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PRIVATE AND CONFIDENTIAL

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SHELF INFORMATION MEMORANDUM

GMR INFRASTRUCTURE LIMITED (Incorporated on 10th May, 1996 under The Companies Act, 1956)

Registered Office: GMR Towers, No. 6-3-866/868/1/G2, Green Lands, Begumpet, Hyderabad 500 016

Corporate Office: SKIP House, 25/1, Museum Road, Bangalore 560 025 Tel No. : +91 80 2207 0100, Fax No. : +91 80 2299 8118, website: www.gmrgroup.co.in

SHELF INFORMATION MEMORANDUM FOR PRIVATE PLACEMENT OF 1500 – 7.90% SECURED REDEEMABLE NON-CONVERTIBLE DEBENTURES OF RS. 10,00,000/- EACH FOR CASH AT PAR

AGGREGATING RS. 150 CRORES TO BE ISSUED IN ONE OR MORE TRANCHE UPTO 31.03.2005

General Risk Investment in debt instruments involves a degree of risk and investors should invest any funds in the issue only after reading the risk factors on page no. iii in the Shelf Information Memorandum carefully. For taking investment decision, investors must rely on their own examination of the Issuer and the issue including the risk involved. The Securities have not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document.

Issuer’s Absolute Responsibility The issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this offer document contains all information with regard to the issuer and the issue, which is material in the context of the issue, that the information contained in the Shelf Information Memorandum is true and correct in all material aspects 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 make this 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 of the Company are proposed to be listed on The Stock Exchange, Mumbai. The Company has obtained in-principal approval for listing the Debentures.

Credit Rating: The Credit Analysis and Rating Agency (CARE) has assigned “A (SO)” (pronounced Single A (Structured Obligation) rating to the NCD issue of Rs. 150 crores. Instruments with this rating are considered upper medium grade instruments and have many favourable investment attributes. Safety for principal and interest are considered adequate. Assumption that do not materialise may have a greater impact as compared to the instruments rated higher.

DEBENTURE TRUSTEE UTI Bank Limited 111, Maker Tower F, Cuffe Parade, Mumbai 400 005 Phone No. (022) 22162684, 22162815 Fax No. (022) 22162467 Website: www.utibank.com

ARRANGER UTI Bank Limited 111, Maker Tower F, Cuffe Parade, Mumbai 400 005 Phone No. (022) 22162684, 22162815 Fax No. (022) 22162467 Website: www.utibank.com

REGISTRAR TO THE ISSUE Bigshare Services Pvt. Ltd. Address: E-2/3, Ansa Industrial Estate, Sakivihar Road, Saki Naka, Andheri(E), Mumbai 400 072 Tel No. (022) 28473747, 28473474 Fax No. (022) 28475207 Email Id: [email protected]

Issue Opening Date Issue Closing Date Deemed Date of Allotment

Issue Opening, Closing and Deemed Date of Allotment of each issue will be informed to the investors separately and shall be incorporated in the Term Sheet of respective issue.


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INDEX

CONTENTS

PAGE NO.

DEFINITIONS & ABBREVIATIONS

iii

RISK FACTORS & PROPOSAL TO ADDRESS THE RISK

v

HIGHLIGHTS

vi

IMPORTANT NOTICE

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PART - I I. GENERAL INFORMATION 1 II. CAPITAL STRUCTURE OF THE COMPANY 3 III. TERMS OF THE PRESENT ISSUE 5 IV. PARTICULARS OF THE ISSUE 11 V. ISSUER PROFILE 11 VI. INDUSTRY SCENARIO AND ACTIVITIES OF THE ISSUER 24 VII. STOCK MARKET DATA VIII. MANAGEMENT DISCUSSION & ANANLYSIS OF THE FINANCIAL STATEMENT FOR THE

LAST THREE FINANCIAL YEARS: 34 IX. FINANCIALS OF GROUP COMPANIES PROMOTED BY PROMOTERS 39 X. CAPITAL ISSUES MADE DURING LAST THREE YEARS BY THE COMPANY UNDER THE

SAME MANAGEMENT XI. BASIS FOR ISSUE PRICE 48 XII. OUTSTANDING LITIGATIONS OR DEFAULTS 48 XIII. RISK FACTORS AND PROPOSALS TO ADDRESS THE RISK 54 XIV. DISCLOSURE ON INVESTOR GRIEVANCES AND REDREESAL SYSTEM : 54 XV. GENERAL INFORMATION 56 XVI. AUDITORS REPORT & FINANCIAL INFORMATION 58 XVII. OTHER PROVISIONS RELATING TO ACCOUNTS OF THE ISSUER COMPANY 63 XVIII. STATUTORY AND OTHER INFORMATION 63 XIX. RELATED PARTY DISCLOSURE 66 XX. OTHER DETAILS 67 XXI. MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS 70 XXII. DECLARATION 71 ANNEXURE CREDIT RATING


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DEFINITIONS/ABBREVIATIONS USED

Act The Companies Act, 1956 BSE The Stock Exchange, Mumbai CDSL Central Depository Services Limited FI Financial Institution FII Foreign Institutional Investors G-Sec Government Securities GIL GMR Infrastructure Limited GEL GMR Energy Limited KPTCL Karnataka Power Transmission Corporation Limited LD Liquidated damages MoP Ministry of Power NAV Net Asset Value NPAs Non Performing Assets NRI(s) Non Resident Individuals NSDL National Securities Depository Limited NSE National Stock Exchange. OTCEI Over The Counter Exchange of India OCB Overseas Corporate Body PPA Power Purchase Agreement PLF Plant Load Factor RBI Reserve Bank of India SEBI Securities and Exchange Board of India TNEB Tamil Nadu Electricity Board VPGL Vemagiri Power Generation Limited


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RISK FACTORS

Following are certain considerations, which the investors should peruse before making an investment in the issue. The material implication of the risks envisaged by the management has been quantified as far as possible. Where such quantification has not been made it may be construed that the implication cannot be quantified. 1.Payment Risk: The interest and principal repayment is depended mainly on the cash flows arising from the dividend distribution of GEL. Proposal to address the Risk : GEL is the flagship company for all the energy initiatives of the group. GEL has an operating power plant with 220MW capacity and is a dividend paying company. It has an operational escrow where 1.25 times the monthly bill flows in. Further, it has a 51% stake in GPCL and 100% stake in VPGL. GPCL has been operating for the last 5 years and it has a 15 year PPA with TNEB and has been receiving payments from TNEB. VPGL, a gas based power plant has already entered into a 15 year PPA with AP Transco. The power generated by VPGL would be at a competitive price of Rs. 1.93 / unit in its first full year of operation FY07. 2. Alternate buyer post completion of its PPA with KPTCL Proposal to address the Risk : Current PPA with KPTCL is valid upto FY 2009 and the GEL is confident of extending the validity of PPA for further period. Since GEL is a barge mounted power project, post PPA the plant can be shifted to coastal line where plenty of gas is available and using the gas the plant can be operated effectively. A Sensitivity has been carried out assuming this scenario. Post completion of PPA period, A condition would be put that if GEL is unable to make arrangements for selling power to the satisfaction of Debentureholder then 15% of GEL shares held by GIL would be pledged for the benefit of debentureholders. 3. Energy generated risk: The power generated by GEL may not be sold Proposal to address the Risk : Even though it has been operating at a lower PLF, as per the PPA with KPTCL the fixed charges are payable at a PLF of 85%, hence debenture holders interest is protected 4. Delay in commissioning of VPGL Proposal to address the Risk : The company has entered into a fixed time fixed price Engineering, Procurement & Construction contract with L&T. The project construction is on schedule and is expected to be commissioned by December 2005. Appropriate LD clauses have been inbuilt for making good any shortfalls on account of cost overrun / time overrun due to delay attributable to EPC Contractor.


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HIGHLIGHTS OF THE COMPANY GMR Infrastructure Ltd (GIL) is the GMR Group’s flagship and investment vehicle for

power, roads and airport projects. GIL, as a holding company, has built up a substantial and profitable asset portfolio, which will be used for its future growth in the infrastructure sector.

GIL is a profit making entity with sound financials and demonstrated experience in

developing & operating various infrastructure projects. The Promoters have shown strong commitment towards timely implementation of the large infrastructure project.

CARE has assigned CARE “A (SO)” rating pronounced Single A (Structured

Obligation) rating to the NCD issue of Rs. 150 crores. GIL through its subsidiary GEL, has a 220 MW naphtha –based plant at Mangalore,

200 MW two stroke stationary engine plat at Chennai and constructing a 388MW combined cycle power plant is fast coming up at Vemagiri. GEL is a profit making and dividend paying entity. GIL is also involved in the construction of two Build-Operate-Transfer (BOT) road projects in Andhra Pradesh and Tamil Nadu, and Airport in Andhra Pradesh on public private participation basis.

GIL has Strong profitable asset portfolio in energy and transportation sectors

GMR Group has been a pioneer in the energy sector, bringing innovative

technologies into India in order to suit the need of the hour. GMR Group has a demonstrated track record of conceptualizing infrastructure

projects and executing them successfully. GMR Group has successfully developed and maintained international alliances with

prominent players. The operations of the various GMR Group Companies are managed by Senior

Professional Experts in diverse fields along with the promoters. Professional chief executives head the individual companies and independently manage the respective companies as profit centers. Professional management teams provide the necessary bandwidth to drive and manage growth in the different businesses of GMR Group.

GMR Group has identified Infrastructure as its focus and growth area, the most

happening industry in the current scenario.


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IMPORTANT NOTICE OR ANY OTHER IMPORTANT NOTES No part of this document is intended for the use of any recipient located outside India or any recipient who is not resident in India. This document is also not intended for the use of Non-Resident Indians ('NRIs') (except on non repatriation basis as stated elsewhere), Overseas Corporate Bodies ('OCBs') or Foreign Institutional Investors ('FIIs'), who can apply subject to the statutory compliance. This issue by GMR Infrastructure Ltd. (the "Issuer"), of Secured Redeemable Non-Convertible Debentures ("Debentures") is being made strictly on a private placement basis. It is not and should not be deemed to constitute an offer to the public in general or any section or class thereof. This Memorandum ("Shelf Information Memorandum" or “IM") is neither a prospectus nor a statement in lieu of prospectus. It cannot be acted upon by any person other than to whom it has been specifically addressed, neither can this document be circulated, reproduced or redistributed in any form whatsoever. This Shelf Information Memorandum is not intended to provide the sole basis of any credit decision or other evaluation and should not be considered as a recommendation that any recipients of this Shelf Information Memorandum should invest in the Debentures proposed to be issued by Issuer. Each potential investor should make its own independent assessment of the investment merit of the Debentures and the Issuer. This Shelf Information Memorandum is made available to potential Debentures investors on the strict understanding that it is confidential. Recipients shall not be entitled to use any of the information otherwise than for the purpose of deciding whether or not to invest in the Debentures. No person including any employee of the Issuer has been authorised to give any information or to make any representation not contained in this Shelf Information Memorandum. Any information or representation not contained herein must not be relied upon as having being authorised by or on behalf of the Issuer. Neither the delivery of this Shelf Information Memorandum at any time nor any statement made in connection with the offering of the Debentures shall under the circumstances imply that any information/representation contained herein is correct at any time subsequent to the date of this Shelf Information Memorandum. The distribution of this Shelf Information Memorandum and the offering of the Debentures in certain jurisdictions may be restricted by law. Persons into whose possession this Shelf Information Memorandum comes are required by the Issuer to inform themselves about, and observe any such restrictions.


PART I

I. GENERAL INFORMATION

Shelf Information Memorandum for Private Placement of 1500 - 7.90% Secured Redeemable Non-Convertible Debentures of Rs. 10,00,000/- each for cash at par aggregating Rs. 150 crores for the period upto 31.03.2005.

GMR Infrastructure Limited (Incorporated on 10th May, 1996 under The Companies Act, 1956)

Registered Office: GMR Towers, No. 6-3-866/868/1/G2, Green Lands, Begumpet,

Hyderabad 500 016 Corporate Office: SKIP House, 25/1, Museum Road, Bangalore 560 025

Tel No. : +91 80 2207 0100, Fax No. : +91 80 2299 8118, website: www.gmrgroup.co.in Government Approvals / Industrial License The Company was incorporated on 10th May, 1996 and received Certificate of Commencement of Business on 23rd May, 1996. The Company is a registered NBFC, registration no. being 09.00255 dated 28th July, 2002 received from Reserve Bank of India in terms of Section 45 IA of the Reserve Bank of India Act, 1934.

It must be distinctly understood, however, that the issuing of license and granting of approval by RBI should not, in any way, be deemed or construed to be an approval by RBI, to this Information Memorandum nor should it be deemed that RBI has approved it nor does RBI take any responsibility either for the financial soundness of the company or for the correctness of the statements made or opinions expressed in this connection. Authority for Present Issue Board of Directors of the Company vide their Board Meeting dated September 14, 2004 have passed a resolution to raise the fund aggregating Rs. 150 crores by issuing privately placed Secured Redeemable Non-Convertible Debenture under the Shelf Information Memorandum. Stock Exchange Disclaimer Clause It is to be distinctly understood that the submission of the Shelf Information Memorandum to the Stock Exchange and the Term Sheet from time to times as annexures should not in any way be deemed or construed that the Shelf Information Memorandum has been cleared or approved by the stock Exchange. Stock Exchange does not take any responsibility either for the financial or other soundness of this Issuer, or the achievement of the object for which placement is proposed to be made or for the correctness of the statement made or opinions expressed in the Shelf Information Memorandum. General Disclaimer The issuer accepts no responsibility for statements made otherwise than in the Shelf Information Memorandum or in the advertisement or any other material issued by or at the instance for the issuer and that anyone placing reliance on any other source of information would be doing so at his own risk.

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Listing The Secured Redeemable Non-Convertible Debentures (NCDs) are proposed to be listed on The Stock Exchange, Mumbai. Initial Application has been made to The Stock Exchange, Mumbai which has conveyed it’s in principal approval for listing the NCDs. Impersonation Any person who- a) makes in a fictitious name an application to a company of acquiring, or subscribing

for any Securities therein, or b) otherwise induces a company to allot or register any transfer of Securities therein to

him, or any other person in a fictitious name shall be punishable under the extant laws.

Minimum Subscription Pursuant to the notification no. SEBI/MRD/SE/AT/46/2003 dated 22nd December 2003 issued by SEBI minimum subscription clause is not applicable to the privately placed debt securities. Issue of Letter of Allotment/ Allotment Advice and Debenture Certificates The Issuer will execute and dispatch Letters of Allotment/ Allotment advice in favour of the allottees or Refund Letter along with refund amount, not later than 7 days after the Deemed Date of Allotment. After completion of all legal formalities, the Issuer will issue the Debentures certificate(s) / credit the DP account of the allottees against surrender of the letter(s) of allotment within three month(s) of the Deemed Date of Allotment, or such extended period subject to obtaining the approvals, if any. Interest at the applicable coupon rate will be paid via interest warrants on the application money to the applicants. Such interest will be paid for the period commencing from the date of realisation of the cheque(s) / demand drafts (s) up to but excluding the Deemed Date of Allotment. The interest warrants for interest payable on application money will be dispatched by Registered Post/ Courier the next working day after the Deemed Date of Allotment. Investor may also advise the Company to credit the interest through ECS directly into their Bank Account. The letters of allotment/ allotment advice/refund orders, as the case may be, will be sent by Registered Post/ Courier /Hand Delivery within 7 days from the Deemed Date of Allotment to the first/sole applicant, at the sole risk of the applicant. The payment will be subject to deduction of tax at source at the rates prescribed under the provisions of the Income Tax Act, 1961 or any other statutory modification or re-enactment thereof. Issue Schedule Issue Opening Date Issue Closing Date Deemed Date of

Allotment Issue Opening, Closing and Deemed Date of Allotment of each issue will be informed to the investors separately and shall be incorporated in the Term Sheet of respective issue. The issuer reserves the right to close the issue earlier from the aforesaid date or change the issue time table including the Deemed Date of Allotment at its sole discretion, without giving any reasons or prior notice.

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Names and Addresses of Auditors, Registrars, Debenture Trustees Statutory Auditors S. Venkatdri & Co 1408, Babukhan Estate Basheer Bagh Hyderabd 500 001

Registrars to the issue Bigshare Services Pvt. Ltd. Address: E-2/3, Ansa Industrial Estate, Sakivihar Road, Saki Naka, Andheri(E), Mumbai 400 072

Trustees to the Debentureholders: UTI Bank Limited Maker Tower 'F', 11th Floor, Cuffe Parade, Colaba, Mumbai: 400 005

Credit Rating CARE has assigned in-principle CARE A (SO) (pronounced Single A (Structured Obligation) rating to the NCD issue of Rs. 150 crores. Instruments with this rating are considered upper medium grade instruments and have many favourable investment attributes. Safety for principal and interest are considered adequate. Assumptions that do not materialise may have a greater impact as compared to the instruments rated higher. Company has not obtained any credit rating for listed Debentures in the last three years and this is being the first credit rating obtained by the Company. Compliance Officer Mr. I.V. Srinivasa Rao Company Secretary GMR Infrastructure Limited, 25/1, Museum Road, Bangalore – 560 025 Tel No: 080 - 220 70 100 Fax No. 080 – 22 99 8 11 8 E-mail Id : [email protected] The Investor may contact the compliance officer in case of any pre-issue / post-issue related problems such as non-receipt of letters of allotment / debenture certificates / refund orders. II. CAPITAL STRUCTURE OF THE COMPANY Shares Capital of the Company as on date of filing of Shelf Information Memorandum

Amount (Rs. Crs.)

A. Authorised Capital 17,50,00,000 Equity Shares of Rs. 10/- each 30,00,000 Preference Shares of Rs. 100/- each

175.00 30.00

205.00 B. Issued Subscribed and Paid-up Capital 15,86,62,091 Fully Paid up Equity Shares of Rs. 10/- each 12,00,000 Fully Paid up 13% Optionally Convertible Cumulative Redeemable Preference Shares of Rs. 100/- each

158.66

12.00

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6,50,000 Fully Paid up 13% Optionally Convertible Cumulative Redeemable Preference Shares of Rs. 100/- each

6.50

C. Paidup Capital after the present issue 177.16 D. Share Premium Account (before and after issue) 55.30 Details regarding Shareholders Top Ten Shareholders available as on date of filing of Shelf Information Memorandum Sr. No. Name of the Shareholder Shares Held

(Number) % Stake In Total

1 GMR Investments Pvt. Ltd 101,506,299 63.98 2 Varalakshmi Investments Pvt. Ltd. 39,977,250 25.20 3 Rao Investments Pvt. Ltd. 8,975,842 5.66 4 Vasavi Finance Pvt. Ltd. 8,202,000 5.17 5 G. Mallikarjuna Rao 200 0.00 6 G. Varalakshmi 100 0.00 7 G.B.S.Raju 100 0.00 8 G.Kiran Kumar 100 0.00 9 GMR Operations Private Ltd 100 0.00

10 Medvin Finance Private Ltd 100 0.00 TOTAL 158,662,091 100.00 Top Ten Shareholders two years prior the date of filing of Shelf Information Memorandum

Sr. No.

Name of the Shareholder Shares Held (Number)

% Stake In Total

1 Varalakshmi Investments Pvt Ltd 17,618,250 30.033 2 GMR Investments Pvt Ltd 16,618,250 28.333 3 Marble Arch Investments PCC Ltd 7,328,342 12.490 4 Vasavi Finance Pvt Ltd 736,000 1.255 5 Rao Investments Pvt Ltd 647,700 1.103 6 Utility Investments Ltd 15,713,049 26.785 7 G.Mallikarjuna Rao 500 0.001

Total

58,662,091

100.00 Top Ten Shareholders ten days prior to the date of filing of Shelf Information Memorandum. Sr. No. Name of the Shareholder Shares Held


1 GMR Investments Pvt. Ltd 101,506,299 63.98 2 Varalakshmi Investments Pvt. Ltd. 39,977,250 25.20 3 Rao Investments Pvt. Ltd. 8,976,042 5.66 4 Vasavi Finance Pvt. Ltd. 8,202,000 5.17 5 G. Mallikarjuna Rao 200 0.00 6 G. Varalakshmi 100 0.00 7 G.B.S.Raju 100 0.00

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8 G.Kiran Kumar 100 0.00 9 GMR Operations Private Ltd 100 0.00

10 Medvin Finance Private Ltd 100 0.00

TOTAL 158,662,091 100.00 Details regarding Shareholding of Promoters Group and Directors of the promoters Aggregate shareholding of the Promoters Group is given below: Promoter/Promoter Group Shares held


GMR Investments Pvt. Ltd 101,506,299 63.98 Varalakshmi Investments Pvt. Ltd. 39,977,250 25.20

Rao Investments Pvt. Ltd. 8,976,042 5.66 Vasavi Finance Pvt. Ltd. 8,202,000 5.17 G. Mallikarjuna Rao 200 0.00 G. Varalakshmi 100 0.00 G.B.S.Raju 100 0.00 G.Kiran Kumar 100 0.00 GMR Operations Private Ltd 100 0.00

Medvin Finance Private Ltd 100 0.00 TOTAL 158,662,091 100.00

Details of shares traded by the Promoter Group and its Director and maximum and minimum price at which purchases and sales were made along with the relevant dates, if any. The Shares of the Company are not listed on any of the recognised Stock Exchange and there have been no trading in the same by Promoter Group and its Directors III. TERMS OF THE PRESENT ISSUE Terms and Conditions of the each Issue will be as per the Term Sheet of the respective issue, which will be filed with the BSE as an addendum to this Shelf Information Memorandum.

Record Date The Record Date will be 7 calendar days prior to each interest payment/ principal payment date. Payment of Interest Interest payments will be made by way of interest warrants(s)/cheque(s) which will be delivered to the debenture-holders one day prior to the due date either by hand delivery or by registered post. The interest will be payable to the registered Debenture-holders and in case of joint holders, to the one whose name stands first in the List of Beneficial owners given by the Depository. Interest payment date for respective issue shall be as per the Term Sheet submitted from time to time.

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Place and Currency of Payment The Debentures are being issued by GMR Infrastructure Limited in India. All obligations under these Debentures are payable solely by the Issuer in Indian Rupees only. Tax Deduction at Source Tax as applicable under the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof will be deducted at source on the debentures. Tax exemption certificate / document / form, under Section 193 of the Income Tax Act, 1961, if any, must be lodged at the Registered Office, at least thirty days before the relevant interest payment becoming due.

Issue Of Debentures in Dematerialised Form The Company has made depository arrangements with CDSL for the Debentures. The investors will have the option to hold the debentures in dematerialised form and deal with the same as per the provisions of Depositories Act, 1996/ Rules as notified by CDSL from time to time. Investors desirous of receiving debenture certificate in the dematerialised form should mention their Depository Participant's name, DP-ID and beneficiary account number in the appropriate place in the application form. Debentures allotted to successful allottee(s) having depository account shall be credited to their depository account against surrender of letter of allotment. In case of incorrect details provided by the investors and inability of the Registrar to credit the Depository Account the debentures will be issued in physical form to such investors. Issue of Letter of Allotment/ Allotment Advice and Debenture Certificates The Issuer will execute and dispatch Letters of Allotment/ Allotment advice in favour of the allottees on the Deemed Date of Allotment. After completion of all legal formalities, the Issuer will issue the Debentures certificate(s) / credit the DP account of the allottee against surrender of the letter(s) of allotment within three month(s) of the Deemed Date of Allotment , or such extended period subject to obtaining the approvals, if any. Interest at applicable coupon rate will be paid via interest warrants on the application money to the applicants. Such interest will be paid for the period commencing from the date of realisation of the cheque(s) / demand drafts (s) up to but excluding the Deemed Date of Allotment. Right to Re-purchase and Re-issue the Debentures This would be as per the prevailing guidelines/regulations of Reserve Bank of India and other statutes. Eligible Holders and Mode of Transfer The Issuer will not register any transfers of the Debentures to any NRIs (except on non-repatriation basis), OCBs, FIIs, or any persons not resident in India, unless appropriate regulatory approvals are obtained. The Issuer shall not be duty bound to take interest or trust in or over the Debentures. The title to the Debentures shall pass by execution of duly stamped transfer deed(s) accompanied by the Debentures certificate(s)/Letter of allotments(s) together with necessary supporting documents. The transferee(s) should deliver the Debenture certificates to the Issuer for registration of transfer in the Register of Debenture holders at

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the Registered Office. The Issuer on being satisfied will register the transfer of such Debentures in its Register of Debenture holders. The person whose name is recorded in the Register of Debenture holders shall be deemed to be the owner of the Debentures.

Request for registration of transfer, along with the necessary documents, and all other communications, requests, queries and clarifications with respect to the Debentures should be addressed to and sent to the Registered Office. No correspondence shall be entertained in this regard at any other Offices of the GMR Infrastructure Limited.

The request from Registered Debenture holder(s) for splitting/consolidation of Debenture certificates will be accepted by the Issuer only if the original Debentures certificate(s) is/are enclosed along with an acceptable letter of request. No requests for splits below the Market Lot will be entertained. Transfer of debentures in dematerialised form would be in accordance to the rules /procedures as prescribed by CDSL. Succession In the event of demise of a Registered Debenture holder of the Debentures, or the first holder in the case of joint holders, the Issuer will recognize the executor or administrator of the demised Debenture holder or the holder of succession certificate or other legal representative of the demised Debenture holder as the Registered Debentures holder of such Registered Holder’s Debentures if such a person obtains probate or letter of administration or is the holder of succession certificate or other legal representation, as the case may be, from a Court of India having jurisdiction over the matter and delivers a copy of the same to the Issuer. The Issuer may in its absolute discretion, where it thinks fit, dispense with the production of the probate or letter of administration or succession certificate or other legal representation, in order to recognize such holder as being entitled to the Debentures standing in the name of the demised debentures holder on production of sufficient documentary proof or indemnity. In case the debentures are held by person other than individual, the rights in the debentures shall vest with the successor acquiring interest therein, including liquidator or such any person appointed as per the applicable laws. Issue of Duplicate Debenture Certificates If any Debenture certificate(s) issued in physical form is/are mutilated or defaced, then, upon production of such certificates at the Registered Office, the same will be cancelled and a new certificate issued in lieu thereof. If any Debenture certificate is lost, stolen or destroyed then, upon production of proof thereof to the satisfaction of the Issuer and upon furnishing such indemnity as the Issuer may deem adequate and upon payment of any expenses incurred by the Issuer in connection thereof, new certificate(s) shall be issued. A fee will be charged by the Issuer on each fresh Debenture certificate issued hereunder. Modifications of Rights The rights, privileges, terms and conditions attached to all Debentures may be varied, modified or abrogated with the consent, in writing, of those holders of the Debentures who hold at least three-fourths of the outstanding amount of Debentures or with the sanction accorded pursuant to a resolution passed at a meeting of the Debentureholders, carried by a majority consisting of not less than three-fourths of the persons voting there upon a show of hands or, if a poll is demanded by a majority representing not less than three-fourths in value of the votes cast on such poll, provided

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that nothing in such consent or resolution shall be operative against the Issuer if the same are not accepted in writing by the Issuer. Notices The notices, communications and writings to the Debentureholder(s) required to be given by the Issuer shall be deemed to have been given if sent by Registered Post to the Registered Debentureholder(s) at the address of the Debentureholder(s) registered with the Registered Office. All notices, communications and writings to be given by the Debentureholder(s) shall be sent by Registered Post or by hand delivery to the Issuer at Registered Office or to such persons at such address as may be notified by the Issuer from time to time and shall be deemed to have been received on actual receipt. Application for the Debentures

♦ How to Apply Applications for the Debentures must be made in the prescribed Debenture Application Form which would be attached with the Respective Issue Term Sheet and must be completed in block letters in English by investors. Debentures Application forms must be accompanied by either a demand draft or cheque drawn or made payable in favour of "GMR Infrastructure Limited”. The full amount of the face value of the Debentures applied for has to be paid along with the delivery of the fully completed and executed Debenture Application Form together with other applicable documents described below. Cheques / demand drafts may be drawn on any bank which is situated and is a member or sub-member of the Banker’s Clearing House located at Mumbai, Calcutta, Bangalore, Chennai, or New Delhi. Investors in centres which do not have any bank which is a member or sub-member of the Banker’s Clearing House located at the above mentioned centres will be required to make payments only through demand drafts payable at Mumbai / Bangalore. Investors may also have the option to apply by transferring the amount payable on application for subscription to the debentures to the company’s account. The issuer assumes no responsibility for any applications / cheques / demand drafts lost in mail or transit.

♦ Who can apply Only investors who have been addressed through a communication directly are eligible to apply. Furthermore, NRIs (except on non-repatriation basis), OCBs, FIIs and minors are not eligible to apply for the Debentures.

♦ Application by Banks/Corporate Bodies / Mutual Funds / FIs / Trusts/Statutory

Corporations / NRI (Non Repatriation basis). The applications must be accompanied by certified true copies of (i) Memorandum and Articles of Association Constitution / Bye-laws / Trust Deed, (ii) Resolution authorizing investment and containing operating instructions, (iii) Specimen signatures of authorized signatories, (iv) Necessary form for claiming exemption from deduction of tax at source on interest on application money. Application made by Asset Management Company or custodian of Mutual Fund shall clearly indicate the name of the concerned scheme for which application is being made.

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♦ Application under Power of Attorney A certified true copy of the power of attorney or the relevant authority as the case may be along with the names and specimen signatures of all authorised signatories must be lodged along with the submission of the completed Debenture Application form. Further modifications/additions in the power of attorney or authority should be delivered to the Issuer at Registered Office.

♦ Interest on Application Money Interest will be paid via interest warrants on the application money to the applicants at its respective coupon rate as specified in the respective Term Sheet. Such interest will be paid for the period commencing from the date of realisation of the cheque(s) / demand drafts (s) up to but excluding the Deemed Date of Allotment. The interest warrants for interest payable on application money will be despatched by Registered Post/ Courier the next working day after the Deemed Date of Allotment. The letters of allotment/ allotment advice/refund orders, as the case may be, will be sent by Registered Post/ Courier /Hand Delivery within 7 days from the Deemed Date of Allotment to the first/sole applicant, at the sole risk of the applicant. The payment will be subject to deduction of tax at source at the rates prescribed under the provisions of the Income Tax Act, 1961 or any other statutory modification or re-enactment thereof. Tax exemption certificates, if applicable, in respect of non-deduction of tax on interest on application money must be submitted along with the Debentures Application Form. It is clarified that interest shall not be paid on invalid and incomplete applications.

♦ Basis of Allotment The Issuer has sole and absolute right to allot the Debentures to any applicant.

♦ Right to Accept or Reject Applications The Issuer is entitled at its sole and absolute discretion to accept or reject any application, in part or in full, without assigning any reason. Debenture Application Forms that are not complete in all respects may be rejected at the sole and absolute discretion of the Issuer.

♦ Future Borrowings The Issuer shall without the approval of the Debentureholder and the Debenture Trustee, be entitled to make further issue(s) of debentures, raise further loans and advances and/or avail further deferred payment guarantees or other financial facilities from time to time from such persons/ banks/ financial institutions or body corporate/ anyother agency till debt equity is below 2:1. However, until the Debentures are fully redeemed the company shall not create any mortgage or charge on any of the properties or assets without the prior written approval of the Debentureholder and the Debenture Trustee.

♦ Governing Laws and Jurisdiction The Debentures are governed by and will be construed in accordance with the Indian Law. However Investors and the Issuer can also refer to the Arbitrators as per the governing law as applicable in Bangalore in case of any dispute in the terms and conditions of the issue The Issuer, the Debentures and Issuer’s obligations under the Debentures shall, at all times, be subject to the directions of

9


the Reserve Bank of India and Securities & Exchange Board of India. The Debenture holders, by purchasing the Debentures, agree that the Karnataka High Court shall have exclusive jurisdiction with respect to matters relating to the Debentures.

♦ Despatch of Refund Orders The Company shall ensure despatch of refund orders of value over Rs. 1500/- and Debenture certificates by Registered Post/Hand Delivery only and adequate funds for the purpose shall be made available to the Registrars by the Issuer Company.

Undertaking by the Issuer Company:

a. The complaints received in respect of any issue of Debentures pursuant to this IM shall be attended to by the issuer company expeditiously and satisfactorily

b. All steps for completion of the necessary formalities for listing and commencement of trading at The Stock Exchange, Mumbai where the securities are to be listed are taken within 7 working days of finalization of basis of allotment.

c. Necessary co-operation with the credit rating agency shall be extended in providing true and adequate information till the debt obligations in respect of the instrument are outstanding.

d. The Company shall disclose the complete name and address of the debenture trustee in the annual report.

e. The Company shall provide a compliance certificate to the debenture holders (on yearly basis) in respect of compliance with the terms and conditions of issue of debentures as contained in the Shelf Information Memorandum duly certified by the debenture trustee.

Special Tax benefits under Income Tax Act, 1961 and Wealth Tax Act, 1957 Investors / Debentureholder(s) should also consult their own tax advisers on the tax implications of the acquisition, ownership and sale of NCDs, and income arising thereon.

10


IV. PARTICULARS OF THE ISSUE Objects of the Borrowing The Debentures under the Shelf Information Memorandum are being issued for meeting the general corporate requirements. Authority for the Present Offer Board of Directors of the Company has passed a resolution to raise the fund aggregating Rs. 150 crores by issuing Privately Placed Secured Redeemable Non-Convertible Debenture under the Shelf Information Memorandum vide its Board Meeting dated September 14, 2004 V. ISSUER PROFILE ♦ History, Main Object and Present business of the Company History Note

GMR Infrastructure Ltd (GIL) is the GMR Group’s flagship and investment vehicle for all its initiatives in infrastructure sector. GMR Infrastructure Limited (GIL) was incorporated in 1996 as Varalakshmi Vasavi Power Projects Ltd with the objective of investing in the power initiatives of the Group. Subsequently, the name of the company was changed to GMR Vasavi Infrastructure Finance Ltd in 1999 to reflect the wider focus of investing in the infrastructure sector and later to the present name, GMR Infrastructure Ltd in the year 2000. Main Object as per Memorandum and Articles of Association

To carry on the business of developing, maintaining and operating of Road, Highways, development of housing projects, industrial parks, rail system, maintaining and operating of airport, maintaining and operating of providing telecommunication services, to carry on the business of the information technology, software consultancy in telecom and all other areas. To carry on the business of developing, maintaining and operating of project for generating or generation and distribution of electricity or any other form of power of energy, start distribution by laying a network of new distribution lines. To carry on business of investing in securities, giving guarantees or any other financial assistance as may be conducive for development, construction, operation, maintenance etc., of infrastructure projects in India in the fields of road, highway, power generation and for power distribution or any other form of power. Investors may please refer to the Memorandum and Articles of Association that is available for inspection at the Registered office of the company.

11


Present Business of the Company

GMR Infrastructure Ltd (GIL) is the GMR Group’s flagship and investment vehicle for all its initiatives in infrastructure sector. GMR group’s interests in the infrastructure sector encompass the Energy and Transportation Sectors. As GMR group has reorganised its infrastructure business into two Sectors ie. Energy Sector and Transportation Sector, all the Power initiatives of the GMR Group will come under GMR Energy Limited (GEL) while GEL will come under GMR Infrastructure Ltd. and all the transportation assets are currently held by GMR infrastructure Limited. GIL, as a holding company, has built up a substantial and profitable asset portfolio, which will be used for future growth in the infrastructure sector. The investment portfolio of GIL as on March 31, 2004 is given below :

Company Equity Held (%) Rs. Crore GMR Energy Limited 84.90% 296.27 GMR Operations Private Limited 49.00% 0.03 GMR Tambaram-Tindivanam Expressways Pvt. Ltd

Equity Preference Share application money

10.00% 38.00%

0.10 40.05

0.14 GMR Tuni-Anakapalli Expressways Pvt. Ltd.

Equity Preference Share application money

10.00% 38.00%

0.10

29.30 0.12

Hyderabad International Airport Ltd. Eqiity Share application money

63.00%

0.037 19.13

GMR Group and its associates, through GIL holds 84.90% of GMR Energy Limited (GEL) equity. GEL (previously known as Tanir Bavi Power Company Pvt. Ltd.) was established as a private limited company in December 1997 to develop, construct and execute a 220-MW, barge-mounted, naphtha-based combined cycle power project, situated off the coast of Mangalore, in the state of Karnataka. GEL holds the distinction of being the only barge mounted power plant in India. The project is envisaged as a short-gestation project, and operates as a base load plant selling all of its output to the Karnataka Power Transmission Corporation Limited (KPTCL), under a Power Purchase Agreement (PPA) valid for a period of 7 years. The PPA would be valid till November 20, 2008. The project construction phase is over and the plant has commenced operations. GMR Group and its associates, through GEL holds 51% of equity in GMR Power Corporation Ltd. GPCPL has set up a 200-MW, diesel engine based power project located at Basin Bridge, in Chennai, in the state of Tamil Nadu. It was the Group’s maiden venture into large infrastructure projects. The Project is operated as a base load plant, using Low Sulphur Heavy Stock (LSHS) as fuel, and sells the entire power generated to the TNEB. The PPA entered into with TNEB is for a period of 15 years running until 2014

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GEL holds 100% of equity in Vemagiri Power Generation Limited (VPGL). VPGL is the third power company promoted by GMR Group, to develop, construct, own and operate a 388MW combined cycle, natural-gas based, power project, near Rajahamundry in the state of Andhra Pradesh and sell all its output to the AP Transco.The project has achieved Financial Closure on December 10,2003 and expected to be commercially operational by December 2005. The other infrastructure companies in the GMR group where GIL has made investments are GMR Tambaram – Tindivanam Expressways Private Limited (GTTEPL) and GMR Tuni - Anakapalli Expressways Private Limited (GTAEPL), which are developing Build-Own-Operate-Transfer (annuity), based road projects. GTTEPL is expected to be commercially operational by Oct’04 and GTAEPL is expected to be commercially operational by Nov’04. The GMR consortium, comprising GIL, Malaysia Airport Holdings Berhad (MAHB) are currently developing the Hyderabad International Airport project under the Public Private Partnership initiative alongwith the Government of Andhra Pradesh and Airport Auhtority of India. The project concept envisages the airport to be built on a modular basis with expansion in airport facilities tracking the growth in traffic. The project is expected to achieve the financial closure by the end of current financial year. Capital History of the Company

Date of Allotment

Number of Equity Shares

Face Value (Rs.)

Issue Price (Rs.)

Nature of payment of

Consideration Reasons for Allotment

Cumulative Paid -up Capital

(Rs.)

Cumulative Share

Premium (Rs.)

10/05/1996 700 10 10 Cash/Bank Subscribers to MOA

7,000 NIL

16/06/1999 2,080,000 10 10 ,, Further Issue of Share Capital

20,807,000 NIL

28/10/2000 24,540,000 10 10 ,, Further Issue 266,207,000 NIL

31/01/2001 9,000,000 10 10 ,, ,, 356,207,000 NIL

28/03/2001 23,041,391 10 34 (Rs.10+ Share Premium of Rs.24)

,, Further Issue 586,620,910 552,993,384

10/03/2003 100,000,000 10 10 ,, Rights Issue 1,586,620,910 552,993,384

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♦ Subsidiary of the Company The company currently has the following subsidiaries, (1) GMR Energy Ltd. (GEL) (2) Hyderabad International Airport Ltd. which are direct subsidiaries and (3) GMR Power Corporation PVt. Ltd (GPCPL) and (4) Vemagiri Power Generation Ltd. (VPGL) which are indirect subsidiaries since they being subsidiaries of GEL. (1) GMR Energy Limited (GEL) GEL was incorporated as Tanir Bavi Power Company, a private unlimited company on October 10, 1996 under the Companies Act, 1956. The company was changed into a private limited company on December 10, 1997. On September 29, 2003 the name of the company was changed to GMR Energy Private Limited. On September 30, 2003 the company was converted into a public limited company and the name was changed to GMR Energy Limited and a fresh certificate of incorporation consequent on change of name was issued by the ROC on October 1, 2004.

GEL is the primary vehicle through which the GMR Group operates in the Energy Sector. GEL owns and operates a barge-mounted, naptha-based combined cycle power plant with a contracted capacity of 220 MW situated off the coast of Mangalore, in the state of Karnataka. The Mangalore plant commenced simple cycle operations on June 08, 2001 and combined cycle operations on November 21, 2001. GEL holds 51% of equity in GMR Power Corporation Ltd which has set up set up a 200-MW, diesel engine based power project located at Basin Bridge, in Chennai, in the state of Tamil Nadu. In addition Vemagiri Power Generation Limited, the wholly owned subsidiary of GEL is setting up a 388MW combined cycle, natural-gas based, power project, near Rajahamundry in the state of Andhra Pradesh. Shareholding The equity shareholding pattern of GEL as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 GMR Infrastructure Limited 276826898 84.902 G. Mallikarjuna Rao 5000 0.003 G. Varalakshmi 5000 0.004 G. Kiran Kumar 100 0.005 G.B.S. Raju 100 0.006 B. Srinivas 100 0.007 Rao Investments Private Limited 100 0.008 India Development Fund 49236829 15.10

Total 326074127 100.00

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Financial Performance (Rs. in Lacs)

Year 2001-2002 2002-2003 2003-2004 Equity Capital 27507.68 27683.73 32607.41Free Reserves 3021.99 3763.75 12054.67Income 43145.83 64440.98 55422.05 Book Value per Share (Rs.) 10.66 11.03 13.70 2. Hyderabad International Airport Limited Hyderabad International Airport Limited was incorporated on December 17, 2002 in Andhra Pradesh. Hyderabad International Airport Limited is developing a green filed International Airport at Shamshabad, Hyderabad. Malaysia Airport Holdings Berhad (MAHB) is one of the sponsors of the project along with GMR Group and holds 11% of the total equity of Hyderabad International Airport Limited. MAHB also provides the technical support for the project. Shareholding The equity shareholding pattern of HIAL as on March 31, 2004 is as under:

Sl.No. Name of The Share Holder No. of Shares %

1 Government of Andhra Pradesh 7635 13.002 Airports Authority of India 7635 13.003 Malaysia Airports Holdings Berhad 6460 11.004 GMR Infrastructure Ltd 36995 63.005 Rao Investments Private Ltd 2 0.006 GMR Operations Private Ltd 1 0.007 Medvin Finance Private Ltd 2 0.00

Total 58730 100 The operating results of Hyderabad International Airport Limited as at and for the 15 month period ended March 31, 2004 is set forth below:

(Rs. in lacs) Particulars As at and for the 15

month period ended March 31, 2004@

Total Income - Profit After Tax - Equity Capital* 2930.00 Reserves - Earnings per Share Rs. - Book Value per Share Rs. 10

@ The project is under development phase * Equity capital is inclusive of share application money pending allotment

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GMR Power Corporation Private Limited (GPCPL) GMR Power Corporation Private Limited is engaged in the business of Power generation. The company was incorporated on January 11, 1995 in the name GMR Vasavi Power Corporation Limited as a [public limited] company under the provisions of the Companies Act, 1956. GPCL was converted into a private limited company on November 21, 1997 and the name was changed to GMR Vasavi Power Corporation Private Limited. The name GMR Vasavi Power Corporation Private Limited was changed to GMR Power Corporation Private Limited with effect from November 7, 2000. Shareholding The equity shareholding pattern of GPCL as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 G Mallikarjuna Rao 300 0.002 Bommidala Srinivas 100 0.003 B V Nageswara Rao 100 0.004 G Varalakshmi 100 0.005 G B S Raju 100 0.006 GMR Energy Ltd 126225000 51.007 Odeon Limited, Mauritius 121274300 49.00

Total 247500000 100.00 Board of Directors Mr. K Balasubramanian, Mr. B V Nageswara Rao, Mr. Srinivas Bommidala, Mr. R Ram Mohan, Mr. Luis Miranda, Mr K Siva Prakasam, Mr.V K Chanana, Mr. Bimal Parekh, Mr. Heng Fook Seng and Mr.Ben Lim Choon Kee. Financial Performance

(Rs. in Lacs) Year 2001-2002 2002-2003 2003-2004

Equity Capital 24750.00 24750.00 24750.00Free Reserves (incl Major maint. Res.) 11879.27 15583.45 7644.03Income 47593.07 50520.25 43846.45Profit After Tax 4629.37 4164.07 3229.02Earnings Per Share (Rs.) 1.87 1.68 1.30Book Value per Share (Rs.) 14.77 16.27 13.07

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Vemagiri Power Generation Limited (VPGL) The Company was incorporated on 8th January, 1997 under the name of “Ispat Power Limited.” The Company’s name was changed to “Vemagiri Power Generation Limited” on 11th December, 1998.” The Company is setting up a 388 MW gas based power plant at Vemagiri Village, Near Rajahmundry, Andhra Pradesh. Shareholding The equity share holding pattern of VPGL as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 G Mallikarjuna Rao 1 0.002 G B S Raju 1 0.003 G Kiran Kumar 1 0.004 Sreenivas Bommidala 1 0.005 B V Nageswara Rao 1 0.006 R Ram Mohan 1 0.007 A Subba Rao 1 0.008 Madhu Terdal 1 0.009 O Bangaru Raju 1 0.00

10 Pradeep Kumar Lenka 1 0.0011 GMR Energy Ltd 141615000 99.99

Total 141615010 100.00 Board of Directors Sri G M Rao (Chairman) Sri Srinivas Bommidala Sri B V Nageswara Rao Sri K Balasubramanian Sri P B Vanchi Sri Luis Miranda Sri S P Talwar Sri Udaya Holla Sri A.P. Rao Financial Performance

(Rs. in Lacs) Year 2001-2002* 2002-2003 2003-2004

Equity Capital 160.00 160.00 14161.50Free Reserves 199.98 199.98 199.99Income N.A N.A N.AProfit After Tax N.A N.A N.A.Earnings Per Share (Rs.) N.A N.A N.A.Book Value per Share (Rs.) 21.80 21.51 10.01*30th June, 2004

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♦ Promoters and their background The Promoters of the Company are Mr. G.M. Rao, GMR Investments Pvt. Limited, Varalakshmi Investments Private Limited, Rao Investments Pvt. Limited, Vasavi Finance Pvt. Limited. Mr. G. Mallikarjuna Rao, 54 years, Chairman, is the founder promoter of the GMR Group. He completed his Mechanical Engineering from A.U.College of Engineering, Vishakapatnam in 1972. Mr. Rao began his entrepreneurial career [27] years ago and has had varied business interests including in jute, ferro alloys, sugar, banking, etc. He is also the trustee of the GMR Foundation and has established three educational institutions.. GMR Investments Private Limited was incorporated as a private company on December 8, 1992 in Tamil Nadu as a Non Banking Finance Company engaged in investment activities. Shareholding The equity shareholding pattern of GMR Investments Pvt. Ltd. as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 G B S Raju 25000 0.072 G Kiran Kumar 276200 0.733 G Varalakshmi 205100 0.544 Rao Investments Pvt Ltd 37343700 98.535 B Rama Devi 50000 0.13 Total 37900000 100.00

Board of Directors Mr. A Subba Rao, Mr. Y Kamalakara Rao Mr. V R L Paparao. Financial Performance

(Rs. in Lacs) Year 2001-2002 2002-2003 2003-2004*

Equity Capital 3790.00 3790.00 3790.00Free Reserves 2633.20 4395.59 4260.52Income 508.41 5231.19 999.37Profit After Tax 92.58 1762.38 (135.06)Earnings Per Share (Rs.) 0.24 4.65 -Book Value per Share (Rs.) 16.79 21.47 21.15* FY 2003 – 2004 are provisionals

18


Varalakshmi Investments Private Limited Varalakshmi Investments Private Limited was incorporated on February 12, 1992 in Andhra Pradesh as a Non Banking Finance Company engaged in investment activities. Shareholding The equity shareholding pattern of Varalakshmi Investments Private Limited as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 GMR Investments Pvt Ltd 26174800 78.142 Rao Investments Pvt Ltd 7322000 21.86 Total 33496800 100.00 Board of Directors Mr. A Subba Rao (Chairman), Mr. Y Kamalakara Rao Mr. V R L Paparao. Financial Performance

(Rs. in Lacs) Year 2001-2002 2002-2003 2003-2004(*)

Equity Capital 3349.68 3349.68 3349.68Free Reserves 1569.19 3853.79 3971.96Income 544.17 3983.03 203.70Profit After Tax 150.02 2284.60 118.17Earnings Per Share (Rs.) 0.44 6.82 0.35Book Value per Share (Rs.) 14.66 21.49 21.85* FY 2003 – 2004 are provisionals

Rao Investments Private Limited Rao Investments Private Limited was incorporated on April 7, 1993 in Tamil Nadu as a Non Banking Finance Company engaged in investment activities. Shareholding The equity shareholding pattern of Varalakshmi Investments Private Limited as on March 31, 2004 is as under:

Sl.No. Name of The Share Holder No. of Shares % 1 G B S Raju 10 0.002 G Kiran Kumar 10 0.003 G Mallikarjuna Rao 1990200 100.00

Total 1990220 100.00

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Board of Directors Mr. A Subba Rao (Chairman) Mr. A S Cherukupalli Mr. K Ramesh Babu Mr. P Sreenivasa Rao. Financial Performance

(Rs. in Lacs) Year 2001-2002 2002-2003 2003-2004*

Equity Capital 199.02 199.02 199.02Free Reserves 88.37 4512.64 4387.30Income 54.37 5225.41 3.67Profit After Tax 38.46 4424.27 (125.35)Earnings Per Share (Rs.) 1.93 222.30 --Book Value per Share (Rs.) 14.44 236.74 230.45* FY 2003 – 2004 are provisionals Vasavi Finance Private Limited Vasavi Finance Private Limited was incorporated on January 22, 1992 in Tamil Nadu as a Non Banking Finance Company engaged in investment activities. Shareholding The equity share holding pattern of Vasavi Finance Private Limited as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 G B S Raju 100 0.012 G Kiran Kumar 20 0.003 G Mallikarjuna Rao 1989800 99.984 G Varalakshmi 100 0.01 Total 1990020 100.00 Board of Directors Mr. Y Kamalakara Rao (Chairman) Mr. T S S V L Narayana Mr. G Satyanarayana. Financial Performance

(Rs. in Lacs) Year 2001-2002 2002-2003 2003-2004*

Equity Capital 199.00 199.00 199.00Free Reserves 42.84 3820.54 3856.56Income 50.60 4821.98 132.48Profit After Tax (14.73) 3777.70 36.02Earnings Per Share (Rs.) Nil 189.83 1.81Book Value per Share (Rs.) 12.15 201.98 203.80* FY 2003 – 2004 are provisional

20


A scheme of amalgamation (Company Application No. 543 of 2004) under the provisions of Section 391 to 394 of the Companies Act has been filed in the High Court of Tamil Nadu to amalgamate Vasavi Finance Private Limited and GMR Investments Private Limited with Rao Investments Private Limited. and in the High Court of Andhra Pradesh to amalgamate Vasavi Securities Limited and Varalakshmi Investments Private Limited into Rao Investments Private Limited. The High Court of Andhra Pradesh passed its order on 28th August, 2004, to amalgamate Vasavi Securities Limited and Varalakshmi Investments Private Limited and the orders from High Cout of Tamil Nadu are awaited, Key Managerial Personnel:

Name Designation Department Date of Joining

Qualification

Experience

Ex-Employer Name

A. Subba Rao

Vice President Account, Taxation

03.12.1999 B.Com, 1981 CA, 1986

About 17 Yrs Kotak Mahindra

Finance Ltd

Bruce Allan Benjamin

Head – Project Management

Project Management

22.03.2004 Bachelor of Engineering (Civil) - Monash University,Melbourne,Australia. (BE) Chartered Professional Engineer, IEAust. (1980). (CPE)

About 26 Yrs Chek Lap Kok Airport, Hong Kong

Madhu Terdal

Vice President Strategic Finance

01.01.2002 BSc., MA, CAIIB, DBM

About 26 Yrs Vysya Bank

Shirish M Navlekar

Vice President Energy Finance 11.10.2001 BE-Electrical,

1981 MMM, 1987

About 22 Yrs Southern Energy Asia

Pacific

Srinageh T Vice President Contract & Commercial

26.05.2003 B.Tech from IIT, 1979 PGDM (MBA) from IIM Bangalore, 1997

About 23 Yrs ABB Financial Services

Srinivasa Rao I.V.

Vice President Energy Finance 01.01.1993 ACA,ACS, LLB., M.Com

About 26 yrs Gold Star Group

Subba Rao G

Vice President Corporate Relation

01.10.2001 About 27 yrs The Vysya Bank Ltd

Subba Rao MV

Independent director

Administration 01.05.1992 BE (Mechnical), 1969 MBA, 1972

About 28 Yrs Andhra Bank

Sunil Tandon

President Project Management

01.04.2003 MBA from University of Strathclyde, UK

About 22 yrs Chairman & Managing Director, Capital Partner

21


Change in Key Managerial Personnel in the preceding one year:

NAME DESIGNATION JOIN_DT LEAVE_DT P CHAKRAPANI VICE PRESIDENT 23.04.1997 30.09.2003 K RAVISHANKAR CFO 16.10.2002 31.05.2003

Board of Directors:

Name, Designation, Father's Name, Address, Occupation

and Term National of Age

(years) Other Directorships in Indian companies G. M. Rao,

Chairman (S/o late Mr. Grandhi China Sanyasi Raju) No. 17, Varalakshmi Nilayam 1st Main Road, 4th Phase Dollars Layout J.P. Nagar, Bangalore 560 078 Business RETIRING DIRECTOR

India 55 Chairman & Managing Director, GMR Energy Limited Chairman, GMR Tambaram Tindivanam Expressways Pvt. Ltd Chairman, GMR Tuni Anakapalli Expressways Pvt. Ltd Chairman, Vemagiri Power Generation Limited Chairman, Hyderabad International Airport Ltd. Chairman, ING Vysya Bank Limited ING Vysya Life Insurance Company Pvt. Ltd

B. V. Nageswara Rao, Director (S/o Mr. Venkateswara Rao) No. 1209, 13th Street, ‘Z’ Block,Anna Nagar,

Chennai 600 040 Business RETIRING DIRECTOR

India 50 Managing Director, GMR Power Corporation Pvt. Ltd GMR Energy Limited Vemagiri Power Generation Limited Hyderabad International Airport Limited

G. B. S. Raju, Director (S/o Mr. G.M.Rao) No. 17, Varalakshmi Nilayam 1st Main Road, 4th Phase Dollars Layout

J.P. Nagar, Bangalore 560 078 Business RETIRING DIRECTOR

India 30 Executive Vice Chairman, GMR Tuni Anakapalli Expressways Pvt. Ltd Vice Chairman, GMR Tambaram Tindivanam Expressways Pvt. Ltd GMR Energy Limited

Srinivas Bommidala, Director (S/o Mr. Kasiviswanadham) No. 8, 9th Cross, Sastrinagar,

Adyar, Chennai 600 020 Business

India 41 Managing Director, Vemagiri Power Generation Limited GMR Energy Limited GMR Power Corporation Pvt. Ltd Sapphire Springs Pvt. Ltd Bommidala Exports Pvt. Ltd

22


Name, Designation, Father's Name, Address, Occupation

and Term National of Age

(years) Other Directorships in Indian companies RETIRING DIRECTOR G. Kiran Kumar

Director (S/o Mr. G.M.Rao) No. 17, Varalakshmi Nilayam 1st Main Road, 4th Phase Dollars Layout


India 29 Managing Director, Hyderabad Intl. Airport Ltd Managing Director, GMR Operations Pvt. Ltd. GMR Tambaram Tindivanam Expressways Pvt. Limited GMR Tuni Anakapalli Expressways Pvt. Limited Ideapsace Solutions Limited GMR Industries Limited

K.Balasubramanian, Director T-306, III Floor, ‘Nishant Prime’ No 5, Prime Street Bangalore 560 025 PROFESSIONAL ADDITIONAL DIRECTOR

India 61 Chairman ,GMR Power Corporation P Ltd, Vemagiri Power Generation Ltd., Hyderabad International Airport Ltd., ING Vysya Life Insurance Co P Ltd., Director

K.V.K.Seshavataram, Director 1st Floor, K.K.Mansions 45-58-16/5/1 Narasimha Nagar Visakhapatnam 530 024 PROFESSIONAL ADDITIONAL DIRECTOR

India 62 Chairman, GMR Industries Ltd, Hyderabad International Airport Ltd.,

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VI. INDUSTRY SCENARIO AND ACTIVITIES OF THE ISSUER The company is a registered NBFC and is carrying on the business of investment in the various infrastructure projects i.e. power, roads and airports undertaken by the group companies. Infrastructure is the base for all activities. It is from the band of services within this domain that all other developmental activities draw their sustenance. Inadequately envisioned, or poorly delivered, it can stunt growth for decades. Understanding the significance of good quality infrastructure for economic growth, GOI changed gears to public/private partnership for infrastructure development rather than earlier practice of taking the entire burden of providing entire infrastructure backbone by itself. Agencies such as World Bank, Asian Development Bank, Japan Bank for International Cooperation, USAID and AUSAID have also scaled up funding Indian infrastructure development. Good infrastructure is a must for any country to help its economy to grow. This is more important for the developing countries like India. However, the state of infrastructure in India continues to be abysmal, and is a major obstacle in its economic competitiveness. The pace of infrastructure development is sluggish and tardy and the level of private and public investment in infrastructure is unacceptably low. State governments often lack the resources to meet their financial commitments to their contractors. Pivotal role of infrastructure development in economic and industrial growth has now been well recognized and established and which is confirmed by the fact that infrastructure projects account for 54% of total construction activity in the country. Improving existing network of roads and highways, construction of bridges, hydel projects, development of new ports, pipelines etc. are some of the areas, which offer tremendous opportunities. The government has also been promoting investments in infrastructure through its own entities as well as private participation over the past two years. Power Industry: The power industry in India has been characterized by energy shortages. In the fiscal 2004, demand for electricity exceeded supply by an estimated 7.1% in terms of total energy requirements and 11.2% in terms of peak demand requirements. Although power generation capacity has increased substantially in recent years it has not kept pace with the growth in demand or the growth of the economy in general. Historically, state and central government entities played the dominant roles in the development of Indian power industry. However, capacity growth did not keep pace with demand, due to inadequate investment and poor financial health of the SEBs. In recent years, however in light of persistent shortages, the Government has taken significant action to restructure and attract investment. This has included measures to restructure the SEBs and improve their financial health. In addition, the Government has liberalised policies relating to the generation, Transmission, Trading and distribution sectors.

24


Actual Power Supply Position (Fiscal 2001-Fiscal 2004) Fiscal Year Requirement Availability (million units) (million units) 2001 5,07,216 4,67,400 2002 5,22,537 4,83,350 2003 5,45,983 4,97,890 2004 5,59,264 5,19,398 The end users of power can be broadly classified into industrial (representing approximately 34% of sales in fiscal 2004), agricultural (representing approximately 25% of sales in fiscal 2004), domestic (representing approximately 25% of sales in fiscal 2004), and commercial consumers (representing approximately 7% of sales in fiscal 2004). The balance of sales goes to various other consumers. Power Generation: As on March 31, 2004 India’s power system had an installed generation capacity of approximately 112058MW. Thermal power plants powered by coal, gas, naptha or oil accounted for approximately 70% of total power capacity in India as on March 31, 2004, hydroelectric stations for approximately 26% and others (including nuclear stations and wind power) accounted for approximately 4%. Installed Capacities: The following table presents the installed generation capacity of India’s electricity generators by type of generation from fiscal 2001-2004 As on March 31 Thermal

(% of Total) Hydro

(% of Total) Wind

(% of Total) Nuclear

(% of Total) Total (in MW)

2001 71.2 24.7 1.3 2.8 101626 2002 71.0 25.0 1.4 2.6 105046 2003 71.0 24.9 1.6 2.5 107973 2004 69.6 26.3 1.7 2.4 112058 Installed Generation by Capacity by Sector (Fiscal 2004) Type / Sector Central State Private Total Thermal 27,257 41,676 9,036 77,968 Hydro 5,374 23,250 876 29,500 Nuclear 2,720 0 0 2,720 Wind 0 65 1,805 1,870 Total 35,351 64,991 11,717 1,12058 Future Capacity Additions: The Government adopts a system of five-year Plan that set out targets for economic development in various sectors, including the power sector. Each successive Five-Year Plan has increased power generation capacity addition targets. The Ninth Plan targeted a capacity addition of 40,245 MW, of which 24.4% was to come from hydro capacity, 73.4% was to come from thermal capacity, and 2.2% was to come from nuclear capacity. MOP estimates indicate that only around 19,251 MW or 48% of the planned

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capacity addition, were added in the aggregate during the Ninth Plan. The target for capacity addition has been set at 41,110 MW under the Tenth Plan as described below: Type / Sector Central State Private Total Thermal 12,790 6,676 5,951 25,417 Hydro 8,742 4,481 1,170 14,393 Nuclear 1,300 0 0 1,300 Total 22,832 11,157 7,121 41,110 The Government has set an target of providing “Power for All” during the Tenth and Eleventh Plans. Based on the 16th Electricity Power Survey prepared by the CEA, India would require additional capacity creation of nearly 1,00,000 MW by 2012 to achieve goal. Regulatory Framework Power is a concurrent subject under the Constitution of India. The responsibility for the development of the power industry is shared between the Central and State Governments and State Government. The MoP is the ministry governing the central power sector in the country. The MoP oversees the operation of all CPUs. The Central Electricity Authortity (“CEA”) advises the MoP on electricity policy and technical matters, among others. The Central Electricity Regulatory Commission (“CERC”) was constituted under the Electricity Regulatory Commission Act, 1998 (the ERC Act”) to regulate the tariffs for the CPSUs and other entities with interstate generation or transmission operations. The ERC Act, which has been replaced by the Electricity Act, also provided for the formation of State Electricity Regulatory Commission in the respective states for the rationalization of energy tariffs and the formulation of policy within each state. As of March 31, 2004 twenty states have set up their SERCs. Source: The financial and statistical data relating to the power industry in India is derived from Ministry of Power’s Annual Report (2002-03), the Central Electricity Authority’s General Review (2000-2001) and Executive Summary (March 2004) and Planning Commission (Power and Energy Division) Annual Report on the Working of the State Electricity Boards and Electricity Dept. (2001-02)

Roads & Highways : With a total length of approximately 3.3 million kilometers, India has the second largest road network in the world. Roads have played a vital role in transportation and also enhancing trade. The different categories of roads and authorities responsible for them are: a. National Highways - Central Government (through Ministry of Road Transport and

Highways) b. State Highways and Major District Highways- State Governments (PWDs) c. Rural Roads and Urban Roads - Rural Engineering Organizations, Local Authorities like

Panchayats and Municipalities The government has taken initiatives to improve and strengthen the network of National Highways, State Highways and roads in major districts and rural areas. In terms of private

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sector participation in road projects, the government has received an encouraging response from private investors, both foreign and domestic. - Estimates show that Indian roads carry almost 67 per cent of freight and 8 per cent of

passengers annually. - In India, road traffic is growing at a considerable pace. According to estimates, traffic on roads is growing at a rate of 7 to 10 per cent per annum. The growth in the number of vehicles has been around 12 per cent per annum.

- The Indian road network is divided into three main categories:

- national highways (interstate) covering over 58,000 kilometres. - state highways covering approximately 200,000 kilometres. - rural and urban roads covering nearly 3 million kilometres. - The national highways cater to about 45 per cent of the road transport demand

in the country. The government has embarked upon an integrated National Highways Development Programme (NHDP).

The National Highway Development Project is an ambitious program to improve the connectivity / road infrastructure and comprises the following three sub-programs, to be completed within a period of 10 years:

♦ Strengthening and 4 - laning of high-density corridors along the “Golden Quadrilateral” measuring 5,952 Kilometres connecting the four major metros of Delhi, Calcutta, Chennai, and Mumbai

♦ Strengthening and 4 - laning of the North –South and East-West corridors of 7,300 Kms connecting Kashmir to Kanyakumari including Salem to Cochin spur and Silchar to Porbandar

♦ Providing connectivity to the major ports The total investment requirement for the same have been pegged at Rs 66,000 crores (US$ 3.20 billion), proposed to be financed from a judicious combination of the following sources, External agency funding (World Bank, IMF loans), Cess on diesel and petrol, budgetary allocations, private sector funding and debt issues by NHAI/NHAI promoted project companies. NHAI would play a pivoted role in the NHDP plan and has been following critical mission parameters:-

♦ To develop, maintain and manage the national highways and any other highway entrusted to it by GOI;

♦ To award contracts for the construction, expansion, maintenance of the highways;

♦ To regulate and control the vehicular movement on these roads;

♦ To collect toll fees on behalf of GoI for services rendered;

♦ Incorporate one or more companies under the Companies Act 1956 to ensure efficient discharge of functions under the NHAI Act.

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Exhibit 1 – NHDP – Project Map

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Policy Initiatives The government has adopted a roads development policy setting out the guidelines for investment in highways. In order to meet the huge investment requirements in the sector, the government has taken a number of measures to attract private sector participation.

- The government has permitted 100 per cent foreign equity (up to US$ 306 million) in construction and maintenance of roads, highways, tunnels etc.

- In order to share project risks, the government, through the National Highways Authority of India (NHAI), can acquire equity stakes up to 40 per cent in build-operate-transfer (BOT) projects.

- Promoters are permitted to charge toll tax on certain projects. These toll taxes are

indexed to the wholesale price index. - Road projects are entitled to corporate tax holidays for 10 years. - Investors in Infrastructure projects are eligible for Tax benefit u/s 10 (23 G) of the

Income Tax Act - The government permits duty free import of high capacity equipment required for

highway Construction. - The government also facilitates investors with feasibility study, land acquisition,

resettlement and rehabilitation, etc. - Earlier, most of the private sector investments were through the build-operate-

transfer schemes. Now many of the recent projects are being bid on a toll collection system to finance the project. This new scheme has generated considerable interest among private investors and operators.

Opportunities

- To augment resources, the Ministry of Road Transport and Highways has taken a

lead in private sector participation in road infrastructure projects. At present 34 National Highways projects costing about US$ 1120 million are in different stages of construction or in operation.

- The NHDP project is one of the largest road sector projects being pursued by the

government. The private sector is expected to play a significant part in this. Source: Department of Road Transport & Highways

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Privatisation Experience Private participation in the road sector is a recent phenomenon in the Indian context. Private capital has been found to be forthcoming for smaller scale road projects like bridges, and bypasses. There have been a few large-scale/highway projects in the private sector. This can be attributed to the lack of a clear policy framework and action plan, which coupled with a limited history of toll imposition and collection makes project returns suspect. Initial experiment on privatisation of roads based on toll collection mechanism failed miserably on two comments; mainly improper traffic estimation and leakages in the toll collection and tendency to bypass toll booths with alternate routes. Now, the private sector projects have been funded with significantly improved support mechanisms from the NHAI. These measures have been aimed at reducing the risk profile of projects, thereby attracting private capital.

Categories of projects identified for private investment are given in the following table:

Exhibit 2 – Categories of Projects identified for Private Investment

S.No. Category of projects Indicative Quantum Existing Network

1 Widening from 2 lanes to 4 lanes 4000 km 2 Major Bridges 50 3 Railway Over Bridges 50 4 Elevated section through Urban Areas To be identified 5 Interchanges To be identified 6 Bypasses 30

New Network 7 Expressways 1000 km.

- The number of foreign investors in the Indian road sector has been increasing over the years. The following is a summary of contracts under implementation: Category of Firms No of contracts Awarded cost (INR billion)

Indian firms 85 104.55 Joint ventures (Indian & 35 61.15 foreign firms) Foreign firms 12 19.74 Total no of contracts 132 185.44

Levy of Road User Charges Broadly, road user charges are levied and collected in the following ways: Direct tolls The users pay directly at the time of usage of the facilities. The demand and toll collection risks are borne by the concessionaire. The concessionaire may be allowed to undertake real estate development/ development of amenities to balance risks and enhance returns. The method assumes full risk exposure to the developers for traffic flow as well as toll collection.

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Shadow Tolls The concessionaire does not collect any user charges directly. Instead the project authorities pay the concessionaire based on the actual number of vehicles that have used the facility as verified by an independent authority or through the use of modern technology. The project authority, in turn may recover the costs indirectly via cess, taxes or toll at a different point.

Annuity system Under the annuity system, the project authority pays the concessionaire a fixed semi-annual amount to cover all O&M expenses, Debt service obligations and equity a returns thereon. The concessionaire however does not have any rights for toll collection/ real estate development. The annuity method is more suited for catalysing private sector investments as compared to its counterparts as the traffic and collection risks are assumed by the NHAI and not by the concessionaire. Further, the cash flows to the investors and lenders are known front giving them a greater comfort. In the shadow tolling and direct tolls methods, project cash flows turn positive only after a time lag of 3-4 years, whereas annuity projects generate revenues immediately upon project commissioning. This results in a broadening of the universe of investors to include those with a shorter investment horizon. Under the annuity method, the Government by shouldering the traffic risk has taken a significant step forward in attracting the private sector investments. Also, from the developers and lender’s perspective, once the construction is completed, the project risk profile dramatically improves and reaches the ultimate off taken credit levels, NHAI in this case. NHAI as on date is a “AAA” rated sovereign entity. Thus, annuity projects on completion of construction are expected to attain a “fixed income-GOI Bond” status. Current Scenario The total length of the National Highways covered by Golden Quadrilateral is 5846 kms. It covers 13 states across the country and the country and the State-wise breakup is as follows :.

Sl. No State Length (in kms.) 1 Andhra Pradesh 1016 2 Bihar 206 3 Delhi 25 4 Gujarat 485 5 Haryana 152 6 Jharkhand 192 7 Karnataka 623 8 Maharashtra 489 9 Orissa 443 10 Rajasthan 722 11 Tamil Nadu 341 12 Uttar Pradesh 754 13 West Bengal 398

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The status of the development of the golden quadrilateral component as on 31.07.2004 is as follows :

Sector Total Length Already 4 laned Under Implementation

Delhi - Mumbai 1419 1218 201 Mumbai - Chennai 1290 602 688 Chennai - Kolkata 1684 848 836 Kolkata - Delhi 1453 370 1083

Airports Our country has about 450 airports, variously managed by government agencies like defence services, state governments, the Airports Authority of India (AAI), and private operators. The AAI manages 120 airports including 12 international airports. Plan outlay for airports has remained almost constant over the past four years. Policies for modernisation of airports are in early stages of formulation. The sectors could see private sector investment from Indian as well as foreign majors. The total passenger traffic handled at the Indian airports has been growing at a CAGR of 4.7% p.a. since FY 2000 and the total passenger traffic handled during FY 2003 was about 44 million (domestic - 29 million and international -15 million). The cargo traffic has been growing at a CAGR of 7.1% p.a. since FY 2000 and the total cargo handled during FY 2003 was about 983 thousand tonnes (domestic - 334 thousand tonnes and international - 649 thousand tonnes). The top eight airports in Mumbai, Delhi, Chennai, Kolkata, Thiruvananthapuram, Bangalore, Hyderabad and Kochi together handle about 80% of the total passenger traffic (about 35 million during FY 2003). Further, Mumbai, Delhi and Chennai account for about 58% of the total passenger traffic (domestic traffic - 50% and international traffic - 73%) and the remaining five major airports account for about 22% of the total passenger traffic, with about 4% being the share of existing Hyderabad airport. GoI is in the process of upgrading the existing airports in the country and set up Greenfield International airports through Private Sector Participation to keep pace with anticipated traffic growth. In order to facilitate and encourage PSP in the airport sector, GoI has undertaken various initiatives including amendment of Airport Authority of India Act, 1994 allowing carrying out of airports related activities through PSP except for certain reserved activities such as air traffic control, security, customs etc. GoI has also announced several fiscal incentives and concessions such as availability of land from respective State Governments, financial assistance by way of equity / interest free loans etc. Future Out look Empirical evidence suggests that there exist a strong correlation between economic growth and air traffic growth. The global economy is expected to register a higher growth in next few years with USA, Japan and Euro economies showing signs of positive

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growth. Underpinned by strong domestic demand, opening up of the economy and also international demand for Indian software services, bio-tech, pharmaceuticals, etc, the Indian economy is poised for a strong GDP growth rate in the range of 6-8% in the next few years. Besides, continuous reform initiatives by GoI including proposal for “open sky” policy is likely to further augment the growth in air traffic in a larger way. Both ICAO and IATA have forecasted a significant increase in scheduled global passenger traffic. In India the growth is expected to be higher due to huge dormant demand in air traffic and also due to the fact that the economy is expected to grow at higher rate in the next few years. The recent positive developments in the sector includes hike in FDI announced in the budget 2004-05, slashing of apex fares by leading carriers, keenness by number of players to enter the sector. Low cost airlines are likely to further stimulate the market by poaching upper class railway customers, which was non-existent earlier. All these are indication of boom time ahead for Indian aviation sector. Traffic Scenario in Hyderabad The total passenger traffic handled at the Hyderabad airport has been growing at a CAGR of about 12% p.a. since FY 2000 and the total passenger traffic handled in FY 2004 was about 2.2 million (domestic 1.6 million and international 0.6 million). The cargo handled at Hyderabad airport has been growing at a CAGR of over 37% p.a. since FY 2000 and the total cargo handled in FY 2004 was about 29.4 thousand tonnes (domestic 15.2 thousand tonnes and international 14.2 thousand tonnes). The total passenger and cargo traffic handled at Hyderabad airport since FY 2000 is summarised as follows:

Exhibit 0-A – Traffic Scenario at Existing Hyderabad Airport

Year ended March 31 , 2000 2001 2002 2003 2004 CAGR(%) Passenger traffic (p.a.) - Domestic 1180000 1374008 1344817 1451015 1601450 7.88% - International 230000 236004 332365 459174 610366 27.63%

Total 1410000 1610012 1677182 1910189 2211816 11.91% Freight (tones p.a.) - Domestic 6353 14163 11624 13185 15176.83 24.27% - International 1979 2934 5470 7543 14245.57 63.80%

Total 8332 17097 17094 20728 29422.4 37.08%

(Source: AAI) It may be noted that the significant growth rate of passenger traffic has been recorded in Hyderabad, which has been above the overall growth rate of passenger traffic in India. However, the existing airport suffers from severe limitations for expansion of both airside and landside facilities to keep pace with the expected growth in air traffic in the future. Consequently, the need for a new international airport in Hyderabad has been felt.

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VII. MANAGEMENT DISCUSSION & ANANLYSIS OF THE FINANCIAL STATEMENT of GMR

Infrastructure Limited FOR THE LAST THREE FINANCIAL YEARS:

(Rs. in Lacs)

STATEMENT OF PROFITS AND LOSSES 2002 2003 2004

Operating Income 2350.92 8038.15 12529.16 Other Income 82.8 25.68 1277.88 Operating & Other Expenditure 554.05 1575.92 3687.63 Interest & Financing Charges 846.73 2413.84 4101.64 Depreciation 13.29 34.34 22.9 Profit Before Tax 1019.65 4039.73 5734.43 Profit After Tax 794.65 4020.65 5746.66

STATEMENT OF ASSETS & LIABILITIES 2002 2003 2004

Share Capital 7716.21 17716.21 17716.21 Share Application Money 145.8 Reserves & Surplus 6124.01 9688.61 15163.95 (excluding Revaluation Reserve) Secured Loans 6861.17 23578.59 22134.26 Unsecured Loans - 17857.81 1492.46 Deferred Tax 52.2 39.97 Total 20701.39 69039.22 56546.85 Fixed Assets 164.44 168.79 164.65 Investments 12470.48 64453.71 39120.34 Current Assets 10400.82 8095.6 17774.96 Less : Current Liabilities and Provisions 2408.73 3817.52 610.02 Miscellaneous Expenditure 74.38 138.65 96.92 (to the extent not written off or adjusted)

Total 20701.39 69039.22 56546.85

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The following discussion and analysis should be read in conjunction with financial statements. Result of Operations for the year ended March 31, 2004 compared to the year ended March 31, 2003 Income Income comprises of two main components namely Operating Income and other income Operating income

Operating Income for the year 2003-04 (Rs 125.29 crores) is increased by 57.43 crores (84.63%) when compared to the previous year 2002-03 (Rs 67.86 crores). The increase is mainly because of the following

dividend from subsidiary company M/S GMR Power Corporation (P) Ltd • Capital gains on the sale of shares to the extent of Rs 10.53 crores

Other Income Other income for the year 2003-04 (Rs 10.17 crore) is declined by 2.61 crore (20.42%) when compared to the previous year 2002-03 (Rs 12.78 crore) The main component of the other income is collection fee which is based on the sales realizations of the subsidiary company M/s GMR Energy Ltd. The decline in the dispatch of power from GMR Energy power plant at Mangalore had its impact on the sales realizations and consequently on the collection fee also. Expenditure Salaries & Employee benefits The employee cost is increased by 36.06% or Rs 1.37 Crores. This is because of the additional recruitments caused by the increased activities and new projects undertaken by the group Professional & Consultancy Fee Professional charges were decreased by 56.73% or 3.71 crores. This is mainly due to the fact that an extraordinary non recurring amount of Rs 2.74 crores was paid during the year 2002-03 to a consultant and Rs 2.31 crore paid to S B I Capital markets towards preparation of financial model of Airport project. Loss on sale of Investments There is a loss of Rs 24.24 crores on sale of investments for the year 2003-04. This is mainly on account of sale of GMR Power corporation (P) Ltd shares (Rs 15.05 crores) and the sale of mutual fund investments on ex dividend basis (Rs 8.23 crores) in fact the dividend is considered on income side. Hence this is a notional capital loss only.

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Interest cost Interest cost is increased by 69.93% or 16.88 crores during the year 2003-04 when compared to the year 2002-03. This is because of the following reasons

1. interest incurred on additional borrowings availed during the year

2. interest incurred on the additional borrowings taken during second half of last year. In this case the interest for the last year is for partial period and during the current year it is for full year.

Result of Operations for the year ended March 31, 2003 compared to the year ended March 31, 2002 Income Income comprises of two main components namely Operating Income and other income Operating income Operating Income for the year 2002-03 is increased by 46.92 crores (221.43%) from Rs 21.19 crores to Rs 68.11 crores when compared to the last year The increase is mainly because of the following

• Consideration of dividend from Subsidiary M/s GMR Energy Ltd • Increase of management fee income from 1.40 crores to 5.75 crores. The increase

is because of the reason that the agreement for management services had come into force with effect from 21/11/01 in case of GEL and with effect from 1st February 2002 in case of GMR Tambaram Tindivanam Express Ways (P) Ltd and Tuni Anakapalli Express Ways (P) Ltd. Hence the income is for partial period only during the year 2001-02 whereas in the year 2002-03 the income is for full year.

• Income from shared and other services increased from Rs 2.50 crores to Rs 4.86

crores. This is because of

o receipt of man power deputation charges of Rs 2.36 crore during the year 2002-03 which was not there in the year 2001-02.

Other Income Other income for the year 2002-03 is increased from 3.15 crores to 12.53 crores when compared to the previous year 2001-02. This is because of the reason that there is an agreement for collection fee with GEL had come into force with effect from 21st November, 2001 only. Hence collection fee for the year 2001-02 (Rs 2.32 crores) was partial whereas during the year 2002-03 (Rs 12.27 crores) the fee was for the full year.

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Expenditure Salaries & Employee benefits The employee cost increased from 1.65 crores to 3.67 crores. This is because of the additional recruitments caused by the increased activities and new projects undertaken by the group Professional & Consultancy Fee Professional charges increased from 1.08 crores to Rs 6.55 crores . This is mainly due to the fact that an extraordinary non recurring amount of Rs 2.74 crores was paid during the year 2002-03 to a consultant and Rs 2.31 crore paid to S B I Capital markets towards financial advisory and fund syndication for HUDCO term loan Interest & Financial Charges Interest & Financial Charges increased from 8.47 crores to 24.14 crores during the year 2002-03 when compared to the year 2001-02. This is because of secured loans obtained from various banks and FIs for the purpose of additional investments in group companies to the extent of about 520 crores. Result of Operations for the year ended March 31, 2002 compared to the year ended March 31, 2001 Income Income comprises of two main components namely Operating Income and other income Operating income Operating Income for the year 2001-02 (Rs 21.19 crores) is increased by Rs 14.62 crores (222.53%) from 6.57 crores during the year 2000-01 The increase is mainly because of the following

• Receipt of management fee of Rs 1.40 crores as a result of new agreement for management services came into force with effect from 21/11/01 in case of GEL and with effect from 1st February 2002 in case of GMR Tambaram Tindivanam Express Ways (P) Ltd and Tuni Anakapalli Express Ways (P) Ltd.

• Income from shared and other services of Rs 2.50 crores received during the year

2001-02 which is not there in the year 2000-01

• Income from managerial services is increased from Rs 1.66 crores to Rs 4.72 crores

• Interest income is increased from 2.40 crores to Rs 7.71 crores

• Profit on sale of shares is increased from 2.11 crores to Rs 4.78 crores

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Other Income Other income for the year 2001-02 is 3.15 crores. There is no other income during the previous year 2000-01. Other income consist of the following

• Collection fee of Rs 2.32 crore received from GEL with effect from 21st November, 2001

• During the year 2001-02 the Company is holding shares in Andhra Pradesh Gas

Power Corporation Ltd (APGPCL). The share holding entitled the company to avail the concessional power produced by (APGPCL). The entitlement was transferred to GMR Industries Ltd and received consideration of Rs 0.83 crores which is there in the other income. The similar income was not there during the year 2000-01.

Expenditure Salaries & Employee benefits The employee cost was increased from 1.01 crores to 1.65 crores. This is because of the additional recruitments caused by the increased activities and new projects undertaken by the group Interest cost Interest cost is increased from 1.36 crores to 8.47 crores during the year 2001-02 when compared to the year 2000-01. This is because of secured loans obtained from various banks and FIs for the purpose of additional investments in group companies Professional & Consultancy charges The professional and consultancy charges increased from 0.98 crores (2000-01 ) to 1.08 crores (2001-02) because of the following

• An amount of Rs 0.26 crores paid to ANZ Grindlays Bank towards financial model of Airport project

GMR Infrastructure Limited confirms that: 1. There have been no unusual or infrequent events or transactions, since the date of

the Auditors Report dated 31st March, 2004 contained herein. 2. There are no significant economic changes that materially affected or are likely to

materially affect income from continued operations. 3. There are no known trends or uncertainties that have had or are likely to have a

material adverse impact on the revenue or income from continuing operations. 4. There have been no changes in the activity of the Issuer which may have had a

material effect on the statement of profit / loss for the last five years. Material Development: In the opinion of the GMR Infrastructure Limited, since the date of the last financial statement disclosed in the Shelf Information Memorandum, there have been no circumstances that materially and adversely affect or are likely to affect the trading or

38


profitability of the issuer, or the value of its assets, or its ability to pay its liabilities, within the next twelve months. Corporate Governance The shares of the Company are not listed on any of the Stock Exchanges However, the Company complies with Companies Act and RBI regulations and has constituted the committees such as Audit Committee, Asset Liability Management Committee. VIII. FINANCIALS OF GROUP COMPANIES PROMOTED BY PROMOTERS Companies promoted by Promoters irrespective whether covered under 370(1)(b) or

not Mr. G.M.Rao has management control of all the group companies’ described herein as well as those described above. The Company has the following group companies: GMR Operations Private Limited GMR Operations Private Limited is engaged in the business of operation and maintenance services of power projects, including the Tanir Bavi power project. The company was incorporated on December 10, 1999 in Tamil Nadu under the name of GMR PSEG Operations Private Limited. Effective January 29, 2003 the name was changed to GMR Operations Private Limited and presently the Registered Office of the Company is situated at Bangalore in the State of Karnataka. Shareholding The equity share holding pattern of GMR Operations Private Limited as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 GMR Infrastructure Ltd 2450 49.002 Varalakshmi Investments Pvt Ltd 1 0.003 Rao Investments Pvt Ltd 2549 51.00 Total 5000 100.00

Board of Directors Mr. Kiran Kumar Grandhi Mr. M V Subba Rao Mr. S Nagarajan. Financial Performance

(Rs. in Lacs) Year 2001-2002* 2002-2003 2003-2004

Equity Capital 5.00 5.00 5.00Free Reserves 171.28 323.58 375.20Income 274.52 282.83 279.56Profit After Tax 164.68 152.29 51.63Earnings Per Share (Rs.) 3293.70 3045.96 1033.00Book Value per Share (Rs.) 352.57 657.16 760.40

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GMR Tambaram-Tindivanam Expressways Private Limited GMR Tambaram-Tindivanam Expressways Private Limited was incorporated on August 27, 2001 in Andhra Pradesh. GMR Tambaram-Tindivanam Expressways Private Limited is implementing a highway project on a 93 km stretch connecting Tambaram and Tindivanam in the state of Tamil Nadu. The total concession period is 17.5 years out of which 2.5 years is for construction and 15 years for operation and maintenance. Shareholding The equity shareholding pattern of GMR Tambaram-Tindivanam Expressways Private Limited as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 GMR Power Corporation Pvt Ltd 460000 50.002 GMR Infrastructure Ltd 100000 10.873 GMR Industries Ltd 100000 10.874 UE Development India Pvt Ltd 260000 28.26

Total 920000 100.00 Board of Directors Mr. G M Rao (Chairman), Mr. G B S Raju, Mr. O Bangaru Raju, Mr. Kiran Kumar Grandhi, Mr. S Raja Gopal, Mr. Sunil Tandon, Mr. Lee Soo Sin, Mr. Dato’ Mohd Nor Bin Idrus and Mr. James Wong Tet Foh as alternative Director to Mr. Dato’ Mohd Nor Bin Idrus. Financial Performance

(Rs. in Lacs) Year 2001-2002 2002-2003 2003-2004

Equity Capital 1.00 92.00 7264.78Free Reserves Nil Nil NilIncome NA NA NAProfit After Tax NA NA NAEarnings Per Share (Rs.) NA NA NILBook Value per Share (Rs.) Nil NIL NIL

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GMR Tuni-Anakapalli Expressways Private Limited GMR Tuni-Anakapalli Expressways Private Limited was incorporated on August 27, 2001 in Andhra Pradesh. GMR Tuni-Anakapalli Expressways Private Limited is implementing a highway project on a 59.2 km stretch connecting Tuni and Anakapalli in the state of Andhra Pradesh. The total concession period is 17.5 years out of which 2.5 years is for construction and 15 years for operation and maintenance. Shareholding The equity shareholding pattern of GMR Tuni-Anakapalli Expressways Private Limited as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 GMR Power Corporation Pvt Ltd 460000 50.002 GMR Infrastructure Ltd 100000 10.873 GMR Industries Ltd 100000 10.874 UE Development India Pvt Ltd 260000 28.26 Total 920000 100.00

Board of Directors Mr. G M Rao (Chairman), Mr. G B S Raju, Mr. O. Bangaru Raju, Mr. Kiran Kumar Grandhi, Mr. S Raja Gopal, Mr. Sunil Tandon, Mr. Lee Soo Sin, Mr. Dato’ Mohd Nor Bin Idrus and Mr. James Wong Tet Foh as alternative Director to Mr. Dato’ Mohd Nor Bin Idrus Financial Performance

(Rs. in Lacs) Year 2001-2002 2002-2003 2003-2004

Equity Capital 1.00 92.00 5140.63Free Reserves Nil Nil NilIncome N.A N.A NAProfit After Tax N.A N.A NAEarnings Per Share (Rs.) N.A N.A NABook Value per Share (Rs.) Nil NIL NIL ING Vysya Life Insurance Company Private Limited ING Vysya Life Insurance Company Private Limited was incorporated on December 13, 2000 in Karnataka and is engaged in the business of life insurance. Shareholding The equity shareholding pattern of ING Vysya Life Insurance Company Private Limited as on March 31, 2004 is as under:

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Sl.No. Name of The Share Holder No. of Shares %

1 ING Vysya Bank Ltd 49000000 20.002 GMR Industries Ltd 117600000 48.003 ING Insurance International B V 63700000 26.004 Others 14700000 6.00

Total 245000000 100.00 Board of Directors Mr. K R V Subrahmanian (Chairman) Mr. Frank J E Koster, Mr. Peter Smyth Mr. Steve Ong Chong Gain Mr. N N Joshi Mr. K R Ramamoorthy Mr. V Raghunathan Mr. Steven Billiet Mr. G M Rao Mr. K Balasubramanian. Financial Performance

(Rs. in lacs) Year 2001-2002 2002-2003 2003-2004

Equity Capital 11000.00 17000.00 24457.53Free Reserves (3094.20) (6880.30) --Income 1190.88 3140.11 1279.20Profit After Tax (3094.20) (3786.10) (6299.09)Earnings Per Share (Rs.) Nil Nil (3.46)Book Value per Share (Rs.) 7.11 5.91 4.61 Medvin Finance Private Limited Medvin Finance Private Limited was incorporated on February 6, 1992 in Tamil Nadu as a Non Banking Finance Company engaged in investment activities. Shareholding The equity share holding pattern of Medvin Finance Private Limited as on March 31, 2004 is as under:

Sl No Name of the Share Holder No of Shares % 1 GMR Investments Pvt Ltd 230000 9.22 2 Rao Investments Pvt Ltd 1080040 43.28 3 Vasavi Finance Pvt Ltd 185750 7.44 4 GMR Operations Pvt Ltd 1000000 40.07 Total

2495790

100.00

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Board of Directors Mr. A S Cherukupalli (Chairman) Mr. T S S V L Narayana Mr. K Ramesh Babu Financial Performance

(Rs. in lacs) Year 2001-2002 2002-2003 2003-2004

Equity Capital 199.58 199.58 249.58Free Reserves 55.12 1190.43 4014.22Income 99.66 1702.87 4332.35Profit After Tax 58.66 1134.44 2552.00Earnings Per Share (Rs.) 2.93 56.84 102.25Book Value per Share (Rs.) 12.76 69.64 170.84 Varalakshmi Jute Twine Mills Private Limited Varalakshmi Jute Twine Mills Private Limited is engaged in the business of manufacture of Fine Yarn. The company was incorporated on December 17, 1990 under the name of Sri Lakshmi Jute Twine Mills Private Limited in Andhra Pradesh. Effective February 23, 1994 the name was changed to Sri Varalakshmi Jute Twine Mills Private Limited. Effective July 1, 1997 the name was changed to Sri Varalakshmi Jute Twine Mills Limited. Effective November 20, 2001 the name was changed to Sri Varalakshmi Jute Twine Mills Private Limited. When was the name changed to Varalakshmi from Sri Varalakshmi Shareholding The equity shareholding pattern of Varalakshmi Jute Twine Mills Private Limited as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 GMR Industries Ltd 8593220 99.412 V. Kesava Rao 24100 0.293 P. Satyavathi 3000 0.034 K. Annapurnamma 3000 0.035 K. Satya Rao 3000 0.036 A Krishna Rao 18000 0.21

Total 8644320 100.00 Board of Directors Mr. K. Narayana Rao (Chairman), Mr. V.K. Rao Ch. Mr. Rajesh Jhunjhunwala Mr. E. Siva Sankaram Mr. V.S. Prakasa Rao

43


Financial Performance

(Rs. in Lacs) Year 2001-2002 2002-2003 2003-2004

Equity Capital 864.43 864.13 864.43Free Reserves 498.80 568.94 588.80Income 7404.66 4987.84 3258.85Profit After Tax 79.39 70.13 19.87Earnings Per Share (Rs.) 0.92 0.81 0.23Book Value per Share (Rs.) 10.00 10.00 16.76 Listed Ventures of Promoters: GMR Industries Limited

GMR Industries Limited was incorporated on June 30, 1986 under the provisions of the Companies Act as a [public limited] company by name of Sree Sarada Ferro Alloys Limited. The name Sree Sarada Ferro Alloys Limited was changed to GMR Vasavi Industries Limited with effect from February 1, 1994 and subsequently changed to to GMR Technologies and Industries Limited with effect from April 12, 2000. The name GMR Technologies and Industries Limited was changed to GMR Industries Limited with effect from January 30, 2004. Varalakshmi Sugars Limited merged with GMR Industries Limited on April 1, 1999 and GMR Breweries and Industries Limited merged with GMR Industries Limited on January 2001. Varalakshmi International Limited merged with GMR Industries Limited on April 1, 2002. The company is listed on the BSE and stock exchanges in Ahmedabad, Hyderabad and Kolkata. GMR Industries Limited is engaged in the business of manufacture of ferro alloys, sugar, generation and sale of power from co-generation plants and international trading. Shareholding The equity shareholding pattern of GMR Industries Limited as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 Rao Investments Pvt Ltd 12396618 45.882 Vasavi Finance Pvt Ltd 1690000 6.253 Varalakshmi Investments Pvt Ltd 1650100 6.114 Medvin Finance Pvt Ltd 1110720 4.115 GMR Investments Pvt Ltd 751000 2.786 Promoter Individuals / Others 5700 0.027 Indian Public 9144839 33.848 NRIs/OCBs 273180 1.01

Total 27022157 100.00

44


Board of Directors Mr. K V K Seshavataram (Chairman) Mr. K Narayana Rao Mr. N. V. Varadarajulu Mr. M Sudhakara Rao Mr. Ch. V K Rao Mr, A Subba Rao Mr Kiran Kumar Grandhi Mr. I Sada Siva Rao. Financial Performance

(Rs. in Lacs) Year 2001-2002 2002-2003 2003-2004

Equity Capital 2702.20 2702.20 2702.22Free Reserves 4826.70 7426.92 7962.00Income (net of change instocks) 18910.60 26486.44 26990.03Profit After Tax 351.00 814.45 1109.95Earnings Per Share (Rs.) 1.30 3.01 3.67Book Value per Share (Rs.) 23.31 37.48 38.32 The company has allotted 5174145 equity shares to members of erstwhile VIL, as per scheme of amalgamation on 14.08.2004. Share Quotation The highest and lowest market price of shares of GMR Industries Limited as listed on BSE during the preceding six months is as follows: Month High (Rs.) Low (Rs.) August 2004 34.55 26.10 July 2004 34.90 22.00 June 2004 25.00 21.45 May 2004 28.50 20.50 April 2004 27.25 22.20 March 2004 23.25 18.15

Ideaspace Solutions Limited

Ideaspace Solutions Limited was incorporated on April 6, 1993 under the name of Geemer (Vasavi) Finance Limited. Effective September 15, 1994, the name was changed to Natwest Finance Limited. Effective January 1, 1996, the name was changed to Natwest Capital Services Limited. Effective February 25, 1999, the name was changed to GMR Vasavi Infotech Limited. Effective August 7, 2000, the name was changed to Ideaspace Solutions Limited. Ideaspace Solutions Limited is engaged in the business of providing information technology services to the financial services industry and is involved in software development and related services. The shares of the Company were listed on The Stock Exchange, Mumbai (BSE), Hyderabad Stock Exchange (HSE),

45


the Bangalore Stock Exchange (BgSE). The Company through reverse book building process delisted from the Stock Exchange, Mumbai ( vide Notice No. 20040917-3, dated September 17, 2004) w. e. f. 30th September, 2004 and delisting from the Stock Exchanges of Bangalore and Hyderabad is awaited. Shareholding The equity shareholding pattern of Ideaspace Solutions Ltd. as on March 31, 2004 is as under: Sl.No. Name of The Share Holder No. of Shares %

1 Mr GBS Raju 128200 2.152 Varalakshmi Investments P Ltd. 1473900 24.733 GMR Investments P. Ltd 1582464 26.564 Medvin Finance P. Ltd. 153225 2.575 Rao Investments Private Limited 875,085 4.536 Vasavi Finance Private Limited 270000 4.537 GMR Infrastructure Ltd. 750000 12.598 Other Promoters 433,215 7.279 Other Corporate Bodies 99,331 4.6610 Indian Public 99,331 10.41 Total 5958865 100.00 The promoters have initiated the process of delisting the shares of Ideaspace Solutions Limited from the exchanges pursuant to and in compliance with Clause 7 of the SEBI (Delisting of Securities) Guidelines, 2003 (“Delisting Guidelines”). The promoters with Rao Investments being designated as the ‘Acquirer’ along with the other promoters being persons acting in concert, vide their Public Announcement dated April 15, 2004, made a voluntary offer to acquire 897,861 full paid-up equity shares of Rs. 10/- each, representing 15.07% of the capital of the Company (non-promoter holding) at a price to be determined under the reverse book building process. The Floor Price was fixed at Rs. 12/-. Based on the results of the reverse book building the Exit Price was established at Rs. 15/-, being the price at which the largest number of shares were tendered. The Exit Price of Rs. 15/- was accepted and the Promoters have acquired 5,99,585 Shares in electronic form and 5,500 shares in physical form. The company was delisted from the Stock Exchange of Mumbai and delisting from the Bangalore Stock Ltd and Hyderabad Stock Exchange Ltd, awaited as stated above. The public shareholders remaining may sell their holdings at the Exit Price to the Acquirer in accordance with the Delisting Guidelines within a period of 6 (six) months from the date of delisting of the shares. Board of Directors Mr. Kiran Kumar Grandhi Mr. A P Rao Mr. A.Subba Rao Mr. A.S.Cherukupalli

46


Financial Performance (Rs. in Lacs)

Year 2001-2002 2002-2003 2003-2004 Equity Capital 376.88 595.89 595.88Free Reserves 213.35 Nil 248.48Income 1065.89 1252.89 1215.99Profit After Tax 126.31 (295.58) 330.72Earnings Per Share (Rs.) 2.32 Nil 5.55Book Value per Share (Rs.) 15.66 8.62 14.17 IX. CAPITAL ISSUES MADE DURING LAST THREE YEARS BY THE COMPANY UNDER THE

SAME MANAGEMENT A. Equity Issued –

There has been no Public issue of Equity Shares either by the company or by the Companies under the same management during the last three years

B. Other public Issue

There has been no Public issue either by the company nor by the Companies under the same management during the last three years

Promise V/s. Performance Issuer Company The company is not a listed company and the company has not made any public issue of shares in the last three years. Listed Ventures of Promoters

(1) GMR Industries Limited : Previous Issues (Last Public Issue) Public Issue in 1994 GMR Industries Limited made an issue of 4,289,100 equity shares of Rs. 10/- each for cash at a premium of Rs.15/- per share aggregating Rs.107.2275 million. Out of this, 1,300,000 shares were reserved for Promoters, Directors, friends, relatives and others and 200,000 shares were reserved for United Breweries Limited, with whom there was a marketing arrangement. The public issue prospectus offered 2,789,100 equity shares of Rs.10/- each for cash at a premium of Rs.15/- per share aggregating Rs. 69.7275 million with the net offer to the Indian public being Rs. 32.0775 million. The details of the said issue are as follows: Issue opened on December 5, 1994 Issue closed on December 15, 1994 Object of the issue To part-finance the setting up of a brewery unit with

an installed capacity of 10,000 KL of beer per annum To finance a downstream fishery project To upgrade existing 33 KV substation to 132 KV To meet expenses of the issue

47


Rate of dividend paid prior to the issue 15%

Particulars of changes in the capital structure are given below:

Particulars

Equity Share Capital (Rs. million)

Share Premium (Rs. million)

Prior to the issue 95.442 23.860 After the public issue 138.333 88.197

Promise v/s Performance (Rs. in million) Year ended March 31,

1995 19961 19972

Projections Performance Projections Performance Projections Performance Sales 227.13 258.84 341.86 581.13 444.71 607.32 PAT 21.30 21.16 63.29 81.88 72.63 51.82 EPS (Rs.) 3.39* 1.53 4.58 5.92 5.25 3.75 Dividend (%)

- 16% - 16% - 10%

* Weighted Average 1 Variation between the projected and actual figures is attributable to higher operational efficiency and optimum utilisation of resources 2 Variation between the projected and actual figures for sales is attributable to better product mix and improved efficiency. The lower profit after tax is on account of higher interest burden Due to a legislation was enacted in 1995 in Andhra Pradesh prohibiting the manufacture, sale and consumption of Indian Made Foreign Liquor including beer, GMR Industries Limited kept in abeyance the implementation of brewery and downstream fishery projects. Instead it utilised the proceeds of the issue amount for (a) expanding its ferroalloy production capacity, (b) meeting long-term working capital requirements and (c) investment in GPCL. Since the projects underlying the issue were not implemented, a comparison of projected cost and time vis-à-vis actual cost and time cannot be established. X. BASIS FOR ISSUE PRICE Issue is based at par and interest would be benchmarked based on the credit rating of the company, market scenario and the financials of the Company. XI. OUTSTANDING LITIGATIONS OR DEFAULTS Outstanding litigations pertaining to GMR Infrastructure Limited There are no litigations against the Company whose likely outcome will have a material adverse effect on the position of the Company. Further, There are no outstanding litigations against or defaults by the Company with respect to the repayment of principal and / or interest on any of its borrowings.

48


Sl. No.

Company Case No.

Parties Forum Brief Facts Status

GIL 26715 of 2003

GMR Infrastructure Ltd., Vs. S.P.

Mani

XIV Addl. Chief

Metropolitan Magistrate –Bangalore

Cheque Bounce Case for an amount

of Rs. Rs. 103,700

26799 of 2003 -Do- -Do-

Cheque Bounce Case for an amount

for Rs. 1,00,000/- (50,000+50,000)

Complaint filed and Sworn Statement taken – notice ordered

Outstanding litigation pertaining to Group companies

Sl. No.

Company

Case No. Parties Forum Brief Facts Status

1. GPCL M.C.V. No. 3296 of 2003

Mohammed Khasim Vs. GPCL & New India Assurance

Motor Accident

Claims Tribunal,

Bangalore

Motor Accident Case for causing Injury

Compensation Claim:-

Rs. 2,00,000/-

Written Statement

filed – notice awaited from

2nd Respondent

2. GEL O.S. No. 77/03

M/s. Tanirbavi Power Company & G.M. Rao Vs. Ivan D’ Souza & Others

P.C.J – Mangalor

e

Defamatory statements against GEL and Making illegal demands on GEL for payment of compensation in respect of certain properties that were acquired by GEL and which properties supposedly belonged to the defendants. GEL has claimed an amount of Rs. 1,000,000 (along with interest at 12% per annum)

Posted for filing W/S & Objections

with condonation

of delay

3. GEL Mis. No. 82/01

Nagesh Poojary Vs. M/s. TanirBavi Power Company Pvt., Ltd.,

II – D .J - Mangalore

Mr. Nagesh Poojary filed case against KPTCL and GEL under Section 18(3) of the Indian Telegraph Act, 1885 on the grounds that KPTCL and GEL have drawn an electricity transmission line of 220 KV double circuits across his property which has

Posted for argument

49


affected the land and resulted in the respondents felling certain trees on the property including revenue yielding trees. The plaintiff has claimed compensation of Rs. 3,08,000 with interest at the rate of 12% per annum.

4. GEL O.S. No. 555/01

M/s. Tanir Bavi Power Company Pvt., Ltd., Vs. The TanirBavi Nivasigala Horata Samithi & 26 others

IV M - Mangalore

GEL has sought for a declaration that the demands made by the defendants are illegal and an order of permanent injunction restraining the defendants from agitating at the power plant site, obstructing the employees of GEL from entering the site, or interfering with the peaceful functioning of the power project.

Ad Interim Injunction

granted on 07.09.01 and

posted for issues

5. GEL O.S. No. 613/02

M/s. Tanir Bavi Power Company Pvt., Ltd., Vs. The Tanir Bavi Nagarikara Vedika & Others

IV M - Mangalore

Case filed on the same grounds and for the same relief as aforementioned in O.S. No. 555/2001. GEL has made an application under Order 39, Rule 2-A, CPC for detainment of certain defendants in the civil prison for disobedience of the ad-interim order of temporary injunction granted on October 8, 2002

Pending application

for permanent Injunction. Trail

started & posted for

plaintiff evidence

50


O.S. No. 499/2000 & I.A No. 2031/200

0

City Civil Court

GTIL filed civil and criminal cases against 12 parties for fraud and cheating for an amount of Rs. Rs. 1,60,82,955/- GTIL also filed a case preventing UTI bank from releasing LC to Citibank, Paris (Citibank had already released the LC to the Beneficiary)

C.M.A No.363/0

4

6. GMR

Industries Limited

Ship Arrest

Petition I.A. No: - 2031/00

GTIL (Vs) M/s. Golden Rich (Chung's) Development Co. Ltd., Hong Kong and 11 others

High Court

– A.P.

High Court directed GTIL to submit a Bank Guarantee for an amount of Rs. 2 Crore and GTIL submitted the same in the court. Hence status quo is issued by the High Court against UTI Bank releasing LC Posted for evidence

O.S. No. 109/01

Case filed for recovery of a sum of Rs. 1,383,933 for goods supplied by GTIL in terms of the contract dated June 10, 2000 entered into by the parties for supply of copper scrap

Pending for evidence 7

GMR Industries Limited

418/03

GTIL Vs. Karnataka Agro Chemicals

High Court – A.P.

• Name of Tanir Bavi Power Company Pvt Limited since been changed to GMR Energy Limited

51


O.S. No. 214/02

Civil case for recovery of money City Civil

Court

Pending for chief examination & posted on 11.08.04 8

GMR Industries Limited

C.C. No. 636,

640,641/99 &

294,295/2000

GTIL Vs. Nutech Organic Chemicals

Magistrate Court

Cheque bounce case Case dismissed GMRIL is preferring appeal

9 GMR

Industries Limited

C.M.P. No.

16285/03

GTIL Vs. The Anakapalli Co-operative Sugars Limited

High Court -

Hyderabad

Lower court decreed a suit for an amount of Rs. 2,82,980/- against GTIL for breach of Contract. GTIL preferred a appeal in the High Court through First Appeal

GTIL deposited an amount of Rs. 1, 59, 641/- and the lower court order is stayed by the High Court until the disposal of the appeal.

10 GMR

Industries Limited

W.P. No. 19706 GTIL VS. NTPC

High Court -

Hyderabad

GIL has agreed to pay the disputed amount vide W.P. Nos. 6287/2001 & 5713/2000 & NTPC has demanded additional charges for the belated payment and GTIL preferred writ in the High Court

High Court granted interim suspension for payment

11 GMR

Industries Limited

A.S. No. 2061/03

Vegasna Narayana Raju Vs. GTIL (Sugar Division)

High Court -

Hyderabad

The other side filed suit for specific performance where GTIL is included as a party since GTIL is a bonafide purchaser of the property subjected to the dispute.

Pending

12 GMR

Industries Limited

W.P. No. 5713/200

0

GTIL Vs. NTPC & 4 Others

High Court –

Hyderabad

NTPC demanded for additional payment of Rs. Rs.28,424,028 and Rs. 6,044,572. by way of a supplementary bills, for which GTIL disputes that the demand is illegal.

Re examination ordered by the Bench. Pending for reopen

52


13 GMR

Industries Limited

W.P. No. 6287/01

GTIL Vs. NTPC & 4 Others

High Court –

Hyderabad

NTPC demanded for additional payment of Rs. Rs. 15,424,788 by way of supplementary bills, for which GTIL disputes that the demand is arbitrary and illegal.

Re examination ordered by the Bench. Pending for reopen

14 GMR

Industries Limited

W.P. No. 7358/04

GTIL Vs. Union of India rep. Secretary, by Ministry of Energy

High Court -

Hyderabad

It is claimed that Duty @ 25 pc under A.P. Electricity Duty Act is arbitrary/discriminatory and unconstitutional

Respondents will not enforce the recovery of the amount until further orders

15 GMR

Industries Limited

M/s. UC Gas Engineering Ltd., New Delhi Vs. GTIL

High Court -

Hyderabad

Case for recovery of money for a sum of Rs. 7,66,254/- being the balance amount with interest which was claimed to be due to them due to contractual obligation

Application filed that the matter should be referred to the arbitration as per the provisions of the agreement. The court has given six weeks time from 07.07.04 for appointment of arbitrator

Details of contingent liability under Direct Taxes and Indirect Taxes of Group companies as on March 31, 2004: Sl. No.

Name of the company Income Tax Excise Duty Sales Tax

1 GMR Investment Pvt. Ltd 5,26,255 - - 2 Varalakshmi Investments

Pvt. Ltd 4,79,363 - -

3 Medivin Finance P L 1346 - - 4 Ideaspace Solutions Ltd 84,020 - - 5 GMR Industries Ltd. 70,87,713 - - 6 Varalakshmi Jute & Twine

Mills Ltd 76,116 - -

53


RISK FACTORS AND PROPOSALS TO ADDRESS THE RISK RISK FACTORS

Following are certain considerations, which the investors should peruse before making an investment in the issue. The material implication of the risks envisaged by the management has been quantified as far as possible. Where such quantification has not been made it may be construed that the implication cannot be quantified. 1.Payment Risk: The interest and principal repayment is depended mainly on the cash flows arising from the dividend distribution of GEL. Proposal to address the Risk : GEL is the flagship company for all the energy initiatives of the group. GEL has an operating power plant with 220MW capacity and is a dividend paying company. It has an operational escrow with KPTCL where 1.25 times the monthly bill flows in. Further, it has a 51% stake in GPCL and 100% stake in VPGL. GPCL has been operating for the last 5 years and it has a 15 year PPA with TNEB and has been receiving payments from TNEB. VPGL, a gas based power plant has already entered into a 15 year PPA with AP Transco. The power generated by VPGL would be at a competitive price of Rs. 1.93 / unit in its first full year of operation FY07. 2. Alternate buyer post completion of its PPA with KPTCL Proposal to address the Risk : Current PPA with KPTCL is valid upto FY 2009 and the GEL is confident of extending the validity of PPA for further period. Since GEL is a barge mounted power project, post PPA the plant can be shifted to coastal line where plenty of gas is available and using the gas the plant can be operated effectively. A Sensitivity has been carried out assuming this scenario. Post completion of PPA period, A condition would be put that if GEL is unable to make arrangements for selling power to the satisfaction of Debentureholder then 15% of GEL shares held by GIL would be pledged for the benefit of debentureholders. 3. Energy generated risk: The power generated by GEL may not be sold Proposal to address the Risk : Even though it has been operating at a lower PLF due to lower offtake of power by KPTCL, the fixed charges are payable at a PLF of 85%, hence debenture holders interest is protected. 4. Delay in commissioning of VPGL Proposal to address the Risk : The company has entered into a fixed time fixed price Engineering, Procurement & Construction contract with L&T. The project construction is on schedule and is expected to be commissioned by December 2005. Appropriate LD clauses have been inbuilt for making good any shortfalls on account of cost overrun / time overrun due to reasons attributable to EPC Contractor. DISCLOSURE ON INVESTOR GRIEVANCES AND REDREESAL SYSTEM : To ensure that Investors grievances are attended to expeditiously the issuer has appointed M/s. Bigshare Services Pvt. Ltd. as its Registrar and Share Transfer Agent :

54


M/s. Bigshare Services Pvt. Ltd., E-23/, Ansa Industrial Estate Sakivihar Road, Saki Naka Andheri (E) Mumbai 400 072 Tel. Nos.: (022) 2847 3747 / 2847 3474 Fax No.: (022) 28475207 Further, investors may note that a compliance officer has also been appointed by the Issuer and he may be contacted in case of any grievances at the following address : Mr. I.V. Srinivasa Rao Vice – President & Company Secretary GMR Infrastructure Limited, 25/1, Museum Road, Bangalore – 560 025 Tel No: 080 - 220 70 100 Fax No. 080 – 22 99 8 11 8 E-mail Id : [email protected] As on date there is no outstanding grievances against GMR Infrastructure Ltd. from investors/ shareholders. The details regarding normal time taken for disposal of various types of investors’ grievances for listed companies under the same management within the meaning of Section 370 (1)(B) of the Companies Act, 1956 GMR Industries Limited

1. Transfer/Transmission of equity shares : 15 days 2. Change of Address : 7 days 3. Issuance of duplicate share certificates : 30 days 4. Non receipt of share certificates : 7 days 5. Non receipt of dividend warrants : 7 days 6. Noting of bank mandate : 7 days As on date there is no outstanding grievances against the company from investors/ shareholders. Idea Space Solutions Limited

1. Transfer/Transmission of equity shares : 15 days 2. Change of Address : 7 days 3. Issuance of duplicate share certificates : 30 days 4. Non receipt of share certificates : 7 days 5. Non receipt of dividend warrants : 7 days 6. Noting of bank mandate : 7 days As on date there is no outstanding grievances against the company from investors/ shareholders.

55


PART II

XIII. GENERAL INFORMATION Consent M/s. S Venkatadri & Co. the Statutory Auditors of the Issuer have their written consent to their report being included in the form and content in which it appears in this Shelf Information Memorandum UTI Bank Ltd. has given its written consent to act as Trustees to the issue and for including their name in the Shelf Information Memorandum. M/s Bigshares Services Pvt. Ltd. has given its written consent to act as Registrar to the issue and for including their name in the Shelf Information Memorandum Registrar. Change in Directors of GMR Infrastructure Limited during the Last Three Years The following Persons have been appointed and inducted into the Board as Directors during the last 3 years

Sr. No.

Name of Director Date of Appointment

1 K.Balasubramanian, September 14, 2004 2 K.V.K.Seshavataram September 14, 2004 The following Persons have ceased to be Directors during the last 3 years

Sr. No.

Name of Director Date Reason

1 Mr.Sure Suryanarayana Murthy 07.12.2001 Resigned as Director 2 Mr.O.Bangaru Raju 25.03.2002 Resigned as Director

Change in Auditors of GMR Infrastructure Ltd during The Last Three Years There is no change in Auditors during the last three years. Authority for the Present Offer Board of Directors of the Company has passed an resolution to raise the fund aggregating Rs. 150 crores by issuing Privately Placed Secured Redeemable Non-Convertible Debenture under the Shelf Information Memorandum vide its Board Meeting dated September 14, 2004. Procedure and time schedule for allotment and issue of certificates. Debentures would be allotted by Board / Committee of Directors of the Issuer and Letter of Allotment would be issued / credited within 7 days from date of allotment and Debenture Certificate in Dematerliased form would be issued / credited within 3 months from the date of allotment.

56


Name and address The Company Secretary Mr.I.V.Srinivasa Rao Vice-President & Company Secretary GMR Infrastructure Ltd Skip House, 25/1, Museum Road,Bangalore-560 025. PH:080 -22 070100 ,FAX: 080-22 99 8 11 8

Auditors: S.Venkatadri&Co 1408,Babukhan Estate Basheer Bagh Hyderabad-500 001 PH:040-23237463,23210182 Fax: 040-23296341

57


IV. AUDITORS REPORT & FINANCIAL INFORMATION 29th September, 2004

To, The Company Secretary, GMR Infrastructure Limited Bangalore

Auditors Report for your privately placed Debentures aggregating Rs. 150 crores

Dear Sir, We were engaged to report on the financial information of GMR Infrastructure Limited annexed to this report, which is required to be prepared in accordance with the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (‘the Guidelines’), issued by Securities and Exchange Board of India (‘SEBI’) on 19 January 2000 in pursuance of section 11 of the Securities and Exchange Board of India Act, 1992. The financial information is proposed to be included in the Offer Document of the Company in connection with the issue of Secured Redeemable Non Convertible Debentures of Rs 150 crores on a private placement basis. We were engaged to report on the annexed statements of assets and liabilities of the Company as at 31 March 2004, 31 March 2003, 31 March 2002, 31 March 2001 and 31 March 2000 and the annexed statements of Profit and loss for each of the years ended on those dates (‘the summary statements’) (Annexure I). The summary statements have been extracted from the financial statements drawn up in confirmation with the provisions of sub section (1), (2) and (5) of section 211 and sub section (5) of the Companies Act, 1956, audited by us. Based on our audit of the financial statements, we confirm that: The summary statements have been reproduced from the audited financial statements of the respective years. The Company’s management is responsible for the preparation of the summary statements and the Capitalization statement. Our responsibility is to report based on the work done. We have performed such tests and procedures, which, in our opinion, were necessary for our reporting to you. These procedures include comparison of the annexed financial information with the Company’s audited financial statements. This report is intended solely for your information and for the Company to comply with the provision of the SEBI Guidelines and may not be suitable for any other purpose. Yours Sincerely, for S Venkatadri & Co Chartered Accountants K Srinivasa Rao Partner

58


ANNEXURE 1

GMR Infrastructure LimitedStatement of Profitability for the last five years

(Rs. In Lacs)

For the year ended 31st March 2000 2001 2002 2003 2004

Interest Income 1.39 239.74 771.48 401.21 146.82 Dividend Income 141.65 39.47 7.71 4,931.88 9,662.11 Income from Shared & Technical Services Fees 166.31 1,093.99 1,445.46 1,667.73 Proft on Sale of Investments - 9.62 477.74 7.40 1,052.50 Profit on sale of shares in Stock in Trade - 201.86 - Others Income 10.01 - 82.80 1,277.88 1,017.44 Total Income (Excl. Changes in Stock) 153.05 657.00 2,433.72 8,063.83 13,546.60 Salaries & Welfare 9.19 112.10 187.80 444.90 517.13 Movement cost 1.62 40.44 43.34 127.02 107.21 Professional charges - 97.63 107.50 654.82 283.12 Other Administrative Expenses 1.27 80.21 194.53 307.44 2,624.96 Miscellaneous Expenditure written off 3.68 3.74 20.88 41.74 41.74 Provision for diminution in value of investments 113.47 Total Expenditure 15.76 334.12 554.05 1,575.92 3,687.63 EBDIT (Earning Before Depn, Interest, Tax) 137.29 322.88 1,879.67 6,487.91 9,858.97 Depreciation 0.05 5.74 13.29 34.34 22.90 Interest Paid 87.97 136.30 846.73 2,413.84 4,101.64 Profit Before Tax 49.27 180.84 1,019.65 4,039.73 5,734.43 Provision for Tax

- Current Tax - 12.00 225.00 - Deferred Tax 19.08 (12.23)

Profit After Tax Before Dividend 49.27 168.84 794.65 4,020.65 5,746.66 Preference dividend+tax on dividend - - 36.90 240.50 271.31 Profit available to equity share holders 49.27 168.84 757.75 3,780.15 5,475.35 Cash Profit 49.32 174.58 807.94 4,054.99 5,769.56 Earnings Per Share 2.37 0.29 1.29 2.38 3.45 Cash Earning Per Share 2.37 0.30 1.38 2.56 3.64

59


Balance Sheet of GMR Infrastructure Limited for the Year 1999-200, 2000-2001, 2001-2002, 2002-2003 and 2003-2004

(Rs. In Lacs)

For the year ended 31st March GMR Infrastructure Limited

2000 2001 2002 2003 2004

Gross Block of Fixed Asset 6.25 91.44 175.80 221.78 240.54

Less: Accu. Depreciation 0.05 5.79 18.66 53.00 75.89

Net Block of Fixed Asset 6.20 85.66 157.14 168.78 164.65

Capital Work in Progress - - 7.30 - -

Investments 5,613.44 10,853.33 12,470.48 64,453.71 39,120.34

Deferred Tax Asset - - - - -Current Assets, Loans & Advances 714.14 6,687.84 10,400.82 8,095.60 17,774.96

Current Liabilities 1,242.88 779.80 2,408.73 3,817.52 610.02Net Current Assets, Loans & Advances (528.75) 5,908.04 7,992.09 4,278.08 17,164.94

Unsecured Loans 1,268.59 223.12 - 17,857.82 1,492.46

Secured Loans - 5,111.11 6,861.17 23,578.59 22,134.26

Share Application Money 3,589.75 145.80

Deferred Tax Liability - - - 52.20 39.97

Preference Share Capital - - 1,850.00 1,850.00 1,850.00

Equity 208.07 5,866.21 5,866.21 15,866.21 15,866.21

Reserves & Surplus 39.21 5,659.57 6,124.01 9,688.60 15,163.95

Misc. Expenditure Not Written Off 14.72 12.98 74.38 138.65 96.92

Net Worth 232.56 11,512.80 11,915.84 25,416.16 30,933.24

Secured Loans / Net Worth - 0.44 0.58 0.93 0.72

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Capitalisation statement (Rs. In Lacs)Particulars Pre issue as on As adjusted for the 29/09/2004 issue Short term borrowings 1,570.20 1,570.20 Long term borrowings 20,159.89 35,159.89

Total 21,730.09 36,730.09 Share holders funds(As per Audited accounts as on 31/3/04) Share Capital 15,866.21 15,866.21 Reserves 15,163.95 15,163.95 Total Share holders funds 31,030.16 31,030.16 Long term Debt / Net worth 0.70 1.18 SIGNIFICANT ACCOUNTING POLICIES Significant Accounting Policies a) Basis of Accounting The financial statements are prepared under the historical cost convention b) Revenue Recognition The Company follows mercantile system of Accounting and recognizes significant items of income and expenditure on accrual basis except in case of those with significant uncertainties. Dividends declared by subsidiary companies after the Balance Sheet date, which are in respect of the current year, are recognised as income. c) Investments The Long Term Investments are carried at cost, inclusive of any expenditure incidental to the acquisition. The interest on the loans borrowed for the purpose of acquisition of such investments is capitalized till the date of commencement of commercial operations. The Current Investments are carried at lower of cost or fair value, which ever is less.

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d) Fixed Assets Fixed Assets are stated at cost. Cost comprises of purchase price and any directly attributable cost of bringing the asset to its present condition for intended use. e) Depreciation Depreciation is provided on straight line method as per Section 205 and at the rates prescribed in Schedule XIV to the Companies Act, 1956. f) Retirement and Other Costs Retirement benefits are accounted for on accrual basis with contributions to recognised funds such as Provident Fund charged against revenue each year. Liability for gratuity is funded through a scheme administered by an insurer. Liability on account of accumulated leave is provided on accrual basis. g) Foreign Currency Transactions All foreign currency transactions are accounted for at the exchange rates prevailing on the date of such transactions. h) Taxes on Income Current Taxes Current tax is determined as the amount of tax payable in respect of taxable

income for the year. Deferred Taxes Deferred tax is recognised subject to consideration of prudence on timing

difference being the difference between taxable income and accounting income. Deferred Tax charge or credit on timing deference is recognised using current tax rates and tax laws that have been enacted or substantially enacted as of the balance sheet date. Deferred tax assets are recognised to the extent there is a reasonable certainty that these assets can be realised in future.

Deferred tax assets/liabilities are renewed at each balance sheet date. i) Miscellaneous Expenditure (to the extent not written off or adjusted) Miscellaneous Expenditure (to the extent not written off or adjusted) j) Borrowing Cost Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that takes substantial period of time to get ready for intended use. Borrowing cost incurred, on the funds used for investments in the companies promoted by the company are capitalised as part of such investments till the commencement of commercial operations of such promotee company. Other borrowing costs not attributable to the acquisition of any capital asset or investment are charged to revenue.

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OTHER PROVISIONS RELATING TO ACCOUNTS OF THE ISSUER COMPANY ♦ GMR Infrastructure Limited confirms that there have been no changes in the activity

of the Issuer which may have had a material effect on the statement of profit/loss for the last five years.

XVI. STATUTORY AND OTHER INFORMATION a) Minimum Subscription

Pursuant to the notification no. SEBI/MRD/SE/AT/46/2003 dated 22nd December 2003 issued by SEBI minimum subscription clause is not applicable to the privately placed debt securities.

b) Expenses of the Issue giving separately fee payable:

Trusteeship Fees & Registrar and Transfer Agent Fees are specified in the respective consent letter which are available for inspection.

c) Commission/Brokerage: Nil

Debt : Nil

d) Previous issue for cash: Equity :

Date of Allotment

Number of Equity Shares

Face Value (Rs.)

Issue Price (Rs.)

Nature of payment of

Consideration Reasons for Allotment

10/03/03 100,000,000 10 10 Cash, Rights Issue

Debt : S.No. Name of Institution Amount (Rs. Crs.) Type of Instrument

1. Life Insurance Corpn. Of India 12.00 NCD 2. General Insurance Corpn. Of

India 6.50 NCD

3. Infrastructure Leasing & Financial Services

60.00 NCD

4. Housing and Urban Development Corpn. Ltd

160.00 Loan

e) Previous public or rights issue, if any: The Company has not made any Public or

(during last five years) Rights issue during last five years.

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f) (i) Debentures issued by the Issuer outstanding as on the date of Shelf Information

Memorandum and terms of issue:

Details of Debentures issued by the Issuer

Sr No

Type of Security

Scrip code issued by

the exchange

Date of Allotment

Number of Debentures

Face Value

Rs.

% of interest

Date of redemption

Outstanding amount Rs. crs

1. Secured Redeemable

Non Convertible Debentures

Not listed 8th Jan, 2002

12,00,000 Rs. 100/- 10% To be redeemed in 20 equal quarterly

installments from October 1, 2002

7.20



Not listed 4th Feb, 2002

6,50,000 Rs. 100/- 14% To be redeemed in 20 equal quarterly

installments from October 1, 2002

3.90



Not listed 27th December, 2002

6,000 Rs. 1,00,000/

-

9% To be redeemed in 10 equal semi

annual installments from

December 1, 2003

48.0

(ii) Preference Shares issued by the Issuer outstanding as on the date of Shelf Information Memorandum and terms of issue:

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Sr.No. Type Interest Particulars of the Issue Outstanding

(Rs. in Lacs) 1. Optionally Convertible

Cumulative Redeemable Preference Shares

13.00% The Preference Shares are optionally convertible into equity shares of the Company between 36-42 months from the date of subscription- January 8, 2002 or to be redeemed in four equal installment commencing from January 8, 2005

1200

2. Optionally Convertible Cumulative Redeemable Preference Shares

13.00% The Preference Shares are optionally convertible into equity shares of the Company between 36-42 months from the date of subscription- February 4, 2002 or to be redeemed in four equal installment commencing from February 5, 2005

650

g) Option to subscribe: The Issuer has made depository arrangement with CDSL for the Debentures. The investors will have the option to hold the debentures in dematerialised form and deal with the same as per the provisions of Depositories Act, 1996/Rules as notified by CDSL from time to time. Investors desirous of receiving the debenture certificate in the dematerialised from should mention their Depository Participant’s name, DP-ID and beneficiary account number in the appropriate place in the application form. Debentures allotted to successful allottee(s) having depository account shall be credited to their depository account against surrender of letter of allotment. In case of incorrect details provided by the investors and inability of the Registrar to credit the Depository Account, the Debentures will be issued in physical form to such investors. (h) Property purchased by the Company during last two years - Nil

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XVII. RELATED PARTY DISCLOSURE Related Party Transactions:

List of the Related Parties along with the nature of relationship Common Control

Subsidiaries Medvin Finance (P) Ltd GMR Energy Ltd GMR Foundation GMR Power Corporation (P) Ltd GMR Industries Ltd Hyderabad International Airport Ltd Ideaspace Solutions Ltd Vemagiri Power Generation Ltd GMR Tambaram Tindivanam Express ways (P) Ltd GMR Tuni Anakapalli Express ways (P) Ltd Vasavi Securities Limited Share Holders having substantial interest Directors * Rao Investments (P) Ltd Mr G M Rao GMR Investments (P) Ltd Mr G B S Raju Varalakshmi Investments (P) Ltd Mr Srinivas Bommidala Vasavi Finance (P) Ltd Mr G Kiran Kumar Mr B V Nageswara Rao Mr.K.Balasubramanian Mr.K.V.K.Seshavataram * No Transactions with the directors during the year Summary of transactions with the related Parties I. Remunerations paid to directors

Payable as at March 31 Particulars

For the year 2003

- 04 For the year 2002 - 03

2004 2003 Sri G. B. S. Raju Nil 7.00 Nil Nil Sri G. Kiran Kumar Nil 70.80 Nil Nil Sri G Mallikarjuna Rao Nil Nil Nil Nil II Other Transactions Transactions for the year 2003-04

Subsidiaries Common Control Total

Share Holders having substantialinterest

Management fee received 623.59 350.00 973.59 Technical Fee Received 601.53 601.53 Collection Fee Received 928.40 928.40 Man Power Deputation Charges Received 80.01 2.40 9.00 91.41 Interest Received 72.51 72.51 Dividend Received 8,924.64 8,924.64 Rent Received 24.00 24.00 Expenses recovered 3.60 0.90 4.50

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Sale of Investments 23,656.76 23,656.76 Outstanding Paybles - - Outstanding Receivables 7,432.59 0.05 7,432.64 Transactions for the year 2002-03 Subsidiaries Total Share Holders having substantial interest Common Control Management fee received 225.00 350.00 575.00 Technical Fee Received 409.41 409.41 Collection Fee Received 1,227.05 1,227.05 Shared Services Fee Received 250.00 250.00 Man Power Deputation Charges Received - 2.40 231.75 234.15 Interest Received 48.52 188.77 237.29 Dividend Received 5,536.55 5,536.55 Rent Received 19.05 19.05 Guarantee Charges received 321.00 321.00 Expenses Recovered 3.36 3.36 Interest Paid 2.44 2.44 Sale of Investments - Outstanding Paybles 0.02 263.83 263.85 Outstanding Receivables 1,327.51 1,327.51

Transaction in the nature of reimbursement of expenses incurred by the company on behalf of the related parties and vice versa have not been considered above . XVIII. OTHER DETAILS (a) Details of Directors.

Name, Designation, Father's Name, Address, Occupation and Term Other Directorships in Indian companies

G. M. Rao, Chairman (S/o late Mr. Grandhi China SanyasiRaju) No. 17, Varalakshmi Nilayam 1st Main Road, 4th Phase Dollars Layout J.P. Nagar, Bangalore 560 078 Business RETIRING DIRECTOR

Chairman & Managing Director, GMR Energy Limited Chairman, GMR Tambaram Tindivanam Expressways Pvt. Ltd Chairman, GMR Tuni Anakapalli Expressways Pvt. Ltd Chairman, Vemagiri Power Generation Limited Chairman, Hyderabad International Airport Ltd. Chairman, ING Vysya Bank Limited ING Vysya Life Insurance Company Pvt. Ltd

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Name, Designation, Father's Name, Address, Occupation and Term Other Directorships in Indian companies

B. V. Nageswara Rao, Director (S/o Mr. Venkateswara Rao) No. 1209, 13th Street, ‘Z’ Block, Anna Nagar, Chennai 600 040 Business RETIRING DIRECTOR

Managing Director, GMR Power Corporation Pvt. Ltd GMR Energy Limited Vemagiri Power Generation Limited Hyderabad International Airport Limited

G. B. S. Raju, Director (S/o Mr. G.M.Rao) No. 17, Varalakshmi Nilayam 1st Main Road, 4th Phase Dollars Layout J.P. Nagar, Bangalore 560 078 Business RETIRING DIRECTOR

Executive Vice Chairman, GMR Tuni Anakapalli Expressways Pvt. Ltd Vice Chairman, GMR Tambaram Tindivanam Expressways Pvt. Ltd GMR Energy Limited

Srinivas Bommidala, Director (S/o Mr. Kasiviswanadham) No. 8, 9th Cross, Sastrinagar, Adyar, Chennai 600 020 Business RETIRING DIRECTOR

Managing Director, Vemagiri Power Generation Limited GMR Energy Limited GMR Power Corporation Pvt. Ltd Sapphire Springs Pvt. Ltd Bommidala Exports Pvt. Ltd GMR Foundation

G. Kiran Kumar Director (S/o Mr. G.M.Rao) No. 17, Varalakshmi Nilayam 1st Main Road, 4th Phase Dollars Layout


Managing Director, Hyderabad Intl. Airport Ltd GMR Tambaram Tindivanam Expressways Pvt. Limited GMR Tuni Anakapalli Expressways Pvt. LtdManaging Director, GMR Operations Pvt. Limited Ideaspace Solutions Limited GMR Foundation GMR Industries Limited

K.Balasubramanian, Director T-306, III Floor, ‘Nishant Prime’ No 5, Prime Street Bangalore 560 025 PROFESSIONAL ADDITIONAL DIRECTOR

Chairman ,GMR Power Corporation P Ltd, Vemagiri Power Generation Ltd., Hyderabad International Airport Ltd., ING Life Insurance Co P Ltd., Director

K.V.K.Seshavataram, Director 1st Floor, K.K.Mansions 45-58-16/5/1 Narasimha Nagar Visakhapatnam 530 024 PROFESSIONAL ADDITIONAL DIRECTOR

Chairman, GMR Industries Ltd., Hyderabad International Airport Ltd.,

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(b) Agreement between GMR Infrastructure Ltd. & and Managing Director /Whole Time Director Agreement between GIL & and Managing Director: No Agreement has been executed Date of Agreement / Supplementary Agreements : Not Applicable (c) Rights of Debentureholders Debentureholders do not carry any rights regarding voting, dividend, lien on shares. (d) Modifications of Rights

The rights, privileges, terms and conditions attached to all Debentures may be varied, modified or abrogated with the consent, in writing, of those holders of the Debentures who hold at least three-fourths of the outstanding amount of Debentures or with the sanction accorded pursuant to a resolution passed at a meeting of the Debentureholders, carried by a majority consisting of not less than three-fourths of the persons voting there upon a show of hands or, if a poll is demanded by a majority representing not less than three-fourths in value of the votes cast on such poll, provided that nothing in such consent or resolution shall be operative against the Issuer if the same are not accepted in writing by the Issuer. (e) Restrictions, if any, on Transfer and Transmission of Debentures and on their Consolidation The Issuer will not register any transfers of the Debentures to any NRIs (except on non-repatriation basis), OCBs, FIIs, or any persons not resident in India, unless appropriate regulatory approvals are obtained. The Issuer shall not be duty bound to take interest or trust in or over the Debentures. The title to the Debentures shall pass by execution of duly stamped transfer deed(s) accompanied by the Debentures certificate (s) / Letter of allotments (s) together with necessary supporting documents. The transferee(s) should deliver the Debenture certificates to the Issuer for registration of transfer in the Register of Debentureholders at the Registered Office. The Issuer on being satisfied will register the transfer of such Debentures in its Register of Debentureholders. The person whose name is recorded in the Register of Debentureholders shall be deemed to be the owner of the Debentures. Request for registration of transfer, along with the necessary documents, and all other communications, requests, queries and clarifications with respect to the Debentures should be addressed to and sent to the Registered Office. No correspondence shall be entertained in this regard at any other Branches or any of the offices of the Issuer. Transfer of debentures in dematerialised form would be in accordance to the rules /procedures as prescribed by NSDL /Depository Participant. (f) Consolidation and Splitting of Debentures The request from Registered Debentureholder(s) for splitting / consolidation of Debenture certificates will be accepted by the Issuer only if the original Debentures certificate(s) is / are enclosed along with an acceptable letter of request.

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No requests for splits below the Market Lot will be entertained. (g) Transmission In the event of demise of a Registered Debenture holder of the Debentures, or the first holder in the case of joint holders, the Issuer will recognize the executor or administrator of the demised Debenture holder or the holder of succession certificate or other legal representative of the demised Debenture holder as the Registered Debentures holder of such Registered Holder’s Debentures if such a person obtains probate or letter of administration or is the holder of succession certificate or other legal representation, as the case may be, from a Court of India having jurisdiction over the matter and delivers a copy of the same to the Issuer. The Issuer may in its absolute discretion, where it thinks fit, dispense with the production of the probate or letter of administration or succession certificate or other legal representation, in order to recognize such holder as being entitled to the Debentures standing in the name of the demised debentures holder on production of sufficient documentary proof or indemnity. (h) Revaluation of Assets There has been no revaluation of Issuer’s assets during the last five years. XVIII. MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS The following contracts and also documents for inspection referred to hereunder, may be inspected at the Corporate Office of the company at Bangalore from 11.00 am to 1.00 pm from the date of this Shelf Information Memorandum until the date of closure of this Issue. ♦ MATERIAL CONTRACTS Letter received from R & T Agent agreeing to act as Registrar and Transfer Agent. Letter received from the Trustees agreeing to act as Debenture Trustees ♦ DOCUMENTS 1. Memorandum and Articles of the Issuer as amended from time to time 2. Certificate of Incorporation of the Issuer and Certificate of Commencement of

Business 3. Audited Accounts of the Issuer for the year ended March 31, 2004, 2003, 2002, 2001,

2000 and the Auditors’ Report thereon alongwith the tax opinion, if any. 4 Copy of Board Resolution dated September 14, 2004 authorising the issue .

5. Copy of application made to Stock Exchanges.

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XIX DECLARATION We declare that all the relevant provisions of the Companies Act, 1956 and the guidelines issued by the Government have been complied with and no statement made in this Shelf Information Memorandum is contrary to the provisions of the Companies act, 1956. Signed for and on behalf of GMR Infrastructure Limited. Company Secretary Date: September 29, 04 Place: Bangalore

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CREDIT RATING LETTER

(COPY OF CREDIT RATING LETTER ALONG WITH RATIONAL TO BE SCANNED AND ENCLOSED)

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