Message from the Managing Director

Dear Shareholder,

At the outset, let me thank you for your continued support and patronage of Tata Capital. We completed 6 full years of operations and are now a ~ 3,200 employee strong organisation. The last year was amongst the most extraordinary and challenging in the short history of Tata Capital. The year was eventful (i) macro headwinds impacted our asset quality; (ii) our housing finance business did extremely well; (iii) on the operating front we got PCMM level certified and received recognition for our TBEM efforts; and (iv) the Tata group withdrew its application for the banking license. We took a decision to refocus our operating model to be a pureplay NBFC enabling us to enter the next phase of our ambitious journey.

It is our sense of responsibility to our many stakeholders that enables us to move beyond the distractions of the moment and stay focused on what really matters: taking care of our clients, helping the communities in which we operate and protecting our company. Since our inception we have chosen to focus on four simple goals (i) maintaining a strong financial position; (ii) creating sustainable competitive advantages for our businesses; (iii) acquiring and developing new and varied streams of earnings; (iv)nurturing and expanding our pool of outstanding operating managers.

During the year, Fortune magazine released its latest ranking and we were ranked 288th in the Fortune 500 Indian company listing representing an improvement of 35 ranks over previous year. Tata Capital is one of three Tata Companies to show an improvement across all four ranking parameters (Revenue, Profits, Assets, and Networth). Tata Capital has slowly but steadily established its position in the top league of NBFCs, as also one of the larger Tata Companies.

I am sure that, as I take you through the highlights of the year gone by, you will be happy to note that the faith reposed in the Tata Capital team has been validated. Our consolidated advances were at ~ Rs. 28,585 crore, representing a YoY growth of -15%, revenues were at Rs. 1,383 crore recording a YOY growth of ~ 9% and operating profits at Rs. 625 crore increased 5% YOY. Our International business has recouped all past accumulated losses and has accreted to the networth (against an investment of US$ 21.6 million, the networth is ~US$ 30.0 million a 39.5% accretion). We completed investments amounting to ~ 60% of the investible corpus of our domestic private equity funds and ~ 40% of the investible corpus of the overseas funds and we are already seeing valuation gains and NAV accretions on our investments. Our housing finance company was the shining star in the current financial year, reporting a portfolio and profitability growth, and cost/income ratio improvement by 10.1%. Our enterprise risk score improved year on year for Tata Capital Financial Services Limited and Tata Capital Housing Finance Limited. However, credit losses and investment impairment severely impeded our profit after tax and return metrics. The main reason for the difference between what we should be earning and what we are earning is the extraordinarily high credit losses on our infrastructure book and few large credit exposures. We hope to correct this in the coming year and I can see somegreenshoots already.

We have successfully mobilized funds in excess of Rs. 790 crore by way of private placement of our Cumulative Redeemable Preference Shares, a first of its kind issue in India and its success is largely attributable to the faith put in Tata Capital by our retail HNI investors.

We have a strong control orientation and have extensive processes to protect the company and conduct business the right way. We have strong treasury, risk, IT, human resources, audit, compliance and legal teams to support each of our businesses.

We have always recognized that our employees drive our efforts, are key contributors to our success and form the bedrock of the High Performing organization we are aiming to be. Our Employee Engagement scores measured through Gallup have witnessed an increase from 3.98 to 4.15 in this year. We further strengthened our policies and practices during the year and moved from People Capable Maturity Model (PCMM) Level 2 to Level 3 certification i.e. from Basic HR processes to Competency-based HR practices. We aim to achieve level-5 certification by 2017, and have developed processes to achieve the desired level of maturity; We need to be thoughtful about potential successors, particularly for senior jobs. We have redoubled our efforts to ensure that we have people in the pipeline who are capable of assuming senior levels of responsibility either right away or over the three to five years. Recognizing the importance of the health and safety of our employees, we covered 9 locations housing more than 60% of our and our partner employees in OHSAS 18001:2007 certification. During the year, we launched the 'Do Right' initiative, taking forward our brand promise of 'We only do what's right for you'. The initiative is aimed at inspiring people to 'do right' in the context of society at large, both by inspiring them with the 'right' values and by providing them with platforms to 'do right'. The latter took the form of 'Half Stories-The Journey of Doing Right', a digital and social media driven initiative which has won prestigious awards in its category, both in India and abroad.

Tata Capital has adopted the Business Excellence framework to develop and implement strategy, through focused action plans and operating processes, since inception. The key principles of the TBEM methodology are embedded into our work processes and in everything that we do. Our "excellence goal" is to achieve the prestigious JRD QV recognition. The Company completed its first Tata Business Excellence Model ("TBEM") external assessment this year. It gives me immense pleasure to inform you that Tata Capital is amongst the few applicant companies, who have been placed in the score band of 451-500 ("Good Performance"), in their very first External Assessment.

Tata Capital believes in social equity and the principle of equal opportunity, irrespective of caste or creed. To deliver on this we have adopted a two pronged approach-develop long partnerships with NGO's and promote access to quality education and technical skills and competencies for members of the SC/ST communities, thus creating economic independence and sustainable livelihoods. Tata Quality Management Services facilitates an annual review of the Affirmative Action program. This year the assessment placed Tata Capital in the score band of 40 to 50. Our company continues to do everything it can, and we have not lost sight of our strengths. Tata Capital has successfully faced and emerged victorious from crises in the past and I am optimistic- about our ability to course correct expeditiously and effectively.

I take immense pleasure and privilege in thanking our esteemed shareholders for their continued faith and support. With your support and the dedication and commitment of our employees, I am sure Tata Capital will soar new heights in years to come.

Praveen P Kadle

Managing Director and CEO Tata Capital Limited