Dear Shareholders,

I extend my warm greetings to all of you on the occasion of the 20th Annual General Meeting of your company. The annual accounts along with other management reports have been with you for quite sometime and with your permission I take them as read.

I am happy to share with you yet another year of impressive performance, with a healthy topline growth and high quality earnings. Support of our shareholders is a constant source of strength for us and I am confident that you will continue to guide and support us in all our future endeavours.

Economic Scenario:

During 2008-09, uncertainties, volatility and major bank failures dominated the global economic scenario thereby resulting in a steep fall in global real GDP which affected the sustained growth of emerging market economies. The Indian Economy too, has seen the growth rate fall from its highs of over 9% recorded over the last few years to less than 7%. Global financial meltdown and economic recession in developed economies were major factors in India’s economic slowdown. Despite the slowdown in growth, investment remained relatively buoyant growing at a rate higher than the growth rate of GDP. Despite the global economic slowdown, the service sector in India contributed 56 percent to the GDP during 2008-09. The service sector accounted for a huge 24.3 per cent of the total foreign direct investment (FDI) inflow in 2008. In actual terms, the FDI inflow to this sector has grown 32 times in the past five years from a mere US$ 214.78 million in 2004 to US$ 6.78 billion in 2008. `

The Indian Government has attempted to curb the effects of the global recession through several fiscal and monetary stimulus packages, including additional spending, repo rates cuts and excise duty cut.

Tourism Industry :

Tourism industry in India is being utilised as a powerful tool to facilitate international understanding and enable building of broader cultural horizons. The tourism industry is cyclical in nature and highly susceptible to macro-environmental changes. Aviation and hospitality are amongst the first to get impacted by an adverse environment and also the last to recuperate. The rate of growth of tourism sector in India has been way above the world average in the last few years. Despite the numerous problems, tourism industry was the second-largest foreign exchange earner for India. A boom was witnessed in Indian domestic market that was swelling in size by the growing population of young and middleclass possessing higher disposable income and better livelihood. The Indian middle class is adding 40 million new members to economy every year which shows that the wealth is now getting spread more evenly.
                     The hotel industry although has been hit hard by global slowdown and terrorist attacks, leading to a fall in occupancies.  The ARR have also gone down across the major cities by about 20%.The hotel industry is expected to have a tough FY10.
                    The contribution of travel and tourism to gross domestic product (GDP) is expected to be at 6.0 per cent (US$ 67.3 billion) in 2009 rising to US$ 187.3 billion by 2019. To strengthen the Indian tourism sector ahead of the Commonwealth Games in 2010 and to double foreign tourist arrivals from 5.37 million in 2008 to 10 million by 2010, the ministry is taking measures such as rationalising taxes, increased focus on infrastructure and easy visas. With a view to giving fillip to the tourism industry, which is witnessing a downturn, a sum of Rs.1,070 crore has been allocated to the sector.

Performance Highlights:

I am pleased to report that your company performed well in the financial year 2008/09 despite the extremely difficult economic conditions that prevailed throughout the second half of the year. Your Company continued its journey of making sustained growth by setting new milestone of business size recording a growth during 2008-09 in the following parameters :-

• Your Company registered Net Profit of Rs.28.97 crore  33% increase over the profit of last year.

• The sanctions increased by 58% to Rs.580.48 crore as compared to Rs.366.21 crore last year.

• The total disbursements during the year were Rs.275.80 crore, increase of 46.3% over the previous year’s disbursement of Rs.188.50cr.

• Your Company earned Profit Before Tax of Rs.39.23     crore recording a growth of 32% over the previous year’s PBT of Rs.29.74 cr.

• Your Company, during the year came out with Tier II subordinated Bond Issues of Rs. 75 crore with green shoe option of upto Rs.25 crore bearing interest @ 9.50% payable half-yearly. The issue was fully subscribed.

• During the year, your Company, besides recovering Rs.24.54 crore from NPA and Rs.0.33 cr from written- off cases, took possession of 3 hotels located at Mukundgarh, Bikaner and Jaisalmer under the SARFAESI Act.

Dividend:

You, the shareholders, can draw even greater satisfaction from the fact that your board of directors has recommended a dividend @ 10% for the year 2008-09.

Concerns:

The financial sector has been witnessing tough competition for garnering sound portfolio by offering competitive rate of interest, which may impact the growth of portfolio of your Company. The banks and other financial institutions have access to low-cost funds and have increased their involvement in these projects posing a tough competition for your company.
               Though the financial crisis and the transmission of its impact on the real economy is now better understood and global financial conditions have shown improvement over the recent months, uncertainty related to the revival of the global economy  still remain. These factors may impact the viability of new/ existing    projects adversely. The hotel companies are already facing cash-flow pressure, thereby affecting their expansion plans. The profitability of premium hotels is expected to be impacted due to decline in occupancy and room rates which may have an adverse effect on the profitability of your company.
               National calamities and health issues, are creating artificial       barriers for people to travel hinterland and long distance destinations, especially to S.E.Asia. Already reeling under the  impact of global recession, India's travel and trade industry is afraid of being dealt a double blow by swine flu. The number of Inbound tourists is decreasing each day which again is going to affect the overall   occupancy of hotels in the country.
               The internal security, social and political unrests, safety and security of women travellers are also major issues which need a special attention from the concerned departments and authorities. It is the need of hour to have well-trained and skilled manpower     offering tourist-friendly attitude with pleasant disposition. The recent terror attack in Mumbai has further hastened the need for a separate security cover to instil confidence in the tourists in India. it’s not the numbers that will work wonders for the tourism ministry. If it needs the visitors to keep pouring in, then it has to provide a safe and secure environment. The tourist police force appointed by ten top states in the country need to be a little more visible to tourists.
             Further, there are infrastructural inadequacies that are constraining the growth of tourism in India. In order to attract more visitors, India needs to increase room supply, airport facilitation (visa,     immigration etc.), upgrade its roads and other infrastructure to global standards to sustain tourism development.

            Recognizing the intrinsic strength of our business, I would like to take this opportunity to say that we believe that the intensity and multiplicity of our business will allow us to profitably deal with the challenges of the competitive environment. We are confident that through our well-planned long-term, forward-thinking strategies and the strength of our core competencies & various initiatives, your Company will achieve improved business performance over the years.

Company's Vision

While we look back with pride on our achievements, we also look ahead with confidence towards new opportunities of building a new TFCI with much bigger targets, much wider business portfolio and much greater outreach.

Indeed, we are already taking advantage of some of the new business opportunities and as a result are actively pursuing advisory services. We are also trying to bring value by scouting for new opportunities emerging in the market and also pursuing with various state govt. for working mutually on various tourism-related projects in the states. TFCI has been actively involved with the Gujarat Govt and as a result also signed an MOU during the Vibrant Gujarat Summit for brining in investment in the state.

Though the way ahead is tough and terrain is difficult. TFCI team and patient shareholders, we are confident to scale newer heights in the years to come.

Corporate Governance Policies:

Your Company firmly believes in and has consistently been practicing good standards of excellence in Corporate Governance.  Your Company maintains high ethical standards in accounting and general governance, is regulatory and statutory-compliant and adopts transparent policies with an objective to enhance shareholders’ value in the long term. The Corporate Governance at your Company recognizes all stakeholders and decision-making process reflects this concern.

Acknowledgements

Before I conclude, I would like to thank Ministry of Finance, Department of Tourism, especially for the far-reaching impact    under the “Incredible India Campaign”, Reserve Bank of India, Securities Exchange Board of India and the Banks for the valuable     co-operation, support and guidance received. I would also like to thank our steadfast and loyal clients in India for their continued support to the company and each and every shareowner of TFCI, whose trust and confidence are pillars of strength in all our endeavours. We look forward to your long association with us. It is this pride and sense of fulfilment that encourage our outstanding human capital to strive harder, in the face of all adversity, to bring more glory to this organisation. On their behalf, I look forward to your continued support and encouragement, as always.

I also extend sincere thanks to my colleagues on the Board for their involvement, guidance and wise counsel.

Thank you,
(ARCHANA CAPOOR)
September 18, 2009
New Delhi