JM FINANCIAL ASSET RECONSTRUCTION COMPANY ...

JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED

The Company was incorporated as JM Financial Asset Reconstruction Company Private Limited, a private company limited by shares under the Companies Act, 1956 on September 19, 2007 in the State of Maharashtra with the registration number 11-174287. The Corporate Identity Number (CIN) of the Company is U67190MH2007PTC174287.

Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025 Tel: +91 22 6630 3030; Fax: +91 22 6630 3223

Contact Person and Company Secretary: Mr. Nikhil Bhandary E-mail: [email protected] Website: www.jmfl.com

DISCLOSURE DOCUMENT FOR ISSUE OF 1,000, 13% SECURED, RATED, LISTED, REDEEMABLE NON-CONVERTIBLE DEBENTURES (“DEBENTURES” OR “NCDs”) OF THE FACE VALUE OF ` 10,00,000/- (RUPEES TEN LAKH ONLY) EACH FOR CASH AGGREGATING ` 100,00,00,000/- (RUPEES ONE HUNDRED CRORE ONLY) TO BE ISSUED ON RIGHTS BASIS TO THE EXISTING ELIGIBLE EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF ONE (1) NCD FOR EVERY TWO LAKH TEN THOUSAND (210000) EQUITY SHARES HELD ON THE RECORD DATE I.E. JULY 11, 2014 (“THE ISSUE” OR “THIS ISSUE”)

GENERAL RISKS Investment in debt and debt related securities involve a degree of risk and investors should not invest any funds in the debt instruments, unless they can afford to take the risks attached to such investments. Investors are advised to read the risk factors carefully before taking an investment decision in relation to this Issue. For taking an investment decision, the investors must rely on their own examination of the Company, this Disclosure Document and the Issue including the risks involved. The Issue has not been recommended or approved by the Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this Disclosure Document. Prospective investors are advised to carefully read the risks associated with the Issue of Debentures. Specific attention of investors is invited to statement of Risk Factors contained under Section II of this Disclosure Document. These risks are not, and are not intended to be, a complete list of all risks and considerations relevant to the Debentures or investor’s decision to purchase the Debentures.

CREDIT RATING CRISIL Limited has assigned a “CRISIL A+/Stable” (pronounced “CRISIL A plus rating with stable outlook”) rating to the captioned Issue. As per CRISIL’s rating letter, instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations and such instruments carry low credit risk. Investors may please note that the rating is not a recommendation to buy, sell or hold securities and investors should take their own decisions. The rating agency has the right to suspend, withdraw or revise the rating/outlook assigned to the Issue at any time, on the basis of new information or unavailability of information or other circumstances which the rating agency believes may have an impact on the rating.

ISSUER’S ABSOLUTE RESPONSIBILITY

The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Disclosure Document contains all information as required under Schedule I of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 as amended, and RBI Guidelines, that the information contained in this Disclosure Document is true and fair in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Disclosure Document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

LISTING

The Debentures are proposed to be listed on the wholesale debt market segment of BSE Ltd. (“BSE”). BSE has given its ‘in-principle’ approval to list the Debentures vide its letter dated August 1, 2014.

ISSUE PROGRAMME ISSUE OPENS ON ISSUE CLOSES ON AUGUST 18, 2014 SEPTEMBER 16, 2014

This Disclosure Document is dated August 4, 2014 REGISTRAR TO THE ISSUE Sharepro Services (India) Private Limited 13 AB, Samhita Warehousing Complex, Behind Sakinaka Telephone Exchange, Kurla Andheri Road, Sakinaka, Mumbai – 400 072 Tel: +91 22 6772 0329; Fax: +91 22 2850 8927 E-mail: [email protected] Website: www.shareproservices.com Contact Person: Mr. Kumaresan

DEBENTURE TRUSTEE IL&FS Trust Company Limited IL&FS Financial Centre, Plot C-22, G Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051 Tel: +91 22 2659 3884; Fax: +91 22 2653 3297 E-mail: [email protected] Website: www.itclindia.com Contact Person: Ms. Sitara Pillai

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FOR PRIVATE CIRCULATION ONLY (For Eligible Equity Shareholders only)

TABLE OF CONTENTS

TITLE PAGE NO.

SECTION I Notice to Investors and Disclaimers

1-6

Definitions and Abbreviations

SECTION II 7-12 Risk Factors

SECTION III 13-37 Disclosures as per Schedule I of SEBI (Issue and Listing of Debt

Securities) Regulations, 2008 as amended

A. Issuer Information

B. Issue details

SECTION IV Annexures

A. Credit rating letter and rating rationale 38-43 B. Consent Letter of the Debenture trustee 44-45 C. Annual report for financial year 2013-14 46-88


SECTION – I

NOTICE TO SHAREHOLDERS AND DISCLAIMERS

This Disclosure Document (the “Disclosure Document” or “DD”) is not a prospectus under the Companies Act, 2013 and/or the Companies Act, 1956. This Disclosure Document has not been approved by the Securities and Exchange Board of India (“SEBI”) and has been prepared by the Company in conformity with the extant SEBI Regulations. This Issue of NCDs which is to be listed on the WDM segment of BSE Limited is being made strictly to less than fifty persons. This DD does not constitute and shall not be deemed to constitute an offer or an invitation to the public to subscribe to the NCDs. This DD is intended for the eligible equity shareholders of the Company only and the NCDs are offered to the holders of equity shares on rights basis in the ratio of 1 (One) NCD for every 2,10,000 (Two Lakh Ten Thousand) equity shares held by them. Neither this DD nor any other information supplied in connection with the NCDs is intended to provide the basis of any credit or other evaluation and a recipient of this DD should not consider such receipt as a recommendation to purchase NCDs. Each potential investor contemplating the purchase of NCDs should make his/her/its own independent investigation of the financial condition and affairs of the Company and his/her/its own appraisal of the creditworthiness of the Company as well as the structure of the Issue. Potential investors should consult their own financial, legal, tax and other professional advisors as to the risks and investment considerations arising from an investment in the NCDs and should possess the appropriate resources to analyze such investment and the suitability of an investment to the investors’ particular circumstances. This DD and the contents hereof are addressed only to the intended recipients who have been addressed directly and specifically through a communication by the Company. All potential investors are required to comply with the relevant regulations/guidelines applicable to them for investing in this Issue. The contents of this DD are intended to be used only by those potential investors to whom it is distributed. It is not intended for distribution to any other person and should not be reproduced by the recipient or made public or its contents disclosed to a third person. No invitation is being made to any person other than the equity shareholders of the Company to whom this DD has been sent. Any application by a person to whom this DD has not been sent by the Company may be rejected without assigning any reason. Invitations, offers and sales of NCDs shall only be made pursuant to this DD. You may not and are not authorised to (1) deliver this DD to any other person; or (2) reproduce this DD in any manner whatsoever. Any distribution or reproduction or copying of this DD in whole or in part or any public announcement or any announcement to third parties regarding the contents of this DD is unauthorised. Failure to comply with this instruction may result in a violation of applicable laws of India and/or other jurisdictions. This DD has been prepared by the Company for providing information in connection with the proposed Issue of NCDs. The Company does not undertake to update this DD to reflect subsequent events after the date of this DD and thus it should not be relied upon with respect to such subsequent events without first confirming its accuracy with the Company. Neither the delivery of this DD nor the issue of any NCDs made hereunder shall, under any circumstances, constitute a representation or create any implication that there has been no change in the affairs of the Company since the date thereof. The distribution of this DD and the Issue of the NCDs aggregating ` 100 Crore by the Company on rights basis to its shareholders also include an offer to a shareholder in jurisdiction outside India. Such rights issue to a person outside India may be restricted by legal requirements prevailing in that jurisdiction and/or in India. Persons in whose possession this DD may come are required to inform themselves about such restrictions and observe them.

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Accordingly, the NCDs may not be allotted to an applicant in any jurisdiction, except in accordance with legal requirements applicable in such jurisdiction and only after receipt of necessary statutory approvals from the Government of India or any Statutory body in India. Receipt of this DD will not constitute an offer in those jurisdictions in which it would be illegal to make such an offer and, in those circumstances, this DD must be treated as sent for information only and should not be copied or redistributed. Accordingly, persons receiving a copy of this DD should not, in connection with this issue, distribute or send this DD in or into the United States of America or any other jurisdiction where to do so would or might contravene local securities laws or regulations. If this DD is received by any person in any such territory, or by their agent or nominee, they must not seek to subscribe to the NCDs referred to in this DD. This DD does not constitute, nor may it be used for or in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. This DD is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where distribution or use of such information would be contrary to law or regulation. This DD is made available to the eligible equity shareholders only on the strict understanding that it is confidential and may not be transmitted to others, whether in electronic form or otherwise. It is the responsibility of allottees of these NCDs to also ensure that they/it will transfer these Debentures in strict accordance with this DD and other applicable laws. DISCLAIMER CLAUSE OF SEBI As per the provisions of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 as amended, a copy of this DD has not been approved by SEBI. It is distinctly understood that this DD should not in any way be deemed or construed to be approved or vetted by SEBI. SEBI does not take any responsibility either for the financial soundness of the Company or for the correctness of the statements made or opinions expressed in this DD. DISCLAIMER CLAUSE OF THE STOCK EXCHANGE As required, a copy of this DD has been filed with BSE Limited in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 as amended. It is to be distinctly understood that submission of this DD to BSE should not in any way be deemed or construed to mean that this DD has been reviewed, cleared or approved by BSE, nor does BSE in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this DD. BSE does not warrant that the NCDs will be listed or will continue to be listed on BSE nor does BSE take any responsibility for the soundness of the financial and other conditions of the Company, its sponsors, its management or any activities of the Company. DISCLAIMER CLAUSE OF RBI The Company has obtained a certificate of registration dated September 23, 2008 bearing no. 11 issued by the Reserve Bank of India (RBI) to carry on the business of securitisation and asset reconstruction under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, a copy of this DD has not been reviewed, cleared or approved by the RBI. RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the Issuer or for the correctness of any of the statements or representations made or opinions expressed by the Issuer and for discharge of liability by the Issuer. By issuing the aforesaid certificate of registration dated September 23, 2008 to the Issuer, RBI neither accepts any responsibility nor guarantee for the payment of any amount due to any investor in respect of the NCDs.

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DISCLAIMER CLAUSE OF THE COMPANY The Company has certified that the disclosures made in this DD are adequate and in conformity with the SEBI guidelines and RBI Guidelines in force for the time being. This requirement is to facilitate investors to take an informed decision for making an investment in the proposed Issue. The Company accepts no responsibility for statements made otherwise than in the DD or any other material issued by or at the instance of the Company and that anyone placing reliance on any other source of information would be doing so at their own risk. DISCLAIMER IN RESPECT OF JURISDICTION Issue of these Debentures will be made to investors as specified under clause “Who Can Apply” in this DD, being the equity shareholders of the Company. This DD is not to be construed or constituted as an offer to sell or an invitation to subscribe to Debentures offered hereby to any person to whom it is not specifically addressed. The Debentures are governed by and shall be construed in accordance with the existing Indian laws as applicable in the state of Maharashtra. Any dispute arising in respect thereof will be subject to the exclusive jurisdiction of the courts and tribunals of Mumbai. FORCE MAJEURE The Company reserves the right to withdraw the Issue at any time prior to the closing date thereof in the event of any unforeseen development adversely affecting the economic and/or regulatory environment or otherwise. In such an event, the Company will refund the application money, if any, without assigning any reason.

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DEFINITIONS AND ABBREVIATIONS Unless the context otherwise indicates or requires, the following terms shall have the meanings given below in this Disclosure Document. General terms

Term Description JM Financial Asset Reconstruction Company Private Limited/ JMFARC / the Company / the Issuer

JM Financial Asset Reconstruction Company Private Limited, a private limited company incorporated under the Companies Act, 1956, having its registered office at 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, Maharashtra, India and registered as SC/RC with the Reserve Bank of India

Company related terms

Term Description Auditor M/s. Khimji Kunverji & Co., the statutory auditors of the Company Board of Directors/Board The Board of Directors of the Company or any Committee thereof Director(s) Director(s) of the Company for the time being on the Board of the

Company, unless otherwise specified Memorandum and Articles

The Memorandum & Articles of Association of the Company, as amended from time to time

NBFC Non Banking Financial Company as per the Reserve Bank of India Act, 1934, as amended from time to time

Registered Office The registered office of the Company located at 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, Maharashtra, India

SC/RC Securitisation Company/Reconstruction Company registered under Section 3 of SARFAESI

Issue related terms

Term Description Act shall mean provisions of the Companies Act, 1956 and the Companies

Act, 2013, which are in effect from time to time Allotment/Allot The allotment of the NCDs or Debentures under this Issue Application Form The form in which an investor can apply for subscription to the NCDs Beneficial Owner(s) Holder(s) of the Debentures in dematerialized form as defined under

section 2 of the Depositories Act, 1996 BSE BSE Limited Business Day Any day of the week excluding Saturdays, Sundays, any day which is a

public holiday for the purpose of the Negotiable Instruments Act, 1881 in Mumbai and any other day on which banks are closed for customer business in Mumbai, India

CDSL Central Depository Services (India) Limited

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Term Description Date of Allotment The date of allotment of NCDs as may be decided by the Board Debenture(s) Secured, Rated, Listed, Redeemable, Non-convertible Debenture(s) of

the face value of ` 10,00,000/- (Rupees Ten Lakh only) each for cash aggregating `100,00,00,000/- (Rupees One Hundred Crore only) to be issued pursuant to this issue

Debenture Holder The Debenture holder whose name appears in the register of debenture holders or in the beneficial ownership record furnished by NSDL/CDSL for this purpose

Debenture Trustee

Trustee for the Debenture Holders, in this case being IL&FS Trust Company Limited

Depository(ies) A depository registered with SEBI under the Securities and Exchange Board of India (Depositories and Participant) Regulations, 1996, as amended from time to time, in this case being NSDL and CDSL

Depositories Act The Depositories Act, 1996, as amended from time to time Depository Participant/DP A depository participant as defined under the Depositories Act, 1996 Disclosure Document/ DD This Disclosure Document through which the Issue is being made and

which contains the disclosures as per Schedule I of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 as amended from time to time

DP-ID Depository Participant Identification Number DRR Debenture Redemption Reserve to be created, if any, in accordance with

the provisions of the Companies Act, 2013 ECS Electronic clearing system Equity Shares Equity shares of the Company of the face value of `10 each Interest/Coupon Rate The rate of interest payable on the NCDs for the period specified in the

DD Issue Rights issue of the Debentures under this DD Market Lot The minimum lot size for trading of the Debentures on the Stock

Exchange, in this case being One Debenture Moveable Property Moveable Property shall mean the specific identified movable properties

of the Company provided as security in relation to this issue, including the Security Receipts held by the Company and the Company’s receivables

Mutual Fund A mutual fund registered with SEBI under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996

NCDs Debentures issued pursuant to this Issue NEFT National Electronic Fund Transfer Service NSDL National Securities Depository Limited PAN Permanent Account Number Rating Agency CRISIL Limited RBI Act The Reserve Bank of India Act, 1934, as amended from time to time RBI Guidelines RBI Guidelines means the guidelines issued by RBI for the purpose of

issue of NCDs RoC Registrar of Companies, Mumbai, Maharashtra RTGS Real Time Gross Settlement

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Term Description Receivables Receivables shall mean all amounts payable to the Company by the

obligors including principal, interest, additional interest, overdue charges, premium on prepayment, prepayment proceeds, gross of service tax (if any) arising out of any of loans and advances, investments, stock in trade and other current assets of the Company

Redemption Date The date on which repayment of principal amount and all other amounts due in respect of the Debentures will be made

Registrar/Registrar to the Issue

Registrar to the Issue, in this case being Sharepro Services (India) Private Limited

RBI The Reserve Bank of India SARFAESI The Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 SEBI The Securities and Exchange Board of India constituted under the SEBI

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

time to time SEBI Regulations Securities and Exchange Board of India (Issue and Listing of Debt

Securities) Regulations, 2008, as amended from time to time Security Means the security created or caused to be created by the Company to

secure its obligations in respect of the Debentures and includes movable and/or immovable properties of the Company

Security Receipts Security Receipts issued by SC/RC in accordance with the provisions of SARFAESI

Stock Exchange BSE Limited WDM Wholesale Debt market Segment of the BSE

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SECTION - II

RISK FACTORS The following are the risks envisaged by the management of the Company relating to the Company, the Debentures and the market in general. Investors should carefully consider all the risk factors in this DD for evaluating the Company and its business and the Debentures before making any investment decision relating to the Debentures. The Company believes that the factors described below represent the principal risks inherent in investing in the Debentures, but does not represent that the statements below regarding the risks of holding the Debentures are exhaustive. The order 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. Investors should also read the detailed information set out elsewhere in this DD and reach their own views prior to making any investment decision. If any one of the following stated risks actually occurs, the Company’s business, financial conditions and results of operations could suffer and, therefore, the value of the Company’s Debentures could decline and/or the Company’s ability to meet its obligations in respect of the Debentures could be affected. More than one risk factor may have simultaneous effect with regard to the Debentures such that the effect of a particular risk factor may not be predictable. In addition, more than one risk factor may have a compounding effect which may not be predictable. No prediction can be made as to the effect that any combination of risk factors may have on the value of the Debentures and/or the Company’s ability to meet its obligations in respect of the Debentures. These risks and uncertainties are not the only issues that the Company faces. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be immaterial may also have a material adverse effect on its financial condition or business. Unless specified or quantified in the relevant risk factors, the Company is not in a position to quantify the financial or other implications of any risk mentioned herein below.

A. INTERNAL RISK FACTORS

1. Credit Risk

Any lending and investment activity by the Company is exposed to credit risk arising from interest/repayment default by borrowers and other counterparties. Being an SC/RC, the Company has invested in Security Receipts having underlying assets being Non-performing assets (NPAs) and has also lent money to borrowers having high credit risks. The Company is also exposed to the risk of borrowers who owe money, securities or other dues and does not meet their obligations due to various reasons.

In performing its credit assessment, the Company relies largely on information furnished by or on behalf of its borrowers, including financial information, based on which the Company performs its credit assessment. The Company may also depend on certain representations and undertakings with regard to the accuracy, correctness and completeness of information, and the verification of the same by agencies to whom such functions are outsourced. Any such information if materially misleading may increase the risk of default and could adversely impact the financial condition, financial results and/or operations of the Company.

The value of the security/collateral granted in favour of the Company, as the case may be, may decline due to adverse market and economic conditions (both global and domestic), delays in insolvency, winding up and foreclosure proceedings, defects in title, difficulty in locating moveable assets, inadequate documentation in respect of assets secured and the necessity of obtaining regulatory approvals for the enforcement of the security over the assets and the Company may not be able to recover the estimated value of the assets, thus exposing it to potential losses.

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Any delay in enforcing the collateral due to delays in enforcement proceedings before Indian courts or otherwise could also expose the Company to potential losses. Although the Company regularly reviews its credit exposures, defaults may arise from events or circumstances that are difficult to detect or foresee.

2. Repayment of principal is subject to the credit risk of the Company Investors should be aware that receipt of principal amount and any other amounts that may be due in respect of the Debentures is subject to the credit risk of the Company. In the event that bankruptcy proceedings or composition, scheme of arrangement or similar proceedings to avert bankruptcy are instituted by or against the Company, the payment of sums due in respect of the Debentures may be substantially reduced or delayed.

3. Access to Capital Markets and Commercial Borrowings

With the growth of its business, the Company will increasingly rely on funding from the debt capital markets and commercial borrowings. The Company’s growth will depend on its continued ability to access funds at competitive rates which in turn will depend on various factors including its ability to maintain its credit ratings. If the Company is unable to access funds at an effective cost that is comparable to or lower than its competitors, the Company may not be able to have adequate funds to meet the requirements of the business. This may adversely impact its business results and its future financial performance.

4. Commercial Papers and Short term borrowings

The Company, being SC/RC, does not have access to public deposits. A major portion of the Company’s funding requirements is currently met through short term funding sources such as commercial papers and short term loans from banks and other bodies corporate. Potential funding mismatches can be created if short term funding sources are not available to the Company. This could have a negative impact on the business and future financial performance of the Company.

5. Operational and System Risk

The Company is faced with operational and system risks, which may arise as a result of various factors, viz., improper authorizations, failure of employees to adhere to approved procedures, inappropriate documentation, failure in maintenance of proper policies, frauds, inadequate training and employee errors. Further, there can also be a security risk in terms of handling information technology related products such as system failures, information system disruptions, communication systems failure which involves certain risks like data loss, breach of confidentiality and adverse effect on business continuity and network security. If any of the systems do not operate properly or are disabled or if other shortcomings or failures in internal processes or systems are to arise, this could affect the Company’s operations and/or result in financial loss, disruption of Company’s businesses, regulatory intervention and/or damage to its reputation. In addition, the Company’s ability to conduct business may be adversely impacted by a disruption (i) in the infrastructure that supports its businesses and (ii) in the localities in which it is located.

6. Any inability of the Company to attract or retain talented professionals may impact its

business operations The business in which the Company operates is very competitive and ability to attract and retain quality talent impacts the successful implementation of growth plans. The Company may lose many business opportunities and business would suffer if such required manpower is not available on

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time. The inability of the Company to replace manpower in a satisfactory and timely manner may adversely affect its business and future financial performance.

7. Employee Misconduct

Any kind of employee misconduct may impair the Company’s ability to service its clients. It is not always possible to deter employee misconduct and the precautions the Company takes to detect and prevent this activity may not be effective in all cases.

8. Downgrading in credit rating

CRISIL Limited has assigned “CRISIL A+/Stable” rating for this NCD issue of ` 100 Crore. The Company cannot guarantee that this rating will not be downgraded. In the event of deterioration in the financial health of the Company, there is a possibility that the Rating Agency may downgrade the rating of the Debentures. In such cases, investors may have to take losses on re-valuation of their investment or make provisions towards sub-standard/non-performing investment as per their usual norms. Such a downgrade in the credit rating may lower the value of the Debentures and/or the Company’s ability to meet its obligations in respect of the Debentures could be affected.

9. No guarantee

JM Financial Limited, the Principal Sponsor of the Company has not provided any guarantee in any manner with respect to the Debentures and no Investor shall have any recourse against JM Financial Limited or any of its promoters or group companies, except the Company, with respect to the performance of the terms and conditions of the Issue.

10. Decisions may be made on behalf of all Debenture Holders that may be adverse to the

interest of individual Debenture Holders The terms of the Debentures contain provisions for calling meetings of Debenture Holders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Debenture Holders including Debenture Holders who did not attend and vote at the relevant meeting.

11. Security may be insufficient to redeem the Debentures

In the event that the Company is unable to meet its payment and other obligations towards Investors under the terms of the Debentures, the Debenture Trustee may enforce the Security as per the terms of the Debenture Trust Deed and other related documents. The Investors’ recovery in relation to the Debentures will be subject to (i) the market value of the property offered as security, and (ii) finding a willing buyer for such security at a price sufficient to repay the investors’ amounts outstanding under the Debentures.

12. Tax and other Considerations

Special tax, accounting and legal considerations may apply to certain types of investors. Investors are urged to consult with their own financial, legal, tax and other professional advisors to determine any financial, legal, tax and other implications of an investment into the Debentures.

13. Company’s indebtedness and covenants imposed by its financing arrangements may restrict its ability to conduct its business or operations The Company’s financing arrangements require it to maintain certain security cover for some of its borrowings. Should there be any breach of financial or other covenants of any financing arrangements and such breach continues beyond the stipulated cure period, the Company may be

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subjected to various consequences as a result of such default including forced repayment of such borrowings. Further, under some of the financing arrangements, the Company is required to inform/obtain prior approval of the lenders/debentures holders/ debenture trustee for various actions. This may restrict/delay some of the actions/initiatives of the Company from time to time.

14. Our business is dependent on the successful acquisition of financial assets from the

banks/financial institutions and the resolution of such acquired assets within the realisation time frame.

Any failure in realisation of the assets acquired by the Company due to recession, inflation, economy, change in regulations, etc. could adversely affect our business.

15. There has been a substantial increase in our borrowings during the current financial year 2014-15 as against previous financial year 2013-14.

Our short term borrowings have increased to ` 1258.17 Crore as on June 30, 2014 from ` 345.97 Crore as on March 31, 2014. This increase in the short term borrowings was mainly due to financing for acquisition of new assets.

B. EXTERNAL RISK FACTORS 1. The Debentures may be illiquid The Company intends to list the Debentures on the WDM segment of the BSE. The Company

cannot provide any guarantee that the Debentures will be frequently traded on the Stock Exchange and that there would be any market for the Debentures. It is not possible to predict if and to what extent a secondary market may develop for the Debentures or at what price the Debentures will trade in the secondary market or whether such market will be liquid or illiquid. The fact that the Debentures may be so listed or quoted or admitted to trading does not necessarily lead to greater liquidity than if they were not so listed or quoted or admitted to trading.

The Company may, but is not obliged to, at any time purchase the Debentures at any price in the

market or by tender or private agreement. Any Debentures so purchased may be resold or surrendered for cancellation. The more limited the secondary market is, the more difficult it may be for holders of the Debentures to realise value for the Debentures prior to settlement of the Debentures.

Further, the Company may not be able to issue any further Debentures, in case of any disruptions

in the securities market. 2. Future legal and regulatory impact

Future government policies and changes in laws and regulations in India (including their

interpretation and application to the operations of the Company) and comments, statements or policy changes by any regulator, including but not limited to SEBI or RBI, may adversely affect the Debentures, and restrict the Company’s ability to do business. The timing and content of any new law or regulation is not within the Company’s control and such new law, regulation, comment, statement or policy change could have an adverse effect on its business, financial results and/or operations.

Further, SEBI, the relevant Stock Exchange(s) or other regulatory authorities may require

clarifications on this DD, which may cause a delay in the issuance of Debentures or may result in the Debentures being materially affected or even rejected.

Page 10


3. Material changes in regulations to which the Company is subject

SC/RCs in India are subject to detailed supervision and regulation by the RBI. In addition, the Company is generally subject to changes in Indian law, as well as to changes in regulations and policies and accounting principles. Any changes in the regulatory framework affecting SC/RCs could adversely affect the profitability of the Company or its future financial performance by requiring a restructuring of its activities, increasing costs or otherwise.

4. A slowdown in economic growth in India The Company’s performance and the recovery from the assets acquired are necessarily dependent

on the health of the overall Indian economy. 5. Political instability or changes in the government could delay further liberalization of the

Indian economy and adversely affect economic conditions in India generally If there was to be any slowdown in the economic liberalization, or a reversal of steps already taken,

it could have an adverse effect on the Company’s business. Financial difficulties and other problems in certain financial institutions in India could cause the Company’s business to suffer. The Company is exposed to the risks of the Indian financial system, which in turn may be affected by financial difficulties, trends and other problems faced by certain Indian financial institutions. The problems faced by such Indian financial institutions and any instability in or difficulties faced by the Indian financial system generally could create an adverse market perception about Indian financial institutions, banks, NBFCs and SC/RCs. This in turn could adversely affect the Company’s business, its future financial performance and its shareholders’ funds.

6. Acts of God, terrorist attacks, civil unrest and other acts of violence or war involving India

and other countries could adversely affect the financial markets and the Company’s business Acts of God, terrorist attacks and other acts of violence or war may negatively affect the Indian markets and may also adversely affect the worldwide financial markets. These acts may also result in a loss of business confidence. In addition, adverse social, economic and political events in India could have a negative impact on the Company. Such incidents could also create a perception that investment in Indian companies involves a higher degree of risk which could have an adverse impact on the Company’s business.

7. The Company’s business may be adversely impacted by natural calamities or unfavourable climatic changes. India has experienced natural calamities such as earthquakes, floods, droughts and tsunami in recent years. India has also experienced pandemics, including the outbreak of avian flu and swine flu. The extent and severity of these natural disasters and pandemics determine their impact on the economy and in turn their effect on the financial services sector of which the Company is a part cannot be ascertained or predicted but could adversely affect the Company. Prolonged spells of abnormal rainfall and other natural calamities could have an adverse impact on the economy which in turn could adversely affect the financial results and/or operations of the Company.

C. ASSUMPTIONS IN RESPECT OF INVESTMENT IN NCDS BY INVESTORS

The initial subscriber by subscribing to and any subsequent purchaser by purchasing the NCDs shall be deemed to have agreed that and accordingly the Company shall be entitled to assume that each of the initial subscribers and any subsequent purchasers (Debenture Holder, as referred to hereinabove and hereinafter):

Page 11


1) has reviewed the terms and conditions applicable to the NCDs as contained in the DD and has understood the same, and, on an independent assessment thereof, found the same acceptable for the investment made and has also reviewed the risk disclosures contained herein and has understood the risks, and determined that NCDs are a suitable investment and that the Debenture Holder can bear the economic risk of that investment;

2) has received all the information believed by it to be necessary and appropriate or material in

connection with, and for, investment in the NCDs; 3) has sufficient knowledge, experience and expertise as an investor, to make investment in the

NCDs;

4) has not relied on either the Company or any of its affiliate, associate or any person acting in its or their behalf for any information, advice or recommendations of any sort except as regards the accuracy of the specific factual information about the terms of the NCDs set out in this DD;

5) has understood that information contained in this DD is not to be construed as business or

investment advice; 6) has made an independent evaluation and judgement of all risks and merits before investing in the

NCDs; 7) has understood that the method and manner of computation of returns and calculations on the

NCDs shall be solely determined by the Company and the decision of the Company shall be final and binding;

8) has understood that in the event of any discretions to be exercised, in relation to method and

manner of any of the above computations including due to any disruptions in any of the financial or other related markets or if for any other reason the calculations cannot be made as the method and manner originally stipulated or referred to or implied, such alternative methods or approach shall be used as deemed fit by the Company and may include the use of estimates and approximations. All such computations shall be valid and binding on the Debenture Holder(s) and no liability thereof will attach to the Company;

9) has understood that in the event that the Debenture Holder(s) suffers adverse consequences or

loss, the Debenture Holder(s) shall be solely responsible for the same and the Company, its members, directors or affiliates shall not be responsible, in any manner whatsoever, for any adverse consequences or loss suffered by the Debenture Holder(s) including but not limited to on the basis of any claim that no adequate disclosure regarding the risks involved were made or that the full risks involved were not explained or understood;

10) has the legal ability to invest in the NCDs and the investment does not contravene any provision of

any law, regulation or contractual restriction or obligation or undertaking binding on or affecting the Debenture Holder or its assets;

11) where the Debenture Holder is a company, that:

(a) the Debenture Holder is not precluded under any law, rules, regulations and / or circular(s) issued by any statutory authority (ies) including under the Act from investing in the NCDs;

(b) all necessary corporate or other necessary action has been taken and that the Debenture Holder has corporate ability and authority, to invest in the NCDs; and

(c) investment in the NCDs does not contravene any provisions of its Memorandum and Articles of Association or any law, regulation or contractual restriction or obligation or undertaking binding on or affecting the Debenture Holder or the Debenture Holder’s assets.

Page 12


SECTION - III

DISCLOSURES AS PER SCHEDULE I OF SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE AND LISTING OF DEBT SECURITIES) REGULATIONS, 2008 AS AMENDED FROM TIME

TO TIME A. ISSUER INFORMATION a. Name and Address of the following: Sr. No. Particulars Details

1. Name of the Issuer JM Financial Asset Reconstruction Company Private Limited

2. Registered Office of the Issuer

7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025 Tel. No. +91 22 - 6630 3030 Fax: +91 22 - 6630 3223

3. Corporate Office of the Issuer

7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025 Tel. No. +91 22 - 6630 3030 Fax: +91 22 - 6630 3223

4. Company Secretary and Compliance Officer of the Issuer

Mr. Nikhil Bhandary 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025 Tel. No. +91 22 - 6630 3445 Fax: +91 22 - 6630 3223 Email: [email protected]

5. Trustee of the Issue IL&FS Trust Company Limited IL&FS Financial Centre, Plot C-22, G Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051 Tel: +91 22 2659 3884; Fax: +91 22 2653 3297 E-mail: [email protected] Website: www.itclindia.com

6. Registrar of the Issue

Sharepro Services (India) Private Limited 13 AB, Samhita Warehousing Complex, Behind Sakinaka Telephone Exchange, Kurla Andheri Road, Sakinaka, Mumbai – 400 072 Tel: +91 22 6772 0300; Fax: +91 22 2859 1568 E-mail: [email protected] website: www.shareproservices.com

7. Credit Rating agency of the Issue

CRISIL Limited CRISIL House, Central Avenue, Hiranandani Business Park, Powai, Mumbai - 400 076 Tel: +91 22 3342 3000; Fax: +91 22 3342 3050 website: www.crisil.com

8. Auditors of the Issuer

M/s. Khimji Kunverji & Co Sunshine Tower, Level 19, Senapati Bapat Marg, Elphinstone (W), Mumbai - 400 013 Tel: +91 22 2439 1111 website: www.khimjikunverji.com

Page 13


b. Brief summary of the business / activities of the Issuer and its line of business:

i. Overview: JM Financial Asset Reconstruction Company Private Limited is a Securitisation Company / Reconstruction Company registered with the Reserve Bank of India under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Company is engaged in the business of acquisition of financial assets from banks / financial institutions and implementing resolution strategies for the acquired assets. Part of the strong financial services JM Financial Group, the Company is a leading player in the asset reconstruction business. As on March 31, 2014, the Company had acquired financial assets (cumulative) valued at `12,026 Crore at an acquisition cost (cumulative) of `3,967 Crore. The total assets under management of the Company as on March 31, 2014 were ` 3,647 Crore.

ii. Corporate Structure: The shareholding pattern of the Company as on the date of this DD is as follows: Name of the shareholder Number of shares held Percentage of

shareholding as on Record date

(%) Sponsor Shareholders

JM Financial Limited (Principal Sponsor)

10,29,00,000 49.00

Mr. Narotam Sekhsaria 3,15,00,000 15.00 Radhakrishna Bimalkumar Private Limited

1,05,00,000 5.00

Indian Overseas Bank 2,10,00,000 10.00 Non –Sponsor Shareholders

UCO Bank 1,00,00,000 4.76 Union Bank of India 1,00,00,000 4.76 Central Bank of India 75,00,000 3.57 Valiant Mauritius Partners FDI Limited

1,66,00,000 7.91

Total 21,00,00,000 100.00

Page 14


iii. Key Operational and Financial Parameters for the last three Audited years: The Key Operational and Financial Parameters for the last three Audited Financial years are as under:

(` in Lakh) As per audited

financials

As per audited

financials

As per audited

financials

Particulars

As at 31st March 2014



Net Worth 33,037.09 28,212.89 24,227.36Total Debt 20,000.00 16,877.61 13.25 - Short Term Borrowing 20,000.00 16,875.00 - - Current maturities of long term borrowing - 2.61 13.25Net Fixed Assets 101.32 131.33 93.09Non Current Assets 4,441.38 220.65 1,917.61Cash and cash equivalents 61.37 8,867.22 1,061.13Current Investment 58,117.53 33,605.09 20,494.13Current Assets 7,336.03 3,668.70 1,460.72Current Liabilities 16,985.91 1,359.68 759.03Asset Under Management 3,64,653.63 1,08,262.70 75,838.91Off Balance Sheet Assets - - -Total Income 12,037.55 8,897.28 4,031.94Total expenses (other than interest) 2,481.56 1,966.17 1,658.02Interest Expenses 1,727.45 124.11 161.37Provisioning & write-offs 319.31 742.63 321.09PAT 4,824.21 3,985.53 1,444.74Capital Adequacy Ratio (%) 47% 75% 100%

Abridged Balance Sheet (` in Lakh)

As per audited

financials

As per audited

financials

As per audited

financials

Sr No Particulars As at 31st

March 2014 As at 31st

March 2013 As at 31st

March 2012 A EQUITY AND LIABILITIES 1 Shareholders' funds a Share Capital 21,000.00 21,000.00 21,000.00 b Reserves and Surplus 12,037.09 7,212.89 3,227.36

2 Non-current liabilities 33,037.09 28,212.89 24,227.36 a Long-term borrowings - 15.61 18.22b Long-term provisions 34.63 29.75 22.06 34.63 45.37 40.29

Page 15


3 Current liabilities a Short-term borrowings 20,000.00 16,875.00 -b Trade payables 11.26 15.14 20.01 c Other current liabilities 16,942.31 1,316.44 716.16 d Short-term provisions 32.34 28.16 22.87 36,985.91 18,234.74 759.04

Total 70,057.64 46,492.99 25,026.68

B ASSETS 1 Non-current assets a Fixed assets (i) Tangible assets 44.93 59.15 52.14 (ii) Intangible assets 56.39 72.18 4.98 (iii) Capital work-in-progress - - 35.97 b Deferred tax assets (liabilities) 116.23 154.25 36.08 c Long-term loans and advances 4,325.15 66.40 1,881.53

4,542.70

351.98

2,010.70 2 Current assets a Current investments 58,117.53 33,605.09 20,494.13 b Trade receivables 4,678.09 1,009.85 1,318.89 c Cash and bank balances 61.37 8,867.22 1,061.13 d Short-term loans and advances 2,657.94 2,606.06 136.79 e Other current assets - 52.79 5.05 65,514.93 46,141.01 23,015.99

Total 70,057.64 46,492.99 25,026.68 Abridged Statement of Profit and Loss

(` in Lakh) For the year

ended For the year

ended For the year

ended

Particulars

31.03.2014 Rupees

31.03.2013 Rupees

31.03.2012 Rupees

REVENUE FROM OPERATIONS

Management and advisory fees

5,629.38

2,230.99

1,964.13 Interest income on restructuring 3,709.30 1,532.21 1,307.41 Interest income on loans 1,129.90 383.25 162.18 Profit on redemption/sale of security receipts 1,411.50 4,292.90 466.29 Interest income on funded expenses 4.80 10.58 13.64 Earlier year provision w/back

70.93

180.80

-

Total

11,955.80

8,630.73

3,913.65

Page 16


OTHER INCOME

Interest income on fixed deposit

71.21

255.29

77.31 Other non-operating income 10.53 11.26 40.98 Total 81.74 266.54 118.29

Total Revenue

12,037.54

8,897.27

4,031.94 EXPENSES

Employee benefits expense

1,508.10

1,214.69

890.84 Finance costs 1,727.45 124.11 161.37 Provision/write off for receivables, loans & investments 319.31 742.64 321.09 Depreciation and amortization expense 42.33 35.82 24.64 Other expenses 931.12 715.66 421.46

Total expenses

4,528.32

2,832.91

1,819.39 Profit before Tax 7,509.22 6,064.36 2,212.54 Tax expense

Current tax

2,647.00

2,197.00

846.00 Deferred tax 38.02 (118.17) (14.02) Excess provision for tax in respect of earlier year (net)

-

-

(64.18)

2,685.02 2,078.83 767.81 Profit after tax 4,824.21 3,985.53 1,444.74

Page 17


Abridged Statement of Cash flow (` in Lakh)

Particulars For the

year ended March 31,

2014

For the year ended

March 31, 2013

For the year ended

March 31, 2012

Cash flow from operating activities Profit before tax 7,509.22 6,064.36 2,212.54 Adjustment for: Depreciation 42.33 35.82 24.64 Loss on sale of fixed assets / written off 0.08 0.43 - Write off /reversal of receivables and investments - 13.85 - Provision for receivables and advances & loans 319.31 380.29 321.09 Earlier year provision on receivables/ advances w/back (70.93) (180.80) - Provision for loss on impairment of investments - 348.49 - Provision for gratuity 5.16 8.85 6.44 Provision for/(reversal of) compensated absences 3.90 4.12 4.17 Interest expense 1,727.45 124.11 161.37 Operating profit before working capital changes 9,536.53 6,799.52 2,730.25 Adjustment for:

(Increase)/decrease in trade receivables (3,832.96) 36.95 (33.47) (Increase)/decrease in short-term loans and advances (206.80) (996.61) 67.20 (Increase)/decrease in other current assets 52.79 (47.74) 47.76 Increase/(decrease) in trade payables (3.88) (4.86) 12.25 Increase/(decrease) in other current liabilities 15,626.28 805.85 211.87 Cash generated from/(used in) operations 21,171.96 6,593.11 3,035.86

Direct taxes paid (2,676.25) (1,893.34) (974.99) Net cash from/(used in) operating activities 18,495.71 4,699.77 2,060.87 Cash flow from investing activities Purchase of current investments - Others (27,610.46) (24,014.84) (8,637.22) Sale/ redemption of current investments - Others 3,168.95 10,555.39 6,025.67 Purchase of fixed assets (12.40) (74.68) (86.63) Sale of fixed assets - 0.20 - Bank balances not considered as Cash and cash equivalents

319.00 (319.00) (100.00)

Net cash from/(used in) investment activities (24,134.91) (13,852.93) (2,798.18) Cash flow from financing activities Proceeds from long term loans and advances - - 7.34 Increase in long term loans and advances (4,229.50) 2.61 - Proceeds from long-term borrowings - - 18.22 Repayment of long-term borrowings (15.61) (2.61) - Repayment of short-term borrowings (0.08) (10.64) - Proceeds from short-term borrowings 3,125.00 16,875.00 13.25 Disbursement of secured loan - - (600.00)

Page 18


Interest paid (1,727.45) (124.11) (161.37) Net cash from/(used in) financing activities (2,847.65) 16,740.25 (722.55) Net increase/(decrease) in cash and cash equivalents

(8,486.85) 7,587.09 (1,459.87)

Cash & cash equivalents (opening) 8,548.22 961.13 2,421.00 Cash & cash equivalents (closing) 61.37 8,548.22 961.13

As on August 4, 2014, the Gross Debt equity ratio of the Company was 3.72 (prior to issue of NCDs) which is not expected to change materially post the issuance of NCDs since the proceeds would be utilised for repayment of existing borrowings. However in case the proceeds are not utilised for repayment of existing borrowings immediately, the Gross Debt equity ratio shall be higher for a temporary period. For the purpose of this calculation, Gross Debt includes aggregate of financial indebtedness of the Company (Secured Loan from bank, unsecured borrowings and secured working capital facilities only) and Gross Equity includes the equity share capital of the Company and the Reserves & Surplus as on June 30, 2014. Further, unamortised interest on Commercial Papers have been considered as debt.

Page 19


iv. Project cost and means of financing, in case of funding new projects:

Not Applicable, the funds raised through issue of these NCDs will be utilised to meet the objects stated under the term sheet of this DD.

c. Brief history of the Issuer since its incorporation giving details of its following activities:

Brief History of the Company

The Company was incorporated on September 19, 2007 as a private limited company under the provisions of the Companies Act, 1956. The Company has obtained a certificate of registration dated September 23, 2008 bearing no. 11 issued by the Reserve Bank of India to carry on the business of securitisation and asset reconstruction under the provisions of SARFAESI.

i. Details of Share Capital as on June 30, 2014:

Share Capital Particulars

Authorised Share Capital `260 Crore comprising 26,00,00,000 Equity Shares of `10 each

Issued, Subscribed and Paid up Share Capital

`210 Crore comprising 21,00,00,000 Equity Shares of `10 each

ii. Changes in its capital structure as on June 30, 2014:

The changes in Authorised Share Capital of the Company are as under:

Date of change (Annual General Meeting (AGM) / Extra Ordinary General Meeting (EGM))

In ` Particulars

EGM held on April 28, 2014 260 Crore

Increase in authorised share capital of the Company from `210 Crore to `260 Crore divided into 26 Crore equity shares of `10/- each

EGM held on February 18, 2008 210 Crore

Increase in authorised share capital of the Company from `110 Crore divided into 10.50 Crore equity shares of `10/- each and 50 Lakh Preference shares of `10/- each to `210 Crore divided into 21 Crore equity shares of `10/- each

EGM held on November 28, 2007 110 Crore

Increase in authorised share capital of the Company from `2 Crore divided into 20 Lakh equity shares of `10/- each to `110 Crore divided into 10.50 Crore equity shares of `10/- each and 50 Lakh Preference shares of `10/- each

Page 20


On incorporation (September 19, 2007)

2 Crore `2 Crore divided into 20 Lakh equity shares of `10/- each

iii. Equity Share Capital History of the Company as on June 30, 2014: The details of equity share capital raised by the Company up to June 30, 2014 are as under:

Cumulative Date of Allotment

No. of equity shares

Face value

(`)

Issue Price

(`)

Consideration(Cash, other than cash,

etc.)

Nature of Allotment No. of

equity shares

Equity Share Capital (`)

Equity Share premi-

um (`)

On incorporation 10,000 10 10 Cash Allotment to

Subscribers 10,000 1,00,000 Nil

20.12.2007 1,99,90,000 10 10 Cash

Preferential Allotment to

JM Financial Limited

2,00,00,000 20,00,00,000 Nil

31.03.2008 10,89,50,000 10 10 Cash


JM Financial Limited, Mr.

Narotam Sekhsaria and RKBK

Fiscal Services Pvt. Ltd.

12,89,50,000 128,95,00,000 Nil

05.05.2008 4,85,00,000 10 10 Cash


Indian Overseas

Bank, UCO Bank, Union

Bank of India and

Central Bank of India

17,74,50,000 177,45,00,000 Nil

04.03.2010 3,25,50,000 10 10 Cash


JM Financial Limited and

Valiant Mauritius

Partners FDI Limited

21,00,00,000 210,00,00,000 Nil

Page 21


iv. Details of any Amalgamation in the last one year:

None

v. Details of any Reorganisition or Reconstruction in the last one year:

None

d. Details of the shareholding of the Company as on June 30, 2014:

i. Shareholding pattern of the Company:

Name of the shareholder Number of shares held Percentage of shareholding as on

Record date (%)

Sponsor Shareholders JM Financial Limited (Principal Sponsor)

10,29,00,000 49.00

Mr. Narotam Sekhsaria 3,15,00,000 15.00 Radhakrishna Bimalkumar Private Limited

1,05,00,000 5.00

Indian Overseas Bank 2,10,00,000 10.00 Non –Sponsor Shareholders

UCO Bank 1,00,00,000 4.76 Union Bank of India 1,00,00,000 4.76 Central Bank of India 75,00,000 3.57 Valiant Mauritius Partners FDI Limited

1,66,00,000 7.91

Total 21,00,00,000 100.00 All shares are held in demat mode except 2,00,00,000 equity shares held by JM Financial Limited are held in physical form.

ii. List of top 10 holders of equity shares of the Company as on June 30, 2014:

The list of top 10 holders of equity shares of the Company is as under:

Sr. No. Particulars

1. JM Financial Limited 2. Mr. Narotam S Sekhsaria 3. Radhakrishna Bimalkumar Private Limited 4. Indian Overseas Bank 5. UCO Bank 6. Union Bank of India 7. Central Bank of India 8. Valiant Mauritius Partners FDI Limited

Page 22


e. Following details regarding the directors of the Company:

i. Details of the current directors of the Company:

Sr. No. Name, Designation DIN Age Address

Director of the Company since

1. Mr. V P Shetty, Non - Executive Chairman

00021773 67 Ansal Heights, B-1802, 18th Floor, G.M. Bhosale Marg, Worli Naka, Worli, Mumbai – 400018

28/11/2007

2. Mr. Narotam Sekhsaria, Non - Executive Director

00276351 65 Rushilla 3, 17-C Carmichael Road, Mumbai – 400026

10/04/2008

3. Mr. Hoshang N Sinor, Non-Executive & Independent Director

00074905 70 764-F, Sarosh Court, Tilak Road, Dadar, Mumbai - 400014

10/04/2008

4. Mr. G M Ramamurthy, Non-Executive & Independent Director

00064358 68 Flat No.1, Newry Shobhika,, 3,Chinnaiah Street, T-Nagar, Chennai -600017

10/04/2008

5. Mr. S H Khan, Non-Executive & Independent Director

00006170 76 181,Antariksha Apartments, 95/96 Kakasaheb Gadgil Marg, Prabhadevi, Mumbai – 400025

10/04/2008

6. Mr. Shailesh Haribhakti, Non-Executive & Independent Director

00007347 58 Flat No 228, 'B' Wing, Kalpataru Habitat, 22nd Floor, Dr.S.S. Rao Road, Parel, Mumbai, 400012.

15/09/2008

7. Dr. Anil Khandelwal, Non-Executive & Independent Director

00005619 66 184/B, Kalpataru Horizon Chs Ltd,, S K Ahire Marg, Worli, Mumbai - 400018

11/09/2013

8. Mr. Anil Bhatia, Managing Director and CEO

01310959 49 1, Neelima, 12th Road, Near Ram Krishna Mission, Khar West, Mumbai – 400 052

19/09/2007

We are awaiting the approval of the Reserve Bank of India for the appointment of Mr. Pulkit Sekhsaria as a Director on the Board of the Company. Indian Overseas Bank has requested the Company to change their nominee from Mr. A M Venkatesa Prasad to Mr. Gurudutt Nanajkar. This change in nominee is also subject to the approval of the Reserve Bank of India.

Page 23


To the best of the Company’s knowledge and belief, none of the current Directors are appearing in the RBI’s defaulter list. Details of other directorship of the directors of the Company: (As per the latest general notice given by the directors) Sr. No. Name of the Director Details of other directorship

1. Mr. V P Shetty JM Financial Asset Management Ltd. JM Financial Products Limited FICS Consultancy Services Limited

2. Mr. Narotam Sekhsaria

ACC Limited Ambuja Cements Limited Radha Madhav Investments Limited Ambuja Cement Foundation Ambuja Educational Institute Narotam Sekhsaria Foundation

3. Mr. Hoshang N Sinor 3i Infotech Limited 3i Infotech Holdings Pvt. Ltd. (Mauritius) ICICI Venture Funds Management Co. Ltd. Tata Investment Corporation Limited Tata Motors Finance Limited CRISIL Limited Themis Medicare Limited Zoorastrian Co-operative Bank Limited IFMR Rural Channels and Services Pvt. Ltd. MF Utilities India Pvt. Ltd. Institution of Mutual Funds Intermediaries

4. Mr. G M Ramamurthy JM Financial Asset Management Limited ONGC Mangalore Petrochemicals Limited

5. Mr. S H Khan ITC Limited IDFC Limited Bajaj Auto Limited Bajaj Holdings & Investment Limited Bajaj Finserv Limited Bajaj Allianz Life Insurance Company Limited Bajaj Allianz General Insurance Company Limited

6. Mr. Shailesh Haribhakti

Torrent Pharmaceuticals Limited L&T Finance Holdings Limited Raymond Limited Future Lifestyle Fashions Limited Blue Star Limited Mahindra Life space Developers Limited NSDL e-Governance Infrastructure Limited Ambuja Cements Limited

Page 24


Sr. No. Name of the Director Details of other directorship

ACC Limited J K Paper Limited Milestone Capital Advisors Limited Karam Chand Thapar & Bros. (Coal Sales) Limited D H Consultants Private Limited Quadrum Solutions Private Limited AAA Infrastructure Consulting & Engineers Pvt. Ltd. Reliance Enterprises & Ventures Pvt. Ltd. ADA Enterprises & Ventures Pvt. Ltd. AAA International Capital Pvt. Ltd. AAA Industries Pvt. Ltd. MentorCap Management Pvt. Ltd. Haribhakti Moti India Pvt. Ltd. Planet People & Profit Consulting Pvt. Ltd. HB Advisory Services Pvt. Ltd.

7. Dr. Anil Khandelwal Dighi Ports Limited Anugyan Consulting Private Limited Access Development Services Grassroot Trading Network for Women Gail (India) Limited

8. Mr. Anil Bhatia None

ii. Details of change in directors since last three years:

Sr. No.

Name and Designation DIN

Date of Appointment / Resignation


(in case of resignation)

Remarks

1. Mr. Suresh Kumar Neotia

00152016 15/05/2014 (Date of

Cessation)

10/04/2008 (Date of

appointment)

Resigned as a Director

2. Mr. Rabindra Behera

05298483 11/09/2013 (Date of

Cessation)

11/05/2012 (Date of

appointment)

Change in Nominee by Indian Overseas Bank

3. Dr. Anil Khandelwal 00005619 11/09/2013 (Date of

appointment)

- Appointed as Independent Director

4. Mr. Sunil B Mathur 00013239 31/03/2013 (Date of

Cessation)

10/04/2008 (Date of

appointment)

Resigned as a Director

Page 25


Sr. No.

Name and Designation DIN

Date of Appointment / Resignation


(in case of resignation)

Remarks

5. Mr. A P Singh 02829137 11/05/2012 (Date of

Cessation)

12/10/2009 (Date of

appointment)

Change in Nominee by Indian Overseas Bank

We are awaiting the approval of the Reserve Bank of India for the appointment of Mr. Pulkit Sekhsaria as a Director on the Board of the Company. Indian Overseas Bank has requested the Company to change their nominee from Mr. A M Venkatesa Prasad to Mr. Gurudutt Nanajkar. This change in nominee is also subject to the approval of the Reserve Bank of India. f. Following details regarding the auditors of the Company:

i. Details of the auditor of the Company:

Name Address Auditor since M/s. Khimji Kunverji & Co.

Sunshine Tower, Level 19, Senapati Bapat Marg, Elphinstone (W), Mumbai - 400 013

16/10/2007

ii. Details of change in auditor since last three years:

None g. Details of Borrowings of the Company, as on June 30, 2014:

i. Details of Secured Loan Facilities as on June 30, 2014:

Lender’s Name Type of Facility

Amount Sanctioned (` in Crore)

Principal Amount

Outstanding (` in Crore)

Repayment Date /

Schedule Security

IDBI Bank Overdraft 100.00

81.98

Annually renewable

Pledge of Security Receipts

Ratnakar Bank Ltd Cash Credit 75.00

57.58

Annually renewable


UCO Bank Cash Credit 25.00

20.18

Annually renewable


Indian Overseas Bank Cash Credit

50.00

43.43 Annually

renewable Pledge of Security Receipts

Karur Vysya Bank Short Term Loan

20.00

20.00 May 30, 2015 Pledge of Security

Receipts

Total 270.00

223.18

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Repayment schedule of secured loans from banks

Amount Lenders name Repayment

date (` in Crore) Karur Vysya Bank May 30, 2015 20

ii. Details of Unsecured Loan Facilities (Inter Corporate Loans) as on June 30, 2014:

Lender’s Name Type of FacilityPrincipal Amount

Outstanding (` in Crore)

Repayment Date / Schedule

Indostar Capital Short term loan 25.00 14-Aug-14

Vinamra Universal Inter Corporate Loan 25.00 27-Aug-14

Vinamra Universal Inter Corporate Loan 100.00 25-Sep-14

Vinamra Universal Inter Corporate Loan 45.00 28-Oct-14

Vinamra Universal Inter Corporate Loan 25.00 26-Nov-14

HDFC Ltd Inter Corporate Loan 250.00 29-Sep-14

JM Financial Limited Inter Corporate Loan 200.00 29-Sep-14

JM Financial Products Limited

Inter Corporate Loan 100.00 29-Sep-14

JM Financial Services Limited

Inter Corporate Loan 15.00 29-Sep-14

Total 785.00

iii. Details of Non-Convertible Debentures as on June 30, 2014: None

iv. List of top 10 Debenture Holders as on June 30, 2014:

None

v. The amount of corporate guarantee issued by the Issuer along with name of the counterparty (like name of the subsidiary, JV entity, group company, etc.) on behalf of whom it has been issued:

None

vi. Details of Commercial Paper:

The total Face Value of Commercial Papers Outstanding as on June 30, 2014 and its breakup are as follows:

Page 27


Name of the Commercial Paper holder

Maturity Date

Amount Outstanding (Face Value)

(` in Crore)

Ms. Sushma Jain 30-Jun-15 25.00 Pramerica Mutual Fund 19-Jun-15 20.00 Alkem Laboratories 10-Dec-14 20.00 Indiabulls Liquid Funds 12-Sep-14 15.00 Indiabulls Ultra Short Term Fund 12-Sep-14 10.00 Tata Liquid Fund 29-Aug-14 50.00 UTI Treasury Advantage Fund 29-Aug-14 35.00 Religare Invesco Credit Opp Fund 11-Aug-14 25.00 Religare Invesco Credit Opp Fund 8-Aug-14 25.00 Pramerica Mutual Fund 14-Jul-14 25.00

Total 250.00

vii. Details of rest of the borrowing (if any including hybrid debt like FCCB, optionally convertible debentures/preference shares) as on June 30, 2014:

None

viii. Details of all default/s and/or delay in payments of interest and principal of any kind of term loans, debt securities and other financial indebtness including corporate guarantee issued by the Company, in the past 5 years:

None

ix. Details of any outstanding borrowings taken/ debt securities issued where taken/issued (i) for consideration other than cash, whether in whole or in part, (ii) at a premium or discount, or (iii) in pursuance of an option:

None

h. Details of Sponsor of the Company: JM Financial Limited, Mr. Narotam Sekhsaria and Indian Overseas Bank are the Sponsors of the Company. Details of Sponsor’s holding in the Company as on June 30, 2014: Sr. No.

Name of the shareholders Total no. of Equity shares

% of total no. of equity shares

1. JM Financial Limited (Principal Sponsor)

10,29,00,000 49.00

2. Mr. Narotam Sekhsaria 3,15,00,000 15.00

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3. Radhakrishna Bimalkumar Private Limited

1,05,00,000 5.00

4. Indian Overseas Bank 2,10,00,000 10.00 All shares are held in demat mode except 2,00,00,000 equity shares held by JM Financial Limited are held in physical form.

i. & j. Abridged version of audited financial information for the last three years: As provided under A.b.iii above. No auditors’ qualification during the previous three years. k. Any material event/ development or change having implications on the financials/credit quality (e.g. any material regulatory proceedings against the Issuer/promoters, tax litigations resulting in material liabilities, corporate restructuring event etc.) at the time of issue which may affect the issue or the investor’s decision to invest / continue to invest in the debt securities: Save as stated elsewhere in this DD, since the date of the last published audited financial accounts, to the best of the Company’s knowledge and belief, no material developments have taken place that will materially affect the performance or prospects of the Company.

l. Name of the Debenture Trustee: The Company has appointed IL&FS Trust Company Limited as the Debenture Trustee for the Issue. The address and contact details of the Debenture Trustee are as under:

IL&FS Trust Company Limited IL&FS Financial Centre, Plot C-22, G Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051 Tel: +91 22 2659 3884; Fax: +91 22 2653 3297 E-mail: [email protected] Website: www.itclindia.com

IL&FS Trust Company Limited has given its consent to the Company vide letter date August 1, 2014 under the provisions of Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 and the Companies Act,2013 to be appointed as the Debenture Trustee for this Issue. All the rights and remedies of the Debenture Holders shall vest in and shall be exercised by the Debenture Trustee without referring to the Debenture Holders (other than to the extent as will be set out in the relevant Debenture Trust Deed (s)). All Debenture Holders shall without any further act or deed be deemed to have irrevocably given their authority and consent to IL&FS Trust Company Ltd. to act as their Debenture Trustee and authorized the Debenture Trustee or any of its agents or authorised officials to do, inter alia, acts, deeds and things necessary in respect of or relating to their duty in such capacity including accepting the Security to be created by the Company in terms of this DD. No Debenture Holder shall be entitled to proceed directly against the Company unless the Debenture Trustee having become so bound to proceed, fails to do so. Any payment by the Company to the Debenture Trustee on behalf of the Debenture Holders shall discharge the Company pro tanto to the Debenture Holders. The Debenture Trustee shall carry out its duties and shall perform its functions as per the SEBI Regulations and this DD, with due care, diligence and loyalty. Resignation/retirement of the Debenture Trustee shall be as per terms of the trust deed(s) entered into between the Company and the Debenture Trustee and a notice in writing to the Debenture Holders shall be provided for the same.

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The Debenture Trustee will protect the interest of the Debenture Holders on the occurrence of an event of default by the Company in regard to timely payment of interest and repayment of principal and it will take necessary action at the Company’s cost as provided in the Debenture Trust Deed. m. The detailed rating rationale(s) adopted/ credit rating letter issued by the rating agencies shall be disclosed: CRISIL Limited has assigned “CRISIL A+/Stable” (pronounced “CRISIL A plus rating with stable outlook”) rating to the captioned Issue. As per CRISIL’s rating letter, instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations and such instruments carry low credit risk. Investors may please note that the rating is not a recommendation to buy, sell or hold securities and investors should take their own decisions. The Rating Agency has the right to suspend, withdraw or revise the rating / outlook assigned to the Issue at any time, on the basis of new information or unavailability of information or other circumstances which the Rating Agency believes may have an impact on the rating. A copy of the CRISIL rating letter and rating rationale is enclosed in Annexure A. n. Details/Copy of Guarantee or Letter of Comfort or any other Document / Letter with similar intent, if any: None o. Copy of Consent Letter from the Trustee: A copy of the consent letter of IL&FS Trust Company Limited dated August 1, 2014 is enclosed in Annexure B. p. Name of the recognised stock exchange where the debt securities are proposed to be listed clearly indicating the designated stock exchange: BSE will be the designated stock exchange for the Issue. NCDs will be listed on the wholesale debt market segment of BSE. The Company shall forward the listing application to BSE within 15 days from the date of allotment(s). In case of delay in listing of the NCDs beyond 20 days from the date of allotment, the Company will pay penal interest, of 1 % p.a. over the interest/coupon rate from the expiry of 30 days from the date of allotment till the listing of such NCDs to the investor. q. Other Details: i. Debenture Redemption Reserve: Debenture Redemption Reserve, if any, required under the applicable provisions of the Companies Act, 2013 will be created by the Company out of the profits of the Company. ii. Issue/instrument specific regulations: The Debentures are governed by and will be construed in accordance with the Indian laws. The Company, the Debentures and Company’s obligations under the Debentures shall, at all times, be subject to the provisions of the Companies Act, 2013, regulations/guidelines/directions of RBI, SEBI and Stock Exchanges and other applicable laws and regulations from time to time. The Debenture-

Page 30


holders, by purchasing the Debentures, agree that the courts in Mumbai shall have exclusive jurisdiction with respect to any matters relating to the Debentures. Further, the said Debentures shall be subject to the terms and conditions as contained in the application form, Disclosure Document, Debenture Trust Deed, Debenture Trustee Agreement and other Transaction / Security documents. iii. Application Process: How to Apply Applications for the NCDs must be made in the prescribed Application Form as provided by the Company and must be completed by the investors. Application Form must be accompanied by either a demand draft or cheque drawn or made payable in favour of “JM Financial Asset Reconstruction Company Private Limited” only and should be crossed “Account Payee only”. Demand Draft(s)/ cheque(s) may be drawn on any bank including a co-operative bank, which is a member or sub-member of the Banker’s clearing house located at Mumbai. In case the payment is made through any electronic mode of payment such as RTGS / NEFT, the funds have to be credited to the Company’s current account, the details of which are provided in the Application Form. It may be noted that payment by any other means shall not be accepted. The Company assumes no responsibility for any applications/cheques/demand drafts lost in mail or in transit or any failure of electronic fund transfer. Who can apply Nothing in this DD shall constitute and/or deem to constitute an offer or an invitation to offer, to be made to the public or any section thereof through this DD and this DD and its contents should not be construed to be a prospectus under the Companies Act. This issue is made to the eligible equity shareholders of the Company on rights basis. All investors are required to check and comply with applicable laws including the relevant rules / regulations / guidelines applicable to them for investing in this Issue of NCDs and the Company, is not in any way, directly or indirectly, responsible for any statutory or regulatory breaches by any investor, neither is the Company required to check or confirm the same. Although above investors are eligible to apply however only those investors, who are individually addressed through direct communication by the Company, are eligible to apply for the Debentures. No other person may apply. Hosting of DD on the website of the BSE should not be construed as an offer or an invitation to offer to subscribe to the NCDs and the same has been hosted only as it is stipulated by the SEBI Regulations. Investors should check their eligibility before making any investment. Submission of Documents Investors should submit the following documents, wherever applicable: a. Memorandum and Articles of Association/Documents governing constitution, in case of other than

individuals; b. Government notification/certificate of incorporation; c. SEBI registration certificate, if applicable; d. Resolution authorizing investment along with operating instructions; e. Power of Attorney (original & certified true copy); f. Specimen signatures of authorised persons; g. Certified true copy of PAN card;

Page 31


h. Registered / communication address; The list of documents required to be provided by an investor as mentioned above is only indicative and an investor will be required to provide all additional documents / authorizations / information, which may be required by the Company. The Company may, but is not bound to revert to any investor for any additional documents / information and can accept or reject an application as it deems fit, without assigning any reasons. Submission of completed Application Form All applications duly completed accompanied by fund transfer instrument / fund transfer instructions from the respective investor’s account to the account of the Company, shall be submitted at the Registered Office of the Company. Right to Accept or Reject Applications The Company is entitled at its sole and absolute discretion to accept or reject any application, in part or in full, without assigning any reason thereof. Application Forms that are not complete in all respects may be rejected at the sole and absolute discretion of the Company. Any application, which has been rejected, would be intimated by the Company along with the refund warrant. Debentures in Dematerialised mode The Company will make allotment of NCDs to investors in due course after verification of the application form, the accompanying documents and on realization of the application money. The allotted NCDs will be credited in dematerialized form within 2 (two) Business Days from the Date of Allotment. The Depository Participant’s name, DPID and beneficiary account number must be mentioned at the appropriate place in the Application Form. Notwithstanding the foregoing, investors have the option to seek rematerialisation of NCDs (i.e. investors shall have the right to hold the NCDs in physical form) at any time in the future.

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B. ISSUE DETAILS The Issue The Company proposes to issue up to 1000 Secured, Rated, Listed, Redeemable, Non-Convertible Debentures of the face value of `10,00,000 (Rupees Ten Lakh only) each for cash aggregating upto ` 100,00,00,000/- (Rupees One Hundred Crore only) to the eligible equity shareholders of the Company on rights basis in the ratio of 1 (One) NCD for every 2,10,000 (Two Lakh Ten Thousand) equity shares held by them as on the record date viz., July 11, 2014. Pursuant to a resolution passed by the Company’s shareholders at their meeting held on November 25, 2013 in accordance with provisions of the Companies Act, 2013, the Board has been authorised to borrow, for the purpose of the Company, upon such terms and conditions as the Board may think fit for amounts up to ` 1,500 Crore. The present issue of NCDs in terms of this DD is within the overall powers of the Board as per the above resolution. This present rights issue of NCDs is being made pursuant to the resolution of the Board of Directors passed at its meeting held on June 27, 2014, which has approved the issue of these Non-Convertible Debentures of `100 Crore. The following is a summary of the terms of the Issue.

SUMMARY TERM SHEET

Rights issue of 1000 Secured, Rated, Listed, Redeemable, Non-Convertible Debentures (“Debentures” or “NCDs”) of the face value of ` 10,00,000/- (Rupees Ten Lakh only) each for cash aggregating up to ` 100,00,00,000/- (Rupees One Hundred Crore only) Security Name JM Financial Asset Reconstruction Company Private Limited, 13%

Secured, Rated, Listed, Redeemable, Non-Convertible Debentures Issuer JM Financial Asset Reconstruction Company Private Limited Type of Instrument Secured, Rated, Listed, Redeemable Non-Convertible Debentures Nature of Instrument Secured Seniority Senior Mode of Issue Rights issue of NCDs to the eligible equity shareholders of the

Company in the ratio of 1 (One) NCD for every 2,10,000 (Two Lakh Ten Thousand) equity shares held by them as on the record date viz., July 11, 2014

Eligible Investors Eligible equity shareholders of the Company Listing

The NCDs are proposed to be listed on WDM segment of BSE Limited. BSE has given its in-principle approval to list the NCDs to be issued and allotted in terms of this DD vide its letter dated August 1, 2014. The Company shall forward the listing application to BSE Limited alongwith the applicable disclosures within 15 days from the date of allotment of NCDs.

Rating of the Instrument CRISIL Limited has assigned a rating of “CRISIL A+/Stable” to this NCD issue of ` 100,00,00,000/- (Rupees One Hundred Crore only) of the Company. Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.

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Issue Size Upto ` 100 Crore Option to retain oversubscription (Amount)

None

Objects of the Issue The object of the Issue is to augment the long term resources of the Company and to increase the average maturity period of its borrowings.

Details of the utilization of the Proceeds

The proceeds of the Issue would be utilised to finance the acquisition of non-performing assets to be acquired by the Company in its ordinary course of business, to meet working capital requirements of the Company including repayment / pre-payment, in full or in part, of certain loans availed by the Company in its ordinary course of business and for general corporate purposes.

Interest/Coupon Rate 13% per annum Step Up/ Step Down Coupon Rate

None

Coupon Payment Frequency Annual

Coupon payment dates Annually (commencing from the date of allotment) Coupon Type Fixed Coupon Reset Process None Day Count Basis Actual / Actual

Interest on application money

13% per annum (to be calculated from the closing of the issue till the date of allotment)

Default Interest Rate In case of default in payment of interest and/or principal redemption on the due dates, additional interest @ 2% p.a. over the applicable interest / coupon rate will be payable by the Company for the defaulting period.

Tenor 5 (five years) from the date of allotment. Redemption Date 5 (five years) from the date of allotment. Redemption Amount ` 10,00,000/- per NCD Redemption Premium / Discount

None

Issue Price 1000 NCDs of face value of `10,00,000/- each. Discount at which security is issued and the effective yield as a result of such discount

None

Put Option Date None Put Option Price None Call Option Date Upon completion of 3 (three) years from the date of allotment of NCDs Call Option Price `10,00,000/- per NCD. Put Notification Time None Call Notification Time Thirty (30) days prior to the exercise of call option by the Issuer. Face Value ` 10,00,000/- (Rupees Ten Lakh only) per NCD Minimum Application and in multiples of Debt securities thereafter

Minimum 1 Debenture and in multiples of 1 thereafter

Issue Timing

- Issue Opening date - Issue Closing Date

August 18, 2014 September 16, 2014

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Issuance mode of the Instrument

Demat only

Trading mode of the Instrument

Demat only

Settlement mode of the Instrument

Cheque / Demand Draft / NEFT / RTGS / other permitted mechanisms

Depository(ies) NSDL / CDSL Business Day Convention Any day of the week excluding Saturdays, Sundays, any day which is

a public holiday for the purpose of Section 25 of the Negotiable Instruments Act, 1881 (26 of 1881) in Mumbai and any other day on which banks are closed for customer business in Mumbai, India.

Record Date for payment / call option /redemption

15 days prior to each Coupon Payment / Call Option Date / Redemption Date

Security (where applicable) (Including description, type of security, type of charge, likely date of creation of security, minimum security cover, revaluation, replacement of security) and Ranking of Security.

The NCDs being issued under this Disclosure Document shall be secured through a first pari passu charge / mortgage / hypothecation over portions of the Moveable Property or such other assets / properties as may be identified by the Company as set out in the relevant debenture trust deed / security documents. The Company shall endeavor for security to be created prior to allotment of the NCDs being issued and allotted under this DD. The Company may provide or cause to be provided (without being obliged to) such further security (including over immoveable property) for securing its obligations in respect of the Debentures as may be decided by the Company without requiring the consent of the Debenture Trustee and/or the Debenture Holders. There shall be a security cover of 1.33 times at any given point of time.

Transaction Documents Disclosure Document, Debenture Trust Deed, Debenture Trustee Agreement, Deed of Hypothecation (if required/applicable) and any other document that may be designated by the Debenture Trustee as a Transaction Document

Conditions Precedent to Disbursement

None

Condition Subsequent to Disbursement

None

Event of Defaults As per Note 1 Provisions related to Cross Default Clause

Not Applicable

Role and Responsibilities of Debenture Trustee

As per SEBI (Debenture Trustee) Regulations, 1993, SEBI (Issue and Listing of Debt Securities) Regulation, 2008, the Companies Act, 2013 and debt listing agreement(s) as amended from time to time.

Governing Law and Jurisdiction

The Company, the NCDs and Company’s obligations under the NCDs shall, at all times, be subject to the provisions of the Companies Act, regulations/ guidelines/ directions of RBI, SEBI and Stock Exchanges and other applicable laws and regulations from time to time. The Debenture-holders, by purchasing the NCDs, agree that the courts in Mumbai shall have exclusive jurisdiction with respect to any matters relating to the NCDs.

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Cash flow for the above NCDs shall be as follows: Cash flows Date Number of days in

coupon period Amount (in `) Per NCD

1st Coupon Upon completion of 1 year from the actual date of allotment

365 1,30,000/-

2nd Coupon Upon completion of 2 years from the actual date of allotment

366 1,30,000/-

3rd Coupon Upon completion of 3 years from the actual date of allotment

365 1,30,000/-

Call Option Upon completion of 3 years from the actual date of allotment

10,00,000/-

4th Coupon Upon completion of 4 years from the actual date of allotment

365 1,30,000/-*

5th Coupon & Redemption

Upon completion of 5 years from the actual date of allotment

365 11,30,000/-*

* If the call option is not exercised by the issuer. Effect on holidays: Should any of the date(s), as defined above or elsewhere in this DD, fall on a non Business Day, the next Business Day shall be considered as the effective date for the purpose of coupon/interest payment and the previous Business Day shall be considered as the effective date for the purpose of payment of redemption proceeds. Note 1: I. Events of Default

In the event of: a) the Company being in default of any of its payment obligations in relation to the Debentures

undertaken in terms of the Debenture Trust Deed or otherwise, and the Company fails to cure such default within a maximum period of 30 (Thirty) days from the scheduled date for making such payment; or

b) the value of the Security not being sufficient to maintain the Security Cover, and the Company fails to cure such default within a maximum period of 45 (Forty Five) days from the date on which the Security Cover was breached; or

c) a petition for winding up of the Company having been admitted or if an order of a Court of

competent jurisdiction having been made for the winding up of the Company, otherwise than in pursuance of a scheme of voluntary amalgamation or reconstruction or arrangement previously approved in writing by the Debenture Trustee (acting on the instruction of Debenture Holders holding an aggregate amount representing not less than 75% (Seventy Five Percent) of the value of the nominal amount of the NCDs for the time being outstanding) and duly carried into effect; or

d) proceedings for the voluntary or involuntary dissolution of the Company having been

commenced; or

Page 36


e) a receiver or liquidator having been appointed or allowed to be appointed for all or any part of the undertaking of the Company and such appointment not being dismissed within 60 days of appointment; or

f) the Company having voluntarily or involuntarily become the subject of proceedings under any insolvency laws; or

g) the Company having taken or suffered any action to be taken for its liquidation or dissolution; or

h) the Company ceasing to carry all of its business; or

i) the passing of any order by a court of competent jurisdiction ordering, restraining or otherwise preventing the Company from conducting all or any material part of its business;

II. Consequence of Event of Default

a) On and at any time after the occurrence of an Event of Default, the Debenture Trustee shall, if so directed by Debenture Holder(s) (holding an aggregate amount representing not less than 75% (Seventy Five Percent) of the value of the nominal amount of the Debentures for the time being outstanding), be entitled to:

i) accelerate the redemption of the Debentures and the amounts due under the security documents shall become immediately due and payable; and/or

ii) enforce its charge over the Secured Property in terms of the security documents to recover the amounts due; and/or

iii) exercise any other right that the Debenture Trustee and / or Debenture Holder(s) may have under the Transaction Documents or under Indian law.

b) If any Event of Default or any event which, after the notice, or lapse of time, or both, would

constitute an Event of Default has happened, the Company shall, promptly give notice thereof to the Debenture Trustee, in writing, specifying the nature of such Event of Default.

c) In addition to the above, and without prejudice to the Company’s obligation to make payment of default interest on account of any delay in relation to making of any payments due in relation to the Debentures, so long as there shall be an Event of Default other than item I (a) above, the Company shall pay an additional interest of 2% (two per cent) per annum over the Interest / Coupon Rate until such Event of Default is rectified, without any prejudice to the remedies available to the Debenture Holder(s) or the consequences of Events of Default.

for JM Financial Asset Reconstruction Company Private Limited

Sd/- Nikhil Bhandary Company Secretary Place: Mumbai Date: 04th August, 2014

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SECTION - IV

ANNEXURES

A – CRISIL CREDIT RATING LETTER AND RATING RATIONALE

Page 38

Rating Rationale JM Financial Asset Reconstruction Company Private Limited

Rs.1.0 Billion Non-convertible Debenture issue CRISIL A+/Stable(Assigned) Rs.3.0 Billion Commercial Paper Programme*

CRISIL A1+ (Reaffirmed)

Total Bank Loan Facilities Rated Rs.2.00 Billion Long-Term Rating* CRISIL A+/Stable (Reaffirmed)

(Refer to annexure for details on facilities) *The common independent director on the boards of CRISIL Ltd and JM Financial Asset Reconstruction Company private Ltd did not participate in the Rating Committee Meeting and the rating process for these instruments

CRISIL has assigned its ‘CRISIL A+/Stable’ rating to the Rs.1.0-billion non-convertible debenture issue of JM Financial Asset Reconstruction Company Pvt Ltd (JMFARC), and has reaffirmed its ratings on the company’s bank facilities and other debt instruments at ‘CRISIL A+/Stable/CRISIL A1’. The ratings continue to centrally factor in the expectation of strong support from JMFARC’s promoter and single largest shareholder, JM Financial Ltd, both on an ongoing basis and during challenging times. The ratings also reflect JMFARC’s healthy capitalisation and adequate market position. These rating strengths are partially offset by JMFARC’s exposure to asset-quality challenges inherent in the industry it operates in and volatility in earnings profile. JM Financial Ltd held a 49 per cent stake in JMFARC as on June 30, 2014, and is JMFARC’s single largest shareholder. The promoter’s shareholding is restricted to 49 per cent because of regulatory requirements; CRISIL believes that JM Financial Ltd will become at least a majority shareholder as soon as regulations permit such ownership. JMFARC is strategically important to the JM Financial group given that the group has identified asset reconstruction as one of the core businesses for growth. JMFARC will play a key role in the group’s plan of launching a distressed asset fund. JMFARC also has operational synergies with other businesses of the group such as investment banking and corporate lending. The JM Financial group extends financial, operational, and management support to JMFARC. JM Financial Ltd has infused equity capital of Rs.1.02 billion in JMFARC as on date, and is willing to extend additional capital (subject to board approval) to support JMFARC’s growth plans over the medium term. The JM Financial group’s senior management is actively involved in strategic decision making at JMFARC and has representation on the company’s board. CRISIL believes that the single largest shareholding and the shared brand lead to high moral obligation on the JM Financial group to support JMFARC. CRISIL believes that the JM Financial group will support JMFARC in meeting its debt obligations on time. CRISIL believes that JMFARC is expected to continue to receive strong support from its parent over the medium term, given its high strategic importance to the parent and the strong moral obligation of the parent to support the company. JMFARC has healthy capitalisation, with a net worth of Rs.3.3 billion and an overall capital adequacy ratio (CAR) of 47 per cent as on March 31, 2014 (Rs.2.8 billion and 75 per cent, respectively, as on March 31, 2013). JMFARC is likely to raise equity capital of up to Rs.1 billion over the next one to two years to support its medium-term growth plans and the ability to do so will remain a key monitorable. JMFARC has a conservative gearing philosophy given the nature of its business, which supports its capitalisation. The company’s gearing stood at 1.05 times as

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on March 31, 2014 (0.6 times as on March 31, 2013). JMFARC’s gearing is likely to be around 1.7 times as on March 31, 2015, against the earlier expectation of below 1 time. However, the gearing will remain high over the next few quarters because of the acquisition of one large stressed asset in the first quarter of 2014-15 (refers to financial year, April 1 to March 31). JMFARC has an adequate market position and is one of the leading asset reconstruction companies with outstanding security receipts (SRs)—both owned and managed—of Rs.36.5 billion as on March 31, 2014 (Rs.10.8 billion as on March 31, 2013). JMFARC’s assets under management (AUM) registered a compound annual growth rate (CAGR) of 93 per cent between 2009-10 and 2013-14 and is expected to grow at a healthy pace over the medium term, supported by increased willingness of banks to sell non-performing assets during times of significant asset quality challenges. This is reflected in the asset acquisition of Rs.26.4 billion in 2013-14, which accounted for two-thirds of its total acquisitions till date. The company acquired assets of Rs.46.6 billion in the first quarter of 2014-15. JMFARC has demonstrated a healthy recovery track record which enhances its competitive position; the company has made recoveries of 39.2 per cent of cumulative acquisitions till December 31, 2013, wherein recoveries have happened in some cases within one year of acquisition. The recoveries as a percentage of cumulative acquisitions till March 31, 2014, fell to 16.2 per cent on account of sharp increase in acquisitions in the last quarter of 2013-14. However, JMFARC faces asset-quality-related challenges given its exposure to stressed assets, despite its adequate asset acquisition and resolution policy framework in place. As the company’s AUM has grown primarily in the past few years and it takes around four years to resolve an asset and recover dues, the performance of the recently acquired portfolio remains to be seen. Additionally, the pace of resolution has been slower with regard to a sizeable proportion of portfolio acquired in 2009-10 (63 per cent) and 2010-11 (73 per cent). In the current weak economic scenario, marked by significant pressure on cash flows of borrowers, JMFARC’s ability to recover money will remain a key monitorable. JMFARC’s earnings profile is volatile because of uncertain and erratic recoveries from acquired assets, given the inherent nature of the business. The company reported a profit after tax (PAT) of Rs.0.48 billion in 2013-14 (Rs.0.4 billion in the previous year) supported by strong growth in management fee income and interest income on restructuring. JMFARC plans to increase the share of relatively stable fee-based income by managing an increased amount of trust assets, wherein a significant proportion of SRs are held by external investors, and launch of a distressed asset fund. JMFARC’s ability to scale up its fee-based business, and thus improve stability of its earnings profile, will remain a key monitorable over the medium term. Outlook: Stable CRISIL believes that JMFARC will continue to receive strong support from the JM Financial group and will maintain comfortable capitalisation and adequate gearing over the medium term. The outlook may be revised to ‘Positive’ in case of a material improvement in the JM Financial group’s credit risk profile or if the group acquires majority stake in JMFARC. Conversely, the outlook may be revised to ‘Negative’ in case of decline in the JM Financial group’s stake in, or support extended to, JMFARC, or if the JM Financial group’s credit risk profile weakens. The outlook may also be revised to ‘Negative’ in case of a significant slowdown in the pace of recoveries by JMFARC and deterioration in its earnings position.

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About the Company JMFARC was incorporated in September 2007 by JM Financial Ltd which holds 49 per cent stake in JMFARC, with the balance held by Mr. Narotam Sekhsaria and Mr. Suresh Neotia (20 per cent), Valiant Mauritius Partners FDI Ltd (7.9 per cent), and four public sector banks (23.1 per cent). JMFARC is one of the largest asset reconstruction companies and made acquisitions of Rs.39.7 billion till March 31, 2014. As on March 31, 2014, the company had SRs outstanding of Rs.36.5 billion. JMFARC reported a PAT of Rs.0.48 billion on a total income (net of interest expense) of Rs.1.02 billion for 2013-14, compared with a PAT of Rs.0.40 billion on a total income (net of interest expense) of Rs.0.86 billion for 2012-13. Annexure 1 - Details of Bank Facilities

Current Facilities Previous Facilities

Facility Amount

(Rs. Million)

Rating Facility Amount

(Rs. Million)

Rating

Cash Credit* 1000 CRISIL A+/Stable Cash Credit* 1000 CRISIL

A+/Stable Overdraft

facility 1000 CRISIL A+/Stable

Overdraft facility 1000 CRISIL

A+/Stable

Total 2000 -- Total 2000 --

*Cash credit facility of Rs.750 million is interchangeable with working capital demand loan

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B - CONSENT LETTER OF THE DEBENTURE TRUSTEE

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C – ANNUAL REPORT OF THE COMPANY FOR FY 2013-14

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Annual Report 2013 - 14

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BOARD OF DIRECTORS

Mr. V P Shetty Chairman Mr. Narotam S Sekhsaria Mr. Suresh Kumar Neotia Mr. Hoshang N Sinor Mr. G M Ramamurthy Mr. S H Khan Mr. Shailesh Haribhakti Dr. Anil Kumar Khandelwal (with effect from September 11, 2013) Mr. A M Venkatesa Prasad (with effect from September 11, 2013) Nominee of Indian Overseas Bank Mr. Rabindra Behera (upto September 11, 2013) Nominee of Indian Overseas Bank Mr. Anil Bhatia Managing Director and CEO AUDIT COMMITTEE ISSUE AND ALLOTMENT COMMITTEE

Mr. Shailesh Haribhakti Mr. V P Shetty Mr. V P Shetty Mr. Narotam S Sekhsaria Mr. G M Ramamurthy (with effect from May 15, 2013) Mr. Shailesh Haribhakti Mr. Anil Bhatia CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

Mr. V P Shetty Dr. Anil Kumar Khandelwal Mr. Anil Bhatia COMPANY SECRETARY

Mr. Nikhil Bhandary AUDITORS INTERNAL AUDITORS

M/s. Khimji Kunverji & Co M/s. Deloitte Haskins & Sells Chartered Accountants Chartered Accountants Sunshine Tower, Level 19, 27th-32nd Floor, Indiabulls Finance Centre, Senapati Bapat Marg, Elphinstone Road, Tower 3, Elphinstone Mill Compound, Mumbai 400 013 Senapati Bapat Marg, Elphinstone Road,

Mumbai 400 013 BANKERS

HDFC Bank Limited IDBI Bank Limited UCO Bank The Ratnakar Bank Limited Indian Overseas Bank REGISTERED OFFICE 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025 CIN: U67190MH2007PTC174287 Tel: 91-22-6630 3030 Fax: 91-22-6630 3223 Website: www.jmfl.com

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DIRECTORS’ REPORT To the Members JM Financial Asset Reconstruction Company Private Limited The Directors are pleased to present their Seventh Annual Report together with the Audited Statement of Accounts, Auditors’ Report and the report on the business and operations of your Company for the financial year ended March 31, 2014.

1. Financial Results (` in lakh)

Particulars 2013-14 2012-13

Revenue 12,037.54 8,897.27

Expenses 4,528.32 2,832.91

Profit before tax 7,509.22 6,064.36

Provision for Tax

Current Tax 2,647.00

2,197.00

Deferred tax 38.02 (118.17)

Profit after tax 4,824.20 3,985.53

Balance brought forward from previous year 7,212.89 3,227.36

Surplus carried to Balance Sheet 12,037.09 7,212.89

2. Company’s Performance

During the financial year 2013-14, your Company has achieved a robust growth and stable profitability. Your Company has crossed the top line of `100 crore for the financial year 2013-14 for the first time.

The revenue from operations for the financial year 2013-14 at `120.38 crore was higher by 35 percent over the previous year (`88.97 crore in 2012-13). Profit before tax at `75.09 crore was higher by 24 percent over previous year (`60.64 crore in 2012-13). Profit after tax for the year at `48.24 crore was higher by 21 percent over the previous year (`39.86 crore in 2012-13). 3. Dividend

In order to conserve the reserves of your Company and to meet the long term capital requirements of your Company, your directors do not recommend any dividend for the year ended March 31, 2014. 4. Management Discussion and Analysis

4.1 Industry and Macro economic Overview The banking sector accounts for a major portion of financial intermediation in India and is considered to be the main channel of monetary policy transmission, credit delivery and payment systems. The stability and sound health of the banking system hence is a key pre-requisite for overall economic development and financial stability. The Non-Performing Assets (NPAs) are important prudential indicators to assess the financial health of the banking sector. Besides asset quality, NPAs epitomize the credit risk management and efficacy in allocation of resources within the banking system.

Asset quality continues to be a major concern for Scheduled Commercial Banks (SCBs) in India. The Gross NPA ratio of SCBs increased to 4.20 percent as at end of September 2013 from 3.40 percent at the end of March 2013. The restructured standard advances also increased to 6 percent of total advances as at the end of September 2013 from 5.80 percent at the end of March 2013. Overall the stressed advances rose significantly to 10.20 percent of total advances as at end of September 2013 from 9.20 percent at the end of March 2013. (Source: Financial Stability Report – December 2013 )

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The progress report of the cases with the Corporate Debt Restructuring (CDR) Cell as on March 31, 2014 is summarised below. As on March 31, 2014, there were 280 live cases with the CDR Cell having an aggregate debt of `2,42,259 crore.

Overall Status (Aggregate debt in ` crore) As on March 31, 2014

Number of cases Aggregate debt

Total references received by CDR Cell 622 4,29,989

Cases rejected before admission or approval 111 57,540

Cases under consideration of CDR Empowered Group 35 42,005

Total Cases Approved 476 3,30,444

Cases withdrawn on account of package failure 121 29,980

Cases exited successfully 75 58,205 (Source: CDR Cell Progress Report)

In the year 2013, among the three channels for NPA recovery viz., the Securtisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act), Debt Recovery Tribunals (DRT) and Lok Adalats, the largest amount was recovered through the SARFAESI Act. NPAs recovered through this Act accounted for about 80 percent of the total amount of NPAs recovered.

Banks remained the most important subscribers of securitised assets of Asset Reconstruction Companies (ARCs). However, their share has been on a continued decline in the recent years. The details of financial assets securitised by ARCs are represented below.

Details of Financial Assets Securitised by ARCs (in ` crore) June 2012 June 2013

Book Value of assets acquired 80,500 88,500

Security Receipts issued by ARCs 16,700 18,900

Security Receipts subscribed to by

Banks 11,600 12,600 ARCs 3,600 4,500 FIIs 100 100 Other Qualified Institutional Buyers 1,500 1,700

Amount of Security Receipts completely redeemed 8,200 10,100

(Source: Report on Trend and Progress of Banking in India 2012-13) 4.2 Regulatory Overview The Reserve Bank of India (RBI), with a focus to improve the financial system, implemented several developmental measures during the year 2013-2014. One of the important developmental measures is to improve the system’s ability to deal with corporate distress and financial institution distress by strengthening financial restructuring as well as debt recovery. In order to ensure that the system recognises financial distress early, takes steps to resolve it, and fair recovery for lenders and investors, RBI has outlined a ‘Framework for Revitalising Distressed Assets in the Economy’. This framework, which is operational from April 1, 2014, will focus on putting distressed assets back to work in their best use. The main proposals of the framework are:

• Centralised reporting and dissemination of information on large credit;

• Early formation of lenders’ committee with timelines to agree to a plan for resolution;

• Incentives for lenders to agree collectively and quickly to a plan;

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• Improvement in current restructuring process: Independent evaluation of large value restructurings mandated,

with a focus on viable plans and a fair sharing of losses (and future possible upside) between promoters and creditors;

• More expensive future borrowing for borrowers who do not co-operate with lenders in resolution;

• More liberal regulatory treatment of asset sales:

– Lenders can spread loss on sale of loan assets over two years provided the loss is fully disclosed;

– Takeout financing/refinancing possible over a longer period and will not be construed as restructuring;

– Leveraged buyouts will be allowed for specialised entities for acquisition of ‘stressed companies’;

– Steps to enable better functioning of Asset Reconstruction Companies;

– Sector-specific Companies/Private Equity (PE) firms encouraged to play active role in stressed assets market.

On the regulatory front, RBI has implemented several positive initiatives effecting the working of the Asset Reconstruction Companies (ARCs) as highlighted below:

– ARCs are allowed to convert a portion of debt into the shares of the borrower company;

– ARCs have been permitted to enforce security interest with the consent of secured creditors holding up to 60 percent of the amount outstanding as against 75 percent earlier;

– ARCs are allowed to acquire debt from other ARCs (which was not permitted earlier) provided that such acquisition is made for aggregation of debt;

– In order to ensure better chances of reconstruction of stressed assets at an early stage, a financial asset may be sold to an ARC when the asset is reported as Special Mention Account-2 (SMA – 2 i.e. the accounts where the principal or interest payment is overdue between 61-90 days);

– Banks using auction process for sale of NPAs to ARCs should be more transparent, including the disclosure of reserve price, specifying clauses of non- acceptance of bids, etc. If a bid is received in cash, and also fulfills the other conditions specified in the bid offer document, acceptance of the bid would be mandatory;

– Urban co-operative banks registered under the Multi State Co-Operative Societies Act, 2002 are permitted to invest in the Security Receipts issued in respect of financial assets sold by them to ARCs;

– Uniform accounting standards for ARCs have been notified in April 2014 and the said accounting standards shall be applicable to your Company from the financial year 2014-15 onwards;

– RBI has imposed restrictions on ARCs to acquire assets from their sponsor banks on a bilateral basis. ARCs may however participate in auctions of NPAs by their sponsor banks provided that such auction is conducted in a transparent manner, on an arms length basis, at price determined by market factors;

– Promoters of the defaulting companies / borrowers or guarantors are now allowed to buy back their assets from the ARCs provided that such a settlement is considered helpful in minimising the cost of litigation, arresting the negative impact of diminution in the value of secured assets, where the recovery would appear to be rather uncertain and where such settlement will be beneficial for restructuring purposes;

On the Foreign Direct Investment (FDI) policy front, there has been a flurry of recent announcements by India’s Union Government. The following significant changes have been announced to the FDI regime for ARCs :

– the overall limit for investment by Foreign Institutional Investors (FIIs) / Foreign Portfolio Investors (FPIs) or through FDI route in the equity capital of ARCs has been increased from 74 percent to 100 percent;

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– the FDI entry route after the above change in policy shall be through Automatic route up to 49 percent and

through Government approval route beyond 49 percent;

– the total shareholding of any sponsor either by way of FDI or by routing it through an FII / FPI shall not exceed 50 percent whereas the total shareholding of an individual FII / FPI shall not exceed 10 percent of the total capital of an ARC;

– Both FIIs and FPIs can invest in the Security Receipts up to 74 percent of each tranche of scheme of Security Receipts.

The Securities and Exchange Board of India (SEBI) has notified the SEBI (Foreign Portfolio Investors) Regulations, 2014. A FPI is an eligible qualified institutional buyer to invest in the Security Receipts issued by an ARC.

4.3 Business Performance Overview

4.3.1 Acquisition activities During the year under review, your Company was successful in closing 18 transactions with outstanding dues of around `6048 crore. A summary of the debts acquired during the year as compared to the previous financial year is given below:

Details of Financial Assets acquired by the Company (in ` crore) FY 2013-14 FY 2012-13

Dues acquired 6,048 887

Acquisition cost

Investment by the Company 276 240

Issue of Security Receipts to other investors 2,362 237

Total acquisition cost 2,638 477

Acquisition cost as a percent of dues acquired 44 percent 54 percent

Total outstanding dues acquired (cumulative as on March 31)

12,026 5,978

Total gross acquisition cost (Cumulative as on March 31)

3,967 1,329

4.3.2 Bid participation During the year, your Company has participated in portfolio auctions of 26 banks with outstanding dues of about `14,400 crore. 4.3.3 Resolution and Recovery activities Your Company had steady resolution of assets throughout the year. The summary of resolution of assets is given below:

Details of Financial Assets resolved by the Company (in ` crore) FY 2013-14 FY 2012-13

Redemption of Security Receipts 74 153

Restructuring of assets (Cumulative as on March 31) 499 345

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4.3.4 Assets under management The synopsis of the category of the assets under the management of the Company is as given below:

Comparison of assets under management (in ` crore) As on

March 31, 2014 As on

March 31, 2013

Single Assets 615 496

Corporate Portfolio 2,921 448

Retail Portfolio 111 139

Total 3,647 1,083 4.3.5 Security Receipts issued and outstanding The summary of Security Receipts issued and outstanding as on March 31, 2014 as compared to March 31, 2013 is given hereunder:

SRs issued, redeemed and outstanding (in ` crore) As on

March 31, 2014

As on

March 31, 2013

Security Receipts issued during the year 2,638 477

Security Receipts redeemed during the year 74 153

Security Receipts outstanding as at the end of the year 3,647 1,083

Out of the total Security Receipts issued by the Company of ` 3,967 crore as on March 31, 2014, Security Receipts worth ` 555 crore have been subscribed by your Company as a sole investor to the Security Receipt schemes and schemes involving Security Receipts worth ` 3,412 crore have been subscribed by other investors together with the Company. Out of the above ` 3,412 crore, ` 249 crore has been contributed by your Company. 4.3.6 Credit ratings CRISIL Limited has assigned ratings for the various facilities availed by the Company, details of which are given below:

Facility CRISIL Rating Loans from Banks (`200 Crore) CRISIL A+ (Stable) Borrowing through issue of Commercial Papers (`100 Crore) CRISIL A1+

4.3.7 Corporate Social Responsibility During the year, as a Corporate Social Responsibility initiative, your Company has contributed an aggregate amount of ` 20 lakh to charitable trusts. 4.3.8 Future Outlook The financial year 2014-15 is expected to have an increased level of activity. The Company anticipates higher NPA sales in the financial system due to the incentives given by the Reserve Bank of India’s framework on distressed assets and the regulatory push for early recognition and sale of NPAs. Your Company will continue to work diligently in acquiring financial assets. It will also continue with its efforts on working closely with the distressed borrowers in providing them support and guidance to bail them out from their stressed state of affairs. 5. Report on Corporate Governance

5.1 Company’s philosophy Your Company’s corporate governance philosophy is based on an effective independent Board and the separation of the Board’s supervisory role from the management. Your Company believes that its operations and actions must serve the underlying goal of enhancing overall stakeholders’ value. Our vision is to be the most trusted partner for every stakeholder, to demonstrate the highest level of accountability, maintaining highest standard of transparency, to

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ensure thorough compliance with the applicable acts, laws, rules and regulations and conducting business in the best ethical manner. 5.2 Composition of the Board of Directors Your Company has a proficient Board of Directors, constituted in conformity with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. As at March 31, 2014, the Board of your Company consists of 10 (ten) directors out of which 5 directors are independent. There were 5 (five) meetings of the Board during the financial year 2013-14 which were held on May 15, 2013, July 23, 2013, October 21, 2013, January 20, 2014 and March 18, 2014. The names of the directors and their attendance at the Board meetings during the year are set out below:

Attendance of Directors at Board meetings Name of the Director Position held on the Board No. of Board

meetings held during the financial

year 2013-14

No. of Board meetings

attended during the financial year

2013-14

Mr. V P Shetty Non-Executive Chairman (Sponsor Director)

5 5

Mr. Anil Bhatia Managing Director and Chief Executive Officer (Sponsor Director)

5 5

Mr. Narotam Sekhsaria Non-Executive Director (Sponsor Director)

5 4

Mr. Suresh Kumar Neotia Non-Executive Director (Sponsor Director)

5 -

Mr. A M Venkatesa Prasad* Nominee of Indian Overseas Bank (Sponsor Director)

5 3

Mr. Hoshang N Sinor Independent Director 5 2

Mr. G M Ramamurthy Independent Director 5 5

Mr. S H Khan Independent Director 5 4

Mr. Shailesh Haribhakti Independent Director 5 4

Dr. Anil Khandelwal* Independent Director 5 1

Mr. Rabindra Behera# Nominee of Indian Overseas Bank (Sponsor Director)

5 1

* Appointed with effect from September 11, 2013 # up to September 11, 2013

5.3 Committees of the Board and/or functionaries of the Company The board committees and other committees of senior officials of the Company are guided by their respective terms of reference. The Board of Directors of your Company has constituted the following committees.

A. Audit Committee The Audit Committee comprises three directors and is chaired by Mr. Shailesh Haribhakti, an independent director. 4 (four) meetings of the Committee were held during the year. The composition of the Committee and attendance at its meetings are set out in the following table:

Name of the Director No. of meetings held No. of meetings attended

Mr. Shailesh Haribhakti , Chairman 4 3

Mr. V P Shetty , Member 4 3

Mr. G M Ramamurthy, Member 4 3

Mr. G M Ramamurthy was appointed as a member of the Audit Committee with effect from May 15, 2013.

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B. Issue and Allotment Committee

The Board of Directors of your Company, at its meeting held on March 18, 2014 has constituted the Issue and Allotment Committee comprising Mr. V P Shetty, Mr. Narotam Sekhsaria, Mr. Shailesh Haribhakti and Mr. Anil Bhatia to oversee and decide on the issue and allotment of equity shares and debentures, from time to time.

C. Corporate Social Responsibility Committee The Board of Directors of your Company has constituted the Corporate Social Responsibility Committee comprising Mr. V P Shetty, Mr. Anil Bhatia and Dr. Anil Kumar Khandelwal to monitor the CSR expenditure of the Company in accordance with the provisions of Section 135 of the Companies Act, 2013 and the Rules made thereunder.

D. Asset Acquisition Committee The Asset Acquisition Committee of the Company comprises of the Chairman, the Managing Director & CEO and other functionaries of your Company. The Asset Acquisition Committee takes decisions on the acquisition consideration and the acquisition of assets in accordance with the Reserve Bank of India guidelines and the Asset Acquisition Policy of the Company.

E. Asset Resolution Committee The Asset Resolution Committee of the Company comprises of the Chairman, the Managing Director and CEO and other functionaries of the Company. The decisions on resolution and recovery are administered by this Committee.

5.4 Policies and Procedures Your Company conducts its business in a fair, transparent and ethical manner within the existing rules and regulations prescribed for asset reconstruction companies. The Board of your Company has adopted the following policies in accordance with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, RBI guidelines for Securitisation Companies/Reconstruction Companies and the Companies Act, 2013:

A. Asset Acquisition Policy The Asset Acquisition Policy of your Company lays down the framework to acquire financial assets from banks/financial institutions in compliance with the guidelines prescribed by RBI for acquisition of assets. This policy is administered by the Asset Acquisition Committee.

B. Asset Resolution Policy The Asset Resolution Policy of your Company lays down the broad parameters for rescheduling of debts due from borrowers and is administered by the Asset Resolution Committee.

C. Investment Policy The Investment Policy lays down a framework for deployment of funds of the Company with a view to maximise returns on investments.

D. Policy for issue of Security Receipts The objective of this policy is to enable trusts established by the Company to issue Security Receipts for financing the purchase of financial assets and to lay down the broad guidelines for the issuance of Security Receipts.

E. Credit information policy The Company, being a member of a credit information company (CIBIL) is required to have in place a credit information policy in accordance with the Credit Information Companies (Regulation) Act, 2005 and the Rules/Regulations made thereunder.

F. Whistle Blower policy The Company is required to establish a vigil mechanism for their directors and employees to report genuine concerns or grievances pursuant to the provisions of Section 177 of the Companies Act, 2013 and the Rules made thereunder. Accordingly a Whistle Blower policy governing the vigil mechanism of the Company has been approved by the Board. The Audit Committee of the Company shall oversee the vigil mechanism of the Company in accordance with this policy.

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5.5 General Shareholders’ information

Registered office address of the Company 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025

Corporate Identity Number U67190MH2007PTC174287

ISIN Number

INE265J01012

Registrars and Share Transfer Agents Sharepro Services (India) Private Limited 2nd Floor, Samhita Warehousing Complex, Gala No-52 to 56, Bldg No.13 A-B, Near Sakinaka Telephone Exchange, Andheri-Kurla Road Sakinaka, Andheri (East), Mumbai – 400 072 Tel No: 022 6772 0300

Investor Relations Mr. Nikhil Bhandary Company Secretary 5th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025 Tel: 022 6630 3445 Fax: 022 6630 3223 Email: [email protected]

6. Registered office

During the year under review, the Registered office of your Company has been changed from 141, Maker Chambers III, Nariman Point, Mumbai – 400 021 to 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025. 7. Share Capital

The Board of Directors of your Company has taken ‘in-principle’ decision to issue equity shares for an amount aggregating up to ` 50 crore to the existing shareholders of the Company on a rights basis during the financial year 2014-15. Accordingly, the Authorised share capital of your Company is being increased from `210 crore to `260 crore. 8. Fixed Deposits

Your Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet. 9. Directors

Mr. Rabindra Behera, a nominee of one of the sponsor shareholders of your Company viz., Indian Overseas Bank (IOB), retired from the services of IOB during the year under review and accordingly Mr. A M Venkatesa Prasad was appointed as a nominee of IOB on the Board of your Company in place of Mr. Behera with effect from September 11, 2013. The Directors place on record their appreciation for the contribution made by Mr. Behera during his tenure as a Director of your Company.

Pursuant to the provisions of Section 260 of the Companies Act, 1956, Dr. Anil Kumar Khandelwal was appointed as an additional director of the Company with effect from September 11, 2013. He holds office as a Director up to the date of the forthcoming annual general meeting. Your Company has received a notice in writing from a Member proposing his candidature for the office of Director pursuant to Section 160 of the Companies Act, 2013.

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The above appointments have been approved by the Reserve Bank of India (RBI). RBI has also given its approval for the continuation of Mr. Anil Bhatia as the Managing Director & Chief Executive Officer (MD & CEO) of your Company for a period of three years from May 15, 2014 to May 14, 2017. 10. Statutory Auditors

M/s. Khimji Kunverji & Co, Mumbai, the Statutory Auditors of your Company retire at the ensuing annual general meeting and offer themselves for re-appointment. In accordance with Section 139 of the Companies Act, 2013 read with the Rules made thereunder, M/s. Khimji Kunverji & Co, Mumbai, can be appointed as the Statutory Auditors of the Company for a period of maximum of three years. They have confirmed that their appointment, if made, shall be in accordance with the provisions of Section 139(1) of the Act read with Companies (Audit and Auditors) Rules, 2014 and that they satisfy the criteria given under Section 141 of the Act. Members are requested to consider their re-appointment.

The Audit committee and Board of Directors have recommended the appointment of M/s. Khimji Kunverji & Co., Chartered Accountants as the Statutory Auditors of your Company. 11. Internal Audit/Control

Your Company has in place robust systems of internal control to ensure compliance with various policies and procedures. M/s. Deloitte Haskins & Sells, Chartered Accountants, are the internal auditors of your Company. The Audit Committee and the Board of Directors have re-appointed them as the internal auditors for the next financial year 2014-15. 12. Policy for Prevention, Prohibition and Redressal of Sexual Harassment of Women at workplace

Our policy against sexual harassment is made under the overall ambit of the Code of Conduct of JM Financial Group and in accordance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the calendar year 2013, no cases were reported or filed for sexual harassment at workplace. 13. Directors’ Responsibility Statement

Pursuant to the requirements of sub-section (2AA) of Section 217 of the Companies Act, 1956, the Directors of your Company hereby confirm that:

In the preparation of the annual accounts for the financial year 2013-14, the applicable accounting standards have been followed;

they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for the financial year;

they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956. They confirm that there are adequate systems and controls for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

they have prepared the annual accounts on a going concern basis. 14. Conservation of energy, technology absorption, foreign exchange earnings and outgo

In view of the nature of activities which are being carried on by your Company, the particulars as prescribed under the Companies Act, 1956 regarding conservation of energy and technology absorption are not applicable to your Company and therefore not required to be furnished with this report. There was no inflow or outflow of foreign exchange during the year under review.

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15. Particulars of employees

The information required under Section 217(2A) of the Companies Act, 1956 and the Rules made thereunder, in respect of employees of the Company, is provided in the annexure forming part of this report. Your Company had 31 (thirty one) employees as on March 31, 2014. Out of these employees, 3 (three) employees who were employed throughout the year were in receipt of remuneration of more than ` 60.00 lakh per annum. 16. Appreciations and acknowledgements

Your Directors thank the Company’s bankers, sponsors and members for their continued support and confidence in the Company. The Directors also take this opportunity to express their sincere appreciation for the guidance and assistance received from the Reserve Bank of India, the Ministry of Finance, the Ministry of Corporate Affairs, Indian Banks’ Association and the Association of Asset Reconstruction Companies in India.

The Company continued to receive unstinted support from various banks and financial institutions which have assigned their non performing assets to the Company and have invested in the Company’s asset securitisation schemes from time to time. The Directors wish to place on record their deep sense of appreciation for the same and the Company will continue in its effort to build and nurture strong relationships with the banks and financial institutions. Your Directors also appreciate and value the contributions made by every employee resulting in the successful performance of the Company during the year.

For and on behalf of the Board

Sd/- Place: Mumbai V P Shetty Date: April 28, 2014 Chairman

(DIN – 00021773)

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INDEPENDENT AUDITOR’S REPORT To The Members of JM Financial Asset Reconstruction Company Private Limited Report on the Financial Statements 1 We have audited the accompanying financial statements of JM Financial Asset Reconstruction Company

Private Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2014, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information

Management’s Responsibility for the Financial Statements 2 Management is responsible for the preparation of these financial statements that give a true and fair view of

the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 (“the Act”) which continues to be applicable even under the provisions of Section 133 of the New Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error

Auditor’s Responsibility 3 Our responsibility is to express an opinion on these financial statements based on our audit. We conducted

our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement

4 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements

5 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

audit opinion Opinion 6 In our opinion and to the best of our information and according to the explanations given to us, the financial

statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014; b) In the case of the Profit and Loss Account, of the profit for the year ended on that date; and c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date

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Report on Other Legal and Regulatory Requirements

7 As required by the Companies (Auditor’s Report) Order, 2003 (“the Order”) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters Specified in paragraphs 4 and 5 of the Order

8 As required by section 227(3) of the Act, we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the applicable Accounting Standards referred to in subsection (3C) of section 211 of the Act;

e. on the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act;

For Khimji Kunverji & Co Chartered Accountants

Firm Registration No 105146W

Sd/- Place: Mumbai Date: April 28, 2014

Hasmukh B Dedhia (Partner) F-33494

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Annexure referred to in paragraph 7 of our Report of even date to the members of JM Financial Asset Reconstruction Company Private Limited on the accounts of the company for the year ended March 31, 2014 (i) (a) The Company has maintained proper records showing full particulars, including quantitative details and

situation of fixed assets

(b) The fixed assets have been physically verified by the management at reasonable interval. As informed, no material discrepancies were noticed on such verification

(c) The Company has not disposed off substantial part of its fixed assets during the year.

(ii) The Company does not hold any inventory during the year, hence clause (ii) of the Order is not applicable to the Company

(iii) The Company has neither taken nor granted loan to parties in register maintained under Section 301 of the Act, hence clause (iii) of the Order is not applicable to the Company

(iv) In our opinion and according to the information and explanation given, there is adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of fixed assets and for rendering services. Further, on the basis of examination of the books and records of the Company and according to the information and explanations given, and as per the checking carried out in accordance with the auditing standards generally accepted in India, neither we have observed nor have we been reported for any continuing failure to correct major weaknesses in the internal control system relating to the aforesaid. During the year, the Company has neither purchased any inventory nor sold any goods

(v) (a)Based on the audit procedures applied and according to the information and explanations given, the contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under that Section have been so entered

(b)According to the information and explanations given to us, where each of such contracts or arrangement is in excess of Rs. 5 Lakh in respect of any party, the contracts or arrangement have been made at prices which are prima facie, reasonable having regard to the prevailing market prices at the relevant time or the prices at which transactions for similar services have been made with other parties or as per information available with the Company

(vi) The Company has not accepted any deposits from the public, hence clause (vi) of the Order is not applicable to the Company

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed maintenance of

cost records under clause (d) of sub-section (1) of Section 209 of the Act for the products of the Company

(ix) (a) According to the records of the Company, the Company is regular in depositing with appropriate authorities undisputed statutory dues including Provident fund, Income tax, Service tax, Cess and other material statutory dues applicable to it. We have been informed that Investor education and protection fund, Employees’ state insurance, Sales tax, Wealth tax, Custom duty and Excise Duty are currently not applicable to the Company for the year under audit

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund, Income tax, Service tax, Cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable

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We have been informed that Investor education and protection fund, Employees’ state insurance, Sales tax, Wealth tax, Custom duty and Excise Duty are currently not applicable to the Company for the year under audit

(c) According to the information and explanations given, there are no dues of Income tax, Service tax and Cess which have not been deposited on account of any dispute. We have been informed that Sales tax, Wealth tax, Custom duty and Excise Duty are currently not applicable to the Company for the year under audit

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year

(xi) Based on our audit procedures and as per the information and explanations given, we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution or bank

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has maintained adequate documents and records in case of loans and advances granted on the basis of security by way of pledge of shares, or other securities

(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society, hence clause 4(xiii) of the Order is not applicable to the Company

(xiv) According to the information and explanations given and in our opinion, the Company is not dealing or trading in shares, securities, debentures, and other investments otherwise than in its ordinary course of business, hence clause 4(xiv) of the Order is not applicable to the Company

(xv) According to the information and explanations given, the Company has not given any guarantee for loans taken by others from bank or financial institution.

(xvi) According to the information and explanations given, the Company has not raised any term loans, hence clause 4(xvi) of the Order is not applicable to the Company

(xvii) According to the information and explanations given and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or Companies covered in the register maintained under Section 301 of the Act

(xix) According to the information and explanations given, the Company has not issued any debentures, hence

clause 4(xix) of the Order is not applicable to the Company

(xx) The Company has not raised any money through a public issue during the year

(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the auditing standards generally accepted in India, we have neither come across any instances of fraud on or by the Company, noticed or reported during the course of our audit nor have we been informed of such case by the management For Khimji Kunverji & Co

Chartered Accountants Firm Registration No 105146W

Sd/-

Place: Mumbai Date: April 28, 2014

Hasmukh B Dedhia (Partner) F-33494

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JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED BALANCE SHEET AS AT MARCH 31, 2014

As at As at

Particulars Note

No. 31.03.2014

Rupees 31.03.2013

Rupees I. EQUITY AND LIABILITIES 1 Shareholders' funds

a Share Capital 2.01 2,100,000,000 2,100,000,000 b Reserves and Surplus 2.02 1,203,709,237 721,288,641 3,303,709,237 2,821,288,641

2 Non-current liabilities a Long-term borrowings 2.03 - 1,561,494 b Long-term provisions 2.04 3,463,130 2,975,357 3,463,130 4,536,851

3 Current liabilities a Short-term borrowings 2.05 2,000,000,000 1,687,500,000 b Trade payables 2.06 1,126,396 1,514,393 c Other current liabilities 2.07 1,694,230,984 131,638,576 d Short-term provisions 2.08 3,233,956 2,815,506 3,698,591,336 1,823,468,475 Total 7,005,763,703 4,649,293,967

II. ASSETS 1 Non-current assets

a Fixed assets 2.09 (i) Tangible assets 4,492,618 5,915,327 (ii) Intangible assets 5,639,360 7,217,535 b Deferred tax assets / (liabilities) 2.10 11,623,473 15,425,066 c Long-term loans and advances 2.11 432,514,892 6,639,940 454,270,343 35,197,868

2 Current assets a Current investments 2.12 5,811,753,178 3,360,509,208 b Trade receivables 2.13 467,808,930 94,791,131 c Cash and bank balances 2.14 6,137,077 886,722,115 d Short-term loans and advances 2.15 265,794,175 266,794,800 e Other current assets 2.16 - 5,278,845 6,551,493,361 4,614,096,099 Total 7,005,763,703 4,649,293,967

Significant accounting policies and notes to the financial statements

1 & 2

As per our attached report of even date For Khimji Kunverji & Co For and on behalf of the Board of Directors Chartered Accountants Firm Registration No: 105146W Sd/- Sd/- Sd/- Sd/- Hasmukh B Dedhia VP Shetty Shailesh Haribhakti Anil Bhatia Partner Chairman Chairman-Audit Committee Managing Director & Membership No. F-33494 (DIN-00021773) (DIN-00007347) Chief Executive Officer (DIN-01310959) Sd/- Nikhil Bhandary Company Secretary Date : April 28, 2014 Date : April 28, 2014 Place : Mumbai Place : Mumbai

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JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED STATEMENT OF PROFIT & LOSS FOR THE YEAR ENDED MARCH 31, 2014 For the year ended For the year ended

Particulars Note

No. March 31, 2014

Rupees March 31, 2013

Rupees I. REVENUE FROM OPERATIONS 2.17 1,195,580,148 863,073,334

II. OTHER INCOME 2.18 8,174,362 26,654,242

III Total Revenue (I + II) 1,203,754,510 889,727,576

IV EXPENSES Employee benefits expense 2.19 150,810,290 121,469,234 Finance costs 2.20 172,745,389 12,411,001 Provision/write off for receivables, loans & investments 2.21 31,931,276 74,263,417 Depreciation and amortization expense 2.09 4, 233,185 3,581,512 Other expenses 2.22 93,112,179 71,556,290 Total expenses 452,832,319 283,291,454

V Profit before tax 750,922,191 606,436,122 Tax expense Current tax 264,700,000 219,700,000 Deferred tax 3,801,595 (11,816,918) 268,501,595 207,883,082

VI Profit after tax 482,420,596 398,553,040

VII Earnings per share 2.23 Basic / Diluted 2.30 1.90

Significant accounting policies and notes to the financial statements

1 & 2

As per our attached report of even date For Khimji Kunverji & Co For and on behalf of the Board of Directors Chartered Accountants Firm Registration No: 105146W Sd/- Sd/- Sd/- Sd/- Hasmukh B Dedhia VP Shetty Shailesh Haribhakti Anil Bhatia Partner Chairman Chairman-Audit Committee Managing Director & Membership No. 33494 (DIN-00021773) (DIN-00007347) Chief Executive Officer (DIN-01310959) Sd/- Nikhil Bhandary Company Secretary Date : April 28, 2014 Date : April 28, 2014 Place : Mumbai Place : Mumbai

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JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED STATEMENT OF CASH FLOW FOR THE YEAR ENDED MARCH 31, 2014

In Rupees

Particulars For the

year ended March 31, 2014

For the

year ended March 31, 2013

A Cash flow from operating activities Profit before tax 750,922,191 606,436,122 Adjustment for: Depreciation 4,233,185 3,581,513 Provision for gratuity 516,041 885,217 Provision for/(reversal of) compensated absences 390,182 412,166 Provision for receivables, advances and loans 31,931,276 38,029,314 Provision for loss on impairment of investments - 34,848,715 Earlier year provision on receivables / advances w/back (7,092,571) (18,080,303) Reversal of receivable and investments - 1,385,388 Loss on sale of fixed assets 7,591 43,060 Interest expense 172,745,389 12,411,001 Operating profit before working capital changes 953,653,283 679,952,192 Adjustment for: (Increase)/decrease in trade receivables (383,295,794) 3,694,870 (Increase)/decrease in short-term loans and advances (20,680,204) (99,660,695) (Increase)/decrease in other current assets 5,278,845 (4,774,034) (Increase)/decrease in trade payables (387,997) (486,389) Increase/(decrease) in other current liabilities 1,562,627,757 80,585,445 Cash generated from/(used in) operations 2,117,195,889 659,311,390 Direct taxes paid (267,625,054) (189,334,217) Net cash from/(used in) operating activities 1,849,570,835 469,977,173

B Cash flow from investing activities Purchase of current investments - Others (2,761,046,000) (2,401,484,000) Sale/ redemption of current investments - Others 316,894,601 1,055,539,170 Purchase of fixed assets (1,239,892) (7,468,226) Sale of fixed assets - 19,800 Bank balances not considered as Cash and cash equivalents 31,900,000 (31,900,000) (opening less closing) Net cash from/(used in) investment activities (2,413,491,291) (1,385,293,256)

C Cash flow from financing activities Increase in long term loans & advances (422,949,904) 261,423 Repayment of long-term borrowings (1,561,494) (260,939) Proceeds from short-term borrowings 312,500,000 1,687,500,000 Repayment of short-term borrowings (7,795) (1,064,212) Interest paid (172,745,389) (12,411,001) Net cash from/(used in) financing activities (284,764,582) 1,674,025,272 Net increase/(decrease) in Cash and cash equivalents (848,685,038) 758,709,188 Cash & cash equivalents (opening) 854,822,115 96,112,928 Cash & cash equivalents (closing) 6,137,077 854,822,115

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Notes

1 The cash flow statement has been prepared under the 'Indirect Method' set out in AS 3 - "Cash Flow Statement" notified in Companies (Accounting standards) Rules, 2006 (as amended).

2 Previous year's figures have been regrouped and rearranged wherever necessary As per our attached report of even date For Khimji Kunverji & Co For and on behalf of the Board of Directors Chartered Accountants Firm Registration No: 105146W Sd/- Sd/- Sd/- Sd/- Hasmukh B Dedhia VP Shetty Shailesh Haribhakti Anil Bhatia Partner Chairman Chairman-Audit Committee Managing Director & Membership No. 33494 (DIN-00021773) (DIN-00007347) Chief Executive Officer (DIN-01310959) Sd/- Nikhil Bhandary Company Secretary Date : April 28, 2014 Date : April 28, 2014 Place : Mumbai Place : Mumbai

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JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED 1. SIGNIFICANT ACCOUNTING POLICIES a. Accounting convention "The financial statements have been prepared in compliance with all material aspects of the applicable Accounting

Standards notified under Companies (Accounting Standards) Rules 2006 (as amended), the Guidelines issued by the Reserve Bank of India ('RBI') from time to time and the provisions of the Companies Act, 1956 ( the “Act”).

The financial statements are based on historical cost convention and are prepared on accrual basis, except where

impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and are consistent with those used in the

previous year. Accounting Policies not specifically referred to otherwise, are consistent with generally accepted accounting principles.

b. Use of estimates The preparation of financial statements is in conformity with Indian Generally Accepted Accounting Principles which

requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates and differences between actual results and estimates are recognised in the periods in which the results are known / materialised.

c. Fixed assets and depreciation Owned tangible assets

Tangible Fixed Assets are stated at original cost of acquisition less accumulated depreciation and impairment losses. Cost comprises of all costs incurred to bring the assets to their present location and working condition.

Depreciation on tangible fixed assets is provided pro-rata basis for the period of use, on the Straight Line Method

(SLM), based on management's estimate of useful lives of the fixed assets, or at the rates prescribed in Schedule XIV to the Act whichever is higher, as per the following table:

Asset Useful Life Office equipments 5 years

Computers 5 years

Motor Vehicles 5 years

Furniture and Fixtures 10 years Assets costing Rs. 5,000/- or less are fully depreciated in the year of acquisition. Owned intangible assets

Intangible fixed assets are stated at cost of acquisition or internal generation, less accumulated amortisation and impairment losses. An intangible asset is recognised, where it is probable that the future economic benefits attributable to the assets will flow to the enterprise and where its cost can be reliably measured. The depreciable amount of the intangible assets is allocated over the best estimate of its useful life on a straight line basis.

The Company capitalises software and related implementation costs where it is reasonably estimated that the

software has an enduring useful life. Software is depreciated over management estimate of its useful life not exceeding 5 year

Leased assets

Assets acquired under finance lease are accounted for at the inception of lease at the fair value of the assets or present value of minimum lease payments whichever is lower. At the end of lease term, asset will revert back to the lessor; hence they are fully depreciated on a straight line basis over the lease term or its useful life whichever is shorter.

At the balance sheet date, assets held for disposal are valued at Written Down Value (WDV) or Net Realisable

Value (NRV), whichever is lower.

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JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED d. Impairment of assets The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based

on internal / external factors. An asset is treated as impaired when the carrying cost of the assets exceed its recoverable value. An impairment loss, if any, is charged to the profit and loss account in the year, in which an asset is identified as impaired. Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised for the assets no longer exist or have decreased.

e. Investments Investments in Security Receipt (SR) held by the Company are treated as Current Investment. They are valued at lower

of cost or realisable value. Latest available declared NAV is considered to be realizable value. In case where NAV is not declared within one year from acquisition of assets or finalization of resolution strategy, whichever is earlier, cost of SR is considered as realizable value. Individual scrip wise appreciation or diminution is arrived by comparing cost and NAV. Diminution, if any at the trust level is provided for and appreciation, if any is ignored.

f. Revenue recognition Accounting Standard 9 issued by ICAI specifies that the amount of revenue arising on a transaction is usually

determined by agreement between the parties involved in the transaction. When uncertainties exist regarding determination of the amount, these uncertainties may influence the timing of revenue recognition.

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the

revenue can be reliably measured with no significant uncertainty as to the ultimate collection. In case of significant uncertainty as to the ultimate collection, revenue recognition is postponed till such uncertainty is removed.

i Management fee:

• Management fee from trusts is accrued as per terms of the relevant trust deed / offer document.

• Management fee from borrowers/parties is accrued as per the terms of the relevant contract. However in

respect of such fees, the ultimate realization is tested for impairment and in case there are events which suggest significant uncertainty as to the ultimate collection, revenue recognition is postponed to the extent of the uncertainty involved. Revenue is such case is recognized only when such uncertainty is removed.

• Outstanding management fee in respect of trusts where management fee is remaining unpaid for more than one year is provided for in the profit and loss account as a matter of prudence. In respect of such trusts, no further management fee is recognised unless it is realized.

ii Any fee income other than (i) above (e.g. advisory fees, etc.) is recognised as per the terms of contract. . However

in respect of such fees, the ultimate realization is tested for impairment and in case there are events which suggest significant uncertainty as to the ultimate collection, revenue recognition is postponed to the extent of the uncertainty involved. Revenue in such cases is recognized only when such uncertainty is removed.

iii Outstanding management fee/ any other fee from borrowers/ parties remaining unpaid for more than one year is

provided for in the profit and loss account as a matter of prudence. In respect of such cases, no further fee is recognized unless it is realized.

iv Additional realization / return on assets over acquisition price on redemption of SR is accounted for as per the

terms of relevant trust deed / offer document. v Income by way of yield on SR’s is accounted on actual distribution from the trusts. vi Interest income:

• Interest on bank deposits placed with banks is accounted on accrual basis. • Interest on expenses incurred on behalf of trust(s) is accounted as per terms of the relevant trust deed and

offer document and is accrued where reasonable certainty exists with respect to its recovery. Outstanding interest on expenses in respect of trusts where it is remaining unpaid for more than one year is provided for in the profit and loss account as a matter of prudence. In respect of such trusts no further interest is recognized unless it is realised.

• Interest on restructuring is accrued as per contract, net of the proportionate share of expenses incurred and management fees charged in the trust.

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• Interest on loan is accounted for as per the terms of the contract. In case interest / principal is overdue for

more than 180 days from the due date specified in the contract, the loan outstanding is classified as Non Performing Asset and provision is made as per the guidelines issued by the Reserve Bank of India. Unrealized interest on loan is derecognized and further recognition is made only on realisation.

g. Employee Benefits

Defined contribution plan • The Company makes defined contribution to the provident fund, which is recognized in the profit and loss

account on an accrual basis.

Defined benefit plan • The Company's liabilities under the Payment of Gratuity Act are determined on the basis of actuarial valuation

made at the end of each financial year using the projected unit credit method. Actuarial gains and losses are recognised in the statement of profit and loss account as income or expense respectively. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields on the date of balance sheet on government bonds where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defined benefit obligation.

Short term employee benefits • Short term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss

account of the year in which the related services are rendered. h. Expenses incurred for financial assets not acquired

• Acquisition expenses pertaining to financial assets not acquired are shown as 'Recoverable from Sellers / Trust(s)'

and grouped under Advances recoverable in cash or in kind in the balance sheet for a maximum period of six months from the date the expenses are incurred to take care of the eventuality of such asset being subsequently acquired by the Company or the expenses agreed to be reimbursed by the Sellers as deal breakage cost within the said period. Where the Sellers have not agreed to reimburse the same or no acquisition takes place within said period from the date of incurrence of cost, the same are charged to profit and loss account.

i. Expenses incurred by the Company on behalf of the trust

• The expenses incurred on behalf of trusts are shown as 'Recoverable from Trusts' and grouped under Advances

recoverable in cash or in kind in the balance sheet. These expenses are reimbursed to the Company in terms of the provisions of the relevant trust deed and offer document. The recoverable amount if not realized within a period of one year, is provided for in the profit and loss account as a matter of prudence and the same is reversed on recovery.

j. Foreign currency transactions

• Transactions in foreign currency are recorded at the rate of exchange prevailing on the date of transaction. Foreign currency monetary items are reported using closing rate of exchange at the end of the year. The resulting exchange gain / loss is reflected in the profit and loss account. Other non-monetary items, like fixed assets, investments in equity shares, are carried in terms of historical cost using the exchange rate at the date of transaction. Premium / Discount, in respect of forward foreign exchange contract is recognised over the life of the contract. Profit / Loss on cancellation / renewal of forward exchange contract is recognised as income / expense for the year.

k. Taxation

• Tax expense comprises current tax and deferred tax. • Provision for current tax is made on the basis of estimated taxable income for the current accounting year in

accordance with the provisions of Income Tax Act, 1961. • Deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax

rates and laws that apply substantively as on the date of balance sheet. Deferred tax assets arising from timing differences are recognised to the extent there is reasonable certainty that these would be realised in future.

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• Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws.

• At each balance sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets 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.

l. Operating leases

Operating lease payments are recognised as expenditure in the profit and loss account on a straight line basis, which is representative of the time pattern user’s benefit.

m. Provisions, contingent liabilities and contingent assets

Contingent Liabilities are possible but not probable obligations as on the balance sheet date, based on the available evidence. Department appeals, in respect of cases won by the Company, are also considered as Contingent Liabilities. Provisions are recognised when there is a present obligation as a result of past event; and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are determined based on best estimate required to settle the obligation at the balance sheet date. Contingent assets are not recognized in the financial statements.

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JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED 2. NOTES TO THE FINANCIAL STATEMENTS SHARE CAPITAL As at As at 31.03.2014 31.03.2013 Rupees Rupees 2.01 SHARE CAPITAL Authorised 210,000,000 (Previous Year 210,000,000) Equity Shares of Rs 10/- each 2,100,000,000 2,100,000,000 2,100,000,000 2,100,000,000

Issued, Subscribed and Paid-up

210,000,000 (Previous Year 210,000,000) Equity Shares of Rs 10/- each fully paid up 2,100,000,000 2,100,000,000

Total 2,100,000,000 2,100,000,000

Note a. The Company has only one class of shares referred to as equity shares having a Face Value of Rs. 10/-. Each holder of equity shares is entitled to one vote per share. Note b.

Equity Shares As at 31.03.2014 As at 31.03.2013 Particulars Number Rupees Number Rupees

Shares outstanding at the beginning of the year 210,000,000 2,100,000,000 210,000,000 2,100,000,000 Shares Issued during the year - - - - Shares bought back during the year - - - - Shares outstanding at the end of the year 210,000,000 2,100,000,000 210,000,000 2,100,000,000 Note c. Out of Equity shares issued by the Company, shares held by each shareholder, holding more than 5 percent shares specifying the number of shares held are as below:

As at 31.03.2014 As at 31.03.2013 Particulars No. of

Shares held % of

Holding No. of

Shares held % of

Holding Equity Shares: JM Financial Limited 102,900,000 49.00% 102,900,000 49.00% Mr Narotam S Sekhsaria 31,500,000 15.00% 31,500,000 15.00% Indian Overseas Bank 21,000,000 10.00% 21,000,000 10.00% Valiant Mauritius Partners FDI Ltd 16,600,000 7.90% 16,600,000 7.90%

Page 71

JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED NOTES TO THE FINANCIAL STATEMENTS As at As at 31.03.2014 31.03.2013 Rupees Rupees 2.02 RESERVES AND SURPLUS Surplus / (Deficit) in profit and loss account: Opening balance 721,288,641 322,735,601 (+) Profit for the year 482,420,596 398,553,040 Closing balance 1,203,709,237 721,288,641 Total 1,203,709,237 721,288,641

As at As at 31.03.2014 31.03.2013 Rupees Rupees 2.03 LONG-TERM BORROWINGS Secured: Long term maturities of finance lease obligations - 1,561,494 (Secured by way of hypothecation of vehicles. The lease is repayable on a monthly basis over a period of 36 months) Total - 1,561,494

As at As at 31.03.2014 31.03.2013 Rupees Rupees 2.04 LONG-TERM PROVISIONS

For employee benefits - gratuity 3,463,130 2,975,357 Total 3,463,130 2,975,357

As at As at 31.03.2014 31.03.2013 Rupees Rupees 2.05 SHORT-TERM BORROWINGS

Other loans & advances Commercial Paper 500,000,000 -

Other unsecured loans 1,500,000,000 1,687,500,000

Total 2,000,000,000 1,687,500,000

Page 72

JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED NOTES TO THE FINANCIAL STATEMENTS As at As at 31.03.2014 31.03.2013 Rupees Rupees 2.06 TRADE PAYABLES

Total outstanding dues to micro, small and medium enterprises - -

Total outstanding dues to creditors other than micro, small and medium enterprises 1,126,396 1,514,393

Total 1,126,396 1,514,393

As at As at 31.03.2014 31.03.2013 Rupees Rupees 2.07 OTHER CURRENT LIABILITIES

Short term maturities of finance lease obligations (Secured by way of hypothecation of vehicles) 253,145 260,940

Statutory dues 5,875,389 5,102,374 Secured working capital facilities from banks (refer note 2.25) 1,459,704,546 942,422 (Secured by way of pledge of security receipts)

Employees benefits payable 90,000,000 69,731,774 Amounts collected on behalf of trusts 109,611,258 15,711,160 Interest accrued but not due 4,069,880 2,945,034

Other Liabilities 24,716,766 36,944,872 Total 1,694,230,984 131,638,576

As at As at 31.03.2014 31.03.2013 Rupees Rupees 2.08 SHORT-TERM PROVISIONS

For employee benefits - gratuity 257,898 229,630 For employee benefits - compensated absences 2,976,058 2,585,876 Total 3,233,956 2,815,506

Page 73

JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED NOTES TO THE FINANCIAL STATEMENTS 2.09 FIXED ASSETS

Amount in Rupees

GROSS BLOCK DEPRECIATION/AMORTISATION NET BLOCK

Description As at 01.04.2013 Additions Disposals As at

31.03.2014 Up to

01.04.2013 Additions Deductions Upto 31.03.2014

As at 31.03.2014

As at 31.03.2013

i) TANGIBLE ASSETS: Owned Assets: Furniture and Fixtures 654,166 - - 654,166 302,162 67,035 - 369,197 284,969 352,004 Office Equipments 3,194,734 306,484 134,407 3,366,811 2,875,215 270,507 134,407 3,011,315 355,496 319,519 Computers 5,069,453 906,607 379,762 5,596,297 1,398,145 918,901 372,172 1,944,874 3,651,423 3,671,308 Leased Assets: Vehicles 4,115,299 - - 4,115,299 2,542,803 1,371,766 - 3,914,569 200,730 1,572,496 (refer note below) Total 13,033,652 1,213,091 514,169 13,732,573 7,118,325 2,628,209 506,579 9,239,955 4,492,618 5,915,327 ii) INTANGIBLE ASSETS: Software 8,024,877 26,801 - 8,051,678 807,342 1,604,975 - 2,412,317 5,639,360 7,217,535 Total 8,024,877 26,801 - 8,051,678 807,342 1,604,975 - 2,412,317 5,639,360 7,217,535 Total 21,058,528 1,239,892 514,169 21,784,251 7,925,667 4,233,185 506,579 11,652,273 10,131,978 13,132,862 Previous Year 11,151,122 11,065,173 1,157,766 21,058,529 5,439,061 3,581,513 1,094,907 7,925,667 13,132,862 Note: Vendor has lien over the assets taken on lease.

Page 74

JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED NOTES TO THE FINANCIAL STATEMENTS

As at As at 31.03.2014 31.03.2013 Rupees Rupees

2.10 DEFERRED TAX ASSETS/ (LIABILITIES)

Differences in the tax and books - written down value of fixed assets (104,995) 442,559 Due under finance lease 17,816 81,092 Provision for gratuity 1,264,777 1,039,858 Preliminary expenses - 93,655 Compensated absences 1,011,562 838,987 Impairment of investments 9,434,313 11,306,665 Provision for bonus - 1,622,250 Total 11,623,473 15,425,066


2.11 LONG TERM LOANS AND ADVANCES

Other loans and advances Secured, considered good: Loan funds 423,038,655 - Unsecured, considered good: Staff loans 5,850 94,601 Advance Tax (Net of provisions) 8,861,453 5,936,405 Other deposits 608,934 6,08,934 Total 432,514,892 6,639,940

Page 75

JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED NOTES TO THE FINANCIAL STATEMENTS 2.12 CURRENT INVESTMENT As at As at 31.03.2014 31.03.2013 Nos. of Rupees Nos. of Rupees SR SR Other current investments (Unquoted- valued at cost) Investment in Security Receipts of the trusts (Face Value Rs. 1,000/- each except otherwise stated) 1. JMFARC - BOB 2008 - Trust 111,600 111,600 111,600 111,600 (Face value Rs.1/- each, Previous year Rs.1/- each) 2. JMFARC-SHREE RAMA - Trust 5,518 250,000 5,518 250,000 (Face value Rs. 45/- each, Previous year Rs. 45/- each) 3. JMFARC-BOI 2009 – Trust* 48,600 48,600,000 48,600 48,600,000 4. JMFARC-BOI 2009 I – Trust* 36,000 36,000,000 36,000 36,000,000 5. JMFARC - DB - ICICI – Trust* 115,000 115,000,000 115,000 115,000,000 6. JMFARC - DB - DCB – Trust* 7,500 7,500,000 7,500 7,500,000 7. JMFARC - DB - SBI – Trust* 61,000 61,000,000 61,000 61,000,000 8. JMFARC -Jord - SUUTI Trust* 8,000 8,000,000 8,000 8,000,000 9. JMFARC - Pasupati - SASF – Trust* 250,000 40,000,000 250,000 125,258,941 (Face value Rs. 160/- each, Previous year Rs.501/- each) 10. JMFARC -Central bank - Tube – Trust* 50,000 50,000,000 50,000 50,000,000 11. JMFARC -UTI - Tube – Trust* 6,000 6,000,000 6,000 6,000,000 12. JMFARC - Rice - June 2010 – Trust* 129,450 59,450,000 129,450 74,450,000 (Face value Rs. 459/- each, Previous year Rs. 575/- each) 13. JMFARC - Yarn 2010 – Trust* 100,000 32,715,898 100,000 52,656,339 (Face value Rs. 327/- each, Previous year Rs. 527 /- each)

14. JMFARC - SASF Tube – Trust* 62,000 62,000,000 62,000 62,000,000 15. JMFARC - UCO Bank 2010 - Trust* 31,500 28,474,741 31,500 28,474,741 (Face value Rs. 904 /- each, Previous year Rs.904/- each) 16. JMFARC - SME Retail 2011 - Trust 13,365 13,365 13,365 13,365 (Face value Rs.1/- each, Previous year Rs.1/-each) 17. JMFARC-IOB March 2011-Trust* 376,500 318,671,283 376,500 333,098,824 (Face value - Class A SRs Rs. 793/- each, Class B SRs Rs. 1000/- each, Previous year Rs. Class A SRs Rs. 845/- each, Class B SRs Rs. 1000/- each)

18. JMFARC-UCO Bank March 2011-Trust 16,500 16,500,000 16,500 16,500,000 19. JMFARC-IOB II March 2011-Trust* 110,000 109,425,113 110,000 110,000,000 (Face value - Class A SRs Rs. 995/- each, Class B SRs Rs. 1000/- each, Previous year Rs. Class A SRs Rs. 1000/- each, Class B SRs Rs. 1000/- each) 20. JMFARC-Central Bank Retail 2011-Trust 88,872 55,387,288 88,872 69,572,430 (Face value Rs.623/- each, Previous year Rs.783/-each) 21. JMFARC-Retail June 2011-Trust 469,884 469,884 469,884 469,884 (Face value - Rs. 1/- each for Series I, II and III respectively, Previous year Face value - Series I SRs Rs. 1/- each, Series II SRs Rs. 1/- each, Series III SRs Rs. 1/- each) 22. JMFARC-Retail Aug 2011-Trust 7,039 7,039 7,039 7,039 (Face value Rs.1/- each, Previous year Rs.1/- each)

Page 76

As at As at 31.03.2014 31.03.2013 Nos. of Rupees Nos. of Rupees SR SR 23. JMFARC-Swarna 2011-Trust* 196,799 79,096,701 196,799 196,799,000 (Face value - Class A Rs. 55/-, Class B Rs. 1000/-, Previous Year Class A and Class B Rs. 1000/- each) 24. JMFARC-Petrochemicals 2012-Trust* 190,000 121,645,797 190,000 121,645,797 (Face value Rs.640/- each, Previous year Rs.640/- each) 25. JMFARC-Synthetic Rubber 2012-Trust 14,962 14,962 14,962 14,962 (Face value Re.1/- each, Previous year Rs.Nil ) 26. JMFARC-Swarna II 2012-Trust* 78,700 7,87,00,000 78,700 7,87,00,000 27. JMFARC-Kruti 2012-Trust* 564,587 5,00,00,000 564,587 5,00,00,000 (Face value Rs.89/- each, Previous year Rs.89/- each ) 28. JMFARC –Green December 2012 - Trust 23,945 2,39,45,000 23,945 2,39,45,000 29. JMFARC – Media 2013- Trust 12,500 1,25,00,000 12,500 1,25,00,000 30. JMFARC – Kruti II 2013- Trust* 686,600 686,600,000 686,600 686,600,000 31. JMFARC – Media II 2013- Trust* 34,030 34,030,000 34,030 34,030,000 32. JMFARC – Federal Bank March 2013- Trust 70,000 58,358,650 70,000 70,000,000 (Face value Rs.834/- each, Previous year Rs 1,000/- each) 33. JMFARC – Textile 2013- Trust* 91,000 91,000,000 91,000 91,000,000 34. JMFARC – Central India 2013- Trust* 289,360 289,360,000 289,360 289,360,000 35. JMFARC – Corp I 2013- Trust 93,000 59,002,000 93,000 93,000,000 (Face value Rs.634/- each, Previous year Rs 1,000/- each) 36. JMFARC – Corp II 2013- Trust 58,800 58,800,000 58,800 58,800,000 37. JMFARC – Corp Textile 2013- Trust* 150,000 150,000,000 150,000 150,000,000 38. JMFARC-Corp Apparel 2013-Trust 120,000 116,833,000 1,20,000 120,000,000 (Face value Rs.974/- each, Previous year Rs 1,000/- each) 39. JMFARC – Corp Biotech 2013- Trust 114,000 114,000,000 114,000 114,000,000 40. JMFARC-Kruti III 2013-Trust* 360,500 360,500,000 - -

41. JMFARC-Stancy Textile 2013-Trust 1,000 1,000 - - (Face value Re.1/- each, Previous year Rs.Nil ) 42. JMFARC-Fed Textile 2013-Trust 8,820 8,820,000 - - 43. JMFARC-Hospitality 2013-Trust* 107,294 107,294,000 - - 44. JMFARC-BOI Textile 2013-Trust 41,000 41,000,000 - - 45. JMFARC-OBC March 2014-Trust 34,500 34,500,000 - - 46. JMFARC-Dena Bank March 2014-Trust 67,000 67,000,000 - - 47. JMFARC-UCO March 2014-Trust 462,500 462,500,000 - - 48. JMFARC-Gelatine March 2014-Trust 628,672 628,672,000 - - 49. JMFARC-Fed Gelatine March 2014-Trust 17,500 17,500,000 - - 50. JMFARC-SBI March 2014 I-Trust 173,750 173,750,000 - - 51. JMFARC-SBI March 2014 II-Trust 45,250 45,250,000 - - 52. JMFARC-Cosmos March 2014-Trust 154,500 154,500,000 - - 53. JMFARC-Indian Bank March 2014-Trust 44,500 44,500,000 - - 54. JMFARC-Petro BOB 2014-Trust 135,500 135,500,000 - - 55. JMFARC-Petro UCO 2014-Trust 140,000 140,000,000 - - 56. JMFARC-Petro CBOI 2014-Trust 51,500 51,500,000 - - 57. JMFARC-OBC March 2014 II -Trust 4,760 4,760,000 - - 58. JMFARC-BOI March 2014 II -Trust 215,750 215,750,000 - - 59. JMFARC-UBOI March 2014-Trust 66,750 66,750,000 - -

5,839,509,321 3,395,357,922 Less: Provision for impairment of investments 27,756,143 34,848,715

Total 5,811,753,178 3,360,509,208

Page 77

As at As at 31.03.2014 31.03.2013 Nos. of Rupees Nos. of Rupees SR SR

Notes: As at

31.03.2014 As at

31.03.2013 Cost Cost 1. Aggregate value of Rupees Rupees Unquoted Investments 5,811,753,178 3,360,509,208 *Pledged with banks as security for bank overdraft / cash credit limit

Page 78



2.13 TRADE RECEIVABLES (Refer note no. 2.26)

Trade receivables outstanding for a period exceeding six months from the date they are due for payment

Unsecured, considered good 68,301,159 69,095,846 Less: Provision for receivables outstanding over 1 year 55,050,548 44,772,553 13,250,611 24,323,293

Trade receivables outstanding for a period less than six months from the date they are due for payment

Unsecured, considered good 454,558,319 70,467,838 454,558,319 70,467,838 Total 467,808,930 94,791,131


2.14 CASH AND BANK BALANCES

Cash and cash equivalents Cash in hand - 31,673 Balances with banks In Current Accounts 6,137,077 273,890,442 In Deposit Accounts (with maturity below 3 months) - 580,900,000 6,137,077 854,822,115 Other bank balances - 31,900,000 Total 6,137,077 886,722,115

a. Balances with banks in deposit account (maturing after b. Earmarked balances with banks (for example, for unpaid

dividend) c. Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other

commitments. d. Repatriation restrictions, if any, in respect of cash and bank balances

Page 79



2.15 SHORT-TERM LOANS AND ADVANCES Secured considered good: Loan Funds 209,967,227 178,005,882 Staff Loans - 35,000,000 Unsecured considered good: Staff Loans 102,472 308,058

Advances recoverable in cash or in kind or for value to be received (Refer note no. 2.26)

39,614,596

28,928,722

Others 45,075,984 31,837,406 Total 294,760,280 274,080,068 Less: Provision for advances outstanding over 1 year 19,016,104 7,285,268 Less: Provision for loans 9,950,000 - Total 265,794,175 266,794,800

As at As at 31.03.2014 31.03.2013

Rupees Rupees

2.16 OTHER CURRENT ASSETS Interest accrued on fixed deposit - 5,278,845 Total - 5,278,845

Page 80

JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended For the year ended

March 31, 2014


Rupees 2.17 REVENUE FROM OPERATIONS

Operating revenue Management and advisory fees 562,938,273 223,099,283 Interest income on restructuring 370,929,844 153,220,594 Interest income on loans 112,989,530 38,325,360 Profit on redemption/ sale of security receipts 141,150,358 429,289,525 Other operating revenue Interest income on funded expenses 479,572 1,058,269 Earlier year provision on receivables/ advances written back 7,092,571 18,080,303 Total 1,195,580,148 863,073,334

For the year ended For the year ended

March 31, 2014


Rupees 2.18 OTHER INCOME

Interest income on fixed deposit 7,121,409 25,528,585 Other non-operating income 1,052,953 1,125,657 Total 8,174,362 26,654,242


March 31, 2014


Rupees 2.19 EMPLOYEE BENEFITS EXPENSE

Salaries, Bonus and Allowances 146,807,398 117,441,818 Contribution to Provident Fund and Other Funds 3,293,448 3,076,188 Gratuity 589,097 885,217 Staff Welfare 120,347 66,011 Total 150,810,290 121,469,234


March 31, 2014


Rupees 2.20 FINANCE COSTS

Interest Expense 167,575,014 9,698,030 Other borrowing costs 5,170,375 2,712,971 Total 172,745,389 12,411,001

Page 81

JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended For the year ended

March 31, 2014


Rupees 2.21 PROVISION / WRITE OFF FOR RECEIVABLES, LOANS AND

INVESTMENTS Provision for receivables and advances over 1 year 21,981,276 38,029,314 Provision for loans 99,50,000 - Provision for impairment of investments - 34,848,715 Write off/ reversal of receivables and investments - 1,385,388 Total 31,931,276 74,263,417


March 31, 2014


Rupees 2.22 OTHER EXPENSES

Rent and other cost 27,021,425 19,559,813 Rates & taxes 3,256,047 2,562,063 Insurance premium 1,307,072 1,037,940 Communication expenses 646,520 552,459 Repairs and maintenance (Building) 110,632 351,076 Repairs and maintenance (Machinery) 2,466,970 1,275,367 Professional fees 3,613,031 2,469,056 Auditors Remuneration -as auditor 403,484 318,540 -as tax auditor 74,326 22,271 -for management services (limited review) 127,416 80,305 Support service charges 19,112,400 19,112,400 Membership & Subscription 296,361 795,395 Travelling expenses 1,796,430 1,637,836 Electricity 1,409,215 855,504 Printing and stationery 511,115 339,016 Director’s fees and commission 24,040,000 17,490,000 Donation 2,027,000 - Miscellaneous expenses 4,892,734 3,107,249 Total 93,112,179 71,566,290

Page 82


2.23 Earning per share Earning per share is calculated by dividing the profit attributable to the equity shareholders by the weighted average

number of equity shares outstanding during the year, as under:

Particulars For the year ended 31 March 2014

For the year ended31 March 2013

Profit attributable to the equity shareholders for the purpose of basic/ diluted earnings per share (Rupees)

482,420,596 398,553,040

Weighted average number of equity shares outstanding during the year for basic/ diluted earnings per share

210,000,000 210,000,000

Basic/ diluted earnings per share – (Rupees) 2.30 1.90 Nominal value per share – (Rupees) 10 10

2.24 Expenditure in Foreign Currency

Particulars As at 31 March 2014

As at 31 March 2013

Conference & Seminars (Rupees) - 108,406

2.25 The Company have been sanctioned overdraft/ cash credit limits of Rs. 2,50,00,00,000 by scheduled banks secured

against pledge of investments in security receipts.

2.26 The normal operating cycle of the Company is five years in view of the estimated timeframe for resolution of the assets post their acquisition. Accordingly, the trade receivables and advances recoverable have been classified under current assets.

2.27 Segment Reporting

The Company operates in only one business and geographical segment and hence there are no reportable segments.

2.28 Leases

a) Finance Lease The Company has acquired vehicles under the finance lease agreement. The tenure of the lease agreements are 36

and 60 months with an option to prepayment/foreclosure. The minimum lease rentals outstanding with respect to these assets are as under:

Amount in Rupees

Particulars

Total minimum

lease payment

outstanding as at March

31, 2014

Lease finance charges not

due

Present value of the minimum

lease payment as at March 31,

2014

Total minimum

lease payment

outstanding as at March

31, 2013

Lease finance charges not due

Present value of the

minimum lease

payment as at March 31,

2013 Not later than 1 year 260,940 7,795 253,145 1,777,320 208,031 1,569,289 Later than 1 year but not later than 5 years

- - - 260,940 7,795 253,145

Total 260,940 7,795 253,145 2,038,260 215,826 1,822,434

Page 83


b) Operating Lease The current office premises of the Company is under operating lease upto March 31, 2015

The minimum lease rentals outstanding with respect to these assets are as under:

Amount in Rupees Total lease payments

outstanding as at Total lease payments

outstanding as at Particulars March 31, 2014 March 31, 2013

Not later than 1 year 19,490,400 21,157,200 Later than 1 year but not later than 5 years - - Later than 5 years - - Expenditure debited to profit & loss account 27,796,609 15,874,002

2.29 Employee benefits

A Defined benefit plans a) Gratuity

Amount in Rupees Amount recognised in the balance sheet with

respect to gratuity For the year ended

March 31, 2014 For the year ended

March 31, 2013

Present value of the defined benefit obligation at the year end

3,721,028 3,204,987

Fair value of plan assets - - Net liability 3,721,028 3,204,987

Amount recognised in salary, wages and employee benefits in the profit and loss account

with respect to gratuity

For the year ended March 31, 2014


Current service cost 637,739 500,791 Interest on defined benefit obligations 301,961 239,068 Expected return on plan assets - - Net actuarial (gain) loss recognised during the year (350,603) 145,358 Past service cost - - Net gratuity cost 589,097 885,217

Page 84


Amount in Rupees Reconciliation of present value of the obligation and the fair value of the plan assets:



Opening defined benefit obligation 3,204,987 2,319,770 Current service cost 637,739 500,791 Interest cost 301,961 239,068 Actuarial (gain)/loss (350,603) 145,358 Past service cost - - Benefits paid (73,056) - Closing defined benefit obligation 3,721,028 3,204,987 Change in fair value of plan assets For the year ended


March 31, 2013

Opening fair value of the plan assets - - Expected return on plan assets - - Actuarial (gain)/loss - - Contributions by the employer 73,056 - Benefits paid (73,056) - Closing fair value of the plan assets - - Investment details of plan assets For the year ended


March 31, 2013

Investment details of plan assets - - Principal actuarial assumptions at the balance sheet date



Discount rate 9.10% 8.10% Estimated rate of return on plan assets - - Retirement age 60 years 60 years Salary escalation 7.00% 7.00%

Valuation assumptions • The estimates of future salary increases, takes into account inflation, seniority, promotion and other relevant

factors. • The above information is certified by the actuary.

b) Compensated absences

As per Company’s policy, provision of Rs.29,76,058/- (previous year Rs. 25,85,876/- ) has been made towards compensated absences, calculated on the basis of unutilised leave as on the last day of the financial year.

B Defined contribution plans

Amount recognised as an expense and included in the ‘Contribution to provident fund & other funds’ Rs. 32,93,448/- (previous year Rs. 30,76,188/- ).

2.30 "Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.”

Page 85


Additional disclosure: The following additional disclosures have been made taking into account RBI guidelines in this regard:

a) Name and address of the banks / financial institutions from whom financial assets were acquired and the values at

which such assets were acquired from each such bank/ financial institutions. Name of the selling bank/ financial institution Address Acquisition cost

Rupees % to total

Sponsors

Indian Overseas Bank 763, Anna Salai, Chennai 3,619,100,000 9.12%

Sponsors Total 3,619,100,000 9.12%

Non- Sponsors

UCO Bank Biplabi Trailokya Maharaj Sarani, Kolkata - 700001 9,79,85,00,000 24.70%

Bank of India Star House, C-5, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051 5,67,00,80,000 14.29%

State Bank of India State Bank Bhavan, Corporate Centre, Madame Came Marg, Mumbai, Maharashtra – 400 021 4,12,57,94,000 10.40%

The Cosmos Co-operative Bank Ltd Cosmos Heights, 269/270 Shaniwar Peth, Pune - 411030 3,09,00,00,000 7.79%

Central Bank of India Chandermukhi, Nariman Point, Mumbai 400021 2,68,30,34,000 6.76%

The Federal Bank Ltd Federal Towers, Aluva, Ernakulum, Kerala - 683101 1,95,90,00,000 4.94%

Union Bank of India 239, Vidhan Bhavan Marg, Nariman Point, Mumbai - 400021 1,33,50,00,000 3.36%

Indian Bank 254-260, Avvai, Shanmugam Salai, Royapettah, Chennai - 600014 89,00,00,000 2.24%

Oriental Bank of Commerce Harsh Bhavan, E- Block, Connaught Place, New Delhi - 110001 78,52,00,000 1.98%

Canara Bank 112 J. C. Road, Bangalore 71,55,20,000 1.80%

Punjab National Bank 7, Bhikhaji Cama Place, New Delhi 67,79,41,000 1.71%

Sicom Ltd Solitaire Corporate Park, Building No 4, Andheri Kurla Road, Chakala, Andheri (East), Mumbai - 400093

62,86,72,560 1.58%

Yes Bank 9th floor Nehru Centre, Worli, Mumbai - 400018 54,45,00,000 1.37%

Corporation Bank Mangladevi Temple Road, Mangalore - 575 001 53,58,00,000 1.35%

HSBC 52/60, M. G. Road, Fort, Mumbai - 400001 49,02,88,000 1.24%

Stressed Asset Stabilisation Fund IDBl Tower, 10th Floor, WTC Complex, Cuffe Parade, Mumbai 400005 31,20,00,000 0.79%

Ratnakar Bank One India Bulls Center, Tower 2 , 6th Floor,841, Senapati Bapat Marg,Lower Parel (W),Mumbai 400013

25,00,00,000 0.63%

Bank of Baroda Kalpataru Heritage Building, 6th floor, Nanik Motwani Lane, Fort, Mumbai - 400023 24,71,00,000 0.62%

HUDCO HUDCO Bhawan, Core-7-A,India Habitat Centre,Lodhi Road, New Delhi - 110 003 21,34,44,661 0.54%

Deutsche Bank DB House, Hazarimal Somani Marg, Fort, Mumbai 400001 18,35,00,000 0.46%

Dena Bank C -10, G Block, Bandra Kurla Complex, Mumbai - 400051 14,29,16,048 0.36%

Axis Bank Maker Towers F, 13th Floor, Cuffe Parade, Mumbai - 400005 13,72,50,000 0.35%

State Bank of Patiala The Mall, Patiala- 147001, Punjab 12,45,26,000 0.31%

IDBI Bank IDBl Tower, WTC Complex, Cuffe Parade, Mumbai 400005 10,00,00,000 0.25%

Page 86

JM FINANCIAL ASSET RECONSTRUCTION COMPANY PRIVATE LIMITED NOTES TO THE FINANCIAL STATEMENTS Name of the selling bank/ financial institution Address Acquisition cost Rupees % to total

Specified Undertaking of UTI UTI Tower, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051 7,30,00,000 0.18%

Allahabad Bank 2, Netaji Subhash Road, Kolkata - 700001 6,50,00,000 0.16%

Vijaya Bank 41/2, M.G.Road, Bangalore 560001 6,38,62,102 0.16%

Rupee Co-operative Bank 2062, Sadashiv Peth, Astang Ayurved Building, Pune- 411030 6,00,00,000 0.15%

BNP Paribas Unit No 203, Sakar II, Ellisbridge, Ahmedabad 380006 3,38,70,000 0.09%

Standard Chartered Bank 23, Narain Manzil, Barakhamba Road, New Delhi- 110001 2,59,30,000 0.07%

Karnataka Bank Mahavira Circle, Kankanadi, Mangalore - 575002 2,51,00,000 0.06%

The Saraswat Co-op Bank Ltd Mittal Court 'A' Wing 1st Floor, Nariman Point, Mumbai - 400004 1,91,00,000 0.05%

The Nashik Road Deolali Vyapari Sahakari Bank Ltd

Kalpavruksha, Aashanagar, Nashikroad, Nashik, Maharashtra - 422101 1,50,00,000 0.04%

Life Insurance Corporation of India Yogakshema, Jeevan Bima Marg, Mumbai - 400021 1,49,62,620 0.04%

Bank of Bahrain & Kuwait B.S.C Jolly Maker Chamber, 2, Ground Floor, Nariman point, Mumbai - 400021 1,39,09,236 0.04%

UTI Mutual Fund UTI Tower, Gn Block, Bandra Kurla Complex, Bandra (East) 400051 60,00,000 0.02%

Non Sponsors Total 36,055,800,227 90.88%

Grand Total 39,674,900,227 100.00% b) Dispersion of various assets industry wise.

Industry Acquisition Price in Rupees % to total Textiles 7,31,31,78,747 18.43% Real Estate 7,20,05,48,028 18.15% Iron & Steel 2,52,58,00,000 6.37% Retail 2,36,91,10,632 5.97% Plywood/ laminates 1,68,00,00,000 4.23% Airlines 1,66,00,00,000 4.18% Hospitality 1,43,05,68,000 3.61% Information Technology 1,26,46,26,000 3.19% Media 1,14,71,03,106 2.89% Trading 1,13,40,57,560 2.86% Leather 1,07,15,00,000 2.70% Chemicals 96,03,55,578 2.42% Pharmaceuticals 86,25,61,786 2.17% Healthcare 76,75,00,000 1.93% Infrastructure 75,28,00,000 1.90% Paper 71,79,00,000 1.81% Food Products 68,42,47,208 1.72% Engineering 61,53,00,000 1.55% Plastics 58,28,00,000 1.47% Packaging 55,88,53,456 1.41% Poultry 50,97,68,803 1.28%

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Industry Acquisition Price in Rupees % to total Plantation 47,62,54,195 1.20% Transportation 38,74,00,000 0.98% Metals 35,06,00,000 0.88% Electronic 34,58,45,805 0.87% Education 33,83,69,780 0.85% Power 24,98,50,544 0.63% Energy 22,70,00,000 0.57% Ceramics 19,32,00,000 0.49% Gems & Jewellery 17,77,00,000 0.45% Agro Products 12,96,00,000 0.33% Cement 7,30,00,000 0.18% Paints 6,91,00,000 0.17% Alcohol 5,18,00,000 0.13% Coal 4,33,00,000 0.11% Others 75,33,01,000 1.90% Grand Total 39,674,900,227 100.00% c) The above table (b) has been prepared by management and the same has been relied upon by the auditors. d) The acquisition price in the tables (a) and (b) above includes financial assets acquired till March 31, 2014 including

financial assets resolved till date. e) Restructuring loan disbursed to one borrower amounting to Rs. 9.95 crore has been reclassified from standard asset to

non-performing asset (sub-standard) during the year as per the accounting policy of the Company and guidelines issued by the RBI. A provision of 10% (Rs. 99.50 lac) has been made on the same as per RBI guidelines.

f) The accounting policies adopted by the Company in preparation and presentation of the financial statements are in

conformity with the applicable prudential norms prescribed by the RBI. g) The Company has put in place internal audit system, scope of which provides for periodical checks and review of the

assets acquisition procedures and asset reconstruction measures and the matters related thereto. h) The capital adequacy ratio is well above fifteen percent of its total risk weighted assets, accordingly the Company has

complied with the capital adequacy norms as prescribed the RBI. i) Additional disclosure as per RBI Notification No. DBNS.PD(SC/RC). 8/ CGM (ASR) dated April 21, 2010.

Particulars Amount in Rupees (face value)

Value of financial assets acquired during the financial year either in its own books or in the books of the trust 26,380,166,560

Value of financial assets realized during the financial year 1,104,440,010 Value of financial assets outstanding for realization as at the end of the financial year 35,775,738,777 Value of Security Receipts redeemed partly during the financial year 741,072,947 Value of Security Receipts redeemed fully during the financial year - Value of Security Receipts pending for redemption as at the end of the financial year 36,465,362,933 Value of Security Receipts which could not be redeemed as a result of non-realization of the financial asset as per the policy formulated by the Securitization company or Reconstruction company under Paragraph 7(6)(ii) or 7(6)(iii)

Nil

Value of land and/or building acquired in ordinary course of business of reconstruction of assets Nil

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