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Annual Report 2007 - 08

SBI DFHI LIMITED

BOARD OF DIRECTORS

Shri O. P. Bhatt

Shri R. Sridharan

Shri M. M. Lateef

Dr. S. A. Dave

Dr. Dilip M. Nachane

Shri Mohammad Tahir

Shri Dilip M. Muzumdar

Smt. Renu Challu

50

Annual Report 2007-08

BOARD OF DIRECTORS
(As on April 16, 2008)

Shri O. P. Bhatt Chairman Shri R. Sridharan Shri M. M. Lateef Shri Dilip M. Muzumdar Dr. S. A. Dave Dr. Dilip M. Nachane Shri Mohammad Tahir Smt. Renu Challu Managing Director & Chief Executive Officer

Auditors
M/s. A. P. Sanzgiri & Co. Chartered Accountants

Bankers
Reserve Bank of India State Bank of India State Bank of Mysore Bank of India Bank of Baroda HDFC Bank Ltd.

Registered Office
Voltas House (3rd Floor) 23, J. N. Heredia Marg, Ballard Estate, Mumbai - 400 001. Web site : www.sbidfhi.com

SBI DFHI LIMITED

CONTENTS
Report of the Directors Auditors Report Balance Sheet, Profit & Loss Account and Schedules 3 10 16

Annual Report 2007-08

Directors Report
Your Directors have pleasure in presenting the Twentieth Annual Report together with the audited accounts of the Company for the Financial Year ended March 31, 2008. A summary of the financial results for the year is as under :(Rs. in crore) Year ended March 31, 2008 Profit / (Loss) before depreciation, taxation & Provision Less : Depreciation Profit / (Loss) before taxation & Provision Less : Provision for Investment & interest on FDR of MMCB Profit Before Tax Less : : : : Provision for Income-tax Fringe Benefit Tax Deferred Tax Year ended March 31, 2007

2. Capital
The Capital Adequacy Ratio (CAR) has been computed after providing for market risk capital charge based on the Value at Risk for a fifteen day horizon and at 99 per cent confidence, as specified by the RBI. This ratio for the Company stands at 78.46 per cent at the end of March 31, 2008 as against the required ratio of 15 per cent for Non-banking Financial Companies.

3. Dividend
In terms of regulatory guidelines, dividend is payable out of the current years profits. Having regard to the higher profits for the current year, your Directors recommend a step-up of 33% in final dividend to 10% (previous year 7.5%) for the year ended March 31, 2008.

100.82 (0.32)

60.44 (0.33)

100.50

60.11

4. Business Environment
(4.61) 95.89 0.00 60.11

(11.62) (0.04) 1.45

(6.75) (0.03) (0.08)

Profit /(Loss) after depreciation and taxation Add: Excess provision for taxation of earlier years (net) Add: Balance in Profit & Loss A/c brought forward Amount available for appropriation Transfer to Statutory Reserve Transfer to General Reserve Proposed Dividend Tax on Dividend Balance in Profit & Loss Account carried forward Earnings Per Share (Rs.)

85.68

53.25

0.00

4.76

298.83 384.51 17.14 Nil 29.09 4.94

276.35 334.36 10.65 Nil 21.82 3.06

The current fiscal witnessed major turmoil in the global markets. The US subprime mortgage crisis and recessionary signals in the US economy led to the US Federal Open Market Committee (FOMC) cutting the Fed funds rate by 300 bps to 2.25% and extending special credit lines to counter credit contraction. US Fed efforts to assuage credit market fears were supported by other major Central Banks to contain the contagion effect of the US crisis on their economies. While the Bank of England also cut rates by 50 bps to 5.25% in H2, the European Central Banks perception of inflationary pressures led to their maintaining rates at 4%. The adverse global developments negatively impacted Indian markets, both debt and equity, specially in the last quarter.

A) Debt Market
As against budgeted borrowing of Rs.1,81,455 crores for F.Y. 2007-08, actual Government borrowings amounted to Rs.1,85,000 crores through issuance of Rs.1,56,000 crores of Dated Government Securities and Rs.29,000 crores of 364 day Treasury Bills.

333.34 29.45

298.83 18.31

SBI DFHI LIMITED

The first half of the fiscal was characterized by large FII inflows into the domestic equity markets. During H1 F.Y. 2007-08, Forex reserves rose from USD 199 bn to USD 248 bn and the Rupee appreciated against the dollar from Rs.43.38/USD to Rs.39.84/USD. By the end of the fiscal, forex reserves and the Rupee stood at USD 305 bn and Rs.40.11/USD respectively. Faced with the problem of surplus liquidity, the ceiling on MSS was revised to Rs.2,50,000 crores and outstanding balances under MSS increased from Rs.62,974 crores as on 31.03.07 to Rs.1,69,319 crores as on 21.03.08. Inflation was contained for most of the year within the comfort zone of RBI, declining from 5.94% at the beginning of the year to 3% as on 09.11.07. However, the last quarter saw inflation touch a high of 6.68% due to rise in food, oil and commodity prices. The G-sec market tracked liquidity conditions and rising inflationary expectations with the 10 year benchmark yield declining from 8.19% as on 01.4.07 to 7.28% as on 23.01.08 (after peaking at 8.44% in June 2007) and then rising again to touch 7.94% as on 31.03.08. T Bills (91 Days) cut-off yields touched 7.13% at the end of the fiscal. RBI policy actions during the fiscal comprised of CRR hike in two tranches from 6.50% to 7.50% & hike in Repo rate by 25 bps to 7.75%, while maintaining the Reverse Repo and Bank rates at 6.00%. The cap of Rs.3000 crs. on acceptance of funds at daily Reverse Repo auctions imposed in the April Monetary Policy Statement was lifted in July Policy Review. Structural developments in the debt markets included compulsory reporting of Corporate Bond deals to FIMMDA and OTC derivative deals to CCIL to improve information dissemination and impart transparency to these segments.

conditions most of the time with rates in Call/Repo/CBLO markets plummeting to near zero levels in June July 2007. With RBI lifting the ceiling on Reverse Repo in its Q1 Monetary Policy Review, rates re-entered the Repo/ Reverse Repo corridor. Q2 saw a high of 8.74% on NSE MIBOR while Q3 registered a high of 7.99%. The rates climbed up again in Q4 with a high of 8.51%. CBLO market further consolidated its position as the preferred avenue for market participants with total volumes of Rs. 81 lakh crores.

C) Corporate Bond Market


Corporate Bond Issuances for the Year 2007-08 aggregated Rs.1,10,000 crores with 10 issuers accounting for Rs.75,000 crores. Major issuers included HDFC, NABARD, SBI and PFC. The market saw high volatility with 5 year AAA rated bonds trading in the range of 8.85% to 9.80% while 10 year AAA rated bonds traded between 8.90% & 10.20%. The spread of 5 year AAA rated bonds over comparable GOI saw a high of 200 bps and a low of 130 bps while spreads on 10 year AAA rated bonds saw a high of 190 bps and low of 125 bps during the fiscal.

D) Equity Market
The Indian Stock Market witnessed highly volatile conditions during the fiscal. Starting at 12,455 points, the SENSEX registered a gradual rise in the first quarter. The second quarter saw the SENSEX touch a high of 19,204 only to come down to 17,777. Markets bounced back strongly in the third quarter reaching a new high of 21,206. But the euphoria was short lived as the market retraced 28% from this peak to touch an intraday low of 15,332 in just 8 trading sessions. The prime reason for such a sharp fall was FII pullout from emerging markets consequent upon the US subprime induced credit crisis and fears of a recession in the US. The fiscal ended with SENSEX at 15,682.

B) Money Market
Started with tight liquidity conditions and call rates hovering at 12-14%. The fiscal saw ample liquidity

Annual Report 2007-08

5. Performance Highlights
The performance of the Company in the various segments of its operations is set out below:(Rs. in Crore) Segment I. Call, Notice and Term Money Lendings 2007-08 8,341 2006-07 15,769

II. SLR segment turnover (A) Treasury Bills a. Primary market Auctions Maturity 3,190 677 3,867 5,428 1,048 776 7,252 11,119 2,322 359 2,681 3,014 349 2,068 5,431 8,112

Company actively participated in underwriting at CGsec / SDL auctions and bidding commitments to the extent of successful underwriting were regularly surpassed throughout the year. Bidding commitment to RBI for Treasury Bill auctions (@6% of notified amount for each auction) was met and success ratio requirement (40%) surpassed (58.01% for H1 & 57.47% for H2). The Companys turnover exceeded RBI stipulation of minimum 5 times average month end stocks for Government Securities and 10 times for Treasury Bills. The Company maintained its track record of timely submission of all retur ns as prescribed by the Regulators.

Total of (a) b. Secondary market Outright Repo with market Repo with RBI

Risk Management
The risk management framework of the Company is comprehensive covering market, credit, operational and liquidity risk. The risk management function is independent of Front and Back office functions. Risk profiles are monitored on an ongoing basis by the MidOffice and reviewed by the Companys Asset Liability Management Committee (ALCO) at regular intervals. Market risk is assessed using Value at Risk (VaR) to determine capital adequacy and Price Value per Basis Point (PVBP) to assess the interest rate sensitivity of the fixed income portfolio. The VaR of the total portfolio (at 99 percent confidence level, holding period 30 days) as on 31.03.08 stood at Rs.122.16 crores. The PVBP of the fixed income portfolio impact of a 75 basis points rise in yields on portfolio value works out at Rs.28.59 crores as on 31.03.08. Both parameters lie well within the internal prudential limits stipulated by the Companys Board.

Total of (b) Total of A (a + b) (B) Dated Govt. Securities a. Primary market Auctions Devolvement Maturity

3,383 24 1 3,408 49,491 1,056 6,670 57,217 60,625 71,744

2,068 194 10 2,272 19,778 175 140,266 1,60,219 1,62,491 1,70,603

Total of (a) b. Secondary market Outright Repo with market Repo with RBI

Total of (b) Total of B (a + b) Total of II : (A+B) III. Non SLR segment turnover a. b. CP / CD/ DDB / CB Bonds and Non-convertible debentures etc.

3,922

284

2,829 6,751 43,589

2,460 2,744 18,081

Total of III (a+b) IV. CBLO Segment

6. Directors
The Companys Board at present consists of 8 Directors. The changes which took place during the year were as under: a) Smt. Bharati Rao, Deputy Managing Director, State Bank of India became Director on the Board of Directors of the Company w.e.f. December 7, 2007 in terms of Article 103(2)(A)(c)of the Articles of Association of the Company.

Performance as a Primary Dealer


F.Y. 2007-08 saw the 10 year benchmark yield move up from 7.94% to a high of 8.45%, touch a low of 7.28% and end the year flat at 7.94%. The year also saw RBI hike the CRR from 6.50% to 7.50% and the Repo Rate from 7.50% to 7.75%. Against this backdrop, the

SBI DFHI LIMITED

b) Smt. Renu Challu, Deputy Managing Director, State Bank of India was appointed as Managing Director & CEO of the Company w.e.f. December 7, 2007 in terms of Article 103(2)(A)(b) of the Articles of Association of the Company. c) Shri M. M. Lateef was appointed as an Additional Director of the Company on October 15, 2007. d) Shri S. A. Dave was re-elected by the shareholders as Director at the 19th Annual General Meeting held on April 12, 2007. e) Shri Y. Vijayanand, Dy. Managing Director, State Bank of India, consequent upon superannuation, resigned as Director w.e.f. October 15, 2007. f) Shri V. K. Gupta, Managing Director & CEO, consequent upon his repatriation to State Bank of India, resigned w.e.f. December 7, 2007.

(ii) they have selected such accounting policies and applied them consistently as recommended by the Audit Committee and approved by the Board and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended March 31, 2008 and of the profit of the Company for that period; (iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; and (iv) the Directors have prepared the annual accounts on a going concern basis.

7. Statutory Information
As no employee of the Company is drawing remuneration in excess of the amount prescribed under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, as amended on October 25, 2000, no statement containing the particulars of the employees is annexed to the report. The requirement of disclosure, in terms of Section 217 (1) (e) of the Companies Act, 1956, as regards the steps taken for conservation of energy and technology absorption is not applicable to the Company as the Company does not own any manufacturing facility. During the year, Company has spent foreign exchange equivalent to Rs. 96,522/- on account of foreign travel & other expenses and has not earned any foreign exchange.

The Board places on record its appreciation of the valuable contributions made by Shri Y. Vijayanand and Shri V.K.Gupta towards the progress of the Company.

Number of Board Meetings


The Company held five Board Meetings during the year on April 12, 2007, July 19, 2007, October 15, 2007, December 7, 2007 and January 14, 2008.

Corporate Governance
As part of good corporate governance, your Company endeavours to effectively manage the business and enhance the long-term interests of shareholders. In pursuance of these objectives, the Board has been involved in monitoring the Companys activities. A detailed report on Corporate Governance is annexed and forms part of this report.

Directors Responsibility Statement


Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm that: (i) in the preparation of the annual accounts for the year ended March 31, 2008, the applicable accounting standards have been followed;

8. Public Deposits
During the year ended March 31, 2008, the Company has not accepted any deposits from the public within the meaning of the provisions of the Non-Banking Financial Companies RBI Directions 1998, issued in terms of RBI notification No. DFC 118/DG(SPT)-98 dated January 31, 1998.

Annual Report 2007-08

9. Auditors
Messrs A. P. Sanzgiri & Co., Chartered Accountants, Statutory Auditors of the Company for the financial year 2007-2008 would retire at the conclusion of the ensuing Annual General Meeting. Statutory Auditors for the financial year 2008-09 will be appointed by the Company under the provision of Section 224 A of the Companies Act, 1956.

10. Acknowledgement
Your Directors thank the Government of India, State Governments, Reserve Bank of India, Asian Development Bank, all Commercial and Co-operative Banks, Financial Institutions, National Stock Exchange and Mutual Funds for their whole-hearted co-operation

and continued support. Your Directors also place on record their thanks to State Bank of India for lending the services of their experienced employees to the Company. The Board also takes the opportunity to place on record its appreciation of the sincere efforts put in by the employees of the Company and for their commendable team work and enthusiasm which helped its smooth functioning and efficient performance. Your Directors look forward to the employees as well as all shareholders continued support in future to enable the Company to sustain & reinforce its leadership position amongst Primary Dealers. On behalf of the Board of Directors Mumbai April 16, 2008 O. P. Bhatt Chairman

SBI DFHI LIMITED

Corporate Governance Report


Companys philosophy of Corporate governance
Corporate governance is the touchstone of the Companys decision-making and monitoring process. The Companys philosophy of Corporate governance is aimed at assisting the management of the Company in the efficient conduct of its business & in meeting its obligations to stakeholders and is guided by the principles of transparency, accountability and integrity. The Company has always adopted good corporate practices which meet all relevant legal and regulatory requirements.

2. Committees of the Board Audit Committee


The Company has an Audit Committee with powers and role in accordance with Section 292A of the Companies Act, 1956 with scope & terms of reference laid down at the Board Meeting held on May 8, 2005. The Committee acts as a link between the Management, the Statutory and Internal Auditors and the Board of Directors and oversees the financial reporting process. While one member is a nominee of SBI (Non-Executive Director), the other three members are Independent Directors. The composition of the Audit Committee and the attendance of the members at the meetings held are given hereunder.
Name of Director Category No. of Meeting during the tenure Held Mr. Y. Vijayanand (resigned w.e.f. 15.10.07) Mrs. Bharati Rao (appointed w.e.f. 07.12.07) Mr. D. M. Muzumdar Dr. S. A. Dave Dr. D. M. Nachane Attended

1. Board of Directors
The Board of Directors consist of 8 members as on March 31, 2008 comprising the Non-Executive Chairman, one Non-Executive Director nominated by SBI, the MD & CEO, 4 Independent Directors and one Additional Director. The Independent Directors on the Board are financially literate, experienced, competent and highly reputed in their respective fields. They take an active part in the deliberations at the meetings of the Board and Committee Meetings which adds value to the decision making process. The Composition of the Board of Directors is in conformity with the Corporate Governance Code. The Composition of the Board of Directors along with attendance of the members at the meetings held is given hereunder.
Name of Director Category No. of Board Meeting during the tenure Held Mr. O. P. Bhatt Mrs. Bharati Rao (appointed w.e.f. 07.12.07) Mr. Y. Vijayanand (resigned w.e.f. 15.10.07) Mr. M. M. Lateef (appointed w.e.f. 15.10.07) Mr. D. M. Muzumdar Dr . D. M. Nachane Dr. S. A. Dave Mr. M. Tahir Mrs. Renu Challu (appointed w.e.f. 07.12.07) Mr. V. K. Gupta (resigned w.e.f. 07.12.07) Non-Executive Non-Executive Non-Executive Additional Independent Independent Independent Independent MD & CEO MD & CEO 5 1 2 2 5 5 5 5 2 4 Attended 4 1 2 2 5 3 4 5 2 4

Non-Executive

Non-Executive Independent Independent Independent

1 4 4 4

4 4 2

Risk Management Committee


The Company has a Risk Management Committee to oversee the Risk Management operations and review & recommend the Risk Management Policy to the Board. The Committee comprises 1 Non-Executive Director, 2 Independent Directors, an Additional Director & the MD & CEO of the Company. The composition of the Risk Management Committee and the attendance of the members at the meetings held are given hereunder.

Annual Report 2007-08

Name of Director

Category

No. of Meeting during the tenure Held Attended 2 4 1 4 1 3 1 2 4 1 4 1 3

Name of Director

Category

No. of Board Meeting during the tenure Held A t t e n d e d

Mrs. Bharati Rao (appointed w.e.f. 07.12.07) Mr. Y. Vijayanand (resigned w.e.f. 15.10.07) Mr. D. M. Muzumdar Mr. M. M. Lateef (appointed w.e.f. 15.10.07) Mr. M. Tahir Mrs. Renu Challu (appointed w.e.f. 07.12.07) Mr. V. K. Gupta (resigned w.e.f. 07.12.07)

Non-Executive Non-Executive Independent Additional Independent MD & CEO MD & CEO

Mr. Y. Vijayanand (resigned w.e.f. 15.10.07) Mrs. Bharati Rao (appointed w.e.f. 07.12.07) Dr. D. M. Nachane Mr. M. Tahir

Non-Executive Non-Executive Independent Independent

1 1 2 2

1 2 2

Code of Conduct & Declaration


The Board of Directors play an important role in ensuring good governance and have laid down the Code of Conduct for all Board members and Senior Management of the Company. I confirm that all Board Members and Senior Management have affirmed compliance with the Companys code of conduct for the financial year ended March 31, 2008.

HR Committee
The Company has a HR Committee to formulate, review & recommend the Compensation Structure, and Annual Performance Linked Incentive for employees. The Committee comprises 1 Non-Executive Director & 2 Independent Directors. The composition of the HR Committee and the attendance of the members at the meetings held are given hereunder.

Renu Challu Managing Director & CEO

SBI DFHI LIMITED

Auditors Report
To, The Members of SBI DFHI LIMITED We have audited the attached Balance Sheet of SBI DFHI LIMITED as at March 31, 2008 and the Profit & Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956 we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to above, we report that: a) We have obtained all information and explanations, which to the best of our knowledge and belief, were necessary for the purpose of the audit; b) In our opinion, proper books of account as required by law have been kept by the Company, so far as appears from our examination of those books; c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this Report are in agreement with the books of account; d) In our opinion, Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; e) On the basis of the written representations received from Directors of the Company, as at March 31, 2008 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2008 from being appointed as a Director in terms of clause (g) of sub Section (1) of Section 274 of the Companies Act, 1956; and f) In our opinion, and to the best of our information and according to the explanations given to us, the said Financial Statements, read together with notes thereon, give the information required by the Companies Act, 1956, in the manner so required and present a true and fair view in conformity with the accounting principles generally accepted in India; i) In the case of the Balance Sheet, of the state of affairs of the Company as on March 31, 2008;

10

Annual Report 2007-08

ii) In the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date; and iii) In the case of Cash Flow Statement, of the cash flows for the year ended on that date. For A. P. Sanzgiri & Co. Chartered Accountants Abhijit Sanzgiri Partner Membership No. 43230

Mumbai. April 16, 2008.

11

SBI DFHI LIMITED

Annexure to the Auditors Report


Annexure referred to is our report of even date to the Members of SBI DFHI LIMITED; on the Financial statements of the Company for the year ended March 31, 2008. 1) In respect of its fixed assets a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. b) As explained to us, all the fixed assets have been physically verified by the management in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification. c) During the year, there was no substantial disposal of fixed assets and therefore the same does not affect the going concern assumption. 2) In respect of its inventories a) The Companys stock consisting of Treasury Bills and Dated Government Securities is held in the form of Subsidiary General Ledger Account maintained with the Reserve Bank of India. The said stock in the SGL account is verified by the management with the confirmation certificates received from the Reserve Bank of India at regular intervals. Stocks of Bonds in the nature of Promissory Notes, Commercial Papers, Certificate of Deposits, Commercial Zero Coupon Bonds, and Non-Convertible Debentures at the yearend are confirmed with the statement of holding provided by the depository participant (SBI). Stock of Equity shares is confirmed with the statement of holding provided by the depository participant (SHCIL). Mutual Funds balances are confirmed with the statements provided by the respective Mutual Funds. b) The existing procedures of physical verification and reconciliation of securities/confirmation of stock of securities followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business. In our opinion, the frequency of such verification/confirmation is reasonable. c) The Company has maintained proper records of securities. No material discrepancies were observed on the reconciliation as mentioned above, as compared with book records. 3) In respect of Loans a) According to the information and explanation given to us, the Company has not granted/taken any loans, secured or unsecured, to/from parties covered in the register maintained under Section 301 of the Companies Act, 1956. b) The Company has borrowed funds from Reserve Bank of India, Financial Institutions, Mutual Funds, Primary Dealers, Banks and others and has lent monies to Banks, Financial Institutions, Primary Dealers and others. The Directors of the Company who are nominees of such entities are not regarded as concerned or interested under the provisions of Section 299(1) of the Companies Act, 1956.

12

Annual Report 2007-08

4) In our opinion, and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business for the purchase and sale of securities held as stock in trade, and purchase of fixed assets. Further, based on our examination of books of account and according to the information and explanations given to us, we have not come across any instance of major weakness in the internal control system. 5) In our opinion, and according to the information and explanations given to us, there are no transactions in the current financial year under review that need to be entered into a register in pursuance of Section 301 of the Companies Act, 1956. 6) The Company has not accepted any deposits from the public within the meaning of Section 58A and Section 58AA of the Companies Act, 1956 and Companies (Acceptance of Deposits) Rules 1975. 7) In our opinion, the Company has an internal audit system commensurate with the size of the Company and nature of its business. The provisions of Section 209 (1) (d) of the Companies Act, 1956 regarding maintenance of cost records are not applicable to the Company. According to the information and explanations given to us and based on our examination of the books of account, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Income Tax, Service Tax, Wealth Tax and any other Material dues applicable to it during the year with the appropriate authorities. There are no undisputed dues payable for a period of more than six months from the date they became payable as at March 31, 2008. 10) The Company does not have any accumulated losses at the end of the financial year and has not incurred any cash loss in the current financial year as well as financial year immediately preceding such financial year. 11) According to the information and explanations given to us there has been no default in the repayment of dues to any financial institution or Bank or debenture holders. 12) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities except Reverse Repo with Reserve Bank of India and Collateralised Borrowing and Lending Obligation (CBLO Lending). Adequate records and documents in respect thereof have been maintained by the Company. 13) In our opinion and according to the information and explanations given to us, the Company is not a chit fund/ nidhi/mutual benefit fund/society. Accordingly, the provisions of clause 4(xiii) are not applicable to the Company. 14) According to the information and explanations given to us, the Company is dealing in money market & debt instruments, Equity shares, Derivatives and Mutual fund units. Proper records have been maintained and timely entries have been made thereof. The Company holds the stocks of aforesaid securities in its own name. 15) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from Banks or Financial Institutions.

8)

9)

13

SBI DFHI LIMITED

16) The Company has not applied for term loans during the year. 17) According to the information and explanation given to us, and on overall examination of balance sheet, we report that the funds raised on short-term basis have prima facie, not been used during the year for long term investment. 18) The Company has not made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956, during the year. 19) The Company has not issued any debentures. 20) The Company has not raised any money by public issue during the year. 21) During the course of examination of the books of account and records of the Company, carried out in accordance with generally accepted auditing practices in India, we have not come across any fraud on or by the Company, noticed or reported during the year, nor we have been informed of any such case by the Management. For A. P. Sanzgiri & Co. Chartered Accountants Abhijit Sanzgiri Mumbai April 16, 2008 Partner Membership No.43230

14

Annual Report 2007-08

To The Board of Directors

SBI DFHI Limited


In addition to the report made under Section 227 of the Companies Act, 1956 (1 of 1956) on the financial statements of SBI DFHI Limited (the Company) for the year ended March 31, 2008 and as required by the Non-Banking Financial Companies Auditors Report (Reserve Bank) Directions, 1998 dated January 2, 1998, We report that: The Company received intimation from the Reserve Bank of India (RBI) granting the certificate of registration vide letter dated December 9, 1997 in pursuance of Section 45-IA, of the RBI Act,1934. The Board of Directors has decided not to accept deposits from the public in terms of board resolution dated April 12, 2007. The Company has not accepted public deposits during year ended March 31, 2008. The Company has complied with prudential norms relating to income recognition accounting standards, asset classification and provision for bad and doubtful debts as applicable to the Company. This report is issued to comply with the Non-Banking Financial Companies Auditors Report (Reserve Bank) Directions, 1998 vide notification no. DFC 117/DG (SPT)-98 dated January 2, 1998 and may not be suitable for any other purpose. For A. P. Sanzgiri & Co. Chartered Accountants Abhijit Sanzgiri Partner Membership No.43230

Mumbai April 16, 2008

15

SBI DFHI LIMITED

Balance Sheet
as at March 31, 2008
(Rs. in Lacs) Schedule Sources of Funds Shareholders Funds: Share Capital Reserves and Surplus Loan Funds: Secured Loans Unsecured Loans T O TA L Application of Funds Fixed Assets : Gross Block Less: Depreciation Net Block Investments Deferred Tax Asset Current Assets, Loans and Advances Current Assets Money Market and Other Instruments Accrued Income Money lent to banks Cash and Bank Balances Loans and Advances Less: Current Liabilities & Provisions Current Liabilities Provisions Net Current Assets Miscellaneous Expenditure (To the extent not written off or adjusted) Deferred Revenue Expenditure Less: Written off during current year T O TA L Significant Accounting Policies Notes to Accounts As per our attached report of even date For A. P. Sanzgiri & Co. Chartered Accountants Abhijit Sanzgiri Partner Membership No. 43230 Mumbai Dated: April 16, 2008 16 17 The above Balance Sheet including the schedules and notes thereon is hereby authenticated by us. For and on behalf of the Boards of Directors O. P. Bhatt Chairman S. Venkatraman Company Secretary Renu Challu Managing Director & Chief Executive Officer 2.78 1.39 1.39 179,351.22 4.18 1.39 2.78 128,905.82 8 20.61 3,510.33 3,530.94 178,117.47 61.16 93.64 154.80 127,305.02 156,539.53 2,220.09 5,000.00 16,503.57 1,385.22 181,648.41 107,552.84 1,223.76 10,000.00 7,577.12 1,106.10 127,459.82 5 504.84 362.33 6 7 142.51 911.51 178.34 520.73 369.95 150.78 1,408.11 39.13 1 2 3 4 29,090.91 77,028.92 40,233.31 32,998.08 29,090.91 71,851.63 21,329.64 6,633.64 As at 31.03.2008 As at 31.03.2007

106,119.83

100,942.54

73,231.39 179,351.22

27,963.28 128,905.82

16

Annual Report 2007-08

Profit and Loss Account


For the year ended March 31, 2008
(Rs. in Lacs) Schedule IN COME Discount Income Interest Income Trading Income Other Income EXPENDITURE Interest Expenses Discount on CBLO Payments to and provision for employees Establishment & Other Expenses Depreciation Profit Before Provision For Long Term Investment & Tax Less : Provision for Long Term Investments PROFIT BEFORE TAX Less : Tax Expense Current Income Tax Fringe Benefits Tax Deferred Tax PROFIT AFTER TAX Add : Excess provision for tax of earlier years (net) Add : Balance in Profit & Loss A/c. B/F AMOUNT AVAILABLE FOR APPROPRIATION APPROPRIATION : Statutory Reserve Proposed Dividend Dividend Tax Balance carried to Balance Sheet Basic and Diluted Earnings Per Share (Rs) (Refer Note 9 of Schedule 17) Significant Accounting Policies Notes to Accounts As per our attached report of even date For A. P. Sanzgiri & Co. Chartered Accountants Abhijit Sanzgiri Partner Membership No. 43230 Mumbai Dated: April 16, 2008 16 17 The above Profit & Loss Account including the schedules and notes thereon is hereby authenticated by us. For and on behalf of the Boards of Directors O. P. Bhatt Chairman S. Venkatraman Company Secretary Renu Challu Managing Director & Chief Executive Officer 1,713.67 2,909.09 494.40 33,334.53 38,451.69 29.45 13 14 15 2,461.41 957.82 273.23 562.19 32.40 4,287.05 10,050.52 (461.08) 9,589.44 (1,162.45) (4.25) 145.64 8,568.38 0.00 8,568.38 29,883.31 38,451.69 1,065.05 2,181.82 306.00 29,883.31 33,436.18 18.31 2,033.75 183.00 229.69 381.95 33.50 2,861.89 6,010.78 0.00 6,010.78 (674.41) (3.34) (7.77) 5,325.26 475.63 5,800.89 27,635.29 33,436.18 9 10 11 12 4,928.04 7,498.15 1,406.09 505.29 14,337.57 2,488.44 6,523.58 (762.72) 623.37 8,872.67 2007-08 2006-07

17

SBI DFHI LIMITED

Schedules Forming Part of Accounts


as at March 31, 2008
(Rs. in Lacs) As at 31.03.2008 SCHEDULE 1 SHARE CAPITAL Authorised 3,00,00,000 Equity Shares of Rs. 100/- each Issued, Subscribed and Paid up 2,90,90,906 Equity Shares of Rs.100/- each fully paid up [Of the above 90,90,906 Equity Shares of Rs. 100/each fully paid up, issued for consideration other than cash pursuant to amalgamation of SBI Gilts Ltd. with the Company] [of the above 1,65,70,844 are held by State Bank of India, the holding entity and 29,23,256 equity shares are held by subsidiaries of State Bank of India] SCHEDULE 2 RESERVES AND SURPLUS Statutory Reserve As per last Balance Sheet Add : Amount transferred from P & L Account General Reserve As per last Balance Sheet Add : Transfer of excess employee benefits provision (refer note 21 of Schedule 17) Balance in Profit and Loss Account 18,745.63 12.40 18,758.03 33,334.53 77,028.92 SCHEDULE 3 SECURED LOANS CBLO Borrowing (Availed from CCIL against collateral of Dated Government Securities and T Bills.) Liquidity Adjustment facility (LAF) from RBI (Availed from RBI against collateral of Dated Government Securities and T Bills) 30,233.31 329.64 18,745.63 0.00 18,745.63 29,883.31 71,851.63 23,222.69 1,713.67 24,936.36 22,157.64 1,065.05 23,222.69 30,000.00 30,000.00 As at 31.03.2007

29,090.91

29,090.91

10,000.00

21,000.00

40,233.31

21,329.64

18

Annual Report 2007-08

Schedules Forming Part of Accounts


as at March 31, 2008
(Rs. in Lacs) As at 31.03.2008 SCHEDULE 4 UNSECURED LOANS From banks/ financial institutions & other entitiies at call and short notice Inter Corporate Deposits 30,498.08 2,500.00 32,998.08 SCHEDULE 5 FIXED ASSETS
GROSS BLOCK (AT COST) Description TANGIBLE Buildings Office Equipments Furniture and Fixtures Computers Vehicle 143.37 84.31 72.45 210.08 10.52 520.73 INTANGIBLE Software TOTAL Previous Year 520.73 569.95 8.70 32.46 35.48 48.35 84.70 8.70 504.84 520.73 369.95 417.30 1.69 32.40 33.50 40.03 80.85 1.69 362.33 369.95 7.01 142.51 150.78 150.78 152.65 6.64 5.55 11.57 23.76 22.48 11.66 14.21 48.35 143.37 68.47 66.34 207.44 10.52 496.14 82.00 55.71 54.26 176.40 1.58 369.95 3.07 5.56 4.12 15.65 2.31 30.71 16.73 9.52 13.78 40.03 85.07 44.54 48.86 178.27 3.90 360.64 58.30 23.93 17.48 29.17 6.62 135.50 61.37 28.60 18.19 33.68 8.94 150.78 As at 01.04.07 Additions Deductions As at 31.03.08 Upto 01.04.07 DEPRECIATION For the period On Sales/ Deductions Upto 31.03.08

As at 31.03.2007

6,563.34 70.30 6,633.64

(Rs. in Lacs)
NET BLOCK As at 31.03.08 As at 31.03.07

Note : Cost of Buildings includes Rs.1510/- being the value of Shares in Cooperative Housing Societies allotted towards ownership of Office/ ResidentialPremises.

As at 31.03.2008 SCHEDULE 6 INVESTMENTS Long Term, Unquoted, At cost Fixed Deposit of The Madhavpura Mercantile Co-op Bank Less:-Provision Unquoted 22,50,000 Equity Shares of face value of Rs. 10/- each of Clearing Corporation of India Ltd. (at cost)

As at 31.03.2007

1,144.19 457.68 686.51

1,183.11 0.00 1,183.11

225.00 911.51

225.00 1,408.11

19

SBI DFHI LIMITED

Schedules Forming Part of Accounts


as at March 31, 2008
(Rs. in Lacs) As at 31.03.2008 SCHEDULE 7 CURRENT ASSETS, LOANS AND ADVANCES Money Market and Other Instruments (As per Schedule 17 A) - Treasury Bills - Dated Government Securities - Corporate Bonds - Zero Coupon Bonds - Commercial Paper - Certificate of Deposit - Equity Shares - Mutual Funds Less :- Provision for Diminution in Value Accrued Income Accrued Interest on : Lendings Dated Government Securities Corporate Bonds Interest on Fixed deposit Interest on Term Deposits Loan to Employees Money Lent to Banks Outstanding for a period of less than six months and considered good - Call and short notice Cash and Bank Balances Cash on hand Balances with Scheduled Banks - In Current account - In Deposit account Balances in Current account with RBI LOANS AND ADVANCES Secured Lending to RBI (against collateral of Dated Govt.Securities) CBLO Lending (Against collateral of Dated Govt. Securities and T Bills) Unsecured Advances recoverable in cash or in kind or for value to be received (Considered Good) Deposits Tax Payments (Net of Provisons) 0.00 0.00 0.00 0.00 As at 31.03.2007

4,269.33 89,875.45 7,643.81 1,466.47 6,833.99 38,597.31 237.11 7,900.00 156,823.47 283.94 156,539.53

6,098.15 56,597.89 4,934.50 0.00 4,456.50 32,900.21 65.59 2,500.00 107,552.84 0.00 107,552.84

1.06 1,653.06 256.62 305.97 3.38

2,220.09

7.81 975.46 189.60 3.40 44.29 3.20

1,223.76

5,000.00 0.08 290.67 16,200.00 12.82 0.06 67.46 7,500.00 9.60

10,000.00

16,503.57

7,577.12

52.94 555.54 776.74 1,385.22 181,648.41

40.65 488.27 577.18 1,106.10 127,459.81

20

Annual Report 2007-08

Schedules Forming Part of Accounts


as at March 31, 2008
(Rs. in Lacs) As at 31.03.2008 SCHEDULE 8 CURRENT LIABILITIES AND PROVISIONS Current Liabilities Sundry Creditors Other Liabilities Interest accrued but not due on borrowings Provi si ons Gratuity Leave Encashment & compensated leave Provision for Expenses Proposed Dividend & Dividend Tax 0.00 16.68 90.16 3,403.49 3,510.33 3,530.94 SCHEDULE 9 DISCOUNT On Treasur y Bills Sales / Redemption Add : Closing Stock* L e s s : (i) Purchases (ii) Opening Stock 510,635.06 4,269.33 508,067.24 6,098.15 514,165.39 739.00 On Zero Coupon Bonds Sales / Redemption Add : Closing Stock* L e s s : (i) Purchases (ii) Opening Stock 200.34 1,464.90 1,644.70 0.00 1,644.70 20.54 On Commercial Bills Sales / Redemption Add : Closing Stock* L e s s : (i) Purchases (ii) Opening Stock 0.00 0.00 0.00 0.00 0.00 0.00 0.00 12,500.00 0.00 12,256.82 0.00 12,256.82 243.18 12,500.00 1,665.24 0.00 0.00 0.00 0.00 0.00 0.00 0.00 514,904.39 301,228.01 6,098.15 293,682.29 12,694.48 306,376.77 949.39 307,326.16 19.78 17.58 56.28 0.00 93.64 154.80 1.97 0.05 18.59 20.61 49.03 0.87 11.26 61.16 As at 31.03.2007

21

SBI DFHI LIMITED

Schedules Forming Part of Accounts


as at March 31, 2008
(Rs. in Lacs) As at 31.03.2008 SCHEDULE 9 (Contd.) On Certificates of Deposit Sales / Redemption Add : Closing Stock L e s s : (i) Purchases (ii) Opening Stock 104,470.32 38,597.31 106,809.30 32,900.21 139,709.51 3,358.12 On Commercial Paper Sales / Redemption Add : Closing Stock* L e s s : (i) Purchases (ii) Opening Stock 30,999.45 6,822.86 32,599.05 4,456.50 37,055.54 766.76 On CBLO Lending Total Discount Income * Adjusted for Dimunition in value SCHEDULE 10 INTEREST INCOME Dated Government Securities Other Securities Call and Short Notice Lendings Liquidity Adjustment Facility Reverse Repo Lending Interest on Fixed &Term Deposit 5,244.75 444.06 756.19 0.00 0.25 1,052.90 7,498.15 SCHEDULE 11 TRADING INCOME Dated Government Securities Sales Add : Closing Stock* Less : (i) Purchases (ii) Opening Stock 2,685,441.33 8 9 , 8 7 5 . 4 5 2,775,316.78 2,718,114.07 56,597.89 2,774,711.96 604.82 1,160,829.10 56,597.89 1,081,540.25 136,583.30 1,218,123.55 (696.56) 1,217,426.99 4,232.65 310.86 424.26 1,474.31 0.79 80.71 6,523.58 43.62 4,928.04 37,822.31 22,500.00 4,456.50 26,718.95 0.00 26,718.95 237.55 138.07 2,488.44 26,956.50 143,067.63 68,974.85 32,900.21 100,954.81 0.00 100,954.81 920.25 101,875.06 As at 31.03.2007

22

Annual Report 2007-08

Schedules Forming Part of Accounts


as at March 31, 2008
(Rs. in Lacs) As at 31.03.2008 SCHEDULE 11 (Contd.) On Other Securities Sales Add : Closing Stock* Less : (i) Purchases (ii) Opening Stock On Equity Sales Add : Closing Stock* Less : (i) Purchases (ii) Opening Stock 1,197.73 187.21 1,336.12 65.59 1,401.71 (16.77) On Equity Derivatives On Mutual Funds Sales Add : Closing Stock* Less : (i) Purchases (ii) Opening Stock 139,101.13 7,696.11 143,550.49 2,500.00 146,050.49 746.75 Total Trading Income * Adjusted for Diminution in value SCHEDULE 12 OTHER INCOME - Underwriting Fee - Income from Constitutents - Interest rate Swap - Commission on Non Competitive Bid - Dividend income - Rent Received - Interest on Tax refunds - Income from Mutual Fund Distribution - Miscellaneous Income 92.38 7.40 (4.11) 0.88 202.35 42.00 0.00 139.25 25.14 505.29 130.42 7.98 (10.33) 0.49 28.01 14.00 430.18 0.00 22.62 623.37 1,406.09 146,797.24 17,323.04 2,500.00 19,700.00 0.00 19,700.00 123.04 (762.72) 19,823.04 (19.37) 1,384.94 4,196.15 65.59 4,247.57 0.00 4,247.57 14.17 0.00 4,261.74 195,779.99 7,626.36 198,381.19 4,934.50 203,315.69 90.66 203,406.35 13,620.03 4,934.50 14,421.10 4,336.80 18,757.90 (203.37) 18,554.53 As at 31.03.2007

23

SBI DFHI LIMITED

Schedules Forming Part of Accounts


as at March 31, 2008
(Rs. in Lacs) As at 31.03.2008 SCHEDULE 13 INTEREST EXPENSES - Call and Short Notice Borrowings - Inter Corporate Deposits - Interest on borrowing arrangements with RBI - Repo Borrowing 2,099.67 175.66 164.84 21.24 2,461.41 SCHEDULE 14 EMPLOYEE COSTS Salaries, Wages, Allowances, etc. Contribution to Provident and Other Funds Gratuity Leave Encashment & Compensated absence Performance Linked Incentive Staff Welfare Expenses 182.84 19.82 3.59 8.18 50.00 8.80 273.23 SCHEDULE 15 ESTABLISHMENT & OTHER EXPENSES Electricity Charges Rent Insurance Security Transaction Tax Information & Technology Expense Postages / Telephone / Telex Printing & Stationery Travelling Legal and Professional Fees Repairs / Renewals Depository Charges Clearing & Settlement Charges Payment to Auditors : - Audit Fees - Tax Audit Fees - Out of pocket expenses Loss on sale of asset / written off Miscellaneous Expenses 4.49 0.51 0.00 5.26 85.26 562.19 4.21 0.51 0.14 2.55 63.52 381.95 17.29 168.00 0.96 8.55 75.69 22.20 13.53 16.18 50.38 4.94 8.55 80.40 12.42 133.59 1.36 10.49 30.52 17.72 9.44 11.12 35.15 15.25 1.65 32.33 160.26 8.84 5.51 10.47 40.00 4.61 229.69 1,682.95 89.93 254.70 6.17 2,033.75 As at 31.03.2007

24

Annual Report 2007-08

SCHEDULE 16

Statement of Significant Accounting Policies


1 . Basis of Accounting The financial statements have been prepared under the historical cost convention on accrual basis and in accordance with the generally accepted accounting principles as adopted consistently by the Company, the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI), the provisions of the Companies Act, 1956 as amended from time to time and the Reserve Bank of India guidelines to NBFCs as applicable to Primary Dealers in Government Securities. 2 . Revenue Recognition Discount (a) The income by way of discount on Treasury Bills, Commercial Bills, Commercial Papers, Certificates of Deposit and Deep Discount Bonds represents the excess of the sale proceeds and the value of closing stock over the value of opening stock and purchases of such instruments. (b) The income by way of discount on CBLOs represents the excess of the sale/ maturity proceeds over the value of opening stock and purchases of each such instrument. (c) The difference between the acquisition cost and the redemption value of Treasury Bills, Commercial Bills, Commercial Papers, Certificates of Deposit and Deep Discount Bonds held as on the date of the Balance Sheet is apportioned on time basis and recognised as accrued income. The accrued income is included in the carrying value of these securities and is regarded as carrying cost. Interest (a) Interest on fixed rate instruments is accrued for the expired period as per coupon rate. (b) Interest on floating rate instruments is accrued for the expired period as per the terms of the instrument. Profit/Loss on sale Trading profits/losses on securities are recognised on a trade-date basis. (a) The profit/loss on sale of Dated Government Securities, Tax Free Bonds, Non Convertible Debentures, Regular Income Bonds and Floating Rate Bonds and Bonds in the nature of Promissory Notes indicates the excess /deficit of the sale proceeds and the value of closing stock over the value of opening stock and purchases of such instruments. (b) The profit/loss on sale of Equity Shares and Mutual Funds represents the excess/deficit of the sale proceeds and value of closing stock over the value of opening stock and purchase of such instruments. Dividend Dividend on equity shares, preference shares and mutual fund units is recognised as income when the right to receive the dividend is established. Underwriting fee Underwriting fees for auction of Dated Government Securities and Treasury Bills is treated as income except in case of successful bidding of securities, where in the proportionate fees are adjusted against the cost of these securities.

25

SBI DFHI LIMITED

Repo/Reverse Repo transactions The securities sold/ purchased under Repo/Reverse Repo have been accounted for as sale/purchase in accordance with the RBI Guidelines for uniform accounting for Repo/ Reverse Repo transactions in terms of Circular no IDMC .3810 /11.08.10 / 2002-03 dated March 24, 2003. In accordance with guidelines issued in the aforesaid circular, the difference between the amounts booked in the first and second leg in the Repo/Reverse Repo Price Adjustment Account and in the Repo/Reverse Repo Interest Adjustment Account is transferred to the Repo Interest Expenditure and Reverse Repo Interest Income Account as the case may be.

3 . Investments Investments are bifurcated into long term and short term Investments. Investments other than for the purpose of trade are classified as long term investments and are valued at cost. Provision for diminution in the value of long term investments is made only if, such a decline is not temporary in the opinion of the management. 4 . Current Assets Short term Investments for trade purpose in money market, debt instruments, equity and Mutual Funds are regarded as current assets. The instruments on hand at the year-end are valued on the following basis:Type of Securities Treasury Bills Certificates of Deposit Commercial Bills, Commercial Papers, Deep Discount Bonds Tax Free Bonds, Non Convertible Debentures, Floating Rate Bonds, Bonds in the nature of Promissory Notes Dated Government Securities Equity Shares Mutual Fund Units Method of Valuation At cost or price based on FIMMDA yield to maturity basis whichever is lower. CDs are valued at carrying cost in accordance with FIMMDA guidelines. At cost or price based on FIMMDA yield to maturity basis whichever is lower. At cost or price indicated by FIMMDA whichever is lower. At cost or price indicated by FIMMDA whichever is lower. At cost or market price, whichever is lower based on market quotes on the last trade date. At cost or market NAV whichever is lower.

The cost is arrived at on Moving Weighted Average basis by considering only outright sales/purchases (excluding securities sold/purchased under repo/reverse repo transactions). For Valuation, all the securities in each category are valued scrip-wise, at lower of cost or market value. Net Depreciation in each category is charged to the Profit and Loss Account and Net Appreciation, if any, is ignored. Depreciation in one category of securities is not set off against appreciation in another category.

5. Derivative Transactions Equity Index/Stock Futures (a) Initial margin payable in respect of future contract is adjusted against the deposit in the form of Term Deposits. 26

Annual Report 2007-08

(b) Profit/Loss is recognised only on settlement/expiry of the contracts for equity Index/Stock Futures as the difference between the settlement price and the initial contract price. (c) Equity index/stock futures entered for arbitrage purpose are marked to market. Debit or credit balance in the Mark-to-Market Margin - Equity Index / Stock Futures account is disclosed under Loans and Advances or Current Liabilities respectively and represents the net amount paid or received on the basis of movement in the prices of index /stock futures till the Balance Sheet date. (d) All open positions as on Balance Sheet date are marked to market and the net unrealized loss is charged to the Profit & Loss Account and net mark to market gains, if any, are ignored. Interest Rate Swap Transactions The income/expense in respect of the IRS transactions are accounted for on accrual basis over the life of the swaps. Gains/Losses on termination are recorded as on the termination date. On the Balance Sheet date, outstanding IRS contracts, if any, are marked to market and unrealized losses are provided for in the Profit and Loss Account; unrealized gains, if any, are ignored. 6 . Operating Lease The monthly rent payments made for the premises acquired on lease are charged to the Profit and Loss Account on accrual basis. 7 . Payments to and Provisions for Employees Payments made to State Bank of India towards emoluments of their employees who are on deputation to the Company are regarded as the employees cost of the Company. 8. Employee Retirement & other Benefits Provident Fund Contributions as required under the statute, made to the Provident Fund (Defined Contribution Plan) are charged to the Profit and Loss Account. Superannuation Fund Contributions made for the certain employees covered under the Superannuation scheme of LIC (Defined Contribution Plan) are charged to the Profit and Loss Account. Gratuity Company accounts for the liability of future gratuity benefits based on an actuarial valuation. The Company has created a trust for future payment of gratuities which is funded with Gratuity cum Life Assurance Scheme of LIC ( Defined Benefit Plan). Other Long Term Benefits Other long-term employee benefits comprise of leave encashment and are provided for based on the actuarial valuation. Short Term Employee Benefits Short-term employee benefits including accumulating compensated absences are charged to the Profit and Loss Account based on expected obligation on an undiscounted basis. 9. Fixed Assets and Depreciation Fixed assets are stated at cost of acquisition including any attributable cost for acquisition, installation and commissioning, less accumulated depreciation.

27

SBI DFHI LIMITED

Depreciation on Fixed Assets other than Software is charged on Written down Value Method in accordance with the provisions of Schedule XIV of the Companies Act, 1956. Software cost is amortised over a period of 3 years. 10. Brokerage The brokerage paid on purchase of stocks is added to the cost of the stocks and the brokerage paid on sale of stocks is adjusted against the sale price of the stocks. 11. Taxes on Income Current tax is determined as the amount of tax payable in respect of taxable income for the period. Deferred tax assets and liabilities are recognised for timing differences, for the expected future tax consequences, between accounting income and taxable income, for a period, that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantially enacted by the Balance Sheet date. Deferred tax assets are recognized and carried forward only if there is a reasonable/virtual certainty of its realization. 12. Miscellaneous Expenditure Deferred revenue expenditure in respect of stamp duty paid on leased premises is written off over the primary period of the lease. 13. Borrowing Costs Borrowing Costs other than those directly attributable to Fixed Assets are recognised as expenses in the period in which they are incurred and are charged to revenue. 14. Service Tax Service tax liability is set-off against available Cenvat credits. Unutilized credits, if any, are carried forward under Loans & Advances for set-off in subsequent periods. 15. Provisions/ Contingencies The Company creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for the contingent liability is made in the Notes to Accounts when there is a possible obligation or a present obligation that may, but probably will not require, an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. 16. Impairment of Assets As asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss, if any, is charged to the Profit and Loss Account to the extent carrying amount of assets exceeds their recoverable amount in the year in which as asset is identified as impaired.

28

Annual Report 2007-08

SCHEDULE 17 NOTES TO ACCOUNTS 1. The Company is a member of Primary Dealers Association of India (PDAI), a Company limited by guarantee holding a license under Section 25 of the Companies Act, 1956. As a member of the PDAI, the liability of the Company by way of guarantee is limited to Rupees One Thousand. The Company is also a member of Fixed Income Money Market and Derivatives Association of India (FIMMDA), a Company limited by guarantee holding a license under Section 25 of the Companies Act, 1956. As a member of FIMMDA, the liability of the Company by way of guarantee is limited to Rupees One Thousand. 2. Remuneration to Managing Director & Chief Executive Officer. (Amount in Rs.) Particulars Salaries, Allowances & Incentive Contribution to Provident Fund & Pension Fund Other perquisites TOTAL 2007-08 887,530.26 51,517.00 15,067.19 954,114.45 2006-07 672,923.10 48,302.00 0.00 721,225.10

Commission is not payable to any directors of the Company. Consequently, the computation of profits as required under Section 349 of the Companies Act, 1956 has not been included. 3. The Company deals in Government Securities and Treasury Bills on behalf of its constituents through the constituent SGL account opened with RBI. The transactions undertaken cover monies received from the constituents and physicals tendered by them for conversion into SGL account. As on March 31, 2008 the Company holds the following investments on behalf of the constituents:(Face value Rs.in lacs) Security Dated Government Securities Treasury Bills. 2007-08 1,457,887.33 50,652.50 2006-07 1,334,350.40 12,065.00

4. Interest Income, Trading Profit on Securities, Underwriting and other incomes include income tax deducted at source amounting to Rs. 369.50 lacs (previous year Rs.81.27 lacs). 5. Assets taken on Lease The premises at Mumbai, Ahmedabad, Bangalore, Chennai and New Delhi have been acquired under operating lease on payment of monthly rentals. The lease agreements for the premises at Mumbai, Ahmedabad and Bangalore include an escalation clause. Future minimum lease rental relating to non-cancellable operating lease. (Rupees in lacs) Particulars Not later than 1 year Later than 1 year but not later than 5 years Later than 5 years Particulars Payment made during the year. Lease rental charges (including cancellable lease) are recognised in the Profit and Loss Account: 29 2007-08 11.47 6.19 Nil (Rupees in lacs) 2007-08 140.69

SBI DFHI LIMITED

6. Deferred Taxes The components of the Deferred Tax Asset / (Liability) are as under:(Rupees in lacs) Particulars Deferred tax asset Provision for Leave Encashment* Amalgamation Expenses Provision for Gratuity* Provision for Doubtful Debts Total Deferred tax liability Depreciation on Fixed Assets Deferred Revenue Expenditure Total Deferred Tax Asset/(liability) (net) Total charge to Profit & Loss Account 14.51 0.47 14.98 178.34 145.64 18.14 0.93 19.07 39.13 (7.77) 5.38 31.22 0.00 156.72 193.32 5.67 46.37 6.16 0.00 58.20 31.03.2008 31.03.2007

*Deferred tax asset has been reversed at the beginning of the year by Rs. 6.43 lacs on adoption of Revised AS 15. 7. Stock pledged with Clearing Corporation of India Ltd. towards Securities Guarantee Fund (SGF) and Collateralised Borrowing and Lending Obligations (CBLO) as on March 31, 2008. (Rupees in lacs) Nomenclature GOI Floating Rate Bond 2013 GOI Floating Rate Bond 2015 GOI Floating Rate Bond 2015 II 91 DTB 18/04/2008 91 DTB 11/04/2008 7.99% Govt. Stock TOTAL Face value 5,000.00 19,500.00 10,000.00 1,000.00 400.00 1,000.00 36,900.00 Book value 5,000.00 19,496.74 9,997.33 996.74 399.25 1,018.98 36,909.04

Stock pledged with Reserve Bank of India towards Intraday Liquidity Facility of the Real Time Gross Settlement System (RTGS) as on March 31, 2008. (Rupees in lacs) Nomenclature 6.65% GS 2009 GOI Floating rate Bond 2015 TOTAL Face value 7,500.00 5,500.00 13,000.00 Book value 7,428.85 5,499.08 12,927.93

30

Annual Report 2007-08

8. The Company has changed the method of valuation of its securities in the Current year and is now providing Net Depreciation Category-wise instead of Scrip-wise Gross Depreciation in the previous year. The profit in the current year is higher by Rs. 11.37 crores on account of such change in the method of valuation of securities as compared to the profit of the previous year. 9. Earnings Per Share (EPS) Particulars Face Value of the Share Number of Equity Shares as at March 31. Net Profit/ (Loss) for the year after tax Basic and Diluted E.P.S. Rs. Lacs Lacs Rs. 2007-08 100.00 290.91 8,568.38 29.45 2006-07 100.00 290.91 5,325.26 18.31

10. The details of transactions which were carried out during the financial year with related parties in the ordinary course of business are as follows:(Rupees in lac)
Nature of Transaction HOLDING COMPANY ASSOCIATES OF THE HOLDING COMPANY 2007-08 Call/Notice/ Term Money/ ICD/ CBLO Borrowings Call/Notice Money /CBLO Lendings Interest paid on Call Money/ Repo/ICD / CBLO Borrowings Interest received on Call/ Notice Money / CBLO lendings Purchase of GOI Securities (including T. B.) Interest on GOI Securities paid Sale of GOI Securities (including T. Bills.) Interest on GOI Securities received Sale of Securities [repo/reverse repo (Gross)] Purchase of Securities [repo/reverse repo (Gross)] Purchase of Other Securities Interest income from other Securities Sale of other Securities 630,625.00 183,135.00 148.32 47.22 2006-07 100,605.00 2007-08 4,349,031.52 2006-07 1,254,296.82 1,401,377.41 184.86 186.25 SUBSIDIARIES OF THE HOLDING COMPANY 2007-08 3,924.00 2,500.00 3.72 57.97 2006-07 7,740.98 17,800.00 9.50 10.30

1,000.00 4,350,036.38 49.03 0.16 Nil 8.66

68,660.54 371.39 69,812.81 Nil 502.31 502.06 2,220.00 92.40

24,429.13 298.32 2,953.53 Nil Nil Nil 4,500.00 161.07

1,654.55 41.42 93,055.91 759.00 Nil Nil 953.23 Nil

757,470.55 14,544.07 951,479.28 17,133.23 Nil Nil 2,485.40 Nil

7,140.13 104.80 48,222.71 620.74 Nil Nil 980.16 Nil

Nil Nil 29,614.96 159.25 521.88 521.55 5,942.71 Nil

Nil

4,000.00

14,500.00

16,500.00

1.000.00

6,000.00

31

SBI DFHI LIMITED

Nature of Transaction

HOLDING COMPANY

ASSOCIATES OF THE HOLDING COMPANY

SUBSIDIARIES OF THE HOLDING COMPANY 2007-08 66.18 17.88 90.91 66.18 17.88 42.00 600.00 1,500.00 2007-08 NIL 2006-07 2.45 12.09 68.18 2.45 12.09 14.00 18,000.00 16,506.25 2006-07 NIL

2007-08 Other Income Other Expenses Dividend paid / (Proposed) Other Income Other Expenses Rent Income Purchase of Mutual Fund Units Sale of Mutual Fund Units 25.60 0.94 1,657.08 25.60 0.94 Nil Nil Nil

2006-07 Nil 0.49 1,242.81 Nil 0.49 Nil Nil Nil

2007-08 33.75 80.40 201.42 33.75 80.40 Nil Nil Nil

2006-07 1.3 35.97 151.06 1.3 35.97 Nil Nil Nil

Payments made to /on behalf of Key Management Personnel Salary/Allowances/Perquisites

I . Names of related parties and description of relationship:Holding Company: State Bank of India Associates of the Holding Company: State Bank of Patiala State Bank of Bikaner & Jaipur State Bank of Mysore State Bank of Hyderabad State Bank of Travancore State Bank of Indore State Bank of Saurashtra Clearing Corporation of India Limited Subsidiaries of the Holding Company: SBI Capital Markets Limited SBI Commercial & International Limited SBI Life Insurance Company Limited SBI Mutual Fund SBI Cards & Payment Services Pvt. Ltd. SBI Cap Securities Ltd. Key Management Personnel Salary and allowances of Shri V.K. Gupta (upto 07/12/2007) and Smt. Renu Challu (from 08/11/2007 to 31/ 03/2008) as Managing Director & Chief Executive Officer, SBI DFHI Limited have been included in Salary & Allowances of Staff on deputation. II. There have been no transactions with relatives of any of the key management personnel during the year.

32

Annual Report 2007-08

11. Segment Reporting The business segments are broadly classified into three reportable segments viz the Gilt segment, Non-Gilt Segment and Equity and Mutual Funds based on the dominant sources of risks and returns. The Company does not have reportable geographical segments as contemplated by the Accounting Standard 17 on Segment Reporting issued by The Institute of Chartered Accountants of India. Segment-wise information is as under: (Rupees in lacs)
Gilt Segment 2007-08 REVENUES From external clients Inter-segment Extraordinary Items Total Revenue R E S U LT Segment Result Unallocated expenses Operating profit 4238.32 0.00 4238.32 0.00 4527.00 4500.38 0.00 0.00 1408.21 0.00 1408.21 0.00 1408.21 849.86 0.00 849.86 0.00 849.86 137.21 0.00 137.21 0.00 137.21 1329.79 835.42 494.37 493.48 0.88 583.50 10918.35 611.64 835.42 6655.92 611.64 6044.28 33.50 6010.78 7481.89 0.00 0.00 7481.89 6653.82 4676.03 0.00 0.00 0.00 0.00 1498.14 0.00 0.00 1498.14 849.86 0.00 0.00 849.86 137.21 0.00 0.00 1329.79 0.00 0.00 583.50 14337.57 0.00 0.00 0.00 0.00 8872.67 0.00 0.00 8872.67 Non-Gilts Segment Equity & MF Unallocated Total 2006-07

2006-07 2007-08

2006-07 2007-08

2006-07 2007-08

2006-07 2007-08

6653.82 4676.03

137.21 1 3 2 9 . 7 9

583.50 14337.57

4527.00 4500.38 0.00 0.00

(28.14) 10082.92 33.50 493.48

Depreciation & Prov.

Profit before Tax 4238.32 Provision for tax Current tax Deferred tax Profit after tax SEGMENT ASSETS SEGMENT LIABILITIES

4527.00 4500.38

(61.63) 9 5 8 9 . 4 4

(1166.70) 145.64

(677.75) (7.77)

8568.38 5325.26

100798.90 81179.31 54768.05

42480.81

7883.32

2565.59 19431.89

5400.50 182882.17 131626.21

70740.07 27895.39

2509.91

79.15

0.00

0.00

108.87

143.53 76762.34

28118.07

Segment Revenue and Expenses: The segment revenue and expenses include all incomes/expenses directly attributable to the respective segments. Administrative expenses, staff expenses, and depreciation on fixed assets cannot be attributed to any particular segment and are hence regarded as unallocable expenses. Segment Assets and Liabilities: Segment assets and liabilities include only those assets and liabilities that are directly attributable to the respective segments. The assets and liabilities that cannot be directly identified with any particular segment are regarded as unallocable. The Gilts segment comprises of Dated Government Securities, Treasury Bills, CBLO, Call/Notice/Term lending and borrowings and all revenues and expenses directly related thereto. The Non-Gilts segment comprises of Certificates of Deposit, Commercial Papers, other Non-SLR Securities, Term Deposits and Inter-Corporate Deposits, and all revenues and expenses directly related thereto. 33

SBI DFHI LIMITED

Equity & Mutual Funds Comprises of Equity Shares, Equity Derivatives and Equity & Debt oriented Mutual funds and all revenues and expenses directly related thereto. 12. Contingent Liability The Company has appealed in the Small Causes Court against the levy of increased Municipal Taxes of Rs. 4.47 lacs, under the B.M.C. Act as per new policy of assessment procedure with retrospective effect from 01.04.2000 in respect of the premises of the Company at Varma Chambers, Fort. No provision has been made in respect of Income Tax matters disputed by the Company since these are subject to appeals / representations. The income under dispute is Rs. 430.24 lacs. 13. Repo/Reverse Repo Transactions (Rs. in Crores)
Particulars Minimum outs tanding during the the year Securities sold under repos. Securities purchased under reverse repo. Nil Nil Maximum outstanding during the year 98.60 4.98 Daily average outstanding during the year 3.55 0.01 As on March 31, 2008

Nil Nil

14. Net Borrowings in Call Money Market Leverage Ratio. Particulars Net Call Borrowings (Rs. in Crores) Leverage Ratio (%) 15. Interest Rate Swaps (IRS) The notional principal outstanding as of March 31, 2008 is Nil (Previous Year Nil). The Company has entered into Five IRS transactions for trading purposes during the year (Previous year Two) with SBI. Notional amount of transactions for the year is Rs.150 Crore (Previous year Rs. 50 Crores). Collateral is not insisted upon by counter party of IRS contracts. 16. Capital Risk Adequacy Ratio (CRAR) Quarter ended Jun-07 76.22% Sep-07 81.01% Dec-07 80.55% Mar-08 78.46% Average 264.29 1.56 Peak 752.26 1.87

34

Annual Report 2007-08

17. Details of the Non-Government Investment Portfolio * (Rs. In Lacs)


Sr. No. I s s u e r Amount Extent of private placement Extent of below Investment Grade securities (5) Extent of unrated securities Extent of unlisted securities

(1) 1 2 3 4 5 6 7 8

(2) PSUs FIs Banks Other PDs Private Corporate Subsidiaries/Joint Ventures Others Provision held towards depreciation Total

(3) 1,711.42 1,974.90 5,423.97 -

(4) 1,711.42 1,974.90 5,423.97 -

(6) -

(7) -

(19.02) 9,091.27

(19.02) 9,091.27

* Excluding CP / CD, Equity Shares and Mutual Fund Units. 18. As required by Accounting Standard (AS 28) Impairment of Assets, issued by the Institute of Chartered Accountants of India, the Company has during the current year, reviewed the carrying amount of Fixed Assets of Company and none of the assets were found impaired. 19. Dividend Income includes dividend on Cumulative Preference Shares of IFCI Ltd. of Rs. 1,67,35,410/- for the period 2001-02 to 2007-08. Arrears of dividend on Cumulative Preference Shares till 31/03/07 amounts to Rs 1,46,69,310/-. The same have been received in accordance with the revised terms of repayment of preferential shares of IFCI Ltd., for which the Company had given its approval during the current financial year. 20. Vide Order dated June 13, 2007, the Joint Secretary to GOI & Central Registrar of Co-operative Societies in approval with RBI, has decided to make some amendments to the existing Reconstruction scheme of Madhavpura Mercantile Co-operative Bank Ltd. (MMCB) and has deferred the interest and principal repayment of Fixed Deposits of Madhavpura Mercantile Co-Op Bank by one year. Consequentially, the Company as a matter of prudence has made a provision of 40% on the entire principal outstanding in the current financial year. The Company has also not recognised the interest income on the deposits for the current year and has also created a provision for the income not realized of the previous year. 21. During the year, the Company has adopted Accounting Standard 15 (revised 2005) Employee Benefits issued by the ICAI. Consequently, the excess provision for employee benefits based on earlier policy, as at April 1, 2007, amounting to Rs. 12.40 lacs (net of deferred tax of Rs. 6.43 lacs), has been added to General Reserve.

35

SBI DFHI LIMITED

Disclosures as per Revised AS 15 Employee Costs are as under. (Rs. in Lacs) Sr. No. ( 1) Particulars Changes in present value of obligation Opening Defined Benefit Obligation Interest Cost Current Service Cost Actuarial (Gains) / Losses Benefits Paid Closing Defined Benefit Obligation Changes in the fair value of plan assets Fair value of plan assets at beginning of year Expected return on plan assets Contributions Benefits paid Actuarial Gains/ (Losses) Fair value of plan assets at the end of the year (3) Fair value of plan assets at beginning of year Actual return on plan assets Contributions Benefits paid Fair value of plan assets at the end of the year Excess of Actual over estimate return on plan assets (4) Actuarial Gain/ (loss) recognised Actuarial Gain/ (Loss) for the year - obligation Actuarial Gain/ (Loss) for the year - plan assets Net Actuarial Gain/ (Loss) recognised for the year (5) Amount to be recognised in Balance Sheet and Profit and Loss Account Fair value of plan assets as at the end of the year Present value of obligation as at the end of the year Funded status Prepaid Expense recognised in Balance Sheet (6) Expenses Recognised in Profit and Loss Account Current Service Cost Interest Cost Net Actuarial loss recognised in the year Less:-Expected return on plan assets Expenses recognised in Profit & Loss Account (7) Assumptions Discount rate Salary Escalation 8% 5% 1.28 0.94 2.67 (1.31) 3.59 15.76 13.47 2.29 2.29 (1.57) (1.10) (2.67) 4.34 1.31 12.79 (1.58) (1.10) 15.76 4.34 0.21 12.79 1.58 15.76 (1.10) 31st March, 2008 11.26 0.94 1.28 1.57 (1.58) 13.47

(2)

22. Figures for the previous year have been regrouped and rearranged, wherever necessary to make them comparable with figures of the current year. 36

Annual Report 2007-08

Cash Flow Statement


For the year ended March 31, 2008 (Rs. in Lacs) 2007-08 A ) CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and extraordinary items Adjustments for: Depreciation Amortisation of preliminary expenses Profit / (Loss) on sale of assets Provision for Doubtful Debts Provision for Leave Encashment & Gratuity Payment of Gratuity & Leave Encashment Dividend income Operating Profit before Working Capital changes Adjustments for: Inventories Short Term Borrowings (Net) Trade Payables Other Receivables Operating Profit after Working Capital changes Direct Taxes paid (including TDS) Income Tax refund received Net Cash from Operating activities A B ) CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Fixed deposit Matured Dividend income Net Cash from Investing Activities B (32.46) 3.06 38.92 33.75 43.27 43.27 (35.47) 1.29 62.27 28.01 56.10 56.10 (1,366.25) 0.00 (1,366.25) 8,883.18 (48,986.70) 50,268.11 (6.66) (1,079.56) 195.19 10,249.43 46,061.75 (43,672.66) (1,116.70) 1,431.13 2,703.52 8,731.62 32.40 1.39 5.26 461.08 11.77 (13.35) (33.75) 464.80 10,054.24 33.50 1.39 2.56 0.00 12.86 (4.98) (28.01) 17.32 6,028.10 9,589.44 6,010.78 2006-07

(1,191.36) 2,425.84 1,234.48 9,966.10

37

SBI DFHI LIMITED

(Rs. in Lacs) 2007-08 C) CASH FLOW FROM FINANCING ACTIVITIES Dividend Paid (Including tax thereon) Net Cash used in financing activities C Net Increase in Cash & Cash Equivalents (A+B+C) Cash & Cash Equivalents at the start of the year Cash & Cash Equivalents as at the end of the year 0.00 0.00 0.00 (2,487.82) (2,487.82) (2,487.82) 2006-07

8,926.45 7,577.12

7,534.38 42.74

16,503.57

7,577.12

The Cash Flow statement has been prepared under the Indirect Method as set out in AS-3 Cash Flow Statement issued by the ICAI.

As per our attached report of even date

For and on behalf of the Board of Directors

For A. P. Sanzgiri & Co. Chartered Accountants

O. P. Bhatt Chairman

Renu Challu Managing Director & Chief Executive Officer

Abhijit Sanzgiri Partner Membership No. 43230

S. Venkatraman Company Secretary

Mumbai Dated: April 16, 2008

38

Annual Report 2007-08

Schedule 17A STATEMENT OF STOCKS


Sr. N o m e n c l a t u r e No. I 1 2 3 4 TREASURY BILLS 25-Apr-08 11-May-07 08-Jun-07 09-Nov-07 Subtotal - 1 B ) 91 Days 1 2 3 4 5 11-Apr-08 18-Apr-08 25-Apr-08 09-May-08 06-Jun-08 Subtotal - 2 Total ( 1+2 ) II 1 2 3 4 5 6 7 8 COMMERCIAL PAPER Essar Shipping Ltd. 26-05-2008 Hindustan Construction Co. Ltd. 28-05-2008 Unitech Ltd. 18-09-2008 Unitech Ltd. 14-11-2008 Hindustan Construction Co. Ltd. 20-04-2007 Essar Shipping Ltd. 30-04-2007 Hindustan Construction Co. Ltd. 30-04-2007 HDFC Ltd. 11-05-2007 To t a l III CERTIFICATE OF DEPOSITS 1 2 3 Karnataka Bank 15-05-2008 ING Vysya Bank Ltd. 21-05-2008 Union Bank of India 22-05-2008 1,484.00 986.34 494.07 0.00 0.00 0.00 2,467.72 2,464.68 957.70 943.89 0.00 0.00 0.00 0.00 6,833.99 0.00 0.00 0.00 0.00 993.69 1,485.60 990.40 986.81 4,456.50 617.59 1,495.13 134.89 29.78 0.99 2,278.38 4,269.33 0.00 0.00 0.00 0.00 0.00 0.00 6,098.15 9 1,990.95 0.00 0.00 0.00 1,990.95 0.00 4,125.98 1,953.07 19.10 6,098.15 8 As at 31.03.2008 Rs. in Lacs As at 31.03.2007 Rs. in Lacs Sr. N o m e n c l a t u r e No. 4 5 6 7 Standard Chartered Bank 22-05-2008 Union Bank of India 28-05-2008 Federal Bank 20-06-2008 Union Bank of India 24-06-2008 Karur Vysya Bank 02-07-2008 Kotak Mahindra Bank Ltd. 25-07-2008 As at 31.03.2008 Rs. in Lacs 986.23 2,464.89 3,922.02 979.96 977.66 2,432.23 969.49 964.38 960.24 959.93 2,405.50 2,390.76 2,334.31 2,318.90 925.20 2,311.27 918.26 917.58 2,289.12 914.63 1,378.96 911.38 0.00 0.00 0.00 As at 31.03.2007 Rs. in Lacs 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 499.35 499.35 994.55

A ) 364 Days

10 AXIS Bank 12-08-2008 11 State Bank of Travancore 18-08-2008 12 State Bank of Mysore 01-09-2008 13 State Bank of Patiala 02-09-2008 14 State Bank of Patiala 12-09-2008 15 Federal Bank 03-10-2008 16 Allahabad Bank 16-01-2009 17 Allahabad Bank 06-02-2009 18 State Bank of Travancore 11-02-2009 19 Corporation Bank 12-02-2009 20 ICICI Bank 17-02-2009 21 Allahabad Bank 27-02-2009 22 Punjab National Bank 05-03-2009 23 IDBI 10-03-2009 24 ICICI Bank Ltd. 10-03-2009 25 Karnataka Bank 12-03-2009 26 American Express Bank 06-04-2007 27 ING Vysya Bank Ltd. 06-04-2007 28 IDBI Ltd. 23-04-2007

39

SBI DFHI LIMITED

Sr. N o m e n c l a t u r e No. 29 UCO Bank 24-04-2007 30 Federal Bank 24-04-2007 31 Federal Bank 24-04-2007 32 ABN Amro Bank 24-04-2007 33 Karnataka Bank 30-04-2007 34 State Bank of Indore 30-04-2007 35 IDBI Ltd. 02-05-2007 36 ABN Amro Bank 07-05-2007 37 UCO Bank 08-05-2007 38 American Express Bank 08-05-2007 39 IDBI Ltd. 11-05-2007 40 IDBI Ltd. 14-05-2007 41 State Bank of Indore 14-05-2007 42 State Bank of Mysore 14-05-2007 43 State Bank of Saurashtra 14-05-2007 44 State Bank of Indore 21-05-2007 45 UCO Bank 25-05-2007 46 ICICI Bank 29-05-2007 47 ICICI Bank 29-05-2007 48 ICICI Bank 22-06-2007 49 State Bank of Patiala 25-07-2007 50 State Bank of Patiala 17-08-2007 51 ICICI Bank 11-03-2008 To t a l IV DATED GOVERNMENT SECURITIES 1 2 3 4 5 6 7 11.90 2007 9.50 2008 6.65 2009 11.30 2010 10.95 2011 9.39 2011 12.00 2011

As at 31.03.2008 Rs. in Lacs 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 38,597.31

As at 31.03.2007 Rs. in Lacs 2,486.10 994.21 994.19 994.24 2,481.61 992.52 1,984.40 2,477.22 1,485.73 989.88 990.12 989.60 494.38 494.58 2,470.34 986.10 981.72 983.61 983.71 974.88 968.20 1,442.99 2,266.63 32,900.21

Sr. N o m e n c l a t u r e No. 8 9 6.72 2012 12.40 2013

As at 31.03.2008 Rs. in Lacs 0.00 1.15 0.00 5.04 0.74 0.00 15,798.33 497.87 0.27 3.06 0.00 2,584.09 2,638.88 256.35 175.79 170.09 959.50 841.91 974.33 0.14 1,518.25 9,236.10 43,289.48

As at 31.03.2007 Rs. in Lacs 100.73 1.15 1,932.11 5,841.60 0.77 4,028.68 0.00 0.00 0.27 0.00 78.39 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.13 0.00 0.00 12,763.92

10 7.37 2014 11 7.59 2016 12 12.30 2016 13 8.07 2017 14 7.99 2017 15 7.46 2017 16 12.60 2018 17 7.94 2021 18 8.15 FCI SPECIAL BONDS 2022 19 8.20 2022 20 8.35 2022 21 8.01 OIL MARKET BOND 2023 22 8.30 FERTILIZER BOND 2023 23 8.20 OIL MARKET GOI 2024 24 7.95 OIL MARKET SP. BOND 2025 25 8.40 OIL MARKET GOI 2026 26 8.23 GOI FCI 2027 27 6.01 2028 28 7.95 2032 29 8.33 2036 Subtotal - 1 STATE GOVERNMENT SECURITIES 1 2 3 4 5 6 7 8 9 12.15 Kerala 2008 12.15 Uttar Pradesh 2008 11.00 Andhra Pradesh 2010 11.50 Andhra Pradesh 2010 10.35 Punjab 2011 9.45 Gujarat 2011 9.45 Madhya Pradesh 2011 11.50 Andhra Pradesh 2011 7.80 Andhra Pradesh 2012

52.15 104.29 30.53 1.64 3.21 0.60 0.00 0.39 0.00 836.03

52.15 104.28 0.00 1.64 3.22 0.60 47.06 0.39 6.19 0.00

0.00 0.00 7,428.85 186.56 11.03 0.00 1.15

0.30 0.25 0.00 233.24 19.85 525.30 1.15

10 8.50 West Bengal 2017

40

Annual Report 2007-08

Sr. N o m e n c l a t u r e No. 11 8.47 Tamil Nadu 2017 12 8.39 Tamil Nadu 2017 13 8.48 AP 2017 14 8.50 MAHA 2017 15 8.43% Madhya Pradesh 2017 16 8.07 Gujarat 2018 17 8.01 UP 2018 18 8.00 Maharashtra 2018 19 12.30 Andhra Pradesh 2007 20 12.30 Kerala 2007 21 12.30 Tamil Nadu 2007 SUB TOTAL- 2 FLOATING RATE BONDS 1 2 3 FRB 2013 FRB 2015 FRB 2015(ii) SUB TOTAL- 3 Total (1 + 2 +3) V CORPORATE BONDS Zero Coupon Bonds 1 150, HDFC Bond 2008 in the nature of Deep Discount Bond of Face Value of Rs. 10,00,000/each. Sub Total -1 Other Bonds 1 50, 7.97% ( 8.18% ) Unsecured Redeemable Subordinated Bonds in the nature of Debentures of Face Value of Rs.10,00,000/each of ICICI Bank Ltd. 3, 9.28% Unsecured Redeemable NonConvertible NonCumulative Taxable in the nature of Debentures of Face Value of Rs. 10,00,000/each of Power Finance Corp. 2017

As at 31.03.2008 Rs. in Lacs 1.03 516.21 105.18 64.06 225.25 802.50 300.63 50.05 0.00 0.00 0.00 3,093.75

As at 31.03.2007 Rs. in Lacs 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 89.28 28.14 8.79 341.74

Sr. N o m e n c l a t u r e No. 3 20, 7.30% Secured Redeemable NonConvertible Taxable Bonds in the nature of Debentures of Face Value of Rs.10,00,000/- each of REC 2015 100, 8.15% Non Priority Sector Bonds 2009 VIII I Series in the nature of Debentures of Face Value of Rs.10,00,000/- each of NABARD. 100, 9.35% NonConvertible Debentures of Face Value of Rs. 10,00,000/each of LIC Housing Finance Ltd. 2014 100, 8.95% in the nature of Non-Convertible Debentures of Face Value of Rs. 10,00,000/- each of HDFC Bond 2010 100, 8.50% Secured Redeemable NonConvertible Debentures of Face Value of Rs. 10,00,000/-each of HDFC 2008 50, 9.01% PFC in the nature of Non-Convertible Debentures of Face Value of Rs. 10,00,000/- each of PFC. 2011 100, 9.07% Secured NonConvertible NonCumulative Redeemble Taxable bonds in the nature of Debentures of Face Value of Rs. 10,00,000/- each of REC. Ltd. 2018

As at 31.03.2008 Rs. in Lacs

As at 31.03.2007 Rs. in Lacs

181.40

0.00

974.90

974.90

5,000.00 24,995.82 13,496.40 43,492.22 89,875.45

5,000.00 24,995.83 13,496.40 43,492.23 56,597.89 6

1,000.00

0.00

988.46

0.00

1,466.47 1,466.47

0.00 0.00

995.69

0.00

500.00

0.00

493.00

493.00 9

30.02

0.00

1,000.00

0.00

41

SBI DFHI LIMITED

Sr. N o m e n c l a t u r e No. 10 100, 7.90% Non Priority Sector Bonds 2009 - VIII H Series in the nature of Debentures of Face Value of Rs.10,00,000/- each of NABARD. 11 2, 10.20% Unsecured Redeemable NonConvertible Subordinated Bonds in the nature of Promissory Notes of Face Value of Rs. 10,00,000/each of State Bank of India Upper Tier II 2022 12 50, 9.00% Redeemable Secured Tier II Subordinated Bonds in the nature of Promissory Notes of Face Value of Rs. 10,00,000/- each of Canara Bank 2018 13 5.10, 8.97% Unsecured Redeemable NonConvertible Bonds in the nature of Promissory Notes of Face Value of Rs. 10,00,000/- each of SBI Tier II - 2021 14 50, 8.96% Unsecured Redeemable NonConvertible Bonds in the nature of Promissory Notes of Face Value of Rs. 10,00,000 each of State Bank of India Upper Tier II - 2021 Sub Total -2 Total Corporate Bonds

As at 31.03.2008 Rs. in Lacs

As at 31.03.2007 Rs. in Lacs

Sr. N o m e n c l a t u r e No. VI EQUITY SHARES 1 L& T 2 3 4 NTPC Power Grid Corp. Ltd. Thermax Tata Power Co. Ltd. Gail (India) Ltd. Bajaj Auto Ltd. Reliance Communication Ltd. Total VII MUTUAL FUNDS 1

As at 31.03.2008 Rs. in Lacs 130.81 61.73 28.03 16.54 0.00 0.00 0.00 0.00 237.11

As at 31.03.2007 Rs. in Lacs

0.00

990.80

5 6 7 8

17.83 12.97 24.28 10.51 65.59

20.96

0.00 2

ICICI Prudential FMP Series 39 - Three Months Plan C Retail Cumulative ICICI Pru Interval Fund Qtly Interval Plan - III Retail Growth Birla Sun Life - Interval Income Fund - Qtly Plan Series II Growth Birla Sun Life Special Situations Fund - Growth Lotus India AGILE Fund - Growth SBI Magnum Mutliplier Plus Scheme - Growth L 120G SBI Debt Fund Series - 13 Months (November 06) - Growth PEDWRG Prudential ICICI Equity & Derivatives Fund - Wealth Optimiser - Regular Growth PEDIIG Prudential ICICI Equity & Derivatives Fund - Income Optimiser Institutional Growth Total TOTAL STOCK

2,500.00

0.00

1,500.00

0.00

2,500.00 500.00 300.00 600.00

0.00 0.00 0.00 0.00

500.00

0.00

4 5 6 7

480.16

2,005.40 8

0.00

1,500.00

0.00

500.00

479.22 7,643.81 9,110.28

470.40 4,934.50 4,934.50

0.00 7,900.00 156,823.47

500.00 2,500.00 107,552.84

42

Annual Report 2007-08

SBI DFHI LIMITED


SCHEDULE 17B
BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE a) Registration Details Registration No. Balance Sheet Date 11-46447 31st March, 2008 State Code 11

b) Capital raised during the year (Rupees in lacs) Public Issue : Bonus Issue : NIL NIL Rights Issue Private Placement NIL NIL

c) Position of Mobilisation and Deployment of Funds (Rupees in lacs) Total Liabilities Sources of Funds : Paid-up Capital Equity Share Suspense Reserves & Surplus Secured Loans Unsecured Loans 29,090.91 0.00 77,028.92 40,233.31 32,998.08 Total Assets Application of Funds : Net Fixed Assets Investments Deferred Tax Net Current Assets Misc. Expenditure Accumulated Losses d) Performance of the Company (Rupees in lacs) Turnover - Income Total Expenditure Profit Before Tax Profit After Tax Earnings per share in Rs. Dividend rate % 14,337.57 4,748.13 9,589.44 8,568.38 29.45 10.00% 142.51 911.51 178.34 178,117.47 1.39 0.00

e) Generic Names of Three Principal Products/Services of Company (as per monetary terms) Item Code No. (ITC Code) : Not Applicable Service Description : Primary Dealer in Dated Government Securities

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SBI DFHI LIMITED

Schedule to the Balance Sheet of a Non-Banking Financial Company as required in terms of Paragraph 9BB of NonBanking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 (Rs. in lacs) LIABILITIES SIDE Particulars 1 Loans and advances availed by the NBFCs inclusive of interest accrued thereon but not paid: (a) Debentures Secured Unsecured (other than falling within the meaning of public deposits) Nil Nil Nil Nil 2,500.00 Nil N.A. Nil Nil Nil Nil Nil Nil N.A. Amount outstanding Amount overdue

(b) Deferred Credits (c) Term Loans (d) Inter-corporate loans and borrowing (e) Commercial Paper (f) Public Deposits

(g) Other Loans 2 Call and Short Notice Borrowings from banks/financial institutions borrowing from RBI under LAF & CBLO Borowing Accrued Interest on (d) & (g) 30,498.08 40,233.31 18.59 Nil Nil

Break-up of (1)(f) above (Outstanding public deposits inclusive of interest accrued thereon but not paid): (a) In the form of Unsecured debentures (b) In the form of partly secured debentures i.e. debentures where there is a shortfall in the value of security (c) Other public deposits ASSET SIDE Particulars Amount outstanding N.A. N.A.

N.A. N.A.

N.A. N.A.

Break-up of Loans and Advances including bills receivables (other than those included in (4) below ): Secured Unsecured Nil 1,385.22

Break-up of Leased Assets and stock on hire and hypothecation loans counting towards EL/HP activities (i) Lease assets including lease rentals under sundry debtors: N.A.

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Annual Report 2007-08

(Rs. in Lacs) Particulars (a) Financial lease (b) Operating lease (ii) Stock on hire including hire charges under sundry debtors: (a) Assets on hire (b) Repossessed Assets (iii) Hypothecation loans counting towards EL/HP activities (a) Loans where assets have been repossessed (b) Loans other than (a) above 5 Break-up of Investments: Current Investments: 1 Quoted: (i) Shares: (a) (b) Equity Preference 237.11 Nil 9,110.28 7,900.00 94,144.78 45,431.30 N.A. N.A. Amount outstanding

(ii) Debentures and Bonds (iii) Units of mutual funds (iv) Government Securities (v) CD/CP 2 Unquoted: (i) Shares: (a) (b) Equity Preference

Nil Nil Nil Nil Nil Nil

(ii) Debentures and Bonds (iii) Units of mutual funds (iv) Government Securities (v) Others Long Term investments 1 Quoted: (i) Shares: (a) (b) Equity Preference

Nil Nil Nil Nil Nil Nil

(ii) Debentures and Bonds (iii) Units of mutual funds (iv) Government Securities (v) Others 2 Unquoted: (i) Shares: (a) (b) Equity Preference

225.00 Nil

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SBI DFHI LIMITED

(Rs. in Lacs) Particulars (ii) Debentures and Bonds (iii) Units of mutual funds (iv) Government Securities (v) Others - Fixed Deposit ( Net of Provision ) 6 Borrower group-wise classification of all leased assets, stock-on-hire and loans and advances : Category Secured 1 Related Parties (a) Subsidiaries (b) Companies in the same group (c) Other related parties 2 Other than related parties Total 7 Nil Nil Nil Nil Nil Nil Nil Nil 1,385.22 1,385.22 Nil Nil Nil 1,385.22 1,385.22 Amount net of provisions Unsecured Total 686.51 Amount outstanding Nil Nil Nil

Investor group-wise classification of all investments (current and long term) in shares and securities (both quoted and unquoted) Category Market Value / Break up or fair value or NAV Book Value (Net of Provisions)

Related Parties (a) Subsidiaries (b) Companies in the same group (c) Other related parties (Holding Co.) Nil 7,040.25 980.35 149,598.95 157,619.55 Nil 7,040.25 980.35 149,430.44 157,451.04

Other than related parties Total

Other information Particulars (i) Gross Non-Performing Assets/ Investment (a) Related parties (b) Other than related parties (ii) Net Non-Performing Assets / Investment (a) Related parties (b) Other than related parties (iii) Assets acquired in satisfaction of debt Fixed Deposit Nil Nil 686.51 Nil 1,144.19 Amount

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Annual Report 2007-08

The Team Corporate Office


Voltas House (3rd floor), 23 J. N. Heredia Marg, Ballard Estate, Mumbai 400 001 Telephone : 022-22625970 / 72 Dealing Room : 022 22625944 to 22625951 Back Office : 022 22364696 / 97 Fax : 022 22625968 / 22610483 E-mail : dfhibom@bom5.vsnl.net.in/ sbidfhi@rediffmail.com Web site : www.sbidfhi.com Smt. Renu Challu Shri Biswajit Mohanty Shri B. S. Hora Shri Manas Sen Shri Ravi Prakash Shri Ajoy Chowdhury Shri Milan P. Shirodkar Shri Kedar D. Anaokar Shri Ram Kamal Samanta Shri Hemal Doshi Shri Abhishek Chowdhury Shri Kamlesh Kedar Rathi Shri S. Venkatraman Shri Debashis Mitra Ms. Surya Ramakrishnan Ms. Hansa J. Sampat Mr. Nilesh Patil : : : : : : : : : : : : : : : : : Managing Director & Chief Executive Officer Executive Vice President Head (New Business) Head (Back Office) Chief Dealer Head Admin / PER & HR Head (Mid Office) Head (Marketing) Dy. Chief Dealer Dealer Manager System Administration Head (Accounts) Company Secretary Manager (Backoffice) Associate (Business Development) Associate Market Research & Analysis (Equity) Associate Market Research & Analysis (Debt)

Accounts Executive Ms. Ms. Ms. Ms. V. D. Shewale Ambili Nair Lorraine DCruz Annie John Ms. Aparna Surve Ms. Yogita Mirekar Ms. Meenal Deobhankar Computer-cum-Management Executives Ms. Madhuri D. Padwal Ms. Nilam Bhavake Shri Manish S. Sarang Secretaries Ms. Lynette M. Mohite Ms. Anita Pinto Messengers Shri K. K. Achrekar Shri M.M.Sawant

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SBI DFHI LIMITED

Branch Offices
Ahmedabad Shri S.P.Pareek - Branch Head Ms.Manya Bahadur - Manager (Marketing) 211/212,Abhishek Plaza Behind Navgujarat College RBI Lane, Off Ashram Road Ahmedabad 380 014 Tel Nos. : (079) 27541341 / 1343 Fax No. (079) 27544348 Email ID : sbidfhiahmedabad@yahoo.co.in Bangalore Shri H Shiva Rao, Branch Head Shri Naveen T.N., Manager (Marketing) N-405, North Wing (4th Floor) Brigade Plaza 71/1, Subedar Chatram Road Gandhinagar Bangalore 560 009 Tel Nos. : (080) 2220 8818 / 8826 Fax No. (080) 2220 8825 Email ID : sbidfhi@dataone.in Chennai Mr J. Karthikeyan, Branch Head Mr D.V.Ravi Kiran, Manager (Marketing) State Bank of India Main Branch Ground Floor 84, Rajaji Salai Chennai 600 001 Tel.Nos. : (044) 25242680, / 2681 Fax No. (044) 25242682 Email ID : sbidfhiltd@yahoo.co.in Hyderabad Mr P.Venugopal, Branch Head Mr K.Kishore Kumar, Manager (Marketing) 2nd Floor, Right Wing State Bank of India Local Head Office, Bank Street, Koti Hyderabad 500 095 Tel Nos. : (040) 24751735, (040)64527750 Fax Nos. (040) 24751736 Email ID : sbidfhi@yahoo.com Kolkata Mr S.K.Biswas, Branch Head Mr Avishek Murarka - Manager (Marketing) 9th Floor, Jeevan Deep Building 1, Middleton Street Kolkata 700 071 Tel Nos. : (033)22830733 / 0734 Fax No. (033)22830735 Email ID : dfhical@dataone.in

New Delhi Mr Vijay Gupta, Branch Head Mr N.K. Bansal, Dy. Branch Head Mr Kunal Narang, Manager (Marketing) A - Block (Behind Service Branch) Ground Floor, State Bank of India Local Head Office Complex 11, Sansad Marg, New Delhi 110 001 Tel.Nos. (011) 23348477/ 8478 Fax No. (011) 2331 8478 Email ID : sbidfhindro@gmail.com

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Annual Report 2007-08

SBI DFHI LIMITED


THE LEADING PRIMARY DEALER

51

Voltas House (3rd Floor), 23, J. N. Heredia Marg, Ballard Estate, Mumbai 400 001. Web site: www.sbidfhi.com

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