Shristi Infrastructure Development Corporation Ltd

DEAR SHAREHOLDERS,

Your Directors are pleased to present the Twenty First Annual Report together with theAudited Accounts of your Company for the financial year ended 31^stMarch, 2011. The summarised standalone and consolidated financial performance of yourCompany is as under:

FINANCIAL RESULTS

(Rs. in Lacs)

OPERATIONAL REVIEW

The year under review has been good for your Company as it has registered a growth ofabout 123%. Total Income, Profit before Tax and Profit after Tax in standalone basis arehigher by Rs.1409 lacs (15%), Rs.411 lacs (93%) and Rs.206 lacs (123%) respectivelycompared to that of previous year ended on 31^st March, 2010. Similarly,Total Income, Profit before Tax and Profit after Tax on consolidated basis are higher byRs.4791 lacs (40%), Rs.406 lacs (51%) and Rs.156 lacs (34%) respectively compared to thatof previous year ended on 31^st March, 2010.

DIVIDEND

In continued pursuit of distributing profits to shareholders, your Directors haverecommended equity dividend of Rs.0.50 per share of Rs.10/- face value (5% on the paid-upequity share capital) for the financial year 2010-11. The dividend, if approved, at the 21^stAnnual General Meeting by the members, will be paid to all those equity shareholders whosenames appear in the register of members as on 9^th September, 2011.

Global Outlook

The global economy is recovering steadily from the low of 2008. After the globalfinancial crisis, a new world order has emerged, wherein, the emerging nations are actingas drivers of global growth and whereas most of the developed nations are still recoveringslowly. This is evident from the fact that much of the new growth impetus came fromdeveloping and emerging economies that witnessed 7.1% growth in 2010 compared to 2.6% in2009.

But economic instability in some countries of Europe and growing unrest in Middle Eastand North African region has affected Asian trade and market sentiments. The surge inprices of commodities and oil have led to high levels of inflation which has hit normallife especially in emerging economies like India.

Indian Scenario

The financial year 2010-11 saw growth and development in the Indian economy, itregistered a healthy growth of 8.5% in FY 11 compared to 8% in 2010. Economic growth andinfrastructure development share a reciprocal relationship, while positive growthsentiments drive higher infrastructure investments, such investments and provision ofadequate infrastructure support is also essential to sustain over 8% growth over a periodof time. Government envisages investment of USD 1 trillion during the Twelfth Five YearPlan (2012-17). Thus infrastructure industry in India is poised for significant growth andyour company is all set to ride this wave and reap the benefits.

The Indian Economic growth was coupled with inflation and to curb inflation, Governmentresorted to monetary measures by increasing the interest rate. This led to increase incost of credit thereby affecting profitability as not all input costs can be passed to thecustomer.

India continues to remain an attractive investment destination. In FY10, India receivedUSD 37.7 billion as FDI. During April-February FY11, FDI inflows stood at USD 25.9billion. During the same phase, FII inflows stood at USD 31.3 billion. MeanwhileIndia’s trade deficit widened as FY11 saw exports at USD 245.9 billion and imports atUSD 350.7 billion. Exports expanded faster than imports, but a decline in net invisiblestranslated into a widening of the current account deficit. The current account deficitremains buffered by higher capital inflows, but given typically lesser duration portfolioinflows figure more than the long-term FDI in the capital flow composition, thesustainability of India’s current account deficit will be an area of concern.

India’s foreign exchange reserves increased as we moved ahead in fiscal 2010-11.In April 2010, India’s foreign exchange reserves totaled USD 279.6 billion; bySeptember 2010 this figure had increased to USD 292.9 billion. Recently numbers show thatthe country’s foreign exchange reserves have shot up further crossing the USD 300billion mark. With this level of reserves, India is amongst the ten largest holders offoreign exchange reserves in the world.

Business Outlook & Future Plans

The development of physical infrastructure in the country and, consequently, theconstruction sector has been in focus during the last decade. It is well established thatthe influence of the construction industry spans across several sub-sectors of the economyas well as the infrastructure development, such as industrial and mining infrastructure,highways, roads, ports, railways, airports, power systems, irrigation and agriculturesystems, telecommunication systems, hospitals, schools, townships, offices, houses andother buildings; urban infrastructure, including water supply, sewerage, and drainage, andrural infrastructure. Thus, it becomes the basic input for socio-economic development.

For proper implementation of infrastructure projects, regulations have to be put inplace which would ensure project viability and would avoid frequent changes in policies. Acomprehensive land acquisition policy which takes care of the resettlement, rehabilitationand compensation issues should be laid out so that projects involving acquisition of landdo not get mired up in protests and legal tangles. Clear guidelines for environmentalclearances also need to be outlined for speedy project implementation. Shortage of skilledand semi-skilled manpower is emerging as a serious issue. This is one area where privatesector has to partner the government for expeditious scaling up of human capital.

On financing front, a vibrant corporate debt market needs to be developed as muchreliance is on commercial banks for infrastructure loans. Since infrastructure projectsusually have long gestation periods of 10-15 years and bank deposits typically havetenures of three years or less, this creates asset-liability mismatch problem forcommercial banks. Further long-term resources at fixed interest rates are scarce. Floatingrates loan with short reset periods can escalate project cost through higher interestburden, especially in a rising rate regime. Government has taken initiatives to addressthe various bottlenecks towards infrastructure creation like The Viability Gap Funding(VGF), formation of India Infrastructure Finance Company Limited (IIFCL), introduction oftax saving infrastructure bonds and enhancement of investment limits of FIIs in corporatebonds of infrastructure category.

On many fronts, work is in progress and as the issues are addressed morecomprehensively, more investment will flow into India’s Infrastructure. With anenhanced emphasis on infrastructure creation, your Company is well positioned and wellcapitalized to tap the opportunities and expand its business portfolio both on theconstruction and development side.

BUSINESS REVIEW

Shristi Group is operating in three main verticals, Infrastructure Construction,Infrastructure Development and Infrastructure Consultancy.

In the Infrastructure Construction vertical, since the Company was already executinginfrastructure projects in housing, hospitality, roads etc., the Company considered itprudent to diversify into execution of power projects on EPC basis as in order to sustain8 percent plus GDP growth rate, the power sector has to grow at 1.8 to 2 times the GDPrate. This means an addition of 15,000-20,000 MW capacity every year. The CentralElectricity Authority expects a capacity addition of 75,000 MW to 1,00,000 MW during theTwelfth Plan (2012-17) and majority of the addition would be from coal based plants. Tocapitalize on this great opportunity, your Company has started Power Division forexecuting power projects on EPC basis by drawing on its own strength and also byrequisitioning the services of renowned persons, supplemented with decades of experiencein development, engineering, project management, construction, operation and maintenanceof power plants of various capacities from organizations like BHEL, NTPC, DVC, Reliance,Adani, Tata Power, Jindal Power, Alstom, Hindalco, Lanco etc. The Company, inter-alia, ispresently executing a 12 MW project on EPC basis at Dishergarh and building a 220/33 KVsub station along with 50kms transmission line. The Company is also being appointed as aPMC consultant for the 3 X 150 MW power project at Haldia. Besides these, with its PowerDivision fully geared up to execute thermal power plants of various ratings on EPC basiswithin competitive prices and time bound schedules, it is also expected to win orders forother Power projects and associated transmission and sub stations shortly.

During the year under review, your Company handed over the dwelling units comprisingover 10 lacs square feet area with complete external services, roads, drainage, sewerage,transformers etc. spread over 30 acres of land in Bareilly and 35 acres of land in Bhopalto Ministry of Defence.

India, due to its size, requires an efficient road network both for nationalintegration as well as for socio- economic development. The Government plans to construct35,000 km of highways by 2014 under the National Highways Development Programmes (NHDP)with an investment of USD 60 billion. Since it provides an excellent opportunity to allthe infrastructure construction companies, your company would also be consolidating itsRoad division in the lines of Power division so that it is able to capitalize on theopportunity.

Similarly, in the building division your company is augmenting its capacity forbuilding steel & glass high rises as the future holds a lot of promise for thesestructures.

In the Infrastructure Development business, Shristi’s singular objective has beento create value for its investors by developing large infrastructure projects which havesocio-economic implications by creating affordable housing in Tier II/ III cities ofIndia. Through these projects, the company had addressed the critical infrastructure needsand contributed to the improvement in the quality of life of people in the region. Indoing so, Shristi has been giving adequate attention towards protecting the environmentand natural habitat, traffic circulation, facilities for sports and games, IT andprofessional services, training facilities, as well as, drainage, sewerage, power supplyetc. The demand, affordability, cost effectiveness, viability and environmental concernsare the primary criterion, based on which Shristi aims at propelling the developmentprocess for the region.

Shristi is focusing on building both affordable housing and high end residencies. Anexample of the same is, the Shristinagar township at Asansol, an Integrated Green Townshipcatering to all the income groups. Shristi’s relentless pursuit for excellence andquality is expected to catapult the organization into the leading infrastructuredevelopment companies.

In the Infrastructure Consultancy vertical, Shristi provides consultancy services inthe field of construction & real estate. Its expertise lies in architectural space andit outsources part of the work to external agencies to provide fullfledged service to itsclients. Shristi draws upon HUDCO’s (its JV partner) immense technical knowledgerelated to Housing & Urban Infrastructure, City Planning, Neighbourhood Planning,Tourism Development, Landscaping, Development of Heritage, Redevelopment of Walled Cities& other Environmental Projects, for providing consultancy to its clientele.

RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

In a highly competitive market, a Company’s ability to manage diverse risksdetermines its success. Your Company recognizes Risk Management as an integrated, forwardlooking and process oriented approach for managing all key business risks andopportunities. We focus our energies in de-risking our business to each of the projects byway of taking various steps e.g. limiting our financial exposure in geographies well knownto us, limiting overheads budget, building up strategic alliances etc. Your Company’sbusiness exposure to the normal financial and market risks continue to be monitored,managed and strengthened from time to time by systems and processes commensurate with thevolume of business activities and the perceived risk mitigation requirements. Internalcontrol systems and process level checks and balances are reviewed and updated on acontinuous basis. The internal control is supplemented by an extensive program of internalaudit, reviewed by the Management, documented policies, guidelines and procedures. TheInternal Audit Department of your Company reviews the processes that are in place foridentification, measurement, monitoring and management of risks and that these processesare effective within the organization. The top management and Audit Committee of the Boardreview the findings evolved during checking of system and operation. Your Company has lastyear implemented Standard Operating Procedure Manual prepared by PriceWaterhouse Coopersto minimize risk and meet the challenges of the dynamic business goals of the Company.This fiscal year, your Company has migrated to ERP platform for better control &efficiency.

HUMAN RESOURCES

Shristi family, believes employees are key to its success. Only highly motivatedemployees can enable the Company to meet and exceed the expectations of variousstakeholders including customers and investors. Employees are encouraged to develop theirrespective individual development plans and continuous learning help them do better. YourCompany creates and maintains a supportive environment, to attract and cultivate the verybest talent in this business. Shristi strives towards becoming the employer of choice andvarious initiatives have been and are underway to curtail the attrition rate.

CORPORATE GOVERNANCE

In pursuance of Clause 49 of the Listing Agreement entered into with the stockexchanges, a separate section on Corporate Governance has been incorporated in the AnnualReport for the information of the shareholders, a certificate from the Auditors of theCompany regarding compliance of the conditions of Corporate Governance as stipulated underthe said Clause 49 also forms a part of this Annual Report.

FIXED DEPOSITS

Deposits amounting to Rs.2,72,842/- matured and remained unclaimed by the depositors ason 31^st March, 2011 and the said amount is lying in escrow account withHDFC Bank. The Company has not accepted any deposits from the public during the financialyear ended 31^st March, 2011.

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND

During the year under review, your Company has transferred a sum of Rs.3,56,391/- tothe Investor Education & Protection Fund, the amount which was due & payable andremained unclaimed and unpaid for a period of seven years, as provided in Section 205A(5)of the Companies Act, 1956.

SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements of the Company prepared in accordance withAccounting Standards AS-21 and 27, issued by the Institute of Chartered Accountants ofIndia, form part of the Annual Report. The group recorded a consolidated profit before taxof Rs.1198 lacs for the financial year 2010-11 as compared to Rs.792 lacs during the F. Y.2009-10. The statement pursuant to Section 212 of the Companies Act, 1956, containingdetails of Company’s subsidiaries form part of the Annual Report.

Ministry of Corporate Affairs, Government of India vide General Circular 2/2011 dated 8^thFebruary, 2011 has granted general exemption by directing that the provisions of Section212(8) of the Companies Act, 1956 shall not apply in relation to subsidiaries and subsubsidiaries of those Companies which fulfill certain conditions mentioned in the saidcircular. Accordingly, by fulfilling the conditions mentioned in the said circular, thebalance sheet, profit and loss account and other documents of the said subsidiaries andsub subsidiaries are not attached with the Company’s accounts. As required by thesaid circular, the financial information of the said subsidiaries and sub subsidiaries arebeing disclosed in the Annual Report and the detailed accounts of the subsidiary and subsubsidiaries shall be put on the Company’s website www.shristicorp.com. The Companywill make available the annual accounts of the said subsidiaries and sub subsidiaries andthe related detailed information to any member of the Company who may be interested inobtaining the same. The annual accounts of any subsidiaries will also be kept open forinspection by any shareholders at the Company’s Registered Office and that of therespective subsidiaries. The consolidated financial statements presented by the Companyinclude financial results of the said subsidiaries. A statement of holding Company’sinterest in subsidiaries and sub subsidiaries viz., Shristi Housing Development PrivateLimited, Shristi Urban Infrastructure Development Private Limited, Vivekananda SkyroadLimited, Border Transport Infrastructure Development Limited, Shristi Udaipur Hotels &Resorts Private Limited, East Kolkata Infrastructure Development Private Limited, KanchanJanga Integrated Infrastructure Development Private Limited, World City DevelopmentPrivate Limited, Medi-Net Services Private Limited and Vitthal Hospitality Private Limitedis also furnished.

PARTICULARS OF EMPLOYEES

Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies(Particulars of employees) Rules, 1975 is as given below:

*denotes that the person was in employment for part of the year.

1. The aforesaid appointment is contractual and terminable by giving three monthsnotice by either side.

2. Remuneration includes Basic Salary, Commission, Leave Encashment, Employer’scontribution to Provident Fund, Incentive and other perquisites.

3. Mr. Debi Prasad Sarawgi is not related to any of the Directors.

4. Mr. Debi Prasad Sarawgi has no holding in the Equity Shares of the Company.

SHRISTI WEBSITE

The website of your company, www.shristicorp.com carries a comprehensive database ofinformation of interest to the investors including the corporate profile and businessactivities of your company and the various projects which are handled by your company.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and your Company’sArticles of Association, Mr. Kailash Nath Bhandari retires by rotation at the ensuingAnnual General Meeting and being eligible, offers himself for re-appointment.

The appropriate resolution(s) seeking your approval and brief resume / details forre-appointment is furnished in the notice of the ensuing Annual General Meeting.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of provisions of Section 217(2AA) of the Companies Act, 1956, your directorsconfirm:

(i) that in the preparation of the annual accounts for the financial year ended 31^stMarch, 2011, the applicable accounting standards have been followed along with properexplanation relating to material departures;

(ii) that the directors have selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit or loss of the Company for the year;

(iii) that the directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;and

(iv) that the directors have prepared the annual accounts for the financial year ended31^st March, 2011 on a going concern basis.

AUDITORS

M/s. S. S. Kothari & Co., Chartered Accountants, retire as Auditors of your Companyat the conclusion of the ensuing Annual General Meeting and have confirmed theireligibility and willingness to accept the office of Auditors, if re-appointed. ACertificate from the Auditors has been received to the effect that their re- appointment,if made, would be within the limits prescribed under Section 224(1B) of the Companies Act,1956. Members are requested to consider their re – appointment for financial yearending 31^st March, 2012 on remuneration to be decided by the Board ofDirectors of your Company.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGSAND OUTFLOW

Information in accordance with the provisions of Section 217(1)(e) of the CompaniesAct, 1956, read with the Companies (Disclosure of Particulars in the Report of Board ofDirectors) Rules, 1988 regarding conservation of energy and technology absorption are notgiven as the Company has not undertaken any manufacturing activity.

During the year under review, the total foreign exchange expenditure of your Companywas Rs16.33 lacs (previous year Rs.99.51 lacs).

ACKNOWLEDGEMENT

Your Directors would like to express their grateful appreciation for the excellentsupport and co–operation received from the Financial Institutions, Banks, GovernmentAuthorities, Stock Exchanges, Customers, Suppliers, Depositors and Shareholders during theyear under review. Your directors also place on record their deep appreciation for thecommitted services of all employees of the Company during the year and look forward totheir continued co – operation in realization of the corporate goals in the yearsahead.

For and on behalf of the Board of Directors