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Directors Report of CARE Ratings Ltd.

Mar 31, 2018

The Directors are pleased to present the Twenty Fifth Annual Report of your Company along with the audited Financial Statements for the year ended March 31, 2018.

Financial Performance

Your Companyâs Financial Performance for the year ended March 31, 2018, is summarized below:

(Rs. Lakhs)

Particulars	For the year ended March 31,2018	For the year ended March 31,2017
Income from Operations	32,161	28,048
Other Income	2,527	3,408
Total Income	34,688	31,456
Total Expenditure	11,513	9,750
Profit Before Tax (PBT)	23,175	21,706
Provision for Tax	7,073	6,481
Profit After Tax (PAT)	16,103	15,225
Other comprehensive Income	410	-113
Total Comprehensive Income for the period	16,513	15,112
Appropriations
Interim Dividend	5,303	5,301
Tax on Interim Dividend	1,080	1,079
Final Dividend	2,945	2,940
Tax on final dividend	599	599
Total (Dividend Outflow)	9,927	9,919
Transferred to General Reserve	1,500	1,500

Income from operations increased by about 14.66% during the year due to increase in volume of debt rated in the long term debt instruments and bank loan ratings. This was supported by surveillance income. Other income decreased from Rs 34.08 crore to Rs.25.27 crore mainly due to change in investment portfolio mix as well as decrease in interest rates.

During the year ended March 31, 2018, the Company has reviewed its efforts required for completion of various activities in the rating process in light of changes in Regulations, Business-Mix and Technological Enhancements.

Accordingly, the revenue recognized for the year ended on March 31, 2018 is higher by Rs. 18.62 Lakhs.

Total expenditure increased by 18.10% largely on account of ESOP Charge of Rs. 8.65 Crore, increase in marketing teams and brand building exercise.

Dividend

Your Company paid a total interim dividend of Rs. 18/- per share amounting to a payout of Rs.63.83 crores including Dividend Distribution Tax (DDT). The Board has recommended final dividend of Rs. 37/- per share (it comprises of Rs.12/- Normal dividend and Special dividend of Rs.25/- to mark the celebration of 25^th Anniversary of the Company) amounting to a payout of Rs. 131 crores including DDT for FY 2017-18, to be approved at the ensuing Annual General Meeting. The dividend would be paid in compliance with the applicable rules and regulations. In terms of Regulation 43A of the SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015, The Dividend Distribution Policy is appended as Annexure I to the report and is available on the website of the Company at www.careratings.com.

Transfer to reserves

Your Directors recommend to transfer Rs. 15 crores (Rupees Fifteen Crores Only) to the General Reserve of the Company.

Share Capital

The Authorised Share Capital of your Company is 3,00,00,000 Equity Shares of face value Rs.10/- each amounting to Rs.30,00,00,000/-(Rupees Thirty Crores only) and the Paid-up Share Capital is 2,94,61,214 Equity Shares amounting to Rs. 29,46,12,140/- (Rupees Twenty Nine Crores Forty Six Lacs Twelve Thousand One Hundred Forty Only). During the financial year ended March 31, 2018, the Company has issued and allotted 10,013 equity shares of Rs. 10/- each at a premium of Rs. 607/- per share to its eligible employees under the CARE Employees Stock Option Scheme, 2013 (ESOS 2013).

Economic Backdrop

The countryâs economic growth declined for the second year in a row in FY18, with GDP growing by 6.7%, the lowest growth in the last 3 years. GDP growth in FY18 was 0.4% lower than that in FY17 and 1.5% lower than that in FY16. The disruptions caused by the structural reforms of demonetization followed by GST implementation along with the paucity in investment demand has impacted overall economic output. The domestic economy has however shown signs of recovery in the second half of FY18. As per the provisional estimates, GDP grew by 7% in Q3 and 7.7% in Q4 of FY18, higher than the growth of 5.6% in Q1 and 6.3% in Q2 FY18.

In terms of sectoral performance, the services sector continues to be driving domestic economic progress. Barring construction, public administration, financial services, trade, hotel, transport & communication services the performance across sectors has been subdued. As per the provisional estimates by the Central Statistical Office, the construction sector grew by 5.7% in FY18 notably higher than the 1.3% growth of FY17. The growth in this sector can be attributed to the higher government spending towards construction of roads. Public spending (public administration, defense and other services) grew by 10% in FY18, marginally lower than 10.7% growth in the previous year. Financial services (including real estate and professional services) are estimated to have grown by 6.6% in FY18, marginally higher from 6% a year ago. Likewise, services of trade, hotels, transport & communication grew at a higher rate of 8% in FY18 compared with 7.2% growth of FY17. Aided by favorable monsoons, the agriculture sector grew by 3.4% in FY18 over the 6.3% growth of FY17. The favorable growth in the agriculture sector in the last 2 years which was expected to stimulate the other sectors of economy failed to materialize on account of declining incomes of farmers due to excess production which led to declining prices of agricultural commodities.

Industrial growth at 4.3% in FY18 was lower than the 4.6% growth in FY17. The manufacturing sector growth during the year was fairly stable at 4.5% (4.4% in FY17). Capital goods saw an improvement in FY18 with growth of 4.4% compared with 3.2% in FY17. The growth of consumer durables weakened to 0.6% in FY18 from 2.9% in FY17. Also, the investment rate in the economy did not witness an improvement during FY18 and continued to be stable at 28.5% since the last 3 years. The continued low capacity utilization rate of 72.4% (since FY15) as per the RBI, coupled with the extended bank NPA problem has been pressuring fresh investments in the domestic economy.

Corporate performance did see some improvement during FY18. For the sample of 1,222 companies excluding banks, sales (y-o-y) registered a growth of 11.8% in FY18 from 7.0% in FY17 while net profits increased by 15.1%. Net profit margin improved from 8.2% to 8.5% during this period. Majority of industries witnessed positive growth in sales during FY18. Higher operational costs and working capital requirements impacted profit margins of some industries.

The credit off-take in the banking sector improved during the year. Incremental credit growth in FY18 grew by 10.3% compared with the 8.2% growth in FY17. Bank credit growth however remains notably lower compared with the average 16.0% growth seen during FY10-13. Credit growth during the year continued to be driven by the retail and service sector, which recorded double digit growth. The retail sector grew by 17.8% compared with 16.4% in the previous year while the services sector grew by 13.8% lower than the 16.9% growth registered in the previous year. The industrial sector also witnessed an improvement in credit off take, albeit a marginal growth of 0.7% form the contraction of (-) 1.9% of FY17. The credit off take in the agriculture sector was low at 3.8% compared with 12.4% growth of the previous year. Credit growth was negative for various segments in FY18. In case of medium sized industries it contracted by (-) 1.07%.

Within industry growth in credit contracted for, chemicals (-) 5.5% , shipping (-) 24.7%, petro-chemicals (-)23.7%, infrastructure (-)1.7%, metals & metal products (-)1.2% among others. The growth in the rating business in the bank loan segment needs to be viewed in relation with the growth in bank credit at the aggregate level to help highlight the challenges faced in the rating business.

Along with the subdued growth in bank credit, the banks were also faced with the major challenge of rising stressed assets. RBI had reported an increase in bank NPAâs from 9.6% to 11.6% between Marchâ17 and Marchâ18 while stressed assets ratio had moved from 12.1 to 12.5%. These numbers are expected to increase further. Stressed assets ratio was highest for industry at 24.8%.

The corporate bond markets saw a decline in issuances in FY18 compared with the previous year. In FY18, the total corporate bonds issuances as per the SEBI data aggregated to Rs. 6.0 lakh crore, which was around 10% lower than the issuances of Rs. 6.7 lakh crore in FY17. Of the total amount raised, 99.0% of the total corporate bond issuances were through private placements.

Outstanding corporate bonds amounted to Rs. 27.42 lakh crore as on March 2018, which was 14% higher than the outstanding bonds worth Rs. 24.05 lakh crore as on March 2017. The major share of the corporate bond issuances in FY18 continued to be by the financial sector comprising primarily of banks and NBFCs (nearly 70% share in total) and the funds raised by them were being used for onward lending. The funds raised by the non-financial sector (22% of total) indicate limited fresh investments in these sectors.

In FY18, commercial paper to the tune of Rs. 22.9 lakh crore were raised, 32% higher than the issuances of Rs. 17.4 lakh crore in the previous year. Public sector enterprises were seen to tap corporate bond markets to meet their capital requirements, with banks addressing the NPA issues.

Inflation in the country declined during the year. Retail inflation during FY18 fell to a 6 year low. It declined by 95 bps to 3.6% from 4.5% in FY17, mainly on account of the benign inflation in the first half of the year. The easing in food inflation was largely attributable to favourable monsoon which helped cool food prices. The rise in global oil prices and the statistical base effect of the HRA revision of the 7th Pay Commission were being built into inflation in the latter half of the year. The Wholesale Price Index (WPI) based inflation firmed up to reach a 4 year high level at 2.9% in FY18 as against 1.7% in the previous year mainly on account of high price of fuel and power. Both the CPI and WPI remained well within the RBI target inflation level of 4% with a band of /- 2%.

The RBI adopted a cautious monetary policy stance during the year. The policy decisions were driven by concerns of rising global oil prices, impact of the implementation of 7th Pay Commission, monetary tightening by the US Federal Reserve and fiscal slippages at the central and state government level. During the year, the RBI lowered the key policy rate i.e. repo rate once by 25 bps to 6% in its Augustâ17 policy.

The Government fiscal position was pressured in FY18. The government overshot the budgeted fiscal deficit target of 3.2% for FY18 to 3.5%. Lower tax revenue collections owing to GST led interruptions coupled with higher expenditure pressured government finances during the year.

During FY18, the government securities (GSec) yields exhibited significant volatility and ended the year higher. The benchmark 10 year GSec yield rose by 77 bps from the average yield of 6.85% in Aprâ18 to 7.62% in Marâ18. The average yield during the year was 6.93% and the yields ranged from 6.41% to 7.91%. The movement in yields were driven by concerns over fiscal slippages and additional borrowings requirements of the government, widening trade and current account deficits, increase in commodity price levels, US Federal Reserveâs policy action, movement in US treasuries, liquidity conditions in the system and lower demand from banks faced with mark-to -market losses.

The rupee was seen to be fairly stable against the US dollar (USD) during FY18, ranging between Rs.64.0 to Rs. 61.5 per USD. The exchange rate as of end Marchâ18 was Rs.64.04 per USD compared with Rs.64.82 per USD as of end Marchâ17, a strengthening of 1.2%. The gains in the rupee can be ascribed to the weakness in the USD in the overseas markets, higher FPI inflows and positive macroeconomic performance in the second half of the fiscal led by the various reforms undertaken by the government. However, the increasing oil prices, concerns over fiscal slippages with lower than expected GST collections and widening trade deficit and current account deficit capped the upward movement of the currency towards the end of the year.

Business operations

While your Companyâs strategy is to grow the business book by widening the coverage of debt rated in the market as well as increase the client base, building the client book assumed significance under conditions of limited buoyancy in the markets.

Since inception, your company has completed total 67,151 rating assignments till March 31, 2018. On a cumulative basis, the amount of debt rated instruments increased to Rs. 108.47 lakh crore as of March 31, 2018.

Assignment Type (New Instruments)	Number of Instruments Rated		Volume of debt rated (Rs. crore)
Assignment Type (New Instruments)	2017-18	2016-17	2017-18	2016-17
Short & Medium term	156	82	3,55,928	1,28,414
Long term	365	363	6,53,690	5,97,361
Bank Facility Ratings	8,090	5,828	6,37,916	5,92,978
Others including NSIC rating	1,632	3,754	-	-
Total	10,243	10,027	16,47,535	13,18,753

The above table provides information on the various aspects of the business profile and growth during the year. Certain key aspects are enumerated as under:

1. The total number of rating assignments increased by 2.2% in 2017-18. This was mainly due to a decline in the NSIC-SME segment (under others) even as there was an increase in the number of assignments on account of bank facility ratings and capital market instrument ratings. Bank facilities accounted foRs.79% of total assignments in 2017-18, higher from 58.1% in 2016-17. The miscellaneous assignments including NSIC grading witnessed a decline from 37.4% in 2016-17 to 15.9% of total rated assignments in 2017-18.

2. The total volume of new debt rated increased from Rs. 13.19 lakh crore in 2016-17 to Rs. 16.48 lakh crore in 2017-18. This was mainly due to increase in volume of debt rated across categories such as short & medium term, long term and bank facility ratings. Within short and medium term instrument ratings, commercial paper was the dominant segment which was aided by the dual rating rule brought in by the RBI.

3. In terms of volume of debt rated, the short and medium term instrument ratings witnessed an increase in share from 9.7% in 2016-17 to 21.6% in 2017-18. On the other hand, the share of long term instrument ratings decreased from 45.3% to 39.7% and that of bank facility ratings fell from 45% to 38.7% in 2017-18.

Business during the year

Large corporates and Mid-corporates

We continued to have a focused team on the large and mid-corporate segments which works on both - augmenting the client portfolio through new client addition and maintaining relationships with the existing companies. These two prongs are required to keep the business improving in future.

Your Company continues to be the dominant credit rating agency in this space. For the year under consideration too, CARE Ratings continued to hold significant presence with share of 50%, 43% and 45% in ET Top 500, BS Top 1000 and FE Top 1000 companies respectively.

New Initiatives

CARE Ratings has been authorized by RBI for undertaking Independent Credit Evaluation (ICE) in respect of resolution plans of stressed assets. In this regard, your Company has carried out resolution plan ratings based on such plans for some accounts referred for resolution under Insolvency & Bankruptcy Code (IBC) by some banks. The implementation of the IBC has ushered in urgency in the resolution of the NPA problem which has given rise to this new line of business for your company.

Your Company was the first rating agency to assign rating to the consumer durable securitization in India during the year.

During the year, your company also rated Partial guarantee bonds / Co-guarantee structured bonds as well as projects based on Hybrid Annuity Model in road projects.

Rating Committee

In line with the practices of most of the leading credit rating agencies across the country and the globe, CARE Ratings decided to replace the external rating committee comprising eminent independent professionals with an Internal Rating Committee comprising senior executives from within the ratings team w.e.f. April 1, 2017. CARE Ratings has greatly benefitted from the experience and expertise of the members of External Committee who have provided continuous guidance in developing rating criteria and methodologies over the last two and a half decades. While the overall guidance provided by the external members has been invaluable, it was felt that after more than two decades, there is enough expertise gained by senior personnel in CARE to carry out ratings on their own. Accordingly CARE Ratings has constituted committees chaired by senior personnel from its rating division possessing rich experience of ratings across varied sectors.

Small and Medium Enterprises (SMEs)

The SME rating business has the potential to be a important component of our revenue stream as the eco system is large and is underpenetrated. This provides a very good opportunity for us to aggressively leverage technology to include a large part of this universe. SMEs of today would enter the medium to large bracket in the medium to long run and hence needs to be included in our client list today. We are working on various models to reach out to them and provide a rating or scoring by using technology.

Therefore, the approach to this business is very different from the hitherto targeting of the traditional NSIC model which received support from the government. The NSIC rating was based on a subsidy provision to the SME for procuring a rating from a rating agency. This apart, the bank facility ratings for SMEs continues to be a strong pillar for the SME business of your company. With significant geographic presence across the country, your company has been successfully able to cater the need for adequacy of finance for such entities through the bank facility ratings.

For FY16, the Union Budget had scaled down this allocation by oveRs.100% from Rs 88 crs in FY15 to Rs 37 crs. Thereafter, it increased by 36% to Rs 57.9 crs in FY17; however, it was again much lower than the budgeted amount of Rs 200 cr during the year. As per the revised estimates of FY18, the allocation has declined sharply to Rs 5 crores only.

A SME Newsletter covers important developments on a fortnightly basis with all the clients. Further, participation in various seminars on SMEs has been as a medium of accessing the universe of players in this segment.

CP market

Your company did take advantage of the revised regulatory guidelines that require dual rating of commercial paper when the size of issue during the year is above Rs 1000 cr. This led to an increase in the number of short term instruments rated during the year. We believe this will also add to the stock of debt which would continue to earn a surveillance fee in the coming years.

Information Technology: the enabler

In 2017-18, our IT initiatives were focused more on upgrading the existing IT infrastructure to support business growth. We implemented Data Leakage prevention solution to ensure and fortify data security. In this year we rolled out integrated customer relationship management solution iCRM, this application is bespoke development done for specific requirements of CARE Ratings, thus ensuring best of the support for sales, operation and back-office. We improvised and upgraded open source technology based solution for securitization analysis and reporting application which helps users to widen their analytics horizon and decision making.

IT helped to digitize the manual processes for improving Operation efficiency. Moving with technology trends we have implemented Cloud based Human Resource Management System. We have started exploring and doing initial work on artificial intelligence and machine learning based solution for rating operation.

CARE has completed multiple IT projects and infrastructure upgradation during this year.

Future prospects and Outlook for the Company

The Indian economy is expected to perform better in FY19 and we expect growth to be about 7.5%. However, the investment growth is to continue to be driven by the government as private sector participation will come with a lag. The financial system would be challenged this year as banks would be a differential position to lend given the overhang of NPAs and shortage of capital. Further, the PCA (Prompt Corrective Action) has hindered fresh borrowing from some banks and hence the demand has to be met progressively by other banks as well as the corporate debt market.

The debt market will offer more opportunity for the borrowers which are good for your company. However to the extent that it is substitution with bank credit, in terms of overall business volumes the impact would be lower.

The RBI has already increased interest rates and there are chances of anotheRs.1-2 hikes this year of 25 bps each. This being the case, market borrowings will be under pressure as the transmission mechanism is faster in this segment. This can also affect the CP segment which has leveraged the benefit of more efficient transmission of lower cost when interest rates came down. With a reversal in direction of interest rates, CPs could be less attractive relative to conventional bank loans. However, it may still draw the benefit of banks not being in a position to lend on account of the PCA guidelines.

Crude oil prices have been fairly volatile and uncertain and would largely drive the exchange rate and interest rate this year. Inflation too can come under strain on this score besides the higher MSPs that have been announced. Therefore, while growth per se will be higher this year, the financial sector would be going through a series of waves pulling in both directions.

Two significant developments would be aiding our business in the coming years. The first relates to the IBC and the progressive success in resolution of some of the plans. We do believe that as the recognition and resolution processes get quicker, the recovery given default ratio on the NPA cases will improve significantly. As this schedule moves downwards, investors would gain confidence in the debt markets and would be more willing to invest in âAâ rated paper, which hitherto has been eschewed given the uncertainty of recovery in case of default in the corporate debt market. Second, the Finance Minister in the Union Budget of 2018-19 had specifically stated that institutions should be investing also in âAâ rated bonds to give a fillip to the corporate bond market. If these two developments are put together, it can be seen that there is a fairly encouraging future for the corporate bond market which will be good for your company.

Knowledge Dissemination

CARE Ratings believes in presenting its views on various pertinent issues immediately in order to ensure that our clients and media are informed about CAREâs stance on various issues. For this, we have two independent research teams - Economics and Industry Research team which has been frontrunners in knowledge dissemination.

CARE Ratings continued with its monthly release of CARE Debt Quality Index (CDQI) which tracks the changes in the overall quality of the debt in the economy based on a representative sample of companies. In addition to this, CARE Ratings also comes up with quarterly release of Modified Credit Ratio (MCR) which looks at number of upgrades and downgrades.

A major innovation this year has been the release of CARE Ratingsâ Corporate Bond Monitor (CBM) where we trace how the yields or certain tenures as well as spreads over GSecs have traversed over time.

Economics

The Economics department is known for its regular and real-time domestic and global economy related updates. It brings out reports on GDP, Inflation, Industrial growth, monsoons, fiscal situation, NPA situation, monetary policy etc. In addition to this, in depth analytical studies are carried out pertaining to debt market, employment, state finances etc. along with regular surveys. Economics division also come up with daily and monthly debt market reports including DDMU- Daily Debt Market Update and DMR- Debt Market Review.

The team also published Debt book edition foRs.2018 in the month of January.

Sectoral Views

The Industry research team now covers oveRs.30 sectors including Auto, textiles, Infrastructure, Metals, Sugar, Telecom, Oil and Gas, Retail, Hospitality, Fertilizers, Gems and Jewellery, Paper etc. These reports are perpared in close consultation with the sector specialist in the organisation. Sector specialists also put out some of the critical updates from time to time. All this enables in better understanding of the Industry while undertaking rating exercise.

All these reports are widely disseminated within the company, clients, regulators, government authorities, opinion makers, media etc.

Webinars

Your company takes pride in being a part of a knowledge driven industry. As a part of knowledge dissemination series, 37 Live Webinars were conducted on Industry & Economic perspectives. These webinars had healthy participations with Q&A sessions in real time. They were conducted by the senior officials along with the relevant analysts.

Branding and Media

CARE Ratings branding strategy has always been to communicate to our strength and ethos across all touch points. Consistent efforts are therefore made to be visible, create value, awareness and enhance our equity amongst all our stake holders.

Events

We hosted our flagship event âCredit Markets Conclave 2018â at Hotel Trident, - Mumbai on 18 Januaryâ18. The Conclave was inaugurated by the Deputy Governor of RBI Mr. N. S. Vishwanathan. This was followed by panel discussions on 3 aspects of the Credit Markets i.e. Banking, Corporate Bond Market and Mutual Funds. The participants were amongst the best in the industries. CARE Ratings also published its detailed study âThe Debt Book 2018â at this event.

We also held ouRs.2018 edition of Conversations over Dinner Event at Delhi on March 07, 2018. Mr. Shaktikanta Das (Former Joint Secretary - Department of Economic Affairs, Ministry of Finance, Government of India) was the special guest of the evening.

Jury on Prestigious awards

CARE Ratings was associated as âknowledge partnerâ in the 15th edition of Outlook Money Awards. Mr. Rajesh Mokashi, MD & CEO was in the esteemed jury panel to decide on the winners. CARE Ratings did the thorough evaluation as per the Criteria approved by the Jury and also did data validation on sampling basis.

CARE Ratings was a part of Business Todayâs 6th edition of Best CEOs in India. Mr. Rajesh Mokashi, MD & CEO was part of the jury for the selection process.

We were associated with Samudra Manthan Awards 2017 (Earlier associations in 2016, 2015 & 2014). This is a significant initiative instituted with an objective to fuel healthy competition, create a yearning for improvement and reach the collective voice of Indian Maritime Industry. CARE Ratings designed the criteria and presented the top nominations based on its evaluation.

Knowledge partner

CARE Ratings was associated as Knowledge Partner at ASSOCHAM India Steel Summit 2017, Delhi on NovembeRs.9, 2017. CARE Ratings prepared & published its background paper on Steel Sector- Credit Perspective at the event. This was released at the event by Mr. Vishnu Deo Sai (Union Ministry of State for Steel and Mines, GoI), Mr. Sunil Barthwal (Joint Secretary of Ministry of Steel, GoI) and Ms. Sminu Jindal (Managing Director of Jindal SAW Ltd).

CARE Ratings was associated as Knowledge Partner at PHD Chambersâ National Solar Summit 2017, on May 10, 2017, Delhi & published its knowledge paper at the summit.

Media interactions

CARE Ratingsâ Senior Management is regularly seen at prominent forums, seminars and conferences for presenting views and insights. CARE Ratings management interviews and expert quotes are constantly featured across media.

CARE Ratings regularly published & disseminated its updates on Industry Research covering 30 sectors & Economy. These reports were widely covered in print media, online & television. CARE Ratings Reports, Insights, Management & Industry Expert quotes are regularly uploaded on our Social Media channels such as LinkedIn & YouTube. Some of our reports has been a focal point of discussions on social media amongst influencers and thought leaders.

Advertising and publicity

For celebrating ouRs.25th year a comprehensive media plan was activated in form of print advertising in major financial dailies and television commercial spots in prominent business news channels.

From Visual & Design perspective we had created a special 25th year logo. This was executed consistently across all our design communications in form of stationery, brochures, website banners, office displays & social media.

Interaction with JCR

CARE Ratings is in strategic alliance with Japan Credit Ratings Agency (JCR). On August 21, 2017 delegates from JCR visited our office and gave a perspective on Ratings Business & Economy vis-a-vis Japan. The delegates we were joined by our MD&CEO, Mr. Rajesh Mokashi & other Senior Management personnel along with 25 of our key clients.

Top Management Representations

Maintaining the brand image has been the top priority of the MD & CEO and effort has been put in to ensure that CARE Ratings brand is visible in several forums.

SME Chamber of India hosted an event, Private Equity & Venture Capital for SMEs on March 23, 2018 Hotel Sofitel, BKC, Mumbai. Mr. Rajesh Mokashi, MD & CEO delivered the key note address here on Credit Scoring & Rating for Faster access to SME Funding

Mr. Rajesh Mokashi , MD & CEO was a speaker at the Pension Fund Regulatory and Development Authority (PFRDA) Conference on âCreating an inclusive and sustainable Pension system in India: Opportunities and Challengesâ, Delhi, February 28, 2018

Hindu Business Line had hosted an Union Budget 2018 event on January 19, 2018 at Mumbai with Mr. Nitin Gadkari, Union Minister of Road Transport, Highways and Shipping Minister as the chief guest. The event saw experts from various sectors talk about their expectations on the upcoming Budget. Mr. Rajesh Mokashi, MD & CEO was part of one of the panel discussions on BFSI.

Business Today publication evaluated and shortlisted the nominees for its 6th edition of Best CEOs in India. Mr. Rajesh Mokashi, MD & CEO was part of the jury for the selection process.

Mr. Rajesh Mokashi, MD & CEO was a panellist at the Roundtable on âSmart Cities: Role of Private Capital in Financing Municipal Infrastructureâ in Mumbai on Thursday, NovembeRs.23, 2017, at the Mumbai Cricket Association (MCA), Bandra-Kurla Complex, jointly organised by Janaagraha Centre for Citizenship and Democracy and Edelweiss Financial Services Limited.

The Economic Times hosted its prestigious âET Awards for Corporate Excellenceâ on Saturday, OctobeRs.28, 2017, in Mumbai. Mr. Rajesh Mokashi, MD & CEO was part of the exclusive guest list including corporate dignitaries & senior ministers

Mr. Rajesh Mokashi, MD & CEO was invited as a keynote speaker at, Arth Samvaad, a part of Solaris 2017, the Annual Management fest of IIM - Udaipur

Mr. Rajesh Mokashi, MD & CEO, was part of the panel speakers at the 6th Securitisation Summit 2017 held on May 12, 2017 at Mumbai. He spoke on âCommercial mortgage lending - is the market for CMBS looking possibleâ

Indian Infrastructure and PowerLine hosted its conference on âInsolvency and Bankruptcyâ on March 15, 2018 at Taj Krishna, Hyderabad. Mr. T. N. Arun Kumar, Executive Director was invited as a panel speaker in this conference, wherein he spoke on Current Scenario - Insolvency and NPA Casesâ India Infrastructures hosted their annual conferences on REITs and InvITS at Hotel Four Seasons Mumbai on May 02, 2017. Mr. T. N. Arun Kumar, Executive Director was the speaker at this event, wherein he spoke on Credit Enhancement.

Mr. T. N. Arun Kumar, Executive Director was invited to be a panel speaker at India infrastructure conference on âInsolvency and Bankruptcy Code, 2016â on NovembeRs.27, 2017, Delhi.

Mr. Mehul Pandya, Executive Director was the Key Note Speaker and Panellist at the Conference and Award Ceremony on June 13, 2017, Bangalore, at the Global Real Estate Brand Awards 2017 and 5th Edition of ARC Review Conclave hosted by Exhibition Asia in association with NAREDCO Karnataka.

Mr. Mehul Pandya, ED, was a Panelist for the session on Capacity Building at the Credit Summit India 2017 at Mumbai.

CARE Ratings associated as âKnowledge Partnerâ at PHD Chambersâ National Solar Summit 2017, on May 10, 2017, Delhi & published its knowledge paper at the summit. Ms. Swati Agrawal, Senior Director was part of the speaker panel at this event.

India Infrastructure hosted its 3rd annual conference on Bonds Financing in Infrastructure Sector on February 27, 2018, at ITC Maratha, Mumbai. Mr. Sanjay Kumar Agarwal, Senior Director was part of the speaker panel, wherein he spoke on âCredit Enhancement & Impact on Bond Ratings CARE Ratings associated with Samudra Manthan Awards 2017 a significant initiative instituted with an objective to fuel healthy competition, create a yearning for improvement and reach the collective voice of Indian Maritime Industry. Mrs. Revati Kasture, Senior Director, CARE Ratings was a member of the Core Committee of Samudra Manthan Awards.

Association of Credit Rating Agencies in Asia (ACRAA) had conducted a workshop on - âOpportunities in Infrastructure Projects. A Knowledge Sharing Workshopâ at Bangkok on September 28-29, 2017. Mr. Amod Khanorkar, Senior Director was part of the training team along with other senior members of the rating fraternity.

CSR activities

As part of CARE Ratingsâ initiative under Corporate Social Responsibility (CSR), CARE Ratings has selected Financial Education as its primary theme. Local area development has been decided as as one of the concurrent themes along with some other themes involving employee engagement and leadership passion. The activity under the primary theme was in the form of scholarships to deserving students pursuing higher education in finance as a part of CARE Ratings Vidyasaarthi e-portal initiative. As a part of its local area development concurrent theme, CARE Ratings took the initiative to support the infrastructure in some municipal schools in Mumbai and Ahmedabad.

About CARE Ratings Vidyasaarthi e-portal initiative

CARE Ratings tied up with NSDL e- Governance Infrastructure Limited for on-boarding CARE Ratings Scholarship on Vidyasaarathi Platform. As a part of the same, 46 deserving students pursuing higher education in the field of: i) Finance; and ii) Banking and Insurance, were selected for scholarship after a thorough screening process.

About local area development

The theme of local area development revolves around providing for development of Local Area (area in the city in which CAREâs office is located) in terms providing assistance and infrastructure to local bodies, government offices, schools and public places. Your Company considers sound infrastructure in government / municipal schools as one of the fundamental requirements for providing quality education and appropriate environment for study. To begin with and as a first such initiative in FY18, CARE Ratings explored the requirements in some schools around its office locations. We understood from the school management that availability of safe drinking water for the children and projectors with screens are their key requirements. Accordingly, we provided good quality water coolers with purifiers and projectors with screens to 19 municipal schools in Mumbai and Ahmedabad.

Human Resources

The level of analytical expertise has a bearing on the quality of the ratings assigned by a credit rating agency wherein human resources play an important role in the business. We have always believed in picking up the best talent and encouraging them to think independently while working in teams in order to enhance the quality of rating. We further enrich their talents by way of conducting induction and training programmes which are conducted by our Senior Experts in the field. In addition to in-house training sessions we sponsor attendance to external training programmes are fine tune the existing skills of the employees.

As of March 31, 2018, we had 627 employees compared with 569 as on March 31, 2017. Around 90% of the staff is professionally qualified in the areas of management, CA, CS, legal, economics, engineering etc. holding professional qualifications or are post graduates.

Depository Services

Our Companyâs equity shares are available for dematerialisation through National Securities Depository Limited and Central Depository Services (India) Limited. As on March 31, 2018, nearly 100 % of the equity shares of your Company were held in dematerialised form and 26 no. of shares are in Physical form which constitutes insignificant quantum of the equity shares of your Company.

Extract of Annual Return

The Extract of Annual Return as provided under Section 92(3) of the Companies Act, 2013 and as prescribed in Form No. MGT-9 of the Companies (Management and Administration) Rules, 2014 is appended as Annexure II

Number of Meetings of the Board & its committees

a) Board of Directors

The Board of Directors met 5 (Five) times during the financial yeaRs.2017-18 on May 16, 2017, June 02, 2017, August 22, 2017, NovembeRs.15, 2017 and January 30, 2018.

b) Audit Committee

The Audit Committee met 5 (five) times during the financial yeaRs.2017-2018 on May 16, 2017, June 02, 2017, August 22, 2017, NovembeRs.15, 2017, December 05, 2017 and January 30, 2018.

c) Nomination and Remuneration Committee

The Nomination and Remuneration Committee met 4 (four) times during the financial yeaRs.2017-2018 on May 16, 2017, June 02, 2017, August 22, 2017 and NovembeRs.15, 2017.

d) Stakeholders Relationship Committee

The Stakeholders Relationship Committee met 4 (four) times during the financial yeaRs.2017-2018 on May 09, 2017, August 16, 2017, November 07, 2017 and January 22, 2018.

e) Corporate Social Responsibility (CSR) Committee

The Corporate Social Responsibility (CSR) Committee met twice during the financial yeaRs.2017-2018 on May 16, 2017 and December 05, 2017.

Directors Responsibility Statement

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability confirm that:

i. In the preparation of the annual accounts for financial year ended March 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures;

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

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

iv They have prepared the annual accounts for financial year ended March 31, 2018 on a âgoing concernâ basis;

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

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

Declaration by Independent Directors

The Independent Directors of the Company have submitted the declaration of Independence as required under Section 149(7) of the Companies Act, 2013 confirming that they meet the criteria of independence under Section 149(6) of the Companies Act, 2013 and Regulation 16 (1) (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Policy on Directorsâ appointment and remuneration

The Policy of the Company on Directorsâ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under sub-section (3) of section 178, is appended as Annexure III to this Report and also available on the website of the Company viz.; www.careratings.com

Particulars of Loans, Guarantees or Investments under section 186

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 forms part of the Notes to the financial statements provided in this Annual Report.

Particulars of Contracts or Arrangements with Related Parties

All transactions entered into during the financial yeaRs.2017-18 with Related Parties as defined under the Companies Act, 2013 and Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 were in the ordinary course of business and on an armâs length basis. During the year, the Company had not entered into any transaction referred to in Section 188 of the Companies Act, 2013 with related parties which could be considered material. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3) of the Companies Act, 2013 in Form AOC-2 is not applicable.

Attention of the members is drawn to the disclosures of transactions with related parties set out in Notes to Accounts - Note No 31 forming part of the Standalone Financial Statements.

As required under Regulation 23 (1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Policy on Materiality of and dealing with Related Party Transactions which is available on the website of the Company at www.careratings.com.

Material Changes and Commitments affecting the Financial Position of the Company

There have been no material changes and commitments affecting the financial position of the Company which have occurred between March 31, 2018 and the date of this report other than those disclosed in this report.

Particulars regarding conservation of energy, technology absorption and foreign exchange earnings and outgo Conservation of Energy and Technology Absorption

Your Company has taken necessary steps and initiative in respect of conservation of energy to possible extent to conserve the resources as required under Section 134(3)(m) of the Companies Act, 2013 and rules framed thereunder. As your Company is not engaged in any manufacturing activity, the particulars of technology absorption as required under the section are not applicable.

Foreign Exchange Earnings and Outgo

During the year under review, the Company has earned a foreign exchange of Rs. 238.58 Lakhs and has spent a foreign exchange of Rs. 20.93 Lakhs.

Business Risk Management

Your Company has formulated a risk management policy to ensure that every effort is made to manage risk appropriately so as to maximize potential business opportunities and minimize the adverse effects of risk.

Corporate Social Responsibility

The Board has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The CSR Policy has been devised on the basis of the recommendations made by the CSR Committee. The CSR Policy of the Company and details about the development of CSR Policy as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 are given in CSR Report appended as Annexure IV to this Report along with reasons for not spending any amount under CSR in the financial yeaRs.2017-18.

Vigil Mechanism - Whistle Blower

The Company has established a vigil mechanism for directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report and also posted on the website of the Company at www.careratings.com. During the year your Company affirm that no employee of the Company was denied access to the Audit Committee.

Annual Evaluation of Performance of the Board

The Board of Directors have carried out an annual evaluation of its own performance, own committees and individual Directors pursuant to the provisions of the Act and the Corporate Governance Requirements as prescribed by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 on the basis of criteria such as skills, knowledge, discharge of duties, level of participation at the meetings etc., on the issues to be discussed.

In a separate meeting of Independent Directors, performance of Non Independent Directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking in to account the views of executive directors and non-executive directors. Performance evaluation of independent Directors was done by the entire Board, excluding the independent Director being evaluated.

CARE Subsidiaries

CARE Risk Solutions Private Limited (CRSPL) (formerly known as CARE Kalypto Risk Technologies & Advisory Services Pvt. Ltd)

CARE Risk Solutions (100% subsidiary of CARE Ratings), a niche risk management solution provider for banking and financial institutions has diversified its product offerings. We developed a new product - IFRS-9 and Financial Reporting Automation system after surveying that this product has immense market potential. We successfully Implemented IFRS-9 in Sri Lanka and East Africa to leverage the first moverâs advantage, which in turn opens up more opportunities for us.

CRS has also started incubation in certain key areas like IFRS on cloud for NBFCs and small banks, Artificial Intelligence (AI) and machine learning led models for risk management solutions which enhance accuracy. This will help us to be ahead of the curve and become a leader in the market.

CRS is also a leader in the Sri Lanka market and going ahead would work to become a leader in East Africa too.

CARE Advisory Research and Training Limited (CART)

CARE Advisory Research and Training Limited is a wholly owned subsidiary of your Company which was incorporated on September 06, 2016. CART is in the business of Training, Advisory and Research.

Advisory Division

During FY 2017-18, CART has been able to expand its business offerings beyond TEV and now offer Valuation, Business plan preparation, financial improvement plan, bid process management, LIE services among other services. CART is empanelled by 7 Public sector banks for TEV assessments. CART executed a prestigious mandate on due diligence study of an acquisition target for an international client. During FY 2017-18, CART executed total of 76 Advisory assignments.

Research Division

CART services a variety of business research needs of its domestic and multinational clients with credible, high-quality research and analysis on various facets of the Economy and Industries. During the year, CART undertook 9 industry research assignments for clients to assist them in filing Draft Red Herring Prospectus.

Training Division

The Company caters to the training needs of corporates and professionals through its training programmes which are offered through on-line medium as well class room mode. During the year the company conducted 13 days of executive classroom trainings on various topics which included customized training for a bank and an NBFC.

During the year, the Company launched on-line Certificate Course in Credit Management (CCCM). The course was launched by Mr. S.B. Mainak, former MD of LIC and Chairman of CARE Ratings Ltd. in Mumbai on February 02, 2018.

CARE Ratings (Africa) Private Limited (CRAF)

CRAF has been operating in Mauritius since DecembeRs.2014. It got its credit rating license from Financial Services Commission in May, 2015 and had been recognised as an External Credit Assessment Institution (ECAI) by Bank of Mauritius in May, 2016. CRAF provides credit ratings and related services in Mauritius and has plans to venture into other geographies of Africa.

In Mauritius, CRAF provides ratings for various instruments such as bonds, debentures, commercial paper, bank deposits, structured finance and other debt instruments besides the bank facilities including term loans, working capital limits, non-funded exposures etc. CRAF will also cover rating of issuers including insurance companies, channel partner evaluation and SMEs.

Performance in FY17-18:

In FY17-18, CRAF has expanded its operations and assigned ratings to instruments in both the bond and bank facilities domain aggregating to around MURS.20.0 billion (MuRs.9.0 billion in FY17).

CRAF introduced the concept of Commercial Paper (C.P.) in Mauritius. In January 2018, Bank of Mauritius has published the Final - Guidelines on the Issue of Commercial Paper. The same is awaiting final approval of Ministry of Finance and expected to be effective shortly.

In OctobeRs.2017, Bank of Mauritius has published the revised guidelines on The Recognition and Use of External Credit Assessment Institutions whereby CRAFâs name and mapping of CRAFâs Ratings has been included in the Guideline. BOM also revised the risk weight in AA category from 50% to 30%.

CARE Ratings Nepal Limited (CRNL)

CARE Ratings Nepal Limited (CRNL) is incorporated in Kathmandu, Nepal and is the second credit rating agency to be licensed by the Securities Board of Nepal w.e.f. NovembeRs.16, 2017. CRNL is providing credit ratings and related services in the geography of Nepal. The rating services of CRNL majorly include IPO grading, issuer rating and rating of debt instruments. over the short period of operations, crnl executed rating assignments in various sectors namely commercial banks, finance companies, microfinance companies, general insurance companies and hydro power companies.

Material Non-Listed Indian Subsidiary

There is no material (non-listed) Indian subsidiary of your Company as on March 31, 2018.

Performance and Financial Position of Subsidiary, Associate and Joint Venture Company and their contribution to the overall performance of the Company

As required under Section 129 of the Companies Act, 2013 and Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards and form part of the Annual Report. Statement on the highlights of performance of the subsidiary companies and their contribution to the overall performance of the Company are given in the Form AOC-1 and note 45 of the consolidated financial statements and forms part of this report.

Details relating to Deposits covered under Chapter V of the Companies Act, 2013

Your company has not accepted any deposits within the purview of Chapter V of the Companies Act, 2013 during the year under review.

Significant and Material Orders passed by the Regulators or Courts or Tribunals

There are no significant material orders passed by the Regulators/Courts which would impact the going concern status of your Company and its future operations.

Instances of fraud, if any reported by the Auditors

There have been no instances of fraud reported by the Auditors under Section 143(12) of the Companies Act, 2013.

Internal Financial Control System

The Company has an Internal Financial Control System commensurate with the size, scale and complexity of its operations. Your Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating action on continuing basis. These are routinely tested and certified by Statutory as well as Internal Auditors. Significant Audit observations and follow up actions thereon are reported to the Audit Committee.

Directors and Key Managerial Personnel

In accordance with the Articles of Association of the Company and provisions of the Section 152(6) (e) of the Companies Act, 2013 Ms. Sadhana Dhamane (DIN: 1062315 ) will retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offers herself for re-appointment.

Mr. V. Chandrasekaran (DIN: 03126243) was appointed as an Additional Director by the Board of Directors at its meeting held on NovembeRs.15, 2017. As per the provisions of section 161 (1) of the Companies Act, 2013, the tenure of Mr. V. Chandrasekaran will come to an end on the date of the ensuing Annual General Meeting. The Board of Directors at its meeting held on NovembeRs.15, 2017 on the recommendation of the Nomination and Remuneration Committee decided to appoint Mr. V. Chandrasekaran as a Non-Executive Director liable to retire by rotation subject to the approval of the shareholders at the ensuing Annual General Meeting. Further your Company has received a notice in writing proposing the appointment of Mr. V. Chandrashekaran as NonExecutive Director of your Company in compliance with the provisions of section 160 of the Companies Act, 2013. Your Company welcomes Mr. V. Chandrashekaran on Board of Directors of the Company.

Mr Adesh Kumar Gupta (DIN: 0020403) was appointed as an Additional Director (Independent) by the Board of Directors at its meeting held on May 22, 2018. As per the provisions of section 161 (1) of the Companies Act, 2013, the tenure of Mr Adesh Gupta will come to an end on the date of the ensuing Annual General Meeting. The Board of Directors at its meeting held on May 22, 2018 on the recommendation of the Nomination and Remuneration Committee decided to appoint Mr. Adesh Kumar Gupta as an Independent Director for a period of three years subject to the approval of the shareholders at the ensuing Annual General Meeting. Further your Company has received a notice in writing proposing the appointment of Mr. Adesh Kumar Gupta as an Independent Director of your Company in compliance with the provisions of the Companies Act, 2013. Your Company welcomes Mr. Adesh Kumar Gupta on Board of Directors of the Company.

Further, Mr Mahendra Naik, Company Secretary and Compliance Officer of the Company resigned from the services of the Company with effect from May 22, 2018, and your Company has appointed Mr Anandghan S. Bohra, as the Company Secretary and Compliance Officer with effect from May 22, 2018.

Auditor and Auditorâs Report

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. Khimji Kunverji & Co., Chartered Accountants, Statutory Auditors, in their report.

Status of Investors Compliant

During the financial yeaRs.2017-18, your Company has received complaints with regard to non-receipt of annual report and nonreceipt of dividend. The details of complaints are appended to this Report as Annexure V.

Secretarial Audit Report

The Board of Directors of your Company have appointed M/s A K Jain & Co., Company Secretaries, Mumbai, to conduct the Secretarial Audit and his Report on Companyâs Secretarial Audit is appended to this Report as Annexure VI.

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s A K Jain & Co., Company Secretaries, Mumbai in their secretarial audit report.

Employees Stock Option Schemes

As required in terms of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, the disclosure relating to Credit Analysis and Research Limited (âESOS - 2013â) is appended as Annexure VII respectively to this report.

Management Discussion and Analysis Report

The Managementâs Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2) (e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with the Stock Exchanges, is annexed as Annexure VIII to this report.

Particulars of Employees

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Companies Act, 2013 and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been appended as Annexure IX to this Report. The information required pursuant to Section 197 of the Companies Act, 2013 read with Rule 5(2) & (3) of the Companies (Appointment and Remuneration of managerial Personnel) Amended Rules, 2016 in respect of employees of your Company is available for inspection by the members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent.

Business Responsibility Statement

As per regulation 34(2) (f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the annual report of top 500 listed entities based on market capitalisation (calculated on March 31 of every financial year), must include a business responsibility report describing the initiatives taken by them from an environmental, social and governance perspective, in the format as specified by the SEBI from time to time. The Business Responsibility Statement is annexed as Annexure X to this report.

Corporate Governance

The Company is committed to maintaining the highest standards of Corporate Governance and adhering to the Corporate Governance requirements as set out by Securities and Exchange Board of India. The Report on Corporate Governance as stipulated under Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of the Annual Report. The Certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under Schedule V (E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of the Corporate Governance Report.

Audit Committee of the Company

Your Companyâs Audit Committee comprises the following directors as its members:

1.	Mr Milind Sarwate	Chairman (Independent Director)
2.	Mr S. B. Mainak	Member (Independent Director)
3.	Dr Ashima Goyal	Member (Independent Director)
4.	Mr Anil Kumar Bansal	Member (Independent Director)

The composition of the Audit Committee is in compliance with the requirements of Section 177 of the Companies Act, 2013 and Regulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Disclosures under Sexual Harassment of women at workplace (Prevention, Prohibition & Redressal) Act, 2013

Your Company has always believed in providing a safe and harassment free workplace for every individual working in the Companyâs premises through various interventions and practices. The Company always endeavours to create and provide an environment that is free from discrimination and harassment including sexual harassment.

Your Company has a policy on Prevention of Sexual Harassment at Workplace. The policy aims at prevention of harassment of employees and lays down the guidelines for identification, reporting and prevention of undesired behaviour. An Internal Complaints Committee (ICC) has been set up as per the provisons of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 in order to investigate any complaints / issues related to sexual harassment. The ICC is responsible for redressal of complaints related to sexual harassment and follows the guidelines provided in the Policy.

During the year ended March 31, 2018, the ICC did not receive any complaint pertaining to sexual harassment.

Compliance of the Secretarial Standards 1 & 2 Issued by The Institute of The Company Secretaries of India (ICSI)

The relevant Secretarial Standards issued by ICSI related to the Board and General Meetings have been complied by the Company.

Acknowledgements

The Board places on record its appreciation of the contribution of its employees to the companyâs operations and the trust reposed in it by market intermediaries, issuers and investors. The Board also appreciates the support provided by the Reserve Bank of India, Securities Exchange Board of India and the Companyâs Bankers, IDBI Bank and HDFC Bank.

On behalf of the Board of Directors

Place: Mumbai S. B. Mainak

Date: May 22, 2018 Chairman (DIN: 02531129)

Mar 31, 2017

The Directors are pleased to present the Twenty Fourth Annual Report of your Company along with the audited Financial Statements for the year ended March 31, 2017.

Financial Performance

Your Company''s Financial Performance for the year ended March 31, 2017, is summarized below:

(Rs. Lakhs)

*Particulars*	*For the year ended March 31,2017*	*For the year ended March 31,2016*
Income from Operations	28,048	26,484
Other Income	3,289	861
Total Income	31,337	27,345
Total Expenditure	9,709	9,663
Profit Before Tax (PBT)	21,628	17,682
Provision for Tax	6,477	5,913
Profit After Tax (PAT)	15,151	11,769
Balance brought forward from previous year	15,232	14,814
Appropriations
Interim Dividend	5,300	5,244
Tax on Interim Dividend	1,079	1,068
Final Dividend	4*	2,940
Tax on final dividend	1*	599
Total (Dividend Outflow)	6,384	9,851
Transferred to General Reserve	1,500	1,500
Balance carried forward to next year	22,499	15,232

*The Central Government has amended the Companies (Accounting Standards) Rules. 2006, through a notification issued by the Ministry of Corporate Affairs dated March 30, 2016. On account of the amendments in Para 8.5 of AS-4 - Contingencies and Events occuring after Balance Sheet date, from April 01, 2016, the Company recognizes a liability to make cash or noncash distributions to equity holders of the Company when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders.

Income from operations increased by about 5.9% during the year due to increase in volume of debt rated in the long term debt instruments and bank loan ratings. This was supported by surveillance income. Other income increased from Rs 8.61 crore to Rs.32.89 crore mainly due to income on maturity / realization of FMP''s.

Total expenditure increased marginally by 0.5%. The staff expenditure was lower by Rs. 2.77 crores mainly due to savings of ESOP charges corresponding to the financial year 2015-16. Other expenses increased mainly due to increase in professional fees paid for off roll business development teams hired through a manpower agency and other incidental marketing expenses. Higher operating income resulted in increase by 9% in operating profits. The maturity gain on FMPs resulted in increase of 22.3% in Profit Before Tax and 28.7% in Profit After Tax. There was hence overall improvement in profit margins over previous year.

Dividend

Your Company paid a total interim dividend of Rs. 18/- per share amounting to a payout of Rs.63.79 crores. The Board has recommended final dividend of Rs. 10/- per share amounting to a payout of Rs. 35.45 crores for FY 2016-17, to be approved at the ensuing Annual General Meeting. The dividend would be paid in compliance with the applicable rules and regulations. In terms of Regulation 43A of the SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015, The Dividend Distribution Policy is appended as Annexure I to the report and also available on the website of the Company at www.careratings.com.

Transfer to reserves

Your Directors recommend to transfer Rs. 15 crores (Rupees Fifteen Crores Only) to the General Reserve of the Company.

Share Capital

The Authorized Share Capital of your Company is 3,00,00,000 Equity Shares of face value Rs.10/- each amounting to Rs.30,00,00,000/-(Rupees Thrity Crores only) and the Paid-up Share Capital is 2,94,51,201 Equity Shares amounting to Rs.29,45,12,010/- (Rupees Twenty Nine Crores Forty Five Lakhs Twelve Thousand Ten Only). During the financial year ended March 31, 2017, the Company has issued and allotted 50,105 equity shares of Rs. 10/- each at a premium of Rs. 607/- per share to its eligible employees under the CARE Employees Stock Option Scheme, 2013 (ESOS 2013).

Economic Backdrop

The hope for economic revival in FY17 aided by anticipated higher growth in the last 2 quarters of the fiscal, on the back of favorable monsoons, did not materialize due to the shock of demonetization of high value currency notes announced by the Government on 8 November''16. As per the Government''s second advance estimates, India''s GDP growth in FY17 is estimated at 7.1%, lower than the 8.0% growth of FY16.

In terms of sectoral performance, barring public spending and agriculture, the performance across sectors has been rather subdued and has not provided the required momentum to stimulate the economy. Public spending (public administration, defense and other services) is estimated (as per second advance estimates) to have grown by 11.3% in FY17, notably higher than the growth of 6.9% in the previous year. Agriculture, aided by favorable monsoons is estimated to have grown by 4.9% in FY17, compared with the 0.7% growth in FY16. The improved performance of the agriculture sector that was expected to provide the required impetus for the other sectors of the economy did not fructify partly due to the demonetization induced cash crunch.

Industrial growth has now been reckoned with a new base year of 2011-12. Growth in FY17 was 5.0% compared with the 3.4% growth in the corresponding period of FY16. In particular, capital goods output grew by just 1.9% compared with 2.1% in FY16. Also, capital formation or investment rate has deteriorated further to 27.1% of GDP in FY17 from 29.3% in the previous year. The low capacity utilization rate, which as per the RBI data has seen a successive decline to around 73% in Q3 FY17, has further pressured fresh investments in the economy.

Overall corporate performance did not see a significant pickup during the year. For a sample of 810 companies (non-banks/ finance/oil/refinery and IT companies) growth in net sales was 6.1% compared with 8.8% last year. Also, the performance across industries has shown a differing trend with those based on consumer spending not having done well while those in the infra space having performed relatively better.

The economic scenario was not favorable enough for the funding segment. Demand for funding was muted during the year with bank credit growth falling to a multi- decade low. In FY17 (up to 17 March''17), bank credit grew by a mere 4.4%, the lowest growth rate in five decades. This improved to 8.7% (10.9%) by March 31, 2017. Credit growth in FY16 was 10.9%. The growth in bank credit was driven by the services and retail segment in FY17.

The industrial sector which comes within the scope of credit rating, saw low credit growth. Credit growth to Industry contracted (-) 1.9% in FY17 as against growth of 2.7% in FY16, while credit off take towards services registered a 19.5% increase during FY17 compared with the growth in the previous year of 9.1%. The retail segment registered growth of 16.7% in FY17, 2.7% lower than that of FY16. Credit growth to services in FY17 was led by the professional services (32% growth), shipping (11.7% growth), transport operators (10.7% growth), trade (12.3% growth) and NBFC segment (10.9% growth). Credit off take in FY17 contracted in various segments. In case of the computer software segment it contracted by (-) 6.3%, for medium sized industries by (-) 8.7% and for large industries by (-) 1.8%. The growth in the rating business in the bank loan segment needs to be viewed in relation with the growth in bank credit at the aggregate level to help highlight the challenges faced by the rating business.

Along with tepid credit growth, the banking system was also weighed down by the build-up of NPAs and stressed assets. As per the RBI''s financial stability report, gross NPA''s has increased sharply to 9.1% in Sep''16 from 7.8% in Mar''16. As per CARE''s own study on Performance of Banks, bank gross NPA have risen further 9.15% in March 2017 from 7.73% in March 2016 for a set of 35 banks.

The corporate debt market recorded an increase in issuances in FY17. Based on SEBI data, in FY17, public debt issuances amounting to Rs. 29,559 crore were issued compared with Rs 33,812 crore in FY16. Private placements aggregated Rs. 6.41 lakh crore in FY17 as against Rs. 4.58 lakh crore in FY16. Although, there has been an increase in corporate debt issuances, it need be noted the major share of these issuances have been by the financial sector which comprises banks and NBFCs and the funds raised by them are used for on-lending purposes. The funds raised by the non-financial sector reflect the direct/fresh investment in the respective industries.

With regard to inflation, the picture has been mixed during the year. While inflationary pressures viz. that of retail (CPI) inflation has moderated in recent months (from 5.4% in Apr''16 to 3.8% in Mar''17) mainly on account of the decline in food prices viz. vegetables and pulses consequent to the favorable monsoons, Wholesale Price Inflation (WPI) on the other hand has been firming up, from -1.1% in Apr''16 to 5.3% in Mar''17 as per the new methodology, with the increase in fuel and manufactured good prices. Despite the increase, WPI, continues to be within the RBIs target levels of 4% with a band of -/ 2%. CPI too continues to be well within the RBI target.

While the RBI on the whole adopted a cautious approach towards monetary policy in FY17, with continued focus on inflation targeting, it also indicated a change in its policy stance from accommodative to neutral in its February''17 policy review. The RBI lowered repo rate by 50 bps during the year.

The government has successfully adhered to the fiscal deficit targets of 3.5% of GDP for FY17, aided in large part by the benign global commodity prices viz. crude oil prices and the buoyancy in receipts - tax revenue, non-tax revenue and non-debt capital receipts that helped the government in its fiscal management. With government fiscal management not being an area of concern, the RBI was able to focus on inflation.

The market interest rates had been moving in tandem with the RBI''s policy changes as seen from the decline in 10-years GSec rates which came down from 7.7% to 6.6% during the year. This was also replicated in the CP market which witnessed higher issuances during the year. In FY17, the CPs worth Rs. 18.83 lakh crore were issued by corporates, 20.5% higher than CP issuances in FY16. Higher issuances were accompanied with lower yields. The average yield for 365-days CPs was 7.72%, 77 bps lower than the average yield of 8.49% in FY16. The lower rates in the CP market were seen to have prompted migration from bank credit to CP in case of some large corporates who carry high ratings.

The rupee was fairly stable for most part of FY17. The rupee depreciated by 1% against the US dollar during Apr''16 to mid-Feb''17 (from average 66.47 in Apr''16 to 67.14 in Feb''17). It however appreciated quite sharply (to Rs. 64.95 by end Mar''17) due to improved investor sentiments. This was based on expectations that the government would be better placed to accelerate the pace of reforms and bring about higher growth in the economy. The RBI has been effectively managing the orderly movement of the currency and has maintained healthy forex reserves of over $ 368 bn.

Business Operations

While your Company''s medium-term strategy is to grow the business book by widening the coverage of debt rated in the market as well as increase the client base, the focus had changed to build the client book under conditions of limited buoyancy in the markets.

Your Company has in all completed 56,908 rating assignments since inception to March 31, 2017. The cumulative amount of debt rated has increased to Rs. 91.99 lakh crore as of March 31, 2017, which is around 60% of GDP at current market prices. As of March 31, 2017, we had business relationships with 15,098 clients (12,373 as on March 31, 2016). During the year your Company added 4,676 new clients.

*Assignment Type*	*Number of assignments completed*		*Volume of debt rated (Rs crore)*
*(Instruments)*	*2016-17*	*2015-16*	*2016-17*	*2015-16*
Short & Medium Term	82	92	128,414	116,706
Long term	363	325	597,361	423,391
Bank facility rating	5,828	6,038	592,978	545,246
Others including NSIC grading	3,754	1,072	-	-
Total	10,027	7,527	13,18,753	10,85,343

The table provides information on the various aspects of the business profile and growth during the year.

1. The total number of assignments rated increased by 33.2% in FY17. This was mainly due to increase in number of assignments on account of long term rating and number of assignments in the miscellaneous category which includes SME ratings among others. However, the number of assignments decreased for bank facility ratings by 3.5%

2. Bank facilities accounted for 58.1% of total assignments in FY17, down from 80.2% in FY16. The miscellaneous assignments including NSIC gradings witnessed sharp increase from 14.2% in FY16 to 37.4% in FY17.

3. The total volume of debt rated increased from Rs 10.85 lakh crore to Rs 13.18 lakh crore. The increase was mainly attributed to increase in volumes rated in the short, long term categories and bank facility ratings.

4. In terms of volume of debt rated, the long term assignments witnessed an increase in share from 39.0% to 45.3% while that of bank facilities came down from 50.2% to 45%.

Business during the year

Large and Medium Enterprises (LME)

We continue to have a focused team on the LME segment which works on both augmenting the client portfolio and maintaining relationships with the existing companies. These two prongs are required to keep the business improving in future.

Your Company continues to be the dominant credit rating agency in this space. Based on the press releases on various agency web sites, we have calculated the shares of the agency in the pool of rated ET Top 500, BS Top 1000 and FE Top 500 companies. For this year too CARE Ratings continues to maintain leadership with shares of 52%, 44% and 50% respectively.

New Initiatives

Your company has launched a New Credit Rating system for infrastructure projects. The product has been developed in consultation with the Ministry of Finance and other stakeholders. The new ratings will be a comment on the expected loss (EL) of a debt instrument after factoring in the probability of default (PD) and recovery prospects. The new rating will be assigned on a scale from (Infra) EL 1 to (Infra) EL 7, with EL 1 having the lowest expected loss and EL 7 the highest. The rating scale can be used to assess projects across sub - sectors in infrastructure throughout their life cycle.

During the year, your company launched the Green Initiative Rating (GIR) aimed at measuring the green initiatives of entities beyond the basic compliance requirements. A risk assessment by an independent entity such as a credit rating agency would enable the lenders, the investors and the society at large to understand the initiatives undertaken by the company beyond minimum requirement for minimizing the adverse impact caused by the units'' economic activity on the environment with focus on sustainability.

Recognizing the need for independent evaluation of cooperative banks, your company also developed the Cooperative Banks Financial Strength Grading. The product would focus on the financial strength/capability of a co-operative bank in long-term as well as short term. It indicates bank''s intrinsic safety and soundness.

CARE Advisory Research & Training Ltd. (CART) got incorporated on September 6, 2016 and is a wholly-owned subsidiary of CARE Ratings. CART has been formed with the objective of rendering financial and management advisory services, undertaking diligence studies and appraisals of all types of projects and other related research. CART also caters to the training needs of corporates and professionals through its training programme offerings.

Your company started the CARE Executive Training Programme (CETP); conducting its first training programme on Fundamentals of Corporate Credit on 19th May 2016 at Mumbai.

Your Company also signed a MoU subject to regulatory approvals in India and Nepal with Vishal Group Limited and Emerging Nepal Limited to start a credit rating agency in Nepal to be called CARE Ratings (Nepal) Limited. As per the terms of the MoU, CARE Ratings will hold 51% of the equity of NR 5 crore while Vishal group will own 19% and Emerging Nepal Limited 10%. The balance 20% will be held by banks, insurance companies, FIs and corporate bodies in Nepal subject to a maximum of 9% per legal entity.

Small and Medium Enterprises (SME)

The SME rating business comprises two parts: the NSIC based grading and bank loan ratings. The former is dependent on the subsidy provided by the government in the Budget which has been volatile of late. While the amount increased for FY17, the revised figure was lower at Rs 55.72 crore as against a budgeted amount of Rs 200 crore. For FY18, this amount has come down sharply to Rs 10 crore.

Our focus has been on widening the coverage of business on both the segments. Several SMEs also have the potential to grow and as their size increases they would come directly under the bucket of bank loan ratings. The revised model of SME business hence focuses on human resources which can be used for not just the NSIC product but also bank loan ratings as well as cross-selling of other products.

Future prospects and Outlook of the Company

We do expect the Indian economy to do better in the coming year with GDP growth of 7.6-7.8% being projected by CARE Ratings for the year. This is predicated on a good monsoon stabilizing inflation further thus enabling the RBI to lower interest rates during the course of the year.

While both bank credit and corporate debt are expected to improve gradually in FY18, a major challenge for the financial sector will continue to be the issue of NPAs which have created considerable strain on the lending ability of the banking system. The reforms which are expected in the debt market and banking sector may be expected to provide some modicum of buoyancy to the system in the coming years.

A critical element of the growth process of the economy is the pick-up in investment in the private sector. Presently, investment has emanated only from the government and there is need to witness more from the private sector. We do believe that with the government focusing on infrastructure, roads, transport, railways and urban development including affordable housing & development of smart cities, there will be some impetus for the private sector which will help to supplement the investment cycle. However, the pace of growth would be gradual in FY18.

Developments on the external front would continue to be uncertain given the present behaviour of the rupee which has been strengthening of late due to FPI inflows. Hence, while the fundamentals will probably indicate a weaker rupee by the end of the year, in the short run, a stronger rupee is expected which could lead to some intervention from the RBI.

Knowledge dissemination

CARE has always been proactive in presenting its views in various areas. Our views on various issues are immediately presented so that clients, regulators, government departments and the media are being informed about CARE''s stance on various issues.

This year CARE continued with its monthly release of a CARE Debt Quality Index and Modified Credit Ratio that suggest the status of debt in the country. In addition, CARE has introduced knowledge sharing sessions with its employees wherein the experts in various fields are invited to present on various topics and share their views with the employees of CARE. The employees are also encouraged to conduct webinars on their subject, which gives employees of CARE an opportunity to discuss their research.

Economics

The Economics team has been coming out promptly with CARE''s view on the economic indicators by way of its timely reports. It brings out the regular reports pertaining to GDP, Industrial growth, monsoons, fiscal scene, monetary policy etc. Special studies are also carried out on subjects like the debt market, state finances, employment etc. The quarterly analysis of corporate results is undertaken that analyses the trends in performance at the aggregate level as well as industry and size levels.

Sectoral Views

This year has been marked with strengthing of the Industry Research Team that aims to come out with industry reports from time to time. Various industries have been identified on which the team writes research reports such as textile, auto and auto components, tyres, steel, retail, roads and highways, real estate, cement, sugar, telecom, edible oils, power among others. Sector specialists also give their views on various developments in the areas from time to time. All this put together helps in the better assessment of the industry while undertaking the rating exercise.

Branding and Media

Our main objective is to present the Brand "CARE Ratings" in different forums. In this regard our corporate communication team shares all reports and analysis with the media. CARE''s top management and sector specialists regularly interact with the media to express our views. They also participate in various seminars and conferences and showcase the brand of CARE Ratings.

ET Now had hosted its Leaders of Tomorrow event on "Spirit of Excellence in the MSME Space", 20th May 2016, at Hotel Myriad, Lucknow. CARE Ratings was invited to be part of the speaker panel. The event was attended by over 100 MSME and start up entrepreneurs, policy makers and academia.

CARE Ratings was associated as ''Knowledge Partner'' in a CII''s Financial Conclave event held in Kolkata on 30th July 2016. CARE Ratings prepared and released the knowledge paper on ''Growth Drivers for the Financial Sector'' on this occasion.

CARE Ratings was associated as ''Knowledge Partner'' at the Bond Market Summit hosted by Assocham on 21st November 2016, at Four Seasons Hotel, Worli, Mumbai. CARE Ratings published the knowledge book, which was released by Mr. H R Khan, Former Dy Governor, RBI along with Mr T. N Arun Kumar, ED, CARE Ratings and others. Ms Revati Kasture, Senior Director addressed a technical session on ''Ratings and Corporate Bond Market in India''.

CARE Ratings held a seminar on "Performance and Credit Rating for SC/ST Entrepreneurs" at MCCI Hall, Pune, on November 16, 2016 for the members of Annabhau Sathe Matang Chamber for Commerce and Industries. Over 60 participants attended the seminar.

CARE Ratings hosted its 2016-17 edition of ''Conversations Over Dinner'' at The Lalit, New Delhi on 15th Dec 2016. The Special Guest of the evening was Mr. Pratip Chaudhuri, Former Chairman, SBI. The panel speakers from CARE Ratings included Mr. Rajesh Mokashi, MD&CEO and Ms. Swati Agrawal, Senior Director.

As a part of its stakeholder education initiatives to create greater awareness about the concept of credit rating in Mauritius and to mark the visit of top management of CARE Ratings to Mauritius, CRAF had organized "Conversations over Dinner" at Port Louis, Mauritius on January 18, 2017. CEOs / CFOs / Directors and senior functionaries of the financial and corporate world of Mauritius attended the event in large number. Top officials from the regulators, FSC and BoM, were also present. The Indian High Commissioner to Mauritius, His Excellency Mr. Abhay Thakur, graced the occasion as the Special Guest.

CARE Ratings hosted an event on launch of its Expected Loss Ratings (EL Ratings) for Infrastructure Projects on 31st January 2017, at Hotel Intercontinental, Mumbai. Mr Sabyasachi Mukherjee - Chief Operating Officer - Project Debt Syndication, IL&FS Financial Service Limited (IFIN), Mr Shameek Ray, Head Debt Capital Markets at ICICI Securities Primary Dealership Ltd. (I-Sec PD) and Mr Avinash Welekar, Sr Vice President, Debt Capital Markets, Kotak Mahindra Bank were the guest speakers at the Event. Our MD & CEO, Mr. Rajesh Mokashi opened the discussion forum & our Executive Director Mr. T. N. Arun Kumar gave the technical presentation. This was followed by our Guest Speakers'' address, Q&A session and High Tea.

Top Management representation / Recognition and Awards

The top management has represented CARE at various forums.

CARE Ratings was associated with Outlook Money Awards 2016 as Knowledge Partner to evaluate and form the criteria for award selection. MD&CEO, Mr. Rajesh Mokashi was part of the jury panel.

Mr. Rajesh Mokashi, MD & CEO was a member of the Jury to finalize the Best Bank Award winners for the 9th Best Banks Awards, hosted by Business world in Mumbai.

YES BANK and Business World hosted their edition of ''CFO Awards 2017''. This is to recognize and acknowledge the exemplary achievements and the professional contributions made by the Chief Financial Officers (CFOs) of India Inc. Mr. Rajesh Mokashi MD & CEO was part of the distinguished Jury Members who met, assessed & evaluated, to pick the winners in Mumbai.

Mr. Rajesh Mokashi, MD&CEO, CARE Ratings was a Guest of Honour and addressed the SMEs at "India SME Business Summit", on 9th January 2017 at Hotel Hilton, Mumbai, Organized by Small & Medium Business Development Chamber of India (SME Chamber of India).

Mr. Rajesh Mokashi, MD & CEO, CARE Ratings was part of the eminent speaker panel and shared his insights and expertise at the event hosted by The Confederation of Indian Industries (CII) on ''Insolvency and Bankruptcy Code 2016 in Mumbai on 24 March 2017.

CARE Ratings won The Financial Express CFO Platinum Award (1st rank in services category for companies with turn-over of less than Rs. 500 crores). The award celebrates excellence, best practices and outstanding achievements. The award were adjudged by an eminent jury panel headed by Mr. R Seshasayee, Chairman, Infosys and includes Mr. Amit Chandra, MD-Bain Capital; Mr. Leo Puri, MD, UTI Asset Management; Mr. YM Deosthalee, Chairman, L&T Finance Holdings and Mr. Pradip Shah, Founder, IndAsia Fund Advisors. The distribution ceremony was held at ITC Grand Central, Mumbai on 24th March 2017.

IT initiatives

In 2016-17 our IT initiatives were focused more on upgrading the existing IT infrastructure to support business growth. We experimented and implemented Open source technology platform for analysis of securitization pool data helping users to widen their analytics horizon. IT helped to digitize the manual processes for improving Operation efficiency. Moving with technology trends we have implemented Cloud Human Resource Management System. CARE has completed multiple IT projects and infrastructure upgradation during this year.

ISO Certification

CARE has been ISO 9001:2008 certified for its credit rating of debt instruments/facilities, various grading services and its data processing services at CARE Knowledge Centre for 6 years now. The certification was renewed in 2016 by Systems and Services Certification (SSC) agency - SGS India Private Limited, and is valid till 2018. It covers all offices of CARE in India and reflects high quality standards set by CARE in delivery of its services to various stakeholders.

CARE in global space

CARE Ratings signed a MoU with Vishal Group Limited and Emerging Nepal Limited to start a credit rating agency in Nepal to be called CARE Ratings Nepal Limited. As per the terms of the MoU, CARE Ratings would hold 51% of the equity of NR 5 crore while Vishal group would own 19% and Emerging Nepal Limited 10%. The balance 20% would be held by banks, insurance companies, FIs and corporate bodies in Nepal subject to a maximum of 9% per legal entity. Further, on May 03, 2017, the Company has been incorporated with the name "CARE Ratings Nepal Public Limited".

CARE Ratings (Africa) Private Limited (CRAF) is now operational and has also completed a few rating assignments. This venture aims to leverage opportunities in the African continent. CRAF has also got the recognition from Bank of Mauritius (BoM) as an External Credit Assessment Institution (ECAI) for all market segments w.e.f. May 9, 2016. Further, The African Development Bank has taken up close to 10% stake in CRAF.

CARE owns 10% stake in Malaysia''s leading credit rating agency, MARC. CARE also owns 10% stake in ARC Ratings, a credit rating agency based out of Europe.

Rating Committee

CARE has since inception always had an External Rating Committee comprising eminent independent professionals to assign ratings to its clients. Over the past 24 years, the Senior Executives in CARE along with other employees from the analytical teams have been working under the guidance of this Rating Committee.

As Senior Executives of the Company have over the years acquired sufficient expertise in ratings it was felt they are ready to take on the responsibility of assigning ratings on their own. CARE''s rating processes are insulated from any conflict as the analytical teams are separated from the Business development teams.

Thus, the Company has decided to have Internal Rating Committee comprising Senior executives from within the organization with effect from April 1, 2017. The company is grateful to the experts for spending time and guiding such decisions for the last 24 years. We are thankful to Mr Y.H. Malegam, Mr V. Leeladhar, Mr V.K. Chopra and Mr H.R. Khan who were part of this Committee as of March 31, 2017 for lending their expertise in this respect.

Human Resources

The level of analytical expertise has a bearing on the quality of the ratings assigned by a credit rating agency wherein human resources play an important role in our business. We have always believed in picking up the best talent and encouraging them to express their views freely in order to enhance the quality of rating. We further enrich their talents by way of conducting induction and training programmes time to time which are conducted by our own senior experts in the field. In addition, in-house training sessions along with sponsorships to attend external training programme are also provided to fine tune the existing skills of the employees.

As of March 31, 2017, we had 569 employees compared with 552 as on March 31, 2016. Around 90% of the staff is professionally qualified in the areas of management, CA, CS, legal, economics, engineering etc. holding professional qualifications or are post graduates.

Depository System

Your Company''s equity shares are available for dematerialisation through National Securities Depository Limited and Central Depository Services (India) Limited. As on March 31, 2017, 100 % of the equity shares of your Company were held in dematerialised form and 26 no. of shares are in Physical form which constitutes 0.00% of the equity shares of your Company.

Extract of Annual Return

Number of Meetings of the Board & its Committees

a) Board of Directors

The Board of Directors met 7 (seven) times during the financial year 2016-17 on May 26, 2016, June 09, 2016, August 05, 2016, August 23, 2016, September 27, 2016, November 04, 2016 and February 03, 2017.

b) Audit Committee

The Audit Committee met 4 (four) times during the financial year 2016-2017 on May 26, 2016, August 05, 2016, November 04, 2016 and February 03, 2017.

c) Nomination and Remuneration Committee

The Nomination and Remuneration Committee met 5 (five) times during the financial year 2016-2017 on May 26, 2016, June 28, 2016, August 23, 2016, November 04, 2016 and February 03, 2017.

d) Stakeholders Relationship Committee

The Stakeholders Relationship Committee met 3 (three) times during the financial year 2016-2017 on August 23, 2016, October 28, 2016 and January 25, 2017.

e) Corporate Social Responsibility (CSR) Committee

The Corporate Social Responsibility (CSR) Committee met once during the financial year 2016-2017 on February 03, 2017.

Directors Responsibility Statement

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability confirm that:

i. In the preparation of the annual accounts for financial year ended March 31, 2017, the applicable accounting standards have been followed along with proper explanation relating to material departures;

iv. They have prepared the annual accounts for financial year ended March 31, 2017 on a ''going concern'' basis;

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

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

Declaration by Independent Directors

Policy on Directors'' appointment and remuneration

The Policy of the Company on Directors'' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under sub-section (3) of section 178, is appended as Annexure III to this Report and also available on the website of the Company viz.; www.careratings.com

Particulars of Loans, Guarantees or Investments under section 186 Loans, guarantees and investments covered under 186 of the Companies Act, 2013 forms part of the Notes to the financial statements provided in this Annual Report.

Particulars of Contracts or Arrangements with Related Parties

All transactions entered into during the financial year 2016-17 with Related Parties as defined under the Companies Act, 2013 and Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 were in the ordinary course of business and on an arm''s length basis. During the year, the Company had not entered into any transaction referred to in Section 188 of the Companies Act, 2013 with related parties which could be considered material. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3) of the Companies Act, 2013 in Form AOC-2 is not applicable.

Attention of the members is drawn to the disclosures of transactions with related parties set out in Notes to Accounts - Note No 21 forming part of the Standalone Financial Statements.

Material Changes and Commitments affecting the Financial Position of the Company

There have been no material changes and commitments affecting the financial position of the Company which have occurred between 31^st March, 2017 and the date of this report other than those disclosed in this report.

Particulars regarding conservation of energy, technology absorption and foreign exchange earnings and outgo Conservation of Energy and Technology Absorption

Your Company has taken necessary steps and initiative in respect of conservation of energy to possible extent to conserve the resources as required under Section 134(3)(m) of the Companies Act, 2013 and rules framed there under. As your Company is not engaged in any manufacturing activity, the particulars of technology absorption as required under the section are not applicable.

Foreign Exchange Earnings and Outgo

During the year under review, the Company has earned a foreign exchange of Rs. 2,29,40,222/-and has spent a foreign exchange of Rs.41,31,882/-.

Business Risk Management

Corporate Social Responsibility

Vigil Mechanism - Whistle Blower

Annual Evaluation of Performance of the Board

Subsidiary Companies

During the financial year under review, your Company has three subsidiaries as follows:

1) CARE Risk Solutions Pvt. Ltd. (Formerly known as CARE Kalypto Risk Technologies and Advisory Services Private Limited) :-FY17 - ACHIEVEMENTS:

1. Project deliveries

During FY 17, all the projects received in FY2016 viz. Bank of Ceylon (BOC), CRDB Bank, Seylan Bank and Bandhan Bank reached completion or near completion stages. This was a herculean effort requiring re-training of team, restructuring of delivery processes etc. as company has in its past never undertaken deliveries of this magnitude.

2. Product development/ enhancements

During FY 17, the Company undertook enhancement/ redevelopment of many of the product features in order to make them competitive and up to date.

3. Establishment of dedicated sales team

FY 2017 saw formation of dedicated sales team with focus on India, APAC, Middle-East and Africa. This allowed the company to be considered for a record number of opportunities globally - however the same could not be converted to orders as of date because of slow buying process globally. The Company operates in a niche financial area where bank needs to spend significant funds to purchase the solution. The gestation period for converting a lead into an order ranges between 9 to 18 months. Parallely we have seen decline in the global economy resulting in delayed IT investments by most banks.

2) CARE Advisory Research and Training Limited (CART):-

CARE Advisory Research and Training Limited is a wholly owned subsidiary of your Company which was incorporated on September 06, 2016. CART is in the business of Training, Advisory and Research. It was incorporated with an Authorized Share Capital of Rs. 10 crores and a paid up share capital of Rs. 5 Lakhs. During the year the Company allotted 40,45,450 (Forty Lakhs Forty Five Thousand Four Hundred and Fifty) equity shares of Rs.10/- each at a premium of Rs. 1/- per share amounting to Rs. 4,44,99,950/- (Rupees Four crore forty four lakhs ninety nine thousand nine hundred and fifty only) on a preferential basis to CARE. The Company has achieved breakeven in the first few months of its operations.

3) CARE Ratings (Africa) Pvt. Ltd (CRAF):-

CARE Ratings (Africa) Private Limited (CRAF) is incorporated in Mauritius and is the first credit rating agency to be licensed by the Financial Services Commission of Mauritius w.e.f. May 7, 2015. It is also recognized by Bank of Mauritius as External Credit Assessment Institution (ECAI) w.e.f. May 9, 2016. CRAF provides credit ratings and related services in Mauritius and will expand in some other African countries as well.

CRAF''s shareholders are Credit Analysis & Research Limited, India (CARE Ratings), MCB Equity Fund (MEF), SBM (NFC) Holdings Limited (SNHL) and African Development Bank (AfDB). The experienced mix of shareholders will enable the entity to have stronger brand recognition in the African continent. However, management control will be with CARE Ratings having majority shareholding.

During the year, CRAF has assigned ratings to 7 corporates. The bank facilities and bond issue rated by CRAF aggregate to MUR 9.0 billion.

CRAF''s endeavour is to offer investors and risk managers with independent, timely and insightful credit opinions based on detailed in-depth research, which includes detailed analysis of risks that affect credit quality of an issuer/entity.

CARE, owing to its experience of handling credit ratings of both Large Corporates and Small & Medium Enterprises (SMEs) in emerging market like India, aims to customize the rating methodologies to suite the requirement of African countries.

The Company shall provide the copy of the annual accounts of its subsidiary companies to the members of the Company and also to the members of the subsidiary companies on their request. The annual accounts of the subsidiary companies will also be kept open for inspection by any members at the Registered Office of the Company and also at the Registered Office of the subsidiary companies during business hours.

Material Non-Listed Indian Subsidiary

There is no material non-listed Indian subsidiary of your Company as on March 31, 2017.

Performance and Financial Position of Subsidiary, Associate and Joint Venture Company and their contribution to the overall performance of the Company

As required under Section 129 of the Companies Act, 2013 and Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards and form part of the Annual Report. Statement on the highlights of performance of the subsidiary companies and their contribution to the overall performance of the Company are given in the Form AOC-1 and note 26 of the consolidated financial statements and forms part of this report.

Details relating to Deposits covered under Chapter V of the Companies Act, 2013

Your company has not accepted any deposits within the purview of Chapter V of the Companies Act, 2013 during the year under review.

Significant and Material Orders passed by the Regulators or Courts or Tribunals

There are no significant material orders passed by the Regulators/Courts which would impact the going concern status of your Company and its future operations.

Instances of fraud, if any reported by the Auditors

There have been no instances of fraud reported by the Auditors under Section 143(12) of the Companies Act, 2013.

Internal Financial Control System

Directors and Key Managerial Personnel

In accordance with the Articles of Association of the Company and provisions of the Section 152(6) (e) of the Companies Act, 2013 Mr. Rajesh Mokashi (DIN: 02781355) will retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offers himself for re-appointment.

Ms. Sadhana Dhamane (DIN: 01062315) was appointed as an Additional Director by the Board of Directors at its meeting held on June 02, 2017. As per the provisions of section 161 (1) of the Companies Act, 2013, the tenure of Ms. Sadhana Dhamane will come to an end on the date of the ensuing Annual General Meeting The Board of Directors at its meeting held on June 02, 2017 on the recommendation of the Nomination and Remuneration Committee decided to appoint Ms. Sadhana Dhamane as a Non-Executive Director liable to retire by rotation subject to the approval of the shareholders at the ensuing Annual General Meeting. Further your Company has received a notice in writing proposing the appointment of Ms. Sadhana Dhamane Non-Executive Director of your Company in compliance with the provisions of section 160 of the Companies Act, 2013. Your Company welcomes Ms. Sadhana Dhamane on Board of Directors of the Company.

Mr. Milind Sarwate (DIN: 00109854) was appointed as an Additional Director (Independent) by the Board of Directors at its meeting held on November 03, 2016. As per the provisions of section 161 (1) of the Companies Act, 2013, the tenure of Mr. Milind Sarwate will come to an end on the date of the ensuing Annual General Meeting. The Board of Directors at its meeting held on June 02, 2017 on the recommendation of the Nomination and Remuneration Committee decided to appoint Mr. Milind Sarwate as an Independent Director for a period of three years subject to the approval of the shareholders at the ensuing Annual General Meeting. Further your Company has received a notice in writing proposing the appointment of Mr. Milind Sarwate as an Independent Director of your Company in compliance with the provisions of section 160 of the Companies Act, 2013. Your Company welcomes Mr. Milind Sarwate on Board of Directors of the Company.

Mr. S. B. Mainak (DIN: 02531129) is a Non-Executive Chairman of your Company. The Board of Directors at its meeting held on June 02, 2017 on the recommendation of the Nomination and Remuneration Committee decided to appoint Mr. S. B. Mainak as an Independent Director for a period of three years subject to the approval of the shareholders at the ensuing Annual General Meeting. Your Company has received a notice in writing proposing the appointment of Mr. S. B. Mainak as an Independent Director of your Company in compliance with the provisions of section 160 of the Companies Act, 2013.

During the Financial Year 2016-17, Mr. D R Dogra, Managing Director & CEO of the company ceased to be Director of the Company on the expiry of his term on August 21, 2016 and Mr. Rajesh Mokashi who was the Deputy Managing Director was appointed as the Managing Director and CEO of the Company with effect from August 22, 2016.

Further, Mr. Navin Kumar Jain, Company Secretary and Compliance Officer of the Company resigned from the services of the Company with effect from 31^st May, 2016 and your Company has appointed Mr. Mahendra Naik, Assistant Company Secretary as the Company Secretary and Compliance Officer with effect from 1st June, 2016.

Auditors'' Appointment

M/s. Khimji Kunverji & Co., Chartered Accountants (Firm Registration No. 105146W) were reappointed as the Statutory Auditors of the Company at the 23rd Annual General Meeting to hold office from the conclusion of 23rd Annual General Meeting till the conclusion of the 28th Annual General Meeting to be held in 2021, subject to ratification of their appointment at every Annual General Meeting. The Board of Directors of the Company at its meeting held on May 16, 2017 recommended to members of the Company the ratification of M/s Khimji Kunverji & Co., Chartered Accountants as the Statutory Auditors of the Company for the financial year 2017-18.

Your Company has received a letter from M/s Khimji Kunverji & Co., Chartered Accountants to the effect that their ratification, if made, would be under the second and third proviso to Section 139 (1) of the Act and that they are not disqualified within the meaning of Section 141 of the Act read with Rule 4(1) of the Companies (Audit and Auditors) Rules, 2014.

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. Khimji Kunverji & Co., Chartered Accountants, Statutory Auditors, in their report.

Stakeholders Report

During the financial year 2016-17, your Company has received complaints with regard to non-receipt of annual report and non-receipt of dividend and non-receipt of securities. The details of complaints is appended to this Report as Annexure V.

Secretarial Audit Report

The Board of Directors of your Company have appointed M/s A K Jain & Co., Company Secretaries, Mumbai, to conduct the Secretarial Audit and his Report on Company''s Secretarial Audit is appended to this Report as Annexure VI.

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s A K Jain & Co., Company Secretaries, Mumbai in their secretarial audit report.

Employees Stock Option Schemes

As required in terms of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, the disclosure relating to Credit Analysis and Research Limited ("ESOS - 2013") is appended as Annexure VII respectively to this report.

Management Discussion and Analysis Report

The Management''s Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,2015 with the Stock Exchanges, is annexed as Annexure VIII to this report.

Particulars of Employees

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Companies Act, 2013 and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been appended as Annexure IX to this Report. The information required pursuant to Section 197 of the Companies Act, 2013 read with Rule 5(2)&(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Amended Rules, 2016 in respect of employees of your Company is available for inspection by the members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent.

Business Responsibility Statement

As per regulation 34(2) (f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the annual report of top 500 listed entities based on market capitalization (calculated on March 31 of every financial year), must include a business responsibility report describing the initiatives taken by them from an environmental, social and governance perspective, in the format as specified by the SEBI from time to time. The Business Responsibility Statement is annexed as Annexure X to this report.

Corporate Governance

Audit Committee of the Company

Your Company''s Audit Committee comprises the following directors as its members:

1. Mr. Milind Sarwate Chairman (Additional Director - Independent)

2. Mr. S. B. Mainak Member (Non-Executive Director)

3. Dr. Ashima Goyal Member (Independent Director)

4. Mr. Anil Kumar Bansal Member (Independent Director)

Disclosures under Sexual Harassment of women at workplace (Prevention, Prohibition & Redressal) Act, 2013

Your Company has always believed in providing a safe and harassment free workplace for every individual working in the Company''s premises through various interventions and practices. The Company always endeavours to create and provide an environment that is free from discrimination and harassment including sexual harassment.

Your Company has a policy on Prevention of Sexual Harassment at Workplace. The policy aims at prevention of harassment of employees and lays down the guidelines for identification, reporting and prevention of undesired behaviour. An Internal Complaints Committee (ICC) was set up comprising the senior management with women employees constituting majority in order to investigate any complaints / issues related to sexual harassment. The ICC is responsible for redressal of complaints related to sexual harassment and follows the guidelines provided in the Policy.

During the year ended March 31, 2017, the ICC did not receive any complaint pertaining to sexual harassment.

Acknowledgements

The Board places on record its appreciation of the contribution of its employees to the company''s operations and the trust reposed in it by market intermediaries, issuers and investors. The Board also appreciates the support provided by the Reserve Bank of India, Securities Exchange Board of India and the Company''s Bankers, IDBI Bank, HDFC Bank and State Bank of India.

On behalf of the Board of Directors

Place: Mumbai S. B. Mainak

Date: June 02, 2017 Chairman

(DIN:02531129)

Mar 31, 2014

Dear Members,

The Directors have pleasure in presentng the Twenty First Annual Report of your company along with the audited accounts for the year ended March 31, 2014.

Economic Backdrop

The Indian economy went through challenging tmes since FY12 with a cyclical downturn in growth, pressure on fiscal balances, elevated current account defcit and prolonged high infaton. The government put in place a series of appropriate measures in order to address these challenges. However, the recovery in growth contnued to remain weak at sub 5% level. In FY14, GDP growth as per the provisional estmates showed a growth of 4.7%, marginally higher than the 4.5% of FY13.

The agricultural sector performed well during FY14 on the back of good monsoons, recording growth of 4.7% in FY14 against 1.4% in FY13. However, industrial growth weakened further in FY14 contractng by -0.08% as against growth of 1.1% in FY13 and 2.9% in FY12. The contnued weak industrial performance has been the outcome of the slowdown in investments and slump in overall consumer demand. This has, in turn, had an impact on demand for credit and long term funds. With elevated infatonary pressures fuelled by food infaton, RBI hiked its key interest rates thrice during the year maintaining an ant-infatonary policy stance. With the RBI pursuing a tght interest rate regime since FY12 and with domestc economic conditons coming under pressure coupled with a less favorable investment environment, entrepreneurs were seen to keep capital projects on hold. Consequently, the gross fixed capital formaton rate declined from 30.4% of GDP in FY13 to 28.3% in FY14.

Global economic actvity remained in low gear in the frst half of 2013. It then picked up in the second half of the year. As per the IMF estmates, World GDP in 2013 grew at 3.0%, 0.2% lower than that in 2012. Although, growth has been subdued in 2013, the dynamics of the global economy changed and the advanced economies accounted for much of the pickup, whereas growth in emerging markets increased only modestly. Growth in U.S was recorded at 1.9%, against 2.8% in 2012. The Euro area economic growth stll contnued to be weak at -0.5% in 2013. Among the emerging economies, growth in China remained stable at 7.7% while it slipped in Russia to 1.3% from 3.4% earlier. In terms of monetary policy across various countries such as Brazil, India, and Indonesia which were afected by high infatonary pressures and currency depreciaton, interest rates were raised in the past year.

With prevailing tghter monetary conditons in the Indian economy, growth in deposits stood at 14.6% which was marginally higher than 14.2% growth recorded in FY13. Growth in deposits was largely supported by inflows of over $30 bn through the FCNR deposit scheme where a foreign currency swap facility was ofered by RBI to banks. Likewise, bank credit growth also increased marginally to 14.3% compared with 14.1% in FY13 and was concentrated relatvely more in the retail loan space. Investments witnessed a downward trend and grew at a slower pace of 10.7% when compared with the 15.4% growth in FY13.

Also, the yields in the secondary markets witnessed signifcant fuctuaton during the year. The 10-Year GSec yields fell marginally in the frst three months of the financial year from 7.82% in April''13 to 7.47% in Jun''13. However, since July''13 the yields gradually picked up from 7.99% to touch 8.96% in November''13. These fuctuatons in the yields have been witnessed on account of various RBI initatves taken on the policy front. The yields did remain range bound between 8.8-9% for the remainder of the year.

During the year monetary policy stance was mainly infuenced by the rising concern over the depreciatng rupee and elevated food infaton which constrained the RBI from cutng down its key interest rates. Repo rate was hiked three tmes in the second half of FY14 in tranches of 25bps each from 7.25% in May''13 to 8% in Jan''14. The RBI has also indicated that it would be targetng the CPI infaton rate and monetary policy would be tuned to the same. It has targeted CPI infaton of 8% by January 2015.

The corporate debt market was also subdued during the year. Total debt raised through public issues and private placements was lower at Rs 318,437 crore in FY14 as against Rs 381,444 cr in FY13. Lower growth and investment in the economy Â especially in the infrastructure space was responsible for this slowdown in demand for long term funds.

Corporate performance remained subdued during FY14. A study on the performance of 880 companies showed that net sales increased by 12% in FY14 as against 15.3% in the previous year, while net profit increased by 8.2% in FY14 compared with growth of 13.1% in FY13. Accordingly, the net profit margin moderated from 9.8% to 9.5% during the fiscal. The deterioraton in the overall performance has been the outcome of muted investment and lower market demand. Growth has been lower this year due to low demand conditons as well as higher raw material costs which have put pressure on profits. Also high interest rates have impacted cost of operatons.

On the fiscal front, the government has managed to achieve its fiscal defcit target by primarily cutng down its capital expenditure signifcantly. In FY14, fiscal defcit has been contained at 4.6%, below the target of 4.8% for the year. On the other hand, taking into account the elevated borrowing costs on the back of high interest rates, government maintained its borrowing programme at Rs.5.63 lakh crore during FY14. The Budget announced by the new government in July 2014 has targeted gross market borrowings of Rs 6 lkh crore for FY15 which is almost the same as was announced in the Interim Budget. For the year FY15, fiscal defcit is budgeted to decline to 4.1%.

The performance of your company may be evaluated against this background.

Financial Performance

The financial results for the year ended March 31, 2014 are presented below: (Rs. Lakh)

For the year ended For the year ended Particulars March 31, 2014 March 31, 2013

Income from Operatons 229,46 198,77

Other Income 35,66 28,63

Total Income 265,12 227,39

Total Expenditure 85,72# 67,51

Profit Before Tax (PBT) 179,40 159,88

Provision for Tax 50,73 46,55

Profit Afer Tax (PAT) 128,67 113,33

Appropriatons

Interim Dividend 51,94 34,26

Tax on Interim Dividend 8,83 5,56

Final Dividend 29,00 22,84

Tax on fnal dividend 4,93 3,88

Transferred to General Reserve 15,00 15,00

Balance carried forward 18,97 31,79

#includes Rs. 143 lakh towards Amortzaton of Deferred Employees Compensaton for Optons granted under the Employee Stock Opton Scheme of your company on January 1, 2014.

Total income increased by 16.6% with income from operatons increasing by 15.4%. This may be atributed to an increase in both ratng assignments from new companies as well as from existng clients. Total expenditure increased by 26.9%, with an increase in wage bill largely on account of an increase in staf count from 565 on March 31, 2013 to 594 on March 31, 2014. profit before tax increased by 12.2% in FY14, and with provision for tax rising by 8.9%, profit afer tax increased by 13.5%.

Dividend

During the year ended March 31, 2014, your company has distributed an amount of Rs. 18 per share as interim dividend. The Board of Directors has recommended a fnal dividend of Rs. 10 per share. If approved, the total dividend for the year would be Rs. 28 per share and the payout rato would be 74%.

Increase in issued, subscribed and paid-up Equity Share Capital

During the year your company, alloted 446,310 equity shares of Rs. 10 each to Ascent India Fund III, at a price of Rs. 560.15 per share (including Rs. 550.15 towards share premium) aggregatng to an issue price of Rs. 250,000,547 to comply with the minimum capitalizaton norms applicable to non-fund based non-banking finance companies in connecton with the IPO of the Company undertaken in December 2012. Consequently the issued, subscribed and paid-up capital of the Company increased from 28,552,812 equity shares of Rs. 10 each to 28,999,120 equity shares of Rs. 10 each.

Business Operatons

While overall economic conditons have been and contnue to be challenging, your company was successful in both the widening of customer base and deepening of relatonship with existng clients. Your company has now completed over 30,000 ratng assignments since incepton to reach 31,381 as of March 2014. The cumulatve amount of debt rated has increased to Rs.56.99 lakh crore as of March 2014 from Rs. 48.51 lakh crore as of March 2013. As of March 2014, your company had business relatonships with 7,754 clients (5,263 in March 2013). The relentless thrust on expanding the client base will set the foundaton for further leveraging in future.

Instruments Number of assignments completed Volume of debt rated (Rs crore)

FY14 FY13 FY14 FY13

Short term 44 61 30,713 32,906

Medium & Long term 297 298 298,752 264,436

Bank facility rating 6,117 6,074 556,609 481,798

Others 1,407 1,006 - -

Total 7,865 7,439 886,074 779,140

As per the statstcs given above the total number of ratng assignments completed grew by about 5.7% in FY14 aggregatng to 7,865 from 7,439 in FY13. Also, the total volume of debt rated has witnessed an increase on account of bank facility ratngs segment by 15.5% while that of long term debt increased by 13.7%. Volume of short-term debt was lower by 6.8%.

In terms of ratng assignments completed, there was a decline in the number of short term ratngs and long term ratngs while bank facility ratngs increased by 0.7%. The miscellaneous category (including grading) witnessed robust increase of more than 39.8%, which was mainly due to higher NSIC-MSME ratngs.

Business during the year

The credit ratngs business is volumes driven; and comes from expanding the client base and deepening the value of the relatonship. The business team has focused on both these aspects and focused Specifically on widening our coverage of clients given that both the debt and credit markets were stagnant. Your company has made signifcant strides in terms of enhancing the client base despite a challenging year. CARE has the highest coverage in the Economic Times (ET) Top 500 companies with a share of 53% within a sub-sample of 438 rated companies as per the published accepted ratngs on the web sites of ratng agencies. Your company also accounts for the highest coverage in Business Standard (BS) Top 1000 companies with a share of 43% as percent of the universe of 846 rated companies (as per published accepted ratngs of various ratng agencies).

Your company has also widened its reach by having its business development team in 53 locatons. For furthering business with area- wise focus, your company has opened an ofce in Chandigarh. The company is also in the process of setng up an ofce in Coimbatore.

Products

Your company rated India''s First Securitzaton Transacton backed by Mortgage Guarantee. This transacton is a landmark development that will enhance the growth prospects for the securitzaton market for housing loan receivables in India by helping to efectvely manage credit risk associated with housing loans. During the course of the year, your company launched the ratngs of infrastructure debt funds.

CARE also assigned a ratng to India''s frst Alternate Investment Fund (AIF). AIFs have the potental to show the way for the MFIs and other enttes which are looking out for funding alternatves.

SMEs

Your company does realize that SME business is a very critcal part of the overall business strategy. The company has worked on various fronters to make the SME business model more robust. To begin with the SME division launched the CARE Due Diligence Services (CDDS) for the existng / prospectve clientele of banks. Your company also took some defnite steps through MOUs signed with some leading banks and more such te-ups are in the ofng. Contnuous productvity improvement measures were put in place for the operatons in this segment. This will be crucial as these services are scaled up.

A consortum led by CARE bagged the prestgious assignment for development of a Green Ratng Model for MSMEs. The project is a part of the initatve from Global Environment Facility (GEF) through SIDBI.

Towards providing a tool for value assessment of ratng informaton by users, CARE has published Default Study and Customer Satsfacton Survey for MSEs. Also, CARE has come out with publicatons on the SME sector to provide regular updates in the sector. To keep our clients informed about developments taking place in the SME sector, your company publishes a daily SME newsleter which is widely disseminated. It covers the day''s major developments in the SME segment in India as well as globally. This report is sent to more than 15,000 users across India. The SME division also came out with special studies such as Study of SME policies of Major Asian Economies, Malaysian SME Master Plan and learning for India etc.

Your company hosted a workshop for risk assessment of SMEs on behalf of ACRAA at Alibaug, Maharashtra in November, 2013. The workshop was atended by partcipants from credit ratng agencies across Asia.

Views of sector specialists

An initatve taken in the area of sectoral research and analysis was the publicaton of views from the designated sector specialists within the ratngs team. These reports have also been circulated widely to the clients and media with some being printed and circulated.

CARE Industry Risk Metrics

CARE Ratngs ofers a product for quantfying industry risk known as CARE Industry Risk Metrics. Your company covers 150 industries under this product which is used by various banks as an input in their credit risk assessment process. Your company has also begun its Valuaton Services and ofers valuaton of equity, debt instruments and market linked debentures (also with embedded complex optons).

Economics

Economics Division provides near real tme global and domestc economic updates through reports that are released almost immediately afer economic announcements are made. The coverage of economic reports encompasses regular updates on global and domestc indicators and/or events, topical notes on new interestng economic developments, debt market related updates monthly (Debt Market Review) as well as on daily basis (DDMU- Daily Debt Market Update), studies on macro Â phenomena and surveys on contemporary trends. These reports are circulated widely to clients, banks, mutual funds, government ofcials and the media. The purpose is to showcase the brand CARE Ratngs as well as disseminate your company''s viewpoint on issues relatng to both the global and domestc economy.

As a part of building our visibility, the company contnues to print and circulate major reports to several opinion makers which have been appreciated. This is over and above a wide circulaton through e-mails to clients, banks, mutual funds investors, media, government ofcials, etc. These reports are also uploaded on company''s website. CARE Ratngs economic division is now included in the polls on economic variables carried out by RBI, Reuters, Bloomberg, Dow Jones and Ticker News.

Brand CARE Ratngs and Media Coverage

A ''brand'' is a percepton of your business. Hence, CARE has been contnuously focusing on strengthening its brand through its presence in media as well as organizing various events.

Your company conducted a series of 20 years celebratons events across the country in FY14 with top dignitaries being our chief guests who spoke on various subjects and interacted with our guests Â Mr. Pradip Shah (Chairman, Ind Asia Fund Advisors in Mumbai), Mr. R.K Dubey (CMD, Canara Bank in Bangalore), Mr. M. Narendra (CMD, Indian Overseas Bank in Chennai), Mr. Bhagvantha Rao (MD, State Bank Of Hyderabad in Hyderabad), Ms. S.A Panse (CMD, Allahabad Bank in Kolkata), Mr. Sunil Jain (Managing Editor, Financial Express in Delhi) and Mr. Anil Padmanabhan (Deputy Managing Editor, Mint in Delhi).

Your company has also been associated with various prestgious awards ceremonies and our MD & CEO, Mr. D. R. Dogra presented the awards for ''CV dealer of the year'' & ''Most aspiring CV dealer of the year at The Automotve Dealership Excellence Awards (ADEA) as well as at the MSME Banking Excellence Awards- 2013''.

Your company has been knowledge partner for several seminars and conferences. The company has prepared the Knowledge paper for FICCI''s conference, ''Progressive Maharashtra'' on ''Rethinking, Reshaping: Agenda for good growth and governance in Maharashtra''. CARE Ratngs also published a background report ttled ''Financial Markets Â Reviving India Story'' for the ASSOCHAM Summit on Financial Markets.

Top Management representaton

The top management has represented CARE at various events at the natonal and internatonal level during the year. Some of the signifcant events where they partcipated are:- Mr. D. R. Dogra, Managing Director & CEO, was awarded the prestgious IPE (Insttute of Public Enterprises, Hyderabad) Corporate Excellence Award for his contributon to this feld. He also represented CARE at various events- ARC Ratngs S.A meet in Portugal, Investors'' meet in Boston and BANCON 2013 in Mumbai. He was also jury member on Constructon Global Awards 2013. He has been a panelist at various forums such as the interactve Session on ''Emerging Capital markets Scenario: Investors'' Confdence'' by Calcuta Chamber of Commerce, ''Global Economic Outlook & India''s Positon'' At Business Standard Â Smart event, etc.

Mr. Rajesh Mokashi, Deputy Managing Director, made presentatons at training programmes organized by Indian Insttute of Capital Markets/ Natonal Insttute of Securites Markets for the Central Economic Intelligence Bureau, Department of Revenue, Ministry of Finance, Indian Economic Service, SEBI etc. on credit ratng. He has spoken in various seminars such as The Annual Lenders Meet 2013 organized by India Infoline Finance Ltd, ''Progressive Maharashtra 2014'' etc.

Knowledge Sharing Forums

CARE employees have actvely partcipated in Knowledge sharing forums where our senior staf provided views on the economy and various sectors to ofcials in banks, corporates, etc. During the year CARE presented its views in over 15 Knowledge sharing forums.

IT initatves

Your company has revamped its corporate and research websites. The website contains a rich user interface (UI), beter navigaton, more dynamic content, beter visualizaton and importance for new products, news highlights and banners. Your company also launched CARE Ratngs iOS and Android App which has the capability to retrieve and display the public domain informaton available on www.careratngs.com such as rated company brief ratonale, search by industry/ company, and outstanding ratngs.

Another initatve taken was Ci3 - DMS (Document Management System) integraton. This is an integrated document management workfow with core ratng applicaton which is aimed for secure, faster and reliable document retrieval. During the year your company also upgraded the technology for its ci3 applicaton. It has migrated to the latest Microsof DotNet technology framework (4.5). The Ci3 Applicaton can now support both 32 bit and 64 bit operatng system. Ci3 applicaton has gone through several enhancement cycles to incorporate business needs like existng client mapping with account manager, sales business segregaton (new/existng), SME/LME segregaton, integraton of securitzaton, invoice booking to Oracle, ratng and CKC database separaton.

Your company also implemented an open source applicaton for IT infrastructure monitoring, which generates auto alerts for critcal paths like network interrupton, server status etc. as well as an open source applicaton for IT Asset management.

ISO Certfcaton

Your company has received ISO 9001:2008 quality management certfcatons for our head ofce in Mumbai and six branch ofces (Ahmedabad, Kolkata, Delhi, Hyderabad, Bangalore and Chennai) for the credit ratng of debt instruments and facilites, for research services at our head ofce in Mumbai and for data processing at the CARE Knowledge Centre in Ahmedabad.

Internal Control Systems and their Adequacy

Your Company has established and maintained strong internal controls for financial reportng and has evaluated the efectveness of the internal control systems of the Company pertaining to financial reportng. The roles and responsibilites have been clearly Defined for people at various levels. Adherence to these processes is ensured by the internal auditors and periodically reported to the Audit Commitee.

CARE Kalypto Risk Technologies and Advisory Services Pvt Limited

Your company exercised the call opton, and has acquired 1,992,960 equity shares representng 24.87% of the paid up equity share capital of its subsidiary CARE Kalypto Risk Technologies and Advisory Services Private Limited, thus making it a wholly owned subsidiary.

Risk Solutons

During FY14, CARE Kalypto received a mandate to implement its Funds Transfer Pricing and Customer profitability Soluton at a reputed private bank in India. The Company also upgraded its Ratng Engine at a leading bank in Sri Lanka. With the closure of many of its projects, the Company is now a major player in Sri Lanka with the largest number of live risk management soluton implementatons. The Company also successfully completed rolling-out its credit risk soluton at a large bank in Vietnam, which was a frst-of-its-kind, thereby enabling the bank to become a pioneer in the credit risk automaton space in Vietnam. The Company also successfully completed rolling-out the 1st Phase of its Kalypto/IFRS soluton at a bank in Sri Lanka. The Company further expanded its geographic reach with the sign-on of a bank in the Philippines for its market risk soluton.

CARE Advisory

During FY14 CARE Kalypto started it advisory practce. The Advisory services SBU has organized its business under two practces: Corporate & Infra and Risk Advisory. The focus areas of Corporate & Infra practce are credit assessment studies, business and financial restructuring studies, TEV studies, investment banking, enterprise valuaton etc. Services ofered by Risk Advisory include designing of risk assessment models and related actvites. Given the nature of the business and the competton around, the progress would depend largely on the state of the economy as well as our own ability to make inroads into this compettve space.

Global Forays

Your company is one of the five partners in a new global credit ratng agency, ARC Ratngs. The other shareholders are domestc credit ratng agencies in Brazil, Malaysia, Portugal and South Africa. ARC Ratngs was launched in London on 16th January 2014. This diversifcaton in the global space will help build alternatve business streams over the next few years and complement our domestc business besides helping to de-risk our income flows.

CARE is planning to set up a subsidiary company in Mauritus in the current year subject to regulatory approvals. The subsidiary shall ofer the entre gamut of ratng and informaton services in Mauritus. Some leading players in the financial sector in Mauritus are likely to join the venture as equity partner(s).

Human Resources

Human resource, a broad combinaton of educaton, knowledge, experience and skill is the most valuable asset for a company. Especially for a ratng business, human capital is the backbone of the organizaton''s business. Hence, your company aims to obtain the best from the talent pool of diverse professionals.

As of March 31, 2014, your company had 594 Employees spread across the country which marks an increase over the 565 staf strength as on March 31, 2013. Over 90% of the staf was professionally qualified in the areas of management, CAs, CS, legal, economics, engineering etc.

The company has in place a rigorous inducton programme for all new joiners on a regular basis. All the new recruits have been through such inducton programmes where senior and experienced colleagues give an overview of various aspects of the functoning of the processes in the organizaton.

Besides, employees have been nominated to atend various training programmes and seminars. We have sent our staf members for several seminars/conferences/training programmes during the year. In order to incentvize employees to enhance their knowledge and hone their skill sets, your company has also a policy in place to reimburse the fees for relevant professional courses such as CFA and FRM programmes undertaken and completed by the employees.

Ratng Commitee

Your company is commited to maintaining high standards of professional quality and integrity. In line with this, your company has an internal ratng commitee comprising senior executves of our company and an external ratng commitee, comprising a majority of independent members. The ratng report is considered by our internal ratng commitee or our external ratng commitee, if not both. Ratngs decided by our internal ratng commitee are reported to the external ratng commitee. Our ratng commitees are assisted in the evaluaton by a team of professional analysts with relevant industry knowledge. Mr. Y. H. Malegam (Chairman), Mr. P. P. Patanayak, Mr. V. Leeladhar, and Mr. V. K. Chopra are independent members on the Commitee while Mr. D. R. Dogra is the only employee of CARE on the external ratng commitee.

Confict of interest

There is a clear policy to segregate staf on the basis of business and ratngs to ensure that there is no confict of interest. Besides, there is a strict code of conduct rules for staf which, clearly ensures that the ratng analyst does not have any interest in terms of equity or otherwise in the company being rated by him/her. This we believe is necessary for providing unbiased ratngs which in turn enhances the credibility of the organizaton.

Board of Directors

The Board of Directors comprise Mr. A.K. Bansal, Ms. Bhart Prasad, Mr. S. Venkatraman, Mr. D.R. Dogra and Mr. Rajesh Mokashi.

The company is sorry to announce the demise of our Director, Dr. N.K. Sengupta who was associated with your company as an Independent Director since May 1993. During the year, Mr. O.V. Bundellu, Chairman and Independent Director of the company had resigned due to personal reasons.

Your company wishes to thank Dr. N. K. Sengupta and Mr. O. V. Bundellu for their contributon to the company and the contnuous encouragement and support provided to the management. Your company also welcomes Mr A.K. Bansal, former Executve Director, Indian Overseas Bank, as our new Chairman and Independent Director and Dr. Ashima Goyal as a Non-Executve Independent Director on the Board.

Management Discussion and Analysis

The management discussion and analysis for FY14 is annexed to the Directors'' report as Annexure Â A.

Corporate Governance

The report of the Board of Directors of your Company on Corporate Governance for FY14 which forms part of the annual report is annexed to the Directors'' report as Annexure Â B.

The following are the Standing Commitees of the Board (See Annexure Â B ttled Corporate Governance Report)

Audit Commitee

The Commitee met 4 tmes in FY14. The Commitee comprises Mr. S. Venkatraman, Mr. A. K. Bansal, Ms. Bhart Prasad and Mr. Rajesh Mokashi. Dr. N.K. Sengupta who was one of the member of the Audit Commitee expired on November 03, 2013.

The Board of Directors at its meetng held on July 31, 2014 inducted Mr. A. K. Bansal, Non-Executve Independent Director as a member in the Commitee.

Investment Commitee

The Investment Commitee comprises the following Directors, namely: - Mr. S. Venkatraman, Mr. D.R. Dogra and Mr. Rajesh Mokashi. Mr. O.V. Bundellu, who was one of the member of the Investment Commitee, resigned on December 03, 2013.

The Commitee met 2 tmes during the year 2013-2014 and decided on various investment optons for the company''s funds to derive the maximum return while optmizing risk levels.

Stakeholders Relatonship Commitee (Shareholders / Investor grievance commitee)

The Shareholders/Investor Grievance Commitee comprise the following Directors, namely:- Mr. S. Venkatraman, Ms. Bhart Prasad and Mr. D.R. Dogra.

The Commitee carries out such functons for the redressal of shareholders'' and investors'' complaints, including but not limited to, transfer of equity shares, non-receipt of balance sheet, non-receipt of dividends and any other grievance that a shareholder or investor of the Company may have against the Company.

The Board of Directors at its meetng held on May 20, 2014 designated the Shareholders /Investor Grievance Commitee as "Stakeholders Relatonship Commitee" to comply with the provisions of secton 178 of the Companies Act, 2013 and revised clause 49 of the Listng Agreement. Further, the Commitee was reconsttuted to include the following Directors as its members, namely: Mr. A. K. Bansal, Ms. Bhart Prasad and Mr. D. R. Dogra.

Nominaton and Remuneraton Commitee

a) Remuneraton Commitee

The Remuneraton Commitee comprises the following Directors, namely: - Mr. S. Venkatraman, Ms. Bhart Prasad and Mr. D. R. Dogra. Dr. N.K. Sengupta, who was the chairman of the Commitee, expired on November 03, 2013.

The Commitee met once during the year.

b) Corporate Governance and Nominaton Commitee

Your company has also adopted the Corporate Governance and Nominaton Commitee Charter and consttuted Corporate Governance and Nominaton Commitee. This commitee will be responsible for developing CARE''s approach to Board governance issues and the company''s response to the corporate governance guidelines; reviewing the compositon and contributon of the Board and its members as also the Ratng Commitee and its members and recommending Board/Ratng Commitee nominees and maintaining an efectve working relatonship between the Board/Ratng Commitee members.

Mr. O.V.Bundellu, who was the Chairman of the Commitee, resigned on December 03, 2013, Dr. N.K. Sengupta, who was one of the member of the Commitee, expired on November 03, 2013.

In order to comply with the provisions of Secton 178 of the Companies Act, 2013 and revised clause 49 of the Listng Agreement, the Board of Directors at its meetng held on May 20, 2014, merged the Remuneraton Commitee and Corporate Governance and Nominaton Commitee and named it as "Nominaton and Remuneraton Commitee". The Nominaton and Remuneraton Commitee comprise the following Directors, namely: - Mr. S. Venkatraman, Ms. Bhart Prasad and Mr. A. K. Bansal.

Corporate Social Responsibility Commitee

To comply with the provisions of secton 135 of the Companies Act, 2013, the Corporate Social Responsibility Commitee was consttuted with the following directors as its members, namely Ms. Bhart Prasad, Mr. D. R. Dogra and Mr. Rajesh Mokashi. Further the Board of Directors at its meetng held on May 20, 2014 reconsttuted the commitee to include the following directors as its members, namely Ms. Bhart Prasad, Mr. A. K. Bansal and Mr. Rajesh Mokashi.

ESOP Compensaton Commitee

The ESOP Compensaton Commitee comprises the following Directors as its members, namely Mr. A. K. Bansal, Mr. S. Venkatraman and Mr. D. R. Dogra. The Commitee met twice during the year.

Directors Responsibility Statement

The MCA has vide its General Circular No. 08/2014 dated April 4, 2014, clarifed that the financial statements (and documents required to be atached thereto), auditors report and Board Report in respect of financial years that commenced earlier than April 1, 2014 shall be governed by the relevant provisions/Schedules/Rules of the 1956 Act. In view of this, the following informaton has been provided as per the provisions of the 1956 Act.

Pursuant to the requirement under Secton 217(2AA) of the Companies Act, 1956 with respect to Directors Responsibility statement, it is hereby confirmed.

I. that in the preparaton of the annual accounts for the financial year ended March 31, 2014, the applicable accountng standards have been followed along with proper explanaton relatng to material departures;

II. that the Directors have selected such accountng policies and applied them consistently and made judgments and estmates that are reasonable and prudent so as to give true and fair view of the state of afairs of the Company at the end of the financial year and of the profit and loss of the Company for the year under review;

III. that the Directors have taken proper and sufcient care for the maintenance of adequate accountng records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventng and detectng fraud and other irregularites; and

IV. that the Directors have prepared the accounts for the financial year ended March 31, 2014 on a ''going concern'' basis.

Auditors

As per the provisions of secton 139 (2) of the Companies Act, 2013, no listed company or a company belonging to such class or classes of companies as may be prescribed, shall appoint or re-appointÂ

(a) an individual as auditor for more than one term of five consecutve years; and

(b) an audit frm as auditor for more than two terms of five consecutve years.

M/s. Khimji Kunverji & Co., Chartered Accountant, the Statutory Auditors of CARE have already completed their term of 3 years as they were the auditors of CARE since FY 2012. Taking into consideraton the provisions of secton 139 (2) of the Companies Act, 2013, they may now be appointed for a further period of 2 years for FY15 & FY16 to complete their term of 5 years.

Employees Salary

As required in terms of secton 217(2A) of the Companies Act,1956, read with the rules framed there under a statement of employees drawing a salary of Rs. Sixty Lakhs if employed throughout the year is to be provided as Annexure to the Annual Report. However, in terms of Secton 219 (1) (b) (iv) of the Companies Act, 1956, the Directors'' Report is being sent to all Shareholders of your Company without this annexure. Any Shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Ofce of your Company.

Subsidiary Companies

During the financial year under review, your Company had one subsidiary, CARE Kalypto Risk Technologies and Advisory Services Private Limited.

Pursuant to the General Circular No. 2/2011 dated February 08, 2011 issued by the Ministry of Corporate Afairs, Government of India, the Board of Directors of your Company have given their consent for not ataching the accounts of subsidiary of your Company along with the Annual report of your Company. In line with the above circular and as per the Accountng Standard 21 (AS 21) issued by the Insttute of Chartered Accountants of India, the Audited Consolidated Financial Statements of your Company along with the Auditors Report have been annexed to this Annual Report.

The annual accounts of subsidiary and the related informaton will be made available to any member of the Company / its subsidiary seeking such informaton and are available for inspecton by any member of the Company / its subsidiary at the registered ofce of the Company. The annual accounts of the said subsidiary will also be available for inspecton, at the head ofce / registered ofce of the subsidiary company.

Disclosures as per secton 217(1)(e) of the Companies Act, 1956

A. Conservaton of Energy & Technology Absorpton

The Company did not carry out any business actvites warrantng conservaton of energy and technology absorpton in accordance with the Companies (Disclosure of Partculars in the Report of Board of Directors) Rules, 1988.

B. Foreign Exchange Earnings and Outgo

During the year under review the Company has received a foreign exchange of Rs. 97,15,117/- and has spent a foreign exchange of Rs. 93,05,215/-.

Fixed Deposits

The Company has not accepted Fixed Deposits within the purview of secton 58A of the Companies Act, 1956 during the year under review.

Employee Stock Opton Scheme

The Company has an employee stock opton scheme. The CARE Employee Stock Opton Scheme - 2013 (ESOS 2013) was approved by the shareholders vide a special resoluton at the Annual General Meetng of the Company held on September 27, 2013.

Summary Informaton on ESOS 2013 of the Company is provided as Annexure-I to this Report. The informaton is being provided in compliance with Clause 12 of the Securites and Exchange Board of India (Employee Stock Opton Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended.

Acknowledgements

The Board places on record its appreciaton of the contributon of its employees to the company''s operatons and the trust reposed in it by market intermediaries, issuers and investors. The Board also appreciates the support provided by the Reserve Bank of India, Securites Exchange Board of India, Comptroller and Auditor General of India and the Company''s Bankers, IDBI Bank, State Bank of India and HDFC Bank.

On behalf of the Board of Directors

A. K. Bansal

Chairman Place : Mumbai Date : July 31, 2014

Mar 31, 2013

The directors have pleasure in presenting the Twentieth Annual Report of your company along with the audited accounts for the year ending March 2013.

Economic Backdrop

Following the financial crisis in FY08, the Indian economy had recovered to grow by 8.4% in FY10 and FY11. However, the conditions turned adverse in FY12 with GDP growth slowing down to 6.2% which further declined to 5.0% in FY13. Production was affected by a slowdown in investment, and the gross fixed capital formation rate declined from 32.5% of GDP in FY11 to 29.6% in FY13. While overall demand remained subdued with the government trying to get its reins on the deficit, persistent inflation has led RBI maintain key interest rate at status quo for most of the year.The RBI has been following an anti - inflationary policy stance since early 2010. However in FY13, RBI reduced key interest rates gradually by 100 bps from 8.5% to 7.5% on growth concerns and a decline in inflation.

Global economic conditions too were challenging with growth slipping to 3.2% in 2012 (4.0%) with USA growing by 2.2% (1.8%) and Euro region growth slipped into negative territory growing by -0.6% (1.4%). Among the emerging markets, China registered growth of 7.8% (9.3%) which is the lowest since 2005. The Euro crisis response has been volatile with Greece, Ireland, Portugal, Spain, Italy and most recently Cyprus raising indebtedness issues. The ECB and IMF have been working hard towards resolving of the default crisis. Alongside, monetary policy has been liberal with the Fed and Bank of England maintaining its rate at 0.25% and 0.50% respectively, while the ECB has lowered rates more recently to 0.50%.

The Indian economy was affected by the global crisis in various ways. Firstly, trade flows were impacted. While growth in both imports and exports has moderated, the fall in exports has been far more pronounced (negative growth) when compared with imports (near-zero growth), resulting in a wider CAD (current account deficit). Secondly, the rupee became vulnerable to the dollar - euro relationship and remains so, also the continued problems in the Euro Zone would continue to make rupee volatile. Thirdly, FII inflows have been volatile, easy monetary policy pursued by advanced countries has impacted capital investment flows (QE in USA and Japan and ECB bond buying programme).

Corporate Performance has also been subdued. A study of 1,297 non - financial companies showed that net sales increased by 12.6% in FYI3 as against 21.1% in FYI2 while net profit increased by 11.7% in FYI3 compared with a negative growth of 5.7% in FYI2. Growth has hence been held up this year on both the supply and demand fronts which has impeded any pick-up in activity. It may be recollected that we started the year with an assumption of upwards of 7.5% GDP growth for the year and the path followed has been quite different from what was expected.

The government''s budget was affected by lower than expected growth in GDP which impacted the revenue collections; however the government managed to control the expenditure resulting in the fiscal deficit of 5.2% in FYI3 (RE) (revised subsequently to 4.9%). For FYI4, it has been budgeted at 4.8%. Performance on the disinvestment front stands nearer to budgeted estimate amount of Rs.30,000 crore in FYI3, where the government is expected to mobilize Rs.24,000 crore of funds.

Low economic growth and high inflation contradicted monetary activity during FYI3. Bank deposits grew by I4.3% in FYI3 as against I3.5% in FYI2. Elevated borrowing costs against the backdrop of high interest rates coupled with low demand conditions pressurized growth in credit offtake in FYI3 to 14.1% (17%). The shortage in liquidity was evident with the monthly average repo borrowing in FY13 from the RBI amounted to Rs 17,19,329 crore. At the same time, government maintained its borrowing programme at Rs 5.57 lakh crore as budgeted at the start of the year.

The performance of your company in FY13 should be viewed against this background.

Financial Performance

The financial results for the year ended March 31, 2013 are presented below:

(Rs. lakh)

Particulars For the year ended For the year ended March 31,2013 March 31,2012

Income from Operations 198,77 178,08

Other Income 28,63 28,21

Total Income 227,39 206,29

Total expenditure 67,51 56,78

Profit Before tax (PBT) 159,88 149,51

Provision for Tax 46,55 41,97

Profit After Tax (PAT) 113,33 107,54

Appropriations

Interim Dividend 34,26 28,55

Tax on Interim Dividend 5,56 4,63

Final Dividend 22,84 -

Tax on final dividend 3,88 -

Transferred to General Reserve 15,00 12,00

Balance carried forward 31,78 62,36

Total income increased by 10.23% with income from operations increasing by 11.62%. This may be attributed to an increase in both rating assignments from new companies as well as from existing clients. Total expenditure increased by 18.90%, with an increase in wage bill as also on account of an increase in staff count from 500 on March 31, 2012 to 565 on March 31, 2013. Profit before tax increased by 6.94% in FY13, and with provision for tax rising by 10.92%, profit after tax increased by 5.38%.

Dividend

An interim dividend @Rs.12 per share was declared and paid in March 2013. Special dividend for celebrating 20 years @ Rs. 8 per share is recommended for FY13.

Business Operations

While overall economic conditions have been and continue to be challenging, your company was successful in both the widening of customer base and deepening of relationship with existing clients.Your company has now completed over 23,000 rating assignments since inception to reach 23,516 as of March 2013. The cumulative amount of debt rated has increased to Rs 48.51 lakh crore as of March 2013 from Rs 40.46 lakh crore as of March 2012. As of March 2013, we had business relationships with 5,263 clients (3,900 in March 2012). The relentless thrust on expanding the client base will set the foundations for further leveraging in future.

Instruments Number of assignments Volume of debt rated completed (Rs crore)

FYI3 FYI2 FYI3 FYI2

Shortterm 61 109 32,906 52,522

Medium term - - 2,002 -

Longterm 298 307 262,434 195,518

Bank facility rating 6,074 4,883 481,798 678,820

Others (Gradings etc.) 1,006 681 - -

Total 7,439 5,980 779,140 926,860

Two facts stand out in the above table. The first is that the total number of rating assignments completed grew by about 24% in FY13 aggregating 7,439. However, the volume of debt rated has witnessed a decline on account of low ticket size of issues as we focused on the SME segment where the average size of debt/loan rated is significantly lower than for a LME case. This is particularly observed in the bank facility ratings segment where the volume of debt rated declined by about 29% in FY13.

In terms of rating assignments completed, there was a decline in the number of long term ratings by around 3% while bank facility ratings increased by nearly 24%. However, there was a decline in short-term rating assignments by 44%. The miscellaneous category (including gradings) witnessed robust increase of more than 48%, which was mainly due to an increase in NSIC-MSME ratings.

Total volume of debt rated increased for long term debt by nearly 34%, but declined for bank facilities (by 29%) and short term ratings (by 37%).The low growth conditions as well as slowdown in growth in bank credit did impact the growth in debt rated under bank loan facilities.

CARE''s business during the year

Your company continued to focus on extending the client base across both the large and SME segments to provide services for borrowers pan-India. Further, the existing relations with clients have been strengthened with our business teams working on cross selling products. Our grading products, Equi-grade and Real-estate Star grading have received notable response. 23 companies are now covered under Equi-grade, while 12 projects have been assigned real-estate star gradings.

In a bid to expand our reach to the SME segment, the company has also introduced SME Fundamental Grading this year.This product, it is believed, will contribute progressively more to the revenue base of the company in the years to come.

Knowledge Strength - CARE Research Division

Our business derives strength from leveraging our research capabilities.The independent CARE Research Division continues to widen its canvas, today covering 46 industries under its Research services offerings (up from 39 in FY12). Also, 116 sectors are covered under the CARE Industry Risk Metrics (CIRM). These cutting edge research reports across the spectrum of sectors that are available on a subscription basis have found progressively more acceptance in the market.

Apart from off the shelf reports, CARE Research also undertakes customized research in areas such as demand analysis, cost analysis, customer satisfaction, niche industry studies, industry write ups for IPO DRHP documents etc.

In order to build the brand of CARE as knowledge based company CARE Research contributes by:

- Publishing thematic articles on various sectors, some of which are printed and sent to banks, companies and policy makers.The articles are widely quoted in media and appreciated as being thorough and insightful.These reports are also circulated to clients, media, bankers, brokers, mutual funds, investors, government officials, etc.

- Associating as a knowledge partner and preparing background papers for events such as ADEA-FADA awards,AIBI Summit, Global Steel Conference etc

In expanding the scope of research services, the CARE Research Division, this year launched MLD (market linked debentures) valuation and has brought out a thematic monthly report on PPMLD (Principal protected market linked debentures), a first of its kind in the market.

Views of Sector Specialists

An initiative taken in the area of sectoral research and analysis was the publication of views from the designated Sector Specialists within the Ratings team.These reports have also been circulated widely to the clients and media with some being published.

Economics

The Economics Division continues to provide near real time economic analysis through reports that are released almost immediately after economic announcements are made. The coverage of economic reports encompasses regular updates on global and domestic economic indicators and/or events, topical notes on new interesting economic developments, debt market related updates, studies on macro-phenomena and surveys on contemporary trends. These reports are circulated widely to clients, banks, mutual funds, government officials and the media. The purpose is to showcase the brand CARE Ratings as well as disseminate your company''s viewpoint on issues relating to both the global and domestic economy.

As a part of building our visibility, we continue to print and circulate major reports to several opinion makers which have been appreciated. This is over and above the wide circulation through e-mails to clients, banks, mutual funds, investors, media, government officials, etc.

In addition, the Economics Division has also brought out a number of whitepapers relating to Indian capital markets (both debt markets and equity markets) and background studies on financial reforms in the country.

CARE IPO

With the aim of unlocking value for the shareholders of the company and improving visibility of the brand - CARE Ratings, your company made an IPO through an offer for sale, with disinvestment by existing shareholders. The offer for sale was for 7,I99,700 equity shares which was a dilution of 25.22% of post offer paid up capital. The issue which got listed on December 26, 20I2 received an overwhelming response and was subscribed 34.05 times. CARE is part of S&P BSE 500 index and S&P BSE Mid Cap index.

In the context of our IPO through an offer for sale, as per the RBI directive, the company is in the process of meeting the minimum capitalization norm of USD 0.50 mn which is applicable to CRAs.

Brand CARE Ratings

We have been continuously focusing on deepening our brand by holding and sponsoring various conferences and events as well as continuous engagement with the media. There were essentially five major heads under which we have built the CARE brand. First, we have organized events such as CARE Ratings'' Banking Summit, Mumbai and CARE Ratings'' Debt Market Summit (CDMS 2013), New Delhi. Second, we have been knowledge partner for various events held by associations such as CII,AADA, FICCI, SME Chamber of India, Global Steel Conference etc. Third, we have sponsored events such as CFO Awards. Fourth, the company''s top management has participated actively in global events such as BRICS Business Forum, International Rating Roundtable Conference, and ACCRA CEOs Roundtable Discussion etc. Fifth, CARE has ventured to launch webinars on various issues and topics as part of its knowledge sharing endeavours.

CARE also completed 20 years in April 2013 and has held a special event for its clients in Mumbai.

Human Resources

Human resources are the most critical asset for a company as plans can be executed successfully only in case we have the right people.Your organization realises the importance of developing and maintaining a highly skilled and motivated staff. The focus has been on recruiting the best talent from top management institutes. However, for specialized functions at higher levels lateral recruitment has been done from some of the best companies so as to match experience and superior skills with different roles.

As of March 31, 2013, we had 565 employees spread across the country which marks an increase over the 500 staff strength as on March 31, 2012. This has been necessitated from the demands of business development and ratings which has widened, as we have been reaching out to potential customers across the country with special focus on the MSME segment. Out of these, there are 432 professionally qualified personnel with MBA/PGDM/CFA etc, 49 CAs, 21 Post graduates (including Economists) and 63 graduates.

We do recognise the importance of training our staff so that they are equipped with better skill sets for both professional and personal development. We do have in place a rigorous induction programme for all new joinees where experts in various domains from within the organization impart training. We also send our staff for specialised training programmes on a regular basis.

IT initiatives

Recognizing the importance of information technology, your company took several initiatives in this domain. The Ci3 core application has from time to time been improvised in order to facilitate better and efficient processing, MIS reporting and control. It is an end-to-end solution for all information relating to rating activity which enables ease in generating reports, monitoring and planning. Ci3 is now upgraded to latest technology platform with seamless workflow for business.

This year your company transited from its existing accounting software system to the Oracle enterprise application (ERP) for accounting and human resources management systems. The Oracle application has now been successfully implemented and integrated in all operations of the company.

A major milestone attained is the creation of our Disaster Recovery (DR) site at Pune. DR site is built to support entire operation of the company.

Global Forays

Your company has reached an advanced stage in the formation of a proposed global rating agency - ARC Ratings SA (with participation of rating agencies from Portugal, Brazil, Malaysia and South Africa). This diversification in the global space will help build alternative business streams over the next few years and complement our domestic business besides helping to de-risk our income flows.

Rating Committee

Your company is committed to maintaining high standards of professional quality and integrity. In line with this, we have an internal rating committee comprising senior executives of our Company and an external rating committee, comprising a majority of independent members. Each rating report is considered by our internal rating committee or our external rating committee, if not both. Ratings decided by our internal rating committee are reported to the external rating committee. Our rating committees are assisted in the evaluation by a team of professional analysts with relevant industry knowledge. The external rating members are Shri Y. H. Malegam (Chairman), Shri P. P. Pattanayak, Shri V. Leeladhar, Shri V. K. Chopra and Shri D. R. Dogra.

Conflict of interest

There is a clear policy to segregate staff on the basis of business and ratings to ensure that there is no conflict of interest. Besides, there is a strict code of conduct rules for staff which, clearly ensures that the rating analyst does not have any interest in terms of equity or otherwise in the company being rated by him/her. This we believe is necessary for providing unbiased ratings which in turn enhances the credibility of the organization.

The following are the Standing Committees of the Board (See Annexure - A on Corporate Governance Report)

Audit Committee

The Committee met 4 times in FYI3. The Committee comprises Shri S. Venkatraman, Dr N.K. Sengupta, Ms Bharti Prasad and Shri Rajesh Mokashi.

Investment Committee

The Investment Committee comprises the following Directors, namely: Shri O.VBundellu, Shri S. Venkatraman, Shri D.R. Dogra and Shri Rajesh Mokashi. The Committee met 3 times during the year 2012-2013 and decided on various investment options for the company''s funds to derive the maximum return while optimizing risk levels.

Remuneration Committee

The Remuneration Committee comprises the following Directors, Shri S. Venkatraman, Dr N.K. Sengupta, Ms Bharti Prasad and Shri D.R. Dogra. The Committee met once during the year.

IPO Committee

The IPO Committee comprises of the following Directors, Shri O.V.Bundellu, Shri S.Venkatraman, Shri D.R. Dogra and Shri Rajesh Mokashi. It met 5 times during the year. This Committee has been dissolved since the completion of the IPO through offer for sale.

Shareholders / investor grievance committee

The Shareholders / Investor Grievance Committee was constituted during the year. The Investor Grievance Committee carries out such functions for the redressal of shareholders'' and investors'' complaints, including but not limited to, transfer of equity shares, non-receipt of balance sheet, non-receipt of dividends and any other grievance that a shareholder or investor of the Company may have against the Company. The Committee comprises the following Directors Shri S. Venkatraman, Ms Bharti Prasad and Shri D.R. Dogra.

Corporate Governance and Nomination Committee

We have also adopted the Corporate Governance and Nomination Committee Charter and constituted Corporate Governance and Nomination Committee. This committee will be responsible for developing CARE''s approach to Board governance issues and the company''s response to the corporate governance guidelines; reviewing the composition and contribution of the Board and its members as also the Rating Committee and its members and recommending Board/Rating Committee nominees and maintaining an effective working relationship between the Board/Rating Committee members. The Committee will meet at least twice annually. The Committee comprise of Shri O.V Bundellu, Dr N.K. Sengupta and Shri S. Venkataraman.

Pursuant to the requirement under Section 2I7(2AA) of the Companies Act, I956 with respect to Directors Responsibility statement, it is hereby confirmed.

I. that in the preparation of the annual accounts for the financial year ended March 20I3, the applicable accounting standards have been followed along with proper explanation relating to material departures;

II. that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for the year under review;

III. that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, I956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

IV. that the Directors have prepared the accounts for the financial year ended March 3I, 20I3 on a ''going concern'' basis.

Auditors

Prior to the IPO through an offer for sale, as the shareholding of Corporations owned or controlled by the Central Government in CARE exceeded 5I%, the company was covered under provisions of section 6I9B of the Companies Act, I956. The statutory Auditors for FYI3 were appointed by the Comptroller and Auditor General of India (CAG). Post IPO, as less than 5I% of shareholding is owned or controlled by the Central Government, the statutory auditors will be appointed by the shareholders.

Employees Salary

As required in terms of section 2I7(2A) of the Companies Act,I956, read with the rules framed there under a statement of employees drawing a salary of Rs Sixty Lakhs if employed throughout the year is to be provided as Annexure to the Annual Report. However, in terms of Section 2I9 (I) (b) (iv) of the Companies Act, I956, the Directors'' Report is being sent to all Shareholders of your Company without this annexure. Any Shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of your Company.

Acknowledgements

The Board places on record its appreciation of the contribution of its employees to the company''s operations and the trust reposed in it by market intermediaries, issuers and investors. The Board also appreciates the support provided by the Reserve Bank of India, Securities Exchange Board of India, Comptroller and Auditor General of India and the Company''s Bankers, IDBI Bank, State Bank of India and HDFC Bank.

On behalf of the Board of Directors

O.V. Bundellu

Chairman

Place: Mumbai

Date: 10th August 2013

Mar 31, 2012

The directors have pleasure in presenting the Nineteenth Annual Report of your company along with the audited accounts for the year ending March 31, 2012.

Economic background

Following the financial crisis of 2008-09, the Indian economy had recovered to grow by 8.4% per annum in the subsequent two successive years. However, conditions turned adverse in FY12 with growth slowing down to 6.5% and industrial growth, in particular, to just 2.8%. Production was affected by a slowdown in investment, where the gross fixed capital formation rate declined from 32.5% in FY11 to 32.0% in FY12. While overall demand remained subdued with the government trying to get its reins on the deficit, high persistent inflation had the RBI taking an aggressive stance on interest rates. The repo rate was hiked by 175 bps during the year to combat inflation. All these conditions played a major role in driving the financial markets during the year which confronted the twin issues of tight liquidity conditions and increasing cost of funds.

Global economic conditions too were challenging with growth slipping to 3.9% in 2011 (5.3%) with the USA growing by 1.7% (3.2%) and Euro region by 1.4% (1.9%). Among the emerging markets China registered growth of 9.2% (10.4%) which was still lower than that of 2010. The Euro crisis response has been volatile with Greece, Ireland, Portugal, Spain and Italy raising indebtedness issues. The ECB, EFSF and IMF had worked hard to resolve the default crisis in Greece which finally has pledged to resort to austerity measures. Alongside, monetary policy has been liberal with the Fed maintaining its rate at 25 bps, while the ECB has lowered rates more recently to 75bps and Bank of England to 50 bps. Quantitative easing in the USA and LTRO (long term refinancing operations) in Euro enabled the flow of liquidity to provide a boost to Bank lending. However, given that austerity measures had to be pursued by the Euro nations under stress such as Greece, Portugal, Spain and Italy, there was a tendency for Banks to deleverage.

The Indian economy was affected by the global crisis in various ways. To begin with trade flows were impacted. Secondly, foreign investors looked positively towards the Asian markets sporadically though the perceived recovery in the USA did at times cause the flow of funds to reverse. This led to volatility in their flows in 2011. Third, the rupee became vulnerable to the dollar-euro relationship, and remains so even today with the possibility of a Greek default and problems in countries like Spain still making the rupee volatile. The rupee moved from Rs 44.37/$ in March 2011 to a range of between Rs 45.28 to 52.67 during August to December before closing at Rs 50.32 in March 2012. FII inflows in particular were lower for the year at $ 18.9 bn as against $ 32.2 bn in FYii.The RBI has been active in the forex market to defend the rupee and has put in $ 20.1 bn during FYI2. Such sale of dollars did in turn put pressure on liquidity conditions in the market.

GDP growth was 6.5% for the year as against 8.4% last year. This was to be brought about by growth of 2.8% in agriculture and 2.5% in manufacturing. Growth has been under pressure with inflation reining high for most part of the year. It ranged between 9-10% up to December when it crossed the double digit mark. It started moderating subsequently to end at 6.9% in March 2012. The RBI had subsequently taken a decision to lower the repo rate for the first time in two years by 50 bps with the rider that the market was not to expect further rate cuts until inflationary conditions improved.

The government''s budget was affected by lower than expected growth in GDP and hence lower revenue growth as well as higher expenditure. This impacted revenue collections as well as pressurized the deficit as the subsidy burden in particular increased on account of food, fuel and fertilizers. The disinvestment programme too was not realized and consequently the fiscal deficit increased from a targeted 4.6% to 5.9% for FYI2 (revised subsequently to 5.8%). For FYI3, it has been budgeted at 5.1%, which again would be contingent on several assumptions being met. Higher deficit meant higher borrowings which in turn strained liquidity in the system.

The monetary scene in the country was subdued. Bank deposits grew by 13.4% in FYI2 as against 15.9% in FYII. Bank credit on the other hand grew by I7% (2I.5%). Lower growth in deposits may be attributed to households spending more on account of inflation and saving less consequently. Bank credit on the other hand increased with the following sectors accounting for the same: beverages and tobacco, paper, petroleum, coal, chemicals, cement, vehicles, and gems and jewellery. There was a distinct slowdown in growth in case of credit to infrastructure and basic metals and metal products industries. The shortage in liquidity led to the RBI intervening positively through open market operations (OMOs). Net OMOs were Rs I.34 lakh crore (Rs 0.67 lakh crore). Further, the average repo borrowings from the RBI were over Rs I lakh crore from December onwards. By March it averaged Rs I.55 lakh crore. Towards the end of the year, the RBI had also lowered the CRR by I25 bps which released Rs 80,000 crore.

At the same time, government borrowing overshot the initial estimate of Rs 4.17 lakh crore and the total borrowings were Rs 5.1 lakh crore. This put pressure on interest rates. The 10-year GSec yield moved within a range of a low of 8.13% in April to a high of 8.88% in October. In March it ended at 8.53%. The average base rate of banks had increased from 9.17% in April 2011 to 10.48% in March 2012.

The performance of your company should hence be viewed against this background of extremely challenging economic and financial conditions

Change in accounting policy:

During the year, the Company changed its revenue recognition policy for surveillance fees. Uptill now the Company was recognising surveillance fees in full in the year in which they became due. However, in the current year the management has estimated a portion of surveillance fees to be recognised as income, commensurate with the efforts involved on the date the surveillance activity is completed. The balance surveillance fee is recorded equally over the 12 months surveillance period which commences 1 year after the date of assigning a rating.

Financial Performance

The financial results of the Company for the year ended March 31, 2012 are presented below:

(Rs. Lakh)

Particulars For the year ended For the year ended March 31, 2012 March 31, 2011

Income from Operations 178,08 170,87

Other Income 28,21 5,76

Total Income 206,29 176,63

Total Expenditure 56,78 42,62

/(-) Prior period adjustments - 9

Profit before Tax (PBT) 149,51 134,10

Provision for Tax 41,97 43,15

Profit after Tax (PAT) 107,54 90,95

Appropriations

Interim Dividend 28,55 -

Tax on Interim Dividend 4,63 -

Final Dividend - 6,19

Tax on final dividend - 1,00

Transferred to General Reserve 12,00 20,00

Balance carried forward 62,36 63,76

Total income increased by 16.79% with income from operations increasing by 4.21%. This may be attributed to both increase in rating assignments from new companies as well as from existing clients offset by impact due to change in accounting policy. Total expenditure increased by 33.22% mainly due to an increase in the wage bill which was on account of an increase in staff count from 303 as on March 31, 2011 to 500 on March 31, 2012. Profit before tax increased by 11.50% in FY12 and with tax provisions reducing by 2.73%, profit after tax increased by 18.24%.

During the year the Company has changed its revenue recognition policy for surveillance fees. Had the Company continued with its earlier policy, Rating Income including Surveillance Fees for the year would have been higher by Rs. 19.79 crore resulting in an increase of 15.80% in income from operations in FY12 over FY11. Profit after tax and revenue reserves would have been higher by Rs. 13.37 crore (i.e. an increase of 32.94% in FY12 over FY11).

Issue of Bonus shares

CARE, in September, 2011 allotted bonus shares in the ratio of 2:1, i.e. two shares for every one share held and issued 1,90,35,208 new shares. The paid up capital of the Company went up to Rs. 28,55,28,120 from Rs. 9,51,76,040.

Dividend

An interim dividend @Rs. 10/- per share was declared and paid in March 2012. No final dividend is recommended for FY 2011-12.

Business operations

While overall economic conditions were challenging, your company was aggressive in terms of both lengthening the customer base and deepening the relationships with existing clients. This effort is evidenced in the following achievements. Your company has now completed over 15,000 rating assignments since inception to reach 15,824 as of March 2012. The total amount of debt rated has increased to Rs. 40.46 lakh crore as of March 2012 from Rs. 31.19 lakh crore as on March 2011. As of March 2012, we had business relationships with 3,900 clients (2,094 in March 2011).The relentless thrust on expanding the client base will set the foundations for further leveraging in future.

Instrument Number of Volume of debt assignments completed rated (Rs crore) FY12 FY11 FY12 FY11

Short term 109 123 52,522 88,801

Medium term - 4 - 1,242

Long term 307 238 195,518 196,973

Bank facility rating 4,883 1,654 678,821 519,862

Others 681 168 - -

Total 5,980 2,187 926,860 806,878

Two facets stand out in the table above. The first is that the total number of assignments completed more than doubled, increasing by 173% in FY12 and the other is that there was an increase in the total volume of debt rated by 15%.

In terms of the number of assignments completed, there was an increase in the number of long term rating by 29% and bank loan ratings by 195% indicating higher penetration levels in these areas. However, there was a decline in short-term rating assignments by 13%. The miscellaneous category (including gradings) witnessed an increase of 305% which was mainly due to the NSIC - MSME ratings.

Total volume of debt rated however had increased for bank facility but declined in case of both short term (- 41%) and long term (marginally by - 0.7%) which were reflective of the slowdown in overall investment in the economy.

CARE''s business during the year

Your company continued to focus on widening the client base across both the large and SME segments to provide services for borrowers. Further, the existing relations with clients have been deepened with our business teams working on cross selling products. While conventional rating of debt has been accepted, the use of other products such as grading has yet to catch on and hence efforts have been made to educate corporates on their use. Some of the more noteworthy products that have caught interest are Edu grade and Real estate star ratings besides equi grade.

We have particularly witnessed significant interest being shown in equi grade which deals with equity research. These products, it is believed will contribute progressively more to the revenue base of the Company in the years to come.

Overseas operations

Your company also commenced operations in the Republic of Maldives and completed two rating assignments there. We have established our office in Male which is fully operational and we are working closely with the authorities and do hope to grow the business along with the market in course of time. More importantly we see this venture as an enterprise which can be leveraged going ahead in our global forays to be made.

Acquisition of majority stake in Kalypto Risk Technologies Private Limited

Kalypto Risk Technologies Private Limited (KRTL), a company providing risk management software solutions with a focus on banking and financial services domain addressing the areas of enterprise risk management. KRTL is engaged in developing specialized risk management solutions addressing the area of credit and operation risk for financial institutions and banks. The credit risk product serves as a foundation to meet evolving regulatory risk requirements in the backdrop of Basel II recommendations and for integrating the bank''s entire credit risk information.The operational risk product facilitates Banks in assessing, identifying, measuring, monitoring, controlling and reporting of losses resulting from inadequate or failed internal processes, people or systems. Your company has acquired 75.13% stake in KRTL at an investment of Rs 893.68 lakhs. This acquisition will result in diversification of revenue streams by enhancing product offerings and building up alternative revenue streams for the organization.

Knowledge strength-CARE Research Division

Our business is concentrated on leveraging our research capabilities when doing a rating exercise. The independent CARE Research Division has now widened its canvas to cover 39 sectors, which are up from 28 in FY11. These research reports, which are available on a subscription basis, have found progressively more acceptance in the market. We are working towards enhancing the coverage so that customers, especially those from institutions, are able to procure latest cutting edge research on the entire spectrum of sectors.

Economics

The Economics Division continues to provide real time economic analysis through reports that are released almost immediately after economic announcements are made. These reports are circulated widely to clients, banks, mutual funds, government officials and the media. The purpose is to both showcase CARE Ratings brand as well as disseminate your company''s viewpoint on all issues relating to both the global and domestic economy.

As part of building our visibility we have started printing and circulating our major reports to several opinion makers and the response has been encouraging. This is over and above the wide circulation through e-mail to clients, banks, mutual funds, investors, media, government officials etc.

Rating Committee

Your company is committed to maintaining high standards of professional quality and integrity. In line with this, we have an internal rating committee comprising senior executives of our Company and an external rating committee, comprising a majority of independent members. Each rating report is considered by our internal rating committee or our external rating committee, if not both. Ratings decided by our internal rating committee are reported to the external rating committee. Our rating committees are assisted in the evaluation by a team of professional analysts with relevant industry knowledge. The external rating committee members are Shri Y. H. Malegam (Chairman), Shri P. P. Pattanayak, Shri V. Leeladhar, Shri V.K. Chopra and Shri D.R. Dogra.

Working with the Government of India

Your company had collaborated with the Department of Economic Affairs, Ministry of Finance, to bring out a dossier on the Indian Economy. The dossier was comprehensive and covered all aspects of the economy highlighting the strengths in detail.

Brand CARE Ratings

We have been continuously espousing our brand in various conferences and events as well as media. We had organized two major events during the year. The first was a seminar on Credit Default Swaps in Mumbai and the other a debate on the Union Budget 2012-13 in New Delhi. (The former was graced by Smt S. Gopinath (Ex Deputy Governor, RBI) and Smt. Shilpa Kumar (Chairperson FIMMDA). For the latter, the main speakers were Shri T K Arun (Opinions Editor: The Economic Times) and Shri Sunil Jain (Opinions Editor: Financial Express). Our DMD, Shri Rajesh Mokashi was the third speaker on both the occasions while our MD & CEO, Shri D R Dogra, made the inauguration and welcome addresses.

Besides, we were active in terms of participation as sponsors in various events such as CII Finance and Investment Summit 2012, CNBC CFO Awards 2012, ASSOCHAM 2nd Annual Summit on Financial Markets, The CFO Summit 2011 and the ET REIFBS 2011 (Economic Times Real Estate Investment Forum and Business Spaces Conference).

Your company''s top management has participated actively in global events such as the WG Round Table on- The Importance of Rating for Countries and Companies in Africa, at Theodor-Heuss-Academy, Gummersbach (Cologne), Germany, where a presentation on ''Rating of Companies in Africa: Specific Challenges'' was made by our MD & CEO, Shri D. R. Dogra and Shri Mehul Pandya, General Manager. Shri D. R. Dogra was also appointed Director on the Board of Directors of Association of Credit Rating Agencies in Asia (ACCRA) on January 20, 20I2.

CARE''s participation was also visible in FICCI''s seminar involving business meeting with the Prime Minister of Mauritius, RBI''s Second International Research Conference, Kotak Institutional Equities ''Global Investor Conference'', Meeting of FICCI - Maharashtra State Council, International Conference on ''Growth with stability in affordable Housing Markets'', India Investment Conference - Positioning Portfolio for Turbulent Times, Global Steel Conference 20I2, International Conference on Accounting, Finance and Taxation, ASSOCHAM, 2nd Annual Summit on Financial Markets.

Human Resources

Human resources are the most critical asset for a company as plans can be executed thoroughly only in case we have the right people. Your organization realizes the importance of developing and maintaining a highly skilled and motivated staff. The focus has been on recruiting the best talent from top management institutes. However, for specialized functions at higher levels, lateral recruitment has been done from some of the best companies so as to match experience and superior skills with different roles.

As of March 3I, 20I2 we had 500 employees spread across the country which is a substantial increase from 303 as on March 3I, 20II. This has been necessitated from the demands of business development and ratings which has widened, as we have been reaching out to potential customers across the country with special focus on the MSME segment. Out of these, 337 are management graduates, out of which 87 are having engineering background. Further, there are 88 Chartered Accountants and II Post Graduates in specialized fields like Economics, Commerce etc. The remaining 64 have other varied qualifications according to the required roles.

We also do recognize the importance of training our staff so that they are equipped with better skill sets for both professional and personal development. Apart from a rigorous induction programme for all fresh recruits, we had sent 54 colleagues for attending 28 external training programmes across the country. This serves us dual purpose of skills enhancement as well as employee retention strategies.

IT Upgradation

The Ci3 application has been made fully operational during the year. It helps in better MIS reporting and control. It is an end-to-end solution for all information relating to rating activity which enables ease in generating reports, monitoring activity as well as used for planning.

The web site of any company is a useful marketing tool. Your company''s web site has been changed to present a different look and offers easier maneuverability to visitors. A lot of data and reports are available on the website. As this is an evolving process, we are still in the process of making changes in the web site to be more effective not just from the point of view of information but also marketing.

Directors

Pursuant to the provisions of Section 256 of the Companies Act, I956 and Articles of Association of the Company, Shri O V Bundellu retires by rotation and being eligible offers himself for reappointment.

The following are the Standing Committees of the Board Audit Committee

The Committee met four times in FY I2. The Committee comprises of Shri S. Venkatraman, Dr. N.K.Sengupta, Ms Bharti Prasad and Shri Rajesh Mokashi.

Investment Committee

The Investment Committee comprises Shri O.V. Bundellu, Shri S. Venkataraman, Shri D. R. Dogra and Shri Rajesh Mokashi. It met four times in FYI2. The Committee decided on various investment options for the company''s funds to derive the maximum return while optimizing the risk level.

Remuneration Committee

The Remuneration Committee comprises Dr. N.K.Sengupta, Shri S. Venkataraman, Ms Bharti Prasad and Shri D.R. Dogra.

IPO Committee

The IPO Committee comprises Shri O.V Bundellu, Shri S. Venkataraman, Shri D.R. Dogra, Shri Rajesh Mokashi and Shri Navin K. Jain. It met two times in FY12.

Directors Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors Responsibility statement, it is hereby confirmed.

I. that in the preparation of the annual accounts for the financial year ended March 31, 2012, the applicable accounting standards have been followed along with proper explanation relating to material departures;

II. that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for the year under review;

III. that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

IV that the Directors have prepared the accounts for the financial year ended March 31, 2012 on a ''going concern'' basis.

Auditors

As the shareholding of Corporations owned or controlled by the Central Government in CARE exceeds 51% the company is covered under provisions of section 619B of the Companies Act, 1956. The statutory Auditors for FY12 were appointed by the Comptroller and Auditor General of India (CAG).

Employees Salary

As required in terms of section 217(2A) of the Companies Act,1956, read with the rules framed there under a statement of employees drawing a salary of Rs Sixty Lakhs if employed throughout the year or Rs Five Lakhs per month if employed for part of the year is attached to this report.

Conflict of interest

There is a clear policy to segregate staff on the basis of business and ratings to ensure that there is no conflict of interest. Besides, there is a strict code of conduct which clearly ensures that the rating analyst does not have any interest in terms of equity or otherwise in the company being rated by him/her. Individual declarations have been taken from all employees in this regard. This we believe is necessary for providing unbiased ratings which in turn enhances the credibility of the organization.

Acknowledgements

The Board places on record its appreciation of the contribution of its employees to the company''s operations and the trust reposed in it by market intermediaries, issuers and investors. The Board also appreciates the support provided by the Reserve Bank of India, Securities Exchange Board of India, Comptroller and Auditor General of India and the Company''s Bankers, IDBI Bank, State Bank of India and HDFC Bank.

On behalf of the Board of Directors

O. V. Bundellu

Chairman

Place : Mumbai

Date : July 17, 2012

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