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Directors Report of ICRA Ltd.

Mar 31, 2015

To The Members, ICRA Limited

The Directors have pleasure in presenting the 24th Annual Report of your Company along with the Audited Financial Statements for the year ended March 31,2015.

Financial Performance

During its 24th year of operations, your Company has earned a Net Profit of Rs. 50.42 crore as against Rs. 58.73 crore during the previous year. Your Company's Basic Earning per Share for the year ended March 31,2015 was Rs. 51.44 as against Rs. 58.73 in the previous year. The financial results of your Company (standalone and consolidated) for the year ended March 31,2015 are presented in the following table.

Standalone Particulars 2013-14 2014-15 (Rs. crore) (Rs. crore)

Revenue from Operations 162.11 180.18

Other operating income 0.79 1.07

Other Income 17.29 24.92

Total Revenue 180.19 206.17

Total Expenditure (98.27) (110.87)

Profit before prior period adjustments, 81.92 95.30

exceptional items and tax

Prior period adjustments - 7.65

Profit before exceptional items and tax 81.92 87.65

Exceptional items - (11.52)

Profit before Tax 81.92 76.13

Tax Expense (23.19) (25.71)

Profit before Minority Interest 58.73 50.42

Minority Interest - -

Profit for the year 58.73 50.42

Balance brought Forward 127.49 153.43

Adjustment of on account of depreciation - (0.20)

Profit Available for Appropriation 186.22 203.65

appropriations

Proposed Dividend 23.00 24.00

Corporate Tax on Proposed Dividend 3.91 4.89

Transfer to General Reserve 5.88 5.05

Balance Carried to Balance Sheet 153.43 169.71

186.22 203.65

Consolidated 2013-14 2014-15 (Rs. crore) (Rs. crore)

Revenue from Operations 282.16 320.88

Other operating income 0.80 1.04

Other Income 19.35 26.23

Total Revenue 302.31 348.15

Total Expenditure (204.40)* (234.61)

Profit before prior period adjustments, exceptional items and tax 97.91 113.53

Prior period adjustments - 8.97

Profit before exceptional items and tax 97.91 104.56

Exceptional items - (4.13)

Profit before Tax 97.91 100.43

Tax Expense (28.98) (34.85)

Profit before Minority Interest 68.92 65.59

Minority Interest 0.01 0.13

Profit for the year . 68.93 65.45

Balance brought Forward 139.71 175.85

Adjustment of on account of depreciation - (63.25)

Profit Available for Appropriation 208.64 240.76 appropriations

Proposed Dividend 23.00 24.00

Corporate Tax on Proposed Dividend 3.91 4.89

Transfer to General Reserve 5.88 5.05

Balance Carried to Balance Sheet 175.85 206.82

208.64 240.76

*lncludes Rs. 1.46 crore towards Amortisation of Deferred Employees Compensation for Options granted under the Employees Stock Option Scheme of your Company.

Conditional Open Offer by Moody's

Moody's Singapore Pte Ltd along with Moody's Investment Company India Private Limited and Moody's Corporation made a Conditional Open Offer under Regulation 3(2) and Regulation 4 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Regulations") vide a Public Announcement dated February 21,2014 for the acquisition, from public shareholders, of up to 26,50,000 equity

shares, representing 26.50% of the total equity shares, of your Company, at a price of Rs. 2,000 per equity share and subsequently revised the price upwards to Rs. 2,400 per equity share.

The tendering period commenced on June 3, 2014 and closed on June 16, 2014. Pursuant to the closing of the tendering period, Moody's Singapore Pte Ltd acquired 2,154,722 equity shares tendered in the Open Offer, amounting to a total of 21.55% of the equity share capital of the Company. This resulted in an increase in the Moody's Group's total equity shareholding in the Company to 50.06% of the equity share capital of your Company.

Review of Operations Rating Services Market Overview

Compared to the previous fiscal, the macroeconomic situation improved in 2014-15 following substantial moderation in wholesale and retail inflation as well as narrowing of the current account and fiscal deficits; all of which benefited to an extent from the global trend of softening commodity prices. Economic growth recorded a mild uptick in spite of the drag created by weak rural demand and exports. Exchange rate volatility reduced substantially in 2014-15 versus the situation in 2013-14.

The investment-friendly policies and reform measures adopted by the new Union Government, such as faster clearances for stalled projects, easing of norms for foreign investments in key sectors and allocation of coal blocks through the auction route, led to an improvement in business confidence, creating the prospect of economic activity picking up pace, going forward. However, persisting problems related to land acquisition, high corporate leverage and banks' asset quality continued to constrain investment.

In line with subdued economic activity, credit growth of the banking system remained sluggish at less than 10% in 2014-15. Apart from muted demand growth across sectors and absence of pick up in investments, the increasing trend of disintermediation with a number of corporates accessing the bond markets (both domestic as well as international) also contributed to the same. Primary domestic equity issuances too remained sluggish in 2014-15 although, as mentioned earlier, domestic bond issuances revived.

With moderation in retail inflation, the Reserve Bank of India (RBI) reduced the benchmark repo rate by 50 basis points (bps) in January-March 2015. With decline in crude oil and other commodity prices contributing towards a narrowing of India's current account deficit (CAD), it is expected that further monetary easing in the remainder of calendar 2015 would take place. In addition, the focus on infrastructure in the Union Budget and the expectation of continued reform momentum would support investment activity with a lag.

The pick-up in economic activity, along with the expected monetary easing, should result in an increase in bank credit growth as well as increased activity in the bond market . Bond issuances should also get a fillip from the increased refinancing of high cost bank loans, including those by Special Purpose Vehicles (SPVs) set up for implementation of infrastructure projects, as well as financial sector players seeking to capitalise on lower cost of incremental borrowings.

Rating Services Review

Ratings: Segment-wise Revenue Composition

Segment 2013-14 2014-15 Growth (%) (Rs.crore) (Rs.crore)

Corporate Sector 99.10 110.49 11%

Financial Sector 42.63 51.49 21%

Structured Finance 7.41 7.96 7%

Public Finance 0.87 0.84 -3%

Other Ratings 12.89 15.12 17%

Total 162.90 185.90 14%

Composition of Rating Revenues

Segment 2013-14 2014-15 Growth (%) (Rs. crore) (Rs.crore)

Basel II 69.92 43% 77.78 42% 11%

Non-Basel II 92.98 57% 108.13 58% 16%

Total 162.90 100% 185.91 100% 14%

Corporate Sector

The market for bank loan ratings continued to remain sluggish in 2014-15, affected by the muted growth in corporate credit and the subdued investment climate. Your Company is hopeful that the measures being taken by the Union Government would start yielding positive results during the latter half of the current fiscal, supported by a benign macroeconomic environment, softening interest rates and gradual demand revival.

Also, on the positive side, despite the sluggish investment climate, total domestic bond issuance increased by approximately 60% in 2014-15 as against the 27% decline reported in 2013-14. The increase in issuance volumes was aided by softening interest rates (given the reluctance of banks to lower their base rates proportionately) and the trend towards increasing disintermediation. The increase in net foreign portfolio investment (FPI) inflows into the Indian bond markets during 2014-15 also helped corporates partly refinance their bank borrowings with bonds at finer pricing.

During the first nine months of the year under review, your Company continued to make significant progress in scaling up its business of rating small and medium enterprises (SMEs). However, during the last quarter of the fiscal year, the business received a setback as the National Small Scale Industries Corporation (NSIC) cut back the subsidy on the performance and credit rating scheme for SMEs. Thus your Company expects its SME rating business to remain sluggish during the current fiscal. However, given the large number of SMEs in the country and the valuable experience gained so far, your Company is exploring other options to scale up this business.

Financial Sector

Total domestic bond issuance by financial sector entities increased over 40% during 2014-15 as against the decline of 24% reported during the previous fiscal. The sharp increase was aided by the issuance of long tenure infrastructure bonds by banks, which the RBI allowed in August 2014. A number of banks also raised Basel III compliant capital instruments to meet the regulatory requirements. Your Company benefited from this development, given its strong presence in the rating of bank issuances. As for non-banking financial companies (NBFCs), they took advantage of the sticky base rates of banks amidst strong inflows into mutual funds on expectations of softening interest rates and came out with more bond issuances during 2014-15. With the banking system facing challenges on capital adequacy, an increase in capital issuance by banks is expected over the medium term, which should help your Company, going forward. Issuances of certificates of deposit (CDs) by banks continued to decline during the year under review, with most banks paring their bulk deposits as bank credit off-take remained subdued.

Among NBFCs, most of the retail focussed ones continued to scale up at a good pace in 2014-15. Some NBFCs continued to take the public debt issuance route in 2014-15 to raise funds from a wider investor base for onward lending. The better rated entities used commercial papers (CPs) to lower their borrowing costs as the cost of bank funds remained relatively high. The banks' base rate, especially, remained sticky while the CP and bond rates eased in 2014- 15. Accordingly, CP issuances were significantly higher throughout the year under review as compared with the previous year. The overall trends in the NBFC sector benefited your Company during the year under review, and it was able to use its strong presence in the sector to continue adding new clients while also increasing the volume of rated debt.

During 2014-15, your Company reinforced its position further in the rating of debt mutual funds with a number of fresh ratings of schemes across fund houses.

Looking forward, rating activity for your Company in the financial sector is expected to grow, but at a pace determined by several factors, including pickup in economic activity, especially in investment and consumption demand, and behaviour of interest rates.

Structured Finance

During 2014-15, issuance volumes in the securitisation market dropped for the second year in a row and issuance was around 45% lower than in the previous fiscal at around Rs. 16,000 crore. The predominant motive for banks—primarily private sector banks—to invest in securitisation instruments, despite the high tax incidence and the resultant low yield, is the need to meet shortfalls in meeting priority sector lending (PSL) targets. During May 2014, the RBI decided to recognise as priority sector loans banks' remaining deposits placed under the Rural Infrastructure Development Fund (RIDF) and certain other funds established with the National Bank of Agriculture and Rural Development (NABARD). This change resulted in a significant reduction in the PSL shortfall of banks for 2014-15, which in turn directly reduced such requirement from banks, the key investor segment for such securitised debt in India. However, even as the securitisation market lost pace in 2014-15, your Company was able to increase its share of this segment over the previous year.

The dip in securitisation activity in 2014-15 was partly compensated by growth in the bilateral assignment of loan pools, the alternative mode for acquisition of retail loan assets by banks.

Investing in securitisation transactions and acquiring loan pools through bilateral assignment—with the underlying assets being eligible loan receivables—continue to be the key routes for banks to meet shortfalls in PSL targets.

Thus, going forward, the extent of shortfall in PSL targets in the banking system and the availability of eligible assets with sellers are expected to be the key factors influencing securitisation issuance/assignment volumes.

Economic and Industry Research

Economic Research

Economic research is an activity that your Company has been engaged in right since its inception. The purpose of this continuing programme is to analyse contemporary developments that characterise the money and finance world, and to offer a framework for the explanation of policy choices, initiatives and outcomes. Your Company invests considerable time and resources in this activity, a product of which is the ICRA Bulletin: Money & Finance (Money & Finance). Every issue of Money & Finance features in-depth articles covering the key developments in the global and Indian economy since the previous edition, besides research articles on issues of contemporary interest. A host of

financial statistics is also presented at the end of every issue. The periodical is disseminated among a wide variety of readers, including, among others, students, academicians, policymakers, investors and economists across the country.

Apart from the abovementioned Bulletin, your Company regularly comes out with impact-assessment studies, research notes and trend analyses, covering several topics including, but not limited to, inflation, industrial growth, economic performance, the Union Budget and policy assessment and impact.

Industry Research

Your Company has continued to strengthen its research offerings, covering over 30 sub-segments within the corporate sector and multiple sub-segments under both the financial services and structured finance sectors. Given your Company's strong analytical capabilities across industries, access to primary data and reach across various tiers of industry players, the research reports provide in-depth analyses of industry-specific issues, trends in demand-supply factors, the competitive landscape, credit trends and medium-to-long-term outlook. The research reports are tailored to meet the analytical requirements of a wide range of participants, including banks, mutual funds, insurance companies, venture funds and corporate entities. Your Company has also introduced a quarterly Industry Risk Score service covering a wide range of industry sub-segments. The service captures industry-level factors that impact the credit profiles of companies operating in an industry and can be a comprehensive guide to assess credit risks for the lending community.

Besides periodic off-the-shelf research publications, your Company also offers customised research to meet the niche requirements of various clients. Your Company would continue to strengthen its offerings under this service, harnessing its extensive knowledge base and research capabilities.

During the year under review, your Company brought out regular research notes, analysing the impact of various events on a wide variety of industry players from the credit perspective. Besides, your Company continued to hold seminars, webinars and teleconferences on credit trends across industries for market participants at regular intervals.

Franchise Development

Your Company continues to make significant efforts to enhance its visibility and reinforce its brand strength through activities aimed at promoting investor and market awareness, bridging the information gap, and recognising excellence.

During the year, your Company held several joint seminars with Moody's Investors Service to disseminate its views on developments in the domestic and global credit markets. Further, to achieve faster dissemination of our views among a wider set of market participants your Company held a large number of teleconferences, which were all well appreciated. These initiatives, along with the increasing use of your Company's research and rating reports, have led to increasing requests from corporate groups and investors to hold sector specific briefings for them. Your Company continues to hold sessions along with banks, on Bank Loan Ratings under Basel II Guidelines, Rating of Small and Medium Enterprises, and other ICRA products as part of its outreach and education initiative. Apart from these, regular media releases voicing our opinion on contemporary issues continue to be made in the interest of the investing public.

On recognising excellence, your Company continues to power the Financial Advisor Awards along with CNBC-TV18, and the India Pride Awards, an initiative to recognise the superior performing public sector entities, with the Dainik Bhaskar group. All these awards have gained considerable popularity, as is evident from the level of participation witnessed over the years. These media houses make considerable efforts to popularise these awards, which helps your Company's position as an objective and independent firm, apart from providing visibility.

Subsidiary Companies

During 2014-15, your Company has dissolved one of its step-down subsidiaries, BPA Technologies Pte Ltd., incorporated in Singapore. As of March 31,2015, your Company has the following subsidiaries:

1. ICRA Management Consulting Services Limited

1.1. IMaCS Virtus Global Partners Inc.

1.2. Pragati Development Consulting Services Limited

2. ICRA Techno Analytics Limited

2.1. ICRA Sapphire Inc.

2.2. ICRA Global Capital Inc.

2.2.1. BPA Technologies Inc.

2.2.1.2. BPA Technologies Pvt. Ltd.

3. ICRA Online Limited

4. PT. ICRA Indonesia

5. ICRA Lanka Limited

6. ICRA Nepal Limited

1 A

The Consolidated Financial Statements of Group ICRA, consisting of ICRA Limited, its subsidiaries, and their subsidiaries, for the year 2014-15, which form a part of the Annual Report, are attached. The Auditors' Report on the Consolidated Financial Statements is also attached. In compliance with the relevant provisions of the Companies Act, 2013, a statement containing the brief financial details of the said subsidiary companies is annexed to the Consolidated Financial Statements. The Consolidated Financial Statements have been prepared in accordance with the prescribed Accounting Standards.

As required under the provisions of Section 136 (1) of the Companies Act, 2013, the financial statements, including consolidated financial statements and other documents required to be attached thereto, have been uploaded on the Company's website, www.icra.in. Further, your Company has also uploaded on its website the audited annual accounts of each of its subsidiary companies.

Branches of the Company

Your Company operates its business from its offices in Delhi, Gurgaon, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune.

Human Resource Development & Training

Human resource development continued to be accorded high priority during the year under review, with emphasis being placed on improving skill, competence and knowledge through regular training and in-house/external professional development programmes. The relation between the employees and the management of your Company remained harmonious during the year. Your Company has a consultative and participative management style, which has facilitated the achievement of its corporate goals. The morale of the employees remained high during the year, resulting in a positive contribution to the progress of your Company.

Employees Stock Option Scheme (ESOS)

Your Company has implemented the Employee Stock Option Scheme 2006 ("the Scheme") in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in conformity with the resolutions passed by the Shareholders at the Annual General Meetings of the Company held on June 12, 2006, July 29, 2008, and August 12, 2011. Pursuant to the resolution passed by the Shareholders at the Annual General Meeting held on June 12, 2006 for the grant of Options, 9,06,000 Equity Shares amounting to 9.06% of the Equity Share Capital of your Company have been issued to the ICRA Employees Welfare Trust for grant of Options to the eligible Optionees. Accordingly, the Stock Options have been granted to the eligible Optionees from the said pool of 9,06,000 Equity Shares in two tranches so far.

The first tranche was granted during 2006-07 and the second during 2010-11. The details of the Stock Options granted under the Scheme is annexed to the Directors' Report (Annexure I). The Scheme is administered by the ESOS Compensation Committee of the Board of your Company and the ICRA Employees Welfare Trust.

Particulars of Employees

The disclosure under the provisions of Section 197(12) of the Companies Act, 2013, regarding the ratio of the remuneration of each Director to the median employee's remuneration and such other details as specified in Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to the Directors' Report (Annexure II). The information on employees receiving remuneration of Rs. 60 lakh per financial year or Rs. 5 lakh per month, or more, is availble at the Registered Office of the Company during working hour and shall be made available to any shareholder on request.

Corporate Governance

The report of the Board of Directors of your Company on Corporate Governance is presented as a separate section (Annexure III) titled "Corporate Governance Report", which forms a part of the Annual Report. The composition of the Board, the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders Relationship Committee, the Corporate Social Responsibility Committee and other Committees of the Board, number of meetings of the Board, Committees of the Board and other matters are presented in the Corporate Governance Report.

The certificate of the Statutory Auditors of your Company regarding compliance with the Corporate Governance requirements as stipulated in Clause 49 of the Listing Agreement with the stock exchanges concerned is annexed to the Directors' Report.

Management Discussion & Analysis

The Management Discussion and Analysis is annexed to the Directors' Report (Annexure IV).

Insider Trading Regulations

Based on the requirements under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time, the Code of Conduct for prevention of insider trading is in force in your Company. The Board of Directors of the Company has adopted the Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information in compliance with Chapter IV of the said Regulations.

Material Changes and Commitments

No material changes and commitments that would affect the financial position of the Company have occurred between the end of the financial year to which the attached financial statements relate and the date of this report.

Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings and Expenditure

As your Company is not engaged in any manufacturing activity, the particulars relating to conservation of energy and technology absorption, as mentioned in the Companies (Accounts) Rules, 2014, are not applicable to it. However, emphasis is placed on employing techniques that result in the conservation of energy. Details on the foreign exchange earnings and expenditure of your Company appear in the Notes to Accounts.

Directors and Key Managerial Personnel

During 2014-15, Mr. Pranab Kumar Choudhury retired as Chairman & Group CEO of your Company and as Director from all the Group companies and their subsidiaries with effect from January 29, 2015. The Board placed on record its gratitude towards Mr. Choudhury for having nurtured and led the Company through evolution and growth to its present status.

During 2014-15, Mr. Amal Ganguli, Dr. Uddesh Kohli, Prof. Deepak Nayyar and Mr. Piyush Gunwantrai Mankad ceased to be Directors of your Company following their resignation from the Board. The resignations of Mr. Ganguli and Dr. Kohli were effective as of July 25, 2014 and July 26, 2014, respectively, while the resignations of Prof. Nayyar and Mr. Mankad were effective as of September 30, 2014. The Board placed on record its deep appreciation of the valuable advice and guidance provided by the said Directors throughout their tenure with your Company.

Pursuant to the provisions of Section 152 of the Companies Act, 2013, and the Articles of Association of your Company, Mr. Simon Richard Hastilow is due to retire by rotation, and being eligible, has offered himself for reappointment.

Pursuant to the provisions of sub-sections (4), (10), (11) of Section 149 of the Companies Act, 2013, read with the Companies (Appointment and Qualification of Directors) Rules, 2014, the Board of Directors appointed Mr. Arun Duggal and Ms. Ranjana Agarwal as Independent Directors for a period of five consecutive years with effect from November 11,2014 subject to approval of the shareholders of the Company at the forthcoming Annual General Meeting; the Board at its meeting on December 4, 2014, named Mr. Duggal as non-executive Chairman of your Company, effective January 29, 2015; the Board of Directors also appointed Ms. Radhika Vijay Haribhakti as Independent Director for a period of five consecutive years with effect from December 4, 2014 subject to approval of the shareholders of the Company at the forthcoming Annual General Meeting. The resolutions seeking their appointment as Independent Directors have been included in the Agenda of the Annual General Meeting.

Further, the Board of Directors appointed Mr. Robert Scott Fauber and Mr. Thomas John Keller Jr. as Additional Directors with effect from January 30, 2015 under the category of Non-Executive and Independent Directors. Both of them will hold office till the date of the next Annual General Meeting. The resolutions seeking their appointment as Director have been included in the Agenda of the Annual General Meeting.

The Board of Directors elevated and appointed Mr. Naresh Takkar as CEO of ICRA Group effective from January 30, 2015 (the elevation and appointment being in addition to his existing position as Managing Director and CEO of the Company), subject to approval of the shareholders of the Company at the forthcoming Annual General Meeting and other authorities, if any, under the provisions of Sections 196, 197, 198 and 203 read with Schedule V of the Companies Act, 2013, and the Rules made thereunder (including any statutory modification(s) or re- enactment thereof for the time being in force).

Proposals for the above appointments are part of the Agenda for the forthcoming Annual General Meeting and the respective resolutions are recommended for your approval.

The profiles of these Directors are presented in the Notice of the 24th Annual General Meeting, as required under the Companies Act, 2013, and Clause 49 of the Listing Agreement.

During 2014-15, Mr. Vijay Wadhwa resigned as the Company Secretary & Chief Financial Officer of the Company and was relieved from the services of the Company on September 29, 2014. The Board of Directors at its meeting held on March 2, 2015 appointed Mr. Vivek Mathur as the Chief Financial Officer of the Company and Mr. S. Shakeb Rahman as the Company Secretary & Compliance Officer.

Independent Directors' Declaration

As required under Section 149 (7) of the Companies Act, 2013, and Clause 49 of the Listing Agreement with the Stock Exchanges, the Company has received a confirmation/declaration from each of the Independent Directors stating that they meet the criteria of independence. The following Non-Executive Directors of the Company are independent in terms of Section 149(6) of the Companies Act, 2013, and Clause 49 of the Listing Agreement:

1. Mr. Arun Duggal

2. Ms. Ranjana Agarwal

3. Ms. Radhika Vijay Haribhakti

Extract of the Annual Return

An extract of the Annual Return in Form No. MGT 9 as per Section 92(3) and Rule 12 of the Companies (Management and Administration) Rules, 2014, is annexed with this report (Annexure V).

Directors' Responsibility Statement

As required under the provisions contained in Section 134 of the Companies Act, 2013, your Directors hereby confirm that:

(i) in the preparation of the Annual Accounts for the year ended March 31,2015, the applicable accounting standards have been followed and there are no material departures from the same;

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

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

(iv) the Directors had prepared the Annual Accounts on a going concern basis;

(v) the Directors had laid down the internal financial controls followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(vi) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Policy on Directors' Appointment

The Nomination and Remuneration Committee works with the Board to determine the appropriate characteristics, skill and experience that are required of the members of the Board. The members of the Board should possess the expertise, skills and experience needed to manage and guide the Company in the right direction and to create value for all stakeholders. The members of the Board will need to consist of eminent persons of proven competence and integrity and with an established track record. Besides having financial literacy, experience, leadership qualities and the ability to think strategically, the members of the Board of Directors are required to have a significant degree of commitment to the Company and should devote adequate time in preparing for the Board meeting and attending the same. Members of the Board of Directors are required to possess the education, expertise, skills and experience in various sectors and industries needed to manage and guide the Company. The members of the Board are required to look at strategic planning and policy formulation.

The members of the Board should not be related to any Executive or Independent Director of the Company or any of its subsidiaries. They are not expected to hold any executive or independent position in any entity that is in direct competition with the Company. Board members are expected to attend and participate in the meetings of the Board and its Committees, as relevant. They are also expected to ensure that their other commitments do not interfere with the responsibilities they have by virtue of being a member of the Board of the Company. While reappointing Directors on the Board and Committees of the Board, the contribution and attendance record of the Director concerned shall be considered in respect of such reappointment. The Independent Directors shall hold office as a member of the Board for a maximum term as per the provisions of the Companies Act, 2013, and the Listing

Agreement. The appointment of Directors shall be formalised through a letter of appointment.

The Executive Directors with the prior approval of the Board may serve on the Board of any other entity if there is no conflict of interest with the business of the Company.

Board and Directors Performance Evaluation

The Board of Directors of the Company based on the recommendations of the Nomination and Remuneration Committee has formulated a Board and Director Performance Evaluation Policy, thereby setting out the performance evaluation criteria for the Directors and the Board of the Company. The Board of Directors of the Company believe that the effectiveness of its governance framework can continue to be improved through periodic evaluation of the functioning of the Board as a whole, its Committees and individual Director's performance evaluation.

The Nomination and Remuneration Committee of the Board has established the performance evaluation criteria for (i) the Board as a whole (ii) Chairperson of the Board, (iii) individual Directors, and (iv) every Committee of the Board.

Auditors

M/s. B S R & Co. LLfl Chartered Accountants, Statutory Auditors of your Company, hold office until the conclusion of the forthcoming Annual General Meeting and are eligible for reappointment. The Company has received their written consent and a certificate that they satisfy the criteria provided under Section 141 of the Companies Act, 2013, and that the appointment, if made, shall be in accordance with the applicable provisions of the Companies Act, 2013, and the Rules framed thereunder. The Audit Committee and the Board of Directors has recommended the appointment of M/s. B S R & Co. LLFJ Chartered Accountants, as the Auditors of the Company for a period of four years, subject to ratification of the same at the Annual General Meeting.

Comments on Auditors' Report

The notes to accounts referred to in the Auditors' Report are self explanatory and do not call for any further comments. The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks.

The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.

Transfer to Reserves

Your Company proposes to transfer Rs. 5.05 crore (10% of the Net Profit for the year) to the General Reserve. An amount of Rs. 169.71 crore is proposed to be retained in the Statement of Profit & Loss.

Dividend

The Board of Directors recommends for approval of the Shareholders at the forthcoming Annual General Meeting, payment of dividend of Rs. 24 per Equity Share for the financial year ended March 31,2015. If the Shareholders approve the dividend at the forthcoming Annual General Meeting, the dividend shall be paid to: (i) all those Members whose names appear in the Register of Members as on August 7, 2015; and (ii) all those Members whose names appear on that date as beneficial owners as furnished by National Securities Depository Limited and Central Depository Services (India) Limited.

Transfer to Investor Education and Protection Fund

The Company sends reminder letters to all Shareholders whose dividends are unclaimed so as to ensure that they receive their rightful dues. Your Company has also uploaded on its website, www.icra.in, information regarding unpaid/unclaimed dividend amounts lying with your Company.

During 2014-15, the unclaimed dividend and Initial Public Offer application amounts which were due for transfer to the Investor Education and Protection Fund in accordance with the provisions of Section 205A(5) and 205C of the Companies Act, 1956, were transferred to the Investor Education and Protection Fund established by the Central Government: Rs. 18,800 on April 19, 2014 towards the application money received for the allotment of securities and due for refund; and Rs. 87,170 on September 12, 2014 towards amount in the unpaid dividend account of the Company for the financial year 2006-07. The said amounts had remained unclaimed for seven years, despite reminder letters having been sent to each of the Investors/Shareholders concerned.

Risk Management Policy

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

Audit Committee monitor and review the risk management plan.

Corporate Social Responsibility

Your Company 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, have been annexed to this report (Annexure VI). The reasons for not spending any amount under CSR in the financial year 2014-15 is provided in the Annual Report on Corporate Social Responsibility Activities.

Particulars of Contracts or Arrangements with Related Parties

Your Company has entered into contracts or arrangements with its related parties. The related-party transactions are disclosed in the financial statements for the year ended March 31,2015. There have been no material related-party transactions as per Section 188(1) of the Companies Act, 2013, and the required disclosure of information in Form AOC—2 as per Rule 8(2) of the Companies (Accounts) Rules, 2014, is annexed to this report (Annexure VII).

Policy on Prohibition, Prevention and Redressal of Sexual Harassment

Your Company has formulated a Policy on Prohibition, Prevention and Redressal of Sexual Harassment of Women at Workplace in accordance with The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013. The Company received one complaint dated March 10, 2015 relating to sexual harassment of a women employee. The Internal Complaint Committee (ICC) examined the same and the necessary action has been taken as recommended by the ICC.

Vigil Mechanism

Your Company has established a vigil mechanism in compliance with the provisions of Section 177 (9) of the Companies Act, 2013, and Clause 49 of the Listing Agreement. The vigil mechanism established provides adequate safeguards against victimization of persons who use such mechanism and make provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases. The Whistle Blower Policy of the Company has been uploaded on the website of the Company, www.icra.in.

Composition of the Audit of Committee

Your Company has constituted an Audit Committee, the composition of which has been provided in the Corporate Governance Report. During 2014-15, the Board accepted all the recommendations of the Audit Committee.

Secretarial Audit

The Board of Directors of the Company has appointed M/s. YJ. Basrar & Co., Company Secretaries (PCS Registration No. 3528), as the Secretarial Auditor of the Company for the financial year 2014-15 in terms of Section 204 of the Companies Act, 2013. The Secretarial Audit Report for financial year 2014-15 has been annexed to this Report (Annexure VIII).

Acknowledgements

Your Directors acknowledge the cooperation and assistance received from various institutions, Government agencies, Shareholders and professionals from different disciplines.

Your Directors also wish to place on record their appreciation of the contribution made by the members of staff of your Company.

For and on behalf of the Board of Directors Place : Gurgaon (Arun Duggal) Date : May 21,2015 Chairman DIN:00024262


Mar 31, 2014

To The Members, ICRA Limited

The Directors have pleasure in presenting the 23rd Annual Report of your Company along with the Audited Financial Statements for the year ended March 31, 2014.

Financial Performance

During its 23rd year of operations, your Company earned a Net Profit of Rs. 58.73 crore as against Rs. 60.38 crore during the previous year. Your Company''s Earning per Share and Cash Earning per Share† for the year ended March 31, 2014 were Rs. 58.73 and Rs. 62.65, respectively, as against Rs. 60.38 and Rs. 67.30, respectively, in the previous year. The financial results of your Company (standalone and consolidated) for the year ended March 31, 2014 are presented in the following table. Particulars Standalone Consolidated 2012-2013 2013-14 2012-13 2013-14

Revenue from Operations 148.59 162.90 251.41 282.96

Other Income 16.24 17.29 17.91 19.10

Total Revenue 164.83 180.19 269.32 302.06

Total Expenditure (91.95)# (98.27)* (197.28)# (204.15)*

Profit before Tax 72.88 81.92 72.04 97.91

Tax Expense (12.50) (23.19) (13.23) (28.99)

Profit before Minority Interest 60.38 58.73 58.81 68.92

Minority Interest - - 0.35 0.01

Profit after Tax 60.38 58.73 59.16 68.93

Balance brought Forward 98.89 127.49 112.33 139.71

Profit Available for Appropriation 159.27 186.22 171.49 208.64

APPROPRIATIONS

Proposed Dividend 22.00 23.00 22.00 23.00

Corporate Tax on Proposed Dividend 3.74 3.91 3.74 3.91

Transfer to General Reserve 6.04 5.88 6.04 5.88

Balance Carried to Balance Sheet 127.49 153.43 139.71 175.85

159.27 186.22 171.49 208.64

#Includes Rs. 4.81 crore towards Amortisation of Deferred Employees Compensation for Options granted under the Employees Stock Option Scheme of your Company.

*Includes Rs. 1.46 crore towards Amortisation of Deferred Employees Compensation for Options granted under the Employees Stock Option Scheme of your Company.

Conditional Open Offer by Moody''s

Moody''s Singapore Pte Ltd along with Moody''s Investment Company India Private Limited and Moody''s Corporation has made a Conditional Open Offer under Regulation 3(2) and Regulation 4 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Regulations") vide a Public Announcement dated February 21, 2014 for the acquisition of up to 26,50,000 equity shares, representing 26.50% of the total equity shares, of your Company, at a price of Rs. 2,000 per equity share, from public shareholders. At present, Moody''s Investment Company India Private Limited holds 28,50,900 equity shares, representing 28.509% of the total equity share capital, of your Company. The Offer is conditional on the acquisition of a minimum of 21,49,101 equity shares, representing 21.49101% of the total equity share capital, of your Company. Acquisition of the minimum 21,49,101 equity shares will take up Moody''s shareholding to 50.00001%, thereby making Moody''s the majority shareholder of your Company. In case of full acceptance of the Offer, on the other hand, Moody''s will hold 55,00,900 equity shares, representing 55.009% of the total equity share capital, of your Company.

As required under the Takeover Regulations, your Company has constituted a Committee of Independent Directors to provide its Reasoned Recommendations on the Open Offer to the shareholders of your Company. The Takeover Regulations require the Committee of Independent Directors to provide its recommendations at least two working days prior to the commencement of the Tendering Period.

Under Regulation 9(c) of the Securities and Exchange Board of India (Credit Rating Agencies), Regulations, 1999, prior approval of Securities and Exchange Board of India (SEBI) is required in cases involving change in control of a Credit Rating Agency. Accordingly, an application has been submitted with SEBI, seeking approval for change in control of your Company.

Under the Takeover Regulations, the Tendering Period will commence within 12 working days of the receipt of comments on the draft Letter of Offer from SEBI.

Review of Operations

Rating Services

Market Overview

Anaemic growth, high retail price inflation and periods of substantial volatility of the rupee''s exchange rate complicated macroeconomic management in fiscal year 2013-14, although risks related to the current account and fiscal deficits eased during the course of the year.

Despite a favourable monsoon and healthy growth of agricultural output, the pickup in domestic demand in 2013-14 was feeble and restricted to a few sectors. Additionally, issues related to weak investment confidence, high leverage levels of corporates, especially those in the infrastructure sector, and impaired asset quality of banks continued to constrain capacity expansion even as the Cabinet Committee on Investments (CCI) facilitated clearances for stalled projects during the year.

While a moderation in wholesale price inflation led to some monetary easing at the beginning of the fiscal year, the benchmark repo rate was raised by 75 basis points (bps) in September 2013-January 2014 in response to the elevated consumer price inflation rate. Also, given the sharp weakening of the Indian rupee (INR) relative to the US dollar in May-August 2013, the Reserve Bank of India (RBI) undertook temporary measures to combat exchange rate volatility, which however also put a strain on systemic liquidity. On the positive side, after a sharp deterioration in April-June 2013, India''s current account deficit (CAD) improved considerably in the subsequent three quarters, led partly by a successful clampdown on gold imports and contraction in non-oil, non-gold merchandise imports following feeble domestic growth. Moreover, merchandise exports looked up, benefiting from the weaker currency. Similarly, the Government of India''s fiscal deficit was also contained at a level below the budget estimates.

Primary equity and domestic bond issuances were sluggish in 2013-14. Growth in bank credit also remained at 14-15% during the year as it had in 2012-13.

The RBI has signalled an end to further monetary tightening if consumer price inflation follows the hoped-for path of moderation. However, the risks arising out of factors such as the possibility of a below-average monsoon in 2014 and resetting of administered prices (electricity, fuels, fertilisers) point to the high likelihood of an extended pause on policy rates. This, in turn, would keep consumption sentiments in check in 2014-15. Notwithstanding clearances received by various stalled projects, a long gestation period would limit the upside in the near term. Factoring in a mild improvement in manufacturing growth and a pickup in investment activity in the second half, economic growth is likely to display a small up-tick in 2014-15.

Rating Services Review

Ratings: Segment-wise Revenue Composition

Segment 2012-13 2013-14 Growth(%) (Rs. crore) (Rs. crore)

Corporate Sector 92.12 99.10 8% Financial Sector 40.85 42.63 4%

Structured Finance 6.21 7.41 19%

Public Finance 1.18 0.87 -26%

Other Ratings 8.23 12.89 57%

Total 148.59 162.90 10% Composition of Rating Revenues

Segment 2012-13 2013-14 Growtg(%) (Rs. crore) (Rs. crore)

Basel II 64.94 44% 69.92 43% 8%

Non-Basel II 83.65 56% 92.98 57% 11%

Total 148.59 100% 162.90 100% 10%

Corporate Sector

The market for bank loan ratings expanded at a sluggish pace in 2013-14. It continued to be affected by muted growth in corporate credit, the subdued investment climate leading to slow or deferred project execution and greater risk aversion among lenders in sanctioning new loans. While the high-powered CCI took the lead in according fast-track clearances to several core sector projects during the latter half of the year, it would possibly take some more time for project execution and investments to gather momentum.

As a result of the weak investment climate and high interest rates, total domestic bond issuance declined 27% during 2013-14 over the previous fiscal. Apart from a few tax-free bond issuances by public sector undertakings (PSUs), bond issuances by corporate entities remained low. On the positive side, there were some instances of refinancing of existing loans through bond issuances, and this could be expected to pick up once the interest rate environment turns more benign.

During the year under review, your Company continued to make significant progress in scaling up the business activity of rating small and medium enterprises (SMEs). This has been achieved through a combination of factors like greater reach and higher awareness about the benefits that SME ratings provide to borrowers. Given the large number of SMEs in the country and the valuable experience gained so far, your Company hopes to be able to continue increasing its scale and reach in this segment.

Financial Sector

The total domestic bond issuance by entities in the financial sector declined by 24% during 2013-14 over the previous fiscal as the investment climate remained subdued and the interest rate outlook uncertain. The decline would have been sharper but for the good investor response to the public issuance of debt (including tax-free bonds) by non-banking financial companies (NBFCs) and institutions in the second half of 2013-14, given the relatively high post-tax yields. The volumes were also supported by the increase in issuances of debt capital by banks, with many raising Basel III complaint Tier II bonds to meet regulatory capital requirements. Your Company benefited from this development, given its strong presence in the rating of Bank issuances. During 2013-14, your Company also rated the first Basel III compliant Tier I bonds to be issued by any bank in India. With the banking system facing challenges on capital adequacy, an increase in capital issuance by banks is expected over the medium term, which should help your Company, going forward. Issuances of certificates of deposit (CDs) by banks continued to decline during the year under review, with most banks paring their bulk deposits as bank credit off-take remained subdued.

As for NBFCs, most of them continued to scale up in 2013-14, albeit at a lower rate level than in 2012-13 when the operating environment was more benign. Some NBFCs continued to take the public debt issuance route in 2013-14 to raise funds from a wider investor base for onward lending. The tax-free bond issuances by strong public sector entities picked up in 2013-14 as they offered higher yields than the issuances made the previous year and given the expectations of softening interest rates over the medium term. Better rated entities used commercial papers (CPs) to lower their borrowing costs as the cost of bank funds remained relatively high, especially after the increase in base rates in the second quarter of 2013-14. Accordingly, CP issuances picked up in the second half of 2013-14 after having witnessed a decline in the first. The overall trends in the NBFC sector benefited your Company during the year under review, and it was able to use its strong presence in the sector to continue adding new clients while also increasing the volume of rated debt.

During 2013-14, your Company reinforced its position further in the rating of debt mutual funds by rating a number of capital protection oriented schemes (across fund houses) launched during the year.

Looking forward, rating activity in the financial sector is expected to grow, but at a pace determined by several factors, including pickup in economic activity, especially in investment and consumption demand, and behaviour of interest rates.

Structured Finance

During 2013-14, issuance volumes in the securitisation market declined 8% over the previous fiscal to around Rs. 28,000 crore. The dip in securitisation activity is attributable primarily to the distribution tax regime for securitisation transactions introduced by the Union Budget, 2013-14. The new tax treatment marks a significant adverse change for banks, the key investor segment in securitisation transactions in India. The pre-dominant motive for banks—primarily private sector banks—to invest in these securities, despite the high tax incidence and the resultant low yield, is the need to meet shortfalls in meeting priority sector lending (PSL) targets. However, even as the securitisation market lost some pace in 2013-14, your Company achieved significant growth compared to the previous year.

The dip in securitisation activity during the year under review was more than compensated by a strong revival in bilateral assignment of loan pools, the alternative mode for acquisition of retail loan assets by banks. The total estimated volume of bilateral assignments was around Rs. 18,000 crore, a rise of over 100% over the figure (albeit low) for the previous year. Notably, a sizable portion of this volume was accounted for by public sector banks, which acquired retail loan pools not to meet PSL shortfalls but as a tool for inorganic growth in assets at a time when corporate credit off-take was low. Estimation of credit loss in such loan pools, which is required by the investors, helped your Company serve this segment effectively.

Investing in securitisation transactions or acquiring loan pools through bilateral assignment—with the underlying assets being eligible loan receivables—continue to be the key routes for banks to meet shortfalls in PSL targets. Thus, going forward, the extent of shortfall in PSL targets in the banking system and the availability of eligible assets with sellers are expected to be the key factors influencing securitisation issuance/assignment volumes.

Economic and Industry Research

Economic Research

Economic research is an activity that your Company has been engaged in right since its inception. The purpose of this continuing programme is to analyse contemporary developments that characterise the money and finance world, and to offer a framework for the explanation of policy choices, initiatives and outcomes. Your Company invests considerable time and resources in this activity, a product of which is the ICRA Bulletin: Money & Finance (Money & Finance). Every issue of Money & Finance features in-depth articles covering the key developments in the global and Indian economy since the previous edition, besides research articles on issues of contemporary interest. A host of financial statistics is also presented at the end of every issue. The periodical is disseminated among a wide variety of readers, including, among others, students, academicians, policymakers, investors and economists across the country.

Money & Finance apart, your Company regularly comes out with impact-assessment studies, research notes and trend analyses, covering several topics including, but not limited to, inflation, economic performance, the Union Budget, the index of industrial production, and policy assessment and impact.

Industry Research

Your Company has continued to strengthen its research offerings, covering over 30 segments in the corporate and financial services sectors. Given your Company''s strong analytical capabilities across industries, access to primary data and reach across various tiers of industry players, the research reports provide in-depth analysis of industry-specific issues, trends in demand-supply factors, the competitive landscape, credit trends and medium-to-long-term outlook. The research reports are tailored to meet the analytical requirements of a wide range of participants, including banks, mutual funds, insurance companies, venture funds and corporate entities. Besides periodic off-the-shelf publications, your Company also offers customised research to meet the niche requirements of various clients. Your Company would continue to strengthen its offerings under this service, harnessing its extensive knowledge base and research capabilities.

During the year under review, your Company continued to bring out research notes, analysing the impact of various events on a wide variety of industry players from the credit perspective. Besides, your Company continued to hold seminars, webinars and teleconferences for market participants at regular intervals.

Franchise Development

Your Company continues to make significant efforts to enhance its visibility and reinforce its brand strength through activities aimed at promoting investor and market awareness, bridging the information gap, and recognising excellence.

During the year, your Company held several seminars, some along with banks, on Bank Loan Ratings under Basel II Guidelines, Rating of Small and Medium Enterprises, and other ICRA products in several Tier II cities as part of its outreach and education initiative. Besides, joint seminars with Moody''s Investors Service were conducted, all of which were well attended and widely appreciated. Further, several teleconferences, covering most of the key sectors, were organised, with these enabling more efficient and faster dissemination of ICRA''s credit outlook among a wider set of market participants. These apart, regular media releases were made on issues of interest to the investing public.

On recognising excellence, your Company continues to power the Financial Advisor Awards along with CNBC-TV18, and the India Pride Awards, an initiative to recognise the superior performing public sector entities, with the Dainik Bhaskar group. All these awards have gained considerable popularity, as is evident from the level of participation witnessed over the years. In addition, your Company during the year under review powered the MACCIA Awards that recognise Corporate Excellence in the State of Maharashtra. This award is promoted by Maharashtra Chamber of Commerce, Industry & Agriculture and IBN Lokmat.

Subsidiary Companies

During the year under review, ICRA Techno Analytics Limited (ICTEAS), a wholly owned subsidiary of your Company, through its subsidiary ICRA Global Capital Inc., increased its equity stake to 100% in BPA Technologies Inc. (BPA), thereby making BPA a wholly-owned subsidiary of ICTEAS. BPA is a California-based global business consulting and software technology services firm. Other than in California, BPA has development centres in Chennai and Visakhapatnam. Focused on enterprise content management, enterprise portal and collaboration, BPA offers strategy consulting, implementation and application management services in its areas of specialisation.

Your Company is in compliance with all the conditions stipulated by the Ministry of Corporate Affairs, Government of India, for availing itself of the general exemption under Section 212 (8) of the Companies Act, 1956, from annexing to the Balance Sheet of your Company, the Audited Statements of Account together with the Directors'' Reports and the Auditors'' Reports for the year 2013-14 of the following subsidiary companies:

1. ICRA Management Consulting Services Limited

1.1. IMaCS Virtus Global Partners Inc.

1.2. Pragati Development Consulting Services Limited

2. ICRA Techno Analytics Limited

2.1. ICRA Sapphire Inc.

2.2. ICRA Global Capital Inc.

2.2.1. BPA Technologies Inc.

2.2.1.1. BPA Technologies Pte Ltd.

2.2.1.2. BPA Technologies Pvt. Ltd.

3. ICRA Online Limited

4. PT. ICRA Indonesia

5. ICRA Lanka Limited

6. ICRA Nepal Limited

However, if any Shareholder of your Company or its subsidiary companies so desires, your Company will make available copies of the Financial Statements of the above subsidiary companies and related information, free of charge.

The Consolidated Financial Statements of Group ICRA, consisting of ICRA Limited, its subsidiaries, and their subsidiaries, for the year 2013-14, which form a part of the Annual Report, are attached. The Auditors'' Report on the Consolidated Financial Statements is also attached. A statement containing the brief financial details of the said subsidiary companies is annexed, as prescribed by the Ministry of Corporate Affairs, Government of India, to the Consolidated Financial Statements. The Consolidated Financial Statements have been prepared in accordance with the prescribed Accounting Standards.

Recovery of Security Deposit from Associated Journals Limited

During 1998-99, your Company had filed a suit with the Hon''ble High Court of Delhi for the recovery of a refundable security deposit of Rs. 46.73 lakh, along with interest due thereon, from Associated Journals Limited for premises located at Herald House, Bahadurshah Zafar Marg, New Delhi. During 2007-08, a ruling was passed in favour of your Company in the said matter by the Hon''ble High Court of Delhi. Subsequently however, appeals were filed by Associated Journals Limited against the said ruling. In 2011-12, the Hon''ble High Court of Delhi dismissed the appeals, but refrained from imposing any cost on Associated Journals Limited. Thereafter, your Company reinitiated proceedings against Associated Journals Limited for recovery of the sums due in terms of the decree passed in favour of your Company. Your Company has received the amount deposited by Associated Journals Limited with the Hon''ble High Court of Delhi, and subsequently full and final settlement amount was received on March 31, 2014.

Branches of the Company

Your Company operates its business from its offices in Delhi, Gurgaon, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune. During the year under review, your Company took additional space on lease in Mumbai, Kolkata, Chennai and Pune to accommodate employees who have joined your Company recently.

Human Resource Development & Training

Human resource development continued to be accorded high priority during the year under review, with emphasis being placed on improving skill, competence and knowledge through regular training and in-house/external professional development programmes. The relation between the employees and the management of your Company remained harmonious during the year. Your Company has a consultative and participative management style, which has facilitated achievement of its corporate goals. The morale of employees remained high during the year, contributing positively to the progress of your Company.

Employees Stock Option Scheme (ESOS)

Your Company has implemented the Employee Stock Option Scheme 2006 ("the Scheme") in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in conformity with the resolutions passed by the Shareholders at the Annual General Meetings of the Company held on June 12, 2006, July 29, 2008, and August 12, 2011. Pursuant to the resolution passed by the Shareholders at the Annual General Meeting held on June 12, 2006 for the grant of Options, 9,06,000 Equity Shares amounting to 9.06% of the Equity Share Capital of your Company have been issued to the ICRA Employees Welfare Trust for grant of Options to the eligible Optionees. Accordingly, the Stock Options have been granted to the eligible Optionees from the said pool of 9,06,000 Equity Shares in two tranches so far. The first tranche was granted during 2006-07 and the second during 2010-11. The details of the Stock Options granted under the Scheme are annexed to the Directors'' Report (Annexure I), and so is the Certificate from the Statutory Auditors of your Company certifying that the scheme has been implemented in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in accordance with the resolutions passed in the said Annual General Meetings of the Company (Annexure II). The Scheme is administered by the ESOS Compensation Committee of the Board of your Company and the ICRA Employees Welfare Trust.

Particulars of Employees

The information on employees receiving remuneration of Rs. 60 lakh per financial year or Rs. 5 lakh per month, or more, is required to be given as annexure to the Directors'' Report under Section 217 (2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Amendment Rules, 2011. However, in terms of Section 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 Office of your Company.

Corporate Governance

The report of the Board of Directors of your Company on Corporate Governance is presented as a separate section (Annexure III) titled "Corporate Governance Report", which forms a part of the Annual Report. The Composition of the Board, the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders Relationship Committee, the Corporate Social Responsibility Committee and other Committees of the Board, number of meetings of the Board, Committees of the Board and other matters are presented in the Corporate Governance Report.

The Certificate of the Statutory Auditors of your Company regarding compliance with the Corporate Governance requirements as stipulated in Clause 49 of the Listing Agreement with the stock exchanges concerned is annexed to the Directors'' Report.

Management Discussion & Analysis

The Management Discussion and Analysis is annexed to the Directors'' Report (Annexure IV).

Insider Trading Regulations

Based on the requirements under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended from time to time, the Code of Conduct for prevention of insider trading is in force in your Company.

Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings and Expenditure

As your Company is not engaged in any manufacturing activity, the particulars relating to conservation of energy and technology absorption, as mentioned in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, are not applicable to it. However, emphasis is placed on employing techniques that result in the conservation of energy. Details on the foreign exchange earnings and expenditure of your Company appear in the Notes to Accounts.

Directors

During 2013-14, Mr. Pranab Kumar Choudhury was reappointed Whole-time Director (Chairman & Group CEO) of your Company by the Shareholders at the 22nd Annual General Meeting held on August 2, 2013.

Further, Dr. Min Ye and Mr. Simon Richard Hastilow have been appointed Directors of your Company by the Shareholders at the 22nd Annual General Meeting held on August 2, 2013.

During 2013-14, Ms. Jennifer Ann Elliott and Mr. Frederic Walter Jacques Drevon ceased to be Directors of your Company following their resignation from the Board on May 24, 2013. The Board places on record its deep appreciation of the valuable advice and guidance provided by them throughout their tenure with your Company.

Pursuant to the provisions of Section 152 of the Companies Act, 2013, and the Articles of Association of your Company, Dr. Min Ye retires by rotation, and being eligible, offers himself for reappointment.

The Board of Directors of your Company has considered the provision of Section 149(10) of the Companies Act, 2013, which states that an Independent Director shall hold office for a term of up to five consecutive years on the Board of a Company, but shall be eligible for re-appointment on the passing of a special resolution by the Company and the disclosure of such appointment in the Board''s report. The Board has also considered the provision of Section 149(11) which states that no Independent Director shall hold office for more than two consecutive terms, but such Independent Director shall be eligible for re-appointment after the expiration of three years from the date s/he ceased to be an Independent Director.

Further, the Board of Directors of your Company has considered the provision of Section 149(13) of the Companies Act, 2013, which states that the provision of sub-sections (6) and (7) of Section 152 in respect of retirement of Directors by rotation shall not apply to the appointment of Independent Directors.

The Board of Directors of your Company felt that it would be important to re-appoint the existing Independent Directors of your Company in accordance with the provisions of sub-sections (4), (10), (11) of Section 149 of the Companies Act, 2013, read with the Companies (Appointment and Qualification of Directors) Rules, 2014.

Pursuant to the provisions of sub-sections (4), (10), (11) of Section 149 of the Companies Act, 2013, read with the Companies (Appointment and Qualification of Directors) Rules, 2014, the Board of Directors recommends the re-appointment of Dr. Uddesh Kohli, Prof. Deepak Nayyar, Mr. Piyush Gunwantrai Mankad and Mr. Amal Ganguli, for a period of five consecutive years with effect from August 13, 2014 to the Shareholders of your Company at the ensuing Annual General Meeting.

Proposals for the above re-appointments are part of the Agenda for the forthcoming Annual General Meeting and the respective resolutions are recommended for your approval.

The profiles of these Directors are presented in the Notice of the 23rd Annual General Meeting, as required under the Companies Act, 2013, and Clause 49 of the Listing Agreement.

Directors'' Responsibility Statement

As required under the provisions contained in Section 217(2AA) of the Companies Act, 1956, your Directors hereby confirm that:

(i) in the preparation of the Annual Accounts for the year ended March 31, 2014, the applicable accounting standards have been followed and there are no material departures from the same;

(ii) 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 a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that year;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; and

(iv) the Directors have prepared the Annual Accounts on a going concern basis.

Auditors

Messers Vipin Aggarwal & Associates, Chartered Accountants, Statutory Auditors of your Company, hold office until the conclusion of the forthcoming Annual General Meeting and are eligible for re- appointment. They have confirmed their eligibility for reappointment under the provisions of Section 139 of the Companies Act, 2013.

The Notes to Accounts referred to in the Auditors'' Report are self explanatory and do not call for any further comments.

Transfer to Reserves

Your Company proposes to transfer Rs. 5.88 crore (10% of the Net Profit for the year) to the General Reserve. An amount of Rs. 153.43 crore is proposed to be retained in the Statement of Profit & Loss.

Dividend

The Board of Directors recommends for approval of the Shareholders at the forthcoming Annual General Meeting, payment of dividend of Rs. 23 per Equity Share for the financial year ended March 31, 2014. If the Shareholders approve the dividend at the forthcoming Annual General Meeting, the dividend shall be paid to: (i) all those Members whose names appear in the Register of Members as on August 7, 2014; and (ii) all those Members whose names appear on that date as beneficial owners as furnished by National Securities Depository Limited and Central Depository Services (India) Limited.

Transfer to Investor Education and Protection Fund

The Company sends reminder letters to all Shareholders whose dividends are unclaimed so as to ensure that they receive their rightful dues. Your Company has also uploaded on its website, www. icra. in, information regarding unpaid/unclaimed dividend amounts lying with your Company.

During 2013-14, none of the unclaimed dividend/Initial Public Offer application amounts were due for transfer to the Investor Education and Protection Fund. However, pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956, your Company has transferred to the Investor Education and Protection Fund established by the Central Government, Rs. 18,800 on April 19, 2014 towards the application money received for the allotment of securities and due for refund. The said amount remained unclaimed for a period of seven years, despite reminder letters having been sent to each of the Investors concerned.

Acknowledgements

Your Directors acknowledge the cooperation and assistance received from various institutions, Government agencies, Shareholders and professionals from different disciplines.

Your Directors also wish to place on record their appreciation of the contribution made by the members of staff of your Company.

For and on behalf of the Board of Directors

(Pranab Kumar Choudhury)

Place : New Delhi Chairman & Group CEO

Date : May 14, 2014 DIN: 00015470


Mar 31, 2013

To The Members, ICRA Limited

The Directors have pleasure in presenting the 22nd Annual Report of your Company along with the Audited Financial Statements for the year ended March 31, 2013.

Financial Performance

During its 22nd year of operations, your Company earned a Net Profit of Rs. 60.38 crore as against Rs. 50.90 crore during the previous year. Your Company''s Earning per Share and Cash Earning per Share† for the year ended March 31, 2013 were Rs. 60.38 and Rs. 67.30, respectively, as against Rs. 50.90 and Rs. 65.72, respectively, in the previous year. The financial results of your Company (standalone and consolidated) for the year ended March 31, 2013 are presented in the following table.

Particulars Standalone Consolidated 2011-12 2012-13 2011-12 2012-13 (Rs. crore)(Rs. crore)(Rs. crore) (Rs. crore)

Revenue from Operations 139.36 148.59 207.46 251.41

Other Income 19.74 16.24 21.29 17.91

Total Revenue 159.10 164.83 228.75 269.32

Total Expenditure (83.37)# (91.95)* (149.58)# (197.28)*

Profit before Tax 75.73 72.88 79.17 72.04

Tax Expense (24.83) (12.50) (25.31) (13.23)

Profit before Minority Interest 50.90 60.38 53.86 58.81

Minority Interest 0.15 0.35

Profit after Tax 50.90 60.38 54.01 59.16

Balance brought Forward 76.32 98.89 86.94 112.33

Profit Available for Appropriation 127.22 159.27 140.95 171.49

APPROPRIATIONS

Proposed Dividend 20.00 22.00 20.00 22.00

Corporate Tax on Proposed Dividend 3.24 3.74 3.24 3.74

Transfer to Capital Redemption Reserve 0.30

Transfer to General Reserve 5.09 6.04 5.09 6.04

Adjustments relating to erstwhile Axiom Technologies Ltd. (0.01)

Balance Carried to Balance Sheet 98.89 127.49 112.33 139.71

127.22 159.27 140.95 171.49

#Includes Rs. 12.92 crore towards Amortisation of Deferred Employees Compensation for Options granted under the Employees Stock Option Scheme of your Company.

*Includes Rs. 4.81 crore towards Amortisation of Deferred Employees Compensation for Options granted under the Employees Stock Option Scheme of your Company.

Review of Operations Rating Services

Market Overview

The fiscal year 2012-13 remained challenging from a macroeconomic perspective. Although core inflation moderated appreciably, retail inflation remained stubbornly high, limiting the space available for the Reserve Bank of India (RBI) to ease the policy repo rate in response to the slowing of economic growth. While the announcement of various reforms from September 2012 onwards led to an improvement in sentiments, new project announcements and capacity addition remained elusive.

An unfavourable monsoon weakened agricultural growth and incomes in the rural sector during the year, while relatively high retail inflation dampened growth of disposable income for other households. As a result, consumption demand moderated for various categories of products. Moreover, the investment cycle showed no signs of revival, given the persistence of issues related to regulatory approvals, land acquisition, availability of critical inputs, and over-leveraged balance sheets.

The domestic systemic liquidity deficit breached the RBI''s comfort zone for much of the second half (H2) of 2012-13 despite the reduction of 75 basis points (bps) in the cash reserve ratio (CRR) since September 2012 as deposit accretion lagged credit growth at the absolute level in H2, 2012- 13. Tight liquidity restrained the pace of transmission of monetary easing to lower interest rates, particularly in the fourth quarter (Q4) of the year.

Merchandise exports contracted during the year, reflecting weak demand from advanced economies and persisting infrastructural deficits in India, which offset the competitiveness gains arising out of a weaker exchange rate of the rupee relative to major currencies. At the same time, relatively inelastic demand for crude oil and gold kept merchandise imports high. A weaker rupee in conjunction with the substantial volume of short-term debt due for redemption created problems for corporate entities, especially those with large foreign currency borrowings.

While the primary equity market revived somewhat in H2, 2012-13, domestic bond issuances displayed over 30% growth during the year driven by higher issuances by non-banking finance companies (NBFCs) and corporates. Growth in bank credit dipped from 17% in 2011-12 to around 15% in 2012-13. Continuing the trend set in 2011-12, a significant proportion of the incremental bank credit extended to industry in 2012-13 was absorbed by the power sector (largely to offset the substantial accumulated losses) and basic metals & metal products (partly on account of the higher working capital requirement against the backdrop of elevated commodity prices).

On the regulatory side, recently, Government of India (GoI) has made concerted efforts to arrest fiscal slippages and also announced some bold policy measures with a view to stimulating economic growth. Even as the RBI''s policy stance continues to tilt towards measures addressing growth concerns, the forward-looking guidance it has provided cites high retail inflation and the wide current account deficit to emphasise that headroom for further monetary easing remains limited. Nevertheless, transmission of the recent and anticipated repo rate cuts would ease interest rates to an extent, providing a limited boost to interest-rate sensitive sectors and consumption sentiments. Additionally, a normal monsoon would help ease food inflation and revive consumer demand, particularly from the rural sector. Moreover, the steps initiated by GoI to expedite clearances through the Cabinet Committee on Investment and address sector-specific issues (for instance, in power) are likely to help revive investment activity over the course of the current fiscal year.

Rating Services Review

Ratings: Segment-wise Revenue Composition

Segment 2011-12 2012-13 Growth (%) Rs. Rs.

Corporate Sector 93.05 92.12 -1%

Financial Sector 35.72 40.85 14%

Structured Finance 6.30 6.21 -1%

Public Finance 0.88 1.18 34%

Other Ratings 3.41 8.23 141%

Total 139.36 148.59 7%

Corporate Sector

The market for bank loan ratings continued to expand in 2012-13, although the ticket size of individual mandates remained small. Also, the market for bank loans was affected by sluggish growth in corporate credit as well as by the subdued investment climate in the country which saw very few large projects achieving financial closure. The challenging macroeconomic environment along with the highly leveraged balance sheet of a large number of corporates, especially in the infrastructure sector, also constrained pick-up in fresh investment activity.

The volume of corporate debt issuance through the capital market continued to rise in 2012-13 as better-rated entities (including NBFCs and corporate entities) raised funds via bonds at finer rates, given the high base rate of banks. Also, there was some progress in rating credit enhanced bonds with partial guarantee provided by India Infrastructure Finance Company Limited (IIFCL). The takeout financing scheme of IIFCL also saw a few special purpose vehicles (SPVs) refinance loans taken from the banking system.

The market for grading of initial public offerings (IPOs) remained sluggish during 2012-13. Growth in this segment hinges on revival in market sentiments and the consequent increase in fund-raising via IPOs.

Your Company has been making progress in scaling up the business activity of rating small and medium enterprises (SMEs). These ratings are widely used by banks as an input for the pricing of credit to the SMEs concerned. The total number of SMEs rated by ICRA picked up well during the year under review. Given the large number of SMEs in the country and the valuable experience gained so far, your Company hopes to step up the volumes in this segment during the current year.

Financial Sector

During the year, your Company benefited from the increase in issuances of commercial paper and corporate bonds, which in turn drew support from the greater investor appetite for such products and the higher limits set for investments by foreign institutional investors (FIIs) in corporate bonds. However capital debt issuances by banks stagnated in 2012-13, with overall credit off-take being weaker and some equity infusion taking place ahead of Basel III. Certificate of deposit (CD) issuances by banks also declined during the year with most public sector banks paring their bulk deposits on regulatory prompt.

As for NBFCs, most of them continued to scale up operations in 2012-13 even as the operating environment remained challenging. The year also saw some NBFCs take the public debt issuance route to raise funds for onward lending. Tax-free bond issuances by strong public sector entities however remained weak during 2012-13 with investor interest for these long-tenure issues remaining tepid as banks continued to offer attractive rates on deposits. The overall trends in the NBFC sector continued to benefit your Company during the year under review, given its strong presence in this sector.

Your Company continued to further strengthen its position in the rating of debt mutual funds during 2012-13, adding new asset management companies (AMCs) as clients, besides rating more debt schemes of its existing AMC-clients.

Looking ahead, rating activity in the financial sector is expected to grow, given GoI''s attempts to put growth back of track and the likelihood of a decline in interest rates in the economy, both of which should encourage investment and consumption demand.

Structured Finance

During 2012-13, issuance volumes in the rated bilateral loan assignment/securitisation market reduced by around 20% over the previous fiscal to around Rs. 29,000 crore. The dip in activity followed mainly from the H1, 2012-13-issued RBI guidelines disallowing originators from providing credit enhancement in the bilateral assignment of loan pools—the popular mode of doing transactions till 2011-12. Further, some of the requirements introduced by the RBI guidelines left originators with a smaller portfolio eligible for securitisation. On the positive side, the year under review saw the first instance of pass-through certificates, the instruments issued in securitisation transactions, being listed on the stock exchange—a positive step towards improving secondary market trading.

Even as the opportunity for rating of bilateral assignment transactions ceased, your Company developed an alternative product—estimate of credit loss in the loan pool—to serve the segment. This was received well by market participants. Also, your Company rated a number of customised structured obligations—guarantee-backed non-convertible debentures (NCDs)/commercial paper, put option-backed NCDs, and annuity-backed structured NCDs—during the year under review. It is also expected that the new tax treatment introduced by the Union Budget for 2013-14 would open the path for mutual funds to invest in securitisation transactions (which would have to be rated), although the same could be a negative for banks.

With bank finance to NBFCs no longer qualifying as priority sector lending (PSL), investing in securitisation transactions—with the underlying assets being eligible loan receivables—remains the key route left for banks to meet their shortfall in PSL targets. Thus, going forward, the extent of shortfall in PSL targets in the banking system and the availability of eligible assets with sellers are expected to be the key factors influencing securitisation issuance volumes. Nevertheless, in this regard, the tax treatment could lower banks'' motivation to invest in securitised paper.

Economic and Industry Research

Economic Research

Your Company has been engaged in economic research since its inception, investing considerable time and resources into the activity. The purpose has been to analyse contemporary developments that characterise the money and finance world, and to offer a framework for the explanation of policy choices, initiatives and outcomes. The ICRA Bulletin: Money & Finance (Money & Finance) is a product of this research. This periodical is disseminated among a wide variety of readers, including, among others, students, academicians, policymakers, investors and economists across the country.

Apart from Money & Finance, your Company regularly comes out with impact-assessment studies, research notes and trend analyses, covering several topics including, but not limited to, inflation, economic performance, the Union Budget, the index of industrial production, and policy assessment and impact.

Industry Research

Your Company has re-launched industry research service, covering over 30 segments in the corporate and financial services sectors. Given your Company''s strong analytical capabilities across industries, the research reports provide in-depth analysis of industry-specific issues, trends in demand-supply factors, the competitive landscape, and medium-to-long-term outlook. The research reports are tailored to meet the research requirements of a wide range of participants, including banks, mutual funds, insurance companies, venture funds and corporates. Your Company would continue to strengthen its offerings under this service, harnessing its extensive knowledge base and research capabilities.

During the year under review, your Company continued to bring out research notes, analysing the impact of various events on the sectors concerned from the credit perspective. Besides, your Company continued to hold seminars and teleconferences for market participants at regular intervals.

Franchise Development

Your Company continues to make every effort to enhance its visibility and reinforce its brand strength through such activities that are aimed at promoting investor and market awareness, bridging the information gap, and recognising excellence.

During the year, your Company held several seminars, some along with banks, on Bank Loan Ratings under Basel II Guidelines, Rating of Small and Medium Enterprises, and other ICRA products in several Tier II cities as part of its outreach and education initiative. Besides, joint seminars with Moody''s Investors Service were conducted, all of which were well attended and appreciated. Further, several teleconferences, covering most of the key sectors, were organised, with these enabling more efficient and faster dissemination of ICRA''s credit outlook among a wider set of market participants. These apart, regular media releases were made on issues of interest to the investing public.

On recognising excellence, your Company continues to power the Financial Advisor Awards along with CNBC-TV18, the Financial Leadership Awards with Bloomberg UTV, and the India Pride Awards, an initiative to recognise the superior performing public sector entities, with the Dainik Bhaskar group. All these Awards have gained considerable popularity, as is evident from the level of participation witnessed over the years. This year, your Company has also powered Dainik Bhaskar''s inaugural Jaipur Real Estate Awards.

Subsidiary Companies

During the year, ICRA Nepal Limited (ICRA Nepal), a subsidiary of your Company, commenced credit rating services in Nepal following the grant of rating licence by the Securities Board of Nepal. Your Company holds 51% of the share capital in ICRA Nepal, the balance 49% being held by certain reputable Nepal-based institutions and professionals.

During 2012-13, ICRA Techno Analytics Limited (ICTEAS), a wholly owned subsidiary of your Company, through its subsidiary ICRA Global Capital Inc., acquired a majority stake of 75.1% in BPA Technologies Inc. (BPA), a California-based global business consulting and software technology services firm. Other than in California, BPA has development centres in Chennai and Visakhapatnam, besides a sales and customer service centre in Singapore. Focused on enterprise content management, enterprise portal and collaboration, BPA offers strategy consulting, implementation and application management services in its areas of specialisation.

The acquisition of BPA is structured in three tranches over a period of three years. The valuation of BPA would be performance-linked and is estimated at US$16 million.

Your Company is in compliance with all the conditions stipulated by the Ministry of Corporate Affairs, Government of India, for availing itself of the general exemption under Section 212 (8) of the Companies Act, 1956, from annexing to the Balance Sheet of your Company, the Audited Statements of Account together with the Directors'' Reports and the Auditors'' Reports for the year 2012-13 of the following subsidiary companies:

1. ICRA Management Consulting Services Limited

1.1. IMaCS Virtus Global Partners Inc.

1.2. Pragati Development Consulting Services Limited

2. ICRA Techno Analytics Limited

2.1. ICRA Sapphire Inc.

2.2. ICRA Global Capital Inc.

2.2.1. BPA Technologies Inc.

2.2.1.1. BPA Technologies Pte Ltd.

2.2.1.2. BPA Technologies Pvt. Ltd.

3. ICRA Online Limited

4. PT. ICRA Indonesia

5. ICRA Lanka Limited

6. ICRA Nepal Limited

However, if any Shareholder of your Company or subsidiary companies so desires, your Company will make available copies of the Financial Statements of the above subsidiary companies and related information, free of charge.

The Consolidated Financial Statements of Group ICRA, consisting of ICRA Limited, its subsidiaries, and their subsidiaries, for the year 2012-13, which form a part of the Annual Report, are attached. The Auditors'' Report on the Consolidated Financial Statements is also attached. A statement containing the brief financial details of the said subsidiary companies is annexed, as prescribed by the Ministry of Corporate Affairs, Government of India, to the Consolidated Financial Statements. The Consolidated Financial Statements have been prepared in accordance with the prescribed Accounting Standards.

Recovery of Security Deposit from Associated Journals Limited

During 1998-99, your Company had filed a suit with the Hon''ble High Court of Delhi for the recovery of a refundable security deposit of Rs. 46.73 lakh, along with interest due thereon, from Associated Journals Limited for premises located at Herald House, Bahadurshah Zafar Marg, New Delhi. During 2007-08, a ruling was passed in favour of your Company in the said matter by the Hon''ble High Court of Delhi. Subsequently however, appeals were filed by Associated Journals Limited against the said ruling. In 2011-12, the Hon''ble High Court of Delhi dismissed the appeals, but refrained from imposing any cost on Associated Journals Limited. Your Company has reinitiated proceedings against Associated Journals Limited for recovery of the sums due in terms of the decree passed in favour of your Company and has received the amount deposited by Associated Journals Limited with the Hon''ble High Court of Delhi.

Branches of the Company

Your Company operates its business from its offices in Delhi, Gurgaon, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune. During the year, your Company took additional space on lease in Mumbai, Chennai, Ahmedabad and Bengaluru to accommodate new employees who have joined your Company recently.

Human Resource Development & Training

Human resource development continued to be accorded high priority during the year, with emphasis being placed on improving skill, competence and knowledge through regular training and in- house/external professional development programmes. The relation between the employees and the management of your Company remained harmonious during the year. Your Company has a consultative and participative management style, which has facilitated achievement of its corporate goals. The morale of employees remained high during the year, contributing positively to the progress of your Company.

Employees Stock Option Scheme (ESOS)

Your Company has implemented the Employee Stock Option Scheme 2006 ("the Scheme") in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in conformity with the resolutions passed by the Shareholders at the Annual General Meetings of the Company held on June 12, 2006, July 29, 2008, and August 12, 2011. Pursuant to the resolution passed by the Shareholders at the Annual General Meeting held on June 12, 2006 for the grant of Options, 9,06,000 Equity Shares amounting to 9.06% of the Equity Share Capital of your Company have been issued to the ICRA Employees Welfare Trust for grant of Options to the eligible Optionees. Accordingly, the Stock Options have been granted to the eligible Optionees from the said pool of 9,06,000 Equity Shares in two tranches so far. The first tranche was granted during 2006-07 and the second during 2010-11. The details of the Stock Options granted under the Scheme are annexed to the Directors'' Report (Annexure I), and so is the Certificate from the Statutory Auditors of your Company certifying that the scheme has been implemented in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in accordance with the resolutions passed in the said Annual General Meetings of the Company (Annexure II). The Scheme is administered by the ESOS Compensation Committee of the Board of your Company and the ICRA Employees Welfare Trust.

Particulars of Employees

The information on employees receiving remuneration of Rs. 60 lakh per financial year or Rs. 5 lakh per month, or more, is required to be given as annexure to the Directors'' Report under Section 217 (2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Amendment Rules, 2011. However, in terms of Section 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 Office of your Company.

Corporate Governance

The report of the Board of Directors of your Company on Corporate Governance is presented as a separate section (Annexure III) titled "Corporate Governance Report", which forms a part of the Annual Report. The Certificate of the Statutory Auditors of your Company regarding compliance with the Corporate Governance requirements as stipulated in Clause 49 of the Listing Agreement with the stock exchanges concerned is annexed to the Directors'' Report.

Management Discussion & Analysis

The Management Discussion and Analysis is annexed to the Directors'' Report (Annexure IV).

Insider Trading Regulations

Based on the requirements under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended from time to time, the Code of Conduct for prevention of insider trading is in force in your Company.

Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings and Expenditure

As your Company is not engaged in any manufacturing activity, the particulars relating to conservation of energy and technology absorption, as mentioned in the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, are not applicable to it. However, emphasis is placed on employing techniques that result in the conservation of energy. Details on the foreign exchange earnings and expenditure of your Company appear in the Notes to Accounts.

Directors

During 2012-13, Mr. Dhruba Narayan Ghosh resigned as Chairman and Independent Director of the Company with effect from February 1, 2013. The Board accepted his resignation and resolved to place on record its debt of gratitude to Mr. Ghosh for having nurtured and led ICRA through its evolution from a startup to a leader in the credit rating business in India. Mr. Ghosh, from the said date, holds the position of Chairman Emeritus, ICRA Limited.

The Board of Directors of your Company has, at its meeting on January 25, 2013, approved the elevation of Mr. Pranab Kumar Choudhury to the position of Executive Chairman of ICRA Limited with effect from February 1, 2013. The Board reappointed Mr. Choudhury as Whole-time Director (Chairman & Group CEO) for a period of three years with effect from February 1, 2013, subject to the approval of the Shareholders at the forthcoming Annual General Meeting.

Ms. Jennifer Ann Elliott and Mr. Frederic Walter Jacques Drevon have ceased to be Directors following their resignation from the Board on May 24, 2013. The Board places on record its deep appreciation of the valuable advice and guidance provided by them throughout their tenure with your Company.

Dr. Min Ye and Mr. Simon Richard Hastilow have been appointed Additional Directors of your Company at the Board Meeting held on May 24, 2013. Both of them will hold office till the date of the next Annual General Meeting. The resolutions seeking their appointment as Director have been included in the Agenda of the Annual General Meeting.

Pursuant to the provisions of Sections 255 and 256 of the Companies Act, 1956, and the Articles of Association of your Company, Dr. Uddesh Kohli and Prof. Deepak Nayyar retire by rotation, and being eligible, offer themselves for reappointment.

Proposals for the above reappointments/appointments are part of the Agenda for the forthcoming Annual General Meeting and the respective resolutions are recommended for your approval.

The profiles of these Directors are presented in the Notice of the 22nd Annual General Meeting, as required under Clause 49 of the Listing Agreement.

Directors'' Responsibility Statement

As required under the provisions contained in Section 217(2AA) of the Companies Act, 1956, your Directors hereby confirm that:

(i) in the preparation of the Annual Accounts for the year ended March 31, 2013, the applicable accounting standards have been followed and there are no material departures from the same;

(ii) 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 a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that year;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; and

(iv) the Directors have prepared the Annual Accounts on a going concern basis.

Auditors

Messers Vipin Aggarwal & Associates, Chartered Accountants, Statutory Auditors of your Company, hold office until the conclusion of the forthcoming Annual General Meeting and are eligible for reappointment. They have confirmed their eligibility for reappointment under the provisions of Section 224 (1B) of the Companies Act, 1956.

The Notes to Accounts referred to in the Auditors'' Report are self explanatory and do not call for any further comments.

Transfer to Reserves

Your Company proposes to transfer Rs. 6.04 crore (10% of the Net Profit for the year) to the General Reserve. An amount of Rs. 127.49 crore is proposed to be retained in the Statement of Profit & Loss.

Dividend

The Board of Directors recommends for approval of the Shareholders at the forthcoming Annual General Meeting, payment of dividend of Rs. 22 per Equity Share for the financial year ended March 31, 2013. If the Shareholders approve the dividend at the forthcoming Annual General Meeting, the dividend shall be paid to: (i) all those Members whose names appear in the Register of Members as on July 29, 2013; and (ii) all those Members whose names appear on that date as beneficial owners as furnished by National Securities Depository Limited and Central Depository Services (India) Limited.

Acknowledgements

Your Directors acknowledge the cooperation and assistance received from various institutions, Government agencies, Shareholders and professionals from different disciplines.

Your Directors also wish to place on record their appreciation of the contribution made by the members of staff of your Company.

For and on behalf of the Board of Directors

Place : New Delhi (Pranab Kumar Choudhury)

Date : May 24, 2013 Chairman & Group CEO

 
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