TABLE OF CONTENTS

SECTION I : GENERAL ................................................................................................................................................................................i

Definitions / Abbreviations ................................................................................................................................................................................i

Forward Looking Statements......................................................................................................................................................................... viii

SECTION II : RISK FACTORS....................................................................................................................................................................1

SECTION III : INTRODUCTION ..............................................................................................................................................................20

General Information ........................................................................................................................................................................................20

Summary of Business, Strength & Strategy ....................................................................................................................................................30

The Issue .........................................................................................................................................................................................................35

Summary Financial Information......................................................................................................................................................................37

Capital Structure..............................................................................................................................................................................................49

Objects of the Issue .........................................................................................................................................................................................60

Statement of Tax Benefits ...............................................................................................................................................................................61

SECTION IV : ABOUT THE ISSUER COMPANY AND THE INDUSTRY .........................................................................................65

Industry............................................................................................................................................................................................................65

Our Business....................................................................................................................................................................................................84

History, Main Objects And Key Agreements................................................................................................................................................100

Our Management ...........................................................................................................................................................................................111

Our Promoter .................................................................................................................................................................................................123

Our Subsidiary...............................................................................................................................................................................................128

SECTION V : FINANCIAL INFORMATION.........................................................................................................................................130

Financial Statements ......................................................................................................................................................................................130

Disclosures on Existing Financial Indebtedness .............................................................................................................................................131

Material Developments .................................................................................................................................................................................137

SECTION VI : ISSUE RELATED INFORMATION ..............................................................................................................................141

Terms of the Issue .........................................................................................................................................................................................141

Issue Structure ...............................................................................................................................................................................................144

Issue Procedure..............................................................................................................................................................................................156

SECTION VII : LEGAL AND OTHER INFORMATION .....................................................................................................................169

Pending Proceedings and Statutory Defaults .................................................................................................................................................169

Regulations and Policies................................................................................................................................................................................181

Summary of Key Provisions of Articles Of Association ...............................................................................................................................189

Material Contracts and Documents For Inspection .......................................................................................................................................192

DECLARATION .........................................................................................................................................................................................194

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SECTION I : GENERAL

DEFINITIONS / ABBREVIATIONS

Company related terms

Term Description

"SCUFL", "Issuer", “the Company” and “our Company”

Shriram City Union Finance Limited, a company incorporated under the Companies Act, 1956, registered as a Non-Banking Financial Company with the Reserve Bank of India under Section 45-IA of the Reserve Bank of India Act, 1934, and having its Registered Office at 123, Angappa Naicken Street, Chennai-600001, Tamil Nadu, India

AOA/Articles / Articles of Association Articles of Association of our Company

Board / Board of Directors The Board of Directors of our Company and includes any Committee thereof from time to time

DIN Director Identification Number

ESOP 2006 The Company Employee Stock Option Scheme of the year 2006, namely, “SCUF Employee Stock Option Scheme 2006”

ESOP 2008 The Company Employee Stock Option Scheme of the year 2008, namely, “SCUF Employee Stock Option Scheme 2008”

Equity Shares Equity shares of face value of ` 10/- each of our Company

Fitch Fitch Ratings India Private Limited

Loan Assets Assets under financing activities

Memorandum / MOA Memorandum of Association of our Company

Net Interest Margins/NIM Interest income net off the amount of outgoing interest paid by the Company on its liabilities

Net Loan Assets Assets under financing activities net of provision for non-performing assets

NAV Net Asset Value

NBFC Non-Banking Financial Company as defined under Section 45-IA of the RBI Act, 1934

NPA Non Performing Asset

Promoter(s) Shriram Enterprise Holdings Private Limited and Shriram Retail holdings Private Limited

` / Rs./ INR/ Rupees The lawful currency of the Republic of India

SCL Shriram Capital Limited

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Term Description

SEHPL Shriram Enterprise Holdings Private Limited

SHFL Shriram Housing Finance Limited

SRHPL Shriram Retail Holdings Private Limited

Shriram Chits Entities operating under the brand name of “Shriram Chits” namely, Shriram Chits Private Limited, Shriram Chits Tamilnadu Private Limited, Shriram Chits Karnataka Private Limited, and Shriram Chits Maharashtra Private Limited

Shriram Group Entities operating under the “Shriram” brand name

Statutory Auditor Our statutory auditor being M/s Pijush Gupta & Co.

Subsidiary Subsidiary of our Company namely Shriram Housing Finance Limited

“We”, “us” and “our” Our Company and/or its Subsidiary, unless the context otherwise requires

Issue related terms

Term Description

Allotment / Allotted Unless the context otherwise requires, the allotment of the NCDs pursuant to the Issue to the Allottees

Allottee The successful applicant to whom the NCDs are being/have been allotted

Application Form The form used by an applicant to apply for NCDs being issued through the Prospectus

Bankers to the Issue/Escrow Collection Banks

The bank(s) with whom Escrow Accounts will be opened as specified on page 24 of this Prospectus

Base Issue Public Issue of NCDs by our Company aggregating upto ` 37,500 lakhs

Basis of Allotment The basis on which NCDs will be allotted to applicants under the Issue and which is described in “Issue Procedure – Basis of Allotment” on page 165 of this Prospectus.

CARE Credit Analysis and Research Limited

CRISIL CRISIL Limited

Co-Lead Manager Karvy Investor Services Limited

Debentures / NCDs Secured, Redeemable, Non-Convertible Debentures offered through this Prospectus aggregating upto ` 37,500 lakhs with an option to retain over-subscription upto ` 37,500 lakhs for issuance of additional NCDs aggregating to a total of upto ` 75,000 lakhs.

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Term Description

Debenture Holder (s) The holders of the NCDs

Debt Listing Agreement The listing agreement entered into/to be entered into between our Company and the relevant stock exchange(s) in connection with the listing of debt securities of our Company.

Debt Regulations

SEBI (Issue and Listing of Debt Securities) Regulations, 2008, issued by SEBI, effective from June 6, 2008 as amended from time to time

Deemed Date of Allotment The date of issue of the Allotment Advice / regret.

Depositories Act The Depositories Act, 1996, as amended from time to time

Depository(ies) National Securities Depository Limited (NSDL) and /or Central Depository Services (India) Limited (CDSL)

DP / Depository Participant A depository participant as defined under the Depositories Act

Designated Stock Exchange National Stock Exchange of India Limited

Draft Prospectus / Draft Offer Document

The draft prospectus dated July 21, 2011 filed with the NSE for receiving public comments in accordance with the provisions of the Act and the Debt Regulations

Early Redemption (Call) Date The date, 48 months after the expiry of the Deemed Date of Allotment , after which our Company has the right to exercise its Call Option with respect to Option I NCDs

Early Redemption (Call) Period The period of 30 days from the Early Redemption (Call) Date within which our Company has the right to exercise its Call Option with respect to Option I NCDs

Early Redemption (Put) Date The date, 48 months after the expiry of the Deemed Date of Allotment Date, after which a holder of Option I NCDs has the right to exercise his Put Option with respect to the Option I NCDs held by him

Early Redemption (Put) Period The period of 30 days from the Early Redemption (Put) Date within which a holder of Option I NCDs has the right to exercise his Put Option with respect to the Option I NCDs held by him

Escrow Agreement Agreement dated July 28, 2011 entered into amongst our Company, the Registrar, the Escrow Collection Bank(s) and the Lead Managers for collection of the application amounts and for remitting refunds, if any, of the amounts collected, to the applicants on the terms and conditions contained therein

Escrow Account Accounts opened in connection with the Issue with the Escrow Collection Banks and in whose favour the applicant will issue cheques or bank drafts in respect of the application amount while submitting the application

Institutional Portion Portion of applications received from Category I of persons eligible to apply for the issue which includes Public Financial Institutions, Statutory Corporations, Commercial Banks, Co-operative Banks and Regional Rural Banks which are authorised to invest in the NCDs, Provident Funds, Pension

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Term Description

Funds and Superannuation Funds and Gratuity Funds which are authorised to invest in the NCDs, Venture Capital funds registered with SEBI, Insurance Companies registered with the IRDA, National Investment Fund and Mutual Funds

Issue Public Issue by our Company of NCDs aggregating upto ` 37,500 lakhs with an option to retain over-subscription upto 37,500 lakhs for issuance of additional NCDs aggregating to a total of upto ` 75,000 lakhs.

Issue Opening Date August 11, 2011

Issue Closing Date August 27, 2011

Lead Brokers A.K. Stockmart Private Limited, JM Financial Services Private Limited, Karvy Stock Broking Limited, ICICI Securities Limited, R.R Equity Brokers Private Limited, SPA Securities Limited, Integrated Securities Limited, HDFC Securities Limited, Edelweiss Broking Limited, Bajaj Capital Investor Services Limited, Kotak Securities Limited, Enam Securities Private Limited, SMC Global Securities Limited, and Anand Rathi Shares & Stock Brokers Limited

Lead Managers JM Financial Consultants Private Limited, A. K. Capital Services Limited and ICICI Securities Limited

Market Lot One NCD

Non-Institutional Portion Category II of persons eligible to apply for the issue which includes Companies, Bodies Corporate and Societies registered under the applicable laws in India and authorised to invest in NCDs, Public/Private Charitable/Religious Trusts which are authorised to invest in the NCDs, Scientific and/or Industrial Research Organisations which are authorised to invest in the NCDs, Partnership Firms in the name of the partners and Limited liability partnerships formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (No. 6 of 2009)

Options Options being offered to the applicants as stated in the section titled ‘Issue

Related Information’ beginning on page 141 of this Prospectus

Prospectus / Offer Document This Prospectus dated August 1, 2011 issued and filed/to be filed with the ROC in accordance with the Debt Regulations containing inter alia the coupon rate for the NCDs and certain other information

Put Option The right of holders of Option I NCDs to seek redemption of such Option I NCDs held by them at the expiry of 48 months, from the Deemed Date of Allotment

Registrar to the Issue Integrated Enterprises (India) Limited

Senior Citizen Any person who has completed the age of 60 years as on the date of the Prospectus

Trustees / Debenture Trustee Trustees for the Debenture Holders in this case being IDBI Trusteeship Services Limited.

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∗ The subscription list shall remain open for a period as indicated herein, with an option for early closure or extension by such period, as may be decided by the duly authorised committee of Directors of our Company, subject to necessary approvals. In the event of such early closure of subscription list of the Issue, our Company shall ensure that notice of such early closure is given on such early date of closure through advertisement/s in a leading national daily newspaper.

Technical & Industry Terms

Term Description

ALM Asset Liability Management

ALCO Asset - Liability Committee

CAR Capital Adequacy Ratio computed on the basis of applicable RBI requirements

KYC Norms Customer identification procedure for opening of accounts and monitoring transactions of suspicious nature followed by NBFCs for the purpose of reporting it to appropriate authority

MSME Micro Small and Medium Enterprises

Non-Deposit Accepting NBFC Directions

Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007

NBFC-D NBFC registered as a deposit accepting NBFC

NBFC-ND NBFC registered as a non-deposit accepting NBFC

Prudential Norms Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007

Public Deposit Directions The Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998

SME Small and Medium Enterprises

Conventional / General Terms

Term Description

AGM Annual General Meeting

AS Accounting Standard

Act The Companies Act, 1956, as amended from time to time

BSE Bombay Stock Exchange Limited

CAGR Compounded Annual Growth Rate

CDSL Central Depository Services (India) Limited

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Term Description

DRR Debenture Redemption Reserve

EGM Extraordinary General Meeting

EPS Earnings Per Share

FDI Policy FDI in an Indian company is governed by the provisions of the FEMA read with the FEMA Regulations and the Foreign Direct Investment Policy

FEMA Foreign Exchange Management Act, 1999, as amended from time to time

FEMA Regulations Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended from time to time

FII/FIIs Foreign Institutional Investor(s)

Financial Year / FY Financial Year ending March 31

GDP Gross Domestic Product

GoI Government of India

HUF Hindu Undivided Family

IFRS International Financial Reporting Standards

IFSC Indian Financial System Code

Indian GAAP Generally Accepted Accounting Principles in India

IRDA Insurance Regulatory and Development Authority

IT Act The Income Tax Act, 1961, as amended from time to time

MCA Ministry of Corporate Affairs, Government of India

MICR Magnetic Ink Character Recognition

MSE Madras Stock Exchange Limited

NECS National Electronic Clearing Services

NEFT National Electronic Funds Transfer

NRI Non Resident Indian

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

PAN Permanent Account Number

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Term Description

RBI The Reserve Bank of India

RBI Act The Reserve Bank of India Act, 1934, as amended from time to time

ROC Registrar of Companies

RTGS Real Time Gross Settlement

SBI State Bank of India

SCRA Securities Contracts (Regulation) Act, 1956, as amended from time to time

SCRR The Securities Contracts (Regulation) Rules, 1957, as amended from time to time

SEBI

The Securities and Exchange Board of India constituted under the Securities and Exchange Board of India Act, 1992

SEBI Act The Securities and Exchange Board of India Act, 1992 as amended from time to time

TDS Tax Deducted at Source

WDM Wholesale Debt Market

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FORWARD LOOKING STATEMENTS

Certain statements contained in this Prospectus that are not statements of historical fact constitute “forward-looking statements.” Investors can generally identify forward-looking statements by terminology such as “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “objective”, “plan”, “potential”, “project”, “pursue”, “shall”, “should”, “will”, “would”, or other words or phrases of similar import. All statements regarding our Company’s expected financial condition and results of operations and business plans and prospects are forward-looking statements. These forward-looking statements include statements as to our Company’ business strategy, revenue and profitability, planned projects and other matters discussed in this Prospectus that are not historical facts. These forward-looking statements and any other projections contained in this Prospectus (whether made by our Company or any third party) are predictions and involve known and unknown risks, uncertainties, assumptions and other factors that may cause our Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or other projections. All forward-looking statements are subject to risks, uncertainties and assumptions about our Company that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our Company’s expectations include, among others:

• General economic and business conditions in India and globally;

• Our ability to successfully implement our strategy, our growth and expansion plans and technological changes;

• Our ability to compete effectively and access funds at competitive cost;

• Changes in the value of Rupee and other currency changes;

• Unanticipated turbulence in interest rates, equity prices or other rates or prices; the performance of the financial and capital markets in India and globally;

• Availability of funds and willingness of our lenders to lend;

• Changes in political conditions in India;

• The rate of growth of our Loan Assets;

• The outcome of any legal or regulatory proceedings we are or may become a party to;

• Changes in Indian and/or foreign laws and regulations, including tax, accounting, banking, securities, insurance and other regulations; changes in competition and the pricing environment in India; and regional or general changes in asset valuations;

• Any changes in connection with policies, statutory provisions, regulations and/or RBI directions in connection with NBFCs, including laws that impact our lending rates and our ability to enforce our collateral;

• Performance of the sectors and industries that our financial products cater to namely the automobile industry, the small enterprises finance sector sector etc.

• Changes in the value of gold prices in connection with our loans against gold.

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• Emergence of new competitors;

• Performance of the Indian debt and equity markets;

• Occurrence of natural calamities or natural disasters affecting the areas in which our Company has operations; and

• Other factors discussed in this Prospectus, including under the section titled “Risk Factors” beginning on page 1 of this Prospectus.

All forward-looking statements are subject to risks, uncertainties and assumptions about our Company that could cause actual results and valuations to differ materially from those contemplated by the relevant statement. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under the sections titled “Industry” and “Our Business”. The forward-looking statements contained in this Prospectus are based on the beliefs of management, as well as the assumptions made by and information currently available to management. Although our Company believes that the expectations reflected in such forward-looking statements are reasonable at this time, it cannot assure investors that such expectations will prove to be correct or will hold good at all times. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. If any of these risks and uncertainties materialise, or if any of our Company’s underlying assumptions prove to be incorrect, our Company’s actual results of operations or financial condition could differ materially from that described herein as anticipated, believed, estimated or expected. All subsequent forward-looking statements attributable to our Company are expressly qualified in their entirety by reference to these cautionary statements. Neither our Company, our Directors and Officers nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

General In this Prospectus, unless the context otherwise indicates or implies, references to “you,” “offeree,” “purchaser,” “subscriber,” “recipient,” “investors” and “potential investor” are to the prospective investors in this Offering, references to our “Company”, the “Company” or the “Issuer” are to Shriram City Union Finance Limited. In this Prospectus, references to “US$” is to the legal currency of the United States and references to “Rs.”, “`” and “Rupees” are to the legal currency of India. All references herein to the “U.S.” or the “United States” are to the United States of America and its territories and possessions and all references to “India” are to the Republic of India and its territories and possessions, and the "Government", the "Central Government" or the "State Government" are to the Government of India, central or state, as applicable. Unless otherwise stated, references in this Prospectus to a particular year are to the calendar year ended on December 31 and to a particular “fiscal” or “fiscal year” are to the fiscal year ended on March 31. Unless otherwise stated all figures pertaining to the financial information in connection with our Company are on an unconsolidated basis. Presentation of Financial Information Our Company publishes its financial statements in Rupees. Our Company’s financial statements are prepared in accordance with Indian GAAP and the Companies Act. The Reformatted Unconsolidated Summary Financial Statements and the Reformatted Consolidated Summary Financial Statements are included in this Prospectus and collectively referred to hereinafter as the “Reformatted

Summary Financial Statements”. The examination reports on the Reformatted Summary Financial Statements, as issued by our Company’s Statutory Auditor, M/s Pijush Gupta & Co, are included in this Prospectus in the section titled “Financial Information” beginning at page 130. Any discrepancies in the tables included herein between the amounts listed and the totals thereof are due to rounding off.

Unless stated otherwise, macroeconomic and industry data used throughout this Prospectus has been obtained from publications prepared by providers of industry information, government sources and multilateral institutions. Such publications generally state that the information contained therein has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although the Issuer believes that industry data used in this Prospectus is reliable, it has not been independently verified.

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SECTION II : RISK FACTORS

Prospective investors should carefully consider the risks and uncertainties described below, in addition to the other

information contained in this Prospectus before making any investment decision relating to the NCDs. If any of the

following risks or other risks that are not currently known or are now deemed immaterial, actually occur, our

business, financial condition and result of operation could suffer, the trading price of the NCDs could decline and

you may lose your all or part of your interest and / or redemption amounts. Unless otherwise stated in the relevant

risk factors set forth below, we are not in a position to specify or quantify the financial or other implications of any

of the risks mentioned herein. The ordering of the risk factors is intended to facilitate ease of reading and reference

and does not in any manner indicate the importance of one risk factor over another.

This Prospectus contains forward looking statements that involve risk and uncertainties. Our Company’s actual

results could differ materially from those anticipated in these forward looking statements as a result of several

factors, including the considerations described below and elsewhere in this Prospectus.

Investors are advised to read the following risk factors carefully before making an investment in the NCDs offered

in this Issue. You must rely on your own examination of our Company and this Issue, including the risks and

uncertainties involved.

INTERNAL RISK FACTORS

Risks relating to our Company and its Business

1. Our financial performance is particularly vulnerable to interest rate volatility.

Our results of operations are substantially dependent upon the level of our Net Interest Margins. Income from our financing activities is the largest component of our total income, and constituted 87.73% and 92.95% of our total income in fiscal 2010 and fiscal 2011, respectively. As of March 31, 2011, our assets under management were ` 799,804.88 lakhs. We borrow funds on both fixed and floating rates. Volatility in interest rates can materially and adversely affect our financial performance. In a rising interest rate environment, if the yield on our interest-earning assets does not increase simultaneously with or to the same extent as our cost of funds, or, in a declining interest rate environment, if our cost of funds does not decline simultaneously or to the same extent as the yield on our interest-earning assets, our net interest income and net interest margin would be adversely impacted. Additional risks arising from increasing interest rates, among others, include:

• increases in the rates of interest charged on various loans in our loan portfolio, which could result in the extension of loan maturities and higher monthly installments due from borrowers which, in turn, could result in higher rates of default;

• reductions in the volume of product finance loans, auto loans, personal loans, loans against gold and/or loans to small enterprise finance segment as a result of clients' inability to service high interest rate payments; and

• reduction in the value of fixed income securities held in our investment portfolio. Accordingly, our operations are susceptible to fluctuations in interest rates. Interest rates are highly sensitive and fluctuations thereof are dependent upon many factors which are beyond our control, including the monetary policies of the RBI, de-regulation of the financial services sector in India, domestic and international economic and political conditions, inflation and other factors. Rise in inflation, and consequent changes in Bank rates, Repo rates and Reverse Repo rates by the RBI has led to an increase in interest rates on loans provided by banks and financial institutions, and market interest rates in India have been volatile in recent periods.

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2. Our business requires substantial capital, and any disruption in funding sources would have a material

adverse effect on our liquidity and financial condition.

As a finance company, our liquidity and ongoing profitability are, in large part, dependent upon our timely access to, and the costs associated with, raising capital. Our funding requirements historically have been met from a combination of term loans from banks and financial institutions, issuance of redeemable non-convertible debentures, public deposits, the issue of subordinated bonds and commercial paper. Thus, our business depends and will continue to depend on our ability to access diversified funding sources. Our ability to raise funds on acceptable terms and at competitive rates continues to depend on various factors including our credit ratings, the regulatory environment and policy initiatives in India, developments in the international markets affecting the Indian economy, investors' and/or lenders' perception of demand for debt and equity securities of NBFCs, and our current and future results of operations and financial condition. Changes in economic and financial conditions or continuing lack of liquidity in the market could make it difficult for us to access funds at competitive rates. As an NBFC, we also face certain restrictions on our ability to raise money from international markets which may further constrain our ability to raise funds at attractive rates. Such conditions may occur again in the future and may lead to a disruption in our primary funding sources at competitive costs and would have a material adverse effect on our liquidity and financial condition.

3. High levels of customer defaults could adversely affect our business, financial condition and results of

operations.

Our business involves lending money and accordingly we are subject to customer default risks including default or delay in repayment of principal or interest on our loans. Customers may default on their obligations to us as a result of various factors including bankruptcy, lack of liquidity, lack of business and operational failure. If borrowers fail to repay loans in a timely manner or at all, our financial condition and results of operations will be adversely impacted. In addition, our customer portfolio principally consists of the under-banked community who does not typically have easy access to financing from commercial banks or other organized lenders and often have limited credit history. Such borrowers generally are less financially resilient than larger corporate borrowers, and, as a result, they can be more adversely affected by declining economic conditions. In addition, a significant majority of our client base belongs to the low or middle income group. In addition, we may not receive updated information regarding any change in the financial condition of our customers or may receive inaccurate or incomplete information as a result of any fraudulent misrepresentation on the part of our customers. Furthermore, unlike several developed economies, a nationwide credit bureau has only recently become operational in India, so there is less financial information available about the creditworthiness of our customers. It is therefore difficult to carry out precise credit risk analyses on our clients. Although we follow certain procedures to evaluate the credit profile of our customers at the time of sanctioning a loan, we generally rely on the referrals from the current or past customers of our Company or those of other entities in the Shriram Group. Although we believe that our risk management controls are sufficient, we cannot be certain that they will continue to be sufficient or that additional risk management policies for individual borrowers will not be required. Failure to continuously monitor the loan contracts, particularly for individual borrowers, could adversely affect our credit portfolio which could have a material and adverse effect on our results of operations and financial condition.

4. We may not be able to recover, on a timely basis or at all, the full value of collateral or amounts which

are sufficient to cover the outstanding amounts due under defaulted loans.

For our two-wheeler and other vehicle loans, the two-wheeler/vehicle is typically hypothecated in favour of our Company for the tenure of the loan. The value of the vehicle, however, is subject to depreciation, deterioration, and/or reduction in value on account of other extraneous reasons, over the course of time. Consequently, the realizable value of the collateral for the credit facility provided by us, when liquidated,

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may be lower than the outstanding loan from such customers. The hypothecated vehicles, being movable property, may be difficult to locate or seize in the event of any default by our customers. There can also be no assurance that we will be able to sell such vehicles provided as collateral at prices sufficient to cover the amounts under default. In addition, there may be delays associated with such process. In connection with loans against gold provided by us, the gold jewellery and/or ornaments are provided as security. An economic downturn or sharp downward movement in the price of gold could result in a fall in collateral values. In the event of any decrease in the price of gold, customers may not repay their loans and the collateral gold jewellery securing the loans may have decreased significantly in value, resulting in losses which we may not be able to support. No assurance can be given that if the price of gold decreased significantly, our financial condition and results of operations from this business product would not be adversely affected. The impact on our financial position and results of operations of a hypothetical decrease in gold values cannot be reasonably estimated because the market and competitive response to changes in gold values is not pre-determinable. Additionally, we may not be able to realise the full value of our collateral, due to, among other things, defects in the quality of gold or wastage on melting gold jewellery into gold bars. In addition, failure by our employees to properly appraise the value of the collateral provides us with no recourse against the borrower. For the personal loans and loans to small enterprises business, in connection with a customer who is also an existing customer of ‘Shriram Chits’ we typically create a lien over the chit deposits of such customer. If the value of the chit deposits is insufficient to cover the entire loan amount, we typically also require immovable or movable property to be provided for the remaining value of the loan amount. In cases where the customer is unable to provide such immovable or movable property as security, the applicant is also required to furnish a guarantee from typically an existing or a former customer. Any deterioration in the value of such additional security or our failure to enforce such guarantees or to enforce such charges in a timely manner or at all could adversely affect our operations and profitability. Any default in repayment of the outstanding credit obligations by our customers may expose us to losses. A failure or delay to recover the expected value from sale of collateral security could expose us to a potential loss. Any such losses could adversely affect our financial condition and results of operations. Furthermore, enforcing our legal rights by litigating against defaulting customers is generally a slow and potentially expensive process in India. Accordingly, it may be difficult for us to recover amounts owed by defaulting customers in a timely manner or at all.

5. Our significant indebtedness and the conditions and restrictions imposed by our financing arrangements

could restrict our ability to conduct our business and operations in the manner we desire.

As of March 31, 2011, we had outstanding secured debt of ` 656,951.01 lakhs and unsecured debt of ` 75,827.43 lakhs and we will continue to incur additional indebtedness in the future. Most of our borrowings are secured by our immovable and other assets. Our significant indebtedness could have several important consequences, including but not limited to the following:

• a portion of our cash flow may be used towards repayment of our existing debt, which will reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate requirements;

• our ability to obtain additional financing in the future at reasonable terms may be restricted or our cost of borrowings may increase due to sudden adverse market conditions, including decreased availability of credit or fluctuations in interest rates;

• fluctuations in market interest rates may affect the cost of our borrowings as some of our indebtedness are at variable interest rates;

• there could be a material adverse effect on our business, financial condition and results of operations if we are unable to service our indebtedness or otherwise comply with financial and other covenants specified in the financing agreements; and

• we may be more vulnerable to economic downturns, may be limited in our ability to withstand

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competitive pressures and may have reduced flexibility in responding to changing business, regulatory and economic conditions.

Some of our financing agreements also include various conditions and covenants that require us to obtain lender consents prior to carrying out certain activities and entering into certain transactions. Failure to meet these conditions or obtain these consents could have significant consequences on our business and operations. Specifically, under some of our financing agreements, we require, and may be unable to obtain, consents from the relevant lenders for, among others, the following matters: entering into any scheme of merger; spinning-off of a business division; selling or transferring all or a substantial portion of our assets; making any change in ownership or control or constitution of our Company; making amendments in our Memorandum and Articles of Association; creating any further security interest on the assets upon which the existing lenders have a prior charge; and raising funds by way of any fresh capital issue. Our financing agreements also typically contain certain financial covenants including the requirement to maintain, among others, specified debt-to-equity ratios, debt-to-net worth ratios, or Tier I to Tier II capital ratios that may be higher than statutory or regulatory requirements. These covenants vary depending on the requirements of the financial institution extending the loan and the conditions negotiated under each financing document. Such covenants may restrict or delay certain actions or initiatives that we may propose to take from time to time. A failure to observe the covenants under our financing arrangements or to obtain necessary consents required thereunder may lead to the termination of our credit facilities, acceleration of all amounts due under such facilities and the enforcement of any security provided. Any acceleration of amounts due under such facilities may also trigger cross default provisions under our other financing agreements. If the obligations under any of our financing documents are accelerated, we may have to dedicate a substantial portion of our cash flow from operations to make payments under such financing documents, thereby reducing the availability of cash for our working capital requirements and other general corporate purposes. Further, during any period in which we are in default, we may be unable to raise, or face difficulties raising, further financing. Any of these circumstances could adversely affect our business, credit rating and financial condition and results of operations. Moreover, any such action initiated by our lenders could result in the price of our NCDs being adversely affected.

6. Our entire customer base comprises individual and/or small enterprise segment borrowers, who

generally are more likely to be affected by declining economic conditions than larger corporate

borrowers.

Individual and small enterprise segment borrowers generally are less financially resilient than larger corporate borrowers, and, as a result, they can be more adversely affected by declining economic conditions. In addition, a significant majority of our customer base belongs to the low to medium income group and/or the small enterprises finance sector. Furthermore, unlike several developed economies, a nationwide credit bureau has only recently become operational in India, so there is less financial information available about individuals, particularly our focus customer segment from the low to medium income group who typically have limited access to other financing sources. It is therefore difficult to carry out precise credit risk analyses on our customers. Although we believe that our risk management controls are sufficient, we cannot be certain that they will continue to be sufficient or that additional risk management policies for individual borrowers will not be required. Failure to maintain sufficient credit assessment policies, particularly for individual borrowers, could adversely affect our credit portfolio which could have a material and adverse effect on our results of operations and financial condition.

7. We face increasing competition in our business which may result in declining margins if we are unable

to compete effectively.

We face competition in all our lines of businesses. Our primary competitors are other NBFCs, public sector banks, private sector banks, co-operative banks and foreign banks and the unorganized financiers who principally operate in the local markets. Over the past few years, the retail financing area has seen the entry of banks, both nationalized as well as foreign. Banks have access to low cost funds which enables them to enjoy higher margins and / or offer finance at lower rates. NBFCs do not have access to large quantities of low cost deposits, a factor which can render them less competitive. In addition, interest rate deregulation

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and other liberalization measures affecting the retail and small enterprises finance sector, together with increased demand for capital by individuals as well as small enterprises, have resulted in an increase in competition. All of these factors have resulted in us facing increased competition from other lenders in each of our lines of businesses, including commercial banks and other NBFCs. Our ability to compete effectively will depend, to some extent, on our ability to raise low-cost funding in the future. Furthermore, as a result of increased competition in the finance sector, finance products are becoming increasingly standardized and variable interest rate and payment terms and lower processing fees are becoming increasingly common in the finance sector in India. There can be no assurance that we will be able to react effectively to these or other market developments or compete effectively with new and existing players in the increasingly competitive finance industry. Increasing competition may have an adverse effect on our net interest margin and other income, and, if we are unable to compete successfully, our market share may decline. If we are unable to compete effectively with other participants in the finance sector, our business, future financial performance and the trading price of the NCDs may be adversely affected.

8. Since we handle high volume of cash and gold jewellery in a dispersed network of branches, we are

exposed to operational risks, including employee negligence, fraud, petty theft, burglary and

embezzlement, which could harm our results of operations and financial position.

Our transactions in connection with loans against gold, personal loans and loans to the small enterprises finance segment involve cash and gold jewellery. Large cash and gold jewellery transactions expose us to the risk of fraud by employees, agents, customers or third parties, theft, burglary and misappropriation or unauthorized transactions by our employees. Our insurance policies, security systems and measures undertaken to detect and prevent these risks may not be sufficient to prevent or deter such activities in all cases, which may adversely affect our operations and profitability. Further, we may be subject to regulatory or other proceedings in connection with any unauthorized transaction, fraud or misappropriation by our representatives and employees, which could adversely affect our goodwill. The nature and size of the items provided as collateral allow these items to be misplaced or mis-delivered, which may have a negative impact on our operations and result in losses.

9. We may not be able to successfully sustain our growth strategy.

We have demonstrated consistent growth in our business and in our profitability. Our Assets Under Management have grown by a compounded annual growth rate, or CAGR, of 34% from ` 250,686.49 lakhs as of March 31, 2007 to ` 799,804.88 lakhs as of March 31, 2011. Our capital adequacy ratio as of March 31, 2011 computed on the basis of applicable RBI requirements was 20.53%, compared to the RBI stipulated minimum requirement of 12.00%. Our Tier I capital as of March 31, 2011 was ` 119,419 lakhs. Our Gross NPAs as a percentage of Total Loan Assets were 1.86% as of March 31, 2011. Our Net NPAs as a percentage of Net Loan Assets was 0.43% as of March 31, 2011. Our total income increased from ` 34,805.91 lakhs in fiscal 2007 to ` 132,091.19 lakhs in fiscal 2011 at a CAGR of 40%. Our net profit after tax increased from ` 5,162.16 lakhs in fiscal 2007 to ` 24,058.85 lakhs in fiscal 2011, at a CAGR of 47%. Our growth strategy includes growing our loan book and expanding our customer base. There can be no assurance that we will be able to sustain our growth strategy successfully or that we will be able to expand further or diversify our product portfolio. If we grow our loan book too rapidly or fail to make proper assessments of credit risks associated with new borrowers, a higher percentage of our loans may become non-performing, which would have a negative impact on the quality of our assets and our financial condition. We also face a number of operational risks in executing our growth strategy. We have experienced growth in each of our lines of business particularly in connection with loans to the small enterprises segment and loans against gold businesses, our branch network has expanded significantly, we are entering into new, smaller towns and cities within India as part of our growth strategy and gradually introducing all our products in each of our branches.

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Our rapid growth exposes us to a wide range of increased risks, including business risks, such as the possibility that a number of our impaired loans may grow faster than anticipated, as well as operational risks, fraud risks and regulatory and legal risks. Moreover, our ability to sustain our rate of growth depends significantly upon our ability to manage key issues such as selecting and retaining key managerial personnel, maintaining effective risk management policies, continuing to offer products which are relevant to our target base of clients, developing managerial experience to address emerging challenges and ensuring a high standard of client service. We will need to recruit new employees, who will have to be trained and integrated into our operations. We will also have to train existing employees to adhere properly to internal controls and risk management procedures. Failure to train our employees properly may result in an increase in employee attrition rates, require additional hiring, erode the quality of customer service, divert management resources, increase our exposure to high-risk credit and impose significant costs on us.

10. We have no prior operating experience in the housing finance business and accordingly, we may not be

able to successfully implement our growth strategy to foray into the housing finance business.

Our Company incorporated a wholly owned subsidiary namely Shriram Housing Finance Limited in November 2010, with a view of entering the housing finance sector. We have applied to National Housing Bank (wholly owned by the Reserve Bank of India), for a certificate of registration under the National Housing Bank Act, 1987, to carry on business of a housing finance institution. The aforesaid Subsidiary will commence operations once it is registered with the National Housing Bank. Shriram Housing Finance Limited will typically target middle-income customers in semi-urban locations. We cannot assure that our foray into the housing finance business would yield favorable or expected results as our overall profitability and success will be subject to various factors including, among others, our ability to obtain necessary statutory and/or regulatory approvals and licenses in connection with the said business, our ability to effectively recruit, retain and motivate appropriate managerial talent, our inexperience in the housing finance sector and ability to compete with banks, housing finance companies and other financial institutions that are already well established in this market segment as well as our ability to effectively absorb additional infrastructure costs. Our housing finance business will require significant capital investments and commitments of time from our senior management, there also can be no assurance that our management will be able to develop the skills necessary to successfully manage these new business areas. Our inability to effectively manage any of these issues could materially and adversely affect our business and impact our future financial performance.

11. We may experience difficulties in expanding our business into new regions and markets in India and

introducing our complete range of products in each of our branches.

As part of our growth strategy, we continue to evaluate attractive growth opportunities to expand our business into new regions and markets in India. Factors such as competition, culture, regulatory regimes, business practices and customs and customer requirements in these new markets may differ from those in our current markets and our experience in our current markets may not be applicable to these new markets. In addition, as we enter new markets and geographical regions, we are likely to compete not only with other banks and financial institutions but also the local unorganized or semi-organized private financiers, who are more familiar with local regulations, business practices and customs and have stronger relationships with customers. As a part of our growth strategy, we propose to target establishing our operations through new branches in cities and towns where we historically had relatively limited operations, such as in eastern and northern parts of India, and to further consolidate our position and operations in western and southern parts of India. We target to gradually introduce our entire range of product offerings, namely (i) product finance loans, (ii) pre-owned and new vehicles loans, (iii) personal loans, (iv) loans against gold, and (v) loans to small enterprises at each of our existing branches across India. Our business may be exposed to various additional challenges including obtaining necessary governmental approvals, identifying and collaborating with local business and partners with whom we may have no

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previous working relationship; successfully gauging market conditions in local markets with which we have no previous familiarity; attracting potential customers in a market in which we do not have significant experience or visibility; being susceptible to local taxation in additional geographical areas of India and adapting our marketing strategy and operations to different regions of India in which different languages are spoken. Our inability to expand our current operations may adversely affect our business prospects, financial conditions and results of operations.

12. A large number of our branches are located in southern India, and any downturn in the economy in the

states in India where we operate, or any change in consumer preferences in that region could adversely

affect our results of operations and financial condition.

We have a strong concentration of our business in south India with 248 of our 559 branches as on March 31, 2011, located in the states of Tamil Nadu, Andhra Pradesh and Karnataka. Any adverse change in the political and/or economic environment in the states of Tamil Nadu, Andhra Pradesh and Karnataka or any unfavourable changes in the regulatory and policy regime in the said region could adversely affect our manufacturing operations, financial condition and/or profitbility. Further, any changes in consumer preferences in the said region could also affect our operations and profitability.

13. Any downgrade of our credit ratings would increase borrowing costs and constrain our access to capital

and lending markets and, as a result, would negatively affect our net interest margin and our business.

In relation to our long-term debt instruments, we currently have ratings of CARE AA from Credit Analysis and Research Limited (“CARE”), AA-(ind) from Fitch Ratings India Private Limited, (“Fitch”) and CRISIL AA- /Stable from CRISIL. In relation to our short-term debt instruments, we have also received ratings of CARE A1+ from CARE, F1+(ind) from Fitch, and CRISIL A1+ from CRISIL. Our fixed deposit programme has been rated as CARE AA (FD) by CARE, and tAA- (ind) by Fitch. The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of financial obligations. Any downgrade of our credit ratings would increase borrowing costs and constrain our access to capital and debt markets and, as a result, would negatively affect our net interest margin and our business. In addition, downgrades of our credit ratings could increase the possibility of additional terms and conditions being added to any additional financing or refinancing arrangements in the future. Any such adverse development could adversely affect our business, financial condition and results of operations. A large number of our branches are located in southern India and any downturn in the economy of southern India or adverse change in consumer preferences in that region could adversely affect our results of operations

14. If we are unable to manage the level of NPAs in our Loan Assets, our financial position and results of

operations may suffer.

Our Gross NPAs as a percentage of Total Loan Assets were 1.86 % and 2.27 % as of March 31, 2011 and March 31, 2010 respectively, while our Net NPAs as a percentage of Net Loan Assets were 0.43 % and 0.71 % as of March 31, 2011 and March 31, 2010, respectively. We cannot be sure that we will be able to improve our collections and recoveries in relation to our NPAs or otherwise adequately control our level of NPAs in future. Moreover, as our loan portfolio matures, we may experience greater defaults in principal and/or interest repayments. Thus, if we are not able to control or reduce our level of NPAs, the overall quality of our loan portfolio may deteriorate and our results of operations may be adversely affected. Furthermore, our current provisions may not be adequate when compared to the loan portfolios of other financial institutions. Moreover, there also can be no assurance that there will be no further deterioration in our provisioning coverage as a percentage of Gross NPAs or otherwise, or that the percentage of NPAs that we will be able to recover will be similar to our past experience of recoveries of NPAs. In the event of any further deterioration in our NPA portfolio, there could be an even greater, adverse impact on our results of operations.

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15. A decline in our capital adequacy ratio could restrict our future business growth.

As per RBI notification dated February 17, 2011, all deposit taking NBFCs have to maintain a minimum capital adequacy ratio, consisting of Tier I and Tier II capital, which shall not be less than 15.00% of its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items w.e.f. March 31, 2012. Our capital adequacy ratio computed on the basis of applicable RBI requirements was 20.53 % as of March 31, 2011, with Tier I capital comprising 16.36 %. If we continue to grow our loan portfolio and asset base, we will be required to raise additional Tier I and Tier II capital in order to continue to meet applicable capital adequacy ratios with respect to our business. There can be no assurance that we will be able to raise adequate additional capital in the future on terms favorable to us or at all and this may adversely affect the growth of our business.

16. System failures or inadequacy and security breaches in computer systems may adversely affect our

business.

Our business is increasingly dependent on our ability to process, on a daily basis, a large number of transactions. Our financial, accounting or other data processing systems may fail to operate adequately or become disabled as a result of events that are wholly or partially beyond our control including a disruption of electrical or communications services. Our ability to operate and remain competitive will depend in part on our ability to maintain and upgrade our information technology systems on a timely and cost-effective basis. The information available to and received by our management through our existing systems may not be timely and sufficient to manage risks or to plan for and respond to changes in market conditions and other developments in our operations. We may experience difficulties in upgrading, developing and expanding our systems quickly enough to accommodate our growing customer base and range of products. Our operations also rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. Our computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could compromise data integrity and security. Any failure to effectively maintain or improve or upgrade our management information systems in a timely manner could materially and adversely affect our competitiveness, financial position and results of operations. Moreover, if any of these systems do not operate properly or are disabled or if there are other shortcomings or failures in our internal processes or systems, it could affect our operations or result in financial loss, disruption of our businesses, regulatory intervention or damage to our reputation. In addition, our ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports our businesses and the localities in which we are located.

17. We may not be able to maintain our current levels of profitability due to increased costs or reduced

spreads.

Our business strategy involves a relatively high level of ongoing interaction with our customers. We believe that this involvement is an important part of developing our relationship with our customers, identifying new cross-selling opportunities and monitoring our performance. However, this level of involvement also entails higher levels of costs and also requires a relatively higher gross spread, or margin, on the finance products we offer in order to maintain profitability. There can be no assurance that we will be able to maintain our current levels of profitability if the gross spreads on our finance products were to reduce substantially, which could adversely affect our results of operations.

18. As part of our business strategy we assign or securitize a substantial portion of our Loan Assets to banks

and other institutions. Any deterioration in the performance of any pool of receivables assigned or

securitized to banks and other institutions may adversely impact our financial performance.

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As part of our means of raising and/or managing our funds, we assign or securitize a substantial portion of the receivables from our loan portfolio to banks and other institutions. Such assignment or securitization transactions are conducted on the basis of our internal estimates of our funding requirements, which may vary from time to time. In fiscal 2007, 2008, 2009, 2010 and 2011 we securitized/assigned assets of a book value of ` 80,493.74 lakhs, ` 75,781.80 lakhs, ` 88,844.37 lakhs, ` 30,000 lakhs, and ` 117,915.72 lakhs respectively. Any change in statutory and/regulatory requirements in relation to assignments or securitizations by financial institutions, including the requirements prescribed by RBI and the Government of India, could have an adverse impact on our assignment or securitization transactions. Any adverse changes in the policy and/or regulations in connection with securitization of assets by NBFCs and/or new circulars and/or directions issued by the RBI in this regard, affecting NBFCs or the purchasers of assets, would affect the securitization market in general and our ability to securitise and/or assign our assets. We are also required to provide a credit enhancement for the securitization/assignment transactions by way of either fixed deposits or corporate guarantees and the aggregate credit enhancement amount outstanding as on March 31, 2011 was ` 15,436.40 lakhs by way of cash collateral. In the event a relevant bank or institution does not realize the receivables due under such Loan Assets, such bank or institution would have recourse to such credit enhancement, which could have a material adverse effect on our results of operations and financial condition.

19. We face asset-liability mismatches which could affect our liquidity and consequently may adversely

affect our operations and profitability.

We face potential liquidity risks due to varying periods over which our assets and liabilities mature. As is typical for NBFCs, a portion of our funding requirements is met through short-term funding sources such as bank loans, working capital demand loans, cash credit, short term loans and commercial papers. However, each of our products differs in terms of the average tenor, average yield, average interest rates and average size of loan. The average tenor of our products may not match with the average tenor of our liabilities. Consequently, our inability to obtain additional credit facilities or renew our existing credit facilities, in a timely and cost-effective manner or at all, may lead to mismatches between our assets and liabilities, which in turn may adversely affect our operations and financial performance. Further, mismatches between our assets and liabilities are compounded in case of pre-payments of the financing facilities we grant to our customers.

20. Any change in control of our Promoters and/or any disassociation of our Company from the Shriram

Group could adversely affect our operations and profitability.

As of June 31, 2011, SCL holds 50.99 % of the paid up share capital of our Promoter Shriram Retail Holdings Private Limited, (“SRHPL”), and the remaining shares in SRHPL were held by certain strategic investors. SEHPL and SRHPL hold 36.04% and 17.20% of the paid up share capital of our Company as on March 31, 2011, respectively. If SCL ceases to exercise control over SRHPL as a result of any transfer of shares or otherwise, our ability to derive any benefit from the brand name “Shriram” and our goodwill as a part of the Shriram Group of companies may be adversely affected, which in turn could adversely affect our business and results of operations. Any such change of control could also significantly influence our business policies and operations. We benefit in several ways from other entities under the Shriram Group. We leverage on the Shriram Group’s ecosystem to reach out to our prospective customers and our focus has been in maximizing our association with the “Shriram” brand name and the synergies offered by the infrastructure, of other entities in the Shriram Group. Our customer base over the years has comprised of customers of other entities in the Shriram Group. The large customer bases and wide-spread network of branches of entities such as Shriram Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and entities operating under the “Shriram Chits” brand name has continued to provide us with a large platform of target customers. Further, typically loans provided to chit depositors of Shriram Chits are partly or entirely secured by the deposits made with Shriram Chits. Accordingly, any disassociation of our Company from the Shriram Group and/or our inability to have access to the infrastructure provided by other

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companies in the Shriram Group could adversely affect our ability to attract customers and to expand our business, which in turn could adversely affect our goodwill, operations and profitability.

21. The trade mark/service mark and logo in connection with the “Shriram” brand which we use is licensed

to us and consequently, any termination or non-renewal of such license may adversely affect our

goodwill, operations and profitability.

Pursuant to a license agreement dated April 1, 2010 between our Company and Shriram Ownership Trust, (“SOT”) we are entitled to use the brand name “Shriram” and the associated mark. In this regard, our Company has to pay to SOT, 0.25% on the gross turnover of our Company for the first year of the license agreement. Royalty rates for the subsequent years will be decided mutually on or before April 1st of the respective financial years. Along with the royalty, our Company also is required to pay to SOT amounts by way of reimbursement of actual expenses incurred by SOT in respect of protection and defence of the Copyright. The agreement is valid for a period of three years from the date of execution thereof, subject to any pre-mature termination thereof by SOT in accordance with the terms and conditions of the agreement. In the event such license agreement is terminated or is not renewed or extended in the future, we may not be entitled to use the brand name “Shriram” and the associated mark in connection with our business operations. Consequently, we will not be able to derive the goodwill that we have been enjoying under the “Shriram” brand. Further, if the commercial terms and conditions including the consideration payable pursuant to the said agreement are revised unfavorably, our Company may be required to allocate larger portions of its profits and/or revenues towards such consideration, which would adversely affect our profitability. We operate in a competitive environment and we believe that our brand recognition is a significant competitive advantage to us. If the license and user agreement is not renewed or terminated, we may need to change our name, trade mark/service mark or the logo. Any such change could require us to incur additional costs and may adversely impact our goodwill, business prospects and results of operations.

22. We have certain contingent liabilities which may adversely affect our financial condition.

As of March 31, 2011, we had certain contingent liabilities not provided for, including the following:

• Guarantees issued by the company –`6.81 lakhs

• Guarantees issued by others –` 1,942.77 lakhs For further information on such contingent liabilities, see Annexure VI to our Reformatted Consolidated Summary Financial Statements. In the event that any of these contingent liabilities materialize, our financial condition may be adversely affected.

23. We are involved in various legal and other proceedings that if determined against us could have a

material adverse effect on our financial condition and results of operations.

We are currently involved in a number of legal proceedings arising in the ordinary course of our business. These proceedings are pending at different levels of adjudication before various courts and tribunals, primarily relating to civil suits and tax disputes. For further information relating to certain significant legal proceedings that we are involved in, please refer to the section titled “Pending Proceedings and Statutory

Defaults” beginning on page 169 of this Prospectus. An adverse decision in these proceedings could materially and adversely affect our business, financial condition and results of operations.

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24. We may have to comply with strict regulations and guidelines issued by regulatory authorities in India.

We are regulated principally by and have reporting obligations to the RBI. We are also subject to the corporate, taxation and other laws in effect in India. The regulatory and legal framework governing us may continue to change as India’s economy and commercial and financial markets evolve. In recent years, existing rules and regulations have been modified, new rules and regulations have been enacted and reforms have been implemented which are intended to provide tighter control and more transparency in India’s asset finance sector. Further, RBI may increase the minimum capital adequacy requirement for deposit taking NBFCs such as us. Compliance with many of the regulations applicable to our operations may involve significant costs and otherwise may impose restrictions on our operations. If the interpretation of the regulators and authorities varies from our interpretation, we may be subject to penalties and the business of our Company could be adversely affected. There can be no assurance that changes in these regulations and the enforcement of existing and future rules by governmental and regulatory authorities will not adversely affect our business and future financial performance.

25. Our ability to assess, monitor and manage risks inherent in our business differs from the standards of

some of our counterparts in India and in some developed countries.

We are exposed to a variety of risks, including liquidity risk, interest rate risk, credit risk, operational risk and legal risk. The effectiveness of our risk management is limited by the quality and timeliness of available data. Our hedging strategies and other risk management techniques may not be fully effective in mitigating our risks in all market environments or against all types of risk, including risks that are unidentified or unanticipated. Some methods of managing risks are based upon observed historical market behavior. As a result, these methods may not predict future risk exposures, which could be greater than the historical measures indicated. Other risk management methods depend upon an evaluation of information regarding markets, customers or other matters. This information may not in all cases be accurate, complete, current, or properly evaluated. Management of operational, legal or regulatory risk requires, among other things, policies and procedures to properly record and verify a number of transactions and events. Although we have established these policies and procedures, they may not be fully effective. Our future success will depend, in part, on our ability to respond to new technological advances and evolving NBFC and retail finance sector standards and practices on a cost-effective and timely basis. The development and implementation of such technology entails significant technical and business risks. There can be no assurance that we will successfully implement new technologies or adapt our transaction-processing systems to customer requirements or evolving market standards.

26. Our Promoters have significant control in our Company, which will enable them to influence the

outcome of matters submitted to shareholders for approval, and their interests may differ from those of

other holders of Equity Shares.

As of June 30, 2011, our Promoters SEHPL and SRHPL beneficially owned 36.04% and 17.20%, respectively, of our paid-up equity share capital. See “Capital Structure”. Our Promoters have the ability to control our business including matters relating to any sale of all or substantially all of our assets, the timing and distribution of dividends and the election or termination of appointment of our officers and directors. This control could delay, defer or prevent a change in control of our Company, impede a merger, consolidation, takeover or other business combination involving our Company or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company even if it is in our Company’s best interest. In addition, for so long as our Promoters continue to exercise significant control over our Company, it may influence the material policies of our Company in a manner that could conflict with the interests of our other shareholders. The Promoters may have interests that are adverse to the interests of our other shareholders and may take positions with which we or our other shareholders do not agree.

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27. We have entered into certain related party transactions and may continue to do so in the future.

We have entered into transactions with related parties, within the meaning of AS 18 as notified by the Companies (Accounting Standards) Rules, 2006. These transactions include royalty paid to Shriram Ownership Trust pursuant to the License Agreement dated April 1, 2010 between our Company and Shriram Ownership Trust in connection with the use of the brand name "Shriram" and the associated mark. For further information on our related party transactions please see the section titled “Financial

Information”. Such transactions may give rise to current or potential conflicts of interest with respect to dealings between us and such related parties. Additionally, there can be no assurance that any dispute that may arise between us and related parties will be resolved in our favor.

28. Any failure by us to identify, manage, complete and integrate acquisitions, divestitures and other

significant transactions successfully could adversely affect our results of operations, business and

prospects.

As part of our business strategy, we may acquire complementary companies or businesses, divest non-core businesses or assets, enter into strategic alliances and joint ventures and make investments to further our business. In order to pursue this strategy successfully, we must identify suitable candidates for and successfully complete such transactions, some of which may be large and complex, and manage the integration of acquired companies or employees. We may not fully realize all of the anticipated benefits of any such transaction within the anticipated timeframe or at all. Any increased or unexpected costs, unanticipated delays or failure to achieve contractual obligations could make such transactions less profitable or unprofitable. Managing business combination and investment transactions requires varying levels of management resources, which may divert our attention from other business operations, may result in significant costs and expenses and charges to earnings. The challenges involved in integration include:

• combining product offerings and entering into new markets in which we are not experienced;

• consolidating and maintaining relationships with customers;

• consolidating and rationalizing transaction processes and corporate and IT infrastructure;

• integrating employees and managing employee issues;

• coordinating and combining administrative and other operations and relationships with third parties in accordance with applicable laws and other obligations while maintaining adequate standards, controls and procedures;

• achieving savings from infrastructure integration; and

• managing other business, infrastructure and operational integration issues. 29. Our success depends in large part upon our management team and key personnel and our ability to

attract, train and retain such persons.

Our ability to sustain our rate of growth depends significantly upon our ability to manage key issues such as selecting and retaining key managerial personnel, developing managerial experience to address emerging challenges and ensuring a high standard of client service. In order to be successful, we must attract, train, motivate and retain highly skilled employees, especially branch managers and product executives. If we cannot hire additional qualified personnel or retain them, our ability to expand our business will be impaired and our revenue could decline. We will need to recruit new employees, who will have to be trained and integrated into our operations. We will also have to train existing employees to adhere properly to internal controls and risk management procedures. Failure to train and motivate our employees properly may result in an increase in employee attrition rates, divert management resources and subject us to incurring additional human resource related expenditure. Hiring and retaining qualified and skilled managers are critical to our future, as our business model depends on our credit-appraisal and asset

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valuation mechanism, which are personnel-driven operations. Moreover, competition for experienced employees in the finance sector can be intense. While we have an incentive structure and two employee stock option schemes namely, ESOP 2006 and ESOP 2008, designed to encourage employee retention, our inability to attract and retain talented professionals, or the resignation or loss of key management personnel, may have an adverse impact on our business and future financial performance.

30. We are exposed to fluctuations in the market values of our investment and other asset portfolio.

Recent turmoil in the financial markets has adversely affected economic activity globally, including in India. Continued deterioration of the credit and capital markets could result in volatility of our investment earnings and impairments to our investment and asset portfolio, which could negatively impact our financial condition and reported income.

31. Our results of operations could be adversely affected by any disputes with our employees.

As of March 31, 2011, we employed 2,318 employees. Currently, none of our employees are members of any labor union. While we believe that we maintain good relationships with our employees, there can be no assurance that we will not experience future disruptions to our operations due to disputes or other problems with our work force, which may adversely affect our business and results of operations.

32. Our inability to obtain, renew or maintain our statutory and regulatory permits and approvals required

to operate our business may have a material adverse effect on our business.

We require certain statutory and/or regulatory permits and approvals for our business. Our Company incorporated a wholly owned subsidiary namely Shriram Housing Finance Limited in November 2010, with a view of entering the housing finance sector. We have applied to National Housing Bank (wholly owned by the Reserve Bank of India), for a certificate of registration under the National Housing Bank Act, 1987, to carry on business of a housing finance institution. Failure to obtain the same will adversely affect our proposed business in the housing finance sector. In the future, we will be required to renew such permits and approvals and obtain new permits and approvals for any proposed operations. There can be no assurance that the relevant authorities will issue any of such permits or approvals in a timely manner or at all, and/or on favorable terms and conditions. Failure by us to comply with the terms and conditions to which such permits or approvals are subject, and/or to renew, maintain or obtain the required permits or approvals may result in the interruption of our operations and may have a material adverse effect on our business, financial condition and results of operations.

33. We are subject to supervision and regulation by the RBI as a deposit-taking NBFC, and changes in

RBI’s regulations governing us could adversely affect our business.

We are subject to the RBI’s guidelines on financial regulation of NBFCs, including capital adequacy, exposure and other prudential norms. The RBI also regulates the credit flow by banks to NBFCs and provides guidelines to commercial banks with respect to their investment and credit exposure norms for lending to NBFCs. The RBI’s regulations of NBFCs could change in the future which may require us to restructure our activities, incur additional costs or could otherwise adversely affect our business and our financial performance. The RBI, from time to time, amends the regulatory framework governing NBFCs to address, inter-alia, concerns arising from certain divergent regulatory requirements for banks and NBFCs. Pursuant to two notifications dated December 6, 2006, (Notifications No. DNBS. 189 / CGM (PK)-2006 and DNBS.190 / CGM (PK)-2006), the RBI amended the NBFC Acceptance of Public Deposits (Reserve Bank) Directions, 1998, reclassifying deposit taking NBFCs, such as us. We are also subject to the requirements of the Non Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, issued by the RBI on February 22, 2007, as amended.

The laws and regulations governing the banking and financial services industry in India have become increasingly complex and cover a wide variety of issues such as interest rates, liquidity, securitization, investments, ethical issues, money laundering and privacy. In some cases, there are overlapping regulations

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and enforcement authorities. Moreover, these laws and regulations can be amended, supplemented or changed at any time such that we may be required to restructure our activities and incur additional expenses to comply with such laws and regulations, which could materially and adversely affect our business and our financial performance. For instance, RBI has vide recent circular dated May 3, 2011 clarified that bank finance to NBFCs would not be classified as priority sector lending, which has affected profitability of NBFCs engaged in money lending activities. Compliance with many of the regulations applicable to our operations in India and/or outside India, including any restrictions on investments, lending and other activities currently being carried out by our Company, involves a number of risks, particularly in areas where applicable regulations may be subject to varying interpretations. If the interpretation of the regulators and authorities varies from our interpretation, we may be subject to penalties and our business could be adversely affected. We are also subject to changes in Indian laws, regulations and accounting principles and practices. There can be no assurance that the laws governing the Indian financial services sector will not change in the future or that such changes or the interpretation or enforcement of existing and future laws and rules by governmental and regulatory authorities will not adversely affect our business and future financial performance.

34. Our insurance coverage may not adequately protect us against losses.

We maintain such insurance coverage that we believe is adequate for our operations. Our insurance policies, however, may not provide adequate coverage in certain circumstances and are subject to certain deductibles, exclusions and limits on coverage. We maintain general liability insurance coverage including coverage for errors or omissions. We cannot, however, assure you that the terms of our insurance policies will be adequate to cover any damage or loss suffered by us or that such coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims or that the insurer will not disclaim coverage as to any future claim. A successful assertion of one or more large claims against us that exceeds our available insurance coverage or changes in our insurance policies including premium increases or the imposition of a larger deductible or co-insurance requirement could adversely affect our business, financial condition and results of operations.

35. There is ambiguity on whether or not NBFCs are required to comply with the provisions of state money

lending laws, which if interpreted unfavorably by statutory/regulatory authorities or courts of law could

adversely affect our operations and profitability.

There is ambiguity on whether or not NBFCs are required to comply with the provisions of state money lending laws that establish ceilings on interest rates. We also carry out operations in several states such as Andhra Pradesh, Tamil Nadu, Madhya Pradesh, and Maharashtra, where there are money lending statutes in operation. The relevant state money lending statutes provide penalties for non-compliance with such statutes, including civil and criminal consequences. In the event that the government of any state in India requires us to comply with the provisions of their respective state money lending laws or imposes any penalty against us, our Directors or our officers, including for prior non-compliance, our business, results of operations and financial condition may be adversely affected.

36. We do not own most of our branch offices and our registered office. Any failure on our part to execute

and/or renew leave and license agreements and/or lease deeds in connection with such offices or failure

to locate alternative offices in case of termination of the leases and/or leave and license arrangements in

connection with any branch could adversely affect our operations and profitability.

Our Registered Office and most of our branches are located on leased and/or licensed premises. If any of the owners of these premises does not renew an agreement under which we occupy the premises or if any of the owners seeks to renew an agreement on terms and conditions unfavorable to us, we may suffer a disruption in our operations or increased costs, or both, which may adversely affect our business and results of operations.

15

Risks Relating to the Utilization of Issue Proceeds

37. The fund requirement and deployment mentioned in the Objects of the Issue have not been appraised by

any bank or financial institution.

We intend to use the proceeds of the Issue, after meeting the expenditures of and related to the Issue, for our various financing activities including lending and investments, subject to applicable statutory and/or regulatory requirements, to repay our existing loans and our business operations including for our capital expenditure and working capital requirements. For further details, please refer to the section titled “Objects

of the Issue” beginning on page 60 of this Prospectus. The fund requirement and deployment is based on internal management estimates and has not been appraised by any bank or financial institution. The management will have significant flexibility in applying the proceeds received by us from the Issue. Further, as per the provisions of the Debt Regulations, we are not required to appoint a monitoring agency and therefore no monitoring agency has been appointed for this Issue.

Risks Relating to the NCDs

38. Changes in interest rates may affect the price of our NCDs.

All securities where a fixed rate of interest is offered, such as our NCDs, are subject to price risk. The price of such securities will vary inversely with changes in prevailing interest rates, i.e. when interest rates rise, prices of fixed income securities fall and when interest rates drop, the prices increase. The extent of fall or rise in the prices is a function of the existing coupon, days to maturity and the increase or decrease in the level of prevailing interest rates. Increased rates of interest, which frequently accompany inflation and/or a growing economy, are likely to have a negative effect on the price of our NCDs.

39. You may not be able to recover, on a timely basis or at all, the full value of the outstanding amounts

and/or the interest accrued thereon in connection with the NCDs.

Our ability to pay interest accrued on the NCDs and/or the principal amount outstanding from time to time in connection therewith would be subject to various factors inter-alia including our financial condition, profitability and the general economic conditions in India and in the global financial markets. We cannot assure you that we would be able to repay the principal amount outstanding from time to time on the NCDs and/or the interest accrued thereon in a timely manner or at all. Although our Company will create appropriate security in favour of the Debenture Trustee for the NCD holders on the assets adequate to ensure at least 100% asset cover for the NCDs, which shall be free from any encumbrances, the realizable value of the assets charged as security, when liquidated, may be lower than the outstanding principal and/or interest accrued thereon in connection with the NCDs. A failure or delay to recover the expected value from a sale or disposition of the assets charged as security in connection with the NCDs could expose you to a potential loss.

40. If we do not generate adequate profits, we may not be able to maintain an adequate Debenture

Redemption Reserve, (“DRR”) for the NCDs issued pursuant to this Prospectus.

Section 117C of the Act states that any company that intends to issue debentures must create a DRR to which adequate amounts shall be credited out of the profits of the company until the debentures are redeemed. The Ministry of Corporate Affairs has, through its circular dated April 18, 2002, (“Circular”), specified that the quantum of DRR to be created before the redemption liability actually arises in normal circumstances should be ‘adequate’ to pay the value of the debentures plus accrued interest, (if not already paid), till the debentures are redeemed and cancelled. The Circular however further specifies that, for NBFCs like our Company, (NBFCs which are registered with the RBI under Section 45-IA of the RBI Act), the adequacy of the DRR will be 50% of the value of debentures issued through the public issue. Accordingly, our Company is required to create a DRR of 50% of the value of debentures issued through the public issue. As further clarified by the Circular, the amount to be credited as DRR will be carved out of the profits of the company only and there is no obligation on the part of the company to create DRR if

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there is no profit for the particular year. Accordingly, if we are unable to generate adequate profits, the DRR created by us may not be adequate to meet the 50% of the value of the NCDs. This may have a bearing on the timely redemption of the NCDs by our Company.

41. Any downgrading in credit rating of our NCDs may affect the value of NCDs and thus our ability to

raise further debts.

The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of financial obligations. The ratings provided by CRISIL and/or CARE may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any other rating. These ratings are not a recommendation to buy, sell or hold securities and investors should take their own decisions. Please refer to page 28 for the rationale for the above ratings. .

42. There is no active market for the NCDs on the stock exchanges. As a result the liquidity and market

prices of the NCDs may fail to develop and may accordingly be adversely affected.

There can be no assurance that an active market for the NCDs will develop. If an active market for the NCDs fails to develop or be sustained, the liquidity and market prices of the NCDs may be adversely affected. The market price of the NCDs would depend on various factors inter alia including (i) the interest rate on similar securities available in the market and the general interest rate scenario in the country, (ii) the market price of our Equity Shares, (iii) the market for listed debt securities, (iv) general economic conditions, and, (v) our financial performance, growth prospects and results of operations. The aforementioned factors may adversely affect the liquidity and market price of the NCDs, which may trade at a discount to the price at which you purchase the NCDs and/or be relatively illiquid.

43. There may be a delay in making refunds to applicants.

We cannot assure you that the monies refundable to you, on account of (a) withdrawal of your applications, (b) our failure to receive minimum subscription in connection with the Base Issue, (c) withdrawal of the Issue, or (d) failure to obtain the final approval from the NSE and/or BSE for listing of the NCDs, will be refunded to you in a timely manner. We however, shall refund such monies, with the interest due and payable thereon as prescribed under applicable statutory and/or regulatory provisions.

B. EXTERNAL RISK FACTORS

44. Our two-wheeler and other vehicle loans businesses are dependent on the automobile and transportation

industry in India.

Our two-wheeler and other vehicle loans businesses to a large extent depend on the continued growth in the automobile and transportation industry in India, which are influenced by a number of extraneous factors which are beyond our control, inter-alia including (a) the macroeconomic environment in India, (b) the demand for transportation services, (c) natural disasters and calamities, and (d) changes in regulations and policies in connection with motor vehicles. Such factors may result in a decline in the sales or value of new and pre-owned vehicles. Correspondingly, the demand for availing finance for new and pre-owned vehicles may decline, which in turn may adversely affect our financial condition and the results of our operations. Further, the ability of vehicle owners and/or operators to perform their obligations under existing financing agreements may be adversely affected if their businesses suffer as a result of the aforesaid factors.

45. Our loans to the small enterprises is dependent on the performance of the small enterprises sector in

India, competition from public sector banks and financial institutions and other NBFCs, and

government policies and statutory and/or regulatory reforms in the small enterprises finance sector.

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As on March 31, 2011, 24 % of our Assets Under Management were represented by loans to the small enterprises segment. In recognition of the contribution and vast potential of the small enterprises finance sector in the economy, provision of adequate credit to this sector continues to be an important element of banking policy, particularly after the initiation of structural reforms in 1991. According to the Ministry of Finance, Government of India, small and medium enterprises sector contribute about 40% of total manufacturing and 34% of total exports and is crucial to India's economic growth, employment generation and entrepreneurial development, (Source: Ministry Website). The Government of India has from time to time taken economic policy initiatives to promote this sector and enhance credit to small and medium enterprises. Some of the initiatives of the Government towards MSME financing include setting up of credit guarantee fund trust for small industries, risk sharing facility, venture capital funding, micro credit, etc. The small enterprises finance sector currently is catered to largely by public sector banks, public financial institutions and local unorganized private financiers.

Any change in statutory and/or regulatory requirements in connection with the small enterprises finance sector, change in government policies, slow down in liberalization and reforms affecting the sector could affect the performance of small enterprises, which would affect the demand for finance in this sector, which in turn would affect the results of our operations from loans to the small enterprises finance sector.

Further, progressive reforms, policy, statutory and/regulatory provisions in connection with the sector could enable easier access to finance to small enterprises from banks, NBFCs and other financial institutions which in turn could result in increased competition for our Company in relation to loans issued to small enterprises. Our inability to manage such competition could adversely affect our results of operations from loans to the small enterprises finance sector.

46. Increase in competition from our peer group in the finance sector may result in reduction of our market

share, which in turn may adversely affect our profitability.

We have been increasingly facing competition from domestic and foreign banks and NBFCs in each of our lines of businesses. Some of our competitors are very aggressive in underwriting credit risk and pricing their products and may have access to funds at a lower cost, wider networks and greater resources than our Company. Our financial condition and results of operations are dependent on our ability to obtain and maintain low cost funds and to provide prompt and quality services to our customers. If our Company is unable to access funds at a cost comparable to or lower than our competitors, we may not be able to offer loans at competitive interest rates to our customers.

While our Company believes that it has historically been able to offer competitive interest rates on the loans extended to our customers, there can be no assurance that our Company will be able to continue to do so in the future. An increase in competition from our peer group may result in a decline in our market share, which may in turn result in reduced incomes from our operations and may adversely affect our profitability.

47. Our growth depends on the sustained growth of the Indian economy. An economic slowdown in India

and abroad could have a direct impact on our operations and profitability.

Macroeconomic factors that affect the Indian economy and the global economic scenario have an impact on our business. The quantum of our disbursements is driven by the growth in demand for vehicles, capital by small enterprises and loans by individuals. Any slow down in the Indian economy may have a direct impact on our disbursements and a slowdown in the economy as a whole can increase the level of defaults thereby adversely impacting our Company’s profitability, the quality of its portfolio and growth plans.

48. Political instability or changes in the government could delay further liberalization of the Indian

economy and adversely affect economic conditions in India generally, which could impact our business.

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Since 1991, the Government has pursued a policy of economic liberalization, including significantly relaxing restrictions on the private sector. There can be no assurance that these liberalization policies will continue in the future as well. The rate of economic liberalization could change and specific laws and policies affecting financial services companies, foreign investment, currency exchange rates and other matters affecting investments in Indian companies could change as well. A significant slowdown in India’s economic liberalization and deregulation policies could disrupt business and economic conditions in India, thus affecting our business. Any political instability in the country, including any change in the Government, could materially impact our business adversely.

49. Civil unrest, terrorist attacks and war would affect our business.

Terrorist attacks and other acts of violence, war or conflicts, particularly those involving India, as well as the United States of America, the United Kingdom, Singapore and the European Union, may adversely affect Indian and global financial markets. Such acts may negatively impact business sentiment, which could adversely affect our business and profitability. India has from time to time experienced and continues to experience, social and civil unrest, terrorist attacks and hostilities with neighbouring countries. Also, some of India’s neighbouring countries have experienced or are currently experiencing internal unrest. This, in turn, could have a material adverse effect on the Indian economy and in turn may adversely affect our operations and profitability and the market for the NCDs.

50. Our business may be adversely impacted by natural calamities or unfavourable climatic changes.

India, Bangladesh, Pakistan, Indonesia, Japan and other Asian countries have experienced natural calamities such as earthquakes, floods, droughts and a tsunami in recent years. Some of these countries have also experienced pandemics, including the outbreak of avian flu. These economies could be affected by the extent and severity of such natural disasters and pandemics which could, in turn affect the financial services sector of which our Company is a part. Prolonged spells of abnormal rainfall, draught and other natural calamities could have an adverse impact on the economy, which could in turn adversely affect our business and the price of our NCDs.

51. Any downgrading of India's sovereign rating by an international rating agency (ies) may affect our

business and our liquidity to a great extent.

Any adverse revision to India's credit rating for domestic and international debt by international rating agencies may adversely impact our ability to raise additional finances at favourable interest rates and other commercial terms. This could have an adverse effect on our growth, financial performance and our operations.

PROMINENT NOTES

1. This is a public issue of NCDs by our Company aggregating upto ` 37,500 lakhs with an option to retain

over-subscription upto ` 37,500 lakhs for issuance of additional NCDs, aggregating to a total of ` 75,000 lakhs.

2. For details on the interest of our Company’s Directors, please refer to the sections titled “Our

Management” and “Capital Structure” beginning on pages 111 and 49 of this Prospectus, respectively.

3. Our Company has entered into certain related party transactions, within the meaning of AS 18 as notified by the Companies (Accounting Standards) Rules, 2006, as disclosed in the section titled “Financial

Information” beginning on page 130 of this Prospectus. 4. Any clarification or information relating to the Issue shall be made available by the Lead Managers, the

Co-Lead Manager and our Company to the investors at large and no selective or additional information would be available for a section of investors in any manner whatsoever.

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5. Investors may contact the Registrar to the Issue, Compliance Officer, the Lead Managers and the Co-Lead Manager for any complaints pertaining to the Issue. In case of any specific queries on allotment/refund, Investor may contact Registrar to the Issue.

6. In the event of oversubscription to the Issue, allocation of NCDs will be as per the "Basis of Allotment" set

out on page 165of this Prospectus. 7. Our Equity Shares are listed on the NSE and BSE. 8. Some of our privately placed non convertible debentures are listed in BSE. 9. As of March 31, 2011, we had certain contingent liabilities not provided for, including the following:

• Guarantees issued by the company – `6.81 lakhs

• Guarantees issued by others – `1,942.77 lakhs

For further information on such contingent liabilities, see Annexure VI to our Reformatted Unconsolidated Summary Financial Statements.

10. For further information relating to certain significant legal proceedings that we are involved in, see

“Pending Proceedings and Statutory Defaults” beginning on page 169 of this Prospectus.

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SECTION III : INTRODUCTION

GENERAL INFORMATION

Shriram City Union Finance Limited

Date of Incorporation: March 27, 1986. Our Company was incorporated as a private limited company under the

provisions of the Act. Subsequently, our Company became a public limited company pursuant to a fresh certificate of

incorporation dated April 10, 1990.

Registered Office:

123, Angappa Naicken Street, Chennai, Tamil Nadu - 600 001.

Corporate Office:

221, Royapettah High Road, Mylapore, Chennai, Tamil Nadu – 600 004 Tel.: + 91 44 4391 5300; Fax: +91 44 4391

5351.

Registration:

Corporate Identification Number: L65191TN1986PLC012840 issued by the Registrar of Companies, Chennai, Tamil

Nadu.

Our Company holds a certificate of registration dated April 17, 2007, bearing registration no. 07-00458 issued by the

RBI to carry on the activities of a NBFC under section 45 IA of the RBI Act, 1934.

Compliance Officer (and Company Secretary):

The details of the person appointed to act as Compliance Officer for the purposes of this Issue is set out below:

Mr. C. R. Dash

Company Secretary

Shriram City Union Finance Limited

221, Royapettah High Road

Mylapore, Chennai

Tamil Nadu – 600 004

Tel.: + 91 44 4391 5300

Fax: +91 44 4391 5351

Email: sect@shriramcity.in

Investors may contact the Registrar to the Issue or the Compliance Officer in case of any pre-Issue or post-Issue related

matters such as non-receipt of Allotment Advice, demat credit, refund orders or interest on application money.

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Lead Managers:

JM Financial Consultants Private

Limited 141 Maker Chambers III Nariman Point Mumbai - 400 021 Tel: + 91 22 6630 3030 Fax: +91 22 2204 2137 Email: scuf.ncd@jmfinancial.in Investor Grievance Email: greivance.ibd@jmfinancial.in Website: www.jmfinancial.in Contact Person: Ms. Lakshmi Lakshmanan Compliance Officer: Mr. Chintal Sakaria SEBI Registration No.: INM000010361

A. K. Capital Services Limited

30-39, Free press House Free Press Journal Marg 215, Nariman Point Mumbai-400021 Tel: +91 22 6754 6500/6634 Fax: +91 22 6610 0594

Email: shriramcitydipo@akgroup.co.in Investor Grievance Email: investor.grievance@akgroup.co.in Website: www.akcapindia.com Contact Person: Mr. Hitesh Shah Compliance Officer: Mr. Vikas Agarwal SEBI Registration No: INM000010411

ICICI Securities Limited

ICICI Centre, H.T. Parekh Marg, Churchgate Mumbai- 400 020 Tel: +91 22 2288 2460 Fax: +91 22 2282 6580 Email: scufbondissue@icicisecurities.com Investor Grievance Email: customercare@icicisecurities.com Website: www.icicisecurities.com Contact Person: Mr. Manvendra Tiwari Compliance Officer: Mr. Subir Saha SEBI Registration No: INM000011179

Co-Lead Managers:

Karvy Investor Services Limited Regent Chambers, 2nd floor Nariman Point, Mumbai – 400021 Tel : +91 22 2289 5000 Fax: +91 22 3020 4040 Email: shriramcityunion@karvy.com Investor Grievance Email: cmg@karvy.com; rajnish.rangari@karvy.com Website: www.karvy.com Contact Person: Mr. Omkar Barve Compliance Officer: Mr. Rajnish Rangari SEBI Registration No: INM000008365

Debenture Trustee: IDBI Trusteeship Services Limited Asian Building, Ground Floor 17, R Kamani Marg Ballard Estate Mumbai – 400 001 Tel: +91 22 4080 7000 Fax: + 91 22 6631 1776 Website: www.idbitrustee.co.in Contact Person: Ms. Brindha V Email: brindha@idbitrustee.co.in SEBI Registration No.: IND000000460 IDBI Trusteeship Services Limited has by its letter dated July 4, 2011 given its consent for its appointment as Debenture Trustee to the Issue and for its name to be included in this Prospectus and in all the subsequent periodical communications sent to the holders of the Debentures issued pursuant to this Issue.

22

Registrar to the Issue

Integrated Enterprises (India) Limited

2nd Floor, ‘Kences Towers’ No.1 Ramakrishna Street North Usman Road, T Nagar Chennai – 600 017 Tel: +91 44 2814 0801, +91 44 2814 0802, +91 44 2814 0803 Fax: +91 44 2814 2479 Email: scuf@iepindia.com Investor Grievance Email: sureshbabu@iepindia.com Website: www.iepindia.com Contact Person: Mr. K. Balasubramanian / Mr. Sriram S SEBI Registration No.: INR000000544

Statutory Auditor:

Our statutory auditor being:

M/s Pijush Gupta & Co Chartered Accountants P-199, C.I.T. Road, Scheme IV-M Kolkata - 700 010 Email: pijushgupta.ca@gmail.com Tel: +91 33 2353 6859 Firm registration number: 309015E

Credit Rating Agencies:

Credit Analysis & Research Limited 4th Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway Sion (East), Mumbai – 400 022 Tel: +91 22 6754 3456 Fax: +91 22 6754 3457

CRISIL Limited CRISIL House, Central Avenue, Hiranandani Business Park, Powai, Mumbai – 400 076 Tel: +91 22 3342 3000 Fax: +91 22 3342 3050

Legal Advisor to the Issue:

J Sagar Associates Vakils House, 18, Sprott Road Ballard Estate Mumbai- 400 001 Tel: +91 22 4341 8500 Fax: +91 22 6656 1515

Lead Brokers to the Issue

JM Financial Services Private Limited

141 Maker Chambers III, 13th Floor, Nariman Point, Mumbai 400 021, India Tel: +91 22 3021 3500/2266 5577- 80 Fax: +91 22 2266 5902 Email: rohit.singh@jmfinancial.in Website: www.jmfinancialservices.in

AK Stockmart Private Limited 30-39, Free Press House, Free Press Journal Marg, 215, Nariman Point, Mumbai 400 021, India. Tel: +91 22 6754 6500 Fax: +91 22 6754 4666 Email: alpesh.busa@akgroup.co.in Website: www.akcapindia.com

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Contact Person: Mr. Rohit Singh SEBI Registration No: NSE: INB231054835 BSE: INB011054831

Contact Person: Mr. Alpesh Busa SEBI Registration No: INB231269532

ICICI Securities Limited ICICI Centre, HT Parekh Marg, Churchgate, Mumbai 400 020, India Tel: +91 22 2288 2460 Fax: +91 22 2282 6580 Email: scufbondissue@icicisecurities.com Website: www.icicisecurities.com Contact Person: Mr. Mitesh Shah SEBI Registration No: NSE: INB230773037 BSE: INB011286854

Karvy Stock Broking Limited Karvy House 46, Avenue 4, Street No.1,Banjara Hills, Hyderabad 500 034, India Tel: +91 040 2331 2454 Fax: +91 040 6662 1474 Email: ksblredressal@karvy.com Website: www.karvy.com Contact Person: Mr. Ramapriyan PB SEBI Registration No: INB2300770138

Anand Rathi Shares & Stock Brokers Limited

4th Floor, Silver Metropolis Jai Coach Compound, Opposite Bimbisar Nagar, Goregaon (East) Mumbai 400 063, India. Tel: +91 22 4001 3773 Fax: +91 22 4001 3770 Email: vinaymahajan@rathi.com Website: www.rathi.com Contact Person: Mr. Vinay Mahajan SEBI Registration No: NSE: INB230676935 BSE: INB011371557

Bajaj Capital Investor Services Limited

5th Floor, Bajaj House, 97, Nehru Place, New Delhi - 110019 India. Tel: +91 11 6616 1111 Fax: +91 11 6660 8888 Email: surajitm@bajajcapital.com Website: www.justtrade.in Contact Person: Mr. Surajit Misra SEBI Registration No: INB231269334

Edelweiss Broking Limited Edelweisss House Off. C.S.T. Road, Kalina, Mumbai 400 098, India. Tel: +91 22 6747 1340, +91 9867009711 Fax: +91 22 6747 1347 Email: nirmal.rewaria@edelcap.com Website: www.edelcap.com Contact Person: Mr. Nirmal Rewaria SEBI Registration No: NSE: INB231311631 BSE: INB011311637

ENAM Securities Private Limited Khatau Building, 2nd Floor, 44 Bank Street, Fort, Mumbai 400 001, India. Tel: +91 22 2267 7901 Fax: +91 22 2266 5613 Email: ajays@enam.com, vinay@enam.com Website: www.enam.com Contact Person: Mr. Ajay Sheth / Mr. Vinay Ketkar SEBI Registration No: NSE: INB011287852 BSE: INB230468336

HDFC Securities Limited

Office Floor 8, “I Think” Building, Jolly Board Campus, Opp. Crompton Greaves Factory, Kanjurmarg (East) Mumbai 400 042, India. Tel: +91 22 3075 3442 Fax: +91 22 3075 3435 Email: sunil.raula@hdfcsec.com Website: www.hdfcsec.com Contact Person: Mr. Sunil Raula SEBI Registration No: NSE: INB231109431 BSE: INB011109437

Integrated Securities Limited 15, 1st Floor, Modern House, Dr. V.B. Gandhi Marg, Forbes Street, Fort, Mumbai 400 023, India Tel: +91 22 4066 1800 Fax: +91 22 2287 4676 Email: krishnan_v@iepindia.com Website: www.cubsharebroking.com Contact Person: Mr. V. Krishnan SEBI Registration No: INB231271835

Kotak Securities Limited 3rd Floor, Nirlon House, Dr. Annie Besant Road, Worli, Mumbai 400 025, India Tel: +91 22 6652 9191 Fax: +91 22 6661 7041 Email: sanjeeb.das@kotak.com

RR Equity Brokers Private Limited 47, MM Road, Rani Jhansi Marg, Jhandewalan, New Delhi 110 055, India Tel: +91 11 2363 6362/63 Fax: +91 11 2363 6745 Email: manishagrawal@rrfcl.com

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Website: www.kotak.com Contact Person: Mr. Sanjeeb Kumar Das SEBI Registration No: NSE: INB230808130 BSE: INB010808153

Website: www.rrfinance.com Contact Person: Mr. Manish Agrawal SEBI Registration No: INB231219636

SMC Global Securities Limited

11/6B, Shanti Chambers Pusa Road, New Delhi, India. Tel: +91 11 3011 1000 Fax: +91 11 2575 4365 Email: mkg@smcindiaonline.com Website: www.smctradeonline.com Contact Person: Mr. Mahesh Gupta SEBI Registration No: INB230771431

SPA Securities Limited

101-A, 10th Floor, Mittal Court, Nariman Point, Mumbai 400 021, India Tel: +91 22 2280 1240/ 4043 9000 Fax: +91 22 2657 3708/09 Website: www.spasecurities.in Contact Person: Mr. Rajesh Gandhi SEBI Registration No: NSE: INB231178238 BSE: INB011178234

Bankers to the Issue:

HDFC Bank Limited FIG - OPS Department, - Lodha, I Think Techno Campus, O-3, Level, Next to Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai- 400 042 Tel: +91 22 3075 2928 Fax: +91 22 2579 9801 Email: Deepak.rane@hdfcbank.com Website: www.hdfcbank.com Contact Person: Mr. Deepak Rane SEBI Registration No.: INBI00000063

YES Bank Limited 3rd Floor, Ion House, Dr. E. Moses Road, Mahalaxmi, Mumbai – 400 011 Tel: +91 22 6622 9031 Fax: +91 22 2497 4875 Email: dlbtiservices@yesbank.in Website: www.yesbank.in Contact Person: Mr. Mahesh Shirali SEBI Registration No.: INBI00000935

Dhanlaxmi Bank Ground Floor, Janmabhoomi Bhavan, Janmabhoomi Marg, Fort, Mumbai – 400 001 Tel: +91 22 2202 2535 / 6154 1857 Fax: +91 22 2287 1637 / 6154 1725 Email: Venkataraghavan.ta@dhanbank.co.in Website: www.dhanbank.com Contact Person: Venkataraghavan T. A. SEBI Registration No.: INBI00000025

ICICI Bank Limited Rajabahadur Mansion, 30, Mumbai Samachar Marg, Fort, Mumbai - 400 001 Tel: +91 22 6631 0322/12 Fax: +91 22 6631 0350 Email: anil.gadoo@icicibank.com Website: www.icicibank.com Contact Person: Mr.Anil Gadoo SEBI Registration No.: INBI00000004

INDUSIND Bank Limited

Cash Management Services Solitare Corporate Park, No. 1001, Building No. 10, Ground Floor, Guru Hargovindji Marg, Andheri (East), Mumbai – 400 093 Tel: +91 22 6772 3901-17 Fax: +91 22 6772 3998 Email: suresh.esaki@indusind.com Website: www.indusind.com Contact Person: Suresh Esaki SEBI Registration No.: INBI00000002

The Hongkong and Shanghai Banking Corporation

Limited

Plot No. 139-140 B, Western Express Highway, Sahar Road Junction, Ville Parle (East), Mumbai – 400 057 Tel: +91 22 4035 7458 Fax: +91 22 4035 7657 Email: swapnilpavale@hsbc.co.in; ctlaindiainm@hsbc.co.in Website: www.hsbc.co.in Contact Person: Swapnil Pavale SEBI Registration No.: INBI00000027

Kotak Mahindra Bank Limited 5th Floor, Dani Corporate Park, 158 CST Road, Kalina, Santacruz (East), Mumbai 400 098

25

Tel: +91 22 6759 5335 Fax: +91 22 6759 5374 Email: vidhi.gupta@kotak.com Website: www.kotak.com Contact Person: Vidhi Gupta SEBI Registration No.: INBI00000927

Bankers to our Company

ANDHRA BANK Corporate Finance Branch, 16th, Earnest House, NCPA Marg, Nariman Point, Mumbai – 400 021 Tel: +91 22 2288 4877 Fax: +91 22 2288 5841

AXIS BANK Ground Floor, Karumuthu Nilayam, No. 192, Anna Salai, Chennai -600 002 Tel: +91 44 28577763 Fax: +91 44 28544193

BANK OF INDIA Chennai Corporate Banking Branch, IV Floor, Tarapore Towers, 826, Anna Salai, Chennai - 600 002. Tel: +91 44 2851 0661 Fax: +91 44 2852 1912

BANK OF MAHARASHTRA 16, East Mada Street, Chennai - 600 004 Tel: +91 44 24338248 Fax: +91 44 2461 4357

CREDIT AGRICOLE CORPORATE AND

INVESTMENT BANK

Westminster Building 2nd Floor, New No. 70, Dr. Radhakrishnann Salai, Mylapore, Chennai 600 004 Tel: +91 44 6635 1001 Fax: +91 44 2847 4619

CANARA BANK Prime Corporate Branch, Ground Floor Spencer Tower-I, No.770, Anna Salai, Chennai - 600 002 Tel: +91 44 2849 7010 Fax: +91 44 2849 7016

CENTRAL BANK OF INDIA Industrial Finance Branch, No.49, Montieth Road, Egmore, Chennai -600 008. Tel: +91 44 2888 3186 Fax: +91 44 2346 4231

CORPORATION BANK White Road Branch, 38 & 39, Whites Road, Chennai - 600014 Tel: +91 44 2852 4258 Fax: +91 44 2852 2919

CITY UNION BANK LIMITED

"Keerthis", First Floor, No.67, Mandaveli Street, Mandaveli, Chennai – 600 028. Tel: +91 44 2493 7874 Fax: +91 44 2461 0024

DBS BANK LIMITED DBS Building, 806 Annasalai, Chennai - 600002 Tel: +91 44 6656 8824 Fax: +91 44 6656 8899

DENA BANK T Nagar Branch No.1, Thanikachalam Road, Chennai - 600017 Tel: +91 44 2433 2656 Fax: +91 44 2434 4870

FEDERAL BANK LIMITED 61, Anna Salai, Chennai - 600002 Tel: +91 44 2851 2561 Fax: +91 44 2852 3058

26

HDFC BANK LIMITED Corporate Banking Department, 2nd Floor, Process House, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013 Tel: +91 22 2496 1616 Fax: +91 22 2496 8135

THE HONGKONG AND SHANGHAI BANKING

CORPORATION LIMITED Nagabrahma Towers, No.76. Cathedral Road Chennai - 600 086 Tel: +91 44 4391 2064 Fax: +91 44 2811 1845

ICICI BANK LIMITED

3rd Floor No.1, Cenotaph Road Teynampet Chennai 600 018

Tel: +91 44 4231 6978 Fax: +91 44 4231 6960

INDIAN OVERSEAS BANK Commercial & Institutional Credit Branch, "Auras Corporate Centre", 98-A, Dr. Radhakrishnan Salai, Mylapore, Chennai - 600 004 Tel: +91 44 2847 8634 Fax: +91 44 2847 8633

INDIAN BANK No.66, Rajaji Salai, Chennai - 600 001 Tel: +91 44 2521 5368 Fax: +91 44 2521 0342

IDBI Bank Limited No.115, Anna Salai, P.B. No. 805, Saidapet, Chennai - 600 015 Tel: +91 44 22355201 Fax: +91 44 22355226

INDUSIND BANK 1st Floor, IndusInd House, 425, Dadasaheb Bhadkamkar Marg, Opera House, Mumbai - 400 004 Tel: +91 22 4345 7534 Fax: +91 22 4345 7530

JAMMU & KASHMIR BANK Voltax International Centre, No. 52, Armenian Street, Parrys Chennai – 600 001 Tel: + 91 44 2533 0478 Fax: +91 44 2535 9131

ING VYSYA BANK Regional Office: No. 185, Anna Salai, 02nd Floor, Chennai - 600 006 Tel: +91 44 2852 8377 Fax: +91 44 2859 3322

KARUR VYSYA BANK LIMITED Kamanwala Chambers, Sir P.M. Road, Fort, Mumbai 400 001 Tel: +91 22 2266 5467 Fax: +91 22 2261 2761

ORIENTAL BANK OF COMMERCE

Spencer Plaza, Ground Floor, 769, Anna Salai, Chennai - 600 002 Tel: +91 44 2849 2940 Fax: +91 44 2849 8031

KOTAK MAHINDRA BANK LIMITED 04th Floor, Kotak Infiniti, Building No.21, Infinity Park, Gen A.K. Vaidya Marg, Malad (E), Mumbai - 400 097 Tel: +91 22 6605 4139 Fax: +91 22 67259063

PUNJAB NATIONAL BANK No.10,Raja Street, T. Nagar, Chennai - 600 017 Tel: +91 44 2432 3928 Fax: +91 44 2434 1050

STANDARD CHARTERED BANK Origination & Client Coverage, 19, Rajaji Salai, 4th Floor, Chennai - 600 001 Tel: +91 44 2534 9450 Fax: +91 44 2534 9186

27

THE SOUTH INDIAN BANK LIMITED Industrial Finance Branch, No. 110, Raheja Towers, 177, Anna Salai, Chennai - 600 002 Tel: +91 44 2860 3964 Fax: +91 44 2860 3963

SMALL INDUSTRIES DEVELOPMENT BANK

OF INDIA Overseas Towers, No. 756L, Anna Salai (Opp. TVS), Chennai - 600 002 Tel: +91 44 2841 3716 Fax: +91 44 2852 0692

STATE BANK OF BIKANER AND JAIPUR 1st Floor, Giriraj Bldg., 73, Sant Tukaram Road, Danabunder, Masjid (E), Mumbai 400 009 Tel: +91 22 2348 7020 Fax: +91 22 2348 1944

STATE BANK OF MAURITIUS LIMITED Prince Arcade, 4th Floor, 22-A, Cathedral Road, Chennai - 600 086 Tel: +91 44 2811 0943 Fax: +91 44 2811 6445

STATE BANK OF MYSORE Branch 224-C, Mittal Court, 4th Floor, Nariman Point, Mumbai - 400 021

Tel: +91 22 2288 5577 Fax: +91 22 2282 3895

STATE BANK OF PATIALA Commercial Branch, Atlanta, First Floor, Nariman Point, Mumbai - 400 021 Tel: +91 22 2285 1762 Fax: +91 22 2285 6626

STATE BANK OF INDIA Industrial Finance Branch, Mumbai 'The Arcade" 2nd floor, World Trade Centre, Cuffe Parade, Coloba, Mumbai - 400 005 Tel: +91 22 2216 1955 Fax: +91 22 2216 0918

SYNDICATE BANK 170 Eldams Road, Teynampet Chennai - 600 018 Tel: +91 44 2432 3212 Fax: +91 44 2435 2182

STATE BANK OF TRAVANCORE 556 Anna Salai, Teynampet, Chennai - 600 018 Tel: +91 44 2435 9432 Fax: +91 44 2435 1671

UNION BANK OF INDIA 12/13, Kodambakkam High Road, Nunqambakkam, Chennai - 600 034 Tel: +91 44 2346 0749 Fax: +91 44 2346 0751

TAMIL NADU MERCANTILE BANK

738, Anna Salai, (Near District Central Library), Chennai - 600 002 Tel: +91 44 2841 2205 Fax: +91 44 2841 2208

VIJAYA BANK 168 Mount Road, Chennai - 600 002 Tel: +91 44 2852 1746 Fax: +91 44 2852 5231

UNITED BANK OF INDIA

United Bank of India, No. 25, Sir P.M. Road, Fort, Mumbai - 400 001 Tel: +91 22 2202 0431 Fax: +91 22 2281 0440

YES BANK LIMITED 143/1, Nungambakkam High Road, Chennai - 600 034 Tel: +91 44 2831 9000 Fax: +91 44 2831 9001

28

Impersonation

As a matter of abundant precaution, attention of the investors is specifically drawn to the provisions of sub-section

(1) of section 68A of the Act, relating to punishment for fictitious applications.

Minimum Subscription

If our Company does not receive the minimum subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs, on the date of closure of the Issue, the entire subscription shall be refunded to the applicants within 30 days from the date of closure of the Issue. If there is delay in the refund of subscription by more than 8 days after our Company becomes liable to refund the subscription amount, our Company will pay interest for the delayed period at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.

Credit Rating and Rationale

The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of financial obligations. Rationale The rationale for the aforementioned credit rating issued by CARE is as follows: The rating factors in the strong business growth of the Company with good profitability and asset quality parameters. The rating also factors in the strengths that the Company derives from the Shriram Group franchise, SCUF’s position as a niche player in the semi urban and rural areas, diversified product portfolio, adequate capitalization and strong resource raising capability with diversified funding base and experienced management. The rating is however constrained on account of regional concentration of the Company’s business and evolving nature of the management information system. SCUF’s ability to maintain asset quality and raise capital to sustain growth are the key rating sensitivities.

CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall

the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings on information

obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy,

adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results

obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have

paid a credit rating fee, based on the amount and type of bank facilities/instruments. The rationale for the aforementioned credit rating issued by CRISIL is as follows: The rating reflects the Company’s following strengths, (i) synergies derived from association with the Shriram Group, (ii) healthy capitalization and (iii) adequate earnings. The aforementioned strengths are partially offset by the Company’s following weaknesses, (i) exposure to potential asset quality risks from lending to low income group segments and (ii) geographical concentration in lending portfolio.

CRISIL rating reflects CRISIL's current opinion on the likelihood of timely payment of the obligations under the

rated instrument and does not constitute an audit of the rated entity by CRISIL. CRISIL ratings are based on

information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not

guarantee the completeness or accuracy of the information on which the rating is based. A CRISIL rating is not a

recommendation to buy, sell, or hold the rated instrument; it does not comment on the market price or suitability for

a particular investor. All CRISIL ratings are under surveillance. Ratings are revised as and when circumstances so

29

warrant. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever

to the subscribers / users / transmitters / distributors of this product.

Utilisation of Issue proceeds Our Board of Directors certifies that:

• all monies received out of the Issue shall be credited/transferred to a separate bank account other than the bank account referred to in sub-section (3) of Section 73 of the Act;

• details of all monies utilised out of the Issue referred above shall be disclosed under an appropriate separate head in our balance sheet indicating the purpose for which such monies have been utilised;

• details of all unutilised monies out of the Issue, if any, shall be disclosed under an appropriate head in our balance sheet indicating the form in which such unutilised monies have been invested; and

• we shall utilize the Issue proceeds only upon creation of security as stated in this Prospectus in the section titled “Issue Structure” beginning on page 144 of this Prospectus.

• the Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other acquisition, inter alia by way of a lease, of any property.

Issue Programme The subscription list for the Issue shall remain open for subscription at the commencement of banking hours and shall close at the close of banking hours on the dates indicated below or earlier or on such date, as may be decided at the discretion of the Board of Directors or any committee of the Board of Directors of our Company subject to necessary approvals

ISSUE OPENS ON August 11, 2011

ISSUE CLOSES ON August 27, 2011

The subscription list for the Issue shall remain open for subscription at the commencement of banking hours and close at the close of banking hours on the dates indicated above or earlier or on such date as may be decided at the discretion of the Committee of Directors of our Company subject to necessary approvals. In the event of such early closure of subscription list of the Issue, our Company shall ensure that notice of such early closure is given on such early date of closure through advertisement/s in a leading national daily newspaper.

30

SUMMARY OF BUSINESS, STRENGTH & STRATEGY

Frost & Sullivan India Private Limited has used due care and caution in preparing the report titled “Analysis of

MSME Loan Markets for NBFCs – July 2011”. Information has been obtained from sources that Frost & Sullivan

India Private Limited considers reliable. However, Frost & Sullivan India Private Limited does not guarantee the

accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the

results obtained from the use of such information. No part of the said report may be published / reproduced in any

form without Frost & Sullivan India Private Limited’s prior written approval. Frost & Sullivan India Private

Limited is not liable for investment decisions which may be based on the views expressed in the said report.

Overview

Our Company is a deposit-accepting NBFC registered with RBI, offering (i) financing for two wheelers, appliances and other commercial goods, (“Product Finance”), (ii) pre-owned and new vehicle loans, (iii) personal loans, (iv) loans against gold, and (v) loans to the small enterprise finance segment. Our current lines of business and organisational structure are as follows:

According to the Frost and Sullivan report titled “Analysis of MSME Loan Markets for NBFCs – July 2011”, our Company is the largest small enterprise finance company in India. In the small loan segment (loans of `1 lakh -10 lakh) our Company has a dominant share of 95%. Our Company also leads the total Indian micro, small and medium enterprises market with 53 % share. Our Company was established in 1986 and we have a track record of twenty five years in the financial services sector in India. Since 2005 we have focused on the retail financing segment. Our Company has been registered as a deposit-taking NBFC with the RBI since September 4, 2000 under Section 45IA of the Reserve Bank of India Act, 1934. We are a part of the Shriram Group of companies which has a strong presence in financial services in India, including commercial vehicle financing, consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products such as life and general insurance products and mutual fund products, as well as a growing presence in other businesses such as property development, engineering projects and information technology.

31

We leverage on the Shriram Group’s ecosystem to reach out to our prospective customers and our focus has been in maximizing our association with the “Shriram” brand name and the synergies offered by the infrastructure, of other entities in the Shriram Group. Our customer base over the years has significantly comprised of customers of other entities in the Shriram Group. The large customer bases and wide-spread network of business outlets of entities such as, Shriram Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and entities operating under the “Shriram Chits” brand name, has continued to provide us with a large platform of target customers. Over the last 25 years our Company has established a pan-India presence, with 559 branches and 91 other business outlets as of March 31, 2011, across 17 states in India, with a significant presence in south India. As on March 31, 2011, our total employee strength was 2,318. We operate in a ‘hub-and spoke’ business model, where responsibilities from loan origination to recoveries of loans are vested in each of our business outlets, under the general supervision and control of our head office in Chennai. Our business outlet networks are interconnected and each business outlet is connected to our head office through an ERP platform developed by Take Solution Limited, Chennai. We have demonstrated consistent growth in our business and in our profitability. Our Assets Under Management have grown by a compounded annual growth rate, or CAGR, of 34% from ` 250,686.49 lakhs as of March 31, 2007 to ` 799,804.88 lakhs as of March 31, 2011. Our capital adequacy ratio as of March 31, 2011 computed on the basis of applicable RBI requirements was 20.53%, compared to the RBI stipulated minimum requirement of 12.00%. Our Tier I capital as of March 31, 2011 was ` 119,419.00 lakhs. Our Gross NPAs as a percentage of Total Loan Assets were 1.86% as of March 31, 2011. Our Net NPAs as a percentage of Net Loan Assets was 0.43% as of March 31, 2011. Our total income increased from ` 34,805.91 lakhs in fiscal 2007 to ` 132,091.19 lakhs in fiscal 2011 at a CAGR of 40%. Our net profit after tax increased from ` 5,162.16 lakhs in fiscal 2007 to ` 24,058.85 lakhs in fiscal 2011, at a CAGR of 47%. A summary of our assets under management, net non performing assets, total income and net profit after tax for the corresponding periods specified below are as follows:

` In Lakhs

Particulars As at March

31, 2007

As at March

31, 2008

As at March

31, 2009

As at March

31, 2010

As at March

31, 2011

Assets Under Management

250,686.49 336,889.78 462,950.89 521,550.18 799,804.88

Net Non performing assets

2,561.44 2,495.70 3,590.35 3,322.73 2,982.76

For the

Financial

Year Ended

March 31,

2007

For the

Financial

Year Ended

March 31,

2008

For the

Financial

Year Ended

March 31,

2009

For the

Financial

Year ended

March 31,

2010

For the

Financial

year ended

March 31,

2011

Total Income 34,805.91 62,318.76 93,393.75 110,284.71 132,091.19 Net Profit after Tax 5,162.16 8,763.50 11,700.77 19,425.86 24,058.85

Our Strengths

We believe that the following are our key strengths: Diversified Portfolio of Products

Our Company’s product portfolio comprises (i) Product Finance loans, (ii) pre-owned and new vehicles loans, (iii) personal loans, (iv) loans against gold, and (v) loans to small enterprise finance segment. Each of our products differs in terms of the average tenor, average yield, average interest rates and average size of loan. As on March 31, 2011 approximately 15 % of our Assets Under Management comprised product finance loans, 24 % of our Assets Under Management comprised vehicle loans, 9 % of our Assets Under Management comprised personal loans, 28 %

32

of our Assets Under Management comprised loans against gold, and 24 % of our Assets Under Management comprised loans to small enterprise finance segment. Our diverse revenue streams reduce our dependence on any particular product, thus enabling us to spread and mitigate our risk exposure to any particular industry, business or customer segment. Pan-India Presence, Strong Foot-hold in Southern India and Synergies with Other Shriram Group Entities

As of March 31, 2011, we had 559 branches and 91 other business outlets across 17 states in India, with a significant presence in south India. As on March 31, 2011, our total employee strength was 2,318. We have a strong foothold in south India. We leverage on the Shriram Group’s ecosystem to solicit our customers and our focus has been in maximizing our association with the “Shriram” brand name and the synergies offered by the infrastructure, of other entities in the Shriram Group. Our customer base over the years has significantly comprised of customers of other entities in the Shriram Group. The large customer bases and wide-spread network of business outlets of entities such as, Shriram Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and entities operating under the “Shriram Chits” brand name, has continued to provide us with a large platform of target customers. We believe the under-banked community, especially the small enterprise finance segment often do not have sufficient movable and/or immovable property to provide as security or collateral for loans. Our relationship and knowledge of customers’ requirements also enables us to minimize our risks while extending loans to such under-banked communities. For instance, loans provided to chit depositors of Shriram Chits, are partly or entirely secured by the deposits made with Shriram Chits. Shriram Chits has several years of experience of collecting chit deposits from self-employed professionals, wholesale/retail dealers, merchants, builders, manufacturers and small and medium scale business operators, which provides us a with an extensive database of potential borrowers, specially for our loans to the small enterprise finance segment. Hub and Spoke Business Model with Efficient Credit Policies and Procedures

We operate in a ‘hub-and spoke’ business model, where the responsibilities from loan origination to recoveries of loans are vested in each of our business outlets, under the general supervision and control of our head office in Chennai. Our business outlet networks are interconnected and each business outlet is connected to our head office through an ERP platform developed by Take Solution Limited, Chennai. The ERP platform enables our management to monitor each loan right from its origination to final closure of accounts. Our head office and senior management is primarily responsible for the broad policy formulation for our businesses. However, the decision making process in connection with loans is decentralized and majorly vested in our business outlets, which ensures speedy credit approvals and more efficient turn around times in processing loans. We focus on closely monitoring our assets and borrowers through our officials at each business outlet. Our branch officials develop relationships with our target customer base, which enables us to capitalize on local knowledge. We follow stringent credit policies, including limits on customer exposure, to ensure the asset quality of our loans and the security provided for such loans. Further, we have nurtured a culture of accountability by making our product executives responsible for loan administration and monitoring as well as recovery of the loans they originate. We have a dedicated team of officials at each business outlet who are responsible for (i) loan origination, (ii) credit evaluation, (iii) pre-lending field investigations where our officials personally visit our prospective customers at their homes or offices, and (v) post lending credit appraisal. The team of officials responsible for origination of a loan is also responsible for the timely servicing of loans, recoveries, and monitoring the performance of each loan from origination to closure of the loan. We offer incentivized salary structures to such officials, where their incentives are linked to recovery of installments of the principal amount and interest on the loans. We believe our efficient credit policies, credit approval procedures, credit delivery process and relationship-based loan administration and monitoring methodology have aided in increasing our customer loyalty and earn repeat business and customer referrals. Our stringent credit policies and relationship based model has helped us maintain relatively low NPA levels. Our Gross NPAs as a percentage of Total Loan Assets were 1.86 % as of March 31, 2011. Our Net NPAs as a percentage of Net Loan Assets was 0.43 % as of March 31, 2011.

33

Access to a range of cost effective funding sources

We fund our capital requirements through a variety of sources. Our fund requirements are currently predominantly sourced through term loans from banks, issue of redeemable non-convertible debentures on a private placement basis, and cash credit from banks including working capital loans. We access funds from a number of credit providers, including nationalized banks, private Indian banks and foreign banks, and our track record of prompt debt servicing has allowed us to establish and maintain strong relationships with these financial institutions. We have also placed commercial paper, as and when required in the past. As a deposit-taking NBFC, we are also able to mobilize retail fixed deposits at competitive rates. We have also raised subordinated loans eligible for Tier II capital. We also undertake securitization/assignment transactions to increase the efficient use of our capital and as a cost effective source of funds. In relation to our long-term debt instruments, we currently have ratings of CARE AA from Credit Analysis and Research Limited (“CARE”), AA-(ind) from Fitch Ratings India Private Limited, (“Fitch”) and CRISIL AA- /Stable from CRISIL. In relation to our short-term debt instruments, we have also received ratings of CARE A1+ from CARE, F1+(ind) from Fitch, and CRISIL A1+ from CRISIL. Our fixed deposit programme has been rated as CARE AA (FD) by CARE, and tAA- (ind) by Fitch. The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of financial obligations. We believe that we have been able to achieve a relatively stable cost of funds despite the difficult conditions in the global and Indian economy and the resultant reduced liquidity and an increase in interest rates, primarily due to our improved credit ratings, (as evidenced by the recent upgrade in our ratings by Fitch and CARE). We believe we are able to borrow from a range of sources at competitive rates. Experienced senior management team Our Board consists of 12 Directors, (including representatives of the TPG Group), with extensive experience in the financial services sectors. Our senior and middle management personnel have significant experience and in-depth industry knowledge and expertise. Our management promotes a result-oriented culture that rewards our employees on the basis of merit. In order to strengthen our credit appraisal and risk management systems, and to develop and implement our credit policies, we have hired a number of senior managers who have extensive experience in the Indian banking and financial services sector and in specialized finance firms providing loans to retail customers. We believe that the in-depth industry knowledge and loyalty of our management and professionals provide us with a distinct competitive advantage. Strategy

Our key strategic priorities are as follows:

Further expand operations by growing our business outlet network and introducing full range of products in all

business outlets

We intend to continue to strategically expand our operations in target markets establishing additional business outlets. Our customer origination and servicing efforts strategically focus on building long term relationships with our customers and address specific issues and local business requirements of potential customers in a particular region. We have a strong concentration of our business in south India with 248 of our 559 branches as on March 31, 2011, located in the states of Tamil Nadu, Andhra Pradesh and Karnataka. 91 % of our Assets Under Management as on March 31, 2011 were represented by loans originated in the states of Tamil Nadu, Karnataka and Andhra Pradesh. However, we have continued to make efforts to expand and penetrate into other regions in India. Currently, we have succeeded in opening business outlets in 17 different states in India. We propose to target establishing our operations through new business outlets in cities and towns where we historically had relatively limited operations, such as in eastern and northern parts of India, and to further consolidate our position and

34

operations in western and southern parts of India. Our focus would be to typically target Tier II and Tier III cities, where we believe that demand for our products will grow steadily in the near future. As an internal policy, we typically introduce our products in a particular location only after having evaluated the regional market and the demand for each individual product. Currently, not all of our business outlets offer our full range of products. As a part of our strategy we target to gradually introduce our entire range of product offerings, namely (i) Product Finance loans, (ii) pre-owned and new vehicles loans, (iii) personal loans, (iv) loans against gold, and (v) small enterprise finance segment at each of our existing business outlets across India.

Continue growth in the Loans to Small Enterprises Finance Segment

Our Company started offering customized loans to small enterprises finance segment in 2006 and has continually focused on expanding our customer base for this product since then. We see a significant opportunity for our Company to expand our customer base in small enterprise finance segment. According to the Frost and Sullivan report titled “Analysis of MSME Loan Markets for NBFCs – July 2011”, our Company is the largest small enterprise finance company in India. In the small loan segment (loans of `1 lakh -10 lakh) our Company has a dominant share of 95 %. Our Company also leads the total Indian micro, small and medium enterprises market with 53 % share. As a strategy, we will continue to leverage on the infrastructure provided by entities operating under the ‘Shriram Chits’ brand name. Shriram Chits has several years of experience of collecting chit deposits from self-employed professionals, wholesale/retail dealers, merchants, builders, manufacturers and small and medium scale business operators, which provides us a with an extensive database of potential borrowers, specially for our loans to the small enterprises segment. We also propose to extend such loans to our existing customer base for our other products and propose to introduce small enterprises segment loans in all our current business outlets as well as in new business outlets that we open in the future.

Increase focus on loans against gold business Since 2007 we have been providing personal and business loans secured by gold jewellery and ornaments, primarily to individuals who possess gold jewellery but do not have access to formal credit within a reasonable time, or to whom credit may not be available at all, to meet their short-term requirements. We propose to utilize our existing business outlet networks, our existing customer base as well as the infrastructure offered by other Shriram Group entities, to expand our reach and customer base for loans against gold. We expect to establish this product in new markets and to target potential customers using the Shriram Group’s eco-system, to include customers who otherwise continue to rely on the unorganized sector for timely funding requirements. We propose to capitalize on the “Shriram” brand name and our good-will with our existing customers to further develop our business for this product.

Continue to implement advanced processes and systems We have invested in our technology systems and processes to create a stronger organization and ensure good management of customer credit quality. Our information technology strategy is designed to increase our operational and managerial efficiency. We aim to increasingly use technology in streamlining our credit approval, administration and monitoring processes to meet customer requirements on a real-time basis. We continue to implement technology led processing systems to make our appraisal and collection processes more efficient, facilitate rapid delivery of credit to our customers and augment the benefits of our relationship based approach. We also believe that deploying strong technology systems will enable us to respond to market opportunities and challenges swiftly, improve the quality of services to our customers, and improve our risk management capabilities. Foray into Housing Finance Business

Our Company incorporated a wholly owned subsidiary namely Shriram Housing Finance Limited in November 2010, with a view of entering the housing finance sector. We have applied to National Housing Bank (wholly owned by the Reserve Bank of India), for a certificate of registration under the National Housing Bank Act, 1987, to carry on business of a housing finance institution. We believe that offering housing finance will help us expand our product portfolio and we are well positioned to enter into this business through our established infrastructure, our existing customer base as well as through leveraging our association with other entities in the Shriram Group. The aforesaid Subsidiary will commence operations once it is registered with the National Housing Bank. As a part of its strategy, Shriram Housing Finance Limited will typically target middle-income customers in semi-urban locations.

35

THE ISSUE

The following is a summary of the Issue. This summary should be read in conjunction with, and is qualified in its entirety by, more detailed information in the chapter titled “Terms of the Issue” beginning on page 141 of this Prospectus.

Common Terms of NCDs

Issuer Shriram City Union Finance Limited

Issue Public Issue by our Company of NCDs aggregating upto ` 37,500 lakhs with an option to retain over-subscription upto ` 37,500 lakhs for issuance of additional NCDs aggregating to a total of upto ` 75,000 lakhs.

Stock Exchanges

proposed for listing of

the NCDs

NSE and BSE

Issuance and Trading Compulsorily in dematerialised form

Trading Lot One NCD

Depositories NSDL and CDSL

Security

Security for the purpose of this Issue will be created in accordance with the terms of the Debenture Trust Deed. For further details please refer to the section titled “Issue

Structure” beginning on page 144 of this Prospectus.

Rating The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of financial obligations.

Issue Schedule ∗

The Issue shall be open from August 11, 2011 to August 27, 2011 with an option to close earlier and/or extend upto a period as may be determined by our Board.

Pay-in date 3 (three) Business Days from the date of reciept of application or the date of realisation of the cheques/demand drafts, whichever is later.

Deemed Date of

Allotment

Deemed date of allotment shall be the date of issue of the Allotment Advice / regret.

*The subscription list shall remain open for a period as indicated, with an option for early closure or extension by such period, upto a period of

30 days from date of opening of the Issue, as may be decided by the Board of Directors of our Company. In the event of such early closure of

subscription list of the Issue, our Company shall ensure that notice of such early closure is given on such early date of closure through

advertisement/s in a leading national daily newspaper.

36

The specific terms of each instrument are set out below:

Options I II

Frequency of Interest Payment Annual Annual

Minimum Application ` 10,000/- (10 NCDs) (for all options of NCDs, namely Options I and Option II either taken individually or collectively)

In Multiples of ` 1,000 (1 NCD) ` 1,000 (1 NCD)

Face Value of NCDs

(` / NCD)

` 1,000 ` 1,000

Issue Price (` / NCD) ` 1,000 ` 1,000

Mode of Interest Payment Through Various options available Through Various options available

Coupon (%) for NCD Holders in

Category I and Category II

11.60% per annum 11.50% per annum

Coupon (%) for NCD holders in the

Reserved Individual Portion

12.10% per annum 11.85% per annum

Coupon (%) for NCD holders in the

Unreserved Individual Portion

11.85% per annum 11.60% per annum

Effective Yield (per annum) For NCD holders in the Reserved Individual Portion – 12.10%

For NCD holders in the Unreserved Individual Portion – 11.85%

For all other NCD holders – 11.60%

For NCD holders in the Reserved Individual Portion – 11.85%

For NCD holders in the Unreserved Individual Portion –

11.60% For all other NCD holders –

11.50%

Put and call option Exercisable at the end of 48 months from the Deemed Date of Allotment

Nil

Tenor 60 months* 36 months

Redemption Date

60 months from the Deemed Date of Allotment*

36 months from the Deemed Date of Allotment.

Redemption Amount (`/NCD) Repayment of the Face Value plus any interest that may have accrued at the Redemption Date, or at the date of early redemption if any Put Option or Call Option is exercised, as the case may be*

Repayment of the Face Value plus any interest that may have accrued at the Redemption Date.

Nature of Indebtedness Pari Passu with other secured creditors and priority over unsecured creditors

Pari Passu with other secured creditors and priority over unsecured creditors

Credit Rating

CRISIL 'AA-/Stable' for an amount of upto ` 75,000 Lakhs

'AA-/Stable' for an amount of upto ` 75,000 Lakhs

CARE 'CARE AA' for an amount of upto ` 75,000 Lakhs

'CARE AA' for an amount of upto ` 75,000 Lakhs

Deemed Date of Allotment Deemed date of allotment shall be the date of issue of the Allotment Advice / regret.

Deemed date of allotment shall be the date of issue of the Allotment Advice / regret.

* Subject to the exercise of the put and/or call option

37

SUMMARY FINANCIAL INFORMATION

The following tables present an extract of Reformatted Consolidated Summary Financial Statements and the Reformatted Unconsolidated Summary Financial Statements. The Reformatted Consolidated Summary Financial Statements and the Reformatted Unconsolidated Summary Financial Statements should be read in conjunction with the examination report thereon issued by our Statutory Auditors and statement of significant accounting policies and notes to accounts on the Reformatted Consolidated Summary Financial Statements and the Reformatted Unconsolidated Summary Financial Statements contained in the section titled “Financial Information” beginning on page 130 of this Prospectus.

A. SUMMARY INFORMATION OF OUR UNCONSOLIDATED ASSETS AND LIABILITIES

(` in lakhs)

Particulars As at March 31,

2011 2010 2009 2008 2007

Assets

A. Fixed and Intangible Assets(Net) (including CWIP)

2,944.43

2,044.52

3,721.98 5,108.06 5,570.48

B Investments

551.45

101.45

606.45 604.98 664.03

C Deferred Tax Asset (Net)

1,581.66 1,122.70 313.05 - -

D Current Assets, Loans & Advances

936,121.22

621,545.53

539,518.62 373,141.11 215,885.47

F

Total (A+B+C+D)

941,198.76

624,814.20

544,160.10 378,854.15 222,119.98

Liabilities

G Secured Loans

656,951.01

413,610.55

390,445.43 262,795.40 130,384.22

H Unsecured Loans

75,827.43

53,103.69 41,831.33 37,127.45 20,246.27

I Deferred Tax Liability (Net)

-

-

- 632.99 2,973.32

J Current Liabilities

70,089.54

46,393.55 33,125.35 29,048.76 31,165.45

K Provisions

17,123.50

11,706.08 7,783.75 4,269.76 2,457.10

L Total (G+H+I+J+K)

819,991.48

524,813.87

473,185.86 333,874.36 187,226.36

38

(` in lakhs)

Particulars As at March 31,

2011 2010 2009 2008 2007

M

Net Worth (F-L)

121,207.28

100,000.33

70,974.24 44,979.79 34,893.62

Represented By

(i) Share Capital

4,953.69

4,915.47

4,585.68 6,444.48 6,238.98

(ii) Share application money pending allotment - 0.71 - - -

(iii) Stock Option Outstanding

1,887.27

2,281.04

1,637.97 542.08 -

(iv) Optionally Convertible warrants

-

- 2,700.00 232.20 560.00

(v) Reserves and Surplus

114,366.32

92,803.11 62,050.59 37,761.03 28,096.77

(vi) Less : Miscellaneous Expenditure (to the extent not written off or adjusted)

-

-

- -

2.13

Total (i+ii+iii+iv+v-vi)

121,207.28

100,000.33

70,974.24 44,979.79 34,893.62

39

B. SUMMARY INFORMATION OF OUR UNCONSOLIDATED PROFIT AND LOSS ACCOUNT

(` in lakhs)

For the year ended March 31, Particulars

2011 2010 2009 2008 2007

A. Income

i Income from Operations 131,800.12 107,205.35 92,357.73 61,072.29 33,592.29

ii Other Income 291.07 3,079.36 1,036.02 1,246.47 1,213.62

Total Income 132,091.19 110,284.71 93,393.75 62,318.76 34,805.91

B. Expenditure

i Financial Expenses 58,848.26 51,759.01 49,048.65 30,848.93 17,124.52

ii Personnel Expenses 4,367.02 3,611.63 3,582.75 2,274.74 935.51

iii Operating & Other Expenses 20,470.16 14,163.60 12,882.73 10,273.02 6,034.77

iv Depreciation and amortization 747.41 464.77 1,018.23 1,127.52 373.35

v Impairment loss/(Reversal) on Fixed assets & stock - - 1,186.81 - -

vi Share & Debenture Issue expenses written off

- - - 2.13 1.69

vii Provisions & Write offs (net)

11,598.25 11,659.84 7,701.05 5,093.96 2,392.75

Total Expenditure 96,031.10 81,658.85 75,420.22 49,620.30 26,862.59

C. Net Profit Before Taxation (A-B) 36,060.09 28,625.86 17,973.53 12,698.46 7,943.32

D. Provision for taxation

Current tax 12,460.20 9,972.11 7,055.25 6,134.29 2,902.09

Deferred tax (458.96) (809.65) (946.04) (2,340.33) (191.70)

Wealth tax 1.76

Fringe Benefit Tax 161.79 141.00 70.77

Fringe Benefit Tax of earlier Year 37.54

Total Tax 12,001.24 9,200.00 6,272.76 3,934.96 2,781.16

E. Net Profit after Taxation (C-D) 24,058.85 19,425.86 11,700.77 8,763.50 5,162.16

Balance in Profit & Loss Account brought forward 22,730.09 12,003.01 8,412.03 4,471.38 2,264.35

40

(` in lakhs)

For the year ended March 31, Particulars

2011 2010 2009 2008 2007

F. Balance Available for

Appropriations 46,788.94 31,428.87 20,112.80 13,234.88 7,426.51

G. Appropriations

Dividend - Cumulative Redeemable Preference Shares - - 63.17 141.59 145.15

Equity Shares - Interim dividend 1,236.25 982.28 501.85 391.00 271.00

Equity Shares - Proposed final dividend 1,733.79 1,474.64 1,375.92 1,332.15 782.00

Preference Shares - Proposed final dividend 0.08 9.41

Tax on dividend 205.33 166.94 96.02 316.92 192.87

Tax on proposed dividend 281.26 244.92 233.84 - -

Transfer to statutory reserve 4,810.00 3,890.00 2,340.00 1,761.11 1,032.43

Transfer to general reserve 2,410.00 1,940.00 1,170.00 880.00 522.27

Transfer to Capital Redemption Reserve - -

2,328.98

-

-

Total Appropriations

10,676.63 8,698.78

8,109.79

4,822.85

2,955.13

H. Balance carried to Balance Sheet

(F-G) 36,112.31 22,730.09 12,003.01 8,412.03 4,471.38

41

C. SUMMARY INFORMATION OF OUR UNCONSOLIDATED CASH FLOW STATEMENT

(`̀̀̀ in lakhs)

For the year ended March 31, Particulars

2011 2010 2009 2008 2007

A. Cash flow from operating activities

Net profit before taxation

36,060.09

28,625.86

17,973.53

12,698.46

7,943.32

Depreciation and amortization

747.41

464.77

1,018.23

1,127.52

373.35 Share and debenture issue expenses written off

-

-

-

2.13

1.69

(Profit) / loss on sale of fixed assets (net)

13.78

1.60

0.12

3.35

0.96

Lease equalization Adjustments

(11.49) (Profit) / loss on sale of current and long term investments (net)

-

-

0.08

-

-

Interest income on current and long term investments and interest income on fixed deposits

(270.70)

(1,203.65)

(258.14)

(228.64)

(302.65)

Dividend income

-

(444.91)

(56.47)

(46.06)

(65.27)

Employees Stock option compensation cost

471.68

751.53

1,111.28

542.09

-

Provision for impairment

-

-

1,186.81

-

-

Provision for hedging contracts

(546.62)

-

994.18

811.68

- Provisions for non performing assets and bad debts written off

10,136.82

12,165.62

7,809.37

5,174.98

2,482.15

Provisions for standard assets

1,714.89

-

-

-

-

Provision for gratuity

40.82

15.88

6.46

104.70 28.48

Provision for leave encashment

27.48

9.87

1.51

13.60 1.77 Provision for diminution in value of investments

-

-

-

-

2.99

Operating profit before working capital

changes

48,395.65

40,386.57

29,786.96

20,203.81

10,455.31

Movements in working capital:

(Increase) / decrease in current assets:

(Increase) / decrease in assets under financing activities

(233,365.56)

(111,057.72)

(101,492.75

)

(108,713.56

)

(88,184.8

9)

(Increase) / decrease in sundry debtors

-

89.03

(13.21)

102.25

(60.52) (Increase) / decrease in lease assets - net of sales -

-

-

-

8.89

(Increase) / decrease in other current assets

(11,530.50)

(5,552.81)

(29.55)

(94.98)

306.06

42

(`̀̀̀ in lakhs)

For the year ended March 31, Particulars

2011 2010 2009 2008 2007

(Increase) / decrease in other loans and advances

(931.92) 4,708.39 2,239.18 (2,111.58) (1,734.19)

Increase / (decrease) in current liabilities

23,690.91

13,272.04

4,078.50

(2,119.00) 10913.48

Cash generated from operations

(173,741.42)

(58,154.50)

(65,430.87)

(92,733.06)

(68,295.8

6)

Direct taxes paid (net of refunds)

(11,127.69)

(9,197.57)

(6,450.11)

(6,522.66)

(3,154.36)

Net cash used in operating activities (A)

(184,869.11)

(67,352.07)

(71,880.98)

(99,255.72)

(71,450.2

2)

B. Cash flows from investing activities

Investment in Fixed deposits (net)

7,992.17

(12,665.70)

(5,855.70)

52.63

42.27

Purchase of fixed assets and intangibles

(1,663.61)

(1,058.11)

(879.02)

(670.26)

13.80

Proceeds from sale of fixed assets

2.52

2,269.20

59.93

1.81

(368.18)

Purchase of Investment

(200.00)

-

-

-

-

Investment in subsidiary company

(250.00) -

(4.55)

(4.99) - Proceeds from sale of investment in subsidiary company - - -

4.55 -

Proceeds from sale of investments

-

1,905.00

3.00

59.50 -

Interest received on current and long term investments and interest on fixed deposits

270.70

1,203.65

258.14

228.64

302.65

Dividend received -

444.91

56.47

46.06

65.27

Net cash used in investing activities (B)

6,151.78

(7,901.05)

(6,361.73)

(282.06)

55.81

C. Cash Flows from financing activities Proceeds from issue of equity share capital including securities premium & Share application

133.05

10,317.48

12,985.41

3,288.00

19,200.00

Proceeds from issue of share warrants

-

-

2,467.80

(327.80)

560.00 Increase / (decrease) in bank borrowings (net)

180,566.59

(3,271.15)

70,101.92

114,921.35

52,645.77

Increase / (decrease) in long term borrowings(net)

62,773.87

26,436.27

57,548.11

17,489.83

840.64

Increase / (decrease) in fixed deposits (net)

(45.64)

(12.06)

(52.87)

(214.31)

2.84 Increase / (decrease) in subordinate debts (net)

269.38

11,284.42

13,681.75

8,170.49

10,915.28

43

(`̀̀̀ in lakhs)

For the year ended March 31, Particulars

2011 2010 2009 2008 2007

Increase / (decrease) in redeemable non convertible debentures (net) -

-

(3,500.00)

3,500.00 -

Increase / (decrease) in unsecured loans

22,500.00

-

(5,425.00)

5,425.00

(247.50)

Dividend paid

(2,710.89)

(2,358.20)

(1,897.26)

(1,324.00)

(959.32)

Tax on dividend

(450.25)

(400.77)

(322.44)

(225.01)

(134.55)

Net cash from financing activities (C)

263,036.11

41,995.99

145,587.42

150,703.55

82,823.16

Net increase / (decrease) in cash and

cash equivalents (A + B + C)

84,318.77

(33,257.14)

67,344.72

51,165.77

11,428.75

Cash and Cash Equivalents at the

beginning of the year

116,711.86

149,969.00

82,624.28

31,458.51

20,029.76

Cash and Cash Equivalents at the end of

the year

201,030.63

116,711.86

149,969.00

82,624.28

31,458.51

Components of Cash and Cash

Equivalents As at March 31,

2011 2010 2009 2008 2007

Cash and Cash Equivalents at the end of

the year as per Balance Sheet 216,540.14

140,208.46

160,879.51

88,001.90

38,101.96

Less: Balance in Current account held for unpaid dividends

Less : Fixed deposits held for unpaid dividends

22.11

17.03

20.87

22.78

20.47

Less : Fixed deposits held for more than three months

51.00

106.00

807.34

597.58

527.80

Less : Fixed Deposit under Lien 15436.40

23373.57

10,082.30

4,757.26

6,095.18

201,030.63

116,711.86

149,969.00

82,624.28

31,458.51

44

D. SUMMARY INFORMATION OF OUR CONSOLIDATED ASSETS AND LIABILITIES

(` in lakhs)

Particulars As at March 31, 2011

Assets

A. Fixed and Intangible Assets(Net) (including CWIP) 2,947.16

B Investments 301.45

C Deferred Tax Asset (Net) 1,581.66

D Current Assets, Loans & Advances 936,363.41

E Total (A+B+C+D) 941,193.68

Liabilities

F Secured Loans 656,951.01

G Unsecured Loans 75,827.43

H Current Liabilities 70,108.22

I Provisions 17,123.50

J Total (F+G+H+I) 820,010.16

K Net Worth (F-K) 121,183.52

Represented By

(i) Share Capital 4,953.69

(ii) Stock Option Outstanding 1,887.27

(iii) Reserves and Surplus 114,366.32

(iv) Less : Miscellaneous Expenditure (to the extent not written off or adjusted)

23.76

Total (i+ii+iii+iv+v-vi) 121,183.52

45

E. SUMMARY INFORMATION OF OUR CONSOLIDATED PROFIT AND LOSS ACCOUNT

(` in lakhs)

Particulars

For the year ended March

31,2011

A. Income

i Income from Operations 131,800.12

ii Other Income 291.07

Total Income 132,091.19

B. Expenditure

i Financial Expenses 58,848.26

ii Personnel Expenses 4,367.02

iii Operating & Other Expenses 20,470.16

iv Depreciation and amortization 747.41

v Provisions & Write offs (net) 11,598.25

Total Expenditure 96,031.10

C. Net Profit Before Taxation (A-B) 36,060.09

D. Provision for taxation

Current tax 12,460.20

Deferred tax (458.96)

Total Tax 12,001.24

E. Net Profit after Taxation (C-D) 24,058.85

Balance in Profit & Loss Account brought forward 22,730.09

F. Balance Available for Appropriations 46,788.94

G. Appropriations

Equity Shares - Interim dividend 1,236.25

Equity Shares - Proposed final dividend 1,733.79

Tax on dividend 205.33

Tax on proposed dividend 281.26

Transfer to statutory reserve 4,810.00

46

(` in lakhs)

Particulars

For the year ended March

31,2011

Transfer to general reserve 2,410.00

Total Appropriations 10,676.63

H. Balance carried to Balance Sheet (F-G) 36,112.31

47

F. SUMMARY INFORMATION OF OUR CONSOLIDATED CASH FLOW STATEMENT

(` in lakhs)

Particulars Total As at March 31, 2011

A. Cash flow from operating activities

Net Profit before taxation 36,060.09

Depreciation and amortisation 747.42

(Profit)/loss on sale of assets(net) 13.78

income on fixed deposits (270.70)

Employees Stock option compensation cost 471.68

Provision for hedging contracts (546.62)

Provision for non performing assets and bad debts written off 10,136.80

Contingent Provision against Standard assets 1,714.89

Provision for gratuity 40.82

Provision for leave encashment 27.48

Operating profit before working capital changes 48,395.64

Movements in working capital:

(Increase) / decrease in assets under financing activities (233,365.55)

(Increase) / decrease in other current assets (11,530.50)

(Increase)/decrease in other loans and advances (931.92)

Increase / (decrease) in current liabilities 23,709.59

Cash generated from operations (173,722.74)

Direct taxes paid ( net of refunds) (11,127.69)

Net cash used in operating activities (A) (184,850.43)

B. Cash flows from investing activities

Investment in Fixed deposits (net) 7,992.17

Purchase of fixed and intangible assets (1,666.35)

Proceeds from sale of fixed assets 2.52

Interest on fixed deposit 270.70

Pre-operative Expenditure (21.03)

Preliminary Expenditure (2.73)

Net cash used in investing activities (B) 6,575.28

C. Cash Flows from financing activities

Proceeds from issue of equity share capital including securities

premium and Share Application Money 133.05

Increase/ (decrease) in bank borrowings(net) 180,566.59

Increase/ (decrease) in long term borrowings (net) 62,773.87

Increase/ (decrease) in fixed deposits (net) (45.64)

Increase/ (decrease) in subordinate debts (net) 269.38

Increase / (decrease) in unsecured loans 22,500.00

Dividend paid (2,710.89)

Tax on dividend (450.25)

Net cash from financing activities (C) 263,036.11

Net increase / (decrease) in cash and cash equivalents (A + B + C) 84,560.97

48

(` in lakhs)

Particulars Total As at March 31, 2011

Cash and Cash Equivalents at the beginning of the period 116,711.86

Cash and Cash Equivalents at the end of the year 201,272.83

Components of Cash and Cash Equivalents

Cash and Cash Equivalents at the end of the year as per

Balance Sheet 216,782.34

Less: Balance in Current account held for unpaid dividends 22.11

Less: Fixed deposits held for more than three months 51.00

Less: Fixed deposit under lien 15,436.40

201,272.83

49

CAPITAL STRUCTURE Details of share capital

The share capital of our Company as at date of this Prospectus is set forth below:

Share Capital `̀̀̀ in Lakhs

AUTHORISED SHARE CAPITAL

60,000,000 Equity Shares of ` 10/- each 6,000.00

4000,000 Cumulative Redeemable Preference Shares of ` 100/- each 4,000.00

TOTAL 10,000.00

ISSUED

49,733,379 Equity Shares of ` 10 /- each 4, 973.33

SUBSCRIBED

49,733,379 Equity Shares of ` 10 /- each 4, 973.33

PAID-UP SHARE CAPITAL

49,733,379 Equity Shares of ` 10/- each 4,973.33

TOTAL 4, 973.33

Changes in the authorised capital of our Company as on the date of this Prospectus:

Sr.

No.

FY Alteration

1. 1987 The Authorised Share capital of our Company was increased from ` 2,500,000 divided into 25,000 Equity shares of `100/- each to ` 5,000,000 divided into 50,000 Equity shares of ` 100/- each.

2. 1988 The Authorised Share capital of our Company was increased from ` 5,000,000 divided into 50,000 Equity shares of `100/- each to ` 20,000,000 divided into 2,000,000 Equity shares of ` 10/- each.

3. 1990 The Authorised Share capital of our Company was reorganised and increased from ` 20,000,000 divided into 2,000,000 Equity shares of ` 10/- each to ` 60,000,000 divided into 6,000,000 Equity shares of `10/- each

4. 1990 The Authorised Share capital of our Company was reorganised ` 60,000,000 divided into 6,000,000 Equity shares of `10/- each to ` 45,000,000 divided into 4,500,000 Equity shares of `10/- each and ` 15,000,000 divided into 1,500,000 preference shares of `10/- each.

5. 1994 The Authorised Share capital of our Company was increased from ` 60,000,000 divided into 4,500,000 Equity shares of `10/- each and 1,500,000 preference shares of `10/- each to ` 100,000,000 divided into 8,500,000 Equity shares of `10/- each and 1,500,000 preference shares of `10/- each.

6. 1997 The Authorised Share capital of our Company was increased from ` 100,000,000 divided into 8,500,000 Equity shares of `10/- each and 1,500,000 preference shares of `10/- each to ` 200,000,000 divided into 15,000,000 Equity Shares of `10/- each and 5,000,000 redeemable preference shares of `10/- each

7. 1998 The Authorised Share capital of our Company was increased from ` 200,000,000 divided into 15,000,000 Equity Shares of `10/- each and 5,000,000 redeemable preference shares of `10/- each to ` 250,000,000 divided into 15,000,000 Equity shares of `10/- each and 1,000,000 Cumulative Redeemable Preference shares of `100/- each with redemption period of 5 years carrying dividends by the Board.

8. 2000 The Authorised Share capital of our Company was increased from ` 250,000,000 divided into 15,000,000 Equity shares of `10/- each and 1,000,000 Cumulative Redeemable Preference shares of `100/- each to ` 350,000,000 divided into 15,000,000 Equity shares of `10/- each and 2,000,000

50

Sr.

No.

FY Alteration

Cumulative Redeemable Preference shares of `100/- each with redemption period of 5 years carrying dividends by the Board.

9. 2001 The Authorised Share capital of our Company was increased from ` 350,000,000 divided into 15,000,000 Equity shares of `10/- each and 2,000,000 Cumulative Redeemable Preference shares of `100/- each to ` 450,000,000 divided into 15,000,000 Equity shares of `10/- each and 3,000,000 Cumulative Redeemable Preference shares of `100/- each with redemption period of 5 years carrying dividends by the Board.

10. 2002 The Authorised Share capital of our Company was increased from ` 4,50,000,000 divided into 15,000,000 Equity shares of `10/- each and 3,000,000 Cumulative Redeemable Preference shares of `100/- each to ` 550,000,000 divided into 25,000,000 Equity shares of `10/- each and 3,000,000 Cumulative Redeemable Preference shares of `100/- each with redemption period of 5 years carrying dividends by the Board.

11. 2003 The Authorised Share capital of our Company was increased from ` 550,000,000 divided into 25,000,000 Equity shares of `10/- each and 3,000,000 Cumulative Redeemable Preference shares of `100/- each to ` 850,000,000 divided into 45,000,000 Equity shares of `10/- each and 4,000,000 Cumulative Redeemable Preference shares of `100/- each with redemption period of 5 years carrying dividends by the Board.

12. 2008 The Authorised Share capital of our Company was increased from ` 850,000,000 divided into 45,000,000 Equity shares of `10/- each and 4,000,000 Cumulative Redeemable Preference shares of `100/- each to ` 1,000,000,000 divided into 60,000,000 Equity shares of `10/- each and 4,000,000 Cumulative Redeemable Preference shares of `100/-each.

Equity Share Capital History of our Company

Date of Allotment Number of shares

issued and allotted

Cumulative

Paid-up capital

in (`̀̀̀)

Nature of Issue Issue Price

(`̀̀̀)

Premiu

m (`̀̀̀)

March 27, 1986 20 2,000 Subscribers to the Memorandum 100/- Nil

April 7, 1986 4,980 500,000 Further Issue 100/- Nil

May 14, 1986 1,000 600,000 Further Issue 100/- Nil

May 30, 1986 4,000 1,000,000 Further Issue 100/- Nil

August 2, 1986 1,000 1,100,000 Further Issue 100/- Nil

September 6,1986 5,000 1,600,000 Further Issue 100/- Nil

November 29,1986 4,000 2,000,000 Further Issue 100/- Nil

March 7,1987 3,500 2,350,000 Further Issue 100/- Nil

April 14,1987 3,500 2,700,000 Further Issue 100/- Nil

November 21, 1987 8,000 3,500,000 Further Issue 100/- Nil

June 11, 1988 15,000 5,000,000 Further Issue 100/- Nil

October 29, 1988 10,000 6,000,000 Rights Issue 100/- Nil

December 30, 1988 150,000 7,500,000 Rights Issue 10/- Nil

March 27, 1989 240,000 9,900,000 Rights Issue 10/- Nil

January 22, 1991 990,000 19,800,000 Rights Issue 10/- Nil

June 10, 1993 1,980,000 39,600,000 Rights Issue 10/- Nil

June 14, 1994 40,000 40,000,000 Preferential Issue 10/- Nil

December 22, 1994 2,000,000 60,000,000 Public Issue 10/- 10/-

February 19, 1996 1,500,000 75,000,000 Bonus Issue Nil Nil

September 12, 2003 19,600,000 271,000,000 Preferential Issue 10/- 5.35/-

December 22, 2006 4,000,000 311,000,000 Preferential Issue 10/- 150/-

December 27, 2006 4,000,000 351,000,000 Preferential Issue 10/- 150/-

51

Date of Allotment Number of shares

issued and allotted

Cumulative

Paid-up capital

in (`̀̀̀)

Nature of Issue Issue Price

(`̀̀̀)

Premiu

m (`̀̀̀)

December 29, 2006 4,000,000 391,000,000 Preferential Issue 10/- 150/-

March 20, 2008 2,055,000 411,550,000 Preferential Issue (Conversion of Warrants)

10/- 150/-

May 14, 2008 1,837,500 429,925,000 Preferential Issue 10/- 390/-

May 16, 2008 1,412,500 444,050,000 Preferential Issue 10/- 390/-

June 27, 2008 1,445,000 458,500,000 Preferential Issue (Conversion of Warrants)

10/- 150/-

January 30, 2009 6,800 458,568,000 ESOP$ 10/- 25/-

May 29, 2009 7,050 458,638,500 ESOP$ 10/- 25/-

November 6, 2009 587,500 464,513,500 Preferential Issue

(Conversion of Warrants) 10/- 390/-

November 9, 2009 662,500 471,138,500 Preferential Issue (Conversion of Warrants)

10/- 390/-

November 11,2009 2,000,000 491,138,500 Preferential Issue

(Conversion of Warrants) 10/- 390/-

January 6, 2010 10,100 491,239,500 ESOP$ 10/- 25/-

March 30, 2010 30,750 491,547,000 ESOP$ 10/- 25/-

May 31, 2010 27,184 491,818,840 ESOP$ 10/- 25/-

June 30, 2010 20,572 492,024,560 ESOP$ 10/- 25/-

August 13, 2010 83,126 492,855,820 ESOP$ 10/- 25/-

September 17, 2010 39,957 493,255,390 ESOP$ 10/- 25/-

October 19,2010 34,050 493,595,890 ESOP$ 10/- 25/-

November 8,2010 33,150 493,927,390 ESOP$ 10/- 25/-

December 04, 2010 20,350 494,130,890 ESOP$ 10/- 25/-

December 31,2010 49,150 494,622,390 ESOP$ 10/- 25/-

January 31, 2011 48,200 495,104,390 ESOP$ 10/- 25/-

March 2, 2011 14,810 495,252,490 ESOP$ 10/- 25/-

March 31, 2011 11,628 495,368,770 ESOP$ 10/- 25/-

April 30, 2011 1,48,400 496,852,770 ESOP$ 10/- 25/-

June 7, 2011 43,550 497,288,270 ESOP$ 10/- 25/-

June 29, 2011 4,552 497,333,790 ESOP$ 10/- 25/-

Total 49,733,379 497,333,790

$ Equity shares allotted to the employees of our Company as fully paid up under the Company’s ESOP 2006 on exercise of vested options.

Notes:

1. On March 20, 2008, the Company issued and allotted 2,055,000 Equity Shares of ` 10/- each at a premium of ` 150/- per Equity share on conversion of warrants to Shriram Enterprise Holdings Private Limited

2. On June 27, 2008, the Company issued and allotted 1,445,000 Equity Shares of ` 10/- each at a premium of ` 150/- per Equity share on conversion of warrants to Shriram Enterprise Holdings Private Limited.

3. On November 6, 2009, the Company issued and allotted 587,500 Equity Shares of ` 10/- each at a premium of `

390/- per Equity share on conversion of warrants to Asiabridge fund I LLC

4. On November 9, 2009 the Company issued and allotted 662,500 Equity Shares of ` 10/- each at a premium of ` 390/- per Equity share on conversion of warrants to Van Gogh Limited.

52

5. On November 11, 2009, the Company issued and allotted 2,000,000 Equity Shares of ` 10/- each at a premium of ` 390/- per Equity share on conversion of warrants, to Bessemer Venture Partners Trust (1,250,000) and IDBI Trusteeship Services Limited (India Advantage Fund VI)(750,000) .

Share holding pattern of our Company as on June 30, 2011:

Total shareholding as

a % of total number

of Equity Shares

Shares pledged or

otherwise

encumbered

Sr.

No

Category of

Shareholder

Number

of

shareholders

Total

number

of Equity

Shares

Number of

shares held in

dematerialized

form % of

shares

(A+B)

% of

shares

(A+B+C)

Number of

shares

As a %

(A) Shareholding of

Promoters and

Promoter Group

(A)

(1) Indian (1)

(a) Individuals/Hindu Undivided Family

0 0 0 0 0 0.00 0.00

(b) Central Government/State Government(s)

0 0 0 0 0 0.00 0.00

(c) Bodies Corporate 2 26,477,663 26,477,663 53.24 53.24 0.00 0.00

(d) Financial Institutions/Banks

0 0 0 0 0 0.00 0.00

(e) Any Other 0 0 0 0 0 0.00 0.00

Sub Total A (1) 2 26,477,663 26,477,663 53.24 53.24 0.00 0.00 (2) Foreign

(a) Individuals (Non-Resident Individuals/Foreign Individuals)

0 0 0 0 0 0.00 0.00

(b) Bodies Corporate 0 0 0 0 0 0.00 0.00

(c) Institutions/FII 0 0 0 0 0 0.00 0.00

(d) Any Other 0 0 0 0 0

Sub Total A (2) 0 0 0 0.00 0.00 0.00 0.00 Total Shareholding

of Promoters and

Promoter Group

(A)= (A)(1)+(A)(2)

2 26,477,663 26,477,663 53.24 53.24 0.00 0.00

(B) Public shareholding

(1) Institutions

(a) Mutual Funds/ UTI 5 21,891 21,616 0.04 0.04 0.00 0.00

(b) Financial Institutions / Banks

2 100,125 100,125 0.20 0.20 0.00 0.00

(c) Central Government/State Government(s)

0 0 0 0 0 0.00 0.00

(d) Venture Capital Fund

0 0 0 0 0 0.00 0.00

(e) Insurance Companies

0 0 0 0 0 0.00 0.00

(f) Foreign Institutional Investors

12 7,492,395 7,492,395 15.07 15.07 0.00 0.00

(g) Foreign Venture Capital Investor

0 0 0 0 0 0.00 0.00

(h) Any other 0 0 0 0 0 0.00 0.00

Sub-Total (B)(1) 19 7,614,411 7,614,136 15.31 15.31 0.00 0.00

(2) Non-institutions

53

Total shareholding as

a % of total number

of Equity Shares

Shares pledged or

otherwise

encumbered

Sr.

No

Category of

Shareholder

Number

of

shareholders

Total

number

of Equity

Shares

Number of

shares held in

dematerialized

form % of

shares

(A+B)

% of

shares

(A+B+C)

Number of

shares

As a %

(a) Bodies Corporate 108 141,679 135,429 0.28 0.28 0.00 0.00

(b) Individuals 0 0 0 0 0 0.00 0.00

(i) Individual shareholders holding nominal share capital up to ` 1 Lakh

4,926 1,284,898 906,748 2.58 2.58 0.00 0.00

(ii) Individual shareholders holding nominal share capital in excess of ` 1 Lakh

12 173,859 173,859 0.35 0.35 0.00 0.00

(c) Any other

Non Resident Indians

21 21,353 21,353 0.04 0.04 N.A N.A

Trust 2 3,700,124 3,700,124 7.44 7.44 N.A N.A

Clearing Members 24 19,392 19,392 0.04 0.04 N.A N.A

Overseas Corporate Bodies

3 10,300,000 10,300,000 20.71 20.71 N.A N.A

Sub-Total (B) (2) 5,096 15,641,305 15,256,905 31.45 31.45 N.A N.A

Total Public

Shareholding (B) =

(B)(1)+(B)(2)

5,115 23,255,716 22,871,041 46.76 46.76 N.A N.A

TOTAL (A) + (B) 5,117 49,733,379 49,348,704 100 100 0.00 0.00

(C) Shares held by

custodians and

against which

Depository receipts

have been issued

C1 Promoter and Promoter Group

0 0 0 0 0 0.00 0.00

C2 Public 0 0 0 0 0 0.00 0.00

Total C=C1+C2 0 0 0 0 0 0.00 0.00

GRAND TOTAL

(A)+(B)+(C) 5,117 49,733,379 49,348,704 100 100 0.00 0.00

List of top ten holders of Equity Shares of our Company as on June 30, 2011:

Sr. No Name of

shareholders Address Total Number of Equity Shares held

Percentage

Holding

(%)

1. Shriram Enterprise Holdings Private Limited

Mookambika Complex, No.4, Lady Desika Road, Mylapore, Chennai -600 004.

17,921,462 36.04

2. Shriram Retail Holdings Private Limited

Mookambika Complex, No.4, Lady Desika Road, Mylapore, Chennai -600 004.

8,556,201 17.20

3. Van Gogh Limited

HDFC Bank Limited, Custody Services, Lodha- I Think Techno Campus Office Floor-

6,625,000 13.32

54

Sr. No Name of

shareholders Address Total Number of Equity Shares held

Percentage

Holding

(%)

8, Next to Kanjurmarg railway station, Kanjurmarg (East) Mumbai- 400 042

4. Norwest Ventures Partners X FII Mauritius

C/o Standard Chartered Bank, Securities Services, 23-25 M.G. Road, Fort Mumbai- 400 001

4,342,179 8.73

5. IDBI Trusteeship Services Limited

ICICI Bank Limited, 1st Floor SMS Department 414 Empire House S B Marg Lower Parel, Mumbai- 400 013

3,700,054 7.44

6. Bessemer Venture Partners Trust

Deutsche Bank AG, DB House, Hazrimal Somani Marg, Post Box No. 1142, Fort Mumbai - 400 001

2,500,000 5.03

7. Acacia Partners LP

Citibank N.A. Custody Services, 3rd Floor, Trent House, G Block, Plot No. 60, Bandra Kurla Complex, Bandra (East) Mumbai-400 051

1,555,728 3.13

8. Asiabridge Fund I LLC

Citibank N.A. Custody Services, 3rd Floor, Trent House, G Block, Plot No. 60, BKC Bandra (East) Mumbai-400 051

1,175,000 2.36

9. Acacia Institutional Partners LP

Citibank N.A. Custody Services, 3rd Floor, Trent House, G Block, Plot No. 60, BKC Bandra (East) Mumbai-400 051

543,000 1.09

10. Morgan Stanley Mauritius Company Limited

HSBC Securities Services Limited, 2nd Floor “SHIV” Plot no 139-140 B Western Express Highway, Sahar Road Junction Vile Parle (East), Mumbai- 400 057

431,092 0.87

List of top ten holders of debt instruments, as on July 18, 2011:

1. List of top ten holders of Secured Redeemable Non Convertibles Debentures (issued on private placement

basis) of face value `̀̀̀ 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07067):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Corporation Bank 500 500.00

2. Allahabad Bank 400 400.00

3. Central Bank of India 200 200.00

4. Trustees Central Bank of India Employees 200 200.00

55

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

Pension Fund

5. Trustees Central Bank of India Employees Pension Fund

100 100.00

2. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07075):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Corporation Bank 500 500.00

2. Allahabad Bank 400 400.00

3. Central Bank of India 200 200.00

4. Trustees Central Bank of India Employees Pension Fund

200 200.00

5. Trustees Central Bank of India Employees Pension Fund

100 100

3. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07083):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Corporation Bank 750 750.00

2. Allahabad Bank 600 600.00

3. Central Bank of India 300 300.00

4. Trustees Central Bank of India Employees Pension Fund

300 300.00

5. Trustees Central Bank of India Employees Pension Fund

150 150.00

4. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07091):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Corporation Bank 750 750.00

2. Allahabad Bank 600 600.00

3. Central Bank of India 300 300.00

4. Trustees Central Bank of India Employees Pension Fund

300 300

5. Trustees Central Bank of India Employees Pension Fund

150 150

5. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07109):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Central Bank of India 400 400.00

2. Bank of Baroda 200 200.00

56

6. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07117):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Central Bank of India 400 400.00

2. Bank of Baroda 200 200.00

7. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07125):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Central Bank of India 600 600.00

2. Bank of Baroda 300 300.00

8. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07133):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Central Bank of India 600 600.00

2. Bank of Baroda 300 300.00

9. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07141):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Standard Chartered Bank (Mauritius) Limited-Debt

1,750 17,500.00

10. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07158):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Reliance Capital Trustee Company Limited A/c Reliance Dual Advantage Fixed tenure Fund Plan A

220 2,200.00

2. Reliance Capital Trustee Company Limited A/c Reliance Fixed Horizon Fund XIX Series 20

210 2100.00

3. Reliance Capital Trustee Company Limited A/c Reliance Fixed Horizon Fund XIX Series 19

160 1,600.00

4. Reliance Capital Trustee Company Limited A/c Reliance Fixed Horizon Fund XIX Series 13

85 850.00

5. Reliance Capital Trustee Company Limited A/c Reliance Monthly Income Plan

75 750.00

57

11. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07166):

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. United India Insurance Company Limited Employees Provident Fund

100 1,000.00

2. Board of Trustees for Bokaro Steel Employees Provident Fund

70 700.00

3. ING Vysya Bank Limited 30 300.00

12. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07174)

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Bank of Maharashtra 190 1,900.00

2. Board of Trustees for Bokaro Steel Employees Provident Fund

20 200.00

3. The Jalgaon People’s Co operative Bank Limited

20 200.00

4. The Thane District Central Co operative Bank Staff Provident Fund

8 80.00

5. Iris Mercantile Private Limited 5 50.00

6. Dhwani Mercantile Private Limited 3 30.00

7. Shrikrishna Baburao Malpekar 2 20

8. Jacobs H and G private Limited Employees Provident Fund

1 10.00

9. Ushma Niren Nagri 1 10.00

13. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07182)

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Jharkhand Gramin Bank 50 500.00

14. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement

basis) of face value `̀̀̀ 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07190)

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (FMO)

2,500 25,000.00

2. Deutsche Bank AG 250 2,500.00

58

15. List of top ten holders of Commercial Paper of face value `̀̀̀ 500,000/- as on July 18, 2011 (ISIN

:INE722A14089)

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. ICICI Prudential Life Insurance Company Limited

1,000 5000.00

2. UTI-Treasury Advantage Fund 500 2,500.00

3. UTI-FMP-Yearly Series August 10 400 2,000.00

4. UTI FIIF Annual Interval Plan II 200 1,000.00

16. List of top ten holders of Commercial Paper of face value `̀̀̀ 500,000/- as on July 18, 2011 (ISIN

:INE722A14097)

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. TATA Trustee Company Limited A/c TATA Mutual Fund A/c TATA Fixed Maturity Plan- Scheme 27 Scheme A

1500 7,500

17. List of top ten holders of Commercial Paper of face value `̀̀̀ 500,000/- as on July 18, 2011 (ISIN

:INE722A14105)

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. UTI-FMP- Yearly Series September 2010 300 1,500.00

2. UTI-FIIF Annual Interval Plan S-III 200 1,000.00

3. Cholamandalam Ms General Insurance Company Limited

100 500.00

18. List of top ten holders of Commercial Paper of face value `̀̀̀ 500,000/- as on July 18, 2011 (ISIN

:INE722A14113)

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. TATA Trustee Company Limited A/c TATA Mutual Fund A/c TATA Fixed Maturity Plan Series 27 Scheme B

300 1,500.00

19. List of top ten holders of Commercial Paper of face value `̀̀̀ 500,000/- as on July 18, 2011 (ISIN

:INE722A14154)

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. Kotak Mahindra Trustee Company Limited A/c Kotak Floater Short Term Scheme

2,000 10,000.00

20. List of top ten holders of Commercial Paper of face value `̀̀̀ 500,000/- as on July 18, 2011 (ISIN

:INE722A14147)

Sr. No. Name of holder Number of

instruments

Aggregate Amount (`̀̀̀. in

lakhs)

1. UTI Liquid Cash Plan 1,000 5,000.00

59

Employee Stock Option Schemes

Pursuant to a special resolution dated October 30, 2006 passed by the shareholders of our Company, our Company has formulated an employee stock option scheme in 2006, namely, “SCUF Employee Stock Option Scheme 2006”, (“ESOP 2006”). As on the date of this Prospectus, our Company had issued 1,355,000 stock options under the ESOP 2006, of which nil stock options have lapsed, 602,000 stock options are unvested, 119,621 stock options are vested and unexercised and 633,379 stock options have been vested and exercised for Equity Shares. Under the ESOP 2006 the exercise price for stock options is ` 35 per Equity Share to be issued upon the exercise of such stock options.

Pursuant to a special resolution dated May 3, 2008 passed by the shareholders of our Company, our Company has formulated an employee stock option scheme in 2008, namely, “SCUF Employee Stock Option Scheme 2008”, (“ESOP 2008”). As on the date of this Prospectus, our Company has not granted any stock options under the ESOP 2008. Under the ESOP 2008 the exercise price for stock options is ` 112 per Equity Share to be issued upon the exercise of such stock options.

Debt - Equity ratio:

The debt-equity ratio prior to this Issue is based on a total outstanding consolidated debt of ` 732,778.44 lakhs and consolidated shareholder funds amounting to ` 121,207.28 lakhs as on March 31, 2011. The debt equity ratio post the Issue, (assuming subscription of NCDs aggregating to ` 75,000 lakhs would be 6.66 times, is based on a total outstanding debt of ` 807,778.44 lakhs and shareholders fund of ` 121,207.28 lakhs as on March 31, 2011.

(` in lakhs)

Particulars# Prior to the Issue Post Issue*

Secured loans as on March 31, 2011 656,951.01

731,951.01

Unsecured loans as on March 31, 2011

75,827.43

75,827.43

Total Debt 732,778.44 807,778.44

Share capital as on March 31, 2011 4,953.69

4,953.69

Stock Option outstanding as on March 31, 2011

1,887.27

1,887.27

Reserves as on March 31, 2011 114,366.32

114,366.32

Total Shareholders Fund 121,207.28

121,207.28

Debt Equity Ratio (Number of

times) 6.05 6.66

# On a consolidated basis.

* The debt-equity ratio post the Issue is indicative and is on account of assumed inflow of ` 75,000 lakhs from the

Issue as on March 31, 2011 and does not include contingent and off-balance sheet liabilities. The actual debt-equity

ratio post the Issue would depend upon the actual position of debt and equity on the date of allotment.

For details on the total outstanding debt of our Company, please refer to the section titled “Disclosures on Existing

Financial Indebtedness” beginning on page 131 of this Prospectus.

60

OBJECTS OF THE ISSUE

The funds raised through this Issue, after meeting the expenditures of and related to the Issue, will be used for our various financing activities including lending and investments, subject to applicable statutory and/or regulatory requirements, to repay our existing loans and our business operations including for our capital expenditure and working capital requirements. The Main Objects clause of the Memorandum of Association of our Company permits our Company to undertake the activities for which the funds are being raised through the present Issue and also the activities which our Company has been carrying on till date. Further, in accordance with the Debt Regulations, our Company will not utilize the proceeds of the Issue for providing loans to or acquisitions of shares of any person who is a part of the same group as our Company or who is under the same management as our Company. The Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other acquisition, inter alia by way of a lease of any property. Further, the Company undertakes that Issue proceeds from NCDs allotted to banks shall not be used for any purpose which may be in contravention of the RBI guidelines on bank financing to NBFCs.

Interim Use of Proceeds The management of our Company, in accordance with the policies formulated by it from time to time, will have flexibility in deploying the proceeds received from the Issue. Pending utilization of the proceeds out of the Issue for the purposes described above, our Company intends to temporarily invest funds in high quality interest bearing liquid instruments including money market mutual funds, deposits with banks or temporarily deploy the funds in investment grade interest bearing securities as may be approved by the Board. Such investment would be in accordance with the investment policies approved by the Board or any committee thereof from time to time. Monitoring of Utilization of Funds There is no requirement for appointment of a monitoring agency in terms of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008. Our Board shall monitor the utilization of the proceeds of the Issue. For the relevant Financial Years commencing from FY 2012, our Company will disclose in our financial statements, the utilization of the net proceeds of the Issue under a separate head along with details, if any, in relation to all such proceeds of the Issue that have not been utilized thereby also indicating investments, if any, of such unutilized proceeds of the Issue. We shall utilize the proceeds of the Issue only upon the execution of the documents for creation of security as stated in this Prospectus in the section entitled “Terms of the Issue - Security” on page 154 and upon the listing of the NCDs.

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STATEMENT OF TAX BENEFITS

Under the current tax laws, the following tax benefits interalia, will be available to the Debenture Holders as mentioned below. The tax benefits are given as per the prevailing tax laws and may vary from time to time in accordance with amendments to the law or enactments thereto. The Debenture Holder is advised to consider in his own case the tax implications in respect of subscription to the Debentures after consulting his tax advisor as alternate views are possible. We are not liable to the Debenture Holder in any manner for placing reliance upon the contents of this statement of tax benefits. To our Debenture Holder

A. INCOME-TAX

I To the Resident Debenture Holder 1. Interest on NCD received by Debenture Holders would be subject to tax at the normal rates of tax in accordance with and subject to the provisions of the I.T. Act. No income tax is deductible at source as per the provisions of section 193 of the Income Tax Act (IT Act) on interest on debentures in respect of the following: (a) In case the payment of interest on debentures to resident individual Debenture Holder in the aggregate during the financial year does not exceed ` 2,500 provided the debentures are listed on a recognized stock exchange in India and the interest is paid by an account payee cheque. (b) When the Assessing Officer issues a certificate on an application by a Debenture Holder on satisfaction that the total income of the Debenture holder justifies no/lower deduction of tax at source as per the provisions of Section 197(1) of the I.T. Act; and that certificate is filed with our Company BEFORE THE PRESCRIBED DATE OF

CLOSURE OF BOOKS FOR PAYMENT OF DEBENTURE INTEREST. (c) When the resident Debenture Holder with PAN (not being a company or a firm or a senior citizen) submits a declaration in the prescribed Form 15G verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil as per the provisions of section 197A (1A) of the I.T. Act. HOWEVER under section 197A (1B) of the I.T. Act, Form 15G cannot be submitted nor considered for exemption from deduction from tax at source if the aggregate of income of the nature referred to in the said section, viz. dividend, interest, etc as prescribed therein, credited or paid or likely to be credited or paid during the Previous year in which such income is to be included exceeds the maximum amount which is not chargeable to tax, as may be prescribed in each year’s Finance Act. To illustrate, as on

April 1, 2011, the maximum amount of income not chargeable to tax in case of individuals (other than women assesses, senior citizens and super senior citizens) and HUFs is ` 180,000; in the case of every individual being a woman resident in India and below the age of 60 years at any time during the previous year is ` 190,000; in the case of every individual being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year (Senior Citizen) is ` 250,000; and in the case of every individual being a resident in India, who is of the age of 80 years or more at any time during the previous year (Super Senior Citizen) is ` 500,000 for Previous Year 2011-12. Senior citizens, who are 60 or more years of age at any time during the financial year, enjoy the special privilege to submit a self-declaration in the prescribed Form 15H for non deduction of tax at source in accordance with the provisions of section 197A (1C) of the I.T. Act even if the aggregate income credited or paid or likely to be credited or paid exceeds the maximum amount not chargeable to tax i.e. ` 250,000 for FY 2011-12 provided that the tax due on total income of the person is NIL. In all other situations, tax would be deducted at source as per prevailing provisions of the I.T. Act; Form No.15G WITH PAN / 15H WITH PAN / Certificate

issued u/s 197(1) has to be filed with our Company before the prescribed date of closure of books for payment

of debenture interest.

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(d) On any security issued by a company in a dematerialized form and is listed on recognized stock exchange in India. (w.e.f. 01.06.2008). 2. Under section 2(29A) of the I.T. Act, read with section 2(42A) of the I.T. Act, a listed debenture is treated as a long term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer. Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being listed securities are subject to tax at the rate of 10% of capital gains calculated without indexation of the cost of acquisition. The capital gains will be computed by deducting cost of acquisition of the debenture and expenditure

incurred in connection with such transfer from the full value of sale consideration.

In case of an individual or HUF, being a resident, where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate mentioned above. 3. Short-term capital gains on the transfer of listed debentures, where debentures are held for a period of not more than 12 months would be taxed at the normal rates of tax in accordance with and subject to the provisions of the I.T. Act. The provisions relating to maximum amount not chargeable to tax, surcharge and education cess described at para 2 above would also apply to such short term capital gains. 4. In case the debentures are held as stock in trade, the income on transfer of debentures would be taxed as business income or loss in accordance with and subject to the provisions of the I.T. Act. 5. HOWEVER IN CASE WHERE TAX HAS TO BE DEDUCTED @ SOURCE WHILE PAYING

DEBENTURE INTEREST, THE COMPANY IS NOT REQUIRED TO DEDUCT SURCHARGE,

EDUCATION CESS : AND SECONDARY AND HIGHER EDUCATION CESS. II To the Non Resident Indians 1. A non resident Indian has an option to be governed by Chapter XII-A of the I.T. Act, subject to the provisions contained therein which are given in brief as under: a) Under section 115E of the I.T. Act, interest income from debentures acquired or purchased with or subscribed to in convertible foreign exchange will be taxable at 20%, whereas, long term capital gains on transfer of such Debentures will be taxable at 10% of such capital gains without indexation of cost of acquisition. Short-term capital gains will be taxable at the normal rates of tax in accordance with and subject to the provisions contained therein. b) Under section 115F of the I.T. Act, subject to the conditions and to the extent specified therein, long term capital gains arising to a non-resident Indian from transfer of debentures acquired or purchased with or subscribed to in convertible foreign exchange will be exempt from capital gain tax if the net consideration is invested within six months after the date of transfer of the debentures in any specified asset or in any saving certificates referred to in clause (4B) of section 10 of the I.T. Act in accordance with and subject to the provisions contained therein. c) Under section 115G of the I.T. Act, it shall not be necessary for a non-resident Indian to file a return of income under section 139(1) of the I.T. Act, if his total income consists only of investment income as defined under section 115C and/or long term capital gains earned on transfer of such investment acquired out of convertible foreign exchange, and the tax has been deducted at source from such income under the provisions of Chapter XVII-B of the I.T. Act in accordance with and subject to the provisions contained therein. d) Under section 115H of the I.T. Act, where a non-resident Indian becomes a resident in India in any subsequent year, he may furnish to the Assessing Officer a declaration in writing along with return of income under section 139 for the assessment year for which he is assessable, to the effect that the provisions of Chapter XII-A shall continue to apply to him in relation to the investment income (other than on shares in an Indian Company) derived from any foreign exchange assets in accordance with and subject to the provisions contained therein. On doing so, the

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provisions of Chapter XII-A shall continue to apply to him in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets. 2. In accordance with and subject to the provisions of section 115I of the I.T. Act, Non-Resident Indian may opt not to be governed by the provisions of Chapter XII-A of the I.T. Act. In that case, please refer to para A (2, 3 and 4) for the tax implications arising on transfer of debentures. 3. Under Section 195 of the I.T. Act, the company is required to deduct tax at source at the rate of 20% on investment income and at the rate of 10% on any long-term capital gains as prescribed in section 115E; at the normal rates for Short Term Capital Gains if the payee Debenture Holder is a Non Resident Indian. 2% education cess and 1% secondary and higher education cess on the total income tax is also deductible. 4. As per section 90(2) of the I.T. Act read with the circular no. 728 dated October 30, 1995 issued by the CBDT, in the case of a remittance to a country with which a Double Tax Avoidance Agreement (DTAA) is in force, the tax should be deducted at the rate provided in the Finance Act of the relevant year or at the rate provided in the DTAA, whichever is more beneficial to the assessee. 5. Alternatively, to ensure non deduction or lower deduction of tax at source, as the case may be, the Debenture Holder should furnish a certificate under section 197(1) of the I.T. Act, from the Assessing Officer before the prescribed date of closure of books for payment of debenture interest. III To the Foreign Institutional Investors (FIIs): In accordance with and subject to the provisions of section 115AD of the I.T. Act on transfer of debentures by FIIs, long term capital gains are taxable at 10% (plus applicable surcharge and education and secondary and higher education cess) and short-term capital gains are taxable at 30% (plus applicable surcharge and education and secondary and higher education cess). The cost indexation benefit will not be available. Further, benefit of provisions of the first proviso of section 48 of the I.T. Act will not apply. Income other than capital gains arising out of debentures is taxable at 20% in accordance with and subject to the provisions contained therein. In addition to the aforesaid tax, in case of foreign corporate FIIs where the income exceeds ` 1,00,00,000 a surcharge of 2% of such tax liability is also payable. A 2% education cess and 1% secondary and higher education cess on the total income tax (including surcharge) is payable by all categories of FIIs. In accordance with and subject to the provisions of section 196D(2) of the I.T. Act, no deduction of tax at source is applicable in respect of capital gains arising on the transfer of debentures by FIIs. The provisions at para II (4 and 5) above would also apply to FIIs. IV. To the Other Eligible Institutions: All mutual funds registered under Securities and Exchange Board of India or set up by public sector banks or public financial institutions or authorised by the Reserve Bank of India are exempt from tax on all their income, including income from investment in Debentures under the provisions of Section 10(23D) of the I.T. Act subject to and in accordance with the provisions contained therein.

B. WEALTH TAX Wealth-tax is not levied on investment in debentures under section 2(ea) of the Wealth-tax Act, 1957.

C. GIFT TAX

Gift-tax is not levied on gift of debentures in the hands of the donor as well as the donee because the provisions of the Gift-tax Act, 1958 have ceased to apply in respect of gifts made on or after October 1, 1998. HOWEVER, IF

ANY INDIVIDUAL OR HUF, RECEIVES THESE DEBENTURES OF THE AGGREGATE VALUE OVER

`̀̀̀ 50,000 FROM ANY PERSON OR PERSONS WITHOUT CONSIDERATION OR RECEIVES THESE

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DEBENTURES FOR A CONSIDERATION WHICH IS LESS THAN AGGREGATE FAIR MARKET

VALUE OF THE DEBENTURES BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPEES, THERE

WILL BE LIABILITY TO INCOME TAX TO THE EXTENT PROVIDED IN SEC.56(2)(VII) OF THE

INCOME TAX ACT 1961 TO SUCH RECEIVER. HOWEVER, THE DEBENTURES RECEIVED AS

GIFTS FROM ANY RELATIVE AS DEFINED IN SEC.56(2)(VII) OF THE INCOME TAX ACT WILL

NOT ATTRACT INCOME TAX LIABILITY IN THE HANDS OF THE RECEIVER.

D. REQUIREMENT TO FURNISH PERMANENT ACCOUNT NUMBER UNDER I.T. ACT

1. Sec.139A(5A):

Subsection (5A) of Sec.139A lays down that every person whose income tax has been deducted at source under chapter XVII B of the Income Tax Act shall furnish his Permanent Account Number to the person responsible for deduction of tax at source.

2. Sec.206AA:

(1) Notwithstanding anything contained in any other provisions of I.T. Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereinafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereinafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:—

(i) at the rate specified in the relevant provision of this Act; or

(ii) at the rate or rates in force; or

(iii) at the rate of twenty per cent.

(2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A shall be valid unless the person furnishes his Permanent Account Number in such declaration.

(3) In case any declaration becomes invalid under sub-section (2), the deductor shall deduct the tax at source in accordance with the provisions of sub-section (1).

(4) Where the Permanent Account Number provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the provisions of sub-section (1) shall apply accordingly.

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SECTION IV : ABOUT THE ISSUER COMPANY AND THE INDUSTRY

INDUSTRY

The information in this section is derived from various government publications and other industry sources. Neither

we, nor any other person connected with the issue has verified this information. Industry sources and publications

generally state that the information contained therein has been obtained from sources generally believed to be

reliable, but their accuracy, completeness and underlying assumptions are not guaranteed and their reliability

cannot be assured and accordingly, investment decisions should not be based on such information.

In connection with the report by CRISIL Research titled "CRISIL - Retail Finance - Auto – May 2010", CRISIL

Limited has used due care and caution in preparing the aforementioned report. Information has been obtained by

CRISIL from sources it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or

completeness of any information and is not responsible for any errors or omissions or for the results obtained from

the use of such information. No part of the aforementioned report may be published / reproduced in any form

without CRISIL’s prior written approval. CRISIL is not liable for any investment decisions which may be based on

the views expressed in the aforementioned report. CRISIL Research operates independently of, and does not have

access to information obtained by CRISIL’s Rating Division, which may, in its regular operations, obtain

information of a confidential nature that is not available to CRISIL Research.

Frost & Sullivan India Private Limited has used due care and caution in preparing the report titled “Analysis of

MSME Loan Markets for NBFCs – July 2011”. Information has been obtained from sources that Frost & Sullivan

India Private Limited considers reliable. However, Frost & Sullivan India Private Limited does not guarantee the

accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the

results obtained from the use of such information. No part of the said report may be published / reproduced in any

form without Frost & Sullivan India Private Limited’s prior written approval. Frost & Sullivan India Private

Limited is not liable for investment decisions which may be based on the views expressed in the said report.

Indian Economy India is the world’s largest democracy by the population size with an estimated population of approximately 11,900 Lakhs (July 2011 estimate). It is also one of the fastest growing economies in the world with the real growth rate of GDP being 8.5% (Source: Press Information Bureau, Government of India, Press Note dated May 31, 2011). The International Monetary Fund has projected India’s year on year growth at 8.2% for 2011(Source: World Economic

Outlook Projections – International Monetary Fund – June 2011).

Structure of India’s Financial Services Industry

The RBI is the central regulatory and supervisory authority for the Indian financial system. SEBI and the IRDA regulate the capital markets and insurance sector, respectively. A variety of financial intermediaries in the public and private sectors participate in India’s financial sector, including the following:

• Commercial banks;

• NBFCs ;

• Specialized financial institutions like the National Bank for Agriculture and Rural Development (NABARD), Export-Import Bank of India (EXIM Bank), the Small Industries Development Bank of India (SIDBI) and the Tourism Finance Corporation of India (TFCI);

• Securities brokers;

• Investment banks;

• Insurance companies;

• Mutual funds; and

• Venture capital funds.

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Non-Banking Finance Companies (NBFCs)

Non-Banking Finance Companies (NBFCs) are an integral part of the country’s financial system, catering to a large market of niche customers and have emerged as one of the major purveyors of retail and SME credit in India. It is a heterogeneous group of institutions (other than commercial and co-operative banks) performing financial intermediation in a variety of ways such as accepting deposits, making loans and advances, providing leasing/hire purchase services, among others. There are over 12,000 NBFCs in India, (Source: Reserve Bank of India, Annual Report, August 2009) mostly in the private sector. The RBI defines an NBFC as a company registered under the Companies Act, 1956 and engaged in the business of loans and advances, acquisition of shares, stock, bonds, debentures, and securities issued by the GoI or local government authorities, or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business. However, this excludes institutions whose principal business is in the agricultural or industrial sector, or in the sale, purchase and construction of immovable property. A non-banking entity that has as its principal line of business the receipt of deposits, under any scheme or arrangement, or the extension of loans, in any manner, is also considered an NBFC. Gradually, NBFCs have become recognized as complementary to the banking sector due to their customer-oriented services, simplified procedures, attractive rates of return on deposits, flexibility and timeliness in meeting the credit needs of specified sectors, among other reasons. NBFCs have traditionally extended credit across the country through their widespread geographical presence, with NBFCs supplying credit in segments such as equipment leasing, hire purchase, and consumer finance. These are areas which warrant infusion of financing due to the existing demand-supply gap. NBFCs have provided a more flexible source of financing and have been able to disburse funds to a gamut of clientele, from local individual customers to a variety of corporate clientele. NBFCs can be divided into deposit taking NBFCs, i.e., those which accept deposits from the public and non-deposit taking NBFCs, i.e., those which do not accept deposits from the public. The activities carried out by NBFCs in India can be grouped as follows:

Even though NBFCs perform functions similar to those of banks, there are a few differences: (i) NBFCs cannot accept demand deposits; (ii) NBFCs are not a part of the payment and settlement system and as such cannot allow their customers to

operate accounts through the issuance of cheques; and (iii) Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available for

NBFC depositors.

NBFC

Fund Based Activities

• Equipment Leasing

• Hire Purchase

• Bill Discounting

• Loans / Investments

• Venture Capital

• Factoring

• Equity Participation

• Short Term Loans

• Inter Corporate Loans

Fee based Activities

• Investment Banking

• Portfolio Management

• Wealth Management

• Corporate Consulting

• Project Consulting

• Loan / Lease Syndication

• Advisory Services

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Initially, the NBFCs registered with the RBI could only operate as equipment leasing companies, hire purchase companies, loan companies and investment companies. However, effective December 6, 2006, NBFCs registered with the RBI have been reclassified as (i) asset finance companies (“AFCs”); (ii) investment companies (“IC”); and (iii) loan companies (“LC”). Further, RBI through a notification dated February 12, 2010, introduced a fourth category of NBFCs namely, Infrastructure Finance Company (“IFC”), which are predominantly engaged in the business of infrastructure financing. Efforts have been made to integrate NBFCs into the mainstream financial sector by strengthening the prudential guidelines relating to income recognition, asset classification and provisioning. A number of measures to enhance the regulatory and supervisory standards of NBFCs in order to put them on par with commercial banks were undertaken by the RBI over a period of time including the alignment of interest rates, allowing diversification of businesses e.g. issuance of co-branded cards and distribution of mutual fund and insurance products, regulation of systemically important NBFCs and introduction of a fair practices code and corporate governance. Retail Finance – Automobiles

Automotive Industry Overview

In terms of global scale, the Indian automotive industry is the second largest two-wheeler market in the world, the fourth largest heavy commercial vehicle market in the world and the eleventh largest passenger vehicle market in the world. As one of the largest industrial sectors in India, it contributes nearly 17.0% to total indirect taxes. Although the automotive industry provides direct and indirect employment to over 130 lakh people, the penetration levels for vehicles in India are among the lowest in the world. [Source: Society of Indian Automobile Manufacturers (SIAM) ].

According to SIAM, the demand for automobiles in India is projected to grow by 12% -15% by 2011-2012 as compared to 2010-2011. The forecasts made by SIAM in this regard are as follows:

Automobile segments 2011-12 growth over 2010-11 (per cent)

Passenger cars 16-18%

Utility vehicles 12-14%

Light Commercial Vehicles (goods) 18-21%

Medium and Heavy Commercial Vehicles (goods) 10-12%

Commercial vehicles (buses) 8-10%

Motorcycles 11-13%

Scooters 15-17%

Three wheelers (Cargo) 4-6%

Three wheelers (passengers) 10-12%

Automobile Industry 12-15%

Source: SIAM – Demand Forecasts for Indian Automobile Industry2011-2012

According to the Automotive Mission Plan 2006-2016, prepared by the Ministry of Industries & Public Enterprises, Government of India, (“Automotive Mission Plan”), India is emerging as one of the world’s fastest growing passenger car markets and the second largest two wheeler manufacturer. The growth of the Indian middle class with increasing purchasing power along with robust growth in economy in recent years has attracted major global auto manufacturers to Indian market. The Indian automotive industry after de-licensing has grown approximately at a rate of 17%. Passenger vehicles segment grew at 14.00 % during April 2011 over same month last year. Passenger cars grew by 13.18 %, utility vehicles grew by 6.25 % and Vans grew by 37.39 % in April 2011 as compared to same month last year. The overall commercial vehicles segment registered growth of 8.22 % in April 2011 as compared to the same month last year. While medium and heavy commercial vehicles registered only a marginal growth rate of 0.70 %, light commercial vehicles grew at 14.43 %. Three wheelers sales recorded a growth rate of only 1.94 % in April

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2011. Two Wheelers registered a healthy growth of 26.44 % in April 2011. Mopeds, motorcycles and scooters grew by 15.68 %, 23.39 % and 48.06 % respectively in April 2011. [Source SIAM] In the month of April 2011 overall automobile exports registered a growth rate of 29.62 %. Passenger Vehicles registered growth at 12.66 % in the month. Commercial Vehicles, Three Wheelers and Two Wheelers segments recorded growth of 36.01 %, 36.95 % and 32.77 % respectively in April 2011. [Source SIAM] The domestic market share between passenger cars, commercial vehicles, two wheelers and three wheelers for 2010-2011 were as follows:

Segment wise Market Share in 2010–11

Three Wheelers

3.39%Commercial Vehicles

4.36%

Passenger Vehicles

16.25%

Tw o Wheelers

76.00%

Segment wise Market Share in 2010–11

Three Wheelers

3.39%Commercial Vehicles

4.36%

Passenger Vehicles

16.25%

Tw o Wheelers

76.00%

Source: SIAM

Two Wheeler Industry

The two-wheeler industry's domestic sales volumes are expected to grow by 20-22 % in 2010-11, driven by a strong rural demand, an improvement in the financing scenario and new model launches. Segment-wise change in demand for two-wheelers [Source: CRISIL – Retail Finance – Auto – May 2011]

1. Motorcycles: The motorcycles segment is the largest in the two-wheelers industry, accounting for almost

79 % of total domestic sales. The segment primarily targets the urban and rural male population in the age group of 16-45 years. Penetration of motorcycles has been higher in the urban markets compared to the rural markets due to easy availability of finance in the former and an increased focus on the establishment of dealers, service and distribution networks in these areas. On the flipside, the introduction of ultra low-cost cars and the declining cost of ownership would pose a threat to motorcycle demand over the long term. The entry of new players and the launch of new models in the ungeared scooter segment is also likely to affect the demand for motorcycles. Going forward, higher disposable incomes due to the restructuring of personal income tax slabs, loan waivers for farmers and pay commission hikes are likely to drive motorcycle demand.

2. Ungeared scooters: The target market for ungeared scooters in urban areas has mainly been the female

population in the age group of 18-30 years and to some extent, the male population in the age group of 16-45 years. In the long run, the growth potential for this segment would be higher due to the current lower penetration levels and a low base over the previous year. Convenient riding, increasing urban incomes, continuing urbanisation and an increase in the number of educated women and workforce population would drive demand for ungeared scooters. In many households, ungeared scooters are preferred as a second vehicle after cars, which is a major demand driver. Lower dependence on finance, which relatively insulates the segment from such issues, also aids demand.

3. Mopeds: The major target customers for this segment are low-income, self-employed professionals and

shopkeepers in urban areas. Although demand for mopeds has been rising, the prospects of any significant increase are capped due to increase in substitution by ungeared scooters, limited regional presence and lack of player interest.

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Overall Demand Drivers in the Two Wheeler Industry [Source: CRISIL – Retail Finance – Auto – May 2011]

1. Demographic trends: Going forward, growth in two-wheeler demand would come mainly from rising

population in the relevant age and income groups (which is defined as population in the age group of 16-45 years and income bracket of ` 0.1-0.5 million) and increasing use of personal transport. Growth in relevant population in urban areas is expected to have slowed down to about 5 % during 2005 to 2010, while it is expected to increase to 7.3 % in rural areas. Two-wheelers are estimated to have fairly penetrated the relevant population in both the rural and urban markets. However, growth in demand is mainly expected to come from rural markets.

2. Need for mobility and shift in preferred mode of transport: A growing population and rising economic

activity is expected to increase consumers' need for mobility. Other contributors to mobility are an increasing female workforce, especially in urban areas, and the rising trend of drifting away from agricultural employment in rural areas. Thus, there is likely to be a modal shift in demand for transport. Going ahead, the share of private modes of transport is expected to increase in comparison to public modes of transport. In rural markets, demand for transport arises from rudimentary means like walking, bicycles, animal-drawn vehicles and tractors. Going ahead, we expect dependence on walking and bicycles to shift in favour of two-wheelers and buses. Thus, increasing need for mobility and the substitution effect will drive rural demand for two-wheelers. Urban markets are likely to stagnate as here the shift is expected to be in favour of four-wheelers from two-wheelers and public modes.

3. Improving finance disbursement to support two-wheeler demand: Players have come out with schemes

such as Direct Cash Collection (DCC) systems where cash is collected every month on a door-to-door basis and loans are given to people who do not have access to formal payment options like a bank account. Such schemes along with the increasing risk appetite of two-wheeler players are expected to support sales in the industry.

Cars and Utility Vehicles Industry The domestic cars and utility vehicles (UV) industry grew by 33 % during the first half of 2010-11 primarily backed by higher disposable incomes, easy availability of finance and price-competitive model launches by players. The industry's domestic volumes are expected to grow by 23-25 % for 2010-11. In 2010-11, car and UV domestic sales volume increased by 28.7 per cent and 27.4 per cent, respectively. Sales volume increased on account of increased confidence among consumers with economic recovery and reduced uncertainty over income growth. In 2011- 12, car sales volume is forecasted to further grow by 15-17 per cent and UV sales volumes to grow by 9-10 per cent. The volume growth would mainly be driven by the small car segment, which has become the focal area for many original equipment manufacturers. [Source: CRISIL – Retail Finance – Auto – May 2011] Segment-wise assessment of demand drivers

The small car segment accounts for the largest proportion (about 78 %) of overall domestic car sales volumes. The mid-size segment, which accounts for about 20 % of domestic car sales, depends on upgradation demand and additional demand. An expected rise in corporate profitability, better financing environment and improved customer sentiment would drive growth in the industry. Domestic sales in higher segments (the executive, premium and luxury segments) are expected to grow at 19-21 % in 2010-11 owing to the availability of internationally-renowned brands and the perceived prestige attached to bigger cars and due to improved business confidence and better corporate profitability. International brands are likely to enhance their presence in India in these segments. [Source:

CRISIL – Retail Finance – Auto – May 2011] Domestic utility vehicle (UV) sales are likely to be driven by strong growth in the personal UV segment, on the back of new model launches and an increase in the addressable market, driven by the increase in per capita income. Higher-end sports utility vehicle sales will also grow aggressively, due to the launch of new models and the status ascribed to owning one. However, sales of commercial UVs are expected to grow at a moderate rate. [Source:

CRISIL – Retail Finance – Auto – May 2011]

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Overall demand drivers for the passenger cars industry [Source: CRISIL – Retail Finance – Auto – May 2011]

1. Increase in affordability: Growth in passenger car sales is mainly driven by greater affordability, which

enhances the aspiration levels of the consumers. The following factors determine affordability: 2. Growth in addressable market, led by increase in disposable income: Addressable households in India

trebled during 2003-04 to 2008-09, led by an increase in per capita income. During 2003-04 to 2007-08, there was a huge increase in the addressable market due to higher affordability, led by rise in per capita income. However, in 2008-09, the size of the addressable market rose on account of a decline in car prices, which was in turn the result of a reduction in excise duty on small cars from 16 % to 8 %.

Over the next 5 years, increase in per capita income and a reduction in entry-level prices of cars will be the major drivers for the increase in affordability. A fall in car prices due to a rise in competition in the small car segment, with the launch of ultra low-cost cars are likely to substantially increase the addressable market in 2009-10.

3. New launches: There is a significant increase in car sales after the launch of new models, as customers are tempted to prepone their decision to purchase the vehicle. With competition intensifying, the number of new launches has gone up, which will continue to drive demand. New launches at competitive prices across segments, which are less penetrated, would also woo customers for new purchases.

4. Increase in dealerships and easy access to finance: The widening of distribution networks by automakers

will push up car sales, as a large number of households will be added to the target population. Typically, these households have the potential to buy a car, but defer the decision due to lack of sales and service infrastructure. With most urban centres covered by dealership networks, car manufacturers are setting up new dealerships in smaller towns to increase penetration and sales in semi-urban and rural areas. Enhanced penetration of financing will also help the rise in passenger car sales across all segments. Most manufacturers are targeting rural and semi-urban areas to increase sales volumes due to the rise in disposable incomes in these areas. Along with increasing the number of dealerships, manufacturers are providing easy accessibility to finance in these markets to enable customers to purchase cars.

5. Reduction in excise duty: A cut in excise duty on cars, which if passed on by original equipment

manufacturers, increases affordability for buyers. In December 2008, excise duty on small cars (cars that are less than 4,000 mm long and have an engine capacity below 1,200 cc and 1,500 cc for petrol cars and diesel cars, respectively) was cut to 8 % from 12 %. For other cars and UVs, the duty was reduced to 20 % from 24 %. The decline in small-car prices led to increase in demand on account of the lower cost of ownership and growth in the addressable market.

6. Reduction in holding period increases demand for a second car: A decline in the average holding period

will also increase passenger car sales, mainly in the mainstream/ small car/ mid-size segments. The average holding period has shrunk to 3-4 years in 2008-09 from 5-6 years in 2000-01, implying frequent upgradations to advanced models from the same or higher segment. Also, the concept of a second car is on the rise in urban areas. With more than one working member in a family, the need for personal transportation is an impetus for purchasing more than one car.

Commercial Vehicles Industry

The commercial vehicle industry is segmented into “light commercial vehicles” (for vehicles with gross vehicle weight of less than 7.5 tons) and “medium and heavy commercial vehicles” (for vehicles weighing more than 7.5 tons). The performance of the medium and heavy commercial vehicle industry bears a high correlation with industrial growth and is driven by economic development, improved road infrastructure (such as the Golden Quadrilateral) for long haulage transportation and a favorable regulatory environment (in this regard, demand created in the years 2006-2007 was attributable to the strict enforcement of overloading restrictions and age norms). In turn, the performance of the light commercial vehicle industry tends to be less cyclical in nature and is driven by GDP growth and demand for last mile distribution. The market share of light commercial vehicles increased rapidly - the introduction of a sub-one ton carrier by certain players created a new segment typically occupied by three-

71

wheelers and similar forms of intra-city transport, resulting in significant growth in the commercial vehicle market as a whole. Total domestic sales in the commercial vehicle industry reached 6,76,048 units in 2010-11. From 2004-05 to 2010-11, domestic sales had grown at a healthy CAGR of 13.4%. The reduction in domestic sales was attributed to the slowdown in economic development, credit availability and costs, an increase in fuel prices, in addition to the base effect due to the one-time demand created in 2006-07 by the strict enforcement of overloading restrictions. [Source:

SIAM]

Domestic commercial Vehicle Sales VolumesUnits

318,430351,041

467,765 490,494

384,194

532,721

676,408

0

200,000

400,000

600,000

800,000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

10.2%

33.3%4.9%

-21.7%

38.7%

27.0%CAGR : 13.4%

Domestic commercial Vehicle Sales VolumesUnits

318,430351,041

467,765 490,494

384,194

532,721

676,408

0

200,000

400,000

600,000

800,000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

10.2%

33.3%4.9%

-21.7%

38.7%

27.0%CAGR : 13.4%

Source: CRISIL – Retail Finance – Auto – May 2011

Numbers in italics represent change over previous year

Source: Society of Indian Automobile Manufacturers ("SIAM")

After a stable second quarter in fiscal 2009, the automotive sector in India suffered severe contraction in demand in the third quarter of fiscal 2009, arising from major financial and other market upheavals. This, along with contraction in freight movement in many segments of the industry, led to a massive drop in the medium and heavy commercial vehicle segment demand. High interest rates and peak commodity prices also affected the industry and the supply chain. In the third quarter of fiscal 2009, industry commercial vehicle sales were down 44.0% and passenger vehicle sales dropped by as much as 16.5% against the comparable quarter of the previous year. The economy grew 5.3% in the December 2008 quarter from a year earlier, below forecasts of 6.2% and the previous quarter's 7.6% as the global economic crisis cut demand and exports. As a result, 2008-2009 volumes declined 21.7%. With the Indian economy gaining momentum and rising GDP growth, the sales of the commercial vehicles increased by 38.7% in 2009-10 and by 27.0% in 2010-11. Over the long term, the commercial vehicle industry and consequently, commercial vehicle financing, is expected to continue to show growth in light of the following factors: Modernization of trucking industry. A replacement boom is likely to be triggered by stricter enforcement of regulations banning trucks beyond 15 years and overloading, as well as the introduction by transport associations of a voluntary retirement scheme for old trucks with better financing options. An anticipated replacement demand for 11 Lakh new as well as pre-owned trucks will require financing of ` 1,07,80,000 Lakhs. (Source: Society of Indian

Automobile Manufacturers)

Structural shift to hub-and-spoke model and improving road infrastructure. All commercial vehicle segments are expected to experience a boost from the fast-evolving hub- and spoke-structure of the freight industry. Long-distance haulage between hubs is typically serviced by heavy commercial vehicles on highways which continue to benefit from the Golden Quadrilateral and road development projects, with freight distribution from the hub to the local warehouse at the end of the spoke requiring medium commercial vehicles and distribution over the last mile requiring small commercial vehicles. Growing freight capacity. GDP growth rate continues to drive incremental freight capacity, which is estimated to increase at 1.25 times of GDP growth.

72

Growth of construction industry. The share of the construction industry in GDP has increased from 6.1% in 2002-03 to 6.9% in 2006-07. This increase has been largely propelled by government spending. Because a substantial portion of construction investment is spent on equipment, this construction boom heralds a similar expansion in the need for construction vehicles. The Indian construction industry is dominated by small contractors that perform over 90.0% of projects. These local players often lack adequate access to institutional finance, creating enormous opportunities in the area of construction equipment financing. (Source: Government of India Planning Commission

Eleventh Five Year Plan)

Vehicle Finance Industry – Overview

Strong growth in underlying asset sales, improvement in finance penetration and increase in the average ticket size are the primary factors driving the growth of the Indian vehicle finance market. The vehicle finance disbursements are expected to grow at around 23% in 2011-2012. Amongst individual segments, the cars and utility vehicle segments are expected to grow the fastest. Disbursements in the new car and utility vehicle finance industry are expected to grow by 26% in 2011-2012. Over the next five years, the vehicle finance disbursements are projected to grow at 22% CAGR. [CRISIL – Retail Finance – Auto – May 2011]

Two Wheeler Finance Industry

Unlike passenger cars and commercial vehicles, market sentiment in the two-wheeler finance industry is expected to remain subdued in the next 2 years. High operating expenses and a high probability of defaults, despite healthy growth in sales volume, are expected to restrain many financiers from re-entering or becoming aggressive in the market. Currently, only captive financiers and some NBFCs and few private banks are lending to the two-wheeler buyers. Small ticket size, high operating expenses and high probability of defaults is expected to keep several financiers wary of the market in the next 12-18 months. [CRISIL – Retail Finance – Auto – May 2011]. The two-wheeler finance disbursements in 2010-11 are expected to grow at 18%, reaching ` 99 billion. A 21.3 % rise in underlying sales volume in 2010-11 over 2009-10 supports this positive growth. Deterioration in asset quality and increased operating expenses has led many financiers to withdraw from some markets, particularly in the northern and eastern regions of India, [CRISIL – Retail Finance – Auto – May 2011]. The growth in two-wheeler finance disbursements over 2008-2009 to 2014-2015 can be summarized as follows:

`̀̀̀ billion 2008-09 E 2009-10 E 2010-11 P 2011-12 P 2014-15 P

CAGR (2010-11

to 2014-1 5)

New TW finance market 72 84 99 114 150 11.1%

New TW market size 295 380 478 531 657 8.3%

E: Estimated; P: Projected

Source: CRISIL – Retail Finance – Auto – May 2011 Disbursements towards two-wheelers are expected to grow moderately by 11 % annually over the next 4 years mainly supported by underlying assets volume growth. [CRISIL – Retail Finance – Auto – May 2011].

Domestic sales volume of two-wheelers recorded a growth of 21.3 % in 2010-2011 with strong performance across all segments. The aforesaid growth rate was primarily on account of a low base effect of previous year and growing demand from rural areas. The domestic demand for two wheelers is expected to grow at a CAGR of 8-10 % cent till 2014-2015. However, growing sales in rural markets will negatively affect the percentage of vehicles financed, as consumers in these markets prefer to pay in cash for the vehicle purchased. Finance penetration which has fallen to 30 % in 2010-11 from 37 % in 2008-09, is expected to improve marginally to 31 % by 2011-12. However, with players expected to increase their level of finance provided on account of better risk appetite, finance penetration levels are expected to increase marginally and reach a level of around 33 % till 2014-15. [CRISIL – Retail Finance –

Auto – May 2011].

73

Players are now adopting stringent norms, including adequate check on past track record and proper documentation. Average Loan to Value (LTV) ratio in the two-wheeler finance industry, which had dropped to 65 % in 2008-09, is estimated to have increased marginally to 69 % in 2010-11. Stringent credit appraisal norms, better information about customers due to Credit Information Bureau of India Limited (CIBIL) and increase in risk appetite of financiers are expected to increase levels of finance provided in the industry. This is expected to translate into higher LTV ratio for the industry with the LTV ratio expected to reach a level of 70 % by 2011-12 and remain constant thereon. [CRISIL – Retail Finance – Auto – May 2011].

Drivers for two-wheeler finance market%

37% 33% 30% 31% 33%

65% 67% 69% 70% 70%

0%

20%

40%

60%

80%

2008-09E 2009-10E 2010-11P 2011-12P 2014-15P

Finance penetration LTV

Drivers for two-wheeler finance market%

37% 33% 30% 31% 33%

65% 67% 69% 70% 70%

0%

20%

40%

60%

80%

2008-09E 2009-10E 2010-11P 2011-12P 2014-15P

Finance penetration LTV

E- Estimated; P- Projected; Source: CRISIL – Retail Finance – Auto – May 2011

Car and Utility Vehicle Finance Industry

Strong recovery in underlying car and UV sales and decline in financiers risk aversion towards borrowers has led to a strong growth in loan disbursements towards the sector. Disbursements in the new car and UV finance industry are estimated to have grown by 44 % in 2010-11. The industry is expected to register a growth of 23-24 % in 2011-12. The growth can mainly be attributed to swift recovery in the economy which has boosted consumer confidence, thereby leading to higher car sales and increased willingness on the part of financiers to lend. Average ticket size for car loans is also estimated to have increased on account of higher value car sales. [Source: CRISIL – Retail Finance

– Auto – May 2011] Aggregate disbursements towards cars and UVs are forecasted to register a CAGR of 21 % till 2014-15. Continued growth in underlying vehicle demand, increase in finance penetration and higher LTV would drive the disbursements growth in the next four years. [Source: CRISIL – Retail Finance – Auto – May 2011] Growth in car and UV finance disbursements

`̀̀̀ billion 2008-09 E 2009-10 E 2010-11 P 2011-12 P 2014-15 P

CAGR (2010-11

to 2014-1 5)

New Car finance market 246 330 482 598 1,051 21.5%

New UV finance market 78 109 149 181 288 17.8%

New car and UV finance

market 324 439 632 779 1,339 20.7%

E: Estimated; P: Projected

Source: CRISIL – Retail Finance – Auto – May 2011

Finance penetration

The percentage of vehicles financed for cars and UVs increased from 68 % and 60 % in 2008-09 to 74 % and 61 % in 2010-11. The aggressive interest rate schemes and decline in risk aversion amongst players is expected to lead to an increase in the finance penetration in the cars and UV segment to improve to 80% and 69% by 2014-15. Increase

74

in competition and strong growth in underlying asset are expected to aid the growth of finance penetration going forward. [Source: CRISIL – Retail Finance – Auto – May 2011]

Finance Penetration%

Source

69% 71%74% 75%

80%

60% 62% 61% 63%

69%

50%

60%

70%

80%

90%

2008-09E 2009-10E 2010-11P 2011-12P 2014-15P

Cars Utility Vehicles

Finance Penetration%

Source

69% 71%74% 75%

80%

60% 62% 61% 63%

69%

50%

60%

70%

80%

90%

2008-09E 2009-10E 2010-11P 2011-12P 2014-15P

Cars Utility Vehicles

E- Estimated; P-Projected

Source: CRISIL – Retail Finance – Auto – May 2011

Players have adopted stringent underwriting norms since the economic slowdown in 2008-09 which led to a number of financiers facing high delinquency levels. However, improvement in business sentiments and reduction in uncertainty over income growth have increased the comfort level of financiers in lending. Also, better information about customers due to CIBIL has led to players increasing their LTV ratios for the segment. Hence, average LTV ratio is estimated to have increased to 75 % and 70 % for cars and UVs, respectively. Over the next 4 years, we expect LTV ratio for cars and UV segment to rise to 78 % and 72 % respectively. [Source: CRISIL – Retail Finance

– Auto – May 2011]

Average LTV Ratio%

72% 73%75%

76% 78%

67% 68%70%

71%72%

60%

65%

70%

75%

80%

2008-09E 2009-10E 2010-11P 2011-12P 2014-15P

Cars Utility Vehicles

Average LTV Ratio%

72% 73%75%

76% 78%

67% 68%70%

71%72%

60%

65%

70%

75%

80%

2008-09E 2009-10E 2010-11P 2011-12P 2014-15P

Cars Utility Vehicles

E: Estimated; P: Projected

Source: CRISIL – Retail Finance – Auto – May 2011

Commercial Vehicle Finance

Continued economic growth and strong credit appraisal mechanisms are expected to maintain the industry's growth momentum in the next 4 years. Led by a robust growth of 28 % in underlying vehicle domestic sales volume, the commercial vehicle finance industry is estimated to have recorded a strong growth of 44 % in disbursements in 2010-11. Disbursements are expected to remain buoyant over the medium term on account of revival of sales, decline in risk aversion levels and increase in average ticket size for players. Commercial vehicles disbursements are projected to grow by 22 per cent and 19 per cent in 2011-12 and 2012-13, respectively owing to healthy growth in underlying sales volume and higher LTVs. The industry is expected to register a CAGR of 19 % in disbursements, reaching a level of around ` 795 billion by 2014-15. [Source: CRISIL – Retail Finance – Auto – May 2011]

75

Growth in CV finance disbursements

`̀̀̀ billion 2008-09 E 2009-10 E 2010-11 P 2011-12 P 2014-15 P

CAGR (2010-11

to 2014-1 5)

New LCV finance market 48 71 103 131 248 24.5%

New MHCV finance market 146 201 289 347 547 17.3%

New CV finance market 194 272 392 479 795 19.3%

E- Estimated; P – Projected LCV – Light Commercial Vehicle; MHCV – Medium and Heavy Commercial Vehicle Source: CRISIL – Retail Finance – Auto – May 2011 Financiers are expected to marginally increase LTVs given their growing confidence in the transporter's earning potential and repayment capabilities and consequently, increase their disbursements. CRISIL Research forecasts average LTV ratio to increase from 74 % in 2009-10 to 75 % in 2010-11. However, credit appraisal mechanisms are expected to remain stringent in the next 2 years due to the anxiety of deterioration in asset quality. Small fleet operators and first-time users continue to remain at a higher risk from the financier’s perspective. On this backdrop, we expect LTV levels to increase to a level of around 78 % by 2014-15. [Source: CRISIL – Retail Finance – Auto –

May 2011] Commercial vehicle finance industry is already highly penetrated in terms of credit availed. Typically, more than 95 % of vehicles are purchased on finance. Finance penetration had decreased marginally in 2008-09. However, the finance penetration levels have improved in 2009-10. This represents a huge dependence on finance industry. Finance penetration levels are expected to remain high at a level of around 98 % by 2014-15. [Source: CRISIL –

Retail Finance – Auto – May 2011] Micro Small and Medium Enterprises (MSME) Finance

MSME Sector

Micro, Small and Medium Enterprises (MSMEs), including khadi and village/rural enterprises credited with generating the highest rates of employment growth, account for a major share of industrial production and exports. They also play a key role in the development of economies with their effective, efficient, flexible and innovative entrepreneurial spirit. The socio-economic policies adopted by India since the Industries (Development and Regulation) Act, 1951 have laid stress on MSMEs as a means to improve the country’s economic conditions. [Ministry of MSME Annual Report 2010-11]

The MSME sector contributes significantly to the manufacturing output, employment and exports of the country. It is estimated that in terms of value, the sector accounts for about 45 % of the manufacturing output and 40 % of the total exports of the country. The sector is estimated to employ about 59 million persons in over 26 million units throughout the country. Further, this sector has consistently registered a higher growth rate than the rest of the industrial sector. [Ministry of MSME Annual Report 2010-11] In recognition of the contribution and vast potential of the MSME sector in the economy, provision of adequate credit to this sector continues to be an important element of banking policy, particularly after the initiation of structural reforms in 1991. The Government of India has from time to time taken economic policy initiatives to promote this sector and enhance credit to small and medium enterprises. Some of the initiatives of the Government towards MSME financing include setting up of credit guarantee fund trust for small industries, risk sharing facility, venture capital funding, micro credit, etc.

76

Performance of MSMEs - Units, Investment, Production, Employment & Exports

Production

(`̀̀̀ crore)

SI.

No. Year

Total

MSMEs

(lakh

numbers)

Fixed

Investment

(` Crore)

Current

Prices

Employment

(lakh person)

Exports (`

crore)

1 1992-93 73.51 109,623 84,413 174.84 17,784

(4.07) (9.24) (4.71) (5.33) (28.10)

2 1993-94 76.49 115,795 98,796 182.64 25,307

(4.07) (5.63) (17.04) (4.46) (42.30)

3 1994-95 79.60 123,790 122,154 191.40 29,068

(4.07) (6.90) (23.64) (4.79) (14.86)

4 1995-96 82.84 125,750 147,712 197.93 36,470

(4.07) (1.58) (20.92) (3.42) (25.46)

5 1996-97 86.21 130,560 167,805 205.86 39,248

(4.07) (3.82) (13.60) (4.00) (7.62)

6 1997-98 89.71 133,242 187,217 213.16 11,112

(4.07) (2.05) (11.57) (3.55) (13.23)

7 1998-99 93.36 135,482 210,454 220.55 48,979

(4.07) (1.68) (12.41) (3.46) (10.21)

8 1999-00 97.15 139,982 233,760 229.10 54,200

(4.07) (3.32) (11.07) (3.88) (10.66)

9 2000-01 101.10 146,845 261,297 238.73 69,797

(4.07) (4.90) (11.78) (4.21) (28.78)

10 2001-02 105.21 154,349 282,270 249.33 71,244

(4.07) (5.11) (8.03) (4.44) (2.07)

11 2002-03 109.49 162,317 314,850 260.21 86,013

(4.07) (5.16) (11.54) (4.36) (20.73)

12 2003-04 113.95 170,219 364,547 271.42 97,644

(4.07) (4.87) (15.78) (4.31) (13.52)

13 2004-05 118.59 178,699 429,796 282.57 124,417

(4.07) (4.98) (17.90) (4.11) (27.42)

14 2005-06 123.42 188,113 497,842 294.91 150,242

(4.07) (5.27) (15.83) (4.37) (20.76)

15 2006-07 261.01 500,758 709,398 594.61 182,538

(111.48) (166.20) (42.49) (101.62) (21.50)

16** 2007-08 272.79 558,190 790,759 626.34 202,017

(4.51) (11.47) (11.47) (5.34) (10.67)

17** 2008-09 285.16 621,753 880,805 659.35 NA

(4.53) (11.39) (11.39) (5.35)

77

Production

(`̀̀̀ crore)

SI.

No. Year

Total

MSMEs

(lakh

numbers)

Fixed

Investment

(` Crore)

Current

Prices

Employment

(lakh person)

Exports (`

crore)

18** 2009-10 298.08 693,835 982,919 695.38 NA

(4.53) (11.59) (11.59) (5.47)

The figures in brackets show the percentage growth over the previous year. The data for the period up to 2005-06 is of small scale industries

(SSl). Subsequent to 2005-06, data with reference to micro, small and medium enterprises (MSME5) are being compiled.

*Projected (Source: S&D Division — Office of the DC (MSME))

Comparison of the MSME Sector with the Overall Industrial Growth in India

The MSME sector has maintained a higher rate of growth vis-à-vis the overall industrial sector as would be clear from the comparative growth rates of production for both the sectors during last five years as incorporated in the following table:

Growth rates of 2001-02

base IIP (%age)

Over all Industrial

Growth rates of sector

(%age) #

2002-03 8.68 5.70

2003-04 9.64 7.00

2004-05 10.88 8.40

2005-06 12.32 8.20

2006-07 12.6 11.60

2007-08 13.00* 8.50

2008-09 Not Available 2.80

2009-10 Not Available 10.40

*: Projected, IIP — Index of industrial Production

#: Source- M/o Statistics and P1 website – http://www.mospi.gov.in

The total employment from the MSME sector in the country as per the Fourth Census of MSMEs with reference year 2006-07 was 594.61 lakh numbers. As per the estimates compiled for the year 2009-10, the MSME sector employed 695.38 lakh persons.

EmploymentNo. in lakh person

Note1. Projected data for the year 2007-08 to 2009-102. Data for 2005-06 pertain to small scale industries (SSI) only

294.91

594.61 626.34659.35

695.38

0

100

200

300

400

500

600

700

800

2005-06 2006-07 2007-08 2008-09 2009-10

EmploymentNo. in lakh person

Note1. Projected data for the year 2007-08 to 2009-102. Data for 2005-06 pertain to small scale industries (SSI) only

294.91

594.61 626.34659.35

695.38

0

100

200

300

400

500

600

700

800

2005-06 2006-07 2007-08 2008-09 2009-10

78

The size of the registered MSME sector is estimated to be 1,563,974 of the total working enterprises. The total proportion by micro, small and medium enterprises were 94.94%, 4.89% and 0.17% respectively. About 45.23% (7.07 lakh) of the units were located in rural areas. 67.10 % of the enterprises in the registered MSME sector were engaged in manufacturing/ assembling/processing, whereas 16.78 % of the units were engaged in services activities. The remaining 16.13 % of the enterprises were engaged in the repair and maintenance.

Distribution by Nature of Activity No. in lakh

Manufacturing/ Assembling/ Processing 10.50 (67.10%)

Services 2.62 (16.78%)

Repairing & Maintenance 2.52 (16.13%)

Total 15.64 (100%)

The MSME industry envisions that the sector will have a healthy growth with a large number of enterprises being set up and their upward graduation into small and medium enterprises. This would be accompanied by enhancement of their contribution to the GDP, manufacturing output, employment and exports. The economic externalities which affect the MSME sector are the following: (i) Overall domestic and global growth trends; (ii) Domestic tax regime, particularly advent of Goods and Service Tax and Direct Tax Code; (iii) Policies governing the credit flow to the sector; (iv) Trade policies, including free trade agreements with other countries; (v) Labour policies, particularly multiplicity of labour laws and procedures for compliance of various labour

regulations; (vi) Availability of infrastructure facilities, including power, water, roads, etc.; (vii) Availability of critical raw material at competitive prices; (viii) Availability of skilled manpower for manufacturing, services, marketing, etc. Credit to the MSME sector

Credit availability to MSMEs remains one of the major concerns. Although, the Government of India has taken several steps to increase the lending of this Sector, this remains even now the most difficult problem faced by the MSME. There is a cyclical nature of availability of funds to the MSME sector. This is determined by larger issues of international and domestic monetary policies, fiscal policies and other parameters beyond the pale of the sector. In times of a liquidity crunch, lack of liquidity in the financial system, even though caused by external factors, can quite dry up the flow of credit to the sector. The major dependence of the sector is working capital requirement which directly impacts the production cycle. As stated elsewhere, the tolerance threshold levels of this sector are very low. Hence, any liquidity crunch has an immediate and disastrous impact. During the last global economic crisis, this was seen to be a problem area, affecting the MSMEs for their day-today requirement of working capital. The MSME thus need to be insulated from such credit squeezes in times of adverse monetary conditions. Credit Guarantee Fund Scheme

The Government of India launched the Credit Guarantee Fund Scheme for Micro and Small Enterprises in August, 2000, with the objective of making available credit to micro and small enterprises (MSEs), particularly micro enterprises, for loans up to ` 100 lakh without collateral/third party guarantees. The Scheme is being operated through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) set up jointly by the Government of India and Small Industries Development Bank of India (SIDBI). The Scheme covers collateral free credit facility (term loan and/ or working capital) extended by eligible member lending institutions (MLIs) to new and existing micro and small enterprises up to ` 100 lakh per borrowing unit. The guarantee cover provided is up to 75% of the credit facility up to `50 lakh with an incremental guarantee of 50% of the credit facility above `50 lakh and up to `100 lakh (85% for loans up to ` 5 lakh provided to micro enterprises, 80% for MSEs owned/ operated by

79

women and all loans to the North Eastern Region of India). As on 31st December 2010, there were 115 eligible lending institutions registered as MLIs of the Trust comprising 27 Public Sector Banks, 17 Private Sector Banks, 61 Regional Rural Banks (RRBs), 2 foreign banks and 8 other Institutions. Cumulatively 476,452 proposals have been approved for guarantee cover for a total sanctioned loan amount of ` 20,109.36 crore. In spite of various initiatives taken by the Government of India, banks and financial institutions, MSMEs face certain challenges. These problems relate to the issue of collaterals, cost of loans, delay in receivables, obsolete technology, marketing, etc. The MSME sector is still under banked to a large extent and barring certain public financial institutions and public sector banks, lending in this sector has traditionally been addressed by the unorganized players in most regions in India.

Outstanding Bank Credit to Micro and Small Enterprises

As on last

reporting

Friday of

March

Public Sector

Banks

Private

Sector Banks

Foreign

Banks

All

Scheduled

Commercial

Banks

Percentage of

MSE Credit

to Net Bank

Credit

1 2 3 4 5 6

2005 67,800 8,592 6,907 83,498 8.8

2006 82,434 10,421 8,430 1,01,285 7.5

(21.6) (21.3) (22.1) (21.3)

2007 1,02,550 13,136 11,637 1,27,323 7.2

(24.4) (26.1) (38.0) (25.7)

2008 1,51,137 46,912 15,489 2,13,538 11.6

(47.7) (257.1) (33.1) (67.7)

2009 1,91,408 46,656 18,063 2,56,127 11.3

(26.6) 0.0 (16.6) (19.9)

2010 2,78,398 64,534 21,080 3,64,012 13.4

(Provisional) (45.4) (38.3) (16.7) (42.1)

Source: Reserve Bank of India.

Note:

1. Figure in parentheses indicates year-on-year growth.

2. The high growth witnessed during 2008 is on account of re-classification of MSEs as per MSMED Act, 2006.

Firstly, the investment limit of small (manufacturing) was raised from `1 crore to `5 crore and small (services)

was added to include enterprises with investment limit between `1 0 lakh to `2 crore. Secondly, the coverage of

service enterprises was broadened to include small road and water transport operators, small business,

professional and self-employed and all other service enterprises as per definition provided under MSMED Act,

2006.

3. Vide circular RPC.CO.Plan.C.24/04.09.01/2009-10 dated September 18, 2009, retail trade (credit limit not

exceeding `20 lakh) has also been included under the ambit of MSE Sector.

Role of NBFCs in the MSME finance sector

Funding through banks requires extensive documentation; funding through unorganized sources is expensive. NBFC loans provide ideal mid way between bank lending and unorganized sector. The growth drivers for NBFCs engaged in MSME finance can be summarized as follows:

• Swift Loan Processing due to minimal documentation and flexibility of disbursement process;

• Customized repayment schedules, based on customer requirement at a lower interest rate than informal sources

• Huge untapped market and the lack of adequate penetration by banks

• Extensive network of branches which leads to better customer service

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[Source: Analysis of MSME Loan Markets for NBFCs – Frost & Sullivan – July 2011] Most of the loans given to MSME sectors by NBFCs have a tenure of 2-3 years and it is only since 2008 the market has witnessed significant size and growth. While loans to MSMEs are considered relatively risky (mostly unsecured and to under-banked community), there is no concrete data to validate it due to the young life of this market. MSME LOAN MARKET FOR NBFCS:

Source: Analysis of MSME Loan Markets for NBFCs – Frost & Sullivan – July 2011 NBFCs loan disbursals to MSMEs have grown at 75.8 % CAGR from Fiscal 2009 to Fiscal 2011. MSME loan market is expected to increase at a CAGR of over 50.0% from 2011 to 2013 and further continue growing at 30-35 per cent from 2013 to 2015. Thereafter growth in this segment is expected to stabilise post 2015 around 20 % per year for the next five years. [Source: Analysis of MSME Loan Markets for NBFCs – Frost & Sullivan – July 2011] Loans Against Gold

India is one of the largest markets for gold and accounts for around 10% of total world gold stock with an annual demand of around 700 tonnes. [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics].

Gold Loans have continued emerging as a key gold based financial product and as of Fiscal 2010, the organised gold loans market in India is estimated at around ` 350-400 billion with a compounded annual growth of around 40% during Fiscal 2002-2010. At this level, the gold loans portfolio translates into a marginal 1.2% of the value of total gold stock in India. The market is significantly under-penetrated and is expected to continue growing at the rate of 35-45% going forward. Gold loans in India have largely been concentrated in South India, which holds the largest proportion of gold portfolio and is typically more open to borrowing against gold as compared to consumers in Northern and Western India, which are averse to pledging their gold holdings - considered as a symbol of family pride and honour. As of Fiscal 2010, the gold loans market is largely concentrated between two categories of lenders; south based NBFCs specialised in gold loans accounting for around 32 % of total market and scheduled commercial banks holding another 58% of the market. The rest of the gold loans portfolio is constituted by several small co-operative banks. [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics] Role of NBFCs in the Gold Loan Market Due to their ability to service the customer requirements, the specialised NBFCs command superior yields (20-24%) as compared to their banking competitors (at 8-12%). [Source: Gold Loans Market in India 2010 - IMaCS Research

and Analytics]. Even with attractive yields in the gold loans segment, banks typically lack adequate focus on the

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segment and the ability to provide flexible service offerings such as quick disbursal and low levels of documentation to meet the requirements of gold loans customers. Given these limitations, banks find it difficult to service the demand of non-agriculture client base which is largely un-organised and are hesitant of going through the processes and formalities of banks, even if it means getting loans at significantly lower rates of interest. [Source: Gold Loans

Market in India 2010 - IMaCS Research and Analytics] Several large pan-India NBFCs have marked their entry into the segment. These NBFCs are currently in a very cautious and preparatory mode and are expected to take a few years to ramp up their capabilities in gold loans segment. A few of these NBFCs have strong knowledge of local market conditions in South India, brand presence and an ability to replicate the business model and service offerings of large specialised NBFCs and are to be closely watched at in this space. [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics]

IMaCS Research and Analytics believe gold loans market holds immense potential in India and specialised NBFCs will continue to be a leading force in the segment over the next 4-5 years. These NBFCs are expected to be able to maintain their commanding position in the space, work aggressively to increase their branch presence and brand image, establish operations beyond South India and develop alternate product and fee based offerings for the large customer franchise. The following chart illustrates gold demand trends in India since 1991:

Lending against gold is one of the popular instruments based on gold and it works well with Indian rural household’s mindset, which typically view gold as an important saving instrument that is liquid and can be into converted into cash instantly to meet any urgent expense needs. The market is very well established in the Southern states of India, which account for the highest accumulated gold stock. Further, traditionally gold holders in Southern India are more open to accept and exercise the option of pledging gold as compared to other regions in the country which are reluctant to pledge jewellery or ornaments for borrowing money. Size and Potential of Gold Loans Market in India

The organised gold loans market in India is estimated at around ` 350-400 billion in Fiscal 2010. At this size, the organised gold loans market translates into 1.2% of the value of total gold stock in India and signifies a hugely under penetrated market with a large potential. The organised segment has registered a growth of 35-45% and is expected to continue growing at the same rate over the next few years and reach a portfolio size of ` 520-550 billion by Fiscal 2011. [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics]

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There are no official estimates available on the size of this market which is marked with the presence of numerous pawnbrokers, money lenders and cooperative societies operating on a local level. These players are quite active in rural areas of India and provide loans against jewellery to families at interest rates in excess of 30 %. These operators have a strong understanding of the local customer base and offer an advantage of immediate liquidity to customers in need, without requirements of any elaborate formalities and documentation. However, these players are largely un-regulated leaving the customers vulnerable to exploitation at the hands of these moneylenders and pawn-brokers. Going forward, we believe that as organised players, particularly NBFCs, become more aggressive in the gold loans market, a significant part of the gold loans should shift from the un-organised lenders to the organised lenders, thus fuelling a strong growth in the organised market. Further, the growth would be even higher if the customer attitude towards gold pledging becomes more positive aided by government regulations and aggressive promotion by banks and finance companies. [Source: Gold Loans Market in India 2010 - IMaCS Research and

Analytics] A typical Gold Loan customer expects high loan-to-value ratios, easy access, low levels of documentation and formalities, quick approval and disbursal of loans, lockers to ensure safety of their pledged gold and a team of expert valuers. Specialized NBFCs have created a niche in the Gold Loans capabilities by meeting these requirements of the typical gold loan customers, who require Gold Loans primarily to meet their urgent cash requirements[Source:

Gold Loans Market in India 2010 - IMaCS Research and Analytics]

NBFCs specializing in Gold Loans continue to perform strongly in the Gold Loans market and the overall statistics demonstrate that the relative share of traditional gold finance NBFCs in the market has not changed significantly over the last three years. In fiscal 2010, the Gold Loans market was largely concentrated between two categories of lenders: south Indian based NBFCs specializing in Gold Loans which held approximately 32% and SCBs which held 58% of the total market. The rest of the Gold Loans portfolio was held by several small co-operative banks. [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics] Outlook of the Gold Loans Market in India

As the market is currently under-penetrated, it is expected that the Gold Loans market will offer enough opportunities for portfolio expansion and retain attractive margins for all existing specialised NBFCs, banks and new entrants [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics] The branch expansion and marketing initiatives of various specialized NBFCs are anticipated to give a strong boost to the acceptability of gold loans and lead to further growth in the gold loans market. [Source: Gold Loans Market in

India 2010 - IMaCS Research and Analytics]

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NBFCs in the Indian gold loans market

Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics

In addition, it is anticipated that the large public sector banks in southern India will continue to be amongst the leading lenders, but considering the various regulatory and operational processes, it would be challenging for the banks to match the flexible service regime of the specialised NBFCs (Source: Gold Loans Market in India 2010 -

IMaCS Research and Analytics). New NBFC entrants in the market are currently in a cautious preparatory mode to enter the Gold Loans market but it will take some time for these NBFCs to emerge as formidable competitors to specialized existing NBFCs. [Source:

Gold Loans Market in India 2010 - IMaCS Research and Analytics] This is because it will take time for these new NBFCs to build the requisite focus, infrastructure (valuers, lockers, etc,) and branch network (Source: IMaCS Industry Report 2009). Specialized NBFCs are expected to continue to hold their share of the Gold Loans market with their ability to provide superior and niche servicing capabilities to their existing and future customers. The following factors will be crucial in contributing to the continued growth of specialized NBFCs:

• ability to maintain their strong hold in the southern India markets in terms of reach and customer services;

• strengthening brand image in the target customer segments with a special emphasis on markets beyond the southern region in India;

• developing related products such as education loans and offering fee based services such as money transfers or financial products distribution; and

• capturing a strong market position in other regions of India, including in the northern and western regions

Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics

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OUR BUSINESS

Frost & Sullivan India Private Limited has used due care and caution in preparing the report titled “Analysis of

MSME Loan Markets for NBFCs – July 2011”. Information has been obtained from sources that Frost & Sullivan

India Private Limited considers reliable. However, Frost & Sullivan India Private Limited does not guarantee the

accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the

results obtained from the use of such information. No part of the said report may be published / reproduced in any

form without Frost & Sullivan India Private Limited’s prior written approval. Frost & Sullivan India Private

Limited is not liable for investment decisions which may be based on the views expressed in the said report.

Overview

Our Company is a deposit-accepting NBFC registered with RBI, offering (i) financing for two wheelers, appliances and other commercial goods, (“Product Finance”), (ii) pre-owned and new vehicle loans, (iii) personal loans, (iv) loans against gold, and (v) loans to the small enterprise finance segment. Our current lines of business and organisational structure are as follows:

According to the Frost and Sullivan report titled “Analysis of MSME Loan Markets for NBFCs – July 2011”, our Company is the largest small enterprise finance company in India. In the small loan segment (loans of `1 lakh -10 lakh) our Company has a dominant share of 95%. Our Company also leads the total Indian micro, small and medium enterprises market with 53 % share. Our Company was established in 1986 and we have a track record of twenty five years in the financial services sector in India. Since 2005 we have focused on the retail financing segment. Our Company has been registered as a deposit-taking NBFC with the RBI since September 4, 2000 under Section 45IA of the Reserve Bank of India Act, 1934. We are a part of the Shriram Group of companies which has a strong presence in financial services in India, including commercial vehicle financing, consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products such as life and general insurance products and mutual fund products, as well as a growing presence in other businesses such as property development, engineering projects and information technology.

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We leverage on the Shriram Group’s ecosystem to reach out to our prospective customers and our focus has been in maximizing our association with the “Shriram” brand name and the synergies offered by the infrastructure, of other entities in the Shriram Group. Our customer base over the years has significantly comprised of customers of other entities in the Shriram Group. The large customer bases and wide-spread network of business outlets of entities such as, Shriram Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and entities operating under the “Shriram Chits” brand name, has continued to provide us with a large platform of target customers. Over the last 25 years our Company has established a pan-India presence, with 559 branches and 91 other business outlets as of March 31, 2011, across 17 states in India, with a significant presence in south India. As on March 31, 2011, our total employee strength was 2,318. We operate in a ‘hub-and spoke’ business model, where responsibilities from loan origination to recoveries of loans are vested in each of our business outlets, under the general supervision and control of our head office in Chennai. Our business outlet networks are interconnected and each business outlet is connected to our head office through an ERP platform developed by Take Solution Limited, Chennai. We have demonstrated consistent growth in our business and in our profitability. Our Assets Under Management have grown by a compounded annual growth rate, or CAGR, of 34% from ` 250,686.49 lakhs as of March 31, 2007 to ` 799,804.88 lakhs as of March 31, 2011. Our capital adequacy ratio as of March 31, 2011 computed on the basis of applicable RBI requirements was 20.53%, compared to the RBI stipulated minimum requirement of 12.00%. Our Tier I capital as of March 31, 2011 was ` 119,419.00 lakhs. Our Gross NPAs as a percentage of Total Loan Assets were 1.86% as of March 31, 2011. Our Net NPAs as a percentage of Net Loan Assets was 0.43% as of March 31, 2011. Our total income increased from ` 34,805.91 lakhs in fiscal 2007 to ` 132,091.19 lakhs in fiscal 2011 at a CAGR of 40%. Our net profit after tax increased from ` 5,162.16 lakhs in fiscal 2007 to ` 24,058.85 lakhs in fiscal 2011, at a CAGR of 47%. A summary of our assets under management, net non performing assets, total income and net profit after tax for the corresponding periods specified below are as follows:

` In Lakhs

Particulars As at March

31, 2007

As at March

31, 2008

As at March

31, 2009

As at March

31, 2010

As at March

31, 2011

Assets Under Management

250,686.49 336,889.78 462,950.89 521,550.18 799,804.88

Net Non performing assets

2,561.44 2,495.70 3,590.35 3,322.73 2,982.76

For the

Financial

Year Ended

March 31,

2007

For the

Financial

Year Ended

March 31,

2008

For the

Financial

Year Ended

March 31,

2009

For the

Financial

Year ended

March 31,

2010

For the

Financial

year ended

March 31,

2011

Total Income 34,805.91 62,318.76 93,393.75 110,284.71 132,091.19 Net Profit after Tax 5,162.16 8,763.50 11,700.77 19,425.86 24,058.85

Our Strengths

We believe that the following are our key strengths: Diversified Portfolio of Products

Our Company’s product portfolio comprises (i) Product Finance loans, (ii) pre-owned and new vehicles loans, (iii) personal loans, (iv) loans against gold, and (v) loans to small enterprise finance segment. Each of our products differs in terms of the average tenor, average yield, average interest rates and average size of loan. As on March 31, 2011 approximately 15 % of our Assets Under Management comprised product finance loans, 24 % of our Assets Under Management comprised vehicle loans, 9 % of our Assets Under Management comprised personal loans, 28 %

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of our Assets Under Management comprised loans against gold, and 24 % of our Assets Under Management comprised loans to small enterprise finance segment. Our diverse revenue streams reduce our dependence on any particular product, thus enabling us to spread and mitigate our risk exposure to any particular industry, business or customer segment. Pan-India Presence, Strong Foot-hold in Southern India and Synergies with Other Shriram Group Entities

As of March 31, 2011, we had 559 branches and 91 other business outlets across 17 states in India, with a significant presence in south India. As on March 31, 2011, our total employee strength was 2,318. We have a strong foothold in south India. We leverage on the Shriram Group’s ecosystem to solicit our customers and our focus has been in maximizing our association with the “Shriram” brand name and the synergies offered by the infrastructure, of other entities in the Shriram Group. Our customer base over the years has significantly comprised of customers of other entities in the Shriram Group. The large customer bases and wide-spread network of business outlets of entities such as, Shriram Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and entities operating under the “Shriram Chits” brand name, has continued to provide us with a large platform of target customers. We believe the under-banked community, especially the small enterprise finance segment often do not have sufficient movable and/or immovable property to provide as security or collateral for loans. Our relationship and knowledge of customers’ requirements also enables us to minimize our risks while extending loans to such under-banked communities. For instance, loans provided to chit depositors of Shriram Chits, are partly or entirely secured by the deposits made with Shriram Chits. Shriram Chits has several years of experience of collecting chit deposits from self-employed professionals, wholesale/retail dealers, merchants, builders, manufacturers and small and medium scale business operators, which provides us a with an extensive database of potential borrowers, specially for our loans to the small enterprise finance segment. Hub and Spoke Business Model with Efficient Credit Policies and Procedures

We operate in a ‘hub-and spoke’ business model, where the responsibilities from loan origination to recoveries of loans are vested in each of our business outlets, under the general supervision and control of our head office in Chennai. Our business outlet networks are interconnected and each business outlet is connected to our head office through an ERP platform developed by Take Solution Limited, Chennai. The ERP platform enables our management to monitor each loan right from its origination to final closure of accounts. Our head office and senior management is primarily responsible for the broad policy formulation for our businesses. However, the decision making process in connection with loans is decentralized and majorly vested in our business outlets, which ensures speedy credit approvals and more efficient turn around times in processing loans. We focus on closely monitoring our assets and borrowers through our officials at each business outlet. Our branch officials develop relationships with our target customer base, which enables us to capitalize on local knowledge. We follow stringent credit policies, including limits on customer exposure, to ensure the asset quality of our loans and the security provided for such loans. Further, we have nurtured a culture of accountability by making our product executives responsible for loan administration and monitoring as well as recovery of the loans they originate. We have a dedicated team of officials at each business outlet who are responsible for (i) loan origination, (ii) credit evaluation, (iii) pre-lending field investigations where our officials personally visit our prospective customers at their homes or offices, and (v) post lending credit appraisal. The team of officials responsible for origination of a loan is also responsible for the timely servicing of loans, recoveries, and monitoring the performance of each loan from origination to closure of the loan. We offer incentivized salary structures to such officials, where their incentives are linked to recovery of installments of the principal amount and interest on the loans. We believe our efficient credit policies, credit approval procedures, credit delivery process and relationship-based loan administration and monitoring methodology have aided in increasing our customer loyalty and earn repeat business and customer referrals. Our stringent credit policies and relationship based model has helped us maintain relatively low NPA levels. Our Gross NPAs as a percentage of Total Loan Assets were 1.86 % as of March 31, 2011. Our Net NPAs as a percentage of Net Loan Assets was 0.43 % as of March 31, 2011.

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Access to a range of cost effective funding sources

We fund our capital requirements through a variety of sources. Our fund requirements are currently predominantly sourced through term loans from banks, issue of redeemable non-convertible debentures on a private placement basis, and cash credit from banks including working capital loans. We access funds from a number of credit providers, including nationalized banks, private Indian banks and foreign banks, and our track record of prompt debt servicing has allowed us to establish and maintain strong relationships with these financial institutions. We have also placed commercial paper, as and when required in the past. As a deposit-taking NBFC, we are also able to mobilize retail fixed deposits at competitive rates. We have also raised subordinated loans eligible for Tier II capital. We also undertake securitization/assignment transactions to increase the efficient use of our capital and as a cost effective source of funds. In relation to our long-term debt instruments, we currently have ratings of CARE AA from Credit Analysis and Research Limited (“CARE”), AA-(ind) from Fitch Ratings India Private Limited, (“Fitch”) and CRISIL AA- /Stable from CRISIL. In relation to our short-term debt instruments, we have also received ratings of CARE A1+ from CARE, F1+(ind) from Fitch, and CRISIL A1+ from CRISIL. Our fixed deposit programme has been rated as CARE AA (FD) by CARE, and tAA- (ind) by Fitch. The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of financial obligations. We believe that we have been able to achieve a relatively stable cost of funds despite the difficult conditions in the global and Indian economy and the resultant reduced liquidity and an increase in interest rates, primarily due to our improved credit ratings, (as evidenced by the recent upgrade in our ratings by Fitch and CARE). We believe we are able to borrow from a range of sources at competitive rates. Experienced senior management team Our Board consists of 12 Directors, (including representatives of the TPG Group), with extensive experience in the financial services sectors. Our senior and middle management personnel have significant experience and in-depth industry knowledge and expertise. Our management promotes a result-oriented culture that rewards our employees on the basis of merit. In order to strengthen our credit appraisal and risk management systems, and to develop and implement our credit policies, we have hired a number of senior managers who have extensive experience in the Indian banking and financial services sector and in specialized finance firms providing loans to retail customers. We believe that the in-depth industry knowledge and loyalty of our management and professionals provide us with a distinct competitive advantage. Strategy

Our key strategic priorities are as follows:

Further expand operations by growing our business outlet network and introducing full range of products in all

business outlets

We intend to continue to strategically expand our operations in target markets establishing additional business outlets. Our customer origination and servicing efforts strategically focus on building long term relationships with our customers and address specific issues and local business requirements of potential customers in a particular region. We have a strong concentration of our business in south India with 248 of our 559 branches as on March 31, 2011, located in the states of Tamil Nadu, Andhra Pradesh and Karnataka. 91 % of our Assets Under Management as on March 31, 2011 were represented by loans originated in the states of Tamil Nadu, Karnataka and Andhra Pradesh. However, we have continued to make efforts to expand and penetrate into other regions in India. Currently, we have succeeded in opening business outlets in 17 different states in India. We propose to target establishing our operations through new business outlets in cities and towns where we historically had relatively limited operations, such as in eastern and northern parts of India, and to further consolidate our position and

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operations in western and southern parts of India. Our focus would be to typically target Tier II and Tier III cities, where we believe that demand for our products will grow steadily in the near future. As an internal policy, we typically introduce our products in a particular location only after having evaluated the regional market and the demand for each individual product. Currently, not all of our business outlets offer our full range of products. As a part of our strategy we target to gradually introduce our entire range of product offerings, namely (i) Product Finance loans, (ii) pre-owned and new vehicles loans, (iii) personal loans, (iv) loans against gold, and (v) small enterprise finance segment at each of our existing business outlets across India.

Continue growth in the Loans to Small Enterprises Finance Segment

Our Company started offering customized loans to small enterprises finance segment in 2006 and has continually focused on expanding our customer base for this product since then. We see a significant opportunity for our Company to expand our customer base in small enterprise finance segment. According to the Frost and Sullivan report titled “Analysis of MSME Loan Markets for NBFCs – July 2011”, our Company is the largest small enterprise finance company in India. In the small loan segment (loans of `1 lakh -10 lakh) our Company has a dominant share of 95 %. Our Company also leads the total Indian micro, small and medium enterprises market with 53 % share. As a strategy, we will continue to leverage on the infrastructure provided by entities operating under the ‘Shriram Chits’ brand name. Shriram Chits has several years of experience of collecting chit deposits from self-employed professionals, wholesale/retail dealers, merchants, builders, manufacturers and small and medium scale business operators, which provides us a with an extensive database of potential borrowers, specially for our loans to the small enterprises segment. We also propose to extend such loans to our existing customer base for our other products and propose to introduce small enterprises segment loans in all our current business outlets as well as in new business outlets that we open in the future.

Increase focus on loans against gold business Since 2007 we have been providing personal and business loans secured by gold jewellery and ornaments, primarily to individuals who possess gold jewellery but do not have access to formal credit within a reasonable time, or to whom credit may not be available at all, to meet their short-term requirements. We propose to utilize our existing business outlet networks, our existing customer base as well as the infrastructure offered by other Shriram Group entities, to expand our reach and customer base for loans against gold. We expect to establish this product in new markets and to target potential customers using the Shriram Group’s eco-system, to include customers who otherwise continue to rely on the unorganized sector for timely funding requirements. We propose to capitalize on the “Shriram” brand name and our good-will with our existing customers to further develop our business for this product.

Continue to implement advanced processes and systems We have invested in our technology systems and processes to create a stronger organization and ensure good management of customer credit quality. Our information technology strategy is designed to increase our operational and managerial efficiency. We aim to increasingly use technology in streamlining our credit approval, administration and monitoring processes to meet customer requirements on a real-time basis. We continue to implement technology led processing systems to make our appraisal and collection processes more efficient, facilitate rapid delivery of credit to our customers and augment the benefits of our relationship based approach. We also believe that deploying strong technology systems will enable us to respond to market opportunities and challenges swiftly, improve the quality of services to our customers, and improve our risk management capabilities. Foray into Housing Finance Business

Our Company incorporated a wholly owned subsidiary namely Shriram Housing Finance Limited in November 2010, with a view of entering the housing finance sector. We have applied to National Housing Bank (wholly owned by the Reserve Bank of India), for a certificate of registration under the National Housing Bank Act, 1987, to carry on business of a housing finance institution. We believe that offering housing finance will help us expand our product portfolio and we are well positioned to enter into this business through our established infrastructure, our existing customer base as well as through leveraging our association with other entities in the Shriram Group. The aforesaid Subsidiary will commence operations once it is registered with the National Housing Bank. As a part of its strategy, Shriram Housing Finance Limited will typically target middle-income customers in semi-urban locations.

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Our Company’s Products

Product Finance Loan

Our product finance loans comprise of two wheeler loans, loans for purchase of electrical appliances and other white and brown goods. The average tenor for our Product Finance loans is typically 24 months and the average yield typically ranges between 24-26%. As on March 31, 2011, the Assets Under Management for Product Finance loans was ` 116,584.39 lakhs, which represented 15 % of our total Assets under Management as at that date.

Pre-owned and New Vehicle Loans

Our Company offers a variety of loans to finance the purchase of new and pre-owned passenger and commercial vehicles includes three wheelers, four wheelers, used and new cars. Our financing products are principally targeted at the financing of new passenger and commercial vehicles, although we also provide financing for pre-owned passenger and commercial vehicles. Our Company’s executives are stationed at the showrooms of various passenger and commercial vehicle dealers and are responsible right from bringing in the customer, credit verification and loan origination to recovery of the loan. The average tenor for our vehicle loans is typically 30 months and the average yield typically ranges between 22-24%. As on March 31, 2011, the Assets Under Management for vehicle loans was ` 193,530.59 lakhs, which represented 24 % of our total Assets Under Management as at that date. Personal Loans

We provide personal loans to our existing and old customers as well as to customers of other Shriram Group entities. Our officials reach out directly to our personal loan customers and visit them at their doorstep to carry out loan origination and credit evaluation, so as to ensure speedy processing of loans. We target customer segments who do not have easy access to bank or other modes of financing for immediate short or medium term funding requirements, within reasonable time or at all. The average tenor for such loans is typically 30 months with average yields typically ranging between 24-27%. As on March 31, 2011, the Assets Under Management for personal loans was ` 71,548.15 lakhs, which represented 9 % of our total Assets Under Management as at that date. .

Loans against Gold

Since 2007 we have been providing personal and business loans secured by gold jewellery and ornaments, primarily to individuals who possess gold jewellery but do not have access to formal credit within a reasonable time, or to whom credit may not be available at all, to meet their short-term requirements. Our gold loans are for an average tenure of 4 months and provide a typical average yield of 18-20%. As on March 31, 2011, the Assets Under Management for loans against gold was ` 220,472.81 lakhs, which represented 28 % of our total Assets Under Management as at that date. .

Small Enterprise Finance Segment

Our Company started offering customized loans to small enterprises segment in 2006 and we have continually focused on expanding our customer base for this product since then. According to the Frost and Sullivan report titled “Analysis of MSME Loan Markets for NBFCs – July 2011”, our Company is the largest small enterprise finance company in India. In the small loan segment (loans of `1 lakh -10 lakh) our Company has a dominant share of 95 %. Our Company also leads the total Indian micro, small and medium enterprises market with 53 % share. Currently, our Company offers business loans to the small enterprises segment for an average tenor of 36 months and an average yield of 22-24%. Our target customers in the small enterprises segment typically comprises self-employed professionals, wholesale and retail dealers, merchants, builders, small and medium scale manufacturing concerns, catering services, tour operators, etc. Our small enterprises segment is typically customized to suit the requirements of our customers after having assessed and understood their business model. As on March 31, 2011,

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the Assets Under Management for loans to the small enterprises finance segment was ` 195,329.92 lakhs, which represented 24 % of our total Assets Under Management as at that date. We believe that the small enterprises finance segment is still under banked to a large extent and barring certain public financial institutions and public sector banks, lending in this sector has traditionally been addressed by the unorganized players in most regions in India. Accordingly, we see a significant opportunity for our Company to expand our customer base in small enterprises segment. The Shriram Group, particularly Shriram Chits has a large number of customers under the small enterprises segment. Our Company does business with various vendors and dealers of Shriram Group. We plan to tap this potential small enterprises segment and increase the size of our small enterprises segment portfolio by continuing to offer customized products to our target customers.

Our Company’s Operations

Business Outlet Network

As of March 31, 2011, we had a wide network of 559 branches and 91 other business outlets across India and 2,318 employees, across 17 states in India. We have a strong concentration of our business in south India in the states of Tamil Nadu, Andhra Pradesh and Karnataka. We propose to target establishing our operations through new business outlets in cities and towns where we historically had relatively limited operations, such as in eastern and northern parts of India, and to further consolidate our position and operations in western and southern parts of India. As an internal policy, we typically introduce our products in a particular location only after having evaluated the regional market and the demand for each individual product. Currently, not all of our business outlets offer our full range of products. As a part of our strategy we target to gradually introduce our entire range of product offerings at each of our existing business outlets across India. A typical business outlet comprises 3 to 6 employees, including the branch manager. As of March 31, 2011, all of our business outlets were connected to servers at our corporate office to enable real time information with respect to our loan disbursement and recovery administration. Our customer origination efforts strategically focus on building long term relationships with our customers, address specific issues and local business requirements of potential customers in a specific region.

Strategic Partnerships Since the retail financing and Small Enterprise Finance Segment continue to be influenced by the unorganized lending sector in semi-urban regions, we from time to time, enter into agreements and memorandum of understanding with local private financiers to cater to such markets. Currently, we have entered into a memorandum of understanding dated January 2, 2010 with M/s. Hari & Company Investment Madras Private Limited, (“HAC”), whereby HAC identifies the prospective customers desirous of availing finance, verifies the credit worthiness of such customers, evaluates the loan proposals, disburses the loan amounts, obtains all necessary documentation in connection with the loan proposal, collects installments and penalties for all customers, assists in creation of the charge in connection with the loan and follows up on recovery of loan amounts, repossession of assets and/or enforcement of the security interest on such loans. Our Company in turn provides the necessary funds for financing the target customers and maintains the policy and procedures and banking transactions in connection with such loans. The aforesaid memorandum of understanding is valid for a period of five years. HAC is entitled to an incentivized revenue sharing based payment in connection with each loan originated and serviced by HAC. Customer Evaluation, Credit Appraisal and Disbursement Initial Evaluation

Due to our customer profile, in addition to a credit evaluation of the borrower, we rely on guarantor arrangements, the availability of security, referrals from existing relationships and close client relationships in order to manage our asset quality.

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All customer origination and evaluation, loan disbursement, loan administration and monitoring as well as loan recovery processes are carried out by our executives at each business outlet, who are responsible for (i) loan origination, (ii) credit evaluation, (iii) pre-lending field investigations and (iv) post lending credit appraisal. The team of officials responsible for origination of a loan is also responsible for the timely servicing of loans, recoveries, and monitoring performance of each loan from origination to closure of the loan. We offer incentivized salary structures to such officials where their incentives are directly linked to recovery of installments of the principal amount and interest on the loans. We do not utilize or engage direct selling or other marketing and distribution agents or appraisers to carry out these processes. We follow certain procedures for the evaluation of the creditworthiness of potential borrowers. The credit appraisal process is as follows:

When a customer is identified and the requisite information for a financing proposal is received, a branch manager or our branch executive personally visits such customer at their homes and/or place of business to assess the loan requirements and creditworthiness of such customer. We also require an applicant to provide appropriate references from existing or former customers. The proposal form requires the customer to provide information on the age, address, employment details and annual income of the customer, as well as information on outstanding loans. The applicant is required to provide proof of identification and residence for verification purposes. Generally, where the customer is unable to provide sufficient immovable or movable property to secure the entire value of the loan, the applicant is also required to furnish a guarantee from an existing or a former customer. Detailed information relating to such guarantor is also required to be provided. Credit policies

We follow stringent credit policies to ensure the asset quality of our loans and the security provided for such loans. Any deviation from such credit policies in connection with a loan application requires prior approval from our head office. In connection with a customer who is also an existing customer of ‘Shriram Chits’ we generally create a lien over the chit deposits of such customer. If the value of the chit deposits is in-sufficient to cover the entire loan amount, we generally also require immovable or movable property to be provided for the remaining value of the loan amount. In cases where the customer is unable to provide such immovable or movable property as security, the applicant is also required to furnish a guarantee from an existing or a former customer. For our two-wheeler and vehicle loans, the two-wheeler/vehicle is hypothecated in favour of our Company for the tenure of the loan. From time to time, our management lays down loan approval parameters which are linked to the value of the underlying security and/or collateral. The borrower is charged prepayment charges in the event of termination of the loan by prepayment. Security received from the borrower, including unutilized post-dated cheques, if any, is released on repayment of all dues or on collection of the entire outstanding loan amount, provided no other existing right or lien for any other claim exists against the borrower.

Approval Process

After having verified the credentials of an applicant, our branch executive is responsible for signaling any early warning signals to the relevant branch manager and the disbursement team. The branch manager evaluates the loan proposal based on supporting documentation and various other factors. The primary criterion for approval of a loan proposal is based on the past reference of the prospective customer either from an existing or a past customer of our Company or of another Shriram Group entity, report of our branch executive and guarantee if required furnished by the customer. In addition, our branch managers may also consider other factors in the approval process such as the location and the time period of residence, past repayment record and income sources. The branch manager is authorized to approve a loan if the proposal meets the criteria established for the approval of a loan. The applicant is intimated of the outcome of the approval process, as well as the amount of loan approved, the terms and conditions of such financing, including the rate of interest (annualized) and the application of such interest during the tenure of the loan. Disbursement

Margin money and other charges are collected prior to loan disbursements. The disbursing officer retains evidence of the applicant’s acceptance of the terms and conditions of the loan as part of the loan documentation. For vehicle

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loans and two-wheeler loans, a chassis print of the vehicle is also obtained and maintained in the loan file. The relevant Regional Transport Office (RTO) endorsement forms are also required to be executed by the borrower prior to the disbursement of the loan. Prior to the loan disbursement, the loan officer ensures that a Know Your Customer checklist is completed by the applicant. The loan officer verifies such information provided and includes the records in the relevant loan file. The loan officer is also required to ensure that the contents of the loan documents are explained in detail to the borrower either in English or in the local language of the borrower and a statement to such effect is included as part of the loan documentation. The borrower is provided with a copy of the loan documents executed by him. Although our customers have the option of making payments by cash or cheque, we may require the applicant to submit post-dated cheques covering an initial period prior to any loan disbursement. Loan administration and monitoring

The borrower (and guarantor, if required) execute(s) the security creation documents and the loan agreement setting out the terms of the loan. A loan repayment schedule is attached as a schedule to the loan agreement, which generally sets out periodical repayment terms. Repayments are made in periodical installments. Loans disbursed are recovered from the customer in accordance with the loan terms and conditions agreed with the customer. We track loan repayment schedules of our customers, on a monthly basis, based on the outstanding tenure of the loans, the number of installments due and defaults committed, if any. This data is analyzed based on the loans disbursed and location of the customer. The official originating the loan is responsible for monitoring the quality of the underlying security and/or collateral and timely repayment of loans. Typically, the loan official’s remuneration is incentivized and linked to the recovery of installments from the customer. Our management information systems department operates out of our head office and monitors compliance with the terms and conditions for credit facilities through our ERP system. We monitor the completeness of documentation, creation of security etc. through regular visits to the business outlets by our regional as well as head office executives and internal auditors. All borrower accounts are reviewed at least once a year, with a higher frequency of reviews for the larger exposures and delinquent borrowers. The branch managers review collections regularly and personally contact borrowers that have defaulted on their loan payments. Branch managers are assisted by the officers responsible for loan origination, who are also responsible for the collection of installments from each borrower serviced by them. We believe that close monitoring of debt servicing efficiency enables us to maintain high recovery ratios. Collection and Recovery

We believe that our loan recovery procedure is particularly well-suited to our target market for each of our products. The entire collection operation is administered in-house through our branch officials and we do not outsource loan recovery and collection operations. In case of default, the reasons for the default are identified by the officer responsible for each loan and appropriate action is initiated, such as requiring partial repayment and/or seeking additional guarantees or collateral. In the event of a default on three loan installments, the relevant officer is required to make a personal visit to the borrower to determine the gravity of the loan recovery problem. We may initiate the process for repossession of the underlying asset and/or enforcement of the charge if required. Our officers are trained to repossess assets and/or enforce the security interest and no external agency is involved in such processes. Repossessed assets are held at designated secured facilities for eventual disposal. The notice to the customer specifies the outstanding amount to be paid within a specified period, failing which the asset may be disposed of and/or the charge enforced. In the event there is a short fall in the recovery of the outstanding amount from enforcement of the charge, legal proceedings against the customer may be initiated. Asset Quality We maintain our asset quality through the establishment of prudent credit norms, the application of stringent credit evaluation tools, limiting customer and security exposure and direct interaction with customers. In addition to our credit evaluation and recovery mechanism, our asset-backed lending model and adequate asset cover has helped

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maintain low gross and net NPA levels. Our historical Assets Under Management for each segment and Net NPAs of our business have been as follows:

` In Lakhs

Particulars As at March

31, 2007

As at March

31, 2008

As at March

31, 2009

As at March

31, 2010

As at March

31, 2011

Assets Under Management for Product Finance Loans

73,904.25 1,38,519.97 98,219.95 79,422.24 1,16,584.39

Assets Under Management for Vehicle Loans

1,25,459.69 1,01,631.66 2,14,126.71 2,07,372.26 1,93,530.59

Assets Under Management for Personal Loans

23,337.61 37,814.52 39,755.51 49,785.79 71,548.15

Assets Under Management for Loans Against Gold

1,519.19 13,436.18 34,751.82 85,478.36 2,20,472.81

Assets Under Management for Small Enterprise Finance Segment Loans

24,157.05 4,35,85.85 70,294.50 99,197.48 1,95,329.92

Other Assets Under Management

2,308.70 1,901.60 5,802.41 294.05 2,339.01

Total Assets Under

Management 2,50,686.49 3,36,889.78 4,62,950.89 5,21,550.18 7,99,804.88

Net Non

performing assets

2,561.44 2,495.70 3,590.35 3,322.73 2,982.76

Classification of Assets

The Prudential Norms Directions, 2007, read with the NBFC Acceptance of Public Deposits Directions, 1998, as amended, prescribed by the RBI, among other matters, require us to observe the classification of our asset; treatment of NPAs; and provisioning against NPAs. An asset is termed as an NPA if interest or installments of the principal amount remain overdue for a period of 180 days or more. Each deposit-accepting NBFC is required to classify its lease/hire purchase assets, loans, advances and other forms of credit into the following classes, namely: Standard assets: An asset in respect of which no default in repayment of principal or payment of interest is perceived and which does not disclose any problem nor carry more than normal risk attached to the business. Sub-standard assets: An asset will be classified as an NPA for a period not exceeding 18 months or where the terms of the agreement regarding interest and / or principal have been renegotiated or rescheduled after commencement of operations, until the expiry of one year of satisfactory performance under the renegotiated or rescheduled terms. Doubtful assets: An asset which remains a sub-standard asset for a period exceeding 18 months. Loss assets (a) An asset which has been identified as loss asset by the NBFC or its internal or external auditor or by the RBI during the inspection of the NBFC, to the extent that it is not written off by the NBFC; and (b) an asset which is adversely affected by a potential threat of non-recoverability due to either erosion in the value of security or non availability of security or due to any fraudulent act or omission on the part of the borrower.

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For further information on the Prudential Norms Directions, 2007, refer to the section titled “Regulations and

Policies” beginning on page 181 this Prospectus. Our Audit Committee has constituted a policy for making provisions in excess of the amounts prescribed by RBI and we may make further provisions if we determine that it is prudent for a known and identified risk. Based on our policy our provisions as of March 31, 2011 stood at ` 9,983.42 lakhs as compared to the RBI required minimum provision of ` 9,249.10 lakhs.

The following table sets forth, as of the dates indicated, data regarding our NPAs:

Period Gross NPA (`

in lakhs)

Net NPA (` in

lakhs)

Total Loan

Assets (` in

lakhs)

Net Loan

Assets(1)

(` in

lakhs)

% of Gross

NPA to Total

Loan Assets

% of Net

NPA to Net

Loan Assets

March 31, 2007

4,040.66

2,561.44 171,048.30 169,569.09 2.36 1.51

March 31, 2008

4,228.66 2,495.70 274,857.78 273,124.82 1.54 0.91

March 31, 2009

7,784.03 3,590.35 375,395.10 371,201.42 2.07 0.97

March 31, 2010

10,753.30 3,322.73 473,135.02 465,704.45 2.27 0.71

March 31, 2011

12,966.18 2,982.76 698,919.09 688,935.67 1.86 0.43

Our Gross NPAs as a percentage of Total Loan Assets were 1.86% as of March 31, 2011. Our Net NPAs as a percentage of Net Loan Assets was 0.43% as of March 31, 2011. We believe that our eventual write-offs are relatively low because of our relationship based customer origination and customer support, prudent loan approval processes, including adequate collateral being obtained and our ability to realize such collateral in a timely manner. Funding Sources

We have expanded our sources of funds in order to reduce our funding costs, protect interest margins and maintain a diverse funding portfolio. This will enable us to achieve funding stability and liquidity. Our sources of funding comprise term loans including term loans from banks and financial institutions, cash credit from banks, redeemable non-convertible debentures on a private placement basis, subordinated bonds, short term commercial paper, public deposits, and inter-corporate deposits. Borrowings

The following table sets forth the principal components of our secured loans as of the dates indicated:

As of March 31

` In Lakhs

SECURED LOANS 2007 2008 2009 2010 2011

Redeemable non-convertible debentures

60,968.50 69,106.39 127,741.10 154,073.77 219,877.64

Term loans:

- Term loans from banks 41,453.74 115,755.02 143,562.74 104,634.17 295,677.28 - Term loans from financial institutions, and corporate

1,161.00 10,513.00 9,426.40 9,530.00 6,500.00

Cash credit from banks including working capital demand loans

26,800.92 67,420.99 109,715.19 145,372.61 134,896.09

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The following table sets forth the principal components of our unsecured loans as of the dates indicated:

As of March 31,

` In Lakhs

UNSECURED LOANS 2007 2008 2009 2010 2011

Fixed deposits 379.98 165.67 112.80 100.74 55.10 Inter-corporate deposits Nil 925.00 Nil Nil Nil Subordinated debt 19,866.29 28,036.78 41,718.53 53,002.95 53,272.33 Redeemable non-convertible debentures Nil 3,500.00 Nil Nil Nil Commercial paper Nil 4,500.00 Nil Nil 22,500 Term loans:

- Term loans from banks Nil Nil Nil Nil Nil - Term loans from corporate Nil Nil Nil Nil Nil

Increasingly, we have depended on the issue of redeemable non-convertible debentures on a private placement basis, term loans from banks, term loans from financial institutions and corporates and cash credit from banks including working capital demand loans as the primary sources of our funding. We believe that we have developed stable long term relationships with our lenders, and established a track record of timely servicing of our debts, and have been able to secure fixed rate long term loans of three to five years tenure to stabilize our cost of borrowings. In fiscal 2011, total repayment of bank borrowings was ` 92,866.16 lakhs. As of March 31, 2011, loans from banks aggregated ` 430,573.37 lakhs, as compared to ` 250,006.78 lakhs as of March 31, 2010. In fiscal 2011, net redemption of redeemable non-convertible debentures was ` 76,112.67 lakhs. As of March 31, 2011, the aggregate outstanding amount of secured redeemable non-convertible debentures was ` 219,877.64 lakhs as compared to ` 154,073.77 lakhs as of March 31, 2010. Our short term fund requirements are primarily funded by cash credit from banks including working capital loans. Cash credit from banks including working capital loans outstanding as of March 31, 2011 was ` 134,896.09 lakhs.

As of March 31, 2011 our outstanding subordinated debt amounted to ` 53,272.33 lakhs, compared to ` 53,002.95 lakhs as of March 31, 2010. The debt is subordinated to our present and future senior indebtedness. Based on the balance term to maturity, as of March 31, 2011, ` 28,712 lakhs of the discounted book value of subordinated debt is considered as Tier II under the guidelines issued by the RBI for the purpose of capital adequacy computation. As of March 31, 2011, outstanding commercial paper amounted to ` 22,500 lakhs. We are registered as a deposit-taking NBFC with the RBI under Section 45IA of the Reserve Bank of India Act, 1934, which authorizes us to accept deposits from the public. We do not, however, depend on deposits as our primary source of funding. As of March 31, 2011, we had fixed deposits outstanding of ` 55.10 lakhs, compared to ` 100.74 lakhs as of March 31, 2010, respectively. Securitization/assignment of Portfolio against financing activities

We also undertake securitization/assignment transactions to increase and efficiently utilize our capital, and as a cost effective source of funds. We sell part of our assets under financing activities from time to time through securitization transactions as well as through direct assignment transactions. Our securitization/assignment transactions involve provision of additional collateral and deposits or bank/ corporate guarantee. In fiscal 2011, total book value of Loan Assets securitized/assigned was ` 117,915.72 lakhs.

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We continue to provide administration services for the securitized/assigned portfolio, the expenses for which are provided for, at the outset of each transaction. The gains arising out of securitization/assignment, which vary according to a number of factors such as the tenor of the securitized/assigned portfolio, the yield on the portfolio securitized/assigned and the discounting rate applied are treated as income over the tenure of agreements as per RBI guidelines on securitization of standard assets. Loss, if any, is recognized upfront. The following tables set forth certain information with respect to our securitization/assignment transactions: For the Financial Year Ended March 31,

` In Lakhs

2007 2008 2009 2010 2011

Total number of Loan Assets securitized/assigned

438,457.00 398,691 314,685 146,402.00 178,502.00

Total book value of Loan Assets securitized/assigned

80,493.74 75,781.80 88,844.37 30,000.00 117,915.72

Sale consideration received for securitized/assigned assets

91,302.42 83,539.14 91,874.15 30,000.00 126,737.01

Gain on account of securitization/assignment

10,808.68 7,757.34 13,182.64 2,554.73 27,163.76

As on March 31

`̀̀̀ In Lakhs

2007 2008 2009 2010 2011

-Fixed Deposit 5,711.93 46,95.88 10,017.54 7,373.57 15,436.40 -Guarantees given by third parties

16.69 - 3,117.77 1,942.77 1,942.77

We are required to provide credit enhancement for the securitization/assignment transactions by way of either fixed deposits or corporate guarantees and the aggregate credit enhancement amount outstanding as on March 31, 2011 was ` 1,5436.40 lakhs. In the event a relevant bank or institution does not realize the receivables due under such Loan Assets, such bank or institution would have recourse to such credit enhancement.

Capital Adequacy

We are subject to the capital adequacy ratio (“CAR”) requirements prescribed by the RBI. We are currently required to maintain a minimum CAR of 12.00%, as prescribed under the Prudential Norms Directions, 2007, based on our total capital to risk-weighted assets. As per RBI notification dated February 17, 2011, all deposit taking NBFCs have to maintain a minimum capital ratio, consisting of Tier I and Tier II capital, which shall not be less than 15.00% of its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items w.e.f. March 31, 2012. As a part of our governance policy, we ordinarily maintain capital adequacy higher than the statutorily prescribed CAR. As of March 31, 2011, our capital adequacy ratio computed on the basis of applicable RBI requirements was 20.53%, compared to the minimum capital adequacy requirement of 12.00% stipulated by the RBI.

The following table sets out our capital adequacy ratios computed on the basis of applicable RBI requirements as of the dates indicated:

As of March 31,

2007

2008 2009 2010 2011

Capital adequacy ratio (%)……………………………………………………….

23.95 20.25 25.74 26.28 20.53

Tier 1 capital……………………………………………. 29,464.00 39,265.00 70,662.00 98,585.00 1,19,419.00

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Credit Rating

The following table sets forth certain information with respect to our credit ratings as on the date of this Prospectus:

Credit Rating

Agency

Instruments

Ratings

Limit in ` Lakhs

CARE

Non Convertible Debentures

CARE AA 27,500

CARE

Fixed Deposit

CARE AA(FD) 1,000

CARE

Short Term Debt

CARE A1+ 37500

CRISIL

Non Convertible Debentures

CRISIL AA- / STABLE

2,000

CRISIL

Short Term Debt

CRISIL A1 + 32,000

Fitch

Long Term Rating

AA-(ind)

75,000

Fitch

Long Term Bank Loans

AA-(ind)

5,35,600

Fitch

Term Deposit Programme tAA-(ind) 800

Fitch Short Term F1+(ind) 40,000

The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of financial obligations. Risk Management We have developed a strong risk-assessment model in order to maintain adequate asset quality. The key risks and risk-mitigation principles we apply to address these risks are summarized below: Interest Rate Risk Our results of operations are dependent upon the level of our net interest margins. Net interest income is the difference between our interest income and interest expense. Since our balance sheet consists of rupee assets and predominantly rupee liabilities, movements in domestic interest rates constitute the primary source of interest rate risk. We assess and manage the interest rate risk on our balance sheet through the process of asset liability management. We borrow funds at fixed and floating rates of interest, while we extend credit at fixed rates. In the absence of proper planning and in a market where liquidity is limited, our net interest margin may decline, which may impact our revenues and ability to exploit business opportunities. We have developed stable long term relationships with our lenders, and established a track record of timely servicing our debts. This has enabled us to become a preferred customer with most of the major banks and financial institutions with whom we do business. Moreover, our valuation capabilities enable us to invest in good quality assets with stable, attractive yields. Some of our loans are classified as priority sector assets by the RBI, which when securitized, find a ready market with various financial institutions, including our lenders.

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Liquidity Risk Liquidity risk arises due to non-availability of adequate funds or non-availability of adequate funds at an appropriate cost, or of appropriate tenure, to meet our business requirements. This risk is minimized through a mix of strategies, including asset securitization/assignment and temporary asset liability gap. We monitor liquidity risk through our Asset Liability Management (“ALM”) function with the help of liquidity gap reports. This involves the categorization of all assets and liabilities into different maturity profiles, and evaluating these items for any mismatches in any particular maturities, especially in the short-term. The ALM policy has capped the maximum mismatches in the various maturities in line with RBI guidelines and ALCO guidelines. To address liquidity risk, we have developed expertise in mobilizing long-term and short-term funds at competitive interest rates, according to the requirements of the situation. For instance, we structure our indebtedness to adequately cover the average three-year tenure of loans we extend. As a matter of practice, we generally do not deploy funds raised from short term borrowing for long term lending.

Credit risk Credit risk is the risk of loss that may occur from the default by our customers under the loan agreements with us. As discussed above, borrower defaults and inadequate collateral may lead to higher NPAs. We lend on a relationship-based model, and we believe that our high loan recovery ratios indicate the effectiveness of this approach for our target customer base. We also employ advanced credit assessment procedures, which include verifying the identity and checking references of the proposed customer thoroughly at the lead generation stage. Our extensive local presence also enables us to maintain regular direct contact with our customers. In this regard, we assign personal responsibility to each member of the lead generation team for the timely recovery of the loans they originate, closely monitoring their performance against our Company's standards, and maintain client wise exposure limits. Employees As of March 31, 2011 our total employee strength was 2,318. We have built a highly capable workforce primarily by recruiting and training fresh graduates. As our business model does not require extensive background in banking or the financial services industry, we prefer to hire and train fresh graduates in the particular operational aspects of our business. Moreover, we prefer to hire our workforce from the locality in which they will operate, in order to benefit from their knowledge of the local culture, language, preferences and territory. We emphasize both classroom training and on-the-job skills acquisition. Post recruitment, an employee undergoes induction training to gain an understanding of our Company and our operations. Our product executives are responsible for customer origination, loan administration and monitoring as well as loan recovery and this enables them to develop strong relationships with our customers. We believe our transparent organizational structure ensures efficient communication and feedback and drives our performance-driven work culture. In a business where personal relationships are an important driver of growth, executive attrition may lead to loss of business. We therefore endeavor to build common values and goals throughout our organization, and strive to ensure a progressive career path for promising employees and retention of quality intellectual capital in our Company. We provide a performance-based progressive career path for our employees. For instance, we introduced two employee stock option plans for eligible employees at branch manager level and above. We believe our attrition rates are among the lowest in the industry at managerial levels. Intellectual Property Pursuant to a License Agreement dated April 1, 2010 between our Company and Shriram Ownership Trust, (“SOT”), we are licensed to use the name "Shriram" and the associated mark for which our Company has to pay to SOT, 0.25% on the gross turnover of our Company for the first year of the License Agreement. Royalty rates for the subsequent years will be decided mutually on or before April 1st of the respective financial years. Along with the

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royalty, our Company is also required to pay to SOT amounts by way of reimbursement of actual expenses incurred by SOT in respect of protection and defence of the Copyright. The License Agreement is valid for a period of three years from the date of execution thereof.

Technology

We use information technology as a strategic tool in our business operations to improve our overall productivity. We believe that our information systems enable us to manage our nationwide operations network well and to effectively monitor and control risks. All our business outlets are online, connected through an ERP software developed by Take Solution Limited Chennai and all our business outlets with our Central Server located at Chennai. Property

Our registered office is at 123, Angappa Naicken Street, Chennai -600001, Tamil Nadu, India. Our corporate office is at 221, Royapettah High Road, Mylapore, Chennai- 600004, Tamil Nadu, India. As of March 31, 2011, we had 559 branches and 91 other business outlets across India. We enter into lease and/or leave and license agreements in connection with the premises required for our business outlet. Collaborations

Except as disclosed herein, our Company has not entered into any collaboration, any performance guarantee or assistance in marketing by any collaborators.

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HISTORY, MAIN OBJECTS AND KEY AGREEMENTS

Brief background of our Company

Our Company was incorporated as a private limited company, Shriram Hire-Purchase Finance Private Limited, on March 27, 1986, under the provisions of the Companies Act, 1956. Further with effect from October 29, 1988, the status of our Company was changed to a public limited company. The name of our Company was changed from Shriram Hire-Purchase Finance Limited to Shriram City Union Finance Limited and a fresh certificate of incorporation dated April 10, 1990 was issued by the ROC, Chennai, Tamil Nadu. Subsequently, our Company has obtained a certificate of registration as a Deposit-Accepting Financing Company, dated April 17, 2007, bearing registration no. 07-00458 issued by the RBI to carry on activities of a NBFC under section 45 IA of the RBI Act, 1934.

Change in registered office of our Company

There has been no change in the registered office of our Company in the last five years preceding the date of this Prospectus. Main objects of our Company

The main objects of our Company as contained in our Memorandum of Association are:

• To lend money on security on movable or immovable properties or any shares or securities of any nature or without security and to negotiate loans.

• To Undertake and carry on the business of financing, hire-purchase contracts relating to property or assets of any description either fixed or movable and in particular relating to Houses, Lands, Government Bonds, Goods, Chattels, Motorcars, Motor-Buses, Motor-lorries, Auto-Rickshaws, Omnibuses, Tricycles, Scooters, Bicycles, Unicycles, Quadricycles, Velocipedes, Carriages and Vehicles of all kinds whether mechanically propelled by steam, oil, gas, petrol or electricity or otherwise, Tractors, bullion, stocks, Shares, television sets, machineries of all kinds, pump-sets, refrigerators, electric and electronic goods and on other household articles.

• To draw, accept, endorse, discount, buy, sell and deal in bills of exchange, promissory notes, bonds Debentures and other negotiable instruments and securities.

• To issue on commission, subscribe for, take acquire and hold, sell, exchange and deal in Shares, stock, bonds, obligations or securities of any Government, local authority or Company.

• To acquire, improve, manage, work, develop, exercise all rights in respect of leases and mortgages and to sell, dispose of, turn to account and otherwise deal with property of all kinds, and in particular, land, buildings, concessions, patents, business concerns and undertakings.

• Generally to carry on and undertake any business or operation, commonly carried on or undertaken by capitalists, financiers.

• To borrow or take deposits of money at interest or otherwise from any person or persons, local authority of Government and advance, lend or deposit any such money or other moneys of the Company for the time being on such security or otherwise as the Company may deem expedient. But the Company shall not do any banking business, as defined in the Banking Regulations Act, 1949.

• The Company shall either singly or in association with other Bodies Corporate-act as Asset Management Company/ Manager/ Fund Manager in respect of any scheme of Mutual Fund whether Open-End Scheme or Closed-End Scheme, floated/to be floated by any Trust/Mutual Fund (whether offshore or onshore)/Company by providing management of Mutual Fund for both offshore and onshore Mutual Funds, Financial Services consultancy, exchange of research and analysis on commercial basis. Constitute any trust and to subscribe and

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act as, and to undertake and carry on the office or offices and duties of trustees, custodian trustees, executors, administrators, liquidators, receivers, treasures, attorneys, nominees and agents; and to manage the funds of all kinds of trusts and to render periodic advice on investments, finance, taxation and to invest these funds from time to time in various forms of investments including shares, term loans and debentures etc. Carry on and undertake the business of portfolio investment and Management, for individuals as well as large Corporate Bodies and/or such other bodies as approved by the Government, in Equity Shares, Preference Shares, Stock. Debentures (both convertible and non-convertible), Company deposits, bonds unit. loans, obligations and securities issued or guaranteed by Indian or Foreign Governments, States, Dominions, Sovereigns, Municipalities or Public Authorities and/or any other financial instruments, and to provide a package of Investment/Merchant Banking Services by acting as Managers to Public issue of securities, to act as underwriters, issue house and to carry on the business of Registrar to Public issue/various investment schemes and to act as Brokers to Public Issue. Without prejudice to the generality of the foregoing to acquire any shares, stocks, debentures, debenture-stock, bonds, units of any Mutual Fund Scheme or any other statutory body including Unit Trust of India, obligations or securities by original subscription, and/or through markets both primary, secondary or otherwise participation in syndicates, tender, purchase, (through any stock exchange, OTC exchange Of privately), exchange or otherwise and to subscribe for the same whether or not fully paid-up, either conditionally or otherwise, to guarantee the subscription thereof and to exercise and to enforce all rights and powers conferred by or incidental to the ownership thereof and to advance, deposit or lend money against securities and properties to or with any company, body corporate, firms, person or association or without security and on such terms as may be determined from time to time. To engage in Merchant Banking activities, Venture Capital, acquisitions, amalgamations and all related merchant banking activities including loan Syndication.

• To carry on the business as manufacturers, exporters, importers, contractors, sub-contractors, sellers, buyers, lesser or lessees and agents for wind electric generators and turbines, hydro turbines, thermal turbines, solar modules and components and parts including rotor blades, braking systems, tower, nacelle, control unit, generators, etc. and to set up wind farms for the company and/or other singly or jointly and also to generate, acquire by purchase in bulk, accumulate, sell distribute and supply electricity and other power (subject to and in accordance with the laws in force from time to time);

• To carry on business of an investment company or an Investment Trust Company, to undertake and transact trust and agency investment, financial business, financiers and for the purpose to lend or invest money or negotiate loans in any form or manner, to draw, accept , endorse, discount, buy, sell and deal in bills of exchange, hundies, promissory notes and other negotiable instruments and securities and also to issue on commission , to subscribe for, underwrite, take, acquire and hold, sell and exchange and deal in shares stocks, bonds or debentures or securities of any Government or Public Authority or Company, gold and silver and bullion and to form, promote, subsidize and assist companies, syndicates and partnership to promote and finance industrial enterprises and also to give any guarantees for payment of money or performance of any obligation or undertaking, to advances, loans and subscribe to the capital of industrial undertakings and to undertake any business transaction or operation commonly carried on or undertaken by capitalists, promoters, financiers and underwriters.

• To act as investors, guarantors, underwriters and financers with the object of financing industrial enterprises, to lend or deal with the money either with or without interest or security including in current or deposit account with any bank or banks, other person or persons upon such terms, conditions and manner as may from time to time be determined and to receive money on deposit or loan upon such terms and conditions as the Company may approve. Provided that the Company shall not do any banking business as defined under the Banking Regulations Act, 1949;

• To act as investors, guarantors, underwriters and financiers with the object of financing industrial enterprises, to lend or deal with the money either with or without interest or security including in current or deposit account with any bank or banks, other person or persons upon such terms, conditions and manner as may from time to time be determined and to receive money on deposit or loan upon such terms, conditions and manner as may from time to time be determined and to receive money on deposit or loan upon such terms and conditions as the Company may approve. Provided that the Company shall not do any banking business as defined under the Banking Regulations Act, 1949.

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• To carry on in India or elsewhere the business of consultancy services in various fields, such as, general, administrative, commercial, financial, legal, economic, labour and industrial relations, public relations, statistical, accountancy, taxation and other allied services, promoting, enhancing, propagating the activity of investment in securities, tendering necessary services related thereto, advising the potential investors or investment activities, acting as brokers, sub-brokers, investment consultant and to act as marketing agents, general agents, sub-agents for individuals/bodies corporate/institutions for marketing of shares, securities, stocks, bonds, fully convertibles debentures partly convertible debentures, Non-convertible debentures, debenture stocks, warrants, certificates, premium notes, mortgages, obligations, inter corporate deposits, call money deposits, public deposits, commercial papers, general insurance products, life insurance products and other similar instruments whether issued by government, semi government, local authorities, public sector undertakings, companies, corporations, co-operative societies, and other similar organisations at national and international levels;

Key terms of our Material Agreements

KEY TERMS OF THE MATERIAL CONTRACTS

1. Investor agreement dated May 13, 2008 between Western India Trustee and Executor Company

Limited, in its capacity as the trustee of India Advantage Fund – VI, (“Investor”) and Shriram City

Union Finance Limited, (“Company”), (“Investor Agreement”).

Pursuant to the Investor Agreement, the Investor has subscribed to 750,000 equity shares constituting 1.69% of the equity share capital of our Company post the preferential allotment of equity shares to the Investor, certain other investors, Shriram Capital Limited and Shriram Enterprise Holding Limited, (“Post

Preferential Issue Equity Share Capital”) and warrants. The shares and the warrants subscribed by the Investor in one or more tranches would, on a fully diluted basis, aggregate to 2.85% of the Post Preferential Issue Equity Share Capital of our Company. The salient features of the Investor Agreement are as follows:

(a) Investor rights:

(i) Right to appoint independent director: The Investor has a right to appoint an independent director on the

Board of our Company, with mutual consent of our Company, as long as the shareholding of the Investor,

together with its affiliates equals to or exceeds 7% of the paid up equity share capital of our Company.

(ii) Right to appoint observer: The Investor has a right to appoint an observer who will be entitled to attend any

and all of the meetings of the Board and the committees, as long as the shareholding of the Investor and its

affiliates is equal to or exceeds 7% of the paid up equity share capital of our Company.

(iii) Pre-emptive right on further issues of capital: If our Company should undertake a further issue of equity

shares or any other instrument convertible to equity shares, the Investor is entitled to be offered equity

shares in a manner so as to enable the Investor to maintain its shareholding percentage in our Company at

the same level as it had prior to such further issue. This right is available to the Investor as long as the

shareholding of the Investor and its affiliates is equal to or exceeds 5% of the paid up equity share capital

of our Company.

(iv) Information Rights: Customary information rights are available to the Investor as long as the shareholding

of the Investor together with its affiliates in our Company is equal to or exceeds 7% of the paid up equity

share capital of our Company. If the shareholding of the Investor, together with its affiliates in our

Company falls below 7% of the paid up equity share capital of our Company and thereafter the Investor or

its affiliates acquire additional shares of our Company so as to take the shareholding of the Investor in our

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Company equal to or more than 7% of the paid up equity share capital of our Company, the information

rights will no longer be available to the Investor.

(b) Investor not considered to be promoters: The Investor is merely a financial investor in our Company.

Our Company shall take all actions to ensure that the Investor shall not be considered or classified to be a

promoter or any ‘person acting in concert’ of the promoter of our Company. The Investor is not in control

of our Company.

(c) Term and Termination: The Agreement may be terminated and the transactions contemplated by the

Agreement may be abandoned if closing does not take place on or before such time as mutually agreed to

between the parties. . Either party may terminate this Investment Agreement any time before the date on

which closing shall have taken place in the event that the other party commits a breach of its obligations

under this Investment Agreement and such breach is not remedied by the defaulting party within 60 days of

notice of such breach.

This Agreement shall terminate in the event that the shareholding of the Investor in our Company (which includes warrants on a fully diluted basis and shares purchased by the Investor in an open market) and its affiliates falls below 5% of the paid up share capital of our Company.

(d) Governing Law: Indian Law.

(e) Dispute Resolution: Arbitration will be carried out in accordance with the Arbitration and Conciliation

Act, 1996 and the place of arbitration is Mumbai. All proceedings will be conducted in English Language.

2. Investor agreement dated May 12, 2008 between Bessemer Ventures Partners, (“Investor”) and

Shriram City Union Finance Limited, (“Company”), (“Investor Agreement”)

Pursuant to the Investor Agreement, the Investor has subscribed to 12,50,000 equity shares constituting 2.81% of the equity share capital of our Company post the preferential allotment of equity shares to the Investor, certain other investors, Shriram Capital Limited and Shriram Enterprise Holding Limited, (“Post

Preferential Issue Equity Share Capital”) and 12,50,000 warrants each convertible to one equity share of our Company. The shares and the warrants subscribed by the Investor in one or more tranches would, on a fully diluted basis, aggregate to 4.75% of the Post Preferential Issue Equity Share Capital of our Company. The salient features of the Investor Agreement are as follows:

(a) Investor Rights:

(i) Right to appoint observer: The Investor has a right to appoint an observer to the Board.

(ii) Pre-emptive right on further issues of capital: If our Company should undertake any further issue of equity

shares and/or any other instrument convertible into equity shares, the Investor is entitled to be offered such

equity shares and/or other instruments on the same terms as the proposed issuance so as to enable to the

Investor to maintain its shareholding in our Company at the same level as it had prior to such further issue.

This right is available to the Investor as long as the shareholding of the Investor in our Company is more

than 5% of the paid up equity share capital of our Company.

(iii) Information rights: As long as the shareholding of the Investor is more than 7% of the paid-up equity share

capital of our Company, the Investor is entitled to customary information rights as set out in the Investor

Agreement. In the event that the shareholding of the Investor falls below 7%, and thereafter the Investor

acquires additional shares of our Company so as to take the shareholding of the Investor in our Company to

more than 7%, the information rights will no longer be available to the Investor. However, notwithstanding

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the information rights of the Investor, our Company shall publish any unpublished price sensitive

information before providing it to the Investor and the Investor agrees that these information rights shall

remain suspended during the time the Board withholds the publication of such price sensitive information.

(b) Investor not to be considered Promoters: The Investor is merely a financial investor in our Company.

Our Company shall take all actions to ensure that the Investor is not considered or classified to be a

‘promoter’ of our Company or as a person acting in concert with the promoter of our Company. The

Investor is not in control of our Company and the investment by the Investor is purely financial in nature.

(c) Non termination of arrangements with connected persons: Our Company is required to seek prior

written consent of the Investor before terminating any of its material contracts or arrangements with such

persons described as ‘connected persons’ in the Investment Agreement, in relation to sharing of

infrastructure or facilities.

(d) Term and termination: Either party has the right to terminate this Agreement any time before the date on

which closing shall have taken place due to a breach of the covenants of this Investment Agreement. In the

event the shareholding of the Investor (which shall include warrants on a fully diluted basis and any

purchase by the Investor of the shares of our Company in an open market) and its affiliates fall below 5%

of the paid up share capital of our Company this Investment Agreement shall terminate.

(e) Governing law: Indian law

(f) Dispute resolution: Arbitration will be carried out in accordance with the Arbitration and Conciliation Act,

1996 and the place of arbitration is Mumbai. All proceedings will be conducted in English Language.

3. Investment agreement dated May 9, 2008 between Asiabridge Fund I LLC, (“Investor”) and Shriram

City Union Finance Limited, (“Company”), (“Investment Agreement”)

Pursuant to the Investor Agreement, the Investor has subscribed to 5,87,500 equity shares constituting 1.32% of the equity share capital of our Company post the preferential allotment of equity shares to the Investor, certain other investors, Shriram Capital Limited and Shriram Enterprise Holding Limited, (“Post

Preferential Issue Equity Share Capital”) and 5,87,500 warrants each convertible to one equity share of our Company. The shares and the warrants subscribed by the Investor in one or more tranches would, on a fully diluted basis, aggregate to 2.23% of the Post Preferential Issue Equity Share Capital of our Company. The salient features of the Investor Agreement are as follows:

(a) Investor Rights:

(i) More favourable rights: Our Company shall not grant to the shareholders who may invest in our Company in the future (“New Investors”), any terms which are more favourable than that of the existing Investors, so long as the New Investors are at par or less than 2.23% of the shareholding in our Company.

(ii) Information Rights: The Investor is entitled to customary information rights as set out in the Investor Agreement. In the event any information rights are provided to other investors participating in the preferential allotment, the same rights shall be provided to the Investors.

(b) Investor not to be considered as promoters: The Investor is merely a financial investor in our Company.

Our Company shall take actions to ensure that the Investor shall not be considered/classified to be a

‘promoter’ of our Company or any ‘person acting in concert’ with the promoter of our Company. The

Investor is not in control of our Company and the investment by the Investor is purely financial in nature.

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(c) Term and termination: Either party has the right to terminate this Agreement any time before the date on

which closing shall have taken place due to a breach of the covenants by the opposite party of this

Investment Agreement.

(d) Governing Law: Indian Law

(g) Dispute Resolution: Arbitration will be in accordance with the Arbitration and Conciliation Act, 1996, and

the place of arbitration is Mumbai. All proceedings will be conducted in English Language.

4. Investment agreement dated December 26, 2006 between Van Gogh Limited, (“Investor”) and

Shriram City Union Finance Limited, (“Company”), (“Investment Agreement”) as amended by the

Subscription and Amendment Agreement dated May 12, 2008 between the Investor and our

Company, (“Amendment Agreement”)

Pursuant to the Investment Agreement, our Company has issued and allotted 40,00,000 equity shares, to the Investor in one or more tranches aggregating to 10.23% of the equity share capital of our Company, post the preferential allotment of equity shares to the Investor and other financial investors investing in the equity shares of our Company (“Other New Investors-I”)pursuant to the resolution passed under the extra-ordinary general meeting dated December 18, 2006, of our Company (“Post Preferential Issue Equity

Share Capital-I”). Pursuant to the Amendment Agreement our Company has further issued and allotted to the Investor, 6,62,500 equity shares constituting 1.5% of the equity share capital of our Company post the preferential allotment of equity shares to the Investor, Other New Investors-I and other financial investors investing in the equity shares of our Company (“Other New Investors – II”) pursuant to the preferential allotment under the extra-ordinary general meeting resolution dated May 3, 2008. Further, pursuant to the Amendment Agreement, our Company has issued and allotted 6,62,500 warrants to the Investor which represent a right to apply for an aggregate of 6,62,500 equity shares of our Company(adjusted for any bonus issues, share splits, share consolidation or reduction of capital of our Company). The salient features of the Investment Agreement and the Amendment Agreement are as follows:

(a) Indemnities: Our Company will indemnify (i) the Investor and its affiliates (entities which are either

controlled, in control of or in common control with the Investor) and employees and (ii) the Investor Group

(as described in the Investment Agreement), against any losses arising out of misrepresentations or breach

of any warranty, costs and expenses incurred by the Investors in respect of any claim.

(b) Board of Directors: Our Company, the Investor and Other New Investors – I will jointly agree on a panel

of six independent directors out of which three will be appointed by our Company for a period of five years

and will not be eligible to retire by rotation. The Investor also has a right to appoint an observer who is

entitled to attend any and all Board meetings.

(c) Reserved matters: Our Company is required to seek consent from the Investor before passing any

resolution or taking any decisions with respect to a reserved matter. Reserved matters include approval of

an annual business plan/operating budget; any material deviations from the approved business plan;

entering into or modifying transactions with connected persons/concerns; making investments or acquiring

shares exceeding ` 5 crore; transfer or disposal of any material part of our Company’s business; changes in

the memorandum or articles of association of our Company; issue of new shares or convertible instruments

(except in a case where the Investor has not exercised the pre-emptive rights offered to the Investor); any

change in the class rights, preferences and privileges of shareholders (including common equity, preference

shares and other convertible instruments); voluntary delisting of the shares; any material change in the

nature of business of our Company or commencement of a new line of business or entering into any joint

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venture, partnership or consortium arrangement; passing any resolution or taking any steps to have our

Company wound up, liquidated or to dissolve our Company, including taking steps to effect a

recapitalization, reclassification, split-off, spin-off or bankruptcy of our Company; undertaking a merger,

amalgamation, demerger, spin-off, consolidation of or by our Company or an acquisition of another

company; to mortgage, pledge, hypothecate, grant security interest in, subject to any lien, any business or

assets of our Company; appointment of the independent director and director appointed at the suggestion of

the Other New Investors and Other New Investors - II; approval of any employee stock option scheme or

employee stock purchase scheme; any change in the name of our Company; and any commitment or

agreement to do any of the foregoing;

(d) Further Issue of Shares: In the event that our Company issues any further shares or other warrants,

convertible instruments, or any options or any appreciation rights and other securities convertible into

securities or otherwise to any person, (“Fresh Offering”) the following shall be applicable vis-à-vis the

Investor.

(i) In case of a preferential issue: Our Company will offer such number of securities to the Investor, Other

New Investors-I and Other New Investors – II in the Fresh Offering, which is equal to their shareholding in

our Company prior to such Fresh Offering on the same terms as that of the Fresh Offering.

If any of the Other New Investors-I and the Other New Investors – II decline to subscribe to their portion of the securities so offered, then such declined securities shall be offered proportionately to the Investor and the non-declining Other New Investors-I and the non-declining Other New Investors – II in proportion to their respective shareholding percentage prior to the Fresh Offering in our Company, on the same terms as the proposed Fresh Offering.

(ii) In case of a rights issue: If a whole or a part of the rights issue remains unsubscribed then the unsubscribed

portion of the securities shall be proportionately offered to the Investor, the Other New Investors-I and the

Other New Investors – II on the same terms as the proposed rights issue. Provided that, if any of the Other

New Investors-I, the Other New Investors – II decline to subscribe such securities, our Company shall offer

such securities proportionately to the Investor, Other New Investor-I and the Other New Investor- II on the

same terms as the proposed rights issue.

(e) Investor not to be considered as Promoter: The Investor is merely a financial investor in our Company.

Our Company shall ensure that the Investor is not classified or considered to be a ‘promoter’ or a ‘person

acting in concert’ with the promoter of our Company. The Investor is not in control of our Company and

the investment by the Investor is purely financial in nature.

(f) Term and Termination: The rights of the Investor in connection with reserved matters stand terminated

upon the dilution threshold of the Investor (calculated as per the Amendment Agreement) falls below 7% as

a result of the Investor selling any of the Investor’s shares or failing to exercise their pre-emptive rights at

the time of a further issue. The rights of the Investor in connection with further issue of shares stand

terminated upon the dilution threshold falling below 5% unless the same is caused due to securities not

being offered to the Investor in accordance with the Investor’s pre-emptive right.

5. Share subscription agreement dated September 12, 2008 between (i) Mr. R. Thyagarajan, Mr. T

Jayaraman, Shriram Capital Limited and Shriram Ownership Trust acting through its trustees Mr.

R. Thyagarajan, Mr. Arun Duggal, Mr. D.A Prasanna, Mr. R. Kannan and Mr. D.V Ravi

(collectively known as the “Founders”) and (ii) TPG India Investments I, Inc. (the “Investor”) and

(iii) Shriram Retail Holdings Private Limited (“SRHPL”), and (iv) Shriram Enterprises Holdings

Private Limited (“SRHPL”) and Shriram City Union Finance Limited (“Company”), (“Agreement”).

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Pursuant to the Agreement, the Investor has subscribed to 1,306,700 shares and 1,538,278 warrants of SRHPL. Upon allotment of shares by SRHPL, the Investor shall hold 39.0% equivalent to 1,306,700 shares of SRHPL. The salient features of the agreement are as follows:

(a) Non-Compete: As long as the Investor directly or indirectly holds no less than 5% beneficial interest in

the paid up share capital of our Company, whether through SRHPL, SEHPL or directly in our Company, neither the Founders nor any of their affiliates may work for, associate with or conduct business as a competitor of the Company or any future direct or indirect subsidiaries of the Company (directly or indirectly).

Regardless of the beneficial interest of the Investor in our Company, (whether through SRHPL, SEHPL or directly in our Company), the Founders shall not, directly or indirectly, work for or associate in any way (including but not limited to as proprietor, shareholder, partner or director) with, or conduct business as, a competitor of our Company or any of its future direct or indirect subsidiaries for a period of five years from the later of (a) the date on which the Founders cease to have the right to appoint or nominate any Directors to the Board of all the Companies or (b) the date on which the Founders (taken together) cease to directly or indirectly hold at least 5% beneficial interest in the paid up share capital of the Company, whether through SRHPL, SEHPL or directly in our Company.

(b) Lock in and Restrictions on Transfer: For a period of three years from the date of closing, the Founders

shall not directly or indirectly effect or permit any transfer of shares of our Company, SEHPL or SRHPL or warrants issued by our Company to any person including the lenders of our Company, except with the prior written consent of the Investors. Such restrictions

The restrictions for transfer of shares shall not apply to any inter-se transfer between the Promoter and their affiliates, provided that such affiliate signs a deed of adherence. The Founders may seek to create a pledge, lien or charge over the shares held by SRHPL and SEHPL and SRHPL upon completion of the merger of SEHPL with SRHPL (as contemplated in the Agreement) in our Company as security for short term borrowings which pledge, lien or charge shall be subject to the prior written consent of the Investor. The restrictions contemplated herein shall not in any manner apply to the transfer of shares of Shriram Capital Limited subject to it satisfying certain conditions as laid down in the Agreement.

(c) Investor’s Right of First Refusal: Before transferring any of its shares and/or warrants in SCUFL and/or SRHPL, the Founder shall give a notice of such intention to transfer such shares and warrants (“Transfer

Notice”) which inter-alia includes details of the offer price and the name of the proposed purchaser to the Investor. If the Investor either fails to respond to the notice within 30 days or refuses to buy the shares, the Founder may transfer such shares and/or warrants to any person on terms and conditions no less favourable than indicated in the Transfer Notice.

(d) Tag along rights: Tag along rights are provided for in the Agreement. In the event of a proposed transfer

of shares and/or warrants by the Investor or Founders to a third party, the transferring percentage will be calculated and the non-transferring party is entitled to cause the proposed transferee to purchase such number of shares and/or warrants held by the non-transferring party as equal to the transferring percentage of the total number of shares and/or warrants held by the non-transferring party as on the date of the proposed transfer. Transferring percentage means the ratio of the number of shares and/or warrants proposed to be transferred by the transferring party and the total number of share and/or warrants held by the transferring party.

(e) Composition of the Board of Directors: Under the terms of the Agreement, the Board of our Company

shall constitute 12 (twelve) directors out of which (i) three directors shall be the nominee of the Investor; (ii) three directors shall be the nominee of the Founders; (iii) one director shall be the nominee of IREDA; (iv) four independent directors to be nominated by the following existing investors investment agreements namely (a) Indopark Holdings Limited (b) CPIM Structured Credit Fund A 1500 Limited; (c) CPIM Structured Credit Fund A 1000 Limited (d) CPIM Structured Credit Fund A 20 Limited (e) Van Gogh Limited (f) Western India Trustee and Executor Company Limited. The Investor and Founders shall mutually agree upon and identify one individual who shall be independent Director and who shall be the

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chairman of the Board. In the event that IREDA or any of the Existing Investors waive their right to nominate an independent Director on the Board of the Companies or cease to be entitled to such right, the resulting vacancy in the office of independent directors of the Companies shall be filled in accordance to the terms of this Agreement. The Managing Director of the Companies shall be appointed by the Founders.

(f) Quorum: The Chairman of the Board shall not have a casting vote. The quorum of any meeting of the

Board where any matter which requires the specific consent of the nominee(s) of the Investor or the Founders or both in accordance with the provisions of the Agreement is to be taken up shall be in accordance with applicable law, of which at least one Director shall be the nominee(s) of the Investor or the Founders or both, as the case may be. The quorum of any meeting of the Board of Directors other than those aforementioned shall be in accordance with the applicable law and shall comprise at least one Director who shall be a nominee of the Investor and one Director who shall be a nominee of the Founders. In the absence of such quorum, the meeting of the Board of Directors shall be reconvened after one week. At such reconvened meeting, the quorum shall be in accordance with applicable law and shall not require the presence of a nominee of the Investor and / or the Founders. However, it is clarified that at such meeting of the Board of Directors, there will be no discussion and no vote on matters which require either the specific consent of the nominee of the Investor or the Founders in terms of the Agreement. All decisions at any meeting of the Board shall be in accordance with the vote of a simple majority save such decisions which require the specific consent of the Founders or the Investor, as the case may be.

(g) Fundamental Issues: Any action with respect to customary fundamental issues shall require the specific

consent of the shareholders of SRHPL and SEHPL by way of an extraordinary resolution and/or the consent of the Investor’s and the Founders’ nominee on the Board or Committee thereof, as the case may be.

(h) Indemnification: Our Company and the Founders jointly and severally agree to indemnify the Investor in

case of any material breach arising from the agreement. (i) Investor not to be considered Founder/Promoter: The Founders will ensure that the Investor will not be

classified as ‘promoter’ of any of our Company or its subsidiaries and the shares and warrants allotted to the Investor at the time of closing are not subject to lock-in or any other restriction, which are applicable to the promoters. SRHPL, SEHPL and the Founders will be considered as ‘persons acting in concert’ with the Investor solely for the purpose of the Agreement and the acquisition of shares contemplated therein.

(j) Investor’s Right to Exit:

(i) Right to sell or transfer shares: The Investor has the right to freely transfer the beneficial interest held by it in SCUFL whether directly or through shares/warrants of SRHPL to any person including third parties. In the event that the proposed transfer of such beneficial (direct or indirect) interest by the Investor is by way of placement with other investors of a block of shares/warrants owned by the Investor, the SRHPL and SEHPL shall take necessary steps (including access to information and records) to facilitate such transfer by the Investor.

In the event of the block of shares/warrants proposed to be transferred by the Investor is:

• less than 25% of the fully diluted percentage beneficial ownership held by the Investor in SCUFL (whether directly or through SRHPL and SEHPL), the transfer of such shares and warrants by the Investor shall be without any rights attached to such shares/warrants under this Agreement, subject to the transferee executing a deed of adherence;

• more than 25%, but less than 50% of the fully diluted percentage beneficial ownership held by the Investor in SCUFL (whether directly or through SRHPL and SEHPL), the Investor shall be entitled to transfer such shares and warrants along with the Tag-along rights, Information Rights, Right of registration and right to nominate one director on the Board of Directors of SRHPL and SCUFL only, subject to the transferee executing a deed of adherence;

• more than 50% of the fully diluted percentage of beneficial ownership held by the Investor in SCUFL (whether directly or through SRHPL and SEHPL), the Investor shall be entitled to transfer such shares and warrants with all rights attached to such shares or warrants under this Agreement subject to the transferee executing a deed of adherence.

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(ii) Roll down of beneficial ownership of SCUFL: Any time after the expiry of two years from the date of

closing, the Investor may require SRHPL to distribute the shares/warrants held by SRHPL in our Company amongst the Founders and the Investor in proportion to their respective holdings in SRHPL. In the alternative, the Investor may require the merger of SRHPL with our Company to effect such distribution and the Founders agree to use their best efforts to effect such distribution.

(h) Drag along Rights: The Investor has the right but not the obligation to require the Founders to sell all or

part of the any Shares or Warrants that the Founders hold in our Company and/or SRHPL. (Shares or Warrants mean any shares and warrants held by the Founders or the Investor in our Company and/or SRHPL, or any direct or indirect beneficial interest held by the Founders or the Investor in the shares and warrants of our Company and/or SRHPL). The Investor may notify the Founders of its decision to exercise this right by delivering a written notice (“Exit Notice”) to the Founders. The Founders may notify the name of a proposed purchaser, (“Proposed Purchaser”), terms and conditions of the purchase, including the price, (“Exit Price”), for the purchase of all but not part of the Shares and Warrants held by the Investor within 30 days from the receipt of the Exit Notice.

The Investor may exercise its acceptance to sell all of its Shares and Warrants to the proposed purchaser within 30 days of the receipt of the exit notice (“Acceptance Period”), by delivery of a written notice.

In the event the Investor, at its sole discretion, does not accept the offer for purchase, or the Investor has failed to communicate its agreement to sell its Shares and Warrants to the proposed purchaser at the end of the expiry of the Acceptance Period, the Investor may, within 180 days of the Acceptance Period, furnish a written notice (“Drag Notice”) giving the name of a proposed buyer, (“Exit Buyer”), along with terms and conditions including price offered by the Exit Buyer, (“Drag Price”) to purchase all or part of the Shares and Warrants held by the Founders. The Drag Price shall not be less than the Exit Price and the fair market value calculated as on the date of the Exit Notice.

Upon delivery of the Drag Notice, the Founders are required to transfer the Shares and Warrants as required by the Drag Notice to the Exit Buyer, upon the same terms and conditions (including, the Drag Price) as agreed by the Investor and the Exit Buyer. The Founder shall make representations, warranties, covenants and agreements to the Exit Buyer comparable to those made by the Investor and shall agree to the same conditions to the transfer as the Investor agrees. All such representations, warranties, covenants and agreements shall be made by each Founder and Investor severally and not jointly

(i) Consequences of a material breach: In the event of a material breach of the provisions of this Agreement,

the non-defaulting parties are entitled to the following rights if such material breach is not cured within 60 days of receipt of notice of such breach, (“Cure Period”) and the non-defaulting party has not been compensated according to the provisions of the Agreement.

(i) Put and Call Option: The non-defaulting party shall have the right to either require the defaulting party, jointly and severally, to acquire any or all of the Shares and Warrants held by the non-defaulting party in SRHPL (collectively, “Securities”) at a price equivalent to 12.5% of the fair market value of the Securities, or cause the defaulting party to sell to the non-Defaulting party any or all of the Securities then held by the defaulting party at a price equivalent of 75% of the fair market value of the securities. The aforesaid premium or discount to the fair market value represents a reasonable assessment made by the defaulting party and the non-defaulting party representing the size of the liquidated damages payable to the non-defaulting party owing to the breach on the part of the defaulting party.

Within 30 days from the expiry of the Cure Period, the non-defaulting party shall issue a notice, (“Options

Notice”) to the defaulting party setting out the details of the option proposed to be exercised by the non-defaulting party, number of shares and/or warrants in respect of which such option is proposed to be exercised and the price of each share and/or warrant for such purpose. The sale or purchase of the Shares and/or Warrants, pursuant to such Option Notice shall be completed within 30 days from the date of the Option Notice.

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(ii) Merger of SCUFL with SRHPL: The non-defaulting party has the right to requisition the convening of an

extra-ordinary general meeting of the shareholders of our Company and SRHPL to effect and sanction the

merger of SCUFL and SRHPL. For the purpose of protecting the non-defaulting party’s rights under this

Agreement, SRHPL and the defaulting party shall vote in favour of any resolution at such meeting of the

shareholders of our Company and SRHPL to authorize, sanction or effect such merger.

(j) Dispute Resolution: Arbitration in accordance with the Arbitration and Conciliation Act, 1996 and the

place of arbitration is Mumbai. Arbitration will be conducted in English Language.

(k) Governing law: Indian Law.

6. License Agreement dated April 1, 2010 between Shriram Ownership Trust, (“SOT”) and our

Company, (“License Agreement”):

Pursuant to the License Agreement, SOT granted license to use the non exclusive copyright, relating to the existing artistic work “SHRIRAM” logo, (“Copyright”) assigned in the favour of SOT by Shriram Capital Limited, to our Company and to reproduce the said work, in connection with the business activities of our Company in the territory of India during the term of the Copyright. The salient terms of the License Agreement are as follows:

(i) Consideration: A royalty of 0.25% on the gross turnover of our Company for the first year of the License Agreement will be paid by our Company to SOT. Royalty rates for the subsequent years will be decided mutually on or before April 1st of the respective financial years. Royalty will be paid by our Company to SOT with quarterly rates ending on June 30th, September 30th, December 31st and March 31st with effect from date of the License Agreement. Along with the royalty, our Company will also pay to SOT amounts by way of reimbursement of actual expenses incurred by SOT in respect of protection and defence of the Copyright.

(ii) Duration: The License Agreement will remain in force for a period of three years and can be renewed thereafter by mutual consent. SOT may terminate the agreement if our Company breaches the provisions of the License Agreement and fails to remedy such breach within 60 days of notice of such breach.

(iii) Arbitration: In case of dispute or difference arising between the SOT and our Company shall be referred to an arbitrator decided on a mutual consent and the decision of the arbitrator is final and binding on both the parties. The place of arbitration shall be in Chennai.

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OUR MANAGEMENT

Board of Directors The general superintendence, direction and management of our affairs and business are vested in our Board of Directors. Currently, we have 12 Directors on our Board.

Details relating to Directors

Name, Designation,

Age and DIN

Nationality Date of

Appointment

Address Other Directorships

Mr. Arun Duggal

Non Executive Non-

Independent

Chairman

Age: 64 DIN: 00024262

Indian/United States of America (Dual citizenship holder)

May 25, 2007 A-4, 3rd Floor West-End Colony New Delhi- 110 021

(i) Zuari Industries Limited; (ii) Patni Computers Systems Limited; (iii) Ecron Acunova Limited ( Name

change from Manipal Acunova Limited);

(iv) Info Edge (India) Limited ; (v) Jubiliant Energy N.V, Canada; (vi) Shriram Properties Limited; (vii) Dish TV India Limited; (viii) Shriram Transport Finance

Company Limited; (ix) Mundra Port and Special

Economic Zone Limited; (x) Shriram EPC Limited; (xi) Motrice Limited, Singapore; (xii) FIL Fund Management Private

Limited; (xiii) Carzonrent (India) Private Limited; (xiv) The Bellwether Microfinance Fund

Private Limited; (xv) International Asset Reconstruction

Company Private Limited; (xvi) Blackstone Investment Company

Private Limited; (xvii) Tanglewood Financial Advisors

Private Limited; (xviii) Shriram Capital Limited; and (xix) Jubiliant Energy N.V, Netherlands

Mr. R. Kannan Managing Director Age:66 DIN: 00140363

Indian September 15, 2005

No. 20/32, 2nd Floor SA-1 Abirami Camelia, 4th Main Road Kasturbai Nagar Adyar, Chennai- 600 020

(i) Shriram Properties and Constructions (Chennai) Limited;

(ii) Shriram Permanent Fund Limited; and

(iii) Shriram Entrepreneurial Ventures Limited

Mr. Mukund Govind Diwan Non Executive

Independent Director

Age:79 DIN:00001097

Indian June 15, 2007 Flat No. 3, Gulmohar Building, 1st Floor, Vile Parle Kalpataru Co-operative Housing Society, off. Swami Vivekanand Road, Vile Parle (West), Mumbai-400 056

(i) Indian Institute of Public Opinions Private Limited;

(ii) DS Acturial Education Services Private Limited;

(iii) VLS Finance Limited; (iv) G M Breweries Limited; (v) Marketing Research Corporation of

India Limited (vi) Shriram Chits (Maharashtra)

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Name, Designation,

Age and DIN

Nationality Date of

Appointment

Address Other Directorships

Limited; and (vii) GDA Trustee and Consultancy

Limited

Mr. S.

Krishnamurthy Non Executive

Independent Director

Age:72 DIN: 00140414

Indian April 28, 2005 Flat No. 2/B 2nd Floor, SPL Uma Apartments, Old No. 169 New No. 34 Luz Church Road Mylapore, Chennai -600 004

(i) Kerela Ayurveda Limited; (ii) Take Solutions Limited; and (iii) Shriram EPC Limited

Mr. Vipen Kapur Non Executive

Independent Director

Age:65 DIN: 01623192

Indian June 15, 2007 No. A1-1201 World SPA, Sector - 41, Gurgaon - 122002

(i) Maxima Global Executive and Search Singapore PTE Limited

Mr. S.

Venkatkrishanan Non Executive Non-

Independent Director

Age:81 DIN: 00136608

Indian July 28, 2000 34, Oliver Road, Mylapore, Chennai , 600 004

(i) Galada Finance Limited; (ii) Shriram Transport Finance

Company Limited; (iii) Shriram Housing Finance &

Development Company Limited; (iv) Novochem Laboratories Limited; (v) Madras Shoe Fabric Company

Limited; (vi) Shriram Credit Company Limited; (vii) Shriram Trade Finance Company

Limited; (viii) Shriram Industrial Holdings

Private Limited; (ix) Shriram Exports Private Limited; (x) Ranjani Enterprises Private

Limited; (xi) Charukesi Investments

PrivateLimited; (xii) Road Safety Club Private Limited; (xiii) Rambal Properties Private Limited; (xiv) Shriram Investments Holdings

Limited (xv) Shriram Overseas Investment

Private Limited (Formerly Dhanashri Investments Private Limited) and

(xvi) Celindia Finance And Investment Company Private Limited

Mr. Ranvir Dewan Non-Executive Non

Independent Director

Citizen of Singapore

December 1, 2010

41, Ewe Boon Road #11/41, Crystal Tower Singapore - 259335

(i) PT Bank Tabunean Pensiunan Nasional (Indonesia); and

(ii) Shriram Transport Finance Company Limited

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Name, Designation,

Age and DIN

Nationality Date of

Appointment

Address Other Directorships

Age; 57 DIN: 01254350

Mr.K.R.

Ramamoorthy

Non-Executive

Independent Director

Age:70 DIN:00058467

Indian December 1, 2010

D-302M Mantri Garden, Madhavan Park, Jayanagar I-Block, Bangalore Karnataka-560 011

(i) FIL Trustee Company Private Limited;

(ii) Ujjivan Financial Services Private Limited;

(iii) GMR Power Corporation Private Limited;

(iv) GMR Ambala- Chandigarh Expressways Private Limited;

(v) The Clearing Corporation of India Limited;

(vi) Subros Limited; (vii) Nilkamal Plastics Limited; (viii) Amrit Corp. Limited; (ix) GMR Infrastructure Limited and; (x) Clear Corp Dealing Systems (India)

Limited;

Ms. Lakshmi

Pranesh Non-Executive

Independent Director

Age: 66 DIN: 03333412

Indian December 1, 2010

Old 48, New 30, Rukmani Road Kalakshetra Colony Besant Nagar, Chennai Tamil Nadu -600 090

Nil

Mr. Puneet Bhatia Non-executive Non-

Independent Director

Age:44 DIN: 00143973

Indian December 1, 2010

214B Aralias Apartments, DLF PH-V, Old Golf Club Gurgaon - 122009

(i) TPG Capital India Private Limited; (ii) Shriram Transport Finance

Company; (iii) Shriram Holdings (Madras) Private

Limited (iv) Shriram Capital Limited (v) Shriram Properties Limited

Mr. G. S.

Sundararajan Non Executive Non-

Independent Director

Age: 51 DIN: 00361030

Indian December 31, 2009

A2, Ashok Tejashvi, New No. 7, Fourth Cross Street, R. A. Puram, Chennai – 600 028

(i) Shriram Capital Limited;; (ii) Shriram Credit Company Limited; (iii) Shriram General Insurance

Company Limited; (iv) Vistaar Livelihood Financial

Services Private Limited and (v) Shriram Life Insurance Company

Limited; (vi)

Mr. Sunil Varma

Non Executive

Independent Director

Age: 67 DIN: 01020611

Indian August 17, 2007

104 Aradhana Apartments R.K.Puram Sec-13, New Delhi- 110 066

(i) International Asset Reconstruction Company Private Limited

(ii) Vistaar Livelihood Financial Services Private Limited and

(iii) Shriram EPC Limited

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Profile of Directors

Profile of Directors

Mr. Arun Duggal - Chairman

Mr. Arun Duggal is the non-executive Chairman of our Board. Mr. Duggal holds a Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Delhi and a Master’s degree in Business Administration from the Indian Institute of Management, Ahmedabad. Mr. Duggal is an experienced international banker and has an experience of approximately 33 years in the banking and finance industry. He has advised companies on financial strategy, mergers and acquisitions and on various means of raising capital. He serves on the Board of Directors of Jubiliant Energy. Netherlands (Chairman of Audit Committee), Patni Computers (Chairman of Audit Committee), Fidelity Fund Management, Ecron Acunova, Zuari Industries, Info Edge (Chairman of Audit Committee), Dish TV, Mundra Port, Motrice Limited (Singapore) (Chairman of Audit Committee), Shriram City Union Finance Limited, Shriram Capital Limited and others. He is also a member of the Investment Committee of Axis Private Equity. He had a distinguished career with Bank of America for 26 years in the US, Hong Kong, Japan, Philippines, etc. He was the Chief Executive of Bank of America in India from 1998 to 2001. Currently, he is a visiting faculty at the Indian Institute of Management, Ahmedabad and teaching Venture Capital. Mr. R. Kannan- Managing Director

Mr. R. Kannan holds a degree in Bachelors in Arts from University of Madras. Mr. Kannan has approximately 50 years of experience in the banking and finance industry. He serves on the board of directors of Shriram Properties & Constructions (Chennai) Limited, Shriram Permanent Fund Limited and Shriram Entreprenuerial Ventures Limited.

Mr. Mukund G. Diwan

Mr. Mukund G. Diwan holds a masters degree in Statistics from University of Mumbai, and is a fellow member of the Institution of Actuaries, London (FIA) and the Institute of Actuaries of India. Mr. Diwan has a wide experience in the insurance industry and expertise in carrying out Management and Actuarial consultant assignments. He has served as a Chairman of the Life Insurance Corporation of India (LIC) and is working as a consulting actuary in the areas of life insurance, general insurance and retirement benefits. He serves on the Boards of VLS Finance Limited, G.M. Breweries Limited, Marketing Research Corporation of India Limited, Sriram Chits (Maharashtra) Limited, GDA Trustee & Consultancy Limited, Indian Institute of Public Opinion Private Limited, DS Actual Education Services Private Limited and a partner in K.A. Pandit (Consulting Actuaries). Currently he is appointed as an Actuary for LIC, Nepal; LIC, Sri Lanka and a few companies in the Gulf.

Mr. S. Krishnamurthy

Mr. S. Krishnamurthy holds a Master’s Degree in labor management and post graduate diploma in Industrial Relations and Personnel Management from Madurai Kamaraj University and Personnel Management (IR&PM).. He is also a certified Associate of the Indian Institute of Bankers with a Bachelors Degree in General Laws from University of Mysore. Mr. Krishnamurthy is a senior banker with experience of approximately 40 years with the Reserve Bank of India and commercial banks. He was the chairman and chief executive officer of Tamil Nadu Mercantile Bank, Tuticorin for a

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period of 5 years and also served as General Manager (Vigilance & Inspection/Audit) with Indian Overseas Bank, Chennai for a period of 5 years. He was Banking Ombudsman, Chennai for a period of approximately 2 years. He serves on the Board of Kerala Ayurveda Limited, Take Solutions Limited and Sriram EPC Limited.

Mr. Vipen Kapur

Mr. Vipen Kapur holds bachelors degree in Commerce from University of Madras and is an Associate of the Institute of Bankers, London. He has wide experience in the international banking sector and has served in various departments of the Standard Chartered (erstwhile Grindlays Bank). Mr. Kapur was the chief operations officer at the Al Rushiad Group in Saudi Arabia, Managing Director of Sinar Mas Group of Indonesia and President and chief executive officer of New Quest Corporation Private Limited. Mr. Kapur is the author of “Power through people and principles”, published by Tata Mcgraw Hill, which won the Best Book Award by Indian Society for Training and Development in the year 2001. He serves on the Board of Maxima Global Executive Search Singapore Pte. Limited. Mr. S. Venkatakrishnan

Mr. S. Venkatakrishnan is a Non-executive Director on our Board. He is a post graduate in Mathematics from Madras University and is also a member of the Indian Audit and Accounts Service, Government of India, where he has held senior positions in the Finance, Audit & Accounts department of the Government and other Public Undertakings. He also functioned as BIFR Director in several companies for a period of five years. He serves on the Board of Shriram Transport Finance Company Limited, Shriram Industrial Holdings Private Limited, Shriram Exports Private limited, Dhanasri Investments Private Limited, Shriram Housing Finance and Development Company Limited, Sriram Credit Company, Shriram Trade Finance Company Limited, Sriram Investments Holdings Limited and others. Mr. Ranvir Dewan

Mr. Ranvir Dewan is a Non-Executive Director on our Board. Mr. Dewan holds bachelors degree in Commerce (Hons) from Shriram College of Commerce, Delhi University, India. He is a fellow member of the Institute of Chartered Accountants in England & Wales (FCA) and a member of the Canadian Institute of Chartered Accountants (CA). He has over 30 years of experience in the finance and investment sector. Mr. Dewan joined TPG-Newbridge Capital in July 2006 and is currently the Head of Financial Institutions Group Operations. Previously, he was Executive Vice President and Chief Financial Officer of Standard Chartered First Bank in Seoul, Korea. He has also spent over thirteen years at Citibank in various senior positions in its international businesses. In his previous assignment, he was Vice President and Regional Financial Controller of Citibank’s Global Consumer Bank with responsibilities covering 11 countries in the Asia Pacific region. He has also held senior positions with KPMG in Canada and England where he specialized in the audits of financial institutions. Mr. Dewan serves on the Boards of Shriram Transport Finance Company Limited in Chennai, India and PT Bank Tabunean Pensiunan Nasional Tbp (“BTPN”) in Jakarta, Indonesia and is a member of the Audit and Risk Committees of Bank BTPN. Mr. Dewan is an advisor of Taishin Financial Holdings. Mr. K. R. Ramamoorthy

Mr. K.R. Ramamoorthy holds a Bachelors degree in Economics and Law from University of Delhi and is a senior Fellow member of the Institute of Company Secretaries of India. Mr. Ramamoorthy is a senior banker with approximately 40 years of commercial and banking experience in India. He has served as the Chairman and Managing Director of Corporation Bank and the Chairman and CEO of ING Vysya Bank. Mr. Ramamoorthy has served on various committees including those constituted by the Reserve Bank of India, SEBI and the Indian Banks Association. He has also served as Convener, Economic Affairs Panel, Confederation of Indian Industry (CII), Karnataka.

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He serves on the Board of the Clearing Corporation of India Limited, Subros Limited, Amrit Corp. Limited, GMR Infrastructure Limited, , ClearCorp Dealings Systems (India) Limited, FIL Trustee Company Private Limited, Ujjivan Financial Services Private Limited, GMR Power Corporation Private Limited and GMR Ambala-Chandigarh Expressways Private Limited.

Mrs. Lakshmi Pranesh

Mrs. Lakshmi Pranesh holds a bachelors and a master’s degree in Mathematics from the University of Madras. She is an ex-officer of the Indian Administrative Services (I.A.S.). She retired as Chief Secretary to the Government of Tamil Nadu in the year 2005. She has served as a government nominated director in many corporations in the public sector viz. the Tamil Nadu Industrial Development Corporation, Small Industries Development Corporation, Police Housing Corporation and Agro-Industries Corporation. Presently she does not hold directorships in any other company. Mr. Puneet Bhatia

Mr. Puneet Bhatia is Managing Director and Country Head - India for TPG Asia. Prior to joining TPG Asia in April 2002, Mr. Bhatia was Chief Executive, Private Equity Group for GE Capital India (“GE Capital”), where he was responsible for conceptualizing and creating its direct and strategic private equity investment group. As Chief Executive, he handled a portfolio of almost a dozen companies including TCS, Patni Computers, BirlaSoft, Sierra Atlantic, iGate, Indus Software and Rediff. He was also responsible for consummating some of GE Capital’s joint ventures in India. Prior to this, Mr. Bhatia was with ICICI Bank Limited from 1990 to 1995 in the Project and Corporate Finance group and thereafter worked as Senior Analyst with Crosby Securities from 1995 to 1996 covering the automobiles and consumer sectors. Mr. Bhatia is a native of and is based in India and currently serves as Director on the Board of Shriram Transport Finance Company Limited, TPG Capital India Private Limited, Shriram Holdings (Madras) Private Limited, Shriram Capital Limited and Shriram Properties Limited . Mr. Bhatia has a B.Com Honors degree from the Sriram College of Commerce, Delhi and an M.B.A. from the Indian Institute of Management, Calcutta. Mr. G.S. Sundararajan Mr. G.S. Sundararajan holds a bachelors degree in engineering from College of Agricultural Engineering, Tamil Nadu Agricultural University, Coimbatore and a post graduate diploma in management from the Indian Institute of Management, Ahmedabad. Mr. Sundararajan has served as the Managing Director and head of Citibank SME & Asset Based Finance business in India and as the Managing Director of Fullerton India Credit Company Limited. He is also the Managing Director of Shriram Capital Limited, and serves on the boards of Shriram Credit Company Limited, Shriram General Insurance Company Limited, Shriram Life Insurance Company Limited and Vistaar Livelihood Financial Services Private Limited.

Mr. Sunil Varma

Mr. Sunil Varma is a fellow member of the Institute of Chartered Accountants of India and the Institute of Cost & Management Accountants India. He also holds a Bachelor’s degree in Arts (Maths and Economics) from Punjab University. Mr. Varma has consulting experience of approximately 30 years with Price Waterhouse Management Consultants and the IBM Consulting group in India and overseas. He has also worked as a CFO in HCL Perot Systems and MD Asia online Limited Hong Kong. He has advised companies on corporate governance, financial management, organizational strengthening, efficiency improvements, process re-engineering and business systems. He serves on the Board of Sriram EPC Limited, International Asset Reconstruction Company Private Limited and Vistaar Livelihood Financial Services Private Limited.

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Remuneration of the Directors

The independent directors are paid sitting fees for attending the various meetings of the Board and of the Committees of the Board as under:

Meeting Overall limit per Director (`)

Meetings of the Board 15,000

Meetings of any committee of the Board 10,000

Appointment and Remuneration of the Managing Director

Mr. R. Kannan has been appointed as the managing director of our Company for period of three (3) years with effect from September 15, 2010, pursuant to a resolution of the shareholders of our Company passed at their AGM held on July 30, 2010. Currently no remuneration is payable to our managing director as consented by him and authorised by an ordinary resolution passed by the shareholders of our Company at their general meeting held on July 30, 2010. Other terms of appointment of our Managing Director are as follows:

1. The Managing Director shall not be paid any sitting fees for attending General Meetings and Meetings of the Board or Committee thereof.

2. The Board may revise the existing or allow any other facilities/perquisites from time to time, within overall ceiling limits.

3. The Managing Director is not liable to retire by rotation.

For further details refer to the section titled “Material Contracts and Documents for Inspection” beginning on page 192 this Prospectus.

Borrowing Powers of the Board

Pursuant to resolution passed by the shareholders of our Company at their AGM held on July 28, 2011, and in accordance with provisions of Section 293 (1)(d) of the Act, the Board has been authorised to borrow sums of money as they may deem necessary for the purpose of the business of our Company upon such terms and conditions and with or without security as the Board of Directors may think fit, provided that money or monies to be borrowed together with the monies already borrowed by our Company (apart from temporary loans obtained and/or to be obtained from the Company’s bankers in the ordinary course of business) shall not exceed ` 15,00,000 lakhs.

Interest of the Directors

All the directors of our Company, including our independent directors, may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the board or a committee thereof as well as to the extent of other remuneration and reimbursement of expenses payable to them. All the non-executive independent directors of our Company are entitled to sitting fees for every meeting of the board or a committee thereof. The managing director of our Company is interested to the extent of remuneration paid for services rendered as an officer or employee of our Company. All the directors of our Company, including independent directors, may also be deemed to be interested to the extent of Equity Shares, if any, held by them or by companies, firms and trusts in which they are interested as

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directors, partners, members or trustees and also to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares. All our directors may be deemed to be interested in the contracts, agreements/arrangements entered into or to be entered into by our Company with any company in which they hold directorships or any partnership firm in which they are partners as declared in their respective declarations. Except as otherwise stated in this Prospectus and statutory registers maintained by our Company in this regard, our Company has not entered into any contract, agreements or arrangements during the preceding two years from the date of this Prospectus in which the directors are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements which are proposed to be made with them. Our Company’s directors have not taken any loan from our Company.

Debenture holding of Directors:

None of our Directors are holding debentures of our Company.

Changes in the Directors of our Company during the last three years:

The Changes in the Board of Directors of our Company in the three years preceding the date of this Prospectus are as follows:

Name of the Director Date of Change Reason

Mr. V. Parthasarathi November 2, 2009 Resignation

Dr. T.S. Sethurathnam January 30, 2010 Resignation

Shareholding of Directors, including details of qualification shares held by Directors

As per the provisions of our MOA and AOA, Directors are not required to hold any qualification shares.

None of our Directors are holding shares in our Company.

Corporate Governance

Our Company has been complying with the requirements of the applicable regulations, including the listing agreement with the Stock Exchanges where our securities are listed and the SEBI Regulations, in respect of corporate governance including constitution of the Board and Committees thereof. The corporate governance framework is based on an effective independent Board, separation of the Board’s supervisory role from the executive management team and constitution of the Board Committees, as required under law. The Board is constituted in compliance with the Companies Act , the listing agreement with Stock Exchanges where our securities are listed and in accordance with best practices in corporate governance. The Board functions either as a full Board or through various committees constituted to oversee specific operational areas. The executive management of our Company provides the Board detailed reports on its performance periodically.

Details of various committees of the Board

Our Company has constituted the following committees:

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A. Audit Committee

The members of the Audit Committee as on March 31, 2011 are: 1. Mr. Sunil Varma- Chairman 2. Mr.S. Krishnamurthy 3. Mr. S Venkatakrishnan 4. Mr. Mukund Govind Diwan 5. Mr. Ranvir Dewan 6. Mrs. Lakshmi Pranesh Terms of Reference:

� To oversee the financial reporting process � To recommend appointment and re-appointment of Auditors and their remuneration � Approval of payment to Statutory Auditors for any other services rendered by the Statutory Auditors � Reviewing, with the management, the Financial Statements before submission to the Board � To ensure proper disclosure in the quarterly , half yearly and Audited Financial Statements

� Reviewing the adequacy of internal audit function including the structure of the internal audit department,

staffing and seniority of the official heading the department, reporting structure , coverage and frequency of internal audit

� Discussing with Internal Auditors on any significant findings and follow up there on

� Reviewing the findings of any internal examinations by the Internal Auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board

� Discussion with Statutory Auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern.

� To discuss with management, the senior internal audit executives and the Statutory Auditor/s, the

Company’s major risk exposures and guidelines and policies to govern the processes by which risk assessment and risk management is undertaken by the Company, including discussing the Company’s major financial risk exposures and steps taken by management to monitor and mitigate such exposures and from time to time conferring with another Committee/s of the Board about risk exposures and policies within the scope of such other Committee’s oversight.

� To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors, if any.

� To review the functioning of the Whistle Blower Mechanism

� To approve appointment of Chief Financial Officer (CFO) of the Company( person heading the finance function or discharging that function) .

� To have management discussion and analysis of financial condition and results of operations;

� To review significant related party transactions

� Management letters/letters of internal control weaknesses issued by the Statutory Auditors

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� Internal Audit Reports relating to internal control weaknesses � To review the appointment , removal and terms of remuneration of the Internal Auditor

� Reviewing , with the management, performance of Statutory and Internal Auditors, adequacies of the

internal control systems

� To Carry out any other function as decided by the Board from time to time

B. Remuneration and Compensation Committee

The members of the Remuneration and Compensation Committee as on March 31, 2011 are: 1. Mr. Vipen Kapur- Chairman 2. Mr. S. Krishnamurthy 3. Mr. Mukund Govind Diwan The terms of reference of the Remuneration and Compensation Committee, inter alia, include:

� To determine salaries, benefits and stock options grants to Directors of the Company.

� To develop guidelines, review and approve the Remuneration Policy of the Company.

� To guide the management regarding the Company’s compensation, bonus, pension and other benefit plans, policies and practices and the talent management .

� To review and approve employment agreements , severance arrangements, change in control agreements and

any other benefits, compensation or arrangements for the Directors of the Company

� To establish guidelines and to grant the stock options to employees and officers of the Company .

� To administer the Company’s stock incentive plans and other similar incentive plans and interpret and adopt rules for the operation thereof.

C. Shareholders’ and Investors’ Grievance Committee The members of the Shareholders’ and Investors’ Grievance Committee as on March 31, 2011 are:

1. Mr. S. Venkatakrishnan- Chairman 2. Mr. R. Kannan 3. Mr. S. Krishnamurthy

The terms of reference of the Shareholders and Investors Grievance Committee, inter alia, include: � Redressal of shareholders' and investors' complaints;

� Review the Shareholding pattern and Ownership .

� Facilitate better investor services and relations.

� Transfer of unclaimed Dividend/Deposits/Debentures/Subordinated Debt , to Investor Education and

Protection Fund

� Listing of Securities on Stock Exchanges including Global depository receipts

� Review of Secretarial audits, appointment of Secretarial Auditors and their remuneration

� Any other subject as may be assigned by the Board from time to time.

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� To form Sub Committees

D. Asset liability Management Committee The members of the Asset liability Management Committee, (“ALCO”) as on March 31, 2011 are:

1. Mr. R. Kannan- Chairman 2. Mr. R. Chandra Sekhar 3. Mrs. Subasri Sriram

The terms of reference of the ALCO, inter alia, include:

The ALCO is responsible for ensuring adherence to the limits set by the Board as well as for deciding the

business strategy of the Company in line with the Company’s budget and decided risk management objectives.

The ALCO is the decision-making unit responsible for Balance Sheet planning from risk-return perspective

including strategic management of interest rate and liquidity risks.

Its functions include the following:

� Liquidity risk management

� Funding and Capital Planning

� Forecasting and analyzing future business environment and preparation of contingency plans

� Management of Market Risk

� Profit Planning and growth projection

E. Banking and Finance Committee The members of the Banking and Finance Committee as on March 31, 2011 are: 1. Mr. S. Venkatakrishnan - Chairman 2. Mr. R. Kannan The terms of reference of the Banking and Finance Committee, inter alia, include: � Banking operations including Open, Close, Operation of all types of Bank Accounts with any Bank and

authorize such person to do all or any of these activities. � Authorise any person/s to accept and confirm the bank balances � Borrow money from bank or any other institution within the limit specified by the Board from time to time

either by short term loan or long term loan by whatever name called.i.e, working capital loan, cash credit, working capital demand loan, short term loan, overdraft, term loan, commercial paper, debentures, securitization etc.

122

� Invest keep deposited or otherwise the funds of the Company in short term deposits and long term deposits with banks or any other institutions, in mutual funds or any other funds within the limit sanctioned by the Board and authorize such person/s to do any such activities.

� Apply for listing of any instruments/ securities as may be required with any of the Stock exchanges. � To authorize any person to sign the documents required for banking and borrowing of any nature and such

other activities. � To do all such acts required for all types of banking and borrowing and authorize such other person/s to do

any or all such activities. � To sell down the assets of the Company. � To appoint issuing and paying agents, merchant bankers, brokers and related agents for banking and

borrowings. � Any other activity related to banking and borrowing or any activity of business importance as may be

ratified by the Board.

Payment of benefits and profit-share to Employees

Except entitlement to stock options under the ESOP 2006 and ESOP 2008, and payments in accordance with the terms of appointment of our employees, we have not paid or granted any amounts or benefits to our employees, in the two years preceding the date of this Prospectus. Our employees are not entitled to any share in the profits of our Company.

123

OUR PROMOTER

Profile of our Promoters

Our Promoters are Shriram Enterprise Holdings Private Limited and Shriram Retail Holdings Private Limited.

A. Shriram Enterprise Holdings Private Limited

Shriram Enterprise Holdings Private Limited was incorporated as a private limited company under the Act on June 29, 1995, vide a certificate of incorporation issued by the ROC, Chennai, Tamil Nadu. The registered office of our Promoter is located at Mookambika Complex, No.4, Lady Desika Road, Mylapore, Chennai 600 004. Our Promoter is primarily engaged in the business of investment promotion including facilitating strategic investor or private equity investor or third parties to invest in our Company.

Our Promoter has not been named or set out as a promoter of any other company in any offer document, filing with stock exchange(s) or with any regulatory and/or statutory authorities. Further, besides holding shares of our Company, our Promoter does not directly or indirectly hold shares in the share capital of any company. There are no common pursuits between our Company and our Promoter.

Interest of Promoter in our Company

Except as stated under the section titled “Financial Information” beginning on page 130 of this Prospectus and to the extent of their shareholding in our Company, the Promoter does not have any other interest in our Company’s business. Further, our Promoter has no interest in any property acquired by our Company in the last two years from the date of this Prospectus, or proposed to be acquired by our Company.

Our Promoter does not propose to subscribe to this Issue.

Other than the payment of dividend on the shares held by our Promoter in the share capital of our Company, and issue of the following Equity Shares and warrants convertible into Equity Shares, interest paid on Inter-corporate Deposit, we have not paid or granted any amounts or benefits, in the two years preceding the date of this Prospectus. Details of Shares allotted to our Promoter during the last three Financial Years

Shareholding Pattern of our Promoter as on March 31, 2011:

Sr.

No.

Name of Shareholder No. of Shares Percentage Shareholding(%)

1. Shriram Retail Holdings Private Limited 999,990 99.99

2. Sri R. Thyagarajan and Shriram Retail Holdings Private Limited

10 0.01

Total 1,000,000 100.00

Sr.

No.

Nature of Transaction Date of

allotment

No. of

Securities

Issue Price (`̀̀̀)

1. Conversion of warrants issued on December 29, 2006 March 20, 2008 20,55,000 160/-

2. Conversion of warrants issued on December 29, 2006 June 27, 2008 14,45,000 160/-

124

Board of directors of our Promoter as on March 31, 2011

1. Mr. Chandrashekhar Ramasubramanian 2. Mr. Ravi Devaki Venkatraman 3. Mr. Murali Srinivasan

Changes in the board of directors

There have been no changes in the board of directors of our Promoter in the last three years preceding the date of this Prospectus.

Name of the Director Date of Change Reason

Mr. Murali Srinivasan September 6, 2008 Appointment

Mr. Rengaswamy Sundararajan October 1, 2009 Resignation

Mr. Venkataraman Mahalingam May 27, 2010 Deceased

Financial Performance of our Promoter for the last three financial years

(` in Lakhs)

Particulars FY 2008 FY 2009 FY 2010

Balance Sheet

SOURCES OF FUNDS

Shareholder Funds:

Share Capital 1,000.00 1000.00 1000.00

Unsecured Loan from Shareholder 2,682.50 4228.30 4228.30

Reserves and Surplus 22,556.34 23265.25 23991.49

Total 26,238.84 28493.55 29219.79

APPLICATION OF FUNDS

Investments 2,6230.93 28,311.73 28,311.73

Deferred Tax Asset (Net) Nil Nil Nil

Current Assets

Cash and Bank Balances 7.80 181.74 907.99

Loans & Advances 0.18 0.18 0.18

Less: Current Liabilities 0.07 0.10 0.12

Net Current Assets 7.91 181.82 908.05

Total 26,238.84 28,493.55 29,219.79

Profit and Loss Account

INCOME

Dividend Income 432.64 716.86 896.07

Interest Received 0.00 0.00 0.00

Total 432.64 716.86 896.07

EXPENDITURE

125

Particulars FY 2008 FY 2009 FY 2010

Interest Paid 0.00 0.00 0.00

Audit Fees 0.10 0.13 0.15

Demat A/c Charges 0.00 0.36 0.13

Filing Fees 6.50 1.06 0.02

Postage & Courier Expenses 0.29 0.00 0.00

Professional Charges Paid 0.00 6.25 169.53

Miscellaneous Expenses 0.00 0.06 0.00

Loss on sale of Shares 142.50 0.00 0.00

Printing and Stationary Charges 0.00 0.04 0.00

Bank Charges 0.03 0.04 0.01

Total 149.42 7.94 169.84

Net Profit Before Tax 283.22 708.92 726.23

Add: Provision for Deferred Tax - - -

Less : Provision for –Taxation - - -

Net Profit After Tax 283.22 708.92 726.23

Balance brought down from Previous Year 429.77 712.99 1421.91

Less: Prior Period Tax - - -

Less: Dividend Paid - - -

Less: Transferred to General Reserve - - -

Surplus carried over to Balance Sheet 712.99 1,421.91 2148.14

B. Shriram Retail Holdings Private Limited

Shriram Retail Holdings Private Limited was incorporated as private limited companies under the Act on January 24, 2006 vide a certificate of incorporation issued by the ROC, Chennai, Tamil Nadu. The registered office of our Promoter is located at Mookambika Complex, No.4, Lady Desika Road, Mylapore, Chennai 600 004. Our Promoter is primarily engaged in the business of investment promotion including facilitating strategic investor or private equity investors or third parties to invest in our Company.

Our Promoter has not been named or set out as a promoter of any other company in any offer document, filing with stock exchange(s) or with any regulatory and/or statutory authorities. Further, besides holding shares of our Company, our Promoter does not directly or indirectly hold shares in the share capital of any company. There are no common pursuits between our Company and our Promoter.

Interest of Promoter in our Company

Except as stated under the section titled “Financial Information” beginning on page 130 of this Prospectus and to the extent of their shareholding in our Company, the Promoter does not have any other interest in our Company’s business. Further, our Promoter has no interest in any property acquired by our Company in the last two years from the date of this Prospectus, or proposed to be acquired by our Company.

Our Promoter does not propose to subscribe to this Issue.

Other than the payment of dividend on the shares held by our Promoter in the share capital of our Company, and issue of the following Equity Shares and warrants convertible into Equity Shares, interest paid on Inter-corporate Deposit, we have not paid or granted any amounts or benefits, in the two years preceding the date of this Prospectus. Details of Shares allotted to our Promoter during the last three Financial Years

126

There have been no allotments to Shriram Retail Holdings private Limited during the last three Financial years.

Shareholding Pattern of our Promoter as on March 31, 2011:

Sr.

No.

Name of Shareholder No. of Shares Percentage Shareholding (%)

1. Shriram Capital Limited 2,305,997 50.99 2. R. Thyagarajan and Shriram Capital

Limited 10 0.00

3. TPG India Investments INC. 2,215,575 49.00 Total 4,521,582 100.00

Board of directors of our Promoter as on March 31, 2011:

1. Mr. Ravi Devaki Venkataraman 2. Ms. Akhila Srinivasan

Changes in the board of directors

There have been no changes in the board of directors of our Promoter in the last three years preceding the date of this Prospectus.

Financial Performance of our Promoter for the last three financial years

(` in Lakhs)

Particulars FY 2008 FY 2009 FY 2010

Balance Sheet

SOURCES OF FUNDS

Shareholder Funds:

Share Capital 5.00 334.67 452.15

Unsecured Loan 0.00 43,092.93 0.00

Reserves and Surplus 0.00 33,730.94 61,678.24

Total 5.00 77,158.54 62,130.39

APPLICATION OF FUNDS

Investments 0.00 44,904.27 55,962.27

Deferred Tax Asset (Net) 0.00 0.00 0.00

Current Assets

Cash and Bank Balances 4.55 32,021.61 939.82

Other Current Assets 0.00 138.78 4,374.48

Less: Current Liabilities 0.01 0.70 86.24

Net Current Assets 4.54 32,159.70 5,228.06

Miscellaneous Expenditure

Preliminary Expenses- To the extent not written off 0.10 0.06 0.03

Profit and Loss account 0.35 94.51 940.03

Total 5.00 77,158.54 62130.39

Profit and Loss Account

INCOME

Dividend Income 0.00 217.66 334.38

127

Particulars FY 2008 FY 2009 FY 2010

Interest Received 0.00 296.05 449.00

Other Income 0.00 0.02 0.01

Total 0.00 513.74 783.39

EXPENDITURE

Audit Fees 0.01 0.15 0.15

Filling Fees 0.04 58.65 0.07

General Charges 0.002 0.11 1,400.34

Demat A/c Charges 0.00 0.40 0.13

Management Charges 0.00 548.31 120.00

Bank Charges 0.004 0.02 0.01

Advertisement Expenses 0.00 0.00 0.36

Printing and Stationery 0.00 0.03 0.97

Travelling Expenses 0.00 0.14 0.00

Postage and Courier Expenses 0.00 0.00 0.61

Professional Charges 0.00 0.01 20.14

Preliminary Expenses written off 0.03 0.03 0.03

Total 0.09 607.90 1,542.83

Net Profit Before Tax (0.09) (94.15) (759.44)

Less : Provision for –Taxation 0.00 0.00 86.07

Less: Provision for Fringe Benefit Tax 0.00 0.002 0.00

Balance brought down from Previous Year (0.26) (0.35) (94.51)

Surplus carried over to Balance Sheet (0.35) (94.51) (940.03)

128

OUR SUBSIDIARY

As on the date of this Prospectus our Company has the following one subsidiary:

1. Shriram Housing Finance Limited (“SHFL”):

SHFL was incorporated pursuant to a certificate of incorporation dated November 9, 2010, issued by the Registrar of Companies, Chennai, Tamil Nadu , and commenced its operations, pursuant to a certificate of commencement of business dated January 21, 2011. The registered office is situated at123, Angappa Naicken Street, Chennai, Tamil Nadu 600001.

Shareholding Pattern:

As on the date of this Prospectus the shareholding pattern of SHFL is as follows:

Sr.

No.

Name of Shareholder Address No. Of Equity

Shares

Face value of

Equity

Shares in (`̀̀̀)

Percentage

of Equity

Share capital

(%)

1. Shriram City Union Finance Limited

123, Angappa Naicken Street, Chennai, Tamil Nadu - 600 001.

2,999,994 10 99.99

2. Subhasri Sriram No.5 (Old No. 23) 29th Cross Street, Indra Nagar, Chennai, Tamil Nadu - 600 020.

1 10 0.00003

3. C.R. Dash Flat no. B/13,

Raghamallika

Apartment, No. 2,

Jeevaratnam Nagar,

Adyar, Chennai - 600

020.

1 10 0.00003

4. Y.S. Chakravarthi Flat No. 302, Banjara Heritage Apts Road No. 3, Panchavati Society, Banjara Hills, Hyderabad- 500 034.

1 10 0.00003

5. M. R. Vijaya Golden Emerald Flats No. 12, G4, Muthu Kumaran Street, Venkatewara Nagar, Ambattur Chennai - 600 053.

1 10 0.00003

6. Krithika Doraiswamy Flat No. 8, Anandham Flats, new No. 343, Thachi Aruchalam Street, Mylapore, Chennai - 600 004.

1 10 0.00003

7. P Udhaya Geetha No. 5/10, Govindasamy Street MGR Nagar, (Jothi Nagar),

1 10 0.00003

129

Sr.

No.

Name of Shareholder Address No. Of Equity

Shares

Face value of

Equity

Shares in (`̀̀̀)

Percentage

of Equity

Share capital

(%)

Chitlapakkam, Chennai -600 064.

Total 3,000,000 100

Board of Directors:

The board of directors of SHFL comprises of the following persons:

1. Mr. Sujan Sinha-Managing Director;

2. Mrs. Subhasri Sriram; and

3. Mr. Y. S. Chakravarti;

130

SECTION V : FINANCIAL INFORMATION

FINANCIAL STATEMENTS

Sr.

No.

Particulars Page No.

1. Examination report on Reformatted Unconsolidated Summary Financial Statements as at and for the financial years ended March 31, 2007, 2008, 2009, 2010 and 2011 as issued by the Statutory Auditor

F-1

2. Reformatted Unconsolidated Summary Financial Statements as at and for the years ended for the financial years ended March 31, 2007, 2008, 2009, 2010 and 2011

F-4

3. Examination report on Reformatted Consolidated Summary Financial Statements as at and for the financial year ended March 31, 2011 as issued by Statutory Auditor

F-123

4. Reformatted Consolidated Summary Financial Statements as at and for the financial year ended March 31, 2011.

F-126

F-1

PIJUSH GUPTA & CO

C H A R T E R E D A C C O U N T A N T S

P-199, C.I.T.ROAD, SCHEME IV-M, KOLKATA – 700 010

TEL (033) 2353-6859, (0) 98311 91779 MAIL: pijushgupta.ca@gmail.com

Auditors' Report

To

The Board of Directors Shriram City Union Finance Limited 221, Royapettah High Road, Mylapore, Chennai Dear Sirs,

1. We, Pijush Gupta & Co., have examined the attached Reformatted unconsolidated financial information

comprising of Balance Sheet, Profit and Loss Accounts, Cash Flows and notes thereon of Shriram City Union

Finance Limited, ("Company" or “Issuer”) as at and for the years ended March 31, 2011, 2010, 2009, 2008 and

2007, approved by the board of directors of the Company and as prepared by the Company in accordance with

the requirements of:

a. paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 ('the Act') and

b. the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, ("Regulations"), issued by the Securities and Exchange Board of India, ("SEBI"), as amended from time to time in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992 ("SEBI

Act").

Pijush Gupta & Co. is referred to as the "Auditors" and the references to the Auditors as "we", "us" or "our", in

this letter, shall be construed accordingly.

2. We have examined such reformatted unconsolidated financial information taking into consideration:

a. The terms of reference dated June 26, 2011 received from the Company and engagement letter of

auditors dated June 26, 2011 requesting us to carry out the assignment, in connection with the Draft

Prospectus/Prospectus (collectively referred to as “Offer Document”) being issued by the Company for

its proposed public issue of secured non-convertible debentures ("NCDs"), having a face value of

Rs.1000 each (referred to as the "Issue") and

b. The ‘(Revised) Guidance Note on Reports in Company Prospectuses’ issued by the Institute of Chartered

Accountants of India.

Reformatted Unconsolidated Financial information as per audited unconsolidated financial statements:

3. The reformatted unconsolidated financial information of the Company has been extracted by the management

from:

a. the Unconsolidated balance sheet as at March 31, 2011, 2010, 2009, 2008 and 2007 and the related Unconsolidated profit and loss account and Unconsolidated cash flow statement for the year ended March 31, 2011, 2010, 2009, 2008 and 2007 (collectively referred to as the " Unconsolidated Financial

Statements") audited by us;

b. In the course of our aforesaid audit we relied upon audit reports received from Branch Auditors who had conducted audit of business regions of the company.

These Audited Unconsolidated Financial Statements have been approved by the Board of Directors.

F-2

4. In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI Regulations,

terms of our engagement agreed with you and statement of responsibilities of auditors, we further report that:

a) The Reformatted Unconsolidated Summary Statement of Assets and Liabilities and the schedules

forming part thereof, Reformatted Unconsolidated Summary Statement of Profit and Loss and the

schedules forming part thereof and the Reformatted Unconsolidated Summary Statement of Cash Flow

(‘Reformatted Unconsolidated Summary Statements’) of the Company, including and as at and for the

years ended March 31, 2011, 2010, 2009, 2008 and 2007 , examined by us have been set out in Annexure

I to V to this report. These Reformatted Unconsolidated Summary Statements are after regrouping as in

our opinion are appropriate and more fully described in Significant Accounting Policies and Notes (Refer

Annexure XIII)

b) Based on the above, we state that:

� the Reformatted Unconsolidated Summary Statements have to be read in conjunction with the notes given in Annexure XIII;

� the figures of earlier periods have been regrouped (but not restated retrospectively for change in accounting policy), wherever necessary, to confirm to the classification adopted for the Reformatted Unconsolidated Summary Statement as at/for the year ended March 31, 2011;

� there are no extraordinary items which need to be disclosed separately in the reformatted unconsolidated summary statements; and

� there are no qualifications in the auditors’ reports, which require any adjustments to the reformatted consolidated summary statements.

5. We have not audited any unconsolidated financial statements of the Company as of any date or for any

period subsequent to March 31, 2011. Accordingly, we express no opinion on the financial position,

results of operations or cash flows of the Company as of any date or for any period subsequent to March

31, 2011.

Other unconsolidated Financial Information:

6. At the Company’s request, we have also examined the following unconsolidated financial information proposed

to be included in the Offer Document prepared by the Company and approved by the board of directors of the

Company and annexed to this report, relating to the Company for the years ended March 31, 2011, 2010, 2009,

2008 and 2007 :

i. Statement of contingent liabilities, enclosed as Annexure VI ii. Statement of dividend paid/proposed, enclosed as Annexure VII iii. Statement of accounting ratios relating to earnings per share, net asset value, return on net worth,

enclosed as Annexure VIII iv. Statement of Secured and Unsecured Loans including terms and conditions, enclosed as Annexure IX &

X v. Capitalization Statement as at March 31, 2011, enclosed as Annexure XI vi. Statement of tax shelters, enclosed as Annexure XII

7. In our opinion, the reformatted unconsolidated financial information as disclosed in the annexure to this report,

read with the respective significant accounting policies and notes disclosed in Annexure XIII, and after making

re-groupings as considered appropriate and disclosed, has been prepared in accordance with Paragraph B(1) of

Part II of Schedule II of the Act and the Regulations.

F-3

8. This report should not be in any way construed as a reissuance or redating of any of the previous audit reports

issued by us or by any other firm of Chartered Accountants, nor should this report be construed as a new

opinion on any of the Reformatted Unconsolidated Financial Statements referred to herein.

9. We have no responsibility to update our report for events and circumstances occurring after the date of the

report for the financial position, results of operations or cash flows of the Company as of any date or for any

period subsequent to March 31, 2011.

10. This report is intended solely for your information and for inclusion in the Offer Document in connection with

the Offering of the Company, and is not to be used, referred to or distributed for any other purpose without our

prior written consent.

For Pijush Gupta & Co.

Firm registration number: 309015E Chartered Accountants

Ramendra Nath Das Partner Membership No.: 014125 Chennai, July 21, 2011

F-4

Annexure I

Shriram City Union Finance Limited

Reformatted summary of Assets and Liabilities

(Rs. in lakhs)

Particulars Schedule As at March 31,

2011 2010 2009 2008 2007

Assets

A. Fixed and Intangible Assets(Net)

(including CWIP) 1

2,944.43 2,044.52 3,721.98

5,108.06 5,570.48

B Investments

2 551.45 101.45 606.45

604.98 664.03

C Deferred Tax Asset (Net)

1,581.66 1,122.70 313.05

- -

D

Current Assets, Loans & Advances

3 936,121.22 621,545.53 539,518.62 373,141.11 215,885.47

F Total (A+B+C+D)

941,198.76 624,814.20 544,160.10 378,854.15 222,119.98

Liabilities

G Secured Loans

4 656,951.01 413,610.55 390,445.43 262,795.40 130,384.22

H Unsecured Loans

5 75,827.43 53,103.69 41,831.33 37,127.45 20,246.27

I Deferred Tax Liability (Net)

- - -

632.99 2,973.32

J Current Liabilities

6 70,089.54 46,393.55 33,125.35 29,048.76 31,165.45

K Provisions

7 17,123.50 11,706.08 7,783.75

4,269.76 2,457.10

L Total (G+H+I+J+K)

819,991.48 524,813.87 473,185.86 333,874.36 187,226.36

M Net Worth (F-L)

121,207.28 100,000.33 70,974.24 44,979.79 34,893.62

Represented By

(i) Share Capital

8 4,953.69 4,915.47 4,585.68

6,444.48 6,238.98

F-5

Annexure I

Shriram City Union Finance Limited

Reformatted summary of Assets and Liabilities

(Rs. in lakhs)

Particulars Schedule As at March 31,

2011 2010 2009 2008 2007

(ii) Share application money pending allotment

- 0.71 -

- -

(iii) Stock Option Outstanding

10 1,887.27 2,281.04 1,637.97

542.08 -

(iv) Optionally Convertible warrants

- - 2,700.00

232.20 560.00

(v) Reserves and Surplus

9 114,366.32 92,803.11 62,050.59 37,761.03 28,096.77

(vi)

Less : Miscellaneous Expenditure (to the extent not written off or adjusted)

11

- - -

- 2.13

Total (i+ii+iii+iv+v-vi)

121,207.28 100,000.33 70,974.24 44,979.79 34,893.62

The accompanying statement of Significant Accounting Policies and Notes to Accounts on Summary Financial Statements are

integral part of this statement.

As per our report of even date

For Pijush Gupta & Co. For and on behalf of the Board of Directors of

Firm Registration No. 309015E Shriram City Union finance Limited

Chartered Accountants

Ramendra Nath Das R. Kannan S. Venkatakrishnan

Partner Managing Director Director

Membership No. 014125

F-6

Annexure II

Shriram City Union Finance Limited

Reformatted summary of Profit and Loss Account

(Rs. in Lacs)

For the year ended March 31, Particulars Schedule

2011 2010 2009 2008 2007

A. Income

i Income from Operations 12 131,800.12 107,205.35 92,357.73 61,072.29 33,592.29

ii Other Income 13 291.07 3,079.36 1,036.02 1,246.47 1,213.62

Total Income 132,091.19 110,284.71 93,393.75 62,318.76 34,805.91

B. Expenditure

i Financial Expenses 14 58,848.26 51,759.01 49,048.65 30,848.93 17,124.52

ii Personnel Expenses 15 4,367.02 3,611.63 3,582.75 2,274.74 935.51

iii Operating & Other Expenses 16 20,470.16 14,163.60 12,882.73 10,273.02 6,034.77

iv Depreciation and amortization 747.41 464.77 1,018.23 1,127.52 373.35

v Impairment loss/(Reversal) on Fixed assets & stock - - 1,186.81 - -

vi Share & Debenture Issue expenses written off

17 - - - 2.13 1.69

vii Provisions & Write offs (net)

18 11,598.25 11,659.84 7,701.05 5,093.96 2,392.75

Total Expenditure 96,031.10 81,658.85 75,420.22 49,620.30 26,862.59

C. Net Profit Before Taxation (A-B) 36,060.09 28,625.86 17,973.53 12,698.46 7,943.32

D. Provision for taxation

Current tax 12,460.20 9,972.11 7,055.25 6,134.29 2,902.09

Deferred tax (458.96) (809.65) (946.04) (2,340.33) (191.70)

Wealth tax 1.76

Fringe Benefit Tax 161.79 141.00 70.77

Fringe Benefit Tax of earlier Year 37.54

Total Tax 12,001.24 9,200.00 6,272.76 3,934.96 2,781.16

E. Net Profit after Taxation (C-D) 24,058.85 19,425.86 11,700.77 8,763.50 5,162.16

F-7

Annexure II

Shriram City Union Finance Limited

Reformatted summary of Profit and Loss Account

(Rs. in Lacs)

For the year ended March 31, Particulars Schedule

2011 2010 2009 2008 2007

Balance in Profit & Loss Account brought forward

22,730.09 12,003.01 8,412.03 4,471.38 2,264.35

F. Balance Available for

Appropriations

46,788.94 31,428.87 20,112.80 13,234.88 7,426.51

G. Appropriations

Dividend - Cumulative Redeemable Preference Shares

- - 63.17 141.59 145.15

Equity Shares - Interim dividend

1,236.25 982.28 501.85 391.00 271.00

Equity Shares - Proposed final dividend

1,733.79 1,474.64 1,375.92 1,332.15 782.00

Preference Shares - Proposed final dividend

0.08 9.41

Tax on dividend 205.33 166.94 96.02 316.92 192.87

Tax on proposed dividend 281.26 244.92 233.84 - -

Transfer to statutory reserve 4,810.00 3,890.00 2,340.00 1,761.11 1,032.43

Transfer to general reserve

2,410.00 1,940.00 1,170.00 880.00 522.27

Transfer to Capital Redemption Reserve

- -

2,328.98

-

-

Total Appropriations 10,676.63 8,698.78 8,109.79 4,822.85 2,955.13

H. Balance carried to Balance Sheet

(F-G)

36,112.31 22,730.09 12,003.01 8,412.03 4,471.38

As per our report of even date

For Pijush Gupta & Co. For and on behalf of the Board of Directors of

Firm Registration No. 309015E Shriram City Union finance Limited

Chartered Accountants

Ramendra Nath Das R. Kannan S. Venkatakrishnan

Partner Managing Director Director

Membership No. 014125

Place: Chennai C R DASH

Date: July 21, 2011 Company Secretary

F-8

Annexure III

Shriram City Union Finance Limited

Reformatted Summary of Cash Flow Statement

(Rs in Lacs)

For the year ended March 31, Particulars

2011 2010 2009 2008 2007

A. Cash flow from operating activities

Net profit before taxation 36,060.09 28,625.86 17,973.53 12,698.46 7,943.32

Depreciation and amortization

747.41

464.77 1,018.23 1,127.52

373.35 Share and debenture issue expenses written off -

- - 2.13

1.69

(Profit) / loss on sale of fixed assets (net)

13.78

1.60 0.12 3.35

0.96

Lease equalization Adjustments

(11.49) (Profit) / loss on sale of current and long term investments (net) -

- 0.08 -

-

Interest income on current and long term investments and interest income on fixed deposits

(270.70)

(1,203.65) (258.14) (228.64)

(302.65)

Dividend income -

(444.91) (56.47) (46.06)

(65.27)

Employees Stock option compensation cost

471.68

751.53 1,111.28 542.09

-

Provision for impairment -

- 1,186.81 -

-

Provision for hedging contracts

(546.62)

- 994.18 811.68

- Provisions for non performing assets and bad debts written off 10,136.82 12,165.62 7,809.37 5,174.98 2,482.15

Provisions for standard assets 1,714.89

- - -

-

Provision for gratuity

40.82

15.88 6.46 104.70 28.48

Provision for leave encashment

27.48

9.87 1.51 13.60 1.77 Provision for diminution in value of investments -

- - -

2.99

F-9

Shriram City Union Finance Limited Annexure III

Reformatted Summary of Cash Flow Statement

(Rs in Lacs)

For the year ended March 31, Particulars

2011 2010 2009 2008 2007

Operating profit before working capital

changes 48,395.65 40,386.57 29,786.96 20,203.81 10,455.31

Movements in working capital:

(Increase) / decrease in current assets:

(Increase) / decrease in assets under financing activities (233,365.56) (111,057.72) (101,492.75) (108,713.56) (88,184.89)

(Increase) / decrease in sundry debtors -

89.03 (13.21) 102.25 (60.52)

(Increase) / decrease in lease assets - net of sales -

- - - 8.89

(Increase) / decrease in other current assets (11,530.50) (5,552.81) (29.55) (94.98) 306.06

(Increase) / decrease in other loans and advances (931.92) 4,708.39 2,239.18 (2,111.58) (1,734.19)

Increase / (decrease) in current liabilities 23,690.91 13,272.04 4,078.50 (2,119.00) 10913.48

Cash generated from operations (173,741.42) (58,154.50) (65,430.87) (92,733.06) (68,295.86)

Direct taxes paid (net of refunds) (11,127.69)

(9,197.57) (6,450.11) (6,522.66)

(3,154.36)

Net cash used in operating activities (A) (184,869.11) (67,352.07) (71,880.98) (99,255.72) (71,450.22)

B. Cash flows from investing activities

Investment in Fixed deposits (net) 7,992.17

(12,665.70) (5,855.70) 52.63

42.27

Purchase of fixed assets and intangibles

(1,663.61)

(1,058.11) (879.02) (670.26)

13.80

Proceeds from sale of fixed assets

2.52

2,269.20 59.93 1.81

(368.18)

Purchase of Investment

(200.00)

- - -

-

Investment in subsidiary company

(250.00) -

(4.55)

(4.99) -

Proceeds from sale of investment in subsidiary company - - - 4.55 -

Proceeds from sale of investments -

1,905.00 3.00 59.50 -

Interest received on current and long term investments and interest on fixed deposits

270.70

1,203.65 258.14 228.64

302.65

Dividend received -

444.91 56.47 46.06

65.27

Net cash used in investing activities (B) 6,151.78

(7,901.05) (6,361.73) (282.06)

55.81

F-10

Annexure III

Shriram City Union Finance Limited

Reformatted Summary of Cash Flow Statement

(Rs in Lacs)

For the year ended March 31, Particulars

2011 2010 2009 2008 2007

C. Cash Flows from financing activities

Proceeds from issue of equity share capital including securities premium & Share application

133.05 10,317.48 12,985.41 3,288.00 19,200.00

Proceeds from issue of share warrants -

- 2,467.80 (327.80)

560.00

Increase / (decrease) in bank borrowings (net) 180,566.59

(3,271.15) 70,101.92 114,921.35 52,645.77

Increase / (decrease) in long term borrowings(net) 62,773.87 26,436.27 57,548.11 17,489.83

840.64

Increase / (decrease) in fixed deposits (net)

(45.64)

(12.06) (52.87) (214.31)

2.84

Increase / (decrease) in subordinate debts (net)

269.38 11,284.42 13,681.75 8,170.49 10,915.28

Increase / (decrease) in redeemable non convertible debentures (net) -

- (3,500.00) 3,500.00 -

Increase / (decrease) in unsecured loans 22,500.00

- (5,425.00) 5,425.00

(247.50)

Dividend paid

(2,710.89)

(2,358.20) (1,897.26) (1,324.00)

(959.32)

Tax on dividend

(450.25)

(400.77) (322.44) (225.01)

(134.55)

Net cash from financing activities (C) 263,036.11 41,995.99 145,587.42 150,703.55 82,823.16

Net increase / (decrease) in cash and cash

equivalents (A + B + C) 84,318.77 (33,257.14) 67,344.72 51,165.77 11,428.75

Cash and Cash Equivalents at the

beginning of the year 116,711.86 149,969.00 82,624.28 31,458.51 20,029.76

Cash and Cash Equivalents at the end of

the year 201,030.63 116,711.86 149,969.00 82,624.28 31,458.51

F-11

Annexure III

Shriram City Union Finance Limited

Reformatted Summary of Cash Flow Statement

(Rs in Lacs)

Components of Cash and Cash

Equivalents As at March 31,

2011 2010 2009 2008 2007

Cash and Cash Equivalents at the end of

the year as per Balance Sheet 216,540.14 140,208.46 160,879.51 88,001.90 38,101.96

Less: Balance in Current account held for unpaid dividends

Less : Fixed deposits held for unpaid dividends

22.11 17.03 20.87 22.78 20.47

Less : Fixed deposits held for more than three months

51.00 106.00 807.34 597.58 527.80

Less : Fixed Deposit under Lien 15436.40

23373.57

10,082.30

4,757.26

6,095.18

201,030.63 116,711.86 149,969.00 82,624.28 31,458.51

As per our report of even date

For Pijush Gupta & Co. For and on behalf of the Board of Directors of

Firm Registration No. 309015E Shriram City Union finance Limited

Chartered Accountants

Ramendra Nath Das R. Kannan S. Venkatakrishnan

Partner Managing Director Director

Membership No. 014125

Place: Chennai C R DASH

Date: July 21, 2011 Company Secretary

F-12

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 1 - Fixed and Intangible

Assets(Net) 2011 2010 2009 2008 2007

ASSETS FOR OWN USE

Tangible Fixed Assets

Building 10.59 10.80 11.01 11.22 11.41

Leasehold Improvements 681.68 374.89 287.54 229.02 -

Furniture & Fixtures 790.93 417.94 317.97 94.63 283.86

Vehicles 22.73 19.14 18.54 10.23 6.47

Land - Freehold 1.76 1.76 72.89 131.70 131.70

Land - Leasehold - - -

Plant and Machinery 1230.25 927.61 3,009.38 4,631.26 5,137.04

Intangible Fixed Assets

Software 206.49 292.38 4.65 - -

TOTAL (A) 2,944.43 2,044.52 3,721.98 5,108.06 5,570.48

ASSETS GIVEN ON LEASE

Plant and Machinery - - - - -

Vehicles - - - - -

Land - - - - -

Buildings - - - - -

TOTAL (B) - - - - -

TOTAL (A+B) 2,944.43 2,044.52 3,721.98 5,108.06 5,570.48

F-13

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 2 – Investments

2011 2010 2009 2008 2007

LONG TERM INVESTMENT (At cost)

Trade

Shares : Fully paid up - -

Unquoted - Preference Share - -

Other Than Trade

Quoted :

A. Government Securities:

13.05% GI Loan 2007 (Face Value-Rs. 55.70 Lacs) - - - - 59.50

12.25% GI Loan 2008 (Face Value Rs. 3 Lacs) - - - 3.08 3.08

6.13% GI Loan 2028(Face value -Rs.100 lacs) 101.45 101.45 101.45 101.45 101.45

B.Equity Shares (Fully paid up)

Unquoted :

Shriram Life Insurance Company Ltd. - - 500.00 500.00 500.00

(Face Value of Rs. 10/- each)

Shriram Non Convention Energy Ltd. - - 5.00 0.45

(Face Value of Rs. 10/- each)

In wholly Owned Subsidiary

Shriram Housing Finance Ltd.

(Face Value of Rs. 10/- each) 250.00

Others

Highmark Credit Information Services Pvt. Ltd

(Face Value of Rs. 10/- each) 200.00

551.45 101.45 606.45 604.98 664.03

Book value of Quoted investments 101.45 101.45 101.45 104.53 164.03

Market value of Quoted investments 83.52 83.52 83.52 86.69 143.43

Book value of Unquoted investments 450.00 - 505.00 500.45 500.00

Details of investments may be referred from the annual report of the respective years

F-14

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 3 - Current Assets, Loans &

Advances 2011 2010 2009 2008 2007

Assets under financing activities

(a) Secured Loan

- Considered good 617,967.11 418,113.82 327,961.52 235,141.98 146,105.68

- Considered doubtful 7,066.95 4,950.58 3090.72 1,511.01 1,479.21

(b)Unsecured Loans

- Considered good 70,970.68 47,595.24 38,855.44 37,991.59 23,489.31

- Considered doubtful 2,916.48 2,479.99 1,102.96 221.95 -

698,921.22 473,139.63 371,010.64 274,866.53 171,074.20

Sundry Debtors

(Unsecured, considered Good)

Debts outstanding for a period exceeding six months

Other debts - - 89.03 75.82 178.07

- - 89.03 75.82 178.07

Cash & Bank Balances

(i) Cash on hand 6,025.87 3,590.69 1,515.96 1,686.20 1,676.56

(ii) Remittances in transit - - 86.81 221.04 453.34

(iii) Balances with scheduled banks in:

Current accounts 95,526.87 93,150.93 37,527.09 36,694.58 15,619.07

Deposit Accounts # 114,987.40 43,466.84 121,749.65 49,400.08 20,352.99

216,540.14 140,208.46 160,879.51 88,001.90 38,101.96

F-15

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 3 - Current Assets, Loans &

Advances 2011 2010 2009 2008 2007

Other current assets

(i) Interest accrued on fixed deposits and other loans and advances 324.96 1,262.84 413.71 325.18 177.57

(ii) Other Assets 24.99 161.60 - - -

(iii) Securitsation - Receivable 17,147.07 4,542.08 - 58.98 75.86

(iv)Repossessed Assets - - - - 35.75

17,497.02 5,966.52 413.71 384.16 289.18

Other Loans and Advances

Secured - Considered Good

loans to subsidiaries - - 4392.66 - -

Unsecured- Considered Good

Advances recoverable in cash or in kind or for value to be received 1,547.91 2,065.94 2,274.95 4,319.43 3,156.69

Advance- Capital Assets 108.93 12.60 50.00 4,128.96 2,209.76

Advance tax (Net of provisions for Income Tax) - - 262.19 1,030.88 783.51

Prepaid expenses 952.29 24.00 38.21 202.35 29.79

Security deposits 553.71 128.38 107.72 131.08 62.31

3,162.84 2,230.92 7,125.73 9,812.70 6,242.06

Total 936,121.22 621,545.53 539,518.62 373,141.11 215,885.47

# Includes Fixed deposits pledged with Banks as margin for securitization 15,436.40 7,373.57 9,941.77 4,299.21 4,149.75

# Includes Fixed deposits pledged with Banks as as lien against loans taken - 16,000.00 140.53 458.05 1,945.43

F-16

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 4 - Secured Loans

2011 2010 2009 2008 2007

Redeemable non convertible debentures 219,877.64 154,073.77 127,741.10 69,106.39 60,968.56

refer note 2(1)(a)(b) 2(1)(a)(b)(c) 2(1)(a) 2(1)(a) B(1)(i)

Term loans

i) From Financial institutions / Corporate 6,500.00 9,530.00 9,426.40 10,513.00 1,161.00

refer note 2(1)(c)(i) 2(1) (d)(i) 2(1)(b)(i) 2(1)(b)(i) B(1)(ii)(iii)

ii) From banks 295,677.28 104,634.17 143,562.74 115,755.02 41,453.74

refer note 2(1)(c)(ii) 2(1)(d)(ii) 2(1)(b )(ii) 2(1)(b)(ii) B(1)(ii)(iii)(iv)

Cash credit from banks 134,896.09 145,372.61 109,715.19 67,420.99 26,800.92

refer note 2(1)(d) 2(1)(e) 2(1)(c) 2(1)(c) B(1)(v)

656,951.01 413,610.55 390,445.43 262,795.40 130,384.22

F-17

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 5 - Unsecured Loans

2011 2010 2009 2008 2007

Fixed deposits 55.10 100.74 112.80 165.67 379.98

Inter corporate deposits - - - 925.00 -

Subordinated debts 53,272.33 53,002.95 41,718.53 28,036.78 19,866.29

Redeemable non-convertible debentures - - - 3,500.00 -

Commercial papers 22,500.00 - - 4,500.00 -

75,827.43 53,103.69 41,831.33 37,127.45 20,246.27

F-18

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 6 - Current Liabilities

2011 2010 2009 2008 2007

Sundry Creditors 2,653.61 1,133.96 1,776.37 2,857.83 1,845.87

Caution and lease deposits - - - - 44.44

Interest accrued but not due on loans 32,818.43 28,902.17 21,543.25 13,595.42 15,045.02

Unclaimed Redeemable Preference Shares - - -

Application money on Redeemable non convertible debentures 967.07 117.27 172.09 392.23 303.87

Application money on Subordinated debts 107.47 4.00 43.11 216.33 151.05

Investor Education and Protection Fund shall be credited by the following amounts (as and when due)

Unclaimed Matured Deposits 20.83 21.01 19.79 13.71 19.98

Unclaimed Matured Debentures 3,777.27 2,744.13 2,219.30 1,932.21 1,136.73

Unclaimed Matured Subordinated Debts 210.19 13.85 - - -

Interest accrued and due on above 858.63 568.99 614.44 669.57 246.20

Unclaimed dividend 22.11 17.03 20.87 22.78 20.47

Temporary credit balance in bank accounts 3,122.28 7,126.55 2,796.97 2,473.35 3,950.78

Securitization deferred income 23,686.37 4,025.63 2,228.49 5,176.46 6,799.25

Other liabilities

1,845.28 1,718.96 1,690.67 1,698.87

1,601.79

70,089.54 46,393.55 33,125.35 29,048.76 31,165.45

F-19

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 7 - Provisions 2011 2010 2009 2008 2007

For non-performing assets 9,983.42 7,430.57 4,193.68 1,732.96 1,479.21

For standard assets 1,714.89 - - - -

For income tax (net of advance tax) 1,882.40 549.89 - - -

For diminution in value of investments 17.93 17.93 17.93 17.93 21.73

For hedging contracts 1,259.24 1,805.86 1,805.86 811.68 -

For leave encashment and availment 54.23 26.75 16.88 15.37 1.77

For gratuity 196.34 155.52 139.64 133.18 28.48

Proposed dividend 1,733.79 1,474.64 1,375.92 1,332.15 782.00

Dividend on preference shares - - - 0.08 9.41

Corporate dividend tax 281.26 244.92 233.84 226.41 134.50

17,123.50 11,706.08 7,783.75 4,269.76 2,457.10

F-20

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 8 - Share Capital

2011 2010 2009 2008 2007

Authorized

Equity Share Capital 6,000.00 6,000.00 6,000.00 4,500.00 4,500.00

Preference Share Capital 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00

10,000.00 10,000.00 10,000.00 8,500.00 8,500.00

No. of equity Shares of Rs.10/- each 60,000,000 60,000,000 60,000,000 45,000,000 45,000,000

No. of preference Shares of Rs.100/- each 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000

Issued, Subscribed & Fully Paid up

Equity Shares 4,953.69 4,915.47 4,585.68 4,115.50 3,910.00

No. of equity shares of Rs. 10/- each 49,536,877 49,154,700 45,856,800 41,155,000 39,100,000

Preference Share Capital - - - 2,328.98 2,328.98

4,953.69 4,915.47 4,585.68 6,444.48 6,238.98

F-21

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31, Schedule 9 - Reserves and Surplus

2011 2010 2009 2008 2007

Capital Reserve

Balance as per last account 1,400.00 - - - -

Add: Forfeiture of optionally convertible warrants - 1,400.00 - - -

1,400.00 1,400.00 - - -

Capital Redemption Reserve

Balance as per last account 2,328.98 2,328.98 - - -

Add : Transfer from Profit & Loss A/c - - 2,328.98 - -

2,328.98 2,328.98 2,328.98 -

Securities Premium Account

Balance as per last account 49,836.14 37,040.70 22,181.10 19,098.60 1,098.60

Add: Amount received during the year 960.99 12,795.44 14,859.60 3,082.50 18,000.00

50,797.13 49,836.14 37,040.70 22,181.10 19,098.60

Investment Allowance Reserve

Balance as per last Account - - - 7.90 7.90

Less: Transfer to General Reserve - - - 7.90 -

- - - - 7.90

Statutory Reserve

Balance as per last account 11,150.00 7,260.00 4,920.00 3,158.89 2,126.46

Add: Transfer from Profit & Loss Account 4,810.00 3,890.00 2,340.00 1,761.11 1,032.43

15,960.00 11,150.00 7,260.00 4,920.00 3,158.89

Debenture Redemption Reserve

Balance as per last account - - - - 25.00

Less: Transfer to General Reserve - - - - 25.00

- - - - -

General Reserve

Balance as per last account 5,357.90 3,417.90 2,247.90 1,360.00 812.73 Add: Transfer from Investment Allowance Reserve 7.90 - Add: Transfer from Debenture Redemption Reserve - 25.00

Add: Transfer from Profit & Loss Account 2,410.00 1,940.00 1,170.00 880.00 522.27

7,767.90 5,357.90 3,417.90 2,247.90 1,360.00

Balance in Profit & Loss Account 36,112.31 22,730.09 12,003.01 8,412.03 4,471.38

114,366.32 92,803.11 62,050.59 37,761.03 28,096.77

F-22

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

( Rs. in Lacs)

As at March 31, Schedule 10 - Stock Option Outstanding

2011 2010 2009 2008 2007

Employee stock option outstanding 2,079.09 2,882.26 2,990.73 3,006.12 -

Less : Deferred employee compensation outstanding 191.82 601.22 1,352.76 2,464.04 -

1,887.27 2,281.04 1,637.97 542.08 -

F-23

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

As at March 31,

Schedule 11- Miscellaneous Expenditure (to the

extent not written off or adjusted) 2011 2010 2009 2008 2007

Issue expenses for equity shares - - - - 2.13

- - - - 2.13

F-24

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

For the year ended March 31,

Schedule 12 - Income from Operations

2011 2010 2009 2008 2007

Income from financing activities 122,778.70 96,759.92 86,138.88 51,351.57 27,107.08

Interest on margin money on securitization 799.12 749.99 405.96 457.44 260.15

Gain on securitization / assignment 8,222.30 9,695.44 5,812.89 9,255.64 6,203.52

Lease Rentals - - - 7.64 21.54

131,800.12 107,205.35 92,357.73 61,072.29 33,592.29

F-25

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

For the year ended March 31,

Schedule 13 - Other Income

2011 2010 2009 2008 2007

Interest on deposits with banks * 264.57 1,197.52 251.85 221.73 288.89

Sale of electricity - 500.59 476.13 583.08

Profit on sale of assets 0.16 0.15 - 0.01 8.85

Income from Long Term Investments (non

trade)

- Profit on sale of investments - 1,400.00 - -

- Interest on government securities 6.13 6.13 6.29 6.91 13.76

Income from Current Investments (non trade)

- Profit on sale of investments

- Dividend - 444.91 56.47 46.06 65.27

Commission/Referral fees Received 10.23 10.37 116.32 121.22 164.04

Compensation Charges - - 24.74 242.54 -

Miscellaneous Income 9.98 20.28 79.76 131.87 89.73

291.07 3,079.36 1,036.02 1,246.47 1,213.62

F-26

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

For the year ended March 31,

Schedule 14 -Financial Expenses

2011 2010 2009 2008 2007

Interest on :

- Debentures 18,256.28 17,817.36 12,863.43 8,777.67 8,917.22

- Subordinated debts 7,456.74 6,764.46 4,460.21 2,971.95 1,463.89

- Fixed deposits 6.03 10.42 11.56 36.35 43.96

- Loans from banks # 18,914.70 15,549.18 19,430.72 9,944.02 1,688.79

- Loans from institutions and others 1,243.82 962.59 1,670.87 453.36 110.34

- Commercial paper 1,434.16 30.40 250.72 291.17 -

Bank charges 1,535.79 3,289.78 2,700.70 1,591.33 720.08

Processing and other charges 2413.69 907.39 1,684.45 971.18 278.30

Brokerage & Commission 7587.05 6,427.43 5,975.99 5,811.90 3,901.94

58,848.26 51,759.01 49,048.65 30,848.93 17,124.52

F-27

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. In Lacs)

For the year ended March 31,

Schedule 15 - Personnel Expenses

2011 2010 2009 2008 2007

Salaries, allowances and Bonus 4,150.24

3,472.85 3,452.64 2,163.40 837.14

Gratuity 40.51

14.60 9.24 31.77 24.49

Contribution to provident and other funds 138.21

94.27 90.09 60.07 36.69

Staff welfare 38.06

29.91 30.78 19.50 37.19

4,367.02 3,611.63 3,582.75 2,274.74 935.51

F-28

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

For the year ended March 31,

Schedule 16 - Operating and other Expenses

2011 2010 2009 2008 2007

Rent 1,007.21 689.58 476.63 526.83 268.32

Electricity expenses 360.57 452.72 393.97 232.87 151.07

Repairs & Maintenance

- Plant & machinery - - 127.29 80.58 120.79

- Others 437.90 1,176.79 759.43 723.26 790.72

Rates, duties & Taxes 636.02 643.41 577.56 0.68 2.02

Printing & stationery 1,649.92 835.83 748.39 838.55 626.03

Travelling & conveyance 3,704.17 2,166.87 2,038.11 1,755.57 780.03

Advertisement 520.06 49.84 61.04 63.53 70.05

Business Promotion Expenses 3,495.02 2,533.95 2,257.86 1,880.57 673.62

Sourcing Fees and other charges 1,444.79 1,123.68 949.88 443.61 515.14

Royalty 364.24 304.08 269.55 147.50 79.24

Directors' sitting fees 5.45 5.55 5.20 3.03 0.15

Insurance 167.01 44.07 21.59 21.47 11.32

Communication expenses 1,908.24 1,603.23 1,533.99 1,493.66 585.07

Auditor's remuneration

- Audit fees 7.65 7.58 6.05 4.50 6.44

- Tax audit fees 3.10 2.59 2.08 1.50 1.52

- Certification fee 4.60 7.41 5.10 2.25 4.59

- Limited Review 5.88 4.65 4.55 2.25 2.49

Professional charges 2,092.43 1,069.77 1,130.74 648.15 567.19

Legal Expenses - 62.24 7.69 5.30 156.53

Recovery Expenses 2,053.29 1,232.91 1,077.91 843.91 556.26

Donations 1.00 - 65.00 41.50 1.60

Loss on sale of assets 13.94 1.75 0.12 3.36 9.81

Loss on sale of Long Term Investments (non trade) - - 0.08 - -

Miscellaneous expenses 587.67 145.10 362.92 508.59 54.77

20,470.16 14,163.60 12,882.73 10,273.02 6,034.77

F-29

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

For the year ended March 31,

Schedule 17 - Share & Debenture issue expenses

written off 2011 2010 2009 2008 2007

Issue expenses for equity shares - - - 2.13 1.69

- - - 2.13 1.69

F-30

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Statement of Assets and Liabilities

(Rs. in Lacs)

For the year ended March 31,

Schedule 18 - Provisions & Write offs

2011 2010 2009 2008 2007

Provision for non performing assets 2,552.85 3,236.89 2,460.72 253.75 212.67

Provision for standard assets 1,714.89 - -

Provision for diminution in value of investments - - - - 2.99

Bad debts written off 7,583.97 8,928.73 5,348.64 4,921.23 2,269.48

Bad debt recovery (253.46) (505.78) (108.31) (81.02) (92.39)

11,598.25 11,659.84 7,701.05 5,093.96 2,392.75

F-31

Annexure VI

Shriram City Union Finance Ltd.,

Statement of Contingent Liabilities

(Rs. In Lacs)

As on 31, March

Particulars 2011 2010 2009 2008 2007

Guarantees issued by the Company and out standing 6.81 6.81 6.81 6.81 6.81

Guarantees issued by Others 1942.77 1942.77 3117.77 - -

In respect of assets securitized - - - - 16.69

In respect of derivative transaction - - - - 9.97

F-32

Annexure VII

Shriram City Union Finance Ltd.,

Statement of Dividend in respect of Equity Shares

Particulars 2011 2010 2009 2008 2007

Interim

Rate of Dividend 25% 20% 10% 10% 10%

Number of Equity Shares on which

interim dividend paid 49449939 49113850 45850000 39100000 27100000

Amount of Interim Dividend 1236.25 982.28 501.85 391.00 271.00

Dividend Distribution tax 205.33 166.94 85.28 66.45 38.01

Dividend Distribution tax Rate 16.609% 16.995% 16.995% 16.995% 14.025%

Proposed Final Dividend for the Current Year

Rate of Dividend 35% 30% 30% 30% 20%

Number of Equity Shares on which

final dividend paid 49536877 49154700 45856800 41155000 39100000

Amount of Final Dividend 1733.79 1474.64 1375.92 1332.15 782.00

Dividend Distribution tax Rate 16.2225% 16.609% 16.995% 16.995% 16.995%

Dividend Distribution tax 281.26 244.92 233.84 226.40 132.90

Note: For the year 2009 interim dividend includes 30% final dividend of 433500 (No. of shares 1445000)

F-33

Annexure VII

Shriram City Union Finance Ltd.,

Statement of Dividend

Statement of Dividend in respect of Preference Shares

Particulars 2011 2010 2009 2008 2007

5% - - - 4210 176170

6% - - 2328980* 2018590 1343230

8% - - - 83260 277730

9% - - - - 302350

10% - - - 16270 21050

12% - - - 2950 3850

13.50% - - - 200000 200000

14% - - - 1900 2750

15% - - - 1800 1850

Total shares 2328980 2328980 2328980

Amount of dividend 63.17 141.67 154.56

Dividend distribution Tax 10.74 24.07 21.96

* During the financial year 2008-09 all Preference Shares are redeemed

F-34

Annexure VIII

Shriram City Union Finance Limited

Statement of Accounting Ratios

[Calculation of Earnings Per Share (EPS)]

Earnings per share calculation are done in accordance with Accounting Standard -20 "Earning Per Share" notified under Accounting Standards (AS) under Companies Accounting Standard Rules, 2006, as amended

(Rs. in Lacs)

As at March 31, Particulars

2011 2010 2009 2008 2007

A. Net Profit After Tax (Rs in Lacs) 24058.85 19425.86 11700.77 8763.5 5162.16

B. Less: Preference dividend including tax on dividend (Rs in Lacs) - - 73.91 165.74 176.52

C. Net Profit Attributable to Equity Shareholders (Rs in Lacs)

a 24058.85 19425.86 11626.86 8597.76 4985.64

D. Weighted average number of Equity Share Outstanding during the year/ period (for Basic EPS) (Lacs)

b

493.23 471.32 451.16 391.67 302.45

E. (i) Equity Share arising on conversion of optionally convertible warrants (Lacs)

c - - 59.28 1.45 0.89

F. (ii) Equity Share for no consideration arising on grant of Stock option under ESOP (Lacs)

d 8.32 10.45 7.71 2.29 -

G. Weighted average number of Equity Shares outstanding during the year/ period (for Diluted EPS) (b+c+d) (Lacs)

e

501.55 481.77 518.15 395.41 303.34

H. Earnings per share (Basics) (Rs.) (a/b) 48.78 41.22 25.77 21.95 16.48

I. Earnings per share (Diluted) (Rs.) (a/e) 47.97 40.32 22.44 21.74 16.44

F-35

Annexure VIII

Shriram City Union Finance Limited

Statement of Accounting Ratios

Calculation of Return on Net Worth (RONW)

(Rs. in Lacs)

As at March 31, Particulars Schedule

2011 2010 2009 2008 2007

SHAREHOLDERS FUNDS

A. Share Capital 8 4953.69 4915.47 4585.68 6444.48 6238.98

B. Share Application Money Pending Allotment - 0.71 - - -

C. Stock Option Outstanding 10 1887.27 2281.04 1637.97 542.08 -

D. Optionally Convertible Warrants - - 2700 232.2 560

E. Reserve and Surplus 9 114366.32 92803.11 62050.59 37761.03 28096.77

F. Less: Miscellaneous Expenditure (Not written off) - - - - 2.13

G. Net Worth as at the end of the year/

period 121207.28 100000.33 70974.24 44979.79 34893.62

H. Net Profit after tax 24058.85 19425.86 11700.77 8763.5 5162.16

I. Return on Net Worth (Annualized) (%) 19.85% 19.43% 16.49% 19.48% 14.79%

F-36

Annexure VIII

Shriram City Union Finance Limited

Statement of Accounting Ratios

[Calculation of Net Asset Value (NAV) Per Equity Share]

(Rs. in Lacs)

As at March 31, Particulars Schedule

2011 2010 2009 2008 2007

SHAREHOLDERS FUNDS

A. Share Capital 8 4953.69 4915.47 4585.68 6444.48 6238.98

B. Share Application Money Pending Allotment

- 0.71

-

-

-

C. Stock Option Outstanding 10 1887.27 2281.04 1637.97

542.08

-

D. Optionally Convertible Warrants

-

- 2700 232.2 560

E. Reserve and Surplus 9 114366.32 92803.11 62050.59 37761.03 28096.77

F. Less: Miscellaneous Expenditure (Not written off)

-

-

-

- 2.13

G. Net Asset Value 121207.28 100000.33 70974.24 44979.79 34893.62

H. Number of Equity shares outstanding at the end of the year/ period 49536877 49154700 45856800 41155000 39100000

I. Net asset Value per Equity Share (Rs.) 244.68 203.44 154.77 109.29 89.24

F-37

Annexure IX

Shriram City Union Finance Ltd., SECURED LOANS

A. Term loan from banks

Particulars Date of

Disbursement

Disbursed

amount (Rs. in

lacs)

Balance as on

March 31st

2011 (Rs. in

lacs)

Interest

Rate % Repayment terms

ANDHRA BANK 31-Dec-08

10000.00 4371.95 12.25 Repayable In 16 Quarterly Installments

BANK OF MAHARASHTRA 31-Mar-11

5000.00 5000.00 10.00 25 Crs Each at the end Of 30-Jun-14 & 30-Sep-14

CALYON BANK 2-Dec-10 3500.00 3500.00 9.49 Bullet Payment on 02-Dec-12

CANARA BANK 17-Dec-07

7500.00 1250.00 11.50

35 Months 5 Half Yearly Installments - 1.250Crs / Installment

CANARA BANK 29-Jan-10 20000.00 20000.00 10.50 Bullet Payment on 18-Feb-12

CANARA BANK 17 & 24-Sep-10 20000.00 20000.00 10.00 Bullet Payment on 24-Aug-13

CANARA BANK 24-Sep-10 10000.00 10000.00 10.00 Bullet Payment on 24-Aug-13

CORPORATION BANK 28-Dec-10 10000.00 10000.00 9.75 Bullet Payment on 28-Dec-13

CORPORATION BANK 29-Mar-11 20000.00 20000.00 9.50 Bullet Payment on 29-Jun-11

DBS BANK LTD 4-Mar-11 6000.00 6000.00 9.20 Bullet Payment on 07-Oct-11

DBS BANK LTD 24-Sep-10 5000.00 5000.00 8.65 Bullet Payment on 24-Sep-13

DBS BANK LTD 26-Oct-10 8000.00 8000.00 8.90 Bullet Payment on 26-Oct-11

HDFC BANK 22-Mar-10

5000.00 5000.00 8.25

Tenor-18 Months(3 Equal Installment At The End Of 12Th,15Th & 18Th)

ICICI BANK 22-Mar-11

25000.00 25000.00 8.75 25 Months-(Oct11, Apr12, Oct12, Apr13 - 62.5 Crs

IDBI BANK 22-Mar-11 20000.00 20000.00 9.50 Bullet Payment on 22-Jun-11

IDBI BANK 22-Mar-11 4000.00 4000.00 9.50 Bullet Payment on 22-Jun-11

ING VYSYA BANK 26-Mar-09 1000.00 333.28 10.50 Monthly Emi 27.70 Lacs

ING VYSYA BANK 25-Mar-10

4300.00 2866.67 8.20

Half Yearly Installment(Rs.71666666) - 35 Months

KARUR VYSYA BANK 31-Jul-09

2500.00 625.00 9.50

Tenro-24 Months(Repaid In 4 Equal Half Yearly Installments Of Rs.6.25 Cr)

ORIENTAL BANK OF COMMERCE

31-Mar-10 2000.00 2000.00 9.50

Repayable In 24 Monthly Installments (208.33 Lac)

ORIENTAL BANK OF COMMERCE

28-Mar-11

10000.00 10000.00 10.00

In 4 Quarterly Installment Of 25 Cr-36 Months(25 Crs-Jun 13, Sep 13, Dec 13 & Mar 14)

STATE BANK OF INDORE 31-Mar-09

5000.00 1397.73 12.50

11 Quarterly Installment-(Rs.4.50Cr) And Last One (5Cr)

STATE BANK OF MAURITIUS

7-Feb-11 1500.00 1500.00 10.50

8 Quarterly Installments - 31.25 Million

F-38

Annexure IX

Shriram City Union Finance Ltd.

SECURED LOANS

A. Term loan from banks

Particulars Date of

Disbursement

Disbursed

amount (Rs. in

lacs)

Balance as on

March 31st

2011 (Rs. in

lacs)

Interest

Rate % Repayment terms

STATE BANK OF MYSORE 27-Nov-10 10000.00 9999.38 9.50 Bullet Payment on 27-Nov-13

STATE BANK OF PATIALA 28-Feb-09 5000.00 2000.00 10.25 10 Qtrly installment (5.00 Crs)

STATE BANK OF PATIALA 21-Dec-10 10000.00 10000.00 10.75 Bullet Payment on 21-Dec-13

STATE BANK OF PATIALA

22-Mar-11

15000.00 15000.00 9.75

Repayment At The End Of Every 12 Months In 3 Annual Equal Instalments-3Years

STATE BANK OF TRAVANCORE

23-Dec-10 10000.00 9999.97 10.50 Bullet Payment on 23-Dec-12

SYNDICATE BANK 3-Jan-11 15000.00 15000.00 10.00 Bullet Payment on 03-Jan-13

UNION BANK OF INDIA 22-Nov-10 15000.00 15000.00 9.75 Bullet Payment on 22-Nov-12

UNION BANK OF INDIA 4-Jan-11 15000.00 15000.00 10.50 Bullet Payment on 04-Jan-13

UNITED BANK OF INDIA 27-Dec-08

2500.00 833.30 11.00 12 Quarterly Installments For 36 Months

VIJAYA BANK

30-Mar-11

9000.00 9000.00 10.50

Repayable In 36 Months With An Initial Moratorium Period Of 12 Months & Thereafter It Should Be Repaid In 24 Emi

YES BANK 28-Feb-11 8000.00 8000.00 9.25 Bullet Payment on 28-Feb-14

Total 295677.28

B. Term loan from institutions

Particulars Date of

disbursement

Disbursed

amount (Rs. in

lacs)

Balance as on

March 31st

2011 (Rs. in

lacs)

Repayment terms

SIDBI 10-Aug-10 10000.00 6500.00 10.00 Repayable on 10-Aug-13

F-39

Annexure IX

C. Cash Credit from Banks(Including WCDL)

Particulars Date of

disbursement

Disbursed amount

(Rs. in lacs)

Balance as on March 31st

2011 (Rs. in lacs) Interest Rate %

AXIS BANK 23-Aug-06 10000.00 9.08 11.75%

BANK OF INDIA 11-Jun-09 20000.00 10185.07 9.60%

BANK OF MAHARASHTRA 19-Mar-06 5000.00 4997.40 10.50%

CANARA BANK 24-Nov-09 5000.00 4088.27 11.00%

CENTRAL BANK OF INDIA 24-Mar-09 10000.00 3532.29 10.50%

CITY UNION BANK 10-Nov-10 1400.00 78.13 11.50%

CORPORATION BANK 28-Dec-10 5000.00 3522.68 9.75%

DBS BANK 29-Apr-10 100.00 5.91 10.00%

DENA BANK 5-Mar-07 15000.00 10713.18 10.45%

IDBI BANK 10-Oct-08 1000.00 90.30 11.25%

INDUSIND BANK 31-May-10 7500.00 120.56 10.60%

ING VYSYA BANK 23-Mar-10 500.00 5.70 10.00%

JAMMU & KASHMIR BANK LTD., 15-Mar-11 10000.00 8013.44 11.00%

KOTAK MAHINDRA BANK 21-Aug-09 5000.00 1014.64 10.60%

ORIENTAL BANK OF COMMERCE

18-Sep-06 5000.00 3662.67 10.00%

PUNJAB NATIONAL BANK 4-Aug-07 5000.00 9.16 13.00%

SOUTH INDIAN BANK 25-Jun-10 1000.00 40.33 12.00%

STATE BANK OF INDIA 13-Mar-09 15000.00 7539.90 12.00%

STATE BANK OF PATIALA 24-Feb-09 5000.00 48.11 12.75%

STATE OF BIKANUR AND JAIPUR 8-Sep-10 100.00 40.59 11.50%

TAMILNADU MERCANTILE BANK

20-Aug-07 5000.00 19.89 11.50%

UNION BANK OF INDIA 25-Mar-08 5000.00 2766.09 12.00%

UNITED BANK OF INDIA 25-Mar-09 7500.00 3292.02 9.00%

YES BANK - ac 200 25-Mar-10 2000.00 10.74 11.00%

WCDL

HSBC BANK 23-Dec-09 10000.00 10000.00 8.15%

HSBC BANK 23-Dec-09 5000.00 5000.00 8.05%

SOUTH INDIAN BANK 25-Jun-10 5000.00 4989.92 7.75%

STATE BANK OF BIKANER & JAIPUR

22-Dec-10 2400.00 2400.00 9.50%

STANDARD CHARTERED BANK 25-Oct-10 5000.00 5000.00 8.90%

CENTURION CC BANK 31-Dec-10 2400.00 2400.00 9.50%

CANARA BANK 9-Dec-10 15000.00 15000.00 9.80%

DBS 4-Mar-11 1400.00 1400.00 9.20%

FEDERAL 1-Mar-11 5000.00 5000.00 9.90%

STATE BANK OF MYSORE 18-Mar-11 4900.00 4900.00 9.30%

IDBI 22-Mar-11 15000.00 15000.00 9.50%

Total 134896.09

F-40

Annexure IX

D. Privately placed Redeemable NCD

Particulars Date of

disbursement

Disbursed

amount (Rs. in

lacs)

Balance as on

March 31st

2011 (Rs. in

lacs)

Interest

Rate % Repayment terms

CORPORATION BANK 24-Sep-09 2500.00 2500.00 10.75 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

CENTRAL BANK OF INDIA 17-Sep-09 1000.00 1000.00 10.75 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

CENTRAL BANK PENSION FUND

17-Sep-09 1000.00 1000.00 10.75 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

CENTRAL BANK PROVIDENT FUND

17-Sep-09 500.00 500.00 10.75 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

ALLAHABAD BANK 23-Sep-09 2000.00 2000.00 10.75 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

A.K.CAPITAL SERVICES 6-Oct-09 2000.00 2000.00 10.75 Repayable on 07-Oct-14

BANK OF BARODA 6-Oct-09 1000.00 1000.00 10.75 Repayable on 07-Oct-14

STANDARD CHARTERED BANK

22-Apr-10 17500.00 14583.33 7.82 Half yearly instalment-3 years

RELIANCE MUTUAL FUND 5-Jul-10 7500.00 7500.00 9.00 Repayable on 05-Jan-13

ING VYSYA BANK 23-Nov-10 2000.00 2000.00 10.50 In 3 Equal installments in 5th/6th/ 7th Year from deemed date of allotment

ING VYSYA BANK 13-Dec-10 1000.00 1000.00 10.60 Repayable on 13-Dec-17

ING VYSYA BANK 13-Dec-10 1500.00 1500.00 10.60 Repayable on 13-Dec-17

JHARKAND GRAHIM BANK 4-Feb-11 500.00 500.00 10.75 Repayable on 04-Feb-21

DEUTSCHE BANK 30-Mar-11 27500.00 27500.00 9.00 Repayable on 30-Mar-17

Total 64583.33

E. Privately placed Redeemable Non Convertible Debenture of Rs. 1,000 each

Particulars Balance as on March 31st 2011 (Rs. in lacs)

Repayment terms

Retail Debentures 155294.31 Redeemable at par over a period 12 to 160 months

F-41

Annexure X

Shriram City Union Finance Limited

UNSECURED LOANS

Particulars

Balance as on

March 31st

2011 (Rs. in

lacs) Repayment terms

A. Fixed Deposits

55.10

Redeemable at par over a period 12 to 60 months

B. Subordinated Debts

53,272.33

Redeemable at par over a period 60 to 216 months

Total 53,327.43

C. Commercial Paper

Particulars Date of

disbursement

Disbursed amount

(Rs. in lacs)

Balance as

on March

31st 2011

(Rs. in lacs)

Interest

Rate % Repayment terms

UTI MUTUAL FUND 13-Sep-10

5500.00 5500.00 8.66 Repayable on 12-Sep-11

ICICI PRUDENTIAL LIFE INSURANCE

13-Sep-10 5000.00 5000.00 8.66

Repayable on 12-Sep-11

TATA MUTUAL FUND 13-Sep-10

7500.00 7500.00 8.66 Repayable on 07-Sep-11

CHOLAMANDALAM MS GENERAL INSURANCE COMPANY LTD.

8-Oct-10 500.00 500.00 8.67

Repayable on 07-Oct-11

TATA TRUSTEE COMPANY LTD.

8-Oct-10 1500.00 1500.00 8.24

Repayable on 19-Sep-11

UTI - FIIF ANNUAL INTERVAL PLAN S-III

8-Oct-10 1000.00 1000.00 8.67

Repayable on 07-Oct-11

UTI-FMP-YEARLY SERIES 8-Oct-10

1500.00 1500.00 8.67 Repayable on 07-Oct-11

Total 22500.00

F-42

Annexure XI

Shriram City Union Finance Limited

Capitalization statement

(Rs. In Lacs)

Particulars

Pre Issue as at March 31,

2011 (Audited) As adjusted for Issue

Debt

Short Term Debt 160552.61 160552.61

Long Term Debt 572225.83 647225.83

Total 732778.44 807778.44

Shareholders Fund

Share Capital 4953.69 4953.69

Share Application Money pending allotment - -

Stock Option Outstanding 1887.27 1887.27

Reserve & Surplus (Refer Annexure IV - Schedule 10) 114366.32 114366.32

Less: Miscellaneous Expenditure - -

Total of Shareholders Fund 121207.28 121207.28

Long Term Debt / equity Ratio 6.05 6.66

F-43

Annexure - XII

Shriram City Union Finance Limited

Statement of Tax Shelter

(Rs. in Lacs)

For the year ended

March 31 For the year ended 31st March

Particulars

2011 2010 2009 2008 2007

Profit as per accounting books (business) 36,060.09 27,225.86 17,973.53 12,698.46 7,943.32 Profit as per accounting books (investments) 1,400.00 Total profit as per accounting

books 36,060.09 28,625.86 17,973.53 12,698.46 7,943.32

Tax rate on business income 33.22% 33.99% 33.99% 33.99% 33.66%

Tax rate on investment income 11.33%

Tax on accounting profit 11,978.26 9,412.69 6,109.20 4,316.21 2,673.72

Permanent Differences

Donation 0.50 32.50 13.25 0.80

Exempt Dividend Income (444.91) (56.47) (46.06) (65.27)

Disallowance u/s 14A 500.00

Capital gains on sale of fixed assets 2,193.38 2,797.00

Others 13.94 200.00 0.20 24.34 15.52

Sub Total (A) 14.44 2,448.47 (23.77) 2,788.53 (48.95)

Temporary Differences

Depreciation and Lease adjustments 0.03 (97.37) 1,804.92 859.39 516.21

Service tax write off 783.14 173.41

Provision for standard assets 1,714.89 Leave Encashment, Gratuity & Bonus 68.30 25.75 7.97 140.16 23.38

Derivative provision (546.62) 994.18 811.68

Others 199.84 (0.42) (34.03) 14.42

Sub Total (B) 1,436.44 (72.04) 2,807.07 2,560.34 727.42

Net Adjustments (A+B) 1,450.88 2,376.43 2,783.30 5,348.87 678.47

Tax Impact on Net Adjustments 481.95 559.42 946.04 1,818.08 228.37

Total Taxation 12,460.21 9,972.11 7,055.25 6,134.29 2,902.09

Current Tax Provision for the year 12,460.20 9,972.11 7,055.25 6,134.29 2,902.09

Notes:-

1. Profits after tax are often affected by the tax shelters which are available.

2. Some of these are of a relatively permanent nature while others may be limited in point of time.

3. Tax provisions are also affected by timing differences which can be reversed in future.

F-44

Annexure XIII

Significant Accounting Policies

Back Ground

Shriram City Union Finance Limited (SCUFL) was incorporated on 27th March 1986, as a Private Limited

Company and became a Public Limited Company on 29th October 1988. The Company is a Non-Banking Finance

Company registered with Reserve Bank of India (RBI)

a. Basis of preparation

The financial statements have been prepared under historical cost convention on an accrual basis and in

accordance with generally accepted accounting principles in India and specifically to comply in all material

respects with the notified Accounting Standards (AS) issued under the Companies Accounting Standard Rules

2006 and the relevant provisions of the Companies Act 1956. (‘The Act’) and the guidelines issued by the

Reserve Bank of India (‘RBI’) as applicable to a Non Banking Finance Company (‘NBFC’). The Accounting

policies are consistent with those used in the previous year.

b. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

disclosure of contingent liabilities at the date of the financial statements and the results of operations during the

reporting year end. Although these estimates are based upon management’s best knowledge of current events and

actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized

prospectively in the current and future years.

F-45

c. Fixed Assets, Depreciation / Amortization and Impairment of assets

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation/amortization and impairment losses, if any. Cost

comprises the purchase price and any attributable cost of bringing the asset to its working condition for its

intended use. Borrowing costs relating to acquisition of fixed assets are included to the extent they relate to the

period till such assets are ready to be put to use.

Depreciation / Amortization

Depreciation is provided pro rata on Straight Line Method (‘SLM’), which reflect the management’s estimate of

the useful lives of the respective fixed assets and are greater than or equal to the corresponding rates prescribed in

Schedule XIV of the Act. The assets for which higher rates are applied are as follows:

Particulars Rates (SLM) Schedule XIV rates (SLM)

Windmills 10% 5.28%

Computer Software 33.33% 16.21%

Leasehold improvement is amortized over the primary period of lease subject to a maximum of 60 months. All

fixed assets individually costing Rs.5000 or less are fully depreciated in the year of installation.

Impairment of assets

The carrying amount of assets is reviewed at each balance sheet date if there is any indication of impairment

based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset

exceeds its recoverable amount. The recoverable amount is the greater of the assets’ net selling price and value in

use.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful

life.

A previously recognized impairment loss is increased or reversed depending on changes in circumstances.

However the carrying value after reversal is not increased beyond the carrying value that would have prevailed by

charging usual depreciation if there was no impairment.

Up to year ended March 31, 2007

Fixed Assets and Depreciation:-

Fixed assets have been stated at historical cost less depreciation. Depreciation has been provided under straight

line method at rates prescribed under the Companies Act, 1956. Assets costing Rs.5000/- or less are fully

depreciated in the year of purchase.

F-46

d. Investments

Investments intended to be held for not more than a year are classified as current investments. All other

investments are classified as long-term investments. Current investments are carried at lower of cost and fair

value determined on an individual investment basis. Long Term Investments are carried at cost. Provision for

diminution in the value of long term investments is made to recognize decline in value other than temporary in

nature.

e. Assets under financing activities

Assets under Financing Activities are stated at the amount advanced including finance charges accrued and expenses

recoverable, as reduced by the amounts received up to Balance sheet date and assets securitized. Non Performing

Assets are written off / provided for, as per management estimates, subject to the minimum provision required as per

Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions

2007.

Provision @0.25% on standard Asset is made as required under Reserve bank of India (RBI) notification No.

DNBS.222/CGM (US-2011) Dated January 17, 2011 for the year 2010-11.

Up to year ended March, 31, 2008

Provisioning / Write – off of assets

Loans, hire purchase and lease receivables are written off / provided for , as per management estimates, subject to the

minimum provision required as per Non – Banking Financial Companies Prudential Norms (Reserve Bank) Directions,

1998.

Up to the year ended March, 31, 2007

Receivables under Hire Purchase and Financial Lease Agreements

Receivables under Hire Purchase and Financial Lease Agreements are stated at agreement value including expenses

recoverable reduced by installment received and unearned finance income as required under Accounting Standard AS -

19 issued by the Institute of Charted Accountants of India and shown net of assets securitized.

f. Foreign currency translation

Foreign currency transactions are accounted at the exchange rate prevailing on the date of transactions. Foreign

currency monetary items on the Balance Sheet date are restated at the closing exchange rates. All Exchange

differences are dealt within the profit & loss account.

F-47

g. Revenue recognition

i. Income from Financing Activities is recognised on the basis of internal rate of return. This includes Additional Finance Charges which is accounted when received because of uncertainty of realization.

ii. Gain arising on securitization/direct assignment of assets is recognized over the tenure of agreements as

per guideline on securitization of standard assets issued by RBI. Loss (if any) is recognized upfront.

iii. The Prudential norms for income recognition prescribed under Non-Banking Financial (Deposit Accepting

or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007 are followed.

iv. Income from services is recognized as per the terms of the contract on accrual basis.

v. Interest Income on deposit accounts with banks is recognized on a time proportion basis taking into

account the amount outstanding and the rate applicable.

vi. Dividend is recognized as Income when right to receive is established by the date of balance sheet.

vii.

Profit / Loss on sale of investments is recognized at the time of actual sale / redemption.

Up to the year ended March 31, 2010

Income from power generation is recognized on supply of power to the grid as per the terms of the Power

Purchase Agreements with State Electricity Boards.

Up to the year ended March 31, 2007

Income from financial lease is recognized on the basis of Internal Rate of Return and the corresponding assets are booked as receivable in accordance with Accounting Standard AS-19 issued by the institute of Chartered Accountants of India. Lease rentals is respect of assets leased up to 31.03.2011are recognized as per “Guidance Note on Accounting for Leases (Revised)” issued by the Institute of Chartered Accountants of India and in respect of these assets lease equalization/adjustment accounts are created for the shortfall in capital recovery and adjusted in lease rental income/fixed assets. Interest on Hypothecation loans, Personal loans, Microfinance and Hire Purchase finance charges are recognized on the basis of Internal Rate of Return. Additional finance charges are treated to accrue only on realization, due to uncertainty of realization and are accounted for accordingly.

F-48

h. Employee benefits

Provident Fund

All the employees of the Company are entitled to receive benefits under the Provident Fund, a defined contribution

plan in which both the employee and the Company contribute monthly at a stipulated rate. The Company has no

liability for future Provident Fund benefits other than its annual contribution and recognizes such contributions as

an expense in the year it is incurred.

Gratuity

The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The plan

provides for lump sum payments to employees at retirement, death while in employment or on separation from

employment as per Provisions of payment of Gratuity Act 1972 . The Company accounts for liability of future

gratuity benefits based on an external actuarial valuation on projected unit credit method carried out annually for

assessing liability as at the balance sheet date.

Leave Encashment

Short term compensated absences are provided for based on estimates. Long term compensated absences are

provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.

Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

i. Income Tax

Tax expense comprises of current tax, deferred tax and fringe benefit tax. Current income tax and fringe benefit

tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax

Act, 1961. Deferred income taxes reflects the impact of current year timing differences between taxable income

and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance

sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient

future taxable income will be available against which such deferred tax assets can be realized. In situations where

the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if

there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.

The un-recognized deferred tax assets are re-assessed by the Company at each balance sheet date and are

recognized to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient

future taxable income will be available against which such deferred tax assets can be realized.

The carrying cost of the deferred tax assets are reviewed at each balance sheet date. The Company writes down

the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain,

as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be

realized. Any such write down is reversed to the extent that it becomes reasonably certain or virtually certain, as

the case may be, that sufficient future taxable income will be available.

F-49

j. Segment reporting

The company operates in one reportable segment.

k. Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

l. Cash and cash equivalents

Cash and cash equivalents in the cash flow statement which is prepared in accordance with Accounting Standard (AS) 3 issued by the Institute of Chartered Accountants of India(ICAI) comprise cash at bank, cash in hand and short term investments with an original maturity of three months or less.

m. Expenses on deposits / debentures

Expenses on mobilization of deposits / debentures are charged to Profit & Loss account in the year in which they are incurred.

Upto year ended March, 31 2007

Expenses on mobilization of deposits / debenture have been charges to Profit & Loss account in the year in which they are incurred. However, expenses incurred up to 31st March 2003 are charged to Profit and Loss Account on the basis of duration of deposits / debenture.

n. Provisions

A provision is recognized when the Company has a present obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

o. Derivative instruments

Accounting for derivative contracts, other than those covered under AS-11, are marked to market and the net loss after considering the offsetting effect on the underlying hedge item is charged to profit and loss account. Net gains are ignored.

F-50

p. Employee stock compensation costs

Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI. The Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.

Up to year ended March. 31, 2007

l. Equity Shares and Preference Shares Issue Expenses

Equity Shares and Preference Shares and Debenture issue Expenses are written off over a period of 10 years.

Up to the year ended March 31, 2010

m. Leases

Assets taken on operating lease are not capitalized in the books of the Company and the lease rental payments are

charged to Profit and Loss accounts.

F-51

2010 - 2011

2. Notes to Accounts

1. Particulars of Secured Loans

a) Privately placed Redeemable Non-convertible Debentures of Rs.1, 000/- each (Retail)

As at March 31,2011 As at March 31,2010

Number Amount

(Rs. in lacs)

Number Amount (Rs. in lacs)

1,55,29,431 1,55,294.31 1,34,07,377 1,34,073.77

Secured by equitable mortgage of title deeds of immovable property. Further secured by charge on plant and

machinery, furniture and other fixed assets of the Company, charge on Company’s hypothecation loans, other loans,

advances and investments of the Company subject to prior charges created or to be created in favor of the Company’s

bankers, financial institutions and others.

These Debentures are redeemable at par over a period of 12 months to 160 months from the date of allotment depending

on the terms of the agreement. The earliest date of redemption is April 1, 2011 (March 31, 2010; April 1, 2010). The

last date of redemption is October 25, 2017 (March 31, 2010; October 25, 2017).

Debentures may be bought back subject to applicable statutory and /or regulatory requirements, upon the terms and

conditions as may be decided by the Company. The Company may grant loan against the security of Non Convertible

Debentures upon the terms and conditions as may be decided by the Company and subject to applicable statutory and/or

regulatory requirements.

F-52

b) Privately Placed Redeemable Non-Convertible Debenture (Institutional)

Amount (Rs. In lacs)

Date of

Allotment/renewal

Face

Value

Number As at

March

31, 2011

As at

March

31, 2010

Redeemable at par on

23.04.2009 100000 1000 - 10000.00 23.04.2010

24.09.2009 100000 2500 2500.00 2500.00 30.09.2014

17.09.2009 100000 1000 1000.00 1000.00 30.09.2014

17.09.2009 100000 1000 1000.00 1000.00 30.09.2014

17.09.2009 100000 500 500.00 500.00 30.09.2014

23.09.2009 100000 2000 2000.00 2000.00 30.09.2014

06.10.2009 100000 2000 2000.00 2000.00 07.10.2014

06.10.2009 100000 2000 1000.00 1000.00 07.10.2014

22.04.2010 1000000 1458 14583.33 - 22.04.2013

05.07.2010 1000000 750 7500.00 - 05.01.2013

23.11.2010 1000000 200 2000.00 - 23.11.2017

13.12.2010 1000000 100 1000.00 - 13.12.2017

13.12.2010 1000000 150 1500.00 - 13.12.2017

04.02.2011 1000000 50 500.00 - 04.02.2021

30.03.2011 1000000 2750 27500.00 - 30.03.2017

Total 64583.33 20000.00

Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable

mortgage of title deeds of immovable property.

F-53

c) Term Loans:

(Rs. In lacs)

i. From Financial Institutions/Corporate :

As at March 31

2011

As at March 31

2010

Secured by an exclusive charge by way of hypothecation of assets under

financing.

6500.00

9530.00

Total 6500.00 9530.00

ii. From Banks :

Secured by an exclusive charge by way of hypothecation of assets

under financing.

295677.28

104634.17

Total

295677.28 104634.17

d) Cash Credit from Banks

(Rs. In lacs)

As at March 31

2011 As at March 31 2010

Cash Credit from Banks 134896.09 145372.61

Secured by an exclusive charge by way of hypothecation of receivables relating to assets under financing.

2.

Subordinated Debt

The Company has as on 31.03.2011 subordinated debt bonds amounting to Rs. 53272.33 Lacs (March 31,2010:

Rs. 53002.95 Lacs) with coupon rate of 7.00% to 13.00% Per annum which are redeemable over a period of 60

month to 216 month.

3. Gratuity and other post-employment benefit plans:

The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five years or

more of service gets a gratuity on separation at 15 days basic salary (last drawn salary) for each completed year of

service

Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI the following

disclosures have been made as required by the standard:

F-54

Profit and Loss account

Net employee benefit expense (recognized in Employee Cost) (Rs. in Lacs)

Gratuity

Particulars March 31 2011 March 31 2010

Current service cost 4.84 21.49

Interest cost on benefit obligation 12.44 12.38

Expected return on plan assets N.A N.A

Net actuarial (gain) / loss recognized in the year 23.23 (19.27)

Past service cost NIL NIL

Net benefit expense 40.51 14.60

Actual return on plan assets N.A N.A

Balance sheet

Details of Provision for gratuity (Rs in Lacs)

Gratuity

Particulars March 31 2011 March 31 2010

Defined benefit obligation 196.34 155.52

Fair value of plan assets N.A N.A

Total 196.34 155.52

Less: Unrecognized past service cost NIL NIL

Plan asset / (liability) (196.34) (155.52)

F-55

Changes in the present value of the defined benefit obligation are as follows: (Rs. In Lacs)

Gratuity

Particulars March 31 2011 March 31 2010

Opening defined benefit obligation 155.52 139.64

Interest cost 12.44 12.38

Current service cost 4.84 21.49

Benefits paid -- 1.28

Actuarial (gains) / losses on obligation 23.54 (19.27)

Closing defined benefit obligation 196.34 155.52

The Company would not contribute any amount to gratuity in 2011-12 as the scheme is unfunded. The major categories of plan assets as a percentage of the fair value of total plan assets are as follows: (Rs. In Lacs)

Gratuity

Particulars March 31 2011 March 31 2010

% %

Investments with insurer NA NA

The principal assumptions used in determining gratuity obligations for the company’s plan are shown below: (Rs. In Lacs)

Gratuity

Particulars March 31 2011 March 31 2010

Discount Rate 8.25% 7.75%

Increase in compensation cost 5.00% 5.00%

Employee Turnover 2.00% 3.25%

F-56

The estimates of future salary increases considered in actuarial valuation, are on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market. Amounts for the current and previous years are as follows:

Particulars March 31 2011 March 31 2010 March 31 2009 March 31 2008

Defined Benefit obligation 196.34 155.52 139.64 133.18

Plan Assets N.A N.A N.A N.A

Surplus/Deficit (196.34) (155.52) (139.64) (133.18)

Experience adjustment on Plan

Liabilities (29.63) (19.27) (39.51) 53.10

Experience adjustment on Plan

Assets N.A N.A N.A N.A

4. Related Party Disclosures

Related Parities have been identified by the Management and relied upon by the auditors.

Subsidiary : Shriram Housing Finance Limited (from 9th November 2010)

Shriram Non-Conventional Energy Limited (till 26th June 2009)

Enterprises having significant

influence over the Company

: Shriram Enterprise Holdings Private Limited

Shriram Retail Holdings Private Limited

Shriram Capital Limited

Shriram Ownership Trust

TPG India Investments I Inc.

Key Managerial Personnel : R Kannan Managing Director

F-57

(Rs. in Lacs)

Enterprises having

significant influence

over the Company

Subsidiary Total

2011 2010 2011 2010 2011 2010

Payments -

Royalty 338.15# 304.08* - - 338.15# 304.08*

Data Sourcing fees 206.40# 160.53* - - 206.40# 160.53*

Service Charges 1238.39# 963.15* - - 1238.39# 963.15*

Reimbursement of Business Promotion

Expenses 33.09 * 44.12* - - 33.09* 44.12*

Equity dividend 985.68$ 896.07$ - - 985.68$ 896.07$

Equity dividend 470.59@ 334.38@ - - 470.59@ 334.38@

Investments in Equity shares - - 250.00^ - 250.00^ --

Receipts

Sale of investments - 1900.00* - - - 1900.00*

Balance outstanding at the year end

Share Capital 1792.15* 1792.15# - - 1792.15* 1792.15#

Share Capital 855.62@ 855.62@ - - 855.62@ 855.62@

Investment in Shares - - 250.00^ - 250.00^ -

Outstanding Expenses - 41.84* - 41.84*

* Denotes transactions with Shriram Capital Limited

$ Denotes transactions with Shriram Enterprise Holdings Private Limited

@ Denotes transactions with Shriram Retail Holdings Private Limited

#

^

Denotes transactions with Shriram Ownership Trust Limited

Denotes transactions with Shriram Housing Finance Limited

5. In accordance with the Reserve Bank of India circular no. RBI/2006-07/225 DNBS (PD) C.C No.87/03.02.2004/2006-07 dated January 4,2007, the Company has created a floating charge on the statutory liquid assets comprising of investment in Government Securities to the extent of Rs. 101.45 Lacs ( March 31,2010: Rs: 101.45Lacs) in favour of trustees representing the public deposit holders of the Company.

F-58

6. Earnings per share (Rs. in lacs)

Particulars

Year ended

March 31 2011

Year ended March 31

2010

Net Profit after tax and Share of loss of Associates as per profit

and loss account (Rs. in lacs)(A) 24058.85 19425.86

Weighted average number of equity shares for calculating Basic

EPS (in lacs) (B) 493.23 471.32

Weighted average number of equity shares for calculating Diluted

EPS (in lacs) (C) 501.55 481.77

Basic earnings per equity share (in Rupees) (Face value of Rs. 10/-

per share) (A) / (B) 48.78 41.22

Diluted earnings per equity share (in Rupees) (Face value of Rs.

10/- per share) (A) / (C) 47.97 40.32

(Rs. in lacs)

Particulars

Year ended March

31 2011

Year ended March

31 2010

Weighted average number of equity shares for calculating EPS (in

lacs) 493.23 471.32

Add : Equity shares arising on conversion of optionally convertible

warrants (in lacs) - --

Add : Equity shares for no consideration arising on grant of stock

options under ESOP (in lacs) 8.32 10.45

Weighted average number of equity shares in calculation diluted

EPS (in lacs) 501.55 481.77

Deferred Tax Liabilities /Asset (Net)

The breakup of deferred tax asset / liabilities is as under:-

(Rs. in lacs)

Particulars As at March 31 2011 As at March 31 2010

Deferred Tax Liabilities

Timing difference on account of :

Differences in depreciation in block of fixed assets as per tax books and financial books

85.63 92.32

Gross Deferred Tax Liabilities (A) 85.63 92.32

F-59

Deferred Tax Asset

Timing difference on account of :

Service Tax Provision 515.90 527.89

Additional Provision against standard assets 569.65 0.00

Leave Encashment Provision 18.01 9.09

Gratuity Provision 65.22 52.86

Derivative Provision 418.29 613.81

Bonus Provision 13.78 11.42

Estimated Disallowances 66.44

Gross Deferred Tax Assets (B) 1667.29 1215.02

Deferred Tax Liabilities/(Asset) (Net) (A-B) (1581.66) (1122.70)

(Rs. in lacs)

8. Capital commitments As at March 31

2011

As at March 31 2010

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)

61.78

2.80

(Rs. in lacs)

9. Contingent Liabilities not provided for As at March 31

2011

As at March 31 2010

a. Guarantees issued by the Company 6.81 6.81

b. Guarantees issued by others 1942.77 1942.77

10. Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax

Disputed Wealth Tax/Service Tax demands contested in appeal as on March 31st , 2011. Wealth tax – Rs.

176.00 lacs (March 31st 2010: Rs.176 lacs)

Service Tax - Rs.1553.08 Lacs (March 31st 2010: Rs.1553.08 lacs)

However provision is made in the books for any liability that may arise.

11. Employee Stock Option Plan:

Date of grant October 19 2007

Date of Board Approval October 19 2007

Date of Shareholder’s approval October 30 2006

Number of options granted 1355000

F-60

Method of Settlement (Cash/Equity) Equity

Graded vesting period:

After 1 year of grant date 10% of options granted

After 2 years of grant date 20% of options granted

After 3 years of grant date 30% of options granted

After 4 years of grant date 40% of options granted

Exercisable period 10 years from vesting date

Vesting Conditions on achievement of pre –determined targets

The details of Stock Option Plan are summarized below:

The details of exercise price for stock options outstanding at the end of the year are:

As at

Range of

exercise

prices(Rs.)

No. of options

outstanding

Weighted average

remaining

contractual life of

options (in years)

Weighted average

Exercise Price(Rs.)

March 31 2011 35 9,18,123 9.55 35

March 31 2010 35 12,72,800 10.55 35

As at March 31 2011 As at March 31 2010

Number of

Shares

Weighted

Average

Exercise

Price(Rs.)

Number of

Shares

Weighted Average

Exercise Price(Rs.)

Outstanding at the beginning of the year 1272800 35.00 1320700 35.00

Add: Granted during the year 27500 - -

Less: Forfeited during the year - - -

Less: Exercised during the year 382177 35.00 47900 35.00

Less: Expired during the year - - -

Outstanding at the end of the year 918123 35.00 1272800 35.00

Exercisable at the end of the year - - -

Weighted average remaining contractual life

(in years)

- 9.55 - 10.55

Weighted average fair value of options

granted

- 227.42 - 227.42

F-61

Stock Options granted

The weighted average fair value of stock options granted was Rs.227.42. The Black Scholes model has been used for

computing the weighted average fair value of options considering the following inputs:

Yr 1 Yr 2 Yr 3 Yr 4

Exercise Price (Rs.) 35.00 35.00 35.00 35.00

Expected Volatility (%) 55.36 55.36 55.36 55.36

Historical Volatility NA NA NA NA

Life of the options granted (Vesting and exercise period) in

years

1.50 2.50 3.50 4.50

Expected dividends per annum (Rs.) 3.00 3.00 3.00 3.00

Average risk-free interest rate (%) 7.70 7.67 7.66 7.67

Expected dividend rate (%) 0.84 0.84 0.84 0.84

The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank Nifty

which is considered as a comparable peer group of the Company. To allow for the effects of early exercise it was

assumed that the employees would exercise the options within six months from the date of vesting in view of the

exercise price being significantly lower than the market price.

Effect of the employee share-based payment plans on the profit and loss account and on its financial position:

(Rs. in lacs)

As at March 31

2011

As at March 31 2010

Compensation cost pertaining to equity-settled employee share-based

payment plan included above

471.68 751.53

Liability for employee stock options outstanding as at year end 2079.09 2882.26

Deferred compensation cost 191.82 601.22

F-62

Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings per

share by applying the fair value based method is as follows:

In March 2005,the ICAI issued a guidance note on “Accounting for Employees Share Based Payments” applicable to

employee based share plan the grant date in respect of which falls on or after April 1 2005. The said guidance note

requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock

compensation accounting in the financial statements. Applying the fair value based method defined in the said

guidance note the impact on the reported net profit and earnings per share would be as follows:

(Rs. in lacs)

Year ended March

31 2011

Year ended March 31

2010

Profit as reported (Rs. in lacs) 24058.85 19425.86

Add: Employee stock compensation under intrinsic value

method (Rs. in lacs) 471.68 751.53

Less: Employee stock compensation under fair value method

(Rs. in lacs) 473.70 754.75

Proforma profit (Rs. in lacs) 24056.83 19422.64

Less Preference Dividend - -

Proforma Net Profit for Equity Shareholders 24056.83 19422.64

Earnings per share

Basic (Rs.)

- As reported 48.78 41.22

- Proforma 48.77 41.21

Diluted (Rs.)

- As reported 47.97 40.32

- Proforma 47.96 40.31

F-63

12. Securitization

The information on securitization & direct assignment activity of the Company as an originator for the year March

31 2011 and March 31 2010 is given below:

Year ended March

31 2011

Year ended March 31

2010

Total number of assets securitized 178502 146402

Total book value of assets securitized (Rs. in lacs) 117915.72 30000.00

Sale consideration received for the securitised assets (Rs. in

lacs) 126737.01 30000.00

Net gain on account of securitization (Rs. in lacs) 27163.76 2554.73

Outstanding credit enhancement- Deposit with

banks/corporate

15436.40 7373.57

Outstanding Credit enhancement – Assets under financing 1900.63 2735.13

13.

Derivative Instruments:

The Notional principal amount of derivative transactions outstanding as on March 31 2011 for interest rate

swaps Rs.12500 lacs (March 31 2010 – 12500 lacs).

14. Supplementary Statutory Information

14.1 Managing Director’s Remuneration

The computation of profits under section 349 of the Act has not been given as no remuneration / commission is payable to the Managing Director.

(Rs.in lacs)

14.2 Expenditure in foreign currency (On cash basis)

Year ended March

31 2011

Year ended March 31

2010

Subscription Fees 0.09 0.08

15. Additional information pursuant to the provisions of paragraphs 3 4C and 4D of Part II of schedule VI

to the Act

The Company does not have licensed capacity as it is a Non Banking Finance Company.

16. Previous Year Comparatives

The figures for the previous year have been regrouped and reclassified, wherever necessary to conform to current

year’s classification.

F-64

2009 – 2010

2. Notes to Accounts

1. Particulars of Secured Loans

a) Privately placed Redeemable Non-convertible Debentures (Retail)

As at March 31,2010 As at March 31,2009

Face Value

(Rs.)

Number Amount

(Rs.in lacs)

Number Amount (Rs.in

lacs)

1,000 1,34,07,377 1,34,073.77 1,00,74,110 1,00,741.10

These Debentures are redeemable at par over a period of 12 months to 160 months from the date of allotment depending

on the terms of the agreement. The earliest date of redemption is 01.04.2010 (March 31,2009; 01.04.2009). The last

date of redemption is 25.10.2017 (March 31, 2009; 25.10.2017).

b) Privately Placed Redeemable Non-Convertible Debenture (Institutional)

Amount (Rs. in lacs)

Date of

Allotment/renewal

Face

Value

Number As at

March

31, 2010

As at

March

31, 2009

Redemption date

28.03.2008 1,000 5,00,000 - 5,000.00 15.04.2009

28.05.2008 1,000 12,50,000 - 12,500.00 28.10.2009

17.12.2008 10,00,000 950 - 9,500.00 17.12.2009

23.04.2009 10,00,000 1,000 10,000.00 - 23.04.2010

24.09.2009 10,00,000 250 2,500.00 - 30.09.2014

17.09.2009 10,00,000 100 1,000.00 - 30.09.2014

17.09.2009 10,00,000 100 1,000.00 - 30.09.2014

17.09.2009 10,00,000 50 500.00 - 30.09.2014

23.09.2009 10,00,000 200 2,000.00 - 30.09.2014

06.10.2009 10,00,000 200 2,000.00 - 07.10.2014

06.10.2009 10,00,000 200 1,000.00 - 07.10.2014

Total 20,000.00 27,000.00

These Debentures are redeemable at par at respective dates given above.

F-65

c) All Debentures under (a) and (b) above are secured by exclusive mortgage of office premise and further secured by

charge on Plant and Machinery, Furniture and other fixed assets of the Company, charge on Company’s book debts,

loans, advances and other investments of the Company subject to prior charges created or to be created in favour of

the Company’s bankers, financial institutions and others.

d) Term Loans:

(Rs. in lacs)

As at March 31,

2010

As at March 31,

2009

i. From Financial Institutions/Corporate:

(a) Secured by an exclusive charge by way of

hypothecation of assets under financing.

9,530.00

9,103.00

(b)

Secured by an exclusive charge by way of

hypothecation of specific charge on Land, Plant &

Machinery and Receivables relating to the

Windmills

--

323.40

Total 9,530.00 9,426.40

(Rs. in lacs)

As at March 31,

2010

As at March 31,

2009

ii. From Banks :

(a) Secured by an exclusive charge by way of

hypothecation of assets under financing.

1,04,634.17

1,40,150.93

(b) Secured by an exclusive charge by way of

hypothecation of specific charge on Land, Plant &

Machinery and Receivables relating to the Windmills

--

1,448.70

(c) Secured by an exclusive charge by way of

hypothecation of specific charge on Land, Plant &

Machinery relating to the Bio Mass Plant

--

1,963.11

Total

104634.17 1,43,562.74

F-66

e) Cash Credit from Banks

(Rs. in lacs)

As at March 31,

2010

As at March 31,

2009

Cash Credit from Banks 1,45,372.61 1,09,715.19

Secured by an exclusive charge by way of hypothecation of receivables relating to assets under financing.

2.

Gratuity and other post-employment benefit plans:

The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five years or

more of service gets a gratuity on separation at 15 days salary (last drawn salary) for each completed year of

service.

Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI, the following disclosures

have been made as required by the standard :

Profit and Loss account

Net employee benefit expense (recognized in Employee Cost) (Rs. in lacs)

Gratuity

Particulars March 31, 2010 March 31, 2009

Current service cost 21.49 35.29

Interest cost on benefit obligation 12.38 13.37

Expected return on plan assets N.A N.A

Net actuarial (gain) / loss recognized in the year (19.27) (39.51)

Past service cost NIL NIL

Net benefit expense 14.60 9.15

Actual return on plan assets N.A N.A

F-67

Balance sheet

Details of Provision for gratuity

(Rs in Lacs)

Gratuity

Particulars March 31, 2010 March 31, 2009

Defined benefit obligation 155.52 139.64

Fair value of plan assets N.A N.A

Total 155.52 139.64

Less: Unrecognized past service cost NIL NIL

Plan asset / (liability) (155.52) (139.64)

Changes in the present value of the defined benefit obligation are as follows: (Rs. in Lacs)

Gratuity

Particulars March 31, 2010 March 31, 2009

Opening defined benefit obligation 139.64 133.18

Interest cost 12.38 13.37

Current service cost 21.49 35.29

Benefits paid 1.28 (2.69)

Actuarial (gains) / losses on obligation (19.27) (39.51)

Closing defined benefit obligation 155.52 139.64

The Company would not contribute any amount to gratuity in 2010-11 as the scheme is unfunded. The major categories of plan assets as a percentage of the fair value of total plan assets are as follows: (Rs. In Lacs)

Gratuity

Particulars March 31, 2010 March 31, 2009

% %

Investments with insurer NA NA

The principal assumptions used in determining gratuity obligations for the company’s plan are shown below:

F-68

(Rs. In Lacs)

Gratuity

Particulars March 31, 2010 March 31, 2009

Discount Rate 7.75% 7.75%

Increase in compensation cost 5.00% 5.00%

Employee Turnover 3.25% 3.25%

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market Amounts for the current period are as follows: (Rs. in lacs)

Particulars March 31, 2010 March 31, 2009 March 31, 2008

Defined benefit obligation 155.52 139.64 133.18

Plan assets N.A N.A N.A

Surplus / (deficit) (155.52) (139.64) (133.18)

Experience adjustments on plan liabilities (19.27) (39.51) 53.10

Experience adjustments on plan assets N.A N.A. N.A

3. Related Party Disclosures

Related Parities have been identified by the Management and relied upon by the auditors.

Subsidiary : Shriram Non-Conventional Energy Limited (till 26th June 2009)

Enterprises having significant

influence over the Company

: Shriram Enterprise Holdings Private Limited

Shriram Retail Holdings Private Limited

Shriram Capital Limited

Shriram Ownership Trust

TPG India Investments I Inc.

Key Managerial Personnel : R Kannan, Managing Director

F-69

(Rs. In Lacs)

Enterprises having

significant influence over

the Company

Subsidiary Total

2010 2009 2010 2009 2010 2009

Payments

Royalty 304.08* 269.55* - - 304.08* 269.55*

Data Sourcing fees 160.53* 135.70* - - 160.53* 135.70*

Service Charges 963.15* 814.18* - - 963.15* 814.18*

Equity dividend - - - -

Reimbursement of Business

Promotion Expenses 44.12* - - - 44.12* -

Equity dividend 896.07# 716.86# - - 896.07# 716.86#

Equity dividend 334.38@ 217.67@ - - 334.38@ 217.67@

Investments in shares - - - -

Loan to Subsidiary - - 4,392.66^ 4,392.66^

Receipts - -

Sale of investments 1,900.00* - - - 1,900.00* -

Subscription of equity shares - - - -

Subscription to optionally

convertible warrants 1,400.00@ - - 1,400.00@

Conversation of Warrants into

Equity / Securities Premium 2,080.80# - - 2,080.80#

Interest Received - 78.00^ 78.00^

Balance outstanding at the year

end -

Share Capital 1,792.15# 1,792.15# - 1,792.15# 1,792.15#

Share Capital 855.62@ 544.17@ - 855.62@ 544.17@

Share Warrants - 1,400.00@ - - 1,400.00@

Investment in Shares - - 5.00^ - 5.00^

Outstanding Expenses 41.84* 60.90* - 41.84* 60.90*

Interest receivable on Loan to

Subsidiary - 60.32^ 60.32^

F-70

* Denotes transactions with Shriram Capital Limited

# Denotes transactions with Shriram Enterprise Holdings Private Limited

@ Denotes transactions with Shriram Retail Holdings Private Limited

^ Denotes transactions with Shriram Non Conventional Energy Limited

4. Earnings Per Share

(Rs. In Lacs)

( Particulars Year ended

March 31, 2010

Year ended

March 31, 2009

Net Profit after tax as per profit and loss account (Rs. in lacs) 19,425.86 11,700.77

Less : Preference Dividend 0.00 73.91

Net Profit for Equity Shareholders (A) 19,425.86 11,626.86

Weighted average number of equity shares for calculating Basic EPS (in lacs) (B) 471.32 451.16

Weighted average number of equity shares for calculating Diluted EPS (in lacs)

(C) 481.77 518.15

Basic earnings per equity share (in Rupees) (Face value of Rs. 10/- per share) (A)

/ (B) 41.22 25.77

Diluted earnings per equity share (in Rupees) (Face value of Rs. 10/- per share)

(A) / (C) 40.32 22.44

(Rs. in lacs)

Particulars

Year ended

March 31, 2010

Year ended

March 31, 2009

Weighted average number of equity shares for calculating EPS (in lacs) 471.32 451.16

Add : Equity shares arising on conversion of optionally convertible warrants (in

lacs) -- 59.28

Add : Equity shares for no consideration arising on grant of stock options under

ESOP (in lacs) 10.45 7.71

Weighted average number of equity shares in calculation diluted EPS (in lacs) 481.77 518.15

F-71

5. Deferred Tax Liabilities/(Asset) (Net)

(Rs. in lacs)

The breakup of deferred tax asset / liabilities is as under:- As at March 31,

2010

As at March 31,

2009

Deferred Tax Liabilities

Timing difference on account of :

Differences in depreciation in block of fixed assets as per tax books and financial books

92.32 881.85

Gross Deferred Tax Liabilities (A) 92.32 881.85

Deferred Tax Asset

Timing difference on account of :

Expenses disallowed under Income Tax Act, 1961 601.20 581.09

Provision for hedging contracts 613.81 613.81

Gross Deferred Tax Assets (B) 1,215.02 1,194.90

Deferred Tax Liabilities/(Asset) (Net) (A-B) (1,122.70) (313.05)

(Rs. in lacs)

6. Capital commitments As at March 31,

2010

As at March 31,

2009

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)

2.80

NIL

(Rs. in lacs)

7. Contingent Liabilities not provided for As at March 31,

2010

As at March 31,

2009

Guarantees issued by the Company 6.81 6.81

Guarantees issued by others 1,942.77 3,117.77

Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax

Disputed Income tax/Wealth Tax/Service Tax/Fringe Benefit Tax demands contested in appeal as on March 31st,

2010 amount to Rs.1,553.08 lacs (March 31st 2009: Rs.1,554.83 lacs. However provision is made in the books for

any liability that may arise.

F-72

8. The Company during the year converted 32,50,000 warrants issued on preferential basis into equity shares of Rs.10/- each at a premium of Rs.390/-. The company forfeited 35,00,000 warrants for non exercise of option and the amount of Rs.1,400 lacs was transferred to Capital Reserve.

9. Employee Stock Option Plan

Series I

Date of grant October 19, 2007

Date of Board Approval October 19, 2007

Date of Shareholder’s approval October 30, 2006

Number of options granted 13,27,500

Method of Settlement (Cash/Equity) Equity

After 1 year of grant date 10% of options granted

After 2 years of grant date 20% of options granted

After 3 years of grant date 30% of options granted

After 4 years of grant date 40% of options granted

Exercisable period 10 years from vesting date

Vesting Conditions on achievement of pre –determined targets

F-73

The details of Series I have been summarized below:

The details of exercise price for stock options outstanding for Series I at the end of the year are:

As at Range of

exercise

prices

Number of options

outstanding

Weighted average

remaining contractual life

of options (in years)

Weighted average

exercise price

March 31, 2010 Rs.35/- 12,72,800 10.55 Rs.35/-

March 31, 2009 Rs.35/- 13,20,700 11.55 Rs.35/-

As at March 31, 2010 As at March 31, 2009

Number of

Shares

Weighted

Average

Exercise

Price(Rs.)

Number of

Shares

Weighted Average

Exercise Price(Rs.)

Outstanding at the beginning of the year 13,20,700 35.00 Nil -

Add: Granted during the year - - 13,27,500 35.00

Less: Forfeited during the year - - Nil -

Less: Exercised during the year 47,900 35.00 6,800 35.00

Less: Expired during the year Nil - Nil -

Outstanding at the end of the year 12,72,800 35.00 13,20,700 35.00

Exercisable at the end of the year - - - -

Weighted average remaining contractual life

(in years)

- 10.55 - 11.55

Weighted average fair value of options granted - 227.42 - 227.42

F-74

Stock Options granted

Series I:

The weighted average fair value of stock options granted was Rs.227.42. The Black Scholes model has been used for

computing the weighted average fair value of options considering the following inputs:

Yr 1 Yr 2 Yr 3 Yr 4

Exercise Price (Rs.) 35.00 35.00 35.00 35.00

Expected Volatility (%) 55.36 55.36 55.36 55.36

Historical Volatility NA NA NA NA

Life of the options granted (Vesting and exercise

period) in years

1.50 2.50 3.50 4.50

Expected dividends per annum (Rs.) 3.00 3.00 3.00 3.00

Average risk-free interest rate (%) 7.70 7.67 7.66 7.67

Expected dividend rate (%) 0.84 0.84 0.84 0.84

The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank Nifty

which is considered as a comparable peer group of the Company. To allow for the effects of early exercise, it was

assumed that the employees will exercise the options within six months from the date of vesting in view of the exercise

price being significantly lower than the market price.

Effect of the employee share-based payment plans on the profit and loss account and on its financial position:

(Rs. in lacs)

As at March

31, 2010

As at March 31,

2009

Compensation cost pertaining to equity-settled employee share-based

payment plan included above

751.53 1,111.28

Liability for employee stock options outstanding as at year end 2,882.26 2,990.73

Deferred compensation cost 601.22 1,352.76

F-75

Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings per

share by applying the fair value based method is as follows:

In March 2005, ICAI has issued a guidance note on “Accounting for Employees Share Based Payments” applicable to

employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said guidance note

requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock

compensation accounting in the financial statements. Applying the fair value based method defined in the said

guidance note, the impact on the reported net profit and earnings per share would be as follows:

(Rs. in lacs)

Year ended March

31, 2010

Year ended March

31, 2009

Profit as reported (Rs. in lacs) 19,425.86 11,700.77

Add: Employee stock compensation under intrinsic value

method (Rs. in lacs) 751.53 1,111.28

Less: Employee stock compensation under fair value method

(Rs. in lacs) 754.75 1,116.04

Proforma profit (Rs. in lacs) 19,422.64 11,696.01

Less Preference Dividend - 73.91

Proforma Net Profit for Equity Shareholders 19,422.64 11,622.10

Earnings per share

Basic (Rs.)

- As reported 41.22 25.77

- Proforma 41.21 25.76

Diluted (Rs.)

- As reported 40.32 22.44

- Proforma 40.31 22.43

F-76

10. Securitization

The information on securitization & direct assignment activity of the Company as an originator for the year March

31, 2010 and March 31, 2009 is given below:

(Rs. In Lacs)

Year ended March

31, 2010

Year ended March

31, 2009

Total number of assets securitized 1,46,402 3,14,685

Total book value of assets securitized (Rs. in lacs) 30,000.00 88,844.37

Sale consideration received for the securitized assets (Rs. in

lacs) 30,000.00 91,874.15

Net gain on account of securitization (Rs. in lacs) 2,554.73 13,182.64

Outstanding credit enhancement- Deposit with

banks/corporate

7,373.57 10,017.54

Outstanding Credit enhancement – Assets under financing 2,735.13 1,762.03

11. Derivative Instruments:

The Notional principal amount of derivative transactions outstanding as on March 31, 2010 for interest

rate swaps Rs.12,500 lacs (March 31, 2009 – 12,500 lacs).

12. Supplementary Statutory Information

12.1 Managing Director’s Remuneration

The computation of profits under section 349 of the Act has not been given as no remuneration / commission is payable to the Managing Director.

(Rs .in lacs)

12.2 Expenditure in foreign currency (On cash basis)

Year ended March

31, 2010

Year ended March 31,

2009

Subscription Fees 0.08 0.08

13. Additional information pursuant to the provisions of paragraphs 3, 4C and 4D of Part II of schedule

VI to the Act

F-77

13.1 Licensed Capacity, Installed capacity, Actual production and Sales

Class of

Goods

Units Licensed

Capacity as

at March 31,

Installed

Capacity as at

March 31, (in

KW)

Actual Production and

Sales for the year ended

March 31, (in units)

Sales Value

(Rs. in lacs)

2010 2009 2010 2009 2010 2009 2010 2009

Electricity -

Windmill

34 - NA - 12,550 1,71,19,786 500.5

9

F-78

2008 – 2009

2. Notes to Accounts

1. Particulars of Secured Loans

a) Privately placed Redeemable Non-convertible Debentures of Rs.1,000/- each

(Rs. in lacs)

Debentures are redeemable over a period of 12 months to 160 months from the date of allotment depending on the

terms of the agreement.

Privately Placed Redeemable Non-Convertible Debenture of Rs.1000/- each

(Rs. in lacs)

Amount (Rs. in lacs)

Date of

Allotment/renewal As at March 31,

2009

As at March 31,

2008

Redemption date

28.03.2008 5,000.00 5,000.00 15.04.2009

28.05.2008 12,500.00 - 28.10.2009

17.12.2008 9,500.00 - 17.12.2009

Total 27,000.00 5,000.00

The above mentioned privately placed Non-Convertible Debentures are secured by exclusive mortgage of office

premise. Further secured by charge on Plant and Machinery, Furniture and other fixed assets of the Company, charge on

Company’s book debts, loans, advances and other investments of the Company subject to prior charges created or to be

created in favour of the Company’s bankers, financial institutions and others.

As at March 31, 2009 As at March 31, 2008

Number 1,00,74,110 64,10,639

Amount 1,00,741.10 64,106.39

F-79

b) Term Loans:

(Rs. in lacs)

As at March 31,

2009 As at March 31, 2008

i. From Financial Institutions/Corporate:

(a) Secured by an exclusive charge by way of

hypothecation of receivables relating to

Loans

9,103.00

10,100.00

(b) Secured by an exclusive charge by way of

hypothecation of specific charge on Land, Plant

& Machinery and Receivables relating to the

Windmills

323.40

413.00

Total 9,426.40 10,513.00

(Rs. in lacs)

As at March 31,

2009 As at March 31, 2008

ii. From Banks :

(a)

Secured by an exclusive charge by way of

hypothecation of receivables relating to Loans

1,40,150.93

1,11,568.53

(b) Secured by an exclusive charge by way of

hypothecation of specific charge on Land, Plant

& Machinery and Receivables relating to the

Windmills

1,448.70 1,910.78

(c) Secured by an exclusive charge by way of

hypothecation of specific charge on Land, Plant

& Machinery relating to the Bio Mass Plant

1,963.11

2,275.71

Total

1,43,562.74 1,15,755.02

c) Cash Credit from Banks

(Rs. in lacs)

As at March 31,

2009 As at March 31, 2008

Cash Credit from Banks 1,09,715.19 67,420.99

Secured by an exclusive charge by way of hypothecation of receivables relating to Loans

F

F-80

2. FiFixed Deposits

In accordance with the Reserve Bank of India circular no.RBI/2006-07/ 225 DNBS (PD) C.C No.

87/03.02.004/2006-07 dated January 4, 2007, the Company has created a floating charge on the statutory liquid

assets comprising of investment in Government Securities to the extent of Rs101.45 lacs in favour of trustees

representing the public deposit holders of the Company.

3. Subordinated Debt

The Company has raised during the year subordinated debt bonds amounting to

Rs.13,813.75 lacs (March 31, 2008: Rs. 8,170.49 lacs) with coupon rate of 11.5% to 13% per annum which

are redeemable over a period of 62 months to 73 months.

4. Cash & Cash Equivalents

(Rs. in lacs)

Particulars Year ended March 31,

2009

Year ended March 31,

2008

Cash & Bank balance (as per schedule 8 ) 1,60,803.74 87,605.23

Less : Fixed deposits having original maturity

greater than 3 months or pledged with banks or lien marked

deposits

10,813.87 4,958.17

Balance considered as cash & cash equivalents for cash

flow statement 1,49,989.87 82,647.06

5. Gratuity and other post-employment benefit plans:

The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five

years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each

completed year of service.

Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI, the following

disclosures have been made as required by the standard:

F-81

Profit and Loss account

Net employee benefit expense (recognized in Employee Cost) (Rs. in lacs)

Gratuity Gratuity

Particulars March 31, 2009 March 31, 2008

Current service cost 35.29 45.67

Interest cost on benefit obligation 13.37 5.93

Expected return on plan assets N.A N.A

Net actuarial (gain) / loss recognized in the year (39.51) 53.10

Past service cost NIL NIL

Net benefit expense 9.15 104.70

Actual return on plan assets N.A N.A

Balance sheet

Details of Provision for gratuity (Rs in Lacs)

Gratuity Gratuity

Particulars March 31, 2009 March 31, 2008

Defined benefit obligation 139.64 133.18

Fair value of plan assets N.A N.A

Total 139.64 133.18

Less: Unrecognized past service cost NIL NIL

Plan asset / (liability) (139.64) (133.18)

F-82

Changes in the present value of the defined benefit obligation are as follows: (Rs. in Lacs)

Gratuity Gratuity

Particulars March 31, 2009 March 31, 2008

Opening defined benefit obligation 133.18 28.48

Interest cost 13.37 5.93

Current service cost 35.29 45.67

Benefits paid (2.69) NIL

Actuarial (gains) / losses on obligation (39.51) 53.10

Closing defined benefit obligation 139.64 133.18

The Company would not contribute any amount to gratuity in 2009-10 as the scheme is unfunded. The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:

Gratuity Gratuity

Particulars March 31, 2009 March 31, 2008

% %

Investments with insurer NA NA

The principal assumptions used in determining gratuity obligations for the company’s plan are shown below:

Gratuity Gratuity

Particulars March 31, 2009 March 31, 2008

Discount Rate 7.75% 8%

Increase in compensation cost 5.00% 5%

Employee Turnover 3.25% 10%

F-83

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Amounts for the current period are as follows: ( Rs. In Lacs)

Particulars March 31, 2009 March 31, 2008

Defined benefit obligation 139.64 133.18

Plan assets N.A N.A

Surplus / (deficit) (139.64) (133.18)

Experience adjustments on plan liabilities (39.51) 53.10

Experience adjustments on plan assets N.A. NA

The current year being the first year of adoption of AS 15 (revised) by the Company, the previous year comparative

information has not been furnished.

F-84

6. Segment Reporting

(Rs. in lacs)

Year ended March 31, 2009 Year ended March 31, 2008

Particulars

Financing

Activities

Unallocated

reconciling

items

Total Financing

Activities

Unallocated

reconciling

items

Total

Segment Revenue 92,893.16 500.59 93,393.75 61,842.63 476.13 62,318.76

Segment Results

(Profit before tax and

after interest on

Financing Segment)

19,785.18 (1,552.74) 18,232.43 13,366.42 (347.14) 13,019.28

Less: Interest on

unallocated

reconciling items

- 258.90 258.90 - 320.82 320.82

Net profit before tax 17,973.53 12,698.46

Less: Income taxes 6,272.76 3,934.96

Net profit 11,700.77 8,763.50

Other Information:

Segment assets 5,33,858.67 9,726.13 5,43,584.80 3,69,451.13 8,372.14 3,77,823.27

Unallocated corporate

assets - 575.82 575.82 1,030.88 1,030.88

Total Assets 5,33,858.67 10,301.95 5,44,160.62 3,69,451.13 9,403.02 3,78,854.15

Segment liabilities 4,69,776.83 1,799.79 4,71,576.62 3,28,489.90 4,752.31 3,33,241.21

Unallocated corporate

liabilities - - - - 632.99 632.99

Total Liabilities 4,69,776.83 1,799.79 4,71,576.62 3,28,489.90 5,384.30 3,33,874.20

Capital expenditure 879.02 - 879.02 670.25 - 670.25

Depreciation 285.12 1,919.93 2,205.05 394.40 733.12 1,127.52

Other non - cash

expenses 9,922.91 - 9,922.91 6,652.54 6,652.54

F-85

7. Related Party Disclosures

Related Parities have been identified by the Management and relied upon by the auditors.

Subsidiary : Shriram Non-Conventional Energy Limited (From 10th January

2009)

Enterprises having significant influence over

the Company

:

Shriram Enterprise Holdings Private Limited

Shriram Retail Holdings Private Limited

Shriram Capital Limited

Key Managerial Personnel : R Kannan, Managing Director

F-86

(Rs in Lacs)

Enterprises having

significant influence

over the Company

Subsidiary Total

2009 2008 2009 2008 2009 2008

Payments

Royalty 269.55* 147.50* - - 269.55* 147.50*

Data Sourcing fees 135.70* 63.38* - - 135.70* 63.38*

Service Charges 814.18* 380.24* - - 814.18* 380.24*

Equity dividend - 162.60* - - - 162.60*

Equity dividend 716.86# 432.64# - - 716.86# 432.64#

Equity dividend 217.67@ - - - 217.67@ -

Investments in shares - - - 4.99^ - 4.99^

Loan to Subsidiary - - 4392.66^ - 4392.66^ -

Receipts

Sale of investments - - - 4.54^ - 4.54^

Subscription of equity shares - - - - - -

Subscription to optionally convertible

warrants 1400.00@ - - - 1400.00@ -

Conversation of Warrants into Equity /

Securities Premium 2080.80# 2959.20# - - 2080.80# 2,959.20#

Interest Received 78.00^ - 78.00^ -

Balance outstanding at the year end

Share Capital 542.00* 542.00*

Share Capital 1,792.15# 1,647.65# 1,792.15# 1,647.65#

Share Capital 544.17@ - 544.17@ -

Share Warrants 1,400.00@ 232.20# 1,400.00@ 232.20#

Investment in Shares 5.00^ 0.45^ 5.00^ 0.45^

Outstanding Expenses 60.90* 174.28* 60.90* 174.28*

Interest receivable on Loan to

Subsidiary

60.32^ - 60.32^ -

F-87

* Denotes transactions with Shriram Capital Limited

# Denotes transactions with Shriram Enterprise Holdings Private Limited

@ Denotes transactions with Shriram Retail Holdings Private Limited

^ Denotes transactions with Shriram Non Conventional Energy Limited

8. Earnings per share

(Rs. in lacs)

Particulars Year ended March 31,

2009

Year ended March 31, 2008

Net Profit after tax as per profit and loss account (Rs. in lacs) 11,700.77 8,763.50

Less : Preference Dividend 73.91 165.74

Net Profit for Equity Shareholders (A) 11,626.86 8,597.76

Weighted average number of equity shares for calculating

Basic EPS (in lacs) (B) 451.16 391.67

Weighted average number of equity shares for calculating

Diluted EPS (in lacs) (C) 518.15 395.41

Basic earnings per equity share (in Rupees) (Face value of Rs.

10/- per share) (A) / (B) 25.77 21.95

Diluted earnings per equity share (in Rupees) (Face value of

Rs. 10/- per share) (A) / (C) 22.44 21.74

(Rs. in lacs)

Particulars

Year ended March 31,

2009

Year ended March 31,

2008

Weighted average number of equity shares for calculating EPS

(in lacs) 451.16 391.67

Add : Equity shares arising on conversion of optionally

convertible warrants (in lacs) 59.28 1.45

Add : Equity shares for no consideration arising on grant of stock

options under ESOP (in lacs) 7.71 2.29

Weighted average number of equity shares in calculation diluted

EPS (in lacs) 518.15 395.41

F-88

9. Consolidated Financial Statements

The Company has further acquired 45,500 equity shares of M/s. Shriram Non Conventional Energy Limited

(SNEL) during the year and consequently SNEL has become wholly owned subsidiary with effect from 10th

January 2009. This investment is intended to be temporary since the subsidiary is acquired and held exclusively

with a view to dispose it in the near future. Complying with Accounting Standard 21 issued by the Institute of

Chartered Accountants of India consolidated accounts are therefore not presented. The Company has at its

Extra Ordinary General Meeting of the shareholders held on May 11, 2009 obtained the approval of the

shareholders to sell the shares held as Investments in its wholly owned subsidiary.

10. Deferred Tax Liabilities/(Asset) (Net)

(Rs. in lacs)

The breakup of deferred tax asset / liabilities is as under:- As at March 31,

2009 As at March 31, 2008

Deferred Tax Liabilities

Timing difference on account of :

Differences in depreciation in block of fixed assets as per tax books and financial books

881.85 1,495.39

Gross Deferred Tax Liabilities (A) 881.85 1,495.39

Deferred Tax Asset

Timing difference on account of :

Expenses disallowed under Income Tax Act, 1961 581.09 586.51

Provision for hedging contracts 613.81 275.89

Gross Deferred Tax Assets (B) 1194.90 862.40

Deferred Tax Liabilities/(Asset) (Net) (A-B) (313.05) 632.99

(Rs. in lacs)

11. Capital Commitments As at March 31,

2009

As at March 31, 2008

Estimated amount of contracts remaining to be executed on

capital account and not provided for (net of advances) NIL 276.84

F-89

(Rs. in lacs)

12. Contingent Liabilities not provided for As at March 31,

2009

As at March 31, 2008

Guarantees issued by the Company 6.81 6.81

Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax

Disputed Income tax/Wealth Tax/Service Tax/Fringe Benefit Tax demands contested in appeal as on March 31st,

2009 amount to Rs.1554.83 lacs (March 31st 2008: Rs.1,603.12 Lacs. However provision is made in the books

for any liability that may arise.

13. The Company during the year converted 14,40,000 warrants issued to Shriram Enterprise Holdings Private Limited into equity shares of Rs.10/- each at a premium of Rs.150/-. The total amount of Rs. 2167.50 lacs received from the said preferential allotment was utilized for the purpose of increasing the net worth and working capital of the Company. The company has further issued 35,00,000 warrants to Shriram Retail Holdings Private Limited on a preferential basis with an option to convert into equity shares of Rs.400/-each (including securities premium of Rs.390/-) within 18 months from the date of issue i.e. May 16,2008.

14. Employee Stock Option Plan

Series I

Date of grant October 19, 2007

Date of Board Approval October 19, 2007

Date of Shareholder’s approval October 30, 2006

Number of options granted 13,27,500

Method of Settlement (Cash/Equity) Equity

After 1 year of grant date 10% of options granted

After 2 years of grant date 20% of options granted

After 3 years of grant date 30% of options granted

After 4 years of grant date 40% of options granted

Exercisable period 10 years from vesting date

Vesting Conditions on achievement of pre –determined targets

F-90

The details of Series I have been summarized below:

The details of exercise price for stock options outstanding for Series I at the end of the year are:

As at Range of

exercise

prices

Number of options

outstanding

Weighted average

remaining

contractual life of

options (in years)

Weighted average exercise price

March 31, 2009 Rs.35/- 13,27,500 11.55 Rs.35/-

March 31, 2008 Rs.35/- 13,27,500 12.55 Rs.35/-

As at March 31, 2009 As at March 31, 2008

Number of

Shares

Weighted

Average

Exercise

Price(Rs.)

Number of

Shares

Weighted Average

Exercise Price(Rs.)

Outstanding at the beginning of the year Nil Nil

Add: Granted during the year 13,27,500 Rs. 35.00 13,27,500 Rs. 35.00

Less: Forfeited during the year Nil - Nil -

Less: Exercised during the year 6,800 Rs.35.00 - -

Less: Expired during the year - - - -

Outstanding at the end of the year 13,20,700 Rs. 35.00 13,27,500 Rs. 35.00

Exercisable at the end of the year - -

Weighted average remaining contractual life

(in years)

11.55 12.55

Weighted average fair value of options granted Rs. 227.42 Rs. 227.42

F-91

Stock Options granted

Series I:

The weighted average fair value of stock options granted was Rs.227.42/-. The Black Scholes model has been used for

computing the weighted average fair value of options considering the following inputs:

Yr 1 Yr 2 Yr 3 Yr 4

Exercise Price (Rs.) 35.00 35.00 35.00 35.00

Expected Volatility (%) 55.36 55.36 55.36 55.36

Historical Volatility NA NA NA NA

Life of the options granted (Vesting and exercise period) in

years

1.50 2.50 3.50 4.50

Expected dividends per annum (Rs.) 3.00 3.00 3.00 3.00

Average risk-free interest rate (%) 7.70 7.67 7.66 7.67

Expected dividend rate (%) 0.84 0.84 0.84 0.84

The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank Nifty

which is considered as a comparable peer group of the Company. To allow for the effects of early exercise, it was

assumed that the employees will exercise the options within six months from the date of vesting in view of the exercise

price being significantly lower than the market price.

Effect of the employee share-based payment plans on the profit and loss account and on its financial position:

(Rs. in lacs)

As at March

31, 2009

As at March

31, 2008

Compensation cost pertaining to equity-settled employee share-based payment

plan included above

1,111.28 542.08

Liability for employee stock options outstanding as at year end 2,990.73 3,006.12

Deferred compensation cost 1,352.76 2,464.04

F-92

Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings per

share by applying the fair value based method is as follows:

In March 2005, ICAI has issued a guidance note on “Accounting for Employees Share Based Payments” applicable to

employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said guidance note

requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock

compensation accounting in the financial statements. Applying the fair value based method defined in the said

guidance note, the impact on the reported net profit and earnings per share would be as follows:

(Rs. in lacs)

Year ended March

31, 2009

Year ended March

31, 2008

Profit as reported (Rs. in lacs) 11,700.77 8,763.50

Add: Employee stock compensation under intrinsic value method

(Rs. in lacs) 1,111.28 542.08

Less: Employee stock compensation under fair value method (Rs. in

lacs) 1,116.04 544.40

Proforma profit (Rs. in lacs) 11,696.01 8,761.18

Less Preference Dividend 73.91 165.74

Proforma Net Profit for Equity Shareholders 11,622.10 8,595.44

Earnings per share

Basic (Rs.)

- As reported 25.77 21.95

- Proforma 25.76 21.95

Diluted (Rs.) - -

- As reported 22.44 21.74

- Proforma 22.43 21.74

F-93

15. Securitisation

The Company sells loans through securitisation and direct assignment. The information on securitisation & direct

assignment activity of the Company as an originator for the year March 31, 2009 and March 31, 2008 is given

below:

Year ended

March 31, 2009

Year ended March 31,

2008

Total number of loan assets securitized 3,14,685 3,98,691

Total book value of loan assets securitised (Rs. in lacs) 88,844.37 75,781.80

Sale consideration received for the securitised assets (Rs. in

lacs) 91,874.15 83,539.14

Net gain on account of securitization (Rs. in lacs) 3,029.78 7,757.34

The information on securitisation & direct assignment activity of the Company as an originator as on March 31, 2009

and March 31, 2008 is given in the table below :

(Rs. in Lacs)

As at March 31,

2009 As at March 31, 2008

Outstanding credit enhancement- Deposit with banks/corporate 10,017.54 4,695.88

Outstanding Credit enhancement - Receivables 1,762.03 3,200.86

16. Derivative Instruments:

The Notional principal amount of derivative transactions outstanding as on March 31, 2009 for interest rate swaps

Rs.12,500 lacs (March 31, 2008 – 50,000 lacs).

17. Supplementary Statutory Information

17.1 Managing Director’s Remuneration

The computation of profits under section 349 of the Act has not been given as no remuneration / commission is payable to the Managing Director.

(Rs.in lacs)

17.2 Expenditure in foreign currency (On cash basis)

Year ended March

31, 2009

Year ended March 31,

2008

Travelling - 1.67

Others 0.08 Nil

0.08 1.67

F-94

18. Additional information pursuant to the provisions of paragraphs 3, 4C and 4D of Part II of schedule VI to

the Act

18.1 Licensed Capacity, Installed capacity, Actual production and Sales

Class of

Goods

Units Licensed

Capacity as at

March 31,

Installed

Capacity as at

March 31, (in

KW)

Actual Production and

Sales for the year ended

March 31, (in units)

Sales Value

(Rs. in lacs)

2009 2008 2009 2008 2009 2008 2009 2008

Electricity

- Windmill

34 NA NA 12,550 12,550 1,71,19,786 1,65,56,603 500.59 476.13

19. Based on the intimation received by the Company, none of the suppliers have confirmed to be registered under The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. Accordingly, no disclosures relating to amounts unpaid as at the year end together with interest paid /payable are required to be furnished.

F-95

2007 – 2008

2. Notes to Accounts

1. Particulars of Secured Loans

a) Privately placed Redeemable Non-convertible Debentures of Rs.1,000/- each

(Rs. in lacs)

Debentures are redeemable over a period of 12 months to 160 months from the date of allotment depending on the

terms of the agreement.

Privately Placed Redeemable Non-Convertible Debenture of Rs.1000/- each

(Rs. in lacs)

Amount (Rs. in lacs)

Date of

Allotment/renewal As at March 31,

2008

As at March 31,

2007

Redemption date

28.03.2008 5,000.00 Nil 15.04.2009

The above mentioned privately placed Non-Convertible Debentures are secured by exclusive mortgage of office

premise. Further secured by charge on Plant and Machinery, Furniture and other fixed assets of the Company,

charge on Company’s book debts, leased assets, loans, advances and other investments of the Company subject to

prior charges created or to be created in favour of the Company’s bankers, financial institutions and others.

As at March 31,

2008 As at March 31, 2007

Number 64,10,639 60,96,856

Amount 64,106.39 60,968.56

F-96

b) Term Loans:

(Rs. in lacs)

As at March 31,

2008 As at March 31, 2007

i. From Financial Institutions/Corporate:

(a) Secured by an exclusive charge by way of

hypothecation of receivables relating to

Loans

10,100.00

700.00

(b) Secured by an exclusive charge by way of

hypothecation of specific charge on Land,

Plant & Machinery and Receivables relating to

the Windmills

413.00 461.00

Total 10,513.00 1,161.00

(Rs. in lacs)

As at March 31,

2008 As at March 31, 2007

ii. From Banks :

(a) Secured by an exclusive charge by way of

hypothecation of receivables relating to

Loans

1,11,568.53

37,716.00

(c) Secured by an exclusive charge by way of

hypothecation of specific charge on Land,

Plant & Machinery and Receivables relating

to the Windmills

1,910.78 2,370.19

(d) Secured by an exclusive charge by way of

hypothecation of specific charge on Land,

Plant & Machinery relating to the Bio Mass

Plant

2,275.71

1,367.55

Total

1,15,755.02 41,453.74

c) Cash Credit from Banks

(Rs. in lacs)

As at March 31,

2008 As at March 31, 2007

Cash Credit from Banks 67,420.99 26,800.92

Secured by an exclusive charge by way of hypothecation of receivables relating to Loans

F-97

2. Subordinated Debt

The Company has raised during the year subordinated debt bonds amounting to Rs. 8,170.49 lacs (March

31, 2007: Rs. 10,920.89 lacs) with coupon rate of 11.5% per annum which are redeemable over a period

of 62 months to 73 months.

3. Cash & Cash Equivalents

(Rs. in lacs)

Particulars Year ended March 31,

2008

Year ended March 31, 2007

Cash & Bank balance (as per schedule 8 ) 87,605.23 36,489.78

Less : Fixed deposits having original maturity

greater than 3 months or pledged with banks or lien marked

deposits

4,958.17 5,010.80

Balance considered as cash & cash equivalents for

cash flow statement 82,647.06 31,478.98

Gratuity and other post-employment benefit plans:

The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five

years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each

completed year of service.

Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI, the following

disclosures have been made as required by the standard:

Profit and Loss account

Net employee benefit expense (recognized in Employee Cost) (Rs. in lacs)

Gratuity

Particulars March 31, 2008

Current service cost 45.67

Interest cost on benefit obligation 5.93

Expected return on plan assets N.A

Net actuarial (gain) / loss recognized in the year 53.10

Past service cost NIL

Net benefit expense 104.70

Actual return on plan assets N.A

F-98

Balance sheet

Details of Provision for gratuity (Rs in Lacs)

Gratuity

Particulars March 31, 2008

Defined benefit obligation 133.18

Fair value of plan assets N.A

Total 133.18

Less: Unrecognized past service cost NIL

Plan asset / (liability) (133.18)

Changes in the present value of the defined benefit obligation are as follows: (Rs..in Lacs)

Gratuity

Particulars March 31, 2008

Opening defined benefit obligation 28.48

Interest cost 5.93

Current service cost 45.67

Benefits paid NIL

Actuarial (gains) / losses on obligation 53.10

Closing defined benefit obligation 133.18

The Company would not contribute any amount to gratuity in 2008-09 as the scheme is unfunded. The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:

Gratuity

Particulars March 31, 2008

%

Investments with insurer NA

F-99

The principal assumptions used in determining gratuity obligations for the company’s plan are shown below:

Gratuity

Particulars March 31, 2008

Discount Rate 8%

Increase in compensation cost 5%

Employee Turnover 10%

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Amounts for the current period are as follows: (Rs. In Lacs)

Particulars March 31, 2008

Defined benefit obligation

133.18

Plan assets NA

Surplus / (deficit) (133.18)

Experience adjustments on plan liabilities 53.10

Experience adjustments on plan assets NA

The current year being the first year of adoption of AS 15 (revised) by the Company, the previous year comparative

information has not been furnished.

F-100

(Rs. In Lacs)

Year ended March 31, 2008 Year ended March 31, 2007

Particulars

Financing

Activities

Unallocated

reconciling

items

Total Financing

Activities

Unallocated

reconciling

items

Total

Segment Revenue 61,843 476 62,319 34,223 583 34,806

Segment Results (Profit

before tax and after interest

on Financing Segment) 13,366 (347) 13,019 8,078 195 8,273

Less: Interest on

unallocated reconciling

items

- 321 321 - 330 330

Net profit before tax 12,698 7,943

Less: Income taxes 3,935 2,781

Net profit 8,763 5,162

Other Information:

Segment assets 3,69,451 8,372 3,77,823 2,13,998 7,340 2,21,338

Unallocated corporate

assets 1,031 1,031 784 784

Total Assets 3,69,451 9,403 3,78,854 2,13,998 8,124 2,22,122

Segment liabilities 3,73,469 4,752 3,78,221 2,14,798 4,351 2,19,149

Unallocated corporate

liabilities 633 633 2,973 2,973

Total Liabilities 3,73,469 5,385 3,78,854 2,14,798 7,324 2,22,122

Capital expenditure - -

Depreciation 395 733 1,128 117 256 373

Other non - cash expenses 6,004 6,004 1,860 1,860

5. Segment Reporting

F-101

6. Related Party Disclosures

Related Parities have been identified by the Management and relied upon by the auditors.

Subsidiary : Shriram Non-Conventional Energy Limited (upto March 20, 2008)

Enterprises having significant influence over

the Company

:

Shriram Enterprise Holdings Private Limited

Shriram Capital Limited (formerly known as Shriram Financial

Services Holding Private Limited)

Key Managerial Personnel : R Kannan, Managing Director

(Rs in Lacs)

Enterprises having

significant influence over

the Company

Subsidiary Total

2008 2007 2008 2007 2008 2007

Payments

Royalty 147.50 79.24 - - 147.50 79.24

Data Sourcing fees 63.38 73.59 - - 63.38 73.59

Service Charges 380.24 441.55 - - 380.24 441.55

Equity dividend 595.24 595.24 - - 595.24 595.24

Investments in shares - - 4.99 4.99 -

Receipts

Sale of investments - - 4.54 - 4.54 -

Subscription of equity

shares - -

Subscription to optionally

convertible warrants 560.00

- - -

560.00

-

Conversation of Warrants

into Equity / Securities

Premium

2,959.20 - - - 2,959.20 -

F-102

7. Leases

In case of assets given on lease

Financial lease including hire purchase

The Company has given vehicles on finance lease. The lease term is for 3 to 5 years. There is no escalation clause in the

lease agreement. There are no restrictions imposed by lease arrangements.

(Rs. in lacs)

As at March 31,

2008 As at March 31, 2007

Total gross investment in the lease NIL 6166.73

Less : Unearned finance income NIL 589.35

Less: Unguaranteed residual value NIL NIL

Present value of minimum lease payments NIL 5577.38

Gross investment in the lease for the period :

Not later than one year [Present value of minimum lease payments receivable Rs. NIL as on March 31, 2008 (March 31, 2007: Rs.4560.18 lacs)]

NIL 5024.56

Later than one year but not later than five years [Present value of minimum lease payments Rs. NIL as on March 31, 2008 (March 31, 2007 : Rs. 1017.19 lacs)]

NIL 1142.17

Later than five years [Present value of minimum lease payments Nil as on March 31, 2008 (March 31, 2007: Nil)]

NIL Nil

In case of assets taken on lease

Rent Rs.164 lacs (March 31,2007 : Rs. 129 lacs) represents lease payments in respect of cancellable leases as per respective agreements. There are no separate amounts for minimum lease payments and contingent rents. There is no sub-lease.

8. Investments

In accordance with the Reserve Bank of India circular no.RBI/2006-07/ 225 DNBS (PD) C.C No.

87/03.02.004/2006-07 dated January 4, 2007, the Company has created a floating charge on the statutory liquid

assets comprising of investment in Government Securities to the extent of Rs.104.53 lacs in favour of trustees

representing the public deposit holders of the Company.

F-103

9. Earnings per share

Particulars Year ended March

31, 2008

Year ended March

31, 2007

Net Profit after tax as per profit and loss account (Rs. in lacs) 8,763.50 5,162.16

Less : Preference Dividend 165.74 176.52

Net Profit for Equity Shareholders (A) 8,597.76 4,985.64

Weighted average number of equity shares for calculating Basic EPS (in

lacs) (B) 391.67 302.45

Weighted average number of equity shares for calculating Diluted EPS

(in lacs) (C) 395.41 303.34

Basic earnings per equity share (in Rupees) (Face value of Rs. 10/- per

share) (A) / (B) 21.95 16.48

Diluted earnings per equity share (in Rupees) (Face value of Rs. 10/- per

share) (A) / (C) 21.74 16.44

Particulars

Year ended March

31, 2008

Year ended March

31, 2007

Weighted average number of equity shares for calculating EPS (in lacs) 391.67 302.45

Add : Equity shares arising on conversion of optionally convertible

warrants (in lacs) 1.45 0.89

Add : Equity shares for no consideration arising on grant of stock options

under ESOP (in lacs) 2.29 -

Weighted average number of equity shares in calculation diluted EPS (in

lacs) 395.41 303.34

F-104

10. Deferred Tax Liabilities (Net)

(Rs. in Lacs)

The break up of deferred tax asset / liabilities is as under:- As at March 31,

2008

As at March 31,

2007

Deferred Tax Liabilities

Timing difference on account of :

Differences due to accelerated amortisation of intangibles

under Income Tax Act - 7.07

Differences in depreciation in block of fixed assets as per tax books and financial books

1,495.39 1,657.12

Effect of lease accounting - 788.47

Others - 530.84

Gross Deferred Tax Liabilities (A) 1,495.39 2,983.50

Deferred Tax Asset

Timing difference on account of :

Expenses disallowed under Income Tax Act, 1961 586.51 10.18

Provision for securitization

Provision for hedging contracts 275.89 0.00

Gross Deferred Tax Assets (B) 862.40 10.18

Deferred Tax Liabilities (Net) (A-B) 632.99 2,973.32

(Rs. in lacs)

11. Capital Commitments As at March 31,

2008

As at March 31,

2007

Estimated amount of contracts remaining to be executed on

capital account and not provided for (net of advances) 276.84 1,126.88

(Rs. in lacs)

12. Contingent Liabilities not provided for As at March 31,

2008

As at March 31, 2007

Guarantees issued by the Company 6.81 6.81

In respect of assets securitized NIL 16.69

In respect of derivative transaction NIL 9.97

F-105

Income Tax/Wealth Tax

Disputed Income tax/Wealth Tax demands contested in appeal as on March 31st, 2008 amount to

Rs.1,603.12 lacs(March 31st 2007: Rs.1,397.89 Lacs. In view of favourable appellate decisions in respect

of earlier years on similar issues, the company is confident of getting full relief. Hence the amount is not

considered as contingent liability.

Service Tax

The applicability of Service tax has been challenged in respect of its hire purchase/lease activities and

has obtained a stay in its favour granted by Madras High Court. However provision is made in the books

for any liability that may arise.

13. The Company during the year converted 20,55,000 warrants issued to Shriram Enterprise Holdings Private Limited into equity shares of Rs.10/- each at a premium of Rs.150/-. The total amount of Rs. 3,082.50 lacs received from the said preferential allotment was utilized for the purpose of increasing the net worth and working capital of the Company.

14. Employee Stock Option Plan

Series I

Date of grant October 19, 2007

Date of Board Approval October 19, 2007

Date of Shareholder’s approval October 30, 2006

Number of options granted 13,27,500

Method of Settlement (Cash/Equity) Equity

After 1 year of grant date 10% of options granted

After 2 years of grant date 20% of options granted

After 3 years of grant date 30% of options granted

After 4 years of grant date 40% of options granted

Exercisable period 10 years from vesting date

Vesting Conditions on achievement of pre –determined targets

F-106

The details of Series I have been summarized below:

The details of exercise price for stock options outstanding for Series I at the end of the year are:

As at Range of exercise

prices

Number of

options

outstanding

Weighted average

remaining contractual life

of options (in years)

Weighted average

exercise price

March 31, 2008 Rs.35/- 13,27,500 12.55 Rs.35/-

March 31, 2007 NIL NIL NIL NIL

As at March 31, 2008 As at March 31, 2007

Number of

Shares

Weighted

Average

Exercise

Price(Rs.)

Number of

Shares

Weighted

Average

Exercise

Price(Rs.)

Outstanding at the beginning of the year Nil Nil -

Add: Granted during the year 13,27,500 Rs. 35.00 Nil -

Less: Forfeited during the year Nil - Nil -

Less: Exercised during the year

Less: Expired during the year - -

Outstanding at the end of the year 13,27,500 Rs. 35.00 -

Exercisable at the end of the year - -

Weighted average remaining contractual life (in

years)

12.55 -

Weighted average fair value of options granted Rs. 227.42 -

F-107

Stock Options granted

Series I:

The weighted average fair value of stock options granted was Rs.227.42/-. The Black Scholes model has been used

for computing the weighted average fair value of options considering the following inputs:

Yr 1 Yr 2 Yr 3 Yr 4

Exercise Price (Rs.) 35.00 35.00 35.00 35.00

Expected Volatility (%) 55.36 55.36 55.36 55.36

Historical Volatility NA NA NA NA

Life of the options granted (Vesting and exercise period) in

years

1.50 2.50 3.50 4.50

Expected dividends per annum (Rs.) 3.00 3.00 3.00 3.00

Average risk-free interest rate (%) 7.70 7.67 7.66 7.67

Expected dividend rate (%) 0.84 0.84 0.84 0.84

The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank Nifty

which is considered as a comparable peer group of the Company. To allow for the effects of early exercise, it was

assumed that the employees will exercise the options within six months from the date of vesting in view of the exercise

price being significantly lower than the market pric

Effect of the employee share-based payment plans on the profit and loss account and on its financial position:

(Rs. in Lacs)

As at March

31, 2008

As at March

31, 2007

Compensation cost pertaining to equity-settled employee share-based

payment plan included above

542.08 -

Liability for employee stock options outstanding as at year end 3,006.12 -

Deferred compensation cost 2,464.04 -

F-108

Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings per

share by applying the fair value based method is as follows:

In March 2005, ICAI has issued a guidance note on “Accounting for Employees Share Based Payments” applicable to

employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said guidance note

requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock

compensation accounting in the financial statements. Applying the fair value based method defined in the said

guidance note, the impact on the reported net profit and earnings per share would be as follows:

Year ended March

31, 2008

Year ended March

31, 2007

Profit as reported (Rs. in lacs) 8,763.50 5,162.16

Add: Employee stock compensation under intrinsic value method (Rs. in

lacs) 542.08 -

Less: Employee stock compensation under fair value method (Rs. in lacs) 544.40 -

Proforma profit (Rs. in lacs) 8,761.18 5,162.16

Less Preference Dividend 165.74 176.52

Proforma Net Profit for Equity Shareholders 8,595.44 4,985.64

Earnings per share -

Basic (Rs.) -

- As reported 21.95 16.48

- Proforma 21.95 16.48

Diluted (Rs.) - -

- As reported 21.74 16.44

- Proforma 21.74 16.44

F-109

15. Securitisation

The Company sells loans through securitisation and direct assignment. The information on securitisation & direct

assignment activity of the Company as an originator for the year March 31, 2008 and March 31, 2007 is given below:

Year ended March

31, 2008

Year ended March

31, 2007

Total number of loan assets securitized 3,98,691 4,38,457

Total book value of loan assets securitised (Rs. in lacs) 75,781.80 80,493.74

Sale consideration received for the securitised assets (Rs. in lacs) 83,539.14 91,302.42

Net gain on account of securitization (Rs. in lacs) 7,757.34 10,808.68

The information on securitisation & direct assignment activity of the Company as an originator as on March 31, 2008

and March 31, 2007 is given in the table below :

(Rs. in Lacs)

As at March 31,

2008 As at March 31, 2007

Outstanding credit enhancement- Deposit with banks/corporate 4,695.88 5,711.93

Outstanding Credit enhancement - Receivables 3,200.86 1,906.69

16. Derivative Instruments:

The Notional principal amount of derivative transactions outstanding as on March 31, 2008 for interest

rate swaps Rs.50,000 lacs (March 31, 2007 – 5,000). The interest rate swaps is to hedge against exposure

to variable interest outflow on loans.

17. During the year ended March 31, 2008, the Company has reassessed the balance useful life of its Windmills and Leasehold improvement (Furniture & fixtures ). Based on such reassessment, the estimated balance useful life has reduced from 6 years to 3 years and 16 years to 5 years respectively. Accordingly, the Company has provided additional depreciation amounting to Rs.505.34 lacs in respect of these assets during the year.

F-110

18. Supplementary Statutory Information

18.1 Managing Director’s Remuneration

The computation of profits under section 349 of the Act has not been given as no remuneration / commission is payable to the Managing Director.

(Rs. in lacs)

18.2 Expenditure in foreign currency (On cash basis)

Year ended March 31,

2008

Year ended March

31, 2007

Travelling 1.67 Nil

Others Nil Nil

1.67 Nil

19. Additional information pursuant to the provisions of paragraphs 3, 4C and 4D of Part II of schedule VI to

the Act

19.1 Licensed Capacity, Installed capacity, Actual production and Sales

Class of

Goods

Units Licensed

Capacity as at

March 31,

Installed

Capacity as at

March 31, (in

KW)

Actual Production and

Sales for the year ended

March 31, (in units)

Sales Value

(Rs. in lacs)

2008 2007 2008 2007 2008 2007 2008 2007

Windmill 34 NA NA 12,550 12,550 1,65,56,603 2,06,05,220 476.13 583.08

20. The Company has initiated the process of identification of ‘suppliers’ registered under the “The Micro, Small and Medium Enterprises Development (‘MSMED’) Act, 2006” by obtaining confirmations from suppliers. Based on the intimation received by the Company, none of the suppliers have confirmed to be registered under MSMED Act, 2006. Accordingly, no disclosures relating to amounts unpaid as at the year end together with interest paid /payable are required to be furnished.

F-111

2006 – 2007

B) Notes to Accounts

Particulars of Secured Loans are as follows:-

i) Redeemable Non Convertible Debentures are redeemable at par between six months and one hundred sixty months from the date of allotment depending on the terms of issue and are secured by charge on company’s buildings, plant & machinery, receivables, leased assets, lease rentals including future receivables other than assets specifically charged to banks / institutions / other lenders, referred to (ii), (iii), (iv) and (v) below.

ii) Term Loan from Banks / Institution to the extent of Rs. 38416.00 lacs are secured by hypothecation of all the present and future receivables covered by specific Hire Purchase /lease/Loan Agreements.

iii) Term Loan from Banks and Institution to the extent of Rs. 2831.19 lacs are secured by specific charge

on Land, Plant & Machinery and Sundry Debtors relating to Windmills.

iv) Term Loan from Banks to the extent of Rs.1367.55 lacs is secured by specific charge on Land, Machinery & Receivable relating to Biomass Plant.

v) Cash Credit from Banks are secured by hypothecation of all present and future receivables covered by specific Hire Purchase/Lease/Loan Agreements.

2. The company has created floating charge on its Statutory Liquid Assets to the extent of Rs.158.70 lacs in favor of trustees representing public deposit holders of the Company.

3. The Company has issued 35,00,000 warrants on Preferential basis with an option to convert into Equity

Shares of Rs.160/- each including Premium of Rs.150/- within 18 months from the date of issue i.e 29th December, 2006.

4. In view of the circular number 9/2002 dated 18th April 2002 issued by the Department of Company Affairs, no Debenture Redemption Reserve is required to be created in case of privately placed debentures. Since

the debentures issued by the company are privately placed, the Debenture Redemption Reserve of Rs. 25 Las created during the year 2000-2001 is transferred to the General Reserve.

5. In the opinion of the Board of Directors, Receivable and Debtors, have a value on realisation in the ordinary course of business, at least equal to the amount at which they are stated.

6. The Company does not have any dues payable to small scale industries.

F-112

7. Contingent Liabilities:

(Rs. In Lacs)

As on 31.03.2007 As on 31.03.2006

i. Income Tax NIL 160.63

ii. Guarantees 6.81 116.11

iii. In respect of assets securitised 16.69 958.40

iv. In respect of derivative transaction 9.97 NIL

Disputed Income Tax / Wealth Tax demand contested in appeals not provided for Rs.1397.89 lacs. In the

opinion of the Management there is no contingent liability, for the said disputed tax demand, in view of

favourable appellate decision in the company’s own cases in respect of earlier years.

Estimated amount of contracts on capital account not provided for is Rs.1126.88 lacs.

8. Securitization:

The company sells loans through securitization and direct assignment. The information on securitization

activity of the company as on organizer for the year March 31, 2007 and March 31,2006 is given below

As on 31st

March 2007

As on 31st

March 2006

Total number of agreements securitised (Nos) 438457 188082

Total book value of loan assets securitised (Rs, in lacs) 80493.74 34907.38

Sale consideration for the securitised assets (Rs. In lacs) 91302.42 38734.72

Net gain on account of securitisation (Rs. In lacs) 10808.68 3827.34

The information on securitization activity of the company as an originator as on March 31,2007 and

March 31, 2006 is given in the table below.

As on 31st March 2007 As on 31st March

2006

Outstanding credit enhancement – Deposits with

Banks/Corporates

5711.93 2321.72

Outstanding credit enhancement – Receivables 1906.69 --

F-113

9. Expenses in respect of common branches and infrastructure are shared by the Company with other

Companies. The expenses/ recoveries are booked under respective Account heads.

10. The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard AS - 17 “ Segment Reporting “ issued by The Institute of Chartered Accountants of India.

11. The Particulars of power generation by wind mills are as follows :

For the Year Ended

31.03.2007

For the Year ended

31.03.2006

Licensed Capacity Not Applicable Not Applicable

Installed Capacity

(As Certified by the management)

12550kw 12800 kw

Units Generated 2,06,05,220 Units 1,73,32,680 Units

Units Sold 2,06,05,220 Units 1,73,32,680 Units

12. Earnings per share:

For the Year Ended

Particulars Unit 31.03.2007 31.03.2006

Opening No.of shares Nos. (Lacs) 271 271

Total No of shares outstanding Nos. (Lacs) 391 271

Weighted Average No of shares outstanding for Basic EPS Nos. (Lacs) 302.45 271

Weighted Average No of shares outstanding for Diluted EPS Nos. (Lacs) 303.34 271

Profit After Tax Rs. (Lacs) 5162.16 3167.29

Less. Preference Dividend Rs. (Lacs) 105.60 211.88

Net Profit for Equity Shareholders Rs. (Lacs) 5056.56 2955.41

Basic Earning Per Share Rs. 16.48 10.91

Diluted Earning per share Rs. 16.44 10.91

F-114

13. Related Party transactions

Names of related parties where control exists irrespective of whether any

transactions have occurred or not

a. Significant influence over the Company Shriram Enterprises Holding Private

Limited

Shriram Financial Services Holdings

Private Limited

b .Key Management Personnel R.Kannan ( Previous Year - Akhilesh Kumar Singh)

Related Party Disclosure

(Rs. In lacs)

Holding company or group of individuals having control or

significant influence over the Company and relatives of such

individuals

Payments 2007 2006

Royalty 79.24 47.85

Data Sourcing Fees 73.59 48.03

Service Charges 441.55 288.20

Equity Dividend 595.24 496.04

Subscription to optionally Convertible Warrants 560 --

Remuneration to Managing Director -- 5.38

14 . Particulars of Receivables are as follows on Hire Purchase and Financial Lease (for advances on or

after 01/04/2001)

(Rs. in lacs)

As on 31st March 2007 RECEIVABLES

Not Later than 1

Year

Later than 1 year but not

later than 5 years

GROSS INVESTMENTS 6166.73 5024.56 1142.17

Less : UNEARNED INCOME 589.35 464.37 124.98

NET PRESENT VALUE 5577.37 4560.18 1017.19

F-115

15. Details of Deferred Tax Liability:

(Rs in Lacs)

Deferred Tax Liabilities Mar 31,2007 Mar 31,2006

Differences due to accelerated amortization of intangibles under Income Tax Act

7.07 12.53

Difference in depreciation and other difference in block of fixed assets as per tax books and financial books

1657.12 1660.69

Effects of lease accounting 788.47 975.18

Others 530.84 521.41

Gross Deferred Tax Liabilities 2983.5 3169.82

Deferred Tax Assets

Effect of expenditure debited to profit and loss account in the current year But allowed for tax purpose in following years

10.18 4.8

Gross Deferred Tax Assets 10.18 4.8

Net Deferred Tax Liability 2973.32 3165.02

F-116

18. Schedule to the Balance Sheet of a Non-Banking Financial (Deposit Accepting of Holding) Company [As required in terms of paragraph 13 of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007] (Rs. In lacs)

Particulars As on 31.03.,2011 As on 31.03. 2010 As on 31.03.2009 As on 31.03.2008 As on 31.03. 2007

Liabilities side :

1 Loans and advances availed by

the NBFCs inclusive of interest

accrued thereon but not paid :

Amount

outstanding

Amount overdue

Amount

outstanding

Amount overdue

Amount

outstanding

Amount overdue

Amount

outstanding

Amount overdue

Amount

outstandin

g Amount overdue

(a) Debentures : Secured 242299.99 4487.39 173984.77 3300.41 144720.26 2826.03 81076.87 2597.38 75594.27 1377.10

Unsecured nil nil nil nil nil nil 3669.88 nil nil nil

(other than falling within the meaning of public deposits*)

(b) Deferred Credits nil nil nil nil nil nil nil nil nil nil

(c) Term Loans 302979.72 nil 114676.66 nil 153594.21 nil 126803.37 nil 42799.21 nil

(d) Inter-corporate loans and borrowings nil nil nil nil nil nil 959.41 nil nil nil

(e) Commercial Paper 22500.00 nil nil nil nil nil 4500.00 nil nil nil

(f) Public Deposits* 90.85 27.05 139.50 28.92 155.19 27.50 210.43 18.11 441.35 25.81

(g) Other Loans - HP Refinance nil nil nil nil nil nil nil nil nil nil

- Cash Credit from banks 134965.79 nil 145453.74 nil 109771.11 nil 67420.99 nil 26800.92 nil

- Others - Subordinated Debts 68701.99 352.48 64830.99 18.65 48647.97 nil 32101.36 nil 21651.38 nil

- ICD nil nil nil nil nil nil nil nil nil nil

* Please see Note 1 below

2 Break-up of (1)(f) above

(Outstanding public deposits

inclusive

of interest accrued thereon but

not paid):

(a) In the form of Unsecured debenture nil nil nil nil nil nil nil nil nil nil

(b) In the form of partly secured debenture i.e. debentures where

there is a shortfall in the value of security

nil nil nil nil nil nil nil nil nil nil

(c) Other Public deposit 90.85 27.05 139.50 28.92 155.19 27.50 210.43 18.11 441.35 25.81

* Please see Note 1 below

F-117

(Rs. In lacs)

As on March 31,

2011 2010 2009 2008 2007

Particulars

Amount outstanding

Asset side :

Break-up of Loans and advances including bills receivables [other than those 3

included in (4) below]

(a) secured 625034.06 423064.40 1215.04 8.75 25.90

(b) Unsecured 71548.15 50075.23 39958.40 nil nil

4 Break-up of Lease Assets and stock on hire counting towards AFC activities

(l) Lease assets including lease rentals under sundry debtors:

(a) Financial lease nil nil nil nil 2485.26

(b) Operating lease nil nil nil nil nil

(ii) Stock on hire including hire charges under sundry debtors:

(a) Assets on hire nil nil nil nil 3117.30

(b) Repossessed Assets nil nil nil nil nil

(iii) Other loans counting towards AFC activities

(a) Loans where assets have been repossessed nil nil nil nil 35.75

(b) Loans other than (a) above nil nil 335118.24 237502.50 131177.55

F-118

(Rs. In lacs)

Amount outstanding as on March 31,

Particulars

2011 2010 2009 2008 2007

5 Break-up of Investments:

Current Investments:

1 Quoted:

(l) Shares: (a) Equity nil nil nil nil nil

(b) Preference nil nil nil nil nil

(ii) Debentures and Bonds nil nil nil nil nil

(iii) Units of mutual funds nil nil nil nil nil

(iv) Governments Securities nil nil nil nil nil

(v) Others (please specify) nil nil nil nil nil

2 Unquoted:

(l) Shares: (a) Equity 450.00 nil nil nil nil

(b) Preference nil nil nil nil nil

(ii) Debentures and Bonds nil nil nil nil nil

(iii) Units of mutual funds nil nil nil nil nil

(iv) Governments Securities nil nil nil nil nil

(v) Others (please specify) nil nil nil nil nil

Long term Investments:

1 Quoted:

(l) Shares: (a) Equity nil nil nil nil nil

(b) Preference nil nil nil nil nil

(ii) Debentures and Bonds nil nil nil nil nil

(iii) Units of mutual funds nil nil nil nil nil

(iv) Governments Securities 101.45 101.45 101.45 104.53 164.03

(v) Others (please specify) nil nil nil nil nil

F-119

(Rs. In lacs)

Amount outstanding as on March 31,

Particulars

2011 2010 2009 2008 2007

2 Unquoted:

(l) Shares: (a) Equity nil nil 505.00 500.45 500.00

(b) Preference nil nil nil nil nil

(ii) Debentures and Bonds nil nil nil nil nil

(iii) Units of mutual funds nil nil nil nil nil

(iv) Governments Securities nil nil nil nil nil

(v) Others (please specify) nil nil nil nil nil

F-120

6 Borrower group-wise classification of all assets financed as in (3) and (4) above Please see Note 2 below

As on March 31, 2011 As on March 31, 2010 As on March 31, 2009 As on March 31, 2008 As on March 31, 2007

Category Amount net of provisions

Secured Unsecured Secured Unsecured Secured Unsecured Secured Unsecured Secured Unsecured

1 Related Parties**

(a) Subsidiaries nil nil nil nil 4369.66 nil nil nil nil nil

(b) Companies in the same group nil nil nil nil nil nil nil nil nil nil

(c) Other related parties nil nil nil nil nil nil nil nil nil nil

2 Other than related parties 617967.11 68631.67 418113.82 47595.24 328872.90 38855.44 237578.64 37991.59 169773.06 nil

Total 617967 68631.67 418113.82 47595.24 333242.56 38855.44 237578.64 37991.59 169773.06 nil

F-121

7 Investor group-wise classification of all investments(current and long term) in shares and Securities(both quoted and unquoted):

Please see Note 3 below

Year ended March 31,

2011

Year ended March 31,

2010

Year ended March 31,

2009

Year ended March 31,

2008

Year ended March 31,

2007

Market

Value/

Break-up

or

Book

value

Market

Value/

Break-up

or

Book

value

Market

Value/

Break-up

or

Book

value

Market

Value/

Break-up

or

Book

value

Market

Value/

Break-up

or

Book

value

Category

fair value

or NAV**

(net of

provisions

)

fair value

or NAV**

(net of

provisions

)

fair value

or NAV**

(net of

provisions

)

fair value

or NAV**

(net of

provisions

)

fair value

or NAV**

(net of

provisions

)

1 Related Parties**

(a) Subsidiaries nil nil nil nil 5.00 5.00 nil nil nil nil

(b) Companies in the same group nil nil nil nil nil nil nil nil nil nil

(c) Other related parties nil nil nil nil nil nil nil nil nil nil

2 Other than related parties 533.52 533.52 83.52 83.52 583.52 583.52 587.14 587.05 643.43 642.30

Total 533.52 533.52 83.52 83.52 588.52 588.52 587.14 587.05 643.43 642.30

** As per Accounting Standard of ICAI(please see Note3)

F-122

8 Other information : Year ended March 31,

2011 2010 2009 2008 2007

Particulars Amount Amount Amount Amount Amount

(l) Gross Non-Performing Assets

(a) Related Parties nil nil nil nil Nil

(b) Other than related parties 12966.18 10753.30 7784.03 4228.66 4040.66

(ii) Net Non-Performing Assets

(a) Related Parties nil nil nil nil Nil

(b) Other than related parties 2982.76 3322.73 3590.35 2495.70 2561.44

(iii) Assets acquired in satisfaction of debt nil nil nil nil Nil

Notes: 1. As defined in Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptances of Public Deposits (Reserve Bank) Directions, 1998.

2. Provisioning norms shall be applicable as prescribed in the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007.

3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of investments and other assets as also assets acquired in satisfaction of debt. However, market value in respect of quoted investments and break-up/fair value/NAV in respect of unquoted investments should be disclosed irrespective of whether they are classified as long term or current in column (5) above.

For Pijush Gupta & Co. For and on behalf of the Board of Directors of

Firm Registration No. 309015E Shriram City Union Finance Limited

Chartered Accountants

R. Kannan S.Venkatakrichnan

Ramendra Nath Das Managing Director Director

Partner

Membership No. 014125

Place: Chennai C R Dash

Date: July 21, 2011 Company Secretary

F-123

PIJUSH GUPTA & CO

C H A R T E R E D A CC O U N T A N T S P-199, C.I.T.ROAD, SCHEME IV-M, KOLKATA – 700 010

TEL (033) 2353-6859, (0) 98311 91779 MAIL: pijushgupta.ca@gmail.com

Auditors' Report

To

The Board of Directors

Shriram City Finance Limited

221, Royapettah High Road,

Mylapore, Chennai

Dear Sirs,

1. We, Pijush Gupta & Co., have examined the attached Reformatted Consolidated financial information comprising of Consolidated Balance Sheet, Consolidated Profit and Loss Accounts, Consolidated Cash Flows and Consolidated notes therein of Shriram City Union Finance Limited (‘Company’ or ‘Issuer’), and its subsidiary Shriram Housing Finance Limited (Collectively referred to as "Group") as at and for the year ended March 31, 2011, approved by the board of directors of the Company and as prepared by the Company in accordance with the requirements of:

a. paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 ('the Act') and

b. the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 ("Regulations") issued by the Securities and Exchange Board of India ("SEBI"), as amended from time to time in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992 ("SEBI Act").

Pijush Gupta & Co. is referred to as the "Auditors" and the references to the Auditors as "we", "us" or "our",

in this letter, shall be construed accordingly.

2. We have examined such reformatted consolidated financial information taking into consideration:

a. the terms of reference dated June 26, 2011 received from the Company and statement of

responsibilities of auditors dated June 26 ,2011 requesting us to carry out the assignment, in

connection with the Draft Prospectus/Prospectus (collectively referred to as “Offer Document”)

being issued by the Company for its proposed public issue of secured non-convertible debentures

("NCDs"), having a face value of Rs. 1000 each (referred to as the "Issue") and

b. The Revised Guidance Note on Reports in Company Prospectuses issued by the Institute of Chartered

Accountants of India.

F-124

Reformatted Consolidated financial information as per audited Consolidated financial statements:

3. The Reformatted Consolidated financial information of the Group has been extracted by the management

from the Consolidated balance sheet of the Group as at March 31, 2011, and the related Consolidated profit

and loss account and Consolidated cash flow statement for the year ended March 31, 2011, (Collectively

referred to as the "Audited Consolidated Financial Statements") audited by us..

For our examination, we placed reliance on -

a. The financial statements of Shriram Housing Finance Limited for the year ended March 31,

2011, audited and reported upon by R. Shankar, Chartered Accountants, Auditors of the said

subsidiary for the financial year ended March 31, 2011, and

b. Audit reports received from Branch Auditors who had conducted audit of business regions of

the company.

These Audited Consolidated Financial Statements have been approved by the board of directors.

4. In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI

Regulations, terms of our engagement agreed with you and statement of responsibilities of auditors, we

further report that:

a. The Reformatted Consolidated Summary Statement of Assets and Liabilities and the schedules

forming part thereof, Reformatted Consolidated Summary Statement of Profit and Loss and the

schedules forming part thereof and the Reformatted Consolidated Summary Statement of Cash Flow

("Reformatted Consolidated Summary Statements") of the Group, as at March 31, 2011 examined

by us, have been set out in Annexure I to V to this report. These Reformatted Consolidated Summary

Statements are after regrouping as in our opinion is appropriate and more fully described in Significant

Accounting Policies and Notes (Refer Annexure XIII)

b. Based on the above we state that:

� the Reformatted Consolidated Summary Statements have to be read in conjunction with the notes given in Annexure XIII;

� there are no extraordinary items which need to be disclosed separately in the reformatted consolidated summary statements; and

� there are no qualifications in the auditors’ reports, which require any adjustments to the reformatted consolidated summary statements.

5. We have not audited any consolidated financial statements of the Group as of any date or for any

period subsequent to March 31, 2011. Accordingly, we express no opinion on the financial position,

results of operations or cash flows of the Group as of any date or for any period subsequent to March

31, 2011.

F-125

Other consolidated Financial Information:

6. At the Company’s request, we have also examined the following consolidated financial information proposed

to be included in the Offer Document prepared by the management and approved by the board of directors of

the Company and annexed to this report relating to the Group for the year ended March 31, 2011 :

i. Statement of contingent liabilities, enclosed as Annexure VI ii. Statement of dividend paid/proposed, enclosed as Annexure VII iii. Statement of accounting ratios relating to earnings per share, net asset value, return on net worth,

enclosed as Annexure VIII iv. Statement of Secured and Unsecured Loans including terms and conditions, enclosed as Annexure IX

& X v. Capitalization Statement as at March 31, 2011, enclosed as Annexure XI vi. Statement of tax shelters, enclosed as Annexure XII

7. In our opinion, the Reformatted consolidated financial information as disclosed in the annexure to this report,

read with the respective significant accounting policies and notes disclosed in Annexure XIII, as considered

appropriate and disclosed, has been prepared in accordance with Paragraph B(1) of Part II of Schedule II of

the Act and the Regulations.

8. This report should not be in any way construed as a reissuance or redating of any of the previous audit reports

issued by us or by any other firm of Chartered Accountants, nor should this report be construed as a new

opinion on any of the Reformatted Consolidated Financial Statements referred to herein.

9. We have no responsibility to update our report for events and circumstances occurring after the date of the

report for the financial position, results of operations or cash flows of the Group as of any date or for any

period subsequent to March 31, 2011.

10. This report is intended solely for your information and for inclusion in the Offer Document in connection

with the Offering of the Company, and is not to be used, referred to or distributed for any other purpose

without our prior written consent.

For Pijush Gupta & Co.

Firm registration number: 309015E

Chartered Accountants

Ramendra Nath Das

Partner

Membership No.: 014125

Chennai, July 21, 2011

F-126

Annexure I

Shriram City Union Finance Limited

Reformatted Consolidated summary of Assets and Liabilities

(Rs. in lacs)

Particulars Schedule As at March 31, 2011

Assets

A. Fixed and Intangible Assets(Net) (including CWIP) 1 2,947.16

B Investments 2 301.45

C Deferred Tax Asset (Net) 1,581.66

D Current Assets, Loans & Advances 3 936,363.41

E Total (A+B+C+D) 941,193.68

Liabilities

F Secured Loans 4 656,951.01

G Unsecured Loans 5 75,827.43

H Current Liabilities 6 70,108.22

I Provisions 7 17,123.50

J Total (F+G+H+I) 820,010.16

K Net Worth (F-K) 121,183.52

Represented By

(i) Share Capital 8 4,953.69

(ii) Stock Option Outstanding 10 1,887.27

(iii) Reserves and Surplus 9 114,366.32

(iv) Less : Miscellaneous Expenditure (to the extent not written off or adjusted)

11 23.76

Total (i+ii+iii+iv+v-vi) 121,183.52

The accompanying statement of Significant Accounting Policies and Notes to Accounts on Summary Financial Statements are integral part of this statement. As per our report of even date

For Pijush Gupta & Co. For and on behalf of the Board of Directors of

Firm Registration No. 309015E Shriram City Union finance Limited

Chartered Accountants

Ramendra Nath Das R. Kannan S. Venkatakrishnan

Partner Managing Director Director

Membership No. 014125

Place: Chennai C R DASH

Date: July 21, 2011 Company Secretary

F-127

Annexure II

Shriram City Union Finance Limited

Reformatted Consolidated summary of Profit and Loss Account

(Rs. in lacs)

Particulars Schedule

For the year ended

March 31,2011

A. Income

i Income from Operations 12 131,800.12

ii Other Income 13 291.07

Total Income 132,091.19

B. Expenditure

i Financial Expenses 14 58,848.26

ii Personnel Expenses 15 4,367.02

iii Operating & Other Expenses 16 20,470.16

iv Depreciation and amortization 747.41

v Provisions & Write offs (net) 17 11,598.25

Total Expenditure 96,031.10

C. Net Profit Before Taxation (A-B) 36,060.09

D. Provision for taxation

Current tax 12,460.20

Deferred tax (458.96)

Total Tax 12,001.24

E. Net Profit after Taxation (C-D) 24,058.85

Balance in Profit & Loss Account brought forward 22,730.09

F. Balance Available for Appropriations 46,788.94

G. Appropriations

Equity Shares - Interim dividend 1,236.25

Equity Shares - Proposed final dividend 1,733.79

Tax on dividend 205.33

Tax on proposed dividend 281.26

Transfer to statutory reserve 4,810.00

Transfer to general reserve 2,410.00

Total Appropriations 10,676.63

H. Balance carried to Balance Sheet (F-G) 36,112.31

F-128

The accompanying statement of Significant Accounting Policies and Notes to Accounts on Summary Financial Statements are integral part of this statement.

As per our report of even date

For Pijush Gupta & Co. For and on behalf of the Board of Directors of

Firm Registration No. 309015E Shriram City Union finance Limited

Chartered Accountants

Ramendra Nath Das R. Kannan S. Venkatakrishnan

Partner Managing Director Director

Membership No. 014125

Place: Chennai C R DASH

Date: July 21, 2011 Company Secretary

F-129

Annexure III

Shriram City Union Finance Limited

Consolidated Cash Flow Statement for the Year ended March 31, 2011

(Rs. in lacs)

Particulars Total As at March 31, 2011

A. Cash flow from operating activities

Net Profit before taxation 36,060.09

Depreciation and amortization 747.42

(Profit)/loss on sale of assets(net) 13.78

income on fixed deposits (270.70)

Employees Stock option compensation cost 471.68

Provision for hedging contracts (546.62)

Provision for non performing assets and bad debts written off 10,136.80

Contingent Provision against Standad assets 1,714.89

Provision for gratuity 40.82

Provision for leave encashment 27.48

Operating profit before working capital changes 48,395.64

Movements in working capital:

(Increase) / decrease in assets under financing activities (233,365.55)

(Increase) / decrease in other current assets (11,530.50)

(Increase)/decreae in other loans and advances (931.92)

Increase / (decrease) in current liabilities 23,709.59

Cash generated from operations (173,722.74)

Direct taxes paid ( net of refunds) (11,127.69)

Net cash used in operating activities (A) (184,850.43)

B. Cash flows from investing activities

Investment in Fixed depostis (net) 7,992.17

Purchase of fixed and intangible assets (1,666.35)

Proceeds from sale of fixed assets 2.52

Interest on fixed deposit 270.70

Pre-operative Expenditure (21.03)

Preliminary Expenditure (2.73)

Net cash used in investing activities (B) 6,575.28

C. Cash Flows from financing activities

Proceeds from issue of equity share capital including securities

premium and Share Application Money 133.05

Increase/ (decrease) in bank borrowings(net) 180,566.59

Increase/ (decrease) in long term borrowings (net) 62,773.87

Increase/ (decrease) in fixed deposits (net) (45.64)

Increase/ (decrease) in subordinate debts (net) 269.38

Increase / (decrease) in unsecured loans 22,500.00

Dividend paid (2,710.89)

Tax on dividend (450.25)

Net cash from financing activities (C) 263,036.11

F-130

Annexure III

Shriram City Union Finance Limited

Consolidated Cash Flow Statement for the Year ended March 31, 2011 (Rs. in lacs)

Particulars Total As at March 31,

2011

Net increase / (decrease) in cash and cash equivalents (A + B + C) 84,560.97

Cash and Cash Equivalents at the beginning of the period 116,711.86

Cash and Cash Equivalents at the end of the year 201,272.83

Components of Cash and Cash Equivalents

Cash and Cash Equivalents at the end of the year as per

Balance Sheet 216,782.34

Less: Balance in Current account held for unpaid dividends 22.11

Less: Fixed deposits held for more than three months 51.00

Less: Fixed deposit under lien 15,436.40

201,272.83

As per our report of even date

For Pijush Gupta & Co. For and on behalf of the Board of Directors of

Firm Registration No: 309015E Shriram City Union Finance Limited

Chartered Accountants

Ramendra Nath Das R Kannan S Venkatakrishnan

Partner Managing Director Director

Membership No : 014125

Place : Chennai C R Dash

Date: July 21, 2011 Company Secretary

F-131

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Assets and Liabilities

(Rs. in lacs)

Schedule 1 - Fixed and Intangible Assets(Net) As at March 31,2011

ASSETS FOR OWN USE

Tangible Fixed Assets

Building 10.59

Leasehold Improvements 681.68

Furniture & Fixtures 791.09

Vehicles 22.73

Land - Freehold 1.76

Plant and Machinery 1232.82

Intangible Fixed Assets

Software 206.49

TOTAL (A) 2,947.16

F-132

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Assets and Liabilities

(Rs. in lacs)

Schedule 2 - Investments

As at March 31, 2011

LONG TERM (at cost)

Trade

Shares : Fully paid up

Other Than Trade

Quoted :

A. Government Securities:

6.13% GI Loan 2028(Face value -Rs.100 lacs) 101.45

B.Equity Shares (Fully paid up)

Others

Highmark Credit Information Services Pvt. Ltd

(Face Value of Rs. 10/- each) 200.00

301.45

Book value of Quoted investments 101.45

Market value of Quoted investments 83.52

Book value of Unquoted investments 200.00

Details of investments may be referred from the annual report of the respective years

F-133

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Assets and Liabilities

(Rs. in lacs)

Schedule 3 - Current Assets, Loans & Advances As at March 31, 2011

Assets under financing activities

Secured Loans

-Consider good 617,967.11

-Consider doubtful 7,066.95

Unsecured Loans

-Consider good 70,970.68

-Consider doubtful 2,916.48

698,921.22

Cash & Bank Balances

i) Cash on hand 6,025.90

ii) Balances with scheduled banks in:

- Current accounts 95,769.03

- Deposit Accounts # 114,987.40

216,782.33

Other current assets

i) Interest accrued on fixed deposits and other loans and advances 324.96

iii) Other Assets 24.99

iv) Securitsation- Receivable 17147.07

17,497.02

Other loans and advances

Unsecured- Considered Good

Advances recoverable in cash or in kind or for value to be received 1,547.91

Advance- Capital Assets 108.93

Prepaid expenses 952.29

Security deposits 553.71

3162.84

Total 936,363.41

# Includes Fixed deposits pledged with Banks as margin for securitisation 15,436.40

F-134

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Assets and Liabilities

(Rs. in lacs)

Schedule 4 - Secured Loans

As at March 31, 2011

Redeemable non convertible debentures 219,877.64

refer notes to account 2(2)(a)(b)

Term loans

i) From Financial institutions / Corporate 6,500.00

refer notes to account 2(2)( c)(i)

ii) From banks 295,677.28

refer notes to account 2(2)(c )(ii)

Cash credit from banks 134,896.09

refer notes to account 2(2)(d)

656,951.01

Schedule 5 - Unsecured Loans As at March 31, 2011

Fixed deposits

55.10

Subordinated debts 53,272.33

Commercial papers 22,500.00

Total 75,827.43

F-135

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Assets and Liabilities

(Rs. in lacs)

Schedule 6 - Current Liabilities

As at March

31,2011

Sundry creditors 2,653.61

Interest accrued but not due on loans 32,818.43

Application money on Redeemable non convertible debentures 967.07

Application money on Subordinated debts 107.47

- Unclaimed Matured Deposits 20.83

- Unclaimed Matured Debentures 3,777.27

- Unclaimed Matured Subordinated Debts 210.19

- Interest accrued and due on above 858.63

- Unclaimed dividend 22.11

Temporary credit balance in bank accounts 3,122.28

Securitization deferred income 23,686.37

Other liabilities 1,863.96

70,108.22

(Rs. in lacs)

Schedule 7 - Provisions

As at March 31,

2011

For non-performing assets 9,983.42

For standard assets 1,714.89

For income tax (net of advance tax) 1,882.40

For diminution in value of investments 17.93

For hedging contracts 1,259.24

For leave encashment and availment 54.23

For gratuity 196.34

Proposed dividend 1,733.79 Corporate dividend tax 281.26

17,123.50

F-136

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Assets and Liabilities

(Rs. in lacs)

Schedule 8 - Share Capital As at March 31, 2011

Authorised

Equity Share Capital 6,000.00

Preference Share Capital 4,000.00

10,000.00

No. of equity Shares of Rs.10/- each 60,000,000

No. of preference Shares of Rs.100/- each 4,000,000

Issued, Subscribed & Fully Paid up

Equity Shares 4,953.69

No. of equity shares of Rs. 10/- each 49,536,877

4,953.69

F-137

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Assets and Liabilities

(Rs. in lacs)

Schedule 9 - Reserves and Surplus As at March 31, 2011

Capital Reserve

Balance as per last account 1,400.00

Forfeiture of optionally convertible warrants -

1,400.00

Capital Redemption Reserve

Balance as per last account 2,328.98

Add : Transfer from Profit & Loss A/c -

2,328.98

Securities Premium Account

Balance as per last account 49,836.14

Add: Amount received during the year 960.99

50,797.13

Statutory Reserve

Balance as per last account 11,150.00

Add: Transfer from Profit & Loss Account 4,810.00

15,960.00

General Reserve

Balance as per last account 5,357.90

Add: Transfer from Profit & Loss Account 2,410.00

7,767.90

Balance in Profit & Loss Account 36,112.31

114,366.32

(Rs. in lacs)

Schedule 10 - Stock Option Outstanding As at March 31,2011

Employee stock option outstanding 2,079.09

Less : Deferred employee compensation outstanding 191.82

1887.27

F-138

Annexure IV

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Assets and Liabilities

(Rs. in lacs)

Schedule 11- Miscellaneous Expenditure (to the extent not

written off or adjusted) As at March 31, 2011

Issue expenses for equity shares

Preliminary and Incorporation expenditure 2.73

Pre Operative expenditure:

Rent 16.79

Deprecation and amortization 0.01

Printing & stationery 0.43

Travelling & conveyance 0.35

Communication expenses 0.19

Audit fees 0.10

Professional charges. 0.60

Legal & professional charges 0.09

Miscellaneous expenses 2.47

23.76

F-139

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Profit and Loss Account

(Rs. in lacs)

Schedule 12 - Income from Operations

For the year ended March 31,

2011

Income from financing activities 122,778.70

Interest on margin money on securitization/ assignments 799.12

Gain on securitization/ assignments 8,222.30

131,800.12

(Rs. in lacs)

Schedule 13 - Other Income

For the year ended March 31,

2011

Interest on deposits with banks 264.57

Profit on sale of assets 0.16

Income from Long Term Investments (non trade)

- Interest on government securities 6.13

Income from Current Investments (non trade)

Commission /Referral fees received 10.23

Miscellaneous Income 9.98

291.07

F-140

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Profit and Loss Account

(Rs. in lacs)

Schedule 14 - Financial Expenses

For the year ended March 31,

2011

Interest on :

- Debentures 18,256.28

- Subordinated debts 7,456.74

- Fixed deposits 6.03

- Loans from banks 18,914.70

- Loans from institutions and others 1,243.82

- Commercial paper 1,434.16

Bank charges 1,535.79

Brokerage and Commission 7,587.05

Processing and other charges 2,413.69

58,848.26

(Rs. in lacs)

Schedule 15 - Personnel Expenses

For the year ended March 31,

2011

Salaries, other allowances and bonus 4,150.24

Gratuity 40.51

Contribution to provident and other funds 138.21

Staff welfare 38.06

4,367.02

F-141

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Profit and Loss Account

(Rs. in lacs)

Schedule 16 - Operating and other Expenses

For the year ended March 31,

2011

Rent 1,007.21

Electricity expenses 360.57

Repairs & Maintenance 437.90

Rates, Duties and Taxes 636.02

Printing & stationery 1,649.92

Travelling & conveyance 3,704.17

Advertisement 520.06

Business Promotion 3,495.02

Sourcing fees and other charges 1,444.79

Royalty 364.24

Directors' sitting fees 5.45

Insurance 167.01

Communication expenses 1,908.24

Payment to auditor

As Auditor:

- Audit fees 7.65

- Tax audit fees 3.10

- Certification fee & Other services 4.60

- Limited Review 5.88

Professional charges 2,092.43

Legal & Recovery Expenses 2,053.29

Donations 1.00

Loss on sale of assets 13.94

Miscellaneous expenses 587.67

20,470.16

F-142

Annexure V

Shriram City Union Finance Limited

Schedules to the Reformatted Consolidated Statement of Profit and Loss Account

(Rs. in lacs)

Schedule 17 - Provisions & Write offs

For the year ended March 31,

2011

Provision for non performing assets 2,552.85

Provision for standard assets 1,714.89

Bad debts written off 7,583.97

Bad debt recovery (253.46)

11,598.25

F-143

Annexure VI

Shriram City Union Finance Ltd.,

Statement of Contingent Liabilities

(Rs. in lacs)

Particulars As on March 31, 2011

Guarantees issued by the Company and out standing 6.81

Guarantees issued by Others 1942.77

F-144

Annexure VII

Shriram City Union Finance Ltd.,

Statement of Dividend in respect of Equity Shares

(Rs. in lacs)

Particulars 2011

Interim

Rate of Dividend 25%

Number of Equity Shares on which interim dividend paid 49449939

Amount of Interim Dividend 1236.25

Dividend Distribution tax 205.33

Dividend Distribution tax Rate 16.609%

Final Dividend for the current year

Rate of Dividend 35%

Number of Equity Shares on which Final dividend paid 49536877

Amount of Final Dividend 1733.79

Dividend Distribution tax Rate 16.222%

Dividend Distribution tax 281.26

F-145

Annexure VIII

Page 1 of 3

Shriram City Union Finance Limited

Statement of Accounting Ratios

Calculation of Earning Per Share (EPS)

(Rs. in lacs)

Particulars As at March

31,2011

A. Net Profit After Tax (Rs in Lakhs) 24058.85 B. Less: Preference dividend including tax on dividend (Rs in

Lakhs) - C. Net Profit Attributable to Equity Shareholders (Rs in Lakhs)

a 24058.85

D. Weighted average number of Equity Share Outstanding during the

year/ period (for Basic EPS) (Lakhs) b 493.23

E. (i) Equity Share arising on conversion of optionally convertible

warrants (Lakhs) c -

F. (ii) Equity Share for no consideration arising on grant of Stock

option under ESOP (Lakhs) d 8.32 G. Weighted average number of Equity Shares outstanding during the

year/ period (for Diluted EPS) (b+c+d) (Lakhs) e 501.55 H. Earnings per share (Basics) (Rs.) (a/b) 48.78

I. Earnings per share (Diluted) (Rs.) (a/e) 47.97

F-146

Annexure VIII

Page 2 of 3

Shriram City Union Finance Limited

Statement of Accounting Ratios Calculation of Return on Net Worth (RONW)

(Rs. in lacs)

Particulars Schedule As at March 31,

2011

SHAREHOLDERS FUNDS

A. Share Capital 9 4953.69

B. Share Application Money Pending Allotment -

C. Stock Option Outstanding 11 1887.27

D. Optionally Convertible Warrants -

E. Reserve and Surplus 10 114366.32

F. Less: Miscellaneous Expenditure (Not written off) 23.76

G. Net Worth as at the end of the year/ period 121183.52

H. Net Profit after tax 24058.85

I. Return on Net Worth (Annualized) (%) 19.85%

F-147

Annexure VIII

Page 3 of 3

Shriram City Union Finance Limited

Statement of Accounting Ratios

Calculation of Net Asset Value (NAV) Per Equity Share

(Rs. in lacs)

Particulars Schedule As at March 31,

2011

SHAREHOLDERS FUNDS

A. Share Capital 9 4953.69

B. Share Application Money Pending Allotment -

C. Stock Option Outstanding 11 1887.27

D. Optionally Convertible Warrants -

E. Reserve and Surplus 10 114366.32

F. Less: Miscellaneous Expenditure (Not written off) 23.76

G. Net Asset Value 121183.52

H. Number of Equity shares outstanding at the end of the year/ period 49536877

I. Net asset Value per Equity Share (Rs.) 244.63

F-148

Annexure IX

Shriram City Union Finance Ltd.,

Secured Loans

Term loan from banks

Particulars Date of

Disbursement

Disbursed

amount (Rs. in

lacs)

Balance as on

March 31st

2011 (Rs. in

lacs)

Interest

Rate % Repayment terms

ANDHRA BANK 31-Dec-08

10000.00 4371.95 12.25 Repayable In 16 Quarterly Installments

BANK OF MAHARASHTRA 31-Mar-11

5000.00 5000.00 10.00 25 Crs Each at the end Of 30-Jun-14 & 30-Sep-14

CALYON BANK 2-Dec-10 3500.00 3500.00 9.49 Bullet Payment on 02-Dec-12

CANARA BANK 17-Dec-07

7500.00 1250.00 11.50

35 Months 5 Half Yearly Installments - 1.250Crs / Installment

CANARA BANK 29-Jan-10 20000.00 20000.00 10.50 Bullet Payment on 18-Feb-12

CANARA BANK 17 & 24-Sep-10 20000.00 20000.00 10.00 Bullet Payment on 24-Aug-13

CANARA BANK 24-Sep-10 10000.00 10000.00 10.00 Bullet Payment on 24-Aug-13

CORPORATION BANK 28-Dec-10 10000.00 10000.00 9.75 Bullet Payment on 28-Dec-13

CORPORATION BANK 29-Mar-11 20000.00 20000.00 9.50 Bullet Payment on 29-Jun-11

DBS BANK LTD 4-Mar-11 6000.00 6000.00 9.20 Bullet Payment on 07-Oct-11

DBS BANK LTD 24-Sep-10 5000.00 5000.00 8.65 Bullet Payment on 24-Sep-13

DBS BANK LTD 26-Oct-10 8000.00 8000.00 8.90 Bullet Payment on 26-Oct-11

HDFC BANK 22-Mar-10

5000.00 5000.00 8.25

Tenor-18 Months(3 Equal Installment At The End Of 12Th,15Th & 18Th)

ICICI BANK 22-Mar-11

25000.00 25000.00 8.75 25 Months-(Oct11, Apr12, Oct12, Apr13 - 62.5 Crs

IDBI BANK 22-Mar-11 20000.00 20000.00 9.50 Bullet Payment on 22-Jun-11

IDBI BANK 22-Mar-11 4000.00 4000.00 9.50 Bullet Payment on 22-Jun-11

ING VYSYA BANK 26-Mar-09 1000.00 333.28 10.50 Monthly Emi 27.70 Lacs

ING VYSYA BANK 25-Mar-10

4300.00 2866.67 8.20

Half Yearly Installment(Rs.71666666) - 35 Months

KARUR VYSYA BANK 31-Jul-09

2500.00 625.00 9.50

Tenro-24 Months(Repaid In 4 Equal Half Yearly Installments Of Rs.6.25 Cr)

ORIENTAL BANK OF COMMERCE

31-Mar-10 2000.00 2000.00 9.50

Repayable In 24 Monthly Installments (208.33 Lac)

ORIENTAL BANK OF COMMERCE

28-Mar-11

10000.00 10000.00 10.00

In 4 Quarterly Installment Of 25 Cr-36 Months(25 Crs-Jun 13, Sep 13, Dec 13 & Mar 14)

F-149

Annexure IX

Shriram City Union Finance Ltd.,

Secured Loans Term loan from banks

Particulars Date of

Disbursement

Disbursed

amount (Rs. in

lacs)

Balance as on

March 31st

2011 (Rs. in

lacs)

Interest

Rate % Repayment terms

STATE BANK OF INDORE

31-Mar-09 5000.00 1397.73 12.50

11 Quarterly Installment-(Rs.4.50Cr) And Last One (5Cr)

STATE BANK OF MAURITIUS

7-Feb-11 1500.00 1500.00 10.50

8 Quarterly Installments - 31.25 Million

STATE BANK OF MYSORE 27-Nov-10 10000.00 9999.38 9.50 Bullet Payment on 27-Nov-13

STATE BANK OF PATIALA 28-Feb-09 5000.00 2000.00 10.25 10 Qtrly installment (5.00 Crs)

STATE BANK OF PATIALA 21-Dec-10 10000.00 10000.00 10.75 Bullet Payment on 21-Dec-13

STATE BANK OF PATIALA

22-Mar-11 15000.00 15000.00 9.75

Repayment At The End Of Every 12 Months In 3 Annual Equal Instalments-3Years

STATE BANK OF TRAVANCORE

23-Dec-10 10000.00 9999.97 10.50 Bullet Payment on 23-Dec-12

SYNDICATE BANK 3-Jan-11 15000.00 15000.00 10.00 Bullet Payment on 03-Jan-13

UNION BANK OF INDIA 22-Nov-10 15000.00 15000.00 9.75 Bullet Payment on 22-Nov-12

UNION BANK OF INDIA 4-Jan-11 15000.00 15000.00 10.50 Bullet Payment on 04-Jan-13

UNITED BANK OF INDIA

27-Dec-08 2500.00 833.30 11.00

12 Quarterly Installments For 36 Months

VIJAYA BANK

30-Mar-11 9000.00 9000.00 10.50

Repayable In 36 Months With An Initial Moratorium Period Of 12 Months & Thereafter It Should Be Repaid In 24 Emi

YES BANK 28-Feb-11 8000.00 8000.00 9.25 Bullet Payment on 28-Feb-14

Total 295677.28

Term loan from institutions

Particulars Date of

Disbursement

Disbursed

amount (Rs. in

lacs)

Balance as on

March 31st

2011 (Rs. in

lacs)

Repayment terms

SIDBI 10-Aug-10 10000.00 6500.00 10.00 Repayable on 10-Aug-13

F-150

Annexure IX

Shriram City Union Finance Ltd.,

Cash Credit from Banks(including WCDL)

Particulars Date of

Disbursement Disbursed amount (Rs. in lacs)

Balance as on March

31st 2011 (Rs. in lacs) Int. Rate %

AXIS BANK 23-Aug-06 10000.00 9.08 11.75%

BANK OF INDIA 11-Jun-09 20000.00 10185.07 9.60%

BANK OF MAHARASHTRA 19-Mar-06 5000.00 4997.40 10.50%

CANARA BANK 24-Nov-09 5000.00 4088.27 11.00%

CENTRAL BANK OF INDIA 24-Mar-09 10000.00 3532.29 10.50%

CITY UNION BANK 10-Nov-10 1400.00 78.13 11.50%

CORPORATION BANK 28-Dec-10 5000.00 3522.68 9.75%

DBS BANK 29-Apr-10 100.00 5.91 10.00%

DENA BANK 5-Mar-07 15000.00 10713.18 10.45%

IDBI BANK 10-Oct-08 1000.00 90.30 11.25%

INDUSIND BANK 31-May-10 7500.00 120.56 10.60%

ING VYSYA BANK 23-Mar-10 500.00 5.70 10.00%

JAMMU & KASHMIR BANK LTD., 15-Mar-11 10000.00 8013.44 11.00%

KOTAK MAHINDRA BANK 21-Aug-09 5000.00 1014.64 10.60%

ORIENTAL BANK OF COMMERCE 18-Sep-06 5000.00 3662.67 10.00%

PUNJAB NATIONAL BANK 4-Aug-07 5000.00 9.16 13.00%

SOUTH INDIAN BANK 25-Jun-10 1000.00 40.33 12.00%

STATE BANK OF INDIA 13-Mar-09 15000.00 7539.90 12.00%

STATE BANK OF PATIALA 24-Feb-09 5000.00 48.11 12.75%

STATE OF BIKANUR AND JAIPUR 8-Sep-10 100.00 40.59 11.50%

TAMILNADU MERCANTILE BANK 20-Aug-07 5000.00 19.89 11.50%

UNION BANK OF INDIA 25-Mar-08 5000.00 2766.09 12.00%

UNITED BANK OF INDIA 25-Mar-09 7500.00 3292.02 9.00%

YES BANK - ac 200 25-Mar-10 2000.00 10.74 11.00%

WCDL

HSBC BANK 23-Dec-09 10000.00 10000.00 8.15%

HSBC BANK 23-Dec-09 5000.00 5000.00 8.05%

SOUTH INDIAN BANK 25-Jun-10 5000.00 4989.92 7.75%

STATE BANK OF BIKANER & JAIPUR 22-Dec-10 2400.00 2400.00 9.50%

STANDARD CHARTERED BANK 25-Oct-10 5000.00 5000.00 8.90%

CENTURION CC BANK 31-Dec-10 2400.00 2400.00 9.50%

CANARA BANK 9-Dec-10 15000.00 15000.00 9.80%

DBS 4-Mar-11 1400.00 1400.00 9.20%

FEDERAL 1-Mar-11 5000.00 5000.00 9.90%

STATE BANK OF MYSORE 18-Mar-11 4900.00 4900.00 9.30%

IDBI 22-Mar-11 15000.00 15000.00 9.50%

Total 134896.09

F-151

Annexure IX

Shriram City Union Finance Ltd.,

Privately placed Redeemable NCD

Particulars Date of

Disbursement

Disbursed

amount (Rs. in

lacs)

Balance as on

March 31st

2011 (Rs. in

lacs)

Interest

Rate % Repayment terms

CORPORATION BANK 24-Sep-09 2500.00 2500.00 10.75% 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

CENTRAL BANK OF INDIA 17-Sep-09 1000.00 1000.00 10.75% 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

CENTRAL BANK PENSION FUND

17-Sep-09 1000.00 1000.00 10.75% 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

CENTRAL BANK PROVIDENT FUND

17-Sep-09 500.00 500.00 10.75% 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

ALLAHABAD BANK 23-Sep-09 2000.00 2000.00 10.75% 3.5 years 1st 20% 4th year 2nd 20% 4.5 years 30% and 5th year30%

A.K.CAPITAL SERVICES 6-Oct-09 2000.00 2000.00 10.75% Repayable on 07-Oct-14

BANK OF BARODA 6-Oct-09 1000.00 1000.00 10.75% Repayable on 07-Oct-14

STANDARD CHARTERED BANK

20-Apr-10 17500.00 14583.33 7.82% Half yearly instalment-3 years

RELIANCE MUTUAL FUND 2-Jul-10 7500.00 7500.00 9.00% Repayable on 05-Jan-13

ING VYSYA BANK 22-Nov-10 2000.00 2000.00 10.50% In 3 Equal installments in 5th/6th/ 7th Year from deemed date of allotment

ING VYSYA BANK 13-Dec-10 1000.00 1000.00 10.60% Repayable on 13-Dec-17

ING VYSYA BANK 13-Dec-10 1500.00 1500.00 10.60% Repayable on 13-Dec-17

JHARKAND GRAHIM BANK 4-Feb-11 500.00 500.00 10.75% Repayable on 04-Feb-21

DEUTSCHE BANK 30-Mar-11 27500.00 27500.00 9.00% Repayable on 30-Mar-17

Total 64583.33

Privately placed Redeemable Non Convertible Debenture of Rs. 1,000 each

Particulars Balance as on March 31st 2011 (Rs. in lacs)

Repayment terms

Retail Debentures 155294.31 Redeemable at par over a period 12 to 160 months

F-152

Annexure X

Shriram City Union Finance Limited Unsecured loans

Particulars Balance as on March 31st

2011 (Rs. in lacs) Repayment terms

Fixed Deposits 55.10 Redeemable at par over a period 12 to 60 months

Subordinated Debts 53,272.33 Redeemable at par over a period 60 to 216 months

Total 53,327.43

Commercial Paper

Particulars Date of

Disbursement

Disbursed

amount

(Rs. in

lacs)

Balance as on

March 31st

2011 (Rs. In

lacs)

Interest

Rate % Repayment terms

UTI MUTUAL FUND 13-Sep-10 5500.00 5500.00 8.66 Repayable on 12-Sep-11

ICICI PRUDENTIAL LIFE INSURANCE 13-Sep-10 5000.00 5000.00 8.66 Repayable on 12-Sep-11

TATA MUTUAL FUND 13-Sep-10 7500.00 7500.00 8.66 Repayable on 07-Sep-11

CHOLAMANDALAM MS GENERAL INSURANCE COMPANY LTD.

8-Oct-10 500.00 500.00 8.67 Repayable on 07-Oct-11

TATA TRUSTEE COMPANY LTD. 8-Oct-10 1500.00 1500.00 8.24 Repayable on 19-Sep-11

UTI - FIIF ANNUAL INTERVAL PLAN S-III

8-Oct-10 1000.00 1000.00 8.67 Repayable on 07-Oct-11

UTI-FMP-YEARLY SERIES 8-Oct-10 1500.00 1500.00 8.67 Repayable on 07-Oct-11

Total 22500.00

F-153

Annexure XI

Shriram City Union Finance Limited

Capitalization statement

(Rs. in lacs)

Particulars

Pre Issue as at

March 31, 2011

(Audited)

As adjusted for

Issue

Debt

Short Term Debt 160552.61 160552.61

Long Term Debt 572225.83 647225.83

Total 732778.44 807778.44

Shareholders Fund

Share Capital 4953.69 4953.69

Share Application Money pending allotment - -

Stock Option Outstanding 1887.27 1887.27

Reserve 7 Surplus (Refer Annexure IV - Schedule 10) 114366.32 114366.32

Less: Miscellaneous Expenditure 23.76 23.76

Total of Shareholders Fund 121183.52 121183.52

Long Term Debt / equity Ratio 6.05 6.67

F-154

Annexure XII

Shriram City Union Finance Limited

Statement of Tax Shelter

(Rs. in lacs)

Particulars For the year ended March

31, 2011

Profit as per accounting books (business)

36,060.09

Profit as per accounting books (investments)

Total profit as per accounting books

36,060.09

Tax rate on business income 33.22%

Tax rate on investment income

Tax on accounting profit

11,978.26

Permanent Differences

Donation

0.50

Exempt Dividend Income

Disallowance u/s 14A

Capital gains on sale of fixed assets

Others

13.94

Sub Total (A)

14.44

Temporary Differences

Depreciation and Lease adjustments

0.03

Provision for standard assets

1,714.89

Leave Encashment, Gratuity & Bonus

68.30

Derivative provision

(546.62)

Others

199.84

Sub Total (B)

1,436.44

Net Adjustments (A+B)

1,450.88

Tax Impact on Net Adjustments

481.95

Total Taxation

12,460.21

Current Tax Provision for the year

12,460.20

Notes:-

1. Profits after tax are often affected by the tax shelters which are available.

2. Some of these are of a relatively permanent nature while others may be limited in point of time.

3. Tax provisions are also affected by timing differences which can be reversed in future.

F-155

Annexure XIII

Shriram City Union Finance Limited

Significant Accounting Policies & Notes to Accounts

1. Significant Accounting Policies

(A) Basis of preparation

The Consolidated financial statements relates to M/s. Shriram City Union Finance Company Limited (the

Company) and its subsidiary company. The Company and its subsidiary company constitute the Group.

The financial statements have been prepared in conformity with generally accepted accounting principles

to comply in all material respects with the notified Accounting Standards (‘AS’) under Companies

Accounting Standard Rules, 2006, as amended, the relevant provisions of the Companies Act, 1956 (‘the

Act’) and the guidelines issued by the Reserve Bank of India (‘RBI’) as applicable to a Non Banking

Finance Company (‘NBFC’). The financial statements have been prepared under the historical cost

convention on an accrual basis.

(B) Basis of consolidation

(i) The financial statements of the subsidiary company Shriram Housing Finance Limited used in the consolidation are drawn up to the same reporting date as of the Company i.e. period ended March 31, 2011 and are prepared based on the accounting policies consistent with those used by the Company.

(ii) The financial statements of the Group have been prepared in accordance with the Accounting Standard 21- ‘Consolidated Financial Statements’ and Accounting Standard 23 – ‘Accounting for investments in Associates in Consolidated Financial Statements, notified under the Companies (Accounting Standards) Rules, 2006, as amended and other generally accepted accounting principles in India.

(iii) The consolidated financial statements have been prepared on the following basis :

a. The financial statements of the company and its subsidiary company have been combined on a line-by-line basis by adding together like items of assets, liabilities, income and expenses. The intra-group balances and intra-group transactions and unrealised profits or losses have been fully eliminated.

b. The excess of cost to the Company of its investments in the subsidiary company over its share of equity of the subsidiary company, at the dates on which the investments in the subsidiary company is made, is recognised as ‘Goodwill’ being an asset in the consolidated financial statements. Alternatively, where the share of equity in the subsidiary company as on the date of investment is in excess of cost of investment of the Company, it is recognised as ‘Capital Reserve’ and shown under the head ‘Reserves and Surplus’, in the consolidated financial statement.

c. Minority interest, if any, in the net assets of consolidated subsidiary consists of the amount of equity attributable to the minority shareholders at the dates on which investments are made by the Company in the subsidiary company and further movements in their share in the equity, subsequent to the dates of investments as stated above.

(C) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles

requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of

operations during the reporting year end. Although these estimates are based upon management’s best

knowledge of current events and actions, actual results could differ from these estimates. Any revisions to

the accounting estimates are recognized prospectively in the current and future years.

F-156

(D) Fixed Assets, Depreciation / Amortisation and Impairment of assets

Fixed Assets Fixed assets are stated at cost less accumulated depreciation/amortisation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets are included to the extent they relate to the period till such assets are ready to be put to use.

Depreciation / Amortisation

Depreciation is provided pro rata on Straight Line Method (‘SLM’), which reflect the management’s estimate of the useful lives of the respective fixed assets and are greater than or equal to the corresponding rates prescribed in Schedule XIV of the Act. The assets for which higher rates are applied are as follows:

Particulars Rates (SLM) Schedule XIV rates (SLM)

Computer Software 33.33% 16.21%

Leasehold improvement is amortized over the primary period of lease subject to a maximum of 60 months.

All fixed assets individually costing Rs.5000 or less are fully depreciated in the year of installation.

Impairment of assets

The carrying amount of assets is reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets’ net selling price and value in use.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

A previously recognized impairment loss is increased or reversed depending on changes in circumstances.

However the carrying value after reversal is not increased beyond the carrying value that would have

prevailed by charging usual depreciation if there was no impairment.

F-157

(E) Investments

Investments intended to be held for not more than a year are classified as current investments. All other

investments are classified as long-term investments. Current investments are carried at lower of cost and

fair value determined on an individual investment basis. Long Term Investments are carried at cost.

Provision for diminution in the value of long term investments is made to recognize decline in value other

than temporary in nature.

(F) Assets under financing activities

Assets under Financing Activities are stated at the amount advanced including finance charges accrued and

expenses recoverable, as reduced by the amounts received up to Balance sheet date and assets securitized.

Non performing Asset are written off / provided for, as per management estimates, subject to the minimum

provision required as per Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential

Norms (Reserve Bank) Directions 2007.

Provision @0.25% on standard asset is made as per the notification DNBS.PD.CC.No.207/ 03.02.002

/2010-11 issue by Reserve Bank of India.

(G) Foreign currency translation

Foreign currency transactions are accounted at the exchange rate prevailing on the date of transactions.

Foreign currency monetary items on the Balance Sheet date are restated at the closing exchange rates. All

Exchange differences are dealt with in the profit and loss account.

(H) Revenue recognition

i. Income from Financing Activities is recognised on the basis of internal rate of return. This includes Additional Finance Charges which is accounted when received because of uncertainty of realization.

ii. Gain arising on securitization/direct assignment of assets is recognized over the tenure of

agreements as per guideline on securitization of standard assets issued by RBI. Loss (if any) is

recognized upfront.

iii. The Prudential norms for income recognition prescribed under Non-Banking Financial (Deposit

Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007 are followed.

iv. Income from services is recognized as per the terms of the contract on accrual basis.

v. Interest Income on deposit accounts with banks is recognized on a time proportion basis taking into

account the amount outstanding and the rate applicable.

vi. Dividend is recognized as Income when right to receive is established by the date of balance sheet.

vii. Profit / Loss on sale of investments is recognized at the time of actual sale / redemption.

F-158

(I) Employee benefits

Provident Fund

All the employees of the Company are entitled to receive benefits under the Provident Fund, a defined

contribution plan in which both the employee and the Company contribute monthly at a stipulated rate. The

Company has no liability for future Provident Fund benefits other than its annual contribution and

recognizes such contributions as an expense in the year it is incurred.

Gratuity

The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The plan

provides for lump sum payments to employees at retirement, death while in employment or on separation

from employment as per provisions of payment of Gratuity Act, 1972. The Group accounts for liability of

future gratuity benefits based on an external actuarial valuation on projected unit credit method carried out

annually for assessing liability as at the balance sheet date.

Leave Encashment

Short term compensated absences are provided for based on estimates. Long term compensated absences

are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit

method.

Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

(J) Income tax

Tax expense comprises of current tax, deferred tax and fringe benefit tax. Current income tax and fringe

benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the

Indian Income Tax Act, 1961. Deferred income taxes reflects the impact of current year timing differences

between taxable income and accounting income for the year and reversal of timing differences of earlier

years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the

balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty

that sufficient future taxable income will be available against which such deferred tax assets can be

realized. In situations where the Group has unabsorbed depreciation or carry forward tax losses, all

deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that

they can be realized against future taxable profits.

The un-recognized deferred tax assets are re-assessed by the Group at each balance sheet date and are

recognized to the extent that it has become reasonably certain or virtually certain, as the case may be that

sufficient future taxable income will be available against which such deferred tax assets can be realized.

The carrying cost of the deferred tax assets are reviewed at each balance sheet date. The

Group writes down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably

certain or virtually certain, as the case may be, that sufficient future taxable income will be available

against which deferred tax asset can be realized. Any such write down is reversed to the extent that it

becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income

will be available.

F-159

(K) Segment reporting

The company operates in one reportable segment.

(L) Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

(M) Cash and cash equivalents

Cash and cash equivalents in the cash flow statement which is prepared in accordance with Accounting Standard (AS) 3 issued by the Institute of Chartered Accountants of India comprise cash at bank and in hand and short term investments with an original maturity of three months or less.

(N) Expenses on deposits / debentures

Expenses on mobilization of deposits / debentures are charged to Profit & Loss account in the year in which they are incurred.

(O) Provisions

A provision is recognized when the Group has a present obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

(P) Derivative instruments

Accounting for derivative contracts, other than those covered under AS-11, are marked to market and the net loss after considering the off setting effect on the underlying hedge item is charged to profit and loss account. Net gains are ignored

(Q) Employee stock compensation costs

Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999and the Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI. The Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.

F-160

2. Notes to Accounts

(1) The following subsidiary company is considered in the consolidated financial statements:

Sr.

No.

Name of the Subsidiary Company Country of

incorporation

% of holding either

directly as at March

31, 2011

% of holding either

directly as at

March 31, 2010

a) Shriram Housing Finance Limited (Incorporated on 9th November 2010)

India 100% -

(2) Particulars of Secured Loans

a) Privately placed Redeemable Non-convertible Debentures of Rs 1000/- each (Retail)

As at March 31,2011

Number Amount (Rs. in lacs)

1,55,29,431 1,55,294.31

Secured by equitable mortgage of title deeds of immovable property. Further secured by charge on plant and

machinery, furniture and other fixed assets of the Company, charge on Company’s hypothecation loans, other loans,

advances and investments of the Company subject to prior charges created or to be created in favor of the

Company’s bankers, financial institutions and others.

These Debentures are redeemable at par over a period of 12 months to 160 months from the date of allotment

depending on the terms of the agreement. The earliest date of redemption is April 1, 2011. The last date of

redemption is October 25, 2017.

Debentures may be bought back subject to applicable statutory and /or regulatory requirements, upon the terms and

conditions as may be decided by the Company. The Company may grant loan against the security of NCDs upon the

terms and conditions as may be decided by the Company and subject to applicable statutory and/or regulatory

requirements.

F-161

b) Privately Placed Redeemable Non-Convertible Debenture (Institutional)

Date of

Allotment/renewal

Face

Value Number As at March

31, 2011

Redeemable

at par on

24.09.2009 100000 2500 2500.00 30.09.2014

17.09.2009 100000 1000 1000.00 30.09.2014

17.09.2009 100000 1000 1000.00 30.09.2014

17.09.2009 100000 500 500.00 30.09.2014

23.09.2009 100000 2000 2000.00 30.09.2014

06.10.2009 100000 2000 2000.00 07.10.2014

06.10.2009 100000 1000 1000.00 07.10.2014

22.04.2010 1000000 1458 14583.33 22.04.2013

05.07.2010 1000000 750 7500.00 05.01.2013

23.11.2010 1000000 200 2000.00 23.11.2017

13.12.2010 1000000 100 1000.00 13.12.2017

13.12.2010 1000000 150 1500.00 13.12.2017

04.02.2011 1000000 50 500.00 04.02.2021

30.03.2011 1000000 2750 27500.00 30.03.2017

Total 64583.33

Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and

equitable mortgage of title deeds of immovable property.

c) Term Loans:

(Rs. in lacs)

i. From Financial Institutions/Corporate As at March 31,

2011

Secured by an exclusive charge by way of

hypothecation of assets under financing.

6500.00

Total 6500.00

ii. From Banks As at March 31,

2011

Secured by an exclusive charge by way of

hypothecation of assets under financing.

295677.28

Total 295677.28

F-162

d) Cash Credit from Banks

(Rs. in lacs)

As at March 31, 2011

Cash Credit from Banks

134896.09

3.

Subordinated Debt

The Company has issued subordinated debt bonds amounting to Rs. 53272.33 Lacs with coupon rate of 7.00% to 13.00% Per annum which are redeemable over a period of 60 month to 216 month.

4. Gratuity and other post-employment benefit plans:

The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on separation at 15 days basic salary (last drawn salary) for each completed year of service.

Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI the following

disclosures have been made as required by the standard:

Profit and Loss account

Net employee benefit expense (recognized in Employee Cost)

(Rs. in lacs)

Gratuity

Particulars March 31, 2011

Current service cost 4.84

Interest cost on benefit obligation 12.44

Expected return on plan assets N.A

Net actuarial (gain) / loss recognized in the year 23.23

Past service cost NIL

Net benefit expense 40.51

Actual return on plan assets N.A

F-163

Balance sheet

Details of Provision for gratuity

(Rs in lacs)

Gratuity

Particulars March 31, 2011

Defined benefit obligation 196.34

Fair value of plan assets N.A

Total 196.34

Less: Unrecognized past service cost NIL

Plan asset / (liability) (196.34)

Changes in the present value of the defined benefit obligation are as follows:

(Rs. in lacs)

Gratuity

Particulars March 31, 2011

Opening defined benefit obligation 155.52

Interest cost 12.44

Current service cost 4.84

Benefits paid --

Actuarial (gains) / losses on obligation 23.54

Closing defined benefit obligation 196.34

The Group would not contribute any amount to gratuity in 2011-12 as the scheme is unfunded.

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:

Gratuity

Particulars March 31, 2011

%

Investments with insurer NA

F-164

The principal assumptions used in determining gratuity obligations for the Group’s plan are shown below:

Gratuity

Particulars March 31, 2011

Discount Rate 8.25%

Increase in compensation cost 5.00%

Employee Turnover 2.00%

The estimates of future salary increases considered in actuarial valuation, are on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

Amounts for the current and previous year are as follows:

Particulars March 31, 2011

Defined Benefit obligation 196.34

Plan Assets N.A

Surplus/Deficit (196.34)

Experience adjustment on Plan Liabilities (29.63)

Experience adjustment on Plan Assets N.A

(5) Related Party Disclosures

Related Parities have been identified by the Management and relied upon by the auditors.

Subsidiary : Shriram Non-Conventional Energy Limited (till 26th June 2009)

Enterprises having significant

influence over the Company

: Shriram Enterprise Holdings Private Limited

Shriram Retail Holdings Private Limited

Shriram Capital Limited

Shriram Ownership Trust

TPG India Investments I Inc.

Key Managerial Personnel : R Kannan Managing Director

F-165

(Rs. in lacs)

Enterprises having significant influence over the Company

2011

Payments

Royalty 338.15#

Data Sourcing fees 206.40#

Service Charges 1238.39#

Equity dividend

Reimbursement of Business Promotion Expenses 33.09*

Equity dividend 985.68$

Equity dividend 470.59@

Receipts

Balance outstanding at the year end

Share Capital 1792.15*

Share Capital 855.62@

* Denotes transactions with Shriram Capital Limited

$ Denotes transactions with Shriram Enterprise Holdings Private Limited

@ Denotes transactions with Shriram Retail Holdings Private Limited

# Denotes transactions with Shriram Ownership Trust Limited

(6) In accordance with the Reserve Bank of India circular no. RBI/2006-07/225 DNBS (PD) C.C No.87/03.02.2004/2006-07 dated January 4,2007, the Company has created a floating charge on the statutory liquid assets comprising of investment in Government Securities to the extent of Rs.101.45 Lacs in favour of trustees representing the public deposit holders of the Company.

F-166

(7) Earnings per share

(Rs. in lacs)

Particulars Year ended March

31, 2011

Net Profit after tax and Share of loss of Associates as per profit and loss account (Rs. in

lacs)(A) 24058.85

Weighted average number of equity shares for calculating Basic EPS (in lacs) (B) 493.23

Weighted average number of equity shares for calculating Diluted EPS (in lacs) (C) 501.25

Basic earnings per equity share (in Rupees) (Face value of Rs. 10/- per share) (A) / (B) 48.78

Diluted earnings per equity share (in Rupees) (Face value of Rs. 10/- per share) (A) / (C) 47.97

(Rs. in lacs)

Particulars

Year ended March

31, 2011

Weighted average number of equity shares for calculating EPS (in lacs) 493.23

Add : Equity shares arising on conversion of optionally convertible warrants (in lacs) -

Add : Equity shares for no consideration arising on grant of stock options under ESOP (in

lacs) 8.32

Weighted average number of equity shares in calculation diluted EPS (in lacs) 501.55

F-167

(8) Deferred Tax Liabilities/(Asset) (Net)

The breakup of deferred tax asset/ liabilities is as under : (Rs. in lacs)

As at March 31,

2011

Deferred Tax Liabilities

Timing difference on account of :

Differences in depreciation in block of fixed assets as per tax books and financial books

85.63

Gross Deferred Tax Liabilities (A) 85.63

Deferred Tax Asset

Timing difference on account of :

Service Tax Provision 515.90

Additional Provision against Standard Asset 569.65

Leave Encashment Provision 18.01

Gratuity Provision 65.22

Derivative Provision 418.29

Bonus Provision 13.78

Estimated Disallowances 66.44

Gross Deferred Tax Assets (B) 1667.29

Deferred Tax Liabilities/(Asset) (Net) (A-B) (1581.66)

(Rs. in lacs)

(9) Capital commitments As at March 31, 2011

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)

61.78

F-168

(Rs. in lacs)

(10) Contingent Liabilities not provided for As at March 31, 2011

a. Guarantees issued by the Company 6.81

b. Guarantees issued by others 1942.77

(11) Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax

Disputed Wealth Tax/Service Tax demands contested in appeal as on 31st 2011.

Wealth Tax – Rs. 1.76 lacs , Service Tax – Rs.1553.08 Lacs

However provision is made in the books for any liability that may arise.

(12) Employee Stock Option Plan

Date of grant October 19 2007

Date of Board Approval October 19 2007

Date of Shareholder’s approval October 30 2006

Number of options granted 1355000

Method of Settlement (Cash/Equity) Equity

Graded vesting period:

After 1 year of grant date 10% of options granted

After 2 years of grant date 20% of options granted

After 3 years of grant date 30% of options granted

After 4 years of grant date 40% of options granted

Exercisable period 10 years from vesting date

Vesting Conditions on achievement of pre –determined targets

F-169

The details of Stock Option plan are summarized below:

As at March 31, 2011

Number of

Shares

Weighted Average

Exercise Price(Rs.)

Outstanding at the beginning of the year 1272800 35

Add: Granted during the year 27500

Less: Forfeited during the year -

Less: Exercised during the year 382177 35

Less: Expired during the year -

Outstanding at the end of the year 918123 35

Exercisable at the end of the year -

Weighted average remaining contractual life (in years) - 9.55

Weighted average fair value of options granted - 227.42

The details of exercise price for stock options outstanding at the end of the year are:

As at Range of

exercise

prices

Number of options

outstanding

Weighted average

remaining

contractual life of

options (in years)

Weighted average

exercise price

March 31, 2011 Rs.35/- 918123 9.55 Rs.35/-

F-170

Stock Options granted

The weighted average fair value of stock options granted was Rs.227.42. The Black Scholes model has been used for

computing the weighted average fair value of options considering the following inputs:

Yr 1 Yr 2 Yr 3 Yr 4

Exercise Price (Rs.) 35.00 35.00 35.00 35.00

Expected Volatility (%) 55.36 55.36 55.36 55.36

Historical Volatility NA NA NA NA

Life of the options granted (Vesting and

exercise period) in years

1.50 2.50 3.50 4.50

Expected dividends per annum (Rs.) 3.00 3.00 3.00 3.00

Average risk-free interest rate (%) 7.70 7.67 7.66 7.67

Expected dividend rate (%) 0.84 0.84 0.84 0.84

The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank

Nifty which is considered as a comparable peer group of the Company. To allow for the effects of early exercise it

was assumed that the employees will exercise the options within six months from the date of vesting in view of the

exercise price being significantly lower than the market price.

Effect of the employee share-based payment plans on the profit and loss account and on its financial position:

(Rs. in lacs)

As at March 31, 2011

Compensation cost pertaining to equity-settled employee share-based payment plan

included above

471.68

Liability for employee stock options outstanding as at year end 2079.09

Deferred compensation cost 191.82

Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings

per share by applying the fair value based method is as follows:

F-171

In March 2005 the ICAI has issued a guidance note on “Accounting for Employees Share Based Payments”

applicable to employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said

guidance note requires that the pro-forma disclosures of the impact of the fair value method of accounting of

employee stock compensation accounting in the financial statements. Applying the fair value based method defined

in the said guidance note the impact on the reported net profit and earnings per share would be as follows:

(Rs. in lacs)

Year ended March 31, 2011

Profit as reported (Rs. in lacs) 24058.85

Add: Employee stock compensation under intrinsic value method (Rs.

in lacs) 471.68

Less: Employee stock compensation under fair value method (Rs. in

lacs) 473.70

Proforma profit (Rs. in lacs) 24056.83

Less Preference Dividend -

Proforma Net Profit for Equity Shareholders 24056.83

Earnings per share

Basic (Rs.)

- As reported 48.78

- Proforma 48.77

Diluted (Rs.)

- As reported 47.97

- Proforma 47.96

13. Securitisation

The information on securitisation & direct assignment activity of the Company as an originator for the year

F-172

March 31 2011 is given below:

Year ended March 31, 2011

Total number of assets securitised 178502

Total book value of assets securitised (Rs. in lacs) 117915.72

Sale consideration received for the securitised assets (Rs. in lacs) 126737.01

Net gain on account of securitization (Rs. in lacs) 27163.76

Outstanding credit enhancement- Deposit with banks/corporate 15436.40

Outstanding Credit enhancement – Assets under financing 1900.63

14. Derivative Instruments:

The Notional principal amount of derivative transactions outstanding as on March 31, 2010 for interest

rate swaps Rs.12500 lacs.

15. Supplementary Statutory Information

15.1 Managing Director’s Remuneration

The computation of profits under section 349 of the Act has not been given as no remuneration / commission is payable to the Managing Director.

(Rs. in lacs)

15.2 Expenditure in foreign currency (On cash basis)

Year ended March 31, 2011

Subscription Fees 0.09

16. Additional information pursuant to the provisions of paragraphs 3 4C and 4D of Part II of

schedule VI to the Act

The Company does not have licensed capacity as it is Non Banking Finance Company.

17. Previous year Comparatives

The figures for the previous year have been regrouped and reclassified, wherever necessary to conform to

current year’s classification.

F-173

As per our report of even date

For Pijush Gupta & Co. For and on behalf of the Board of Directors of

Firm Registration No: 309015E Shriram City Union Finance Limited

Chartered Accountants

Ramendra Nath Das R Kannan S Venkatakrishnan

Partner Managing Director Director

Membership No : 014125

Place : Chennai C R Dash

Date: July 21, 2011 Company Secretary

131

DISCLOSURES ON EXISTING FINANCIAL INDEBTEDNESS

A. Details of Secured Borrowings:

Our company’s secured borrowings as on March 31, 2011 amount to ` 656,951.01 lakhs. The details of the individual borrowings are set out below:

1. Term Loans from Banks:

Sr.

No.

Particulars Date of

disbursement

Amount outstanding

as on March 31,2011

(`̀̀̀ in Lakhs)

Maturity date

1. Andhra Bank December 31,2008 4,371.95 December 31,2012

2. Bank of Maharashtra March 31, 2011 5,000.00 September 30, 2014

3. Calyon bank December 2, 2010 3,500.00 December 2, 2012

4. Canara Bank December 17, 2007 1,250.00 August 9, 2011

5. Canara Bank January 29, 2010 20,000.00 February 18, 2012

6. Canara Bank September 24, 2010 20,000.00 August 24, 2013

7. Canara Bank September 24, 2010 10,000.00 August 24, 2013

8. Corporation Bank December 28, 2010 10,000.00 December 28, 2013

9. Corporation Bank March 29, 2011 20,000.00 June 29, 2011

10. DBS Bank Limited March 4, 2011 6,000.00 October 7, 2011

11. DBS Bank Limited September 24, 2010 5,000.00 September 24, 2013

12. DBS Bank Limited October 26, 2010 8,000.00 October 26, 2011

13. HDFC Bank Limited March 22, 2010 5,000.00 September 21, 2011

14. ICICI Bank Limited March 22, 2011 25,000.00 April 22, 2013

15. Industrial Development Bank of India Limited

March 22, 2011 20,000.00 June 22, 2011

132

Sr.

No.

Particulars Date of

disbursement

Amount outstanding

as on March 31,2011

(`̀̀̀ in Lakhs)

Maturity date

16. Industrial Development Bank of India Limited

March 22, 2011 4,000.00 June 22, 2011

17. ING Vysya Bank Limited March 26, 2009 333.28 March 23, 2012

18. ING Vysya Bank Limited March 25, 2010 2,866.67 February 25, 2013

19. Karur Vysya Bank July 31, 2009 625.00 July 31, 2011

20. Oriental Bank of Commerce March 31, 2010 2,000.00 March 31, 2012

21. Oriental Bank of Commerce March 28, 2011 10,000.00 March 28, 2014

22. State Bank of Indore March 31, 2009 1,397.73 December 19, 2011

23. State Bank of Mauritius February 7, 2011 1,500.00 February 7, 2013

24. State Bank of Mysore November 27, 2010 9,999.38 November 27, 2013

25. State Bank of Patiala February 28, 2009 2,000.00 February 27, 2012

26. State Bank of Patiala December 21, 2010 10,000.00 December 21, 2013

27. State Bank of Patiala March 22, 2011 15,000.00 March 22, 2014

28. State Bank of Travancore December 23, 2010 9,999.97 December 23, 2012

29. Syndicate Bank January 3, 2011 15,000.00 January 3, 2013

30. Union Bank of India November 22, 2010 15,000.00 November 22, 2012

31. Union Bank of India January 4, 2011 15,000.00 January 4, 2013

32. United Bank of India December 27, 2008 833.30 December 31, 2011

33. Vijaya Bank March 30, 2011 9,000.00 March 31, 2014

34. YES Bank Limited February 28, 2011 8,000.00 February 28, 2014

133

Sr.

No.

Particulars Date of

disbursement

Amount outstanding

as on March 31,2011

(`̀̀̀ in Lakhs)

Maturity date

Total 2,95,677.28

2. Term Loans from Others:

Sr.

No.

Particulars Date of disbursement Amount

outstanding on

March 31, 2011 (`̀̀̀

in Lakhs)

Maturity date

1. Small Industries Development Bank of India

August 10, 2010 6,500.00 August 10, 2013

Total 6,500

3. Cash Credit from Banks

Sr.

No.

Particulars Date of sanction Amount outstanding as on

March 31, 2011(`̀̀̀ in Lakhs)

1. Axis Bank Limited August 23, 2006 9.08

2. Bank of India June 11, 2009 10,185.07

3. Bank of Maharashtra March 19, 2006 4,997.40

4. Canara Bank November 24, 2009 4,088.27

5. Central Bank of India March 24, 2009 3,532.29

6. City Union Bank November 10, 2010 78.13

7. Corporation Bank December 28, 2010 3,522.68

8. DBS Bank Limited April 29, 2010 5.91

9. Dena Bank March 5, 2007 10,713.18

10. Industrial Development Bank of India Limited

October 10, 2008 90.30

11. INDUSIND Bank May 31, 2010 120.56

12. ING Vysya Bank March 23, 2010 5.70

13. Jammu & Kashmir Bank LimitedKotak Mahindra bank

March 15, 2011 8,013.44

14. Kotak Mahindra Bank Limited August 21, 2009 1,014.64

15. Oriental Bank of Commerce September 18, 2006 3,662.67

16. Punjab National Bank August 4, 2007 9.16

17. South Indian Bank June 25, 2010 40.33

18. State Bank of India March 13, 2009 7,539.90

19. State Bank of Patiala February 24, 2009 48.11

20. State Bank of Bikaner and Jaipur September 8, 2010 40.59

21. Tamil Nadu Mercantile Bank August 20, 2007 19.89

22. Union Bank of India March 25, 2008 2,766.09

23. United Bank of India March 25, 2009 3,292.02

24. YES Bank Limited March 25, 2010 10.74

25. HSBC Bank Limited December 23, 2009 10,000.00

26. HSBC Bank Limited December 23, 2009 5,000.00

27. South Indian Bank June 25, 2010 4,989.92

28. State Bank of Bikaner and Jaipur December 22, 2010 2,400.00

134

Sr.

No.

Particulars Date of sanction Amount outstanding as on

March 31, 2011(`̀̀̀ in Lakhs)

29. Standard Chartered Bank October 25, 2010 5,000.00

30. Centurion Bank December 31, 2010 2,400.00

31. Canara Bank December 9, 2010 15,000.00

32. DBS Bank Limited March 4, 2011 1,400.00

33. Federal Bank Limited March 1, 2011 5,000.00

34. State Bank of Mysore March 18, 2011 4,900.00

35. Industrial Development Bank of India Limited March 22, 2011 15,000.00

TOTAL 1,34,896.09

4. Our Company has issued secured redeemable non convertible debentures on a private placement basis of

which `̀̀̀ 64,583.33 lakhs is outstanding as on March 31, 2011, the details of which are set forth below:

Sl. No. Particulars Date of Allotment Amount outstanding as on March

31, 2011(`̀̀̀ in Lakhs)

Maturity Date

1. Corporation Bank September 24, 2009

*2,500.00 September 30, 2014

2. Central Bank of India September 17, 2009

*1,000.00 September 30, 2014

3. Central Bank Pension Fund September 17, 2009

*1,000.00 September 30, 2014

4. Central Bank Provident Fund September 17, 2009

*500.00 September 30, 2014

5. Allahabad Bank September 23, 2009

*2,000.00 September 30, 2014

6. A.K. Capital Services Limited October 6, 2009 *2,000.00 October 7, 2014

7. Bank of Baroda October 6, 2009 *1,000.00 October 7, 2014

8. Standard Chartered Bank April 22, 2010 **14,583.33 April 22, 2013

9. Reliance Mutual Fund July 5, 2010 **7,500.00 January 5, 2013

10. ING Vysya Bank November 23, 2010

**2,000.00 November 23, 2017

11. ING Vysya Bank December 13, 2010

**1,000.00 December 13, 2017

12. ING Vysya Bank December 13, 2010

**1,500.00 December 13, 2017

13. Jharkhand Gramin Bank February 4, 2011

**500.00 February 4, 2021

14. Deutsche Bank March 30, 2011 **27,500.00 March 30, 2017

Total 64,583.33

* Face Value: ` 1,00,000 each **Face Value: `10,00,000 each

5. Our Company has issued secured redeemable non convertible debentures of face value of `̀̀̀ 1000 each on a

private placement basis of which `̀̀̀ 1,55,294.31 lakhs is outstanding as on March 31,2011, the details of which

are set forth below:

Sl. No. Particulars Amount outstanding as on March 31,

2011(`̀̀̀ in Lakhs)

Maturity Date

1. Retail 1,55,294.31 Redeemable at par over a period of 12 months to 160 months

135

B. Details of Unsecured Borrowings:

Our Company’s Unsecured Borrowings as on March 31, 2011 amount to ` 75,827.43 lakhs. The details of the individual Borrowings are set forth below:

1. Subordinated Debts:

(`̀̀̀.In Lakhs)

Sr.

No.

Particulars Amount Outstanding as on

March 31, 2011

Maturity Date

1. Subordinated Debt 53,272.33 Redeemable at par over a period of 60 months to 216 months

Total 53,272.33

2. Fixed Deposits:

(`̀̀̀ in lakhs)

Amount Outstanding as on March 31, 2011 Maturity Date

55.10 Redeemable over a period of 12 to 60 months

3. Commercial Paper

The Company has issued commercial paper of which `. 22,500.00 lakhs are outstanding as on March 31, 2011, the details of which are set forth below:

(`̀̀̀ in lakhs)

Name of Holder Date of

Disbursement

Amount Outstanding

as on March 31, 2011

Maturity

UTI Mutual Fund September 13, 2010 5,500.00 September 12, 2011

ICICI Prudential Life Insurance Company Limited

September 13, 2010 5,000.00 September 12, 2011

Tata Mutual Fund September 13, 2010 7,500.00 September 7, 2011

Cholamandalam MS General Insurance Company Limited

October 8, 2010 500.00 September 7, 2011

Tata Trustee Company Limited October 8, 2010 1,500.00 September 19, 2011

UTI – FIIF Annual Interval Plan S-III October 8, 2010 1,000.00 October 7, 2011

UTI FMP Yearly Series October 8, 2010 1,500.00 October 7, 2011

Total 22,500.00

Restrictive Covenants under our Financing Arrangements:

Some of the corporate actions for which our Company requires the prior written consent of lenders include the following:

1. to declare and/ or pay dividend to any of its shareholders whether equity or preference, during any financial

year unless our Company has paid to the lender the dues payable by our Company in that year;

136

2. to undertake or permit any merger, amalgamation or compromise with its shareholders, creditors or effect any scheme of amalgamation or reconstruction;

3. to create or permit any charges or lien on any mortgaged properties; 4. to amend its MOA and AOA or alter its capital structure; and 5. to make any major investments by way of deposits, loans, share capital, etc. in any manner. Servicing behaviour on existing debt securities, payment of due interest on due dates on term loans and debt

securities.

As on the date of this Prospectus, there has been no default in payment of principal or interest on any existing term loan and debt security issued by the Issuer in the past.

137

MATERIAL DEVELOPMENTS

Save as disclosed hereinafter, there have been no developments since March 31, 2011 which effect the operations,

or financial condition of our Company:

• On June 29, 2011, our Company issued and allotted 4,552 Equity Shares at a price of ` 35 per Equity Share to our employees pursuant to the exercise of stock options pursuant to the ESOP 2006.

• On June 7, 2011, our Company issued and allotted 43,550 Equity Shares at a price of ` 35 per Equity Share to 29 employees pursuant to the exercise of stock options pursuant to the ESOP 2006.

• On May 26, 2011, the Board of Directors of our Company have recommended a final dividend of ` 3.5 per Equity Share (35%), subject to the approval of our shareholders at their ensuing AGM.

• On April 30, 2011, our Company issued and allotted 1,48,400 Equity Shares at a price of ` 35 per Equity Share to 71 employees pursuant to the exercise of stock options pursuant to the ESOP 2006.

• On March 31, 2011, our Company issued and allotted 11,628 Equity Shares at a price of ` 35 per Equity Share to 10 employees pursuant to the exercise of stock options pursuant to the ESOP 2006.

• Pursuant to resolution passed by the shareholders of our Company at their AGM held on July 28, 2011, and in accordance with provisions of Section 293 (1)(d) of the Act, the borrowing limits of the Board of Directors was increased from ` 10,00,000 lakhs to ` 15,00,000 lakhs.

• Pursuant to resolution passed by the shareholders of our Company at their AGM held on July 28, 2011, and in accordance with provisions of Section 293 (1)(a) of the Act, the Board of Directors were authorised to mortgage and/or charge the current and future movable and immovable properties of the Company to secure borrowings and/or other financing arrangements availed by our Company upto a sum not exceeding ` 20,00,000 lakhs.

• Interim Financial Information for the Quarter ended June 30, 2011

Pursuant to a meeting of its Board of Directors on July 28, 2011, our Company has adopted and filed with the Stock Exchanges on July 28, 2011 the unaudited financial information as of and for the three months ended June 30, 2011, (“Unaudited June Interim Financial Information”), as presented below, in accordance with the provisions of Clause 41 of the Listing Agreement with the Stock Exchanges. Please note that the Unaudited June Interim Financial Information have been subjected to a limited review by the Statutory Auditors of the Company, M/s Pijush Gupta & Co. The presentation of the Unaudited June Interim Financial Information may not be comparable to the presentation of the Reformatted Financial Information Reformatted Unconsolidated Summary Financial Statements and the Reformatted Consolidated Summary Financial Statements included in this Prospectus.

138

PIJUSH GUPTA & CO

CHARTERED ACCOUNTANTS

P-199, C.I.T.ROAD, SCHEME IV-M, KOLKATA –700 010 TEL (033) 2353-6859 Cell (0) 98311 91779

E-MAIL: pijushgupta.ca@gmail.com

RE: SHRIRAM CITY UNION FINANCE LIMITED

LIMITED REVIEW REPORT

We have reviewed the accompanying statement of unaudited financial results of Shriram City Union Finance

Limited for the quarter ended June 30, 2011. This statement is the responsibility of the Company’s management and has been approved by the Board of Directors. Our responsibility is to issue a report on these financial statements based on our review.

We conducted our review in accordance with the Standard on Review Engagement (SRE) 2400, Engagements to

Review Financial Statements issued by the Institute of Chartered Accountants of India. This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free from material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and accordingly, we do not express an audit opinion. Based on our review conducted as above, nothing has come to our attention that caused us to believe that the accompanying statement of unaudited financial results for the quarter ended June 30, 2011 prepared in accordance with recognition and measurement principles laid down in Accounting Standard 25 ‘Interim Financial Reporting’, notified pursuant to the Companies (Accounting Standards) Rules, 2006 and other recognized accounting practices and policies has not disclosed the information required to be disclosed in terms of Clause 41 of the Listing Agreement including the manner in which it is to be disclosed, or that it contains any material misstatement.

For Pijush Gupta & Co.

Firm Registration No : 309015E

Chartered Accountants

Ramendra Nath Das

Partner

Membership No. 014125

Place : Chennai

Date : July 28, 2011.

139

Quarter

ended

30.06.2011

(Unaudited)

Quarter

ended

30.06.2010

(Unaudited)

Year Ended

31.03.2011

(Audited)

1 (a) 41513 28088 131800

(b)

41513 28088 131800

2

(a) 1632 945 4367

(b) 263 151 747

(c) 3370 2684 9875

(d) 250 1715

(e) 4468 4304 20471

9983 8084 37174

3

31530 20004 94626

4 1314 128 291

5 32844 20132 94917

6 21063 12741 58848

7

11781 7391 36069

8 0 0 0

9 11781 7391 36069

10 3743 2478 12002

11 8038 4913 24067

12

4973 4920 4954

13 116382

14

(a) 16.33 9.99 48.78

(b) 16.31 9.79 47.97

15

(a) 23255716 22677037 23059214

(b) 46.76% 46.13% 46.55%

Public shareholdings

Number of shares

Percentage of shareholdings

Diluted

Profit before Interest & Exceptional items (3+4)

Interest

Profit after Interest but before exceptional item (5-

6)

Exceptional Items (Income)

Profit before tax

Tax Expense

Net Profit after tax

Paid up equity share capital ( Face value of Rs. 10

each)

Reserve (excluding revaluation reserves)

Earnings Per Share(EPS) in Rs. (Not Annualised)

Basic

Provisions & write off's

Provision for Standard Assets

Other Expenditure

Total

Profit from operations before Other income,

Interest & exceptional items (1-2)

SHRIRAM CITY UNION FINANCE LIMITED

Regd.Office: No.123, Angappa Naickan Street, Chennai 600 001.

Website: www.shriramcity.in Email: sect@shriramcity.in

UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30,2011

(Rs. In Lacs)

Sr. No Particulars

Other Income

Income from operations

Other Operating Income

Total

Expenditure

Employment cost

Depreciation

140

Quarter

ended

30.06.2011

(Unaudited)

Quarter

ended

30.06.2010

(Unaudited)

Year Ended

31.03.2011

(Audited)

16

(a)

i.

ii.

iii.

(b)

i. 26,477,663 26,477,663 26,477,663

ii.100% 100% 100%

iii.53.24% 53.87% 53.45%

Percentage of shares( as a percentage of total share

capital of the company)

Promoters and promoter group Shareholdings

Pledge/ encumbered

Number of shares

Percentage of shares (as a percentage of total

shareholding of promoter and promoter group)

Percentage of shares (as a percentage of total share

capital of the company)

Non- Encumbered

Number of shares

Percentage of shares (as a percentage of total

shareholding of promoter and promoter group)

Sr. No Particulars

SHRIRAM CITY UNION FINANCE LIMITED

UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30,2011

(Rs. In Lacs)

Notes:

1. The above results have been reviewed by the Audit Committee and approved by the Board of Directors at their respective meetings held on July 27, 2011 and July 28, 2011.

2. The above results have been subjected to Limited Review by the statutory auditors of the company. 3. The figures for the previous year / period have been regrouped /rearranged wherever necessary. 4. There has been no change in the accounting policies and practices followed during the period ended June

30, 2011 compared to those in preceding financial year ended March 31, 2011. 5. During the quarter ended June 30, 2011 the Company allotted 196502 Equity Shares of Rs.10/- each to its

Employees under the Company's Employees Stock Option Scheme. 6. The Company operates in single reportable segment. 7. Status of complaints for the quarter ended June 30, 2011:- Pending as on April 1, 2011:- Nil, Received

during the quarter: - Nil, Resolved during the quarter: - Nil, Pending as on June 30, 2011:- Nil.

8. The results of the company are available at www.bseindia.com; www.nseindia.com; www.shriramcity.in;

As per our Limited Review report of even date By Order of the Board For Pijush Gupta & Co. For Shriram City Union Finance Ltd Firm Registration No: 309015E

Chartered Accountants

Ramendra Nath Das R.KANNAN Partner Managing Director Membership No : 014125 Place: Chennai Date: July 28, 2011

141

SECTION VI : ISSUE RELATED INFORMATION

TERMS OF THE ISSUE

The NCDs being offered as part of the Issue are subject to the provisions of the Debt Regulations, the Act, the Memorandum and Articles of Association of our Company, the terms of the Draft Prospectus, this Prospectus, the Application Forms, the terms and conditions of the Debenture Trust Agreement and the Debenture Trust Deed, other applicable statutory and/or regulatory requirements including those issued from time to time by SEBI/the Government of India/the Stock Exchange/s, RBI, and/or other statutory/regulatory authorities relating to the offer, issue and listing of securities and any other documents that may be executed in connection with the NCDs.

Ranking of NCDs

The NCDs would constitute direct and secured obligations of ours and shall rank pari passu inter se, and subject to any obligations under applicable statutory and/or regulatory requirements, shall also, with regard to the amount invested, be secured by way of first and exclusive charge on the identified immovable property and the specified future loan receivables of the company. The claims of the NCD holders shall be superior to the claims of any unsecured creditors, subject to applicable statutory and/or regulatory requirements. Debenture Redemption Reserve

Section 117C of the Act states that any company that intends to issue debentures must create a DRR to which adequate amounts shall be credited out of the profits of the company until the redemption of the debentures. The Ministry of Corporate Affairs has, through its circular dated April 18, 2002, (“Circular”), specified that the quantum of DRR to be created before the redemption liability actually arises in normal circumstances should be ‘adequate’ to pay the value of the debentures plus accrued interest, (if not already paid), till the debentures are redeemed and cancelled. The Circular however further specifies that, for NBFCs like our Company, (NBFCs which are registered with the RBI under Section 45-IA of the RBI Act), the adequacy of the DRR will be 50% of the value of debentures issued through the public issue. Accordingly our Company is required to create a DRR of 50% of the value of debentures issued through the public issue. As further clarified by the Circular, the amount to be credited as DRR will be carved out of the profits of the company only if there is profit for the particular year and there is no obligation on the part of the company to create DRR if there is no profit for the particular year. Our Company shall credit adequate amounts to DRR, from its profits every year until such NCDs are redeemed. The amounts credited to DRR shall not be utilized by the company except for the redemption of the NCDs.

Face Value The face value of each NCD shall be ` 1,000. NCD holder not a Shareholder The NCD holders will not be entitled to any of the rights and privileges available to the equity and/or preference shareholders of our Company. Rights of NCD holders

Some of the significant rights available to the NCD holders are as follows: 1. The NCDs shall not, except as provided in the Act, confer upon the holders thereof any rights or

privileges available to our members including the right to receive notices or annual reports of, or to attend and/or vote, at our general meeting. However, if any resolution affecting the rights attached to the NCDs is to be placed before the members, the said resolution will first be placed before the concerned registered NCD holders for their consideration. In terms of Section 219(2) of the Act, holders of NCDs shall be entitled to a copy of the balance sheet and copy of trust deed on a specific request made to us.

142

2. Subject to applicable statutory/regulatory requirements, including requirements of the RBI, the rights, privileges and

conditions attached to the NCDs may be varied, modified and/or abrogated with the consent in writing of the holders of at least three-fourths of the outstanding amount of the NCDs or with the sanction of a special resolution passed at a meeting of the concerned NCD holders, provided that nothing in such consent or resolution shall be operative against us, where such consent or resolution modifies or varies the terms and conditions governing the NCDs, if the same are not acceptable to us.

3. The registered NCD holder or in case of joint-holders, the one whose name stands first in the register of

debenture holders shall be entitled to vote in respect of such NCDs, either in person or by proxy, at any meeting of the concerned NCD holders and every such holder shall be entitled to one vote on a show of hands and on a poll, his/her voting rights on every resolution placed before such meeting of the NCD holders shall be in proportion to the outstanding nominal value of NCDs held by him/her.

4. The NCDs are subject to the provisions of the Debt Regulations, the Act, the Memorandum and Articles of

Association of our Company, the terms of the Draft Prospectus, this Prospectus, the Application Forms, the terms and conditions of the Debenture Trust Deed, requirements of the RBI, other applicable statutory and/or regulatory requirements relating to the issue and listing, of securities and any other documents that may be executed in connection with the NCDs.

5. A register of NCD holders will be maintained in accordance with Section 152 of the Act and all interest

and principal sums becoming due and payable in respect of the NCDs will be paid to the registered holder thereof for the time being or in the case of joint-holders, to the person whose name stands first in the Register of NCD holders as on the record date.

6. Subject to compliance with RBI requirements, NCDs can be rolled over only with the consent of the

holders of at least 75% of the outstanding amount of the NCDs after providing at least 21 days prior notice for such roll over and in accordance with the Debt Regulations. The Company shall redeem the debt securities of all the debt securities holders, who have not given their positive consent to the roll-over.

The aforementioned rights of the NCD holders are merely indicative. The final rights of the NCD holders will be as per the terms of the Prospectus and the Debenture Trust Deed to be executed between our Company and the Debenture Trustee.

Minimum Subscription

If our Company does not receive the minimum subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs, on the date of closure of the Issue, the entire subscription shall be refunded to the applicants within 30 days from the date of closure of the Issue. If there is delay in the refund of subscription by more than 8 days after our Company becomes liable to refund the subscription amount, our Company will pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.

Market Lot & Trading Lot Under Section 68B of the Act, the NCDs shall be allotted only in dematerialized form. As per the Debt Regulations, the trading of the NCDs shall be in dematerialised form only. Since trading of the NCDs is in dematerialised form, the tradable lot is one NCD. Allotment in the Issue will be in electronic form in multiples of one NCD. For details of allotment refer to chapter titled “Issue Procedure” under section titled “Issue Related Information” beginning on page 156 of this Prospectus. Nomination facility to NCD holder In accordance with Section 109A of the Act, the sole NCD holder or first NCD holder, along with other joint NCD holders (being individual(s)) may nominate any one person (being an individual) who, in the event of death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the NCD. A

143

person, being a nominee, becoming entitled to the NCD by reason of the death of the NCD holder(s), shall be entitled to the same rights to which he would be entitled if he were the registered holder of the NCD. Where the nominee is a minor, the NCD holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to the NCD(s), in the event of his death, during the minority. A nomination shall stand rescinded upon sale of a NCD by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. When the NCD is held by two or more persons, the nominee shall become entitled to receive the amount only on the demise of all the holders. Fresh nominations can be made only in the prescribed form available on request at our Registered/ Corporate Office or at such other addresses as may be notified by us. NCD holder(s) are advised to provide the specimen signature of the nominee to us to expedite the transmission of the NCD(s) to the nominee in the event of demise of the NCD holder(s). The signature can be provided in the Application Form or subsequently at the time of making fresh nominations. This facility of providing the specimen signature of the nominee is purely optional.

In accordance with Section 109B of the Act, any person who becomes a nominee by virtue of the provisions of Section 109A of the Act, shall upon the production of such evidence as may be required by our Board, elect either: (a) to register himself or herself as the holder of the NCDs; or (b) to make such transfer of the NCDs, as the deceased holder could have made. Further, our Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transfer the NCDs, and if the notice is not complied with, within a period of 90 days, our Board may thereafter withhold payment of all interests or other monies payable in respect of the NCDs, until the requirements of the notice have been complied with. Notwithstanding anything stated above, since the allotment of NCDs in this Issue will be made only in dematerialised mode, there is no need to make a separate nomination with our Company. Nominations registered with the respective Depository Participant of the applicant would prevail. If the investors require changing their nomination, they are requested to inform their respective Depository Participant.

Jurisdiction Exclusive jurisdiction for the purpose of the Issue is with the competent courts of jurisdiction in Chennai, India. Application in the Issue

NCDs being issued through this Prospectus can be applied for in the dematerialised form only through a valid Application Form filled in by the applicant along with attachment, as applicable. Period of Subscription The subscription list shall remain open for a period as indicated below, with an option for early closure or extension by such period, as may be decided by the duly authorised committee of Directors of our Company, subject to necessary approvals. In the event of such early closure of subscription list of the Issue, our Company shall ensure that notice of such early closure is given on the day of such early date of closure through advertisement/s in a leading national daily newspaper.

Issue Opens on August 11, 2011

Closing Date August 27, 2011

Restriction on transfer of NCDs There are no restrictions on transfers and transmission of NCDs and on their consolidation/ splitting except as may be required under RBI requirements and as provided in our Articles of Association. Please refer to the section titled “Summary of the Key Provisions of the Articles of Association” beginning on page 189 of this Prospectus.

144

ISSUE STRUCTURE

Public Issue of NCDs aggregating upto ` 37,500 lakhs with an option to retain over-subscription upto ` 37,500

lakhs for issuance of additional NCDs, aggregating to a total of up to ` 75,000 lakhs.

The key common terms and conditions of the NCDs are as follows:

Particulars Terms and Conditions

Minimum Application Size The minimum number of NCDs per application form will be calculated on the basis of the total number of NCDs applied for under each such Application Form and not on the basis of any specific option

Mode of allotment Compulsorily in dematerialised form

Terms of Payment Full amount on application

Trading Lot 1 (one) NCD

Who can Apply Category I

• Public Financial Institutions, Statutory Corporations, Commercial Banks, Co-operative Banks and Regional Rural Banks, which are authorised to invest in the NCDs;

• Provident Funds, Pension Funds, Superannuation Funds and Gratuity Fund, which are authorised to invest in the NCDs;

• Venture Capital funds registered with SEBI;

• Insurance Companies registered with the IRDA;

• National Investment Fund;

• Mutual Funds;

Category II

• Companies; bodies corporate and societies registered under the applicable laws in India and authorised to invest in the NCDs;

• Public/private charitable/religious trusts which are authorised to invest in the NCDs;

• Scientific and/or industrial research organisations, which are authorised to invest in the NCDs;

• Partnership firms in the name of the partners; and

• Limited liability partnerships formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (No. 6 of 2009)

Category III*

The following persons/entities

• Resident Indian individuals; and

• Hindu Undivided Families through the Karta.

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*With respect to applications received from Category III applicants, applications by applicants who apply for NCDs aggregating to a value not more than ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be grouped together, (“Reserved Individual Portion”) while applications by applicants who apply for NCDs aggregating to a value exceeding ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be separately grouped together, (“Unreserved Individual Portion”).

Participation by any of the above-mentioned investor classes in this Issue will be subject to applicable statutory

and/or regulatory requirements. Applicants are advised to ensure that applications made by them do not exceed

the investment limits or maximum number of NCDs that can be held by them under applicable statutory and/or

regulatory provisions. In case of Application Form being submitted in joint names, the applicants should ensure that the de-mat account is also held in the same joint names, and the names are in the same sequence in which they appear in the Application Form. Applicants are advised to ensure that they have obtained the necessary statutory and/or regulatory

permissions/consents/approvals in connection with applying for, subscribing to, or seeking allotment of NCDs

pursuant to the Issue. For further details, please see “Issue Procedure” on page 156.

Principal Terms and Conditions of the Issue

TERMS AND CONDITIONS IN CONNECTION WITH THE NCDs

Nature of the NCDs We are offering NCDs which shall have a fixed rate of interest. The NCDs will be issued at a face value of ` 1,000/- per NCD. Interest on the NCDs shall be payable on an annual basis, as set out hereinafter. The terms of the NCDs offered pursuant to the Issue are as follows:

Options I II

Frequency of Interest Payment Annual Annual

Minimum Application ` 10,000/- (10 NCDs) (for all options of NCDs, namely Options I and Option II either taken individually or collectively)

In Multiples of ` 1,000 (1 NCD) ` 1,000 (1 NCD)

Face Value of NCDs

(` / NCD)

` 1,000 ` 1,000

Issue Price (` / NCD) ` 1,000 ` 1,000

Mode of Interest Payment Through Various options available Through Various options available

Coupon (%) for NCD Holders in

Category I and Category II

11.60% per annum 11.50% per annum

Coupon (%) for NCD holders in the

Reserved Individual Portion

12.10% per annum 11.85% per annum

Coupon (%) for NCD holders in the

Unreserved Individual Portion

11.85% per annum 11.60% per annum

Effective Yield (per annum) For NCD holders in the Reserved Individual Portion – 12.10%

For NCD holders in the Unreserved Individual Portion – 11.85%

For all other NCD holders – 11.60%

For NCD holders in the Reserved Individual Portion – 11.85%

For NCD holders in the Unreserved Individual Portion –

11.60% For all other NCD holders –

11.50%

Put and call option Exercisable at the end of 48 months from the Deemed Date of Allotment

Nil

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Options I II

Tenor 60 months* 36 months

Redemption Date

60 months from the Deemed Date of Allotment*

36 months from the Deemed Date of Allotment.

Redemption Amount (`/NCD) Repayment of the Face Value plus any interest that may have accrued at the Redemption Date, or at the date of early redemption if any Put Option or Call Option is exercised, as the case may be*

Repayment of the Face Value plus any interest that may have accrued at the Redemption Date.

Nature of Indebtedness Pari Passu with other secured creditors and priority over unsecured creditors

Pari Passu with other secured creditors and priority over unsecured creditors

Credit Rating

CRISIL 'CRISIL AA-/Stable' for an amount of upto ` 75,000 Lakhs

'CRISIL AA-/Stable' for an amount of upto ` 75,000 Lakhs

CARE 'CARE AA' for an amount of upto ` 75,000 Lakhs

'CARE AA' for an amount of upto ` 75,000 Lakhs

Deemed Date of Allotment Deemed date of allotment shall be the date of issue of the Allotment Advice / regret.

Deemed date of allotment shall be the date of issue of the Allotment Advice / regret.

* Subject to the exercise of the put and/or call option

Interest and Payment of Interest

A. Interest

In case of Option I NCDs, interest would be paid annually at the following rates of interest in connection with the relevant categories of NCD holders, on the amount outstanding from time to time, commencing from the Deemed Date of Allotment of each Option I NCD:

Category of NCD Holder Rate of Interest per annum (%)

Category I and Category II 11.60

Reserved Individual Portion 12.10

Unreserved Individual Portion 11.85

Option I NCDs shall be redeemed at the Face Value thereof along with the interest accrued thereon, if any, at the end of 60 months from the Deemed Date of Allotment, or on the date of early redemption in case of the exercise of any put/call option. In case of Option II NCDs, interest would be paid annually at the following rates of interest in connection with the relevant categories of NCD holders, on the amount outstanding from time to time, commencing from the Deemed Date of Allotment of each Option II NCD:

Category of NCD Holder Rate of Interest per annum (%)

Category I and Category II 11.50

Reserved Individual Portion 11.85

Unreserved Individual Portion 11.60

Option II NCDs shall be redeemed at the Face Value thereof along with the interest accrued thereon, if any, at the end of 36 months from the Deemed Date of Allotment. If the date of interest payment falls on a Saturday, Sunday or a public holiday in Mumbai or any

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other payment centre notified in terms of the Negotiable Instruments Act, 1881, then interest would be paid on the next working day. Payment of interest would be subject to the deduction as prescribed in the I.T. Act or any statutory modification or re-enactment thereof for the time being in force. Please note that in case the NCDs are transferred and/or transmitted in accordance with the

provisions of this Prospectus read with the provisions of the Articles of Association of our Company,

the transferee of such NCDs or the deceased holder of NCDs, as the case may be, shall be entitled to

any interest which may have accrued on the NCDs.

As per clause (ix) of Section 193 of the I.T. Act, no tax is required to be withheld on any interest payable on any security issued by a company, where such security is in dematerialized form and is listed on a recognized stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the rules made thereunder. Accordingly, no tax will be deducted at source from the interest on listed NCDs held in the dematerialised form. However in case of NCDs held in physical form, as per the current provisions of the IT Act, tax will not be deducted at source from interest payable on such NCDs held by the investor (in case of resident individual NCD holders), if such interest does not exceed ` 2,500 in any financial year. If interest exceeds the prescribed limit of ` 2,500 on account of interest on the NCDs, then the tax will be deducted at applicable rate. However in case of NCD holders claiming non-deduction or lower deduction of tax at source, as the case may be, the NCD holder should furnish either (a) a declaration (in duplicate) in the prescribed form i.e. (i) Form 15H which can be given by individuals who are of the age of 60 years or more (ii) Form 15G which can be given by all applicants (other than companies, and firms ), or (b) a certificate, from the Assessing Officer which can be obtained by all applicants (including companies and firms) by making an application in the prescribed form i.e. Form No.13. The aforesaid documents, as may be applicable, should be submitted to our Company quoting the name of the sole/ first NCD holder, NCD folio number and the distinctive number(s) of the NCD held, prior to the record date to ensure non-deduction/lower deduction of tax at source from interest on the NCD. The investors need to submit Form 15H/ 15G/certificate in original from Assessing Officer for each financial year during the currency of the NCD to ensure non-deduction or lower deduction of tax at source from interest on the NCD.

B. Payment of Interest

Annual Payment of Interest For NCDs subscribed under Option I and Option II, the relevant interest will be paid on the first day of April every year for the amount outstanding. The first interest payment will be made on April 1, 2012 for the period commencing from the Deemed Date of Allotment till March 31, 2012. The last interest payment will be made at the time of redemption of the NCD on a pro rata basis.

C. Payment of Interest to NCD Holders

Payment of Interest will be made to those NCD holders whose names appear in the register of NCD holders (or to first holder in case of joint-holders) as on record date. We may enter into an arrangement with one or more banks in one or more cities for direct credit of interest to the account of the investors. In such cases, interest, on the interest payment date, would be directly credited to the account of those investors who have given their bank mandate. We may offer the facility of NECS, NEFT, RTGS, Direct Credit and any other method permitted by RBI and SEBI from time to time to help NCD holders. The terms of this facility (including towns where this facility would be available) would be as prescribed by RBI. Refer to the paragraph on “Manner of Payment of Interest/Refund/Redemption” at page 148 in this Prospectus.

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Tax exemption certificate/document, if any, must be lodged at the office of the Registrar at least 7(seven) days prior to the record date or as specifically required, failing which tax applicable on interest will be deducted at source on accrual thereof in our Company’s books and/or on payment thereof, in accordance with the provisions of the IT Act and/or any other statutory modification, enactment or notification as the case may be. A tax deduction certificate will be issued for the amount of tax so deducted.

Maturity and Redemption

The NCDs issued pursuant to this Prospectus have a fixed maturity date. The date of maturity for NCDs subscribed under Option I and Option II is 60 months and 36 months, respectively, from the Deemed Date of Allotment. The redemption of NCDs is subject to the exercise of any put / call option with respect to Option I NCDs which can be exercised by any NCD holder/ Company.

Options If put / call option is exercised At the end of maturity period

I 48 months from the Deemed date of Allotment

60 months from the Deemed Date of Allotment

II Not Applicable 36 months from the Deemed Date of Allotment

Deemed Date of Allotment Deemed date of allotment shall be the date of issue of the Allotment Advice / regret. Application Size Each application should be for a minimum of 10 NCDs and multiples of 1 NCD thereof. The minimum application size for each application for NCDs would be ` 10,000/- (for all options of NCDs namely, Option I and Option II NCDs either taken individually or collectively) and in multiples of ` 1,000/- thereafter. Applicants can apply for any or all options of NCDs offered hereunder (any/all options) using the same Application Form. Applicants are advised to ensure that applications made by them do not exceed the investment limits or

maximum number of NCDs that can be held by them under applicable statutory and or regulatory

provisions. Terms of Payment The entire issue price of ` 1,000 per NCD is payable on application itself. In case of allotment of lesser number of NCDs than the number of NCDs applied for, our Company shall refund the excess amount paid on application to the applicant in accordance with the terms of this Prospectus. For further details please refer to the paragraph on “Interest on Application Money” beginning on page 155 of this Prospectus. Record Date The record date for payment of interest in connection with the NCDs or repayment of principal in connection therewith shall be 15 (fifteen) days prior to the date on which interest is due and payable, or the date of redemption or early redemption or as prescribed by the relevant stock exchange(s).

Manner of Payment of Interest / Refund / Redemption

The manner of payment of interest / refund / redemption in connection with the NCDs is set out below: For NCDs applied / held in electronic form: The bank details will be obtained from the Depositories for payment of Interest / refund / redemption as the

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case may be. Applicants who have applied for or are holding the NCDs in electronic form, are advised to immediately update their bank account details as appearing on the records of the depository participant. Please note that failure to do so could result in delays in credit of refunds to the applicant at the applicant’s sole risk, and the Lead Managers, the Co-Lead Manager, our Company nor the Registrar to the Issue shall have any responsibility and undertake any liability for the same. For NCDs held in physical form: The bank details will be obtained from the Registrar to the Issue for payment of interest / refund / redemption as the case may be. The mode of interest / refund / redemption payments shall be undertaken in the following order of preference: 1. Direct Credit

Investors having their bank account with the Refund Banks, shall be eligible to receive refunds, if any, through direct credit. The refund amount, if any, would be credited directly to their bank account with the Refund Banker. 2. NECS Payment of interest / refund / redemption shall be undertaken through NECS for applicants having an account at the centers mentioned in NECS MICR list. This mode of payment of refunds would be subject to availability of complete bank account details including the MICR code, IFSC code, bank account number, bank name and branch name as appearing on a cheque leaf, from the Depositories. One of the methods for payment of interest / refund / redemption is through NECS for applicants having a bank account at any of the abovementioned centers. 3. RTGS Applicants having a bank account with a participating bank and whose interest payment / refund / redemption amount exceeds ` 2 lakhs, or such amount as may be fixed by RBI from time to time, have the option to receive refund through RTGS. Such eligible applicants who indicate their preference to receive interest payment / refund / redemption through RTGS are required to provide the IFSC code in the Application Form or intimate our Company and the Registrars to the Issue at least 7 (seven) days before the record date. Charges, if any, levied by the applicant’s bank receiving the credit would be borne by the applicant. In the event the same is not provided, interest payment / refund / redemption shall be made through NECS subject to availability of complete bank account details for the same as stated above.

3. NEFT Payment of interest / refund / redemption shall be undertaken through NEFT wherever the applicants’ bank has been assigned the Indian Financial System Code (“IFSC”), which can be linked to a Magnetic Ink Character Recognition (“MICR”), if any, available to that particular bank branch. IFSC Code will be obtained from the website of RBI as on a date immediately prior to the date of payment of refund, duly mapped with MICR numbers. Wherever the applicants have registered their nine digit MICR number and their bank account number while opening and operating the de-mat account, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment of interest/refund/redemption will be made to the applicants through this method. 4. Registered Post/Speed Post For all other applicants, including those who have not updated their bank particulars with the MICR code, the interest payment / refund / redemption orders shall be dispatched by post for value up to ` 1,500/- and through Speed Post/ Registered Post for refund orders /interest payment/redemption orders of ` 1,500/- and above.

Please note that applicants are eligible to receive payments through the modes detailed in (1), (2) (3), and (4)

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herein above provided they provide necessary information for the above modes and where such payment facilities are allowed / available. Please note that our Company shall not be responsible to the holder of NCD, for any delay in receiving credit of interest / refund / redemption so long as our Company has initiated the process of such request in time.

Printing of Bank Particulars on Interest Warrants

As a matter of precaution against possible fraudulent encashment of refund orders and interest/redemption warrants due to loss or misplacement, the particulars of the applicant’s bank account are mandatorily required to be given for printing on the orders/ warrants. In relation to NCDs applied and held in dematerialized form, these particulars would be taken directly from the depositories. In case of NCDs held in physical form either on account of rematerialisation or transfer, the investors are advised to submit their bank account details with our Company / Registrar at least 7 (seven) days prior to the record date failing which the orders / warrants will be dispatched to the postal address of the holder of the NCD as available in the records of our Company. Bank account particulars will be printed on the orders/ warrants which can then be deposited only in the account specified. Loan against NCDs Our Company, at its sole discretion, subject to applicable statutory and/or regulatory requirements, may consider granting of a loan facility to the holders of NCDs against the security of such NCDs. Such loans shall be subject to the terms and conditions as may be decided by our Company from time to time.

Buy Back of NCDs Our Company may, at its sole discretion, from time to time, consider, subject to applicable statutory and/or regulatory requirements, buyback of NCDs, upon such terms and conditions as may be decided by our Company. Form and Denomination In case of NCDs held in physical form, a single certificate will be issued to the NCD holder for the aggregate amount (“Consolidated Certificate”) for each type of NCDs. The applicant can also request for the issue of NCD certificates in denomination of one NCD (“Market Lot”). In respect of Consolidated Certificates, we will, only upon receipt of a request from the NCD holder, split such Consolidated Certificates into smaller denominations subject to the minimum of Market Lot. No fees would be charged for splitting of NCD certificates in Market Lots, but stamp duty payable, if any, would be borne by the NCD holder. The request for splitting should be accompanied by the original NCD certificate which would then be treated as cancelled by us. Procedure for Redemption by NCD holders Subject to the exercise of the put option by the NCD holder / call option by our Company, the procedure for redemption is set out below: NCDs held in physical form: No action would ordinarily be required on the part of the NCD holder at the time of redemption and the redemption proceeds would be paid to those NCD holders whose names stand in the register of NCD holders maintained by us on the record date fixed for the purpose of Redemption. However, our Company may require that the NCD certificate(s), duly discharged by the sole holder/all the joint-holders (signed on the reverse of the NCD certificate(s)) be surrendered for redemption on maturity and should be sent by the NCD holder(s) by Registered Post with acknowledgment due or by hand delivery to our office or to such persons at such addresses as may be notified by us from time to time. NCD holder(s) may be requested to surrender the NCD certificate(s) in the manner as stated above, not more than three months and not less than one month prior to the

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redemption date so as to facilitate timely payment. We may at our discretion redeem the NCDs without the requirement of surrendering of the NCD certificates by the holder(s) thereof. In case we decide to do so, the holders of NCDs need not submit the NCD certificates to us and the redemption proceeds would be paid to those NCD holders whose names stand in the register of NCD holders maintained by us on the record date fixed for the purpose of redemption of NCDs. In such case, the NCD certificates would be deemed to have been cancelled. Also see the para “Payment on Redemption” given below. NCDs held in electronic form: No action is required on the part of NCD holder(s) at the time of redemption of NCDs. Payment on Redemption The manner of payment of redemption is set out below: NCDs held in physical form:

The payment on redemption of the NCDs will be made by way of cheque/pay order/ electronic modes. However, if our Company so requires, the aforementioned payment would only be made on the surrender of NCD certificate(s), duly discharged by the sole holder / all the joint-holders (signed on the reverse of the NCD certificate(s)). Despatch of cheques/pay order, etc. in respect of such payment will be made on the Redemption Date or (if so requested by our Company in this regard) within a period of 30 days from the date of receipt of the duly discharged NCD certificate. In case we decide to do so, the redemption proceeds in the manner stated above would be paid on the Redemption Date to those NCD holders whose names stand in the register of NCD holders maintained by us on the record date fixed for the purpose of Redemption. Hence the transferees, if any, should ensure lodgement of the transfer documents with us at least 7 (seven) days prior to the record date. In case the transfer documents are not lodged with us at least 7 (seven) days prior to the record date and we dispatch the redemption proceeds to the transferor, claims in respect of the redemption proceeds should be settled amongst the parties inter se and no claim or action shall lie against us or the Registrars. Our liability to holder(s) towards his/their rights including for payment or otherwise shall stand extinguished from the date of early redemption (in case of an exercise of the put/call option)/ redemption in all events and when we dispatch the redemption amounts to the NCD holder(s). Further, we will not be liable to pay any interest, income or compensation of any kind from the date of redemption of the NCD(s). NCDs held in electronic form: On the redemption date, or the date of early redemption (in case of an exercise of the put/call option), redemption proceeds would be paid by cheque /pay order / electronic mode to those NCD holders whose names appear on the list of beneficial owners given by the Depositories to us. These names would be as per the Depositories’ records on the record date fixed for the purpose of redemption. These NCDs will be simultaneously extinguished to the extent of the amount redeemed through appropriate debit corporate action upon redemption of the corresponding value of the NCDs. It may be noted that in the entire process mentioned above, no action is required on the part of NCD holders. Our liability to NCD holder(s) towards his/their rights including for payment or otherwise shall stand extinguished from the date of early redemption (in case of an exercise of the put/call option)/ redemption in all events and when we dispatch the redemption amounts to the NCD holder(s). Further, we will not be liable to pay any interest, income or compensation of any kind from the date of redemption of the NCD(s).

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Redemption Date Option I NCDs will be redeemed at the expiry of 60 months from the Deemed Date of Allotment, subject to the exercise of any put option by the Option I NCD holders / call option by our Company, as the case may be. Option II NCDs will be redeemed at the expiry of 36 months from the Deemed Date of Allotment. Put / Call Option

With respect to Option I NCDs, the holders thereof shall at the expiry of 48 months, from the Deemed Date of Allotment, have the right to seek redemption of such Option I NCDs held by them, (“Put Option”). A NCD holder of Option I NCDs, may at his discretion, redeem any number of Option I NCDs held by him, while exercising such Put Option. With respect to Option I NCDs, our Company shall at the expiry of 48 months have the right to redeem such outstanding Option I NCDs, (“Call Option”). The holders of Option II NCDs shall not be entitled to exercise any Put Option in connection with such Option II NCDs held by them. Our Company shall not be entitled to exercise any Call Option in connection with any Option II NCDs. Procedure for Exercise of Put Option At the expiry of 48 months with respect to Option I NCDs from the Deemed Date of Allotment, (“Early Redemption

(Put) Date”), a holder of Option I NCDs has the right to exercise his Put Option with respect to the Option I NCDs held by him within 30 days from the Early Redemption (Put) Date (“Early Redemption (Put) Period”). During the Early Redemption (Put) Period, an Option I NCD holder seeking to exercise his Put Option can approach our Company in writing of his intention to redeem any or all of the Option I NCDs held by him. The Option I NCDs with respect to which an NCD holder exercises his Put Option will be redeemed within 30 (thirty) days from the expiry of the Early Redemption (Put) period. Procedure for Exercise of Call Option At the expiry of 48 months with respect to Option I NCDs from the Deemed Date of Allotment, (“Early Redemption

(Call) Date”), our Company has the right to exercise its Call Option with respect to Option I NCDs within 30 days from the Early Redemption (Call) Date (“Early Redemption (Call) Period”). During the Early Redemption (Call) Period, our Company can send a notice in writing to the holder of any Option I NCDs, (as on record on the Early Redemption (Call) Date), calling for redemption of all Option I NCDs that are outstanding. The Call can be exercised for all outstanding Option I NCDs. The Option I NCDs with respect to which our Company exercises its Call Option will be redeemed within 30 (thirty) days from the expiry of the Early Redemption (Call) Period. Method for calculation for Early Redemption On exercise of the Put Option by the holders of Option I NCDs and/or the Call Option by our Company, in connection with Option I NCDs, as the case may be, the NCDs will be redeemed at their respective face value along with interest accrued thereon, if any. Right to Reissue NCD(s) Subject to the provisions of the Act, where we have fully redeemed or repurchased any NCD(s), we shall have and shall be deemed always to have had the right to keep such NCDs in effect without extinguishment thereof,

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for the purpose of resale or reissue and in exercising such right, we shall have and be deemed always to have had the power to resell or reissue such NCDs either by reselling or reissuing the same NCDs or by issuing other NCDs in their place. The aforementioned right includes the right to reissue original NCDs. Transfer/Transmission of NCD (s)

The NCDs shall be transferred or transmitted freely in accordance with the applicable provisions of the Act. The provisions relating to transfer and transmission and other related matters in respect of our shares contained in the Articles and the Act shall apply, mutatis mutandis (to the extent applicable to debentures) to the NCD(s) as well. In respect of the NCDs held in physical form, a suitable instrument of transfer as may be prescribed by the Issuer may be used for the same. The NCDs held in dematerialised form shall be transferred subject to and in accordance with the rules/procedures as prescribed by NSDL/CDSL and the relevant DPs of the transfer or transferee and any other applicable laws and rules notified in respect thereof. The transferee(s) should ensure that the transfer formalities are completed prior to the record date. In the absence of the same, interest will be paid/redemption will be made to the person, whose name appears in the register of debenture holders maintained by the Depositories. In such cases, claims, if any, by the transferees would need to be settled with the transferor(s) and not with the Issuer or Registrar. For NCDs held in electronic form:

The normal procedure followed for transfer of securities held in dematerialised form shall be followed for transfer of the NCDs held in electronic form. The seller should give delivery instructions containing details of the buyer’s DP account to his depository participant. In case the transferee does not have a DP account, the seller can re-materialise the NCDs and thereby convert his dematerialised holding into physical holding. Thereafter the NCDs can be transferred in the manner as stated above. In case the buyer of the NCDs in physical form wants to hold the NCDs in dematerialised form, he can choose to dematerialise the securities through his DP. Joint-holders Where two or more persons are holders of any NCD(s), they shall be deemed to hold the same as joint holders with benefits of survivorship subject to other provisions contained in the Articles. Sharing of Information We may, at our option, use on our own, as well as exchange, share or part with any financial or other information about the NCD holders available with us, with our subsidiaries, if any and affiliates and other banks, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and neither we or our affiliates nor their agents shall be liable for use of the aforesaid information. Notices

All notices to the NCD holder(s) required to be given by us or the Debenture Trustee will be sent by post/ courier or through email or other electronic media to the Registered Holders of the NCD(s) from time to time. Issue of Duplicate NCD Certificate(s)

If any NCD certificate(s) is/are mutilated or defaced or the cages for recording transfers of NCDs are fully utilised, the same may be replaced by us against the surrender of such certificate(s). Provided, where the NCD certificate(s) are mutilated or defaced, the same will be replaced as aforesaid only if the certificate numbers and the distinctive numbers are legible. If any NCD certificate is destroyed, stolen or lost then upon production of proof thereof to our satisfaction and

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upon furnishing such indemnity/security and/or documents as we may deem adequate, duplicate NCD certificate(s) shall be issued. Upon issuance of a duplicate NCD certificate, the original NCD certificate shall stand cancelled. Security

The principal amount of the NCDs to be issued in terms of this Prospectus together with all interest due on the NCDs, as well as all costs, charges, all fees, remuneration of Debenture Trustee and expenses payable in respect thereof shall be secured by way of first and exclusive charge in favour of the Debenture Trustee on an identified immovable property and specified future receivables of our Company as may be decided mutually by our Company and the Debenture Trustee. Our Company will create appropriate security in favour of the Debenture Trustee for the NCD holders on the assets adequate to ensure 100% asset cover for the NCDs, which shall be free from any encumbrances. Our Company intends to enter into an agreement with the Debenture Trustee, (‘Debenture Trust Deed’), the terms of which will govern the appointment of the Debenture Trustee. Our Company proposes to complete the execution of the Debenture Trust Deed during the subscription period after the minimum subscription for the Issue has been achieved and utilize the funds after the stipulated security has been created. Under the terms of the Debenture Trust Deed, our Company will covenant with the Debenture Trustee that it will pay the NCD holders the principal amount on the NCDs on the relevant redemption date and also that it will pay the interest due on NCDs on the rate specified in this Prospectus and in the Debenture Trust Deed The Debenture Trust Deed will also provide that our Company may withdraw any portion of the security and replace with another asset of the same or a higher value. Trustees for the NCD holders We have appointed IDBI Trusteeship Services Limited to act as the Debenture Trustees for the NCD holders. We and the Debenture Trustee will execute a Debenture Trust Deed, inter alia, specifying the powers, authorities and obligations of the Debenture Trustee and us. The NCD holder(s) shall, without further act or deed, be deemed to have irrevocably given their consent to the Debenture Trustee or any of its agents or authorised officials to do all such acts, deeds, matters and things in respect of or relating to the NCDs as the Debenture Trustee may in its absolute discretion deem necessary or require to be done in the interest of the NCD holder(s). Any payment made by us to the Debenture Trustee on behalf of the NCD holder(s) shall discharge us pro tanto to the NCD holder(s). The Debenture Trustee will protect the interest of the NCD holders in the event of default by us in regard to timely payment of interest and repayment of principal and they will take necessary action at our cost. Future Borrowings

We will be entitled to borrow/raise loans or avail of financial assistance in whatever form as also to issue debentures/ NCDs/other securities in any manner having such ranking in priority, pari passu or otherwise, subject to applicable consents, approvals or permissions that may be required under any statutory/regulatory/contractual requirement, and change the capital structure including the issue of shares of any class, on such terms and conditions as we may think appropriate, without the consent of, or intimation to, the NCD holders or the Debenture Trustee in this connection.

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Interest on Application Money

Interest on application monies received which are used towards allotment of NCDs

Our Company shall pay interest on application money on the amount allotted, subject to deduction of income tax under the provisions of the Income Tax Act, 1961, as amended, as applicable, to any applicants to whom NCDs are allotted pursuant to the Issue from the date of realization of the cheque(s)/demand draft(s) or 3 (three) days from the date of receipt of the application (being the date of presentation of each application as acknowledged by the Bankers to the Issue) whichever is later upto one day prior to the Deemed Date of Allotment, at the rate of 7.00% per annum.

Our Company has a right to withdraw the Issue at anytime 2 (two) days prior to Issue closing date for receiving subscription in the Issue. Our Company shall in the event of such withdrawal, subject to receipt of a minimum subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs, allot NCDs to all applicants who have applied for NCDs upto one day prior to the date by which Company gives notice for withdrawal of Issue. Further our Company shall pay interest on application money on the amount allotted, subject to deduction of income tax under the provisions of the Income Tax Act, 1961, as amended, as applicable, to any applicants to whom NCDs are allotted pursuant to the Issue from the date of realization of the cheque(s)/demand draft(s) or 3 (three) days from the date of receipt of the application (being the date of presentation of each application as acknowledged by the Bankers to the Issue) whichever is later upto one day prior to the Deemed Date of Allotment, at the rate of 7.00% per annum. However, it is clarified that in the event that our Company does not receive a minimum subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs our Company will not allot any NCDs to applicants.

Our Company may enter into an arrangement with one or more banks in one or more cities for direct credit of interest to the account of the applicants. Alternatively, the interest warrant will be dispatched along with the Letter(s) of Allotment at the sole risk of the applicant, to the sole/first applicant.

Interest on application monies received which are liable to be refunded

Our Company shall pay interest on application money which is liable to be refunded to the applicants in accordance with the provisions of the Debt Regulations and/or the Companies Act, or other applicable statutory and/or regulatory requirements, subject to deduction of income tax under the provisions of the Income Tax Act, 1961, as amended, as applicable, from the date of realization of the cheque(s)/demand draft(s) or 3 (three) days from the date of receipt of the application (being the date of presentation of each application as acknowledged by the Bankers to the Issue) whichever is later upto one day prior to the Deemed Date of Allotment, at the rate of 2.50% per annum. Such interest shall be paid along with the monies liable to be refunded. Interest warrant will be dispatched / credited (in case of electronic payment) along with the Letter(s) of Refund at the sole risk of the applicant, to the sole/first applicant.

In the event our Company does not receive a minimum subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs on the date of closure of the Issue, our Company shall pay interest on application money which is liable to be refunded to the applicants in accordance with the provisions of the Debt Regulations and/or the Companies Act, or other applicable statutory and/or regulatory requirements, subject to deduction of income tax under the provisions of the Income Tax Act, 1961, as amended, as applicable, from the date of realization of the cheque(s)/demand draft(s) or 3 (three) days from the date of receipt of the application (being the date of presentation of each application to the Bankers to the Issue as acknowledged) whichever is later upto one day prior to the date of closure of the Issue or one day prior to the date on which Company gives notice for withdrawal of Issue, as the case may be at the rate of 2.50% per annum. Such interest shall be paid along with the monies liable to be refunded.

Provided that, notwithstanding anything contained hereinabove, our Company shall not be liable to pay any interest on monies liable to be refunded in case of (a) invalid applications or applications liable to be rejected, and/or (b) applications which are withdrawn by the applicant. Please refer to “Rejection of Application” at page 164 of this Prospectus.

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ISSUE PROCEDURE

1. How to Apply?

i. Availability of Prospectus and Application Forms

The abridged Prospectus containing the salient features of the Prospectus together with Application Forms and copies of the Prospectus may be obtained from our Registered Office, Lead Manager(s) to the Issue, the Co-Lead Manager to the Issue, the Registrar to the Issue and at branches/collection centres of the Bankers to the Issue, as mentioned on the Application Form.

In addition, Application Forms would also be made available to the stock exchanges where listing of the NCDs are sought and to brokers, on their request.

We may provide Application Forms for being filled and downloaded at such websites as we may deem fit.

ii. Who can Apply

The following categories of persons are eligible to apply in the Issue: Category I

• Public Financial Institutions, Statutory Corporations, Commercial Banks, Co-operative Banks and Regional Rural Banks, which are authorised to invest in the NCDs;

• Provident Funds, Pension Funds, Superannuation Funds and Gratuity Funds, which are authorised to invest in the NCDs

• Venture Capital funds registered with SEBI;

• Insurance Companies registered with the IRDA

• National Investment Fund; and

• Mutual Funds. Category II

• Companies, Bodies Corporate and Societies registered under the applicable laws in India and authorised to invest in NCDs;

• Public/Private Charitable/Religious Trusts which are authorised to invest in the NCDs;

• Scientific and/or Industrial Research Organisations, which are authorised to invest in the NCDs;

• Partnership Firms in the name of the partner; and

• Limited liability partnerships formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (No. 6 of 2009)

Category III*

• Resident Indian individuals; and

• Hindu Undivided Families through the Karta. * With respect to applications received from Category III applicants, applications by applicants who apply for NCDs aggregating to a value not more than ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be grouped together, (“Reserved Individual Portion”) while applications by applicants who apply for NCDs aggregating to a value exceeding ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be separately grouped together, (“Unreserved Individual Portion”). Note: Participation of any of the aforementioned categories of persons or entities is subject to the applicable statutory and/or regulatory requirements in connection with the subscription to Indian securities by such categories of persons

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or entities. Applicants are advised to ensure that applications made by them do not exceed the investment limits or

maximum number of NCDs that can be held by them under applicable statutory and or regulatory provisions.

Applicants are advised to ensure that they have obtained the necessary statutory and/or regulatory

permissions/consents/approvals in connection with applying for, subscribing to, or seeking allotment of NCDs

pursuant to the Issue.

The Lead Managers, the Co-Lead Manager and their respective associates and affiliates are permitted to subscribe in the Issue. The information below is given for the benefit of the investors. Our Company, the Lead Managers and/or the Co-Lead Manager are not liable for any amendment or modification or changes in applicable laws or regulations, which may occur after the date of this Prospectus. Investors are advised to ensure that the aggregate number of NCDs applied for does not exceed the investment limits or maximum number of NCDs that can be held by them under applicable law. Grouping of Applications and Allocation Ratio For the purposes of the basis of allotment: i) Applications received from Category I applicants: Applications received from Category I, shall be

grouped together, (“Institutional Portion”); ii) Applications received from Category II applicants: Applications received from Category II, shall be

grouped together, (“Non-Institutional Portion”); iii) Applications received from Category III applicants: Further with respect to applications received

from Category III applicants, applications by applicants who apply for NCDs aggregating to a value not more than ` 5 Lakhs, across all series of NCDs (Option I and/or Option II), shall be grouped together, (“Reserved Individual Portion”) while applications by applicants who apply for NCDs aggregating to a value exceeding ` 5 Lakhs (Option I and/or Option II,), shall be separately grouped together, (“Unreserved

Individual Portion”). For further details please refer to “Additional Applications” beginning on page 163 of this Prospectus.

For removal of doubt, “Institutional Portion”, Non-Institutional Portion” “Reserved Individual Portion” and “Unreserved Individual Portion” are individually referred to as “Portion” and collectively referred to as “Portions”

Applications by Mutual Funds

No mutual fund scheme shall invest more than 15% of its NAV in debt instruments issued by a single Company which are rated not below investment grade by a credit rating agency authorised to carry out such activity. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company A separate application can be made in respect of each scheme of an Indian mutual fund registered with SEBI and such applications shall not be treated as multiple applications. Applications made by the AMCs or custodians of a Mutual Fund shall clearly indicate the name of the concerned scheme for which application is being made. In case of Applications made by Mutual Fund registered with SEBI, a certified copy of their SEBI registration certificate must be submitted with the Application Form. The applications must be also accompanied by certified true copies of (i) SEBI Registration Certificate and trust deed (ii) resolution authorising investment and containing operating instructions and (iii) specimen signatures of authorized signatories. Failing this, our Company reserves the right to accept or reject any Application in whole or in part, in either case, without assigning any reason therefor.

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Application by Scheduled Banks, Co-operative Banks and Regional Rural Banks

Scheduled Banks, Co-operative banks and Regional Rural Banks can apply in this public issue based upon their own investment limits and approvals. The application must be accompanied by certified true copies of (i) Board Resolution authorising investments; (ii) Letter of Authorisation. Failing this, our Company reserves the right to accept or reject any Application in whole or in part, in either case, without assigning any reason therefor.

Application by Insurance Companies

In case of Applications made by insurance companies registered with the Insurance Regulatory and Development Authority, a certified copy of certificate of registration issued by Insurance Regulatory and Development Authority must be lodged along with Application Form. The applications must be accompanied by certified copies of (i) Memorandum and Articles of Association (ii) Power of Attorney (iii) Resolution authorising investment and containing operating instructions (iv) Specimen signatures of authorized signatories. Failing this, our Company reserves the right to accept or reject any Application in whole or in part, in either case, without assigning any reason therefor. Applications by Trusts

In case of Applications made by trusts, settled under the Indian Trusts Act, 1882, as amended, or any other statutory and/or regulatory provision governing the settlement of trusts in India, must submit a (i) certified copy of the registered instrument for creation of such trust, (ii) Power of Attorney, if any, in favour of one or more trustees thereof, (iii) such other documents evidencing registration thereof under applicable statutory/regulatory requirements. Further, any trusts applying for NCDs pursuant to the Issue must ensure that (a) they are authorised under applicable statutory/regulatory requirements and their constitution instrument to hold and invest in debentures, (b) they have obtained all necessary approvals, consents or other authorisations, which may be required under applicable statutory and/or regulatory requirements to invest in debentures, and (c) applications made by them do not exceed the investment limits or maximum number of NCDs that can be held by them under applicable statutory and or regulatory provisions. Failing this, our Company reserves the right to accept or reject any Applications in whole or in part, in either case, without assigning any reason therefor.

iii. Applications cannot be made by:

a) Minors without a guardian name; b) Foreign nationals; c) Persons resident outside India; d) Foreign Institutional Investors; e) Non Resident Indians; and f) Overseas Corporate Bodies

2. Escrow Mechanism

We shall open Escrow Accounts with one or more Escrow Collection Bank(s) in whose favour the applicants shall make out the cheque or demand draft in respect of their application. Cheques or demand drafts for the application amount received from applicants would be deposited in the respective Escrow Account. Upon creation of security as disclosed in this Prospectus, the Escrow Collection Bank(s) shall transfer the monies from the Escrow Accounts to a separate bank account as per the terms of the Escrow Agreement, (“Public Issue

Account”). Payments of refund to the applicants shall also be made from the Escrow Accounts/refund account(s) as per the terms of the Escrow Agreement and this Prospectus. The Escrow Collection Bank(s) will act in terms of the Draft Prospectus, this Prospectus and the Escrow Agreement. The Escrow Collection Bank(s) shall not exercise any lien whatsoever over the monies deposited therein. In terms of Debt Regulations, it is mandatory for our Company to keep the proceeds of the Issue in an escrow account until the documents for creation of security as stated in this Prospectus are executed.

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3. Filing of the Prospectus with ROC

A copy of the Prospectus shall be filed with the Registrar of Companies, Chennai, Tamil Nadu, in terms of section 56 and section 60 of the Act.

4. Pre-Issue Advertisement

Our Company will issue a statutory advertisement on or before the Issue Opening Date. This advertisement will contain the information as prescribed under Debt Regulations. Material updates, if any, between the date of filing of the Prospectus with ROC and the date of release of this statutory advertisement will be included in the statutory advertisement.

5. General Instructions

Do’s

� Check if you are eligible to apply;

� Read all the instructions carefully and complete the Application Form;

� Ensure that the details about Depository Participant and Beneficiary Account are correct as allotment of NCDs will be in the dematerialized form only;

� Ensure that you mention your PAN allotted under the IT Act

� Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all respects.

� Ensure that you have obtained all necessary approvals from the relevant statutory and/or regulatory authorities to apply for, subscribe to and/or seek allotment of NCDs pursuant to the Issue.

Don’ts:

� Do not apply for lower than the minimum application size;

� Do not pay the application amount in cash;

� Do not fill up the Application Form such that the NCDs applied for exceeds the issue size and/or investment limit or maximum number of NCDs that can be held under the applicable laws or regulations or maximum amount permissible under the applicable regulations;

� Do not submit application accompanied with Stockinvest.

6. Instructions for completing the Application Form

A. Submission of Application Form

� Applications to be made in prescribed form only � The forms to be completed in block letters in English � Applications should be in single or joint names and should be applied by Karta in case of HUF � Thumb impressions and signatures other than in English/Hindi/Gujarati/Marathi or any other languages

specified in the 8th Schedule of the Constitution needs to be attested by a Magistrate or Notary Public or a Special Executive Magistrate under his/her seal.

� All Application Forms duly completed together with cheque/bank draft for the amount payable on application must be delivered before the closing of the subscription list to any of the Bankers to the Public Issue or collection centre(s)/ agent(s) as may be specified before the closure of the Issue. Applicants at centres not covered by the branches of collecting banks can send their forms together with a cheque/draft drawn on/payable at a local bank in Chennai to the Registrar to the Issue by registered post.

� No receipt will be issued for the application money. However, Bankers to the Issue and/or their branches receiving the applications will acknowledge the same.

� Every applicant should hold valid Permanent Account Number (PAN) and mention the same in the Application Form.

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� All applicants are required to tick the relevant column of “Category of Investor” in the Application Form.

� ALL APPLICATIONS BY CATEGORY I APPLICANTS SHALL BE RECEIVED ONLY BY

THE LEAD MANAGERS, THE CO-LEAD MANAGER AND THEIR RESPECTIVE

AFFILIATES. All applicants should apply for one or more type of NCDs and/or one or more option of NCDs in a single Application Form only. Our Company would allot Option I NCDs to all valid applications, wherein the applicants have not indicated their choice of NCDs. B. Applicant’s Bank Account Details

It is mandatory for all the applicants to have their NCDs allotted in dematerialised form. The Registrars to the Issue will obtain the applicant’s bank account details from the Depository. The applicant should note that on the basis of the name of the applicant, Depository Participant’s (DP) name, Depository Participants identification number and beneficiary account number provided by them in the Application Form, the Registrar to the Issue will obtain from the applicant’s DP account, the applicant’s bank account details. The investors are advised to ensure that bank account details are updated in their respective DP A/cs as these bank account details would be printed on the refund order(s), if any. Please note that failure to do so could result in delays in credit of refunds to applicants at the applicant’s sole risk and neither the Lead Managers, the Co-Lead Manager, our Company, the Refund Banker, nor the Registrar to the Issue shall have any responsibility and undertake any liability for the same.

C. Applicant’s Depository Account Details IT IS MANDATORY FOR ALL THE APPLICANTS TO HAVE THEIR NCDs IN

DEMATERIALISED FORM. ALL APPLICANTS SHOULD MENTION THEIR DEPOSITORY

PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND

BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. INVESTORS MUST

ENSURE THAT THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME

AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE

APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT

THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN

THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE APPLICATION FORM. Applicant should note that on the basis of name of the applicant, Depository Participant’s name, Depository Participant-Identification number and Beneficiary Account Number provided by them in the Application Form, the Registrar to the Issue will obtain from the Depository, demographic details of the investor such as address, bank account details for printing on refund orders and occupation (“Demographic Details”). Hence, applicants should carefully fill in their Depository Account details in the Application Form. These Demographic Details would be used for all correspondence with the applicants including mailing of the refund orders/ Allotment Advice and printing of bank particulars on the refund/interest order and the Demographic Details given by applicant in the Application Form would not be used for these purposes by the Registrar. Hence, applicants are advised to update their Demographic Details as provided to their Depository Participants and ensure that they are true and correct. By signing the Application Form, the applicant would have deemed to have authorised the depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records. Refund Orders/Allotment Advice would be mailed at the address of the applicant as per the Demographic Details received from the Depositories. Applicant may note that delivery of Refund Orders/Allotment Advice may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event, the address and other details given by the applicant

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in the Application Form would be used only to ensure dispatch of refund orders. Please note that any such delay shall be at the applicant’s sole risk and neither we nor the Lead Managers, the Co-Lead Manager nor the Registrars shall be liable to compensate the applicant for any losses caused to the applicant due to any such delay or liable to pay any interest for such delay. However in case of applications made under power of attorney, our Company in its absolute discretion, reserves the right to permit the holder of Power of Attorney to request the Registrar that for the purpose of printing particulars on the refund order and mailing of Refund Orders /Allotment Advice, the demographic details obtained from the Depository of the applicant shall be used. In case no corresponding record is available with the Depositories that matches all three parameters, namely, names of the applicants (including the order of names of joint holders), the Depository Participant’s identity (DP ID) and the beneficiary’s identity, then such applications are liable to be rejected.

D. Applications under Power of Attorney by limited companies, corporate bodies, registered societies etc.

In case of Applications made pursuant to a power of attorney or by limited companies, corporate bodies, registered societies etc, a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the Memorandum of Association and Articles of Association and/or bye laws must be lodged along with the Application Form, failing this, our Company reserves the right to accept or reject any Application in whole or in part, in either case, without assigning any reason therefor.

E. Permanent Account Number The applicant or in the case of applications made in joint names, each of the applicant, should mention his or her Permanent Account Number (PAN) allotted under the IT Act. In accordance with Circular No. MRD/DOP/Cir-05/2007 dated April 27, 2007 issued by SEBI, the PAN would be the sole identification number for the participants transacting in the securities market, irrespective of the amount of transaction. Any Application Form, without the PAN is liable to be rejected, irrespective of the amount of transaction. It is to be specifically noted that the applicants should not submit the GIR number instead of the PAN as the Application is liable to be rejected on this ground.

F. Terms of Payment

The entire issue price for the NCDs is payable on application only. In case of allotment of lesser number of NCDs than the number applied, our Company shall refund the excess amount paid on application to the applicant.

G. Payment Instructions for Applicants

� In pursuance of Debt Regulations, we shall open Escrow Account with the Escrow Collection Banks(s) for the collection of the application amount payable upon submission of the Application Form.

� Payment may be made by way of cheque/bank draft drawn on any bank, including a co-operative bank which is situated at and is member or sub-member of the Bankers’ clearing-house located at the place where the Application Form is submitted, i.e. at designated collection centres. Outstation cheques /bank drafts drawn on banks not participating in the clearing process will not be accepted and applications accompanied by such cheques or bank drafts are liable to be rejected. Payment though stockinvest would also not be allowed as the same has been discontinued by the RBI vide notification No. DBOD.NO.FSC.BC. 42/24.47.001/2003-04 dated November 5, 2003. Cash/Stockinvest/Money Orders/Postal Orders will not be accepted. In case payment is effected in contravention of conditions mentioned herein, the application is liable to be rejected and application money will be refunded and no interest will be paid thereon. A separate cheque / bank draft must accompany each Application Form.

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� All Application Forms received with outstation cheques, post dated cheques, cheques / bank drafts drawn on banks not participating in the clearing process, Money orders/postal orders, cash, stockinvest shall be rejected and the collecting bank shall not be responsible for such rejections.

� All cheques / bank drafts accompanying the application should be crossed “A/c Payee only” and (a) all cheques / bank drafts accompanying the applications made by eligible applicants must be made payable to “Escrow Account SCUF NCD Public Issue”.

� The Escrow Collection Bank(s) shall transfer the funds from the Escrow Account, as per the terms of the Escrow Agreement, into a public issue account after the creation of security as disclosed in this Prospectus.

� Only Category I applicants have an option to make payments on applications through RTGS.

8. Submission of Completed Application Forms

� All applications duly completed and accompanied by account payee cheques / drafts shall be submitted at the branches of the Bankers to the Issue (listed in the Application Form) or our Collection Centre(s)/ agent(s) as may be specified by us before the closure of the Issue. Our collection centre/ agent however, will not accept payments made in cash. However, Application Forms duly completed together with cheque/bank draft drawn on/payable at a local bank in Chennai for the amount payable on application may also be sent by Registered Post to the Registrar to the Issue, so as to reach the Registrar prior to closure of the Issue. Applicants at centres not covered by the branches of collecting banks can send their Application Forms together with cheque / draft drawn on / payable at a local bank in Chennai to the Registrar to the Issue by registered post.

� No separate receipts shall be issued for the application money. However, Bankers to the Issue at their designated branches/our Collection Centre(s)/ agent(s) receiving the duly completed Application Forms will acknowledge the receipt of the applications by stamping and returning the acknowledgment slip to the applicant.

� Applications shall be deemed to have been received by us only when submitted to Bankers to the Issue at their designated branches or at our Collection Centre/ agent or on receipt by the Registrar as detailed above and not otherwise.

� All applications by persons or entities belonging to Category I should be made in the form

prescribed for Category I applicants and shall be received only by the Lead Managers, the Co-

Lead Manager and their respective affiliates.

9. On-line Applications We may decide to offer online application facility for NCDs, as and when it is permitted by law subject to terms and conditions as may be prescribed.

10. Other Instructions

A. Joint Applications

Applications may be made in single or joint names (not exceeding three). In the case of joint applications, all payments will be made out in favour of the first applicant. All communications will be addressed to the first named applicant whose name appears in the Application Form and at the address mentioned therein.

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B. Additional Applications

An applicant is allowed to make one or more applications for the NCDs for the same or other series of NCDs, subject to a minimum application size of ` 10,000/- and in multiples of ` 1,000/- thereafter, for each application. Any application for an amount below the aforesaid minimum application size will be deemed as an invalid application and shall be rejected. However, multiple applications by the same applicant belonging to Category III aggregating to a value exceeding ` 5 Lakhs shall be grouped in the Unreserved Individual Portion, for the purpose of determining the basis of allotment to such applicant. However, any application made by any person in his individual capacity and an application made by such person in his capacity as a karta of a Hindu Undivided family and/or as joint applicant (second or third applicant), shall not be deemed to be a multiple application. For the purposes of allotment of NCDs under the Issue, applications shall be grouped based on the PAN, i.e. applications under the same PAN shall be grouped together and treated as one application. Two or more applications will be deemed to be multiple applications if the sole or first applicant is one and the same. For the sake of clarity, two or more applications shall be deemed to be a multiple application for the aforesaid purpose if the PAN number of the sole or the first applicant is one and the same.

C. Depository Arrangements

As per the provisions of Section 68B of the Act, the allotment of NCDs of our Company can be made in a dematerialised form, (i.e. not in the form of physical certificates but be fungible and be represented by the Statement issued through electronic mode). We have made depository arrangements with NSDL and CDSL for issue and holding of the NCDs in dematerialised form. Please note that tripartite agreements have been executed between our Company, the Registrar and both the depositories.

As per the provisions of the Depositories Act, 1996, the NCDs issued by us can be held in a dematerialized form. In this context:

i Tripartite Agreement dated March 30, 2000 and April 30, 1999 between us, the Registrar to the Issue and

CDSL and NSDL, respectively for offering depository option to the investors. ii. An applicant who wishes to apply for NCDs in the electronic form must have at least one beneficiary

account with any of the Depository Participants (DPs) of NSDL or CDSL prior to making the application. iii. The applicant seeking allotment of NCDs in the Electronic Form must necessarily fill in the details

(including the beneficiary account number and DP’s ID) appearing in the Application Form under the heading ‘Request for NCDs in Electronic Form’.

iv. NCDs allotted to an applicant in the Electronic Account Form will be credited directly to the applicant’s respective beneficiary account(s) with the DP.

v. For subscription in electronic form, names in the Application Form should be identical to those appearing in the account details in the depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details in the depository.

vi. Non-transferable Allotment Advice/refund orders will be directly sent to the applicant by the Registrars to this Issue.

vii. If incomplete/incorrect details are given under the heading ‘Request for NCDs in electronic form’ in the Application Form, it will be deemed to be an application for NCDs in physical form and thus will be rejected.

viii. For allotment of NCDs in electronic form, the address, nomination details and other details of the applicant as registered with his/her DP shall be used for all correspondence with the applicant. The applicant is therefore responsible for the correctness of his/her demographic details given in the Application Form vis-à-vis those with his/her DP. In case the information is incorrect or insufficient, our Company would not be liable for losses, if any.

ix. It may be noted that NCDs in electronic form can be traded only on the Stock Exchanges having electronic connectivity with NSDL or CDSL. The Stock Exchange/s have connectivity with NSDL and CDSL.

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x. Interest or other benefits with respect to the NCDs held in dematerialised form would be paid to those NCD holders whose names appear on the list of beneficial owners given by the Depositories to us as on record date. In case of those NCDs for which the beneficial owner is not identified by the Depository as on the record date/ book closure date, we would keep in abeyance the payment of interest or other benefits, till such time that the beneficial owner is identified by the Depository and conveyed to us, whereupon the interest or benefits will be paid to the beneficiaries, as identified, within a period of 30 days.

xi. The trading of the NCDs shall be in dematerialized form only. D. Communications

• All future Communications in connection with Applications made in the Issue should be addressed to the Registrar to the Issue quoting all relevant details as regards the applicant and its application.

• Applicants can contact the Compliance Officer of our Company/Lead Managers/Co-Lead Manager or the Registrar to the Issue in case of any Pre-Issue related problems. In case of Post-Issue related problems such as non-receipt of Allotment Advice / credit of NCDs in depository’s beneficiary account / refund orders, etc., applicants may contact the Compliance Officer of our Company/Lead Manager/Co-Lead Manager or Registrar to the Issue.

11. Rejection of Application

The Board of Directors and/or any committee of our Company reserves its full, unqualified and absolute right to accept or reject any application in whole or in part and in either case without assigning any reason thereof.

Application may be rejected on one or more technical grounds, including but not restricted to:

� Applications not duly signed by the sole/joint applicants (in the same sequence as they appear in the records of the depository);

� Amount paid doesn’t tally with the amount payable for the NCDs applied for;

� Age of First applicant not given;

� Application by persons not competent to contract under the Indian Contract Act, 1872 including minors (without the name of guardian) and insane persons;

� PAN not mentioned in the Application Form;

� GIR number furnished instead of PAN;

� Applications for amounts greater than the maximum permissible amounts prescribed by applicable regulations;

� Applications by persons/entities who have been debarred from accessing the capital markets by SEBI;

� Applications by any persons outside India;

� Any application for an amount below the minimum application size;

� Application for number of NCDs, which are not in multiples of one;

� Category not ticked;

� Application under power of attorney or by limited companies, corporate, trust etc., where relevant documents are not submitted;

� Application Form does not have applicant’s depository account details;

� Applications accompanied by Stockinvest/money order/postal order;

� Signature of sole and/ or joint applicant(s) missing;

� Application Forms not delivered by the applicant within the time prescribed as per the Application Form and the Prospectus and as per the instructions in the Prospectus and the Application Form; or

� In case the subscription amount is paid in cash.

� In case no corresponding record is available with the Depositories that matches three parameters namely, names of the applicant, the Depository Participant’s Identity and the beneficiary’s account number.

� Application Form accompanied with more than one cheque.

� Institutional Investor Applications not procured by the Lead Managers, the Co-Lead Manager or their respective affiliates.

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For further instructions regarding application for the NCDs, investors are requested to read the Application Form 12. Allotment Advice / Refund Orders

The unutilised portion of the application money will be refunded to the applicant by an A/c Payee cheque/demand draft. In case the at par facility is not available, our Company reserves the right to adopt any other suitable mode of payment.

The Company shall credit the allotted NCDs to the respective beneficiary accounts/despatch the Letter(s) of Allotment or Letter(s) of Regret/Refund Orders in excess of ` 1,500/-, as the case may be, by Registered Post/Speed Post at the applicant’s sole risk, within 30 days from the date of closure of the Issue. Refund Orders up to ` 1,500/- will be sent by post. We may enter into an arrangement with one or more banks in one or more cities for refund to the account of the applicants through Direct Credit/RTGS/NEFT. Further,

a) Allotment of NCDs offered to the public shall be made within a time period of 30 days from the date

of closure of the Issue; b) Credit to de-mat account will be given within 2 working days from the date of allotment c) Interest at a rate of 15 per cent per annum will be paid if the allotment has not been made and/or the

Refund Orders have not been dispatched to the applicants within 30 days from the date of the closure of the Issue, for the delay beyond 30 days.

The Company will provide adequate funds to the Registrars to the Issue, for this purpose. 13. Retention of oversubscription

The Company is making a public Issue of NCDs aggregating upto ` 37,500 lakhs with an option to retain oversubscription of NCDs up to ` 37,500 lakhs.

14. Basis of Allotment Grouping of Applications and Allocation Ratio: Applications received from various applicants shall be grouped together on the following basis:

i) Applications received from Category I applicants: Applications received from Category I, shall be

grouped together, (“Institutional Portion”); ii) Applications received from Category II applicants: Applications received from Category II, shall be

grouped together, (“Non-Institutional Portion”); iii) Applications received from Category III applicants: Further with respect to applications received

from Category III applicants, applications by applicants who apply for NCDs aggregating to a value not more than ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be grouped together, (“Reserved Individual Portion”) while applications by applicants who apply for NCDs aggregating to a value exceeding ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be separately grouped together, (“Unreserved Individual Portion”). For further details please refer to “Additional

Applications” beginning on page 163 of this Prospectus.

For removal of doubt, “Institutional Portion”, Non-Institutional Portion” “Reserved Individual Portion” and “Unreserved Individual Portion” are individually referred to as “Portion” and collectively referred to as “Portions”

For the purposes of determining the number of NCDs available for allocation to each of the abovementioned Portions, our Company shall have the discretion of determining the number of NCDs to be allotted over and above the Base Issue Size, in case our Company opts to retain any oversubscription in the Issue upto ` 75,000 Lakhs. The aggregate value of NCDs decided to be allotted over and above the Base Issue Size, (in case our

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Company opts to retain any oversubscription in the Issue), and/or the aggregate value of NCDs upto the Base Issue Size shall be collectively termed as the “Overall Issue Size”. Basis of Allotment for NCDs (a) Allotments in the first instance:

(i) Applicants belonging to the Institutional Portion, in the first instance, will be allocated NCDs upto 10% of Overall Issue Size on first come first serve basis (determined on the basis of date of receipt of each application duly acknowledged by the Bankers to the Issue);

(ii) Applicants belonging to the Non-Institutional Portion, in the first instance, will be allocated

NCDs upto 10% of Overall Issue Size on first come first serve basis (determined on the basis of date of receipt of each application duly acknowledged by the Bankers to the Issue);

(iii) Applicants belonging to the Reserved Individual Portion, in the first instance, will be

allocated NCDs upto 60% of Overall Issue Size on first come first serve basis (determined on the basis of date of receipt of each application duly acknowledged by the Bankers to the Issue);

(iv) Applicants belonging to the Unreserved Individual Portion, in the first instance, will be

allocated NCDs upto 20% of Overall Issue Size on first come first serve basis (determined on the basis of date of receipt of each application duly acknowledged by the Bankers to the Issue);

Allotments, in consultation with the Designated Stock Exchange, shall be made on a first-come first-serve basis, based on the date of presentation of each application to the Bankers to the Issue, in each Portion subject to the Allocation Ratio.

(b) Under Subscription: Under subscription, if any, in Reserved Individual Portion or Unreserved

Individual Portion shall first be met by inter-se adjustment between these two sub-categories. Thereafter, if there is any under subscription in any Portion, priority in allotments will be given to the Category III, with preference in allotments to Reserved Individual Portion applicants, and balance, if any, shall be first made to applicants of the Non-Institutional Portion (Category II), and thereafter to Institutional Portion (Category I) on a first come first serve basis, on proportionate basis.

(c) For each Portion, all applications received on the same day by the Bankers to the Issue would be

treated at par with each other. Allotment within a day would be on proportionate basis, where NCDs applied for exceeds NCDs to be allotted for each Portion respectively.

(d) Minimum allotments of 1NCD and in multiples of 1 NCD thereafter would be made in case of each

valid application.

(e) Allotments in case of oversubscription: In case of an oversubscription, allotments to the maximum extent, as possible, will be made on a first-come first-serve basis and thereafter on proportionate basis, i.e. full allotment of NCDs to the applicants on a first come first basis up to the date falling 1 (one) day prior to the date of oversubscription and proportionate allotment of NCDs to the applicants on the date of oversubscription (based on the date of presentation of each application to the Bankers to the Issue, in each Portion).

(f) Proportionate Allotments: For each Portion, on the date of oversubscription:

i) Allotments to the applicants shall be made in proportion to their respective application size, rounded off to the nearest integer.

ii) If the process of rounding off to the nearest integer results in the actual allocation of NCDs being higher than the Issue size, not all applicants will be allotted the number of NCDs arrived at after such rounding off. Rather, each applicant whose allotment size, prior to rounding off, had the

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highest decimal point would be given preference. iii) In the event, there are more than one applicant whose entitlement remain equal after the manner

of distribution referred to above, our Company will ensure that the basis of allotment is finalised by draw of lots in a fair and equitable manner.

(g) Applicant applying for more than one series of NCDs: If an applicant has applied for more than one

series of NCDs, (Option I and Option II, individually referred to as “Series”), and in case such applicant is entitled to allocation of only a part of the aggregate number of NCDs applied for, the Series-wise allocation of NCDs to such applicants shall be in proportion to the number of NCDs with respect to each Series, applied for by such applicant, subject to rounding off to the nearest integer, as appropriate in consultation with Lead Managers, the Co-Lead Manager and Designated Stock Exchange.

All decisions pertaining to the basis of allotment of NCDs pursuant to the Issue shall be taken by our Company in consultation with the Lead Managers, the Co-Lead Manager and the Designated Stock Exchange and in compliance with the aforementioned provisions of this Prospectus. Our Company would allot Option I NCDs to all valid applications, wherein the applicants have not indicated their choice of the relevant Series of NCDs (Option I, or Option II).

15. Investor Withdrawals and Pre-closure

Investor Withdrawal: Applicants are allowed to withdraw their applications at any time prior to the closure of the Issue. Pre-closure: Our Company, in consultation with the Lead Managers and the Co-Lead Manager reserve the right to close the Issue at any time prior to the Closing Date, subject to receipt of minimum subscription for NCDs aggregating to 75% of the Base Issue. Our Company shall allot NCDs with respect to the applications received at the time of such pre-closure in accordance with the Basis of Allotment as described hereinabove and subject to applicable statutory and/or regulatory requirements.

16. Utilisation of Application Money The sum received in respect of the Issue will be kept in separate bank accounts and we will have access to such funds as per applicable provisions of law(s), regulations and approvals. 17. Utilisation of Issue Proceeds a) All monies received pursuant to the Issue of NCDs to public shall be transferred to a separate bank

account other than the bank account referred to in sub-section (3) of section 73 of the Act. b) Details of all monies utilised out of Issue referred to in sub-item (a) shall be disclosed under an

appropriate separate head in our Balance Sheet indicating the purpose for which such monies had been utilised; and

c) Details of all unutilised monies out of issue of NCDs, if any, referred to in sub-item (a) shall be

disclosed under an appropriate separate head in our Balance Sheet indicating the form in which such unutilised monies have been invested.

d) We shall utilize the Issue proceeds only upon creation of security as stated in this Prospectus and on

receipt of the minimum subscription of 75% of the Base Issue.

e) The Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other acquisition, inter alia by way of a lease, of any property.

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Listing

The NCDs offered through this Prospectus are proposed to be listed on the NSE and BSE. Our Company has obtained an ‘in-principle’ approvals for the Issue from the NSE vide their letter dated August 1, 2011 and from BSE vide their letter dated July 29, 2011. For the purposes of the Issue, NSE shall be the Designated Stock Exchange. If permissions to deal in and for an official quotation of our NCDs are not granted by NSE and/or BSE, our Company will forthwith repay, without interest, all moneys received from the applicants in pursuance of this Prospectus. Our Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at NSE and BSE are taken within 7 working days from the date of allotment. For the avoidance of doubt, it is hereby clarified that in the event of non subscription to any one or more of the Options, such NCDs with Option(s) shall not be listed.

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SECTION VII : LEGAL AND OTHER INFORMATION

PENDING PROCEEDINGS AND STATUTORY DEFAULTS

As on the date of this Prospectus, there are no defaults in meeting statutory dues, institutional dues, and towards holders of instrument like debentures, fixed deposits and arrears on cumulative preference shares, etc, by our Company or by public companies promoted by the same promoter and listed on stock exchange. Our Company is involved in legal proceedings which have arisen in the ordinary course of business. Save as stated

hereinbelow, such proceedings however, are not material enough to adversely affect our operations, financial

position and profitability.

Save as stated herein, there are no material defaults, non payments or over dues of statutory dues, institutional or

bank dues or dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares. Save as disclosed herein below, there are no pending proceedings pertaining to: a. matters likely to affect operation and finances of our Company including disputed tax liabilities of any

nature; and b. criminal prosecution launched against our Company and the Directors for alleged offences under the

enactments specified in Paragraph 1 of Part I of Schedule XIII to the Act.

Proceedings Initiated Against our Company

Civil Proceedings

259 civil proceedings have been initiated in the regular course of business against our Company involving an aggregate amount of ` 1,555.03 lakhs. Tax Proceedings

1. The Commissioner of Income Tax (“CIT”), has filed an appeal against our Company before the Hon’ble

High Court of Madras (bearing no 835 of 2007 and T.C.A No.836 of 2007) against the order of the Income Tax Appellate Tribunal (“ITAT”) dated November 16, 2009, wherein inter alia it has confirmed the disallowance of bad debts and treating them as NPA as per the RBI norms for the assessment year 1996-97. The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing and final disposal.

2. The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble

High Court of Madras (bearing no T.C.A No. 1236 of 2007 and T.C.A No.1237/2007) against the order of the Income Tax Appellate Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed the deduction of i) deposit mobilisation expenses amounting to ` 28,500,000, ii) taxing of Additional Finance Charges on accrual basis : ` 31,015,733, and iii) method of accounting for the assessment year 1997-98. The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing and final disposal.

3. The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble

High Court of Madras (bearing no 1238 & 1239 of 2007) against the order of the Income Tax Appellate Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed the deduction of deposit mobilisation expenses amounting to ` 28,500,000 for the assessment year 1998-99. The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing and final disposal.

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4. The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble

High Court of Madras (bearing no T.C.A No.1241/2007 and T.C.A No.1242/2007) against the order of the Income Tax Appellate Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed the i) taxing of additional finance charges on accrual basis ` 9,75,65,295 ii) method of accounting and iii) deduction of deposit mobilisation expenses amounting to ` 28,500,000 for the assessment year 1999-2000. The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing and final disposal.

5. The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble

High Court of Madras (bearing T.C.A No.1240/2007) against the order of the Income Tax Appellate Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed i) taxing of additional finance charges on accrual basis: ` 2,11,69,152 ii) method of accounting and iii)the deduction of deposit mobilisation expenses amounting to ` 28,500,000 for the assessment year 2000-2001. The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing and final disposal.

6. The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble High Court of Madras (bearing T.C.A No.1243/2007) against the order of the Income Tax Appellate Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed i) taxing of additional finance charges on accrual basis: ` 8,90,62,060 ii) method of accounting and iii) the deduction of deposit mobilisation expenses amounting to ` 28,500,000 for the assessment year 2001-2002. The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing and final disposal.

7. The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble

High Court of Madras (bearing T.C.A No. 2161/2008) against the order of the Income Tax Appellate Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed i) taxing of Additional Finance Charges on accrual basis : `.8,72,388 ii) Method of Accounting iii) Enhancement of Additional Finance Charges & iv) Provision for Bad Debts u/s 115JB ` 2,16,00,000 for the assessment year 2002-2003. The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing and final disposal.

8. The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble

High Court of Madras (bearing T.C.A No.638/2009) against the order of the Income Tax Appellate Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed i) method of accounting and ii) enhancement of additional finance charges `. 168,498,442 for the assessment year 2003-2004. The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing and final disposal.

9. The Commissioner of Income tax (“CIT”) has filled an appeal against our Company before the Hon’ble

High Court of Madras (bearing No T.C.A. No.1422/2010) against the order of the Income Tax Appellate Tribunal (“ITAT”) dated July 16, 2009 wherein inter alia it has confirmed i.) taxing of Additional Finance Charges on accrual basis : ` 1,03,77,135 & ii) method of accounting & iii) provision for bad debts u/s 115JB : `. 41,451,000 for the assessment year 2005-2006. The matter is pending hearing and final disposal.

Proceedings Initiated by our Company Tax Proceedings

1. The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”)

raised a demand amounting to ` 181,447,869 by order dated December 31, 2010 for the assessment year 2008-09 (“Assessment Order”) on the alleged grounds that our Company may have concealed income within the meaning of section 271 (1) (c) of the Income Tax Act, 1961. Our Company filed an appeal dated

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January 20, 2011 before the Commissioner of Income Tax (Appeals), (“CIT Appeals”) against the Assessment Order on the grounds that additions and disallowances made by the Assessing Officer are erroneous. The matter is pending hearing and final disposal.

2. The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”) raised a demand amounting to ` 26,557,859 by order dated March 3, 2011 for the assessment year 2006-07 (“Assessment Order”) on the alleged grounds that our Company may have concealed income within the meaning of section 271 (1) (c) of the Income Tax Act, 1961 in respect of amount transferred to the statutory reserve fund.. Our Company filed an appeal dated April 26, 2011 before the Commissioner of Income Tax (Appeals), (“CIT Appeals”) against the Assessment Order on the grounds that additions and disallowances made by the Assessing Officer are erroneous. The matter is pending hearing and final disposal.

3. The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”) issued a notice granting a refund amounting to ` 25,343,340 by order dated December 3, 2010 for the assessment year 2005-06 (“Assessment Order”). Our Company filed an appeal dated January 20, 2011 before the Commissioner of Income Tax (Appeals), (“CIT Appeals”) against the Assessment Order on the grounds that additions on interest accrued on NPA made to the taxable income by the Assessing Officer is erroneous. The matter is pending hearing and final disposal.

4. The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”) raised a demand amounting to ` 16,653,626 by order dated March 03, 2011 for the assessment year 2005-06 (“Assessment Order”) on the alleged grounds that our Company may have concealed income within the meaning of section 271 (1) (c) of the Income Tax Act, 1961 in respect of amount transferred to the statutory reserve fund. Our Company filed an appeal dated April 26, 2011 before the Commissioner of Income Tax (Appeals), (“CIT Appeals”) against the Assessment Order u/s 271(1)(c) on the grounds that additions and disallowances made by the Assessing Officer are erroneous. The matter is pending hearing and final disposal.

5. The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”) raised a demand amounting to ` 1,041,069 by order dated December 3, 2010 for the assessment year 2003-04 (“Assessment Order”) on the alleged grounds that our Company did has not charged to tax the interest accrued on NPA, on a year to year basis and may have concealed income within the meaning of section 271 (1) (c) of the Income Tax Act, 1961. Our Company filed an appeal dated January 20, 2011 before the Commissioner of Income Tax (Appeals), (“CIT Appeals”) against the Assessment Order on the grounds that additions and disallowances made by the Assessing Officer are erroneous. The matter is pending hearing and final disposal.

6. Our Company has preferred an appeal before the Income Tax Appellate Tribunal (bearing No 362/09-10) dated November 11, 2010, against the order of the Commissioner of Income Tax Appeals (“CIT Appeals”) dated December 22, 2009, for Assessment Year 2007-2008 demanding ` 77,088,130 the (“Assessment

Order”). The appeal has been raised on the grounds that the additions and disallowances made by the CIT Appeal under section 250 of the Income tax Act, 1961, are erroneous. The Department has also filed appeals before the Income Tax Appellate Tribunal against the above mentioned order of CIT(A) in respect of following additions. i) royalty ` 5,045,977 ii) ex-gratia ` 338,948 & iii) Rule 8D : ` 608,458. The matter is pending hearing and final disposal.

7. Our Company has preferred an appeal before the Hon’ble High Court of Madras against the order of the Income Tax Appellate Tribunal (“ITAT”), dated May 6, 2009, wherein inter alia it had confirmed the disallowance of the amount transferred to the statutory reserve fund of ` 2,99,57,110 in compliance with the provisions of section 45-I of the Reserve Bank of India Act (“Act”) for the assessment year 2004-05. The appeal has been raised on the grounds that the order of ITAT, in computing income under section 115 JB of the Income Tax Act, 1961, is erroneous. The matter is pending hearing and final disposal.

8. Our Company has preferred an appeal before the Hon’ble High Court of Madras against the order of the

Income Tax Appellate Tribunal (“ITAT”) dated July 16, 2009, wherein inter alia it had confirmed the

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disallowance of the amount transferred to the statutory reserve fund of ` 455,11,034 in compliance with the provisions of the section 45-I of the Reserve Bank of India, Act (“Act”) for the assessment year 2005-06. The appeal has been raised on the grounds that additions and disallowances made by the order of ITAT, in computing income under section 115-JB of the Income Tax act, 1961, is erroneous. The matter is pending hearing and final disposal

9. Our Company has preferred an appeal before the Hon’ble High Court of Madras against the order of the Income Tax Appellate Tribunal (“ITAT”) dated December 8, 2010, wherein inter alia it had confirmed the disallowance of the amount transferred to the statutory reserve fund of ` 789,00,354 in compliance with the provisions of the section 45-I of the Reserve Bank of India, Act (“Act”) for the assessment year 2006-07. The appeal has been raised on the grounds that additions and disallowances made by the order of ITAT in computing income under section 115-JB of the Income Tax Act, 1961, is erroneous. The matter is pending hearing and final disposal.

Civil Proceedings

Our Company has initiated various civil proceedings in the regular course of business, the outcome of which our Company believes will not materially adversely affect the financial condition and operations of our Company.

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OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Issue

At the meeting of the Board of Directors of our Company, held on March 24, 2011, the Directors approved the issue of NCDs to the public upto an amount not exceeding `75,000 lakhs.

Prohibition by SEBI Our Company, persons in control of our Company and/or our Promoter have not been restrained, prohibited or debarred by SEBI from accessing the securities market or dealing in securities and no such order or direction is in force. Further, no member of our promoter group has been prohibited or debarred by SEBI from accessing the securities market or dealing in securities due to fraud.

Disclaimer Clause of the Stock Exchanges Disclaimer Clause of BSE

“BOMBAY STOCK EXCHANGE LIMITED (“THE EXCHANGE”) HAS GIVEN VIDE ITS LETTER DATED JULY 29, 2011, PERMISSION TO THIS COMPANY TO USE THE EXCHANGE’S NAME IN THIS OFFER DOCUMENT AS ONE OF THE STOCK EXCHANGES ON WHICH THE COMPANY’S SECURITIES ARE PROPOSED TO BE LISTED. THE EXCHANGE HAS SCRUTINIZED THIS OFFER DOCUMENT FOR ITS LIMITED INTERNAL PURPOSE OF DECIDING ON THE MATTER OF GRANTING THE AFORESAID PERMISSION TO THIS COMPANY. THE EXCHANGE DOES NOT IN ANY MANNER- a) WARRANT, CERTIFY OR ENDORSE THE CORRECTNESS OR COMPLETENESS OF ANY OF THE

CONTENTS OF THIS OFFER DOCUMENT; b) WARRANT THAT THIS COMPANY’S SECURITIES WILL BE LISTED OR WILL CONTINUE TO BE

LISTED ON THE EXCHANGE; OR c) TAKE ANY RESPONSIBILITY FOR THE FINANCIAL OR OTHER SOUNDNESS OF THIS COMPANY,

ITS PROMOTERS, ITS MANAGEMENT OR ANY SCHEME OR PROJECT OF THIS COMPANY. AND IT SHOULD NOT FOR ANY REASON BE DEEMED OR CONSTRUED THAT THIS OFFER DOCUMENT HAS BEEN CLEARED OR APPROVED BY THE EXCHANGE. EVERY PERSON WHO DESIRES TO APPLY FOR OR OTHERWISE ACQUIRES ANY SECURITIES OF THE COMPANY MAY DO SO PURSUANT TO INDEPENDENT INQUIRY, INVESTIGATION AND ANALYSIS AND SHALL NOT HAVE ANY CLAIM AGAINST THE EXCHANGE WHATSOEVER BY REASON OF ANY LOSS WHICH MAY BE SUFFERED BY SUCH PERSON CONSEQUENT TO OR IN CONNECTION WITH SUCH SUBSCRIPTION/ACQUISITION WHETHER BY REASON OF ANYTHING STATED OR OMITTED TO BE STATED HEREIN OR FOR ANY OTHER REASON WHATSOEVER”. Disclaimer Clause of NSE

AS REQUIRED, A COPY OF THIS OFFER DOCUMENT HAS BEEN SUBMITTED TO NATIONAL

STOCK EXCHANGE OF INDIA LIMITED (HEREINAFTER REFERRED TO AS NSE). NSE HAS GIVEN

VIDE ITS LETTER REF.:NSE/LIST/141452-E DATED AUGUST 1, 2011 PERMISSION TO THE ISSUER

TO USE THE EXCHANGE’S NAME IN THIS OFFER DOCUMENT AS ONE OF THE STOCK

EXCHANGES ON WHICH THIS ISSUER’S SECURITIES ARE PROPOSED TO BE LISTED. THE

EXCHANGE HAS SCRUTINIZED THIS DRAFT OFFER DOCUMENT FOR ITS LIMITED INTERNAL

PURPOSE OF DECIDING ON THE MATTER OF GRANTING THE AFORESAID PERMISSION TO

THIS ISSUER. IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE AFORESAID PERMISSION

GIVEN BY NSE SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE OFFER

DOCUMENT HAS BEEN CLEARED OR APPROVED BY NSE; NOR DOES IT IN ANY MANNER

WARRANT, CERTIFY OR ENDORSE THE CORRECTNESS OR COMPLETENESS OF ANY OF THE

CONTENTS OF THIS OFFER DOCUMENT; NOR DOES IT WARRANT THAT THIS ISSUER’S

SECURITIES WILL BE LISTED OR WILL CONTINUE TO BE LISTED ON THE EXCHANGE; NOR

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DOES IT TAKE ANY RESPONSIBILITY FOR THE FINANCIAL OR OTHER SOUNDNESS OF THIS

ISSUER, ITS PROMOTERS, ITS MANAGEMENT OR ANY SCHEME OF PROJECT OF THIS ISSUER.

EVERY PERSON WHO DESIRES TO APPLY FOR OR OTHERWISE ACQUIRE ANY SECURITIES OF

THIS ISSUER MAY DO SO PURSUANT TO INDEPENDENT INQUIRY, INVESTIGATION AND

ANALYSIS AND SHALL NOT HAVE ANY CLAIM AGAINST THE EXCHANGE WHATSOEVER BY

REASON OF ANY LOSS WHICH MAY BE SUFFERED BY SUCH PERSON CONSEQUENT TO OR IN

CONNECTION WITH SUCH SUBSCRIPTION/ ACQUISITION WHETHER BY REASON OF

ANYTHING STATED OR OMITTED TO BE STATED HEREIN OR ANY OTHER REASON

WHATSOEVER.”

Disclaimer Clause of the RBI

THE COMPANY IS HAVING A VALID CERTIFICATE OF REGISTRATION DATED APRIL 17, 2007

ISSUED BY THE RESERVE BANK OF INDIA UNDER SECTION 45 IA OF THE RESERVE BANK OF

INDIA ACT, 1934. HOWEVER, THE RBI DOES NOT ACCEPT ANY RESPONSIBILITY OR

GUARANTEE ABOUT THE PRESENT POSITION AS TO THE FINANCIAL SOUNDNESS OF THE

COMPANY OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS OR REPRESENTATIONS

MADE OR OPINIONS EXPRESSED BY THE COMPANY AND FOR REPAYMENT OF DEPOSITS/

DISCHARGE OF LIABILITY BY THE COMPANY.

Listing

The NCDs offered through this Prospectus are proposed to be listed on the NSE and BSE. Our Company has obtained an ‘in-principle’ approvals for the Issue from the NSE vide their letter dated August 1, 2011 and from BSE vide their letter dated July 29, 2011. For the purposes of the Issue, NSE shall be the Designated Stock Exchange. If permissions to deal in and for an official quotation of our NCDs are not granted by NSE and/or BSE, our Company will forthwith repay, without interest, all moneys received from the applicants in pursuance of this Prospectus. Our Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges mentioned above are taken within 7 working days from the date of allotment. For the avoidance of doubt, it is hereby clarified that in the event of non subscription to any one or more of the Options, such NCDs with Option(s) shall not be listed. Consents

Consents in writing of: (a) the Directors, (b) our Company Secretary and Compliance Officer (c) Bankers to our Company and Bankers to the Issue; (d) Lead Managers, (e) Co-Lead Manager, (f) the Registrar to the Issue, (g) Lead Brokers to the Issue, (h) Legal Advisors to the Issue, (i) Credit Rating Agencies, (j) the Debenture Trustee, and (k) the Lead Brokers to act in their respective capacities, have been obtained and the same will be filed along with a copy of the Prospectus with the ROC. The consent of the Statutory Auditor of our Company, namely M/s. Pijush Gupta & Co for (a) inclusion of their names as the Statutory Auditor, (b) examination reports on Reformatted Consolidated Summary Financial Statements and the Reformatted Unconsolidated Summary Financial Statements in the form and context in which they appear in this Prospectus, have been obtained and the same will be filed along with a copy of this Prospectus with the Designated Stock Exchange. Expert Opinion

Except the reports issued by CRISIL dated July 14, 2011 and CARE dated July 14, 2011, respectively in respect of the credit ratings issued thereby for this Issue and the rationale for its rating, our Company has not obtained any

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expert opinions.

Common form of Transfer

The Issuer undertakes that there shall be a common form of transfer for the NCDs and the provisions of the Companies Act, 1956 and all applicable laws shall be duly complied with in respect of all transfer of debentures and registration thereof.

Minimum Subscription

If our Company does not receive the minimum subscription of 75% of the Base Issue, i.e. ` 28,125 lakhs, on the date of closure of the Issue, the entire subscription shall be refunded to the applicants within 30 days from the date of closure of the Issue. If there is delay in the refund of subscription by more than 8 days after our Company becomes liable to refund the subscription amount, our Company will pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.

Filing of the Draft Prospectus

The Draft Prospectus has been filed with NSE on July 21, 2011 and with BSE on July 22, 2011 in terms of Regulation 7 of the Debt Regulations for dissemination on their website(s).

Debenture Redemption Reserve

Section 117C of the Act states that any company that intends to issue debentures must create a DRR to which adequate amounts shall be credited out of the profits of the company until the redemption of the debentures. The Ministry of Corporate Affairs has, through its circular dated April 18, 2002, (“Circular”), specified that the quantum of DRR to be created before the redemption liability actually arises in normal circumstances should be ‘adequate’ to pay the value of the debentures plus accrued interest, (if not already paid), till the debentures are redeemed and cancelled. The Circular however further specifies that, for NBFCs like our Company, (NBFCs which are registered with the RBI under Section 45-IA of the RBI Act), the adequacy of the DRR will be 50% of the value of debentures issued through the public issue. Accordingly our Company is required to create a DRR of 50% of the value of debentures issued through the public issue. As further clarified by the Circular, the amount to be credited as DRR will be carved out of the profits of the company only if there is profit for the particular year and there is no obligation on the part of the company to create DRR if there is no profit for the particular year. Our Company shall credit adequate amounts to DRR, from its profits every year until such NCDs are redeemed. The amounts credited to DRR shall not be utilized by the company except for the redemption of the NCDs.

Issue Related Expenses

The expenses of this Issue include, among others, Fees for the Lead Managers and the Co-Lead Manager, printing and distribution expenses, legal fees, advertisement expenses and listing fees. The estimated Issue expenses to be incurred for the Issue size of up to ` 2,739.05 lakhs (assuming the full subscription including the retention of over subscription of up to ` 75,000 lakhs) are as follows:

(` in lakhs)

Activity

Revised Expenses (final to be

published in Prospectus

Lead Management Fee/ Underwriting Commission 352.96

Advertising and Marketing Expenses 1,000.00

Printing and Stationery 120.00

Fees payable legal advisors to the Issue 27.57

Fess payable to the Registrars to the Issue 25.00

Fees payable to the Debenture Trustee 7.16

Credit Rating Fee 140.00

Brokerage 1,000.00

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Activity

Revised Expenses (final to be

published in Prospectus

Listing Fees 41.36

Others 25.00

Total 2,739.05

The above expenses are indicative and are subject to change depending on the actual level of subscription to the Issue and the number of Allottees, market conditions and other relevant factors.

Underwriting

The Issue has not been underwritten.

Details regarding the public issue during the last three years by our Company and other listed companies

under the same management within the meaning of section 370(1B):

Our Company has not made any public or rights or composite issue of capital during the last three years. There are no listed companies under the same management within the meaning of Section 370(1) (B) of the Companies Act, 1956.

Public / Rights Issues

Our Company has not made any public or rights issuances in the last five years.

Previous Issue

Other than as specifically disclosed in this Prospectus, our Company has not issued any securities for consideration other than cash.

Stock Market Data

A. Our Equity Shares

Our Equity Shares are listed on the BSE and NSE. The high, low and average market prices of the Equity Shares of our Company during the preceding three years:

BSE

Year Date of High High (`̀̀̀) Volume on

date of High

(No

of shares)

Date of low Low (`̀̀̀) Volume on

Date of low

(No of

shares)

Average (`̀̀̀)

2008 May 16, 2008 385.00 22,05,675 October 24, 2008

318.00 3,922 351.50

2009 December 10, 2009

401.10 397 May 15, 2009

320.05 4256 360.58

2010 October 11, 2010

713.50 397 January 6, 2010

401.00 411 557.25

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BSE

Year Date of High High (`̀̀̀) Volume on

date of High

(No

of shares)

Date of low Low (`̀̀̀) Volume on

Date of low

(No of

shares)

Average (`̀̀̀)

2011 January 5, 2011

616.60 6 February 25, 2011

490.10 51 553.35

(Source:www.bseindia.com) Notes

• High, low and average prices are of the daily closing prices.

• In case of two days with the same closing price, the date with higher volume has been considered.

NSE

Year Date of

High

High (`̀̀̀) Volume on

date of

High (No

of Equity

Shares)

Date of

Low

Low(`̀̀̀) Volume on

date of

High (No

of Equity

Shares)

Average

(`̀̀̀)

2008 January 7, 2008

389.80 1,845 January 21, 2008

305.60 3,990 347.70

2009 December 14, 2009

405.00 209 July 14, 2009

315.65 40,12,132 360.30

2010 October 11, 2010

712.45 2,706 January 4, 2010

388.95 953 550.70

2011 April 29, 2011

617.20 5,850 February 9, 2011

499.85 3,599 558.53

(Source:www.nseindia.com)

Notes

• High, low and average prices are of the daily closing prices.

• In case of two days with the same closing price, the date with higher volume has been considered. Monthly high and low prices and trading volumes on the Stock Exchanges for the six months preceding the date of filing of this Prospectus:

BSE

Month Date High

(`̀̀̀)

Volume (No.

of Shares) Date

Low

(`̀̀̀)

Volume (No.

of Shares)

Average

(`)

January 2011 January 5, 2011

615.50 6 January 28, 2011

512.22 38 563.86

February2011 February16, 2011

538.00 95 February 25, 2011

490.10 51 514.05

March 2011 March 1,2011 523.00 101 March 21, 2011

500.10 317 511.55

April 2011 April 29, 2011

616.05 982 April 1, 2011 534.69 708 575.37

May 2011 May 2, 2011 611.00 162 May 24, 2011 541.00 194 576

June 2011 June 14, 2011 560.00 633 June 30, 2011 540.50 1658 550.26

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(Source: www.bseindia.com)

NSE

Month Date High

(`̀̀̀)

Volume (No.

of Shares) Date

Low

(`̀̀̀)

Volume (No.

of Shares)

Average

(`)

January 2011 January 3, 2011

603.85 2,198 January 25, 2011

530.00 3144 566.92

February2011 February 14, 2011

525.40 1644 February 9, 2011

499.85 3599 512.62

March 2011 March 3,2011

521.00 111 March 10, 2011

500.05 913 510.52

April 2011 April 29, 2011

617.20 5850 April 5, 2011 526.80 795 572

May 2011 May 4, 2011 610.06 9,245 May 30,2011 555.00 1864 582.53

June 2011 June 10, 2011 564.90 2,342 June 29, 2011 540.45 1387 552.67

(Source: www.nseindia.com)

Notes

• High, low and average prices are of the daily closing prices.

• In case of two days with the same closing price, the date with higher volume has been considered. Details of the volume of business transacted during the last six months on the Stock Exchanges where our securities are listed:

(` lakhs)

Period BSE NSE

January 2011 4,606,484.00 201.60

February 2011 3,565,050.00 230.25

March 2011 3,722,643.00 151.69

April 2011 2,829,569.00 374.65

May 2011 1,788,743.00 377.85

June 2011 4,632,183.00 396.75

(Source: www.bseindia.com, www.nseindia.com)

B. Trading of Debentures

The following privately placed debentures issued by our Company have been traded on the BSE in the last 3 years preceding the date of this Prospectus:

ISIN No. Date of Trade Last Trade Price (`̀̀̀ in lakhs)

Last Trade Value(`̀̀̀ in lakhs)

Total Trade Value(`̀̀̀ in lakhs)

Last Trade Yield (%) per annum

Weighted Average Price (`̀̀̀ in lakhs)

INE722A07141 April 30, 2010 100.0686 17,500 17,500 7.79 100.07

INE722A07I90 May 5, 2011 100.16 25,000 25,000 8.96 100.16

(Source: www.bseindia.com )

Except as stated above none of our other listed privately placed non convertible debentures have been traded in the last 3 years.

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Debentures or bonds and redeemable preference shares and other instruments issued by our Company and

outstanding Our Company has issued secured redeemable non convertible debentures on a private placement basis of which non convertible debentures aggregating to ` 219,877.64 lakhs are outstanding as on March 31, 2011.

Dividend

Our Company has no stated dividend policy. The declaration and payment of dividends on our shares will be recommended by our Board of Directors and approved by our shareholders, at their discretion, and will depend on a number of factors, including but not limited to our profits, capital requirements and overall financial condition.

Dividend details with respect of Equity Shares

Year ended As at 31st March `̀̀̀ In Lakhs

Particulars 2011 2010 2009 2008 2007

Interim Dividend

Rate of Dividend 25% 20% 10% 10% 10%

Number of Equity Shares on which Interim Dividend paid

49,449,939 49,113,850 45,850,000 39,100,000 27,100,000

Amount of Interim Dividend 1,236.25 982.28 501.85 391.00 271.00

Dividend Distribution Tax Rate 16.609% 16.995% 16.995% 16.995% 14.025%

Proposed Final Dividend for the current year

Rate of Dividend 35% 30% 30% 30% 20%

Number of Equity Shares on which Final Dividend paid

49,536,877 49,154,700 45,856,800 41,155,000 39,100,000

Amount of Final Dividend 1,733.79 14,74.64 1,375.92 1,332.15 782.00

Dividend Distribution Tax 281.26 244.92 233.84 226.40 132.90

Dividend details respect of Preference Shares

Year ended As at 31st March `̀̀̀ In Lakhs

Particulars 2011 2010 2009 2008 2007

5% - - - 4,210 176,170

6% - - 2,328,980* 2,018,590 1,343,230

8% - - - 83,260 277,730

9% - - - - 302,350

10% - - - 16,270 21,050

12% - - - 2,950 3,850

13.50% - - - 200,000 200,000

14% - - - 1,900 2,750

15% - - - 1,800 1,850

Total shares 2,328,980 2,328,980 2,328,980

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Year ended As at 31st March `̀̀̀ In Lakhs

Particulars 2011 2010 2009 2008 2007

Amount of dividend 63.17 141.67 154.56

Dividend distribution Tax 10.74 24.07 21.96

* During the financial year 2008-09 all Preference Shares are redeemed

Revaluation of assets Our Company has not revalued its assets in the last five years.

Mechanism for redressal of investor grievances

The MoU between the Registrar to the Issue and our Company will provide for retention of records with the Registrar to the Issue for a period of at least three years from the last date of despatch of the Allotment Advice, demat credit and refund orders to enable the investors to approach the Registrar to the Issue for redressal of their grievances.

All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details such as name, address of the applicant, number of NCDs applied for, amount paid on application and the bank branch or collection centre where the application was submitted. The contact details of Registrar to the Issue are as follows:

Integrated Enterprises (India) Limited 2nd Floor, ‘Kences Towers’ No.1 Ramakrishna Street North Usman Road, T Nagar Chennai – 600 017 Tel: +91 44 2814 0801, +91 44 2814 0802, +91 44 2814 0803 Fax: +91 44 2814 2479 Email: scuf@iepindia.com Investor Grievance Email: sureshbabu@iepindia.com Website: www.iepindia.com Contact Person: Mr. K. Balasubramanian / Mr. Sriram S SEBI Registration No.: INR000000544

We estimate that the average time required by us or the Registrar to the Issue for the redressal of routine investor grievances will be 7 (seven) business days from the date of receipt of the complaint. In case of non-routine complaints and complaints where external agencies are involved, we will seek to redress these complaints as expeditiously as possible.

Mr. C.R. Dash has been appointed as the Compliance Officer of our Company for this issue.

The contact details of Compliance officer of our Company are as follows:

Mr. C.R. Dash,

221, Royapettah High Road, Mylapore,

Chennai – 600004, Tamil Nadu

Tel.: + 91 44 4391 5300

Fax: +91 44 4391 5351

Email: sect@shriramcity.in

Change in Auditors of our Company during the last three years

There has been no change(s) in the statutory auditor of our company in the last 3 (three) financial years preceding the date of this Prospectus.

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REGULATIONS AND POLICIES

The regulations summarised below are not exhaustive and are only intended to provide general information to

Investors and is neither designed nor intended to be a substitute for any professional legal advice. Taxation statutes

such as the IT Act, Central Sales Tax Act, 1956 and applicable local sales tax statutes, labour regulations such as

the Employees State Insurance Act, 1948 and the Employees Provident Fund and Miscellaneous Act, 1952, and

other miscellaneous regulations such as the Trade and Merchandise Marks Act, 1958 and applicable Shops and

Establishments statutes apply to us as they do to any other Indian company and therefore have not been detailed

below. The following information is based on the current provisions of applicable Indian law, which are subject to

change or modification by subsequent legislative, regulatory, administrative or judicial decisions.

As per the RBI Act, a financial institution has been defined as a company which includes a non-banking institution carrying on as its business or part of its business the financing activities, whether by way of making loans or advances or otherwise, of any activity, other than its own and it is engaged in the activities of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by the Government of India or other local authorities or other marketable securities of like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of carrying out any agricultural or industrial activities or the sale/purchase/construction of immovable property. Any company which carries on the business of a non-banking financial institution as its principal business is to be treated as an NBFC. Since the term 'principal business' has not been defined in law, the RBI has clarified through a press release (Ref. No. 1998-99/ 1269) in 1999, that in order to identify a particular company as an NBFC, it will consider both the assets and the income pattern as evidenced from the last audited balance sheet of the company to decide its principal business. The company will be treated as an NBFC if its financial assets are more than 50 per cent of its total assets (netted off by intangible assets) and income from financial assets should be more than 50 per cent of the gross income. Both these tests are required to be satisfied as the determinant factor for principal business of a company. With effect from 1997, NBFCs were not permitted to commence or carry on the business of a non banking financial institution without obtaining a Certificate of Registration (CoR). Further, with a view to imparting greater financial soundness and achieving the economies of scale in terms of efficiency of operations and higher managerial skills, the RBI has raised the requirement of minimum net owned fund from ` 25 Lakhs to ` 200 Lakhs for the NBFC which commences business on or after April 21, 1999. Further, every NBFC is required to submit to the RBI a certificate, from its statutory auditor within one month from the date of finalization of the balance sheet and in any case not later than December 30th of that year, stating that it is engaged in the business of non-banking financial institution requiring it to hold a CoR.

1. Regulation of NBFCs registered with the RBI

NBFCs are primarily governed by the RBI Act, 1934 (“RBI Act”), the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, (“Prudential

Norms”), the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998, (“Public Deposit Directions”), the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 (“Non- Deposit Accepting

NBFC Directions”), and the provisions of the Non- Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998. In addition to these regulations, NBFCs are also governed by various circulars, notifications, guidelines and directions issued by the RBI from time to time.

2. Types of Activities that NBFCs are permitted to carry out

Although by definition, NBFCs are permitted to operate in similar sphere of activities as banks, there are a few important, key differences. The most important distinctions are:

(i) an NBFC cannot accept deposits repayable on demand – in other words, NBFCs can only accept

fixed term deposits. Thus, NBFCs are not permitted to issue negotiable instruments, such as cheques which are payable on demand; and

182

(ii) NBFCs are not allowed to deal in foreign exchange, even if they specifically apply to the RBI for

approval in this regard.

3. Types of NBFCs:

Section 45-IA of the RBI Act makes it mandatory for every NBFC to get itself registered with the Reserve Bank in order to be able to commence any of the aforementioned activities. Further, an NBFC may be registered as a deposit accepting NBFC (“NBFC-D”) or as a non-deposit accepting NBFC (“NBFC-ND”). NBFCs registered with RBI are further classified as: (i) asset finance companies; (ii) investment companies; and/or

(iii) loan companies and/or

(iv) infrastructure finance companies Our Company has been classified as an NBFC-D and is further classified as an “asset finance company”.

An asset finance company is an NBFC whose principal business is to finance physical assets supporting productive / economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines.

4. Regulatory Requirements of an NBFC under the RBI Act Net Owned Fund

Section 45-IA of the RBI Act provides that to carry on the business of a NBFC, an entity would have to

register as an NBFC with the RBI and would be required to have a minimum net owned fund of ` 2,00,00,000 (Rupees two crore only). For this purpose, the RBI Act has defined “net owned fund” to mean:

(a) the aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the

company, after deducting (i) accumulated balance of losses, (ii) deferred revenue expenditure, and (iii) other intangible assets; and

(b) further reduced by the amounts representing, (1) investment by such companies in shares of (i) its subsidiaries, (ii) companies in the same group,

(iii) other NBFCs, and (2) the book value of debentures, bonds, outstanding loans and advances (including hire purchase and

lease finance) made to, and deposits with (i) subsidiaries of such companies; and (ii) companies in the same group,

to the extent such amount exceeds 10% of (a) above.

Reserve Fund

In addition to the above, Section 45-IC of the RBI Act requires NBFCs to create a reserve fund and transfer therein a sum of not less than 20% of its net profits earned annually before declaration of dividend. Such sum cannot be appropriated by the NBFC except for the purpose as may be specified by the RBI from time to time and every such appropriation is required to be reported to the RBI within 21 days from the date of

183

such withdrawal.

Maintenance of liquid assets

The RBI through notification dated January 31, 1998, as amended has prescribed that every NBFC shall invest and continue to invest in unencumbered approved securities valued at a price not exceeding the current market price of such securities an amount which shall, at the close of business on any day be not less than 10% in approved securities and the remaining in unencumbered term deposits in any scheduled commercial bank; the aggregate of which shall not be less than 15% of the public deposit outstanding at the last working day of the second preceding quarter.

5. Obligations of NBFC-D under the Public Deposit Directions

The RBI’s Public Deposit Directions governs the manner in which NBFCs may accept and/or hold public deposits. The Public Deposit Directions places the following restrictions on NBFCs in connection with accepting public deposits:

1. Prohibition from accepting any demand deposits: NBFCs are prohibited from accepting any public deposit which is repayable on demand.

2. Ceiling on quantum of deposits: A NBFC which is classified as an asset finance company, (a) having net

owned funds of ` 25,00,000/- (Rupees twenty five lakh only) or more, and, (b) having complied with all prudential norms relating to the capital adequacy ratio of not less than fifteen percent as per last audited balance-sheet, may, accept or renew public deposits not exceeding one and one-half times of its net owned funds or public deposit up to ` 10,00,00,000/- (Rupees ten crore), whichever is less. Further, an asset finance company, (a) having net owned funds ` 25,00,000/- (Rupees twenty five lakh only) or more, (b) having complied with all the prudential norms, and (c) having obtained minimum investment grade credit rating from a notified credit rating agency, may, accept or renew public deposits not exceeding four times of its net owned funds.

3. Downgrading of credit-rating: In the event that the credit rating issued by a credit rating agency recognised

by RBI, for an asset finance company is downgraded below the minimum specified investment grade, with respect to the relevant credit rating agency, the NBFC must (a) forthwith stop accepting public deposit, (b) report the position of the credit rating within fifteen working days to the RBI, and, (c) reduce, within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil or the appropriate extent as permitted under the Public Deposit Directions, by repayment as and when such deposit falls due or otherwise.

4. Ceiling on rate of interest: An NBFC cannot invite or accept or renew public deposit at a rate of interest

exceeding twelve and half per cent per annum. Such interest may be paid or compounded at rests which shall not be shorter than monthly rests.

5. Minimum lock-in period: An NBFC is prohibited from granting any loan against a public deposit or make

premature repayment of a public deposit within a period of three months from the date of acceptance of such public deposit.

6. Obligations of NBFC-D under the Prudential Norms NBFC-Ds are required to comply with prescribed capital adequacy ratios, single and group exposure norms, and other specified prudential requirements prescribed under the Prudential Norms. Some of the important obligations are as follows:

i) Income Recognition: NBFC-Ds are required to follow recognised accounting principles in connection with recognition of income. Income including interest/discount or any other charges on NPA is recognised only when it is actually realised. Any such income recognised before the asset became non-performing and remaining unrealised must be reversed. With respect to hire purchase assets, where instalments are overdue for more than 12 months, income shall be recognised only

184

when hire charges are actually received. Any such income taken to the credit of profit and loss account before the asset became non-performing and remaining unrealised, must be reversed.

ii) Asset Classification and provisioning of assets: Every NBFC-D is required to, after taking into

account the degree of well defined credit weaknesses and extent of dependence on collateral security for realisation, classify its lease/hire purchase assets, loans and advances and any other forms of credit into the following classes, namely:

• Standard assets;

• Sub-standard assets;

• Doubtful assets; and

• Loss assets.

Further, an NBFC-D must, after taking into account the time lag between an account becoming non-performing, its recognition as such, the realisation of the security and the erosion over time in the value of security charged, make provision against sub-standard assets, doubtful assets and loss assets in the manner prescribed by RBI.

iii) Provisioning of Standard Assets: In terms of the requirement of the circular dated January 17,

2011 issued by the RBI, NBFCs are required to make a general provision at 0.25 per cent of the outstanding standard assets. The provisions on standard assets are not reckoned for arriving at net NPAs. The provisions towards standard assets are not needed to be netted from gross advances but shown separately as 'Contingent Provisions against Standard Assets' in the balance sheet. NBFCs are allowed to include the ‘General Provisions on Standard Assets’ in Tier II capital which together with other ‘general provisions/ loss reserves’ will be admitted as Tier II capital only up to a maximum of 1.25 per cent of the total risk-weighted assets.

iv) Loans against NBFC’s own shares prohibited: No NBFC-D can lend against its own shares, as of

July 1, 2008. Any outstanding loan granted by a NBFC-D against its own shares on the date of commencement of these Directions shall be recovered by the NBFC as per the repayment schedule.

v) NBFC failing to repay public deposit prohibited from making loans and investments: A NBFC-D

which has failed to repay any public deposit or part thereof in accordance with the terms and conditions of such deposit, cannot grant any loan or other credit facility by whatever name called or make any investment or create any other asset as long as such default exists.

vi) Exposure to capital-markets: Every NBFC-D with total assets of ` 100 crore and above according

to the previous audited balance sheet, must submit a monthly return within a period of 7 days of the expiry of the month to which it pertains in the prescribed form to the Regional Office of the Department of Non-Banking Supervision of the RBI.

vii) Capital Adequacy: Every NBFC-D shall maintain a minimum CAR consisting of Tier I and Tier II

capital which must not be less than twelve per cent of its aggregate risk weighted assets on balance sheet and of risk adjusted value of off-balance sheet items. The total of Tier II capital of any NBFC-D, at any point of time, must not exceed one hundred per cent of Tier I capital. As per RBI notification dated February 17, 2011, all deposit taking NBFCs have to maintain a minimum capital ratio, consisting of Tier I and Tier II capital, which shall not be less than 15% of its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items w.e.f. March 31, 2012.

viii) Disclosure Requirements: Every NBFC-D is required to separately disclose in its balance sheet the

provisions made in accordance with the applicable prudential norms prescribed by the RBI without netting them from the income or against the value of assets. Further, the provisions must be distinctly indicated under separate heads of account as under:

185

• provisions for bad and doubtful debts; and

• provisions for depreciation in investments.

Such provisions shall not be appropriated from the general provisions and loss reserves held, if any, by the NBFC-D and for each year shall be debited to the profit and loss account. The excess of provisions, if any, held under the heads general provisions and loss reserves may be written back without making adjustment against them.

ix) Monthly Return: Every NBFC with total assets of ` 100 crore and above according to the previous

21 days audited balance sheet, is required to submit a monthly return within a period of 7 days of the expiry of the month to which it pertains in the prescribed format to the Regional Office of the Department of Non-Banking Supervision of the RBI.

x) Fair Practices Code: The RBI has framed the fair practice guidelines, to promote good and fair

practices by setting minimum standards to be adhered to by NBFCs in dealing with customers. These guidelines require NBFCs to ensure that they meet the commitments and standards specified therein for the products and services they offer and in the procedures and practices their staff follows, their products and services meet relevant laws and regulations in letter and spirit, and their dealings with customers rest on ethical principles of integrity and transparency. Further, the said guidelines prescribe the requirements in connection with information to be provided and disclosures to be made by NBFCs to their customers. Accordingly, the guidelines require NBFCs to provide information on interest rates, common fees and charges, provide clear information explaining the key features of their services and products that customers are interested in, provide information on any type of product and service offered, that may suit the customer’s needs, tell the customers about the various means through which products and services are offered, and provide more information on the key features of the products, including applicable interest rates / fees and charges.

xi) KYC Guidelines: NBFCs have been advised to follow certain customer identification procedure

for opening of accounts and monitoring transactions of suspicious nature for the purpose of reporting it to appropriate authority, (“KYC Norms”). Accordingly, NBFCs have been advised to ensure that a proper policy framework on ‘know your customer’ and anti-money laundering measures is formulated and put in place with the approval of the RBI. The KYC Norms also require that while preparing operational guidelines NBFCs may keep in mind to treat the information collected from the customer for the purpose of opening of account as confidential and not divulge any details thereof for cross selling or any other purposes. NBFCs may, therefore, ensure that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard. Any other information from the customer should be sought separately with his /her consent and after opening the account.

Rating of Financial Product

As per RBI Circular dated February 4, 2009 all NBFCs with assets size of ` 10,000 lakhs and above is required to furnish at the regional office of the RBI under whose jurisdiction the registered office of the NBFC is functioning, information relating to the downgrading and upgrading of assigned rating of any financial products issued by them within 15 days of such change. Norms for excessive interest rates

RBI through its circular dated May 24, 2007 directed all NBFCs to put in place appropriate internal principles and procedures in determining interest rates and processing and other charges. In addition to the aforesaid instruction RBI has issued a circular dated January 2, 2009 and a master circular on Fair Practices Code dated July 1, 2009 for regulating the excessive rates of interest charged by the NBFCs. The aforementioned circular and the master circular stipulate that the board of each NBFC shall adopt an interest rate model taking into account the various relevant factors such as cost of funds, margin and risk premium etc. The rate of interest and the approach for gradation of risk and the rationale for charging

186

different rates of interest for different categories of borrowers shall be required to be disclosed to the borrowers in the application form and communicated explicitly in the sanction letter. Further, the same is also required to be made available on the company’s website or be published in the relevant newspapers and is required to be updated in the event of any change therein. Further, the rate of interest would have to be annualized rates so that that the borrower is aware of the exact rates that would be charged to the account.

7. Corporate Governance

Pursuant to RBI circular (DNBS.PD/CC 94/03.10.042/2006-07) dated May 8, 2007, the RBI has proposed certain corporate governance guidelines for the consideration of all NBFC–D with an asset size of ` 20 crore or more. The guidelines recommend that such NBFCs constitute an Audit Committee, a Nomination Committee (to ensure that fit and proper persons are nominated as directors on their respective boards) and a Risk Management Committee to institute risk management systems. The guidelines have also issued instructions relating to credit facilities to directors, loans and advances to relatives of the directors of the said NBFCs or to the directors of other companies and their relatives and other entities, timeframe for recovery of such loans, etc. Such NBFCs are also required to frame internal corporate governance guidelines based on the guidelines issued by the RBI on May 8, 2007.

8. Accounting Standards & Accounting policies Subject to the changes in Indian Accounting Standards and regulatory environment applicable to a NBFC we may change our accounting policies in the future and it might not always be possible to determine the effect on the Profit and Loss account of these changes in each of the accounting years preceding the change. In such cases our profit/ loss for the preceding years might not be strictly comparable with the profit/ loss for the period for which such accounting policy changes are being made.

9. Reporting by Statutory Auditor

The statutory auditor of the NBFC-D is required to submit to the Board of Directors of the company a report inter-alia certifying that such company has complied with the prudential norms relating to income recognition, accounting standards, asset classification and provisioning for bad and doubtful debts and standard assets as applicable to it. In the event of non-compliance, the statutory auditors are required to directly report the same to the RBI.

10. Other Regulations

Applicable Foreign Investment Regime

FEMA Regulations Foreign investment in India is governed primarily by the provisions of the FEMA which relates to regulation primarily by the RBI and the rules, regulations and notifications thereunder, and the policy prescribed by the Department of Industrial Policy and Promotion (DIPP), GoI which is regulated by the FIPB. The RBI, in exercise of its power under the FEMA, has notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (“FEMA Regulations”) to prohibit, restrict or regulate, transfer by or issue of security to a person resident outside India. As laid down by the FEMA Regulations, no prior consent and approval is required from the RBI, for FDI under the “automatic route” within the specified sectoral caps. In respect of all industries not specified as FDI under the automatic route, and in respect of investment in excess of the specified sectoral limits under the automatic route, approval may be required from the FIPB and/or the RBI.

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Foreign Direct Investment

FDI in an Indian company is governed by the provisions of the FEMA read with the FEMA Regulations and the Foreign Direct Investment Policy (“FDI Policy”) by the DIPP. FDI is permitted (except in the prohibited sectors) in Indian companies either through the automatic route or the approval route, depending upon the sector in which FDI is sought to be made. Under the automatic route, no prior Government approval is required for the issue of securities by Indian companies/ acquisition of securities of Indian companies, subject to the sectoral caps and other prescribed conditions. Investors are required to file the required documentation with the RBI within 30 days of such issue/ acquisition of securities. Under the approval route, prior approval from the FIPB or RBI is required. FDI for the items/ activities that cannot be brought in under the automatic route (other than in prohibited sectors) may be brought in through the approval route. Further: (a) As per the sector specific guidelines of the Government of India, 100% FDI/ NRI investments are allowed

under the automatic route in certain NBFC activities subject to compliance with guidelines of the RBI in this regard.

(b) Minimum Capitalisation Norms for fund based NBFCs:

(i) For FDI up to 51% - US$ 5 Lakhs to be brought upfront (ii) For FDI above 51% and up to 75% - US $ 50 Lakhs to be brought upfront (iii) For FDI above 75% and up to 100% - US $ 500 Lakhs out of which US $ 75 Lakhs to be brought

upfront and the balance in 24 months (c) Minimum capitalization norm of US $5 Lakhs is applicable in respect of all permitted non fund based

NBFCs with foreign investment (d) Foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of

25% of its equity to Indian entities, subject to bringing in US$ 500 Lakhs as at (b) (iii) above(without any restriction on number of operating subsidiaries without bringing in additional capital)

(e) Joint ventures operating NBFC’s that have 75% or less than 75% foreign investment will also be allowed to

set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capital inflow i.e. (b) (i) and (b) (ii) above.

Where FDI is allowed on an automatic basis without FIPB approval, the RBI would continue to be the primary agency for the purposes of monitoring and regulating foreign investment. In cases where FIPB approval is obtained, no approval of the RBI is required except with respect to fixing the issuance price, although a declaration in the prescribed form, detailing the foreign investment, must be filed with the RBI once the foreign investment is made in the Indian company. The foregoing description applies only to an issuance of shares by, and not to a transfer of shares of, Indian companies. Every Indian company issuing shares or convertible debentures in accordance with the RBI regulations is required to submit a report to the RBI within 30 days of receipt of the consideration and another report within 30 days from the date of issue of the shares to the non resident purchaser. Laws relating to Employment

Shops and Establishments legislations in various states

The provisions of various Shops and Establishments legislations, as applicable, regulate the conditions of work and employment in shops and commercial establishments and generally prescribe obligations in respect of inter alia registration, opening and closing hours, daily and weekly working hours, holidays, leave, health and safety measures and wages for overtime work.

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Labour Laws

The Company is required to comply with various labour laws, including the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, the Payment of Wages Act, 1936, the Payment of Gratuity Act, 1972 and the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Laws relating to Intellectual Property

The Trade Marks Act, 1999 and the Indian Copyright Act, 1957 inter alia govern the law in relation to intellectual property, including brand names, trade names and service marks and research works. In addition to the above, our Company is required to comply with the provisions of the Companies Act, 1956, the Foreign Exchange Management Act, 1999, various tax related legislations and other applicable statutes.

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SUMMARY OF KEY PROVISIONS OF ARTICLES OF ASSOCIATION

Pursuant to Schedule II of the Act the main provisions of the AOA relating to the issue and allotment of debentures and matters incidental thereto. Please note that the each provision herein below is numbered as per the corresponding article number in the AOA. All defined terms used in this section have the meaning given to them in the AOA. Any reference to the term “Article” hereunder means the corresponding article contained in the AOA. Article 11 provides that Debenture/Debenture Stock, Loan/Loan Stock, Bonds or other securities conferring the right to allotment or conversion into shares or the option or right to call for allotment of shares shall not be issued except with the sanction of the Company in the General meeting. Article 14 provides that in case Share/Debenture certificates are issued for either more or less than marketable lots, sub-division or consolidation into marketable lots will be done by the Company at no charge. Clause (ii) of Article 15 A provides that the Company shall within three months after the allotment or within one month after the application for registration of the transfer of any Share or Debenture is completed and have ready for delivery the certificates of all the Shares and Debentures so allotted or transferred unless the conditions of issue of the said Shares otherwise provide. Article 16 provides that if a certificate be worn out, defaced or if there is no further space on the back thereof for endorsement of transfer, it shall, if required, be replaced by a new certificate free of charge provided/however that such new certificate shall not be issued except upon delivery of the said worn out or defaced or used up certificate for the purpose of cancellation. Article 17 provides that if a certificate is lost or destroyed the Company may, upon such evidence and proof of such loss or destruction and such Indemnity as the Board may require and on payment of such a fee not exceeding Rupee one issue a renewed certificate. Any renewed certificate shall be marked as such. Clause A of Article 17 provides that notwithstanding what is stated in Article 16 and 17 above the Directors shall comply with such Rules or Regulations or requirements of any Stock Exchange or the Rules made under the Securities Contract (Regulation) Act, 1956 or any other Act, or rules applicable in this behalf. The provisions of this Article shall mutatis mutandis apply to the Debentures of the Company. Clause A of Article 20 provides that the Board of Directors may, if they think fit, receive from any member willing to advance the same, all or any part of the money uncalled and unpaid upon any Share/Debenture held by him and upon all or any part of the money so advanced may (until the same would but for such advance become presently payable) pay interest at such rate not exceeding 14%, p.a. or such other percentage as may be fixed in this regard as the maximum percentage without the sanction of the Company in the General meeting as may be agreed upon between the member paying the sum in advance and the Board of Directors, provided that the amount of advance calls so received shall not be entitled to rank for dividend or participate in the profits of the Company. Clause (f) of Article 21 provides that the Company should effect transfer, transmission, sub-division or consolidation of Shares/ Debentures within one month from the date of lodgement thereof. Clause (g) of Article 21 provides that notwithstanding anything contained in these Articles, the Board of Directors of the Company may in their absolute discretion refuse splitting of any Share certificate or Debenture certificate into denominations less than Marketable lots i.e. the minimum number of Shares or Debentures as required for the purpose of trading on the stock exchange in which the Company’s Shares and/or Debentures are/will be listed, except where subdivision is required to be made to comply with a statutory provision or order of a competent Authority of law. Article 24 provides that no fee shall be charged for registration of transfer of Shares/Debentures or for effecting transmission or for registering any letter of probate, letters of administration and similar other documents. Article 42 provides that in furtherance of and without prejudice to the general powers conferred on the Board of Directors by or implied in Articles 41 and the other powers conferred by these articles and subject to the provision

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of Sec.292 of the Act, it is hereby expressly declared that it shall be lawful, for the Directors to carry out all or any of the objects set forth in the Memorandum of Association and to do the following things: … Clause (3) of Article 42 at their discretion to pay for any property rights, or privileges acquired by, or services rendered to the Company, either wholly or partially in cash or in Shares, bonds, Debentures or other securities of the company and any such Shares may be issued either as fully paid-up or with such amount credited as paid up thereon as may be agreed upon and any such bonds, Debentures, or other securities may be either specifically charged upon all or any of the property of the company and its uncalled Shares, or not so charged. Clause (4) of Article 42 to secure the fulfilment of any contracts or agreement entered into by the Company by mortgage or charge of all or any of the properties of the Company and its uncalled capital for the time being or in such other manner as they think fit.

Clause (16) of Article 42 To borrow on mortgage of the whole or any part of the property of the Company or on the Bonds, Debentures either unsecured or secured by a charge or mortgage or other securities of the Company, or otherwise as they may deem expedient, such sums as they may think necessary for the purpose of the Company, subject to provisions contained in Sec.292 and Sec.293 of the Act.

Article 44 provides that he Board of Directors may from time to time but with such consent of the Company in general meetings as may be required under Sec.293 of the Act, raise any money or any moneys or sum of money for the purpose of the Company, provided that the moneys to be borrowed together with moneys already borrowed by the company apart from temporary loans obtained from the Company’s bankers in the ordinary course of business shall not without the sanction of the Company at a General Meeting exceed the aggregate of the paid-up capital of the company and its free reserves that is to say reserves not set apart for any specific purpose and in particular but subject to the provision of Section 292 of the Act, the Board may from time to time at their discretion may raise or borrow or secure the payment of any such sum or sums of money for the purpose of the Company, by the issue of Debentures to members, raised or received, to mortgage, pledge or change, the whole or any part of the property, assets, or revenue of the Company, present or future, including its uncalled capital by special assignment or otherwise or to transfer or convey the same absolutely or in trust and to give the lenders powers of sale and others as may be expedient and to purchase, redeem or pay off any such securities.

Provided that the Directors may, by a resolution at a meeting of the Board delegate the power to borrow money otherwise than on Debentures to a committee of Directors subject to limits specified in the said resolution in respect of the total which can be so borrowed.

“Debentures, Debenture Stocks, Bonds or other securities with a right to allotment of or conversion into Shares shall not be issued except with the sanction of the Company in General Meeting”.

Article 54 provides that Clause (1) of Article 54 Every shareholder or debenture holder or depositor of the Company, may at any time, nominate a person to whom his shares or debentures or deposits shall vest in the event of his death in such manner as may be prescribed under the Act. Clause (2) of Article 54 Where the shares or debentures or deposits of the Company are held by more than one person jointly, joint holders may together nominate a person to whom all the rights in the shares or debentures or deposits, as the case may be shall vest in the event of death of all the joint holders in such manner as may be prescribed under the Act. Clause (3) of Article 54 Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, where a nomination made in the manner aforesaid purports to confer on any person the right to vest the shares of debentures or deposits, the nominee shall, on the death of the shareholder or debenture holder or depositor or, as the case may be on the death of the joint holders become entitled

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to all the rights in such shares or debentures or deposits or, as the case may be, all the joint holders, in relation to such shares or debentures or deposits, to the exclusion of all other person, unless the nomination is varied or cancelled in the manner as may be prescribed under the Act. Clause (4) of Article 54 Where the nominee is a minor, it shall be lawful for the holder of the shares or Debenture or deposits, to make the nomination to appoint any person to become entitled to shares in or debentures of or deposits of the Company in any manner prescribed under the Act, in the event of his death, during minority. Article 55 provides that Clause (1) of Article 55 provides that a nominee, upon production of such evidence as may be required by the Board and subject as hereinafter provided elect, either- Clause (1) (a) register himself as holder of the share or debenture or deposit, as the case may be; or Clause (1) (b) to make such transfer of the share or debenture or deposit, as the deceased shareholder or debenture holder or deposit holder, as the case may be, could have made. Clause (2) of Articles 55 provides that if the nominee elects to be registered as nominee of the Share or Debenture or deposit himself as the case may be, he shall deliver or send to the Company, a notice in writing signed by him stating that he so elects and such notice shall be accompanied with the death certificate of the deceased shareholder or debenture holder or deposit holder, as the case may be. Clause (4) of Article 55 provides that the Board may, at any time, give notice requiring any such person to elect either to be registered himself or to transfer the shares or debenture or deposit, and if the notice is not complied with within ninety (90) days, the Board may hereafter withhold payment of all dividends, interest, bonuses or other moneys payable in respect of the share or debenture or deposit, until the requirements of the notice have been complied with.

Article 56 provides that the Company shall be entitled to dematerialise its existing shares, debentures and other securities, rematerialise its shares, debentures and other securities held in the Depositories and/or offer its fresh shares and debentures and other securities in a dematerialised form pursuant to the Depositories Act, and the Rules framed thereunder, if any. Every person subscribing to or holding securities offered by the Company shall have the option to receive security certificates or to hold the securities with a Depository. Such a person who is the beneficial owner of the securities can at any time opt out of a depository, if permitted by law, in respect of any security in the manner provided by the Depositories Act, and the Company shall, in the manner and within the time prescribed, issue to the beneficial owner the required Certificates of Securities. If a person opts to hold his security with a Depository, the Company shall intimate such Depository the details of allotment of the security, and on receipt of the information, the Depository shall enter in its record the name of the allottee as the beneficial owner of the security. The Company shall cause to be kept a Register and Index of Members and a Register and Index of Debenture holders in accordance with all applicable provisions of the Companies Act, 1956 and the Depositories Act, with details of shares and Debentures held in material and dematerialised forms in any media as may be permitted by law, including in any form of electronic media. The Register and Index of Beneficial Owners maintained by Depository under the Depositories Act shall be deemed to be Register and Index of Members and Security holders for the purposes of these Articles. The Company shall be entitled to keep in any State or Country outside India a Branch Register of Members Resident in that State or Country.

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MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

The following contracts which are or may be deemed material have been entered or are to be entered into by the Company. These contracts and also the documents for inspection referred to hereunder, may be inspected at the Registered Office of the Company situated at 123, Angappa Naicken Street, Chennai, Tamil Nadu, India 600001 from 10.00 AM to 5 P.M on any business days from the date of this Prospectus until the date of closure of the Issue. A. Material Contracts

1. Engagement Letter dated July 20, 2011 received from the Company appointing the Lead Managers

and the Co-Lead Manager. 2. Memorandum of Understanding dated July 20, 2011 between the Company, the Lead Managers

and the Co-Lead Manager. 3. Memorandum of Understanding dated July 14, 2011 with the Registrar to the Issue 4. Debenture Trust Agreement dated July 18, 2011 executed between the Company and the

Debenture Trustee. 5. The agreed form of the Debenture Trust Deed to be executed between the Company and the

Debenture Trustee. 6. Escrow agreement dated July 28, 2011 executed by the Company, the Registrar, the Escrow

Collection Bank(s), the Lead Managers and the Co-Lead Manager.

B. Material Documents

1. Certificate of Incorporation of the Company dated March 27, 1986, issued by Registrar of

Companies, Tamil Nadu, Chennai 2. Memorandum and Articles of Association of the Company. 3. The certificate of registration No. 07-00458 dated April 17, 2007 issued by Reserve Bank of India

u/s 45 IA of the Reserve Bank of India, 1934. 4. Credit rating letter dated July 14, 2011 from CARE and credit rating letter dated July 14, 2011

from CRISIL, granting credit ratings to the NCDs. 5. Copy of the Board Resolution dated March 24, 2011, approving the Issue. 6. Resolution passed by the shareholders of the Company at the Annual General Meeting held on

July 28, 2011 approving the overall borrowing limit of Company. 7. Consents of the Directors, Lead Managers to the Issue, the Co-Lead Manager to the Issue,

Compliance Officer of our Company, Debenture Trustee, Lead Brokers, credit rating agencies for the Issue, Legal Advisor to the Issue, Bankers to the Issue, Bankers to the Company and the Registrar to the Issue, to include their names in this Prospectus.

8. The consent of the Statutory Auditors of our Company, namely M/s. Pijush Gupta & Co. for (a) inclusion of their names as the Statutory Auditors, (b) inclusion of examination reports on Reformatted Consolidated Summary Financial Statements and the Reformatted Unconsolidated Summary Financial Statements in the form and context in which they appear in this Prospectus.

9. The examination report of the Statutory Auditors dated July 21, 2011 in relation to the Reformatted Consolidated Summary Financial Statements included herein.

10. The examination report of the Statutory Auditors dated July 21, 2011 in relation to the Reformatted Unconsolidated Summary Financial Statements included herein.

11. Annual Reports of the Company for the last five Financial Years 2006-07 to 2010-11. 12. Due Diligence certificates dated August 1, 2011 filed by the Lead Managers and the Co-Lead

Manager, respectively. 13. Due Diligence Certificate of the Debenture Trustee to be filed with SEBI (prior to the Issue

Opening Date). 14. Tripartite agreement between the Company, Registrar to the Issue and CDSL and the Company,

Registrar to the issue and NSDL dated March 30, 2000 and April 20, 1999, respectively. 15. Copy of the shareholders’ resolution re-appointing the Managing Director of the Company dated

July 30, 2010. 16. License Agreement dated April 1, 2010 with Shriram Ownership Trust.

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17. Investor agreement dated May 13, 2008 between Western India Trustee and Executor Company

Limited, in its capacity as the trustee of India Advantage Fund – VI and our Company.

18. Investor agreement dated May 12, 2008 between Bessemer Ventures Partners and our Company.

19. Investment agreement dated May 9, 2008 between Asiabridge Fund I LLC and our Company.

20. Investment agreement dated December 26, 2006 between Van Gogh Limited and our Company

and the Subscription and Amendment Agreement dated May 12, 2008 between Van Gogh Limited

and our Company.

21. Share subscription agreement dated September 12, 2008 between (i) Mr. R. Thyagarajan, Mr. T

Jayaraman, Shriram Capital Limited and Shriram Ownership Trust acting through its trustees Mr.

R. Thyagarajan, Mr. Arun Duggal, Mr. D.A Prasanna, Mr. R. Kannan and Mr. D.V Ravi, TPG

India Investments I, Inc., Shriram Retail Holdings Private Limited, Shriram Enterprises Holdings

Private Limited and our Company.

22. SCUF Employee Stock Option Scheme of 2006 and SCUF Employee Stock Option Scheme of

2008.

23. In-principle approval, dated August 1, 2011 for the Issue issued by NSE.

24. In-principle approval, dated July 29, 2011 for the Issue issued by BSE.

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DECLARATION

We, the Directors of the Shriram City Union Finance Limited, certify that all the relevant provisions of the Companies Act, 1956 and the guidelines issued by the Government of India or the guidelines issued by the Securities and Exchange Board of India established under Section 3 of the Securities and Exchange Board of India Act, 1992, as the case may be, have been complied with and no statement made in this Prospectus is contrary to the provisions of the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992 or the rules made or guidelines issued thereunder, as the case may be.

Yours faithfully On behalf of the Board of Directors of Shriram City Union Finance Limited: _________________________ MR. ARUN DUGGAL ____________________________

MR. R. KANNAN _______________________

MR. MUKUND GOVIND DIWAN _________________________

MR. S. KRISHNAMURTHY _______________________

MR. VIPEN KAPUR ____________________

MR. S. VENKATKRISHANAN ________________________

MR. RANVIR DEWAN ______________________

MR. K. R. RAMAMOORTHY _________________________________

MRS. LAKSHMI PRANESH _________________________________

MR. PUNEET BHATIA _________________________________ MR.G.S. SUNDARAJAN

_________________________________ MR. SUNIL VARMA

Place: Chennai Date: August 1, 2011