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Directors Report of Bajaj Finance Ltd.

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 tier–II 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;

f» 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 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. 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, 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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