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Contents SBI CAPITAL MARKETS LIMITED

Board of Directors 04

Financial Highlights 05

Awards 06

About us 07

Project Advisory and Structured Finance 08

Mergers & Acquisitions and Advisory 12

Capital Markets 14

Directors Report 16

Auditors Report 34

CAG Comments 39

Balance Sheet 40

Profit & Loss Account 41

Cash Flow Statement 42

Schedules 44

SBICAP SECURITIES LIMITED 74

SBICAP TRUSTEE COMPANY LIMITED 107

SBICAPS VENTURES LIMITED 132

SBICAP (UK) LIMITED 150

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SBI Capital Markets Limited (SBICAP), headquartered in Mumbai, is a wholly owned subsidiary and Investment Banking Arm of State Bank of India (SBI), the largest bank in India. While SBICAP started its operations in August 1986, today it offers a wide suite of Financial Services covering areas including Project Advisory and Fund Mobilisation, Structured Debt Placement, Capital Markets, Mergers & Acquisitions, Private Equity and Stressed Assets Resolution.

SBICAP has a team of qualified and dedicated professionals with vast experience in a wide range of Investment Banking Services, to provide a complete platform to its clients in Project Advisory, M & A Advisory, Private Equity, Structured Finance, Corporate Strategy, Equity, Debt and Hybrid Capital raising and in Securities Research.

Believing in not just advising clients but also partnering them, we have set up 7 offices (6 Regional Offices and 1 Branch Office) and 3 subsidiaries across India for the convenience of our clients. We have also set up a subsidiary in London, SBICAP (UK) LTD., a FSA registered entity, which supports Indian clients in their European initiatives of fund mobilisation and advisory.

SBICAP also offers services in the areas of Equity Broking, Private Equity Financing, Security Agency and Trusteeship through its wholly-owned subsidiaries viz. SBICAP Securities Ltd., SBICAPS Ventures Limited and SBICAP Trustee Co. Ltd. respectively.

SBICAP continues to evolve as a leading financial services player committed to offering complete solutions to its clients in all stages of the corporate life cycle. Presently focused on the domestic markets, SBICAP plans to take up mandates in the International Market in the near future.

In line with the accolades earned in previous years, SBICAP has currently been ranked:

No.1MandatedLeadArrangerforProjectFinanceLoansgloballyin2009by ThomsonReuters(PFI)andDealogic

No.1FinancialAdvisorforProjectFinanceDealsgloballyin2009byDealogic,

which alongwith several other rankings / awards, reaffirms our leadership position in the Investment Banking advisory space.

Aboutus

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SBI Capital Markets Ltd. has built a formidable presence in Project Finance advisory and funds arrangement, with several prestigious mandates to its credit. We are the leading Financial Advisor / Arranger for the infrastructure projects in India, playing a pivotal role in offering customized solutions to an extensive and diversified client base that includes corporate, financial institutions, governments and high net worth individuals.

The PA&SF Group provides advisory and fund arranging services across various sectors, such as energy, telecom, transportation, urban infrastructure, agro industries, pharma and healthcare, textiles, cements and steel.

Ourproductportfolioincludes:

Debt & Equity syndication (Domestic & Foreign Capital)

Project Appraisal & Project Advisory

Structured Finance & Syndication

Securitization

LandmarkDealsinFY2009-10

ReliancePowersUMPPatSasan,MadhyaPradesh

SBI Capital Markets successfully completed appraisal and debt syndication of INR 14,550 crore and was awarded EuromoneyPowerDealoftheyear(2009).

ProjectAdvisoryAndStructuredFinance

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Botswana Power Corporation:

SBI Capital Markets successfully completed fi nancial advisory 600 MW Morupule B Project in Botswana . It was awarded African Power Deal of the year by Thomson Reuters Project Finance International for the year 2009.

CAIRN Energy - Reserve based funding

SBI Capital Markets successfully completed fi nancial appraisal and debt syndication of Rs 4000 crores (Rupee Equivalent of USD 850 Million) for part fi nancing the development of various oil fi elds in Block RJ-ON-90/1 in Barmer, Rajasthan. This was one of the largest reserve based funding for a private player in the country and this transaction was adjudged as the Asia Pacifi c Oil and Gas Deal of the Year by Thomson Reuters- Project Finance International 2009.

Jaypee Infratech Ltd. Yamuna Expressway

Indias largest expressway Yamuna Expressway built on PPP model this deal was jointly completed by SBI Capital Markets for arranging the debt of INR 9837 crore. It was awarded the Indian Road Deal of the year 2009 by Euromoney .

Other Key Deals completed in FY 2009-10

Jindal Power Ltd.

SBI Capital Markets completed the fi nancial appraisal and debt syndication of Rs. 10,057 crore for Jindal Power Limiteds 4x600 MW coal-fi red sub-critical thermal power project located at Raigarh, Chhattisgarh.

Jaypee Groups Vishnuprayag project

SBI Capital Markets successfully completed Indias fi rst securitization against future receivables in the power sector, i.e. INR 1650 crore was raised against the receivables of 400 MW Vishnuprayag Project in Uttaranchal owned by the Jaypee Group.

Power Transmission projects under the Western Region System Strengthening Scheme - II(WRSSS-II)

SBI Capital Markets successfully completed fi nancial appraisal and debt syndication for INR 329.7 crore and INR 628.4 crore for transmission projects in Gujarat and Maharashtra respectively, which were the fi rst Independent Power Transmission Company (IPTC) projects in the country.

Indian Oil Corporations Paradip Refi nery

SBI Capital Markets completed fi nancial appraisal and debt syndication of INR 14,900 crore for the Paradip refi nery. Awarded the Indian Downstream Oil & Gas Deal of the year 2009 by Euromoney.

Suzlon Energy Ltd.

SBI Capital Markets successfully completed refi nance and consolidated scheme for Suzlon Energy and its group companies with tie up of rupee term loan of INR 10,000 crore and ECB of USD 465 million.

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HPCLMittalEnergyLtd&HPCLMittalpipeline

SBI Capital Markets successfully tied up ECB facility of USD 200 million each for HPCL Mittal Energy Ltd & HPCL Mittal Pipelines Ltd.

Delhi-GurgaonSuperconnectivityLtd.

SBI Capital Markets successfully completed the securitization of the toll receivables for Delhi-Gurgaon Superconnectivity Ltds access controlled 8/6 lane rack of length 27.7 kms on NH8. The deal was the largest toll receivables securitization in India amounting to Rs 1275 crore.

AircelGrouppanIndianexpansion

SBI Capital Markets arranged INR 11000 crore for financing Aircels pan India expansion (largest telecom deal by value).It was awarded the IndianTelecomdealoftheyear2009byEuromoney.

TataMotorsLtd.LandRover

SBI Capital Markets successfully arranged Indian public sector bank guarantee of GBP 370 Mn for Tata Motors subsidiary Land Rover for the purpose of research and engineering activities aimed at achieving CO2 emission targets set by the European Commission.

IndusTowersLtd.

SBI Capital Markets successfully completed financial appraisal and debt syndication for INR 3600 crore for Indus Towers Limited, a telecom passive infrastructure services provider company jointly floated by Bharti Airtel, Vodafone and Idea.

VodafoneEssarLtd.Acquisitionof3GandBWAspectrum

SBI Capital Markets successfully appraised and syndicated INR 10000 crore for Vodafone Essar Ltd and its subsidiaries towards funding acquisition of 3G and BWA spectrum auctioned by the Department of Telecom.

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OtherTransactionsofsubstantialvalueincludethefollowing:

Client Name DebtAmount(Rs.incrores)ONGC Petro Additions Ltd. (OPAL) 8708Adani Power Ltd. - Phase IV 7168Sterlite Energy Ltd. 6150Indiabulls Power Ltd. 5166Unitech Wireless Ltd. 5000Chennai Network Infrastructure Ltd. 5000Tata Motors Ltd. 4900ONGC Mangalore Petrochemicals Ltd.(OMPL) 3758Bhushan Power & Steel Ltd. 3285Anrak Aluminium Ltd. 2995IOT Utkal Energy Services Ltd. 2352Corporate Power Ltd. 2175Adani Power Maharashtra Ltd. - Phase II 2152Gujarat Narmada Valley Fertilizers Co.Ltd. 2001Visa Power Ltd. 1964Jaiprakash Power Ventures Ltd. 1650Alok Industries Ltd. 1550HCL EAS Ltd. 1380Delhi Gurgaon Super Connectivity Ltd. 1275JSW Steel Ltd. 1250

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Mergers & Acquisitions And Advisory

Exclusive Indian member of

As companies undertake a series of measures to underscore growth organically as well as to stay buoyant during economic uncertainties, our expertise, reach and experience allow us to help our customers look at strategic options including M & A, JV which cement their market positions, enhance brand recognition as well as leave a global footprint.

We offer clients customized solutions to suit their distinctive needs thereby adhering to their growth strategy and in some cases also facilitate development of a strategic roadmap to help the company grow to the next level.

For our Customers

We offer our clients seamless end-to-end M&A services right from target identifi cation to successful deal closure, advising and assisting them at each stage of the transaction. Our capabilities in arranging fi nancing for transactions, both debt and equity allow us to better represent the interests of companies and facilitate the entire process in a planned manner.

Our services when representing an acquirer for either domestic or cross border transaction cover areas which include target search and identifi cation, preparing and positioning the acquirer as a favourable partner for the potential target, valuations, due diligence, structuring of the transaction, assistance in negotiations with targets and also assisting in complying with all applicable rules and regulations to facilitate a successful closure.

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Our services when representing a seller or for induction of strategic partner covers the process of preparing and planning the company for such sale or divestment including valuation indicators, creating the most appropriate marketing strategy, reaching out to potential partners based on the business and opportunity fit assessment, facilitating the due diligence, and managing the negotiation or the bidding process to ensure maximization of value to the stakeholders in a project management manner.

We also assist Indian companies in syndication of private equity and also in arranging acquisition financing. We also leverage the presence of SBICAPS Ventures as well as the financing capabilities of SBI, wherever appropriate to bring the most synergistic value to a client.

SBI Capital Markets Limited is the exclusive Indian member of M&A International. M&A International Inc. members in 41 countries are closely linked in a global alliance to advise clients on acquisitions, divestitures, funding and joint ventures. In 2009, M&A International professionals closed over 224 transactions worth more than $ 20.4 billion. We shall continue to leverage our exclusive Indian relationship in the network for facilitating both inbound and outbound M & A for our clients both Indian and Global.

In the financial year the team along with the German partner of M & A International concluded one landmark deal in the chemicals space involving the acquisition of a company in Germany by an listed Indian company. The financing of the deal both in equity and debt was also facilitated by SBICAP.

While we work on transactions in many sectors, we have identified few non-infrastructure sectors to build core sector expertise which we estimate would witness substantial M&A activity in the years ahead. The additional sectors identified for specific thrust include IT, ITes and Technology, Pharma & LifeSciences, Banking & Finance, Insurance, Media & Entertainment to complement the existing strengths of SBICAPs in infrastructure. Dedicated teams are being built to cover the entire spectrum of advisory and financing services under these verticals.

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BouquetofourServices:

Issue Management of:

Public Offerings of Equity / Bonds / GDRs Rights Issues of Equity Placement of Equity with QIBs Private Placement of Non-convertible / Convertible Bonds - incl. FCCBs Pre-IPO Advisory Take-overs / Open Offers De-listings of Shares Buy-backs of Equity Shares and FCCBs Valuation Advisory

There was a significant increase in the number of public / other offerings in the financial year 2009-10, as the global market sentiments improved and FII inflows increased to near 2007 levels. With a sharp revival in the Indian economy and return of investor confidence, the Indian stock markets were one of the best performing in the world. The positive sentiments were also reflected in the public issuance market with 44 public equity offerings aggregating Rs. 46,941 crore in the financial year 2009-10, as against 21 public equity offerings of Rs. 2,034 crore in the financial year 2008-09. During the financial year 2009-10, our Company managed 10 public equity offerings aggregating Rs. 13,923 crore. With this, we were ranked 2nd (in terms of number of issues) and 5th (in terms of amount) among all merchant banks in public equity offerings.

It was an outstanding year for our Capital Markets Group, and we concluded several transactions across all sectors and geographies in India and had a healthy mix of diverse offerings - Public Offering, Rights Issue, Qualified Institutions Placement, Open Offer, Delisting, etc.

Capital Markets

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Apart from public equity offerings of Mahindra Holidays & Resort India Ltd., Adani Power Ltd., NHPC Ltd., Pipavav Shipyard Ltd., JSW Energy Ltd., ARSS Infrastructure Projects Ltd., United Bank of India, DQ Entertainment (International) Ltd., IL&FS Transportation Networks Ltd. and Goenka Diamond and Jewels Ltd., our Company was also lead manager for Qualified Institutions Placements of Hindalco Industries Ltd. and Alok Industries Ltd. raising funds aggregating Rs. 3,214 crore.

We also acted as lead manager for the Rights Issues of The Tinplate Company of India Ltd. raising funds aggregating Rs. 374 crore and of Videocon Industries Ltd. for Rs. 1,156 crore.

We were ranked 1st among all merchant banks for managing open offers by promoters of Natural Ventures Private Ltd., ArcelorMittal Projects Netherlands BV and Infrastructure Leasing & Financial Services Ltd.

We were also lead manager for de-listing transaction of India Forge & Drop Stamping Ltd.

During the financial year 2009-10, our Company managed 27 debt issues aggregating Rs. 34,832 crore. This also included the public issue of Non-convertible Debentures by L&T Finance Ltd. aggregating Rs. 1,000 crore, which enabled us to achieve 3rd rank in public issuances of debt instruments during the year 2009-10.

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To the Members,

Your Directors take pleasure in presenting the Twenty Fourth Annual Report of the Company together with the Profi t and Loss Account for the year ended 31st March, 2010 and the Balance Sheet as on that date.

Performance Highlights

Year ended March 31 2010 2009Operating ResultsGross Income :a) Fee based Merchant Banking and advisory fees (net)b) Income from securities, Lease and hire purchase and Other IncomeTotal

243.09

40.56283.65

153.52

121.97275.50

Profi t before provisions, Depreciation, Interest and Tax 207.29 223.16Provisions 10.15 10.77Depreciation 2.00 3.06Interest - -Profi t before tax 195.14 209.33Profi t after tax 137.12 150.90Financial PositionEquity Share Capital 58.03 58.03Reserves and Surplus 493.05 450.99Debt Funds 2.48 2.48Other Selected DataEarnings per share (Rs.) 23.63 26.00Return on Equity 25% 30%Dividend per share (Rs.) 14.00 12.00Book Value per share (Rs.) 94.04 87.00

During the year, the fee based income registered a robust 58% growth. The reduction in Profi t was mainly due to one time extra-ordinary income of Rs. 74.98 crores during the previous year.

Some major Performance Highlights are : Fee based Income has doubled in the last 2 years, 56% growth in Project Advisory & Structured Finance (PASF) Income, Doubled the volume of syndicated loans to over Rs. 1,87,000 crores, Over 600% growth in Capital Market Group Income, Book Running Lead Manager for 10 public issues aggregating Rs. 13,923 crores, International ECB Syndication deals volume touching US$ 3 billion, Associated with 26 Debt mandates exceeding Rs. 33,000 crores, Managed GDR issue of Tata Power Company Ltd. aggregating US$ 335 million, and public issue of NCDs of L&T Finance Ltd. aggregating Rs. 1,000 crores.

Directors Report for the year 2009-10

(Rs. in crores)

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Dividend&TransferToGeneralReserve

Out of the current years profits, the Directors propose that a sum of Rs. 13.71 crores be transferred to the General Reserve. During the year, the Board declared 1st Interim Dividend of Rs.10/- per share on 29th September, 2009 and 2nd Interim Dividend of Rs. 4/- per share on 31st March, 2010. The Directors propose that the two Interim Dividends aggregating Rs. 14/- per share be declared as the Final Dividend.

Awards&Recognition

Your Company continued to receive both domestic and international awards during the calendar year 2009, the most prominent being Asia Pacific Bank of the Year from Thomson Reuters, India Loan House from IFR Asia and Best Arranger of Indian Loans Asia Pacific Region from Euroweek Asia.

Your Company was rated at the Top by many rating agencies during the calendar year 2009. The significant among them are :

No. 1 - Mandated Lead Arranger Global Project Finance Loans by Thomson Reuters (PFI) (previous year 3rd), No. 1 - Mandated Lead Arranger Global Project Finance Loans by Dealogic (previous year 2nd) No. 1 - Financial Adviser of Global Project Finance Deals by Dealogic (previous year 3rd), No. 1 - Asia ex-Japan Loans Mandated Arranger by Bloomberg (previous year 1st), No. 1 - Asia ex-Japan Loans Book Runner by Bloomberg (previous year 1st), No. 1 - Asia Pacific ex-Japan Loans Mandated Arranger by Bloomberg (previous year 1st), No. 1 - Asia Pacific ex-Japan Loans Book Runner by Bloomberg (previous year 1st).

The Company was also awarded Oil & Gas Deal of the Year for Cairn India in Asia Pacific region by Thomson Reuters in 2009. Similarly, Euro Money Project Finance awarded Sasan Power as Power Deal of the Year, Cairn India as Upstream Oil & Gas Deal of the Year, Yamuna Expressway as the Road Deal of the Year and Aircel as the Telecom Deal of the Year in India.

The Company was ranked 2nd in terms of both Issue Amount and Number of Issues in IPO category, 2nd in terms of Number of Issues and 5th in terms of Issue Amount in IPO/FPO category by Prime Database.

ChangeInShareholding

During the year, State Bank of India purchased the entire 13.84% stake held by Asian Development Bank. As a result, your Company is now a wholly owned subsidiary of State Bank of India.

ManagementDiscussionAndAnalysis

Management Discussion and Analysis is annexed to and forms part of this report (Annexure A).

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CorporateGovernance

The Directors Report on Corporate Governance for the year 2009-10 is attached (Annexure B).

SUBSIDIARIES

The performance of the four subsidiaries during the year 2009-10 is as follows :-

SBICAPSecuritiesLimited(SSL)

A brief summary of financial highlights is as under - (Rs. in crores)

Year March2010 March2009Gross income 53.26 23.87Direct Expenses 42.15 25.10Profit/(Loss) before tax 11.11 (1.23)Profit/(Loss) after tax 8.11 (1.32)

After the global downturn during the year 2008-2009, the year saw signs of stabilization, growing confidence and recovery in the major economies of the world. The Indian capital markets were one of the first to recover with the BSE SENSEX ending the year (March 2010) at 17692, as against the previous years close of 9708. During the year, our securities subsidiary - SSL turned the corner and registered a Profit after Tax of Rs. 8.11 crores as compared to a loss of Rs. 1.32 crores in the previous year. Income from broking activity contributed Rs 30.11 crores (previous year Rs. 12.73 crores) and Sales and Distribution Rs 18.75 crores (previous year Rs. 5.41 crores). Broking income improved both in the Institutional and Retail segments as a result of business development initiatives. The E-broking space was the primary focus during the year and this resulted in an eight fold increase in the income from this sub-segment. The pick up in IPO offerings particularly during the last quarter of the financial year saw substantial improvement in income from S&D activities.

SSL has committed substantial manpower and other resources to the Retail effort this year. The network of branches was extended from 44 to 70 in around 60 centres. The number of Retail broking clients also increased from 46,000 to 1,11,000. The investment in this segment should bring substantial benefits to SSL in the coming years.

SBICAP (UK) Limited (SUL)

A brief summary of financial highlights is as under:- (Rs. in crores)

Year March2010 March2009Gross income 4.40 2.14Direct Expenses 1.73 1.53Profit before tax 2.67 0.61Profit after tax 1.92 0.44

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During the year SUL registered an impressive growth in revenue and profits despite the global recessionary scenario. SUL has booked revenue of GBP 564,047 and PBT of GBP 333,408 during the FY 2009-10 as against the revenue of GBP 261,138 and profit of GBP 71,046 for FY 2008-09.

SUL is positioning itself as a Relationship outfit for SBICAP in UK and Europe. Relationships are being built with FIIs, Financial Institutions, Law Firms, Accounting Companies etc. to market the business products of SBICAP. Relationships are also being developed with Foreign Banks in UK in addition to the overseas branches of Indian Banks. SUL is actively scouting for companies located in UK/Europe that are possible acquisition targets for Indian corporates looking at inorganic growth and originating cross border M&A leads/mandates. SUL is also developing relationships with UK based clients, who may be interested in getting a foothold in India, either directly or through intermediaries, and focusing on providing advisory services to them.

SBICAPTrusteeCompanyLimited(STCL)

A brief summary of financial highlights is as under:- (Rs. in crores)

Year March2010 March2009Gross Income 3.78 0.44Expenses 0.82 0.24Profit Before Tax 2.96 0.20Profit After Tax 1.94 0.14

STCL effectively commenced Security Trustee business with effect from 1st October, 2008. The year 2009 -10 was the first full year of operations.

Presently, STCL is undertaking various Trusteeship activities viz. Security Trusteeship, Security Agent, Escrow Agent, Escrow Trusteeship, Share Pledge Trustee, Safe Custody / Safe Keeper etc.

Further, STCL is proposing to obtain SEBI License to undertake various other activities such as Venture Capital Trusteeship, Non Disposal Undertaking (NDU) / Power of Attorney (POA) Agency, Facility Agent role, Debenture / Bond Trusteeship etc. SBICAPS Ventures Limited (SVL)

SVL has set up a Venture Capital Fund (India Japan Fund) of USD 100 million jointly with SBI Holdings Inc., Japan. Two investments have been made by SVL and SBI Holdings jointly till date. No fresh investment was made by India Japan Fund during the year 2009-10.

During the year under review, SVL earned a Dividend income of Rs.3.08 crores and incurred an expenditure of Rs. 0.08 crore towards employee costs and administrative expenses. SVL also made a provision of Rs. 2.00 crores for diminution in value of investments in units of Scheme I (India Knowledge Fund) of India Japan Fund. The net profit during the year was Rs. 1.00 crore. After setting off the previous years losses of Rs.0.41 crore, the balance Profit of Rs. 0.59 crore has been carried to the Balance Sheet.

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Directors

During the year under review, the following changes took place among the Directors of the Company :-

Shri A.P. Verma resigned as Managing Director & CEO and also as Director of the Company with effect from the close of business hours on 20th June, 2009. Shri S. Vishvanathan was appointed as Managing Director & CEO of the Company w.e.f. 22nd June, 2009. Shri Ajay Sagar resigned as Nominee Director, Asian Development Bank, w.e.f. 30th November, 2009. Ms. Sujata Gupta was appointed as Nominee Director, Asian Development Bank w.e.f. 30th December, 2009. Ms. Sujata Gupta resigned as Nominee Director, Asian Development Bank w.e.f. 30th March, 2010.

Shri Bansi S. Mehta and Dr. Swati A. Piramal, Directors, retire by rotation at the 24th Annual General Meeting of the Company and being eligible, offer themselves for re-appointment.

The Board extends a hearty welcome to Shri S. Vishvanathan as Managing Director & CEO of the Compan y and places on record its deep appreciation of the invaluable contributions made by Shri A.P. Verma during his tenure as Managing Director & CEO of the Company. The Board also places on record its deep appreciation of the invaluable contributions made by Shri Ajay Sagar and Ms. Sujata Gupta during their tenure as Directors of the Company.

DirectorsResponsibilityStatement

Pursuant to Section 217(2AA) of the Companies Act,1956, the Directors confirm that :-

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) Appropriate accounting policies have been selected and applied consistently, and the judgements and estimates that have been made are reasonable and prudent so as to

give a true and fair view of the state of affairs of the company as on 31st March, 2010 and of the profit or loss of the company for the year ended 31st March, 2010;

(iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities;

(iv) The annual accounts have been prepared on a going concern basis.

Companies(DisclosuresOfParticularsInTheReportOfTheBoardOfDirectors)Rules,1988

In terms of the above Rules issued by the Central Government, the following information is furnished:-

ConservationofEnergyandTechnologyAbsorption

Since the Company is engaged in Merchant Banking and Advisory Services, there is no information to report under this head.

ForeignExchangeEarningsandOutgo

During the year under review, SBICAP earned foreign exchange equivalent to Rs. 24.45 crores towards

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advisory fees from overseas clients and reimbursement of expenses. The total foreign exchange expended amounted to Rs. 7.91 crores on account of sharing of fees, foreign travel and other expenses.

Auditors

M/s. Sudit K. Parekh & Co., Chartered Accountants, were appointed as the Statutory Auditors of the Company for the financial year 2009-10, by the Comptroller & Auditor General of India (CAG), under the provisions of Section 619(2) of the Companies Act 1956. They will hold office till the ensuing Annual General Meeting of the Company. The application for appointment of Statutory Auditors for the financial year 2010-11 has been made to CAG.

CommentsOfTheComptroller&AuditorGeneralOfIndia

Comments of the Comptroller & Auditor General of India dated 18th May, 2010 under Section 619(4) of the Companies Act, 1956 on the accounts of the Company for the year ended 31st March, 2010 is enclosed. It is reported therein that on the basis of audit, nothing significant has come to their knowledge which would give rise to any comment upon or supplement to Statutory Auditors report under Section 619(4) of the Companies Act, 1956.

ParticularsOfEmployees

The information as required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, is given in Annexure C.

Acknowledgement

The Board of Directors would like to express its thanks to SEBI - the Companys Regulator and Comptroller & Auditor General of India (CAG), for the advice and guidance received. The Board is also grateful to the State Bank of India and its group companies for providing significant business support, which has been mutually rewarding.

The Board of Directors places on record its appreciation for the valued support from our clients, which has been very crucial for its standing in the industry. The Board would also like to thank the investing community, intermediaries in the investment-banking field and the governmental authorities for the co-operation extended from time to time. The Board also places on record its deep appreciation for the dedication and commitment of its staff and looks forward to their increased involvement and contribution in the journey ahead.

ForandonbehalfoftheBoardofDirectors

R.SridharanBharatiRaoDirector Director

Place : MumbaiDate : 16/7/2010

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ManagementDiscussionandAnalysis

1.MacroeconomicReview

In the aftermath of the recent meltdown, global recovery was off to a faster start than anticipated earlier but with rate of growth varying from region to region. Following one of the steepest global downturns in recent history, global economy is beginning to recover slowly.

According to IMFs latest World Development Outlook, output in the advanced economies is now forecast to expand by 2.5 % in 2011, after an expected rebound to 2% in 2010, following a sharp decline in output during the crisis. Notwithstanding this, the recovery in advanced economies is still expected to be weak by historical standards, with real output remaining below its pre-crisis level until late 2011.

In contrast, growth in emerging and developing economies is expected to rise to about 6% in 2010, following a modest pace of growth in the aftermath of the crisis.

Turning to the Indian economy, the growth outlook in India has emerged positive. For one, it has been one of the first countries to recover from the economic crisis. As per CSOs advanced estimates, GDP growth in FY10 is expected to clock 7.2%. We expect GDP growth to reach 8% in FY11. The twin engines of growth in India- domestic savings and external capital ensured that the country was poised to face the global economic and financial crisis from a position of advantage. This recovery, of course, would be driven by private investment and private consumption, given that corporate profits and growth prospects have been looking up. In this backdrop, one negative fallout is that inflation has been accelerating in India. There are two reasons for this cyclical and structural. Food production has not kept pace with rising demand over the past few years. In addition cyclical recovery from the crisis is also intensifying demand pressures. The Central bank is very vigilant and has begun to rein in liquidity and tighten monetary policy, raising the Cash Reserve Ratio by 75 bps in its January 2010 meeting (50 bps effective from 13th February, 2010 and 25 bps from 27th February, 2010). The rates were further raised by 25 bps in April, 2010. Going forward, as the recovery becomes more entrenched, demand pressures would intensify and the RBI would continue with its policy of gradual tightening.

On the fiscal front, Indias deficit and debt are among the highest in the Emerging markets. The authorities are cognizant of this and have pledged to reduce the deficit over the next couple of years.

The Centres fiscal deficit target for FY11 was set at 5.5% of GDP in the Medium Term Fiscal Policy Statement presented along with Budget 2009-10. The fiscal deficit target has been adhered to in Union Budget FY11. Against a fiscal deficit of 7.8 % in FY09, inclusive of oil and fertiliser bonds, the comparable fiscal deficit is 6.9 % as per the Revised Estimates for FY10.

Further in the Medium Term Fiscal Policy Statement accompanying Union Budget FY11, the rolling targets for fiscal deficit have been pegged at 4.8% and 4.1% for FY12 and FY13, respectively. These projections improve upon the recommendations of the Thirteenth Finance Commission.

Moreover, as a part of the fiscal consolidation process, it would be for the first time that the Government would target an explicit reduction in its domestic public debt-GDP ratio.

There are some revenue measures that have been proposed to be implemented to reduce fiscal deficit like the disinvestment agenda, auction of 3G/wireless broadband spectrum under telecom segment, the rollout of the Goods and Services tax and the Direct Tax code, but equally important are reforms on the expenditure side. In this regard, the specific concern is on subsidies. Right now subsidies go towards benefiting the relatively well off sections of the society, instead of going to the neediest. A proper subsidy targeting regime is the need of the hour, apart from some of the aforementioned revenue measures.

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Turning to the external front, exports recorded a growth of 13.2 % during Q3 of FY10 over the corresponding quarter of the previous year, after consecutive declines in the last four quarters. Imports registered a growth of 2.6 % in Q3 of FY10 after recording consecutive declines in the last three quarters. This positive story has been reinforced by strong private transfer receipts comprising mainly remittances from Indians working overseas, which increased to US$ 40.8 bn in April-December 2009, while net invisibles (invisibles receipts minus invisibles payments) recorded a surplus of US$ 18.7 bn in Q3 of FY10. As per provisional figures published by the Ministry of Commerce, there is a steep increase in growth of exports by 33% (yoy) and imports by 55% (yoy) during Q4 of FY10.

The aforementioned turnaround in the economy has been mirrored in the buoyant performance of the Indian equity market. Foreign Institutional Investor flows into Indian equities were worth a net US$ 23bn, through the last fiscal.

The robustness of capital flows, especially foreign direct investments, is conducive for the turnaround in the business cycle. As such the buoyancy in capital flows is expected to continue unabated, given the growth differentials between the emerging and the developed economies. The Indian economy is poised to benefit from these external flows in that they provide the much needed risk capital to plug the gap between domestic savings and investments.

2.InvestmentBankingStrategies

During the year, the Company continued its thrust on synergy with State Bank of India and its Associate Banks. Joint presentations were made to the clients on behalf of SBICAP and State Bank of India/ Associate Banks. Training programmes were arranged for the officials of both the Groups.

Capital Market Group (CMG) is focusing on Corporate Debt, financial advisory, valuations, rights issues, shares buy-back, delisting assignments apart from its major activities like IPOs, Right Issues, QIPs. In addition CMG is also expanding its bouquet of services by providing other services like, Pre-IPO advisory, Valuation Analysis and ESOP Advisory and also exploring and suggesting suitable opportunities like buy-back, delisting, IDR and GDR/FCCB.

Project Advisory & Structured Finance (PA&SF) Group has increased its staff strength by recruiting a team of 40 skilled personnel to tap growing business opportunities. Besides continuing advisory and credit syndications for large infrastructure projects, the Group has established relationship with foreign lenders for ECB Syndication.

Mergers & Acquisitions & Corporate Advisory (M&A&CA) Group is focusing on harnessing Group Strength to tap business relating to M&A, PE and Sale of distressed assets. During the year, the Group added two Separate Teams, one in the area of Healthcare & Life Sciences and another in Stressed Assets Restructuring. There is an enhanced marketing initiative with M&A International member firms, especially those in Germany, US and Holland to increase the Deal flow.

Institutional Relationship Group has established itself amongst the growing list of Institutional Investors like FIIs, Private Insurance Companies and Mutual Funds. The Group has developed synergy with SBI DFHI for placement of debt to PF participants.

3.SBICAPsPerformance

The performance of your Company during the year 2009-10 has been discussed below:

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3.1QuantitativePerformance

The Company booked a fee based income of Rs. 243.09 crores during the year, as compared to Rs. 153.52 crores in the previous year. However, Profit after Tax (PAT) was Rs. 137.12 crores as compared to Rs. 150.90 crores in the previous year. The reduction in PAT was mainly due to one time extraordinary income of Rs. 74.98 crores in the previous year.

The performance in respect of various activities is as under:

3.1.1MerchantBanking&AdvisoryFees

3.1.1(a)CapitalMarkets

The net income booked by the Capital Markets Group was Rs. 20.11 crores as compared to Rs. 3.32 crores in the previous year.

The Group activities involve equity offerings like initial public offers and follow-on public offers, rights issues, qualified institutional placements and private placements of equity and debt. There was a significant increase in the number of offerings in the financial year 2009-10, as the global market sentiments improved and FII inflows increased to near 2007 levels. As the Indian economy revived and investor confidence returned, Indian stock markets out performed most of the global markets during the year. The positive sentiments were reflected in new public issuances - with 44 public offers (other than PSU divestments) raising funds aggregating Rs. 46,941 crores in the financial year 2009-10, as against 21 public offers aggregating only Rs. 2,034 crores in the financial year 2008-09. During the financial year 2009-10, your Company managed equity offerings / placements aggregating Rs. 24,707 crores.

Your Company was the Book Running Lead Manager for 10 public issues aggregating Rs. 13,923 crores, which included Mahindra Holidays & Resort India Ltd., Adani Power Ltd., NHPC Ltd., Pipavav Shipyard Ltd., JSW Energy Ltd., ARSS Infrastructure Projects Ltd., United Bank of India, DQ Entertainment (International) Ltd., IL&FS Transportation Networks Ltd. and Goenka Diamond and Jewels Ltd. Additionally, your Company was the Lead Manager for Qualified Institutional Placements of Hindalco Industries Ltd. and Alok Industries Ltd. raising funds aggregating Rs. 3,215 crores. Your Company was the Lead Manager for the Rights Issue of The Tinplate Company of India Ltd. raising funds aggregating Rs. 374 crores and was also the Lead Manager for the Rights Issue of Videocon Industries Ltd. for Rs. 1,156 crores. Your Company was associated with disinvestment of NHPC by the Govt. of India and also the Lead Manager for 3 Open Offers and 1 Delisting.

During this financial year, there have been several firsts for your Company which included co-managing the Global Depository Receipts (GDR) issue of Tata Power Company Limited aggregating USD 335 million.

Further, your Company is the Book Running Lead Manager for several proposed equity and debt offerings, which are at various stages of completion.

3.1.1(b)InstitutionalRelationshipsGroup

The current financial year saw increased action in the bond markets and the overall mobilization for the year through bonds exceeded Rs 1,75,000 crores. SBICAP was associated with 26 debt mandates with mobilization in excess of Rs. 33,000 crores and was ranked amongst the top 5 for the calendar year 2009 by Bloomberg. Your Company was instrumental in raising funds for large PSUs like PFC,

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REC, PGCIL, IRFC, ONGC Videsh and large private sector issuance of Tata Motors, HCL Tech, etc. The Group was also mandated for public issue of debentures of L&T Finance Ltd., which has mobilized Rs.1000 crores from the market.

The Group established itself amongst the growing list of institutional investors like Foreign Institutional Investors, private insurance companies and Mutual Funds. During FY10, the Group has developed synergy with SBI DFHI for placement of debt to PF participants. The group has also successfully targeted large corporate treasuries to distribute debt products.

The Group is now well positioned to leverage on the foundation laid during the year and is also expanding the scope of services including fund raising solutions to corporates through structured finance, arranging placement on an underwritten basis, etc. The Group is expecting to leverage the support of Corporate Accounts Group/Mid-Corporate Group of SBI to originate business in a more effective manner.

3.1.1(c)Mergers&Acquisitions&CorporateAdvisory

The M&A&CA Group has booked an income of Rs. 19.64 crores during the year as compared to Rs.18.03 crores during the previous year.

The Group has closed 9 transactions in the current financial year in the areas of cross border acquisitions, private placement of equity and arranging acquisition financing for Indian acquirers and merger deals. The group added two new teams in the areas of Healthcare and Lifesciences and Stressed Assets restructuring apart from initiating a third team for the IT, ITeS Technology from within the existing group. The Group is currently working on close to 45 mandates spread across domestic & cross border M&A, private equity and acquisition financing, with some of them expected to close in the first half of next financial year. The new teams have also established themselves and are working on a number of mandates.

3.1.1(d)ProjectAdvisory&StructuredFinance

Project Advisory & Structured Finance (PA&SF) Groups fee income has registered a growth of over 57% with the income growing from Rs. 192.26 crores during the previous year to Rs. 302.33 crores during the current year. The net fee income after sharing with SBI for the year was Rs 197.34 crores as against Rs. 132.17 crores during the previous year. The Indian market share of the Group has increased to 64% from 46% in FY09.

The Group has syndicated loans of over Rs. 1,87,000 crores in FY 2009-10, with Power sector contributing around Rs.60,000 crores, Telecom and Oil & Gas sectors contributing around Rs. 40,000 crores and Rs. 39,150 crores respectively. Riding on the Groups placement capability, SBI could underwrite debt deals in excess of Rs 40,000 crores and received underwriting fees besides upfront fees thereby increasing the fee based income for SBI.

The Group has also bagged large number of prestigious syndication mandates in private ports, communication, power and energy sectors.

In continuation of the Groups focus on ECB syndications, the Group has established relationships with foreign lenders and has syndicated ECB in excess of US$ 3 billion for various projects.

The Group is also actively working on large number of advisory mandates including bid advisory work for developers for road, port, power projects and restructuring advisory for some of the larger corporates as also advising SEBs/ PSU Ports for selection of developers for setting up power and port projects.

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3.1.2IncomefromSecurities-Treasury&Investments

The Treasury Income for the year ended 31st March, 2010 was Rs. 24.46 crores as against Rs. 31.27 crores during the previous year. The income was lower as the yields on investments were lower during the year.

The Companys equity portfolio has given a return of 101.07% as against a return of 73.76% on the Benchmark Nifty Index.

3.1.3 AssetFinance

Pursuant to SEBI directives, the Company stopped executing fresh Leasing and Hire purchase contracts w.e.f. 1st July 1998. However, contractual obligations undertaken prior to the said date are being fulfilled.

3.2 QualitativePerformance

3.2.1 HumanResources

The Companys mission is to provide credible, professional and customer focused world class investment banking solutions. The Company also believes that Human Resources are critical for achieving its objectives. SBICAPS continuously strives to align its HR policies and practices with Companys policies for achieving the corporate objectives.

The Company has put in place a policy of recognizing and rewarding achievers. Outstanding Performers who have contributed significantly to the business goals of the Company, are differentiated and rewarded suitably.

We value a work environment where diversity is embraced, and where people treat each other with mutual respect and dignity. The Company offers a challenging work environment, fostering a stimulating work culture of innovation and individual growth. We are an Equal Opportunity employer without gender discrimination.

The organisation is growing rapidly and to keep pace with the growth, this year we have recruited 76 experienced professionals from the market and 25 management graduates from premier B-schools and Foreign Universities. We also offer summer internship to students pursuing professional courses, so that they gain live experience, after they have undergone core courses in various fields.

Being a knowledge driven organisation, the Company has a well established system of Training and Development to provide Continuous Learning Opportunities to our employees. The soft skills and hard skills of our employees are sharpened continuously by nominating them for seminars and conferences both in India and abroad, to ensure that there is no gap in their knowledge and delivery capabilities.

Today, the Company has a team of 363 experienced Professionals from diverse streams who are committed to our vision to be The Best India based Investment Bank.

3.2.2InformationTechnology

The Information technology group facilitates IT Infrastructure and Application for the company. During the year 2009-10, the IT department has taken the following technology initiatives:-

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An MPLS based wide area network has been implemented to provide faster, reliable and secured connectivity to Regional Offices. Video Conferencing facility has been extended to all Regional Offices. Blackberry facility has been provided to all senior officials in the various Product groups. Symantec Endpoint Protection Manager (SEPM) has been rolled out to enhance the security of the corporate network, The internet bandwidth in corporate office has been upgraded to 4MBPS. Implementation of an Integrated system for Lead and Assignment Management System is in progress.

4.FutureOutlook

In the past year, the Indian as well as the global economies witnessed a very high degree of uncertainty. While the year began on a subdued note with top priority being accorded to sustaining growth, sentiments improved as the year drew to a close as economic growth became more sustainable and broad-based. On the back of strong economic data flow, the Reserve Bank has revised the baseline projection for GDP growth for 2009-10 upwards from 6.0% to 7.5% based on strong growth in industrial production and recovery in services sector activity. The bellwether SENSEX ended the year sharply higher by 80.54%.

The outlook for the global economy remains challenging but optimistic. IMF has estimated that the world economy will grow by 3.9% in 2010 and 4.3% in 2011 after a fall of 0.8% in 2009. With the recovery taking a strong foothold, the advanced economies are expected to grow by 2.1% in 2010, while emerging and developed economies are expected to grow by 6%. India and China are expected to be the fastest growing economies in 2010 and 2011. As per CSO estimates the Indian economy is expected to grow by 8.5% to 9% in 2011-12. The external perspective of India in the rest of the world has been growing very rapidly and an increasing number of foreign players are entering Indian markets to grab a pie of huge growth potential.

With revival of growth, public sector disinvestment and success of many IPOs, we see a number of opportunities opening up in the capital market, mergers & acquisitions and project advisory business. In such a scenario, we are committed to leverage upon the strong base we have built in domestic markets and tap the synergies arising out of various entities of the SBI group. To address the emerging opportunities, we have increased our focus on the capital market segment as well as in areas like mergers & acquisition and private funding. We continue to maintain our efforts to retain our dominant position in the credit syndication & advisory segment where we are already ranked No.1. On the international front, we envisage extending our expertise and providing services to those countries which are at a similar stage of development. Accordingly, we intend to increasingly bid for international projects more particularly in Asian economies having high growth potential.

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CorporateGovernanceReport

The principles of Corporate Governance are followed in letter and spirit even though ours is not a listed Company. For your Company, Corporate Governance is not just an objective in isolation but a means to an end - To be the Best India based Investment Bank.

i)CompositionoftheBoard

The Board of Directors comprises eight Directors out of whom five are independent, i.e. Directors who are not having any pecuniary relationship or transactions with the Company, its promoters or management, which, in the opinion of the Board, is likely to affect the independence of judgement of a Director. Given hereunder is the composition of the Board of Directors along with their brief profiles:-

1. ShriO.P.Bhatt, Chairman [SBI Nominee]: Shri Bhatt is the Chairman of State Bank of India (SBI) since 1st July, 2006 and is also Head of the entire State Bank Group. His 37 years in SBI covered a variety of assignments both in domestic and international banking. He was closely associated with SBIs ambitious computerization project and spent 6 years co-ordinating the teams efforts from the Banks Corporate Centre at Mumbai. In September 1997, he was posted as the Banks Representative at Washington D.C. where his role included maintaining rapport with FRB, FDIC, US Exim, Indian Embassy, American Banks, World Bank, IMF, etc. He has held a string of critical assignments and was quickly promoted from General Manager to Chief General Manager and then as Deputy Managing Director. He was General Manager in charge of Development and Personal Banking at the Banks Lucknow Head Office, Chief General Manager of North East Circle and then, the Managing Director of State Bank of Travancore. In view of his successful handling of these critical assignments, he was appointed as Managing Director of SBI and was in charge of the Banks National Banking Group, which handles the entire retail portfolio of the Bank, prior to taking over as Chairman.

2. ShriR.Sridharan, Managing Director & GE (Associates & Subsidiaries) - [SBI Nominee] : Shri Sridharan has over 37 years of experience in the banking sector. He has held various responsible positions in State Bank of India and SBI Capital Markets Limited such as Dy. Managing Director & GE (Subsidiaries), Executive Vice President State Bank of India, Tokyo Branch, Head Corporate Accounts Group Branch, Ahmedabad, General Manager Treasury, SBI, Mumbai, Chief General Manager Bangalore Circle and Managing Director & CEO, SBI Capital Markets Limited. He has also held assignments in the State Bank of Indias International Division as also at its Frankfurt Branch. He was also deputed to the Ministry of Finance, Government of India, New Delhi as Advisor.

3. Smt.BharatiRao, Non Executive Independent Director: Smt. Rao has over 36 years of experience in the banking sector. She retired from State Bank of India on 31st October, 2008. Smt. Bharati Rao was Advisor (Mergers & Acquisitions), State Bank of India. During her tenure with the Bank, she had held various responsible positions. Her 36 years in the Bank have seen a range of assignments both in India and abroad in areas like Commercial Banking, Project Finance, and International Banking. She was Dy. Managing Director & Chief Credit Officer, Corporate Centre, Mumbai with an additional charge as Dy. Managing Director and Group Executive (Associate Banks) and Dy. Managing Director & CDO at the time of retiring from services.

4. Dr.R.H.Patil, Non Executive Independent Director: Dr. Patil has over 41 years of experience in the fields of Finance and Securities Market. He retired as the Managing Director of the National Stock Exchange of India and was also associated with establishment of reputed institutions like

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Stock Holding Corporation of India Ltd., National Stock Exchange of India Ltd., Credit Analysis and Research Ltd. He was also Chairman of UTI Asset Management Co. Pvt. Ltd. At present, he is Chairman of Clearing Corporation of India Ltd. and National Securities Depository Ltd. (NSDL) and Director of Axis Bank Ltd.

5. ShriBansiS.Mehta, Non Executive Independent Director: Shri Mehta is a well-known practicing Chartered Accountant and is a Senior Partner of Bansi S. Mehta & Co., Chartered Accountants. Shri Mehta has rich experience of over 50 years in the fields of financial management, taxation, accounting and auditing.

6. ShriD.Sundaram, Non Executive Independent Director & Chairman of the Audit Committee: Shri Sundaram is Vice Chairman of TVS Capital Funds Ltd. and has over 34 years of experience in the areas of Finance and Accounting. He was with the HUL group since 1975 and was Vice Chairman of HUL. He was seconded twice to Unilever, London. He has held important positions such as Commercial Manager & Treasurer, Finance Member TOMCO Integration Team, Finance Director BBLIL and Sr. Vice President Finance, Central Asia & Middle East Group.

7. Dr.SwatiA.Piramal, Non Executive Independent Director: Dr. Swati Piramal, Director (Strategic Alliances & Communications) of Nicholas Piramal India Ltd. is a Medical Doctor (M.B.B.S.) from the University of Bombay and has graduated with Masters Degree from Harvard School of Public Health, Boston USA. Dr. Piramals special research interests include Herbal, Clinical Discovery and Nutrition Research in Pharmaceuticals. Her specific research interests focus on Malaria, Tuberculosis, AIDS and Diabetes. She holds directorships of well-known institutions/companies like Council of Scientific & Industrial Research (CSIR), Piramal Healthcare Limited, Piramal Life Sciences Limited, etc. She is presently Chairperson of ASSOCHAM.

8. ShriS.Vishvanathan, Managing Director & CEO [SBI Nominee] : Shri Vishvanathan has over 33 years of Banking experience with State Bank of India. Earlier, he was Chief General Manager of State Bank of Indias North Eastern operations. He joined SBI as a Probationary Officer in 1976 and has served the bank in several important capacities which include an assignment in New York Branch and stints as Regional Manager and Deputy General Manager in Delhi Circle. He has extensive experience in the domain of Treasury and Global Markets both in the Domestic as well as International Markets and has been associated with State Banks foray into structured products and derivatives in his capacity as General Manager (Global markets).

ii) Tenure

The Chairman has been appointed by State Bank of India (SBI) in terms of Articles 139(ii) & 157 of the Articles of Association of the Company.

The Non-Executive Nominee Directors have been appointed by SBI in terms of Article 139(i) and 140 of the Articles of Association of the Company.

The Non-Executive Independent Directors have been appointed as Directors liable to retire by rotation under Section 255 of the Companies Act 1956.

The Managing Director & CEO has been appointed by SBI in terms of Article 168 of the Articles of Association of the Company.

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iii)Responsibilities

The Board of Directors focuses on monitoring the business operations and the development of business strategies, while the task of reviewing matters such as status of overdues, status of litigations etc., are delegated to a Committee of Directors (COD) constituted for the purpose by the Board.

The Board has evolved a Calendar of Reviews, which has identified the various reports/reviews to be submitted on a periodical basis to the Board/COD/Audit Committee and the said Calendar of Reviews is strictly followed.

iv)RoleoftheIndependentDirectors

The Independent Directors play a very crucial role in the Board meetings and their wide experience, expertise and knowledge of economics, finance, capital markets, taxation, accounting, auditing etc., have benefited the Company immensely.

v)BoardMeetings

During the year under review, 6 Board meetings were held and the attendance record of each Director at the said Board Meetings is given hereunder :-

NameoftheDirector NumberofBoardMeetingsattendedShri O.P. Bhatt, Chairman 4Shri R. Sridharan, Nominee Director, SBI 4Smt. Bharati Rao, Non Executive Independent Director 4Dr. R.H. Patil, Non Executive Independent Director 4Shri Bansi S. Mehta, Non Executive Independent Director 4Shri D. Sundaram, Non Executive Independent Director 2Dr. Swati A. Piramal, Non Executive Independent Director 3Shri Ajay Sagar, Nominee Director ADB - (resigned as Director w.e.f. 30th

November, 2009)Ms. Sujata Gupta, Nominee Director, ADB 1 (resigned as Director w.e.f. 30th March,

2010) Shri A.P. Verma, former MD & CEO, SBI Nominee 1 (resigned as MD & CEO w.e.f. 20th

June, 2009)Shri S. Vishvanathan, MD & CEO, SBI Nominee 5 (appointed as MD & CEO w.e.f. 22nd

June, 2009)

vi)CompositionandroleoftheAuditCommitteeandthescopeofInternalAuditFunction

An Audit Committee comprising Shri D. Sundaram, Chairman, Dr. R.H. Patil, Director and Shri R. Sridharan, Director, is operational and the composition of the Audit Committee as well as its role and functions are broadly in conformity with the stipulations of the Kumar Mangalam Birla Committee Report on Corporate Governance, the combined code of the London Stock Exchange, the code prescribed by the Blue Ribbon committee for the NASDAQ and the New York Stock Exchange, and the Report of the advisory group on Corporate Governance set up by the RBIs standing committee on international financial standards and Codes. The composition and the role of the Audit Committee are also in

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compliance with Section 292A of the Companies Act, 1956. The scope of internal audit has also been modified to comply with the recommendations of the said authorities.

vii)Strengtheningofthecompliancesystems

The Company has set in place an effective system to ensure compliance with all the applicable Laws/Statutes and the same is monitored by the Compliance & Risk Management Dept.

viii)CompliancewithSEBIsProhibitionofInsiderTradingRegulations

With a view to preventing insider trading, a suitable Code of Conduct has been set in place to regulate the dealings in securities by all the employees of the Company and compliance with the same is monitored by the Manager (Compliance & Risk Management). The Code of Conduct of the Company is in conformity with the SEBI (Prohibition of Insider Trading) Regulations, 1992.

ix)Directorsaredulyqualifiedtoactassuch

As per the declarations submitted to the Company, all the Directors are duly qualified to act as such and none of them is disqualified under section 274(1)(g) of the Companies Act, 1956. This aspect has also been verified by the Statutory Auditors of the Company.

Declaration

I confirm that all Board Members and Senior Management have affirmed compliance with the Companys Code of Conduct for the financial year ended 31st March, 2010.

(S.Vishvanathan)Managing Director & CEO

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To,

The Members of SBI CAPITAL MARKETS LIMITED

We have audited the attached Balance Sheet of SBI CAPITAL MARKET LIMITED as at 31st March 2010 and also the profit and loss account and cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing Standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditors Report) Order, 2003 as amended by Companies (Auditors Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of sub section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

c) The Balance Sheet and Profit and Loss account dealt with by this report is in agreement with the books of account;

d) In our opinion, the Balance Sheet and Profit and Loss account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) On the basis of written representations received from the directors, as on 31st March, 2010, and taken on record by the Board of Directors, we report that none of the director is disqualified as on 31st March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

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ii) In the case of the profit and loss account, of the profit for the year ended on that date

iii) In case of cash flow statement, of the cash flows for the year ended as on that date

ForSUDITKPAREKH&CO.Chartered Accountants

(S.V.JILLA)PartnerMembership No. 39461Firm No. 110512WMumbai, dated: 19th April, 2010

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ANNEXURETOTHEAUDITORSREPORT

(Referred to in our report of even date)

Re:SBICAPITALMARKETSLIMITED

i. In respect of its fixed assets:

a. The Company has maintained proper records showing full particulars, including quantitative details and the situation of fixed assets.

b. All fixed assets, except certain leased assets were physically verified by the management in the previous year in accordance with a planned program of verifying them which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Certain leased fixed assets have not been physically verified where, as per the terms of the agreement, the Company obtains confirmation from the lessee on the regular basis. As informed no material discrepancies were noted on such verification.

c. Fixed assets disposed off during the period were not substantial and therefore do not affect the going concern assumption.

ii. In respect of inventories

a. The securities held as stock in trade and in custody of the Company have been physically verified by the management at reasonable intervals while securities held by the custodian are verified with the confirmation statement received from them on a regular basis. In our opinion, the frequency of such verification is reasonable.

b. The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. The Company is maintaining proper records of inventory and no discrepancies were noticed on comparing the physical securities/statement from custodian with book records.

iii. According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act. Accordingly sub clauses (b), (c), (d), (e), (f) and (g) of clause (iii) of the Order are not applicable

iv. In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of fixed assets. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system of the Company.

v. According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Act that need to be entered into the register maintained under section 301 have been so entered. Accordingly, sub clause (b) of clause (v) of the Order is not applicable to the Company for the current period.

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vi. The Company has not accepted any deposits from the public.

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

viii. The provisions of Section 209(1) (d) of the Companies Act, 1956 are not applicable to the Company.

ix. In respect of Statutory Dues:

a. The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, income-tax, sales-tax, service tax and other material statutory dues applicable to it. The provisions of Investor Education and Protection Fund, wealth tax, customs duty, excise duty and cess are not applicable to the Company in the current year.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, income-tax, service tax, sales-tax, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

c. According to the records of the Company, the dues outstanding of income-tax , sales-tax, wealth-tax, service tax,, custom duty, excise duty and cess on account of any dispute, are as follows:

Name of the statute Nature of dues Amount (Rs. in thousands)Period to which

the amount relates

Forum where dispute is pending

Income Tax Act, 1961

Issue relating to disallowance of expenses

2,430 31,438

AY 2001-02 AY 2004-05

Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal (ITAT)

Sales Tax (Central and State)

Issues relating to lease tax

8,004 1989-90 to 2000-01

Commissioner Sales Tax

Bombay Sales Tax Act, 1959

Issues relating to sales tax

858 1998-99 to 2000-2001

Commissioner Sales Tax

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

xi. According to the information and explanations given to us, and based on checks carried out by us, the Company has not defaulted in repayment of dues to financial institutions or banks. The Company has not issued any debentures during the year.

xii. According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. According to the information and explanations given to us, the provisions of Chit Funds or Nidhi or

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mutual benefit fund or society are not applicable to the Company; accordingly clause (xiii) of the Order is not applicable to the Company.

xiv. In respect of dealing/trading in shares, securities, debentures and other investments, in our opinion and according to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The shares, securities, debentures and other investments have been held by the Company, in its own name.

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

xvi. The Company did not have any term loans outstanding during the year.

xvii. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, funds raised on short-term basis have, prima facie, not been used during the year for making long-term investments

xviii. The Company has not made any preferential allotment of shares during the year.

xix. The Company has not issued any debentures during the year.

xx. The Company has not raised any money through a public issue.

xxi. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

ForSUDITKPAREKH&CO.Chartered Accountants

(S.V.JILLA)PartnerM. No.:39461Firm No. 110512WMumbai; dated: 19th April, 2010

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SCHEDULE20NOTES TO ACCOUNTS

A.STATEMENTOFSIGNIFICANTACCOUNTINGPOLICIES

a) Basisofpreparation

The financial statements have been prepared to comply in all material respects with the Notified Accounting Standard by Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis, except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year except for Depreciation of computers, mobiles and blackberries. During the current year, the Company has changed the method of depreciation on computers, mobiles and blackberries from written down value basis to straight line method. This has resulted in reduction of profit by Rs. 3,808 (000).

b) Useofestimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon managements best knowledge of current events and actions, actual results could differ from these estimates.

c) FixedAssetsandDepreciation

Fixed assets are stated at cost less accumulated depreciation and impairment loss, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

Depreciation on fixed assets, other than leased fixed assets, software, computers, mobiles and blackberries is provided using the written down value at the rates prescribed in Schedule XIV to the Companies Act, 1956, on a pro-rata basis. Computers, mobiles and blackberries are depreciated over a period of three years on straight line basis.

In case of fixed assets leased prior to April 1, 2001, depreciation is provided using the straight-line method at the rates prescribed in Schedule XIV to the Companies Act, 1956, on a pro-rata basis, or amount worked out in the ratio of lease rentals accrued as per the agreement to the lease rentals for the entire primary period of lease, whichever is higher (on a cumulative basis). This method is followed in preference to the recommendations made by the Institute of Chartered Accountants of India, in its Guidance Note, Accounting for Lease. This Guidance Note is recommendatory in nature.

d) Intangibles

Software is amortized on over a period of 3 years on a straight line basis.

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e) Impairment

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life

f) Investments

Investments include equity shares, preference shares, debt instruments and units of mutual funds, which are intended to be held to maturity or for a period of not less than one year. These investments are classified as long term investments. All other investments are classified as Current investments.

Long term investments are carried at cost arrived at on weighted average basis and are stated net of provision. Cost comprises purchase price, brokerage and stamp duty. Appropriate provision is made for, other than temporary, diminution in the value of investments. The premium paid over the face value of the debt instruments is amortized over its residual maturity on a straight-line method.

g) Stock-in-trade

Securities acquired and held, principally for the purpose of selling them in the near term, are classified as stock-in-trade.

Quoted securities are valued at lower of cost and market value. Unquoted equity shares are valuedat the lower of cost and break-up value. Unquoted debt instruments are valued in accordance with the valuation guidelines issued by Fixed Income Money Market and Derivatives Association of India (FIMMDA). Accordingly, stock of government dated securities, corporate/FI debentures/bonds are valued at lower of cost or market/fair value. The premium paid over the face value of the debt instruments is amortized over its residual maturity on a straight-line method. Appropriate provisions, as prescribed by Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 are made for non-performing debt instruments. Commercial papers / treasury bills are valued at carrying cost. The discount, if any, is amortised over the holding period of the instrument based on the original yields for the residual maturities and the carrying value of the instrument is adjusted correspondingly. Units of mutual fund are valued at lower of cost and net asset value.

Cost comprises purchase price, brokerage and stamp duty and is computed on weighted average basis. The market value is the price at which the securities are traded in the market. In the absence of such market price, the market value is derived based on market related spreads over the Government benchmark curve, as specified in FIMMDA guidelines.

h)Revenuerecognition

Revenue is recognized to the extent that it is probable that economic benefits will flow to the Company and revenue can be easily measured.

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FeebasedIncome:

Issue management and advisory fees are recognised as per the terms of the agreement with the client.

Fees for private placement are recognised on completion of assignment.

Incomefromsecurities:

Gains and losses on the sale of securities are recognised on trade date. Dividend is accounted on an accrual basis where the right to receive the dividend is

established. Interest is recognised on a time proportion basis taking into account the amount

outstanding and the rate applicable except interest in respect of non-performing/doubtful assets which is recognised on cash basis.

Leaseandhirepurchaseincome:

Lease and hire purchase rentals are accounted for on accrual basis except those in respect of non-performing / doubtful assets, which are recognised on cash basis. Appropriate provision, as prescribed by Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998, is made for non-performing assets.

i) Foreigncurrencytransactions

InitialRecognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

ExchangeDifferences

Exchange differences arising on the settlement of monetary items or on reporting companys monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as incom