idfc investment advisors ltd Directors report

DIRECTORS

TO THE MEMBERS

We are pleased to present the Eighth Annual Report to the Members, together with the audited accounts for the year ended March 31, 2014.

FINANCIAL RESULTS

	FOR THE YEAR ENDED	FOR THE YEAR ENDED
PARTICULARS	MARCH 31, 2014	MARCH 31, 2013
	Rs	Rs
Total Income	217,214,496	207,475,565
Less: Total expenses	92,203,372	105,809,088
Profit / (Loss) before Tax	125,011,124	101,666,477
Provision for Tax	37,556,688	41,650,513
Profit / (Loss) after Tax	87,454,436	60,015,964

OPERATIONAL REVIEW

The Company is registered as a Portfolio Manager with the Securities and Exchange Board of India ("SEBI") to carry out Portfolio Management Services pursuant to SEBI (Portfolio Managers) Regulations, 1993. IDFC Hybrid Infrastructure Portfolio ("HIP") was the first portfolio offering for domestic retail investors under the PMS platform of the Company. The investment objective of HIP is to invest in permitted securities / instruments issued by companies operating in the Infrastructure space, and endeavour to achieve risk adjusted medium to long term capital appreciation. The investment strategy is summarized as below:

• Focus on Growth Opportunities / Companies: The idea is to provide growth capital for business opportunities especially to mid-sized companies with sound track record and reputation and ride the growth curve with them.

• Optimise Returns through Portfolio Diversification: In order to achieve superior risk adjusted portfolio returns the Portfolio Manager has sought to achieve a diversified portfolio. This PMS offering received overwhelming response from investors. HIP - discretionary portfolio collected approximately Rs 451.78 crore in capital commitment. HIP investors have been given online access wherein they can log into the website for a 24x7 access to Portfolio and Capital Registers. In addition to the Portfolio and Capital registers there are various reports available to the investor online itself. The quarterly newsletters from the Fund Managers are also made available on the site.

IDFC Financials Portfolio was offered with an objective to generate capital appreciation over the medium term by investing in a diversified pool of listed equities. The portfolio shall endeavour to invest in companies that are expected to benefit from an important driver of domestic consumption financial services. The Portfolio was closed in April 2013.

IDFC Regal Portfolio was offered with an objective to seek to invest in companies that are expected to benefit the most from the next round of capex / investment cycle that is expected to take place in India over the next few years. It shall be the endeavour of the Portfolio Manager to have about 15 stocks on an average in the portfolio of Public Sector Units.

Since the portfolio was launched in November 2012, a couple of events did push back the cyclical recovery of the Indian economy. High interest rates, a prolonged sluggishness in capital expenditure and an impending election made 2013 a tough year for corporate India. All this took a toll on the growth rates of earnings going into the result season in the first quarter of FY14. Earnings growth was in low single digits.

Hence, the portfolio which has been in existence since the last quarter of Calendar Year 2013, despite a large cash holding was not being able to protect capital. Thus, the investment manager decided that the mandate required a small addition - to broad base or diversify the portfolio. The Company also acts as an Investment Advisor to IDFC India Equities Fund which is a sub-fund of Natixis International Funds (Lux) I, and its activities are to provide investment advisory services, identify, evaluate investment opportunities to the Fund and to monitor investments of the Fund in the Indian companies.

The Company also acts as an Investment Manager to IDFC S.P.I.C.E. Fund, the objective of the fund is to achieve attractive risk adjusted returns through investments in medium to long term unlisted and listed opportunities in social infrastructure, physical infrastructure, consumption and environment sectors.

DIVIDEND

The Board of Directors, at its meeting held on July 25, 2013 had approved the Interim Dividend amounting to Rs 5 crore for the financial year 2013-14 at the rate of Rs 5 per equity share i.e. 50% to the shareholders of the Company holding 10,000,000 equity shares of Rs 10 each. The Board of Directors of the Company proposed to consider the same as final dividend.

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.

DIRECTORS

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Vikram Limaye (DIN-00488534) would retire by rotation and being eligible, offers himself for reappointment at the ensuing Annual General Meeting ("AGM").

The Board of Directors recommends the reappointment of Mr. Vikram Limaye as a Director at the ensuing AGM.

AUDIT COMMITTEE

The Audit Committee comprises of three Directors, Mr. Sunil Kakar (DIN-03055561) as Chairman, Mr. Eric Ward (DIN-03522521) and Dr. Rajeev Uberoi (DIN-01731829).

AUDITORS

S.V. Ghatalia & Associates LLP, Chartered Accountants (Reg. No.: 103162W), an affiliate of Ernst & Young, were the Statutory Auditors of the Company for FY14 and would hold office till the conclusion of the ensuing AGM of the Company. The Company received a letter from S.V. Ghatalia & Associates LLP, Chartered Accountants expressing their unwillingness to be reappointed as Statutory Auditors at the ensuing AGM.

In accordance with the above, the Board of Directors of the Company, at its meeting held on April 23, 2014 recommended appointment of S.R. Batliboi & Co. LLP, Chartered Accountants (Reg. No.: 301003E), being a member firm of Ernst & Young Global Limited, in place of S.V. Ghatalia & Associates LLP as the Statutory Auditors of the Company, to audit the financials of the Company. The Board recommends the appointment of S.R. Batliboi & Co. 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 details of income in foreign currency are given in Note No. 22 to the Financial Statements. There are no expenses in foreign currency.

PERSONNEL AND OTHER MATTERS

The Company had 8 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, names and other particulars of the employees are set out in the annexure to the Directors’ Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956 the Directors confirm that:

• in preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to the 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 annual accounts on a going concern basis.

ACKNOWLEDGEMENTS

The Board places on record its gratitude to the investors of the Funds, clients of discretionary PMS and regulatory authorities such as the Reserve Bank of India, the Securities and Exchange Board of India and other regulatory authorities & institutions and to the Members for their continued guidance and support and expresses its sincere appreciation to all the employees for their commendable teamwork and enthusiastic contribution during the year.

The Directors also express their gratitude for the unstinted support and guidance received from IDFC Asset Management Company Limited and other IDFC group companies.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

VIKRAM LIMAYE

Chairman

Mumbai, April 23, 2014