Directors Report of Cholamandalam Investment & Finance Company Ltd.
Mar 31, 2023
Your directors have pleasure in presenting the forty fifth annual report together with the audited accounts of the company for the year ended 31 March, 2023.
|
FINANCIAL RESULTS |
'' in crores |
|
|
Particulars |
2022-23 |
2021-22 |
|
Gross Income: |
12,977.98 |
10,138.77 |
|
Profit Before Tax (PBT) |
3,599.69 |
2,890.94 |
|
Profit After Tax (PAT) |
2,666.20 |
2,146.71 |
|
Total Comprehensive income |
2,700.01 |
2,267.95 |
|
Appropriation: |
||
|
Transfer to statutory and other reserves |
1,540.00 |
1,430.00 |
|
Dividend - Equity |
164.36 |
164.14 |
During the year, there was an increase in paid up capital by '' 0.20 crores, consequent to allotment of shares upon exercise of stock options by employees under the company''s employee stock option scheme.
Indian economy has moved on after its encounter with the COVID-19 pandemic, staging a full recovery in FY 22 ahead of many developing nations and positioned itself to ascend to pre-pandemic growth path in FY 23. Yet in the current year, India also faced the challenge of reigning in inflation that the European strife accentuated. RBI raised policy rates cumulatively by 250 bps during the financial year. Despite high inflation and high interest rates, release of pent-up demand was reflected in the housing market as demand for housing loans picked up. Sales of commercial vehicles have come close to pre-pandemic levels of over a million units in FY 23 due to improved fleet utilizations and passenger vehicles registering highest ever sales with nearly 3.9 million units sold in FY 23.
Your company has achieved its highest ever disbursals, collections and profitability in FY 23. The disbursements for FY 23 grew by 87% to '' 66,532 crores. Disbursements in Vehicle
Finance (VF) business grew by 56% in FY 23 to '' 39,699 crores. Disbursements in Loan against property (LAP) business grew by 68% to '' 9,299 crores in FY 23. Disbursements in Home Loans (HL) stood at '' 3,830 crores in FY 23, which is a growth of 102% Year on Year (YoY). Disbursements in Small and Medium Enterprises (SME) stood at '' 6,388 crores in FY 23 which is a growth of 232% YoY. Disbursements in Consumer and Small Enterprise Loans (CSEL) and Secured Business & Personal Loans (SBPL) launched last year stood at '' 6,865 crores and at '' 451 crores respectively in FY 23.
The business AUM of the company stood at '' 1,06,498 crores which is a growth of 38% YOY.
The profit before tax of the company for the year FY 23 is '' 3,599.69 crores as against '' 2,890.94 crores for FY 22, which is a growth of 24% YoY.
The company continued to hold a strong liquidity position with '' 5,042 crores as cash balance as at end of 31 March, 2023 (including '' 1,542 crore in Government securities and '' 1,536 crore invested in T-bill shown under investments), with a total liquidity position of '' 9,119 crores (including undrawn sanctioned lines). The Asset Liability Management (ALM) is comfortable with no negative cumulative mismatches across all time buckets.
OUTLOOK
GDP for the country is projected to grow at 6.5% during FY 24 supported by solid domestic demand and pick up in capital investment. The company will look to scale up through new product segments (CSEL, SME and SBPL) as well as improving efficiencies in existing segments (VF, LAP and HL). The company''s strong sales and collections set-up combined with digital initiatives and branch reach will also support in improving efficiencies.
DIVIDEND
Dividend distribution policy
The company has formulated a dividend distribution policy in compliance with regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), a copy of which is available on the website of the company. (weblink: https://cholamandalam.com/files/dividend distribution policy)
Payment of dividend
The company paid an interim dividend on the equity shares at the rate of 65% ('' 1.30 per equity share) as approved by the Board on 31 January, 2023 for the year ended 31 March, 2023.
Your directors are pleased to recommend a final dividend of 35% ('' 0.70 per equity share) on the equity shares of the company. With this, the total dividend will be 100% ('' 2.00 per equity share) for the year ended 31 March, 2023.
TRANSFER TO RESERVES
The company transferred a sum of '' 540 crores to statutory reserve as required under the Reserve Bank of India Act, 1934 and '' 1,000 crores to general reserves.
FIXED DEPOSITS
The company is a non deposit taking NBFC. The company does not hold or accept deposits as of the date of balance sheet.
RBI LICENSE
The company is an NBFC - Investment and Credit Company (NBFC-ICC). During the year, the company has also obtained a license to carry on factoring business.
The company has been notified as an NBFC in Upper Layer (NBFC-UL) by the Reserve Bank of India under the recently implemented Scale Based Regulatory Framework for NBFCs.
CAPITAL ADEQUACY
The company''s capital adequacy ratio was at 17.13% as on 31 March, 2023 as against the statutory minimum capital adequacy ratio of 15% prescribed by RBI. The Common Equity Tier 1 (CET1) capital was at 13.70% and Tier I capital was at 14.78% as against the statutory minimum requirement of 9% and 10% respectively. Tier II capital was at 2.35% as on 31 March, 2023.
EMPLOYEE STOCK OPTION (ESOP) SCHEME
Pursuant to the approval accorded by the shareholders on 3 January, 2017 the nomination and remuneration committee had formulated an employee stock option scheme 2016 (ESOP 2016).
During the year, the company made grants aggregating to 21,03,500 options to 242 employees. The total number of options issued as on 31 March, 2023 under ESOP 2016 scheme is at 54,03,455.
The scheme is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI (SBEB) Regulations) and the Companies Act, 2013 (the Act).
The certificate from secretarial auditor M/s. R. Sridharan & Associates, company secretaries confirming implementation of ESOP 2016 scheme in accordance with the SEBI (SBEB) Regulations and shareholders resolutions has been obtained and will be available for inspection of the shareholders at the ensuing annual general meeting (AGM). The details of the scheme as on 31 March, 2023 are disclosed on the website of the company. (weblink: https://cholamandalam.com/files/esop scheme chola)
Re-appointment
Mr. M A M Arunachalam, director who retires by rotation at the ensuing AGM and being eligible, has offered himself for reappointment and is recommended to the shareholders for approval.
Mr. N Ramesh Rajan and Mr. Rohan Verma, independent directors complete their first term of 5 years on 29 October, 2023 and 28 March, 2024 respectively and being eligible have offered themselves for re-appointment for a second term of 5 years and are recommended to the shareholders for approval.
Retirement / Resignation
Mr. Ashok Kumar Barat, independent director retired from the board with effect from the close of business hours of 30 October, 2022, upon completion of his five-year term. Mr. Bharath Vasudevan, independent director resigned from the board with effect from the close of business hours of 31 March, 2023 to comply with his new employment terms. The disclosure relating to his resignation is available on the Company''s website at https://cholamandalam. com/files/resignation of independent director
The company has received confirmation from Mr. Bharath Vasudevan that there are no other material reasons for his resignation other than what has been stated in the resignation letter.
The board places on record its deep appreciation for the guidance and significant contributions made by Mr. Ashok Kumar Barat and Mr. Bharat Vasudevan during their tenure on the Board and as members of various committees.
DECLARATION FROM INDEPENDENT DIRECTORS
All the independent directors (IDs) have submitted their declaration of independence, as required pursuant to section 149(7) of the Act, confirming that they meet the criteria of independence as provided in section 149(6) of the Act. In the opinion of the board, the IDs fulfil the conditions specified in the Act and the rules made there under for appointment as IDs including integrity, expertise and experience
and confirm that they are independent of the management. All the IDs of the company have registered their names with the data bank of IDs and are in the process of completion of online proficiency self-assessment test as per the timeline notified by the Ministry of Corporate Affairs (MCA).
Pursuant to the provisions of section 203 of the Act read with the rules made there under, the following employees are the whole time key managerial personnel of the company during FY 23:
a) Mr. Ravindra Kumar Kundu, Executive Director
b) Mr. D. Arulselvan, Chief Financial Officer and
c) Ms. P. Sujatha, Company Secretary
DIRECTORS'' RESPONSIBILITY STATEMENT
The directors'' responsibility statement as required under section 134(5) of the Act, reporting the compliance with accounting standards, is attached and forms part of the board''s report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
There are no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status of the company and its future operations.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There are no significant material changes and commitments affecting the financial position of the company that occurred between the end of financial year and the date of this report.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report (MDA), highlighting the business-wise details are attached and forms part of this report. MDA also contains the details of the risk management framework of the company including the development and implementation of risk management policy and the key risks faced by the company.
A report on corporate governance as per the Listing Regulations is attached and forms part of this report. The report also contains the details as required to be provided on the composition and category of directors, number of meetings of the board, composition of the various committees, annual board evaluation, remuneration policy, criteria for board nomination and senior management appointment, whistle blower policy / vigil mechanism, disclosure of relationships between directors inter-se, state of company''s affairs, etc.
The executive director and the chief financial officer have submitted a compliance certificate to the board regarding the financial statements and other matters as required under regulation 17(8) of the Listing Regulations.
BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
The company being in top 1000 listed entities based on market capitalization, in terms of Regulation 34(2)(f) of SEBI Listing Regulations read with SEBI circular dated May 10, 2021, a business responsibility and sustainability report is attached and forms part of this report.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with the Act and the relevant accounting standards and forms part of this annual report.
M/s. Price Waterhouse LLP, and M/s. Sundaram & Srinivasan, chartered accountants are the joint statutory auditors of the company. They were appointed as joint statutory auditors at the 43rd AGM held on 30 July, 2021 for a period of three years commencing from the conclusion of 43rd AGM till the conclusion of 46th AGM. The statutory audit report is attached with financial statements and forms part of this report and does not contain any qualification, reservation or adverse remarks.
Pursuant to the provisions of the Act and the rules framed there under, M/s. R. Sridharan & Associates, company secretaries had undertaken a secretarial audit of the company for FY 23. The secretarial audit report is attached and forms part of this report and does not contain any qualification, reservation, or adverse remarks.
Maintenance of cost records and requirements of cost audit as prescribed under the provisions of section 148(1) of the Act is not applicable for the business activities carried out by the company.
In accordance with sections 134(3)(a) and 92(3) of the Act, the annual return in form MGT-7 is placed on the website of the company and is available on the weblink: https://cholamandalam.com/files/annual-return-fv-2022-2023.
CORPORATE SOCIAL RESPONSIBILITY
The Murugappa group is known for its tradition of philanthropy and community service. The group''s philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. The company upholds the group''s tradition by earmarking a part of its income for carrying out its social responsibilities.
The company has been carrying out corporate social responsibility (CSR) activities for many years even before it was mandated under the Act. The company has in place a CSR policy. The policy along with composition of CSR committee and projects approved by the board are available on the website of the company. (Weblink: https://cholamandalam.com/files/csr policy).
As per the provisions of the Act, the company is required to spend at least 2% of the average net profits of the company made during the three immediately preceding financial years. This amount aggregated to '' 43.43 crores and the company had spent a marginally higher amount of '' 43.63 crores towards CSR activities during FY 23, the details of which are annexed to and forms part of this report.
Internal control framework including clear delegation of authority and standard operating procedures are established and laid out across all businesses and functions. The framework is reviewed periodically at all levels.The risk and control matrices are reviewed on a quarterly basis and control measures are tested and documented. These measures have helped in ensuring the adequacy of internal financial controls commensurate with the scale of operations of the company. The internal financial controls with reference to the financial statements were tested and reported adequate.
The company has in place a policy on related party transactions as approved by the board and the same is available on the website of the company (weblink:https://cholamandalam.com/files/policy on related party transactions).
All transactions with related parties that were entered into during the financial year were in the ordinary course of business and were on an arm''s length basis. There were no materially significant transactions with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large. There were no contracts or arrangements entered into with related parties during the year to be disclosed under sections 188(1) and 134(h) of the Act in form AOC-2. All proposed transactions with related parties were placed before the audit committee for prior approval at the beginning of the financial year/quarter. Omnibus approval for transactions that cannot be foreseen or envisaged were obtained as permitted under the applicable laws and the thresholds are periodically reviewed. The transactions entered into pursuant to the approval so granted were placed before the audit committee for its review on a quarterly basis.
INFORMATION AS PER SECTION 134(3)(m) OF THE ACT
During the year under review, the company had no major impact on account of conservation of energy or technology absorption. Foreign currency expenditure / remittances amounting to '' 1,725.48 crores towards repayment of overseas borrowing and interest, software license fees and other professional charges were incurred during the year under review. The company does not have any foreign exchange earnings.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Being an NBFC, the disclosures regarding particulars of loans given, guarantees given and security provided is exempted under the provisions of section 186(11) of the Act. With regard to investments made by the company, the details of the same are provided
under Note 10 in standalone financial statements and Note 12 in consolidated financial statements of the company for the year ended 31 March, 2023.
The disclosure with respect to remuneration as required under section 197 of the Act read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached and forms part of this report.
In accordance with section 136 of the Act, the financial statements are being sent to the members and others entitled thereto. The statement prescribed under rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is available for inspection of the shareholders at the ensuing annual general meeting (AGM). If any member is interested in obtaining a copy, such member may send an e-mail to the company secretary in this regard.
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS
The company has complied with all the provisions of secretarial standards issued by the Institute of Company Secretaries of India in respect of meetings of the board of directors and general meetings held during the year.
The company has in place a policy for prevention of sexual harassment in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). The company has complied with the provisions relating to constitution of internal complaints committee (ICC) under the POSH Act. ICC has been set up to redress complaints received regarding sexual harassment. All employees including contract workers, probationer, trainee, apprentice or any person so employed at the workplace called by any other such name are covered under this policy. During the year, the company conducted workshops for employees creating awareness about POSH Act. During the calendar year ended 31 December, 2022 there were no referrals received by ICC.
There was no fraud reported by auditors of the company as given under Section 143(12) of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014.
During the year ended 31 March, 2023, the company had not made any application under the Insolvency and Bankruptcy Code, 2016 ("the Code"). As at 31 March, 2023, total number of applications filed and pending under the Code are 10 cases amounting to '' 49.65 crores. No proceeding is pending against the company under the Code. During the year, the company had not made any one-time settlement with banks or financial institutions.
HIGHLIGHTS OF PERFORMANCE OF SUBSIDIARIES / ASSOCIATES AND JOINT VENTURESCHOLAMANDALAM SECURITIES LIMITED (CSEC)
In FY 23, CSEC focused on (i) emerging as an integrated financial services player through Chola''s trusted brand and deep-rooted reach across India by leveraging the Chola ecosystem (ii) creating customer journeys and technology enabled platforms for both sales assisted and direct to customer for onboarding, equity trading and mutual fund transactions (iii) expanded presence across the 4 zones to leverage on Chola ecosystem. CSEC achieved a gross income of '' 51.54 crores for the year ended 31 March, 2023 and made a PBT of '' 8.68 crores as against a PBT of '' 7.48 crores in the previous year. The mutual fund AUM was at '' 791 crores. CSEC did not declare any dividend during the year.
CHOLAMANDALAM HOME FINANCE LIMITED (CHFL)
CHFL recorded a gross income of '' 81.87 crores for the year ended 31 March, 2023 and made a profit before tax of '' 7.66 crores as against profit of '' 9.19 crores in the previous year. CHFL did not declare any dividend during the year. The company continues its focus on insurance corporate agency business.
WHITE DATA SYSTEMS INDIA PRIVATE LIMITED (WDSI)
WDSI recorded a gross income of '' 5.26 crores for the year ended 31 March, 2023 and made a loss of '' 5.41 crores as against a loss of '' 0.24 crores in the previous year. WDSI did not declare any dividend during the year.
During the year, the company had entered into a Share Swap Agreement with TVS Supply Chain Solutions Limited (TVSSCSL) for sale of 12,75,917 equity shares constituting 30.87% of the equity shares held by the company in WDSI to TVSSCSL at a price of ? 315.34 per share. As consideration for sale of WDSI shares, the company was issued 22,35,265 compulsory convertible preference
shares of TVSSCSL with a face value of ? 1 each with a yield of 0.0001% at an issue price of ? 180 per share (with a conversion ratio of 1:1 where each compulsorily convertible preference share will convert into one equity share of ? 1 each of TVSSCSL) through preferential allotment via private placement. The transaction was completed on 20 April, 2023 and consequently WDSI ceased to be an associate of the company.
VISHVAKARMA PAYMENTS PRIVATE LIMITED (VPPL)
The company forms part of the consortium for retail payments - Vishvakarma Payments Private Limited (VPPL) that had applied for a New Umbrella Entity (NUE) License for retail payments with Reserve Bank of India in the year March 2021. The company holds 21% of equity share capital of VPPL. The application is pending for approval.
PAYSWIFF TECHNOLOGIES PRIVATE LIMITED (PTPL)
PTPL recorded a gross consolidated income of '' 230.27 crores for the year ended 31 March, 2023 and made a loss of '' 12.03 crores as against a loss of '' 42.51 crores in the previous year. The company made an additional investment of '' 6.81 crores during the year and holds 74.80% of the equity share capital of PTPL.
The directors wish to thank the company''s customers, vehicle manufacturers, vehicle dealers, channel partners, banks, mutual funds, other lenders, rating agencies and shareholders for their continued support. The directors also thank the employees of the company for their contribution to the company''s operations during the year under review.
On behalf of the board Place : Chennai Vellayan Subbiah
Date : 3 May, 2023 Chairman
Mar 31, 2021
Your directors have pleasure in presenting the forty third annual report together with the audited accounts of the company for the year ended 31 March, 2021.
FINANCIAL RESULTS
|
'' in crores |
||
|
Particulars |
2020-21 |
2019-20 |
|
Gross Income |
9,519.62 |
8,652.89 |
|
Profit Before Tax (PBT) |
2,038.44 |
1,585.73 |
|
Profit After Tax (PAT) |
1,514.91 |
1,052.37 |
|
One-time provision for COVID and Macro |
565.78 |
504.36 |
|
Profit Before Tax before one-time provisions |
2,604.23 |
2,090.09 |
|
Profit after Tax before one-time provisions |
1,935.38 |
1,387.09 |
|
Total Comprehensive income |
1,480.13 |
988.92 |
|
Appropriation: |
||
|
Transfer to statutory and other reserves |
1060.00 |
720.00 |
|
Dividend - Equity (including Taxes) |
106.56 |
200.32 |
SHARE CAPITAL
During the year, there was an increase in paid up capital by ? 0.09 crores, consequent to allotment of shares upon exercise of stock options by employees under the company''s employee stock option schemes.
OPERATIONS
The year began with the COVID-19 pandemic and nation-wide lock down resulting in halting most of the economic activities across the country and the globe. Central Banks across the globe including RBI came into action for supporting the economy. Moratoriums were offered to borrowers for a period of 6 months to support them to overcome the impact of COVID and related lock down. Emergency Credit Guarantee Schemes and one-time restructuring of loans were other initiatives by RBI to support the borrowers in COVID-19 related stress. Further reduction in repo rates, Cash Reserve Ratio (CRR) and Long Term Repo Operation (LRTO) action with Banks supported in abundant liquidity in the financial system.
Inspite of the slowdown in the automotive sector and imposition of lockdown from March, 2020 to July, 2020 across majority of states, which had a significant impact on the economy, your company surged back and achieved a growth of 16% in assets under
management (AUM) for FY 21. The profit before tax (PBT) registered a growth of 29% as compared to FY 20 after considering the onetime provision of ? 565.78 crores.
Vehicle Finance (VF) business witnessed a disbursement decline of 13%. Disbursements in VF for the year were at ? 20,249.11 crores as against ? 23,387.43 crores in the previous year. The business recorded a growth of 14% in closing managed assets and PBT registered a growth by 36% after considering additional provision of ? 449 crores towards its share of one-time provision.
Loan Against Property (LAP) business also witnessed a disbursement decline of 1%. Disbursements in LAP for the year were at ? 3,626.80 crores as against ? 3,661.89 crores in the previous year. The business recorded a growth of 14% in closing managed assets and PBT showed a growth of 25% after considering its share of one-time provision of ? 89.71 crores.
Disbursements in Home Loans (HL) business were at ? 1,542.28 crores as against ? 1,504.74 crores in the previous year and Micro, Small and Medium Enterprise (MSME) business were at ? 624.44 crores as against ? 537.11 crores in the previous year.
The business AUM of the company as at 31 March, 2021 increased to ? 69,996 crores from ? 60,549 crores in the previous year, recording a growth of 16%.
In accordance with the Reserve Bank of India (RBI) guidelines related to "COVID-19 regulatory package", your company had offered moratorium to its customers based on their eligibility for EMIs falling due between 1 March, 2020 to 31 August, 2020. Further, your company had offered resolution plans to its customers pursuant to RBI''s guideline on ''Resolution framework for COVID-19 related stress''.
Your company holds a management overlay of ? 1,100 crores as at 31 March, 2021 which includes an additional one-time provision created for COVID-19 in FY 21 for ? 566 crores and also retaining additional provision as on 31 March, 2020 ? 534 crores.
As required by the RBI notification dated 13 March, 2020, your company has complied with the requirements of Ind AS and the guidelines and policies approved by the board in recognition of impairment. The overall impairment provision made under Ind AS is higher than the prudential floor (including the provision requirement specified in the above notification) prescribed by RBI.
Given the dynamic and evolving nature of pandemic these estimates include the possible impact of known events till date are subject to uncertainty caused by resurgence of COVID-19 pandemic and related events.
During the year, your company had not availed moratorium on its borrowings. Your company had a closing balance of cash and bank balances including term deposits and investments in Government securities ? 6,428 crores, sanctioned lines of ? 2,000 crores and undrawn consortium limits of ? 1,351 crores as on 31 March, 2021, ensuring no negative cumulative mismatches across all time buckets. Pursuant to RBI notification on monitoring liquidity position of company, Liquidity Coverage Ratio (LCR) must be maintained at 50% and your company has been tracking this ratio for the past few months and ensured that the coverage is amply fulfilled.
OUTLOOK
Outlook for FY 22 continues to remain uncertain, with onset of second wave of COVID-19. Apart from agriculture and related activities, most other sectors of the economy have been adversely impacted by the pandemic and are expected to show de-growth.
VF business will continue to be the mainstay for the company. LAP portfolio has also been a significant contributor to the company''s growth and profitability. HL is the rising star and has a great potential to be built into a solid portfolio considering the expertise of the company in handling typical customer profiles. The company has also collaborated and upgraded in strengthening its digital applications with an aim to reduce physical touchpoint with stakeholders especially in this pandemic situation. The company''s robust collection mechanism aided with a strong credit risk assessment framework will help us steer through the strong currents of the COVID-19 pandemic in FY 22.
DIVIDEND
Dividend distribution policy
The company has formulated a dividend distribution policy in compliance with regulation 43A of SEBI (Listing Obligation and
Disclosure Requirement) Regulations, 2015 (Listing Regulations), copy of which is available on the website of the company. (weblink: https://www.cholamandalam.com/company-policies.aspx)
Payment of dividend
Your company paid an interim dividend on the equity shares at the rate of 65% (? 1.30 per equity share) as approved by the Board on
29 January, 2021 for the year ended 31 March, 2021.
Your directors are pleased to recommend a final dividend of 35% (? 0.70 per equity share) on the equity shares of the company. With this, the total dividend will be 100% (? 2.00 per equity share) for the year ended 31 March, 2021.
TRANSFER TO RESERVES
The company transferred a sum of ? 310 crores to statutory reserve as required under the Reserve Bank of India Act, 1934 and ? 750 crores to general reserves.
FIXED DEPOSITS
The company is an NBFC - Investment and Credit Company (NBFC-ICC). The company does not hold or accept deposits as of the date of balance sheet.
CAPITAL ADEQUACY
The company''s capital adequacy ratio was at 19.1% as on 31 March, 2021 as against the statutory minimum capital adequacy of 15% prescribed by RBI.
EMPLOYEE STOCK OPTION (ESOP) SCHEMES
ESOP 2016
Pursuant to the approval accorded by the shareholders on 3 January, 2017 the nomination and remuneration committee had formulated an employee stock option scheme 2016 (ESOP 2016).
During the year, the company made a grant aggregating to 2,13,805 options to 4 employees. The total number of options issued as on 31 March, 2021 under ESOP 2016 is 35,24,972.
ESOP 2007
Pursuant to the approval accorded by the shareholders at the twenty ninth annual general meeting (AGM) of the company held on
30 July, 2007 the nomination and remuneration committee had formulated an employee stock option scheme 2007 (ESOP 2007). During the year, there have been no fresh grants under the scheme and there have been no changes in the scheme. Number of options outstanding as on 31 March, 2021 under the ESOP 2007 is 18,820.
The schemes are in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI (SBEB) Regulations) and the Companies Act, 2013 (the Act).
The certificate from the statutory auditors confirming that ESOP 2007 and ESOP 2016 have been implemented in accordance with the SEBI (SBEB) Regulations and shareholders resolutions has been obtained and will be available for the shareholders at the ensuing AGM.
The details of the schemes as on 31 March, 2021 are provided and disclosed on the website of the company (weblink: https://www.cholamandalam/esop.aspx).
DIRECTORS
Appointments
Mr. Vellayan Subbiah was appointed as an additional director with effect from 11 November, 2020 by the board and elected as chairman of the board effective 12 November, 2020.
Further, Mr. M.A.M. Arunachalam was appointed as an additional director of the company effective 29 January, 2021.
Mr. Vellayan and Mr. Arunachalam hold office up to the date of ensuing AGM as additional directors. Their appointment as non-executive directors liable to retire by rotation have been recommended for approval of the shareholders at the ensuing AGM of the company.
Mr. Anand Kumar and Mr. Bharath Vasudevan were appointed as additional directors in the capacity of independent directors on 16 March, 2021. They hold office up to the date of ensuing AGM as additional directors. The appointments of Mr. Kumar and Mr. Vasudevan as independent directors up to 5 years from the date of their appointments have been recommended for approval of the shareholders at the ensuing AGM of the company.
Mr. Ravindra Kumar Kundu, Director who retires by rotation at the ensuing AGM and being eligible, has offered himself for re-appointment.
Resignation
Mr. M.M. Murugappan, chairman and non-executive director of the company resigned as a director and chairman of the board with effect from the close of business hours of 11 November, 2020.
Mr. Arun Alagappan, managing director stepped down from board of the company with effect from end of day 14 February, 2021.
The board places on record its deep appreciation for the guidance and significant contribution made by Mr. Murugappan and Mr. Arun Alagappan towards the success of the company during their tenure.
DECLARATION FROM INDEPENDENT DIRECTORS
All the independent directors (IDs) have submitted their declaration of independence, as required pursuant to section 149(7) of the Act, confirming that they meet the criteria of independence as provided in section 149(6) of the Act. In the opinion of the board, the IDs fulfil the conditions specified in the Act and the rules made there under for appointment as IDs including the integrity, expertise and experience and confirm that they are independent of the management. All the IDs of the company have registered their names with the data bank of IDs and are in the process of completion of online proficiency self-assessment test as per the timeline notified by the Ministry of Corporate Affairs (MCA).
KEY MANAGERIAL PERSONNEL
Pursuant to the provisions of section 203 of the Act read with the rules made there under, the following employees are the whole time key managerial personnel of the company during FY 21:
1. Mr. Arun Alagappan, Managing Director (upto 14 February, 2021)
2. Mr. Ravindra Kumar Kundu, Executive Director
3. Mr. D. Arul Selvan, Chief Financial Officer and
4. Ms. P. Sujatha, Company Secretary
DIRECTORS'' RESPONSIBILITY STATEMENT
The directors'' responsibility statement as required under section 134(5) of the Act, reporting the compliance with accounting standards, is attached and forms part of the board''s report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
There are no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status of the company and its future operations.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There are no significant material changes and commitments affecting the financial position of the company that occurred between the end of financial year and the date of this Report.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report (MDA), highlighting the business-wise details is attached and forms part of this report. MDA also contains the details of the risk management framework of the company including the development and implementation of risk management policy and the key risks faced by the company.
CORPORATE GOVERNANCE REPORT
A report on corporate governance as per the Listing Regulations is attached and forms part of this report. The report also contains the details as required to be provided on the composition and category of directors, number of meetings of the board, composition of the various committees, annual board evaluation, remuneration policy, criteria for board nomination and senior management appointment, whistle blower policy/vigil mechanism, disclosure of relationships between directors inter-se, state of company''s affairs, etc.
The executive director and the chief financial officer have submitted a compliance certificate to the board regarding the financial statements and other matters as required under regulation 17(8) of the Listing Regulations.
BUSINESS RESPONSIBILITY REPORT
A business responsibility report is attached and forms part of this report.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statement is prepared in accordance with the Act and the relevant accounting standards and forms part of this annual report.
AUDITORS
M/s. S. R. Batliboi & Associates LLP, chartered accountants are the statutory auditors of the company. They were appointed as statutory auditors of the company at the 39th AGM held on 27 July, 2017 for a period of five years commencing from the conclusion of 39th AGM till the conclusion of 44th AGM. The statutory audit report is attached with financial statement and forms part of this report and does not contain any qualification, reservation or adverse remarks.
RBI has issued guidelines on 27 April, 2021 for appointment of statutory auditors for Banks and NBFCs applicable from second half of FY 22 which inter alia mandates appointment of joint auditors and tenure of the auditors shall be for 3 continuous years. The company will be taking necessary steps to comply with the new RBI guidelines.
SECRETARIAL AUDIT
Pursuant to the provisions of the Act and the rules framed there under, M/s. R. Sridharan & Associates, company secretaries had undertaken a secretarial audit of the company for FY 21. The secretarial audit report is attached and forms part of this report and does not contain any qualification, reservation, or adverse remarks.
COST RECORD AND COST AUDIT
Maintenance of cost records and requirements of cost audit as prescribed under the provisions of section 148(1) of the Act is not applicable for the business activities carried out by the company.
ANNUAL RETURN
In accordance with sections 134(3)(a) and 92(3) of the Act, the annual return in form MGT-7 is placed on the website of the company and is available on the weblink: https://cholamandalam.com/files/MEDIA/ Annual-Return-2020-2021.pdf.
CORPORATE SOCIAL RESPONSIBILITY
The Murugappa group is known for its tradition of philanthropy and community service. The group''s philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. The company upholds the group''s tradition by earmarking a part of its income for carrying out its social responsibilities.
The company has been carrying out corporate social responsibility (CSR) activities for many years now even before it was mandated under the Act. The company has put in place a CSR policy. The policy along with composition of CSR committee and projects approved by the board are available on the website of the company (weblink: httDs://www.cholamandalam.com/community-relations.aspx).
As per the provisions of the Act, the company is required to spend at least 2% of the average net profits of the company made during the three immediately preceding financial years. This amount aggregated to ? 32.07 crores and the company spent the entire ? 32.07 crores towards CSR activities during FY 21, the details of which are annexed to and forms part of this report.
INTERNAL FINANCIAL CONTROLS
Internal control framework including clear delegation of authority and standard operating procedures are established and laid out across all businesses and functions. These are reviewed periodically at all levels. The risk and control matrices are reviewed on a quarterly basis and control measures are tested and documented. These measures have helped in ensuring the adequacy of internal financial controls commensurate with the scale of operations of the company.
The internal financial controls with reference to the financial statements were tested and reported adequate.
RELATED PARTY TRANSACTIONS
The company has in place a policy on related party transactions as approved by the board and the same is available on the website of the company_(weblink: https://www.cholamandalam.com/company-policies.aspx).
All transactions with related parties that were entered into during the financial year were in the ordinary course of business and were on an arm''s length basis. There were no materially significant transactions made by the company with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large. There were no contracts or arrangements entered into with related parties during the year to be disclosed under sections 188(1) and 134(h) of the Act in form AOC-2. All transactions with related parties were placed before the audit committee for prior approval at the beginning of the financial year. The transactions entered into pursuant to the approval so granted were placed before the audit committee for its review on a quarterly basis. None of the directors has any pecuniary relationship or transaction vis-a-vis the company.
INFORMATION AS PER SECTION 134(3)(m) OF THE ACT
During the year under review, the company has no major impact on account of conservation of energy or technology absorption. Foreign currency expenditure / remittances amounting to ? 143.57 crores was incurred during the year under review. Foreign currency remittances made during the year was ? 2.65 crores towards purchase of computer equipment. The company does not have any foreign exchange earnings.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Being an NBFC, the disclosures regarding particulars of loans given, guarantees given and security provided is exempted under the provisions of section 186(11) of the Act.
As regards investments made by the company, the details of the same are provided under note 10 in standalone financial statements and notes 12 and 45 in consolidated financial statements of the company for the year ended 31 March, 2021.
DISCLOSURE OF REMUNERATION
The disclosure with respect to remuneration as required under section 197 of the Act read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached and forms part of this report.
PARTICULARS OF EMPLOYEES
In accordance with section 136 of the Act, the report and accounts are being sent to the members and others entitled thereto. The statement prescribed under rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is available for inspection. If any member is interested in obtaining a copy, such member may send an e-mail to the company secretary in this regard.
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS
The company has complied with all the provisions of secretarial standards issued by the Institute of Company Secretaries of India in respect of meetings of the board of directors and general meetings held during the year.
INTERNAL COMPLAINTS COMMITTEE
The company has in place a policy for prevention of sexual harassment in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). The company has complied with the provisions relating to constitution of internal complaints committee (ICC) under the POSH Act. ICC has been set up to redress complaints received regarding sexual harassment. All employees are covered under this policy. During the year, the company conducted workshops for employees creating awareness about POSH Act. During the calendar year ended 31 December, 2020, there were no referrals received by ICC.
OTHER DISCLOSURES
There was no fraud reported by auditors of the company as given under Section 143(12) of the Companies Act, 2013 (Read with Companies (Audit and Auditors) Rules, 2014.
During the year ended 31 March, 2021, the company had made one application amounting to ? 1.28 crores under the Insolvency and Bankruptcy Code, 2016 ("the Code"). As at 31 March, 2021, total number of applications filed and pending under the Code are 12 amounting to ? 31.86 crores. No proceeding is pending against the company under the Code.
During the year, the company had not made any one-time settlement with banks or financial institutions.
HIGHLIGHTS OF PERFORMANCE OF SUBSIDIARIES / ASSOCIATES
CHOLAMANDALAM SECURITIES LIMITED (CSEC)
During the year, CSEC focused on creating three distinct business lines for enhancing revenues and productivity - broking, wealth, and insurance distribution. The broking business grew, wealth business dropped by due to cap on upfront income and insurance distribution business was scaled up significantly. CSEC achieved a gross income of ? 30.14 crores for the year ended 31 March, 2021 and made a PBT of ? 6.84 crores as against a PBT of ? 3.27 crores in the previous year. The Mutual Fund AUM was at ? 967 crores. CSEC did not declare any dividend during the year. The PBT contribution of CSEC to the overall performance of the company was ? 6.84 crores during the year.
CHOLAMANDALAM HOME FINANCE LIMITED (CHFL)
CHFL recorded a gross income of ? 37.15 crores for the year ended 31 March, 2021 and made a profit before tax of ? 2.62 crores as against a loss of ? 0.77 crores in the previous year. CHFL did not declare any dividend during the year. Currently, the company continues its focus on growing insurance corporate agency business.
The PBT contribution of CHFL to the overall performance of the company was ? 2.62 crores during the year.
WHITE DATA SYSTEMS INDIA PRIVATE LIMITED (WDSI)
WDSI recorded a gross income of ? 5.77 crores for the year ended 31 March, 2021 and made a loss of ? 2.30 crores as against a loss of ? 1.35 crores in the previous year. WDSI did not declare any dividend during the year.
VISHVAKARMA PAYMENTS PRIVATE LIMITED (VPPL)
During the year, the Company joined a consortium for retail payments - Vishvakarma Payments Private Limited (VPPL) that applied for a New Umbrella Entity (NUE) License for retail payments with Reserve Bank of India. VPPL is a Company incorporated in India under the Act. FSS, Zoho, Zerodha, RazorPay, Ujjivan and Airpay are also part of the VPPL consortium along with the company. The company holds 21% of equity share capital of VPPL. The application for NUE license is pending before RBI.
ACKNOWLEDGEMENT
The directors wish to thank the company''s customers, vehicle manufacturers, vehicle dealers, channel partners, banks, mutual funds, rating agencies and shareholders for their continued support. The directors also thank the employees of the company for their contribution to the company''s operations during the year under review.
On behalf of the board
Place : Chennai Vellayan Subbiah
Date : 7 May, 2021 Chairman
Mar 31, 2019
BOARD-S REPORT
The directors have pleasure in presenting the forty first annual report together with the audited accounts of the company for the year ended 31 March, 2019.
FINANCIAL RESULTS
Rs. in crores
|
Particulars |
2018Rs.19 |
2017Rs.18 |
|
Gross Income |
6,992.64 |
5,479.66 |
|
Profit Before Tax (PBT) |
1,823.15 |
1,401.37 |
|
Profit After Tax (PAT) |
1,186.15 |
918.30 |
|
Total Comprehensive income |
1,190.24 |
924.60 |
|
Appropriation: |
||
|
Transfer to statutory and other reserves |
840.00 |
700.00 |
|
Dividend - Equity |
101.63 |
101.60 |
|
Tax on dividend |
20.89 |
20.68 |
SHARE CAPITAL
The paid up equity share capital of the company as at 31 March, 2019 is Rs.156.43 crores including the increase during the year by Rs.3.42 lakhs, consequent to allotment of shares upon exercise of stock options by employees under the company-s employee stock option schemes 2007 and 2016.
The board of directors of the company at its meeting held on 27 April, 2019 has recommended sub-division of each equity share of face value of Rs.10 (Rupees Ten) fully paid up into 5 (Five) equity shares of face value of Rs.2 (Rupees Two) fully paid up to the shareholders of the company. Upon approval by shareholders and completion of other regulatory procedures for the sub-division, face value of each equity share will become Rs.2 (Rupees Two).
OPERATIONS
During the year, the company achieved a 30% growth in PBT and 26% growth in business assets under management net of provisions (AUM). The company brought down the stage 3 assets (net of ECL) to 1.67% of closing assets as on 31 March, 2019 as compared to 2.25% as on 31 March, 2018.
Vehicle finance (VF) business recorded a disbursement growth of 21%. Disbursements in VF for the year were at Rs.24,806.70 crores as against Rs.20,539.97 crores in the previous year. The business recorded a growth of 29% in closing managed assets and a PBT growth of 28%.
Home equity (HE) business recorded a disbursement growth of 21%. Disbursements in HE for the year were at Rs.3,836.55 crores as against Rs.3,174.04 crores in the previous year. The business recorded a growth of 15% in closing managed assets and a PBT growth of 38%.
Disbursements in home loans (HL) business were at Rs.1,156.88 crores as against Rs.605.96 crores in the previous year and Micro, Small and Medium Enterprise (MSME) business were at Rs.473.84 crores as against Rs.629.09 crores in the previous year. The new lines of businesses, disbursed Rs.176.54 crores as against Rs.67.35 crores during the previous year.
The AUM of the company as at 31 March, 2019 increased to Rs.54,279 crores from Rs.42,924 crores in the previous year, recording a growth of 26%.
The PBT for the year was at Rs.1,823.15 crores as against Rs.1,401.37 crores in the previous year, recording a growth of 30%. PAT grew by 29% and was at Rs.1,186.15 crores for the year as compared to Rs.918.30 crores in the previous year.
OUTLOOK
VF business will continue to be the mainstay for the company. HE portfolio has also been a significant contributor to the company-s growth and profitability. While the company expects the affordable housing segment to grow over the next few years, the growth opportunities available in VF and HE businesses, will enable the company to continue to hold the product leadership in these businesses. Cholamandalam Home Finance Limited (CHFL), the company-s wholly owned subsidiary has applied for housing finance license from National Housing Bank (NHB). Upon receipt of license, CHFL will start home loan business. The company will leverage digital, data and analytics with a key objective to create better customer experience.
DIVIDEND
Dividend distribution policy
The company has formulated a dividend distribution policy in compliance with regulation 43A of SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015 (Listing Regulations), copy of which is available on the website of the company. (weblink: https://www.cholamandalam.com/files/media/ CholamandalamDividend-Distribution-policy.pdf).
Payment of dividend
The company paid an interim dividend on the equity shares at the rate of 45% (Rs.4.50 per equity share) as approved by the board on 30 January, 2019 for the year ended 31 March, 2019.
Your directors are pleased to recommend a final dividend of 20% (Rs.2 per equity share) on the equity shares of the company. With this, the total dividend will be 65% (Rs.6.50 per equity share) for the year ended 31 March, 2019.
Upon sub-division of equity shares of Rs.10 (Rupees Ten) each into 5 (Five) equity shares of face value of Rs.2 (Rupee Two) each fully paid-up, the final dividend if declared at the ensuing AGM would be paid proportionately at the rate of 20% on the equity shares of Rs.2 each i.e. Rs.0.40 per share.
TRANSFER TO RESERVES
The company transferred a sum of Rs.240 crores to statutory reserve as required under the Reserve Bank of India Act, 1934 and Rs.600 crores to general reserves.
FIXED DEPOSITS
The company is a Systemically Important Non-Deposit Accepting Non-Banking Finance Company (NBFC-ND-SI). It ceased taking deposits from the public effective 1 November, 2006. The company does not hold or accept deposits as of the date of balance sheet.
Investment and Credit Company (NBFC-ICC)
During the year, RBI vide notification dated 22 February, 2019 harmonised different categories of non-banking financial companies (NBFCs) viz. Asset Finance Companies (AFC), Loan Companies (LCs) and Investment Companies (ICs) into a new category called NBFC - Investment and Credit Company (NBFC-ICC). Accordingly, the company being an AFC falls in the category of Investment and Credit Company (NBFC-ICC).
CAPITAL ADEQUACY
The company-s capital adequacy ratio was at 17.36% as on 31 March, 2019 as against the statutory minimum capital adequacy of 15% prescribed by RBI.
EMPLOYEE STOCK OPTION (ESOP) SCHEMES
ESOP 2016
Pursuant to the approval accorded by the shareholders by way of postal ballot on 3 January, 2017, the nomination and remuneration committee had formulated an employee stock option scheme 2016 (ESOP 2016). During the year, the company made four grants aggregating to 2,55,104 options to 29 employees. The total number of options issued as on 31 March, 2019 under ESOP 2016 is 7,94,946.
ESOP 2007
Pursuant to the approval accorded by the shareholders at the twenty ninth annual general meeting (AGM) of the company held on 30 July, 2007, the nomination and remuneration committee had formulated an employee stock option scheme 2007 (ESOP 2007). During the year, there have been no fresh grants under the scheme and there have been no changes in the scheme. Number of options outstanding as on 31 March, 2019 under the ESOP 2007 is 31,203.
The schemes are in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI (SBEB) Regulations) and the Companies Act, 2013 (the Act).
The certificate from the statutory auditors confirming that ESOP 2007 and ESOP 2016 have been implemented in accordance with the SEBI (SBEB) Regulations and shareholders resolutions has been obtained and will be placed before the shareholders at the ensuing AGM.
The details of the schemes as on 31 March, 2019 are provided and disclosed on the website of the company (weblink: https://www. cholamandalam/esop.aspx).
DIRECTORS
Appointments
Mr. M.M. Murugappan was appointed as an additional director with effect from 31 May, 2018 by the board and subsequently appointed by the members at the 40th Annual general meeting (AGM) held on 26 July, 2018 as a director of the company. Mr. Murugappan has been elected as chairman of the board effective 27 July, 2018.
Mr. N. Ramesh Rajan and Mr. Rohan Verma were appointed as additional directors in the capacity of independent directors with effect from 30 October, 2018 and 25 March, 2019 respectively. They shall hold office up to the date of the ensuing AGM as additional directors. The appointments of Mr. Rajan and Mr. Verma as independent directors up to 5 years from the respective date of their appointments has been recommended for the approval of shareholders at the ensuing AGM.
Mr. Arun Alagappan, executive director retires by rotation at the ensuing AGM and being eligible, has offered himself for re-appointment.
Retirement / Resignation
Mr. M.B.N. Rao, chairman of the company retired at the conclusion of the 40th AGM held on 26 July, 2018.
Mr. V. Srinivasa Rangan, director of the company retired at the close of business hours of 31 March, 2019.
Mr. N. Srinivasan, executive vice chairman and managing director stepped down as a director and as managing director of the company effective the close of business hours of 18 August, 2018.
The board places on record its deep appreciation for the significant contributions made by Mr. M.B.N. Rao, Mr. V. Srinivasa Rangan and Mr. N. Srinivasan towards the success of the company during their tenure.
DECLARATION FROM INDEPENDENT DIRECTORS
All the independent directors (IDs) have submitted their declaration of independence, as required pursuant to section 149(7) of the Act, confirming that they meet the criteria of independence as provided in section 149(6) of the Act. In the opinion of the board, the IDs fulfill the conditions specified in the Act and the rules made there under for appointment as IDs and confirm that they are independent of the management.
KEY MANAGERIAL PERSONNEL
Pursuant to the provisions of section 203 of the Act read with the rules made there under, the following employees were/are the wholetime key managerial personnel of the company during FY 19:
1. Mr. N. Srinivasan, EVC & MD (up to 18 August, 2018)
2. Mr. Arun Alagappan, Executive Director
3. Mr. D. Arul Selvan, Chief Financial Officer and
4. Ms. P. Sujatha, Company Secretary
DIRECTORS- RESPONSIBILITY STATEMENT
The directors- responsibility statement as required under section 134(5) of the Act, reporting the compliance with accounting standards, is attached and forms part of the board-s report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
There are no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status of the company and its future operations.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report (MDA), highlighting the business-wise details is attached and forms part of this report. MDA report also contains the details of the risk management framework of the company including the development and implementation of risk management policy and the key risks faced by the company.
CORPORATE GOVERNANCE REPORT
A report on corporate governance as per the Listing Regulations is attached and forms part of this report. The report also contains the details as required to be provided on the composition and category of directors, number of meetings of the board, composition of the various committees annual board evaluation, remuneration policy, criteria for board nomination and senior management appointment, whistle blower policy/vigil mechanism, disclosure of relationships between directors inter-se, state of company-s affairs, etc.
The executive director and the chief financial officer have submitted a compliance certificate to the board regarding the financial statements and other matters as required under regulation 17(8) of the Listing Regulations.
BUSINESS RESPONSIBILITY REPORT
A business responsibility report is attached and forms part of this report.
ADOPTION OF INDIAN ACCOUNTING STANDARDS
The company has adopted the Indian Accounting Standards (Ind AS) in respect of the accounting period beginning from 1 April, 2018 pursuant to the Companies (Indian Accounting Standards) Rules, 2015, as amended. Accordingly, the company has for the first time prepared its financial statements in compliance with Ind AS for the year ended 31 March, 2019, together with the comparative period data as at and for the year ended 31 March, 2018. The principle adjustments made by the company in restating the Indian GAAP financial statements including the balance sheet are given under Note 48 and Note 49 in the standalone and consolidated financial statements respectively.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statement is prepared in accordance with the Act and the relevant accounting standards and forms part of this annual report.
AUDITORS
M/s. S. R. Batliboi & Associates LLP, chartered accountants are the statutory auditors of the company. They were appointed as statutory auditors of the company at the 39th AGM held on 27 July, 2017 for a period of five years commencing from the conclusion of 39th AGM till the conclusion of 44th AGM.
SECRETARIAL AUDIT
Pursuant to the provisions of the Act and the rules framed there under, M/s. R. Sridharan & Associates, company secretaries had undertaken a secretarial audit of the company for FY 19. The secretarial audit report is attached and forms part of this report and does not contain any qualification.
COST RECORD AND COST AUDIT
Maintenance of cost records and requirements of cost audit as prescribed under the provisions of section 148(1) of the Act is not applicable for the business activities carried out by the company.
EXTRACT OF ANNUAL RETURN
In accordance with section 134(3)(a) of the Act, the extract of the annual return in form MGTRs.9 is attached and forms part of this report.
CORPORATE SOCIAL RESPONSIBILITY
The murugappa group is known for its tradition of philanthropy and community service. The group-s philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. The company upholds the group-s tradition by earmarking a part of its income for carrying out its social responsibilities.
The company has been carrying out corporate social responsibility (CSR) activities for many years now even before it was mandated under the Act. The company has put in place a CSR policy and is available on the website of the company (weblink: www.cholamandalam.com/csr-policy.aspx).
As per the provisions of the Act, the company is required to spend at least 2% of the average net profits of the company made during the three immediately preceding financial years. This amount aggregated to Rs.23.06 crores and the company spent Rs.23.07 crores towards CSR activities during FY 19, the details of which are annexed to and forms part of this report.
INTERNAL FINANCIAL CONTROLS
Internal control framework including clear delegation of authority and standard operating procedures are established and laid out across all businesses and functions. These are reviewed periodically at all levels. The company has a co-sourced model of internal audit. The risk and control matrices are reviewed on a quarterly basis and control measures are tested and documented. These measures have helped in ensuring the adequacy of internal financial controls commensurate with the scale of operations of the company.
RELATED PARTY TRANSACTIONS
The company has in place a policy on related party transactions as approved by the board and the same is available on the website of the company (weblink: https://www.cholamandalam.com/files/ MEDIA/Policy-on-Related-Party-Transactions.pdf).
All transactions with related parties that were entered into during the financial year were in the ordinary course of business and were on an arm-s length basis. There are no materially significant related party transactions made by the company with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large. There are no contracts or arrangements entered into with related parties during the year to be disclosed under sections 188(1) and 134(h) of the Act in form AOCRs.2. All transactions with related parties were placed before the audit committee for prior approval at the beginning of the financial year. The transactions entered into pursuant to the approval so granted were placed before the audit committee for its review on a quarterly basis. None of the directors has any pecuniary relationship or transaction vis-a-vis the company.
INFORMATION AS PER SECTION 134(3)(m) OF THE ACT
The company has no activity relating to consumption of energy or technology absorption. Foreign currency expenditure amounting to Rs.2.77 crores was incurred during the year under review. Foreign currency remittances made during the year was Rs.9.85 crores towards purchase of fixed assets. The company does not have any foreign exchange earnings.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Being an NBFC, the disclosures regarding particulars of loans given, guarantees given and security provided is exempt under the provisions of section 186(11) of the Act.
As regards investments made by the company, the details of the same are provided under note 10 in standalone financial statements and notes 12 and 45 in consolidated financial statements of the company for the year ended 31 March, 2019.
DISCLOSURE OF REMUNERATION
The disclosure with respect to remuneration as required under section 197 of the Act read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached and forms part of this report.
PARTICULARS OF EMPLOYEES
In accordance with section 136 of the Act, the report and accounts is being sent to the members and others entitled thereto. The statement prescribed under rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is available for inspection at the registered office of the company during the business hours on working days of the company. If any member is interested in obtaining a copy, such member may write to the company secretary in this regard.
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS
The company has complied with all the provisions of secretarial standards issued by the Institute of Company Secretaries of India in respect of meetings of the board of directors and general meetings held during the year.
INTERNAL COMPLAINTS COMMITTEE
The company has in place a policy for prevention of sexual harassment in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). The company has complied with the provisions relating to constitution of internal complaints committee (ICC) under the POSH Act. ICC has been set up to redress complaints received regarding sexual harassment. All employees are covered under this policy. During the year the company conducted workshops for employees creating awareness about POSH Act. During the calendar year ended 31 December, 2018, there were no referrals received by ICC.
HIGHLIGHTS OF PERFORMANCE OF SUBSIDIARIES / ASSOCIATES CHOLAMANDALAM SECURITIES LIMITED (CSEC)
During the year, the securities business and wealth business merged its operations with focus to build profitable relationships with retail and emerging high networth individual clients. The company achieved an income of Rs.22.02 crores for the year ended 31 March, 2019 as against Rs.19.68 crores in the previous year. The Mutual fund AUM crossed Rs.1,130 crores. CSEC recorded a gross income of Rs.22.02 crores for the year ended 31 March, 2019 and made a PBT of Rs.2.68 crores as against a PBT of Rs.3.41 crores in the previous year. During the year, CSEC obtained corporate agency (composite) license from Insurance Regulatory and Development Authority (IRDA) to carry on the insurance distribution business. CSEC did not declare any dividend during the year.
CHOLAMANDALAM HOME FINANCE LIMITED (CHFL)
The name of Cholamandalam Distribution Services Limited was changed to Cholamandalam Home Finance Limited with effect from 27 April, 2018 to reflect the proposed new housing finance business of the company. During the year, the company applied for Housing Finance Company (HFC) license with National Housing Bank (NHB) and the license from NHB is awaited.
CHFL recorded a gross income of Rs.41.24 crores for the year ended 31 March, 2019 and made a loss before tax of Rs.10.53 crores as against a PBT of Rs.6.78 crores in the previous year. CHFL did not declare any dividend during the year.
WHITE DATA SYSTEMS INDIA PRIVATE LIMITED (WDSI)
During the year, the shareholding of the company in WDSI reduced from 63% to 31% consequent to TVS Logistics Services Limited taking a majority stake in WDSI. Consequently, status of WDSI changed from subsidiary to associate effective 1 October, 2018. WDSI recorded a gross income of Rs.52.12 crores (unaudited) for the year ended 31 March, 2019 and made a loss of Rs.4.21 crores (unaudited) as against a loss of Rs.4.50 crores in the previous year. WDSI did not declare any dividend during the year.
ACKNOWLEDGEMENT
The directors wish to thank the company-s customers, vehicle manufacturers, vehicle dealers, channel partners, banks, mutual funds, rating agencies and shareholders for their continued support. The directors also thank the employees of the company for their contribution to the company-s operations during the year under review.
On behalf of the board
Place : Chennai M.M. Murugappan
Date : April 27, 2019 Chairman
Mar 31, 2018
Board''s Report
BOARD''S REPORT
The directors have pleasure in presenting the fortieth annual report together with the audited accounts of the company for the year ended 31 March, 2018.
FINANCIAL RESULTS
Rs, in crores
|
Particulars |
2017 - 18 |
2016 - 17 |
|
Gross Income |
5,425.77 |
4,660.35 |
|
Profit Before Tax (PBT) |
1,483.31 |
1,105.58 |
|
Profit After Tax (PAT) |
974.12 |
718.74 |
|
Add: Balance brought forward |
450.85 |
247.94 |
|
Amount available for appropriation |
1,424.97 |
966.69 |
|
Adjustments / Appropriation: |
||
|
Transfer to statutory and other reserves |
700.00 |
450.00 |
|
Dividend - Equity |
101.60 |
54.70 |
|
Tax on dividend |
20.68 |
11.14 |
|
Balance carried forward |
602.69 |
450.85 |
|
TOTAL |
1,424.97 |
966.69 |
SHARE CAPITAL
The paid up equity share capital of the company as at 31 March, 2018 is Rs, 156.33 crores including the increase during the year by Rs, 5.38 lakhs, consequent to allotment of shares upon exercise of stock options by employees under the company''s employee stock option scheme 2007 and employee stock option scheme 2016.
OPERATIONS
During the year, your company achieved a 34% growth in profit before tax (PBT) and 25% growth in total assets under management. During the second half of the year the commercial vehicle (CV) industry saw a sharp recovery boosting sales of vehicles across.
Vehicle finance (VF) business recorded a disbursement growth of 42% buoyed by the recovery signals in the CV market. Disbursements in VF for the year were at Rs, 20,540 crores as against Rs, 14,471 crores in the previous year.
The business recorded a growth of 33% in closing managed assets and a PBT growth of 50%. With a relentless focus on collections, the business brought down the non performing assets to 2% of closing assets as compared to 4.2% as on 31 March, 2017.
Home equity (HE) business recorded a disbursement of Rs, 3,174 crores as against Rs, 3,056 crores in the previous year. The business faced huge rate competition from Banks which triggered lot of pre-closures leading to a marginal growth in assets under management by 4%.
Disbursements in home loans (HL) were at Rs, 606 crores as against Rs, 325 crores in the previous year and Micro, Small and Medium Enterprise (MSME) were at Rs, 629 crores as against Rs, 666 crores in the previous year. The rural agri financing business disbursed Rs, 97 crores as against Rs, 73 crores during the previous year. The new initiative line of businesses Vishesh and Trip Loans has recorded Rs, 67 crores of disbursements in its first year of launch.
The business assets under management (net of provisions) of the company as at 31 March, 2018 increased to Rs, 42,879 crores from Rs, 34,167 crores in the previous year, recording a growth of 25%.
The PBT for the year was at Rs, 1483.31 crores as against Rs, 1,105.58 crores in the previous year, recording a growth of 34%.
Profit after tax grew by 36% and was at Rs, 974.12 crores for the year as compared to Rs, 718.74 crores in the previous year.
DIVIDEND
Dividend distribution policy
The company has formulated a dividend distribution policy in compliance with regulation 43A of SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015 (Listing Regulations), copy of which is available on the website of the company (weblink: http://www.cholamandalam.com/files/media/Cholamandalam-Dividend-Distribution-policy.pdf).
Payment of dividend
The company paid an interim dividend on the equity shares at the rate of 45% (Rs, 4.50 per equity share) as approved by the board on 30 January, 2018 for the year ended 31 March, 2018.
Your directors are pleased to recommend a final dividend of 20% (Rs, 2 per equity share) on the equity shares of the company. With this, the total dividend will be 65% (Rs, 6.5 per equity share) for the year ended 31 March, 2018.
CREDIT RATING
The credit rating details of the company as at 31 March, 2018 are as follows:
|
Rating Agency |
Term |
Type |
Rating 1 |
|
ICRA |
LT |
NCD / SD / CC / TL |
[ICRA]AA with Positive Outlook |
|
LT |
PD |
[ICRA]AA- with Positive Outlook |
|
|
ST |
CP/WCDL |
[ICRA]A1 |
|
|
CRISIL |
ST |
CP |
[CRISIL]A1 |
|
LT |
SD |
[CRISIL]AA / Stable |
|
|
CARE* |
LT |
SD |
CARE AA |
|
LT |
PD |
CARE AA |
|
|
INDIA Ratings* |
LT |
NCD/SD |
IND AA with Stable Outlook |
|
LT |
PD |
IND AA with Stable Outlook |
|
|
Brickwork Ratings |
LT |
NCD |
BWR AA with Stable Outlook |
NCD - Non Convertible Debenture CP - Commercial Paper PD - Perpetual Debt
CC - Cash Credit ST - Short Term SD - Subordinated Debt
LT - Long Term TL - Term Loan WCDL - Working Capital Demand Loan
* INDIA ratings and CARE ratings have upgraded the long term rating to IND AA (Stable) and CARE AA during the year.
The ratings as mentioned above were re-affirmed by the rating agencies during FY 18.
TRANSFER TO RESERVES
Your company has transferred a sum of Rs, 200 crores to statutory reserve as required under the Reserve Bank of India Act, 1934 and Rs, 500 crores to general reserves.
OUTLOOK
The company continues to focus and grow its two main business lines - VF and HE, while testing the waters in new businesses such as HL, MSME loans, and rural agri loans. The company continued its pilot of trip loans and Chola Vishesh the new product extensions under VF, catering to the funding requirements of the VF eco-system. Trip loan is targeted at the trucking community by extending shortterm credit for the freight/transportation process, and is aimed at moving this lending product from the unorganized segment to the organised segment. This will help the truckers get comparatively lower cost credit in a transparent process and thereby improving their profitability. Chola Vishesh is extended to existing credit tested customers, a pre-approved loan leveraging technology.
FIXED DEPOSITS
The company is a Systemically Important Non-Deposit Accepting Non-Banking Finance Company (NBFC-ND-SI). It ceased taking deposits from the public effective 1 November, 2006. At the time of conversion, the outstanding unmatured deposits were transferred to an escrow account together with the future interest payable thereon till the date of maturity and were repaid on maturity. All the amounts were repaid and there was no unclaimed / unpaid matured deposits lying in the escrow account and hence the escrow account was closed on 31 March, 2018.
ASSET FINANCE COMPANY
During the year, the company continued being categorised as an Asset Finance Company (AFC) under the RBI Regulations.
CAPITAL ADEQUACY
The company''s capital adequacy ratio was at 18.36% as on 31 March, 2018 as against the statutory minimum capital adequacy of 15% prescribed by RBI.
EMPLOYEE STOCK OPTION (ESOP) SCHEMES ESOP 2016
Pursuant to the approval accorded by the shareholders by way of postal ballot on 3 January, 2017, the nomination and remuneration committee had formulated an employee stock option scheme 2016 (ESOP 2016). During the year, the company made two grants aggregating to 82,860 options to 15 employees. The scheme is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI (SBEB) Regulations) and the Companies Act, 2013 (the Act). The total number of options available as on 31 March, 2018 under ESOP 2016 is 6,05,513.
ESOP 2007
Pursuant to the approval accorded by the shareholders at the twenty ninth annual general meeting (AGM) of the company held on 30 July, 2007, the nomination and remuneration committee had formulated an employee stock option scheme 2007 (ESOP 2007). During the year, there have been no fresh grants under the scheme and there have been no changes in the scheme. The scheme is in compliance with SEBI (SBEB) Regulations and the Act. Number of options outstanding as on 31 March, 2018 under the ESOP 2007 is 44,294.
The certificate from the statutory auditors confirming that ESOP 2007 and ESOP 2016 have been implemented in accordance with the SEBI (SBEB) Regulations and shareholders resolution will be placed before the shareholders at the ensuing AGM.
The details of both the schemes as on 31 March, 2018 are provided and disclosed on the website of the company (we blink: http://www.cholamandalam/esop.aspx).
DIRECTORS
Appointment:
During the year, Mr. N. Srinivasan was appointed as an executive vice chairman & managing director for a period of two years and Mr. Arun Alagappan was appointed as an executive director for a period of five years with effect from 19 August, 2017.
Further, the board at its meeting held on 30 October, 2017 appointed Mr. Ashok Kumar Barat as an additional director of the company, who shall hold office up to the date of ensuing AGM as an additional director. Mr. Barat is eligible for a term of office as an independent director up to 5 years with the approval of shareholders.
Reappointment:
Mr. N. Srinivasan, executive vice chairman & managing director, (EVC & MD) retires by rotation at the ensuing AGM and being eligible, has offered himself for re-appointment.
Retirement / Resignation:
The term of office of Mr. Nalin Mansukhlal Shah, independent director of the company expired at the 39th AGM held on 27 July, 2017 and accordingly he ceased to be a director. The term of office of Mr. Vellayan Subbiah, managing director expired at the close of business hours on 18 August, 2017.
Mr. M. M. Murugappan, non-executive director resigned from the office of directorship of the company effective the close of business hours on 31 October, 2017.
The board places on record its deep appreciation for the significant contributions made by Mr. Nalin Mansukhlal Shah and Mr. M. M. Murugappan as members of the Board and its sub-committees during their tenure of office. Further, the board acknowledges and places on record its deep appreciation to Mr. Vellayan Subbiah, former managing director for ably steering the company for the last 7 years and building the company from strength to strength.
DECLARATION FROM INDEPENDENT DIRECTORS
The independent directors (IDs) have submitted declaration of independence, as required pursuant to section 149(7) of the Act, stating that they meet the criteria of independence as provided in section 149(6) of the Act. In the opinion of the board, these IDs fulfil the conditions specified in the Act and the rules made there under for appointment as IDs and confirm that they are independent of the management.
KEY MANAGERIAL PERSONNEL
Pursuant to the provisions of section 203 of the Act read with the rules made there under, the following employees are the whole time key managerial personnel of the company:
1. Mr. N. Srinivasan, EVC & MD (from 19 August, 2017)
2. Mr. Vellayan Subbiah, Managing Director (upto 18 August, 2017)
3. Mr. Arun Alagappan, Executive Director (from 19 August, 2017)
4. Mr. D. Arul Selvan, Chief Financial Officer and
5. Ms. P. Sujatha, Company Secretary
DIRECTORS'' RESPONSIBILITY STATEMENT
The directors'' responsibility statement as required under section 134(5) of the Act, reporting the compliance with accounting standards, is attached and forms part of the board''s report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
There are no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status of the company and its future operations.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report (MDA), highlighting the business-wise details is attached and forms part of this report. MDA report also contains the details of the risk management framework of the company including the development and implementation of risk management policy and the key risks faced by the company.
CORPORATE GOVERNANCE REPORT
A report on corporate governance as per the Listing Regulations is attached and forms part of this report. The report also contains the details as required to be provided on the composition and category of directors, number of meetings of the board, composition of the various committees including the audit committee, nomination and remuneration committee, stakeholders relationship committee and corporate social responsibility committee, annual board evaluation, remuneration policy, criteria for board nomination and senior management appointment, whistle blower policy/vigil mechanism, disclosure of relationships between directors inter-se, state of company''s affairs, etc.
The managing director and the chief financial officer have submitted a certificate to the board regarding the financial statements and other matters as required under regulation 17(8) of the Listing Regulations.
BUSINESS RESPONSIBILITY REPORT
A business responsibility report is attached and forms part of this report.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statement is prepared in accordance with the Act and the relevant accounting standards form part of this annual report.
AUDITORS
M/s. S. R. Batliboi & Associates LLP, chartered accountants were appointed as statutory auditors of the company at the thirty ninth AGM held on 27 July, 2017 for a period of five years commencing from the conclusion of thirty ninth AGM till the forty fourth AGM subject to ratification by members at every AGM. Accordingly, your directors recommend the ratification of the appointment of
M/s. S. R. Batliboi & Associates LLP, as statutory auditors of the company from the conclusion of the fortieth AGM till the conclusion of the forty first AGM of the company. The statutory auditors have confirmed their eligibility for appointment.
SECRETARIAL AUDIT
Pursuant to the provisions of the Act and the rules framed there under, M/s. R. Sridharan & Associates, company secretaries had undertaken a secretarial audit of the company for FY 18. The secretarial audit report is attached and forms part of this report and does not contain any qualification.
EXTRACT OF ANNUAL RETURN
In accordance with section 134(3)(a) of the Act, the extract of the annual return in form MGT-9 is attached and forms part of this report.
CORPORATE SOCIAL RESPONSIBILITY
The murugappa group is known for its tradition of philanthropy and community service. The group''s philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. The company upholds the group''s tradition by earmarking a part of its income for carrying out its social responsibilities.
The company has been carrying out corporate social responsibility (CSR) activities for many years now even before it was mandated under the Act. The company has put in place a CSR policy and is available on the website of the company (we blink: www.cholamandalam.com/csr-policy.aspx).
As per the provisions of the Act, the company is required to spend at least 2% of the average net profits of the company made during the three immediately preceding financial years. This amount aggregated to Rs, 17.56 crores and the company actually spent Rs, 17.57 crores towards CSR activities during FY 18, the details of which are annexed to and forms part of this report.
INTERNAL FINANCIAL CONTROLS
Internal control framework including clear delegation of authority and standard operating procedures are established and laid out across all businesses and functions. These are reviewed periodically at all levels. The company has a co-sourced model of internal audit. The risk and control matrices are reviewed on a quarterly basis and control measures are tested and documented. These measures have helped in ensuring the adequacy of internal financial controls commensurate with the scale of operations of the company.
RELATED PARTY TRANSACTIONS
The company has in place a policy on related party transactions as approved by the board and the same is available on the website of the company (weblink: http://www.cholamandalam.com/files/ MEDIAJPolicy-on-Related-Party-Transactions.pdf).
All related party transactions that were entered into during the financial year were in the ordinary course of business and were on an arm''s length basis. There are no materially significant related party transactions made by the company with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large. There are no contracts or arrangements entered into with related parties during the year to be disclosed under sections 188(1) and 134(h) of the Act in form AOC-2. All related party transactions were placed before the audit committee for prior omnibus approval at the beginning of the financial year. The transactions entered into pursuant to the approval so granted were placed before the audit committee for its review on a quarterly basis. None of the directors has any pecuniary relationship or transaction vis-a-vis the company.
INFORMATION AS PER SECTION 134(3)(m) OF THE ACT
The company has no activity relating to consumption of energy or technology absorption. Foreign currency expenditure amounting to Rs, 1.89 crores was incurred during the year under review. Foreign currency remittances made during the year was Rs, 10.30 crores towards purchase of fixed assets. The company does not have any foreign exchange earnings.
DISCLOSURE OF REMUNERATION
The disclosure with respect to remuneration as required under section 197 of the Act read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached and forms part of this report.
PARTICULARS OF EMPLOYEES
In accordance with section 136 of the Act, the report and accounts is being sent to the members and others entitled thereto, excluding the statement prescribed under rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
The aforesaid information is available for inspection at the registered office of the company during the business hours on working days of the company. If any member is interested in obtaining a copy, such member may write to the company secretary in this regard.
SUBSIDIARIES CHOLAMANDALAM SECURITIES LIMITED (CSEC)
CSEC recorded a gross income of Rs, 19.68 crores for the year ended 31 March, 2018 and made a PBT of Rs, 3.54 crores as against a PBT of Rs, 2.68 crores in the previous year.
CHOLAMANDALAM DISTRIBUTION SERVICES LIMITED (CDSL)
CDSL recorded a gross income of Rs, 11.51 crores for the year ended 31 March, 2018 and made a PBT of Rs, 6.78 crores as against a PBT of Rs, 8.35 crores in the previous year.
WHITE DATA SYSTEMS INDIA PRIVATE LIMITED (WDSI)
WDSI recorded a gross income of Rs, 50.33 crores for the year ended 31 March, 2018 and made a loss of Rs, 4.34 crores as against loss of Rs, 4.18 crores in the previous year.
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS
The company has complied with secretarial standards issued by the Institute of Company Secretaries of India in respect of Board Meetings and Annual General Meeting held during the year.
ACKNOWLEDGEMENT
The directors wish to thank the company''s customers, vehicle manufacturers, vehicle dealers, channel partners, banks, mutual funds, rating agencies and shareholders for their continued support. The directors also thank the employees of the company for their contribution to the company''s operations during the year under review.
On behalf of the board
Place : Chennai M.B.N. Rao
Date : April 23, 2018 Chairman
Mar 31, 2017
The directors have pleasure in presenting the thirty ninth annual report together with the audited accounts of the company for the year ended 31 March, 2017.
FINANCIAL RESULTS Rs. in crores
|
Particulars |
2016 - 17 |
2015 - 16 |
|
Gross Income |
4,660.35 |
4193.70 |
|
Profit Before Tax (PBT) |
1,105.58 |
870.77 |
|
Profit After Tax (PAT) |
718.74 |
568.45 |
|
Add: Balance brought forward |
247.94 |
186.62 |
|
Amount available for appropriation |
966.69 |
755.07 |
|
Adjustments / Appropriation: |
||
|
Transfer to statutory and other reserves |
450.00 |
420.00 |
|
Dividend - Preference |
- |
2.12 |
|
Dividend - Equity * |
54.70 |
70.26 |
|
Tax on dividend |
11.14 |
14.74 |
|
Balance carried forward |
450.85 |
247.95 |
|
TOTAL |
966.69 |
755.07 |
* Provision for final dividend for FY 17 is not included in current year as per Revised Accounting Standard-4.
SHARE CAPITAL
The paid up equity share capital of the company as at 31 March, 2017 is Rs. 156.28 crores including the increase during the year by Rs. 0.13 crores, consequent to allotment of shares upon exercise of stock options by employees under the companyâs employee stock option scheme 2007 (ESOP 2007).
OPERATIONS
During the year, your company achieved a 27% growth in profit before tax (PBT) and 15% growth in total assets under management. Though FY 17 was a turbulent year with macro-economic factors impacting the businesses, a growth of 13% in disbursements was achieved as compared to FY 16.
The note-ban impacted the business in the second half of the year marking sluggish growth in disbursement when compared to first half. Though collections were also impacted for a short period, quick actions to mitigate the same was put in place, by introducing non-cash modes of collection at all locations.
Vehicle finance (VF) business recorded a disbursement growth of 17% buoyed by the recovery signals in the commercial vehicles (CV) market. Disbursements in VF for the year were at Rs. 14,471 crores as against Rs. 12,383 crores in the previous year.
The business recorded a growth of 18% in closing managed assets and a PBT growth of 23%. VF business was able to achieve improved collection behavior compared to previous year in spite of setbacks arising due to demonetisation related issues.
Home equity (HE) business recorded a disbursement of Rs. 3,056 crores as against Rs. 3,476 crores in the previous year. The drop is primarily attributable to low credit appetite of the small and medium enterprises (SME) customers, in the wake of demonetisation. Closing managed assets of HE grew by 8%. HE business continued to register higher levels of non-performing assets (NPA), compounded due to note-ban adversely affecting the SME segment.
Disbursements in home loans (HL) were at Rs. 325 crores as against Rs. 175 crores in the previous year and micro, small and medium enterprise (MSME) were at Rs. 666 crores as against Rs. 325 crores in the previous year. The rural agri financing business disbursed Rs. 73 crores as against Rs. 21 crores during the previous year.
The business assets under management (net of provisions) of the company as at 31 March, 2017 increased to Rs. 34,167 crores from Rs. 29,650 crores in the previous year, recording a growth of 15%.
As in the last few years, your company has early adopted the revised asset classification norms by recognising NPAs at 3 months overdue, one year ahead of the mandatory requirement, as laid down by RBI.
The PBT for the year was at Rs. 1,105.58 crores as against Rs. 870.77 crores in the previous year, recording a growth of 27%.
Profit after tax grew by 26% and was at Rs. 718.74 crores for the year as compared to Rs. 568.45 crores in the previous year.
DIVIDEND
Dividend distribution policy
The company has formulated a dividend distribution policy in compliance with regulation 43A of SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015 (Listing Regulations), copy of which is available on the website of the company (weblink: http://www.cholamandalam.com/files/ media/Cholamandalam-Dividend-Distribution-policy.pdf).
Payment of dividend
The company paid an interim dividend on the equity shares at the rate of 35% (Rs. 3.50 per equity share) as approved by the board on 25 January, 2017 for the year ended 31 March, 2017.
Your directors are pleased to recommend a final dividend of 20% (Rs. 2 per equity share) on the equity shares of the company. With this, the total dividend will be 55% (Rs. 5.50 per equity share) for the year ended 31 March, 2017.
TRANSFER TO RESERVES
Your company has transferred a sum of Rs. 150 crores to statutory reserve as required under the Reserve Bank of India Act, 1934 and Rs. 300 crores to general reserves.
OUTLOOK
The company continues to focus and grow its two main business lines - VF and HE, while nurturing the new businesses such as HL, MSME loans, and rural agri loans for future growth.
The company has added trip loans and Chola Vishesh as new product extensions under VF, catering to the funding requirements of the VF eco-system. Trip loan is targeted at the trucking community by extending short-term credit for the freight/transportation process, and is aimed at moving this lending product from the unorganized segment to the organised segment. This will help the truckers get comparatively lower cost credit in a transparent process and thereby improving their profitability. Chola Vishesh is extended to existing credit tested customers, a pre-approved loan leveraging technology.
FIXED DEPOSITS
The company is a Systemically Important Non-Deposit Accepting Non-Banking Finance Company (NBFC-ND-SI). It ceased taking deposits from the public effective 1 November, 2006. At the time of conversion, the outstanding unmatured deposits were transferred to an escrow account together with the future interest payable thereon till the date of maturity and were repaid on maturity. Accordingly, there have been no fresh deposits accepted during FY 17.
As at 31 March, 2017, there were no deposits matured but had not been claimed (along with interest accrued). During the year, the company remitted a sum of Rs. 1.89 lakhs to IEPF under this head representing unclaimed public deposits and interest thereon beyond seven years.
ASSET FINANCE COMPANY
During the year, the company continued being categorised as an Asset Finance Company (AFC) under the RBI Regulations.
CREDIT RATING
The credit rating details of the company as at 31 March, 2017 are as follows:
|
Rating Agency |
Term |
Type |
Rating |
|
ICRA |
LT |
NCD/SD/CC/TL |
[ICRA]AA with Positive Outlook |
|
LT |
PD |
[ICRA]AA- with Positive Outlook |
|
|
ST |
CP / WCDL |
[ICRA]A1 |
|
|
CRISIL |
ST |
CP |
[CRISIL]A1 |
|
LT |
SD |
[CRISIL]AA / Stable |
|
|
CARE |
LT |
SD |
CARE AA |
|
LT |
PD |
CARE AA- |
|
|
INDIA Ratings |
LT |
NCD/SD |
IND AA with Stable Outlook |
|
LT |
PD |
IND AA- with Stable Outlook |
|
|
Brickwork Ratings* |
LT |
NCD |
BWR AA with Stable Outlook |
NCD - Non Convertible Debentures CP - Commercial Paper PD - Perpetual Debt CC - Cash Credit ST - Short Term SD - Subordinated Debt LT - Long Term TL - Term Loan WCDL - Working Capital Demand Loan
ICRA revised the rating outlook from Stable to Positive in July 2016.
* Brickwork ratings assigned BWR AA (Stable) rating for the proposed NCD issuance of the company.
The ratings as mentioned above were re-affirmed by the rating agencies during FY 17.
CAPITAL ADEQUACY
The companyâs capital adequacy ratio was at 18.64% as on 31 March, 2017 as against the statutory minimum capital adequacy of 15% prescribed by RBI.
EMPLOYEE STOCK OPTION (ESOP) SCHEMES ESOP 2016
Pursuant to the approval accorded by the shareholders by way of postal ballot on 3 January, 2017, the nomination and remuneration committee had formulated an employee stock option scheme 2016 (ESOP 2016). During the year, the company made 5,79,980 grants to 40 employees. The scheme is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI (SBEB) Regulations) and the Companies Act, 2013 (the Act). The total number of options available under ESOP 2016 is 31,25,102.
ESOP 2007
Pursuant to the approval accorded by the shareholders at the twenty ninth annual general meeting (AGM) of the company held on 30 July, 2007, the nomination and remuneration committee had formulated the ESOP 2007. During the year, there have been no fresh grants under the scheme and there has been no changes in the scheme. The scheme is in compliance with SEBI (SBEB) Regulations and the Act. Number of options outstanding as on 31 March, 2017 under the ESOP 2007 is 6,48,965.
The certificate from the statutory auditors confirming that ESOP 2007 and ESOP 2016 have been implemented in accordance with the SEBI (SBEB) Regulations and shareholders resolution, will be placed before the shareholders at the ensuing AGM.
The details of both the schemes as on 31 March, 2017 are provided and disclosed on the website of the company (weblink: http://www.cholamandalam/esop.aspx).
DIRECTORS
Mr. N. Srinivasan, director, retires by rotation at the ensuring AGM and being eligible, has offered himself for re-appointment.
Mr. Vellayan Subbiah, the current managing director holds office till 18 August, 2017.
Further, the board at its meeting held on 15 March, 2017 appointed Mr. N. Srinivasan as executive vice chairman and managing director of the company for a period of two years effective 19 August, 2017 and Mr. Arun Alagappan as an executive director of the company for a period of five years effective 19 August, 2017 subject to the approval of the members at the ensuing AGM of the company. Upon such appointments becoming effective, Mr. N. Srinivasan and Mr. Arun Alagappan will become key managerial personnel of the company pursuant to the provisions of section 203 of the Act.
DECLARATION FROM INDEPENDENT DIRECTORS
The independent directors (IDs) have submitted a declaration of independence, as required pursuant to section 149(7) of the Act, stating that they meet the criteria of independence as provided in section 149(6) of the Act. In the opinion of the board, these IDs fulfill the conditions specified in the Act and the rules made there under for appointment as IDs and confirm that they are independent of the management.
KEY MANAGERIAL PERSONNEL
Pursuant to the provisions of section 203 of the Act read with the rules made there under, the following employees are the whole-time key managerial personnel of the company:
1. Mr. Vellayan Subbiah, Managing Director
2. Mr. D. Arul Selvan, Chief Financial Officer and
3. Ms. P. Sujatha, Company Secretary DIRECTORSâ RESPONSIBILITY STATEMENT
The directorsâ responsibility statement as required under section 134(5) of the Act, reporting the compliance with accounting standards, is attached and forms part of the boardâs report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
There are no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status of the company and its future operations.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report, highlighting the business-wise details is attached and forms part of this report. The report also contains the details of the risk management framework of the company including the development and implementation of risk management policy and the key risks faced by the company.
CORPORATE GOVERNANCE REPORT
A report on corporate governance as per the Listing Regulations is attached and forms part of this report. The report also contains the details as required to be provided on the number of meetings of the board, composition of the various committees including the audit committee and corporate social responsibility committee, annual board evaluation, remuneration policy, criteria for board nomination and senior management appointment, whistle blower policy/ vigil mechanism, disclosure of relationships between directors inter-se, state of companyâs affairs, etc.
The managing director and the chief financial officer have submitted a certificate to the board regarding the financial statements and other matters as required under regulation 17(8) of the Listing Regulations.
BUSINESS RESPONSIBILITY REPORT
A business responsibility report is attached and forms part of this report.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements prepared in accordance with the Act and the relevant accounting standards form part of this annual report.
AUDITORS
M/s. Deloitte Haskins & Sells, chartered accountants were appointed as statutory auditors of the company for a period of three years at the thirty sixth AGM of the company as per the transition provisions of section 139 of the Act, where the rules prescribed the maximum tenure for appointment of a firm if they had already been serving as auditors for more than 7 years. Accordingly, M/s. Deloitte Haskins & Sells, chartered accountants, statutory auditors of the company complete their three year tenure at the closure of the thirty ninth AGM of the company.
Pursuant to sections 139 and 141 of the Act and other applicable provisions, if any, read with Companies (Audit & Auditors) Rules, 2014 made there under (including any statutory modification(s) or re-enactment thereof for the time being in force), it is proposed to appoint, M/s. S.R.Batliboi & Associates LLP, chartered accountants, as statutory auditors of the company for a period of five years commencing from the conclusion of thirty ninth AGM till the forty fourth AGM subject to approval of the members at the ensuing AGM.
SECRETARIAL AUDIT
The secretarial audit report is attached and forms part of this report and does not contain any qualification. Pursuant to the provisions of the Act and the rules framed there under, the company appointed M/s. R. Sridharan & Associates, company secretaries to undertake the secretarial audit of the company for FY 17.
EXTRACT OF ANNUAL RETURN
In accordance with section 134(3)(a) of the Act, the extract of the annual return in form MGT-9 is attached and forms part of this report.
CORPORATE SOCIAL RESPONSIBILITY
The murugappa group is known for its tradition of philanthropy and community service. The groupâs philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. The company upholds the groupâs tradition by earmarking a part of its income for carrying out its social responsibilities.
The company has been carrying out corporate social responsibility (CSR) activities for many years now even before it was mandated under the Act. The company has put in place a CSR policy incorporating the requirements therein which is available on the website of the company (weblink: www.cholamandalam.com/csr-policy.aspx).
As per the provisions of the Act, the company is required to spend at least 2% of the average net profits of the company made during the three immediately preceding financial years. This amount aggregated to Rs. 13.85 crores and the company actually spent Rs. 13.86 crores towards CSR activities during FY 17, the details of which are annexed to and forms part of this report.
INTERNAL FINANCIAL CONTROLS
Internal control framework including clear delegation of authority and standard operating procedures are established and laid out across all businesses and functions. These are reviewed periodically at all levels. The company has a co-sourced model of internal audit. The risk and control matrices are reviewed on a quarterly basis and control measures are tested and documented. These measures have helped in ensuring the adequacy of internal financial controls commensurate with the scale of operations of the company.
RELATED PARTY TRANSACTIONS
The company has in place a policy on related party transactions as approved by the board and the same is available on the website of the company (weblink: http://www.cholamandalam. com/files/MEDIA/Policy-on-Related-Party-Transactions.pdf).
All related party transactions that were entered into during the financial year were in the ordinary course of business and were on an armâs length basis. There are no materially significant related party transactions made by the company with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large.
There are no contracts or arrangements entered into with related parties during the year to be disclosed under sections 188(1) and 134(h) of the Act in form AOC-2.
All proposed related party transactions were placed before the audit committee for prior omnibus approval at the beginning of the financial year. The transactions entered into pursuant to the approval so granted were placed before the audit committee for its review on a quarterly basis. None of the directors has any pecuniary relationship or transaction vis-a-vis the company.
INFORMATION AS PER SECTION 134(3)(m) OF THE ACT
The company has no activity relating to consumption of energy or technology absorption. Foreign currency expenditure amounting to Rs. 1.61 crores was incurred during the year under review. Foreign currency remittances made during the year was Rs. 2.45 crores towards equity dividend and Rs. 5.83 crores towards purchase of fixed assets. The company does not have any foreign exchange earnings.
DISCLOSURE OF REMUNERATION
The disclosure with respect to remuneration as required under section 197 of the Act read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached and forms part of this report.
PARTICULARS OF EMPLOYEES
In accordance with section 136 of the Act, the report and accounts is being sent to the members and others entitled thereto, excluding the statement prescribed under rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The aforesaid information is available for inspection at the registered office of the company during the business hours on working days of the company. If any member is interested in obtaining a copy, such member may write to the company secretary in this regard.
SUBSIDIARIES CHOLAMANDALAM SECURITIES LIMITED (CSEC)
CSEC recorded a gross income of Rs. 15.33 crores for the year ended 31 March, 2017 and made a PBT of Rs. 2.68 crores as against a PBT of Rs. 1.74 crores in the previous year.
CHOLAMANDALAM DISTRIBUTION SERVICES LIMITED (CDSL)
CDSL recorded a gross income of Rs. 13.40 crores for the year ended 31 March, 2017 and made a PBT of Rs. 8.35 crores as against a PBT of Rs. 7.01 crores in the previous year.
WHITE DATA SYSTEMS INDIA PRIVATE LIMITED (WDSI)
WDSI recorded a gross income of Rs. 11.07 crores for the year ended 31 March, 2017 and made a loss of Rs. 4.17 crores as against loss of Rs. 0.52 crores in the previous year.
ACKNOWLEDGEMENT
The directors wish to thank the companyâs customers, vehicle manufacturers, vehicle dealers, channel partners, banks, mutual funds, rating agencies and shareholders for their continued support. The directors also thank the employees of the company for their contribution to the companyâs operations during the year under review.
On behalf of the board
Place : Chennai M.B.N. Rao
Date : April 28, 2017 Chairman
Mar 31, 2015
Dear Members,
The directors have pleasure in presenting the thirty seventh annual
report together with the audited accounts of the company for the year
ended 31 March, 2015.
FINANCIAL RESULTS
Rs. in crores
Particulars 2014 - 15 2013 - 14
Gross Income 3691.19 3,262.84
Profit Before Tax 657.22 550.21
Profit After Tax 435.16 364.01
Add: Balance brought forward 305.32 123.64
Less: Adjustment for the year 2012-13
pursuant to the Scheme of Amalgamation - 0.49
Less: Deferred Tax adjustment for the
year 2012-13 consequent to the
Scheme of Amalgamation - 0.40
Amount available for appropriation 740.48 486.76
Adjustments / Appropriation:
Transfer to statutory and other reserves 490.00 122.81
Dividend - Preference 2.88 -
Dividend - Equity 50.30 50.11
Tax on dividend 10.68 8.52
Balance carried forward 186.62 305.32
TOTAL 740.48 486.76
SHARE CAPITAL
During the year, the company increased the authorised share capital
from Rs. 540 crores to Rs. 740 crores by increasing the authorised
preference capital from Rs. 300 crores to Rs. 500 crores. The company
issued and allotted 1% compulsorily convertible preference shares
(CCPS) aggregating to Rs. 500 crores on a preferential basis to M/s.
Dynasty Acquisition (FDI) Ltd., a foreign corporate.
OPERATIONS
In a challenging year, your company achieved a 19% growth in profit
before tax. Closing managed assets grew by 9%. Given the muted economy
and pressure on portfolio quality, your company adopted a cautious
approach to disbursements, resulting in a slight dip of 2% in
disbursements as compared to the prior year.
At a division level, the continuing slowdown in the commercial vehicles
(CV) market reflected in a drop in disbursements in the vehicle finance
(VF) business to the tune of 8%. However, the division recorded a
growth of 3% in closing managed assets and a PBT growth of 7%. The home
equity (HE) business recorded healthy growth rates across all
parameters: PBT growth of 26%, closing managed assets growth of 24% and
disbursement growth of 8%.
Both divisions faced pressure on their portfolio quality, resulting in
higher gross non-performing assets (GNPA) percentages than the prior
year. However, collections performance was better in the last quarter
of the year and the deteriorating trend has been arrested. The GNPA
levels remained lower than the industry.
Disbursements in vehicle finance for the year were at Rs. 9,363 crores as
against Rs. 10,128 crores in the previous year. The home equity business
recorded a disbursement of Rs. 3,043 crores as against Rs. 2,810 crores in
the previous year. Disbursements in home loans were at Rs. 89 crores as
against Rs. 39 crores in the previous year and micro, small and medium
enterprise (MSME) were at Rs. 249 crores as against Rs. 137 crores in the
previous year. The gold loan vertical disbursed Rs. 62 crores during the
year, but given the external environment, volatile gold prices and
susceptibility to losses, your company stopped disbursements in this
product in the second quarter of the year.
The business assets under management (net of provisions) of the company
as at 31 March, 2015 increased to Rs. 25,452 crores from Rs. 23,253 crores
in the previous year, recording a growth of 9%.
During the year, the RBI issued revised regulatory framework for NBFCs,
progressively reducing the number of months overdue considered for
recognition of NPAs and increasing the standard asset provisioning
requirements starting FY16. A year ahead of the RBI mandatory
requirement, as a prudent and conservative measure, your company
decided to move to the next level of NPA recognition from the existing
6 months to 5 months overdue and increased its standard assets
provisioning from 0.25% to 0.30% in FY15.
The profit before tax for the year was at Rs. 657.22 crores as against Rs.
550.21 crores in the previous year.
Profit after tax grew by 20% and was at Rs. 435.16 crores for the year as
compared to Rs. 364.01 crores in the previous year.
DIVIDEND
The company paid an interim dividend on the equity shares at the rate
of 25% (Rs. 2.50 per equity share) and a pro rata preferential dividend
on 5,00,00,000 CCPS of Rs. 100 each at the rate of 1% per annum as
approved by the board on 27 January, 2015 for the year ended 31 March,
2015.
Your directors are pleased to recommend a final dividend of 10% (Rs. 1
per equity share) on the equity shares of the company. With this, the
total dividend will be 35% (Rs. 3.50 per equity share) for the year ended
31 March, 2015.
TRANSFER TO RESERVES
Your company has transferred a sum of Rs. 90 crores to statutory reserve
as required under the Reserve Bank of India Act, 1934 and Rs. 400 crores
to general reserves.
OUTLOOK
The company continues to focus and grow its two main business lines -
vehicle finance and home equity while seeding new business lines like
home loans, corporate finance and rural finance.
Vehicle finance:
India's commercial vehicle industry faced significant challenges in
FY15, with sales dropping by 2.8% over the previous year. LCV sales
dropped by 11.6% in the same period. However, the sector showed signs
of revival in the second half of FY15. While the revival is currently
limited to the strategic segment, it is widely expected that the uptick
will be felt in the other segments as well. Many factors influence
this belief - expected improvement in industrial activity, enhanced
agricultural output, faster execution of infrastructure projects,
improvement in consumption expenditure etc. A growth rate of 7-9% is
projected for the CV industry in FY16 and the industry is expected to
grow at a compounded annual growth rate (CAGR) of 10-13% till FY20
(source: CRISIL Research). Therefore, the outlook for the vehicle
finance business is positive both in the short and medium term. The
recent line extensions in the division such as two wheelers and
construction equipment are also expected to grow rapidly and supplement
the growth in the traditional product lines.
Home equity:
Competition has been rapidly increasing in this product with almost all
the private sector banks and a number of public sector banks increasing
their focus on loan against property (LAP) as an exclusive offering. An
aggressive pricing strategy by the new entrants is expected to put
downward pressure on the industry's net interest margin (NIM).
Entrenched players are scaling up operations to tap the market
potential from tier III and tier IV cities. However, your company has
established itself in the market place as a trusted and reliable
partner for customers seeking a LAP loan with a quick turnaround time
and customer friendly service. Building on this momentum, your company
expects to grow this product line at a healthy pace in FY16.
FIXED DEPOSITS
The company is a systemically important non-deposit accepting
non-banking finance company (SI - ND - NBFC). It ceased taking deposits
from the public effective 1 November, 2006. At the time of conversion,
the outstanding unmatured deposits were transferred to an escrow
account together with the future interest payable thereon till the date
of maturity and these are being repaid on maturity. Accordingly, there
have been no fresh deposits accepted during FY15.
As at 31 March, 2015 there were 30 depositors whose deposits had
matured but had not claimed the maturity amount aggregating to Rs. 8.44
lakhs (along with interest accrued). As a process, the company sends
periodical reminders to these depositors before transferring the sums
due to the investor education and protection fund (IEPF) under section
125 of the Companies Act, 2013 (corresponding to section 205C of the
Companies Act, 1956). During the year, the company remitted a sum of Rs.
5.54 lakhs to IEPF under this head representing unclaimed public
deposits and interests thereon beyond seven years.
ASSET FINANCE COMPANY
During the year, the company retained its categorisation as an asset
finance company (AFC) under the RBI Regulations.
CAPITAL ADEQUACY
The company's capital adequacy ratio was at 21.24% as on 31 March, 2015
as against the statutory minimum capital adequacy of 15% prescribed by
RBI.
EMPLOYEE STOCK OPTION SCHEME
Pursuant to the approval accorded by the shareholders at the twenty
ninth annual general meeting of the company held on 30 July, 2007, the
nomination and remuneration committee had formulated the Employee Stock
Option Scheme 2007. During the year under review, the employees
exercised 6,41,513 options and there were no fresh options granted. As
required under the Securities and Exchange Board of India Regulations
(SEBI Regulations) and the Companies Act, 2013, the following details
of this scheme as on 31 March, 2015 are being provided:
Mr. N. Srinivasan retires by rotation at the ensuing annual general
meeting and being eligible, has offered himself for re-appointment.
Ms. Bharati Rao and Mr. M.M. Murugappan were appointed as additional
directors of the company during the year and they hold office up to the
ensuing annual general meeting of the company.
Your company has received required notices under the provisions of
section 160 of the Companies Act, 2013 ("the Act") proposing the
candidature of Ms. Bharati Rao and Mr. Murugappan as directors and your
board recommends the appointment of Mr. Murugappan as a non-executive
director of the company liable to retire by rotation and Ms. Rao as an
independent director for a term as proposed in the notice of the
ensuing annual general meeting.
DECLARATION FROM INDEPENDENT DIRECTORS
The independent directors (IDs) have submitted a declaration of
independence, as required pursuant to section 149(7) of the Act,
stating that they meet the criteria of independence as provided in
section 149(6). In the opinion of the board, these IDs fulfil the
conditions specified in the Act and the rules made thereunder for
appointment as IDs and confirm that they are independent of the
management.
KEY MANAGERIAL PERSONNEL
Pursuant to the provisions of section 203 of the Act read with the
rules made thereunder, the following employees are the whole-time key
managerial personnel of the company:
1. Mr. Vellayan Subbiah, Managing Director
2. Mr. D. Arul Selvan, Chief Financial Officer and
3. Ms. P. Sujatha, Company Secretary
DIRECTORS' RESPONSIBILITY STATEMENT
The directors' responsibility statement as required under section
134(3)(c) of the Act, reporting the compliance with accounting
standards, is attached and forms part of the board's report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
There are no significant material orders passed by the regulators or
courts or tribunals which would impact the going concern status of the
company and its future operations.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report, highlighting the
business-wise details is attached and forms part of this report. The
report also contains the details of the risk management framework of
the company including the development and implementation of risk
management policy and the key risks faced by the company.
CORPORATE GOVERNANCE REPORT
A report on corporate governance as per clause 49 of the listing
agreement is attached and forms part of this report. The report also
contains the details as required to be provided on the number of
meetings of the board, composition of the various committees including
the audit committee and corporate social responsibility committee,
annual board evaluation, remuneration policy, criteria for board
nomination and senior management appointment, whistle blower policy /
vigil mechanism, etc.
The managing director and the chief financial officer have submitted a
certificate to the board regarding the financial statements and other
matters as required under clause 49 of the listing agreement.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements prepared in accordance with the
Act and the relevant accounting standards form part of this annual
report.
AUDITORS
Pursuant to the provisions of section 139 of the Act and the rules
framed thereunder, M/s. Deloitte Haskins & Sells, chartered
accountants, were appointed as statutory auditors of the company in the
last annual general meeting held on 31 July, 2014 for a period of 3
years commencing from the conclusion of the thirty sixth annual general
meeting till the conclusion of the thirty ninth annual general meeting
subject to ratification by members at every AGM. Accordingly, your
directors recommend the ratification of the appointment of M/s.
Deloitte Haskins & Sells, as statutory auditors of the company from the
conclusion of the thirty seventh annual general meeting till the
conclusion of the thirty eighth annual general meeting of the company.
The statutory auditors have confirmed their eligibility for
appointment.
SECRETARIAL AUDIT
Pursuant to the provisions of the Act and the rules framed thereunder,
the company appointed M/s. R. Sridharan & Associates, company
secretaries to undertake the secretarial audit of the company for FY15.
The audit report is attached and forms part of this report and does not
contain any qualification.
EXTRACT OF ANNUAL RETURN
In accordance with section 134(3)(a) of the Act, the extract of the
annual return in form MGT-9 is attached and forms part of this report.
CORPORATE SOCIAL RESPONSIBILITY
The murugappa group is known for its tradition of philanthropy and
community service. The group's philosophy is to reach out to the
community by establishing service-oriented philanthropic institutions
in the field of education and healthcare as the core focus areas. The
company upholds the group's tradition by earmarking a part of its
income for carrying out its social responsibilities.
The company has been carrying out corporate social responsibility (CSR)
activities for many years now and has been earmarking 0.5% of its net
profits to CSR activities till last year. With the enactment of the CSR
provisions in the Act, the company has put in place a CSR policy
incorporating the requirements therein which is also available on the
company's website, www.cholamandalam.com.
As per the provisions of the Act, the company is required to spend
atleast 2% of the average net profits of the company made during the
three immediately preceding financial years. This amount aggregates to
Rs. 860.74 lakhs and the company has entered into commitments with
various NGOs to spend the entire amount. This being the first year of
implementation of CSR activity, there was lead time involved in setting
up the internal team and identification of implementing agencies and
beneficiaries. Hence, out of the committed amount, the company spent Rs.
573.94 lakhs towards CSR activities during FY15, the details of which
are annexed to and form part of this report. The company will continue
with the remaining commitments in FY16.
INTERNAL FINANCIAL CONTROLS
Internal control framework including clear delegation of authority and
standard operating procedures are available across all businesses and
functions. These are reviewed periodically at all levels. The company
adopts a co-sourced model of internal audit. The risk and control
matrices are reviewed on a quarterly basis and control measures are
tested and documented. These measures have helped in ensuring the
adequacy of internal financial controls commensurate with the scale of
operations of the company.
RELATED PARTY TRANSACTIONS
The company has in place a policy on related party transactions as
approved by the board and the same is available on the website of the
company.
All related party transactions other than exempted transactions that
were entered into during the financial year were on an arm's length
basis and were in the ordinary course of business. There are no
materially significant related party transactions made by the company
with promoters, directors, key managerial personnel or other designated
persons which may have a potential conflict with the interest of the
company at large.
All proposed related party transactions are placed before the audit
committee and also the board for approval at the beginning of the
financial year. The transactions entered into pursuant to the approval
so granted are placed before the audit committee for its review and
ratification for modifications, if any, on a quarterly basis. None of
the directors has any pecuniary relationship or transaction vis-a-vis
the company.
INFORMATION AS PER SECTION 134(3)(m) OF THE ACT
The company has no activity relating to consumption of energy or
technology absorption. Foreign currency expenditure amounting to Rs. 5.17
crores was incurred during the year under review. Foreign currency
remittances during the year was Rs. 2.88 crores towards preference
dividend and Rs. 2.01 crores towards purchase of fixed assets. The
company does not have any foreign exchange earnings.
PARTICULARS OF EMPLOYEES
In accordance with the provisions of section 197 of the Act read with
rule 5 of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, the information in respect of the employees of
the company will be provided upon request. In terms of section 136 of
the Act, the report and accounts are being sent to the members and
others entitled thereto, excluding the aforesaid information which is
available for inspection by the members at the registered office of the
company during business hours on working days of the company. If any
member is interested in obtaining a copy, such member may write to the
company secretary in this regard.
DISCLOSURE OF REMUNERATION
The disclosure with respect to remuneration as required under section
197 of the Act read with rule 5 of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 is attached and forms
part of this report.
CHOLAMANDALAM SECURITIES LIMITED (CSEC)
CSEC recorded a gross income of Rs. 14.44 crores for the year ended 31
March, 2015 and made a profit before tax of Rs. 3.42 crores as against a
loss before tax of Rs. 0.40 crores in the previous year.
CHOLAMANDALAM DISTRIBUTION SERVICES LIMITED (CDSL)
CDSL recorded a gross income of Rs. 13.13 crores for the year ended 31
March, 2015 and made a profit before tax of Rs. 5.58 crores as against a
profit before tax of Rs. 4.68 crores in the previous year.
ACKNOWLEDGEMENT
The directors wish to thank the company's customers, vehicle
manufacturers, vehicle dealers, channel partners, banks, mutual funds,
rating agencies and shareholders for their continued support. The
directors also thank the employees of the company for their
contribution to the company's operations during the year under review.
Directors' Responsibility Statement
The directors accept the responsibility for the integrity and
objectivity of the Statement of Profit & Loss and the Cash Flow
Statement for the year ended 31 March, 2015 and the Balance Sheet as at
that date ("financial statements") and confirm that:
- in the preparation of the financial statements the generally
accepted accounting principles (GAAP) of India and applicable
accounting standards have been followed and no material departures have
been made from the same;
- appropriate accounting policies have been selected and applied
consistently and judgments and estimates that are reasonable and
prudent have been made so as to give a true and fair view of the state
of affairs of the company as at the end of the financial year and of
the profits and the cash flows of the company for the year;
- proper and sufficient care has been taken 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. To ensure
this, the company has established internal control systems, consistent
with its size and nature of operations, subject to the inherent
limitations that should be recognised in weighing the assurance
provided by any such system of internal controls. These systems are
reviewed and updated on an ongoing basis. Periodic internal audits are
conducted to provide reasonable assurance of compliance with these
systems. The audit committee meets at regular intervals to review the
internal audit function;
- the financial statements have been prepared on a going concern
basis;
- adequate internal financial controls have been laid down to be
followed by the company and such internal financial controls are
operating effectively;
- proper systems are in place to ensure compliance with the
provisions of all applicable laws and such systems are adequate and
operating effectively.
On behalf of the board
Place: Chennai M.B.N. Rao
Date : 24 April, 2015 Chairman
Mar 31, 2013
The directors have pleasure in presenting the thirty fifth annual
report together with the audited accounts of the company for the year
ended 31 March, 2013.
FINANCIAL RESULTS
Rs. in crores
2012-13 2011-12
Gross income 2,555.68 1,788.21
Profit before tax 450.80 290.11
Profit after tax 306.55 172.54
Add: Balance brought forward 83.67 81.84
Amount available for appropriation 390.22 254.38
Adjustments / Appropriation:
Transfer to statutory and other reserves 211.31 134.51
Dividend - Equity 47.46 31.15
Tax on dividend 7.81 5.05
Balance carried forward 123.64 83.67
TOTAL 390.22 254.38
SHARE CAPITAL
During the year under review, the company issued and allotted
10,526,315 equity shares of Rs. 10 each at Rs. 285 per equity share, by
way of a qualified institutional placement (QIP) aggregating to Rs. 300
crores to eligible investors.
OPERATIONS
During the year, the company recorded a substantial jump in its
performance in vehicle finance and home equity businesses resulting in:
- 55% growth in profits before tax
- 36% growth in disbursements
- 41% growth in closing managed assets
Disbursements in vehicle finance for the year were at Rs. 9,882 crores
as against Rs. 7,306 crores in the previous year recording a growth of
35%.
Home equity business recorded a disbursement of Rs. 2,161 crores as
against Rs. 1,528 crores in the previous year recording a growth of
41%.
During the year, the company added three new product lines namely home
loans, rural financing syndication and micro, small and medium
enterprise (MSME) loans. While home loan business will focus on new
home loans for the self employed segment, rural financing business will
focus on arranging loans to the farmer community leveraging the
relationships of the agri-based businesses of the Murugappa Group. The
MSME business will offer bill discounting, working capital demand
loans, bridge loans, pre-shipment credit and term loans to MSME''s.
Disbursements in home loans were at Rs. 3 crores and MSME were at Rs.
13 crores. The rural financing business syndicated an aggregate
disbursement of Rs. 1 crore.
The business assets under management (net of provisions) of the company
as at 31 March, 2013 increased to Rs. 18,999 crores from Rs. 13,470
crores in the previous year recording a growth of 41%.
The profit before tax for the year was at Rs. 450.80 crores as against
Rs. 290.11 crores in the previous year. Profit after tax was at Rs.
306.55 crores for the year as compared to Rs. 172.54 crores in the
previous year.
DIVIDEND
The company has paid an interim dividend of 25% (Rs. 2.50 per equity
share) as approved by the board on 18 January 2013 for the year ended
31 March, 2013.
Your directors are pleased to recommend a final dividend of 10% (Rs. 1
per equity share). With this, the total dividend for the year will be
35% (Rs. 3.50 per equity share) for the year ended 31 March, 2013.
TRANSFER TO RESERVES
Your company has transferred a sum of Rs. 61.31 crores to statutory
reserve as required under the Reserve Bank of India Act, 1934 and Rs.
150 crores to general reserves.
OUTLOOK
Vehicle finance:
The slowdown in the growth of the economy is impacting the sales of
commercial vehicle (CV), particularly the heavy commercial vehicle
(HCV) segment. The CV industry witnessed a de-growth of 2% during
2012-13 over 2011-12, led by the sharp decline (-23% over the previous
year) in the sales of HCVs, which are essentially production driven
assets. The vehicle finance business in Chola, predominantly focuses on
the light commercial vehicles and small commercial vehicles for which
the demand continued to be good during 2012-13. Hence the light and
small CV segment, which are consumption driven assets and are engaged
primarily in last mile transportation applications recorded a growth of
14%. Government of India has been taking several initiatives to bring
the economy back to growth. Prospects for 2013-14 hinges on the overall
economic growth and demand in the CV sector.
Home equity:
The environment for the home equity business has been intensely
competitive in 2012-13 with more banks and NBFC''s entering the space
and existing players strengthening their presence. However, the
business has established itself in this space and is viewed today, as
one of the most competitive and customer friendly business. The
business expects to post decent growth in 2013-14 in this segment
fueled by healthy credit off take in our target customer segments.
Gold loan:
Keeping in perspective the regulatory environment and market/industry
trends, alternate business models for gold loan is being evaluated.
The company is adopting a cautious approach given the volatile and
changing conditions in this domain.
FIXED DEPOSITS
The company is a systemically important non-deposit accepting
non-banking finance company (SI - ND - NBFC). It ceased taking deposits
from public effective 1 November, 2006. At the time of conversion, the
outstanding unmatured deposits were transferred to an escrow account
together with the future interest payable thereon till the date of
maturity and these are being repaid on maturity, Accordingly, there
have been no fresh deposits accepted during 2012-13. Net of
repayments, the matured and unclaimed deposits (including interest
accrued) as at 31 March, 2013 were Rs. 0.40 crores.
As at 31 March, 2013 there were 152 depositors whose deposits had
matured but had not claimed the maturity amount aggregating to Rs. 0.40
crores (along with interest accrued). As a process, the company sends
periodical reminders to these depositors before transferring the sums
due to the Investor Education and Protection Fund (IEPF) under Section
205C of the Companies Act, 1956. During the year, the company remitted
a sum of Rs. 0.18 crores to IEPF under this head representing unclaimed
public deposits and interests thereon beyond seven years. In respect of
outstanding fixed deposit of Rs. 0.02 crores, the repayment to the
depositors has been stayed by courts / instruction from CBI and not
remitted to IEPF.
CREDIT RATING
The Credit rating details of the company as on 31 March, 2013 are as
follows:
Rating
Agency Term Type Rating
ICRA LT NCD/SD/CC/Tl [ICRA]AA with Stable Outlook
LT PD [ICRA]AA- with Stable Outlook
ST CP / WCDL [ICRA]A1
CRISIL ST CP [CRISIL]A1
LT SD [CRISIL]AA-/Stable Outlook
CARE LT NCD CARE AA
LT SD CARE AA -
LT PD CARE A
INDIA
Ratings* LT SD IND AA- (ind) with Stable Outlook
* earlier known as FITCH
NCD - Non Convertible Debentures CP - Commercial Paper
CC - Cash Credit SD - Subordinated Debt
TL - Term Loan WCDL- Working Capital Demand Loan
PD - Perpetual Debt ST - Short Term
LT - Long Term
The ratings as mentioned above were re-affirmed by the rating agencies
during the year 2012-13.
ASSET FINANCE COMPANY
During the year, the company retained its categorisation as an asset
finance company (AFC) by Reserve Bank of India (RBI).
RBI GUIDELINES
RBI constituted a Working Group headed by Smt. Usha Thorat to reflect
on the broad principles that underpin the regulatory architecture for
NBFCs. Based on the recommendations of the working group, RBI has
released the draft guidelines on 12 December, 2012 in relation to
corporate governance, entry point norms, principle business criteria
and prudential regulations. The final guidelines on the same is
awaited.
CAPITAL ADEQUACY
The company''s capital adequacy ratio was at 19.04% as on 31 March, 2013
as against 18.08% as on 31 March, 2012. The minimum capital adequacy
prescribed by RBI is 15%.
EMPLOYEE STOCK OPTION SCHEME
Pursuant to the approval accorded by the shareholders at the twenty
ninth annual general meeting of the company held in July, 2007, the
compensation & nomination committee had formulated the Employee Stock
Option Scheme 2007. During the year under review, the employees
exercised 26,899 options and there were no fresh options granted. As
required under the Securities and Exchange Board of India (Employee
Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999 (SEBI
Guidelines), the following details of this scheme as on 31 March, 2013
are being provided:
The certificate from the statutory auditors as required under the SEBI
Guidelines, confirming that the company''s Employees Stock Option Scheme
2007 has been implemented in accordance with the SEBI Guidelines and
shareholders resolution, will be placed before the shareholders at the
ensuing annual general meeting.
The board at its meeting held on 26 April, 2012 had approved the
introduction of a new Employee Stock Option Plan 2012 (ESOP 2012) for
the benefit of eligible employees of the company and its subsidiaries,
subject to shareholders approval at the general meeting.
While members'' approval was obtained for the ESOP 2012 at the company''s
annual general meeting held on 30 July, 2012, the company did not
proceed with the implementation of the scheme consequent to the
regulatory changes prohibiting acquisition of securities from the
secondary market by ESOP Schemes.
DIRECTORS'' RESPONSIBILITY STATEMENT
The directors'' responsibility statement as required under Section 217
(2AA) of the Companies Act, 1956, reporting the compliance with the
accounting standards, is attached and forms part of the directors''
report.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report, highlighting the
business-wise details is attached and forms part of this report.
CORPORATE GOVERNANCE REPORT
A report on corporate governance, including the status of
implementation of mandatory and non-mandatory norms as per clause 49 of
the listing agreement and the corporate governance voluntary
guidelines, 2009 issued by Ministry of Corporate Affairs, is attached
and forms part of this report.
DIRECTORS
Mr. R.VKanoria retires by rotation at the ensuing annual general
meeting and has expressed his intention not to seek re-appointment in
view of his serving the board for a considerable period of time since
1995. The board places on record its appreciation for the long years of
guidance, support and advise rendered by Mr. Kanoria.
Mr. M.B.N.Rao is liable to retire by rotation at the ensuing annual
general meeting and being eligible, offers himself for re-appointment.
AUDITORS
M/s. Deloitte Haskins & Sells, chartered accountants, retire at the
ensuing annual general meeting and are eligible for re-appointment.
INFORMATION AS PER SECTION 217 (1)(e) OF THE COMPANIES ACT, 1956
The company has no activity relating to consumption of energy or
technology absorption. Foreign currency expenditure amounting to Rs.
0.28 crores (including interest accrued but not due) was incurred
during the year under review. The company does not have any foreign
exchange earnings.
PARTICULARS OF EMPLOYEES
In accordance with the provisions of Section 217 (2A) of the Companies
Act, 1956, read with Companies (Particulars of Employees) Rules, 1975
and the Companies (Particulars of Employees) Amendment Rules, 2011, the
name and other particulars of employees are to be set out in the
annexure to the directors'' report. However, having regard to
provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, the
annual report is being sent to all members of the company excluding the
aforesaid information. Any member interested in obtaining such
particulars may write to the company secretary at the registered office
of the company.
SUBSIDIARY COMPANIES
Cholamandalam Securities Limited, Cholamandalam Distribution Services
Limited and Cholamandalam Factoring Limited are subsidiaries of the
company. The financial performance of the subsidiaries is given below.
Cholamandalam Securities Limited (CSEC)
CSEC recorded a gross income of Rs. 7.21 crores for the year ended 31
March, 2013. CSEC made a loss before tax of Rs. 0.96 crores as against
a loss before tax of Rs. 2.58 crores in the previous year.
Cholamandalam Distribution Services Limited (CDSL)
CDSL recorded a gross income of Rs. 11.56 crores for the year ended 31
March, 2013. CDSL made a profit before tax of Rs. 2 crores as against a
loss before tax of Rs. 0.37 crores in the previous year.
Cholamandalam Factoring Limited (CFACT)
CFACT recorded a gross income of Rs. 1.46 crores for the year ended 31
March, 2013. CFACT made a profit before tax of Rs. 1.43 crores as
against a loss of Rs. 61.29 crores in the previous year.
During the year, your board considered and approved a scheme of
amalgamation of CFACT with the company, subject to the approval of
Hon''ble High Court of Judicature at Madras and other necessary
approvals and sanctions. The proposed "Appointed Date" for amalgamation
is 1 April, 2012. CFACT filed the application and petition documents
and the matter came up for final hearing on 27 March, 2013. The Order
of the Hon''ble High Court is awaited.
ACKNOWLEDGEMENT
The directors wish to thank the company''s customers, vehicle
manufacturers, vehicle dealers, banks, mutual funds, rating agencies
and shareholders for their continued support. The directors also thank
the employees of the company for their contribution to the company''s
operations during the year under review.
On behalf of the board
Place : Chennai M.B.N.Rao
Date : 26 April, 2013 Chairman
Mar 31, 2012
The directors have pleasure in presenting the thirty fourth annual
report together with the audited accounts of the company for the year
ended 31 March, 2012.
FINANCIAL RESULTS
Rs in crores
2011-12 2010-11
Gross income 1,766.60 1,201.83
Profit before tax 290.11 100.11
Profit after tax 172.54 62.18
Add: Balance brought forward 81.84 56.46
Amount available for
appropriation 254.38 118.64
Adjustments / Appropriation:
Transfer to statutory and other
reserves 134.51 15.55
Dividend
- Equity 31.15 17.89
- Preference 0.39
Tax on dividend 5.05 2.97
Balance carried forward 83.67 81.84
Total 254.38 118.64
SHARE CAPITAL
During the year under review, the company with the approval of the
shareholders, increased the authorised capital from Rs 420 crores to Rs
450 crores and further made a fresh issue of 1,32,55,454 equity shares
of Rs 10 each at Rs 160 per equity share, being the price determined in
accordance with the SEBI ICDR Regulations, by way of a preferential
issue aggregating to Rs 212 crores to the following investors:
Name of the Investor No. of equity Amount of
shares Investment
Rs in crores
Creador 1 LLC 66,27,727 106
Multiples Private Equity FII I 48,13,718 77
Multiples Private Equity Fund 18,14,009 29
Total 1,32,55,454 212
OPERATIONS
During the year ended 31 March, 2012, the company recorded a
significant increase in its performance due to the sustained
performance of the Vehicle Finance and Home Equity business inspite of
the slow- down in the economy during the later part of the financial
year. The reduction in loan losses on account of the Personal loan
portfolio which has completely run-down also aided the effort. This
resulted in:
190% growth in Profits before Tax
55% growth in disbursements
48% growth in closing managed assets
Disbursements in Vehicle Finance for the year were at Rs 7,306 crores as
against Rs 4,496 crores in the previous year recording a growth of
62.50%.
Home Equity business recorded a disbursement of Rs 1,528 crores as
against Rs 1,235 crores in the previous year recording a growth of 24%.
The newly launched gold loan business (launched in the month of Dec
2011) recorded disbursements aggregating to Rs 54 crores.
The total business assets under management (net of provisions) of the
company as at 31 March, 2012 increased to Rs 13,462 crores from Rs 9,124
crores in the previous year recording a growth of 48%.
The profit before tax for the year was at Rs 290.11 crores as against Rs
100.11 crores in the previous year. Profit after tax was at Rs 172.54
crores for the year as compared to Rs 62.18 crores in the previous year.
DIVIDEND
Your directors approved an interim dividend of 15% (Rs 1.50/- per equity
share) on 31 January, 2012 for the year ended 31 March, 2012, which has
been since paid out.
Your directors are pleased to recommend a final dividend of 10% (Rs 1/-
per equity share) of Rs 10 each.
TRANSFER TO RESERVES
Your company has transferred a sum of Rs 34.51 crores to statutory
reserve as required by the Reserve Bank of India Act, 1934 and Rs 100
crores to general reserves.
OUTLOOK
Vehicle Finance:
The company is poised to grow at a steady phase as the growth potential
of the portfolio continues to remain robust. The vehicle finance
business predominantly focuses on the light commercial vehicles and
small commercial vehicles for which the demand continues to be high.
Hence it is expected that the demand will sustain for the commercial
vehicles and the industry growth momentum will be stable over the next
5 years. As per CRISIL research the commercial vehicle industry is
expected to record a growth [CAGR] of 18% to 20% in disbursements and
is targeted to reach a level of about Rs 98,700 crores by 2015-16. If
the inflationary pressures are contained without any significant
monetary compression, the year ahead will see the growth momentum
sustained.
Home Equity:
For the financial year 2012-13, the market for loan against property is
projected at Rs 31,500 crores and is expected to maintain its growth
trajectory for the next few years.
The demand for home equity loans is derived from the demand for credit
off-take from its target customer segment. The target customer for home
equity loans is the self-employed non-professional (SENP) group which
comprises of small and medium scale industries / service providers,
traders and SSI's.
Gold Loan:
The gold loan business, currently operating out of 31 locations will be
evaluated taking into consideration the regulatory environment and
market / industry trends.
New Business:
The company is planning to enter into affordable housing finance and
provide loan facilities to Micro, Small and Medium Enterprises (MSME)
that are associated with our group companies as vendors and suppliers.
FIXED DEPOSITS
The company is a systemically important non-deposit accepting non
banking finance company (SI-ND- NBFC). It ceased taking deposits from
public effective 1 November, 2006. At the time of conversion, the
outstanding unmatured deposits were transferred to an escrow account
together with the future interest payable thereon till the date of
maturity and these are being repaid on maturity. Accordingly, there
have been no fresh deposits accepted during the financial year 2011 -
12. Net of repayments, the matured and unclaimed deposits (including
interest accrued) as at 31 March, 2012 were Rs 0.54 crores. As at 31
March, 2012 and as on the date of this report, there were 211
depositors whose deposits had matured but had not claimed the maturity
amount aggregating to Rs 0.54 crores (along with interest accrued). As a
process, the company sends periodical reminders to these depositors
before transferring the sums due to the Investor Education and
Protection Fund (IEPF) under Section 205C of the Companies Act, 1956.
During the year, the company remitted a sum of Rs 0.16 crores to IEPF
under this head representing unclaimed public deposits and interests
thereon beyond seven years. In respect of outstanding fixed deposit of
Rs 0.02 crores, the repayment to the depositors has been stayed by
courts / instruction from CBI and not remitted to IEPF.
CREDIT RATING
Short Term:
The company's short term debt of Rs 3,000 crores is rated as [ICRA]
A1 by ICRA and for Rs 250 crores is also rated as "CRISIL A1 " by
CRISIL.
Long Term -Secured:
During the year, ICRA upgraded its long term rating on non convertible
debentures and lines of credit from banks from [ICRA]AA- to [ICRA]AA.
The outlook on the upgraded rating is "Stable".
CARE affirmed the rating of "CARE AA" to the non convertible debenture
programme of the company.
Long Term - Unsecured:
ICRA upgraded its long term rating on subordinated debt programme of
the company from [ICRA] AA- to [ICRA] AA. The outlook on the upgraded
rating is Stable.
Fitch re-affirmed its existing rating of "Fitch AA-(ind)" with Stable
outlook on the subordinated debt programme of the company.
ICRA upgraded its long term rating on perpetual debt instrument from
[ICRA]A to [ICRA]AA-. The outlook on the upgraded rating is Stable.
CARE re-affirmed its existing rating of "CARE A " on the perpetual debt
instrument of the company.
During the year, the company raised Perpetual Debt Instrument (PDI)
aggregating to Rs 358 crores which were rated as [ICRA] A (Positive) or
[ICRA] AA- by ICRA and CARE A by CARE. Part of the issue will qualify
as Tier I capital and the balance will be considered as Tier II capital
to address the company's capital adequacy requirements. The company
also raised subordinated debt to the tune of Rs 225 crores which were
rated as [ICRA] AA- or [ICRA] AA by ICRA and Fitch AA-(Ind) by Fitch,
which will be used to meet the Tier II capital requirements as per RBI
Guidelines.
ASSET Financing Company
During the year, the company was categorised as an Asset Financing
Company (AFC) by Reserve Bank of India (RBI).
CAPITAL ADEQUACY
The company's capital adequacy ratio was at 18.08% as on 31 March,
2012 as against 16.67% as on 31 March, 2011. The minimum capital
adequacy prescribed by RBI for an Asset Finance Company is at 15%.
Employee stock option scheme
Pursuant to the approval accorded by the shareholders at the twenty
ninth annual general meeting of the company held in July 2007, the
compensation & nomination committee had formulated the Employee Stock
Option Scheme 2007. During the year under review, 3,70,880 options were
granted to the employees of the company and its subsidiaries under the
said scheme. As required under the Securities and Exchange Board of
India (Employees Stock Option and Employees Stock Purchase Scheme)
Guidelines, 1999 (SEBI Guidelines), the following details of this
scheme as on 31 March, 2012 are being provided:
Nature of Disclosure Particulars
a. Options granted 24,73,123 options in 10 tranches since 30 July,
2007. Each option gives the grantee a right to
subscribe to one equity share of Rs 10 each in
the company.
b.The pricing formula The options were granted at an exercise price
equal to the latest available closing price of
the equity shares on the Stock Exchange in
which there was highest trading volume,
prior to the date of grant of the options.
c. Options vested 4,38,992
d. Options exercised 15,214
e. The total no. of
shares 15,214
arising as a
result of
exercise of
option
f. Options lapsed/ 12,49,056
surrendered
g. Variation of terms
of The compensation & nomination committee at
its meeting
Option held on 30 July, 2008 revised the
performance parameters of the
employees for vesting. No terms were varied
during FY 2011-12.
h. Money realised by
exercise Rs 4,35,887/-
of options
i. Total no of Options
in force 12,08,853
j. (i) Details of
Options Options granted till date to senior
management personnel are as
granted to Senior follows:
Management
Personnel
name & Designation of the No. of Options granted
Employee
Kaushik Banerjee, 69,995
President - Asset Finance
D.Arul Selvan, 43,773
Sr. Vice President & CFO
Rohit Phadke, 43,773
Sr. Vice President & Business
Head - Home Equity
(ii) Any other
employee Name & Designation of the No. of Options granted
who
received
a grant in Employee
any one
year of
Option
amounting
to 5% or
more of
Options
granted
during
the year
Pravin Salian 35,400
Jaikumar K.P. 34,000
Nature of Disclosure Particulars
(iii) Employees who were None
granted Options, during
any one year, equal to or
exceeding 1% of the issued
capital of the company at
the time of grant
k. Diluted Earnings Per 14.39
Share (EPS) pursuant
to issue of shares on
exercise of Option
calculated in accordance
with Accounting Standard
AS-20
l.(i) Difference between the The employee compensation cost for
the year would have been
compensation cost using higher by Rs 2.60 crores had the
company used the fair value of
the intrinsic value of the options as the method of accounting
instead of intrinsic value
stock Options (which is
the method of accounting
used by the company)
and the compensation
cost that would have been
recognised in the accounts
if the fair value of Options
had been used as the
method of accounting
(ii) Impact of the The stock-based compensation cost
calculated as per the intrinsic
difference mentioned in (i) value method upto 31 March, 2012 is
Nil. If the stock-based
above on the profits of the compensation cost was calculated as
per the fair value method
company prescribed by SEBI, the total cost to
be recognised in the financial
statements for the period ended 31
March, 2012 would beRs 2,59,75,221/-
(iii)Impact of the Had the company accounted the Options
as per fair value
difference mentioned in the diluted EPS would have been Rs
14.18 per share instead of
(i) above on the EPS of the Rs 14.39 per share
company
m. (i) Weighted Average Rs 160.46
exercise price of Options
(ii) Weighted average fair Rs 71.02
value of Options
n. (i) Method used to estimate
the Black Scholes Options Pricing Model
fair value of Options
(ii) Significant assumptions
used (weighted average
information relating)
(a) Risk -free interest rate 7.66%
(b) Expected life of the
Option 4.15 years
(c) Expected volatility 50.21%
(d) Expected dividend yields 3.64%
(e) Price of the underlying Rs 185.45
share in the market at the time
of Option grant
The certificate from the statutory auditor as required under the SEBI
Guidelines, confirming that the company's Employees Stock Option Scheme
2007 has been implemented in accordance with the SEBI Guidelines and
shareholders resolution, will be placed before the shareholders at the
ensuing annual general meeting.
DIRECTORS' RESPONSIBIHTY Statement
The directors' responsibility statement as required under Section
217(2AA) of the Companies Act, 1956, reporting the compliance with the
accounting standards, is attached and forms a part of the directors'
report.
CORPORATE GOVERNANCE REPORT
A report on corporate governance, including the status of
implementation of mandatory and non-mandatory norms as per clause 49 of
the listing agreement and the corporate governance voluntary
guidelines, 2009 issued by Ministry of Corporate Affairs, is attached
and forms part of the directors' report.
MANAGEMENT DISCUSSION AND analysis
The management discussion and analysis report, highlighting the
business-wise details is attached and forms part of this report.
DIRECTORS
Mr. N. Srinivasan was appointed as vice chairman of the company at the
board meeting held on 31 January, 2012.
Mr. Indresh Narain and Mr. N. Srinivasan are liable to retire by
rotation at the ensuing annual general meeting and being eligible, have
offered themselves for re-appointment.
AUDITORS
M/s. Deloitte Haskins & Sells, chartered accountants, retire at the
ensuing annual general meeting and are eligible for re-appointment.
INFORMATION AS PER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956
The company has no activity relating to consumption of energy or
technology absorption. Foreign currency expenditure amounting to Rs 2.79
crores (including interest accrued but not due) was incurred during the
year under review. The company does not have any foreign exchange
earnings.
PARTICULARS OF EMPLOYEES
In accordance with the provisions of Section 217(2A) of the Companies
Act, 1956, read with Companies (Particulars of Employees) Rules, 1975
and the Companies (Particulars of Employees) Amendment Rules, 2011, the
name and other particulars of employees are set out in the annexure to
the directors' report. However, having regard to provisions of
Section 219 (1) (b) (iv) of the Companies Act, 1956, the annual report
is being sent to all members of the company excluding the aforesaid
information. Any member interested in obtaining such particulars may
write to the company secretary at the registered office of the company.
SUBSIDIARY COMPANIES
Cholamandalam Securities Limited, Cholamandalam Distribution Services
Limited and Cholamandalam Factoring Limited are subsidiaries of the
company. The financial performance of the subsidiaries is given below.
Cholamandalam Securities Limited (CSEC)
CSEC recorded a gross income of Rs6.32 crores for the year ended 31
March, 2012. CSEC made a loss before tax of Rs 2.58 crores as against a
profit of Rs 0.49 crores in the previous year.
Cholamandalam Distribution Services Limited (CDSL)
CDSL recorded a gross income of Rs11.76 crores for the year ended 31
March, 2012. CDSL made a loss before tax of Rs 0.37 crores as against a
profit of Rs 6.90 crores in the previous year.
Cholamandalam Factoring Limited (CFACT)
During the year, the company infused equity share capital aggregating
to Rs 60 crores to strengthen the capital base of CFACT. CFACT recorded
a gross income of Rs 0.02 crores for the year ended 31 March, 2012.
CFACT made a loss before tax of Rs 61.29 crores as against a loss of Rs
8.16 crores in the previous year.
DIRECTORS'RESPONSIBILITY STATEMENT
The directors accept the responsibility for the integrity and
objectivity of the statement of Profit & Loss Account for the year
ended 31 March, 2012 and the Balance Sheet as at that date ("financial
statements") and confirm that:
- In the preparation of the financial statements the generally accepted
accounting principles (GAAP) of India and applicable accounting
standards issued by the Institute of Chartered Accountants of India
have been followed.
- Appropriate accounting policies have been selected and applied
consistently and judgments and estimates that are reasonable and
prudent have been made so as to give a true and fair view of the state
of affairs of the company as at the end of the financial year and of
the profit of the company for that period.
- Proper and sufficient care has been taken 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. To ensure
this, the company has established internal control systems, consistent
with its size and nature of operations, subject to the inherent
limitations that should be recognised in weighing the assurance
provided by any such system of internal controls. These systems are
reviewed and updated on an ongoing basis. Periodic internal audits are
conducted to provide reasonable assurance of compliance with these
systems. The audit committee meets at regular intervals to review the
internal audit function.
- The financial statements have been prepared on a going concern basis.
ACKNOWLEDGEMENT
The directors wish to thank the company's customers, vehicle
manufacturers, vehicle dealers, banks, mutual funds, rating agencies
and shareholders for their continued support. The directors also thank
the employees of the company for their contribution to the company's
operations during the year under review.
On behalf of the board
26 April, 2012 M.B.N. Rao
Chennai Chairman
Mar 31, 2011
The directors have pleasure in presenting the thirty third annual
report together with the audited accounts of the company for the year
ended 31 March, 2011.
FINANCIAL RESULTS
Rs. in crores
2010-11 2009-10
Gross income 1201.83 929.52
Profit before tax 100.11 31.33
Profit after tax 62.18 15.42
Add: Balance brought forward 56.46 55.55
Amount available for appropriation 118.64 70.97
Adjustments / Appropriation:
Transfer to statutory and other reserves 15.55 3.09
Dividend
- Equity 17.89 6.64
- Preference 0.39 3.15
Tax on dividend 2.97 1.63
Balance carried forward 81.84 56.46
Total 118.64 70.97
TERMINATION OF JOINT VENTURE
During the year under review, the joint venture with DBS Bank Ltd.,
Singapore (DBS) was terminated and the equity and preference shares
held by DBS were bought by Tube Investments of India Ltd. (TII) and New
Ambadi Estates Pvt. Ltd. (NAEPL) ,constituents of the Murugappa Group
on 8 April, 2010. Further to this, the company changed its name to
refect the change in the joint venture status of the company.
SHARE CAPITAL
During the year under review, the company increased the authorised
capital from Rs.400 crores to Rs.420 crores and further made the
following issues with the approval of shareholders:
1. Issue of 1,08,93,852 equity shares of Rs.10/- each to International
Finance Corporation (IFC), a qualified institutional buyer on a
preferential basis at Rs.92/- per equity share aggregating to about
Rs.100.22 crores.
2. Conversion of 3,00,00,000, 1% fully convertible cumulative
preference shares (FCCPS) of Rs.100/- each held by the existing
promoters at a conversion price of Rs.92/- per equity share and alloted
3,26,08,695 equity shares of Rs.10/- each on 17 May, 2010 in accordance
with the SEBI (Issue of capital and disclosure requirements),
Regulations 2009 ("SEBI ICDR Regulations).
3. On 6 October, 2010 the company made a further issue of 9,375,000
equity shares of Rs.10/- each at Rs.160/- per equity share aggregating
to Rs.150 crores being the price determined in accordance with the SEBI
ICDR Regulations to the following investors:
Name of the Investors Amount of
Investment
(Rs. in crores)
Amansa Investments Limited 50.00
Aquarius Investments Limited 42.50
India Capital Fund Limited 18.00
India Capital Opportunities 1
Limited 4.50
International Finance Corporation 15.00
Reliance Capital Trustee Limited
A/c Reliance Banking Fund 20.00
Total 150.00
In view of lack of appetite from the investors at competitive coupon
rates for the instrument, the company did not place any preference
shares during the year even though the shareholders had on 6 October,
2010 approved an issue of 100,00,000 cumulative redeemable preference
shares of Rs.100/- each aggregating to Rs.100 crores by way of private
placement.
Issue of perpetual debt & subordinated debt
During the year, the company mobilized funds in the form of Perpetual
Debt Instrument (PDI) aggregating to Rs.150 crores which qualifies
partly as Tier I capital and partly as Tier II capital and subordinated
debt to the tune of Rs.161.50 crores which forms part of Tier II
capital as per RBI Guidelines.
OPERATIONS
During the year ended 31 March, 2011, the company recorded,
- 48% growth in disbursements à (vehicle finance and home equity)
- 33% growth in Net Managed Assets (including assigned assets)
Disbursements in commercial vehicle finance for the year were at
Rs.4496 crores as against Rs.2861 crores in the previous year. The
division achieved a growth of 57% over previous year.
For the year, home equity business recorded a disbursement of Rs.1235
crores as against Rs.1004 crores in the previous year. The division
achieved a growth of 23% over the previous year.
The total business assets under management (net of provisions) of the
company as at 31 March, 2011 increased to Rs.9133 crores from Rs.6850
crores in the previous year. The company has seen a growth of 33% over
the previous year.
The profit before tax for the year was at Rs.100.11 crores as against
Rs.31.33 crores in the previous year. Profit after tax was at Rs.62.18
crores for the year as compared to Rs.15.42 crores in the previous
year.
DIVIDEND
Your directors are pleased to recommend a dividend of Rs.1.50 per
equity share of Rs.10 each.
Your directors also recommend approval for the payment of the
cumulative dividend on 3,00,00,000 fully convertible cumulative
preference shares (FCCPS) of Rs.100/- each from 1 April, 2010 till 17
May, 2010 being the date of conversion @ 1% coupon rate being Re.1 per
preference share of Rs.100/- each.
TRANSFER TO RESERVES
Your company has transferred a sum of Rs.12.44 crores to statutory
reserve as required by the Reserve Bank of India Act, 1934 and Rs.3.11
crores to general reserves.
OUTLOOK
With the rebound of the economy and the spectacular growth witnessed in
the automobile sector à specifically in the commercial vehicles
industry, the outlook for the year ahead is promising. If the
inflationary pressures are contained without any significant monetary
compression, the year ahead will see the growth momentum sustained.
FIXED DEPOSITS
The company is classified as a systemically important non-deposit
accepting non banking finance company (SI-ND-NBFC). It ceased taking
deposits from public effective 1 November, 2006. At the time of
conversion, the outstanding unmatured deposits were transferred to an
escrow account together with the future interest payable thereon till
the date of maturity and these are being repaid on maturity.
Accordingly, there have been no fresh deposits accepted during the
financial year 2010 - 11. Net of repayments, the matured and unclaimed
deposits (including interest accrued) as at 31 March, 2011 were Rs.0.67
crores.
As at 31 March, 2011 and as on the date of this report, there were 267
depositors whose deposits had matured but had not claimed the maturity
amount aggregating to Rs.0.67 crores (along with interest accrued). As
a process, the company sends periodical reminders to these depositors
before transferring the sums due to the Investor Education and
Protection Fund (IEPF) under Section 205C of the Companies Act, 1956.
During the year, the company remitted a sum of Rs.0.08 crores to
IEPF under this head representing unclaimed public deposits and
interests thereon beyond seven years. In respect of outstanding fixed
deposit of Rs.0.02 crores, the repayment to the depositors has been
stayed by courts / instruction from CBI and not remitted to IEPF.
CREDIT RATING
Short Term:
The companys short term debt of Rs.2000 crores is rated as A1+ by
ICRA. During the year, CRISIL upgraded the companys short term debt
rating from P1 to P1+ for Rs.250 crores.
Long Term à Secured:
ICRA re-affirmed its existing rating of LAA- to the various non
convertible debentures and lines of credit from banks. During the year,
ICRA revised the outlook on the above ratings to Ãpositive from Ãunder
watch with developing implications.
During the year, CARE affirmed the rating of CARE AA to the non
convertible debenture programme of the company.
Long Term - Unsecured:
ICRA re-affirmed its existing rating of LAA - on the subordinated debt
programme of the company. During the year, ICRA revised the outlook on
the above ratings to Ãpositive from Ãunder watch with developing
implications.
Fitch re-affirmed its existing rating of AA - (ind) with Stable outlook
on the subordinated debt programme of the company. During the year,
Fitch revised the outlook on the above ratings to ÃStable from
ÃNegative.
The company Ãs Perpetual Debt Instrument (PDI) aggregating to Rs.150
crores are dual rated as LA+ (Positive) by ICRA and CARE A+ by CARE.
RBI GUIDELINES
The company has complied with all the applicable regulations of the
Reserve Bank of India as on 31 March, 2011.
CAPITAL ADEQUACY
The companys capital adequacy ratio was at 16.67% as on 31 March, 2011
as against 14.80% as on 31 March, 2010. The minimum capital adequacy
prescribed by RBI at 12% was revised to 15% effective 31 March, 2011.
EMPLOYEE STOCK OPTION SCHEME
Pursuant to the approval accorded by the shareholders at the twenty
ninth annual general meeting of the company held in July 2007, the
compensation & nomination committee had formulated the Employee Stock
Option Scheme 2007. During the year under review, 5,04,300 options were
granted to the
employees of the company and its subsidiaries under the said scheme. As
required under the Securities and Exchange Board of India (Employees
Stock Option and Employees Stock Purchase Scheme) Guidelines, 1999
(SEBI Guidelines), the following details of this scheme as on 31 March,
2011 are being provided:
Nature of Disclosure Particulars
a. Options granted 21,02,243 options in 7 tranches since
30 July, 2007. Each option gives the
grantee a right to subscribe to one equity
share of Rs.10/- each in the company.
b. The pricing formula The options were granted at an exercise
price equal to the latest available closing
price of the equity shares on the Stock
Exchange in which there was highest
trading volume, prior to the date of grant
of the options.
c. Options vested 2,44,298
d. Options exercised 3,652
e. The total no. of
shares arising as a 3,652 (Pending allotment as on 31
March, 2011)
result of exercise
of option
f. Options lapsed/
surrendered 11,17,310
g. Variation of terms of
Option The compensation & nomination committee
at its meeting held on 30 July, 2008
revised the performance parameters of
the employees for vesting. No terms were
varied during the 2010-11.
h. Money realised by
exercise of options Rs.2,73,088/-
i. Total no of
Options in force 9,81,281
j. (i) Details of Options
granted to Senior Options granted till date to senior
management personnel are as follows:
Management Personnel
Name & Designation of the
Employee No. of Options
granted
Kaushik Banerjee,
President à Asset Finance 69,995
D.Arulselvan, Sr. Vice
President & CFO 43,773
Rohit Phadke, Sr. Vice
President & Business Head 43,773
- Home Equity
(ii) Any other employee
who received None
a grant in any one year
of Option amounting to 5%
or more of Options granted
during the year
(iii) Employees who were
granted None
Options, during any one
year,equal to or exceeding
1% of the issued capital
of the company at the
time of grant.
k. Diluted Earnings Per
Share (EPS) Rs.5.67/-
pursuant to issue of
shares on exercise of
Option calculated in
accordance with
Accounting Standard
AS-20.
l. (i) Difference between
the compensation The employee compensation cost for the
year would have been higher by Rs.57.60
cost using the intrinsic
value of the lakhs had the company used the fair
value of options as the method of
accounting
stock Options (which is
the method instead of intrinsic value.
of accounting used by
the company) and the
compensation cost that
would have been
recognized in the
accounts if
the fair value of
Options had been
used as the method of
accounting.
(ii) Impact of the
difference mentioned in The stock-based compensation cost calculated
as per the intrinsic value method upto
(i) above on the
profits of the company 31 March, 2011 is Nil. If the stock-based
compensation cost was calculated as per the
fair value method prescribed by SEBI, the
total cost to be recognized in the
financial statements for the period ended
31 March, 2011 would be Rs.57,59,567/-
(iii) Impact of the
difference mentioned in Had the company accounted the Options
as per fair value the diluted EPS would have
(i) above on the EPS
of the company been Rs.5.62 instead of Rs.5.67
m. (i) Weighted Average
exercise price Rs.187.60
of Options
(ii) Weighted average
fair value of Rs.93.07
Options
n. (i) Method used to
estimate the fair The fair value has been calculated using
the Black Scholes Options Pricing model.
value of Options
(ii) Significant
assumptions used
(weighted average
information
relating)
30-Jul-07 24-Oct-07 25-Jan-08 25-Apr-08
(a) Risk Ãfree
interest rate 7.10%- 7.87%- 6.14% - 7.79%-
7.56% 7.98% 7.10% 8.00%
(b) Expected life of
the Option 3-6 3-6 3-6 2.50
Ã5.50
years years years years
(c) Expected volatility 40.64%- 41.24%- 44.58% - 45.78%-
43.16% 43.84% 47.63% 53.39%
(d) Expected dividend
yields 5.65% 5.65% 5.65% 3.97%
(e) Price of the underlying
share in the market at
the time of Option
grant 193.40 149.90 262.20 191.80
30-Jul-08 24-Oct-08 27-Jan-11 27-Jan-11
Trache I Trache II
(a) Risk Ãfree
interest rate 9.14%- 7.54%-
9.27% 7.68% 8% 8%
(b) Expected life of
the Option 2.50 2.50 4 3.40
Ã5.50 Ã5.50
years years years years
(c) Expected volatility 46.52%- 48.20%-
53.14% 55.48% 59.50% 61.63%
(d) Expected dividend
yields 3.97% 3.97% 10% 10%
(e) Price of the underlying
share in the market at
the time of Option
grant 105.00 37.70 187.60 187.60
The certificate from the statutory auditor as required under the SEBI
Guidelines, confirming that the companys Employees Stock Option Scheme
2007 has been implemented in accordance with the SEBI Guidelines and
shareholders resolution, will be placed before the shareholders at the
ensuing annual general meeting.
DIRECTORS RESPONSIBILITY STATEMENT
The directors responsibility statement as required under
Section 217(2AA) of the Companies Act, 1956, reporting the compliance
with the accounting standards, is attached and forms a part of the
directors report.
CORPORATE GOVERNANCE REPORT
A report on corporate governance, including the status of
implementation of mandatory and non-mandatory norms as per clause 49 of
the listing agreement and the corporate
governance voluntary guidelines, 2009 issued by Ministry of Corporate
Affairs, is attached and forms part of the directors report.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report, highlighting the
business-wise details is attached and forms part of this report.
DIRECTORS
Mr. V.P.Mahendra is liable to retire by rotation and expressed his
desire not to seek re-appointment at the ensuing annual general
meeting. Your board considered recommending the appointment of
Mr.V.Srinivasa Rangan, Executive Director of HDFC Ltd. in the place of
Mr.V.P.Mahendra at the ensuing annual general meeting to the
shareholders.
Mr. R.V.Kanoria retires by rotation at the ensuing annual general
meeting and being eligible, offers himself for re-appointment.
On 28 July, 2010 Mr.M.B.N.Rao and Mr.L.Ramkumar were appointed as
additional directors. Further, the board, subject to the approval of
the shareholders, appointed Mr.Vellayan Subbiah as managing director of
the company on 28 July, 2010 for a period of five years with effect
from 19 August, 2010. All the additional directors hold office till
the ensuing annual general meeting.
The company has received notices from members under the provisions of
Section 257 of the Companies Act, 1956 proposing the appointment of the
additional directors as directors of the company and proposing the
candidature of Mr.Srinivasa Rangan as a director.
AUDITORS
M/s. Deloite Haskins & Sells, chartered accountants, retire at the
ensuing annual general meeting and are eligible for re-appointment.
INFORMATION AS PER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956
The company has no activity relating to consumption of energy or
technology absorption. Foreign currency expenditure amounting to
Rs.4.63 crores (including interest accrued but not due) was incurred
during the year under review. The company does not have any foreign
exchange earnings.
PARTICULARS OF EMPLOYEES
In accordance with the provisions of Section 217(2A) of the Companies
Act, 1956, read with Companies (Particulars of Employees) Rules, 1975
and the Companies (Particulars of Employees) Amendment Rules, 2011, the
name and other
particulars of employees are set out in the annexure to the directors
report. However, having regard to provisions of Section 219 (1) (b)
(iv) of the Companies Act, 1956, the annual report is being sent to all
members of the company excluding the aforesaid information. Any member
interested in obtaining such particulars may write to the company
secretary at the registered office of the company.
SUBSIDIARY COMPANIES
Consequent to the termination of joint venture with DBS, the names of
the subsidiary companies also were changed.
Cholamandalam Securities Limited, Cholamandalam Distribution Services
Limited and Cholamandalam Factoring Limited are subsidiaries of the
company. The financial performance of the subsidiaries is given below.
Cholamandalam Securites Limited (CSEC)
CSEC recorded a gross income of Rs.10.14 crores for the year ended 31
March, 2011. CSEC made a profit before tax of Rs.0.49 crores as against
a profit of Rs.3.48 crores in the previous year.
Cholamandalam Distributon Services Limited (CDSL)
CDSL recorded a gross income of Rs.11.51 crores for the year ended 31
March, 2011. CDSL made a profit before tax of Rs.6.90 crores as against
a profit of Rs.6.89 crores in the previous year.
Cholamandalam Factoring Limited (CFACT)
During the year, the company infused equity share capital aggregating
to Rs.20 crores to strengthen its capital base. CFACT recorded a gross
income of Rs.0.02 crores for the year ended 31 March, 2011. CFACT made
a loss before tax of Rs.8.16 crores as against a loss of Rs.8.62 crores
in the previous year.
Directors Responsibility Statement
The directors accept the responsibility for the integrity and
objectivity of the Profit & Loss Account for the year ended 31 March,
2011 and the Balance Sheet as at that date (financial statements") and
confirm that:
- in the preparation of the financial statements the generally accepted
accounting principles (GAAP) of India and applicable accounting
standards issued by the Institute of Chartered Accountants of India
have been followed.
- appropriate accounting policies have been selected and applied
consistently and judgments and estimates that are reasonable and
prudent have been made so as to give a true and fair view of the state
of affairs of the company as at the end of the financial year and of
the profit of the company for that period.
- proper and sufficient care has been taken 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. To ensure
this, the company has established internal control systems, consistent
with its size and nature of operations, subject to the inherent
limitations that should be recognized in weighing the assurance
provided by any such system of internal controls. These systems are
reviewed and updated on an ongoing basis. Periodic internal audits are
conducted to provide reasonable assurance of compliance with these
systems. The audit committee meets at regular intervals to review the
internal audit function.
- the financial statements have been prepared on a going concern basis
ACKNOWLEDGEMENT
The directors wish to thank the companys customers, vehicle
manufacturers, vehicle dealers, banks, mutual funds, rating agencies
and shareholders for their continued support. The directors also thank
the employees of the company for their contribution to the companys
operations during the year under review.
On behalf of the board
M.B.N.Rao
Chairman
30 April, 2011
Chennai
Mar 31, 2010
The directors have pleasure in presenting the thirty second Annual
Report together with the audited accounts of the company for the year
ended 31 March, 2010.
FINANCIAL RESULTS
Rupees in lakhs
2009-10 2008-09
Gross income 92950 112063
Profit before tax 3133 1708*
Profit after tax 1542 4275
Add: Balance brought forward 5555 2280
Amount available for appropriation 7097 6555
Adjustments/Appropriation :
Adjustments
Transfer to statutory and other reserves 309 1000
Dividend
- Equity 664 --
- Preference 315 --
Tax on dividend 163 --
Balance carried forward 5646 5555
Total 7097 6555
* after giving effect to capital restructuring
TERMINATION OF JOINT VENTuRE
During the year under review, the promoters, Tube Investments of India
Ltd. (TII), a constituent of the Murugappa Group and DBS Bank Ltd.,
Singapore (DBS) entered into a share purchase agreement on 30 March,
2010 for an interse promoter transfer of the entire shareholding held
by DBS in the equity and preference share capital of the company
aggregating to 37.48% and 50% respectively to TII and New Ambadi
Estates Pvt. Ltd. (NAEPL) another constituent of the Murugappa Group.
Accordingly, the transaction was completed and the shareholdersÃ
agreement (SHA) dated 16 June, 2005 between the company, TII and DBS
was terminated on 8 April, 2010. Further to this, the company is
required to change the name of the company and do necessary amendments
to its Memorandum and Articles of Association to reflect the change in
the joint venture status of the company. Accordingly, the company had
sought the approval of the shareholders of the company for changing to
its earlier name, Cholamandalam Investment and Finance Company Limited
and for amendments to the existing Memorandum and Articles of
Association of the company vide a postal ballot.
SHARE CAPITAL
The shareholders had on 5 March, 2009 approved an issue of 3,00,00,000
1% fully convertible cumulative preference shares (FCCPS) of Rs.100
each aggregating to Rs.300 crores to TII and DBS on a preferential
basis to improve the liquidity position of the company and strengthen
the capital adequacy ratio. As per the terms of the offer and in
accordance with the Securities and Exchange Board of India (Issue of
Capital and Disclosure Requirements) Regulations, 2009 (ÃSEBI ICDR
RegulationsÃ), the FCCPS shall be converted on or before 18 months from
the date of allotment. As the FCCPS are due to be converted before 12
September, 2010, in order to ensure that the proportion of promoter
shareholding and public shareholding remain status quo upon conversion
and in order to maintain the minimum public shareholding of 25%, the
Board at its meeting held on 3 April, 2010 has recommended to the
shareholders an issue of 1,08,93,852 equity shares aggregating to about
Rs.100.23 crores on preferential basis to International Finance
Corporation (IFC), a multilateral development financial institution at
a price of Rs.92/- per share in accordance with the SEBI ICDR
Regulations. The Board had further recommended an increase in the
authorised share capital of the company from Rs.400 crores to Rs.420
crores comprising Rs.120 crores of equity share capital and Rs.300
crores of preference share capital. The postal ballot forms and notice
in this regard had been sent individually to the shareholders on 3
April, 2010.
In order to maintain the minimum public shareholding at the stipulated
level it is proposed to convert the FCCPS allotted to the existing
promoters of the company on the same date as at the date of allotment
of the equity shares on preferential basis to IFC.
During the year, the company infused Tier 2 Capital in the nature of
subordinated debt aggregating to Rs.250 crores.
OPERATIONS
During the year ended 31 March, 2010, the company recorded,
à 36% growth in disbursements;
à 15% growth in total assets (including assigned assets).
Disbursements in commercial vehicle finance for the year were at
Rs.2861 crores against Rs.1502 crores in previous year. The Division
has achieved a growth of 90% over previous year.
Disbursements in home equity business for the year recorded a
disbursement of Rs.1004 crores against Rs.501 crores in the previous
year. The division has achieved a growth of 100% over previous year.
The total assets under management (net of provisions) of the company as
at 31 March, 2010 increased to Rs.6850 crores from Rs.6001 crores in
the previous year. The company has seen a growth of 14% over previous
year.
During the year, the company increased the participation of higher
yielding assets and increased the lending rates to offset the increase
in cost of funds.
The profit before tax for the year was at Rs.31.33 crores as against
Rs.17.08 crores in the previous year. Net profit after tax was at
Rs.15.42 crores for the year as compared to Rs.42.75 crores in the
previous year.
DIVIDEND
Your directors recommend dividends as under:
Equity shares: The interim dividend of 10% (Re.1/- per equity share)
declared by the board of directors on 26 April, 2010 for the year ended
31 March, 2010 be treated as the final dividend.
Preference shares: The cumulative dividend as on 31 March, 2010 payable
on FCCPS @ 1% coupon rate being Re.1/- per preference share of Rs.100/-
each for every year payable proportionately for the period from 13
March, 2009 being the date of allotment of FCCPS till 31 March, 2010.
OUTLOOK
With the rebound of the economy and the spectacular growth witnessed in
the automobile sector à specifically in the commercial vehicles
industry, the outlook for the year ahead is promising. If the
inflationary pressures are contained without any significant monetary
compression, the year ahead will see the growth momentum sustained.
FIXED DEPOSITS
The company is classified as a non-deposit taking NBFC after it has
ceased taking deposits from public effective 1 November, 2006. At the
time of conversion, the outstanding unmatured deposits were transferred
to an escrow account together with the future interest payable thereon
till the date of maturity and these are being repaid on maturity.
Accordingly, there have been no fresh deposits accepted during the
financial year 2009-10. Net of repayments, the total deposits as at 31
March, 2010 were Rs.0.93 crores.
As at 31 March, 2010, there were 396 depositors whose deposits had
matured but had not claimed the maturity amount aggregating to Rs.0.93
crores (along with interest accrued). The number stands on the date of
this report at 381 depositors with an amount aggregating to Rs.0.90
crores (along with interest accrued). As a process, the company sends
periodical reminders to these depositors before transferring the sums
due to the Investor Education and Protection Fund (IEPF) under section
205C of the Companies Act, 1956. During the year, the company has
remitted a sum of Rs.0.05 crores to IEPF under this head representing
unclaimed public deposits and interests thereon beyond seven years. In
respect of outstanding fixed deposit of Rs.0.02 crores, the repayment
to the depositors has been stayed by Courts / instruction from CBI and
not remitted to IEPF.
CREDIT RATING
Short Term :
The CompanyÃs short term debt programme of Rs.2000 crores is rated as
A1+ by ICRA.
During the year, at the request of the company, CRISIL withdrew its
short term rating of P1 (pronounced ÃP oneÃ) assigned to the Rs.750
crores Short Term Debt programme as the company had repaid all the
outstanding instruments under the programme.
Long Term :
ICRA has re-affirmed its existing rating of LAA- to the various non
convertible debentures, subordinated debt and lines of credit from
banks. During the year, ICRA has revised the outlook on the above
ratings to Ãstableà from ÃnegativeÃ.
Fitch has re-affirmed its existing rating of FAA - Negative on the
subordinated debt programme of the company.
Post DBS Bank exit, ICRA has brought its ratings under watch with
developing implications.
RBI GUIDELINES
The company has complied with all the applicable regulations of the
Reserve Bank of India as on 31 March, 2010.
CAPITAL ADEQUACY
The companyÃs capital adequacy ratio was at 14.80% as on 31 March, 2010
as against 15.12% as on 31 March, 2009. The minimum capital adequacy
ratio prescribed by RBI is 12%.
EMPLOYEE STOCK OPTION SCHEME
Pursuant to the approval accorded by the shareholders at the twenty
ninth Annual General Meeting of the company held in July 2007, the
compensation & nomination committee had formulated the Cholamandalam
DBS Finance Limited - Employee Stock Option Scheme 2007. During the
year under review, no options were granted to the Employees of the
company under the said scheme. As required under the Securities and
Exchange Board of India (Employees Stock Option and Employees Stock
Purchase Scheme)
DE-LISTING FROM MSE
In view of the insignificant trading of the companyÃs equity shares in
MSE, the board at its meeting held on 25 March, 2010 had approved
de-listing of the equity shares admitted on MSE in accordance with the
SEBI (Delisting of equity shares) Regulations, 2009. Accordingly, the
company has complied with all the formalities prescribed for delisting
and has applied to MSE on 5 April, 2010 for de-listing and a public
notice in this regard was issued in Financial Express, Dinamani on 6
April, 2010 and Dainik Jagran on 7 April, 2010. As the equity shares of
the company will be continued to be listed on NSE and BSE, having
nationwide trading terminals, the de- listing will not cause any
hardship to the shareholders of the company.
DIRETORS RESPONSIBILITY STATEMENT
The directorsà responsibility statement as required under section
217(2AA) of the Companies Act, 1956, reporting the compliance with the
accounting standards, is attached and forms a part of the directorsÃ
report.
CORPORATE GOVERNANCE REPORT
A report on corporate governance, giving the status of implementation
of mandatory and non-mandatory norms as per clause 49 of the listing
agreement and the corporate governance voluntary guidelines, 2009
issued by Ministry of Corporate Affairs, is attached and forms part of
the directorsà report.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report, highlighting the
business-wise details is attached and forms part of this report.
DIRECTORS
Mr. M. A. Alagappan and Mr. R. Krishnamurthy retire by rotation at the
ensuing annual general meeting and have expressed their desire not to
seek re-appointment as directors of the company.
Consequent to the termination of the joint venture with DBS, Mr. Pranam
Wahi and Mr. Wong Ann Chai, nominees of DBS on the Board of the company
resigned from the Board effective 9 April, 2010. The Board places on
record its appreciation for their support during their tenure of
office.
AUDITORS
M/s. Deloitte Haskins & Sells, chartered accountants, retire at the
ensuing annual general meeting and are eligible for re-appointment.
INFORMATION AS PER SECTION 217(1)(E) OF THE COMPANIES ACT, 1956
The company has no activity relating to consumption of energy or
technology absorption. Foreign currency expenditure amounting to
Rs.730.66 lakhs (including interest accrued but not due) was incurred
during the year under review. The company does not have any foreign
exchange earnings.
PARTICULARS OF EMPLOYEES
In terms of the provisions of section 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975, the
names and other particulars of employees are set out in the annexure to
the directorsà report. However, having regard to provisions of section
219 (1)(b)(iv) of the Companies Act, 1956, the annual report is being
sent to all members of the company excluding the aforesaid information.
Any member interested in obtaining such particulars may write to the
Company Secretary at the registered office of the company.
SUBSIDIARY COMPANIES
Due to the various cost reduction measures initiated by the company,
DBS Cholamandalam Securities Limited and DBS Cholamandalam Distribution
Limited, fully owned subsidiaries of the company have turned around and
became profitable during the year.
Dbs cholamandalam securities Limited
The company recorded a gross income of Rs.13.17 crores for the year
ended 31 March, 2010. The company made a profit before tax of Rs.3.48
crores as against a loss of Rs.9.01 crores in the previous year.
Dbs cholamandalam Distribution Limited
The company recorded 36% growth in gross income to Rs.1 1.30 crores for
the year ended 31 March, 2010. The company made a profit before tax of
Rs.6.89 crores as against a loss of Rs.18.25 crores in the previous
year
cholamandalam Factoring Limited
During the year under review, Cholamandalam acquired shares at an
amount of Rs.0.95 crores in the share capital of Cholamandalam
Factoring Limited, a non banking finance company registered with RBI
with a view to have this company focus exclusively on collection of
unsecured loan receivables.
The company recorded a 82% growth in gross income to Rs.0.08 crores for
the year ended 31 March, 2010. The company made a loss before tax of
Rs.8.62 crores as against a profit of Rs.0.04 crores in the previous
year. The company has a loan receivables book of Rs.79.01 crores as on
31 March, 2010.
Asset management business
During the year under review, considering its long term vision for its
core businesses of asset backed lending, the company exited the asset
management business on 20 January, 2010 by dis-investing its entire
shareholding in its two wholly owned subsidiary companies à DBS
Cholamandalam Asset Management Limited (now called L & T Investment
Management Ltd.) and DBS Cholamandalam Trustees Limited (now called L &
T Mutual Fund Trustee Ltd.) by way of a sale to L & T Finance Ltd.
Upto 19 January, 2010, the DBS Cholamandalam Asset Management Limited
reported an income of Rs.2.69 crores as
against Rs.4.98 crores for the previous year. The company made a loss
of Rs.17.75 crores. as against a loss of Rs.37.76 crores for the
previous year.
Upto 19 January, 2010, the DBS Cholamandalam Trustees Limited reported
an income of Rs.4 lacs as against Rs.7 lacs. for the previous year.
The company made a profit of Rs.0.12 lacs. as against a profit of
Rs.0.65 lacs for the previous year.
ACKNOWLEDGEMENT
The directors wish to thank the companyÃs customers, vehicle
manufacturers, vehicle dealers, banks, mutual funds, rating agencies
and shareholders for their continued support. The directors also thank
the employees of the company for their contribution to the companyÃs
operations during the year under review.
On behalf of the board
26 April, 2010 m. A. Alagappan
Chennai Chairman
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