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IMPORTANT NOTICE NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES IMPORTANT: You must read the following before continuing. The following applies to the offering circular (the "Offering Circular") following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the Offering Circular. In accessing the Offering Circular, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OF AMERICA (WITH ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES OF AMERICA AND THE DISTRICT OF COLUMBIA, COLLECTIVELY THE "UNITED STATES") OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES DESCRIBED IN THIS OFFERING CIRCULAR HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER UNITED STATES JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. ADDRESS OR TO ANY U.S. PERSON. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, THEN YOU ARE NOT AUTHORISED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE SECURITIES DESCRIBED THEREIN. Confirmation of your Representation: The Offering Circular is being sent at your request and by accepting the e-mail and accessing the Offering Circular, you shall be deemed to have represented to us that the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the United States and that you consent to delivery of such Offering Circular by electronic transmission. You are reminded that the Offering Circular has been delivered to you on the basis that you are a person into whose possession the Offering Circular may be lawfully delivered in accordance with the laws of jurisdiction in which you are located and you may not, nor are you authorised to, deliver the Offering Circular to any other person. The materials relating to any offering of securities described in the Offering Circular do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the underwriters or such affiliate on behalf of the Issuer (as defined in the Offering Circular) in such jurisdiction. The Offering Circular has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of the Dealers (as defined in the Offering Circular) nor any person who controls each of them nor any director, officer, employee nor agent of each of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Offering Circular distributed to you in electronic format and the hard copy version available to you on request from the Dealers. In accordance with applicable provisions of Indian regulations, only investors from jurisdictions that are Financial Action Task Force ("FATF") compliant are eligible to purchase Rupee denominated Notes (as defined in the Offering Circular). Further, banks incorporated in India and overseas branches and subsidiaries of such banks are not permitted to purchase or hold Rupee denominated Notes in any manner whatsoever, save and except as underwriters or arrangers for a period of six months. The Offering Circular has not been and will not be registered, produced or made available to all as an offer document (whether a prospectus in respect of a public offer or an information memorandum or private placement offer letter or other offering material in respect of any private placement under the Companies Act, 2013 or any other applicable Indian laws) with the Registrar of Companies of India ("RoC") or the Securities and Exchange Board of India ("SEBI") or any other statutory or regulatory body of like nature in India, save and except for any information from any part of the Offering Circular which is mandatorily required to be disclosed or filed in India under any applicable Indian laws, including, but not limited to, the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations 2015, as amended, and under the listing agreement with any Indian stock exchange pursuant to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 or pursuant to the sanction of any regulatory and adjudicatory body in India. In addition, holders and beneficial owners shall be responsible for compliance with the restrictions on the ownership of the Rupee denominated Notes imposed from time to time by applicable laws or by any regulatory authority or otherwise. In this context, holders and beneficial owners of Rupee denominated Notes shall be deemed to have acknowledged, represented and agreed that such holders and beneficial owners are eligible to purchase the Rupee denominated Notes under applicable laws and regulations and are not prohibited under any applicable law or regulation from acquiring, owning or selling the Rupee denominated Notes. Potential investors should seek independent advice and verify compliance with the FATF Requirements (as defined in the Offering Circular) prior to any purchase of Rupee denominated Notes. The holders and beneficial owners of Rupee denominated Notes shall be deemed to confirm that for so long as they hold any Rupee denominated Notes, they will meet the FATF Requirements and will not be an offshore branch of an Indian bank or a related party as given under the Indian Accounting Standard-24. Further, all Noteholders represent and agree that the Rupee denominated Notes will not be offered or sold on the secondary market to any person who does not comply with the FATF Requirements or which is an offshore branch or subsidiary of an Indian bank or a related party as given under the Indian Accounting Standard-24. In connection with Section 309B of the Securities and Futures Act (Cap. 289) of Singapore ("SFA") and the Securities and Futures (Capital Markets Products) Regulations 2018, the Issuer is exempt from the obligations under Section 309B(1) of the SFA to determine and to notify any approved exchange or relevant person (as defined in Section 309A(1) of the SFA) of the classification of the Notes in respect of the Relevant Offer. You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. To the fullest extent permitted by law, none of Axis Bank Limited, Singapore Branch, Standard Chartered Bank or Standard Chartered Bank (Singapore) Limited (together the "Arrangers") nor the Trustee or the Agents (each as defined in the Offering Circular) accept any responsibility for the contents of this Offering Circular or for any other statement, made or purported to be made by the Arrangers, the Trustee or the Agents or on their behalf in connection with the Issuer, the Guarantor (as defined in the Offering Circular) or the issue and offering of the Notes. The Arrangers, the

Trustee, the Agents and their respective affiliates, directors, officers, employees, agents, representatives or advisers accordingly disclaim all and any liability whether arising in tort or contract or otherwise (save as referred to above) which they might otherwise have in respect of this Offering Circular or any such statement.

Defining the Future Kerala Infrastructure Investment Fund Board (a body corporate constituted by the Kerala Infrastructure Investment Fund Act, 1999) INR 50,000,000,000 Guaranteed Medium Term Note Programme

unconditionally and irrevocably guaranteed by The Government of Kerala acting through the Finance Department of Kerala

Under this INR 50,000,000,000 Guaranteed Medium Term Note Programme (the "Programme"), Kerala Infrastructure Investment Fund Board (the "Issuer") may from time to time issue notes (the "Notes") denominated in INR or any other currency agreed between the Issuer and the relevant Dealer (as defined below) and as permitted by applicable Indian law. The payments of all amounts due in respect of the Notes will be unconditionally and irrevocably guaranteed by The Government of Kerala ("State Government" or the "Guarantor"), acting through the Finance Department of Kerala (the "Finance Department of Kerala"). The Notes may be issued in bearer or registered form (respectively, "Bearer Notes" and "Registered Notes"). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed INR 50,000,000,000 (or its equivalent in other currencies calculated as described herein), subject to any increases as described herein. The Notes may be issued on a continuing basis to one or more of the Dealers specified under "Summary of the Programme" and any additional Dealer appointed under the Programme from time to time by the Issuer (each, a "Dealer" and, together, the "Dealers"), which appointment may be for a specific issue or on an on-going basis. References in this Offering Circular to the "relevant Dealer" shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe to such Notes. Approval-in-principle has been received from the Singapore Exchange Securities Trading Limited (the "SGX-ST") for establishment of the Programme and application will be made for the listing and quotation of the Notes that may be issued pursuant to the Programme and which are agreed at or prior to the time of issue thereof to be so listed on the SGX-ST. Such permission will be granted when such Notes have been admitted to the Official List of the SGX-ST (the "Singapore Official List"). The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained herein. Admission to the Singapore Official List and quotation of any Notes on the SGX-ST are not to be taken as an indication of the merits of the Issuer, the Programme or the Notes. Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and any other terms and conditions not contained herein which are applicable to each Tranche (as defined in the terms and conditions of the Notes herein (the "Conditions") of Notes will be set out in a pricing supplement (the "Pricing Supplement") which, with respect to Notes to be listed on the SGX-ST, will be delivered to the SGX-ST on or before the date of issue of the Notes of such Tranche. For so long as any Notes are listed on the SGX-ST and the rules of the SGX-ST so require, such Notes will be traded on the SGX-ST in a minimum board lot size of S$200,000 or its equivalent in other currencies. Application has been made to the London Stock Exchange for the Notes to be admitted to the London Stock Exchange's International Securities Market (the "ISM"). The ISM is not a regulated market for the purposes of Directive 2004/39/EC. The ISM is a market designated for professional investors. Notes admitted to trading on the ISM are not admitted to the Official List of the UKLA. The London Stock Exchange has not approved or verified the contents of this Offering Circular. The Programme provides that Notes may be listed on such other or further stock exchange(s) as may be agreed between the Issuer and the relevant Dealer. The Issuer may also issue unlisted Notes. The Programme has been rated "BB" by S&P Global Ratings ("S&P Global Ratings") and "BB" by Fitch Ratings Inc. ("Fitch"). Notes issued under the Programme may be rated or unrated. Where a Tranche of Notes is rated, such rating will be disclosed in the Pricing Supplement and will not necessarily be the same as the rating assigned to the Programme by the relevant rating agency. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. The Issuer may agree with any Dealer and the Trustee (as defined herein) that Notes may be issued in a form not contemplated by the Conditions, in which event (in the case of Notes intended to be listed on the SGX-ST or the ISM) a supplementary Offering Circular, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes. See "Investment Considerations" and "Terms and Conditions of the Notes" for a discussion of certain factors to be considered in connection with an investment in the Notes. Notes to be listed on the SGX-ST or the ISM will be accepted for clearance through Euroclear Bank SA/NV ("Euroclear") and Clearstream Banking S.A. ("Clearstream, Luxembourg") and/any other clearing system as specified in the applicable Pricing Supplement. Each Tranche of Bearer Notes of each series (as defined in "Form of the Notes") will initially be represented by either a temporary bearer global note (a "Temporary Bearer Global Note") or a permanent bearer global note (a "Permanent Bearer Global Note" and, together with a Temporary Bearer Global Note, the "Bearer Global Notes", and each a "Bearer Global Note") as indicated in the applicable Pricing Supplement, which, in either case, will be delivered on or prior to the original issue date of the Tranche to a common depositary (the "Common Depositary") for Euroclear and Clearstream, Luxembourg and/any other clearing system as specified in the applicable Pricing Supplement. On and after the date (the "Exchange Date") which, for each Tranche in respect of which a Temporary Bearer Global Note is issued, is 40 days after the Temporary Bearer Global Note is issued, interests in such Temporary Bearer Global Note will be exchangeable (free of charge) upon a request as described therein either for (i) interests in a Permanent Bearer Global Note of the same Series or (ii) definitive Bearer Notes of the same Series. Registered Notes sold in an "offshore transaction" within the meaning of Regulation S ("Regulation S") under the U.S. Securities Act of 1933, as amended (the "Securities Act"), which will be sold outside the United States (the "U.S.") and only to non-U.S. persons (as defined in Regulation S), will initially be represented by a global note in registered form, without receipts or coupons (a "Registered Global Note"), deposited with a common depositary for Euroclear and Clearstream, Luxembourg, and registered in the name of a nominee of such common depositary. Prior to expiry of the distribution compliance period (as defined in Regulation S) (the "Distribution Compliance Period") (if any) applicable to each Tranche of Notes, beneficial interests in a Registered Global Note may not be offered or sold to, or for the account or benefit of, a U.S. person, save as otherwise provided in the Conditions and may not be held otherwise than through Euroclear or Clearstream, Luxembourg. The applicable Pricing Supplement will specify that a Permanent Bearer Global Note will be exchangeable for definitive Bearer Notes in certain limited circumstances. For Indian regulatory purposes, Notes denominated in Rupees issued under this Programme ("Rupee denominated Notes") constitute "Rupee denominated bonds" under the terms of the RBI Master Directions RBI/FED/2015-2016 FED Master Direction No. 5/2015-16 dated 1 January 2016, as amended. If you purchase any of the Rupee denominated Notes, you will be deemed to have acknowledged, represented and agreed that you are eligible to purchase Rupee denominated Notes under applicable laws and regulations and that you are in compliance with the FATF Requirements (as defined in this Offering Circular) and you are not an overseas branch or subsidiary of an Indian bank or otherwise prohibited under any applicable law or regulation from acquiring, owning or selling the Rupee denominated Notes. The Rupee denominated Notes may not be offered or sold directly or indirectly in India or to, or for the account or benefit of, any resident of India. This Offering Circular has not been and will not be registered as a prospectus or a statement in lieu of a prospectus in respect of a public offer, information memorandum or private placement offer letter or any other offering material with the Registrar of Companies in India in accordance with the Companies Act, 1956, as amended and replaced from time to time, the Companies Act, 2013, as amended and other applicable Indian laws for the time being in force. This Offering Circular has not been and will not be reviewed or approved by any regulatory authority in India, including, but not limited to, the Securities and Exchange Board of India, any Registrar of Companies, the Reserve Bank of India or any stock exchange in India. This Offering Circular and the Notes are not and should not be construed as an advertisement, invitation, offer or sale of any securities whether to the public or by way of private placement to any person resident in India. The Notes have not been and will not be, offered or sold to any person resident in India. If you purchase any of the Notes, you will be deemed to have acknowledged, represented and agreed that you are eligible to purchase the Notes under applicable laws and regulations and that you are not prohibited under any applicable law or regulation from acquiring, owning or selling the Notes. See the section of this Offering Circular entitled "Subscription and Sale". The Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or, in certain circumstances, to U.S. persons. See the section of this Offering Circular entitled "Subscription and Sale"

Arrangers and Dealers

Axis Bank Standard Chartered Bank

The date of this Offering Circular is 19 September 2018

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The Issuer accepts responsibility for the information contained in this Offering Circular. Having taken all reasonable care to ensure that such is the case, the information contained in this Offering Circular is, to the best of the Issuer's knowledge, in accordance with the facts and does not omit anything likely to affect its import.

The Guarantor accepts responsibility for the information contained in the sections of this Offering Circular headed "Description of the State of Kerala", "The Kerala Economy" and "Public Finance". Having taken all reasonable care to ensure that such is the case, the information contained in the sections of this Offering Circular headed "Description of the State of Kerala", "The Kerala Economy" and "Public Finance" is, to the best of the Guarantor's knowledge, in accordance with the facts and contains no information likely to affect its import.

No person is or has been authorised by the Issuer or the Guarantor to give any information or to make any representation other than those contained in this Offering Circular or any other information supplied in connection with the Programme, the Guarantee (as defined in the Conditions) or the Notes and, if given or made by any other person, such information or representations must not be relied upon as having been authorised by the Issuer, the Guarantor, any of the Arrangers, the Dealers, the Trustee or the Agents (as defined in the Conditions) or any of their respective affiliates, directors, officers, employees, agents, representatives or advisers.

No representation, warranty or undertaking, express or implied, is made and, to the fullest extent permitted by law, no responsibility or liability is accepted by any of the Arrangers, the Dealers, the Trustee or the Agents or their respective affiliates, directors, officers, employees, agents, representatives or advisers or any of them as to the accuracy or completeness of the information contained or incorporated in this Offering Circular, or for any other statement, made or purported to be made by the Arrangers, a Dealer, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, agents, representatives or advisers or on their behalf in connection with the Issuer, the Guarantor or the Programme or any other information provided by the Issuer or the Guarantor in connection with the Programme. The Arrangers, the Dealers, the Trustee, the Agents and their respective affiliates, directors, officers, employees, agents, representatives and advisers accordingly disclaim all and any liability whether arising in tort or contract or otherwise (save as referred to above) which they might otherwise have in respect of this Offering Circular or any such statement.

Neither this Offering Circular nor any other information supplied in connection with the Programme, the Guarantee or any Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a recommendation by the Issuer, the Guarantor, any of the Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, agents, representatives or advisers that any recipient of this Offering Circular or any other information supplied in connection with the Programme or any Notes should purchase any of the Notes. Each investor contemplating purchasing Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and the Guarantor. Neither this Offering Circular nor any other information supplied in connection with the Programme, the Guarantee or the issue of any Notes constitutes an offer or invitation by or on behalf of the Issuer, the Guarantor, any of the Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, agents, representatives or advisers to any person to subscribe for or to purchase any Notes.

Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning the Issuer or the Guarantor is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same. The Arrangers, the Dealers, the Trustee, the Agents and their respective affiliates, directors, officers, employees, agents, representatives and advisers expressly do not undertake to review the financial condition or affairs of the Issuer or the Guarantor during the life of the Programme or to advise any investor in the Notes of any information coming to their attention. Investors should review, inter alia, the most recently published documents incorporated by reference into this Offering Circular when deciding whether or not to purchase any Notes.

The Notes in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to United States persons, except in certain transactions permitted by U.S. Treasury regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986, as amended (the "Code") and the Treasury regulations promulgated thereunder.

This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee and the Agents and their respective affiliates, directors, officers, employees, agents, representatives and advisers do not represent that this Offering Circular may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Guarantor, any of the Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, agents, representatives or advisers which would permit a public offering of any Notes or distribution of this Offering Circular in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Offering Circular or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Offering Circular and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer or sale of Notes in the United States, the European Economic Area (including the United Kingdom, Italy and The Netherlands), India, Singapore, Japan and Hong Kong, see "Subscription and Sale".

None of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the Agents or their respective affiliates, directors, officers, employees, agents, representatives or advisers make any representation to any investor in the Notes regarding the legality of its investment under any applicable laws. Any investor in the Notes should be able to bear the economic risk of an investment in the Notes for an indefinite period of time.

There are restrictions on the offer and sale of the Notes in the United Kingdom. All applicable provisions of the Financial Services and Market Act 2000 ("FSMA") with respect to anything done by any person in relation to the Notes in, from or otherwise involving the United Kingdom must be complied with. See the section of this Offering Circular entitled "Subscription and Sale".

This document is for distribution only to persons who (i) are outside the United Kingdom, (ii) have professional experience in matters relating to investments, (iii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the FSMA (Financial Promotion) Order 2005 (as amended), or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of any Notes may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as "relevant persons". This document is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons.

In connection with the offering of any Series of Notes, each Dealer is acting or will act for the Issuer in connection with the offering and will not be responsible to anyone other than the Issuer for providing the protections afforded to clients of that Dealer nor for providing advice in relation to any such offering.

If a jurisdiction requires that the offering of any Notes be made by a licensed broker or dealer and the Dealers or any affiliate of the Dealers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that Dealer or its affiliate on behalf of the Issuer in such jurisdiction.

This Offering Circular has not been and will not be registered as a prospectus with the Monetary Authority of Singapore and the Notes will be offered pursuant to the exemptions under the Securities and Futures Act,

Chapter 289 of Singapore (the "SFA"). Accordingly, this Offering Circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor pursuant to Section 274 of the SFA, (ii) to a relevant person under Section 275(1) of the SFA, or to any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

In accordance with applicable provisions of Indian regulations, only investors from jurisdictions that are FATF compliant are eligible to purchase or subscribe to Rupee denominated Notes. Further, banks incorporated in India and overseas branches and subsidiaries of such banks are not permitted to purchase or hold Rupee denominated Notes in any manner whatsoever. By purchasing Rupee denominated Notes, each investor shall be deemed to have acknowledged, represented and agreed that such investor is eligible to purchase Rupee denominated Notes under applicable laws and regulations and is in compliance with the FATF Requirements and is not an overseas branch or subsidiary of an Indian bank and is not a related party as given under applicable accounting standards in India or otherwise prohibited under any applicable law or regulation from acquiring, owning or selling Rupee denominated Notes and that so long as it holds any Rupee denominated Notes, it will continue to be in compliance with the FATF Requirements. Potential investors should seek independent advice and verify compliance with the requirements under the ECB Directions (as defined in this Offering Circular) prior to any purchase of Rupee denominated Notes.

MiFID II product governance/target market

The Pricing Supplement in respect of any Notes may include a legend entitled "MiFID II Product Governance" which will outline the target market assessment in respect of the Notes and which channels for distribution of the Notes are appropriate. Any person subsequently offering, selling or recommending the Notes (a "distributor") should take into consideration the target market assessment; however, a distributor subject to Directive 2014/65/EU (as amended, "MiFID II" is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the target market assessment) and determining appropriate distribution channels.

A determination will be made in relation to each issue about whether, for the purposes of the MiFID Product Governance rules under EU Delegated Directive 2017/593 (the "MiFID Product Governance Rules"), any dealer subscribing for any Notes is a manufacturer in respect of such Notes, but otherwise neither the Arrangers nor the Dealers nor any of their respective affiliates will be a manufacturer for the purpose of the MiFID Product Governance Rules.

PRIIPs/IMPORTANT - EEA RETAIL INVESTORS

If the Pricing Supplement in respect of any Notes includes a legend entitled "Prohibition of Sales to EEA Retail Investors", the Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area ("EEA"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II or (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the "Insurance Mediation Directive") where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the "Prospectus Directive"). Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended) the "PRIIPs Regulation") for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

The Notes are freely transferable, subject to the restrictions on the transferability of the Notes described under "Subscription and Sale". For a description of certain restrictions on offers, sales and transfers of the Notes and the distribution of this Offering Circular, see "Subscription and Sale".

In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the Stabilisation Manager(s) (or persons acting on behalf of any Stabilisation Manager(s)) in the applicable Pricing Supplement may over-allot Notes or effect transactions with a view to supporting the market price of the Notes of the Series (as defined below) of which such Tranche forms part at a level higher than that which might otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilisation Manager (or persons acting on behalf of any Stabilisation Manager) in accordance with all applicable laws and rules.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

The financial year of the Issuer commences on 1 April of each calendar year and ends on 31 March of the following calendar year and, unless otherwise specified or if the context requires otherwise, all references to a particular "Fiscal Year" or "Fiscal" or "fiscal" or "financial year" or "FY" are to the 12 month period ended on 31 March of that year.

The Issuer publishes its financial statements in Indian Rupees. The Issuer is a body corporate constituted by the Kerala Infrastructure Investment Fund Act 1999, (the "KIIF Act") and is not a company incorporated under the Companies Act. Therefore, the Accounting Standards ("AS") issued by the Institute of Chartered Accountants of India (the "ICAI") and notified under the Companies Act are prima facie not applicable to the Issuer.

The Issuer prepares its financial statements in accordance with the generally accepted accounting principles in India, which differ in certain important respects from generally accepted accounting principles in other countries. The generally accepted accounting principles in India (the "Indian GAAP") differ in certain significant respects from the International Financial Reporting Standards (the "IFRS"). For a discussion on certain significant differences between Indian GAAP and IFRS, see "Summary of significant differences between Indian GAAP and IFRS". The Issuer publishes its financial statements in Indian Rupees. The degree to which the financial information prepared in accordance with Indian GAAP will provide meaningful information is entirely dependent on the reader's level of familiarity with the Indian GAAP. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this Offering Circular should accordingly be limited. The Issuer has not attempted to explain those differences or quantify their impact on the financial data included herein, and the Issuer urges prospective investors to consult their own advisors regarding such differences and their impact on the Issuer's financial data. Unless otherwise stated, all financial data contained herein is that of the Issuer on a standalone basis. In this Offering Circular, certain monetary thresholds have been subjected to rounding adjustments; accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

The Issuer's (i) audited standalone financial statements as of and for Fiscal 2018 and 2017 which have been audited by Sridhar & Co, Chartered Accountants ("Sridhar & Co"); and (ii) the interim standalone financial statements for the quarter ended 30 June 2018 which have been reviewed by Sridhar & Co, and along with their respective reports, have been included in this Offering Circular. The comparative financial information of the Issuer for the quarter ended 30 June 2018 included in the interim standalone financial statements referred to in (ii) above, were reviewed by Sridhar & Co.

CERTAIN DEFINITIONS

Capitalised terms which are used but not defined in any particular section of this Offering Circular will have the meaning attributed to them in the section "Terms and Conditions of the Notes" or any other section of this Offering Circular.

In this Offering Circular, references to "India" are to the Republic of India, references to the "Government" or "Central Government" are to the Government of India. References to "Kerala" are to the State of Kerala, references to the "State Government" are to the Government of the State of Kerala and references to the "RBI" are to the Reserve Bank of India. References to specific data applicable to particular subsidiaries or other consolidated entities are made by reference to the name of that particular entity.

Unless the context otherwise indicates, all references to the Issuer are to Kerala Infrastructure Investment Fund Board on a standalone basis.

Certain industry and market share data in this Offering Circular are derived from data of the RBI, publications by various departments of the Central Government and State Government (the "Third Parties"), among other relevant industry sources. As far as the Issuer is aware and is able to ascertain from information published by the Third Parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. Certain other information regarding market position, growth rates and other industry data pertaining to the Issuer's business or the Guarantor contained in this Offering Circular consists of estimates based on data

viii

reports compiled by professional organisations and analysts, on data from other external sources and on the Issuer's and Guarantor's knowledge of their markets. This data is subject to change and cannot be verified with complete certainty due to limits on the availability and reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. In many cases, there is no readily available external information (whether from trade associations, government bodies or other organisations) to validate market-related analyses and estimates, so the Issuer and the Guarantor rely on internally developed estimates. While the Issuer has compiled, extracted and reproduced market or other industry data from external sources, including third parties or industry or general publications, none of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the Agents or their respective affiliates, directors, officers, employees, agents, representatives or advisers have independently verified that data and none of them make any representation regarding the accuracy of such data. Similarly, while the Issuer and the Guarantor believe that internal estimates to be reasonable, such estimates have not been verified by any independent sources and none of the Issuer, the Guarantor, the Arrangers, the Dealers, or the Trustee or the Agents or their respective affiliates, directors, officers, employees, agents, representatives or advisers can assure potential investors as to their accuracy.

All references in this Offering Circular to "U.S. dollars" and "U.S.$" are to United States dollars, to "Rupees" and "INR " are to Indian Rupees, and to "S$" are to Singapore dollars. In addition, references to "Sterling" and "£" are to pounds sterling and to "euro" and "Eur" and "€" are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of the European Community, as amended.

References to "lakhs" and "crores" in the Issuer's financial statements and elsewhere in this Offering Circular are to the following:

One lakh ...... 100,000 (one hundred thousand) One crore ...... 10,000,000 (ten million) Ten crores ...... 100,000,000 (one hundred million) One hundred crores ...... 1,000,000,000 (one thousand million or one billion)

In this Offering Circular, where information has been presented in millions or billions of units, amounts may have been rounded, in the case of information presented in millions, to the nearest ten thousand or one hundred thousand units or, in the case of information presented in billions, one, ten or one hundred million units. Accordingly, the totals of columns or rows of numbers in tables may not be equal to the apparent total of the individual items and actual numbers may differ from those contained herein due to rounding.

Furthermore, certain figures and percentages included in this Offering Circular have been subject to rounding adjustments; accordingly, figures shown in the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

FORWARD-LOOKING STATEMENTS

The Issuer and the Guarantor have included statements in this Offering Circular which contain words or phrases such as "will", "would", "aim", "is likely", "are likely", "believe", "expect", "expected to", "will continue", "will achieve", "anticipate", "estimate", "intend", "plan", "contemplate", "seek to", "seeking to", "target", "propose to", "future", "objective", "goal", "projected", "should", "can", "could", "may" and similar expressions or variations of such expressions, that are "forward-looking statements".

Actual results may differ materially from those suggested by the forward-looking statements due to certain risks or uncertainties associated with the expectations of the Issuer with respect to, but not limited to, regulatory changes relating to the infrastructure sector in Kerala and the Issuer's or Guarantor's ability to respond to them, the Issuer's and/or Guarantor's ability to successfully implement its strategy, the Issuer's growth and expansion, including the Issuer's ability to complete its capacity expansion plans, technological changes, the Issuer's exposure to market risks, general economic and political conditions in India and Kerala which have an impact on the Issuer's business activities or investments, the monetary and fiscal policies of India and Kerala, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and Kerala and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the Issuer's industry.

For a further discussion on the factors that could cause actual results to differ, see the discussion under the section entitled "Investment Considerations" of this Offering Circular.

ENFORCEMENT OF FOREIGN JUDGMENTS IN INDIA

The Issuer is a body corporate constituted by the Kerala Infrastructure Investment Fund Act, 1999 and the Guarantor is the Government of Kerala. All of the Issuer's directors and executive officers named herein and all of the Guarantor's executive officers are residents of India and all or a substantial portion of the Issuer's and the Guarantor's assets and such persons are located in India. As a result, it may not be possible for investors to effect service of process on the Issuer or the Guarantor or such persons in jurisdictions outside of India, or to enforce judgments against them which have been obtained in courts outside of India predicated upon civil liabilities of the Issuer or the Guarantor or such directors and executive officers under laws other than Indian law, including any judgement predicated upon United States federal securities laws.

India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments.

However, the statutory basis for recognition and enforcement of foreign judgments is provided for under Sections 13, 14 and 44A of The Code of Civil Procedure, 1908, as amended (the "CPC").

Any judgment which is a money decree and which is obtained against the Issuer in England (if passed by the superior courts of any reciprocating territory notified under Section 44A of the CPC) will be recognised and enforced by the courts in India, subject to the provisions of Sections 13 and 14 of the CPC, without re-examination of the issues.

Section 13 of the CPC provides that a foreign judgement shall be conclusive regarding any matter directly adjudicated upon between the same parties or between parties under which they or any of them are litigating under the same title except (i) where the judgement has not been pronounced by a court of competent jurisdiction; (ii) where the judgement has not been given on the merits of the case; (iii) where it appears on the face of the proceedings that the judgement is founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable; (iv) where the proceedings in which the judgement was obtained were opposed to natural justice; (v) where the judgement has been obtained by fraud; or (vi) where the judgement sustains a claim founded on a breach of any law in force in India. A foreign judgement which is conclusive under Section 13 of the CPC may be enforced either by a separate suit upon the judgement or by proceedings in execution. Under Section 14 of the CPC, an Indian court shall, on production of any document purporting to be a certified copy of a foreign judgement, presume that the judgement was pronounced by a court of competent jurisdiction unless the contrary appears on the record; such presumption may be displaced by proving want of jurisdiction.

Section 44A of the CPC provides that where a foreign judgement (including in relation to monetary claim) has been rendered by a superior court, within the meaning of such section, in any country or territory outside India which the Government has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgement had been rendered by the relevant court in India. However, Section 44A of the CPC is applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalties and does not apply to arbitration awards.

The United Kingdom, Singapore and Hong Kong, among other jurisdictions, have been declared by the Government to be reciprocating territories for the purposes of Section 44A of the CPC but the United States has not been so declared. Furthermore, India is a sovereign state and like all other countries in the world recognises the maxim "par in parem non habet imperium", which translates to "one sovereign state is not subject to the jurisdiction of another state". Even though India is a signatory to the United Nations Convention on Jurisdictional Immunities of States and their Property, India has neither ratified nor accepted, approved or acceded to the said treaty. Furthermore, unlike other countries, such as UK and US, India has no separate legislation in this respect.

Therefore, there is a risk that, notwithstanding the Guarantor and Issuer's agreement to waive the defence of sovereign immunity in certain circumstances in connection with the Notes, a claimant may not be able to enforce a court judgment against the Issuer or the Guarantor and/or certain assets of the Issuer or the Guarantor (including the imposition of any arrest order or attachment or seizure of such assets and their subsequent sale) without the Issuer and/or the Guarantor having specifically consented to such enforcement at the time when the enforcement is sought. It may not be possible to effect service of process against the Issuer or the Guarantor in courts outside India or in a jurisdiction to which India has not explicitly submitted, and the choice of jurisdiction of a foreign court (including English courts) in contractual agreements may be held to be invalid by an Indian court.

A judgement of a court in a jurisdiction which is not a reciprocating territory may be enforced only by a separate suit upon the judgement and not by proceedings in execution. The suit must be brought in India within three years from the date of the judgement in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with Indian public policy. Further, any judgement or award in a foreign currency would be converted into Rupees on the date of such judgement or award and not on the date of payment, which could also increase risks relating to foreign exchange. A party seeking to enforce a foreign judgement in India is required to obtain approval from the RBI to repatriate any amount recovered outside India. Any such amount may be subject to income tax in accordance with applicable laws.

CONTENTS

Page

Documents Incorporated by Reference ...... 2

General Description of the Programme ...... 3

Summary of the Programme ...... 4

Summary of the Issuer's Business...... 10

Form of the Notes ...... 19

Form of Pricing Supplement ...... 22

Terms and Conditions of the Notes ...... 35

Use of Proceeds ...... 72

Investment Considerations...... 73

Description of the State of Kerala...... 95

The Kerala Economy ...... 110

Public Finance ...... 127

The Issuer's Business ...... 156

Guarantee ...... 184

Regulation and Policies ...... 185

Taxation ...... 192

Subscription and Sale ...... 196

General Information ...... 212

Index of Defined Terms ...... 215

DOCUMENTS INCORPORATED BY REFERENCE

The Issuer's most recently published audited standalone annual financial statements and, if published later, the Issuer's most recently published audited or reviewed, as the case may be, interim standalone financial results (see "General Information" for a description of the financial statements currently published by the Issuer) published or issued from time to time after the date hereof shall be deemed to be incorporated in, and to form part of, this Offering Circular:

Each of the documents outlined in paragraph above will be made available via the London Stock Exchange's Regulatory News Service.

Any statement contained herein or in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Offering Circular to the extent that a statement contained in any such subsequent document which is deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Offering Circular.

The Issuer will provide, without charge, to each person to whom a copy of this Offering Circular has been delivered, upon the request of such person, a copy of any or all of the documents deemed to be incorporated herein by reference unless such documents have been modified or superseded as specified above. Requests for such documents should be directed to the Issuer at its office set out at the end of this Offering Circular. In addition, such documents will be available free of charge during 9:00am to 3:00pm (Hong Kong time) on any weekday (Saturdays and public holidays exempted) from the specified office of the principal paying agent (which for the time being is The Hongkong and Shanghai Banking Corporation Limited) (the "Principal Paying Agent") for the Notes listed on the SGX-ST and the ISM.

If the terms of the Programme are modified or amended in a manner which would make this Offering Circular, as so modified or amended, inaccurate or misleading, to an extent which is material in the context of the Programme, a new offering circular will be prepared.

GENERAL DESCRIPTION OF THE PROGRAMME

Under the Programme, the Issuer may from time to time issue Notes denominated in any currency, subject as set out herein. A summary of the terms and conditions of the Programme and the Notes appears below. The applicable terms of any Notes will be agreed between the Issuer and the relevant Dealer prior to the issue of the Notes and will be set out in the Conditions endorsed on, attached to, or incorporated by reference into, the Notes, as modified and supplemented by the applicable Pricing Supplement attached to, or endorsed on, such Notes, as more fully described under "Form of Pricing Supplement".

This Offering Circular and any supplement will only be valid for listing Notes on the SGX-ST and the ISM in an aggregate nominal amount which, when added to the aggregate nominal amount then outstanding of all Notes previously or simultaneously issued under the Programme, does not exceed INR 50,000,000,000 or its equivalent in other currencies. For the purpose of calculating the INR equivalent of the aggregate nominal amount of Notes issued under the Programme from time to time:

(a) the INR equivalent of Notes denominated in another Specified Currency (as specified in the applicable Pricing Supplement in relation to the relevant Notes, described under "Form of Pricing Supplement") shall be determined, at the Issuer's discretion, either as of the date on which agreement is reached for the issue of Notes or on the preceding day on which commercial banks and foreign exchange markets are open for business in Mumbai, in each case on the basis of the spot rate for the sale of the INR against the purchase of such Specified Currency in the Mumbai foreign exchange market quoted by any leading international bank selected by the Issuer on the relevant day of calculation;

(b) the INR equivalent of Dual Currency Notes, Index Linked Interest Notes and Partly Paid Notes (each as specified in the applicable Pricing Supplement in relation to the relevant Notes, described under "Form of Pricing Supplement") shall be calculated in the manner specified above by reference to the original nominal amount on issue of such Notes (in the case of Partly Paid Notes regardless of the subscription price paid); and

(c) the INR equivalent of Zero Coupon Notes (as specified in the applicable Pricing Supplement in relation to the relevant Notes, described under "Form of Pricing Supplement") and other Notes issued at a discount or a premium shall be calculated in the manner specified above by reference to the net proceeds received by the Issuer for the relevant issue.

The offering of the Notes will be made entirely outside India. This Offering Circular may not be distributed directly or indirectly in India or to residents of India and the Notes are not being offered or sold and may not be offered or sold directly or indirectly in India or to, or for the account or benefit of, any resident of India.

Each purchaser of Notes will be deemed to represent that it is neither located in India nor a resident of India and that it is not purchasing for, or for the account or benefit of, any such person, and understands that the Notes may not be offered, sold, pledged or otherwise transferred to any person located in India, to any resident of India or to, or for the account of, such persons, unless determined otherwise in compliance with applicable law.

The Issuer will issue Notes under the Programme in accordance with The Master Direction on External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers dated 1 January 2016, as may be amended, replaced or substituted from time to time; and the Master Direction on Reporting under Foreign Exchange Management Act, 1999, dated 1 January 2016, as amended (the "ECB Directions"), along with any circulars issued thereunder by the RBI from time to time issued pursuant to, and read with, the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations 2000, as amended, and the Foreign Exchange Management Act, 1999.

SUMMARY OF THE PROGRAMME

The following summary does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Offering Circular and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Pricing Supplement. Words and expressions defined in "Form of the Notes" and "Terms and Conditions of the Notes" shall have the same meanings in this summary.

Issuer: ...... Kerala Infrastructure Investment Fund Board.

Guarantor: ...... The Government of Kerala acting through the Finance Department of Kerala.

Guarantee: ...... The Guarantor will unconditionally and irrevocably guarantee the due payment of all sums from time to time due and payable by the Issuer in respect of the Notes.

Investment Considerations: ...... There are certain factors that may affect the Issuer's ability to fulfil its obligations under Notes issued under the Programme. These are set out under "Investment Considerations" below. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme. These are set out under "Investment Considerations" and include certain risks relating to the structure of particular Series of Notes and certain market risks.

Description: ...... Guaranteed Medium Term Note Programme.

Arrangers: ...... Axis Bank Limited, Singapore Branch, Standard Chartered Bank and Standard Chartered Bank (Singapore) Limited.

Dealers: ...... Axis Bank Limited, Singapore Branch, Standard Chartered Bank, Standard Chartered Bank (Singapore) Limited and any other Dealers appointed in accordance with the Programme Agreement (as defined under "Subscription and Sale").

Certain Restrictions ...... Each issue of Notes in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see "Subscription and Sale") applicable at the date of this Offering Circular.

Trustee: ...... The Hongkong and Shanghai Banking Corporation Limited.

Principal Paying Agent: ...... The Hongkong and Shanghai Banking Corporation Limited.

Registrar and Transfer Agent: ...... The Hongkong and Shanghai Banking Corporation Limited.

Programme Size: ...... INR 50,000,000,000 (or its equivalent in other currencies calculated as described under "General Description of the Programme") in aggregate nominal amount of Notes outstanding at any time. The Issuer may increase the amount of the Programme in accordance with the terms of the Programme Agreement.

Distribution: ...... Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis.

Currencies: ...... Subject to any applicable legal or regulatory restrictions, any currency agreed between the Issuer and the relevant Dealer. As of the date of this Offering Circular, the Issuer is only permitted to issue Indian Rupee denominated bond overseas. The Issuer reserves the right to issue notes in other currencies overseas as and when approved by the Board of the Issuer and permitted by the RBI.

Maturities: ...... Such maturities as may be agreed between the Issuer and the relevant Dealer, subject to such minimum or maximum maturities as may be allowed or required from time to time by RBI or any laws or regulations applicable to the Issuer including but not limited to, the minimum maturity period specified under the ECB Directions or the laws or regulations applicable to the relevant Specified Currency.

Issue Price: ...... Notes may be issued on a fully-paid or a partly-paid basis and at an issue price which is at par or at a discount to, or premium over, par.

Form of Notes: ...... The Notes will be issued in bearer and/or registered form as described in "Form of the Notes".

Fixed Rate Notes: ...... Fixed interest will be payable at such rate or rates in arrear and on such date or dates as may be agreed between the Issuer and the relevant Dealer, subject to any regulatory requirement (including but not limited to the ECB Directions) and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer and the relevant Dealer, subject to any regulatory requirement (including but not limited to the ECB Directions).

Floating Rate Notes: ...... Floating Rate Notes will bear interest at a rate as may be agreed between the Issuer and the relevant Dealer, subject to any regulatory requirement, including but not limited to, the ECB Directions, determined:

(i) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc., and as amended and updated as of the Issue Date of the first Tranche of the Notes of the relevant Series); or

(ii) on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or

(iii) on such other basis as may be agreed between the Issuer and the relevant Dealer.

The margin (if any) relating to such floating rate will be agreed between the Issuer and the relevant Dealer for each Series of Floating Rate Notes, subject to any regulatory requirement (including but not limited to the ECB Directions).

Index Linked Interest Notes: ...... Payments of principal in respect of Index Linked Redemption Notes or of interest in respect of Index Linked Interest Notes will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or to such other factors as the Issuer and the relevant Dealer may agree, subject to any regulatory requirement (including but not limited to the ECB Directions).

Other provisions in Floating Rate Notes and Floating Rate Notes and Index Linked Interest Notes may also Index Linked Interest Notes: ...... have a maximum interest rate, a minimum interest rate or both, subject to any regulatory requirement including but not limited to the ECB Directions.

Interest on Floating Rate Notes and Index Linked Interest Notes in respect of each Interest Period, as agreed prior to issue by the Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and will be calculated on the basis of such Day Count Fraction, as may be agreed between the Issuer and the relevant Dealer.

Dual Currency Notes: ...... Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes will be made in such currencies, and based on such rates of exchange, as the Issuer and the relevant Dealer may agree, subject to any regulatory requirement (including but not limited to the ECB Directions).

Partly Paid Notes:...... The Issuer may issue Notes in respect of which the issue price is paid in separate instalments in such amounts and on such dates as the Issuer and the relevant Dealer may agree subject to any regulatory requirement (including but not limited to the ECB Directions).

Zero Coupon Notes: ...... Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest subject to any regulatory requirement (including but not limited to the ECB Directions).

Other Notes: ...... The Issuer may agree with any Dealer and the Trustee that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes, in which event the relevant provisions will be included in the applicable Pricing Supplement.

Redemption: ...... Unless otherwise indicated in the applicable Pricing Supplement, the relevant Notes cannot be redeemed prior to their stated maturity other than (i) in specified instalments, in the case of Instalment Redemption Notes, (ii) for taxation reasons, (iii) following a Change in Control (as defined in Condition 7.5 (Redemption upon Change of Control (Investor Put Upon Change of Control)) (iv) (iii) following a Change in Law (as defined in Condition 7.6 (Redemption upon Change of Law (Investor Put Upon Change of Law)) or (v) following an

Event of Default (as defined in Condition 10 (Events of Default and Enforcement)). Under the ECB Directions, any repayment of an external commercial borrowing ("ECB") prior to its stated maturity requires the prior approval of the RBI or the designated authorised dealer category I bank, appointed in accordance with the ECB Directions (the "AD Bank"), as the case may be. Therefore, any redemption of the Notes prior to their stated Maturity Date will require the prior approval of the RBI or the AD Bank, as the case may be, under the ECB Directions.

Instalment Redemption Notes: ...... The applicable Pricing Supplement may provide that Notes may be redeemable in separate instalments in such amounts and on such dates as are indicated in the applicable Pricing Supplement, subject to any regulatory requirements, including but not limited to, the ECB Directions.

Denomination of Notes: ...... Notes will be issued in such denominations as may be agreed between the Issuer and the relevant Dealer, save that the minimum denomination of each Note will be such as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency.

Taxation: ...... All payments in respect of the Notes will be made without deduction for or on account of withholding taxes imposed by any Tax Jurisdiction (as defined in Condition 8.2 (Interpretation)), subject as provided in Condition 8.1 (Payment without Withholding). In the event that any such deduction is made, the Issuer or, as the case may be, the Guarantor will, save in certain limited circumstances provided in Condition 8.1 (Payment without Withholding), be required to pay additional amounts to cover the amounts so deducted.

Without prejudice to the Issuer's or, as the case may be, the Guarantor's obligation to pay additional amounts as described above, all payments in respect of the Notes will be made subject to any withholding or deduction required pursuant to fiscal and other laws, as provided in Condition 8.1 (Payment without Withholding).

Negative Pledge: ...... The terms of the Notes will contain a negative pledge provision as further described in Condition 4 (Negative Pledge).

Cross Default: ...... The terms of the Notes will contain a cross default provision as further described in Condition 10.1(d) (Events of Default).

Status of the Notes: ...... The Notes will constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 4 (Negative Pledge)) unsecured obligations of the Issuer and will rank pari passu among themselves and (save for certain obligations required to be preferred by law) will rank equally with all other unsecured obligations (other than subordinated obligations, if any) of the Issuer, from time to time outstanding.

Guarantee: ...... The Notes will be unconditionally and irrevocably guaranteed by the Guarantor. The obligations of the Guarantor under the Guarantee will be direct, general, unconditional, unsubordinated and unsecured obligations of the Guarantor which will at all times rank at least pari passu with all other present and future unsecured and unsubordinated obligations of the Guarantor, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors' rights and priority of claims.

Listing: ...... Each Series of the Notes may, if so agreed between the Issuer and the relevant Dealer, be listed on the SGX-ST, subject to all necessary approvals having been obtained. Such permission will be granted when such Notes have been admitted to the Singapore Official List. The Notes may also be listed on such other stock exchange(s) as may be agreed between the issuer and the relevant Dealer in relation to each Series. If the application to the SGX-ST to list a particular series of Notes is approved, such Notes listed on the SGX-ST will be traded on the SGX-ST in a minimum board lot size of at least S$200,000 (or its equivalent in foreign currencies).

Application has been made to the London Stock Exchange for the Notes to be admitted to trading on the ISM. The ISM is not a regulated market for the purposes of Directive 2004/39/EC.

Unlisted Notes may also be issued.

Ratings: ...... On 19 September 2018, the Issuer and the Programme were assigned ratings of "BB" and "BB", respectively, with stable outlook from S&P Global Ratings, the same rating as that of Kerala. S&P Global Ratings also highlighted the strong link between the Issuer and Kerala, adding that the Issuer's baseline risk is the same as the default risk of Kerala and indicating a strong correlation of the Issuer's credit rating with the credit rating of Kerala.

On 19 September 2018, the Issuer and the Programme were also assigned ratings of "BB" and "BB", respectively, with stable outlook from Fitch. The ratings assigned to the Issuer are equalised with Fitch’s internal assessment of the credit profile of Kerala.

Governing Law: ...... The Trust Deed, the Agency Agreement and the Notes and any non-contractual obligations arising out of or in connection therewith will be governed by, and construed in accordance with, English law.

Clearing System: ...... Euroclear, Clearstream, Luxembourg and/or any other clearing system, as specified in the applicable Pricing Supplement (see "Form of the Notes").

Selling Restrictions: ...... There are restrictions on the offer, sale and transfer of the Notes under the Prospectus Directive and in the United States, the United Kingdom, Italy, The Netherlands, Japan, India, Hong Kong and Singapore and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes (see "Subscription and Sale").

United States Selling Restrictions: ...... Regulation S Compliance Category 2. TEFRA C or D, or TEFRA not applicable as specified in the applicable Pricing Supplement.

SUMMARY OF THE ISSUER'S BUSINESS

This summary highlights information from this Offering Circular. It is not complete and does not contain all of the information that you should consider before investing in the Notes. You should read this Offering Circular carefully in its entirety, including the sections entitled "Investment Considerations", "Description of the state of Kerala", "The Kerala Economy", "Public Finance", "The Issuer's Business", as well as the Issuer's financial statements and all supplements or amendments to this Offering Circular circulated by the Issuer from time to time. Certain capitalised terms used but not defined in this summary are used herein as defined elsewhere in this Offering Circular.

OVERVIEW

The Issuer is a body corporate constituted by the State Government under the KIIF Act on 11 November 1999, to manage the Kerala Infrastructure Investment Fund (the "Fund").

The KIIF Act was amended in November 2016 by the Kerala Infrastructure Investment Fund Amendment Act 2016 in order to further streamline the process of mobilising funds for infrastructure development in Kerala. Pursuant to this amendment, the Issuer was restructured to (i) create the Fund Trustee and Advisory Commission (the "FTAC") as an independent commission to ensure that all investments by the Issuer are made in accordance with the decisions of the Board and provisions of the KIIF Act; (ii) include a provision in the KIIF Act that all receivables due from the State Government are transferred to the Issuer on or before the last working day of December every year and that a percentage share of motor vehicles tax receipts ("Motor Vehicles Tax") and cess levied on petroleum products under the Kerala General Sales Tax Act, 1963 ("Cess") will be provided to the Issuer each year; and (iii) ensure that the Issuer's funds are used solely for the purposes of the KIIF Act and are not diverted from the intended purpose.

The Issuer was established with the main objective of providing investment for critical and large infrastructure projects in Kerala. The Issuer acts as the primary agency of the State Government to facilitate the development of both the physical and social infrastructure in Kerala and to assist the State Government and its agencies in the development of infrastructure in Kerala. The Issuer acts as the main agency of the State Government for scrutinising, approving and funding major infrastructure projects. These infrastructure projects may be revenue generating or non-revenue generating.

The Issuer is headed by the Chief Executive Officer who also acts as the fund manager of the Issuer and the Deputy Managing Director. The Board is the highest decision making body of the Issuer and comprises the Chief Minister, the Finance Minister, the Chief Executive Officer, key bureaucrats and independent members.

The Finance (Infrastructure) Department is the administrative department of the Issuer, which is directly under the control of the Principal Secretary (Finance), with a Joint Secretary and Deputy Secretary amongst others. The Joint Secretary and Deputy Secretary also function as the joint fund manager and deputy fund manager of the Issuer, respectively.

Funds available to the Issuer are deployed in accordance with an investment management policy (the "Investment Management Policy") formulated by an investment management committee (the "Investment Management Committee" or "IMC") consisting of a Secretary (Resources) and three independent members of the Issuer.

The Issuer benefits from having the FTAC, an independent committee constituted to ensure transparency in the functioning of the Issuer. It acts as the trustee of the Fund and is responsible for ensuring that all investments of the Fund serve the purpose and intent of the KIIF Act and that there are no diversions of the funds available to the Issuer. The FTAC comprises three to five members including a chairperson. The members of the FTAC are experts with experience at national or international levels in the fields of banking, financial regulation, financial markets, administration or economics.

The Chief Executive Officer has three independent divisions under his control: (i) the finance and administration division ("Finance and Administrative Division"); (ii) the project appraisal division ("Project Appraisal Division"); and (iii) the inspection authority ("Inspection Authority").

The Finance and Administration Division which is headed by the joint fund manager looks after the administrative and financial matters of the Issuer. The Finance and Administrative Division also has an institutional finance group which handles the legal and technical matters relating to fund mobilisation by the Issuer and is staffed with financial and legal personnel on deputation from the Securities Exchange Board of India ("SEBI") and the RBI.

The Project Appraisal Division is supported by professional technical support from the Centre for Management Development (a society whose ownership interest is held by the State Government). The Project Appraisal Division is presently staffed with various professionals on a deputation or contractual basis. Currently, an Additional Secretary, an Under Secretary and an Accounts Officer from the Finance Department of Kerala are working on a deputation basis.

The Inspection Authority appointed by the State Government pursuant to its powers under the KIIF Act is led by a chief project examiner, with a technical department comprising of engineers and a non-technical department which is currently staffed on a deputation basis with an Additional Secretary from the Administrative Secretariat, a Joint Secretary and other personnel from the Finance Department of Kerala.

On 19 September 2018, the Issuer and the Programme were assigned ratings of "BB" and "BB", respectively, with stable outlook from S&P Global Ratings, the same rating as that of Kerala. S&P Global Ratings also highlighted the strong link between the Issuer and Kerala, adding that the Issuer's baseline risk is the same as the default risk of Kerala and indicating a strong correlation of the Issuer's credit rating with the credit rating of Kerala.

On 19 September 2018, the Issuer and the Programme were also assigned ratings of "BB" and "BB" respectively with stable outlook from Fitch. The ratings assigned to the Issuer are equalised with Fitch’s internal assessment of the credit profile of Kerala.

The Issuer's sources of funds and other support mechanisms facilitate the efficient functioning of the Issuer and the timely servicing of its debt obligations.

The Issuer has been incorporated with a structure that benefits from statutory protection and which aims to ensure the timely servicing of the Issuer's debt obligations. This involves a combination of identified primary revenue streams, additional fall back provisions to access alternate revenue streams, guarantees from the State Government and the support of operational and governance mechanisms such as the Escrow Mechanism (see section - Escrow Mechanism below) and the oversight provided by the FTAC.

Primary Revenue Streams

Additional Revenue Streams

Guaranteed by State Government pursuant to Section 9 of the KIIF Act

mechanism

support and Funds of Sources Fiduciary Role of FTAC

Escrow Mechanism

 Primary revenue streams

Under the KIIF Act, the State Government is required to set aside (i) the Cess and (ii) up to 50 per cent. of the Motor Vehicles Tax collected each year. The KIIF Act further requires that the receipts from the Cess and Motor Vehicles Tax are transferred from the State Government's treasury to the Issuer on or before the last day in December each year, provided that any revenue from projects that include a user levy is off-set from such transfer and only the balance after payment of operational expenses is required to be transferred. This mechanism for the transfer of the Cess and Motor Vehicles Tax in accordance with the KIIF Act provides the Issuer with an identified source of funds to use for the various infrastructure projects undertaken by it and to meet its other liabilities.

 Additional revenue streams

In accordance with section 7 of the KIIF Act, the State Government is also required to make a provision in its annual budget to meet any shortfall that the Issuer may face with respect to the payment of any annuity or other repayment obligations and to meet the other operational and administrative expenses of the Issuer. The State Government may also make such grants, funds, advances and loans available to the Issuer as may be necessary for carrying out the Issuer's function and on such terms as the State Government may determine.

 Guarantee of the State Government

force (currently 5 per cent. of the Gross State Domestic Product ("GSDP") of Kerala). The State Government has also pursuant to section 9 of the KIIF Act through a government order dated 17 September 2018 (G.O.(Ms)No.347/2018/FIN) provided an unconditional and irrevocable guarantee under the Trust Deed in relation to the obligations of the Issuer in relation to the Notes.

 Fiduciary role of the FTAC

The FTAC, with the approval of the majority of its members, issues a fidelity certificate (the "Fidelity Certificate") every six months certifying that the application of funds by the Issuer and the investment of surplus funds is in conformity with the KIIF Act. The Fidelity Certificate is presented in the State Legislative Assembly together with the annual budget for Kerala. The FTAC is also required to certify that the Issuer has adequate funds to meet its debt obligations arising in the next six months following the period under review.

 Escrow Mechanism

Pursuant to the recommendation by the FTAC, the Issuer is also transitioning to a direct debit mechanism whereby Motor Vehicles Tax and Cess will be directly transferred from the State Government to the Issuer's bank account on a daily basis (the "Escrow Mechanism"). It is expected that the Escrow Mechanism would be operational from 1 October 2018.

No Expenditure Head Remittances Credit Consolidated Fund (CF) Motor Vehicles Tax Cess Receipt Head >= Debit CF Assigned Motor Vehicles Tax Cess maximum Credit KIIFB Account

KIIFB Bank Account

Yes

Stop

THE ISSUER'S STRENGTHS & STRATEGIES

STRENGTHS

The Issuer believes the following to be its key strengths.

The Issuer has a central role in the State Government's initiatives in developing the physical and social infrastructure in Kerala and is the primary agency responsible for the financing of infrastructure projects in Kerala

The Issuer has a significant strategic advantage owing to its strong relationship with the State Government and the central position it occupies with respect to the State Government's initiatives in undertaking various programmes, policies and structural and procedural reforms for critical and large infrastructure development projects in Kerala.

The Issuer has been incorporated to act as the primary agency for facilitating the State Government's efforts to increase capital expenditure on physical and social infrastructure in Kerala. It is the main agency for scrutinising, approving and funding major infrastructure projects in Kerala. The State Government places significant importance on enhancing the Issuer's operational structure, governance and management framework. The KIIF Act, when it was amended in 2016 pursuant to the Kerala Infrastructure Investment Fund Amendment Act, 2016 (the "Amendment Act"), was passed with the unanimous support of the State Legislature.

Since the implementation of the structural changes in 2016 pursuant to the Amendment Act, the State Government has announced a pipeline of infrastructure projects worth ₹50,000 crore for the Issuer to appraise, finance and monitor. The Issuer has also commenced tendering and financing key infrastructure projects across various sectors including transport, water sanitation, energy, social and commercial infrastructure, IT and telecommunications.

There are no comparable agencies within the State Government for the development of infrastructure in Kerala which ensures that funds can be deployed to the various infrastructure projects in an efficient manner. In the absence of direct competition for the funding and monitoring of infrastructure projects in Kerala, the Issuer is in a unique position as the primary funding agency for large infrastructure in Kerala. The Issuer also believes that it benefits from continuity in policy and support from the State Government in relation to its infrastructure development plans.

The Issuer benefits from a strong operating relationship with the State Government which facilities efficient operations.

The Board, which is the highest decision making body of the Issuer, is chaired by the Chief Minister of the state and also includes the Minister for Finance, the Chief Secretary and key bureaucrats from the State Government's finance and legal departments. Furthermore, all projects are put forward for approval by the Executive Committee, whose members include the Minister for Finance, the Chief Secretary and three independent members nominated by the State Government.

The Chief Executive Officer of the Issuer, Dr. Kandathil Mathew Abraham, is also designated as the Ex-officio Secretary of the Finance (Infrastructure) department of the State Government. While the Finance (Infrastructure) Department within the Finance Department of Kerala is the administrative department for the Issuer, the Joint Secretary and Deputy Secretary of the Finance (Infrastructure) department also function as the joint fund manager and deputy fund manager of the Issuer, respectively. This unique operating structure of the Issuer enables ease of decision making and ensures that procedural and operational matters are dealt with in a seamless and timely manner between the Issuer and the State Government.

The Issuer benefits from multi-tiered levels of financial support, which is provided for under the KIIF Act, from the State Government in relation to its financial requirements. These mechanisms, the Issuer believes, allows it to carry out its operations and manage its financial requirements in an efficient manner.

Under the KIIF Act, the State Government is required to set aside (i) Cess and (ii) up to 50 per cent. of Motor Vehicles Tax collected each year. In compliance with the KIIF Act, the receipts from the Cess and Motor Vehicles Tax are transferred from the State Government's treasury to the Issuer on or before the last day in December each year. This mechanism for the transfer of the Cess and Motor Vehicles Tax in accordance with the KIIF Act ensures that the Issuer has an identified source of funds to use for the various infrastructure projects undertaken by it and to meet its other liabilities.

In accordance with section 7 of the KIIF Act, the State Government is required to make provisions in its annual budget to meet any shortfall for the expenses incurred by the Issuer for the payment of any annuity or other repayment obligations and to meet the other operational and administrative expenses of the Issuer. The State Government may also make grants, funds, advances and loans available to the Issuer as may be necessary for carrying out its functions and on such terms as the State Government may determine.

The State Government has also pursuant to section 9 of the KIIF Act through a government order dated 17 September 2018 (G.O.(Ms)No.347/2018/FIN) provided an unconditional and irrevocable guarantee in relation to the obligations of the Issuer in relation to the Notes.

The Issuer has also set up the Escrow Mechanism.

See "The Issuer's sources of funds and other support mechanisms facilitate the efficient functioning of the Issuer and the timely servicing of its debt obligations.".

The FTAC ensures a robust governance framework and greater transparency in the deployment of the Issuer's funds and the Issuer's operations.

The Issuer benefits from having the FTAC, an independent committee constituted pursuant to Section 6C of the KIIF Act to ensure transparency in the functioning of the Issuer. It acts as the trustee of the Fund and is responsible for ensuring that all investments of the Fund serve the purpose and intent of the KIIF Act and that the funds of the Issuer are deployed appropriately. The FTAC comprises three to five members including a chairperson appointed by the Board for a period of two years, but whose membership cannot be terminated by the Board or the State Government except on the grounds of a conviction by a court of law on criminal charges involving moral turpitude or corruption.

The members of the FTAC are selected on the basis of their expertise and experience at national or international levels in the fields of banking, financial regulation, financial markets, administration and/or economics. The FTAC, with the approval of the majority of its members, issues a Fidelity Certificate every six months certifying that the application of funds by the Issuer and the investment of its surplus funds are in conformity with the KIIF Act. The Fidelity Certificate is presented to the State Legislative Assembly together with the annual budget for Kerala. The FTAC is also required, pursuant to its powers granted under the KIIF Act, to certify that the Board of the Issuer has adequate funds to meet its debt obligations arising in the next six months following the period under review (See, "Fund Trustee and Advisory Commission").

Experienced and committed management and employee base with in-depth sector expertise

positions in various government agencies and departments, regulatory bodies at the national level and corporates (See "The Chief Executive Officer and the Deputy Managing Director"). The institutional finance group of the Finance and Administrative Division of the Issuer is staffed with financial and legal experts on deputation from the SEBI and RBI. Additionally, the Issuer has a Project Appraisal Division backed by professional technical support from the Centre for Management Development. The Issuer also has an Inspection Authority led by a chief project examiner, with a technical department comprising of engineers and a non-technical department headed by an Additional Secretary who undertakes non-technical inspections of projects. The members of the Board of the Issuer consist of the Chief Minister, the Minister of Finance, the Chief Secretary, the Vice-Chairman State Planning Board, Secretary (Law), Secretary (Finance), Secretary (Finance Resources), the Chief Executive Officer (member secretary) and seven independent members who are experts in one or more of the areas of finance, banking and/or economics.

The Issuer benefits from economies of scale

Owing to the scale of operations and the legislative mandate of the Issuer pursuant to the KIIF Act, the Issuer benefits from appraising, financing and monitoring a large volume of infrastructure projects. The Issuer enjoys significant cost benefits as a result of a centralised fund raising and decision making system. The Issuer believes that it will be able to manage its operations more efficiently as project appraisals, deployment of resources and project monitoring continue to be carried out in a centralised manner, thereby ensuring consistency in its decision making and efficient use of resources.

THE ISSUER'S STRATEGIES

The Issuer's objective is to fund infrastructure projects which promote the social and economic development of Kerala. In order to achieve this objective, the Issuer's strategies are as follows.

Mobilisation of financial resources

The Issuer has the power to borrow (with the prior sanction of the State Government) and lend any sum required for the purposes of the KIIF Act, pursuant to Section 8 of the KIIF Act. For this purpose, the Issuer may issue any financial instrument including general obligation bonds, revenue obligation bonds or any other appropriate financial instruments or raise funds through any financial structures including revenue bonds with structured repayment mechanisms, land bonds and any other appropriate financial instruments or by making arrangements with banks, multilateral funding agencies or institutions approved by the State Government. The Issuer may also act as a sponsor for setting up infrastructure investment structures (including alternate investment funds ("AIF"), infrastructure investment trusts, mutual funds and infrastructure development funds ("Infrastructure Development Funds"), as may be required for facilitating the mobilisation of resources for a project or group of projects. Recently the Issuer also acted as the technical partner to KSFE Pravasi Chitties, a saving scheme set up for non-resident Indians by the Kerala State Financial Enterprises Ltd.

Strengthening of quality audit and review processes

As the Issuer relies on outsourcing the implementation of projects, its strategy is to invest its resources in the infrastructure required to carry out advanced audits and performance reviews of its service providers. This strategy includes improving the review process of project designs, greater involvement of the Issuer's field unit and supervision consultants at an earlier stage in a project, strengthening independent quality audits during the construction stage of PPP projects and receiving continuous feedback from stakeholders which enables it to enhance its wider monitoring framework. Recent initiatives have seen the Issuer procure ground penetrating radars ("GPR") and other advanced testing equipment used to detect the thickness and quality of layers below the finished surfaces of roads and other hard surfaces. Such equipment is to be deployed in inspections carried out by the Inspection Authority.

Greater focus on human resources

extend its outsourcing of personnel to different areas of operation in order that the appropriate level of expertise is available where necessary. The Issuer believes that by doing so it shall be able to utilise the experience and expertise of these personnel to enhance its business and areas of operation.

Developing strong institutional relationships with external stakeholders

The Issuer's strategy is to engage with and build strong relationships with a variety of stakeholders across various aspects of its operations. These include, but are not limited to, the State Government, local governments and agencies, implementing authorities such as the police and health service, contractors, concessionaires, technical, financial and legal consultants, audit firms, financial institutions, investors, industry associations, academic institutions, the media and both multilateral and bilateral funding agencies.

Greater use of information technology

The rapid improvements in IT based solutions across various aspects of infrastructure development and management have resulted in a stronger incentive for the Issuer to maximise the application of these resources within its operations. Significant focus on automated and IT based systems is one of the key strategies for the Issuer in its plans for growth. The Issuer has already instituted various IT systems and protocols across its various operations, examples include e-tendering and the use of IT for project appraisal and building information systems. With the assistance of the National Informatics Centre (a Central Government body primarily involved in the governance of projects), the Issuer has developed and implemented an online project submission and payment systems called the Direct Payment System for quicker approval of projects and fund release. The Issuer expects to invest in the implementation of IT across its operations in order to enhance productivity and the results of its operations.

RELATIONSHIP WITH THE STATE GOVERNMENT

The Issuer has a strong relationship with the State Government, owing to its critical role in Kerala's development of physical and social infrastructure. While the management team and the various divisions of the Issuer enjoy functional autonomy, the State Government plays a significant role in matters related to the Issuer's constitution, policy, governance and regulatory framework, financing and operations.

Incorporation of the Issuer

The Issuer is an autonomous statutory body constituted by the State Government under the KIIF Act, (as amended pursuant to the Amendment Act) and is of high strategic importance to the State Government. The legislation to establish the Issuer was debated extensively in the State Legislature and passed unanimously by the legislators. The Board of the Issuer is comprised of elected representatives of the State Government including the Chief Minister and the Minister of Finance in addition to key bureaucrats of the finance and legal departments. The State Government also appoints the independent members of the Board and the Executive Committee

State Government as the administrator

The Issuer is administered by the State Government acting through the Finance (Infrastructure) Department within the Finance Department of Kerala directly under the control of the Principal Secretary (Finance). The Chief Executive Officer acts as the Secretary to the State Government. The Chief Executive Officer is also the fund manager of the Issuer. The Joint Secretary and the Deputy Secretary in the Finance (Infrastructure) Department also function as the joint fund manager and deputy fund manager of the Issuer, respectively.

The Issuer's Project Appraisal Division is currently staffed on a deputation basis by an Additional Secretary, an Under Secretary and an Accounts Officer from the Finance Department of Kerala. The Issuer's Inspection Authority is currently staffed on a deputation basis by an Additional Secretary from the Administrative Secretariat, a Joint Secretary and assistants from the Finance Department of Kerala.

Financial support from the State Government

The Issuer has the power, with prior sanction of the State Government, to borrow funds required for the purposes of the KIIF Act and may issue financial instruments or act as a sponsor for setting up infrastructure investment structures as specified in Section 8 of the KIIF Act.

Financial support for the Issuer from the State Government comes primarily in the form of the Cess and Motor Vehicles Tax collected by the State Government under the KIIF Act. The KIIF Act also provides for the State Government to provide any capital that may be required by the Issuer or pay by way of loans or grants such sums of money as it may consider necessary to ensure the efficient discharge of the Issuer's functions.

In accordance with Section 7 the KIIF Act, the State Government makes provision in the annual budget of Kerala to meet the expenses incurred by the Issuer for payment of annuity or other repayment obligations and to meet operational and administrative expenses of the Issuer. All funds due to the Issuer are transferred by the State Government on or before the last working day of December each year.

State Government as the policy maker

The State Government is, pursuant to Section 14 of the KIIF Act, able to issue directions to the Issuer in matters relating to state and national policies and such directions are binding on the Issuer. The State Government also has powers to consult the Board and provide general directions to be followed by the Issuer. In addition, the State Government identifies projects to be developed, managed or operated in Kerala and submits its recommendations to the Issuer, who must prioritise the same.

State Government as the regulator

The KIIF Act also designates the State Government as the principal regulator of the Issuer. The State Government has a range of powers enabling it to exercise a broad degree of control over the functioning of the Issuer. Under section 17A of the KIIF Act, the State Government has appointed the Inspection Authority to inspect any projects and related documents of any special purpose vehicle ("SPV") implementing such projects. The Inspection Authority has the power to call for documents from any SPV and inspect the office, site and premises of the projects. The State Government has the power under the KIIF Act to appoint any person to investigate the operations of the Issuer and to submit a report of such findings.

Under the KIIF Act, the FTAC, with the approval of the majority of its members, issues the Fidelity Certificate every six months certifying that the application of funds by the Issuer and the investment of its surplus funds are in conformity with the KIIF Act. The Fidelity Certificate is presented in the State Legislative Assembly together with the annual budget for Kerala. The FTAC is also required, pursuant to its powers granted under the KIIF Act, to certify that the Issuer has adequate funds to meet its debt obligations arising in the next six months following the period under review.

State Government as the guarantor

Under section 9 of the KIIF Act, the State Government guarantees the payment of principal and interest of any financing proposed to be raised by the Issuer in accordance with the KIIF Act, provided that the total aggregate value of such guarantee shall not exceed the limits set by the Kerala Ceiling on Government Guarantees Act 2003 (30 of 2003) in force (currently 5 per cent. of the GSDP of Kerala).

Each year, the State Government presents before the State Legislature during the budget session, a statement of any guarantee given during the then current financial year and the total sums (if any) which have been paid out of the consolidated fund of Kerala to meet such guaranteed obligations.

FORM OF THE NOTES

The Notes of each Series will either be in bearer form, with or without interest coupons ("Coupons") attached ("Bearer Notes"), or registered form, without interest coupons attached ("Registered Notes"). The Notes are offered and sold in reliance on Regulation S in offshore transactions to persons other than U.S. persons.

Bearer Notes

Each Tranche of Bearer Notes will be in bearer form and will initially be represented by either a temporary bearer global note (a "Temporary Bearer Global Note") or a permanent bearer global note (a "Permanent Bearer Global Note" and, together with a Temporary Bearer Global Note, the "Bearer Global Notes", and each a "Bearer Global Note") as indicated in the applicable Pricing Supplement, which, in either case, will be delivered on or prior to the original issue date of the Tranche to a common depositary (the "Common Depositary") for Euroclear and Clearstream, Luxembourg. While any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal, interest (if any) and any other amount due prior to the Exchange Date (as defined below) will only be made to the bearer thereof to the extent that there is presented to the Principal Paying Agent by Clearstream, Luxembourg or Euroclear a certificate to the effect that it has received from or in respect of a person entitled to a particular nominal amount of the Notes represented by the Temporary Bearer Global Note (as shown by its records) a certificate of non-US beneficial ownership in the form required by it. The bearer of the Temporary Bearer Global Note will not (unless, upon due presentation of the Temporary Bearer Global Note for exchange or delivery of the appropriate number of definitive Bearer Notes (the "Definitive Bearer Notes") as the case may be, issue and delivery (or, as the case may be, endorsement) of the Permanent Bearer Global Note is improperly withheld or refused and such withholding or refusal is continuing at the relevant payment date) be entitled to receive any payment due on or after the Exchange Date.

On or after the date (the "Exchange Date") which is 40 days after the Issue Date, the Temporary Bearer Global Note may be exchanged (free of charge) in whole or in part for, as specified in the applicable Pricing Supplement, either Definitive Bearer Notes and (if applicable) Receipts, Coupons and/or Talons (on the basis that all the appropriate details have been included on the face of such Definitive Bearer Notes and (if applicable) Receipts, Coupons and/or Talons and the relevant information supplementing, replacing or modifying the Conditions appearing in the applicable Pricing Supplement has been endorsed on or attached to such Definitive Bearer Notes) or a Permanent Bearer Global Note upon notice being given by Euroclear and/or Clearstream, Luxembourg or the common depositary on their behalf, acting on the instructions of any holder of an interest in the Temporary Bearer Global Note, or the Trustee and subject, in the case of Definitive Bearer Notes, to such notice period as is specified in the applicable Pricing Supplement, but in either case (if there has been no prior payment of interest) only if there is presented to the Issuer a certificate of non-US beneficial ownership in the form required by it.

Payments of principal, interest (if any) or any other amounts on a Permanent Bearer Global Note will be made through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the Permanent Bearer Global Note without any requirement for certification.

The applicable Pricing Supplement will specify that a Permanent Bearer Global Note will be exchangeable (free of charge), in whole but not in part, for Definitive Bearer Notes with, where applicable, receipts, interest coupons and talons attached only upon the occurrence of an Exchange Event.

For these purposes, "Exchange Event" means (a) an Event of Default has occurred and is continuing; (b) in the case of Notes registered in the name of a common depositary for Euroclear and Clearstream, Luxembourg or held by any other clearing system, Euroclear and Clearstream, Luxembourg and/or such other clearing system is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business or has in fact done so; or (c) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes in definitive form and a certificate to such effect from an authorised officer of the Issuer has been given to the Trustee. The Issuer will promptly give notice to the Noteholders in accordance with Condition 14 (Notices) upon the occurrence of such Exchange Event and Euroclear and/or Clearstream, Luxembourg or the common depositary on their behalf (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) or the Trustee may give notice to the Principal Paying Agent requesting exchange and in the event of the occurrence of an

Exchange Event as described in paragraph (c) of Exchange Event above, the Issuer may also give notice to the Principal Paying Agent requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Principal Paying Agent.

The following legend will appear on all Bearer Notes (other than Temporary Bearer Global Notes), receipts and interest coupons relating to such Notes where TEFRA D is specified in the applicable Pricing Supplement:

"ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE."

The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on Notes, receipts or interest coupons, and will not be entitled to capital gains treatment in respect of any gain on any sale, disposition, redemption or payment of principal in respect of such Notes, receipts or interest coupons.

Notes which are represented by a Bearer Global Note will only be transferable in accordance with the rules and procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be.

Registered Notes

The Registered Notes of each Tranche will initially be represented by a global note in registered form (a "Registered Global Note").

Registered Global Notes will be deposited with, and registered in the name of a nominee of, a common depositary for Euroclear and Clearstream, Luxembourg. Persons holding beneficial interests in Registered Global Notes will be entitled under the circumstances described below, to receive physical delivery of definitive Notes in fully registered form ("Definitive Registered Notes").

Each payment in respect of the Registered Global Notes will be made to the person shown on the Register (as defined in Condition 6.4 (Payments in respect of Registered Notes)) as the registered holder of the Registered Global Notes. None of the Issuer, the Guarantor, the Trustee, any Paying Agent or the Registrar (each as defined under "Terms and Conditions of the Notes") will have any responsibility or liability for any aspect of the records relating to or payments or deliveries made on account of beneficial ownership interests in the Registered Global Notes, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Payments of principal, interest or any other amount in respect of the Definitive Registered Notes will be made to the persons shown on the Register on the relevant Record Date (as defined in Condition 6.4 (Payments in respect of Registered Notes)) immediately preceding the due date for payment in the manner provided in that Condition.

Interests in a Registered Global Note may be exchanged (free of charge), in whole but not in part, for Definitive Registered Notes without Receipts, Coupons or Talons attached only upon the occurrence of an Exchange Event (as defined under " — Bearer Notes").

The Issuer will promptly give notice to Noteholders and the Trustee in accordance with Condition 14 (Notices) upon the occurrence of an Exchange Event and Euroclear and/or Clearstream, Luxembourg or any person acting on their behalf (acting on the instructions of any holder of an interest in such Registered Global Note) or the Trustee may give notice to the Registrar requesting exchange and, in the event of the occurrence of an Exchange Event as described in paragraph (c) of Exchange Event, the Issuer may also give notice to the Registrar requesting exchange. Any such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar.

Transfer of Interests

Interests in a Registered Global Note may, subject to compliance with all applicable restrictions, be transferred to a person who wishes to hold such interest in another Registered Global Note. No beneficial owner of an

interest in a Registered Global Note will be able to transfer such interest, except in accordance with the applicable procedures of Euroclear and Clearstream, Luxembourg, in each case to the extent applicable.

General

Pursuant to the Agency Agreement (as defined under "Terms and Conditions of the Notes"), the Principal Paying Agent shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing Tranche of Notes at a point after the Issue Date of the further Tranche, the Notes of such further Tranche shall be assigned a common code and ISIN number which are different from the common code and ISIN assigned to Notes of any other Tranche of the same Series until such time as the Tranches are consolidated and form a single Series, which shall not be prior to the expiry of the Distribution Compliance Period (as defined in Regulation S under the Securities Act) applicable to the Notes of such Tranche.

For so long as any of the Notes is represented by a Bearer Global Note or a Registered Global Note (each a "Global Note") held on behalf of Euroclear and/or Clearstream, Luxembourg each person (other than Euroclear and/or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Trustee, the Agents, the Issuer and the Guarantor as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of the relevant Registered Global Note shall be treated by the Trustee, the Agents, the Issuer and their agents as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the Agency Agreement and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly.

Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Pricing Supplement.

No Noteholder, Receiptholder (as defined herein) or Couponholder (as defined herein) shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing.

So long as any Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer shall appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption. In the event that any of the Global Notes are exchanged for definitive Notes, an announcement of such exchange shall be made by or on behalf of the Issuer through the SGX-ST and such announcement will include all material information with respect to the delivery of the definitive Notes, including details of the paying agent in Singapore.

FORM OF PRICING SUPPLEMENT

Set out below is the form of Pricing Supplement which will be completed for each Tranche of Notes issued under the Programme.

[Date]

Kerala Infrastructure Investment Fund Board

Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] under the INR 50,000,000,000 Guaranteed Medium Term Note Programme unconditionally and irrevocably guaranteed by The Government of Kerala acting through the Finance Department of Kerala

This document constitutes the Pricing Supplement relating to the issue of Notes described herein.

Terms used herein shall be deemed to be defined as such for the purposes of the terms and conditions of the Notes (the "Conditions") set forth in the Offering Circular relating to the above Programme dated 19 September 2018 [and the supplement[s] to it dated [ ] and [ ] (the "Offering Circular"). This Pricing Supplement contains the final terms of the Notes and must be read in conjunction with such Offering Circular. Full information on the Issuer, the Guarantor and the offer of the Notes is only available on the basis of the combination of this Pricing Supplement and the Offering Circular.

[MiFID II product governance/Professional investors and ECPs only target market - Solely for the purposes of [the/each] manufacturer's product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in Directive 2014/65/EU (as amended, "MiFID II", and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a "distributor") should take into consideration the manufacturer['s/s'] target market assessment; however a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer['s/s'] target market assessment) and determining appropriate distribution channels.]

[PROHIBITION OF SALES TO EEA RETAIL INVESTORS - The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area ("EEA"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of [Directive 2014/65/EU (as amended, "MiFID II"] (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the "Insurance Mediation Directive") where that customer would not qualify as a professional client as defined in point (1) of Article 41(1) of MiFID II; or (ii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the "Prospective Directive"). Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended the "PRIIPs Regulation") for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.]

[The following alternative language applies if the first tranche of an issue which is being increased was issued under an Offering Circular with an earlier date.]

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the "Conditions") set forth in the Offering Circular dated 19 September 2018. This Pricing Supplement contains the final terms of the Notes and must be read in conjunction with the Offering Circular dated [current date], save in respect of the Conditions which are extracted from the Offering Circular dated 19 September 2018 and are attached hereto.]

[Include whichever of the following apply or specify as "Not Applicable" (N/A). Note that the numbering should remain as set out below, even if "Not Applicable" is indicated for individual paragraphs or subparagraphs. Italics denote directions for completing the Pricing Supplement]

1. (a) Issuer: Kerala Infrastructure Investment Fund Board

(b) Guarantor: The Government of Kerala acting through the Finance Department of Kerala

2. (a) Series Number: [ ]

(b) Tranche Number: [ ] (If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible)

(c) Date on which the Notes The Notes will be consolidated and form a single Series with will be consolidated and [identify earlier Tranches] on [the Issue Date/exchange of the form a single Series: Temporary Global Note for interests in the Permanent Global Note, as referred to in paragraph [ ] below, which is expected to occur on or about [date]] [Not Applicable]

3. Specified Currency or Currencies: [ ]

4. Synthetic Rupee denominated [Applicable/Not Applicable]. Note provisions (All Notes shall be Synthetic Rupee denominated Notes until such time as the RBI permits the Issuer to issue Notes overseas in a currency other than Rupees)

(If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Calculation Agent [ ]

(b) Reference Rate [ ]

(d) Synthetic Rupee [ ] denominated Notes Settlement Currency

5. Aggregate Nominal Amount:

(a) Series: [ ]

(b) Tranche: [ ]

6. (a) Issue Price: [ ]% of the Aggregate Nominal Amount [plus accrued interest from [insert date] (in the case of fungible issues only, if applicable)]

[The Issue Price will be payable in the Synthetic Rupee denominated Notes Settlement Currency and will be based on the Aggregate Nominal Amount (in INR ) divided by the conversion rate reported by the RBI and displayed on Reuters page "INRREF=FBIL" [other page if applicable] or its successor at approximately [●] [am/pm], Mumbai time, on [●]]

(b) [Net proceeds: [ ]]

(d) [Discretionary fee: [ ]]

7. (a) Specified Denominations: (N.B. Notes must have a minimum denomination of €100,000 or equivalent unless the issue of Notes is (i) NOT admitted to trading on a European Economic Area exchange; and (ii) only offered in the European Economic Area in circumstances where a prospectus is not required to be published under the Prospectus Directive)

(NB — Where Bearer Notes with multiple denominations above €100,000 or equivalent are being issued, with respect to Bearer Notes, the following sample wording should be followed:

"€100,000 and integral multiples of €1,000 in excess thereof, up to and including €199,000. No notes in definitive form will be issued with a denomination above €199,000.)

N.B. In the case of Synthetic Rupee denominated Notes listed on the SGX ST, minimum board lot size will be ₹10,000,000 and integral multiples thereof).

(b) Calculation Amount (and [ ] in relation to calculation (If only one Specified Denomination, insert the Specified of interest in global form Denomination. see Conditions): If more than one Specified Denomination, insert the highest common factor. Note: There must be a common factor in the case of two or more Specified Denominations.)

8. (a) Issue Date: [ ]

(b) Interest Commencement [Specify/Issue Date/Not Applicable] (N.B. An Interest Date: Commencement Date will not be relevant for certain Notes, for example Zero Coupon Notes.)

9. Maturity Date: [Fixed rate - specify date/Floating rate - Interest Payment Date falling in or nearest to [specify month and year]]

(N.B.: The maturity date of the Notes will be subject to the guidelines issued by the RBI from time to time)

10. Interest Basis: [[ ] % Fixed Rate] [[LIBOR/EURIBOR] +/- [ ] % Floating Rate] [Zero Coupon] [Index Linked Interest] [Dual Currency Interest] [specify other] (further particulars specified below)

11. Redemption/Payment Basis: [Redemption at par] [Index Linked Redemption] [Dual Currency Redemption] [Partly Paid] [Instalment] [specify other]

12. Change of Interest Basis or [Applicable/Not Applicable] Redemption/Payment Basis: (if applicable, specify details of any provision for change of Notes into another Interest Basis or Redemption/Payment Basis).

(N.B. Conditions related to the maturity, redemption, put/call and similar features of Notes qualifying as regulatory capital will be subject to the guidelines issued by the RBI from time to time.)

13. Put/Call Options: [Investor Put] [Issuer Call] (N.B. Conditions related to the maturity, redemption, put/call and similar features of Notes qualifying as regulatory capital will be subject to the guidelines issued by the RBI from time to time). [(further particulars specified below)] [Not Applicable]

14. (a) Date of board approval for [ ] [and [ ], respectively]]/[None required] issuance of Notes [and (N.B. Only relevant where regulatory (or similar) approval or Guarantee] obtained: consent is required for the particular tranche of Notes)

(b) Date of regulatory [ ]/[None required] approval/consent for (N.B. Only relevant where regulatory (or similar) approval or issuance of Notes consent is required for the particular tranche of Notes) obtained:

15. Listing: [SGX-ST/ISM/specify other/None] (N.B. Consider disclosure requirements under the EU Prospectus Directive applicable to securities admitted to an EU regulated market)

16. Method of distribution: [Syndicated/Non-syndicated]

17. Status of the Notes: Senior

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

18. Fixed Rate Note Provisions: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Rate(s) of Interest: [ ]per cent. per annum payable in arrears on each Interest Payment Date

(b) Interest Payment Date(s): [ ] in each year up to and including the Maturity Date (Amend appropriately in the case of irregular coupons)

(c) Fixed Coupon Amount(s) [ ] per Calculation Amount for Notes in definitive form (and in relation to Notes in global form see Conditions):

(d) Broken Amount(s) for [[ ] per Calculation Amount, payable on the Interest Notes in definitive form Payment Date falling [in/on] [ ]][Not Applicable] (and in relation to Notes in global form see Conditions):

(e) Day Count Fraction: [Actual/Actual (ICMA)] 30/360 [Actual/365 (Fixed)] [specify other]

(f) Determination Date(s): [[ ] in each year][Not Applicable] (Only relevant where Day Count Fraction is Actual/Actual (ICMA). In such case, insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon)

(g) Other terms relating to the [None/Give details] method of calculating interest for Fixed Rate Notes:

19. Floating Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Specified period(s)/ [ ][, subject to adjustment in accordance with the Specified Interest Business Day Convention set out in (b) below, /not subject to any Payment Dates: adjustment, as the Business Day Convention in (b) below is specified to be not applicable.]

(b) Interest Period End Date: [●]

(Not applicable unless different from Interest Payment Date)

(c) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/[specify other]/Not Applicable][Adjusted/Unadjusted]

(d) Additional Business [ ] Centre(s):

(e) Manner in which the Rate [Screen Rate Determination/ISDA Determination/[Not of Interest and Interest Applicable]/[specify other]] Amount is to be determined:

(f) Party responsible for [ ] calculating the Rate of Interest and Interest Amount (if not the Principal Paying Agent):

(g) Screen Rate [ ] Determination:

(i) Reference Rate: [ ] month [LIBOR/EURIBOR/specify other Reference Rate] (Either LIBOR, EURIBOR or other, although additional information required if other, including fallback provisions in the Conditions).

(ii) Interest [ ] Determination (Second London Business Day prior to the start of each Interest Date(s): Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET2 System is open prior to the start of each Interest Period if EURIBOR or euro LIBOR)

(iii) Relevant Screen [ ] Page: (In the case of EURIBOR, if not Reuters EURIBOR 01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately)

(h) ISDA Determination:

(i) Floating Rate [ ] Option:

(ii) Designated [ ] Maturity:

(iii) Reset Date: [ ] (in the case of a LIBOR or EURIBOR based option, the first day of the Interest Period)

(i) Linear Interpolation: [Not Applicable/Applicable - the Rate of Interest for the [long/short] [first/last] Interest Period shall be calculated using Linear Interpolation (specify for each short or long interest period)]

(j) Margin(s): [+/-] [ ] per cent. per annum

(k) Minimum Rate of Interest: [ ] per cent. per annum

(l) Maximum Rate of Interest: [ ] per cent. per annum

(m) Day Count Fraction: [Actual/Actual (ISDA)] [Actual/Actual] Actual/365 (Fixed) Actual/365 (Sterling) Actual/360 30/360 360/360 [Bond Basis] [specify other] (See Condition 5 for alternatives)

20. Zero Coupon Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Accrual Yield: [ ]per cent. per annum

(b) Reference Price: [ ]

(d) Day Count Fraction in 30/360 [Actual/360 [Actual/365 [specify other] relation to Early Redemption Amounts:

21. Index Linked Interest Note [Applicable/Not Applicable] Provisions (If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Index/Formula: [give or annex details]

(b) Calculation Agent: [give name]

(d) Provisions for [ ] (Need to include a description of market disruption or determining Coupon settlement disruption events and adjustment provisions) where calculation by reference to Index and/or Formula is impossible or impracticable:

(e) Specified [ ] Period(s)/Specified Interest Payment Dates:

(f) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/specify other] [Adjusted/Unadjusted]

(g) Additional Business [ ] Centre(s):

(h) Minimum Rate of Interest: [ ]per cent. per annum

(i) Maximum Rate of [ ]per cent. per annum Interest:

(j) Day Count Fraction: [ ]

22. Dual Currency Interest Note [Applicable/Not Applicable] Provisions: (If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Rate of Exchange/method [give details] of calculating Rate of Exchange:

(b) Party responsible for [ ] calculating the Rate of Interest (if not the Calculation Agent) and Interest Amount (if not the Principal Paying Agent):

(c) Provisions for [ ] determining Coupon where calculation by reference to Index and/or Formula is impossible or impracticable:

(d) Person at whose option [ ] Specified Currency(ies) is/are payable:

PROVISIONS RELATING TO REDEMPTION

23. Issuer Call: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Optional Redemption [ ] Date(s):

(b) Optional Redemption [ ] per Calculation Amount/specify other/see Appendix] Amount and method, if any, of calculation of such amount(s):

(i) Minimum [ ] Redemption Amount:

(ii) Maximum [ ] Redemption Amount:

(d) Notice period: Minimum period : 15 days Maximum period : 30 days

(N.B. If setting notice periods, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems (which require a minimum of 5 clearing system business days' notice for a call) and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer, the Principal Paying Agent and the Trustee) 24. Investor Put: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Optional Redemption [ ] Date(s):

(b) Optional Redemption [[ ] per Calculation Amount/specify other/see Appendix] Amount of each Note and method, if any, of calculation of such amount(s):

(N.B. When setting notice periods, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems (which require a minimum of 15 clearing system business days' notice for a put) and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer the Principal Paying Agent and the Trustee)

25. Final Redemption Amount [ ] per Calculation Amount

26. Early Redemption Amount [[ ] per Calculation Amount/specify other/see Appendix] payable on redemption for taxation reasons or on event of default and/or the method of calculating the same (if requires):

GENERAL PROVISIONS APPLICABLE TO THE NOTES

27. Form of Notes: [Bearer Notes: [Temporary Bearer Global Note exchangeable for a Permanent Bearer Global Note which is exchangeable for Definitive Bearer Notes [only upon an Exchange Event]] [Temporary Bearer Global Note exchangeable for Definitive Bearer Notes on and after the Exchange Date] [Permanent Bearer Global Note exchangeable for Definitive Bearer Notes [only upon an Exchange Event]]

(Ensure that this is consistent with the wording in the "Form of the Notes" section in the Offering Circular and the Notes themselves. The exchange upon notice option should not be expressed to be applicable if the Specified Denomination of the Notes in paragraph 7 includes language substantially to the following effect:

"€100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000. No Notes in definitive form will be issued with a denomination above €199,000". Furthermore, such Specified Denomination construction is not permitted in relation to any issue of Notes which is to be represented on issue by a Temporary/Permanent Bearer Global Note exchangeable for Definitive Bearer Notes.)

[Registered Notes: Registered Global Note ([ ] nominal amount) registered in the name of a nominee for a common depositary for Euroclear and Clearstream, Luxembourg (specify nominal amounts)]

28. Additional Financial Centres: [Not Applicable/TARGET2 System/give details] (Note that this item relates to the date of payment and not Interest Period end dates to which items 19(d) and 21(g) relate)

29. Talons for future Coupons to be [Yes, as the Notes have more than 27 coupon payments, Talons may attached to Definitive Notes in be required if, on exchange into definitive form, more than 27 bearer form (and dates on which coupon payments are still to be made/No] such Talons mature):

30. Details relating to Partly Paid [Not Applicable/give details. N.B. a new form of Temporary Bearer Notes: amount of each payment Global Note and/or Permanent Bearer Global Note may be required comprising the Issue Price and for Partly Paid issues] date on which each payment is to be made and consequences of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment:

31. Details relating to Instalment [Not Applicable] Notes: (If not applicable, delete the remaining sub-paragraphs of this paragraph)

(a) [Instalment Amount(s): [give details]]

(b) [Instalment Date(s): [give details]]

32. Other terms or special conditions: [Not Applicable/give details]

DISTRIBUTION

33. (a) If syndicated, names of [Not Applicable/give names] Managers:

(b) Stabilisation Manager(s) [Not Applicable/give name(s)] (if any):

34. If non-syndicated, name of [ ] relevant Dealer:

35. Whether TEFRA D or TEFRA C (In the case of Registered Notes) rules applicable or TEFRA rules [Not Applicable] not applicable:

36. U.S. Selling Restrictions: Regulation S Compliance Category 2

37. Additional selling restrictions: [Not Applicable/give details]

38. Prohibition of Sales to EEA [Applicable/Not Applicable] Retail Investors

OPERATIONAL INFORMATION

39. Any clearing system(s) other than [Not Applicable/give name(s) and number(s)] Euroclear and Clearstream, Luxembourg and the relevant identification number(s):

40. Delivery: Delivery [against/free of] payment

41. Additional Paying Agent(s) (if [ ] any):

ISIN: [ ]

Common Code: [ ]

FISN: [ ]

CFI: [ ]

42. Listing: [Application [has been made/is expected to be made] by the Issuer (or on its behalf) for the Notes to be listed on [specify market — note this must not be a regulated market] with effect from [ ].][Not Applicable]

43. Ratings: The Notes to be issued [have been/are expected to be] rated:

[Fitch: [ ]

[Other: [ ]

[The Notes have not been specifically rated.]

[[ ] is established in the European Union and has applied for registration under Regulation (EC) No. 1060/2009, although notification of the corresponding registration decision has not yet been provided by the relevant competent authority.]

[[ ] is established in the European Union and is registered under Regulation (EC) No. 1060/2009.]

[[ ] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009. However, the application for registration under Regulation (EC) No. 1060/2009 of [ ], which is established in the European Union, disclosed the intention to endorse credit ratings of [ ].]

[[ ] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009. The ratings [[have been]/[are expected to be] endorsed by [ ] in accordance with Regulation (EC) No. 1060/2009. [ ] is established in the European Union and registered under Regulation (EC) No. 1060/2009.] [[ ] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009, but it is certified in accordance with such Regulation.]

44. Legal Entity Identifier 213800Q188S952WWDA51

USE OF PROCEEDS

Give details if different from the "Use of Proceeds" section in the Offering Circular.

[STABILISATION

In connection with this issue, [insert name of Stabilisation Manager] (the "Stabilisation Manager") (or persons acting on behalf of any Stabilisation Manager) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilisation Manager (or persons acting on behalf of any Stabilisation Manager) in accordance with all applicable laws and rules.]

PURPOSE OF PRICING SUPPLEMENT

This Pricing Supplement comprises the final terms required for issue and admission to the Singapore Official List of the Singapore Exchange Securities Limited (the "SGX-ST") and London Stock Exchange's International Securities Market (the "ISM") of the Notes described herein pursuant to the INR 50,000,000,000 Guaranteed Medium Term Note Programme of the Issuer.

INVESTMENT CONSIDERATIONS

There are significant risks associated with the Notes including, but not limited to, counterparty risk, country risk, price risk and liquidity risk. Investors should contact their own financial, legal, accounting and tax advisers about the risks associated with an investment in these Notes, the appropriate tools to analyse that investment, and the suitability of the investment in each investor's particular circumstances. No investor should purchase the Notes unless that investor understands and has sufficient financial resources to bear the price, market liquidity, structure and other risks associated with an investment in these Notes.

Before entering into any transaction, investors should ensure that they fully understand the potential risks and rewards of that transaction and independently determine that the transaction is appropriate given their objectives, experience, financial and operational resources and other relevant circumstances. Investors should consider consulting with such advisers as they deem necessary to assist them in making these determinations.

RESPONSIBILITY

The Issuer accepts responsibility for the information contained in this Pricing Supplement.

Signed on behalf of the Issuer:

By: ______Duly authorised

TERMS AND CONDITIONS OF THE NOTES

As of the date of this offering circular prepared in connection with the Notes (the "Offering Circular"), the Issuer is only permitted to issue Indian Rupee denominated bonds overseas. The Issuer reserves the right to issue notes in other currencies overseas as and when permitted by the Reserve Bank of India (the "RBI").

The following, subject to alteration and except for the paragraphs in italics, are the Terms and Conditions of the Notes which will be incorporated by reference into each Global Note (as defined below) and each definitive Note, in the latter case only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Pricing Supplement in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Pricing Supplement (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference should be made to "Form of Pricing Supplement" for a description of the content of Pricing Supplements which will specify which of such terms are to apply in relation to the relevant Notes. For any redemption that would be in breach of the minimum maturity requirements as set out in the ECB Directions (as defined below) under the Conditions (as defined below) including, but not limited to, an Issuer Tax Call, Issuer Call, Investor Put or Investor Put upon Change of Control (each as defined below), the Issuer is required to obtain the prior approval of the Reserve Bank of India or the designated authorised dealer category I bank, appointed in accordance with the ECB Directions (the "AD Bank"), as the case may be, in accordance with the ECB Directions, before providing notice for or effecting a redemption in breach of the minimum maturity requirements as set out in the ECB Directions and such approval may not be provided. See "Investment Considerations — Risks Relating to an Investment in the Notes — Approval of the RBI or an AD Bank, as the case may be, is required for redemption of Notes prior to maturity, including upon an Event of Default (as defined in the Terms and Conditions of the Notes)."

The issuance of, and Conditions in relation to, the Notes are subject to applicable laws including the ECB Directions. The Notes will be offered, sold and transferred only to investors who are eligible to purchase Notes under applicable laws and regulations and in respect to Rupee denominated Notes, investors who are in compliance with the FATF Requirements (as defined in the Offering Circular) and investors, who are not an offshore branch or subsidiary of an Indian bank or a related party as provided under the Indian Accounting Standard-24.

This Note is one of a Series (as defined below) of Notes issued by Kerala Infrastructure Investment Fund Board (the "Issuer" and constituted by a trust deed (as modified and/or supplemented and/or restated from time to time, the "Trust Deed") dated 19 September 2018 made between the Issuer, The Government of Kerala acting through the Finance Department of Kerala (the "Guarantor") and The Hongkong and Shanghai Banking Corporation Limited (the "Trustee" which expression shall include any person from time to time as trustee or co-trustee under the Trust Deed).

The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an agency agreement (such agency agreement as modified and/or supplemented and/or restated from time to time, the "Agency Agreement" dated 19 September 2018 and made between the Issuer, the Guarantor, the Trustee, The Hongkong and Shanghai Banking Corporation Limited as principal paying agent (in that capacity, the "Principal Paying Agent", which expression shall include any successor principal paying agent) and the other paying agents named therein (together with the Principal Paying Agent, the "Paying Agents" which expression shall include any additional or successor paying agents and The Hongkong and Shanghai Banking Corporation Limited as transfer agent (in that capacity, the "Transfer Agent", which expression shall include any substitute or any additional transfer agents appointed in accordance with the Agency Agreement) and as registrar (in that capacity, the "Registrar", which expression shall include any successor registrar and together with the Paying Agents and Transfer Agents the "Agents").

Copies of the Trust Deed and the Agency Agreement are available for inspection between 9:00am and 3:00pm (Hong Kong time) on any weekday (Saturdays and public holidays exempted) at the specified office for the time being of the Principal Paying Agent upon prior written request and satisfactory proof of holding by Noteholders. Copies of the applicable Pricing Supplement (as defined below) are obtainable between 9:00am

and 3:00pm (Hong Kong time) on any weekday (Saturdays and public holidays exempted) from the specified office of the Principal Paying Agent and the corporate office of the Issuer save that, if this Note is an unlisted Note of any Series, the applicable Pricing Supplement will only be obtainable by a Noteholder holding one or more Notes of that Series upon prior written request and such Noteholder must produce evidence satisfactory to the Issuer and the Principal Paying Agent as to its holding of such Notes and its identity. The Noteholders, the Receiptholders (as defined below) and the Couponholders (as defined below) are deemed to have notice of, and are entitled to the benefit of, and are bound by, all the provisions of the Trust Deed and the applicable Pricing Supplement and those provisions of the Agency Agreement (together with the Trust Deed and the applicable Pricing Supplement, the "Transaction Documents" which term shall as regards any Series of Notes be construed as including only those Transaction Documents applicable to that Series) which are applicable to them. The statements in these Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed and the Agency Agreement.

References herein to the "Notes" shall be references to the Notes of this Series and shall mean:

(a) in relation to any Notes represented by a global Note (a "Global Note"), units of the lowest Specified Denomination in the Specified Currency (each as specified in the applicable Pricing Supplement);

(b) any Global Note in bearer form represented by either a temporary bearer global note (a "Temporary Bearer Global Note") or a permanent bearer global note (a "Permanent Bearer Global Note" and, together with a Temporary Bearer Global Note, the "Bearer Global Notes")", and each a "Bearer Global Note";

(d) definitive Notes in bearer form ("Definitive Bearer Notes" and, together with Bearer Global Notes, the "Bearer Notes") issued in exchange for a Bearer Global Note; and

(e) definitive Notes in registered form ("Definitive Registered Notes", and together with Registered Global Notes, the "Registered Notes"), whether or not issued in exchange for a Registered Global Note.

Interest-bearing Definitive Bearer Notes have interest coupons ("Coupons") and, in the case of Bearer Notes which, when issued in definitive form, have more than 27 interest payments remaining, talons for further Coupons ("Talons") attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Definitive Bearer Notes repayable in instalments have receipts ("Receipts") for the payment of the instalments of principal (other than the final instalment) attached on issue. Registered Notes and Global Notes do not have Receipts, Coupons or Talons attached on issue.

The Pricing Supplement for this Note (or the relevant provisions thereof) is attached to or endorsed on this Note and supplements these Terms and Conditions ("Conditions") and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Conditions, replace or modify these Conditions for the purposes of this Note. References to the "applicable Pricing Supplement" are to the Pricing Supplement (or the relevant provisions thereof) attached to or endorsed on this Note.

Any reference to "Noteholders" or "holders" in relation to any Notes shall mean (in the case of Bearer Notes) the holders of the Notes and (in the case of Registered Notes) the persons in whose names the Notes are registered and shall, in relation to any Notes represented by a Global Note, be construed as provided below. Any reference herein to "Receiptholders" shall mean the holders of the Receipts and any reference herein to "Couponholders" shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons. The Trustee acts for the benefit of the Noteholders, the Receiptholders and the Couponholders, in accordance with the provisions of the Trust Deed.

As used herein, "Tranche" means Notes which are identical in all respects (including as to listing and admission to trading) and "Series" means a Tranche of Notes together with any further Tranche or Tranches of Notes which (i) are expressed to be consolidated and form a single series therewith and (ii) have terms and

conditions which are the same in all respects save for the amount and/or date of the first payment of interest thereon and/or the Interest Commencement Date (as defined in the applicable Pricing Supplement).

Words and expressions defined in the Trust Deed and the Agency Agreement or used in the applicable Pricing Supplement shall have the same meanings where used in these Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed and the Agency Agreement, terms defined in the Trust Deed will prevail and, in the event of inconsistency between the Trust Deed or the Agency Agreement and the applicable Pricing Supplement, the applicable Pricing Supplement will prevail.

1. FORM, DENOMINATION AND TITLE

The Notes may be in bearer form ("Bearer Notes") or in registered form ("Registered Notes") as specified in the applicable Pricing Supplement and, in the case of definitive Notes, will be serially numbered, in the currency (the "Specified Currency") and the denominations (the "Specified Denomination(s)"), specified in the applicable Pricing Supplement. Save as provided in Condition 2 (Transfers of Registered Notes), Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination.

This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Pricing Supplement which Interest Basis shall be as per the applicable laws including but not limited to the ECB Directions (as defined below).

This Note may also be an Index Linked Redemption Note, an Instalment Note, a Dual Currency Redemption Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the Redemption/Payment Basis shown in the applicable Pricing Supplement.

Definitive Bearer Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in these Conditions are not applicable.

Subject as set out below, title to the Bearer Notes, Receipts and Coupons will pass by delivery. Title to Registered Notes will pass upon registration of transfers in the Register (as defined below) in accordance with the provisions of the Agency Agreement. The Issuer, the Guarantor, the Trustee, the Paying Agents, the Registrar and the Transfer Agent will (except as otherwise ordered by a court of competent jurisdiction or required by law) deem and treat the bearer of any Bearer Note, Receipt or Coupon and any person in whose name a Registered Note is registered as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon (save, in the case of Registered Notes, for the endorsed form of transfer) or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph.

For so long as any of the Notes is represented by a Global Note held by a common depositary or its nominee on behalf of Euroclear Bank SA/NV ("Euroclear") and/or Clearstream Banking S.A. ("Clearstream, Luxembourg"), each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Guarantor, the Trustee, the Paying Agents, the Registrar and the Transfer Agent as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer or registered holder of the relevant Global Note shall be treated by the Issuer, the Guarantor, the Trustee, the Paying Agents, the Registrar and the Transfer Agent as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions "Noteholder" and "holder" in relation to any such Notes and related expressions shall be construed accordingly. In determining whether a particular person is entitled to a particular nominal amount of Notes, as aforesaid, the Trustee may call for any certificate or other document to be issued or given by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person, which shall, in the absence of manifest error, be conclusive and binding for all purposes.

Notes which are represented by a Global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear and Clearstream, Luxembourg, as the case may be. References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Pricing Supplement or as may otherwise be approved by the Issuer, the Trustee and the Principal Paying Agent and in the case of any Registered Notes, the Registrar.

2. TRANSFERS OF REGISTERED NOTES

2.1 Transfers of Interests in Registered Global Notes

Transfers of beneficial interests in Registered Global Notes will be effected by Euroclear or Clearstream, Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate, indirect participants in such clearing systems acting on behalf of beneficial transferors and transferees of such interests. A beneficial interest in a Registered Global Note will, subject to compliance with all applicable legal and regulatory restrictions, be exchangeable for Registered Notes in definitive form or for a beneficial interest in another Registered Global Note only in the Specified Denominations set out in the applicable Pricing Supplement and only in accordance with the rules and operating procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be, and in accordance with the terms and conditions specified in the Trust Deed and the Agency Agreement.

2.2 Transfers of Registered Notes Generally

Registered Notes may not be exchanged for Bearer Notes and vice versa.

Upon the terms and subject to the conditions set forth in the Trust Deed and the Agency Agreement, a Definitive Registered Note may be transferred in whole or in part (in the Specified Denominations and provided, in the case of a transfer in part, that the amount not transferred is also a Specified Denomination). In order to effect any such transfer: (i) the holder or holders must (a) deliver the Definitive Registered Note for registration of the transfer of the Definitive Registered Note (or the relevant part of the Definitive Registered Note) at the specified office of the Registrar or any Transfer Agent, with the form of transfer endorsed on it (or such other form of transfer as may be obtained from the Registrar or any Transfer Agent) duly completed and executed by the holder or holders thereof and (b) complete and deposit such other documents, evidence and information (including, but not limited to, a Transfer Certificate (as applicable) as defined in the Agency Agreement) as may be required by the relevant Transfer Agent or the Registrar and (ii) the Registrar or, as the case may be, the relevant Transfer Agent being satisfied with the proof of title of the person making the request and subject to such regulations (the "Regulations") as may from time to time be prescribed (the initial such regulations being set out in Schedule 4 (Register and Transfer of Registered Notes) to the Agency Agreement). The Regulations may be changed by the Issuer, with the prior written approval of the Registrar and the Trustee or by the Registrar with the prior written approval of the Trustee. Subject as provided above, the Registrar or, as the case

may be, the relevant Transfer Agent will, within three business days (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar or, as the case may be, the relevant Transfer Agent is located) of the request (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations) authenticate and deliver at its specified office to the transferee or (at the risk of the transferee) send by mail to such address as the transferee may request, a new Definitive Registered Note of a like aggregate nominal amount to the Definitive Registered Note (or the relevant part of the Definitive Registered Note) transferred. In the case of the transfer of part only of a Definitive Registered Note, a new Definitive Registered Note in respect of the balance of the Definitive Registered Note not transferred will be so authenticated and delivered or (at the risk of the transferor) sent to the transferor.

2.3 Registration of Transfer upon Partial Redemption

In the event of a Registered Note in respect of which an election for partial redemption under Condition 7 (Redemption and purchase) has occurred the Issuer shall not be required to register the transfer of such Registered Note, or a part thereof.

2.4 Costs of Registration

Registration of transfers will be effected without charge by or on behalf of the Issuer, the Registrar or the relevant Transfer Agent, but upon payment by the transferee (or the giving of such indemnity by the transferee as the Registrar and/or the relevant Transfer Agent may reasonably require in advance of the registration of transfers) in respect of any tax or other governmental charges which may be imposed in relation to it provided that the Issuer shall not be responsible for any documentary stamp tax payable on the transfer effected in the Republic of India unless the Issuer is the counterparty directly liable for that documentary stamp tax.

3. STATUS OF THE NOTES AND GUARANTEE

3.1 Status of the Notes

The Notes and any related Receipts and Coupons are direct, unconditional and (subject to the provisions of Condition 4 (Negative Pledge)) unsecured obligations of the Issuer and (subject as provided above) rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors' rights and priority of claims.

3.2 Status of the Guarantee

The Guarantor has, in the Trust Deed, unconditionally and irrevocably guaranteed the due and punctual payment of all sums from time to time due and payable by the Issuer in respect of the Notes. This guarantee (the "Guarantee") constitutes direct, general, unconditional, unsubordinated and unsecured obligations of the Guarantor which will at all times rank at least pari passu with all other present and future unsecured and unsubordinated obligations of the Guarantor, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors' rights and priority of claims.

4. NEGATIVE PLEDGE

So long as the Notes remain outstanding (as defined in the Trust Deed):

(a) the Issuer will not create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest ("Security") upon the whole or any part of its undertaking, assets or revenue, present or future, to secure any International Investment Securities (as defined below), or to secure any guarantee or indemnity in respect of any International Investment Securities; and

(b) the Issuer will procure that no other person gives any guarantee of, or indemnity in respect of, any of the Issuer's International Investment Securities;

unless, at the same time or prior thereto, the Issuer's obligations under the Notes and the Trust Deed (a) are secured equally and rateably therewith to the satisfaction of the Trustee, or (b) have the benefit of such other security, guarantee, indemnity or other arrangement as the Trustee in its absolute discretion shall deem to be not materially less beneficial to the Noteholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders.

For the purposes of these Conditions, "International Investment Securities" means any present or future indebtedness in the form of, or represented by, bonds, debentures or other debt securities which are for the time being quoted, listed, ordinarily dealt in or traded on any stock exchange or over-the-counter market, in each case outside India, and having an original maturity of more than one year from its date of issue payable or optionally payable in a currency other than Rupees or which are denominated in Rupees and more than 50 per cent. of the aggregate principal amount of which is initially distributed outside India by or with the authority of the Issuer.

5. INTEREST

All interest payable on the Notes shall be subject to applicable laws including but not limited to the ECB Directions.

5.1 Interest on Fixed Rate Notes

Each Fixed Rate Note bears interest on its outstanding nominal amount (or, if it is a Partly Paid Note, the nominal amount paid up) from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrears on the Interest Payment Date(s) in each year up to (and including) the Maturity Date.

If the Notes are in definitive form, except as provided in the applicable Pricing Supplement, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Pricing Supplement, amount to the Broken Amount so specified.

As used in these Conditions, "Fixed Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.

Except in the case of Notes in definitive form where an applicable Fixed Coupon Amount or Broken Amount is specified in the applicable Pricing Supplement, interest is required to be calculated in respect of any period by applying the Rate of Interest to:

(a) in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Fixed Rate Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or

(b) in the case of Fixed Rate Notes in definitive form, the Calculation Amount;

and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding.

Each Fixed Rate Note shall have an interest rate which shall be in accordance with Indian regulatory requirements (including but not limited to the ECB Directions) or any specific approval received by the

Issuer from the RBI or designated authorised dealer category I bank appointed in accordance with the ECB Directions or any other regulatory authority.

"Day Count Fraction" means, in respect of the calculation of an amount of interest in accordance with this Condition 5.1:

(a) if "Actual/Actual (ICMA)" is specified in the applicable Pricing Supplement: in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the "Accrual Period") is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (A) the number of days in such Determination Period and (B) the number of Determination Dates (as specified in the applicable Pricing Supplement) that would occur in one calendar year; or in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:

(A) the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and

(B) the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year;

(b) if "30/360" is specified in the applicable Pricing Supplement, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360; or

(c) if "Actual/365 (Fixed)" is specified in the applicable Pricing Supplement, the actual number of days in the Accrual Period divided by 365.

In these Conditions:

"Determination Period" means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and

"sub-unit" means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent.

5.2 Interest on Floating Rate Notes and Index Linked Interest Notes

(a) Interest Payment Dates

Each Floating Rate Note and Index Linked Interest Note bears interest on its outstanding nominal amount (or, if it is a Partly Paid Note, the amount paid up) from (and including) the Interest Commencement Date and such interest will be payable in arrears on either: the Specified Interest Payment Date(s) in each year specified in the applicable Pricing Supplement; or if no Specified Interest Payment Date(s) is/are specified in the applicable Pricing Supplement, each date (each such date, together with each Specified Interest Payment Date, an "Interest Payment Date") which falls the

number of months or other period specified as the Specified Period in the applicable Pricing Supplement after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date.

Such interest will be payable in respect of each Interest Period. In these Conditions, "Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.

(b) Rate of Interest

The rate of interest payable from time to time in respect of Floating Rate Notes and Index Linked Interest Notes (the "Rate of Interest") will be determined in the manner specified in the applicable Pricing Supplement. The Rate of Interest shall comply with Indian regulatory requirements (including but not limited to the ECB Directions) or any specific approval received by the Issuer from the RBI or designated authorised dealer category I bank appointed in accordance with the ECB Directions or any other regulatory authority.

ISDA Determination for Floating Rate Notes

Where ISDA Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any). For the purposes of this sub-paragraph (b), "ISDA Rate" for an Interest Period means a rate equal to the Floating Rate that would be determined by the Calculation Agent (as stated in the applicable Pricing Supplement) under an interest rate swap transaction if the Calculation Agent (as stated in the applicable Pricing Supplement) were acting as Calculation Agent (as such term is defined in the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as of the Issue Date of the first Tranche of the Notes (the "ISDA Definitions") for that swap transaction under the terms of an agreement incorporating the ISDA Definitions, under which:

(A) the Floating Rate Option is as specified in the applicable Pricing Supplement;

(B) the Designated Maturity is a period specified in the applicable Pricing Supplement; and

For the purposes of this sub-paragraph (b), "Floating Rate", "Floating Rate Option", "Designated Maturity" and "Reset Date" have the meanings given to those terms in the ISDA Definitions.

Screen Rate Determination for Floating Rate Notes

Where Screen Rate Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either:

(A) if only one quotation is shown, the offered quotation; or

(B) if more than one quotation is shown, the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations,

(in each case expressed as a percentage rate per annum) for the Reference Rate (being either LIBOR or EURIBOR as specified in the applicable Pricing Supplement) which appears or appear, as the case may be, on the Relevant Screen Page (or such replacement page on that service which displays the information) as of 11.00 a.m. (London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date in question plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any), all as determined by the Principal Paying Agent or such other person specified in the applicable Pricing Supplement. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Principal Paying Agent or such other person specified in the applicable Pricing Supplement for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.

If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Pricing Supplement as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Pricing Supplement.

The Agency Agreement contains provisions for determining the Rate of Interest in the event that the Relevant Screen Page is not available or if, in the case of (A) above, no such offered quotation appears or, in the case of (B) above, fewer than three such offered quotations appear, in each case as of the time specified in the preceding paragraph.

If the applicable Pricing Supplement specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest. Unless otherwise stated in the applicable Pricing Supplement, the Minimum Rate of Interest shall be deemed to be zero.

If the applicable Pricing Supplement specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.

The Rate of Interest shall not exceed the rate of interest as specified under the ECB Directions or any specific approval received by the Issuer from the RBI or designated authorised dealer category I bank appointed in accordance with the ECB Directions or any other regulatory authority.

(d) Determination of Rate of Interest and Calculation of Interest Amounts

The Principal Paying Agent or such other person specified in the applicable Pricing Supplement, in the case of Floating Rate Notes, and the Calculation Agent, in the case of Index Linked Interest Notes, will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case of Index Linked Interest Notes, the Calculation Agent will notify the Principal Paying Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same. If required to be calculated by it, the Principal Paying Agent shall cause the Final Redemption Amount, Early Redemption Amount, Optional Redemption Amount or any Instalment Amount to be notified to the Trustee, the Issuer and each of the Paying Agents

and notice thereof to be published on behalf of, and at the expense of, the Issuer to the Noteholders in accordance with Condition 14 (Notices) and, if the Notes are listed on a stock exchange and the rules of such stock exchange or other relevant authority so require, the Issuer shall notify the same to such stock exchange or other relevant authority as soon as practicable after calculating the same.

The Principal Paying Agent or, as the case may be, the Calculation Agent will calculate the amount of interest (the "Interest Amount") payable on the Floating Rate Notes or Index Linked Interest Notes for the relevant Interest Period by applying the Rate of Interest to:

(A) in the case of Floating Rate Notes or Index Linked Interest Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or

(B) in the case of Floating Rate Notes or Index Linked Interest Notes in definitive form, the Calculation Amount; and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note or an Index Linked Interest Note in definitive form is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding.

Each Floating Rate Note or Index Linked Interest Note shall have an interest rate which shall be in accordance with Indian regulatory requirements (including but not limited to the ECB Directions, if applicable) or any specific approval received by the Issuer from the RBI or designated authorised dealer category I bank appointed in accordance with the ECB Directions or any other regulatory authority.

"Day Count Fraction" means, in respect of the calculation of an amount of interest in accordance with this Condition 5.2:

(a) if "Actual/Actual (ISDA)" or "Actual/Actual" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (i) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (ii) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365);

(b) if "Actual/365 (Fixed)" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365;

(c) if "Actual/365 (Sterling)" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;

(d) if "Actual/360" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 360;

(e) if "30/360", "360/360" or "Bond Basis" is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

[360 x (Y2 Y1)][30 x (M2 M1)](D2 D1) Day CountFraction  360

where:

"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls;

"Y2" is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

"M2" is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

"D1" is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and

"D2" is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30;

(f) if "30E/360" or "Eurobond Basis" is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

[360 x (Y2 Y1)][30 x (M2 M1)](D2 D1) Day CountFraction  360

where:

"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls;

"Y2" is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

"M2" is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

"D1" is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D1 will be 30; and

"D2" is the calendar day, expressed as a number, immediately following the last day included

in the Interest Period, unless such number would be 31, in which case D2 will be 30; and

(g) if "30E/360 (ISDA)" is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

[360 x (Y2 Y1)][30 x (M2 M1)](D2 D1) Day CountFraction  360

where:

"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls;

"Y2" is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

"M2" is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

"D1" is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and

"D2" is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30.

(e) Notification of Rate of Interest and Interest Amounts

The Principal Paying Agent or, as the case may be, the Calculation Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer and the Trustee and the Issuer shall notify the same to any stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and notice thereof to be published in accordance with Condition 14 (Notices) as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified by the Issuer to each stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and to the Noteholders in accordance with Condition 14 (Notices). For the purposes of this paragraph (e), the expression "London Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in London.

(f) Determination or Calculation by Trustee

If for any reason at any relevant time the Principal Paying Agent or, as the case may be, the Calculation Agent defaults in its obligation to determine the Rate of Interest or the Principal Paying Agent defaults in its obligation to calculate any Interest Amount in accordance with sub-paragraph (b) above or as otherwise specified in the applicable Pricing Supplement, as the case may be, and in each case in accordance with paragraph (d) above, the Trustee (or an agent appointed by it at the expense of the Issuer) shall determine the Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition 5, but subject always to any Minimum Rate of Interest or Maximum Rate of Interest specified in the applicable Pricing Supplement), it shall deem fair and reasonable in all the circumstances or, as the case may be, the Trustee (or an agent

appointed by it at the expense of the Issuer) shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in all the circumstances and each such determination or calculation shall be deemed to have been made by the Principal Paying Agent or the Calculation Agent, as applicable.

(g) Certificates to be Final

All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 5, whether by the Principal Paying Agent or, if applicable, the Calculation Agent or the Trustee, shall (in the absence of wilful default, gross negligence or fraud) be binding on the Issuer, the Guarantor, the Trustee, the Principal Paying Agent, the Registrar, the Calculation Agent (if applicable), the other Paying Agents and all Noteholders, Receiptholders and Couponholders and (in the absence as aforesaid) no liability to the Issuer, the Guarantor, the Noteholders, the Receiptholders or the Couponholders shall attach to the Principal Paying Agent or, if applicable, the Calculation Agent or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.

(h) Linear Interpolation

Where Linear Interpolation is specified as applicable in respect of an Interest Period in the applicable Pricing Supplement, the Rate of Interest for such Interest Period shall be calculated by the Calculation Agent by straight line linear interpolation by reference to two rates based on the relevant Reference Rate (where Screen Rate Determination is specified as applicable in the applicable Pricing Supplement) or the relevant Floating Rate Option (where ISDA Determination is specified as applicable in the applicable Pricing Supplement), one of which shall be determined as if the Designated Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Period and the other of which shall be determined as if the Designated Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Period provided however that if there is no rate available for a period of time next shorter or, as the case may be, next longer, then the Calculation Agent shall determine such rate at such time and by reference to such sources as it determines appropriate.

5.3 Interest on Dual Currency Interest Notes

The rate or amount of interest payable in respect of Dual Currency Interest Notes shall be determined in the manner specified in the applicable Pricing Supplement.

Each Dual Currency Interest Note shall have an interest rate which shall be in accordance with Indian regulatory requirements (including but not limited to the ECB Directions) or any specific approval received by the Issuer from the RBI or designated authorised dealer category I bank appointed in accordance with the ECB Directions or any other regulatory authority.

5.4 Interest on Partly Paid Notes

In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the applicable Pricing Supplement.

Each Partly Paid Note shall have an interest rate which shall be in accordance with Indian regulatory requirements (including but not limited to the ECB Directions) or any specific approval received by the Issuer from the RBI or designated authorised dealer category I bank appointed in accordance with the ECB Directions or any other regulatory authority.

5.5 Accrual of Interest

Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from and including the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue until whichever is the earlier of:

(a) the date on which all amounts due in respect of such Note have been paid; and

(b) as provided in the Trust Deed.

5.6 Definitions

In these Conditions, if a Business Day Convention is specified in the applicable Pricing Supplement and (x) if there is no numerically corresponding day on the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is:

(a) in any case where Specified Periods are specified in accordance with Condition 0, the Floating Rate Convention, such Interest Payment Date (a) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (ii) below shall apply mutatis mutandis or (b) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (i) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (ii) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date occurred; or

(b) the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or

(c) the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or

(d) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.

If "Unadjusted" is specified in the applicable Pricing Supplement, the number of days in each Interest Period shall be calculated as if the Interest Period End Date were not subject to adjustment in accordance with the Business Day Convention specified in the applicable Pricing Supplement.

If "Adjusted" is specified in the applicable Pricing Supplement, the number of days in each Interest Period shall be calculated as if the Interest Period End Date is subject to adjustment in line with the corresponding Interest Payment Date in accordance with the Business Day Convention specified in the applicable Pricing Supplement.

In these Conditions,

"Business Day" means a day which is both:

(a) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in each Additional Business Centre specified in the applicable Pricing Supplement; and

(b) either (i) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for

general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than London and any Additional Business Centre and which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively) or (ii) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System or any successor system (the "TARGET2 System") is open.

"Interest Period End Date" means each Interest Payment Date unless otherwise specified in the applicable Pricing Supplement.

6. PAYMENTS

6.1 Method of payment

Subject as provided below:

(a) payments in (i) a Specified Currency other than euro or (ii) the Synthetic Rupee denominated Notes Settlement Currency will be made by credit or transfer to an account in the relevant Specified Currency or Synthetic Rupee denominated Notes Settlement Currency, respectively maintained by the payee with a bank in the principal financial centre of the country of such Specified Currency or Synthetic Rupee denominated Notes Settlement Currency, respectively (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland respectively); and

(b) payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee; and

(c) payments in respect of Synthetic Rupee denominated Notes shall be determined by the Calculation Agent on the Rate Fixing Date in respect of an Interest Payment Date, the Maturity Date or as otherwise required.

Payments will be subject in all cases to (i) any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 8 (Taxation) and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or any treaty, law, regulation or guidance implementing an intergovernmental approach thereto.

6.2 Presentation of definitive Bearer Notes, Receipts and Coupons

Payments of principal in respect of Definitive Bearer Notes will (subject as provided below) be made in the manner provided in Condition 5.1 (Interest on Fixed Rate Notes) only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Definitive Bearer Notes, and payments of interest in respect of Definitive Bearer Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America and its possessions).

Payments of Instalment Amounts (if any) in respect of Definitive Bearer Notes, other than the final instalment, will (subject as provided below) be made in the manner provided in Condition 5.1 (Interest on Fixed Rate Notes) against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Receipt in accordance with the preceding paragraph. Payment of the final instalment will be made in the manner provided in Condition 5.1 (Interest on Fixed Rate Notes) only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Bearer Note in accordance with the preceding paragraph. Each Receipt must be presented for payment of the relevant instalment together with the Definitive Bearer Note to which it appertains. Receipts presented without the Definitive Bearer Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any Definitive

Bearer Note becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof.

Fixed Rate Notes in definitive bearer form (other than Dual Currency Notes, Index Linked Interest Notes or Long Maturity Notes (as defined below)) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 8 (Taxation)) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 9 (Prescription)) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter.

Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof.

Upon the date on which any Floating Rate Note, Dual Currency Note, Index Linked Interest Note or Long Maturity Note in definitive form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof. A "Long Maturity Note" is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be paid after that date is less than the nominal amount of such Note.

If the due date for redemption of any Definitive Bearer Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant Definitive Bearer Note.

6.3 Payments in respect of Bearer Global Notes

Payments of principal and interest (if any) in respect of Bearer Notes represented by any Bearer Global Note will (subject as provided below) be made in the manner specified above in relation to Definitive Bearer Notes or otherwise in the manner specified in the relevant Bearer Global Note against presentation or surrender of such Bearer Global Note at the specified office of any Paying Agent outside the United States. A record of each payment made against presentation or surrender of any Bearer Global Note, distinguishing between any payment of principal and any payment of interest, will be made on such Bearer Global Note by the Paying Agent to which it was presented and such record shall be prima facie evidence that the payment in question has been made.

6.4 Payments in respect of Registered Notes

Payments of principal (other than instalments of principal prior to the final instalment) in respect of each Registered Note (whether or not in global form) will be made against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the Registered Note at the specified office of the Registrar or any of the Paying Agents. Such payments will be made by transfer to the Designated Account (as defined below) of the holder (or the first named of joint holders) of the Registered Note appearing in the register of holders of the Registered Notes maintained by the Registrar (the "Register") (i) where in global form, at the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are open for business) before the relevant due date, and (ii) where in definitive form, at the close of business on the third business day (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar is located) before the relevant due date. For these purposes, "Designated Account" means the account (which, in the case of a payment in Japanese yen to a non-resident of Japan, shall be a non-resident account) maintained by a holder with a Designated Bank and identified as such in the Register and "Designated Bank" means (in the case of payment in a Specified Currency other than euro) a bank in the

principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively) and (in the case of a payment in euro) any bank which processes payments in euro.

Payments of interest and payments of instalments of principal (other than the final instalment) in respect of each Registered Note (whether or not in global form) will be made by transfer on the due date to the Designated Account of the holder (or the first named of joint holders) of the Registered Note appearing in the Register (i) where in global form, at the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are open for business) before the relevant due date, and (ii) where in definitive form, at the close of business on the fifteenth day (whether or not such fifteenth day is a Business Day) before the relevant due date (the "Record Date"). Payment of the interest due in respect of each Registered Note on redemption and the final instalment of principal will be made in the same manner as payment of the principal amount of such Registered Note.

No commissions or expenses shall be charged to such holders by the Registrar in respect of any payments of principal or interest in respect of the Registered Notes.

None of the Issuer, the Guarantor, the Trustee or any Agent will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

6.5 General provisions applicable to payments

The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the Issuer or, as the case may be, the Guarantor will be discharged by payment to, or to the order of, the holder of such Global Note in respect of each amount so paid. Each of the persons shown in the records of Euroclear or Clearstream, Luxembourg as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer or, as the case may be, the Guarantor in respect of such Global Note to, or to the order of, the holder of such Global Note.

So long as the Global Note is held on behalf of Euroclear, Clearstream or any other clearing system, each payment in respect of the Global Note will be made to the bearer (in the case of a Bearer Global Note) or the person shown as the holder in the Register at the close of business of the relevant clearing system on the Clearing System Business Date before the due date for such payments (in the case of a Registered Global Note), where "Clearing System Business Day" means a weekday (Monday to Friday, inclusive) except 25 December and 1 January.

Notwithstanding the foregoing provisions of this Condition 6, if any amount of principal and/or interest in respect of Bearer Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States only if:

(a) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such specified offices outside the United States of the full amount of principal and interest on the Bearer Notes in the manner provided above when due;

(b) payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and

(c) such payment is then permitted under United States law without involving, in the opinion of the Issuer and the Guarantor, adverse tax consequences to the Issuer or the Guarantor.

6.6 Payment Day

If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. In these Conditions, "Payment Day" means any day which (subject to Condition 10 (Events of Default and Enforcement)) is:

(a) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in:

(i) in the case of Notes in definitive form only, the relevant place of presentation;

(ii) any Additional Financial Centre (other than TARGET2 System) specified in the applicable Pricing Supplement;

(iii) if TARGET2 System is specified as an Additional Financial Centre in the applicable Pricing Supplement, a day on which the TARGET2 System (or any successor system) is open; and

(b) either (A) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland respectively) or (B) in relation to any sum payable in euro, a day on which the TARGET2 System (or any successor system) is open.

6.7 Interpretation of principal and interest

Any reference in these Conditions to principal in respect of the Notes shall be deemed to include, as applicable:

(a) any additional amounts which may be payable with respect to principal under Condition 8 (Taxation) or under any undertaking or covenant given in addition thereto, or in substitution therefor, pursuant to the Trust Deed;

(b) the Final Redemption Amount of the Notes;

(d) the Optional Redemption Amount(s) (if any) of the Notes;

(e) in relation to Notes redeemable in instalments, the Instalment Amounts;

(f) in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 7.7 (Early Redemption Amounts)); and

(g) any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes.

Any reference in these Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 8 (Taxation) or under any undertaking or covenant given in addition thereto, or in substitution therefor, pursuant to the Trust Deed.

6.8 Synthetic Rupee denominated Notes

This Condition 6.8 is only applicable to Synthetic Rupee denominated Notes and in addition to the provisions of Conditions 6.1 (Method of payment) to 6.7 (Interpretation of principal and interest) above.

(a) If a Price Source Disruption Event occurs on the Scheduled Rate Fixing Date, then the Reference Rate for such Rate Fixing Date shall be determined by the Calculation Agent in accordance with the applicable price source disruption fallbacks set out in Condition 6.8(d).

(b) If a Scheduled Rate Fixing Date is adjusted for an Unscheduled Holiday or if Valuation Postponement applies, then the Interest Payment Date, the Maturity Date or other applicable date relating to such Scheduled Rate Fixing Date shall be two (2) Payment Business Days after the date on which the Reference Rate for such Interest Payment Date, the Maturity Date or other applicable date is determined.

(c) If any Interest Payment Date, the Maturity Date or other applicable date is adjusted in accordance with Condition 6.8(b), then such adjustment (and the corresponding payment obligations to be made on such dates) shall apply only to such Interest Payment Date, the Maturity Date or other applicable date, as applicable and no further adjustment shall apply to the amount of interest payable.

(d) In the event of a Price Source Disruption Event, the Calculation Agent shall apply each of the following price source disruption fallbacks (the "Price Source Disruption Fallbacks") for the determination of the Reference Rate, in the following order, until the Reference Rate can be determined:

(i) first, Valuation Postponement;

(ii) second, Fallback Reference Price;

(iii) third, Fallback Survey Valuation Postponement; and

(iv) last, determination of Reference Rate by the Calculation Agent in accordance with the provisions of clause 8.2 (Interest determination) of the Agency Agreement.

(e) In the event the Scheduled Rate Fixing Date is postponed due to the occurrence of an Unscheduled Holiday, and if the Rate Fixing Date has not occurred on or before the 14th calendar day after the Scheduled Rate Fixing Date (any such period being a "Deferral Period"), then the next day after the Deferral Period that would have been a Fixing Business Day but for the Unscheduled Holiday shall be deemed to be the Rate Fixing Date.

(f) For the purposes of this Condition 6.8:

"Calculation Agent" means the Principal Paying Agent or such other Person specified in the relevant Pricing Supplement as the party responsible for calculating the Rate(s) of Interest, Interest Amount(s), Reference Rate and/or such other amount(s) as may be specified in the relevant Pricing Supplement;

"Cumulative Events" means, unless otherwise provided in the applicable Pricing Supplement, the total number of consecutive calendar days during which either (i) valuation is deferred due to an Unscheduled Holiday, or (ii) a Valuation Postponement shall occur (or any combination of (i) and (ii)), exceed 14 consecutive calendar days in the aggregate. Accordingly, (x) if, upon the lapse of any such 14 calendar day period, an Unscheduled Holiday shall have occurred or be continuing on the day following such period that otherwise would have been a Fixing Business Day, then such day shall be deemed to be a Rate Fixing Date, and (y) if, upon the lapse of any such 14 calendar day period, a Price Source Disruption Event shall have occurred or be continuing on the day following such period on which the Reference Rate otherwise would be determined, then Valuation Postponement shall not apply

and the Reference Rate shall be determined in accordance with the next Price Source Disruption Fallback;

"Fallback Reference Price" has the meaning given in the relevant Pricing Supplement;

"Fallback Survey Valuation Postponement" means that, in the event that the Fallback Reference Price is not available on or before the third Fixing Business Day (or the day that would have been a Fixing Business Day but for an Unscheduled Holiday) succeeding the end of either (i) Valuation Postponement due to a Price Source Disruption Event, (ii) Deferral Period for Unscheduled Holiday, or (iii) Cumulative Events, as applicable, then the Reference Rate will be determined in accordance with the next applicable Price Source Disruption Fallback on such day (which will be deemed to be the applicable Rate Fixing Date). For the avoidance of doubt, Cumulative Events, if applicable, do not preclude postponement of valuation in accordance with this provision;

"Fixing Business Days" means any day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in Mumbai;

"Maximum Days of Postponement" means 14 calendar days;

"Price Source Disruption Event" means it becomes impossible to obtain the Reference Rate on a Rate Fixing Date;

"Rate Fixing Date" means the Scheduled Rate Fixing Date, subject to Valuation Postponement;

"Rate Fixing Day" means any day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in Mumbai and London;

"Reference Rate" means, unless otherwise provided in the applicable Pricing Supplement, the rate used on each Rate Fixing Date which will be the spot rate for conversion between the Synthetic Rupee denominated Notes Settlement Currency and Indian rupees, expressed as the amount of Indian rupees per one undivided unit of the Synthetic Rupee denominated Notes Settlement Currency, for settlement in two Fixing Business Days, reported by the Reserve Bank of India, which is displayed on Reuters page "INRREF=FBIL" (or any successor page) at approximately 1:30pm, Mumbai time, on each Rate Fixing Date. If a Price Source Disruption Event occurs on the Scheduled Rate Fixing Date, then the Reference Rate for such Rate Fixing Date shall be determined by the Calculation Agent in accordance with Condition 6.8(d);

"Scheduled Rate Fixing Date" means the date which is two Fixing Business Days prior to the Interest Payment Date or the Maturity Date or such other date on which an amount in respect of the Notes is due and payable. If the Scheduled Rate Fixing Date is an Unscheduled Holiday, the Rate Fixing Date shall be the next following relevant Fixing Business Day, subject to the Deferral Period for Unscheduled Holiday set out in Condition 6.8(e);

"Synthetic Rupee denominated Notes" means Bearer Notes or Registered Notes (as the case may be) in the Specified Currency of Rupees, provided that all payments in respect of such Notes will be made in the Synthetic Rupee denominated Notes Settlement Currency;

"Synthetic Rupee denominated Notes Settlement Currency" means any currency other than Rupees specified in the relevant Pricing Supplement and which is acceptable to the Trustee and the Agents;

"Unscheduled Holiday" means a day that is not a Fixing Business Day and the market was not aware of such fact (by means of a public announcement or by reference to other publicly available information) until a time later than 9:00 a.m. local time in Mumbai, two Fixing Business Days prior to the relevant Rate Fixing Date; and

"Valuation Postponement" means that the Reference Rate will be determined on the Fixing Business Day first succeeding the day on which the Price Source Disruption Event ceases to exist, unless the Price Source Disruption Event continues to exist (measured from the date that, but for the occurrence of the Price Source Disruption Event, would have been the Rate Fixing Date) for a consecutive number of calendar days equal to the Maximum Days of Postponement. In such event, the Reference Rate will be determined on the next Fixing Business Day after 14 consecutive calendar days (which will, subject to the provisions relating to Fallback Survey Valuation Postponement, be deemed to be the applicable Rate Fixing Date) in accordance with the next applicable Price Source Disruption Fallback.

7. REDEMPTION AND PURCHASE

7.1 Redemption at Maturity

Unless previously redeemed or purchased and cancelled as specified below, each Note (including each Index Linked Redemption Note and Dual Currency Redemption Note) will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Pricing Supplement in the relevant Specified Currency on the Maturity Date.

7.2 Redemption for Tax Reasons (Issuer Tax Call)

The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if the Notes are neither a Floating Rate Note, an Index Linked Interest Note nor a Dual Currency Note) or on any Interest Payment Date (if the Notes are either a Floating Rate Note, an Index Linked Interest Note or a Dual Currency Interest Note), on giving not less than 30 nor more than 60 days' notice to the Trustee and the Principal Paying Agent and, in accordance with Condition 14 (Notices), the Noteholders (which notice shall be irrevocable), if the Issuer satisfies the Trustee immediately before the giving of such notice that:

(a) on the occasion of the next payment due under the Notes, the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 8 (Taxation) or the Guarantor would be unable for reasons outside its control to procure payment by the Issuer and in making payments itself would be required to pay such additional amounts, in each case as a result of any change in, or amendment to, the laws or regulations of a Tax Jurisdiction (as defined in Condition 8 (Taxation)) or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Notes for such Series; and

(b) such obligation cannot be avoided by the Issuer or, as the case may be, the Guarantor taking reasonable measures available to it,

provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due.

Prior to the publication of any notice of redemption pursuant to this Condition 7, the Issuer or, as the case may be, the Guarantor shall deliver to the Trustee to make available at its specified office (during the hours of 9:00am to 3:00pm (Hong Kong time), Mondays to Fridays (except public holidays)) to the Noteholders (1) a certificate signed by the Chief Executive Officer of the Issuer or, as the case may be, an authorised signatory of the Guarantor stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and (2) an opinion of independent legal advisers of recognised standing to the effect that the Issuer or, as the case may be, the Guarantor has or will become obliged to pay such additional amounts as a result of such change or amendment and the Trustee shall be entitled to accept the certificate as sufficient evidence of the satisfaction of the

conditions precedent set out above, in which event it shall be conclusive and binding on the Noteholders, the Receiptholders and the Couponholders.

Notes redeemed pursuant to this Condition 7.2 will be redeemed at their Early Redemption Amount referred to in Condition 7.7 (Early Redemption Amounts) together (if appropriate) with interest accrued to (but excluding) the date of redemption.

ECB Directions require the Issuer to obtain the prior approval of the RBI or designated authorised dealer category I bank appointed in accordance with the ECB Directions, as the case may be, before providing notice for or effecting such a redemption in breach of the minimum maturity requirements as set out in the ECB Directions and such approval may not be forthcoming.

7.3 Redemption at the option of the Issuer (Issuer Call)

If Issuer Call is specified as being applicable in the applicable Pricing Supplement, the Issuer may, having given not less than the minimum period (which shall not be less than 5 Business Days) nor more than the maximum period of notice specified in applicable Pricing Supplement to the Noteholders in accordance with Condition 14 (Notices) (which notice shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in the applicable Pricing Supplement together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be specified in the applicable Pricing Supplement. The Optional Redemption Amount will be the specified percentage of the nominal amount of the Notes stated in the applicable Pricing Supplement.

In the case of a partial redemption of Notes, the Notes to be redeemed ("Redeemed Notes") will (i) in the case of Redeemed Notes represented by definitive Notes, be selected individually by lot, not more than 30 days prior to the date fixed for redemption and (ii) in the case of Redeemed Notes represented by a Global Note, be selected in accordance with the rules of Euroclear and/or Clearstream, Luxembourg. In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 14 (Notices) not less than 15 days prior to the date fixed for redemption.

ECB Directions may require the Issuer to obtain the prior approval of the RBI or designated authorised dealer category I bank appointed in accordance with the ECB Directions as the case may be, before providing notice for or effecting such a redemption in breach of the minimum maturity requirements as set out in the ECB Directions and such approval may not be forthcoming.

7.4 Redemption at the option of the Noteholders (Investor Put)

If Investor Put is specified as being applicable in the applicable Pricing Supplement, upon the holder of any Note giving to the Issuer in accordance with Condition 14 (Notices) not less than the minimum period (which shall not be less than 15 Business Days) nor more than the maximum period of notice specified in the applicable Pricing Supplement, the Issuer will, upon the expiry of such notice, redeem such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date.

To exercise the right to require redemption of this Note the holder of this Note must, if this Note is in definitive form and held outside Euroclear and Clearstream, Luxembourg, deliver, at the specified office of any Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes) between 9:00am and 3:00pm (Hong Kong time) on any weekday (Saturdays and public holidays exempted) of such Paying Agent or, as the case may be, the Registrar falling within the notice period, a duly completed and signed notice of exercise in the form (for the time being current) obtainable at the business hours aforementioned from the specified office of any Paying Agent or, as the case may be, the Registrar (a "Put Notice") and in which the holder must specify a bank account to which payment is to be made under this Condition 7 and, in the case of Registered Notes, the nominal amount thereof to be redeemed and, if less than the full nominal amount of the Registered Notes so surrendered is to be redeemed, an address to which a new Registered Note in respect of the balance of such Registered Notes is to be sent subject to and in accordance with the provisions of Condition 2.2 (Transfers of Registered Notes Generally). If this Note is in definitive bearer form, the Put Notice must be

accompanied by this Note or evidence satisfactory to the Paying Agent concerned that this Note will, following delivery of the Put Notice, be held to its order or under its control.

If this Note is represented by a Global Note or is in definitive form and held through Euroclear or Clearstream, Luxembourg, to exercise the right to require redemption of this Note the holder of this Note must, within the notice period, give notice to the Principal Paying Agent of such exercise in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg (which may include notice being given on his instruction by Euroclear, Clearstream, Luxembourg or any common depositary for them to the Principal Paying Agent by electronic means) in a form acceptable to Euroclear and Clearstream, Luxembourg from time to time.

Any Put Notice or other notice given in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg by a holder of any Note pursuant to this Condition 7.4 shall be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and the Trustee has declared the Notes to be due and payable pursuant to Condition 10 (Events of Default and Enforcement), in which event such holder, at its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this Condition 7.4.

Any early redemption of the Notes in breach of the minimum maturity requirements as set out in the ECB Directions will require prior approval of the RBI or designated authorised dealer category I bank appointed in accordance with the ECB Directions and such approval may not be forthcoming.

7.5 Redemption upon Change of Control (Investor Put upon Change of Control)

Within 15 days following any Change in Control, the Issuer or the Guarantor will give notice to the Noteholders, the Trustee and the Principal Paying Agent in accordance with Condition 14 (Notices) stating that a Change in Control has occurred.

Following the occurrence of a Change in Control, each Noteholder will have the right to require the Issuer to redeem any of the Notes held by such Noteholder at their nominal amount outstanding together with interest (including additional amounts pursuant to Condition 8 (Taxation) if any) accrued to (but excluding) the date of redemption.

To exercise the right to require redemption of any Notes, the holder of the Notes must deliver such Notes at the specified office of any Paying Agent, in the case of Bearer Notes, or of any Transfer Agent or the Registrar, in the case of Registered Notes, during normal business hours on any business day (being, in relation to any place, a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in that place) at the place of such specified office falling within the notice period, accompanied by a duly signed and completed notice of exercise in the form (for the time being current and which may, if this Note is held in a clearing system, be any form acceptable to the clearing system delivered in a manner acceptable to the clearing system) obtainable on any business day as aforementioned from the specified office of any Paying Agent, Transfer Agent or the Registrar (a "Put Notice") and in which the holder must specify a bank account to which payment is to be made under this paragraph accompanied by such Notes or evidence satisfactory to the relevant Paying Agent, Transfer Agent or the Registrar, as the case may be, that such Notes will, following the delivery of the Put Notice, be held to its order or under its control.

Subject to the receipt of RBI approvals, the Issuer is obliged to redeem any such Notes on the first business day in the place where such redemption notice is deposited falling 30 days after such deposit.

A Put Notice given by a holder of any Note shall be irrevocable and no Note deposited with a Paying Agent, Transfer Agent or the Registrar pursuant to this Condition 7.5 may be withdrawn without the prior written consent of the Issuer.

The right of any Noteholder to require the Issuer to redeem any Note upon a Change in Control is not conditional upon a Change in Control notice having been given by the Issuer, but will, if such notice is given by the Issuer, be exercised by such Noteholder within 45 days of the giving of such notice.

A "Change in Control" will have occurred if the State Government will at any time cease to have Control of the Issuer.

In this Condition 7.5:

"Control" means the right to appoint and/or remove all or the majority of the members of the Issuer's Board of directors or other governing body, whether obtained directly or indirectly, and whether obtained by contract or otherwise.

7.6 Redemption upon Change of Law (Investor Put upon Change of Law)

Within 15 days following any Change in Law, the Issuer or the Guarantor will give notice to the Noteholders, the Trustee and the Principal Paying Agent in accordance with Condition 14 (Notices) stating that a Change in Law has occurred.

Following the occurrence of a Change in Law, each Noteholder will have the right to require the Issuer to redeem any of the Notes held by such Noteholder at their nominal amount outstanding together with interest (including additional amounts pursuant to Condition 8 (Taxation) if any) accrued to (but excluding) the date of redemption.

To exercise the right to require redemption of any Notes, the holder of the Notes must deliver such Notes at the specified office of any Paying Agent, in the case of Bearer Notes, or of any Transfer Agent or the Registrar, in the case of Registered Notes, during normal business hours on any business day (being, in relation to any place, a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in that place) at the place of such specified office falling within the notice period, accompanied by a duly signed and completed Put Notice and in which the holder must specify a bank account to which payment is to be made under this paragraph accompanied by such Notes or evidence satisfactory to the relevant Paying Agent, Transfer Agent or the Registrar, as the case may be, that such Notes will, following the delivery of the Put Notice, be held to its order or under its control.

A Put Notice given by a holder of any Note shall be irrevocable and no Note deposited with a Paying Agent, Transfer Agent or the Registrar pursuant to this Condition 7.6 may be withdrawn without the prior written consent of the Issuer.

The right of any Noteholder to require the Issuer to redeem any Note upon a Change in Law is not conditional upon a Change in Law notice having been given by the Issuer, but will, if such notice is given by the Issuer, be exercised by such Noteholder within 45 days of the giving of such notice.

A "Change in Law" will have occurred if there is any amendment to the KIIF Act that could have a Material Adverse Effect.

In this Condition 7.6:

"Material Adverse Effect" means a material adverse effect on:

(a) the business, operations, property, condition (financial or otherwise) or prospects of the Issuer or the Guarantor; or

(b) the ability of the Issuer or the Guarantor to perform its obligations under the Transaction Documents; or

(d) the rights or remedies of any Noteholder under any of the Transaction Documents;.

7.7 Early Redemption Amounts

For the purpose of Conditions 7.2 (Redemption for Tax Reasons (Issuer Tax Call))), 7.5 (Redemption upon Change of Control (Investor Put upon Change of Control)), 7.6 (Redemption upon Change of Law (Investor Put upon Change of Law) and Condition 10 (Events of Default and Enforcement), each Note will be redeemed at its Early Redemption Amount calculated as follows:

(a) in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof;

(b) in the case of a Note (other than a Zero Coupon Note but including an Instalment Note and Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Note is denominated, at the amount specified in, or determined in the manner specified in, the applicable Pricing Supplement or, if no such amount or manner is so specified in the applicable Pricing Supplement, at its nominal amount; or

(c) in the case of a Zero Coupon Note, at an amount (the "Amortised Face Amount") calculated in accordance with the following formula:

Early Redemption Amount = RP x (1 + AY)y

where:

"RP" means the Reference Price;

"AY" means the Accrual Yield expressed as a decimal; and

"y is the Day Count Fraction specified in the applicable Pricing Supplement which will be either (i) 30/360 (in which case the numerator will be equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator will be 360) or (ii) Actual/360 (in which case the numerator will be equal to the actual number of days from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator will be 360) or (iii) Actual/365 (in which case the numerator will be equal to the actual number of days from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator will be 365), or on such other calculation basis as may be specified in the applicable Pricing Supplement.

7.8 Instalments

Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates specified in the applicable Pricing Supplement. In the case of early redemption, the Early Redemption Amount will be determined pursuant to Condition 7.7 (Early Redemption Amounts).

7.9 Partly Paid Notes

Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition 7 and the applicable Pricing Supplement.

7.10 Purchases

The Issuer, or the Guarantor may at any time purchase Notes (provided that, in the case of definitive Bearer Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise subject to applicable laws. Such Notes may be held, reissued, resold or, at the option of the Issuer or the Guarantor surrendered to any Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes) for cancellation.

7.11 Cancellation

All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts, Coupons and Talons (if any) attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and any Notes purchased and cancelled pursuant to Condition 7.10 (Purchases) (together with all unmatured Receipts, Coupons and Talons (if any) cancelled therewith) shall be forwarded to the Principal Paying Agent (which shall notify the Registrar of such cancelled Notes in the case of Registered Notes) and may not be reissued or resold.

7.12 Late payment on Zero Coupon Notes

If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to Condition 7.1 (Redemption at Maturity), 7.2 (Redemption for Tax Reasons (Issuer Tax Call)), 7.5 (Redemption upon Change of Control (Investor Put upon Change of Control)) or 7.6 (Redemption upon Change of Law (Investor Put upon Change of Law) or upon its becoming due and repayable as provided in Condition 10 (Events of Default and Enforcement) is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in Condition 7.7 (Early Redemption Amounts) as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of:

(a) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and

(b) five days after the date on which the full amount of the moneys payable in respect of such Zero Coupon Note has been received by the Trustee or the Principal Paying Agent and notice to that effect has been given to the Noteholders in accordance with Condition 14 (Notices).

7.13 No verification by Trustee

Neither the Trustee nor any of the Agents shall be responsible for calculating or verifying the calculations of any amount payable under any notice of redemption and shall not be liable to the Noteholders or any other person for not doing so.

8. TAXATION

8.1 Payment without Withholding

All payments of principal and interest (including, for the avoidance of doubt, the difference between the issue price of the Notes and the final redemption price of the Notes, if applicable) in respect of the Notes, Receipts and Coupons by the Issuer will be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature ("Taxes") imposed or levied by or on behalf of any Tax Jurisdiction unless such withholding or deduction is required by law. In such event, the Issuer or, as the case may be, the Guarantor will pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes, Receipts or Coupons after such withholding or deduction shall equal the respective amounts of principal and interest (including, for the avoidance of doubt, the difference between the issue price of the Notes and the final redemption price of the Notes, if applicable) which would otherwise have been receivable in respect of the Notes, Receipts or Coupons, as the case may be, in the absence of such withholding or deduction (the "Additional Amounts") except that no such Additional Amounts shall be payable with respect to any Note, Receipt or Coupon:

(a) to a holder who is liable for such taxes or duties in respect of such Note, Receipt or Coupon by reason of his having some connection with a Tax Jurisdiction other than the mere holding of such Note, Receipt or Coupon; or

(b) presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to an Additional Amount on presenting the same for payment on such thirtieth day assuming that day to have been a Payment Day (as defined in Condition 6.6 (Payment Day)); or

(c) presented for payment by or on behalf of a holder of such Note, Receipt or Coupon who, at the time of such presentation, is able to avoid such withholding or deduction by making a declaration of non-residence or other similar claim for exemption and does not make such declaration or claim; or

(d) where such withholding or deduction is required on income in respect of the Notes in the form of capital gains under Indian law; or

(e) where such withholding or deduction is required pursuant to: (i) an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder or any official interpretations thereof; or (ii) any treaty, law, regulation or other official guidance required in any other jurisdiction, or relating to any intergovernment agreement between the United States and any other jurisdiction, which (in either case) facilitates the implementation of (i) above.

The Issuer has in the Trust Deed agreed, subject to the receipt of reasonably appropriate written evidence in respect thereof, in respect of any holder of a Note (or any person having a beneficial interest therein), other than a holder falling within paragraph (a) above, to compensate and indemnify, defend and hold harmless each Noteholder and its officers, directors, employees, agents and authorised representatives (if any) from and against any and all taxes and any resultant losses, liabilities, damages, demands, expenses (including interests and penalties with respect thereto, out-of pocket expenses and reasonable attorneys' and accountants' fees), claims, assessments, interest and penalties, based upon or, arising out of, or in relation to, or in connection with, amounts payable by the Issuer to the holder pursuant to a holder's investment in the Notes in respect of any interest income (including the difference between the issue price of the Notes and the redemption price, if applicable). This indemnity shall cover any taxes that a holder may be required or be liable to pay to the Republic of India as a result of the Notes being issued at an amount below 100 per cent. of the principal amount of the Notes. For the avoidance of doubt, this indemnity shall survive any redemption of the Notes in accordance with the Conditions and shall remain in full force and effect.

Any payments made by the Issuer are required to be within the all-in-cost ceilings prescribed under the ECB Directions and in accordance with any specific approvals from the RBI in this regard.

8.2 Interpretation

As used herein:

(a) "Relevant Date" means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Trustee or the Principal Paying Agent on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 14 (Notices); and

(b) "Tax Jurisdiction" means India or any political subdivision or any authority thereof or therein having power to tax in respect of payments made by the Issuer of principal and interest in respect of the Notes, Receipts and Coupons.

8.3 Transfers or Sales

The Issuer has agreed to indemnify any transferor or transferee of a Note (or any beneficial interest therein), other than a transferor or transferee who is liable to Indian tax by reason of his having a connection with India apart from the mere holding of a Note, against any loss resulting from the imposition of Indian income or capital gains tax on the transfer or sale of a Note outside India.

The Issuer will first obtain approval from the RBI prior to making any payments under such indemnity, if required.

8.4 Additional Amounts

Any reference in these Conditions to any amounts in respect of the Notes shall be deemed also to refer to any additional amounts which may be payable under this Condition 8 or under any undertakings given in addition to, or in substitution for, this Condition 8 pursuant to the Trust Deed.

8.5 Trustee and Agents not responsible for tax

Neither the Trustee nor any Agent shall be responsible for paying any tax, duty, charge, withholding or other payment referred to in this Condition 8 or for determining whether such amounts are payable or the amount thereof, and none of them shall be responsible or liable for any failure by the Issuer, any Noteholder or any third party to pay such tax, duty, charge, withholding or other payment in any jurisdiction or to provide any notice or information to the Trustee or any Agent that would permit, enable or facilitate the payment of any principal, premium (if any), interest or other amount under or in respect of the Notes without deduction or withholding for or on account of any tax, duty, charge, withholding or other payment imposed by or in any jurisdiction.

9. PRESCRIPTION

The Notes (whether in bearer or registered form), Receipts and Coupons will become void unless presented for payment within a period of ten years (in the case of principal) and five years (in the case of interest) after the Relevant Date therefor.

There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition 9 or Condition 6.2 (Presentation of definitive Bearer Notes, Receipts and Coupons) or any Talon which would be void pursuant to Condition 6.2 (Presentation of definitive Bearer Notes, Receipts and Coupons).

10. EVENTS OF DEFAULT AND ENFORCEMENT

10.1 Events of Default

The Trustee at its discretion may, and if so requested in writing by the holders of not less than one-quarter in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to being indemnified and/or secured and/or prefunded by the Noteholders to its satisfaction), give notice to the Issuer and the Guarantor at the specified office of the Guarantor that the Notes are, and they shall accordingly thereby become, immediately due and repayable at the Early Redemption Amount, together with accrued interest as provided in the Trust Deed, in any of the following events (each, an "Event of Default"):

(a) Non-payment

a default is made in the payment of any principal or interest due in respect of the Notes or any of them and such failure continues for a period of five (5) Business Days; or

(b) Breach of the obligations

the Issuer or the Guarantor does not perform or comply with one or more of its other obligations in the Notes, the Guarantee or the Trust Deed which default is in the opinion of the Trustee incapable of remedy or, if in the opinion of the Trustee capable of remedy, is not in the opinion of the Trustee remedied within 30 days after written notice of such default shall have been given to the Issuer or the Guarantor (as the case may be) by the Trustee (provided that, in each such case, if the default is incapable of remedy or has not been remedied within 30 days after such written notice, the Trustee shall have certified in writing to the Issuer that such default is, in its opinion, materially prejudicial to the interests of the Noteholders, it being acknowledged that the Trustee is under no obligation to provide such certification and if such certification is provided, it shall be binding and conclusive on the Issuer, Guarantor, the Noteholders, the Receiptholders and the Couponholders); or

the Issuer or the Guarantor (as the case may be) is (or is deemed by law or a court to be) insolvent or bankrupt or unable to pay a material part of its debts, or stops, suspends or threatens to stop or suspend payment of all or a material part of (or of a particular type of) its debts, proposes or makes any agreement for the deferral, rescheduling or other readjustment of all or a material part of (or all of a particular type of) its debts (or of any part which it will or might otherwise be unable to pay when due), proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or any part of (or of a particular type of) the debts of the Issuer or the Guarantor (as the case may be); or

(d) Cross-Default

if:

(i) any present or future indebtedness for borrowed money of the Issuer becomes (or becomes capable of being declared) due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described), or

(ii) any such indebtedness for borrowed money is not paid when due or, as the case may be, within any applicable grace period, or

(iii) the Issuer or the Guarantor (as the case may be) fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised, provided that the aggregate amount of the relevant indebtedness, any moneys borrowed or raised, guarantees and indemnities in respect of which one or more of the events mentioned above in this Condition 10.1(d) have occurred equals or exceeds (i) US$ 50,000,000 in the case of the Issuer, or (ii) US$100,000,000 in the case of the Guarantor, in each case, or its equivalent (as determined on the basis of the middle spot rate for the relevant currency against the U.S. dollar as quoted by any leading bank selected by the Trustee on the day on which such indebtedness becomes due and payable or is not paid or any such amount becomes due and payable or is not paid under any such guarantee or indemnity); or

(e) Enforcement proceedings

a distress, attachment, execution or other legal process is levied, enforced or sued out on or against any material part of the property, assets or revenues of the Issuer or the Guarantor (as the case may be) and is not discharged or stayed within 30 days; or

(f) Winding-up and disposals

an order is made or an effective resolution passed for the winding-up or dissolution, judicial management or administration of the Issuer, or the Issuer ceases or threatens to cease to carry on all or substantially all of its business or operations; or

(g) Security enforced

an encumbrancer takes possession or an administrative or other receiver or an administrator is appointed of the whole or any substantial part of the property, assets or revenues of the Issuer or the Guarantor (as the case may be) and is not discharged within 30 days; or

(h) Unlawfulness

it is or will become unlawful for the Issuer or the Guarantor to perform or comply with any one or more of its obligations under any of the Notes or the Trust Deed; or

(i) Expropriation

any step is taken by a governmental authority or agency or any other competent authority with a view to the seizure, compulsory acquisition, expropriation or nationalisation of all or a material part of the assets of the Issuer; or

(j) Analogous Events

any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in paragraphs (d) to (i) above; or

(k) Cessation of Guarantee

the Guarantee ceases to be, or is claimed by the Issuer or the Guarantor not to be, in full force and effect.

In this Condition, "indebtedness for borrowed money" means any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or acceptance credit or (iii) any notes, bonds, debentures, debenture stock, loan stock or other securities, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash.

Neither the Trustee nor any Agents shall be obliged to take any steps to ascertain whether an Event of Default or Potential Event of Default has occurred or to monitor the occurrence of any Event of Default or Potential Event of Default, and shall not be liable to the Noteholders or any other person for not doing so.

10.2 Enforcement

The Trustee may at any time, at its discretion and without notice, take such proceedings as it may think fit against or in relation to the Issuer to enforce the provisions of the Trust Deed, the Notes, the Receipts and the Coupons but it shall not be bound to take any such proceedings or any other action in relation to the Trust Deed, the Notes, the Receipts or the Coupons unless (i) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at least one-quarter in nominal amount of the Notes then outstanding and (ii) it shall have been indemnified and/or secured and/or prefunded to its satisfaction.

No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer to enforce the provisions of the Trust Deed, the Notes, the Receipts and/or Coupons unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing.

The Trustee may refrain from taking any action in any jurisdiction if the taking of such action in that jurisdiction would, in its opinion based upon legal advice in the relevant jurisdiction, be contrary to any law of

that jurisdiction. Furthermore, the Trustee may also refrain from taking such action if it would otherwise render it liable to any person in that jurisdiction or if, in its opinion based upon such legal advice, it would not have the power to do the relevant thing in that jurisdiction by virtue of any applicable law in that jurisdiction or if it is determined by any court or other competent authority in that jurisdiction that it does not have such power.

Payments of any amounts outside India by the Issuer under an indemnity clause may require the prior approval of the RBI.

11. REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS

Should any Note, Receipt, Coupon or Talon be mutilated or defaced or alleged to be lost, stolen or destroyed, it may be replaced subject to applicable laws, regulations and relevant stock exchange regulations at the specified office of the Principal Paying Agent (in the case of Bearer Notes, Receipts or Coupons) or the Registrar (in the case of Registered Notes) upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer, the Guarantor and the Principal Paying Agent or the Registrar (as the case may be) may reasonably require. Mutilated or defaced Notes, Receipts, Coupons or Talons must be surrendered before replacements will be issued.

12. PAYING AGENTS, REGISTRAR AND TRANSFER AGENTS

The names of the initial Paying Agents, the initial Registrar and the initial Transfer Agent and their initial specified offices are set out below.

The Issuer is entitled, with the prior written approval of the Trustee, to vary or terminate the appointment of the Principal Paying Agent, Paying Agent, Registrar or Transfer Agent and/or appoint additional or other Paying Agents, Registrar or Transfer Agents and/or approve any change in the specified office through which any Agent acts, provided that:

(a) so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer shall appoint and maintain a Paying Agent in Singapore, where the Notes may be presented or surrendered for payment or redemption;

(b) there will at all times be a Principal Paying Agent and a Registrar;

(c) so long as the Notes are listed on any stock exchange, there will at all times be a Paying Agent, which may be the Principal Paying Agent, and Transfer Agent (in the case of Registered Notes) with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange (or any other relevant authority); and

(d) so long as the Notes are listed on the SGX-ST, if the Notes are issued in definitive form, there will at all times be a Paying Agent in Singapore unless the Issuer obtains an exemption from the SGX-ST.

In addition, the Issuer shall immediately appoint a Paying Agent having a specified office in New York City in the circumstances described in Condition 6.5 (General provisions applicable to payments).

Any variation, termination, appointment or change in Paying Agents shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days' prior notice to the Noteholders by the Issuer in accordance with Condition 14 (Notices).

In acting under the Agency Agreement, the Paying Agents, Registrar and the Transfer Agents act solely as agents of the Issuer, the Guarantor and, in certain circumstances specified therein, of the Trustee and do not assume any obligation to, or relationship of agency or trust with, any Noteholders, Receiptholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor agent.

13. EXCHANGE OF TALONS

On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 9 (Prescription).

14. NOTICES

Notices to holders of Registered Notes will be deemed to be validly given if sent by first class mail or (if posted to an overseas address) by air mail to them at their respective addresses as recorded in the Register and will be deemed to have been validly given on the fourth day after the date of such mailing and, in addition, for so long as any Registered Notes are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules. So long as the Registered Notes are listed on the SGX-ST or the ISM and the rules of the SGX-ST or the ISM, as the case may be, so require, if a Global Certificate is exchanged for a definitive Note, announcement of such exchange shall be made by or on behalf of the Issuer through the SGX-ST and such announcement will include all material information with respect to the delivery of the definitive Note, including details of the paying agent in Singapore.

All notices regarding the Bearer Notes will be deemed to be validly given if published in a leading daily newspaper of general circulation in Asia or such other English language daily newspaper with general circulation in Asia as the Trustee may approve. It is expected that such publication will be made in the Asian Wall Street Journal. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange (or any other relevant authority) on which the Notes are for the time being listed. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in all required newspapers. If, in the opinion of the Trustee, publication as provided above is not practicable, a notice will be given in such other manner, and will be deemed to have been given on such date, as the Trustee shall approve.

Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg, be substituted for such publication in such newspaper(s) or such mailing the delivery by electronic mail of the relevant notice to Euroclear and/or Clearstream, Luxembourg for communication by them to the holders of the Notes and, in addition, for so long as any Notes are listed on a stock exchange and the rules of that stock exchange (or any other relevant authority) so require, such notice will be published in a daily newspaper of general circulation in the place or places required by the rules of that stock exchange (or any other relevant authority). Any such notice shall be deemed to have been given to the holders of the Notes on the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg.

Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Principal Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes). Whilst any of the Notes are represented by a Global Note, such notice may be given by any holder of a Note to the Principal Paying Agent or the Registrar through Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the Principal Paying Agent, the Registrar and Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose.

Receiptholders and Couponholders will be deemed for all purposes to have notice of the contents of any notice given to Noteholders in accordance with this Condition 14.

15. MEETINGS OF NOTEHOLDERS, MODIFICATION, WAIVER AND SUBSTITUTION

The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, the Receipts, the Coupons or any of the provisions of the Trust Deed or the Agency Agreement. Such a meeting may be convened by the Issuer, the Guarantor or the Trustee and shall be convened by the Issuer if required in writing by one or more Noteholders holding not less than one-tenth in nominal amount of the Notes for the time being outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing not less than 50 per cent. in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes, the Receipts, the Coupons or the Trust Deed (including, inter alia, (i) reduction or cancellation of the amount payable or, where applicable, modification, except where such modification is in the opinion of the Trustee bound to result in an increase, of the method of calculating the amount payable or modification of the date of payment or, where applicable, of the method of calculating the date of payment in respect of any principal or interest in respect of the Notes, (ii) reduction of any Minimum Rate of Interest and/or Maximum Rate of Interest specified in the applicable Pricing Supplement, (iii) alteration of the currency in which payments under the Notes, the Guarantee, Receipts and Coupons are to be made, (iv) to modify or cancel the Guarantee, and (v) alteration of the majority required to pass an Extraordinary Resolution), the quorum shall be one or more persons holding or representing not less than two-thirds in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or representing not less than one-third in nominal amount of the Notes for the time being outstanding. The Trust Deed provides that: (i) a resolution passed at a meeting duly convened and held in accordance with the Trust Deed by a majority consisting of not less than three fourths of the votes cast on such resolution; (ii) a resolution in writing signed by or on behalf of the holders of not less than three fourths in nominal amount of the Notes for the time being outstanding; or (iii) consent given by way of electronic consents through the relevant clearing system(s) (in a form satisfactory to the Trustee) by or on behalf of the holders of not less than three fourths in nominal amount of the Notes for the time being outstanding, shall, in each case, be effective as an Extraordinary Resolution of the Noteholders. An Extraordinary Resolution passed by the Noteholders will be binding on all the Noteholders, whether or not they are present at any meeting and whether or not they voted on the resolution, and on all Receiptholders and Couponholders.

The Trustee may without the consent or sanction of the Noteholders, the Receiptholders or the Couponholders at any time and from time to time concur with the Issuer and the Guarantor to agree and concur with the Issuer in making any modification:

(a) to the Notes, the Trust Deed and/or the Agency Agreement which in the opinion of the Trustee it may be proper to make provided that the Trustee is of the opinion that such modification will not be materially prejudicial to the interests of the Noteholders; or

(b) to the Notes, the Trust Deed and/or the Agency Agreement if in the opinion of the Trustee such modification is of a formal, minor or technical nature or to correct a manifest error or an error which in the opinion of the Trustee is proven or to comply with mandatory provisions of law.

Any such modification may be made on such terms and subject to such conditions (if any) as the Trustee may determine, shall be binding upon the Noteholders, the Receiptholders and the Couponholders and, unless the Trustee agrees otherwise, shall be notified by the Issuer to the Noteholders in accordance with Condition 14 (Notices) as soon as practicable thereafter.

In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation, determination or substitution), the Trustee shall have regard to the general interests of the Noteholders as a class but shall not have regard to any interests arising from circumstances particular to individual Noteholders, Receiptholders or Couponholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for

individual Noteholders, Receiptholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political subdivision thereof and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the Issuer, the Guarantor, the Trustee or any other person any indemnification or payment in respect of any tax consequences of any such exercise upon individual Noteholders, Receiptholders or Couponholders except to the extent already provided for in Condition 8 (Taxation) pursuant to the Trust Deed.

The Trustee may rely, without liability to Noteholders, on a report, confirmation, opinion or certificate or any advice of any lawyers, accountants, financial advisers, financial institution or any other expert, whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or by any engagement letter relating thereto or in any other manner) by reference to a monetary cap, methodology or otherwise. The Trustee may accept and shall be entitled to rely (without further investigation or enquiry) on any such report, confirmation, opinion or certificate or advice and such report, confirmation or certificate or advice shall be binding on the Issuer, the Guarantors, the Trustee and the Noteholders.

The Trustee may, without the consent of the Noteholders, at any time agree with the Issuer and the Guarantor to the substitution in place of the Issuer (or of any previous substitute under this Condition 15) as the principal debtor under the Notes, the Receipts, the Coupons and the Trust Deed, subject to, inter alia, (a) the Notes being unconditionally and irrevocably guaranteed by the Guarantor; (b) the Issuer complying with any stock exchange rules that may apply to the listing of the Notes; (c) approval of the designated authorised dealer category I bank or the RBI, as may be applicable, in accordance with the ECB Directions and FEMA, prior to such substitution; (d) the new entity being eligible to be the issuer in respect of the Notes then outstanding in accordance with the ECB Directions or having obtained the prior approval in writing of the RBI; (e) where the new entity is incorporated, domiciled or resident in, or subject generally to the taxing jurisdiction of, a territory other than or in addition to India or any political subdivision or any authority therein or thereof having power to tax, undertakings or covenants being given by the new entity in terms corresponding to the provisions of Condition 8 (Taxation) with the substitution for (or, as the case may be, the addition to) the references to India of references to that other or additional territory in which the new entity is incorporated, domiciled or resident or to whose taxing jurisdiction it is subject and (where applicable) Condition 8.2(b) (Interpretation) shall be modified accordingly; (f) without prejudice to the rights of reliance of the Trustee under the immediately following paragraph the Trustee being satisfied that the relevant transaction is not materially prejudicial to the interests of the Noteholders; (g) two Directors of the new entity (or other officers acceptable to the Trustee) certifying that the new entity is solvent both at the time at which the relevant transaction is proposed to be effected and immediately thereafter (which certificate the Trustee may rely upon absolutely) and the Trustee shall not be under any duty to have regard to the financial condition, profits or prospects of the new entity or to compare the same with those of the Issuer or the previous substitute under this Condition as applicable; and (h) certain other conditions set out in the Trust Deed being complied with.

Any such modification, waiver, authorisation, determination or substitution shall be binding on the Noteholders, the Receiptholders and the Couponholders and, unless the Trustee otherwise agrees, any such modification or substitution shall be promptly notified to Noteholders by the Issuer in accordance with Condition 14 (Notices).

16. INDEMNIFICATION OF THE TRUSTEE AND TRUSTEE CONTRACTING WITH THE ISSUER

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified and/or secured and/or prefunded to its satisfaction.

The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (a) to enter into business transactions with the Issuer and the Guarantor and to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the Issuer or the Guarantor, (b) to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences for, the Noteholders, Receiptholders or Couponholders and (c) to retain and not be liable to account for any profit made or any other amount or benefit received thereby or in connection therewith.

Repatriation of proceeds outside India by the Issuer under an indemnity clause may require the prior approval of the RBI in accordance with applicable laws, including the ECB Directions.

17. FURTHER ISSUES

The Issuer shall be at liberty from time to time (but subject always to the provisions of the Trust Deed) without the consent of the Noteholders, the Receiptholders or the Couponholders to create and issue further notes (whether bearer or registered) having terms and conditions the same as the Notes of any Series (or the same in all respects save for the amount and date of the first payment of interest thereon and the date from which interest starts to accrue) and so that the same shall be consolidated and form a single series with the outstanding Notes of a particular Series.

18. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Note, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

19. GOVERNING LAW AND SUBMISSION TO JURISDICTION

19.1 Governing law

The Trust Deed, the Agency Agreement, the Notes, the Receipts, the Coupons and any non-contractual obligations arising out of or in connection with the Trust Deed, the Agency Agreement, the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with, English law.

19.2 Submission to jurisdiction

(a) Subject to Condition 19.2(c), the English courts have exclusive jurisdiction to settle any dispute arising out of or in connection with the Trust Deed, the Notes, the Receipts and/or the Coupons, including any dispute as to their existence, validity, interpretation, performance, breach or termination or the consequences of their nullity and any dispute relating to any non-contractual obligations arising out of or in connection with the Trust Deed, the Notes, the Receipts and/or the Coupons (a "Dispute") and all Disputes will be submitted to the exclusive jurisdiction of the English courts.

(b) For the purposes of this Condition 19.2, the Issuer waives any objection to the English courts on the grounds that they are an inconvenient or inappropriate forum to settle any Dispute.

(c) This Condition 19.2(c) is for the benefit of the Trustee, the Noteholders, the Receiptholders and the Couponholders only. To the extent allowed by law, the Trustee, the Noteholders, the Receiptholders and the Couponholders may, in respect of any Dispute or Disputes, take (i) proceedings in any other court with jurisdiction; and (ii) concurrent proceedings in any number of jurisdictions.

19.3 Appointment of Process Agent

(a) The Issuer irrevocably appoints TMF Global Services (UK) Limited at its specified office for the time being at 6 St Andrew Street, 5th Floor, London EC4A 3AE, United Kingdom as its agent for service of process in any proceedings before the English courts in relation to any Dispute, and agrees that, in the event of TMF Global Services (UK) Limited being unable or unwilling for any reason so to act, it will immediately appoint another person approved by the Trustee as its agent for service of process in England in respect of any Dispute, failing which after 30 days the Trustee shall be entitled to appoint such a person by notice to the Issuer and service on such person shall be as effective as if appointed by the Issuer. The Issuer agrees that failure by a process agent to notify it of any process will not invalidate service. Nothing herein shall affect the right to serve process in any other manner permitted by law.

(b) The Guarantor irrevocably appoints TMF Global Services (UK) Limited at its specified office for the time being at 6 St Andrew Street, 5th Floor, London EC4A 3AE, United Kingdom as its agent for service of process in any proceedings before the English courts in relation to any Dispute, and agrees that, in the event of TMF Global Services (UK) Limited being unable or unwilling for any reason so to act, it will immediately appoint another person approved by the Trustee as its agent for service of process in England in respect of any Dispute, failing which after 30 days the Trustee shall be entitled to appoint such a person by notice to the Issuer and service on such person shall be as effective as if appointed by the Issuer. The Issuer agrees that failure by a process agent to notify it of any process will not invalidate service. Nothing herein shall affect the right to serve process in any other manner permitted by law.

19.4 Waiver of immunity

To the fullest extent permitted by law each of the Issuer and the Guarantor irrevocably and unconditionally:

(a) submits to the jurisdiction of the English courts in relation to any Dispute and waives and agrees not to claim any sovereign or other immunity from the jurisdiction of the English courts in relation to any Dispute (including to the extent that such immunity may be attributed to it), and agrees to ensure that no such claim is made on its behalf;

(b) submits to the jurisdiction of the English courts and the courts of any other jurisdiction in relation to the recognition of any judgment or order of the English courts or the courts of any other jurisdiction in relation to any Dispute and waives and agrees not to claim any sovereign or other immunity from the jurisdiction of the English courts or the courts of any other jurisdiction in relation to the recognition of any such judgment or court order and agrees to ensure that no such claim is made on its behalf; and

(c) consents to the enforcement of any order or judgment made or given in connection with any Dispute and the giving of any relief in the English courts and the courts of any other jurisdiction whether before or after final judgment including, without limitation: (i) relief by way of interim or final injunction or order for specific performance or recovery of any property; (ii) attachment of its assets; and (iii) enforcement or execution against any property, revenues or other assets whatsoever (irrespective of their use or intended use) and waives and agrees not to claim any sovereign or other immunity from the jurisdiction of the English courts or the courts of any other jurisdiction in relation to such enforcement and the giving of such relief (including to the extent that such immunity may be attributed to it), and agrees to ensure that no such claim is made on its behalf.

19.5 Currency indemnity

The Issuer shall indemnify the Trustee, the Noteholders, the Receiptholders and the Couponholders and keep them indemnified against:

(a) any liability incurred by any of them arising from the non-payment by the Issuer or the Guarantor of any amount due to the Trustee, or the holders of the Notes and the relative Receiptholders or Couponholders under the Conditions by reason of any variation in the rates of exchange between those used for the purposes of calculating the amount due under a judgment or order in respect thereof and those prevailing at the date of actual payment by the Issuer; and

(b) any deficiency arising or resulting from any variation in rates of exchange between:

(i) the date as of which the local currency equivalent of the amounts due or contingently due under these Conditions (other than this Condition) is calculated for the purposes of any bankruptcy, insolvency or liquidation of the Issuer; and

(ii) the final date for ascertaining the amount of claims in such bankruptcy, insolvency or liquidation. The amount of such deficiency shall be deemed not to be reduced by any variation in rates of exchange occurring between the said final date and the date of any distribution of assets in connection with any such bankruptcy, insolvency or liquidation.

The above indemnity shall constitute an obligation of the Issuer separate and independent from its obligations under the other provisions of the Conditions and shall apply irrespective of any indulgence granted by the Trustee or the Noteholders, the Receiptholders or the Couponholders from time to time and shall continue in full force and effect notwithstanding the judgment or filing of any proof or proofs in any bankruptcy, insolvency or liquidation of the Issuer for a liquidated sum or sums in respect of amounts due under the Conditions (other than this Condition). Any such deficiency as aforesaid shall be deemed to constitute a loss suffered by the Noteholders, the Receiptholders and the Couponholders and no proof or evidence of any actual loss shall be required by the Issuer or its liquidator or liquidators.

USE OF PROCEEDS

The net proceeds from each issue of Notes will be applied by the Issuer for its infrastructure project related activities and other general corporate purposes in accordance with the ECB Directions and such other directions specified by the RBI.

INVESTMENT CONSIDERATIONS

Each of the Issuer and the Guarantor believes that the following factors may affect its ability to fulfil its obligations in respect of the Notes issued under the Programme. All of these factors are contingencies which may or may not occur and neither the Issuer nor the Guarantor is in a position to express a view on the likelihood of any such contingency occurring. Additional risks not presently known to either the Issuer or the Guarantor that it currently deems immaterial may also impair the Issuer's business operations. The Issuer's businesses, financial condition and/or results of operations could be materially adversely affected by any of these risks, which may, as a result, affect the Issuer's ability to repay the amount of principal of or interest on, the Notes.

In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are described below. Prospective investors should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision.

Investors should carefully consider the following investment considerations as well as the other information contained in this Offering Circular and any pricing supplement prior to making an investment in the Notes. In making an investment decision, each investor must rely on its own examination of the Issuer and the Guarantor and the terms of the offering of the Notes. The risks described below are not the only ones that may affect the Notes. Additional risks not currently known to the Issuer or the Guarantor or that the Issuer or the Guarantor currently deems immaterial may also impair the Issuer's business operations.

This section should be read together with the financial statements, including the notes thereto, and other financial information included elsewhere in this Offering Circular. This Offering Circular also contains forward looking statements as a result of certain factors including the considerations described below and elsewhere in this Offering Circular. In making an investment decision, investors must rely on their own examination of the Issuer including the merits and risks involved.

RISKS RELATING TO THE ISSUER

The Issuer's cash inflows (excluding funds raised from the capital market or financial institutions) are expected to be primarily composed of the cess levied on petroleum products pursuant to the additional sales tax levied on petroleum products under the Kerala General Sales Tax Act, 1963 ("Cess") and the motor vehicles tax receipts ("Motor Vehicles Tax").

The Issuer is incorporated solely for the purpose of funding infrastructure projects in Kerala and to engage in activities incidental to or related to the funding of infrastructure projects in Kerala. The ability of the Issuer to successfully carry out its funding operations and to fulfil its financial obligations including in relation to the Notes will be partly dependent upon receiving its share of the Motor Vehicles Tax and Cess collected by the State Government.

As of 30 June 2018, the Issuer had received a sum of ₹1,772 crore from the State Government which comprised ₹869 crore on account of Cess, ₹903 crore on account of Motor Vehicles Tax and ₹2,498.42 crore as a grant from the State Government. Any material decrease in the amount of Motor Vehicles Tax or Cess collected by the State Government may have a material adverse effect on the Issuer's cash inflows.

The amount of Cess and Motor Vehicles Tax collected may be affected by a number of factors including:

(a) actual sales volume of motor vehicles; (b) petrol and diesel consumption in Kerala; (c) global crude prices and consequent fuel prices in India; (d) affordability and efficiency of automobiles; (e) increasing popularity and availability of alternative fuel powered options for automobile users; (f) availability of alternative means of transportation, including rail networks and air transport; (g) growth of the Indian economy and that of Kerala; (h) adverse weather conditions; and (i) seasonal holidays.

For instance, any material decrease in the actual motor vehicle sales volume compared to the forecasted motor vehicle sales volume on account of inaccurate forecasting or (any other reason) may have a material adverse effect on the amount of Motor Vehicles Tax collected and consequently on the Issuer's cash inflows. Similarly, in the case of Cess, should there be a decrease in the consumption of petroleum products by consumers, there may be a material impact on the Issuer's cash inflows.

The factors which determine Cess and Motor Vehicles Tax receipts are therefore beyond the Issuer's control. Further, any change in the applicable policies or other applicable laws which affect the category of vehicle or fuel, may lead to an increase or a decrease in the Cess and Motor Vehicles Tax collected and may affect the Issuer's cash inflows. In the event of a significant decrease in sales volumes and/or consumption of petrol and diesel, the Issuer may experience a corresponding decrease in the cash inflows received from the State Government from these sources. Such a situation, if it arises may impact the Issuer's future expansion plans and its ability to fulfil its financial obligations, unless the State Government makes appropriate alternative budgetary allocations to the Issuer as provided by the KIIF Act.

Delay or inability of the State Government to transfer Cess, Motor Vehicles Tax, budgetary allocations or support any financial shortfalls of the Issuer may have an adverse impact on the financial condition of the Issuer.

In addition to Cess and Motor Vehicles Tax, the Issuer is also dependent upon (i) grants, loans and advances by the State Government pursuant to the KIIF Act, (ii) the funds made available by the State Government pursuant to the KIIF Act to make up any shortfall in the funds required by the Issuer to meet its operational and administrative expenses and (iii) the guarantee provided pursuant to section 9 of the KIIF Act by the State Government pursuant to the KIIF Act. See "The Issuer's sources of funds and other support mechanisms facilitate the efficient functioning of the Issuer and the timely servicing of its debt obligations.".

The Issuer's funding operations are very capital intensive and any delay or inability of the State Government to fulfil the guaranteed obligations of the Issuer or any reduction, delay or inability of the State Government to make the appropriate budgetary allocation of capital, funding or grants or any reduction or delay in the collection and/or remittance to the Issuer of the Cess and the Motor Vehicles Tax collected may materially affect the Issuer's performance and funding operations including its ability to fulfil its obligation under the Notes. If funding from the State Government reduces or stops or if there is any adverse change in the pattern of allocation of the Cess or Motor Vehicles Tax collected by the State Government or any adverse change in the ability of the State Government to fulfil its obligations under the KIIF Act, the Issuer's operations and future performance could be materially and adversely affected.

The process and mechanism adopted for inclusion of petroleum products under the Goods and Services Tax ("GST") may adversely impact the cash inflows of the Issuer.

In the event of the taxation of petroleum products such as petrol and diesel being subsumed into the GST in the future, there may be an impact on the cash inflows of the Issuer. There may be a material impact on the Issuer's financial condition owing to any reduction of Cess collection, including its ability to carry out its obligations under the Notes, unless, the State Government makes appropriate alternative budgetary allocations to meet the operational and administrative expenses of the Issuer as mandated by the KIIF Act.

In addition, the General Anti-Avoidance Rules ("GAAR") have been implemented from 1 April 2017. The tax consequences of the GAAR provisions being applied to an arrangement could result in denial of tax benefit amongst other consequences. In the absence of any precedents on the subject, the application of these provisions is uncertain. If the GAAR provisions are made applicable to the Issuer, it may have an adverse tax impact on the Issuer.

Increase in interest rates on the Issuer's borrowings may adversely affect its cost of borrowing and its financial performance.

As of 31 March 2018, the Issuer has outstanding borrowings of ₹100.8 crore. The Issuer does not have any floating rate debt obligations as of 30 June 2018. However, the Issuer expects to raise additional debt to finance infrastructure projects in the future. Such additional debt may be a mix of fixed and/or floating rate instruments and onshore and/or offshore instruments, depending upon the market conditions. Any increase in

domestic and/or international interest rates may have an adverse impact on the Issuer's cost of borrowing and its financial performance.

The Issuer's future growth is dependent on the policies of the State Government and the initiatives implemented by it to develop infrastructure in Kerala. Non-implementation or lack of progress in respect of policies or regulatory initiatives related to the infrastructure sector in Kerala will adversely affect the Issuer's expansion plans for funding infrastructure projects in Kerala.

The Issuer believes that the development of the Kerala's infrastructure is dependent upon the formulation and effective implementation of State Government's programmes and policies that facilitate and encourage investment (including from the private sector) in the infrastructure sector in Kerala. These programmes and policies could be subject to changes and their successful implementation may depend on whether they are properly designed to address the infrastructure development needs in Kerala. These programmes will need continuous policy support including stable regulatory regimes to encourage continued capital inflows into the infrastructure sector. In the event that the State Government's initiatives to develop Kerala's infrastructure do not proceed or progress in the anticipated manner, the Issuer's future growth plans could be materially affected.

The State Government can exercise a broad degree of control on the functioning and operations of the Issuer. In certain circumstances, conflicts of interest may arise.

The State Government has a significant representation in the key decision making bodies of the Issuer including the board of the Issuer (the "Board") and the executive committee (the "Executive Committee"). The Chief Executive Officer and the Deputy Managing Director of the Issuer are also appointed by the State Government giving the State Government indirect control over the functioning of the Issuer. The projects appraised by the Issuer for financing are based on the recommendation of the State Government. The Issuer is bound by the directions of the State Government on questions of policy and the State Government can direct the Issuer to fund projects which may not necessarily be revenue generating. While the final decision on funding rests with the Board, the State Government nominees form the majority of the members of the Board. Therefore the State Government may exercise a broad degree of control over the functioning of the Issuer. In certain circumstances, there is the potential for members of the Board (or the Executive Committee) who have been appointed by the State Government to have a conflict of interest between his or her role within the State Government and the Board of the Issuer (or the Executive Committee, as applicable). The Issuer has appointed independent members to the Board to address potential conflicts of interest. At least one independent member of the Board has to vote in favour of a proposal for it to be passed.

Any allegations, proceedings, litigation or opposition brought against, or negative media reports about, any politically exposed persons (“Politically Exposed Persons”) may have a negative impact on the Issuer’s business

The Issuer is controlled and managed by Politically Exposed Persons, for example, the Board is chaired by the Chief Minister of the State and the Board members also include the Minister for Finance, the Chief Secretary and key bureaucrats from the State Government's finance and legal departments. Furthermore, all projects are put forward for approval by the Executive Committee, whose members include the Minister for Finance and the Chief Secretary. The Chief Executive Officer of the Issuer is also the Ex-officio Secretary of the Finance (Infrastructure) department of the State Government. The Finance (Infrastructure) Department within the Finance Department of Kerala is the administrative department for the Issuer, and the Joint Secretary and Deputy Secretary of the Finance (Infrastructure) department also function as the joint fund manager and deputy fund manager of the Issuer, respectively.

Any allegations, proceedings, litigation or opposition brought against, or negative media reports about, any Politically Exposed Persons may have a negative impact on the Issuer in relation to (i) the Issuer’s reputation, (ii) the management of the Issuer by the Politically Exposed Persons and (iii) the policies being followed by the Issuer and its ability to formulate policies objectively.

Any adverse change in the administrative structure of the Issuer may negatively affect its operations.

The Issuer is a body corporate constituted by the Kerala Infrastructure Investment Fund Act, 1999 (the "KIIF Act") and is wholly owned, controlled and administered by the State Government. Any adverse changes in the structure and operations of the Issuer, either due to a policy decision by the State Government or due to

any amendments to the KIIF Act could materially adversely affect the financial status and operations of the Issuer.

Dissolution of the Issuer under the KIIF Act may affect the Noteholder's rights under the Notes.

In accordance with section 18 of the KIIF Act, if the State Government for any reason is of the opinion that it is not necessary to continue the Board, it may by notification in the Gazette dissolve the Board from such date as may be specified by the State Government.

Even though the KIIF Act provides that upon such dissolution of the Issuer, all liabilities legally subsisting and enforceable against the Issuer shall be enforceable against the State Government, if the Issuer is dissolved by the State Government in accordance with the KIIF Act, this may affect the Noteholders rights and the recovery of payments due under the Notes. See "Regulations and Policies - The Kerala Infrastructure Investment Fund Act 1999 – Dissolution of the Board."

Delay in completion of projects funded by the Issuer due to slow execution or other factors may impact the Issuer's reputation, revenue (if any) and future growth.

There may be a delay in implementation or completion of projects due to factors which are beyond the Issuer's control or the control of the relevant contractors or concessionaires. Delays in the completion of a project may also lead to cost overruns and the commencement of collection of revenue by the Issuer from some of the projects which it has funded which in turn could affect the Issuer's anticipated residual cash flows.

The Issuer's reputation and its future growth and expansion plans may therefore be adversely affected due to a delay in the completion of one or more projects it has provided funding for.

The Issuer's operations may be adversely affected if it is unable to manage its operations as it grows or due to shortcomings or failures in the Issuer's internal processes and systems.

The Issuer's business is also dependent on its ability to appraise, process, finance and monitor a large number of infrastructure projects. As the Issuer grows its business, the inability of its systems to accommodate an increasing volume of projects that it is required to finance and/or monitor could also constrain its ability to expand its operations. Additionally, shortcomings or failures in the Issuer's internal processes or systems could lead to an impairment of its financial condition, financial loss, disruption of its business and reputational damage. Any inability of the Issuer to successfully scale up its resources will adversely affect its business and results of operations.

The Issuer's ability to operate will depend in part on its ability to maintain and upgrade its project appraisal systems and policies on a timely and cost-effective basis. The Issuer may experience difficulties in upgrading, developing and expanding its systems quickly enough to accommodate its growing requirements. The Issuer's failure to maintain or improve or upgrade its management information systems in a timely manner could materially and adversely affect its ability to effectively and efficiently deploy its financial resources.

The Issuer may also be subject to disruptions of its operating systems, arising from events that are wholly or partially beyond the Issuer's control, including but not limited to, computer viruses or electrical or telecommunication service disruptions, which may result in a loss or liability.

The escrow mechanism ("Escrow Mechanism") that is being set up by the State Government to transfer Cess and Motor Vehicles Tax to the Issuer's account is subject to the risk of failure of the relevant information technology systems.

The State Government is in the process of implementing an Escrow Mechanism whereby the Motor Vehicles Tax and Cess collected by the State Government are transferred to the Issuer's bank account on a daily basis. The timely transfer of Cess and Motor Vehicles Tax through this Escrow Mechanism is therefore subject to the risk of the information technology system not functioning in the intended manner. Any delay or disruption in the

performance of the systems relating to the Escrow Mechanism could affect the Issuer's daily cash flows. See "The Issuer’s Business – Escrow Mechanism".

Accounts for the three month period ended June 2018 for the Issuer have been the subject of a limited review and have not been audited.

The accounts of the Issuer are not subject to any interim audit. Accounts for the three month period ended 30 June 2018 have been prepared by the Issuer and are subject to limited review by Sridhar & Co (the "Auditors") and have not been audited. The Auditors have reviewed the unaudited limited review financial accounts of the Issuer for the three-month period ended 30 June 2018. However, the actual audited performance may be materially different from the limited review results. The Issuer has disclosed a limited review report for the three month period ended 30 June 2018.

Project executing entities or agencies may be unable to obtain environmental clearances from competent authorities in a timely manner or at all and the lack of such permissions could adversely affect the Issuer's growth plans.

The Issuer's ability to fund projects depends on such projects obtaining certain environmental approvals from the relevant governmental authorities, including from the Central Government and the State Government. In the event that any such environmental approvals are not received on a timely basis or at all, the ability of the Issuer to deploy funds to such projects will be adversely affected, which may have a material adverse impact on the Issuer's growth plans.

The Issuer does not own the premises from which it operates.

All of the Issuer's offices are on a lease or a leave and licence basis. Any failure on the Issuer's part to execute and/or renew leave and licence agreements and/or lease deeds in connection with such offices or the failure to locate alternative offices in case of termination of the leases and/or leave and license agreements could adversely affect the ability of the Issuer to efficiently carry out its operations.

The Issuer has a limited operating history and therefore has a limited experience in the financing of infrastructure projects.

The Issuer has a limited operating history. The Issuer commenced operations in its present form pursuant to the restructuring of the Issuer carried out through amendments made to the Kerala Infrastructure Investment Fund Act in November 2016. The Issuer's experience in carrying out its functions in relation to the development of the infrastructure in Kerala is therefore limited.

There have been negative observations in relation to the Issuer and its operations in the State Legislature and in the media

The Issuer being a public entity is subject to intense scrutiny in the State Legislature as well as among the public at large. Although the Issuer's incorporation has been through broad based unanimous support from the State Legislature, there have been and could be instances where the Issuer is criticised by members of the State Legislature.

There could be instances of opposition to specific infrastructure projects from local communities, special interest groups, environmental groups and other related parties relating to the perceived negative impact of some of the projects on the local community and environment. Additonally, any allegations or outstanding litigations against the Issuer or its employees may have a negative impact on the Issuer in relation to (i) the Issuer’s reputation, (ii) the management of the Issuer and (iii) the policies being followed by the Issuer and its ability to formulate policies objectively.

There have also been and could be various adverse media reports that are critical about the Issuer and its operations. These reports could be material and adverse in nature including those concerning certain present and past employees of the Issuer, opposition from the local communities and other parties. Such adverse media reports in the future may affect the Issuer's reputation, its operations and future growth plans.

Any inability to attract, recruit and retain skilled personnel could adversely affect the Issuer's operations.

The Issuer is significantly dependent on members of its Board (the "Members"), the Executive Committee, the FTAC, its senior management and other key personnel including skilled project management personnel for managing its operations and maintaining its strategic focus. The Issuer may also face strong competition in recruiting and retaining skilled and professionally qualified staff. Increasing demand for skilled personnel in the Issuer's industry could result in increased competition to retain senior management, engineers and commercial and finance professionals. Loss of the services of the independent members, the Executive Committee, the FTAC or other key personnel or the Issuer's inability to recruit or train a sufficient number of experienced personnel may have an adverse effect on the Issuer's operations and future growth plans.

A change in the political environment in Kerala may adversely affect the existence of the Issuer under KIIF Act.

The Board of the Issuer comprises of the Chief Minister of Kerala along with the Finance Minister. In the event that a President's rule is declared under Article 356 of the Constitution of India Act, 1950 in Kerala, the powers of the Chief Minister will be temporarily suspended. The Governor of Kerala will be entrusted with the administration of the state as the chief executive on behalf of the President. Therefore, the Governor would be acting in accordance with the directions issued by the President from time to time. In such a situation, since the Chief Minister and Finance Minister of Kerala as the Chairperson and Vice Chairperson of the Board, respectively, exercise a large degree of control over the Board, in the event of the President's rule, the Issuer's operations and future growth strategies could be materially affected.

Additionally, the President (acting as the head of Kerala pursuant to an emergency under Article 356) has the power to dissolve the Board in accordance with Section 18 of the KIIF Act.

The regulatory framework in India is evolving, and regulatory changes as and when introduced by the Central Government and/or State Government could have a material adverse effect on the Issuer's business, financial condition and results of operations.

The Issuer is subject to the regulation and supervision by the State Government and its departments. In addition, currently, it is constituted as a statutory body corporate under the KIIF Act and will be subject to regulations generally applicable to statutory body corporates in India as well as contractual obligations under the agreements signed with other public sector undertakings and project companies. These regulations are still developing and will continue to evolve. Any such change which may be adverse compared to the current regulatory regime may have a material impact on the Issuer's business and hence on its financial performance.

Trade deficits could adversely affect the Issuer's business.

India's trade relationships with other countries and its trade deficit may adversely affect Indian economic conditions. In the fourth quarter of fiscal year 2017, India experienced a current account deficit of U.S.$13 billion, which was an increase from the current account deficit of U.S.$7 billion in the third quarter of fiscal year 2017 and of U.S.$8 billion in the third quarter of fiscal year 2016. If trade deficits increase or are no longer manageable, the Indian economy, and therefore the Issuer's business and financial performance could be adversely affected.

The Issuer's ability to raise foreign capital may be constrained by Indian law.

As an Indian company, the Issuer is subject to exchange controls that regulate borrowing in foreign currencies. Such regulatory restrictions limit the Issuer's financing sources and hence could constrain the Issuer's ability to obtain financing on competitive terms and refinance existing indebtedness. In addition, the Issuer cannot assure investors in the Notes that the required approvals will be granted to the Issuer without onerous conditions, or at all. The limitations on foreign debt may have an adverse effect on the Issuer's business growth, financial condition and results of operations.

RISKS RELATING TO THE GUARANTOR

Kerala has a revenue deficit and a fiscal deficit, both of which are not expected to turn into a surplus in the near future. Any adverse impact on Kerala's economy may have an impact on its financial operations and its ability to fulfil its obligations under the KIIF Act and under the Guarantee. Kerala's economy could be impacted by adverse economic and financial conditions.

Kerala's primary revenues are from its own tax and non-tax resources. In addition to these, Kerala receives its share of the taxes levied by the Central Government and also grants and aid from the Central Government. Although there has been an increase in the tax revenue and non-tax revenue in Fiscals 2016-17 and 2017-18, from ₹57401.40 crore and ₹18210.33 crore to ₹65715.12 crore and ₹22551.73 crore respectively, Kerala has a revenue deficit of ₹13,079.64 crore and a fiscal deficit of ₹22,774.41 crore representing 1.19 per cent. and 3.31 per cent. of its Gross State Domestic Product ("GSDP") for Fiscal 2018. Kerala's total debt is 30.71 per cent. of GSDP for Fiscal 2018. Kerala has set fiscal targets in the Medium Term Fiscal Policy as formulated by the Finance Department of Kerala, to reduce (i) the revenue deficit to 1.33 per cent. of the GSDP by 2020-21, (ii) the fiscal deficit to a level not exceeding 2.91 per cent. of the GSDP by 2020-21 and (iii) its total debt to 29.70 per cent. of GSDP by 2020-21.

Kerala's GSDP is largely driven by the services sector which includes trade, tourism, real estate, transport and communication, while agriculture, traditional small-scale industries, mining and utilities form the other contributors. Kerala has also been characterised by a dynamic and sustained emigration pattern particularly to the Gulf Arab states and other western countries which is a result of historic, cultural, demographic and political factors. Consequently, Kerala receives a large share of the overall remittance flows to India. Therefore remittances, amongst others have played and continue to play a key role in the socio-economic development of Kerala.

Factors such as weather, macroeconomic conditions of India and the state of the economy of the countries from which the remittances are generated have an impact on Kerala's economy. Foreign remittances are estimated to be around 30 per cent. of Kerala's GSDP.

Owing to a large part of its economy being dependent upon the informal sectors, Kerala has also been adversely affected by the Central Government's decision in November 2016 to withdraw the legal tender status of ₹500 and ₹1,000 denominations of banknotes ("Demonetisation") issued by the RBI. Demonetisation had at the time significantly impacted Kerala due to cash transactions being the predominant mode of exchange in Kerala's traditional agricultural, fishery and retail, transport and tourism sectors.

Similarly, the introduction of GST from August 2017 that incorporates several state and central taxes under a common platform across India may adversely affect Kerala. While Kerala is expected to benefit from this measure in the medium term due to its consumption driven economy in which the service sector is a significant contributor, there could be certain short term impacts during the implementation and stabilisation of the new tax regime.

Recent changes in government policy in countries that are part of the Gulf Cooperation Council has led to slower growth of foreign remittances to Kerala, which may have an impact on household consumption and cause slowdown in the real estate and construction sectors.

Health scares due to the outbreak of any infectious disease in Asia, India or Kerala or any other serious public health concerns relating to the region could have a negative impact on the tourism inflows.

There can be no assurance that factors such as those described above, or any other events not currently anticipated, will not negatively affect the economy and the financial condition of Kerala and its ability to fulfil its obligations under the Guarantee or its obligations under the KIIF Act.

Global and domestic economic conditions may have a material adverse effect on the Guarantor's fiscal and economic condition.

Global financial markets have in the past experienced turmoil and upheaval characterised by extreme volatility and declines in prices of securities, diminished liquidity and credit availability, inability to access capital markets, the bankruptcy, failure, collapse, nationalisation or sale of financial institutions and an unprecedented level of governmental intervention. The Indian economy and financial markets were also significantly impacted

by such global economic, financial and market conditions. Any financial turmoil, especially in the United States, Europe or China, may have a negative impact on the Indian economy and the economy of the Guarantor. Indian financial markets also experienced the contagion effect of the volatility and turmoil in the global financial markets due to the conditions in the global and domestic financial markets. The Guarantor cannot be certain that funding will be available or that it would be able to raise funds, if needed or to the extent required, and it may be unable to implement its public finance strategy efficiently in such scenarios.

The Guarantor is subject to restrictions on the amount of guarantees it can provide in relation to the financial obligations of entities related to the State Government.

The State Government is subject to the Kerala Ceiling on Government Guarantees Act, 2003 (read with the Kerala Ceiling on Government Guarantees (Amendment) Act, 2015) (the "Guarantee Act")) which provides for a maximum ceiling of total government guarantees as of the first day of April in each year. In accordance with the existing regulatory framework, Kerala would be the deciding authority in respect of the amount of guarantees it can provide, and it retains the right to increase the ceiling for guarantees by amending the Guarantee Act.

For Fiscal 2019, the ceiling on government guarantees by the State Government is 5 per cent. of the Gross State Domestic Product of Kerala. The State Government is also required, pursuant to the Guarantee Act, to establish a Guarantee Redemption Fund.

Therefore as described above, should the guaranteed obligations of the Guarantor exceed the limits provided in the Guarantee Act, the Guarantor may be restricted from carrying out its financial obligations, including in relation to the Guarantee, the Notes and under the KIIF Act.

The Guarantor is involved in legal, regulatory and arbitration proceedings that, if determined against it, may have an adverse impact on its financial condition.

There are certain outstanding legal proceedings against the Guarantor pending at various levels of adjudication before various courts, tribunals, authorities and appellate bodies in India. Should any new development arise, such as a change in applicable laws or rulings against the Guarantor by the appellate courts or tribunals, the Guarantor may need to make provisions in its budget for such financial obligations, which may increase the Guarantor's financial and economic liabilities. In addition, the Guarantor is presently, and in the future may be subject to risks of litigation, including public interest litigation, including litigation in relation to the infrastructure projects funded by the Issuer. Such litigations could be on various issues including breach of environmental laws, financial irregularities, etc. The Guarantor cannot provide assurance that these legal proceedings will be decided in its favour. Any adverse decision may have a significant effect on the Guarantor's financial condition and the implementation of its current or future projects.

Kerala faces significant infrastructure development challenges that require substantial and accelerated capital investments in the infrastructure sector.

The State Government's efforts to improve Kerala's infrastructure through planned capital expenditure have seen a slow but steady growth over the last few years. Despite this, addressing Kerala's infrastructure needs will require substantial investments over many years. The State Government's ability to make such large investments may be hindered by policy changes, delayed implementation of infrastructure projects, long gestation periods and bureaucratic delays. Kerala's economy is dominated by the public sector, which puts pressure on the State Government's public finances. If the State Government is unable to address its infrastructure requirements in the coming years, economic growth is likely to suffer, which in turn may impact the economic and fiscal situation of the Guarantor and the operations of the Issuer.

Any adverse change in the Central Government's policies on tariffs, direct and indirect taxation and fiscal or other incentives provided to states could adversely affect the financial condition of Kerala.

There can be no assurance that there will not be a significant change in Central Government policy which could adversely affect Kerala's financial condition. The Guarantor's fiscal and economic condition is significantly dependent on the policies of the Central Government relating to various direct and indirect taxes (including sales tax and income tax), duties (including excise duties and import duties) and fiscal or other incentives. Any

change in the Central Government's policies relating to such taxes or duties or incentives could adversely affect the Guarantor's economic policies and condition.

The recent floods in Kerala could affect the economy of Kerala and may impact the Issuer operations in Kerala and the financial condition of the Guarantor.

Kerala has recently experienced severe flooding in late July 2018 and August 2018 which has resulted in over 370 fatalities and severe damage to Kerala’s infrastructure, including roads, dams, bridges, airports, ports, factories and schools. This event is likely to have a negative effect on Kerala’s economy, particularly given the damage to infrastructure and farmland and the consequential effect on the tourism industry. This in turn could strain the financial condition of the Guarantor due to the need to allocate significant quantum of resources towards the rebuilding and rehabilitation efforts as a result of the floods. While the losses of the floods have not been quantified, it is possible that the flooding could affect the operations and timelines of infrastructure projects, among others, in Kerala.

RISKS RELATING TO INDIA

It may be difficult to enforce judgments obtained in foreign jurisdictions due to India's sovereign immunity.

India is a sovereign state. India, like all other countries in the world recognises the maxim, "par in parem non habet imperium", which translates to, "one sovereign state is not subject to the jurisdiction of another state". Even though India is a signatory to the United Nations Convention on Jurisdictional Immunities of States and their Property, India has neither ratified nor accepted, approved or acceded to the said treaty. Furthermore, unlike other countries, such as UK and US, India has no separate legislation in this respect. The manner of recognition and enforcement of foreign judgments in India is dependent on whether the country in which the foreign judgment has been pronounced is a reciprocating territory or not. For further detail on recognition and enforcement of foreign judgments in India, please see the section entitled "Enforcement of Foreign Judgments in India" of this Offering Circular. A party seeking to enforce a foreign judgment in India is required to obtain approval from the RBI under the FEMA, 1999 to execute such a judgment or to repatriate outside India any amount recovered pursuant to execution. Any judgment in a foreign currency would be converted into Indian Rupees on the date of the judgment and not on the date of the payment. The Issuer cannot predict whether a suit brought in an Indian court will be disposed of in a timely manner or be subject to considerable delays.

It is also important to note that the Issuer is a body corporate incorporated under a statute of Kerala passed by the State Legislature and all members of the Issuer are deemed to be public servants as understood in the context of the Indian Penal Code, 1860. Therefore, there is a risk that, notwithstanding the Guarantor's and Issuer's agreement to waive the defence of sovereign immunity in certain circumstances in connection with the Notes, a claimant may not be able to enforce a court judgment against the Issuer or the Guarantor and/or certain assets of the Issuer or the Guarantor (including the imposition of any arrest order or attachment or seizure of such assets and their subsequent sale) without the Issuer and/or the Guarantor having specifically consented to such enforcement at the time when the enforcement is sought. It may not be possible to effect service of process against the Issuer or the Guarantor in courts outside India or in a jurisdiction to which India has not explicitly submitted, and the choice of jurisdiction of a foreign court (including English courts) in contractual agreements may be held to be invalid by an Indian court.

In addition, all of the Issuer's directors and executive officers named herein are residents of India and all or a substantial portion of the assets of it and such persons are located in India. As a result, it may not be possible for investors to effect service of process on the Issuer or such persons in jurisdictions outside of India, or to enforce against them judgments obtained in courts outside of India.

A slowdown in economic growth in India could cause its business to suffer.

Any slowdown in the Indian economy could adversely affect the Issuer's ability to finance projects and make it more dependent upon the State Government for its growth.

India's economy could be adversely affected by a general rise in interest rates, currency exchange rates, adverse conditions affecting agriculture, commodity and electricity prices or various other factors. Furthermore, conditions outside India, such as slowdowns in the economic growth of other countries, could have an impact on the growth of the Indian economy, and government policy may change in response to such conditions.

The Indian economy and financial markets are also significantly influenced by worldwide economic, financial and market conditions. Any financial turmoil in the United States, Europe or China, including due to imposition of trade tariffs by the United States and China, may have a negative impact on the Indian economy. Although economic conditions differ in each country, investors' reactions to any significant developments in one country can have adverse effects on the financial and market conditions in other countries. A loss in investor confidence in the financial systems, particularly in other emerging markets, may cause increased volatility in Indian financial markets.

On 23 June 2016, the United Kingdom held a referendum on its membership of the European Union and voted to leave ("Brexit"). On 29 March 2017, the United Kingdom served notice in accordance with Article 50 of the Treaty on European Union of its intention to withdraw from the European Union. The notification of withdrawal started a two-year process during which the terms of the UK's exit will be negotiated, although this period may be extended in certain circumstances. There is significant uncertainty at this stage as to the impact of Brexit on general economic conditions in the United Kingdom and the European Union and any consequential impact on global financial markets. For example, Brexit could give rise to increased volatility in foreign exchange rate movements and the value of equity and debt investments. A lack of clarity over the process for managing the exit and uncertainties surrounding the economic impact could lead to a further slowdown and instability in financial markets. This and any prolonged financial crisis may have an adverse impact on the Indian economy, thereby resulting in a material adverse effect on the Issuer's business, financial condition and results of operations.

Political instability, social instability, changes in Central Government policy or natural disasters may adversely affect economic conditions in India, which may impact the Issuer's business, financial condition and results of operations.

The Central Government has traditionally exercised, and continues to exercise, influence over many aspects of the economy of Kerala. The Issuer's business and the market price and liquidity of the Notes may be affected by interest rates, changes in Central Government policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India. Since 1991, successive Indian governments have pursued policies of economic liberalisation and financial sector reforms. Various factors could trigger significant changes in India's economic liberalisation and deregulation policies, disrupt business and economic conditions in India generally and the Issuer's business in particular. The Issuer's financial performance and the market price of the Notes may be adversely affected by changes in inflation, exchange rates and controls, interest rates, the Central Government policies, social stability or other political, economic or diplomatic developments affecting India in the future.

India has experienced and may continue to experience natural disasters such as earthquakes, floods and drought. The extent and severity of these natural disasters determine their effect on the Indian economy.

A decline in India's foreign exchange reserves may affect liquidity and interest rates in the Indian economy, which could adversely impact the Issuer's economic condition.

According to the weekly statistical supplement released by the RBI, India's foreign exchange reserves totalled over U.S.$ 407.85 billion as of 29 June 2018. Flows to foreign exchange reserves can be volatile, and past declines may have adversely affected the valuation of the Rupee. Further declines in foreign exchange reserves, as well as other factors, could adversely affect the valuation of the Rupee which could result in reduced liquidity and higher interest rates that could adversely affect the Central Government's and State Government's future fiscal situation and subsequently impact the Issuer.

Economic developments and volatility in the securities markets in other countries may negatively affect the Indian economy.

The Indian securities market and the Indian economy are influenced by economic and market conditions in other countries. Although economic conditions are different in each country, investors' reactions to developments in one country can have adverse effect on the securities of companies in other countries, including India. A loss of investor confidence in the financial systems of other emerging markets may cause volatility in Indian financial markets and, indirectly, in the Indian economy in general. Any worldwide financial instability could also have a negative impact on the Indian economy, including the movement of exchange rates and interest rates in India.

The global credit and equity markets have experienced substantial dislocations, liquidity disruptions and market corrections. The collapse of the sub-prime mortgage loan market in the United States that began in September 2008 led to increased liquidity and credit concerns and volatility in the global credit and financial markets in following fiscal years. The European sovereign debt crisis has led to renewed concerns for global financial stability and increased volatility in debt and equity markets. These and other related factors such as concerns over recession, inflation or deflation, energy costs, geopolitical issues, slowdown in economic growth in China and Renminbi (Chinese Yuan) devaluation, Brexit, commodity prices and the availability and cost of credit have had a significant impact on the global credit and financial markets as a whole, including reduced liquidity, greater volatility, widening of credit spreads and global credit and financial markets.

In the event there are any significant financial disruptions, this could have an adverse effect on the Issuer's cost of funding, financing operations, future financial performance and the trading price of any Notes issued under the Programme. Negative economic developments, such as rising fiscal or trade deficits, or a default on national debt in other emerging market countries, may also affect investor confidence and cause increased volatility in Indian securities markets and indirectly affect the Indian economy in general.

Any volatility in the exchange rate may lead to a decline in India's foreign exchange reserves and may affect liquidity and interest rates in the Indian economy, which could adversely impact the Issuer.

Capital inflows into India have remained extremely volatile responding to concerns about the domestic macroeconomic landscape and changes in the global risk environment. While the current account deficit ("CAD") remained a main area of concern over Fiscal 2012 and Fiscal 2013, it has shrunk sharply in Fiscal 2016 and Fiscal 2017. A substantial decline in the imports bill, mainly on account of lower crude oil prices, led to a significant narrowing in the trade deficit that in turn reduced the size of the CAD. However, the primary challenge for the Rupee was the volatile swings in capital flows. The Rupee recorded a high of ₹68.7235 to the U.S. dollar and a low of ₹64.8386 to the U.S. dollar during Fiscal 2017. In calendar year 2018 to date, the Rupee has been experiencing volatility due to among, others, the depreciation of the Turkish lira and the associated capital outflows outflows out of emerging markets. The Rupee is also likely to come under pressure given the increased likelihood of a gradual reversal in U.S. monetary policy that may result in the movement of global fund flows from emerging markets to the U.S. markets over the medium term. There remains a possibility of the RBI needing to intervene in the foreign exchange market to control volatility of the exchange rate. The need to have such an intervention at that point in time may result in a decline in India's foreign exchange reserves and subsequently reduce the amount of liquidity in the domestic financial system. This, in turn, could impact domestic interest rates, which could adversely affect the Issuer's operations.

Terrorist attacks, communal disturbances, civil unrest and other acts of violence or war involving India and other countries may adversely affect the financial markets and the Issuer's business.

Terrorist attacks and other acts of violence or war may adversely affect the Indian and worldwide financial markets. These acts may also result in a loss of business confidence and adversely affect the Issuer's business, financial condition and growth plans. In addition, any deterioration in relations between India and its neighbouring countries might result in investor concern about stability in the region, which may adversely affect the price of the Notes.

India has also witnessed civil unrest including communal disturbances and riots in recent years. Such incidents may create a perception that investment in Indian companies involves a higher degree of risk and may have an adverse impact on the price of the Notes.

Any downgrade of credit ratings of India may adversely affect the Issuer's ability to raise debt financing on favourable terms.

India's sovereign ratings reflect an assessment of the Central Government's overall financial capacity to pay its obligations and its ability or willingness to meet its financial commitments as they become due.

No assurance can be given that any statistical rating organisation will not downgrade the credit ratings of India. Any such downgrade could adversely affect the Issuer's ability to raise additional financing and the interest rates and other commercial terms at which such additional financing is available. This could have an adverse effect on the Issuer's operations and financial performance.

Financial difficulty and other problems in certain financial institutions in India could adversely affect the Issuer's ability to raise debt financing which may in turn affect its growth plans.

The Issuer is exposed to the risks of the Indian financial system, which may be affected by the financial difficulties faced by certain Indian financial institutions because the commercial soundness of many financial institutions may be closely related as a result of credit, trading, clearing or other relationships. This risk, which is sometimes referred to as "systemic risk", may adversely affect financial intermediaries, such as clearing agencies, banks, financial institutions, securities firms and exchanges with whom the Issuer interacts regularly to facilitate its operations who may default on their obligations due to bankruptcy, lack of liquidity, operational failure or other reasons. Any such difficulties or instability of the Indian financial system in general could create an adverse market perception about Indian financial institutions and banks and cause disruptions in the capital and financial markets that could adversely affect the Issuer's ability to raise debt financing and fund its projects. As the Indian financial system operates within an emerging market, it faces risks of a nature and extent not typically faced in more developed economies, including the risk of deposit runs, notwithstanding the existence of a national deposit insurance scheme.

Significant differences exist between Indian GAAP used to prepare the Issuer's financial statements and other accounting principles, such as IFRS, with which investors may be more familiar.

The Issuer's financial statements included in this Offering Circular are prepared and presented in conformity with Indian GAAP. Indian GAAP differs in certain significant respects from IFRS and other accounting principles and standards. The Issuer has not made any attempt to quantify the impact of IFRS on the financial data included in this Offering Circular, nor does it provide a reconciliation of its financial statements to those of IFRS. If the Issuer were to prepare its financial statements in accordance with such other accounting principles, its results of operations, cash flows and financial condition may be substantially different. The significant accounting policies applied in the preparation of its Indian GAAP financial statements are set forth in the notes to the financial statements included in this Offering Circular.

Prospective investors should review the accounting policies applied in the preparation of the Issuer's financial statements summarised in the section "Index to Financial Statements" and "Summary of significant differences between Indian GAAP and IFRS", and consult their own professional advisers for an understanding of the differences between these accounting principles and those with which they may be more familiar.

Accordingly, the degree to which the financial statements included in this Offering Circular will provide meaningful information is entirely dependent on the investor's level of familiarity with Indian accounting practices. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this Offering Circular should accordingly be limited.

Certain facts and statistics are derived from publications not independently verified by the Issuer, the Dealers or their respective advisors.

Facts and statistics in this Offering Circular relating to India's and Kerala's economy and the infrastructure industry are derived from publicly available sources, including publication from the Central Government, the State Governments and their respective agencies and, industry publications. In particular, the information in the section titled "Description of the state of Kerala", "The Kerala Economy" and "Public Finance" of this Offering Circular has been derived from various government publications. While the Issuer has taken reasonable care to ensure that the facts and statistics presented are accurately reproduced from such sources, they have not been independently verified by the Issuer, the Dealers or their respective advisors and, therefore, they make no representation as to the accuracy of such facts and statistics, which may not be consistent with other information compiled within or outside India and Kerala.

Due to possibly flawed or ineffective calculation and collection methods and other problems, the facts and statistics in this Offering Circular may be inaccurate or may not be comparable to facts and statistics produced for other economies and should not be unduly relied upon. Further, there can be no assurance that they are stated or compiled on the same basis or with the same degree of accuracy as may be the case elsewhere.

RISKS RELATING TO AN INVESTMENT IN THE NOTES

Notes may not be a suitable investment for all investors.

Each potential investor in any Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

(a) have sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes, the merits and risks of investing in the relevant Notes and the information contained or incorporated by reference in this Offering Circular or any applicable supplement;

(b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Notes and the impact such investment will have on its overall investment portfolio;

(c) have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Notes, including where principal or interest is payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor's currency;

(d) understand thoroughly the terms of the relevant Notes and be familiar with the behaviour of any relevant indices and financial markets; and

(e) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

Some Notes are complex financial instruments and such instruments may be purchased as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of such Notes and the impact this investment will have on the potential investor's overall investment portfolio.

Remittances of funds outside India pursuant to an indemnification by the Issuer or other payments in relation to the Notes requires prior RBI approval.

Remittance of funds outside India by the Issuer pursuant to indemnity clauses or other similar payments under the Trust Deed or any other agreements in relation to the Notes requires prior RBI approval. Any approval, if and when required, for the remittance of funds outside India is at the discretion of the RBI and the Issuer can give no assurance that it will be able to obtain such approvals.

A debenture redemption reserve will not be created.

The relevant provision of the Companies Act, 2013, as amended, and the Company (Share Capital and Debentures) Rules, 2014, as amended, which requires a company issuing debentures to provide for a debenture redemption reserve is not applicable to Issuer or to the Notes. Therefore, the Issuer is not required to maintain a debenture redemption reserve for redemption of the Notes.

Legal investment considerations may restrict certain investments.

The investment activities of certain investors are subject to investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (i) the Notes are legal investments for it, (ii) the Notes can be used as collateral for various types of borrowing and (iii) other restrictions apply to its purchase or pledge of the Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules.

Modification, waivers and substitution.

The Terms and Conditions of the Notes and the Trust Deed contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders, including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.

The Terms and Conditions of the Notes also provide that the Trustee may, without the consent or sanction of the Noteholders, the Receiptholders or the Couponholders at any time and from time to time concur with the Issuer and the Guarantor to agree or concur with the Issuer in making any modification (i) to the Notes, the Trust Deed and/or the Agency Agreement which in the opinion of the Trustee it may be proper to make provided that the Trustee is of the opinion that such modification will not be materially prejudicial to the interests of the Noteholders; or (ii) to the Notes, the Trust Deed and/or the Agency Agreement if in the opinion of the Trustee such modification is of a formal, minor or technical nature or to correct a manifest error or an error which in the opinion of the Trustee is proven or to comply with mandatory provisions of law. Any such modification may be made on such terms and subject to such conditions (if any) as the Trustee may determine, shall be binding upon the Noteholders, the Receiptholders and the Couponholders and, unless the Trustee agrees otherwise, shall be notified by the Issuer to the Noteholders in accordance with Condition 14 (Notices) as soon as practicable thereafter.

The Trustee may, without the consent of the Noteholders, at any time agree with the Issuer and the Guarantor to the substitution in place of the Issuer (or of any previous substitute under Condition 15 (Meetings of Noteholders, Modification, Waiver and Substitution)) as the principal debtor under the Notes, the Receipts, the Coupons and the Trust Deed, subject to, inter alia, (a) the Notes being unconditionally and irrevocably guaranteed by the Guarantor; (b) the Issuer complying with any stock exchange rules that may apply to the listing of the Notes; (c) approval of the designated authorised dealer category I bank or the RBI, as may be applicable, in accordance with the ECB Directions and FEMA, prior to such substitution; (d) the new entity being eligible to be the issuer in respect of the Notes then outstanding in accordance with the ECB Directions or having obtained the prior approval in writing of the RBI; (e) where the new entity is incorporated, domiciled or resident in, or subject generally to the taxing jurisdiction of, a territory other than or in addition to India or any political subdivision or any authority therein or thereof having power to tax, undertakings or covenants being given by the new entity in terms corresponding to the provisions of Condition 8 (Taxation) with the substitution for (or, as the case may be, the addition to) the references to India of references to that other or additional territory in which the new entity is incorporated, domiciled or resident or to whose taxing jurisdiction it is subject and (where applicable) Condition 8.2(b) (Interpretation) shall be modified accordingly; (f) without prejudice to the rights of reliance of the Trustee under the immediately following paragraph the Trustee being satisfied that the relevant transaction is not materially prejudicial to the interests of the Noteholders; (g) two Directors of the new entity (or other officers acceptable to the Trustee) certifying that the new entity is solvent both at the time at which the relevant transaction is proposed to be effected and immediately thereafter (which certificate the Trustee may rely upon absolutely) and the Trustee shall not be under any duty to have regard to the financial condition, profits or prospects of the new entity or to compare the same with those of the Issuer or the previous substitute under this Condition as applicable; and (h) certain other conditions set out in the Trust Deed being complied with.

The Notes are subject to the risk of change in law.

The Terms and Conditions of the Notes are based on English law in effect as of the date of issue of the relevant Notes. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of issue of the relevant Notes, and any such change could materially and adversely impact the value of any Notes affected by it.

The regulation and reform of "benchmark" rates of interest and indices may adversely affect the value of Notes linked to or referencing such "benchmarks".

Interest rates and indices which are deemed to be or used as "benchmarks", are the subject of recent international regulatory guidance and proposals for reform. Some of these reforms are already effective whilst others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the

past or to disappear entirely, or have other consequences which cannot be predicted. Any such consequence could have a material adverse effect on any Note linked to or referencing a benchmark.

More broadly, any of the international reforms or the general increased regulatory scrutiny of benchmarks could increase the costs and risks of administering or otherwise participating in the setting of a benchmark and complying with any such regulations or requirements. For example, the sustainability of the London interbank offered rate ("LIBOR") has been questioned as a result of regulatory reforms for market participants to continue contributing to such benchmarks. On 27 July 2017, the United Kingdom Financial Conduct Authority announced that it will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021 (the "FCA Announcement"). The FCA Announcement indicated that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. The potential elimination of the LIBOR benchmark or any other benchmark, or changes in the manner of administration of any benchmark, could require an adjustment to the terms and conditions, or result in other consequences in respect of any Notes linked to such benchmark. Such factors may have the following effects on certain benchmarks: (i) discourage market participants from continuing to administer or contribute to the benchmark; (ii) trigger changes in the rules or methodologies used in the benchmark or (iii) lead to the disappearance of the "benchmark". Any of the above changes or any other consequential changes as a result of international reforms or other initiatives or investigations, could have a material adverse effect on the value of and return on any Notes linked to or referencing a benchmark.

Investors should consult their own independent advisers and make their own assessment about the potential risks imposed by any international reforms in making any investment decision with respect to any Notes linked to or referencing a benchmark.

There is no public market for the Notes.

The Notes will be a new issue of securities with no existing trading market. Neither the Issuer nor the Guarantor can make any assurances that the Notes will ultimately be listed on the exchange or that a liquid trading market will develop for the Notes. Although the Notes may be listed on an exchange, neither the Issuer nor the Guarantor can make any assurances as to whether an active market will develop for the Notes or as to the liquidity of the Notes. If an active market does develop, future trading prices of the Notes will depend on many factors, including, among others, prevailing interest rates, the Guarantor's financial condition, performance and prospects, political and economic developments in India and the State Government, and the market for securities similar to the Notes. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market.

Developments in other markets may adversely affect the market price of the Notes.

The market price of the Notes may be adversely affected by declines in the international financial markets and world economic conditions. The market for Indian securities is, to varying degrees, influenced by economic and market conditions in other markets, especially those in Asia. Although economic conditions are different in each country, investors' reactions to developments in one country can affect the securities markets and the securities of issuers in other countries, including India. If developments similar to the sub-prime mortgage crisis in 2008 occur in the international financial markets in the future, the market price of the Notes could be adversely affected.

The price of the Notes following the offering may be volatile.

The price and trading volume of the Notes may be highly volatile. Factors such as variations in the Guarantor's and Issuer's revenues, earnings and cash flows and proposals of new investments, strategic alliances, interest rates, fluctuations in prices for comparable entities and the Guarantor's policy with respect to public funding and subsidies could cause the price of the Notes to change. Any such developments may result in large and sudden changes in the volume and price at which the Notes will trade. There can be no assurance by the Guarantor that these developments will not occur in the future.

The Notes may have limited liquidity.

The Notes constitute a new issue of securities for which there is no existing market.

No assurance can be given as to the liquidity of, or the development and continuation of an active trading market for, the Notes. If an active trading market for the Notes does not develop, or is not maintained, the market price and liquidity of the Notes may be adversely affected. If such a market were to develop, the Notes could trade at prices that may be higher or lower than the price at which the Notes are issued, depending on many factors, including:

(a) prevailing interest rates;

(b) the Issuer's results of operations and financial condition;

(d) the market conditions for similar securities; and

(e) the financial condition and stability of the Indian infrastructure sector.

Investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market.

Notes where denominations involve integral multiples: definitive Notes.

In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination (as specified in the applicable Pricing Supplement) plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts that are not integral multiples of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time may not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to a Specified Denomination.

Noteholders are required to rely on the procedures of the relevant clearing system and its participants while the Notes are cleared through the relevant clearing system.

Notes issued under the Programme will be represented on issue by one or more Global Notes that may be deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in each Global Note, investors will not be entitled to receive Notes in definitive form. Each of Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants will maintain records of the beneficial interests in each Global Note held through it. While the Notes are represented by a Global Note, investors will be able to trade their beneficial interests only through the relevant clearing systems and their respective participants.

While the Notes are represented by Global Notes, the Issuer will discharge its payment obligation under the Notes by making payments through the relevant clearing systems. A holder of a beneficial interest in a Global Note must rely on the procedures of the relevant clearing system and its participants to receive payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in any Global Note.

Holders of beneficial interests in a Global Note will not have a direct right to vote in respect of the Notes so represented. Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant clearing system and its participants to appoint appropriate proxies.

If definitive Notes are issued, holders should be aware that definitive Notes that have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.

The liquidity and price of the Notes following the offering may be volatile.

The price and trading volume of the Notes may be highly volatile. Factors such as variations in the Issuer's revenues, earnings and cash flows and proposals for new investments, strategic alliances and/or acquisitions, interest rates and fluctuations in price for comparable companies could cause the price of the Notes to change. Any such developments may result in large and sudden changes in the trading volume and price of the Notes. There can be no assurance that these developments will not occur in the future.

The Issuer will be subject to applicable corporate disclosure standards for debt securities listed on the SGX-ST and the ISM, which standards may be different from those applicable to debt securities listed in certain other countries.

The Issuer will be subject to reporting obligations in respect of the Notes to be listed and admitted on the SGX-ST and the ISM. The disclosure standards imposed by the SGX-ST or the ISM may be different than those imposed by securities exchanges in other countries or regions. As a result, the level of information that is available may not correspond to what investors in the Notes are accustomed to.

Rights as a creditor may not be the same under the insolvency laws applicable to the Guarantor and the Issuer as under United States or other insolvency laws.

The Guarantor is the State Government and the Issuer is as a body corporate under the KIIF Act. The insolvency laws of India and specifically the law applicable to the Issuer and the Guarantor are likely to differ and may not be as favourable as those of the United States or another jurisdiction with which investors may be familiar.

The Trustee may request Noteholders to provide an indemnity and/or security and/or prefunding to its satisfaction.

In certain circumstances, the Trustee may (at its sole discretion) request Noteholders to provide an indemnity and/or security and/or prefunding to its satisfaction before it takes actions on behalf of the Noteholders. The Trustee shall not be obliged to take any such actions if not indemnified and/or secured and/or prefunded to its satisfaction. Negotiating and agreeing to an indemnity and/or security and/or prefunding can be a lengthy process and may have an impact on when such actions can be taken. The Trustee may not be able to take actions, notwithstanding the provision of an indemnity or security or prefunding to it, in breach of the terms of the Trust Deed or in circumstances where there is uncertainty or dispute as to the applicable laws or regulations and, to the extent permitted by the agreements and the applicable law, it will be for the Noteholders to take such actions directly.

Each Note shall have an interest rate which shall be in accordance with Indian regulatory requirements.

The rate of interest with respect to any Note shall be in accordance with Indian regulatory requirements (including but not limited to the ECB Directions) or any specific approval received by the Issuer from the RBI or the an AD Bank or any other regulatory authority (together, "Indian Regulatory Requirements"). This includes any maximum rate of interest prescribed by applicable Indian Regulatory Requirements. Accordingly, the interest rate of certain Notes may be subject to change after their respective Issue Date in accordance with related changes to Indian Regulatory Requirements. Alternatively, any Notes with an interest rate outside of the range prescribed by Indian Regulatory Requirements may require prior approval from the RBI or an AD Bank as the case may be, in accordance with the ECB Direction, and such approval may not be forthcoming.

Fixed Rate Notes/Floating Rate Notes

Fixed Rate Notes and Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Where the Issuer has the right to effect such a conversion, this will affect the secondary market and the market value of the Notes, since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate in such circumstances, the spread on such Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate in such circumstances, the fixed rate may be lower than the then prevailing rates on its Notes.

Approval of the RBI or an AD Bank, as the case may be, is required for redemption of Notes prior to maturity, including upon an Event of Default (as defined in the Terms and Conditions of the Notes).

Under the ECB Direction, any redemption of Notes prior to its stated maturity requires the prior approval of the RBI or an AD Bank, as the case may be. Therefore, any repayment of Notes prior to maturity as a result of early redemption pursuant to the Terms and Conditions of the Notes (Condition 7.2 (Redemption for Tax Reasons (Issuer Tax Call)), Condition 7.3 (Redemption at the option of the Issuer (Issuer Call), Condition 7.4 (Redemption at the option of the Noteholders (Investor Put)), Condition 7.5 (Redemption upon Change of Control (Investor Put upon Change of Control)) or Condition 7.6 (Redemption upon Change of Law (Investor Put upon Change of Law)) or acceleration of Notes upon an Event of Default pursuant to Condition 10 (Events of Default and Enforcement) would require the prior approval of the RBI or an AD Bank, as the case may be. There can be no assurance that such approval would be obtained in a timely manner or at all. In the absence of such an approval, the Issuer may not be able to redeem all or any of the Notes prior to maturity. Further, any modification or waiver of the Terms and Conditions of the Notes which has the effect of modifying or waiving terms which are not permitted under the automatic route for issue of Notes under the ECB Directions will require prior approval from the RBI or an AD Bank, as the case may be, in accordance with the ECB Directions, and such approval may not be forthcoming.

Noteholders' right to receive payments is junior to certain tax and other liabilities preferred by law.

The Notes will rank subordinated to certain liabilities preferred by law, such as claims of the Government on account of taxes and certain liabilities incurred in the ordinary course of the Issuer's business. In the event of bankruptcy, liquidation or winding-up, there may not be sufficient assets remaining, after paying amounts relating to these proceedings, to pay amounts due on the Notes.

RISKS RELATED TO THE MARKET GENERALLY

Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:

Payments of principal and interest are subject to exchange rate risks and exchange controls.

For foreign currency denominated Notes, the Issuer will pay principal and interest on the Notes in such foreign currency. This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the "Investor's Currency") other than such foreign currency. These include the risk that exchange rates may significantly change (including changes due to the devaluation of such foreign currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to such foreign currency would decrease (i) the Investor's Currency-equivalent yield on the Notes, (ii) the Investor's Currency-equivalent value of the principal payable on the Notes, and (iii) the Investor's Currency-equivalent market value of the Notes. See " — Rupee denominated Notes are subject to exchange rate risks and exchange controls" for details of the exchange rate risks associated with an investment in Rupee denominated Notes.

Investment in the Notes is subject to interest rate risks.

Investment in the Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of them.

RISKS RELATED TO THE STRUCTURE OF A PARTICULAR ISSUE OF NOTES

A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of certain such features:

Notes subject to optional redemption.

An optional redemption feature of Notes is likely to limit their market value of the Notes. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.

The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally may not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.

Notes issued at a substantial discount or premium.

The market values of securities issued at a substantial discount or premium to their nominal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.

The secondary market generally.

Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, that are designed for specific investment objectives or strategies or that have been structured to meet the investment requirements of limited categories of investors. These types of Notes would generally have a more limited secondary market and more price volatility than would conventional debt securities. Illiquidity may have a severe adverse effect on the market value of Notes.

Changes in market interest rates may adversely affect the value of Fixed Rate Notes.

Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of Fixed Rate Notes.

Ratings of Notes.

Credit ratings assigned to the Programme, the Issuer or any Notes may not reflect all the risks associated with an investment in those Notes. One or more independent credit rating agencies may assign credit ratings to the Programme, the Issuer or the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised, suspended or withdrawn by the rating agency at any time.

If the Issuer is unable to comply with the restrictions and covenants in its debt agreements or the Trust Deed, there could be a default under the terms of these agreements or the Trust Deed, which could cause repayment of its debt to be accelerated.

If the Issuer is unable to comply with the restrictions and covenants in the Trust Deed, or its current or future debt obligations and other agreements, there could be a default under the terms of these agreements. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to the Issuer, accelerate repayment of the debt and declare all amounts borrowed due and payable or terminate the

agreements, as the case may be. Furthermore, some of the Issuer's debt agreements, including the Trust Deed, contain cross-acceleration or cross-default provisions. Any early redemption would require approval of the RBI.

As a result, the Issuer's default under one debt agreement may cause the acceleration of repayment of debt, subject to RBI approval, including the Notes, or result in a default under its other debt agreements, including the Trust Deed. If any of these events occur, the Issuer cannot assure the Noteholders that its assets and cash flow would be sufficient to repay in full all of its indebtedness, or that it would be able to find alternative financing. Even if the Issuer could obtain alternative financing, it cannot assure the Noteholders that such financing would be on terms that are favourable or acceptable to it.

The Issuer may not be able to meet its obligations to pay or redeem the Notes.

In certain circumstances, Noteholders may require the Issuer to redeem all or a portion of the Notes and the Issuer would be required to pay all amounts then due under the Notes. In particular, upon a change of control of the Issuer, Noteholders may require the Issuer to redeem their Notes and, following an acceleration of the Notes upon an Event of Default, the Issuer would be required to pay all amounts then due under the Notes which the Issuer may not be able to meet. The Issuer may not be able to make required payments in connection with the Notes if the requisite regulatory approval for early redemption of the Notes is not received or if the Issuer does not have sufficient cash flows for those payments.

The Issuer may not be able to redeem or repurchase the Notes upon a Change of Control.

The Issuer is required to redeem or repurchase the Notes upon the occurrence of a Change of Control (as defined in the Conditions), should a Noteholder decide to exercise its rights to require the Issuer to redeem its Notes, at their principal amount together with interest accrued to the date fixed for redemption. See "Terms and Conditions of the Notes". The source of funds for such redemption would be the Issuer's available cash or third-party financing. However, the Issuer may not have enough available funds at the time of the occurrence of any Change of Control to redeem such Notes.

The Issuer may not be able to redeem or repurchase the Notes upon a Change of Law.

The Issuer is required to redeem or repurchase the Notes upon the occurrence of a Change of Law (as defined in the Conditions), should a Noteholder decide to exercise its rights to require the Issuer to redeem its Notes, at their principal amount together with interest accrued to the date fixed for redemption. See "Terms and Conditions of the Notes". The source of funds for such redemption would be the Issuer's available cash or third-party financing. However, the Issuer may not have enough available funds at the time of the occurrence of any Change of Law to redeem such Notes.

RISKS RELATING TO AN INVESTMENT IN RUPEE DENOMINATED NOTES

Rupee denominated Notes are subject to exchange rate risks and exchange controls.

India maintains a managed floating exchange rate system under which market forces determine the exchange rate for Rupees. Under the RBI's policies, the RBI may intervene in the market to maintain orderly market conditions and limit sharp fluctuations in the exchange rate. Interventions by the RBI have taken the form of transparent measures and have included clearly delineated periods and amounts involved, as well as the explanations for these actions. The RBI's foreign exchange policy objectives include maintaining price stability, promoting and maintaining monetary stability and the convertibility of the INR and protecting its international reserves during times of impending or on-going exchange crises or national emergencies.

The Synthetic Rupee denominated Notes are denominated in INR but settled both on issue and on maturity in the relevant Synthetic Rupee denominated Notes Settlement Currency. Investors in the Synthetic Rupee denominated Notes are required to pay the issue price for their Synthetic Rupee denominated Notes in the relevant Synthetic Rupee denominated Notes Settlement Currency at the prevailing exchange rate between INR and the relevant Synthetic Rupee denominated Notes Settlement Currency as set out in the applicable Pricing Supplement. This entails risks which are not associated with a similar investment in a non-synthetic-denominated securities. Such risks include, without limitation, the possibility of significant changes in the exchange rate between INR and the relevant Synthetic Rupee denominated Notes Settlement

Currency if such currency risk is unhedged and the possibility of imposition or modification of exchange controls by the RBI. Such risks are usually dependent on various economic and political events over which the Issuer does not have any control. Recently, exchange rates have been volatile and such volatility is expected in the near future as well, so the risk pertaining to exchange rate fluctuation persists. However, the recent fluctuations in exchange rates are not indicative in nature.

The non-INR currency return on the Synthetic Rupee denominated Notes, or yield to maturity, will depend on the principal amount, the coupon and the premium converted into the relevant Synthetic Rupee denominated Notes Settlement Currency at the prevailing exchange rate at the time of the relevant payments in accordance with the Conditions. Any volatility of the exchange rate between INR and the relevant Synthetic Rupee denominated Notes Settlement Currency during the term of the Rupee denominated Notes will affect the return on the Rupee denominated Notes in the relevant Synthetic Rupee denominated Notes Settlement Currency. In particular, any devaluation of INR against the relevant Synthetic Rupee denominated Notes Settlement Currency during the term of the Synthetic Rupee denominated Notes will decrease the relevant Synthetic Rupee denominated Notes Settlement Currency return on the Synthetic Rupee denominated Notes and will result in the yield to maturity of the Synthetic Rupee denominated Notes in non-INR currency being less than the stated yield to maturity thereof, which is calculated in INR. In the event of a material devaluation of INR against the relevant Synthetic Rupee denominated Notes Settlement Currency, Noteholders may not receive the full non-INR currency subscription money upon maturity or redemption of the Synthetic Rupee denominated Notes. Rates of exchange between the relevant Synthetic Rupee denominated Notes Settlement Currency and INR may significantly vary over time. However, historical trends do not necessarily indicate future fluctuations in rates and should not be relied upon as indicative of future trends. Political, economic or stock exchange developments in India or elsewhere could lead to significant and sudden changes in the exchange rate between INR and non-INR currency.

Although substantially all of the Issuer's revenues are denominated in INR, it is required to settle all amounts due under the Synthetic Rupee denominated Notes (including principal, premium, if any, as well as the interest and redemption payments) in the relevant Synthetic Rupee denominated Notes Settlement Currency at the prevailing exchange rate between INR and the relevant Synthetic Rupee denominated Notes Settlement Currency at the time of payment. Furthermore, depreciation of INR against the non-INR currency could adversely affect the non-INR currency value of the Issuer's earnings and its ability to satisfy its obligations under the Synthetic Rupee denominated Notes.

Furthermore, overseas investors are eligible to hedge the above mentioned exchange rate risk only by way of permitted derivative products with (i) AD Category — I banks in India; (ii) offshore branches or subsidiaries of Indian Banks; or (iii) branches of foreign banks with an Indian presence, on a back to back basis.

Rupee denominated Notes are subject to selling restrictions and may be transferred only to a limited pool of investors.

Rupee denominated Notes can only be issued to, and held by, investors resident in jurisdictions who are a member of the FATF or a member of a FATF-Style Regional Body and whose securities market regulator is a signatory to the International Organisation of Securities Commission's Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to bilateral Memorandum of Understanding with the SEBI for information sharing arrangements. Additionally, investors should not be resident of a country identified in the public statement of the FATF as: (i) a jurisdiction having a strategic anti-money laundering or combating the financing of terrorism deficiencies to which counter measures apply; or (ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies.

Non-convertibility of Rupee.

The convertibility of a currency (including Rupee) is dependent, among other things, on international and domestic political and economic factors, and on measures taken by governments and central banks. Such measures include, without limitation, imposition of regulatory controls or taxes, issuance of a new currency to replace an existing currency, alteration of the exchange rate or exchange characteristics by revaluation or revaluation of a currency, or imposition of exchange controls with respect to the exchange or transfer of a specified currency that would affect exchange rates and the availability of a specified currency. The taking of

any one or more of such measures could adversely affect the value of Rupee denominated Notes as well as any amount which may be payable upon redemption of Rupee denominated Notes.

DESCRIPTION OF THE STATE OF KERALA

General Description

Geography and demography

Kerala is located in the south-west of the Republic of India ("India"). The state of Karnataka lies to the north and the state of Tamil Nadu to the south and east. To the west lies the Arabian Sea which meets Kerala's approximately 580 km of coastline. Nine out of Kerala's fourteen districts are on the coast.

Kerala is located on the trans-national trade corridor connecting Europe and the Pacific, accessible through an international seaport at Kochi and three international airports each located at Thiruvananthapuram, Kochi and Calicut. During April 2017 to February 2018, passenger traffic through Kochi and Thiruvananthapuram airport stood at 92.3 lakh and 40.2 lakh respectively, and freight traffic stood at 68,896 tonnes and 26,241 tonnes respectively. Kerala has 18 ports; one major port in Kochi, 3 intermediate ports in Neendakara, Alappuzha and Kozhikode and 14 minor ports. The Cochin Port handled 290 lakh tonnes of cargo in 2017-18.

Located within humid equatorial longitudes, Kerala comprises three climatically distinct regions: the eastern highlands (rugged and cool mountainous terrain), central midlands (rolling hills) and the western lowlands (coastal plains). Whilst these regions experience significant variations in annual rainfall, the state-wide annual rainfall averages 3,107 mm with between 120-140 days of rain per year being influenced by the seasonal heavy rains of the southwest summer monsoon.

Being located towards the southernmost tip of the Indian subcontinent, Kerala is situated near the centre of the Indian tectonic plate. Accordingly, Kerala experiences comparatively little seismic or volcanic activity.

The eastern part of Kerala comprises of large mountains and 'gorges and deep-cut valleys' on the coastal side where the vast majority of Kerala's rivers originate. The central part of Kerala has mountainous terrain and midland plains with rolling hills and valleys of significantly lower elevation. Kerala's western coastal belt is generally flat with a wide-ranging network of interconnected canals, lakes, estuaries and rivers dominating the area. The majority of Kerala's major cities including Kochi, Thiruvananthapuram, Kozhikode (Calicut), Thrissur and Kollam are situated to the Western Coastal belt.

Kerala has been promoted as a tourism destination by the State Government. Kerala has abundant natural beauty in the form of green landscapes, mountain ranges, beaches, backwaters and lagoons. Kerala has a diverse demography and ecology. Kerala also has a rich culture including ancient forms of martial arts such as "kalaripayattu", dance forms such as "Kathakali" and "Mohiniyattam", sports such as "Vallam Kali" (boat racing), health tourism in the form of "ayurveda" and multiple religious and cultural festivals.

Particulars Kerala

Capital Thiruvananthapuram

Geographical Area (Sq. Km) 38,863

Administrative Districts 14

Population Density (per Sq.Km) 860

Particulars Kerala

Total Population (lakh) 334.1

Male : Female Population % 48% : 52%

GDP (2017-18 - RE) ₹686,498 crore

GDP Growth Rate (2016-17) 7.4%

Main Language Malayalam

Main Religions Hindus / Muslims / Christians

Climate Moderate Tropical

Literacy Rate (2011 consensus) 93.9%

Source: Census of India 2011; Kerala State Budget documents, Government of Kerala website

Population

As of 2011 (the year of the last official census), Kerala was believed to have a population of 334 lakh inhabitants making Kerala the thirteenth largest Indian state by population. Kerala has a population density of 860 (per sq. km) (as of the 2011 census). Of the total population, 48 per cent. are estimated to be male and 52 per cent. are female. The majority of Kerala's inhabitants are concentrated around the western coastal belt with 47.7 per cent. of Kerala's population residing in urban areas.

The first census of the 20th century was conducted in 1901 when Kerala had a population of 64 lakh. 59 lakh were living in rural areas, accounting for more than 90 per cent. of the total population of Kerala. In the 2001 census, rural population accounted for 74 per cent. of the total population of Kerala. Subsequently, in the latest census in 2011, the population of Kerala was almost equally divided between rural and urban areas. According to the 2011 census, Kerala has an urban population of 159 lakh which accounts for 47.7 per cent. of the total population against a rural population of 174 lakh which accounts for 52.3 per cent. of the total population. The decadal growth rate of the urban population was 92.72 per cent. in 2011.

District wise Rural - Urban Distribution of Population, Kerala, 2011

Population % Decadal Rank in Rank in State/District Growth 2001 2011 Total Population Male Female Rate

Total 33406061 16027412 17378649 4.91

Kerala Rural 17471135 8408054 9063081 -25.89

Urban 15934926 7619358 8315568 92.76

Total 1307375 628613 678762 8.58 7 9

Kasaragod Rural 798328 387716 410612 -17.73

Urban 509047 240897 268150 117.82

District wise Rural - Urban Distribution of Population, Kerala, 2011

Population % Decadal Rank in Rank in State/District Growth 2001 2011 Total Population Male Female Rate

Total 2523003 1181446 1341557 4.73 1 4

Kannur Rural 882017 425682 456335 -26.26

Urban 1640986 755764 885222 35.29

Total 817420 401684 415736 4.71 14 14

Wayanad Rural 785840 386283 399557 4.64

Urban 31580 15401 16179 6.65

Total 3086293 1470942 1615351 7.20 3 3

Kozhikode Rural 1013721 484784 528937 -42.98

Urban 2072572 986158 1086414 88.22

Total 4112920 1960328 2152592 13.45 12 8

Malappuram Rural 2295709 1095308 1200401 -29.78

Urban 1817211 865020 952191 410.21

Total 2809934 1359478 1450456 7.35 10 11

Palakkad Rural 2133124 1031466 1101658 -5.65

Urban 676810 328012 348798 89.81

Total 3121200 1480763 1640437 4.94 6 2

Thrissur Rural 1024794 488303 536491 -52.00

Urban 2096406 992460 1103946 149.74

Total 3282388 1619557 1662831 5.69 2 1

Ernakulam Rural 1048025 518510 529515 -35.65

Urban 2234363 1101047 1133316 51.27

Total 1108974 552808 556166 -1.79 13 13

Idukki Rural 1056929 527245 529684 -1.37

Urban 52045 25563 26482 -9.63

District wise Rural - Urban Distribution of Population, Kerala, 2011

Population % Decadal Rank in Rank in State/District Growth 2001 2011 Total Population Male Female Rate

Total 1974551 968289 1006262 1.07 9 10

Kottayam Rural 1409158 692673 716485 -14.79

Urban 565393 275616 289777 88.59

Total 2127789 1013142 1114647 0.88 5 5

Alappuzha Rural 979643 464713 514930 -34.15

Urban 1148146 548429 599717 84.75

Total 1197412 561716 635696 -2.97 11 12

Pathanamthitta Rural 1065799 499820 565979 -4.00

Urban 131613 61896 69717 6.31

Total 2635375 1246968 1388407 1.94 8 7

Kollam Rural 1448217 680687 767530 -31.66

Urban 1187158 566281 620877 154.77

Total 3301427 1581678 1719749 2.07 4 6

Thiruvananthapuram Rural 1529831 724864 804967 -28.60

Urban 1771596 856814 914782 62.28

Source: Census of India 2011; Kerala State Budget documents, Government of Kerala website

Urban Population (%) - 2011 Census

48.0% 48.0% 43.0% 39.0% 33.0% 31.0%

Kerala TN GJ KA AP India

Source: Niti Aayog / Planning Commission, RBI TN – Tamil Nadu; GJ – Gujarat; KA – Karnataka; AP – Andhra Pradesh

The growth in urban population is largely due to the increase in number of census towns in Kerala since 2001. A census town is defined as one area which is not statutorily notified as a town but has attained a number of urban characteristics: (i) number of population exceeding 5,000; (ii) density of population of at least 400 persons per sq. km; and (iii) a minimum of 75 per cent. of male working population employed outside the agricultural sector. In the 2011 census, there were 461 census towns and 59 statutory towns in Kerala compared to 99 and 60 respectively in the 2001 census. This amounts to a 366 per cent. growth in the number of census towns. Furthermore, the decadal population growth rate of the census towns which existed in both the 2001 and 2011 census is estimated to be 3.9 per cent. This is lower than that of Kerala's decadal population growth rate which is an average of 4.86 per cent.

Kerala has a reputation of being one of the most religiously diverse states in India with, as of 2011, 56 per cent. of Kerala's residents identifying as Hindu, 24 per cent. as Muslim, 19 per cent. as Christian with Sikhs, Jains, Buddhists and Jews representing the remaining 1 per cent.. Hindus constitute the majority in all districts except Malappuram, where Muslims are a majority.

The State Government

Kerala is one of the twenty-nine states of the federal constitutional republic of India. India has a quasi-federal form of government where the Indian Parliament acts as the supreme legislative body. The Indian Parliament has two houses, the Rajya Sabha (Council of States) and the Lok Sabha (House of the People), that are composed of elected representatives apportioned across India's states. The Indian Parliament is able to legislate on matters of national importance such as foreign policy, defence, currency taxes as set out in the Union List of the Seventh Schedule to India's constitution.

Kerala is governed by a parliamentary system of representative democracy with universal suffrage. The voting age in India is 18 years.

Kerala's government is led by the Governor of Kerala (the "Governor") who is appointed by the President of India for a term of five years. The Governor acts as the constitutional head of state and appoints the leader of the majority party in the legislative assembly as the Chief Minister. The Chief Minister is the head of the elected government and heads the Council of Ministers, who are collectively responsible to the Legislative Assembly.

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Kerala's unicameral legislative assembly (the "Assembly") comprises members elected by the public and a speaker and deputy speaker elected by the Assembly. Elections to the Assembly are held every five years. The Assembly is comprised of 140 elected members and a nominee of the Governor from the Anglo-Indian community. The Assembly is responsible for passing state laws and regulations with each bill requiring approval by the Governor before it can enter into law. Kerala's Assembly is able to legislate on matters referred to in the state list of the seventh schedule of the Constitution of India. Such matters include public order, health and agriculture.

Kerala has two principal political coalitions: the Communist Party of India led Left Democratic Front ("LDF") and the Indian National Congress led United Democratic Front ("UDF"). The last elections to the Assembly were held in 2016. Kerala is presently ruled by the LDF with Mr. Pinaraya Vijayan serving as the Chief Minister from 25 May 2016.

Social Development Indicators

Kerala has the highest human development index amongst all the states in India. Kerala has achieved improvements in material conditions of living, reflected in indicators of social development such as low levels of infant mortality, maternal mortality and population growth, high levels of literacy and life expectancy, and favourable social progress, health indices and sex ratio.

Human Development Index 2007-08 2014-15 Ranking

Kerala 1 1

Tamil Nadu 5 3

Maharashtra 4 4

Karnataka 9 8

Andhra Pradesh 11 9

Gujarat 8 10

Source: Niti Aayog / Indian Human Development Survey 2011-12 / Social Registry Service

Kerala also has the highest literacy rate amongst Indian states with an effective rate of 93.91 per cent. as of 2011, which contrasts with the national literacy rate of 72 per cent.. The female literacy rate of Kerala was 92 per cent. as of 2011, which contrasts with the national female literacy rate of 65 per cent.. Among districts within Kerala, Kottayam has the highest literacy rate with 97.2 per cent. and Pathanamthitta is just behind with 96.5 per cent. Wayanad has the lowest literacy rate of 89 per cent. All of Kerala's district literacy rates are above the national literacy rate. All districts have literacy rates higher than 90 per cent. except Palakkad (89.3 per cent.) and Wayanad (89 per cent.).

As of 2011, the difference between the lowest and the highest literary rate within Kerala is 8.2 per cent..

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Literacy Density of % of child Population Rate Population population Decada % l District/State Decada change 200 201 200 201 200 201 2001 2011 l of % 1 1 1 1 1 1 Growt h rate

Kerala 31,841,37 33,406,06 4.9 90.9 94 819 860 12 10 -2 4 1

Kasaragod 1,204,078 1,307,375 8.6 84.6 90.1 604 657 13 12 -1

Kannur 2,408,956 2,523,003 4.7 92.6 95.1 812 852 12 11 -1

Wayanad 780,619 817,420 4.7 85.2 89 366 384 13 11 -2

Kozhikode 2,879,131 3,086,293 7.2 92.2 95.1 122 131 12 11 -1 8 6

Malappuram 3,625,471 4,112,920 13.4 89.4 93.6 102 115 15 14 -1 1 7

Palakkad 2,617,482 2,809,934 7.4 84.3 89.3 584 627 12 11 -1

Thrissur 2,974,232 3,121,200 4.9 92.3 95.1 981 103 11 10 -1 1

Ernakulam 3,105,798 3,282,388 5.7 93.2 95.9 101 107 11 9 -2 2 2

Idukki 1,129,221 1,108,974 -1.8 88.7 92 259 255 12 10 -2

Kottayam 1,953,646 1,974,551 1.1 95.8 97.2 885 895 11 9 -2

Alappuzha 2,109,160 2,127,789 0.9 93.4 95.7 149 150 11 9 -2 2 4

Pathanamthitta 1,234,016 1,197,412 -3 94.8 96.5 468 452 10 8 -2

Kollam 2,585,208 2,635,375 1.9 91.2 94.1 103 106 11 10 -1 8 1

Thiruvananthapura 3,234,356 3,301,427 2.1 m

Source: Census of India 2001 and 2011; Kerala State Budget documents, Government of Kerala website

A comparative chart of Kerala's strong performance on key social development indicators when compared to other states in India as per the 2011 census and the latest data compiled by the Niti Aayog, Government of India, is provided below. The social development indicators include overall literacy rate, female literacy rate, sex ratio, child sex ratio, birth rate, infant mortality rate, maternal mortality rate and life expectancy.

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Overall Literacy Rate 2011 Census Female Literacy Rate 2011 Census 94% 92% 87% 79% 76% 74% 74% 71% 67% 68% 65% 60%

Kerala TN GJ KA AP India Kerala TN GJ KA AP India Source: Niti Aayog / Planning Commission TN – Tamil Nadu; GJ – Gujarat; KA – Karnataka; HP – Himachal Pradesh; AP – Andhra Pradesh

Sex Ratio - 2011 Census Child Sex Ratio - 2011 Census 1084 964 948 943 939 996 993 973 914 940 919 890

Kerala KA TN AP India GJ Kerala TN AP KA GJ India Source: Niti Aayog / Planning Commission Sex ratio is number of female per 1,000 males. TN – Tamil Nadu; GJ – Gujarat; KA – Karnataka; HP – Himachal Pradesh; AP – Andhra Pradesh

Birth Rate 2016 (%) Infant Mortality Rate 2016 (per 1000 live births) 34 34 20.1% 20.4% 30 17.6% 16.4% 14.3% 15.0% 24 17

Kerala TN AP KA GJ India Kerala TN KA GJ AP India

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Maternal Mortality Rate 2011-13 Life Expectancy (Yrs) - 2011 Census (per 1 Lakh live births) 167 75

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112 71 92 79 69 69 69 61 68

Kerala TN AP GJ KA India Kerala TN KA GJ AP India

Health Index (Niti Aayog) 2015-16

77 65 63 62 61

Kerala Punjab TN GJ HP

Source: Niti Aayog / Planning Commission TN – Tamil Nadu; GJ – Gujarat; KA – Karnataka; HP – Himachal Pradesh; AP – Andhra Pradesh.

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Economic Indicators

Kerala had the highest per capital income (NSDP) in 2016-17 as compared to some of the other states such as Karnataka, Gujarat, Tamil Nadu and Andhra Pradesh. Kerala is also a consumption led State. This is visible in the average rural monthly per capita consumer expenditure numbers for 2016-17 where the State has higher per capita consumption expenditure compared to other key states. The following chart shows the per capita NSDP of Kerala at Constant Prices in 2016-17.

Per Capita Income (Net SDP) 2016-17 (₹ 1000s) 163 157 157 153 122

Kerala KA GJ TN AP

Source: Niti Aayog / Planning Commission, RBI TN – Tamil Nadu; GJ – Gujarat; KA – Karnataka; HP – Himachal Pradesh; AP – Andhra Pradesh

2356 Avg Rural Monthly Per Capita Consumer Expenditure (INR) 2011-12

1571 1563 1430 1395 1287

Kerala TN AP GJ KA India

Source: Niti Aayog / Planning Commission, RBI TN – Tamil Nadu; GJ – Gujarat; KA – Karnataka; HP – Himachal Pradesh; AP – Andhra Pradesh.

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Social Progress Index

The global social progress index is an aggregate index of social and environmental indicators that capture social progress. It ranks India as 93rd out of 128 countries.

The Institute for Competitiveness of India released a research report in 2017 called the "Social Progress Index: States of India, the first edition of a sub-national Social Progress Index for India". It was conducted in collaboration with the "social progress imperative" and Professor Michael E. Porter of Harvard Business School. It analysed the social progress of 28 Indian states and one union territory (Delhi) for the period 2005– 2016 by applying the social progress index framework. The framework outlines three broad categories of social progress: (i) basic human needs, (ii) foundations of wellbeing and (iii) opportunity. Kerala was the strongest performer with a score of 68. The success is largely attributed to the state's investments in social sectors like education and health over the long term.

Social Progress Index 2017

68 65 60 57 56

Kerala TN KA GJ AP

Source: 2017 Social Progress Index for States of India. TN – Tamil Nadu; GJ – Gujarat; KA – Karnataka; HP – Himachal Pradesh; AP – Andhra Pradesh.

Poverty alleviation and decentralised governance

Amongst the states in India, Kerala has the second lowest percentage of population below the poverty line. The poverty line is the minimum level of income deemed adequate in a particular country to meet a person's daily basic needs. According to the latest data from the RBI in 2011-12, Kerala had 7.05 per cent. of its population falling below the poverty line as opposed to India's national average of 21.92 per cent. Such low rates of poverty in Kerala can be attributed to Kerala's commitment to land reforms, education, health care, pension schemes, public distribution system and decentralisation of governance.

Kerala also runs a successful poverty eradication and women empowerment programme entitled "Kudumbashree". This programme was set up in 1997 by the State Poverty Eradication Mission of the Government of Kerala following the recommendations of a three member task force appointed by the State Government. Kudumbashree consists of a three tier structure with neighbourhood groups ("NHG") at the primary level, area development societies ("ADS") at the ward level and community development societies ("CDS") at the local government level. It is one of the largest women's networks in the world, with 2.77 lakhs NHGs, almost 20,000 ADSs and over 1,000 CDSs participating. Kudumbashree is the largest women movement in Asia with a membership of 41 lakhs. Kudumbashree supports women from poor backgrounds by providing microcredit loans and women empowerment initiatives including vocation training, education and healthcare.

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Kerala's local governments receive development funds from the state's plan allocation using a formula based approach for implementing schemes developed at a local level. The allocation of funds from the State Government to local governments is divided into three categories – general sector, scheduled caste sub plan and tribal sub plan. The local governments have absolute discretion in developing and implementing projects subject to the State Government's plan guidelines. Allocation of funds to local governments is decided by the State Government based on the recommendations of the State Finance Commissions. State Finance Commissions are set up every five years.

Emigration and Remittances

Kerala is also regarded as one of the most cosmopolitan states in India with systematic growth in emigration from Kerala to countries in the West and the Gulf. This trend has been a result of historic, cultural, demographic and political factors. While the Gulf remains a key receiving nation, trends indicate a slow and gradual shift to other regions, particularly South East Asia and North America, with Africa seen as an emerging destination. There has also been a corresponding growth in return emigration. The table below shows the number of the population emigrating from Kerala and the corresponding number of return emigration back to Kerala.

Emigration (EMI) Return Emigration (REM) People in lakhs

24.0 22.8 21.9 22.5

18.4

13.6 12.5 11.6 11.5 10.4 8.9 7.4

1998 2003 2008 2011 2014 2016

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala

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Non Resident Keralite - Lakhs 36.53 33.51 34.31

27.32

21.01

1998 2003 2008 2011 2014

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala

Kerala receives a significant share of remittances from the money sent back by the non-resident Keralites ("NRKs") to their families residing in Kerala. As per the latest results of the survey published by the RBI on the inward remittances received by India during 2016-17, Kerala accounted for approximately 19 per cent. of the total inward remittances received by India. Kerala is ranked highest for inward remittances above larger states such as Maharashtra, Karnataka and Tamil Nadu which accounted for 16.7 per cent., 15 per cent. and 8 per cent. of the total inward remittances in India respectively.

Remittances do not count towards Kerala's Gross State Domestic Product as they form a part of the national income, however, they still play an important role in Kerala's economy. 87.7 per cent. of NRKs are engaged in economic activities. In terms of equivalent size comparables, Kerala's remittances in 2014 were: 36.3 per cent. of the Net State Domestic Product ("NSDP"); 1.2 times the revenue receipts of the State Government; five times the amount received from the Central Government as central transfers; 1.5 times Kerala's annual expenditure and 60 per cent. of Kerala's public debt.

Kerala has experienced significant direct and indirect benefits as a result of remittances. The construction and consumer durables sectors have been important direct beneficiaries. The education and healthcare sectors have been indirect beneficiaries. Household remittances, where NRKs transfer funds to their families in Kerala has a positive impact on Kerala's per capita income. The per capita income was 36.7 per cent. higher in 2014 when household remittances were included. The per capita income not including remittances was ₹63,491, and including remittances it was ₹86,180.

The State Government has set up the Department of Non-Residential Keralite Affairs in order to bring Keralites living outside India under one platform. The Department of Non-Residential Keralite Affairs also hosted an event, the "Loka Kerala Sabha" in 2018 to involve and seek the participation of NRKs in the development of Kerala.

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71,142 Total Remittance to Kerala (₹ Crore) 49,695 43,288

18,465 13,652

1998 2003 2008 2011 2014

Source: Economic Review 2016, Kerala State Planning Board, Budget, Government of Kerala; Kerala Migration Survey 2014

Household Remittance to Kerala (₹ Crore) 24,374

15,129 12,511 7,965 3,530

1998 2003 2008 2011 2014

Source: Economic Review 2016, Kerala State Planning Board, Budget, Government of Kerala; Kerala Migration Survey 2014, 2016

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THE KERALA ECONOMY

Kerala's economy was managed as a democratic socialist welfare economy between 1947 and the 1990s. Subsequently, Kerala has liberalised its economy and reduced restrictions on free trade and foreign direct investment. Kerala's economic growth has trended above the Indian national average until 2015-16. While the growth rate of the Indian economy was higher than Kerala's Gross State Domestic Product ("GSDP") in 2015-16 at 8 per cent., the growth rate of Kerala's economy at 7.41 per cent. in 2016-17 surpassed the national growth rate in 2016-17.

Gross State Domestic Product

The quick estimate of the GSDP at constant prices as per 2011-2012 level (the "Constant Price") is ₹48,087,791 lakh during 2016-17 as against the provisional estimate of ₹44,769,237 lakh during 2015-16, registering a growth rate of 7.41 per cent. in 2016-17 compared to 6.60 per cent. in 2015-16. This growth rate of 7.41 per cent. is higher than India's growth rate of 7.1 per cent. in the same period.

GSDP (₹ Crore) 690,000 620,000 590,000 530,000 470,000

2013-14 2014-15 2015-16 2016-17 2017-18RE

Source: Economic Review 2017, Kerala State Planning Board, Budget, Government of Kerala; GSDP - Gross State Domestic Product

8.00 7.41 7.00 6.50 6.60 6.00

5.00 4.26 3.89 4.00

3.00 Percentage 2.00 1.00 0.00 2012-13 2013-14 2014-15 2015-16 2016-17 Year

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Source: Department of Economics and Statistics, Government of Kerala

The quick estimate of NSDP at factor cost at Constant Prices is ₹44,051,533 lakh in 2016-17 compared to the provisional estimate of ₹40,906,975 lakh during 2015-16, recording a growth rate of 7.69 per cent.

Income (₹ Lakh) Growth Rate (in per cent) Sl. Item No 2015-16 2016-17 2017-18 2015-16 2016-17 2017-18 (PE) (QE) (BE) (PE) (QE) (BE)

1 Gross State Domestic Product

1.1 At Constant (2011-12) Prices 44,769,237 48,087,791 51,732,465 6.60 7.41 7.58

2 Net State Domestic Product

2.1 At Constant (2011-12) Prices 40,906,975 44,051,533 - 7.05 7.69 -

3 Per Capita GSDP

3.1 At Constant (2011-12) Prices 131,086 140,107 149,979 6.08 6.88 7.05

4 Per Capita NSDP

4.1 At Constant (2011-12) Prices 119,763 128,347 - 6.52 7.15 -

Sources: Department of Economics and Statistics; Government of Kerala; PE - Provisional Estimate, QE - Quick Estimate, BE - Budgeted Estimate As per the quick estimates, the per capita GSDP at Constant Prices in 2016-17 was ₹140,107 lakhs as against the provisional estimate of ₹131,086 lakhs in 2015-16, recording a growth rate of 6.88 per cent. in 2016-17.

At Constant Prices, the quick estimates of per capita NSDP in 2016-17 was ₹128,347 lakhs as against provisional estimate of ₹119,763 lakhs in 2015-16, recording a growth rate of 7.15 per cent. in 2016-17. During the period from 2012-13 to 2016-17, the per capita income of Kerala at Constant Prices was significantly higher than the per capita national income. In 2016-17, per capita income of Kerala was ₹128,347, more than 50 per cent. higher than the national per capita income of ₹82,269.

Economic Sectors and Growth Sectors

Primary Sector

Agriculture

Kerala's primary sector is dominated by agriculture with coconut, pepper, cardamom, rice, ginger, coffee, tea, rubber and cashew being key products for domestic and export purposes. The livestock and fishery sectors also contribute significantly to Kerala's primary sector. The share of livestock in Gross State Value Added ("GSVA") in Kerala's agriculture sector is nearly 29 per cent. As India is the second largest fish producing nation in the world, the fishery sector is a significant contributor to the economy of Kerala. In Kerala, fishery and aquaculture contribute around 8.5 per cent. of the GSVA.

The majority of Kerala's food and non-food consumables are imported from neighbouring states. Kerala is therefore price sensitive to macro-economic events across India. Between 2014 and August 2016, the State Government estimates the percentage variation in Average Consumer Price Index of Kerala's inflation to have remained in the 5-6 per cent. range.

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The agriculture sector in Kerala is facing many challenges with regard to growth. According to data from the Directorate of Economics and Statistics ("DES"), the year-on-year growth rate of agriculture and allied activities were (-) 3.1 per cent. in 2012-13, (-) 3.8 per cent. in 2013-14, 0.75 per cent. in 2014-15, (-) 7 per cent. in 2015-16 and 2.5 per cent. in 2016-17. The share of agriculture and allied sectors in total GSVA of Kerala has also declined from 13.7 per cent. in 2012-13 to 10.5 per cent. in 2016-17.

The key initiatives undertaken in Kerala's annual plan 2017-18 were: integrated food crop production programme focusing on self-sufficiency in vegetable production, enhancing rice production, comprehensive land cultivation, promotion of organic farming and safe food production, modernisation and establishment of labs, rejuvenation of spices economy, crop health management covering pests and disease surveillance and application of drones to assess crop health, new plant health clinics, improved service delivery by establishing 20 new agriculture service centres, crop insurance, revival package for pepper and setting up of special agricultural zones for five crops (rice, vegetables, coconut, banana and flowers).

Budget Allocation 2017-18 ₹3,230 Crore

13% 18% Fishery 3% Agri

Soil & Water

Livestock 66%

Source: Economic Review 2017 - Kerala State Planning Board

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Share in Overall Production in India 2014-15

Rubber 91%

Coir 85%

Pepper 40%

Coconut 24%

0% 20% 40% 60% 80% 100%

Source: Economic Review 2017 - Kerala State Planning Board

National Ranking based on Production Volume 15 14

9 10 8 7

0 Milk Egg Meat Poultry

Source: Economic Review 2017 - Kerala State Planning Board

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Kerala's Share in Exports from India 2016-17

Spices 9%

Marine 14%

Tea 30%

Cashew 44%

0% 10% 20% 30% 40% 50%

Source: Economic Review 2017 - Kerala State Planning Board

Secondary Sector

Manufacturing

The principal contributor to Kerala's secondary sector is the manufacturing industry. The quick estimates of Kerala's GSDP for 2016-17 by Department of Economics and Statistics shows that the manufacturing sector in Kerala grew 2.2 per cent. at Constant Prices in 2016-17 compared to 12 per cent. in the previous year. The provisional estimate of growth of the manufacturing sector for 2017-18 at current prices is 9.5 per cent. The provisional estimate of growth of the manufacturing sector for 2017-18 at Constant Prices is 5.6 per cent. The share of the manufacturing sector to GSDP at Constant Prices in 2016-17 was 10.2 per cent.. The income from the manufacturing sector in Kerala, after registering a 12.5 per cent. growth in 2012-13, declined in 2013-14 by 4.6 per cent.. In 2014-15, income from manufacturing grew 2.9 per cent..

The State Government provided ₹3,007.3 crore for the industries sector during Kerala's 12th five-year plan and expenditure was ₹2,528 crore (84.1 per cent.). In annual plans 2016-17 and 2017-18, the State Government provided was ₹658.9 crore and ₹888.8 crore respectively. The expenditure in Annual Plan 2016-17 was ₹576.7 crore (87.5 per cent.) and in 2017-18, the expenditure reported as of October 2017 was ₹335.4 crore (37.7 per cent.). The amount provided in the annual plan 2017-18 for industry sector was 35 per cent. higher than the previous year.

Traditional Industries

The handicraft industry is one of the traditional industries of Kerala. Kerala has a tradition of making handicrafts with materials such as ivory, bamboo, palm leaves, seashells, wood, coconut shells, clay, cloth, coir, metals, stone and lacquer ware. The agencies that promote the handicraft industry in Kerala are the Kerala State Handicrafts Apex Co-operative Society, the Handicrafts Development Corporation and the Artisans Development Corporation. Bamboo is a highly productive renewable and eco-friendly resource and has several applications. It is widely used in environmental protection, as a nutrient food and as a high-value construction material, amongst others. 28 species of bamboo can be found in Kerala. It is estimated that approximately 1 lakh of people in Kerala are dependent on bamboo for their livelihood. A unique feature of Kerala is that 67.3 per cent. of the extracted bamboo comes from home gardens rather than from forests.

The textile industry plays an important role in the economic growth of Kerala through its contribution to industrial output, employment generation and export earnings. In India, handloom weaving is one of the largest economic activities after agriculture, providing direct and indirect employment to more than 43 lakh weavers and allied workers. This sector accounts for approximately 15 per cent. of the cloth production in India and

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contributes to the export earnings of India. 95 per cent. of the world's hand woven fabric is produced in India. The textile industry accounts for 10 per cent. of manufacturing production in India, 2 per cent. of India's GDP and 13 per cent. of India's export earnings.

India is the largest producer of coir in the world, accounting for more than 80 per cent. of the production of coir fibre globally. The coir industry first emerged in Kerala in the 19th century. Kerala's long coast line, lakes, lagoons and backwaters provide the natural conditions required for retting, an important part in coir processing. With the expansion of coconut cultivation, the coir industry has grown in Tamil Nadu, Karnataka, Andhra Pradesh, Orissa, West Bengal, Maharashtra, Assam and Tripura.

Infrastructure and Transport

Transport plays an important role in the economic development of any region. India has an extensive road network, which provides mobility to millions of people every day. It has the third largest road network in the world being 48.8 lakh km in length. Other transport modes like inland waterways and coastal shipping are used for freight transport. With a coastline of 7,512 km, India has 12 major ports and 200 minor ports, of which only 30 ports handle cargo traffic.

Transport infrastructure of Kerala consists of 2.19 lakh km of road, 1,588 km of railways, 1,687 km of inland waterways and 18 ports. Roads play a prominent role in public transportation over other modes of transportation owing to the geographic landscape of Kerala and its widely scattered habitation, with a low rural urban divide and limited geographical area of 38,863 sq. km. Kerala has a total fleet of 25,449 buses, of which 19,496 are private buses (77 per cent.) and 5,953 are KSRTC buses (23 per cent.). Private buses dominate transport in all districts of Kerala except Thiruvananthapuram. Kerala has a rail network of 1,257 km route length with a total track length of 1,588 km, operating under the control of Palakkad and Thiruvananthapuram railway divisions. In Kerala, there are many water bodies, including rivers, lakes, estuaries, backwaters etc.. These provide a basis for the inland water transport system which has a length of 1,895 km. Transportation by inland water transport is considered an efficient and environment-friendly mode of transportation. Transportation by coastal shipping is appropriate for bulk and long-haul traffic. Kerala has the advantage of a 585 km coast line.

Kerala has one major port at Kochi and 17 minor ports. Kerala has three international airports; Thiruvananthapuram, Kochi and Kozhikode. All civilian airports in Kerala are international airports. Upon completion of the Kannur International airport, Kerala and Tamil Nadu will have the highest number of international airports in IndiaThe State Government has embarked on the "Kochi Metro Rail Project" ("KMRP") for Kochi and "Light Metro Project" for Thiruvananthapuram and Kozhikode cities. The "Vizhinjam International Deep-water Multipurpose Seaport" is an important project for Kerala which started in 2015. This port is being developed as the transhipment hub to cater to large mother vessels. Vizhinjam is an all-weather port that will be able to handle new generation mother vessels of size range 18,000 to 22,000 twenty-foot equivalent unit.

Roads are maintained by various agencies in Kerala. These include local self-governments, the Public Works Department (Roads and Bridges) and National Highways Authority of India and various municipalities and corporations. Other agencies dealing with the transport sector are the National Transportation Planning and Research Centre, the Motor Vehicles Department, Kerala State Road Transport Corporation, Roads and Bridges Development Corporation of Kerala, Kerala State Transport Project, Kerala Road Fund Board and Road Infrastructure Company Kerala (RICK) Ltd.

The Indian railway system is the second largest network in the world. It provides one of the cheapest means of transport in India. The railway network comprises 90,803 km of track over a route of 66,030 km and 7,137 stations. It is the fourth largest network in the world after the USA, Russia and China. Kerala has 1,588 km of total track. The Thiruvananthapuram and the Palakkad divisions of the southern railway zone are the administrative divisions. The Palakkad division operates 76 express and 49 passenger trains and carries 2.16 lakh of passengers daily. The Thiruvananthapuram division operates 80 express trains and 60 passenger trains and carries 2.6 lakh of passengers daily.

The KMRP is an important project of the State Government designed to improve the transportation network of the city of Kochi. The project is implemented through the Kochi Metro Rail Ltd ("KMRL"), which is a special purpose vehicle jointly owned by the State Government and Central Government with equity participation.

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KMRL has signed an agreement with the Central Government and the Delhi Metro Rail Corporation Ltd for executing the project in accordance with a tripartite agreement signed between the Central Government, the State Government and KMRL.

Energy

In India, electricity from thermal energy is the predominant source of power. It constitutes approximately 67 per cent. of the total installed capacity of India as of 31 August 2017. The total installed capacity for power generation in India as of 31 August 2017 is 3,29,226 mw. More recently, renewable sources have emerged as the second largest electricity source and hydro is the third largest electricity source in India.

Kerala generates power from four sources; hydroelectricity, thermal, wind and solar. Hydroelectricity and thermal power generations account for the majority of generated power. Total installed capacity of power in Kerala as of March 2017 is 2,961.11 mw, of which hydroelectricity contributed the major share of 2,107.96 mw (71.19 per cent.), thermal contributed 718.46 mw, wind contributed 59.27 mw and solar contributed 75.42 mw.

The Transgrid 2.0 project is focussed on the long term stability of Kerala's power grid to ensure quality and reliable power transmission in Kerala. The State Government has given administrative sanction for the Transgrid 2.0 project at an estimated cost of ₹6,375 crore over a period of five years. Transgrid 2.0 will be executed mainly in two phases. The project has been approved for funding of ₹5,200 crore by the Issuer.

Budget 2017-18 (₹890 Crore) 0.2%

Traditional 45.5% Medium & Large 54.3% Mines / Geology

Source: Economic Review 2017 - Kerala State Planning Board

VSVA - Gross State Vale Added

Tertiary Sector

Tourism

The tertiary sector is a major sector of Kerala's economy, constituting more than 60 per cent. of Kerala's GSVA in 2016-17 at both current prices and Constant Prices.

Tourism is one of Kerala's main economic sectors, contributing to about 10 per cent. of Kerala's GSDP. Kerala is recognised internationally as a tourist destination. The tourism sector generates income and creates employment opportunities, particularly in the areas of trade, transport and hospitality. Kerala's share in India's tourism sector was 11.79 per cent. in 2016 and received multiple awards: the PATA Gold award for Visit Kerala; the Lonely Planet Travel Award for best destination for families; the Conde-Nast traveller readers award for best leisure destinations 2016; the Outlook traveller award for best destination for wellness and spirituality

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2017; and the Better holiday award for India's favourite waterfront destination 2017 among others. Kerala's 13th five-year plan aims to double the arrival of foreign tourists, increase the arrival of domestic tourists by 50 per cent. and create approximately 400,000 jobs in the sector.

Kerala Tourism Growth % India Tourism Growth %

20% 18% 16%

11% 14% 10% 10% 12% 8% 8% 6% 6% 9% 8% 6% 6% 5% 5% -7% 1 2 3 4 5 6 7 8 9 10

-4%

Source: Economic Review 2017 – Kerala State Planning Board, State Budget Documents

Foreign Tourists 2016 (1.04 Million)

8% Saudi Arabia 11% North America 46% Europe 16% UK Australia Others 15% 4%

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Source: Economic Review 2017 – Kerala State Planning Board, State Budget Documents

Tourism Revenue (₹ Crore) 29,700 26,700 24,900 22,900 19,00020,400 17,300 13,10013,200 11,400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Economic Review 2017 – Kerala State Planning Board, State Budget Documents

Information Technology and Communication

Information technology also plays an important role in Kerala's tertiary sector. The information and communication technology sector has been playing an important role in the development of Kerala. Currently, Kerala has the highest mobile penetration in the country with approximately 320 lakh connections and the highest internet penetration, providing approximately 20 per cent. of households with broadband connection and an additional 15 per cent. with mobile connection. Kerala is one of the significant information technology destinations in India and has a role in the digital economy in India. Kerala was declared the first digital state in the country in February 2016. The State Government's Information Technology Policy of 2017 aims to achieve a total digitally literate society by 2020.

The major agencies involved in the implementation and promotion of information technology related activities in Kerala are Kerala State Information Technology Mission, Indian Institute for Information Technology and Management – Kerala, Technopark, Infopark, Cyberpark, Kerala State Information Technology Infrastructure Ltd, International Centre for Free and Open Source Software, Kerala Start-up Mission and Centre for Development of Imaging Technology.

The State Government provided ₹1,623.12 crore during the 12th five-year plan for the development of core information technology infrastructure, information technology enabled services and e-governance activities. The expenditure incurred was ₹1,159.74 crore (71.5 per cent.). In the annual plan 2017-18, the State Government provided was ₹5,49.31 crore for the sector, which is 13.76 per cent. higher than the previous year.

The State Government has announced a new communication infrastructure project, Kerala Fibre Optic Network ("K-FON") to enhance communication in rural areas, provide high speed connectivity to all government and educational institutions and offer internet to the economically backward communities in Kerala. The universal internet facility will be made available to all citizens and government institutions through a new optic fibre pathway. Administrative sanction was granted for ₹1,028.20 crore and a detailed project report has been approved by the Issuer for ₹823.00 crore.

Education

Kerala has the lowest dropout rate of school students of all Indian states. In 2016-17, dropout ratio among school students in Kerala was 0.22 per cent. The dropout ratio is lower in primary education. The dropout rate is highest among high school students.

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Sarva Shiksha Abhiyaan was introduced in 2000-01 as a flagship programme of the Central Government to provide useful and relevant elementary education for all children in the age group of 6 to 14 by 2010. The programme seeks active participation of the community in the management of schools. It provides physical infrastructure, free text book for children and encourages enrolment of girls and teacher training. The sharing of funds between the Central Government and the State Government was 75:25 in the 10th five-year plan. The funding pattern has been modified to 60:40.

There were 2,073 higher secondary schools in 2016 in Kerala. Of these, 833 (40.18 per cent.) are State Government schools, 854 (41.2 per cent.) are aided schools and the remaining 386 (18.62 per cent.) are unaided and technical schools. Among the districts, Malappuram has the largest number of higher secondary schools (248) in Kerala followed by Ernakulam (209) and Thrissur (204). There are 14 universities in Kerala. There are 180 engineering colleges in Kerala with an intake of 57,544 in 2017.

Education is one of the main areas in Kerala's 13th five-year plan. The main area of focus is on the quality of education, both at school level and higher education level. Funds have been allocated by the State Government to strengthen the education project, "Pothu Vidyabhyasa Samrakshana Yajnam" (or the "public education rejuvenation campaign") to meet the changing requirements and to upgrade classrooms and curriculum.

Healthcare

There has been a significant focus on the healthcare sector by the State Government which has resulted in an increased allocation to the sector in successive budgets. Easy accessibility and coverage of medical care facilities in Kerala is considered to havepositively influenced the healthcare sector in Kerala. Kerala has made significant gains in health indices such as high life expectancy, low infant mortality rate, birth rate and death rate.

The Central Government revised the National Health Policy in 2017. It addresses the issues of universal health coverage, reduction in maternal mortality and infant mortality and access to free drugs and diagnosis. The National Health Policy 2017 aims to, amongst others: (i) increase health expenditure by the Central Government from 1.15 per cent. of GDP to 2.5 per cent. of GDP by 2025, (ii) increase state sector health spending to more than 8 per cent. of each state's budget by 2020, (iii) increase life expectancy at birth from 67.5 per cent. to 70 per cent. by 2025 and (iv) ensure that more than 90 per cent. of newborns are fully immunised by one year of age by 2025. During the period 2013-14 to 2015-16, the share of contribution of the tertiary sector increased from 60.43 per cent. to 63.66 per cent.. However, the share of the primary sector decreased from 13.45 per cent. to 12.07 per cent. and the share of the secondary sector decreased from 25.81 to 24.27 per cent. during the same period. The contribution to GSVA (at current prices) of the tertiary sector increased from 62.59 per cent. in 2015-16 to 63.18 per cent. in 2016-17, and the contribution to GSVA (at current prices) of the primary sector increased from 12.82 per cent. in 2015-16 to 13.36 per cent. in 2016-17. During the corresponding period the contribution to GSVA (at current prices) of the secondary sector declined from 24.59 per cent. to 23.47 per cent..

In relation to the annual sectoral growth of GSDP, the tertiary sector recorded the highest rate of growth of 6.7 per cent. in 2016-17 at Constant Prices followed by the primary sector at 5.19 per cent. and the tertiary sector at 2.88 per cent. During the same period, the growth rate in the primary sector increased from -11.2 per cent. to 5.19 per cent., primarily due to the increase in production of certain crops, live stocks, fishing and aquaculture and mining and quarrying.

In 2016-17, at current prices, the primary sector recorded a growth rate of 13.25 per cent., the tertiary sector a growth rate of 9.72 per cent. and the secondary sector a growth rate of 3.74 per cent.. The driving force for the growth of the tertiary sector is primarily the growth in the transport, storage, public administration, communication and service related broadcasting.

During 2016-17, the contribution from primary, secondary and tertiary sectors to the GSVA at Constant Prices was 11.27 per cent., 25.59 per cent. and 63.14 per cent. respectively.

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Sectoral distribution of GSDP

GSDP at Constant Prices 2015-16 (PE) 2016-2017 (QE) (in ₹ lakh unless specified)

GSDP 44,769,237 48,087,791

Primary Sector (-do) 4,548,687 4,784,623

Secondary Sector (-do) 10,562,779 10,866,742

Tertiary Sector (-do) 25,123,807 26,807,523

Income per capita (₹) 131,086 140,107

Source: Government of Kerala; PE - Provisional Estimate, QE - Quick Estimate

GSVA Composition 2016-17

13%

Primary

23% Secondary Tertiary 63%

Source: Economic Review 2017, Kerala State Planning Board, Budget, Government of Kerala; GSVA - Gross State Value Added

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Primary Sector GSVA Composition 2016-17

13%

13% Crops 41% Livestock Forestry Fishing

29%

Source: Economic Review 2017, Kerala State Planning Board, Budget, Government of Kerala; GSVA - Gross State Value Added

Secondary Sector GSVA Composition 2016-17

38% Manufacturin 58% g Construction

29%

Source: Economic Review 2017, Kerala State Planning Board, Budget, Government of Kerala; GSVA - Gross State Value Added

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Tertiary Sector GSVA Composition 2016-17

20% 29% Trade & Hospitality

Real Estate

13% Transport & Communication Fin Services & Public Admin

Other 14% 24%

Source: Economic Review 2017, Kerala State Planning Board, Budget, Government of Kerala; GSVA - Gross State Value Added

Gross State Value Added by Economic Activity (At Constant Prices) Base Year 2011-12 (₹ in lakhs)

SI Item 2015-16 (PE) 2016-17 (QE) 2017-18 (AE) No.

1. Agriculture, forestry and fishing 4367362 4494127 4542889

1.1 Crops 2272133 2363463 2382668

1.2 Livestock 1282147 1309801 1333381

1.3 Forestry and logging 415132 415719 418119

1.4 Fishing and aquaculture 397949 405144 408721

2. Mining and quarrying 181325 290496 241042

Primary 4548687 4784623 4783931

3. Manufacturing 4224148 4316653 4558019

Electricity, gas, water supply & 4. 486300 493946 511287 other utility services

5. Construction 5852330 6056143 6230322

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Gross State Value Added by Economic Activity (At Constant Prices) Base Year 2011-12 (₹ in lakhs)

SI Item 2015-16 (PE) 2016-17 (QE) 2017-18 (AE) No.

Secondary 10562779 10866742 11299628

Trade, repair, hotels and 6. 6826690 7246495 7862772 restaurants

6.1 Trade & repair services 6212557 6599611 7181466

6.2 Hotels & restaurants 614133 646884 681305

Transport, storage, 7. communication & services 3639640 3964021 4355498 related to broadcasting

7.1 Railways 135407 145163 155620

7.2 Road transport 2476435 2587987 2697403

7.3 Water transport 20513 22015 23964

7.4 Air transport 101775 163822 263694

7.5 Services incidental to transport 56642 59322 62055

7.6 Storage 2820 3025 2973

Communication & services 7.7 846047 982688 1149789 related to broadcasting

8. Financial services 1992082 2158810 2339493

Real estate, ownership of 9. 6580299 6910579 7309055 dwelling & professional services

10. Public administration 1432092 1588091 1753932

11. Other services 4653006 4939527 5138188

Tertiary 25123807 26807523 28758938

12. TOTAL GSVA at basic prices 40235273 42458888 44842498

13. Taxes on Products 5105060 6086502 7256625

14. Subsidies on products 571096 457599 366658

15. Gross State Domestic Product 44769237 48087791 51732465

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Gross State Value Added by Economic Activity (At Constant Prices) Base Year 2011-12 (₹ in lakhs)

SI Item 2015-16 (PE) 2016-17 (QE) 2017-18 (AE) No.

16. Population ('00)* 341525 343221 344931

17. Per Capita GSDP (₹) 131086 140107 149979

PE - Provisional Estimate, QE – Quick Estimate, AE - Advanced Estimate, * Projected

Sources: (i) Directorate of Economics &Statistics, Thiruvanthapuram; (ii) Government of Kerala

GSDP by Economic Activity - share of sector and growth rate

% Shares of % Change over Previous Year Base Year 2011-12 sector in GSDP At Constant Prices

Sl. Industry of Origin/Year 2015-16 2016-17 2017-18 No

1. Agriculture, forestry and fishing 14.38 -5.02 2.90 1.09

1.1 Crops 8.63 -8.18 4.02 0.81

1.2 Livestock 3.34 0.16 2.16 1.80

1.3 Forestry and logging 1.27 0.67 0.14 0.58

1.4 Fishing and aquaculture 1.12 -7.75 1.81 0.88

2. Mining and quarrying 15.19 -67.19 60.21 -17.02

Primary -11.69 5.19 -0.01

3. Manufacturing 10.17 11.96 2.19 5.59

Electricity, gas, water supply & 4. 1.39 2.52 1.57 3.51 other utility services

5. Construction 15.78 1.88 3.48 2.88

Secondary 27.34 5.72 2.88 3.98

Trade, repair, hotels and 6. 15.82 3.87 6.15 8.50 restaurants

6.1 Trade & repair services 3.70 6.23 8.82

6.2 Hotels & restaurants 5.62 5.33 5.32

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% Shares of % Change over Previous Year Base Year 2011-12 sector in GSDP At Constant Prices

Sl. Industry of Origin/Year 2015-16 2016-17 2017-18 No

Transport, storage, 7. communication & services 8.32 7.12 8.91 9.88 related to broadcasting

7.1 Railways 7.20 7.20 7.20

7.2 Road transport 3.90 4.50 4.23

7.3 Water transport -5.16 7.32 8.85

7.4 Air transport 60.38 60.96 60.96

7.5 Services incidental to transport -11.09 4.73 4.61

7.6 Storage 9.57 7.28 -1.73

Communication & services 7.7 14.85 16.15 17.00 related to broadcasting

8. Financial services 4.25 8.37 8.37 8.37

Real estate, ownership of 9. 12.55 9.94 5.02 5.77 dwelling & professional services

10. Public administration 4.71 4.92 10.89 10.44

11. Other services 11.79 8.55 6.16 4.02

Tertiary 57.44 7.16 6.70 7.28

12. TOTAL GSVA at basic prices 4.27 5.53 5.61

13. Taxes on Products 24.81 19.22 19.22

14. Subsidies on products -16.21 -19.87 -19.87

15. Gross State Domestic Product 6.60 7.41 7.58

16. Population ('00)* 0.50 0.50 0.50

17. Per Capita GSDP (₹) 6.08 6.88 7.05

* Projected

Sources: Department of Economics and Statistics; Government of Kerala

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Foreign Trade

External trade in Kerala is mainly operated through the Cochin Port. The major items of trade are cashew, coir and coir products, tea, coffee, pepper, cardamom, ginger, other spices and spices oil, marine products, machinery, chemicals, coal, fertilisers and raw materials. The total traffic handled by Cochin Port during 2016-17, both coastal and foreign, was ₹250.07 lakh medium tonnes ("MT") registering an increase of 13.16 per cent. compared to ₹220.18 lakh MT in 2015-16. Out of the total traffic, exports accounted for ₹47.59 lakh MT and imports ₹202.48 lakh MT in 2016-17.

Cargo handled at Cochin Port from 2015-16 to 2016-17, in lakh MT

Traffic Export (lakh MT) Import (lakh MT)

2015-16 2016-17 2015-16 2016-17

Coastal 12.86 14.18 60.4 56.56

Foreign 26.28 33.41 121.44 145.92

Total 39.14 47.59 181.84 202.48

Source: Annual Report 2016, Cochin Port Trust.

Coastal and foreign exports through Cochin Port increased by 21.59 per cent. during 2016-17 with ₹47.59 lakh MT compared to ₹39.14 lakh MT in 2015-16. Coastal export increased from ₹12.86 lakh MT to ₹14.18 lakh MT and foreign export increased from ₹26.28 lakh MT to ₹33.41 lakh MT from 2015-16 to 2016-17. Total import during the above period was ₹202.48 lakh MT, which is 11.35 per cent. higher than during 2015-16. This is primarily due to increase in foreign import from ₹121.44 lakh MT to ₹145.92 lakh MT during the period. Coastal imports registered a decrease of 6.35 per cent. during this period.

Imports through Cochin Port continued to increase in 2016-17 to ₹202.48 lakh MT compared to ₹181.84 lakh MT in 2015-16 showing an increase of 11.36 per cent. Fertilisers and raw materials, iron and steel and machinery, newsprint, raw cashew nut, food grains, petroleum, oil and lubricants ("POL") are the main items of import. During 2016-17, import of fertilisers and raw materials slightly decreased by 0.41 per cent. The growth rate of import of miscellaneous items which includes POL increased to 11.74 per cent. during 2016-17 from 4.63 per cent. in 2015-16. Iron, steel and machinery import decreased by 35.33 per cent. in 2016-17 compared to an increase of 44.47 per cent. in 2015-16. During the review period, ₹174344 MT of food grains were imported through Cochin Port. There was no import of newsprint reported during 2015-16, but import of raw cashew nut decreased by 44.21 per cent. All items except fertilisers and raw materials, miscellaneous items and raw cashew nut showed a decreasing trend of imports during the review period.

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PUBLIC FINANCE

Tax System

On introduction of GST, the following state taxes were subsumed into GST: value added tax ("VAT"), luxury tax, tax on paper lottery, entry tax, central sales tax on goods, entertainment and amusement tax, taxes on advertisement, purchase tax, taxes on lotteries, betting and gambling. Although local bodies can levy entertainment tax in addition to GST, Kerala does not currently levy such tax.

The details of GST collection from August 2017 to March 2018 are provided below.

GST Collection as per return (₹ crore)

Month Central Integrated State CESS TOTAL Government Goods and Government Goods and Service Tax Goods and Service Tax (IGST) Service Tax (CGST) (SGST)

August 2017 474.93 249.95 716.47 10.05 1451.40

September 2017 482.91 243.68 807.05 13.55 1547.19

October 2017 457.82 254.28 740.47 7.64 1460.21

November 2017 410.28 215.79 610.30 11.90 1248.27

December 2017 395.55 238.51 600.51 6.28 1240.85

January 2018 413.64 244.36 700.39 11.29 1369.68

February 2018 388.91 191.17 619.68 5.6 1205.36

March 2018 403.60 228.16 604.24 4.7 1240.70

Total 3,427.64 1,865.90 5,399.11 71.01 10,763.66

Source: Department of Tax, Government of Kerala

Month SGST IGST utilised for Other VAT Total payment of SGST Collection excluding LNG

August 2017 716.47 451.74 132.66 1300.87

September 2017 807.05 763.46 60.29 1630.8

October 2017 740.47 822.64 62.25 1625.36

November 2017 610.30 801.36 47.00 1458.66

December 2017 600.51 795.95 83.83 1480.29

January 2018 700.39 826.00 66.94 1593.33

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Month SGST IGST utilised for Other VAT Total payment of SGST Collection excluding LNG

February 2018 619.68 808.82 31.98 1460.48

March 2018 604.24 794.11 104.97 1503.32

Total 5399.11 6064.08 589.92 12053.11

Source: Department of Tax, Government of Kerala

As per GST (Compensation to States) Act, 2017, states are eligible for compensation from the Central Government if the State Goods and Service Tax ("SGST") collection achieved by that state in a given financial year, is less than the projected revenue for such year. The projected revenue for a state is computed on the basis of 14 per cent. growth on the revenue received by such state in 2015-16, as the base year. On the basis of the 2015-16 collection, considering 14 per cent. growth for the year 2017-18, the estimated amount per month to achieve the projected growth is fixed at ₹1,822 crores.

Compensation Details

Month Compensation Received (₹ crore)

July 2017 810.00 August 2017

September 2017 395.00 October 2017

November 2017 713.00 December 2017

January 2018 567.00 February 2018

March 2018 330.00

Source: Department of Tax, Government of Kerala

Normally states have no power to alter the rate of tax of any supply by itself. Any change in rates and GST rules can be made only with the recommendation of the GST Council.

Trend in State Taxes and Duties

Accounts RE BE SI Item No. 2015-16 2016-17 2017-18 2018-19

1 Central Goods and Services Tax 0.70 1.00

Percentage to total 0.00 0.00

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Accounts RE BE SI Item No. 2015-16 2016-17 2017-18 2018-19

2 State Goods and Services Tax 16200.00 27000.00

Percentage to total 33.18 46.08

3 Taxes on Agricultural Income 2.01 2.37 3.06 3.58

Percentage to total 0.01 0.01 0.01 0.01

4 Land Revenue 182.28 124.15 139.08 157.79

Percentage to total 0.47 0.29 0.28 0.27

5 Stamps & Registration 2877.73 3006.59 3331.19 3766.53

Percentage to total 7.38 7.13 6.82 6.43

6 State Excise Duties 1964.15 2019.30 2254.35 2804.42

Percentage to total 5.04 4.79 4.62 4.79

7 Sales Tax & VAT 30736.78 33453.49 22741.50 19791.10

Percentage to total 78.82 79.32 46.58 33.78

8 Taxes on vehicles 2814.30 3107.23 3756.75 4683.41

Percentage to total 7.22 7.37 7.69 7.99

9 Taxes on goods and passengers 0.01 0.01 0.03 0.03

Percentage to total 0.00 0.00 0.00 0.00

10 Taxes and Duties on Electricity 57.66 63.30 123.45 186.02

Percentage to total 0.15 0.15 0.25 0.32

11 *Other taxes and Duties on Commodities & 360.22 399.94 273.26 194.56 services

Percentage to total 0.92 0.95 0.56 0.33

12 Total (1 to 11) 38995.15 42176.38 48823.37 58588.44

Index 664 718 832 998

* Includes other taxes on Income and expenditures (Employment tax etc.) taxes on immovable property other than agricultural land (building tax) and other taxes and duties on commodities and services. RE - Revised Estimate; BE - Budgeted Estimate Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala

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Trends in Tax and Non Tax Revenue

(in ₹ crore)

Trend in Total Revenue

102801 88267 75612 69033 57950 49177 44137 38010

8731

2000-01 2011-12 2012-13 2014-15 2016-17 2013-14 2015-16

2018-19BE 2017-18RE

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala

State Tax Non Tax Central Transfer

100% 90% 24% 27% 31% 31% 31% 80% 70% 11% 13% 12% 13% 13% 60% 65% 61% 50% 56% 56% 55% 40% 30% 20% 10% 0% 2013-14 2014-15 2015-16 2016-17 2017-18 RE

Source: Economic Review 2017 - Kerala State Planning Board, Budget Govt. of Kerala

130

14.0% Revenue Receipts / GDSP (%) 12.9% 12.3% 11.7% 12.0% 11.0% 10.6% 10.0%

8.0%

6.0%

4.0%

2.0%

0.0% 2013-14 2014-15 2015-16 2016-17 2017-18 RE

Source: Economic Review 2017 - Kerala State Planning Board, Budget Govt. of Kerala

131

(in ₹ crore)

Trend in Tax and Non Tax Revenue 78521

65715 57401 51686 43159 36917 39464

31709

24281

22552

18210

17347

14792 9713

7456 7220

6301

1275

2000-01 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2018-19BE Taxes and Duties Non-Tax Revenue 2017-18RE

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala

State Tax Composition 2016-17

7% 2% 7%

5% Sales Tax & VAT State Excise Duties Stamps & Reg Fee Motor Vehicle Tax Others

79%

Source: Economic Review 2017 - Kerala State Planning Board, Budget Govt. of Kerala

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Non Tax Composition 2016-17

3% 2% 9%

Forest Debt Service Social Dev Others

86%

Source: Economic Review 2017 - Kerala State Planning Board, Budget Govt. of Kerala

Non Tax Composition 2016-17

36%

Grant in Aid Central Taxes

64%

Source: Economic Review 2017 - Kerala State Planning Board, Budget Govt. of Kerala

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Trend in Non-Tax Revenue

Accounts RE BE SI Item No. 2015-16 2016-17 2017-18 2018-19

A Receipts from major items 516.06 485.32 610.23 709.90

1 Forest 283.04 296.85 341.32 397.68

2 Irrigation works 12.67 11.03 25.07 27.86

3 Civil Works 117.23 73.32 84.96 99.58

4 Scientific Research and Tourism 12.89 7.75 16.87 21.34

5 Dividends etc, from Commercial and other 90.23 96.37 142.00 163.43 undertakings

Index of A 284 267 336 391

B Others 7909.43 9214.66 11118.74 13561.24

1 Debt Services (Interest) 105.03 143.51 180.95 191.78

2 Administrative Services * 385.02 424.46 484.37 528.70

3 Social and Developmental Services ** 772.33 868.74 1056.56 1172.83

4 Miscellaneous *** 6647.05 7777.95 9396.86 11667.93

Index of B 1657 1930 2329 2840

C Grant-in-aid from the Central Government 8921.35 8510.35 10822.76 10009.39

1 Non-plan Grants 5177.36 5250.37 3589.36 1900.56

2 Grants for State Plan 59.88 158.49 132.69 90.34

3 Grants for Central Plan 126.10 44.20 36.02 0.00

4 Grants for Centrally sponsored schemes 3558 3057.29 7064.69 8018.49

5 Grants for Special Plan Scheme 0.00 0.00 0.00 0.00

Index of C 1449 1382 1757 1625

Total non-tax revenue (A+B+C) 17346.84 18210.33 22551.73 24280.53

Index 1361 1428 1769 1904

*Includes of Administration of Justice, Jails, Police and miscellaneous departments **Includes of Education, Medical and Public Health, Agriculture, Rural Development, Animal Husbandry, Cooperation, Industries, Community Development and Miscellaneous Social Development Organisations. ***Includes Ports and Lighthouses and recoveries towards Pensions, Stationary and Printing, miscellaneous and extraordinary receipts. Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala; RE - Revised Estimate, BE - Budget Estimate

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Financial Position and Resources

The financial position and resources of Kerala is shown in the below table.

(in ₹ crore) Notes to As at 31 March As at 31 March Assets Statement Accounts 2017 2016

Cash

(i) Cash in Treasuries and Local 21 44.03 6.50 Remittances

(ii) Departmental Balances 21 1.18 1.27

(iii) Permanent Imprest 21 0.41 0.38

(iv) Cash Balance Investments 21 1944.50 1636.75

(v) Deposits with Reserve Bank of Para 2(v) 21 -91.73 -45.88 India

(vi) Investments from Earmarked 22 1751.94 1630.37 Funds

Capital Expenditure

(i) Investments in shares of 5 & 19 7240.03(a) 6493.17(b) Companies, Corporations etc

(ii) Other Capital Expenditure 16 48411.79 39062.94 (c)

Contingency Fund (unrecouped) Para 3(Viii) 21 - -

Loans and Advances Para 3(ii) 7 & 18 13877.94 13009.89

Advances with departmental officers 21 0.43 0.39

Remittance Balances Para 3(vii) 21 981.64 668.64

Cumulative excess of expenditure 117150.87 101666.27 (d) over receipts

Total 191313.03 164130.69

Borrowings (Public Debt)

(i) Internal Debt 6, 17 118268.72 102496.26

(ii) Loans and Advances from Central Government

Non-Plan Loans 6, 17 18.12 20.07

Loans for State Plan Schemes 6, 17 7594.85 7213.48

135

Notes to As at 31 March As at 31 March Assets Statement Accounts 2017 2016

Loans for Central Plan Schemes 6, 17 (*) (*)

Loans for Centrally Sponsored Plan 6, 17 Schemes

Other loans 6, 17 1.16 1.16

Contingency Fund (Corpus) 21 100.00 100.00

Liabilities on Public Account

(i) Small Savings, Provident Funds, Para 3(xii) 6, 21 60571.01 47639.35 etc.

(ii) Deposits Para 2(iii) 6, 21 2892.35 2786.67

(iii) Reserve Funds Para 3(vi) 6, 21 2174.28 2012.06

(iv) Remittance Balances 21

(v) Suspense and Miscellaneous Para 3(vii) 21 -307.46 1861.64 Balances

Total 191313.03 164130.69

Source: the Government of Kerala, Finance Accounts 2016-2017

Income and Expenditure

The income and expenditure accounts of Kerala are shown in the below table.

(₹ in thousand) Revenue Accounts Budget Revised Budget 2016-17 Estimate Estimate Estimate 2017-18 2017-18 2018-19

A. TAX REVENUE

(a) Goods and Services Tax 162007000 270010000

(b) Taxes on Income and Expenditure 82841155820 93488416 93457725 110279733

(d) Taxes on Commodities and 458161736631 570859851 365252863 363728547 Services other than Goods and Services Tax

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Revenue Accounts Budget Revised Budget 2016-17 Estimate Estimate Estimate 2017-18 2017-18 2018-19

B. NON TAX REVENUE

(a) Interest Receipts, Dividends and 2398805873 2526296 3229566 3552134 Profits

A. GENERAL SERVICES

(a) Organs of State 9551046906 10138256 10524123 10877684

(b) Fiscal Services 16515797354 18639377 17709029 19148422

(d) Administrative Services 49398465327 58424346 57625752 61168569

(e) Pension and Miscellaneous 215322971989 254111610 241042375 264553232 General Services

B. SOCIAL SERVICES 337647176421 378033753 365719565 388170074

C. ECONOMIC SERVICES

(a) Agriculture and Allied activities 60881260195 63278287 63450011 72721828

(b) Rural Development 12801634219 44650096 16681396 44777408

(i) General Services 80639769954 99641145 97249540 120282654

(ii) Social Services 5395639061 6096526 6257856 7231100

(iii) Economic Services 8565565902 12113918 10552720 11645482

C. GRANTS-IN-AID AND 85103475572 112437100 108227569 100093900 CONTRIBUTIONS

TOTAL- REVENUE 756117217756 935847388 882668451 1028012367

Excess Expenditure over Revenue or 154845860469 160431425 130796404 128598084 Deficit

GRAND TOTAL 910963078225 1096278813 1013464855 1156610451

(a) Special Area Programmes 1667591911 1300000 1227389 1260800

(b) Irrigation and Flood Control 5081837853 5920872 5790331 5882810

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Revenue Accounts Budget Revised Budget 2016-17 Estimate Estimate Estimate 2017-18 2017-18 2018-19

(d) Industry and Minerals 5078122803 5260840 5435783 6003442

(e) Transport 12850554435 25739948 22474121 27530980

(f) Science Technology and 1514299745 2110619 1709890 3615889 Environment

(i) General Economic Services 5828546014 8433122 7199555 8686490

D. GRANT-IN-AID AND 54809079936 82471898 60130000 91298760 CONTRIBUTIONS

TOTAL - EXPENDITURE ON 910963078225 1096278813 1013464855 1156610451 REVENUE ACCOUNT

Excess of Revenue over Expenditure or Surplus

GRAND TOTAL 910963078225 1096278813 1013464855 1156610451

Source: Annual Financial Statement (Budget) 2018-19, Finance Department of Kerala, Thiruvananthapuram

Total Expenditure Composition (₹102,000 Crore)

11% 1%

Revenue Exp Capital Exp Loans

88%

Source: Economic Review 2017 - Kerala State Planning Board, Budget Government of Kerala

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Total Expenditure Composition

… Plan 22%

Non-Plan 78%

Source: Economic Review 2017 - Kerala State Planning Board, Budget Government of Kerala

Revenue Expenditure (₹ Crore) 1200 101,350 1000 91,100 78,696 800 71,750 60,490 600

400

200

0 2013-14 2014-15 2015-16 2016-17 2017-18 RE

Source: Economic Review 2017 - Kerala State Planning Board, Budget Government of Kerala

139

Interest Salary & Pensions Others

38% 41% 39% 39% 39%

48% 45% 46% 47% 48%

14% 14% 14% 13% 13%

2013-14 2014-15 2015-16 2016-17 2017-18 RE

Source: Economic Review 2017 - Kerala State Planning Board, Budget Government of Kerala

Capital Expenditure / GSDP (%) 1.8 1.6 1.6 1.4 1.3 1.30 1.2 1.0 0.9 0.8 0.8 0.6 0.4 0.2 0.0 2013-14 2014-15 2015-16 2016-17 2017-18 RE

Source: Economic Review 2017 - Kerala State Planning Board, Budget Government of Kerala GSDP - Gross State Domestic Product

140

Capital Outlay 2016-17 (₹10,130 Crore)

7% 5% 5% Irrigation Agri & Allied Industry 55% Public Works 28% Others

Source: Economic Review 2017 - Kerala State Planning Board, Budget Govt. of Kerala

Budget of the State Government

The following table provides an overview of the budget of the State Government from 2015-16 to 2018-19:

(₹ crore) Items 2015-16 2016-17 2017-18 2017-18 2018-19 Accounts Accounts BE RE BE

1 2 3 4 5 6

A. Revenue Receipts 69032.66 75611.72 93584.74 88266.85 102801.24

1. State Tax Revenue 38995.15 42176.38 43411.49 48823.37 58588.44

2. State Non-Tax Revenue 8425.49 9699.98 12037.79 11728.97 14271.14

3. Central Govt. Transfers 21612.02 23735.37 28135.46 27714.51 29941.66 i) Share of Central Taxes 12690.67 15225.02 16891.75 16891.75 19932.27 ii) Grant-in Aid 8921.35 8510.35 11243.71 10822.76 10009.39

B. Capital Receipts 17965.30 26762.51 25539.53 22391.81 24216.55

1. Recoveries of Loans 152.63 292.24 223.87 275.25 297.12

2. Other Receipts 28.08 30.24 37.01 35.02 38.02

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Items 2015-16 2016-17 2017-18 2017-18 2018-19 Accounts Accounts BE RE BE

3. Borrowings and Other Liabilities 17784.59 2644.03 25278.65 22081.54 23881.40 a. Public Debt (Net) 13598.01 16151.89 21227.95 20404.00 22288.87 b. Public Account (Net) 4186.58 10288.15 4050.70 1677.54 1592.53

C. Total Receipts (A+B) 86997.95 102374.23 119124.27 110658.65 127017.78

D. Non-Plan Expenditure 68027.17 79569.30 92762.49 89513.63 98470.46

1. On Revenue Account 66610.97 77603.96 90690.53 87325.06 96239.69 a. Of which Interest Payments 11110.62 12116.50 13631.83 13526.12 14937.71

2. On Capital Account 981.56 1180.30 1615.30 1414.76 1636.05

3. On Loan Disbursements 434.64 785.05 456.66 773.80 594.72

E. Plan Expenditure (including 19004.59 22813.25 26839.45 21837.89 28622.99 centrally sponsored schemes)

1. On Revenue Account 12078.50 13492.35 18937.35 1402.42 19421.36

2. On Capital Account 6518.48 8945.65 7442.18 7253.43 8694.26

3. On Loan Disbursements 407.61 375.25 459.92 563.04 507.37

F. Total Expenditure (D+E) 87031.76 102382.55 119601.94 111351.52 127093.45

1. On Revenue Account 78689.47 91096.31 109527.88 101346.49 115661.05

2. On Capital Account 7500.04 10125.95 9057.49 8668.19 10330.31

3. On Loan Disbursements 842.25 1160.30 916.58 1336.85 1102.09

G. Revenue surplus/deficit (A-F(1)) -9656.891 -15484.59 -16043.14 -13079.64 -12859.81

H. Fiscal Deficit (A+B(1)+B(2)-F) -17818.39 -26448.35 -25756.32 -22774.41 -23957.06

I. Primary Deficit (H-D(1a)) -6707.77 -14331.85 -12124.49 -9248.29 -9019.36

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala. BE = Budget estimate; RE = Revised Estimate.

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Budget estimates – Revenue and expenditure of Kerala for 2018-19

Trend in overall position of the State Budgets

(Revenue Account)

115661

102801

101346

91096

88267

78689

75612

71746

69033

60485

57950

53489

49177

46045

44137

38010

34665

30991

11878

8731

3147

3674

8035

9351

9656

2010-11 2011-12 2013-14 2014-15 2016-17 2017-18 2000-01 2012-13 2015-16 2018-19

11308

12860

13079

13796

15484

- - Rev Receipts Rev Expenditure Rev Deficit

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala.

During the financial year 2018-19 the revenue of Kerala is estimated at ₹102,801 crore, out of which ₹19,932.37 crore is the share of Central Government taxes, ₹10,009.39 crore is a grant from the Central Government, ₹58588.44 crore is receipts from State Government taxes and duties and ₹14271.14 crore is Kerala's non-tax revenue.

Gross Public Debt

Borrowings which are repayable and on which interest accrues are classified as debt. The debt liabilities of Kerala comprises of internal debt, loans and advances from Central Government and liabilities on account of small savings and provident fund deposits, amongst others. During the last five years, market borrowings and accretions in small savings and provident fund deposits were the main source of the State Government's borrowings. Outstanding debt liabilities of Kerala at the end of 2016-17 were ₹186,453.86 crore and at the end of 2017-18 (RE) were ₹210,789.37 crore representing an annual growth rate of 13.05 per cent..

The share of internal debt in the total debt liabilities of Kerala was 63.43 per cent. in 2016-17. Outstanding debt under internal debt increased to ₹137,530.24 crore in 2017-18 (RE) from ₹118,268.72 crore in 2016-17. The growth rate of internal debt in 2016-17 was 15.39 per cent.. The liabilities under small savings and provident fund deposits etc. was 32.49 per cent. of the total liabilities of Kerala in 2016-17 . The liabilities under small savings and provident fund deposits at the end of 2017-18 (RE) were ₹64,502.52 crore. The outstanding liabilities under loans and advances from the Central Government at the end of 2017-18 (RE) were ₹8756.61 crore. The gross and net retention of debt in 2016-17 was ₹28,451.61 crore and ₹16,334.78 crore respectively and in 2017-18 (BE) was ₹26,105.58 crore and ₹12,473.74 crore respectively.

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Trend in Gross and Net Retention of Debt

(in ₹ crore) Item 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 (BE)

1 2 3 4 5 6 7 8 9

Receipts 407.15 552.29 392.02 752.47 531.34 852.14 1518.96

Disbursements 370.54 326.20 351.58 349.63 361.69 472.72 379.27 Loans and Advances Interest 419.32 399.60 386.73 351.36 335.56 334.75 307.20 from Government Gross of India 36.61 226.09 40.44 402.84 169.65 379.42 1139.69 Retention

Net Retention -382.71 -173.51 -346.29 51.48 -165.91 44.67 832.49

Receipts 18020.38 19008.98 24024.80 29155.36 43307.4 53728.79 43892.96

Disbursements 16447.87 17311.32 21720.59 27477.82 37190.59 44367.19 41129.65 Small Interest 795.41 795.71 838.40 1029.91 1105.95 974.75 1176.03 Savings and Deposits Gross 1572.51 1697.66 2304.21 1677.54 6116.8 1 9361.6 2763.31 Retention

Net Retention 777.10 901.95 1465.81 647.63 5010.86 8386.85 1587.28

Receipts 4961.55 4811.86 5447.74 5952.29 6940.04 7136.29 7592.19

Disbursements 2695.02 2823.97 3520.09 3865.05 4724.77 4198.16 5477.87 State Interest 961.95 1142.70 1286.81 1445.18 1628.96 1704.91 1766.97 Provident Funds Gross 2266.53 1987.89 1927.65 2087.24 2215.27 2938.13 2114.32 Retention

Net Retention 1304.58 845.19 640.84 642.06 586.31 1233.22 347.3 5

Receipts 9391.82 12708.89 14069.17 17756.70 19127.4 23005.75 333.15

Disbursements 2522.52 2477.88 2893.23 5493.14 5699.05 7233.29 13226.74

Internal Interest 4118.96 4874.81 5781.64 6963.70 8040.39 9102.42 10381.64 Debt Gross 6869.30 10231.01 11175.94 12263.56 13428.35 15772.46 20088.26 Retention

Net Retention 2750.34 5356.20 5394.30 5299.86 5387.96 6670.04 9706.62

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Item 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 (BE)

1 2 3 4 5 6 7 8 9

Receipts 32780.90 37082.02 43933.73 53616.82 69906.18 84722.97 86319.11

Disbursements 22035.95 22939.37 28485.49 37185.64 47976.10 56271.36 60213.53

Interest 6295.64 7212.82 8293.58 9790.15 11110.86 12116.83 13631.84 Total Debt Gross 10744.95 14142.65 15448.24 16431.18 21930.08 28451.61 26105.58 Retention

Net Retention 4449.31 6929.83 7154.66 6641.03 10819.22 16334.78 12473.74

Source: Economic Review 2017, Kerala State Planning Board, Government of Kerala; BE - Budget Estimate

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Composition of outstanding liabilities of Kerala

The outstanding liabilities of Kerala from 2015 to 2017, and estimates for 2018 and 2019, are shown in the table below. (in ₹ crore) As of 31 March S1. Item No 2016 2017 2018

1 Internal Debt 102496 118268 137530

of which

(i) Market Borrowings 84846 99532 117442

(ii) Special securities issued to 12537 13509 14559 NSSF

(iii) Loans from banks and FIs 5113 5228 5529

2 Loans and advances from the 7235 7614 8757 Centre

3 Public Account (i to iii) 50807 63886 67932

(i) Small savings,, provident fund 47639 60571 64502 etc

(ii) Reserve Funds 382 423 409

(iii) Deposits and Advances 2787 2893 3021

4 Contingency Fund 100 100 100

Total Liabilities (1 to 4) 160638 189869 214320

# Debt is Total liabilities minus (3(ii) Reserve Funds, 3(iii) Deposits and Advances and Contingency Fund)

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala

Trend of Kerala's indebtedness

(in ₹ crore) Year Internal Growth Small Savings, Growth Loans and Growth Total Growth Debt Rate Provident Rate advances Rate Rate (%) (%) Fund, Others (%) from Central (%) Govt.

2010-11 48,528.10 11.90 23,786.06 11.69 6,359.08 0.86 78,673.24 10.86

2011-12 55,397.39 14.16 27,625.10 16.14 6,395.69 0.58 89,418.18 13.66

2012-13 65,628.41 18.47 31,310.65 13.34 6,621.78 3.54 103,560.84 15.82

2013-14 76,804.35 17.03 35,542.51 13.52 6,662.21 0.61 119,009.07 14.92

146

Year Internal Growth Small Savings, Growth Loans and Growth Total Growth Debt Rate Provident Rate advances Rate Rate (%) (%) Fund, Others (%) from Central (%) Govt.

2014-15 89,067.91 15.97 39,307.28 10.59 7,065.05 6.05 135,440.24 13.81

2015-16 102,496.26 15.08 47,639.36 21.20 7,234.71 2.40 157,370.33 16.19

2016-17 118,268.72 15.39 60,571.01 27.14 7,614.14 5.24 186,453.87 18.48

2017-18 (BE) 139,646.01 18.08 58,318.02 -3.72 9,062.78 19.03 207,026.81 11.03

Source: Finance Department of Kerala; BE - Budget Estimate

Weighted average interest rates on government liabilities

Raised during the Fiscal Year Outstanding Amount (End - March) SI. Category No 2016-17 2017-18 R.E. 2016-17 2017-18 R.E. Accounts Accounts

1 Market Borrowings 7.58% 7.39% 8.90% 9.04%

2 Loans from the Centre 5.05%

3 Special Securities issued 9.50% 8.40% 8.78% 8.91% to the NSSF

4 Borrowings from 9.56% 10.90% 8.79% 8.78% Financial Institutions/Banks

5 Borrowings from 5.36% 4.78% 6.54% 6.08% NABARD

6 WMA/OD from RBI 6.60% 5.75% 0.00% 0.00%

7 Small Savings 5.42% 5.46% 5.42% 5.46%

8 Provident Funds 8.70% 8.70% 8.70% 8.70%

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala; RE - Revised Estimate

Maturity profile of outstanding State Government securities

The maturity structure of outstanding market borrowings of the State Government can be found below.

(Outstanding as of March 31, 2017)

Total ₹ 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2032-33 2037-38 Crore

Kerala 5520 5460 5500 8880 11580 12800 13200 15000 17300 11000 5500 4000 115730

Source: Department of Tax, Government of Kerala

147

Contingent liabilities of Kerala

The State Government also provides guarantees to the borrowings of some of the public sector undertakings and other institutions instead of funding them directly through the budget. These contingent liabilities become the debt obligations of Kerala in the event of default by the borrowing public sector units for which the State Government is a guarantor. The outstanding guarantees of the State of Kerala in 2016-17 is ₹20,204.10 crore. The outstanding guarantees of the State Government from 2010-11 to 2016-17 are shown in table below.

Year Maximum amount Guaranteed Total Amount outstanding (including principal & interest)

2010-11 12,625.07 7,425.79

2011-12 11,332.11 8,277.44

2012-13 11,482.25 9,099.50

2013-14 12,275.21 9,763.36

2014-15 13,123.30 11,126.67

2015-16 13,712.77 12,438.52

2016-17 20,204.10 16,245.55

2017-18 24856.33 17052.97

Source: Finance Department of Kerala

Budgetary System

Pursuant to Article 202(1) of the Constitution of India the budget must be laid before the Legislative Assembly for each financial year. The chief controlling officer submits the budget estimate directly to the State Government. The budget is presented to the State Government using a performance budgeting technique whereby the operations of the government are presented in both financial and physical terms, enabling evaluation of the performance of each department. The budget documents presented to the legislature by the Finance Minister at the end of each fiscal year include:

(a) Annual financial statement (budget);

(b) Detailed budget estimates of revenue;

(d) Explanatory memorandum of the budget;

(e) Detailed estimates of receipts and disbursement under debt heads;

(f) Five year programmes for the year;

(g) Performance budget;

(h) Evaluation reports; and

(i) Economic review.

148

The annual financial statement covers the estimated receipts and expenditure of Kerala for each financial year. This covers all the transactions of the State Government during the previous, current and ensuing years and consists of: (i) the consolidated fund; (ii) the contingency fund; and (iii) the public account.

Consolidated fund

The consolidated fund comprises of revenue, capital, public debt, loans and advances. The revenue account deals with taxes, duties, fees, fines and penalties, revenue from the government estates, receipts from the government, commercial concerns and other miscellaneous items. The capital account deals with expenditure usually met from borrowed funds with the object of increasing assets of a material character or of reducing recurring liabilities such as construction of buildings, irrigation, projects etc.. Public debt, loans and advances deal with the internal debt of the State Government.

Contingency fund

The contingency fund has been create under state law enacted under Article 267(2) of the Constitution of India to make advances for meeting unforeseen and unavoidable urgent expenditures. The contingency fund is placed at the disposal of the Governor and is held by the Finance Secretary to State Government. Advances from this fund will be made for the purposes of meeting expenditures not contemplated in the budget subject to authorisation of such expenditure by the legislature. All expenditure financed from the contingency fund in the first instance should be submitted to the legislature at the first session meeting immediately after the advance is sanctioned and thus the advance made from the fund will be resumed to the fund.

Public account

The public account deals with transactions on public moneys relating to deposits, advances, remittances and suspense. It records transactions relating to debt other than the debts included in the consolidated fund. In respect of the transactions of the public account the government functions as banker and incurs liability to repay the moneys received. Moneys in the public account do not belong to State Government as they have to be repaid. The public account consists of (i) small savings; (ii) reserve funds; (iii) deposits and advances; (iv) suspense & miscellaneous; (v) remittances; and (vi) cash balance.

The budget is prepared using a three-step approach. Firstly, the heads of departments prepare the estimates based on the estimates submitted by the district officers. Thereafter the budget estimates are scrutinised by the administrative department and the finance department. Finally, the estimates are consolidated by the finance department before the budget is presented to the legislature.

Auditing Standards

India has a centralised auditing process for the audit of financial information of the Government. The Indian Audit and Accounts Department ("ID&AD") headed by the Comptroller and Auditor General of India ("C&AG") conducts financial audits of financial statements published by Indian government entities. Specifically, the ID&AD carries out financial audits of the State Government's finance accounts and appropriation accounts.

Financial audits conducted by C&AG are primarily concerned with providing an audit opinion on a set of financial statements. It focuses on:

(a) examination and evaluation of financial records and expression of opinions on financial statements;

(b) audit of financial systems and transactions including an evaluation of compliance with applicable statutes and regulations which affect the accuracy and completeness of accounting records; and

(c) audit of internal control and internal audit functions that assist in safeguarding assets and resources and assure the accuracy and completeness of accounting records.

In addition, the Government also examines the risk to regularity, propriety and financial control.

149

The auditing standard currently used by C&AG were issued in 2002 and are in harmony with INTOSAI Standards. INTOSAI Standards were issued by the Auditing Standards Committee of the International Organisation of Supreme Audit Institutions ("INTOSAI"). The INTOSAI Standards do not impose mandatory applications; however, they reflect a "best practice" consensus among the Supreme Audit Institutions ("SAIs") which is required to judge the extent to which the INTOSAI Standards are compatible with the achievement.

The auditing standards of the C&AG of India comprise of (i) general standards; (ii) field standards; and (iii) reporting standards. The general standards should be distinguished from the field standards and reporting standards as they are concerned with the relationship of the auditor to the audited organisation and with the personal conduct of the auditor in carrying out the audit. The field standards and reporting standards are concerned with the audit itself. Field standards regulate the audit activity. Reporting standards regulate what the auditor has to report after completing the audit.

The auditing standards of the C&AG of India are mandatory in the audit and accounts department.

It is the responsibility of an auditor, before certifying an account, to ensure that competent, relevant and reasonable evidence was obtained to support the auditor's judgement and conclusions. There are certain general audit objectives designed to ensure that the correct evidence is obtained, for example, to show whether the accounts are complete and whether the recorded transactions have properly occurred and are properly classified.

For the purpose of expressing an opinion on the financial statements being audited, an auditor collects evidence. To be relevant, audit evidence must relate to the general audit objectives (also called 'assertions'). Assertions are positive statements about the "state of being". For example, an assertion may be that all receipts were accounted for, or that all the investments shown in accounts were really owned by the entity. These general audit objectives (assertions) are designed to ensure that the auditor obtains evidence to support all aspects of the opinion required to be expressed on an account.

150

The below illustration describes an overview of the audit process employed by C&AG.

OVERVIEW OF THE AUDIT PROCESS

Understand the Entity

Establish Audit Objective and Scope P

A Determine Materiality

N Assess Risk

No Assurance from Assurance from The Audit Controls Controls

Develop Audit Programme E

Perform Tests on:

X Perform Tests on: Reliance on Internal

Analytical Review

E Control Substantive Tests of Substantive Tests of C Details Details

Review Working Papers and Conclude R

P Evaluating Audit Results

151

Fiscal roadmap

Fiscal deficit and revenue deficit

In Fiscal 2017-18, Kerala had a revenue deficit of ₹13,079.64 crore and a fiscal deficit of ₹22,774.41 crore representing 1.19 per cent. and 3.31 per cent. of its GSDP. In Fiscal 2016-17, Kerala had a revenue deficit of ₹15,484.59 crore and a fiscal deficit of ₹26,448.35 crore. Between 2011-12 and 2014-15, revenue deficit as a percentage of GSDP increased from 2.36 per cent. to 2.62 per cent. of GSDP. During the same period, fiscal deficit to GSDP ratio remained above 3.5 per cent. of GSDP. Kerala has set fiscal targets in the Medium Term Fiscal Policy as formulated by the Finance Department of Kerala, to reduce (i) the revenue deficit to 1.33 per cent. of the GSDP by 2020-21 and (ii) the fiscal deficit to a level not exceeding 2.91 per cent. of the GSDP by 2020-21. Revenue deficit and fiscal deficit are projected to be 1.66 per cent. and 3.10 per cent., respectively, in 2018-19 (BE).

The following table provides an overview of the fiscal deficit and revenue deficit of the Kerala from 2015-16 to 2018-19: (₹ crore) Items 2015-16 2016-17 2017-18 2017-18 2018-19 Accounts Accounts BE RE BE

1 2 3 4 5 6

A. Revenue surplus/deficit -9656.891 -15484.59 -16043.14 -13079.64 -12859.81

B. Fiscal Deficit -17818.39 -26448.35 -25756.32 -22774.41 -23957.06

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala. BE = Budget estimate; RE = Revised Estimate.

Revenue Deficit / GSDP 2.51%

1.91%

1.66% 1.51% 1.33%

2016-17 2017-18 RE 2018-19 BE 2019-20 2020-21

Source: Economic Review 2017 - Kerala State Planning Board, Budget Government of Kerala

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Fiscal Deficit / GSDP 4.29%

3.31% 3.1% 3.01% 2.91%

2016-17 2017-18 RE 2018-19 BE 2019-20 2020-21

Source: Economic Review 2017 - Kerala State Planning Board, Budget Government of Kerala

Debt outstanding to GSDP Ratio

The debt to GSDP ratio for Kerala as of 2017-2018 is at 30.71 per cent. according to the Economic Review. According to the Economic Review, the debt to GSDP ratio is expected to decrease to 29.70 per cent. by 2020-21.

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Debt / GSDP

30.71% 30.7%

30.22% 30.17%

29.70%

2016-17 2017-18 RE 2018-19 BE 2019-20 2020-21

Source: Economic Review 2017, Kerala State Planning Board Budget, Government of Kerala

Interest payment to revenue receipts

The percentage of interest payments to revenue receipts was in the range of 16-17 per cent. during the last five years. The interest payments as a percentage of revenue expenditure also declined to 13.3 per cent. in 2016-17 from 14.12 per cent. in 2015-16. In 2016-17, committed expenditure versus pension and interest payments and salary was 73.39 per cent. of total revenue receipts.

The following table provides an overview of the expenditure of Kerala on the revenue account, including interest payments, from 2015-16 to 2018-19: (₹ crore) Items 2015-16 2016-17 2017-18 2017-18 2018-19 Accounts Accounts BE RE BE

1 2 3 4 5 6

A. Non-Plan Expenditure 68027.17 79569.30 92762.49 89513.63 98470.46

1. On Revenue Account 66610.97 77603.96 90690.53 87325.06 96239.69 a. Of which Interest Payments 11110.62 12116.50 13631.83 13526.12 14937.71

B. Interest/Revenue Receipts (%) 16 16 - 15 15

Source: Budget in Brief 2018-2019, Department of Finance, Government of Kerala; Medium Term Fiscal Policy & Strategy Statement with Medium Term Fiscal Plan for Kerala 2018-19 to 2020-21, Government of Kerala. BE = Budget estimate; RE = Revised Estimate.

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Interest Payments / Revenue Receipts

16.00%

15.32% 15.27%

14.53% 14.28%

2016-17 2017-18 RE 2018-19 BE 2019-20 2020-21

Source: Economic Review 2017 - Kerala State Planning Board, Budget Government of Kerala

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THE ISSUER'S BUSINESS

Unless stated otherwise or the context otherwise requires, the financial data in this section is as per the Issuer's standalone audited financial statements and unaudited interim standalone financial statements for the quarter ending in 30 June 2018, prepared in accordance with Indian GAAP and set forth elsewhere in this Offering Circular. The following information should be read together with the more detailed financial and other information included in this Offering Circular, including the information contained in the section titled "Investment Considerations" of this Offering Circular.

OVERVIEW

The Issuer is a body corporate constituted by the State Government under the KIIF Act on 11 November 1999, to manage the Kerala Infrastructure Investment Fund (the "Fund").

The KIIF Act was amended in November 2016 by the Kerala Infrastructure Investment Fund Amendment Act 2016 in order to further streamline the process of mobilising funds for infrastructure development in Kerala. Pursuant to this amendment, the Issuer was restructured to (i) create the Fund Trustee and Advisory Commission (the "FTAC") as an independent commission to ensure that all investments by the Issuer are made in accordance with the decisions of the Board and provisions of the KIIF Act; (ii) include a provision in the KIIF Act that all receivables due from the State Government are transferred to the Issuer on or before the last working day of December every year and that a percentage share of Motor Vehicles Tax and Cess will be provided to the Issuer each year; and (iii) ensure that the Issuer's funds are used solely for the purposes of the KIIF Act and are not diverted from the intended purpose.

Funds available to the Issuer are deployed in accordance with the Investment Management Policy formulated by the Investment Management Committee consisting of a Secretary (Resources) and three independent members of the Issuer.

The Chief Executive Officer has three independent divisions under his control: (i) the Finance and Administration Division; (ii) the Project Appraisal Division and (iii) the Inspection Authority.

The Finance and Administration Division, which is headed by the joint fund manager, looks after the administrative and financial matters of the Issuer. The Finance and Administrative Division also has an

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institutional finance group which handles the legal and technical matters relating to fund mobilisation by the Issuer and is staffed with financial and legal personnel on deputation from the SEBI and the RBI.

The Issuer's sources of funds and other support mechanisms facilitate the efficient functioning of the Issuer and the timely servicing of its debt obligations.

Primary Revenue Streams

Additional Revenue Streams

Guaranteed by State Government

pursuant to Section 9 of the KIIF Act mechanism

support and Funds of Sources Fiduciary Role of FTAC

Escrow Mechanism

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 Primary revenue streams

Under the KIIF Act, the State Government is required to set aside (i) the Cess and (ii) up to 50 per cent. of the Motor Vehicles Tax collected each year. The KIIF Act further requires that the receipts from the Cess and Motor Vehicles Tax are transferred from the State Government's treasury to the Issuer on or before the last day in December each year, provided that any revenue from projects that include a user levy is off-set from such transfer and only the balance after payment of operational expenses is required to be transferred. This mechanism for transfer of the Cess and Motor Vehicles Tax in accordance with the KIIF Act provides the Issuer with an identified source of funds to use for the various infrastructure projects undertaken by it and to meet its other liabilities.

 Additional revenue streams

 Guarantee of the State Government

The due payment of all financial obligations (including payment of principal and interest) of the Issuer under any financing arrangement entered into by the Issuer, including in respect of the Notes, are guaranteed by the State Government pursuant to section 9 of the KIIF Act provided that the total value of such guarantees shall not exceed in aggregate the limits set by the Kerala Ceiling on Government Guarantees Act 2003 (30 of 2003) in force (currently 5 per cent. of the GSDP of Kerala). The State Government has also pursuant to section 9 of the KIIF Act through a government order dated 17 September 2018 (G.O.(Ms)No.347/2018/FIN) provided an unconditional and irrevocable guarantee under the Trust Deed in relation to the obligations of the Issuer in relation to the Notes.

 Fiduciary role of the FTAC

The FTAC, with the approval of the majority of its members, issues a fidelity certificate (the "Fidelity Certificate") every six months certifying that the application of funds by the Issuer and the investment of its surplus funds are in conformity with the KIIF Act. The Fidelity Certificate is presented in the State Legislative Assembly together with the annual budget for Kerala. The FTAC is also required, pursuant to its powers granted under the KIIF Act, to certify that the Issuer has adequate funds to meet its debt obligations arising in the next six months following the period under review.

 Escrow Mechanism

Pursuant to the recommendation by the FTAC, the Issuer is also transitioning to the Escrow Mechanism, a direct debit mechanism whereby Motor Vehicles Tax and Cess will be directly transferred from the State Government to the Issuer's bank account on a daily basis. It is expected that the Escrow Mechanism would be operational from 1 October 2018.

No Expenditure Head Remittances Credit Consolidated Fund (CF) Motor Vehicles Tax Cess Receipt Head >= Debit CF Assigned Motor Vehicles Tax Cess maximum Credit KIIFB Account

KIIFB Bank Account

Yes

Stop

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SUMMARY OF MAJOR EVENTS

Year: Event:

1999 Establishment of the Issuer under the KIIF Act.

1999 KIIFB Bonds Series I - 13.25 per cent., ₹507.06 crore, issued in December 1999. Fully redeemed in December 2004.

2002 KIIFB Bond Series II - 10.5 per cent., ₹10.74 crore, issued in March 2002. Fully redeemed in March 2005.

2003 KIIFB Bonds Series III - 11%, ₹505.91 crore, issued in May 2003. Fully redeemed in May 2008.

2016 Issuer restructured in November 2016 through the Kerala Infrastructure Investment Fund (Amendment) Act 2016.

2016-17 The State Government has identified 73 infrastructure projects worth ₹28,213 crore in its revised budget speech for 2016-17 for funding by the Issuer.

2017-18 The State Government has identified 21 infrastructure projects worth ₹25,861 crore in its budget speech for 2017-18 for funding by the Issuer.

Implementation of online direct payment system ("Direct Payment System").

The Issuer approves 197 infrastructure projects worth ₹7936 crore, tendered infrastructure projects worth ₹3051 crore and disbursed ₹442.65 crore.

2018 Implementation of the Escrow Mechanism for transfer of the Cess and share of Motor Vehicles Tax into the Issuer's bank account.

The Issuer approves 83 infrastructure projects worth ₹3369 crore and disbursed ₹220.51 crore.

THE ISSUER'S STRENGTHS & STRATEGIES

STRENGTHS

The Issuer believes the following to be its key strengths.

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The Issuer benefits from a strong operating relationship with the State Government which facilities efficient operations.

The Chief Executive Officer of the Issuer is also designated as the Ex-officio Secretary of the Finance (Infrastructure) department of the State Government. While the Finance (Infrastructure) Department within the Finance Department of Kerala is the administrative department for the Issuer, the Joint Secretary and Deputy Secretary of the Finance (Infrastructure) department also function as the joint fund manager and deputy fund manager of the Issuer, respectively. This unique operating structure of the Issuer enables ease of decision making and ensures that procedural and operational matters are dealt with in a seamless and timely manner between the Issuer and the State Government.

The Issuer has also set up the Escrow Mechanism.

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See "The Issuer's sources of funds and other support mechanisms facilitate the efficient functioning of the Issuer and the timely servicing of its debt obligations.".

The FTAC ensures a robust governance framework and greater transparency in the deployment of the Issuer's funds and the Issuer's operations.

Experienced and committed management and employee base with in-depth sector expertise

The Issuer believes that it has an experienced, qualified and committed management and employee base. The Issuer's members and employees have extensive experience in the areas of banking, finance, economics and law. The Issuer believes that it benefits from the expertise and experiences of its senior management including its Chief Executive Officer and the Deputy Managing Director, both of whom have served in senior leadership positions in various government agencies and departments, regulatory bodies at the national level and corporates (See "The Chief Executive Officer and the Deputy Managing Director"). The institutional finance group of the Finance and Administrative Division of the Issuer is staffed with financial and legal experts on deputation from the SEBI and RBI. Additionally, the Issuer has a Project Appraisal Division backed by professional technical support from the Centre for Management Development. The Issuer also has an Inspection Authority led by a chief project examiner, with a technical department comprising of engineers and a non-technical department headed by an Additional Secretary who undertakes non-technical inspections of projects. The members of the Board of the Issuer consist of the Chief Minister, the Minister of Finance, the Chief Secretary, the Vice-Chairman State Planning Board, Secretary (Law), Secretary (Finance), Secretary (Finance Resources), the Chief Executive Officer (member secretary) and seven independent members who are experts in one or more of the areas of finance, banking and/or economics.

The Issuer benefits from economies of scale

THE ISSUER'S STRATEGIES

The Issuer's objective is to fund infrastructure projects which promote the social and economic development of Kerala. In order to achieve this objective, the Issuer's strategies are as follows.

Mobilisation of financial resources

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The Issuer has the power to borrow (with the prior sanction of the State Government) and lend any sum required for the purposes of the KIIF Act, pursuant to Section 8 of the KIIF Act. For this purpose, the Issuer may issue any financial instrument including general obligation bonds, revenue obligation bonds or any other appropriate financial instruments or raise funds through any financial structures including revenue bonds with structured repayment mechanisms, land bonds and any other appropriate financial instruments or by making arrangements with banks, multilateral funding agencies or institutions approved by the State Government. The Issuer may also act as a sponsor for setting up infrastructure investment structures (including AIFs, infrastructure investment trusts, mutual funds and Infrastructure Development Funds), as may be required for facilitating the mobilisation of resources for a project or group of projects. Recently the Issuer also acted as the technical partner to KSFE Pravasi Chitties, a saving scheme set up for non-resident Indians by the Kerala State Financial Enterprises Ltd.

Strengthening of quality audit and review processes

Greater focus on human resources

The Issuer expects an increase in the scale and complexity of future infrastructure projects it will invest in. This will require continued growth of its human resources both in terms of size and expertise. The Issuer plans to extend its outsourcing of personnel to different areas of operation in order that the appropriate level of expertise is available where necessary. The Issuer believes that by doing so it shall be able to utilise the experience and expertise of these personnel to enhance its business and areas of operation.

Developing strong institutional relationships with external stakeholders

Greater use of information technology

HISTORY AND BACKGROUND OF THE ISSUER

The Issuer was originally constituted in 1999 as a financing agency to raise funds from the market backed by a sovereign guarantee from the State Government and to finance investments in infrastructure projects in Kerala,

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on lend to public sector institutions in Kerala for their investments in infrastructure projects and for any purpose specified in the KIIF Act. Three series of privately placed government-guaranteed general obligation bonds were issued, mobilising a total of ₹1023.71 crore during the period of 2000 to 2003. The issuance proceeds from these bonds which were deposited with the State Government's treasury, indirectly benefitted the development activities of Kerala and the bonds were fully redeemed on their due dates.

The Issuer was restructured in 2016 through the Kerala Infrastructure Investment Fund (Amendment) Act 2016 to (i) create the FTAC as an independent commission to ensure that all investments by the Issuer are made in accordance with the relevant approved scheme; (ii) include a provision in the KIIF Act that all receivables due from Kerala are to be transferred to the Issuer on or before the last working day of December every year and that a percentage share of Motor Vehicles Tax and Cess will be provided to the Issuer each year; and (iii) ensure that the Issuer's funds are used solely for the purposes of the KIIF Act and are not diverted from the intended purpose.

The Issuer is the main agency of the State Government responsible for mobilising financial resources for investment in major infrastructure projects in the Kerala. The Issuer proposes to harness its resources through multiple investment avenues which include modern investment structures such as infrastructure investment trust, infrastructure debt fund, AIF; financial instruments such as general obligation bonds, land bonds, infra bonds; tailor-made investment packages through existing financial agencies like Kerala State Financial Enterprises Ltd., Kerala Financial Corporation Ltd., Kerala State Industrial Development Corporation Ltd.; grants, annuities and other guaranteed payments from the State Government; returns on investments, loans from domestic/bilateral/multilateral financial institutions. Financial assistance in relation to projects includes equity, loans, grants and take-over finance. The Issuer can now finance and monitor projects in the public-sector in addition to through PPP.

A separate department, namely the Finance (Infrastructure) Department, has been established in the Finance Department of Kerala as the administrative department of the Issuer. The Issuer will function as the special purpose vehicle ("SPV") for mobilising and channelling the funds to the various project-specific SPVs. Kerala, over the last two consecutive budget speeches, has announced a total of 94 infrastructure projects estimated at over ₹54,074 crore for implementation through the Issuer's funding. The Board of the Issuer has already approved 387 projects and sub-projects worth ₹23,311 crore.

RELATIONSHIP WITH THE STATE GOVERNMENT

The Issuer has a strong relationship with the State Government, owing to its critical role in Kerala's capital expenditure towards the development of physical and social infrastructure of Kerala. While the management team and the various divisions of the Issuer enjoy functional autonomy, the State Government plays a significant role in matters related to the Issuer's constitution, policy, governance and regulatory framework, financing and operations.

Incorporation of the Issuer

The Issuer is an autonomous statutory body constituted by the State Government under the KIIF Act, (as amended in 2016) and is of high strategic importance to the State Government. The legislation to set up the Issuer was debated extensively in the State Legislature and passed unanimously by the legislators. The Board of the Issuer is comprised of elected representatives of the State Government including the Chief Minister and the Minister of Finance in addition to key bureaucrats of the finance and legal departments. The State Government also appoints the independent members of the Board and the Executive Committee

State Government as the administrator

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Financial support from the State Government

Financial support to the Issuer from the State Government comes primarily in the form of the Cess and Motor Vehicles Tax collected by the State Government as provided under the KIIF Act. The KIIF Act also provides for the State Government to provide any capital that may be required by the Issuer or pay by way of loans or grants such sums of money as it may consider necessary to ensure the efficient discharge of the Issuer's functions.

State Government as the policy maker

State Government as the regulator

The KIIF Act also designates the State Government as the principal regulator of the Issuer. The State Government has a range of powers enabling it to exercise a broad degree of control over the functioning of the Issuer. Under section 17A of the KIIF Act, the State Government has appointed the Inspection Authority to inspect any projects and related documents of any SPV implementing such projects. This authority has the power to call for documents from any SPV and inspect its office, site and premises of the projects. The State Government has the power under the KIIF Act to appoint any person to make investigations into the operations of the Issuer and to submit a report of such findings.

Under the KIIF Act, the State Government is required to present before the State Legislative Assembly, along with the presentation of the annual budget of Kerala, the following documents: (i) a statement of the sources and application of the funds of the Issuer; and (ii) a certificate from the FTAC confirming that the funds of the Issuer have been deployed for the purposes intended and that surplus funds have been managed in accordance with the provisions of the KIIF Act.

In accordance with the KIIF Act, the annual report of the Issuer is prepared and approved by the Issuer and submitted to the State Government before the end of July each year. The State Government is then required to immediately cause the annual report and audited statement of accounts to be presented before the State Legislative Assembly.

State Government as the guarantor

Under section 9 of the KIIF Act, the Government guarantees the payment of principal and interest of any financing proposed to be raised by the Issuer in accordance with the KIIF Act, provided that the total value of such guarantee shall not exceed the limits set by the Kerala Ceiling on Government Guarantees Act 2003 (30 of 2003) in force (currently 5 per cent. of the Gross State Domestic Product of Kerala).

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MANAGEMENT

The Issuer is headed by the Chief Executive Officer who is also the fund manager with three independent divisions: (i) Finance and Administration Division; (ii) Project Appraisal Division; and (iii) Inspection Authority.

Government of Kerala

KIIFB Government (CEO and Fund Manager) Administrative Dept.

KIIFB Finance (Infrastructure) Deputy Managing Director Department

Principal Secretary Joint Secretary (Finance) - Head (Joint Fund Manager) Finance & Admin Division Project Appraisal Division Inspection Authority (Joint Fund Manager) Deputy Secretary Staff (Deputy Fund Manager)

Institutional Finance Grp. (Legal & Technical)

The Chief Executive Officer and the Deputy Managing Director

The current Chief Executive Officer of the Issuer is Dr. Kandathil Mathew Abraham, a former Indian Administrative Services officer of 1982 who retired as the Chief Secretary, Government of Kerala. He also presently serves as the Member Secretary of the Issuer.

Dr. Abraham had been an Additional Chief Secretary or Secretary in the Department of Finance of the State Government for nine years. He was also the founding fund manager of the Fund and the Additional Chief Secretary of the Higher Education & Social Justice Department of the State Government.

In 2008, Dr. Abraham became a member of SEBI. The Indian Institute of Technology, Kanpur has conferred upon him the Satyendra K Dubey Memorial Award 2016 for displaying highest professional integrity and honesty while performing his duties.

The Deputy Managing Director of the Issuer is Mr. Sanjeev Kaushik, a former Indian Administrative Services officer of 1992 who has 25 years' experience in senior policy, regulation and finance. He was formerly the chairman and managing director of the India Infrastructure Finance Company Limited (the "IIFCL"). He also currently serves as the chairman and managing director of the Kerala Financial Corporation and as Principal Secretary (Finance- Resources) of the State Government.

Mr. Kaushik also holds a Masters in Business Administration in finance from the London Business School and has worked for Bank of America, HSBC, Lehman Brothers and Unit Trust of India.

Prior to his tenure at the IIFCL, he was managing financial markets matters in the Department of Economic Affairs, Ministry of Finance, Government of India, where he dealt with policy and regulatory matters relating to capital markets, foreign institutional investment, foreign exchange management and external commercial

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borrowing. Mr. Kaushik has also worked as director of the Fund-Bank (Multilateral Institutions) Division in the Finance Department, Government of Kerala, where he dealt with policy matters relating to the International Finance Corporation, the World Bank and the International Monetary Fund and development financing.

The main divisions under the Chief Executive Officer

The Finance and Administration Division headed by the joint fund manager looks after the administrative and financial matters of the Issuer. The Finance and Administrative Division also has an institutional finance group staffed with financial and legal personnel on deputation from the SEBI which handles the legal and technical matters relating to fund mobilisation.

The Project Appraisal Division is supported by professional technical support from the Centre for Management Development (a society whose ownership interest is held by the State Government) which is staffed on a deputation basis by an Additional Secretary, an Under Secretary and an Accounts Officer from the Finance Department of Kerala.

The Inspection Authority is appointed by the State Government pursuant to its powers in the KIIF Act and is led by a chief project examiner, with a technical department comprising of engineers and a non-technical department which is staffed on a deputation basis by an Additional Secretary from the Administrative Secretariat, a Joint Secretary and other personnel from the Finance Department of Kerala. The Inspection Authority has the powers to call for documents from any project SPV and inspect the office, site and premises of projects implemented by it.

Governance Structure

KERALA FTAC INFRASTRUCTURE EXECUTIVE FUND TRUSTEE INVESTMENT FUND COMMITTEE AND ADVISORY BOARD COMMISSION)

CHAIRMAN - CHIEF CHAIRPERSON - MINISTER COMPRISE OF THREE TO FIVE MINISTER, KERALA FOR FINANCE MEMBERS INCLUDING A CHAIRPERSON VICE-CHAIRMAN - MINISTER MEMBER – CHIEF FOR FINANCE SECRETARY

MEMBER - CHIEF MEMBER - SECRETARY (LAW) SECRETARY MEMBER - SECRETARY MEMBER - VICE-CHAIRMAN, (FINANCE) STATE PLANNING BOARD MEMBER - SECRETARY MEMBER - SECRETARY (LAW) (FINANCE RESOURCES)

MEMBER - SECRETARY THREE INDEPENDENT (FINANCE) MEMBERS OF THE BOARD, TO BE NOMINATED BY THE MEMBER - SECRETARY GOVERNMENT (FINANCE RESOURCES) CHIEF EXECUTIVE OFFICER - SEVEN INDEPENDENT MEMBER MEMBERS

CHIEF EXECUTIVE OFFICER - MEMBER SECRETARY

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Kerala Infrastructure Investment Fund Board

The Board is the main decision making body of the Issuer and is constituted under Section 4 of the KIIF Act through a State Government notification. The Board has powers to administer the Fund and supervise activities financed from the Fund. The Board is headquartered in Thiruvananthapuram.

The composition and appointment of the members of the Board is governed under Section 4 of the KIIF Act. Apart from the independent members, the Board of the Issuer is organised such that there is perpetual succession of its permanent members. The Chairperson of the Board is the Chief Minister of the State Government and an elected representative of the State Legislature. The State Government's Minister of Finance serves as the Vice Chairperson of the Board. In addition, the Vice Chairman of the State Planning Board, the Chief Secretary of the State Government, Secretary of the State Government's legal and finance department serve as members of the Board. The Chief Executive Officer, who is also a member of the Board, has to act as Secretary to the State Government. The Chief Executive Officer is also the fund manager of the Issuer. The Chief Executive Officer exercises the power of supervision and control over the other officers and staff of the Issuer.

The current permanent members of the Board of the Issuer are:

Name Position as of 1 August 2018

(a) Sri.Pinarayi Vijayan Chief Minister - Chairman

(b) Dr. T.M. Thomas Isaac Minister for Finance - Vice Chairman

(c) Dr. Kandathil Mathew Abraham, Chief Executive Officer of the Issuer and Ex-officio Secretary, CFA Finance (Infrastructure)

(d) Sri. Tom Jose, IAS Chief Secretary, State Government

(e) Sri. V.K. Ramachandran Vice Chairman, Planning Board

(f) Sri. Manoj Joshi, IAS Principal Secretary, Finance

(g) Sri. B.G. Harindranath Secretary (Law)

(h) Sanjeev Kaushik, IAS Principal Secretary, Finance Resources and Deputy Managing Director of the Issuer

The independent members of the Issuer, together with the FTAC, act as a monitoring mechanism in respect of the exercise of powers by the Issuer. The current independent members of the Board of the Issuer are:

Name Occupation

(a) Dr. D. Babu Paul Former Finance Secretary, Government of Kerala

(b) Prof. C.P. Chandrasekhar Professor, Centre for Economic Studies and Planning

(d) Sri. Salim Gangadharan Former Regional Director, RBI, Thiruvananthapuram

(e) Sri. J.N. Gupta Former Executive Director, SEBI and Managing Director at Stakeholders Empowerment Services

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(f) Sri. Radhakrishnan Nair Former Executive Director, SEBI

(g) Dr. Sudipto Mundle Member 14th Finance Commission, Former Director Strategy and Policy Department, Asian Development Bank, Emeritus Professor & Member of board of Governors, National Institute of Public Finance & Policy

Under Section 5A of the KIIF Act, the Chairperson, or, in his or her absence, the Vice Chairperson of the Board must preside over the meetings of the Board and the Chief Executive Officer of the Board convenes the Board meetings. The quorum for the Board meetings is eight members, including at least one independent member. The agenda for the Board meetings are decided by a majority of two-third of the votes of members forming the quorum.

Executive Committee

The Executive Committee is a decision making body and exercises the powers delegated to it by the Board. It consists of the following members:

Name Position as of 1 August 2018

(a) Dr. T.M Thomas Isaac Minister for Finance - Chairman

(b) Dr. Kandathil Mathew Abraham Chief Executive Officer - Member

(d) Sri. B.G. Harindranath Secretary (Law) - Member

(e) Sri. Manoj Joshi, IAS Secretary (Finance) - Member

(f) Sanjeev Kaushik, IAS Secretary (Finance Resources)

(g) Professor Sushil Khanna Independent Member*

(h) Sri. J.N. Gupta Independent Member*

(i) Sri. Salim Gangadharan Independent Member*

*Independent members are appointed by the State Government to the Executive Committee.

The Executive Committee scrutinises large infrastructure projects referred to the Board by the State Government. It also periodically monitors the status of the projects financed through the Fund. It obtains its decision-making powers under section 8A of the KIIF Act, which provides that the Board can delegate such of its powers as it deems fit to the Executive Committee or the Chief Executive Officer. Decisions of the Executive Committee are passed by a majority of not less than two-thirds of the members present and voting and the quorum for a meeting is five members, in accordance with Section 6B of the KIIF Act. The Board, in its 29th meeting, resolved that non-revenue generating projects up to a value of ₹100 crore can be approved at the level of Executive Committee and need not go to the Board for approval.

Fund Trustee and Advisory Commission

The FTAC is an independent committee constituted to ensure transparency in the functioning of the Issuer. It acts as the trustee of the fund and is responsible for ensuring that all investments of the Fund serve the purpose and intent of the KIIF Act and that there is no diversion of the funds of the Issuer. The FTAC comprises three to five members including a chairperson appointed by the Board for a period of two years, but whose membership cannot be terminated by the Board or the State Government except on grounds of conviction by a court of law

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on any criminal charges involving moral turpitude or corruption. The members of the FTAC are selected on the basis of their expertise and experience at national or international levels in the fields of banking, financial regulation, financial markets, administration or economics.

Fidelity Certificate

The FTAC, with the approval of the majority of members, issues a Fidelity Certificate every six months certifying that the application of funds by the Issuer and the investment of surplus funds are in conformity with the KIIF Act. The FTAC is required to certify that the Board has adequate funds to meet its debt obligations arising in the next 6 months following the period under review. The Fidelity Certificate is presented in the State Legislative Assembly along with the annual budget for Kerala.

The FTAC has certain powers conferred upon it by the KIIF Act, including to:

(a) call for periodic reports from the Issuer, and any other relevant documents in the Issuer's possession;

(b) supervise the implementation of conditions regarding issues of securities by the Issuer;

(c) carry out such acts as are necessary for the protection of the interests of the holders of securities issued by the Issuer;

(d) do all things necessary to resolve any grievances of the holders of securities issued by the Issuer;

(e) ascertain that funds necessary to discharge the interest and principal payment obligations of the Issuer in respect of the Issuer's securities are available; and

(f) ascertain that funds available to the Issuer are deployed in investments having the highest credit rating from the appropriate regulatory body or credit rating agency for that class of investment.

The current members of the FTAC are:

(a) Shri. Vinod Rai – Formerly an Indian Administrative Service ("IAS") officer and Comptroller & Auditor General of India ("CAG"), he is presently the chairman of the UN Panel of External Auditors and Honorary Advisor to the Ministry of Railways of the Central Government. Mr. Rai holds a master's degree in economics from the University of Delhi and a master's in public administration from Harvard University;

(b) Smt. Usha Thorat - Formerly Deputy Governor of the RBI between 2005 and 2010. Prior to this role, she was the Executive Director of the RBI and has also been the RBI's nominee on the boards of the Bank of Baroda, the Indian Overseas Bank and the Securities Trading Corporation of India. Mrs. Thorat holds a master's degree in economics from the Delhi School of Economics; and

(c) Sri. G. Padmanabhan - Formerly Executive Director of the RBI where he oversaw the Department of Information and Technology, Department of Payment and Settlement Systems and the Foreign Exchange Department. Prior to this role, he headed the Department of Payment and Settlement Systems of the RBI. He is a post-graduate in Economics (First Class) from the University of Kerala and holds an MBA (International Banking and Finance) from the University of Birmingham, United Kingdom.

Investment management committee ("IMC")

The IMC consists of three independent members of the Issuer and a Secretary (Resources). The Secretary (Resources) acts as permanent member and the convener of the committee. The current independent members of the IMC are:

(a) Sri. J.N. Gupta (formerly Executive Director, SEBI and Managing Director at Stakeholders Empowerment Services);

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(b) Sri. Radhakrishnan Nair (formerly Executive Director, SEBI); and

The IMC is responsible for formulating and reviewing the Investment Management Policy of the Issuer and the operational framework for the investment operations of the Issuer. The Investment Management Policy addresses matters relating to liquidity for smooth operations, compliance with statutory norms on investments, risk management/mitigation strategies to ensure returns on investments and protection of funds. It oversees the establishment of an effective reporting system to ensure compliance with the Investment Management Policy and an internal/concurrent audit mechanism for the ongoing monitoring of the investment operations team. The IMC furnishes reports to the Board of the Issuer and the FTAC on the performance of investments. The IMC reviews its investment decisions and ensures that the internal due diligence process is carried out before any investment decision is made. The IMC also reviews and approves the standard operating procedure for the investment operations team (the "IOT").

The IOT is headed by the joint fund manager of the Issuer and includes other members as nominated by the Chief Executive Officer of the Issuer. The IOT is responsible for treasury operations, banking, investment compliance, valuation, accounting, statutory and management reporting, market tracking and research, credit review, deal negotiation and conclusion and providing inputs to the IMC on investments. The IOT formulates standard operating procedures for its day-to-day operations which are submitted to the IMC for approval.

SECTORS, OBJECTIVES AND FUNCTIONS

The Issuer has been established with the main objective of providing investment for projects in Kerala in the sectors of roads, power, irrigation, water supply, ports, inland navigation, solid waste management and drainage. The Issuer is also required to assist the State Government and its agencies in the matters relating to infrastructure development and in particular, management consultancy, financial consultancy, issue advisory and legal consultancy.

The key functions of the Issuer are:

Project development and finance

(a) acting as a primary agency to co-ordinate the efforts of the State Government in relation to the development of infrastructure in Kerala;

(b) selection of eligible projects for implementation in Kerala;

(c) scrutinising concept notes and detailed project reports submitted by administrative departments of the State Government;

(d) augmentation, maintenance and utilisation of the Fund for funding eligible projects;

(e) mobilisation of resources for financing critical and large infrastructure projects;

(f) mobilisation of resources for medium term requirements through general obligation bonds, revenue bonds with structured payment mechanism; and

(g) mobilisation of resources for long term requirements through AIF, infrastructure investment trust and infrastructure debt fund.

Facilitation of projects

(a) co-ordinating the efforts of the State Government, any agency and sponsoring agencies in matters regarding the development of the infrastructure in Kerala including PPP projects;

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(b) identifying delays in the implementation of its projects and recommending policy initiatives to address any such delays;

(c) promoting and overseeing project appraisal, project management and procurement in the State Government and public agencies;

(d) formulating and recommending policies relating to eligible projects so as to ensure that project risks are identified and allocated between the relevant stakeholders;

(e) performing such other functions as may be entrusted to it by the State Government;

(f) approving the agency which shall implement a project which shall either be through the public sector or through a PPP; and

(g) identifying sources of financing and recommending and approving suitable methods of raising finance.

Policy Development

Assisting in the identification of infrastructure deficits of Kerala and creating policies for upgrading the infrastructure in association with the State Government.

Project Monitoring

(a) monitoring projects to ensure proper implementation; and

(b) conducting routine field inspections and technical examinations during the execution of projects.

Under section 3A of the KIIF Act, "eligible projects" are projects eligible for financial assistance from the Fund referred to the Board of the Issuer by the State Government and approved by the Board.

The Issuer provides investment for critical and large infrastructure projects in Kerala in the following sectors:

Transport: To develop a large and sustainable transport sector to aid the development of Kerala.

Energy: To develop the diverse resource based options available for power generation in Kerala.

Social and commercial infrastructure: To implement social and commercial projects that will significantly enhance the standard of living in Kerala.

Information technology ("IT") and telecommunication: To harness the advanced levels of literacy, education and healthcare, and the excellent telecommunications network across all towns and villages in Kerala.

Water sanitation: To promote access to clean drinking water and proper sanitation in order to improve the standard of health for Kerala.

Transport Water sanitation Energy Social & IT & commercial Telecommunications infrastructure

Roads and bridges Irrigation Electricity generation Agriculture IT parks (grid)

Railways Sewage collection, Electricity Education treatment and disposal transmission

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Transport Water sanitation Energy Social & IT & commercial Telecommunications infrastructure

Airports Solid waste Gas pipelines Healthcare management

Inland waterways Water supply pipeline Renewable energy Culture & tourism

Ports Oil/ Gas/ LNG Industrial parks storage Urban public transport Sports & youth affairs

MAJOR INFRASTRUCTURE PROJECTS

(a) Funds disbursed to projects by the Issuer: ₹663 crores.

(b) Projects undergoing appraisal: ₹7,930 crores.

(d) Projected fund requirement over the next two years: ₹14,000 crores

KEY PROJECTS

Project Detail Estimated Cost (₹ Crore)

Hill highway – construction of a new highway to link 1,425 the north and south of Kerala

Coastal highway – construction of a new highway to Under Appraisal link the north and south of Kerala

Transgrid – construction of intra-state high capacity 5,200 corridors across Kerala

K-Fone – building a new core optical fibre network 823 across Kerala

IT parks – contruction of new IT facilities across 351 Kerala

Cancer hospitals (Malabar Cancer Center; Cancer 554 Hospital & Research Center, Kochi) – upgrade of (170 & 384) existing cancer hospital at Malabar and contruction of new facility in Kochi

Upgrade of State Government hospitals – upgrade of 764 State Government health care centres across Kerala

City and town road development – improvement of 7,264 existing road network

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KEY PROJECTS

Project Detail Estimated Cost (₹ Crore)

Hi-tech classrooms – upgrade of State Government 493 schools across Kerala

Drinking water supply augmentation – upgrade of 1,803 drinking water supply projects across Kerala

The below chart illustrates the total amount of projects that have been approved by the Issuer as of 1 August 2018.

PROJECTS BY SECTORS

₹23,311 Crore Across 387 Projects

16% Transport 39% 5% Energy Water Sanitation 10% Commercial Infra IT & Telecom 8% Social Infra 22%

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PROJECT MANAGEMENT

Project proposals reach the approval stage through a series of scrutiny and appraisal measures to ensure the quality of proposals, realistic rates and implementation timelines. Once the Finance and Administrative Division concerned provides in-principle sanction for a proposed project and the SPV is formed or an existing SPV is identified for implementing the project, the SPV commences the project preparation. Project submission, payment approvals and fund release are fully automated through an online platform operated by the Issuer. Payment disbursement by the Issuer directly to contractors, suppliers, service providers and other service providers is ensured through the Issuer's online Direct Payment System.

The Issuer's Direct Payment System was implemented in August 2017. It is aimed at ensuring unhindered flow of funds for the timely completion of projects. Project SPVs will identify those tasks in the online project management software provided by the Issuer as milestones for release of payment to the contractors. Generally, each Project SPV would comprise of a technical committee, a project management unit, a project supervision and monitoring unit and a project implementation unit.

Project management timeline:

(a) Appraisal process

(b) Only tender ready projects granted approval

(d) Inspection and quality control

Project identification, prioritisation and implementation under the KIIF Act

The Board of the Issuer is responsible for matters relating to project identification, prioritisation and implementation.

The process for identifying and implementing a project includes:

(a) identifying or conceptualising a project to be developed, managed and operated in Kerala;

(b) if any State Government department is responsible for identifying or conceptualising a project to be developed, managed or operated in Kerala, sending its proposal to the Issuer for its recommendation. The Issuer shall scrutinise, evaluate and prioritise such proposal from the State Government;

(c) examination by the Issuer of the project proposal with reference to the cost benefit analysis of the project including the socio-economic cost benefit of the proposed project;

(d) where a public agency or government department has proposed a project to be funded by PPP, appraisal by the Issuer of the project with reference to the following factors:

(i) the cost effectiveness of implementation through PPP (including a value for money test);

(ii) the possibility of specifying project performance parameters and measuring their outcomes;

(iii) the risk sharing between the participants;

(iv) the technological and managerial advantages;

(v) the socio-economic factors which may affect investment; and

(vi) compliance with regulatory norms;

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(e) conducting a feasibility study of the proposed project and, after satisfying itself as to the feasibility, recommending the same to the State Government, indicating whether the proposed project may be implemented through the public sector or PPP;

(f) on the State Government's receipt of the proposal for implementation of the project, considering the same and communicating its decision on the implementation of the project, to include recommending the financing method to the Issuer;

(g) in respect of a project decided by the State Government to be implemented through the public sector, designating the public agency which shall implement the project, giving directions for its implementation and monitoring the progress;

(h) in respect of a project approved by the State Government to be implemented through PPP, procuring the sponsoring agency to publish the details of the proposed project. The sponsoring agency will then prepare and submit a report to the Issuer based on any recommendations. On receipt of such report, the Issuer shall consider the project in consultation with the relevant administrative department and may conduct a detailed project study, and will then finalise the scope and structure of the project, with reference to the following factors:

(i) whether the project requires any public financial support;

(ii) the tender criteria or variables relevant for evaluation of the tender; and

(iii) the appropriate concession agreement between the public agency and the private sector participant for and in respect of a PPP project which includes Build-Operate-and-Transfer ("BOT"), Build-Own-and-Operate ("BOO"), Build-Own-Operate-Transfer ("BOOT"), Build-Transfer-and-Operate ("BTO") and Design-Build-Finance-Operate-Transfer ("DBFOT").

Project appraisal process

Identification of a project and SPV

The process begins with the identification of a project in the annual budget of the State Government or as directed by the State Government (as approved by the Cabinet of Ministers) to be funded by the Issuer. The administrative department issues an administrative sanction for the identified project and a concept note is prepared. The concept note is a summary of the proposal together with information on matters such as the relevant the funding agency, the SPV, project objectives, budget estimate and duration. The concept note is used to seek approval, hold stakeholder consultations and conduct pilot studies.

The identification process involves two aspects. Firstly, the gaps in the economy should be identified and secondly, the sector priorities should be identified.

The administrative department also identifies an SPV for the implementation of the project. The SPV will plan, implement, manage, operate, monitor and evaluate the project, and is also responsible for the preparation of the detailed project report ("DPR"). Projects are broken down into subprojects for each infrastructure unit. A subproject cycle is broken down into five phases: (i) subproject identification; (ii) subproject development; (iii) subproject preparation and approval; (iv) subproject implementation and monitoring; and (v) commissioning and post monitoring/evaluation.

Project development

The development stage involves the submission of the DPR prepared by the SPV on behalf of the relevant department. The DPR contains information on, amongst others, engineering design, operation and maintenance strategy, financial estimates and cost projection, revenue streams, cost-benefit analysis and investment criteria, implementation schedule and work breakdown structure, statutory clearances, environmental aspects and sustainability, risk assessment and mitigation.

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Project appraisal

The Issuer appraises the projects at a subproject level to ensure that they are technically, financially and economically viable, considering factors such as national, sectoral and local needs, economic justifications, sustainability and contribution to human or technological advancement. The scope of the appraisal covers verification of data from site studies, review of project documentation for compliance to standards, specifications and regulation, and analysis of financial estimates, cost projection and projected profitability and cash flows. An important aspect of project appraisal is risk mitigation. This involves identification and evaluation of project risks through appraisal of project contracts and evaluation of contracting entities.

Sub Project identification Sub Project Development

Developing Sub Project Submission for Conceptual Project SPV identification identification Approval Proposal

Government/Department Department KIIFB Department

Development of Subproject Tripartite Proceedings DPR Approval Detailed Project Approval Agreement Report

KIIFB KIIFB KIIFB SPV SPV, Department & KIIFB Sub Project Preparation and Approval

Technical Sanction Tendering Bidding Tender Evaluation Award

SPV/Department SPV Contractors SPV/Department SPV/ Department Sub Project Implementation and Monitoring

Operation and Implementation Handing Over Post facto Approval Maintenance and quality check

SPV/Department SPV/Department KIIFB, SPV & Department KIIFB

Sub Project Implementation and Monitoring

Detailed Project Report

Technical Economic Financial Environment Social Institutional Analysis Analysis Analysis al Analysis Analysis Analysis

 Demand Analysis  Socio-economic  Funding pattern  Identify category  Public  Roles &  Functional design survey of the project of the project (A/ consultation Responsibilities  Structural design, Willingness to pay  Potential for B/C)  Identify priority of various details survey collecting user  Prepare needs agencies/  Drawings  No. of charges Environmental  Identify project stakeholders  Works Schedule beneficiaries  Project financial Impact affected persons  Details of  Detailed Estimate  Economic costs & analysis Assessment  Prepare contracting  O&M details benefits  Environmental Resettlement methodology for  Economic Rate of Mitigation plan the execution of Return Measures (EMM)  Risk Assessment project  Risk assessment  Statutory  Quality assurance Clearances & Quality management plan

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Feasibility studies and site visits

The Issuer may carry out a feasibility study of the relevant project, which is a process of identifying and evaluating all alternatives for the project and collecting data on practical alternatives.

Field verification site visits are usually carried out for projects as required by the appraisal team.

Appraisal timeline

Project Report Details shared Draft Detailed Meeting with Field received by Verification with appraisal Appraisal SPV (optional) verification Issuer team Report

Resubmission of Detailed Project Meeting with Meeting with Meeting with Acceptance Report (specified SPV (optional) SPV (optional) SPV (optional) as per comments in Detailed

Project approval

After completing appraisals, a formal approval from the Issuer for the funding of subprojects is required. For this purpose, the Issuer prepares a detailed appraisal report ("Detailed Appraisal Report").

The Detailed Appraisal Report will be prepared by the appraisal team and submitted to the Board of the Issuer for approval. The Board may sanction the financing of the project through the Fund or may request additional documentation or impose conditions.

Following receipt of funding sanction from the Board, the SPV will initiate the procedure for obtaining technical sanction which will be issued by the competent authority with delegated powers from the State Government.

Tendering and bidding process

Following technical sanction, projects will be submitted for tendering. The SPV follows a competitive e-tendering process following the rules and guidelines of the State Government and the Central Government. There must be sufficient advertisement and time for submission of bids to allow bidders to participate in the process. The bidding documents are required to be either (i) compliant with the norms of the Central Public Works department or the Public Works Department, or (ii) approved by the respective State Government department which controls the SPV. The SPV may be allowed to use its own standard bidding documents provided that they do not include any additional liabilities, or additional contractual or legal risks are not likely to arise. The board of the SPV can accept tenders in accordance with delegation of powers from the State Government (the "Acceptance Authority") or alternatively, the Administrative Department of the Issuer will form a committee to accept tenders (the "Tender Acceptance Committee"). The Tender Acceptance Committee shall have not less than 3 members and will be headed by an officer from the Administrative Department holding the rank of at least Secretary to the State Government. The other members of the Tender Acceptance Committee will include chief engineer level officers from the State Government and officers holding equivalent posts within the SPV.

The lowest submitted quote may be accepted by the Tender Acceptance Committee/Acceptance Authority provided that it is less than a confidential internal estimate based on local market rates. This local market rate based estimate is prepared and submitted to the Tender Acceptance Committee/Acceptance Authority before the bidding process is opened. If the lowest tender is more than 10 per cent. above the local market rate based estimate, the decision to approve/reject/retender must be given by the Administrative Department of the Issuer based on recommendations of the Tender Acceptance Committee/Acceptance Authority. Tenders significantly above the local market rate based estimate shall not be accepted, except with the approval of the Council of Ministers of the State Government.

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The bidding process must be completed within the offer period for such bid. After tender acceptance, a letter of award will be issued and the SPV will communicate to the Issuer the relevant details such as the credentials of the successful bidder, account details, scope and rates through an online project portal.

A works agreement is entered into between the SPV and the successful bidder/contractor and a copy of the works agreement is provided to the Issuer together with a works schedule, item breakdown schedule (if applicable), work breakdown structure (including agreed rates) and note on any financial liabilities in the works agreement.

The SPV will constitute a project management unit ("PMU") which will be responsible for the management of the project including planning, execution and monitoring. A project director will be appointed within the PMU for each project, who may also act as project director for other projects under the SPV. Additionally, the SPV will appoint an execution level project manager to coordinate with the Issuer in relation to field inspection and related activities.

Project monitoring

The Issuer is piloting the use of Building Information Modelling ("BIM") technology which uses digital data in the planning, design, construction and management of infrastructure projects. The Issuer believes that the use of BIM technology will increase productivity and efficiency in running its business.

BIM and related tools in the virtual design and construction ("VDC") area are proposed to be implemented in all high value projects funded by the Issuer. This technology will create a digital replica of the project in its finished condition. The Issuer believes that the implementation of BIM based modelling and VDC tools will help to create effective design and project monitoring in visual form, enhancing the SPV's review of design issues. The BIM system will also help to reduce project implementation risk.

Project inspection and quality control

The proposed projects undergo inspection and quality control checks. The Issuer has an inspection and quality management system in place which is intended to ensure that projects funded by the Issuer are planned, designed and executed with the appropriate level of quality standards. The inspection and quality management system oversees technical aspects to ensure that the projects funded by the Issuer have the optimum life cycle cost. The Inspection Authority scrutinises project documents, conducts site inspections and provides technical advisory services. To manage quality related issues, the Issuer is operating a drone based quality monitoring system, a material testing lab and a quality monitoring studio.

FINANCING

The Issuer has the power, with prior sanction of the State Government, to borrow and lend any sum required for the purposes of the KIIF Act, pursuant to section 8 of the KIIF Act. For this purpose, the Issuer may issue any financial instrument including general obligation bonds, revenue obligation bonds or any other appropriate financial instruments or raise funds through any financial structures including revenue bonds with structured repayment mechanisms, land bonds and any other appropriate financial instruments or by making arrangements with banks, multilateral funding agencies or institutions approved by the State Government. The Issuer may also act as a sponsor for setting up infrastructure investment structures (including AIF, infrastructure investment trust, mutual funds and infrastructure development funds), as may be required for facilitating the mobilisation of resources for a project or group of projects.

Rupee term loans

The Issuer has a ₹565 crore term loan outstanding from the National Bank for Agriculture and Rural Development ("NABARD") granted under NABARD Infrastructure Development Assistance ("NIDA") dated 28 July 2017 (the "NABARD Term Loan"). The NABARD Term Loan is to fund (i) the improvement and upgrade of 15 roads in Kozikode, Alappuzha, Thiruvananthapuram and Kannur and (ii) the widening of a

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highway in the Thiruvananthapuram district. The interest rate is 9.3 per cent. per annum and the term is 12 years. As of 31 March 2018, ₹100.8 crore has been drawn down.

The Issuer has no other outstanding term loans as at July 2018.

Market borrowing

The Issuer is authorised to raise funds through the issue of bonds in both domestic and international capital markets. The Board, in its meetings held on 7 November 2016 and 30 November 2017, approved the raising of rupee denominated bonds worth ₹3,500 crore and ₹5,000 crore in the domestic and international market respectively.

The Issuer has no outstanding bond issues as at July 2018.

Setting up of Infrastructure Fund Management Company

Section 8(3) of the KIIF Act empowers the Board to act as sponsor for setting up infrastructure investment structures such as AIFs, infrastructure development funds and infrastructure investment trusts as required for facilitating the mobilisation of resources for infrastructure projects in Kerala. The regulations issued by the SEBI require a corporate entity for sponsoring such investment structures. To comply with the SEBI regulations and to ensure functional autonomy, a fund management company is required to be set up under the sponsorship of the Issuer. Accordingly, pursuant to a government order 8409/2016/Fin. dated 24 October 2016, the Additional Chief Secretary (Planning and Economic Affairs) was appointed as special officer for preparing a project report for setting up such fund management company. Subsequently, the Board approved a proposal for sponsoring a fund management company in its 27th meeting and the recommendations of the report were thereafter approved by the Board. The Board has appointed India Infrastructure Finance Company Limited to assist with incorporation of the new fund management company.

Floating of non-resident Keralites "chitty" in association with KSFE

The Kerala State Financial Enterprises Limited ("KSFE") is a non-banking finance company wholly owned by the State Government. KSFE specialises in a form of financial activity called a "chitty" which is a scheme incorporating the aspects of a recurring deposit and an advance. In a chitty, the subscriber can bid for and obtain an advance from KFSE which will be made up of monies paid by subscribers each month. KFSE is preparing to launch an online "chitty" for NRKs which will include an insurance and pension cover package. The online registration process was opened in July 2018 and the chitty will be launched and become available for subscriptions by the final week of October in 2018. The funds collected by KSFE will be made available to the Issuer in the form of a bond issued by the Issuer and subscribed by KSFE. The proceeds will be used by the Issuer for the purposes of investment in infrastructure projects in Kerala.

For example, in a chitty with 10 subscribers for a term of 40 months, where the monthly subscription amount is ₹100, each month a subscriber can bid for the total money collected each month which in this case would be 10 x 100. This will occur for the 40 months. The money collected each month is kept by the chit fund manager, KSFE. The money received by KSFE from the chit subscribers can only be placed in bank accounts or other secure instruments such as government guaranteed bonds. The Chit Fund Act, 1982 provides that such funds can be invested only in instruments in which a trust can investment its money under the Indian Trust Act, 1882. The funds collected by KSFE as part of the non-resident Keralites chitty is proposed to be invested in bonds issued by the Issuer and guaranteed by the State Government.

Issuing land bonds for facilitating land acquisition

The special investment plan announced under the second recession package in the 2016-17 revised state budget speech announced that ₹8,000 crore worth of land acquisition in Kerala is planned. The special investment plan comprising of infrastructure projects is being implemented by the Issuer. The Board, in its 27th meeting, resolved to authorise the Chief Executive Officer to prepare a scheme for the issue of land bonds. Discussions have been held with revenue authorities and State Government departments requiring land acquisition for their

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infrastructure projects. 20 approved projects require urgent land acquisition in an amount of 617 acres. A conference was held with the Revenue Minister, the Additional Chief Secretary (Finance), Additional Chief Secretary (Taxes), Inspector General of Registration and district collectors to discuss the ways in which land acquisition can be facilitated through the Issuer's funding. It was resolved that the Issuer would finance the acquisition of the 20 approved urgent projects through funds already available to it, prior to land bonds being issued.

Summary of Indebtedness

The following table sets forth the details of the Issuers' indebtedness as of the dates mentioned:

31 March 31 March 31 March 2018 2016 2017 (₹ in (₹ in (₹ in crore) crore) crore) Long Term Borrowings

₹565 crore NABARD Term Loan 0 0 100.8

Total 0 0 100.8

INVESTMENT POLICY OF THE ISSUER

The Issuer has constituted an IMC consisting of three independent members and a Secretary (Resources) from the Stat e Government. The surplus funds of the Issuer are invested in accordance with the Investment Management Policy which is formulated by the IMC and approved by the Board.

The investment operations team

Investment strategy

The investment objective is to ensure adequate return on funds consistent with the protection, safety and liquidity of such funds. The investment strategy of the Issuer is guided by the statutory norms prescribed in the KIIF Act.

The KIIF Act also provides that the Fund may be utilised for certain purposes, including to: (i) finance or leverage investments in infrastructure projects in Kerala; (ii) provide financial assistance to public sector undertakings and other undertakings for investments in infrastructure projects; (iii) redeem bonds or debentures or any other financial instrument used to raise resources for the Issuer and to repay the loans availed from co-operative banks, other commercial banks and any institution to implement the relevant infrastructure project; (iv) finance or leverage investments and financial instruments relating to land acquisitions for infrastructure projects and other purposes of the State Government; (v) provide funding for projects that face significant funding barriers; and (vi) provide direct loan advances and loan guarantees to eligible projects.

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Investment avenues

Considering the nature of the Issuer's funds, the Investment Management Policy provides that investments should only be made in instruments offering complete capital protection without any downside risk. Liquidity needs of the Issuer are taken into consideration before making investments.

Fixed income securities include government securities, non-convertible debentures and bonds, securitised paper, fixed deposits, money market instruments and similar instruments.

Exposure limits

Exposure limits prescribed in the Investment Management Policy are determined by reference to a percentage of the total investible funds outstanding at any time, and exposure is calculated by taking into account the total exposure to a particular group across all asset classes.

Fixed deposits

The Investment Management Policy provides that exposure to fixed deposits of an individual bank should not be more than 20 per cent., of the total outstanding deposits of the Issuer. Exposure to fixed deposits of all banks should not be more than ₹1,000 crore.

The Issuer maintains a list of panel banks. Only nationalised banks and private sector banks with a rating of at least A1+ are included on such panel. Quotes are invited from all panel banks before investing funds. The tenure of the fixed deposits are tailored to the liquidity needs of the Issuer.

Treasury bills

Short term funds may be invested in treasury bills. Such investments are normally held to maturity. There should not be any speculative trading in treasury bills (other than for the purposes of liquidity management).

Sovereign bonds and high quality corporate paper

Investment may be made in sovereign bonds (only Government of India) and high quality corporate paper with a rating of AAA. Such investments should be marked to market on a quarterly basis.

Investment in corporate paper is subject to a cap of 10 per cent. of total investible funds. However, there is no cap on investments that can be made in securities of the Government of India.

Mutual funds

Investments may be made in debt market mutual funds investing in at least AAA corporate debt, subject to a cap of 10 per cent. of total investible funds.

Risk Management

The Issuer is to a large extent protected from the risks associated with typical companies because the repayments of the loans raised by the Issuer are not tied to payments from the projects being financed. The repayments will be largely financed through the Motor Vehicles Tax and the Cess collected and transferred by the State Government to the Issuer pursuant to the KIIF Act.

Steps have been taken for strengthening the financing available with the Issuer. The Escrow Mechanism, a real-time direct debit mechanism for the transfer of Motor Vehicles Tax and the Cess from the State Government to the Issuer is an important risk management process being implemented by the Issuer.

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The Issuer is also in the process of engaging financial institutions to implement an asset liability management programme. Furthermore, the FTAC has approved and instructed the Issuer to establish a ring-fenced sinking fund in respect of the Issuer's large borrowings, which is expected to cover all borrowings over 1,000 crore.

Project level risks including execution risk are managed at the SPV level.

Force majeure risk: Force majeure risk is applicable across all the business of the Issuer. Factors such as acts of God, epidemics, adverse weather conditions, radioactive contamination, ionising radiation, fire or explosion, strikes or boycotts, the discovery of geological conditions, toxic contamination or archaeological remains on the relevant site, indirect political event(s) and political event(s) and change in law are often threats to various projects undertaken by the Issuer. In order to mitigate the losses due to force majeure, the Issuer has a separate mechanism of payment upon the occurrence of a force majeure event.

SUBSIDIARIES

The Issuer has no subsidiaries.

HUMAN RESOURCES

The Issuer employed 51 employees as of 1 August 2018. The employees include professionals in business management, accountancy, engineering, law, computer science, economics and other relevant disciplines. The Issuer believes that its employees are its most valuable asset and the management believes it has a good relationship with the employees. The Issuer aims to develop a collaborative culture and an ongoing consultative process at various levels of administration within the organisation. The Issuer believes that it has amicable relations with its employees. The management of the Issuer is also in constant dialogue with the employees to avoid any industrial relations actions, including strikes or work stoppages.

The details of employees of the Issuer as at 1 August 2018 are as follows:

Category of Employees Number of Employees

Regular 10

Deputation 29

Contract 12

INSURANCE

The Issuer's policy is to insure its properties are adequately insured against fire. The Issuer's insurance policies are subject to exclusions which are customary for those insurance policies, including those exclusions which relate to war and terrorism-related events. The Issuer believes that its insurance policies as described above are appropriate for its operations.

COMPETITION

The Issuer believes that, given its unique position as the primary implementing agency for the funding and implementation of infrastructure projects in Kerala, it has no other peer organisation competing for its role within the State Government's plans to enhance the infrastructure of Kerala. It is possible that in the future other infrastructure funding mechanisms may be set up such AIFs, infrastructure investment trusts, mutual funds and infrastructure development funds.

PROPERTIES

The Issuer does not currently own any properties including its head office. Its offices are currently held on a lease basis.

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INFORMATION TECHNOLOGY

The Issuer is continuing to invest in IT designed to help it better monitor and run its operations. The Issuer has deployed the IT system across its organisation. The Issuer's website is designed to provide a comprehensive description of its business.

MATERIAL EVENT, DEVELOPMENT OR CHANGE AT THE TIME OF ISSUE

The Issuer hereby confirms that, except for any information disclosed in this Offering Circular, there has been no material event, development or change having implications on the financial condition or credit quality of the Issuer at the time of issue of the Notes which may affect the issue of the Notes or an investor's decision to invest or continue to invest in the debt securities of the Issuer.

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GUARANTEE

The Notes will be unconditionally and irrevocably guaranteed by the Guarantor. The obligations of the Guarantor under the Guarantee will be direct and unconditional, and will at all times rank at least pari passu with all other present and future unsecured and unsubordinated obligations of the Guarantor, present and future. The due payment of all financial liabilities of the Issuer (including principal and interest) in respect of the Notes is guaranteed by the State Government, acting through the Finance Department of Kerala, by virtue of section 9 of the KIIF Act through a government order dated 17 September 2018 (G.O.(Ms)No.347/2018/FIN) and the provisions of the Trust Deed dated 19 September 2018, provided that the total value of such guarantee shall not exceed the limit set by the Kerala Ceiling on Government Guarantees Act, 2003, currently 5 per cent. of the Gross State Domestic Product of Kerala.

Upon the occurrence of any Event of Default, the Trustee at its discretion may, and if so requested in writing by the holders of not less than one-quarter in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall, enforce the Guarantee in accordance with the Trust Deed, the Conditions, and applicable law.

However, the Guarantor is the Government of Kerala, which is a federal unit of the sovereign Republic of India. Therefore, there is a risk that, notwithstanding the Guarantor's agreement to waive the defence of sovereign immunity in certain circumstances in connection with the Notes, a claimant may not be able to enforce a court judgment against the Guarantor and/or certain assets of the Guarantor (including the imposition of any arrest order or attachment or seizure of such assets and their subsequent sale) without the Guarantor having specifically consented to such enforcement at the time when the enforcement is sought. For further details on the aspect of sovereign immunity in India, please see the risk factor "It may be difficult to enforce judgments obtained in foreign jurisdictions due to India's sovereign immunity".

Further, as long as the Guarantee is in force it is required to be submitted to the state legislature of the State Government in every year during the budget session, a statement of the Guarantee, and up to date accounts of the total sums, if any, which have been paid out of the Consolidated Fund of the State Government by reason of the Guarantee or paid into the said fund towards repayment of any moneys so paid out. If a Guarantee issued by an Indian entity on behalf of another Indian entity in accordance with applicable law and regulations, for it to be enforced by a competent court in a territory other than a "reciprocal territory", the judgment must be enforced in India by a new suit upon the judgment and not by proceedings in execution. Such a suit has to be filed in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. A party seeking to enforce a foreign judgment in India is required to obtain approval from the RBI to repatriate outside India any amount recovered pursuant to the execution of such a judgment. For further details on the recognition and enforcement of foreign judgments in India, see "Enforcement of Foreign Judgments in India".

As the Guarantee is an obligation of a type which Indian courts would usually enforce, the Guarantee should be enforced against the Guarantor in accordance with its terms by an Indian court, subject to the following exceptions: (i) enforcement may be limited by general principles of equity, such as injunctions; (ii) Indian courts have sole discretion to grant specific performance of the Guarantees and may not grant specific performance in instances such as where damages are considered by the Indian court to be an adequate remedy, or where the court does not regard specific performance to be the appropriate remedy; (iii) actions may become barred under the Limitation Act, 1963, or may be or become subject to set-off or counterclaim, and failure to exercise a right of action within the relevant prescribed limitation period will operate as a bar to the exercise of such right; (iv) any certificate, determination, notification, opinion or the like will not be binding on an Indian court, which will have to be independently satisfied on the contents thereof for the purpose of enforcement despite any provisions in the relevant documents to the contrary; and (v) all limitations resulting from the laws of reorganisation, suretyship or similar laws of general application affecting creditors' rights.

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REGULATION AND POLICIES

The following is a summary of the relevant regulations and policies prescribed by the Central Government, the State Government and other regulatory bodies that are applicable to the Issuer's business and operations. The information has been obtained from legislations available in the public domain, and may not be exhaustive. It is merely intended to provide general information and is neither designed nor intended to be a substitute for professional legal advice.

The statements below are based on the current provisions of Indian law, which is subject to change or modification by subsequent legislative, regulatory, administrative or judicial decisions.

Investors should carefully consider the information described below, together with the information set out in other sections of the Offering Circular including the financial statements before making an investment decision relating to the Notes, as any changes in the regulations and policies could have a material adverse effect on the Issuer's business.

The following are the significant laws and regulations that govern the Issuer's operations:

The Kerala Infrastructure Investment Fund Act 1999, as amended (the "KIIF Act")

The KIIF Act, was enacted to provide for the constitution of a fund (the "Fund") for investments in the infrastructure projects in the state of Kerala and for matters connected therewith or incidental thereto. Under the KIIF Act, the Government may by notification in the Gazette, frame a scheme to be called the 'Kerala Infrastructure Investment Fund Scheme' (the "KIIF Scheme") for the establishment of the Fund.

The Board of the Issuer has been constituted under Section 4 of the KIIF Act, which provides that the State Government may by notification, constitute a board, being a body corporate having perpetual succession and a common seal, to be called the 'Kerala Infrastructure Investment Fund Board' (the "Board") for the administration of the Fund and to supervise or carry out the activities financed by the Fund under the KIIF Act.

The Issuer may, from time to time, in accordance with the KIIF Act, with the previous sanction of the State Government and subject to such conditions as the State Government may by general or special order determine, borrow any sum required for the purposes of the KIIF Act. Under section 9 of the KIIF Act, the State Government may guarantee the payment of principal and interest of any financing proposed to be raised by the Issuer in accordance with the KIIF Act, provided that the total value of such guarantee shall not exceed the limits set by the Kerala Ceiling on Government Guarantees Act, 2003, currently 5 per cent. of the Gross State Domestic Product of Kerala.

The KIIF Scheme formulated under the KIIF Act may provide for inter alia the following : (i) eligibility of undertakings for assistance; (ii) purposes for which assistance may be given; (iii) modes of assistance; (iv) interest and penal charges; (v) security for the assistance; (vi) appraisal, sanction and disbursement procedure; (vii) recovery procedure and monitoring system; (viii) investment of surplus funds; (ix) method of appointment of the staff and method of keeping accounts; and (x) any other matter which may be necessary or propose for the purpose of implementation of the KIIF Scheme.

Dissolution of the Board

In accordance with section 18 of the KIIF Act, if the State Government for any reason is of the opinion that it is not necessary to continue the Board it may by notification in the Gazette dissolve the Board from such date as may be specified by the State Government. All the powers and functions which may, by or under the provisions of the KIIF Act, are to be exercised and performed by or on behalf of the Board or the chairman of the Board shall from the date of such dissolution, be exercised and performed by the State Government or such authority or person as the State Government may appoint in this behalf. All the liabilities legally subsisting and enforceable against the Board shall be enforceable against the State Government to the extent of the funds and properties vested in the Board.

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The Kerala Infrastructure Investment Fund (Amendment) Act, 2016 (the "Amendment Act")

The KIIF Act was amended in November 2016 by the Kerala Infrastructure Investment Fund Amendment Act, 2016 in order to mobilise funds for infrastructure development in Kerala. The constitution of the Issuer was altered to consist of the following members: (i) the Chief Minister; (ii) the Minister of Finance; (iii) the Vice Chairman, State Planning Board; (iv) the Chief Secretary; (v) the Secretary (Law); (vi) the Secretary (Finance); (vii) the Secretary (Finance Resources); (viii) seven independent members who are experts and who have worked in an institution of national repute in one or more of the areas of finance, banking and economics; and (ix) the chief executive officer.

Pursuant to the Amendment Act, the Board has the power to inter alia, (i) approve the selection of eligible projects for financial assistance through the Fund; (ii) authorise the mobilisation of resources for augmentation, maintenance and utilisation of the Fund; (iii) approve the public agency which shall implement a project through the public sector mode or through a public private partnership ; (iv) coordinate the efforts of the State Government, any public agency and sponsoring agencies in matters regarding the development of the infrastructure in the state including public private partnership projects; (v) identify sources of financing, and approve suitable modes of raising resources; (vi) identify bottlenecks in the projects and recommend policy initiatives to rectify the same; (vii) formulate and recommend policies related to eligible projects so as to ensure that project risks are identified and allocated between the stakeholders; (viii) perform such other functions as may be entrusted to it by the State Government.

The Issuer was restructured to create the executive committee ("Executive Committee") to exercise such powers and perform such functions as may be delegated to it by the Issuer. The Executive Committee is to consist of, (i) the Minister of Finance; (ii) the Chief Secretary; (iii) the Secretary (Law); (iv) the Secretary (Finance); (v) the Secretary (Finance – Resources); (vi) three independent members of the Board; and (vii) the chief executive officer.

The Amendment Act also created the fund trustee advisory commission (the "FTAC") as an independent commission to act as the trustee of the Fund and help ensure that all investments of the Fund serve the purpose and intent of the KIIF Act and that there is no diversion of funds of the Issuer. The FTAC is entrusted with the power to inter alia (i) call for periodical report from the Issuer; (ii) any documents in possession; (iii) supervise the implementation of the conditions regarding creation of the securities by the Issuer for the purpose of raising funds; (iii) carrying out such other act as may be necessary for protection of the holders of the securities issued by the Issuer and resolves the grievances; and (iv) ascertain that the funds available with the Issuer are deployed in prudential investments.

The Amendment Act defines the scope of 'eligible projects' which includes projects eligible for financial assistance from the funds referred to the Issuer by the State Government and approved by the Issuer and shall be of a value exceeding ₹100 crores and implemented by a public agency. The scope for which the Issuer may exercise the Fund available under the KIIF Act was further expanded by the Amendment Act. In accordance with the provisions of the KIIF Act the Fund may be utilised for inter alia : (i) to finance or leverage investments in infrastructure projects in the state of Kerala; (ii) to provide financial assistance to public sector undertakings and other undertakings for their investments in infrastructure projects; (iii) to redeem the bonds or debentures or any other financial instruments used to raise resources for the Fund and to repay the loans availed from cooperative banks, other commercial banks and any institution to implement the infrastructure project; (iv) to finance or leverage investments and financial instruments in relation to land acquisitions for infrastructure projects and other government purposes; (v) to provide funding for projects that face significant funding barriers because of the need to combine resources across multiple sectors or parts thereof; (vi) to provide direct loans, advances and loan guarantees to eligible projects, programme of any legal entity or instrumentality including public or other undertaking for their investments in infrastructure projects identified by the State Government ; and (vii) for the implementation of any other purpose specified in the KIIF Scheme.

In order to bring in greater transparency and accountability, the State Government shall lay before the State Legislative Assembly, along with the presentation of the annual budget, a statement of the sources and application of the funds of the Issuer and a certificate from the FTAC to the effect that the funds of the Issuer have been deployed for the purposes intended and that surplus funds have been managed as laid down under the KIIF Act.

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The Amendment Act includes a provision in the KIIF Act that all receivables due from the state of Kerala are transferred to the Issuer on or before the last working day of December every year and that a percentage share of the Motor Vehicles Tax ("MVT"") and a cess on petroleum will be provided to the Issuer each year.

Guidelines under the KIIF Act

Guidelines for ensuring necessary standardisation and efficiency in preparation, processing and implementation of proposals of projects funded by the Issuer dated 24 February 2018 ("2018 KIIFB Guidelines")

The State Government through an order dated 8 August 2016 issued Guidelines for availing financial resources from the Issuer ("2016 KIIFB Guidelines"), for ensuring necessary standardization and efficiency in the preparation, processing and implementation of project proposals of the various government departments, public sector undertakings and other public agencies of the State Government which have been permitted to avail funding through the Issuer by the State Government.

The special purpose vehicles ("SPV(s)") implementing the infrastructure projects funded by the Issuer are under the control of the State Government are bound to follow the rules and guidelines applicable for execution of public works. The State Government through an order dated 24 February 2018, issued the revised procedures and guidelines for planning and execution of the Issuer assisted infrastructure projects by various SPVs thereby replacing the 2016 KIIFB Guidelines.

Pursuant to the 2018 KIIFB Guidelines, projects satisfying the conditions as per the KIIF Act, as amended, are to be registered via the online project portal after administrative sanction is accorded for the projects. The cost of a project has to be a minimum of ₹100 crores and a minimum of ₹10 crores for a sub-project. The SPV for implementing the project shall be identified by the relevant administrative department of the State Government. The Issuer shall verify the details and confirm the SPV registration. Pursuant to issuing the administrative sanction, the tripartite agreement, in the standard form and manner approved by the Issuer, shall be signed between the SPV, the administrative department and the Issuer for implementing the project.

Under the 2018 KIIFB Guidelines, a detailed project report ("DPR") shall be prepared by the SPV, and separate DPRs are to be prepared for sub-projects or project components, if sanctioned separately. The DPR is a comprehensive document which must contain a detailed estimate (sufficient for technical sanction purpose) including the specified details (such as functional design, engineering design, financial estimates and cost projection, etc.) as well as any specifically relevant additional information. On evaluation of the DPR by the Issuer, a technical appraisal report ("TAR") is to be issued online and if any clarification or rectification is proposed therein, the SPV must submit them as a compliance report to the Issuer. After the completion of the appraisal, the project is submitted to the Executive Committee for approval of funding by the Issuer. Once the funding approval is obtained, Issuer shall issue a sanction order which includes the approved project cost and other project details. It is important to note that the Executive Committee may sanction non-revenue generating projects costing up to ₹100 crores only, but all revenue generating projects may be approved irrespective of the estimated cost. The SPV may take advance action for land acquisition by obtaining separate funding approval from the Issuer without awaiting completion of formalities for funding approval for the whole project. The SPV is to follow a competitive e-tendering process following the Central Government or State Government's guidelines for the same. The tenders are to be accepted at the board level of the SPV. A work contract agreement is to be signed between the SPV and the successful tenderer, and any revision in the implementation schedule proposed by the contractor is to be intimated to the Issuer for approval. The SPV is to constitute a project management unit ("PMU") which will be responsible for the entire management of the project and act as the nodal unit of the SPV for coordinating with the Issuer. The project implementation will be monitored through the online project monitoring system. Closure of the relevant contract will occur only with the approval of the technical sanctions committee to ensure that the work has been executed as per the original scope, design and specifications.

Guidelines for the Powers of Inspection Authority of the Issuer dated 22 December 2017 ("Inspection Authority Guidelines")

In accordance with Section 17A of the KIIF Act, 1999, as amended, the State Government may, by general or special order, appoint an inspection authority comprising of such persons as it deems fit to inspect any projects

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and the documents of any SPVs implementing the same that has been financed by the Issuer. The Inspection Authority Guidelines provide for general guidelines for the functioning of the Inspection Authority of the Issuer.

Pursuant to the Inspection Authority Guidelines, the Inspection Authority inter alia has the power to call for documents from any SPV and inspect its office, site and premises of the projects implemented by it. The Inspection Authority will further be divided into two wings being the technical inspection wing ("TIW") and the administrative inspection wing ("AIW"). The TIW is responsible for conducting examination of technical aspects of the construction projects and the quality management aspects during their execution. Such examination will be conducted through document scrutiny, site inspections and periodic reports submitted to the Issuer. The AIW will be responsible for conducting inspections in order to assess the level of compliance of the SPVs in the procedural requirements of public works systems.

Guidelines for the submission of Work Intimation Reports to the Chief Project Examiner, Inspection Authority through KIIFB-Technical Inspection Monitoring System ("K-TIMS") dated 17 March 2018 ("Work Intimation Guidelines")

The KIIF Act, empowers the Issuer's Inspection Authority to conduct examinations of works being carried out by SPVs for the implementation of infrastructure projects in the state of Kerala. The SPVs are required to submit 'work intimation reports' to the chief project examiner of the Inspection Authority through the KIIFB technical inspection monitoring system ("K-TIMS") software. These 'work intimation reports' are to be submitted according to the specifications laid down in the Work Intimation Guidelines.

The Work Intimation Guidelines specify that all reporting by the SPVs shall be done only through the online mode in the K-TIMS of the Issuer's website.

Other Laws in relation to the Issuer

The Kerala Ceiling on Government Guarantees Act 2003 (30 of 2003) ("Guarantee Act")

The Guarantee Act was enacted to provide for a ceiling on government guarantees issued on behalf of the State Government departments, public sector undertakings, local authorities, statutory boards, corporations and co-operative institutions and for promoting fiscal discipline of the state of Kerala. It also prohibits the State Government from providing a government guarantee in respect of a loan of any private individual, institution or company.

Pursuant to the Government Ceiling Act, the total outstanding government guarantees provided by the State Government as on the first day of April of any year cannot exceed the limits set by the Government Ceiling Act, currently 5 per cent. of the Gross State Domestic Product of Kerala

For any government guarantee provided under the Guarantee Act, the State Government shall charge a minimum of 0.75 per cent. per annum as guarantee commission, which cannot be waived under any circumstances. Furthermore, any government guarantee provided cannot be extended on the expiry of the guarantee period unless the borrower for whom the guarantee has been extended has paid the full amount of the guarantee commission due to the State Government.

The Kerala Revenue Recovery Act, 1968 ("Revenue Recovery Act")

The Revenue Recovery Act, was enacted to consolidate and amend the law relating to the recovery of arrears of public revenue in the state of Kerala. Pursuant to the KIIF Act, all sums payable by any person to the Issuer or recoverable by it under the KIIF Act or the scheme and all charges or expenses incurred in connection therewith shall be recoverable as arrears of public revenue due on land under the provisions of the Revenue Recovery Act.

In accordance with the Revenue Recovery Act, whenever public revenue due on land is in arrear, such arrear, together with interest, if any, and cost of process may be recovered by one or more of the following modes : (i) by attachment and sale of the defaulter's movable property; (ii) attachment and sale of the defaulter's immovable property; (iii) by appointing an agent for the management of the defaulter's immovable property; and (iv) by arrest of the defaulter and his detention in prison. Any arrears of public revenue due on land shall bear interest at the rate of 6 per cent. per annum or at such other rate as may be notified by the State Government from time to time in the official Gazette.

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Section 21 in the Indian Penal Code (the "IPC")

The KIIF Act, deems any member of the Issuer, including the Board, the Fund Manager and the staff of the Issuer to be 'public servants' appointed under Section 21 of the IPC. In accordance with the Section 21 of the IPC the words "public servant" denotes a person falling under inter alia any of the descriptions hereinafter namely : (i) every officer whose duty it is, as such officer, to take, receive, keep or expend any property on behalf of the Government, or to make any survey, assessment or contract on behalf of the Government, or to execute any revenue process, or to investigate, or to report, on any matter affecting the pecuniary interests of the Government, or to make, authenticate or keep any document relating to the pecuniary interests of the Govern- ment, or to prevent the infraction of any law for the protection of the pecuniary interests of the Government; (ii) every officer whose duty it is, as such officer, to take, receive, keep or expend any property, to make any survey or assessment or to levy any rate or tax for any secular common purpose of any village, town or district, or to make, authenticate or keep any document for the ascertaining of the rights of the people of any village, town or district; (iii) every person who holds any office in virtue of which he is empowered to prepare, publish, maintain or revise an electoral roll or to conduct an election or part of an election; (iv) every person in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government; (v) in the service or pay of a local authority, a corporation established by or under a Central, Provincial or State Act or a government company as defined in section 617 of the Companies Act, 1956.

Labour Laws

The Issuer is subject to various labour laws that regulate the conditions of work and employment, work hours, safety, protection, working condition, employment terms and welfare of labourers and/or employees. The Issuer is, inter alia, subject to the applicable shops and establishments legislations, the Employees State Insurance Act, 1948, the Employees (Provident Fund and Miscellaneous Provisions) Act, 1952, the Payment of Gratuity Act, 1972, the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, the Maternity Benefit Act, 1961, the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, and the Equal Remuneration Act, 1976.

Laws in relation to external commercial borrowing

External Commercial Borrowings

The current laws relating to ECBs as applicable to the issue of Notes are embodied in the Master Direction on External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers dated 1 January 2016, as updated from time to time and the Master Directions on Reporting under the Foreign Exchange Management Act, 1999 dated 1 January 2016, as amended ("ECB Direction"). ECBs can be accessed under two routes: (i) the automatic route; and (ii) the approval route. The automatic route does not require a borrower to obtain any RBI approvals, whereas the approval route requires a prior RBI approval. The ECB Directions classify ECBs under the categories:

(i) medium term foreign currency denominated ECBs with minimum average maturity of three to five years ("Track I ECBs");

(ii) long-term foreign currency denominated ECBs with minimum average maturity of ten years ("Track II ECBs"); and

(iii) Indian Rupee denominated ECBs with minimum average maturity of three to five years ("Track III ECBs").

Automatic route

The following entities have been classified inter alia as recognised borrowers for raising Track I ECBs: (i) companies in the manufacturing and software development sectors; (ii) shipping and airlines companies; (iii) Small Industries Development Bank of India; (iv) units in special economic zones in India; and (v) companies in the infrastructure sector, NBFC-Infrastructure Finance Companies, NBFCs-Asset Finance Companies, holding companies and core investment companies. For Track II ECBs, all entities eligible under Track I ECBs can raise ECBs in addition to real estate investment trusts and infrastructure investment trusts coming under the regulatory framework of SEBI. In case of Track III ECBs, all entities eligible under Track II ECBs can raise ECBs in addition to (i) all NBFCs coming under the purview of RBI; (ii) NBFCs-micro finance institutions, not

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for profit companies registered under the Companies Act, 1956 or 2013, societies, trusts and co-operatives, nongovernment organisations engaged in micro-finance activities; (iii) companies engaged in miscellaneous services such as research and development, companies supporting infrastructure, companies providing logistics services and companies engaged in maintenance, repair and overhaul and freight forwarding; and (iv) developers of special economic zones and national manufacturing and investment zones.

The following lenders are eligible to provide ECBs for Track I ECBs: (i) international banks; (ii) international capital markets; (iii) multilateral financial institutions or regional financial institutions and Government-owned financial institutions; (iv) export credit agencies; (v) suppliers of equipment; (vi) foreign equity holders; (vii) overseas long term investors; and (viii) overseas branches or subsidiaries of Indian banks. For Track II ECBs all entities listed under Track I ECBs other than overseas branches or subsidiaries of Indian banks. For Track III ECBs all entities listed under Track I ECBs other than overseas branches or subsidiaries of Indian banks. In case of NBFCs- MFIs, other eligible MFIs, not for profit companies and non-government organisations, ECBs can also be availed from overseas organisations and individuals.

In relation to the utilisation of the ECB proceeds, the negative list for all Tracks would include: (i) investment in real estate or purchase of land except when used for affordable housing as defined in the Harmonised Master List of Infrastructure Sub-sectors notified by Government of India, construction and development of special economic zones and industrial parks/integrated townships; (ii) investment in capital markets; (iii) equity investments. Additionally for Tracks I ECBs and Track III ECBs, the following negative end uses will also apply except when raised from direct and indirect equity holders or from a group company, and provided the loan is for a minimum average maturity of 5 years: (i) working capital purposes; (ii) general corporate purposes; (iii) repayment of rupee loans. Finally, for all tracks of ECBs, the following negative end use will also apply in relation to on-lending to entities for the above set out activities from.

Further, the maximum amount which can be raised every fiscal year under the automatic route is U.S.$750 million or its equivalent for companies in the infrastructure and manufacturing sector, NBFC — infrastructure finance companies, NBFC — asset finance companies, holding companies and core investment companies, U.S.$200 million or its equivalent for companies in the software development sector, U.S.$100 million or its equivalent for entities engaged in micro finance activities and U.S.$500 million or its equivalent for remaining entities. The all-in cost (which includes rate of interest, other fees and expenses in foreign currency or Indian Rupees but does not include commitment fees, prepayment fees, payments for withholding tax in Rupees) ceilings for (i) Track I ECBs and Track II ECBs is 450 basis points per annum over six month LIBOR; and (ii) 450 basis points per annum over the prevailing yield of the Government of India securities of corresponding maturity.

Approval route

All ECBs falling outside the automatic route limits are considered by the RBI under the approval route.

Filing and Regulatory Requirements in relation to Issuance of Notes

An ECB borrower is required to obtain a loan registration number ("LRN") from the RBI before an issuance of Notes is effected. To obtain this, ECB borrowers are required to submit a completed Form 83 certified by a company secretary or a chartered accountant to the Authorised Dealer Bank ("AD Bank") of the ECB borrower.

The AD Bank is then required to forward the completed Form 83 to the RBI. An ECB borrower is required to submit an ECB-2 Return on a monthly basis via its AD Bank to the RBI.

Procedure in relation to any change to the Terms and Conditions of the Notes

Any change in the terms and conditions of the Notes after obtaining the LRN requires the prior approval of the RBI or AD Bank, as the case may be. Certain changes (such as amendments to the repayment date, currency, the name of the borrower, recognised lender, the purpose for which the ECB is utilised, all-in costs, cancellation of LRN, reduction in amount of the ECB or any change to the AD Bank) may be approved by the AD Bank under a delegated authority from the RBI subject to certain conditions being complied with. Any redemption of the Notes prior to their stated maturity, including on occurrence of an Event of Default or for taxation reasons (as further described in the Terms and Conditions) will require the prior approval of the RBI.

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Regulatory Requirements in relation to issuance of Indian Rupee denominated Notes overseas

Pursuant to the ECB Direction, any company or body corporate (including NBFCs), as well as real estate investment trusts and infrastructure investment trusts, can issue plain vanilla Rupee - denominated overseas bonds with a three-year minimum maturity period. The Notes can only be subscribed or purchased by a resident of a country that is a member of the FATF or member of a FATF-style regional body and whose securities market regulator is a signatory to the International Organization of Securities Commission's Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to bilateral Memorandum of Understanding with the Securities and Exchange Board of India for information sharing arrangements. Additionally, investors should not be a resident of a country identified in the public statement of the FATF as: (i) a jurisdiction having a strategic anti-money laundering or combating the financing of terrorism deficiencies to which counter measures apply; or (ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies. An offshore branch or subsidiary of an Indian bank is not permitted to invest in such notes.

Banks incorporated in India cannot subscribe to such Rupee denominated Notes, however, they can act as arrangers and underwriters for such issuances. A related party (as defined in IND AS-24) of the Indian company issuing such Notes is not permitted to subscribe to such Notes. Any issuance of Rupee denominated overseas Notes requires that the proposal for issuance be routed through the issuer's AD Bank to the RBI's Foreign Exchange Department, for examination and approval.

The all-in-cost ceiling for such Notes will be 450 basis points over the prevailing yield of the Government of India securities of corresponding maturity.

The proceeds of such issuance can be used for all purposes except for (i) real estate projects other than the development of integrated township and affordable housing projects; (ii) the investment in capital markets and domestic equity investments; (iii) prohibited activities under the foreign direct investment guidelines; (iv) purchase of land; and (v) on-lending to other entities for any of the above objectives.

The foreign currency to Rupee conversion will be at the market rate on the settlement date. Furthermore, investors are allowed to hedge their Rupee exposure through permitted derivative products with: (a) an AD Bank in India; or (b) the offshore branches or subsidiaries of Indian banks on a back-to-back basis; or (c) branches of foreign banks with a presence in India on a back-to-back basis. Issuers issuing Rupee denominated Notes offshore are required to comply with provisions of the ECB Directions in relation to the reporting requirement, security creation and parking of proceeds offshore.

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TAXATION

The information provided below does not purport to be a comprehensive description of all tax considerations which may be relevant to a decision to purchase the Notes. In particular, the information does not consider any specific facts or circumstances that may apply to a particular purchaser. Neither these statements nor any other statements in this Offering Circular are to be regarded as advice on the tax position of any holder of the Notes or of any person acquiring, selling or otherwise dealing with the Notes or on any tax implications arising from the acquisition, sale or other dealings in respect of the Notes. The statements do not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Notes and do not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities) may be subject to special rules.

Prospective purchasers of Notes are advised to consult their own tax advisers as to the tax consequences of the purchase, ownership and disposition of Notes, including the effect of any state or local taxes, under the tax laws applicable in India, the country of which they are residents or the country of purchase, holding or disposal of the Notes. Additionally, in view of the number of jurisdictions where local laws may apply, this Offering Circular does not discuss the local tax consequences to a potential holder, purchaser or seller arising from the acquisition, holding or disposition of the Notes. Prospective investors must therefore inform themselves as to any tax, exchange control legislation or other laws and regulations in force relating to the subscription, holding or disposition of Notes at their place of ordinance, and the countries of which they are citizens or countries of purchase, holding or disposition of Notes.

Taxation in India

The following is a summary of the existing principal Indian tax consequences for non-resident investors ("NRIs") subscribing to the Notes issued by the Issuer. The summary is based on existing Indian taxation law and practice in force at the date of this Offering Circular and is subject to change, possibly with retroactive effect. The summary does not constitute legal or tax advice and is not intended to represent a complete analysis of the tax consequences under Indian law of the acquisition, ownership or disposal of the Notes. Prospective investors should, therefore, consult their own tax advisers regarding the Indian tax consequences, as well as the tax consequences under any other applicable taxing jurisdiction, of acquiring, owning and disposing of the Notes.

Payments through India

Any payments the Issuer makes on the Notes, including additional amounts, made through India will be subject to the regulations of RBI.

Taxation of interest

If the proceeds of the Notes are used for the purposes of the business of the Issuer in India, NRIs will be liable to pay tax on the interest paid on the Notes. As of the date of this Offering Circular, the rate of tax under the Income Tax Act, 1961 (the "ITA") is 5.00 per cent. (plus applicable surcharge and cess). As the interest payable on the Notes is subject to taxation in India, there is a requirement to withhold tax at the applicable rate for the Notes, subject to any lower rate of tax provided by an applicable Tax Treaty (as defined below).

Rates of tax will be reduced if the beneficial recipient is a resident of a country with whom the Government has entered into an agreement for the granting of tax relief or for the avoidance of double taxation (a "Tax Treaty") and the provisions of such treaty, which provide for the taxation in India of income by way of interest at a rate lower than that stated above, and of the ITA, are fulfilled. The interest payable will be subject to withholding tax in India, subject to conditions as detailed below.

An NRI will be obliged to pay such income tax in an amount equal to, or will be entitled to a refund of, as the case may be, any difference between amounts withheld in respect of interest paid on the Notes through India and its ultimate Indian tax liability for such interest, subject to and in accordance with the provisions of the ITA. All NRIs will be obliged to provide all necessary information and documents as may be required by the Issuer in this regard.

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Pursuant to the Conditions, all payments of principal and interest on the Notes will be made free and clear of and without withholding or deduction on account of any present or future taxes within India unless it is required by law, in which case pursuant to Condition 8 (Taxation), the Issuer will pay additional amounts as may be necessary in order that the net amounts received by the Noteholders after the withholding or deduction shall equal the respective amounts which would have been receivable in respect of the Notes in the absence of the withholding or deduction, subject to certain exceptions.

With respect to interest on the Notes that is not subject to taxes in India (where the proceeds of the issuance of the Notes are used for the purposes of business carried on by the Issuer outside India or otherwise), the Issuer may be required to apply annually for an exemption from withholding tax under section 195(2) of the ITA.

Withholding Tax

As interest payable on the Notes is subject to taxation in India, there is a requirement pursuant to the ITA to withhold tax at 5.00 per cent. (plus applicable surcharge and cess), subject to any lower rate of tax provided by an applicable Tax Treaty. However, the Central Government has recently announced a change to this tax treatment giving a special dispensation in respect of Rupee denominated bonds issued during the period from 17th September 2018 to 31st March 2019 (the “Press Release”). Pursuant to the Press Release, the requirement to withhold tax at 5.00 per cent. (plus applicable surcharge and cess) shall not be applicable on the interest payable by an Indian company or a business trust to a non-resident, including a foreign company.

Taxation of gains arising on disposition

Any capital gain of an NRI from disposition of the Notes held (or deemed to be held) as a capital asset will generally be chargeable to income tax in India if the Notes are regarded as property situated in India. An NRI will generally not be charged income tax in India on any disposition of the Notes held as a capital asset provided the Notes are regarded as being situated outside of India. The issue as to where the Notes should properly be regarded as being situated is not free from doubt. The ultimate decision will depend on the view taken by the Indian tax authorities on the position with respect to the situs of the rights being offered in respect of the Notes. There is a possibility that the Indian tax authorities may treat the Notes as being located in India as the Issuer is incorporated in and resident in India.

If the Notes are regarded as situated in India by the Indian tax authorities, upon disposition of a Note:

(a) Capital gains, if any, arising pursuant to any transfer made outside of India by an NRI to another NRI of a Note issued outside of India are not subject to tax in India;

(b) Any NRI who has held the Notes for a period of more than 36 months immediately preceding the date of their disposition will be liable to pay long-term capital gains tax at a rate of 10.0 per cent. of the capital gains (plus applicable surcharge and cess) in accordance with the provisions of the ITA. These rates are subject to any lower rate provided for by an applicable Tax Treaty;

(c) Any NRI who has held the Notes for 36 months or less will be liable to pay short-term capital gains tax at a rate of up to 40.0 per cent. of capital gains (plus applicable surcharge and cess), depending on the legal status of the NRI and his taxable income in India, subject to any lower rate provided for by an applicable Tax Treaty;

(d) in the case of an NRI, any capital gains arising on account of appreciation of the Rupee against a foreign currency at the time of redemption of a Rupee denominated bond of an Indian company held by such NRI shall be ignored for the computation of full value of consideration. Accordingly, such gains arising to the NRI on account of the appreciation of the Rupee against a foreign currency at the time of redemption of the Notes, shall not be taxable as capital gains;

(e) any capital gains of an NRI from a transfer of the Notes held as stock-in-trade will be considered as business income. Business income will be subject to income tax in India only to the extent it is attributable to a "business connection in India" or, where a Tax Treaty applies, to a "permanent establishment" of the NRI in India. An NRI will be liable to pay Indian tax on such income at a rate of

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up to 40.0 per cent. (plus applicable surcharge and cess), depending on the legal status of the NRI and their taxable income in India, subject to any beneficial provision of an applicable Tax Treaty.

If applicable, tax shall be withheld by the person making any payment to an NRI on long-term capital gains at 10 per cent. (plus applicable surcharge, education cess and secondary and higher education cess) and short-term capital gains at 30 per cent. or 40 per cent. (plus applicable surcharge and cess), depending on the legal status of the NRI, subject to any lower rate provided for by a Tax Treaty. Similarly, where business income accrues to a NRI from the sale of Notes, which is taxable in India, tax may be required to be withheld at the aforementioned rates. Tax payable shall be computed in such manner as prescribed in this regard under the ITA. For the purpose of tax withholding, all NRIs shall be obliged to provide the Permanent Account Number ("PAN") allotted by the tax authorities and all prescribed information and documents, including a tax residency certificate (issued by the tax authorities of the country in which the NRI is resident) in order to claim Tax Treaty benefits.

It may be noted that in absence of a PAN, the NRI may alternatively furnish documentation including a tax residency certificate, a tax identification number and other details including their name, address, email and contact number, pursuant to Rule 37BC of Income Tax Rules, 1962. However, as per section 139A of the ITA to provide that all entities, other than individuals, which enter into any financial transaction of an amount exceeding ₹250,000 in a financial year, would be required to apply for PAN. This obligation of obtaining PAN is also proposed to be extended to managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer or any person competent to act on behalf of such entities. Thus, every NRI (not being an individual) entering into a financial transaction of an amount exceeding ₹250,000, with the Issuer, may be required to compulsorily apply for a PAN, unless PAN has been already obtained by such NRI.

Potential investors should, in any event, consult their own tax advisers on the tax consequences of transfer of the Notes.

Estate Duty

No estate duty is payable at present in India in relation to the Notes.

Gift Tax

There is no gift tax payable at present in India in relation to the Notes.

Stamp Duty

A transfer of the Notes outside India will not give rise to any Indian stamp duty liability unless brought into India. Stamp duty will be payable if the Notes are brought into India for enforcement or for any other purpose. The amount of stamp duty payable will depend on the applicable State Stamp Act and the duty will have to be paid within a period of three months from the date the Notes are first brought into India.

Taxation in Europe

The proposed financial transactions tax ("FTT")

On 14 February 2013, the European Commission published a proposal (the "Commission's Proposal") for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the "participating Member States"). However, Estonia has since stated that it will not participate.

The Commission's Proposal has a very broad scope and could, if introduced, apply to certain dealings in the Notes (including secondary market transactions) in certain circumstances. The issuance and subscription of Notes should, however, be exempt.

Under the Commission's Proposal, the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A

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financial institution may be, or be deemed to be, "established" in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.

However, the FTT proposal remains subject to negotiation between the participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate.

Prospective holders of the Notes are advised to seek their own professional advice in relation to the FTT.

Taxation in the United States

Foreign Account Tax Compliance Act

Pursuant to certain provisions of the Code, commonly known as "FATCA", a "foreign financial institution" (as defined by FATCA) may be required to withhold on certain payments it makes ("foreign passthru payments") to persons that fail to meet certain certification, reporting or related requirements. The Issuer may be a foreign financial institution for these purposes. A number of jurisdictions (including the Republic of India) have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA ("IGAs"), which modify the way in which FATCA applies in their jurisdictions. Under the provisions of IGAs as currently in effect, a compliant foreign financial institution in an IGA jurisdiction would generally not be required to withhold under FATCA from payments that it makes. Certain aspects of the application of the FATCA provisions and IGAs to instruments such as the Notes, including whether withholding would ever be required pursuant to FATCA with respect to payments on instruments such as the Notes, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA with respect to payments on instruments such as the Notes, the U.S. Internal Revenue Service has stated that such withholding would not apply prior to 1 January 2019, and any Notes issued on or prior to the date that is six months after the date on which final regulations defining the term foreign passthru payments are filed with the U.S. Federal Register generally would be grandfathered for purposes of FATCA withholding unless materially modified after such date. However, if additional Notes (as described under "Terms and Conditions of the Notes - Further Issues") that are not distinguishable from previously issued Notes are issued after the expiration of the grandfathering period and are subject to withholding under FATCA, then a withholding agent may be required to treat all Notes, including the Notes offered prior to the expiration of the grandfathering period, as subject to withholding under FATCA. Holders should consult their own tax advisers regarding how these rules may apply to their investment in the Notes. In the event any withholding would be required pursuant to FATCA with respect to payments on the Notes, no person will be required to pay additional amounts as a result of the withholding.

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SUBSCRIPTION AND SALE

The Dealers have, in a programme agreement dated 19 September 2018, as amended, restated and/or supplemented from time to time (the "Programme Agreement"), agreed with the Issuer and the Guarantor a basis upon which they or any of them may from time to time agree to purchase Notes. Any such agreement will extend to those matters stated under "Form of the Notes" and "Terms and Conditions of the Notes". The Issuer (failing which the Guarantor) may pay each relevant Dealer a commission as agreed between them in respect of Notes subscribed by such Dealer. The Issuer may also from time to time pay each relevant Dealer a discretionary performance fee as agreed between the Issuer and such Dealer in respect of Notes to be subscribed by such Dealer. In addition, the Issuer may also from time to time agree with the relevant Dealer(s) that it may pay certain third parties commissions (including, without limitation, rebates to certain private banks in connection with the distribution of the Notes to their clients). The commission payable to such private banks will be based on the principal amount of the Notes so distributed, and may be deducted from the purchase price for the Notes payable by such private banks upon settlement. In the Programme Agreement, the Issuer (failing which the Guarantor) has agreed to reimburse the Dealers for certain of their expenses in connection with the establishment of the Programme and the issue of Notes under the Programme and to indemnify the Dealers against certain liabilities incurred by them in connection therewith. The Programme Agreement entitles the Dealers to terminate any agreement that they make to subscribe Notes in certain circumstances prior to payment for such Notes being made to the Issuer.

In order to facilitate the offering of any Tranche of the Notes, a nominated Dealer participating in the offering of the Tranche may engage in transactions that stabilise, maintain or otherwise affect the price of the relevant Notes, which support the market price of the relevant Notes during and after the offering of the Tranche. Specifically such persons may over-allot or create a short position in the Notes for their own account by selling more Notes than have been sold to them by the Issuer. Such persons may also elect to cover any such short position by purchasing Notes in the open market. In addition, such persons may stabilise or maintain the price of the Notes by bidding for or purchasing Notes in the open market and may impose penalty bids, under which selling concessions allowed to syndicate members or other broker-dealers participating in the offering of the Notes are reclaimed if Notes previously distributed in the offering are repurchased in connection with stabilisation transactions or otherwise. The effect of these transactions may be to stabilise or maintain the market price of the Notes at a level higher than that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of the Notes to the extent that it discourages resales thereof. No representation is made as to the magnitude or effect of any such stabilising or other transactions. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilisation Manager (or persons acting on behalf of any Stabilisation Manager) in accordance with all applicable laws and rules.

The Dealers and their affiliates are full service financial institutions engaged in various activities which may include securities trading, commercial and investment banking, financial advice, investment management, principal investment, hedging, financing and brokerage activities. Each of the Dealers may have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with the Issuer or its Subsidiaries, jointly controlled entities or associated companies from time to time. In the ordinary course of their various business activities, the Dealers and their affiliates may make or hold (on their own account, on behalf of clients or in their capacity of investment advisers) a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments and enter into other transactions, including credit derivatives (such as asset swaps, repackaging and credit default swaps) in relation thereto. Such transactions, investments and securities activities may involve securities and instruments of the Issuer or its Subsidiaries, jointly controlled entities or associated companies, including Notes issued under the Programme, may be entered into at the same time or proximate to offers and sales of Notes or at other times in the secondary market and be carried out with counterparties that are also purchasers, holders or sellers of Notes. Notes issued under the Programme may be purchased by or be allocated to any Dealer or an affiliate for asset management and/or proprietary purposes whether or not with a view to later distribution. Such persons do not intend to disclose the

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extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

United States

Each Dealer has represented and agreed and each further Dealer appointed under the Programme will be required to represent and agree that:

(a) Neither the Notes nor the Guarantee have been and will not be registered under the Securities Act, or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S) except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each Dealer represents and agrees that it has not offered and sold any Notes, and will not offer and sell any Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of all Notes of the Tranche of which such Notes are a part, as determined and certified as provided below, within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or another exemption from the registration requirements of the Securities Act. Each Dealer also agrees that, at or prior to confirmation of sale of Notes, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it during the distribution compliance period a confirmation or notice to substantially the following effect:

"Neither the securities nor the guarantee thereof have been registered under the U.S. Securities Act of 1933, as amended (the Securities Act), or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of the Securities as determined and certified by the relevant Dealer, in the case of a non-syndicated issue, or the relevant Lead Manager, in the case of a syndicated issue, and except in either case in accordance with Regulation S under the Securities Act, another exemption from registration under the Securities Act, or pursuant to an effective registration statement under the Securities Act. Terms used above have the meanings given to them by Regulation S under the Securities Act."

(b) the Notes in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax Regulations. Notes will be issued in accordance with the provisions of U.S. Treasury Regulation §1.163-5(c)(2)(i)(D) (or any successor U.S. Treasury Regulation section, including without limitation, Regulations issued in accordance with Internal Revenue Service Notice 2012-20 or otherwise in connection with the U.S. Hiring Incentives to Restore Employment Act of 2010), unless the relevant Pricing Supplement specifies that Notes will be issued in accordance with the provision of U.S. Treasury Regulation §1.163-5(c)(2)(i)(c) (or any successor U.S. Treasury Regulation section, including without limitation, regulations issued in accordance with Internal Revenue Service Notice 2012-20 or otherwise in connection with the U.S. Hiring Incentives to Restore Employment Act of 2010). Terms used in this paragraph have the meanings given to them by the Code and regulations thereunder;

(c) in connection with any Notes which are offered in reliance on an exemption from the registration requirements of the Securities Act provided under Regulation S each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer, sell or deliver Notes (or beneficial interests therein) (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution, as determined and certified by the relevant Dealer or, in the case of an issue of Notes on a syndicated basis, the relevant lead manager, of all Notes of the relevant Tranche of Notes are a part, within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S). Each

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Dealer has further agreed, and each further Dealer appointed under the Programme will be required to agree, that it will send to each dealer to which it sells any Notes during the distribution compliance period (as defined in Regulation S) a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons;

(d) until 40 days after the commencement of the offering of any Series of Notes and the closing date with respect to the original issuance of the Notes, an offer or sale of such Notes (or a beneficial interest therein) within the United States by any Dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from registration under the Securities Act and in accordance with all applicable U.S. federal and state securities laws; and

(e) each issuance of Index Linked Interest Notes or Dual Currency Notes shall be subject to such additional U.S. selling restrictions as the Issuer and the relevant Dealer may agree as a term of the issuance and purchase of such Notes, which additional selling restrictions shall be set out in the applicable Pricing Supplement.

Terms used in this paragraph have the meanings given to them by Regulation S.

Public Offer Selling Restriction under the Prospectus Directive

Unless the Pricing Supplement in respect of any Notes specifies "Prohibition of Sales to EEA Retail Investors" as "Not Applicable", each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by this Offering Circular as completed by the Pricing Supplement in relation thereto to any retail investor in the European Economic Area. For the purposes of this provision:

(a) the expression "retail investor" means a person who is one (or more) of the following:

(i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II");

(ii) a customer within the meaning of Directive 2002/92/EC (as amended, the "Insurance Mediation Directive"), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II;

(iii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the "Prospectus Directive"); and

(b) the expression "offer" includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes.

If the Pricing Supplement in respect of any Notes specifies "Prohibition of Sales to EEA Retail Investors" as "Not Applicable", in relation to each Member State of the EEA which has implemented the Prospectus Directive (each, a "Relevant Member State"), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date") it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Offering Circular as completed by the applicable Pricing Supplement in relation thereto to the public in that Relevant Member State except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State:

(a) if the applicable Pricing Supplement in relation to the Notes specify that an offer of those Notes may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State (a "Non-exempt Offer"), following the date of publication of a prospectus in relation to such Notes which has been approved by the competent authority in that Relevant Member State or, where

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appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, provided that any such prospectus has subsequently been completed by the Pricing Supplement contemplating such Non-exempt Offer, in accordance with the Prospectus Directive, in the period beginning and ending on the dates specified in such prospectus or pricing supplement, as applicable and the Issuer has consented in writing to its use for the purpose of that Non-exempt Offer;

(b) at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(c) at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or

(d) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in (b) to (d) above shall require the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision:

(a) the expression an "offer of Notes to the public" in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State; and

(b) the expression "Prospectus Directive" means Directive 2003/71/EC (as amended including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State.

United Kingdom

Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that:

(a) in relation to any Notes having a maturity of less than one year, (i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (ii) it has not offered or sold and will not offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the FSMA by the Issuer;

(b) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and

(c) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

Italy

Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, that unless it is specified within the relevant Pricing Supplement that a non-exempt offer may be made into Italy, the offering of the Notes has not been

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registered pursuant to Italian securities legislation and, accordingly, no Notes may be offered, sold or delivered, nor may copies of this Offering Circular or of any other document relating to the Notes be distributed in the Republic of Italy, except:

(a) to qualified investors (investitori qualificati), as defined in Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the "Financial Services Act") and Article 34-ter, first paragraph, letter (b) of CONSOB Regulation No. 11971 of 14 May 1999, as amended from time to time ("Regulation No. 11971"); or

(b) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Article 34-ter of Regulation No. 11971.

Any offer, sale or delivery of the Notes or distribution of copies of this Offering Circular or any other document relating to the Notes in the Republic of Italy under (a) or (b) above must:

(a) be made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No. 16190 of 29 October 2007 (as amended from time to time) and Legislative Decree No. 385 of 1 September 1993, as amended (the "Banking Act"); and

(b) comply with any other applicable laws and regulations or requirement imposed by CONSOB, the Bank of Italy (including the reporting requirements, where applicable, pursuant to Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy, as amended from time to time) and/or any other Italian authority.

Please note that in accordance with Article 100-bis of the Financial Services Act, where no exemption from the rules on public offerings applies under (a) and (b) above, the subsequent distribution of the Notes on the secondary market in Italy must be made in compliance with the public offer and the prospectus requirement rules provided under the Financial Services Act and Regulation No. 11971. Failure to comply with such rules may result in the sale of such Notes being declared null and void and in the liability of the intermediary transferring the financial instruments for any damages suffered by the investors.

The Netherlands

Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that the Notes will only be offered in The Netherlands to qualified investors (as defined in the Prospectus Directive), unless such offer is made in accordance with the Dutch Financial Supervision Act (Wet op het financieel toezicht).

India

Each Dealer has represented and acknowledged that (a) this Offering Circular has not been and will not be registered, produced or published as an offer document (whether a prospectus in respect of a public offer or information memorandum or other offering material in respect of any private placement under the Companies Act, 1956, as amended by the Companies Act, 2013, as amended and the rules framed thereunder or any other applicable Indian laws) with the Registrar of Companies, the Securities and Exchange Board of India, the RBI, any Indian stock exchange or any other statutory or regulatory body of like nature in India, save and except for any information from any part of this Offering Circular which is mandatorily required to be disclosed or filed in India under any applicable Indian laws, including but not limited to, the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations 2015, as amended, and under the listing agreement with any Indian stock exchange pursuant to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 or pursuant to the sanction of any regulatory and adjudicatory body in India, and (b) the Notes have not been and will not be offered or sold in India by means of this Offering Circular or any document, other than to persons permitted to acquire the Notes under Indian law, whether as a principal or an agent, and (c) this Offering Circular or any other offering document or material relating to the Notes has not been and will not be circulated or distributed, directly or indirectly, to any person or to the public or any member of the public in India or otherwise generally distributed or circulated in India which would constitute an advertisement, invitation, offer, sale or solicitation or an offer to subscribe for or purchase any securities in

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violation of applicable Indian laws, and (d) this Offering Circular or any material relating to the Notes has not been and will not be circulated or distributed to any prospective investor who does not meet the FATF Requirements or to any offshore branch or subsidiary of an Indian bank or to a related party as given under the Indian Accounting Standards - 24, and (e) the Notes will not be offered or sold or transferred and have not been offered or sold or transferred to any person who does not meet the FATF Requirements or to any offshore branch or subsidiary of an Indian bank or to a related party as given under the Indian Accounting Standards - 24.

For the purposes of this section, "FATF Requirements" mean all of the following:

A resident of a country:

(a) that is a member of FATF or a member of an FATF style regional body;

(b) whose securities market regulator is a signatory to the International Organisation of Securities Commission's Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to bilateral Memorandum of Understanding with the Securities and Exchange Board of India for information sharing arrangements; and

(i) a jurisdiction having a strategic anti-money laundering or combating the financing of terrorism deficiencies to which counter measures apply; or

(ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies.

Each Dealer has represented and agreed that, to the best of its knowledge and belief, the Notes are only being issued and sold to a person who meets FATF Requirements and have not been issued or sold to a person resident in India or any offshore branch or subsidiary of an Indian bank or to a related party as given under the Indian Accounting Standard-24 and the list of eligible investors shall include multi-lateral financial institutions. Further, this Offering Circular or any other material relating to the Notes has not been and will not be circulated or distributed to any prospective investor who does not meet FATF Requirements and who is a person resident in India or any offshore branch of an Indian bank or who is a related party as given under the Indian Accounting Standard-24.

Eligibility of holders of the Notes

Holders and beneficial owners of the Notes shall be responsible for compliance with restrictions on the ownership of the Notes imposed from time to time by applicable laws or by any regulatory authority or otherwise. In this context, holders and beneficial owners of Notes shall be deemed to have acknowledged, represented and agreed that such holders and beneficial owners are eligible to purchase the Notes under applicable laws and regulations and are not prohibited under any applicable law or regulation from acquiring, owning or selling the Notes.

Disclosure of information relating to holders of the Notes

Holders and beneficial owners of the Notes shall be responsible for compliance with restrictions on the ownership and transfer of the Notes imposed from time to time by applicable laws, Indian laws or by any regulatory authority or otherwise. In this context, holders and beneficial owners of Notes shall be deemed to have acknowledged, represented and agreed that such holders and beneficial owners are eligible to purchase the Notes under applicable laws and regulations and are not prohibited under any applicable law or regulation from acquiring, owning, transferring or selling the Notes.

The holders and beneficial owners of Notes shall be deemed to confirm that for so long as they hold any Notes, they will meet the FATF Requirements and will not be a bank incorporated within India or overseas branches or subsidiaries of such Indian banks or to a related party as given under the Indian Accounting Standard-24. Further, all Noteholders represent and agree that the Notes will not be offered or sold on the secondary market

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to any person who does not meet the FATF Requirements or which is an offshore branch or subsidiary of an Indian bank or who is a related party as given under the Indian Accounting Standard-24.

To comply with applicable laws and regulations, the Issuer or its duly appointed agent may from time to time request Euroclear and Clearstream, Luxembourg to provide them with details of the accountholders within Euroclear and Clearstream, Luxembourg, as may be appropriate, that hold the Notes and the amount of Notes held by each such accountholder. Euroclear and Clearstream, Luxembourg participants which are holders of the Notes or intermediaries acting on behalf of such Noteholders would be deemed to have hereby authorised Euroclear and Clearstream, Luxembourg, as may be appropriate, to disclose such information to the Issuer or its duly appointed agent.

Singapore

Each Dealer has acknowledged, and each further Dealer appointed under the Programme will be required to acknowledge, that this Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore (the "MAS"). Accordingly, each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will be required to represent, warrant and agree, that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Offering Circular or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289 of Singapore) (the "SFA")) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:

(i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(ii) where no consideration is or will be given for the transfer;

(iii) where the transfer is by operation of law;

(iv) as specified in Section 276(7) of the SFA; or

(v) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

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Hong Kong

Each Dealer has represented and agreed that:

(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes (except for Notes which are a "structured product" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong) (the "SFO") other than (a) to "professional investors" as defined in the SFO and any rules made under the SFO; or (b) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies (Winding Up and Miscellaneous Provisions Ordinance (Cap. 32) of Hong Kong (the "C(WUMP)O") or which do not constitute an offer to the public within the meaning of the C(WUMP)O; and

(b) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the SFO and any rules made under the SFO.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the "FIEA") and each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, as amended)), or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.

General

Each Dealer has represented, warranted and undertaken and each further Dealer appointed under the Programme will be required to represent, warrant and undertake that it will (to the best of its knowledge and belief) comply with all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers Notes or possesses or distributes this Offering Circular and will obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and neither the Issuer, the Trustee nor any of the other Dealers shall have any responsibility therefor.

None of the Issuer, the Trustee, the Arrangers or the Dealers represent that Notes may at any time lawfully be sold in compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any exemption available thereunder, or assumes any responsibility for facilitating such sale.

With regard to each Tranche, the relevant Dealer will be required to comply with such other restrictions as the Issuer and the relevant Dealer shall agree and as shall be set out in the applicable Pricing Supplement.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND IFRS

The financial information included in this Offering Circular is prepared and presented in accordance with the generally accepted accounting principles in India. Since the Issuer is established through a separate enactment of the State Government and is not engaged in any commercial activities, it is not mandatory to comply with Accounting Standards notified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Accounting Standard) Amendment Rules, 2016 and the relevant provisions of Companies Act 2013 (Indian GAAP). The Issuer prepares its accounts in the format specified by the KIIF Act by following general accounting principles prevailing in India, which has no significant difference to Indian GAAP.

Significant differences exist between the Indian GAAP and IFRS which might be material to the financial information herein. The matters described below should not be expected to reveal all differences between Indian GAAP and IFRS that are relevant to the Issuer or the industry in which the Issuer operates.

This summary has been prepared on the assumption that the Issuer applies IFRS on a continuing basis and, therefore, the impact of IFRS 1 regarding First Time Adoption of IFRS has not been considered.

The Issuer's management has made no attempt to quantify the impact of those differences, nor has any attempt been made to identify all disclosure, presentation or classification differences that would affect the manner in which transactions or events are presented in the financial information. Had any such quantification or identification been undertaken by management, other potential significant accounting and disclosure differences may have come to its attention which are not summarised below. Accordingly, it should not be construed that the following summary of certain differences between Indian GAAP and IFRS is complete.

The Issuer and regulatory bodies that promulgate Indian GAAP and IFRS have significant ongoing projects that could affect future comparisons such as this one. Further, no attempt has been made to identify future differences between Indian GAAP and IFRS as a result of prescribed changes in accounting standards and regulations. Finally, no attempt has been made to identify all future differences between Indian GAAP and IFRS that may affect the financial information as a result of transactions or events that may occur in future.

The Issuer's management believes that the application of IFRS to the financial information could have a material and significant impact upon the financial information reported by the Issuer under Indian GAAP. In making an investment decision, investors must rely upon their own examination of the Issuer, terms of the offering and the financial information. Potential investors should consult their own professional advisors for an understanding of the differences between the accounting principles followed by the Issuer, Indian GAAP and IFRS, and how those differences might affect the financial information included herein.

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Particulars Indian GAAP IFRS

Format and content of Entities are required to present Entities are required to present financial statement balance sheets statement of profit statement of financial position, and loss, cash flow statement, statement of profit or loss and other together with accounting policies comprehensive income — either as and notes in accordance with the single statement or two separate Accounting Standards notified statements, statements of changes in under section 133 of the Companies equity, statement of cash flows; notes Act 2013, read together with comprising significant accounting paragraph 7 of the Companies policies and other explanatory (Accounts) Rules, 2014 and information, comparative information in Companies (Accounting Standards) respect of the preceding period and a Amendment Rules, 2016. statement of financial position as at the beginning of the preceding period when Format for presentation of financial an entity applies an accounting policy statements is as prescribed by retrospectively or makes a retrospective Schedule III of the Companies Act restatement of items in its financial 2013. statements, or when it reclassifies items in its financial statements.

There is no such requirement on There is no specific prescribed format first time adoption of Indian GAAP. of presentation of financial statements under IFRS. IAS 1 also allows presentation based on liquidity of items in financial positions.

Schedule III has prescribed a format On first time adoption of IFRS, the for statement of profit and loss financial position as on date of first time mandating classification of adoption is also to be presented in the expenses by their nature as opposed first set of financial statements prepared to by function. under IFRS.

An entity shall present an analysis of expenses recognised in profit or loss using a classification based on either their nature or their function within the entity, whichever provides information that is reliable and more relevant.

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Particulars Indian GAAP IFRS

Changes in accounting Any change in an accounting policy Any change in an accounting policy policies which has a material effect should should be accounted for retrospectively, be disclosed. The impact of and the with comparative information restated adjustments resulting from such and the amount of the adjustment change, if material, should be relating to prior periods adjusted against shown in the financial statements of the opening balance of retained earnings the period in which such change is of the earliest year presented, by made, to reflect the effect of such restating the opening statement of change. Where the effect of such financial position. An exemption applies change is not ascertainable, wholly when it is impracticable to change or in part, the fact should be comparative information. If indicated. retrospective application is impracticable for a particular prior If a change is made in the period, or for a period before those accounting policies which has no presented, the circumstances that led to material effect on the financial the existence of that condition and a statements for the current period, description of how change in accounting but which is reasonably expected to policy has been applied needs to be have a material effect in later stated. periods, the fact of such change should be appropriately disclosed in the period in which the change is adopted.

Disclosure of critical AS 1 does not specifically require Requires disclosure of critical judgements and estimates disclosure of judgements that judgements and estimates made by management has made in the management in applying accounting summary of significant accounting policies and accounting estimates. policy or other notes.

Determination of functional AS 11 does not specify the currency IAS 21 requires determination of currency in which an enterprise presents its functional currency which is the financial statements. However, an currency of the primary economic enterprise normally uses the environment in which the entity currency of the country in which it operates. is domiciled. If it uses a different currency, this Standard requires disclosure of the reason for using that currency.

Revenue Interest income is recognised on a Interest income is recorded using the recognition - Interest time proportion basis taking into effective interest rate (EIR) for account the amount outstanding and amortised cost and fair value through the rate applicable. Other Comprehensive Income instruments. The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income in the statement of profit or loss and other comprehensive income.

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Particulars Indian GAAP IFRS

Prior Period Items Prior period items are income or Material prior year errors are corrected expenses which arise in the current retrospectively (except to the extent that period as a result of errors or it is impracticable to determine either omissions in the preparation of the the period-specific effects or the financial statements of one or more cumulative effect of the error) by prior periods. The nature and restating the comparative amounts for amount of prior period items are prior periods presented in which the presented separately in the error occurred or if the error occurred statement of profit and loss in the before the earliest period presented, by manner that their impact on the restating the opening statement of current profit or loss can be financial position for the earliest prior perceived. period presented. Comparative information of the earlier years is not restated.

Extraordinary Items Extraordinary items are income or IFRS prohibits the presentation of any expenses that arise from events of items of income or expense as transactions that are clearly distinct extraordinary. from the ordinary activities of the enterprise and, therefore, are not expected to recur frequently or regularly.

Allowance for credit losses Under Indian GAAP, loans and For financial assets carried at amortised receivables are typically measured cost, assessment is made whether at cost, less provision for doubtful impairment exists individually for debts. . financial assets that are individually significant, or collectively for financial assets that are not individually significant. If there is no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. The losses arising from impairment are recognised in the statement of profit or loss and other comprehensive income.

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Particulars Indian GAAP IFRS

Deferred taxation Deferred taxes are required to be Deferred taxes are computed for provided for the tax effect of timing temporary differences between the differences between taxable income carrying amount of an asset or liability and accounting income using in the statement of financial position substantively enacted tax rates. and its tax base. Where an enterprise has unabsorbed Deferred income taxes are recognised depreciation or carry forward of for all temporary differences between losses under tax laws, deferred tax accounting and tax base of assets and assets should be recognised only to liabilities except to the extent which the extent that there is virtual arise from a) initial recognition of certainty supported by convincing goodwill or b) asset or liability in a evidence that sufficient future transaction which i) is not a business taxable income will be available combination; and ii) at the time of the against which such deferred tax transaction, affects neither the assets can be realised. Other accounting nor the tax profit. deferred tax assets are recognised and carried forward only to the Deferred tax asset is recognised for extent that there is a reasonable carry forward unused tax losses and certainty that sufficient future unused tax credits to the extent that it is taxable income will be available probable that future taxable profit will against which such deferred tax be available against which the deferred assets can be realised. tax asset can be utilised. Where an entity has a history of tax losses, the Deferred tax asset/liability is not entity recognises a deferred tax asset recognised in books of the Issuer. only to the extent that the entity has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available.

Employee Benefits / In the case of the Issue, current cost Remeasurements, comprising of Retirement Benefit of employees is recognised on actuarial gains and losses, return on plan accrual basis. Future obligation on assets and any change in the effect of account of current services is not the asset ceiling, excluding amounts estimated or provided for. included in net interest on the net defined benefit liability (asset), are

recognised immediately in the other comprehensive income and shall not be reclassified to profit or loss in a subsequent period. However, the entity may transfer those amounts recognised in other comprehensive income within equity. Past service costs are recognised in profit or loss on the earlier of: (a) The date of the plan amendment or curtailment, and

(b) The date that the Group recognises related restructuring costs

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Particulars Indian GAAP IFRS

Derecognition of financial There is limited guidance on As per IAS 39, the company assets dereocgnition of financial assets. derecognises a financial asset when, criteria as account if they meet the true sale and only when (a) the contractual rights to the cash flows from the financial asset expire or (b) it transfers the financial asset either by transferring the contractual rights to receive the cash flows of the financial asset or retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients in an arrangement that meets the conditions stated in IAS 39. When an entity transfers a financial assets it can be derecognised from the books of account only if substantial risks and rewards of ownership have been transferred. Where substantial risks and rewards of ownership have neither been transferred nor retained then the company evaluates if it has retained control over the transferred asset.

Financial As per AS 13, Accounting for Financial assets are to be classified as Assets - Classification Investments; Investments are one of the following four categories classified as long term investments depending on certain conditions to be and current investments. Current satisfied for each category: investments is an investment that is (a) financial asset at fair value by its nature readily realisable and is through profit or loss; intended to be held for not more than one year from the date on (b) held-to-maturity investments; which such investment was made. . Investments other than current investments are classified as long (c) loans and receivables; and term investments. (d) available-for-sale (AFS) (a) The Issuer has not made financial assets. any investments so far and hence no specific accounting policy has been adopted for classification of Financial Assets

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Particulars Indian GAAP IFRS

Financial Issuer has not made any investments Initially, a financial asset is measured at Assets - Measurement so far and hence no specific its fair value plus, in the case of a accounting policy has been adopted financial asset not at fair value through for classification of Financial profit or loss, transaction costs that are Assets. directly attributable to the acquisition or issue of the financial asset or financial liability. Subsequent measurement depends on the classification of the investment. Held-to-maturity investments: Carried at amortised cost, using effective interest method otherwise stated at fair value.

Financial assets measured at fair value through profit or loss: Unrealised gains and losses on fair value through profit or loss classification (including trading securities) are recognised in the income statement. AFS financial assets: are subsequently measured at fair value with unrealised gains or losses recognised in OCI and credited in the AFS reserve until the investment is derecognised, at which time, the cumulative gain or loss is reclassified from OCI to statement of profit or loss and other comprehensive income or the investment is determined to be impaired, then the cumulative loss is reclassified from the AFS reserve to the statement of profit or loss and other comprehensive income.

Financial There are no classification There are two categories of financial liabilities - Classification guidelines for financial liabilities. liabilities: (a) financial liabilities at fair value

the through the profit and loss account; and

(b) financial liabilities carried at amortised cost.

Financial Liabilities are recognised based on All financial liabilities are recognised Liabilities - Measurement the legal obligation of the entity. initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The measurement of financial liabilities depends on their classification, as described below:

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Particulars Indian GAAP IFRS

Loans and borrowings After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income.

This category generally applies to interest-bearing loans and borrowings.

Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into and that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IAS 39 are satisfied.

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GENERAL INFORMATION

Authorisation

1. The Programme has been duly approved by the resolution of the Issuer's Board dated 26 August 2018. The borrowing limits of ₹50,000,000,000 have also been duly authorised by the resolution of the Issuer's Board dated 26 August 2018. The giving of the Guarantee was duly authorised by a government order (“G.O.”) dated 17 September 2018 (G.O.(Ms)No.347/2018/FIN).

Listing

2. Approval-in-principle has been received for the establishment of the Programme and application will be made for the listing and quotation of Notes that may be issued pursuant to the Programme and which are agreed at or prior to the time of issue thereof to be so listed on the SGX-ST. Such permission will be granted when such Notes have been admitted to the Singapore Official List. If the application to the SGX-ST to list a particular series of Notes is approved, such Notes listed on the SGX-ST will be traded on the SGX-ST in a minimum board lot size of at least S$200,000 (or equivalent).

The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained herein. Admission to the Singapore Official List and quotation of any Notes on the SGX-ST are not to be taken as an indication of the merits of the Issuer, the Programme or the Notes. So long as any Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer shall appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption. In the event that any of the Global Notes are exchanged for definitive Notes, an announcement of such exchange shall be made by or on behalf of the Issuer through the SGX-ST and such announcement will include all material information with respect to the delivery of the definitive Notes, including details of the paying agent in Singapore.

3. Application has been made to the London Stock Exchange for the listing and quotation of Notes on the ISM that may be issued pursuant to the Programme and which are agreed at or prior to the time of issue thereof to be listed on the ISM. Notes so admitted to trading on the ISM are not admitted to the Official List of the UKLA. The London Stock Exchange has not approved or verified the contents of this Offering Circular.

Clearing systems

4. The Notes to be issued under the Programme have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriate common code and ISIN for each Tranche of Notes allocated by Euroclear and Clearstream, Luxembourg will be specified in the applicable Pricing Supplement. If the Notes are to clear through an additional or alternative clearing system, the appropriate information will be specified in the applicable Pricing Supplement.

5. The Issuer's Legal Entity Identifier is 213800Q188S952WWDA51.

No significant or material change

6. Save as disclosed in this Offering Circular, there has been no significant change in the financial or trading position of the Issuer since 31 March 2018 and no material adverse change in the financial position or prospects of the Issuer since 31 March 2018.

7. Save as disclosed in this Offering Circular, there has been no significant change in the financial information of the Guarantor in the section entitled "Public Finance" of this Offering Circular since 31 March 2017.

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Litigation

8. Save as disclosed in this Offering Circular, neither the Issuer nor the Guarantor is involved in any governmental, legal or arbitration proceedings (including any proceedings which are pending or threatened) of which it is aware, which may have or have had, in the 12 months preceding the date of this Offering Circular, a significant effect on the Issuer's or Guarantor's ability to meet its obligations to Noteholders.

Accounts

9. The auditors of the Issuer in respect of the financial statements for Fiscals 2017 and 2018 were as follows:

Sridhar & Co, Sreenidhi T C 37/275 Padmatheertham North, Fort, Thiruvananthapuram, Kerala India

Such auditors have audited the Issuer's standalone financial statements, without qualification, in accordance with generally accepted auditing standards in India for each of the periods mentioned above.

Such auditors have also reviewed the comparative financial information of the Issuer for the quarter period ended 30 June 2017, which is included in the interim standalone condensed financial statements for the quarter ended 30 June 2018 .

Exemption

10. The Monetary Authority of Singapore ("MAS") has granted an exemption in respect of the offer of the Notes by the Issuer to institutional investors in Singapore (the "Relevant Offer") pursuant to Regulation 2 of the Securities and Futures (Capital Markets Products) Regulations 2018 read with Section 309B(5) of the SFA from compliance by the Issuer with its obligations under Section 309B(1) of the SFA to determine and to notify any approved exchange or relevant person (as defined in Section 309A(1) of the SFA) of the classification of the Notes in respect of the Relevant Offer.

Documents Available

11. So long as Notes are capable of being issued under the Programme, copies of the following documents will, when published, be available between 9:00am and 3:00pm (Hong Kong time) on any weekday (Saturdays and public holidays exempted) from the specified office of the Principal Paying Agent, upon prior written request and satisfactory proof of holding by Noteholders:

(a) the Issuer's audited standalone financial statements in respect of the financial years ending 2017 and 2018;

(b) the Issuer's unaudited interim standalone financial statements as of the quarter ended 30 June 2018;

(c) the most recently published audited standalone annual financial statements of the Issuer and the most recently published audited or reviewed, as the case may be, standalone interim financial results of the Issuer;

(d) the Programme Agreement, the Trust Deed, the Agency Agreement and the forms of the Global Notes, the Notes in definitive form, the Receipts, the Coupons and the Talons;

(e) a copy of this Offering Circular;

(f) any future offering circulars, prospectuses, information memoranda and supplements, including Pricing Supplements (save that a Pricing Supplement relating to an unlisted Note will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the Issuer and the Principal Paying Agent as to its holding of Notes

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and identity) to this Offering Circular and any other documents incorporated herein or therein by reference; and

(g) in the case of each issue of listed Notes subscribed pursuant to a subscription agreement, the subscription agreement (or equivalent document).

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INDEX OF DEFINED TERMS

£ ...... ix Bearer Notes ...... iii, 19, 36, 37 € ...... ix BIM ...... 178 2016 KIIFB Guidelines ...... 187 Board ...... 75, 185 2018 KIIFB Guidelines ...... 187 Bond Basis ...... 45 30/360 ...... 41, 45 BOO ...... 175 30E/360 ...... 45 BOOT ...... 175 30E/360 (ISDA) ...... 46 BOT ...... 175 360/360 ...... 45 Brexit ...... 82 Acceptance Authority ...... 177 BTO ...... 175 Accrual Period ...... 41 Business Day ...... 48 Actual/360 ...... 44 C&AG ...... 149 Actual/365 (Fixed) ...... 41, 44 C(WUMP)O...... 203 Actual/365 (Sterling) ...... 44 CAD ...... 83 Actual/Actual ...... 44 CAG ...... 169 Actual/Actual (ICMA) ...... 41 Calculation Agent ...... 53 Actual/Actual (ISDA) ...... 44 CDS ...... 106 AD Bank ...... 6, 35, 190 Central Government ...... viii Additional Amounts ...... 60 Cess ...... 10, 73 Adjusted ...... 48 Change in Control ...... 57 ADS ...... 106 Change in Law ...... 58 Agency Agreement ...... 35 Clearstream, Luxembourg ...... iii, 38 Agents ...... 35 Code ...... v AIF ...... 16 Commission's Proposal ...... 194 AIW ...... 188 Common Depositary ...... iii, 19 Amendment Act ...... 14, 159, 186 Conditions ...... iii, 22, 36 Amortised Face Amount ...... 59 Constant Price ...... 110 applicable Pricing Supplement...... 36 Control ...... 58 Arrangers ...... i Couponholders ...... 36 AS ...... viii Coupons ...... 19, 36 Assembly ...... 101 CPC ...... x Auditors ...... 77 crores ...... ix AY ...... 59 Cumulative Events ...... 53

Banking Act ...... 200 D1 ...... 45, 46

Bearer Global Note ...... iii, 19, 36 D2 ...... 45, 46 Bearer Global Notes ...... iii, 19, 36 Day Count Fraction ...... 41, 44

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DBFOT ...... 175 FCA Announcement ...... 87 Dealer ...... iii Fidelity Certificate ...... 13, 158 Dealers ...... iii FIEA ...... 203 Deferral Period ...... 53 Finance and Administrative Division ...... 11 Definitive Bearer Notes ...... 19, 36 Finance Department of Kerala ...... iii Definitive Registered Notes ...... 20, 36 Financial Services Act ...... 200 Demonetisation ...... 79 financial year ...... viii DES ...... 112 fiscal ...... viii Designated Account ...... 50 Fiscal ...... viii Designated Bank ...... 50 Fiscal Year ...... viii Designated Maturity ...... 42 Fitch ...... iii Detailed Appraisal Report ...... 177 Fixed Interest Period ...... 40 Determination Period ...... 41 Fixing Business Days ...... 54 Direct Payment System ...... 159 Floating Rate...... 42 Dispute ...... 69 Floating Rate Option ...... 42 Distribution Compliance Period...... iii foreign financial institution...... 195 distributor ...... vi, 22 foreign passthru payments ...... 195 DPR ...... 175, 187 FSMA ...... v ECB ...... 6 FTAC ...... 10, 156, 186 ECB Direction ...... 189 FTT ...... 194 ECB Directions ...... 3 Fund ...... 10, 156, 185 EEA ...... vi, 22 FY ...... viii Escrow Mechanism ...... 13, 76 GAAR ...... 74 Eur ...... ix Global Note...... 21, 36 euro ...... ix Government ...... viii Eurobond Basis ...... 45 Governor ...... 100 Euroclear ...... iii, 38 GPR ...... 16, 162 Event of Default ...... 62 GSDP ...... 13, 79, 110 Exchange Date ...... iii, 19 GST ...... 74 Exchange Event ...... 19 GSVA ...... 111 Executive Committee ...... 75, 186 Guarantee ...... 39 Fallback Reference Price ...... 54 Guarantee Act ...... 80, 188 Fallback Survey Valuation Postponement .... 54 Guarantor ...... iii, 35 FATCA ...... 195 holder ...... 38 FATF ...... i holder of notes ...... 21 FATF Requirements ...... 201 holders ...... 36

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IAS ...... 169 KMRL ...... 115 ICAI ...... viii KMRP ...... 115 ID&AD ...... 149 KSFE ...... 179 IFRS ...... viii K-TIMS ...... 188 IGAs ...... 195 lakhs ...... ix IIFCL ...... 165 LDF ...... 101 IMC ...... 10, 169 LIBOR ...... 87 indebtedness for borrowed money ...... 64 London Business Day ...... 46 India ...... viii, 95 Long Maturity Note ...... 50 Indian GAAP ...... viii LRN ...... 190

Indian Regulatory Requirements ...... 89 M1 ...... 45, 46

Infrastructure Development Funds...... 16 M2 ...... 45, 46 INR ...... ix MAS ...... 202, 213 Inspection Authority ...... 11 Material Adverse Effect ...... 58 Inspection Authority Guidelines ...... 187 Maximum Days of Postponement ...... 54 Insurance Mediation Directive ...... vi, 22, 198 Members ...... 78 Interest Amount ...... 44 MiFID II ...... vi, 22, 198 Interest Payment Date ...... 41 MiFID Product Governance Rules ...... vi Interest Period ...... 42 Motor Vehicles Tax ...... 10, 73 Interest Period End Date ...... 49 MT ...... 126 International Investment Securities ...... 40 MVT ...... 187 INTOSAI ...... 150 NABARD ...... 178 Investment Management Committee ...... 10 NABARD Term Loan ...... 178 Investment Management Policy ...... 10 NHG ...... 106 Investor's Currency ...... 90 NIDA ...... 178 IOT ...... 170 Non-exempt Offer ...... 198 IPC ...... 189 Noteholder ...... 21, 38 ISDA Definitions ...... 42 Noteholders ...... 36 ISDA Rate ...... 42 Notes ...... iii, 36 ISM ...... iii, 33 NRIs ...... 192 Issuer ...... iii, 35 NRKs ...... 108 IT ...... 171 NSDP ...... 108 ITA ...... 192 offer ...... 198 K-FON ...... 118 offer of Notes to the public ...... 199 KIIF Act ...... viii, 75, 185 Offering Circular ...... i, 22, 35 KIIF Scheme ...... 185 PAN ...... 194

217

participating Member States ...... 194 Relevant Member State ...... 198 Paying Agents ...... 35 Relevant Offer ...... 213 Payment Day ...... 52 Relevant Persons ...... v Permanent Bearer Global Note ...... iii, 19, 36 Reset Date ...... 42 PMU ...... 178, 187 retail investor ...... 198 POL ...... 126 Revenue Recovery Act ...... 188 Price Source Disruption Event ...... 54 RoC ...... i Price Source Disruption Fallbacks ...... 53 RP ...... 59 Pricing Supplement ...... iii Rupee denominated Notes ...... iii PRIIPs Regulation ...... vi, 22 Rupees ...... ix Principal Paying Agent ...... 2, 35 S$ ...... ix Programme ...... iii SAIs ...... 150 Programme Agreement ...... 196 Scheduled Rate Fixing Date ...... 54 Project Appraisal Division ...... 11 SEBI ...... i Prospective Directive ...... 22 Securities Act ...... i, iii Prospectus Directive ...... vi, 198, 199 Security ...... 39 Put Notice ...... 56, 57 Series ...... 36 Rate Fixing Date ...... 54 SFA ...... i, vi, 202 Rate Fixing Day ...... 54 SFO ...... 203 Rate of Interest ...... 42 SGST ...... 128 RBI ...... viii, 35 SGX-ST ...... iii, 33 Receiptholders...... 36 Singapore Official List ...... iii Receipts ...... 36 Specified Currency ...... 37 Record Date ...... 51 Specified Denomination(s) ...... 37 Redeemed Notes ...... 56 SPV ...... 18, 163 Reference Rate ...... 54 SPV(s) ...... 187 Register ...... 50 Sridhar & Co ...... viii Registered Global Note ...... iii, 20, 36 Stabilisation Manager ...... 33 Registered Notes ...... iii, 19, 36, 37 State Government ...... iii, viii Registrar ...... 35 Sterling...... ix Regulation No. 11971 ...... 200 sub-unit ...... 41 Regulation S ...... iii Synthetic Rupee denominated Notes ...... 54 Regulations ...... 38 Synthetic Rupee denominated Notes Settlement Currency ...... 54 Relevant Date ...... 61 Talons ...... 36 relevant Dealer ...... iii TAR ...... 187 Relevant Implementation Date...... 198 TARGET2 System ...... 49

218

Tax Jurisdiction ...... 61 Trust Deed ...... 35 Tax Treaty ...... 192 Trustee ...... 35 Taxes ...... 60 U.S...... iii Temporary Bearer Global Note...... iii, 19, 36 U.S. dollars ...... ix Tender Acceptance Committee ...... 177 U.S.$ ...... ix Third Parties ...... viii UDF ...... 101 TIW ...... 188 Unadjusted ...... 48 Track I ECBs...... 189 UNITED STATES ...... i, 20 Track II ECBs ...... 189 Unscheduled Holiday ...... 55 Track III ECBs ...... 189 Valuation Postponement ...... 55 Tranche ...... 36 VAT ...... 127 Transaction Documents ...... 36 VDC ...... 178 Transfer Agent ...... 35 Work Intimation Guidelines ...... 188

219

INDEX TO FINANCIAL STATEMENTS

Unaudited Interim Standalone Financial Statements of the Issuer for the quarter ended 30 June 2018

Independent Auditor's Limited Review Report for the quarter ended 30 June 2018 ...... F-1 Balance Sheet for the quarter ended 30 June 2018 as against year ended 31 March 2018 ...... F-2 Statement of Profit and Loss for the quarter ended 30 June 2018 as against year ended 31 March 2108 ...... F-3 Balance Sheet for the quarter ended 30 June 2018 as against quarter ended 30 June 2017 ...... F-8 Statement of Profit and Loss for the quarter ended 30 June 2018 as against quarter ended 30 June 2017 ...... F-9 Notes on Accounts for the quarter ended 30 June 2018 ...... F-12

Standalone Financial Statements of the Issuer for the Year Ended 31 March 2018

Independent Auditor's Report ...... F-14

Balance Sheet as at 31 March 2018 ...... F-16

Statement of Profit and Loss for the year ended 31 March 2018 ...... F-17

Notes on Accounts for the year ended 31 March 2018 ...... F-21

Standalone Financial Statements of the Issuer for the Year Ended 31 March 2017

Independent Auditor's Report ...... F-23

Balance Sheet as at 31 March 2017 ...... F-25

Statement of Profit and Loss for the year ended 31 March 2017 ...... F-26

Notes on Accounts for the year ended 31 March 2017 ...... F-29

220 F - 1 F - 2 F - 3 F - 4 F - 5 F - 6 F - 7 F - 8 F - 9 F - 10 F - 11 F - 12 F - 13 F - 14 F - 15 F - 16 F - 17 F - 18 F - 19 F - 20 F - 21 F - 22 F - 23 F - 24 F - 25 F - 26 F - 27 F - 28 F - 29

THE ISSUER Kerala Infrastructure Investment Fund Board 2nd Floor, Felicity Square MG Road, Statue Thiruvananthapuram 695001 Kerala, India

THE GUARANTOR The Government of Kerala acting through the Finance Department of Kerala Government Secretariat MG Road, Statue Thiruvananthapuram 695001 Kerala, India

ARRANGERS AND DEALERS

Axis Bank Limited, Standard Chartered Bank Standard Chartered Bank Singapore Branch 8 Marina Boulevard, Level 20 (Singapore) Limited 9 Raffles Place Marina Bay Financial Centre Tower 1 8 Marina Boulevard, Level 20 Republic Plaza #48-01 Singapore 018981 Marina Bay Financial Centre Tower Singapore 048619 1 Singapore 018981

PRINCIPAL PAYING AGENT TRUSTEE REGISTRAR AND TRANSFER AGENT The Hongkong and Shanghai The Hongkong and Shanghai Banking Banking Corporation Limited Corporation Limited The Hongkong and Shanghai Level 30, HSBC Main Building Level 30, HSBC Main Building Banking Corporation Limited 1 Queen's Road Central 1 Queen's Road Central Level 30, HSBC Main Building Hong Kong Hong Kong 1 Queen's Road Central Hong Kong

LEGAL ADVISERS

To the Trustee as to English Law To the Dealers as to English Law To the Issuer as to Indian law

Norton Rose Fulbright (Asia) LLP DLA Piper UK LLP Cyril Amarchand Mangaldas One Raffles Quay 3 Noble Street 5th Floor, Peninsula Chambers 34-02 North Tower London Peninsula Corporate Park Ganpatrao Singapore EC2V 7EE Kadam 048583 United Kingdom Marg, Lower Parel, Mumbai 400 013, India

SINGAPORE LISTING AGENT TSMP Law Corporation 6 Battery Road, Level 41 Singapore 049909

INDEPENDENT AUDITORS Sridhar & Co, Sreenidhi T C 37/275 Padmatheertham North, Fort, Thiruvananthapuram, Kerala India