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Directors Report of Bajaj Finance Ltd.

Mar 31, 2023

Your directors present the thirty-sixth Annual Report along with the audited standalone and consolidated financial statements for 2022-23 (or FY2023).

Company overview

Bajaj Finance Ltd., is a public limited company incorporated on 25 March 1987 under the Companies Act, 1956 and has its registered office at Akurdi, Pune 411 035, Maharashtra, India. The Company changed its name from Bajaj Auto Finance Ltd. to Bajaj Finance Ltd. in the year 2010. It is registered as a Deposit taking Non-Banking Finance Company vide the Reserve Bank of India (''RBI'') registration number A-13.00243 dated 5 March 1998. The Company launched its initial public offering of equity share and was listed on the BSE Ltd. in the year 1994. Subsequently, listed on National Stock Exchange of India in the year 2003. It is also a registered intermediary within the meaning of Insurance Regulatory and Development Authority of India (''IRDAI'') as a corporate agent. The Company stood at 12th rank based on market capitalisation as on 31 March 2023. It has been classified in the Upper Layer pursuant to RBI Scale Based Regulations.

Financial Results

The highlights of the standalone financial results are given below:

			(C in crore) % change over FY2022
Particulars	FY2023	FY2022	(C in crore) % change over FY2022
Total income	35,687	27,879	28
Interest and finance charge	9,286	7,578	23
Net interest income	26,401	20,301	30
Total operating expenses	9,453	7,093	33
Pre-impairment operating profit	16,948	13,208	28
Impairment on financial instruments	3,066	4,622	(34)
Profit before tax	13,882	8,586	62
Profit after tax	10,290	6,350	62
Retained earnings as at the beginning of the year	17,961	13,487	33
Profit after tax	10,290	6,350	62
Other comprehensive income on defined benefit plan	(25)	(3)	733
Retained earnings before appropriations	28,226	19,834	42
Appropriations
Transfer to reserve fund u/s 45-IC (1) of the RBI Act, 1934	(2,060)	(1,271)	62
Dividend paid	(1,211)	(603)	101
Adjustment of dividend to ESOP Trust	4	1	300
Retained earnings as at the end of the year	24,959	17,961	39
Due to rounding off, numbers presented in above table may not add up precisely to the totals provided.

Transfer to Reserve Fund

Under section 45-IC (1) of Reserve Bank of India (''RBI'') Act, 1934, non-banking financial companies (''NBFCs'') are required to transfer a sum not less than 20% of its net profit every year to reserve fund before declaration of any dividend. Accordingly, Bajaj Finance Ltd. (the ''Company'', ''Bajaj Finance'' or ''BFL'') has transferred a sum of C 2,060 crore to its reserve fund.

Pursuant to provisions of Companies Act, 2013 (the ''Act'') read with relevant rules thereunder, the Company, being a NBFC, is exempt from creating debenture redemption reserve in respect of privately placed debentures including the requirement to invest up to 15% of the amount of debentures maturing during the next financial year. However, the Company maintains sufficient liquidity buffer to fulfill its obligations arising out of debentures. In case of secured debentures, an asset cover of at least 100% is maintained at all times.

Dividend Distribution Policy

Pursuant to the provisions of regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the ''SEBI Listing Regulations''), the Company had formulated a dividend distribution policy, which sets out the parameters and circumstances to be considered by the Board of Directors (''Board'') in determining the distribution of dividend to its shareholders and/or retaining profit earned. The policy is annexed to this Report and is also available on the website of the Company at https://cms-assets.bajajfinserv.in/is/content/bajajfinance/dividend-distribution-policypdf?scl=1 &fmt=pdf

Dividend

RBI vide its circular dated 24 June 2021 has laid down a framework for declaration of dividend by NBFCs. Accordingly, the Board of Directors, after taking into account various aspects and in compliance with the said circular, recommend for consideration of the members at the ensuing Annual General Meeting (''AGM''), payment of final dividend of C 30 per equity shares (1500%) of face value of C 2. The total dividend for FY2023 is C 1,816 crore.

The dividend recommended is in accordance with the principles and criteria set out in the Company''s dividend distribution policy. Total dividend proposed for the year does not exceed the ceilings specified in said circular/ RBI Master Directions.

The dividend, if declared, at the ensuing AGM will be taxable in the hands of the members of the Company pursuant to Income Tax Act, 1961. For further details on taxability, please refer Notice of AGM.

Scale Based Regulations

Reserve Bank of India issued a circular on "Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs" on 22 October 2021 (''SBR Framework''). As per the framework, based on size, activity, and risk perceived, NBFCs are categorised into four layers, NBFC - Base Layer (NBFC-BL), NBFC - Middle Layer (NBFC-ML), NBFC - Upper Layer (NBFC-UL) and NBFC - Top Layer (NBFC-TL). RBI has categorised Bajaj Finance Limited as an NBFC - Upper Layer (NBFC-UL) vide its press release dated 30 September 2022. The Company has put in place necessary Board approved policies like Large Exposures Policy, Internal Capital Adequacy Assessment Policy, Compensation Policy for Key Managerial Personnel and Senior Management, Compliance Policy, Board approved limits for Sensitive Sectors Exposure under the SBR Framework, etc.

Working Results of the Company

On a consolidated basis, BFL recorded core AUM (AUM excluding extreme short tenor IPO loans) growth of 29% and growth in profit after tax of 64% in FY2023 as against core AUM and profit after tax growth of 26% and 59%, respectively, in FY2022. With its strong AUM and profit growth in FY2023, BFL has further increased its share in the financial services sector in India. Return on average assets (ROAA) and return on average equity (ROAE) for FY2023 was 5.3% and 23.5% respectively on a consolidated basis.

The Company''s business model continues to generate healthy pre-impairment operating profits enabling it to withstand higher credit losses in times of stress such as these. It remains well capitalised with a capital-to-risk weighted asset ratio (CRAR) of 24.97% as on 31 March 2023 - making it among the best capitalised large NBFCs in India.

As a result of its deeply embedded risk culture and robust risk management practices, the Company''s portfolio quality as of 31 March 2023 continues to remain strong. BFL''s consolidated Gross NPA at 0.94% and Net NPA at

0.34% are among the lowest in the industry.

Using its robust risk management and portfolio monitoring framework, BFL took enhanced credit costs based on emerging trends across its different portfolios. It holds a management overlay provision on account of volatile macroeconomic factors of C 960 crore on consolidated basis as on 31 March 2023.

The consolidated performance highlights for FY2023 are given below:

â¢ Number of new loans booked: 29.6 million

â¢ Core AUM grew by 29% to C 247,379 crore

â¢ Total income increased by 31% to C 41,406 crore

â¢ Net interest income (NII) rose by 32% to C 28,846 crore

â¢ Total operating cost to NII stood at 35.1%

â¢ Impairment on financial instruments was C 3,190 crore

â¢ Profit before tax (PBT) increased by 63% to C 15,528 crore

â¢ Profit after tax (PAT) increased by 64% to C 11,508 crore

â¢ Capital adequacy ratio as of 31 March 2023 was 24.97%, which is well above the RBI norms. Tier I adequacy ratio was 23.20%

With the experience of managing significant financial and operational disruption emanating after the pandemic, the transformational journey that BFL has embarked upon and the exit momentum of FY2023, the Company remains confident of a sound growth trajectory in FY2024 and thereafter and, hence, remain a leading NBFC in India.

Resilience and agility are deeply embedded in BFL''s culture. These cultural anchors have enabled BFL to make swift and calibrated changes to its risk and debt management practices to regain its business momentum while maintaining strong vigil on its portfolio quality and adapting to changing customer preferences of post pandemic world.

For more details on the performance of the Company, business segments and risk management framework and initiatives, please refer to the section on Management Discussion and Analysis.

Operations

BFL is one of the largest and most diversified NBFCs in India. It has worked with approximately 69.1 million customers since it started its transformational journey in FY2008 from a mono-line captive lender to a diversified financial service business. During this period, the Company expanded its presence to 3,733 locations with a distribution network of over 154,650 points of sale and also created a strong presence in the digital space.

BFL was among the early movers to transit to digital processes in the financial services industry. It had already moved from ''Physical'' to ''Phygital'' in a seamless manner and has embarked to move to the last phase, namely ''Digital'', in the last four years.

The Company believes that each customer is a critical asset in its growth journey and their satisfaction is BFL''s primary responsibility - which it thrives to achieve through an omnichannel strategy. Business transformation requires significant changes in operating processes and core technology stack of the Company. It focuses on building an ''omnichannel'' model to deliver significant business velocity, reduction in operating costs and significant improvement in customer experience. This model with an integrated offering of products and services, will enable BFL to become a ''moment of truth'' enterprise for its customers.

Further details regarding the operations, state of affairs and initiatives of the Company are given in the Management Discussion and Analysis.

Subsidiaries, Associates and Joint Ventures

A. Subsidiaries:

The Company has two wholly owned subsidiaries, viz.,

(i) Bajaj Housing Finance Ltd. (''BHFL'' or ''Bajaj Housing''), which is registered with National Housing Bank as a Housing Finance Company (''HFC''); and

(ii) Bajaj Financial Securities Ltd. (''BFinsec''), which is registered with the Securities and Exchange Board of India (''SEBI'') as a stockbroker, depository participant and research analyst.

During FY2023, no new subsidiary was incorporated/acquired. The Company has not entered into a joint venture with any other company.

The financial statements of the subsidiary companies are also available in a downloadable format under the ''Investor Relations'' section on the Company''s website at https://www.bajajfinserv.in/finance-investor-relation-annual-reports.

The Company''s policy for determination of material subsidiary, as adopted by the Board of Directors, in conformity with regulation 16 of the SEBI Listing Regulations, can be accessed on the Company''s website at https://cms-assets.bajajfinserv.in/is/content/bajajfinance/policy-for-determining-material-subsidiary-v1 pdf?scl=1 &fmt=pdf.

In terms of the said policy and provisions of regulation 16 of the SEBI Listing Regulations, BHFL is a material subsidiary of the Company.

Performance highlights of the subsidiaries are given below:

BHFL

â¢ AUM as at 31 March 2023 was C 69,228 crore as compared to C 53,322 crore as at 31 March 2022, representing a growth of 30%

â¢ Total income increased by 50% to C 5,665 crore

â¢ NII rose by 52% to C 2,454 crore

â¢ Total operating cost to NII stood at 25.7%

â¢ Impairment on financial instruments was C 124 crore. BHFL holds a management overlay provision of C 237 crore as of 31 March 2023 on account of volatile macro economic factors

â¢ Gross NPA and Net NPA were at 0.22% and 0.08%, respectively, amongst the lowest across all HFCs

â¢ PBT increased by 77% to C 1,700 crore

â¢ PAT grew by 77% to C 1,258 crore

â¢ As on 31 March 2023, capital adequacy ratio was 22.97%, which is well above the prescribed norms of 15%

During FY2023, the Company infused aggregate amount of ~C 2,500 crore to reduce leverage and fund accelerated growth of BHFL.

The total investment as on 31 March 2023 in BHFL is approximately C 7,528 crore.

BFinsec

â¢ The customer franchise as of 31 March 2023 was over 565,100

â¢ Total Income for FY2023 was C 204 crore

â¢ PAT was C 8 crore

During the year under review, no investments were made in BFinsec. The total investment as on 31 March 2023 is approximately C 670 crore.

For more detailed discussion on the performance of the subsidiaries and their various segments, refer to the Management Discussion and Analysis.

B. Associates

Snapwork Technologies Private Ltd. (''Snapwork'')

During FY2023, the Company acquired 41.5% stake on a fully diluted basis in Snapwork for an aggregate amount of ~C 93 crore, with a view to strengthen Company''s technology roadmap. Pursuant to provisions of the Act, post-acquisition, Snapwork became an associate of the Company.

Snapwork is engaged in the business of developing, consulting, providing, exporting, importing, marketing, dealing in and implementation of software technology and allied products for its clients and conducting research and development for the same.

Details of investment made in Snapwork also forms part of the financial statements.

Post-acquisition of shares by the Company, Snapwork made a profit of C 4.03 crore, of which Company''s share of profit was C 1.67 crore.

A separate statement containing the salient features of the subsidiaries and associate in the prescribed form AOC-1 is attached to the consolidated financial statements.

Other strategic investments

Bajaj Finserv Direct Ltd. (''BFS-Direct) is primarily engaged in business of distribution of financial products through its digital marketplace. BFS-Direct is registered with Insurance Regulatory and Development Authority of India as a composite Corporate Agent for distribution of insurance (life and genera) products in India.

During FY2023, no fresh investments were made by BFL into BFS-Direct. The Company continues to hold 19.87% of its capital and the remaining 80.13% is held by Bajaj Finserv Ltd., the holding company. Details of investment made in BFS-Direct also forms part of the financial statements.

Customer Engagement

The Company is committed to fairness, in both form and spirit, in its conduct with customers. One of the key aims of the Company is to communicate transparently its terms, rights and liabilities to enable them to make prudent financial decision.

In line with the above, the Company strives to create a culture of ''Customer Obsession'' and endeavors to provide a frictionless experience across the lifecycle, from pre-disbursal to closure of loan, deposit accepting activities and other value-added services. The Company measures its Net Promoter Score to rate its customer loyalty. This helps the Company to gauge the outcome of its customer engagement efforts.

To strengthen the customer engagement and monitoring process, the Board of Directors have voluntarily constituted a Customer Service Committee (''CSB''), in line with the requirements applicable to Banks. It is headed by an independent director. The Committee consists of following Board members:

1. Pramit Jhaveri - Chairman, non-executive, independent

2. Dr. Naushad Forbes - Member, non-executive, independent

3. Sanjiv Bajaj - Member, non-executive, non-independent

4. Rajeev Jain - Member, executive, non-independent

During the year under review, the Board enhanced the scope of the Committee to cover the following:

â¢ To review the performance of the Company (with respect to Customer Services) against baseline parameters defined by the Management. The matters which do not meet the baseline parameters will be reported to Risk Management Committee.

â¢ Regulatory observations pertaining to Customer Service and remediation plan.

The updated terms of reference can be accessed at https://cms-assets.bajajfinserv.in/is/content/bajajfinance/ csc-terms-of-referencepdf?scl=1&fmt=pdf

During FY2023, the Committee met twice.

In addition, the Company has in place a Standing Committee of Management for Customer Service. The Committee meets on a quarterly basis. The terms of reference of the Committee, inter alia, covers the following:

â¢ To review and evaluate the feedback received from customer service teams;

â¢ To review and guide on the actionable shared by the service team and recommend the process/policy changes required, if any;

â¢ To review the customer complaints received and redressed during the period as well as advisory/awards issued by the regulatory;

â¢ This Committee shall also perform duties relating to Customer Grievance including:

(a) Conducting root cause analysis for complaints;

(b) Formulate a structured process and oversee the measures taken for grievance redressal of customers.

The CSB is updated on the discussions, actions and other recommendation of this Standing Committee. The suggestion, feedback and guidance from CSB is taken note of by the Standing Committee for necessary actions.

Various interventions, to uphold BFL''s commitment towards the customers, under the guidance of these Committees are undertaken. To list a few:

â¢ Enablement of various customer service channels for customers to engage, transact and be serviced online as well as offline channels of their choice and convenience through Mobile App, Website, IVR, branch, email and Social media.

â¢ Dedicated Customer Service branches have been set up across major cities.

â¢ Significant investments and progress in enabling digital channels for engaging with customers.

â¢ Standardisation of communication content being sent to the customer, at various life cycle events as per the laid governance. This includes all types of communications like notifications, SMS, email etc.

â¢ Setting up of a dedicated team to oversee the fees and charges being communicated to the customers at the time of sourcing, across all products.

Other initiatives of the Company towards customer engagement are detailed in the Management Discussion and Analysis.

The Company has suo moto adopted the Internal Ombudsman (IO) framework since December 2020 prior to it being mandated for NBFCs in May 2022. Presently, the Company has appointed two IOs.

Risk Management

The Board of Directors have adopted a risk management policy for the Company which provides for identification of key events/risks impacting the business objectives of the Company and attempts to develop risk policies and strategies to ensure timely evaluation, reporting and monitoring of key business risks.

This framework, inter alia, provides the set of components that provide the foundations and organisational arrangements for designing, implementing, monitoring, reviewing and continually improving Risk Management throughout the organisation. It covers principles of risk management, risk governance with roles and responsibilities, business control measures, principle risks and business continuity plan. The Management identifies and controls risks through a defined framework in terms of the aforesaid policy.

The Board is of the opinion that there are no elements of risk that may threaten the existence of the Company.

The current composition of Risk Management Committee (''RMC'') is as follows:

1. Pramit Jhaveri - Chairman, non-executive, independent

2. Anami N Roy - Member, non-executive, independent

3. Sanjiv Bajaj - Member, non-executive, non-independent

4. Rajeev Jain - Member, Managing Director, executive

5. Deepak Bagati - Member, President - debt management services

6. Fakhari Sarjan - Member, Chief Risk Officer

7. Sandeep Jain - Member, Chief Financial Officer

Further details on RMC are furnished in the Corporate Governance Report.

More detailed discussion on the Company''s risk management and portfolio quality is covered in the Management Discussion and Analysis.

Business Continuity and Cyber Security

The Company continues to enhance cyber security and information security aspects while transforming to a customer-centric digital enterprise. It has capability to offer remote access for identified IT vendors/partners to enable full resources for user support, data center support, application maintenance and testing. All key IT systems are compliant to ISO 27001 Information Security Management System and ISO 22301 Business Continuity Standard. The Company also has a dedicated cyber security and information security team to ensure technical expertise and regulatory as well as internal compliance for Information Technology. In addition, an outsourcing compliance unit and third-party security governance framework is also set up. As part of Omnipresence Strategy, the 3-in-1 app is live now with recent version 9.0.5 (954) and the Company will continue its journey towards a digital organisation.

The Company operates all its critical internet-facing properties behind a well-known cloud-based web application firewall to safeguard against web application attacks as well as distributed denial of service attacks. Further, regular vulnerability assessment and penetration testing, review of segregation of duties, other audit and compliance testing(s) have ensured that the Company''s information assets are safe and secure.

As a part of the brand protection efforts and to safeguard customer''s interest, the Company constantly monitors and, where needed, removes inappropriate/misleading social media pages. An awareness programme is conducted for all employees using the digital channel regarding cyber security. The Company continues cyber security awareness for customers across digital and social media platforms to educate customers and the public at large on financial fraud risks and how to stay protected. Employees of the Company are required to undergo a mandatory online learning module on information security and affirm that they have understood these and are aware of the protocols to be followed. Cyber security awareness session was conducted for Board members as well. Regular information security related mailers are sent to all employees for awareness and training purpose.

The Company will continue its focus on security monitoring and incident response through its security operations centre.

A detailed discussion on information systems, cyber security and information technology is covered under Management Discussion and Analysis.

Directors and Key Managerial Personnel (''KMP'')

A. Change in Directors and KMP during the financial year

(i) Appointments:

Independent Directors

Radhika Haribhakti (DIN: 02409519):

On recommendation of Nomination and Remuneration Committee (''NRC''), the Board has appointed Radhika Haribhakti as an independent director of the Company for a period of five consecutive years effective from 1 May 2022. The same has been approved by the members vide their special resolution dated 27 July 2022.

The Board is of the opinion that Radhika Haribhakti is a person of integrity, expertise, and competent experience and proficiency to serve the Company as an independent director that can strengthen the overall composition of the Board.

Radhika Haribhakti is exempted from requirements of clearing the online proficiency test pursuant to rule 6(4) of Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended. However, she has on a voluntary basis appeared and cleared the proficiency test.

She is a member of Stakeholders Relationship Committee and Chairperson of Nomination and Remuneration Committee. In addition, she is also a member of Review Committee for identification of wilful defaulter constituted pursuant to RBI Regulations.

Dr. Arindam Bhattacharya (DIN: 01570746):

On recommendation of Nomination and Remuneration Committee (''NRC''), the Board, at its meeting held on 16 March 2023, appointed Dr. Arindam Bhattacharya as an independent director of the Company for a period of five consecutive years effective from 1 April 2023.

The Board is of the opinion that Dr. Arindam Bhattacharya is a person of integrity, expertise, and competent experience and proficiency to serve the Company as an independent director that can strengthen the overall composition of the Board.

Dr. Arindam Bhattacharya has successfully passed the online proficiency self-assessment test as required under the provisions of rule 6(4) of the Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended.

He is a member of Audit Committee.

Executive Directors:

Considering the growth and complexity of the business of the Company and in line with the succession framework, the Board, at its meeting held on 16 March 2023, based on the recommendation of NRC, approved appointments of Rakesh Bhatt (DIN: 02531541) and Anup Saha (DIN: 07640220) as Executive Directors of the Company for a period of 5 years effective 1 April 2023.

Both Rakesh Bhatt and Anup Saha are KMPs within the meaning of section 2(51) of the Act. Rakesh Bhatt is a member of IT Strategy Committee.

In terms of regulation 17(1C) of SEBI Listing Regulations, the Company is seeking approval of shareholders within the time limit prescribed therein by way of postal ballot with reference to the aforesaid appointments.

(ii) Resignation:

On account of health reasons, Madhur Bajaj (DIN: 00014593) resigned as non-executive director of the Company with effect from close of business hours on 31 July 2022. The Board places on record its sincere appreciation for the valuable contribution made by him during his long tenure as director on the Board of the Company.

Further, as mentioned in Directors'' Report presented for last year, the independent directors, Ranjan Sanghi (DIN: 00275842) and Dr. Gita Piramal (DIN: 01080602) stepped down as directors with effect from close of business hours on 30 April 2022.

B. Directors liable to retire by rotation

Rajiv Bajaj (DIN:00018262) retires by rotation at the ensuing AGM, being eligible, offers himself for re-appointment.

Brief details of Rajiv Bajaj, who is seeking re-appointment, are given in the Notice of 36th AGM.

C. KMPs

Save and except as stated above, there are no other changes in the KMPs during FY2023.

Declaration by independent directors

All the independent directors have submitted a declaration of independence, stating that they meet the criteria of independence provided under section 149(6) of the Act read with regulation 16 of the SEBI Listing Regulations, as amended. They also confirmed compliance with the provisions of rule 6 of Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended, relating to inclusion of their name in the databank of independent directors.

The Board took on record the declaration and confirmation submitted by the independent directors regarding them meeting the prescribed criteria of independence, after undertaking due assessment of the veracity of the same in terms of the requirements of regulation 25 of the SEBI Listing Regulations.

Remuneration Policies

A. Policy on Directors'' Appointment and Remuneration

Pursuant to section 178(3) of the Companies Act, 2013 and regulation 19(4) read with Part D of schedule II of the SEBI Listing Regulations, the Board has framed a Remuneration Policy. This policy, inter alia, lays down:

(a) The criteria for determining qualifications, positive attributes and independence of directors; and

(b) Broad guidelines of compensation philosophy and structure for non-executive directors, key managerial personnel and other employees.

In view of detailed RBI Guidelines for NBFCs concerning compensation of Key Managerial Personnel (KMP) and Senior Management (SMT), the Company has adopted a specific policy to this effect. Accordingly, this remuneration policy has to be read along with the specific policy adopted pursuant to RBI Guidelines as regards compensation of KMP and SMT, which is detailed below.

B. Policy for Compensation of KMP and SMT pursuant to RBI Guidelines

RBI has vide its circular dated 29 April 2022 issued Guidelines on Compensation of Key Managerial Personnel and Senior Management in NBFCs pursuant to Scale Based Regulatory Framework. Accordingly, the Board of Directors at their meeting held on 16 March 2023 based on the recommendation of NRC, adopted a policy exclusively governing compensation payable to KMP and SMT. This policy lays down detailed framework, inter alia, encompassing the following:

â¢ Principles of compensation;

â¢ Compensation components;

â¢ Principles of variable pay;

â¢ Deferral of variable pay;

â¢ Compensation for control and assurance function personnel; and

â¢ Provisions for malus and clawback and circumstances under which application of malus and clawback is to be considered.

The aforesaid policies can be accessed at https://cms-assets.bajajfinserv.in/is/content/bajajfinance/ remuneration-policypdf?scl=1 &fmt=pdf and https://cms-assets.bajajfinserv.in/is/content/bajajfinance/ remuneration-policy-rbipdf?scl=1 &fmt=pdf

As per the requirements of the RBI Master Directions and SEBI Listing Regulations, details of all pecuniary relationship or transactions of the non-executive directors vis-a-vis the Company are disclosed in the Corporate Governance Report.

Compliance with Code of Conduct

All Board members and Senior Management personnel have affirmed compliance with the Company''s Code of Conduct for FY2023.

A declaration to this effect signed by the Managing Director is included in this Annual Report.

Annual Return

A copy of the Annual Return as provided under section 92(3) of the Act, in the prescribed form, which will be filed with the Registrar of Companies/MCA, is hosted on the Company''s website and can be accessed at https://www.bajajfinserv.in/finance-investor-relation-annual-reports

Number of Meetings of the Board

Six (6) meetings of the Board were held during FY2023. Details of the meetings and attendance thereat forms part of the Corporate Governance Report.

Directors'' Responsibility Statement

The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) under historical cost convention on accrual basis except for certain financial instruments, which are measured at fair value pursuant to the provisions of the Act and guidelines issued by SEBI/RBI. Accounting policies have been consistently applied except where revision to an existing Accounting Standard requires a change in the accounting policy.

In accordance with the provisions of section 134(3) (c) of the Act and based on the information provided by the Management, the Directors state that:

i. in the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

ii. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for FY2023;

iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. they have prepared the annual accounts on a going concern basis;

v. they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

Audit Committee

Sanjiv Bajaj, non-executive, non-independent director stepped down as member with effect from close of business hours on 31 March 2023 and Dr. Arindam Bhattacharya was inducted as a member effective from 1 April 2023.

The present composition of the Committee as approved by the Board at its meeting held on 16 March 2023 is as follows: Anami N Roy (DIN: 01361110), Chairman, Dr. Naushad Forbes (DIN: 00630825), Pramit Jhaveri (DIN: 00186137) and Dr. Arindam Bhattacharya.

The composition of Audit Committee is over and above the minimum requirement prescribed under the Act,

SEBI Listing Regulations, and the RBI Regulations for NBFCs (the ''NBFC Regulations'') of having a minimum of two-thirds of independent directors, including the Chairman. All members of the Committee are non-executive independent directors possessing financial literacy, and expertise in accounting or financial management related matters.

During FY2023, all recommendations of the Audit Committee were accepted by the Board.

The brief terms of reference and attendance record of members are given in the Corporate Governance Report.

Particulars of Loans, Guarantees and Investments

The Company, being an NBFC registered with the RBI and engaged in the business of giving loans in ordinary course of its business, is exempt from complying with the provisions of section 186 of the Act with respect to loans, guarantees and investments. Accordingly, the Company is exempted from complying with the requirements to disclose in the financial statement the full particulars of the loans given, investment made or guarantee given or security provided.

In addition to investment in subsidiaries, associates and group companies which is covered above, details of other major strategic investments are under:

1. One MobiKwik Systems Ltd. (''MobiKwik''):

The Company continues to stay invested in MobiKwik. Total investment in MobiKwik as on 31 March 2023 is approximately C 296.89 crore.

The total equity shares held by the Company in MobiKwik is 7,979,440 equity shares representing 13.95% of its capital on a fully diluted basis.

2. RBL Bank Ltd.

The Company continues to stay invested in RBL Bank Ltd.

The Company has additionally disclosed information regarding investments in the financial statements. Employee Stock Options (''ESOP'')

The Company offers stock options to select employees of the Company and its subsidiaries to foster a spirit of ownership and an entrepreneurial mindset. Because of their nature, stock options help to build a holistic, longterm view of the business and a sustainability focus in the Senior Management team. Stock options are granted to tenured employees in managerial and leadership positions upon achieving defined thresholds of performance and leadership behaviour. This has contributed to the active involvement of the leadership and senior team who are motivated to ensure long-term success of the Company. Grant of stock options also allows the Company to maintain the right balance between fixed pay, short-term incentives and long-term incentives to effectively align with the risk considerations and build the focus on consistent long-term results.

As per the Employee Stock Option Scheme of the Company, total option that could be granted is 35,071,160. During the year under review, the scheme has not been amended and it is in compliance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

A statement giving complete details, as at 31 March 2023, under regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, is available on the website of the Company and can be accessed at https://www.bajajfinserv.in/finance-investor-relation-annual-reports

Grant wise details of options vested, exercised and cancelled are provided in the notes to the standalone financial statements. The Company has not issued any sweat equity shares or equity shares with differential voting rights during FY2023.

Share Capital

During FY2023, no new equity shares were issued.

As on 31 March 2023, the paid-up share capital of the Company stood at C 121.09 crore consisting of 605,429,233 equity shares of face value of C 2 fully paid-up.

Related Party Transactions

All contracts/arrangement/transactions entered by the Company during FY2023 with related parties were in compliance with the applicable provisions of the Act and SEBI Listing Regulations. Prior omnibus approval of the Audit Committee is obtained for all related party transactions which are foreseen and of repetitive nature. Pursuant to the said omnibus approval, details of transaction entered into is also reviewed by the Audit Committee on a quarterly basis.

All related party transactions entered during FY2023 were in the ordinary course of business, at arm''s length and not material under the Act and SEBI Listing Regulations. None of the transactions required members'' prior approval under the Act or SEBI Listing Regulations.

Details of transactions with related parties during FY2023 are provided in the notes to the financial statements. There were no transaction requiring disclosure under section 134(3) (h) of the Act. Hence, the prescribed Form AOC-2 does not form a part of this Report.

The policy on materiality of related party transactions and on dealing with related party transactions is available on the website of the Company at https://cms-assets.bajajfinserv.in/is/content/bajajfinance/policy-of-materiality-and-dealing-with-related-party-transactionpdf?scl=1 &fmt=pdf and also forms a part of the Corporate Governance Report.

Succession Planning

The Company has in place a succession planning framework to address anticipated, as well as unscheduled changes in leadership. The plan is revisited, re-evaluated and updated every year. The key attribute of the plan involves:

â¢ Organisational level Long Range Strategy wherein talent required to fulfil the Company''s strategy and annual operating plan is discussed and planned.

â¢ Performance appraisal system which helps identifying people demonstrating leadership behaviours in line with our cultural anchors.

â¢ Talent Management framework is a bi-annual exercise under which a Talent Card is made for every Senior Management team member.

â¢ Job Rotation Policy with the intent of providing movement and enhancements to senior leaders in the organisation.

Material Changes and Commitments

There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year and the date of this Report.

Conservation of Energy

The operations of the Company are not energy intensive. The Company implements various energy conservation measures across all its functions and value chain, which are highlighted in the Business Responsibility and Sustainability Report.

Technology Absorption

The details pertaining to technology absorption have been explained in the Management Discussion and Analysis.

Considering the nature of services and businesses, no specific amount of expenditure is earmarked for Research and Development. However, the Company on an ongoing basis strives for various improvements in the products, platforms, and processes.

Foreign Exchange Earnings and Outgo

During FY2023, the Company did not have any foreign exchange earnings and the foreign exchange outgo in terms of actual outflow amounted to C 4,245.17 crore.

Corporate Social Responsibility (''CSR'')

The CSR Committee comprises of three directors viz., Dr. Naushad Forbes, Chairman, Sanjiv Bajaj and Rajeev Jain, members.

The CSR obligation of the Company for FY2023 is C 138.33 crore. As on 31 March 2023, total amount spent on CSR activities by Company is C 117.46 crore.

As per section 135 of the Act read with Companies (Corporate Social Responsibility) Rules, 2014, as amended, the Company is required to transfer any unspent amount, pursuant to any ongoing project undertaken by the Company in pursuance of its Corporate Social Responsibility Policy, within a period of thirty days from the end of the financial year to a special account opened by the Company in that behalf for that financial year in any scheduled bank called Unspent Corporate Social Responsibility Account.

Due to delay in commencement of project as compared to approved timelines, some part of the mandatory spend for few ongoing projects remained unspent as on 31 March 2023, thereby requiring it to be transferred

to an Unspent Corporate Social Responsibility Account. Accordingly, the Company has opened necessary bank account to transfer unspent amount of C 20.87 crore.

Detailed information on CSR Policy, its salient features, details pertaining to spent and unspent amount forms part of Annual Report on CSR activities.

The CSR policy has been hosted on the website of the Company and can be accessed at https://cms-assets. bajajfinserv.in/is/content/bajajfinance/corporate-social-responsibilitypdf?scl=1 &fmt=pdf.

Further, the Chief Financial Officer has certified that the funds disbursed have been utilised for the purpose and in the manner approved by the Board for FY2023.

Formal Annual Evaluation of the performance of the Board, Committees and directors

Pursuant to section 178 of the Act, the NRC and the Board has decided that the evaluation shall be carried out by the Board only and the NRC will only review its implementation and compliance.

Further, as per Schedule IV of the Act and provisions of the SEBI Listing Regulations, the performance evaluation of independent directors shall be done by the entire Board excluding the directors being evaluated, on the basis of performance and fulfilment of criteria of independence and their independence from Management. On the basis of the report of the performance evaluation, it shall be determined whether to extend or continue the term of appointment of independent director.

Accordingly, the Board has carried out an annual performance evaluation of its own performance, that of its Committees, Chairperson and individual directors.

The manner in which formal annual evaluation of performance was carried out by the Board for the year 2022-23 is given below:

â¢ The NRC at its meeting held on 19 May 2020, reviewed the criteria for performance evaluation. The criteria is available on the website of the Company at https://cms-assets.bajajfinserv.in/is/content/ bajajfinance/performance-evaluation-criteria-for-board-committees-of-board-chairperson-and-directorspdf?scl=1 &fmt=pdf

â¢ Based on the said criteria, a questionnaire-cum-rating sheet was deployed using an IT platform for seeking feedback of the directors with regards to the performance of the Board, its Committees, the Chairperson and individual directors.

â¢ From the individual ratings received from the directors, a report on summary of ratings in respect of performance evaluation of the Board, its Committees, Chairperson and individual directors for the year 2022-23 and a consolidated report thereof were arrived at.

â¢ The report of performance evaluation so arrived at was then discussed and noted by the Board at its meeting held on 16 March 2023.

â¢ The NRC reviewed the implementation and compliance of the performance evaluation at its meeting held on 16 March 2023.

â¢ Based on the report and evaluation, the Board and NRC at their respective meetings held on 16 March 2023, determined that the appointment of all independent directors may continue.

â¢ Details on the evaluation of Board, non-independent directors and Chairperson of the Company as carried out by the independent directors at their separate meeting held on 16 March 2023 have been furnished in a separate paragraph elsewhere in this Report.

â¢ During FY2023, the process followed by the Company was reviewed by the NRC, which opined these to be in compliant with applicable provisions and found it to be satisfactory.

Other than Chairman of the Board and NRC, no other director has access to the individual ratings given by directors.

The criteria was reviewed by the NRC and Board and advised enhancement to the feedback mechanism by introducing few qualitative aspects to the criteria.

Significant and Material Orders passed by the Regulators or Courts

During FY2023, there were no significant or material orders passed by any regulator or court or tribunal impacting the going concern status and Company''s operations in future.

Internal Financial Controls

Internal Financial Controls laid down by the Company is a systematic set of controls and procedures to ensure orderly and efficient conduct of its business including adherence to the Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. Internal financial controls not only require the system to be designed effectively but also to be tested for operating effectiveness periodically.

The Board is of the opinion that internal financial controls with reference to the financial statements were tested and reported adequate and operating effectively. The internal financial controls are commensurate with the size, scale and complexity of operations.

Internal Control Systems and their adequacy has been discussed in more detail in Management Discussion and Analysis.

Deposits

The Company accepts deposits from retail and corporate clients. As on 31 March 2023, it had a standalone deposit book of C 44,489.79 crore, delivering an annual growth of 46.88% in FY2023. Deposits contributed to 27.52% of BFL''s standalone borrowings versus 24.62% as at the end of FY2022.

The consolidated deposits book as on 31 March 2023 stood at C 44,665.56 crore, delivering an annual growth of 45.02% in FY2023. Deposit contributed to 20.61% of its consolidated borrowings as on FY2023 versus 18.64% as at the end of FY2022.

Break-up of deposits raised on a consolidated basis:

		(C in crore)
Sr. No. Type	Amount raised	Outstanding as on 31 March 2023
1. Public deposit	15,793.02	28,303.10
2. Corporate deposit	13,684.07	11,518.30
3. Other deposit	3,271.55	4,668.39

Pursuant to provisions of the RBI Act, 1934, the Company has created a charge on statutory liquid assets

amounting to C 5,192.05 crore in favour of the trustee for Public Fixed Deposit (''FD'') holders.

During FY2023, there was no default in repayment of deposits or payment of interest thereon.

With a view to reduce unclaimed deposits, the Company adopted the following process:

â¢ Wherever payment of deposit amount and interest thereon is rejected by bank of the deposit holder,

Customer Service Team calls the depositor to inform about rejection reason and advise them the process for change of linked bank account;

â¢ In addition, SMS/Email/Physical letter are also sent to depositors to inform them of rejection reason(s) and advise them to initiate appropriate action for change of bank details;

â¢ Account payee cheque in the name of the customer for unclaimed amount is dispatched at customer''s communication address (excluding deceased cases, where settlement is to be done as per nomination/ survivorship clause);

â¢ In case of death of depositors, claim settlement process is advised to joint depositors/nominee/legal heir, as the case may be;

â¢ Wherever the residential status of the depositors has changed from Resident to Non-Resident, they are advised to submit updated FATCA/CRS declaration and to get their bank details updated.

As on 31 March 2023, there were 58 deposits amounting to C 73.29 lakh which had matured and remained

unclaimed and interest on matured deposits amounting to C 7.23 lakh and interest on active deposits amounting

to C 3.90 lakh had also remained unclaimed.

Borrowings

The total borrowing limit approved by the shareholders stands at C 225,000 crore.

The total borrowing as on 31 March 2023 is C 161,684.63 crore. The break-up of the same is as under:

						(C in crore)
Particulars	Deposits	Bank Loans (TL/CC/ OD/WCDL)	Non Convertible Debentures	Subordinate Liability	Short-term Borrowings	External Commercial Borrowing
Amount	44,489.79	38,287.89	55,446.82	3,630.29	18,368.39	1,461.45
% to total borrowing	27.52	23.68	34.29	2.25	11.36	0.90

Credit Rating

The brief details of the ratings received from credit rating agencies by the Company for all its outstanding instruments is given in General Shareholder Information.

Whistle Blower Policy/Vigil Mechanism

The Company has a Whistle Blower Policy encompassing vigil mechanism pursuant to the requirements of section 177(9) of the Act and regulation 22 of the SEBI Listing Regulations. The whistle blower framework has been introduced with an aim to provide employees, directors and value chain partners with a safe and confidential channel to share their inputs about such aspects which are adversely impacting their work environment. The policy/vigil mechanism enables directors, employees and value chain partners to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company''s Code of Conduct or ethics policy and leak or suspected leak of unpublished price sensitive information.

The concerns may be reported anonymously either through email or through a ''Confidential Feedback Mechanism'', which is reviewed by a Committee comprising of Senior Management representatives. Pursuant to the Whistle Blower Policy, the summary of incidents investigated, actioned upon, founded and unfounded are reviewed by the Audit Committee on a quarterly basis. Further, the Committee from time to time reviews the functioning of the whistle blower mechanism and measures taken by the Management to encourage employees to avail of the mechanism to report unethical practices.

The Whistle Blower Policy is uploaded on the website of the Company and can be accessed at https://cms-assets.bajajfinserv.in/is/content/bajajfinance/whistle-blower-policy-v2pdf?scl=1 &fmt=pdf

More details are given in Corporate Governance Report.

Independent Directors'' Meeting

Pursuant to the Act and SEBI Listing Regulations, the independent directors must hold at least one meeting in a financial year without attendance of non-independent director and members of the Management. Accordingly, independent directors of the Company met on 16 March 2023 and:

â¢ noted the report of performance evaluation from the Chairman of the Board for the year 2022-23;

â¢ reviewed the performance of non-independent directors and the Board as a whole;

â¢ reviewed the performance of the Chairman of the Board, taking into account the views of executive and nonexecutive directors; and

â¢ assessed the quality, quantity and timeliness of flow of information between the Company''s Management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

The independent directors present elected Anami N Roy as Chairman for the meeting. All independent directors were present at the meeting.

In addition, the independent directors have a separate meeting with the Senior Management team (SMT), during which the SMT is encouraged to express its views and concerns pertaining to the business. Suggestions from the directors are noted by the Management.

RBI Guidelines

for asset liability management (ALM) system for NBFCs, the Company has an asset liability committee, which meets monthly to review its ALM risks and opportunities. Further, BFL exceeds the regulatory requirement of liquidity coverage ratio (LCR) introduced by the RBI in FY2020. As against the LCR requirement of 70%, BFL''s LCR as on 31 March 2023 was 113%.

The Company continues to be in compliance with the Master Direction for Non-Banking Financial Company-Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank)

Directions, 2016.

Corporate Governance

In terms of the SEBI Listing Regulations, a separate section titled Report on Corporate Governance has been included in this Annual Report, along with the Management Discussion and Analysis and report on General Shareholder Information.

The Managing Director and the Chief Financial Officer have certified to the Board in relation to the financial statements and other matters as specified in the SEBI Listing Regulations.

A certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Business Responsibility and Sustainability Report (''BRSR'')

Pursuant to amendment in SEBI Listing Regulations, top 1,000 listed entities based on market capitalisation are required to submit a BRSR with effect from FY2023.

Accordingly, the Company has adopted a Policy for Responsible and Sustainable Business Conduct. The BRSR in the format prescribed by SEBI is annexed to the annual report.

The Board has in place an executive level cross functional ESG Committee headed by an Executive Director. The Committee chalks out plans and other initiatives keeping in view the leading practices and the requirements.

It also monitors the implementation of the ESG related initiatives and reporting thereof. A detailed ESG report describing various initiatives, actions and process of the Company towards the ESG endeavor can be accessed at https://www.bajajfinserv.in/finance-investor-relation-annual-reports

Secretarial Standards of ICSI

The Company has complied with the requirements prescribed under the Secretarial Standards on meetings of the Board of Directors (SS-1) and General Meetings (SS-2) read with the MCA circulars.

Internal Audit

The internal audit function provides an assurance to the Audit Committee/Board of Directors and the Senior Management on the quality and effectiveness of the BFL''s internal controls, risk management and governance related systems and processes. In line with the RBI''s guidelines on Risk Based Internal Audit, the Company has implemented a Risk Based Internal Audit Policy.

At the beginning of each financial year, an audit plan is rolled out after approval of the Audit Committee.

The Audit Committee on a quarterly basis reviews the internal audit reports based on the approved plan, which includes significant audit observations, corrective and preventive actions. The Committee also reviews adequacy and effectiveness of internal controls based on such reports.

The Committee also has independent meetings with the internal auditors without the presence of Management. Auditors and Auditors'' Report Statutory Auditors

In line with the RBI requirements, the Board of Directors, based on the recommendation of the Audit Committee, at their meeting held on 16 September 2021, appointed Deloitte Haskins & Sells, Chartered Accountants, (Firm Registration No. 302009E) (''Deloitte'') and G. M. Kapadia & Co., Chartered Accountants, (Firm Registration No.104767W) (''G. M. Kapadia'') as Joint Statutory Auditors for a period of 3 years to conduct audit of the financial statements of the Company for the financial years 2022, 2023 and 2024. The said appointment was also approved by the shareholders.

The audit report given by Deloitte and G.M. Kapadia, Joint Statutory Auditors for FY2023 is unmodified, i.e., it does not contain any qualification, reservation or adverse remark or disclaimer.

In terms of the RBI Master Directions - Non-Banking Financial Companies Auditors'' Report (Reserve Bank) Directions, 2016, the Joint Statutory Auditors have also submitted an additional report dated 27 July 2022, for FY2022 which has been filed with RBI. There were no comments or adverse remarks in the said report as well.

Secretarial Auditor

Pursuant to the provisions of section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed Shyamprasad D. Limaye, Practicing Company Secretary (FCS No. 1587, CP No. 572), to undertake secretarial audit of the Company.

A report from the secretarial auditor in the prescribed Form MR-3 is annexed to this Report.

As per regulation 24A(1) of SEBI Listing Regulations, a listed company is required to annex a secretarial audit report of its material unlisted subsidiary to its Annual Report. The secretarial audit report of BHFL, a material subsidiary (a high value debt listed company) for FY2023 is annexed herewith.

In addition, secretarial audit report pursuant to section 204 of the Act for BFinsec, a non-material subsidiary is also annexed herewith.

Pursuant to regulation 24A(2) of SEBI Listing Regulations, a report on secretarial compliance for FY2023 has been issued by Shyamprasad D. Limaye and the same will be submitted with the stock exchanges within the given timeframe. The report will be made available on the website of the Company.

There are no observations, reservations or qualifications or adverse remark in any of the aforesaid reports.

The auditors, i.e., statutory auditors and secretarial auditor have not reported any matter under section 143(12) of the Act, and therefore, no details are required to be disclosed under section 134(3) (ca) of the Act.

Other Statutory Disclosures

â¢ The financial statements of the Company and its subsidiaries are placed on the Company''s website at https://www.bajajfinserv.in/finance-investor-relation-annual-reports

â¢ Details required under the provisions of section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, containing, inter alia, the ratio of remuneration of director to median remuneration of employees, percentage increase in the median remuneration, are annexed to this Report.

â¢ Details of top ten employees in terms of the remuneration and employees in receipt of remuneration as prescribed under rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, containing details prescribed under rule 5(3) of the said rules, which form part of the Directors'' Report, will be made available to any member on request, as per provisions of section 136(1) of the Act.

â¢ The Company being an NBFC, the provisions relating to Chapter V of the Act, i.e., acceptance of deposit, are not applicable. Disclosures as per NBFC regulations have been made in this Annual Report.

â¢ The provision of section 148 of the Act relating to maintenance of cost records and cost audit are not applicable to the Company.

â¢ The Company has a policy on prevention of sexual harassment at the workplace. The Board, at its meeting held on 26 April 2023, reviewed the policy and approved amendments to make it gender neutral. The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The number of complaints received, disposed of and pending during FY2023 is given in the Corporate Governance Report.

â¢ There is no change in the nature of business of the Company during FY2023.

â¢ The securities of the Company were not suspended from trading during the year on account of corporate actions or otherwise.

â¢ The Company has not defaulted in repayment of loans from banks and financial institutions. There were no delays or defaults in payment of interest/principle of any of its debt securities.

â¢ During FY2023, the Company has issued non-convertible debenture to the tune of C 19,199.50 crore and redeemed non-convertible debentures and subordinate liability to the tune of C 15,135.80 crore and C 207.10 crore respectively.

â¢ Disclosure under section 197(14) of Companies Act, 2013:

Rajeev Jain, Managing Director (DIN: 01550158)

Post the relinquishment of his position as MD of Bajaj Housing Finance Ltd. a wholly owned subsidiary, he has been elected as Non-Executive Vice Chairman effective from 1 May 2022. In his capacity as a non-executive director, he draws sitting fees and profit linked commission from BHFL at par with other non-executive directors in terms of its remuneration policy. The total remuneration (sitting fees and commission) drawn for FY2023 is C 25.50 lakh. Apart from above, he does not draw any commission from any other subsidiary company.

During FY2023, he has been awarded a one time grant of 94,680 ESOPs of Bajaj Finserv Ltd., holding company (''BFS'') at grant price of C 1,482.64. All options will vest entirely post completion of 5 years from grant date.

Anup Saha, Executive Director (DIN: 07640220)

Anup Saha does not draw any commission or remuneration from any of the subsidiary company.

During FY2023, he has been awarded a one time grant of 31,560 ESOPs of BFS at grant price of C 1,482.64. The options will vest entirely post completion of 5 years from grant date.

Rakesh Bhatt, Executive Director (DIN: 02531541)

Rakesh Bhatt does not draw any commission or remuneration from any of the subsidiary company.

During FY2023, he has been awarded a one time grant of 31,560 ESOPs of BFS at grant price of C 1,482.64. The options will vest entirely post completion of 5 years from grant date.

He has also been granted stock option of BFS as per the details given below during his association with BFS-Direct:

Grant Date	Vesting Schedule	Option Granted	Exercise Price (in J)
16 May 2019		156,250	745.47
21 May 2020	Options will vest 25% each year	257,250	470.21
28 April 2021		131,000	1,009.14

â¢ As on 31 March 2023, there is no amount remaining unclaimed in respect of non-convertible debentures.

â¢ Neither any application was made, nor any proceeding is pending under the Insolvency and Bankruptcy Code, 2016 against the Company.

â¢ During FY2023, there was no instance of one-time settlement with Banks or Financial Institutions. Therefore, as per rule 8(5) (xii) of Companies (Accounts) Rules, 2014, reasons of difference in the valuation at the time of one-time settlement and valuation done while taking loan from the Banks or Financial Institutions are

not reported.

â¢ Disclosures pursuant to RBI Master Directions, unless provided in the Directors'' Report, form part of the notes to the standalone financial statements and Report on Corporate Governance.

Acknowledgement

The Board of Directors places its gratitude and appreciation for the support and cooperation from its members, the RBI and other regulators, banks, financial institutions, trustees for debenture holders and fixed deposit holders.

The Board of Directors also places on record its sincere appreciation for the commitment and hard work put in by the Management and the employees of the Company, its subsidiaries and associates and thanks them for yet an excellent year of performance.

On behalf of the Board of Directors,

CLU

Sanjiv Bajaj

Chairman DIN: 0014615

Pune: 26 April 2023

Mar 31, 2022

Your directors present the thirty-fifth Annual Report along with the audited standalone and consolidated financial statements for FY2022.

Sad demise of Shri Rahul Bajaj, Chairman Emeritus of the Company

At the outset, your directors express their profound grief on sad demise of Shri Rahul Bajaj, the iconic leader of the Company, who passed away on 12 February 2022.

He lived an extraordinary life. He was the architect of one of the most respected business groups in the country, a vocal proponent of entrepreneurship, and a voice of the industry at large.

He stood for what he believed, a man driven by values, bold in both expression and action. While he remained the torchbearer of a family legacy that dates back to the founding days of our country, he championed the creation of a new India.

While his passing away has left a huge void among us, he leaves behind an unparalleled foundation for all of us to build upon.

The Board of Directors (''Board'') places on record its whole-hearted appreciation of the invaluable contribution made by him to the spectacular success of the Company and the Group over several decades.

Financial Results

The highlights of the standalone financial results are given below:

Particulars	FY2022	FY2021	(? in crore) % change over FY2021

Total income	27,871	23,546	18
Interest and finance charge	7,573	7,446	2
Net interest income	20,298	16,100	26
Total operating expenses	7,090	5,016	41
Pre-impairment operating profit	13,208	11,084	19
Impairment on financial instruments	4,622	5,721	(19)
Profit before tax	8,586	5,363	60
Profit after tax	6,350	3,956	61

Retained earnings as at the beginning of the year	13,487	10,349	30
Profit after tax	6,350	3,956	61
Other comprehensive income on defined benefit plan	(3)	(26)	(88)
Retained earnings before appropriations	19,834	14,279	39
Appropriations
Transfer to reserve fund u/s 45-IC(1) of the RBI Act, 1934	(1,271)	(792)	60
Dividend paid	(603)	-	-
Adjustment of dividend to ESOP Trust	1	-	-
Retained earnings as at the end of the year	17,961	13,487	33
Due to rounding off, numbers presented in above table may not add up precisely to the totals provided.

Transfer to Reserve Fund

Under section 45-IC(1) of Reserve Bank of India (''RBI'') Act, 1934, non-banking financial companies (''NBFCs'') are required to transfer a sum not less than 20% of its net profit every year to reserve fund before declaration of any dividend. Accordingly, Bajaj Finance Ltd. (the ''Company'', ''Bajaj Finance'' or ''BFL) has transferred a sum of ? 1,271 crore to its reserve fund.

Pursuant to provisions of Companies Act, 2013 (the ''Act'') read with relevant rules thereunder, the Company, being a NBFC, is exempt from transferring any amount to debenture redemption reserve in respect of privately placed debentures including the requirement to invest up to 15% of the amount of debentures maturing during the next financial year. However, the Company maintains sufficient liquidity buffer to fulfill its obligations arising out of debentures. In case of secured debentures, an asset cover of over 100% is maintained at all times.

Dividend Distribution Policy

Pursuant to the provisions of regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the ''SEBI Listing Regulations''), the Company had formulated a dividend distribution policy, which sets out the parameters and circumstances to be considered by the Board in determining the distribution of dividend to its shareholders and/or retaining profit earned. The policy is annexed to this report and is also available on the website of the Company at https:// cms-assets.bajajfinserv.in/is/content/bajajfinance/dividend-distribution-policypdf?scl=1&fmt=pdf

Dividend

RBI vide its circular dated 24 June 2021 have laid down framework for declaration of dividend by NBFCs. Accordingly, the Board of Directors after taking into account various aspects and in compliance with the said circular, recommend for consideration of the members at the ensuing Annual General Meeting (''AGM''), payment of dividend of ? 20 per equity shares (1000%) of face value of ? 2. The total dividend for FY2022 is ? 1,211 crore.

The COVID-19 Pandemic

FY2022 was once again dominated by the COVID-19 pandemic as new waves of infection swept across countries. In India, the second wave (called ''Delta'') proved far more deadly than the first that struck in 2020.

The advent of the highly transmissible variant ''Omicron'' in early January 2022 (the third wave) spread much dread across the world. During this wave, India''s daily number of reported cases peaked to nearly 350,000 on 20 January 2022 and the active case load was over 22 million as on 23 January 2022. Fortunately, while highly transmissible, Omicron was not as clinically deadly as Delta. So, while many got infected, almost all got well again within a week or so, without hospitalisation and mortality.

The impact of the second and third wave of the pandemic on the performance of the Company and measures adopted to steer through this continuing crisis have been discussed in detail in Management Discussion and Analysis.

Working Results of the Company

The pandemic induced disruptions continued in FY2022 as well. The first half of FY2022 witnessed a significant impact of the deadly second (Delta) wave of the pandemic - impacting performance of both

business and debt management services. The third wave (Omicron) strain was more transmissible; however, its impact on BFL''s operation was limited.

Drawing from its experience of FY2020 and the fact that the lockdowns were curtailed in FY2022, the Company remained open for business with a nuanced strategy on acquisition and underwriting across all its businesses.

As a result, BFL recorded a 29% growth in assets under management or AUM (core AUM growth is 26%) and 59% growth in profit after tax on a consolidated basis in FY2022 versus 4% growth in AUM and 16% de-growth in profit after tax in FY2021. This was despite continued disruption in business and debt management services in the first half of the year, elevated level of credit cost and higher liquidity buffers. Return on average assets (ROAA) and return on average equity (ROAE) for FY2022 was 4.2% and 17.4% respectively on a consolidated basis.

The Company''s business model continues to generate healthy pre-impairment operating profits enabling it to withstand higher credit losses in times of stress such as these. It remains well capitalised with a capital-to-risk weighted asset ratio (CRAR) of 27.22% as on 31 March 2022 - making it among the best capitalised large NBFCs in India.

As a result of its deeply embedded risk culture and robust risk management practices, the Company''s portfolio quality as of 31 March 2022 continues to remain strong despite of repeated waves of COVID-19.

BFL''s consolidated Gross NPA at 1.60% and Net NPA at 0.68% are among the lowest in the industry.

Using its robust risk management and portfolio monitoring framework, BFL took enhanced credit costs based on emerging trends across its different portfolios. It holds a management overlay provision for macroeconomic factors and COVID-19 of ? 1,060 crore as on 31 March 2022.

The consolidated performance highlights for FY2022 are given below:

â¢ Number of new loans booked: 24.7 million

â¢ Core AUM grew by 26% to ? 192,087 crore

â¢ Total income increased by 19% to ? 31,640 crore

â¢ Net interest income (NII) rose by 27% to ? 21,892 crore

â¢ Total operating cost to NII stood at 34.6%

â¢ Loan losses and provisions was ? 4,803 crore

â¢ Profit before tax (PBT) increased by 59% to ? 9,504 crore

â¢ Profit after tax (PAT) increased by 59% to ? 7,028 crore

â¢ Capital adequacy ratio as of 31 March 2022 was 27.22%, which is well above the RBI norms.

Tier I adequacy ratio was 24.75%

With the experience of managing significant financial and operational disruption emanating from the pandemic, the transformational journey that BFL has embarked upon and the exit momentum of FY2022, the Company remains confident of a sound growth trajectory in FY2023 and thereafter and, hence, remain a leading NBFC in India.

For more details on the performance of the Company, business segments and risk management framework and initiatives, please refer Management Discussion and Analysis.

Operations

BFL is one of the largest and most diversified NBFCs in India. It has worked with approximately 57.6 million customers since it started its transformational journey in FY2008 from a mono-line captive lender to a diversified financial service business. During this period, the Company expanded its presence to 3,504 locations with a distribution network of over 133,200 points of sale and also created a strong presence in the digital space.

Further details regarding the operations, state of affairs and initiatives of the Company are given in the Management Discussion and Analysis.

Subsidiaries, Associates and Joint Ventures

The Company has two wholly owned subsidiaries, viz.,

i. Bajaj Housing Finance Ltd. (''BHFL'' or ''Bajaj Housing''), which is registered with National Housing Bank as a Housing Finance Company (''HFC''); and

ii. Bajaj Financial Securities Ltd. (''BFinsec''), which is registered with the Securities and Exchange Board of India C''SEBIâ) as a stockbroker and depository participant.

During FY2022, no new subsidiary was incorporated/acquired. The Company does not have any associate company, nor has it entered into a joint venture with any other company.

In terms of the said policy and provisions of regulation 16 of the SEBI Listing Regulations, BHFL is a material subsidiary of the Company.

Performance highlights of the subsidiaries are given below:

BHFL

â¢ AUM as at 31 March 2022 was ? 53,322 crore as compared to ? 38,871 crore as at 31 March 2021, representing a growth of 37%

â¢ Total income increased by 19% to ? 3,767 crore

â¢ NII rose by 36% to ? 1,612 crore

â¢ Total operating cost to NII stood at 29%

â¢ Impairment on financial instruments was ? 181 crore. BHFL holds a management overlay provision of ? 211 crore as of 31 March 2022 on account of COVID-19 related stress

â¢ Gross NPA and Net NPA were at 0.31% and 0.14%, respectively, amongst the lowest across all HFCs

â¢ PBT increased by 57% to ? 960 crore

â¢ PAT grew by 57% to ? 710 crore

â¢ As on 31 March 2022, capital adequacy ratio was 19.71%, which is well above the NHB norms of 15%

During FY2022, the Board has approved a capital infusion up to ? 2,500 crore to reduce leverage and fund accelerated growth of BHFL.

As on date of this report, the total investment in BHFL is approximately ? 7,528 crore.

BFinsec

â¢ The customer franchise as of 31 March 2022 was over 331,000

â¢ Total Income for FY2022 was ? 124 crore

â¢ PAT was ? 17 crore

In order to support BFinsec to augment its business growth, facilitate working capital requirements, and building proprietary trading book, the Company infused capital to the tune of ? 400 crore.

The total investment in BFinsec as on 31 March 2022 is approximately ? 670 crore.

For more detailed discussion on the performance of the subsidiaries and their various segments, refer to the Management Discussion and Analysis.

A separate statement containing the salient features of the subsidiaries in the prescribed form AOC-1 is attached to the standalone financial statements.

Bajaj Finserv Direct Ltd. (''BFS-Direct'')

BFS-Direct is primarily engaged in business of distribution of financial products through its digital marketplace. BFS-Direct is registered with Insurance Regulatory and Development Authority of India as a composite Corporate Agent for distribution of insurance (life and general) products in India.

During FY2022, the Company along with Bajaj Finserv Ltd., holding company made joint investments in the form of Equity shares and/or Convertible Loan or Security into Equity Shares for an aggregate amount of ? 283.16 crore. Out of this, investment in equity share capital of BFS-Direct stands at ? 2.69 crore representing 19.90% of its capital.

It may be noted that BFS-Direct is neither a subsidiary nor an associate of the Company.

Details of investment made in BFS-Direct also forms part of the financial statements.

Customer Engagement

To strengthen the customer engagement and monitoring process, the Board of Directors have voluntarily constituted a Customer Service Committee, in line with the requirements applicable to Banks. It is headed by an Independent Director. The Committee consists of following Board members:

1. Pramit Jhaveri - Chairman, non-executive, independent

2. Dr. Naushad Forbes - Member, non-executive, independent

3. Sanjiv Bajaj - Member, non-executive, non-independent

4. Rajeev Jain - Member, executive, non-independent

The terms of reference are:

â¢ To oversee and guide implementation of service enhancement initiatives across the Company.

â¢ To review grievance redressal and issues bearing on the quality of services rendered by the Company to its customers, adherence to the Fair Practices Code, review of awards under Ombudsman scheme and implementation of the internal ombudsman policy.

The Committee shall endeavor to meet at least once every six months.

In addition, the Company has in place a Consumer Grievance and Protection Committee consisting of Senior Executives of the Company, inter alia, to conduct root cause analysis for complaints and oversee the measures taken for grievance redressal of customers.

The initiatives of the Company towards customer engagement are detailed in the Management Discussion and Analysis.

Risk Management

During the year under review, a revised Risk Management Policy/framework was adopted by the Board.

This framework, inter alia, provides for principles of risk management, risk governance, organisation structure, business control measures, principle risks and business continuity plan. The Management identifies and controls risks through a defined framework in terms of the aforesaid policy.

The Company continued to closely monitor new acquisitions and product portfolios to navigate through the second and third waves of COVID-19 during the year and maintain risk metrics at pre-covid levels.

Further, in Q3 FY2022, the Company has changed its NPA classification criteria from number of EMI outstanding to Days Past Due approach in line with the RBI circular dated 12 November 2021 - ''Prudential norms on Income Recognition, Asset classification and provisioning pertaining to advances- Clarification''.

This change did not cause any negative impact on the Company''s Gross Non-Performing Asset.

The current composition of Risk Management Committee (''RMC'') is as follows: Anami N Roy, Chairman of the Committee (Independent Director), Sanjiv Bajaj (non-executive, non-independent director), Pramit Jhaveri (Independent Director), Rajeev Jain (Managing Director), Fakhari Sarjan (Chief Risk Officer), Sandeep Jain (Chief Financial Officer) and Deepak Bagati (President - Debt Management Services). Further details on RMC is furnished in Corporate Governance Report.

More detailed discussion on the Company''s risk management and portfolio quality is covered in the Management Discussion and Analysis.

Business Continuity and Cyber Security

The Company continues to leverage its technological capabilities and operate in a hybrid model based on business roles and requirements. Multiple facilities like virtual private networks, laptops for employees, higher bandwidth availability and digital collaboration platforms etc. have enabled and facilitated operations in the ''Work-from-Home'' protocol where required. The Company continues to offer remote access for identified IT vendors/partners to enable full resources for user support, data centre support, application maintenance and testing. All key IT systems are compliant to ISO 22301 Business Continuity Standard. Simultaneously, the Company has initiated a phase-wise launch of its 3-in-1 application and continues its journey to become a digital organisation.

Public awareness campaign âSavdhan Rahein. Safe Rahein was launched across digital and social media platforms to educate customers and the public at large on financial fraud risks and how to stay protected. Employees of the Company are required to undergo a mandatory online learning module on information security and affirm that they have understood these and are aware of the protocols to be followed. Regular information security related mailers are sent to all employees for awareness and training purpose.

The Company will continue its focus on security monitoring and incident response through its security operations center.

A detailed discussion on information systems, cyber security and information technology is covered under Management Discussion and Analysis.

Directors and Key Managerial Personnel (''KMP'')

A. Change in Directorate

i. Resignation:

Dr. Omkar Goswami with effect from 9 July 2021, and Ranjan Sanghi and Dr. Gita Piramal with effect from close of business hours on 30 April 2022 resigned as non-executive independent director of the Company. The Board places on record its sincere appreciation for the valuable contribution made by them during their tenure on the Board.

ii. Appointment:

â¢ On recommendation of Nomination and Remuneration Committee (''NRC''), the Board has appointed Pramit Jhaveri as an independent director of the Company for a period of five consecutive years effective 1 August 2021. Further, shareholders have approved his appointment through a postal ballot on 17 November 2021.

The Board is of the opinion that Pramit Jhaveri is a person of integrity, expertise, and has competent experience to serve the Company as an independent director.

Pramit Jhaveri served as CEO of Citibank N.A. for over a decade. However, this position not being one of the categories exempting such persons from appearing in proficiency test as per Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended, he will undertake the test within the prescribed time limit.

â¢ The Board, at its meeting held on 26 April 2022, based on the recommendation of NRC, appointed Radhika Haribhakti as an additional director and independent director for a period of five consecutive years with effect from 1 May 2022.

The Board is of the opinion that Radhika Haribhakti is a person of integrity, expertise, and has relevant experience to serve the Company as an independent director.

iii. Retirement:

Dipak Poddar ceased to be a Director of the Company from the close of business hours on 31 March 2022, upon completion of his second term as an independent director.

The Board places on record its sincere appreciation for the valuable service and contribution made by him during his long association with the Company.

B. Directors liable to retire by rotation

Rajeev Jain retires by rotation at the ensuing AGM, being eligible, offers himself for re-appointment.

Brief details of Rajeev Jain, who is seeking re-appointment, are given in the Notice of AGM.

C. KMPs

There was no change in the KMPs of the Company during FY2022.

Declaration by Independent Directors

The independent directors have submitted a declaration of independence, stating that they meet the criteria of independence provided under section 149(6) of the Act read with regulation 16 of the SEBI Listing Regulations, as amended. The independent directors have also confirmed compliance with the provisions of rule 6 of Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended, relating to inclusion of their name in the databank of independent directors.

Policy on Directors'' Appointment and Remuneration

On recommendation of the NRC, the Board has framed a Remuneration Policy. This policy, inter alia, provides

(a) The criteria for determining qualifications, positive attributes and independence of directors; and

(b) Policy on remuneration of directors, key managerial personnel and other employees.

The policy is directed towards a compensation philosophy and structure that will reward and retain talent; and provides for a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.

The Remuneration Policy is available on the Company''s website and can be accessed at https://cms-assets. bajajfinserv.in/is/content/bajajfinance/remuneration-policypdf?scl=1&fmt=pdf

Compliance with Code of Conduct

All Board members and senior management personnel have affirmed compliance with the Company''s Code of Conduct for FY2022.

A declaration to this effect signed by the Managing Director is included in this Annual Report.

Annual Return

Number of Meetings of the Board

Six (6) meetings of the Board were held during FY2022. Details of the meetings and attendance thereat forms part of the Corporate Governance Report.

Directors'' Responsibility Statement

The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) under historical cost convention on accrual basis except for certain financial instruments, which are measured at fair values pursuant to the provisions of the Act and guidelines issued by SEBI/RBI. Accounting policies have been consistently applied except where a newly issued Accounting Standard is initially adopted or a revision to an existing Accounting Standard requires a change in the accounting policy. These form a part of the Notes to the financial statements.

In accordance with the provisions of section 134(3) (c) of the Act and based on the information provided by the Management, the directors state that:

i. in the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

iv. they have prepared the annual accounts on a going concern basis;

v. they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

Audit Committee

During the year under review, consequent to resignation of Dr. Omkar Goswami, the Audit Committee was re-constituted to induct Anami N Roy as member and Chairman in his place. Further, Pramit Jhaveri was inducted as member of the Committee effective 1 August 2021.

The present composition of the Committee is Anami N Roy as Chairman and Sanjiv Bajaj, Dr. Naushad Forbes and Pramit Jhaveri as other members.

During FY2022, all recommendations of the Audit Committee were accepted by the Board.

The brief terms of reference and attendance record of members are given in the Corporate Governance Report.

Particulars of Loans, Guarantees and Investments

The Company, being an NBFC registered with the RBI and engaged in the business of giving loans in ordinary course of its business, is exempt from complying with the provisions of section 186 of the Act with respect to loans and guarantees. Accordingly, the disclosures of the loans given as required under the aforesaid section have not been made in this Report.

In addition to investment in subsidiaries and group companies which is covered above, details of major investments in other companies are under:

1. One MobiKwik Systems Ltd. (''MobiKwik''):

Pursuant to a commercial agreement with MobiKwik, the Company was allotted 15,389 compulsorily convertible cumulative preference shares, in tranches, against receivables aggregating approximately to ? 15.67 crore. Total investment in MobiKwik as on 31 March 2022 is approximately ? 296.89 crore.

Further, MobiKwik sub-divided equity shares of face value of ? 10 to face value of ? 2 and issued bonus shares in the ratio of 1:3.

The total equity shares held by the Company in MobiKwik is 7,979,440 equity shares (post giving effect to sub-division and bonus) representing 13.95% of its capital on a fully diluted basis.

During FY2022, MobiKwik has received in-principle approval from SEBI in respect of an Initial Public Offer (IPO). The IPO size is ? 1,900 crore, out of which the Offer for Sale (OFS) pool is approximately ? 400 crore. The Company has expressed its intention to participate in the OFS to the extent permissible under SEBI Regulations.

2. RBL Bank Ltd.:

The Company continues to stay invested in RBL Bank Ltd. Information regarding investments covered under the provisions of section 186 of the Act is detailed in the financial statements.

Employee Stock Options (''ESOP'')

The Company offers stock options to select employees to foster a spirit of ownership and an entrepreneurial mindset. Because of their nature, stock options help to build a holistic, long-term view of the business and a sustainability focus in the senior management team. Stock options are granted to tenured employees in managerial and leadership positions upon achieving defined thresholds of performance and leadership behaviour. This has contributed to the active involvement of the leadership and senior team who are motivated to ensure long-term success of the Company. Grant of stock options also allow the Company to be conservative in awarding fixed pay, balance short-term incentives with risk considerations and build the focus on consistent long-term results.

During FY2022, number of options that could be granted under the scheme was enhanced by 10,000,000 stock options convertible into 10,000,000 equity shares of the face value of ? 2 fully paid-up. Total option that could be granted under the scheme stands revised from 25,071,160 options (adjusted for sub-division and bonus) to 35,071,160 options. The treatment of unvested and vested options at the time of retirement has also been amended during the year under review.

A statement giving complete details, as at 31 March 2022, under regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, is available on the website of the Company and can be accessed at https://www.bajajfinserv.in/finance-investor-relation-annual-reports

The Employee Stock Option Scheme, 2009 adopted by the Company is in line compliance with provisions of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

Grant wise details of options vested, exercised and cancelled are provided in the notes to the standalone financial statements.

The Company has not issued any sweat equity shares or equity shares with differential voting rights during FY2022.

Share Capital

During FY2022, 2,841,894, equity shares, at applicable grant prices, were allotted to BFL Employee Welfare Trust under the BFL Employee Stock Options Scheme, 2009.

As on 31 March 2022, the paid-up share capital of the Company stood at ? 121.09 crore consisting of 605,429,233 equity shares of face value of ? 2 fully paid-up.

Related Party Transactions

All contracts/arrangement/transactions entered by the Company during FY2022 with related parties were in compliance with the applicable provisions of the Act and SEBI Listing Regulations. Prior omnibus approval of the Audit Committee is obtained for all related party transactions which are foreseen and of repetitive nature. Pursuant to the said omnibus approval, details of transaction entered into is also reviewed by the Audit Committee on a quarterly basis.

All related party transactions entered during FY2022 were on arm''s length basis and not material under the Act and SEBI Listing Regulations. None of the transactions required members'' prior approval under the Act or SEBI Listing Regulations.

Details of transactions with related parties during FY2022 are provided in the notes to the financial statements. There were no transaction requiring disclosure under section 134(3)(h) of the Act. Hence, the prescribed Form AOC-2 does not form a part of this report.

The policy on materiality of related party transactions and on dealing with related party transactions was amended in line with SEBI (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021. The policy is available on the website of the Company at https://cms-assets. bajajfinserv.in/is/content/bajajfinance/policy-of-materiality-and-dealing-with-related-party-transactionpdf?scl=1&fmt=pdf and also forms a part of the Corporate Governance Report.

Material Changes and Commitments

There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year and the date of this report.

Conservation of Energy

Technology Absorption

The details pertaining to technology absorption have been explained in the Management Discussion and Analysis.

Foreign Exchange Earnings and Outgo

During FY2022, the Company did not have any foreign exchange earnings and the foreign exchange outgo in terms of actual outflow amounted to ? 177.04 crore.

Corporate Social Responsibility (''CSR'')

The CSR Committee comprises of three directors viz., Dr. Naushad Forbes, Sanjiv Bajaj and Rajeev Jain.

The Board at its meeting held on 26 October 2021 has appointed Dr. Naushad Forbes as Chairman of the Committee with effect from 27 October 2021.

The CSR obligation of the Company for FY2022 is ? 120.89 crore (after adjustment). As on 31 March 2022, total amount spent on CSR activities by Company is ? 60.01 crore.

Some part of the mandatory obligations for FY2022 remained unspent as the funding for ongoing projects were delayed/reduced on account of COVID-19 pandemic and lockdowns. Besides, few pertaining to COVID relief did not require anticipated funds as the third wave was not as severe as estimated, thereby requiring it to be transferred to an Unspent Corporate Social Responsibility Account. Accordingly, the Company has opened necessary bank account to transfer unspent amount of ? 60.88 crore.

Detailed information on CSR Policy, its salient features, CSR initiatives undertaken during the year, details pertaining to spent and unspent amount forms part of Annual Report on CSR activities.

The CSR policy has been hosted on the website of the Company and can be accessed at https://cms-assets. bajajfinserv.in/is/content/bajajfinance/corporate-social-responsibilitypdf?scl=1&fmt=pdf

Further, Chief Financial Officer has certified that the funds disbursed have been utilised for the purpose and in the manner approved by the Board for FY2022.

Formal Annual Evaluation

Pursuant to section 178 of the Act, the NRC and the Board has decided that the evaluation shall be carried out by the Board only and the NRC will only review its implementation and compliance.

Further, as per Schedule IV of the Act and provisions of SEBI Listing Regulations, the performance evaluation of independent directors shall be done by the entire Board excluding the directors being evaluated, on the basis of performance and fulfillment of criteria of independence and their independence from Management. On the basis of the report of the performance evaluation, it shall be determined whether to extend or continue the term of appointment of independent director.

Accordingly, the Board has carried out an annual performance evaluation of its own performance, that of its Committees, Chairperson and individual directors.

The manner in which formal annual evaluation of performance was carried out by the Board for the year 2021-22 is given below:

â¢ The NRC at its meeting held on 19 May 2020, reviewed the criteria for performance evaluation.

The criteria is available on the website of the Company at https://cms-assets.bajajfinserv.in/is/content/

bajajfinance/performance-evaluation-criteria-for-board-committees-of-board-chairperson-and-

directorspdf?scl=1&fmt=pdf

â¢ From the individual ratings received from the directors, a report on summary of ratings in respect of performance evaluation of the Board, its Committees, Chairperson and individual directors for the year 2021-22 and a consolidated report thereof were arrived at.

â¢ The report of performance evaluation so arrived at was then discussed and noted by the Board at its meeting held on 14 March 2022.

â¢ The NRC reviewed the implementation and compliance of the performance evaluation at its meeting held on 14 March 2022.

â¢ Based on the report and evaluation, the Board and NRC at their respective meetings held on 14 March 2022, determined that the appointment of all independent directors may continue.

â¢ Details on the evaluation of Board, non-independent directors and Chairperson of the Company as carried out by the independent directors at their separate meeting held on 14 March 2022 have been furnished in a separate paragraph elsewhere in this report.

â¢ During FY2022, the criteria and process followed by the Company was reviewed by the NRC, which opined these to be satisfactory.

Other than Chairman of the Board and NRC, no other Director has access to the individual ratings given by directors.

Significant and Material Orders

During FY2022, there were no significant or material orders passed by any regulator or court or tribunal impacting the going concern status and Company''s operations in future.

Internal Financial Controls

Deposits

The Company accepts deposits from retail and corporate clients. As on 31 March 2022, it had a standalone deposit book of ? 30,289.52 crore, delivering an annual growth of 17.39% in FY2022. Deposits contributed to 24.62% of BFL''s standalone borrowings versus 25.84% as at the end of FY2021.

The consolidated deposits book as on 31 March 2022 stood at ? 30,800 crore, delivering an annual growth of 19% in FY2022. Deposit contributed to 19% of its consolidated borrowings as on versus 20% at the end of FY2021.

During FY2022, the Company accepted public deposits of ? 9,264.53 crore. Public deposits outstanding as at the end of the year aggregated to ? 21,184.07 crore.

Pursuant to provisions of the RBI Act, 1934, the Company has created a charge on statutory liquid assets amounting to ? 3,910.12 crore in favour of the trustee for Fixed Deposit (''FD'') holders.

During FY2022, the Company accepted corporate deposits (CDs) of ? 17,383.16 crore. CDs outstanding as on 31 March 2022 were ? 4,253.48 crore.

During FY2022, the Company accepted other deposits of ? 4,094.15 crore. Other deposit outstanding as on 31 March 2022 were ? 4,851.58 crore.

During FY2022, there was no default in repayment of deposits or payment of interest thereon.

With a view to reduce unclaimed amount of fixed deposits, the Company adopted the following process:

â¢ Wherever payment of deposit amount and interest thereon is rejected by bank of the deposit holder, Customer Service Team calls the depositor to inform about rejection reason and advise them the process for change of linked bank account;

â¢ In addition, SMS/Email/Physical letter are also sent to depositors to inform them of rejection reason(s) and advise them to initiate appropriate action for change of bank details;

â¢ In case of death of depositors, claim settlement process is advised to joint depositors/nominee/legal heir, as the case may be;

â¢ Wherever the residential status of the depositors has changed from Resident to Non-Resident, they are advised to submit updated FATCA/CRS declaration and to get their bank details updated; and

â¢ Assistance of Risk Containment Unit is sought to seek whereabouts of the customer, wherever latter remains untraceable.

As on 31 March 2022, there were 23 FDs amounting to ? 33.96 lakh which had matured and remained unclaimed and interest on matured deposits amounting to ? 1.89 lakh and interest on active deposits amounting to ? 2.94 lakh had also remained unclaimed.

Borrowings

During FY2022, the Company has increased the borrowing limit from ? 160,000 crore to ? 225,000 crore vide special resolution passed by the members on 2 March 2022.

The total borrowing as on 31 March 2022 is ? 123,040.25 crore. The breakup of the same is as under:

Particulars

Deposits

Bank Loans (TL/CC/OD/ WCDL)

Non

Convertible

Securities

Subordinate

Debt

Short-term

Borrowings

External

Commercial

Borrowing

Amount in crore)

30,289.52

22,348.78

52,608.53

3,845.77

8,425.21

5,522.44

% to total borrowing

25%

18%

43%

The Company had established a Secured Euro Medium Term Note Programme for USD 1.5 billion listed on Singapore Exchange Securities Trading Ltd. during FY2020, to be utilised over a period.

Credit Rating

S&P Global Ratings have revised the credit rating outlook of the Company to ''Positive'' from ''Stable'' while reaffirming the Long-Term Rating at ''BB '' and Short-Term Rating at ''B'' on 30 March 2022 on the ground of Company''s continued sound financial performance.

The brief details of the ratings received from credit rating agencies by the Company for all its outstanding instruments is given in General Shareholder Information.

Whistle Blower Policy/Vigil Mechanism

The Company has a Whistle Blower Policy encompassing vigil mechanism pursuant to the requirements of the section 177(9) of the Act and regulation 22 of the SEBI Listing Regulations. The whistle blower framework has been introduced with an aim to provide employees, directors and value chain partners with a safe and confidential channel to share their inputs about such aspects which are adversely impacting their work environment. The policy/vigil mechanism has been revised recently and enables directors, employees and value chain partners to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company''s Code of Conduct or ethics policy and leak or suspected leak of unpublished price sensitive information.

The concerns may be reported anonymously either through email or through a ''Confidential Feedback Mechanism'', which is reviewed by a Whistle Blower Committee comprising senior management representatives from within and outside the organisation. The Audit Committee reviews the functioning of the vigil mechanism/Whistle Blower Policy once a year.

The Whistle Blower Policy is uploaded on the website of the Company and can be accessed at https://cms-assets.bajajfinserv.in/is/content/bajajfinance/whistle-blower-policy-v2pdf?scl=1&fmt=pdf

More details are given in Corporate Governance Report.

Independent Directors'' Meeting

Pursuant to the Act and SEBI Listing Regulations, the independent directors must hold at least one meeting in a financial year without attendance of non-independent directors and members of the Management. Accordingly, independent directors of the Company met on 14 March 2022 and:

â¢ noted the report of performance evaluation from the Chairman of the Board for the year 2021-22;

â¢ reviewed the performance of non-independent directors and the Board as a whole;

â¢ reviewed the performance of the Chairman of the Board, taking into account the views of executive directors and non-executive directors; and

The independent directors present elected Dr. Naushad Forbes as Chairman for the meeting. All independent directors were present at the meeting, except Dr. Gita Piramal to whom the leave of absence was granted.

In addition, the independent directors have a separate meeting with the senior management team (SMT), during which the SMT is encouraged to express its views and concerns pertaining to the business. Suggestions from the directors are noted by the Management.

RBI Guidelines

The Company continues to fulfil all the norms and standards laid down by RBI pertaining to non-performing assets, capital adequacy, statutory liquidity assets, etc. As against the RBI norm of 15%, the capital to risk-weighted assets ratio of the Company was 27.22% as on 31 March 2022. In line with the RBI guidelines for asset liability management (ALM) system for NBFCs, the Company has an asset liability committee, which meets monthly to review its ALM risks and opportunities. Further, BFL exceeds the regulatory requirement of liquidity coverage ratio (LCR) introduced by the RBI in FY2020. As against the LCR requirement of 60%, BFL''s LCR as on 31 March 2022 was 134%.

The Company continues to be in compliance with the Master Direction for Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.

Corporate Governance

The Managing Director and the Chief Financial Officer have certified to the Board in relation to the financial statements and other matters as specified in the SEBI Listing Regulations.

A certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Business Responsibility and Sustainability Report (''BRSR'')

Pursuant to amendment in SEBI Listing Regulations, top 1,000 listed entities based on market capitalisation are required to submit a BRSR with effect from the FY2023. However, these top 1,000 listed entities may voluntarily adopt to submit the BRSR for FY2022 in place of Business Responsibility Report.

Accordingly, the Company has adopted a Policy on BRSR and other ESG initiatives. A detailed BRSR in the format prescribed by SEBI describing various initiatives, actions and process of the Company towards the ESG endeavor has been hosted on Company''s website and can be accessed at https://www.bajajfinserv.in/ finance-investor-relation-annual-reports

Secretarial Standards of ICSI

The Company has complied with the requirements prescribed under the Secretarial Standards on meetings of the Board of Directors (SS-1) and General Meetings (SS-2) read with the MCA circulars granting exemptions in view of the COVID-19 pandemic.

Internal Audit

The internal audit function provides an independent view to the Board of Directors, the Audit Committee and the Senior Management on the quality and efficacy of the internal controls, governance systems and processes. In line with the RBI''s guidelines on Risk Based Internal Audit, the Company has adopted a Risk Based Internal audit policy.

At the beginning of each financial year, an audit plan is rolled out after approval of the Audit Committee. Pursuant to Risk Based Internal Audit Framework, internal audit is aligned in such a manner that assurance is provided to the Audit Committee and Board of Directors on quality and effectiveness of the internal controls, and governance related systems and processes.

The Audit Committee regularly reviews the internal audit reports and the adequacy and effectiveness of internal controls. Significant audit observations, corrective and preventive actions thereon are presented to the Audit Committee on a quarterly basis.

Statutory Auditors

Reserve Bank of India, through its circular dated 27 April 2021, issued Guidelines for Appointment of Statutory Auditors (the ''Guidelines''/''circular''), mandating NBFCs (including HFCs) with an asset size of ? 15,000 crore and above to appoint minimum two audit firms as joint auditors for a continuous period of three years. Further, the Guidelines also specifies that an auditor who has completed a period of three years (counted as one tenure) as on the date of the circular shall not be eligible for re-appointment in the same entity for six years (two tenures) after completion of one tenure of three years. Subsequently, the RBI had also released Frequently Asked Questions (FAQs) dated 11 June 2021, inter alia, clarifying that the existing statutory auditors who have completed three years with an entity would not be able to continue as auditors with effect from second half of FY2022, even though they may not have completed their present tenure as approved by the Members of the said entity.

In terms of section 139 of the Act, S R B C & CO LLP, Chartered Accountants, (Firm Registration No. 324982E/ E300003) (''SRBC'') were appointed as Statutory Auditors of the Company for a period of five consecutive years to hold office from the conclusion of the 30th AGM of the Company till the conclusion of the 35th AGM.

Given the RBI guidelines stated above, SRBC being ineligible to continue as Statutory Auditors of the Company for FY2022, and had, therefore, tendered their resignation effective from 13 November 2021.

In line with the RBI requirements, the Board of Directors, based on the recommendation of the Audit Committee, at their meeting held on 16 September 2021, have proposed the appointment of Deloitte Haskins & Sells, Chartered Accountants, (Firm Registration No. 302009E) (''Deloitte'') and G. M. Kapadia & Co., Chartered Accountants, (Firm Registration No.104767W) (''G. M. Kapadia'') as Joint Statutory Auditors for a period of 3 years to conduct audit of the financial statements of the Company for the financial years 2022, 2023 and 2024.

Pursuant to the provisions of section 139(8) of the Act, members of the Company have approved appointment of Deloitte and G. M. Kapadia as Joint Statutory Auditors effective 17 November 2021 till conclusion of 35th AGM. In the ensuing AGM, approval of the members is being sought for their appointment as Joint Statutory Auditor for remaining two terms from the conclusion of the 35th AGM till the conclusion of the 37th AGM for the financial year ending 31 March 2023 and 31 March 2024 respectively.

The audit report given by Deloitte and G.M. Kapadia, Joint Statutory Auditors for FY2022 is unmodified, i.e., it does not contain any qualification, reservation or adverse remark or disclaimer.

In terms of the RBI Master Directions - Non-Banking Financial Companies Auditors'' Report (Reserve Bank) Directions, 2016, the previous auditors have also submitted an additional report dated 17 July 2021, for FY2021 which has been filed with RBI. There were no comments or adverse remarks in the said report as well.

Secretarial Auditor

A report from the secretarial auditor in the prescribed Form MR-3 is annexed to this Report.

In addition, secretarial audit report pursuant to section 204 of the Act for BFinsec, a non-material subsidiary is also annexed herewith.

Pursuant to regulation 24A(2) of SEBI Listing Regulations, a report on secretarial compliance for FY2022 has been issued by Shyamprasad D. Limaye and the same will be submitted with the stock exchanges within the given timeframe. The report will be made available on the website of the Company.

There are no observations, reservations or qualifications or adverse remark in any of the aforesaid reports.

Other Statutory Disclosures

â¢ The financial statements of the Company and its subsidiaries are placed on the Company''s website at https://www.bajajfinserv.in/finance-investor-relation-annual-reports

â¢ Details required under the provisions of section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, containing, inter alia, the ratio of remuneration of directors to median remuneration of employees, percentage increase in the median remuneration, are annexed to this Report.

section 136(1) of the Act.

â¢ The auditors, i.e., statutory auditors and secretarial auditors have not reported any matter under section 143(12) of the Act, and therefore, no details are required to be disclosed under section 134(3)(ca) of the Act.

â¢ The provision of section 148 of the Act relating to maintenance of cost records and cost audit are not applicable to the Company.

â¢ The Company has a policy on prevention of sexual harassment at the workplace. The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The number of complaints received, disposed off and pending during FY2022 is given in the Corporate Governance Report.

â¢ There is no change in the nature of business of the Company during FY2022.

â¢ The securities of the Company were not suspended from trading during the year on account of corporate actions or otherwise.

â¢ The Company has not defaulted in repayment of loans from banks and financial institutions. There were no delays or defaults in payment of interest/principle of any of its debt securities.

â¢ During FY2022, the Company has issued non-convertible debenture to the tune of ? 16,650 crore and redeemed non-convertible debentures and subordinate debt to the tune of ? 2,182 crore and

? 50 crore respectively.

â¢ The Managing Director, as per the terms of his appointment, does not draw any commission or remuneration from subsidiary company. Hence, no disclosure as required under section 197(14) of the Act has been made.

â¢ As on 31 March 2022, there is no amount remaining unclaimed in respect of non-convertible debentures.

â¢ Neither any application was made, nor any proceeding is pending under the Insolvency and Bankruptcy Code, 2016 against the Company.

â¢ During FY2022, there was no instance of one-time settlement with Banks or Financial Institutions. Therefore, as per rule 5(xii) of Companies (Accounts) Rules, 2014, reasons of difference in the valuation at the time of one-time settlement and valuation done while taking loan from the Banks or Financial Institutions are not reported.

â¢ Disclosures pursuant to RBI Master Directions, unless provided in the Directors'' Report, form part of the notes to the standalone financial statements.

Acknowledgement

The Board of Directors also places on record its sincere appreciation for the commitment and hard work put in by the Management and the employees of the Company and its subsidiaries and thanks them for yet an excellent year of performance.

On behalf of the Board of Directors

Sanjiv Bajaj Chairman

Pune: 26 April 2022

Mar 31, 2021

At the outset, your Company''s (BFL) Board of directors commiserates with the families of all employees, shareholders and others who succumbed to this dreadful COVID-19 pandemic.

Your directors present the thirty-fourth Annual Report along with the audited standalone and consolidated financial statements for FY2021. This report read with the Management Discussion and Analysis include details of the macro-economic scenario, Company''s performance, various initiatives taken by the Company as well as its approach to risk management.

Circulation of Annual Reports in electronic form

Pursuant to Ministry of Corporate Affairs'' (''MCA'') circulars dated 8 April 2020, 13 April 2020, 5 May 2020 and 13 January 2021, read with SEBI Circulars dated 12 May 2020 and 15 January 2021, relaxation has been granted to the companies in respect of sending physical copies of annual report to shareholders and requirement of proxy for general meetings held through electronic mode till 31 December 2021.

Accordingly, the financial statements (including Boards'' Report, Corporate Governance Report, Management Discussion and Analysis, Auditors'' Report and other documents to be attached therewith) are being sent only through electronic mode to those shareholders whose email addresses are registered with the Company''s Registrar and Share Transfer Agent viz.,

KFin Technologies Private Limited (''KFin'')/Depository Participants, and whose names appear in the register of members as on Friday, 18 June 2021. The Company has also made arrangements for those shareholders who have not yet registered their email address to get these registered by following the procedure prescribed in the notice of Annual General Meeting (AGM).

The Annual Report for FY2021 is also available on the website of the Company at https://www.bajajfinserv.in/finance-investor-relation-annual-reports.

Financial results

The highlights of the standalone financial results are given below

Particulars	FY2021	FY2020	(H In Crore) % change over FY2020

Total income	23,546	23,834	(1)
Interest and finance charge	7,446	7,857	(5)
Net interest income	16,100	15,977	1
Total operating expenses	5,016	5,364	(6)
Pre-provisioning operating profit	11,084	10,613	4
Impairment on financial instruments	5,721	3,805	50
Profit before tax	5,363	6,808	(21)
Profit after tax	3,956	4,881	(19)

Retained earnings as at the beginning of the year	10,349	7,612	36
Profit after tax	3,956	4,881	(19)
Other comprehensive income on defined benefit plan	(26)	(25)	(0)
Retained earnings before appropriations	14,279	12,468	15
Appropriations
Transfer to reserve fund u/s 45-IC(1) of the RBI Act, 1934	(792)	(977)	(19)
Dividend paid	-	(950)
Tax on dividend	-	(195)
Adjustment of dividend to ESOP Trust	-	3
Retained earnings as at the end of the year	13,487	10,349	30
Due to rounding off, numbers presented in above table may not add up precisely to the totals provided.

Transfer to reserve fund

Under section 45-IC(1) of Reserve Bank of India Act, 1934, non-banking financial companies (NBFCs) are required to transfer a sum not less than 20% of its net profit every year to reserve fund before declaration of any dividend. Accordingly, the Company has transferred a sum of H 792 crore to its reserve fund.

Vide amendment dated 5 June 2020 to the Companies (Share Capital and Debenture) Rules, 2014, (the ''Rules'') the requirement to invest upto 15% of the amount of debentures maturing during the next financial year, in case of privately placed debentures, has been done away with. Further, in terms of the provisions of the Companies Act, 2013 (the ''Act'') and the Rules, the Company, being a NBFC, is exempt from transferring any amount to debenture redemption reserve in respect of privately placed debentures.

Dividend distribution policy

Pursuant to the provisions of regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the ''SEBI Listing Regulations''), the Company had formulated a dividend distribution policy. The Board, at its meeting held on 15 March 2021, amended the said policy. In terms of the amendment, the Board will endeavour to maintain a dividend pay-out in the range of 15% to 25% of the profit after tax on a standalone basis. Prior to the amendment, the pay-out was up to 15%. The revised policy is annexed to this report and is also available on the website of the Company at https://www.bajajfinserv.in/media/finance/downloads/dividend-distribution-policy.pdf.

Dividend

The directors recommend, for consideration of the members at the ensuing AGM, payment of dividend of H 10 per equity shares (500%) of face value of H 2. The total dividend for FY2021 is H 602.59 crore.

The dividend recommended is in accordance with the principles and criteria set out in the dividend distribution policy.

Dividend paid for FY2020 was H 10 per equity share (500%) of face value of H 2. The amount of dividend and tax thereon aggregated to H 725.37 crore.

In view of the amendment to the Income Tax Act, 1961 through the Finance Act, 2020, imposition of dividend distribution tax has been abolished. The dividend, if declared, at the ensuing AGM will be taxable in the hands of the members of the Company. For further details on taxability, please refer Notice of AGM.

COVID-19 pandemic

The COVID-19 pandemic which is a once in a lifetime occurrence has brought with it an unimaginable suffering to people and to almost all sections of the economy. The nationwide lockdowns to curtail the transmission of disease, had put the global economy in extreme stress of the level not seen since the Great Depression and would have a long-lasting economic impact.

The dynamic and evolving nature of the pandemic with its resurgence (second wave) at the close of the year once again creates uncertainty, including economic impact. Hopefully, the outreach of vaccination drives across the country, additional efforts to set up medical infrastructure and obtain required medical supplies, in addition to continued adherence to COVID-19 specific protocols will help in overcoming this testing situation.

Like the greater economy, the pandemic coupled with the lockdown and relief measures provided by RBI had a bearing on the performance of the Company. The impact of the above on the performance of the Company and the measures adopted by the Company to steer through the pandemic have been discussed in detail in Management Discussion and Analysis.

Working results of the Company

The performance of the Company was impacted due to the COVID-19 pandemic resulting in marginal growth in consolidated Assets Under Management (''AUM'') by 4% and a degrowth in the consolidated profit after tax by 16%. FY2021 was earmarked by lower acquisition volumes, higher liquidity buffers and increased recovery costs. Despite the challenges, the Company once again demonstrated the resilience of its business model which generates strong pre-impairment profitability to absorb higher losses resulting from the crisis.

BFL maintained a conservative stance on volumes as post-lockdown restrictions were gradually lifted till August 2020.

The conservative stances were maintained considering extended moratoriums, disruption in economic activity, weakened portfolio quality and collections, and absence of updated customer bureau data.

Consolidated Performance highlights for FY2021 are as below

Number of new loans booked: 16.88 million

AUM grew by 4% to H 152,947 crore

Total income increased by 1% to H 26,683 crore

Net interest income (NII) rose by 2% to H 17,269 crore

â¢ Total operating cost to NII improved to 30.7% from 33.5% in FY2020

Loan losses and provisions was H 5,969 crore. During FY2021, the Company has done accelerated write-offs of H 3,500 crore of principal outstanding on account of COVID-19 related stress and advancement of its write-off policy.

The Company holds a management overlay and macro provision of H 840 crore as of 31 March 2021

BFL''s Gross NPA and Net NPA stood at 1.79% and 0.75%, respectively - amongst the lowest across all NBFCs.

The Company''s loan book continued to remain strong because of its deeply embedded risk culture and robust risk management practices

Profit before tax (PBT) decreased by 18% to H 5,992 crore Profit after tax (PAT) decreased by 16% to H 4,420 crore

Capital adequacy ratio as of 31 March 2021 was 28.31%, which is well above the RBI norms. Tier I adequacy ratio was 25.11%

For more details on the performance of the Company, its products and risk management framework and initiatives, please refer to Management Discussion and Analysis.

Operations

BFL, being one of the largest and most diversified NBFCs in India has transformed itself from a mono-line captive lender to a diversified financial service business.

The Company was amongst the early movers to transit to digital process in the financial services industry. The Company has embarked to create an ''omnichannel'' framework to conduct its business. The omnichannel model will provide flexibility to the customer to move between online to offline and vice versa in a frictionless manner. It had already moved from ''Physical'' to ''Phygital''.

Further details regarding the operations, state of affairs and initiatives of the Company are given in the Management Discussion and Analysis.

Moratorium and restructuring of loans

RBI issued guidelines on 27 March 2020 permitting all commercial banks, co-operative banks, All- India Financial Institutions and NBFCs to give moratorium to customers in respect of instalments falling due between 1 March 2020 to 31 May 2020. It then further extended the moratorium period by three months till 31 August 2020, through its notification dated 23 May 2020. Accordingly, the Company offered moratorium to its customers based on a Board approved policy.

RBI, through its circular dated 6 August 2020, provided a resolution framework for COVID-19 related stress and allowed a one-time restructuring of certain categories of loans from 1 September 2020 till 31 December 2020. In line with the RBI''s framework and a Board approved policy, the Company executed restructuring to the tune of H1,725 crore (approximately 1.50% of AUM).

The impact of the moratorium and restructuring on the performance of the Company is discussed in the Management Discussion and Analysis.

Customer engagement

The Company strives to create a culture of ''Customer Obsession'' and endeavours to provide a frictionless experience across the lifecycle, from pre-disbursal to closure of loan, deposit accepting activities and other value-added services.

The Company measures, through an independent third party, its Net Promoter Score to rate its customer loyalty. This helps the Company to gauge the outcome of its customer engagement efforts.

The initiatives of the Company towards customer engagement are detailed in the Management Discussion and Analysis.

Subsidiaries, associates and joint ventures

The Company has two wholly owned subsidiaries, viz.,

(i) Bajaj Housing Finance Ltd. (''BHFL'' or ''Bajaj Housing''), which is registered with National Housing Bank as a Housing Finance Company (HFC); and

(ii) Bajaj Financial Securities Ltd. (''BFinsec''), which is registered with the Securities and Exchange Board of India (SEBI) as a stockbroker and depository participant.

BHFL commenced its business in FY2018. BFinsec commenced its commercial operations in FY2020.

During FY2021, no new subsidiary was incorporated/acquired. The Company does not have any associate company, nor has it entered into a joint venture with any other company.

The Company''s policy for determination of material subsidiary, as adopted by the Board of Directors, in conformity with regulation 16 of the SEBI Listing Regulations, can be accessed on the Company''s website at https://www.bajajfinserv.in/ media/finance/downloads/policy-for-determining-material-subsidiaries.pdf.

In terms of the said policy and provisions of regulation 16 of the SEBI Listing Regulations, BHFL is a material subsidiary of the Company as its net worth exceeds 10% of the consolidated net worth of the Company.

Performance highlights of the subsidiaries are given below:

BHFL

AUM as at 31 March 2021 was H 38,871 crore as compared to H 32,705 crore as at 31 March 2020, representing a growth of 19%

Total income increased by 19% to H 3,155 crore NII rose by 15% to H 1,189 crore

Total operating cost to NII improved significantly to 27.7% from 32.9% in FY2020

Impairment on financial instruments was H 247 crore. BHFL holds a management overlay provision of H 166 crore as of 31 March 2021 on account of COVID-19 related stress

Gross NPA and Net NPA were at 0.35% and 0.22%, respectively, amongst the lowest across all HFCs PBT increased by 8% to H 613 crore PAT grew by 8% to H 453 crore

As on 31 March 2021, capital adequacy ratio was 21.33%, which is well above the NHB norms of 14%

BFinsec

Total Income for FY2021 was H 36.34 crore PAT was H 5.55 crore

For more detailed discussion on the performance of the subsidiaries and their various segments, refer to the Management Discussion and Analysis.

A separate statement containing the salient features of the subsidiaries in the prescribed form AOC -1 is attached to the standalone financial statements.

Directors and key managerial personnel (KMP)

A. Change in Directorate

Having been at the helm of affairs of the Company for over three decades, Rahul Bajaj, as a part of succession planning, demitted the office of Chairman of the Company w.e.f. close of business hours on 31 July 2020.

The Board, at its meeting held on 21 July 2020, appointed Sanjiv Bajaj as Non-executive Chairman of the Company w.e.f. 1 August 2020.

Due to his health, Rahul Bajaj stepped down from the Board of the Company w.e.f. the close of business hours on 30 April 2021. The Board, after considering his huge contribution to the spectacular success of the Company and in order to benefit from his tremendous experience, conferred upon him the status and title of Chairman Emeritus w.e.f. 1 May 2021. His insights on strategic aspects, corporate governance related matters, brand and image building will further steer the Company to achieve its strategic and business objectives. He has agreed to shoulder the responsibility of Chairman Emeritus without any compensation and would not be considered as a director for the purpose of the provisions of the Act and SEBI Listing Regulations.

B. Directors liable to retire by rotation

Rajiv Bajaj retires by rotation at the ensuing AGM, being eligible, offers himself for re-appointment.

Brief details of Rajiv Bajaj, who is seeking re-appointment, are given in the Notice of AGM.

C. KMP

There was no change in the KMP of the Company during FY2021.

As per the requirements of the RBI Directions and SEBI Listing Regulations, details of all pecuniary relationship or transactions of the non-executive directors vis-a-vis the Company are disclosed in the Corporate Governance Report.

Declaration by independent directors

The independent directors have submitted a declaration of independence, stating that they meet the criteria of independence provided under section 149(6) of the Act, as amended, and regulation 16 of the SEBI Listing Regulations.

The independent directors have also confirmed compliance with the provisions of rule 6 of Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended, relating to inclusion of their name in the databank of independent directors.

Policy on directors'' appointment and remuneration

The salient features of the policy on directors'' appointment and remuneration forms a part of the ''Corporate Governance Report''. This policy is also placed on the Company''s website and can be accessed at https://www.bajajfinserv.in/media/ finance/downloads/remuneration-policy.pdf.

Annual return

A copy of the annual return as provided under section 92(3) of the Act, in the prescribed form, which will be filed with the Registrar of Companies/MCA, is hosted on the Company''s website and can be accessed at https://www.bajajfinserv.in/ finance-investor-relation-annual-reports.

Number of meetings of the Board

Six (6) meetings of the Board were held during FY2021. Details of the meetings and attendance thereat forms part of the ''Corporate Governance Report''.

Directors'' responsibility statement

The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) under historical cost convention on accrual basis except for certain financial instruments, which are measured at fair values pursuant to the provisions of the Act and guidelines issued by SEBI/RBI. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy. These form a part of the Notes to the financial statements.

In accordance with the provisions of section 134(3)(c) of the Act and based on the information provided by the management, the directors state that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for FY2021;

(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) they have prepared the annual accounts on a going concern basis;

(v) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

Audit Committee

The Audit Committee comprises of Dr. Omkar Goswami as Chairman and Sanjiv Bajaj, Ranjan Sanghi and Dr. Naushad Forbes as other members.

The brief terms of reference and attendance record of members are given in the Corporate Governance Report.

Particulars of loans, guarantees and investments

The Company, being an NBFC registered with the RBI and engaged in the business of giving loans in ordinary course of its business, is exempt from complying with the provisions of section 186 of the Act with respect to loans. Accordingly, the disclosures of the loans given as required under the aforesaid section have not been made in this Report.

During FY2021, the Company infused capital in the following:

1. One MobiKwik Systems Pvt. Ltd. (MobiKwik)

Pursuant to a commercial agreement with MobiKwik, the Company was allotted 22,944 Series E compulsorily convertible cumulative preference shares, in tranches, against receivables aggregating to H 18.89 crore.

Total investment in MobiKwik as on 31 March 2021 is approximately H 281.21 crore.

2. BFinsec

In order to support BFinsec to augment its minimum net worth and consequently help leverage its Margin Trading Financing requirements, the Company made further investment of approximately H 150 crore. The total investment in BFinsec as on 31 March 2021 is H 270.38 crore.

The Company continues to stay invested in BHFL and RBL Bank Ltd. Information regarding investments covered under the provisions of section 186 of the Act is detailed in the financial statements.

Employee Stock Options (ESOP)

The Company grants share-based benefits to eligible employees with a view to attract and retain talent, align individual performance with the Company objectives, and promote increased participation by them in the growth of the Company.

Shareholders, through postal ballot, approved amendment to the existing ESOP Scheme to, inter alia, increasing the limit of options by 10,000,000 options; and treatment of unvested and vested options at the time of retirement. The maximum limit of stock options that can be granted under the scheme now stand revised from 25,071,160 options to 35,071,160 options.

A statement giving complete details, as at 31 March 2021, under regulation 14 of the SEBI (Share Based Employee Benefits Regulations, 2014, is available on the website of the Company and can be accessed at https://www.bajajfinserv.in/finance-investor-relation-annual-reports.

Grant wise details of options vested, exercised and cancelled are provided in the notes to the standalone financial statements.

The Company has not issued any sweat equity shares or equity shares with differential rights during FY2021.

Share capital

During FY2021, 898,270 equity shares, at applicable grant prices, were allotted to BFL Employee Welfare Trust under the BFL Employee Stock Options Scheme, 2009.

As on 31 March 2021, the paid-up share capital of the Company stood at H 120.52 crore consisting of 602,587,339 equity shares of face value of H 2 fully paid up.

Related party transactions

All contracts/arrangement/transactions entered by the Company during FY2021 with related parties were in compliance with the applicable provisions of the Act and SEBI Listing Regulations. Prior omnibus approval of the Audit Committee is obtained for all related party transactions which are foreseen and of repetitive nature. Pursuant to the said omnibus approval, details of transaction entered into is also reviewed by the Audit Committee on a quarterly basis.

All related party transactions entered during FY2021 were on arm''s length basis and in the ordinary course of business of the Company under the Act and not material under the SEBI Listing Regulations or extant RBI guidelines. None of the transactions required members'' prior approval under the Act or SEBI Listing Regulations.

Details of transactions with related parties during FY2021 are provided in the notes to the financial statements. There were no transaction requiring disclosure under section 134(3)(h) of the Act. Hence, the prescribed Form AOC-2 does not form a part of this report.

The Company has formulated a policy on materiality of related party transactions and on dealing with related party transactions including clear threshold limits, duly approved by the Board. The Board has reviewed the policy and has not recommended any change to either the policy or prescribed threshold. The policy is available on the website of the Company at https://www.bajajfinserv.in/media/finance/downloads/policy-on-materiality-of-related-party-transactions.pdf and also forms a part to the Corporate Governance Report.

Material changes and commitments

There were no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year and the date of this report.

Conservation of energy

Technology absorption

The details pertaining to technology absorption have been explained in the annexed Management Discussion and Analysis.

Foreign exchange earnings and outgo

During FY2021, the Company did not have any foreign exchange earnings and the foreign exchange outgo in terms of actual outflow amounted to H 128.17 crore (FY2020 - H 203.67 crore).

Risk management

The Board of Directors have adopted a risk management policy for the Company which provides for identification, assessment and control of risks which, in the opinion of the Board, may pose significant loss or threat to the Company.

The Company re-calibrated its risk management framework and approach to enable it to tide over the ongoing COVID-19 pandemic. These included:

Tightening of underwriting and LTV norms across all businesses Buttressing of collection infrastructure and capacity Offering flexible payment options to the customers Pausing lending in B2C and commercial lending during the lockdown

Building multiple scenarios on potential COVID-19 credit cost impacts taking into consideration lockdown, behaviour of moratorium customers, collection capacity management, changes in regulatory forbearance and response of the economy after the lockdown

Proactive contingency provisioning to the tune of H 672 crore

The above initiatives helped the Company to bounce back to pre-COVID levels in the risk metrics.

Further, during FY2021, the Board enhanced the scope of risk management committee to cover operational, reputational and market (investment) risk. The frequency of the meetings of the Risk Management Committee has been increased to have a closer oversight. Details of the Committee are given in the Corporate Governance Report.

As per RBI circular on Risk Management System - Appointment of Chief Risk Officer dated 16 May 2019, Fakhari Sarjan is the Chief Risk Officer (CRO) of the Company. Further, in terms of the said circular, an independent meeting of the CRO with the Board/Risk Management Committee in absence of the Managing Director is organised on a quarterly basis.

More detailed discussion on the Company''s risk management and portfolio quality is covered in the Management Discussion and Analysis.

Corporate social responsibility (CSR)

The CSR Committee comprises of three directors viz., Rahul Bajaj, Sanjiv Bajaj and Dr. Naushad Forbes. Consequent to resignation of Rahul Bajaj w.e.f. close of business hours on 30 April 2021, the CSR Committee was re-constituted with induction of Rajeev Jain as its member and Sanjiv Bajaj, member, was designated as Chairman w.e.f. 1 May 2021.

During FY2021, the Committee met three (3) times. The attendance record of members is given in the Annual Report on CSR activities.

Section 135 of the Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014 (the ''CSR Rules'') have been amended substantially with effect from 22 January 2021.

In terms of the provisions of the Act, read with the CSR Rules, the Annual Report on CSR activities under the format prescribed in Annexure II of the CSR Rules is annexed to this Report.

In line with the said amendments, the Board, at its meeting held on 27 April 2021, amended the existing Policy.

The Policy is uploaded on the website of the Company and can be accessed at https://www.bajajfinserv.in/corporate-social-responsibility.pdf.

Further, in terms of the amended CSR Rules, Chief Financial Officer has certified that the funds disbursed have been utilized for the purpose and in the manner approved by the Board for FY2021.

Formal annual evaluation

Information on the manner in which formal annual evaluation is made by the Board of its own performance and that of its Committees, Chairperson and individual directors is given in the annexed Corporate Governance Report.

Significant and material orders

During FY2021, there were no significant or material orders passed by any regulator or court or tribunal impacting the going concern status and Company''s operations in future.

In January 2021, the RBI imposed a monetary penalty of H 2.50 crore on the Company for non-compliance with provisions of Directions on Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs. The Company maintains that this is neither financially significant nor material in nature and does not affect the going concern status of the Company. However, the Company has strengthened its collections infrastructure, institutionalised the framework for training of recovery agents and has taken other measures to ensure that such incidents do not recur.

Internal audit

At the beginning of each financial year, an audit plan is rolled out after approval of the Audit Committee. The audit plan is aimed at evaluation of the efficacy and adequacy of internal control systems and compliance thereof, robustness of internal processes, policies and accounting procedures and compliance with laws and regulations. Based on the reports of internal audit function process owners undertake corrective action in their respective areas.

Significant audit observations and corrective actions thereon are presented to the Audit Committee on quarterly basis.

RBI, through its circular dated 3 February 2021, has introduced risk based internal audit (RBIA) for NBFCs, by which applicable NBFCs shall put in place a RBIA framework by 31 March 2022.

On the recommendation of the Audit Committee, the Board has approved a RBIA framework, along with appropriate processes and plans for internal audit. This has been implemented from 1 April 2021.

Business continuity and cyber security

In the wake of COVID-19 pandemic, the Company swiftly leveraged its technological capabilities to ensure bandwidth availability, set-up virtual private networks, make laptops available wherever needed, and created multiple available platforms for collaboration and team meetings over digital media. This allowed operations to continue under the ''Work-from-Home'' protocol. The Company also enabled remote access for identified IT vendors/partners to enable full resources for user support, DC support, application maintenance and testing. Simultaneously, the Company increased its thrust on digital capabilities to connect with customers for servicing and recovery during the lockdown period.

To improve its cyber security posture, the Company has migrated all its critical internet-facing properties behind a well-known cloud-based web application firewall to safeguard against web application attacks as well as distributed denial of service attacks.

Further, regular vulnerability assessment and penetration testing, review of segregation of duties, other audit and compliance testing(s) have ensured that the Company''s information assets are safe and secure. An awareness program is conducted for all employees using the digital channel regarding cyber security. Employees of the Company are required to undergo a mandatory online learning module on information security and affirm that they have understood and are aware of the protocols to be followed. Regular information security related mailers are also sent to all employees for awareness and training purpose.

The Company will continue its focus on the automation of security orchestration to respond to cyber incidents through its security operations centre.

A detailed discussion on information systems, cyber security and information technology is covered under ''Management Discussion and Analysis''.

Information system audit

In terms of the Master Direction on Information Technology Framework for the NBFC Sector, NBFCs are required to have an information system audit at least once in two years. During FY2021, a system audit was conducted by a CERT-in empaneled audit firm. The areas audited were, inter alia, user access management, patch management, business continuity and disaster recovery, data protection and the information security management system framework. The audit revealed no major observations.

Internal financial controls

The Company has in place adequate financial controls commensurate with its size, scale and complexity of operations with reference to its financial statements. Internal financial controls of the Company are also similarly commensurate.

These have been designed to provide reasonable assurance about recording and providing reliable financials information, ensuring integrity in conducting business, accuracy and completeness in maintaining accounting records and prevention and detection of frauds and errors.

Deposits

The Company accepts deposits from retail and corporate clients. As on 31 March 2021, it had a deposit book of H 25,803.43 crore, delivering an annual growth of 20% in FY2021. Deposits contributed to 26% of BFL''s standalone borrowings versus 21% as at the end of FY2020.

During FY2021, the Company accepted public deposits of H 8,850.82 crore. Public deposits outstanding as at the end of the year aggregated to H 18,961.23 crore.

Pursuant to provisions of the RBI Act, 1934, the Company has created a charge on statutory liquid assets amounting to H 3,275.03 crore in favour of the trustee for FD holders.

During FY2021, the Company accepted inter corporate deposits (ICDs) of H 4,550.59 crore. ICDs outstanding as on 31 March 2021 were H 4,012.86 crore.

During FY2021, the Company accepted other deposits of H 2,448.48 crore. Other deposit outstanding as on 31 March 2021 were H 2,829.34 crore.

During FY2021, there was no default in repayment of deposits or payment of interest thereon.

As on 31 March 2021, there were 6 FDs amounting to H 16.43 lakh which had matured and remained unclaimed and interest on matured deposits amounting to H 0.18 lakh and interest on active deposits amounting to H 0.95 lakh had also remained unclaimed.

To avoid piling up of unclaimed deposits, depositor''s money shall be paid by default on maturity date through RTGS/NEFT unless renewal instructions have been submitted by the depositor. Wherever it is not possible to make the payment and the amount remains unclaimed, the following process has been adopted:

Wherever payment of deposit amount and interest thereon is rejected by bank, the Company''s customer service team calls the depositor to inform about the reason(s) for the rejection and advises them on the process of changing their linked bank account.

In addition, SMS/email are also sent to depositors to inform them of rejection reason(s) which advise them to initiate appropriate action to update their bank details.

In case of death of depositors, claim settlement process is advised to joint depositors/nominee/legal heir, as the case may be.

Wherever resident status of the depositors has changed from Resident to Non-Resident, they are advised to submit updated FATCA/CRS declaration and to get their bank details updated.

Borrowings

The Company had established a Secured Euro Medium Term Note Programme for USD 1.5 billion listed on Singapore Exchange Securities Trading Ltd. during FY2020, to be utilised over a period.

During FY2021, the Company has availed external commercial borrowing (ECB) to the tune of USD 175 million in addition to USD 575 million availed during FY2020. The ECB is within overall borrowing limits approved by the shareholders of H 160,000 crore.

During FY2021, the Company has issued non-convertible debenture to the tune of H 8,213 crore and redeemed non-convertible debentures and subordinate debt to the tune of H 10,619.30 crore and H 228.70 crore respectively.

Credit rating

The brief details of the ratings received from credit rating agencies by the Company for its outstanding instruments is given in General Shareholder Information.

Whistle blower policy/vigil mechanism

The Company has a whistle blower policy encompassing vigil mechanism pursuant to the requirements of the section 177(9) of the Act and regulation 22 of the SEBI Listing Regulations. The Audit Committee reviews the functioning of the whistle blower policy. The policy/vigil mechanism enables directors and employees to report to the management their concerns about unethical behaviour, actual or suspected fraud or violation of the Company''s code of conduct or ethics policy and leak or suspected leak of unpublished price sensitive information. More details are given in Corporate Governance Report.

The whistle blower policy is uploaded on the website of the Company and can be accessed at https://www.bajajfinserv.in/ media/finance/downloads/whistle-blower-policy.pdf.

RBI guidelines

The Company continues to fulfil all the norms and standards laid down by RBI pertaining to non-performing assets, capital adequacy, statutory liquidity assets, etc. As against the RBI norm of 15%, the capital to risk-weighted assets ratio of the Company was 28.31% as on 31 March 2021. In line with the RBI guidelines for asset liability management (ALM) system for NBFCs, the Company has an asset liability committee, which meets monthly to review its ALM risks and opportunities.

The Company continues to be in compliance with the NBFC - Corporate Governance (Reserve Bank) Directions, 2015.

Statutory disclosures

The financial statements of the Company and its subsidiaries are placed on the Company''s website at https://www.bajajfinserv.in/finance-investor-relation-annual-reports .

Details required under the provisions of section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, containing, inter alia, the ratio of remuneration of directors to median remuneration of employees, percentage increase in the median remuneration, are annexed to this Report.

Details of top ten employees in terms of the remuneration and employees in receipt of remuneration as prescribed under rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, containing details prescribed under rule 5(3) of the said rules, which form part of the Directors'' Report, will be made available to any member on request, as per provisions of section 136(1) of the Act.

The Company being an NBFC, the provisions relating to Chapter V of the Act, i.e., acceptance of deposit, are not applicable. Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC regulations have been made in this Annual Report.

The provision of section 148 of the Act relating to maintenance of cost records and cost audit are not applicable to the Company.

The Company has a policy on prevention of sexual harassment at the workplace. The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The number of complaints received, disposed of and pending during FY2021 is given in the annexed ''Corporate Governance Report''.

There is no change in the nature of business of the Company during FY2021.

The Company has not defaulted in repayment of loans from banks and financial institutions.

There were no delays or defaults in payment of interest/principle of any of its debt securities.

The Managing Director, as per the terms of his appointment, does not draw any commission or remuneration from subsidiary company. Hence, no disclosure as required under section 197(14) of the Act has been made.

Disclosures pursuant to RBI Master Directions, unless provided in the Directors'' Report, form part of the notes to the standalone financial statements.

Corporate governance

All Board members and senior management personnel have affirmed compliance with the Company''s code of conduct for FY2021. A declaration to this effect signed by the Managing Director is included in this Annual Report.

The Managing Director and the Chief Financial Officer have certified to the Board in relation to the financial statements and other matters as specified in the SEBI Listing Regulations.

A certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Acknowledgement

The Board places its gratitude and appreciation for the support and cooperation from its members, the RBI and other regulators, banks, financial institutions, trustees for debenture holders and fixed deposit holders.

The Board also places on record its sincere appreciation for the commitment and hard work put in by the management and the employees in these trying times.

On behalf of the Board of directors

Sanjiv Bajaj Chairman

27 April 2021

Mar 31, 2019

The directors have pleasure in presenting the thirty-second Annual Report along with the audited standalone and consolidated financial statements for FY2019.

Presentation of financial statements

Ministry of Corporate Affairs (MCA) vide its notification dated 30 March 2016, mandated, Non-Banking Financial Companies (NBFCs) having net worth of rupees five hundred crore or more to comply with the Indian Accounting Standards (Ind AS) in preparation of their financial statements and quarterly financial results for the accounting periods beginning on or after 1 April 2018 with effective transition date of 1 April 2017.

Further, MCA has amended Schedule III to the Companies Act, 2013 (the âActâ). Vide the amendment, a new division viz., âDivision IIIâ financial statement format has been introduced for NBFCs effective 11 October 2018.

Accordingly, the financial statements of the Company for the year ended 31 March 2019 have been prepared in accordance with Ind AS and revised Schedule III to the Act. The corresponding figures for the year ended 31 March 2018 and opening Balance Sheet as on 1 April 2017 have been recast as per Ind AS and revised Schedule III to the Act. The Company has applied Ind AS 101 âFirst time adoption of Indian Accounting Standardsâ, for transition from previous GAAP to Ind AS. An explanation of how transition to Ind AS has affected the previously reported financial position, financial performance and cash flows of the Company, is detailed in the note no. 51 to the standalone financial statements and note no. 52 to the consolidated financial statements of the Company.

The audited consolidated financial statements have been prepared in compliance with the Act, Ind AS 110 âConsolidated financial statementsâ and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the âListing Regulationsâ).

A separate statement containing the salient features of its subsidiaries in the prescribed Form AOC-1 is attached to the standalone financial statements.

Financial results

The highlights of the standalone financial results are as under:

(Rs. In Crore)

Particulars	FY2019	FY2018	% change over FY2018

Total income	17,401	12,650	38
Finance costs	5,939	4,567	30
Net interest income	11,462	8,083	42
Total operating expenses	3,951	3,226	22
Pre-provisioning operating profit	7,511	4,857	55
Impairment on financial instruments	1,476	1,026	44
Profit before tax	6,035	3,831	58
Profit after tax	3,890	2,485	57

Retained earnings as at the beginning of the year	4,788	3,076	56
Profit after tax	3,890	2,485	57
Other comprehensive income on defined benefit plan	(9)	(5)	80
Retained earnings before appropriations	8,669	5,556	56
Appropriations
Transfer to reserve fund u/s 45-IC(1) of the RBI Act, 1934	(779)	(530)	47
Dividend paid	(231)	(198)	17
Tax on dividend	(48)	(40)	20
Adjustment of dividend to ESOP Trust	1	1
Retained earnings as at the end of the year	7,612	4,788	59

Due to rounding off, numbers presented in above table may not add up precisely to the totals provided.

A summary of financial performance of subsidiaries viz; Bajaj Housing Finance Ltd. and Bajaj Financial Securities Ltd. is given below:

Subsidiaries, associate and joint ventures

A. Bajaj Housing Finance Ltd. (BHFL) - A housing finance company, registered with NHB.

BHFL, a wholly owned subsidiary of the Company, started full scale mortgage operations from February 2018 and had assets under management of RS. 17,562 crore as on 31 March 2019 as against RS. 3,570 crore as on 31 March 2018. The Profit after tax for FY2019 of BHFL was RS. 110 crore as against RS. 10 crore for FY2018.

B. Bajaj Financial Securities Ltd. (Bfinsec) - A stock broking company, registered with SEBI.

The Company acquired the entire shareholding of Bfinsec from its wholly owned subsidiary, BHFL on 10 August 2018 at armâs length pricing. The acquisition is intended to support the Companyâs existing line of business viz; loan against securities, where the Company currently avails services of other depository participants (DP) and stock brokers.

During FY2019, Bfinsec received approval from SEBI to carry on the business as a stock broker and trading membership of BSE Ltd. Bfinsec is in the nascent stage of stock broking and DP business.

The Profit after tax for FY2019 of Bfinsec was RS. 1.19 crore as against RS. 1.67 crore for FY2018.

None of the subsidiaries mentioned above is a material subsidiary as per the thresholds laid down under the Listing Regulations.

The Company does not have any associate or joint venture company.

Performance and financial position of subsidiaries

A summary of financial performance for FY2019 of the wholly owned subsidiaries i.e., BHFL and Bfinsec is given below:

BHFL (Rs. In Crore)

Particulars	FY2019	FY2018

Total income	1,150	106
Finance costs	685	47
Net interest income	465	59
Total operating expenses	297	44
Impairment on financial instruments	25	4
Profit before exceptional items	143	11
Exceptional items	6	-
Profit before tax	149	11
Profit after tax	110	10
Other comprehensive income	(2)
Total comprehensive income	108	10

Bfinsec (Rs. In Crore)

Particulars	FY2019	FY2018

Total income	2	1
Finance costs	-
Net interest income	2	1
Total operating expenses
Impairment on financial instruments	-	-
Profit before tax	2	1
Profit after tax	1	2

Dividend

The directors recommend for consideration of the members at the ensuing annual general meeting (AGM), payment of dividend of RS. 6 per equity share (300%) of face value of RS. 2 for FY2019. The amount of dividend and tax thereon aggregate to RS. 419.46 crore.

Dividend paid for FY2018 was RS. 4 per equity share (200%) of face value of RS. 2. The amount of dividend and tax thereon aggregated to RS. 278.71 crore.

Share capital

As on 31 March 2019, paid-up share capital of the Company stood at RS. 1,155,936,776 consisting of 577,968,388 equity shares of face value of RS. 2 fully paid-up.

Increase in borrowing powers

During FY2019, pursuant to section 180(1)(c) of the Act, the Company increased the limit of the borrowing powers of the Board of Directors from RS. 100,000 crore to RS. 130,000 crore, to meet its growing business needs.

Working results

Assets Under Management (AUM) as on 31 March 2019 were RS. 98,671 crore as compared to RS. 78,852 crore as on 31 March 2018, an increase of 25% over the previous year. The consolidated AUM as on 31 March 2019 stood at RS. 115,888 crore, an increase of 41% over the previous year.

Loans receivables as on 31 March 2019 were RS. 95,181 crore as compared to RS. 75,533 crore as on 31 March 2018, an increase of 26% over the previous year. The consolidated loans receivables as on 31 March 2019 stood at RS. 112,513 crore, an increase of 42% over the previous year.

Total income during FY2019 increased to RS. 17,401 crore from RS. 12,650 crore during FY2018 registering a growth of 38% over the previous year.

Profit before tax for FY2019 was RS. 6,035 crore, as against RS. 3,831 crore for FY2018, an increase of 58% over the previous year. The profit after tax for FY2019 was RS. 3,890 crore as compared to RS. 2,485 crore for FY2018, an increase of 57% over the previous year. This has been due to the Companyâs healthy growth in AUM, net interest margin, operating efficiencies and prudent risk management.

The Company again Rs.ad an excellent year, aided by strong volume growth across all its lines of business. During FY2019, the Company launched various new products and variants to strengthen its business model and continue its growth momentum.

Consequent to transition to Ind AS in FY2019 with transition/effective date of 1 April 2017, the Company is required to provide for impairment allowance on its financial insruments basis expected credit loss (ECL), calculated using empirical portfolio performance and adjusted for forward looking macroeconomic factors, as prescribed by Ind AS. The overall provisioning so made, continues to be in excess of the extant provisioning norms of RBI for NBFCs.

The Companyâs impairment provision (ECL) on financial instrument increased from RS. 1,026 crore in FY2018 to RS. 1,476 crore in FY2019 taking into account the increased business. The Company ended FY2019 with a net NPA of 0.73%.

Operations

Details regarding the operations of the different products of the Company and the state of affairs of the Company are covered in the âManagement Discussion and Analysisâ.

Annual return

The extract of annual return as provided under section 92(3) of the Act, in the prescribed form MGT-9 is annexed to this Report and is also hosted on the Companyâs website https://www.bajajfinserv.in/finance-investor-relation-annual-reports

Number of meetings of the Board

Eight meetings of the Board were held during FY2019. Details of the meetings and attendance thereat forms part of the âCorporate Governance Reportâ.

Audit Committee

The composition of the Audit Committee is given in the annexed âCorporate Governance Reportâ. All recommendations of the Audit Committee were accepted by the Board.

Directorsâ responsibility statement

In compliance of section 134(5) of the Act, the directors state that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanation relating to material departures;

- they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the financial year 2018-19;

- they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- they have prepared the annual accounts on a going concern basis;

- they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

- they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

Declaration by independent directors

Policy on directorsâ appointment and remuneration

The Board, at its meeting held on 12 March 2019, has revised the sitting fees from RS. 50,000 to RS. 100,000 and commission from RS. 100,000 to RS. 200,000 payable per meeting to all non-executive directors (including independent directors) for meetings of the Board and/or Committee thereof attended by them on or after 1 April 2019.

The salient features and changes to the policy on directorsâ appointment and remuneration forms a part of the âCorporate Governance Reportâ. The said policy is placed on the Companyâs website https://www.bajajfinserv.in/media/finance/downloads/remuneration-policy.pdf

Particulars of loans, guarantees and investments

The Company, being a non-banking financial company registered with the RBI and engaged in the business of giving loans, is exempt from complying with the provisions of section 186 of the Act in respect of loans and guarantees. Accordingly, the disclosures of the loans given as required under the aforesaid section have not been made in this Report.

During FY2019, the Company made following significant strategic investments:

- BHFL - an amount of RS. 2,000 crore by subscribing to 2,000,000,000 equity shares of the face value of RS. 10 on rights basis.

- Acquisition of 100% shareholding of BFinsec from its wholly owned subsidiary, BHFL by investing an amount of RS. 20.38 crore.

Further, the Company was allotted 10,534 Series E compulsorily convertible cumulative preference shares of One MobiKwik Systems Pvt. Ltd. (MobiKwik) on 12 April 2019 against the receivables of the Company, pursuant to commercial agreement with MobiKwik, amounting to RS. 8.67 crore.

The total investment in MobiKwik as on the date of this report is approximately RS. 234 crore.

Information regarding investments covered under the provisions of section 186 of the Act is detailed in the financial statements.

Related party transactions

During FY2019, transactions with related parties were entered with the approval of the Audit Committee in line with provisions of the Act and Listing Regulations. The Audit Committee reviews the said transactions on a quarterly basis.

All related party transactions entered during FY2019 were on an armâs length basis and in the ordinary course of business under the Act and not material under the Listing Regulations. None of the transactions required membersâ prior approval under the Act or the Listing Regulations.

During FY2019, there were no related party transactions requiring disclosure under section 134 of the Act.

Pursuant to regulation 23 of the Listing Regulations, the Board, at its meeting held on 12 March 2019, revised the policy on materiality of related party transactions and on dealing with related party transactions providing clear threshold limits for various transactions with related parties.

The revised policy is placed on the Companyâs website https://www.bajajfinserv.in/media/ finance/downloads/policy-on-materiality-of-related-party-transactions.pdf and is also included in the annexed âCorporate Governance Reportâ.

Material changes and commitments

There have been no material changes and commitments, affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this Report.

Conservation of energy

The Company has taken, inter alia, following measures to reduce energy consumption:

- switched from conventional lighting systems to LED lights at most of the branches in metro areas.

- selecting and designing offices to facilitate maximum natural light utilisation.

- use of cloud based virtual servers to increase energy efficiency and data security.

Technology absorption

The details pertaining to technology absorption have been explained in the annexed âManagement Discussion and Analysisâ.

Foreign exchange earnings and outgo

During FY2019, the Company did not have any foreign exchange earnings and, the foreign exchange outgo amounted to RS. 35.39 crore (FY2018 - RS. 31.54 crore).

Risk management

The Board of Directors have adopted a risk management policy for the Company which provides for identification, assessment and control of risks which in the opinion of the Board may threaten the existence of the Company. The Management identifies and controls risks through a properly defined framework in terms of the aforesaid policy.

Corporate social responsibility

During FY2019, the Company spent RS. 56.78 crore on corporate social responsibility (CSR) activities as against mandatory expenditure of RS. 56.59 crore. Detailed information on the CSR policy and CSR initiatives taken during FY2019 and composition of the Committee is given in the annexed âAnnual Report on CSR activitiesâ.

Formal annual evaluation

Information on the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees, Chairperson and individual directors is given in the annexed âCorporate Governance Reportâ.

Directors and key managerial personnel (KMP)

A. Change in Directorate:

i. Appointment/re-appointment of independent directors:

(a) The Board, at its meeting held on 12 March 2019, based on the recommendation of Nomination and Remuneration Committee, appointed Naushad Forbes and Anami N Roy as additional directors and independent directors for a period of 5 years with effect from 1 April 2019.

(b) At the aforesaid meeting, the Board, considering the report of performance evaluation and based on the recommendation of Nomination and Remuneration Committee, re-appointed the following independent directors for a second term as given below:

Sr. No.	Name of independent director	Tenure of second term

1.	Nanoo Pamnani	Five years w.e.f. 1 April 2019
2.	Dipak Poddar	Three years w.e.f. 1 April 2019
3.	Ranjan Sanghi	Five years w.e.f. 1 April 2019
4.	D J Balaji Rao	Five years w.e.f. 1 April 2019
5.	Omkar Goswami	Five years w.e.f. 1 April 2019
6.	Gita Piramal	Five years w.e.f. 16 July 2019

In terms of the requirement of regulation 17(1A) of the Listing Regulations, special resolution for appointment/continuation of directorship in the Company of directors who have attained or will attain the age of 75 years forms part of the notice of the ensuing AGM.

Accordingly, resolutions seeking approval of the members for the aforementioned appointments/re-appointments forms part of notice convening the 32nd AGM.

Necessary details regarding their appointment and re-appointment as required under the Act and the Listing Regulations are given in the notice of AGM.

ii. Retirement of independent directors:

D S Mehta and Rajendra Lakhotia had expressed their intention to not continue as independent directors of the Company for another term, due to their other priorities and pre-occupations. Consequently, they have ceased to be directors of the Company from the close of business hours on 31 March 2019. The Board placed on record its appreciation for their valuable contribution during their long association with the Company.

iii. Directors liable to retire by rotation:

Rajiv Bajaj, director, retires by rotation at the ensuing AGM and, being eligible, offers himself for re-appointment. Necessary details for re-appointment as required under the Act and the Listing Regulations is given in the notice of AGM.

B. Change in KMP:

R Vijay was appointed as Company Secretary w.e.f. 1 October 2018 in place of Anant Damle who retired from the services of the Company on 30 September 2018.

Significant and material orders

During FY2019, no significant and material orders were passed by any regulator or court or tribunal impacting the going concern status and Companyâs operations in future.

Internal audit

At the beginning of each financial year, an audit plan is rolled out after the same has been approved by Audit Committee. The audit plan is aimed at evaluation of the efficacy and adequacy of internal control systems and compliance thereof, robustness of internal processes, policies and accounting procedures, compliance with laws and regulations. Based on the reports of internal audit function process owners undertake corrective action in their respective areas.

Significant audit observations and corrective actions thereon are presented to the Audit Committee of Board.

Internal financial controls

The internal financial controls of the Company are commensurate with its size, scale and complexity of operations. The Company has robust policies and procedures which, inter alia, ensure integrity in conducting business, timely preparation of reliable financial information, accuracy and completeness in maintaining accounting records and prevention and detection of frauds and errors.

The internal financial controls with reference to the financial statements were adequate and operating effectively.

Employee stock option scheme

During FY2019, there has been no change in the Employee Stock Option Scheme, 2009 (the âESOP schemeâ) of the Company. The ESOP Scheme is in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014 (the âSBEB Regulationsâ).

Disclosures pertaining to the ESOP scheme pursuant to the SBEB Regulations are placed on the Companyâs website https://www.bajajfinserv.in/finance-investor-relation-annual-reports Grant wise details of options vested, exercised and cancelled are provided in the notes to the standalone financial statements.

Deposits

During FY2019, the Company accepted public deposits of RS. 5,778 crore. Public deposits outstanding as at the end of the year aggregated to RS. 6,828 crore. As on 31 March 2019, there were five FDs amounting to RS. 6.67 lakh which had matured and remained unclaimed and interest on matured deposits amounting to RS. 2.14 lakh had also remained unclaimed.

Pursuant to provisions of the RBI Act, 1934, the Company has created a charge on statutory liquid assets amounting to RS. 1,029.23 crore in favour of the trustee for FD holders.

During FY2019, the Company accepted inter corporate deposits (ICDs) of RS. 6,364 crore.

ICDs outstanding as on 31 March 2019 were RS. 6,365 crore.

Overall deposits outstanding as on 31 March 2019 were RS. 13,193 crore, contributing to approximately 15% of overall borrowings.

During FY2019, there was no default in repayment of deposits or payment of interest thereon.

Credit rating

The brief details of the ratings received from credit rating agencies by the Company for its outstanding instruments is given in the annexed âGeneral Shareholder Informationâ.

RBI guidelines

The Company continues to fulfill all the norms and standards laid down by the RBI pertaining to non-performing assets, capital adequacy, statutory liquidity assets, etc. As against the RBI norm of 15%, the capital to risk-weighted assets ratio of the Company was 20.66% as on 31 March 2019. In line with the RBI guidelines for asset liability management (ALM) system for NBFCs, the Company has an Asset Liability Committee, which meets monthly to review its ALM risks and opportunities.

The Company is in compliance with the NBFC - Corporate Governance (Reserve Bank) Directions, 2015.

Harmonisation of different categories of NBFCs

RBI, vide its circular dated 22 February 2019, harmonised different categories of NBFCs into fewer ones on the basis of the principle of regulation by activity rather than regulation by entity in order to provide greater operational flexibility.

Accordingly, the three categories of NBFCs viz., Asset Finance Companies, Loan Companies and Investment Companies have been merged into a new category called NBFC - Investment and Credit Company.

The Company now is categorised as NBFC- Investment and Credit Company.

Statutory disclosures

- A summary of the key financials of the Companyâs subsidiaries is included in this Annual Report.

A copy of audited financial statements for each of the subsidiary companies will be made available to the members of the Company, seeking such information at any point of time.

- The audited financial statements for each of the subsidiary companies are available for inspection by any member of the Company at the registered office and at corporate office of the Company during 10.00 a.m. to 12.30 p.m. except holidays.

- The financial results of the Company are placed on the Companyâs website https://www.bajajfinserv.in/finance-investor-relations-financial-information

- Details required under the provisions of section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed to this Report.

- Details required under the provisions of section 197(12) of the Act read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, which form part of the Directorsâ Report, will be made available to any member on request, as per provisions of section 136(1) of the Act.

- The directorsâ responsibility statement as required by section 134(5) of the Act, appears in a preceding paragraph.

- Pursuant to the provisions of the Act, no fraud was reported by auditors of the Company during FY2019.

- The Company being an NBFC, the provision relating to Chapter V, i.e., acceptance of deposit, of the Act, are not applicable. Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC regulations have been made in this Annual Report.

- Pursuant to RBI Master Direction-Information Technology Framework for the NBFC sector, the Company has constituted an IT Strategy Committee to review the IT strategies in line with its corporate strategies, cyber security arrangements and any other matter related to IT governance.

- The provision of section 148 of the Act, are not applicable to the Company. Accordingly, there is no requirement of maintenance of cost records as specified under section 148(1) of the Act.

- Cash Flow Statement for FY2019 is attached to the Balance Sheet.

- The Company has a policy on prevention of sexual harassment at the workplace. The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The number of complaints received, disposed of and pending during FY2019 is given in the annexed âCorporate Governance Reportâ.

Inclusion in S&P BSE SENSEX

Equity shares of the Company have been included in the S&P BSE SENSEX of BSE Ltd. with effect from 24 December 2018.

Corporate governance

Pursuant to the Listing Regulations, a separate section titled âCorporate Governanceâ has been included in this Annual Report, along with the Reports on âManagement Discussion and Analysisâ and âGeneral Shareholder Informationâ.

All Board members and Senior Management personnel have affirmed compliance with the code of conduct for FY2019. A declaration to this effect signed by the Managing Director of the Company is included in this Annual Report.

The Managing Director and the Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as specified in the Listing Regulations.

A certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Business responsibility report

Pursuant to the provisions of the Listing Regulations, the Company is required to give Business Responsibility Report (âBRRâ) in the Annual Report.

As a part of green initiative, the BRR for FY2019 has been placed on the Companyâs website https://www.bajajfinserv.in/finance-investor-relation-annual-reports Physical copy of the BRR will be made available to any members on request.

Secretarial standards of ICSI

The Company has complied with the requirements prescribed under the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2).

Auditors

Pursuant to the provisions of section 139 of the Act, S R B C & CO LLP, Chartered Accountants,

(Firm Registration No. 324982E/E300003) were appointed as statutory auditors of the Company to hold office from the conclusion of the 30th AGM of the Company till the conclusion of the 35th AGM.

The Audit Report by S R B C & CO LLP, for FY2019 is unmodified, i.e., it does not contain any qualification, reservation or adverse remark.

Secretarial auditor

Pursuant to the provisions of section 204 of the Act, the Board has re-appointed Shyamprasad D Limaye, practising company secretary (FCS No. 1587, CP No. 572), to undertake secretarial audit of the Company.

A report from the secretarial auditor in the prescribed Form MR-3 is annexed to this Report.

The same does not contain any qualification, reservation or adverse remark.

In addition to the above and pursuant to SEBI circular dated 8 February 2019, a report on secretarial compliance by Shyamprasad D Limaye for the FY2019 has been submitted with stock exchanges. There are no observations, reservations or qualifications in the said report.

Acknowledgement

The Board of Directors would like to express its gratitude and its appreciation for the support and co-operation from its members, RBI and other regulators, banks, financial institutions, trustees for debenture holders and FD holders.

The Board of Directors also places on record its sincere appreciation for the commitment and hard work put in by the Management and the employees of the Company and thank them for yet another excellent year.

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Pune: 16 May 2019

Mar 31, 2018

The directors present their thirty-first Annual Report and the standalone and consolidated audited financial statements for FY2018.

Financial results

The highlights of the standalone financial results are as under:

(Rs. In Crore)

Particulars	FY2018	FY2017	% change over FY2017

Total income	13,329	9,989	33
Interest and finance charges	4,585	3,803	21
Net interest income	8,744	6,186	41
Operating expenses	3,618	2,536	43
CSR expenditure	40	28	43
Pre-provisioning operating profit	5,086	3,622	40
Loan losses and provisions	1,030	804	28
Profit before tax	4,056	2,818	44
Profit after tax	2,647	1,837	44
Balance brought forward from previous year	3,692	2,411
Profit available for appropriations	6,339	4,247
Appropriations
Transfer to Reserve Fund u/s 45-IC(1) of the RBI Act, 1934	(530)	(368)
Transfer to General Reserve	-	(184)
Transfer to Infrastructure Reserve	-	(3)
Dividend paid	(198)	-
Tax on dividend	(40)	-
Adjustment of dividend to ESOP Trust	1
Balance carried to Balance Sheet	5,571	3,692

Due to rounding off, numbers presented in above table may not add up precisely to the totals provided.

A summary of consolidated financial performance for FY2018 consolidating the results of wholly owned subsidiary, Bajaj Housing Finance Ltd. (BHFL) along with its subsidiary Bajaj Financial Securities Ltd. (BFinsec) is given below:

(Rs. In Crore)

Particulars	FY2018	FY2017

Total income	13,466	9,992
Interest and finance charges	4,635	3,804
Net interest income	8,831	6,188
Operating expenses	3,690	2,567
Loan losses and provisions	1,045	804
Profit before tax	4,096	2,817
Profit after tax	2,674	1,836

Performance and financial position of subsidiaries

During FY2018, BHFL commenced operations and all incremental home loans-cum-mortgage business was done through BHFL. There were no major business operations in BFinsec. The Profit after tax for FY2018 of BHFL was RS.22.31 crore as against RS.0.12 crore for FY2017 and of BFinsec was RS.7.06 crore as against RS.0.48 crore for FY2017.

Dividend

The directors recommend for consideration of the members at the ensuing annual general meeting, payment of dividend of RS.4 per equity share (200%) of face value of RS.2 for FY2018.

The amount of dividend and tax thereon aggregate to RS.278.71 crore.

Dividend paid for FY2017 was RS.3.60 per equity share (180%) of face value of RS.2. The amount of dividend and tax thereon aggregated to RS.238.26 crore.

Capital infusion

During FY2018, pursuant to provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, the Companies Act, 2013 and the approval of members and of the Board of Directors, the Company made Qualified Institutions Placement of 26,627,218 equity shares of face value of RS.2 at a price of RS.1,690 per equity share (inclusive of premium of RS.1,688 per equity share) to Qualified Institutional Buyers aggregating to approximately RS.4,500 crore.

Share capital

During FY2018, the Company allotted equity shares of face value of RS.2 as follows:

a) 26,627,218 equity shares to Qualified Institutional Buyers under Qualified Institutions Placement.

b) 1,451,080 equity shares, at the applicable grant prices, to the Trustees of BFL Employee Welfare Trust under the Employee Stock Option Scheme, 2009.

As on 31 March 2018, paid-up share capital of the Company stood at RS.1,155,936,776 consisting of 577,968,388 equity shares of face value of RS.2 fully paid-up.

Increase in borrowing powers

During FY2018, pursuant to section 180(1)(c) of the Companies Act, 2013, the Company increased the limit on the borrowing powers of the Board of Directors from RS.75,000 crore to RS.100,000 crore, to meet its growing business needs.

Working results

The Assets Under Management (AUM) as on 31 March 2018 were RS.80,444 crore as compared to RS.60,196 crore as on 31 March 2017, an increase of 34% over the previous year. The consolidated AUM as on 31 March 2018 stood at RS.84,033 crore, an increase of 40% over the previous year.

The receivables under financing activity as on 31 March 2018 were RS.77,125 crore as compared to RS.56,834 crore as on 31 March 2017, an increase of 36% over the previous year. The consolidated receivables under financing activity as on 31 March 2018 stood at RS.80,714 crore, an increase of 42% over the previous year.

Total income during FY2018 increased to RS.13,329 crore from RS.9,989 crore during FY2017, an increase of 33% over the previous year.

The profit before tax for FY2018 was RS.4,056 crore, as against RS.2,818 crore for FY2017, an increase of 44% over the previous year. The profit after tax for FY2018 was RS.2,647 crore as compared to RS.1,837 crore for FY2017, an increase of 44% over the previous year. This has been due to the Companyâs healthy net interest margin, operating efficiencies and prudent risk management.

The Company had an excellent year aided by strong volume growth across all its lines of businesses. During FY2018, the Company launched various new products and variants to strengthen its business model and continue its growth momentum.

The Companyâs current provisioning standards are more stringent than RBI prudential norms.

In line with its conservative approach, the Company continues to strengthen its provisioning norms beyond the RBI regulations by accelerating the provisioning to an early stage of delinquencies based on the past experience and emerging trends.

The Companyâs loan losses and provisions increased from RS.804 crore in FY2017 to RS.1,030 crore in FY2018 taking into account the increased business. The Company ended FY2018 with a net NPA of 0.38%.

Operations

Detailed information on the operations of the different products of the Company and details on the state of affairs of the Company are covered in the âManagement Discussion and Analysisâ.

Extract of annual return

The extract of annual return as provided under section 92(3) the Companies Act, 2013, in the prescribed Form MGT-9 is annexed to this Report.

Number of meetings of the Board

Eight meetings of the Board were held during FY2018, as per details given in the annexed âCorporate Governance Reportâ.

Directorsâ responsibility statement

In compliance of section 134(5) of the Companies Act, 2013, the directors state that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

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

- the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- the directors have prepared the annual accounts on a going concern basis;

- the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

- the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

Declaration by independent directors

The independent directors have submitted the declaration of independence, as required under section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âthe Listing Regulationsâ).

Policy on directorsâ appointment and remuneration

The policy on directorsâ appointment and remuneration is given in the annexed âCorporate Governance Reportâ.

Particulars of loans, guarantees and investments

The Company, being a non-banking finance company registered with the RBI and engaged in the business of giving loans, is exempt from complying with the provisions of section 186 of the Companies Act, 2013 in respect of loans and guarantees. Accordingly, the disclosures of the loans given as required under the aforesaid section have not been made in this Report.

During FY2018, the Company made following significant strategic investments:

- One MobiKwik Systems Pvt. Ltd. (MobiKwik) - approximately RS.225 crore by subscribing to the equity shares and Series D cumulative compulsorily convertible preference shares.

- Bajaj Housing Finance Ltd. (a wholly owned subsidiary) - an amount of RS.1,200 crore by subscribing to 1,200,000,000 equity shares of the face value of RS.10 on rights basis.

Information regarding investments covered under the provisions of section 186 of the Companies Act, 2013, is detailed in the financial statements.

Related party transactions

During FY2018, transactions with related parties were entered with the approval of the Audit Committee pursuant to provisions of Companies Act, 2013 and the Listing Regulations.

The details of such transactions were placed before the Audit Committee for noting/review.

All related party transactions entered into during FY2018 were on an armâs length basis and in the ordinary course of business under the Companies Act, 2013 and not material under the Listing Regulations and hence did not require membersâ prior approval under the Companies Act, 2013 and the Listing Regulations. During FY2018, there were no related party transactions requiring disclosure under section 134 of the Companies Act, 2013.

A policy on materiality of related party transactions and dealing with related party transactions is placed on the Companyâs website https://www.bajajfinserv.in/finance-investor-relations-policies-and-documents and is also included in this Annual Report.

Material changes and commitments

Conservation of energy

The Company has taken, inter alia, following measures to reduce energy consumption:

- switched from conventional lighting systems to LED lights at most of the branches in metro areas.

- selecting and designing offices to facilitate maximum natural light utilisation.

Technology absorption

The details pertaining to technology absorption have been explained in the annexed âManagement Discussion and Analysisâ.

Foreign exchange earnings and outgo

During FY2018, the Company did not have any foreign exchange earnings and, foreign exchange outgo amounted to RS.31.54 crore (FY2017 RS.17.56 crore).

Risk management

The Board of Directors has adopted a risk management policy for the Company which provides for identification, assessment and control of risks which in the opinion of the Board may threaten the existence of the Company. The Management identifies and controls risks through a properly defined framework in terms of the aforesaid policy.

Corporate social responsibility

During FY2018, the Company spent RS.39.56 crore on corporate social responsibility (CSR).

Detailed information report on the CSR policy and the CSR initiatives taken during FY2018 is given in the annexed âAnnual Report on CSR activitiesâ.

Formal annual evaluation

Directors and key managerial personnel (KMP)

According to the provisions of the Companies Act, 2013, Rajeev Jain (DIN 01550158), Managing Director, retires from the Board by rotation this year and, being eligible, has offered his candidature for re-appointment.

Brief details of Rajeev Jain, Managing Director, who is seeking re-appointment are given in the notice of annual general meeting.

There was no change in the directors and KMP during the FY2018.

Significant and material orders

During FY2018, no significant and material orders were passed by any regulator or court or tribunal impacting the going concern status and Companyâs operations in future.

Adequacy of internal financial controls

The Company has documented its internal financial controls considering the essential components of various critical processes, physical and operational which include its design, implementation and maintenance along with periodical internal review of operational effectiveness and sustenance.

This ensures orderly and efficient conduct of its business, including adherence to Companyâs policies, safeguarding of its assets, prevention of errors, accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

The internal financial controls with reference to the financial statements were adequate and operating effectively.

Employee stock option scheme

During FY2018, there has been no change in the Employee Stock Option Scheme, 2009 (âthe ESOP schemeâ) of the Company. The ESOP Scheme is in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014 (âthe SBEB Regulationsâ).

Disclosures pertaining to the ESOP Scheme pursuant to the SBEB Regulations are placed on the Companyâs website https://www.bajajfinserv.in/finance-investor-relation-annual-reports Grant wise details of options vested, exercised and cancelled are provided in the notes to the standalone financial statements.

Deposits

During FY2018, the Company accepted fixed deposits (FDs) of RS.3,662.23 crore. FDs outstanding at the year end were RS.5,705.02 crore. As on 31 March 2018, there were six FDs amounting to RS.4.44 lakh which had matured and remained unclaimed.

Pursuant to provisions of the RBI Act, 1934, the Company has created a charge on statutory liquid assets amounting to RS.612.67 crore in favour of the trustee for FD holders.

During FY2018, the Company accepted inter corporate deposits (ICDs) of RS.2,377.33 crore.

ICDs outstanding as on 31 March 2018 were RS.1,863.98 crore.

Overall deposits outstanding as on 31 March 2018 were RS.7,569 crore.

During FY2018, there was no default in repayment of deposits or payment of interest thereon.

Credit rating

During FY2018, the Company retained or upgraded its credit ratings owing to high capital adequacy, strong promoter support, tightened credit acceptance criteria and robust asset liability management. During FY2018, the Company has been upgraded from âICRA AA (Positive)â to âICRA AAA (Stable)â for its long term debt programme from ICRA Ratings.

The Company enjoys the following ratings from various credit rating agencies.

Long term debt rating

- âCRISIL AAA/Stableâ for its long term borrowing programme, which comprises of

RS.22,052.80 crore for the non-convertible debenture (NCD) programme, RS.3,300 crore for the lower tier II bond/subordinate debt programme, RS.21,000 crore for its bank loan rating programme and âFAAA/Stableâ for the fixed deposit programme.

- âICRA AAA(Stable)â for its long term borrowing programme, which comprises of RS.3,238 crore for the NCD programme and RS.1,700 crore for the lower tier II bond/subordinate debt programme and âMAAA(Stable)â for the fixed deposit programme.

- âIND AAA/Stableâ for its long term borrowing programme, which comprises of RS.10,000 crore for the NCD programme, RS.2,000 crore for the subordinate debt programme and RS.30,000 crore for its bank loan rating programme.

- âCARE AAA/Stableâ for its long term borrowing programme, which comprises of RS.1,545 crore for the NCD programme, RS.3,455 crore for the subordinate debt programme.

Short term debt rating

- âCRISIL A1 â for its short-term debt programme with a programme size of RS.15,000 crore

- âCRISIL A1 â for its short-term bank loan facilities

- âICRA A1 â for its short-term debt programme with a programme size of RS.15,000 crore

- âIND A1 â for its short-term bank loan facilities

All of the above ratings indicate a high degree of safety with regard to timely payment of interest and principal.

RBI guidelines

The Company continues to fulfill all the norms and standards laid down by the RBI pertaining to non-performing assets, capital adequacy, statutory liquidity assets, etc. As against the RBI norm of 15%, the capital adequacy ratio of the Company was 24.71% as on 31 March 2018. In line with the RBI guidelines for asset liability management (ALM) system for NBFCs, the Company has an Asset Liability Committee which meets monthly to review its ALM risks and opportunities.

The Company is also in compliance with the NBFC - Corporate Governance (Reserve Bank) Directions, 2015.

Policy on dividend distribution

The policy on dividend distribution is given in the annexed âCorporate Governance Reportâ.

Presentation of financial statements

The financial statements of the Company for the year ended 31 March 2018 have been disclosed as per schedule III to the Companies Act, 2013.

Consolidated financial statements

The directors also present the audited consolidated financial statements, incorporating the duly audited financial statements of the subsidiaries, prepared in compliance with the Companies Act, 2013, Accounting Standard-21 and the Listing Regulations.

A separate statement containing the salient features of its subsidiaries in the prescribed Form AOC-1 is attached to the standalone financial statements.

Statutory disclosures

- A summary of the key financials of the Companyâs subsidiaries is included in this Annual Report.

A copy of audited financial statements for each of the subsidiary companies will be made available to the members of the Company, seeking such information at any point of time.

- The audited financial statements for each of the subsidiary companies will be made available for inspection by any member of the Company at its registered office during 10.00 a.m. to 12 noon.

- The financial results are placed on the Companyâs website https://www.bajajfinserv.in/ finance-investor-relations-financial-information

- Details as required under the provisions of section 197(12) of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, are annexed to this Report.

- Details as required under the provisions of section 197(12) of the Companies Act, 2013 read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, which form part of the Directorsâ Report, will be made available to any member on request, as per provisions of section 136(1) of the said Act.

- The directorsâ responsibility statement as required by section 134(5) of the Companies Act, 2013, appears in a preceding paragraph.

- Pursuant to the provisions of the Companies Act, 2013, no fraud was reported by auditors of the Company to the Audit Committee during FY2018.

- Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC regulations have been made in this Annual Report.

- Pursuant to RBI Master Direction-Information Technology Framework for the NBFC sector, the Company has constituted an IT Strategy Committee to review the IT strategies in line with the corporate strategies, board policy reviews, cyber security arrangements and any other matter related to IT governance.

- Cash Flow Statement for FY2018 is attached to the Balance Sheet.

- The Company has a policy on prevention of sexual harassment at the workplace. No case of sexual harassment was reported during FY2018.

Inclusion in NIFTY 50 Index

With effect from 29 September 2017, the Company has been included in the NIFTY 50 Index of National Stock Exchange of India Ltd.

Mint Corporate Strategy Award - âShapingâ category

During FY2018, BFL has been conferred the prestigious Mint Corporate Strategy Award - âShapingâ category in recognition of excellence in corporate governance.

The nominated firms are evaluated for one of the four strategic environments, namely - Classic, Adaptive, Shaping and Renewal. The parameters of evaluation were Gross sales (CAGR), Profit margin (%), Return on Capital Employed (ROCE) (%), Debt Equity Ratio (D/E) and Soft score.

Corporate governance

All Board members and Senior Management personnel have affirmed compliance with the code of conduct for FY2018. A declaration to this effect signed by the Managing Director of the Company is included in this Annual Report.

The Managing Director and Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as specified in the Listing Regulations.

A certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Business responsibility report

Pursuant to the provisions of the Listing Regulations, the Company is required to give Business Responsibility Report (âBRRâ) in the Annual Report.

As a green initiative, the BRR for FY2018 has been placed on the Companyâs website https://www.bajajfinserv.in/finance-investor-relation-annual-reports A physical copy of the BRR will be made available to any members on request.

Secretarial standards of ICSI

Pursuant to the approval from the Ministry of Corporate Affairs (MCA), the Institute of Company Secretaries of India (ICSI) has, on 14 June 2017, revised the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) effective from 1 October 2017.

The Company is compliant with the same.

EMI Network Card goes digital on the Bajaj Finserv Wallet App

Insta Credit

. With the Bajaj Finserv Wallet App, you can now transfer Rs. 5,000 to your Wallet balance using your digital EMI Network Card

Digital EMI Card

No more hassle of carrying the EMI Network Card every time you go shopping. Activate your digital EMI Network Card on the Wallet app and enjoy hassle free shopping on the EMI Network.

Debit & Credit Facility

From shopping to bill payments, the Bajaj Finserv Wallet App lets you transact with ease of a few simple steps

Increased Security

With the Bajaj Finserv Wallet App, you can block or unblock your EMI Network Card giving you added security against physical fraud

Auditors

Pursuant to the provisions of section 139 of the Companies Act, 2013, S R B C & CO LLP, Chartered Accountants, were appointed as statutory auditors of the Company at the 30th annual general meeting (AGM) of the Company for a period from the conclusion of the said AGM till the conclusion of the 35th AGM subject to ratification of their appointment by the members at every AGM held thereafter.

MCA vide its notification dated 7 May 2018, has brought into effect certain provisions of the Companies (Amendment) Act, 2017, thereby amending provisions of the Companies Act, 2013, including section 139 of the Act, whereby the requirement of ratification of appointment of statutory auditors at every subsequent AGM has been done away with.

However, pursuant to the provisions of Companies Act, 2013, a resolution to delegate the authority to the Board of Directors to fix the remuneration of statutory auditors of the Company for the years 2018-19 onwards is proposed in the notice of the ensuing AGM for the approval of the members.

The Audit Report submitted by S R B C & CO LLP, for FY2018 does not contain any qualification, reservation or adverse remark or disclaimer.

Secretarial auditor

Pursuant to the provisions of section 204 of the Companies Act, 2013, the Board has re-appointed Shyamprasad D Limaye, company secretary in practice (FCS No. 1587, CP No. 572), to undertake secretarial audit of the Company.

A report from the secretarial auditor in the prescribed Form MR-3 is annexed to this Report.

The same does not contain any qualification, reservation or adverse remark or disclaimer.

Acknowledgement

The Board of Directors takes this opportunity to express its sincere appreciation for the support and co-operation from its members, RBI and other regulators, banks, financial institutions and the trustees for debenture holders and FD holders.

The Board of Directors also places on record its sincere appreciation of the commitment and hard work put in by the Management and the employees of the Company and thanks them for yet another excellent year.

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Pune: 17 May 2018

Mar 31, 2017

The directors present their thirtieth Annual Report and the standalone and consolidated audited financial statements for FY2017.

Financial results

The highlights of the standalone financial results are as under:

(RS, In Crore)

Particulars	FY2017	FY2016	% change over FY2016

Income from operations	9,977.36	7,293.54	37
Other income	25.95	39.84	(35)
Total income	10,003.31	7,333.38	36
Expenses	2,464.69	1,821.40	35
Loan losses and provisions	818.19	542.85	51
Finance costs	3,803.37	2,926.86	30
Depreciation and amortization	71.16	56.34	26
CSR expenditure	28.38	21.36	33
Total expenditure	7,185.79	5,368.81	34
Profit before tax	2,817.52	1,964.57	43
Tax expense	980.97	686.05	43
Profit for the year	1,836.55	1,278.52	44
Balance brought forward from previous year	2,410.85	1,684.03
Profit available for appropriations	4,247.40	2,962.55
Appropriations
Transfer to Reserve Fund	(368.00)	(256.00)
Transfer to General Reserve	(184.00)	(128.00)
Transfer to Infrastructure Reserve	(3.50)	-
Final dividend to Qualified Institutional Buyers	-	(5.89)
Tax on final dividend to Qualified Institutional Buyers and ESOP Trust	_-	(1.28)
Adjustment of dividend to ESOP Trust	0.17	1.57
Interim dividend	-	(96.97)
Dividend tax on interim dividend	-	(19.74)
Proposed dividend	-	(37.71)
Provision for dividend tax on dividend	-	(7.68)
Balance carried to Balance Sheet	3,692.07	2,410.85

A summary of consolidated financial performance for FY2017 consolidating the results of wholly owned subsidiary Bajaj Housing Finance Ltd. (BHFL) along with its subsidiary Bajaj Financial Securities Ltd. (BFinsec) is given below. The operations of the subsidiaries in FY2017 were not significant and hence the consolidated profit of the Company almost equals its standalone profit.

Particulars	FY2017	FY2016

Total income	10,006.53	7,333.56
Interest and finance charges	3,803.71	2,926.85
Net interest income	6,202.82	4,406.71
Operating expenses	2,567.22	1,899.18
Loan losses and provisions	818.19	542.85
Profit before tax	2,817.41	1,964.68
Profit after tax	1,836.38	1,278.63

Performance and financial position of subsidiaries

During FY2017, there were no major business operations in BHFL and its subsidiary BFinsec.

The profit after tax for FY2017 of BHFL was H 1,169,643 as against H 529,939 for FY2016, for BFinsec the same was H 4,825,578 as against H 566,846 for FY2016.

Dividend

The directors recommend for consideration of the members at the ensuing annual general meeting, payment of dividend of RS, 3.60 per equity share of the face value of RS, 2 each (180%) for FY2017. The amount of dividend and tax thereon aggregate to RS, 238.26 crore.

Dividend paid (i.e. interim dividend of 180% and final dividend of 70%) for FY2016 was RS, 25 per share (250%) on face value of RS, 10 each. The amount of dividend and tax thereon aggregated to RS, 162.10 crore.

Increase in authorized share capital

During FY2017, the Company increased its authorized share capital from RS, 75 crore consisting of 75,000,000 equity shares of face value of RS, 10 each to RS, 150 crore consisting of 750,000,000 equity shares of face value of RS, 2 each.

Share capital

During FY2017, pursuant to the approval of the Board of Directors and members of the Company, the following changes have taken place in the share capital of the Company:

1. Sub division of equity shares

Each equity share of face value of H 10 was sub divided into five equity shares of face value of H 2 each, as a result, the number of equity shares in the authorized share capital, issued share capital and paid-up capital has increased by five times.

2. Allotment of equity shares

a) 269,360,950 bonus equity shares were allotted in the ratio of one fully paid bonus equity share of the face value of H 2 each for every one equity share of the face value of H 2 each held as on the record date, as a result the number of equity shares in the issued share capital and paid-up share capital has increased two times.

b) 9,250,000 equity shares (as adjusted for sub division and bonus shares) of the face value of H 2 each were allotted to promoter Bajaj Finserv Ltd. on conversion of warrants and receipt of balance 75% of the issue price amounting to RS, 306.08 crore.

c) 150 equity shares (as adjusted for sub division and bonus shares) of the face value of

H 2 each were allotted in respect of the rights entitlement (in rights issue made in 2013) held in abeyance on 1,000 equity shares (as adjusted for sub division and bonus shares) transferred from the unclaimed suspense account.

d) 1,918,040 equity shares of the face value of RS, 2 each were allotted to the trustees of BFL Employee Welfare Trust under the Employee Stock Options Scheme, 2009.

As on 31 March 2017, paid-up share capital of the Company stood at RS, 1,099,780,180 consisting of 549,890,090 equity shares of face value of RS, 2 each fully paid-up.

Increase in borrowing powers

During FY2017, pursuant to section 180(1)(c) of the Companies Act, 2013, the Company increased the limit on the borrowing powers of the Board of Directors from RS, 50,000 crore to RS, 75,000 crore to meet its growing business needs.

Working results

The receivables under financing activity as on 31 March 2017 were RS, 56,832 crore as compared to RS, 42,756 crore as on 31 March 2016, an increase of 33% over the previous year.

Total income during FY2017 increased to RS, 10,003 crore from RS, 7,333 crore during FY2016, an increase of 36% over the previous year.

The profit before tax for FY2017 was RS, 2,818 crore, as against RS, 1,965 crore for FY2016, an increase of 43% over the previous year. The profit after tax for FY2017 was RS, 1,837 crore as compared to RS, 1,279 crore for FY2016, an increase of 44% over the previous year. This has been due to the Company''s healthy net interest margins, operating efficiencies and prudent risk management.

The Company had an excellent year aided by strong volume growth across all its lines of businesses. During FY2017, the Company launched various new products and variants to strengthen its business model and continue its growth momentum.

The Company''s current provisioning standards are more stringent than Reserve Bank of India (RBI) prudential norms. In line with its conservative approach, the Company continues to strengthen its provisioning norms beyond the RBI regulations by accelerating the provisioning to an early stage of delinquencies based on past experience and emerging trends.

The Company''s loan loss and provisions increased from RS, 543 crore in FY2016 to RS, 818 crore in FY2017 taking into account the increased business. The Company ended FY2017 with a net NPA of 0.44%.

Operations

The operations of the Company are elaborated in the annexed ''Management Discussion and Analysis Report''.

Extract of annual return

An extract of annual return as provided under section 92(3) of the Companies Act, 2013, in the prescribed Form MGT-9 is annexed to this Report.

Number of meetings of the Board

Seven meetings of the Board were held during FY2017, as per details given in the annexed ''Corporate Governance Report''.

Directors'' responsibility statement

In compliance with section 134(5) of the Companies Act, 2013, the directors state that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

- the directors have prepared the annual accounts on a going concern basis;

- the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

- the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

Declaration by independent directors

Policy on directors'' appointment and remuneration

The policy on directors'' appointment and remuneration is given in the annexed ''Corporate Governance Report''.

Particulars of loans, guarantees and investments

The Company, being a non-banking finance company registered with the Reserve Bank of India and engaged in the business of giving loans, is exempt from complying with the provisions of section 186 of the Companies Act, 2013, in respect of loans and guarantees. Accordingly, the disclosures of the loans given, as required under the aforesaid section, have not been made in this Report.

Information regarding investments covered under the provisions of section 186 of the said Act are detailed in the financial statements.

Related party transactions

During FY2017, the Company entered into transactions with related parties pursuant to approval of the Audit Committee. The details of such transactions were placed before the Committee for noting/review.

All related party transactions entered into during FY2017 were on an arm''s length basis and in the ordinary course of business under the companies Act, 2013 and not material under Securities and Exchange Board of India (Listing Obligations and Disclosures Requirements) Regulations, 2015 (the Listing Regulations) and hence did not require members'' prior approval under the Companies Act, 2013 and the Listing Regulations. During FY2017, there were no related party transactions requiring disclosure under section 134 of the Companies Act, 2013.

A policy on materiality of related party transactions and dealing with related party transactions is placed on the Company''s website https://www.bajajfinserv.in/finance/investor-relations/ policies-and-documents.aspx and is also included in the Annual Report.

Material changes and commitments

Conservation of energy and technology absorption

The Company, being a non-banking finance company (NBFC), does not have any manufacturing activity. The directors, therefore, have nothing to report on conservation of energy and technology absorption.

Foreign currency

Foreign currency expenditure amounting to RS, 17.56 crore (FY2016 RS, 14.83 crore) was incurred during FY2017. The Company did not have any foreign exchange earnings.

Risk management

The Board of Directors has adopted a risk management policy for the Company which provides for identification, assessment and control of risks that in the opinion of the Board may threaten the existence of the Company. The Management identifies and controls risks through a properly defined framework in terms of the aforesaid policy.

Corporate social responsibility

During FY2017, the Company spent RS, 28.38 crore on corporate social responsibility (CSR).

A detailed information report on the CSR policy and the CSR initiatives taken during FY2017 is given in the annexed ''Annual Report on CSR activities''.

Formal annual evaluation

Information on the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual directors is given in the annexed ''Corporate Governance Report''.

Directors and Key Managerial Personnel (KMP)

According to the Companies Act, 2013, Madhur Bajaj (DIN 00014593), non-executive director, retires from the Board by rotation this year and, being eligible, has offered his candidature for re-appointment.

Brief details of Madhur Bajaj (DIN 00014593), non-executive director who is seeking re-appointment are given in the notice of annual general meeting.

There was no change in the directors and KMP during FY2017.

Significant and material orders

During FY2017, the Company has received an order from the Commissioner of Service Tax, Pune confirming the demand of service tax of H 644.65 crore on the ''interest subsidy'' along with interest of RS, 303.50 crore and penalty of RS, 198.95 crore aggregating to RS, 1,147.10 crore. The Company is in the process of filing an appeal before the Central Excise and Service Tax Tribunal, Mumbai.

The Company had taken opinions in the past from eminent counsels and tax consultants on the taxability of the interest subsidy and they had confirmed that the same is not liable to service tax in the hands of the Company.

Adequacy of internal financial controls

The Company has documented its internal financial controls considering the essential components of various critical processes, physical and operational which include its design, implementation and maintenance along with periodic internal review of operational effectiveness and sustenance.

This ensures orderly and efficient conduct of its business, including adherence to Company''s policies, safeguarding of its assets, prevention of errors, accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

The internal financial controls with reference to the financial statements were adequate and operating effectively.

Employee stock option scheme

Disclosures pertaining to the Employee Stock Option Scheme, 2009 of the Company pursuant to the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 are placed on the Company''s website https://www.bajajfinserv.in/finance/investor-relations/annual-reports.aspx Grant wise details of options vested, exercised and cancelled are provided in the notes to the standalone financial statements.

Deposits

During FY2017, the Company accepted fixed deposits (FDs) of RS, 2,353.75 crore. FDs outstanding at the yearend were RS, 3,518.97 crore. As on 31 March 2017, there were four FDs amounting to RS, 0.60 lakh which had matured and remained unclaimed.

Pursuant to the provisions of the Reserve Bank of India Act, 1934, the Company has created a charge on statutory liquid assets amounting to RS, 557.38 crore in favour of the trustee for FD holders.

During FY2017, the Company accepted Inter Corporate Deposits (ICDs) of RS, 764.27 crore.

ICDs outstanding as on 31 March 2017 were RS, 609.18 crore.

Overall deposits outstanding as on 31 March 2017 were RS, 4,128.15 crore.

During FY2017, there was no default in repayment of deposits or payment of interest thereon.

Credit rating

Despite a tough economic environment, the Company retained or upgraded its credit ratings owing to high capital adequacy, strong promoter support, tightened credit acceptance criteria and robust asset liability management. During FY2017, the Company has been assigned "CARE AAA/Stable" for its long term debt programme from CARE Ratings.

CRISIL and ICRA have reaffirmed the highest rating of "FAAA/Stable" and "MAAA(Stable)" for the fixed deposit programme of the Company. These ratings indicate the highest degree of safety with regard to timely payment of interest and principal. The Company is amongst the few NBFCs in India which enjoys the highest rating for its fixed deposit programme.

The Company also enjoys the highest rating of "CRISIL A1 " from CRISIL and "ICRA A1 " from ICRA for its short term debt programme for RS, 10,000 crore from each rating agency.

CRISIL has upgraded the Company''s long term debt programme from "CRISIL AA /Positive" to "CRISIL AAA/Stable" in October 2016 with a size of RS, 10,052.80 crore for the non-convertible debenture (NCD) programme. The Company has also been assigned "CARE AAA/Stable" for its long term debt programme from CARE Ratings with a size of RS, 2,545 crore and

"IND AAA/Stable" rating by INDIA RATINGS witRs, a size of RS, 10,000 crore for the NCD programme. ICRA has revised the rating outlook for the long term debt programme from "ICRA AA (Stable)" to "ICRA AA (Positive)" in July 2016 for a size of RS, 8,000 crore for the NCD programme. All of the above ratings indicate a high degree of safety with regard to timely payment of interest and principal.

The Company has also been assigned "IND AAA/Stable" by INDIA RATINGS, "CRISIL AAA/Stable" rating by CRISIL, "CARE AAA/Stable" by CARE Ratings and "[ICRA] AA /Positive" by ICRA for RS, 2,000 crore, RS, 2,700 crore, RS, 2,455 crore and RS, 1,700 crore respectively for the subordinated debt programme.

As regards the bank loan ratings for the bank facilities stipulated by RBI, as a part of BASEL II guidelines, INDIA RATINGS has assigned "IND AAA/Stable" and CRISIL has assigned "CRISIL AAA/Stable" rating for the Company''s cash credit/working capital demand loan and long-term bank facilities. INDIA RATINGS has assigned "IND A1 " rating and CRISIL has assigned "CRISIL A1 " rating for the short term bank facilities. The cumulative rating for the bank loan programme is RS, 30,000 crore under INDIA RATINGS and RS, 21,000 crore under CRISIL Ratings.

RBI guidelines

The Company continues to fulfill all the norms and standards laid down by the RBI pertaining to non-performing assets, capital adequacy, statutory liquidity assets, etc. As against the RBI norm of 15%, the capital adequacy ratio of the Company was 20.30% as on 31 March 2017. In line with the RBI guidelines for asset liability management (ALM) system for NBFCs, the Company has an Asset Liability Committee which meets monthly to review its ALM risks and opportunities.

The Company is also in compliance with the NBFC - Corporate Governance (Reserve Bank) Directions, 2015.

Policy on dividend distribution

The policy on dividend distribution is given in the annexed ''Corporate Governance Report''.

Presentation of financial statements

The financial statements of the Company for the year ended 31 March 2017 have been disclosed as per schedule III to the Companies Act, 2013.

Consolidated financial statements

A separate statement containing the salient features of its subsidiaries in the prescribed Form AOC-1 is attached to the standalone financial statements.

Statutory disclosures

- A summary of the key financials of the Company''s subsidiaries is included in this Annual Report. A copy of audited financial statements for each of the subsidiary companies will be made available to the members of the Company seeking such information at any point of time.

- The audited financial statements for each of the subsidiary companies will be kept open for inspection by any member of the Company at its registered office during

10.00 a.m. to 12 noon.

- The financial results are placed on the Company''s website https://www.bajajfinserv.in/finance/investor-relations/annual-reports.aspx

- Details as required under the provisions of section 197(12) of the Companies Act, 2013 read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, which form part of the Directors'' Report, will be made available to any member on request, as per the provisions of section 136(1) of the said Act.

- The directors'' responsibility statement as required under section 134(5) of the Companies Act, 2013 appears in a preceding paragraph.

- Pursuant to the provisions of the Companies Act, 2013 no fraud was reported by auditors of the Company to the Audit Committee during FY2017.

- Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC Regulations have been made in this Annual Report.

- Cash Flow Statement for FY2017 is attached to the Balance Sheet.

- The Company has a policy on prevention of sexual harassment at the workplace. No case of sexual harassment was reported during FY2017.

Best Audit Committee award 2016

The Asian Centre for Corporate Governance and Sustainability has awarded the ''Best Audit Committee Award 2016'' to the Company in recognition of its commitment to the best practices of good governance.

Corporate governance

Pursuant to the Listing Regulations, a separate section titled ''Corporate Governance'' has been included in this Annual Report, along with the Reports on ''Management Discussion and Analysis'' and ''General Shareholder Information''.

All Board members and Senior Management personnel have affirmed compliance with the code of conduct for FY2017. A declaration to this effect signed by the Managing Director of the Company is included in this Annual Report.

The Managing Director and Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as specified in the Listing Regulations.

A certificate from the auditors of the Company regarding compliance with the conditions of corporate governance is annexed to this Report.

Business responsibility report

Pursuant to the provisions of the Listing Regulations, the Company, being in the top 500 companies by market capitalization on National Stock Exchange of India Ltd. and BSE Ltd. as on 31 March 2016, is required to give a ''Business Responsibility Report'' (the BRR) in the Annual Report.

As a green initiative the BRR for FY2017 has been hosted on the Company''s website https://www.bajajfinserv.in/finance/investor-relations/annual-reports.aspx A physical copy of the BRR will be made available to members on request.

Secretarial standards of ICSI

Pursuant to the approval from the Ministry of Corporate Affairs, the Institute of Company Secretaries of India (ICSI) has, on 23 April 2015, notified the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) effective from 1 July 2015.

The Company is compliant with the same.

Auditors

Pursuant to the provisions of section 139 of the Companies Act, 2013, Dalal & Shah LLP, Chartered Accountants, were appointed as statutory auditors of the Company at the 27th annual general meeting (AGM) of the Company for a period from the conclusion of the said AGM till the conclusion of the 30th AGM subject to ratification of their appointment by the members at every AGM held thereafter. The term of the existing auditors expires after the conclusion of the ensuing AGM.

A resolution for appointment of S R B C & CO LLP, Chartered Accountants, as auditors and fixation of their remuneration for the year 2017-18 is proposed in the notice of the ensuing AGM for the approval of the members.

The Company has received from S R B C & CO LLP, a certificate to the effect that their appointment shall be in accordance with the prescribed conditions and that the firm is not disqualified under the Companies Act, 2013.

The Audit Report submitted by Dalal & Shah LLP, for FY2017 does not contain any qualification, reservation or adverse remark or disclaimer.

Secretarial auditor

A report from the secretarial auditor in the prescribed Form MR-3 is annexed to this Report.

The same does not contain any qualification, reservation or adverse remark or disclaimer.

Acknowledgement

The Board of Directors takes this opportunity to express its sincere appreciation for the support and co-operation from its members, Reserve Bank of India and other regulators, banks, financial institutions and the trustees for debenture holders and FD holders.

The Board of Directors also places on record its sincere appreciation of the commitment and hard work put in by the Management and employees of the Company and thanks them for yet another excellent year.

On behalf of the Board of Directors

Rahul Bajaj Chairman

Pune: 17 May 2017

Mar 31, 2015

Dear Members,

The directors present their twenty eighth Annual Report and the audited financial statements for FY2015.

Financial results

The highlights of the standalone financial results are as under:

(Rs. In Crore) Particulars FY2015 FY2014

Income from Operations 5,381.80 4,032.44

Other Income 36.43 41.91

Total Income 5,418.23 4,074.35

Expenses 1,392.83 1,121.93

Loan Losses and Provisions 384.56 258.83

Finance Costs 2,248.30 1,573.24

Depreciation and amortisation 35.60 29.19

Total Expenditure 4,061.29 2,983.19

Profit Before Taxation 1,356.94 1,091.16

Tax Expenses 459.07 372.15

Profit for the year after Taxation 897.87 719.01

Balance brought forward from previous year 1,171.91 764.36

Profit available for appropriations 2,069.78 1,483.37

Appropriations:

Transfer to Reserve Fund (185.00) (144.00)

Transfer to General Reserve (90.00) (72.00)

Transfer to Infrastructure Reserve (2.10) (1.60)

Provision for Proposed Dividend (90.27) (80.23)

Provision for Dividend Tax (18.38) (13.63)

Balance carried to Balance Sheet 1,684.03 1171.91

A summary of consolidated financial performance for FY2015 consolidating the results of wholly owned subsidiary Bajaj Housing Finance Limited alongwith its subsidiary Bajaj Financial Securities Limited is given below. Since the subsidiary was acquired in FY2015 there are no comparatives for FY2014. The operations of the subsidiaries in FY2015 were not significant and hence the consolidated profit of the Company almost equals its standalone profit.

(Rs. In Crore)

Particulars FY2015

Total income 5,418.28

Interest and finance charges 2,248.27

Net interest income 3,170.01

Operating expenses 1,428.50

Loan losses and provisions 384.56

Profit before tax 1,356.95

Profit after tax 897.88

On 1 November 2014, the Company acquired 100% shareholding in Bajaj Financial Solutions Limited [name changed to Bajaj Housing Finance Limited (BHFL) w.e.f. 14 November 2014] from Bajaj Finserv Limited. With the said acquisition, Bajaj Financial Securities Limited (BFinsec), being wholly owned subsidiary of BHFL, has also become a wholly owned subsidiary of the Company.

Performance and financial position of subsidiaries

There were no major business operations in BHFL (and its subsidiary BFinsec) in FY2015.

The Profit after tax in FY2015 of BHFL was Rs. 78,920 (FY2014: Loss of Rs. 1,118,140) and of BFinsec was Rs. 154,642 (FY2014: loss of Rs. 988,451).

Dividend

The directors recommend for the consideration of the members at the ensuing annual general meeting, payment of dividend of Rs.18 per share of the face value of Rs.10 (180%) for FY2015. The amount of dividend and tax thereon aggregate to Rs. 108.65 crore.

Dividend paid for FY2014 was Rs.16 per share (160%). The amount of dividend and tax thereon aggregated to Rs. 93.86 crore.

Increase in borrowing powers

During FY2015, pursuant to section 180(1)(c) of the Companies Act, 2013 the Company increased the limit on the borrowing powers of the Board of Directors from Rs. 30,000 crore to Rs. 50,000 crore, to meet its growing business needs.

Working results

The receivables under financing activity as on 31 March 2015 were Rs. 31,199 crore as compared to Rs. 22,971 crore as on 31 March 2014, an increase of 36% over the previous year.

Total income during FY2015 increased to Rs. 5,418 crore from Rs. 4,074 crore during FY2014, an increase of 33% over the previous year.

The profit before tax for FY2015 was Rs. 1,357 crore, as against Rs. 1,091 crore in FY2014, an increase of 24% over the previous year. The profit after tax for the year was Rs. 898 crore as compared to Rs.719 crore in FY2014, an increase of 25% over the previous year. This has been due to the Company''s healthy net interest margins, operating efficiencies and prudent risk management.

The Company''s current provisioning standards are more stringent than Reserve Bank of India (RBI) prudential norms. In line with its conservative approach, the Company continues to strengthen its provisioning norms beyond the RBI regulation by accelerating the provisioning to an early stage of delinquencies based on the past experience and emerging trends.

The Company had an excellent year aided by strong volume growth in Consumer lending and SME lending. Commercial lending declined due to the Company''s cautious stance on the infrastructure sector and also due to its decision to exit the Construction Equipment lending business. During FY2015, the Company launched various new products and variants to strengthen its business model and continue its strong growth momentum.

The Company''s loan loss and provisions increased from Rs.259 crore in FY2014 to Rs.385 crore in FY2015 taking into account the increased business. The Company ended FY2015 with a net NPA of 0.45%.

Share capital

During FY2015, the Company allotted 4,925 equity shares to the trustees of BFL Employee Welfare Trust under Employee Stock Option Scheme, 2009.

As on 31 March 2015, the paid-up share capital of the Company stood at Rs. 501,472,590 consisting of 50,147,259 equity shares of face value of Rs.10 each fully paid-up.

Operations

The operations of the Company are elaborated in the annexed ''Management Discussion and Analysis Report''.

Conservation of energy and technology absorption

The Company, being a non-banking finance company (NBFC), does not have any manufacturing activity. The directors, therefore, have nothing to report on ''conservation of energy and technology absorption''.

Foreign currency

Foreign currency expenditure amounting to Rs. 6.36 crore (FY2014 Rs. 4.41 crore) was incurred during FY2015. The Company did not have any foreign exchange earnings.

Employee stock option scheme

Disclosures pertaining to the Employee Stock Option Scheme 2009 of the Company are set out as an annexure to this Report.

Fixed deposits

During FY2015, the Company accepted fixed deposits of Rs. 828.28 crore. Fixed deposits outstanding at the year-end were Rs. 983.47 crore. As on 31 March 2015, there were no deposits which had matured but remained unclaimed.

During FY2015, there was no default in repayment of deposits or payment of interest thereon.

Adequacy of internal financial controls

Internal financial controls with reference to the financial statements were adequate and operating effectively.

Credit rating

Despite a tough economic environment, the Company retained all its credit ratings owing to high capital adequacy, strong promoter support, tightened credit acceptance criteria and robust asset- liability management.

CRISIL has re-affirmed the highest rating of "FAAA/Stable" for the fixed deposit programme of the Company. ICRA has also assigned "MAAA/Stable" rating to the fixed deposit programme of the Company. These ratings indicate highest degree of safety with regard to timely payment of interest and principal. The Company is one of the very few NBFCs which enjoys the highest rating for its fixed deposit programme.

The Company also enjoys the highest rating of "CRISIL A1 " from CRISIL and "(ICRA) A1 " from ICRA for its short term debt programme for Rs.5,500 crore from each rating agency.

The long term non-convertible debentures have been assigned "CRISIL AA /Stable" rating by CRISIL and "[ICRA] AA (Stable)" by ICRA indicating the high degree of safety with regard to timely payment of interest and principal for an amount of Rs.7,350 crore and Rs.5,000 crore respectively.

The Company has also been assigned "CRISIL AA /Stable" rating by CRISIL and "[ICRA] AA (Stable)" by ICRA for Rs.700 crore lower tierÂII bond programme and Rs. 1,000 crore each for the subordinated debt programme.

As regards the bank loan ratings tor the bank facilities stipulated by RBI, as a part of BASEL II guidelines, CRISIL has assigned "CRISIL AA /Stable" rating for the Company''s cash credit/working capital demand loan and long term bank facilities and "CRISIL A1 " rating for the short term bank facilities. The cumulative rating for the bank loan programme is Rs. 16,000 crore.

RBI guidelines

The Company continues to fulfill all the norms and standards laid down by the Reserve Bank of India (RBI) pertaining to non-performing assets, capital adequacy, statutory liquidity ratio etc. As against the RBI norm of 15%, the capital adequacy ratio of the Company was 17.97% as on 31 March 2015.

In line with the RBI guidelines for asset-liability management (ALM) system for NBFCs, the Company has an Asset-Liability Committee which meets monthly to review its ALM risks and opportunities.

Corporate social responsibility

Detailed information report on corporate social responsibility policy developed and implemented by the Company on CSR initiatives taken during the year pursuant to section 135 of the Companies Act, 2013 is given in the annexed Annual Report on CSR activities.

Formal annual evaluation

During FY2015, evaluation of the performance of the Board, its Committees and individual directors was done on the basis of evaluation criteria approved by the Nomination and Remuneration Committee at its meeting held on 14 October 2014. Rating sheets were circulated to the directors for the purpose of evaluation of performance of the Board, its Committees and individual directors.

A summary of performance evaluation of the Board, its Committees and individual directors was prepared on the basis of rating sheets received from the individual directors and the same was placed before the Board.

Directors and Key Managerial Personnel (KMP)

At the annual general meeting held on 16 July 2014, Gita Piramal (DIN 01080602) was appointed as an independent director of the Company pursuant to section 149 of the Companies Act, 2013 for a term of five consecutive years.

The Board of Directors, at its meeting held on 23 March 2015, appointed Rajeev Jain (DIN 01550158) as an additional director with effect from 1 April 2015 and as a Managing Director for a period

fof five years from that date. It is proposed to appoint Rajeev Jain as a director liable to retire by rotation at the extra ordinary general meeting to be held on 20 May 2015. The Company has received a notice under section 160 of the Companies Act, 2013, from Rajeev Jain, in respect of his candidature as a director.

According to the Companies Act, 2013, at least two-thirds of the total number of directors (excluding independent directors) shall be liable to retire by rotation. Rajiv Bajaj, director (DIN 00018262), being the longest in the office amongst the three directors liable to retire by rotation, retires from the Board by rotation this year and, being eligible, has offered his candidature for re-appointment. Necessary resolution for this purpose is being proposed in the notice of the ensuing annual general meeting for the approval of the members.

As required under clause 49 of the Listing Agreement with the stock exchanges, the information on the particulars of director proposed for re-appointment has been given in the notice of annual general meeting.

The Company has following KMP:

1. Rajeev Jain, Managing Director

2. Rajesh Viswanathan, Chief Financial Officer (appointed w.e.f. 1 August 2014)

3. Anant Damle, Company Secretary

Number of meetings of the Board

There were eight meetings of the Board held during the year, details of which are given in the annexed ''Corporate Governance Report''.

Directors'' responsibility statement

In compliance of section 134(5) of the Companies Act, 2013, the directors state that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

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

- the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- the directors have prepared the annual accounts on a going concern basis;

fÂ» the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and - the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

Declaration by independent directors

The independent directors have submitted the declaration of independence, as required under section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in section 149(6) of the Companies Act, 2013.

Extract of annual return

The extract of annual return as provided under sub-section (3) of section 92 of the Companies Act, 2013, in the prescribed form MGT 9 is annexed to this Report.

Policy on directors'' appointment and remuneration

The policy on directors'' appointment and remuneration is given in the Annual Report under a separate section of ''Corporate Governance Report''.

Presentation of financial statements

The financial statements of the Company for the year ended 31 March 2015 have been disclosed as per schedule III to the Companies Act, 2013.

Consolidated financial statements

The directors also present the audited consolidated financial statements incorporating the duly audited financial statements of the subsidiaries and as prepared in compliance with the Accounting Standards and Listing Agreement as prescribed by Securities and Exchange Board of India.

A separate statement containing the salient features of its subsidiaries in the prescribed form AOC-1 is attached to the standalone financial statements.

Statutory disclosures

The summary of the key financials of the Company''s subsidiaries is included in this Annual Report. A copy of audited financial statements for each of the subsidiary companies will be made available to the members of the Company, seeking such information at any point of time. The audited financial statements for each of the subsidiary companies will be kept for inspection by any member of the Company at its registered office during business hours. The same are placed on the Company''s website www.bajajfinserv.in/finance

As required under the provisions of section 197(12) of the Companies Act, 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, particulars of employees are set out in the annexure to the Directors'' Report. As per the provisions of section 136 of the said Act, this Report is being sent to all the members excluding the particulars of the employees. These particulars will be made available to any member on request.

Directors'' responsibility statement as required by section 134(5) of the Companies Act, 2013 appears in a preceding paragraph.

Certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC regulations have been made in this Annual Report.

A Cash Flow Statement for FY2015 is attached to the Balance Sheet.

The Company has a policy on prevention of sexual harassment at workplace. There was no case of sexual harassment reported during the year under review.

Particulars of loans, guarantees and investments

The Company, being a non-banking finance company registered with the Reserve Bank of India and engaged in the business of giving loans, is exempt from complying with the provisions of section 186 of the Companies Act, 2013. Accordingly, the disclosures of the loans given as required under the aforesaid section have not been given in this Report.

Related party transactions

Transactions with related parties, during the year under review, were entered into pursuant to the prior/omnibus approval of the Audit Committee. The details of such transactions were placed before the Committee for noting/review.

All related party transactions which were entered into during the year were on an arm''s length basis, in the ordinary course of business and not material under clause 49 of Listing Agreement and hence did not require members'' prior approval under the Companies Act, 2013 and Listing Agreement. During the year there were no related party transactions which require disclosure under section 134 of the Companies Act, 2013.

A policy on materiality of related party transactions and dealing with related party transactions is placed on the website of the Company www.bajajfinserv.in/finance

Raising of funds

The Board of Directors, at its meeting held on 21 April 2015, has approved, inter alia, the following proposals subject to the approval of the members at the extra ordinary general meeting scheduled on 20 May 2015: 1. Issue of securities for an aggregate amount up to Rs. 1,400 crore through Qualified Institutions Placement in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 to Qualified Institutional Buyers. 2. Preferential issue of warrants up to 925,000 warrants convertible into equivalent number of equity shares to Bajaj Finserv Limited, the promoter, in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Risk management

The Board of Directors, at its meeting held on 14 May 2014, has adopted risk management policy for the Company which provides for identification, assessment and control of risks which in the opinion of the Board may threaten the existence of the Company. The Management identifies and controls risks through a properly defined framework in terms of the aforesaid policy.

Corporate governance

Pursuant to clause 49 of the Listing Agreement with stock exchanges, a separate section titled ''Corporate Governance'' has been included in this Annual Report, along with the Reports on ''Management Discussion and Analysis'' and ''General Shareholder Information''.

All Board members and Senior Management personnel have affirmed compliance with the code of conduct for FY2015. A declaration to this effect signed by the Managing Director of the Company is contained in this Annual Report.

The Managing Director and Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as specified in clause 49 of the Listing Agreement and the said certificate is included in this Annual Report.

Secretarial standards of ICSI

Pursuant to the approval from the Ministry of Corporate Affairs, the Institute of Company Secretaries of India (ICSI) has on 23 April 2015, notified the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) to be effective from 1 July 2015. The Company is complying with the same.

Auditors

Pursuant to the provisions of section 139 of the Companies Act, 2013, Dalal & Shah, Chartered Accountants, were appointed as statutory auditors of the Company at the 27th annual general meeting (AGM) of the Company for a period from the conclusion of the said AGM till the conclusion of the 30th AGM subject to ratification of their appointment by the members at every AGM held thereafter. A resolution for ratification of appointment of Dalal & Shah, Chartered Accountants, as auditors for the period from the conclusion of the ensuing 28th AGM till the conclusion of the 29th AGM and for fixation of their remuneration for the year 2015-16 is being proposed in the notice of the ensuing AGM for the approval of the members.

The Company has received from Dalal & Shah a written consent for ratification of their appointment from the conclusion of the 28th AGM till the conclusion of the 29th AGM and a certificate to the effect that their appointment shall be in accordance with the prescribed conditions and that the firm is not disqualified under the Companies Act, 2013.

The Audit Report does not contain any qualification, reservation or adverse remark or disclaimer.

Secretarial auditor

Pursuant to the provisions of section 204 of the Companies Act, 2013, the Board has appointed Shyamprasad D. Limaye, (Membership No. 1587) company secretary in practice, to undertake secretarial audit of the Company.

A report from secretarial auditor is annexed to this Report. The same does not contain any qualification, reservation or adverse remark or disclaimer.

Acknowledgement

The Board of Directors takes the opportunity to express its sincere appreciation for the support and co-operation from its members, Reserve Bank of India, banks, financial institutions and the trustees for debenture holders and FD holders.

The Board of Directors also places on record its sincere appreciation of the commitment and hard work put in by the Management and employees of the Company and thanks them for another

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Pune. 20 May 2015

Mar 31, 2014

The directors present their twenty seventh Annual Report and the audited statement of accounts for FY2014. Since this report pertains to financial year that commenced prior to 1 April 2014 the contents herein are governed by the relevant provisions/schedules/rules of the Companies Act, 1956, in compliance with General Circular No.08/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs.

Business performance

The gross deployments of the Company for FY2014 were Rs. 26,024 crore as against Rs. 19,367 crore for FY2013.

Financial results

(Rs. In Crore) Particulars FY2014 FY2013

Income from Operations 4,031.42 3,092.01

Other Income 41.91 17.65

Total Income 4,073.33 3,109.66

Expenses 1,121.93 831.07

Loan Losses and Provisions 257.81 181.75

Finance Costs 1,573.24 1,205.68

Depreciation 29.19 19.56

Total Expenditure 2,982.17 2,238.06

Profit Before Taxation 1,091.16 871.60

Tax Expenses 372.15 280.29

Profit for the year after Taxation 719.01 591.31

Balance brought forward from previous year 764.36 441.31

Profit available for appropriations 1,483.37 1,032.62

Appropriations:

Transfer to Reserve Fund (144.00) (119.00)

Transfer to General Reserve (72.00) (60.00)

Transfer to Infrastructure Reserve (1.60) (1.90)

Provision for Proposed Dividend (80.23) (74.67)

Provision for Dividend Tax (13.63) (12.69)

Balance carried to Balance Sheet 1,171.91 764.36

Dividend

The directors recommend for the consideration of the members at the ensuing annual general meeting, payment of dividend of Rs.16 per share of the face value of Rs.10 (160%) for FY2014. The amount of dividend and tax thereon aggregate to Rs. 93.86 crore.

Dividend paid for FY2013 was Rs.15 per share (150%). The amount of dividend and tax thereon aggregated to Rs. 87.36 crore.

Increase in borrowing powers

During FY2014, pursuant to section 180(1)(c) of the Companies Act, 2013 and the Companies (Passing of the Resolution by Postal Ballot) Rules, 2011, the Company increased the limit on the borrowing powers of the Board of Directors from Rs. 20,000 crore to Rs. 30,000 crore, to meet its growing business needs.

Working results

The Company, during FY2014, deployed an amount of Rs.26,024 crore. As against this, during FY2013, the total amount deployed was Rs. 19,367 crore.

The receivables under financing activity as on 31 March 2014 were Rs.22,971 crore as compared to Rs. 16,744 crore as on 31 March 2013, an increase of 37% over the previous year.

Total income during FY2014 increased to Rs. 4,073 crore from Rs.3,110 crore during FY2013, an increase of 31% over the previous year.

The profit before tax for FY2014 was Rs. 1,091 crore, as against Rs. 872 crore in FY2013, an increase of 25% over the previous year. The profit after tax for the year was Rs.719 crore as compared to Rs.591 crore in FY2013, an increase of 22% over the previous year. This has been due to the Company''s healthy net interest margins, operating efficiencies and prudent risk management.

The Company''s current provisioning standards are more stringent than Reserve Bank of India (RBI) prudential norms. In line with its conservative approach, the Company continues to strengthen its provisioning norms beyond the RBI regulation by accelerating the provisioning to an early stage of delinquencies based on the past experience and emerging trends. Consequently, the additional provision over RBI norms and existing provisioning policies aggregates Rs.38.4 crore for FY2014.

The Company had an excellent year aided by strong volume growth in consumer lending and SME lending. Commercial lending declined due to the Company''s cautious stance on the infrastructure sector. During FY2014, the Company launched various new products and variants to strengthen its business model and continue its strong growth momentum.

The Company''s loan loss and provisions increased from Rs.182 crore in FY2013 to Rs. 258 crore in FY2014 taking into account the increased business. The current year loan loss provisions also included an accelerated provisioning of Rs. 38.4 crore to strengthen its provisioning standards. The Company ended FY2014 with a net NPA of 0.28%.

Share capital

During FY2014, the Company allotted 364,000 equity shares to the trustees of BFL Employee Welfare Trust under Employee Stock Option Scheme, 2009.

As on 31 March 2014, the paid-up share capital of the Company stood at Rs.501,423,340 consisting of 50,142,334 equity shares of face value of Rs. 10 each fully paid-up.

Operations

The operations of the Company are elaborated in the annexed ''Management Discussion and Analysis Report''.

Conservation of energy and technology absorption

The Company, being a non-banking finance company (NBFC), does not have any manufacturing activity. The directors, therefore, have nothing to report on ''conservation of energy and technology absorption''.

Foreign currency

Foreign currency expenditure amounting to Rs. 4.41 crore (FY2013 Rs. 2.77 crore) was incurred during FY2014. The Company did not have any foreign exchange earnings.

Employee stock option scheme

Details required to be provided under Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended, are set out in the annexure to this report.

Fixed deposits

During FY2014, the Company launched a new fixed deposit programme at competitive rates of interest and has received Rs. 210.71 crore as of 31 March 2014.

There were no deposits which had matured but remained unclaimed.

Credit rating

Despite a tough economic environment, the Company retained all its credit ratings owing to high capital adequacy, strong promoter support, tightened credit acceptance criteria and robust asset- liability management.

CRISIL has re-affirmed the highest rating of "FAAA/Stable" for the fixed deposit programme of the Company. ICRA ratings has also assigned "MAAA/Stable" rating to the fixed deposit programme of the Company. These ratings indicate highest degree of safety with regard to timely payment of interest and principal. The Company is one of the very few NBFCs which enjoys the highest rating for its Fixed Deposit programme.

The Company also enjoys the highest rating of "CRISIL A1 " from CRISIL and "(ICRA) A1 " from ICRA for its short term debt programme for Rs. 3,500 crore and Rs.2,000 crore respectively.

The long term non-convertible debentures have been assigned "CRISIL AA /Stable" rating by CRISIL and "[ICRA] AA (Stable)" by ICRA indicating high degree of safety with regard to timely payment of interest and principal for an amount of Rs.3,350 crore and Rs.3,000 crore respectively.

The Company has also been assigned "CRISIL AA /Stable" rating by CRISIL and "[ICRA] AA (Stable)" by ICRA for Rs.700 crore lower tierÂII bond programme.

As regards the bank loan ratings for the bank facilities stipulated by RBI, as a part of BASEL II guidelines, CRISIL has assigned "CRISIL AA /Stable" rating for the Company''s cash credit/working capital demand loan amounting to Rs. 2,050 crore and long term bank facilities amounting to Rs. 12,425 crore and "CRISIL A1 " rating for the short term bank facilities amounting to Rs. 1,525 crore.

RBI guidelines

The Company continues to fulfil all the norms and standards laid down by the Reserve Bank of India (RBI) pertaining to non-performing assets, capital adequacy, statutory liquidity ratio etc. As against the RBI norm of 15%, the capital adequacy ratio of the Company was 19.14% as on 31 March 2014.

In line with the RBI guidelines for asset-liability management (ALM) system for NBFCs, the Company has an asset-liability committee which meets monthly to review its ALM risks and opportunities.

Corporate social responsibility

Section 135 of the Companies Act, 2013 along with the Rules there under and revised Schedule VII to the Act, concerning corporate social responsibility (CSR), have been notified on 27 February 2014 to come into effect from 1 April 2014.

The Company being covered under the provisions of the said section has taken necessary initial steps in this regard. A committee of the directors, titled ''Corporate Social Responsibility Committee'', has been formed by the Board in its meeting held on 27 March 2014, consisting of the following Directors:

Rahul Bajaj, Chairman Nanoo Pamnani, Member Sanjiv Bajaj, Member

The Committee has formulated CSR policy for the Company and is in the process of finalisation of its implementation plan.

The said section being enacted with effect from 1 April 2014, necessary details as prescribed under the said section shall be presented to the members in the Annual Report for the year 2014-15.

Even when the said provisions were not mandated by the Ministry of Corporate Affairs, the Bajaj group continued its CSR initiatives in various fields, during the year 2013-14. Activities in this area are set out in detail in the annexed CSR Report.

Directors

During FY2014 Sanjiv Bajaj, non-executive director, was elevated to the position of non-executive vice-chairman of the Company.

The Board of Directors at its meeting held on 27 March 2014, appointed Gita Piramal as an additional director in the capacity of independent director of the Company pursuant to clause 49 of the listing agreement. Gita Piramal will hold the office up to the date of the ensuing annual general meeting. The Company has received a notice under section 160 of the Companies Act, 2013, in respect of her candidature as a director at the ensuing annual general meeting. Necessary resolution is being proposed in the notice of the ensuing annual general meeting for the approval of the members for appointment of Gita Piramal as an independent director of the Company for a term of 5 consecutive years with effect from 16 July 2014 pursuant to section 149 of the Companies Act, 2013.

Pursuant to section 149 of the Companies Act, 2013, the Board of Directors has, at its meeting held on 27 March 2014, appointed the existing independent directors in terms of clause 49 of the listing agreement Nanoo Pamnani, vice-chairman, D S Mehta, D J Balaji Rao, Omkar Goswami, Dipak Poddar, Ranjan Sanghi and Rajendra Lakhotia as independent directors for a term of 5 consecutive years with effect from 1 April 2014. The requisite resolutions for approval of their appointment as independent directors, are being proposed in the notice of the ensuing annual general meeting for the approval of the members.

According to the Companies Act, 2013, at least two-thirds of the total number of directors (excluding independent directors) shall be liable to retire by rotation. For this purpose, considering the composition of the Board of Directors, the status of Rahul Bajaj, chairman, and Rajiv Bajaj, the non-retiring directors, has been changed to directors liable to retire by rotation.

Rahul Bajaj, chairman, being the longest in the office amongst the three directors liable to retire by rotation, retires from the Board by rotation this year and, being eligible, has offered his candidature for re-appointment. Necessary resolution for this purpose is being proposed in the notice of the ensuing annual general meeting for the approval of the members.

As required under clause 49 of the listing agreement with the stock exchanges, the information on the particulars of directors proposed for appointment/re-appointment has been given in the notice of annual general meeting.

Directors'' responsibility statement

In compliance of section 217(2AA) of the Companies Act, 1956, the directors state that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

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

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

(iv) the directors have prepared the annual accounts on a going concern basis.

Presentation of financial statements

The financial statements of the Company for the year ended 31 March 2014, as in the previous year, have been disclosed as per the revised schedule VI to the Companies Act, 1956, pursuant to notification dated 28 February 2011 and General Notice No.8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs.

Statutory disclosures

As required under the provisions of section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, particulars of employees are set out in the annexure to the Directors'' Report. As per the provisions of section 219(1)(b)(iv) of the said Act, this report is being sent to all the members excluding the particulars of the employees. These particulars will be made available to any member on request.

Directors'' responsibility statement as required by section 217(2AA) of the Companies Act, 1956 appears in a preceding paragraph.

Certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this report.

Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC regulations have been made in this Annual Report.

A cash flow statement for FY2014 is attached to the Balance Sheet.

During the year under review, pursuant to the new legislation "Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace Act 2013" introduced by the Government of India, which came into effect from 9 December 2013, the Company has framed a Policy on Prevention of Sexual Harassment at Workplace. There were three cases reported during the year and the Sexual Harassment Committee formed by the Company under this Act found one employee to be guilty. The concerned employee was dismissed from services of the Company immediately.

Corporate governance

Pursuant to clause 49 of the listing agreement with stock exchanges, a separate section titled ''Corporate Governance'' has been included in this Annual Report, along with the reports on ''Management Discussion and Analysis'' and ''General Shareholder Information''.

SEBI vide its circular no. CIR/CFD/POLICY CELL/2/2014 dated 17 April 2014 has notified the revised clause 49 of the listing agreement to be applicable with effect from 1 October 2014. This report therefore stands complied against the previous clause 49 of the listing agreement.

All Board members and Senior Management personnel have affirmed compliance with the code of conduct for FY2014. A declaration to this effect signed by the Chief Executive Officer (CEO) of the Company is contained in this Annual Report.

The CEO has certified to the Board with regard to the financial statements and other matters as specified in clause 49 of the listing agreement and the said certificate is included in this Annual Report.

Secretarial standards of ICSI

Secretarial standards issued by the Institute of Company Secretaries of India from time to time are currently recommendatory in nature. The Company is, however, complying with most of the same.

Auditors'' report

The observations made in the auditors'' report read with the relevant notes thereon are self-explanatory and hence, do not call for any further comments under section 217 of the Companies Act, 1956.

Auditors

The directors recommend the appointment of Dalal & Shah, Chartered Accountants, as auditors for the period from the conclusion of the ensuing 27th annual general meeting till the conclusion of the 30th annual general meeting and fixation of their remuneration for the year 2014-15.

The Company has received a written consent from Dalal & Shah, Chartered Accountants, to their proposed appointment as auditors of the Company, along with a certificate to the effect that the appointment, if made, shall be in accordance with the prescribed conditions and that the firm is not disqualified for the proposed appointment under the Companies Act, 2013.

Acknowledgement

The Board of Directors takes the opportunity to express its sincere appreciation for the support and co-operation from its members, Reserve Bank of India, banks, financial institutions and the debenture trustees.

The Board of Directors also place on record its sincere appreciation of the commitment and hard work put in by the Management and employees of the Company and thank them for another excellent year.

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Pune: 14 May 2014

Mar 31, 2013

The directors present their twenty sixth annual report and the audited statement of accounts for FY2013.

Business performance

The gross deployments of the Company for FY2013 were Rs. 19,367 crore as against Rs. 15,797 crore for FY2012.

Financial results

(Rs. In Crore)

Particulars 2013 2012

Income from Operations 3,093.72 2,163.02

Other Income 17.65 8.89

Total 3,111.37 2,171.91

Expenses 837.20 657.36

Loan Losses and Provisions 181.75 154.38

Finance Costs 1,205.68 746.18

Depreciation 15.14 11.77

Total Expenditure 2,239.77 1,569.69

Profit Before Taxation 871.60 602.22

Tax Expenses 280.29 195.78

Profit for the year after Taxation 591.31 406.44

Balance brought forward from previous year 441.31 215.14

Profit available for appropriations 1,032.62 621.58

Appropriations :

Transfer to Reserve Fund (119.00) (81.50)

Transfer to General Reserve (60.00) (41.00)

Transfer to Infrastructure Reserve (1.90) (0.15)

Provision for Proposed Dividend (74.67) (49.58)

Provision for Dividend Tax (12.69) (8.04)

Balance carried to Balance Sheet 764.36 441.31

Dividend

The directors recommend for the consideration of the members at the ensuing annual general meeting, payment of dividend of Rs. 15 per share of the face value of Rs. 10 (150%) for FY2013. The amount of dividend and tax thereon aggregate to Rs. 87.36 crore.

Dividend paid for FY2012 was Rs. 12 per share (120%). The amount of dividend and tax thereon aggregated to Rs. 57.62 crore.

Conversion of warrants issued on preferential basis to Bajaj Finserv Limited

On 11 December 2012, Bajaj Finserv Limited exercised its right of conversion of remaining 1.310.000 warrants out of the 6,000,000 warrants issued on 28 July 2011. Accordingly, 1.310.000 equity shares of face value of Rs. 10 each have been allotted to Bajaj Finserv Limited

Capital raising through rights equity issue

To augment the capital base of the Company for the purpose of capital adequacy requirements, pursuant to the approvals of Board of Directors and members, the Company, raised Rs. 743.52 crore through rights issue of equity shares during FY2013. 6,759,258 equity shares of the face value of Rs. 10 each were issued at a premium of Rs. 1,090 per share to the existing eligible equity shareholders in the ratio of 3:19. After the issue, the paid-up equity share capital of the Company has increased from Rs. 42.81 crore to Rs. 49.57 crore. Allotment of the shares was done on 2 March 2013 and these shares commenced trading on BSE & NSE effective from 6 March 2013.

Amendment of objects clause of memorandum of association

The Board of Directors, at its meeting held on 20 March 2013, approved, subject to the approval of the members by way of postal ballot, amendment of objects clause of the memorandum of association of the Company to enable financing through various payment options including credit cards, prepaid cards, stored value cards, debit cards, etc. either in partnership or by self, subject to regulatory approvals, as may be required from time to time. The aforesaid amendment of objects clause and commencement of such new business and activities were approved by the members by way of postal ballot on 10 May 2013.

Working results

The Company, during FY2013, deployed an amount of Rs. 19,367 crore under various products. As against this, during FY2012, the total amount deployed was Rs. 15,797 crore.

The receivables under financing activity as on 31 March 2013 were Rs. 16,744 crore as compared to Rs. 12,283 crore as on 31 March 2012, an increase of 36% over the previous year.

Total income during FY2013 increased to Rs. 3,111 crore from Rs. 2,172 crore during FY2012, an increase of 43% over the previous year.

The profit before tax for FY2013 was Rs. 872 crore, as against Rs. 602 crore in FY2012, an increase of 45% over the previous year. The profit after tax for the year was Rs. 591 crore as compared to Rs. 406 crore in FY2012, an increase of 46% over the previous year. This has been due to the Company continuing to earn healthy net interest margins across businesses, operating efficiencies and control on non performing assets (NPA).

The Company''s current provisioning standards are more stringent than Reserve Bank of India (RBI) prudential norms. In line with its conservative approach, the Company continues to strengthen its provisioning norms beyond the RBI regulation by accelerating the provisioning to an early stage of delinquencies based on the past experience and emerging trends. Consequently, the additional provision over RBI norms and existing provisioning policies aggregates to Rs. 16.71 crore for FY2013.

The Company had an excellent year aided by strong volume growth in auto finance, consumer finance, SME finance and commercial lending business lines. During FY2013, the Company launched new products and product variants to enhance product proposition for its customers. The Company''s credit loss increased from Rs. 154 crore in FY2012 to Rs. 182 crore in FY2013 taking into account the increased business, and the Company exited FY2013 with a net NPA of 0.19%.

Based on the composite licence issued by the Insurance Regulatory and Development Authority, the Company has, during FY2013, renewed the corporate agency agreement with Bajaj Allianz Life Insurance Company Limited for soliciting life insurance business and has entered into a new corporate agency agreement with Bajaj Allianz General Insurance Company Limited for soliciting general insurance business.

The Board of Directors, at its meeting held on 20 March 2013, has approved the commencement of new business of marketing and distribution of mutual fund products as a distributor, subject to applicable regulatory approvals.

Share capital

During FY2013, the Company allotted equity shares as follows:

1. 390,000 equity shares (including re-issue of 1,000 shares forfeited earlier) to the trustees of BFL Employee Welfare Trust under Employee Stock Option Scheme 2009.

2. 1,310,000 equity shares to Bajaj Finserv Limited upon exercise of right of conversion of remaining warrants.

3. 6,759,258 equity shares on rights basis to the eligible equity shareholders.

As on 31 March 2013, the paid-up share capital of the Company stood at Rs. 497,783,340 consisting of 49,778,334 equity shares of the face value of Rs. 10 each fully paid-up.

Operations

The operations of the Company are elaborated in the annexed ''management discussion and analysis report''.

Conservation of energy and technology absorption

The Company, being a non-banking finance company (NBFC), does not have any manufacturing activity. The directors, therefore, have nothing to report on ''conservation of energy and technology absorption''.

Foreign currency

Foreign currency expenditure amounting to Rs. 2.77 crore (FY2012 Rs. 2.51 crore) was incurred during FY2013. The Company did not have any foreign exchange earnings.

Employee stock option scheme

Details required to be provided under Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended, are set out in the annexure to this report.

Fixed deposits

During FY2013, the Company renewed fixed deposits of Rs. 21.86 lakh. Fixed deposits outstanding at the year-end were Rs. 58.93 lakh and the number of depositors was 214. At the end of the FY2013, there were 3 deposits aggregating Rs. 0.25 lakh which had matured but remained unclaimed. The Company had written to these depositors and as on date, all of them have claimed their deposits.

During FY2013, pursuant to the Reserve Bank of India''s master circular dated 2 July 2012, the Company made forced repayment of KYC non-compliant fixed deposits amounting to Rs. 16.70 lakh (mainly renewals of earlier deposits).

Credit rating

Despite a tough economic environment, the Company retained all its credit ratings owing to high capital adequacy, strong promoter support, tightened credit acceptance criteria and robust asset-liability management.

CRISIL has re-affirmed the highest rating of "FAAA/Stable" for the fixed deposit programme of the Company. This rating indicates highest degree of safety with regard to timely payment of interest and principal. The Company is one of the very few NBFCs which enjoys the highest rating.

The Company also enjoys the highest rating of "CRISIL A1 " from CRISIL and "(ICRA) A1 " from ICRA for short term debt programme for Rs. 2,500 crore and Rs. 1,500 crore respectively.

The long term non-convertible debentures have been assigned "CRISIL AA /Stable" rating by CRISIL and "[ICRA] AA (Stable)" by ICRA indicating high degree of safety with regard to timely payment of interest and principal for an amount of Rs. 3,350 crore and Rs. 3,000 crore respectively.

The Company has also been assigned "CRISIL AA / Stable" rating by CRISIL and "[ICRA] AA (Stable)" by ICRA for Rs. 700 crore lower tier II bond programme.

As regards the bank loan ratings for the bank facilities stipulated by RBI, as a part of BASEL II guidelines, CRISIL has assigned "CRISIL AA /Stable" rating for the Company''s cash credit/working capital demand loan amounting to Rs. 1,400 crore and long term bank facilities amounting to Rs. 7,265 crore and "CRISIL A1 " rating for the short term bank facilities amounting to Rs. 335 crore.

RBI guidelines

The Company continues to fulfill all the norms and standards laid down by the Reserve Bank of India (RBI) pertaining to non-performing assets, capital adequacy, statutory liquidity ratio etc. As against the RBI norm of 15%, the capital adequacy ratio of the Company was 21.95% as on 31 March 2013.

In line with the RBI guidelines for asset-liability management (ALM) system for NBFCs, the Company has an asset-liability committee which meets monthly to review its ALM risks and opportunities.

Corporate social responsibility

During FY2013, Bajaj Group continued its corporate social responsibility initiative in various fields. Activities in this area are set out in greater detail in the ''corporate social responsibility report''.

Directors

Nanoo Pamnani, D J Balaji Rao and Dipak Poddar, directors, retire from the Board by rotation this year and being eligible, offer themselves for re-appointment.

As required under clause 49 of the listing agreement with the stock exchanges, the information on the particulars of directors proposed for re-appointment has been given in the notice of annual general meeting.

Directors'' responsibility statement

In compliance of section 217(2AA) of the Companies Act, 1956, the directors state that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

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

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

(iv)the directors have prepared the annual accounts on a going concern basis.

Statutory disclosures

As required under the provisions of section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, particulars of employees are set out in the annexure to the directors'' report. As per the provisions of section 219(1)(b)(iv) of the said Act, this report is being sent to all the members excluding the particulars of the employees. These particulars will be made available to any member on request.

Directors'' responsibility statement as required by section 217(2AA) of the Companies Act, 1956 appears in the foregoing paragraph.

Certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this report.

Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC regulations have been made in this annual report.

A cash flow statement for FY2013 is attached to the balance sheet.

Corporate governance

Pursuant to clause 49 of the listing agreement with stock exchanges, a separate section titled ''corporate governance'' has been included in this annual report, along with the reports on ''management discussion and analysis'' and ''general shareholder information''.

All Board members and senior management personnel have affirmed compliance with the code of conduct for FY2013. A declaration to this effect signed by the Chief Executive Officer (CEO) of the Company is contained in this annual report.

The CEO and Chief Financial Officer (CFO) have certified to the Board with regard to the financial statements and other matters as specified in clause 49 of the listing agreement and the said certificate is included in this annual report.

Secretarial standards of ICSI

Secretarial standards issued by the Institute of Company Secretaries of India from time to time are currently recommendatory in nature. The Company is, however, complying with most of the same.

Auditors'' report

The observations made in the auditors'' report read with the relevant notes thereon are self-explanatory and hence, do not call for any further comments under section 217 of the Companies Act, 1956.

Auditors

The directors recommend the appointment of Dalal & Shah, Chartered Accountants, as auditors for the period from the conclusion of the ensuing annual general meeting till the conclusion of the next annual general meeting and to fix their remuneration.

The Company has obtained a certificate from Dalal & Shah, Chartered Accountants, to the effect that their re-appointment as auditors of the Company, if made, would be within the limits prescribed under section 224(1B) of the Companies Act, 1956.

Acknowledgement

The Board of Directors takes this opportunity to express its sincere appreciation for the support and the co-operation from the members, Reserve Bank of India, banks, financial institutions and the debenture trustees.

The Board of Directors also puts on record its sincere appreciation of the commitment and hard work put in by the management and employees of the Company and thanks them for another good year for the Company.

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Pune: 15 May 2013

Mar 31, 2012

The directors present their twenty fifth annual report and the audited statement of accounts for the year ended 31 March 2012.

Business performance

The gross deployments of the company for the FY2012 were Rs 15,797 crore as against Rs 9,435 crore for the FY2011.

Financial results

(Rs in Crore)

Particulars 2011-12 2010-11

Income from Operations 2,163.02 1,392.33

Other Income 8.89 13.80

Total 2,171.91 1,406.13

Expenses 657.36 451.00

Loan Losses and Provisions 154.38 204.61

Finance Costs 746.18 371.01

Depreciation 11.77 9.64

Total Expenditure 1,569.69 1,036.26

Profit Before Taxation 602.22 369.87

Tax Expenses 195.78 122.91

Profit for the year after Taxation 406.44 246.96

Balance brought forward from the previous year 215.14 85.25

Profit available for appropriations 621.58 332.21

Appropriations :

Transfer to Reserve Fund (81.50) (49.50)

Transfer to General Reserve (41.00) (25.00)

Transfer to Infrastructure Reserve (0.15) -

Provision for Proposed Dividend (49.58) (36.63)

Provision for Dividend Tax (8.04) (5.94)

Balance carried to Balance Sheet 441.31 215.14

Dividend

The directors recommend for the consideration of the shareholders at the ensuing annual general meeting, payment of dividend of Rs 12 per share of face value of Rs 10 each (120%) for the year ended 31 March 2012. The amount of dividend and tax thereon aggregates to Rs 57.62 crore.

Dividend paid for the year ended 31 March 2011 was Rs 10 per share (100%). The amount of dividend and tax thereon aggregated to Rs 42.57 crore.

Increase in authorised share capital

During the year, the company increased its authorised capital from Rs 50 crore divided into 50,000,000 equity shares of Rs 10 each to Rs 75 crore divided into 75,000,000 equity shares of Rs 10 each.

Issue of warrants on preferential basis to promoter, Bajaj Finserv Limited

During the year, pursuant to the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, the company issued 6,000,000 warrants at a price of Rs 651 per warrant with a right to convert the same into equal number of equity shares to the promoter, Bajaj Finserv Limited.

On 29 March 2012, Bajaj Finserv Ltd. exercised its right of conversion of 4,690,000 warrants out of the said 6,000,000 warrants. Accordingly, 4,690,000 equity shares of face value of Rs 10 have been allotted to Bajaj Finserv Ltd., taking its shareholding in the company to 60.98% as on 31 March 2012.

Qualified institutions placement (QIP)

At the annual general meeting of shareholders held on 13 July 2011, the shareholders had approved a QIP of upto 7,500,000 equity shares of Rs 10 each at a price as per the pricing formula prescribed in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. However, in view of the unfavourable market conditions, the company did not proceed with the same.

Increase in borrowing powers

During the year, pursuant to section 293(1)(d) of the Companies Act, 1956 and the Companies (Passing of the Resolution by Postal Ballot) Rules, 2011, the company increased the limit of the borrowing powers of the board of directors from Rs 10,000 crore to Rs 20,000 crore, to meet the increasing business requirements.

Working results

The company, during FY2012, deployed a total amount of Rs 15,797 crore under various products. As against this, during FY2011, the total amount deployed was Rs 9,435 crore, an increase of 67% over the previous year.

The receivables under financing activity as on 31 March 2012 were Rs 12,283 crore as compared to Rs 7,272 crore as on 31 March 2011, an increase of 69% over the previous year.

Total income during FY2012 increased to Rs 2,172 crore from Rs 1,406 crore during FY2011, an increase of 54 % over the previous year.

The profit before tax for the year was Rs 602 crore, as against Rs 370 crore for the previous year, an increase of 63 % over the previous year. The profit after tax for the year was Rs 406 crore as compared to Rs 247 crore for the previous year an increase of 64% over the previous year. This has been due to improvement in net interest margins across businesses, contribution from new lines of businesses, third party fee products distribution and various re-engineering initiatives.

The company's current provisioning standards are more stringent than RBI prudential norms. In line with its conservative approach, the company continues to strengthen its provisioning norms beyond the Reserve Bank of India regulation by accelerating provisioning to an early stage of delinquencies based on the past experience and emerging trends. Consequently, the additional provision over RBI norms and existing provisioning policies aggregates Rs 19.97 crore for the year under review.

The company had an excellent year aided by strong volume growth in consumer finance,

SME finance and commercial lending business lines. During the year, the company launched new products and product variants to enhance product proposition for its customers. The new initiatives included launch of an Existing Member Identification Card (EMI Card) for its consumer durable customers, expansion of unsecured loans to salaried customers, launch of a co-branded credit card with Standard Chartered Bank and a flexible loan proposition for its SME finance and commercial lending business lines. The company also launched an extension of its "0%" interest offering for customers desirous of acquiring lifestyle products such as furniture, home furnishings, fitness equipments, luxury watches etc.

The company also had an excellent year with regard to the quality of its loan book. Its credit loss line dropped by 25% from Rs 205 crore in FY2011 to Rs 154 crore in FY2012 despite a significant growth in its receivables. The company exited FY2012 with a net NPA of 0.12%.

Operations

The operations of the company are elaborated in the annexed 'management discussion and analysis' report.

Conservation of energy and technology absorption

The company, being a non-banking finance company, does not have any manufacturing activity. The directors, therefore, have nothing to report on "Conservation of Energy and Technology Absorption".

Foreign currency

Foreign currency expenditure amounting to Rs 2.51 crore (previous year Rs 1.27 crore) was incurred during the year under review. The company did not have any foreign exchange earnings.

Employee stock option scheme

Details required to be provided under Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in the annexure to this report.

Fixed deposits

During the year under review, the company renewed fixed deposits of Rs 0.16 crore. Public deposits outstanding at the year-end were Rs 1.47 crore and the number of depositors were 476. At the end of the financial year under review, there were 50 deposits aggregating Rs 0.08 crore which matured but remained unclaimed as on that date. The company had written to these depositors and as on date, none of the said depositors have claimed their deposits.

Credit rating

Despite a tough economic environment, the company managed to retain all its credit ratings owing to high capital adequacy, strong promoter support, tightened credit acceptance criteria and robust asset-liability management.

CRISIL has re-affirmed the highest rating of "FAAA/Stable" for the fixed deposit programme of the company. This rating indicates highest degree of safety with regard to timely payment of interest and principal. The company is one of the very few non-banking finance companies (NBFCs) which enjoy the highest rating.

The company also enjoys the highest rating of "CRISIL A1 " from CRISIL and "(ICRA) A1 " from ICRA for short term debt programme for Rs 2,000 crore and Rs 1,500 crore respectively.

The long term non-convertible debentures have been assigned "CRISIL AA /Stable" rating by CRISIL and "[ICRA] AA (Stable)" rating by ICRA indicating high degree of safety with regard to timely payment of interest and principal for an amount of Rs 3,350 crore and Rs 3,000 crore respectively.

The company has also been assigned "CRISIL AA / Stable" rating by CRISIL and "[ICRA] AA (Stable)" rating by ICRA for Rs 700 crore lower tier II bond programme.

As regards the bank loan ratings for the bank facilities stipulated by RBI, as a part of BASEL II guidelines, CRISIL has assigned "CRISIL AA /Stable" rating for the company's cash credit/ working capital demand loan amounting to Rs 1,400 crore and long term bank facilities amounting to Rs 6,275 crore and "CRISIL A1 " rating for the short term bank facilities amounting to Rs 325 crore.

RBI guidelines

The company continues to fulfill all the norms and standards laid down by the Reserve Bank of India (RBI) pertaining to non-performing assets, capital adequacy, statutory liquidity ratio etc. As against the RBI norm of 15%, the capital adequacy ratio of the company was 17.5% as on 31 March 2012.

In line with the RBI guidelines for Asset-Liability Management (ALM) system for NBFCs, the company has an asset-liability committee which meets monthly to review its ALM risks and opportunities.

Corporate social responsibility

During the FY2012, Bajaj Group continued its corporate social responsibility initiative in various fields. Activities in this area are set out in greater detail in the corporate social responsibility report.

Directors

D S Mehta, Ranjan Sanghi and Rajendra Lakhotia, directors, retire from the board by rotation this year and being eligible, offer themselves for re-appointment.

The board of directors has, at its meeting held on 16 May 2012, appointed Omkar Goswami as an additional director of the company. Omkar Goswami will hold the office upto the ensuing annual general meeting. The company has received a notice from a shareholder of the company, under section 257 of the Companies Act, 1956, proposing his candidature as a director at the ensuing annual general meeting. Necessary resolution for this purpose is being proposed in the notice of the ensuing annual general meeting for approval of the shareholders.

As required under clause 49 of the listing agreement with the stock exchanges, the information on the particulars of directors proposed for appointment/re-appointment has been given in the notice of annual general meeting.

In terms of section 255 of the Companies Act 1956, it is proposed to change the status of Rahul Bajaj, Rajiv Bajaj and Sanjiv Bajaj, from retiring directors to non-retiring directors in view of their being part of the promoter group and their long association and involvement in the functioning of the company. Notice of the annual general meeting, accordingly, contains the said items as special business.

Directors' responsibility statement

In compliance of section 217(2AA) of the Companies Act, 1956, the directors state that :

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that period;

(iii) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(iv) the directors have prepared the annual accounts on a going concern basis.

Presentation of financial statements

Pursuant to notification dated 28 February 2011 issued by the Ministry of Corporate Affairs, the format for disclosure of financial statements prescribed under schedule VI to the Companies Act, 1956 has been substantially revised. The financial statements of the company for the year ended 31 March 2012 have, therefore, been disclosed as per the revised schedule VI. Previous year's figures have also been restated to conform with the current year's presentation.

Statutory disclosures

As required under the provisions of section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, particulars of employees are set out in the annexure to the directors' report. As per the provisions of section 219(1)(b)(iv) of the said Act, this report is being sent to all the shareholders excluding the employee particulars. These particulars will be made available to any shareholder on request.

Directors' responsibility statement as required by section 217(2AA) of the Companies Act, 1956 appears in the foregoing paragraph.

Certificate from auditors of the company regarding compliance of conditions of corporate governance is annexed to this report.

Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC regulations have been made in this annual report.

A cash flow statement for the FY2012 is attached to the balance sheet.

Corporate governance

Pursuant to clause 49 of the listing agreement with stock exchanges, a separate section titled 'corporate governance' has been included in this annual report, along with the reports on 'management discussion and analysis' and 'general shareholder information'.

All board members and senior management personnel have affirmed compliance with the code of conduct for the FY2012. A declaration to this effect signed by the Chief Executive Officer (CEO) of the company is contained in this annual report.

The CEO and Chief Finance Officer (CFO) have certified to the board with regard to the financial statements and other matters as specified in clause 49 of the listing agreement and the said certificate is included in this annual report.

Auditors' report

The observations made in the auditors' report read with the relevant notes thereon are self-explanatory and hence, do not call for any further comments under section 217 of the Companies Act, 1956.

Auditors

The directors recommend the appointment of Dalal & Shah, Chartered Accountants, as auditors for the period from the conclusion of the ensuing annual general meeting till the conclusion of the next annual general meeting and to fix their remuneration.

The company has obtained a certificate from Dalal & Shah, Chartered Accountants, to the effect that their re-appointment as auditors of the company, if made, would be within the limits prescribed under section 224 (1B) of the Companies Act, 1956.

Acknowledgement

The board of directors takes this opportunity to express their sincere appreciation for the support and the co-operation from the shareholders, banks, financial institutions and the debenture trustees.

The board of directors also put on record their sincere appreciation of the commitment and hard work put in by the management and employees of the company and thank them for another good year for the company.

On behalf of the board of directors

Rahul Bajaj

Chairman

Pune

16 May 2012

Mar 31, 2011

The Directors present their Twenty Fourth Annual Report and the Audited Statement of Accounts for the year ended 31 March 2011.

Business Performance

The gross deployment of the Company for the year 2010-11 were Rs. 9,435 Crores as against Rs. 4,585 Crores for the year 2009-10.

Rs. in Crores

Deployment 2010-11 2009-10 % change

Two & Three Wheelers 2,034 1,364 49%

Consumer Durables 2,262 1,037 118%

Mortgages 1,672 1,067 57%

Vendor Financing 1,346 149 803%

Other assets 389 165 136%

Construction Equipment 694 - -

Small Business Loans and Personal

Loan Cross sell 1,038 803 29%

Total 9,435 4,585 106%

Financial Results

Rs. in Crores

Particulars 2010-11 2009-10

Income from Operations 1,392.33 910.06

Other Income 13.80 6.10

Total 1,406.13 916.16

Expenses 441.79 311.97

Loan losses and Provisions 204.61 260.58

Interest and Finance Charges 377.95 201.67

Depreciation 11.86 7.64

Total Expenditure 1,036.21 781.86

Profit before Taxation 369.92 134.30

Provision for Taxation 123.29 44.90

Profit for the year after Taxation 246.63 89.40

Prior period adjustments relating to earlier years 0.33 0.01

Profit for the year after Taxation and prior period adjustments 246.96 89.41

Balance brought forward from previous year 85.25 0.40

Transfer from Debenture Redemption Reserve - 48.05

Profit available for appropriations 332.21 137.86

Appropriations:

Transfer to Reserve Fund (49.50) (18.00)

Transfer to General Reserve (25.00) (9.00)

Provision for Proposed Dividend (36.63) (21.96)

Provision for Dividend Tax (5.94) (3.65)

Balance carried to Balance Sheet 215.14 85.25

Dividend

The Directors recommend for the consideration of the shareholders at the ensuing Annual General Meeting, payment of dividend of Rs. 10 per share (100 percent) for the year ended 31 March 2011. The amount of dividend and tax thereon aggregates to Rs. 42.57 Crores.

Dividend paid for the year ended 31 March 2010 was Rs. 6 per share (60 percent). The amount of dividend and tax thereon aggregated to Rs. 25.61 Crores.

Change in the name and status of the Company

Name of the Company has changed from ÃBajaj Auto Finance Limited to ÃBajaj Finance Limited consequent to the fresh Certificate of Incorporation issued by the Registrar of Companies, Maharashtra, Pune w.e.f. 6 September 2010.

The Company has become a subsidiary of Bajaj Finserv Limited w.e.f. 5 July 2010.

Working Results

The Company, during the year 2010-11, deployed a total amount of Rs. 9,435 Crores under various products. As against this, during the previous year 2009-10, the total amount deployed was Rs. 4,585 Crores.

The receivables under financing as on 31 March 2011 were Rs. 7,270 Crores as compared to Rs. 4,032 Crores as on 31 March 2010.

Total income during 2010-11 increased to Rs. 1,406 Crores from Rs. 916 Crores during 2009-10.

The profit before tax for the year was at Rs. 370 Crores, as against Rs. 134 Crores in the previous year. The profit after tax for the year was Rs. 247 Crores as compared to Rs. 89 Crores in the previous year. This has been due to improvement in net interest margins across businesses, contribution from new lines of businesses, third party fee products distribution and various re-engineering initiatives.

The Companys current provisioning standards are more stringent than RBI prudential norms. In line with its conservative approach, the Company continues to strengthen its provisioning norms beyond the Reserve Bank of India regulation by accelerating the provisioning to an early stage of delinquencies based on the past experience and emerging trends. Consequently, the additional estimated provision aggregates Rs. 39 Crores for the year.

The Company had an excellent year aided by strong volume growth in Consumer and Small & Medium Enterprise business lines. During the year, the Company launched three new product lines viz. Construction equipment finance, Retail loans against securities and Home loans. Its investments over the last three years in people, processes and technology have begun to yield operating leverage benefits resulting in improvement in margins. Portfolio quality, aided by a good macro-economic environment is robust. Recent acquisitions across products are performing significantly better than earlier.

Operations

The operations of the Company are elaborated in the annexed Management Discussion and Analysis Report.

Conservation of Energy and Technology Absorption

The Company, being a Non-Banking Financial Company, does not have any manufacturing activity. The Directors, therefore, have nothing to report on "Conservation of Energy and Technology Absorption".

Foreign Currency

Foreign currency expenditure amounting to Rs. 1.27 Crores (previous year Rs. 0.45 Crore) was incurred during the year under review. The Company did not have any foreign exchange earnings.

Employee Stock Option Scheme

Details required to be provided under Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in the Annexure to this report.

Fixed Deposits

During the year under review, the Company renewed fixed deposits of Rs. 0.30 Crore. Public Deposits outstanding at the year end were Rs. 1.75 Crores and the number of depositors were 616. At the end of the financial year under review, there were 71 deposits aggregating Rs. 0.13 Crores which matured but remained unclaimed as on that date. The Company had written to these depositors and as on date, a deposit of Rs. 5,000/- has been repaid.

Credit Rating

Despite a tough economic environment, the Company managed to retain all its credit ratings owing to high capital adequacy, strong promoter support, tightened credit acceptance criteria and robust asset-liability management.

CRISIL has re-affirmed the highest rating of "FAAA/Stable" for the Fixed Deposit programme of the Company. This rating indicates very strong degree of safety with regard to timely payment of interest and principal. The Company is one of the very few Non-Banking Financial Companies (NBFCs) which enjoy the highest rating.

The Company also enjoys the highest rating of "P1+" from CRISIL and "A1+" from ICRA for Short Term Debt programme. The Long Term Non-Convertible Debentures have been assigned "AA+/Stable" rating by CRISIL indicating high degree of safety with regard to timely payment of interest and principal and high credit quality rating of "LAA+" with stable outlook by ICRA. The Company has also been assigned " AA+/ Stable " rating by CRISIL and "LAA+" with stable outlook by ICRA for Rs. 400 Crores Lower Tier II Bond programme.

As regards the latest Bank Loan Ratings for the bank facilities stipulated by RBI, as a part of BASEL II guidelines, CRISIL has assigned "AA+/Stable" rating for the Companys Cash Credit/ Working Capital Demand Loan amounting to Rs. 1,035 Crores and Long Term Bank facilities amounting to Rs. 2,515 Crores and "P1+" rating for the Short Term Bank facilities amounting to Rs. 950 Crores.

RBI Guidelines

The Company continues to fulfill all the norms and standards laid down by the Reserve Bank of India (RBI) pertaining to non- performing assets, capital adequacy, statutory liquidity ratio etc. As against the RBI norm of 12%, the capital adequacy ratio of the Company is 20%.

In line with the RBI guidelines for Asset-Liability Management (ALM) system for NBFCs, the Company has an Asset-Liability Committee which meets periodically to review its ALM risks and opportunities.

Upon change of name of the Company, Reserve Bank of India (RBI) has issued a fresh Certificate of Registration in the name of Bajaj Finance Limited w.e.f. 5 October 2010. The RBI has also changed classification of the Company from ÃAsset Finance Company to a ÃLoan Company.

Corporate Social Responsibility

During the year 2010-11, Bajaj Group continued its Corporate Social Responsibility initiative in various fields. Activities in this area are set out in greater detail in the Corporate Social Responsibility Report.

Directors

Rahul Bajaj, Madhur Bajaj and Sanjiv Bajaj, Directors, retire from the Board by rotation this year and being eligible, offer themselves for re-appointment.

The information on the particulars of Directors seeking re-appointment as required under Clause 49 of the Listing Agreement with the Stock Exchanges has been given in the notice of Annual General Meeting.

Appointment of Manager under the Companies Act,1956

Subject to the approval of the shareholders, the Board of Directors have re-appointed Rajeev Jain, as Manager under the Companies Act, 1956 with the designation Chief Executive Officer (CEO), for a further period of five years with effect from 1 April 2011, on the terms of remuneration set out in the resolution in the notice of the ensuing Annual General Meeting. The resolution is commended for approval of the shareholders at the Annual General Meeting.

Directors Responsibility Statement

In compliance of Section 217(2AA) of the Companies Act, 1956, the Directors state that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

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

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

(iv) the Directors have prepared the annual accounts on a going concern basis.

Statutory Disclosures

As required under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, particulars of employees are set out in the Annexure to the Directors Report. As per the provisions of Section 219(1)(b)(iv) of the said Act, these particulars will be made available to any shareholder on request.

Directors Responsibility Statement as required by Section 217(2AA) of the Companies Act, 1956 appears in the preceding paragraph.

Certificate from auditors of the Company regarding compliance of conditions of Corporate Governance is annexed to this report.

Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC regulations have been made in this Annual Report.

A Cash Flow Statement for the year 2010-11 is attached to the Balance Sheet.

Corporate Governance

Pursuant to clause 49 of the listing agreement with stock exchanges, a separate section titled ÃCorporate Governance has been included in this Annual Report, along with the reports on Management Discussion and Analysis and General Shareholder Information.

All Board members and senior management personnel have affirmed compliance with the Code of Conduct for the year 2010-11. A declaration to this effect signed by the Chief Executive Officer (CEO) of the Company is contained in this Annual Report.

The CEO and Chief Financial Officer (CFO) have certified to the Board with regard to the financial statements and other matters as specified in clause 49 of the listing agreement and the said certificate is contained in this Annual Report.

Group

Pursuant to an intimation from the promoters, the names of the promoters and entities comprising "Group" as defined under the Monopolies and Restrictive Trade Practices Act, ("MRTP") Act, 1969 are disclosed in the Annual Report for the purpose of Regulation 3(1)(e) of the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

Auditors Report

The observations made in the Auditors Report read with the relevant notes thereon are self-explanatory and hence, do not call for any further comments under Section 217 of The Companies Act, 1956.

Auditors

The Directors recommend the appointment of Dalal & Shah, Chartered Accountants as auditors for the period from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting and to fix their remuneration.

The Company has obtained a certificate from Dalal & Shah, Chartered Accountants, Mumbai to the effect that their re- appointment as auditors of the Company if made would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

Acknowledgement

The Board of Directors takes this opportunity to express their sincere appreciation for the support and the co- operation from the banks, financial Institutions and the debenture trustees.

The Board of Directors also put on record their sincere appreciation of the hard work and commitment put in by the management and employees of the Company and thank them for another good year for the Company.

On behalf of the Board of Directors

Rahul Bajaj Chairman

Pune: 17 May 2011

Mar 31, 2010

The directors present theirTwenty Third Annual Report and the Audited Statement of Accounts for the year ended 31 March 2010.

Business Performance

The gross deployment of the company for the year 2009-10 were Rs.45,851 million as against Rs. 24,509 million for the year 2008-09:

Rs. Million Deployment 2009-10 2008-09 % change Consumer Durables 10,374.7 6,548.2 58.4 Mortgages & Other Secured Assets 11,772.6 3,210.8 266.7 Total Depleyment 45,857.0 24,509.3 87.1

Financial Results

Rs. Million 2009-10 2008-09 other Income 61.0 45.8 Expenses 3,119.8 2,148.5 Interest and finance charges 2,016.6 2,148.5 Total Expenditure 7,818.6 5,483.5 Provision for Taxation 449.0 171.2 Prior Period adjustments relating to earlier years 0.1 -- Balance brought forward from previous year 4.0 31.4 Profit available for appropriations 1378.6 370.6 Transfer to Debenture Redemption Reserve -- (183.0) Provision for Proposed Divident (219.6) (73.2) Balance Carried to Balance Sheet 852.5 4.0

Dividend

The directors recommend for the consideration of the Members at the Annual General Meeting, payment of dividend of Rs. 6/- per share (60 per cent) for the year ended 31 March 2010. The total dividend outgo including tax thereon will be Rs. 256 million.

Dividend paid for the year ended 31 March 2009 was Rs.2/- per share (20 per cent) and the total dividend outgo including tax thereon was Rs.85.6 million.

Working Results

The company, during the year 2009-10, deployed a total amount of Rs.45,851 million under various products. As against this, during the previous year 2008-09, the total amount deployed was Rs. 24,509 million.

The receivables under financing as on 31 March 2010 were Rs.40,258 million as compared to Rs. 25,389 million as on 31 March 2009, an increase of 59 per cent over the previous year.

Total income during 2009-10 increased to Rs. 9,162 million from Rs. 5,994 million during 2008-09, an increase of 53 per cent over the previous year.

The profit before tax for the year was at Rs 1,343 million, as against Rs. 510 million in the previous year, an increase of 163 percent over the previous year. The profit after tax for the year was Rs. 894 million as compared to Rs.339 million in the previous year, an increase of 164 per cent over the previous year. This has been due to improvement in net interest margins across businesses, contribution from new lines of businesses, third party fee products distribution and various re-engineering initiatives.

The companys current provisioning standards meet RBI prudential norms. In line with its conservative approach, the company continues to review its provisioning policy over and above RBI prudential norms. In the current year, the company proactively took the decision to provide for a closed business line resulting in increased provisioning to the tune of Rs. 210 million. Additionally, the company also enhanced loan loss provisioning for its consumer durable financing business and increased provisioning by Rs. 46.7 million.

Operations

The Operations of the company are elaborated in the annexed Management Discussions and Analysis Report.

Redemption of Debentures

The 6% Non Convertible Debentures of the face value of Rs.500/- each aggregating to Rs. 2,624.2 million issued by the company

on 9 February 2007 for a tenor of three years became due for redemption on 9 February 2010. The company has redeemed these debentures on the due date.

Employee Stock Option Scheme

Pursuant to the authority given by the members of the company vide special resolution passed through postal ballot on 15 December 2009, and subject to the provisions of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, the Remuneration & Nomination Committee of the Board of Directors made on 12 January 2010 a first grant of 132,000 options under the companys Employee Stock Option Scheme, 2009 (ESOP 2009), as per the terms and conditions of the ESOP Scheme. As required under the SEBI Guidelines, the details of the options granted are given in the annexure to this report.

Fixed Deposits

The company renewed fixed deposits of Rs.10.1 million. Public Deposits outstanding at the year end were Rs.24.5 million and the number of depositors was 794. At the end of the financial year under review, there were 128 deposits aggregating Rs. 2.2 million which matured but remained unclaimed as on that date.The company had written to these depositors and as on date, deposits aggregating Rs. 0.1 million have been repaid / renewed.

Credit Rating

Despite a tough economic environment, the company managed to retain all its credit ratings owing to high capital adequacy, strong promoter support, tightened credit acceptance criteria and robust asset-liability management.

CRISIL has re-affirmed the highest rating of "FAAA/Stable"forthe Fixed Deposit programme of the company. This rating indicates very strong degree of safety with regard to timely payment of interest and principal. The company is one of the very few Non- Banking Finance Companies (NBFCs) which enjoys the highest rating.

The company also enjoys the highest rating of "PI +" from CRISIL and "A1 +" from ICRA for Short Term Debt programme.

The Long Term Non-Convertible Debentures have been assigned "AA+/Stable" rating by CRISIL indicating high degree of safety with regard to timely payment of interest and principal and high credit quality rating of "LAA+"with stable outlook by ICRA.

The company has also been assigned" AA+/ Stable" rating by CRISIL and "LAA+" with stable outlook by ICRA for Rs. 200 Crores Lower Tier II Bond programme.

As regards the Bank Loan Ratings for the bank facilities stipulated by RBI, as a part of BASEL II guidelines, CRISIL has assigned "AA+ / Stable" rating for the companys Cash Credit /Working Capital Demand Loan amounting to Rs.9,850 million and Long Term Bank facilities amounting to Rs.4,010 million and "P1+" rating for the Short Term Bank facilities amounting to Rs.8,050 million.

RBI Guidelines

The company continues to fulfill all the norms and standards laid down by the Reserve Bank of India (RBI) pertaining to non- performing assets, capital adequacy, statutory liquidity ratio etc. As against the RBI norm of 12 per cent, the capital adequacy ratio of the company is 26 per cent.

In line with the RBI guidelines for Asset-Liability Management (ALM) system for NBFCs, the company has an Asset-Liability committee which meets periodically to review its ALM risks and opportunities.

Statutory Disclosures

As required under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, particulars of employees are set out in the Annexure to the Directors Report. As per the provisions of Section 219(1 )(b)(iv) of the said Act, these particulars will be made available to any shareholder on request.

The company, being a Non-Banking Finance Company, not having any manufacturing activity, the directors have nothing to report on Conservation of Energy orTechnology Absorption. Foreign currency expenditure amounting to Rs.4.5 million was incurred during the year under review. The company did not have any foreign exchange earnings.

Directors Responsibility Statement

In compliance of Section 217(2AA) of the Companies Act, 1956, the directors state that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that period;

(iii) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(iv) the directors have prepared the annual accounts on a going concern basis.

Directors

Shri Nanoo Pamnani, Shri Rajiv Bajaj and Shri Dipak Poddar, directors, retire from the Board by rotation this year and being eligible, offer themselves for re-appointment.

The information on the particulars of directors seeking re-appointment as required under Clause 49 of the Listing Agreement with the Stock Exchanges has been given under the report on Corporate Governance.

Auditors Report

The observations made in the Auditors Report read with the relevant notes thereon are self-explanatory and hence do not cal for any further comments under Section 217 of the Companies Act, 1956.

Auditors

You are requested to appoint auditors for the period from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting and to fix their remuneration.

Group

Pursuant to an intimation from the Promoters, the names of the Promoters and entities comprising "group" as defined under the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 are disclosed in the Annual Report for the purpose of the

SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

Corporate Governance

The company complies with all the mandatory requirements pertaining to Corporate Governance, in terms of the revised Clause 49 of the Listing Agreement with the Stock Exchanges. A detailed report on Corporate Governance has been included in this report along with a certificate from the auditors of the company regarding compliance of conditions of Corporate Governance. Further, a separate Management Discussion and Analysis report is also given in this report.

On behalf of the Board of Directors

Rahul Bajaj Chairman

Pune: 11 May 2010

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