1 THE INFRASTRUCTURE OPPORTUNITY : A MACRO PERSPECTIVE Rajiv B. Lall Managing Director & CEO Infrastructure Development Finance Company Limited JAPAN MAY 2007

2 The Context : India vs China Consumption vs Investment led growth Bottom Up vs Top Down Private vs Government led build out of infrastructure

3 India Infrastructure Investment (% of GDP) 33 Year Low

4 INFRASTRUCTURE SPENDING & FINANCING (% OF GDP AT CONSTANT 2005 / 06 PRICES)  Bulk of spending will have to come from non-government sources.  Will need an average of at least $ 5 billion a year in overseas funding just for infrastructure over next 5 years. ~ $ 360 billion over 5 years or > $ 70 billion / year

5 Sustainable Reform & Infrastructure Development Reform Impulse Competition Resistance from incumbents Declining Cost Support from consumers Irrevocable change sustainable reform “Tipping Point”

6 Telecommunication Reforms Telecommunications  In 1994 – Telecom policy – mobile phone licenses for major metros (2 in each city), followed by licenses for mobile and fixed line services in 15 circles (1 each) – major imbroglio due to unrealistic bidding  Resolved by a New Telecom Policy in 1999 – migration to a revenue share regime, more players, universal access service – challenge now is rural connectivity  Regulator (TRAI) established – initial hiccups but now functioning well  Private investment has grown the market - over 200 million subscribers; growing at over 5 million per month  Prices – mobile from 37 cents per minute to 0.01 cents per minute

7 Mobile Growth and Effective Charge per minute Source : TRAI (2005C and 2006C)

8 SectorLimit AirportsUp to 100%, with FDI beyond 74% requiring Government approval Hotels & Tourism100% FDI is permissible in the sector through the automatic route Housing & Real Estate Construction – 100% (If developed area exceeds 50,000 sq metres) Housing – 100% (If area exceeds 25 acres) Power Up to 100%, FDI allowed in respect of projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants Roads & Highways, Ports & Harbours 100% FDI is permissible in the sector through the automatic route in both construction and maintenance Telecommunication 74% FDI is permissible in the sector through the automatic route Source: Investing in India-FDI Manual, DIPP Foreign Direct Investment

9 Opportunities Highways : $ 48 billion  Total emphasis on BOT roads  NHDP 1 to 7 (40,000 kms of new road) Railways : $ 12 billion  Private container trains  Dedicated Freight Corridors  Logistic Parks / Railway Stations Ports : $ 12 billion  Concession at major ports and development of minor ports Airports : $ 9 billion  Delhi, Mumbai, Bangalore, Hyderabad, Chennai, Kolkata & 35 non- metro airports Power : $ 130 billion  Generation and transmission  Wind, hydro

10 IDFC : Who we are Project finance : Debt, Sub-debt, Mezzanine Equity Finance – principal investments and asset management  IDFC Private Equity – 2 funds aggregating USD 630 million  Project Equity Funds USD 1 billion by March ’08 Investment Banking and Advisory Services Focus areas : Energy, Telecom, Transport & Industrial / Commercial Infrastructure Total Loan Assets of close to USD 4 billion + USD 0.5 billion in equity investments Market cap : USD 2.2 billion Track record of performance and consistent growth  25% of the loans to private infrastructure projects  Net Non Performing Assets: Nil  FY 2002 – 2007 CAGR in Balance Sheet – 42%, Infrastructure loans: 48%, Total Income: 31%, PAT: 22% Unique Public Private Partnership delivering innovative financial solution to Indian Infrastructure Sector