idfc alternatives ltd Directors report

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TO THE MEMBERS

Your Directors have pleasure in presenting the Twelfth Annual Report together with the audited accounts for the year ended March 31, 2014.

FINANCIAL RESULTS

	FOR THE YEAR ENDED MARCH 31, 2014	FOR THE YEAR ENDED MARCH 31, 2013
PARTICULARS
Total Income	659,016,534	666,232,531
Less: Total Expenses	406,705,384	299,634,910
Profit before Tax	252,311,150	366,597,621
Less: Provision for Tax	63,992,000	94,832,000
Profit after Tax	188,319,150	271,765,621
Add: Balance Brought Forward	291,001,605	376,715,796
Total Available for Appropriation	479,320,755	648,481,417
APPROPRIATIONS:
Transfer to General Reserve	188,319,150	271,765,621
Interim Dividend	75,000,000	240,000,000
Tax on Dividend	1,699,500	35,303,250
Proposed Equity Dividend	–	55,000,000
Balance Carried Forward	383,789,340	291,001,605

OPERATIONAL REVIEW

Your Company continues to be one of the leading multi-asset class fund managers in India, committed to the development of infrastructure in the country. During the year, your Company acted as fund manager for a total of five funds - India Development Fund, IDFC Private Equity Fund II and IDFC Private Equity Fund III under the private equity asset class, India Infrastructure Fund II under the infrastructure equity asset class and IDFC Real Estate Yield Fund, under the real estate asset class.

The year was very eventful from multiple viewpoints. In October 2013, your Company announced the successful exit of our iconic India Development Fund, returning a multiple of capital of ~2.6x to investors at a net fund IRR of 32%. The Fund was of 2004 vintage with a total corpus of Rs. 8.4 billion and had made investments during the 2004-2008 period. With this event behind us, we now belong to the elite club of fund-houses in India who have seen the full lifecycle of a fund: fund-raising, investing, nurturing and exiting. During the year, private equity team made 5 complete exits and 1 partial exit, aggregating to a total of Rs. 3,386 millon. As on date, the private equity team has made a total of 41 investments across 36 companies. During the year, your Company had also launched its second infrastructure fund, the India Infrastructure Fund II, with a target size of Rs. 55 billion and has received commitments of ~Rs. 47 billion till date in a very challenging fund raising environment. This has been the largest (and the fastest) fund-raising exercise by a domestic fund house in recent times and the fact that several key investors of the previous fund decided to re-up their commitments in the second fund is a testimony of the faith that investors repose in our investment abilities.

Additionally, in February 2014, your Company announced the first close of Rs. 2.9 billion for its maiden domestic real estate fund, the IDFC Real Estate Yield Fund. The Fund has been entirely raised from retail investors and focuses on making opportunistic investments in the residential real estate segment in India. As on date, the fund has made investments in two properties situated at Pune and Bengaluru, respectively.

The year also witnessed the closure of the commitment period of IDFC Private Equity Fund III. The fund has invested in 12 companies and the team would now focus its attention on monitoring the assets and securing attractive exits for the investments.

DIVIDEND

At the Board Meeting held on July 26, 2013, the Board had approved interim dividend amounting to Rs. 7.50 crore at the rate of 15,000% i.e. Rs. 1,500/- per equity share. Your Directors have not recommended any further dividend and recommends confirmation of the said interim dividend as final dividend for the year.

COMPANIES ACT, 2013

Most of the provisions of the Companies Act, 2013 and the Rules notified by the Ministry of Corporate Affairs ("MCA") in this regard, have come into force with effect from April 1, 2014. MCA issued a General Circular no. 8/2014 dated April 4, 2014 which clarified that the Financial Statements, Auditors Report and the Board’s Report in respect of the previous year ended March 31, 2014 will be in accordance with the Companies Act, 1956 and Rules made there under. Your Company shall comply with the provisions of the Companies Act, 2013, as applicable.

SUBSIDIARY COMPANY

Your Company has one wholly owned subsidiary company namely, IDFC Project Equity Company Limited.

As required under the provisions of Section 212 of the Companies Act, 1956, a statement of holding company’s interest in the subsidiary company and the Annual Report of such subsidiary company have been attached to this report.

DIRECTORS

Mr. Sunil Kakar (DIN-03055561) and Mr. Sadashiv S. Rao (DIN-01245772) would retire at the ensuing Annual General Meeting ("AGM") and being eligible, offer themselves for reappointment.

The Board of Directors recommends reappointment of the above retiring directors at the ensuing AGM.

AUDIT COMMITTEE

The Audit Committee of the Company comprises of Mr. Sunil Kakar (DIN-03055561), Mr. Sadashiv S. Rao (DIN-01245772) and Dr. Rajeev Uberoi (DIN-01731829) as its members. The Audit Committee met four times during the year.

AUDITORS

Deloitte Haskins & Sells LLP, Chartered Accountants (Registration No. 117366W / W-100018) Statutory Auditors of the Company will retire at the conclusion of the ensuing AGM. The Board recommends the reappointment of Deloitte Haskins & Sells LLP, Chartered Accountants, as the Statutory Auditors of the Company.

PUBLIC DEPOSITS

The Company has not accepted any public deposits during the year under review.

PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Since the Company does not own any manufacturing facility, the disclosure of information on other matters required to be disclosed in terms of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1998, are not applicable and hence not given.

FOREIGN EXCHANGE EARNINGS AND EXPENDITURE

The Company has no earnings in Foreign Exchange. The particulars regarding foreign exchange expenditure are furnished at Item No. 18 in the Notes forming part of the Financial Statements.

PERSONNEL AND OTHER MATTERS

Your Company had 34 employees as on March 31, 2014. As required by the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in Annexure to the Directors’ Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors confirm that: ? the applicable accounting standards have been followed in preparation of annual accounts and there are no material departures; ? they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2014 and the profit of the Company for the year ended on that date; ? they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and ? they have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS

The Board acknowledges the invaluable support extended to the Company by the investors of Funds, the Ministry of Finance, the Reserve Bank of India and the Securities and Exchange Board of India. The Board would like to express its gratitude for the unstinted support and guidance received from IDFC Limited and also from other group companies. The Board would also like to express its sincere thanks and appreciation to all the employees for their contribution made during the year.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

RAJIV B. LALL

Chairman

Mumbai, April 23, 2014