Dam Capital Advisors Ltd

TO THE MEMBERS

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

FINANCIAL RESULTS

Institutional Broking

The economic slowdown continued into FY14, marking yet another unexciting year for the domestic institutional brokerage industry. The last fiscal was the second consecutive year of sub-5% growth for the Indian economy given manufacturing sector growth was virtually stalled and investment activity remained subdued. In addition, there were cost-push pressures on the corporate sector due to depreciating currency and other supply-side bottlenecks. While stubborn inflationary pressures kept retail investors on the sidelines, foreign flows only picked up in the latter part of the year due to anticipation of a pro-growth political formation taking the reins of government. However, overall low trading volumes and high competition continued to affect brokerage shares in FY14, with domestic institutional brokers’ share slipping to ~25% from historical levels of ~33% in the tough environment.

Nevertheless, key market indices are already reflecting a visible pick-up in investment activity in the past quarter, led by the political events as also an improvement in critical macro indicators like current account deficit, fiscal deficit and even inflation. The Company believes the clear electoral mandate to kick-start the growth cycle will lead to decisive policy action, driving corporate earnings and the return of investor confidence. With a combination of ideas-driven research, constant improvement in talent and widening / deepening of client relationships, the Company is well-poised to benefit from the improving investment climate.

Investment Banking

The year gone by continued to be a challenging year for the Investment Banking industry. Subdued sentiment coupled with economic slowdown and political uncertainty had its impact both on capital markets and the Private Equity and Mergers & Acquisitions ("PE / M&A") deal environment. With the onslaught of many boutique investment banks, competition in the industry has intensified in recent past. Consequently, the overall fee pool for the Investment Banking industry has reduced significantly.

Longer deal cycles, below expectation returns due to high valuations paid in boom period of 2006-2008, fewer exits as capital markets were down, impacted the overall activity. Considering these challenges, we closed the fiscal year 2014 with revenues of Rs 52.11 crore which is marginally better than Rs 50.53 crore in FY13.

Our focus on non-infra sector during FY14 led to successful closures of deals in pharma, auto, engineering, etc. Although infrastructure sector as a whole remained subdued due to high borrowing costs, delays in securing mandatory government approvals and completing land acquisition, our continued focus on non-infra sectors compensated us in maintaining the revenues. Selective hiring done last fiscal and current fiscal is also helping us build the deal pipeline across sectors and products including focused PE coverage, Capital Market coverage (IPOs, QIPs, Block Trades) etc. With the election results round the corner and keeping in mind India’s political scenario in coming 6-9 months, we are gearing up to capture the market share. We are positive of the coming year given our strategic focus around capital markets, continued diversification across sectors, client-centricity, working with international clients/alliance partners; our deal pipeline is a reflection of these initiatives.

DIVIDEND

The Directors do not recommend any dividend for the year ended March 31, 2014.

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 COMPANIES

IDFC Securities Limited has four direct wholly owned subsidiary companies – IDFC Capital (USA) Inc., IDFC Capital (Singapore) Pte. Limited, IDFC Fund of Funds Limited and IDFC Securities Singapore Pte. Limited.

On October 18, 2013, the entire equity stake of IDFC Pension Fund Management Company Limited, which was held by IDFC Limited and IDFC Asset Management Company Limited, was acquired by the Company, thereby making IDFC Pension Fund Management Company Limited a wholly owned subsidiary of the Company.

On November 16, 2013, the Scheme of Amalgamation under Sections 391 to 394 of Companies Act, 1956 was filed with the Hon’ble High Court of Bombay to amalgamate IDFC Distribution Company Limited, IDFC Capital Limited and IDFC Pension Fund Management Company Limited with IDFC Securities Limited and their respective shareholders. The Hon’ble High Court of Bombay approved the amalgamation of the above entities on March 28, 2014. The merged entities were wholly-owned subsidiaries of IDFC Securities Limited.

By virtue of the above amalgamation, the subsidiaries of IDFC Capital Limited i.e. IDFC Fund of Funds Limited, IDFC Capital (Singapore) Pte. Limited and IDFC Securities Singapore Pte. Limited, became direct subsidiaries of the Company.

The objective of merger was to rationalise / streamline overall corporate structure of IDFC. The consolidation was to enable to reduce the number of entities that requires to be administered and also help realize operational synergies which would also result in simplification of operations. Consequent upon the Merger, the Investment Banking and Distribution of securities business are now carried out under IDFC Securities Limited, in addition to its existing Institutional Equity business.

As required under the provisions of Section 212 of the Companies Act, 1956, a statement of holding company’s interest in the subsidiary companies is attached to this report.

DIRECTORS

Mr. Anil Singhvi (DIN-00239589), who was on the Board of the Company, resigned as a Director of the Company w.e.f. August 23, 2013. Mr. Tapasije Mishra (DIN-00336496), who was Whole-Time Director of the Company, resigned from the Board of the Company w.e.f. October 15, 2013. The Board placed on record it's appreciation for the valuable services rendered by Mr. Singhvi and Mr. Mishra during their tenure.

Mr. Sunil Kakar (DIN-03055561) is retiring by rotation and being eligible offers himself for reappointment at the ensuing Annual General Meeting ("AGM").

The Board of Directors recommends reappointment of Mr. Kakar at the ensuing AGM.

AUDIT COMMITTEE

The Audit Committee comprises of the following Directors as its Members:

The Audit Committee met four times during the year under review.

AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (Registration No. 117365W) Statutory Auditors of the Company will retire at the conclusion of the ensuing AGM.

The Board recommends the reappointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, as the Statutory Auditors of the Company.

PUBLIC DEPOSITS

During the year under review, your Company has not accepted any public deposits.

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, 1988, are not applicable and hence not given.

FOREIGN EXCHANGE EARNINGS AND EXPENDITURE

The particulars regarding foreign exchange earnings and expenditure are furnished at Note No. 28 in the Notes forming part of the Financial Statements.

PERSONNEL AND OTHER MATTERS

Your Company had 95 employees as on March 31, 2014 (including 20 employees of IDFC Capital Limited transferred to the Company consequent to merger of IDFC Capital Limited). 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: n the applicable accounting standards have been followed in the preparation of the annual accounts and that there are no material departures; n 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; n 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 n they have prepared annual accounts on a going concern basis.

ACKNOWLEDGEMENTS

The Board wishes to thank the clients, custodians, Securities and Exchange Board of India, Stock Exchanges, Banks, Bombay High Court and other statutory and regulatory authorities for their support to your Company. The Board also places on record its appreciation for the sincere efforts of the staff.

The Board would also like to express its gratitude for the unstinted support and guidance received from IDFC Limited and other group companies.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

VIKRAM LIMAYE

Chairman

Mumbai, April 21, 2014