandate of setting up, operating andmanaging over 27,000 CSCs across seven statesnamely West Bengal, Assam, Orissa, Bihar, Tamil Nadu,Uttar Pradesh and Jammu & Kashmir.39

IIS International Infrastructure ServicesGmbH, GermanyIIS International Infrastructure Services GmbH ("IIS") hasbeen incorporated and is registered in Bonn, Germany toact as a holding company for investment in othercountries.Srei Venture Capital LimitedSrei Venture Capital Limited (SVCL), a SEBI-registeredventure capital fund, is committed to investing in theprivate equity, venture capital and mezzanine space witha primary focus on high-growth sectors of the economy.Total funds under management as on 31st March, 2009is around Rs. 6,749 million (USD 136 million*).ZAO Srei Leasing, RussiaZAO Srei Leasing, a leasing company in Russia, is asubsidiary of IIS and has investments from EBRD, DEGand FMO. It has expanded its operation successfully inthe equipment financing business.Global Investment Trust LimitedGlobal Investment Trust Limited was set up with theobjective of carrying out Trusteeship services and otherfunctions incidental to it.Hyderabad Information TechnologyVenture Enterprises Ltd. (HITVEL)HITVEL, a subsidiary of SVCL, is an asset managementcompany which manages SEBI-registered HIVE Fund(formed for providing financial assistance for IT & ITESsector in Andhra Pradesh). Currently, HITVEL ismanaging a corpus of Rs. 150 million of HIVE Fund.HITVEL has been jointly promoted by APIDC, APIIC,SIDBI and SVCL.Cyberabad Trustee Company Pvt. Ltd.Cyberabad Trustee Company Private Limited (CTCPL)currently acts as a trustee company for SEBI registeredHIVE Fund.* Exchange rate 1USD = Rs. 49.5040

Annual Report 2008-0941

INFRASTRUCTURE REPORTThe Eleventh Five Year Planoutlined a massive capexrequirement for domesticinfrastructure development.42

Annual Report 2008-09During the Eleventh Five Year Plan, the total investment in India’s infrastructure sector isestimated to be around 7.5% of GDP. Capex for infrastructure development is pegged ataround USD 514 billion or Rs. 2,056,150 crore over FY07-12. The Eleventh Planemphasises attracting private investment through public-private partnership (PPP).Estimated investments under the Eleventh Five Year Plan are inclusive of public and privateinvestments for infrastructure development.Infrastructure investment in the Eleventh Plan based on sectoral analysis(Rs. in Crore at 2006-07 prices)SectorTotal investment in Eleventh PlanElectricity (incl. NCE) 666,525Roads 314,152Telecom 258,439Railways (incl. MRTS) 261,808Irrigation (incl. watershed) 253,301Water supply and sanitation 143,730Ports 87,995Airports 30,968Storage 22,378Gas 16,855Total 2,056,150In USD billion 514.04[Source: Planning Commission]ConstructionThe construction sector is the biggest beneficiary of infrastructure expansion. Structuralinfrastructure construction across all sectors will require a Rs. 14,500 billion cumulativecapex in the Eleventh Five Year Plan. Housing construction and surface transportation(roads) are expected to remain the major growth drivers of this sector.43

POWERIndia is the world’s sixth largest energyconsumer and Asia-Pacific’s third largestpower generator (after China and Japan).India’s per capita electricityconsumption stands at a low 619 unitsagainst the 2,596 KWhr world average.The Eleventh Five Year Plan envisagesan increase in per capita consumption to1,000 KWHr, catalysed by itscomprehensive ‘Power for all by 2012’programme.100% foreign direct investment (FDI)is allowed in power generation,transmission and distribution.GenerationIndia has an installed capacity of 150 GWAs per the Eleventh Plan, India expects capacityaddition of 78.577 GW and an investment of USD 76.34billionTransmissionIndia has 265,000 kilometre (km) of transmission linesTransmission lines are generally loaded to 90% of theircapacity compared with the global standards of 50-60%,enhancing network vulnerability to unauthorised tappingAn investment of USD 17.36 billion is expected in powertransmission across the Eleventh PlanDistribution The country suffers high distribution losses (35%)India faces a 22,000 MW power deficit, with peak hourshortages as high as 14% when nearly 50% of householdsare not connected to the grid and are not even a part ofdemand calculationsAcross the Eleventh Plan, an investment of USD 12.5 billionis expected in power distributionRural ElectrificationThere are approximately 586,000 villages in India with138 million households India expects to electrify 120,000 villages (about 78million households) by 2012The total project outlay for rural electrification isestimated to be USD 2.745 billionBudget, 2009-10Budgetary allocations for the Accelerated PowerDevelopment and Reforms Programme (APDRP) wasincreased 160% from Rs. 8 billion in 2008-09 to Rs. 20.8billion in 2009-10. Allocation for the Rajiv Gandhi GrameenVidyutikaran Yojana (RGGVY) was also increased 27%from Rs. 55 billion in 2008-09 to Rs. 70 billion in 2009-10OptimismAn estimated Rs. 85,037 crore will be required to fund theprivate sector’s 10,760 MW capacity creation in theEleventh Plan. The Twelfth Plan will sustain growth with anoverall capacity target of 82,200 MW including 42,200 MWplanned in the thermal space.Source: Ministry of Power, National Electricity Plan - Ahluwalia Committee Report.44

Annual Report 2008-09ROADSIndia has the world’s second largest roadnetwork, aggregating over 3.34 million km.The country’s highways form 2% of thetotal road network but carry 40% of thetraffic. Moreover, only 12% of the highwaysare four-laned, 50% are two-laned and 38%are yet single-laned.The Indian government launched theambitious National Highway DevelopmentProgramme (NHDP), involving a USD 54.1billion investment up to 2012.100% FDI is allowed in the road projects.National Highways projects (31st March 2009)NHDP component Total length Completed four-laneGQ 5,846 5,721NS-EW 7,142 3,436Port connectivity 380 206Other NHs 962 781NHDP Phase III 12,109 787NHDP Phase V 6,500 106NHDP Phase VII 700 0Total 33,639 11,037Construction of rural road under PMGSYYear Length of road works Expenditurecompleted (km)(Rs. in Crore)2005-06 22,891 4,100.402006-07 30,710 7304.302007-08 41,231 10,618.702008-09 52,045 15,162.0TargetAccording to the Planning Commission, the road freightindustry will grow at a 9.9% compound annual growth rate(CAGR) from 2007-08 to 2007-12. A 1,231 billion tonne km(BTK) target was put on road freight volumes for 2011-12.Budget, 2009-10 Allocation for NHDP was increased by 23%Allocations under Pradhan Mantri Gram Sadak Yojana(PMGSY) were increased 59% in 2009-10 to Rs. 120 billionThe decision to allow Indian Infrastructure FinanceCompany Ltd. (IIFCL) to refinance upto 60% of commercialbank loans, amounting to Rs. 1 trillion of PPP projects, willhelp attract private investmentsOptimismAccording to a consultation paper by the PlanningCommission, investment in the road sector during theEleventh Plan is projected at Rs. 3,141 billion.Source: Department of Road Transport and Highways, National Rural Roads Development Agency, CRISIL.45

PORTSIndia has 12 major and 187 minor portswhere around 95% of merchandise tradeby volume and 70% in value terms arehandled. Although, total traffic at portsincreased 4.4% from 722 million tonne in2007-08 to 754 million tonne in 2008-09,port capacity in the same period increasedfrom 772 million tonne to 885 milliontonne. Consequently, Indian ports’capacity utilisation stood at 85% in 2008-09 against 94% in 2007-08. Traffichandled at the non-major ports increasedfrom 28% in 2007-08 to 30% in 2008-09.Government InitiativesThe Government of India initiated several schemes formodernisation and expansion of ports as part of thedomestic infrastructure upgradation effort.Formulated a National Maritime Development Policy tofacilitate private investment, improve service quality andpromote competitiveness; USD 11.33 billion was allocatedfor the samePermitted 100% FDI for port development projects underthe automatic routeProvided 100% income tax exemption for 10 years forport developmental projectsIncreased rail connectivity between domestic ports andmarketsDecided to expand the operating berth programmethrough the PPP model and allocate new berths forconstruction through PPPs. A model concession agreementis being formulated for this purposeDecided to upgrade 12 major ports to world-classstandards. Towards this, each port is preparing aperspective plan for 20 years and an action plan for sevenyearsBudget, 2009-10The decision to allow IIFCL to refinance upto 60% ofcommercial bank loans, amounting to Rs. 1 trillion of PPPprojects, will help attract private investmentsOptimismBetween 2009-10 and 2010-11, the ports sector is expectedto receive Rs. 281 billion in investments. While aroundRs.140 billion will be directed towards the major ports, therest will be invested in the non-major ports.Source: Ministry of Shipping, CRISIL.46

Annual Report 2008-09AIRPORTSIndia has 126 airports comprising 11international and 89 domestic airportsand 26 civil enclaves in defence airfields.The top 6 airports handle around 73% ofthe country’s total passenger traffic. Theair traffic handled by Indian airportsdeclined 6.9% in value terms, fromRs. 116.8 million in 2007-08 to Rs. 108.8million in 2008-09, owing to a decline inboth business and leisure travel followingthe slowdown.Favourable Government Policy100% FDI is permissible, although the ForeignInvestment Promotion Board (FIPB)’s approval is requiredfor FDI beyond 74%100% FDI is allowed in greenfield airports under theautomatic route100% tax exemption is given for airport projects for aperiod of 10 yearsOptimismIt is expected that the airport sector will witness investmentsworth Rs. 290 billion within 2009-10 and 2013-14. A largeportion of these investments would be directed towards themetro airports – where the existing infrastructure isoverstretched – through private participation. AAI is alreadydeveloping infrastructure at the Chennai, Kolkata and 35other non-metro airports. The city-side development ofselect non-metro airports will be carried out with privatesector association.Source: Ministry of Civil Aviation, CRISIL.47

RAILWAYSAsia’s largest and the world’s secondlargest rail network under a singlemanagement, the Indian Railwayscovers 63,140 route km, runs about11,000 trains including about 8,702passenger trains and carries more thana million tonne of freight traffic and 14million passengers across 6,856 stationsdaily.Freight loading increased 5% over theprevious year to 883 million tonne in2008-09.The Indian Railways planned a Rs. 2,618 billion investmentin the Eleventh Five Year Plan while Southern Railway isplanning a USD 137.44 million investment for portconnectivity projects at Chennai, Tuticorin, Mangalore,Ennore and Cochin over the next decade. The Railwaysalso lined up plans for infrastructure upgradation andexpansion, for which it decided to adopt PPP route in thenon-core sector for the establishment of logistic parks,warehouses, budget hotels, wagon investment schemesand wagon leasing schemes along with the development ofmore than 7,000 agricultural outlets nationwide.Railway freight and passenger traffic have been growing ata 5-year average of around 7.9% and 5.9% respectively.Budget, 2009-10 USD 8.34 billion outlay was proposed for 2009-10USD 225.63 million was allocated for passengeramenitiesWorld-class development of 50 stations proposedOptimismThe Indian Railways sanctioned two new dedicated freightcorridors – western and eastern – the construction of whichwill commence from 2010-11. The Ministry of Railways alsosanctioned special units to construct additional railwaytracks connecting the four cities Delhi, Mumbai, Kolkata andChennai, for transmission of goods carriages.The Railways is expecting a freight load of 1,100 milliontonne and passenger traffic of 8,400 million by 2012.The Railways also envisages manufacturing 22.9-tonne axleload stainless steel wagons for achieving higher freight load.Source: Ministry of Railways, CRISIL.48

Annual Report 2008-09OIL & GASIn India indigenous crude oil productionhas not increased in tandem withpetroleum product demand. Indiacurrently imports over 70% of its crude oilrequirement and is expected to increaseimports in the near future.100% FDI is allowed in petroleumproducts pipeline, natural gas and LNGpipelines.100% FDI is allowed in exploration ofcrude oil and natural gas through theautomatic route.The challenges before the country are:Maximising crude oil supply by optimising knownreserves use, encouraging exploration and getting equityfrom abroadDeveloping a suitable gas market through explorationand creating a pipeline network for distribution andcompetitivenessRationalising subsidies on kerosene and LPGEnsuring large investment for creating marketing andassociated infrastructure like ports, storage and pipelines,among othersBudget, 2009-10 Excise duty on naphtha was reduced from 16% to 14%Total excise of 6% plus Rs. 13 per litre on brandedpetrol and 6% plus Rs. 3.25 per litre on branded diesel wasconverted into a specific rate of Rs. 14.5 per litre on petroland Rs. 4.75 per litre on dieselThe tax holiday under Section 80-IB, thus far applicableto oil exploration and production, is now extended to gas aswell (with retrospective effect). This announcement isexpected to trigger a better response in future NELP roundsIn view of the projected increase in oil and gas supplies,the government reiterated its commitment of developing aNational Gas GridFurthermore, the allowance of 100% deduction for allcapital expenditure on pipelines operating on a commoncarrier principle (both oil and gas) is expected to encourageinvestments in pipeline infrastructureOptimismThe Government of India expects to award 4,00,000 sq. km.in acreage and over 100 blocks under NELP VIII.An estimated 75.7 million tonne per annum (mtpa) ofrefinery capacity to be added during Eleventh Plan.Source: Ministry of Petroleum and Natural Gas, CRISIL.49

TELECOMIndia, among the world’s fastest growingtelecom markets today, is expected toemerge as the second largest by 2010.India added 130 million (net) subscribersin 2008-09, reaching a total of 391million subscribers. Rural India – 70% ofthe country’s population – accounts for27% of the total subscriber base,reflecting a huge scope for growth in therural cellular telephony market. India’steledensity stood at 39.86% (June 2009).Upto 74% FDI is allowed for telecomservice providers and 100% FDI fortelecom equipment manufacturers.Growth in internet space was driven by the broadbandsegment, adding 2.3 million subscribers in 2008-09 to reacha total of 6.2 million broadband subscribers. The wirelinebroadband subscriber base is expected to touch 11.5 millionby 2010-11, on the back of rising private participation,relevant content and applications becoming available onlineand better value proposition at competitive price points ascompared with the dial-up segment.Budget, 2009-10Full exemption from special additional customs duty onparts, components and accessories of mobile handsetsincluding cell phones, was extended for one year. Thisextension will maintain affordability for mobile service usersOptimismIndia’s mobile population is expected to touch 520 million bythe end of Eleventh Plan.The rural population is expected to grow to 832 million by2010 and the number of rural households is expected to be180 million. The telecom regulatory authority’s aim to placeone phone in each household will require addition of 90-100million rural subscribers within two years.The report titled 'India Telecom 2012 Study’ says that by2012, India will have about 25-30 million 3G subscribers.India's telecom management services market grew fromRs. 3,000 crore in 2005 to Rs. 20,000 crore today and isprojected to touch Rs. 30,000 crore by 2011.Source: TRAI, Ernst & Young, Hindu Business Line.50

Annual Report 2008-09MININGThe mining sector represents an importantsegment of the Indian economy. Sinceindependence, the country has witnessed apronounced growth in mineral production interms of quantity and value. India producesas many as 86 minerals, which include fourfuels, 10 metallic, 46 non-metallic, threeatomic and 23 minor minerals (includingbuilding and other materials) (Source:Ministry of Mines). India’s 25.2 billion tonneof iron ore, 257.4 billion tonne of coal and3.3 billion tonne of bauxite constitute 3%,10% and 4% respectively of the world'sresources.The mining industry caters to a wide range of basicindustries, including power generation, steel, metals andcement, contributing around 3% to the country’s GDP.The Indian mining sector is largely government-owned; butthe government is planning a phased withdrawal from thenon-strategic metal sector, encouraging private players totake the centrestage. For mining of coal and lignite forcaptive consumption in iron, steel and cement production,100% FDI is allowed on the automatic route.OptimismIndia’s mining industry is estimated to touch overUSD 30 billion in the next four years, provided it developsconducive regulatory framework and attracts significantinvestments in exploration, mine development andinfrastructure. Twelfth Plan’s annual coal demand is estimated at 1,125million tonne, for which 134 coal mining projects (309 milliontonne capacity) have been identified. Of these, 100 projectsare expected to contribute 123 million tonne in 2016-17.The government also plans to increase undergroundcoal mining from the present 50 million tonne to 75 milliontonne.The coal ministry has till date allotted 196 captive coalblocks with a cumulative 51 billion tonne reserve.Source: Edelweiss, The Financial Express, Hindu Business Line, The Hindustan Times, Business Standard.51

AN ANALYSIS OF OURFINANCIAL STATEMENTS*OverviewSrei compiled its accounts in line with generally acceptedAccounting Principles in India, accounting standards notified bythe Central Government under the Companies (AccountingStandards) Rules, 2006 and the norms prescribed by theReserve Bank of India. As a conservative approach, it providedfor non-performing assets in line with guidelines laid down byforeign financial institutions, which are more stringent thanthose of the Reserve Bank of India.Profit and loss account reviewIn a year marked by a global economic crisis and declining liquidity, the Srei Group reported credible results(consolidated): Revenue improved 6.34% over 2007-08 Profit before tax (excluding income of Rs. 64 crore from one time write back of deferred tax liability in2007-08) increased 18.58% over 2007-08 and Profit after tax (excluding income of Rs. 64 crore from onetime write back of deferred tax liability in 2007-08) increased 17.19% over 2007-08 Disbursements grew 15.39% from Rs. 5,737 crore in 2007-08 to Rs. 6,620 crore in 2008-09 Total assets under management increased 26.21% from Rs. 8,214 crore in 2007-08 to Rs. 10,367 crorein 2008-09Disbursement42.40%Revenue58.85%Profit before tax27.64%Net profit30.75%5-year CAGR5-year CAGR5-year CAGR5-year CAGR*Based on consolidated figures52

Annual Report 2008-09RevenueGroup revenues grew fromRs. 800.73 crore in 2007-08to Rs. 851.53 crore in 2008-09, largely due to attractivegrowth in equipmentfinance and infrastructureadvisory services. Thegrowth in infrastructureadvisory service was areflection of its first full yearof operations and holdsattractive promise for thefuture.The Group’s non-coreincome declined fromRs. 67.89 crore in 2007-08(included income ofRs. 64.27 crore from onetimewrite back of deferredtax liability) to Rs. 9.07crore in 2008-09. Otherincome accounted for1.07% of the total income of2008-09, reflecting thestrength of the corebusiness in enhancingshareholder value in asustainable way.Operational costsThe Group’s total operatingcosts (before interest anddepreciation) wereRs. 160.92 crore in 2008-09(Rs. 111.9 crore in 2007-08) following enhancedscale of InfrastructureAdvisory services.Employee cost: Employeecosts grew 19.52% fromRs. 45.04 crore in 2007-08to Rs. 53.83 crore in 2008-09, attributed to an increasein the team from 776 as on31st March, 2008 to 1,083as on 31st March, 2009.The team build-upcommenced in the lastquarter of the previousfinancial year, whichenabled the Group tocapitalise on opportunitiesin the first half of 2008-09.The growth in intellectualcapital investment wasprominent in theinfrastructure advisorydivision and the jointventure business.Administrative costs:Administrative expenseincreased from Rs. 66.04crore in 2007-08 toRs. 106.65 crore in 2008-09, primarily due to theincrease in professional feefor infrastructure advisoryservices.InterestFinance charges increased13.92% from Rs. 458.40crore in 2007-08 toRs. 522.21 crore, largelydue to the increasedbusiness necessitating agrowth in external funds.The Group prudentlyaccessed low-cost debtinstruments for setting offhigh-cost cash creditfacilities, thus reducing theaverage debt cost.However, the globaleconomic crisis impactedborrowing rates in thesecond half of the year,increasing averageborrowing cost from10.31% in 2007-08 to10.63% in 2008-09.Volatility in foreignexchange rates alsocontributed to the increasein interest costs.TaxationThe Group’s tax liabilitywas Rs. 7.49 crore in 2008-09 as against Rs. 8.26crore in 2007-08 due to adecline in profit before tax.Balance sheetreviewThe volatile financialenvironmentnotwithstanding, the SreiGroup strengthened itsfinancial strength in 2008-09, as is reflected below: Capital adequacy ratiowas 39.18% (for the parentcompany) against 12% asprescribed by the ReserveBank of India.Debt-equity ratio was acomfortable 1.93 (for theparent company); whichindicates the Company’scapability to grow itsbusiness initiatives withoutequity dilution.Consolidated Net Worthgrew 59.16% fromRs. 717 crore as on31st March, 2008 toRs. 1,141 crore as on31st March, 2009 withoutan increase in equitycapital.Capital employedCapital employed by theGroup declined 13.39%from Rs. 6,261 crore as on31st March, 2008 toRs. 5,423 crore as on31st March, 2009 as theequipment finance businesswas transferred to the50:50 JV company withBNP Paribas Lease Group(BPLG).Equity capital: Sharecapital of Rs. 1,163 crorecomprised 116,144,798equity shares of Rs. 10each (face value). Of thetotal, 30.02% was held bythe promoters; foreignholding was at 41.48% andIndian institutional holdingwas at 5.19%.53

Reserves and surplus:Consolidated reserves grew72.45% from Rs. 589 croreas on 31st March, 2008 toRs. 1,015 crore as on31st March, 2009. Thisgrowth was attributed to thetransfer of equipmentfinance business to the jointventure company withBPLG which added Rs. 375crore to the share premiumaccount. The balance wason account of the ploughback of business surplus.This reinforced theconsolidated balance sheetin two important ways:Increased borrowingpower for the Group due toreduction of consolidateddebt-equity ratio from7.74 in 2007-08 to 3.75 in2008-09.Permitted the parentcompany to grow businesswithout a need forimmediate equity dilution.Loan Funds: Ourconsolidated secured termloans increased fromRs. 2,260 crore toRs. 2,638 crore, out ofwhich Rs. 1,375 crore wasfrom domestic financialinstitutions and banks andRs. 1,263 crore was fromforeign financial institutions/ banks. Our access tolarge funds has been aconsequence of therelationship, the confidenceand trust earned over theyears. This has been aresult of our ability todeliver superiorperformance. Unsecuredloans reduced fromRs. 1,357 crore toRs. 531 crore.Public deposits: TheCompany has beenfocusing on reducing itsreliance on public deposits.The Company’s publicdeposits reduced toRs. 4.53 crore.Financial Assets andLoans: The Company’sbase of financial assetsdecreased from Rs. 4,606crore in 2007-08 toRs. 3,974 crore in 2008-09,in spite of transfer of theequipment finance businessto the 50:50 JV companywith BPLG, thusconsidering only 50% ofthis business into theconsolidated accounts ofthe Group.Fixed assets: During theyear, our gross fixed assetbase decreased fromRs. 530 crore to Rs. 356crore due to the transfer ofequipment finance businessto the 50:50 JV companywith BPLG.Non performingassetsGross NPA on aconsolidated basis, as perRBI, marginally increasedto 0.79% percent of totalassets in 2008-09 from0.78% in 2007-08. This isamongst the lowest in theindustry. On a net basis,the consolidated NPAswere nil.As per FLI standards, thegross NPA was 1.33% in2008-09 as against 1.01%in 2007-08. The net NPAwas 0.47% for this yearagainst 0.28% for theprevious year.Srei carries out a duediligence before any loan isdisbursed to assure itself ofthe quality and safety of theasset and is complementedby a conservative treatmentof NPAs on the Company’sbooks. NPA provisionnorms followed by Sreiconform to the standardsset by Indian regulatoryauthorities, foreign lendinginstitutions and credit ratingagency parameters.54

Annual Report 2008-09NUMBERS THAT STRENGTHENOUR FOUNDATIONTotal income(Rs. crore)801852Profit before tax(Rs. crore)153Profit after tax(Rs. crore)135Total disbursement(Rs. crore)57376620 #105858343044219106-0707-0808-0906-0707-0808-0906-0707-0808-0906-0707-0808-09Assets undermanagement(Rs. crore)821410367 #Capital adequacy ratio (%)SIFL Standalone42.0939.18Return on net worth(%)18.5822.15Net interest margin(%)6.104.8751503.6114.258.8906-0707-0808-0906-0707-0808-0906-0707-0808-0906-0707-0808-09Book value(Rs. per share)98Earning per share(Rs.)Dividend rates(%)NPA as per FLI1.3312.181246667.767.0710100.931.010.19GrossNet0.28GrossNet0.47GrossNet06-07 07-08 08-0906-07 07-08 08-0906-07 07-08 08-0906-07 07-08All figures on Consolidated Basis# For Disbursement & Assets under management, 100% of SEFPL (50:50 Joint Venture between SIFL & BPLG) has been considered.08-0955

MAPPING RISKSMANAGING UNCERTAINTIESThe business of financing is really the businessof managing risk.This management of risk requires acomprehensive understanding of the businessesthat need to be financed, understanding the keydrivers of the businesses and the environment inwhich they operate, the risks facing thebusinesses, the mitigation of these risks throughappropriate measures including allocation ofrisks to parties which can best address them,and appropriate structuring.At Srei, we manage lending and investment risksthrough various ways. Our lending decisions areguided by a credit policy document whichprovides the main credit risk framework for allcredit decisions. These policies incorporate thefollowing principles:Understanding management competenciesThorough appraisal and credit analysis toensure that risks taken by the organisationare within the limits of the institutionApplying a "zero loss" standard in our lendingdecisionsStructuring the transactions to mitigate therisksReview of key contractsBeyond contracts, understanding theeconomic fundamentals of supply anddemand affecting the revenue and costassumptionsPost approval and pre-disbursement, Srei has acomprehensive risk management system withstrict norms and reporting requirements. This isto ensure that due process is followed betweenthe time a credit is approved and the funds aredisbursed. Any such process would consist ofdocumentation of conditions ofsanction/disbursement, ensuring that suchconditions are met, agreements are in place andfinally ensuring that the credit being given fallswithin the guidelines and policies of theinstitution.Post-disbursement, the portfolio supervisionfunction entails monitoring of portfolio for earlywarnings of credit deterioration. We review thekey risks of the portfolio on a regular basis aswell as the impact of external factors on thequality of the portfolio and perform stress tests tostudy the vulnerability of the portfolio to differentrisks.Slowdownrisk1India has not been immune to the global crisis, andeconomic slowdown has also affected Srei'sbusiness. Despite the lower economic growth, theinfrastructure sector remains a robust sector forgrowth. Indeed it is a major focus area for thegovernment to stimulate the economy. The EleventhFive Year Plan projected about USD 500 billion ofinfrastructure investment and despite a lower GDPgrowth rate USD 216 billion of infrastructureexpenditure is expected during the period 2010-12.Srei is scaling up its project finance businesssubstantially to capitalise on the growth of theinfrastructure sector.56

Annual Report 2008-09Regulatoryrisk2Srei belongs to a regulated NBFI sector. TheCompany has a competent team that monitorsregulations, changes, alternatives and applicability.This enables Srei to improve systems andprocesses to ensure a complete and consistentregulatory adherence. The Company has neverbeen censured for regulatory non-complianceacross its two-decade history, attracting theassociation of leading global brands, BNP Paribasbeing the most prominent.Regulatory risk is an inherent risk in theinfrastructure sector and to the extent that it ispossible we try to insure that these risks arecovered within the contracts i.e. off-takeagreements, concession agreements, fuel supplyagreements, etc. For the residual risks not coveredby the contracts, we pay close attention to economicfundamentals to ensure that the risks taken by theinstitution are prudently managed.Client risk3Srei’s customers belong to the micro, small andmedium enterprise (MSME) category. The Companyhas been financing this customer segment for twodecades now and is completely aware of theintricacies of this kind of business. It has created amulti-check credit appraisal system verifying projectdetails, project and entrepreneur’s credit worthiness.The Company maintains a continuous relationshipwith all its clients which help in supporting themthrough business uncertainties. All these haveresulted in keeping non-performing assets (NPAs)well below the national average.Competitionrisk4While Srei maintains leadership in the infrastructureequipment finance business with a market share ofover 30 percent, this segment is becoming more andmore competitive. The Company has rich experienceof two decades in this field and the key to its successhas been the relationship model that it has followedwhile dealing with both its customers andmanufacturer partners. To strengthen its competitiveposition, Srei formed a joint venture with BNPParibas Lease Group (BPLG). We have adoptedglobal best practices to strengthen and grow thebusiness and also diversify into financing of otherasset classes like IT equipment, medical equipment,etc.Project risk5Each project comprises a number of variables,resulting in a risk that is often a challenge toaccurately estimate. However, Srei has responded tothis challenge with a simple understanding – theremust be a marketplace rationale for the existence ofthat project and a demand-supply product mismatchthat protects its viability. This focus on projectfundamentals has stood the Company in good steadand will continue to do so over the foreseeablefuture.57

PromoterriskSrei is competently placed to appraise borrower’sintent. The Group’s two-decade exposure to thefinancing business has introduced it to diverseborrowers and project promoters. The richrepository of information makes it possible for theGroup to take an informed call on loan makingdecisions. The result is reflected in Srei’s NPAaverage being well below the national average.6Recourserisk7In project financing, there are a number ofassumptions which, if unfulfilled, could lead toenhanced liability for the lender; this is morerelevant in the instance of a holding companywhere its viability would stand to be restricted ifall risks hypothetically reverted to it. However,Srei’s financing contracts comprise unambiguousnon-recourse or limited recourse to the holdingcompany. In the event of the latter, the recourseis extinguished following consistent plantperformance or any stated action for areasonable period of time. Besides, Srei hasstructured contracts where the various risksassociated with financing are allocatedaccordingly.FundingriskThe Company enjoys sound relationships withmost scheduled banks and financial institutionsin India and with leading international financialinstitutions (like DEG, FMO, KFW, HSBC, UPS,etc.). Besides, Srei enjoys a zero-defaultrepayment record and reliable asset financing8opportunities, 3which makes it a preferredborrowing company (for providers). Also, theCompany’s modest gearing of 1.93 (standalone)58and strong capital adequacy ratio 39.18%(standalone) as on 31st March, 2009 havepositioned it attractively to mobilise low costfunds. The Company’s resourcefulness wasadequately demonstrated during the third quarterof 2008-09 when Srei continued to honour itsfunding commitments and expanded businesswhile most companies found it difficult to mobiliseresources.

Annual Report 2008-09Cost risk9Srei’s profitability can potentially be impacted byloans generally priced higher than what isavailable to competing banks. The Company hascountered this risk through some effectivestrategies: partnership-model, unmatchedflexibility and advisory services (at theproject/business initiation stage) to customershave enabled it to earn higher returns thancompeting players; besides, its robust creditratings have translated into funds procurement atrates lower than competitors (other than banks).Its preferred partner status as an advisoryservice provider to several state governmentsfacilitates a competitive pricing of its loans. Itsinnovative money market strategy of being anactive member in the call and put money markethas rationalised average funds cost. Itsgraduation to fee-based services (advisoryservices, capital market services and insuranceservices) is expected to make it morecompetitive.Liquidityrisk10In most cases, an inability to match the debtrepayment cycle with the fund receivable cycleaffects viability. Srei created a framework forstringent and regular mapping of its assets andliabilities to avoid mismatches. For a start, theCompany structures interest payment alignedwith the customer’s cash flow, the most effectiverisk mitigation method. Besides, the Companymonitors on a daily basis the cash-flow situation,asset-liability positions and market conditionswhich enable identifying probable mismatchesbetween receipts and payments well in advancein order for Srei to be able to meet its financialobligations in a timely manner.Interestrate risk11Volatile interest rates could affect businessviability. To protect borrowers, the Companyencourages floating interest rates when debtcosts are high and likely to decline; it encouragesfixed rates when debt costs are low and likely torise. This ensures borrower viability leading tosound credit. All disbursements are linked to theSrei Benchmark Rate (SBR), Srei's prime lendingrate. The SBR is reviewed periodically and basedon the movement of market rates it is increasedor decreased accordingly.59

DIRECTORS' PROFILESitting from L - R : S. Chatterjee, Salil K. Gupta, S. Rajagopal, V. H. PandyaStanding from L - R : Saud Ibne Siddique, Sunil Kanoria, Hemant Kanoria,K. K. Mohanty and Daljit MirchandaniSalil K. GuptaChief MentorHe has over fifty one years of experience. He has been the former Chairman of West BengalIndustrial Development Corporation Ltd. (a leading State financial institution) and has alsobeen the former President of the Institute of Chartered Accountants of India.Hemant KanoriaChairman & Managing DirectorHe has over twenty nine years of industry experience. He is the former President of theCalcutta Chamber of Commerce, former member of Board of Governors of Indian Institute ofManagement, Calcutta, past Chairman of the NBFI Task Force, the Federation of IndianChamber of Commerce and Industry (FICCI), a member of the Steering Committee of TheEnergy & Resources Institute’s (TERI’s) Repository of Environmental Activities andTechnology and Chairman, Infrastructure Committee, Confederation of Indian Industry(Eastern Region).Sunil KanoriaVice ChairmanHe has over twenty one years of experience in the financial services industry. He is agoverning body member of Construction Industry Development Council (CIDC), ASSOCHAMand among other responsibilities, has served as past President in Merchants’ Chamber ofCommerce, Federation of Indian Hire Purchase Association (FIHPA) and Hire Purchase &Lease Association (HPLA).Saud Ibne SiddiqueJoint Managing DirectorHe has over twenty five years of rich experience in global infrastructure financing. He hasworked with the International Finance Corporation (IFC), the private sector arm of the WorldBank, for more than sixteen years. During 2004-07, he was based out of Hong Kong andwas the head of business development for infrastructure projects in the East Asia and Pacificregion for IFC. He has also served as the CEO and Board Member of a publicly listed waterinfrastructure fund in Singapore. He was a member of the top management of Hyflux Ltd. inSingapore, one of the leading water infrastructure companies in Asia.60

Annual Report 2008-09K. K. MohantyWholetime DirectorHe has over thirty four years of experience in asset financing, project funding, profit andcredit appraisal, structuring syndication and receivables management including eleven years’experience in the Orissa State Financial Corporation.V. H. PandyaHe is an associate of the Indian Institute of Bankers. He has spent over forty four years inthe banking and financial industry, holding offices with India’s central bank, the ReserveBank of India (RBI), the capital markets regulator, Securities and Exchange Board of India(SEBI) and the Industrial Development Bank of India (IDBI).S. RajagopalHe possesses over thirty six years of experience in the banking industry. He has been theformer Chairman & Managing Director of Bank of India and a former Chairman of IndianBank.Daljit MirchandaniHe is currently the Chairman of Ingersoll-Rand in India. Mr. Mirchandani has held severalkey positions in the Kirloskar Group, including Executive Director in Kirloskar Oil Engines,the flagship company of the Kirloskar Group (KOEL). He was also the Chairman of theKarnataka State Council of the Confederation of Indian Industry (CII) in 2005.Somabrata MandalHe is a partner in Fox Mandal Little, one of the leading law firms in India. While he was theManaging partner of Fox Mandal Little, the firm won the Best National Law Firm of the YearAward (2006) for India at the IFLR. He has successfully managed to maintain the firm’sposition as the largest law firm in India.ShyamalenduChatterjeeHe has over forty two years of experience in Commercial and Investment Banking. He wasthe Executive Director of UTI Bank Ltd., Mumbai since May 2002. He has extensiveexposure in the areas of International Banking and has also worked in SBI, London for threeyears and in Washington D.C. for five years. He has achieved expertise in the areas ofCorporate Finance, International Banking, Retail Banking, Project Financing, Balance SheetManagement etc.61

DIRECTORS’ REPORTYour Directors are pleased to present the Twenty Fourth Annual Reporttogether with the Audited Accounts of your Company for the financialyear ended 31st March, 2009. The summarised consolidated andstandalone financial performance of your Company is as follows:62

Annual Report 2008-09FINANCIAL RESULTS(Rs. in Lakh)ConsolidatedStandaloneYear ended Year ended Year ended Year ended31st March, 2009 31st March, 2008 31st March, 2009 31st March, 2008Total Income 85,153 80,073 32,643 52,751Total Expenditure 68,313 57,031 26,666 35,971Profit before Depreciation 16,840 23,042 5,977 16,780Depreciation 3,658 4,901 769 3,612Profit before Bad Debts / Provisions and Tax 13,182 18,141 5,208 13,168Bad Debts / Provisions etc. 2,688 2,864 171 1,837Profit Before Tax 10,494 15,277 5,037 11,331Provision for Taxation 2,235 1,800 – 531Income Tax in respect of earlier years 2 4 1 4Profit After Tax 8,257 13,473 5,036 10,796Share of Profit (Loss) of Associate – (232) – –Minority Interest 49 47 – –Pre-Acquisition Adjustment (4) 79 – –Surplus brought forward from Previous Year 13,353 6,251 12,135 5,396Profit Available For Appropriation 21,557 19,524 17,171 16,192Paid up Equity Share Capital 11,629 11,629 11,629 11,629Amount transferred to Reserves 4,279 4,538 3,128 2,426OPERATIONAL REVIEWIn spite of the tough financialenvironment, your Company continuesto maintain its market leadership in theinfrastructure equipment financingbusiness. Some of the key highlights ofyour Company’s performance duringthe year under review are: The gross profit (beforedepreciation, bad debts, provisionand tax) is Rs. 5,977 lakh as againstRs. 16,780 lakh in the last year. Profit before taxation is Rs. 5,037lakh as against Rs. 11,331 lakh inthe last year. Net profit after taxation is Rs. 5,036lakh as against Rs. 10,796 lakh inthe last year.The total assets under managementof the Srei Group is Rs. 1,036,685lakh as against Rs. 821,389 lakh inthe last year.The Consolidated Financial Statementshave been prepared by your Companyin accordance with the requirements ofthe accounting standards notified by theCentral Government under theCompanies (Accounting Standards)Rules, 2006. The audited ConsolidatedFinancial Statement together with theAuditors Report thereon forms part ofthe Annual Report.Your Company has complied with allthe norms prescribed by the ReserveBank of India including the newly63

The Promoters’ Group ofyour Company hasincreased theirshareholding from25.05% to 30.02%introduced Fair practices, Anti moneylaundering & Know your customer(KYC) guidelines and also all themandatory accounting standardsnotified by the Central Governmentunder the Companies (AccountingStandards) Rules, 2006. It has adopteda sound and forward looking accountingpolicy of providing for non-performingassets in terms of the guidelines laiddown by the Foreign FinancialInstitutions, which are more stringentthan the guidelines of the Reserve Bankof India.CAPITALPREFERENTIAL ISSUEIn September, 2007 the Promoters'Group of your Company expressedtheir intention to increase theirshareholding in the Company andaccordingly, your Company issued andallotted 2,50,00,000 Warrants to theentities belonging to the Promoters’Group. Each Warrant being convertibleinto one Equity share, within 18 monthsfrom date of allotment i.e. 30th October,2007. The price of the Equity shares,arising out of conversion of Warrantswas fixed at Rs. 100 (including apremium of Rs. 90) per Equity share ofRs. 10/- each. The price determined inaccordance with the Guidelines forPreferential Issues contained inChapter XIII of the Securities andExchange Board of India (Disclosureand Investor Protection) Guidelines,2000 was Rs. 97.10 per Equity share;thereby, the price fixed on warrants washigher than the SEBI pricing formula.72,00,000 Equity shares were allottedto the Promoters’ Group of yourCompany during the financial year2007-08, on exercise of conversionoption against Warrants allotted tothem. The balance 1,78,00,000Warrants stand lapsed and an amountof Rs. 17.80 crore received from thePromoters’ Group as subscriptionmoney has been forfeited by yourCompany.The Promoters’ Group of yourCompany has increased theirshareholding in your Company duringthe year by 4.97% from 25.05% to30.02%, through the creepingacquisition route allowed as per SEBI(Substantial Acquisition of Shares andTakeovers) Regulations, 1997.The Promoters’ Group has shownincreased commitment to the businessstrategy and substantial growth of yourCompany and your Company believesthat this will result in enhanced value forall the stakeholders.UNSECUREDSUBORDINATED BONDSIn the year 2000, your Company hadissued on rights basis 52,66,075Unsecured Subordinated Bonds ofRs. 100/- each aggregating toRs. 526,607,500/- vide letter of offerdated 16th June, 2000. Each Bond hasan overall tenure of 12 years, reckonedfrom the date of allotment viz.25th August, 2000 and the face valueof the Bonds along with an overallpremium of 20 percent of the original64

Annual Report 2008-09face value is to be redeemed in seveninstallments, commencing from thecompletion of sixth year from the dateof allotment.Your Company has accordinglyredeemed on 25th August, 2008, beingthird redemption date, Rs. 15 towardsprincipal amount and Rs. 3 towardspremium amount, total aggregating toRs. 18 per Unsecured SubordinatedBond and the face value of theaforesaid Bonds stands reduced toRs. 55 per Bond w.e.f. 26th August,2008. The aggregate principal amountoutstanding as on 31st March, 2009 isRs. 28.96 crore.DIVIDENDYour Board has recommended aDividend of Re. 1 per Equity share(10%) for the Financial year 2008-09 tothe equity shareholders of yourCompany. The Dividend for theFinancial year 2008-09 shall be subjectto tax on dividend to be paid by yourCompany, but will be tax-free in thehands of the shareholders.MANAGEMENTDISCUSSION ANDANALYSIS REPORTECONOMIC REVIEWThe sub-prime crisis started in the USin 2007 and metamorphosed into aglobal financial crisis in 2008. Hugelosses by global financial institutionsmostly in the developed world, alongwith high-profile bankruptcies, thefreezing up of credit flow and themassive lay-offs across industries, haveseverely impacted economies.Governments had to intervene withmonetary and fiscal stimuli and wereforced to bailout large institutions in anattempt to prevent a systemic collapseand re-start global economic growth.Although a complete financial meltdownwas avoided, global growth contractedsubstantially in 2008 and is headed fornegative growth in 2009.According to the World EconomicOutlook (WEO) of the InternationalMonetary Fund (IMF), global GDPgrowth is projected to decline by 1.3%in 2009. The situation is worse foradvanced economies in particular. TheGDPs of Japan, Germany, Italy, UK,France and the US are projected tocontract by 6.2%, 5.6%, 4.4%, 4.1%,3% and 2.8%, respectively in 2009. Thiscontraction is seen as the deepest postWorld War II recession. Global growthis expected to recover next year andregister a positive growth of 1.9% in2010. The WEO predicts a prolongedrecovery of the global financial markets.Financial stress in mature markets isexpected to linger well into 2010. Moreclarity over losses on bad assets andinjection of public capital are expectedto lower insolvency concerns. Thisclarity will lead to a reduction incounterparty risk and market volatilityand restoration of more liquid marketconditions. As per the WEO, fiscaldeficits in both advanced anddeveloping economies are likely towiden sharply as governmentsimplement fiscal stimulus plans.However, high rates of precautionarysavings may reduce the impact of thefiscal multiplier. Muted economic activityis expected to keep commodity pricesrelatively stable during the whole of2009 and most of 2010.The Indian economy has not beenimmune to the global turmoil, butcompared to other economies, itsperformance was relatively strongerduring 2008-09. The RBI estimatesIndia’s GDP grew by 6.7% in FY09.Projections for FY10 vary between theIMF’s forecast of 4.5% and the RBI’sestimate of 6%. India’s merchandiseexports stood at USD 168.6 billion inFY09 compared to USD 159.0 billion inFY08. World trade is projected tocontract by 2.8% in 2009, the fastestpace of shrinkage in the last 80 years.Inflation is presently at near-zero rate,however, in the medium-term it isexpected to be in the 3-4% range. TheRBI has lowered policy rates expectingthat banks would lower lending ratesand thereby encourage borrowing.However, banks have yet to fully reflecton the RBI rate cuts in their lendingrates, and borrowing activity from theprivate sector remains weak. With fiscalconsolidation put into the backburnersince last year, and heavy governmentborrowing lined up, interest rates mayinch up during FY10. Despite the globalslowdown, India is estimated to havereceived USD 27.5 billion as FDI inFY09, up from last fiscal’s USD 24.5765

illion, which indicates that Indiacontinues to figure prominently in theglobal investor’s allocation strategy.The government has taken monetaryand fiscal measures to counter thedownturn in economic growth. Thedepth and the extraordinary impact ofthe financial crisis clearly indicated aneed for counter cyclical publicspending. Accordingly, the CentralGovernment invoked the emergencyprovisions of the Fiscal Responsibilityand Budget Management Act to seekrelaxation from the fiscal targets andlaunched two fiscal stimulus packagesin December, 2008 and January, 2009.These fiscal stimulus packages,together amounting to about 3% ofGDP, included additional publicspending, government guaranteedfunds for infrastructure spending, cutsin indirect taxes, expanded guaranteecover for credit to micro and smallenterprises, and additional support toexporters. Government realises that afiscal push towards infrastructureexpenditure will stimulate economicgrowth. The government’s fiscalstimulus is in line with its strategy tosubstantially increase infrastructurespending which accounts for just 4% ofGDP currently. Several infrastructurefocused steps have already beeninitiated to facilitate access of funds byinfrastructure companies. Once the newgovernment presents a full budget, newinitiatives are expected on theinfrastructure front to pump-prime theeconomy.NBFIs IN INDIAThe role of Non Banking FinancialInstitutions (NBFIs) in asset creation andinfrastructure development is wellacknowledged. They act as principalchannels of credit delivery to the micro,small and medium enterprises (MSMEs)which remain under-served by banks andother financial institutions in spite of beingthe back-bone of the India Growth Story.On the infrastructure front, the MSMEsaccount for majority of the contractorsand transporters whose service is centralto the infrastructure creation process.Thus, by serving these MSMEs, theNBFIs are promoting inclusive growthand contributing to the nation-buildingprocess.On the basis of the nature of activitiesand asset types, the NBFIs standclassified by the government. Within theasset financing company (AFC) type,government has taken special note ofNBFIs which are into financing ofinfrastructure assets and infrastructureprojects. This is evident in the measuresadopted by the government to aidinfrastructure financing NBFIs accessfunds in the backdrop of the financialcrisis. Quite naturally, your Companyhas been a beneficiary of government’sproactive actions.Government has allowed infrastructurefinancing NBFIs to source externalcommercial borrowing (ECB) frommultilateral / regional financial institutionsand government-owned developmentfinancial institutions under the ‘approvalroute’. However, keeping in mind howurgently funds are needed forinfrastructure creation, the NBFIsshould be allowed to access ECB underthe ‘automatic route’ and the list ofeligible lenders should also be extendedto include reputed international banksand bilateral funding agencies.Systemically important non deposittaking NBFIs have been allowed toraise capital funds by issuing perpetualdebt instrument (PDI) which would beeligible for inclusion as Tier I capital tothe extent of 15 percent of total Tier Icapital (as on March 31st of previousfiscal) and the amount of PDI in excessof amount admissible will qualify as TierII capital. Systemically important NBFIsare allowed on a temporary basis toraise short term foreign currencyborrowings under the approval route. Inaddition, they are provided access toRs. 25,000 crore through a specialliquidity window set up under IDBI’sStressed Asset Stabilisation Fund. Thesteps initiated by the government tofacilitate the systemically importantnon-deposit taking NBFIs will bebeneficial to Srei Equipment FinancePvt. Ltd., the joint venture between yourCompany and BNP Paribas LeaseGroup.It is reassuring to note that theGovernment acknowledges the role ofNBFIs in helping meet the hugeinvestment needs of the infrastructuresector.66

Annual Report 2008-09BUSINESS OUTLOOK ANDFUTURE PLANSBarring the year under review, India’seconomy has enjoyed a compoundannual growth rate of 8.6 percent overthe past five years. India’s strongeconomic growth has put massive strainon the country’s existing infrastructure,which has not kept pace withdevelopment. There is an urgent needto rehabilitate and expand the country’sinadequate infrastructure. Peak powercapacity is 16 percent short of demand.The quality of roads and highwaysneeds speedy upgradation. Forexample, on an average, trucks cantravel a distance of about 200 km perday, almost one-fourth of the globalaverage. Track coverage of railways isfar below global average. Major portsare operating at 95 percent capacity.Operational standards at airports areyet to catch up with global benchmarks.This highlights the urgency ofinfrastructure investments not only tospur demand amidst the presenteconomic slowdown but to support therising urbanisation, a growing economyand to improve the living conditions of alarge percentage of the population.Infrastructure finance require long termfunds. However, access to long termfunds is a key challenge in today’sscenario of scarce funds and highinterest rates. Banks have to deal withasset-liability mismatch and exposurelimit issues. There are investmentrestrictions on long term savingsmobilisers namely insurance, pensionand provident funds additionally, thebond market remains underdevelopedand access ECB remains constrained.The Eleventh Five Year Plan hadenvisaged a total investment of USD494 billion in Indian infrastructure, withUSD 429 billion in core sectors namelypower, road, railways, water, port,airport, irrigation, storage and gas. Theaim was to increase the gross capitalformation from 4 to 9 percent of GDPfrom 2008 to 2012. While power, roadand port sectors account for more than50 percent of the planned spend, India’ssuccess across various core sectorshas been mixed.The first half of the year under reviewwitnessed an unprecedented globalsurge in fuel prices and prices of key rawmaterials like cement, steel, bitumen, etc.that led to massive cost escalationsmaking many infrastructure projectsunviable. While commodity and fuelprices have come down significantly fromtheir heights, the unfolding of the globalfinancial crisis made access to fundsdifficult.While the government’s emphasis is onBOT type projects to promotepublic-private partnership (PPP), thecost escalation and now the creditscenario have greatly discouragedprivate investment.The biggest casualty was the road andhighway sector. There were hardly anytakers for the highway projects duringthis period. Frequent changes in modelconcession agreements have also67

The three main businessareas of your Companyhas been inInfrastructure EquipmentFinancing, InfrastructureProject Financing andInfrastructure Advisory.complicated matters. The muchpublicised Dedicated Freight Corridorproject of Indian Railways has remaineda pipedream and been a victim ofsudden cost escalation.With the major ports handling 530 milliontonnes of traffic in 2008-09, there is aneed to scale up capacity. The recentslowdown in international trade will notpersist indefinitely. Also with the risingtrend of containerisation of cargo,container transportation will need specialemphasis. While there has been someprogress on airport modernisation in themetros, the upgradation of non-metroairports has not yet taken off. Also theprogress on greenfield airports has beenslow.On the oil and gas front, the 7th roundof New Exploration and LicensingPolicy (NELP VII) elicited lukewarmprivate sector response. State-ownedbidders bagged the lion’s share ofblocks. Petroleum Ministry is nowworking towards NELP VIII (where 100blocks are likely to be offered forexploration of oil and gas) and the 4thround of auction of coal bed methane(CBM) resources. Of the 16 greenfieldprojects approved so far, only two(Hyderabad and Bangalore) have beencommissioned so far. On the powerfront, capacity addition has been slow.Of the 13 proposed ultra mega powerplants (UMPPs), only 4 have beenawarded and 2 have achieved financialclosure. On the lines of the UMPP, thegovernment is developing ultra megatransmission projects (UMTPs),14 UMTPs are in the pipeline.There has been mixed progress on theurban infrastructure with varied degreesof response from the state governmentstowards the Jawaharlal Nehru NationalUrban Renewal Mission (JNNURM).This mission, covering 63 highlypopulated cities pan-India, aims atinfluencing states to implement urbanreforms in order to access investmentsupport from the centre. JNNURM hassustained interest ever since itsinception in 2005 and there has beenexceptionally positive response from anumber of states like Maharashtra,Gujarat and Tamil Nadu. The mission’sscope is likely to be expanded in thecoming years. With two-thirds of India’spopulation dependent directly andindirectly on the rural sector, thegovernment maintains a strong focuson developing the rural economythrough programmes like National RuralHealth Mission, Rajiv Gandhi RuralDrinking Water Mission, Bharat Nirmanand National Rural EmploymentGuarantee Scheme.Outlays for many of the ongoing projectshave been increased in the interim Unionbudget of 2009-10. In addition, thegovernment has taken several initiativesto counter the economic slowdown aswell as ease the flow of funds forinfrastructure projects. In order to makecore projects more attractive for privateinvestment, the government isconsidering steps like increasing theviability gap funding limit, enhancing theconcession period for BOT projects and,68

Annual Report 2008-09converting BOT to annuity projects on aselective basis, etc. ECB sourcing normsstand relaxed for infrastructure buildingfirms and to some extent for NBFCsfinancing infrastructure. Government’sinfrastructure-financing agency, IndiaInfrastructure Finance Company Ltd.(IIFCL), has been authorised to raiseadditional funds through tax-free bondsin order to refinance bank lending oflonger maturity to eligible bid-based PPPprojects.The full budget that will be presented bythe new government is likely to set theroadmap for future course of action.However, with limited fiscal room, thegovernment is unlikely to announce newprogrammes and enhance outlays forexisting programmes. Rather, theemphasis is more likely to be onmonetary stimuli through cuts in repoand reverse repo rates and furtherreduction of the cash reserve ratio(CRR). During the short to medium term,the government is likely to carry outsector-specific procedural, regulatoryand legislative reforms aimed atfacilitating the land acquisition process,contract enforceability and projectimplementation which have a positiveimpact on private sector participation.Apart from the development of ruralinfrastructure, core sectors like roadsand highways, power generation andlow-cost housing may emerge as prioritysectors for the government’sinfrastructure push. On a priority basis,the government may consider raisingthe exposure limits of banks to thesesectors.With future developments likely tounfold on these lines, your Company iswell positioned and well capitalised totap the opportunities and expand itsbusiness portfolio. An infrastructurepush and a sustained rural focus willcreate fresh demand for constructionequipment and agriculture equipment.Both project financing and equipmentfinancing are expected to pick up oncethe monsoons are over. However, itmust be kept in mind that the pace ofgrowth of domestic economy will bemuted and nowhere near the magical9 percent growth of the past few years.Also, the developments in the globaleconomy, especially the developednations, need to be monitored closely.Despite the massive bailout packagesby developed countries, the economiesare still reeling under recession. Anyadverse development on the financialfront in those countries is bound to havea second-round impact on India. Themanagement of your Companycontinues to be vigilant on these fronts.Thus, while there are reasons to beoptimistic, your Company prefers to beready for adverse scenarios.BUSINESS REVIEWThe three main business areas of yourCompany has been in InfrastructureEquipment Financing, InfrastructureProject Financing and InfrastructureAdvisory.INFRASTRUCTUREEQUIPMENT FINANCE -SREI EQUIPMENTFINANCE PRIVATELIMITED(SREI EQUIPMENT)During the year under review, SreiEquipment disbursed Rs. 5,519 crore,which was indeed creditworthy in viewof the present adverse global financialsituation. Srei Equipment has alsoretained its leadership in theInfrastructure Equipment Finance,whereas other competitors exited out oftheir business during the year as theywere not able to weather the storm.In the beginning of the year, as theeconomy was doing extremely welltherefore Srei Equipment’s business wasunder a rapid growth path. Many newbusiness schemes were introduced in themarket like ‘Mother of all Events’ - the9/9 PKN-s in August – 9 editions of‘Paison ki Nilami’ (Srei’s flagship event ofequipment financing through auction ofinterest rates) in 9 different cities one afterthe other. The management’s decision toorganise the 9 PKNs at that point resultedin achieving a large volume of businessfor the entire year and before the globalcrisis hit India in September, 2008.The growth in business till Septemberwas extremely good, but in October theglobal financial crisis also had its effecton the Indian market, resulting in severeliquidity crisis in the country, especiallyduring the last two weeks of October.The stock market crashed in the country69

due to crash in the global stock market.The banking sector also witnessedissues of liquidity, thereby constrictingsupply to industry in general. However,with the intervention of the governmentin November and their proactive stepsin conjunction with the RBI there was agradual improvement in the liquidityposition from December onwards. Bythe beginning of January, 2009, theconfidence in the financial sector wasrestored in India.As a result of liquidity crisis in thebanking sector in October, SreiEquipment took a decision to slow downthe disbursement and adopted astrategy of intensifying relationship withthe customer, so that realisations do notget impaired. It was also decided bySrei Equipment, unlike others both inIndia and overseas, that it would not layoff employees, but redirect their effortstowards better customer relationships.The relationship with themanufacturers, bankers, governmentand bilateral institutions were alsofocused on, by the senior managementteam, so that a conducive environmentfor the operations of Srei Equipment bemaintained. The joint co-ordinatedaction at all points enabled SreiEquipment to weather the storm andemerge stronger in respect to havingstronger relationship with clients,continued business with manufacturers,substantial support from bankers andrecognition of a robust institution by theGovernment and Regulators.Srei Equipment’s strategy in the secondhalf of the financial year was to do newbusiness only selectively, but primarilyinvolve with the customers, so that ifthey were facing any stress in theirbusiness, Srei Equipment could helpthem. Therefore, in the 3rd quarter ofthe financial year, the business volumewas low, but realisations were good. Inthe last quarter, business wasincreased with focus on much betterquality assets. The management teamis now sure that they would be in aposition to go back and increase thebusiness rapidly, as the emergingopportunities are large. The liquidityposition in India has also substantiallyimproved and the government hastaken necessary action to supportinfrastructure financing companies.Therefore, Srei Equipment is quiteconfident that this year, the growth ofSrei Equipment would be good and asSrei Equipment has gone through astormy time, the team has also gearedup towards managing business well,even in adverse situations.JOINT VENTURE WITHBNP PARIBAS LEASEGROUPThe Joint Venture (“JV”) between SreiInfrastructure Finance Limited (“Srei”)and BNP Paribas Lease Group whichwas announced on 31st May, 2007, hasnow been effective from 2nd April, 2008upon the receipt of all necessary legaland statutory clearances.BNP Paribas Lease Group, a 100%BNP Paribas subsidiary, specialises infinancing investments made bycompanies and professionals, eitherthrough the intermediary of its partners(manufacturers, importers and vendorsof equipment) or directly to thecustomers. BNP Paribas Lease Grouphas been in this business for 50 yearsand is today the European and Frenchmarket leader with a global balancesheet of Euro 20 billion. BNP ParibasLease Group is present in Austria,Belgium, France, Germany, Hungary,India, Italy, the Netherlands, Poland,Portugal, Spain and the UK, andthrough BNP Paribas Group entities inAlgeria, Greece, Morocco (BMCILeasing), Turkey (TEB Leasing),Ukraine (ULC) and the USA (TrinityVendor Finance).BNP Paribas Lease Group has investedRs. 775 crore in the JV Company throughinfusion of fresh capital (2,50,00,000Equity shares of Rs. 10/- each at apremium of Rs. 300/- per share). BNPParibas Lease Group will also assist andsupport the JV Company to raiseresources at lower costs, therebyimproving the profitability of theorganisation.Your Company is quite confident thatthis joint venture between BNP ParibasLease Group and Srei will result inhigher profits and higher growth ofbusiness without diluting the equity,thereby enhancing shareholder value.INFRASTRUCTUREPROJECT FINANCEThe global financial turmoil led to a70

Annual Report 2008-09slowdown in investment ininfrastructure projects during financialyear 2008-09. The stimulus plans of theGovernment however, indicate that itwill continue to focus on infrastructurebuilding as the key driver of economicgrowth. There is an urgent need to stepup expenditure in this sector. Thegovernment realises that this cannothappen unless there is significantprivate sector participation. Privatesector share in infrastructure spendingis expected to go up from 19%in the Tenth Five Year Plan (2002-2007) to 30% in the Eleventh Five YearPlan (2007-12).Your Company believes that its abilityto provide holistic financial solutionsand the significant support and interestshown by the multilateral agencies,international vendors, and export creditagencies has created an opportunity foryour Company as a strong niche playerin the Infrastructure project financingspace. The past year has provided yourCompany an opportunity to positionitself for the next level of growth. It hasapproved exposures aggregatingRs. 2,500 crore spanning variousinfrastructure segments - Power, Ports,Roads, Aviation, Logistics, SEZs,Industrial Parks, Mining, Oil & Gas,Telecommunications and UrbanInfrastructure in order to develop awell-diversified portfolio.Power: The power sector continues tobe a focus area for your Company witha significant interest in thermal power,renewable energy, hydroelectric power,co-generation, and waste-heat recoverysystems. This sector is the largestinvestment area in theEleventh Plan with a target additionalgeneration capacity of 90,000 MW. Inthe last financial year, your Companyexecuted several transactions withpower companies across the country.This included equipment financing ofthermal power generation equipment,hypothecated loans for bagasse-basedcaptive power plants in sugar mills, andproject financing of a run-of-the-riverhydro-power plant. It is expected thatPower will be a prime mover of thebusiness with a three prongedapproach –Identify, structure, finance, andsyndicate transactions in themid-sized projects.Participate in a consortium for themega / large sized projects. Through relationships withmanufacturers provide competitiveedge to customers by offeringinnovative financial products.Ports & Port Equipment: Over thepast few years, private sectorparticipation in port infrastructure hasincreased substantially. Your Companyhas approved financing packages forminor ports both greenfield as well asexpansion and development ofmultimodal transport facilities at existingminor ports. Your Company has alsofunded material handling systems (suchas cranes) and dredging vessels. Thefocus area includes dredgers, port71

BNP Paribas LeaseGroup has investedRs. 775 crore in the JVCompany throughinfusion of fresh capitalequipment and ports. Ports will befinanced through a consortium forconstruction of both major and minorports, setting up of new ports, ancillaryfinancing, and port expansion.Railways & Logistics: Logistics costsaccount for nearly 13-14% of the India’sGDP, a significantly higher proportionthan the 8-9% levels for developedcountries, such as the US. Highlogistics costs ultimately increase theproduct cost and adversely affect thecompetitiveness of Indian products inthe global market. Recognising thisissue, the Indian Railways opened upfreight transportation to private playersin the year 2006.Your Company takes pride in havingnurtured several entrepreneurs in thissegment. Your Company has continuedto look at opportunities in financing rollingstock, setting up of Inland ContainerDepots (ICD) / Container Freight Stations(CFS), warehouses, cold storages, anddevelopment of railway sidings. In fact, itwas the pioneer in rolling stock financingin India. With greater organisation in thelogistics sector, it is expected that therewill be more financing opportunities goingforward. Your Company will continue toprovide asset backed financing for rollingstock and containers, and is workingclosely with wagon manufacturers, andcontainer train operators towards thatend. It is also working with logisticscompanies to provide financing not onlyfor purchasing equipment, but also forsetting up of terminals, facilities, andparks.Aviation & Airports: Infrastructureconstraints in terms of inadequateairport capacities, fluctuating fuel prices,and excess airline capacity are keychallenges for this sector in the short tomedium term. However, consolidationamong players, improvement in airportfacilities, and development of newairports is inevitable. While yourCompany has financed major airlines inthe past, considering the currentindustry downturn, it has been veryselective in financing aircraft. It hasprimarily financed aircrafts fornon-scheduled operators backed bycharter hire arrangements withcredit-worthy corporate clients. In thelast financial year, your Companyfinanced the purchase of helicopters toprivate operators catering to thecorporate sector, reflecting its keystrengths of risk mitigation throughasset backed comfort, and identificationof opportunities even in adverse marketconditions.Mining: Two major materials that haveplayed, and will continue to play, amajor role in India’s growth story arecoal and steel. By virtue of its strongpresence in Eastern India, yourCompany is in a good position to tapopportunities in the mining sector (coal,iron ore, manganese ore, chrome ore,bauxite, alumina, copper, etc.) inChattisgarh, Jharkhand and Orissa.Your Company has financed severalmining projects. Additionally, it iscontinuously scouting for opportunitiesto finance mine development including72

Annual Report 2008-09land acquisition, construction ofhaulage roads, railway sidings for coalevacuation and coal washeries.Telecommunications: The Indiantelecom industry was one of the firstinfrastructure sectors to seek privateparticipation in the year 1992. Sincethen, the industry has matured andexpanded tremendously in terms ofcoverage area, services offered, andthe number of subscribers. Even now,nearly 12 million wireless subscribersare added on a monthly basis. Thetele-density has reached nearly 38%, along way ahead of what it was in 1992.The industry is expected to see anotherboom triggered by IPTV (InternetProtocol TV), broadband, entry of newplayers, and penetration in the ruralsegment. Your Company has leveragedits relationships with vendors and itsunderstanding of this sector to structurefinancing packages for new telecomplayers, both for investment in thissector and for acquiring criticalequipment. In the last financial year,your Company has financed telecomassets including transmission towersand cable broadband equipment. Withthe growth opportunities in this sectordue to new licensees entering the fray,it is expected that your Company willcontinue to play a significant role infinancing of telecom assets andprojects.Roads: Road networks will play a keyrole in India’s future growth, as it carriesa significant proportion of domesticfreight. Apart from providingconnectivity to the ports, ICDs, CFSs,warehouses, and facilities beingdeveloped, it also connects the newtownships and suburbs that are beingset up near larger cities. Your Companyrecognises the roads sector as a keycatalyst of growth and intends to financeprojects in this sector. As in the lastfinancial year, it will participateselectively in toll projects and annuitybased projects for select developers,and bridge loans for project completionand exit by way of take out.Oil & Gas: Though this sector haswitnessed extreme fluctuations duringthe credit crisis in the last financial year,it will always be a key determinant of thenation’s growth. The success factor infinancing operators in this sector is totake selective exposure to this sector,and structure it so that risks aremitigated. Your Company’s key strengthof understanding asset-backed fundinghas enabled it to structure operatinglease transactions for onshore rigs, andspecialised deep-sea pipe-layingvessels. Going forward, your Companywill continue to explore opportunities inthis sector that will enable it toselectively finance high quality assets,using structures that will insulate it fromthe shocks inherent to the sector.While your Company was proactivelyidentifying risks and restricting exposureto volatile sectors, it was also preparingitself for the growth that will ensue in thecoming years. In the last financial year,it grew its team by hiring high qualityprofessionals with extensiveinfrastructure and project financingexperience, from leading infrastructureand finance companies in India andabroad. Your Company continues toattract the best talent, and strengthenbest practices in order to generatehigher business volumes, performdiligent credit appraisals, and provideinnovative customer oriented financingsolutions. It will also focus on expandingits revenue stream, by generating higherfee income through syndication. Withthese and other ongoing changes, yourCompany is on the path to become aleading player in the infrastructureproject financing arena.INFRASTRUCTUREPROJECT ADVISORYYour Company has experience andfunctional expertise in InfrastructureProject Advisory with regard to projectconceptualisation and management,project engineering, risk management,regulatory guidelines, financialmodelling, contract structuring,concession agreements, andstructuring solutions for variousinfrastructure projects. Your Companyprovides integrated and comprehensiveprofessional services towardsdevelopment of infrastructure projectsand related components from projectconceptualisation to projectimplementation, with a focus on sectorslike Roads, Ports, Energy, Airports,SEZs / Industrial Parks, UrbanTransport (MRTS / BRTS), WaterSupply and Sanitation, Tourism73

Infrastructure, etc.The focus of the Central and StateGovernments on improving roadconnectivity across the country hasbrought about significant investments inroad development. In order to promoteinvolvement of the private sector inconstruction and maintenance of roads,a large number of projects are beingundertaken on a Build-Operate-Transfer (BOT) basis. During theprevious year, your Company, asconsultants to the Government of UttarPradesh, successfully completed theGanga Expressway mandate fromconceptualisation to award ofconcession in just over three months.Ganga Expressway is the largest roadproject under Public Private Partnershipinvolving development of 8-lane AccessControlled Expressway of length ofabout 1,047 km from Greater Noida toBallia along the north bank of riverGanga in Uttar Pradesh. The estimatedproject cost of Ganga Expressway isRs. 30,000 crore (USD 6.25 billion).Your Company was also awarded theIntegrated Urban Rejuvenation Plan(IURP) project for six cities (Ghaziabad,Meerut, Agra, Aligarh, Allahabad andVaranasi) wherein the scope of workinvolves IURP preparation, projectidentification, conceptualisation,conducting pre-feasibility and bidprocess management. Phase I projecthas been identified and tender hasbeen floated for 37 projects worthapproximately Rs. 12,000 crore. Withthese projects, your Company isstrengthening its position in the marketas a PPP transaction advisor.Your Company has developed thecapability of offering services to thehigh-tech and mega transportationconsultancy projects in the urbantransport sector. Apart fromconventional transportation planningand traffic engineering, the needs in thecountry now are to develop expertise insystem engineering and infrastructuredesigns. Your Company hasestablished itself in this sector withspecialised manpower managementand credibility.Your Company now has the in-housecapability to support and advise metrorail authorities in electrical systemdesigns, traction sub-stations and, trackdesigns. Your Company as lead partnerwith DB is involved in detailed powersystem design of Bangalore Metroproject for traction power and simulationstudies in-shape and fit for constructionincluding bid process management andquality supervision inputs. The otherprestigious assignment awarded by theBangalore Metro is the detailed designof alignment and track for 40 kmnetwork. Your Company has alsocontributed in Mecca Metro aspre-tender advisor to Bovis Lendlease(UK). Siemens, as EPC Contractor toConcessionaire Reliance-ADAG Groupto develop Delhi Airport High SpeedMetro Link, has appointed yourCompany to provide system integrationservices for design assimilation supportfor sub-systems and interface betweenDMRC, contractors, consultants, etc.Your Company also has the mandatefor developing MRT systems forColombo (Sri Lanka) and Kolkata(India).Increasing need for urban mass transitmobility is now being felt and addressedby various cities in India. Following theNUT Policy and best practices in theworld, economically and financiallyfeasible options of Bus Rapid TransitSystem (BRTS) are being embraced byIndian cities on medium dense corridorsin Ahmedabad, Bhopal, Delhi, Indore,Jaipur, Pune, Rajkot, Vizag, Hyderabad& Vijaywada. Your Company also hasbeen entrusted with the preparation ofdetailed project report and projectsupervision consultancy assignment forimplementation of BRTS on twocorridors totalling a length of about 40km in Vishakhapatnam. Your Companyhas ensured high quality and timelypreparation of Detailed Project Report(DPR) for two BRTS corridors toGreater Vishakhapatnam MunicipalCorporation and also endeavoured thatall works are carried out in fullcompliance with the engineeringdesigns, technical specifications andother contract documents within thestipulated time period. InfrastructureAdvisory Division of your Company hasalso been involved in carrying out aTechno-Financial Feasibility vs.Demand Assessment Study ondevelopment of Multi-facility InternationalClass Bus Terminal at Jaipur inRajasthan. This Advisory assignment74

Annual Report 2008-09has been executed on behalf ofHousing and Urban DevelopmentCorporation Ltd. (HUDCO) and theproject is to be taken up fordevelopment by the Rajasthan HousingBoard.Electricity is a key driver for economicgrowth and social development. Thelarge and rapidly growing power marketin India has undergone a radicalchange in sector structure and form ofregulation, opening immenseinvestment opportunities. TheGovernment of India has alreadyannounced an ambitious plan toprovide “electricity for all by 2012” anddetailed guidelines have been issuedfor competitive bidding procedures forgeneration projects and fortransmission projects. Your Companyhas been appointed as Consultants bythe Rural Electrification CorporationLimited to undertake selection ofPrivate Developer for two PowerTransmission Projects throughInternational Competitive Bidding route,namely Transmission StrengtheningSystem associated with NorthKaranpura (1980 MW) andAugmentation of Talcher IITransmission System and also asreview consultants by Power FinanceCorporation for the third project, namelyimport of NER / ER surplus power byNorthern region. With this, yourCompany now holds the distinction ofadvising all the three transmissionprojects, set up under the aegis ofMinistry of Power, for selection ofprivate developer. The bid documentshave been finalised in consultation withthe Central Electricity Authority andMinistry of Power and short-listing ofbidders is in process. The InfrastructureAdvisory Division of your Company alsocarried out the assessment andre-evaluation of the entire PowerDistribution Network of MaharashtraState Electricity Distribution CompanyLimited (MSEDCL) in the State ofMaharashtra. This revaluation exercisehas pegged the market value ofMSEDCL assets at Rs. 43,388 crore asagainst book value ofRs. 4,113 crore.The country saw unprecedented growthin the tourism sector, both domestic andinternational, during the past two years.Travel within the country increased atlevels and to accommodate thesevisitors, hospitality sector infrastructuresupport system needed to bestrengthened. Also with theCommonwealth Games approaching in2010, the country continuesemphasising an increase in roomcapacity. Under this initiative, yourCompany was awarded the project ofConceptualisation, Feasibility, BidProcess Management and ProjectManagement Consultancy for a resortto come up on 70 acre land at Bhondsi,10 km from Gurgaon. The other projectin the Tourism sector which yourCompany was able to win is thetechno-financial consultancy for aSpecial Tourism Zone of 200 acre inManapet, Puducherry.75

Your Company has nowbeen awarded the PMCfor a Textile Park costingRs. 110 crore to come upin 120 acre of land in Palidistrict of Rajasthan.Your Company was empanelled underthe SITP Scheme of the Ministry ofTextiles, Government of India as ProjectManagement Consultant to TextileParks. Your Company has now beenawarded the PMC for a Textile Parkcosting Rs. 110 crore to come up in 120acre of land in Pali district of Rajasthan.With increasing population, prosperityand urbanisation in various towns andcities in India, it remains a majorchallenge for municipalities to addressproblems of water supply, sewerageand solid waste management. YourCompany has been involved inpreparation of Detailed Project Reportsfor various districts in the State ofArunachal Pradesh on Sewerage, SolidWaste Management, construction andimprovement of Storm water drainsunder the Urban InfrastructureDevelopment Scheme for Small andMedium Towns (UIDSSMT) of theGovernment of India. ConsultancyServices are also being provided toPublic Health Engineering Departmentof the Government of Bihar with regardto Preparation of Pre Feasibility Reportand Detailed Project Report on WaterSupply Scheme for Quality Affectedareas under Begusarai District.Other major Infrastructure Advisoryassignments executed by yourCompany during the year under reviewwere:Mandated by the Gujarat MaritimeBoard to carry out Techno-Economic Study to provide Jettyand Allied Infrastructure for Exportof Salt in Maliya Taluka, Rajkot.Prepared a Project Report onDevelopment of ReadymadeGarment Cluster in Jabalpur,Madhya Pradesh, under IndustrialInfrastructure Upgradation Scheme(IIUS) of Department of IndustrialPolicy and Planning (DIPP),Government of India.Carried out Feasibility Study onestablishment of Jatrophaplantations based Bio-Diesel Projectnear Dimapur in Nagaland.Your Company has been extending itsInfrastructure Advisory reach andspread through empanelment withvarious Government organisations andstrategic relationships with some of thebest players in the industry. During theyear under review, Memorandum ofUnderstandings (MoUs) were signedwith Veolia Transportation andEngineering Projects India Limited andproject specific tie-ups were forged withMcCormick Rankin International,RITES, Consulting EngineeringServices, Tata Autocomp Telematics,TUV SUD, DB International (Germany)etc. Your Company also gotempanelled with leading governmentorganisations viz. Ministry of Textiles forIntegrated Textile Parks, PowerFinance Corporation Limited, GujaratInfrastructure Development Board,State Bank of India, InfrastructureCorporation of Andhra Pradesh,Sunderban Development Board, SilcharMunicipal Board, Public HealthEngineering Department (the76

Annual Report 2008-09Government of Bihar) and MadhyaPradesh State Tourism DevelopmentCorporation Limited.Your Company is today a recognisedname in Infrastructure Advisory and itplans to diversify its portfolio of servicesand sector coverage further in comingyears. The plans include extension ofservices in the Railways Sector coveringHigh Speed Railways, Dedicated FreightCorridors, Logistics Park andmodernisation of Railway Stations. YourCompany also plans to take advantageof immense potential of Urban TransportAdvisory involving Engineering Designcum Procurement Management andGeneral Consultancy for BRTS / MRTSprojects. Under the Power Sectordomain, your Company is exploringpossibility of associating with someleading and established players in theindustry so as to exploit opportunities inthe areas of Power Transmission, UtilityReforms, Rajeev Gandhi GrameenVidyutikaran Yojana (RGGVY),Accelerated Power Development &Reforms Programme (APDRP),Decentralised Distributed Generation(DDG) and Renewable Energy. All theseareas are expected to attract substantialinvestments from the Government ofIndia in the Eleventh Plan period. TheGovernment of India is fast encouragingreforms in educational sector. YourCompany is engrossing itself into theeducational sector for development oftechnical institutions in medical andengineering sectors with emphasis onindustrial training skills suitable tovarious industries.INTERNATIONALBUSINESS OPERATIONSYour Company took the first steps ofglobalising its business by establishingZAO Srei Leasing in Russia inassociation with the European Bank ofReconstruction and Development(EBRD, UK) and Deutsche Investitions -und Entwicklungsgesellschaft mbH(DEG, Germany) as equity partners.The company commenced operationsin Russia in mid 2006. The company’sbusiness in Russia is based on thesuccessful asset finance model of yourCompany coupled with the pro-activecustomer orientation in India. Theprincipal focus of the company hasbeen to cater to the SME segmentthrough financing of infrastructureequipment. The company achievedthree years of successive profits sinceits inception and has established goodrelationships with equipmentmanufacturers and dealers, financialinstitutions and customers in the localmarket. ZAO Srei Leasing is now aknown entity in the Russian leasingmarket. The growth of the company in2006 and 2007 was impressive but inthe second half of 2008, the businessslowed down due to the economic crisisin Russia.The global financial crisis impactedRussia somewhat higher than otherEuropean nations. The positive trendsin Russia began to reverse in the latterhalf of 2008. Investor concerns over theRussia-Georgia conflict, corporategovernance issues, and the globalcredit crunch in September caused theRussian stock market to fallsignificantly. Russia's banking systemfaced significant liquidity problems. A70% drop in the price of oil sincemid-July further exacerbatedimbalances in external accounts andthe federal budget. The year 2008 wasquite challenging for the company anddespite that the company maintainedthe same level of disbursements andprofits in 2008 as in the previous year.During the year, EBRD and DEGsubscribed to 30% of the equity. YourCompany is confident that the businessoperations will gain momentum oncethe economy improves and that thecompany will emerge stronger from thistest of resilience.Having established the businesssuccessfully in Russia and with a viewto extend its geographical reach, yourCompany has taken another step byentering into an MoU for setting up aLeasing Company in the UAE in JointVenture with Waha Capital PJSC whichis an eminent public joint stockcompany listed in the Abu Dhabi StockExchange and engaged in leasing ofaircrafts, shipping, financial servicesand real estate development. Waha isbacked by several prominent equityinvestors including MubadalaDevelopment Company (a stateorganisation of Abu Dhabi) and AbuDhabi Investment Company. Theexpertise of Srei as a holistic77

infrastructure institution paired with thebusiness relationships & contacts ofWAHA in UAE is expected to scale upthe business successfully within a shortspan of time. The company expects tocommence operations in 2009-10.Your Company was also approached byvarious esteemed companies forpartnership in other GCC countries.Your Company has entered into MoUwith Aayan Capital for providingtechnical expertise in setting up aleasing business in Saudi Arabia.Aayan Group is one of the largest autoleasing companies of Kuwait, engagedin auto leasing, mortgage financing andreal estate in Saudi Arabia with thepresent intention to establish anequipment leasing company in SaudiArabia. The domain knowledge of yourCompany coupled with theresourcefulness of Aayan in the localmarket will allow for a successful entryin the Saudi Arabian leasing market.RESOURCESYour Company is a Non BankingFinancial Institution with focus oninfrastructure and constructionequipment, playing a very important rolein the development of the economy andrequiring resources continuously. Theripple effect of the credit crunch had itseffect on the market in spite of theCentral Banks’ rate cuts across theworld including the Reserve Bank ofIndia (RBI). Under the circumstances,your Company took up the challenge ofmobilising resources at the mostcompetitive rates and lived up to theexpectations by raising the requiredresources from its bankers and financialinstitutions all the while ensuring properasset liability match.a) Fixed depositsYour Company’s conscious effort tomaintain asset liability match is reflectedin the steadily reducing Fixed Depositoutstandings although your Companycontinues to enjoy the confidence ofinvestors. The total deposits outstandingas on 31st March, 2009 have declinedto Rs. 514.99 lakh as compared toRs. 835 lakh as on 31st March, 2008.There were unclaimed matured depositsof Rs. 62.46 lakh representing 318depositors as at 31st March, 2009, whohave been informed about the maturityof deposits with a request to eitherrenew or claim their deposits back.Your Company’s Fixed Deposit schemecontinues with the assigned creditratings from two different credit ratingagencies, namely ‘AA(FD)’ by CreditAnalysis & Research Limited (CARE)which indicates high quality by allstandards and also classified as highinvestment grade, and ‘MAA-’ by ICRALimited (ICRA) which indicates highcredit quality with low credit risk.b) Institutional / Bank financeYour Company mobilised resources tothe extent of Rs. 680 crore during theyear at the most competitive ratesavailable in the market for the industry.Your Company continued its focus ondomestic sources, comprising of aconsortium of four Banks, IndianFinancial Institutions, Mutual Funds andRetail resources.c) Bonds / Debentures /Commercial PapersYour Company’s short-term debtprogramme was assigned the highestcredit rating of ‘PR1+’ by CARE forRs. 250 crore and ‘A1+’ by ICRA forRs. 600 crore, indicating the highestcredit given by rating agency ICRA toshort term debt instruments.Your Company issued short-term debtinstruments aggregating Rs. 435 croreduring the year to various Banks andMutual Funds, all by way of Bonds /Debentures, including Bonds / Debentureswith maturities up to one year.d) Foreign InstitutionalBorrowingsYour Company has RBI approval forvarious ECB amounting to USD 148million during the financial year2008-09 which it intends to draw downduring the financial year 2009-10.RISK MANAGEMENTYour Company recognises RiskManagement as an integrated, forwardlooking and process oriented approachfor managing all key business risks andopportunities.While translating your Company’s visionand mission into specific strategies,objectives and priorities, your Companyis exposed to various types of risk; the78

Annual Report 2008-09most important amongst them areoperational risk and market risk, whichincludes credit risk, liquidity risk & andprice risk. Top-line and bottom-linegrowth, therefore, have to be weighedin the context of the risks implicit in thebusinesses undertaken by yourCompany. The identification,measurement, monitoring andmanagement of risks remain key focusareas for your Company. Each processowner of your Company addressesopportunities and the attendant risksthrough an institutionalised approachthat is aligned with your Company’sobjectives.Your Company has been able tosuccessfully capitalise the businessopportunities in infrastructure sectorwith an efficient and robust businessmodel. Your Company has been able tomanage associated risks and difficultmarket conditions through well-definedbusiness processes, risk managementtools and techniques geared to protectinterest of stakeholders. YourCompany’s business exposure to thenormal financial and market riskscontinue to be monitored, managed andstrengthened from time to time bysystems and processes commensuratewith the volume of business activities.Internal control systems and processlevel checks and balances are reviewedand updated on a continuous basis.The Internal Audit Department of yourCompany reviews the processes thatare in place for identification,measurement, monitoring andmanagement of risks and ensures thatthese processes are effective within theorganisation.As of 31st March, 2009, yourCompany’s gross NPAs were nil asagainst 0.78 percent as that of31st March, 2008.HUMAN RESOURCESACTIVITIESYour Company continues to recognisethe fact that its employees are its mostvaluable assets. Despite the slowdownin the business environment, yourCompany has been hiring senior criticalresources to increase managementbandwidth and strengthen its riskmanagement system. This year, yourCompany saw French, British, Americanand Singaporean expats joining theteam making your Company one of itskind in the Industry in terms of diversityand outlook of people. Your Companywas able to gainfully keep every teammember utilised during the economicdownturn, which resulted in high moraleamong employees and spiritedenthusiasm.Your Company had engaged HewittAssociates to improve its HReffectiveness. Your Company hasintroduced the Balanced Score Cardapproach to strategy implementationand performance managementresulting in role clarity, competencymapping and overall improvement inwork planning.During the year under review, trainingand development was the continued79

As of 31st March, 2009,your Company’s grossNPAs were nil as against0.78 percent as that of31st March, 2008.thrust of our people initiative and itrecorded about 1,100 man-days oftraining. The focus of the training hasbeen on overall process improvement,performance review and customerservice.With the increase in size and number,your Company is actively pursuing toimplement a HRIMS (Human ResourcesInformation Management System) forbetter data, information managementand service to employees across thecountry.Your Company continues to inducttalent for its present and future needsmore so in new businesses. Thenumber of employees of Srei Groupincreased from 776 on 31st March,2008, to 1,083 on 31st March, 2009.INFORMATIONTECHNOLOGYYour Company realises how technologycan provide the edge to remain aheadof competition and thus constantlyupgrades its technology both in termsof hardware and software.During the year under review, yourCompany engaged with IBM Consultingteam to help your Company build anIntegrated Enterprise ApplicationStrategy, to enable the future potentialgrowth engine of your Company. YourCompany believes that this will enableyour Company the right businesscapabilities, direction and bedrock tosustain the planned growth.In line with the recommendations byIBM, in 2009-10 your Company isplanning to implement two newapplications on Oracle platform usingstate of the art Oracle E-biz Applicationas financials ERP duly integrated withworld class leasing line of businessapplication from International DecisionsSystems (IDS). This will add security,scalability and flexibility along with newcapabilities to support your Company’sgrowth plan. For this implementation,your Company will leverage on industryknowledge and skill of IBM.Another feather in the technology hat ofyour Company is the launch of the newlook Srei website as www.srei.com withlot more information to the customer inall aspects. Srei Intranet has beenenriched more with employee requiredinformation. It puts all important data,documents and information online andthus makes them accessible to allemployees. In addition, it creates aunique forum for all Srei employees toexchange experiences and ideas. YourCompany believes that the intranet willtrigger cross-fertilisation of ideas acrossdepartments and offices and wouldresult in numerous future innovations.INTERNAL CONTROL ANDAUDITYour Company is having anindependent Internal Audit Departmentreporting directly to the AuditCommittee of the Board. Internal AuditTeam is involved in constant evaluationand implementation of adequateinternal control measures to ensure80

Annual Report 2008-09good governance. The Team ensuresseamless efficient business operationand supports mitigation of associatedrisks by the process owners.The follow up role of the Internal AuditTeam involves implementation ofcorrective actions and improvements inbusiness processes after review by theAudit Committee and SeniorManagement. The effectiveness andquality of internal audit functions aremonitored by the Audit Committee onan on going basis.The Internal Audit and the InternalControl procedures adopted in yourCompany are adequate andcommensurate with the size andcomplexity of its business.ENVIRONMENTPROTECTION POLICYYour Company is getting support andguidance from International FinanceCorporation (IFC) of the World BankGroup, DEG-Germany, FMO-Netherlands and other highly reputedmulti-lateral agencies on environmentalissues. While endorsing the view thatenvironment protection is the key to anylong-term sustainable development, yourCompany ensures that environmentaldimensions are factored into all of yourCompany’s business considerations andactivities especially while undertakingreview, clearance and supervision ofprojects. Your Company ensures that itsassets and project financing do notcause adverse environmental and socialimpacts.Non-conventional sources of energyhave emerged as the only viableoptions to achieve the goal ofsustainable development. India is at theforefront of international effort toharness renewable energy resources.In line with its concern for environmentalissues, your Company has a fullyoperational renewable energydepartment which financespollution-free renewable energytechnologies.SOCIAL RESPONSIBILITYRecognising its social responsibility,your Company had created a publiccharitable trust in the name of ‘SreiFoundation’ with the objective ofgranting scholarships and otherfinancial assistance to deserving andtalented candidates. The Fund alsosupports setting up of schools, colleges,medical and scientific researchinstitutions. Donations to SreiFoundation qualify for deduction underSection 80G of the Income Tax Act,1961. Your Company has granteddonation of Rupees Twenty Five lakh toSrei Foundation during the financialyear 2008-09.Your Company also promotes all-rounddevelopment of a clean environment andhelps in propagating and impartingeducation for the betterment ofagriculture / horticulture and other similaractivities.CORPORATEGOVERNANCEYour Company has always practisedgood Corporate Governance and takesnecessary actions at appropriate timesfor enhancing and meetingstakeholders’ expectations whilecontinuing to comply with mandatoryprovisions of Corporate Governance.A separate section on CorporateGovernance and a Certificate from theAuditors of your Company regardingcompliance with the requirements ofCorporate Governance as stipulatedunder Clause 49 of the ListingAgreement with the Stock Exchanges,form part of the Annual Report.TRANSFER TO INVESTOREDUCATION &PROTECTION FUNDDuring the year under review, yourCompany has transferred a sum ofRs. 343,883/- to the Investor Education& Protection Fund, the dividend amountwhich was due & payable and remainedunclaimed and unpaid for a period ofseven years, as provided in Section205A(5) of the Companies Act, 1956.Cumulatively, the dividend amounttransferred to the said Fundtill 31st March, 2009 wasRs. 1,863,351.79.SUBSIDIARY COMPANIESDuring the year under review, SreiInfocomm Services Limited wasincorporated in July, 2008 as asubsidiary of Srei Infrastructure81

Advisors Limited, a subsidiary of yourCompany. Thereafter, it became awholly owned subsidiary of SreiInfrastructure Advisors Limited w.e.f.12th March, 2009 consequent toacquisition of its balance shareholding.The 51% share capital of Bengal SreiInfrastructure Development Limited heldearlier by Srei Capital Markets Limited,was acquired by Srei InfrastructureAdvisors Limited and accordinglyBengal Srei Infrastructure DevelopmentLimited became a subsidiary of SreiInfrastructure Advisors Limited w.e.f.25th September, 2008. During the yearunder review, consequent upon theacquisition of Equity shares by yourCompany, Controlla Electrotech PrivateLimited became a wholly ownedsubsidiary of your Company w.e.f.6th June, 2008.The statement pursuant to Section 212of the Companies Act, 1956, containingdetails of Company’s subsidiaries inIndia and overseas, forms part of theAnnual Report.In view of the exemption received fromthe Ministry of Corporate Affairs,Government of India vide letter no.47/47/2009-CL-III dated 31st March,2009, the audited statement of accountsalong with the Reports of the Board ofDirectors and Auditors relating to yourCompany’s subsidiaries in India andOverseas viz., Srei Capital MarketsLimited, Srei Venture Capital Limited,Srei Forex Limited, Global InvestmentTrust Limited, Srei Sahaj e-VillageLimited, Srei Infrastructure AdvisorsLimited, Controlla Electrotech PrivateLimited, Srei Infocomm Services Limited(subsidiary of Srei InfrastructureAdvisors Limited), Bengal SreiInfrastructure Development Limited(subsidiary of Srei InfrastructureAdvisors Limited), HyderabadInformation Technology VentureEnterprises Limited (subsidiary of SreiVenture Capital Limited), CyberabadTrustee Company Private Limited(subsidiary of Srei Venture CapitalLimited) and IIS InternationalInfrastructure Services GmbH, Germanyfor the financial year ended31st March, 2009, and ZAO SreiLeasing, Russia (subsidiary of IISInternational Infrastructure ServicesGmbH, Germany) for the financial yearended 31st December, 2008 are notannexed as required under Section212(8) of the Companies Act, 1956.Shareholders who wish to have a copyof the full report and accounts of theaforesaid subsidiary companies will beprovided the same by the CompanySecretary on receipt of a written requestfrom them. These documents will alsobe available for inspection by anyshareholder at the registered office ofthe Company and the concernedsubsidiary companies during businesshours on all working days. However, asdirected by the Ministry of CorporateAffairs, Government of India, thefinancial data of the subsidiaries havebeen separately furnished and forms apart of the Annual Report.PARTICULARS OFEMPLOYEESThe names and other particulars of theemployees as required under Section217(2A) of the Companies Act, 1956read with the Companies (Particulars ofEmployees) Rules, 1975, are set out inthe annexure to the Directors’ Reportand forms part of this Annual Report.PARTICULARS OFCONSERVATION OFENERGY, TECHNOLOGYABSORPTION, FOREIGNEXCHANGE EARNINGSAND OUTFLOWYour Company has no activity relating toConservation of Energy and TechnologyAbsorption as stipulated in theCompanies (Disclosure of Particulars inthe Report of Board of Directors) Rules,1988. However, your Company usesinformation technology extensively in itsoperations.During the year under review, the totalforeign exchange earnings andexpenditure of your Company wasRs. 7 lakh and Rs. 15,930 lakh,respectively (previous year Rs. 60 lakhand Rs. 9,436 lakh).SREI WEBSITEThe website of your Company,www.srei.com, carries a comprehensivedatabase of information of interest tothe investors including the financialresults of your Company, dividenddeclared, any price sensitiveinformation disclosed to the regulatory82

Annual Report 2008-09authorities from time to time, corporateprofile and business activities of yourCompany and the services rendered byyour Company to its investors.PROMOTER GROUPCOMPANIESPursuant to intimation from Promotersof your Company, the names ofPromoters and companies comprisingthe “Group” as defined in theMonopolies and Restrictive TradePractices Act, 1969, have beendisclosed in the Annual Report of yourCompany for the purpose of Regulation3(1)(e) of the SEBI (SubstantialAcquisition of Shares and Takeovers)Regulations, 1997.DIRECTORSMr. Saud Ibne Siddique, a Director ofyour Company, was appointed as theJoint Managing Director of yourCompany for a period of 3 (three) yearsw.e.f. 1st April, 2009 to31st March, 2012, subject to approvalof members, the Central Governmentand such other approvals as may berequired. Your Company has made anapplication in specified e-form 25A tothe Central Government for obtainingapproval under Section 269 and otherapplicable provisions of the CompaniesAct, 1956, for the appointment of Mr.Saud Ibne Siddique as the JointManaging Director of your Companyw.e.f. 1st April, 2009. The aforesaidapplication is pending for approval ofthe Central Government.Mr. Sunil Kanoria has assumedresponsibility as the Vice Chairman ofthe Board of Directors of your Companyw.e.f. 20th September, 2008.Pursuant to the transfer of creditfacilities of Indian Renewable EnergyDevelopment Agency Limited (IREDA)to Srei Equipment Finance PrivateLimited w.e.f. 1st January, 2008 inaccordance with a Scheme ofArrangement sanctioned by the Hon’bleHigh Court at Kolkata vide Orderpassed on 28th January, 2008,Mr. B. Swaminathan ceased to be aNominee Director on the Board ofDirectors of your Company w.e.f.23rd September, 2008.Mr. P. K. Pandey retired as WholetimeDirector and Director of your Companyw.e.f. close of business hours on31st March, 2009 and Mr. S. Chatterjeeresigned as Wholetime Director of yourCompany w.e.f. close of business hourson 31st March, 2009. Mr. S. Chatterjeeshall however be a Non-ExecutiveDirector of your Company w.e.f.29th April, 2009. The Board wishes toplace on record deep appreciation of thecontribution, active involvement, adviceand guidance extended by them duringtheir tenure as Directors of yourCompany.In accordance with the provisions of theCompanies Act, 1956 and yourCompany's Articles of Association,Mr. Salil K. Gupta and Mr. K. K. Mohantyretire by rotation at the ensuing AnnualGeneral Meeting and being eligible,offer themselves for re-appointment. All83

these Directors have filed Form DDAwith your Company as required underthe Companies (Disqualification ofDirectors under Section 274(1)(g) of theCompanies Act, 1956) Rules, 2003. Thebrief resume / details relating toDirectors who are to be appointed /re-appointed are furnished in the Noticeof the ensuing Annual General Meeting.During the year under review, yourCompany has received approval ofCentral Government for payment ofremuneration by way of 1 percentcommission on net profits calculatedunder Section 198 of the CompaniesAct, 1956 to non-executive Directors ofyour Company for a period of3 financial years w.e.f. 2008-09, upto amaximum limit of Rs. 35 lakh payable inone financial year to be divided amongnon-executive directors in such manneras may be decided by the Board fromtime to time.In accordance with the approval ofCentral Government, your Companyhas paid remuneration of Rs. 35 lakh byway of commission on net profitscalculated under Section 198 of theCompanies Act, 1956 to non-executiveDirectors of your Company for financialyear 2008-09.DIRECTORS’RESPONSIBILITYSTATEMENTIn terms of provisions of Section217(2AA) of the Companies Act, 1956(Act), your Directors confirm:(i) that in the preparation of the annualaccounts for the financial year ended31st March 2009, the applicableaccounting standards have beenfollowed along with properexplanation relating to materialdepartures;(ii) that the Directors have selectedsuch accounting policies andapplied them consistently and madejudgements and estimates that arereasonable and prudent so as togive a true and fair view of the stateof affairs of the Company at the endof the financial year and of the profitof the Company for the year;(iii) that the Directors have taken properand sufficient care for themaintenance of adequateaccounting records in accordancewith the provisions of this Act forsafeguarding the assets of theCompany and for preventing anddetecting fraud and otherirregularities; and(iv) that the Directors have prepared theannual accounts for the financialyear ended 31st March, 2009 on agoing concern basis.AUDITORSM/s. Deloitte Haskins & Sells,Chartered Accountants, retire asAuditors of your Company at theconclusion of the ensuing AnnualGeneral Meeting and have confirmedtheir eligibility and willingness to acceptthe office of Auditors, if re-appointed.Members are requested to consider84

Annual Report 2008-09their re-appointment for financial yearending 31st March, 2010 onremuneration to be decided by theBoard of Directors of your Company.ACKNOWLEDGEMENTYour Directors would like to expresstheir grateful appreciation for theexcellent support and co-operationreceived from the financial institutions,banks, Central & State GovernmentAuthorities, the Reserve Bank of India,the Securities & Exchange Board ofIndia, Indian and overseas StockExchanges, Credit Rating Agencies,Customers, Manufacturers, Vendors,Suppliers, Depositors, Shareholdersand other Stakeholders during the yearunder review. Your Directors also placeon record their deep appreciation of thevaluable contribution of the employeesat all levels for the progress of yourCompany during the year and lookforward to their continued co-operationin realisation of the corporate goals inthe years ahead.On behalf of the Board of DirectorsKolkata, 12th June, 2009Hemant KanoriaChairman & Managing Director85

Particulars of EmployeesInformation as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules,1975 referred to in the Directors’ Report for the year ended 31st March, 2009 and forming part thereof.Sl. Name Age Designation Qualification Remuneration Date of Working PreviousNo. (Rs.) Commencement experience Employment1 Mr. Abhilash Kamti* 32 Senior Vice President - Treasury BBM, MBA 1,181,332 01-12-2008 10 Paramount Airways(Fin & Mktg)2 Dr. Ahindra Chakrabarti* 60 Advisor – Training M.Com., LLB, 2,513,703 14-05-2008 30 Fortune Institute ofPh.D.International Business3 Mr. Ankur Rajan* 36 Vice President - B.E. (Electrical), 548,424 17-01-2009 14 IL & FS InfrastructureAdvisory Services MBA (Finance) Dev. Corp Ltd.4 Mr. Arnab Basu 42 Head - International Business B.E., PGDBM 4,459,276 05-09-2006 13 ICICI Bank Ltd.5 Mr. Bajrang Kumar 41 Senior Vice President – B.Com., ACA 3,939,988 05-09-2005 14 Apeejay SurrendraChoudhary MD's Secreteriat Group6 Mr. Deepak Kumar 43 Head - Human Resource B.Sc., PGDBM 4,032,389 08-01-2008 21 Enam SecuritiesGupta & IR, MBA Pvt. Ltd.7 Mr. Hemant Kanoria 46 Chairman & Managing Director B.Com. (H) 13,925,876 07-05-1994 29 Not Applicable8 Mr. Kishore Kumar 51 Wholetime Director B.Tech., MBA 6,538,667 18-03-1995 34 Orissa StateMohantyFinancial Corporation9 Mr. Malay Kumar Paul* 48 Vice President - Internal Audit ACA, AICWA, 1,039,753 04-11-2008 22 Tata Chemicals Ltd.M.Com.10 Ms. Manorama Arvind 55 Head - Credit Risk & B.Sc. (H), M.Sc. 2,493,160 01-01-2007 29 Sumitomo MitsuiSonmale Management (IPF) Banking Corporation11 Ms. Monika Pal Bharti 40 Vice President - B.Sc., PGDM 4,227,708 01-07-2006 17 Pradeshiya Industrial &Advisory Services(Mkt, Fin, Hr,Investment CorporationOb & Comp)of U.P. Ltd.12 Mr. Naveen Bansal 44 Vice President & Head – B.Com. (H) 2,912,225 14-06-2006 24 Shree SidhiSpecial ProjectSilicons (P) Ltd.13 Mr. Navodit Mehra 42 Vice President - Legal B.A. (H), LLB, Dll 2,438,769 17-09-2007 16 Deccan Aviation Ltd.14 Mr. Prasad Kumar 63 Wholetime Director B.Com., ACA 4,688,000 02-06-1997 37 Indian Metal FerroPandey #Alloys Ltd.15 Mr. Praveen Sethia 42 Senior Vice President & Head – B.Com., ACA, 2,994,907 10-03-2007 15 ICICI Bank Ltd.Infrastructure Project Development AICWA16 Mr. Raghuvir Bhandari* 58 Group Finance Advisor – B.A., ACA 2,341,733 01-07-2008 36 Electrosteel CastingsStrategic Planning CellLtd.17 Mr. Rajdeep Khullar 47 Head - Legal B.Com., LLB 3,959,321 02-02-1998 25 The Right Address Ltd.18 Dr. Ratiranjan Mandal 59 CEO - Advisory Services B.Tech., M.Tech., 13,715,573 12-11-2007 33 Govt. of IndiaPh.D., PG in(Planning Commission)Project Mgmt.19 Mr. S. Balasubramanian* 52 Senior Vice President - B.Com., ICWA, 3,131,683 01-07-2008 31 Infrastructure DevelopmentCore (IPF) CAIIB (Part I) Finance Co. Ltd.20 Mr. Sandip Ghosh* 46 Head - Infrastructure Project B.E. (Mech), 1,902,133 01-07-2008 22 Quippo InfrastructureDevelopment (Mining) MBA Equipment Ltd.21 Mr. Sanjay Agarwal* 42 Vice President – B.E. (Civil), MBA 2,131,971 02-06-2008 16 Mahindra WorldAdvisory Services (Int Bus & Fin) City Developers Ltd.22 Mr. Sanjeev Sancheti 42 Chief Financial Officer B.Com. (H), 4,065,586 14-11-2007 18 Tebma Shipyards Ltd.ACA, AICWA23 Mr. Shashi Bhushan 53 Head - Treasury B.Sc. (H), 2,783,455 03-12-1999 30 IDBI Bank Ltd.TiwariLLB, DBM24 Mr. Shyamalendu 63 Wholetime Director B.A. (H) 4,557,467 16-05-2007 41 Axis Bank Ltd.Chatterjee #(Formerly, UTI Bank Ltd.)* denotes that the person was in employment for part of the year, # denotes that the person retired / resigned on 31st March, 2009.Notes:1. The aforesaid appointment is contractual and terminable by giving three / six months notice by either side.2. Remuneration includes basic salary, commission, LTA, medical, leave encashment, employer's contribution to provident fund, incentivesand other perquisites.3. Mr. Hemant Kanoria is related to Mr. Sunil Kanoria, a Director of the Company.4. None of the employees hold 2% or more of the paid-up Share Capital of the Company.86of Employmentin years

Annual Report 2008-09CERTIFICATE BY CHIEF EXECUTIVE OFFICER (CEO)AND CHIEF FINANCIAL OFFICER (CFO)The Board of Directors 12th June, 2009Srei Infrastructure Finance Limited‘Vishwakarma’, 86C Topsia Road (South)Kolkata – 700046We, Hemant Kanoria, Chairman & Managing Director (CEO) andSanjeev Sancheti, Chief Financial Officer (CFO) of Srei InfrastructureFinance Limited both certify to the Board that we have reviewed thefinancial statements of the Company for the twelve months ended31st March, 2009 and to the best of our knowledge and belief, wecertify that –1. The Statements do not contain any materially untrue statement oromit any material fact or contain statements that might bemisleading; that the Statements together present a true and fairview of the Company’s affairs and are in compliance with existingaccounting standards, applicable laws and regulations.2. There are no fraudulent or illegal transactions.3. For the purposes of financial reporting, we accept theresponsibility for establishing and maintaining the internal controlswhich are monitored by the Company’s Internal Audit Team andhave evaluated based on feedbacks received from theCompany’s Internal Audit Team, the effectiveness of the internalcontrol systems of the Company pertaining to financial reportingand have reported to the Auditors and the Audit Committee, thedeficiencies, if any, in the operation and design of such internalcontrols.4. We have indicated to the Auditors and the Audit Committee:(i)significant changes, if any in the internal controls overfinancial reporting during the year;(ii) significant changes, if any in accounting policies made duringthe year and the same have been disclosed in the notes to thefinancial statements; and(iii) instances of significant fraud of which we have become awareand the involvement therein, if any of the management or anemployee having a significant role in the Company’s internalcontrol system over financial reporting.Hemant KanoriaChairman & Managing Director (CEO)Sanjeev SanchetiChief Financial Officer (CFO)AUDITORS' CERTIFICATE ONCORPORATE GOVERNANCEToThe Members,Srei Infrastructure Finance LimitedWe have examined the compliance of conditions of CorporateGovernance by Srei Infrastructure Finance Limited for the year ended31st March, 2009 as stipulated in Clause 49 of the Listing Agreementsof the said Company with stock exchanges.The compliance of conditions of Corporate Governance is theresponsibility of the Management. Our examination was limited toprocedures and implementation thereof, adopted by the Company forensuring the compliance of the conditions of the CorporateGovernance. It is neither an audit nor expression of opinion on theFinancial Statements of the Company.In our opinion and to the best of our information and according to theexplanations given to us, we certify that the Company has compliedwith the conditions of Corporate Governance as stipulated in theabove mentioned Listing Agreement.We further state that such compliance is neither an assurance as tothe future viability of the Company nor the efficiency with which theManagement has conducted the affairs of the Company.For Deloitte Haskins & SellsChartered AccountantsAbhijit BandyopadhyayPlace : KolkataPartnerDated : 12th June, 2009 Membership No. 05478587

REPORT ONCORPORATE GOVERNANCECorporate Governance is the combination of voluntary practices andcompliance with laws and regulations leading to effective control andmanagement of the organisation. Good Corporate Governance leadsto long term shareholder value and enhances interest of otherstakeholders.Srei believes in adopting and adhering to the best CorporateGovernance practices and continuously benchmarking itself againsteach such practice in the industry. Srei understands and respects itsfiduciary and trusteeship role and responsibility to its stakeholders andstrives hard to meet their expectations.The Company’s Equity shares are presently listed on three StockExchanges in India and the Global Depository Receipts (GDRs) arelisted on London Stock Exchange. Srei has complied in all material88

Annual Report 2008-09respects with the features of CorporateGovernance Code as per Clause 49 ofthe Listing Agreement with the domesticStock Exchanges. In accordance withClause 49 of the Listing Agreement withthe domestic Stock Exchanges, thedetails of compliances by the Companyfor the year ended 31st March, 2009 areas under:A. MANDATORYREQUIREMENTS1. Company’s philosophy onCode of GovernanceThe Company has endeavoured tobenchmark itself against globalstandards in all areas, includingCorporate Governance. GoodCorporate Governance implies optimumutilisation of the resources and ethicalbehaviour of the enterprise to enhancethe shareholders’ value withstrong emphasis on transparency,accountability and integrity, which arethe primary objectives of Srei.2. Board of DirectorsCompositionThe Board has strength of 11 (Eleven)Directors as on 31st March, 2009. TheBoard comprises of Executive,Non-Executive and IndependentDirectors. One director is Non-ExecutiveDirector, four Directors are ExecutiveDirectors (including the Chairman) andsix Directors are Non-Executive andIndependent Directors.None of the Directors on the Board is amember of more than 10 committeesand Chairman of more than5 committees across all companies inwhich he is a Director. All the Directorshave made necessary disclosuresregarding committee positions occupiedby them in other companies.The Composition of the Board ofDirectors as on 31st March, 2009 is inconformity with the provisions of Clause49 of the Listing Agreement. The detailsof the Board of Directors as on31st March, 2009 are as under:Sl. No.Directors1. Mr. Salil K. Gupta (Chief Mentor) Non-Executive & Independent2. Mr. Hemant Kanoria (Chairman)* Chairman & Managing Director3. Mr. Sunil Kanoria (Vice Chairman)** Non-Executive4. Mr. V. H. Pandya Non-Executive & Independent5. Mr. S. Rajagopal Non-Executive & Independent6. Mr. Daljit Mirchandani*** Non-Executive & Independent7. Mr. Somabrata Mandal*** Non-Executive & Independent8. Mr. Saud Siddique Non-Executive & Independent9. Mr. P. K. Pandey$ Wholetime Director10. Mr. K. K. Mohanty Wholetime Director11. Mr. S. Chatterjee₤ Wholetime Director12. Mr. M. S. Verma# Non-Executive & Independent13. Mr. B. Swaminathan@ Nominee Director of IREDA14. Mr. R. Sankaran# Non-Executive & Independent* Appointed as Chairman w.e.f. 14th May, 2008** Appointed as Vice Chairman w.e.f. 20th September, 2008*** Appointed w.e.f. 14th May, 2008# Resigned w.e.f. 14th May, 2008@ Rescission of Nomination w.e.f. 23rd September, 2008$ Retired w.e.f. close of business hours on 31st March, 2009₤ Resigned w.e.f. close of business hours on 31st March, 200989

Mr. Hemant Kanoria, Mr. P. K. Pandeyand Mr. K. K. Mohanty hold234,296, 20,000 and 112,000 Equityshares in the Company respectively ason 31st March, 2009. None of the otherdirectors hold any Equity shares in theCompany.All the Independent Directors of theCompany furnish a declaration at thetime of their appointment as alsoannually that they qualify the tests oftheir being independent as laid downunder Clause 49. All such declarationsare placed before the Board.Except Mr. Hemant Kanoria andMr. Sunil Kanoria, no Director of theCompany is related to any other Directoron the Board.Attendance of each Director at Board meetings and at the last AGMSeven Board meetings were held during the year 2008-2009Directors No. of Board meetings attended Attendance at the last AGM held on 20th September, 2008Mr. Salil K. Gupta 7 YesMr. Hemant Kanoria 7 YesMr. Sunil Kanoria 7 YesMr. V. H. Pandya 6 YesMr. S. Rajagopal 7 YesMr. Daljit Mirchandani* 2 YesMr. Somabrata Mandal* 2 NoMr. Saud Siddique 5 YesMr. P. K. Pandey$ 6 YesMr. K. K. Mohanty 4 YesMr. S. Chatterjee₤ 5 YesMr. M. S. Verma** 2 N.A.Mr. B. Swaminathan@ 2 NoMr. R. Sankaran** 1 N.A.* Appointed w.e.f. 14th May, 2008** Resigned w.e.f. 14th May, 2008@ Rescission of Nomination w.e.f. 23rd September, 2008$ Retired w.e.f. close of business hours on 31st March, 2009₤ Resigned w.e.f. close of business hours on 31st March, 200990

Annual Report 2008-09Number of other companies or committees in which the Director is a Director / ChairmanDirectors No. of other Indian Public No. of Committees (other thanLimited Companies in which Director Srei Infrastructure Finance Limited) in which MemberMr. Salil K. Gupta 1* 1Mr. Hemant Kanoria 9* 1Mr. Sunil Kanoria 6* 2 (Chairman - 1)Mr. V. H. Pandya 4* 2 (Chairman - 2)Mr. S. Rajagopal 9* 10 (Chairman - 4)Mr. Daljit Mirchandani# 4* 4 (Chairman - 3)Mr. Somabrata Mandal# 1* NilMr. Saud Siddique Nil NilMr. P. K. Pandey$ 2* 1Mr. K. K. Mohanty 7* NilMr. S. Chatterjee₤ Nil Nil* In addition, (a) Mr. Salil K. Gupta is a Director of two Private Limited Companies; (b) Mr. Hemant Kanoria is a Director of three PrivateLimited Companies and two overseas companies; (c) Mr. Sunil Kanoria is a Director of three Private Limited Companies and oneoverseas company; (d) Mr. V. H. Pandya is a Director of one Private Limited Company; (e) Mr. S. Rajagopal is a Director of threePrivate Limited Companies; (f) Mr. Daljit Mirchandani is a Director of one Private Limited Company; (g) Mr. Somabrata Mandal is aDirector of six Private Limited Companies; (h) Mr. P. K. Pandey is a Director of one overseas company; and (i) Mr. K. K. Mohanty is athe Director of three Private Limited Companies.# Appointed w.e.f. 14th May, 2008$ Retired w.e.f. close of business hours on 31st March, 2009₤ Resigned w.e.f. close of business hours on 31st March, 2009Number of Board meetings held andthe dates on which heldSeven Board meetings were heldduring the year 2008-2009 on2nd April, 2008, 14th May, 2008,16th June, 2008, 30th July, 2008,20th September, 2008, 30th October,2008 and 29th January, 2009. Themaximum time gap between any twoconsecutive meetings did not exceedfour months.3. Audit CommitteeTerms of Reference, Composition,Name of Members and the ChairmanThe Audit Committee comprises ofMr. Salil K. Gupta, Mr. V. H. Pandya,Mr. S. Rajagopal, Mr. Saud Siddique,Independent & Non-ExecutiveDirectors, Mr. Sunil Kanoria,Non-Executive Director and Mr. P. K.Pandey, Wholetime Director, as on31st March, 2009. Mr. Salil K. Gupta,Chief Mentor & Director of the Companyis the Chairman of the Audit Committee.All the members of the Audit Committeeare financially literate. The Head ofInternal Audit Department and the ChiefFinancial Officer attends the meetingsof the Audit Committee and theCompany Secretary acts as theSecretary to the Audit Committee. TheCommittee also invites seniorexecutives, as it considers appropriateto be present at the meetings of theCommittee. The Terms of Reference ofthis Committee includes ensuringproper disclosures in the financialstatements, recommending reappointmentof statutory auditors andfixation of their remuneration, reviewingannual financial statements beforesubmission to the Board, reviewingadequacy of internal control systemsand other matters specified for Audit91

Committee in Section 292A of the Companies Act, 1956 and under the Listing Agreements. The Chairman of the AuditCommittee was present at the last Annual General Meeting of the Company to answer shareholder queries.Meetings and attendance during the yearFive meetings of the Audit Committee were held during the year 2008-2009 on 2nd April, 2008, 16th June, 2008, 30th July, 2008,30th October, 2008 and 29th January, 2009. The attendance of each member of the Committee is given below:MembersNo. of Meetings attendedMr. Salil K. Gupta 5Mr. Sunil Kanoria 5Mr. V. H. Pandya 4Mr. S. Rajagopal 5Mr. Saud Siddique* 3Mr. P. K. Pandey 3Mr. B. Swaminathan# 1* Appointed as member w.e.f. 16th June, 2008 # Resigned as member w.e.f. 16th June, 20084. Remuneration of DirectorsDetails of remuneration paid/payable to Directors for the year ended 31st March, 2009 are as follows: (Amount in Rupees)Directors Sitting Fees* Salary & Perquisites Commission TotalMr. Salil K. Gupta (Chief Mentor) 272,500 - 1,000,000 1,272,500Mr. Hemant Kanoria (Chairman & Managing Director) N.A. 10,325,876 3,600,000 13,925,876Mr. Sunil Kanoria (Vice Chairman) 267,500 - 400,000 667,500Mr. V. H. Pandya 90,000 - 400,000 490,000Mr. S. Rajagopal 107,500 - 400,000 507,500Mr. Daljit Mirchandani** 20,000 - 1,000,000 1,020,000Mr. Somabrata Mandal** 20,000 - 300,000 320,000Mr. Saud Siddique 72,500 - - 72,500Mr. P. K. Pandey (Wholetime Director)$ N.A. 4,688,000 - 4,688,000Mr. K. K. Mohanty (Wholetime Director) N.A. 6,538,667 - 6,538,667Mr. S. Chatterjee (Wholetime Director)₤ N.A. 4,557,467 - 4,557,467Mr. M. S. Verma*** 20,000 - - 20,000Mr. B. Swaminathan@ 27,500 - - 27,500Mr. R. Sankaran*** 10,000 - - 10,000* includes sitting fees paid for various Board Committee meetings** Appointed w.e.f. 14th May, 2008*** Resigned w.e.f. 14th May, 2008@ Rescission of Nomination w.e.f. 23rd September, 2008$ Retired w.e.f. close of business hours on 31st March, 2009₤ Resigned w.e.f. close of business hours on 31st March, 200992

Annual Report 2008-09The appointment of the ManagingDirector and Wholetime Directors isgoverned by the resolutions passed bythe Board of Directors and theShareholders of the Company, whichcovers the terms and conditions of suchappointment. Payment of remunerationto the Managing Director andWholetime Directors is governed by therespective agreements executedbetween them and the Company.Presently, the agreement with theManaging Director and WholetimeDirectors is entered into by theCompany for a period of 3 years.The Non-Executive Directors arepaid remuneration by way of SittingFees for each meeting of the Board orany Committee thereof attended bythem. However, the members of theCompany at their meeting held on20th September, 2008, as well as theCentral Government vide its letter dated5th June, 2009 have approved paymentof commission to Non-ExecutiveDirectors of the Company annually foreach of the three financial years of theCompany commencing from financialyear 2008-09, up to a maximum limit ofRs. 35 lakh payable in one financialyear to be divided amongstNon-Executive Directors in suchmanner as may be decided by theBoard from time to time. No pecuniarytransactions have been entered into bythe Company with any of theNon-Executive Directors of theCompany, save and except thepayment of sitting fees and commissionto them. The remuneration by way ofcommission to the Non-ExecutiveDirectors is decided by the Board ofDirectors and distributed to them basedon their attendance and contribution atthe Board and certain Committeemeetings as well as time spent onoperational matters other than at themeetings.5. Code of Conduct for Directorsand Senior ManagementA Code of Conduct as applicable to theDirectors and Members of the SeniorManagement has been approved by theBoard. The said Code has also beendisplayed on the Company’s websitewww.srei.com. The Board membersand Senior Management have affirmedtheir compliance with the Code and adeclaration signed by the Chairman &Managing Director (CEO in terms ofClause 49) is given below:It is hereby declared that the Companyhas obtained from all members of theBoard and Senior Managementaffirmation that they have complied withthe Code of Conduct for the year2008-09.sd/-Hemant KanoriaChairman & Managing Director6. Share Transfer and Investors’Grievance Committee Details of the members, ComplianceOfficer and Number of ComplaintsreceivedTo expedite the process of sharetransfers, the Board of the Companyhas delegated the power of sharetransfers to the Share Transfer andInvestors’ Grievance Committee. TheShare Transfer and Investors’Grievance Committee meets at leastonce in a fortnight to approve sharetransfer and other matters. TheCommittee comprises Mr. Salil K.Gupta, Chief Mentor & Director of theCompany, Mr. Hemant Kanoria,Chairman & Managing Director of theCompany, and Mr. Sunil Kanoria, ViceChairman & Non-Executive Director.Mr. Salil K. Gupta, Chief Mentor &Director of the Company is theChairman of the Share Transfer andInvestors’ Grievance Committee.During the year 2008-2009, the ShareTransfer and Investors’ GrievanceCommittee met 26 times. Mr. SandeepLakhotia, Company Secretary is theCompliance Officer of the Companyand assigned with the responsibilities ofoverseeing investor grievances.Total number of shares physicallytransferred during the year 2008-2009was 13,637 compared to 53,978 duringthe year 2007-2008.During the financial year ended31st March, 2009, the Companyreceived 24 complaints from theshareholders and none of the93

complaints received were pending ason that date.7. General Body MeetingsDetails of the location of the lastthree AGMs and the details of theresolutions passedThe date, time and venue of the lastthree AGMs of the Company have beenprovided in the section on Shareholders’Information in the Annual Report. All theresolutions set out in the respectivenotices were passed by theShareholders.No special resolution requiring a postalballot was placed before the last AnnualGeneral Meeting of the Company heldon 20th September, 2008.Similarly, no special resolution requiringa postal ballot is being proposed at theensuing Annual General Meeting of theCompany.8. DisclosuresDisclosures on materially significantrelated party transactions i.e. transactionsof the Company of material nature, withits promoters, the Directors or themanagement, their subsidiaries orrelatives etc. that may have potentialconflict with the interests of Company atlargeNo transaction of material nature hasbeen entered into by the Company withits Directors or management and theirrelatives, etc. that may have a potentialconflict with the interests of theCompany. The Register of Contractscontaining transactions, in whichDirectors are interested, is placedbefore the Board regularly.Transactions effected with the relatedparties are disclosed in Note No. 25 ofSchedule 19 to the Accounts in theAnnual Report, in accordance with therequirements of Accounting StandardAS 18 issued by The Institute ofChartered Accountants of India.Details of non-compliance by theCompany, penalties, strictures imposedon the Company by Stock Exchange orSEBI or any statutory authority, on anymatter related to capital markets, duringthe last three yearsDuring the last three years, there wereno strictures or penalties imposed byeither Stock Exchanges or SEBI or anystatutory authority for non-complianceof any matter related to the capitalmarkets.Based on an inspection of the books ofaccounts and other records of theCompany pursuant to Section 209A ofthe Companies Act, 1956, the RegionalDirector (Eastern Region) (RD), Ministryof Corporate Affairs, Government ofIndia, Kolkata had sent a PreliminaryFinding Report to the Companyobserving violation of various provisionsof the Companies Act, 1956. TheCompany had thereafter submitted itsexplanations to the aforesaidobservations. However, the Registrar ofCompanies, West Bengal (ROC) issueda notice to launch prosecutionproceedings against the Company and/ or its directors and officers in defaultalleging violation of provisions of theCompanies Act, 1956 and also advisedthem to file application seeking tocompound the alleged offences, if theydesire to do so. The Directors andCompany Secretary of the Companythereafter filed a petition before theHon’ble High Court at Calcutta seekingrelief under Section 633 of theCompanies Act, 1956 and the Hon’bleJustice was pleased to grant an interimorder restraining the RD and ROC frominstituting or causing to be instituted anyproceedings till further Order by theHon’ble High Court at Calcutta in thisregard. The interim Order remains inforce till date.Srei Code of Conduct for Preventionof Insider TradingIn accordance with the Securities andExchange Board of India (Prohibition ofInsider Trading) Regulations, 1992, theBoard of Directors of the Company hasformulated ‘Srei Code of Conduct forPrevention of Insider Trading’ (SreiCode) in the shares and securities ofthe Company by its Directors anddesignated employees. In order toincorporate the various modificationscarried out in the Insider TradingRegulations by SEBI from time to time,the Board of Directors of the Companyhas adopted a revised ‘Srei Code ofConduct for Prevention of InsiderTrading (Srei Code)’ w.e.f.29th January, 2009.Mr. Sandeep Lakhotia, CompanySecretary is the Compliance Officer formonitoring adherence to the regulations94

Annual Report 2008-09for the preservation of price sensitiveinformation, pre-clearance of trades andimplementation of the Code of Conductfor the prevention of Insider Trading.9. Means of CommunicationThe Company regularly interacts withthe shareholders through the multiplechannels of communication such aspublication of results, Annual Report,press releases and the Company’swebsite. The Company also informs theStock Exchanges in a prompt manner,all price sensitive and all such othermatters which in its opinion, are materialand relevant for the shareholders.Half-yearly report sent to each household ofshareholdersQuarterly resultsNewspapers in which results are normallypublishedAny website, where displayedWhether it also displays official newsreleasesThe presentations made to institutionalinvestors or to the analystsWhether MD & A is a part of Annual Reportor notSince half-yearly and annual results of the Company are published inprominent English newspaper, having a wide circulation, and prominentBengali newspaper (having circulation in Kolkata) and regularly put onCompany’s website, these are not sent individually to the shareholders ofthe Company. There is no declaration / publication of second half-yearlyresults as the audited annual results are taken on record by the Board andthen communicated to the shareholders through the Annual Report.The Quarterly results of the Company are published in prominent Newspapershaving wide circulation and regularly put on Company’s website.Business Standard and Sambad Pratidin.Pursuant to Clause 51 of the Listing Agreement, all data related to quarterlyfinancial results shareholding pattern, etc. are hosted on the ElectronicData Information Filing and Retrieval (EDIFAR) website maintained bySEBI in association with the National Informatics Centre, within the timeframe prescribed in this regard.Yes, at the Company’s website www.srei.com.YesYesYes10. General Shareholders’ InformationA section on Shareholders’ Information is separately provided in the Annual Report.B. NON-MANDATORY REQUIREMENTSa) Chairman of the BoardWhether Non-executive Chairman is entitled to maintain aChairman’s office at the Company’s expense and also allowedreimbursement of expenses incurred in performance of his dutiesNot Applicable, as the Company has an ExecutiveChairman.95

) Independent DirectorsIndependent Directors may have a tenure not exceeding, in theaggregate, a period of nine years, on the Board of the Companyc) Remuneration Committeed) Shareholder rightsA half-yearly declaration of financial performance includingsummary of the significant events in last six-months, may be sentto each household of shareholderse) Audit qualificationsCompany may move towards a regime of unqualified financialstatementsf) Training of Board MembersA Company may train its Board members in the business model ofthe Company as well as the risk profile of the business parametersof the Company, their responsibilities as directors and the bestways to discharge themg) Mechanism for evaluating Non-Executive BoardMembersThe performance evaluation of Non-Executive Directors could bedone by a peer group comprising the entire Board of Directors,excluding the Director being evaluated; and Peer Group evaluationcould be the mechanism to determine whether to extend / continuethe terms of appointment of Non-Executive Directorsh) Whistle Blower PolicyNot adopted.No, but the Company already has a CompensationCommittee of the Board in place and the samecomprises of majority of Non-Executive Directors; theChairman of the Committee being an IndependentDirector. One meeting of the Compensation Committeewas held during the year 2008-2009 on 28th January,2009. The Chairman of Compensation Committee waspresent at the last Annual General Meeting of theCompany to answer shareholder queries.Since half-yearly and annual results of the Company arepublished in a leading English newspaper having a widecirculation and a Bengali newspaper (having circulationin Kolkata) and regularly put on Company’s website,these are not sent individually to the shareholders of theCompany. There is no declaration / publication of secondhalf yearly results as the audited annual results are takenon record by the Board and then communicated to theshareholders through the Annual Report.Presently not applicable to the Company.Presently the Company does not have such a trainingprogramme.Presently the Company does not have such amechanism as contemplated for evaluating theperformance of Non-Executive Directors.Not adopted.96

Annual Report 2008-09SHAREHOLDERS’ INFORMATION1. Annual General Meetinga. Date and timeb. VenueSaturday, the 12th September, 2009 at 10.30 a.m.Science City Mini Auditorium, JBS Haldane Avenue, Kolkata – 7000462. Financial Calendar (Tentative)a. Financial reporting for 2009-2010Quarter ending 30th June, 2009Quarter / half year ending30th September, 2009Quarter ending 31st December, 2009Year ending 31st March, 2010b. Annual General Meeting for the yearending on 31st March, 20103. Book Closure Date4. Date for payment of Dividend5. Listing on Stock ExchangesJuly, 2009October, 2009January, 2010May / June, 2010August / September, 2010Friday, 28th August, 2009 to Saturday, 5th September, 2009 (both days inclusive)On or after 14th September, 2009The Equity Shares and other Securities of the Company are presently listedon the following Stock Exchanges:a. The Calcutta Stock Exchange Association Limited, 7 Lyons Range,Kolkata - 700 001b. The Stock Exchange, Mumbai, Phiroze Jeejeebhoy Towers, Dalal Street,Mumbai - 400 001c. The National Stock Exchange of India Limited, Exchange Plaza, 5th Floor,Plot no. C/1, G Block, Bandra - Kurla Complex, Bandra (E),Mumbai - 400 051The Global Depository Receipts (GDRs) issued by the Company are listedand admitted to trading on London Stock Exchange w.e.f. 21st April, 2005.The Debt securities of the Company are listed on the Wholesale Debt Market(WDM) Segment of The Stock Exchange, Mumbai (BSE).6. Listing FeesListing fees for 2009-2010 have been paid to all the abovementioned domesticand overseas Stock Exchanges as per the Listing Agreement.The Company has paid custodial fees for the year 2009-2010 to the NationalSecurities Depository Limited (NSDL) and Central Depository Services (India)Limited (CDSL) on the basis of number of beneficial accounts maintained bythem as on 31st March, 2009.97

7. ISIN Numbers8. Stock Codes(Equity Shares &GDRs)Equity Shares - INE872A01014Unsecured Subordinated Bonds - INE872A10015Global Depository Receipts (GDRs) - US78465V2043Equity sharesCSE - 29051, BSE - 523756 and NSE - SREINTFINGlobal Depository Receipts (GDRs)London Stock Exchange - SRI9. Stock Market DataMonth National Stock Exchange (NSE) The Stock Exchange,Mumbai (BSE)High Low High LowRs. Rs. Rs. Rs.April, 2008 157.40 125.10 156.20 126.00May, 2008 173.00 141.00 173.00 139.00June, 2008 155.00 79.55 154.70 79.50July, 2008 120.00 81.65 118.10 80.15August, 2008 129.00 104.00 130.00 104.70September, 2008 129.00 56.00 117.00 55.00October, 2008 64.00 41.60 64.30 41.50November, 2008 62.45 35.85 61.40 38.65December, 2008 51.50 35.00 51.75 35.00January, 2009 57.00 33.10 56.95 32.80February, 2009 48.15 28.00 46.90 28.90March, 2009 33.40 22.05 34.50 22.3020020000Performance in comparison to17500BSE Sensex (monthly high)Srei Infra Price (Rs.)150100501500012500100007500BSE SensexSrei Infra Price (Rs.)BSE Sensex0AprilMayJuneJulyAugSeptOctNovDecJanFebMar5000Months98

Annual Report 2008-0910. Registered Officea. Addressb. Telephone No.c. Facsimile Nos.d. Websitee. Email“Vishwakarma”, 86C Topsia Road (South), Kolkata - 70004691 - 33 - 3988 773491 - 33 - 2285 7542 / 8501www.srei.comcorporate@srei.com11. Registrar andShare TransferAgent’s detailsa. Name & Addressb. Telephone Nos.c. Facsimile No.d. Email12. Financial yearMaheshwari Datamatics Private Limited, 6 Mangoe Lane, 2nd Floor, Kolkata - 70000191 - 33 - 2243 5029 / 5809, 2248 224891 - 33 - 2248 4787mdpl@cal.vsnl.net.in1st April to 31st March13. Particulars ofPast three AGMsAGM Year Venue Date Time23rd* 2007/08 ‘Science City Mini Auditorium’, 20/09/2008 (Saturday) 10.30 a.m.JBS Haldane Avenue, Kolkata - 70004622nd** 2006/07 ‘Science City Mini Auditorium’, 25/09/2007 (Tuesday) 10.30 a.m.JBS Haldane Avenue, Kolkata - 70004621st*** 2005/06 ‘Science City Mini Auditorium’, 19/08/2006 (Saturday) 10.30 a.m.JBS Haldane Avenue, Kolkata - 700046* Three special resolutions were passed:To approve holding of an office or place of profit by Mr. Hemant Kanoria, Chairman &Managing Director of the Company in Srei Sahaj e-Village Limited, subsidiary of theCompany.To approve holding of an office or place of profit by Mr. Salil K. Gupta, Chief Mentor &Director of the Company in Srei Sahaj e-Village Limited, subsidiary of the Company.To approve payment of commission to Non-executive Directors of the Company annuallyfor each of the three financial years of the Company commencing from Financial Year2008-2009.** One special resolution was passed:To approve holding of an office or place of profit by Mr. K. K. Mohanty, Wholetime Director99

of the Company in Srei Insurance Broking Private Limited (formerly Srei InsuranceServices Limited), erstwhile subsidiary of the Company.*** One special resolution was passed:To approve holding of an office or place of profit by Mr. S. Rajagopal, Independent &Non-Executive Director of the Company in Srei Venture Capital Limited, subsidiary of theCompany.14. Distribution ofShareholding ason 31st March,2009No. of Shares No. of Shareholders No. of SharesTotal % Total %Up to 500 32093 87.76 4662696 4.01501 to 1,000 2281 6.24 1897334 1.631,001 to 2,000 1034 2.83 1624531 1.402,001 to 3,000 321 0.88 827035 0.713,001 to 4,000 160 0.44 577788 0.504,001 to 5,000 176 0.48 842194 0.735,001 to 10,000 233 0.64 1690315 1.4610,001 and above 268 0.73 104022905 89.56Total 36566 100.00 116144798 100.0015. Dividend History(Last 5 Years)16. Categories ofShareholders ason 31st March,2009Financial Year ended Dividend Per Share (Rs.) Total Dividend* (Rs. in Lakh)31.03.2008 1.20 1,631.0031.03.2007 1.00 1,274.0031.03.2006 1.65 2,050.0031.03.2005 1.50 1,335.6531.03.2004 1.50 903.00*inclusive of dividend distribution taxCategory No. of Shares held Percentage ofShareholdingPromoters (including promoters group) 34871985 30.02Foreign Institutional Investors (FIIs) 46686290 40.20Banks, Mutual Funds & Institutional Investors 6026170 5.19Public- Private Corporate Bodies 10652424 9.17- Indian Public 16421450 14.14NRIs 438883 0.38Shares underlying Global Depository Receipts 1047596 0.90Grand Total 116144798 100.00100

Annual Report 2008-0917. Equity ShareCapital HistoryThe Paid up Capital of the Company consists of 11,61,44,798 Equity shares of Rs. 10/- eachfully paid up and allotted as under:Date of Allotment No. of Shares Issue Price (Rs. per Share)30.03.1985 2742 1027.06.1986 31600 1024.05.1987 16000 1013.12.1988 5000 1030.05.1990 608558 1020.04.1991 256100 1031.08.1992 3220000 1013.01.1994 4140000 2013.11.1997 45454545 2205.09.1998 27688 1501.06.1999 5500 1018.04.2005 34594000 44.3822.11.2005 21050056 3320.02.2006 3556 3713.05.2006 880 3919.02.2007 200 2811.05.2007 400 2908.11.2007 800 4131.03.2008 7200000 100Total 116617625Less: Shares forfeited on 14.03.2000 472827Total shares as on date 11614479818. Credit Ratings Agency CARE FITCH ICRASecured NCDs / Bonds CARE AA (Rs. 250 crore)Fixed Deposits CARE AA (FD) (Rs. 25 crore) MAA-Short-term Debt Instruments PR1+ F1+(ind) A 1 +(upto Rs. 250 crore) (Rs. 200 crore) (Rs. 600 crore)Unsecured Subordinated CARE AA- LA+Bonds / Debts (Rs. 50 crore) (Rs. 50 crore)National Long-term RatingAA-(ind)101

19. Measures adoptedto protect theinterests of theShareholdersa. Share TransferProcessingb. Bad Deliveryc. Redressal ofGrievancesd. Prevention ofFraudulent Transferse. Dematerialisation ofSharesRequests for share transfers are cleared and advices mailed within a time period of 30 daysfrom the date of receipt, if the same are found to be valid in all respects. The Share Transferand Investors’ Grievance Committee meets at least once in a fortnight. During the year2008-2009, the Share Transfer and Investors’ Grievance Committee met 26 times. Totalnumber of shares physically transferred during the year 2008-2009 was 13,637 Equityshares. There are no legal cases relating to transfer of shares.In case of Bad Delivery, the relevant documents are sent immediately after specifying thedefects through a covering letter.Necessary system has been put in place in order to attend with promptness any grievancesor queries by the Shareholders. An exclusive email id has also been designated by theCompany for prompt redressal of shareholder grievances. The Shareholders can email theirqueries/grievances to investor.relations@srei.com.A locking provision is in existence whereby, whenever any intimation is received from theshareholders regarding loss of shares or of any legal dispute, the shares are immediatelykept locked so that fraudulent transfer is stalled.Based on a SEBI directive, the Equity shares of the Company are permitted to be traded only indematerialised form and are available for demat under both the Depository Systems in India –National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited(CDSL).As on 31st March, 2009, a total of 107,947,312 Equity shares of the Company representing92.94% of the total Equity Share Capital were held in dematerialised form.The bifurcation of shares held in Physical and Demat form as on 31st March, 2009 is givenbelow –Particulars No. of Shares PercentagePhysical Segment 8197486 7.06Demat SegmentNSDL 93886935 80.84CDSL 14060377 12.10Total 116144798 100.00102

Annual Report 2008-0920. OutstandingGDRs / ADRs /Warrants / anyConvertibleInstruments,conversion dateand likely impacton EquityIn April, 2005, 8,648,500 Global Depository Receipts (GDRs) were issued by the Companythrough book building process at a price of US$4.05 per GDR, each GDR representing fourunderlying Equity shares of the Company. The GDRs are presently listed and traded on theLondon Stock Exchange. As on 31st March, 2009, 1,047,596 Equity shares of the Companyrepresenting 0.90% of the paid up Share Capital of the Company are held as sharesunderlying the GDRs.In October, 2007, the Company issued and allotted 25,000,000 convertible Warrants to theentities belonging to the Promoters’ Group of the Company. Each Warrant is convertibleinto one Equity share of Rs. 10/- each in one or more tranches at a price of Rs. 100/- perEquity share (including premium of Rs. 90/-) within a period of 18 months from date of theallotment. In accordance with relevant Securities and Exchange Board of India (SEBI)Guidelines, the Warrants are locked-in for a period of three years from the date of theirallotment. On 31st March, 2008, 7,200,000 Equity shares were allotted to the Promoters’Group of the Company on exercise of conversion option against Warrants held by them andthe said equity shares are presently under lock-in.The Promoters’ Group of the Company have not exercised any conversion option duringthe financial year 2008-2009 against Warrants held by them. As on 31st March, 2009,17,800,000 warrants remain in issuance.21. Address forShareholders’correspondence22. Transfer ofUnclaimedamounts toInvestorEducation andProtection FundThe Company SecretarySrei Infrastructure Finance Limited‘Vishwakarma’, 86C Topsia Road (South), Kolkata - 700046Email : secretarial@srei.com, investor.relations@srei.comPursuant to Section 205C of the Companies Act, 1956, dividends that are unpaid / unclaimedfor a period of seven years from the date they became due for payment are required to betransferred by the Company to the Investor Education and Protection Fund (IEPF)administered by the Central Government. Given below are the dates of declaration ofdividend and corresponding dates when unpaid/unclaimed dividends are due for transfer toIEPF:Financial YearDate of Declaration of Dividend Due Date of Transfer to IEPF2001-2002 31st August, 2002 6th October, 20092002-2003 30th August, 2003 5th October, 20102003-2004 28th August, 2004 3rd October, 20112004-2005 17th September, 2005 23rd October, 20122005-2006 19th August, 2006 24th September, 20132006-2007 25th September, 2007 31st October, 20142007-2008 20th September, 2008 26th October, 2015The shareholders are regularly advised to claim the unencashed dividends lying in the103

23. Nomination24. ElectronicClearing Service(ECS)25. Secretarial Auditfor Reconciliationof Capital26. ComplianceOfficerunpaid dividend accounts of the Company before the due dates for crediting the same to theInvestor Education and Protection Fund. Separate letters have been sent on31st March, 2009 to the shareholders who are yet to encash the dividend for the financialyear 2001-2002 indicating that the unclaimed amount will be transferred to the InvestorEducation and Protection Fund (IEPF), if not claimed by the shareholders before the duedate of transfer to the said Fund.During the year under review, the Company has credited a sum of Rs. 343,883/- to theInvestor Education and Protection Fund pursuant to Section 205C of the Companies Act,1956 and the Investor Education and Protection Fund (Awareness and Protection ofInvestors) Rules, 2001. Cumulatively, the aggregate dividend amount transferred to the saidFund as on 31st March, 2009 stands at Rs. 1,863,351.79.Individual shareholders holding shares singly or jointly in physical form can nominate aperson in whose name the shares shall be transferable in case of death of the registeredshareholder(s). Nomination facility in respect of shares held in electronic form is alsoavailable with the depository participants as per bye-laws and business rules applicable toNSDL and CDSL. Nomination forms can be obtained from the Company’s Registrar andShare Transfer Agents.SEBI had vide its circular No. DCC/FITTCIR-3/2001 dated October 15, 2001 advised thatall companies should mandatorily use ECS facility, wherever available. In the absence ofECS facility, companies may use warrants for distributing the dividends and vide its CircularNo. D&CC/FITTCIR-04/2001 dated November 13, 2001, SEBI had advised companies tomandatorily print the Bank Account details furnished by the Depositories, on the dividendwarrants. This ensures that the dividend warrants, even if lost or stolen, cannot be used forany purpose other than for depositing the money in the accounts specified on the dividendwarrants and ensures safety for the investors. However, members who wish to receivedividend in an account other than the one specified while opening the Depository Account,may notify their DPs about any change in the Bank Account details.As stipulated by SEBI, a qualified practising Company Secretary carries out secretarial auditto reconcile the total admitted capital with the National Securities Depository Limited (NSDL)and the Central Depository Services (India) Limited (CDSL) and the total issued and listedcapital. This audit is carried out every quarter and the report thereon is submitted to theconcerned Stock Exchanges. The audit confirms that the total Listed and Paid-up Capital isin agreement with the aggregate of the total number of shares in dematerialised form (heldwith NSDL and CDSL) and total number of shares in physical form.Mr. Sandeep LakhotiaCompany Secretary“Vishwakarma”, 86C Topsia Road (South), Kolkata - 700046Tel: 91 - 33 - 3988 7734Fax: 91 - 33 - 2285 7542 / 8501E-mail: secretarial@srei.com, investor.relations@srei.com104

Annual Report 2008-09LIST OF PROMOTERSList of Promoters of the Company forming part of the same ‘Group’ for the purposes of Regulation 3(1)(e)(i) of SEBI(Substantial Acquisition of Shares & Takeovers) Regulations, 1997.Sl. No.Names1. Hemant Kanoria & Family2. Adisri Investment Limited and subsidiaries3. Bharat Connect Limited and subsidiaries4. Adhyatma Commercial Private Limited and subsidiaries5. Hari Prasad Kanoria Family Nidhi6. Hari Prasad Sanjeev Kumar HUF7. Hari Prasad Hemant Kumar HUF8. Sujit Kanoria HUF9. Hemant Kanoria HUF10. Anantraj Kanoria & Family11. Raghavraj Kanoria & Family12. Champa Devi Kanoria & Family13. Sunil Kanoria HUF14. Hari Prasad Kanoria & Family15. Sangita Kanoria & Family16. Divita Kanoria & Family17. Sujit Kanoria & Family18. Madhulika Kanoria & Family19. Sunita Kanoria & Family20. Sunil Kanoria & Family21. Nityashree Kanoria & Family22. Sidhishree Kanoria & Family23. Avanishree Kanoria & Family24. Sanjeev Kanoria HUF25. Sanjeev Kanoria & Family26. Manisha Lohia & Family27. Mukundraj Kanoria & Family28. Vatsalraj Kanoria & Family29. Any Company / entity promoted by any of the aboveFamily for this purpose includes spouse, dependent children and parents.105

106

Annual Report 2008-09Auditors’ ReportTo the Members,Srei Infrastructure Finance LimitedWe have audited the attached Balance Sheet of SreiInfrastructure Finance Limited, as at 31st March, 2009 and theProfit and Loss Account and Cash Flow Statement for the yearended on that date annexed thereto. These financial statementsare the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financialstatements based on our audit.We conducted our audit in accordance with the auditingstandards generally accepted in India. Those standards requirethat we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonablebasis for our opinion.As required by the Companies (Auditor’s Report) Order, 2003issued by the Central Government of India in terms ofsub - section (4A) of Section 227 of the Companies Act, 1956,we enclose in the Annexure a statement on the matters specifiedin paragraphs 4 and 5 of the said Order.Further to our comments in the Annexure referred to above, wereport that:(iv) In our opinion, the Balance Sheet, Profit and LossAccount and Cash Flow Statement dealt with by thisreport comply with the accounting standards referred to insub - section (3C) of Section 211 of the Companies Act,1956;(v) In our opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts give the information required by the CompaniesAct, 1956, in the manner so required and give a true andfair view in conformity with the accounting principlesgenerally accepted in India:(a) in the case of the Balance Sheet, of the state of affairsof the Company as at 31st March, 2009;(b) in the case of the Profit and Loss Account, of the profitfor the year ended on that date; and(c) in the case of the Cash Flow Statement, of the cashflows for the year ended on that date.On the basis of written representations received from thedirectors, as on 31st March, 2009 and taken on record by theBoard of Directors, we report that none of the directors isdisqualified as on 31 March, 2009 from being appointed asdirector in terms of clause (g) of sub - section (1) of Section 274of the Companies Act, 1956.(i)(ii)(iii)We have obtained all the information and explanations,which to the best of our knowledge and belief werenecessary for the purposes of our audit;In our opinion, proper books of account as required bylaw have been kept by the Company so far as appearsfrom our examination of those books;The Balance Sheet, Profit and Loss Account and CashFlow Statement dealt with by this report are in agreementwith the books of account;For Deloitte Haskins & SellsChartered AccountantsAbhijit BandyopadhyayPlace : KolkataPartnerDate : 12th June, 2009 Membership No. 054785107

Annexure to the Auditors’ Report(Referred to in paragraph 3 of our report of even date)The nature of the Company’s business / activities during the yearis such that clauses 4 (viii) and (xiii) are not applicable to theCompany.(i) In respect of its fixed assets:(a) The Company has maintained proper recordsshowing full particulars, including quantitative detailsand situation of fixed assets.(b) All the fixed assets were verified during the year andno material discrepancies were observed as per thereports submitted to us.(c) The fixed assets disposed off during the year, in ouropinion, do not constitute a substantial part of thefixed assets of the Company and such disposal, hasin our opinion, not affected the going concern statusof the Company.(ii) In respect of shares and securities held as stock in trade:(a) As explained to us, stock in trade was physicallyverified during the year by the management atreasonable intervals.(b) In our opinion and according to the information andexplanations given to us, the procedures of physicalverification of stock in trade followed by themanagement were reasonable and adequate inrelation to the size of the company and the nature ofits business.(c) In our opinion and according to the information andexplanations given to us, the Company hasmaintained proper records of stock in trade and nomaterial discrepancies were noticed on physicalverification.(iii) The Company has neither granted nor taken any loans,secured or unsecured to or from companies, firms orother parties covered in the register maintained underSection 301 of the Companies Act, 1956. Accordinglyclauses 4 (iii) (a) to (g) are not applicable to the Company.(iv) In our opinion and according to the information andexplanations given to us, there are adequate internalcontrol procedures commensurate with the size of theCompany and the nature of its business for the purchaseof fixed assets and shares and securities held as stock intrade and for the sale of services. We have not observedany continuing failure to correct major weaknesses insuch internal controls.(v) There were no contracts or arrangements referred to inSection 301 of the Companies Act, 1956, during the yearthat need to have been entered in the register maintained108(vi)(vii)(viii)under that section. Accordingly clauses 4 (v) (a) and (b)are not applicable to the Company.In our opinion and according to the information andexplanations given to us, the Company has complied withthe directives issued by the Reserve Bank of India andthe relevant provisions of Sections 58A, provisions ofSection 58AA or any other relevant provisions of theCompanies Act, 1956 and the Companies (Acceptanceof Deposits) Rules, 1975 with regard to the depositsaccepted from the public.In our opinion, the Company has an adequate internalaudit system commensurate with the size and nature of itsbusiness.In respect of statutory dues:(a) According to the information and explanations givento us, the Company has been generally regular indepositing undisputed statutory dues includingProvident Fund, Investor Education and ProtectionFund, Employees’ State Insurance, Income Tax,Sales Tax, Wealth Tax, Custom Duty, Cess and anyother material statutory dues with the appropriateauthorities during the year.According to the information and explanations givento us, no undisputed amounts payable in respect ofIncome Tax, Wealth Tax, Sales Tax, Customs Duty,Excise Duty, Cess and other material statutory dues,were in arrears, as at 31st March, 2009 for a period ofmore than six months from the date they becamepayable.(b) According to the information and explanations givento us, there are no dues of Income Tax, Sales Tax,Wealth Tax, Service Tax, Custom Duty, Excise Dutyand Cess which have not been paid as on31st March, 2009 on account of any dispute.The Company has challenged constitutional validityof Fringe Benefits Tax before the Hon’ble High Courtat Calcutta and the Hon’ble Court has granted interimstay on levy of such Fringe Benefits Tax on theCompany. In view of this, the Company has notprovided for any liability towards Fringe Benefits Tax.The levy of service tax on hire purchase andleasing transactions introduced with effect from16th July, 2001 has been challenged by TradeAssociations and the Company before the Hon’bleHigh Court at Calcutta and Chennai High Court and astay has been obtained. Pending disposal of writpetitions, the Company is not recognising service taxon the aforesaid transactions.

Annual Report 2008-09(ix)The Company does not have any accumulated losses asthe information and explanations given to us, these termat the end of the year. The Company has not incurredloans availed were prima facie, applied by the Companycash losses during the financial year covered by our auditduring the year for the purposes for which the loans wereand the immediately preceding financial year.obtained, other than temporary deployment pending(x)In our opinion and according to the information andapplication.explanations given to us, the Company has not defaulted(xv)According to the information and explanations given toin the repayment of dues to financial institutions, banksus, and on an overall examination of the balance sheetand debenture holders.of the Company, funds raised on short - term basis have,(xi)In our opinion and according to the information andexplanations given to us, the Company has maintainedprima facie, not been used during the year for long - terminvestment.adequate documents and records in cases where the(xvi)The Company has not made any preferential allotment ofCompany has granted loans and advances on the basisshares to parties and companies covered in the Registerof security by way of pledge of shares, debentures andmaintained under Section 301 of the Companies Act,other securities.1956.(xii)Based on our examination of the records and evaluation(xvii)According to the information and explanations given to usof the related internal controls, the Company hasand the records examined by us, securities / chargesmaintained proper records of transactions and contractshave been created in respect of debentures issued.(xiii)in respect of its dealing in shares, securities, debenturesand other investments and timely entries have been madetherein. The aforesaid securities have been held by theCompany in its own name, except to the extent of theexemption granted under Section 49 of the CompaniesAct, 1956.According to the information and explanations given to(xviii)(xix)The Company has not raised money by public issuesduring the year.To the best of our knowledge and belief and according tothe information and explanations given to us, no fraud onor by the Company was noticed or reported during theyear.us, the terms and conditions of the guarantees given bythe Company for loans taken by others from banks arenot prima facie prejudicial to the interest of the Company.For Deloitte Haskins & SellsChartered AccountantsThe Company has not given any guarantee for loanstaken by others from financial institutions.(xiv)Term loans availed by the Company are deposited incentralised bank accounts from where utilisation is made.To the best of our knowledge and belief and according toAbhijit BandyopadhyayPlace : KolkataPartnerDate : 12th June, 2009 Membership No. 054785109

Balance Sheet as at 31st March, 2009(Rupees in Lakh)Schedule 2009 2008SOURCES OF FUNDSShareholders' FundsShare Capital 1 11,629 11,629Equity Warrants Issued and Subscribed 1,780 1,780Reserves and Surplus 2 56,077 69,486 52,399 65,808Loan FundsSecured 3 115,161 58,778Unsecured 4 19,100 30,641134,261 89,419Total 203,747 155,227APPLICATION OF FUNDSFixed Assets 5Gross Block 8,814 454Less: Depreciation 779 10Net Block 8,035 444Investments 6 48,051 32,818Current Assets, Loans and AdvancesSundry Debtors 7 722 -Cash & Bank Balances 8 29,708 8,421Other Current Assets 9 107 89Loans & Advances 10 121,078 124,434151,615 132,944Less: Current Liabilities and ProvisionsCurrent Liabilities 11 2,260 8,939Provisions 12 1,694 2,0403,954 10,979Net Current Assets 147,661 121,965Miscellaneous Expenditure 13 - -(To the extent not written off or adjusted)Total 203,747 155,227Significant Accounting Policies and Notes toFinancial Statements as per our report of even date 19The Schedules referred to above form an integral part of the Balance Sheet.This is the Balance Sheet referred to in our report of even date.For Deloitte Haskins & SellsChartered AccountantsOn behalf of the Board of DirectorsAbhijit Bandyopadhyay Hemant Kanoria Salil K. Gupta Sandeep LakhotiaPartner Chairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 0910 Lakh is equal to 1 Million110

Annual Report 2008-09Profit and Loss Account for the year ended 31st March, 2009(Rupees in Lakh)Schedule 2009 2008INCOMEIncome from Operations 14 32,227 46,215Other Income 15 416 6,536Total 32,643 52,751EXPENDITUREStaff Expenses 16 1,438 2,561Administrative & Other Expenses 17 5,835 3,127Finance Charges 18 19,393 30,222Depreciation 769 3,612Miscellaneous Expenditure written off - 61Total 27,435 39,583PROFIT BEFORE BAD DEBTS, PROVISIONS AND TAX 5,208 13,168Bad Debts written off 83 -Stock for Trade written off - 347Provisions as per the norms of Reserve Bank of India &Foreign Financial Institutions - 1,371Provision for Premium on Unsecured Subordinated Bonds 88 88Difference Between the Value of Assets and Liabilities transferredPursuant to Scheme of Arrangement - 31171 1,837PROFIT BEFORE TAX 5,037 11,331Provision for Tax:- Current Tax 211 531- Mat credit entitlement (211) -- Income Tax in respect of Earlier Years 1 4PROFIT AFTER TAX 5,036 10,796Surplus brought forward from previous year 12,135 5,396PROFIT AVAILABLE FOR APPROPRIATION 17,171 16,192APPROPRIATIONSSpecial Reserve (As per Reserve Bank of India guidelines) 1,020 2,200Debt Redemption Reserve (Refer Note II 7 of Schedule 19) 2,108 (74)General Reserve - 300Proposed Dividend 1,161 1,394Corporate Dividend Tax on Proposed Dividend 197 237Surplus carried to Balance Sheet 12,685 12,135Total 17,171 16,192Earnings Per Equity Share (Basic & Diluted) Rs. 4.34 9.91(Face Value Rs. 10/- per Share)Significant Accounting Policies and Notes to Financial Statementsas per our report of even date 19For Deloitte Haskins & SellsChartered AccountantsOn behalf of the Board of DirectorsAbhijit Bandyopadhyay Hemant Kanoria Salil K. Gupta Sandeep LakhotiaPartner Chairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 0910 Lakh is equal to 1 Million111

112Cash Flow Statement for the year ended 31st March, 2009(Rupees in Lakh)2009 2008A. Cash Flow from Operating ActivitiesNet Profit Before Tax 5,037 11,331Adjustment for :Depreciation 769 3,612Bad Debts / Stock for trade written off 83 398Provision for Non - Performing Assets - 1,371Provision for Premium on Unsecured Subordinated Bonds 88 88Loss on sale of Fixed Assets (net) - 14Profit on sale of Fixed Assets (354) -Interest Expenses 19,393 30,222Miscellaneous Expenditure Written off - 61Profit on sale of Investments (net) (94) (127)Liabilities No Longer Required Now Written Back - (6,427)Dividend Income (62) (23)Difference Between the Value of Assets and Liabilities Transferred - 31Provision for dimunition in value of Investments 216 -Operating Profit before Working Capital Changes 25,076 40,551Adjustments for:(Increase) / Decrease in Receivables / Others (34,436) (46,326)(Increase) / Decrease in Stock for Trade 30 458(Increase) / Decrease in Financial Assets - (138,831)(Decrease) / Increase in Trade Payables (6,573) 13,056Cash Generated from Operations (15,903) (131,092)Interest Paid (net of foreign exchange fluctuation) (19,660) (31,756)Direct Taxes paid (562) (256)Net Cash (Used in) / Generated from Operating Activities (36,125) (163,104)B. Cash Flow from Investing ActivitiesPurchase of Fixed Assets (8,540) (9,000)Proceeds from Sale of Fixed Assets 534 368Amount received towards transfer of business 37,500 -(Increase) in Investments (13,015) (16,539)(Increase) of Investments in Subsidiary (45) (1,734)Investments in Joint Venture (2,295) -Dividend Received 62 23Net Cash (Used) / Generated in Investing Activities 14,201 (26,882)C. Cash Flow from Financing ActivitiesIssue of Equity Capital (including premium) - 7,200Issue of Equity Warrants (Net) - 1,780Net Increase in Borrowings 44,842 190,551Dividend Paid (1,394) (1,089)Dividend Tax (237) (185)Net Cash (Used) / Generated in Financing Activities 43,211 198,257Net Increase / (Decrease) in Cash & Cash Equivalents 21,287 8,271Cash & Cash Equivalents as on 01.04.2008 8,421 497Less: Cash and Bank balance transferred as per Scheme of Arrangement - 347Cash & Cash Equivalents as on 31.03.09 29,708 8,421Notes:1. The above Cash Flow Statement has been prepared under the Indirect Method as set outin the Accounting Standard 3 (AS 3) 'Cash Flow Statements' notified by the CentralGovernment under Companies (Accounting Standards) Rules, 20062. Cash and Cash Equivalent at the end of the year as per Balance Sheet 29,708 8,421Less: Fixed Deposits under Lien 130 -29,578 8,4213. Previous year's figures have been regrouped, wherever necessary to conform to thecurrent year's classification.This is the Cash Flow Statement referred to in our report of even date.For Deloitte Haskins & SellsOn behalf of the Board of DirectorsChartered AccountantsAbhijit Bandyopadhyay Hemant Kanoria Salil K. Gupta Sandeep LakhotiaPartner Chairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 0910 Lakh is equal to 1 Million

Annual Report 2008-09Schedules to the Balance Sheet as at 31st March, 2009(Rupees in Lakh)2009 2008SCHEDULE 1 - SHARE CAPITALAuthorised400,000,000 Equity Shares of Rs. 10/- each 40,000 40,000(Previous year 400,000,000 shares of Rs. 10/- each)30,000,000 Preference Shares of Rs. 100/- each 30,000 30,000(Previous year 30,000,000 shares of Rs. 100/- each)70,000 70,000Issued and Subscribed116,617,625 Equity Shares of Rs. 10/- each 11,661 11,661(Previous year 116,617,625 shares of Rs. 10/- each)Paid up116,144,798 Equity Shares of Rs. 10/- each fully paid up 11,614 11,614(Previous year 116,144,798 shares of Rs. 10/- each)Add : Forfeited Shares 15 1511,629 11,629(Rupees in Lakh)2009 2008SCHEDULE 2 - RESERVES & SURPLUSCapital Reserves 165 165Securities Premium AccountAs per Last Balance Sheet 29,046 22,566Add: Addition during the year - 29,046 6,480 29,046Other Reserves:General ReserveAs per Last Balance Sheet 1,434 1,174Add: Addition during the year - 3001,434 1,474Less: Adjustments for employee benefits(Net of deferred tax Rs. 20 Lakh) (as on 01-04-2007) - 1,434 40 1,434Bond / Debt Redemption ReserveAs per Last Balance Sheet 2,192 2,266Add: Addition during the year 2,900 2,1415,092 4,407Less: Reversal due to repayment of Bond / Debt 792 4,300 2,215 2,192Special Reserve as per Reserve Bank of India GuidelinesAs per Last Balance Sheet 7,427 5,227Add: Addition during the year 1,020 8,447 2,200 7,427Profit & Loss AccountAs per Last Balance Sheet 12,135 5,396Add: Addition during the year 550 12,685 6,739 12,13556,077 52,39910 Lakh is equal to 1 Million113

Schedules to the Balance Sheet as at 31st March, 2009(Rupees in Lakh)2009 2008SCHEDULE 3 - SECURED LOANSTerm Loans:Domestic Banks 30,000 -(Refer Note II 5.2 of Schedule 19)Foreign Banks 50,720 40,020(Refer Note II 5.1 of Schedule 19)Foreign Financial Institutions 21,556 18,009(Refer Note II 5.1 of Schedule 19)Working Capital Facilities from Banks 12,432 -(Refer Note II 5.3 of Schedule 19)Public Deposits 453 749(Refer Note II 5.4 of Schedule 19)115,161 58,778SCHEDULE 4 - UNSECURED LOANSSubordinated Bonds 7,896 8,686(Refer Note II 4 of Schedule 19)Short Term Loans and Advances:(Refer Note II 5.6 of Schedule 19)Domestic Banks 10,000 -Others 1,204 21,95519,100 30,641SCHEDULE 5 - FIXED ASSETS(Rupees in Lakh)Particulars Gross Block Depreciation / Amortisation Net BlockAs of Additions Sales / As of As of For Sales / As of 31st As of 31st As of 31st1st April, during Adjustments 31st March, 1st April, the year Adjustments March, March, March,2008 the year during 2009 2008 during 2009 2009 2008the yearthe yearAssets for Own use:Freehold Land 404 - 180 224 - - - - 224 404Buildings 49 - - 49 10 -# - 10 39 39Furniture & Fixtures - 19 - 19 - 2 - 2 17 -Machinery 1 42 - 43 - 4 - 4 39 1Total (A) 454 61 180 335 10 6 - 16 319 444Intangible Assets - OthersSoftware - 5 - 5 - -# - - 5 -Total (B) - 5 - 5 - - - - 5 -Total (C) (A+B) 454 66 180 340 10 6 - 16 324 444Assets forOperating Lease:Aeroplanes / Aircraft - 1,987 - 1,987 - 212 - 212 1,775 -Plant & Machinery - 6,487 - 6,487 - 551 - 551 5,936 -Total (D) - 8,474 - 8,474 - 763 - 763 7,711 -Total (C+D) 454 8,540 180 8,814 10 769 - 779 8,035 444Previous Year 48,265 2,959 50,770 454 4,804 3,612 8,406 10 444# Less than Rs.1 Lakh11410 Lakh is equal to 1 million

Annual Report 2008-09Schedules to the Balance Sheet as at 31st March, 2009SCHEDULE 6 - INVESTMENTSFully Paid Up Long Term - At Cost(Rupees in Lakh)Particulars Face Value Quantity Amount(Rs.) 2009 2008 2009 2008I. In Government / Government Guaranteed Securities, Bonds & UnitsUnquotedNational Saving Certificate (Lodged with Sales Tax authorities) 15,000 - - 0.15 0.150.15 0.15Quoted10.65% Andhra Pradesh Power Finance Corporation Loan, 2013(Refer Note 1) 100,000 120 120 120.97 120.977.77% Karnataka State Development Loan, 2015 (Refer Note 1) 100 57500 57500 58.36 58.367.77% Tamilnadu State Development Loan, 2015 (Refer Note 1) 100 16020 16020 16.26 16.2611.50% Tamilnadu Industrial Investment Corporation, 2008 1,000 - 1500 - 16.438.40% Transmission Corporation of Andhra Pradesh Ltd., 2014(Refer Note 1) 1,000,000 1 1 9.92 9.9211.50% West Bengal Finance Corporation, 2011 (Refer Note 1) 100 6066 6066 6.74 6.7411.50% West Bengal Finance Corporation, 2010 (Refer Note 1) 100 9099 9099 9.99 9.999.10% West Bengal Infrastructure Development Finance Corporation Ltd.,2016 (Refer Note 1) 1,000,000 2 2 20.45 20.45242.69 259.12Sub - Total - I 242.84 259.27II.In Subsidiary Companies - In Equity SharesUnquotedSrei Capital Markets Ltd. 10 5050000 5050000 505.00 505.00Srei Forex Ltd. (net of provision for diminution Rs. 50 Lakh) 10 500000 500000 0.00 50.00Srei Venture Capital Ltd. 10 250000 250000 25.00 25.00Global Investment Trust Ltd. 10 50000 50000 5.00 5.00Srei Infrastructure Advisors Ltd. 10 500000 50000 50.00 5.00Srei Sahaj e-Village Ltd. 10 510000 510000 51.00 51.00Srei Equipment Finance Pvt. Ltd. (Refer Note II 1 of Schedule 19) 10 - 2050000 - 205.00Controlla Electrotech Private Ltd. 10 35305 - 707.87 -IIS International Infrastructure Services GmbH, Germany ** ** 3,389.96 3,389.96Sub - Total - II 4,733.83 4,235.96** Subscription of Euro Nil (Previous year Euro 5,895,000) to the AuthorisedCapital. There is no system of issuance of distinctive shares in the countryof registration.III. In Joint Venture - In Equity SharesUnquotedSrei Equipment Finance Pvt. Ltd. 10 25000000 - 2,500.00 -Sub - Total - III 2,500.00 0.00IV. In Equity Sharesi) Unquoted - TradeNew India Co-operative Bank Ltd. 10 573 573 0.06 0.06Quippo Infrastructure Equipment Ltd. 10 14000000 14000000 1,851.50 1,851.50National Stock Exchange of India Ltd. 10 57200 - 2,062.06 -TN (DK) Expressways Ltd. (Refer Note 2) 10 13000 13000 1.30 1.30Madurai Tuticorin Expressways Ltd. (Refer Note 2) 10 19500 19500 1.95 1.95Guruvayoor Infrastructure Private Ltd. (Refer Note 2) 10 20010000 20010000 2,001.00 2,001.00Jaora-Nayagaon Toll Road Co. Ltd. (Refer Note 2) 10 2800 - 0.28 -Nagpur Seoni Expressway Ltd. (Refer Note 2) 10 4800000 - 480.00 -10 Lakh is equal to 1 million6,398.15 3,855.81115

Schedules to the Balance Sheet as at 31st March, 2009SCHEDULE 6 - INVESTMENTSFully Paid Up Long Term - At Cost (Contd.)(Rupees in Lakh)116Particulars Face Value Quantity Amount(Rs.) 2009 2008 2009 2008ii) Quoted - TradeAlpic Finance Ltd. (net of provision for diminution Rs. 0.01 Lakh) 10 100 100 0.00 0.01Apple Finance Ltd. (net of provision for diminution Rs. 0.02 Lakh) 10 100 100 0.00 0.02HDFC Bank Ltd. (Refer Note no. 3) 10 402 11667 1.00 1.00CRISIL Ltd. 10 200 200 0.10 0.10GAIL India Ltd. (Refer Note 4) 10 66000 44000 188.57 188.57Hotline Glass Ltd. (net of provision for diminution Rs. 166 Lakh) 10 8006030 8006030 52.04 218.35Indian Metal & Ferro Alloys Ltd. 10 642182 35 1,076.06 -ICICI Bank Ltd. 10 445419 445419 4,491.34 4,491.34IDFC Ltd. 10 91000 91000 183.35 183.35Kotak Mahindra Bank Ltd. 10 500 500 0.02 0.02Century Plyboards (India) Ltd. 10 1725000 - 984.54 -Mahanagar Telephone Nigam Ltd. 10 140000 140000 182.80 182.80Mahindra & Mahindra Ltd. 10 10000 10000 65.17 65.17Power Grid Corporation of India Ltd. 10 160000 160000 180.41 180.41Steel Authority of India Ltd. 10 85000 85000 182.92 182.92Tata Steel Ltd. 10 4000 4000 28.34 28.34iii) Quoted - Non Trade7,616.66 5,722.40New Era Urban Amenities Ltd. 10 100 100 0.01 0.010.01 0.01Sub - Total - IV (i+ii+iii) 14,014.82 9,578.22V. In Bonds / Debentures / Unitsi) Quoted - TradeMorgan Stanley Mutual Fund 10 2000 2000 0.20 0.20Unit Trust of India 10 400 400 0.04 0.04ii) Unquoted - Trade0.24 0.24India Global Competitive Fund 100 3375000 5500000 3,375.00 5,500.00Infrastructure Project Development Fund 100 13219900 10299500 13,219.90 10,299.50Infrastructure Project Development Capital 100 6247800 - 6,247.80 -Medium and Small Infrastructure Fund 100 700000 700000 700.00 700.00Bharat Opportunity Fund 100 770000 - 770.00 -Sunshine Fund 100 2250500 2250500 2,250.50 2,250.5026,563.20 18,750.00Sub - Total - V (i+ii) 26,563.44 18,750.24TOTAL = I + II + III + IV + V 48,054.93 32,823.69Less: Amortisation of Premium / Discount on Government Securities 4.00 5.4348,050.93 32,818.26Aggregate Book Value of Quoted Investment 7,855.60 5,976.34Aggregate Market Value of Quoted Investment 3,876.53 4,782.80Aggregate Book Value of Unquoted Investment 40,195.33 26,841.92Note:(1) Under Pledge With Bank as Trustee for Public depositors as per RBI circular dated 04.01.2007.(2) Under Pledge With Bank.(3) Received 402 nos. shares of HDFC Bank Ltd. against conversion of 11667 nos. shares of Centurion Bank of Punjab Ltd. as per Schemeof Amalgamation.(4) Received 22000 nos. shares as Bonus during the year.(5) Refer Note II 24 of Schedule 19 for movement in investments.10 Lakh is equal to 1 million

Annual Report 2008-09Schedules to the Balance Sheet as at 31st March, 2009(Rupees in Lakh)2009 2008SCHEDULE 7 - SUNDRY DEBTORSSundry Debtors Operating Lease - Secured, Considered goodDebts outstanding for a period exceeding six months - -Other Debts (Refer Note II 2 of Schedule 19) 267 -Sundry Debtors - Others (Unsecured, Considered good)Debts outstanding for a period exceeding six months - -Other Debts (Refer Note II 2 of Schedule 19) 455 -722 -SCHEDULE 8 - CASH AND BANK BALANCESCash & Bank BalancesCash in hand 4 3With Scheduled Banks- In Unclaimed Dividend Account 35 35- In Current Account 6,018 353- In Fixed Deposit Account[includes Rs. 130 Lakh under lien (previous year - Rs. 8,030 Lakh)] 23,651 8,03029,708 8,421SCHEDULE 9 - OTHER CURRENT ASSETSInterest accrued but not due on investments / Fixed deposits / Loans 63 15Stock for Trade 44 74107 89SCHEDULE 10 - LOANS & ADVANCESSecured, Considered Good:- Loan (Refer Note II 2 of Schedule 19) 94,886 16,969- Advance for Operating Lease 3,594 -Unsecured, Considered Good:- Loan to Subsidiary Companies (Refer Note II 20 of Schedule 19) 1,584 826- Loan Others (Refer Note II 2 of Schedule 19) 1,400 -Advances recoverable in cash or in kind or for value to be receivedAdvance Tax [net of provision for tax Rs. 1,510 Lakh (previous year Rs. 1,833 Lakh)] 1,047 697MAT credit entitlement 211 -Receivable from Subsidiary - 37,500Other Advances - Subsidiary Companies (Refer Note II 20 of Schedule 19) 2,411 -- Others 15,945 68,442121,078 124,434SCHEDULE 11 - CURRENT LIABILITIESSundry Creditors - Others- total outstanding dues of micro, small and medium enterprises - -- total outstanding dues of creditors other than micro, small and medium enterprises 56 10Amounts to be credited to Investor Education and Protection Fund*Unpaid dividend 35 35Unpaid matured deposits 62 86Other liabilities 1,713 8,305Interest accrued but not due on loans 394 5032,260 8,939* There is no amount due and outstanding as at Balance Sheet dateto be credited to Investor Education and Protection Fund10 Lakh is equal to 1 million117

Schedules to the Balance Sheet as at 31st March, 2009(Rupees in Lakh)2009 2008SCHEDULE 12 - PROVISIONSProposed Dividends 1,161 1,394Provision for Corporate Dividend Tax 197 237Provision as per the norms of Reserve Bank of India & Foreign Financial Institution - -Provision for Gratuity 18 21Provision for Premium on Unsecured Subordinated Bonds 318 3881,694 2,040SCHEDULE 13 - MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)Opening BalanceShare issue expenses - -Bonds and Debentures issue expenses - 152Share issue expenses (GDR) - 455- 607Add: Addition during the yearDebenture issue expenses - -- 607Less: Amounts written off during the yearBonds and Debentures issue expenses - 18Share issue expenses (GDR) - 43- 61Less: Transferred as per Scheme of ArrangementBonds and Debentures issue expenses - 134Share issue expenses (GDR) - 412- 546Closing BalanceBonds and Debentures issue expenses - -Share issue expenses (GDR) - -- -11810 Lakh is equal to 1 million

Annual Report 2008-09Schedules to the Profit and Loss Account for the year ended 31st March, 2009(Rupees in Lakh)2009 2008SCHEDULE 14 - INCOME FROM OPERATIONSIncome from Loans 10,919 36,953Income from Operating Lease 1,529 6,155Assignment Receipt 8,900 -Fee Based Income 7,406 886Income from Trade Investments- Long term 2,452 235- Stock for Trade - 3Profit on Sale of Trade Investments (net)- Long term 94 127- Stock for Trade 113 908Interest from Trade Investments- Long term 5 2- Stock for Trade 79 -Dividend from Trade Investments 62 23Income from Sub - letting 464 180Interest received from Govt. Securities / Banks 204 743SCHEDULE 15 - OTHER INCOME32,227 46,215Liabilities No Longer Required Written Back - 6,427Profit on sale of Fixed Assets 354 -Other Income 62 109SCHEDULE 16 - STAFF EXPENSES416 6,536Salaries, Allowances, Commission & Bonus 1,329 2,292Contribution to Provident and Other Funds 99 206Staff Welfare Expenses 10 63SCHEDULE 17 - ADMINISTRATIVE & OTHER EXPENSES1,438 2,561Communication Expenses 41 272Legal & Professional Fees 4,538 520Electricity Charges 11 99Rent (Refer Note II 10 of Schedule 19) 150 231Rates and Taxes 15 23Brokerage and Service Charges 11 163Auditors' Remuneration 27 42Repairs - Machinery 15 90- Others 61 149Travelling and Conveyance 493 847Director Fees 10 8Insurance 2 10Printing and Stationery 45 113Advertisement and Subscription 105 153Provision for Diminution in value of Stock for Trade 5 -Provision for Diminution in value of Investments 216 -Loss on sale of Fixed Assets (net) - 14Miscellaneous Expenses 90 3935,835 3,12710 Lakh is equal to 1 million119

Schedules to the Profit and Loss Account for the year ended 31st March, 2009(Rupees in Lakh)2009 2008SCHEDULE 18 - FINANCE CHARGESInterest on Debentures 424 5,267Interest on Other Fixed Loans:Term Loans from Domestic Banks / Financial Institutions 1,901 10,511Term Loans from Foreign Banks / Financial Institutions 15,308 8,219Public Deposits 48 80Bonds 919 1,829Interest on Working Capital Facilities 550 2,888Interest - Others 180 196Other Financial Charges 63 1,23219,393 30,222Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTSI. Significant Accounting Policies1. Basis of Preparation1.1 The financial statements are prepared in accordance with historical cost convention and accrual basis of accounting.1.2 These are presented in accordance with Generally Accepted Accounting Principles in India, provisions of the Companies Act,1956, Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006 andthe guidelines issued by the Reserve Bank of India, wherever applicable.1.3 The preparation of financial statements requires the Management to make estimates and assumptions considered in the reportedamounts of assets and liabilities including Contingent Liabilities as of the date of the financial statements and the reported incomeand expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statementsare prudent and reasonable. Future results could differ from these estimates.2. Revenue RecognitionIncome from Operations is recognised in the Profit & Loss Account on accrual basis as stated herein except in the case ofnon - performing assets where it is recognised, upon realisation, as per the Prudential Norms of Reserve Bank of India, applicableto NBFCs.2.1 Income from LoansIt is recognised based on the internal rate of return to provide a constant periodic rate of return on the net investment outstandingover the period of the contract or as per the terms of the contract.2.2 Income from Operating LeaseIt is recognised as rentals, as accrued over the period of lease, net of value added tax, if applicable.2.3 Securitisations, Assignments and Co - Branded ArrangementsIncome arising from securitisation and assignment of loans is amortised over the life of the contract. In case of co - brandedarrangements income is accounted on accrual basis as provided under respective arrangements. These are included in incomefrom loans under Income from Operations.2.4 Fee Based IncomeFees for financial advisory services are accounted based on stage of completion of assignments, when there is reasonablecertainty of its ultimate realisation / collection.2.5 Other Operating IncomeDividend Income is accounted when the right to receive the payment is established. Income from investment in Funds isrecognised on cash basis as per the Prudential Norms of the Reserve Bank of India. All other operating income is accounted foron accrual basis.2.6 Other IncomeOther income is accounted for on accrual basis.12010 Lakh is equal to 1 million

Annual Report 2008-09Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)3. Fixed Assets and Depreciation / Amortisation3.1 Fixed Assets include assets given under Operating Lease. Fixed Assets are stated at Cost less accumulated depreciation. Costincludes taxes, duties, freight and incidental expenses related to the acquisition and installation of the assets.3.2 Intangible Assets expected to provide future enduring economic benefits are stated at cost less amortisation. Cost comprisespurchase price and directly attributable expenditure on making the asset ready for its intended use.3.3 Depreciation has been provided on straight line method at rates prescribed in Schedule XIV to the Companies Act, 1956, orhigher rates as ascertained by the management.The Depreciation rates adopted are given as follows:Assets for Own Use:i. Building 1.63%ii. Furniture & Fixtures 6.33%iii. Motor Vehicles 9.50%iv. Computers 16.21%v. General Plant & Machinery 4.75%Assets for Operating Lease:vi. Aeroplanes / Aircraft # 11.11%vii. Oil Rig 11.31%Fixed Assets costing less than Rs. 5,000/- 100.00%# based on estimated useful life of 9 years.3.4 Leasehold assets are amortised over the period of the lease.3.5 Intangible assets are amortised over their best estimated useful life ranging up to 6 years on straight line method.4. Impairment of Fixed AssetsWherever events or changes in circumstances indicate that the carrying value of fixed assets may be impaired, the Companysubjects such assets to a test of recoverability, based on discounted cash flows expected from use or disposal thereof. If the assetsare impaired, the Company recognises an impairment loss as the difference between the carrying value and value in use.A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However the carryingvalue after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if therewas no impairment.5. Capital Work in ProgressCapital work in progress is stated at cost and includes development and other expenses including interest during constructionperiod.6. Investments6.1 Investments are classified into “Long Term” and “Current” investment.6.2 All long term investments including investments in Subsidiary Companies are stated at cost. Provision for diminution in value, otherthan temporary, is considered wherever necessary on individual basis.6.3 Cost is arrived at on weighted average method for the purpose of valuation of investment.6.4 Investments held as stock for trade are valued at lower of cost and market price determined category - wise.7. Loan Assets7.1 Loan Assets include loans advanced by the Company secured by collateral offered by the customers if applicable. These areshown net of assets securitised.7.2 Loan assets are valued at net investment amount including installments fallen due and net of unmatured / unearned financecharges etc.121

Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)8. Provision for Non Performing Assets and Bad Debts8.1 Relating to Loans & Operating Lease Assets:8.1.1Provisions for non performing assets are considered in the financial statements according to Prudential Norms prescribed by theReserve Bank of India. Additional provision as per the requirement of Foreign Financial Institutions has also been made asfollows:Loan Assets:Asset Classification Arrear Period Provision as per Provision as per ProvisionReserve Bank of India Foreign Financial adopted byInstitution the Company% of Portfolio % of Portfolio % of PortfolioStandard Upto 90 days Nil Nil Nil91 to 180 days Nil 20 20Sub-Standard 181 to 360 days 10 50 50361 to 365 days 10 100 100More than 12 months to 24 months 10 100 100Doubtful (Unsecured) More than 24 months 100 100 100Doubtful (Secured) More than 24 months to 36 months 20 100 100More than 36 months to 60 months 30 100 100Above 60 months 50 100 100Loss As per Management discretion 100 100 100Operating Lease Assets:Asset Classification Arrear Period Provision as per Provision as per ProvisionReserve Bank of India Foreign Financial adopted byInstitution the Company% of Outstanding % of Outstanding % of OutstandingStandard Upto 90 days Nil Nil Nil91 to 180 days Nil 20 20181 to 360 days Nil 50 50361 to 365 days Nil 100 100Sub-Standard More than 12 months to 24 months 10 100 100More than 24 months to 30 months 40 100 100Doubtful More than 30 months to 36 months 40 100 100More than 36 months to 48 months 70 100 100More than 48 months 100 100 100Loss As per Management Discretion 100 100 1008.1.2 Loan Assets overdue for more than four years are considered as bad debts and written off.8.2 Provision for other debts arising from services is considered in the financial statements according to the Prudential Normsprescribed by the Reserve Bank of India.122

Annual Report 2008-09Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)9. Foreign Currency Transactions9.1 Foreign currency transactions are recorded at the exchange rates prevailing at the time of transaction.9.2 Assets and liabilities expressed in foreign currencies are translated into the reporting currency at the exchange rate prevailing atthe Balance Sheet date except with respect to liabilities where exchange fluctuation losses are to be borne by customers. Anyloss or gain arising there from has been included in Finance Charges as per the provisions of Accounting Standard 16 and 11notified by the Central Government under the Companies (Accounting Standards) Rules, 2006.9.3 In respect of forward exchange contracts entered into by the Company, the difference between the forward rate and the exchangerate on the date of the transaction are recognised as income or expense over the life of the contract.Gain / loss on settlement of transactions arising on renewal / cancellation are recognised as income or expense in the period inwhich these are renewed or cancelled.9.4 In respect of Derivative contracts, premium paid, gains / losses on settlement and provisions for losses determined in accordancewith principles of prudence, on category wise basis, are recognised in the Profit & Loss account.10. Prior Period and Extra Ordinary ItemsPrior Period and Extra Ordinary items having material impact on the financial affairs of the Company are disclosed separately.11. Borrowing CostsBorrowing costs to the extent attributed to the acquisition / construction of qualifying assets are capitalised up to the date whensuch assets are ready for its intended use and all other borrowing costs are recognised as an expense in the period in which theyare incurred.12. Employee Benefits12.1 Short term employee benefitsShort term employee benefits based on expected obligation on undiscounted basis are recognised as expense in the Profit andLoss account of the period in which the related service is rendered.12.2 Defined contribution planCompany’s contribution towards Regional Provident Fund Authority and Employee State Insurance Corporation are charged tothe Profit and Loss Account.12.3 Defined benefit planCompany’s liability towards gratuity is a defined benefit plan. Such liabilities are ascertained by an independent actuary as perthe requirements of Accounting Standard – 15 (revised 2005) “Employee Benefits”.All actuarial gains and losses are recognised in Profit and Loss Account in the year in which they occur.During the year, the Company has started making contributions to Regional Provident Fund Authority towards its Provident Fundobligations for all employees. Hitherto for some of its employees, contributions were being made to the “Srei International FinanceProvident Fund Trust” which was a defined benefit plan.13. Segment ReportingSegment information is reported in the consolidated financial statements.14. Taxes on Income14.1 Current tax is the amount of tax payable on the taxable income for the year determined in accordance with the provisions of theIncome Tax Act, 1961.14.2 Deferred tax is recognised on timing differences, being the differences between the taxable income and accounting income thatoriginate in one period and are capable of reversal in one or more subsequent periods.Deferred tax assets subject to the consideration of prudence are recognised and carried forward only to the extent that there isa reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can berealised.In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognisedonly if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits.15. Provision, Contingent Liabilities and Contingent AssetsProvisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a resultof past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but aredisclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.16. Earnings per ShareThe Company reports basic and diluted earnings per equity share in accordance with Accounting Standard – 20, Earnings PerShare notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. Basic earnings per equityshare has been computed by dividing net profit after tax attributable to equity shareholders by the weighted average number of123

Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)equity shares outstanding during the year. Diluted earnings during the year adjusted for effects of all dilutive potential equityshares per equity share is computed using the weighted average number of equity shares and dilutive potential equity sharesoutstanding during the year.17. Assets under Management17.1 Contracts securitised or assigned are derecognised from the books of accounts. Co - branded loan transactions are originatedby the Company on behalf of partner bank / financial institution.17.2 Contingent liabilities, if any, for such contracts are disclosed separately.18. Miscellaneous ExpenditureMiscellaneous Expenditure on issue of Bonds and Debentures are being amortised over the tenure of the respective Bonds andDebentures.II. Notes on Financial Statements1. Scheme of Arrangementi. The Board of Directors of the Company on 31st May, 2007 had given its consent for the execution of a Joint Venture Agreement,Share Subscription Agreement and Shareholders Agreement in connection with the formation of a joint venture with BNP ParibasLease Group (a wholly owned subsidiary of BNP Paribas S.A.) (‘BPLG’). In accordance with these agreements, the Company hasbeen allotted 22,950,000 equity shares of Rs. 10 each at par in Srei Equipment Finance Private Ltd. (formerly known as SreiInfrastructure Development Finance Ltd.) (‘SEFPL’) and BPLG has been allotted 25,000,000 equity shares of Rs. 10 each at apremium of Rs. 300 per share in SEFPL on the Effective Date i.e. 2nd April, 2008, being the date of filing of the Order of the Hon’bleHigh Court at Calcutta with the Registrar of Companies, West Bengal. Consequently, SEFPL has become a joint venture betweenthe Company and BPLG with effect from 2nd April, 2008.ii. Pursuant to the Scheme of Arrangement ('the Scheme') approved by the shareholders and sanctioned by the Hon'ble High Courtat Calcutta vide Order of 28th January, 2008, all business, assets and liabilities pertaining to the project finance business and assetbased financing business of the Company including its shareholding in Srei Insurance Broking Private Ltd. (‘SIBPL’) (formerlyknown as Srei Insurance Services Ltd.) were transferred to SEFPL as a going concern on a slump sale basis, pursuant toSections 391 to 394 and other relevant provisions of the Companies Act, 1956 with effect from 1st January, 2008 ('Appointed Date')and accordingly, the Scheme has been given effect from 1st January, 2008.iii. The consideration for the transfer of all business, assets and liabilities pertaining to the project finance business and asset basedfinancing business of the Company amounting to Rs. 3,750,000,000/- against the net book value of assets and liabilities ofRs. 3,753,136,469/- was received by the Company from SEFPL on 3rd April, 2008.iv. Pursuant to the Scheme of Arrangement, with effect from the Appointed Date up to and including the Effective Date, the Companyshall be deemed to have been carrying on all business and activities relating to business, assets and liabilities pertaining to theproject finance business and asset based financing business including its shareholding in SIBPL, in trust for SEFPL. Accordinglyall business and activities relating to business, assets and liabilities pertaining to the project finance business and asset basedfinancing business including its shareholding in SIBPL have been carried on in Trust by the Company for SEFPL from1st January, 2008 being the Appointed Date up to 2nd April, 2008 being the Effective Date.v. Pending completion of relevant formalities of transfer of certain assets and liabilities acquired pursuant to the Scheme, suchassets and liabilities remain included in the books of SEFPL under the name of the Company.Further, during the current year, pending completion of certain formalities, certain transactions and documents pertaining to andreported in the books of accounts of SEFPL, were executed in the name of SIFL.124

Annual Report 2008-09Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)2. Performance wise classification of assets and total provision made thereon:Loan Assets:Asset Arrear Period Book Value Provisions as at 31st March, 2009(Rupees in Lakh)Total ProvisionClassification as at 31st as at 31stMarch, 2009 March, 2009As perAdditionalReserve Bank of India provision as perForeign FinancialInstitutionStandard Upto 90 days 97,870 - - -91 to 180 days - - - -Sub Total 97,870 - - -Sub-Standard 181 to 360 days - - - -361 to 365 days - - - -More than12 monthsto 24 months - - - -Sub Total - - - -Doubtful (Unsecured) More than 24 months - - - -Doubtful (Secured) More than 24 monthsto 36 months - - - -More than 36 monthsto 60 months - - - -Above 60 Months - - - -Sub Total - - - -LossAs per Managementdiscretion - - - -Sub Total - - - -Grand Total 97,870 - - -Operating Lease Assets:Asset Arrear Period Outstanding Provisions as at 31st March, 2009(Rupees in Lakh)Total ProvisionClassification as at 31st as at 31stMarch, 2009 March, 2009As perAdditionalReserve Bank of India provision as perForeign FinancialInstitutionStandard Upto 90 days 267 - - -91 to 180 days - - - -181 to 360 days - - - -361 to 365 days - - - -Sub Total 267 - - -Sub-StandardMore than 12 monthsto 24 months - - - -More than 24 monthsto 30 months - - - -Sub Total - - - -DoubtfulMore than 30 monthsto 36 months - - - -More than 36 monthsto 48 months - - - -Above 48 months - - - -Sub Total - - - -LossAs per Managementdiscretion - - - -Sub Total - - - -Grand Total 267 - - -125

Schedules to the Balance Sheet and Profit and Loss Account126SCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)3. Issue of Warrants on Preferential Allotment basisThe Company on 30th October, 2007 issued and allotted 25,000,000 warrants of Rs. 10/- each to the Promoters’ Group of theCompany by way of Preferential Allotment. Each warrant was convertible into Equity shares of Rs. 10/- each in one or more tranchesat a price of Rs. 100/- per share (including premium of Rs. 90/-) within a period of 18 months from the date of allotment of the warrants.Out of 25,000,000 warrants, conversion option for 7,200,000 warrants was exercised in 2007 - 08. Conversion option for balancewarrants were not exercised during the year ended 31st March, 2009 and has since expired and hence forfeited on29th April, 2009. Application money is disclosed as ‘Equity Warrants Issued and Subscribed’ as on 31st March, 2009.4. Tier II Capital4.1 Unsecured Subordinated Redeemable Non Convertible BondsThe Company has allotted 500 Unsecured Subordinated Redeemable Non Convertible Bonds in the nature of Debentures ofRs. 10 lakh each on Private Placement basis forming part of Tier II Capital aggregating to Rs. 5,000 lakh for cash at par on30th March, 2007.Each bond is having an overall tenure of 10 years, reckoned from the date of allotment. The face value of the bonds shall be redeemedat the end of 10 years from the date of allotment i.e. 29th March, 2017. Interest is payable annually @ 12% p.a.The unsecured subordinated redeemable non convertible bonds repayable within one year amounts to Rs. Nil (Previous year Rs. Nil).4.2 Unsecured Subordinated Bonds4.2.1 The Company has allotted 5,266,075 Unsecured Subordinated Bonds to the equity shareholders in the nature of Tier II Capital ofRs. 100 each aggregating to Rs. 5,266 lakh for cash at par on 25th August, 2000 on right basis.Each bond is having an overall tenure of 12 years, reckoned from the date of allotment. The face value of the bonds shall be redeemedin 7 installments at a premium of 20% of the original face value starting from 6th year on 25th August, 2006 at the rate of 15% of theface value and premium thereon for 6 years and balance 10% in the year thereafter.The third such installment of Rs. 948 lakh representing 15% of the face value together with 20% of the premium towards redemptionhas been paid on 25th August, 2008 being third redemption date. The face value of the aforesaid Bonds stands reduced toRs. 55/- per Bond.Premium payable on redemption of these Subordinated Bonds is provided over the tenure of the bond.4.2.2 The unsecured subordinated bonds redeemable within one year amounts to Rs. 790 lakh (Previous year Rs. 790 lakh).5. Loans5.1 Term loan from Foreign Banks & Foreign Financial Institutions are secured by hypothecation of specific assets covered by loanassets / hypothecation agreements and receivables arising there from.Modification of charge on the assets consequent to the transfer of business, assets and liabilities pertaining to the project financebusiness and asset based financing business including the Company’s shareholding in SIBPL to SEFPL as per Scheme ofArrangement as enumerated in Note II 1 above, was yet to be made at the year end. Subsequently all the charges have beenappropriately modified by 1 June, 2009.5.2 Term loan from Domestic Banks are secured by hypothecation / assignment of specific assets covered by loanassets / hypothecation agreements and receivables arising there from.5.3 Working Capital facilities from banks are secured by hypothecation of assets covered by loan assets / hypothecation / OperatingLease agreements and receivables arising there from ranking pari passu (excluding assets which are specifically charged to others).5.4 Public Deposits are secured by pledge of certain Government Securities as per RBI Circular dated 04.01.2007. Public Deposits(including matured and unclaimed) repayable within one year aggregate to Rs. 488 lakh (Previous year Rs. 677 lakh).5.5 Secured Loans and advances from Domestic Banks include Rs. 30,000 lakh (Previous year Rs. Nil) guaranteed by the directors.5.6 Unsecured Loans and Advances from Domestic Banks and others includes amount repayable within one year amounting toRs. 11,204 lakh (Previous year Rs. 21,955 lakh).5.7 Company has issued on private placement basis Non - Convertible debentures aggregating to Rs. 43,500 lakh during the year. Thereis no outstanding position as on 31.03.09.6. None of the Company’s Fixed Assets are considered impaired as on the Balance Sheet date.7. During the year, the Company has created Debt Redemption Reserve of Rs. 2,900 lakh (Previous year Rs. 2,141 lakh) towardsredemption of Unsecured Subordinated Debenture / Bonds / Debt i.e. Mezzanine Capital (Tier II Capital). Debt Redemption Reserveof Rs. 792 lakh (Previous year Rs. 2,215 lakh) has been reversed due to repayment of loan during the year.8. Disclosure pursuant to Accounting Standard (AS) 15 (Revised):Contribution to Regional Provident Fund Authority charged to Profit and Loss Account aggregates to Rs. 28 lakh (Previousyear – Rs. 26 lakh). Besides, Rs. 14 lakh has been paid to “Srei International Finance Provident Fund Trust” towards Company’s shareof shortfall between the return from the investments of the trust and the Government notified interest rate. Contribution to EmployeeState Insurance Corporation charged to Profit and Loss Account aggregates to Rs. 0.07 lakh (Previousyear – Rs. 4 lakh).During the year, the Company has started making contributions to Regional Provident Fund Authority towards its Provident Fundobligations for all employees, which hitherto for some of its employees were being made to the “Srei International Finance ProvidentFund Trust” which was a defined benefit plan.Gratuity benefits to employees have been funded under separate arrangement with the Life Insurance Corporation of India (LIC).

Annual Report 2008-09Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)The following table sets out the details of amount recognised in the financial statements in respect of employee benefit schemes.(Rupees in Lakh)Employee Benefits: Gratuity Provident FundDefined benefit plans (As per actuarial valuation) 31.03.09 31.03.08 31.03.09 31.03.08I. Components of employer expenses1. Current Service Cost 15 33 - 1112. Interest cost 3 5 - 503. Expected return on plan assets (2) (5) - (50)4. Curtailment cost / (credit) - - - -5. Settlement cost / (credit) - - - -6. Past Service Cost - - - -7. Actuarial Losses / (Gains) 6 33 - -8. Other Adjustments - (2) - -9. Employee Contributions - - - 510. Total expenses recognised in the Statement of Profit & Loss Account (Total 1 to 9) 22 64 - 116II. Actual Contribution and Benefits Payments for the previous year1. Actual benefit payments - (6) - (451)2. Actual Contributions 25 3 - 223III. Net assets / (liability) recognised in balance sheet as at the year end1. Present value of Defined Benefit Obligation 59 36 - 3742. Fair value of plan assets 41 15 - 3743. Funded status [Surplus / (Deficit)] (18) (21) - -4. Unrecognised past service cost - - - -5. Net asset / (liability) recognised in balance sheet (18) (21) - -IV. Change in Defined Benefit Obligations during the year ended1. Present Value of DBO at beginning of year 36 63 - 5242. Current Service cost 15 33 - 1113. Interest cost 3 5 - 504. Curtailment cost / (credit) - - - -5. Settlement cost / (credit) - (85) - -6. Plan amendments - - - -7. Acquisitions - - - 288. Actuarial (Gains) / Losses 5 26 - -9. Benefits paid - (6) - (451)10. Employee Contribution - - - 11211. Other Adjustments - - - -12. Present Value of DBO at the end of year 59 36 - 374V. Change in Fair value of Assets during the year ended1. Plan assets at beginning of period 15 55 - 5242. Acquisition / Settlement Adjustment - (36) - 283. Expected return on plan assets 2 5 - 504. Actual Company contribution 25 3 - 1115. Employees contribution - - - 1126. Benefits paid - (6) - (451)7. Actuarial Gains / (Losses) (1) (6) - -8. Other Adjustments - - - -9. Plan assets at the end of the year 41 15 - 374VI. Actuarial Calculation1. Experience Loss / (Gain) adjustment on plan liabilities - 22 - -2. Actuarial Loss / (Gain) due to change in assumptions 5 4 - -Actuarial Loss / (Gain) due on Defined Benefit Obligations 5 26 - -3. Experience Loss / (Gain) adjustment on plan assets 1 (6) - -VII. Actuarial Assumptions1. Discount Rate 8.00% 8.70% NA 8.70%2. Expected return on plan assets 9.15%* 9.15%* NA 8.45%*3. Salary Escalation 10.00% 10.00% NA -4. Mortality LIC LIC NA Indian(1994-96) (1994-96) AssuredUltimate Ultimate Mortality(1994-96)(Modified)Ultimate5. Retirement / Superannuation Age 60 yrs. 60 yrs. NA 60 yrs.127

Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)(Rupees in Lakh)Employee Benefits: Gratuity Provident FundDefined benefit plans (As per actuarial valuation) 31.03.09 31.03.08 31.03.09 31.03.086. Withdrawal Rate for Gratuity:Age (yrs.) 20-24 25-29 30-34 35-49 50-54 55+Attrition Rate 5% 3% 2% 1% 2% 3%* The rate of return declared by LIC has been taken as expected rate of return on plan assets with respect to gratuity.1289. Assets under Management9.1 SecuritisationIn terms of Reserve Bank of India Guidelines on securitisation of assets issued on 1st February, 2006, details of loans securitisedare as under:(Rupees in Lakh)Particulars 31.03.09 31.03.08Total number of contracts securitised during the year 1 621Book Value of contracts securitised (on date of securitisation) 6,019 34,819Sale consideration (on date of securitisation) 6,026 34,767(Loss) / Gain on securitisation (on date of securitisation)* 7 (52)Subordinated assets as on balance sheet date - -Bank / Other deposits provided as collateral as on balance sheet date - -Guarantee against securitised contracts Nil Nil* Gain from securitisation is amortised over the life of the contracts and loss is charged off upfront in Profit and Loss Account.9.2 Assignment of Receivables:The Company has assigned loan assets to the extent of Rs. Nil (Previous year Rs. 47,226 lakh) for purchase consideration ofRs. Nil (Previous year Rs. 48,826 lakh) during the year. The Company has not provided any corporate guarantee and no collateralagainst these contracts is outstanding at the year end.9.3 Co - Branded Arrangements:Agreements with Banks / Financial Institutions to make disbursements on their behalf amount to Rs. Nil during the year (Previousyear Rs. 3,543 lakh).9.4 There are no contracts outstanding in terms of foregoing paragraph 9.1 to 9.3 above as on 31.03.09.10. In accordance with the Accounting Standard 19 on ‘Leases’ as notified by the Companies (Accounting Standards) Rules, 2006the following disclosures in respect of Operating Leases is made :a. In the capacity of LesseeThe Company has leasing arrangements in respect of operating leases for office premises. These leasing arrangements whichare not non - cancellable in nature range between 11 months and 21 years, generally and are usually renewable by mutualconsent on mutually agreeable terms. Minimum lease payments charged to the Profit and Loss Account with respect to the leasingarrangements referred to above aggregate Rs. 150 lakh (Previous year – Rs. 231 lakh).Sub lease payments received or receivable recognised in the Profit and Loss Account for the year ended 31 March, 2009aggregates Rs. 464 lakh (Previous year – Rs. Nil).b. In the capacity of LessorThe Company has given assets on Operating lease for periods ranging between 5 to 6 years based on the nature of equipment.11. The Company has challenged constitutional validity of Fringe Benefits Tax before the Hon’ble High Court at Calcutta and theHon’ble Court has granted interim stay on levy of such Fringe Benefits Tax on the Company. In view of this, the Company hasnot provided for any liability against Fringe Benefits Tax.12. The Company has not received any memorandum (as required to be filed by the suppliers with the notified authority under theMicro, Small and Medium Enterprises Development Act, 2006) claiming their status as on 31st March, 2009 as micro, small ormedium enterprises. Consequently the amount paid / payable to these parties during the year is nil (Previous year Rs. Nil).13. Interest income includes Rs. 27 lakh (Previous year Rs. 31 lakh) on long term investments.14. Interest from Government Securities / Banks, Loan Assets and other income includes tax deducted at source of Rs. 1,029 lakh(Previous year Rs. 597 lakh).

Annual Report 2008-09Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)15.1 Deferred tax asset arising out of timing difference as on 31st March, 2009 has not been recognised. The components of thesame are as follows:(Rupees in Lakh)Components of Deferred Tax 31.03.09 31.03.08Asset / (Liability)Asset / (Liability)Depreciation (1,341) -Deferred Revenue Expenditure (14) -Unabsorbed Depreciation (to the extent of deferred tax liability) 1,355 -Deferred Tax Asset / (Liability) Nil -15.2 Provision for Income Tax has been computed on the basis of Minimum Alternate Tax (MAT) in accordance with Sec 115JB ofthe Income Tax Act, 1961. Considering the future profitability and taxable positions in the subsequent years, the Company hasrecognised ‘MAT credit entitlement’ of Rs. 211 lakh (Previous year Rs. Nil) as an asset by crediting to the Profit and Loss accountan equivalent amount and included under “Loans & Advances” in accordance with the Guidance Note on “Accounting for creditavailable in respect of Minimum Alternate Tax under Income Tax Act, 1961” issued by The Institute of Chartered Accountants ofIndia.16. The Company has entered into Options / Swaps / Forward contracts (being derivative instruments) which are not intended fortrading or speculation, for the purpose of hedging currency and interest rate related risks. Option and Swap contracts outstandingas on 31.03.09 are as follows:Category Currency Amount in MillionOptions 31.03.09 31.03.081 USD / INR USD 135.00 USD 139.2422 EURO / USD - EURO 10.003 USD / CHF - USD 33.004 USD / YEN - USD 5.00Interest Rate Swap1 INR - INR 600.00There are no forward contracts outstanding as on 31st March, 2009.Foreign currency exposure that are not hedged by derivative instruments as on 31st March, 2009 amounts to Rs. 3,804 lakh(Previous year Rs. Nil).17. Auditor’s Remuneration(Rupees in Lakh)Particulars 2008-09 2007-08Audit Fees 18 18Others 8 23Reimbursement of Expenses 1 1Total 27 4218. Managerial Remuneration(a) Managing and Non - Executive Directors’ remuneration:(Rupees in Lakh)Particulars 2008-09 2007-08Salary 193 150Allowances 49 38Contribution to Provident Fund 19 16Commission to Chairman & Managing Director 36 30Commission to Non - Executive Directors 35 25Total 332 259129

Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)(b) Computation of Net Profit in accordance with Section 198 of the Companies Act, 1956:(Rupees in Lakh)Particulars 2008-09 2007-08Profit before taxation 5,037 11,331Add: Director’s remuneration (including commission) 332 259Sitting Fees 10 8Depreciation as per book of accounts 769 3,612Provision for diminution in value of investments 216 -Loss on sale etc. of Fixed Assets for Own Use (Net) - 14Difference between the value of assets and liabilitiestransferred pursuant to Scheme of Arrangement - 316,364 15,255Less: Depreciation as envisaged under section 350 of the Companies Act, 1956 769 3612Profit on sale etc. of Fixed Assets for Own Use 354 -Profit on sale of Investments (Net) 94 127Net Profit for the year 5,147 11,516Non - Executive Director's Commission @ 1% of the above 51 115For Non - Executive Directors, restricted to 35 25For Chairman cum Managing Director restricted to 36 30(c) Salary includes provision of Rs. 35 lakh (Previous year Rs. 25 lakh) towards commission payable to non - executive directors ofthe Company, in terms of approval from Shareholders and Central Government.(d) Provision for gratuity in respect of Directors is not included above, as actuarial valuation is done on an overall basis.19. Contingent Liabilities(Rupees in Lakh)Particulars 31.03.09 31.03.0819.1 Estimated amount of capital contracts remaining to be executed (Net of advances) 77 -19.2 Bank guarantee 3,088 1,31519.3 Guarantee against receivables assigned - -19.4 Guarantee against co - branded arrangements - -19.5 Corporate Guarantee to bank 5,180 2,98119.6 Disputed income tax demand 749 -13020. Details of loans / advances to Subsidiaries & Associates:(Rupees in Lakh)Maximum Amount AmountName of Company Outstanding during Outstanding asthe period at 31.03.09Srei Capital Markets Ltd. 742 225Srei Sahaj e-Village Ltd. 1,231 1,175Srei Infrastructure Advisors Ltd. 70 70Bengal Srei Infrastructure Development Ltd. 150 115Controlla Electrotech Private Ltd. 2,411 2,411Srei Forex Ltd. 83 -Global Investment Trust Ltd. 2 -Srei Venture Capital Ltd. 64 -Quippo Infrastructure Equipment Ltd. (ceased to be an associate on 30.09.2008) 11,882 -The amounts are repayable on demand except that of Controlla Electrotech Private Ltd., Bengal Srei Infrastructure DevelopmentLtd. and Srei Sahaj e-Village Ltd. The loans and advances are interest bearing except that of Srei Capital Markets Ltd. andControlla Electrotech Private Ltd.

Annual Report 2008-09Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)21. Other financial expenses include Rs. 40 lakh (Previous year Rs. 829 lakh) paid towards upfront fees on loan processing.22. Other miscellaneous expenses include Rs. Nil (Previous year Rs. 51 lakh) towards sundry balance written off.23. Value of Imports (C.I.F. Value)(Rupees in Lakh)2008-09 2007-08Operating Lease Assets 8,522.00 91.0024. Details of movements in long term investments during the year are given as follows:Particulars Purchase Sale / RedemptionFace Value Quantity Cost Quantity Cost(Rs.) (in Lakh) (in Lakh)In Government / Government GuaranteedSecurities, Bonds & Units11.50% Tamilnadu IndustrialInvestment Corporation, 2008 1,000 - - 1500 16Equity SharesSrei Infrastructure Advisors Ltd. 10 450000 45 - -Srei Equipment Finance Private Ltd. 10 22950000 2,295 - -Controlla Electrotech Private Ltd. 10 35305 708 - -National Stock Exchange of India Ltd. 10 57200 2,062 - -Jaora-Nayagaon Toll Road Co. Ltd. 10 2800 0* - -Nagpur Seoni Expressway Ltd. 10 4800000 480 - -Indian Metal & Ferro Alloys Ltd. 10 1367147 2,468 725000 1,392Century Plyboards (I) Ltd. 10 1725000 985 - -Bonds / Debentures / UnitsIndia Global Competitive Fund 100 21875000 21,875 24000000 24,000Infrastructure Project Development Fund 100 4028500 4,029 1108100 1,108Infrastructure Project Development Capital 100 6250000 6,250 2200 2Bharat Opportunity Fund 100 24370000 24,370 23600000 23,600Tata Sons Ltd. 1,000,000 2150 21,500 2150 21,500* Less than Rs. 1 Lakh i.e. Rs. 28,000/-25. Related Party TransactionsSubsidiary Companies:Srei Infrastructure Advisors Limited(Formerly Srei Insurance Agency & Broking Limited)Srei Venture Capital Ltd.Global Investment Trust Ltd.Srei Forex Ltd.Srei Sahaj e-Village Ltd.Srei Capital Markets Ltd.Srei Infocomm Services Ltd. (Subsidiary of SreiHyderabad Information Technology Venture Enterprises Ltd.Infrastructure Advisors Ltd. w.e.f. 17.07.2008)(Subsidiary of Srei Venture Capital Ltd.)Bengal Srei Infrastructure Development LimitedIIS International Infrastructure Services GmbH, Germany(Subsidiary of Srei Infrastructure Advisors Ltd.w.e.f. 25.09.2008) (ceased to be subsidiary ofSrei Capital Markets Ltd. w.e.f. 25.09.08)Cyberabad Trustee Company Pvt. Ltd. Controlla Electrotech Private Ltd. w.e.f. 06.06.2008(Subsidiary of Srei Venture Capital Ltd.)ZAO Srei Leasing, Russia (Subsidiary of IIS International Srei Insurance Broking Pvt. Ltd. (Subsidiary of Srei EquipmentInfrastructure Services GmbH, Germany)Finance Private Ltd.) Ceased to be sub - subsidiaryw.e.f. 02.04.2008 – Refer Note II 1 of Schedule 19131

Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)Joint Venture:Srei Equipment Finance Private Ltd. (Formerly Srei Infrastructure Development Finance Ltd.) ceased to be subsidiaryw.e.f. 02.04.2008Associate Company:Quippo Infrastructure Equipment Limited (ceased to be an associate on 30.09.2008)Key Management PersonnelNameDesignationHemant Kanoria Chairman & Managing Director (w.e.f. 14.05.2008)Prasad Kumar Pandey Wholetime Director (retired on 31.03.2009)Kishore Kumar MohantyWholetime DirectorShyamalendu ChatterjeeResigned on 31.03.2009 as Wholetime Director, Appointed asNon - Executive Director w.e.f. 29.04.2009Sanjeev SanchetiChief Financial Officer132Summary of Transactions with Related Parties(Rupees in Lakh)Name of related party & Nature of Transactions and 2009 2008Nature of relationshipOutstanding balances(A) Subsidiaries:Srei Infrastructure Advisors Limited Subscription to Equity Shares 45 -Loan advanced 66 -Interest received on Loan 4 -Balance receivable 70 -Srei Venture Capital Ltd. Short term advance given 26 -Refund of short term advance 26 -Srei Sahaj e-Village Ltd. Subscription to Equity Shares - 56Loan advanced 830 220Interest received on Loan 166 28Corporate guarantee given on behalf of Subsidiary 6,000 2,981Corporate guarantee – Outstanding as at year end 8,981 2,981Balance receivable 1,175 345Bengal Srei Infrastructure Development Limited Loan advanced 150 -Refund of Loan advanced 40 -Interest received on Loan 5 -Balance receivable 115 -Global Investment Trust Ltd. Loan advanced 1 -Refund of Loan advanced 2 -Balance receivable - 1Srei Forex Ltd. Loan advanced 3 -Loan Write - off 83 -Balance receivable - 80Srei Capital Markets Ltd. Loan advanced 510 1,839Refund of Loan advanced 685 1,439Balance receivable 225 400IIS International Infrastructure ServicesGmbH, Germany Subscription to Equity Shares - 1,933Controlla Electrotech Private Ltd. Security deposit paid 2,411 -Rent Paid 6 -Security Deposit receivable 2,411 -

Annual Report 2008-09Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)(Rupees in Lakh)Name of related party & Nature of Transactions and 2009 2008Nature of relationshipOutstanding balances(B) Joint Ventures:Srei Equipment Finance Private Ltd. Subscription to Equity Shares 2,295 -Transfer as per Scheme of Arrangement - 37,531Amount received towards transfer as perScheme of Arrangement 37,500 -Loan advanced 46,997 -Refund of loan advanced 46,997 -Loan received 5,937 21,955Refund of Loan received 27,991 -Security deposit received 717 -Security deposit paid 72 -Interest received on Loan 2,083 -Interest paid on Loan 49 99Rent paid 36 -Rent received 464 -Balances Outstanding:Security Deposit payable 717 -Security Deposit receivable 72 -Transfer as per Scheme ofArrangement - balance receivable - 37,500Loan balance receivable - 22,054(C) Associates:Quippo Infrastructure Equipment Limited Interest / Finance Charges received 637 932Loan advanced 4,183 7,063Sale of Assets - 3(D) Key Management Personnel:Hemant Kanoria Remuneration 103 81Commission 36 30Dividend paid 2 3Prasad Kumar Pandey Remuneration 47 39Dividend paid 1 -Kishore Kumar Mohanty Remuneration 65 43Dividend paid 1 -Shyamalendu Chatterjee Remuneration 46 41Sanjeev Sancheti Remuneration 41 1426. Disclosure in respect of Company’s Joint Ventures in India pursuant to Accounting Standard 27 ‘Financial Reporting of Interestin Joint Ventures’ as on 31.03.09:a) Name of the Venture Country of Proportion ofIncorporationOwnership InterestSrei Equipment Finance Private Ltd. (100% subsidiary upto 01.04.08) India 50%b) The aggregate of the Company’s share in the above venture is: (Rupees in Lakh)Particulars 2009Net Fixed Assets 20,095Net Current Assets 300,713Loans / Borrowings 274,005Income 46,765Expenses (Including Depreciation & Taxation) 43,638Contingent Liabilities 4,026Capital Commitments (Net of Advances) 56133

Schedules to the Balance Sheet and Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS (Contd.)27. Earnings Per Share - Basic and Diluted Earnings per ShareParticulars 31.03.09 31.03.081. Net Profit after tax attributable to Equity Shareholders (Rs. In Lakh) 5,036 10,7962. Weighted average number of Equity Shares Basic (Nos.) 116144798 1089639433. Weighted average number of Potential Equity Shares (Nos.) - 3,3624. Weighted average number of Equity Shares Diluted (Nos.) 116144798 1089673055. Nominal Value of Equity per share (Rs.) 10 106. Basic Earnings per share (Rs.) 4.34 9.917. Diluted Earnings per share (Rs.) 4.34 9.9128. Schedule to the Balance Sheet as required by the Reserve Bank of India vide notification dated 29th March, 2003 (as perAnnexure – II attached).Additional information pursuant to the provisions of para 3, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956.(Rupees in Lakh)Particulars 31.03.09 31.03.0829. Expenditure in foreign currencies:a) Finance charges 15,509 8,667b) Professional / Consultation Fees 285 71c) On other matter 136 69830. Earning in foreign currencies:a) Interest on Bank Deposit - -b) Income from loan - 60c) Fee Based Income 7 -31. Amount remitted in foreign currencies for dividend(including one Foreign Financial Institution)a) Number of Non Resident Shareholders 12 14b) Number of Shares held(Equity Shares of Rs. 10/- each) 166175 177538c) Dividend Remitted (Rs. in Lakh) 2 2d) Year 2007-08 2006-0732. The Company is a Non Banking Finance Company and was being classified as “Asset Finance Company” on the basis of thecriteria set forth by the Reserve Bank of India in circular number DNBS.PD.CC No 85/03.02.089/2006-07 dated 06-12-2006.Based on the asset / income pattern for the year ended 31-03-2009, the company will now apply to RBI for change in classificationto “Loan Company”.33. In view of the transfer of all business, assets and liabilities of the project finance business and asset based financing business ofthe Company including its shareholding in SIBPL to SEFPL with effect from January 1, 2008, referred to in Note II.1, the figuresfor the previous year are not comparable with the current year.34. Previous year figures have been regrouped / rearranged, wherever considered necessary.Signatories to Schedules 1 to 19.For Deloitte Haskins & SellsChartered AccountantsOn behalf of the Board of DirectorsAbhijit Bandyopadhyay Hemant Kanoria Salil K. Gupta Sandeep LakhotiaPartner Chairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 09134

Annual Report 2008-09ANNEXURE I TO NOTES ON FINANCIAL STATEMENTSStock for Trade as at 31st March, 2009Equity Shares: Trade Face Value Quantity Cost Value(Rs.) (Nos.) (Rs. in Lakh)Bala Techno Synthetics Ltd. 10 5000 1 1Hotline Glass Ltd. 10 110609 12 1Kamala Tea Co. Ltd. 10 25000 11 30Shanghi Polyster Ltd. 10 2000 0 0Shriram Asset Management Company Ltd. 10 15000 2 2Dwarikesh Sugar Mills Ltd. 10 25000 23 10L. D. Textile Industries Ltd. 10 42000 0* 0#Shentracon Chemicals Ltd. 10 99400 0* 0#India Lead Ltd. 10 418668 0* 0#Mega Marketshare Resources Ltd. 10 6000 0* 0#PAAM Pharmaceuticals (Delhi) Ltd. 10 1210 0* 0#Standard Chrome Limited 10 300 0* 0#Kanel Oil & Export Ltd. 10 3100 0* 0#Kesoram Textiles Ltd. 10 20 0* 0#NEPC Agro Foods Ltd. 10 1333 0* 0#49 44Less: Provision for diminution 5Total 44* Book value Re. 1; # Valued at Re. 1Equity Shares purchased and / or sold during the yearEquity Shares: Trade Face Value Purchase Sale / Redemption(Rs.) Quantity Cost Quantity Cost(Nos.) (Rs. in Lakh) (Nos.) (Rs. in Lakh)Diana Tea Company Ltd. 10 - - 508235 48Balrampur Chini Mills Ltd. 10 152706 118 152706 118Dwarikesh Sugar Mills Ltd. 10 25000 23 - -GAIL India Ltd. 10 5000 22 5000 22135

ANNEXURE I TO NOTES ON FINANCIAL STATEMENTSBonds / Debentures / Units purchased and sold during the yearPurchaseSale / RedemptionBonds / Debentures / Units : Trade Face Value Cost Face Value Cost(in Lakh) (in Lakh) (in Lakh) (in Lakh)0% National Bank for Agriculture & Rural Development, 2017 103 111 103 11110.10% State Bank of India, 2022 140 145 140 14510.90% Rural Electrification Corporation, 2018 300 321 300 32111% Industrial Development Bank of India, 2018 170 178 170 17811% Power Finance Corporation, 2018 230 259 230 25911% Tamil Nadu Electricity Board, 2013 110 119 110 11911.25% Housing Development Finance Corporation Ltd., 2018 600 645 600 64511.25% Power Finance Corporation, 2018 50 55 50 5511.30% Industrial Development Bank of India, 2018 150 168 150 16811.35% Industrial Development Bank of India, 2013 40 43 40 4311.95% Housing Development Finance Corporation Ltd., 2018 20 23 20 238.45% Indian Railway Finance Corporation, 2018 20 19 20 198.50% Indian Railway Finance Corporation, 2023 120 115 120 1158.64% Indian Railway Finance Corporation, 2021 20 20 20 208.80% State Bank of India, 2021 40 40 40 408.90% State Bank of India - Upper Tier 2 Bonds 20,000 20,935 20,000 20,9358.95% Infrastructure Development Finance Corporation, 2018 60 59 60 599.30% West Bengal Infrastructure Development Corporation Ltd., 2017 130 128 130 1289.34% State Bank of Travancore, 2016 100 100 100 1009.35% Central Bank of India, 2018 50 51 50 519.35% Punjab National Bank, 2023 500 499 500 4999.40% Power Finance Corporation, 2013 1,000 1,003 1,000 1,0039.50% Housing Development Finance Corporation Ltd., 2017 140 136 140 1369.78% State Bank of Bikaner & Jaipur, 2022 270 285 270 2859.80% LIC Housing Finance Ltd., 2017 100 99 100 99136

Annual Report 2008-09ANNEXURE II TO NOTES ON FINANCIAL STATEMENTSDisclosure of details as required in terms of paragraph 13 of Non Banking Financial (Deposit Accepting or Holding) CompaniesPrudential Norms (Reserve Bank) Directions, 2007(Rupees In Lakh)Particulars Amount AmountOutstandingOverdueLiabilities Side:(1) Loans and advances availed by the non - banking financial companyinclusive of interest accrued thereon but not paid:(a) Secured Debentures / Bonds -Secured - -Unsecured (Other than falling within the meaning of public deposit) 7,898 -(b) Deferred Credits - -(c) Term Loans 112,537 -(d) Inter - corporate loans and borrowing 1,289 -(e) Commercial Papers - -(f) Public Deposits (Refer Note 1) 543 62(g) Other Loans 12,450 -(2) Break up of (1) (f) above (Outstanding Public Deposits inclusive of interestaccrued thereon but not paid):(a) In the form of Unsecured Debentures - -(b) In the form of partly secured Debentures i.e. Debentures where thereis a shortfall in the value of security - -(c) Other public deposits (Refer Note 1) 543 62(Rupees in Lakh)Assets Side :AmountOutstanding(3) Break up of Loans and Advances including bills receivables[other than those included in (4) below]:(a) Secured 94,886(b) Unsecured 22,598(4) Break up of Leased Assets and Stock on Hire and other assets counting towards AFC activities(a) Financial assets -(b) Assets on Operating Lease 11,572(c) Repossessed Assets -(5) Break up of InvestmentsCurrent Investments(1) Quoted:(i) Shares: Equity 37(ii) Debentures and bonds -(iii) Units of mutual funds -(iv) Government Securities -(v) Others -(2) Unquoted:(i) Shares: Equity 11(ii) Debentures and bonds -(iii) Units of mutual funds -(iv) Government Securities -(v) Others -137

ANNEXURE II TO NOTES ON FINANCIAL STATEMENTSDisclosure of details as required in terms of paragraph 13 of Non Banking Financial (Deposit Accepting or Holding)Companies Prudential Norms (Reserve Bank) Directions, 2007 (Contd.)(Rupees in Lakh)Assets Side :AmountOutstandingLong term investments(1) Quoted:(i) Shares: Equity 7,617(ii) Debentures and bonds -(iii) Units of mutual funds 0.24(iv) Government Securities 243(v) Others -(2) Unquoted:(i) Shares: Equity 13,632(ii) Debentures, bonds / units -(iii) Units of mutual funds -(iv) Government Securities 0.15(v) Others (Investment in Funds) 26,563(6) Borrower group - wise classification of assets financed as in (3) and (4) above:CategoryAmount net of provisions1. Related Parties Secured Unsecured Total(a) Subsidiaries - 3,995 3,995(b) Companies in the same group - - -(c) Other related parties - 72 722. Other than related parties 106,458 18,531 124,989Total 106,458 22,598 129,056(7) Investor group wise classification of all investments (current and long term) in shares and securities (both quoted andunquoted):Category Market Value / Book ValueBreak up or fair (net of provisions)value or NAV1. Related Parties(a) Subsidiaries 4,734 4,734(b) Companies in the same group - -(c) Other related parties 2,500 2,5002. Other than related parties 36,881 40,860Total 44,115 48,094(8) Other Information:ParticularsAmounti. Gross Non - Performing Assets(a) Related Parties -(b) Other than Related Parties -ii. Net Non - Performing Assets(a) Related Parties -(b) Other than Related Parties -iii. Assets acquired in satisfaction of debt -Note - 1: As defined in Paragraph 2(1) (xii) of the Non - Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)Directions, 1998.138

Annual Report 2008-09BALANCE SHEET ABSTRACTINFORMATION PURSUANT TO PART IV OF SCHEDULE VI TO COMPANIES ACT, 1956 (AS AMENDED)Balance Sheet Abstract and Company's General Business ProfileI. Registration DetailsRegistration No L29219WB1985PLC055352 State Code 21Balance Sheet Date 31st March, 2009II. Capital Raised during the year(Amount in Rs. Thousands)Public Issue Nil Right Issue NilBonus Issue Nil Private Placement NilPreferential AllotmentNilIII. Position of Mobilisation and Deployment ofFunds (Amount in Rs. Thousands)Total Liabilities 20,770,067 Total Assets 20,770,067Source of FundsPaid up Capital 1,162,962 Reserves & Surplus 5,743,334Equity Warrants 178,000 Unsecured Loans 1,910,022Secured Loans 11,516,096 Deferred Tax -Application of FundsNet Fixed Assets 803,470 Investments 4,805,091Net Current Assets 14,901,853 Misc. Expenditure -Accumulated Losses -IV. Performance of the Company(Amount in Rs. Thousands)Turnover 3,264,322 Total Expenditure 2,760,715Profit Before Tax [+] 503,552 Profit After Tax [+] 503,608(+ for Profit, - for Loss)Earnings Per Share (in Rs.) Dividend Per Share Re.1Basic 4.34 Dividend Rate (%) 10%Dilutive 4.34V. Generic names of Three Principal Products /Services of Company (as per monetary terms)Item Code No (ITC Code)Not ApplicableProducts DescriptionFinancing ActivityItem code No. (ITC Code) –Products Description –Item Code No. (ITC Code) –Products Description –On behalf of the Board of DirectorsHemant Kanoria Salil K. Gupta Sandeep LakhotiaChairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 09139

Statement Pursuant to Section 212 of The Companies Act, 1956 Relating to Subsidiary CompaniesName of the Subsidiary Company Srei Venture Global Srei Capital Srei Forex Ltd. Srei Controlla Srei Sahaj Bengal Srei Hyderabad Cyberabad Srei Infocomm IIS International ZAO SreiCapital Ltd. Investment Markets Ltd. Infrastructure Electrotech e - Village Ltd. Infrastructure Information Trustee Services Ltd. Infrastructure LeasingTrust Ltd. Advisors Ltd. Private Ltd. Development Technology Company Services GmbHLtd. Venture Private Ltd.Enterprises Ltd.Accounting year of the Subsidiary Company March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009 Dec 31, 2008Shares of the Subsidiary Companya. Number and Face Value 250,000 50,000 Equity 5,050,000 500,000 500,000 35,305 Equity 1,000,000 50,000 Equity 250,000 50,000 Equity 50,000 Equity 6,370,000 330,750,000Equity Shares Shares of Equity Shares Equity Shares Equity Shares Shares of Equity Shares Shares of Equity Shares Shares of Shares of Euro# RUB#of Rs. 10/- each Rs. 10/- each of Rs. 10/- each of Rs. 10/- each of Rs. 10/- each Rs. 10/- each of Rs. 10/- each Rs. 10/- each of Rs. 10/- each Rs. 10/- each Rs. 10/- eachfully paid up fully paid up fully paid up fully paid up fully paid up fully paid up fully paid up fully paid up fully paid up fully paid up fully paid upb. Extent of holding 100% 100% 100% 100% 100% 100% 51% 51% Held by 51% Held by 51% Held by 100% Held by 92.54% 63.49% Held bySrei Srei Venture Srei Venture Srei IIS InternationalInfrastructure Capital Ltd. Capital Ltd. Infrastructure InfrastructureAdvisors Ltd. Advisors Ltd. Services GmbH& its Nominees* & its NomineesNet Aggregate amount of Profit / (Loss) of the SubsidiaryCompany so far as it concerns the members ofSrei Infrastructure Finance Limited.a. Not dealt with in the Account of Srei InfrastructureFinance Limited for the year ended March 31, 2009(i) for the Subsidiary's financial year ended Rs. 1,119,639 Rs. 77,673 Rs. (5,568,753) Rs. (411,907) Rs. 107,258 Rs. (4,021,206) Rs. 20,715,586 Rs. 1,751,900 Rs. 844,801 Rs. 10,139 Rs. (174,312) Euro (28,820) RUB 6,017,489 @March 31, 2009(ii) for the previous financial years of the Subsidiary Rs. 96,747,638 Rs. 532,316 Rs. 17,594,285 Rs. (948,988) Rs. 508,309 Rs. Nil Rs. (7,162,969) Rs. 466,773 Rs. 5,061,304 Rs. 2,641 Rs. Nil Euro (208,516) RUB 101,670since it became the Holding Company's Subsidiaryb. Dealt with in the Account of SreI InfrastructureFinance Limited for the year ended March 31, 2009(i) for the Subsidiary's financial year ended Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil N.A N.AMarch 31, 2009(ii) for the previous financial years of the Subsidiary Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil Rs. Nil N.A N.Asince it became the Holding Company's Subsidiary* '51% Held by Srei Capital Markets Ltd. & its Nominees upto 24.09.08@ For the financial year ended 31st December, 2008# There is no system of issuance of distinctive shares in the country of registration.On behalf of the Board of DirectorsHemant Kanoria Salil K. Gupta Sandeep LakhotiaChairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 2009140

Annual Report 2008-09Consolidated Financial StatementsAuditors’ ReportTo the Board of Directors,Srei Infrastructure Finance Limited1. We have audited the attached Consolidated BalanceSheet of Srei Infrastructure Finance Limited, itssubsidiaries (including its subsidiaries and joint venture),associate company and joint venture (including itssubsidiary) (collectively referred to as “the Group”) as at31st March, 2009, the Consolidated Profit and Lossaccount for the year ended on that date and theConsolidated Cash Flow Statement for the year ended onthat date annexed thereto. These financial statements arethe responsibility of the Company’s management andhave been prepared by the management on the basis ofseparate financial statements and other financialinformation regarding components. Our responsibility isto express an opinion on these financial statements basedon our audit.2. We conducted our audit in accordance with generallyaccepted auditing standards in India. Those standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes, examining on a test basis, evidence supportingthe amounts and disclosures in the financial statements.An audit also includes assessing the accounting principlesused and significant estimates made by the management,as well as evaluating the overall financial statementpresentation. We believe that our audit provides areasonable basis for our opinion.3. We did not audit the financial statements of certainsubsidiaries (including their subsidiaries and jointventure), whose financial statements reflect total assetsof Rs. 40,136 lakh as at 31st March, 2009, total revenueof Rs. 16,144 lakh and net cash inflows amounting toRs. 415 lakh for the year then ended. We have also notreviewed the financial statements of a subsidiary of thejoint venture of the Company whose financial statementsreflect total assets of Rs. 308 lakh, total revenuesof Rs. 137 lakh and net cash inflows amounting toRs. 35 lakh for the year then ended. These financialstatements and other financial information have beenaudited by other auditors whose reports have beenfurnished to us, and our opinion in so far as it relates to theamounts included in respect of the subsidiaries (includingtheir subsidiaries) is based solely on the report of otherauditors except for in case of a foreign sub subsidiarywhere reliance has also been placed on the managementaccounts for the 3 month period ended 31st March, 2009and 31st March, 2008.4. The financial statements of the associate have not beenconsolidated due to the non availability of managementaccounts.5. We report that the consolidated financial statementshave been prepared by the Company’s managementin accordance with requirements of AccountingStandard 21 - Consolidated Financial Statements,Accounting Standard 23 - Accounting for Investments inAssociates in Consolidated Financial Statements andAccounting Standard 27 - Financial Reporting of Interestsin Joint Ventures, notified by the Central Governmentunder Companies (Accounting Standards) Rules, 2006.6. Based on our audit as aforesaid and on consideration ofreports of other auditors on separate financial statementsand on the other financial information of the components,and to the best of our information and according to theexplanations given to us, we are of the opinion that theattached consolidated financial statements give a true andfair view in conformity with the accounting principlesgenerally accepted in India:a. in the case of the Consolidated Balance Sheet, of thestate of affairs of the Group as at March 31, 2009;b. in the case of the Consolidated Profit and Loss Account,of the profit of the Group for the year ended on that date;andc. in the case of the Consolidated Cash Flow Statement, ofthe cash flows of the Group for the year ended on thatdate.For Deloitte Haskins & SellsChartered AccountantsAbhijit BandyopadhyayPlace : KolkataPartnerDate : 12th June, 2009 Membership No. 054785141

Consolidated Balance Sheet as at 31st March, 2009(Rupees in Lakh)Schedule 2009 2008SOURCES OF FUNDSShareholders' FundsShare Capital 1 11,629 11,629Equity Warrants Issued and Subscribed 1,780 1,780Reserves and Surplus 2 101,529 114,938 58,875 72,284Minority Interest 2,211 762Loan FundsSecured 3 375,155 418,800Unsecured 4 53,074 135,650428,229 554,450Deferred Tax Liability 2,743 1,140Total 548,121 628,636APPLICATION OF FUNDSFixed AssetsGross Block 5 35,610 53,024Less: Depreciation 4,223 9,651Net Block 31,387 43,373Goodwill 622 57Deferred Tax Assets 22 61Investments 6 44,382 32,189Current Assets, Loans and AdvancesInventories 2,401 2,287Sundry Debtors 7 6,759 1,204Cash & Bank Balances 8 48,308 27,931Financial & Other Current Assets 9 297,215 443,607Loans & Advances 10 136,771 105,121491,454 580,150Less: Current Liabilities and ProvisionsLiabilities 11 13,278 20,853Provisions 12 6,728 6,90820,006 27,761Net Current Assets 471,448 552,389Miscellaneous Expenditure 13 260 567(To the extent not written off or adjusted)Total 548,121 628,636Significant accounting policies and noteson financial statements 19The Schedules referred to above form an integral part of the Balance Sheet.This is the Balance Sheet referred to in our report of even date.For Deloitte Haskins & SellsChartered AccountantsOn behalf of the Board of DirectorsAbhijit Bandyopadhyay Hemant Kanoria Salil K. Gupta Sandeep LakhotiaPartner Chairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 0910 Lakh is equal to 1 Million142

Annual Report 2008-09Consolidated Profit and Loss Account for the year ended 31 March, 2009(Rupees in Lakh)Schedule 2009 2008INCOMEIncome from Operations 14 84,246 73,284Other Income 15 907 6,789Total 85,153 80,073EXPENDITUREStaff Expenses 16 5,383 4,504Administrative & Other Expenses 17 10,665 6,604Finance Charges 18 52,221 45,840Depreciation 3,658 4,901Miscellaneous Expenditure written off 44 83Total 71,971 61,932PROFIT BEFORE BAD DEBTS AND PROVISIONS 13,182 18,141Bad Debts / Advances written off 87 693Stock for Trade written off - 347Provisions as per the norms of Reserve Bank of India &Foreign Financial Institutions 2,513 1,736Provision for Premium on Unsecured Subordinated Bonds 88 882,688 2,864PROFIT BEFORE TAX 10,494 15,277Provision for Tax:- Current Tax 701 807- MAT Credit Entitlement (711) (162)- Deferred Tax 2,199 1,140- Fringe Benefits Tax 46 15- Income Tax in respect of earlier years 2 4PROFIT AFTER TAX BEFORE SHARE OF RESULTS OF ASSOCIATEAND MINORITY INTERESTS 8,257 13,473Share of loss of Associates - (232)PROFIT AFTER TAX BEFORE MINORITY INTERESTS 8,257 13,241Minority Interest 49 47Net Profit 8,208 13,194Pre Acquisition Profit / (Loss) - 52Minority Interest of Pre Acquisition (Profit) / Loss (4) 27PROFIT AFTER TAX AFTER ADJUSTMENT OF MINORITY INTERESTS 8,204 13,273Surplus brought forward from previous year 13,353 6,251PROFIT AVAILABLE FOR APPROPRIATION 21,557 19,524APPROPRIATIONSSpecial Reserve (As per Reserve Bank of India Guidelines) 1,647 2,682Debt Redemption Reserve (Net) 2,629 1,556General Reserve 3 300Proposed Dividend 1,163 1,396Corporate Dividend Tax on Proposed Dividend 198 237Adjustment due to conversion of Subsidiary into Joint Venture 142 -Surplus carried to Balance Sheet 15,775 13,353Total 21,557 19,524Earnings Per Equity Share (Basic) Rs. 7.07 12.18Earnings Per Equity Share (Diluted) Rs. 7.07 12.18(Face Value Rs. 10/- per Share)Significant accounting policies and notes on financial statements 19The Schedules referred to above form an integral part of the Profit and Loss Account.This is the Profit and Loss Account referred to in our report of even date.For Deloitte Haskins & SellsChartered AccountantsOn behalf of the Board of DirectorsAbhijit Bandyopadhyay Hemant Kanoria Salil K. Gupta Sandeep LakhotiaPartner Chairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 0910 Lakh is equal to 1 Million143

Consolidated Cash Flow Statement for the year ended 31 March, 2009(Rupees in Lakh)2009 2008A. Cash Flow from Operating ActivitiesNet Profit Before Tax 10,494 15,277Adjustment for:Depreciation 3,658 4,901Bad Debts / stock for trade written off 87 1,040Provision for Non - Performing Assets & Doubtful debts 2,513 1,736Provision for Premium on Unsecured Subordinated Bonds 88 88Loss on sale of Fixed Assets (net) - 17Profit on sale of Fixed Assets 353 -Interest Expenses 52,221 45,840Miscellaneous Expenditure Written off 44 83Liabilities No Longer Required Now Written Back - (6,427)Dividend Income (67) (23)Provision for dimunition in value of Investments 166 -Operating Profit before Working Capital Changes 69,557 62,532Adjustments for:(Increase) / Decrease in Receivables / Others (70,247) (71,509)(Increase) / Decrease in Financial Assets 163,961 (141,396)(Decrease) / Increase in Trade Payables 6,382 4,027Cash Generated from Operations 169,653 (146,346)Interest Paid (54,661) (39,531)Direct Taxes paid (963) (1,021)Net Cash (Used in) / Generated from Operating Activities 114,029 (186,898)B. Cash Flow from Investing ActivitiesPurchase of Fixed Assets 5,806 (6,514)Proceeds from Sale of Fixed Assets 1,604 1,750(Increase) / Decrease in Investments (12,359) (18,040)Dividend Received 67 23Net Cash (Used) / Generated in Investing Activities (4,882) (22,781)C. Cash Flow from Financing ActivitiesIssue of Equity Capital (including premium) 37,582 8,103Issue of Equity Warrants (Net) - 1,780Net Increase in Borrowings (124,719) 220,171Dividend Paid (1,396) (1,089)Dividend Tax (237) (185)Net Cash (Used) / Generated in Financing Activities (88,770) 228,780Net Increase / (Decrease) in Cash & Cash Equivalents 20,377 19,101Cash & Cash Equivalents as on 01.04.2008 27,931 8,830Cash & Cash Equivalents as on 31.03.2009 48,308 27,931Notes:1. The above Cash Flow Statement has been prepared under the IndirectMethod as set out in the Accounting Standard 3 (AS 3) 'Cash FlowStatements' notified by the Central Government under Companies(Accounting Standards) Rules, 20062. Cash and Cash Equivalent at the end of the year as per Balance Sheet 48,308 27,931Less: Fixed Deposits under Lien 14,592 17,31533,716 10,6163. Opening Cash & Cash Equivalents includes Rs. 18,205 Lakh on account ofSEFPL which has became a joint venture w.e.f. 2nd April, 08(Refer Note no. II 6 of Schedule 19)4. Previous year's figures have been regrouped, wherever necessaryto conform to the current year's classification.This is the Cash Flow Statement referred to in our report of even date.For Deloitte Haskins & SellsChartered AccountantsOn behalf of the Board of Directors144Abhijit Bandyopadhyay Hemant Kanoria Salil K. Gupta Sandeep LakhotiaPartner Chairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 0910 Lakh is equal to 1 Million

Annual Report 2008-09Schedules to the Consolidated Balance Sheet as at 31 March, 2009(Rupees in Lakh)2009 2008SCHEDULE 1 - SHARE CAPITALAuthorised400,000,000 Equity Shares of Rs. 10/- each 40,000 40,000(Previous year 400,000,000 shares of Rs.10/- each)30,000,000 Preference Shares of Rs. 100/- each 30,000 30,000(Previous year 30,000,000 shares of Rs. 100/- each)70,000 70,000Issued and Subscribed116,617,625 Equity Shares of Rs. 10/- each 11,661 11,661(Previous year 116,617,625 shares of Rs. 10/- each)Paid up116,144,798 Equity Shares of Rs. 10/- each fully paid up 11,614 11,614(Previous year 116,144,798 shares of Rs. 10/- each)Add : Forfeited Shares 15 1511,629 11,629SCHEDULE 2 - RESERVES & SURPLUSCapital ReservesAs per Last Balance Sheet 184 165Add: Addition during the year 15 199 19 184Share Premium AccountAs per Last Balance Sheet 31,992 24,609Add: Addition during the year 37,582 69,574 7,383 31,992General ReserveAs per Last Balance Sheet 1,434 1,174Add: Addition during the year 3 1,437 260 1,434Bond / Debt Redemption ReserveAs per Last Balance Sheet 3,822 2,266Add: Addition during the year 1,814 5,636 1,556 3,822Special Reserve as per Reserve Bank of India GuidelinesAs per Last Balance Sheet 7,909 5,227Add: Addition during the year 1,403 9,312 2,682 7,909Foreign currency translation reserveAs per Last Balance Sheet 181 8Add: Addition during the year (585) (404) 173 181Profit & Loss AccountAs per Last Balance Sheet 13,353 6,266Add: Addition during the year 2,422 15,775 7,087 13,353101,529 58,875SCHEDULE 3 - SECURED LOANSDebentures 41,348 85,395Term Loans:Banks 124,687 88,436Foreign Banks 86,237 81,839Domestic Financial Institutions 12,814 20,266Foreign Financial Institutions 40,107 35,492Working Capital Facilities from Banks 68,943 105,111Foreign Guaranteed Local Currency Bonds 563 1,500Public Deposits 453 749Other Secured Loans 3 12375,155 418,80010 Lakh is equal to 1 Million145

Schedules to the Consolidated Balance Sheet as at 31 March, 2009(Rupees in Lakh)2009 2008SCHEDULE 4 - UNSECURED LOANSSubordinated Debenture / Bonds / Loan 16,368 21,527Short Term Loans and Advances:Domestic Banks 12,500 8,000Domestic Financial Institutions 10,250 52,500Others 1,204 238Other Loans and Advances:Domestic Banks 3,750 27,000Foreign Banks 1,220 3,024Domestic Financial Institutions 6,250 20,000Foreign Financial Institutions 1,532 3,36153,074 135,650SCHEDULE 5 - FIXED ASSETS(Rupees in Lakh)Particulars Gross Block Depreciation / Amortisation Net BlockAs of 1st Additions Sales / Adj. Adjustment As of 31st As of 1st For Sales / Adj. Adjustment As of 31st As of 31st As of 31stApril, during during March, April, the year during March, March, March,2008 the year the year 2009 2008 the year 2009 2009 2008Assets for Own use:Freehold Land 408 9 180 2 235 - - - - - 235 408Buildings 704 2,188 - 391 2,501 140 33 - 139 34 2,467 564Furniture & Fixtures 1,242 631 10 713 1,150 327 81 1 292 115 1,035 915Motor Vehicles 219 18 3 154 80 89 9 1 86 11 69 130Machinery 1,300 950 3 853 1,394 675 188 1 593 269 1,125 625Development Asset 525 - 525 - - - - - - - - 525Total (A) 4,398 3,796 721 2,113 5,360 1,231 311 3 1,110 429 4,931 3,167Intangible Assets -OthersSoftware 377 201 - 244 334 129 46 - 118 57 277 248Tenancy Right 10 - - 6 4 3 1 - 3 1 3 7Total (B) 387 201 - 250 338 132 47 - 121 58 280 255Total (C) (A+B) 4,785 3,997 721 2,363 5,698 1,363 358 3 1,231 487 5,211 3,422Assets forOperating Lease:Aeroplanes / Aircraft 2,406 1,987 - 1,335 3,058 300 279 - 282 297 2,761 2,106Ships 1,958 - 800 1,158 - 406 81 105 382 - - 1,552EarthmovingEquipments 7,939 88 58 4,708 3,261 1,702 454 10 1,590 556 2,705 6,237Motor Vehicles 17,201 1,398 179 10,551 7,869 4,523 1,438 36 4,212 1,713 6,156 12,678Plant & Machinery 2,348 6,784 - 1,274 7,858 228 607 - 214 621 7,237 2,120Wind Mills 16,387 - - 8,650 7,737 1,129 433 - 1,021 541 7,196 15,258Computers - 129 - - 129 - 8 - - 8 121 -Total (D) 48,239 10,386 1,037 27,676 29,912 8,288 3,300 151 7,701 3,736 26,176 39,951Total (C+D) 53,024 14,383 1,758 30,039 35,610 9,651 3,658 154 8,932 4,223 31,387 43,373Previous year 48,446 6,482 1,904 - 53,024 4,887 4,901 137 - 9,651 43,37310 Lakh is equal to 1 Million146

Annual Report 2008-09Schedules to the Consolidated Balance Sheet as at 31 March, 200910 Lakh is equal to 1 Million(Rupees in Lakh)2009 2008SCHEDULE 6 - INVESTMENTS, FULLY PAID UPIn Associates (Including Goodwill Rs. 121 Lakh in previous year) - 4,619(After adjustment for share of profits and securities premium)In Government, Government guaranteed securities, bonds & units 243 260In Other Securities (including Rs. 4,619 Lakh towards company ceased to be associatew.e.f. 30th September, 08) 44,139 27,31044,382 32,189SCHEDULE 7 - SUNDRY DEBTORSSundry Debtors Operating Lease - Secured, Considered goodDebts outstanding for a period exceeding six months 77 122Other Debts 466 683Sundry Debtors Others - Unsecured, Considered goodDebts outstanding for a period exceeding six months 1,534 185Other Debts 4,682 2146,759 1,204SCHEDULE 8 - CASH AND BANK BALANCESCash & Bank BalancesCash in hand 58 238With Scheduled Banks- In Unclaimed Dividend Account 35 35- In Current Account 9,104 1,777- In Fixed Deposit Account [includes Rs. 14,592 Lakh under lien (previous year - Rs. 17,315 Lakh)] 39,111 25,88148,308 27,931SCHEDULE 9 - FINANCIAL & OTHER CURRENT ASSETSInterest accrued but not due on investments / Fixed deposits / Loans 236 285Stock for Trade 44 74Financial Assets 296,935 442,848Other Current Assets - 400297,215 443,607SCHEDULE 10 - LOANS & ADVANCESSecured, Considered Good:- Loan 94,886 16,969- Advance for Operating Lease 3,594 -Unsecured Loan, Considered Good 1,400 -Advances recoverable in cash or in kind or for value to be receivedAdvance Tax [net of provision for tax Rs. 2,159 Lakh (previous year Rs. 2,148 Lakh)] 1,594 1,260MAT Credit Entitlement 792 162Others 34,505 86,730136,771 105,121SCHEDULE 11 - CURRENT LIABILITIESSundry Creditors for Operating Lease- total outstanding dues of micro, small and medium enterprises - -- total outstanding dues of creditors other than micro, small and medium enterprises 811 218Sundry Creditors - Others- total outstanding dues of micro, small and medium enterprises - -- total outstanding dues of creditors other than micro, small and medium enterprises 3,077 193Amounts to be credited to Investor Education and Protection Fund*Unpaid dividend 35 35Unpaid matured deposits 62 86Other liabilities 3,229 11,975Interest accrued but not due on loans 6,064 8,34613,278 20,853* There is no amount due and outstanding as at Balance Sheet dateto be credited to Investor Education and Protection Fund147

Schedules to the Consolidated Balance Sheet as at 31 March, 2009(Rupees in Lakh)2009 2008SCHEDULE 12 - PROVISIONSProvision for Fringe Benefits Tax 54 15Proposed Dividend 1,163 1,396Provision for Corporate Dividend Tax 198 237Provision as per the norms of Reserve Bank of India & Foreign Financial Institution 4,903 4,781Provision for Gratuity 92 91Provision for Premium on Unsecured Subordinated Bonds 318 3886,728 6,908SCHEDULE 13 - MISCELLANEOUS EXPENDITURE(To the extent not written off or Adjusted)Opening BalanceShare issue expenses 41 4Bonds and Debentures issue expenses 128 152Share issue expenses (GDR) 398 455567 611Add: Addition during the yearShare issue expenses - 39Bonds and Debentures issue expenses - -Share issue expenses (GDR) - -567 650Less: AdjustmentShare issue expenses - -Bonds and Debentures issue expenses 64 -Share issue expenses (GDR) 199 -263 -Less: Amounts written off during the yearShare issue expenses 2 2Bonds and Debentures issue expenses 13 24Share issue expenses (GDR) 29 5744 83Closing BalanceShare issue expenses 39 41Bonds and Debentures issue expenses 51 128Share issue expenses (GDR) 170 398260 567Schedules to the Consolidated Profit and Loss Accountfor the year ended 31st March, 2009(Rupees in Lakh)2009 2008SCHEDULE 14 - INCOME FROM OPERATIONSIncome from Financial Assets & Loans 55,044 58,281Income from Operating Lease 5,376 8,961Assignment Receipt 8,900 -Income from IT Infrastructure (net) 313 1Income from CSC Services 1,534 -Fee Based Income 7,406 -Professional Fees 1,252 3,470Income from Trade Investments- Long term 2,452 236- Stock for Trade - 3Interest from Trade Investments- Long term 5 -- Stock for Trade 79 -Profit / Loss on sale of Investments (net)- Long term 94 127- Stock for Trade 393 987Interest received from Govt. Securities / Banks 1,166 1,038Income from Sub - letting 232 18084,246 73,28410 Lakh is equal to 1 Million148

Annual Report 2008-09Schedules to the Consolidated Profit and Loss Accountfor the year ended 31st March, 2009(Rupees in Lakh)2009 2008SCHEDULE 15 - OTHER INCOMEProfit on sale of Fixed Assets 353 -Dividend from Trade Investments 67 23Liabilities No Longer Required Written Back - 6,427Others 487 339907 6,789SCHEDULE 16 - STAFF EXPENSESSalaries, Allowances, Commission & Bonus 5,044 4,176Contribution to Provident and Other Funds 273 262Staff Welfare Expenses 66 665,383 4,504SCHEDULE 17 - ADMINISTRATIVE & OTHER EXPENSESCommunication Expenses 217 390Legal & Professional Fees 6,404 1,943Electricity Charges 95 124Rent 582 501Rates and Taxes 286 199Brokerage and Service Charges 157 672Auditors' Remuneration 57 120Repairs - Machinery 155 139Others 296 242Travelling and Conveyance 1,288 1,278Directors' Fees 15 10Insurance 54 14Printing and Stationery 129 156Advertisement and Subscription 370 236Provision for Diminution in value of Stock for Trade 5 -Provision for Diminution in value of Investments 166 -Loss on sale of Fixed Assets (net) - 17Miscellaneous Expenses 389 56310,665 6,604SCHEDULE 18 - FINANCE CHARGESInterest on Debentures 6,624 8,025Interest on Other Fixed Loans:Term Loans from Domestic Banks / Financial Institutions 13,204 15,325Term Loans from Foreign Banks / Financial Institutions 22,614 13,692Public Deposits 48 80Bonds 1,724 2,264Interest on Working Capital Facilities 6,262 4,693Interest Others 164 13Other Financial Charges 1,581 1,74852,221 45,84010 Lakh is equal to 1 Million149

Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTSI - APrincipal Accounting Policies1. Basis of Preparation1.1 The Consolidated financial statements are prepared in accordance with historical cost convention and accrual basis ofaccounting.1.2 These are presented in accordance with Generally Accepted Accounting Principles in India, provisions of the Companies Act,1956, Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006and the guidelines issued by the Reserve Bank of India, wherever applicable.1.3 The preparation of financial statements requires the Management to make estimates and assumptions considered in thereported amounts of assets and liabilities including Contingent Liabilities as of the date of the financial statements and thereported income and expenses for the reporting period. Management believes that the estimates used in the preparation of thefinancial statements are prudent and reasonable. Future results could differ from these estimates.2. Principles of ConsolidationI - BThe consolidated financial statements have been prepared in accordance with Accounting Standard 21 (AS - 21) “ConsolidatedFinancial Statements”, Accounting Standard 23 (AS - 23) “Accounting for Investments in Associates in Consolidated FinancialStatements” and Accounting Standard 27 (AS - 27) “Financial Reporting of Interests in Joint Ventures” notified by the CentralGovernment under the Companies (Accounting Standards) Rules, 2006. The consolidated financial statements have beenprepared on the following basis:a) The financial statements of Srei Infrastructure Finance Limited (the Holding Company) and its subsidiary companies havebeen combined on line by line basis by adding together the book value of like items of Assets, Liabilities, Income andExpenses after fully eliminating intra-group balances and intra-group transactions resulting in unrealised profits or losses.b) In case of investments in subsidiaries where the holdings are less than 100%, minority interest in the net assets ofconsolidated subsidiaries consist of:i) The amount of equity attributable to minorities at the date on which Investment in the subsidiary is made.ii)iii)The minorities’ share of movements in equity since the date the holding subsidiary relationship came into existence.Minority interest’s share of net profit for the year of consolidated subsidiaries as identified and adjusted against profitafter tax of the group.c) Foreign subsidiaries representing non integral foreign operations are translated for the purposes of consolidation as follows(in accordance with AS – 11):i) The assets and liabilities, both monetary and non - monetary are translated at closing rate.ii)iii)Income and expense items are translated at average rate for the period.All resulting exchange differences are accumulated in foreign currency translation reserve until disposal of netinvestment.d) Uniform accounting policies for like transactions and other events in similar circumstances have been adopted andpresented to the extent possible, in the same manner as the Holding Company’s separate financial statements.e) The excess of cost of the Holding Company of its investment in the subsidiary over the Holding Company’s portion of equityof the subsidiary as at the date of investment is recognised in the financial statements as Goodwill. It is tested for impairmenton a periodic basis and written - off if found impaired.f) The excess of Holding Company’s portion of equity of the Subsidiary over cost as at the date of investment is treated asCapital Reserve.g) Investment in associate is accounted using the equity method and disclosed separately in the Consolidated Balance Sheet.h) Interests in Joint Ventures have been accounted by using the proportionate consolidation method as per AccountingStandard 27 – “Financial Reporting of Interests in Joint Ventures” notified by the Central Government under the Companies(Accounting Standards) Rules, 2006.Significant Accounting Policies1.1 Revenue RecognitionIncome from Operations is recognised in the Profit & Loss Account on accrual basis as stated herein except in the case ofnon - performing assets where it is recognised, upon realisation, as per the Prudential Norms Directions of Reserve Bank ofIndia, applicable to NBFCs.150

Annual Report 2008-09Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)1.2 Income from Financial Assets & LoansIt is recognised based on the internal rate of return to provide a constant periodic rate of return on the net investment outstandingover the period of the contract or as per the terms of the contract.1.3 Income from Operating LeaseIt is recognised as rentals, as accrued over the period of lease, net of value added tax, if applicable.1.4 Securitisations, Assignments and Co - Branded AgreementsIncome arising from securitisation and assignment of Financial Assets & Loans is amortised over the life of the contract. Incase of co - branded arrangements income is accounted on accrual basis over the life of the contract as provided underrespective arrangements. These are included in Income from Financial Assets & Loans under Income from Operations.1.5 Fee Based IncomeFee for financial advisory services are accounted based on stage of completion of assignments, when there is reasonablecertainty of its ultimate realisation / collection.1.6 Income from IT Infrastructure:Income from IT infrastructure has been disclosed net of associated costs. The associated costs comprise of movement ininventory and other direct expenses.1.7 Other Operating Income:Dividend Income is accounted when the right to receive the payment is established. Income from investment in Funds isrecognised on cash basis as per the Prudential Norms of the Reserve Bank of India. All other operating income is accountedfor on accrual basis.1.8 Other IncomeAll other income is accounted for on accrual basis.2. Fixed Assets and Depreciation / Amortisation2.1 Fixed Assets include assets given under Operating Lease. Fixed Assets are stated at Cost less accumulated depreciation. Costincludes taxes, duties, freight and incidental expenses related to the acquisition and installation of the assets.2.2 Intangible Assets expected to provide future enduring economic benefits are stated at cost less amortisation. Cost comprisespurchase price and directly attributable expenditure in making the asset ready for its intended use.2.3 Depreciation has been provided on straight line method at rates prescribed in Schedule XIV to the Companies Act, 1956 or higherrates as ascertained by the management.The Depreciation rates adopted are given as follows:Assets for Own Use:i. Building 1.63%ii. Furniture & Fixtures 6.33%iii. Motor Vehicles 9.50%iv. Computers 16.21%v. General Plant & Machinery 4.75%Assets for Operating Lease:vi. Aeroplanes / Aircraft 5.60% & 11.11%#vii. Ships 10.00%viii. Earthmoving Equipments 11.31%ix. Motor Vehicles 16.21%x. General Plant & Machinery 4.75%xi. Wind Mills 5.28%xii. Oil Rig 11.31%xiii. Computers 16.21%Fixed Assets costing less than Rs. 5,000/- 100.00%# based on estimated useful life.151

152Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)2.4 Leasehold assets are amortised over the period of the lease.2.5 Intangible assets are amortised over their best estimated useful life ranging upto 6 years on straight line method.3. Impairment of Fixed AssetsWherever events or changes in circumstances indicate that the carrying value of fixed assets may be impaired, the Companysubjects such assets to a test of recoverability, based on discounted cash flows expected from use or disposal thereof. If theassets are impaired, the Company recognises an impairment loss as the difference between the carrying value and value in use.A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However the carryingvalue after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if therewas no impairment.4. Capital Work in ProgressCapital work in progress is stated at cost and includes development and other expenses including interest during constructionperiod.5. Investments5.1 Investments are classified into “Long Term” and “Current” investments.5.2 All long term investments including investments in subsidiary companies are stated at cost. Provision for diminution in value,other than temporary, is considered wherever necessary on an individual basis.5.3 Cost is arrived at on weighted average method for the purpose of valuation of investments.5.4 Investments held as stock for trade are valued at lower of cost and market price determined category - wise.6. Financial Assets6.1 Financial Assets includes assets under Loan / Hypothecation facility. These are shown net of assets securitised.6.2 Financial Assets are valued at net investment amount including installments fallen due and net of unmatured / unearned financecharges etc., amounts received and assets not paid for.7. Loan Assets7.1 Loan Assets include loans advanced by the Company secured by collateral offered by the customers, if applicable. These areshown net of assets securitised.7.2 Loan assets are valued at net investment amount including installments fallen due and net of unmatured / unearned financecharges etc.8. Provision for Non Performing Assets and Bad Debts8.1 Relating to Loans & Operating Lease Assets:8.1.1 Provisions for non performing assets are considered in the financial statements according to Prudential Norms prescribed bythe Reserve Bank of India. Additional provision as per the requirement of Foreign Financial Institutions has also been made asfollows:Financial & Loan Assets:Asset Arrear Period Provision as per Provision as per ProvisionClassification Reserve Bank of Foreign Financial adopted by theIndia Institution Company% of % of % ofPortfolio Portfolio PortfolioStandard Upto 90 days Nil Nil Nil91 to 180 days Nil 20 20Sub-Standard 181 to 360 days 10 50 50361 to 365 days 10 100 100More than 12 monthsto 24 months 10 100 100Doubtful (Unsecured) More than 24 months 100 100 100Doubtful (Secured)More than 24 monthsto 36 months 20 100 100More than 36 monthsto 60 months 30 100 100Above 60 months 50 100 100LossAs per Managementdiscretion 100 100 100

Annual Report 2008-09Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)Operating Lease Assets:Asset Arrear Period Provision as per Provision as per ProvisionClassification Reserve Bank of Foreign Financial adopted by theIndia Institution Company% of % of % ofOutstanding Outstanding OutstandingStandard Upto 90 days Nil Nil Nil91 to 180 days Nil 20 20181 to 360 days Nil 50 50361 to 365 days Nil 100 100Sub-StandardMore than 12 monthsto 24 months 10 100 100More than 24 monthsto 30 months 40 100 100DoubtfulMore than 30 monthsto 36 months 40 100 100More than 36 monthsto 48 months 70 100 100More than 48 months 100 100 100LossAs per ManagementDiscretion 100 100 1008.1.2 Loan and financial assets overdue for more than four years are considered as bad debts and written off.8.2 In the financial statements of a foreign sub - subsidiary, provision for doubtful debtors has been determined based on specificcustomer identification, customer payment trends, subsequent receipts and settlements and analysis of expected future cashflows.8.3 Provision for other debts arising from services is considered in the financial statements according to the Prudential Normsprescribed by the Reserve Bank of India.9. Foreign Currency Transactions9.1 Foreign currency transactions are recorded at the exchange rates prevailing at the time of transaction.9.2 Assets and liabilities expressed in foreign currencies are translated into Indian Rupees at the exchange rate prevailing at theBalance Sheet date except with respect to liabilities where exchange fluctuation losses are to be borne by customers. Any lossor gain arising there from has been included in Finance Charges as per the provisions of Accounting Standards 16 and 11notified by the Central Government under the Companies (Accounting Standards) Rules, 2006.9.3 In respect of forward exchange contracts entered into by the Company, the difference between the forward rate and theexchange rate on the date of the transaction are recognised as income or expense over the life of the contract.Gain / loss on settlement of transactions arising on renewal / cancellation are recognised as income or expense in the periodin which these are renewed or cancelled.9.4 In respect of Derivative contracts, premium paid, gains / losses on settlement and provisions for losses determined in accordancewith principles of prudence, on category wise basis, are recognised in the Profit & Loss Account.10. Prior Period and Extra Ordinary ItemsPrior Period and Extra Ordinary items having material impact on the financial affairs of the Company are disclosed.11. Borrowing CostsBorrowing costs to the extent attributed to the acquisition / construction of qualifying assets are capitalised up to the date whensuch assets are ready for its intended use and all other borrowing costs are recognised as an expense in the period in whichthey are incurred.12. Government / Semi - Government GrantsGrants in the nature of Capital Investment are treated as Capital Reserve.13. Employee Benefits13.1 Short term employee benefitsShort term employee benefits based on expected obligation on undiscounted basis are recognised as expense in the Profit andLoss account of the period in which the related service is rendered.153

Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)13.2 Defined contribution planCompany’s contribution towards Regional Provident Fund Authority and Employee State Insurance Corporation are charged tothe Profit and Loss Account.13.3 Defined benefit planCompany’s liability towards gratuity is a defined benefit plan. Such liabilities are ascertained by an independent actuarial as perthe requirements of Accounting Standard – 15 (revised 2005) “Employee Benefits”.All actuarial gains and losses are recognised in Profit and Loss Account in the year in which they occur.During the year, the Company has started making contributions to Regional Provident Fund Authority towards its ProvidentFund obligations for all employees. Hitherto for some of its employees, contributions were being made to the “Srei InternationalFinance Provident Fund Trust” which was a defined benefit plan.14. Taxes on Income14.1 Current tax is the amount of tax payable on the taxable income for the year determined in accordance with the provisions of theIncome Tax Act, 1961.14.2 Deferred tax is recognised on timing differences, being the differences between the taxable income and accounting income thatoriginate in one period and are capable of reversal in one or more subsequent periods.Deferred tax assets subject to the consideration of prudence are recognised and carried forward only to the extent that there isa reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can berealised.In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognisedonly if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits.15. Provision, Contingent Liabilities and Contingent AssetsProvisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as aresult of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised butare disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.16. Earnings per ShareThe Company reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, Earnings PerShare notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. Basic earnings per equityshare have been computed by dividing net profit after tax attributable to equity shareholders by the weighted average numberof equity shares outstanding during the year. Diluted earnings during the year adjusted for effects of all diluted potential equityshares per equity share is computed using the weighted average number of equity shares and diluted potential equity sharesoutstanding during the year.17. Assets under Management17.1 Contracts securitised or assigned are derecognised from the books of accounts. Co - branded loan transactions are originatedby the Company on behalf of partner bank / financial institution.17.2 Contingent liabilities, if any, for such contracts are disclosed separately.18. InventoriesInventories have been valued at purchase cost on weighted average method or net realisable value whichever is lower.19. Miscellaneous Expenditure:II.Miscellaneous Expenditure represents:Expenses incurred on issue of Equity Shares, Global Depository Receipts (GDRs), Long Term Bonds and Debentures, whichare amortised as follows:-a) The expenses on issue of Equity Shares, GDRs and preliminary expenses at the time of incorporation are amortised overa period of ten years from the year in which the same was incurred.b) The expenses on issue of Bonds and Debentures are being amortised over the tenure of the respective Bonds andDebentures.Notes on Consolidated Financial Statements1. In accordance with Accounting Standard 21 “Consolidated Financial Statements” notified by Central Government underCompanies (Accounting Standards) Rules, 2006, the Consolidated Financial Statements of the Holding Company includes the154

Annual Report 2008-09Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)financial statements of all its subsidiaries and sub - subsidiaries which are more than 50% owned and controlled. Enterprisesover which the Company exercise significant influence are considered for preparation of the Consolidated Financial Statementsas per Accounting Standard 23 “Accounting for Investments in Associates in Consolidated Financial Statements” and Interestsin Joint Ventures have been accounted by using the proportionate consolidation method as per Accounting Standard 27“Financial Reporting of Interests in Joint Ventures”, notified by the Central Government under the Companies (AccountingStandards) Rules, 2006. Investments that are acquired and held exclusively with a view to subsequent disposal in the near futureare not considered for consolidation.2. The details of subsidiaries (including their subsidiaries and joint ventures), associates and joint ventures (including theirsubsidiary) are as follows -Name of the Company Country of Incorporation % HoldingSubsidiarySrei Infrastructure Advisors Ltd. India 100Srei Venture Capital Ltd. India 100Srei Sahaj e-Village Ltd. India 51Srei Capital Markets Ltd. India 100Srei Forex Ltd. India 100Global Investment Trust Ltd. India 100Controlla Electrotech Private Ltd. w.e.f. 06.06.2008 India 100IIS International Infrastructure Services GmbH Germany 92.54Sub - SubsidiariesSrei Infocomm Services Ltd. (Subsidiary of Srei InfrastructureAdvisors Ltd. w.e.f. 17.07.2008) India 100Bengal Srei Infrastructure Development Limited (Subsidiary ofSrei Infrastructure Advisors Ltd. w.e.f. 25.09.2008) (ceased to besubsidiary of Srei Capital Markets Ltd. w.e.f. 25.09.2008) India 51ZAO Srei Leasing (Subsidiary of IIS International InfrastructureServices GmbH) Russia 63.49Hyderabad Information Technology Venture Enterprises Ltd.(Subsidiary of Srei Venture Capital Ltd.) India 51Cyberabad Trustee Company Pvt. Ltd. (Subsidiary ofSrei Venture Capital Ltd.) India 51AssociateQuippo Infrastructure Equipment Ltd. (ceased to be associatew.e.f. 30.09.2008) India 16.85Joint Venture (including its subsidiary)Srei Equipment Finance Pvt. Ltd. (SEFPL) (ceased to besubsidiary w.e.f 02.04.2008) India 50Srei Insurance Broking Pvt. Ltd. (Subsidiary of SEFPL); Ceased tobe sub - subsidiary w.e.f 02.04.2008 - Refer Note no.6 below India 100Joint Venture of SubsidiarySrei (Mauritius) Infrastructure Development Corporation Ltd.(JV between Srei Infrastructure Advisors Ltd. and The StateInvestment Corporation Ltd. of Mauritius w.e.f. 06.11.2008) Mauritius 503. The audited financial statements of IIS International Infrastructure Services GmbH (IIS) and Srei (Mauritius) InfrastructureDevelopment Corporation Ltd. up to 31st March, 2009 have been prepared in accordance with International Financial ReportingStandards. Differences in accounting policies arising there from are not material.The audited Balance Sheet of ZAO Srei Leasing (ZAO), subsidiary of IIS is prepared upto 31st December every year.Management Accounts for the period 1st January, 2008 to 31st March, 2008 and 1st January, 2009 to 31st March, 2009 hasbeen used for consolidation with IIS. The accounts of ZAO have been prepared in accordance with International FinancialReporting Standards. Differences in accounting policies arising there from are not material.155

Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)4. During the year, the Company has acquired 100% equity stake in Controlla Electrotech Private Ltd. (CEPL) and accordingly hasbecome a subsidiary of the Company w.e.f. 6th June, 2008. The impact of the inclusion of the acquired Company in theconsolidated financial statements is given below :(Rupees in Lakh)Particulars 2009Net Fixed Assets 2,377Net Current Assets 27Loans / Borrowings -Income 1Expenses (Including Depreciation & Taxation) 36Contingent Liabilities -Capital Commitments (Net of Advances) -5. Quippo Infrastructure Equipment Ltd. (QIEL) ceased to be an associate of the Company with effect from 30th September, 08.In the absence of financial statements of QIEL, the same has not been consolidated for that period. The effect of the same isnot considered to be material.6. Scheme of ArrangementThe Board of Directors of the Company on 31st May, 2007 had given its consent for the execution of a Joint Venture Agreement,Share Subscription Agreement and Shareholders Agreement in connection with the formation of a joint venture with BNPParibas Lease Group (a wholly owned subsidiary of BNP Paribas S.A.) (‘BPLG’) In accordance with these agreements, theCompany has been allotted 22,950,000 equity shares of Rs.10 each at par in Srei Equipment Finance Private Ltd. (formerlyknown as Srei Infrastructure Development Finance Ltd.) (‘SEFPL’) and BLPG has been allotted 25,000,000 equity shares ofRs. 10 each at a premium of Rs. 300 per share in SEFPL on the effective date i.e. 2nd April, 2008, being the date of filing ofthe Order of the Hon’ble High Court at Calcutta with the Registrar of Companies, West Bengal. Consequently, SEFPL hasbecome a joint venture between the Company and BPLG with effect from 2nd April, 2008.Pursuant to the Scheme of Arrangement ('the Scheme') approved by the shareholders and sanctioned by the Hon'ble High Courtat Calcutta vide Order of 28th January, 2008, all business, assets and liabilities pertaining to the project finance business andasset based financing business of the Company including its shareholding in Srei Insurance Broking Private Ltd. (‘SIBPL’)(formerly known as Srei Insurance Services Ltd.) were transferred to SEFPL as a going concern on a slump sale basis, pursuantto Sections 391 to 394 and other relevant provisions of the Companies Act, 1956 with effect from 1st January, 2008 ('AppointedDate') and accordingly, the Scheme has been given effect to in these accounts.The Scheme was sanctioned by the Hon’ble High Court at Calcutta as approved by the Shareholders without any modification,alteration or change. As per the Scheme of Arrangement, the ‘Effective Date’ is the date on which all conditions and mattersreferred to in the Scheme have been fulfilled, wherein the Scheme becomes operative and effective from the ‘Effective Date’.All conditions and matters prescribed in the Scheme were fulfilled on 2nd April, 2008. Accordingly the transfer in terms of theScheme takes place from the ‘Effective Date’ being 2nd April, 2008.7. The Reporting Company’s proportionate share in the assets, liabilities, income and expenses of its Joint Venture companyincluded in these consolidated financial statements are given below:(Rupees in Lakh)Particulars 2009Net Fixed Assets 20,095Net Current Assets 300,713Loans / Borrowings 274,005Income 46,765Expenses (Including Depreciation & Taxation) 43,638Contingent Liabilities 4,026Capital Commitments (Net of Advances) 56156

Annual Report 2008-09Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)8. Related Party TransactionsAssociate Company :Quippo Infrastructure Equipment Limited (ceased to be associate w.e.f. 30.09.2008).Joint Venture:Srei Equipment Finance Private Ltd. (Formerly Srei Infrastructure Development Finance Ltd.) ceased to be subsidiaryw.e.f. 02.04.2008.Key Management PersonnelNameDesignationHemant Kanoria Chairman & Managing Director (w.e.f. 14.05.2008)Prasad Kumar Pandey Wholetime Director (retired on 31.03.2009)Kishore Kumar MohantyShyamalendu ChatterjeeSanjeev SanchetiWholetime DirectorResigned on 31.03.2009 as Wholetime Director, Appointed as Non - Executive Directorw.e.f. 29.04.2009Chief Financial OfficerSummary of Transactions with Related Parties(Rupees in Lakh)Name of related party and Nature of transaction Value of Amount Considered inTransaction /ConsolidationOutstanding(A) Joint Venture:Subscription to Equity Shares 2,295 1,148Transfer as per Scheme of Arrangement - -Amount received towards transfer as per Scheme of Arrangement 37,500 18,750Loan advanced 46,997 23,499Refund of loan advanced 46,997 23,499Loan received 5,937 2,969Refund of Loan received 27,991 13,996Security deposit received 717 358.5Security deposit paid 72 36Interest received on Loan 2,083 1,042Interest paid on Loan 49 24.5Rent paid 36 18Rent received 464 232Balances Outstanding:Security Deposit payable 717 358.5Security Deposit receivable 72 36Transfer as per Scheme of Arrangement - balance receivable - -Loan balance receivable - -157

Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)(Rupees in Lakh)Name of related party and Nature of Transactions and 2009 2008Nature of relationshipOutstanding balances(B) Associate:Quippo Infrastructure Equipment Limited Interest / Finance Charges received 637 932Loan advanced 4,183 7,063Sale of Assets - 3(C) Key Management Personnel:Hemant Kanoria Remuneration 103 81Commission 36 30Dividend paid 2 3Prasad Kumar Pandey Remuneration 47 39Dividend paid 1 -Kishore Kumar Mohanty Remuneration 65 43Dividend paid 1 -Shyamalendu Chatterjee Remuneration 46 41Sanjeev Sancheti Remuneration 41 149. Contingent Liabilities(Rupees in Lakh)Sr. Particulars 2009 20089.1 Estimated amount of capital contracts remaining to be executed (Net of advances) 163 7609.2 Bank guarantee 3,512 6639.3 Guarantee against receivables assigned 599 3,6689.4 Guarantee against co - branded agreements 88 6909.5 Corporate Guarantee - 4,1519.6 Legal Cases 28 -9.7 Disputed sales tax demand 270 1,1699.8 Disputed service tax demand 2645 5,2909.9 Disputed income tax demand 749 69.10 Letter of credit - 229.11 Others - 1910. Earnings Per Share – Basic and Diluted Earnings Per ShareSr. Particulars Year ended 31st March2009 2008i Net Profit after Tax attributable to Equity Shareholders (Rs. in Lakh) 8,204 13,273ii Weighted average number of Equity Shares Basic (Nos.) 116144798 108963943iii Weighted average number of Potential Equity Shares (Nos.) - 3362iv Weighted average number of Equity Shares Diluted (Nos.) 116144798 108967305v Nominal Value of Equity per share (Rs.) 10 10vi Basic Earnings per share (Rs.) 7.07 12.18vii Diluted Earnings per share (Rs.) 7.07 12.18158

Annual Report 2008-09Schedules to the Consolidated Balance Sheet & Profit and Loss AccountSCHEDULE 19 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON CONSOLIDATED FINANCIAL STATEMENTS (Contd.)11. Income from IT Infrastructure has been disclosed net of associated costs comprise of movement in inventory and other directcosts.12. Segment wise details as required by AS - 17 “Segment Reporting” notified by the Central Government under the Companies(Accounting Standards) Rules, 2006 is as under:(Rupees in Lakh)Particulars Financing Activity Others TotalSegment Revenue 81,767 3,386 85,153(70,180) (9,893) (80,073)Segment Result before Finance Charges 61,337 1,466 62,803(60,111) (1,094) (61,205)Finance Charges 52,309(45,928)Tax Expenses 2,129 108 2,237(1,687) (117) (1,804)Net Profit After Tax - - 8,257- - (13,473)Segment Assets 5,63,851 6,413 570,264(599,335) (58,167) (657,502)Segment Liabilities 452,034 11,796 449,597(557,841) (25,566) (583,407)Capital Expenditures 11,119 3,264 14,383(5,882) (600) (6,482)Depreciation 3,486 172 3,658(4,873) (28) (4,901)Other non - cash expenditure 42 2 44(81) (2) (83)Amount in brackets represent previous year figures13. In view of the transfer of all business, assets and liabilities of the project finance business and asset based financing businessof the Company including its shareholding in SIBPL to SEFPL with effect from January 1, 2008, referred to in Note II. 6, thefigures for the previous year are not comparable with the current year.14. The previous year’s figures have been regrouped / rearranged, wherever considered necessary.Signatories to Schedules 1 to 19.For Deloitte Haskins & SellsChartered AccountantsOn behalf of the Board of DirectorsAbhijit Bandyopadhyay Hemant Kanoria Salil K. Gupta Sandeep LakhotiaPartner Chairman & Managing Director Chief Mentor & Director Company SecretaryPlace : KolkataDate : 12th June, 09159

Information on Subsidiary Companies Pursuant to Direction Under Section 212 (8) of The Companies Act, 1956(Rupees in Lakh)Sl.No. Particulars Srei Global Srei Capital Srei Srei Controlla Srei Hyderabad Cyberabad Srei IIS International Bengal Srei ZAOVenture Investment Markets Ltd. Forex Ltd. Infrastructure Electrotech Sahaj Information Trustee Co. Infocomm Infrastructure Infrastructure SreiCapital Ltd. Trust Ltd. Advisors Ltd. Private e - Village Technology Pvt. Ltd. Services Services Development LeasingLtd. Ltd. Venture Ltd. GmbH Ltd.EnterprisesLtd.Financial year ending on 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st December,2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2008Currency Euro RubbleExchange rate on last day of the financial year 67.2040 1.5331. Share Capital 25.00 5.00 505.00 50.00 50.00 3.53 100.00 25.00 5.00 5.00 4,280.89 5.00 5,070.962. Reserves & Surplus 978.67 6.10 120.26 (13.61) 6.16 (8.47) 135.53 59.06 0.13 (1.74) (159.50) 21.43 238.703. Liabilities 484.79 4.21 268.41 85.91 71.37 2,412.34 10,236.10 49.85 0.41 0.03 8.83 130.28 16,643.344. Total Liabilities 1,488.46 15.31 893.67 122.30 127.53 2,407.40 10,471.63 133.91 5.54 3.29 4,130.23 156.71 21,953.005. Total Assets 1,488.46 15.31 893.67 122.30 127.53 2,407.40 10,471.63 133.91 5.54 3.29 4,130.23 156.71 21,953.006. Investments (Refer Annexure) 731.68 - 1.81 - 65.30 - - - - - 3,995.14 100.00 -7. Turnover 877.60 12.38 448.93 0.33 7.82 7.79 10,659.94 36.91 0.45 - 18.58 130.22 3,844.348. Profit / (Loss) before Taxation 16.29 1.13 (79.33) (3.67) 1.71 (28.18) 313.30 13.36 0.15 (1.74) 18.78 26.29 130.519. Provision for Taxation:Current Tax 4.58 0.36 - 0.59 0.64 1.37 36.50 4.36 0.05 - - 9.02 31.80MAT Credit Entitlement - - - - - - (36.50) - - - - - -Deferred Tax 0.51 (0.01) (23.34) (0.14) - 0.04 106.14 (0.05) - - - (0.25) -Income tax of earlier years - - (0.30) - - - - 0.60 - - - - -10. Profit after Taxation 11.20 0.78 (55.69) (4.12) 1.07 (29.59) 207.16 8.45 0.10 (1.74) 18.78 17.52 98.7111. Proposed Dividend - - - - - - - - - - - 2.00 -On behalf of the Board of DirectorsPlace : Kolkata Hemant Kanoria Salil K. Gupta Sandeep LakhotiaDate : 12th June, 2009 Chairman & Managing Director Chief Mentor & Director Company Secretary160

Annual Report 2008-09Annexure to Information on Subsidiary Companies Pursuant to DirectionUnder Section 212 (8) of The Companies Act, 1956Details of Investments as at 31st March, 2009Sl. Name of the Company No. of shares / Face Value Book Value Quoted /No. units / bonds (Rupees) (Rs. Lakh) Unquoted1. Srei Venture Capital LimitedLong term Investments (at cost)In Subsidiary Company:Cyberabad Trustee Company Private Limited 25500 10 2.55 UnquotedHyderabad Information Technology Venture Enterprises Limited 127500 10 46.74 UnquotedIn Equity Shares:Reliance Power Ltd. 5115 10 14.39 QuotedPilani Investment & Industries Corporation Ltd. 3000 10 108.00 UnquotedIn Bonds / Debentures / Units:Medium & Small Infrastructure Fund (Class A) 55000 100 55.00 UnquotedMedium & Small Infrastructure Fund (Class B) 5000 100 5.00 UnquotedInfrastructure Project Development Fund 500000 100 500.00 UnquotedTOTAL 731.682. Srei Capital Markets LimitedLong term Investments (at cost)In Equity Shares:Andhra Bank Limited 100 10 0.01 QuotedBank of Baroda Limited 100 10 0.07 QuotedBank of India Limited 100 10 0.02 QuotedCorporation Bank Limited 100 10 0.13 QuotedHDFC Bank Limited 100 10 0.25 QuotedICICI Bank Limited 100 10 0.19 QuotedIDBI Bank Limited 120 10 0.04 QuotedOriental Bank of Commerce Limited 100 10 0.04 QuotedState Bank of India Limited 134 10 0.80 QuotedING Vysya Bank Limited 415 10 0.26 QuotedTOTAL 1.813. Srei Infrastructure Advisors LimitedLong term Investments (at cost)In Subsidiary Company:Srei Infocomm Services Limited 50000 10 5.00 UnquotedBengal Srei Infrastructure Development Limited 25500 10 2.55 UnquotedIn Joint Venture:Srei (Mauritius) Infrastructure Development Company Ltd. 292800 *10 44.86 UnquotedIn Equity Shares:Odyssey Group Partners Pte Ltd. 42500 **1 12.89 UnquotedTOTAL 65.304. IIS International Infrastructure Services GmbHLong term Investments (at cost)In Subsidiary Company:ZAO Srei Leasing # # 3,995.14 UnquotedTOTAL 3,995.145. Bengal Srei Infrastructure Development Ltd.Long term Investments (at cost)In Equity Shares:Bengal Integrated Auto Industrial Park Pvt. Ltd. 1000000 10 10,000,000.00 UnquotedTOTAL 10,000,000.00* In Mauritius Rupees** In Singapore Dollar# There is no system of issuance of distinctive shares in the country of registration161

162Notes

Forward looking statementsThis report contains forward looking statements, which may be identified by their use of words like ‘plans’, ‘expects’, ‘will’, ‘anticipates’,‘believes’, ‘intends’, ‘projects’, ‘estimates’ or other words of similar meaning. All statements that address expectations or projections aboutthe future, including but not limited to statements about the Company’s strategy for growth, product development, market position,expenditures and financial results, are forward looking statements.Forward looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that theseassumptions and expectations are accurate or will be realised. The Company’s actual results, performance or achievements could thus differmaterially from those projected in any such forward looking statements. The Company assumes no responsibility to publicly amend, modifyor revise any forward looking statement, on the basis of any subsequent developments, information or events.

Srei Infrastructure Finance LimitedRegistered Office:‘Vishwakarma’, 86C, Topsia Road (South)Kolkata - 700 046www.srei.comSrei Infrastructure Finance Limited Annual Report 2008-09