Annual Report - GMR Infrastructure - 2009-2010

GMR INFRASTRUCTURE LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Dear Shareholders,

Your Directors have pleasure in presenting the 14th Annual Report together
with the audited accounts of your Company for the year ended March 31,
2010.



Financial Results

Your Company, as a holding company, operates in four different business
sectors - energy, airports, highways and urban infrastructure through
subsidiary and associate companies. During the year under review, your
Company commenced the Engineering, Procurement and Construction (EPC)
business as a separate operating division mainly to cater to the
requirements for implementing the projects undertaken by the subsidiaries.
This strategy would enable the Company to insulate the risks associated
with third party contractors, ease in accessing funds, servicing debt
through operating revenues, enhancement of project management, procurement
and construction skills, reinforce risk management processes, better cost
management besides enhancing the synergies and operational advantages
thereof. The company's revenue, expenditure and results of operations are
presented through consolidated financial statements and the details given
below show both the consolidated and standalone financial results.

Presented below are the consolidated financial results of your Company:

(Rs.in Crore)
Particulars March 31, March 31,
2010 2009

Gross revenue 5,123.42 4,476.19

Fee paid to Airports Authority of India 556.91 456.97

Net revenue 4,566.51 4,019.22

Operating and administrative expenditure 3,202.20 2,952.43

EBITDA 1,364.31 1,066.79

Other Income 163.39 21.37

Interest & finance charges 722.33 368.20

Depreciation/amortisation 612.24 389.83

Profit before tax 193.13 330.13

Provisions for taxation (including (32.21) 53.02
deferred tax, MAT credit entitlement
and fringe benefit tax)

Profit after tax 225.34 277.11

Minority interest-(Profits)/ Losses (45.36) 2.34

Share of Profits/(Losses) of Associates (21.58) -

Profit after tax and Minority interest and 158.40 279.45
share of Profits/(Losses) of associates

Surplus brought forward from 778.36 524.21
previous year

Amount available for appropriation 936.76 803.66
after minority interest

Appropriations/Adjustments 22.64 25.30

Available surplus carried to Balance Sheet 914.12 778.36

Earnings per share (Rs.) (Face value 0.43 0.77
of Re.1/- each)-Basic and Diluted

Consolidated gross revenue grew by 14.46% from Rs. 4,476.19 Crore to
Rs.5,123.42 Crore and net revenue by 13.62% from Rs.4,019.22 Crore to
Rs.4,566.51 Crore. Airport, Energy, Highways.

EPC and other (net of inter segment) segments contributed Rs. 2,045.53
crore (39.93%), Rs. 2,039.47 crore (39.81%), Rs. 346.07 crore (6.75%)
Rs.409.85 crore (8.00%) and Rs. 282.50 crore (5.51%) respectively to the
gross revenues.

EBITDA has grown by 27.89% as compared to the previous year from
Rs.1,066.79 Crore to Rs. 1,364.31 Crore. PAT has gone down from Rs. 277.11
Crore to Rs. 225.34 Crore as compared to the previous year mainly due to
the higher depreciation and interest charges. Most of the projects are in
their initial phase of operations wherein the capacity costs tend to be
higher and revenue optimization yet to accrue.

Presented below are the standalone financial results of your Company:

(Rs.in Crore)
Particulars March 31, March 31,
2010 2009

Gross revenue 169.36 159.20

Operating and administrative 95.09 37.13
expenditure

EBITDA 74.27 122.07

Other Income 9.42 5.82

Interest & finance charges 69.11 23.79

Depreciation 0.94 0.11

Profit before tax 13.64 103.99

Provisions for taxation (including 0.19 6.32
deferred tax and fringe benefit tax)

Profit after tax 13.45 97.67

Surplus brought forward from 251.04 149.62
previous year

Amount available for appropriation 264.49 247.29

Appropriations

Debenture redemption reserve (12.98) (3.75)

Surplus carried to Balance Sheet 277.48 251.04

Earnings per share (Rs.) - Basic 0.04 0.27
and Diluted

The total revenues of your Company on standalone basis have gone up by
6.38% from Rs. 159.20 Crore to Rs. 169.36 Crore primarily due to revenue
from EPC division of Rs.101.39 Crore. The increase in operating and
administrative expenditure from Rs. 37.13 Crore to Rs. 95.09 Crore is
mainly due to operating expenses of construction division. Increase in
interest expenditure from Rs. 23.79 Crore to Rs. 69.11 Crore is on account
of interest on borrowings made during the year to meet the increased
requirement of funds for investments. During the year under review, the
Company allotted unsecured debentures of Rs. 500 Crore on private placement
basis which are listed on National Stock Exchange.

Dividend

The strength of your company lies in identification, planning, execution
and successful implementation of the projects in the infrastructure space.
To strengthen the long-term prospects and ensuring sustainable growth in
assets and revenue, it is important foryour company to evaluate various
opportunities in the different business verticals in which your company
operates. Your company currently has several projects under implementation
and continues to explore newer opportunities, both domestic and
international.

Your Board of Directors considers this to be in the strategic interest of
the Company and believe that this will greatly enhance the long term
shareholders' value. In order to fund these projects in their development,
expansion and implementation stages, conservation of funds is of vital
importance. Therefore, your Directors have not recommended any dividend for
the financial year 2009-10.

Subsidiary companies

As stated earlier, your Company carries its business operations through
several subsidiary and associate companies which are formed either directly
or as step-down subsidiaries or in certain cases by acquisition of a
majority stake in existing enterprises, mainly due to the requirement of
concession agreements. As on March 31, 2010, your Company has total 89
Subsidiary Companies apart from other joint ventures / associate companies.

The total list of subsidiary companies as on March 31, 2010 is provided as
annexure 'A' to this report.

Review of Operations/Projects of Subsidiary Companies

The detailed review of operations of each subsidiary's business is
presented in the respective company's Directors' Report; a brief overview
of the major developments thereof is presented below. Further, Management
Discussion and Analysis, forming part of this Report, also brings out a
brief review of the business operations of various subsidiaries and
associates.

Airport Sector

Airports business of your Company consists of two airports at Delhi and
Hyderabad in India and one airport abroad in Istanbul, Turkey. Briefly
presented below are the significant developments in these three assets
during the year:

Delhi International Airport Private Limited (DIAL)

DIAL is a joint venture between your Company (54%), Airports Authority of
India (26%), Fraport AG (10%) and Malaysia Airports (10%). DIAL has entered
into along term agreement to operate, manage and develop the Indira Gandhi
International Airport, Delhi. The significant progresses achieved during
the current year are:

* Work on the new integrated Terminal 3 construction has been completed in
a record time of 37 months and commercial operations are slated to commence
from July 2010.

* DIAL has signed agreements for 1 1 Joint Venture partnerships which
include Duty-free, F&B, Cargo, IT, Fuel Farm, Car Parking, Advertising and
Bridge Mounted Equipments.

* In Phase I of the hospitality district, the Company awarded all asset
areas (45 acres) to successful bidders for commercial property development.

* Delhi Airport has been declared the World's 4th Best Airport and Asia
Pacific's Most Improved Airport for Airport Service Quality (ASQ) in the 15
to 25 million passengers category by Airports Council International (ACI).
It has improved its ASQ score from 3.15 in 2008 to 4.16 in 2009.

DIAL recorded 7% and 18% growth in international and Domestic passenger
traffic respectively for the year 2009-10. With overall growth of 14%, DIAL
recorded 26.1 million passengers traffic for 2009-10 making it the busiest
airport in India.

GMR Hyderabad International Airport Limited (GHIAL)

GHIAL has set up India's first Greenfield Airport, Rajiv Gandhi
International Airport (RGIA) in Shamshabad, Hyderabad through the Public
Private Partnership (PPP) route. GHIAL is a joint venture between your
Company (63%), Airports Authority of India (13%), Government of Andhra
Pradesh (13%) and Malaysia Airports Holdings Berhad (11 %). The progresses
achieved during the current year are:

* RGIA was declared world's best airport in 5 to 15 million passengers
category and 5th best overall by ACI (ASQ 4.44 in 2009) on service quality
standards. It also won the 'Best Airport Award' at the Skytrax World
Airports Awards, 2010.

* On Airlines marketing, Jet Airways and Etihad have started one new route
each to Dubai and Abu Dhabi respectively; Indigo has added new routes, Silk
Air, Etihad and Malaysian Airlines have increased their frequency. RGIA has
been successful in bringing Lufthansa Cargo to Hyderabad.

* GMR Aviation Academy in collaboration with Jeppesen Aviation Training
Services, a subsidiary of Boeing, is in process of initiating Flight
Operations Management training courses at its training academy at Rajiv
Gandhi International Airport.

* CFM International, world's leading aircraft engine manufacturer,
inaugurated the engine Maintenance Training Center at Hyderabad Airport
Aerospace Park.

GHIAL has seen a 5% growth in overall passenger traffic during Financial
Year 2009-10 with the international traffic growing by 9% and domestic
traffic by 3%. Cargo volumes have also recorded growth of 14.8% reaching a
volume of 65.727 tonnes in Financial Year 2009-10.

The Istanbul Airport

Your Company owns 40% of Istanbul Sabiha Gokcen Uluslararasi Havalimani
Yatirim Yapim Ve Isletme A.S., (ISGIA), the company that is operating and
expanding the Istanbul Sabiha Gokcen International Airport at Istanbul,
Turkey for a concession period of 20 years. The other shareholders of ISGIA
are Limak Insaat Sanayi Ve Tic A.S. with 40% and Malaysia Airports Holdings
Berhad with 20%. The consortium took over the operations of the Istanbul
airport in May 2008. Key milestones achieved during the year at ISGIA are:

* Inauguration of the new passenger terminal building on October 31, 2009
(the building was completed 12 months ahead of schedule in 18 months).

* The airport can now handle 25 million passengers annually.

* Developed Cargo Handling capacity of over 1,000 tons monthly.

* All the contracts are in place and the concessions fully operational
(F&B, Duty Free, Advertising etc).

* The airport achieved a 48% increase in the passenger traffic and handled
6.3 million passengers in the year 2009.

* The airport won the anna.aero Airport Traffic Growth Award for highest
traffic growth in the 5 to 10 million passengers category. The airport also
won the Routes Airport Marketing Award 2009 for European Region.

Energy Sector

The year under review was a significant year for the Energy Sector of your
Company. To further strengthen presence in the power generation; your
Company acquired two power projects with a total capacity of 1,970 MW. They
are (i) 600 MW coal based EMCO Power project in Warora, Maharashtra and
(ii) 1,370 MW coal based SJK power project in Shahdol, Madhya Pradesh.

The year was significant for three operating power plants which your
company currently owns:

* Owing to availability of gas, the 388.5 MW GMR Vemagiri Power Plant
achieved its first full year of operation since it was commissioned
recording 89% PLF for the year.

* The 220 MW barge mounted power plant was successfully relocated from
Mangalore to Kakinada and converted to operate on gas. This plant is
expected to commence operation by June 2010.

* O & M operations at the 200 MW contracted capacity LSHSfired Chennai
power plant was taken over by the Company achieving significant cost
savings.

During the year, your Company achieved significant milestones for different
projects which are under different stages of implementation:

* Kamalanga Project: Achieved financial closure for the
1050 MW plant;

* Chhattisgarh Project: EPC order for BTG package has been placed for the
1370 MW plant;

* EMCO Project:

Achieved financial closure and order for BTG equipment placed for the 600
MW plant; and

* Rajahmundry Energy Project:

EPC contract placed for the capacity of 768 MW.

Your Company is on track to implement the other projects which it is
developing and due progress has been made in these projects during the
year. These projects are coal based 1,370 MW SJK Powergen Project, gas
based 80OMW Island power project in Singapore and the five hydroelectric
power projects (i) 300 MW Alaknanda power project on the Alaknanda River in
the state of Uttarakhand, (ii) 160 MW Talong power project in the East
Kameng district in the state of Arunachal Pradesh, (iii) 180 MW Bajoli Holi
power plant in the Chamba district in the state of Himachal Pradesh, (iv)

600 MW Upper Marsyangdi power project in Nepal; and (v) 900 MW Upper
Karnali power project in Nepal.

Highways

Your Company has six highway projects under operation across India
measuring a total length of around 421 kms. These include three Annuity
based projects: Tuni-Anakapalli, Tambaram Tindivanam, Adloor Yellareddy-
Gundla Pochanpalli and three Toll based projects: Ambala-Chandigarh,
Thondapalli-Jadcherla and Tindivanam-Ulundurpet. The Company commenced this
business in October 2004, when the Tambaram-Tindivanam road project entered
into commercial operation. The Group has been maintaining safety standards
by continuous monitoring of traffic and accident analysis. Several accident
mitigation measures have been put in place.

During the financial year under review, the sixth road project, namely
Tindivanam-Ulundurpet was completed and commenced commercial operations as
per schedule.

Your Company has been successful in winning three new projects in the
Highways Sector. These are the 181.6 kms Hyderabad-Vijayawada toll project,
29.65 kms Chennai Outer Ring Road annuity project and 99.05 kms Hungund-
Hospet toll project.

Urban Infrastructure

Your Company is developing SEZ in Krishnagiri and two Aerotropolis around
the Delhi and Hyderabad Airports as part of this sector. The major
developments are:

Krishnagiri SEZ.

Pursuant to a memorandum of understanding entered into with the state of
Tamil Nadu, SEZ is being developed at Krishnagiri district in the state of
Tamil Nadu, through a joint venture with Tamil Nadu Industrial Development
Corporation. The Krishnagiri SEZ is expected to cater to biotechnology,
information technology, traditional electronics and engineering companies.

The Krishnagiri SEZ is planned to be spread over 3,300 acres, approximately
60% of which has already been acquired. Commercial operation of this SEZ is
expected to commence by 2014.

Aerotropolis Development

Your Company is developing airport cities around the Delhi and Hyderabad
Airports to match world class standards.

The Delhi Airport Aerocity is in its first phase of development, which may
ultimately cover up to 5% of the 5,100 acres of the land area of Delhi
Airport. The hospitality district is envisaged to be developed in the first
phase of property development to bring in leading national and
international brands of hotels. A total of 45 acres of land divided into 14
asset areas has been leased out. 7 asset areas (21.8 acres) were awarded to
successful bidders in 2008-09 during the first round of bidding and the
remaining 7 assets were successfully awarded during the current year.
Second phase development is expected to start in financial year 2010-11.

The Hyderabad Aerotropolis is envisaged on a 1,000 acres of commercial land
around the Hyderabad Airport. Your Company plans to develop the Hyderabad
Aerotropolis on a theme based development and it is in the
conceptualization stage. Some of these theme based developments is likely
to happen during financial year 2010-11.

Corporate and International Business

The Corporate business includes provision of common services and resources
to all Group businesses. It also includes the Group's Corporate Aviation
business which consists of chartering business jets both to the Group
companies as well as to third parties. The Company's wholly owned
subsidiary, GMR Aviation Private Limited (GAPL) has a young fleet
comprising of short-haul & long-haul planes and helicopters with
experienced crew & operational staff. The fleet includes Falcon and Hawker
aircrafts and Bell helicopter. GMR International was set up by the Group as
a dedicated division for expanding its presence in the global market place
especially in Energy and Airport sectors. GMR International is pursuing a
region-based strategy with a focus on building strong local relationships
with strategic partners, investors, financial institutions and governmental
bodies. Competing globally, the Group will capitalize on new business
opportunities in emerging markets, access global talent, raise capital from
international market at competitive rates, diversify the portfolio and
strengthen the GMR brand globally.

This division, headquartered in London, leverages the Group's bidding,
financing, project management, and partnership development skills to
develop, own and operate assets abroad. G MR International focuses on a
few 'hotspot' regions characterized by high growth, high demand-supply gap
and openness to Indian investment. The regions of interest for growing
GMR's footprint are Middle East and North Africa (MENA), South East Asia
(ASEAN) and Emerging Europe.

Till date, GMR International has opened two regional offices in Istanbul
and Singapore to target opportunities in MENA and ASEAN regions
respectively.

Your Company is also developing the Island Power Project in Singapore after
acquisition of its 100% stake last year in the gas based 800 MW private
power utility.

Your Company continuously monitors overseas investment made by the Group.
The Company has taken efforts to strengthen the managerial focus in respect
of investments made in InterGen NY The investment in Homeland Energy Group
is for long term strategic requirements to meet the fuel needs of the
energy companies of the Group. The management team has been strengthened in
the Homeland Energy to ensure profitable operations.

Risk Management

Like all businesses in the Infrastructure sector, your Company is exposed
to a number of risk factors, both known and unknown, not all of which are
wholly within our control. All of them have the potential to impact our
business, revenues, profits, assets, liquidity and capital resources
adversely.

We realize that it is imperative to identify and address these risks and
leverage opportunities in order to achieve the objectives that it has set
for itself. Enterprise Risk Management (ERM) Framework is aimed at
institutionalizing a culture of risk awareness and facilitating risk based
decision making across the Group by establishing a suitable balance between
harnessing opportunities and containing risks.

Your Company has well defined processes for risk identification, risk
assessment, appropriate risk mitigation treatment and monitoring actions
thereof at various stages of the value chain, i.e. Bid, Project and Asset
stages.

Your Company also continuously seeks to bring the existing risk policies in
line with current ERM thinking, revisit the risk management organization
structure, refine roles and responsibilities, strengthen the process for
risk treatment and ensure regular reviews at all levels of the
organization.

As a measure of derisking its business, your Company seeks to follow a
policy of undertaking diversified projects in different segments,
geographies and revenue models.

A process exists to inform the Board/Audit Committee Members about the risk
assessment and minimization procedures. These procedures are subjected to a
periodical review to ensure that the management controls the risk through
means of a properly defined framework.

A detailed note on risks and concerns affecting the businesses of your
Company is provided in Management Discussion and Analysis.

Developments in Human Resources and Organisation Development

Your company has robust process of human resources development which is
described in detail in Management Discussion and Analysis under the heading
'Developments in human resources and organisation development at GMR
Group'.

Consolidated Financial Statements

As per Section 212 of the Companies Act, 1956, the Company is required to
attach the Directors' Report, Balance Sheet and Profit and Loss account of
its subsidiary companies to its Annual Report. The Ministry of Corporate
Affairs, Government of India (Gol) has granted exemption to your Company
for not attaching the above documents of subsidiary companies with the
Annual Report of the Company for the financial year 2009-10. Accordingly,
this Annual Report does not contain the reports and other statements of the
subsidiary companies. Your Company will make available the annual audited
accounts and related detailed information of the subsidiary companies to
the investors of the company and its subsidiaries seeking such information
at any point of time. The annual accounts of the subsidiary companies will
also be available for inspection during business hours at the head/
registered office of the Company and that of the subsidiary companies
concerned.

The statement pursuant to above stated approval of Government of India,
about financial information of each subsidiary company, containing details
of (a) capital, (b) reserves, (c) total assets, (d) total liabilities, (e)
details of investment (except in case of investment in subsidiaries), (f)
turnover, (g) profit before taxation, (h) provision for taxation, (i)
profit after taxation and (j) proposed dividend is provided as annexure
'B'. However, the financial statements of GMR Corporate Centre Limited
(GCCL) are not consolidated since GCCL is a guarantee company having no
share capital and commercial operations.

As required by Accounting Standard-21 and Listing Agreement with stock
exchanges, the audited consolidated financial statements of your Company
and its subsidiaries are attached.

Changes in Share capital

Sub-division of Equity Shares

During the year under review, your Company has sub-divided its equity
shares from a face value of Rs.2 to Re.1 in order to facilitate the
benefits like more liquidity, less volatility and broad basing of small
investors.

Qualified Institutional Placements (QIP)

Your Company successfully completed issue of 22,50,80,390 equity shares of
Re.1 each at a price of Rs.62.20 per equity share, including premium of
Rs.61.20 per equity share, aggregating Rs.1400 Crore to Qualified
Institutional Buyers (QIBs) as per Chapter VIII of SEBI (Issue of Capital
and Disclosure Requirement) Regulations, 2009, through the QIRThe QIPopened
for subscription to QIBs on April 15, 2010 and closed on April 19, 2010.

The entire money amounting to Rs.1400 Crore was received and allotment of
shares was made on April 21, 2010. The BSE and the NSE had given trading
permission for the equity shares issued to QIBs on April 22, 2010.
Consequent to this allotment, the listed equity share capital has been
increased from Rs. 366,73,54,392 to Rs. 389,24,34,782.

The Company has paid the listing fees payable to the BSE and the NSE for
the financial year 2010-11.

Directors

Mr. G.B.S. Raju, resigned as the Managing Director with effect from May 12,
2010. He continues as a Director on the Board of Directors of the Company.
The Board places on record, its appreciation for the valuable contribution
made by Mr. G.B.S. Raju during his tenure as the Managing Director of the
Company.

Mr. Srinivas Bommidala has been appointed as the Managing Director of the
Company with effect from May 24, 2010 for a period of 5 years subject to
the approval of the members at the ensuing General Meeting.

Mr. G.B.S. Raju, Mr. B.V. Nageswara Rao, Mr. Arun K. Thiagarajan and Mr.
K.R. Ramamoorthy, Directors, retire by rotation at the ensuing Annual
General Meeting and being eligible, offer themselves for reappointment. The
Board recommends their reappointment for your approval.

The professional background of the above Directors is given under the
section 'Board of Directors' in the Report of Corporate Governance attached
to the Annual Report.

Group

Pursuant to intimation from the Promoters, the names of the Promoters and
entities comprising 'group' are disclosed in the Annual Report for the
purpose of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997.

Directors' responsibility statement

Pursuant to the requirement under Section 217 (2AA) of the Companies Act,
1956, with respect to Directors' responsibility statement, it is hereby
confirmed:

1. That in the preparation of the annual accounts for the year ended March
31, 2010, the applicable Accounting Standards have been followed and proper
explanations were provided for material departures, if any.

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

3. That the Directors have taken proper and sufficient care for maintenance
of adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.

4. That the Directors have prepared the accounts for the financial year
ended March 31, 2010, on a going concern basis.

Corporate Governance

Corporate Governance at GMR is driven by a simple principle- 'Achieve right
results through right means'. Your Company continually works at improving
its practices and processes as it is spreading its presence through
continents. Your Company has a Corporate Governance Committee which was
constituted in 2009 to ensure that the best practices are identified,
adopted and followed. Your company has also developed a framework for
corporate governance and a roadmap for forward thinking corporate
governance practices.

A detailed report on Corporate Governance practices followed by your
Company, in terms of Clause 49 (VI) of the Listing agreement with Stock
Exchanges, is provided separately in this Annual Report.

Secretarial Audit

As per SEBI requirement, Secretarial audit is being carried out at specific
periodicity by a Practising Company Secretary. The findings of the audit
have been satisfactory.

Awards and Recognitions

During the period under review, your company and its subsidiaries
/associates have received the following awards/ recognitions:

* GMR Varalakshmi Foundation, the CSR arm of the Group, received the Silver
Plate Award for supporting cause of Elders - on October 1, 2009, New Delhi
for the CSR works with elderly. The award aims to recognize and applaud the
highest contribution given to the cause of disadvantaged older persons.

* Delhi's Indira Gandhi International Airport (IGIA) was ranked 4th best
airport in the world at the Airport Council International's (ACI) Annual
Airport Service Quality (ASQ) Awards. It received this prestigious rating
for airports in the 15 to 25 million passenger traffic per annum category
in ACI's announcement on February 16, 2010.

* IGIA was also declared the winner of the 'Best Improved Airport' award in
the Asia Pacific Region by ACI.

* Rajiv Gandhi International Airport (RGIA) was adjudged as the best
airport in the 5 to 15 million passenger capacity airports in the world.

* Further, RGIA secured the fifth position amongst all airports, both
worldwide and in the Asia-Pacific region. This unique achievement comes
within less than two years of the green field airport having commenced
operations.

* RGIA alsow on the 'Essar Steel Infrastructure Excellence Award 2009'
organized by CNBC TV 18.

* Mr. Kiran Kumar Grandhi, Business Chairman-Airports and Managing
Director-DIAL received SATTE's-'Young Entrepreneur Award 2009' in the area
of Travel and Tourism.

The Directors of your Company are glad to inform you that Mr. G.M. Rao,
Executive Chairman of your Company was conferred with the following awards:

* 'First Generation Entrepreneur of The Year' at the CNBC TV18 India
Business Leader Awards 2009.

* Doctorate from Andhra University - received an honorary doctorate (Doctor
of Letters) from Governor of Andhra Pradesh and Chancellor of the Andhra
University at the 76th Convocation on December 5, 2009.

Management Discussion and Analysis (MDA)

The Management Discussion and Analysis, forming part of this report, as
required under Clause 49(IV)(F) of the Listing Agreement with the stock
exchanges is attached separately in this Annual Report.

Auditors and Auditors' Report

M/s. S.R. Batliboi & Associates, Chartered Accountants and M/s. Price
Waterhouse, Chartered Accountants, joint statutory auditors of the Company,
retire at the conclusion of the ensuing Annual General Meeting of the
Company. M/s Price Waterhouse, Chartered Accountants have expressed their
desire to discontinue as joint Statutory Auditors of the Company for the
financial year 2010-11.

M/s. S.R. Batliboi & Associates, Chartered Accountants have expressed their
willingness for appointment as statutory auditors and confirmed that their
appointment, if made, will be within the prescribed limits under Section
224 (1B) of the Companies Act, 1956. Special notice has also been received
from a member proposing the appointment of M/s. S.R. Batliboi & Associates,
Chartered Accountants as statutory auditors of the Company for the
financial year 2010-11.

The Notes to Accounts forming part of the financial statements are self-
explanatory and need no further explanation.

There are no qualifications or adverse remarks in the Auditors' Report
which require any clarification or explanation.

Corporate Social Responsibility (CSR)

GMR Group believes corporates have a special and continuing responsibility
towards the society. GMR Varalakshmi Foundation (GMRVF) is the CSR arm of
the Group. GMRVF is actively involved in the areas of education, health,
hygiene & sanitation, community development programmes, employment and
livelihood by developing a sense of entrepreneurship, especially in the
areas where the Group has a presence. GMRVF's mission is to make a
difference in all the above fields through empowerment and capacity
building of the poorest of the poor and their institutions, especially in
rural India with humility, compassion and empathy.

Details on the activities of GMRVF are covered elsewhere in the Annual
Report.

Environmental Protection and Sustainability

Industrial entrepreneurial success of your company is integrated with
strong Environmental Management practices across all process operations.
Clean environment is our top priority and to support that several unique
schemes have been implemented and continually progressed to prevent
pollution and conserve natural resources to achieve sustainable
development.

All the operating units are in compliance with environmental regulations.
Hazardous wastes are being disposed through Pollution Control Board
authorized agencies. Continuous Ambient Monitoring systems have been set up
at appropriate locations in and around the plants and the Environmental
performance indicators like Stack emissions, Ambient air quality etc. are
much below the stipulated norms.

Vemagiri and Chennai units are certified with OHSAS 18001, ISO 14001, ISO
9001 and work is on for establishing Integrated Management System
Certification for Quality, Environment, Health, and Safety in all our
existing and proposed units.

At Chennai plant, fully integrated Sewerage Water Treatment Plant has been
set up including Reverse Osmosis process for treating 10% of Chennai
plant's total sewage saving fresh water intake of 5,400 m3/day, which is
equivalent to the water use by 100,000 people. The treated STP water is
used for cooling operations and green belt development. Waste Heat Recovery
Boilers generate steam for use in indirect heating of fuel storage tanks
and pipelines. Solar energy is used to lighten the boundary fence.

At Vemagiri Plant the Gas Turbine uses the advanced Dry Low NOx (DLN 2.0 +)
burner system to reduce NOx emissions at source. Waste heat from Gas
Turbine is used for power production in Steam Turbine through Heat Recovery
Steam Generator (HRSG). Reuse of Steam Condensate and HRSG is designed for
zero make up.

At GMR Hyderabad International Airport Limited (GHIAL), special environment
friendly design features have been incorporated for power savings by using
natural sun light. The Lighting per square foot in the passenger terminal
block uses only 0.9 watts of energy as against the minimum of 1.3 watts
prescribed by the American Society of Heating, Refrigerating and Air-
Conditioning Engineers.

Process has been put in place for effective waste management system and
Carbon footprint studies have been initiated aiming to reduce carbon
footprint.

Delhi International Airport Private Limited (DIAL) has won Greentech Gold
award Environmental Excellence in Aviation Sector two years in succession
(2008 and 2009). The Greentech award is presented to company in recognition
of outstanding achievements in the field of environment protection on the
basis of evaluation of performance every year. DIAL is certified for its
Implemented Environmental Management System ISO 14001:2004. DIAL has also
undertaken initiative for the certification of new integrated passenger
Terminal Building -T3 under LEED (Leadership in Energy and Environmental
Design) Green Building Rating System.

Conservation of energy, technology absorption and foreign exchange earnings
and outgo

The Particulars as required under section 217 (1) (e) of the Companies Act,
1956, read with the Companies (Disclosure of particulars in the report of
Board of Directors) Rules, 1988, are set out in the annexure 'C' included
in this report.

Particulars of employees

In terms of the provisions of Section 217 (2A) of the Companies Act, 1956,
read with the Companies (Particulars of Employees) Rules 1975, as amended,
the names and other particulars of employees are set out in the annexure
'D' to the Directors' Report. However, having regard to the provisions of
Section 219(1)(b) (iv) of the Companies Act, 1956, the Annual Report
excluding the aforesaid information is being sent to all members of the
Company and others entitled thereto. Any member interested in obtaining
such particulars may write to the Company Secretary at the Registered
Office of the Company.

Fixed Deposits

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

Acknowledgments

Your Directors wish to express their grateful appreciation for the valuable
support and cooperation received from lenders, business associates, banks,
financial institutions, shareholders, various statutory authorities and
society at large. Your Directors also place on record, their appreciation
for the contribution, commitment and dedication of the employees of the
Company and its subsidiaries at all levels.

For and on behalf of the Board

Sd/-
G.M. Rao
Executive Chairman
Place: Bengaluru
Date : June 10, 2010.

Annexure 'C' to the Directors' Report

Information pursuant to Section 217(1) (e) of the Companies Act, 1956, read
with the Companies (Disclosure of Particulars in the Report of the Board of
Directors) Rules, 1988, as amended and forming part of the Directors'
Report for the year ended March 31, 2010.

1. Conservation of energy and technology absorption:

Since the Company is not engaged in any manufacturing activity, the
particulars are not applicable.

2. Foreign exchange earnings and outgo in foreign exchange during the
period:

The particulars relating to foreign exchange earnings and outgo in foreign
exchange incurred during the period are:

i. There were no Foreign Exchange earnings during the year.

ii. The details of Foreign Exchange outgo are as shown below:

(Rs. in Crore)
Particulars Year ending Year ending
March 31, 2010 March 31, 2009

Travelling expenses 0.52 1.71
Professional charges 1.11 1.51
Others 0.15 0.01

For and on behalf of the Board

Sd/-
Place: Bengaluru G.M. Rao
Date : June 10, 2010 Executive Chairman

MANAGEMENT DISCUSSION AND ANALYSIS

Forward-looking Statements

This document contains certain forward looking statements based on the
currently held beliefs and assumptions of the management of GMR
Infrastructure Limited, which are expressed in good faith and in their
opinion reasonable. For these purposes, forward looking statements are
statements that address activities, events, conditions or developments that
the company expects oranticipates may occur in the future. Such forward-
looking statements involve risks and uncertainties that may cause actual
events, results or performances to differ materially from those indicated
by such statements. GMR Infrastructure Limited disclaims any obligation to
update these forward-looking statements to reflect future events or
developments.

About Us:

We are a diversified infrastructure company with operations and investments
across the airport, energy, urban infrastructure and highways sectors. We
have substantial experience in the above mentioned areas. Our airport
business consists of interests in the companies that operate Rajiv Gandhi
International Airport in Hyderabad, Indira Gandhi International Airport in
New Delhi, and Sabiha Gokcen International Airport in Istanbul. Our Energy
business consists of three power plants that are in commercial operation,
four power projects under implementation, six power projects under
development, one coal mining project under development in Indonesia and an
investment in a company that owns coal mining interests in South Africa.
Our highways business consists of six highways in commercial operation and
three projects under development. We play an active role in all stages of
development of our projects, including construction, financing and
operation.

Geographical presence of our businesses

Our Company, over the last decade, has set up projects in various parts of
India. In the past couple of years, the Company has forayed into the
International arena with sizeable investments in airport and energy
sectors. The Company has strategic plans to further expand its operations
to markets across the globe in the infrastructure space.

We are operating, implementing or developing various infrastructure
projects in India, Turkey, Nepal, Singapore and Indonesia. We have also
invested in a company that owns coal mines in South Africa. Our power
portfolio is diversified in terms of geography, fuel type, fuel source and
off-take arrangements. Our highway projects are spread across the country.

Our assets and revenues comprise a healthy mix of diversified assets and
revenue streams:

We continue to take steps to diversify at various levels, in terms of type
and location of assets, fuel, and pricing. Some of the steps taken are:

* The operation of the Istanbul airport, which is our first operating asset
outside India.

* The operation, development and modernization of Delhi airport, where
construction of the new integrated terminal was completed in March 2010 and
the terminal is expected to commence commercial operation from July 2010.

* Relocation of the barge-mounted power plant to Kakinada in the state of
Andhra Pradesh and conversion of the plant to use natural gas-completion by
April 2010.

* The implementation of a 1,400 MW coal-fired power project in Orissa, a
600 MW coal-fired power project in Maharashtra, 1,370 MW coal-fired power
project in Chhattisgarh and 768 MW gas-fired power project in Andhra
Pradesh.

* The development of a 1,370 MW coal-fired power project in Madhya Pradesh.

* The development of an 800 MW gas-fired power project in Singapore which
is expected to be our first overseas greenfield power project.

* The development of a 300 MW hydroelectric power plant on the river
Alaknanda in Uttarakhand, a 160 MW hydroelectric power plant in Arunachal
Pradesh, a 180 MW hydroelectric power plant in Himachal Pradesh.

* The development of two hydroelectric power projects in Nepal, namely the
900 MW Upper Karnali power project and the 600 MW Upper Marsyangdi power
project.

* The development of coal mines in Indonesia.

* The development of toll roads on a 181 kilometer stretch on the Hyderabad
- Vijayawada (NH-9) and a 99 kilometer stretch between Hungund and Hospet
(NH-13) and the development of a 30 kilometer annuity road project as the
outer ring road for the city of Chennai.

* The development of 5% of the total land area of approximately 5,100 acres
(subject to certain excluded land) at the Delhi airport, of which
approximately 45 acres has been licensed to developers.

* The development of up to 1,000 acres of land area at the Hyderabad
airport for commercial property development.

* The development of two 250-acre SEZS at the Hyderabad airport.

* The development of a 3,300-acre SEZ in Krishnagiri, in the State of Tamil
Nadu.

We expect that once these new projects enter into full commercial
operation, they will help further mitigate our risks and improve our
business prospects.

The Indian growth story, post the liberalization and structural reforms of
1991, has been moving on a progressive growth track. Barring few instances
like the Asian currency crisis, internet bubble and more recently the
global credit crisis, the overall direction has been positive. The Indian
economy, caught in the global economic meltdown recently, grew gradually as
reflected in growth rate of real GDP for FY 2009 (6.7%). The real GDP
growth rate moved up in the current FY 2010 (7.2%) in line with the visible
global economic recovery and this trend is expected to continue in FY
2011 (8.2%) (source: RBI).

Post the easing of global credit crisis of late 2008, the world has seen a
fragile economic recovery-countries like China and India are widely
expected to drive economic recovery as they embark on a journey to create
infrastructure for their citizens. The economies of US and Europe are
expected to gradually emerge out of the crisis erasing the impacts of high
leverage and the subsequent bailouts. With the improved sentiments, towards
the second half of the financial year, the credit and equity markets have
become

more receptive to corporate fund raising. There are early signs post the
economic crisis that the global wealth is eager to participate in the long-
term India growth story and Infrastructure will play a vital part in the
overall scheme of things.

The need for Infrastructure development in India is rightfully reflected in
the increased allocation made in the 11th Five year plan of approx. US$ 500
billion. This is widely expected to further double to almost a trillion
dollars in the 1211 Five year plan. About a third of the planned investment
is expected to come from private sector, where the PPP model will continue
to play an important role. Moreover, we expect the Planning Commission to
take active interest in execution of plans to achieve targets by 2012 and
therefore most of the targets for FY 2011 are significantly higher than the
progress made in the current financial year. This should augur well for the
infrastructure sector players and the overall activity on the ground should
pick up pace.

Airport Sector

The fiscal year 2010 marked a visible comeback for the Indian economy
especially in Q4 when the GDP grew by 7.9%. World Bank's projections show
that the Indian economy is slated to grow at 8% per annum during the period
2010-2014. Historically, GDP and Aviation fuel price are the lead
indicators for business in the aviation industry. While, challenges of
volatility in global fuel prices remain, the overall growth and turnaround
seem to be well placed.

Growth in domestic air travel has reversed the downward trend of the
previous year. Domestic air traffic registered positive growth from June
2009 and thereafter. Industry and consumer confidence seem to have
returned, which uphold this upward trend. There is also a shift in the
profile of passengers. Business travelers, which accounted for 80% of all
travelers six years ago now account for about 30%. This has been driven
mainly by the dominance of the Low-Cost Carriers which have been able to
bring many train and bus travelers into the air travel fold. Growth has
also returned to the cargo segment since April 2009, after a fall in 2008.
The recovery is driven by double digit growth from the domestic cargo
segment, the international cargo segment remaining relatively flat.
Industry observers project a growth rate of 8.5% for the next 5 years in
Indian air cargo segment.

Favourable demographics and revived economic growth point to a continued
high growth phase in domestic passenger traffic and international outbound
traffic. International inbound traffic is also expected to grow with
increasing investment, trade activity and as India'stourism potential is
marketed to international leisure travelers. This has led to an increase in
demand for aviation infrastructure in the country. Vision 2020 by the
Ministry of Civil Aviation envisages creating infrastructure to handle 280
million passengers by 2020 with investment opportunities of US$110 billion
- US$80 billion in new aircraft and US$30 billion in development of airport
infrastructure (source: Investment Commission of India report titled
'India: Opportunities in the world's largest democracy'). This shows the
huge untapped potential for the industry. The long term scenario is
encouraging.

Airports are the largest gateway and the first point of contact for foreign
passengers to any country. Hence, the quality of airport infrastructure and
services are vital to a country's image and also for the overall
transportation network, contributing directly to a country's development in
terms of foreign trade. To meet India's huge demand for capacity addition
in the aviation sector, it was estimated that investments of US$9 billion
will be required till 2013-14. This is a significant amount and implies
that a substantial portion has to come from the private sector. It is
estimated that approximately US$6.9 billion will come in the form of Public
Private Partnerships (PPPs). The Government has assigned high priority to
improving the services and facilities at Indian airports and to bring them
at par with international standards.

Energy Sector

Indian Power sector has come along way since the reforms were first
introduced in 1991. The Electricity Act 2003 however, proved to be the
landmark step for the sector reforms. Provisions of the Act such as
'Delicensing of generation', 'Procurement of power through competitive
bidding' & 'Recognition of power trading', etc. have been key enablers for
attracting huge private interest in the sector. The number of private
players in power sector has correspondingly increased to a significant
level in the past few years.

It is evident from the graph below that capacity addition in the Private
sector has outpaced additions in State & Central Sectors in the past three
year.

The installed capacity as on 31 .03.2010 was 1,59,398 MW. The fuel wise
break up is as follows:

Type Capacity (MW) % of Total Capacity

Coal 84198 52.8%
Gas 17056 10.7%
Diesel 1200 0.8%
Total Thermal 102454 64.3%
Nuclear 4560 2.9%
Hydro 36863 23.1
RE Sources 15521 9.7%
Total (MW) 159398 100%

It was planned that the sector will add about 78,000 MW in the current Five
Year plan. However, recent estimates suggest that the sector will be able
to achieve capacity addition of about 62,000 MW only. Even the past data
presented in the graph below suggests that capacity addition has not kept
pace with the targets.

It has been observed that availability of fuel has been one of the key
constraints for capacity addition. In this regard, the recent commencement
of gas production from KG basin is expected to play a key role in the
sector's future capacity expansion plans.

Going forward, the power sector is likely to face coal shortages to the
extent of 62 Million tonnes by 2012, by which time coal requirement for
this sector is estimated to grow to 540 Million tonnes, as projected by
CEA, whereas cumulative availability of coal for this sector from CIL, SCCL
and from the captive mine blocks already allotted to Power Utilities is
estimated at about 478 Million tonnes. Based on the demand-supply mismatch
of domestic coal, non-coking coal has to be imported to sustain and
increase generation level as well as to achieve capacity addition
programme. As per the present Import policy, coal can be freely imported
(under Open General License) by the consumers themselves considering their
needs based on their commercial prudence and that is expected to play a
crucial role in long term energy security.

To address various constraints in Energy sector, GMR has taken a long-term
strategic view:

* It has optimized its power sale strategy by judicious mix of power sale
through long term PPA and short & medium term merchant sale.

* Existing projects and running assets are with multiple fuel mix- balanced
portfolio of coal, gas, liquid fuel and hydro projects.

* Ensuring fuel security of upcoming projects through fuel linkage,
developing domestic coal blocks and acquisition of coal assets overseas.

* Diversification in Power trading and Transmission business.

Highways Sector

India has the second-largest road network in the world, aggregating 3.3
million kilometers. Roads carry about 65 per cent of the freight and 80 per
cent of the passenger traffic. While national highways/ expressways
constitute only about 66,590 kms (2 per cent of all roads), they carry 40
per cent of the road traffic. This signifies the huge potential for
highways development in the country.

The number of vehicles has been growing at an average pace of 10.16 per
cent per annum over the last five years. For the purpose of management and
administration, roads in India are divided into the following categories:
(1) National Highways (NH) which are intended to facilitate medium and long
distance inter-city/state passenger and freight traffic across the country
(2) State Highways (SH) which carry traffic along major centers within the
state (3) Major District Roads (MDR) having the secondary function of
linkage between main roads and rural roads and (4) Other district roads and
village roads which provide accessibility to villages to meet their social
needs, as also the means to transport agricultural produce from villages to
nearby markets.

Out of the total Indian road network of 3.3 million kilometers, National
highways amount to 66,590 kms.

According to the Planning Commission report, the road freight industry will
be growing at a compound annual growth rate (CAGR) of 9.9% from 2007-08 to
2007-12. A target of 1,231 billion tonne kilometer (BTK) has been put on
road freight volumes for 2011-12. (Source: IBEF website, accessed on May
15, 2009)

The Government of India has taken several initiatives to encourage private
investment in roads. Some of the key initiatives are as follows:

* The Government of India to carry out initial preparatory work including
land acquisition and utility removal. Rights of way to be made available to
concessionaries free from all encumbrances.

* NHAI/The Government of India may provide capital grant up to 40%
(maximum) of project cost to enhance viability on a case to case basis.

* 100% tax exemption for any consecutive 10 out of 20 years from the
Commercial Operation Date.

* Concession period allowed for up to 30 years.

* Duty free import of specified modern high capacity equipment for highway
construction.

* The Government of India has approved 100% Foreign Direct Investments for
road and highway construction through the automatic route.

* Arbitration and Conciliation Act 1996 based on UNICITRAL provisions.

* In BOT projects concession holders are allowed to collect and retain
tolls.

* Planning Commission, NHAI and Ministry of Road Transport and Highways
have introduced the model concession agreement to mitigate the traffic
risks of toll based projects - pursuant to which the concession period will
be extended or reduced based on actual traffic.

From the fiscal year 2007 to 2012, the Indian government has predicted a
requirement of US$ 90 billion to enhance the nation's road infrastructure.
With the initiation of the National Highway Development Program (NHDP), the
government is looking forward to sponsor more than 200 schemes in NHDP
Phase III & V to be tendered out embodying around 13,000km of pathways.
Phase VI has received in principle approval from the Government while Phase
IV and VII are yet to be approved by the Government. The average plans are
anticipated to use US$150 million to US$200 million while bigger plans are
likely to touch US$700 million to US$800 million. The acquisition method
prefers firms with decent knowledge and sound fiscal vigor.

The prospects for a developer are greater as more than 10 Indian states are
also vigorously scheduling the growth of their highways. Moreover, in the
year 2010 more than 4,500km of state freeways are expected to be
felicitated by the government.

It is believed that the Sector is on fast track owing to: 1) Political
will; 2) Structural Changes; and 3) Buoyant Capital Markets (boosts
confidence levels that fund raising is still an option). The Sector looks
positive as in the recent past all Road projects have achieved financial
closure. This reflects the increasing readiness and confidence of the
financiers to fund Road Projects. Going ahead, we expect both domestic as
well as international funds to flow into the Sector to capitalize on the
upcoming lucrative opportunities in the Sector. Finally, it is believed
that structural, financial and procedural changes are required to help in
achieving the aggressive target of constructing 20km/day as against 5-6km/
day achieved during FY 2005-09. NHAI's new qualification policy ensures
that only developers with robust technical and financial capabilities are
selected for large projects.

Investment in Road infrastructure has been the focal point in recent years,
as the government has ultimately recognized the fact that inadequate
infrastructure has been constraining growth and deterring foreign players
from investing in the country. The 'Global Competitiveness Report 2007-08'
by the World Bank points at the 'Inadequate supply of Infrastructure',
which is the most problematic factor for doing business in India, and which
sums up the crucial role that infrastructure plays in ushering growth. The
government will continue its focus on infrastructure development in the
country, particularly in the Road Segment.

It is believed there exists significant opportunities in the Road Sector,
which can provide investors a platform to grow and expand in the Indian
economy. The government is also focusing on nurturing the profitable
partnership with the private sector to bridge the investment and knowledge
gaps in Road infrastructure. However, investment in Road Infrastructure
entails substantial investments, and while returns are also high, investors
will have to accept the long gestation periods involved. Thus, it is clear
that the way ahead is through well-defined and innovative partnerships

Urban Infrastructure Sector

a) Special Economic Zones

Asia's first Export Processing Zone (EPZ) was set up in Kandla in 1965.
With a view to attract larger foreign investment in India, the Special
Economic Zones (SEZs) Policy was announced in April 2000. This policy was
intended to make SEZs an engine for economic growth supported by quality
infrastructure and by an attractive fiscal package, both at the Centre and
the State level, with the minimum possible regulations. The functioning of
the SEZs in India is guided by the provisions of the Foreign Trade Policy
and fiscal incentives have been made effective through the provisions of
relevant statutes.

Special Economic Zones Act, 2005 instills confidence in investors and to
impart stability to the SEZ regime thereby generating greater economic
activity and employment through the establishment of SEZs, by providing
simplification of procedures and single window clearance on matters
relating to Central as well as State Governments.

The exports from the functioning SEZs have grown considerably from
Rs.13,854 Cr in 2003-04 to Rs. 99,689 Cr in 2008-09 with a CAGR of 48%. The
fact that during the same time India's overall exports have grown with a
CAGR of 21%, establishes beyond doubt that the response to the SEZ policy
of the Central Government has been overwhelming and the scheme has been
able to achieve the envisaged objectives. An investment of Rs. 1,08,903
crore has been made in SEZs. This includes Foreign Direct Investment of
US$2.29 billions (9.4% of total investment). (Source: Department of
Industrial Policy and Promotion).

India's quest for higher exports as a share of its GDP will be considerably
helped by successful SEZs. SEZs help in creating high-quality
infrastructure in pockets and provide a supportive business environment.
They allow the government to experiment with the liberalization of labour
laws. The liberalized regime allows SEZs to attract foreign capital and
technology. Meeting the challenging goal of increasing the exports
manifolds requires huge investment in SEZs, both domestic as well as FDI.
It is estimated that an additional 6 to 7 lacs acres of land is required
for SEZ development. So far, formal approvals have been granted for setting
up of 576 SEZs out of which 319 have been notified. Considering the
potential to grow exports, it is expected that the trend in SEZ development
will continue in the medium to long term.

b) Property Development

The Indian real estate sector plays a significant role in the country's
economy. The real estate sector contributes heavily towards the gross
domestic product (GDP). Almost six per cent of the country's GDP is
contributed by the Real estate sector. In the next five years, this
contribution to the GDP is expected to rise substantially.

Faster economic growth in Brazil, Russia, India and China (BRIC) could
result in the real estate markets of these nations recovering at a faster
rate than the UK and US real estate markets. India's property sector has
started to improve from end 2009 and is expected to continue its growth
trajectory. India may attract up to US$ 12.11 billion in real estate
investment over a five-year period.

India leads the pack of top real estate investment markets in Asia for
2010. Almost 80 per cent of real estate developed in India is residential
space, the rest comprises of offices, shopping malls, hotels and hospitals.

The real estate sector is also likely to get a boost from Real Estate
Mutual Funds (REMFs) and Real Estate Investment Trusts (REITs). In fact,
according to a CRISIL, the REITs will have the potential to hold at least 5
per cent share of the total global real estate market by 2010, the size of
which will reach US$ 1,400 billion in the next three years.

The government has introduced many progressive reform measures to unlock
the potential of the sector and also meet increasing demand levels. The
stimulus package announced by the government, coupled with the Reserve Bank
of India's (RBI) move allowing banks to provide special treatment to the
real estate sector, is likely to impact the Indian real estate sector in a
positive way. RBI has decided to extend exceptional concessional treatment
to the commercial real estate exposure which is restructured, up to June
30, 2009.

* 100 per cent FDI allowed in realty projects through the automatic route.

* In case of integrated townships, the minimum area to be developed has
been brought down to 25 acres from 100 acres.

* Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) repealed by
increasingly larger number of states.

* Minimum capital investment for wholly-owned subsidiaries and joint
ventures stands at US$ 10 million and US$ 5 million, respectively.

* Full repatriation of original investment after three years.

* 51 per cent FDI allowed in single-brand retail outlets and 100 per cent
in cash-and-carry through the automatic route.

Segment-wise Performance and Outlook Airport Sector

The airport business of the Company consists of two Indian airports - Rajiv
Gandhi International Airport, Hyderabad (RGIA); Indira Gandhi International
Airport, Delhi (IGIA); and one overseas airport - Istanbul Sabiha Gokcen
International Airport, Turkey (ISGIA). All the airports are in commercial
operation. The new green field Terminal-3 in Delhi project is completed and
will be inaugurated in July 2010. During financial year 2009-10, the
airport sector has achieved several landmarks, awards and accolades. Some
of these are described in the subsequent sections:

RGIA-GMR Hyderabad International Airport Ltd

In financial year 2010, RGIA has seen a 5% growth in overall passenger
traffic with the international traffic growing by 9% and domestic traffic
growing by 3%. International air traffic movements (ATMs) grew by 12% while
the domestic ATMs at the RGIA airport contracted by 3%, which has resulted
in the contraction of overall ATMs by 0.5%. It is worthy to note that
passenger traffic has grown although the aircraft movements have declined.
This is mainly due to schedule revisions by airlines which have optimized
capacity, enhanced yields and controlled costs.

Airline Marketing's efforts have resulted in additional routes and
schedules. On the international front, Jet Airways and Etihad have started
one new route each to Dubai and Abu Dhabi respectively; on the domestic
front Indigo has added 2 new routes from Hyderabad to Patna and Lucknow.
There has also been an increase in frequency on the existing routes. Silk
Air and Etihad have increased their frequency from 5 to 7 per week and
Malaysian Airlines from 3 to 4 perweek. RGIA has been successful in
bringing Lufthansa Cargo to operate at a frequency of 2 per week in
addition to other non-scheduled cargo operators.

Cargo volumes have shown a remarkable growth of 14.8% touching 65,727 tons
in FY10. Again, domestic growth has immensely contributed to overall growth
by displaying Yo-Y growth of 22%. International cargo tonnage grew at 10%.

GMR Aviation Academy in collaboration with Jeppesen Aviation Training
Services, a subsidiary of Boeing, will start Flight Operations Management
training courses at its training academy at Rajiv Gandhi International
Airport. The MRO facility is all set to begin the first phase of operations
by next year in July 2011.

RGIA Highlights

* Notification for Aviation SEZ received

* CFM International, world's leading aircraft engine manufacturer,
inaugurated the engine Maintenance Training Center at Hyderabad Airport
Aerospace Park.

* Aero Express service extended to Kukatpally. Also direct route started
from the airport to Vijayawada

* Passenger Transportation Center inaugurated at the airport for the
convenience of passengers and cab drivers

* GMR Aviation Academy appointed as Airport Council International's Global
Training Hub for the Asia Pacific Region

* RGIA bagged three Integrated Management System (IMS) certifications at
one go-The first airport in the PPP sector, to achieve IMS certifications
comprising Quality, Safety and Environment management systems:
International Quality Management Standard ISO 9001:2008, Environment
Management Standard ISO-14001:2004 and Occupational Health and Safety
Management standard BS OHSAS 18001:2007

* Animal Quarantine Facility inaugurated at RGIA

Awards & Accolades

* Declared world's best airport in 5 to 15 million passengers category and
5th best overall by ACI (ASQ 4.44 in 2009) on service quality standards.

* First place in The Routes Asia Airport Marketing Awards for the Indian
Sub-Continent category in 2009.

* CNBC Infrastructure excellence award for Airports.

* CAPA Environment Award of the year : Airport, 2009.

* 'Best Airport India' Award at the Skytrax World Airports Awards 2010.

IGIA-Delhi International Airport Private Limited (DIAL)

The new Domestic Departure Terminal 1D was completed and commercial
operations successfully commenced in April, 2009. Work on the new
integrated Terminal 3 construction has been completed in a record timeof 37
months and commercial operations are slated to commence from July 2010. In
order to focus on the non-aero and aero revenue streams, during the year,
DIAL has signed agreements for 11 Joint Venture partnerships which include
Duty-free, F&B, Cargo, IT, Fuel Farm, Car Parking, Advertising and Bridge
Mounted Equipments. These partnerships will help in value enhancement as
well as bring in operational expertise. DIAL has outsourced its cargo
operations to global professionals Celebi Hava Servisi, Turkey which will
modernize and operate the existing cargo terminal while Cargo Service
Centre (CSC) will design, construct and operate a Greenfield Cargo
Terminal. In Phase I of the hospitality district, the Company awarded all
asset areas (45 acres) to successful bidders for commercial property
development. This is a major step forward towards unlocking the value of
real estate property around IGIA.

DIAL recorded 7% growth in international passenger traffic and 18% in
domestic for the year 2009-2010. With overall growth of 14% DIAL recorded
26.1 million passengers traffic for 2009-2010 making it the busiest airport
in India.

IGIA Highlights

* Improved its ASQ score from 3.15 in 2008 to 4.16 in 2009 giving it a
ranking of 32 out of 140 participating airports.

* Achieved ISO 14001 Environmental Management System accreditation and was
conferred with the Greentech Environmental Excellence Gold Award for the
second consecutive year.

* Taxiway - E2 was extended and joined with Junction-A in August 2009. This
will enable faster aircraft movement at domestic terminals and also release
parking stands which were previously used for movement of aircraft.

* State-of-the-art new Airport Operation Command Centre (AOCC) was
commissioned.

Awards & Accolades

* IGIA was declared the World's 4th Best Airport and APAC's Most Improved
Airport for Airport Service Quality (ASQ) in the 15 to 25 million
passengers category by the Airports Council International (ACI).

Istanbul Sabiha Gokcen International Airport, Turkey

GMR Group owns 40% equity stake in Istanbul Sabiha Gokcen International
airport (ISGIA). GMR Group assumed operation and management of the ISGIA in
May 2008 pursuant to a contract to operate, manage and develop it for a
period of 20 years. The other shareholders of ISGIA are Limak Insaat San.
ve Tic. A.S. Turkey (40%), and Malaysia Airports Holdings Berhad (20%). The
project involved construction of a new international terminal and
complimentary facilities, as well as management of two existing terminals.

Construction of the new terminal was completed in November 2009, in 18
months i.e. 12 months ahead of schedule which is record by itself. The
airport can now handle 25 million passengers annually.

Key milestones achieved during the year:

* Developed monthly Cargo Handling capacity of over 1,000 tons

* All the contracts have been finalized and the concessions are fully
operational (F&B, Duty Free, Advertizing etc)

* The airport experienced a 48% increase in the passenger traffic and
handled 6.3 million passengers

* The airport won the anna.aero Airport Traffic Growth Award for highest
traffic growth in the 5-10 million passenger category

* The airport also won the Routes Airport Marketing Award 2010 for the
European Region

Outlook for FY 2010-11 and future plan:

Airport Sector

Last year was a challenging one for the entire civil aviation industry.
While the business environment is yet to recover to the pre-recession years
levels, it has improved significantly. Most of the airlines and airports
across the globe have declared improved performances. Even IATA has revised
its industry forecast and has estimated speedier recovery of civil aviation
industry.

Indian aviation industry, too, has witnessed similar up trends. Air
traffic, both passenger and cargo, has improved significantly. All, Indian
carriers have declared better operational and financial results. The long-
term potential of Indian aviation industry is attracting major industry
players to India. With economic growth and development of aviation
infrastructure, India is poised to become a more lucrative market. Global
airlines view India as a driver for future growth in the global arena. They
are developing India specific growth plans. Manufactures and maintenance
service providers are setting up facilities in India to tap this market.

However, major challenges for the industry in India remains to be high
operating cost and poor financial health of major Indian airlines. Indian
players have to meet additional challenges posed by the aggressive plans of
other international airlines and airports. In addition, metro airports face
increasing competition from nonmetro airports due to increased direct
access to foreign airlines to the non-metro airports, which severely
affects Indian aviation industry value chain operator.

It is expected that LCCswould further increase dominance in Indian domestic
market. Traditional airlines have identified the trend and have started
offering similar services through sister brands. The trend is expected to
continue and LCCs would further increase their market share.

Airport Economic Regulatory Authority (AERA), which has assumed office in
2009-10, has indicated preference for a Single-Till regime with due
considerations to existing concession agreements. It is generally accepted
that while Double-Till regime is beneficial for attracting investment from
private investors, Single Till regime helps in reducing the user charges
for the passengers. AERA's final policy stand is still awaited. It would
provide more clarity to investors interested in new airport projects in
India.

New terminal at Istanbul Sabiha Gokcen Airport was opened for commercial
operations in November 2009. The commercial opening of the Terminal 3 at
IGIA, Delhi is scheduled in July 2010. Our immediate challenges would be to
provide consistently excellent experience to passengers and simultaneously
ensuring the commercial success of our airport projects in the emerging
regulatory regime. We have plans to exploit the commercial potential of
both our domestic airports, IGIA Delhi and RGIA Hyderabad, to maximize
returns from both these assets. We are exploring various alternate avenues
to enhance our revenue and improve profitability of our airport projects.
We have already started working in these directions. Work is going on in
full swing to set up an MRO facility at Hyderabad in partnership with MAS
Aerospace Engineering. In Delhi, we have already awarded land parcels to
the best in class players for developing hospitality district around the
airport.

We are also exploring new airport development opportunities across the
globe.

Energy Sector

The Group has three power plants namely the - 200 MW LSHS fired Chennai
power plant, 388.5 MW gas-fired combined-cycle Vemagiri power plant and the
220 MW barge mounted power plant. The barge mounted Naphtha based power
plant is converted to operate on gas and relocated to Kakinada.

The year was significant for the three power plants:

* Owing to availability of gas, the Vemagiri power plant achieved a PLF of
89% during the year.

* Significant progress was made to relocate barge mounted power plant from
Mangalore to Kakinada & to convert it to operate on gas.

* The Company took over the 0&M operations at Chennai power plant

During the year the company achieved significant milestones for different
projectswhich are under various stages of implementation and development:

* 1,050 MW coal based Kamalanga Power Project: The Project achieved
financial closure and the construction activities are progressing. The
Project has also received approval from the Government of Orissa for
expansion of the project by another 350 MW. The project is scheduled to
start commercial operation by 2012.

* 1,370 MW coal based Chhattisgarh Power Project: The land acquisition for
the project has been completed & the EPC order for BTG package has been
placed. The project will move into construction phase in 2010 and will
start commercial operation by 2014.

* 600 MW coal based EMCO Power Project: The Group acquired this project in
July 2009 and significant progress has been achieved since then. The
Project achieved financial closure and order for BTG equipment has been
placed. All the predevelopment activities have been completed and the
project will move into construction phase during 2010 and will start
commercial operation by 2012.

* 768 MW gas based GREL Power Project (existing VPGL plant expansion): The
EPC contract for the project has been placed and the construction
activities are in full swing and the project will start commercial
operation by 2012.

* 1,370 MW coal based power project at Shahdol, Madhya Pradesh: The Group
acquired this project in December 2009. The land acquisition & other
development activities are under progress.

* 300 MW Alaknanda hydro power project: All pre-development activities have
been completed. The land acquisition and forest clearance are in advanced
stage.

* 180 MW Bajoli Holi & 160 MW Talong hydro power project: The DPR approval
process is currently underway for these projects.

* 900 MW Upper Karnali & 600 MW Upper Marsyangdi hydro power projects in
Nepal: Government of Nepal has approved enhanced capacities for these
projects and the DPRsare under final stages of completion.

* 800 MW Island power project in Singapore: the gas based power project is
under development.

Business Development

The Group acquired two power projects with a total capacity of 1970 MW.
They are (i) 600 MW coal based EMCO power project in Maharashtra and (ii)
1370 MW coal based SJK power project in Madhya Pradesh.

Transmission

The Group, in line with its vision of being an integrated energy player,
has participated in the bid route transmission opportunities that came up
during the year for some of which results are awaited.

Coal

After the acquisition of 100% stake in PT Barasentosa Lestari (PTBSL)
(Indonesian Coal Asset) in February 2009, the Company is making progress in
mine development activities. The Company plans to start production from
these mines by 2011.

The Group increased its stake in Homeland Energy Group (HEG) a Canadian
listed entity to 38.55% during the year. HEG through its subsidiaries in
South Africa owns controlling interest in already operational Kendel mines,
fully explored Eloff Mines and also other exploration areas with total
mineable reserves of around 300 MMT.

Power Trading

GMR Energy Trading Limited: The Group's power trading arm has within a
short span of one and half years of operations become the sixth largest
private power trader in the country.

Outlook for FY 2010-11 and beyond:

Power Sector is one of the key enablers for achieving overall economic
growth. The country faced a peak power deficit of 13.3% during the year. In
the coming years, the deficit is expected to continue despite the
significant capacity additions that have been planned. Issues like land
acquisition, fuel and water availability, huge order backlog with EPC
vendors will continue to pose challenges to the sector's capacity expansion
plans in the coming years.

GMR Group has in the past displayed its ability to implement large
infrastructure projects within time and costs. The Group is hence confident
that it will be able to implement all the power projects that are currently
under various stages of implementation & development without any delays or
cost overruns.

Following are certain snapshots of company's plans for FY 2010-11

* Maximize value from existing assets through exploring merchant
opportunities.

* Focus on execution of projects under development.

* Add further power assets diversified across fuel types in India.

* Bid for UMPP and other projects coming up for bidding across the country.

* Actively look at enhancing project pipeline through acquisitions/MoU
route.

* Pursue acquisition of coal assets to ensure fuel security for upcoming
projects & other expansion plans.

* Diversification into allied power infrastructure businesses like
Transmission.

Projects under implementation:

Rajah- Kamalanga Chhattisgarh EMCO SJK Island
mundry* * * * + +
Andhra Madhya
Location Pradesh Orissa Chhattisgarh Maharashtra Pradesh Singapore


Capacity 768 1,400 1,370 600 1,370 800
(MW) Natural Natural
Fuel Gas Coal Coal Coal Coal Gas

Type of BOO BOO BOO BOO BOO BOO
Project

CoD/
Expected
CoD 2012 2012 2014 2014 2014 2013


Talong Hydro Alaknanda+ Bajoli Holi+
Power Point+
Location Arunachal Uttaranchal Himachal Pradesh
Pradesh

Capacity(MW) 160 300 180

Fuel Hydro Hydro Hydro

Type of Run of River Run of River on Run of River on
Project on BOOT BOOT basis for BOOT basis for
basis for a 45 years from a concession
concession implementation period of 40
period of 40 Agreement years from CoD
years from
CoD

CoD/Expected 2016 2015 2016
CoD


Upper Upper
Karnali Marsyangdi
Location Nepal Nepal

Capacity(MW) 900 600

Fuel Hydro Hydro

Type of Run of River Run of River on
Project on BOOT BOOT basis for a
basis for a concession
concession period of 30
period of 30 years from
years from Generation
Generation Licence
Licence

CoD/Expected 2015 2016
CoD

* Under Construction

+ Under Development

The Highways Sector

Your company has six highway projects under operation across India
measuring a total length of around 1684 Lane kms. These include three
Annuity based projects: Tuni-Anakapalli, Tambaram-Tindivanam, Adloor
Yellareddy-Gundla Pochanpalli and three Toll based projects: Ambala-
Chandigarh, Thondapalli - Jadcherla and Tindivanam -Ulundurpet. The company
commenced this business in October 2004, when the Tambaram-Tindivanam road
project entered into commercial operation.

Annuity Road Projects

* Tuni-Anakapalli, a 236 Lane kms road project on NHS, Andhra Pradesh
commenced commercial operation in December 2004. The concession period for
the project is 17.5 years with operation period of 15 years.

* Tambaram-Tindivanam, a 372 Lane kms road project on NH45, Tamil Nadu
commenced commercial operation in October 2004. The concession period for
the project is 17.5 years with operation period of 15 years.

* Pochanpalli, a 412 Lane kms road project between Adloor -Yellareddy and
Gundla-Pochanpalli on NH7, Andhra Pradesh commenced commercial operation in
March 2009. The concession period for the project is 20 years with
operation period of 17.5 years.

Toll Road Projects

* Ambala-Chandigarh, a 140 Lane kms road project between Ambala and
Chandigarh on NH21/NH22), Haryana-Punjab which commenced commercial
operation in November 2008. The concession period for the project is 20
years including construction period of 2.5 years.

* Jadcherla, a 232 Lane kms road project between Thondapalli and Jadcherla
on NH7, Andhra Pradesh which commenced commercial operations in February
2009. The concession period for the project is 20 years including
construction period of 2.5 years.

* Ulundurpet, a 292 Lane kms road project between Tindivanam and Ulundurpet
on NH-45, Tamil Nadu highway which commenced commercial operation in July
2009. The concession period for the project is 20 years including
construction period of 2.5 years.

Highways Sector Performance

During the year, Tindivanam and Ulundurpet on NH-45, Tamil Nadu became
operational.

Also, during FY 2009-10 the company has been successful in winning three
new projects in the highways sector. These are namely Hyderabad-Vijayawada,
Chennai ORR and HungundHospet.

Hyde rabad-Vijayawada Road Project:

In May 2009, a consortium led by company was awarded a 25-year concession
to develop the 1090 Lane kms Hyderabad -Vijayawada toll road on NH-9. The
project involves widening of two-lane road to four lanes and subsequent
widening to six-lanes. The concession period is for 25 years which includes
a construction period of 2.5 years. The company expects to achieve
commercial operation of this project in early 2012.

Chennai Outer Ring Road Project:

The Chennai Outer Ring Road in Tamil Nadu measuring 178 Lane kms is the
company's first state highway project. It entails design, construction,
development, finance, operation and maintenance of the six lane and two
service lanes from the Vandalur to Nemilicheri section in Chennai. The
concession period is for 20 years which includes a construction time of 30
months.

Hungund Hospet Road Project:

Hungund Hospet project measuring 396 Lane kms on NH-13 is the company's
first project in Karnataka. The concession period for the project (which
includes the construction time of 30 months) is 19 years.

Outlook for FY 2010-11 and future plan:

The relatively low gestation period of road projects makes it attractive
for the company to balance the longer gestation periods of airports and
power projects. The company's focus for highway projects is on projects of
longer stretch and higher traffic potential. It is at various stages of the
bidding process for new toll and annuity road projects for NHAI and various
states. The company has submitted qualification documents to NHAI for
various forthcoming projects and will continue to evaluate various road
projects and submit qualification and bid documents as appropriate in its
endeavour to maintain a sustainable and robust portfolio which offers
significant value to all its stakeholders.

Urban Infrastructure

The company is planning to develop a 3,300-acre SEZ at Krishnagiri in Tamil
Nadu, with respect to which the company has acquired over 60% of the
required land.

The company plans to develop each of the Hyderabad and Delhi airports and
surrounding land as an airport city or 'Aerotropolis', with a mix of
aeronautical and non-aeronautical developments. The Delhi airport is
expected to include Delhi Aerocity - a world class development constituting
hospitality and commercial developments, which may ultimately cover up to
5% of the approximately 5,100-acre land area at the airport. As part of the
first phase, the company has already leased out 45 acres of land for the
development of Hospitality District with plans to bring leading
international & national hotel brands to this location. The company further
plans to develop approximately 1,000 acres of commercial land at the
Hyderabad airport and has initiated several measures towards this.

The company believes that 'Aerotropolis' strategy will benefit the Group's
relatively new urban infrastructure business by providing large areas for
diversified property development in strategically important locations,
while potentially boosting the airports business through increased air
traffic at the Delhi and Hyderabad airports.

Outlook for FY 2010-11 and future plans:

a) Special Economic Zones: With the revival of economy in India, and the
expected recovery in the global arena, the lure of investments in SEZ will
increase. Also the increased emphasis in value maximization is leading to a
new wave of off-shoring of manufacturing and services to India by global
corporates seeking cost economies and Indian skilled workforce. This will
augur well for SEZ sector and the company will look to leverage the same
for its first phase of Krishnagiri SEZ, likely to commence during the year
2010-11.

b) Property Development:

The realtysector has emerged successfully from the downturn of the recent
past and has started posting significant gains. The Group will leverage its
significant holding in scarce land resource by developing the Delhi and
Hyderabad Aerotropolis in order to derive maximum valuation. The Group is
in the process of conceptualizing and planning the mixed use development
for the second phase of land disbursement at the Delhi Airport in FY 2010-
11.

Discussion and Analysis of Financial Condition and Operational Performance

The consolidated financial position as at March 31, 2010 and performance of
the Company and its subsidiaries during the Financial Year ended as per
Indian GAAP are discussed hereunder: Share Capital Rs. 366.74 Crore (2009:
Rs. 364.13 Crore).

(Rs. in Crore)
March 31, 2010 March 31, 2009
Particulars No. of Equity Amount No. of Equity Amount
Shares Shares

Share Capital-beginning
of the year of Rs. 2 each 1,820,658,088 364.13 1,820,658,088 364.13
(2009: Rs. 2 each)

Add: Equity shares of
Rs. 2 each fully paid-up
allotted in 13,019,108 2.61 - -
Jun-09 to IDF

Add: Increase in number 1,833,677,196 - - -
of Shares due to sub
division of Equity Shares
of Rs. 2 each into 2
Equity Shares of
Re. 1 each

Share Capital-end 3,667,354,392 366.74 1,820,658,088 364.13
of the Year

Increase in share capital is due to allotment of 13,019,108 shares of the
Company of Rs. 2/-each to Infrastructure Development Finance Corporation
Limited Infrastructure Fund (IDF). These shares were allotted to IDF in
exchange for IDF's 3.90% equity interest in Delhi International Airport
Private Limited (DIAL) and Rs. 48.75 Crore Advance paid by IDF for the
subscription of additional equity in DIAL. Further, consequent to the
approval of the Shareholders in the Annual General Meeting held on August
31, 2009, Company in October 2009, sub divided its shares from Rs. 2/- each
into 2 Equity Shares of Re. 1/- each.

Reserves and Surplus Rs. 6,300.32 Crore (2009: Rs. 6,107.00 Crore).

A summary of reserves and surplus is as follows:

Rs. in Crore
Particulars March 31, 2010 March 31, 2009

Capital Reserve on 113.34 70.47
Consolidation

Capital Reserve on 3.41 3.41
Acquisition

Capital Reserve Govt 67.41 67.41
Grant

Securities Premium 5,168.30 5,070.80

Debenture Redemption 35.07 26.91
Reserve

Foreign Currency (1.33) 89.64
Translation Reserve

Profit and Loss Account 914.12 778.36

Total 6,300.32 6,107.00

There is an increase of Rs. 193.32 Crore in the Reserves and Surplus from
Rs. 6,107.00 Crore in March 31, 2009 to Rs. 6,300.32 Crore in March 31,
2010. The detailed analysis of the same is furnished as follows:

a. Capital Reserve on Consolidation Rs. 113.34 Crore (2009: Rs. 70.47
Crore).

Rs. in Crore
Particulars March 31, 2010 March 31, 2009

Balance - Beginning of the year 70.47 70.45
Additions for the year 42.87 0.02
Total 113.34 70.47

The Capital Reserve on consolidation represents the difference between the
book value (as per Subsidiary books) and the amount paid for acquisition of
shares in subsidiaries or on dilution of interest in Subsidiaries where the
amount paid by minority shareholders is higher than the book value. The
increase of Rs. 42.87 Crore during the year is on account of dilution due
to allotment of shares to Minority in GMR Energy Limited.

b. Securities Premium Rs. 5,168.30 Crore (2009: Rs. 5,070.80 Crore).

Rs. in Crore
Particulars March 31, 2010 March 31, 2009

Balance-Beginning of the year 5,070.80 5,070.82

Add: Received through fresh issue of 309.10 -
equity/ preference shares

Less: Transferred to Capital Reserve 42.87 -

Less: Utilised towards Debenture/share 168.33 0.03
issue expenses/ redemption premium

Less: Transferred to minority 0.40 -

Add : Amount received against calls - 0.01
unpaid

Total 5,168.30 5,070.80

The addition of Rs 309.10 Crore during the year is on account of:

* Rs. 147.12 Crore on allotment of 13,019,108 shares of Rs. 2/each at a
premium of Rs. 113/- each to IDF by the Company.

* Rs. 61.98 Crore on allotment of 15,000,000 shares of Rs. 10/ each to
Welfare Trust for GMR Group Employees at a premium of Rs. 41 .32 by GMR
Energy Limited.

* Rs. 100.00 Crore on Allotment of Preference Shares by GMR Energy Limited

An amount of Rs. 42.87 Crore transferred to Capital Reserve being the
impact of dilution and amount of Rs. 168.33 Crore is utilized towards
Debenture issue expenses and Debenture Redemption Premium.

c. Debenture Redemption Reserve Rs. 35.07 Crore (2009: Rs. 26.91 Crore).

Rs. in Crore
Particulars March 31, 2010 March 31, 2009

Balance-Beginning of the year 26.91 20.00

Less: Transfer to Profit and Loss
Account (16.25) (3.75)

Add: Transfer from Profit and Loss

Account 24.41 10.66

Total 35.07 26.91

An amount of Rs. 16.25 Crore transferred to Profit & Loss Account as the
same is no longer required on redemption of Debentures of Rs. 65.00 Crore
by the Company. An amount of Rs. 24.41 Crore is transferred from Profit &
Loss Account as required Under Section 117C of the Companies Act in respect
of Non Convertible debentures (NCD) of Rs. 500 Crore issued by the Company
and NCD issued of Rs. 425 Crore by one of the subsidiaries.

d. Profit and Loss Account Rs. 914.12 Crore (2009: Rs. 778.36 Crore).

The increase of Rs. 135.76 Crore is on account of current year profit
(Profit after Minority Interest/Share of profits/(losses) of Associates)
amounting to Rs. 158.40 Crore and allocation of profits to minority of
Rs.12.68 Crore in the Profit and Loss Account (on account of fresh Minority
Interest in GEL Group Companies) as reduced by dividend and dividend
distribution tax totaling to Rs. 1.80 Crore in case of Hyderabad Menzies
Air Cargo Pvt. Limited and an amount of Rs. 8.16 Crore (Net) transferred to
the Debenture Redemption Reserve account.

Shareholders' funds Rs. 6,667.06 Crore (2009: Rs. 6,471.13 Crore).

On account of the above the total shareholder funds (excluding minority
interest) have increased by Rs. 195.93 Crore compared to March 31, 2009.

Minority Interest Rs 1790.15 Crore (2009: Rs 1806.11 Crore).

Minority Interest has decreased by Rs. 15.96 Crore as compared to March 31,
2009 mainly due to reduction in Minority of Delhi International Airport
Private Limited on account of the purchase of stake of IDF and reduction in
Minority in GMR Energy Trading Limited. This has been partially offset by
profit of Rs. 45.36 Crore attributable to minority due to higher share of
minority shareholders' profit in GPCL and DIAL and the introduction of
Minority in GMR Energy Limited.

Preference shares issued by subsidiary company Rs. 200 Crore (2009: NIL)

This is on account of issue of preference share capital by GMR Energy
Limited.

Loan Funds

a. Secured Loans Rs. 16,229.40 Crore (2009: Rs. 10,664.40 Crore)

The increase of Rs 5,565.00 Crore is mainly on account of the fresh Project
Loan Disbursements in Delhi International Airport Limited, Sabiha Gokcen
International Airport (SGIA) and GMR Kamalanga Energy Limited to meet the
cost of Projects under development. Further, the Company has also raised
additional loans for investments in its subsidiaries.

b.Unsecured Loans: Rs. 4,607.95 Crore (2009: Rs. 1,545.76 Crore)

The increase of Rs. 3,062.19 Crore is mainly due to deposits from
Concessionaires in Airports which have gone up by Rs. 1330.11 Crore to
Rs.1526.79 Crore on monetization of from Real Estate in Delhi International
Airportand depositsfrom trade concessionaires. Unsecured Loans from Banks
have gone up by Rs. 1160.76 Crore to Rs. 2090.97 Crore due to short term
borrowings made to meet the temporary mismatches in cash flows. Further the
Company has issued unsecured Debentures of Rs. 500 Crore during the year.

Deferred payment liability-Negative grant/Utilisation fees

The Company, at a consolidated level, has Deferred payment liability of
Rs.333.92 Crore as at March 31, 2010 as compared to Rs. 290.20 Crore as at
March 31, 2009. This is mainly on account of higher utilisation fees in
Sabiha Gokcen International Airport (SGIA).

Deferred Tax Asset/Liability

The Company, at a consolidated level, has Deferred Tax Asset (Net) of
Rs.80.47 Crore as at March 31, 2010 as compared to Deferred Tax Liability
of Rs. 19.15 Crore as at March 31, 2009. This is mainly on account of
recognition of Deferred Tax Asset by GMR Vemagiri Power Generation Limited.

Fixed Assets

A statement of movement in fixed assets is given below:

Rs. in Crore
Particulars March 31, 2010 March 31, 2009

1) Tangible Assets 10,035.12 8,100.83

2) Intangible Assets
Goodwill on 841.43 584.64

Consolidation
Carriage Ways 3,516.53 2,509.09

Others 488.66 230.19

3) Assets Taken on Lease 7.91 7.85

Gross Block 14,889.64 11,432.60

Less: Accumulated 2,341.58 1,780.97
Depreciation

Net Block 12,548.06 9,651.63

Add: Capital Work 10,382.87 6,790.93
in Progress including
Capital Advances

Net Fixed Assets 22,930.93 16,442.56

Depreciation/ 11.95 8.71
Amortisation as % of

Gross Revenues
Accumulated 15.96 15.72

Depreciation as % of
Gross Block

* Excluding Land

Gross Block have gone up by Rs. 3,457.04 Crore mainly on account of
capitalisation of GMR Ulundurpet Expressways Pvt Ltd. and Sabiha Gokcen
International Airport, Turkey during the year and additional capitalisation
of Terminal 1D at Delhi International Airport.

Capital Work-in-Progress (including capital advances) has increased by
Rs.3,591.94 Crore primarily on account of ongoing project in Delhi
International Airport and other new projects in Energy Sector.

Investments: Rs. 4641.05 Crore (2009: Rs. 1,310.89 Crore).

Rs. in Crore
Particulars March 31, 2010 March 31, 2009

Long-term Investments:

Debentures of 1,259.64 845.06
Companies/ Body
Corporates
Equity/ Preference 171.45 150.78
shares of Companies/
Associate Companies/
Body Corporates
Current Investments
Mutual Funds 2,361.89 204.95
Government Securities/ 808.09 87.33
Certificate of Deposits
Equity Shares 39.98 22.77
(Net of Provision)
Total 4,641.05 1,310.89

The increase in Long Term Investment is mainly due to further investment in
Debentures of GMR Holding Malta.

During the year there was a shift from Bank Fixed Deposits to Mutual Funds
to take advantage of optimum yields coupled with flexibility as reflected
in decrease in 'Cash and Bank Balances' also. The Company and its
subsidiaries invest the temporary surpluses in various mutual funds, Govt.
Securities, Certificate of Deposits etc.

Current Assets, Loans and Advances

Inventories: Rs. 115.92 Crore (2009: Rs. 131.88 Crore).

The inventory primarily constitutes fuel stocks, stores and spares of
energy & airport subsidiaries. The marginal reduction in inventory by
Rs.15.96 Crore is primarily on account of non operation of GMR Energy
Limited in the last quarter.

b. Sundry Debtors: Rs. 864.93 Crore (2009: Rs. 660.91 Crore)

Sundry Debtors as at March 31, 2010 aggregated to Rs. 864.93 Crore compared
to Rs. 660.91 Crore as at March 31, 2009. In DIAL & GVPGL there is an
increase in Debtors on account of higher Revenue. All these receivables are
considered good and receivable.

c. Cash and Bank Balances: Rs. 1,682.62 Crore (2009: Rs. 2,466.52 Crore).

The decrease in the Cash and Bank Balance by Rs. 783.90 Crore is mainly on
account of shift of Investment Pattern from Bank Deposits to Liquid Mutual
Funds which are classified as Investments for the Balance Sheet purposes.

d. Other Current Assets: Rs. 161.65 Crore (2009: Rs. 17.75 Crore).

Other Current Assets mainly includes Interest Accrued on
deposits/investments and Claims and Grants Receivables. The increases in
Other Current Assets by Rs. 143.90 Crore is on account of increase of
Rs.82.81 Crore in Interest Accrued but not due and Rs. 61.09 Crore in
Claims receivable mainly in VPGL on account of the Duty drawback granted
during the year.

e. Loans and Advances: Rs. 1,315.63 Crore (2009: Rs. 1,266.27 Crore).

The increase of Rs. 49.36 Crore is mainly on account of increase in balance
with Govt. Authorities incl. Customs, Excise etc (Rs. 92.75 Crore) and
increase in advances recoverable in cash or in kind to the extent of
Rs.242.59 Crore which is partial offset by reduction in deposits with
others of Rs. 242.16 Crore and Loans to Others of Rs. 44.37 Crores.

Current Liabilities and Provisions

a. Current Liabilities: Rs. 1,582.14 Crore (2009: Rs. 1,409.91 Crore)

The increase of Rs. 172.23 Crore is mainly due to increase of Rs. 188.30
Crore in Advance/Deposits from Concessionaires in Delhi International
Airport Limited in the form of Infrastructure Deposits received on
Monetization of the Land Parcels and increase in Sundry Creditors by
Rs.70.83 Crore. These increases have been partly offset by reduction in
retention money to the extent of Rs. 91.70 Crore.

b. Provisions: Rs. 383.11 Crore (2009: Rs. 83.25 Crore).

The increase of Rs. 299.86 Crore as compared to last year is mainly due to
Provision for Voluntary Retirement Compensation for the AAI Employees of
Rs. 170.88 Crore made in Delhi International Airport Limited, increase in
the Provision for Debenture Redemption Premium in GEL and GIL by Rs. 83.14
Crore.

Overview of our Results of Operations

The following table sets forth information with respect to our revenues,
expenditures and profits on a consolidated basis:

Rs. in Crore
For the year ended March 31,
Particulars 2010 2009
Amount % of Net Amount % of Net
Income Income
Gross Sales/Income
from Operations 5,123.42 - 4,476.19 -

Less: Revenue share
paid/payable to 556.91 - 456.97 -

Concessionaire grantors
Net Income 4,566.51 100% 4,0192.22 100%
Expenditure

Generation and
Operating Expenses 2,576.59 56.42% 2,282.59 56.79%

Administration
and Other Expenses 625.61 13.70% 669.84 16.67%

EBITDA 1,364.31 29.88% 1,066.79 26.54%

Other Income 163.39 3.58% 21.37 0.53%

Interest and
Finance Charges (net) 722.33 15.82% 368.20 9.16%

Depreciation/
Finance Charges (net) 722.33 15.82% 368.20 9.16%

Total Expenditure (net
of other income) 4,373.38 95.77% 3,689.09 91.79%

Profit Before Taxation
and before Minority 193.13 4.23% 330.13 8.21

Interest/Share of Profits/
(Losses) of Associates
Provision for Taxation

Current Tax [includes
tax adjustments 70.76 1.55% 70.10 1.74%
relating to earlier years
of Rs. 5.29 crore
(2009: Rs. 0.75 crore)]

Less: MAT Credit
entitlement (4.41) -0.10% - 0.00%

Deferred Tax Credit (98.56) -2.16% (23.12) -0.58%

Fringe Benefit Tax - - 6.04 0.15%

Total Tax Liability (32.21) -0.71% 53.02 1.32%

Profit After Taxation
and before Minority 225.34 4.93% 277.11 6.89%
Interest/Share of
Profits/(Losses)
of Associate

Minority Interest-
(Profits)/Losses (45.36) -0.99% 2.34 0.06%

Share of Profits/
(Losses) of Associate (21.58) -0.47% - -

Net Profit After 158.40 3.47% 279.45 6.95%
Minority
Interest/Share of
Profits of Associate

Net Income:

The Segment wise break-up of the Net Income are as follows:

Rs. in Crore
For the year ended March 31,
Particulars 2010 2009
Amount % of Total Amount % of Total
Income Income
Net Sales and
Operating Income:

Airports Business 1,488.62 32.60% 1,206.24 30.01

(Net of Revenue Share
of 556.91 crore (2009:
Rs. 456.97 crore)
Power Business 2,039.47 44.66% 2,138.71 53.21

Road Business 346.07 7.58% 151.90 3.78%

EPC division 409.85 8.98% 304.17 7.57%

Other* 282.50 6.19% 218.20 5.43%

Total Net Sales
and Operating Income 4,566.51 100.00% 4,019.22 100.00%

* Others represent management services incomes, investment income and
operating income of GMR Aviation Pvt. Ltd. less inter- segment revenues.

Inter segment revenues: Rs. 48.29 crore (2009: Rs. 33.95 crore)

There is an increase of Rs. 547.29 Crore in Net Sales and Operating Income.
There is a healthy distribution of business over various sectors. The
detailed analysis on the sectoral revenues is as follows:

a) Operating Income from Airport business

Income from our airport business consists of income from aeronautical
sources (principally consisting of landing and parking, passenger service
fees and user development fees charged by GHIAL), non-aeronautical sources
(consisting principally of income from rentals, trade concessionaires and
ground handling) and our cargo operations and rentals received in
connection with commercial development on land that is part of our airport
projects and we have recorded such revenue under income from our airport
business, which is offset by the fees that we are required to pay to the
AAI. Income from airport business is derived primarily from the operations
of Delhi International Airport Private Limited (DIAL), GMR Hyderabad
International Airport (GHIAL) & Sabiha Gokcen International Airport
(ISGIA), Turkey.

The gross operating income for the period ended March 31, 2010 was
Rs.2,045.53 Crore as against Rs. 1,663.21 Crore for the year ended March
31, 2009. As per the terms of Operations, Maintenance and Development
Agreement in DIAL and Concession Agreement in GHIAL, Rs. 556.91 Crore was
accounted towards revenue share in the current year.

Net Sales and Operating Income from airport operations has increased by
23.40% from Rs. 1,206.24 Crore in FY 2008-09 to Rs. 1,488.62 Crore during
the current year.

The increase in DIAL is mainly on account of increase in Aero Revenue due
to increase in Passenger Traffic, increase in Duty Free Rental, Land &
Space rental and lease rentals from Commercial Property Development. In
case of GHIAL, the increase is mainly on account of increase in Passenger
Traffic and increase in Hotel revenue which was operational for part of the
year during FY 2008-09. In ISGIA, Turkey the increase is mainly
attributable to increase in passenger growth and the commencement of
operation of the new terminal in October 2009.

Net Income from Airport business contributed 32.60% of the net income of
the Company for the year ended March 31, 2010 as against 30.01% during the
year ended March 31, 2009. The Airport business has recorded a robust
growth on account of increase in Passenger Traffic in all the Airports.

b) Operating Income from Power business

Income from power business consists of fixed and variable components of
electricity tariff charged to the state electricity boards and distribution
companies as per the terms of the respective power purchase agreements,
generation and sale of power on merchant basis and trading of power.

Income from power business has decreased by 4.64% from Rs. 2,138.71 Crore
for the year ended March 31, 2009 to Rs. 2039.47 Crore for the year ended
March 31, 2010. The decrease is mainly due to non operation of the
Mangalore Power Plant since November 2009 which was being relocated to
Kakinada. The plant is expected to commence its operations after relocation
& conversion to natural gas by July 2010. The operating income of Chennai
Plant has come down on account of lower plant load factor during the
current year as compared to last year. There is a significant increase in
the operating income of Vemagiri plant as the plant was operational for the
entire year in 2009-10 as compared to partial operation in the year 2008-09
due to non availability of gas in that year.

The share of power business in the total revenue has decreased to 44.66%
during the year ended March 31, 2010 as compared to 53.21 % during the year
ended March 31, 2009.

c) Operating Income from Road business

Income from our road operations is derived from annuity payments received
from NHAI forourthree annuity projects and toll collected from road users
for the three toll road projects, respectively.

The operating income from Road business has increased by 127.83% from
Rs.151.90 Crore in FY 2008-09 to Rs. 346.07 Crore during the year ended
March 31, 2010. The increase is due to commencement of commercial operation
of Tindivanam Ulundurpet toll project in July 2009 and a full year
operation of Adloor Yellareddy-Kalkallu (Pochanpalli) annuity project,
AmbalaChandigarh toll road project and Faruknagar-Jadcherla toll road
project which commenced operations during the year.

The share of road business in total revenue has increased to 7.58 during
the year ended March 31, 2010 as compared to 3.78% during the year ended
March 31, 2009.

d) Operating income from EPC Sector

Income from our EPC division is derived from the execution of engineering,
procurement and construction works in connection with our power and road
projects under implementation and from development and an unincorporated
joint venture, of which we are a 50% partner, which is implementing the
Istanbul airport project pursuant to an EPC contract with ISGIA.

During the current year, the EPC sector has contributed Rs. 409.85 Crore to
the Net Operating Income as against Rs. 304.17 Crore in the previousyear.
The increase is mainly contributed by construction income on account of
execution of certain subcontracted portions of turnkey contracts awarded by
our power and road projects.

e) Operating income from Other Sector

Income from other sector includes management services incomes, investment
income and operating income of GMR Aviation Pvt. Ltd. During the current
year, the other sector (net of inter segment revenues) has contributed
Rs.282.50 Crore to the Net Operating Income as against Rs. 218.20 Crore in
the previous year.

Other Income

Other income includes income from investments, profit on sale of
investments, gain on foreign exchange fluctuations, reversal of provisions
and other miscellaneous income. Other income has increased by Rs. 142.02
Crore from Rs. 21 .37 Crore for the year ended March 31, 2009 to Rs. 163.39
Crore for the year ended March 31, 2010. The increase is mainly due to
reversal of provision no longer required/ provision for claims recoverable
amounting to Rs. 72.77 Crore during the current year. Miscellaneous income
has increased by Rs. 47.83 Crore from Rs. 4.73 Crore to Rs. 52.55 Crore
mainly on account of increase in income from the Airport Sector. Further
there is also an increase of Rs. 23.20 Crore in investment income due to
increase in investible surpluses.

Expenditure

The expenditure has the following major components:

* Generation and operating expenses (including consumption of fuel and
lubricants, water, salaries and wages of operational employees, operations
and maintenance, technical consultancy fee, cost of variation works,
insurance for plant and machinery, airport operator fee, cargo handling
charges, lease rentals and repairs and maintenance to plant and machinery),

* Administration and other expenses (including salaries, allowances and
benefits to employees, office rental, travel, insurance, electricity,
consultancy and other professional charges, contributions to provident
fund, provision for advances, claims and debts, losses on sale of fixed
assets and investments, travelling and conveyance, communication and other
miscellaneous expenses),

* Finance charges (including interest on term loans, interest to others and
other finance charges viz., prepayment premiums, guarantee commission, bank
charges etc.) and

* Depreciation & Amortization

Generation and Operating Expenses:

Generation and operating expenses has increased by 12.88% from Rs. 2,282.59
Crore for the year ended March 31, 2009 to Rs. 2,576.59 Crore for the year
ended March 31, 2010. This is on account higher generation in Vemagiri
power plant; which is partially offset by a non operation of the Mangalore
power plant for part of the year. There is an increase of Rs. 64.98 Crore
on account of increase in the purchase of traded goods due to increased
operations in SGIA and GMR Energy Trading Limited. There is also an
increase on account of construction activities taken up by GIL EPC division
during the year.

Administration and Other Expenses:

Administration and other expenses decreased by 6.60% from Rs. 669.84 Crore
for the year ended March 31, 2009 to Rs. 625.61 Crore for the year ended
March 31, 2010. Personnel cost has decreased by Rs. 47.32 Crore mainly due
to reduced operation support expenses payable by DIAL to AAI (as such
payments were required to be paid pursuant to our Operation, Maintenance
and Development Agreement for the Delhi airport through May 2009 only),
which has been marginally offset by increase in administration expenses due
to full year operation of some Road assets and EPC Division starting its
operation during the year.

Earnings Before Interest, Depreciation, Taxes and Amortisation (EBITDA)

The EBITDA has increased by 27.89% from Rs. 1,066.79 Crore during 2008-09
to Rs. 1,364.31 Crore during 2009-10.

The overall EBIDTA Margins has improved from 26.54% in 200809 to 29.88% in
2009-10.

Interest and Finance Charges (net)

Interest and finance charges have increased by Rs. 354.13 Crore from
Rs.368.20 Crore for the year ended March 31, 2009 to Rs. 722.33 Crore for
the year ended March 31, 2010. The additional interest is mainly due to (i)
commencement of operation of Ulundurpet toll during the year 2009-10, (ii)
full year operation of Pochanpalli, Ambala-Chandigarh & Jadcherla Road
projects as against partial operation during last year, (iii) increased
interest expenditure in DIAL on account of capitalization of new Terminal
1-D during the year 2009-10 and second Runway (for the full year as
compared to a part of the year in FY 2008-09) and (iv) increase in SGIA in
connection with the commercial operation of the new terminal. SGIA also had
notional MTM Loss of Rs 23.84 Crore on account of IRS in the year ended
March 31, 2010.

Depreciation

Depreciation for the financial year increased by Rs. 222.41 Crore from
Rs.389.83 Crore for the year ended March 31, 2009 to Rs. 612.24 Crore for
the year ended March 31, 2010, due to capitalization of new terminal at
SGIA, Turkey and Terminal 1D at DIAL during the year 2009-10. Further the
impact of capitalization of the second Runway in DIAL has been for the full
year in 2009-10 as compared to a part of the year in FY 200809.
Depreciation in Road sector has increased due to commercial operation of
Ulundurpet project during the year 2009-10 and increased operational days
for Ambala-Chandigarh, Pochanpalli and Jadcherla road assets.

Profit Before Taxation and Minority Interest / Share of Profits/(Losses) of
Associates Profit before taxation and minority interest /share of profits/
(losses) of associates for the year ended March 31, 2010 is Rs.193.13 Crore
as compared to Rs. 330.13 Crore for the year ended March 31, 2009. The
decrease is mainly due to higher Interest & Depreciation during the year
2009-10.

Taxes

The total tax expense declined from Rs. 53.02 Crore for the year ended
March 31, 2009 to Rs. (32.21) Crore for the year ended March 31, 2010. This
is primarily due to recognition of deferred tax asset in GMR Vemagiri Power
Generation Limited (on past losses) & Sabiha Gokcen International Airport.

Profit After Taxation and Before Minority Interest/Share of Profits/
(losses) of Associates.

As a result of the foregoing, Profit after taxation and before minority
interest and share of profits/(losses) of associates has come down by
18.68% from Rs. 277.11 Crore for the year ended March 31, 2009 to Rs.225.34
Crore for the year ended March 31, 2010.

Net Profit after Minority Interest/Share of Profits/(Losses) of Associates:

Net profit after minority interest/share of profits/(losses) of associates
decreased by 43.32% from Rs. 279.45 Crore for the year ended March 31, 2009
to Rs. 158.40 Crore for the year ended March 31, 2009. Minority interest
represents share of the profits and losses of various subsidiaries which
relates to the minority shareholders. The share of minority shareholders in
the profit for 2009-10 is Rs. 45.36 Crore as against a loss of Rs. 2.34 for
the previous year. Loss from Associates of Rs. 21 .58 Crore in 2009-10 is
mainly on account of loss in Homeland Energy Group, where the Company has
33.47% equity interest as on 31st March 2010.

Risks and Concerns

Our strategic focus on the Infrastructure sector in India & overseas
exposes the company to a variety of risks like operational risk, market
risk, regulatory risk, political / country risk, natural hazard risk,
financial risks, environment, health & safety risks, project management and
execution risks. Our Enterprise Risk Management (ERM) philosophy is to
integrate the process for managing risk across the organization and
throughout its business and lifecycle to enable protection and enhancement
of stakeholder value.

The company's aim is to ensure that we proactively understand, measure and
monitor the various risks and develop and implement appropriate risk
treatment plans to deal with them by establishing a suitable balance
between harnessing opportunities and containing risks.

The company has developed an integrated approach to proactively manage
risks which may hinder achievement of business goals. Company has well
defined processes for risk identification, assessment, treatment and
monitoring actions thereof. Our dedicated in-house team of ERM specialists
coordinates risk at various stages of the value chain, i.e. Bid, Project
and Asset stages.

The company seeks to continuously improve its ERM processes, and has
embarked upon a journey of updating its existing ERM Framework to align
itself with the recently released 'ISO 31000:2009-Risk Management
Principles and Guidelines' standard'.

The company's ERM Framework is as depicted in the diagram below:

A formal risk escalation mechanism has also been put in place that ensures
all identified critical risks are reported to the Board on a regular basis
to approve the proposed treatment plans and to enable continuous monitoring
and review.

Macroeconomic Risk factors:

The contribution from our projects in India to our overall revenue will
continue to be high as compared to our international projects and hence,
macroeconomic factors in India will have a significant impact on our
operating performance. Revenue from our airport projects, merchant sale of

electricity and our toll road projects are exposed to the changes in the
economic environment and market demand.

Fuel availability risks:

Two operational power plants in Andhra Pradesh are gas based. The potential
non-availability of natural gas could adversely affect plant operations and
hence profitability. Chennai power plant is HSD based. Thus diversification
has reduced the risk. Moving forward, coal based projects and hydro
projects will further diversify our fuel mix thereby reducing our business
risk further.

Project development, acquisition and management: We plan to make
significant investments in a number of projects over the next several
years. Our financial condition and earnings could be adversely affected if
we are unable to win them at competitive prices, complete them within time
& cost budgets. This is being mitigated by organizational development in
terms of research, risk assessment at bidding stage, skills development, IT
enablement of project monitoring and management and highly developed
procurement process and partner management.

Ability to borrow funds at competitive rates:

Infrastructure projects by their very nature, are typically capital
intensive and may require high levels of debt financing. We have in the
past been able to raise debt financing on terms acceptable to us. We
believe that, with the continued growth of our businesses and reputation in
the Infrastructure sector, we will be able to obtain debt financing on
competitive terms.

Credit Risk:

With our increasing exposure on merchant sale of electricity to private
sector customers, we will be exposed to credit risk of default in payments.
We have developed models to check and ensure the credit-worthiness of our
customers.

Interest Rate Risk:

The debts on account of investment in our subsidiaries are subject to
fluctuations in interest rates. Any increase in interest rate may adversely
affect our profitability. We have also entered into Interest Rate Swap
agreements forsome of our Foreign Currency Term Loans to adequately hedge
the interest rate risk.

Foreign Currency Exchange Rate Risk:

Our majority of revenues are in Indian Rupees however, airports and other
international assets earn foreign currency. As against this, some of our
expenditures are in foreign currencies for purchase of equipment meant for
projects. A depreciation of the Indian Rupee will increase the effective
cost of projects outside of India and result in an increase in the price of
imported goods and professional services that we purchase from our
suppliers overseas. However, going forward, because of our better Forex
management, some parts being covered through natural hedging, no major
impact is foreseen.

Commodities Risk:

We have historically entered into fixed or guaranteed maximum price
construction contracts with independent construction companies. Going
forward, we expect to bring in-house an increasing portion of the
construction works associated with our presentand future projects
underdevelopment. Hence we will be directly exposed to the variation in
price of input materials and allied costs.

Internal Control Systems and their Adequacy

The Company has in place adequate systems of internal control. It has
documented procedures covering all financial and operating functions. These
controls have been designed to provide a reasonable assurance with regard
to maintaining proper accounting controls, monitoring of operations,
protecting assets from unauthorized use or losses, compliances with
regulations and for ensuring reliability of financial reporting. The
Company has continued its efforts to align all its processes and controls
with best practices in these areas as well. All these controls and
processes have been embedded and integrated with SAP system which has been
implemented across all Group Companies. During the year, the Group has also
carried out a SAP based post-implementation audit to assess the
effectiveness of SAP implementation across the Group by an external agency
which has assessed implementation as robust. Some significant features of
the internal control systems include the following:

* Delegation of power and responsibility matrix with authority limits
defined for incurring capital and revenue expenditure;

* Corporate policies on accounting and major processes;

* Well-defined processes for formulating and reviewing annual and long-term
business plans;

* Preparation and monitoring of annual budgets for all operating
activities, projects and service functions;

* A well-established multi-disciplinary internal audit team, which review
and report to the management and the Audit Committee about the compliance
to internal controls, corporate governance, statutory compliance efficiency
and effectiveness of operations, key process risks, and information
integrity & security;

* Audit Committees of the Boards of Directors regularly reviews the audit
plans, significant audit findings, compliance to suggested audit
recommendations, adequacy of internal controls, compliance to Accounting
Standards as well as reasons for changes in accounting policies and
practices, if any;

* Regular audits are being carried out for all operations, IT systems
including projects and international entities;

* Audit of HR & FMS systems carried out across Group levels;

* Bid documents/records of all new projects including M & A deals are being
critically reviewed for probable risks;

* Effective project management audits are being carried out;

* Safety and security including environment related controls are
continuously reviewed for operational effectiveness and efficiency;

* Strict compliance to all regulations and corporate governance issues;

* Documentation of major business processes, including financial closing,
computer controls;

* Entity-level controls and testing of key controls as a part of compliance
to applicable rules and regulations;

* Identifying and mitigating key business risks through an Enterprise Risk
Management programme.

Developments in Human Resources and Organisation

Development at GMR Group

'Never doubt that a small group of thoughtful, committed citizens can
change the world. Indeed, it's the only thing that ever has'

- Margaret Mead

Creating teams of competent and committed people across all businesses,
functions and levels-this has been the prime focus of People and
Organization building efforts at GMR Group last year.

We successfully rolled out Talent Management and Leadership Development
processes, so vital to long term sustainability and business continuity.

Professional Development Dialogue (PDD), that aims to capture people's
career aspirations were completed for all General Managers & above and
development plans are being rolled out.

Talent Review JR) - a facilitated process (using the 9-Box Performance -
Potential Matrix), was conducted at all businesses and at Corporate. TR is
an important step in helping the business leadership teams arrive at a
shared understanding of the supply and demand situation of talent pipeline
in each business. The Talent Review process culminated in the preparation
of a Human Capital Plan that outlines the Group's overall talent management
strategy covering recruitment, development and succession planning.

he Multi tier Leadership Development Programme focusing on developing a
robust leadership pipeline has been successfully rolled out. The year began
with Senior Leadership Team (SLT) members going through an intensive
Individual Development Centre and a 360 degree feedback process. This was
followed by preparation of their Individual Development Plans (IDPs). The
Leadership Development Programme (LDP), targeted at the VPs and AVPs across
the Group has been commenced. The first batch of participants went through
multiple modules at IIM - Bangalore covering Leadership, Strategy and
Change Management. Executive Coaching was also introduced as a special
component of the program design to support reflection and development of
self awareness. A panel of distinguished external coaches from India and
abroad, has been engaged for the purpose. At the next level, the NextGen
Managers Programme is targeted at the emerging leadership talent of GMs &
AGMs across the Group, with a focus of building a strong band of
operational leaders with strong people and resource management
capabilities.

Being a core Infrastructure developer in India and an organization with a
passion to build world class national assets, we realize the importance of
technical and functional expertise. Further, technical leadership is also a
key requirement for us to keep pace with our exponential growth in projects
and operating assets. So, a special high level team has been formed with
exclusive focus on building capability in the areas of Commercial &
Contracts, Engineering, Procurement, Construction, Operations and
Maintenance (CEPCOM). The highlight of the year was the development of the
Technical Competency Dictionary covering all businesses, functions and
levels, followed by competency mapping. Going ahead, technical training
programmes would be designed and delivered to address measured competency
gaps. We believe that such competency based HR practices are key to
continuous development of the talent pipeline.

During the year, the HR function also moved to the next level of automation
with the successful implementation of SAP Human Capital Modules including
Individual Learning plans, Talent Engagement and Mobility (TEAM) and
Internal Job Posting. The 'HR Helpdesk', an online 24 x 7 support facility
for employees was also launched during the year to clarify employees'
queries on any HR related issue.

Internal communication is key to sustaining vibrancy and organizational
health. Throughout the year, Town Hall meetings were conducted across the
Group, where Group Holding Board (GHB) members and CEOs shared the Group's
plans with employees and answered several queries. The year also saw the
invent of Skip Level Meetings, an initiative meant to provide a formal
forum for employees to share specific views and opinions about the work
environment to their skip level manager. Another important development was
the completion of the Employee Engagement Survey with support from Gallup
Inc. The results of the survey are currently under analysis and action
plans for the next year are being prepared.

The sheer nature of the infrastructure business necessitates team working
and matrix relationships. To support this, a numberof team building and
alignment exercises in the form of offsite workshops and Out Bound Training
(OBT) programmes were conducted throughout the year. These programmes also
help in integration of new comers into the GMR culture through
understanding and alignment of our core values and beliefs.

As we look back, we see several building blocks of People and Organization
capability development being put in place. Looking ahead, our focus and
priority next year would be to stabilize these processes and driving these
towards excellence for maximum business impact.

Corporate Social Responsibility

GMR Varalakshmi Foundation (GMRVF) is the corporate social responsibility
arm of the GMR Group. GMRVF aims to contribute to this objective by
focusing on education, health, hygiene and sanitation; empowerment and
community development initiatives.

The Foundation works intensively with the poorer sections of the society
surrounding the business operations and projects of various GMR Group
companies all across the country. The thrust areas enable the Foundation to
develop need-based and locale specific response to the needs of the diverse
communities it works with, rather than being project driven.

GMRVFwill continue to work with communities around the Group's existing and
future businesses and assets in an effort to enhance the quality of their
lives and livelihoods, in a manner to ensure a win win for the communities
and the corporate. The Foundation works towards improving access and
quality of primary education for these communities; it works towards
primary health care, sanitation and health awareness; focuses on skill
training of youth and income enhancement of women through training,
organization of groups and marketing support; and towards participatory
development through strengthening communities and institutions.

The Foundation will continue to develop educational facilities in under-
served areas, to bring quality education to its target communities, and
will work to make these accessible to the most deserving through financial
and other supports.

GMRVF Technical and Vocational Training initiatives will work to bridge the
skill deficit in India through interventions at various levels-entry level,
supervisory level and higher and specialized levels. This will be through
acting as a bridge between industry (GMR Group, its vendors, contractors,
concessionaires and consultants) and educational and training institutions,
so that relevant and industry-ready manpower is developed.

The Foundation has initiated its foray into healthcare institutions. During
the year, 2 healthcare institutions will be opened. In the coming years,
one of these will be enhanced and developed into a medical education
facility.

GMRVF looks forward to contributing to the development of innovative models
for CSR in India through its initiatives and organizational arrange.