IDFC Ltd Directors Report.

Dear Shareholders,

Your Directors have pleasure in presenting the Twenty-First Annual Report on the business and operations of the Company together with the audited financial statements for the financial year ended March 31, 2018.

OPERATIONS REVIEW

Effective October 1, 2015 post demerger of Financing Undertaking into IDFC Bank Limited ("IDFC Bank"), IDFC Limited ("IDFC" or "the Company") is operating as an NBFC – Investment Company mainly holding investment in IDFC Financial Holding Company Limited ("IDFC FHCL") which is a non-operative financial holding company. IDFC FHCL in turn holds investments in IDFC Bank, IDFC Asset Management Company Limited, IDFC Alternatives Limited, IDFC Securities Limited and IDFC Infrastructure Finance Limited.

During the year, Balance Sheet size decreased from R 9,878 crore as on March 31, 2017 to R 9,785 crore as on March 31, 2018. Profit after tax was higher at R 148.43 crore for FY 2017-18 as compared to R 55.75 crore in FY17. Net worth of the Company increased from R 9,650 crore as on March 31, 2017 to R 9,760 crore as on March 31, 2018.

During the year, the Company transferred R 30 crore to Special Reserve u/s 45-IC of Reserve Bank of India ("RBI") Act, 1934.

Details of business overview and outlook of the Company and its subsidiaries are appearing in the chapter Management Discussion and Analysis which forms part of this report.

DIVIDEND

Your Directors are pleased to recommend a dividend of R 0.75 per equity share of R 10 each (i.e. 7.5 %) for the year ended March 31, 2018.

The Register of Members and Share Transfer Books will remain closed from July 25, 2018 to July 31, 2018 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2018.

Dividend will be paid to those Members whose names appear in the Register of Members as on July 24, 2018. In respect of shares held in dematerialised form, it will be paid to those Members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date.

Above dividend would be paid subject to approval by the Members at the ensuing Annual General Meeting ("AGM").

SR. NO. NAME OF THE SUBSIDIARY DIRECT / INDIRECT SUBSIDIARY % OF SHAREHOLDING
Domestic Subsidiaries
i. IDFC Financial Holding Company Limited ("IDFC FHCL") Direct 100
ii. IDFC Foundation (a Company within the meaning of section 8 of the Act) Direct 100
iii. IDFC Projects Limited Direct 100
iv. IDFC Bank Limited Indirect through IDFC FHCL 52.80
v. IDFC Bharat Limited (Formerly known as Grama Vidiyal Micro Finance Limited) Indirect through IDFC Bank 52.80
vi. IDFC Infrastructure Finance Limited (Formerly known as IDFC Infra Debt Fund Limited) Indirect through IDFC FHCL 81.48
vii. IDFC Alternatives Limited Indirect through IDFC FHCL 100
viii. IDFC Trustee Company Limited Indirect through IDFC FHCL 100
ix. IDFC Securities Limited Indirect through IDFC FHCL 100
x. IDFC Asset Management Company Limited ("IDFC AMC") Indirect through IDFC FHCL 100
xi. IDFC AMC Trustee Company Limited Indirect through IDFC FHCL 100
Foreign Subsidiaries
i. IDFC Capital (Singapore) Pte. Limited Indirect through IDFC Alternatives 100
ii. IDFC Securities Singapore Pte. Limited Indirect through IDFC Securities 100
iii. IDFC Capital (USA) Inc. Indirect through IDFC Securities 100
iv. IDFC Investment Managers (Mauritius) Ltd. Indirect through IDFC AMC 100
Associate
i. Jetpur Somnath Tollways Private Limited Indirect through IDFC Projects Limited 26
Joint Ventures
i. Delhi Intigrated Multi - Modal Transit System Limited Indirect through IDFC Foundation 50
ii. Infrastructure Development Corporation (Karnataka) Limited ("iDeck") Indirect through IDFC Foundation 49.49
iii. Rail Infrastructure Development Company (Karnataka) Limited Indirect through iDeck 24.71

DIVIDEND DISTRIBUTION POLICY

In accordance with the Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI LODR Regulations"), IDFC had formulated a Dividend Distribution Policy. The policy was adopted to set out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its Shareholders and / or retaining profits earned by the Company. The said policy is hosted on the website of the Company and can be viewed at http://www.idfc. com/investor_relations/corporate_ governance_policies.htm.

SUBSIDIARY COMPANIES

The Company has eleven domestic direct / indirect subsidiaries, four foreign indirect subsidiaries, one Associate Company and three Joint Ventures as on March 31, 2018 which are given in Table 1.

IDFC ALTERNATIVES LIMITED

IDFC Alternatives Limited has entered into a definitive agreement with Global Infrastructure Partners India for the sale of its infrastructure asset management business. All necessary regulatory approvals for the sale have been received. IDFC Alternatives will continue to manage Private Equity and Real Estate funds and the aforementioned sale to Global Infrastructure Partners India will not have any impact on its Private Equity and Real Estate verticals. IDFC Limited is evaluating divestiture of the Private Equity and Real Estate platform but no definitive agreement has been signed yet.

EXCLUSIVITY AGREEMENT WITH SHRIRAM GROUP

IDFC Group and Shriram Group had signed an exclusivity agreement on July 8, 2017 to allow for due diligence and discussions to arrive at an agreement on a transaction structure and swap ratio for a strategic combination between certain businesses of the Shriram Group with IDFC Limited and IDFC Bank.

However, despite best efforts, the two groups were not able to reach an agreement on a mutually acceptable swap ratio.

Accordingly, the exclusivity period was terminated with effect from October 30, 2017.

IDFC Bank, while focusing on enhancing its strategic momentum, continued to explore opportunities for inorganic growth as well.

PROPOSED MERGER OF CAPITAL FIRST GROUP WITH IDFC BANK

The Board of Directors of IDFC Bank and Capital First Limited ("Capital First") at their respective meetings held on January 13, 2018 had approved a composite scheme of amalgamation ("Scheme") of Capital First, Capital First Home Finance Limited and Capital First Securities Limited with IDFC Bank and their respective shareholders and creditors under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 ("Amalgamation").

The share exchange ratio for the Amalgamation was approved to be 139 (One Hundred and Thirty Nine) fully paid-up equity shares of IDFC Bank for every 10 (Ten) fully paid-up equity shares held in Capital First.

As on the date of this report, the Scheme has received; a. Approvals from National Housing Bank and Competition Commission of India; b. Approvals from BSE Limited and National Stock Exchange of India Limited (in the capacity of a SEBI registered Stock Broker); c. No Objection Letters from BSE Limited and National Stock Exchange of India Limited under Regulation 37 of SEBI LODR Regulations; d. No Objection Letter from RBI under RBI (Amalgamation of Private Sector Banks) Directions, 2016.

IDFC Bank has filed an application with the National Company Law Tribunal ("NCLT"), Chennai Bench seeking its direction for convening meetings of the Shareholders and Creditors of IDFC Bank.

On receipt of directions from the NCLT, IDFC Bank shall convene meetings of its Shareholders and Creditors, as may be required.

Subsequent to the receipt of approval of the Shareholders and Creditors, IDFC

Bank shall file a Petition with the NCLT for its final approval to the Scheme.

JOINT VENTURES

Additionally, IDFC Foundation, a Section 8 Company within the meaning of the Companies Act, 2013 ("Act") and a wholly owned subsidiary of the Company has Joint Venture with Uttarakhand Infrastructure Development Company Limited ("UDeC") which is under liquidation.

ASSOCIATES

Additionally, IDFC Bank has one associate company namely Millennium City Expressways Private Limited.

CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors of IDFC reviews the affairs of its subsidiary companies regularly. In accordance with the provisions of Section 129(3) of the Act, the Company has prepared Consolidated Financial Statements including requisite details of all the subsidiaries. Further, a statement containing the salient features of performance and financial positions of all the subsidiary companies / associates / joint ventures in the format AOC-I is appended as Annexure 1.

In accordance with Section 136 of the Act, the audited Financial Statements together with the Consolidated Financial Statements and related information of the Company and audited accounts of each subsidiary company are available on the website of the Company: www.idfc.com.

Detailed analysis of the performance of IDFC and its businesses, including initiatives in the areas of Risk Management, Human Resources and IDFC Foundation activities, have been presented in the section on Management Discussion & Analysis which forms part of this Annual Report.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

IDFC had 8 employees as on March 31, 2018 and 10,073 employees at the group level. In terms of the provisions of Section 197(12) of the Act, read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended from time to time, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in this Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the Shareholders of the Company. The said information is available for inspection at the Registered Office and Corporate Office of the Company during working hours and any Member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request.

Disclosure pertaining to remuneration & other details as required under section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended from time to time, are appended as Annexure 2.

SHARE CAPITAL UPDATE

During the year, the Company issued and allotted 412,996 equity shares to eligible employees of IDFC and its subsidiaries on exercise of options granted under Employee Stock Option Scheme 2016 ("IDFC ESOS -2016"). As on March 31, 2018, the total paid up capital of IDFC was 1,596,354,566 equity shares of R 10 each.

MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE

In compliance with Regulation 34 of SEBI LODR Regulations, separate detailed chapters on Management Discussion & Analysis, Report on Corporate Governance and Additional Shareholder Information forms part of this Annual Report.

BUSINESS RESPONSIBILITY REPORT

As per Regulation 34(2)(f) of SEBI LODR Regulations and Notifications issued from time to time, a separate report called Business Responsibility Report ("BRR") describing the initiatives taken by IDFC from an environmental, social and governance perspective is hosted on the Company’s website: www.idfc.com which forms part of this Annual Report.

Any Member interested in obtaining a physical copy of the same may write to the Company by sending an e-mail on shareholders@idfc.com.

PUBLIC DEPOSITS

During FY18, your Company has not accepted any deposits from the public within the meaning of the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 or under Chapter V of the Act.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Post demerger of financing undertaking into IDFC Bank w.e.f. October 1, 2015, IDFC is registered with RBI as NBFC – Investment Company. Being an investment company, the provisions of Section 186 of the Act are not applicable to IDFC. Hence, the requisite details of loans, guarantees and investments are not given.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

IDFC has put in place a Whistle Blower Policy, which includes reporting to the Management instances of unethical behaviour, actual or suspected fraud or violation of the Company’s Code of Conduct. The Audit Committee directly oversees the Vigil Mechanism. The provisions of the policy are also in line with the provisions of Section 177 (9) & (10) of the Act.

The details of Whistle Blower Policy / Vigil Mechanism are posted on the website of the Company: www.idfc.com.

FOREIGN EXCHANGE

There were no foreign exchange earnings during the year. The particulars regarding foreign exchange expenditure are furnished at Item No. 25 in the Notes forming part of the Standalone Financial Statements.

PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Since the Company does not carry out any manufacturing activity, the particulars regarding conservation of energy, technology absorption and other particulars as required by Section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014 are not applicable to IDFC.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year Mr. Vikram Limaye (DIN: 00488534) resigned as the Managing Director and Chief Executive Officer ("MD & CEO") of the Company w.e.f. July 15, 2017. The Board places on record its sincere appreciation for the valuable contribution and services rendered by him during his tenure with IDFC Group. Subsequently, the Board appointed Mr. Sunil Kakar (DIN: 03055561) as MD & CEO of the Company w.e.f. July 16, 2017. The Shareholders at its 20th AGM held on July 28, 2017 approved the appointment of Mr. Sunil Kakar as MD & CEO of the Company for a period of three years w.e.f. July 16, 2017.

The Shareholders of the Company at its 20th AGM held on July 28, 2017 approved the reappointment of Mr. S S Kohli and Ms. Marianne kland for a period of 2 years from conclusion of the 20th AGM till the conclusion of 22nd AGM to be held for FY19. In accordance with the Articles of Association of the Company and pursuant to the provisions of Section 152 of the Act, Mr. Soumyajit Ghosh (DIN: 07698741) would retire by rotation at the ensuing AGM and being eligible, offers himself for reappointment.

The Shareholders of the Company at its 16th AGM held on July 29, 2013 appointed Mr. Vinod Rai (DIN: 01119922) as Director in the category of Independent Director ("ID") to hold office till the conclusion of the ensuing AGM. Considering that his valuable contribution would be of immense benefit to the Company and based on the recommendation of the Nomination and Remuneration Committee ("NRC")the Board of Directors approved the reappointment of Mr. Vinod Rai as Director of the Company in the category of ID, for a period of 3 years, to hold office from the conclusion of the ensuing AGM to be held on July 31, 2018 till July 30, 2021. In terms of Section 160 of the Act, the Company has received a notice in writing from a Member signifying his intention to propose Mr. Vinod Rai for the office of Independent Director of the Company. Approval of the Shareholders is sought for reappointment of Mr. Vinod Rai at the ensuing AGM.

Mr. Manish Kumar (DIN: 07379535) who was on the Board of the Company as nominee of Government of India ("GoI") ceased to be a Nominee Director w.e.f. June 11, 2018 as directed by GoI, Ministry of Finance, Department of Financial Services. The Board places on record its sincere appreciation for the valuable contribution and services rendered by him. The Shareholders of the Company at its 19th AGM held on July 27, 2016 reappointed Mr. Gautam Kaji and Mr. Donald Peck for their 2nd term till the conclusion of the 21st AGM (ensuing AGM). Pursuant to the provisions of the Act read with the Rules made thereunder and SEBI LODR Regulations, Mr. Gautam Kaji and Mr. Donald Peck shall complete their 2nd term at the conclusion of ensuing AGM and will cease to be IDs of the Company. The Board places on record its sincere appreciation for their long association and valuable contribution to IDFC. During the year, Mr. Bipin Gemani resigned as the Chief Financial Officer ("CFO") of the Company w.e.f. January 12, 2018 in view of his appointment as Interim CFO at IDFC Bank Limited. The Company is in process of appointing suitable candidate for the post of CFO. Mr. Ketan S. Kulkarni resigned as the Company Secretary & Compliance Officer of the Company w.e.f. January 31, 2018 and Mr. Amol Ranade was appointed as the Company Secretary & Compliance Officer of the Company w.e.f. February 1, 2018.

FRAMEWORK FOR APPOINTMENT OF DIRECTORS

The Company has in place a framework for Board Diversity, Fit & Proper Criteria and Succession Planning for appointment of Directors on the Board of the Company.

DECLARATION OF INDEPENDENCE

The Company has received a declaration from all IDs that they meet the criteria of independence specified under sub-section (6) of Section 149 of the Act, read with Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and Regulation 16(1)(b) of SEBI LODR Regulations for holding the position of ID and that they shall abide by the "Code for Independent Directors" as per Schedule IV of the Act.

SPECIAL BUSINESS

The Board of Directors recommends the following items under special business for approval of the Shareholders at the ensuing AGM: a. Payment of Commission to Non-Executive Directors. b. Reappointment of Mr. Vinod Rai (DIN: 01119922) as an ID.

c. Offer and Issue of Non-Convertible Securities through Private Placement basis. d. Alteration of Articles of Association of the Company.

SHAREHOLDERS UPDATE

PAYMENT OF COMMISSION TO NON-EXECUTIVE DIRECTORS

The Shareholders of the Company at its 16th AGM held on July 29, 2013, had accorded their approval for the payment of remuneration by way of commission or otherwise, not exceeding in aggregate of 1% of the Net Profits of the Company, to be paid to and distributed amongst any or all Non-Executive Directors ("NEDs") of the Company for a period of five years commencing from April 1, 2013 to March 31, 2018. NRC and the Board of Directors of the Company have recommended to continue compensating NEDs which shall not exceed in aggregate of 1% of the Net Profits of the Company as computed in the manner provided in Section 198 of the Companies Act, 2013; for their time and efforts as they bring with them significant professional expertise and rich experience across a wide spectrum of functional areas and it is necessary that adequate compensation should be given to NEDs for the valuable contribution made by them towards the business of the Company. The resolution seeking approval of the Shareholders regarding the same forms part of the Notice of ensuing AGM.

OFFER AND ISSUE OF NON-CONVERTIBLE SECURITIES THROUGH PRIVATE PLACEMENT BASIS

IDFC has been borrowing through issue of Secured Redeemable Non-Convertible Debentures ("NCDs") and Commercial Papers ("CPs") on Private Placement ("PP") basis, from time to time. Section 42 of the Act, read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014, lays down the provisions subject to which a company is allowed to issue securities on PP basis. In view of the same, it is proposed to seek approval of the Shareholders for borrowing, from time to time, by issuance of Non-Convertible Securities, on PP basis, including but not limited to NCDs and CPs up to an amount not exceeding B 2,000 crore (Rupees Two Thousand crore only), which shall be within the overall borrowing limit of B 10,000 crore (Rupees Ten Thousand crore only) as approved by the Shareholders at its 19th AGM under Section 180(1)(c) of the Act, under one or more shelf disclosure documents, for a period of one year from the conclusion of 21st (Twenty-First) AGM on such terms and conditions as the Board may deem fit and appropriate for each series as the case may be. The Board of Directors recommends the same to the Shareholders of the Company. The resolution seeking approval of the Shareholders regarding the same forms part of the Notice of ensuing AGM.

ALTERATION OF ARTICLES OF ASSOCIATION OF THE COMPANY

RBI, while issuing Banking licence to IDFC being promoter of IDFC Bank, had stipulated certain terms and conditions, one of which being restrictions on the transfer of shares of IDFC that no person, without obtaining prior approval of RBI, directly or indirectly, by himself or acting in concert with any other person, can acquire 5% or more paid up equity share capital or voting rights therein of IDFC, which acquisition taken together with the shares / voting rights / compulsorily convertible debentures / bonds, if any, already held by him or his relative or associate enterprise or person acting in concert with him and / or which may result in aggregate shareholding or voting rights therein of 5% or more (directly or indirectly) in IDFC Bank, in a transaction or in series of transactions.

Further, Section 58 of the Act provides that the shares of a public company are freely transferable. However, Section 58(4) of the Act, recognises that in certain cases, the Board of Directors of a Company can refuse to register a transfer. Such a refusal can only be made for a "sufficient cause". The power to refuse a transfer can only be used under limited circumstances such as requirement of RBI in this case.

Before obtaining Banking license, the existing Article 60A was inserted in the Articles of Association ("AoA")after taking approval of the Shareholders on March 30, 2015 by way of postal ballot. These articles restricted aggregate indirect shareholding of any individual or entity or group in IDFC Bank being equivalent to 5% or more of the paid-up voting equity capital of IDFC Bank, in order to avoid hostile takeover of IDFC / IDFC Bank.

However, banking license conditions prescribed by RBI on IDFC being promoter of IDFC Bank Limited requires putting the same restriction on aggregate shareholding of any person / person(s) acting in concert in IDFC Limited holding equivalent to 5% or more of the paid-up voting equity capital of IDFC.

In order to comply with the restrictions relating to transfer of shares in certain circumstances as required above, it is proposed to replace the existing Article 60A of the AoA. The Board of Directors recommends the same to the Shareholders of the Company. The resolution seeking approval of the Shareholders regarding the same forms part of the Notice of ensuing AGM.

BOARD AND ITS COMMITTEES

During the year, 8 (eight) Board Meetings and 4 (four) Audit Committee Meetings were held. Audit Committee comprises of Mr. Gautam Kaji (DIN: 02333127) - Chairman, Mr. Vinod Rai (DIN: 01119922) and Ms. Marianne kland (DIN: 03581266).

All the recommendations made by the Audit Committee during the year were accepted by the Board. The details of the constitution and meetings of the Board, Audit Committee and other Committees held during the year are provided in the Corporate Governance Report which forms part of this Annual Report.

Note: There are no subsidiaries which are yet to commence operations. No subsidiaries have been liquidated or sold during the year.

# Includes interim dividend of 200% on equity shares paid during the year. Further, In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance sheet date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, dated March 30, 2016, proposed dividend of 1200% is not recognised as a liability by the subsidiary as on March 31, 2018.

* Exchange rate:

Closing Rate : 1 USD = R 65.0441 Average Rate : 1 USD = R 64.4932

For and on behalf of the Board of Directors of IDFC Limited

Vinod Rai Sunil Kakar
Non-Executive Chairman Managing Director & CEO
Amol Ranade
Company Secretary Mumbai : April 27, 2018