Directors' Report

Your Directors have pleasure in presenting their 45th Annual Report on the business and operations of the Company together with the audited results for the financial year ended 31st March, 2010.

Your Company recorded consolidated revenues of Rs. 7,851 Crores in FY'10 as compared to Rs. 10,431 Crores in FY'09, a decrease of 24.73%. Consequently, the gross operating profit, on consolidated basis, reduced from Rs. 5,986 Crores to Rs. 3,940 Crores, a decrease of 34.19%. The net profit after tax and minority interest declined to Rs. 1,814 Crores as compared to Rs. 4,468 Crores for the previous year, a decrease of 59.41%.

The global economic meltdown resulted in very thin demand for commercial spaces including SEZ for sale and lease. This impacted the Company's operations and led to a decline in sales and leasing in this category and consequently the profitability. The FY'10 sales of Rs. 7,851 Crores, were thus largely from residential real estate developments. In residential sales, there was an increase of about 20% in FY'10 as compared to that in FY'09. However, the EBIDTA margin for the year is at a healthy 50%, compared to 57% in the preceding year. The Company's profit was also adversely impeded due to increase in finance charges from Rs. 554.84 Crores in FY'09 to Rs. 1,110.04 Crores in FY'10.

Your Company continued its focus on consolidation, stable growth and risk management. Further, your Company would continue to target reducing its overall debt by unlocking cash in non-core assets, cost-optimisation, process improvements and efficient management of working capital while focusing on various segments of real estate development and growth in rental business.

Review of Operations

The global financial crisis and the resultant credit crunch in 2008-09 led to subdued demand for real estate products across all categories. The trend continued in the first half of FY'10. However, during the second half, the industry showed signs of reversing the downward spiral as the country's economy continued to show signs of recovery. This led to revival of demand in the residential developments, whereas the commercial developments for sale and leasing did not show any significant signs of improvement.

Your Company, in order to weather the tremors of slowdown, repositioned its product mix and changed its business strategies as per the changing macro environment. Your Company focused on execution of ongoing projects and chose to exit from non-core areas. To ensure sharper focus on execution with greater emphasis on robust systems, processes and risk management, your Company was reorganised around two distinct elements - Development Business and Rental Business. The Development Business was segmented into three business units with specific geographies with responsibilities for all developments in their respective geographic areas. The Rental Business comprising of rental streams from Offices, Malls, Facilities Management and Utilities ensures sharp focus on the rental income, thereby enhancing stable cash flows.

During the year under review, the Company's Board, based on the recommendation of its Special Committee, approved the integration of Caraf Builders & Constructions Private Limited (Caraf) (the holding Company of inter-alia, DLF Assets Private Limited - 'DAL'), DLF Info City Developers (Chandigarh) Limited and DLF Info City Developers (Kolkata) Limited with DLF Cyber City Developers Limited (DCCDL), a 100% subsidiary of DLF.

Your Company unlocked about Rs. 1,800 Crores by exiting from very long gestation projects and non-core assets. In view of better returns, your Company dropped its plans to exit from the wind-power business. Your Company met all its stakeholders' commitments in time during the year, including its commitments towards lending institutions without any restructuring of debt. Your Company was also able to significantly bring down the average cost of debt from 11.9% in December, 2008 to 10.5% in March, 2010 and repaid Rs. 5,600 Crores of debt during the year on or ahead of schedule.

During the year under review, despite turbulent economic conditions, your Company launched approximately 8.0 m.s.f. in Delhi and Gurgaon and 5.2 m.s.f. in the rest of India. The customers demonstrated their faith in your Company as the projects received overwhelming response.

A subsidiary of your Company, in a consortium with IL&FS, bagged a contract for construction of a metro rapid transport system in Cyber City, Gurgaon from Government of Haryana. The project is first of its kind in the country.

Your Company believes that there is great potential in the Indian real estate sector and that with economic stability, the demand for residential as well as commercial segment would further strengthen. Therefore, to cater the burgeoning demand for quality real estate, your Company will focus on timely execution of projects, without compromising on quality and compliances. To further strengthen its execution machinery during the year, your Company's subsidiary bought out Laing O'Rourke's stake in the construction joint venture DLF Laing O'Rourke (India) Limited and increased it to 100%, retaining all the expertise, human resources and construction equipments.

Recognising your Company's vision, expertise and contribution to the real estate sector, Euromoney magazine at Euromoney's Fifth Annual Real Estate Awards, awarded the Best Global Developer Award for 2009 to your Company alongwith the awards for Best Developer in Asia and Best Developer in India.

Future Outlook

The Indian economy has shown strong resilience and robustness during the global financial crisis. Given its large domestic consumption base, there exists a demonstrated ability for future growth .This economic growth will have a cascading positive impact on the demand for real estate products in the residential and commercial segments.

Your Company, is therefore, focused on selling existing inventory along with selective launching of new projects across all categories of real estate development. However, there will be a specific focus on strengthening margins across all projects.

Having built a strong asset base of rental assets, your Company will continue to focus on growing the rental business of the Company to capture the growth in leasing demand to generate stable cash flows.

Dividend

Your Directors are pleased to recommend for approval of the Members a Dividend of Rs. 2 per Equity Share (100%) of Rs. 2 each for the FY'10 amounting to Rs. 350.86 Crores (Rs. 339.48 Crores towards Dividend and Rs. 11.38 Crores as Dividend tax).

Corporate Sustainability

Your Company's aspiration of continued leadership in the real estate industry is embedded in its culture, offerings and services, whilst upholding its principles of doing business safely and in a fully compliant manner. Your Company being a responsible corporate citizen believes in sustainable business practices in all spheres of its activities and is committed to contribute to environmental protection, energy conservation and social initiatives while continuing to meet the aspirations of all stakeholders.

Credit Rating

During the year under review:

• CARE assigned a rating of PR1+, which is the highest short term rating, for Company's short term debt programme aggregating Rs. 15 bn.

• ICRA Limited, an associate of Moody's Investors Services, upgraded the rating from 'A2+' to 'A1' for Rs. 30 bn. short term debt programme of the Company.

• CRISIL, a unit of Standard & Poor's, upgraded the rating from 'A+ with negative outlook' to 'A+ with stable outlook' to the Company's Rs. 92.90 bn. term loans, overdraft facilities and Rs. 50 bn. non-convertible debenture programme and reaffirmed its 'P1' rating to the Company's Rs. 15.99 bn. short term loan, bank guarantee, letter of credit and Rs. 30 bn. short term debt programme.

Fixed Deposits

The Company has not accepted/renewed any public deposits during the year under review.

Subsidiary Companies and Consolidated Financial Statements

The consolidated financial statements of the Company and its subsidiaries, prepared in accordance with Accounting Standards AS-21, 23 and 27, issued by the Institute of Chartered Accountants of India, form part of the Annual Report. The Company has made an application to the Central Government seeking exemption under Section 212(8) of the Companies Act, 1956 from attaching the Balance Sheet, Profit & Loss Account and other documents of the subsidiaries to the Balance Sheet of the Company. The documents/ details will be made available upon request to any Member of the Company and are also available for inspection by any Member of the Company/ its subsidiaries at the Registered Office of the Company/its subsidiaries and at the Corporate Office of the Company during working hours up to the date of Annual General Meeting.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings/Outgo etc.

The particulars required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1988 are given at Annexure-A annexed hereto and form part of this Report.

Particulars of Employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of the employees are set out in the annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b)(iv) of the said Act, the Directors' Report and the Accounts are being sent to all the Members of the Company and others entitled thereto excluding the statement of particulars of employees. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

Employees Stock Option Scheme (ESOS)

During the year under review, your Company allotted 2,40,457 equity shares upon exercise of stock options by the eligible employees under the Employees Stock Options Scheme, 2007.

Information in terms of Clause 12 of the SEBI (Employees' Stock Option Scheme and Employees' Stock Purchase Scheme) Guidelines, 1999 is at Annexure-B annexed hereto and forms part of this Report.

The certificate, as required under Clause 14 of the said Guidelines, obtained from the Statutory Auditors with respect to implementation of the Company's Employees Stock Option Scheme, 2006, shall be placed at the Annual General Meeting.

Debentures

During the year under review, the Company has issued 2 series of Non-convertible Debentures (NCDs) of a face value of Rs. 10 Lacs each on private placement basis aggregating to Rs. 1,000 Crores, as per details below:

i) 7,000 10.50% Fully-paid Secured Redeemable Non-convertible Debentures (NCD's) of face value of Rs. 10 Lacs each, aggregating to Rs. 700 Crores with semi-annual interest payment, redeemable after 3 years from the date of allotment; and

ii) 3,000 10% Fully-paid Secured Redeemable Non-convertible Debentures (RNCDs) of face value of Rs. 10 Lacs each, aggregating to Rs. 300 Crores with semi-annual interest payment, redeemable after 2 years from the date of allotment.

Listing at Stock Exchanges

The equity shares of your Company continue to be listed on BSE & NSE and form part of S&P CNX Nifty and BSE-30 indices. The Non-convertible Debentures issued by your Company are also listed on the Wholesale Debt Market (WDM) segment of National Stock Exchange. The listing and custody fees for the year 2010-11 have been paid to the Stock Exchanges and NSDL/CDSL, respectively.

Pursuant to Clause 5A of the Listing Agreement, the Company has opened a suspense account and has placed unclaimed equity shares allotted in 2007 IPO. As on 31st March, 2010, 6,410 equity shares were lying unclaimed by the rightful owners.

Management Discussion & Analysis Report

The Management Discussion and Analysis Report as required under Clause 49 of the Listing Agreement with the Stock Exchanges forms part of this Report.

Corporate Governance Report

The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of this Report.

The requisite certificate from the Statutory Auditors of the Company, M/s. Walker, Chandiok & Co, Chartered Accountants, confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is attached to the Corporate Governance Report.

Directors' Responsibility Statement

As required under Section 217(2AA) of the Companies Act, 1956, your Directors confirm having:

a) followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures, if any;

b) selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profits of your Company for the period;

c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and

d) prepared the Annual Accounts on a going concern basis.

Auditors

The Auditors, M/s. Walker, Chandiok & Co, Chartered Accountants, hold office until the conclusion of the forthcoming Annual General Meeting and offer themselves for re-appointment. Certificate from the Auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

Auditors' Report

There is no qualification or adverse remarks on the stand-alone financials of the Company. Further, the observations given in Point No. 4 of the Auditors' Report on consolidated financials read with Note No. 16 of Schedule 24 to the consolidated financials, are self-explanatory and do not call for any further comments.

Directors

Pursuant to Section 256 of the Companies Act, 1956 read with the Clause 102 of the Articles of Association of your Company, Mr. Rajiv Singh, Brig. (Retd.) N.P. Singh and Mr. B. Bhushan, Directors retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment.

Brief resume of the Directors proposed to be re-appointed, nature of their experience and other details as stipulated under Clause 49 of the Listing Agreement, are provided in the Notice for convening the Annual General Meeting.

Corporate Social Responsibility

The Company has made significant contributions in community welfare initiatives including to underprivileged through education, training, health, environment, capacity building and rural-centric interventions as detailed at Annexure-C. The Employees of the Company have also participated in many of such initiatives.

Awards and Accreditations

Your Directors are pleased to report that your Chairman Dr. K. P. Singh has been conferred with 'Padma Bhushan', one of highest civilian awards of the country, in recognition and appreciation of his outstanding leadership role in spearheading India's real estate development including creation of world-class infrastructure.

Your Company has excelled in various dimensions of Corporate achievements, recognized through peer and public evaluation. The details of awards and recognitions to your Company are as under:

• Your Company has won the Dun & Bradstreet award for Corporate Excellence. Dun & Bradstreet (D&B), is the world's leading provider of global business information, knowledge and insight. The 'Dun & Bradstreet - Rolta Corporate Awards 2009' recognised and felicitated corporate India's leading companies from various sectors.

• Your Company has been conferred the Best Global Developer Award for 2009 by Euromoney magazine at Euromoney's Fifth Annual Real Estate Awards - the most prestigious awards in global real estate. DLF also won the awards for Best Developer in Asia and Best Developer in India for 2009.

• The DLF Golf & Country Club retained its top position as 'THE BEST' course in the country for the third year running at the Asian Golf Monthly Awards, which were held along with the Asia Pacific Golf summit, 2009 in Kuala Lumpur, Malaysia. Asian Golf Monthly Awards are widely regarded as Asia's golf course Oscars and the premier poll of golfing facilities across the Asia-Pacific region.

• Your Company has been awarded the Golden Peacock Award for CSR, 2010 in recognition of its contributions in the field of Corporate Social Responsibility. The award recognises the path breaking initiatives undertaken by DLF in substantially improving the lives of underprivileged communities in its areas of presence. It is also a recognition of the high standards of ethics and integrity upheld by the DLF group in all its business practices.

Acknowledgements

Your Directors wish to place on record their sincere appreciation to the employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the forefront of the industry.

Your Company continues to occupy a place of respect among stakeholders, most of all our valuable customers. Your Directors would like to express their sincere appreciation for assistance and co-operation received from the vendors and stakeholders including financial institutions, banks, Central and State Government authorities, customers and other business associates, who have extended their valuable sustained support and encouragement during the year under review. It will be the Company's endeavour to build and nurture the strong links with its stakeholders.

for and on behalf of the Board of Directors

(Dr. K.P. Singh)

Chairman

New Delhi

July 28, 2010